Audit Report on Job Order Contracting by the Department of Education

Audit Report In Brief

We performed an audit of the Department of Education’s (Department’s) administration of job order contracts. Job order contracting (JOC) is a procurement method for expeditiously performing maintenance, repairs, and minor construction work. Under a job order contract, the Department’s Division of School Facilities can direct a contractor to perform individual tasks as needed rather than awarding individual contracts for each small project. The cost of JOC work is based on previously established unit prices for specific items (e.g., painting, plastering)

The Department’s use of JOC began in 1994 when the Division employed a consultant, The Gordian Group, to develop and implement the Department’s JOC program, create a catalog of unit prices, and provide construction management services, for which it is paid a fee on the basis of a sliding scale.

In Fiscal Year 2005, the Division of School Facilities (Division) allocated approximately $18.7 million of its budget to JOC contracts.

Audit Findings and Conclusions

We found significant weaknesses in the Department’s administration of the JOC program. Specifically, the Department does not have adequate procedures to ensure that required project documentation was submitted and approved. Moreover, the Department lacks any written policies or guidelines that spell out the circumstances—including a monetary threshold—under which the use of job order contracting is appropriate. Further, the Department has not ensured that inspections of proceed order work are adequately conducted and documented by reports, daily logs, and photographs. These weaknesses have led to contractors being assigned work outside their contract locations and contractors not completing all required work, not performing work satisfactorily, and not completing work on time.

In addition, the Department does not have a system in place to review the prices that are used to determine the cost of JOC work. The Department also lacks an adequate system of internal controls to ensure that invoices submitted by The Gordian Group are properly reviewed and approved. As a result, the Department overpaid The Gordian Group $63,482 in construction management fees in Fiscal Years 2004 and 2005.

We found problems with the Department’s mainframe computer system PASSPORT and the Division’s PROGEN databases.

Audit Recommendations

This report makes a total of 24 recommendations. The major recommendations are that the Department should:

• Ensure that JOC contractors submit all required material samples, product data, drawings, test reports, guarantees and warranties. Record and properly maintain all required documentation in Departmental files.
• Ensure that JOC contractors are assigned work within their designated regions. In those cases where work must be assigned to a contractor in another region, written justification must be included in Department files.
• Develop and implement written guidelines that stipulate the circumstances and monetary threshold under which the use of job order contracts would be appropriate. In this regard, the use of job order contracts should be limited to the performance of repairs, maintenance work or minor construction.
• Ensure that it adheres to unit prices in its “Construction Cost Catalog” when determining the cost of proceed order work. The Department should also review the unit prices in the “Construction Cost Catalog,” and make any necessary adjustments to ensure that the prices are consistent with industry standards.
• Implement inspection procedures for Division inspectors consistent with procedures required for The Gordian Group inspectors. Review file documentation to determine if The Gordian Group inspected the work discussed in this report. If the Department cannot verify that inspections were properly conducted, the Department should seek to recoup any payments made to The Gordian Group for that work.
• Ensure that JOC contractors complete all work satisfactorily, and on schedule. Compel the contractors mentioned in this report to immediately perform all necessary remedial work to correct noted deficiencies.
• Recoup $63,482 in overpayments to the Gordian Group. Implement internal controls to ensure that invoices are properly reviewed and approved.

Implement adequate controls, as required by Comptroller’s Directive 18, to ensure that databases are complete and accurate.