The company operating the mammoth Ronald Reagan Building and International Trade Center won its contract through favoritism and was paid nearly $150,000 in fees for work primarily done by subcontractors, federal auditors said Tuesday.
Trade Center Management Associates, which manages the building owned by the General Services Administration, improperly benefited during the 2008 procurement process because a GSA official gave the firm a more positive review of its past performance than was warranted, according to the GSA Office of Inspector General audit. The company has operated the Reagan building since 1995, three years before the structure opened, and was awarded a new contract in December 2008.
(Courtesy of Ronald Reagan Building and International Trade Center)
The audit also faulted GSA’s Public Buildings Service for poorly overseeing the current contract, resulting in inflated costs that often benefitted Trade Center Management Associates. In one instance, auditors said, GSA lost nearly $900,000 in revenue because it failed to charge a restaurant in the Reagan building — owned by the same people who own Trade Center Management Associates — for maintaining a common area near the food court.
In another instance, the Public Buildings Service, which acts as a landlord for the civilian federal government, improperly used $25,000 in federal funds for a 2009 holiday party in the building. The service could have saved $25,000 in room rent for a training course, due to a rent waiver in its contract with Trade Center Management Associates, but instead used the waiver to fund the party, auditors said.
Ultimately, the audit concluded, the contract has contributed to financial issues at the Reagan building through “flawed oversight of the contractor’s performance, as well as increased costs, many of which should be the contractor’s responsibility.’’ It is unclear from the 29-page document how serious the financial issues are.
In a statement, Trade Center Management Associates said the company had not been sent a copy of the report, “although we have just learned it can now be found online. We will take the time to thoroughly review the report.’’
“We are fully committed to making sure the Ronald Reagan Building and International Trade Center remains one of the hallmark venues in our nation’s capital,’’ the company added.
Jackeline Stewart, a GSA spokeswoman, said the agency has taken steps to address the report’s recommendations, including the development of a new procurement model for its Public Buildings Service that “maximizes financial oversight and enhances contractor transparency for the Ronald Reagan Building and the International Trade Center.’’
“GSA is committed to delivering the best value to our federal partners and the American taxpayer,’’ she added. “The agency will continue to work closely with the Inspector General to further ensure the integrity of the procurement process.’’
The 3.1-million-square foot Reagan building, the district’s largest structure, is dedicated to the advancement of trade and includes a conference and event center, office space and retail and dining establishments. Formerly a dusty parking lot, it opened to great fanfare, culminating three decades of work to restore Pennsylvania Avenue, launched by President John F. Kennedy’s reaction to the street’s aged, dingy storefronts during his inaugural ride from the Capitol to the White House in 1961.
The favoritism that auditors said has benefitted Trade Center Management Associates began with the selection process, when a GSA official completed a past performance questionnaire, and “incorrectly stated that revenue under the prior contract exceeded expenses,’’ the report said.
The flawed oversight, the auditors said, resulted in the company being paid $147,730 for general and administrative expenses and profit on work primarily done by subcontractors. “As the prime contractor, TCMA performed minimal work on these additional contracts and did not significantly contribute to their performance,’’ the report said.
* Follow Jerry Markon on Twitter at @JerryMarkon.