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DENIAL OF ACCESS WHICH DID NOT
SERIOUSLY IMPEDE GAO'S PERFORMANCE

In the examples cited below it was determined that denial of access to contractor data did not seriously impede the GAO effort to accomplish its audit objectives. In most of these, alternatives were adopted and the legality of right to access was not pursued even to the extent of evaluating contract provisions, or lack of provisions, for the right to access.

1.

GAO was denied access to information gathered by a contractor during an evaluation of his effort to study the Federal Trade Commission's rulemaking process. Public Law 93-657 of January 4, 1975, authorized the Federal Trade Commission to issue trade regulation rules and to pay for public participation in the rulemaking proceedings. The law also required the Administrative Conference of the U.S. to study the Commission's rulemaking process, including its public participation program. The Conference contracted with a law professor to perform the study. During the survey of that program GAO tried to get as much information as possible from the contractor on his study. The contractor was willing to discuss the scope, execution, and results of the study but would not provide access to the data he had accumulated. The contract specified that all material gathered by the contractor would be his property. It did not address GAO's right to material collected by him; it only implied GAO's rights relative to contract bid protests lodged with GAO. Because the discussion (and the promise of a draft of his report to the Conference) served GAO's purpose, the matter was not pursued further.

2. GAO was recently denied access to contractor information when reviewing delivery of services to elderly Supplemental Security Income recipients provided under Title XX of the Social Security Act.

GAO was denied access to client names and files by Maryland agencies providing legal aid, mental health services and alcohol abuse treatment services with funds granted under Title XX. The agencies denied access because traditionally the relationship between clients and their physicians and lawyers is confidential. GAO was able to collect aggregate data which satisfied the needs of the review so the access matter was not pursued.

3. The Department of Energy contracted with Stone and Webster, a firm headquartered in Boston, Massachusetts, in part to collect and analyze data from utility industry firms in the Southwest on future energy demand. In collecting the data, Stone and Webster promised the firms involved that their individual responses would remain confidential. Stone and Webster is preparing a report for the Department on its findings.

In the course of an ongoing evaluation of the Department's Western Area Power Administration GAO approached both the Department and Stone and Webster to obtain the data on which the study is being based. GAO was rebuffed by both. Because GAO obtained comparable data from other sources, the question of right to the data was not pursued further.

4. F. W. Dodge Company, a subsidiary of McGraw-Hill Information Systems, headquartered in New York City, collects various data from private companies, which it sells to Government, private, or other users under tightly controlled terms. The Department of Energy contracted with F. W. Dodge to provide certain data on energy use in the commercial sector. The contract states that the information may be used only for the purposes provided in the contract.

For the same job as in 3 above, GAO attempted to get this data. The Department said it had no objection to GAO extracting the data from a gency files. However, F. W. Dodge claimed--quite forcefully--that the Department had no right to make the data available to GAO, but the company did offer to sell the data. GAO adopted the alternative of gathering enough data itself to make the necessary determination on energy use in the commercial sector. This satisfied the job requirement in a more timely and less costly manner than pursuing the legal issue with F. W. Dod ge.

5. The Department of Energy contracted with Badger Plants, Inc., a Raytheon subsidiary, to develop a conceptual design for a commercial-size plant to produce methanol from coal. In performing an ongoing review of issues surrounding the use of alcohol as an energy source GAO obtained copy of the executive summary of Badger's report to the Department. GAO asked the Department for access to the complete report and was initially told that GAO should have had no part of the report because Badger had a "patent hold" on the information. This was permitted by the contract provisions. Subsequently, the company lifted the patent hold and GAO will be permitted access to the entire report.

6. The Department of Energy invited bids for a contract to construct a 50 megawatt geothermal demonstration plant. One of the firms bidding on the contract was Public Service Company of New Mexico. As part of the review of Federal efforts to develop geothermal energy GAO requested access to the data underlying the company's proposal. Both the Department and the company said GAO had no rights to the data. To pursue the legality of GAO's rights to access could quite possibly take so much time that our resulting evaluation of cost-efficiency of the geothermal plant vis-a-vis alternative energy forms would be too late to be useful. At the present time, GAO has elected to consider the usefulness of summary cost data which DOE and the company provided. However, we cannot verify the accuracy of that data.

7. GAO was recently prevented from reviewing certain contractor da ta because of a pledge of confidentiality made by the Department of Defense. In 1976, DOD made a study of defense contractor profits. GAO was concerned that the 1976 profit study might lead to an increase in overall contractor profits.

This study included the analysis of contractor's financial data. In order to obtain this data, DOD promised the contractors that the individual data furnished would be reviewed only by the CPA firm hired for that purpose. GAO did not pursue the question of right to the financial data because its use by DOD did not adversely affect the Government's interest (ie., in this case the conclusion of DOD was that the data did not justify an overall contractor profit increase). Hence, there was no compelling need to analyze the financial data.

8.

The Civil Service Commission recently contracted with a private law firm to investigate alleged violations of the merit system by officials of the Commission. The contract contained the standard GAO access-to-records clause, but also contained a specific provision giving the contractor sole access to its files and workpapers for 3 years after submission of its report. An additional contract provision allowed the contractor to destroy all records it determined were not relevant to the report findings.

A member of Congress, through concern over the allegations requested that GAO audit the contractor's performance and records. GAO's Office of the General Counsel determined that GAO's statutory and contractual right to access contractor documents was paramount, and would not be superseded by the conflicting specific contract provisions, should a dispute arise. GAO advised the Commission to instruct the contractor not to destroy any records or documents related to the contract.

The question of GAO access, however, was not asserted a gainst the contractor because the decision was reached not to conduct the audit in view of the fact that previous investigations did not uncover any violations.

APPENDIX 2.-LETTER OF FEBRUARY 23, 1978, FROM HEW SECRETARY

JOSEPH A. CALIFANO, JR., REGARDING APPLICATION OF THE PRIVACY ACT TO DATA HELD BY CONTRACTORS UNDER PROGRAM INVOLVING DEFAULTED STUDENT LOANS

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Thank you for your letter concerning the announcement that the office of Education (OE) is soliciting proposals from private business concerns to assist in the collection of defaulted federally insured student loans. I apologize for the delay in responding.

Last week I' announced a major effort to improve the administration of HEW's student assistance programs and to reduce the backlog of defaulted student loans. A copy of my statement is enclosed. As part of this effort, we plan to contract, on a pilot basis, with private collection firms in two regions. The original Request for Proposal (RFP), which called for a single, nationwide contractor, is now being revised. When our new RFPs are complete, we will send you copies.

Any contractor receiving an award will be required to comply with the Privacy Act of 1974 and with the provisions of the Higher Education Act of 1965 that were added by the Education Amendments of 1976. The ownership of information provided to or gathered by a contractor, safeguards within the contract to prevent misuse of information, and procedures for the ultimate disposition of the information will be specifically addressed in the contract.

In brief, information provided from the Office of Education's files to the contractor will consist of only those data required to successfully contact and collect from the defaulted borrower. The original default file, including all original documents and correspondence, will remain in the possession of the Federal regional offices. Misuse of information by a contractor would constitute grounds for termination of the contract. All information obtained by a contractor from whatever source will be required to be returned to the Office of Education.

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The contract will specifically provide that the contractor is subject to the civil and criminal penalties of the Privacy Act, and should a contractor employ unfair or unreasonable collection techniques, the contract may be terminated immediately. We will require that successful bidders comply with the Fair Debt Collection Practices Act by incorporating the provisions of the Act in our contracts. The Office of Education will have personnel on-site to monitor the activities of the contractor.

These pilot contracts will be for a one year period. This will give us the opportunity to evaluate the effectiveness of our privacy safeguards and our safeguards against unfair debt collection practices after we have gained some solid experience with private agencies.

I appreciate your concern in this matter. It is our intention to improve our record of debt collection without infringing on the rights of the individuals involved.

Sincerely,

Joe

Joseph A. Califano, Jr.

Enclosure

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