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USPS dismisses Inspector General’s concerns over Accenture contracts

Friday, June 21st, 2013

The US Postal Service has been warned off using the services of consultancy Accenture by its Inspector General, but postal executives responded that such action was “not necessary”.

Accenture Federal Services is one of the top 10 suppliers of USPS, securing around $135m from the Postal Service in the 2012 fiscal year.

But the Inspector General issued a report last week suggesting that since the company has been involved in court cases regarding its federal contracting practices from 2007 until 2011, USPS should consider suspending or debarring the company from postal work.

The IG said Accenture’s involvement in lawsuits regarding improper contracting practices created an “immediate risk of future fraud and abuse” in Postal Service contracts.

The warning has been dismissed by USPS management, which said the request to suspend or debar Accenture was “not warranted” given the evidence available to USPS. Accenture currently has four active contracts with USPS, for which it has already been paid $214m.

Accenture told Post&Parcel yesterday that it has been working with the Postal Service to address any concerns.

Settlements

The Inspector General citied lawsuits that were ultimately settled with the Department of Justice out of court regarding claims that Accenture, along with other federal government suppliers, had provided “inaccurate” pricing information when negotiating federal contracts. Other claims suggested that government advisors like Accenture had received kickbacks in return for recommending certain hardware or software products to the government.

The Postal Service received $21m from the DOJ’s settlements with all the federal suppliers concerned, but the DOJ did not bring claims on behalf of the Postal Service against Accenture, since it knowingly allowed Accenture to charge handling fees for acquiring third-party hardware and software.

An Office of the Inspector General investigation identified $71,000 in material handling fees charged by Accenture, and suggested that Postal Service officials had quietly accepted the charges despite federal procurement laws forbidding such practices.

The OIG investigation also alleged that $27,000 in payments were made to Accenture for the recommendation of products to Accenture’s customers, but the OIG said these amounts were so small compared to the contract values that they were not included in the wider federal settlement with Accenture.

The Inspector General issued an audit report last December looking at Accenture Federal Services, following up a 2011 Defense Contract Audit Agency (DCAA) report from 2011 that found that Accenture’s Postal Service cost estimating system was “inadequate”. The report stated that Accenture had addressed six of the eight DCAA recommendations for correcting the situation, but had not conducted periodic reviews of its estimating system, while failing to fully use a particular cost estimating tool resulted in $90,000 in “questioned” costs relating to eight USPS IT contracts valued in total at $8.2m.

At the time, the Inspector General merely recommended that USPS management require Accenture to implement its two remaining DCAA recommendations.

However, this month the Inspector General has gone much further, citing its December 2012 audit and the past DOJ lawsuits, concluding that Accenture had “demonstrated an absence of business ethics, a lack of transparency, and insufficient internal controls in its business dealings with the Postal Service”.

The Inspector General said this month: “The Postal Service should consider Accenture for suspension or debarment and review existing contracts to determine whether the contracts warrant termination. This action would protect the Postal Service’s financial interest from unethical, dishonest, or otherwise irresponsible supplier practices.”

“Not warranted”

In response, the US Postal Service vice president for supply chain, Susan Brownell, told the OIG that having had the USPS legal team review all the documents involved, it wasn’t necessary to block Accenture from USPS contracts in order to protect the Postal Service.

Brownell noted that USPS was not included in the DOJ settlement payout from Accenture, because of the “relatively low” material handling fees and kickbacks involved, and noted that the DOJ had stated in a September 2011 letter that it had no intention of investigating or filing suit against Accenture for providing inaccurate information. The USPS VP also noted that the Department of Defense and government procurement agency GSA had stated that there were no reasons to debar Accenture.

Regarding the DCAA recommendations, Brownell said Accenture had stopped its contentious business practices regarding the recommendation of partners’ products, corrected identified deficiencies in cost-estimate activity, and had provided assurances to USPS that it is operating with “integrity and openness” in dealings with the Postal Service.

The USPS VP also said that no other federal agencies had suspended or debarred Accenture.

“As the Postal Service’s Debarring Official and in consideration of the evidence submitted before me, I find that suspension or debarment of Accenture is not warranted, nor is it necessary, in order to protect the interests of the Postal Service,” said Brownell.

Accenture declined to comment on the specific recommendations of the USPS Inspector General, and spokesperson Joanne Veto referred Post&Parcel to the views of USPS management.

However, Veto added: “Accenture Federal Services worked closely with the US Postal Service to address any concerns.”

The Inspector General said regarding the USPS management comments that it would be content if USPS rectified the areas of concern, and would be providing follow-up audits on Accentures contracts and internal controls.

Source: Post&Parcel/USPS/Accenture

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