Report 2009-114 All Recommendation Responses

Report 2009-114: Department of General Services: It No Longer Strategically Sources Contracts and Has Not Assessed Their Impact on Small Businesses and Disabled Veteran Business Enterprises (Release Date: July 2010)

Recommendation #1 To: General Services, Department of

To ensure that it determines savings to the State going forward for strategically sourced contracts, General Services should examine the State's recent purchasing patterns when determining whether to rebid or extend previously strategically sourced contracts and when estimating expected savings. It should subsequently compare the savings it achieves to the expected savings for those contracts.

Annual Follow-Up Agency Response From October 2013

At the time of our previous update in September 2012, the DGS' Procurement Division (PD) had fully implemented this recommendation except for the final step of comparing expected savings for a sourced contract to actual savings. As of August 2013, this activity is now in place for sourced contracts.

PD's Intake and Analysis Unit has developed a guide describing the process to be followed in comparing actual to expected savings in order to determine if a new competitively bid solicitation met the expected savings. Consequently, PD implemented the provisions contained in that guide in performing savings comparisons for recently awarded statewide contracts for Waterborne Paint and PC Goods.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From September 2012

At the time of our previous update in November 2011, the DGS had fully implemented this recommendation except for the final step of comparing expected savings for a sourced contract to actual savings based on usage reports. This activity is now in place for sourced contracts. See Enclosure I for an example of a savings report for contracts under the Multifunctional Devices category of equipment.

It should be noted that the DGS previously reported that a maintenance, repair and operations statewide contract would be used to show the savings calculation process. However, after conducting an opportunity assessment, the DGS decided to not move forward on that contract.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Recommendation #2 To: General Services, Department of

To ensure that it maximizes the savings to the State for future purchases, General Services should follow the procedures for identifying strategic sourcing opportunities included in the IAU's procedures manual. To ensure that it is effectively identifying new strategic sourcing opportunities, General Services should work to obtain comprehensive and accurate data on the specific items that state agencies are purchasing, including exploring options for obtaining such data for agencies that do not have enterprise-wide systems and therefore would not be using the additional functionality of the eProcurement system. Until it obtains such data, General Services should work with state agencies to identify detailed purchases for categories that it identifies through the State Contract and Procurement Registration System (SCPRS) as viable opportunities for strategically sourcing. For example, if based on its review of SCPRS data, General Services identifies a particular category that it believes is a good candidate for strategic sourcing, it should work with those state agencies that accounted for the most purchases within the category to determine the types and volume of specific goods purchased to further analyze the types of goods to strategically source. General Services should assess any need for additional resources based on the savings it expects to achieve.

Annual Follow-Up Agency Response From September 2012

At the time of our previous update in November 2011, the last remaining portion of this recommendation to be fully implemented was the analysis of sourcing opportunities based on the Procurement Division's (PD) quarterly review of information obtained from the eSCPRS acquisition data base. In November 2011, the PD assigned staff to review available data on potential sourcing opportunities, i.e., to review for opportunities to establish a new statewide contract for a commodity/service. Based on that review, two categories of information technology products were selected for the performance of a high level analysis to discover the potential of creating a sourced solicitation for those goods. The two categories of information technology products are: (1) Fixed Network Equipment and Components and, (2) Network Service Equipment.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation #3 To: General Services, Department of

To provide decision makers with the information necessary to determine the true costs and benefits of strategic sourcing, General Services should evaluate any impact strategic sourcing has on small business and DVBE participation in terms of number of contracts awarded and amounts paid to small businesses and DVBEs within the categories being strategically sourced. Specifically, for goods that were strategically sourced, General Services should compare the number of contracts awarded to small businesses and DVBEs before they were strategically sourced with those awarded through such contracts after they were strategically sourced. This effort should include contracts awarded by General Services and other state agencies.

Annual Follow-Up Agency Response From September 2012

At the time of our previous update to this recommendation, the only outstanding item was to complete an assessment of the impact on small business and DVBE usage after the issuance of two statewide contracts: Toner/Ink Cartridges – New and Toner/Ink Cartridges – Remanufactured. This assessment was completed in October 2012 (See Enclosure I).

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation #4 To: General Services, Department of

To evaluate the effectiveness of the off ramp in providing opportunities for small business and DVBE participation, General Services should track the number and dollar amounts of contracts that state agencies award through the use of the off ramps in strategically sourced and other mandatory statewide contracts. General Services' evaluation also should consider the extent to which an off ramp affects the monetary benefits that result from statewide contracts designed to leverage the State's purchasing power.

Annual Follow-Up Agency Response From September 2012

At the time of our previous update to this recommendation, the only outstanding item was to complete an assessment of the off-ramp program's effectiveness in providing opportunities for small businesses and DVBEs to participate in contracts with State agencies even though a mandatory statewide contract exists. In October 2012, the Procurement Division completed an assessment for two statewide contracts: Toner/Ink Cartridges – New and Toner/Ink Cartridges – Remanufactured (See Enclosure II)

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation #5 To: General Services, Department of

To ensure that small business and DVBE subcontractors comply with the commercially useful function requirements, General Services should develop guidance for state agencies on how to ensure that subcontractors perform commercially useful functions if it believes state agencies making the purchases through statewide contracts should be responsible for this task. In addition, General Services should monitor, on a sample basis, whether state agencies are ensuring compliance with these requirements. General Services could leverage its efforts by working with other state agencies to ensure that subcontractors claiming to have provided the goods and services to the purchasing agency did, in fact, perform the work for which they are invoicing the state agencies.

Annual Follow-Up Agency Response From September 2012

At the time of our previous update in November 2011, the DGS had fully implemented this recommendation except the Procurement Division (PD) had not entered into a statewide contract that required a user department to verify compliance with commercially useful function (CUF) service requirements on individual transactions. In September 2012, the PD added language to all applicable contracts that requires ordering departments to confirm CUF when value-added services are performed by small business (SB) and DVBE subcontractors. As examples of this new practice, see Enclosures III, Article 36A, and IV, Article 34, for language that was recently added to two statewide contracts related to the responsibility of ordering departments to confirm the performance of CUF services by SB/DVBE subcontractors.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation #6 To: General Services, Department of

To improve the integrity of its monitoring of pricing compliance, General Services should implement procedures to help ensure that usage reports reflect the actual items received and prices paid by the state agencies that purchased the items. For example, on a periodic basis, it could select a sample of purchases from the usage reports and work with purchasing state agencies to confirm that the prices and quantity of items reported reconcile with the invoices submitted by the contractor.

Annual Follow-Up Agency Response From September 2012

The last remaining portion of this recommendation to be implemented at the time of our July 2011 one-year status report was the Procurement Division (PD) implementing a process for sampling State department purchasing documents to verify the accuracy of a contractor's usage reports. In April 2012, the PD completed its first compliance review of a statewide contract. The review included the verification of the accuracy of contractor usage reports based on transaction documentation obtained from a State department. See Enclosure V for the final report on the compliance review.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation #7 To: General Services, Department of

To ensure that it has maximized the savings for CGI-recommended categories that it did not strategically source, General Services should conduct its planned review of these categories to determine if there are further opportunities to achieve savings.

1-Year Agency Response

General Services completed its review of consultant-recommended categories that it did not strategically source and concluded that none of the 20 categories warranted additional strategic sourcing contracting efforts. General Services noted that its review confirmed that it used other traditional acquisition techniques to acquire those goods or services that accomplished the same goal as strategic sourcing. It noted that for the remaining categories, such as architectural and engineering services, electricity, and leased real property, the review determined that the categories were of such a broad nature that strategic sourcing techniques could not be applied. In response to our request for documentation of the analysis performed that resulted in its conclusions, General Services provided a document of about three pages. The document commented on the results of each of the categories for which it or others conducted traditional acquisition methods. For many of the categories, General Savings indicated that either savings would be measured by individual contract or savings were not measured. Additionally, General Services described the factors that it believes prevent strategic sourcing of other categories. However, although General Services completed its planned review, we note that the review was unable to report aggregate savings information for many of the categories for which it indicated traditional acquisition techniques were used. This underscores the need for General Services, as it implements our recommendations regarding future purchases, to ensure that it is tracking actual savings in such a way that it can compare them against expected savings. (2012-406, p. 34).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #8 To: General Services, Department of

To ensure prompt recovery of state funds, General Services should implement standard procedures to recover overcharges identified by the Compliance and Savings Administration system. General Services' new procedures should specify the amount of time it considers reasonable to recover funds due back to the State.

1-Year Agency Response

General Services has developed standard procedures to recover any overcharges, including the amount of time considered reasonable to recover funds due back to the State. The procedures provide for the issuance of a demand notice for payment of any identified overcharges—normally within 30 days—and monthly monitoring of any outstanding amounts. (2012-406, p. 36).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

All Recommendations in 2009-114

Agency responses received after June 2013 are posted verbatim.