The Office of the Inspector General (OIG) at the Department of Homeland Security received a request from seven U.S. Senators to examine the Federal Emergency Management Agency’s (FEMA) contracts awarded to Bronze Star LLC as part of its 2017 hurricane response and recovery efforts in Puerto Rico. OIG conducted an audit to determine whether FEMA followed procurement laws, regulations, and procedures when awarding contracts to Bronze Star and announced its findings May 7.
On October 5, 2017, FEMA awarded Bronze Star a $21.2 million contract for 475,000 tarps. Five days later, FEMA awarded another contract to Bronze Star for $9.2 million for 60,000 units of plastic sheeting. Then, on November 6, FEMA canceled both Bronze Star contracts due to non-delivery of the tarps and plastic sheeting. Following the Bronze Star cancellations, FEMA awarded a new $30.8 million contract, on November 9, 2017, to another bidder from the original tarps solicitation — Master Group USA LLC — for 475,000 tarps. However, it did not reissue a plastic sheeting contract because there were no other qualified bidders in response to the original plastic sheeting solicitation. Instead, FEMA issued two additional plastic sheeting solicitations and subsequently awarded two additional plastic sheeting contracts to different contractors.
The audit found that FEMA did not follow all procurement laws, regulations, and procedures when it awarded more than $30 million for two contracts to Bronze Star for tarps and plastic sheeting. In fact, OIG says FEMA did not fully determine Bronze Star’s or its supplier’s compliance with the contracts’ terms because it did not verify that Bronze Star could meet either contract’s delivery schedule. It also did not perform steps necessary to determine whether Bronze Star’s supplier could provide the necessary roof coverings within contractually specified timelines. Further, OIG says FEMA performed inaccurate technical reviews of the Bronze Star proposals, used incorrect Federal Acquisition Regulation clauses and did not reissue the original solicitations because FEMA personnel believed that a 5-hour response window for the tarp modification was sufficient, and the plastic sheeting solicitation had already closed. In addition, FEMA did not consult the Disaster Response Registry, as required, because it lacked guidance and procedures.
As a result of these management control weaknesses, the audit found that FEMA inappropriately awarded two contracts to Bronze Star, which did not meet the requirements of either contract. OIG says this deficiency delayed delivery of crucial supplies, and impeded Puerto Rican residents’ efforts to protect their homes and prevent further damage. In summary, OIG says FEMA wasted personnel resources, time, and taxpayer money by issuing, canceling, and reissuing contracts for tarps.
It is also worth considering that during an acquisition immediately following cancellation of the Bronze Star contracts, FEMA required a potential contractor to provide verifiable information, such as three reference letters and two letters of a commitment from its suppliers prior to contract award. FEMA did not perform this level of due diligence during the acquisition of the Bronze Star contracts.
In the report, OIG recommended that the FEMA Administrator include specific requirements in all future solicitations for prospective contractors to provide verifiable information in their proposal packages. This information should be used to assess and support whether a contractor and supplier is responsible. A second recommendation calls for FEMA to develop or update current policies to make certain that applicable Federal Acquisition Regulation clauses are included in each solicitation; aid the contracting officer in the decision-making process regarding solicitation changes and when a solicitation should be canceled and reissued; provide oversight to ensure the accuracy of all technical evaluations of bid proposals prior to contract award; and conduct market research using the Disaster Response Registry.
FEMA non-concurred with the report recommendations, maintaining that its existing processes already adequately ensure that all contract terms and conditions are clearly defined and implemented. Furthermore, FEMA stated that it only canceled four contracts during the 2017 hurricane season, which, FEMA says, did not hinder it’s ability to achieve its mission. However, documentation provided by FEMA during the OIG audit revealed that the agency canceled a total of 19 contracts related to Hurricane Maria alone.
OIG has expressed its surprise by FEMA’s non-concurrence with the recommendations, given that FEMA does not disagree with the report findings and plans to take other corrective actions to address the deficiencies identified. OIG has also disagreed with FEMA’s assertion that its existing processes adequately ensure that all contract terms and conditions are clearly defined and implemented and maintains that the report findings indicate otherwise. OIG believes such deficiencies are indicative of systemic problems within FEMA’s procurement process.