AUDIT OF THE INTERGOVERNMENTAL
AGREEMENT DETENTION SPACE
NEGOTIATION PROCESS
U.S. Department of Justice
Office of the Inspector General
Audit Division
Audit Report 11-21
March 2011

REDACTED - FOR PUBLIC RELEASE

AUDIT OF THE INTERGOVERNMENTAL AGREEMENT
DETENTION SPACE NEGOTIATION PROCESS
EXECUTIVE SUMMARY·
The United States Marshals Service (USMS) is responsible for holding
Department of Justice (DOJ) criminal detainees while courts adjudicate their
cases. During fiscal year (FY) 2010, the USMS had an average daily custody
population of about 60,000 detainees, who were mostly housed in state and
local detention facilities. 1 The USMS normally procures detention space at
these facilities using intergovernmental agreements (IGA), which set a price,
referred to as a "jail-day rate," that DOJ will pay a state or local government
to hold one detainee for 1 day. While the USMS negotiates IGAs with
detention facilities, the Office of the Federal Detention Trustee (OFDT)
establishes the framework by which the USMS negotiates these IGAs. In
FY 2010, the USMS spent $888 million on IGAs, which was the largest
portion (71 percent) of the $1.24 billion spent to house DOJ detainees in
non-federal facilities.
Before March 2006, jail-day rates were generally based on the
reported costs of each detention facility. According to the OFDT, however,
basing jail-day rates only on costs did not provide an adequate incentive for
state and local governments to operate efficiently and control detentionrelated expenses. In March 2006, the OFDT directed the USMS to consider
other pricing factors besides each facility's costs to negotiate IGA jail-day
rates.
The new negotiation strategy, referred to as "price analysis" in the
Federal Acquisition Regulation (FAR), allows the USMS to compare proposed
rates to estimated rates using facility cost information, government pricing
estimates, and the rates charged by similar or nearby facilities.

• The full version of this report includes information that the OFDT and USMS
considered to be procurement sensitive, and therefore cannot not be publicly released.
According to the USMS and OFDT, disclosure of specific facility names, locations, and facility
jail-day rates would impair future negotiations. To create this public version of the report,
the Office of the Inspector General replaced each facility name with a number and redacted
the portions of the full report that the OFDT and USMS considered sensitive.
1 Of the 60,000 detainees, about 37,000 were housed in state and local detention
facilities. The USMS also housed approximately 12,000 detainees each day in facilities
administered by the Federal Bureau of Prisons and another 11,000 detainees in private
facilities.

In November 2007, as part of the new negotiation strategy, the OFDT
implemented what it called elGA - the electronic Intergovernmental
Agreement system. A web-based system, eIGA is used by state and local
detention facilities to submit IGA applications to the OFDT and USMS. The
USMS and OFDT also use elGA to review IGA applications and collect
information to negotiate new jail-day rates.

OIG Audit Approach
The DOJ Office of the Inspector General (OIG) conducted this audit to:
(1) assess how the OFDT has implemented and the USMS uses elGA to
negotiate jail-day rates, and (2) determine whether the OFDT price analysis
negotiation strategy has resulted in fair and reasonable jail-day rates
charged by state and local facilities.
This audit follows up on the findings of a March 2007 OIG audit that
assessed how the OFDT and USMS negotiated IGAs.2 The March 2007 audit
summarized the results of 31 individual IGA audits conducted between 1995
and 2006 that the OIG performed to assess the.allowability of state and local
government detention facility costs. The individual IGA audits identified a
total of $60 million in dollar-related findings, which the OFDT and USMS
dispute. 3
The March 2007 OIG audit found significant deficiencies in how the
OFDT and USMS planned to establish jail-day rates and revamp the IGA
negotiation process. The OFDT instructed the USMS to begin using elGA to
apply a statistical pricing model to negotiate new jail-day rates. Because the
OFDT's model abandoned the long-held approach of using facility costs to set
jail-day rates, the March 2007 OIG audit recommended that the OFDT and
USMS still consider facility costs when they negotiate IGAs. In our
judgment, cost information was critical for the USMS and OFDT to gauge
whether negotiated IGA rates were fair and reasonable. In response to our
2007 audit, the OFDT modified elGA to require that state and local facilities
requesting a new or revised jail-day rate submit detailed cost data, known
as jail operating expense information (JOEl), to help USMS negotiators
2 U.S. Department of Justice Office of the Inspector General, Oversight of
Intergovernmental Agreements by the United States Marshals Service and the Office of the
Federal Detention Trustee, Audit Report 07-26 (March 2007).

3 Dollar-related findings include questioned costs and funds to be put to a better
use. Questioned costs are expenditures that do not comply with legal, regulatory or
contractual requirements, or are not supported by adequate documentation at the time of
the audit, or are unnecessary or unreasonable. Funds to be put to a better use are dollars
that could be used more efficiently if management took actions to implement and complete
audit recommendations.

ii

gauge whether the requesting facility was proposing a high rate relative to
the facility's actual and allowable expenses.
To accomplish the objectives of this audit, we assessed whether the
USMS and OFDT effectively used elGA to ensure that IGA rates are fair and
reasonable. We interviewed OFDT and USMS officials responsible for
establishing and overseeing IGA negotiation policies and procedures and
USMS specialists who negotiate jail-day rates with state and local detention
facility officials. We reviewed a sample of 25 IGAs to evaluate how the OFDT
and USMS performed and documented negotiations. Further, because the
U.S. Department of Homeland Security, Bureau of Immigration and Customs
Enforcement (ICE) also uses detention space from state and local facilities,
we compared detention rates paid by ICE to similar rates negotiated by the
USMS. We also participated in several discussions and seminars provided by
OFDT regarding elGA and price analysis.
Appendix I contains a more detailed description of our audit
objectives, scope, and methodology.

Results in Brief
Since FY 2005, the last fiscal year before the OFDT started using other
detention pricing factors besides costs to negotiate IGAs, the number of DO]
detainees housed in state and local facilities has remained relatively constant
(ranging between 35,025 and 37,262 detainees each day). As shown by the
following exhibit, the annual cost to house these detainees in state and local
facilities increased 19 percent, from $743 million in FY 2005 to $888 million
in FY 2010.

iii

IGA DETENTION POPULATION AND COST
(FY 2005 TO 2010)

40,000

$900

36,000

$800

32,000

$700

28,000

$600

24,000

$500

20,000

$400
2005

2006

2007

-Annual Detention Cost ($ Millions)

2008
~Average

2009

2010

Number of Detainees Per Day

Source: OFDT

Between FYs 2005 and 2010, the average IGA jail-day rate rose over
12 percent, from $58 in FY 2005 to over $65 in FY 2010. According to OFDT
officials, this corresponds to a 2.42 percent annual increase in average
detention rates, which OFDT officials said was commensurate with cost
increases incurred by non-IGA detention facilities during this time period.
OFDT officials stated that a 6.3 percent increase in the number of detainees
since FY 2005 also contributed to the increase in the overall amount spent
on IGAs.
To evaluate whether the OFDT and USMS could improve its IGA
negotiation strategy to control detention costs, we sampled 25 separate
IGAs negotiated after the OFDT abandoned the traditional approach of
establishing IGAs based on facility costs and began using eIGA to negotiate
rates. We found that eIGA does not include all the documents prepared by
the USMS specialist to substantiate negotiated rates. For example, we found
that USMS specialists have not been documenting the contemporaneous
pricing information (such as jail rates of other facilities, average district
rates, and rates paid by other federal agencies) they should be obtaining
before negotiating IGAs. We recommend that the OFDT and USMS develop
a template for the USMS specialists to obtain, record, and use this
information within eIGA.

iv

Our audit also found that the OFDT and USMS need to ensure that
certain application data provided by the requesting facility is accurate before
beginning negotiations. We identified one example where a facility
underreported the number of detainees it held during the prior year. The
USMS specialist then relied on this incorrect figure to estimate a higher rate
for this facility based on its reported cost. The subsequent negotiations
resulted in a jail-day rate that we believe, based on operating costs, will
provide the requesting facility with almost $8 million in profits over the
3-year term of the IGA.
Once the USMS specialist receives a completed IGA application (which
includes reported jail operating expense information (JOEl) data), the USMS
specialist uses four distinct price analysis techniques to assess the proposed
price against the other types of jail day rates assembled during the prenegotiation stage. The purpose of these techniques is to determine whether
a proposed rate is fair and reasonable.
However, our audit found significant weaknesses in the way the OFDT
and USMS have implemented the new IGA negotiation process using these
price analysis techniques. For example, we found that USMS specialists did
not perform price analysis techniques consistently. First, in some cases
USMS specialists compared proposed rates only to the highest rates in a
particular district, and in other cases did not compare rates of facilities that
were similar in size and location to the requesting facility. Second, USMS
specialists did not consistently document the reasons why higher rates were
used in rate comparisons and whether the facilities with high rates were
similar enough to the requesting facility. The lack of sufficient evidence
offered to justify the price analysis makes it appear that USMS specialists
are sometimes misapplying price analysis to justify high rates.
Furthermore, USMS specialists did not consistently use what we
believe to be the most important price analysis technique: facility-reported
JOEl data. Although using facility JOEl data can help readily show whether a
proposed jail-day rate would appear to provide excessive payments to state
and local facilities, USMS specialists cited JOEl data estimates as
justifications offered for only 6 out of the 25 sampled IGAs. By not
systematically using JOEl data when negotiating IGAs, the USMS was
disregarding information that could provide an important check on the rising
jail-day rates. We compared negotiated rates to rates calculated using JOEl
data and facility capacities and calculated the costs of detention space over
the effective period of each sampled IGA (usually 3 years). This comparison
showed that the negotiated rates for the 25 sampled IGAs would provide a
total of $15 million more to state and local governments than rates based
solely on facility-reported JOEl data.

v

In April 2010, the OFDT updated elGA to calculate estimated JOEl
rates automatically. In our opinion, the fact that USMS specialists have not
treated the estimated JOEl rates as a starting point for negotiations has
strengthened the requesting facility's negotiation position over the USMS.
This is because proposed rates are independently set by the requesting
facility, and the USMS specialist cannot easily determine whether such rates
are reasonable when compared to the requesting facility's costs. We
therefore believe that, at the outset of the IGA negotiation, USMS specialists
should use the requesting facility's estimated JOEl rate as a starting point to
evaluate whether the proposed rate is fair and reasonable. Using the JOEl
rate in this way offers USMS specialists an opportunity to gauge whether the
proposed rate is fair and reasonable or whether the proposed rate would
provide excessive profits to the requesting facility.
We also believe that there are at least two circumstances when USMS
specialists should not use price analysis alone to identify a fair and
reasonable jail-day rate. The first instance is when price analysis yields a
large range of results that vary Widely. The second instance is when USMS
district has a shortage of detention space and the requesting facilities use
this shortage to demand exorbitant jail-day rates. In these circumstances,
we recommend that the USMS should perform "cost analysis" or a review of
facility costs to evaluate whether facility costs are allowable and accurate.
The following example demonstrates how cost analysis could have
been used by the USMS to negotiate a jail-day rate appropriately. In one
IGA, the price analysis techniques yielded more than a 60 percent difference
between compared rates, which ranged from $69 to $125. In this case, the
USMS specialist cited the $125 rate for price analysis to justify a requested
$118 rate. However, if the USMS specialist instead used cost analysis, the
specialist would have been in a better position to determine whether the
requested $118 rate was appropriate by considering whether the operating
expenses reported by the requesting facility indicated that the negotiated
rate should have been in the lower end of the range.
Our audit also identified two IGAs where USMS specialists cited
district-level detention space shortages as justification for what appeared to
be high jail-day rates. While negotiating these IGAs, the OFDT and USMS
could have rigorously applied price and cost analysis results to try to obtain
more reasonable jail-day prices from detention facilities. When highly
utilized state and local facilities demand rates that cannot be justified via
price or cost analysis, we recommend that the OFDT and USMS work closely
with local USMS district officials to find more cost-effective facilities - even
facilities that may be less operationally convenient - that can instead be
used to house detainees.
vi

In our report, we make 15 recommendations to the OFDT and USMS
that we believe can improve the IGA negotiation process and save the OFDT
. and USMS significant detention costs. Many of our recommendations focus
on improving specific price and cost analysis guidelines and ensuring that
USMS specialists adequately document negotiation decisions.
Our report contains information on the full results of our review of the
process used to negotiate detention space IGAs. The remaining sections of
this Executive Summary summarize in more detail our audit findings.

Background
IGA negotiations begin when a state or local facility uses eIGA to
submit an application that includes a proposed jail-day rate to house DOJ
detainees. The following exhibit presents an overview of the IGA negotiation
process.

vii

IGA NEGOTIATION PROCESS

Source: OIG depiction of the eIGA process as of September 2010

viii

The USMS specialist assesses the fairness and reasonableness of the
proposed jail-day rate by using four specific price analysis techniques
outlined by the FAR to consider different types of jail-day rate data. The
first technique uses an elGA-calculated adjusted core rate determined by
applying specific facility attributes to an econometric model developed by
the OFDT. The second technique estimates a jail-day rate by dividing the
operating costs reported by the facility in its JOEl data by the facility's totalrated capacity of detainees. The third technique, referred to as market
research, involves comparing rates charged by facilities that are similar to
the requesting facility. The fourth technique is similar to market research
except that it compares proposed rates to historical detention prices charged
by private and federal facilities.
Generally, the specialist can conclude that the proposed rate is fair and
reasonable if it aligns with these different rates. However, when the
proposed rate is greater than the other price analysis rates, the USMS
specialists should use the price analysis results to counteroffer the proposed
rate with a lower rate that better aligns with price analysis results.

If price analysis techniques cannot be used to derive a rate that is fair,
reasonable, and acceptable to the requesting facility, the OFDT price
negotiation strategy directs USMS specialists to use "cost analysis" to
evaluate the JOEl data and attempt to set a jail-day rate based on actual
costs. Cost analysis is different from price analysis because it involves
actually evaluating a requesting facility's cost elements for allowability and
accuracy. Cost analysis therefore can serve as an important tool that can
strengthen the USMS's negotiation position. Nevertheless, we found that
USMS specialists have not been using cost analysis to seek lower rates.
The following sections provide a summary of our review of each part of
the lGA negotiation process.

Pre-Negotiation Procedures
Detention facilities requesting jail-day rates use elGA to submit
applications and other data to the USMS and OFDT. The OFDT and USMS
use elGA to document and track application materials and prepare for
negotiations. Submitted applications include various administrative and
financial data provided by the requesting facility, including the facility's
'address, contact officials, and total-rated capacity of detainees.

ix

We found that USMS specialists do not always ensure that this data is
accurate or complete before moving forward with negotiations. In
particular, if a facility incorrectly reported the number of detainees it could
hold (total-rated capacity), the estimated jail-day rates using JOEl data
became distorted. For example, we found that a requesting facility
misreported that it held 275 detainees instead of its actual figure of 400
detainees. The smaller reported number of detainees led to the USMS
specialist miscalculating this facility's JOEl rate as $105 per day, instead of
$73 per day.
We recommend that USMS specialists consult detention facility
reference materials and websites and verify application data, such as the
requesting facility's detainee capacity, before beginning IGA negotiations.
Under the FAR, government negotiators are required to establish a
negotiation strategy at the outset of negotiations. To help fulfill this
requirement, USMS specialists have developed strategy sheets to document
various known detention rates. However, we found that the strategy sheets
were not standardized or otherwise required by the OFDT, and some USMS
specialists did not consistently use them to document available pricing
information. As a result, we could not ascertain what detention rates the
USMS specialists had available when they began negotiations. This
information is important for the OFDT and USMS to show that the next step
of the IGA negotiation process - price analysis - was complete and
performed correctly.

Price Analysis
Price analysis is the process of using other factors such as price
estimates and actual rates of other facilities to assess whether a proposed or
negotiated price is fair and reasonable. The FAR provides specific techniques
that government negotiators may use to conduct price analysis. The
following exhibit outlines the four techniques we determined USMS
specialists have applied to IGA negotiations.

x

IGA PRICE ANALYSIS TECHNIQUES
Price Analysis
Technique

Adjusted Core Rate

I
I

I

How To Use
Within the eIGA Process

Compare the proposed jail-day rate to the facility's
adjusted core rate. Adjusted core rates are calculated
by elGA using a pricing model that considers specific
facility attributes, Including: (1) county wage statistics,
(2) facility staff to detainee ratio, (3) facility jurisdiction
type, (4) major metropolitan area, and (5) U.S.
geographic region.

Calculate the per-detainee costs using JOEl data and
Jail Operating
the facility's total-rated capacity and compare the
Expense Information calculation results to the proposed jail-day rate. As of
(JOEl)
April 2010, elGA automatically calculates estimated
JOEl rates.

Market Research

Historical Price

Compare the proposed jail-day rate to: (1) actual
prices charged by other IGA facilities within the same
USMS district or geographical location; (2) an OFDTcalculated average IGA jail-day rate for the USMS
district; or (3) the requesting facility's previous rate,
adjusted for Inflation (If applicable).
Compare the proposed jail-day rate to actual prices of
detention space at private detention facilities
(commercial contract prices) used by the USMS district
or to BOP per capita rates (government prices) at
federal detention centers.

Source: OFDT

Because price analysis incorporates an array of pricing factors, the
OFDT asserted that price analysis would better position the USMS to control
jail-day rate increases because it could examine prices charged by other
facilities, historical prices, and rates estimated using facility pricing
attributes in addition to reported operating costs. However, over the past 6
years, the total amount spent on IGAs had increased by 19 percent - from
$743 million in FY 2005 to $888 million in FY 2010 - while the detainee
population held in state and local facilities increased by only 6.3 percent.
OFDT officials stated that the primary cause of the 19 percent increase
in the total amount spent on IGAs has been a 2.42 percent average annual
increase in detention rates. This annual increase has meant that the
average IGA jail-day rate increased 12 percent from $58 in FY 2005 to over
$65 in FY 2010, which the OFDT stated is commensurate with the increase in
costs associated with housing detainees in federal and private facilities.
According to OFDT, the average number of detainees held in state and local
facilities each day has increased by about 2,200 detainees, or 6.3 percent,
over the past 6 years. The OFDT believes this increase has also contributed
to the 19 percent rise in the amount of funds DO] spends to house detainees
in state and local jails.
xi

We sampled 25 IGAs to: (1) evaluate how the USMS performed price
analysis to justify jail-day rates and (2) determine whether specialists could
have improved how they performed specific price analysis techniques. We
also compared the negotiated jail-day rates of each sampled IGA to
corresponding rates estimated using facility-reported JOEl data and totalrated capacity.4 Of the 25 sampled IGAs, 15 provided state and local
facilities with more funds than the JOEl data indicated the facilities would
spend providing detention services, while only 6 provided less. Four
facilities received negotiated rates that were equal to their estimated JOEl
rates. As shown by the following exhibit, applying the USMS's anticipateduse figures for these facilities to both the estimated JOEl rate and the actual
negotiated rate, the USMS would pay $15 million more than it reportedly
cost the 25 sampled facilities to provide detention space over the duration of
the IGAs (generally 3 years).5

4 To estimate jail-day rates using JOEl data, we divided the requesting facility's
reported operating costs by the product of the total-rated capacity of each facility and 365
days.

5
We applied the projected number of jail days reported in JDIS as the anticipated
use figure for each facility. JDIS uses actual prior usage figures to project a unique number
of jail days that the USMS anticipates requiring annually at each IGA facility.

Only 2 of the 25 sampled IGAs did not have a 36-month term. The IGA for detention
facility 17 was for 18 months while the IGA for detention facility 9's IGA was for 24 months.

xii

RESULTS OF NEGOTIATED JAIL-DAY RATES COMPARED TO RATES
BASED ON FACILITY-REPORTED COSTS

Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detent/on
Detention
Detention
Detention
Detention
Detention
Detent/on
Detention
Detention
Detention

Facili
Faclll
Faclll
Faclll
Faclli
Faclll
Facill
Facill
Facili
FacUi
Faclll
Facll/
Faclli
Facill
Facill
Faclll
FacUi
Faclli
Facill
Faclli
Facili
Facill
Faclli
Faclll
Facili

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

106
124
18
80
97
17
63
65
2
54
56
2
40
41
1
110
135
25
78
78
0
119
119
0
65
65
0
80
80
0
40
25
15
70
65
5
85
78
7
55
39
16
69
62
7
77
72
5
63
48
15
95
91
4
44
33
11
95
36
59
55
49
6
104
95
9
55
30
25
118
91
27
72
41
31
Subtotal of Antlcl ted Funds Provided Under OIG-Calculated Rate
Subtotal of Antici ated Funds Provided Over OIG-Calculated Rate

.. . . . .
lmmr;:mmma_

..

.

Source: DIG analysis of facility submitted JOEl data, USMS IGA files, and JDIS data.

In many instances, USMS specialists responsible for negotiating the
sampled IGAs did not properly perform and document price analysis. The
following sections summarize our findings by each price analysis technique.

TechniqL.!e 1: Adjusted Core Rate
The OFDT programmed eIGA to calculate automatically an adjusted
core rate for each detention facility using a pricing model that considers
specific attributes of each facility. Under the FAR, the adjusted core rate
model can be treated as the results of an independent government estimate
or a parametric pricing model, which can be compared to a proposed rate to
assess whether it is fair and reasonable.
xiii

We found that elGA used submitted facility-specific attributes to
correctly apply the overall econometric pricing model developed by the OFDT
to determine each facility's adjusted core rate. USMS specialists used the
adjusted core rate to justify 20 out of 25 sampled IGAs.
We noted, however, that elGA's core rate model did not consider
whether the facility included fees related to detainee transportation costs in
the proposed jail-day rate. If a facility offered to transport prisoners, a
proposed jail-day rate may have been reasonable even if it was higher than
the facility's adjusted core rate. We recommend that OFDT incorporate
transportation costs as a factor (when applicable) in calculating the adjusted
core rate within eIGA.
Technique 2: JOEl Data (Reported Operating Costs)
IGA applications include JOEl data that detail a requesting facility's
operating costs for the most recent budget year and estimated costs for the
next year. USMS specialists can then use this information to calculate how
much a facility spends per detainee each day. The folloWing illustrates how
USMS specialists should calculate estimated jail-day rates with JOEl data.

FORMULA TO CALCULATE ESTIMATED JAIL-DAY RATES
USING JOEl DATA

Total Annual Operating Costs
Per JOEl Data

--------------- =
of Detainees) (365 Days'
( Number
Held Each Day
1

Calculated
Jail-Day
Rate

Source: OIG analysis of OFDT guidelines and IGA files

However, we found that USMS specialists have inconsistently applied
this formula to calculate JOEl rates. USMS specialists were not using the
same detention population figures as the "number of detainees held daily
each day." Instead, some specialists used the facility's total-rated capacity,
which is the maximum number of detainees allocated to the facility by a
state or local official. Other specialists used the facility's average daily
population, a figure reported by the requesting facility based on detention
statistics over a certain period of time. According to the OFDT, a requesting
facility's total-rated capacity is the preferred figure to use in calculating the
jail-day rate because it is readily verifiable. This is not the case with a
facility's average daily population, because according to the OFDT, this
xiv

figure is difficult to verify and can be erroneously compiled or easily
manipulated.
We determined that estimating JOEl rates by using average daily
population instead of total-rated capacity helped at least 2 of the sampled
25 IGAs - detention facility 24 and detention facility 25 - receive the largest
amount of funding in excess of reported operating costs. Using average
daily population, USMS specialists calculated detention facility 24's JOEl rate
as $118 and detention facility 25's as $105. Applying these estimates,
USMS specialists then justified negotiated jail-day rates of $118 for
detention facility 24 and $72 for detention facility 25. If the estimated JOEl
rates were calculated properly using the requesting facility's total-rated
capacity, the estimated rates based on costs would have been much lower:
$91 and $41 respectively. We believe the properly calculated estimated
rates would have shown that the rates being negotiated were too high and
should have prompted the USMS specialist to counteroffer with lower rates
that better aligned with costs.
We also determined that USMS specialists used JOEl data to justify
only 6 out of the 25 sampled IGA rates. We believe that by not
systematically using JOEl data for negotiations, the USMS is ignoring
information that could provide an important check on the reasonableness of
the offered jail-day rate. In April 2010, during our audit, the OFDT updated
elGA to calculate estimated JOEl rates automatically.
In our opinion, the fact that USMS specialists treat the requesting
facility's proposed rate as the starting point for price analysis negotiations
strengthens the requesting facility's negotiation position over the USMS. This
is because proposed rates are independently set by the requesting facility,
and the USMS specialist cannot easily determine whether such rates are
reasonable considering requesting facility costs. At the outset of the
negotiations, USMS specialists could have used the estimated JOEl rate as
such a starting point and compared the proposed rates against the JOEl
rate. This would have enhanced the USMS specialist's ability to gauge
whether the proposed rate was fair and reasonable considering the facility's
reported costs. If it was not, the USMS specialist could have communicated
back to the facility that the requested rate was not in line with costs and use
the estimated JOEl rate as leverage for a lower jail-day rate.

xv

Considering that elGA now automatically calculates two estimated
rates that can be used in price analysis - JOEl data rate and the adjusted
core rate - we recommend that the OFDT and USMS require that USMS
specialists use these estimates as starting points by comparing each to the
proposed rate at the outset of IGA negotiations.

Technique 3: Market Research
The market research technique compares the proposed jail-day rate to
the IGA rate of other similar or nearby facilities. Market research also
considers the average IGA rate for the overall district. To perform this
technique properly, USMS specialists should identify as many detention
facilities as possible in the district and determine their corresponding jail-day
rates. USMS specialists then need to consider the size, location, and
services offered by these facilities and document which ones are similar to
the requesting facility. This can be accomplished using databases such as
the Justice Detainee Information System (JDIS) and OFDT research
materials to provide facts about individual detention facilities (such as
location, jail-day rates, capacity, and type). Once the USMS specialists
identify similar - and therefore comparable - facilities, they should compare
those rates to the rates proposed by the requesting facility to help assess
whether the proposed rate is fair and reasonable.
We found that 20 of the 25 sampled IGAs used the market research
technique to justify negotiated rates. However, we also found that USMS
specialists did not consistently document clear and complete market
research analysis. Specifically, USMS specialists were neither identifying the
universe of detention facilities within a particular USMS district nor
determining the attributes that make other detention facilities comparable to
the requesting facility. IGA files therefore had little or no documentation to
show why USMS specialists compared rates of specific facilities with rates
proposed by the requesting facility. We also noted some cases when USMS
specialists appeared to compare proposed rates selectively to the highest
rates of nearby facilities without detailing the reasons why these facilities
were comparable. By not documenting why the high-rate facilities were
used to justify proposed rates (as opposed to lower rates of more
comparable or closer facilities) the USMS specialists appeared to be misusing
price analysis to justify high-rates. We recommend that the OFDT and
USMS ensure USMS specialists use market research to compare rates of only
facilities that are similar to the requesting facility.

xvi

Technique 4: Historical Government and Contract Rates
Under the FAR, USMS specialists can also ascertain whether proposed
prices are fair and reasonable by comparing them to detention costs incurred
at Federal Bureau of Prisons (BOP) facilities and rates paid to private
detention facilities. Of the 25 sampled detention facilities, 9 had rates that
were negotiated using the historical rate technique. Yet, similar to our
finding for market research, USMS specialists did not consistently document
whether they compared proposed rates to historical government or private
contract rates of BOP and private facilities that were similar to the
requesting facility. In some cases, we determined that even the basic
aspects of the federal and private detention facilities whose rates were used
- such as size and location - were considerably different from aspects of the
requesting facility.
We believe that USMS specialists using the historical rate technique
should also consider ICE rates. Our audit found, as of February 2010, 32
instances when the USMS and ICE both had separate IGAs with the same
facility. Although we found that many of the rates paid by the USMS and
ICE were the same, 12 facilities charged higher jail-day rates to the USMS
than ICE, while only 3 charged less. In cases where the USMS was paying
more than ICE, we believe the USMS could have reduced the rates it paid for
the same detention space had the USMS considered the ICE rates during the
IGA negotiation. 6
In March 2010, the USMS and ICE began working together to reduce
instances when they inadvertently compete against each other for state and
local detention space. We recommend that the OFDT and the USMS ensure
that USMS specialists determine whether the requesting facility has an ICE
rate during the negotiation process, and if the facility has an ICE jail-day
rate, the USMS specialist must compare the ICE rate to the proposed rate.
Cost Analysis
Under the FAR, when the government cannot negotiate a fair and
reasonable rate using price analysis, the government can evaluate vendor
cost data using "cost analysis."] This technique involves more than applying
the JOEl data as a price analysis technique to estimate a jail-day rate. Cost
analysis instead focuses on assessing and verifying the allowability,
accuracy, and completeness of reported costs.
6 Of the remaining facilities with both USMS and ICE rates, the rates were the same
in 15 instances. ICE was not able to provide data for the two remaining rates.

] FAR § 15.404-1(a)(4) (2010).

xvii

Our audit found at least two circumstances where the USMS should not
rely on price analysis alone to justify a jail-day rate as fair and reasonable.
First, when different price analysis techniques yield very different or large
ranges of estimated or average jail-day rates, price analysis does not show
whether a specific jail-day rate is fair and reasonable. For example, the
USMS specialist who negotiated a $118 jail-day rate for detention facility 24
performed three different price analysis techniques: adjusted core rate,
JOEl estimates, and market research. The facility requested a rate of $118.
The estimated JOEl rate (based on total-rated capacity) was $91 and the
adjusted core rate was $69. However, market research yielded a range of
prices that could have supported a rate of up to $125. The resulting $56
difference in the range of prices yielded by different price analysis
techniques meant that price analysis alone was not sufficient to determine
whether the negotiated rate of $118 was fair and reasonable.
The second circumstance when price analysis alone is insufficient is
when the USMS local district experiences a shortage of detention space and
has a dire need to find housing for its detainees. In some instances, the
local USMS district advocated housing detainees at facilities proposing rates
higher than those that price analysis would have yielded as fair and
reasonable. For examRle the USMS s ecialist who negotiated the IGA for
detention facility 22 in
cited the local USMS district's
emergency need for detention space as the primary justification to provide it
with a $104 jail-day rate. This was done in spite of detention facility 22's
estimated JOEl rate of $95. The USMS specialist further cited the fact that
detention facility 22 was a heavily-used facility by the local district because
it housed a third of its detainee population.
In both of these cases, we believe that had the USMS specialist
performed cost analysis, the USMS specialist might have been able to show
that the facilities were seeking to negotiate high jail-day rates that would
generate excessive profits. USMS specialists subsequently could have used
cost analysis as leverage to gain a stronger negotiating position and justify a
lower jail-day rate. We therefore recommend that the OFDT and USMS
require USMS specialists perform cost analysis on the JOEl data to evaluate
and verify the requesting facility's operating costs when: (1) different price
analysis techniques yield a very large range of results that do not align with
the estimated JOEl rate or (2) the detention facility rejects offered rates
based on price analysis.
When a requesting facility that is heavily used by the local district
refuses to accept a jail-day rate justified either by price analysis (JOEl
estimates) or cost analysis (evaluating JOEl data), we recommend that the
OFDT and USMS work with local USMS district officials to implement a
xviii

detention space action plan to move the detainees currently held by the
requesting facility to other facilities. Such a plan must require that the OFDT
and USMS rigorously solicit IGA applications from facilities - even those that
may not be as operationally convenient for the local district. Detention
space action plans should then be used to expedite negotiations with and
transfer detainees to more reasonably priced facilities.
We also are concerned with the USMS specialist's ability to justify high
jail-day rates by citing "serious" or "emergency" detention space shortfalls at
the USMS district level. Although the USMS performs annual detention
surveys to determine which local districts have the most need for detention
space, neither the USMS nor OFDT has developed national or district-level
strategies to solicit additional local detention facilities to apply for IGAs. We
recommend that the OFDT and USMS require districts designated by the
annual detention survey with "emergency" or "serious" detention space
needs to solicit additional IGA applications from facilities within those
districts. Such an initiative to promote IGAs in these circumstances could
provide the USMS with a better market for detention space by enhancing
competition between facilities available to house USMS detainees.

IGA Negotiation Oversight
Before IGAs can be finalized, USMS and OFDT officials must review the
jail-day rates that USMS specialists negotiated with the requesting detention
facilities. The OFDT coordinators provide comments to USMS specialists
regarding negotiation documents. However, we found that these comments
are not usually tracked or maintained. As a result, we could not ascertain
whether USMS specialists addressed or otherwise resolved issues identified
by OFDT coordinators. We recommend that the OFDT and USMS develop a
process for tracking and resolving IGA review comments.

Conclusions and Recommendations
The amount of DO] funds spent on non-federal detention space is
large - over $1.2 billion a year - and has continued to rise even though the
detention population housed in state and local facilities has remained
relatively constant. IGA detention costs have increased by 19 percent from
$743 million in FY 2005 to $888 million in FY 2010. Because of the
significance of these costs, it is critical that OFDT and USMS obtain the
lowest rates possible and ensure any jail-day rate paid under IGAs is fair and
reasonable.
Our audit concluded that the OFDT and USMS need to take significant
actions before price analysis can be considered an effective tool for USMS
xix

specialists to justify fair and reasonable jail-day rates. First, the OFDT and
the USMS need to provide greater gUidance on how the USMS specialists
should apply estimated rates using JOEl data, compare proposed rates to
rates of other nearby and similar facilities, and document these comparisons
effectively. The OFDT and the USMS should require that USMS specialists
obtain as many third-party jail-day rates as possible to use in their
comparisons, including comparable rates established by ICE.
In some cases, price analysis techniques yield very large ranges in
rates that can be used as pricing factors. In addition, certain USMS districts
have a documented shortage of detention space available for district use.
Both of these circumstances adversely affect the ability of price analysis to
identify whether a specific rate is fair and reasonable - especially when
detention facilities demand high rates. In such Circumstances, instead of
trying to establish rates based strictly on requesting facility operating costs,
our audit found that USMS specialists at times tried to justify high rates
demanded by requesting facilities by citing operational needs or
requirements of the local district. Considering the significant amount of
funds spent on IGAs, we believe that in these instances, the OFDT and the
USMS should require that USMS specialists use the results of cost analysis to
seek to negotiate jail-day rates that are fair and reasonable.
We found that state and local detention facilities at times demand
rates that appear to generate excessive profits - sometimes in the range of
millions of dollars. When this occurs, we believe the OFDT and USMS need
to safeguard DOJ detention funds by either persuading state and local
governments to accept more reasonable rates or, if that fails, by
collaborating with the local USMS district officials to obtain additional
detention space at other facilities.
In total, our audit report contains 15 recommendations to improve the
IGA negotiation process, including ensuring that USMS specialists properly
document pricing decisions, perform price analysis completely and
accurately, and consider costs as a starting point in jail-day rates
negotiations.

xx

AUDIT OF THE INTERGOVERNMENTAL AGREEMENT
DETENTION SPACE NEGOTIATION PROCESS
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
Background
History of Establishing IGAs
March 2007 DIG Audit
Overview of the IGA Negotiation Process
DIG Audit Approach
CHAPTER TWO: PRE-NEGOTIATION PROCEDURES
Completing IGA Applications in eIGA
Validating IGA Application Information
Preparing Price Negotiation Strategy Sheets
Recommendations

1
1
3
4
5
7

9
10
11
12
14

CHAPTER THREE: PRICE ANALySIS •••••••••••••••••••••••.••••••••••••••••••••••••• 16
Using Price Analysis to Negotiate IGAs
18
Review of Individual Price Analysis Techniques
21
Technique 1: Adjusted Core Rate
22
Technique 2: JOEl Data (Reported Operating Costs)
25
Technique 3: Market Research
28
Technique 4: Historical Government and Contract Prices
31
Summary of USMS Specialist Application of Price Analysis
34
Recommendations
35
CHAPTER FOUR: COST ANALySIS
Reasons to Use Cost Analysis
Large Ranges of Price Analysis Technique Results
Lack of Available Detention Space
USMS Specialist Cost Analysis Training
Recommendations

36
36
37
38
41
42

CHAPTER FIVE: IGA OVERSIGHT
Review of USMS Specialist Jail-Day Rate Justifications
Finalizing the IGA
Recommendations

43
43
44
45

~C:Fl()~"~!i

•••••.•••••.•••••.••.••••.•••.•••...••...••••••••••.•• •..••.•••.•••••...•••.••••••..•. ~Ei

STATEMENT ON INTERNAL CONTROLS ••••••••••••••••••••••••••••••••••••••••••••• 47
STATEMENT ON COMPLIANCE WITH LAWS AND REGULATIONS ••••••• 48
APPENDIX I: OBJECTIVES, SCOPE, AND METHODOLOGY •••••••••••••••• 49
APPENDIX II: THE OFFICE OF THE FEDERAL DETENTION
TRUSTEE'S RESPONSE TO THE DRAFT AUDIT REPORT ••••••••••••••••• 52
APPENDIX III: THE U.S. MARSHAL SERVICE'S RESPONSE
T() THE DRAFT AUDIT REPORT

S~

APPENDIX IV: OFFICE OF THE INSPECTOR GENERAL
ANALYSIS AND SUMMARY OF ACTIONS NECESSARY
T() C:LO!iE THE REPORT

59

CHAPTER ONE
INTRODUCTION
The United States Marshals Service (USMS) is responsible for holding
federal criminal detainees while courts adjudicate their cases. 8 During fiscal
year (FY) 2010, the USMS had custody of an average of about 60,000
detainees each day. The USMS held a daily average of 11,554 detainees in
Federal Bureau of Prisons (BOP) facilities, 10,942 detainees in private
detention centers, and 37,248 detainees in state and local detention
facilities. As shown in Exhibit 1-1, this figure constituted 63 percent of the
USMS's average daily detention population in FY 2010.

EXHIBIT 1-1: SOURCE OF DAILY DETAINEE BED SPACE
(FY 2010)

I Average Number
Facility Type
Federal Bureau of Prisons (BOP)
State and Local Government Detention
Facilities
Non-Governmental (Private) Facilities
TOTAL
Source:
Note:

of Daily
Detainees
11,554
37248
10,942

59,744

I

Percentage
19
63
18
100%

FY 2010 DO] detention records
Total average number of daily detainees figure does not include detainees held in
non-federal facilities where the USMS does not pay for their housing costs.

In FY 2010 the Department of Justice (DOJ) spent over $1.24 billion
housing detainees in non-federal facilities. Of this amount, $888 million, or
over 71 percent, was spent on payments made to state and local detention
facilities.

Background
The DO] Appropriations Act of 2001 provided the Attorney General
with the authority to enter into agreements for detention space and related
services for DO] detainees. 9 The Attorney General delegated this authority
to the Office of the Federal Detention Trustee (OFDT), which oversees DO]
8 When federal law enforcement agencies arrest an individual suspected of
committing a federal crime, the suspect is charged and taken before a federal magistrate or
judge. If the magistrate or judge orders that the suspect be detained pending adjudication,
the USMS is responsible for providing the suspect with safe and secure detention space.
9

Pub. L. No. 106-553, Appendix B, § 119 (2001).

detention funds and develops DO] detention policies and procedures. The
USMS is responsible for maintaining custody of DO] detainees.
The OFDT and USMS pay for detention space at state and local
facilities via intergovernmental agreements (IGAs). Individual state and
local facilities interested in housing federal detainees need to request an IGA
that establishes a price the OFDT and USMS will pay the facility to house one
detainee per day. This price, which this report refers to as the "jail-day
rate," is unique to each facility and is usually in effect for 3 years. USMS
specialists negotiate a jail-day rate with requesting facility officials, and
OFDT officials subsequently review and approve the IGA before it is finalized.
Over the past 6 years, the USMS has housed an average of about
36,000 detainees each day in state and local facilities using IGAs. Although
the number of daily detainees housed in state and local facilities has
remained relatively consistent, the USMS detention costs have increased by
over 19 percent, from $743 million in FY 2005 to $888 million in FY 2010, as
illustrated in Exhibit 1-2.
EXHIBIT 1-2: IGA DETENTION POPULATION AND COST
(FY 2005 TO 2010)
40,000

$900

36,000

$800

32,000

$700

28,000

$600

24,000

$500

20,000

$400
2005

-~nnual

2006

2007

2008

2009

2010

Detention Cost ($ Millions) ........Average Number of Detainees Per Day

Source: OFDT

2

OFDT officials stated that the primary cause of the 19 percent increase
in the total amount spent on IGAs has been a 2.42 percent average annual
increase in detention rates. This annual increase has meant that the
average IGA jail-day rate increased over 12 percent from $58 in FY 2005 to
over $65 in FY 2010, which the OFDT stated is commensurate with the
increase in costs associated with housing detainees in federal and private
facilities. The OFDT stated that the 6.3 percent increase in the average
number of daily detainees held in state and local facilities over the past 6
years also contributed to the increase in corresponding detention costs. The
OFDT believes this increase has also contributed to the 19 percent rise in the
amount of funds DOJ spends to house detainees in state and local jails.
History of Establishing IGAs
Prior to March 2006, the USMS established jail-day rates in accordance
with Office of Management and Budget (OMB) Circular A-87, Cost Principles
for State, Local, and Indian Tribal Governments. 10 Under this method, the
USMS used cost data submitted by the detention facility to calculate a jailday rate by dividing a facility's total allowable operating costs by the product
of its average daily detainee population and the number of days per year.
For example, if a facility spent $10 million per year to hold an average of
500 detainees per day, the cost-based calculation would find that the facility
spent about $55 each day on each of its detainees.
Most of the IGAs established before March 2006 also included a clause
stating that state and local governments could only request payments for
detention services based on costs. At the time, state and local facilities
providing detention services to the USMS were thought to have been
precluded from receiving payments in excess of their costS. 11
Between 1995 and 2006, we performed 31 audits of individual IGAs.
The purpose of these reviews was to ensure that individual detention
facilities were not receiving excessive funds - more than their costs - when
providing detention services to the USMS under an IGA. The audits
determined that several state and local governments were receiving windfall
100MB Circular A-87 prOVided the rationale for establishing jail-day rates based on
costs. For an actual cost to be allowable, OMB Circular A-87 requires that the cost: (1) be
necessary and reasonable; (2) be authorized or not prohibited under state or local laws and
regulations; (3) conform with laws, regulations, and the terms and conditions of the IGA;
(4) be accorded consistent treatment; (5) comply with generally accepted accounting
principles; (6) be the net of all applicable credits; and (7) be documented adequately.
11 Craig H. Unger, Federal Detention Trustee, Office of the Federal Detention
Trustee, memorandum for the Deputy Attorney General, August 1, 2002.

3

payments by housing federal detainees. Overall, the audits identified
$60 million in dollar-related findings pertaining to IGAs with state and local
governments, and recommended that the USMS remedy these payments
and renegotiate several of the IGAs reviewed. 12
In March 2006, the OFDT notified the OIG that it had asked the USMS
to refrain from seeking the recovery of overpayments identified by OIG
audits. 13 Citing a December 2002 legal opinion from DOJ's Office of Legal
Counsel, the OFDT argued that IGAs were "fixed-rate" agreements instead of
agreements based on allowable costs. The OFDT stated that because IGA
payments were based on negotiated fixed rates, their purpose was strictly to
pay for the detention services instead of reimbursing a state or local
government for the costs it incurred. In the March 2006 memorandum, the
OFDT further maintained that DOJ did not have the legal standing to seek
recovery of overpayments identified by OIG audits.
March 2007 OIG Audit

The OIG issued an audit report in March 2007 that reviewed OFDT and
USMS oversight of the IGA negotiation process. 14 The audit detailed how the
OFDT was working to implement its electronic Intergovernmental Agreement
system (eIGA) to help detention facilities apply for IGAs and to streamline
the overall IGA negotiation process. 1S According to the OFDT, eIGA would
help the USMS improve the efficiency of the overall IGA application process
because eIGA is a web-based system that any state or local detention facility

12 Dollar-related findings include questioned costs and funds to be put to a better
use. Questioned costs are expenditures that do not comply with legal, regulatory or
contractual requirements, or are not supported by adequate documentation at the time of
the audit, or are unnecessary or unreasonable. Funds to be put to a better use are dollars
that could be used more efficiently if management took actions to implement and complete
audit recommendations.
13 Stacia A. Hylton, Federal Detention Trustee, Office of the Federal Detention
Trustee, memorandum for Guy K. Zimmerman, Assistant Inspector General for Audit,
Department of Justice Office of the Inspector General, March 17, 2006.
14 U.S. Department of Justice Office of the Inspector General, Oversight of
Intergovernmental Agreements by the United States Marshals Service and the Office of the
Federal Detention Trustee, Audit Report 07-26 (March 2007).
15 According to the OFDT, eIGA is an attempt to "e-gov" the IGA application process.
Initiated in 2001, the President's Management Agenda included an initiative to expand
Electronic Government (e-gov). The purpose of e-gov is to expand the use of internetbased technology to make it easier for citizens and businesses to interact with the
government.

4

with Internet access can use to complete and electronically submit an IGA
application.
Our March 2007 audit also reported that the OFDT was requiring the
USMS to begin using other pricing factors besides facility-reported operating
costs to negotiate IGAs. Referred to as "price analysis" under the Federal
Acquisition Regulation (FAR), this change allowed the USMS to consider
comparable detention facility jail-day rates, historical prices, independent
estimates, and facility-reported costs during negotiations. 16 The OFDT stated
that the reason it made this change was because the prior IGA approach
that considered only facility costs did not provide an adequate incentive for
state and local detention facilities to operate efficiently.
Considering this change in negotiation strategy, the March 2007 audit
concluded that the OFDT should not entirely abandon its long-held approach
of establishing IGA rates based on costs. The FAR allows negotiators to
request cost information from vendors, which we believed would be a
valuable tool for the USMS to assess whether proposed rates are fair and
reasonable.
Moreover, because the OFDT was drastically changing how the USMS
negotiated IGAs while simultaneously requiring the USMS to use its new
eIGA system, our 2007 audit recommended that the OFDT develop
comprehensive guidance and training for the USMS on how to use eIGA
properly, including a description of how the USMS specialists who negotiate
IGA rates with requesting facilities should document jail-day rate
negotiations while evaluating various detention pricing factors.
In addition to requiring that the USMS use eIGA to negotiate new and
updated IGAs, the OFDT modified eIGA to require that requesting facilities
report their operating costs when they submitted an IGA application.
Further, the OFDT and USMS instituted various training courses for USMS
specialists charged with negotiating IGA rates, including overviews of price
analysis, different negotiation techniques, and demonstrations of eIGA.
Overview of the IGA Negotiation Process
In August 2010, the USMS revised its policy manual and formally
incorporated price analysis as the foundation of its multi-tiered IGA
negotiation strategy, as shown in Exhibit 1-3.
16 Price analysis comprises various techniques buyers can use to compare and
evaluate prices proposed by sellers. Examples of price analysis techniques are outlined by
the Federal Acquisition Regulation (FAR) § 15.404-1 (2010).

5

EXHIBIT 1-3: OVERVIEW OF IGA NEGOTIATION PROCESS

Source: OIG depiction of eIGA and negotiation workflow processes as of August 2010

6

As noted by Exhibit 1-3, IGA negotiations begin when a state or local
facility submits an application that includes a proposed jail-day rate for DO)
detainees. A USMS specialist assigned to negotiate a jail-day rate considers
the proposed rate as a starting point to compare the proposed rate to other
rates using price analysis. The other rates include estimated rates based on
reported operating costs and rates at similar detention facilities. The OFDT
has instructed USMS specialists that if price analysis comparisons cannot
justify a fair and reasonable rate or if the price analysis rate is rejected by
the requesting facility, the USMS specialist should perform cost analysis to
validate facility costs and set a rate.

OIG Audit Approach
Because of the changes to IGA negotiation policies and procedures
that have occurred since the March 2007 audit, the OIG conducted this audit
to: (1) assess how the OFDT has implemented and the USMS uses eIGA to
negotiate jail-day rates, and (2) determine whether the OFDT price analysis
negotiation strategy has resulted in fair and reasonable jail-day rates
charged by state and local facilities.
To accomplish these objectives, we interviewed contracting officials
and specialists with the OFDT and USMS regarding price analysis techniques
and their application to the IGA procurement process. We reviewed IGA
negotiation documents, including DO) detention statistic reports, detention
expense data prepared by state and local governments, and correspondence
between USMS district offices and headquarters regarding the need for
particular detention services. Further, because the U.S. Department of
Homeland Security, Bureau of Immigration and Customs Enforcement (ICE)
independently procures detention space from state and local facilities, we
compared lists of detention facilities used and jail-day rates paid by ICE to
USMS IGA records. We also participated in several technical overviews and
discussions with OFDT officials charged with developing eIGA as well as the
USMS specialists who use eIGA to negotiate IGAs.

7

This audit report contains five chapters that generally follow the IGA
negotiation process used by USMS specialists as of December 2010.
Chapter Two describes how specialists need to enhance their use of eIGA to
improve how they acquire and document necessary detention facility
information and pricing data at the outset of negotiations. Chapter Three
outlines how the inconsistent and weak application of various price analysis
techniques provided an opportunity for some state and local facilities to
negotiate high jail-day rates that appear to generate excessive profits.
Chapter Four discusses the role of cost analysis and the need for the OFDT
and USMS to verify requesting facility operating costs when price analysis
cannot determine a fair and reasonable jail-day rate or otherwise yields a
jail-day rate that is not accepted by the requesting detention facility.
Meanwhile, Chapter Five discusses how the USMS and OFDT should enhance
their file reviews to ensure that USMS specialists appropriately justified jailday rates.
Appendix I includes additional details on the audit objectives, scope,
and methodology.

8

CHAPTER TWO
PRE-NEGOTIATION PROCEDURES
As shown in Exhibit 2-1, eIGA is used by state and local detention
facilities to complete and submit IGA applications to the OFDT and the
USMS. The OFDT administers eIGA and oversees the IGA negotiation
process.

EXHIBIT 2-1: IGA PRE-NEGOTIATION PROCEDURES

Source: OIG depiction of eIGA workflow process

State and local detention facilities first log into eIGA's web-based
interface to request new or adjusted IGAs. USMS specialists use eIGA to

9

review detention facility applications, assess facility logistical and expense
information, and document pre-negotiation planningY
This chapter reviews how the OFDT and USMS use elGA to document
and track application materials and prepare for jail-day rate negotiations.

Completing IGA Applications in elGA
To complete the IGA application form in eIGA, requesting facilities
enter administrative and financial data. The first set of data required by the
application includes the: (1) facility's location, (2) entity responsible for
day-to-day operations, (3) facility's total-rated capacity, and (4) average
daily population of the facility.18 The application also prompts the facility to
provide the detention rates it has previously charged to house federal
detainees or other state or local prisoners, in addition to a proposed jail-day
rate.
The second set of data that each facility includes in the IGA application
is its jail operating expense information (JOEl), which is viewed as "other
than certified cost or pricing data" under the FAR. 19 Requesting facilities
complete and submit JOEl data using an automated form within the elGA
application that captures prior-year and projected expenses in various cost
categories, including: (1) personnel, (2) detainee care and treatment,
(3) other operating expenses, and (4) indirect costs. JOEl data should not
include any costs that are not ordinary, necessary, or otherwise incurred for
the benefit of federal detainees.
Next, elGA uses the data to populate a JOEl summary data sheet that
allocates the reported facility expenses to specific cost categories. Summary
data sheets provide an overview of the types of costs each facility incurs,
which allows the OFDT and USMS to compare the types of costs among
different requesting facilities. In addition, the OFDT enhanced elGA in April
2010 to calculate automatically the cost incurred to house one detainee per
17 Because the OFDT devised eIGA as a complete, one-stop solution for the
procurement of detention services, our audit considers eIGA as the system of record for
documenting jail-day rate decisions.

18 A facility's total-rated capacity is the maximum number of persons a detention
facility is certified to hold. In comparison, a facility's average daily population is the total
number of prisoners and detainees held by a facility over a period of time divided by the
number of days in that period. According to the OFDT, jails typically operate at 95 percent
capacity nationwide.
19 Other than cost or pricing data is any type of information that the contracting
officer believes is necessary to determine price reasonableness. FAR § 15.402 (2010).

10

day using applicable JOEl data and documented facility total-capacity
figures. This allows the USMS specialist to compare the reported perdetainee cost to the proposed jail-day rate.

Validating IGA Application Information
Because submitted applications contain only information provided by
the requesting facilities, the USMS and OFDT should review applications for
completeness and accuracy.
For example, some detention facilities have included local or countylevel administration fees as line items in their initial JOEl submissions.
Because these fees are not related to specific detention costs, the OFDT
looks for these fees to help ensure that they are not included as costs on the
JOEl forms. If such a high-level inconsistency is found, the OFDT
coordinator contacts the requesting facility to clarify the issue or adjust the
error.
Once an application clears the OFDT-coordinator review, elGA routes
the application to a USMS specialist for "pre-negotiation planning." This step
establishes the federal government's initial negotiation position and
documents any issues that need to be addressed during the negotiation
process. 20 Pre-negotiation planning also allows the USMS to validate,
through publicly available sources, facility-reported information - such as
facility size, number of detainees, and location - that subsequently will be
used to negotiate and justify lGA jail-day rates.
USMS specialists said that they review applications for completeness
and examine the JOEl data for discrepancies - performing essentially the
same steps that OFDT coordinators should complete during the preliminary
review. One specialist said that she researches USMS records and consults
facility websites in an effort to corroborate facility-provided application
information, such as the facility's size and proximity to specific federal
cou rthouses.
However, we determined that USMS specialists did not always verify
reported data before using it to calculate figures that were subsequently
used to negotiate lGA jail-day rates. For example, we identified one
instance where a detention facility - detention facility 25 in
erroneously reported its average daily population of federal detainees
instead of its overall average daily population. Detention facility 25 reported
that it had 275 detainees as its average daily population. However,

20

FAR § 15.406-1 (2010).

11

according to publicly available detention facility statistic journals, the
facility's average daily population was actually closer to 400. Using figures
derived from this incorrect data along with the facility's reported average
daily population, the USMS specialist calculated that detention facility 25
incurred a per-detainee, per-day detention cost of about $105, instead of
about $73 per day.21
Errors in facility-reported application data can affect the IGA
negotiation process. Therefore, it is important that USMS specialists identify
application data discrepancies prior to negotiations. We recommend that the
OFDT and USMS develop procedures that require USMS specialists to consult
available detention facility information sources to validate facility-prepared
application data during pre-negotiation planning. Such sources should
include USMS records, facility websites, and independent research materials.
These procedures should also require that USMS specialists document their
validation of IGA application data. We also recommend that the OFDT and
USMS update eIGA and require that USMS specialists document the IGA
application data verification check within the eIGA system.
Preparing Price Negotiation Strategy Sheets
The FAR requires federal negotiators to document specific objectives
that are used to plan negotiations. 22 Three of the five USMS specialists
developed and shared a template price negotiation strategy sheet (strategy
sheet) to document and consolidate the different detention price information
available to them prior to negotiations. Strategy sheets helped USMS
specialists document the objectives of the IGA negotiation and also detail
available price information for negotiating jail-day rates. Exhibit 2-2
describes the various types of jail-day rates captured by the template
strategy sheet.

21 Chapter 3 evaluates the method used by the USMS specialist to calculate
detention facility 25's per-detainee, per day cost further. Under OFDT gUidelines, the
specialist should have used detention facility 25's total-rated capacity of 700 instead of its
average daily population of 392 to derive its per-detainee, per-day cost. If the specialist
applied this rule, the specialist would have calculated detention facility 25's per-detainee,
per-day cost as $41.
22 FAR § 15.406-1 (2010).

12

EXHIBIT 2-2: DETENTION RATES CAPTURED BY PRICE
NEGOTIATION STRATEGY SHEETS
• Adjusted Core Rate. An independent €lovernment cost estimate that is
calculated automatically by eIGA. Adjusted core rates are unique to each
detention faGility because they are based on several different facility
attributes.
• Average USMS District Rate. The average jail-day rate calculated by
OFDT for a district based on USMS IGA(s) in the district.
• Highest Rate in District. The highest jail-day rate identified by the USMS
specialist. Usually, this is based on a review of the Justice Detention
Information System (JDIS) facility list report or a USMS facility usage
report.
• Nearby Federal Bureau of Prison (BOP) Rates. The OFDT-verlfied
price of detention space at nearby BOP facilities.
• Nearby Private Facility Rates. OFIDT, BOP, ar ICE contract bed space
prices paid to detention facilities nearby or in the same district as the
requesting facility.
• Previous Jail-Day Rate. If applicable, the jail-day rate previously
negotiated by the USMS and the rate currently paid by the USMS to an
actively used facility.
• Jail Operating Expense Information (JOEl) Jail-Day Rate. A jail-day
rate derives fram the JOEl data submitted by the requesting facility during
the applicatian J1>rocess. JOEl data can either be the actual or estimated
total aperatin€l costs.
• Other Rates. These are included if the USMS specialist has available
applieable rates paid to the facility By other entities such as states or other
feseral agencies.
Source: USMS specialist template strategy sheet

However, USMS specialists did not consistently use strategy sheets to
detail the contemporaneous pricing information available to them before the
IGA negotiation. Specifically, 16 out of our sample of 25 IGA files did not
have strategy sheets. In addition, in the cases where specialists did use
strategy sheets, the strategy sheets used were not the most up-to-date
template strategy sheet, which we believe is a useful tool to help ensure
USMS specialists meet FAR pre-negotiation requirements. As a result, the

13

IGA files reviewed did not detail all the types of detention rates that the
specialists had available at the outset of the negotiation.
In August 2010, the USMS updated its policies to require that USMS
specialists at a minimum complete a strategy sheet while preparing for
negotiations. However, we recommend that the OFDT and USMS develop a
standardized strategy sheet that specialists must complete prior to
negotiations.
The strategy sheets that USMS specialists have been using also do not
specifically detail whether the requesting detention facility provides
detention services to ICE. In cases where the requesting facility houses ICE
detainees, USMS specialists should document the price that ICE pays to hold
detainees at that facility. Furthermore, because strategy sheets used by
many specialists include the USMS jail-day rates of nearby facilities, we
believe that a more complete strategy sheet would also capture applicable
ICE jail-day rates paid to nearby facilities. We recommend that the OFDT
and USMS ensure that the standardized strategy sheet includes entries for
ICE jail-day rates of requesting and nearby facilities.
As noted previously, the OFDT implemented eIGA to serve as a
comprehensive state and local detention space procurement IT solution.
Nevertheless, we found that only some of the USMS specialists who
completed strategy sheets were maintaining copies of them.
We recommend that once the strategy sheet is revised and
standardized, the OFDT and USMS ensure that pricing information is
retained in the requesting facility's IGA file by updating eIGA and requiring
that USMS specialists enter the strategy sheet information in eIGA.

Recommendations
We recommend that the OFDT and USMS:
1.

Develop procedures that require USMS specialists to consult
available detention facility information sources to validate
facility-prepared application data during pre-negotiation
planning.

2.

Update eIGA and require that USMS specialists document the
IGA application data verification check within the eIGA system.

14

3.

Develop a standardized strategy sheet that includes entries for
ICE jail-day rates for requesting and nearby facilities, which the
USMS specialists must complete prior to IGA negotiations.

4.

Ensure that pricing information is retained in the requesting
facility's IGA file by updating eIGA and requiring that USMS
specialists enter the strategy sheet information in eIGA.

15

CHAPTER THREE
PRICE ANALYSIS
Price analysis is the process of assessing a proposed price to
determine if it is fair and reasonable without evaluating the offeror's cost
elements. Price analysis is basically the method by which the offered price is
compared with other pricing factors. As of December 2010, USMS
specialists applied four different price analysis techniques during IGA
negotiations, as shown in Exhibit 3-1.

EXHIBIT 3-1: IGA PRICE ANALYSIS NEGOTIATION TECHNIQUES
!

Technique

I

Federal Acquisition
Regulation (FAR) Guidance

Compare proposed prices to an
independent government cost
estimate or to the price
Adjusted Core
estimated by a parametric
Rate
model that highlights price
inconsistencies. FAR § 15.404l(b)(2)(iii) and (v)

Jail Operating
Expense
Information
(JOEl)

Market
Research

Review pricing information
(JOEl data) provided by the
offeror (requesting facility).
FAR § 15.404-1(b)(2)(vli)

Compare proposed prices with
prices obtained through market
research of the same or similar
services. FAR § 15.404l(b)(2)(vi)

How To Use
Within the eIGA Process
Compare the proposed jail-day rate to the
facility's adjusted core rate. Adjusted
core rates are calculated by eIGA using a
pricing model that considers specific
facility attributes, including: (1) county
wage statistics, (2) facility staff to
detainee ratio, (3) facility jurisdiction
type, (4) major metropolitan area, and
(5) U.S. geographic region.
Estimate the per-detainee costs using
JOEl data and the facility's total-rated
capacity and compare the calculation
results to the proposed jail-day rate. As
of April 2010, eIGA automatically
calculates an estimated JOEl rates.
Compare the proposed jail-day rate to:
(1) actual prices charged by other IGA
facilities within the same USMS district or
geographical location; (2) an OFDTcalculated average IGA jail-day rate for
the USMS district; or (3) the requesting
facility's previous rate, adjusted for
inflation (if applicable).

II

Compare historical (preViously
proposed) government and
commercial prices to current
Compare the proposed jail-day rate to
proposed prices for the same or actual prices of detention space at private
similar services, so long as both detention facilities (commercial contract
Historical Price the validity of the comparison
prices) used by the USMS district or to
and the reasonableness of the
BOP per capita rates (government prices)
previous prices can be
at federal detention centers.
established. FAR § 15.404l(b)(2)(11)
Source: DIG analySIS of applicable FAR sections and OFDT price negotiation documents

16

As discussed in the March 2007 DIG Audit, elGA uses a detention
space pricing model to calculate automatically a unique "adjusted core rate"
for each requesting facility. The pricing model considers specific attributes
of each facility, such as its size and location. USMS specialists treat each
facility's adjusted core rate as a unique pricing factor and compare it to the
proposed rate. The second technique estimates a jail-day rate based on the
costs reported by the requesting facility in its jail operating expense
information (JOEl), which is submitted as part of its IGA application. Similar
to the adjusted core rate, a jail-day rate estimated with JOEl data can be
used to assess whether the proposed jail-day rate far exceeds the costs the
jail will reportedly incur to house DOJ detainees. The third and fourth
techniques involve USMS specialists acquiring jail-day rates from third-party
detention facilities and using market or historical prices to assess whether
the proposed rate is fair and reasonable.
As justification for its decision to move toward price analysis, the OFDT
stated that the USMS would be better positioned to control jail-day rate
increases because it could consider many more pricing factors besides costs
during IGA negotiations. Nevertheless, since the OFDT and USMS began
using price analysis instead of facility costs to set IGA rates, the total
amount spent on IGAs has increased 19 percent - from $743 million in
FY 2005 to $888 million in FY 2010. This 19 percent increase is greater than
the 6.3 percent increase in the average detainee population held in state and
local facilities that occurred during the same time period.
Considering the increase in detention costs compared to the increase
in detainee population, we assessed a sample of 25 IGAs to (1) evaluate
how the USMS performed price analysis to justify jail-day rates and
(2) determine whether specialists could have improved how they performed
specific price analysis techniques. The sample review identified significant
weaknesses regarding both the completeness and accuracy by which the
USMS applied price analysis to IGA negotiations. As discussed in the
following two sections, we believe that these discrepancies led the USMS to
negotiate rates in 15 out of the 25 sampled state and local detention
facilities that were excessive.

17

Using Price Analysis to Negotiate IGAs
To control detention costs using price analysis, the OFDT and USMS
need to ensure that USMS specialists properly perform and adequately
document price analysis techniques to demonstrate that a negotiated rate is
fair and reasonable. After selecting a judgmental sample of 25 of 191 lGAs
negotiated using elGA with price analysis, we compared the negotiated jailday rates of each to corresponding rates estimated using facility-reported
JOEl data and each facility's total-rated capacity.23 Exhibit 3-2 shows that
15 of the 25 sampled lGAs provided state and local facilities with more funds
than the JOEl data indicated the facilities would spend providing detention
services, while only 6 provided less. Four facilities received negotiated rates
that were equal to their estimated JOEl rates.

23 To estimate jail-day rates using JOEl data, we divided the requesting facility's
reported operating costs by the product of the total-rated capacity of each facility and 365
days.

18

EXHIBIT 3-2: ACTUAL JAIL-DAY RATES COMPARED TO ESTIMATED JOEl DATA RATES

iDetention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention
Detention

Facili
Facili
Facili
Faclll
Facili
Fadli
Facill
Faclll
Facili
Facili
Facill
Faclli
Fadll
Fadll
Facili
Facill
Facill
Facili
Facili
Faclli
Fadll
Fadll
Facill
Facili
Facili

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

106
80
63
54
40
110
78
119
65
80
40
70
85
55
69
77
63
95
44
95
55
104
55
118

124
97
65
56
41
135
78
119
65
80
25
65
78
39
62

66544
33632
23151
16762
25942
1
40376
29274
34582
7962
15
191
1164
2498
9983
15935
16179
74787
39800
7479
75520
73251
27312
35154

72

48
91
33
36
49
95
30
91

72

19

X
X
X
X

X
X
X
X

X
X
X
X
X
X
X
X

NA
X
X
X
X
X
X

X
X
X
X

X
X
X
X
X
X

The average negotiated rate of the facilities listed in Exhibit 3-2 was
$76 per day. The average rate based on JOEl data was $69. By applying
the number of jail-days the USMS anticipated using for these sampled
facilities during the IGA term for each (usually 3 years), our sample showed
that the rates set with price analysis will result in the USMS spending about
$173 million to procure detention services. 24 Based on facility JOEl data, the
same space actually will cost the facilities only $158 million. The $7
difference between average negotiated jail-day rates and the estimated
rates using JOEl data would therefore result in the USMS and OFDT spending
$15 million more to obtain the same amount of detention space at these 25
facilities. 25
Nevertheless, USMS specialists only used JOEl data - information that
details facility operating costs - to justify 6 out of the 25 sampled IGA rates.
For example, the USMS specialist that negotiated detention facility 20's $95
jail-day rate justified the rate using every other applicable price analysis
technique except JOEl data. By applying detention facility 20's JOEl data to
its total-rated capacity, the rate for this facility based on reported costs
should only have been $36 per day, or $59 less than the rate the USMS
specialist justified by using the other price analysis techniques. Applying
USMS's anticipated-use figures for detention facility 20, the $59 discrepancy
between the JOEl rate and the negotiated rate resulted in detention
facility 20 receiving $1.3 million more in USMS detention funds than it
reported it would spend providing detention services over the 3-year IGA
period.
In our opinion, the fact that some USMS specialists appear to treat the
requesting facility's proposed rate as a starting point for price analysis
negotiations strengthens the requesting facility's negotiation position over
the USMS. This is because proposed rates are independently set by the
requesting facility and the USMS specialist cannot easily determine whether
such rates are reasonable considering requesting facility costs. At the outset
24
We applied the projected number of jail days reported in the USMS's Justice
Detainee Information System (JOIS) as the anticipated use figure for each facility. JDIS
uses actual prior usage data to project a unique number of jail days the USMS anticipates
requiring annually at each IGA facility.
25 The following example demonstrates how a few dollars difference in a jail-day
rate can lead to large payments ~ a r to provide excessive profits to detention
centers. Detention facility 21 in _ _ received a $55 negotiated jail-day rate, which
was $6 more than what its JOEl data indicated it spends to house each of its detainees
every day. According to the IGA file, the USMS anticipates housing an average of over 200
detainees in detention facility 21 each day. Applying this number to the 3-year term of this
IGA, detention facility 21's $55 jail-day rate would result in an overpayment of almost $1.4
million for detention space than the facility reported it will spend housing USMS detainees.

20

of the negotiations, USMS specialists could have instead used the estimated
JOEl rate as the starting point and compared the proposed rates against the
JOEl rate. This would have enhanced the USMS specialist's ability to gauge
whether the proposed rate was fair and reasonable considering the facility's
reported costs. If it was not, the USMS specialist could have communicated
back to the facility that the requested rate was not in line with costs and use
the estimated JOEl rate as leverage for a lower jail-day rate.
While we were conducting this audit, the OFDT updated elGA so that it
automatically calculates an estimated JOEl rate using cost information
submitted by facilities applying for an IGA. Moving forward, this means that
two of the four applicable price analysis techniques (adjusted core rate and
JOEl review) will automatically be calculated by eIGA. We therefore
recommend that the OFDT and USMS require that USMS specialists
consistently use these two figures - the estimated JOEl rate and the
adjusted core rate - as starting points to help negotiate lower jail-day rates.
If the other price analysis techniques (market research and historical
price comparisons) can be applied to the IGA negotiation but are not used by
the USMS specialist, we further recommend that the OFDT and USMS require
that USMS specialists document and their supervisors approve the reasons
that these techniques were not used to justify and negotiate a fair and
reasonable jail-day rate.

Review of Individual Price Analysis Techniques
As shown by Exhibit 3-2, our sample of IGA files revealed that USMS
specialists did not consistently use the four price analysis techniques to
negotiate each sampled jail-day rate. While USMS specialists justified jailday rates using adjusted core rates and market research 20 times, they only
used JOEl data 6 times and historical prices 9 times. USMS specialists also
did not include in the IGA file an explanation as to why certain techniques
were used instead of others. For example, the IGA file for detention
facility 17 in
did not include a memorandum detailing
which price analysis technique the USMS specialist used to justify the
negotiated jail-day rate.
The following sections present the results of our evaluation of how
USMS specialists used each price analysis technique as a tool to negotiate
IGA jail-day rates.

21

Technique 1: Adjusted Core Rate
Using IGA application data, eIGA automatically calculates an adjusted
core rate for every requesting facility. Adjusted core rates are derived from
a base core rate established by an econometric model developed by the
OFDT that uses national detention pricing information. Exhibit 3-3 illustrates
how: (1) eIGA applies the base core rate with facility attributes (such as
size, location, and staff salaries) to calculate an adjusted core rate and
(2) USMS specialists are supposed to compare it to the rate proposed by the
detention fad lity.

22