Federal Contracting
Opportunities Exist to Increase Competition and Assess Reasons When Only One Offer Is Received Gao ID: GAO-10-833 July 26, 2010Competition is a critical tool for achieving the best return on the government's investment. While federal agencies are generally required to award contracts on the basis of full and open competition, they are permitted to award noncompetitive contracts in certain situations. Agencies are also required to establish competition advocates to promote competition. GAO assessed (1) trends in noncompetitive contracts and those receiving only one offer when competed; (2) exceptions to and factors affecting competition; (3) whether contracting approaches reflected sound procurement practices; and (4) how agencies are instituting the competition advocate role. GAO reviewed federal procurement data and 107 randomly selected contracts at the departments of Defense, Interior, and Homeland Security (which had among the highest noncompetitive obligations in fiscal year 2008) and interviewed contracting and program officials, competition advocates, and contractors.
From fiscal years 2005 to 2009, reported obligations for noncompetitive contracts decreased from about 36 to 31 percent of total obligations, while obligations under contracts competed with only one offer received were steady, at about 13 percent of the total in each year. In comparing the data in the federal procurement data system to the information in contract files, we found that about 18 percent of the contracts sampled were coded incorrectly--as either not competed when they had been, or as competed with one offer received when they had not been competed at all. Agencies used a variety of exceptions to competition for the contracts and orders in our sample, with the two most common being "only one responsible source" and sole-source awards under the Small Business Administration's 8(a) business development program. For services supporting DOD weapons programs, the government's lack of access to proprietary technical data and decades-long reliance on specific contractors for expertise limit--or even preclude the possibility of--competition. In other cases, program offices may press for contracts to be awarded to the incumbent contractor without competition, largely due to their relationship and the contractor's understanding of program requirements. For competitive procurements where only one offer is received, factors include a strong incumbent, sometimes coupled with overly restrictive government requirements, or vendors forming large teams to submit one offer for broader government requirements, whereas previously several vendors may have competed. Contracting approaches for nine contracts reviewed did not reflect sound procurement practices and in some instances sound management practices, in some cases not leveraging the effectiveness of the market place. These approaches included ambiguously written justifications for noncompetitive contracts, very limited documentation of the reasonableness of contractors' proposed prices, instances where the contract's cost grew significantly or where labor categories were improperly authorized, and undefinitized contract actions that did not meet definitization requirements. Agencies have much discretion regarding where in the organization the competition advocates should be placed, who should be appointed to this position, and how they should carry out their responsibilities. As a result, agencies have taken a range of approaches regarding the placement of the competition advocates, their skills and expertise, and the methods they use to carry out their responsibilities. Some advocates cited their experience in program offices as helping them to question requirements that may be overly restrictive, while others had been contracting officers or procurement policy officials before assuming the position. Some agency officials said that regulations are vague regarding the role of the competition advocate, and that given the Office of Federal Procurement Policy's (OFPP) recent emphasis on competition, they would like to see more guidance on competition advocate roles and methods of implementing their duties. GAO recommends that OFPP take actions regarding assessment of the reasons only one offer is received and issue guidance on competition advocate roles, including their direct involvement with program offices to seek opportunities for competition. OFPP agreed with the recommendations, and DOD generally agreed with our findings and recommendations. Other agencies provided technical comments.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: John P. Hutton Team: Government Accountability Office: Acquisition and Sourcing Management Phone: (202) 512-7773GAO-10-833, Federal Contracting: Opportunities Exist to Increase Competition and Assess Reasons When Only One Offer Is Received
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Report to the Committee on Oversight and Government Reform, House of
Representatives:
United States Government Accountability Office:
GAO:
July 2010:
Federal Contracting:
Opportunities Exist to Increase Competition and Assess Reasons When
Only One Offer Is Received:
Federal Contracting:
GAO-10-833:
GAO Highlights:
Highlights of GAO-10-833, a report to the Committee on Oversight and
Government Reform, House of Representatives.
Why GAO Did This Study:
Competition is a critical tool for achieving the best return on the
government‘s investment. While federal agencies are generally required
to award contracts on the basis of full and open competition, they are
permitted to award noncompetitive contracts in certain situations.
Agencies are also required to establish competition advocates to
promote competition. GAO assessed (1) trends in noncompetitive
contracts and those receiving only one offer when competed; (2)
exceptions to and factors affecting competition; (3) whether
contracting approaches reflected sound procurement practices; and (4)
how agencies are instituting the competition advocate role. GAO
reviewed federal procurement data and 107 randomly selected contracts
at the departments of Defense, Interior, and Homeland Security (which
had among the highest noncompetitive obligations in fiscal year 2008)
and interviewed contracting and program officials, competition
advocates, and contractors.
What GAO Found:
From fiscal years 2005 to 2009, reported obligations for
noncompetitive contracts decreased from about 36 to 31 percent of
total obligations, while obligations under contracts competed with
only one offer received were steady, at about 13 percent of the total
in each year. In comparing the data in the federal procurement data
system to the information in contract files, we found that about 18
percent of the contracts sampled were coded incorrectly”as either not
competed when they had been, or as competed with one offer received
when they had not been competed at all.
Agencies used a variety of exceptions to competition for the contracts
and orders in our sample, with the two most common being ’only one
responsible source“ and sole-source awards under the Small Business
Administration‘s 8(a) business development program. For services
supporting DOD weapons programs, the government‘s lack of access to
proprietary technical data and decades--long reliance on specific
contractors for expertise limit”-or even preclude the possibility of”
competition. In other cases, program offices may press for contracts
to be awarded to the incumbent contractor without competition, largely
due to their relationship and the contractor‘s understanding of
program requirements. For competitive procurements where only one
offer is received, factors include a strong incumbent, sometimes
coupled with overly restrictive government requirements, or vendors
forming large teams to submit one offer for broader government
requirements, whereas previously several vendors may have competed.
Contracting approaches for nine contracts reviewed did not reflect
sound procurement practices and in some instances sound management
practices, in some cases not leveraging the effectiveness of the
market place. These approaches included ambiguously written
justifications for noncompetitive contracts, very limited
documentation of the reasonableness of contractors‘ proposed prices,
instances where the contract‘s cost grew significantly or where labor
categories were improperly authorized, and undefinitized contract
actions that did not meet definitization requirements.
Agencies have much discretion regarding where in the organization the
competition advocates should be placed, who should be appointed to
this position, and how they should carry out their responsibilities.
As a result, agencies have taken a range of approaches regarding the
placement of the competition advocates, their skills and expertise,
and the methods they use to carry out their responsibilities. Some
advocates cited their experience in program offices as helping them to
question requirements that may be overly restrictive, while others had
been contracting officers or procurement policy officials before
assuming the position. Some agency officials said that regulations are
vague regarding the role of the competition advocate, and that given
the Office of Federal Procurement Policy‘s (OFPP) recent emphasis on
competition, they would like to see more guidance on competition
advocate roles and methods of implementing their duties.
What GAO Recommends:
GAO recommends that OFPP take actions regarding assessment of the
reasons only one offer is received and issue guidance on competition
advocate roles, including their direct involvement with program
offices to seek opportunities for competition. OFPP agreed with the
recommendations, and DOD generally agreed with our findings and
recommendations. Other agencies provided technical comments.
View [hyperlink, http://www.gao.gov/products/GAO-10-833] or key
components. For more information, contact John P. Hutton at (202) 512-
4841 or huttonj@gao.gov.
[End of section]
Contents:
Letter:
Background:
Percentage of Reported Noncompetitive Contract Obligations Has
Decreased While Competed Contracts with One Offer Received Remained
Steady:
Agencies Used a Variety of Exceptions to Competition and Processes to
Award Noncompetitive Contracts:
Key Factors Affecting Competition Include Reliance on Contractor
Expertise and Proprietary Data and Preference for Incumbent:
Some Contracting Approaches Did Not Reflect Sound Procurement or
Management Practices:
Agencies Institute the Roles of Their Competition Advocates in a
Variety of Ways, in Particular with Regard to Placement and Expertise:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of the Interior:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Miscoded Contracts in our Sample:
Table 2: Agencies' Cited Exceptions to Competitive Awards for
Contracts and Orders We Reviewed:
Table 3: Levels of Approval for Justifications for Other Than Full and
Open Competition:
Table 4: Locations We Visited and the Number and Type of Contracts
Reviewed:
Figures:
Figure 1: Percentage of Federal Obligations to Competitive,
Noncompetitive, and Competed Contracts with One Offer Received for
Fiscal Years 2005 through 2009 (Constant Dollars):
Figure 2: Percentage of Reported Obligations for Competitive and
Noncompetitive Awards by Quarter, Fiscal Years 2005 to 2009 (Constant
Dollars):
Abbreviations:
ANC: Alaska Native Corporation:
BPA: blanket purchase agreements:
CICA: Competition in Contracting Act:
COTR: contracting officer's technical representative:
DFARS: Defense Federal Acquisition Regulation Supplement:
DHS: Department of Homeland Security:
DOD: Department of Defense:
FAR: Federal Acquisition Regulation:
FASA: Federal Acquisition Streamlining Act:
FBI: Federal Bureau of Investigation:
FEMA: Federal Emergency Management Agency:
FFRDC: federally funded research and development center:
FPDS-NG: Federal Procurement Data System-Next Generation:
GSA: General Services Administration:
ICE: Immigration and Customs Enforcement:
IDIQ: indefinite delivery/indefinite quantity:
NASA: National Aeronautics and Space Administration:
OFPP: Office of Federal Procurement Policy:
OMB: Office of Management and Budget:
SBA: Small Business Administration:
TOW: Tube-launched, Optically-tracked, Wire-guided:
UCA: undefinitized contract actions:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 26, 2010:
The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House Of Representatives:
Competition is a cornerstone of the acquisition system and a critical
tool for achieving the best possible return on investment for
taxpayers. The benefits of competition in acquiring goods and services
from the private sector are well established. Competitive contracts
can help save the taxpayer money, improve contractor performance, curb
fraud, and promote accountability for results. While federal statute
and acquisition regulations generally require that contracts be
awarded on the basis of full and open competition, they also permit
federal agencies to award noncompetitive contracts in certain
circumstances, for example, when only one vendor can supply the
requirements or when a sole source award is made under specified small
business programs. The government obligates tens of billions of
dollars every year under noncompetitive contracts. Further, the
government obligates billions of dollars annually under contracts that
are awarded competitively but for which the government receives only
one offer--situations the Office of Management and Budget (OMB) has
recently cited, along with noncompetitive contracts, as high risk.
Our prior work has shown that promoting competition in federal
contracting presents the opportunity for significant cost savings, but
that the government has not consistently taken advantage of such
opportunities. For example, our recent review of federal agencies' use
of blanket purchase agreements (BPA) awarded under General Services
Administration (GSA) schedules program contracts showed that agencies
rarely took advantage of additional opportunities for competition when
placing orders under BPAs, reducing the potential to realize
additional savings for taxpayers.[Footnote 1] In other reviews, we
found that the Army had issued contracts for security guards at U.S.
military installations on a sole-source basis, and the Department of
State had issued a sole-source contract for installation and
maintenance of security equipment at U.S. embassies worldwide.
[Footnote 2] Based on GAO's recommendations, the requirements were
subsequently competed, resulting in cost savings. Congress and the
executive branch have recently highlighted as an area of concern the
use of noncompetitive contracts and competed contracts where only one
offer is received.
You asked us to review federal agencies' use of noncompetitive
contracts and competitively awarded contracts in which only one offer
was received. Accordingly, we determined (1) the extent to which
agencies have awarded noncompetitive contracts and contracts awarded
competitively with only one offer received; (2) the exceptions to
competition that agencies used when awarding noncompetitive contracts;
(3) some of the factors that affect competition in federal
contracting; and (4) the extent to which the contracting approaches
for the contracts in our sample reflect sound procurement or
management practices. You also asked us to describe how agencies are
instituting the roles of their competition advocates.
To identify the extent to which agencies have reported obligations
under noncompetitive contracts and those receiving only one offer, we
analyzed data from the government's procurement database--the Federal
Procurement Data System-Next Generation (FPDS-NG)--for fiscal years
2005 through 2009[Footnote 3]. To gain insight into the circumstances
involving noncompetitive contracts, we randomly selected a sample of
79 contracts and orders coded as noncompetitive and reviewed the
contract files. To identify the locations for our contract file
reviews, we selected those agencies with the greatest reported use of
noncompetitive contracts during fiscal year 2008 (the most recent
available data at the time) and, within those agencies, the components
that had the largest percentage of these contracts. Our selection
criteria also included those components with large-dollar-value
procurements. For the Department of Defense (DOD), in order to focus
more on services, we narrowed our selection criteria to those
contracts coded as professional, administrative, and management
support services. Our random sample also included 28 contracts and
orders that had been coded as competed but had only received one
offer. In all, we reviewed 107 contracts or orders. The specific
locations in our review were as follows.
* DOD:
- Redstone Arsenal Army Base;
- Warner Robins Air Force Base;
- Los Angeles Air Force Base;
- China Lake Naval Air Warfare Center Weapons Division;
- Patuxent River Naval Air Station;
- Newport Naval Undersea Warfare Center.
* Department of the Interior's Acquisition Services Directorate
(formerly GovWorks): this fee-for-service contracting office awards
and administers contracts on behalf of other federal agencies.
Included in our sample from the Acquisition Services Directorate were
contracts awarded on behalf of DOD agencies, the Federal Bureau of
Investigation (FBI), and the National Institutes of Health.
* Department of Homeland Security's (DHS) Immigration and Customs
Enforcement (ICE) and Secret Service.
To determine the exceptions to competition that were used, the factors
affecting competition, and the extent to which the contracting
approaches reflected sound procurement or management practices, we
reviewed documentation in the contract files such as the justification
for a noncompetitive award, acquisition plan, and other key documents,
as well as relevant statutory provisions and the Federal Acquisition
Regulation (FAR), agency guidance and supplements to the FAR, Small
Business Administration (SBA) regulations, and OMB and Office of
Federal Procurement Policy (OFPP) memorandums.[Footnote 4] We
interviewed relevant contracting officers and contract specialists
(when available) and, for many of the contracts, also interviewed the
cognizant program officials to obtain their views. We also interviewed
procurement policy officials at the department and local levels.
To determine how agencies are instituting the role of the competition
advocate, we reviewed statutory and FAR provisions, a May 2007 OFPP
memorandum pertaining to the role of the competition advocate,
pertinent agency regulations and guidance, and the agencies'
competition reports from fiscal years 2008 and 2009. We interviewed
the competition advocates at DOD, the Army, Navy, and Air Force, the
Department of the Interior, and DHS, as well as the advocates at the
components included in our review.
A more detailed description of our scope and methodology is presented
in appendix I. We conducted this performance audit from October 2009
to July 2010 in accordance with generally accepted government auditing
standards. 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 believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Background:
Full and open competition is the preferred method for federal agencies
to award contracts. This preference was established through the
Competition in Contracting Act (CICA) of 1984,[Footnote 5] which
required agencies to obtain full and open competition through the use
of competitive procedures in their procurement activities unless
otherwise authorized by law. Contracts awarded using full and open
competition means that all responsible sources--or prospective
contractors that meet certain criteria--are permitted to submit
proposals. Agencies are generally required to perform acquisition
planning and conduct market research to promote and provide for, among
other things, full and open competition. However, Congress, by
enacting CICA, also recognized that there are situations that require
or allow for contracts to be awarded noncompetitively--that is,
contracts awarded without full and open competition.[Footnote 6] Some
of the permitted exceptions to full and open competition follow.
* Supplies and services are only available from one responsible
source, such as unique services from one supplier with unique
capabilities, or limited rights to data that make certain services
available from one source.
* The government is under unusual and compelling urgency to procure a
good or service, and delaying the award of a contract would result in
serious injury, financial or other, to the government.
* A statute expressly authorizes or requires that the acquisition be
made from a specific source or through another agency, such as sole
source awards under the SBA's 8(a) program--one of the federal
government's primary means for developing small businesses owned by
socially and economically disadvantaged individuals.
* The terms of an international agreement between the United States
and a foreign government, or written directions of a foreign
government reimbursing a federal agency for the cost of an
acquisition, preclude competition.
* The disclosure of the agency's needs would compromise national
security. This exception, however, is not to be used merely because
the acquisition is classified or because access to classified matter
is necessary.
Noncompetitive contracts are not permitted in situations in which the
requiring agency has failed to adequately plan for the procurement or
in which there are concerns related to availability of funding for the
agency, such as funds expiring at the end of the year.
Generally, noncompetitive contracts must be supported by written
justifications and approvals that contain sufficient facts and
rationale to justify the use of the specific exception to full and
open competition that is being applied to the procurement. These
justifications must include, at a minimum, 12 elements specified by
the FAR, for example,
* a description of the supplies or services required to meet the
agency's needs and their estimated value;
* identification of the specific statutory authority permitting other
than full and open competition;
* a determination by the contracting officer that the anticipated cost
to the government will be fair and reasonable;
* a description of market research conducted, if any; and:
* a statement of the actions, if any, the agency may take to remove or
overcome any barriers to competition before any subsequent
acquisitions for the supplies or services required.
The approval level for these types of noncompetitive contracts varies
according to the dollar value of the procurement. Some contracts do
not require written justifications, including those awarded on a sole
source basis through the 8(a) program under the "authorized or
required by statute" exception.
Although full and open competition is the preferred method to award a
contract, agencies can competitively award contracts after limiting
the pool of available contractors--a process called "full and open
competition after exclusion of sources." An example of this is when
agencies set aside procurements for small businesses. In fact,
agencies are required to set aside procurements for competition among
qualified small businesses if there is a reasonable expectation that
two or more responsible small businesses will compete for the work.
[Footnote 7]
Competitive Requirements for Indefinite Delivery/Indefinite Quantity
Contracts:
Federal agencies can establish indefinite delivery/indefinite quantity
(IDIQ) contracts, or issue orders under them, using a number of
different authorities. The following is a discussion of some of these
authorities pertinent to the contracts included in our review and any
provisions for exceptions to competition.
The Federal Acquisition Streamlining Act (FASA) of 1994 provided
competition requirements for task order and delivery order contracts,
referred to as IDIQ contracts.[Footnote 8] IDIQ contracts can be
single award or multiple award contracts, but FASA establishes a
preference for multiple award contracts. Multiple award IDIQ contracts
are awarded to multiple contractors through one solicitation. The
number of contract holders depends on the number of contractors
receiving the award, which could be from two contractors to thousands.
Agencies are required to compete orders on multiple award contracts
among all contract holders; however, agencies can award noncompetitive
orders--through a process called an exception to a fair opportunity to
compete--for reasons similar to those used for awarding contracts
without full and open competition, such as only one contractor being
capable of providing the supplies or services needed, or an urgent
requirement.[Footnote 9] The FAR requires contracting officers to
document, in the contract file, the rationale for awarding the order
noncompetitively, but does not specify what should be included in
these justifications. In addition, approval of the justifications for
noncompetitively awarded orders is not required.
One example of a large, multiple award IDIQ is the Navy's Seaport
Enhanced (Seaport-e) program with over 1,200 contract holders that can
provide 22 different services, such as engineering, program, and
logistics support. Orders may be issued under Seaport-e by Navy
Systems Commands, and other Navy Commands and offices. Requirements
must be competed among all contractors within a certain geographical
area. Noncompetitive orders are only allowed if no alternative
contract vehicle exists and written approval from the program manager
of Seaport-e is obtained.
GSA, under its schedules program, awards IDIQ contracts to multiple
vendors for commercially available goods and services, and federal
agencies place orders under the contracts. To compete orders over
$3,000, agencies need only survey three schedule contractors that
offer services that will meet their needs.[Footnote 10] For orders
issued noncompetitively under the schedules program, however, the
ordering agency must justify in writing--with specific content
required by the FAR--the need to restrict competition and also obtain
approval at the same dollar values and by the same officials as for
contracts awarded without full and open competition.[Footnote 11] The
Army has established BPAs under GSA schedule contracts with about
1,200 contractors-called the Express Program--to provide advisory and
assistance services in four domains: business and analytical,
programmatic, logistical, and technical. Requirements are generally
competed within each domain, but orders can be placed noncompetitively.
Competitive Procurements Where Only One Offer Is Received:
Contracts that are awarded using competitive procedures but where only
one offer is received have recently gained attention as an area of
concern. OFPP recently noted that competitions that yield only one
offer in response to a solicitation deprive agencies of the ability to
consider alternative solutions in a reasoned and structured manner.
The Office of Federal Procurement Policy Act, as amended by CICA,
required that agencies begin separating data collected on contracts
that were awarded using competitive procedures where only one offer
was received. The act stipulated that these contracts be recorded as
"noncompetitive procurements using competitive procedures." Currently,
FPDS-NG distinguishes these contracts by recording how many offers
were received on any procurement.
Congressional and Executive Branch Actions:
Congress and the executive branch have recently taken actions that
require or encourage more competition in federal contracting and that
bring more scrutiny to noncompetitive contracts. For example, since
2008 Congress has enacted legislation that:
* requires justifications for certain noncompetitive awards to be
publicly posted;[Footnote 12]
* enhances competition for task orders on multiple award contracts;
[Footnote 13]
* requires acquisition strategies for major defense acquisition
programs to include measures to ensure competition throughout the life
cycle of the program;[Footnote 14] and:
* requires justifications, approvals, and notices for sole source
contract awards over $20 million awarded under the authority of SBA's
8(a) program.[Footnote 15]
The executive branch also has brought attention to the importance of
competition. In May 2007, OFPP called for agencies to reinvigorate the
role of the competition advocate, a position required by law at each
executive agency to promote competition. Each competition advocate
must, among other things, submit an annual report on competition to
the agency's senior procurement executive and chief acquisition
officer and recommend goals and plans for increasing competition. In
March 2009, the President called on federal agencies to examine their
use of noncompetitive contracting as one of several important steps to
improving the results achieved from government contractors. In July
2009, OMB instructed agencies to reduce dollars obligated to high-risk
contracts--including noncompetitively awarded contracts and contracts
competed with only one offer received--by 10 percent in fiscal year
2010. In October 2009, OFPP followed up with guidelines for agencies
to evaluate, in part, the effectiveness of their agencies' competition
practices.
Percentage of Reported Noncompetitive Contract Obligations Has
Decreased While Competed Contracts with One Offer Received Remained
Steady:
Total obligations reported in FPDS-NG increased during fiscal years
2005 through 2009, from $430.6 billion to $543.6 billion. For the same
5-year period, the percentage of obligations reported for
noncompetitive contracts decreased, from 35.6 percent to 31.2 percent
of total obligations, while those reported under contracts that were
competed with one offer received (noncompetitive procurements using
competitive procedures) were steady, at about 13 percent of total
obligations.
Figure 1: Percentage of Federal Obligations to Competitive,
Noncompetitive, and Competed Contracts with One Offer Received for
Fiscal Years 2005 through 2009 (Constant Dollars):
[Refer to PDF for image: stacked vertical bar graph]
Fiscal Year: 2005;
Not competed: 35.7%;
Competed with one offer received: 12.5%;
Competed: 51.8%;
Total obligations: $430 billion.
Fiscal Year: 2006;
Not competed: 35.8%;
Competed with one offer received: 12.5%;
Competed: 51.7%;
Total obligations: $456 billion.
Fiscal Year: 2007[A];
Not competed: 34.0%;
Competed with one offer received: 13.9%;
Competed: 52.2%;
Total obligations: $477 billion.
Fiscal Year: 2008;
Not competed: 34.0%;
Competed with one offer received: 13.5%;
Competed: 52.5%;
Total obligations: $514 billion.
Fiscal Year: 2009;
Not competed: 31.2%;
Competed with one offer received: 13.3%;
Competed: 55.5%;
Total obligations: $543 billion.
Source: FPDS-NG.
[A] For fiscal year 2007, the percent is more than 100 percent due to
rounding.
Note: We did not include obligations where data about the extent
competed was missing, which represented less than or equal to 0.5
percent of the total obligations in each year. This accounts for a
slight difference in the percent not competed in fiscal year 2005.
Further, in FPDS-NG, DOD's total obligations in fiscal year 2009
reflect an approximately $13.9 billion downward adjustment made by DOD
to correct an administrative error made in fiscal year 2008. As this
adjustment significantly affected DOD's reported obligations in fiscal
years 2008 and 2009, the figures we report reflect what DOD's total
obligations would have been had the error not occurred.
[End of figure]
To determine whether there was any variation in dollars obligated to
noncompetitive contracts during the four quarters of the fiscal year,
we analyzed dollars obligated in each quarter for fiscal years 2005
through 2009. We found that the fourth quarter consistently had the
lowest percentage of obligations to noncompetitive contracts in each
fiscal year, while the first quarter generally had the highest
percentage of obligations to noncompetitive contracts, as shown in
figure 2.[Footnote 16]
Figure 2: Percentage of Reported Obligations for Competitive and
Noncompetitive Awards by Quarter, Fiscal Years 2005 to 2009 (Constant
Dollars):
[Refer to PDF for image: stacked vertical bar graph]
Fiscal Year: 2005; Q1;
Not competed: 38.3%;
Competed: 61.7%;
Total obligations: $124 billion.
Fiscal Year: 2005; Q2;
Not competed: 37.5%;
Competed: 62.5%;
Total obligations: $112 billion.
Fiscal Year: 2005; Q3;
Not competed: 36.1%;
Competed: 63.9%;
Total obligations: $81 billion.
Fiscal Year: 2005; Q4;
Not competed: 30.6%;
Competed: 69.4%;
Total obligations: $114 billion.
Fiscal Year: 2006; Q1;
Not competed: 37.8%;
Competed: 62.2%;
Total obligations: $108 billion.
Fiscal Year: 2006; Q2;
Not competed: 41.3%;
Competed: 58.7%;
Total obligations: $134 billion.
Fiscal Year: 2006; Q3;
Not competed: 33.9%;
Competed: 66.1%;
Total obligations: $86 billion.
Fiscal Year: 2006; Q4;
Not competed: 29.7%;
Competed: 70.3%;
Total obligations: $128 billion.
Fiscal Year: 2007; Q1;
Not competed: 41.8%;
Competed: 58.2%;
Total obligations: $131 billion.
Fiscal Year: 2007; Q2;
Not competed: 32.2%;
Competed: 67.8%;
Total obligations: $113 billion.
Fiscal Year: 2007; Q3;
Not competed: 30.9%;
Competed: 69.1%;
Total obligations: $96 billion.
Fiscal Year: 2007; Q4;
Not competed: 30.1%;
Competed: 69.9%;
Total obligations: $136 billion.
Fiscal Year: 2008; Q1;
Not competed: 38.2%;
Competed: 61.8%;
Total obligations: $119 billion.
Fiscal Year: 2008; Q2;
Not competed: 32.6%;
Competed: 67.4%;
Total obligations: $138 billion.
Fiscal Year: 2008; Q3;
Not competed: 33.7%;
Competed: 66.3%;
Total obligations: $98 billion.
Fiscal Year: 2008; Q4;
Not competed: 32.2%;
Competed: 67.8%;
Total obligations: $158 billion.
Fiscal Year: 2009; Q1;
Not competed: 39.8%;
Competed: 60.2%;
Total obligations: $140 billion.
Fiscal Year: 2009; Q2;
Not competed: 31.7%;
Competed: 68.3%;
Total obligations: $115 billion.
Fiscal Year: 2009; Q3;
Not competed: 28.2%;
Competed: 71.8%;
Total obligations: $117 billion.
Fiscal Year: 2009; Q4;
Not competed: 25.9%;
Competed: 74.1%;
Total obligations: $170 billion.
Source: FPDS-NG
Note: We did not include obligations where data about the extent
competed was missing, which represented less than or equal to 0.5
percent of the total obligations in each year.
[End of figure]
In fiscal year 2009, among all federal agencies and DOD services that
obligated over $1 billion, the Navy and Air Force had some of the
highest percentages of total contract obligations that were not
competed, at about 45 percent. The agencies with some of the lowest
percentages of total contract obligations to noncompetitive contracts
were the Department of Energy and the Office of Personnel and
Management, with 7 percent and 5 percent respectively.
Although our sample is not representative of all federal contract
obligations, we found coding errors in FPDS-NG. Specifically, 19 of
the 107 contracts and orders we reviewed, or about 18 percent, were
coded incorrectly. See table 1.
Table 1: Miscoded Contracts in our Sample:
How the contracts and orders were coded in FPDS-NG:
Noncompetitive contracts and orders: 79;
Competed contracts and orders with one offer received: 28;
Total: 107.
Number of contracts that were miscoded:
Noncompetitive contracts and orders: 9;
Competed contracts and orders with one offer received: 10;
Total: 19.
Source: GAO analysis of agency contract files and FPDS-NG.
[End of table]
The 9 contracts and orders miscoded as noncompetitive had actually
been competed. For example, one ICE contract had been coded in FPDS-NG
as not competed, but the agency had in fact competed it and received
proposals from 5 vendors.[Footnote 17] Another 5 of the 9 miscoded
noncompeted contracts were actually orders under single-award IDIQ
contracts that were competed, but the orders were coded as not
competed.[Footnote 18] For example, three orders at Interior coded as
noncompeted in FPDS-NG turned out to have actually been competed,
since their base contracts were competed. When a single-award IDIQ
contract is competed, the orders under that contract are considered
competed. This type of error appears to have stemmed from a lack of
understanding on the part of the person entering the data, as some
agency officials we spoke with admitted that there was confusion among
contracting officials about how to code these orders. In April 2008,
the Department of the Interior issued guidance clarifying that orders
awarded under single-award indefinite delivery contracts that were
awarded under full and open competition should be coded as competed.
However, to address the issue more widely, on October 31, 2009,
systemwide changes were made to FPDS-NG. Now, coding of the extent of
competition under the base contract is automatically pulled forward to
subsequent orders. This action should mitigate such errors in the data
going forward.
Of the 10 contracts and orders that were incorrectly coded as competed
with one offer received, 4 had not been competed at all. Two of the 4
were sole source contracts awarded on the basis of only one
responsible contractor that could perform the work; one was a sole
source contract award through the 8(a) program; and one was a sole
source contract award on the basis of an international agreement with
a foreign government. For the other 6 contracts and orders miscoded as
competed with one offer received, documentation in the contract file
indicated that they were actually competed with more than one offer
received. For example, two Army contracts were labeled as competed
with one offer received, but one had three offers and the other had
four offers. It is not clear why these contracts and orders were
miscoded.
Accounting for the miscoded contracts and orders, our analysis going
forward focused on 74 noncompetitive contracts and 19 contracts that
were competed with one offer received.[Footnote 19]
Agencies Used a Variety of Exceptions to Competition and Processes to
Award Noncompetitive Contracts:
Agencies used a variety of exceptions to full and open competition,
and ordering processes, to award the 74 noncompetitive contracts in
our sample. Table 2 shows the spectrum of exceptions and processes
that agencies used to award these contracts or orders.
Table 2: Agencies' Cited Exceptions to Competitive Awards for
Contracts and Orders We Reviewed:
FAR authority cited:
Only one responsible source: 6.302-1;
Industrial mobilization;
engineering, developmental or research capability;
or expert services: 6.302-3;
International agreements: 6.302-4;
Authorized by statute, specifically sole source authority through the
8(a) program: 6.302-5;
National Security: 6.302-6;
Limited sources justification and approval for orders under GSA
schedules contracts: 8.405-6;
Exception to fair opportunity for orders under multiple award
contracts: 16.505.
Number of noncompetitive contracts in our sample;
Only one responsible source: 42;
Industrial mobilization;
engineering, developmental or research capability;
or expert services: 1;
International agreements: 2;
Authorized by statute, specifically sole source authority through the
8(a) program: 20;
National Security: 3;
Limited sources justification and approval for orders under GSA
schedules contracts: 4;
Exception to fair opportunity for orders under multiple award
contracts: 2;
Total: 74.
Source: GAO analysis of agency contract files.
Note: We reviewed the justification or other contract documentation in
the IDIQ contract files or the order files to determine the exceptions
to competition that were used.
[End of table]
As indicated in the table, for 42 of 74 contracts--or 57 percent of
the noncompetitive contracts in our sample--agencies determined, under
FAR Part 6.3, that only one responsible contractor could meet the
agency's requirements. For example, the National Weather Service--
through an interagency contract awarded by Interior--turned to the
original provider of weather radios to obtain compatible spare parts.
In another example at ICE, only one contractor could provide specified
communications equipment, supplies and services being used in the
field at the time. According to an ICE contracting official, this
contractor essentially owns the market, and until other vendors or
products are available, ICE is bound by the limited availability of
items.
The second most frequently used exception to competition--for 20 of
the 74 noncompetitive contracts in our sample, or 27 percent--was the
authority to award sole source contracts to qualified firms in SBA's
8(a) business development program.[Footnote 20] Through the 8(a)
program, agencies are encouraged to award sole source contracts under
$3.5 million when procuring services, or $5.5 million for
manufacturing, to participating 8(a) firms. In fact, the FAR
encourages agencies not to compete under these thresholds, requiring
agencies to obtain the approval from the SBA Associate Administrator
for 8(a) Business Development for any competed procurements under the
threshold, and this approval is to be given on a limited basis. One
example was a sole source contract for $1.7 million to an 8(a) firm
for lead abatement services for one of the Secret Service's training
facilities. Our sample also included large dollar value sole source
contracts to 8(a) firms owned by Alaska Native Corporations (ANC) or
tribal entities, such as American Indian tribes, which have special
advantages over other 8(a) firms and can receive sole source contracts
for any dollar amount.[Footnote 21] Some examples of these 8(a)
contracts in our sample follow.
* The Air Force awarded a $75 million sole source award to an 8(a)
firm owned by an American Indian tribe for analysis, integration and
technical support services related to corrosion prevention and control.
* The Navy awarded a sole source contract to an 8(a) ANC firm for
operation and management support and analysis and technical support
for $131 million.
In general, awarding noncompetitive contracts through the 8(a) program
is an easy and quick way for agencies to award a contract, rather than
using full and open competition. First, when awarding a sole source
contract through the 8(a) program, a justification for awarding a sole
source contract is generally not required.[Footnote 22] Second, the
agency need only identify a qualified 8(a) firm and obtain approval
from SBA to award it a contract.[Footnote 23] For example, a Secret
Service contract estimated at $3 million for information technology
services included a description in the contract file of the market
research that had been conducted, which simply stated that the program
office provided the source. In another example from Interior, a
program staff person at the National Institutes of Health suggested a
contractor for building repair services to the Interior contracting
officer. The program staff informed us that although other contractors
were available, he was most comfortable with the vendor he suggested,
and therefore requested--and received--a noncompetitive award through
the 8(a) program for approximately $3.5 million.
SBA officials told us that agencies' procurement activities are
encouraged to direct all work to small businesses as long as they do
not run afoul of the Small Business Act or federal acquisition
regulations. The SBA takes the general position that a procuring
agency does not need to document in a contract file any other
prospective sources if the agency selects an 8(a) participant to
perform the requirement, offers it to SBA, and SBA accepts the
requirement into the 8(a) program. SBA officials note that it is the
procuring agency's responsibility to conduct market research to
determine whether the requirements of the Small Business Act can be
met, and then to determine the appropriate contracting vehicle to use.
However, SBA considers market research requirements to be satisfied
when a participant in the 8(a) program self-markets its abilities to a
procuring agency and is subsequently offered a sole source 8(a)
requirement. When we discussed this issue with procurement policy
officials at DHS, they said that, while these activities may meet the
regulatory requirements, in practice they like to see additional
market research so that the offer to the 8(a) firm has a more solid
basis.
Agencies Used a Number of Other Exceptions and Processes to Award
Noncompetitive Contracts and Orders:
Agencies in our review used a number of other exceptions under FAR
Part 6.3 ("Other than Full and Open Competition") to award
noncompetitive contracts, which includes orders issued under
noncompetitively awarded IDIQ contracts.[Footnote 24] For example,
* Three orders at the Air Force were issued under separate sole source
contracts using the justification that disclosure of information on
the program would compromise national security. One of these orders
was to provide spare parts and resolve system failures to sustain the
fielded equipment and software for remote airborne sensors. These
orders were justified as a sole source procurement using a class
justification--meaning one justification is used for consolidated
requirements across DOD activities and multiple programs, such as the
U-2 program.
* Two contracts in our sample were awarded directly to one company on
behalf of another country through an international agreement, referred
to as foreign military sales. One example was an Army contract to
install and configure software to modernize the logistics system for
the Defense Forces of Saudi Arabia.
* One noncompetitive order we reviewed was issued under a contract to
a federally funded research and development center (FFRDC) to look at
work processes and work flow requirements for clinical research and
their interoperability with those of disease-specific research
networks, hospitals, institutions, industry, and government.[Footnote
25] The exception to competition that was used is that it was
necessary to award the order to a particular source to establish or
maintain an essential engineering, research, or development capability
to be provided by an FFRDC. Although the contracting officer at
Interior identified four FFRDCs that could do the work, the National
Institutes of Health staff determined that this particular firm best
met their needs because this work was a continuation of research that
it was performing for them.
Agencies also used different procedures under the FAR to issue
noncompetitive orders under competitively awarded IDIQ contracts. Four
of the orders at two different agencies were issued under GSA
schedules contracts, using procedures under FAR 8.405-6. Agencies
justified not competing the orders because the work was a follow-on to
another requirement that the company performed, or because there was
only one source that could perform the specific work. In one case, a
requiring office at the Department of the Interior that provides
financial services to other federal agencies (or "federal customers")
needed a contractor to help with the integration and execution of the
financial services provided. The Interior contracting officer
suggested a minicompetition among GSA schedule contractors; however,
the limited sources justification noted that this procurement was a
logical follow-on because this particular company had partnered with
the requiring office to perform these same integration services with
six different federal customers and that, because this company was
already familiar with the customer, it was in the best position to
provide these services.[Footnote 26]
In two other cases from our sample, orders were awarded through a
process called "exceptions to the fair opportunity process" under FAR
16.505(b)(2). These exceptions allow noncompetitive orders exceeding
$3,000 issued under multiple award contracts using one of four
reasons: (1) only one contractor is capable, (2) urgency, (3) the work
is a logical follow-on to another task, or (4) there is a need to
place an order with a particular contractor to satisfy a minimum
guarantee. For example, an order was awarded for engineering support
to redesign the B-1 aircraft main landing gear wheel and brake
assembly because the contractor had previously worked on this airplane
and had the expertise. The program official explained that when a new
type of plane comes in for repair, requirements are typically competed
between the two contractors on the multiple award contract, but once a
contractor has built up expertise on that airplane's system, it is
logical to have the same contractor perform additional work on that
system.
Key Factors Affecting Competition Include Reliance on Contractor
Expertise and Proprietary Data and Preference for Incumbent:
A variety of factors affect competition, including reliance on
contractor expertise and decisions made by officials in program and
contracting offices. For services supporting DOD weapons programs, the
government's lack of access to proprietary technical data and a heavy
reliance on specific contractors for expertise limit, or even preclude
the possibility of, competition.[Footnote 27] Contracting officials
pointed out that a program office may be comfortable with the
incumbent contractor and presses the contracting office to remain with
that contractor, thus inhibiting competition. Even for some
procurements using competitive procedures, a strong incumbent coupled
with overly restrictively written requirements can lead to only one
offer--from the incumbent--being received. In other cases, groups of
vendors have formed teams to compete for government requirements.
Contracting officials and contractors told us that whereas previously
several vendors might have submitted offers for more specific
requirements, now only one offer--from the prime contractor on the
team--is being received. However, we did find cases in which
contracting and program officials were actively seeking opportunities
to compete requirements.
A Lack of Access to Proprietary Technical Data and Reliance on
Specific Contractors for Expertise Inhibit Competition:
For 27 of the 47 noncompetitive DOD contracts we reviewed, the
government was unable to compete requirements due to a lack of access
to proprietary technical data. This situation, combined with a heavy
reliance on certain contractors' expertise built over years of
experience, inhibits competition. Most of the contracting and program
officials at DOD that we spoke with pointed to the lack of access to
technical data as one of the main barriers to competition. Some
contracting officers described this condition as essentially being
"stuck" with a certain contractor. For example, a $46 million contract
at the Navy for engineering services in the DOD's Prowler/Growler
aircraft programs could not be competitively awarded because the
government had not procured the technical data package and only the
original contractor, who was one of the developers of the system, has
over 20 years experience and expertise to perform the work. Several
officials pointed out that the situation the government is currently
experiencing is a result of decisions made years ago, when first
acquiring a weapon system, to not purchase critical technical data
packages for reasons that include budgetary constraints or a push
toward streamlined contracting processes by purchasing commercial
items. For a couple of the contracts in our sample, the government had
purchased some of the technical data, but, for budgetary reasons, has
not kept those data packages current over time. Hence, only the
original equipment manufacturer has the technical data needed for
follow-on maintenance and engineering support contracts.
Some contracting and program officials have inquired about the cost of
obtaining the technical data, only to discover that the package is not
for sale or purchase of it would be cost-prohibitive, especially the
systems and equipment that have been contracted out for decades. In
one instance, the Air Force requested an estimate of the cost to the
government to purchase the technical data package for an aircraft
program, and the contractor--the original equipment manufacturer that
had been working on the system for over 30 years--replied that while
it was not for sale, if they were to sell it, the estimated cost was
$1 billon. On a $4.8 billion contract for sustainment and support for
another Air Force program, the contractor estimated the cost to
purchase the data rights to be more than $1.3 billion. However, the
market research report noted that the contractor refused to sell the
data, and because commercial contracting procedures under FAR Part 12
were used in this procurement, the contractor was able to retain
strict control over data rights and the government did not have
insight into the work performed by the major subcontractors. In yet
another case, a contractor for an Army missile program informed the
program office that they would charge approximately $30,000 just to
put together a cost estimate for the technical data package, which the
contractor later stated would be $31 million for selected technical
data elements of the missile program, but excluding rights to critical
contractor-specific software. The contractor was the original
equipment manufacturer and sole producer of the missiles since the
early 1960s. DOD procurement policy officials told us they view this
issue as a long-standing problem and that any significant turnaround
will need to occur with new programs. They also said they see refusal
to share or sell technical data as a larger problem under commercial
acquisitions, where the government lacks leverage.
Recently, Congress has taken steps to address the lack of access to
technical data. For example, the John Warner National Defense
Authorization Act of Fiscal Year 2007 required DOD program managers
for major weapons systems to assess the long-term technical data needs
and establish corresponding acquisition strategies that provide for
the technical data rights needed to sustain such systems over their
life cycle.[Footnote 28] Further, Congress enacted legislation in May
of 2009 that requires DOD to include in the acquisition strategy for
each major defense acquisition program measures to ensure competition--
or the option of competition--at both the prime contract level and
subcontract level throughout the life-cycle of the program. This
includes considering the acquisition of complete technical data
packages, among other things.[Footnote 29] For almost a decade, we
have reported on the limitations to competition when DOD does not
purchase technical data rights for sustainment of weapon systems and
the increased costs as a result.[Footnote 30] In 2001 and 2002, we
reported that DOD had often failed to put adequate emphasis on
obtaining needed technical data during the acquisition process, and
noted officials' concerns on the potential negative impact on
competition and potential increase in costs. In 2004, we found that
not obtaining technical data limited DOD's flexibility to perform work
in house or support alternate source development if necessary. In
another report, in 2006, we noted that as a result of the limitations
of not having technical data rights, the military services had to
alter their plans for developing new sources of supply to increase
production or to obtain competitive offers for the acquisition of
spare parts and components to reduce sustainment costs. In that
report, we also found that DOD's acquisition policies did not
specifically address long term needs for technical data rights and
recommended that DOD require program managers to assess long-term
technical data needs and establish corresponding acquisition
strategies that provide for technical data rights needed to sustain
weapons systems over their life cycles.
Even when technical data are not an issue, the government may have
little choice other than to rely on the contractors that were the
original equipment manufacturers, and who, in some cases, designed and
developed the weapon system. A few contracting and program officials
we spoke with noted that for some DOD programs, the government is so
reliant on the contractor that it is difficult for the government to
even make decisions or set requirements anymore. Our prior work has
noted the government's increasing reliance on contractors and pointed
to the challenges of this increasing reliance, such as identifying and
distinguishing roles and responsibilities and ensuring appropriate
oversight.[Footnote 31] Most noncompetitive DOD contracts in our
sample indicated that the contractor was the only source of the
expertise for the system, having developed that expertise and the
infrastructure over time. For example:
* An engineering contract for the Army's Hellfire missile program has
current obligations at almost $72 million. According to the
justification in the contract file, the technical data package has
been developed, but since 1994, the contractor has been acquiring
unique expertise that is not contained in any documentation.
* The contractor for the Army's Patriot Missile program has been
designing the missile since 1972. The contract for engineering and
other support of the program was worth an estimated $122 million. The
contractor that designed the program was the only contractor capable
of performing the support work because the contractor also developed
and manufactured the system. Over time, the contractor developed the
technical expertise, experience, and the facilities needed for the
contract.
* The Army awarded a $1.7 billion contract for engineering support and
maintenance for the Chinook and Apache Helicopter Programs. The
contractor for these two helicopters--since 1961 and 1984
respectively--is the only contractor with the needed skills, technical
and engineering expertise, and the technical data to provide the full
range of services needed. This contract was one of several billion-
dollar sole-source Army contracts we reviewed that had been awarded to
large prime contractors for depot maintenance requirements that had
been previously performed by many small businesses. A business case
analysis was performed, showing that these contracts were burdensome
to manage and left the government without one entity to hold
accountable. The contracts were bundled into one requirement (with the
appropriate justifications and approvals) and the prime contractors'
subcontracting plans emphasized the need to compete among small
businesses at that level.
* The Air Force awarded a contract for engineering support and
software maintenance for satellite communication systems with an
estimated value of $404.7 million. The contractor, in place since
1982, has 20 years of knowledge and experience with extensive
hardware, software, and test facilities needed to support the system.
Further, the cost, including time and money, of changing contractors
can be relatively high. For instance, the sole-source justification
for an almost $1 billion contract awarded in June 2008 for the
overhaul and recapitalization of the Army's Blackhawk helicopter
included a $50 million estimate as the minimum investment needed to
bring on another contractor and a lead time of 24 to 36 months. The
justification further stated that the current contractor's knowledge
could not be easily duplicated, even with significant investment and
that it was unlikely that the government would be able to recover the
investment cost through competition. In another example, the sole
source justification of an Air Force contract, estimated at $50
million, for general engineering support for Military Satellite
Communication programs, included an estimate of $5 million for
developing another contractor's knowledge and skill, including the
time to gain familiarity with the software tools and technical
requirements. However, the justification also described that any
delays would result in a cost increase of hundreds of millions of
dollars for the program and any unplanned schedule delays would
adversely affect the warfighter.
Program Officials' Preference for Incumbents and Inadequate
Acquisition Planning Can Influence Extent of Competition:
Program officials play a significant role in the contracting process--
developing requirements, performing market research, and interfacing
with contractors. In their 2009 competition reports to OMB, several
agencies in our review recognized the pressure that program offices
place on the contracting process to award new contracts to a specific
vendor without competition. Many contracting officials we spoke with
recognized that program staff sometimes prefer a specific vendor, in
some cases because a relationship had developed between the program
office and the contractor, who understands the program requirements.
We also heard this echoed in discussions with program staff. Program
officials from two program offices at the National Institutes of
Health, for example, described their comfort with certain contractors
because of their level of understanding of requirements and because
they could be relied on to complete the work. A Navy program official
stated that, when one contractor has been performing a requirement for
many years, it is easier to go back to the contractor personnel who
understand the requirement rather than taking the time to find a new
vendor. One contracting official described how, in his former role as
a program manager, he did not want to change contractors for products
and services once he found ones he liked.
Program offices can also influence levels of competition through their
roles in the acquisition planning process, in particular by having
sufficient knowledge of the contract award process and providing
contracting officials with enough time to compete requirements.
However in their competition reports, some agencies in our review
pointed to a lack of acquisition planning, and the role that the
program office plays in it, as a barrier to competition.[Footnote 32]
Further, several contracting officials from different agencies
expressed concern about the fact that they receive short notices from
program offices for acquisitions. Others noted that program offices
sometimes do not allow them enough time to execute a sufficiently
robust acquisition planning process that could increase opportunities
for competition. They told us that program offices are insufficiently
aware of the amount of time needed to properly define requirements or
conduct adequate market research. According to an official at ICE, in
one instance, he only had a couple of days to complete certain
procurements, which he managed to do, but he believed that the
customer would have received a better product if he had had enough
time to obtain more high-quality proposals from the marketplace.
Several contracting officials also pointed to the experience levels
and staffing shortfalls of both the contracting staff and program
staff as affecting the quality of the procurement processes, and, in
turn, the extent of competition. For example, DHS contracting
officials stated that high workloads for limited numbers of staff and
inexperienced staff can hinder the acquisition planning, timing of the
procurements, and market research.
Some agency officials recognize that training on the acquisition
process for program staff may help address some of these issues, but
we found that training on competition issues is often directed to
contracting officers and not necessarily the program staff. For
example, DOD has developed formal training on enhancing competition
awareness, but it is required only for contracting staff and just
recommended for others in the acquisition community. The Navy,
however, has made this training mandatory for Navy personnel engaged
in the acquisition process, including program managers, program
executive officers and logistics personnel. ICE contracting officials
said that they regularly reach out to the program offices--through
meetings and supervisor trainings and by making guidance available--to
provide information on the acquisition process with the goal of
increasing competition. They noted, however, that ICE program offices
still struggle to understand the acquisition process. Other
contracting officials, for instance at the location we visited at the
Department of the Interior, stated that they train program staff about
the benefits of competition during regular, informal interactions or
do so only on issues pertaining to a specific procurement.
Overly-Restrictive Government Requirements Can Limit The Number of
Offers Received:
From a practical standpoint, for contracts awarded using competitive
solicitation procedures where only one offer is received, the
government does not have the benefit of evaluating more than one
competing proposal. As noted earlier, OMB's July 2009 instruction to
agencies to reduce dollars obligated to high risk contracts included
contracts that had been competed but where only one offer was received.
The government's requirements can influence the number of offers
received under competitive solicitations if requirements are written
too restrictively.[Footnote 33] Some contracting officials noted the
challenge of questioning program office requirements that are written
so restrictively that they are geared towards the incumbent. These
contracting officials informed us that their technical backgrounds and
having the assistance of technical staff in evaluating the
requirements can help them determine whether the requirements can be
broadened. They noted that if they lack technical expertise in the
specific area of requirements, it is more difficult to question
whether a statement of work is too restrictive.
The FAR does not require actions to be taken in circumstances where
only one offer is received in response to a competitive solicitation,
such as performing additional market research or determining if the
requirements were overly restrictive. However, contracting officials
at two of the locations we visited noted that they have a local
requirement to document in the contract file the circumstances that
may have led to only one offer being received and actions that will be
taken to obtain more competition if there is a follow-on procurement.
None of the contract files we reviewed where one offer was received
included this information.
Factors Contractors Consider Regarding When to Submit an Offer:
Although the government is generally required to make every effort to
obtain as much competition as possible, the contractors themselves
make a business decision about when to submit an offer in response to
a solicitation. The contractors we spoke with told us that they
consider a wide variety of factors before submitting a proposal in
response to a solicitation, such as:
* the cost of developing proposals;
* their ability to provide the services, including key personnel;
* their knowledge and history of the requirement;
* rapport with the government personnel;
* ability to partner with small businesses to meet small business
subcontracting requirements; and:
* the potential financial gain from the procurement.
There are also certain strategies that companies take when deciding
whether to submit a proposal. For example, companies may submit a
proposal to test the water or get their name recognized as a potential
contractor for a particular requirement, then bid more aggressively
for the follow-on procurement. Contractors may also intentionally not
submit an offer on a certain procurement to retain their status as a
small business--and thus remain eligible for procurements designated
for small businesses.
A predominant factor that contractors consider when deciding whether
to compete for a contract is the performance of the incumbents.
Contracting officers and contractor representatives explained that
when an incumbent is known, contractors may not compete if the
incumbent has historically provided the requirement and is identified
as well-performing. The solicitations for all of the 11 orders we
reviewed under the Navy's Seaport-e Multiple Award Schedule and the
Army's Express Multiple Award Schedule listed previous contractors'
names and contract numbers, and only one offer was received for 9 out
of the 11 solicitations. In talking to us about another contract in
our sample, an Army program official said she believed that vendors
other than the incumbent could have competed for a certain contract,
but that a short time frame combined with the incumbent's history on
the contract caused many vendors to be disinclined to compete.
Ultimately, the Army received only one offer in response to its
solicitation. An Army contracting official also noted that when
evaluation factors in the solicitations are based mostly on experience
with the system and technical skills, other competitors may not submit
offers because the cost of developing a proposal is too high to
outweigh the risk of not winning the award.
Furthermore, several contracting officials and contractors told us
that some contractors find it necessary to team up with other
contractors in order to fulfill certain government needs, which can
also contribute to only one offer being received. For example, a Navy
requirement for submarine engineering services was being performed by
a large business. The Navy decided to set aside the follow-on
contract, estimated at $34 million, for small businesses. Only one
small business submitted a proposal, which included 10 subcontractors--
1 of which was the large-business incumbent, and another of which was
a small business that was originally identified as a possible
competitor for the procurement. In another example, one order under
the Army's Express program, estimated at $122 million, was awarded to
a small business after one offer was received, helping the Army meet
its small business goals. Under a teaming arrangement involving a
number of subcontractors, the small business prime contractor was
going to perform only 7 percent of the work while one subcontractor
was going to perform 87 percent of the work. Under another Express
order, a small business was the prime contractor and a large business,
which had been the prime contractor under a predecessor contract for
the same requirement, was a subcontractor performing the bulk of the
work. Under the Express program, the Army claims full small business
credit for all obligations under these types of arrangements. In one
contractor proposal we reviewed, submitted in response to an Express
program solicitation, the small business prime contractor pointed out
this benefit. According to SBA officials, as long as the procurement
was awarded using full and open competition, the percentage of the
work performed by the small business prime contractor is not relevant.
Some Agencies Are Seeking Opportunities to Enhance Competition:
Some agencies actively seek out opportunities to compete requirements
and contracts that were originally awarded noncompetitively, such as
by breaking out components of the requirement that can be awarded
competitively. We encountered several contracting and program
officials who told us that they broke out pieces of requirements from
past sole-source procurements in order to compete them. For example,
Coast Guard contracting officials informed us that they broke one
requirement for aircraft maintenance and repair into one contract and
three separate orders, which they believe will save the government
approximately $13 million. In another case, a Navy contracting
official informed us that certain requirements for submarine
components had been separated from a sole-source procurement and are
currently in second or third cycles of competition. We also found one
noncompetitive contract at the Navy where the follow-on requirement
was competed. The contract, for operations and maintenance support and
engineering services, was a sole-source award to an ANC 8(a) firm, but
the contracting officer who inherited the contract decided to compete
the follow-on contract in the 8(a) program.
In some cases, the government actively sought additional vendors for
certain requirements. For instance, Air Force officials informed us
that they encouraged a second vendor to compete against the incumbent
contractor for production of aluminum pallets. These officials noted
that at the threat of competition, the incumbent--who ultimately won
the contract--"sharpened his pencil," resulting in savings for the
government through a lower price and improved delivery schedules. In
another example, the Army's Tube-launched, Optically-tracked, Wire-
guided (TOW) missile has been with one contractor since its inception
in the early 1960s. The Army recently made a business case for
breaking out a portion of the requirement and competing it as a
separate procurement because it had identified another capable
contractor: one of the subcontractors with a long history with the
program. But other officials noted that it is not always the best
business decision to invest time and money into finding other vendors;
each situation has to be evaluated on its own merits and future
procurements or production lines must be sufficient to warrant the
government's investment in a second source. The C-130J engine has also
been broken out of the overall Lockheed Martin contract, with a
separate sole source contract to Rolls Royce. According to program and
contracting officials, this decision was made to save money.
Some contracting officials we spoke with recognized the importance of
thorough market research for identifying possible vendors even when it
appears that only one contractor is capable of doing the work. For
example, during the market research phase for the awarding of two
contracts for engineering services for military satellite
communications at the Los Angeles Air Force base, the contracting
officers requested that potential contractors provide information on
their abilities to meet the government's requirements in an attempt to
identify other qualified contractors. Ultimately, however, the two
contracts were awarded using a sole source justification that only one
responsible contractor was capable of doing the work. The director of
contracting at this location informed us that they typically reach out
to the open market when they are not familiar with a requirement or
when a requirement has been procured on a sole source basis for many
years and they wish to test the marketplace to determine if it has
changed over time. He also noted that there have been instances in
which new contractors have expressed interest, but usually no new
contractors come forward. In another case, ICE contracting officials
informed us that the program office wanted a specific vendor for a
requirement for rifle cases. The contracting officer pushed back
against the program's specific request, competed the requirement, and
received numerous offers. The contract was awarded to a vendor that
the program office was not aware of, and the contracting officer
reported that they were very pleased with the results of the
competition.
Some Contracting Approaches Did Not Reflect Sound Procurement or
Management Practices:
In reviewing the contracts in our sample, we identified contracting
approaches for nine contracts or orders that did not reflect sound
procurement or management practices, in some cases not leveraging the
effectiveness of the market place. These approaches included
ambiguously written justifications for noncompetitive contracts, very
limited documentation of the reasonableness of contractors' proposed
prices, instances where the contract's cost grew significantly, and
labor categories that were improperly authorized because they were not
included in the contract. In addition, our sample contained
undefinitized contract actions (UCA) that did not clearly follow UCA
policies or did not meet the definitization requirements, which puts
the government at risk because contractors lack incentives to control
costs during this period. Finally, during our file review, we found an
example of a noncompetitive contract awarded in an urgent situation
that failed to follow sound procurement practices in several ways,
such as drastic increases in ceiling prices, improper modifications to
the contract, inappropriate communications between the program staff
and the contractor, and a program official serving as the contracting
officer's technical representative (COTR) without the required
training. We also found that sound management practices were not
followed in the administration of this contract.
Ambiguous Justifications for Noncompetitive Contracts:
For two contracts in our sample, the justifications for not competing
cited exceptions to competition that were not supported by the
circumstances of the procurement or that were the wrong section of the
FAR and thus created ambiguity about whether circumstances warranted a
noncompetitive award. In the first situation, at ICE, the
justification to use a particular company's online language learning
services cited the wrong section of the FAR in two different ways.
First, the order was placed under the firm's GSA schedule contract
(pursuant to FAR 8.4) and thus should have been justified under one of
the exceptions in FAR 8.405-6, yet the FAR citation was to one of the
exceptions to full and open competition under FAR 6.302. Orders placed
under GSA schedule contracts are exempt from the requirements in FAR
Part 6. Second, the justification itself was not even clear as to the
circumstances warranting a noncompetitive order. Specifically, the
justification incorrectly cited FAR 6.302-2 as "only one responsible
source." FAR 6.302-2 is used to justify sole source procurements that
are urgent and compelling; FAR 6.302-1 is for procurements that have
only one responsible source. Further, the justification should have
been reviewed by the competition advocate and attorney based on the
total estimated value of the procurement--the base year and 2 option
years--but it was not.[Footnote 34] The justification described the
features of the services provided, claiming that it was the best
product available and that a pilot program testing this product had
elicited a positive response. While planning the procurement, the
contract specialist pointed out to the program staff that there were
31 GSA vendors that could offer these services and recommended that
they try to obtain proposals from at least two other vendors. The
contracting officers we spoke with explained that the program office
was insistent on the use of this contractor for these services. The
program office stated that the order was placed solely with this
contractor primarily because DHS had undertaken a successful pilot
program for these services with this contractor, and they were under
time pressure to award the contract quickly.
In the second example, at the Department of the Interior, the
justification for a noncompetitive order on a GSA schedule contract to
lease information technology licenses was similarly ambiguous because
the citation used was FAR 8.405-6(b)(3), for urgent and compelling
requirements, but the supporting narrative stated that this vendor was
the only distributor that could offer all of the required products and
services, i.e., a certain brand name of licenses.[Footnote 35] The
justification also stated that this system was one of three that the
government could use to meet its needs. In addition, the program
office was pushing for this contractor because it was offering
significant discounts if the award was made in a certain time frame.
Other Contracts Had Limited Documentation of Price Analysis, Lack of
Reviews, and Growth in Contract Price:
The Department of the Interior issued an order under an IDIQ contract
for the Office of Historical Trust Accounting to provide assistance
with historical accounting of trust funds for Indian Tribes. The order
was placed for over $2.2 million noncompetitively through the 8(a)
program to a tribally owned 8(a) firm. The contract specialist sent
the firm's proposal to the program official for price and technical
review, and the program official responded in less than an hour that
the contractor's proposal "looked good," with no documentation or
description of what he had reviewed. The contracting officer at the
time put a memo in the file stating that pricing for the labor
categories was found to be in line with another order on the same
contract and the base contract.[Footnote 36] We discussed this finding
with agency officials, and a policy official at Interior's Acquisition
Services Directorate told us that she and other managers in her office
have put a renewed emphasis on more detailed price analysis for orders
under IDIQ contracts in their reviews of contract actions. Further,
during the period of performance, the same program official from the
Office of Historical Trust Accounting worked directly with the
contractor--significantly overstepping his authority and circumventing
the Interior contracting officer--to obtain services that were not
included in an order by adding labor categories to the scope of work.
[Footnote 37] The IDIQ contract under which this order had been issued
was subsequently transferred to a new contracting officer, who noticed
the unauthorized labor categories in the contractor's invoices. This
contracting officer modified the order to incorporate a new statement
of work with the additional labor categories and a corresponding price
increase of about $500,000. A more detailed price analysis was
conducted, including development of an independent government cost
estimate for these labor categories which was compared to the
contractor's proposed prices as a basis for the determination that the
price was fair and reasonable.
In another contract file at the Air Force, no price analysis had been
documented for an order for integrated logistics support and
engineering services in support of the Air Force's Distributed Common
Ground System. The pricing memorandum in the file for the order
contained a brief note that the information was in the base contract
file; however, when we looked in the base file the information was not
there. After we raised this situation, the former contracting officer
prepared a price negotiation memorandum after-the-fact explaining how
the government arrived at a fair and reasonable price. To do so,
however, the contracting officer had to rely on old e-mails as well as
information supplied by the contractor. According to the current
contracting officer, the value of this order grew from the initial
$9.1 million to $18.8 million at the time of our audit.
In another example, ICE contracting officers purchased communication
equipment through an order under a Secret Service contract. ICE issued
the order noncompetitively, using the justification that only one
source was available. The justification stated that only the
contractor could provide the equipment as the original manufacturer of
a system in which the government had already invested significant
resources in training and software. In the order file, the contracting
officer noted that price analysis and legal review were not performed
because the base contract at Secret Service was competed and prices
were determined to be reasonable in part through competition. The base
contract, however, was not competed. When we brought this to their
attention, ICE contracting officials told us that they had
misinterpreted the information in their internal acquisition planning
database and from ICE program and senior management officials. Only
after the order had been issued did they learn that the underlying
contract had not been competed. They recognized that they should not
have pointed to competition as a basis for the fair and reasonable
pricing in the documentation for this order, but noted that they had
compared the prices for this equipment to prices on the open market
and GSA schedules contracts--which was noted in the contract file--and
that this analysis, along with Secret Service's determination of a
fair price at the time of award of the base contract, would suffice as
a determination that the price was fair and reasonable.
Finally, a sole source contract at the Army for engineering and
maintenance support for the Chinook helicopter program grew over a
number of years from $34.7 million to about $477 million, but the
acquisition plan was not revised in spite of this significant price
increase. The FAR requires that whenever significant changes occur,
and no less often than annually, the planner must review the
acquisition plan and, if appropriate, revise it. The sole source
justification prior to award of the contract, at $34.7 million, was
correctly approved by the head of the contracting activity, which is
all that is required for that dollar value. Although not reflected in
the acquisition plan, a second phase of the requirement was identified
and a second justification for this additional work, citing an
estimated value of $134.6 million, was reviewed and approved by the
Army's senior procurement executive. When the contract was
subsequently modified, however, the value was increased to $477
million with no further notification to the senior procurement
executive about the significant price increase. The attorney reviewing
the contract modification expressed serious concerns, including that
the senior procurement executive was not being notified of the drastic
increase in price. A senior DOD acquisition policy official told us
that, given the significant increase in the contract's value,
additional notification should have occurred, such as in the form of
an amended justification and approval or acquisition plan.
Undefinitized Contract Actions:
Our sample also contained UCAs. In one case, it was unclear from the
documentation to what extent the agency followed UCA policies; in
another, the agency did not meet the DOD definitization requirements
and key documentation was missing from the contract file.[Footnote 38]
UCAs are binding commitments that can be entered into using different
contract vehicles (i.e., letter contracts, orders under IDIQ
contracts, or modifications to an existing contract). They are
intended to be used only when the government needs the contractor to
start work quickly and there is not enough time to negotiate all the
terms and conditions for a contract. UCAs are required to be
definitized within 180 days, or when the amount of the funds obligated
under the contract action are 50 percent or more of the not-to-exceed
price, to limit the risk to the government.
* In one case at the Air Force, an order was undefinitized for 17
months. This order, to provide F-15 engines to the Royal Saudi Air
Force, was issued under a sole source IDIQ contract for development,
production and other support of the F-15 weapon program. In addition
to this lengthy undefinitized period, the contractor had begun work 7
months before the UCA was even issued, but neither the contracting
officer nor program office official could locate any documentation
showing that the government had authorized this work to begin. The
Defense Federal Acquisition Regulation Supplement (DFARS) states that,
while foreign military sales are not subject to the DFARS policy for
UCAs, including the definitization requirements, contracting officers
should apply the definitization requirements to the maximum extent
practicable.[Footnote 39] The original contracting officer was no
longer available, but we discussed this matter with the current
contracting officer and an official from the program office, who were
unable to explain the circumstances surrounding the initial
authorization to start work or the lengthy undefinitized time frame.
* In another example, a UCA at the Navy remained undefinitized for 7
months, thereby not meeting DOD definitization requirements. This IDIQ
contract was awarded noncompetitively to an ANC 8(a) firm after the
previous contractor, another 8(a) firm, failed to meet certain
contractual requirements and the government needed to quickly put
another contract in place to avoid a break in service. Further, when
the contract was definitized at an agreed to price of about $131
million, the only documentation included in the modification
definitizing the contract was the award term plan and some contract
line items, but no description of the scope of work required.[Footnote
40] The contracting officer explained that after a reorganization at
the Navy, the contract file had been transferred to her from another
contracting office with missing documentation and she could only make
notes where documentation was missing. She said she would have
expected more information to be included in the modification that
definitized the contract.
One Noncompetitive Contract in an Urgent Situation Highlights Numerous
Problems That Can Occur:
In one example, the government failed to follow sound procurement
practices in several ways and did not adhere to certain sound
management principles, or internal controls, in others. In the period
following the terrorist attacks of September 11, 2001, Interior
initially issued an order in our sample, on behalf of the Federal
Bureau of Investigation (FBI), under a $50 million contract to an 8(a)
ANC firm; the contract value subsequently grew to $100 million. This
order was improperly transferred by the Interior contracting officer
to a second contract--the ceiling price of which tripled, from $100
million to $300 million--with the same vendor. A modification in the
file stated that "this task order is hereby transferred" from the
first contract to the second contract after the ceiling on the first
contract was reached. The contracting officer subsequently noted that
some requirements under the order were not incorporated into the
second contract, and took steps to modify the second contract. In
addition, the work under the first contract included commercial-off-
the-shelf information technology and telecommunication hardware and
software and support services for civilian and DOD agencies;
modifications to the contract added commercial and institutional
building construction. The work under the second contract included
information analysis and technical assistance support to provide a
turnkey solution for operational support for services to the Foreign
Terrorist Tracking Task Force,[Footnote 41] including quick reaction
support for assessment planning and analysis and "other special
requirements." Additional labor categories--such as counter terrorism
operations specialists--were later added. Interior contracting
officials and FBI program officials acknowledged that the FBI's
requirements had changed significantly from a basic information
technology support project to running a 24-hour program to track
terrorist activities.[Footnote 42] The FBI officials noted that they
were responding to a presidential directive to establish a terrorist
watch list within a matter of months and that there was intense
pressure to have this call center up and running quickly. Also,
according to contract file documentation, the government accepted and
paid for an invoice submitted by the contractor for a service--
security guards--that was not within the scope of the first contract.
The Interior contracting officer, in later scrutinizing the
contractor's invoices, noticed this out-of-scope issue and obtained
reimbursement from the contractor. In another instance, the
contracting officer noticed more improper billing, including an
unauthorized expense for a hotel bar tab, and deducted the costs from
the invoices. When the second contract was about to reach its ceiling
price, Interior put in place a third contract with the same 8(a) ANC
firm with an estimated ceiling price of $1 billion, with the
contracting officer noting that after that award they would no "longer
have to worry about contract ceilings" with this vendor. Finally, the
FBI program official designated as the COTR did not have the necessary
training to fulfill this position; the Interior contracting officer
subsequently removed the official from the position.
Apart from the issues with procurement practices discussed above, the
administration of this contract lacked appropriate management
controls--also referred to as internal controls. Examples follow.
* We found little evidence in the contract file that the contractor's
proposed prices had been analyzed for price reasonableness at various
points during the life of the order. For example, the FBI program
official's analysis of the contractor's proposed price for the order
under the initial contract was a statement in an email that she had
reviewed the price and found it reasonable, with no further
documentation supporting the statement. Further, during preparations
to award an option year on this order, an FBI program official again
approved the contractor's revised price proposal with a simple "yes"
response when asked by the Interior contracting officer, and also
explained to the contracting officer that the independent estimate--
presumably for this option year--was different from the contractor's
proposed prices in part because the contractor included additional
labor categories that the FBI did not require, but that they "agreed
with."
* Communications between the FBI and Interior were problematic.
Specifically, the program office was communicating directly with the
contractor about the growth in the requirements but not involving the
contracting officers. For example, the contractor informed the
Interior contracting officer that it had been directed by the program
office, due to a change in requirements, to establish an increased
level of continuity and retention within the terrorist screening
center--particularly for the second and third shifts. The contractor
proposed additional compensation for these shifts and told the
contracting officer that approval to apply these shift differentials
would be approved by the program office . The contracting officer told
us the program office should have informed her first of the need for
shift differential compensation and that the direction to the
contractor should have come from her rather than from the program
office. Interior contracting officials expressed dismay at the program
office's lack of communication with them and told us that sometimes
they did not know what was going on with their own contract. Further,
when Interior was preparing to award the second contract to the ANC
firm, an FBI program official told the contracting officer that she
understood delays in the award may be due to Interior's legal review
process; the FBI official, in an effort to expedite the process, then
asked for the legal representative's contact information to "move this
along smoothly."
Interior officials told us that after several years of dealing with
this contract, their office had undergone a culture change whereby
they were starting to push back on customer demands instead of simply
doing what the program offices wanted. Eventually, after a dispute
about the interagency contracting fees the FBI was paying to Interior
and Interior's desire to not award another sole-source contract to the
same vendor, the FBI officials told us that they pulled the
requirement in-house and, under their own contract, awarded the
requirement noncompetitively to another ANC 8(a) firm. FBI officials
added that by this time, they had increased their own contracting
staff so were able to handle this requirement themselves.
Agencies Institute the Roles of Their Competition Advocates in a
Variety of Ways, in Particular with Regard to Placement and Expertise:
Statute and regulation require that each executive agency establish an
"advocate for competition," commonly known as a competition advocate,
at the agency level as well as at each procuring activity.[Footnote
43] In general, the agencies in our review have organized their
competition advocates into the required department-and procuring
activity levels. For example, the Department of the Interior has a
department-level competition advocate and competition advocates at the
bureaus, including the National Business Center, which houses the
Acquisition Services Directorate. DOD has a competition advocate at
the department level, and additional competition advocates are in
place at the Army, Air Force, and Navy and local contracting
activities. The advocates are to carry out a number of broad
responsibilities, including:
* promoting full and open competition and challenging barriers to
competition,
* reporting to the agency's senior procurement executive and chief
acquisition officer on opportunities and actions taken to achieve
competition, as well as conditions or actions that unnecessarily
restrict it, such as unnecessarily detailed specifications or
restrictive statements of work, and:
* recommending to the senior procurement executive and chief
acquisition officer a "system of personal and organizational
accountability" for competition, which may include recognition and
awards to program managers, contracting officers, or others.
Competition advocates are also responsible for approving
justifications for other than full and open competition within certain
dollar limits, as depicted in table 3.
Table 3: Levels of Approval for Justifications for Other Than Full and
Open Competition:
Estimated value of proposed contract action: $550,000 or less;
Approval by: Contracting officer.
Estimated value of proposed contract action: Over $550,000 but not
exceeding $11.5 million;
Approval by: Competition advocate for the procuring activity.
Estimated value of proposed contract action: Over $11.5 million but
not exceeding $57 million ($78.5 million for DOD, NASA, and Coast
Guard);
Approval by: Head of the procuring activity, or designee.
Estimated value of proposed contract action: More than $57 million (or
$78.5 million for DOD, NASA, and Coast Guard);
Approval by: Agency senior procurement executive.
Source: GAO analysis of FAR Subpart 6.304, Approval of the
justification.
Note: Agency procedures may include higher approval levels.
[End of table]
Apart from these duties, agencies are left with much discretion
regarding where in the organization the competition advocates should
be placed, who should be appointed to this position, and how they
should carry out their responsibilities. Some agency officials we
spoke with said that, because the FAR is vague in this regard, and
especially given the current emphasis on competition, more guidance
related to this position could be helpful. For the agencies in our
review, we found a range of approaches to the competition advocate
position and placement, skills and expertise, and methods of
implementing their responsibilities.
Competition Advocate Placement in the Organization:
Officials at the agencies we reviewed generally agreed that placement
of the competition advocate at a high level within agencies is
important, as the person in this role should have the clout to make
difficult decisions regarding proposed sole-source awards and support
procuring activity contracting officers who attempt to do so. A
competition advocate who can exercise this level of leadership at a
senior level can be more effective in the role and, by emphasizing the
importance of competition to program office staff as well as
contracting officers, has the potential to affect competition results.
The Air Force competition advocate told us, for example, that he sees
value in being highly placed within the organization; if people must
come to him to explain why a particular procurement needs to be sole
source, they are more likely to do things the right way and less
likely to take short cuts.
At the agencies in our review, competition advocates are in various
positions and placements within the organization. Some are senior
leaders in the acquisition arena. For example, the DOD competition
advocate is the Director of Defense Procurement, Acquisition Policy,
and Strategic Sourcing, and the DHS competition advocate is the
Director of Oversight and Strategic Support within the Office of the
Chief Procurement Officer. We found that the duties of competition
advocate can be automatically tied to the person's position within the
agency. For example, Air Force, Navy, and Army acquisition regulations
designate a specific deputy assistant secretary position to be the
advocate. Agency officials told us that the ICE Deputy Assistant
Secretary for Management is automatically designated as the
competition advocate, and within the Secret Service, it is the Deputy
Assistant Director. Also within DHS, the head of contracting activity
was the competition advocate for the Coast Guard, but because this
person was uncomfortable signing sole source justifications in two
different capacities, she told us that she delegated her role as
competition advocate to another senior official--the Deputy Assistant
Commandant for Acquisition--within the acquisition directorate. Within
Interior, the department competition advocate is a senior procurement
analyst who reports to the senior procurement executive. The
competition advocates at the bureaus, components, or procuring
activities included in our review were, for example, acquisition
policy chiefs or senior contracting officers.
We found one situation, at ICE, where the competition advocate is
higher in the organization than the head of contracting activity.
Given the approval thresholds stipulated in the FAR, this means that
the head of contracting approves justifications at a higher dollar
threshold than the competition advocate, but in practice reports to
the competition advocate. The competition advocate explained that ICE
does not administer many high-dollar acquisitions, and therefore,
having the competition advocate in a management position above the
head of contracting brings greater visibility to noncompetitive
requirements at lower-dollar thresholds.
Expertise and Background:
Agencies can appoint any individual, other than the senior procurement
executive, as a competition advocate as long as the individual's
broader functions and duties do not conflict with the responsibilities
of a competition advocate as outlined in statute.[Footnote 44] Agency
officials told us that a competition advocate should have the right
skill set, which may include a background that enables them to
recognize and question overly restrictive requirements which could
lead to an unnecessary sole-source outcome, and the personality to ask
tough questions. In general, we found that no specific qualifications
were required for this role, but the Air Force's Competition and
Commercial Advocacy Program does call for its competition advocates to
have "extensive qualifications and knowledge of the types of
acquisitions" the procuring activity engages in.
The department-and component-level competition advocates we spoke with
had a variety of backgrounds. Several of them had been contracting
officers and program managers, while one was involved in the
operations side of the agency, and another served as an attorney to
the agency. Some competition advocates offered examples of how their
background and expertise influence how they approach their job of
promoting competition.
* Interior's competition advocate informed us that her experience as a
contracting officer and bureau competition advocate influences how she
reviews urgent and compelling requirements. During the Army's
deployment in Bosnia, she was a contingency contracting officer and
processed wartime requirements. She said that because she worked with
urgent and compelling requirements during the deployment, she is more
likely to challenge sole source emergency requirements in her capacity
as the competition advocate. In addition to her experience as a
contingency contracting officer, she also served as the competition
advocate for the U.S. Fish and Wildlife Service during Hurricane
Katrina, service that required her to balance the needs of emergency
response with her responsibility as a competition advocate to promote
competition. She believes that her past experience leads her to have a
different attitude toward her role as a competition advocate in
comparison to other advocates who may be less likely to challenge
emergency requirements.
* The Coast Guard's competition advocate explained that his experience
as a program manager allows him to ask questions that a contracting
officer may not think to ask about a requirement. Over 25 years ago,
he began working in structural design and subsequently served in
several supervisory and program manager capacities in the Navy. His
experience in program, fiscal, and technical management influences how
he approaches his role as competition advocate. He reviews contract
documentation strictly from the perspective of promoting competition.
He stated that when a program office tries to solicit a requirement in
a way that precludes certain vendors, his technical background of
working with various platforms leads him to question these restrictive
requirements.
* The competition advocate at one of the Air Force contracting
activities we visited pointed to her experience as a program manager
and her contracting background as an asset to her current position as
competition advocate. She also noted that the support that she
receives and relationships she has with the command-level and Air
Force competition advocate has helped her challenge sole source
requirements when program managers are pushing for a certain vendor.
* At one Navy location, the advocate pointed to her experience and
familiarity with the program offices' requirements as a plus in
enabling her to question planned sole-source procurements.
* The Secret Service's competition advocate has years of experience in
operations but no experience as a contracting officer or a program
manager. He told us he began working as a criminal investigator and
worked in other positions, such as on the president's protection
detail and in congressional affairs. After over 20 years of working in
operations for the agency, he told us he is learning about contracting
operations and that he believes more agents who work in operations
should hold the position of competition advocate. He works closely
with the head of contracting activity, relying on her expertise and
supporting her efforts to increase competition within the agency.
Competition Advocates Use Various Methods for Carrying Out Their
Duties:
The competition advocates at the agencies in our review are tackling
their jobs in a variety of ways. Most department-level advocates told
us that they review, and in some cases sign, justifications for sole
source procurements that must also be approved by the senior
procurement executive, that is, justifications for the highest dollar
amounts, as another check point in the process to question planned
sole-source procurements. The Army's competition advocate said that
one trigger for potentially rejecting a justification for a sole-
source procurement is when the evaluation of the market is cursory.
For example, a justification for a sole-source award to an 8(a) ANC
firm was turned back for additional detail on market research and
further review of the feedback from other potential offerors, although
the same firm ended up with the follow-on contract.
As noted above, competition advocates are required to recommend to the
senior procurement executive and the chief acquisition officer a
"system of personal and organizational accountability" for
competition. The Navy competition advocate and his staff told us that,
as part of their review of high dollar value justifications prior to
the senior procurement executive's review, they look to see whether
program offices have made strides in improving competition in their
programs if a prior justification had made this claim. Holding the
program offices accountable is part of their overall plan for
improving competition, an attitude that is also strongly held by the
Navy's senior procurement executive. Other competition advocates also
pointed out that strong leadership, from the senior procurement
executive and the competition advocate, can engender results. The DHS
competition advocate, for example, noted that without this level of
continued leadership and the will to enforce accountability, there
could be a slip back to less competition.
Other methods we found that competition advocates are using include:
* DOD officials told us that the DOD competition advocate holds
quarterly meetings with competition advocates from the military
services and other DOD agencies to review the progress toward meeting
competition procurement goals and to challenge the barriers they
identify as inhibiting competition.
* The Navy competition advocate told us that he holds quarterly
contracting council meetings with senior contracting staff for each of
the systems commands (some of whom are also competition advocates),
discussing various topics including competition.
* Interior and DHS do not hold regular meetings with the competition
advocates of bureaus or components, but, according to agency
officials, they have other meetings with procurement staff where
competition goals are discussed.
* The DHS competition advocate recently completed an investigation of
noncompetitive contract awards at DHS and found that some contract
files lacked required justifications for sole source procurements.
Other contract files included justifications that did not adequately
describe why only one source could perform the work. The competition
advocate subsequently approved a memorandum signed by the Chief
Procurement Officer that emphasized the need to include the
justification in the contract file and provided examples of inadequate
rationale for use of a noncompetitive contract.
Competition advocates can also offer recognition and awards--including
to program managers--for efforts to increase competition. Some
advocates indicated that their agencies or procuring activities have
competition awards programs that recognize the work of individuals or
teams who increase competition. For example, since July 2007, DHS has
instituted the DHS Competition and Acquisition Excellence Awards
Program "as a means of renewing and increasing acquisition workforce
interest in competition and related innovative procurement practices."
The Army competition advocate also said the Army was going to add
competition as a metric to the Secretary of the Army's award program,
awarding contracting activities that raised and exceeded their
competition goals.
For their part, local competition advocates told us that they try to
get involved in acquisitions as early as possible to have a greater
impact on decisions related to competition. For example, the advocate
at the Naval Air Warfare Center Weapons Division said that, for
service contracts, she reviews acquisition strategies before she
reviews justifications. If she identifies a potential issue related to
competition in the acquisition strategy stage, she can have the
program make appropriate changes before the justification is ever
developed. The Warner Robins Air Logistics Center competition advocate
and her staff also try to engage program offices early in the process
and, if the procurement must be noncompetitive, the approval process
is faster because they are already familiar with the support for the
justification. The Air Force competition advocate noted that it is his
responsibility to ensure that competition advocates in the field have
a certain level of independence to allow them to push back, especially
with regards to the requirements side, and to make sure there is a
process that allows them to raise issues up the chain when warranted.
Conclusions:
Some degree of noncompetitive contracting is unavoidable, such as when
only one responsible source can perform the work; and in some cases
competition is impractical due to the government's reliance on
contractors stemming from decisions that were made long ago. Recent
congressional actions to strengthen competition opportunities in major
defense programs may take some time to demonstrate results. Further,
OMB's efforts to reduce agencies' use of high risk contract types may
help agencies refocus and reenergize efforts to improve competition.
Despite these actions, other targets of opportunity still exist, but
to take full advantage of them, it will be necessary to challenge
conventional thinking to some extent. Key among these are establishing
an effective, adequately trained team of contracting and program staff
working together, starting early in the acquisition process.
Competition opportunities should be considered when requirements are
initially developed, and as complex programs mature and the government
gains more knowledge about what it needs. Because program officials
have an essential role in the acquisition process, as do contracting
officers, it is just as important for them to advance competition
whenever possible. Given the nation's fiscal constraints, it is not
acceptable to keep an incumbent contractor in place without
competition simply because the contractor is doing a good job, or to
resist legitimate suggestions that competition be imposed even though
it may take longer. As discussed in this report, some agencies have
implemented the leadership and accountability to make progress in this
area, such as breaking out requirements to facilitate competition.
However, there is no requirement to assess the circumstances under
which competitive solicitations receive only one offer to potentially
bring about a greater response from the market place. The competition
advocates, in their unique role and in the context of OFPP's call to
reinvigorate their role, have the potential to implement changes to
practice and to culture. However, to do so they need to be situated in
the right organizational position and able to bring to bear the
acquisition knowledge and leadership to engender change.
Recommendations for Executive Action:
We recommend that the Administrator of the Office of Federal
Procurement Policy take the following three actions:
* Determine whether the FAR should be amended to require agencies to
regularly review and critically evaluate the circumstances leading to
only one offer being received for recurring or other requirements and
to identify additional steps that can be taken to increase the
likelihood that multiple offers will be submitted, with the results of
the evaluation documented in the contract file.
* As part of efforts to reinvigorate the role of the competition
advocate, issue guidance to federal agencies regarding appropriate
considerations when appointing competition advocates, such as
placement within the organization, skill set, and potential methods to
effectively carry out their duties.
* Direct agencies to require their competition advocates to actively
involve program offices in highlighting opportunities to increase
competition.
Agency Comments and Our Evaluation:
We requested comments on a draft of this report from OFPP, the
departments of Defense, Homeland Security, and the Interior, and the
SBA.
In oral comments provided via email, the OFPP Administrator concurred
with our recommendations, noting that they are consistent with the
types of steps agencies have begun to take in response to the
President's direction to be more fiscally responsible in their
contracting practices and to reduce use of high-risk contracting
practices that can lead to taxpayers paying more than they should. The
Administrator noted that there is still much work ahead and that OMB
will periodically meet with agencies to review progress against their
risk reduction goals. He stated that these efforts will include a push
to achieve greater collaboration between contracting, program,
finance, and other key stakeholder offices in the acquisition process.
The Administrator also said that his office would continue in its
efforts to build the capacity and capability of the acquisition
workforce--including program and project managers and COTRs--to ensure
that agencies are well-equipped to take the actions necessary to
maximize the benefits of competition. The Administrator also stated
that executive branch actions to draw agency attention to high risk
contracting and establish goals for risk reduction provide a catalyst
for change and that key among these are establishing an effective,
adequately trained team of contracting and program staff working
together, starting early in the acquisition process. Finally, the
Administrator highlighted OFPP's October 2009 memorandum, which stated
that a spend analysis might be useful for identifying and analyzing
competitions where only one offer is received, by comparing levels of
competition achieved by different organizations within the agency or
those similarly situated in other agencies to determine if more
successful practices may exist for more competition for a given
spending category.
DOD also provided oral comments via email. The Director, Defense
Procurement and Acquisition Policy, stated that, in general, he agrees
with our findings and recommendations concerning opportunities to
increase competition in cases where only one offer is received (a
situation DOD terms "ineffective competition"). He stated that the
department is taking a number of actions to increase the quality of
competition in this regard. For example, the competition advocates
will be required to measure and report on "ineffective competition,"
contracting officers will be directed to perform cost analysis in all
situations where only one offer is received, and the intent is to form
a Contracting Integrity Panel subcommittee to specifically look at
creating opportunities for more effective competition.
In its written comments, Interior pointed out that its September 2008
internal policy, "Enhancing Competition," is one step the department
has taken to enhance competition. Interior also commented that we
should clarify that noncompetitive orders justified as logical follow-
ons are permitted. We believe our report makes this clear. In
addition, Interior commented that one of the limited sources
justifications discussed in our report, where the wrong FAR citation
had been used, was a "minor typographical error." We disagree. Because
of this error, it is not clear what exception was being used and,
therefore, the rationale is ambiguous, as we state in the report.
Interior provided additional technical comments, which we incorporated
as appropriate. Interior's comments are included as appendix II.
DHS had no comment on the draft report.
We received technical comments from the SBA, which we incorporated
where appropriate.
The FBI requested a copy of the draft report and provided technical
comments pertaining to one contract in our sample, which we also
incorporated where appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from the date of the report. We will then send copies of this
report to interested congressional committees and the Secretaries of
Defense, Homeland Security, and the Interior; and to the
Administrators of SBA and OFPP. This report is also available at no
charge on the GAO Web site at [hyperlink, http://www.gao.gov. If you
or your staff have any questions about this report, please contact me
at (202) 512-4841 or huttonj@gao.gov. Contact points for our offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to the
report are listed in appendix III.
Signed by:
John P. Hutton:
Director:
Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
The objectives of this review were to assess (1) the extent to which
agencies are awarding noncompetitive contracts and contracts awarded
competitively with only one offer received; (2) the exceptions to
competition that agencies used when awarding noncompetitive contracts;
(3) factors that affect competition in federal contracting; and (4)
the extent to which the contracting approaches for the contracts in
our sample reflected sound procurement or management practices. We
also identified how agencies are instituting the roles of their
competition advocates.
To address these objectives, we identified through the Federal
Procurement Data System-Next Generation (FPDS-NG) government-wide
obligations to noncompetitive contracts in fiscal year 2008, the most
recent available when we began our review. We included contracts and
orders coded as "not competed," "not available for competition,"
"follow on to competed action" and "noncompetitive delivery order." We
found that a small percentage of obligations for orders under
indefinite delivery/indefinite quantity (IDIQ) contracts were
unlabeled in FPDS-NG as to extent of competition. We were able to
match many of these unlabeled orders to their base contracts to obtain
more complete information. In addition, we identified the fiscal year
2008 obligations under contracts where only one offer had been
received.
To select the agencies to include in our review, we identified the
five agencies with the highest reported percentage of obligations
under noncompetitive contracts in fiscal year 2008. These included the
Air Force, Army, Navy, the National Aeronautics and Space
Administration (NASA), and the Department of Homeland Security (DHS).
For these agencies, the percentage of noncompetitive obligations
ranged from 45.2 percent (Navy) to 25.2 percent (DHS). We performed
additional analysis of NASA and DOD obligations, focusing on the types
of services and products represented by the noncompetitive
obligations, and found that the products were largely what is
generally considered to be specialized equipment. To focus our review
on services, for DOD and NASA we limited our analysis to the "R" codes
in FPDS-NG, which reflect professional, administrative, and management
support services. Each of the DOD agencies and NASA had a significant
percentage of noncompetitive contracts for these services. After
discussion with our congressional requesters, we eliminated NASA from
our scope of work and focused on the DOD agencies, DHS, and the
Department of the Interior.
To identify the components, or specific procuring activities, within
each of these agencies for our contract file reviews, we focused on
those whose percentage of fiscal year 2008 obligations under
noncompetitive contracts exceeded that of the agency (Army, Navy, Air
Force, DHS, and Interior) as a whole. We also focused on those
components with $100 million or more in contract obligations in 2008
and those with higher-dollar procurements, in order to avoid selecting
low-dollar procurements. We then considered other factors, such as
travel expenses, the locations' percentage of obligations under
noncompetitive contracts, and the locations' percentage of obligations
under contracts with only one offer received, into account in making
our final selection. Following is more specific criteria applicable to
the agencies in our review.
* For the Army, Air Force, and Navy, our analysis of fiscal year 2008
noncompetitive obligations was limited to obligations for
professional, administrative, and management support services.
* For DHS: the Coast Guard, the Secret Service, Immigration and
Customs Enforcement (ICE), Customs and Border Protection, the Federal
Emergency Management Agency (FEMA), and the Transportation and
Security Administration met our initial selection criteria. We removed
the Coast Guard and FEMA from the scope of our review due to our
continued audits of the Coast Guard's Deepwater program, and FEMA
because it had also been the subject of many recent audits. (However,
we did speak with the Coast Guard's competition advocate and head of
contracting activity as part of our fifth objective, as discussed
below.) Further, after discussion with the DHS Inspector General, we
also removed the Customs and Border Protection and Transportation and
Security Administration from our scope to avoid duplication of effort,
as the Inspector General had completed or had current work underway on
noncompetitive contracts at those locations. Therefore, we focused on
the Secret Service and ICE.
* At Interior, two components--the Acquisition Services Directorate
and Bureau of Indian Affairs--met our initial selection criteria. We
included the Acquisition Services Directorate in our review due to its
proximity to Washington, D.C. This fee-for-service contracting office
(formerly GovWorks) awards and administers contracts on behalf of
other federal agencies. Included in our contract sample from the
Acquisition Services Directorate were contracts awarded on behalf of
DOD agencies, the Federal Bureau of Investigation, and the National
Institutes of Health.
We then randomly selected a sample of 107 contracts and orders to
review in depth. While our focus was on noncompetitive contracts, we
also selected a small sample of competed contracts where only one
offer had been received in order to gain an understanding of the
circumstances leading to that situation. Table 4 shows the specific
locations we visited, along with the number and type of contracts
reviewed.
Table 4: Locations We Visited and the Number and Type of Contracts
Reviewed:
Agency: Air Force;
Location, number, and type of contracts: Los Angeles Air Force Base,
El Segundo, California;
Reviewed 4 contracts: 2 noncompetitive and 2 competed with one offer
received.
Location, number, and type of contracts: Robins Air Force Base, Warner
Robins, Georgia;
Reviewed 16 contracts: 14 noncompetitive and 2 competed with one offer
received.
Agency: Army;
Location, number, and type of contracts: Redstone Arsenal Army Base,
Huntsville, Alabama;
Reviewed 21 contracts: 16 noncompetitive and 5 competed with one offer
received.
Agency: Navy;
Location, number, and type of contracts: Naval Air Warfare Center
Weapons Division, China Lake, California;
Reviewed 11 contracts: 8 noncompetitive and 3 competed with one offer
received;
Location, number, and type of contracts: Naval Air Station, Patuxent
River, Maryland;
Reviewed 7 contracts: all were noncompetitive;
Location, number, and type of contracts: Naval Undersea Warfare Center
in Newport, Rhode Island;
Reviewed 5 contracts: all were competed with one offer received.
Agency: DHS;
Location, number, and type of contracts: Secret Service Procurement
Division, Washington, D.C.;
Reviewed 11 contracts: 8 noncompetitive and 3 competed with one offer
received;
Location, number, and type of contracts: Immigration and Customs
Enforcement Office of Acquisition Management, Dallas, Texas;
Reviewed 11 contracts: 8 noncompetitive and 3 competed with one offer
received.
Agency: DOI;
Location, number, and type of contracts: Acquisition Services
Directorate, Herndon, Virginia;
Reviewed 21 contracts: 16 noncompetitive and 5 competed with one offer
received.
Source: GAO analysis of FPDS-NG:
Note: The "noncompetitive" and "competed with one offer received" in
this table refers to how the agency had coded the obligations in FPDS-
NG.
[End of table]
To identify the extent to which agencies have reported obligations
under noncompetitive contracts, we analyzed FPDS-NG data from fiscal
years 2005 through 2009 using the fields "not competed," "not
available for competition," and "follow on to competed action." We
determined that a contract or order was miscoded in FPDS-NG if it was
coded as not competed, but our analysis of the contract file
documentation showed that the contract or order was competed.
Similarly, if a contract or order was coded as competed with one offer
received, we determined that it was miscoded if the contract
documentation showed that the requirement was not competed, or that it
was competed and received more than one offer. We did not make a
determination whether the "reason not competed" field in FPDS-NG was
coded correctly. We also analyzed reported obligations under competed
contracts where only one offer had been reported for the same time
period. DOD's total obligations in fiscal year 2009 reflect an
approximately $13.9 billion downward adjustment made by DOD to correct
an administrative error made in fiscal year 2008. As this adjustment
significantly affected DOD's reported obligations in fiscal years 2008
and 2009, the figures we report reflects what DOD's total obligations
would have been had the error not occurred. We also analyzed FPDS-NG
data by quarter for fiscal years 2007 and 2008 to identify trends in
obligations under existing and newly awarded noncompetitive contracts.
In reviewing the contract files in our sample, we compared the
reported competition data in FPDS-NG to the actual data in the
contract file to determine if discrepancies existed in the way
competition had been coded. As discussed in the first objective in
this report, we found that about 18 percent of the contracts or orders
had been miscoded as either competed or not competed. We found the
FPDS-NG data to be adequately reliable for overall trend analysis on
extent of competition and for selection of locations for our file
reviews.
To determine the exceptions to competition that were used, the factors
affecting competition, and the extent to which certain contracting
approaches reflected sound procurement or management practices, we
reviewed documentation in the contract files such as the written
justification, acquisition plan, statement of work, price negotiation
memorandums, records of market research, and other key documents.
Where our sample involved orders under IDIQ contracts, we reviewed the
base contract file as well. We reviewed pertinent legislation, such as
the Competition in Contracting Act, the Federal Acquisition
Streamlining Act, National Defense Authorization Acts, and the Weapon
Systems Acquisition Reform Act. We also reviewed relevant provisions
in the Federal Acquisition Regulation (FAR), specifically Parts 6, 8,
16, and 19, Small Business Administration regulations, and pertinent
agency guidance and supplements to the FAR. We also reviewed GAO and
Inspector General audit reports dealing with competition. At the
locations we visited, we interviewed the contracting officer and
contract specialist responsible for the files we reviewed (when
available) and, for many of the contracts, also interviewed cognizant
program officials to obtain their views. In addition to discussing the
specific issues related to the contracts in our sample, we also
discussed general topics with these officials, such as their views on
barriers to competition and how, if at all, they interact with the
agency or local-level competition advocate. We also interviewed
procurement policy officials at the department and local levels and a
limited number of contractor representatives.
To determine how agencies are instituting the role of the competition
advocate, we reviewed statutory and FAR provisions, Office of
Management and Budget and Office of Federal Procurement Policy
memorandums (such as the May 2007 memorandum on reinvigorating the
role of the competition advocate), pertinent agency regulations and
guidance, and the annual competition reports for fiscal years 2008 and
2009 for the agencies in our review. We interviewed the competition
advocates at DOD, the Army, Navy, and Air Force, the Department of the
Interior, and DHS, as well as the advocates at the components included
in our review. We discussed the competition advocates' placement
within their organizations, their backgrounds and areas of expertise,
their strategies for promoting competition, and factors they
identified as barriers to competition.
We conducted this performance audit from October 2009 to July 2010, in
accordance with generally accepted government auditing standards.
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 believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the Department of the Interior:
United States Department of the Interior:
Office Of The Secretary:
Washington, DC 20240:
July 20 2010:
Mr. John P. Hutton:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Hutton:
Thank you for providing the Department of the Interior the opportunity
to review and comment on the draft Government Accountability Office
Report entitled, Federal Contracting: Opportunities Exist to Increase
Competition and Assess Reasons When Only One Offer is Received (GAO-10-
833).
The Department has some general and technical comments for your
consideration.
We hope the technical comments and the additional information provided
will assist you in preparing the final report. If you have any
questions or need additional information, please contact Megan Olsen,
Policy Division Chief, Acquisition Services Directorate, at (703) 964-
8461.
Sincerely,
Signed by:
Amy Holling, for:
Rhea Suh:
Assistant Secretary:
Policy, Management and Budget:
Enclosures:
[End of letter]
Enclosure:
Government Accountability Office Draft Report:
Federal Contracting: Opportunities Exist to Increase Competition and
Assess Reasons When Only One Offer is Received (GA0-10-833):
General and Technical Comments:
* Please include the date on which each contract was awarded with the
comments related to that contract. It would be beneficial to provide
context for the comments and for trends in non-competitive
acquisitions generally. See table below listing the award dates for
all DOI contracts referenced in the draft.
* Throughout the draft, there are references to steps that agencies
have taken to enhance competition. However, there is no mention of
DIAPR 2008-10 titled Enhancing Competition, which was released on
September 12, 2008. This policy is a strong step taken by DOI to
enhance competition and merits inclusion in the document. Attached are
copies of both the initial policy and its amendment.
* Last paragraph on page 15 (which continues on page 16): As a point
of clarification, it might be beneficial to discuss the logical follow-
on exception here. The text as written implies that it is not proper
to award a contract on a sole-source basis merely because it is a
logical follow-on. However, FAR 8.405-6(b)(2) and FAR
16.505(b)(2)(iii) clearly indicate that a task order may be awarded on
a sole-source basis if it is a logical follow-on to a previously
competed order. There is no requirement that one of the other
exceptions in FAR Part 6 also apply. A brief description of this
exception at this point in the document would be beneficial.
* Page 27, first full paragraph: This paragraph seems to overstate an
issue that is essentially a minor typographical error. GAO has stated
that the Limited Sources Justification is ambiguous, because "the
citation used was FAR 8.405-6(b)(3), for urgent and compelling
requirements, but the supporting narrative stated that this vendor was
the only distributor that could offer all of the required products and
services, i.e., a certain brand name of licenses."
The words "urgent and compelling" do not appear in the limited sources
justification at issue. The FAR section that was referenced was FAR
8.405-6(b)(3), but the entire narrative supports the position that
only one source could supply the product and services. It is clear
from the plain language of the document that urgent and compelling was
not intended to be the justification for limiting competition; rather,
an incorrect FAR citation was used in error. Any reasonable person
reading this document would understand the rationale for limiting
competition. Further, the document contains the required information
and was approved at the appropriate level. Therefore, please consider
rewording the comments on this acquisition.
document would understand the rationale for limiting competition.
Further, the document contains the required information and was
approved at the appropriate level. Therefore, please consider
rewording the comments on this acquisition.
Dates of Department of Interior Contracts:
Contract Number: INM0404D032099;
Contractor: TKC;
Date Awarded: November 2003.
Contract Number: INM0405D040856;
Contractor: Booz Allen Hamilton;
Date Awarded: November 2004.
Contract Number: INM0405T044315;
Contractor: G & B Solutions;
Date Awarded: August 2005.
Contract Number: IND0406T039517;
Contractor: Phoenix Systems;
Date Awarded: November 2005.
Contract Number: IND0406D061483;
Contractor: Resource Consultants, Inc.
Date Awarded: March 2006.
Contract Number: IND0406D062181;
Contractor: SAIC;
Date Awarded: June 2006.
Contract Number: IND040613063204;
Contractor: Mythics;
Date Awarded: August 2006.
Contract Number: IND0407T066427;
Contractor: IAE;
Date Awarded: November 2006.
Contract Number: IND0408T020637;
Contractor: MHN Government Services;
Date Awarded: February 2007.
Contract Number: IND0407P067012;
Contractor: Upper Mohawk;
Date Awarded: February 2007.
Contract Number: IND0407T068650;
Contractor: IBM;
Date Awarded: August 2007.
Contract Number: IND0407CT68513;
Contractor: Brooks & Brooks;
Date Awarded: August 2007.
Contract Number: IND0408D020029;
Contractor: Oaktree Systems;
Date Awarded: October 2007.
Contract Number: IND14060408T020188;
Contractor: MITRE Corp;
Date Awarded: December 2007.
Contract Number: IND0408T020290;
Contractor: Z-Tech Corp;
Date Awarded: January 2008.
Contract Number: IND0408D020222;
Contractor: FEMCO, Inc.
Date Awarded: February 2008.
Contract Number: IND0408D020756;
Contractor: SEK Solutions;
Date Awarded: June 2008.
Contract Number: IND0408D020823;
Contractor: Integrated Systems Analyst;
Date Awarded: July 2008.
Contract Number: IND0408T020817;
Contractor: APG;
Date Awarded: July 2008.
Contract Number: IND0408T020796;
Contractor: Engineering & Software System;
Date Awarded: August 2008.
Contract Number: IND0408CT21027;
Contractor: Armstrong Transmitter;
Date Awarded: September 2008.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
John P. Hutton, (202) 512-4841 or huttonj@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Michele Mackin, Assistant
Director; Tatiana Winger; Julia Kennon; Anh Nguyen; Kenneth Patton;
Jared Sippel; Sylvia Schatz; Kristin VanWychen; and Keo Vongvanith
made key contributions to this report.
[End of section]
Footnotes:
[1] GAO, Contract Management: Agencies Are Not Maximizing
Opportunities for Competition or Savings under Blanket Purchase
Agreements despite Significant Increase in Usage, [hyperlink,
http://www.gao.gov/products/GAO-09-792] (Washington, D.C.: Sept. 9,
2009).
[2] GAO, Department of State Contract for Security Installation at
Embassies, [hyperlink, http://www.gao.gov/products/GAO-07-34R]
(Washington, D.C.; Nov. 8, 2006); GAO, Contract Security Guards:
Army's Guard Program Requires Greater Oversight and Reassessment of
Acquisition Approach, [hyperlink,
http://www.gao.gov/products/GAO-06-284] (Washington, D.C.; April 3,
2006).
[3] We identified obligations to noncompetitive contracts primarily
through the "extent competed" field in FPDS-NG. This included
contracts coded as not competed or not available for competition, and
noncompetitive delivery orders. As a result, and for the purposes of
this report, we are defining noncompetitive contracts to include
contracts that were awarded using the exceptions to full and open
competition in the Federal Acquisition Regulation, and orders issued
under multiple award indefinite delivery/indefinite quantity contracts
under the exception to fair opportunity process or under limited
sources provisions for orders issued under GSA's schedules program.
[4] The Administrator of OFPP serves as chair of the Federal
Acquisition Regulatory Council. The council--whose members include the
DOD Director of Defense Procurement and Acquisition Policy, the
National Aeronautics and Space Administration's Associate
Administrator for Procurement, and the GSA Chief Acquisition Officer--
oversees development and maintenance of the FAR.
[5] Pub. L. No. 98-369, § 2701.
[6] See FAR Subpart 6.3, which contains the seven circumstances in
which a contract is allowed to be awarded without providing for full
and open competition.
[7] See FAR 19.502-2 (b), which also requires that the acquisitions
are over the simplified acquisition threshold and there is a
reasonable expectation that the award will be made at a fair market
price.
[8] IDIQ contracts, known as task order (services) or delivery order
(supply) contracts, do not procure or specify a firm quantity (other
than a minimum or maximum) and provide for the issuance of orders
during the contract period. FAR 16.501-1.
[9] See FAR 16.505(b)(2). Other reasons for allowing a noncompetitive
task order are that the requirement is a logical follow-on, or the
order is needed to meet a minimum guarantee.
[10] FAR 8.405-1(c). DOD has more stringent competition requirements
for use of the GSA Schedules Program. DFARS 208.405-70(c). Congress
recently took action to enhance competition requirements pursuant to
multiple award contracts for all executive agencies; however, the
implementing regulations have not yet been promulgated. Pub. L. No.
110-417 § 863.
[11] FAR 8.405-6, limited sources justification and approval.
[12] National Defense Authorization Act for Fiscal Year 2008, Pub. L.
No. 110-181, § 844. CICA already required that the justification
documents be made available for public inspection, subject to the
exemptions from public disclosures provided in the Freedom of
Information Act (5 U.S.C. 552).
[13] National Defense Authorization Act for Fiscal Year 2008, Pub. L.
No. 110-181, § 843. (2008).
[14] Weapon Systems Acquisition Reform Act, Pub. L. No. 111-23, §
202(a) (1).
[15] Pub. L. No. 111-84, § 811.
[16] These data represent obligations under all contracts, both new
and existing, for each quarter. We also analyzed obligations under
newly awarded contracts for fiscal years 2007 and 2008 and found that
the trend showed an increase in obligations overall in the fourth
quarter of these years; however, the percentage of noncompetitive
contracts in the fourth quarter was not significantly higher than in
the beginning of the fiscal year.
[17] The agency corrected this error in FPDS-NG.
[18] A single-award IDIQ contract results from a solicitation where
only one contractor is awarded the contract. The FAR provides for a
preference for multiple-award IDIQ contracts; however, single-award
contracts are allowed in certain circumstances, such as only one
contractor being capable, or when the orders expected under the
contract are so integrally related that only a single contractor can
reasonably perform the work. FAR 16.504 (c).
[19] One order that was coded as not competed was actually competed
with one offer received.
[20] 15 U.S.C § 637; FAR 6.302-5(b)(4).
[21] GAO, Contract Management: Increased Use of Alaska Native
Corporations' Special 8(a) Provisions Calls for Tailored Oversight,
[hyperlink, http://www.gao.gov/products/GAO-06-399] (Washington, D.C.:
April 27, 2006).
[22] Congress enacted legislation in October 2009 that requires the
FAR to be revised to require a written justification and approval and
postings for sole source awards over $20 million under Section 8(a)
authority of the Small Business Act. National Defense Authorization
Act for Fiscal Year 2010. Pub. L. No. 111-84, § 811. The FAR has not
yet been revised, as OFPP recently requested that the rule be
converted from an interim to a proposed rule.
[23] SBA is prohibited by regulation from accepting procurements for
award under Section 8(a) under certain circumstances and if the price
of the contract results in a cost to the contracting agency that
exceeds a fair market price. Other than these prescriptions, SBA may
accept a procurement for an 8(a) award whenever it determines such
action is necessary or appropriate.
[24] When orders are issued under IDIQ contracts that used a FAR Part
6 exception to competition, the justification and approval at the
contract level adequately covers the requirements contained in the
order. FAR 6.001(e)(2).
[25] FFRDCs are privately owned but government-funded entities that
have long-term relationships with federal agencies to perform research
and development or related tasks. They are still considered
contractors and often have access beyond normal contractual access.
See GAO, Federal Research: Opportunities Exist to Improve the
Management and Oversight of Federally Funded Research and Development
Centers, [hyperlink, http://www.gao.gov/products/GAO-09-15]
(Washington D.C.; October 8, 2008).
[26] Our recent report on BPAs established under GSA schedule
contracts includes a recommendation to OFPP to clarify, in the FAR,
when it is appropriate to establish a BPA using the limited source
justifications. See GAO-09-792.
[27] Technical data is recorded information used to define a design
and to produce, support, maintain, or operate the item.
[28] DFARS 207.106. Additional requirements for major systems.
[29] Weapon Systems Acquisition Reform Act of 2009, Pub. L. No. 111-23
§ 202. The act also requires the Secretary of DOD to take actions to
ensure that, to the maximum extent practicable, contracts for
maintenance and sustainment are awarded on a competitive basis.
[30] GAO, Defense Logistics: Air Force Lacks Data to Assess Contractor
Logistics Support Approaches, [hyperlink,
http://www.gao.gov/products/GAO-01-618] (Washington, D.C.: Sept. 7,
2001); Defense Logistics: Opportunities to Improve the Army's and
Navy's Decision-making Process for Weapons Systems Support,
[hyperlink, http://www.gao.gov/products/GAO-02-306] (Washington, D.C.:
Feb. 28, 2002); Defense Management: Opportunities to Enhance the
Implementation of Performance-Based Logistics, [hyperlink,
http://www.gao.gov/products/GAO-04-715] (Washington, D.C.: Aug. 16,
2004); and Weapons Acquisition: DOD Should Strengthen Policies for
Assessing Technical Data Needs to Support Weapons Systems, [hyperlink,
http://www.gao.gov/products/GAO-06-839] (Washington, D.C.: July 14,
2006).
[31] GAO, Defense Management: DOD Needs to Reexamine Its Extensive
Reliance on Contractors and Continue to Improve Management and
Oversight, [hyperlink, http://www.gao.gov/products/GAO-08-572T]
(Washington D.C.: March 11, 2008). Additionally, our prior work has
found that when federal agencies, including DOD, believe they do not
have the in-house capability to design, develop, and manage complex
acquisitions, they sometimes turn to a systems integrator to carry out
these functions, creating an inherent risk of relying too much on
contractors to make program decisions. For example, the Army's Future
Combat System program is managed by a lead systems integrator that
assumes the responsibilities of developing requirements; selecting
major system and subsystem contractors; and making trade-off decisions
among costs, schedules, and capabilities. While this management
approach has some advantages for DOD, we found that the extent of
contractor responsibility makes DOD vulnerable to decisions being made
by the contractor that are not in the government's best interests. See
GAO, Defense Acquisitions: Role of Lead Systems Integrator on Future
Combat Systems Program Poses Oversight Challenges, [hyperlink,
http://www.gao.gov/products/GAO-07-380] (Washington, D.C.: June 6,
2007).
[32] We also have sustained numerous bid protests that show that
agencies improperly awarded sole source contracts because of lack of
advanced acquisition planning.
[33] FAR 11.105 states "agency requirements shall not be written so as
to require a particular brand name, product, or feature of a product,
peculiar to one manufacturer, thereby precluding consideration of a
product manufactured by another company —" unless certain exceptions
apply. One of these exceptions is if a "particular brand name, product
or feature is essential to the Government's requirements, and market
research indicates other companies' similar products, or products
lacking the particular feature, do not meet, or cannot be modified to
meet, the agency's needs."
[34] For a proposed order exceeding $550,000, but not exceeding $11.5
million, the justification must be approved by the competition
advocate of the activity placing the order or by another official
specified in the FAR. FAR 8.405-6(h)(2). The DHS Acquisition Manual
requires legal review of contract actions, with supporting
documentation, that are expected to exceed $500,000.
[35] FAR 8.405-6(b)(3) is used for restricting consideration to only
one source on an urgent and compelling basis through a GSA schedule
contract. FAR 8.405-6(a)(2) is used when ordering an item peculiar to
one manufacturer, or a brand name item. There is another justification
that contracting officers can use to place a noncompetitive order on
the GSA schedule, which was not cited in this instance, that allows
for situations where only one source is capable of responding due to
the unique or specialized nature of the work. See FAR 8.405-6(b)(1).
[36] The FAR provides discretion for the contracting officer to
determine how much price analysis is necessary based on the complexity
and circumstances of the procurement. See FAR 15.404-1(a)(1). The
purpose of the price analysis is to develop a negotiation position to
reach a fair and reasonable price; the source and type of data used to
support the price analysis conducted is addressed in the price
negotiation memorandum. FAR 15.405 and 15.406-3.
[37] There is no documentation in the contract file that these
unauthorized commitments were not ratified, as authorized by FAR 1.602-
3. An unauthorized commitment is an agreement that is not binding
because the government representative who made the agreement lacked
the authority to enter into the agreement on behalf of the government.
We have previously reported on situations where program officials
overstepped their bounds and where contractors played a role in the
procurement process normally performed by government personnel. See
GAO, U.S. Office of Special Counsel: Selected Contracting and Human
Capital Issues, [hyperlink, http://www.gao.gov/products/GAO-06-16]
(Washington, D.C.: Nov. 17, 2005) and GAO, Interagency Contracting:
Problems with DOD's and Interior's Orders to Support Military
Operations, [hyperlink, http://www.gao.gov/products/GAO-05-201]
(Washington, D.C.: April 29, 2005).
[38] Undefinitized contract actions, or UCAs, are contract actions for
which the contract terms, specifications, or price are not agreed upon
before performance is begun. DFARS 217.7401(d). We have previously
reported on UCAs. GAO, Defense Contracting: Use of Undefinitized
Contract Actions Understated and Definitization Time Frames Often Not
Met, [hyperlink, http://www.gao.gov/products/GAO-07-559] (Washington,
D.C.: June 19, 2007); and Defense Contracting: DOD Has Enhanced
Insight into Undefinitized Contract Action Use, but Management at
Local Commands Needs Improvement, [hyperlink,
http://www.gao.gov/products/GAO-10-299] (Washington, D.C.: Jan. 28,
2010).
[39] DFARS 217.7402.
[40] Award-term incentives are similar to award-fee incentives, but
the contractor is to be rewarded for excellent performance with an
extension of the contract period instead of additional fee.
[41] The Foreign Terrorist Tracking Task Force was established in
response to the September 11, 2001, terrorist attacks and was
comprised of a number of government entities with the goal of keeping
foreign terrorists and their supporters out of the United States.
[42] The task order requirement also shifted from support for the
Foreign Terrorist Tracking Task Force to the FBI's Terrorist Screening
Center.
[43] 41 U.S.C. § 418 and FAR Subpart 6.5.
[44] 41 U.S.C. § 418.
[End of section]
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