Acquisition Management: Opportunities Exist for GAO to Strengthen Its Policies and Procedures

TL;DR

The GAO OIG audit found deficiencies in GAO’s contract administration under a GSA (General Services Administration) Schedule-based blanket purchase agreement (BPA (Blanket Purchase Agreement)) for commercial facility maintenance that was awarded in FY 2019 and later modified to a maximum value of about $119 million. GAO failed to modify the BPA and associated time-and-materials orders to reflect adjusted labor rates from a contractor’s collective bargaining agreement, resulting in about $94,000 in overpayments during the second option year. The OIG also identified gaps in GAO’s standard operating procedures: unclear guidance on evaluating indirect costs/profit on subcontractor work (excessive pass-through charges) and ambiguous direction on applying contracting-by-negotiation rules to GSA Schedule procurements. GAO says it has updated its subcontracting procedures and is updating its GSA Schedule procurement policies. Immediate implications for contractors include likely increased scrutiny of rate modifications, invoice approvals, and pass-through billing on GSA Schedule orders — contractors should audit their own change/modification and invoicing practices now to avoid disputes and payment delays.

Key Points

• What happened: GAO entered a GSA Schedule-based BPA in FY 2019 (modified to a maximum value of about $119 million). GAO did not modify the BPA and related time-and-materials orders to reflect contractor-adjusted labor rates before payment, producing about $94,000 in overpayments in the second option year; OIG also found gaps in guidance on excessive pass-through charges and applicability of contracting-by-negotiation rules for GSA Schedule procurements.
• Who is affected: Facility Maintenance, Commercial Services, Building Services segments; NAICS: 561210, 561720, 561730, 562910; agencies: GAO, GSA; vehicles: GSA Schedule / GSA Multiple Award Schedule / BPA.
• Timeline: FY 2019 entry of the BPA; overpayment occurred in the second option year; additional policy updates are in process by GAO. (Audit conducted to assess time-and-materials orders issued under the BPA.)
• What contractors should do NOW: Immediately review any GSA Schedule BPAs and T&M orders for pending or implemented labor-rate modifications; confirm invoice rates match modified/negotiated rates before submission; document subcontractor pass-through cost/added-value evidence; update internal invoice-approval and modification-tracking procedures.

Who Is Affected

Specific NAICS codes, agencies, and contract vehicles are explicitly named in the segmentation: NAICS 561210, 561720, 561730, 562910; agencies GAO and GSA; contract vehicles GSA Schedule / GSA Multiple Award Schedule / BPA. Market segments called out: Facility Maintenance, Commercial Services, Building Services. Compliance surfaces implicated in the audit include FAR (Federal Acquisition Regulation) Part 15, FAR 52.215-22, Subcontracting Regulations, and issues around Excessive Pass-Through Charges.

Frequently Asked Questions

Q: Did GAO pay incorrect labor rates under the BPA?

A: Yes. According to the OIG, GAO paid about $94,000 more than previously negotiated rates during the second option year because the BPA and associated time-and-materials orders were not modified to reflect the contractor’s adjusted labor rates prior to payment.

Q: What policy or procedural gaps did the OIG identify?

A: The OIG found GAO’s procurement SOPs lacked clear guidance on evaluating contractor charges for indirect costs or profit when subcontractor work has little or no added value (excessive pass-through charges). The OIG also recommended clarifying applicability of contracting-by-negotiation rules to GSA Schedule procurements to avoid unnecessary procurement steps.

Q: What should contractors expect from GAO and similar agencies going forward?

A: GAO indicated it has updated its subcontracting procedures and is updating its GSA Schedule procurement policies. Contractors should expect increased emphasis on modification documentation, stricter invoice review for rate compliance, and closer scrutiny of pass-through charges. Specific future actions and timelines are TBD pending source review.

Definitions

• Blanket Purchase Agreement (BPA): A simplified acquisition mechanism used to fill recurring needs for services or supplies under a pre-negotiated agreement.
• Time-and-materials orders: Contracts or orders that pay for labor at specified hourly rates and reimburse materials at cost.

Intelligence Response

Cabrillo Signals War Room has already detected this OIG finding and delivered this briefing. Use the following Cabrillo products to operationalize a response:

• Cabrillo Signals War Room — continuous detection and alerting for audit findings, contract-vehicle changes, and policy updates. This alerting stream flagged the BPA-related overpayment and policy-gap findings.
• Cabrillo Signals Match Engine — rescores opportunity pipelines and adjusts prioritization when audit findings change the competitive or compliance landscape for GSA Schedule and BPA opportunities.
• Cabrillo Signals Intelligence Hub — creates saved searches for the affected NAICS codes, GAO/GSA opportunities, and GSA Schedule/BPA listings; notifies when follow-on solicitations or modifications appear on SAM.gov (System for Award Management).
• Proposal Studio (Proposal OS) — updates proposal compliance matrices and win themes to reflect heightened scrutiny on invoice/modification controls, pass-through charges, and FAR Part 15-related requirements.
• Proposal Studio Workflow Tracker — executes a 9-gate capture and compliance routing workflow and produces audit-ready documentation for invoice and modification records.

Notify these roles immediately: Contracts/Procurement Lead — to validate modification and invoice controls; Capture/BD Lead — to reassess pipeline and pursue or deconflict opportunities; Finance/Invoice Approver — to audit invoices and prevent overpayments; Compliance Officer/Legal — to review subcontracting and pass-through risk.

First 48-hour response playbook

• Hour 0–4: Confirm receipt of the Cabrillo Signals War Room alert; run Intelligence Hub saved searches for active BPAs and T&M orders under affected NAICS and GAO/GSA vehicles; tag contracts with potential rate-mod issues.
• Hour 4–12: Use Match Engine to rescore impacted opportunities; notify Contracts/Procurement Lead and Finance of identified contracts with pending/implemented labor-rate changes.
• Hour 12–24: Use Proposal Studio to update compliance matrices and standard invoice templates; require supporting documentation for subcontractor pass-through charges; generate checklists for invoice approvers.
• Hour 24–48: Use Workflow Tracker to create audit-ready records of any corrective actions, prepare communication templates for contracting officers, and schedule internal training on modified invoice/modification procedures.

Reference materials

• Primary hub: Winning Federal Contracts Guide (/insights/winning-federal-contracts)
• Related guides:
• CMMC (Cybersecurity Maturity Model Certification) Compliance Guide (/insights/cmmc-compliance-guide)
• CUI (Controlled Unclassified Information)-Safe CRM Guide (/insights/cui-safe-crm-guide)