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GAO'S PROBLEMS WITH ACCESS
GAO has encountered a number of problems with access to government contractors' records resulting from or due in part to a lack of specificity in contract a greements. This document discusses examples of these problems which relate to
--the ongoing effort by GAO to promote reconciliation
of the legitimate needs of access to social research data for audit and the legitimate concerns about the responsibilities of researchers to protect individual privacy of citizens who volunteer data,
--litigation or other attempts to reconcile conflicts of
legal opinions on issues which impact seriously on GAO's ability to perform its functions, and
--conflicts having lesser implications which were easily
resolved, oftentimes without GAO pursuing the issue to
GAO ACCESS TO SOCIAL RESEARCH DATA
GAO is involved in an ongoing effort of communication with the social research community concerning audit and evaluation needs for access to social research data, and the concerns about responsibilities of researchers to protect individual privacy. A discussion of the chronology of events on this issue follows.
The first major attempt by GAO to assess the credibility of social research for policy was its review in 1970 of the New Jersey Negative Income Tax (NIT) Experiment. NIT was a major effort by the social research community - planned and initiated under contract from the Office of Economic Opportunity - to test an alternative to the public welfare system. It was the first instance of a GAO audit of a major social experiment. It was significant because GAO involvement heightened researchers' concerns about access to data and how and under what conditions such data are used in the
policy process. Access to a random sample of individually identified data files was granted to GAO in order to validate data and analyses offered in support of the conclusions of the preliminary report which had been issued by the Office of Economic Opportunity. GAO testified to the Senate Finance Committee that the data attributed to individual participants was in fact used to support the preliminary report. However, the audit of that experiment did not extend at that time to reinterviewing participants and because congressional interest subsided quickly after the Family Assistance Program was defeated, plans to continue the review were not carried out.
The most complete development of problems of access to individually identified social research data occurred during the review by GAO of the Experimental Housing Allowance Program (EHAP). This review led to a preliminary report in March 1974, raising questions about the uncertainty which would be encountered in formulating policy about a national housing allowance program by generalizing from the experimental findings. Because of the high cost of the experiment and the obvious importance in impending national policy, GAO decided to continue and to extend the review to an audit of the data base. This decision led ultima tely to a request in 1975 by GAO for access to individually identified data files, including a request for names and addresses for the purpose of reinterviewing participants in the experiment. GAO and HUD a greed on a procedure for GAO access in this case which allowed for some, but not random, sampling of participants through the use of a third party, a public accounting firm.
In an attempt to remedy a misunderstanding which surfaced in the EHAP case, the Comptroller General called a meeting on May 18, 1976, at GAO with a number of leading social researchers, including representatives from the major contractors in EHAP. In a further attempt to resolve the lack of understanding and to agree on procedures for GAO's access the Comptroller General requested the President of the Social Science Research Council (SSRC) to perform a study for GAO specifically to include consideration of any possible alternatives to reinterview which SSRC might propose. A report of the SSRC Committee on Evaluation Research in response to the request was recently issued. (Audits and Social Experiments: A Report Prepared for the U.S. General Accounting Office, PAD-79-1, October 1978.)
In its contract with the SSRC, GAO provided the SSRC with a background paper. This paper dated April 8, 1977, summarizes the statutory responsibilities and authority of the GAO to have access to records maintained in individually identified form and states that a strong case can be made for the audit function as a surrogate for scientific replication, which is difficult in the case of social experiments.
The paper further stated that in its review of social research and social experimentation programs such as the EHAP "GAO is not interested in personal information about individuals to make determinations about them or their rights and entitlements. GAO is interested in that information only as an aid in evaluating the research or experimental programs being reviewed." With regard to the need to recontact and reinterview participants in an experiment the document concluded, GAO may need to observe as part of an audit, such things as an individual's housing quality or the type and quality of health care services received.
In the report on EHAP, issued in March 1978, GẠO recommended that the Director of the Office of Mana gement and Budget require Federal agencies to consult with GAO when it appears that a pledge of confidentiality extended to program participants in future social experimentation might conflict with GAO's right to access. GAO has stated its intention to study the SSRC recommendations and to determine the degree to which these can be implemented. GAO has stated also its intention to publish guideline documents which will expand on the guidance contained in the SSRC report. We believe these efforts are viewed constructively by most in the research community and that communication difficulties have been greatly alleviated.
CONCERTED EFFORT BY GAO ON LEGAL
GAO is currently involved in legal disputes of its right to access contractor collected data. In these cases GAO has determined that access is critical to the performance of its job. These disputes are with (1) a number of drug companies, and (2) the Environmental Protection Agency (EPA).
Access to drug company pricing information
GAO has been attempting for several years to gain access for audit purposes to records of several drug firms. In this connection, we have been involved in litigation with five major drug firms. A recent development with Eli Lilly & Co.
is significant to the issue of GAO access to contractor pricing information.
By letting stand a lower court ruling, the Supreme Court recently supported the Comptroller General's right to examine the records of any Government supplier having a negotiated contract.
The Court refused to review an April decision by the 7th U.S. Circuit Court of Appeals that Eli Lilly & Co. must show GAO the records pertaining to the cost of producing and the pricing of prescription medicines purchased by the Government. The Appeals Court decision reversed an earlier ruling that the Comptroller General had exceeded his authority.
In 1973–74, Lilly entered into seven negotiated fixedprice contracts, totaling about $6 million, with the Veterans Administration and the Defense Department. Each contract contained the standard GAO access-to-records clause, providing that the Comptroller General shall have access to and the right to examine any directly pertinent books, documents, papers and records of the contractor involving transactions relating to the contract.
When Lilly and other companies refused to open their records to GAO on a voluntary basis, the Comptroller General formally demanded access. Lilly asked the District Court for the Southern District of Indiana to enjoin the Comptroller General from examining its records.
The Court issued the injunction. The purpose of the Comptroller General's request for information, the judge contended, was to conduct a research study of the economics of the pharmaceutical industry, when the law authorized him only to audit contract negotiations and performance. The drug company said that they could not allocate overhead costs to specific products, and that manufacturing and distribution costs accounted for only a small portion of the product's cost.
However, the Court of Appeals concluded that GAO's access request was properly motivated and within its authority, rejecting a narrow interpretation of GAO's access authority.
The ruling means that GAO is entitled to examine records relating to direct manufacturing costs, overhead items such as manufacturing overhead, research and development, marketing, and general and administrative costs, as well as records which
relate to the establishment of the contract price. Moreover, the records of these costs are subject to GAO inspection whether or not the company's accounting system allocates them to individual products or contracts and whether or not the contract price is based on the firm's standard commercial catalog price.
Similar cases involving other pharmaceutical manufacturers are pending in other district courts. The ruling of the 7th District Court of Appeals is not binding in other judicial circuits, but may serve as a legal precedent.
Access provisions not specified--EPA grant
GAO is currently in dispute with the Environmental Protection Agency's Office of General Counsel on GAO's and EPA's right to contractor information when access provisions are not specified in contracts. This question came out of our recent audit of an EPA grant.
At the request of the Chairman, Subcommittee on Investigations and Review, House Committee on Public Works and Transportation, GAO reviewed procurement of architecturalengineering services under EPA grants for constructing waste treatment works. As part of the request, GAO was required to review the accounts and records of the principal consulting firm for the Suffolk County, New York, water pollution abatement project to ascertain selected financial information. The firm denied us access. The firm's contract with the grantee did not contain a GAO access-to-records clause, Because GAO was not able to gain access to the firm's records, the Subcommittee asked GAO to determine whether GAO and/or EPA have access to a firm's financial records on contracts with EPA grantees
EPA regulations require that access-to-records provisions be included in all contracts, but many contracts do not contain such provisions. EPA's General Counsel, has stated that EPA has been gaining access to contractor records when access provisions were not in the contract. EPA and GAO have not resolved the issue of whether EPA and GAO have access when access clauses are not in the contract. EPA's General Counsel is currently studying the matter and will provide GAO with its formal views shortly. GAO will issue a report to the Subcommittee which will discuss the access to records question.
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