Good afternoon, Chairman White and members of the Committee on Government Operations and Facilities. I am George Schutter, Chief Procurement Officer of the District of Columbia and the Director of the Office of Contracting and Procurement. First, I would like to thank you for allowing me the opportunity to provide testimony on emergency procurements conducted during the COVID-19 public health emergency.

Over the last sixteen months, the Office of Contracting and Procurement, through the Mayor’s declaration of the public health emergency, has served as the District’s central contracting and procurement function in response to the COVID-19 pandemic. As I have stated before, my team at OCP and our client agencies overcame many challenges to provide the District with the goods and services vital to keeping our residents, first responders, and healthcare workers safe and healthy. OCP has procured $420 million of goods, services, and construction in support of the District’s COVID-19 pandemic response efforts. That includes over 9 million masks, the contents of an entire emergency hospital at the Alternate Care Facility, hundreds of supplemental call takers, and nurses, as well as over 9 million boxes of gloves. These are just a few examples of the wide range of critical needs the agency procured. Despite the frenetic pace of procurements, OCP stayed true to its mission of purchasing quality goods and services fairly, impartially, and as transparently as possible in a timely manner and at a reasonable cost.

During the pandemic, OCP and specifically our Surplus Property team, worked with the Assistant City Administrator, the Department of Public Works, the Department of Homeland Security and Emergency Management, and DC Health to centralize the District’s warehousing and distribution operations to form the District Strategic Logistics Center (SLC). The establishment of the SLC resulted in the streamlining of warehouse operations and the ability to purchase and distribute goods at scale, providing both distribution speed and cost savings to the District. Additionally, centralizing both the contracting and logistics functions under one agency has allowed the District to efficiently manage the District’s commodities, equipment, storage, security, and distribution. The centralization of these functions has also enabled OCP to track the usage of goods for more precise budgeting and manage the spoilage, disposal, reuse, and end of use sale.

OCP’s role and strategic planning during the pandemic response facilitated the purchase of a wide range of goods, services, and construction for the District despite extreme competition in the marketplace and significant supply chain disruptions. Before the public emergency had been declared, OCP began coordination with DC Health and the Department of Human Services to purchase quarantine hoteling sites. As the impacts of the COVID-19 virus became known, OCP began procuring essential PPE and medical supplies. As the Food and Drug Administration (FDA) started approving immunizations for the virus in late 2020, OCP began procuring goods and services to support the District’s mass vaccination effort.

As I reported during our performance oversight hearing earlier this year, our team has maintained a commitment to our small and local business community. Throughout the pandemic, OCP spent $164 million with Certified Business Enterprises (CBEs). In addition, $63.5 million of procurements were acquired through businesses who are not CBEs but are District-based businesses, such as hotels. I view this spend for critical pandemic needs with our District businesses as a significant investment in our local economy.

I am proud of the work my team accomplished during these unprecedented times. Today, I will address your concerns as outlined in the hearing notice.

Compliance with D.C. Official Code § 7-2304(b)

D.C. Official Code § 7-2304(b)(2) as enacted by the COVID-19 Response Emergency Act of 2020 requires OCP to provide, “a summary of each emergency procurement entered into during a period for which a public health emergency is declared shall be provided to the

Council no later than 7 days after the contract is awarded.” OCP has maintained and continues to maintain records of all emergency procurements. The records meet the requirements FEMA has outlined for states and local government to claim reimbursement of emergency expenses. The agency has made every effort to comply with the reporting requirements in the D.C. Code and will continue to.

Comprehensive Annual Financial Report Management Recommendations for Fiscal Year Ended September 30, 2020

In the Government of the District of Columbia Comprehensive Annual Financial Report (CAFR) Finding 2020-11, I would like to address the following observations from the audit:

1. Condition #1: “For two samples, MJ did not receive definitized contracts. These two samples were regular procurement transactions, in excess of $100,000. The Office of Contracting & Procurement (OCP) confirmed that these procurements should have had contracts issued.”:

OCP clarified the letter contract terms to the CAFR Audit team. Still, the audit team erroneously concluded that the requirement to definitize a contract is based solely on the contract value. OCP did not confirm that “procurements should have had contracts issued.” OCP stated that in instances where the contractual supplies and services were received by the District within the letter contract period, the letter contracts may have been allowed to expire without definitizing the contracts. Therefore, it is the completion of the contract terms within the letter contract period that determines the requirement for a definitized contract, not the contract value. OCP confirmed that definitization of the emergency contract was not required statutorily or regulatorily.

2. Effect: “Failure to maintain appropriate supporting documentation for transactions procured using approved emergency procurement methods increases the risk that the cost of items procured under a valid emergency procurement procedure will be disallowed for reimbursement.”

With the understanding that past federal reimbursement performance is not an indication or guide for current or future federal reimbursement performance, we note that there have been no instances in at least the preceding five fiscal years where costs incurred by OCP under a declared emergency have been disallowed for federal reimbursement for any reason, including lack of adequate supporting documentation. OCP maintains a robust framework for documenting and reporting emergency procurements.

As is noted in the Notice of Finding and Recommendation (NFR), albeit without context, is that to date the District has incurred in excess of $195 million of expenditures while managing its response to the COVID-19 pandemic. What is not mentioned, is that the District has also received federal reimbursement of more than $195 million in COVID-19 expenditures based on the same supporting documentation that was submitted to the CAFR Audit team for their internal control testing procedures.

We also note that FEMA’s public assistance reimbursement grants management portal comprises a multistep review and approval process. FEMA reviews information submitted online including work activities, costs, and supporting documentation and contacts the Recipient if there are any questions.

While we acknowledge cost disallowance is a valid risk overall and also inherent to emergency contracting, we note that the District and OCP in particular, has demonstrated compliance with FEMA policy and its own emergency procurement documentation policies and procedures. To date, the District has received reimbursement for every allowable expense submitted to FEMA under the COVID-19 emergency, as evidenced by FEMA’s acceptance and reimbursement of more than $195 million in allowable COVID-19 expenditures.

The laws governing emergency procurements allow the Chief Procurement Officer flexibility to nimbly and efficiently procure critically needed goods and services in support of the District’s pandemic response. All procurements needed to support our residents through the pandemic were acquired even with the significant lack of supplies to meet the market demands and the global supply chain constraints.

OIG Audit Closeout Letter

The Office of the Inspector General (OIG) sent the audit closeout letter on May 12, 2021. In the letter, the OIG makes several assertions about OCP actions, operations and procedures that are inaccurate. Since the audit was announced on September 16, 2020, OCP has prioritized compliance with the audit process. As I indicated in my response letter to the OIG, I am very troubled by the inaccurate assertions made in the letter and their potential impact on the public’s trust in OCP and the District. Today, I would like to address the primary observation as noted in the closeout letter.

During the audit entrance conference, OCP worked with the OIG to identify the systems and data the auditors felt necessary to successfully complete the audit. The systems identified were the BarCloud inventory management system and QuickBase, which is used for agency supply requests. OIG requested unfettered access to these systems. Because these systems contain confidential, deliberative, and procurement-sensitive information, OCP declined to provide access to the audit team. In addition, given the scope of the audit discussed at the entrance conference, OCP believed that the access requested by the OIG fell outside of the scope of the audit and was not necessary for the auditors to complete their evaluation.[1] The OIG requested a list of COVID-19 emergency procurements, which OCP provided on January 28, 2021. From the start of the audit, I have maintained my offer to provide access to the emergency contract files. In a meeting on unrelated matters with the Assistant Inspector General in February 2021, I reiterated my offer to provide reasonable access to the emergency contract files. The OIG team later indicated that they would like access to the emergency contract storage database, SmartSheets, after seeing it in during a demonstration. After seeking additional legal counsel, OCP granted OIG access to BarCloud, QuickBase, and SmartSheets where the emergency contract files were stored.

Due to the complex nature of these systems, OCP offered and conducted training on each system for the OIG audit staff. The trainings occurred on multiple occasions. However, the auditors seemed intent on navigating the systems and data themselves. Nevertheless, the OCP team remained available to answer any questions posed by the audit team. In my response to the audit closeout letter, I include tables that show the access granted to each of the audit users and training opportunities provided to the auditors.

After receiving the closeout letter, OCP reviewed the audit trail of its systems to find that several of the auditors did not access the systems, or accessed the system only for short periods of time. This finding is troubling because I believe the auditors would not have been able to adequately obtain the information required to comprehensively conduct the audit based on the audit team’s systems access history. This is despite the many times OCP provided systems training and offered systems support. Yet, the OIG closeout letter alleges that OCP denied the OIG audit team access to these resources preventing them from completing the audit, which is false.

The OIG closeout letter contains additional assertions that imply that OCP has been negligent in its operation of the SLC. Since establishing the SLC, our performance warehousing, distributing, and reutilizing vital goods for the District’s COVID-19 pandemic response is a testament to OCP’s operational capabilities. From May 18, 2020, to May 18, 2021, OCP fulfilled 2,136 orders from 108 clients through the warehouse in support of the District’s COVID-19 response. I am happy that you, Chairman White, were able to tour the warehouse and see its capabilities for yourself. I am proud of our SLC team and all that they have accomplished. The SLC will continue to support the COVID-19 emergency while also preparing to support the recovery and increased procurements associated with funding from the American Rescue Plan Act of 2021.

Conclusion

In closing, I continue to be proud of OCP’s role supporting the District’s response to the COVID-19 pandemic. OCP remains committed to a transparent process that upholds the public’s trust by continuing to operate under our current processes authorized under the law, both emergency and otherwise. The success of our operations is evident through the number of critical goods and services that OCP provided to the District throughout the pandemic. Like the support provided to our residents, first responders, and healthcare workers, OCP also distributed critical needs to our Business Improvement Districts (BIDs) such as over two million ounces of hand sanitizer, over four million masks, and over 1.7 million ounces of disinfectant. These critical resources enabled businesses to stay open and provide a safe experience for their clientele and workers. OCP’s operations also supported the District in providing safety and disinfectant supplies to childcare centers, schools, and dentists. OCP’s central contracting and logistics support model has impacted nearly all aspects of the District’s COVID-19 response and recovery efforts and has been highlighted nationally.

To meet the rapidly growing needs of the District’s pandemic response, OCP expanded the capacity of several warehouses throughout the city for all COVID-19 procured items. Having a central process through the SLC has helped the District by serving as an all-hazard-type facility and will be critical in mitigating the incoming influx of goods. As such, OCP appreciates the committee keeping this priority within the Mayor’s budget. Our current space is filled with a multitude of critically needed items received and disbursed daily to District agencies and organizations. OCP is grateful for the support of the Mayor and the Council which will ensure the agency will have the necessary resources to manage any hazards that the District may face, as well as managing the upcoming influx of goods procured from federal funding authorized under the American Rescue Plan Act of 2021.

I want to thank Mayor Bowser, City Administrator Donahue, and Assistant City Administrator Melder for their continued leadership and support throughout the pandemic. I thank you, Chairman White and the members of the Committee on Government Operations and Facilities, for the opportunity to testify and your ongoing support. This concludes my prepared testimony. I am happy to answer any questions you may have.