Inspection Report: DOE-OIG-19-28

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April 25, 2019

Allegations of Improper Contracting by Southwestern Power Administration

The Southwestern Power Administration (Southwestern), established as a Federal agency in 1943, operates as part of the Department of Energy under the authority of Section 5 of the Flood Control Act of 1944.  Southwestern’s mission is to market and reliably deliver Federal hydroelectric power with preference to public bodies and cooperatives.

The Division of Power Marketing and Transmission Strategy (Power Marketing Division) is responsible for contracting for the sale, exchange, transmission, or purchase of power and energy governed by Section 5 of the Flood Control Act of 1944.  It also handles interconnection agreements for electrical system integration, where other transmission providers interconnect their lines to Southwestern’s transmission lines.  Southwestern’s Division of Acquisitions and Facilities Services is responsible for all acquisitions of goods, services, construction, and real property under Federal Acquisition Regulations and Department of Energy Acquisition Regulations, except where expressly excluded; this division is also responsible for property management acquisitions, permits, licenses, easements, disposals, and leases of general office space.

The Office of Inspector General received multiple allegations, from various complainants, of improper contracting activities at Southwestern.  For the purposes of this inspection, we summarized the details into nine allegations.  Seven of the allegations questioned activities of Southwestern’s Power Marketing Division.  The remaining two allegations were related to Southwestern’s former Administrator and Southwestern’s transmission line services.  We initiated this inspection to determine the facts and circumstances surrounding these allegations.

We substantiated four of the allegations related to activities of Southwestern’s Power Marketing Division and could not substantiate the remaining five allegations.  We could not substantiate the allegations that the Power Marketing Division improperly procured equipment for the Jonesboro substation, procured equipment for the Water Valley switching station, or granted the right to place equipment at the Jonesboro substation.  Additionally, we were unable to substantiate the allegations that Southwestern’s former Administrator attempted to circumvent the normal procurement process for acquiring office space or that Southwestern improperly provided transmission line services outside its territory.

The improper contracting activities we substantiated occurred because the Power Marketing Division lacked formalized policies and procedures that clearly outlined its authorities, limitations, and review processes for making agreements.  In addition, Southwestern’s prior practices and beliefs influenced contracting activities.  As a result of these improper contracting activities, Southwestern circumvented Federal procurement and real estate regulations designed to ensure the Government’s interests were protected and costs were reasonable.  Therefore, we made three recommendations that, if implemented, would help ensure that these events do not occur in the future.

Topic: Management and Administration