Commerce IG’s Report Criticizes FirstNet Ethics, Procurement Activities

Courtesy TRDaily

The Commerce Department’s Office of Inspector General today released its long-awaited report on ethics and contractor procurement matters involving the First Responder Network Authority (FirstNet) and concluded that there is a need to strengthen the management of financial disclosures by FirstNet board members and how the authority’s contracts are monitored.

Former FirstNet board chairman Sam Ginn asked the IG to look into ethics and contractor procurement issues last year (TRDaily, Oct. 25, 2013) in the wake of complaints leveled by then-board member Paul Fitzgerald, the sheriff of Story County, Iowa (TRDaily, April 23, 2013).  A special review committee of the FirstNet board reviewed other allegations of Mr. Fitzgerald’s, concluding that FirstNet “conducted open and transparent decision making,” “did not withhold records from Board members,” and “continues to work on a network plan in compliance with statutory requirements” (TRDaily, Sept. 23, 2013).

The IG report issued today concluded that the Commerce “Department’s confidential and public disclosure monitoring procedures were inadequate. OGC [Office of General Counsel] was unable to provide a record of all FirstNet confidential and public financial disclosure files, including due dates, as required by federal regulations. Nor had OGC created a schedule of Board members’ start dates of service, due dates of disclosures, or a centralized point of record showing the training and counselling provided.

“Board members did not file timely public financial disclosure reports,” the 53-page report also concluded. “One Board member initially did not file a required public disclosure—and, when eventually doing so, did not disclose an interest in a conflicting company. Another Board member submitted the required public disclosure form 5 months late. Two others submitted inaccurate time-and-attendance records, in one case to avoid filing the required public financial disclosure. Finally, all four of these Board members continued to engage in decision making, even though they were not in compliance with the financial disclosure requirements.”

The report also said that “operational procedures” used by the FirstNet board “for monitoring potential conflicts of interest need improvement. The Department does not appear to have anticipated that Board members would take on duties sufficient to trigger the more detailed of the required financial reporting requirements. In addition, six months after the Board began regular meetings, senior NTIA and OGC officials were still debating how best to routinely monitor potential conflicts of interest.”

Meanwhile, “FirstNet contracting practices lacked transparent award competition, sufficient oversight of hiring, adequate monitoring, and procedures to prevent payment of erroneous costs,” the IG said. “Even though one contract was properly awarded and administered, two contracts were not, as a result of (a) one contract’s sole-source procurement exceptions for other than full and open competition not appearing to meet FAR [federal acquisition regulation] standards of support; (b) undue influence from a FirstNet official, which interfered with the contractor’s ability to independently recruit and hire consultants; (c) adequate surveillance not being conducted over two contracts, resulting in approximately $11 million in unsupported costs to the government; and (d) the contracting officer’s representative approving duplicate and unsupported charges for one contract, as well as rates higher than that contract allowed.”

However, the report acknowledged “that, subsequent to discussions with OIG, FirstNet took steps to address concerns over Board members’ potential conflicts of interest and ethics issues.”

The report makes a number of recommendations.  For example, it said the Commerce secretary should “[d]etermine whether any of the financial disclosure noncompliance issues identified in our audit require additional administrative action,” while the Commerce general counsel should “[c]onduct a review of OGC internal controls pertaining to financial disclosure and conflict of interest at FirstNet, pursuant to the DAEO’s [designated agency ethics official] responsibilities described in the CFR.”

The FirstNet board chair should “(a) Send a memorandum to all FirstNet Board members and staff to remind them of their obligations under the Ethics in Government Act and corresponding regulations, including the submission of initial disclosure and final public filer termination reports, as well as the implementation of recusal procedures, as appropriate. (b) Provide the appropriate staff at the Office of General Counsel (OGC) routinely updated lists of entities representing potential conflicts of interest with FirstNet Board members and staff.”

The Commerce Department’s Senior Procurement Official should “(a) Provide guidance to NIST contracting staff on correct procedures for (1) selecting contract types, (2) hiring consultants, (3) ensuring receipt of deliverables, and (4) outreach, training, and oversight effort to prevent occurrences of unauthorized commitments, according to appropriate federal regulations and contractual requirements. (b) Provide sufficient resources and guidance to the Contracting Officer Representative (COR) assigned to FirstNet in order that the COR be able to perform adequate contract quality assurance activities. (c) Provide guidance to FirstNet management to ensure that the COR designated for contracts has the appropriate technical expertise to administer the contract. (d) Develop and implement policies and procedures to prevent FirstNet officials from managing contractor personnel as personal service contractors. (e) Identify any active FirstNet contracts or task orders currently being administered as personal services contracts and take action to correct their administration.”

FirstNet, the National Telecommunications and Information Administration, and the Commerce Department’s OGC submitted a 14-page joint response to a draft of the report that said they concur with the report’s recommendations and have worked to implement recommendations where necessary. The response said that Commerce “has a robust ethics program that went beyond Federal requirements” and it said that while “administrative requirements may not have been fulfilled in several instances with respect to certain disclosure reports, as far as we are aware, Board members made the material disclosures necessary to identify and address potential conflicts.”

The response also added that the report did “not identify any violations of conflict of interest laws or circumstances that actually affected FirstNet decision-making.” In addition, it said that “the early FirstNet contracts resulted in valuable work product that has been critical to the rapid establishment of the organization.” It also said that “contrary to the suggestions in the Report, FirstNet used sole-source contracting under an appropriate statutory exception.”

“To be clear, this response acknowledges that administrative errors were made along the way, and the Department takes those mistakes seriously,” NTIA, FirstNet, and Commerce added. “The Department has taken and will take steps to address errors such as date stamps and signatures missing from several confidential disclosure reports and approximately $16,000 in overpayments to contractors, which were contrary to standard Department procedures and practices. These issues occurred during the earliest stages of FirstNet’s existence, and they will not affect the significant procurements and other program activities that are now under way.”

In a statement released this morning, Commerce Department spokesman Jim Hock said that “FirstNet is continuing to evolve, grow and learn, and we appreciate the Commerce Department Office of Inspector General’s audit of the Commerce Department’s administration of the FirstNet ethics program and its early procurements. As in any start-up organization, we recognize that in the early stages of FirstNet there were administrative missteps and areas where documentation could have been improved. We concur with the Report’s administrative recommendations, most of which are in place already. These issues, however, were specific to the unique circumstances that existed during FirstNet’s early start-up operations, and we continue to take the steps necessary to ensure the integrity of the ethics program and contracting policies and procedures utilized by FirstNet. FirstNet today is on the right path toward meeting its statutory obligations and deploying a public safety broadband network for the nation’s public safety personnel.”

In a blog posting today, FirstNet Chairwoman Sue Swenson said that “many” of the ethics and contracting recommendations of the IG’s report have been implemented.

“FirstNet is a unique organization, charged with a significant task – to build the first-ever broadband network for the nation’s public safety community. No organization has accomplished what we have set out to do. We acknowledge some administrative missteps were made in the early days, and we have taken and will continue to take steps to address them,” Ms. Swenson said. “I am confident that the FirstNet of today is on the right path forward for these and many other reasons. Both the Department and FirstNet have instituted a comprehensive and effective ethics program and are taking the appropriate measures to help ensure first-rate procurement practices to assist in FirstNet’s mission. This includes the ongoing expansion of FirstNet’s formal compliance program to supplement existing Commerce Department requirements. We also have learned lessons from the early procurements and are now applying these experiences going forward to further improve.”

But Rep. Greg Walden (R., Ore.), chairman of the House communications and technology subcommittee, expressed disappointment today after the IG’s report was released. “Unfortunately, the Inspector General’s report confirms what we have suspected and long feared – that FirstNet had been operating without proper processes and with disregard for laws that guard against impropriety,” the lawmaker said. “Questions of ethics threaten the legitimacy of FirstNet’s efforts and ultimately undermine its important mission to build a nationwide public safety broadband network. We will continue our thoughtful oversight and hold additional hearings early next year and expect to see significant progress in implementing the Inspector General’s recommendations.” – Paul Kirby,