Top Five Failures in GSA Office of Inspector General (OIG) Audits #2, Unqualified Labor

At a Glance

• Main Takeaway: If an OIG audit or Contractor Assessment finds that a contractor utilizes unqualified labor on their GSA Multiple Award Schedule (MAS), it can result in overcharges.
• Business Impact: Using unqualified labor can cause adverse financial impacts on the contractor and its business.
• Next Steps: Utilizing certain best practices can reduce the risk of negative results in an OIG audit or Contractor Assessment and prevent significant overcharges.

The Full Story:

This is the second in a series of articles dedicated to compliance failures identified in OIG audits and focuses on the issue of utilizing unqualified labor. An objective on every OIG audit of MAS contracts including services is to determine whether the contractor “[a]ssigns employees to work on GSA schedule task orders who are qualified for their billable positions.” Service providers have the responsibility to ensure personnel performing work on their MAS contract, whether employees or subcontractors, meet the qualification requirements of their GSA labor category to avoid overcharges.

What if Unqualified Labor is Found During an OIG Audit?

The OIG will review a sample of resumes during each audit from resources who billed against MAS labor categories to determine if any personnel did not meet the labor category requirements. If unqualified labor is found during an audit, the contractor will be required to pay the difference between the rate charged and the rate for which the person qualifies, multiplied by the number of hours billed. Any time unqualified labor is found, the contractor will be required to refund the overcharges. If there are systemic issues, the OIG may trigger a post-award audit covering the entire five-year contract period.

The amount owed can accumulate quickly and be very costly to the contractor. Here is an example:

Jane Smith billed 1,650 hours against the Data Specialist I category, which requires a bachelor’s degree in computer science and one year of experience. Jane has five years of experience, but only a high school diploma. The MAS contract does not allow the substitution of experience for education, which means Jane cannot be mapped to any category requiring a bachelor’s degree.

The highest category Jane qualifies for is a Junior IT Professional II, which requires a high school diploma and four years of experience. The difference between the Data Specialist I and Junior IT Professional II hourly rates is over $80.00. The resulting overcharge is $136,719.00.

Best Practices to Avoid Negative Results from an OIG Audit or Assessment

No contractor wants to have unqualified labor found on their contract or be liable for the resulting overcharges. Having procedures in place will allow you to rest easy and have confidence that you do not have unqualified labor on the contract. To avoid this issue in an OIG audit or Contractor Assessment, service providers can implement the following best practices today:

• Review labor category requirements on your MAS contract to ensure they are not overly specific or restrictive. Do not write your description to fit the person in that position today because that will change. Labor categories should be based on the minimum requirements for the position to allow for flexibility in staffing. It is good to keep it simple!
• Incorporate an education and experience substitution methodology for all labor categories. Don’t forget to include substitutions for certifications such as the Project Management Professional (PMP) or other industry certifications. Document any substitutions applied at the order level.
• Document and validate each resource’s qualifications prior to allowing them to charge time to a MAS labor category. Repeat the validation process if the labor category assignment changes.
• Require employees to update resumes annually. A good time to do this is during the annual performance review process.
• Obtain current resumes for all subcontractors providing services under the MAS contract. Don’t rely on the subcontractor to ensure the personnel providing services under your GSA contract are qualified.
• Document any mapping of order labor categories to GSA labor categories.

A Note on Waivers

Ultimately, the MAS contract holder is responsible for ensuring all personnel performing services are qualified for the labor category that they are billed under. The ordering agency cannot provide a waiver of the MAS labor category requirements to allow an unqualified person to fill a position. The OIG auditor will take the opinion that the MAS contract terms and conditions supersede any other terms from an ordering agency.

The Bottom Line:

The use of unqualified labor is a common finding on MAS OIG audits and Contractor Assessments that could become very costly to the contractor. It is important for service providers to implement and maintain processes to validate the qualifications of all resources billing against their MAS labor categories. Aprio’s GSA consulting practice can assist MAS contractors with quantifying risk and implementing solutions for this common issue whether you anticipate an OIG audit or simply want a compliance health check before your next assessment.

Contact Aprio’s GSA consulting practice for help quantifying risk and implementing solutions today.