WASHINGTON—The Pension Benefit Guaranty Corp. continues to need a more strategic approach and better oversight of its extensive contracting operations, according to a Government Accountability Office report issued last week that calls such changes “overdue.”
The report said the PBGC, which spends nearly three-fourths of its budget on contractors, has made some improvements but has not moved quickly enough on recommendations made by the GAO in 2000 and 2008.
“A reassessment of the PBGC’s rationale for (contracting) is overdue,” the report concluded.
The GAO looked at eight contracts awarded in the last four years, including a $34.6 million, seven-year fixed price fees contract with PIMCO to manage a fixed-income portfolio; Aon Hewitt Inc.’s $45.9 million, five-year actuarial services contract; and a $30 million, 4.3-year contract for financial advice and expert witness services with Barclays Capital.
The report said the PBGC lacked a strategic plan for contracting, and did not routinely analyze cost benefits or risks. The federal government is moving toward performance-based contracting; about 15% of the PBGC’s contracts are performance-based.
In comments last month, PBGC Director Joshua Gotbaum said the agency is moving toward more performance-based contracting, and has implemented tighter procedures.
“PBGC has come a long way in contracting in recent years,” he wrote in a letter responding to a draft of the GAO report.
The GAO report was requested by Sen. Charles Grassley, R-Iowa. Earlier, at a congressional hearing, Sen. Grassley raised concerns about contracting problems he said have “plagued” the PBGC. He also cited a memo from the agency’s inspector general that said the PBGC “fabricated corrective action that did not take place” in some actuarial contracts.
A PBGC spokesman, said the agency has addressed the inspector general’s report and stands behind Mr. Gotbaum’s comments last month.
Hazel Bradford is a reporter at Pensions & Investments, a sister publication of Business Insurance.
