a

GAO

United States Government Accountability Office

Report to Congressional Committees

July 2004 CONTRACT 

MANAGEMENT

Guidance Needed to 

Promote Competition 

for Defense Task 

Orders

GAO-04-874
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. 

Highlights of GAO-04-874, a report to 

congressional committees 

July 2004

CONTRACT MANAGEMENT 

Guidance Needed to Promote 

Competition for Defense Task Orders 

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. 

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. 

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 

Waivers of competition

No offers solicited 

Three or more offers

Two offers

One offer

34

9

10

5

16

 







Sources: DOD (data); GAO (analysis).

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. 
Page i GAO-04-874 Defense Task Orders 

Letter 1

Results in Brief 3

Background 4

Frequent Use of Competition Waivers Reflects Preference to 

Retain Incumbent Contractors 6

Few Offers Received on Orders Available for Competition 12

Conclusions 17

Recommendations for Executive Action 17

Agency Comments and Our Evaluation 17

Appendix I Scope and Methodology 20 

Appendix II Summary Tables on Orders Selected for Review 23 

Appendix III Comments from the Department of Defense 25 

Tables 

Table 1: Selected Buying Organizations 6

Table 2: Waivers of Competition at Five Buying Organizations 7

Table 3: Basis for Waivers and Frequency Cited 8

Table 4: Number and Dollar Value of Orders GAO Reviewed at Five 

DOD Buying Organizations 21

Table 5: Summary of the Orders Selected for Review at Five Buying 

Organizations 23

Table 6: Extent of Competition for 14 Orders Open to Competition 

under the Federal Supply Schedule at Five Buying 

Organizations 244

Table 7: Extent of Competition for 26 Orders Open to Competition 

under Multiple-Award Contracts at Five Buying 

Organizations 24

Figure 

Figure 1: Offers for 40 Orders Open to Competition 13

Contents 
Page ii GAO-04-874 Defense Task Orders 

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 

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Page 1 GAO-04-874 Defense Task Orders 

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.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 

 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. 

 

United States Government Accountability Office

Washington, DC 20548 
Page 2 GAO-04-874 Defense Task Orders 

competition for orders that Congress had envisioned.2 Congress responded 

by enacting section 803 of the National Defense Authorization Act for 

Fiscal Year 2002.3

 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. 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 

 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, GAO03-983 (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. 
Page 3 GAO-04-874 Defense Task Orders 

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. 

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 

Results in Brief 
Page 4 GAO-04-874 Defense Task Orders 

levels above the contracting officer for waivers of competition on orders 

exceeding specified thresholds. 

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. 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.6

 These procedures require agencies to request 

 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. 

Background 
Page 5 GAO-04-874 Defense Task Orders 

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,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 multipleaward 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 DODwide, Army, Navy, and Air Force buying organizations. (See appendix I for 

more information on our scope and methodology.) 

 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. 
Page 6 GAO-04-874 Defense Task Orders 

Table 1: Selected Buying Organizations 

Buying organization Location 

Communications-Electronics Command (CECOM) Fort Monmouth, N.J. 

Naval Inventory Control Point (NICP) Mechanicsburg, Pa. 

Defense Contracting Command-Washington (DCCW) Washington, D.C. 

Defense Information Systems Agency (DISA) Scott Air Force Base (AFB), Ill.

Oklahoma City Air Logistics Center (OC-ALC) Tinker AFB, Okla. 

Source: GAO. 

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. 

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. 

Frequent Use of 

Competition Waivers 

Reflects Preference to 

Retain Incumbent 

Contractors 

Competition Waivers Used 

Frequently 
Page 7 GAO-04-874 Defense Task Orders 

Table 2: Waivers of Competition at Five Buying Organizations 

Dollars in millions 

Total orders reviewed Waivers of competition 

Buying 

organizations 

Numbers 

of orders Dollars 

Numbers 

of orders Dollars

CECOM 14 $14.9 4 $0.9

NICP 13 17.1 8 9.3

DCCW 15 20.9 8 16.6

DISA 16 31.2 8 23.2

OC-ALC 16 8.2 6 3.3

Total 74 $92.3 34 $53.3

Sources DOD (data); GAO (analysis). 

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. 
Page 8 GAO-04-874 Defense Task Orders 

Table 3: Basis for Waivers and Frequency Cited 

Waiver basis 

Number of 

times used 

Urgent need: The services are urgently needed, and competition 

would result in unacceptable delays. 4

Unique or highly specialized services: Only one contractor is capable 

of providing services that are unique or highly specialized. 14

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. 12

Minimum guarantee: It is necessary to place the order with a 

contractor to satisfy a minimum guarantee. 0

Statutory purchase: A statute expressly authorizes or requires that 

the purchase be made from a specified source. 0

Multiple exceptions and other. 4

Total 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). 

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. 

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 

Safeguards Lacking for 

Addressing Requests to 

Waive Competition 
Page 9 GAO-04-874 Defense Task Orders 

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.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.9

 We found three examples in which contracting officers deemed an 

 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 multipleaward 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). 
Page 10 GAO-04-874 Defense Task Orders 

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 
Page 11 GAO-04-874 Defense Task Orders 

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.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 

 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. 
Page 12 GAO-04-874 Defense Task Orders 

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. 

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.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. 

 11 Appendix II provides detailed tables that characterize the results of this analysis. 

Few Offers Received 

on Orders Available 

for Competition 
Page 13 GAO-04-874 Defense Task Orders 

Figure 1: Offers for 40 Orders Open to Competition 

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 

Orders Based on One Offer 

One offer

No offers solicited 

Three or more offers

Two offers

16

9

10

5









Sources: DOD (data); GAO (analysis).
Page 14 GAO-04-874 Defense Task Orders 

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. 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. 

 12 See GAO/NSIAD-00-56.
Page 15 GAO-04-874 Defense Task Orders 

Fifteen of the 40 orders available for competition were awarded following 

the receipt of two or more offers.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 multipleaward 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. 

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. 

 13 Some multiple-award contracts that we reviewed had only two contractors that were 

eligible to compete for awards. 

Orders Based on Two or 

More Offers 

Orders Awarded without 

Solicitations 
Page 16 GAO-04-874 Defense Task Orders 

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. 
Page 17 GAO-04-874 Defense Task Orders 

We are reviewing this matter further, and will follow up with appropriate 

agency officials. 

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. 

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. 

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 

Conclusions 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 
Page 18 GAO-04-874 Defense Task Orders 

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. 
Page 19 GAO-04-874 Defense Task Orders 

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 
Appendix I: Scope and Methodology 

Page 20 GAO-04-874 Defense Task Orders 

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 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 21 GAO-04-874 Defense Task Orders 

selected for review using random numbers tables.1 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.2

 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 

Orders under multipleaward contracts Orders under federal supply 

schedule 

 

Buying organizations 

Number 

of orders Dollars

Number 

of orders Dollars 

Total 

number 

of orders Total dollars

Communications-Electronics 

Command 8 $7.2 6 $7.7 14 $14.9

Naval Inventory Control Point 5 7.8 8 9.3 13 17.1

Defense Contracting CommandWashington 7 7.3 8 13.6 15 20.9

Defense Information Systems 

Agency 8 28.8 8 2.4 16 31.2

Oklahoma City Air Logistics Center 8 5.2 8 3.0 16 8.2

Total 36 $56.3 38 $36.0 74 $92.3

Sources: DOD (data); GAO (analysis). 

 1

 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. 

2

 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. 
Appendix I: Scope and Methodology 

Page 22 GAO-04-874 Defense Task Orders 

We conducted our review from May 2003 through May 2004 in accordance 

with generally accepted government auditing standards. 
Appendix II: Summary Tables on Orders 

Selected for Review 

Page 23 GAO-04-874 Defense Task Orders 

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 

Number of orders on 

federal supply schedule 

Number of orders on 

multiple-award contracts 

Buying organizations Waivers

Open to 

competition Waivers

Open to 

competition

Total number 

orders

Communications-Electronics 

Command (CECOM) 3 3 1 7 14

Naval Inventory Control Point 

(NICP) 8 5 13

Defense Contracting 

Command–Washington (DCCW) 5334 15

Defense Information Systems 

Agency (DISA) 4444 16

Oklahoma City Air Logistics 

Center (OC-ALC) 4 4 2 6 16

Total 24 14 10 26 74

Sources: DOD (data); GAO (analysis). 

Appendix II: Summary Tables on Orders 

Selected for Review 
Appendix II: Summary Tables on Orders 

Selected for Review 

Page 24 GAO-04-874 Defense Task Orders 

Table 6: Extent of Competition for 14 Orders Open to Competition under the Federal 

Supply Schedule at Five Buying Organizations 

Number of orders under the federal supply schedule 

Buying 

organizations 

Open to 

competition One offer Two offers 

Three or more 

offers 

CECOM 3 2 1

NICP 

DCCW 3 1 1 1

DISA 4 1 1 2

OC-ALC 4 4

Total 14 4 3 7

Sources: DOD (data); GAO (analysis). 

Table 7: Extent of Competition for 26 Orders Open to Competition under MultipleAward Contracts at Five Buying Organizations 

Number of orders under multiple-award contracts 

Buying 

organizations 

Open to 

competition One offer Two offers 

Three or 

more offers 

No offers 

solicited

CECOM 7 4 2 1

NICP 5 2 3

DCCW 4 4 

DISA 4 2 2

OC-ALC 6 6

Total 26 12 2 3 9

Sources: DOD (data); GAO (analysis). 
Appendix III: Comments from the Department 

of Defense 

Page 25 GAO-04-874 Defense Task Orders 

Appendix III: Comments from the 

Department of Defense 
Appendix III: Comments from the Department 

of Defense 

Page 26 GAO-04-874 Defense Task Orders (120245) 
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