The Department of Homeland Security’s (DHS) Science and Technology Directorate (S&T) may have wasted $23 million after prematurely cancelling a contract for a biodetection system, according a recent audit by DHS’s Inspector General (IG).
In April 2010, S&T awarded Silicon Valley startup NVS Technologies, Inc. (NVS) an $18 million contract to develop an easy-to-use system to detect pathogens and biothreat agents for government and private sector use. DHS S&T later requested contract modifications that raised the value of the contract to $30 million.
The NVS technology appeared to be working. According to a January 2014 S&T program review, there was “substantial data” showing that the NVS technology not only worked, but was a much-needed technology.
However, the contract was abruptly terminated on February 6, 2014, after DHS S&T had already spent $23 million on the contract. Consequently, the opportunity to develop a crucial technology may have been lost.
“This was really fantastic, a quantum leap,” a government scientist familiar with the NVS device told the Washington Post. “It allowed you to do things that could never be done before.”
The former Deputy Under Secretary of S&T requested an audit over concerns that poor oversight of the NVS contract led to its termination.
“Although S&T properly awarded the contract with NVS, it did not properly manage the contract,” the IG said. “As a result, S&T may have wasted $23 million in incurred costs plus additional cost associate with the termination of the contract.”
The former Acting Director of the Chemical and Biological Defense Division issued NVS a stop work order “due to funding issues.” Although DHS S&T lifted the stop work order a week later to conduct an independent review, the review never took place.
The IG determined that “The acting director did not have sufficient information to request the termination.”
The former acting director provided a list of concerns regarding the NVS contract, including unbudgeted costs and that he was receiving “mix feedback” on the NVS product. However, the auditors did not identify any evidence to substantiate these concerns.
In a January 2014 memorandum, the contracting officer said DHS S&T’s decision to terminate the contract was “against the better judgment” of S&T subject matter experts.
The IG found no evidence S&T reviewed the documentation provided by NVS, which included meeting minutes, progress reports and records of site visits. The IG said, “This lack of documented review may have hindered management’s ability to make an informed decision about the contract.”
The contract’s cancellation has raised concerns about other contracts administered by S&T, which administered about 370 contracts valued at about $338 million in Fiscal Year 2013. The IG stated that, “If program performance is not adequately documented, S&T may also have difficulty making well-informed decision on all its contracts.”
The IG recommended S&T develop and implement written standard operating procedures for reviewing, documenting and reporting on overall contract management, as well as terminating a contract for convenience.
The IG also recommended S&T review its contract portfolio to ensure it includes sufficient evidence to assist management in making well-informed decisions.
S&T agreed with the recommendations regarding the NVS contract and the IG said the directorate is implementing the recommendations.
DHS spokesperson Ginette Magana told Homeland Security Today DHS Secretary Jeh Johnson issued a memo in April 2014 directing the Unity of Effort Initiative designed to reform the decision-making process across the department. Magana said the initiative mirrors the recommendations made in the IG’s recent review of S&T’s contract management procedures.
“S&T agrees with the IG recommendations regarding the NVS contract and has made significant progress in reviewing and refining its business practices, consistent with the secretary’s Unity of Effort intent and the recommendations in the report," Magana stated.
“It is our fundamental responsibility to manage the Department of Homeland Security efficiently and sound management is critical to our ability to execute our mission,” Magana said, adding that, “S&T, and the department as a whole, will continue to build on the progress made over the last year and strive to be responsible stewards of the public trust in our missions.”