Small Business Administration Contracting Practices

Gao ID: 115034 April 27, 1981

Procurement statutes require that competition be sought to the maximum extent practical. To this end, the Government must describe its needs in the broadest possible terms by publicizing its intent to purchase in the Commerce Business Daily and by using bidders' mailing lists. It must also award contracts to the firms or individuals whose offers are most advantageous to the Government. When sealed bids are submitted, this means award to the lowest priced, responsive, responsible bidder. In negotiated procurement, technical merit may outweigh cost, so that award need not be made at the lowest price. There are 15 statutory exceptions to the general requirement for formal advertising. These include urgency and the fact that it is not practicable to secure competition by formal advertising. A sole-source award must be justified on the basis of specific facts of the procurement. The contracting agency must not only be sure that a competitive award cannot be made, but also must act to avoid subsequent sole-source awards. Sole-source awards are closely scrutinized by GAO. They cannot be justified merely because it is easier or more convenient for an agency to deal with an incumbent contractor, because the agency is familiar with a particular supplier or its equipment, or simply because it prefers one contractor over others who could compete for the work in question. Even when contracts are set aside for small business firms or firms operating in labor surplus areas, there must be competition among those firms. Despite the requirements for competition, sole-source contracting frequently occurs. When an agency seeks management support services, it must be careful to avoid contracting for work which should be performed in-house by its own employees. Service contracts should not be used to circumvent civil service rules regarding hiring and compensation. Whether the contract is proper depends on such things as the degree of Government supervision and control over the work being performed. Informal commitments by contracting officers may also reduce or eliminate competition. The Chiles Bill proposed the use of specifications based on performance, rather than design, as a way of encouraging competition. It would require that agencies issue a notice of intent to make a sole-source award at least 30 days in advance of the proposed award. In addition, a Uniform Procurement System has been proposed to encourage competition.

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