September 4, 2019

The Department of Energy’s Interagency Agreements

The Economy Act of 1933  (Economy Act) provides authority for Federal agencies to acquire goods and services through interagency agreements, if those goods or services cannot be provided as conveniently or at a lower price by commercial enterprises.  The Department of Energy can enter into two types of agreements: interagency acquisitions and interagency transactions.  In both cases, the servicing agency may charge a fee for the assistance, such as a percentage of the contract value or an itemized charge for services.  The Department may enter into interagency agreements as either the requesting agency or the servicing agency.  In some cases, the Department enters into agreements on behalf of the management and operating (M&O) contractors that manage its sites.

Between fiscal years 2012 and 2017, the Department paid approximately $9.7 billion to other agencies on 1,585 interagency agreements for goods, services, and fees.  Given the amount of funding involved, we initiated this audit to determine whether the Department’s use of interagency agreements complied with applicable regulations and Department policies.  We found the Department could not demonstrate that its use of interagency agreements fully complied with applicable regulations and Department policies.

These issues occurred because procurement officials that we spoke to did not believe that they were required to document acquisition planning in the file or obtain support for costs incurred.  Consequently, the Department had no assurance that it took the best procurement approach to meet its mission needs.  Additionally, there was no assurance that the interagency agreement costs represented appropriate project efforts or that costs were appropriately charged to the Department.

Without adequate acquisition planning, the Department may not have acquired goods and services as conveniently or economically as possible by using interagency agreements, totaling approximately $149 million, instead of using a commercial enterprise.  During our audit, Department officials told us that they perceived interagency agreements as having very little risk since other Federal agencies have no profit motive.  Despite the lack of profit motive, the consideration of alternative sources for interagency transactions or market research for interagency acquisitions confirms the cost effectiveness of using the other agencies’ contracts or procurement functions.

To address the issues identified in our report, we made recommendations to the Department.  Management generally concurred with our recommendations and identified actions it would take to address them.  Management’s proposed actions are responsive to our recommendations.

Topic: Management and Adminstration