Letter Report on the Awarding of Future Technology Associates, LLC, Contract in 2005

This letter report was issued to advise the Department of Education (DOE) of control weaknesses to take into consideration in the future when issuing non-competitively bid contracts. Our objective was to determine whether DOE complied with applicable procurement rules and regulations when soliciting and awarding Future Technology Associates’ (FTA’s) initial contract in 2005. In our opinion, DOE incorrectly awarded this contract to FTA in that DOE based its decision on what appears to be misleading and inaccurate information.

Specifically, DOE’s Division of Financial Operations (DFO) submitted a request to the Chancellor’s Committee on Contracts (CoC) to award a sole source contract to FTA. In our opinion, this request appears to have contained inaccurate and misleading statements from FTA. Our review of the New York State’s (NYS’s) back-drop award to FTA determined that it was based upon misleading information contained in FTA’s 2004 application that was submitted to the NYS Office of General Services (OGS) Procurement Services Group. We identified the following inaccuracies:

• FTA misrepresented its experience on the application by stating that it was in business for two years. FTA did not exist until June 2004, when it filed an amendment to its articles of incorporation.
• FTA’s application to become a back-drop contractor contained three project abstracts that identified FTA and its employees as having two years of experience performing consulting systems integration work for DOE. In fact, all the projects FTA listed on its application were projects that DOE had contracted with Tier.
• FTA’s application to NYS stated that it had three employees in New York City in 2004. However, according to VENDEX, FTA began doing business in the City in November 2005.

Had DFO properly researched this vendor, it would have determined that, regardless of FTA having a back-drop contract, at the time FTA was being considered for a sole source contract, it was a newly formed entity with no prior business record by which it could be judged. This should have precluded FTA from being awarded such a contract. In addition, FTA continued to submit inaccurate information in 2006, stating that the business was formed on March 1, 2004, not the actual date of June 1, 2004. Additional inaccuracies include FTA stating that its president had not worked for the City within the previous 5 years, when in fact he had.

We also found that the amount of projected savings that was reported to CoC was inflated. The potential savings was deemed to be approximately 28 percent over the hourly rates Tier was charging at that time. Our comparison showed an actual savings of only 20 percent. Further, DOE paid Tier $731,250 for the release of their employees, which we believe was inappropriate and contrary to standard business practice as this expense that should have been borne by their future employer, FTA.

We recommended that a new control be implemented such that before a contract is sent to the Chancellor’s Office for final approval, the CoC should review the terms of the actual contract to be awarded and attest that there have not been any material changes to the terms initially submitted for their approval.