Finding Text
2024-004 DOCUMENTATION OF SECTION 3 CLAUSES IN PROCUREMENT CONTRACTS - SIGNIFICANT DEFICIENCY Federal Program Community Development Block Grant-Entitlement/Special Purpose Grants Cluster ALN 14.218 passed through the County of Berks Criteria Procurement contracts and bidding documents for federally assisted construction projects must include all applicable Federal labor standards and program requirements, including Section 3 requirements, as applicable. These requirements are mandated by the terms and conditions of the Federal award and applicable Federal statutes and regulations, and must be incorporated into solicitation and contract documents to ensure contractors are properly notified of and comply with Federal requirements. Condition During the audit, procurement files and contracts were reviewed related to federally funded construction activities. It was noted that Section 3 notifications were not included in the retained bidding documents and executed contracts. Although the required clauses were omitted from the retained procurement documents, testing showed that the Authority ultimately complied with the Section 3 requirements during project execution, as evidenced by monitoring documentation and other compliance procedures. Cause The omission occurred due to inadequate procurement review controls, specifically a lack of standardized checklist or review process to ensure that all required Section 3 notifications were included in retained bidding and contract documents for applicable CDBG program construction contracts prior to execution. Effect Failure to include required Federal clauses in procurement and contract documents increases the risk of contractor noncompliance, limits the Authority’s ability to enforce Federal requirements, and could result in questioned costs, repayment of Federal funds, or other administrative actions if compliance cannot be demonstrated. In this instance, no actual noncompliance with Section 3 requirements was identified. Questioned Costs None Repeat Finding This is not a repeat finding. Recommendation We recommend the Authority strengthen its procurement and contract review procedures to ensure that all federally required provisions, including Section 3 requirements, are consistently included in bidding documents and executed contracts for federally funded construction activities. This may include implementing a standardized procurement checklist, updating contract templates, and requiring documented supervisory review prior to solicitation and contract execution. These actions will help ensure contractors are properly notified of Federal requirements and reduce the risk of future noncompliance. Management Response The Authority has revised its policy for Section 3 and will include the policy and requirements in all applicable agreements, pre-bid documents, and resulting contracts. Section 3 requirements will also be reviewed during pre-construction meetings for any applicable projects.