The Internal Revenue Service must increase the effectiveness of its contract oversight, the Treasury Inspector General for Tax Administration (TIGTA) concluded in a report publicly released today.

During 2008, the IRS managed approximately 700 contracts with a total contract value of approximately $34 billion. These contracts were awarded by contracting officers who delegated their oversight authority to employees designated as contracting officer's technical representatives (COTR).

TIGTA found that the majority of the COTRs were not performing day-to-day contract oversight or physical receipt and acceptance of contract deliverables for the procurements to which they were assigned. Instead, these COTRs limited their involvement to administrative functions (i.e., documenting receipt of goods and services in IRS computer tracking systems) and relied on program office employees to determine whether the goods or services provided by the contractor were acceptable.

The majority of the program office employees were never formally delegated COTR authority by the responsible contracting officer and had not received training in Federal contracting to perform their contract administration role. In addition, COTRs were not evaluated on their performance of contract administration duties. When unauthorized personnel inspect deliverables or make recommendations regarding contract payments, there is a risk that work may not be completed in accordance with contractual requirements.

The IRS initiated mandatory training for the required professional certification for all employees formally designated as COTRs. However, the IRS needs to improve management oversight of less experienced COTRs and provide better on-the-job training and support.

"The COTRs become the ?eyes and ears' of the contracting officers," commented J. Russell George, the Treasury Inspector General for Tax Administration. "If COTRs are not properly authorized, trained and supervised, then the IRS lacks a key internal control to ensure that goods and services are of high quality and delivered in a timely and cost-effective manner," added Inspector General George.

TIGTA recommended that the IRS identify all IRS employees performing contract oversight and ensure that they are properly authorized and trained. Furthermore, TIGTA recommended that the IRS ensure that such employees' supervisors are knowledgeable about the oversight requirements for the contracts their employees are assigned to monitor and that they evaluate all aspects of their employees' contract management performance. The IRS disagreed with TIGTA's recommendation to amend employee evaluations to include contract management responsibilities for COTRs, citing technical difficulties in revising annual employee evaluation documents.