Contract Oversight · The BPC will update its current Purchasing and Contracts Manual to add additional detail within the contract management section on contract management best practices

Audit Report No. 201718-24

Page 1 of 13

Contract Oversight August 10, 2018

Audit Report 201718-24 Executive Summary The Department of Highway Safety and Motor Vehicles (Department) Division of Administrative Services (DAS), Bureau of Purchasing and Contracts (BPC), is responsible for the Department’s procurement and contract activities, including; providing technical assistance, training, and administrative guidance to Department members, developing the Department’s solicitations and contracts, and administering contracts. Our audit focused on the Department’s contract oversight process and compliance with best practices, applicable laws, policies, and procedures. We included quality assurance and monitoring activities, the process for tracking contract information, and contract manager training requirements in our review. Currently, contract administration has been limited to the contract procurement process, coordination of mandatory training for contract managers, and serving in an advisory function to contract managers in the administration of their duties. The BPC relies on contract managers to serve as the primary responsible party for enforcing compliance with contract terms and conditions. However, there is no overall Department guidance or monitoring of contract managers to ensure the appropriate enforcement of contract terms and deliverables. Based on our observation of the Department’s primary contract system, it does not contain all pertinent contract information, and we noted vital information was missing, including; contract amounts, expiration dates, term dates, and contract managers.

The BPC is currently restructuring and adding a contract administration section. The new contract administration section will be tasked with assisting Department contract managers with contract renewals and extensions, contract drafting, and quality assurance monitoring. As enhancements to the Department’s contract administration section continue, we recommend the BPC improve the guidance and monitoring of contract managers, and maintain an accurate primary source of significant contract information to improve contract oversight efficiency. We also recommend establishing a process for transferring contract manager responsibilities and ensuring contract managers are trained in accordance with statutory requirements.


Page 2 of 13

Background and Introduction Across state government, agencies are increasingly using contractors to perform vital services. State agencies contract services for a variety of reasons, including reducing costs and improving service quality. With taxpayers’ dollars at stake, strong controls are needed to provide reasonable assurance that contract funds are not lost to improper payments, waste, and mismanagement. Effective contract oversight, which includes effective internal controls throughout the contracting process, is essential to protecting government and taxpayer interests. Section 287.057(15), F.S., states that each agency shall designate at least one employee who shall serve as a contract administrator responsible for maintaining a contract file and financial information on all contractual services contracts and who shall serve as a liaison with the contract managers and the Florida Department of Management Services (DMS). Department policy 10.09 establishes policies for procurement, and the associated Purchasing and Contracts manual sets forth procedures and guidelines for procurement of commodities and services. The BPC is responsible for the Department’s procurement and contract activities, including; providing technical assistance, training, and administrative guidance to Department members, developing the Department’s solicitations and contracts, and administering contracts. The Bureau Chief of BPC serves as the Department’s contract administrator in accordance with Section 287.057, F.S. The BPC facilitates the procurement of contractual services and commodities in response to the needs of the program areas, and is responsible for ensuring Department procurement activities are conducted in accordance with state and federal laws, and administrative rules and guidelines. There are three generally accepted phases of public procurement: pre-award, award, and post-award. The pre-award phase consists of the determination of need, the development of the requirements package, and selection of the contracting method. The award phase consists of the solicitation of vendors or sources, receipt of responses, evaluation of responses, and contract award. The post-award phase, or contract oversight phase, includes contract monitoring, ensuring contractor delivery of specifications, and contract close out. Contract monitoring is a process of ensuring vendors adequately perform contracted services and meet their responsibilities according to contract terms. The importance of contract oversight and monitoring increases when contracts are of high dollar value and when the terms and conditions are complex. Section 287.057(14), F.S., requires the Department to designate an employee to function as a contract manager for each contractual services contract, who is responsible for enforcing performance of the contract terms and conditions and serves as a liaison with the contractor.


Page 3 of 13

Monitoring an agreement is an involved, interactive, and proactive activity. While the contractor has the responsibility to perform under the terms of the contract, the Department has the responsibility for evaluating the contractor’s progress and performance. Effective monitoring can assist in identifying and reducing risks as early as possible, thus, protecting public funds, ensuring the delivery of required services, and providing timely notification of noncompliance. Currently, each division chooses contract managers and assigns responsibilities for contracts under their purview. It is the contract manager’s responsibility to provide specifications for the goods and/or services needed, monitor requirements, ascertain whether promised services are performed and time schedules are met, and ensure all payments under a contract are proper and timely. The contract manager should keep records of expenditures and available balance so over-expenditures do not occur. Department contract managers use various ways to manage contract terms, including spreadsheets, electronic folders and documents, and paper files. Section 287.057, F.S., requires each contract manager responsible for contracts more than $100,000 annually to become a certified contract manager, and if the value of a contract is more than $1 million in any fiscal year, at least one of the persons conducting negotiations must be certified as a contract negotiator. Florida Certified Contract Manager (FCCM) and Florida Certified Contract Negotiator (FCCN) trainings are conducted by DMS. The Department uses lists published by DMS to track members that have taken FCCM and FCCN training, and to track timeframes for recertification. The Department of Financial Services (DFS) is required in Section 215.985, F.S., to provide the capability for state agencies to report their contracts to the public in one central location. To meet this requirement, DFS has developed and manages the Florida Accountability Contract Tracking System (FACTS), an online resource for providing transparency in contracts to the public. Contract documents and audit information is included in the system; however, FACTS does not capture all information related to a contract. In addition to reporting contract information in FACTS, the Department uses the Electronic Repository of Executed Contracts (EREC), a repository

for contract information and documentation. EREC is a web-based manual entry database which was built internally and has been used for over 10 years. Department members also maintain contract information in various folders on their network drive. Bureau Reorganization The BPC is restructuring, and adding a contract oversight section to be called the Contract Administration Section. This section will consist of a designated contract administrator, two purchasing analysts, and a purchasing specialist. The goals of the new Contract Administration Section include assisting Department contract managers with contract renewals and extensions, contract drafting, and quality assurance


Page 4 of 13

monitoring. Additionally, the new section will be tasked with reviewing contract information in EREC. The following charts depict the current BPC structure, and the new structure with the addition of the Contract Administration Section:

Current Bureau Structure New Bureau Structure

Chief of Purchasing and

Contracts

Procurement Administrator

Purchasing Specialist



Purchasing Agent III

Purchasing Technician

Purchasing Manager

Purchasing Analyst

Purchasing Analyst


Government Operations

Consultant II

Operations Analyst II

Chief of Purchasing and

Contracts

Procurement Administrator




Purchasing Technician

Purchasing Manager

Purchasing Analyst

Purchasing Analyst


Purchasing Manager- Contract

Administrator

Purchasing Analyst

Purchasing Analyst


Government Operations

Consultant II

Operations Analyst II


Page 5 of 13

Findings and Recommendations Contract Oversight and Guidance Finding No. 1: Enhancing the guidance and oversight of contract managers would improve contract management throughout the Department. The Contract Administration Best Practices Guide published by the National Association of State Procurement Officials states that monitoring contract performance is a key function in the contract administration process. Additionally, the Contract Management Body of Knowledge published by the National Contract Management Association, states that contract administration is the process that provides the oversight required to ensure that both parties comply with the contract requirements, and that contracting professionals in large organizations frequently require technical assistance and communication with internal professional resources and management. Currently, contract administration is the responsibility of the BPC. However, contract administration has been limited to the contract procurement process, coordination of mandatory training for Department contract managers, and serving in an advisory function to contract managers in the administration of their duties. While gaining an understanding of best practices for contract oversight from other state agencies, we determined some state agencies have established a centralized contract oversight function with a designated contract administrator and staff responsible for Department wide contract oversight. Particularly, two agencies we spoke with have regular and documented quality assurance/monitoring processes conducted by their contract administration unit to monitor contract managers and ensure contract terms are adequately met, and files are maintained accordingly.

The Department currently relies on contract managers to serve as the primary responsible party for enforcing compliance with the terms and conditions of contracts and for the day-to-day oversight, including approval of contract deliverables and invoices. However, there is no overall Department guidance or monitoring of contract managers to ensure the appropriate enforcement of contract terms and deliverables. Additionally, there is not a process for or guidance regarding transferring contract management responsibilities when someone leaves the Department or moves to another position within the Department. Recommendations We recommend the Bureau of Purchasing and Contracts develop guidance and best practices in contract management, including a process for transferring contract manager responsibilities, for Department contract managers.


Page 6 of 13

We also recommend the Bureau of Purchasing and Contracts implement a regular and documented quality assurance process to monitor contract managers and ensure contract terms are adequately met, and files are maintained accordingly. Management Response We agree with the above recommendations. The BPC will update its current Purchasing and Contracts Manual to add additional detail within the contract management section on contract management best practices. This will include best practices for timely and complete transfer of contract management responsibilities in the event of a contract manager change. The BPC has already developed a form for use by all divisions in facilitating and notifying both internal and external stakeholders (i.e., Department members and contracted parties) of a change in contract management. This contract management change form will be disseminated in accordance with a procedure currently being developed by the BPC. Once completed, both the process for disseminating the contract management form and the form itself will be added to the revised Purchasing and Contracts Manual. The form will also be available on the BPC SharePoint page.

The Contract Administration Section will develop a quality assurance process for monitoring the Department’s contract managers to ensure contract terms are adequately met and contract files are correctly documented and properly maintained. This process will include documentation of monitoring findings with appropriate follow-up. List of Contracts and Contract Managers Finding No. 2: Maintaining an accurate primary source of significant contract information would improve contract oversight and efficiency. Best practices for contract management suggests that contract information should be maintained efficiently and easily accessible. Contract information should be stored electronically so important dates, such as expiration, can be tracked, important contract risk elements can be tracked, and so contract managers have an efficient way to manage contracts. While the Department uses EREC as the primary contract management system, there is not a single source that contains all pertinent contract information. Information pertaining to contracts is stored in several systems, including EREC, FACTS, MFMP, and excel spreadsheets maintained by individual contract managers. Because contract


Page 7 of 13

information is stored in various locations, it is difficult to monitor and track significant contract information efficiently. Additionally, our review of information in EREC noted vital contract information missing, including; contract amounts, expiration dates, and term dates, and incorrect contract managers listed. Specifically, we noted 31 persons listed as contract managers of active contracts are no longer employed by the Department. The former members are listed as contract managers for a collective total of 1,190 contracts/MOU’s, with expenditures listed at a collective $32,108,849. Recommendations We recommend the Bureau of Purchasing and Contracts, in coordination with each division, review all information in EREC to ensure it is accurate and contains all significant contract information. We recommend the Bureau of Purchasing and Contracts coordinate with each division to periodically confirm the accuracy of data listed in EREC. Management Response We agree with the above recommendations. The BPC is currently conducting a review of all active contracts and agreements in EREC to determine whether the contract manager listed for each is correct. This review will also involve assessing the capabilities of this database to determine whether improvements in overall functionality and efficiency can be made. The BPC will seek to determine whether EREC’s data fields can be expanded to capture additional contract-based information that will permit for enhanced contract tracking and management.

Once the BPC’s newly established Contract Administration Section is fully-staffed, this unit will begin conducting periodic audits of all contracts and agreements in EREC to determine whether the following information is documented and uploaded in the system for each: contract term dates; contract amount; budget information; contract manager name and contact information; contract monitoring information; and contract documents. Required Training Finding No. 3: Contract Managers should be trained in accordance with statutory requirements. Section 287.057(14) (b), F.S., requires that each contract manager who is responsible for contracts more than $100,000 annually must complete training in contract


Page 8 of 13

management and become a certified contract manager. Chief Financial Officer Memorandum No. 04 (14-15) Contract Manager Requirements, specifies the mandatory training requirements that state agencies must follow for contract and grant managers, including that each state agency must maintain records to adequately support the agency’s compliance in meeting the contract and grant manager training requirements. We reviewed a sample of 20 contract managers to determine if the persons listed as contract managers with contract expenditures over $100,000 annually had completed FCCM training. Our review determined 4 of the 20 (20%) contract managers had not completed FCCM training. While the Department maintains a list of members that have completed FCCM and FCCN trainings, the Department lacks a process to review all contracts with expenditures over $100,000 annually and ensure those contracts are managed by contract managers meeting the training requirements. Recommendations We recommend the Bureau of Purchasing and Contracts ensure current contract managers are trained in accordance with statutory requirements. We also recommend the Bureau of Purchasing and Contracts develop a process to verify contracts with expenditures over $100,000 annually are managed by Florida Certified Contract Managers. Management Response We agree with the above recommendations. The BPC is currently reviewing all active agreements within each division to verify that the currently-listed contract manager’s name and contact information is correctly listed in EREC and that each contract manager has received the appropriate training in accordance with statutory requirements.

The Contract Administration Section will develop and implement new processes and procedures for ensuring that contracts with expenditures over $100,000 annually are managed by an FCCM. This unit will also conduct periodic audits of contracts and agreements to verify that the assigned contract manager’s certification has not lapsed and will ensure that those needing FCCM recertification are scheduled to take the appropriate courses offered by the DMS.


Page 9 of 13

Purpose, Scope, and Methodology

The purpose of this audit was to evaluate the Department’s contract oversight processes and determine compliance with best practices, applicable laws, Department policy, and procedures. The scope includes the current contract oversight process, contracts, and Department contract managers. The methodology included:

• Reviewing applicable statutes, rules, and procedures;

• Reviewing best practices for contract oversight and monitoring;

• Reviewing quality assurance and monitoring activities;

• Reviewing contract manager training requirements;

• Reviewing the process for tracking significant contract information including expiration timeframes; and

• Interviewing Department contract managers and other applicable Department staff.


Page 11 of 13

ATTACHMENT - Management Response


Page 12 of 13


Page 13 of 13

Documents

Contract Oversight · The BPC will update its current Purchasing and Contracts Manual to add additional detail within the contract management section on contract management best practices