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Contract OversightAugust 10, 2018Audit Report 201718-24Executive SummaryThe Department of Highway Safety and Motor Vehicles (Department) Division ofAdministrative Services (DAS), Bureau of Purchasing and Contracts (BPC), isresponsible for the Department’s procurement and contract activities, including;providing technical assistance, training, and administrative guidance to Departmentmembers, developing the Department’s solicitations and contracts, and administeringcontracts.Our audit focused on the Department’s contract oversight process and compliance withbest practices, applicable laws, policies, and procedures. We included qualityassurance and monitoring activities, the process for tracking contract information, andcontract 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 advisoryfunction to contract managers in the administration of their duties. The BPC relies oncontract managers to serve as the primary responsible party for enforcing compliancewith contract terms and conditions. However, there is no overall Department guidanceor monitoring of contract managers to ensure the appropriate enforcement of contractterms and deliverables.Based on our observation of the Department’s primary contract system, it does notcontain 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. Thenew contract administration section will be tasked with assisting Department contractmanagers with contract renewals and extensions, contract drafting, and qualityassurance monitoring. As enhancements to the Department’s contract administrationsection continue, we recommend the BPC improve the guidance and monitoring ofcontract managers, and maintain an accurate primary source of significant contractinformation to improve contract oversight efficiency. We also recommend establishing aprocess for transferring contract manager responsibilities and ensuring contractmanagers are trained in accordance with statutory requirements.Audit Report No. 201718-24Page 1 of 13
Background and IntroductionAcross state government, agencies are increasingly using contractors to perform vitalservices. State agencies contract services for a variety of reasons, including reducingcosts and improving service quality. With taxpayers’ dollars at stake, strong controlsare needed to provide reasonable assurance that contract funds are not lost to improperpayments, waste, and mismanagement. Effective contract oversight, which includeseffective internal controls throughout the contracting process, is essential to protectinggovernment and taxpayer interests.Section 287.057(15), F.S., states that each agency shall designate at least oneemployee who shall serve as a contract administrator responsible for maintaining acontract file and financial information on all contractual services contracts and who shallserve as a liaison with the contract managers and the Florida Department ofManagement Services (DMS). Department policy 10.09 establishes policies forprocurement, and the associated Purchasing and Contracts manual sets forthprocedures 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 toDepartment members, developing the Department’s solicitations and contracts, andadministering contracts. The Bureau Chief of BPC serves as the Department’s contractadministrator in accordance with Section 287.057, F.S. The BPC facilitates theprocurement of contractual services and commodities in response to the needs of theprogram areas, and is responsible for ensuring Department procurement activities areconducted in accordance with state and federal laws, and administrative rules andguidelines.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, thedevelopment of the requirements package, and selection of the contracting method.The award phase consists of the solicitation of vendors or sources, receipt ofresponses, evaluation of responses, and contract award. The post-award phase, orcontract oversight phase, includes contract monitoring, ensuring contractor delivery ofspecifications, and contract close out.Contract monitoring is a process of ensuring vendors adequately perform contractedservices and meet their responsibilities according to contract terms. The importance ofcontract oversight and monitoring increases when contracts are of high dollar value andwhen the terms and conditions are complex. Section 287.057(14), F.S., requires theDepartment to designate an employee to function as a contract manager for eachcontractual services contract, who is responsible for enforcing performance of thecontract terms and conditions and serves as a liaison with the contractor.Audit Report No. 201718-24Page 2 of 13
Monitoring an agreement is an involved, interactive, and proactive activity. While thecontractor has the responsibility to perform under the terms of the contract, theDepartment has the responsibility for evaluating the contractor’s progress andperformance. Effective monitoring can assist in identifying and reducing risks as earlyas possible, thus, protecting public funds, ensuring the delivery of required services,and providing timely notification of noncompliance. Currently, each division choosescontract managers and assigns responsibilities for contracts under their purview. It isthe contract manager’s responsibility to provide specifications for the goods and/orservices needed, monitor requirements, ascertain whether promised services areperformed and time schedules are met, and ensure all payments under a contract areproper and timely. The contract manager should keep records of expenditures andavailable balance so over-expenditures do not occur. Department contract managersuse various ways to manage contract terms, including spreadsheets, electronic foldersand documents, and paper files.Section 287.057, F.S., requires each contract manager responsible for contracts morethan 100,000 annually to become a certified contract manager, and if the value of acontract is more than 1 million in any fiscal year, at least one of the personsconducting negotiations must be certified as a contract negotiator. Florida CertifiedContract Manager (FCCM) and Florida Certified Contract Negotiator (FCCN) trainingsare conducted by DMS. The Department uses lists published by DMS to trackmembers that have taken FCCM and FCCN training, and to track timeframes forrecertification.The Department of Financial Services (DFS) is required in Section 215.985, F.S., toprovide the capability for state agencies to report their contracts to the public in onecentral location. To meet this requirement, DFS has developed and manages theFlorida Accountability Contract Tracking System (FACTS), an online resource forproviding transparency in contracts to the public. Contract documents and auditinformation is included in the system; however, FACTS does not capture all informationrelated to a contract. In addition to reporting contract information in FACTS, theDepartment uses the Electronic Repository of Executed Contracts (EREC), a repositoryfor contract information and documentation. EREC is a web-based manual entrydatabase which was built internally and has been used for over 10 years. Departmentmembers also maintain contract information in various folders on their network drive.Bureau ReorganizationThe BPC is restructuring, and adding a contract oversight section to be called theContract Administration Section. This section will consist of a designated contractadministrator, two purchasing analysts, and a purchasing specialist. The goals of thenew Contract Administration Section include assisting Department contract managerswith contract renewals and extensions, contract drafting, and quality assuranceAudit Report No. 201718-24Page 3 of 13
monitoring. Additionally, the new section will be tasked with reviewing contractinformation in EREC.The following charts depict the current BPC structure, and the new structure with theaddition of the Contract Administration Section:Current Bureau StructureNew Bureau StructureChief ofPurchasing andContractsChief ofPurchasing andContractsOperationsAnalyst IIOperationsAnalyst alistPurchasing AnalystPurchasingSpecialistPurchasing nsultant IIPurchasingTechnicianPurchasingManager- ltant IIPurchasingTechnicianAudit Report No. 201718-24Page 4 of 13
Findings and RecommendationsContract Oversight and GuidanceFinding No. 1: Enhancing the guidance and oversight of contract managers wouldimprove contract management throughout the Department.The Contract Administration Best Practices Guide published by the National Associationof State Procurement Officials states that monitoring contract performance is a keyfunction in the contract administration process. Additionally, the Contract ManagementBody of Knowledge published by the National Contract Management Association, statesthat contract administration is the process that provides the oversight required to ensurethat both parties comply with the contract requirements, and that contractingprofessionals in large organizations frequently require technical assistance andcommunication with internal professional resources and management.Currently, contract administration is the responsibility of the BPC. However, contractadministration has been limited to the contract procurement process, coordination ofmandatory training for Department contract managers, and serving in an advisoryfunction to contract managers in the administration of their duties.While gaining an understanding of best practices for contract oversight from other stateagencies, we determined some state agencies have established a centralized contractoversight function with a designated contract administrator and staff responsible forDepartment wide contract oversight. Particularly, two agencies we spoke with haveregular and documented quality assurance/monitoring processes conducted by theircontract administration unit to monitor contract managers and ensure contract terms areadequately met, and files are maintained accordingly.The Department currently relies on contract managers to serve as the primaryresponsible party for enforcing compliance with the terms and conditions of contractsand for the day-to-day oversight, including approval of contract deliverables andinvoices. However, there is no overall Department guidance or monitoring of contractmanagers to ensure the appropriate enforcement of contract terms and deliverables.Additionally, there is not a process for or guidance regarding transferring contractmanagement responsibilities when someone leaves the Department or moves toanother position within the Department.RecommendationsWe recommend the Bureau of Purchasing and Contracts develop guidance and bestpractices in contract management, including a process for transferring contract managerresponsibilities, for Department contract managers.Audit Report No. 201718-24Page 5 of 13
We also recommend the Bureau of Purchasing and Contracts implement a regular anddocumented quality assurance process to monitor contract managers and ensurecontract terms are adequately met, and files are maintained accordingly.Management ResponseWe agree with the above recommendations.The BPC will update its current Purchasing and Contracts Manual to add additionaldetail within the contract management section on contract management best practices.This will include best practices for timely and complete transfer of contract managementresponsibilities in the event of a contract manager change. The BPC has alreadydeveloped a form for use by all divisions in facilitating and notifying both internal andexternal stakeholders (i.e., Department members and contracted parties) of a change incontract management. This contract management change form will be disseminated inaccordance with a procedure currently being developed by the BPC. Once completed,both the process for disseminating the contract management form and the form itselfwill be added to the revised Purchasing and Contracts Manual. The form will also beavailable on the BPC SharePoint page.The Contract Administration Section will develop a quality assurance process formonitoring the Department’s contract managers to ensure contract terms areadequately met and contract files are correctly documented and properly maintained.This process will include documentation of monitoring findings with appropriate followup.List of Contracts and Contract ManagersFinding No. 2: Maintaining an accurate primary source of significant contractinformation would improve contract oversight and efficiency.Best practices for contract management suggests that contract information should bemaintained efficiently and easily accessible. Contract information should be storedelectronically so important dates, such as expiration, can be tracked, important contractrisk elements can be tracked, and so contract managers have an efficient way tomanage contracts.While the Department uses EREC as the primary contract management system, there isnot a single source that contains all pertinent contract information. Informationpertaining to contracts is stored in several systems, including EREC, FACTS, MFMP,and excel spreadsheets maintained by individual contract managers. Because contractAudit Report No. 201718-24Page 6 of 13
information is stored in various locations, it is difficult to monitor and track significantcontract information efficiently.Additionally, our review of information in EREC noted vital contract information missing,including; contract amounts, expiration dates, and term dates, and incorrect contractmanagers listed. Specifically, we noted 31 persons listed as contract managers ofactive contracts are no longer employed by the Department. The former members arelisted as contract managers for a collective total of 1,190 contracts/MOU’s, withexpenditures listed at a collective 32,108,849.RecommendationsWe recommend the Bureau of Purchasing and Contracts, in coordination with eachdivision, review all information in EREC to ensure it is accurate and contains allsignificant contract information.We recommend the Bureau of Purchasing and Contracts coordinate with each divisionto periodically confirm the accuracy of data listed in EREC.Management ResponseWe agree with the above recommendations.The BPC is currently conducting a review of all active contracts and agreements inEREC to determine whether the contract manager listed for each is correct. This reviewwill also involve assessing the capabilities of this database to determine whetherimprovements in overall functionality and efficiency can be made. The BPC will seek todetermine whether EREC’s data fields can be expanded to capture additional contractbased information that will permit for enhanced contract tracking and management.Once the BPC’s newly established Contract Administration Section is fully-staffed, thisunit will begin conducting periodic audits of all contracts and agreements in EREC todetermine whether the following information is documented and uploaded in the systemfor each: contract term dates; contract amount; budget information; contract managername and contact information; contract monitoring information; and contract documents.Required TrainingFinding No. 3: Contract Managers should be trained in accordance with statutoryrequirements.Section 287.057(14) (b), F.S., requires that each contract manager who is responsiblefor contracts more than 100,000 annually must complete training in contractAudit Report No. 201718-24Page 7 of 13
management and become a certified contract manager. Chief Financial OfficerMemorandum No. 04 (14-15) Contract Manager Requirements, specifies the mandatorytraining requirements that state agencies must follow for contract and grant managers,including that each state agency must maintain records to adequately support theagency’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 ascontract managers with contract expenditures over 100,000 annually had completedFCCM training. Our review determined 4 of the 20 (20%) contract managers had notcompleted FCCM training.While the Department maintains a list of members that have completed FCCM andFCCN trainings, the Department lacks a process to review all contracts withexpenditures over 100,000 annually and ensure those contracts are managed bycontract managers meeting the training requirements.RecommendationsWe recommend the Bureau of Purchasing and Contracts ensure current contractmanagers are trained in accordance with statutory requirements.We also recommend the Bureau of Purchasing and Contracts develop a process toverify contracts with expenditures over 100,000 annually are managed by FloridaCertified Contract Managers.Management ResponseWe agree with the above recommendations.The BPC is currently reviewing all active agreements within each division to verify thatthe currently-listed contract manager’s name and contact information is correctly listedin EREC and that each contract manager has received the appropriate training inaccordance with statutory requirements.The Contract Administration Section will develop and implement new processes andprocedures for ensuring that contracts with expenditures over 100,000 annually aremanaged by an FCCM. This unit will also conduct periodic audits of contracts andagreements to verify that the assigned contract manager’s certification has not lapsedand will ensure that those needing FCCM recertification are scheduled to take theappropriate courses offered by the DMS.Audit Report No. 201718-24Page 8 of 13
Purpose, Scope, and MethodologyThe purpose of this audit was to evaluate the Department’s contract oversightprocesses and determine compliance with best practices, applicable laws, Departmentpolicy, and procedures.The scope includes the current contract oversight process, contracts, and Departmentcontract 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 includingexpiration timeframes; andInterviewing Department contract managers and other applicable Departmentstaff.Audit Report No. 201718-24Page 9 of 13
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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
