The Office of General Services (OGS) negotiated a comprehensive service agreement with IBM Corporation (IBM) for use by agencies that are IBM customers. The contract covers a full range of IBM services, including advisory consulting services, hardware maintenance services, and IBM education. An important feature of this contract is that it provides for a varying level of discount on advisory consulting services, based on the total, annual sales volume incurred by all authorized users of the contract. We audited selected aspects of OGS' administration of the contract, as well as selected aspects of the use of this contract by the Department of Taxation and Finance (Tax Department) and the Office for Technology (OFT). These two agencies were the highest users of the contract.

In our review of certain contract payments, we determined that the services purchased by OFT and the Tax Department were allowable under the contract. In addition, both OFT and Tax Department officials stated they are generally satisfied with the quality of services provided under the contract. However, we determined that OGS left itself largely dependent on IBM for calculating the correct discount for consulting services. OGS staff needed to make a stronger effort to secure the required sales volume data and to conduct tests of the reasonableness of the data reported by IBM. Further, OGS officials did not use the options available to it in the contract to enforce IBM's compliance with the sales volume reporting requirements. Therefore, contract users were vulnerable to being charged an incorrect rate for consulting services. In addition, OGS expects agencies to maintain documentation supporting every decision made by an agency to use this contract instead of other available procurement options. However, we found that, for the projects we reviewed, OFT did not have any significant supporting documentation, and the Tax Department maintained documentation for only some projects.

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