Contract Management
Guidance Needed to Promote Competition for Defense Task Orders Gao ID: GAO-04-874 July 30, 2004The Department of Defense (DOD) spends billions of dollars each year acquiring services through task orders issued under multiple-award contracts or the General Services Administration's federal supply schedule program. However, previous GAO and DOD Inspector General reports found that DOD was not obtaining the level of competition on these task orders that Congress had envisioned. Congress responded by enacting section 803 of the National Defense Authorization Act for Fiscal Year 2002, which requires procedures to promote competition and provides when waivers of competition are allowed. In response to a congressional mandate, GAO identified the extent to which selected DOD buying organizations waived the competition requirements of section 803 and determined the level of competition on orders available for competition. For this review, GAO randomly selected 74 orders at five DOD buying organizations.
Competition requirements were waived for nearly half (34 of 74) of the multiple-award contract and federal supply schedule orders GAO reviewed. Often, contracting officers waived competition based on requests from the program offices to retain the services of contractors currently performing the work. In addressing these requests, safeguards to ensure that waivers were granted only under appropriate circumstances were lacking. Specifically, guidance for granting waivers did not sufficiently describe the circumstances under which a waiver of competition could be used. In addition, the requirements for documenting the basis for waivers were not specific, and there was no requirement that waivers be approved above the level of the contracting officer. Competition was limited on the 40 orders available for competition. For 16 orders, only one offer was received in response to agency solicitations. For 15 orders, the buying organizations received two or more offers. For nine orders, contracting officials did not solicit competitive offers on individual orders. Instead, the nine orders were awarded based on data previously submitted to the government. Striking the right balance between achieving the benefits of competition and retaining contractors that are satisfying customer needs is a challenge for DOD. The frequent use of waivers to competition may be hindering DOD's ability to obtain innovative solutions to problems, and the best value for the taxpayer. On the other hand, requests by program offices to waive competition to retain the services of incumbent contractors are strong indications that contractors are satisfying customer needs.
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: Team: Phone:GAO-04-874, Contract Management: Guidance Needed to Promote Competition for Defense Task Orders
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
July 2004:
CONTRACT MANAGEMENT:
Guidance Needed to Promote Competition for Defense Task Orders:
GAO-04-874:
GAO Highlights:
Highlights of GAO-04-874, a report to congressional committees
Why GAO Did This Study:
The Department of Defense (DOD) spends billions of dollars each year
acquiring services through task orders issued under multiple-award
contracts or the General Services Administration‘s federal supply
schedule program. However, previous GAO and DOD Inspector General
reports found that DOD was not obtaining the level of competition on
these task orders that Congress had envisioned. Congress responded by
enacting section 803 of the National Defense Authorization Act for
Fiscal Year 2002, which requires procedures to promote competition and
provides when waivers of competition are allowed.
In response to a congressional mandate, GAO identified the extent to
which selected DOD buying organizations waived the competition
requirements of section 803 and determined the level of competition on
orders available for competition. For this review, GAO randomly
selected 74 orders at five DOD buying organizations.
What GAO Found:
Competition requirements were waived for nearly half (34 of 74) of the
multiple-award contract and federal supply schedule orders GAO
reviewed. Often, contracting officers waived competition based on
requests from the program offices to retain the services of contractors
currently performing the work. In addressing these requests, safeguards
to ensure that waivers were granted only under appropriate
circumstances were lacking. Specifically, guidance for granting waivers
did not sufficiently describe the circumstances under which a waiver of
competition could be used. In addition, the requirements for
documenting the basis for waivers were not specific, and there was no
requirement that waivers be approved above the level of the contracting
officer.
Competition was limited on the 40 orders available for competition. For
16 orders, only one offer was received in response to agency
solicitations. For 15 orders, the buying organizations received two or
more offers. For nine orders, contracting officials did not solicit
competitive offers on individual orders. Instead, the nine orders were
awarded based on data previously submitted to the government. The
figure below shows the level of competition on the orders that we
reviewed.
Level of Competition on Randomly Selected DOD Task Orders:
[See PDF for image]
[End of figure]
Striking the right balance between achieving the benefits of
competition and retaining contractors that are satisfying customer
needs is a challenge for DOD. The frequent use of waivers to
competition may be hindering DOD‘s ability to obtain innovative
solutions to problems, and the best value for the taxpayer. On the
other hand, requests by program offices to waive competition to retain
the services of incumbent contractors are strong indications that
contractors are satisfying customer needs.
What GAO Recommends:
GAO is making recommendations to the Secretary of Defense to develop
guidance on the conditions under which a waiver of competition may be
used, require detailed documentation to support waivers, and establish
approval authority above the contracting officer level based on the
value of the order. DOD concurred with these recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-874.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William T. Woods at
(202) 512-4841 or woodsw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Frequent Use of Competition Waivers Reflects Preference to Retain
Incumbent Contractors:
Few Offers Received on Orders Available for Competition:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Summary Tables on Orders Selected for Review:
Appendix III: Comments from the Department of Defense:
Tables:
Table 1: Selected Buying Organizations:
Table 2: Waivers of Competition at Five Buying Organizations:
Table 3: Basis for Waivers and Frequency Cited:
Table 4: Number and Dollar Value of Orders GAO Reviewed at Five DOD
Buying Organizations:
Table 5: Summary of the Orders Selected for Review at Five Buying
Organizations:
Table 6: Extent of Competition for 14 Orders Open to Competition under
the Federal Supply Schedule at Five Buying Organizations:
Table 7: Extent of Competition for 26 Orders Open to Competition under
Multiple-Award Contracts at Five Buying Organizations:
Figure:
Figure 1: Offers for 40 Orders Open to Competition:
Abbreviations:
AFB: Air Force Base:
CECOM: Communications-Electronics Command:
DCCW: Defense Contracting Command-Washington:
DFARS: Defense Federal Acquisition Regulation Supplement:
DISA: Defense Information Systems Agency:
DOD: Department of Defense:
FAR: Federal Acquisition Regulation:
GSA: General Services Administration:
NICP: Naval Inventory Control Point:
OC-ALC: Oklahoma City Air Logistics Center:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 30, 2004:
The Honorable John W. Warner:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Committee on Armed Services:
United States Senate:
The Honorable Duncan L. Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
The Department of Defense (DOD) spends billions of dollars each year
for services--ranging from the maintenance of military installations to
managing information systems. Much of this spending is through task
orders issued under multiple-award contracts or the General Services
Administration's (GSA) federal supply schedule program.[Footnote 1]
These contract vehicles permit federal agencies to acquire services in
a streamlined manner, but both require ordering agencies to follow
procedures designed to promote competition for individual orders.
Previous reports by us and the DOD Inspector General on DOD's use of
multiple-award and federal supply schedule contracts have led to
congressional concerns that DOD was not obtaining the level of
competition for orders that Congress had envisioned.[Footnote 2]
Congress responded by enacting section 803 of the National Defense
Authorization Act for Fiscal Year 2002.[Footnote 3] Section 803
requires DOD to solicit offers from all contractors that are offering
the required services under a multiple-award contract for orders
exceeding $100,000. For federal supply schedule orders section 803, as
implemented, requires that DOD solicit all contractors offering the
required services under the applicable schedule or enough contractors
to ensure the receipt of three offers. If three offers are not
received, the contracting officer must determine in writing that no
additional contractors could be identified despite reasonable efforts
to do so. Under certain circumstances, section 803 allows waivers of
competition for multiple-award contract orders and federal supply
schedule orders.
In response to a congressional mandate, we (1) identified the extent to
which selected DOD buying organizations waived the competition
requirements of section 803, and (2) determined the level of
competition for orders available for competition.[Footnote 4] These
objectives allowed us to focus on the outcome that section 803 was
intended to achieve. We did not independently determine the validity of
competition waivers, nor did we assess whether the buying organizations
complied with each of the specific requirements of section 803. To
accomplish our objectives, we reviewed 74 randomly selected multiple-
award and federal supply schedule orders subject to the section 803
requirements at five large DOD buying organizations. Appendix I
contains the details of our scope and methodology. We conducted our
review from May 2003 through May 2004 in accordance with generally
accepted government auditing standards.
Results in Brief:
Contracting officers waived competition requirements on nearly half (34
of 74) of the orders we reviewed. For the most part, competition was
waived based on determinations that only one source could provide the
service or that the work was a follow-on to a previously competed
order. Although these are permitted exceptions to the competition
requirements of section 803, the use of these competition waivers
generally reflected the desire of program offices to retain the
services of contractors currently performing the work. When contracting
officers addressed requests from program offices for waivers,
safeguards to ensure that waivers were granted only under appropriate
circumstances were lacking. Specifically, guidance for granting waivers
did not sufficiently describe the circumstances under which a waiver of
competition could be used. In addition, the requirements for
documenting the basis for waivers were not specific, and there was no
requirement that waivers be approved above the level of the contracting
officer. As a result of the frequent use of waivers, there were fewer
opportunities to obtain the potential benefits of competition--improved
levels of service, market-tested prices, and the best overall value.
Competition was limited for most of the 40 orders available for
competition. Of those 40 orders, buying organizations awarded 16 orders
after receiving only one offer in response to agency solicitations. For
15 of the 40 orders, the buying organizations received two or more
offers. For the remaining nine orders, contracting officials did not
solicit competitive offers, but instead, used procedures that based the
selection of a contractor on data previously submitted to the
government. These procedures, which existed prior to the section 803
requirements, were not designed to maximize competition for individual
orders. We question whether they are consistent with the requirements
of section 803. We are continuing to pursue this issue with appropriate
agency officials.
To encourage competition in awarding task orders under multiple-award
and supply schedule contracts, we are making three recommendations to
the Secretary of Defense to develop additional guidance on the
circumstances under which competition may be waived, require detailed
documentation to support competition waivers, and establish approval
levels above the contracting officer for waivers of competition on
orders exceeding specified thresholds.
Background:
Multiple-award contracts have provided an expeditious way to fill
government needs. Contractors compete under a single solicitation to be
awarded similar contracts for certain types of products or services,
such as information technology services. These contracts are awarded
for indefinite quantities for delivery at dates to be determined. The
purpose of such contracts is to establish a group of prequalified
contractors to compete for future orders under streamlined
administrative procedures once agencies determine their specific needs.
Under the federal supply schedule program, GSA has negotiated contracts
with thousands of companies that supply commercial products and
services. These contracts can be used by any federal agency to purchase
a wide variety of commercial products and services at prices associated
with volume buying.
Under procedures in effect prior to the enactment of section 803, and
which still apply to non-DOD orders, agencies placing multiple-award
contract orders are required to ensure that each contractor is afforded
a fair opportunity to be considered for the orders.[Footnote 5]
Agencies are not required to contact each contractor, however, if the
agency has information available to ensure that each contractor is
provided a fair opportunity to be considered for orders. Waivers of the
fair opportunity requirements are permitted in specified circumstances,
such as when services are urgently needed or when only one source is
capable of providing them. Under the federal supply schedule program,
GSA has established special ordering procedures for services that
require a statement of work.[Footnote 6] These procedures require
agencies to request quotations from at least three federal supply
schedule contractors after an initial evaluation of catalogs and price
lists.
Section 803 of the National Defense Authorization Act for Fiscal Year
2002 changed the competition requirements under both types of contracts
for DOD orders for services more than $100,000. Section 803 and the
implementing regulations in the Defense Federal Acquisition Regulation
Supplement,[Footnote 7] which became effective in October 2002, were
intended to promote competition under these contracts by prescribing
more rigorous requirements. In general, under the section 803
regulations for multiple-award contract orders, DOD contracting
officers (and agencies buying on behalf of DOD) are required to solicit
offers from all contractors offering the required services under the
multiple-award contracts. For federal supply schedule orders, DOD
contracting officers are required to solicit all federal supply
schedule contractors offering the required services under the
applicable schedule or as many as practicable to ensure the receipt of
three offers. If three offers are not received, the contracting officer
must determine in writing that no additional contractors could be
identified despite reasonable efforts to do so. Under both types of
contracts, officials must provide a fair notice of the intent to make
the purchase, a description of the work the contractor shall perform,
and the basis upon which the contracting officer will make the
selection. Additionally, under both types of contracts, DOD contracting
officers are required to afford all responding contractors a fair
opportunity to make an offer and have that offer fairly considered.
Also, section 803 and the DOD implementing regulations permit waivers
for both multiple-award and federal supply schedule contract orders
under specified circumstances.
We randomly selected 74 orders at five DOD buying organizations to
determine the level of competition for DOD orders more than $100,000
subject to section 803. Table 1 below shows the selected locations. We
selected these locations because we wanted to focus on buying
organizations with large volumes of orders and we wanted a mix of DOD-
wide, Army, Navy, and Air Force buying organizations. (See appendix I
for more information on our scope and methodology.)
Table 1: Selected Buying Organizations:
Buying organization: Communications-Electronics Command (CECOM);
Location: Fort Monmouth, N.J.
Buying organization: Naval Inventory Control Point (NICP);
Location: Mechanicsburg, Pa.
Buying organization: Defense Contracting Command-Washington (DCCW);
Location: Washington, D.C.
Buying organization: Defense Information Systems Agency (DISA);
Location: Scott Air Force Base (AFB), Ill.
Buying organization: Oklahoma City Air Logistics Center (OC-ALC);
Location: Tinker AFB, Okla.
Source: GAO.
[End of table]
Frequent Use of Competition Waivers Reflects Preference to Retain
Incumbent Contractors:
Competition requirements were waived for nearly half (34 of 74) of the
multiple-award and federal supply schedule orders we reviewed. In 26 of
these 34 cases, competition was waived based on a determination either
that only one source could provide the service or that the work was a
follow on to a previously competed order. Often, contracting officers
waived competition in these cases based on requests from program office
customers to retain the services of contractors currently performing
the work. When contracting officers addressed requests for waivers from
program offices, the existing process lacked safeguards to ensure that
waivers were granted only under appropriate circumstances.
Specifically, the guidance available to contracting officers in
granting waivers was limited because it did not sufficiently describe
the circumstances under which a waiver of competition could be used;
the requirements for documentation of waivers were not specific; and
regardless of the amount of the order, there was no requirement for
review at a level higher than the contracting officer. As a result of
the frequent use of waivers, there were fewer opportunities to obtain
the potential benefits of competition--improved levels of service,
market-tested prices, and the best overall value for the taxpayer.
Competition Waivers Used Frequently:
Thirty-four of the 74 orders we reviewed were awarded on the basis of
waivers to competition requirements. These waivers accounted for $53.3
million, or 58 percent, of the total dollar value of the orders we
reviewed. Twenty-four of these 34 waivers were for federal supply
schedule orders, and 10 were for multiple-award contract orders. Table
2 shows that waivers were common across all five buying organizations
we visited.
Table 2: Waivers of Competition at Five Buying Organizations:
Dollars in millions.
Buying organizations: CECOM;
Total orders reviewed: Numbers of orders: 14;
Total orders reviewed: Dollars: $14.9;
Waivers of competition: 4;
Waivers of competition: Dollars: $0.9.
Buying organizations: NICP;
Total orders reviewed: Numbers of orders: 13;
Total orders reviewed: Dollars: $17.1;
Waivers of competition: 8;
Waivers of competition: Dollars: $9.3.
Buying organizations: DCCW;
Total orders reviewed: Numbers of orders: 15;
Total orders reviewed: Dollars: $20.9;
Waivers of competition: 8;
Waivers of competition: Dollars: $16.6.
Buying organizations: DISA;
Total orders reviewed: Numbers of orders: 16;
Total orders reviewed: Dollars: $31.2;
Waivers of competition: 8;
Waivers of competition: Dollars: $23.2.
Buying organizations: OC-ALC;
Total orders reviewed: Numbers of orders: 16;
Total orders reviewed: Dollars: $8.2;
Waivers of competition: 6;
Waivers of competition: Dollars: $3.3.
Total;
Total orders reviewed: Numbers of orders: 74;
Total orders reviewed: Dollars: $92.3;
Waivers of competition: 34;
Waivers of competition: Dollars: $53.3.
Sources DOD (data);
GAO (analysis).
[End of table]
The five buying organizations primarily justified waiving competition
requirements by citing either of two specific exceptions to
competition: (1) that only one contractor was capable of providing
services that were unique or highly specialized or (2) that the order
was a logical follow-on to an order already issued on a competitive
basis. Table 3 describes the rationale for granting waivers as stated
in the Federal Acquisition Regulation (FAR) and the Defense Federal
Acquisition Regulation Supplement (DFARS). The table also shows the
frequency with which these waivers were used.
Table 3: Basis for Waivers and Frequency Cited:
Waiver basis: Urgent need: The services are urgently needed, and
competition would result in unacceptable delays;
Number of times used: 4.
Waiver basis: Unique or highly specialized services: Only one
contractor is capable of providing services that are unique or highly
specialized;
Number of times used: 14.
Waiver basis: Logical follow-on: The award is in the interest of
economy and efficiency because it is a logical follow-on to an order
already issued on a competitive basis;
Number of times used: 12.
Waiver basis: Minimum guarantee: It is necessary to place the order
with a contractor to satisfy a minimum guarantee;
Number of times used: 0.
Waiver basis: Statutory purchase: A statute expressly authorizes or
requires that the purchase be made from a specified source;
Number of times used: 0.
Waiver basis: Multiple exceptions and other;
Number of times used: 4.
Total;
Number of times used: 34.
Sources: FAR and DFARS (data); GAO (analysis).
Note: The documentation in the contract files for individual orders
generally cited the legal references pertaining to section 803 or the
DOD regulations (exceptions to fair opportunity). In nine orders, the
files provided references to the Federal Acquisition Regulation,
section 6.302, pertaining to circumstances permitting other than full
and open competition. For summary purposes, we combined similar
justifications for waivers. For example, we combined the orders that
cited "one source" as an exception under the DOD regulations (only one
source is capable because of unique and highly specialized services)
with "one source" as a circumstance under section 6.302-1 permitting
other than full and open competition (only one responsible source and
no other suppliers or services will satisfy agency requirements).
[End of table]
The waivers to competition include one case in which the order was
awarded under the small business contracting program under section 8(a)
of the Small Business Act.
Safeguards Lacking for Addressing Requests to Waive Competition:
In requesting contract services, program offices often requested that
contracting officers waive competition and retain contractors already
providing the services. This preference for the incumbent contractor
was particularly evident in the 26 waiver cases that cited the unique
services or logical follow-on exceptions as the basis for the waivers.
The following is an example:
* In March 2003, the Oklahoma City Air Logistics Center awarded a
$667,554 order under the federal supply schedule to provide information
technology engineering and technical computer support services for the
B-1 system support management office. In its request for services, the
program manager for the B-1 technical support center said that it has
several projects currently being developed and that the incumbent
contractor had continually delivered quality services on time and
within budget. The program manager added that the center is a complex
system of interrelated software applications and that it would be in
the government's interest to award the order to the same contractor
again. The program office said that it had no desire to change
contractors at this critical time. The waiver was justified on the
basis of a logical follow-on.
Several representatives of buying organizations told us that program
offices often prefer to continue with incumbent contractors. For
example, one buying organization representative told us that program
offices continually place pressure on the buying organization to award
orders to incumbent contractors and that program offices have been very
resistant when the buying organization insisted on seeking competition.
Another buying organization representative stated that it is often
difficult for a contracting officer to balance competition requirements
with the desire of a program office to maintain an existing
relationship with its incumbent contractor.
In addressing requests from program offices to retain incumbent
contractors, the guidance available to contracting officers in the
Defense Federal Acquisition Regulation Supplement on the appropriate
use of waivers is limited. Specifically, DOD's regulations implementing
section 803 merely refer to the exceptions (listed above in table 3).
The DOD regulations do not elaborate further on the circumstances under
which an exception to competition may be used. As a result, contracting
officers lack guidance in determining whether program office requests
for waivers to competition should be granted.[Footnote 8]
For example, DOD regulations do not specify what constitutes a logical
follow-on to an order already issued on a competitive basis, how recent
the previous competitive order should be, or whether there are any
limits on the number of times the follow-on exception to competition
may be used.[Footnote 9] We found three examples in which contracting
officers deemed an order to be a logical follow-on for two or more
consecutive procurements. The absence of additional guidance makes it
more difficult for contracting officers to question program office
requests for follow-on waivers. In one case, however, we found that the
contracting officer requested additional information to justify a
waiver because the order was the fourth consecutive order without
competition. Specifically, the contracting officer said that the
justification should discuss why the specific requirement was
continuing and why it would be a benefit to the government to continue
this work as a logical follow-on.
The following is an example of a follow-on waiver for a continuing
requirement:
* In March 2003, the Naval Inventory Control Point awarded a $1.2
million order under the federal supply schedule to provide information
technology services for the Portsmouth Naval Shipyard. The program
office prepared a sole-source justification, which the contracting
officer used to waive competition on the basis of the logical follow-on
exception. The waiver stated that the requirement was competed on two
previous occasions. Based on further review, we found that the
incumbent contractor was the only offeror in the two previous
competitions, the last of which was in 1999, and had provided
continuous services since 1992.
In addition, the DOD regulations do not explain what may be considered
a unique and highly specialized service. We found examples in which
contractors had provided their customers with the same services for
multiple years. The documentation supporting the waivers said that the
incumbent contractors had experience and knowledge gained through work
on prior orders and that a change in contractors would result in
increased cost or program delay. Often, documentation supporting the
waiver focused on the qualities of the contractor (experience and
knowledge gained over time), not the uniqueness of the services
provided. The following is an example:
* In February 2003, Naval Inventory Control Point awarded a $263,000
order under the federal supply schedule for the maintenance of hardware
and software for an engineering program. The basis of the waiver of
competition stated that only one contractor was capable of providing
unique or highly specialized services. However, the justification
supporting the waiver focused on the qualities of the contractor, such
as system and software operating knowledge that would ensure the
operation at existing levels. The justification said that the cost to
duplicate the contractor's expertise could not reasonably be expected
to be recovered through competition and that the time necessary to
develop another source would delay the program past published
milestones.
Another factor relevant to addressing program office requests for
waivers is the lack of specific requirements for the documentation
needed to support a waiver. The DOD regulations state that each order
for services exceeding $100,000 must be awarded on a competitive basis
unless the contracting officer waives this requirement on the basis of
a "written determination" that one of the exceptions applies to the
order. The regulations do not specify a particular format or the type
of information that is needed to support a waiver. In particular, there
is no requirement that the written determination describe the specific
facts and circumstances that justify waiving competition.[Footnote 10]
The determinations and supporting documentation we reviewed varied
greatly among the 34 waiver cases. Written support for the waivers was
in various types of documents and at various levels of specificity.
Although some contract files contained detailed justifications to
support a waiver, many files contained merely conclusions. For example,
one contract file for an order exceeding $17.4 million included only a
statement in the price negotiation memorandum that the task monitor in
the program office requested, and the contracting officer approved, the
order as a logical follow-on to a previously competed action. The
absence of detailed support for waivers makes it difficult for any
reviewer to assess whether individual waivers were granted
appropriately.
Finally, the DOD regulations do not require that waiver determinations
be approved above the level of the contracting officer, regardless of
the amount of the order. In contrast to section 803 requirements
applicable to task orders, part 6 of FAR, which governs the use of
other than full and open competition to award the underlying contracts,
limits a contracting officer's approval of a sole-source justification
to contracts that do not exceed $500,000. Part 6.304 specifies a higher
approval authority based on the dollar amount of the contract. These
requirements are intended to ensure that exceptions to competition on
higher dollar-value contracts are reviewed to ensure that exceptions
are used only in appropriate cases. In June 2004, FAR subpart 8.4 was
revised to establish approval thresholds similar to part 6 for waivers
of competition on federal supply schedule orders. The revised
regulation did not extend these approval requirements to orders under
multiple-award contracts.
Few Offers Received on Orders Available for Competition:
Competition was limited on the 40 orders available for competition.
Contracting officers generally awarded these orders based on
solicitations to contractors and the receipt and evaluation of offers.
These 40 orders represented over $38.9 million, or about 42 percent of
the total dollar value of the 74 orders we reviewed.
The level of competition for the 40 orders is summarized in figure 1
below.[Footnote 11] For 16 of the orders, the buying organization
received only one offer in response to a solicitation. The buying
organizations received two or more offers for 15 of the 40 orders
available for competition. For the remaining nine orders, contracting
officials did not solicit competitive offers. Instead, the nine orders
were awarded based on data previously submitted to the government. We
question whether the procedures used for these nine orders are
consistent with the requirements of section 803, and we are continuing
to pursue this issue with appropriate agency officials.
Figure 1: Offers for 40 Orders Open to Competition:
[See PDF for image]
[End of figure]
Orders Based on One Offer:
In 16 cases, the buying organizations awarded orders on the basis of
receiving only one offer, even though multiple contractors were
solicited. The following are examples of orders awarded on the basis of
a single offer:
* In July 2003, the Defense Contracting Command-Washington awarded an
order for about $1.4 million to provide education and training for the
Air Force Management School. The only two contractors on the multiple-
award contract were given an opportunity to submit offers. One
contractor, the incumbent, submitted a $1.4 million offer, but the
second contractor declined. The contract file included information
stating that both companies under the multiple-award contract had been
acquired by the same parent company and that the second contractor
rarely submits offers for work under this contract.
* In February 2003, the Naval Inventory Control Point awarded a
$300,000 order to remove and replace existing wiring and cables in a
Marine Corps facility. The only two contractors on a multiple-award
contract were given an opportunity to bid on this urgent requirement.
The contractors had only 1 working day to respond to the request for a
quote. One contractor was working at the facility on another project
and was able to respond to the government's 1-day deadline. The other
contractor did not submit a proposal because, according to the
contracting officer, its competitor was already in the building
conducting work. The Naval Inventory Control Point requested that the
sole offeror lower its proposed price of $545,000 and granted an
extension. Ultimately, the contractor agreed, and the award was made
about 3 weeks after the contractor's initial offer. According to the
contracting officer, the other multiple-award contractor was not
contacted about the work after it initially declined to submit an
offer.
In a prior report, we discussed insights from contractors about factors
they consider when deciding whether to submit a proposal for an
order.[Footnote 12] Contractor representatives emphasized that such
decisions entail a business judgment about the prospects of winning the
award because preparing a proposal can be costly. Contractor
representatives cited several factors that can contribute to a decision
not to submit a proposal. For example, a company may be reluctant to
pursue an opportunity if an incumbent exists, is perceived as having
strong qualifications, and is performing well. If the company does not
excel in that particular type of work, it may be inclined not to submit
a proposal. Other factors that can discourage a company from submitting
a proposal are unreasonably short time frames for preparing proposals
and starting work, and selection criteria that appear to favor
incumbent contractors.
Our current review also demonstrates that obtaining competition for
services can be difficult when there is an incumbent contractor that
may be perceived as having advantages over nonincumbents. For example,
incumbent contractors might have built strong working relationships
with program offices from meeting the needs of program offices. In
addition, incumbent contractors may be more likely to understand the
work requirements, particularly when the order involves continuing
services. Of the 40 orders available for competition, 21 were for
continuing services. The incumbent contractor received the order in 19
of these 21 cases.
Orders Based on Two or More Offers:
Fifteen of the 40 orders available for competition were awarded
following the receipt of two or more offers.[Footnote 13] The following
examples describe orders awarded on the basis of multiple offers:
* In April 2003, the Defense Information Systems Agency awarded an
order for about $346,000 for database technical support services. The
1-year award included options for 4 additional years, which could add
an additional $1.4 million to the value of the award. The new
requirement was competed among all nine contractors on a multiple-award
contract. Six of the nine contractors submitted an offer. The prices
(with options) ranged from about $1.75 million to about $3.4 million.
All of the proposals were technically acceptable. The selection was
based on the lowest-priced, technically acceptable offer.
* In February 2003, the Oklahoma City Air Logistics Center awarded an
order for about $145,000 for information technology support. The 1-year
award included options for 3 additional years of work, which could add
an additional $463,000 to the award. The center requested quotes from
eight contractors, including the incumbent contractor. The incumbent
contractor failed to submit a proposal prior to the due date and
requested an extension, which was denied. The center received three
offers--one at about $145,000 for the first year and two others at
about $200,000 and $190,000. The program office wanted the order to be
awarded to the highest offeror because any other choice would have an
adverse impact on various projects. In response, the contracting
officer worked to resolve various matters (such as security issues) and
ultimately awarded an order to the lowest offeror.
Orders Awarded without Solicitations:
Section 803 and the DOD regulations require DOD's buying organizations
to provide all contractors under a multiple-award contract with a
notice of the intent to make a purchase--including a description of the
work to be performed and the basis on which the selection will be made.
For nine orders, however, two buying organizations did not solicit
competitive offers for individual orders. Instead, the nine orders were
awarded under a selection process that based the award on data
previously submitted to the government.
Six of these nine orders were awarded at the Oklahoma City Air
Logistics Center under a multiple-award contract called Contractor
Field Teams. Under this multiple-award contract, the four participating
contractors were not solicited for individual orders. Instead, the
procedures outlined in the contract called for the contracting officer
to make the selections on the basis of 10 factors: (1) price; (2)
manning; (3) experience; (4) availability of skills; (5) site location;
(6) continuity of program; (7) security clearance; (8) selected factors
such as special requirements; (9) contractor performance; and (10)
diversity. Each of the four contractors was scored from zero to four
points for each factor, and the contractor with the highest total
received the task order. An internal file memorandum stated that the
contracting officer had all the needed information on all four
contractors already in place prior to making the selections. The
memorandum also stated that if the program were to issue an additional
solicitation each time a requirement was submitted, it would result in
lost time in accomplishing the work.
Five of the six orders that we reviewed under the multiple-award
contract at Oklahoma City were awarded to incumbent contactors for the
continuation of existing services. To further assess the impact of this
source selection process, we requested that representatives of the
Oklahoma City Air Logistics Center provide us with data on all awards
under this multiple-award contract for fiscal year 2003. The data
showed that 103 of 112 orders were awarded to incumbent contractors for
the continuation of ongoing services.
Similarly, for three orders, contractors were not solicited for
individual orders in the process used at the Naval Inventory Control
Point. Instead, they were notified of intended work at potential sites
for the fiscal year. Contracting officers at the buying organization
evaluated the contractors prior to the issuance of specific orders on
the basis of previously submitted data. The evaluation was based on a
cost model, which was developed in order to expedite the contract
process and reduce administrative costs.
The selection procedures used at the Oklahoma City Air Logistics Center
and by the Naval Inventory Control Point existed prior to the passage
of section 803 requirements. In our opinion, these procedures were not
designed to maximize competition for individual orders, and we question
whether they are consistent with section 803 requirements in terms of
providing fair notice of intent to make a purchase and fair opportunity
to responding contractors to submit an offer and have it fairly
considered. We are reviewing this matter further, and will follow up
with appropriate agency officials.
Conclusions:
Striking the right balance between achieving the benefits of
competition and retaining contractors that are satisfying customer
needs is a challenge for DOD. On the one hand, the frequent use of
waivers to competition requirements may be hindering DOD's ability to
obtain innovative solutions to problems and the best value for the
taxpayer. On the other hand, requests by program offices to waive
competition to retain the services of incumbent contractors are strong
indications that contractors are satisfying customer needs. Contracting
officers would be aided in meeting program office needs while adhering
to competition requirements through additional guidance on the proper
use of competition waivers. In addition, requiring more thorough
documentation by contracting officers of the circumstances that warrant
the use of waivers and establishing an approval process for the use of
waivers for multiple-award contracts would enhance oversight and help
to ensure that waivers are used only when appropriate.
Recommendations for Executive Action:
In order to promote more competition in the award of orders under
multiple-award and federal supply schedule contracts and to ensure that
waivers of competition are used only in appropriate cases, we recommend
that the Secretary of Defense take the following three actions:
* develop additional guidance on the circumstances under which the
logical follow-on and unique services waivers may be used,
* require that all waiver determinations be supported by documentation
describing in detail the circumstances that warrant the use of a
waiver, and:
* establish approval levels for waivers under multiple-award contracts
that are comparable to the approval levels for sole-source federal
supply schedule orders under subpart 8.4 of the Federal Acquisition
Regulation.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, DOD concurred with our
recommendations. DOD has opened a Defense Federal Acquisition
Regulation Supplement case to develop the necessary changes to the
DFARS and any additional supplemental guidance that may be appropriate
for procedures, guidance, and information. DOD anticipates the issuance
of a rule and supplemental guidance within 180 days. Also, DOD will
issue direction within 30 days to implement approval levels for waivers
under multiple-award contracts comparable to the revised approval
levels at FAR 8.4 for federal supply schedule orders. These approval
levels will be effective October 1, 2004.
Specifically, DOD will develop additional guidance on the circumstances
under which the logical follow-on and unique and highly specialized
services waivers may be used. DOD agrees that additional guidance will
facilitate more consistent and appropriate use of waivers.
In addition, DOD will require that all waiver determinations be
supported by documentation describing in detail the circumstances that
warrant the use of a waiver. DOD agrees that it is appropriate that
each waiver be accompanied by documentation that contains sufficient
facts and rationale to demonstrate the propriety of the waiver.
Lastly, DOD said it will establish approval levels for waivers under
multiple-award contracts comparable to the approval levels established
in the FAR for sole-source federal supply schedule orders. DOD agrees
that elevating the approval level above the contracting officer for
higher-dollar orders increases the emphasis on the importance of
competition. Furthermore, it ensures that orders are treated the same,
whether a federal supply schedule or a multiple-award contract is used.
DOD's comments appear in appendix III.
We are sending copies of this report to the Administrator of General
Services, the Administrator of the Office of Federal Procurement
Policy, the Director of the Office of Management and Budget, and
interested congressional committees. We will also make copies available
to others upon request. In addition, this report will be available at
no charge on the GAO Web site at http://www.gao.gov.
Please contact me at (202) 512-4841, or Blake Ainsworth at (202) 512-
4609, if you have any questions regarding this report. Major
contributors to this report were Ken Graffam, Martin Lobo, Gary
Middleton, Jeffrey Rose, Ralph Roffo, Paul Williams, Robert Ackley, and
Marie Ahearn.
William T. Woods:
Director:
Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
The Department of Defense (DOD) acquires billions of dollars worth of
services each year using various multiple-award contracts and the
General Services Administration's federal supply schedule. To enhance
competition under such contracts, section 803 of the National Defense
Authorization Act for Fiscal Year 2002 included new requirements to
help increase the number of competitive offers on DOD orders for
services worth more than $100,000. Our objectives were to (1) identify
the extent to which the buying organizations waived the competition
requirements of section 803, and (2) determine the level of competition
for orders available for competition. These objectives allowed us to
focus on the outcome that section 803 was intended to achieve. We did
not independently determine the validity of the competition waivers,
nor did we assess whether the buying organizations complied with each
of the specific requirements of section 803.
To determine the locations to visit, we obtained a computer file from
DOD, which listed DOD's contracting actions using DOD's Individual
Contracting Action Report (DD-350). The database provided contracting
actions from January 1 to June 30, 2003. From these data, we were able
to identify the largest users during this period of multiple-award
orders and federal supply schedule orders. We selected five buying
organizations that were large users of both multiple-award contracts
and the federal supply schedule. The selected buying organizations
represented a mix of Army, Navy, Air Force, and DOD-wide buying
organizations--including the Communications-Electronics Command, Fort
Monmouth, New Jersey; Defense Contracting Command-Washington,
Washington, D.C; Defense Information Systems Agency, Scott Air Force
Base (AFB), Illinois; Naval Inventory Control Point, Mechanicsburg,
Pennsylvania; and Oklahoma City Air Logistics Center, Tinker AFB,
Oklahoma.
We also used the DD-350 Individual Contracting Action Report's database
to randomly select the orders for review at the five buying
organizations. These data represented contracting actions from January
1 to June 30, 2003, that were subject to the section 803 requirements-
-multiple-award contract and federal supply schedule orders for
services worth more than $100,000. We prepared two lists of contracting
actions for each of these five buying organizations: one for orders
under multiple-award contracts and one for orders under the federal
supply schedule. Orders were selected for review using random numbers
tables.[Footnote 14] At each location, our goal was to review 16
randomly selected orders, 8 multiple-award orders, and 8 federal supply
schedule orders. For each contract, we reviewed the order file, and in
many cases, interviewed the contracting officer and other contracting
officials to discuss the file.
Ultimately, we reviewed 74 randomly selected orders at five DOD buying
organizations to determine the level of competition for orders subject
to the section 803 requirements.[Footnote 15] As table 4 shows, the
basic awards for these 74 orders (without options for additional work)
represented over $92.3 million.
Table 4: Number and Dollar Value of Orders GAO Reviewed at Five DOD
Buying Organizations:
Dollars in millions.
Buying organizations: Communications-Electronics Command;
Orders under multiple-award contracts: Number of orders: 8;
Orders under multiple-award contracts: Dollars: $7.2;
Orders under federal supply schedule: 6;
Orders under federal supply schedule: Dollars: $7.7;
Total number of orders: 14;
Total dollars: $14.9.
Buying organizations: Naval Inventory Control Point;
Orders under multiple-award contracts: Number of orders: 5;
Orders under multiple-award contracts: Dollars: $7.8;
Orders under federal supply schedule: 8;
Orders under federal supply schedule: Dollars: $9.3;
Total number of orders: 13;
Total dollars: $17.1.
Buying organizations: Defense Contracting Command-Washington;
Orders under multiple-award contracts: Number of orders: 7;
Orders under multiple-award contracts: Dollars: $7.3;
Orders under federal supply schedule: 8;
Orders under federal supply schedule: Dollars: $13.6;
Total number of orders: 15;
Total dollars: $20.9.
Buying organizations: Defense Information Systems Agency;
Orders under multiple-award contracts: Number of orders: 8;
Orders under multiple-award contracts: Dollars: $28.8;
Orders under federal supply schedule: 8;
Orders under federal supply schedule: Dollars: $2.4;
Total number of orders: 16;
Total dollars: $31.2.
Buying organizations: Oklahoma City Air Logistics Center;
Orders under multiple-award contracts: Number of orders: 8;
Orders under multiple-award contracts: Dollars: $5.2;
Orders under federal supply schedule: 8;
Orders under federal supply schedule: Dollars: $3.0;
Total number of orders: 16;
Total dollars: $8.2.
Total;
Orders under multiple-award contracts: Number of orders: 36;
Orders under multiple-award contracts: Dollars: $56.3;
Orders under federal supply schedule: 38;
Orders under federal supply schedule: Dollars: $36.0;
Total number of orders: 74;
Total dollars: $92.3.
Sources: DOD (data); GAO (analysis).
[End of table]
We conducted our review from May 2003 through May 2004 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Summary Tables on Orders Selected for Review:
The three tables below provide a summary of the orders selected for
review at the five buying organizations we visited. Table 5 shows a
breakdown of the orders with waivers to competition and orders open to
competition at the various buying organizations. Tables 6 and 7 show
the level of competition (number of offers) for orders open to
competition under the federal supply schedule and multiple-award
contracts.
Table 5: Summary of the Orders Selected for Review at Five Buying
Organizations:
Buying organizations: Communications-Electronics Command (CECOM);
Number of orders on federal supply schedule: Waivers: 3;
Number of orders on federal supply schedule: Open to competition: 3;
Number of orders on multiple-award contracts: 1;
Number of orders on multiple- award contracts: Open to competition: 7;
Total number orders: 14.
Buying organizations: Naval Inventory Control Point (NICP);
Number of orders on federal supply schedule: Waivers: 8;
Number of orders on federal supply schedule: Open to competition: N/A;
Number of orders on multiple-award contracts: N/A;
Number of orders on multiple- award contracts: Open to competition: 5;
Total number orders: 13.
Buying organizations: Defense Contracting Command-Washington (DCCW);
Number of orders on federal supply schedule: Waivers: 5;
Number of orders on federal supply schedule: Open to competition: 3;
Number of orders on multiple-award contracts: 3;
Number of orders on multiple- award contracts: Open to competition: 4;
Total number orders: 15.
Buying organizations: Defense Information Systems Agency (DISA);
Number of orders on federal supply schedule: Waivers: 4;
Number of orders on federal supply schedule: Open to competition: 4;
Number of orders on multiple-award contracts: 4;
Number of orders on multiple-award contracts: Open to competition: 4;
Total number orders: 16.
Buying organizations: Oklahoma City Air Logistics Center (OC-ALC);
Number of orders on federal supply schedule: Waivers: 4;
Number of orders on federal supply schedule: Open to competition: 4;
Number of orders on multiple-award contracts: 2;
Number of orders on multiple- award contracts: Open to competition: 6;
Total number orders: 16.
Total;
Number of orders on federal supply schedule: Waivers: 24;
Number of orders on federal supply schedule: Open to competition: 14;
Number of orders on multiple-award contracts: 10;
Number of orders on multiple-award contracts: Open to competition: 26;
Total number orders: 74.
Sources: DOD (data); GAO (analysis).
[End of table]
Table 6: Extent of Competition for 14 Orders Open to Competition under
the Federal Supply Schedule at Five Buying Organizations:
Buying organizations: CECOM;
Number of orders under the federal supply schedule: Open to
competition: 3;
Number of orders under the federal supply schedule: One offer: 2;
Number of orders under the federal supply schedule: Two offers: 1;
Number of orders under the federal supply schedule: Three or more
offers: N/A.
Buying organizations: NICP;
Number of orders under the federal supply schedule: Open to
competition: N/A;
Number of orders under the federal supply schedule: One offer: N/A;
Number of orders under the federal supply schedule: Two offers: N/A;
Number of orders under the federal supply schedule: Three or more offers: N/A.
Buying organizations: DCCW;
Number of orders under the federal supply schedule: Open to
competition: 3;
Number of orders under the federal supply schedule: One offer: 1;
Number of orders under the federal supply schedule: Two offers: 1;
Number of orders under the federal supply schedule: Three or more
offers: 1.
Buying organizations: DISA;
Number of orders under the federal supply schedule: Open to
competition: 4;
Number of orders under the federal supply schedule: One offer: 1;
Number of orders under the federal supply schedule: Two offers: 1;
Number of orders under the federal supply schedule: Three or more
offers: 2.
Buying organizations: OC-ALC;
Number of orders under the federal supply schedule: Open to
competition: 4;
Number of orders under the federal supply schedule: One offer: N/A;
Number of orders under the federal supply schedule: Two offers: N/A;
Number of orders under the federal supply schedule: Three or more
offers: 4.
Total;
Number of orders under the federal supply schedule: Open to
competition: 14;
Number of orders under the federal supply schedule: One offer: 4;
Number of orders under the federal supply schedule: Two offers: 3;
Number of orders under the federal supply schedule: Three or more
offers: 7.
Sources: DOD (data); GAO (analysis).
[End of table]
Table 7: Extent of Competition for 26 Orders Open to Competition under
Multiple-Award Contracts at Five Buying Organizations:
Buying organizations: CECOM;
Number of orders under multiple-award contracts: Open to competition:
7;
Number of orders under multiple- award contracts: One offer: 4;
Number of orders under multiple-award contracts: Two offers: 2;
Number of orders under multiple-award contracts: Three or more offers:
1;
Number of orders under multiple- award contracts: No offers solicited:
N/A.
Buying organizations: NICP;
Number of orders under multiple-award contracts: Open to competition:
5;
Number of orders under multiple- award contracts: One offer: 2;
Number of orders under multiple-award contracts: Two offers: N/A;
Number of orders under multiple-award contracts: Three or more offers:
N/A;
Number of orders under multiple-award contracts: No offers solicited:
3.
Buying organizations: DCCW;
Number of orders under multiple-award contracts: Open to competition:
4;
Number of orders under multiple- award contracts: One offer: 4;
Number of orders under multiple-award contracts: Two offers: N/A;
Number of orders under multiple-award contracts: Three or more offers:
N/A;
Number of orders under multiple-award contracts: No offers solicited:
N/A.
Buying organizations: DISA;
Number of orders under multiple-award contracts: Open to competition:
4;
Number of orders under multiple- award contracts: One offer: 2;
Number of orders under multiple-award contracts: Two offers: N/A;
Number of orders under multiple-award contracts: Three or more offers:
2;
Number of orders under multiple- award contracts: No offers solicited:
N/A.
Buying organizations: OC-ALC;
Number of orders under multiple-award contracts: Open to competition:
6;
Number of orders under multiple- award contracts: One offer: N/A;
Number of orders under multiple- award contracts: Two offers: N/A;
Number of orders under multiple- award contracts: Three or more offers:
N/A;
Number of orders under multiple-award contracts: No offers solicited:
6.
Total;
Number of orders under multiple-award contracts: Open to competition:
26;
Number of orders under multiple- award contracts: One offer: 12;
Number of orders under multiple-award contracts: Two offers: 2;
Number of orders under multiple-award contracts: Three or more offers:
3;
Number of orders under multiple- award contracts: No offers solicited:
9.
Sources: DOD (data); GAO (analysis).
[End of table]
[End of section]
Appendix III: Comments from the Department of Defense:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
3000 DEFENSE PENTAGON:
WASHINGTON, DC 20301-3000:
ACQUISITION, TECHNOLOGY AND LOGISTICS:
DPAP/DARS:
JUL 19 2004:
Mr. William T. Woods:
Director, Acquisition and Sourcing Management:
U.S. General Accounting Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Woods:
This is the Department of Defense response to the GAO draft report,
"CONTRACT MANAGEMENT: Guidance Needed to Promote Competition for
Defense Task Orders," dated June 22, 2004 (GAO Code 120245/GAO-04-874).
I appreciate the opportunity to comment on the draft report. I concur
with the GAO recommendations as discussed in the enclosure. I have
opened a Defense Federal Acquisition Regulation Supplement (DFARS) case
to develop necessary changes to the DFARS and any additional
supplemental guidance that may be appropriate for procedures, guidance
and information. I anticipate issuance of a rule and supplemental
guidance within 180 days.
Additionally, I will issue direction within the next 30 days to
implement approval levels for waivers comparable to the revised
approval levels at FAR 8.4 for Federal Supply Schedules. I will extend
these same approval levels for waivers on orders against multiple award
contracts to be effective October 1, 2004.
Please contact Ms. Teresa Brooks, 703-602-0326, teresa.brooks@osd.mil,
should you have any questions.
Sincerely,
Signed by:
Deidre A. Lee:
Director, Defense Procurement and Acquisition Policy:
Enclosure: As stated:
GAO DRAFT REPORT - DATED JUNE 22, 2004 GAO CODE 120245/GAO-04-874:
"CONTRACT MANAGEMENT: GUIDANCE NEEDED TO PROMOTE COMPETITION FOR
DEFENSE TASK ORDERS":
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
develop additional guidance on the circumstances under which the
logical follow-on and unique services waivers may be used. (p. 16/GAO
Draft Report):
DOD RESPONSE: Concur. The Department will develop additional guidance
on the circumstances under which the logical follow-on and unique or
highly specialized services waivers may be used. The Department agrees
that additional guidance will facilitate more consistent and
appropriate use of waivers.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
require that all waiver determinations be supported by documentation
describing in detail the circumstances that warrant use of a waiver.
(p. 16/GAO Draft Report):
DOD RESPONSE: Concur. The Department will require that all waiver
determinations be supported by documentation describing in detail the
circumstances that warrant the use of a waiver. The Department agrees
it is appropriate that each waiver be accompanied by documentation that
contains sufficient facts and rationale to demonstrate the propriety of
the waiver.
RECOMMENDATION 3: The GAO recommended that the Secretary of Defense
establish approval levels for waivers under multiple-award contracts
that are comparable to the approval levels for sole-source federal
supply schedule orders under subpart 8.4 of the Federal Acquisition
Regulation (p. 16/GAO Draft Report):
DOD RESPONSE: Concur. The Department will establish approval levels for
waivers under multiple award contracts, comparable to the approval
levels established in the Federal Acquisition Regulation (effective
July 19, 2004) for sole source federal supply schedule orders. The
Department agrees that elevating the approval level above the
contracting officer for higher dollar orders increases the emphasis on
the importance of competition. Further, it ensures that orders are
treated the same, whether a federal supply schedule or a multiple award
contract is used.
[End of section]
FOOTNOTES
[1] Multiple-award contracts are contracts awarded to multiple
contractors under the same solicitation for the same or similar
products or services. Task orders are awarded under these contracts
based on competition between the multiple contractors. Under the
federal supply schedule program, GSA has negotiated contracts with
thousands of companies that supply commercial products and services.
[2] We and the DOD Inspector General have issued a number of reports on
the level of competition for services. See U.S. General Accounting
Office, Acquisition Reform: Multiple-award Contracting at Six Federal
Organizations, GAO/NSIAD-98-215 (Washington, D.C.: Sept. 30, 1998);
Contract Management: Few Competing Proposals for Large DOD Information
Technology Orders, GAO/NSIAD-00-56 (Washington, D.C.: Mar. 20, 2000);
Department of Defense Inspector General, Contracts for Professional,
Administrative, and Management Support Services, D-2000-100
(Washington, D.C.: Mar. 10, 2000); Contract Management: Not Following
Procedures Undermines Best Pricing under GSA's Schedule, GAO-01-125
(Washington, D.C., Nov. 28, 2000); and Department of Defense Inspector
General, Multiple Award Contracts for Services, D-2001-189 (Washington,
D.C.: Sept. 30, 2001).
[3] Pub. L. No. 107-107 (Dec. 28, 2001).
[4] Section 804 of the National Defense Authorization Act for Fiscal
Year 2000 (Pub. L. No. 106-65, Oct. 5, 1999) required that we review
the use of task and delivery order contracts by executive agencies. Our
first report in response to this mandate, Contract Management: Civilian
Agency Compliance with Revised Task and Delivery Order Regulations,
GAO-03-983 (Washington, D.C., Aug. 29, 2003), excluded DOD because new
requirements applicable only to DOD under section 803 of the National
Defense Authorization Act for Fiscal Year 2002 had only recently become
effective. As agreed with committee staff, our current review of task
orders subject to the section 803 requirements was needed to satisfy
fully the section 804 mandate.
[5] The Federal Acquisition and Streamlining Act of 1994 provided
statutory authority for federal agencies to enter into multiple-award,
task and delivery order contracts. The act and the Federal Acquisition
Regulation (FAR), Part 16.505, provide guidance on ordering
requirements and the competitive process. Section 804 of the National
Defense Authorization Act for Fiscal Year 2000 required more specific
guidance to agencies on the appropriate use of task and delivery order
contracts, which led to revisions in the FAR. See GAO-03-983.
[6] Under the Competition in Contracting Act of 1984, procedures
established by GSA for the federal supply schedule program are
competitive if participation has been open to all responsible sources
and orders result in the lowest overall cost alternative to meet the
needs of the government. Competition requirements are included in the
FAR, subpart 8.4.
[7] The Defense Federal Acquisition Regulation Supplement citations are
DFARS 216.505-70 for orders under multiple-award contracts and DFARS
208.404-70 for orders under the federal supply schedule.
[8] We did not attempt to assess whether the specific facts surrounding
the 34 waivers justified the exceptions cited for granting the waivers,
in large part because of the absence of support for the waivers in many
of the contract files.
[9] In addition to the DOD regulations, FAR section 16.505(b)(4) also
applies to multiple-award contract orders made by or on behalf of DOD
and provides some additional but limited guidance on logical follow-on
waivers. It states that if the agency uses the logical follow-on
exception, the decision documentation for orders shall include the
rationale for placement and price as well as why the relationship
between the initial order and the follow-on is logical (e.g., in terms
of scope, period of performance, or value).
[10] FAR section 16.505(b)(4), which applies to multiple-award contract
orders made by or on behalf of DOD, requires the contract file to
identify the basis for using an exception to the fair opportunity
process. Additionally, it generally provides that the contracting
officer shall document in the contract file the rationale for the
placement and price of each order, including the basis for the award
and the rationale for any trade-offs among cost or price and noncost
considerations in making the award decision. For federal supply orders
under our review, the DOD regulation provides that the documentation
procedures of FAR section 8.404(b)(7) apply. However, this FAR
provision does not specify a particular format or the type of
information that is needed to support a waiver. In June 2004, FAR
subpart 8.4 was revised and FAR section 8.404(b)(7) was deleted. The
revised FAR section 8.405-6 now provides that sole source orders be
justified according to FAR section 6.303-2, modified for services.
Additionally, revised FAR section 8.405-7 now provides for
documentation of the circumstances and rationale for restricting
consideration of schedule contractors to fewer than that required.
[11] Appendix II provides detailed tables that characterize the results
of this analysis.
[12] See GAO/NSIAD-00-56.
[13] Some multiple-award contracts that we reviewed had only two
contractors that were eligible to compete for awards.
[14] We did not assess the reliability of the database used to select
the sample. For several reasons, some of the originally selected orders
had to be replaced with other randomly selected orders. For example,
some orders were incorrectly coded as services rather than products.
Also, some contracting actions were solely to provide additional
funding for existing contracts.
[15] At the Naval Inventory Control Point, all multiple-award contract
orders in the DD-350 database were miscoded and discarded. However,
Control Point staff members were able to identify five orders meeting
our criteria (not listed in DD-350), which we reviewed. Also, at the
Communications-Electronics Command, many orders were discarded for
several reasons. We found only six federal supply schedule orders that
met our criteria; we reviewed all six orders.
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