An Audit Report on the Information and Communications Technology Cooperative Contracts Program at the Department of Information Resources
Report Number 14-007
The Department of Information Resources (Department) has designed and implemented adequate processes and related controls to help ensure that it procures contracts for its Information and Communications Technology Cooperative Contracts Program (Program) in accordance with applicable requirements. The Department also has a comprehensive contract renewal process for the Program that includes verification of vendors' compliance with statutory requirements.
However, the Department should make improvements in the areas of contract procurement, contract renewal and monitoring, cost-savings calculations, and information technology.
Contract Procurement. The Department has adequate processes that generally ensure that its requests for offers (RFO) for the Program and its evaluation of vendors' proposals meet statutory requirements, rules, Office of the Comptroller of Public Accounts' guidance, and Department procedures. However, the Department should make certain improvements to help ensure that its Program contract procurement processes are effective. Specifically:
- The Department should strengthen its efforts to ensure that its procurement process provides the best value for the State. For Program goods and services contracts, the Department generally negotiates with each vendor a percentage discount off of the manufacturer's suggested retail price (MSRP), rather than a not-to-exceed price. In addition, Program goods and services contracts do not prohibit vendors from increasing the MSRP at the time of a sale. In anticipation of House Bill 2472 (83rd Legislature, Regular Session), the Department has started to negotiate firm fixed prices for selected commodities. However, if the Department does not include the MSRP or a not-to-exceed price in other Program contracts, there is less assurance that customers will receive the intended, negotiated price.
- For Program goods and services contracts, the Department does not take advantage of statewide aggregate volume purchasing discounts in a way that would assist both large and small customers (because volume discounts are given per customer and per purchase order).
- The Department generally complies with statutory training requirements for its contracting staff. However, the Department should clarify its policies and procedures to ensure full compliance with training and certification requirements.
Contract Renewal and Monitoring. The Department has a comprehensive contract renewal process for the Program that includes verification of vendors' compliance with statutory requirements. However, the Department should improve its contract monitoring process. Specifically:
- The Department should verify the completeness and accuracy of monthly sales reports that Program vendors submit and administrative fees that vendors pay. The State Auditor’s Office previously reported that same issue in An Audit Report on the Information and Communications Technology Cooperative Contracts Program at the Department of Information Resources (State Auditor's Office Report No. 12-004, October 2011). The Department also should ensure that vendors submit those reports and pay those fees in a timely manner.
- The Department should develop a process to enable its contract managers to easily monitor whether vendors provide customers with the discounts specified in their Program contracts.
Cost-savings Calculations. The Department's methodology to calculate Program cost savings does not align with performance measure guidance approved by the Legislative Budget Board. The Department's policies and procedures also do not offer sufficient guidance to ensure that the Department performs cost-savings calculations consistently. Auditors also identified the following:
- In calculating costs savings for Program goods and services contracts, the Department relies on vendor-reported information and does not consistently verify the accuracy of that information. The Department determines Program cost-savings rates based on a sample of items available through contracts. For 32 contracts tested, the sample of items represented 48 percent of total contract sales. The Department's review and approval process also does not ensure that calculations are performed consistently and are free of errors.
- The Department does not report cost savings for Program deliverables-based information technology services contracts.
- The Department used an incorrect formula to determine cost savings for Program staffing services contracts.
Information Technology. The Department has an adequate process to help ensure that monthly vendor sales report data is completely and accurately uploaded to its contract data warehouse. However, the Department should improve controls over the Program's contract data. In addition, the Department does not regularly review user access to its Contract Management System and it does not consistently remove unused user accounts that are still active. The Department also should ensure that its password policies align with the requirements in Title 1, Texas Administrative Code, Chapter 202, and that contract data warehouse passwords comply with requirements. Auditors also followed up on six information-technology-related recommendations in the State Auditor's Office's October 2011 report and determined that the Department had not implemented four of those recommendations.
Auditors communicated other, less significant issues regarding contract term negotiations, calculation of administrative fees, and contract managers' segregation of duties with regard to scoring of vendors' proposals and contract renewals to the Department's management in writing.
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