CMS Has Not Performed Required Closeouts of Contracts Worth Billions

WHY WE DID THIS STUDY

The Centers for Medicare & Medicaid Services (CMS) relies extensively on contractors to carry out its basic mission and spends billions of dollars each year in contracts for a variety of goods and services. A contract is closed once the contractor has completed contract requirements and the Government has completed all required administrative actions. Because improper payments may be identified and recovered during the closeout process, it is imperative that contracts are closed within Federal Acquisition Regulation (FAR) timeframes. The closeout process, generally, is the last chance for improper contract payments to be detected and recovered, and delayed closeout poses a financial risk to agency funds.

A report by the Government Accountability Office (GAO) in 2009 found a large backlog of unclosed contracts at CMS. OIG designed this study to review the state of unclosed contracts as of February 2014, to gauge CMS's progress, and to support continuing improvements in contract management. Recommendations will help CMS improve its contract management and better protect Federal funds.

HOW WE DID THIS STUDY

This study focused on CMS's FAR contracts that were active as of February 2014, and its FAR contracts pending closeout as of February 2014. We analyzed contract data to determine (1) the number of active contracts and the amounts obligated to those contracts and (2) the number and total cost of contracts pending and overdue for closeout. We also interviewed CMS staff and reviewed policies and procedures related to contract closeout.

WHAT WE FOUND

CMS obligated $15 billion to 1,229 contracts that were active as of February 2014. These contracts were held by 500 separate contractors, with 7 contractors having obligated amounts over $500 million. As of February 2014, CMS contractors completed work for 6,126 contracts that CMS had not closed out as required under the FAR. These contracts totaled $25 billion. CMS continues to have thousands of contracts overdue for closeout, with 15 percent of contracts that completed before fiscal year (FY) 2011 at least 10 years overdue. Furthermore, the closeout status of a number of contracts could not be determined because of inconsistent and conflicting data. Because the closeout process is usually the last chance for improper payments to be detected and recovered, delays in the closeout process pose a financial risk to CMS. While CMS has not consistently met FAR timeframes for closing out contracts, it has been improving the timeliness of contract closeouts over the past several years. CMS reported a number of barriers, including resource constraints, which CMS believes prevent the timely closeout of contracts. Finally, key pieces of information, such as project description and contract payments, which CMS could use to manage and oversee contracts, are not easily accessible through its contract management system.

WHAT WE RECOMMEND

We recommended that CMS (1) implement additional strategies to meet required FAR timeframes for closeout, (2) determine the status of contracts for which closeout status could not be determined, (3) improve reports from CMS's contract management system to allow for easier access to contract data that would assist in closeout and funds management, and (4) improve coordination and collaboration across departmental staff with contract closeout responsibilities. CMS concurred with all four recommendations.