MFMP is a State initiative that, as authorized by law¹, encompasses the development and implementation of an electronic on-line procurement system.  The Department, in consultation with the State Technology Office and the Chief Financial Officer, is responsible² for developing a program for on-line procurement of commodities and contractual services.  To enable the State to promote open competition and to leverage its buying power, agencies shall participate in the on-line procurement program, and eligible users may participate in the program.  Only vendors prequalified as meeting mandatory requirements and qualifications criteria shall be permitted to participate in on‑line procurement.

The MFMP project is a State initiative in which the issues are complex and the investment of time and money is also great.  As the State continues to embark on the implementation of new initiatives that result in multi-million dollar contracts, proper contract administration is paramount to ensure that there is a maximum return on the State’s contracted dollars.

Many challenges are involved with the implementation of State initiatives, including, but not limited to:  (1) complying with the applicable laws, rules, and regulations that are enacted at the local, State, and Federal levels of government; (2) ensuring that the procurement process used to select a vendor results in the State receiving the best value for its money; (3) entering into contractual agreements that prudently benefit all parties involved; (4) obtaining sufficient funding to finance the project and responsibly disbursing the allotted funds in a manner that promotes accountability; (5) assuring the adequacy of project management for the duration of a project and the provision of deliverables in accordance with the contractual terms; and (6) updating the operating policies and procedures in a timely manner to provide effective and efficient administrative oversight for the implementation of these initiatives.

Recognizing the ongoing challenges that must be met to effectively and efficiently implement this new on-line procurement system, we conducted an audit of the procurement and contract administration of the MFMP project.  This audit included a review of compliance and selected controls, policies, and procedures over the evaluation, negotiation, and contract processes, including deliverables and contractual provisions relevant to the State contracting agency for this project (Department of Management Services), the contractor (Accenture, LLP), and the third-party consulting services monitor (The North Highland Company). 

We noted control deficiencies and compliance matters as summarized below.

Planning

An outsourcing initiative on the scale of MFMP requires thoughtful and detailed planning to help ensure a successful project that meets its objectives and delivers on time and within budget.  Our review disclosed deficiencies in actions taken and not taken by the Department during the planning of the ITN.  Specifically, the Department planning process did not include timely completion of a cost-benefit or risk analysis.  Additionally, the Department could not provide documentation that key end-users, stakeholders, subject matter experts, and seasoned technology project managers were consulted in the preparation of the ITN.  Also, significant baseline data, including total procurement spend and total procurement processing costs, was not available and analyzed during the planning process, nor was it available for the consideration of ITN responders.  A mechanism to capture and track all Statewide costs associated with the implementation and operation of MFMP was not established.  Although the Department allowed vendors to submit questions during the pre-ITN response conferences, not all the Department answers were informative or constructive to the ITN process.  (Finding Nos. 1, 7, and 8)

Evaluations and Negotiations

The Department failed to document the independence of some of the contract evaluators and negotiators, as well as the collective knowledge and experience of the evaluation and negotiation teams.  Additionally, the Department’s former Inspector General, in conflict with his oversight of internal audit responsibilities, participated in the evaluation of the eProcurement contract.  (Finding Nos. 2 and 10)

Contract and Amendment Provisions

Modifications to the eProcurement contract provided new system functionalities that were paid from transaction fees, costs that may have been avoided had the Department adequately conferred with the Department of Financial Services prior to the original contract.  Modifications also created a “contingency bucket” that was not anticipated by the original contract, the stated purpose of which was to allow the project to continue without interruption should future modifications be required.  Net additions and subtractions from the scope of the project provided $1.1 million for a contingency bucket.  A reduction of the contract’s audit and performance bond requirements added an additional $550,000 to the contingency bucket.  Additionally, regarding the North Highland contract, several contract amendments may have been avoided had the Department established and implemented effective policies and procedures in accordance with Chapter 287, Florida Statutes.  (Finding Nos. 4 and 11)

Fees and Revenue Share

The Department did not clearly document how it was determined that a 1-percent transaction fee would adequately fund the eProcurement system.  Additionally, the Department did not promulgate rules communicating those transactions and vendors exempted from transaction fees until nearly nine months after the contract was signed.  Also, revenues generated by the transaction fees for the first two years of the contract have fallen far short of projections, leading to a renegotiation of the contract.  After it became apparent that an interface within FLAIR would not be feasible, the contract was modified to provide for a Billing and Collection System (currently referred to as the Transaction Fee Reporting System).  This System relies on vendors to self‑report sales and transaction fees.    (Finding Nos. 3 and 5)

Funding and Financial Matters

MFMP, as it currently operates, gives Accenture custody of all transaction fees, even though the fees are to first pay the procurement oversight budget of the Department.  Additionally, Accenture maintains the records for fees collected.  Interest earnings on the transaction fees held by Accenture, not addressed in the contract, have become the subject of dispute.  In addition, although the cost for rental space at State offices was required to be incorporated into third-party consultant ITN responses, the Department did not charge for work space provided to North Highland.  The Department did not request specific appropriated funding for the third-party monitor contract and, without informing the Executive Office of the Governor, Office of Planning and Budgeting, and the Legislature, the Department utilized recurring appropriations that were requested for and previously used to assist in administering its natural gas contract.   (Findings No. 6, 9, and 12)

[1] Chapters 2000-164; 2001-278; and 2002-207, Laws of Florida.

[2] Chapter 2002-207, Laws of Florida.

The Department of Management Services Secretary's written response to the audit findings and recommendations is included in the audit report on the Auditor General Web site.