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Evaluation of the Department of Public Work’s Monitoring and Oversight of the Ticket Processing and Delinquent Ticket Debt Collection Contracts
April 22, 1999

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OFFICE OF THE DISTRICT OF COLUMBIA AUDITOR
717 14TH STREET, N.W., SUITE 900
WASHINGTON, D.C. 20005
TEL. 202-727-3600, FAX 202-724-8814

Deborah K. Nichols
District of Columbia Auditor

006-099-SDG-SD

Evaluation of the Department of Public Work’s Monitoring and Oversight of the Ticket Processing and Delinquent Ticket Debt Collection Contracts

TABLE OF CONTENTS

Executive Summary
Purpose
Objective, Scope, and Methodology
Background

Ticket Processing Contract Status
Delinquent Ticket Debt Collection Contract Status

Findings

DPW Did Not Effectively Monitor the Services Provided by Lockheed under the Ticket Processing and Delinquent Ticket Debt Collection Contracts
Department of Public Works Relied on a Manual Methodology to Monitor and Evaluate Lockheed's Fully Automated Ticket Information Management System (TIMS)
DPW Could Not Independently Test the Validity of Information Presented In Reports and Invoices Submitted by Lockheed
DPW Failed to Adequately Plan and Award a New Ticket Processing Contract at the Expiration of the Original Contract
Emergency Sole Source Contracts Awarded by DPW Did Not Comply with 27 DCMR Sections 1710.2, 1710.3, and 1710.4
Lockheed Provided Ticket Processing Services Totaling Approximately $475,232 That Were Not Covered by Valid Written Contracts at the Time Services Were Rendered
DPW Did Not Periodically Evaluate Lockheed's Delinquent Ticket Debt Collection Services
DPW Did Not Perform Periodic Analyses to Determine Whether the Contractor Met the Guaranteed Minimum Rate of Recovery (GMRR) for Each Delinquent Ticket Assignment
Lockheed's Collection Rate Averaged Approximately 16 Percent During Fiscal Years 1996 and 1997

Fiscal Year 1996 Ticket Assignments and Collections
Fiscal Year 1997 Ticket Assignments and Collections

Outstanding Delinquent Parking Tickets Carried Forward Year After Year by the Contractor Represent a Minimum of $20 Million in Uncollected Revenue

Fiscal Year 1996 Delinquent Ticket Inventory Pool
Fiscal Year 1997 Delinquent Ticket Inventory Pool

CONCLUSION

Appendix 1 (not available on-line)

Agency Comments

Office of the Chief Financial Officer, February 26, 1999
Department of Public Works, March 1, 1999
Department of Public Works, March 23, 1999

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EXECUTIVE SUMMARY

PURPOSE

The purpose of this audit was to evaluate the Department of Public Works' (DPW) monitoring and oversight of the District government's parking ticket processing and delinquent ticket debt collection contracts. The two contracts were awarded on October 13, 1992 and December 25, 1994, respectively THE ticket processing contract expired on October 12,1997. The delinquent ticket debt collection contract is due to expire on December 24, 1999.

CONCLUSION

The Department of Public Works failed to establish an effective monitoring system for services provided by Lockheed under the ticket processing and delinquent ticket debt collection contracts. Department officials assigned only one employee, a technical representative, the primary responsibility of monitoring these major, technically complex contracts. As a result of operating and other deficiencies, the Department of Public Works routinely authorized payments to the delinquent ticket debt collection contractor without evaluating the quality of data underlying the contractor's invoices. The data underlying the contractor's invoices often contained numerous parking ticket overpayments from which the contractor collected a second fee.

DPW failed to timely complete the competitive process to award a new ticket processing services contract and was forced to issue four 45-day or less sole source emergency contracts, and a one-year sole source contract for these services. The emergency sole source contracts awarded by DPW did not comply with 27 DCMR Sections 1710.2, 1710.3, and 1710.4. The emergency sole source contracts were awarded because of DPW's lack of advance planning, administrative delays, and untimely execution of the procurement process for ticket processing services.

The Auditor determined that DPW allowed Lockheed to provide ticket processing services for short periods of time without valid contracts in place and, as a consequence, the District incurred costs totaling approximately $475,232 for services rendered without a valid contract in place. This occurred mainly because DPW officials did not approve a 17-day emergency sole source contract until after the contractor provided the services. Services rendered without valid written contracts circumvented the Procurement Practices Act of 1985, as amended, and D.C. Code, Section 1-1181.5(d)(1) which stases that: "No District employee subject to this Chapter shall authorize payment for the value of goods and services received without a valid written contract..."

DPW failed to develop measures to effectively evaluate Lockheed's performance under the delinquent ticket debt collection contract. The absence of performance benchmarks, measures, and standards, in addition to the failure to periodically evaluate performance undermined the District's ability to obtain reasonable assurance that the contractor exercised due diligence on behalf of the District government in performing delinquent parking ticket revenue collection services

The Auditor also found that hundreds of thousands, and possibly millions, of uncollected delinquent parking tickets were carried forward by the District's contractor from year to year. Approximately 1,307,085 uncollected delinquent parking tickets had accumulated specifically during fiscal years 1995 through 1997. The 1,307,085 delinquent parking tickets represented a minimum of approximately $20 million in uncollected revenue.

The District's failure to invest sufficient resources in computer hardware, software capable of analyzing data, and human resources hampered effective monitoring and oversight of I Lockheed's performance and contract compliance, and hampered periodic evaluations of data maintained in the Ticket Information Management System (TIMS).

The administration and management of the ticket processing and delinquent ticket debt collection contracts can be improved significantly with the addition of modest resources and the development and implementation of performance standards specifically applicable to this function. Contractor performance under the delinquent ticket debt collection contract may also be improved significantly, in part, by establishing competitive performance standards and a substantially improved and more effective monitoring and evaluation system. Finally, the District's strategy to collect delinquent parking ticket fines and penalties must be significantly improved in order to maximize revenue well beyond the contractor's present disappointing collection rate.

MAJOR FINDINGS

  1. DPW did not effectively monitor the services provided by Lockheed under the ticket processing and delinquent ticket debt collection contracts.
  2. Department of Public Works relied on a manual methodology to monitor and evaluate Lockheed's fully automated Ticket Information Management System (TlMS).
  3. DPW could not independently test the validity of information presented invoices submitted by Lockheed.
  4. DPW failed to adequately plan and award a new ticket processing contract at the expiration of the original contract.
  5. Emergency sole source contracts awarded by DPW did not comply with 27 DCMR Section 1710.2.
  6. Lockheed provided ticket processing services totaling approximately $475,232 that were not covered by valid written contracts at the time services were rendered.
  7. DPW did not periodically evaluate Lockheed's delinquent ticket debt collection services.
  8. DPW did not perform periodic analyses to determine whether the contractor met the Guaranteed Minimum Rate of Recovery (GMRR) for each delinquent ticket assignment.
  9. Lockheed's collection rate averaged approximately 16 percent during fiscal years 1996 and 1997.
  10. Outstanding delinquent parking tickets carried forward year after year by the contractor represent a minimum of $20 million in uncollected revenue.

RECOMMENDATIONS

  1. DPW and/or the Department of Motor Vehicles establish an effective automated contract compliance and performance monitoring component to continuously evaluate the quality of data maintained in the Ticket Information Management System and the quality of services provided by Lockheed under the ticket processing and delinquent ticket debt collection contracts.
  2. DPW and/or the Department of Motor Vehicles allocate sufficient resources to effectively monitor the ticket processing and delinquent ticket debt collection contracts.
  3. DPW and/or the Department of Motor Vehicles (DMV) establish a methodology, which should include an automated evaluation component, to independently verify the validity of information contained in reports submitted by Lockheed. The methodology should enable DPW and/or DMV to determine the reliability and accuracy of data submitted by the contractor, contractor compliance with the terms of the contract, and any other issues requiring management's immediate attention.
  4. DPW, in conjunction with the Office of the Chief Procurement Officer of the District of Columbia, should adequately plan, in advance, for the award of new contracts, and must timely execute the procurement process to avoid the use of sole source contracts.
  5. DPW, in future emergency procurements, comply with the provisions of 27 DCMR Sections 1710.2, 1710.3, and 1710.4.
  6. The Chief Procurement Officer of the District of Columbia strictly enforce D.C. Code, Section 1-1 181.5 (d)(2) and (3) which requires the termination of a District employee or supervisor who enters into or authorizes an oral agreement with a vendor to provide goods or services without a valid written contract.
  7. DPW immediately establish relevant, objective, verifiable performance measures to annually evaluate the delinquent ticket debt collection contractor's performance.
  8. DPW require the delinquent ticket debt collection contractor to report to the Council of the District of Columbia, at the end of each fiscal year, the number of uncollected tickets assigned during the fiscal year that will be carried over to the next fiscal year. The contractor's report must include an effective and efficient strategy for collecting revenue from most, if not all, of the delinquent tickets carried forward into the next fiscal year.
  9. DPW seek payment of $2,917 from Lockheed as a result of the contractor not meeting the GMRR for unidentified tickets in the three assignments discussed in this report.
  10. The Chief Financial Officer of the District of Columbia develop a strategy for collecting delinquent parking ticket revenue from tickets not successfully collected by the contractor over a two-year delinquent collection assignment period, and develop and implement an appropriate policy for writing-off delinquent parking ticket fines and penalties.

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PURPOSE

The purpose of this audit was to evaluate the Department of Public Works' (DPW) monitoring and oversight of the District government's parking ticket processing and delinquent ticket debt collection contracts. The two contracts were awarded on October 13, 1992 and December 25, 1994, respectively. The ticket processing contract expired on October 12, 1997. The delinquent ticket debt collection contract is due to expire on December 24, 1999.

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OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of this audit was to determine: (1) the quality of DPW's monitoring and oversight of the ticket processing and delinquent ticket debt collection contracts, (2) the contractor's compliance with certain provisions of the contract; and (3) whether the contract's provisions were administered by DPW in a manner intended to serve the District's best interest.

The scope of the audit included activities noted above for the period October 1,1995 through September 30, 1997. The scope also included a review of information related to the ticket processing and delinquent ticket debt collection contracts through May 6, 1998.

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BACKGROUND

The Traffic Adjudication Act of 1978 was enacted by the Council of the District of Columbia on June 30, 1978. This law decriminalized parking and minor moving violations, provided for the administrative adjudication of parking and certain moving violations, and provided for the civilian enforcement of parking laws and regulations. District of Columbia Code, Section 40-605(b) of the Traffic Adjudication Act of 1978 states, in relevant part, the following:

"... The Director may pay a reasonable percentage of monies collected to private agencies for the collection of fines, penalties and fees."

Pursuant to this authority and the authority to procure and contract for goods and services1, the District of Columbia government, through the Department of Administrative Services and the Department of Public Works, awarded contracts for the operation and maintenance of a parking ticket processing system and a delinquent parking ticket debt collection system. Lockheed Martin IMS Corporation (Lockheed) has provided these services under two different contracts with the District government since the early 1980's. The Department of Public Works' Transportation Systems Administration (TSA) was responsible for administering and monitoring both contracts. On June 23, 1998, D.C. Act 12-399 was enacted by the Council of the District of Columbia to establish the Department of Motor Vehicles (DMV). The Act, which became effective on October 1,1998, transferred the Bureau of Traffic Adjudication and Bureau of Motor Vehicle Services to the Department of Motor Vehicles. The responsibility for administering and monitoring services provided under the ticket processing and delinquent ticket debt collection contracts now fall under the jurisdiction of the Department of Motor Vehicles and the Department of Public Works.

Under the ticket processing contract, Lockheed provided ticket processing services relative to tickets issued for parking and certain moving violations in the District of Columbia. Ticket processing services included, but were not limited to, ticket payment processing, data entry services for all tickets and payments, lockbox payment processing, on-line cashiering services, and delinquent notice generation.

Under the delinquent ticket debt collection contract, Lockheed provided services pertaining to the collection of delinquent parking ticket payments that had not been paid for 45-days or more after issuance. The delinquent parking ticket collection contract required Lockheed to collect delinquent fines and penalties resulting from tickets issued for parking and certain moving violations, issue delinquent collection notices, maintain an information database for tickets assigned to it for delinquent collection activity, and develop effective debt collection strategies.

Over the seven-year period of 1992 through 1998, revenue collected from the civilian enforcement and adjudication of parking and certain minor moving violations fluctuated significantly as a result, in part, of the following factors: (1) the number of parking control aides deployed by DPW; (2) the number of tickets issued; (3) the amount of ticket fines and penalties collected; (4) the effectiveness of the contractor's delinquent ticket revenue collection strategies and efforts; and (5) the number of functioning parking meters. These factors materially affected the number of tickets issued and the amount of revenue collected. For example, according to officials in the Transportation Systems Administration, during calendar year 1994, budget constraints substantially reduced the number of PCAs deployed by DPW to enforce parking regulations. Additionally, DPW officials estimated that approximately 6,700 meters were inoperable due to vandalism during calendar years 1996 and 1997. While some meters were repaired, many meters remained broken through most of fiscal year 1998. Consequently, the amount of revenue generated from parking enforcement decreased during calendar years 1994 through 1996. Between 1992 and 1998 parking enforcement fines and penalties generated annual revenue of approximately $46 million to $60 million. Table I presents parking revenue collected by the District between calendar years 1992 and 1998 under the ticket processing and delinquent ticket debt collection contracts.

TABLE I

Revenue Collected From Parking Enforcement and Traffic Adjudication Programs:
Calendar Years 1992 Through 1998

Calendar Year Ticket Processing Revenue Collected Delinquent Ticket Revenue Collected Total Revenue Collected
1992 $48,941,025 $9,240,750 $58.181,730
1993 49,174,093 9,816,484 58,990,577
1994 45,255,394 8.992,523 54,24,917
1995 37,356,485 8,716,503 46,072,988
1996 40,900,763 9,502,876 50,403,639
1997 48,235,732 11,392,898 59,628,630
1998 46,991,913 10,857,169 57,847,082
Total $316,855,405 $68,519,158 $385,374,563

Source: DPW Annual Reports to the Council of the District of Columbia.

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Ticket Processing Contract Status

The ticket processing contract reviewed by the Auditor consisted of one base year and four option years, which covered the period October 13, 1992 through October 12, 1997. The contract amount consisted of: (1) a fixed price component which ranged from a per ticket processing cost of $2.18 to $2.53 per ticket, and (2) a cost reimbursement component which ranged from $250,000 to $405,000 per year during the contract period.

As noted earlier, the ticket processing contract with Lockheed expired on October 12,1997. After the expiration of the contract, Lockheed provided ticket processing services under four 45-day or less emergency sole source contracts which ended on May 5,1998. Since May 5,1998, Lockheed has provided the services under a one-year sole source contract which was awarded on May 6,1998 and expires on May S. 1999. During calendar years 1992 through 1998, actual annual payments to Lockheed for processing District parking tickets ranged from $4 million to $6 million per year for a total of $34.3 million. (See Table II.)

Delinquent Ticket Debt Collection Contract Status

Tickets not paid within the prescribed time period are assigned (referred for delinquent debt collection) to Lockheed under the delinquent ticket debt collection contract. Lockheed, not the District, determines when tickets are eligible for assignment based on criteria established in the delinquent ticket collection contract. The District must approve all assignments before collection activity proceeds. The current delinquent ticket collection contract consists of a base year and four option years. The contract period is December 25, 1994 through December 24, 1999.

According to DPW's contract documents, the delinquent ticket collection contract is a firm-fixed- contingency fee requirements contract. The contractor's compensation for collecting delinquent parking ticket revenue is based on a percentage of revenue collected from each delinquent ticket. Under the present contract, the contractor is paid 39.8% for identified tickets2 and 28.1 % for unidentified tickets.3 The Auditor, in a July 12, 1995 report entitled, "Review of the Award and Administration of Parking Ticket Processing and Delinquent Ticket Collection Services Contracts," expressed concern regarding the contractor's collection fee arrangement of 39.8% for identified tickets and 28.1 % for unidentified tickets. The Department of Public Works, which was responsible for negotiating and awarding the delinquent ticket debt collection contract, has indicated that the District pays a fee of 15 to 20 percent more than other cities for parking ticket debt collection services. Further, the contractor is able to obtain a greater fee for collecting revenue on identified tickets requiring less effort than for unidentified tickets which require greater effort. Under the previous delinquent ticket collection contract, the contractor collected a greater fee of 32% for unidentified tickets and a lesser fee of 30% for identified tickets.

Between calendar years 1992 and 1998, actual annual payments made to Lockheed to collect delinquent parking ticket revenue ranged from $2 million to $3.7 million per year for a total of $ 18.3 million. Table II summarizes payments to Lockheed under both the ticket processing and delinquent ticket debt collection contracts, between calendar years 1992 and 1998.

TABLE II

Payments Made to Lockheed Under the Ticket Processing and Delinquent Ticket Collection Contracts:
Calendar Years 1992 through 1998

Calendar Year Ticket Processing Contract Delinquent Ticket Debt Collection Contract Total Payments to Lockheed
1992 $5,565,745 $2,151,290 $7,717,035
1993 4,579,255 2,254,126 6,833,381
1994 4,859,074 2,038,563 6,897,635
1995 4,023,124 2,106,066 6,129,190
1996 4,557,080 2,775,202 7,332,282
1997 5,995,000 3,281,167 9,276,167
1998 4,697,615 3,664,278 8,361,893
Total $34,276,893 $18,270,692 $52,547,585

Source: TSA

DPW proposes to consolidate ticket processing and delinquent ticket collection services under one contract with Lockheed. On January 23, 1998, the Department of Public Works issued a request for proposals (RFP) to provide these services under a single contract rather than two separate contracts. In addition to ticket processing and delinquent ticket collection services, the contract will include services for litter control violation tickets and recycling violation tickets.

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FINDINGS

DPW DID NOT EFFECTIVELY MONITOR THE SERVICES PROVIDED BY LOCKHEED UNDER THE TICKET PROCESSING AND DELINQUENT TICKET DEBT COLLECTION CONTRACTS

DPW did not effectively and efficiently monitor the services provided by Lockheed under the ticket processing and delinquent ticket debt collection contracts. TSA assigned only one employee, a technical representative, the primary responsibility of monitoring these major, technically complex contracts. The technical representative's responsibilities, according to the contract, included: (1) coordinating the daily operating procedures between the District and the contractor, and (2) monitoring contract compliance for the delinquent ticket debt collection and ticket processing contracts. Based on discussions with the technical representative and the Auditor's review of information made available for the audit, it was determined that the technical representative primarily served as a liaison between the District and the contractor to coordinate daily operating procedures and the resolution of operating issues. The Auditor found that the technical representative was unable to effectively monitor and analyze the contractor's services as a result of:

  • limited human resources (only one person);
  • unmet training requirements; and
  • inadequate computer hardware and the absence of software capable of analyzing data.

The TSA technical representative implemented the following processes to monitor Lockheed's service delivery and performance: (1) attending quarterly meetings with Lockheed's personnel, the TSA administrator, and TSA bureau chiefs; (2) coordinating and conducting an annual performance evaluation of ticket processing services only in conjunction with several TSA managers and employees; and (3) conducting a limited manual review of a few hard copy reports prepared and submitted by Lockheed. Further, the technical representative indicated, but the Auditor could not confirm, that he developed, in consultation with the contractor, a transaction process (point of proof) to account for all tickets, payments, and other financial transaction data. While these efforts may have been creditable, the technical representative was unable to independently perform periodic evaluations of the numerous ticket payments and other financial transactions maintained in Lockheed's Ticket Information Management System. This capability would have enabled the District, at a minimum, to verify the quality of key statistical data, verify the accuracy of transaction processing by the contractor's information management system, independently test the contractor's computer processing logic, and perform comparative analyses of revenue data.

As previously noted, DPW assigned only one employee the responsibility of administering and monitoring both the delinquent ticket debt collection and ticket processing contracts. By comparison, Lockheed assigned 91 staff members--31 under ticket processing and 60 under delinquent ticket debt collections--to carry out its contractual obligations under these contracts. To effectively monitor performance and the quality of service delivery under contracts of this magnitude and complexity, more District resources were required than the single staff person assigned to perform this important responsibility. Table III presents a comparison of the contractor's staff assigned to the ticket processing and delinquent ticket debt collection contracts with the District government's staff assigned the responsibility of administering and monitoring these important revenue collection contracts.

TABLE III

Comparison of Lockheed's Staff and the District Government's Staff Assigned to Administer and Monitor the Ticket Processing and Delinquent Ticket Collection Contracts

Lockheed District Government
Ticket Processing Contract Number of Lockheed Staff Assigned Delinquent Ticket Debt Collection Contract Number of Lockheed Staff Assigned Ticket Processing and Delinquent Ticket Collections Contracts Number of DPW Staff Assigned
Management Support 2 Project Oversight 6 Technical Service Representative 1
Project Management 3 Project Management 6    
Computer Resources 6 Computer Resources 7    
System Support 8 Systems Support 23    
Public Service 6 Operations 8    
Noticing, Data Entry, and Clerical Support 3 Consulting 5    
Collections 3 Sub-contractor Support 5    
Total Lockheed Staff 31   60 Total District Staff 1

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Department of Public Works Relied on a Manual Methodology to Monitor and Evaluate Lockheed's Fully Automated Ticket Information Management System

The he Department of Public Works relied solely on a manual methodology to monitor and evaluate Lockheed's vast fully automated Ticket Information Management System (TIMS). For example, the technical representative maintained a handwritten log to record information from invoices submitted by Lockheed which included monthly delinquent ticket collection information and fees collected by the contractor. This information was never transferred to an electronic spreadsheet or database program for comparative or analytical purposes primarily because the technical representative did not have access to such software. Further, to test the accuracy of delinquent ticket collection data, the technical representative occasionally selected a statistically insignificant and grossly inadequate sample of transactions from monthly delinquent ticket collection Fee Analysis Reports containing 8,000 to 14,000 parking ticket transactions. (See Appendix I for a sample of pages from a Fee Analysis Report.)

Lockheed's Ticket Information Management System is a fully automated ticket information database which is used to maintain and process information related to 10 million or more District parking tickets and ticket payments. By comparison, the District's technical representative was required to manually review voluminous hard copy reports generated by Lockheed's automated system. The Auditor's review revealed that DPW failed to provide this one staff person with: (1) the appropriate resources, (2) appropriate computer hardware and software technology, and (3) training necessary to adequately monitor and analyze performance, service delivery, and parking ticket financial transactions flowing through Lockheed's automated information system.

At minimum, to effectively monitor these contracts and the underlying automated information system, DPW should have acquired appropriate hardware and software to: (1) more adequately monitor and evaluate parking ticket financial transactions; (2) verify the quality and validity of parking ticket information entered and maintained in the contractor's information system; and (3) evaluate the quality of the contractor's performance by independently testing the system and the transactions processed through it. The Department's investment in appropriate computer hardware, software, and training would likely have been less than $10,000.

DPW also should have deployed additional personnel who were trained and experienced in operating and evaluating automated information management systems similar to Lockheed's technically complex, expansive automated system. This would have facilitated more effective, efficient, and independent monitoring of financial activity and the evaluation of contractor performance and compliance on an ongoing basis. DPW did not take either course of action. As a consequence, the District has missed the opportunity to maximize revenue collections from parking enforcement and has failed to adequately ensure that the services under the ticket processing and delinquent ticket debt collection contracts were performed in a manner that served the best interest of the District government.

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DPW Could Not Independently Test the Validity of Information Presented In Reports and Invoices Submitted by Lockheed

The delinquent ticket debt collection contract required Lockheed to submit an invoice and a Fee Analysis Report in hard copy format and on diskette by the 15th of each month in order to be paid by the District. The Fee Analysis Report provided both detailed and summarized data concerning the total number of tickets issued, dollars collected, adjustments, and fees paid to the contractor, among other relevant information.

The Auditor's analysis of monthly Fee Analysis Reports found that the reports lacked important fields of data necessary to facilitate an effective, meaningful analysis. At the time of the audit, the Auditor also found that diskettes containing fee analysis report data were of no value to the technical representative because the only software on the technical representative's computer that was capable of reading the fee analysis data was a word processing program that could not analyze the data. As a consequence, the Fee Analysis Report, and other reports, were inconsistently and inadequately reviewed by the technical representative. The hard copy version of the Fee Analysis Report was too voluminous for any meaningful manual review and, as noted earlier, the technical representative lacked the appropriate computer hardware, software, and requisite training to effectively review and evaluate the information electronically. The hard copy Fee Analysis Report consisted of hundreds of pages filled with delinquent ticket transactions. (See Appendix I for a sample of information from a Fee Analysis Report.) Typically, these reports contained data on approximately 8,000 or more delinquent tickets in addition to other financial information related to delinquent ticket collections.

Without reviewing the Fee Analysis Report and independently testing the validity of information contained in the report, TSA routinely authorized DPW to make payments to the delinquent ticket debt collection contractor without evaluating the quality of data underlying the contractor's invoices. In a report released by the Auditor, dated March 19, 1998, entitled, "District's Department of Public Works Improperly Collected and Retained Millions in Parking Ticket Overpayments," the Auditor identified approximately $72,523 in fees improperly collected by Lockheed during fiscal years 1996 and 1997. The Auditor also found that the contractor, over a ten-year period, collected approximately $17. 1 million in overpayments on parking tickets. The he overpayments were never refunded to the payees and Lockheed collected its 39.8% fee twice - once from the initial payment and a second fee from the overpayment. DPW's inadequate monitoring capability and inability to adequately test the validity of information submitted by Lockheed with its invoices precluded DPW from immediately detecting the magnitude of parking ticket overpayments, the contractor's improper collection of fees, and other financial and performance issues related to the delinquent ticket debt collection contract.

RECOMMENDATIONS

  1. DPW and/or the Department of Motor Vehicles establish an effective automated contract compliance and performance monitoring component to continuously evaluate the quality of data maintained in the Ticket Information Management System and the quality of services provided by Lockheed under the ticket processing and delinquent ticket debt collection contracts.
  2. DPW and/or the Department of Motor Vehicles allocate sufficient resources to effectively monitor the ticket processing and delinquent ticket debt collection contracts.
  3. DPW and/or the Department of Motor Vehicles (DMV) establish a methodology, which should include an automated evaluation component, to independently verify the validity of information contained in reports submitted by Lockheed. The methodology should enable DPW and/or DMV to determine the reliability and accuracy of data submitted by the contractor, contractor compliance with the terms of the contract, and any other issues requiring, management's immediate attention.

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DPW FAILED TO ADEQUATELY PLAN AND AWARD A NEW TICKET PROCESSING CONTRACT AT THE EXPIRATION OF THE ORIGINAL CONTRACT

The District's last long-term contract to provide ticket processing services was competitively awarded to Lockheed on October 13, 1992 and expired on October 12, 1997. Because of DPW's failure to timely complete the competitive process to award a new contract, it was forced to issue four 45-day or less sole source emergency contracts for the periods reflected in Table IV.

TABLE lV

Emergency Sole Source Contracts Awarded for Ticket Processing Services During the Period October 14, 1997 – May 5, 1998

Contract Date of Contract Contract Period Contract Amount
#1 October 14, 1997 –November 29, 1997 32 days4 $712,250
Modification to Extend Contract #1 November 29, 1997 – December 17, 1997 13 days 282,750
#2 December 28, 1997 – February 25, 1998 46 days 995,000
#3 March 3, 1998 – April 13, 1998 30 days 539,558
#4 April 14, 1998 – May 5, 1998 16 days 530,000
Total   137 days $3,059,558

Source: Office of the D.C. Auditor

The Auditor held discussions with DPW officials concerning the use of emergency sole source contracts to continue ticket processing services. According to DPW officials, the following mitigating factors impacted DPW's ability to issue a new contract at the expiration of the old contract: (1) staff shortages, and (2) modifications to the Request for Proposals (RFP).

Despite the fact that an (RFP). for ticket processing services was prepared by DPW's Office of Management Services approximately two years prior to the expiration of the last long-term contract, DPW failed to timely award a new contract. The he Auditor noted that DPW officials had sufficient time to plan and execute the procurement process leading to the award of a new contract. DPW has contracted with Lockheed for ticket processing services since early 1980 and should have been well aware of the process and timing necessary to award a new contract before the long-term contract expired.

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Emergency Sole Source Contracts Awarded by DPW Did Not Comply with 27 DCMR Sections 1710.2, 1710.3, and 1710.4

According to 27 DCMR Section 1710.2, an emergency condition for the purpose of emergency contracting is defined as

"...a situation (such as a flood, epidemic, riot, equipment failure, or other reason set forth in a proclamation issued by the Mayor) which creates an immediate threat to the public health, welfare, or safety..." (Auditor's Emphasis)

The sole source emergency contracts awarded by DPW for ticket processing services were not based on any of the situations (flood, epidemic, riot, equipment failure) defined in 27 DCMR Section 1710.2 and were not "set forth in a proclamation issued by the Mayor." Instead, the need for emergency contracts was created by an internal management failure to timely plan and execute a competitive procurement process leading to the award of a competitive contract at the expiration of the last long-term ticket processing contract.

The Auditor's further analysis of the emergency sole-source contracts indicated that these contract awards did not comply with 27 DCMR Section 1710.3 which provides the following:

"The justification for emergency procurement shall not be based solely on internal governmental circumstances. In the absence of an emergency condition, an emergency procurement shall not be justified on the basis of any of the following circumstances:

(a) The lack of adequate advance planning for the procurement of required supplies, services or construction;

(b) Delays in procurement caused by administrative delays, lack of sufficient procurement personnel, or improper handling of procurement requests or competitive procedures; or

(c) Pending expiration of budget authority."

As previously noted, the Auditor identified four 45-day or less emergency sole source contracts issued by DPW. The emergency sole source contracts were issued successively for a total of 137 days. DPW's use of emergency procurements to meet long-term needs (over 120 days) violated 27 DCMR Section 1710.4 which states:

"The emergency procurement of supplies or services shall be limited to quantities or time period sufficient to meet the immediate threat and shall not be used to meet long-term requirements."

At the expiration of the last 45-day emergency sole source contract on May 5, 1998, DPW awarded Lockheed a one-year sole source contract under which it is presently providing ticket processing services to the District of Columbia government. This emergency sole source contract will expire on May 5, 1999.

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Lockheed Provided Ticket Processing Services Totaling Approximately $475,232 That Were Not Covered by Valid Written Contracts at the Time Services Were Rendered

DPW officials permitted Lockheed to provide ticket processing services without valid written contracts in place for a total of 20 days at an approximate cost of $475,232. This occurred because DPW:

  1. failed to award a contract immediately following the expiration of several short term emergency sole source contracts; and
  2. did not approve the contract for the period April 14-May 5, 1998 until May 18, 1998, well after the services had been rendered by the contractor.

For three days (two days after one contract ended and one day before another contract began), Lockheed was allowed to provide services without a valid written contract in place. None of the emergency sole source contracts awarded to Lockheed covered these days. Another emergency sole source contract, which was for a period of 17 days, covered the appropriate period but was not approved until after the services were rendered. Table V shows the exact periods and costs incurred when Lockheed provided services without valid written contracts.

Table V

Services Provided Without Valid Written Contracts: Calendar Year 1998

Data Services Provided Without Valid Written Contracts Number of Days Reasons Costs Incurred
Fixed Costs Cost Reimbursement Total
February 26, 27, 1998 2 Days not included in contract $44,962 $2,561 $7,523
March 2, 1998 1 Days not included in contract 22,481 1,280 23,761
April 14-May 5, 1998 17 Contract not approved until after services rendered 382,179 21,769 403,948
Totals 20   $449,622 $25,610 $475,232

Source: Office of the D.C. Auditor

The continuation of services without a valid written contract would violate D.C. Code, Section l-1 181.5(d)(1) entitled, "Limitation of Contracting Authority," which states in relevant part:

"No District employee subject to this chapter shall authorize payment for the value of goods and services received without a valid written contract. This subsection shall not apply to a payment required by a court order or a final decision of the Contract Appeals Board."

Additionally D.C. Code, Section l-1181.5 (d)(2) and (3) state:

"(2) After April 12, 1997, no District employee shall enter into an oral agreement with a vendor to provide goods or services to the District government without a valid written contract. Any violation of this paragraph shall be cause for termination of employment of the District employee.

(3) Any vendor who, after April 12, 1997, enters into an oral agreement with a District employee to provide goods or services to the District government without a valid written contract shall not be paid. If the oral agreement was entered into by a District employee at the direction of a supervisor, the supervisor shall be terminated. The Mayor shall submit a report to the Council at least 4 times a year on the number of persons cited or terminated under this provision."

RECOMMENDATIONS

  1. DPW, in conjunction with the Office of the Chief Procurement Officer of the District of Columbia, should adequately plan, in advance, for the award of new contracts, and must timely execute the procurement process to avoid the use of sole source contracts.

  2. DPW, in future emergency procurements, comply with the provisions of 27 DCMR Sections 1710.2, 1710.3, and 1710.4.

  3. The Chief Procurement Officer of the District of Columbia strictly enforce D.C. Code, Section 1-1181.5 (d)(2) and (3) which requires the termination of a District employee or supervisor who enters into or authorizes an oral agreement with a vendor to provide goods or services without a valid written contract.

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DPW DID NOT PERIODICALLY EVALUATE LOCKHEED'S DELINQUENT TICKET DEBT COLLECTION SERVICES

During the five-year period of the delinquent ticket debt collection contract, the Department of Public Works did not conduct annual evaluations of the contractor's performance.

The Department of Public Works also failed to develop relevant, objective, and verifiable performance measures to be used in an annual evaluation of the contractor's performance under the delinquent ticket debt collection contract. Performance measures that assess the quality and effectiveness of service delivery, in addition to basic contract requirements, were necessary to ensure that the contractor performed at the highest level. In the absence of an annual evaluation, the Auditor could not find any other evidence that DPW officials performed periodic examinations of the contractor's performance under the delinquent ticket debt collection contract.

The Auditor held discussions with the technical representative regarding the failure to evaluate Lockheed's delinquent ticket debt collection services. The technical representative noted that the contractor's success was determined by the collection rate it achieved on each batch of delinquent tickets assigned under the contract. As a consequence of DPW's failure to periodically evaluate the contractor's delivery of services, the Auditor found that the District government was not reasonably assured that it received satisfactory services simply on the basis of the contractor's collection rate. During fiscal years 1996 and 1997, the contractor's overall collection rate averaged approximately 16 percent of the total number of delinquent tickets assigned during those particular fiscal years. l It is important to note that an unknown, but significant, percentage of the contractor's collection rate contained overpayments on delinquent parking tickets found by the Auditor and discussed in a report dated March 19, 1998 entitled, "District's Department of Public Works Improperly Collected and Retained Millions in Parking Ticket Overpayments."

In an analysis of delinquent ticket debt collection services, the Auditor found that millions of uncollected delinquent tickets are being carried forward from one year into the next. Very little has been done by DPW officials to effectively address this expanding problem, except to offer excuses for maintaining the status quo. The Auditor notes that had DPW implemented an independent monitoring and evaluation process for the delinquent ticket debt collection contract the problems associated with this particularly important revenue and performance issue should have been promptly discovered and resolved by management years ago.

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DPW Did Not Perform Periodic Analyses to Determine Whether the Contractor Met the Guaranteed Minimum Rate of Recovery (GMRR! For Each Delinquent Ticket Assignment

The delinquent ticket debt collection contract provided that the GMRR would be evaluated for each assignment. If the contractor did not meet the minimum level of performance, the District would be entitled to the difference between the actual revenue recovered and the revenue that would have been recovered based on the GMRR. This provision of the contract represented a potential source of revenue for the District if the contractor failed to meet the GMRR for each batch of assigned delinquent tickets. The Auditor reviewed 17 out of 24 delinquent ticket debt collection assignments and found that Lockheed easily met the GMRR of 8.1 percent during fiscal years 1996 and 1997 for identified tickets. Table VI highlights a sample of Lockheed's assigned ticket collection rates achieved during fiscal years 1996 and 1997.

TABLE Vl

Lockheed's Assigned Ticket Collection Rates:
Fiscal Years 1996 and 1997

Identified Tickets Unidentified Tickets
Fiscal Year Assignment Date Average Collection Rate on Dollar Value Required Contract Rate Actual Collection Rate on Dollar Value Required Contract Rate
1996 07/22/96 26.2 8.1 1.12 1.1
  08/19/96 29.7 8.1 .88 1.1
  09/09/96 27.8 8.1 1.08 1.1
1997 10/07/96 24.7 8.1 .93 1.1
  11/11/96 27.8 8.1 1.36 1.1
  12/09/96 26.6 8.1 1.22 1.1

Source: Lockheed's Collection Performance Reports By Ticket Status and Assignment

Based upon the analysis of 17 delinquent ticket debt collection assignments, the Auditor determined that Lockheed attained an average collection rate of 27.1 percent for identified tickets. The 27.1 percent average rate of collection was within the range that should be considered for any guaranteed minimum rate of return that may be included in a new delinquent ticket debt collection contract. If a guaranteed minimum rate of return is not included in future delinquent ticket debt collection contracts, the 27.1 percent average collection rate for an 18-month assignment period should be used as a benchmark for assessing the contractor's parking ticket debt collection performance.

While Lockheed was able to meet the GMRR for identified tickets, it was unable to meet the required GMRR in three unidentified ticket assignments reviewed by the audit team. As a result, the District should have collected approximately $2,917 from the contractor. The Auditor did not find any evidence that the technical representative performed an analysis to determine whether the contractor met the GMRR for each assignment of delinquent tickets. Section 5.4 of the contract states the following:

"Eighteen months from the assignment date, the GMRR shall be evaluated for each assignment. In the event that the contractor fails to meet its proposed GMRR for each assignment, the contractor shall pay the District the difference between the actual revenue recovered and the revenue which would have been recovered based on the proposed GMRR. The contractor shall remit payment within 30 days from the date a request for payment is received from the District. Payment must be in the form of a check, cashier's check, or money order made payable to the D.C. Treasurer. The check shall be mailed to the office address of the contract administrator."

The Auditor notes that DPW officials do not agree with the Auditor's finding for the three assignments in question. The disagreement was based on whether the GMRR in effect at the time of the assignment should be used or whether the GMRR in effect 1 8-months after the assignment should be used. The contract language is vague and only stipulates that the GMRR is to be evaluated for each assignment "18 months from the assignment date." It does not state nor require that the GMRR rate in place at the end of the 1 8-month period is the rate that must be used. As a result, and to compare like components, the rate in effect at the time of assignment was used to perform the Auditor's analysis. The Auditor further notes that it is most beneficial to the contractor, rather than the District, when the GMRR in effect at the end of the 1 8-month period is used rather than the rate in effect at the time of the assignment, because a lower rate would have applied to over half of the ticket assignments made during the 5 year contract period. The Auditor's methodology of calculating the GMRR based on the rate in effect at the time of the assignment is the most appropriate rate to measure the contractor's performance.

Additionally, the Auditor notes that the guaranteed minimum rate of recovery for collections on identified and unidentified tickets, as specified in Lockheed's delinquent ticket debt collection contract with the District, appears too low and has not provided sufficient incentive for the contractor to improve performance and increase the collection rate on delinquent District parking tickets. In accordance with Section 5.3 of the current delinquent ticket debt collection contract, the contractor guarantees the following minimum rates of recovery (level of performance):

YEAR GMRR Identified Tickets GMRR Unidentified Tickets
Base Year 8.1% 1.1%
1st Option Year 8.1% 1.1%
2nd Option Year 8.1% 1.1%
3rd Option Year 6.1% 0.8%
Fiscal Option Year 0.0% 0.0%

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LOCKHEED'S COLLECTION RATE AVERAGED APPROXIMATELY 16 PERCENT DURING FISCAL YEARS 1996 AND 1997

Lockheed's collection rate for tickets assigned during fiscal years 1996 and 1997 was 17 percent and 16 percent respectively. Based on these collection statistics, Lockheed's average collection rate was approximately 16 percent for both fiscal years. The Auditor determined Lockheed's collection rate on delinquent tickets within the fiscal year assigned. For example, if 100 delinquent tickets were assigned during fiscal year 1996, the Auditor sought to determine the number (and percentage) of those tickets on which payments were collected within fiscal year 1996. In other words, the analysis did not include delinquent ticket payments collected on tickets assigned in fiscal years other than 1996 and 1997. As DPW and the Department of Motor Vehicles have indicated in the comments to this report, the longer a ticket debt remains outstanding, the less likely it will be collected. Therefore, the analysis in this section was designed to determine the contractor's collection rate over a short period of time rather than the 18- month collection cycle permitted under the contract. The Auditor's analysis was based on data obtained from the contractor by the Department of Public Works.

Fiscal Year 1996 Ticket Assignments and Collections

Lockheed was assigned 504,397 tickets in fiscal year 1996 under the delinquent ticket debt collection contract. During fiscal year 1996, Lockheed collected fines and penalties on only 85,529, or 17 percent, of the total delinquent tickets assigned for that year. A balance of 418,868 tickets, or 83 percent of fiscal year 1996 ticket assignments, remained uncollected at the close of fiscal year 1996.

Fiscal Year 1997 Ticket Assignments and Collections

Lockheed was assigned 648,902 tickets in fiscal year 1997 under the delinquent ticket debt collection contract. During fiscal year 1997, Lockheed collected fines and penalties on only 102,642, or 16 percent, of the total tickets assigned during fiscal year 1997. A balance of 546,260 tickets, or 84 percent of fiscal year 1997 ticket assignments, remained uncollected at the close of fiscal year 1997.

Table VII presents the total number of tickets assigned during fiscal years 1996 and 1997, respectively, and the total number of tickets on which revenue was collected within the same fiscal year. Chart 1 graphically presents the same information.

TABLE VlI

Delinquent Ticket Assignments and Collections: Fiscal Years 1996 and 1997

Fiscal Year Ticket Assignments Total Collections Percent Collected Uncollected Tickets Percent Uncollected
1996 504,397 85,529 17% 418,868 83%
1997 648,902 102,642 16% 546,260 84%
Total 1,153,299 188,171   965,128  

Source: Lockheed's Fee Analysis Report.

Chart 1

Tickets Assigned and Collected: Fiscal Years 1996 and 1997

Chart 1: bar chart

The Auditor found that Lockheed collected revenue on a total of 188,171 tickets, or approximately l 6 percent, of the l, l 53,299 tickets assigned for collection during fiscal years l 996 and l 997. Revenue from approximately 965, l 28, or 84 percent, of the delinquent parking tickets assigned during fiscal years l996 and l997 remained uncollected at the close of fiscal year l997.

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Outstanding Delinquent Parking Tickets Carried Forward Year After Year by the Contractor Represent a Minimum of $20 Million in Uncollected Revenue

The Auditor found that hundreds of thousands of delinquent parking tickets remain uncollected at the close of each fiscal year and contributed to a burgeoning pool of uncollected delinquent parking tickets. Delinquent tickets that were assigned to the contractor in previous fiscal years remained unpaid and were simply carried forward year after year. The delinquent ticket debt collection contract makes no provision for the disposition of these tickets.

Fiscal Year 1996 Delinquent Ticket Inventory Pool

At the close of fiscal year 1995, 468,3865 uncollected delinquent parking tickets were carried forward into fiscal year 1996. As previously noted, Lockheed was assigned an additional 504,397 tickets under the delinquent ticket debt collection contract during fiscal year 1996. Therefore, during fiscal year 1996, Lockheed's delinquent ticket collection inventory totaled approximately 972,783 tickets. During fiscal year 1996, Lockheed collected fines and penalties on only 149,264, or 15 percent, of the tickets in the delinquent ticket inventory pool of 972,783 tickets. Collections were made on 85,529 tickets assigned during fiscal year 1996 and 63,735 delinquent tickets assigned during fiscal years 1993 through 1995. The Auditor's analysis indicated that a balance of approximately 823,519 uncollected tickets remained at the close of fiscal year 1996 and were carried forward into fiscal year 1997.

Fiscal Year 1997 Delinquent Ticket Inventory Pool

During fiscal year 1997, Lockheed was assigned 648,902 delinquent tickets under the delinquent ticket debt collection contract. Another 823,519 tickets were carried forward into fiscal year 1997. Therefore, during fiscal year 1997, Lockheed's delinquent ticket collection inventory totaled approximately 1,472,421 tickets. During fiscal year 1997, Lockheed collected fines and penalties on only 165,336, or 11 percent, of the l ,472,421 tickets in the delinquent ticket inventory pool. Collections were made on 102,642 tickets assigned during fiscal year 1997 and 62,694 delinquent tickets assigned during fiscal years 1993 through 1996. The Auditor's analysis indicated that a balance of approximately 1,307,085 uncollected tickets remained at the close of fiscal year 1997 and were carried over into fiscal year 1998.

Table VIII presents the total number of assigned delinquent tickets that were carried over starting with fiscal year 1995, and the number of tickets for which revenue was collected on assignments made between fiscal years 1993 and 1997. Chart 2 graphically depicts the same information.

TABLE VIII

Delinquent Ticket Collections and Uncollected Tickets Carried Forward:
Fiscal Years 1996 And 1997

Ticket Assignments and Tickets Not Collected from Perious Year Starting with Fiscal Year 1995

1996

Tickets Assigned 504,397
Tickets Uncollected 468,386
Total 972,783
1997
Tickets Assigned 648,902
Tickets Uncollected 823,519
Total 1,472,421
Tickets for Which Revenue Was Collected on Assignments Made During Fiscal Years 1993-1997
FY 1997 FY 1996 FY 1995 FY 1994 FY 1993 Total Collections Total Uncollected
N/A 85,529 45,846 10,847 7.042 149,264 823,519
102,642 39,079 12,396 6,650 4,569 165,336 1,307,085
104,642 124,608 58,242 17,497 11,611 314,600  

Chart 2

Comparison: Assigned Tickets Collected vs. Tickets Carried Forward-FY 96-97

Chart 2, bar chart

The Auditor's analysis of delinquent ticket assignments and collections indicated that the number of tickets carried forward each year has progressively increased at a disproportionate rate in comparison with the number of delinquent parking ticket payments collected by the contractor. As indicated previously, the delinquent ticket debt collection contract does not address how delinquent parking tickets that remain uncollected after an l 8-month collection period are to be treated by the contractor or by the District. As a consequence, these tickets remain in the delinquent ticket collection inventory from year to year. In discussions with DPW officials, the Auditor found that DPW, in conjunction with the contractor, had not developed a successful strategy to recover a greater percentage of revenue from this growing inventory of delinquent parking tickets. Also, the District had not developed a write-off policy for uncollected parking ticket fines and penalties. The large number of delinquent parking tickets carried over from year to year exceeds approximately $206 million in uncollected revenue that the District must develop a more effective strategy to collect. Further, the District must immediately develop a write-off policy for this revenue source so as not to distort the District's financial position.

RECOMMENDATIONS

  1. DPW immediately establish relevant, objective, verifiable performance measures to annually evaluate the delinquent ticket debt collection contractor's performance.
  2. DPW require the delinquent ticket debt collection contractor to report to the Council of the District of Columbia, at the end of each fiscal year, the number of uncollected tickets assigned during the fiscal year that will be carried over to the next fiscal year. The contractor's report must include an effective and efficient strategy for collecting revenue from most, if not all, of the delinquent tickets carried forward into the next fiscal year.
  3. DPW seek payment of $2,917 from Lockheed as a result of the contractor not meeting the GMRR for unidentified tickets in the three assignments discussed in this report.
  4. The Chief Financial Officer of the District of Columbia develop a strategy for collecting delinquent parking ticket revenue from tickets not successfully collected by the contractor over a two-year delinquent collection assignment period, and develop and implement an appropriate policy for writing-off delinquent parking ticket fines and penalties.

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CONCLUSION

The Department of Public Works failed to establish an effective monitoring system for services provided by Lockheed under the ticket processing and delinquent ticket debt collection contracts. Department officials assigned only one employee, a technical representative, the primary responsibility of monitoring these major, technically complex contracts. As a result of operating and other deficiencies, the Department of Public Works routinely authorized payments to the delinquent ticket debt collection contractor without evaluating the quality of data underlying the contractor's invoices. The data underlying the contractor's invoices often contained numerous parking ticket overpayments from which the contractor collected a second fee.

DPW failed to timely complete the competitive process to award a new ticket processing services contract and was forced to issue four 45-day or less sole source emergency contracts, and a one-year sole source contract for these services. The emergency sole source contracts awarded by DPW did not comply with 27 DCMR Sections 1710.2, 1710.3, and 1710.4. The emergency sole source contracts were awarded because of DPW's lack of advance planning, administrative delays, and untimely execution of the procurement process for ticket processing services.

The Auditor determined that DPW allowed Lockheed to provide ticket processing services for short periods of time without valid contracts in place and, as a consequence, the District incurred costs totaling approximately $475,232 for services rendered without a valid contract in place. This occurred mainly because DPW officials did not approve a 1 7-day emergency sole source contract until after the contractor provided the services. Services rendered without valid written contracts circumvented the Procurement Practices Act of 1985, as amended, and D.C. Code, Section 1-1 181.5(d)(1) which states that: "No District employee subject to this Chapter shall authorize payment for the value of goods and services received without a valid written contract..."

DPW failed to develop measures to effectively evaluate Lockheed's performance under the delinquent ticket debt collection contract. The absence of performance benchmarks, measures, and standards, in addition to the failure to periodically evaluate performance undermined the District's ability to obtain reasonable assurance that the contractor exercised due diligence on behalf of the District government in performing delinquent parking ticket revenue collection services.

The Auditor also found that hundreds of thousands, and possibly millions, of uncollected delinquent parking tickets were carried forward by the District's contractor from year to year. Approximately 1,307,085 uncollected delinquent parking tickets had accumulated specifically during fiscal years 1995 through 1997. The 1,307,085 delinquent parking tickets represented a minimum of approximately $20 million in uncollected revenue.

The District's failure to invest sufficient resources in computer hardware, software capable of analyzing data, and human resources hampered effective monitoring and oversight of Lockheed's performance and contract compliance, and hampered periodic evaluations of data maintained in the Ticket Information Management System (TIMS).

The administration and management of the ticket processing and delinquent ticket debt collection contracts can be improved significantly with the addition of modest resources and the development and implementation of performance standards specifically applicable to this function. Contractor performance under the delinquent ticket debt collection contract may also be improved significantly, in part, by establishing competitive performance standards and a substantially improved and more effective monitoring and evaluation system. Finally, the District's strategy to collect delinquent parking ticket fines and penalties must be significantly improved in order to maximize revenue well beyond the contractor's present disappointing collection rate.

Respectfully submitted,

Deborah K. Nichols
District of Columbia Auditor

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Appendix 1 (not available on-line)

Agency Comments

On February 8,1999, the District of Columbia Auditor submitted the first draft of this report for review and comment to the Acting Director of the Department of Public Works and the Department of Motor Vehicles, the Chief Procurement Officer of the District of Columbia, and the Interim Chief Financial Officer of the District of Columbia. Comments were received from the Acting Director of the Department of Public Works on March 2, 1999 and the Interim Chief Financial Officer of the District of Columbia on March 2, 1999. The Chief Procurement Officer of the District of Columbia failed to provide any comments regarding the draft report.

The Auditor submitted a revised draft report to the Acting Director of the Department of Motor Vehicles for further review and comment on March 17, 1999. Comments were received jointly from the Acting Director of the Department of Public Works and the Acting Director of the Department of Motor Vehicles on March 24, 1999.

The comments received from the Department of Public Works on March 2,1999 and March 24, 1999 are appended in their entirety to this report. Comments received from the Interim Chief Financial Officer of the District of Columbia are also appended in their entirety to this report.

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GOVERNMENT OF THE DISTRICT OF COLUMBIA
Office of the Chief Financial Officer

February 26, 1999

Ms. Deborah K. Nichols
Interim District of Columbia Auditor
Office of the District of Columbia Auditor
717 14th Street, N.W., Suite 900
Washington, DC 20005

Dear Ms. Nichols:

Thank you for the opportunity to comment on the draft report entitled "Evaluation of the Department of Public Works' Monitoring and Oversight of the Ticket Processing and Delinquent Ticket Debt Collection Contracts." Under Public Law 104-8, the District of Columbia Financial Responsibility and Management Assistance Act, the Chief Financial Officer of the District of Columbia is charged with fiduciary responsibility for financial assets of the District. Inasmuch as parking ticket receivables are financial assets of the District, I share your concern that the collection of delinquent ticket debts be efficient, effective, and fair.

In response to your findings, I propose the following immediate actions to improve the delinquent ticket debt collection process. My office is prepared to work with the Office of Contracting and Procurement and the Department of Public Works on contract amendments, as required.

  • The pending ticket processing and collection contract should be modified to include enhanced incentive and penalty provisions within a performance-based contracting framework (see attachment).
  • The pending ticket processing and collection contract should be modified to require the contractor's full disclosure and District approval of its collection methodology. This will permit more active oversight of the contract.
  • The pending ticket processing and collection contract should be modified to require an annual financial audit of ticket collections by an independent audit firm. This will support the financial integrity of the collection process.
  • I will assign a collection professional from the Office of Finance and Treasury's Central Collection Unit to serve as technical representative to the current and proposed contracts. The technical representative will work with the contract administrator to ensure effective contract oversight. Specifically, the technical representative will: (1) assist in establishing performance measures to evaluate Lockheed's performance under the delinquent ticket debt collection contract, and (2) evaluate and approve the contractor's strategy for collecting revenue from tickets carried forward from the previous fiscal year.
  • The technical representative will develop a strategy for collecting delinquent parking ticket revenue from tickets not successfully collected by the contractor over a two-year delinquent collection assignment period.
  • The Office of Financial Operations and Systems will work with the Department of Public Works to develop an appropriate revenue recognition and write-off policy for delinquent parking tickets.
  • The Office of the Chief Financial Officer will support the Department of Public Work's FY 2000 budget request for resources to improve oversight of the ticket collection contract or increase collection of delinquent parking ticket debts.

I believe that the actions outlined above will significantly improve oversight of the Department of Public Works' delinquent ticket debt collection contracts and increase collection of delinquent ticket debts owed to the District. Please contact me at 727-2476, if you have questions about my comments. Thank you again for the opportunity to provide input on this important matter.

Sincerely,
Earl C. Cabbell

Attachment
cc: Richard Fite, Chief Procurement Officer
Art Lawson, Acting Director, Department of Public Works
Tom Huestis, Deputy CFO and Treasurer
Tony Pompa, Interim Deputy CFO for Operations and Systems
Tammie Robinson, Chief of Staff to the Interim CFO
Stephen Taylor, General Counsel to the CFO
Joseph Sanchez, Director of Procurement, OCFO
Craig Small, Associate Treasurer
Pamela Graham, CFO, Department of Public Works
Marc Talbert, Manager, Central Collections Unit, OFT
Richard Prunchak, Contract Administrator, Department of Motor Vehicles

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Performance-Based Contracting Solution

  • DPW establish an effective automated contract monitoring system to continuously evaluate the quality of services provided by Lockheed under the ticket processing and delinquent ticket debt collection contracts." (RE: page 9)
  • "TSA did not establish sufficient performance measures or independently evaluate performance results produced by Lockheed " (RE: page 17)
  • "...the Auditor found that TSA failed to establish sufficient performance measures by which to independently monitor and evaluate Lockheed's performance." (RE: page 18)
  • "TSA failed to develop its own criteria to measure and evaluate Lockheed's performance." (RE: page 18)
  • "In the absence of comparative data to evaluate Lockheed's ' services, the lack of specific performance benchmarks and measures, and the absence of an independent evaluation process, the Auditor questions whether TSA 's overall excellent performance rating of the contractor was justified and supported by valid reliable measurement data." (RE: page 19)
  • "DPW immediately establish credible, edible, comparative performance measures to evaluate Lockheed's performance under the ticket processing and delinquent ticket collection contracts." (RE page 21)
  • The absence of comparative data by which to evaluate Lockheed's services, absence of specific performance benchmarks and measures, and the absence of an independent process to evaluate Lockheed's services, raised questions concerning whether TSA's overall performance rating of excellent was justified and supported by valid, reliable data." (RE: page ?2)
  • Key to using performance-based contracting are the following factors:
    • There must be a clear definition of the outcomes to assure an understanding of them;
    • Outcomes must be specific and quantifiable, or set an acceptable standard for the service or performance levels;
    • The number of outcomes must be reasonable and take into consideration the vendor's capacity to track and provide the information;
    • Administrative procedures must be described, such as the frequency of assessments of vendor progress and the methods to be used, as well as the persons responsible for the assessment:
    • Renewals and extensions of the contract should occur based on achievement of the outcomes.
  • Further, these factors recognize the key benefits of performance based contracting:
    • Reliance on the marketplace to create affordable and effective alternatives for meeting government needs;
    • Effective measurement of contract performance during contract performance, with incentives/penalties tot con corrective action and
    • Performance evaluations which link demonstrated performance (either positive or negative) to future opportunities.

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GOVERNMENT OF THE DISTRICT OF COLUMBIA
DEPARTMENT OF PUBLIC WORKS
2000 14TH STREET N.W.
6TH FLOOR
WASHINGTON D.C. 20009

OFFICE OF THE DIRECTOR
(202} 939-8000

March 1, 1999

Ms. Deborah K. Nichols
Interim District of Columbia Auditor
717 1 4th Street, N.W., Suite 900
Washington, D.C. 20001

Dear Ms. Nichols:

Thank you for the opportunity to respond to the draft audit report titled "Evaluation of the Department of Public Works' Monitoring and Oversight of the Ticket Processing and Delinquent Ticket Debt Collection Contracts." The period covered by the audit was October 1995 through May 1998. During this period, the responsibility for contract procurement and for the monitoring and oversight of these contracts was vested in the Department of Public Works (DPW). Effective October 1, 1998, the responsibility for monitoring and oversight of these contracts is jointly administered by the Department of Motor Vehicles (DMV) and DPW. Procurement responsibility has remained with the Agency Chief Contracting Officer for the Department of Public Works for the Office of Contracting and Procurement (OCP). Accordingly, the responses of the three departments are outlined in this letter.

Although a specific recommendation was not made to this effect, a finding was made that the resources devoted to overseeing and monitoring the contracts (one person) was inadequate and that additional resources in terms of equipment, software and training are also needed. DMV concurs with this finding and is currently reviewing options for augmenting contract monitoring resources in the FY2000 budget. At the same time, DMV and DPW believe that an audit finding should also be made that reflects accomplishments made within the limited resources available, which includes:

  • Comprehensive written evaluations have been prepared on the contractor's performance since 1993, which have been linked to the planning and implementation of substantial process improvements by the contractor. We believe that the scope and quality of these evaluations are unique in the District.
  • The technical representative has been instrumental in coordinating with the contractor the development of a comprehensive transaction reconciliation process, which accounts for all tickets, payments, and other transactions processed on a daily basis. This process was developed with ease of audit as a primary objective, and summary reports of each day's transaction updates are provided monthly to the District.
  • Quarterly status meetings were implemented several years ago; during these meetings, the contractor has presented written and verbal summations of accomplishments and a workplan for the next quarter (in addition to the quarterly meetings, the technical representative and other agency representatives attend numerous meetings throughout the year to discuss and resolve issues or operational problems which impact on users of the ticket system).
  • New reporting requirements were instituted to provide assurance that computer logic was functioning properly in the assignment of tickets for delinquent collections. Ticket assignment and noticing criteria were revised in order to allow the District to collect additional revenue prior to assignment for delinquent ticket collections. The content and size of District notices are being revised in order to promote payment.
  • Price comparisons are regularly made to other jurisdictions, which has assisted in determining a fair price for offered services. A continuing dialogue has been established with parking program managers and contract managers in comparable cities for the purpose of exchanging technical approaches and experiences.
  • Monthly invoices are thoroughly reviewed including the completeness of supporting documentation. The contractor has simplified invoice formats in accordance with our instructions and has augmented attached documentation to support billed work.
  • Contract files have been well documented, including contractor control processes, and are readily accessible for auditing and other purposes.

During the period of the current audit, the technical representative also completed a comprehensive statement of work for competitive procurement of a combined ticket processing and ticket collections contract; reviewed the potential for technical applications such as bar-coding, mobile digital communications, handheld computers, voice response and pay by phone and incorporated these applications into the statement of work; and assumed responsibility for oversight of the parking meter conversion contract and the ticket printing contract.

The Department of Motor Vehicles and Department of Public Works offer the following comments with respect to specific audit recommendations:

AUDIT RECOMMENDATION:

DPW should establish an effective automated contract monitoring system to continuously evaluate the quality of services provided by Lockheed under the ticket processing and delinquent debt collection contracts.

RESPONSE:

We assume that the terminology "automated contract monitoring system" refers to automated tools to assist in contract monitoring. Accordingly, we have addressed this recommendation in the response to the following recommendation, which also relates to automated methodology.

The draft audit report finds that there is no current independent automated methodology used to monitor the quality of services provided. Although admittedly not an independent source, the contractor provides monthly automated reports which contain objective data indicating the extent to which various contract requirements have been met, including on-line system uptime; system response time; number and percentage of tickets processed, imaged and paid within required timeframes; error corrections; and availability of on-line data within required timeframes. The contractor has documented the methodology by which these reports are prepared. Certain data, such as that which relates to on-line system performance, is derived from computer workstations installed by the contractor at a DPW network interface location. Daily transactional data such as the processing of tickets, payments and other updates to the ticket system are compiled by Lockheed staff on a daily basis from various source documents pursuant to well-documented methodology. All documents used to reconcile each day's work are retained in storage, by date, and are available for audit at any time. The Auditor did not request to see any of the stored reconciliation documents during the course of the audit to verify the accuracy or completeness of the contractor's daily reconciliation.

It should be noted that it is commonplace in comparable jurisdictions to utilize the contractor's automated reports to verify conformance with contract standards.

AUDIT RECOMMENDATION:

DPW establish a methodology, which should include an automated evaluation component, to independently verify the validity of information contained in reports submitted by Lockheed in order to determine the reliability and accuracy of the data, and any other issues requiring management's immediate attention.

RESPONSE:

We concur that the use of automated tools can be useful in the review of voluminous data and detection of data anomalies, and that the use of these tools should not be limited to the periodic reviews of these contracts by the auditors. The technical representative is currently reviewing a sample version of the same auditing software utilized by the auditors in their review of Lockheed data. A recommendation will be made with respect to the cost effectiveness of purchasing a site license for this software and requisite training or the use of other software options. In-depth analyses of contractor data on an ongoing basis, however, may be contingent upon availability of additional resources.

AUDIT RECOMMENDATION:

DPW, in conjunction with the Office of the Chief Procurement Officer, should adequately plan, in advance, for the award of new contracts to avoid relying on costly short-term sole source emergency contracts.

RESPONSE:

OCP has put in place an effective process to monitor all agencies planning of new and recurring contract actions. However, there is the potential for the processing of new solicitations to extend beyond pre-established times frames. In the case of the subject procurement, planning and implementation began in excess of one year prior to bid opening. Unfortunately, various circumstances delayed the procurement, which included legal changes to the terms and conditions, operational changes to the scope of work, and identification of funding. Every effort was made by all parties to move this procurement forward as expeditiously as possible without sacrifice to the integrity of the process.

The contention that the award of short-term contracts resulted in the District paying $256,575 more than would have otherwise been paid if a new contract had been timely awarded is erroneous. This dollar amount was derived from a comparison between the price per ticket price paid in the final year of the preceding five-year contract ($2.53) to the price per ticket paid in each of the short-term contracts ($2.59). It was pointed out to the auditors during the review that contract modifications were approved during the preceding five-year contract which were priced separately on the contractor's monthly invoices. The fixed price billed for these modifications was equivalent to a cost per ticket of between five and six cents on the average (number of tickets processed divided by the cost billed for the additional work). When the initial short-term contract was negotiated, the cost for the additional work was folded into the $2.59 per-ticket price, and the additional work was also folded into subsequent short-term contracts. Therefore, no significant change occurred in per-ticket fees from the preceding five-year contract, and in fact the $2.55 paid per ticket in the current one-year contract is less than the price per ticket in the final year of the five-year contract when the costs of the contract modifications are taken into account.

AUDIT RECOMMENDATION:

DPW, in future emergency procurements, comply with the maximum 120 day limit for the emergency procurement of services as set forth in 27 DCMR, Section 1710.5 and the provisions of 27 DCMR 1710.2 and 1710.3.

RESPONSE:

In no instance did OCP and DPW extend any of the four emergency contracts beyond a 120 day period. The auditor's interpretation of the 27 DCMR 1710.5 is in conflict with the interpretation held by the District of Columbia Office of Corporation Counsel which has held that each emergency procurement action is separate and distinct, with a separate 120 day period per action. As indicated in the draft report DPW and OCP processed four separate emergency procurements however the auditor has incorrectly calculated calendar days instead of business days (Monday through Friday, no holidays) for No. 2, 3 and 4. The actual total number of days is 121 days, not 139 days as initially reported by the Auditor:

Contract Date of Contract Contract Period
#1 October 14, 1997 – November 29, 1999 32 days
Modification to extend Contract #1 November 29, 1997 – December 17, 1997 13 days
#2 December 18, 1997 – February 25, 1998 40 days
#3 March 3, 1998 – April 13, 1998 30 days
#4 April 14, 1998 – May 5, 1998 16 days
Total   121 days

The Auditor failed to completely quote 27 DCMR 1710.2:

"For purposes of an emergency procurement under this chapter, an "emergency condition" is a situation (such as a flood, epidemic, riot, equipment failure, or other reason set forth in a proclamation issued by the Mayor) which creates an immediate threat to the public health, welfare, or safety, The existence of an emergency condition creates an immediate need for supplies, services, ore construction which cannot be met through normal procurement methods, and a lack of which would seriously threaten one (1) or more of the following:

(a) The health or safety of any person;

(b) The preservation or protection of property; or

(c) The continuation of necessary governmental functions."

It was necessary to issue short-term emergency contracts to continue necessary government functions while a long-term one year contract underwent review for approval. It would not have been in the best interest of the District to discontinue a ticket processing and collection services with the incumbent supplier, without the benefit of having a successor supplier in place. In addition, DPW did not have the financial resources, staff, or expertise to assume responsibility for this function internally.

AUDIT RECOMMENDATION:

The Chief Procurement Officer immediately issue policies and procedures to enforce the provisions of D.C. Code, Section l-1181.5(d)(l) which prohibits any manager from allowing a contractor to provide services without the benefit of a valid written contract.

RESPONSE:

OCP and DPW concur with the Auditor's recommendation, and OCP has issued policies and procedures to enforce compliance with the provisions of D.C. Code, Section 11181.5(d)(1). Contrary to the draft report, a review of the contract files indicate that the contractor worked without a valid contract for three (3) days February 26, 27 and March 2, 1998. The period April 14,- May 5, 1998, was reviewed and approved by the Chief Procurement Officer on May 18, 1998. An oversight was made for the three days that the supplier worked without a valid contract, a request will be made of the Chief Procurement Officer to ratify that oversight.

AUDIT RECOMMENDATION:

DPW immediately establish credible, comparative performance measures to evaluate Lockheed's performance under the ticket processing and delinquent ticket debt collection contracts.

RESPONSE:

The Auditor notes, on page 18 of the draft report, that the Transportation System Administration (TSA) failed to establish sufficient performance measures by which to independently monitor and evaluate Lockheed's performance and instead relied upon evaluation criteria selected by the contractor. No evaluation criterion used in the monitoring process has been selected by the contractor. In fact, the measurable criteria included in the annual evaluation are all stated in the Request for Proposals and are incorporated into the contract by reference. Similar criteria are used by comparable cities, and in some instances the District's criteria are more stringent. For example, the contractor's ticket processing system is required to be operational and available to users 99.8% of the time during regular working hours, compared to 96% in Los Angeles and San Francisco and 95% in Boston. The system response time requirement at each workstation for accessing ticket data is under three seconds over a one week period (two seconds in the pending contract), compared to five seconds in Los Angeles, three seconds in San Francisco and three to five seconds in Boston. Similarly, timeframes within which the contractor must update tickets, payments, images and other transactions are set forth in the District's contract and are reported monthly for each workday.

The Auditor states correctly that TSA's use of benchmarking in the evaluation process was limited to certain service components and that the only comparison made was against Lockheed's performance within prior periods within the District. We believe that the performance of the computer system, daily transaction processing and project management is most critical in the ticket processing contract. The performance of the computer system and transaction processing is currently well documented. We will make continuous efforts to identify other measures by which the contractor's performance in other service components can be objectively evaluated. Some subjectivity, however, is inherent in the performance of services. For example, the quality of project management provided by a contractor, including intangibles such as accessibility, responsiveness and approach to problem resolution, is not easily measurable or quantifiable. Because a contract component is not easily measurable does not mean that it is not important or should not otherwise be evaluated. We have chosen to evaluate all of the key components provided in the ticket processing contract, whether objective or subjective. To leave out some components due to lack of objective measures would result in an unbalanced assessment.

In ticket collections, the nature of the assigned ticket population (i.e., age of ticket, number of prior notices, percentage of out-of-state registrants, and enforcement methods available) will have a direct impact on the success of collection efforts. There are substantial differences in the nature of the assigned ticket population from city to city, which makes direct comparison less meaningful.

We agree with the finding on page 18 of the draft audit report that the length of time between evaluations could potentially result in overemphasis on recent performance. Ideally, given adequate resources, the evaluation process should be more frequent (perhaps quarterly to coincide with quarterly status meetings). More frequent assessments, however, would necessarily be more limited than the annual evaluation given the level of effort and time required to produce the annual document.

Also on page 18, it is noted that in the annual evaluation there were no comparisons against other entities providing the same service, other cities, or against industry standards. As the Auditor is aware, there are few competitors to Lockheed in the large city market against which to compare. We are not aware of "industry standards" as they apply to ticket processing or delinquent ticket collection services or any organization that would establish such standards. Some of the performance measures that have been incorporated into the District's contract can apply to any large automated processing system, and in fact information systems personnel within DPW were consulted in development of some of the measures. We have no recollection of being surveyed or "benchmarked" by comparable cities to determine the specific performance levels of our contractor. However, we will explore the feasibility of obtaining and including relevant comparison data from comparable cities, to the extent available, in future evaluations.

AUDIT RECOMMENDATION:

DPW require the delinquent ticket collection contractor to report to the District, at the end of each fiscal year, the number of uncollected tickets assigned to it during the fiscal year that will be carried over to the next fiscal year. The contractor's report must include an effective strategy for collecting revenue from most, if not all, of the tickets carried forward into the next fiscal year.

RESPONSE:

We agree that it would be reasonable to require the contractor to present an "action plan" for collecting on the older ticket population, as collection strategies utilized on older tickets are often different than strategies utilized on newer tickets. We will request an action plan on an annual basis, along with statistics on tickets carried over from year to year.

A year-end report that provides statistics on carried-over tickets would be more meaningful if it focused on tickets that have had a reasonable collection activity period, such as 18 or 24 months. As tickets are assigned monthly throughout the year, collection rates on tickets which have not had the benefit of a full collections cycle will be much lower, on average, than tickets assigned earlier in the year, thereby skewing the statistics.

On page 19 of the draft report, it is stated that Lockheed's collection rate for assigned delinquent tickets, which included uncollected tickets from previous fiscal years, averaged approximately 8% during fiscal years 1996 and 1997. We believe that the methodology of including prior-year carryover tickets in calculating supplier current year performance is misleading for the following reasons.

To include uncollected carryover tickets in the collectible ticket inventory year after year, and to count these tickets as part of the current year performance tends to result in a consistently declining year to year performance. Using this methodology, eventually the current year collection performance would approach zero if enough years of carryover tickets were included in the calculation.

The methodology also does not allow adequate time for collection activity to show results. A full collection cycle by the supplier is generally considered to be 12 to 18 months. If the collection rate for a given year includes all tickets assigned in that same year, very few of the tickets will have had the benefit of a full collection cycle, which would result in a low collection rate for those tickets.

The contractor provides, on a monthly basis, a collection performance report by assignment number. The report tracks collection performance in terms of both collection rate and dollar value, by assignment number, after a full 18-month collection cycle. The collection rate is reported separately for identified parking tickets, identified rental tickets, identified moving tickets, and unidentified parking tickets ("identified" refers to the availability of a name and address of the respondent at the time of assignment).

We believe that these reports provide a more realistic picture of performance on assigned tickets. Available reports were reviewed for assignments made between January, 1996 and April, 1997 (the last reported month with a subsequent 18-month collection period). The lowest and highest collection rates reflected on these reports are:

Ticket category Lowest rate Highest rate
Identified parking tickets 28.74% 33.3%
Identified rental vehicle tickets 18.89% 33.83%
Identified moving tickets 28.62% 36.53%
Unidentified parking tickets* 1.28% 3.58%

*It should be noted that the collection rate for unidentified parking tickets has historically been very low due to the non-availability of a name and address at the time of assignment, and these tickets generally constitute fewer than 10% of the total tickets assigned. These tickets have been included in the auditor's analysis of collection rates.

AUDIT RECOMMENDATION:

The District's Chief Financial Officer develop a strategy for collecting delinquent parking ticket revenue from tickets not successfully collected by the contractor over a two-year delinquent collection assignment period.

RESPONSE:

The draft audit report correctly indicates that the pool of outstanding tickets continues to grow. There are various reasons for this occurrence. The longer that ticket debt remains outstanding, the less likely it is that it will be collected, particularly in the absence of new enforcement mechanisms. A majority of the tickets issued in the District are to out-of-state vehicles, and the enforcement strategies available to promote payment are fewer and less effective than those available for District registrants. A large number of ticket recipients cannot be located. Tags are readily transferred without registration hold for District tickets in other jurisdictions. It would appear to be prudent fiscal management, therefore, to write off ticket debts after a period of time so that an unrealistic financial picture is not presented.

We have looked at other options to collect outstanding ticket debt in the past, including the use of credit bureaus. Parking fines do not fall within the nature of accounts traditionally assigned to credit bureaus, since they are involuntary debt, and a court judgment has not been rendered. The companies we have contacted have seemed primarily interested in providing name and address location services, at a fee per transaction, or mailing a letter or series of letters at a fixed fee per letter. The alternative approaches often involve the expenditure of District funds up front with no revenue guarantee (the ticket collection contractor currently pays all costs associated with collection activity). Legal questions have been raised with respect to the District's ability to engage in agreements with credit bureaus for ticket debt collection without specific authorizing legislation.

Any company or entity which provides ticket collection services would be required to conduct a daily two-way interface with the ticket system in order to ensure the timely posting of payment information and other changes in ticket status to both systems. The current ticket collections contract also requires the contractor to assume responsibility for responding to telephone calls and correspondence directed to the telephone number and address indicated on the collections notice. The District does not have the requisite resources to assume these tasks under current funding levels.

In the current contract procurement, ticket collection services have been consolidated with ticket processing services. This is the prevailing arrangement in other comparable cities which contract for both services. The award recommendation currently undergoing review in the Office of Contracts and Procurement includes pricing for both services, and the contract provides that all assigned tickets will remain assigned for the term of the contract including any exercised option periods. Any revision to the assignment criteria contained in this pending contract may impact on the negotiated prices.

In addition to the comments above with respect to the draft audit recommendations, we wish to bring to the Auditor's attention the following correction:

On pages 7 and 8 of the report, it is indicated that the technical representative relied solely on a manual monitoring process and cited, as an example, a manual log used to record selected invoice statistics. The manual log was used solely as a ready reference for internal reporting purposes and was not used as a monitoring tool. For this reason, it does not support the audit findings to attach a copy of pages from this log to the audit report. We suggest that the pages be removed from the attachment.

In conclusion, we found the draft audit report to be useful in reviewing our current resources and approach to monitoring the ticket processing and ticket collections contracts. Thank you for the opportunity to comment.

Sincerely,
Art Lawson
Acting Director
Department of Public Works

Cc: Anthony Williams, Mayor of the District of Columbia
Richard P. Fite, Chief Procurement Officer
Henry Lightfoot, Interim Director, Department Motor Vehicle Services

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GOVERNMENT OF THE DISTRICT OF COLUMBIA
DEPARTMENT OF PUBLIC WORKS
2000 14TH STREET N.W.
6TH FLOOR
WASHINGTON, D.C 20009

OFFICE OF THE DIRECTOR

March 23, 1999

Ms. Deborah K. Nichols
District of Columbia Auditor
717 14th Street, N.W., Suite 900
Washington, D.C. 20001

Dear Ms. Nichols:

Thank you for the opportunity to respond to the draft audit report titled "Evaluation of the Department of Public Works' Monitoring and Oversight of the Ticket Processing and Delinquent Ticket Debt Collection Contracts." The period covered by the audit was October 1995 through May 1998. During this period, the responsibility for contract procurement and for the monitoring and oversight of these contracts was vested in the Department of Public Works (DPW). Effective October 1, 1998, the responsibility for monitoring and oversight of these contracts is jointly administered by the Department of Motor Vehicles (DMV) and DPW. Procurement responsibility has remained with the Agency Chief Contracting Officer for the Department of Public Works for the Office of Contracting and Procurement (OCP). Accordingly, the responses of the three departments are outlined in this letter.

We believe that there are a number of constructive suggestions contained in this report which will be further analyzed and acted upon as appropriate. However, we also find instances in which we cannot support the recommendations, as noted below.

AUDIT RECOMMENDATION:

DPW should establish an effective automated contract monitoring system to continuously evaluate the quality of services provided by Lockheed under the ticket processing and delinquent debt collection contracts.

RESPONSE:

We assume that the terminology "automated contract monitoring system" refers to automated methodology to assist contract monitoring, such as audit software packages. We would welcome further elaboration for the definition of this term by the Auditor. To the extent that automated methodology can effectively supplement current monitoring activity, we will support the use of such methodology to include random sampling on automated test files. In-depth analyses of contractor data on an ongoing basis, however, may be contingent upon availability of additional resources.

We highly recommend that an independent auditor review the contractor's processes. Perhaps the D.C. Auditor can perform this audit or recommend an appropriate entity. Any such recommendation should include an argument that would support increased funding to the Department of Motor Vehicles to support this purpose. Similarly, given financial resources, we would welcome your support in recommending expert consultants to advise us with regard to appropriate automated methodology and to assist with its implementation.

The draft audit references a March 19, 1998 audit report entitled "District's Department of Public Works Improperly Collected and Retained Millions in Parking Ticket Overpayments." In this report the Auditor, refers to $72,523 in fees improperly collected by the contractor Lockheed Martin, IMS during fiscal years 1996 and 1997, as evidence that DPW made payments to the contractor based solely on the contractor's representations. Of this amount, $67,100 of "improper collections" was attributed to fees collected on delinquent ticket overpayments. DPW in its response to the March 19, 1998 report, indicated that DPW was aware of these fees and had sought legal interpretation of their eligibility prior to recommending payment to the contractor. In addition, prior to the March 19, 1998 audit comment, DPW had already included language in the current solicitation for ticket processing and delinquent ticket collections to exclude overpayments from fee eligibility.

AUDIT RECOMMENDATION:

DPW and/or the Department of Motor Vehicles allocate sufficient resources to monitoring both the ticket processing and delinquent ticket debt collection contracts.

RESPONSE:

We concur with this finding and the Department of Motor Vehicles is currently reviewing options for augmenting contract monitoring resources, to include staffing, training and availability of specialized software.

A finding of the draft report was that DPW did not effectively monitor and evaluate the services provided by the ticket processing and delinquent ticket collection contractor. Two reasons were cited for the finding: (1) one person was inadequate to perform this responsibility and (2) the technical representative was unable to independently verify the quality of statistical data and perform analyses of revenue data. We agree that the addition of resources and the ability to independently verify data would further improve the quality of contract oversight. However, we do not agree that effective monitoring and evaluation is not currently occurring. We believe that there is ample evidence of this activity, even with the limited resources currently available. While it is very important to verify data, the ticket processing contract in particular is multifaceted and presents a number of areas in which monitoring and evaluations are relevant. The draft audit report makes passing reference to an annual evaluation of ticket processing performance performed by the technical representative. This evaluation is an exhaustive undertaking, possibly unique in the District, which encompasses all primary contract components and assesses contractor performance on the basis of both objectively measured data and subjective observations. These reviews have been linked to substantial service improvement initiatives by the contractor. Similarly, reference is made in the report to quarterly status reviews. In addition to these reviews, it should be noted that the technical representative and other agency representatives attend numerous meetings throughout the year to discuss and resolve issues or operational problems which impact on users of the ticket system and/or the public.

The draft report further makes reference to the implementation of a comprehensive transaction reconciliation process. The establishment of this process, in late 1996, has substantially improved the audit capability and quality control of transaction processing, including tickets, payments, imaging and other transactions updated to the ticket system on a daily basis. Summary performance reports of each day's transaction updates are provided to the District on a monthly basis.

New reporting requirements were instituted to provide assurance that computer logic was deriving the expected outcomes in the assignment of tickets for delinquent collections. Ticket assignment and noticing criteria were revised in order to allow the District to collect additional revenue prior to assignment for delinquent collections. The content and size of District notices will be revised in the next contract, in accordance with the statement of work, to promote payment prior to assignment.

A continuing dialogue is ongoing with parking program managers and contract administrators in comparable cities for the purpose of exchanging technical approaches and experiences.

The contractor has simplified invoice formats in accordance with our instructions and has augmented attached documentation to support billed work. All invoices are thoroughly reviewed including supporting documentation.

Contract files, which contain contractor control processes, have been well documented. and are readily accessible for auditing and other purposes.

While accomplishing the aforementioned initiatives, the technical representative, during the period covered by the audit, also performed other contract related tasks including the completion of a comprehensive statement of work for the pending ticket processing and delinquent collections contract, ongoing liaison with contractors, coordination of audit related activities, and oversight of the ticket printing and the parking meter conversion and management contracts.

The draft audit report correctly finds that an annual evaluation was not performed on delinquent collection services. Admittedly, more evaluation effort has been focused on ticket processing services since these services are more numerous and complex, and are relied upon by a substantial number of District users. Delinquent ticket collections activity consists primarily of noticing and payment update. The contractor provides several automated reports, which offer substantial detail on the success of collection efforts. Further, the contractor's fee for delinquent ticket collections is contingency based. The contractor's performance in terms of dollars collected for delinquent tickets is directly tied to their compensation, unlike ticket processing. The contractor incurs all costs of collection activity and is not paid unless its efforts result in collection.

AUDIT RECOMMENDATION:

DPW establish a methodology, which should include an automated evaluation component, to independently verify the validity of information contained in reports submitted by Lockheed in order to determine the reliability and accuracy of the data, and any other issues requiring management's immediate attention.

RESPONSE:

The draft audit report finds that there is no current independent automated methodology used to monitor the quality of services provided. Although admittedly not an independent source, the contractor provides regular automated reports, which contain objective data indicating the extent, for which various contract benchmarks have been met. The contractor has documented the methodology by which these reports are prepared. It is commonplace in comparable jurisdictions to utilize the contractor's automated reports to verify conformance with contract standards. Nevertheless, we acknowledge the value of independent verification, where applicable, and toward this end we will review potential applications of automated methodology.

AUDIT RECOMMENDATION:

DPW, in conjunction with the Office of the Chief Procurement Officer, should adequately plan, in advance, for the award of new contracts to avoid relying on costly short-term sole source emergency contracts.

RESPONSE:

OCP has put in place an effective process to monitor all agencies planning of new and recurring contract actions. However, there is the potential for the processing of new solicitations to extend beyond pre-established times frames. In the case of the subject procurement, planning and implementation began in excess of one year prior to bid opening. Unfortunately, various circumstances delayed the procurement, which included legal changes to the terms and conditions, operational changes to the scope of work, and identification of funding. Every effort was made by all parties to move this procurement forward as expeditiously as possible without sacrifice to the integrity of the process.

The audit report notes, that DPW paid $194,948 more by issuing emergency short-term sole source contracts. With regard to the supporting Table V titled "Analysis of the Cost Reimbursement Component Under the Expired and the Emergency Sole Source Contracts," the Auditor has provided no explanation of the method used to calculate the excess dollar amounts purportedly paid. However, from our review of the table's numbers, it appears that the Auditor have listed and prorated cost reimbursement ceiling amounts rather than actual expenditures. It is not meaningful to compare cost reimbursement ceilings for any given period, since ceilings only represent limits to authorized expenditures. In addition, the Auditor incorrectly attributes " the increase in the cost reimbursement component was due mainly to the noncompetitive "...procurement of supplemental workstations or printers, supplies and materials required to maintain equipment (printer ribbons, toner cartridges and paper for printers; special paper for printing reports and correspondence...; and diskettes for personal computers)" that were not apart of the original contract." A review of our records shows that a total of $175,428.04 was expended for contractor reimbursable expenditures during the short term contracts, or approximately 50 percent of the authorized ceiling of $349,178. Of the expended amount, $ 173,674.11 was expended for postage and motor vehicle registration name and address acquisition fees and only $1,753.93 was spent for the procuring of equipment and supplies.

Based on actual invoices billed by the contractor, there is no factual evidence to support the Auditor's claim that "DPW's reliance on emergency short-term sole source contracts resulted in the District paying approximately $194,548 more for supplies and equipment that might otherwise had been procured at a lower cost under a long-term competitive contract." In fact, the ability to procure and maintain equipment and software as a cost reimbursement component of the contract has existed continuously since 1994 (bilateral modification number 7), and the pending contract for combined ticket processing and delinquent collection services contains language permitting, as reimbursable costs, equipment and other parts required to maintain equipment.

AUDIT RECOMMENDATION:

DPW, in future emergency procurements, comply with the provisions of 27 DCMR 1702.3, 1710.2, 1710.3 and 1710.4.

RESPONSE:

DPW and OCP did comply with the provisions of 27 DCMR 1702.3, 1710.2, 1710.3 and 1710.4. It was necessary for DPW and OCP to issue short-term emergency contracts to continue necessary government functions while a long-term contract underwent review for approval. It would not have been in the best interest of the District to discontinue ticket processing and collection services with the incumbent supplier, without the benefit of having a successor supplier in place. In addition, DPW did not have the financial resources, staff, or expertise to assume responsibility for this function internally.

AUDIT RECOMMENDATION:

The Chief Procurement Officer immediately issue policies and procedures to enforce the provisions of D.C. Code, Section 1-l 181.5(d)(1) which prohibits any manager from authorizing quantum meruit payments for services provided by a contractor without the benefit of a valid written contract.

RESPONSE:

OCP and DPW concur with the Auditor's recommendation, and OCP has issued policies and procedures to enforce compliance with the provisions of D.C. Code, Section 11181.5(d)(1). A review of the contract files indicate that the contractor worked without a valid contract for three (3) days February 26, 27 and March 2, 1998. As stated by the Auditor, the period April 14, - May 5, 1998, was reviewed and approved by the Chief Procurement Officer on May 18, 1998. An oversight occurred for the three days that the supplier worked without a valid contract, a request will be made of the Chief Procurement Officer to ratify that oversight.

AUDIT RECOMMENDATION:

DPW immediately establish relevant, objective, verifiable performance measures to annually evaluate the delinquent ticket debt collection contractor's performance.

RESPONSE:

We find the audit recommendation to be constructive and we understand that staff from the Office of Finance and Treasury will be available to assist in this effort.

AUDIT RECOMMENDATION:

DPW require the delinquent ticket collection contractor to report to the District, at the end of each fiscal year, the number of uncollected tickets assigned to it during the fiscal year that will be carried over to the next fiscal year. The contractor's report must include an effective strategy for collecting revenue from most, if not all, of the tickets carried forward into the next fiscal year.

RESPONSE:

We agree that it would be reasonable to require the contractor to present an "action plan" for collecting on the older ticket population, and that collection strategies used for older tickets are often different than strategies used for newer tickets. We will request an action plan on an annual basis, along with statistics on tickets carried over from year to year.

A year-end report that provides statistics on carried-over tickets would be more meaningful if it focused on tickets that have had a reasonable collection activity period, such as 18 or 24 months. As tickets are assigned monthly throughout the year, collection rates on tickets which have not had the benefit of a full collections cycle will be much lower, on average, than tickets which have had this benefit.

AUDIT RECOMMENDATION

DPW seek payment of $2,917 from Lockheed as a result of the contractor not meeting the GMRR for unidentified tickets in three assignments.

RESPONSE:

The audit report notes that the guaranteed minimum rate of recovery for collections (GMRR ) as specified in the contract appears too low and does not provide sufficient incentive for the contractor to improve performance and increase the collection rate. While the contract does provide a minimum performance standard for recovery which provides for reimbursement by the contractor if not met, the substantial fee percentage which is payable to the contractor as a result of collections activity in the contingency based contract is, in our view, a much stronger incentive. In fact, a disincentive would exist if the contractor fails to aggressively pursue outstanding collections within the parameters of the law.

As noted in the audit report, the GMRR is to be evaluated for each assignment 18 months from the assignment date. The audit report further notes that Lockheed did not meet the GMRR on three assignments (Table VII) and that there was no evidence of any analysis to determine whether the contractor achieved the GMRR on each assignment. In determining that the GMRR was not met on three assignments, the Auditor interpreted the GMRR as the minimum rate in effect at the time of assignment.

This interpretation differs from historical practice, and we believe that the Auditor's finding is erroneous. The District has long interpreted the GMRR as the minimum rate set forth in the contract at the end of the 1 8-month assignment period, and the contractor's reporting on compliance has been in accordance with this interpretation. If the GMRR for the three assignments were to be calculated on the basis of the minimum rate at the end of the assignment period, the contractor would have exceeded the minimum rate on each occasion.

The technical representative, including the three assignments noted reviews all GMRR reports submitted by the contractor. The contractor submits supporting documentation of the achievement of the reported rates and these rates are compared to those set forth in the contract. This comparison is self-evident and no separate written analysis is required to make this determination.

However, we agree that the GMRR is unrealistically low for identified tickets and has not served as an incentive in the contract. Accordingly, no provision for the GMRR has been made in the pending combined ticket processing and delinquent collections contract. In the present contract and in past contracts, the GMRR has not been established by the District, but rather has been proposed by offerors as part of the price bid. The minimum rate proposed has been a factor of corporate risk assessment.

RECOMMENDATION:

The District's Chief Financial Officer develop a strategy for collecting delinquent parking ticket revenue from tickets not successfully collected by the contractor over a two-year delinquent collection assignment period.

RESPONSE:

We appreciate the Auditor's recommendation with regard to aged uncollected tickets carried forward from one year to the next. However, as the Auditor have been made aware, there are limited options with respect to aged debt collection in an environment where no legal adverse actions may be taken, such as garnishment of wages or reporting of violators to credit bureaus. It has been our experience that tickets which have aged more than two years are less likely to be collected through current available options. It is our hope that the Auditor will support legislative action to enhance available collection options.

We welcome the Chief Financial Officer's participation in revenue collection opportunities. As the Auditor is aware, the delinquent ticket collections contract is a contingency-based contract which provides a strong incentive to perform.

The draft audit report correctly indicates that the pool of outstanding tickets continues to grow. There are various reasons for this occurrence:

  1. The longer that ticket debt remains outstanding, the less likely it is that it will be collected, particularly in the absence of new enforcement mechanisms.
  2. A majority of the tickets issued in the District are to out-of-state vehicles, and enforcement strategies available to promote payment are fewer and less effective than those available for District registrants.
  3. A large number of ticket recipients cannot be located. Tags are readily transferred without registration hold for District tickets in other jurisdictions.

Therefore, it would appear to be prudent fiscal management, to write off ticket debts after a period of time so that an unrealistic financial picture is not presented.

We have looked at other options to collect outstanding ticket debt in the past, including the use of credit bureaus. Parking fines do not fall within the nature of accounts traditionally assigned to credit bureaus, since they are involuntary debt, and a court judgment has not been rendered. The companies we have contacted have seemed primarily interested in providing name and address location services, at a fee per transaction, or mailing a letter or series of letters at a fixed fee per letter. The alternative approaches often involve the expenditure of District funds up front with no revenue guarantee (the ticket collection contractor currently pays all costs associated with collection activity). Legal questions have been raised with respect to the District's ability to engage in agreements with credit bureaus for ticket debt collection without specific authorizing legislation.

Any company or entity which provides ticket collection services would be required to conduct a daily two-way interface with the ticket system in order to ensure the timely posting of payment information and other changes in ticket status to both systems. The current ticket collections contract also requires the contractor to assume responsibility for responding to telephone calls and correspondence directed to the telephone number and address indicated on the collections notice. The District does not have the requisite resources to assume these tasks under current funding levels.

In the current contract procurement, ticket collection services have been consolidated with ticket processing services. This is the prevailing arrangement in other comparable cities which contract for both services. The award recommendation currently undergoing review in the Office of Contracts and Procurement includes pricing for both services, and the contract provides that all assigned tickets will remain assigned for the term of the contract including any exercised option periods. Any revision to the assignment criteria contained in this pending contract may impact on the negotiated prices.

In conclusion to our response, we wish to summarize the main points as follows:

  • We believe that the ticket processing contract and delinquent ticket collections contract are being effectively monitored and evaluated within existing resource constraints. We agree that the addition of resources and the ability to independently verify data would further increase monitoring effectiveness.
  • We recommend an independent review of the contractor's processes and assistance in establishing appropriate automated methodology.
  • Various circumstances delayed the procurement process and every effort was made to move the procurement forward as expeditiously as possible without sacrifice to the integrity of the process.
  • We disagree that DPW's reliance on short-term contracts resulted in the District paying $194,548 more for supplies and equipment than might otherwise have been procured at a lower cost under a long-term competitive contract.
  • We disagree that the decrease in the cost reimbursement authorized ceiling from the short-term contracts to the one-year contract suggests that short-term emergency sole source contracts may be used as a method of procuring equipment and supplies on a non-competitive basis.
  • It was in the best interest of the District to issue short-term emergency contracts to continue necessary government functions while a long-term one-year contract underwent review for approval.
  • The Office of Contracts and Procurement has issued policies and procedures to enforce compliance with the provisions of D.C. Code, Section 1-1181.5(d)(1) with respect to quantum meruit payments.
  • We concur with the recommendation that relevant, objective, verifiable performance measures for delinquent collections be established for annual evaluation, and would welcome the assistance of the Office of Finance and Treasury in this effort.
  • We agree that it would be reasonable to request contractor reporting on uncollected tickets carried forward from year to year; however, statistics would be more meaningful if it focuses on tickets which have had a full collections activity cycle.
  • We disagree that Lockheed did not meet the Guaranteed Minimum Rate of Recovery (GMRR) in three assignments, and as a result owes the District $2,917. All GMRR reports are reviewed and no separate analysis is necessary to make the determination that minimum recovery rates were made.
  • We agree with the recommendation that a strategy be developed for collecting delinquent ticket revenue from tickets not successfully collected by the contractor over a two-year assignment period, and welcome the participation of the Chief Financial Officer in revenue collection opportunities.

In conclusion, we found the draft audit report to be useful in reviewing our current resources and approach to monitoring the ticket processing and ticket collections contracts. Thank you for the opportunity to comment.

Sincerely,
Art Lawson
Acting Director
Department of Public Works

Henry Lightfoot
Acting Director
Department of Motor Vehicles

cc: Anthony Williams, Mayor of the District of Columbia
Richard P. Fite, Chief Procurement Officer

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1. The Procurement Practices Act of 1985 (D.C. Code, Section 1-1181 5), and Mayor's Order 90-178, effective November 19, 1990

2. An identified ticket is defined as a ticket for which the registered vehicle owner information has been provided by state motor vehicle agencies and at least two delinquent notices have been sent to the registered owner before being referred for collection.

3. An unidentified ticket is defined as a ticket for which the ticket processing contractor has not been able to obtain a valid name and/or address.

4. In accordance with the terms specified in the contract, the contract periods for the four emergency sole source contracts were calculated based on business days only and did not include weekends or holidays.

5. This figure does not include hundreds of thousands, most likely in excess of several millions, of uncollected delinquent parking tickets carried over from years prior to fiscal year 1995.

6. The Auditor's estimate of $20 million is based on a minimum fine of $15 for each ticket included in the delinquent ticket inventory pool at the close of fiscal year 1997. It does not include the value of those tickets that were carried forward from fiscal years prior to 1995 which the Auditor notes may exceed several million.

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