Bureau of Customs and Border Protection--Automated Commercial Environment Contract, B-302358, December 27, 2004

B-302358 Dec 27, 2004 Jump To VIEW DECISION DOWNLOADS RELATED PAGES GAO CONTACTS Highlights The Bureau of Customs and Border Protection's (Customs) Automated Commercial Environment (ACE) contract was an indefinite delivery, indefinite quantity contract and therefore was not subject to the multiyear contracting requirements of 41 U.S.C. 254c, including the termination provisions in that section. Upon award of an ACE contract, Customs should have obligated the contract minimum of 25 million in accordance with 31 U.S.C. 1501(a), the recording statute, to ensure the integrity of Customs' obligational accounting records. View Decision B-302358, Bureau of Customs and Border Protection--Automated Commercial Environment Contract, December 27, 2004 Decision Matter of: Bureau of Customs and Border Protection--Automated Commercial Environment Contract File: B-302358 Date: December 27, 2004 DIGEST 1. Customs's Automated Commercial Environment (ACE) contract was an indefinite delivery, indefinite quantity (IDIQ) contract and therefore was not subject to the multiyear contracting requirements of 41 U.S.C. 254c, including the termination provisions in that section. 2. Upon award of Automated Commercial Environment (ACE) contract, Customs should have obligated the contract minimum of25 million in accordance with 31U.S.C. 1501(a), the recording statute, to ensure the integrity of Customs's obligational accounting records. DECISION The Bureau of Customs and Border Protection (Customs) [1] and the Office of Inspector General (OIG), Department of Homeland Security, have jointly requested our decision, pursuant to 31 U.S.C. 3529, concerning implementation of the Customs modernization program [2] contract (Tc-2001-025), known as the Automated Commercial Environment (ACE) contract. Letter from Clark Kent Ervin, Acting Inspector General, Department of Homeland Security, and Robert C. Bonner, Commissioner, Bureau of Customs and Border Protection, to David Walker, Comptroller General, GAO, Dec. 5, 2003. Specifically, the requestors ask whether Customs should have obligated estimated termination costs pursuant to the Federal Acquisition Streamlining Act's multiyear contracting authority, codified at 41 U.S.C. 254c. Section 254c permits an agency to enter into a contract for up to 5years and requires the agency, at the time of contract award, to obligate the estimated costs of termination (as well as the cost of the first fiscal year in which the contract is in effect) unless the agency obligates for the full period of the contract. OIG's position is that the ACE contract is a multiyear contract governed by the section 254c requirement to obligate termination costs and that Customs's failure to obligate estimated termination costs could result in an Antideficiency Act violation if Customs needs to terminate the contract before its expiration and there are insufficient funds to cover these costs. Customs ACE Contract Management: Deficiencies Noted With Customs Modernization Contract, OIG-03-087 at 7 (June 30, 2003) (hereinafter OIG Report). Customs maintains that the ACE contract is not subject to section 254c. Customs says that it is an indefinite delivery indefinite quantity (IDIQ) contract, funded by a no-year appropriation, and that Customs has correctly followed the rules for obligating funds for IDIQ contracts. Letter from Douglas M. Browning, Deputy Commissioner of Customs, to Jeffrey Rush, Office of Inspector General, Department of the Treasury, Dec. 20, 2002. [3] As we explain below, we conclude that the ACE contract is an IDIQ contract and therefore is not subject to the requirements of section 254c, including the termination provisions of that section. Consequently, Customs did not need to obligate estimated termination costs at the time of contract award. We also conclude that Customs, at the time of contract award, incurred a legal liability of $25 million for its minimum contractual commitment, but failed to obligate that amount. Customs did not record its25 million obligation until 5 months after contract award. There is no indication in the submitted record that Customs did not have sufficient funds to cover the obligation at the time of contract award. Certainly, five months later when Customs finally recorded its obligation, Customs did have sufficient budget authority to meet the contractual minimum. Consistent with 31 U.S.C. 1501(a)(1), commonly referred to as the recording statute, Customs should have recorded an obligation against a currently available appropriation for the authorized purpose in an amount reflecting the liability incurred as a result of a binding written agreement at the time the contract was awarded. BACKGROUND On April 27, 2001, Customs awarded its Modernization Prime Integration Contract, commonly referred to as the ACE contract, to IBM Global Services.