DEFENSE 

CONTRACTING

Improved Policies and 

Tools Could Help 

Increase Competition 

on DOD’s National 

Security Exception 

Procurements

Report to Congressional Committees

January 2012

GAO-12-263

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-263, a report to

congressional committees

January 2012

DEFENSE CONTRACTING

Improved Policies and Tools Could Help Increase 

Competition on DOD’s National Security Exception 

Procurements

Why GAO Did This Study

Competition is a critical tool for 

achieving the best return on the 

government’s investment. Federal 

agencies are generally required to 

award contracts competitively, but they 

are permitted to use other than full and 

open competition in certain situations, 

such as when open competition would 

reveal information that would harm 

national security. GAO examined 

DOD’s use of this provision, known as 

the national security exception. It 

requires the use of competition to the 

greatest extent practicable. GAO 

assessed (1) the pattern of DOD’s use 

of the national security exception; 

(2) DOD’s processes for using the 

exception; and (3) the extent to which 

DOD achieved competition under the 

exception. GAO analyzed federal 

procurement data; reviewed a 

selection of 27 contract files and 

justifications citing the exception from 

the Army, Navy, and Air Force, based 

on largest obligations, frequent users, 

and a range of procurement types, as 

well as five contracts from DOD 

intelligence agencies; and interviewed 

DOD contracting and program officials.

What GAO Recommends

GAO recommends that DOD issue 

guidance clarifying when security 

sensitive contracting data must be 

reported, monitor the impact of new Air 

Force class justification processes, and 

consider using tools that facilitate 

market research in a secure 

environment. DOD concurred with two 

recommendations and partially 

concurred with the recommendation on 

clarifying guidance, citing pending 

revisions to regulations. GAO 

continues to believe that clarifying 

guidance is needed.

What GAO Found

DOD’s use of the national security exception is small—about 2 percent of the 

dollar value of its total use of exceptions to full and open competition, but gaps in 

federal procurement data limit GAO’s ability to determine the full extent of DOD’s 

use. DOD procures a range of goods and services under this exception, and 

according to federal procurement data, the Air Force accounted for about 74 

percent of DOD’s use during fiscal years 2007 through 2010. However, DOD 

intelligence agencies and special access programs frequently use the exception, 

but are generally excluded from reporting procurement data. While an Office of 

the Secretary of Defense memorandum exempts three of the intelligence 

agencies from reporting such data, DOD policy on reporting sensitive 

procurements for other military department programs is not clear.

For most national security exception contract actions GAO reviewed, DOD used 

a single justification and approval document that applies to multiple contracts—

known as a class justification. Among those reviewed, $3.3 billion of $3.4 billion 

was obligated under contracts that used class justifications, which reduce the 

steps required to proceed with individual contract actions that do not use full and 

open competition. According to contracting officials, the increased flexibility of 

national security exception class justifications helps meet mission needs. 

However, in the Air Force, concerns about the reduced management review of 

these contracts have led to changes in the process for approving individual 

contract actions using class justifications. Nevertheless, all of the justifications 

GAO reviewed met Federal Acquisition Regulation requirements.

GAO’s analysis of federal procurement data on about 11,300 contract actions 

found that, from fiscal years 2007 through 2010, only 16 percent of all obligations 

under those actions by the military departments under the national security 

exception received more than one proposal, as shown in the figure below. 

Contract files and contracting officials cited a limited pool of companies with the 

right capabilities, the difficulty of changing from an established vendor, and 

limited tools for soliciting competitive bids as reasons for their inability to obtain 

more competition. Twelve of the 27 military department contract files GAO

reviewed did not include a record of market research, and others included few 

details on the results. Two intelligence agencies that reported using the national 

security exception for all contracting reported achieving comparatively high levels 

of competition. Both have systems that catalogue firms, capabilities, and 

solicitations that are used to facilitate security sensitive market research.

Number of Offers Received on Armed Service National Security Exception Contracts by 

Percentage of Dollars Obligated, Fiscal Years 2007 through 2010

View GAO-12-263. For more information, 

contact Belva Martin at (202) 512-4841 or 

martinb@gao.gov.
Page i GAO-12-263 Defense Contracting

Letter 1 

Background 3

DOD’s Use of the National Security Exception Covers a Range of 

Goods and Services, but Gaps in Data Limit Ability to Determine 

Full Extent of Use 6

DOD Often Uses a Single Document to Justify Multiple Actions 

under the National Security Exception, and All Justifications 

Met Requirements 12

Level of Competition under the National Security Exception Varied 

Greatly Within DOD 20

Conclusions 25

Recommendations for Executive Action 26

Agency Comments and Our Evaluation 26

Appendix I Scope and Methodology 29

Appendix II Comments from the Department of Defense 35

Appendix III GAO Contact and Staff Acknowledgments 38

Table

Table 1: Elements of a Justification for Other Than Full and Open 

Competition Required by the FAR 4

Figures

Figure 1: Percentage of Total DOD Obligations Based on Other 

Than Full and Open Competition, by FAR Exceptions to 

Competition, Fiscal Years 2007 through 2010 7

Figure 2: Percentage of National Security Exception Obligations by 

DOD Component, Fiscal Years 2007 through 2010 8

Figure 3: Types of Procurements under the National Security 

Exception, Fiscal Years 2007 through 2010 9

Figure 4: Types of Procurements under the National Security 

Exception, by Military Department, Fiscal Years 2007 

through 2010 10

Contents
Page ii GAO-12-263 Defense Contracting

Figure 5: Relationship of Contracts Reviewed to Type of 

Justifications Used by the Military Departments and 

Associated Obligations for Fiscal Years 2007 - 2010 14

Figure 6: Review Process Required by FAR for Approval of OtherThan-Full-and-Open Competition Contract Award over 

$85.5 Million under a Class or Individual Justification 17

Figure 7: Percentage of total DOD National Security Exception 

Obligations by Number of Proposals Received, Fiscal 

Years 2007 through 2010 21

Figure 8: Reported Percentage of Contract Obligations Awarded 

Competitively 24
Page iii GAO-12-263 Defense Contracting

Abbreviations

ACC Army Contracting Command

AFMC Air Force Materiel Command

AMC Army Materiel Command

ARC Acquisition Research Center or Acquisition 

Resource Center

CICA Competition in Contracting Act

DIA Defense Intelligence Agency 

DOD Department of Defense

DPAP Defense Procurement and Acquisition Policy

FAR Federal Acquisition Regulation

FPDS-NG Federal Procurement Data System-Next 

Generation 

IG Inspector General

NGA National Geospatial-Intelligence Agency

NRO National Reconnaissance Office

NSA National Security Agency

NSE National Security Exception

OSD Office of the Secretary of Defense

SAP Special Access Programs

SMDC Space and Missile Defense Command 

SPAWAR Space and Naval Warfare Systems Command

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Page 1 GAO-12-263 Defense Contracting

United States Government Accountability Office

Washington, DC 20548

January 13, 2012

Congressional Committees

The Department of Defense (DOD) spent an average of $370 billion per 

year buying goods and services during fiscal years 2007 through 2010. 

The Federal Acquisition Regulation (FAR) requires, with limited 

exceptions, that contracting officers promote and provide for full and open 

competition in soliciting offers and awarding contracts. One exception—

the national security exception—allows agencies to limit potential offerors 

on a contract solicitation in instances when disclosure of the agency’s 

needs would compromise national security, but still requires agencies to 

request offers from as many potential sources as practicable. DOD’s 

Better Buying Power initiative, launched in September 2010, recognized 

that DOD has not taken full advantage of opportunities for competition to 

achieve the best possible return on its investments.

The National Defense Authorization Act for Fiscal Year 2011 mandated 

that we review DOD’s use of the national security exception. The 

mandate required us to review (1) the pattern of usage of such exception 

by acquisition organizations within the department to determine which 

organizations are commonly using the exception and the frequency of 

such usage; (2) the range of items or services being acquired through the 

use of such exception; (3) the process for reviewing and approving 

justifications involving such exception; (4) whether the justifications for 

use of such exception typically meet the requirements of the FAR 

applicable to the use of such exception; (5) issues associated with followon procurements for items or services acquired using such exception; and 

(6) potential additional instances where such exception could be applied 

and any authorities available to the department other than such exception 

that could be applied in such instances.1

 

1 Ike Skelton National Defense Authorization Act for Fiscal Year 2011, Pub. L. No. 111-

383, § 844 (b).

To answer the mandate, we (1) 

identified the pattern of DOD’s use of the national security exception to 

full and open competition, including the range of goods and services 

acquired; (2) assessed DOD’s process for using this exception; and (3) 

determined the extent to which DOD obtained competition on selected 

contracts when using the national security exception. To determine 

 
 

Page 2 GAO-12-263 Defense Contracting

DOD’s pattern of use of the national security exception, we analyzed data 

from the Federal Procurement Data System – Next Generation (FPDSNG) for fiscal years 2007 through 2010, and obtained data on competition 

and use of this exception from the DOD intelligence agencies. We 

determined that the federal procurement data for these fiscal years were 

sufficiently reliable to identify DOD’s use of the national security 

exception, in part by verifying a non-generalizable random sample of the 

data from the Army, Navy, and Air Force (referred to throughout this 

report as the military departments). To determine DOD’s processes for 

using this exception, we used federal procurement data to select a nongeneralizable sample of 27 contract files at the military departments 

based on largest obligations, frequent users, and a range of procurement 

types. In addition, we reviewed five contracts provided by DOD 

intelligence agencies, for a total of 32 contracts across DOD as a whole.2

A more detailed description of our scope and methodology is presented in 

appendix I. We conducted this performance audit from March 2011 to 

January 2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

We did not include other DOD entities in our sample that reported little or 

no use of the exception in federal procurement data. We analyzed the 

documents the military departments and intelligence agencies used to 

seek approval to limit competition on the selected contracts and 

determined whether they met the requirements of the FAR. We 

conducted legal research and interviewed DOD officials on other uses of 

the exception and alternative authorities. Furthermore, we analyzed 

policies and guidance, federal procurement data, and met with DOD 

officials at the Office of the Secretary of Defense (OSD), the three military 

departments, and four DOD intelligence agencies. To determine the 

extent to which DOD obtained competition under the national security 

exception, we reviewed the 32 selected military department and 

intelligence agency contract files, and analyzed FPDS-NG data on the 

number of proposals received for contracts awarded using this exception. 

With military department and intelligence agency officials, we also 

discussed efforts DOD makes to obtain competition when using the 

national security exception as its authority to limit competition.

 

2 Because we did not have a list of intelligence agency contract numbers from which to 

choose, we relied on the agencies to select the contracts for review.
 

Page 3 GAO-12-263 Defense Contracting

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

The FAR requires that contracting officers provide for full and open 

competition in soliciting proposals and awarding government contracts. 

However, the FAR also recognizes that full and open competition is not 

always feasible, and authorizes contracting without full and open 

competition under certain conditions. Situations for which the FAR 

provides exceptions include3

• only one responsible source and no other supplies or services will 

satisfy agency requirements;

• unusual and compelling urgency;

• industrial mobilization; engineering, developmental, or research 

capability; or expert services;

• international agreement;

• authorized or required by statute;

• national security; and

• public interest.

The national security exception allows agencies to limit competition for a 

contract when the disclosure of the agency’s needs would compromise 

national security—not merely because the acquisition is classified or 

because access to classified materials is necessary. Further, the national 

security exception requires that agencies request offers from as many 

potential sources as practicable, although sole-source awards are 

permitted. DOD is the largest user of the national security exception, and 

a variety of entities within the department use the exception.

In September 2010, DOD launched its Better Buying Power initiative, 

which among other goals, aims to promote effective competition in 

government contracting. As a result, promoting competition is a focus at 

DOD, according to a Defense Procurement and Acquisition Policy 

(DPAP) official, the office within OSD responsible for tracking DOD-wide 

procurement and competition metrics. As part of these efforts, DPAP 

 

3 The Competition in Contracting Act of 1984 (CICA), Pub. L. 98-369, established these 

seven exceptions to competition, which are often referred to as CICA exceptions. Subpart 

6.3 of the FAR implements the CICA exceptions.

Background 
 

Page 4 GAO-12-263 Defense Contracting

holds quarterly meetings with competition advocates, who are officials 

designated to promote competition within DOD components.

Generally, noncompetitive contracts must be supported by written 

justification and approval documents that contain sufficient facts and 

rationale to justify the use of the specific exception to full and open 

competition that is being applied to the procurement. These justifications 

must include, at a minimum, 12 elements specified by the FAR, as shown 

in table 1.4

Table 1: Elements of a Justification for Other Than Full and Open Competition 

Required by the FAR

Required justification elements

Identification of the agency and the contracting activity, and specific identification of the 

document as a “justification for other than full and open competition”

Nature and/or description of the action being approved

Description of the supplies or services required to meet the agency’s needs, including 

the estimated value

Identification of the statutory authority permitting other than full and open competition

Demonstration that the proposed contractor’s unique qualifications or the nature of the 

acquisition requires use of the authority cited

Description of efforts made to ensure that offers are solicited from as many potential 

sources as is practicable, including whether a synopsis of the contract was or will be 

publicized and, if not, which exception under 5.202 applies

Determination by the contracting officer that the anticipated cost to the government will 

be fair and reasonable

Description of the market research conducted and the results of the research or a 

statement as to why market research was not conducted

Any other facts supporting the use of other than full and open competition, such as an 

explanation why technical data packages, engineering descriptions, statements of work 

suitable for full and open competition have not been developed or are not available

A listing of the sources, if any, that expressed, in writing, an interest in the acquisition

Statement of the actions, if any, the agency may take to remove or overcome any

barriers to competition before subsequent acquisitions for the supplies or services are 

required

Contracting officer certification that the justification is accurate and complete to the best 

of the officer’s knowledge and belief

Source: FAR § 6.303-2(b). 

 

4 See FAR § 6.303-2 (b) and FAR Subpart 6.304 for approval levels.
 

Page 5 GAO-12-263 Defense Contracting

The level of the official who must approve a justification is determined by 

the estimated total dollar value of the contract or contracts to which it will 

apply, as outlined in the FAR. The approval levels range from the local 

contracting officer for relatively small contract actions up to the 

agencywide senior procurement executive for contracts worth more than 

$85.5 million. The justifications can be made on an individual or class 

basis; a class justification generally covers programs or sets of programs 

and has a dollar limit and time period for all actions taken under the 

authority. The approval levels for the class justification are the same as 

those for an individual justification and are determined by the total 

estimated value of the class. Approval of individual contract actions under 

a class justification requires the contracting officer to ensure that each 

action taken under it is within the scope of the class justification.
 

Page 6 GAO-12-263 Defense Contracting

Based on data from FPDS-NG, DOD dollar obligations under the national 

security exception during fiscal years 2007 through 2010 were small 

relative to other exceptions to full and open competition. Out of the nearly 

$1.5 trillion that DOD obligated for all contracts during this period, 41 

percent ($606.3 billion), were based on other than full and open 

competition, primarily through the seven FAR exceptions.5

 

5 The FAR allows for limited competition in some other instances beyond the seven CICA 

exceptions, such as actions at or below the Micro-Purchase threshold (FAR Subpart 13.2) 

or when simplified acquisition procedures are used (FAR Subpart 13.3). These make up 

less than half a percent of all obligations based on other than full and open competition.

However, only 

about $13 billion—or about 2 percent of DOD’s other than full and open 

competition obligations—were obligated under the national security 

exception. As figure 1 shows, the most common FAR exception used by 

DOD is “only one responsible source,” while other exceptions are used 

much less frequently.

DOD’s Use of the 

National Security 

Exception Covers a 

Range of Goods and 

Services, but Gaps in 

Data Limit Ability to 

Determine Full Extent 

of Use

DOD Military 

Departments’ Use of the 

National Security 

Exception Is Small 

Relative to Other 

Competition Exceptions 

and Covers a Range of 

Goods and Services
 

Page 7 GAO-12-263 Defense Contracting

Figure 1: Percentage of Total DOD Obligations Based on Other Than Full and Open 

Competition, by FAR Exceptions to Competition, Fiscal Years 2007 through 2010

The three military departments were the largest users of the national 

security exception during fiscal years 2007 through 2010, according to the 

data reported in FPDS-NG, obligating about $12.7 billion. The Air Force 

made up 73.5 percent of all of DOD’s obligations under the exception, 

despite only accounting for about 18 percent of DOD’s total contract 

obligations during the same time period, as figure 2 illustrates. By 

contrast, non-military-department components accounted for about 4 

percent of DOD’s use under the exception.
 

Page 8 GAO-12-263 Defense Contracting

Figure 2: Percentage of National Security Exception Obligations by DOD 

Component, Fiscal Years 2007 through 2010

During the same 4-year period, over 40 percent of DOD’s total obligations 

under the national security exception were for services, 37 percent for 

supplies and equipment, and about 22 percent for research and 

development, as shown in figure 3.

0 10 20 30 40 50 60 70 80 90 100

Percent of total DO D

contract obligati ons

Percent of all DOD natio nal

security exception obligati ons

73%

18%

19%

4%

4%

38% 24% 19%
 

Page 9 GAO-12-263 Defense Contracting

Figure 3: Types of Procurements under the National Security Exception, Fiscal 

Years 2007 through 2010

Based on our analysis of FPDS-NG data, the military departments’ use of 

the exception varied both in the extent of use and the types of goods and 

services acquired. During fiscal years 2007 through 2010, the Air Force 

obligated $9.7 billion using the national security exception, nearly all by 

the Air Force Materiel Command. About half of the Air Force’s obligations 

under the national security exception were for services, such as logistical 

support and professional services, and the other half was primarily for 

supplies and equipment, such as communication equipment and aircraft 

components. The second largest user, the Army, obligated $2.5 billion, 

mostly by the Army Materiel Command and the Space and Missile 

Defense Command. More than 80 percent of the Army’s obligations under 

the exception were for research and development, mainly in space and 

missile systems and electronics and communication equipment. Finally, 

the Navy obligated almost $0.5 billion over the 4 fiscal years under the 

exception, mostly under Space and Naval Warfare Systems Command 

contracts. More than half of the Navy’s obligations under the exception 

were to procure services, such as transportation and repair services. 

Figure 4 shows the percent of obligations represented by each category 

of procurement within the military departments.

22%

37%

41%

Research and development 

$2,950,019,510 

Supplies and equipment 

$4,889,360,303 

Services

$5,345,572,628 
 

Page 10 GAO-12-263 Defense Contracting

Figure 4: Types of Procurements under the National Security Exception, by Military 

Department, Fiscal Years 2007 through 2010

DOD intelligence agencies often use the national security exception when 

contracting for supplies and services, but generally do not report 

contracting data to the OSD or to FPDS-NG. Two of the four DOD 

intelligence agencies—the National Reconnaissance Office (NRO) and 

the National Security Agency (NSA)—report using the exception for all 

their contracting activities. The other two intelligence agencies—the 

National Geospatial-Intelligence Agency (NGA) and the Defense 

Intelligence Agency (DIA)—reported using the exception for less than 10 

percent of their total contracted obligations.6

 

6 DOD intelligence agencies provided the percent of total obligations for their 

organizations, rather than dollar amounts, as we did not have access to such information. 

Three of these agencies reported their use for fiscal years 2007 through 2010, but due to 

database limitations, DIA reported its use only for fiscal year 2010. 

Three of the intelligence 

DOD Intelligence Agencies 

and Special Access 

Programs Use the 

Exception but Generally 

Do Not Report Its Use

0

10

20

30

40

50

60

70

80

90

100

Navy Army Air Force

Percent of national security obligations

Military department

Supplies and equipment

Services

Research and development
 

Page 11 GAO-12-263 Defense Contracting

agencies, NGA, DIA, and NSA, are exempt from reporting to FPDS-NG 

based on a memorandum from OSD. NRO is not covered by the 

memorandum, but also does not appear in FPDS-NG data. However, 

some of these agencies report overall competition statistics to OSD and 

participate in DOD-wide competition advocate meetings.7

In addition to the intelligence agencies, DOD Special Access Programs 

(SAP) use the national security exception, but generally do not report 

data to FPDS-NG.8 These are specially classified programs within the 

military departments and other DOD components that limit information to 

individuals with an explicit need to know. These programs impose 

safeguarding and access measures beyond those typically taken for 

information with the same classification level, such as secret and top 

secret. Most officials told us that, in general, these programs do not report 

data to FPDS-NG. Therefore, determining the extent to which these 

entities use the national security exception is not feasible due to the 

limited access these programs allow. However, like the DOD intelligence 

agencies, officials at one military department told us that they report 

overall competition statistics for SAP contracts to DOD. Specifically, Army 

Contracting Command officials who oversee SAP programs reported that 

they use the national security exception for nearly all contracting activity 

and they provide overall obligation totals and competition data to OSD.

Classified data on contracts, agreements, and orders are excluded from 

being reported in FPDS-NG. However, DOD does not have a clear policy 

for excluding sensitive contracting data from being reported in FPDSNG.9

 

7 OSD holds quarterly meetings with competition advocates from DOD’s 21 different 

components to discuss ways to increase competition. The intelligence agencies are not 

required to attend, but OSD officials told us that some participate in the discussions.

While the memorandum from OSD exempts three of DOD’s 

intelligence agencies (NGA, DIA, and NSA) from reporting procurement 

data to FPDS-NG because of the sensitive nature of their procurement 

8 DOD distinguishes between two basic types of Special Access Programs—

acknowledged and unacknowledged. The unacknowledged programs limit the number of 

people aware of the program’s existence, while acknowledged programs limit the specific 

details of the programs not the knowledge of the program itself. 

9 For purposes of this report, we define sensitive contract data as data that while not 

classified, its release could have a negative impact on the agency’s ability to perform its 

mission.

DOD Lacks Clear Policy on 

Reporting Sensitive 

Contracting Activity
 

Page 12 GAO-12-263 Defense Contracting

data, OSD and military department officials were not aware of a specific 

policy basis for excluding sensitive programs outside of the intelligence 

agencies. In addition to the exclusion of SAP procurement data, some 

DOD officials told us that contracts outside of SAP do not appear in 

FPDS-NG due to security concerns. Nevertheless, it appears based on 

the contracts in our review that the information that is in FPDS-NG on 

contracting activities using the national security exception is generally 

from programs that are sensitive but not fully classified programs. Some 

DOD officials, including at the OSD level, were unaware that some 

individual contracts could be excluded from FPDS-NG. By contrast, other 

officials expected all contracts using the national security exception to be 

excluded from FPDS due to the sensitive nature of the procurements. As 

a result, it is unclear the extent to which contracting information on SAPs 

and other highly sensitive contracting activities in DOD are included in 

FPDS-NG. Based on our review, it appears that most information on such 

programs is excluded. Further, according to DOD officials, decisions are 

made on a case-by-case basis to exclude individual contracts from 

FPDS-NG, but they were unsure of the policy basis for these exclusions.

For most contracts we reviewed, DOD entities used a single justification 

and approval document that applies to multiple contracts—referred to in 

the FAR as a class justification—for national security exception contract 

actions. Of the 27 contracts we reviewed at the military departments, all 

18 Air Force contracts cited class justifications, as did 4 of the 6 Army 

contracts. The 2 remaining Army contracts and all 3 Navy contracts we 

reviewed cited individual justifications. Among the contracts we reviewed, 

$3.3 billion in obligations during the period of fiscal years 2007 through 

2010 used class justifications, while less than $0.1 billion was obligated 

during that period under individual justifications. Figure 5 shows the 

DOD Often Uses a 

Single Document to 

Justify Multiple 

Actions under the 

National Security 

Exception, and All 

Justifications Met 

Requirements 

DOD Makes Extensive Use 

of Class Justifications for 

the National Security 

Exception 
 

Page 13 GAO-12-263 Defense Contracting

relationship between the individual contract files we reviewed and the 

type of justification used to support the national security exception, as 

well as the obligation amounts associated with each during this period.10

 

10 One Army contract originally awarded under the national security exception was 

modified in 2004 to cite the “only one source” exception, and thus had no obligations 

under the national security exception during the fiscal year 2007 through 2010 period. 
 

Page 14 GAO-12-263 Defense Contracting

Figure 5: Relationship of Contracts Reviewed to Type of Justifications Used by the 

Military Departments and Associated Obligations for Fiscal Years 2007 - 2010

Note: Justifications are noted by generic identifiers, rather than program names.
 

Page 15 GAO-12-263 Defense Contracting

The Air Force Materiel Command (AFMC) comprises the majority of the 

Air Force’s use of the national security exception—about 72 percent of 

DOD’s total contract obligations under the exception as reported in 

FPDS-NG compared to 73.5 percent for the Air Force overall. Officials at 

the two AFMC centers that make up the majority of the command’s 

contracting under this exception reported that they cite class justifications 

for the vast majority of their national security exception contracting. The 

Air Force justifications we reviewed confirmed this, each covering 

contracts related to multiple systems within a program office. For 

example, one Air Force class justification had an obligation ceiling of 

about $8.7 billion for a 7-year period. The Army’s class justifications also 

covered multiple contracts, but were more focused on an individual 

system within the program office, and two of the three we reviewed had 

much lower obligation ceilings.

Some of the intelligence agencies also use class justifications for the 

national security exception. NSA and NRO have class justifications that 

cover all of their contracting activity. NGA and DIA, by contrast, reported 

using individual justifications for contracts where they cite the national 

security exception.

Class justifications reduce the steps required to proceed with individual 

contract actions that are not fully competitive. Each justification, individual 

or class, must be approved through the same process, with levels of 

approval specified by the FAR based on dollar value. However, once a 

class justification has been approved, the process for individual contract 

actions changes—an individual contract within the scope of the class 

justification can generally be approved for limited competition or solesource award by the local procuring activity, as long as the amount is 

within the obligation ceiling of the justification. For instance, the Air Force 

obligated $915 million under an indefinite delivery/indefinite quantity 

contract for support and modification services on an existing aircraft and 

its related systems. Because this procurement was within the scope of a 

national security exception class justification, under the processes 

established in the FAR, the program office did not have to obtain approval 

for this noncompetitive acquisition from the Air Force’s senior 

procurement executive.

According to contracting officials at an Air Force program office that has a 

class justification in place under the national security exception, the 

increased flexibility of their national security exception class justification 

helps them meet mission needs. In the absence of a class justification, 

approval of an individual justification for a noncompetitive contract award 
 

Page 16 GAO-12-263 Defense Contracting

takes time; officials with one program office cited an instance of an 

individual justification under a different FAR exception that was not yet 

approved 7 months after it was initiated. Figure 6 illustrates the review 

process for contract awards of $85.5 million or more under class and 

individual justifications.
 

Page 17 GAO-12-263 Defense Contracting

Figure 6: Review Process Required by FAR for Approval of Other-Than-Full-and-Open Competition Contract Award over $85.5 

Million under a Class or Individual Justification

Note: Initial approval of class justifications is subject to the same process as individual justifications.
 

Page 18 GAO-12-263 Defense Contracting

In some cases, the class justifications we reviewed included a list of firms 

authorized to participate, as well as anticipated obligation amounts for 

each firm over the applicable time period. For instance, one of the Air 

Force class justifications we reviewed listed about 40 firms, each with 

anticipated contract obligations of several million to several billion dollars 

during the 7-year time frame of the class justification. Despite the number 

of firms listed in the class justification, competition among them for a 

given contract award was rare—the contracts we reviewed under this 

justification typically stated that only one of the firms was capable of 

meeting the government’s requirements. Officials at one Air Force center 

said that amending their existing class justification to add new firms had 

proved difficult in the past, and noted that this can reduce competition by 

limiting ability to work with new entrants to the market.

Some Air Force officials also noted that concerns about the level of 

review of individual contracts that are awarded without full and open 

competition under class justifications have led to efforts to revise the 

review process for activity under class justifications. The Air Force revised 

its process in a recently approved national security class justification for 

an intelligence, surveillance, and reconnaissance program office, 

requiring individual contract actions over $85.5 million be submitted to the 

Air Force senior procurement executive for expedited review.11

Regardless of whether the military departments used class or individual 

justifications, all those we reviewed met FAR standards. We reviewed 

justification and approval documents for the use of the exception for 27 

different contracts awarded by the Army, Navy, and Air Force, and all met 

According 

to an Air Force General Counsel official, the Air Force has not yet 

determined what type of documentation will be required as part of that 

review, but it believes the increased review may identify additional 

opportunities for competition. This is the first Air Force class justification 

to include this new process, and officials were not aware of any similar 

processes at other DOD entities. According to Air Force officials, the new 

class justification also includes a mechanism for adding new firms after 

the initial approval of the justification. Officials in the affected program 

office said that they anticipate an increase in competition rates as a result 

of this new flexibility.

 

11 This new class justification is the successor to one of the Air Force justifications 

included in our review.
 

Page 19 GAO-12-263 Defense Contracting

the standards established in the Federal Acquisition Regulation for 

approving the justification. In addition, we reviewed the justifications and 

approval documents for one national security exception contract each at 

NGA, NRO, and DIA, and two such contracts at NSA, and all generally 

met the requirements of the FAR.

According to officials from all DOD components we met with, the national 

security exception should be used in limited circumstances where full and 

open competition would compromise national security. These officials 

were not aware of other authorities that could be used in its place, nor 

were they aware of any such proposed authorities. In some justifications

and approval documents, DOD components may cite other exceptions in 

addition to the national security exception. For example, the entities that 

reported using the national security exception for all or nearly all 

contracting—NSA, NRO, and some Air Force SAPs—reported citing 

additional exceptions when making sole-source contract awards. 

According to policy documents and officials with these organizations, it is 

standard practice to list more than one exception when applicable. For 

example, one NSA contract for computer security equipment that we 

reviewed cited the “only one responsible source and no other supplies or 

services will satisfy agency requirements” FAR exception alongside the 

national security exception, because contracting officials had determined 

that only one firm was capable of meeting the government’s 

requirements. Likewise, in awarding a satellite contract, NRO used the 

“only one responsible source” exception in addition to the national 

security exception. The military departments generally do not cite 

additional exceptions when using the national security exception.

There Are No Alternative 

Authorities for National 

Security Sensitive 

Procurements, but 

Additional Exceptions May 

Be Cited in Some Cases
 

Page 20 GAO-12-263 Defense Contracting

According to federal procurement data, the military departments typically 

did not achieve competition on national security exception contracts. Of 

the more than 11,300 DOD military department contract actions citing the 

national security exception from fiscal years 2007 through 2010, DOD 

received only one proposal for $10.6 billion of its obligations—about 84 

percent of the total $12.7 billion in obligations under this exception.12

About 4 percent of contract actions, which account for 16 percent of the 

military departments’ obligations, received two or more proposals, as 

shown in figure 7 below. By department, nearly 100 percent of Air Force 

and 95 percent of Navy contract obligations received only one proposal, 

whereas about 80 percent of Army obligations were made under 

contracts that received more than one proposal.13

 

12 FPDS-NG indicated that about 70 actions accounting for 0.02 percent of obligations 

(about $3.16 million) under the national security exception at the military departments 

received no proposals, which are likely data entry errors.

13 About 87 percent of Army contract actions received only one proposal, but the actions 

that did receive multiple proposals had much larger obligation amounts, on average.

Level of Competition 

under the National 

Security Exception 

Varied Greatly Within 

DOD

Few Military Department 

Contracts Achieved 

Competition under 

National Security 

Exception 
 

Page 21 GAO-12-263 Defense Contracting

Figure 7: Percentage of total DOD National Security Exception Obligations by 

Number of Proposals Received, Fiscal Years 2007 through 2010

DOD’s Better Buying Power Initiative includes a goal of decreasing 

instances where only one proposal is received, which DOD has noted 

fails to provide the full benefits of competition. We have previously 

reported that about 13 percent of all contract obligations governmentwide 

were made on contracts awarded with competitive procedures that only 

received one proposal.14

Contracts receiving only one proposal are considered competitively 

awarded if the solicitation was open to multiple potential offerors, so 

contracts reported in FPDS-NG that received only one proposal may have 

been awarded using competitive procedures. While data on the extent 

that national security exception contracts were awarded competitively 

were not sufficiently reliable, the available data confirmed that competition 

is infrequent—indicating that less than a quarter of military department 

obligations under this exception were competitively awarded. 

Furthermore, our data reliability assessment indicated that the errors in 

 

14 GAO, Federal Contracting: Opportunities Exist to Increase Competition and Assess 

Reasons When Only One Offer Is Received, GAO-10-833 (Washington, D.C.: July 26, 

2010). 
 

Page 22 GAO-12-263 Defense Contracting

these data tend to overstate the level of competition, so the actual level 

may be lower.

Likewise, few of the military department national security exception 

contracts we reviewed achieved competition. Of the 27 contracts we 

reviewed for the Air Force, Army, and Navy, only one received multiple 

proposals. For the remaining 26 contracts, only one proposal for each 

was received.

Military department officials said that they make efforts to provide 

competition to the greatest extent practicable, as required by the FAR. 

However, they reported three obstacles to obtaining more competition in 

contract awards:

• the existence of a small number of firms able to meet the security 

requirements for the goods and services being procured;

• constraints on soliciting new vendors, including proprietary data and 

reliance on incumbent contractor expertise; and

• not having tools to increase market research and solicit vendors in a 

secure environment.

For example, Air Force contracting officials reported that restrictions on 

time and expertise make it difficult for many new vendors to meet 

requirements. A senior Air Force contracting official told us that not 

having access to technical data—such as engineering drawings and other 

information needed to have another vendor meet the eligibility 

requirements—is a major barrier to competition. According to this official,

one vendor often controls the data as proprietary information, and buying 

or recreating it would be cost-prohibitive for potential new vendors.

The military departments generally continue to use the same exception 

for follow-on contract actions to national security exception contracts, as 

well as the same vendor, based on our analysis of the contracts in our 

sample. Contracting officials noted that these contracts must go through 

the same approval process as the initial contract, requiring justification for 

the national security exception. Of the 27 contracts in our sample, we 

identified 14 follow-on contracts, 12 of which were awarded to the 

incumbent contractor. Contracting officials confirmed that follow-on 

contracts typically are not competed and are usually awarded to the same 

vendor due to proprietary data rights and expertise of the incumbent 
 

Page 23 GAO-12-263 Defense Contracting

contractors, as well as the time required to initiate work with a new 

vendor. We have previously reported that incumbent contractors have 

important advantages in follow-on contract awards.15

Contracting officials told us that the tools that are used to solicit 

competition generally cannot be used in a security sensitive contracting 

environment. FedBizOpps.com is the military departments’ primary tool 

for soliciting potential offerors.16 The site allows agencies to upload 

unclassified solicitations for goods and services, but it cannot accept 

classified material.17

For the 27 contracts in our sample, the market research reflected in the 

contract files frequently did not have adequate documentation on how it 

was used to identify potential offerors.

Even though national security exception contract 

documents are often unclassified, synopsizing the requirements may 

pose a security risk. Instead, contracting officials identify potential 

sources based on market research and provide the solicitations to those 

firms directly.

18

 

15

Specifically, no evidence of 

market research was present in 12 of the 27 contract files we reviewed; it 

was present in 15 of the files we reviewed. The market research in those 

15 contracts often broadly outlined the means by which the contracting 

office conducted the market research, but in some cases did not include 

details and evidence to document the research. In some cases, the 

contracting officials relied upon their own collective experience with, and 

knowledge of, vendors capable of delivering goods and services in 

accordance with sensitive contract requirements. Nevertheless, even in 

cases in which market research identified multiple firms that could meet 

requirements, it did not always result in multiple proposals on a given 

contract.

GAO-10-833. 

16 The FAR requires contracting officers to synopsize proposed contract actions expected 

to exceed $25,000 in the Government Point of Entry (GPE), FedBizOpps.com. FAR § 

5.101(a)(1) The GPE may be accessed via the Internet at https://www.fbo.gov/. FAR § 

5.201(d). 

17 Contract awards involving classified materials may be announced publicly on 

FedBizOpps.com in instances where the solicitation itself is unclassified.

18 The FAR requires that agencies conduct market research to arrive at the most suitable 

approach to acquiring, distributing, and supporting supplies and services. FAR § 10.000. 
 

Page 24 GAO-12-263 Defense Contracting

NSA and NRO, which reported that they use the national security 

exception for all or nearly all contracting, showed high levels of 

competition compared to the DOD military departments. As illustrated in 

figure 8 below, according to data provided by the agencies, annual 

competition rates ranged from 27 percent to nearly 70 percent of total 

obligations at NSA and NRO. Because data on contracting at intelligence 

agencies are typically classified at highly restrictive levels, we did not 

have sufficient access to independently validate the data provided.

Figure 8: Reported Percentage of Contract Obligations Awarded Competitively

NRO and NSA have both developed tools to help increase competition in 

procuring sensitive goods and services and have made these tools 

available for other intelligence agencies. These tools bring together a 

large number of potential offerors and help the agencies solicit and 

evaluate vendors, and competitively award the contract, while taking 

measures to limit the risk to national security. The NRO Acquisition 

Research Center, developed for intelligence community procurements, 

limits potential contractors to about 1,200 registered firms that are already 

cleared to perform in a secure environment and have a workforce with 

security clearances. An NRO senior procurement official described this 

DOD Intelligence Agencies 

Reported High Levels of 

Competition by 

Conducting Market 

Research and Soliciting 

Proposals within a Secure 

Environment 

0

10

20

30

40

50

60

70

80

90

2007 2008 2009 2010

Percentage of contract obligations awarded competitively

Fiscal year

Source: GAO analysis of FPDS-NG data.

NRO

NSA

38

62

50

60

27

67.9 66

69.4
 

Page 25 GAO-12-263 Defense Contracting

system as a proprietary classified version of FedBizOpps. The NSA’s 

Acquisition Resource Center is the NSA’s business registry database that 

provides industry with a central source for acquisition information. This 

system also serves as a market research tool for NSA personnel, as well 

as a means for distribution of acquisition documents to its industry 

partners. All companies that wish to do business with NSA must be 

registered in the system. As of October 2010, the database included 

about 9,300 companies.19

An NSA Inspector General report found that this system improved the 

agency’s ability to conduct market research and solicit competition. The 

inspector general found that it improved competition by making the 

process more systematic. The other two DOD intelligence agencies, DIA 

and NGA, have made arrangements to use one or both of the NSA and 

NRO systems. For example, our review of a DIA contract under the 

national security exception showed that the agency solicited 11 

companies and received five proposals by using NSA’s Acquisition 

Resource Center. Additionally, NGA has a memorandum of agreement 

with NRO to use its Acquisition Research Center. None of the 27 military 

department contracts we reviewed used the NSA or NRO systems to 

conduct market research. However, contracting officials at one Air Force 

center said that they were aware of NRO’s system, and although they do 

not currently have access, they would like the opportunity to use it for 

their procurements.

DOD’s use of the national security exception is necessary in certain 

situations when disclosing the government’s needs in a full and open 

competition would reveal information that would harm national security. 

The exception requires that agencies pursue limited competition by 

requesting proposals from as many potential sources as is feasible. DOD 

departments may not have a complete understanding of the extent of 

competition, given that DOD lacks clear policy on when sensitive contract 

actions should be excluded from the FPDS-NG, the database it uses to 

track this information. However, the available data show that the military 

departments have achieved relatively little competition in their national 

security exception procurements. Obtaining competition on new 

 

19 The database includes companies with existing security clearances, as well as 

companies without clearances.

Conclusions 
 

Page 26 GAO-12-263 Defense Contracting

procurements is especially important, because our findings and previous 

reports have shown that once a contractor receives an award, historically 

that contractor is likely to receive any follow-on contract. There are 

obstacles to competition in sensitive procurements, including a limited 

number of firms that can meet security requirements. Because of these 

obstacles, program offices may find it easier to forego competition when a 

class justification is already in place. However, more competition is 

possible. The recent changes that Air Force made to its process, which 

introduced a new high-level review of contract actions under a class 

justification, may help increase the extent of competition. Further, while 

the military departments face challenges in conducting market research 

for sensitive contracts, the DOD intelligence agencies, which face similar 

challenges, have created tools to increase their ability to identify multiple 

potential sources and obtain competition when using the national security 

exception. The use of such tools could enhance the ability of the military 

departments to obtain competition on their national security exception 

procurements.

We recommend that the Secretary of Defense take the following three 

actions:

• Issue guidance establishing the circumstances under which security 

sensitive contracting data are required to be reported to OSD and in 

FPDS-NG, including the decision authority for excluding a given 

program or contract from the database.

• Evaluate the effect of the Air Force’s new review process on 

competition and management oversight of national security exception 

actions under a class justification; if the changes are found to be 

beneficial, consider implementing similar changes across DOD.

• Assess the feasibility of providing contracting officials in military 

department programs that routinely use the national security 

exception with access to tools that facilitate market research and 

competitive solicitation in a secure environment, either through 

development of new tools or access to existing intelligence community 

systems. 

We provided a draft of this report to DOD. In written comments, DOD 

concurred with the report’s last two recommendations and partially 

concurred with the first recommendation. DOD also provided technical 

comments, which we incorporated as appropriate. DOD’s comments are 

reprinted in appendix II.

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 27 GAO-12-263 Defense Contracting

In commenting on the draft report, DOD agreed to evaluate the Air 

Force’s new review process for national security exception actions under 

class justifications and implement a similar process across the 

department if it found it beneficial. DOD also agreed to explore deploying 

existing intelligence community market research and solicitation tools to 

organizations in the military departments that frequently use the national 

security exception. DOD partially concurred with our recommendation to 

clarify guidance on the exclusion of data from FPDS-NG citing a pending 

revision to the FAR that will clarify that classified data should not be 

reported to FPDS-NG. We did not encounter any ambiguity on this 

point—contracting officials we met with were clear that classified data 

should not be entered into the system. However, we found that DOD 

policy was not clear on if and when sensitive, but unclassified, contract 

data should be excluded from FPDS-NG. We continue to believe that 

additional guidance is needed to clarify if and when any such data should 

be excluded (outside the existing intelligence agency waiver), and if so, 

outline the criteria and decision authority for doing so.

We are sending copies of this report to interested congressional 

committees and the Secretary of Defense. This report will also be 

available at no charge on GAO’s website at http://www.gao.gov. 

If you or your staff have any questions about this report or need additional 

information, please contact me at (202) 512-4841 or martinb@gao.gov. 

Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this report. Staff 

acknowledgments are provided in appendix III.

Belva M. Martin

Director

Acquisition and Sourcing Management
 

Page 28 GAO-12-263 Defense Contracting

List of Committees

The Honorable Carl Levin

Chairman

The Honorable John McCain

Ranking Member 

Committee on Armed Services

United States Senate

The Honorable Howard P. “Buck” McKeon 

Chairman

The Honorable Adam Smith 

Ranking Member 

Committee on Armed Services

House of Representatives
Appendix I: Scope and Methodology

Page 29 GAO-12-263 Defense Contracting

Our mandate required us to review (1) the pattern of usage of the national 

security exception by acquisition organizations within the Department of 

Defense to determine which organizations are commonly using the 

exception and the frequency of such usage; (2) the range of items or 

services being acquired through the use of such exception; (3) the 

process for reviewing and approving justifications involving such 

exception; 4) whether the justifications for use of such exception typically 

meet the requirements of the Federal Acquisition Regulation applicable to 

the use of such exception; (5) issues associated with follow-on 

procurements for items or services acquired using such exception; and 

(6) potential additional instances where such exception could be applied 

and any authorities available to DOD other than such exception that could 

be applied in such instances. To respond to these objectives, this report 

(1) identified the pattern of DOD’s use of the national security exception, 

including the range of goods and services acquired; (2) assessed DOD’s 

process for using this exception; and (3) determined the extent to which 

DOD obtained competition on selected contracts using the national 

security exception.

To conduct our work we met with DOD officials at the Office of the 

Secretary of Defense (OSD), the three military departments, and DOD 

intelligence agencies. Within OSD we met with Defense Procurement and 

Acquisition Policy officials, including a Federal Procurement Data 

System-Next Generation (FPDS-NG) subject-matter expert. We also met 

with FPDS-NG experts in the three military departments. In addition, 

across DOD we met with officials from the following offices:

• Office of the Deputy Assistant Secretary for Contracting and Policy 

• Air Force Materiel Command, Special Programs Division

• Air Force Materiel Command, Implementation Branch

• General Counsel

• Office of the Assistant Secretary of the Army for Acquisition, Logistics

 and Technology

• Army Materiel Command

• Army Contracting Command

• Army Space and Missile Defense Command

• General Counsel

Appendix I: Scope and Methodology

U.S. Air Force

U.S. Army
Appendix I: Scope and Methodology

Page 30 GAO-12-263 Defense Contracting

• Office of the Assistant Secretary of the Navy, Research, Development 

 & Acquisition

• Naval Sea Systems Command

• Space and Naval Warfare Systems Command

• General Counsel

• Office of Contracting

• Office of the Inspector General

• General Counsel

• Acquisition and Contracts Office

• Office of the Inspector General

• General Counsel

• Acquisition Organization

• Office of Contracting

• Office of the Inspector General

• General Counsel

• Office of Contracting

• Office of the Inspector General

• General Counsel

Based on discussions with FPDS-NG subject-matter experts at OSD and 

the three military departments, we determined that the data available prior 

to fiscal year 2006 were not sufficiently reliable for our purposes. 

Therefore, our review focused on the most current reliable data from 

FPDS-NG, fiscal years 2007 through 2010. We conducted legal research 

and interviewed DOD officials to identify other uses of the exception and 

alternative authorities. To identify the DOD components to include in our 

review, we used FPDS-NG data to determine those with the most 

obligations under the national security exception during fiscal years 2007 

through 2010. These included the three military departments—the Air 

Force, Army, and Navy. Within the departments, we identified the 

commands with the highest obligations under the exception—the Air 

Force Materiel Command (AFMC), Army Materiel Command / Army 

Contracting Command (AMC/ACC), Army Space and Missile Defense 

Command (SMDC), and Navy’s Space and Naval Warfare Systems 

Command (SPAWAR). For entities that do not report data to FPDS-NG 

we relied on knowledgeable DOD officials to identify the frequent users of 

the national security exception. These included the four DOD intelligence 

agencies—the Defense Intelligence Agency (DIA), National GeospatialIntelligence Agency (NGA), National Security Agency (NSA), and National 

U.S. Navy

Defense Intelligence Agency

National GeospatialIntelligence Agency 

National Security Agency

National Reconnaissance 

Office
Appendix I: Scope and Methodology

Page 31 GAO-12-263 Defense Contracting

Reconnaissance Office (NRO), as well as Special Access Programs 

within the DOD military departments. Due to the security limitations at the 

intelligence agencies, we employed different methodological approaches 

to assess the uses and processes at the intelligence agencies and the 

military departments, as described below.

To assess the pattern of use of the exception and the range of items or 

services being acquired at the DOD military departments, we obtained 

data from FPDS-NG. We included contracts and orders coded as using 

the national security exception under the field “reason not competed” from 

fiscal years 2007 through 2010. We analyzed obligations data and the 

types of goods and services based on product code fields. To compare 

use of the national security exception versus other FAR exceptions, we 

conducted an analysis of the other values listed under the “reason not 

competed” field.

To determine the processes the military departments employ when using 

the national security exception and the extent to which they obtain 

competition, we reviewed DOD policies and guidance and selected 

contract files based on a non-generalizable sample of 27. The sample 

included files from the three commands within the military departments 

with the highest reported percentage of obligations under the exception in 

fiscal years 2007 through 2010—AFMC, AMC, and SPAWAR.1

• Air Logistics Center, Robins Air Force Base

Within 

these three commands, we identified contracting offices with the highest 

reported obligations under the national security exception as well as 

contracting offices with a high percentage of overall contracting dollars 

obligated under the national security exception. The components we 

identified for the sample were:

• Aeronautical Systems Center, Wright-Patterson Air Force Base

• Army Contracting Command, Aberdeen Proving Ground

• Special Operations Command, Ground Application Program Office, 

 Fort Belvoir

• Soldier Systems Center, Natick Army Base

 

1

 Two Army commands made up nearly equal shares of Army’s total obligations under 

the National Security Exception. We selected AMC for review over SMDC for logistical 

purposes.

DOD Military Departments

Air Force Materiel Command 

Army Materiel Command
Appendix I: Scope and Methodology

Page 32 GAO-12-263 Defense Contracting

• Systems Center Charleston

Because the Air Force makes up 73.5 percent of all obligations under the 

national security exception, we selected 18 contracts from the Air Force, 

6 from the Army, and 3 from the Navy. We selected the individual 

contracts based on several criteria. First, we selected high-dollar 

contracts. Based on our analysis of commonly procured goods and 

services from FPDS-NG data, we selected contracts with a mix of these 

types of purchases. FPDS-NG data do not indicate whether a contract is 

a follow-on procurement, therefore we selected both older and newer 

contracts. DOD officials also identified contracts to select to capture 

follow-on activities. However, based on other selection criteria, these 

contracts had already been included. The 27 contracts we reviewed 

represented about $3.4 billion—about 27 percent—of the $12.7 billion in 

obligations under the national security exception across the military 

departments in fiscal years 2007 through 2010.

We analyzed the justification and authorization documents for these 

selected contracts and determined whether they met the requirements of 

the FAR Sections 6.302-6 and 6.303-2. In addition, we reviewed preaward documentation to determine the extent to which the services 

obtained competition under the exception and to review market research 

documents. Further, we reviewed the contract files to determine whether 

the contract was a follow-on contract. We met with officials to discuss 

efforts the military departments make to obtain competition when using 

the national security exception to limit competition.

We conducted assessments of both the completeness and the reliability 

of the FPDS-NG data. To assess how complete the FPDS-NG data are, 

we interviewed agency officials at OSD and the three military 

departments to identify instances when individual contracts or entire 

programs are excluded from FPDS-NG to protect classification or security 

sensitive information. OSD officials provided us with the directive from the 

Director of National Intelligence that exempts all DOD intelligence 

agencies from FPDS-NG. We met with officials who oversee Special 

Access Programs in the Army and Air Force to discuss any policies and 

procedures related to the inclusion or exclusion of contract information 

from FPDS-NG.

Our assessment of the reliability of FPDS-NG data involved several 

stages. First, we interviewed FPDS-NG subject-matter experts at OSD 

and the three military departments. We discussed issues with miscoding 

and results of any anomaly reports. After identifying the sample for our file 

Navy Space and Warfare 

Systems Command
Appendix I: Scope and Methodology

Page 33 GAO-12-263 Defense Contracting

review, we asked officials at the contracting offices to verify if the 

contracts did use the national security exception as they were coded in 

the “Reason not Competed” field in FPDS-NG. After identifying coding 

errors in that field for five of the contracts, we compared the “Extent 

Competed” and “Number of Bids” (proposals) fields with the 

documentation in the contract files for the 27 contracts in our review. We 

found four errors in the “Extent Competed” field and one error in the 

numbers of proposals. We also drew upon prior GAO findings regarding 

FPDS-NG data reliability.

Based on this initial data reliability assessment, we selected a second 

random, non-generalizable stratified sample of 36 contracts to assess the 

same three fields in FPDS-NG. We stratified based on the military 

department (Air Force, Army, and Navy); whether it was identified as an 

indefinite delivery, indefinite quantity contract in FPDS-NG; and whether it 

was listed as not competed or competed after exclusion of sources in 

FPDS-NG. We asked DOD officials to review contract files to determine 

1) if the contract cited the national security exception, 2) whether the 

contract was competed, and 3) how many proposals the contract 

received. In addition, in discussions with the Navy, they identified 

contracts that were incorrectly coded as using the national security 

exception. After three Air Force contracts fell out of our sample due to 

nonresponse, we found errors in the “Extent Competed” field for about a 

third of the contracts. However, we found only two of the contracts (6 

percent) had errors in the “Reason not Competed” field and only one 

contract (3 percent) with an error in the number of proposals. These data 

reliability assessments indicate that the “Reason not Competed” and 

“Number of Offers” fields in FPDS-NG are sufficiently reliable for our 

analyses.

To assess the extent of DOD intelligence agencies’ use of the national 

security exception, we obtained data from the four agencies, as these 

agencies do not report data to FPDS-NG. Specifically, we obtained data 

on the percentage of total obligations under the national security 

exception and the percentage of total obligations competed at the four 

agencies.

We reviewed five contract files at four DOD intelligence agencies. We 

analyzed the justification and authorization documents for these selected 

contracts and determined whether they met the requirements of the FAR 

Sections 6.302-6 and 6.303-2. Because we did not have a list of contract 

numbers from which to choose, we relied on the agencies to select the 

DOD Intelligence Agencies 

and Special Access 

Programs
Appendix I: Scope and Methodology

Page 34 GAO-12-263 Defense Contracting

contracts for review. In addition, we reviewed pre-award documentation to 

determine the extent to which the agencies obtained competition under 

the exception and to review market research documents. Further, we 

reviewed the contract files to determine whether the contract was a 

follow-on contract. We met with officials to discuss efforts the intelligence 

agencies make to obtain competition when using the national security 

exception to limit competition.

DOD entities for which little or no use of the exception appeared in federal 

procurement data were not included in our file review. To assess the use 

of the exception at these entities, we met with officials at OSD, as well as 

officials knowledgeable about Special Access Programs at the Army, Air 

Force, and Navy. We obtained information from an Air Force official on 

the extent of use and competition within the Air Force Materiel 

Command’s Special Programs Division.

To assess the reliability of data received from the DOD intelligence 

agencies, we solicited information from officials on the data. Specifically, 

we asked cognizant officials about the type of database systems used to 

track contracting activity; how these systems are used; what procedures 

are in place to ensure consistency and accuracy; if there have been 

issues with the system that may compromise data; what limitations exist

in tracking CICA exceptions; and what data reliability assessments have 

been conducted on these systems.

We conducted this performance audit from March 2011 to January 2012

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Comments from the Department 

of Defense

Page 35 GAO-12-263 Defense Contracting

Appendix II: Comments from the Department 

of Defense
Appendix II: Comments from the Department 

of Defense

Page 36 GAO-12-263 Defense Contracting
Appendix II: Comments from the Department 

of Defense

Page 37 GAO-12-263 Defense Contracting
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 38 GAO-12-263 Defense Contracting

Belva M. Martin, (202) 512-4841 or martinb@gao.gov

In addition to the contact named above, John Neumann, Assistant 

Director; Laura Greifner; Julia M. Kennon; John A. Krump; Caryn E. 

Kuebler; Teague Lyons; Jean McSween; Kenneth Patton; Roxanna T. 

Sun; Sonya Vartivarian; and C. Patrick Washington made key 

contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(120965)
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