Internal Audit Report

Internal Audit Report Purchasing Process Efficiency TxDOT Internal Audit Division

Objective To assess and evaluate the impacts on purchasing categories to determine areas of improvement in the efficiency and effectiveness of the Procurement function. Opinion Based on the audit scope areas reviewed, control mechanisms require improvement and only partially address risk factors and exposures considered significant relative to impacting reporting reliability, operational execution, and compliance. The organization's system of internal controls requires improvement in order to provide reasonable assurance that key goals and objectives will be achieved. Improvements are required to minimize existing process variation and control gap corrections that may result in potentially significant negative impacts to the organization including the achievement of the organization's business/control objectives. Overall Engagement Assessment Needs Improvement Finding 1 Finding 2 Finding 3 Finding 4 Title Blanket Purchase Orders Exceeded Contract Amounts Liquidated Damages Resulting from Late Deliveries Inefficiencies Leading up to Purchase Order Issuance Vendor Performance Evaluation Reporting Findings Operating Control Design Effectiveness Rating X X Needs Improvement X X Needs Improvement X X Needs Improvement X X Unsatisfactory Management concurs with the above findings and prepared management action plans to address deficiencies. Control Environment The Procurement Division (PRO) consists of two areas: Central Procurement and Field Procurement. Central Procurement is located in Austin and consists of Equipment, General Procurement and Program Support, Technology and Services, Performance Management and Analytics, Center for Procurement Excellence, and Records Support. Field Procurement is divided into four branches: North (Ft. Worth district), South (San Antonio district), East (Houston district), and West (Lubbock district). Each branch has a Purchasing Manager (located in the districts noted above) and branch Purchasing Coordinators/Leads who supervise the purchasers. Purchasers are located throughout the State in different districts, and the number of employees in each branch varies (e.g., North has 23, South 20, East 15, and the West 18). Each branch determines the distribution of the workload for purchasers. In the North, South, and East branches, the Leads distribute the workload to the purchasers while in the West, the enterprise resource planning system automatically routes the requisitions to the purchasers. TxDOT converted to the enterprise resource planning system in October 2014. The system conversion resulted in process changes that affect how TxDOT personnel request purchases and how TxDOT issues and monitors purchase orders (POs). To assist end users with learning the new system and the resulting changes to the purchasing process, PRO created May 2017 2

several online training courses to assist with the implementation. Even though training courses were developed, utilization of the training courses was only made optional, and none of the courses were required for users to access and use the system to create and process requisitions. Another source of guidance for end users and purchasers was the TxDOT Purchasing Manual, which contained information about the different purchase types; however, there was no corresponding manual for the new enterprise resource planning system application that provided instructions to purchasers on how to complete POs in the system. PRO produced the Procurement Dashboard for discussion in monthly meetings with purchasing managers and the performance management supervisor to help assess areas for improvement. Some of the items included in the dashboard were: the number of full-time purchasing employees vendor contract renewals metrics for No Bid and Delegated purchases the backlog in the records database that PRO uses for their document retention the top 10 requisitions by age for each business unit PRO also shared this monthly dashboard, including a 3-page executive summary, with the Chief Administrative Officer on October 2016, November 2016, and January 2017. Summary Results Audit testing completed resulting in management action plans. Finding Scope Area Evidence Controls are not in place to prevent blanket POs from exceeding their established maximum purchasing limit with vendors in Fiscal Year (FY) 2016. 1 Requisition to Purchase Order 11 of 1,101 (1%) blanket POs identified were allowed to exceed maximum purchasing amounts by $722,547. 2 Purchase Order to Receipt A comparison of actual receipt dates to PO delivery dates was made on 10 POs that included 29 vehicles or heavy equipment, the following was noted: 8 of 10 (80%) POs that included 27 vehicles or heavy equipment had items delivered after the PO delivery date specified in the respective orders (days ranged from 5 to 151). o For these 8 POs, TxDOT was entitled to $348,167 in liquidated damages. No liquidated damages were assessed to offset invoice amounts paid. May 2017 3

3 4 Requisition to Purchase Order Monitoring and Evaluation Various requisition to PO issues resulted in delays to the process as follows: Requisition Testing: 43 of 99 (43%) requisitions identified remained in the requisition source error report for three consecutive weeks (Central 30 reqs.; South 9 reqs.; and East 4 reqs.) Reasons for inclusion in the report included: o inventory items not stocked in the default end user s warehouse ( 30 items) o incorrect contract information entered in the requisition (11 items) o sales tax not being calculated (1 item) o not clearing the calculate price box (1 item) Through review of PO files, additional errors were identified that caused inefficiencies due to the following: 35 of 79 (44%) PO files were identified with one or more of the following issues causing inefficiencies: o Requisitions had incomplete scope of work (14 files) o incomplete vendor information (8 files) o pending review anywhere from 3 days to 4 months (5 files) o pending review with Comptroller of Public Accounts (CPA) anywhere from 1 to 6 months (10 files) Training: 1,656 of 1,995 (83%) end users with requester role access did not take the highly recommended DEV090 Creating Requisitions training course. TxDOT did not complete and report all required Vendor Performance Evaluations to the CPA for a sample of purchases over $25,000. 59 of 59 (100%) POs for amounts greater than $25,000 did not have vendor performance evaluations completed by the end user, i.e. requisitioner. Audit testing completed not resulting in management action plans. Scope Area Evidence Testing identified 4,888 POs did not have a receipt date recorded in the enterprise resource planning system. Purchase Order to Receipt Additional review confirmed that all POs were paid in accordance with the TxDOT Voucher Manual. May 2017 4

Audit Scope The audit was performed by Shelby Dover, Jessica Esqueda, Azana Headspeth, Sara Silva, and Eva Vargas (Engagement Lead). We conducted the audit during the period from December 5, 2016 to March 8, 2017. The audit scope focused on 1) the TxDOT purchasing process to request, approve, and issue a PO and 2) the procurement process after TxDOT issues a PO to receipt of the requested good or service by TxDOT. In addition, we focused on 3) internal monitoring and evaluation of the procurement cycle. All scope areas reviewed were for purchases made in FY 2016. Scope Area 1: Requisition to PO - we reviewed and analyzed source error reports, completion of recommended training on creating requisitions, gaining perspective through interviews of purchasers across the state, reviewing the tracking, reporting, and utilization of blanket POs. Scope Area 2: PO to Receipt - we assessed major equipment orders, open PO s, and the role of the CPA in the purchasing process. Scope Area 3: Monitoring and Evaluation - we evaluated how PRO assigned requisitions in the different branches, whether TxDOT completed vendor performance evaluations, and administration s involvement in monitoring of the purchasing process. Methodology The methodology used to complete the objectives of this audit included: Conducted interviews with key personnel in PRO, such as the division director, supervisor, business analyst, and purchasers in the five different branches across the state. Interviews were also conducted with officials at the CPA to understand their role in the TxDOT procurement process. o Selected a judgmental sample of 79 POs in FY 2016 and interviewed the purchasers who completed them to understand if inefficiencies were encountered in completing the order. Reviewed TxDOT internal documents such as the Purchasing Manual, Procurement Policy Manual, PRO Dashboards, Statewide Electronic Document Management System (EDMS) Process, and training courses related reference materials created by PRO such as the Requester How Do I and Purchaser How Do I reference documents. Reviewed the federal and state regulations such as 34 TAC Chapter 20, Texas Government Code (TGC) Chapter 497 Subchapter A.; Texas Correctional Industries Section 497.023; Senate Bill 20; General Appropriations Act Article IX section 6.03; The CPA State of Texas Procurement Manual; CPA contracts for major equipment; and the State of Texas Records Retention Schedule. Obtained and analyzed requisition source error reports for common errors and timeliness associated with correcting the errors. Analyzed 1,995 end users with a requisition role to determine how many had taken the recommended training on creating requisitions. Verified if the enterprise resource planning system was calculating the correct released amounts for blanket POs. o Additionally, we compared FY2016 PO data for blanket POs to maximum contract amounts to determine if TxDOT exceeded the maximum contract amounts. May 2017 5

Judgmentally selected and tested a sample of 10 POs in FY 2016 for vehicles and major equipment that TxDOT received after the date specified in the PO. We conducted analysis to determine why TxDOT received the items after the specified delivery date and if TxDOT took any action with the vendor in accordance with the contract. We also verified if vendor performance evaluations were completed. Judgmentally selected and tested a sample of 6 POs for a specific third party vendor with amounts over $25,000 and verified if a vendor performance evaluation was completed. Background This report is prepared for the Texas Transportation Commission and for the Administration and Management of TxDOT. The report presents the results of the Purchasing Process Efficiency audit we conducted as part of the FY 2017 Audit Plan. The purchasing process begins when an end user enters a requisition into TxDOT s enterprise resource planning system. It is then routed to an approver, who is designated by the district or division with delegation of signature authority, and is responsible for reviewing, approving, or denying the requisition. If approved, the system routes the requisition for creation of a purchase order. The requisition is routed to a purchaser who is responsible for creating the purchase order. If a purchaser receives a requisition with minimal information (i.e., incomplete scope of work), the purchaser contacts the end user to obtain the additional information. The purchaser does not return the requisition to the end user; instead, the purchaser works with the end user to correct the requisition so that the purchaser can issue the PO. Once the end user receives the item, the end user inspects and accepts the item and enters the receipt date into TxDOT s enterprise resource planning system. If the item is not accepted, the end user contacts the Purchaser to discuss corrective action. The vendor sends an invoice to TxDOT for payment. Finance, responsible for paying the invoice, will pay if a receipt date is in the enterprise resource planning system. If the purchase request is for a commodity that costs over $25,000 or for a service that costs over $100,000, CPA requires the purchaser to complete additional paperwork and to delegate the request to CPA for processing. As of January 2017, the delegation requirement for commodities increased from $25,000 to $50,000. In addition, CPA has communicated that they will complete commodities purchases within 90 days of receipt compared to up to six months it previously used to complete. We conducted this performance audit in accordance with Generally Accepted Government Auditing Standards and in conformance with the International Standards for the Professional Practice of Internal Auditing. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We provided recommendations to mitigate risks identified to management during the engagement to assist in the formulation of the management action plans included in this report. The Internal Audit Division uses the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control Integrated Framework version 2013. May 2017 6

We utilized a defined set of control objectives to focus on reporting, operational, and compliance goals for the identified scope areas. Our audit opinion is an assessment of the health of the overall control environment based on (1) the effectiveness of the enterprise risk management activities throughout the audit period and (2) the degree to which the defined control objectives were being met. Our audit opinion is not a guarantee against reporting misstatement and reliability, operational sub-optimization, or non-compliance, particularly in areas not included in the scope of this audit. May 2017 7

Detailed Findings and Management Action Plans (MAP) Finding No. 1: Blanket Purchase Orders (POs) Exceeded Contract Amounts Condition Blanket POs were allowed to exceed the maximum purchasing limit amount established with vendors. Currently, there are limited, manual processes in place to prevent or detect this condition. Effect/Potential Impact Exceeding purchasing limits may not guarantee sufficient funds for established encumbrances. Criteria General Appropriations Act, for the 2016-2017 Biennium, Eighty-fourth Texas Legislature Regular Session, 2015; Under Article IX General Provisions, in the General Limitations on Expenditures chapter, section 6.03, Excess Obligations Prohibited states: (a) An agency specified in this Act may not incur an obligation in excess of the amounts appropriated to it for the respective objects or purposes named. Cause PRO does not have a process to effectively prevent expenditures exceeding blanket PO authorization amounts. A preventive control in the enterprise resource planning system is currently not reliable. The contract released amount is not calculating the correct amount. Evidence The South branch identified differences in PO released amounts calling into question the integrity of data in the enterprise resource planning system. This information then prompted further audit work to be performed for blanket POs exceeding maximum amounts in FY 2016 data which also resulted in detection of balances being exceeded in the North and West branches. The enterprise resource planning system is not calculating the contract released amount correctly. There is a discrepancy between the total amount released shown in the system and the Events report total that is also pulled from the enterprise resource planning system. Both of these sources should tie to one another. Auditors compared the FY 2016 maximum purchasing limit contract amounts to FY 2016 blanket PO released amounts as provided by the audit client and through the enterprise resource planning system. Comparisons of these two amounts by vendor identified that 11 contracts had maximum amounts exceeded by $722,547. May 2017 8

Management Action Plan (MAP): MAP Owner: Dee Dee Evans, Business Analyst, Procurement Division (PRO) MAP 1.1: PRO is in the process of reconciling the POs and determining if the POs can contractually be increased to allow for continued use or if the POs will be closed and new POs put in place. Tickets are in place to resolve the above issue. PRO is in the process of working with TxDOT s third-party enterprise resource planning technical team to test software patches received from the software provider that will address the identified issue. Specifically, the patches will address; error generation when a requisition exceeds PO maximum amount, contract release amounts, and contract updates. Once program fixes are migrated to the production environment by Information Management Division (IMD), PRO will validate the program is working properly. Completion Date: July 15, 2017 May 2017 9

Finding No. 2: Liquidated Damages Resulting from Late Deliveries Condition The Procurement (PRO) and Fleet Operations (FOD) divisions are not ensuring liquidated damages are deducted from vendor payments for vehicles/equipment received after the delivery date stated in the purchase order (PO). Effect/Potential Impact TxDOT has paid vendors in excess of terms stated in POs. Also, TxDOT has accepted vendor non-compliance with delivery dates which further delays the completion of the procurement process (requisition to receipt). FOD is manually tracking delivery dates on vehicle and heavy equipment purchases. Criteria TXDOT specifications and Comptroller of Public Accounts (CPA) contracts referenced in POs state: The ordering entity will have the option to charge the vendor $50, $160, or $2,667 per vehicle per day for late delivery. Late fee applies ONLY when vendor has not requested and received PRIOR WRITTEN approval from the ordering entity, to make delivery after the number of days established by the contract or the purchase order. Cause PRO and FOD do not have a process for tracking and collecting liquidated damages. They were also unaware that collection of liquidated damages could be performed for items delivered late. Evidence Ten POs (that include 29 vehicles or heavy equipment) were tested: 8 of 10 (80%) POs that include 27 vehicles or heavy equipment were delivered after the PO delivery date (days late ranged from 5 to 151). o For these 8 POs, TxDOT was entitled to $348,167 in liquidated damages. No liquidated damages were used to offset invoice amounts paid. Management Action Plan (MAP): MAP Owner: Jo Woten, Purchasing Branch Manager, Procurement Division (PRO) MAP 2.1: PRO will coordinate with Fleet Operations Division to establish and implement a process for tracking and collecting liquidated damages. PRO will establish and implement a process to ensure documentation of prior written approval for late deliveries is in the purchase order file. PRO will update the applicable manuals to include a process for the aforementioned bullet points. Instructions for purchases on the enterprise resource planning system request for quote (RFQ) requirements regarding TxSmartBuy (TSB) orders will be updated to May 2017 10

specifically call out the requirement to update the Due Date field with the delivery date from the TSB order. The current interface program will result in the due date entered on the RFQ being reflected on the resulting enterprise resource planning system PO. No interface changes required. Completion Date: August 15, 2017 MAP Owner: Dalton Pratt, Director, Fleet Operations Division (FOD) MAP 2.2: A memo with the following process for tracking deliveries will be communicated to FOD managers: FOD Acquisitions will formalize the notification process when tracking deliveries. Tracking will include a briefing point during the weekly FOD/PRO procurement status meetings. FOD Strategy and Analytics will develop and maintain a dashboard measurement to be briefed at the monthly FOD Dashboard meeting. Completion Date: Action completed May 2017 11

Finding No. 3: Inefficiencies Leading up to Purchase Order (PO) Issuance Condition Inefficient processes/activities were identified that result in delays. Effect/Potential Impact Delays in fulfilling the procurement process will result in negative impacts to fulfilling key functions. This could impact service levels and additional delays that prevent the achievement of key organizational goals. Criteria State of Texas Procurement Manual Section 101 Training and Certification, Requirements for Procurement Personnel : Provides guidance on an agency s training requirements for purchasing employees. Cause The procurement manuals include purchasing concepts but do not provide purchasers with procedural steps to complete purchases in the TxDOT enterprise resource planning system. Purchasers have also noted that numerous requisition errors have to be caught and corrected before the procurement process can continue. These errors are a result of many end users (i.e., employees who create the requisition) who have not completed training sessions. It should be noted Procurement training sessions are not denoted as mandatory and participation shortfalls have arisen. Additionally, automated system checks are not in place to effectively identify potential problems throughout the procurement process like submission of zero dollar requisitions, which are allowed to go through the approval process. Evidence Requisitions, POs, and training utilization were reviewed to determine what potential root causes were driving inefficiencies in the procurement process. The following was noted: Requisition Testing: 43 of 99 (43%) requisitions identified as of February 10, 2017 remained in the source error report for 3 consecutive weeks (Central 30 reqs.; South 9 reqs.; and East 4 reqs.) Reasons for why requisitions were delayed and routed to this error report include: o 30 were for inventory items not stocked in the default end user s warehouse (i.e. out of stock items). o 11 related to incorrect contract information entered in the requisition (i.e. contract not in approved status, PO date out of range of the contract begin or expire date, supplier on the transaction does not match contract, contract maximum has been met). o 1 was related to sales tax not being calculated. o 1 was for not clearing the calculate price box. May 2017 12

Due to our testing, it was determined 9 errors (8 in the South and 1 in the East) had been corrected and an IT ticket was submitted to remove them from the source error report. Through review of PO files, additional errors were identified that caused inefficiencies due to the following: 35 of 79 (44%) PO files were identified with the following issues causing inefficiencies: o 14 requisitions had incomplete scope of work o 8 had incomplete vendor information o 5 were at Central PRO pending review anywhere from 3 days to 4 months o 10 were at CPA anywhere from 1 to 6 months Training: 1,656 of 1,995 (83%) end users with requester role access did not take the highly recommended DEV090 Creating Requisitions training course. Management Action Plan (MAP): MAP Owner: Glenn Hagler, Director, Procurement Division (PRO) MAP 3.1: PRO will coordinate with both the Information Management Division (IMD) to semiannually obtain a list of new PO module users with update roles and with Human Resources Division (HRD) to obtain a list of users that have taken the specific PO Module training, compare the lists, and notify the districts/divisions of the users who have not taken the training requesting they do so. PRO will notify end users of reference materials located in the PRO SharePoint. Procedures will be developed to address the cause and evidence noted above and will be made available in the Internal Procedures Guide to augment detailed procedures for specific methods of purchase and policy information in the Purchasing Manual. Specific enterprise resource planning system instructions will be made available on the ERP Knowledge Center website. Completion Date: September 15, 2017 May 2017 13

Finding No. 4: Vendor Performance Evaluation Reporting Condition Vendor performance evaluations are not always completed and reported to the Comptroller of Public Accounts (CPA) for purchases over $25,000 as required by Texas Administrative Code (TAC). Effect/Potential Impact By not reporting vendor performance to CPA, poor performing vendors may continue to be selected by CPA to provide goods and services to TxDOT. Criteria Texas Administrative Code (TAC) Title 34 Rule 20.115 states each agency shall submit a vendor performance evaluation for purchases over $25,000. TxDOT Purchasing Manual also states vendor performance reporting is required by statute to acknowledge exceptional, satisfactory, and unsatisfactory performance on all purchase orders greater than $25,000. The purchasing file must contain all documentation for reporting vendor performance, and may also include correspondence, e-mails, meeting notes, and telephone reports. Cause Procurement Division does not have a process to verify all purchase orders over $25,000 had vendor performance submitted to CPA. Evidence Testing included purchase order (PO) reviews over $25,000 to determine if vendor performance evaluations were completed and reported. The following results were noted: 59 of 59 (100%) POs for amounts greater than $25,000 did not have vendor performance evaluations completed by the end user (i.e. requisitioner). Management Action Plan (MAP): MAP Owner: Russell Tomlinson, Purchasing Branch Manager, Procurement Division MAP 4.1: Procurement Division (PRO) will establish and implement a process to ensure all purchase orders $25,000 or greater have vendor performance completed and submitted to CPA. Specifically, PRO will develop a process to remind districts/divisions (DDs) of the requirements to complete vendor performance evaluations and communicate the information to PRO. The process will include a follow-up to ensure the information is received, entered in the vendor performance system (VPS), and maintained in the PO file. Non-compliance will be elevated to the applicable DDs as required. Completion Date: September 15, 2017 May 2017 14

MAP Owner: Dalton Pratt, Director, Fleet Operations Division (FOD) MAP 4.2: A memo with the following process for completing vendor performance evaluations will be distributed to FOD managers: Effective immediately, the FOD Acquisitions process will be changed to require equipment supervisors to complete a vendor performance from when the items are received. Items will not be received until the vendor performance form is provided. Completed vendor performance forms will be included with the item s receipt documentation. FOD Strategy and Analytics will develop and maintain a dashboard measurement to be briefed at the monthly FOD Dashboard meeting. Completion Date: Action completed MAP Owner: Andrew Chavez, Director, Support Services Division (SSD) MAP 4.3: SSD will develop a Vendor Performance Evaluation Standard Operating Procedure (SOP) to provide guidance to its employees regarding when a vendor performance evaluation needs to be completed. Included in the SOP will be the following: A vendor performance evaluation needs to be completed for all purchases over $25,000. A copy of the vendor performance evaluation will be filed by SSD, PO file documents are maintained by Procurement. The evaluations will be scanned into EDMS where they will be combined with the rest of the PO information. The vendor performance evaluations are public record, they can also be found on the CPA s vendor performance website for those that do not have access to EDMS. The Austin Regional Distribution Center (RDC) Manager will verify that a vendor performance evaluation has been completed for all purchases over $25,000 by using the Vendor Performance Procedure SOP dated April 5, 2017. o This information is already included on the Expediting Tracker Spreadsheet that is maintained by the Expediting Team. Each PO over $25,000 is marked on the spreadsheet and the Expeditors ensure that an evaluation is filed for these POs when the material has been delivered in full against the PO. The Austin RDC Manager will log in and check for this information, as needed. The Austin RDC Manager will oversee and send vendor performance evaluations to PRO via email. The Expeditors will include the purchasers via email when the evaluation is filed. Completion Date: Action completed May 2017 15

Observations and Recommendations Audit Observation (a): Organizational Tone Purchasers across all branches provided suggestions for improving the efficiency of the purchasing process and overall employee morale. Detailed information collected was provided to the Procurement Division (PRO) management team, and a few highlights of those suggestions follow: 16 of 31 (52%) purchasers wanted opportunities to attend continuing education courses. 14 of 31 (45%) purchasers suggested standardized training, particularly for new purchasers. 14 of 31 (45%) purchasers would like clarification or modifications to metrics, including: o Communication of goals to all purchasers. o Calculation are perceived to be inaccurate due to the following: includes weekends reassigned requisitions do not reset the metric calculation time spent for review at Central PRO and Comptroller of Public Accounts is included 10 of 31 (32%) purchasers commented on the Work Life Balance workload. 4 of 31 (13%) purchasers stated the manual effort to scan complete purchase order (PO) files is time consuming and could result in PO files not being retained in the Electronic Document Management System (EDMS). Effect/Potential Impact Optimizing organizational tone can play an important role in keeping inefficiencies out of the procurement process. Poor communication channels or avoidance of suggestions made by staff members could continue to contribute to attrition and delayed procurement transactions. Audit Recommendation PRO should look to incorporate those training suggestions of its purchasers. Further training enhancements are also needed for new purchasers on the overall purchasing process and on usage of the enterprise resource planning system that handles procurement transactions. PRO should further engage with their purchasers to clarify and assess the metrics used to evaluate and monitor purchasers. PRO should develop a procedure that monitors EDMS and ensures PO files have been uploaded. May 2017 16

Audit Observation (b): Requisitions Sent to the Comptroller of Public Accounts (CPA) While CPA does track TxDOT requisitions submitted by TxDOT to the CPA, the Procurement Division (PRO) does not on an overall basis. It is up to the individual purchaser to monitor the status of the requisition and make sure it continues through the procurement process in a timely manner. CPA provides TxDOT a listing during monthly meetings; however, if TxDOT does not also centrally track those same requisitions, there is the possibility that the CPA listing is incomplete and additional delays could occur. In addition, the CPA has recommended that TxDOT use a Request for Proposal (RFP) format on commodities solicitations submitted to the CPA rather than an Invitation for Bid (IFB) format. CPA noted that the RFP format allows for negotiations with vendors, while the IFB format does not (i.e., CPA awards the purchase order to the lowest bidder). The CPA also noted that IFB submissions from TxDOT have had issues with having adequate support and clarity when initially submitted. PRO believes there are use cases for both formats. For example, the IFB format requires fewer resources and less time to process; thus, PRO prefers the IFB format when they know the desired solution or service and bidding requirements for services are more specific and well defined. PRO also prefers the RFP format on more complicated requisitions in which the solution or service desired is not well known and they seek solutions for the desired results. Effect/Potential Impact Requisitions could be at the CPA without TxDOT knowing about it or following up with the CPA to ensure timely processing. This could result in further delays in delivering the good or service to the end user, which could negatively affect TxDOT s business operations depending on the type or need of purchase. The CPA historically has taken up to 6 months to process TxDOT commodity requisitions so there was the potential for significant delays if PRO does not monitor or follow-up on requisitions. In January 2017, the CPA began advising agencies that their processing time will now be 90 days as they continue to increase their staffing size. Audit Recommendation PRO should establish a central tracking method for requisitions submitted to the CPA in order to monitor the process timing for those requisitions. PRO should also work with the CPA to further understand what improvements could be made by TxDOT upon their initial solicitation using either method. May 2017 17

Summary Results Based on Enterprise Risk Management Framework Closing Comments We discussed and provided the results of this audit to the Procurement Division Director on April 19, 2017. The Internal Audit Division appreciates the cooperation and assistance received from the Procurement, Fleet Operations, and Support Services Divisions during this audit. May 2017 18