Defense Contracting: Early Attention in the Acquisition Process Needed to Enhance Competition
Published: 2014-05-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Competition is the cornerstone of a sound acquisition process. In fiscal year 2013, DOD obligated over $300 billion through contracts and orders, of which 57 percent was competed. DOD also obligates billions of dollars annually on contracts that are awarded using competitive procedures, but for which the government received only one offer. DOD implemented the Better Buying Power initiative in 2010, in part to increase competition. The conference report accompanying the National Defense Authorization Act for Fiscal Year 2012 mandated GAO to report on DOD's noncompetitive and one-offer awards.
GAO examined (1) the trends in DOD's use of competitive awards, (2) the extent to which justifications for exceptions to competitive procedures were adequate and reasons for exceptions, (3) how DOD's strategies aimed at promoting long-term competition are changing behavior, and (4) whether DOD's requirements address reasons only one offer was received for competitive solicitations. GAO analyzed federal procurement data for fiscal years 2009 through 2013; reviewed DOD policy and competition reports; examined two nongeneralizable samples of 14 and 15 awards, in part, based on dollar value; and interviewed DOD officials.
section_title: What GAO Found
paragraphs: The Department of Defense's (DOD) competition rate for all contract obligations declined over the past 5 fiscal years from 62 percent in fiscal year 2009 to 57 percent in fiscal year 2013, but remained flat for the past 2 years. In fiscal year 2013, the Army had the highest competition rate, 66 percent, while the Missile Defense Agency had the lowest competition rate, 29 percent. The 14 justifications for noncompetitive awards that GAO reviewed generally included the elements required by the Federal Acquisition Regulation such as the authority permitting other than full and open competition. The majority of DOD's noncompetitive contracts and task orders (including all in GAO's sample) were coded under the “only one responsible source” exception to competition requirements. Seven of the 14 justifications explained that the awards could not be competed due to a lack of technical data. In these cases, DOD did not purchase the necessary data rights with the initial award. In some cases the justifications provided insight into how a lack of data rights resulted in reliance on a single vendor over time.
DOD's focus on using open systems architecture and acquiring sufficient data rights—which DOD's Better Buying Power memo encourages—is influencing the way DOD acquires goods and services. Programs are trying to move away from dependency upon single suppliers for parts, maintenance or upgrades and are moving toward open systems architecture, which allows components to be modified, replaced or maintained by multiple suppliers. Some DOD programs have shown that using open systems architecture and obtaining data rights involves early consideration and extensive analysis of how each system can best use these approaches to maintain a competitive environment throughout a program's lifecycle. For example, an emphasis on open systems architecture and effective management of data rights resulted in increased competition for the Air Force's user equipment for the Global Positioning System and KC-46 Tanker Modernization programs.
In 2010, DOD introduced requirements for competitive solicitations that result in only one offer; however, these rules are focused late in the acquisition process and DOD has limited insight into the reasons only one offer is received. The 15 one-offer awards GAO reviewed generally satisfied DOD's rules, which require contracting officers to ensure adequate solicitation periods and conduct cost or price analysis. These rules were intended to help ensure more effective competition but may apply too late in the acquisition process. DOD contracting officials and vendors told GAO that engagement with vendors well before the 30 day solicitation period is key to ensuring vendors have adequate time to review draft requests for proposals, plan resources, provide feedback on potentially restrictive requirements, and determine whether to prepare proposals. Moreover, contracting officers for the contracts GAO reviewed seldom collected information about reasons only one offer was received, which could limit their ability to revise acquisition strategies appropriately or plan for future competitive acquisitions. DOD's one-offer rules do not require contracting officials to engage with the vendor community to learn why vendors chose not to submit offers. However, contracting officials chose to do so in two sample cases, and in one case, based on this information, changed the acquisition strategy to allow for recompetition sooner than planned.
section_title: What GAO Recommends
paragraphs: DOD should ensure that existing acquisition planning guidance promotes early vendor engagement, and establish guidance for when contracting officers should assess the reasons only one offer was received on competitive awards. DOD concurred with these recommendations.

section_title: Letter
paragraphs: As the Department of Defense (DOD) and others have recognized,  competition is the cornerstone of a sound acquisition process and a  critical tool for achieving the best return on investment for taxpayers. The  benefits of competition in acquiring goods and services from the private  sector are well established. Competitive contracts can help save money,  improve contractor performance, curb fraud, and promote accountability  for results. In fiscal year 2013, DOD obligated $307.5 billion through  contracts and task orders, of which 57 percent was competed.  Acknowledging the need to make more efficient use of resources, DOD’s  2010 “Better Buying Power” (BBP) initiative placed an emphasis on  maximizing opportunities for competition in the acquisition of products  and services.
While federal statutes and acquisition regulations generally require that  contracts be awarded on the basis of full and open competition, they also  permit federal agencies to award noncompetitive contracts in certain  circumstances, for example, when only one vendor can supply the  requirement or when a sole-source award is made under specified small  business programs. Generally, noncompetitive contracts must be  supported by written justifications that address the specific exception to  full and open competition that applies to the procurement. Also, the  government obligates billions of dollars annually under contracts and task  and delivery orders that are awarded using competitive procedures but for  which the government receives only one offer—situations the Office of  Management and Budget has cited as high risk. DOD has termed this  “ineffective competition” and has implemented regulations requiring that  additional steps be taken before a contract may be awarded when only  one offer is received.
Since 2009, the Office of Management and Budget and DOD have  implemented initiatives to increase competition. The conference report  accompanying the National Defense Authorization Act for Fiscal Year  2012 mandated us to report annually for 3 years on DOD’s  noncompetitive and one-offer awards. For this report, we examined (1)  the trends in DOD’s use of competitive awards, (2) the extent to which  justifications for exceptions to competitive procedures were adequate and  the reasons for the exceptions, (3) how DOD’s strategies aimed at  promoting long-term competition are changing behavior, and (4) the  extent to which DOD’s recent requirements address the reasons why only  one offer was received for competitive solicitations.
To identify trends in DOD’s use of competitive awards, we used the  Federal Procurement Data System-Next Generation (FPDS-NG) to  identify DOD obligations under competitive and noncompetitive contracts  in fiscal years 2009 through 2013, the five most recent years for which  complete data were available. For the purposes of this report, we defined  noncompetitive obligations to include obligations through contracts that  were awarded using the exceptions to full and open competition listed in  Federal Acquisition Regulation (FAR) Subpart 6.3. We also included  noncompetitive orders issued under multiple award indefinite delivery /  indefinite quantity (IDIQ) contracts or under the General Service  Administration’s schedules program. We calculated the competition rate  as the dollars obligated annually on competitive contracts and orders as a  percentage of dollars obligated on all contracts and orders. For the  purposes of this report, we focused on four DOD components: Air Force,  Army, Missile Defense Agency (MDA), and Navy.
To assess the extent to which justifications for exceptions to competitive  procedures were adequate and the reasons for the exceptions, we  randomly selected a nongeneralizable sample of 14 contracts and orders  coded as noncompetitive in FPDS-NG. Our sample included  noncompetitive contracts and task orders from the largest product or  service categories, measured by obligations, where the base and options  values exceeded $650,000 for awards made from April 1, 2012, through  March 31, 2013. For awards in our sample, we reviewed the signed  justification and approval document, the acquisition plan, market  research, and other key information in the contract files. We reviewed the  justifications for these awards to determine whether the documentation  met criteria in the FAR for content, timing, approval, and public  availability. In particular, we assessed whether the justifications were  clear and contained sufficient information to justify the use of the specific  authority cited as required by the FAR. As needed, we also discussed the  selected contracts and orders with contracting officials involved in these  awards to obtain additional information.
To study how DOD strategies aimed at future competition are changing  program behavior, we selected a nongeneralizable sample of 10 major  weapon programs based on responses from these programs to a  questionnaire developed for GAO’s fiscal year 2013 weapons  assessment. We selected 10 programs that indicated that the program  may use, will use, or had already incorporated open systems architecture,  and may acquire, will acquire, or had already acquired a complete  technical data package. We did not select programs that had responded  that use of open systems architecture or acquisition of technical data  rights would not take place or the programs that did not respond to these  questions. We contacted program officials to learn how programs have or  plan to leverage open systems architecture and the acquisition of data  rights to promote competition during development and throughout the life  cycle of the program.
To examine the extent to which DOD’s requirements address the reasons  why only one offer was received, we reviewed a nongeneralizable sample  of 15 contracts and task orders. The sample included the largest dollar  value award from each of the 15 largest product or service categories,  measured by obligations, made from April 1, 2012 through March 31,  2013. Only awards for which one offer was received in response to a  solicitation issued using competitive procedures, as coded in FPDS-NG,  were included in the sample. For each selected award, we obtained  evidence of the solicitation issuance and proposal due date,  documentation of cost or price analysis, and other key information. We  interviewed contracting officials involved with each award to understand  the competitive environment for each award and the possible reasons  why only one offer was received. We also interviewed several vendors  who had expressed interest in some of these awards but chose not to  submit offers. We assessed recent DOD implementing regulations to  determine whether key reasons for one-offer awards were addressed.
A more detailed description of our scope and methodology is presented in  appendix I. We conducted this performance audit from May 2013 to  May 2014, 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.
subsections: section_title: Background
paragraphs: The Competition in Contracting Act of 1984 requires agencies to obtain  full and open competition through the use of competitive procedures in  their procurement activities unless otherwise authorized by law. Using  competitive procedures to award contracts means that all responsible  contractors are permitted to submit offers. The FAR generally requires  agencies to perform acquisition planning and conduct market research to  promote full and open competition. Generally, noncompetitive awards  must be supported by written justifications that address the specific  exception to full and open competition that is being used in the  procurement.
In addition, federal agencies can establish IDIQ contracts with one or  more contractors and may issue orders under these contracts. For  multiple award IDIQ contracts, agencies are generally required by the  FAR to provide all contractors with an IDIQ contract a fair opportunity to  be considered for each order above certain dollar thresholds; however,  agencies can award noncompetitive orders under certain circumstances,  which generally require a written justification. The General Services  Administration administers a program that uses IDIQ contracts with  vendors for commercially available goods and services, and federal  agencies place orders under the contracts. When doing so  noncompetitively, the FAR requires procuring agencies to justify the need  to restrict the number of vendors considered. Finally, agencies can also  competitively award contracts after limiting the pool of available  contractors—a process called full and open competition after exclusion of  sources. For example, agencies are required by the FAR to set aside  procurements for small businesses if there is a reasonable expectation  that two or more responsible small businesses will compete for the work  and will offer fair market prices.
Justifications generally are to provide sufficient facts or the rationale to  explain the use of the specific exception to competition. For example,  under FAR part 6, justifications must include, at a minimum, 12  elements. Examples of these required elements include  a description of the supplies or services required to meet the agency’s needs and their estimated value; identification of the statutory authority permitting other than full and open competition; a determination by the contracting officer that the anticipated cost to the government will be fair and reasonable; a description of market research conducted, if any; and a statement of the actions, if any, the agency may take to remove or overcome any barriers to competition before any subsequent acquisitions for the supplies or services required.
Examples of allowable exceptions to full and open competition for DOD  include circumstances when only one or a limited number of contractors  are the only sources capable of performing the requirement or when an  agency’s need is of such unusual and compelling urgency that the  government would be seriously injured unless the agency is permitted to  limit the number of sources. The FAR generally requires that  justifications be published on the Federal Business Opportunities  (FedBizOpps.gov) website and be approved at various levels within the  contracting organization. These levels vary according to the dollar value  of the procurement.
subsections: section_title: Open Systems Architecture and Appropriate Data Rights Can Help Promote Competition
paragraphs: Our prior work indicates that a long-standing factor impacting DOD’s  competition rate is its reliance on original equipment manufacturers. Open  systems architecture promotes competition by allowing components to be  added, removed, modified, replaced, or maintained by multiple suppliers,  not just the manufacturer that developed the system. An open system is  designed with modular components each having its own functions. This  design makes the system easier to develop, maintain, and modify  because components can be changed without significantly impacting the  remainder of the system.
Likewise, our prior work states that incorporating open systems  architecture and the acquisition of appropriate data rights, such as design  drawings, specifications, and standards, during program development can  result in greater competition and reduce costs during production. Further,  incorporation of open systems architecture and management of data  rights can lead to greater competition and reduced upgrade and repair  costs over a program’s life cycle. But introducing this approach later in a  program’s life cycle, such as for a planned modification or upgrade, is  more difficult, complex, and costly to do as it may require significant  modifications to an already-developed system. Defense systems can  have a life span of 40 years; figure 1 shows that the greater part of a  weapon system’s total ownership cost consists of its operating and  support costs. Early decisions made during design dictate operating and  support costs over the entire life cycle.
section_title: Better Buying Power Initiative Promotes Competition
paragraphs: DOD’s Better Buying Power initiative outlines a series of actions,  guidance, and directives to achieve greater efficiencies, in part through  the promotion of competition, such as the following:
Each program must present a competitive strategy at each major  decision point.
Before starting system development, programs must have a business  case analysis that outlines an approach for using open systems  architecture and acquiring data rights to ensure sustained  consideration of competition in the acquisition of weapons systems.
Each DOD component is to develop a plan to improve the overall rate  of competition by at least 2 percent per year, and the rate of effective  competition—when more than one offer is received under competitive  procedures—by at least 10 percent per year.  Justification and approval documents for noncompetitive contracts  should include a discussion on how the program will take advantage  of business practices to break away from their reliance on a single  vendor and improve competition in future acquisitions.
Updated guidance and directives for open systems architecture and  the acquisition and management of data rights.
Developing new training and updated course curriculum on open  systems architecture and acquisition and management of data rights.
In addition, DOD has termed procurements for which only one offer was  received under full and open competition as “ineffective competition.” The  Office of Federal Procurement Policy (OFPP) noted that competitions that  yield only one offer in response to a solicitation deprive agencies of the  ability to consider alternative solutions in a reasoned and structured  manner. In November 2010, DOD introduced a policy containing new  requirements concerning one-offer awards, and codified it with changes in  the DFARS in June 2012. See figure 2.
Last year, we found that the one-offer requirements will likely have a  limited impact on unnecessarily restrictive solicitation requirements  because many solicitations provide initial response times of more than 30  days, so many awards are not subject to the program office consultation  rule. We also found that the impact of recent guidance on the number  and dollar value of one-offer awards is not quantifiable because of  unreliable data. As a result, DOD is not in a position to accurately  measure the impact of the one-offer requirements since it was  implemented. We recommended that DOD develop an action plan for  DOD components to collect reliable data on competitive procurements for  which only one offer is received, so that the department can determine  the effect of its requirements on one-offer awards. DOD agreed with our  recommendation. In response, the Air Force established mandatory  training for personnel responsible for entering this data in the system.  According to agency officials, DOD is in the process of updating guidance  on entering data for one-offer awards.
section_title: DOD’s Competition Rate Remained the Same for 2 Years
paragraphs: DOD’s competition rate for all contract obligations had been declining  since 2009; however, the competition rate has remained flat for the past  2 years. Among the DOD components in our study, the Army had the  highest competition rate in fiscal year 2013, while MDA had the lowest.  Based on FPDS-NG data, we found that noncompetitive awards cited  several exceptions from competitive procedures. We continue to observe,  as we previously found in 2012 and 2013, that there are a number of  factors that affect DOD’s competition rate. For example, the government  has historically relied on the original equipment manufacturers of weapon  systems for future procurements of the system, including sustainment.
subsections: section_title: Competition Rate Has Stopped Declining and Varies by Component
paragraphs: Between fiscal years 2009 and 2013, DOD’s competition rate—based on  all contract obligations—declined by 5 percent, from 62 percent to 57  percent, with an average competition rate of 59 percent for the 5 year  period (see figure 3).
However, the competition rate did not change from fiscal years 2012 to  2013, remaining at 57 percent. DOD’s total dollars obligated decreased  by almost $53 billion, from $360.4 billion in fiscal year 2012 to  $307.5 billion in fiscal year 2013. Competed obligations decreased by  over $31 billion, from $205.6 billion in fiscal year 2012 to $174.2 billion in  fiscal year 2013.
We also found that the competition rate for all contract obligations varied  by DOD component. Of the 4 organizations we reviewed—Air Force,  Army, Navy, and MDA—in fiscal year 2013, the Army had the highest  competition rate, 66 percent, whereas MDA had the lowest rate of  competition, 29 percent, representing a significant decrease from the prior  year. Figure 4 outlines competition rates by component for fiscal years  2009 through 2013.
In fiscal year 2013, the Air Force’s competition rate improved to  41 percent. However, the Air Force reported that it operates in an  environment where it obligates the majority of its dollars on long standing  sole-source weapon system contracts, noncompetitive foreign military  sales, and reduced number of new programs which affects their ability to  compete. The Navy’s competition rate in fiscal year 2013 declined due  to continued investments in the F-35 Joint Strike Fighter, P-8A Poseidon  long-range maritime patrol aircraft, and carrier construction. The decline  in MDA’s fiscal year 2013 competition rate is principally the result of a  noncompetitive $2.7 billion foreign military sale. Last year, we found that  DOD could gain greater insight into the competition rates if it considered  the impact of foreign military sales when calculating the rates. When we  calculated MDA’s competition rate without including foreign military sales,  we found that the competition rate was 49 percent in both fiscal years  2012 and 2013.
section_title: Competition Rates for Services Substantially Higher Than for Products with Little Change over Time
paragraphs: Slightly more than half of all DOD’s obligations in fiscal year 2013 were to  purchase services, ($160.3 billion, or 52.1 percent), which were competed  at a substantially higher rate than products. Specifically, the competition  rate for services was 73 percent compared to 39 percent for products.  This trend was generally consistent over the 5-year period from fiscal  years 2009 through 2013. As shown in figure 5, historically, services have  been procured at a higher competitive rate than products. In addition, in  fiscal year 2013, non-research and development (R&D) services were  competed at a higher competition rate than R&D services, 75 percent  compared to 65 percent.
The competition rate for non-R&D services at DOD declined from  81 percent in fiscal year 2009 to 75 percent in fiscal year 2013. Among  the major components, the Air Force had the most significant decline,  dropping from 66 percent to 47 percent. MDA increased its non-R&D  services competition rate from 69 percent to 89 percent.
The 10 largest product and service categories, as reported in FPDS-NG,  cumulatively accounted for 31 percent of non-competed obligations in  fiscal years 2009 through 2013. In fiscal year 2013, these 9 product and  1 service categories accounted for 38 percent of all non-competed  obligations and comprised 16 percent of all DOD obligations. In fiscal  year 2013, 10 percent of obligations for fixed wing aircraft procurements  were made competitively (see table 1).
Examples of fixed wing procurements include airframes or components  for the F-35, C-5, F-22, and C-40B aircraft. Similarly, 4 percent of rotary  wing and 3 percent of obligations for guided missiles were competed. For  aircraft carriers, the Navy competition advocate explained that when a  contract for a very large procurement like an aircraft carrier is awarded,  the organization’s competition rate declines for that year because these  types of procurements are made noncompetitively.
Once DOD selects the contractor for a weapon system, such as an  aircraft, truck, or missile, the government has historically relied on the  original equipment manufacturers for future procurements of the system,  including sustainment. The additional systems or sustainment are often  procured through contract modifications or the exercise of contract  options. This situation is partly attributable to the unique relationship that  DOD has with the defense industry that differs from the commercial  marketplace. The combination of a single buyer (DOD), few very large  prime contractors in each segment of the industry, and a limited number  of weapon programs constitutes a structure for doing business that is  altogether different from a classic free market. For instance, there is less  competition and once a contract is awarded, the contractor often remains  the sole vendor capable of providing additional systems and sustainment.  These long-term contractual relationships with weapon system  contractors limit opportunities for competition.
section_title: Majority of New Noncompetitive Awards Were Coded As “Only One Responsible Source”
paragraphs: During the past 5 fiscal years, DOD used the “only one responsible  source” exception for about 64 percent of all awards for new  noncompetitive contracts and task orders on single award IDIQ contracts.  The percent obligated on new noncompetitive contracts and task orders  on single award contracts as reported in FPDS-NG under the “only one  responsible source” exception has increased—from 66 percent in fiscal  year 2009 to 72 percent in fiscal year 2013. The second largest amount  (11 percent awarded in fiscal year 2013) cited the “authorized or required  by statute” exception (see table 2).
The individual components used the “only one responsible source”  exception to varying extents—69 percent for the Air Force, 68 percent for  Army, 80 percent for Navy, and 71 percent for other DOD agencies for  fiscal year 2013. However, MDA used this exception for 96 percent or  $137.4 million of the new noncompetitive contracts and task orders it  awarded in fiscal year 2013.
In fiscal year 2013, the majority of new noncompetitive task orders issued  under multiple award IDIQ contracts and subject to the fair opportunity  process reported two exceptions to the fair opportunity process.  Specifically, “only one source” was cited for 44 percent of obligations  ($1.2 billion) and “follow-on actions,” orders for the same good or service  with the original vendor, was cited for 39 percent ($1.1 billion).
section_title: Justifications Generally Were Adequate and Many Cited a Lack of Appropriate Technical Data Rights as a Barrier to Competition
paragraphs: In general, the documentation for our selected contracts contained the  required elements in accordance with regulations. Specifically, 11 of the  14 justifications in our sample contained all the required elements.  However, our sample also included three justifications that were not  prepared correctly. Further, four justifications were not made publicly  available according to requirements, thus missing an opportunity to add  transparency into the contracting process. Half of the justifications in our  sample explained that the lack of necessary data rights was a barrier to  competition. In some cases the justifications provided insight as to how a  lack of the right level of data rights resulted in complete reliance on a  single vendor over time.
subsections: section_title: Justifications Generally Contained the Required Elements
paragraphs: As required by the FAR, DOD contracting officials prepared written  justifications for all 14 noncompetitive contract awards in our sample. We  determined that 11 of the 14 justifications contained all required elements  and were prepared in accordance with the FAR. For additional details  about the noncompetitive awards in our sample, see appendix II. Further,  we found that the justifications generally provided clear explanations of  the reasons that the procurement could not be competed. Documenting  this information provides insight into why acquisitions were not  competitive and enables agencies to use that knowledge to help remove  obstacles to competition in future acquisitions. For example, three  justifications we reviewed described steps DOD was taking to improve  competition in the future.
Three justifications were not prepared in full accordance with regulations.  One Navy justification prepared for an $882,000 contract for helicopter  support services did not have the signature of the competition advocate.  In addition, the justification was missing the required information about  market research conducted and a list of sources that expressed an  interest in the acquisition. However, the Navy provided a separate market  research memorandum which explained that the government of the  country where the helicopter services were needed directed which  company to use. A Navy justification for a $7.2 million award for  software engineering services did not include the contracting officer’s  signature certifying that the justification was complete and accurate  because the signature block was erroneously removed from the  document. The third justification did not use the correct legal citation for  the exception to competition and instead referenced an exception that  was not supported by the facts provided in the justification.
The FAR requires that justifications be made publicly available, generally  within 14 days of contract award, which increases transparency into the  contracting process by providing the opportunity for public review of  justifications for noncompetitive contracts. In our sample, five  justifications were made publicly available within the time frame required  by the FAR and another justification was exempt from requirements due  to national security concerns. However, four justifications were never  made publicly available and four justifications were not made available  until after the required time frame. DOD acknowledged these as  oversights.
section_title: Lack of Necessary Data Rights Is Frequently a Barrier to Competition and Results in Reliance on a Single Vendor
paragraphs: All 14 noncompetitive contracts and task orders within our sample were  justified under the exceptions for competition of “only one responsible  source or “only one source capable.” For half of these awards, the basis  for this exception was the agency’s lack of data rights. All 7 of these  justifications or supporting documents described situations, ranging from  3 to 30 years in duration, where DOD was unable to conduct a  competition because data rights were not purchased with the initial  award. Within these 7 selected awards, justification content varied from  addressing steps the agency would take to increase competition in the  future to stating that the agency was taking no action to increase  competition for these awards. For example:
The justification for a $7 million Navy award for situational awareness  and communication software explained that the agency and the  contractor disagreed about the level of government data rights. The  justification stated that the agency was negotiating with the contractor  to obtain adequate data rights to develop a data package that will  support competition for future acquisitions of software releases.
The justification for a $3 million MDA award stated that the original  equipment manufacturer for a cost and requirements management  software system owned all of the data rights, necessitating a  noncompetitive award for the system’s maintenance. However, the  justification explained that the agency planned to end the  noncompetitive award and transition to a different system by 2017,  ensuring that necessary data rights are acquired at that time.
A justification for an almost $6 million Navy contract for spare  helicopter windshields addressed how the agency would increase  future competition. The justification explained that the agency planned  to compete this acquisition in the future by encouraging other vendors  to submit a complete data package but did not address plans to  purchase the necessary data. The justification stated that these  articles are highly specialized and the data required for another  vendor to manufacture these articles are not available. These parts  have been continually acquired from the original equipment  manufacturer for the past 25 years. Including the current 5-year  contract, the government will have purchased these parts  noncompetitively for a total of 30 years.
A justification for a $9.5 million Army contract for M1A1 situational  awareness tanks stated that the contractor had refused to sell the  data rights and that the government would take no action to increase  competition at this time because the government would suffer  unacceptable delays. The contractor has refused to sell the process  sheets and associated data needed for the remanufacturing process  to compete this acquisition. The justification explained that the  government will post an announcement for this requirement online  and any bids or proposals will be considered. However, no other  vendors have ever expressed interest in this acquisition.
section_title: Focus on the Use of Open Systems Architectures and Emphasis on Data Rights Help to Guide Program Behavior
paragraphs: The focus on open systems architecture and acquiring effective types of  data rights is changing the way DOD acquires goods and services.  Programs are moving away from dependency upon single suppliers for  parts, maintenance or upgrades and are moving toward open systems;  these are designed to allow components to be added, removed, modified,  replaced or maintained by multiple suppliers. The programs we sampled  illustrate that leveraging open systems architecture and data rights to help  promote competition involves early consideration and extensive analysis  of how each system can best use these approaches to maintain a  competitive environment throughout a program’s life cycle. Likewise, BBP  fosters behaviors with the intent to promote competition. For example,  according to program officials the BBP’s emphasis on open systems  architecture and effective management of data rights resulted in  increased competition for the Air Force’s Military Global Positioning  System User Equipment and KC-46 Tanker Modernization programs.  DOD officials told us that training is an effective way to change patterns of  behavior and that to promote competition the agency needs an  acquisition workforce that is educated on the various types of data rights.
subsections: section_title: Some Programs Already Promote Competition with Open Systems and Data Rights
paragraphs: Programs report using open systems architecture and acquiring the  necessary technical data rights to enable competition during development  and throughout the acquisition life cycle. Based on questionnaire  responses, programs are moving away from proprietary systems and  toward systems that are designed to allow for future competition. As  shown in table 3, 24 of the 31 weapons programs that responded to a  2012 GAO questionnaire reported that they were planning or had already  used open systems architecture, and 14 of 31 had acquired or planned to  acquire a complete technical data package.
The following examples from the 10 programs in our sample illustrate how  programs have or plan to leverage open systems architecture and  acquisition of data rights to promote competition during development and  throughout the life cycle.
The Air Force has planned for sustained competition for its Three- Dimensional Expeditionary Long Range-Radar program. Program  officials said that they used open systems architecture to maximize  competition between multiple vendors and that they plan to acquire  data rights to address long‐term sustainment and competition for  future upgrades to the system. Further, the program is expected to  require the contractor to clearly define and describe all component  and system interfaces and ensure that this information is both  accurate and available to other potential vendors. Specifically, all  documentation that defines a component’s form, fit, function, and  integration is to be delivered to the program with unlimited rights at a  level of detail that will provide a developer, with comparable levels of  expertise, the ability to further develop the system component.
The Army Integrated Air and Missile Defense program began  development in 2006. Open systems architecture and the acquisition  of appropriate data rights were key components since the program’s  conception. Program officials we spoke with stressed that open  systems architecture is a key tenet for the evolution of the air and  missile defense sensors and that decisions to incorporate open  systems architecture and acquire data rights need to be made very  early in program development. Early incorporation will enable the  Army Integrated Air and Missile Defense to compete future production  both at the system level and at the subsystem level. For example, the  program is designed so that the most current technology can be  inserted into just one component of the system through a competitive  acquisition without having to make any changes to any other parts of  the system. This design will allow the program to compete either the  entire system or subcomponents when the system goes into  production.
Program officials at MDA’s Ground Based Midcourse Defense  program conducted extensive data rights analysis and subsequently  acquired all technical data required for successful competition of the  development and sustainment contract. Specifically, the program  released thousands of documents into a technical data library to be  used by vendors that plan to bid on program contracts. Additionally,  according to the program office, the contract includes language to  ensure that future data are not limited or restricted to the government  without prior written authorization from the procuring contracting  officer.
The Ship to Shore Connector program is the first naval acquisition  program in more than 15 years to be designed in house by the Navy  instead of by private industry. Officials from the program told us that  because the program is responsible for the entire life of the Ship to  Shore Connector program that all aspects of acquisition, including  open systems architecture and the acquisition of technical data for  lifecycle support of the craft was accounted for during the design  process. Because of the lifecycle responsibility, they said that it is  important for critical data not to become obsolete so a modular  approach using standard interfaces was implemented to enable  maintenance and support, and prevent obsolescence issues, where  feasible. The program is procuring a technical data package in  support of the program’s long-term technical data requirements for  design, manufacture and sustainment. The data package is to support  re-competition for production, sustainment and upgrades and will  allow the future craft builder to contract with vendors to build  components where the original contractor was also the manufacturer  of the component.
section_title: DOD Initiative Continues to Encourage Use of Open Systems Architecture and Data Rights
paragraphs: DOD’s BBP initiative is intended to improve DOD’s use of open systems  architecture and effectively manage technical data rights. This is  important given the relatively lower rate of competition for products  (39 percent) compared to services (73 percent) from fiscal year 2009  through 2013. We found that BBP has affected decision making of some  weapons programs in the use of open systems architecture and  acquisition of technical data rights that enable competition throughout a  program’s life cycle. Specifically, we identified two instances when major  weapon system program offices were influenced by BBP to make  changes that would promote competition:
According to officials at the Air Force’s Military Global Positioning  System User Equipment program, BBP led them to consider how  open systems architecture and data rights could be used to obtain  greater competition throughout the program’s sustainment. Program  officials told us, that because of BBP, the program revised its  Technical Development Strategy document to include the program  requirement for contractors to implement open systems architecture  principles and provide unlimited rights to technical and manufacturing  data and government purpose rights to remaining non-commercial  technical data licenses. We found evidence of these changes in the  program’s Technology Development Strategy. This document was  required at the decision point prior to the technology development  phase of the defense acquisition process, and it includes a summary  of how the program anticipates meeting the product life-cycle data  rights requirements and supporting the overall competition strategy.
The BBP’s emphasis on effective management of technical data rights  resulted in improvements for the KC-46 tanker modernization  program’s efforts to increase competition and reduce costs over the  program’s life cycle. In particular, the Air Force conducted an analysis  of the FAR, the DFARS and applicable intellectual property laws to  ensure that the program acquired the sufficient data and licensing  rights, including data, for operations, maintenance, installation, and  training. The program obtained the operations, maintenance,  installation, and training data for a fixed price and these data rights  should allow the agency to maintain the system and compete both the  development of the training systems and the reprocurement package  for another system component. The Air Force was able to obtain the  rights for the operations, maintenance, installation, and training data  because the program required offerors to price data and include open  systems architecture and standard interfaces to the maximum extent  practical for a commercial derivative military aircraft.
DOD officials also told us that training is a highly instrumental way to  change patterns of behavior and that to promote competition, the agency  needs an acquisition workforce that is educated on types of data rights. In  2013, as required by the BBP, the Defense Acquisition University  released a series of seven continuous learning modules focused upon  data management to provide fundamental knowledge required for  acquisition professionals to create better data management plans and  obtain necessary types of data rights in defense systems. This training  builds upon the continuous learning module released in 2012 to introduce  open systems architecture principles to acquisition professionals.
To advance the agency’s knowledge of types of data rights, DOD has  issued two updated guidance documents as required by the BBP and is  developing further guidance that emphasizes the importance of creating  and maintaining a competitive environment in order to improve DOD’s  competitive posture:
The Data Rights Brochure explains differences in types of data rights  categories and the importance of anticipating the need for data and  data rights. It also provides guidance to assist in identifying and  resolving data rights issues prior to contract award.
The Open Systems Architecture Contract Guidebook for Program  Managers is to be used by the acquisition community to incorporate  principles and practices of open systems architecture in the  acquisition of systems or services. For example, this guidebook  provides contract language to capture open architecture and an open  business model to increase opportunities for competition,  recommendations for writing a contract data requirements list and a  statement of work that is based upon open systems architecture. It  also contains instructions for obtaining effective levels of data rights to  support full life-cycle competition. DOD officials emphasized that while  the guidebook can assist program managers with including  appropriate language into contracts, without the proper technical  expertise, unsuitable language for the program could be chosen from  the guidebook and be inserted into a contract.
We previously concluded that incorporating open systems architecture  into a program requires a highly knowledgeable workforce; further, we  made a recommendation that DOD assess service-level and program  office capabilities relating to an open systems approach and develop  short-term and long-term strategies to address any capability gaps  identified. Strategies could include the Navy’s cross-cutting approach  where a team of a few technical experts within the Naval Air Systems  Command could be available to work with program offices, as necessary,  to help develop open systems plans.
section_title: DOD’s One-Offer Requirements Are Focused Late in the Acquisition Process
paragraphs: In 2010, DOD introduced new requirements for when full and open  competition results in only one offer; however, these rules, as  implemented in the DFARS, are focused late in the acquisition process  and DOD officials have limited insight into the reasons only one offer was  received. The one-offer awards we reviewed complied with DOD’s rules  which require contracting officers to ensure solicitation periods allow at  least 30 days for receipt of proposals and to conduct cost or price  analysis. But these steps occur too late to impact competition, and  actions can be taken much earlier in the acquisition planning process to  encourage multiple offers. DOD contracting officials and vendors told us  that engagement well before the 30-day solicitation period is key to  ensuring vendors have adequate time to review draft requests for  proposals, plan resources, provide feedback on potentially restrictive  requirements, and determine through internal management processes  whether it is worthwhile to prepare proposals. Limited information is  available about reasons why only one offer is received because  contracting teams seldom collect information from vendors, which could  limit DOD’s ability to adjust acquisition strategies appropriately and plan  for future acquisitions.
subsections: section_title: Recent Guidance Is Being Followed
paragraphs: The contracts and task orders we reviewed that were competed but  received only one offer complied with DOD’s rules, nevertheless DOD  continues to obligate significant amounts on one-offer awards.  Specifically, in fiscal year 2013, DOD obligated a total of $22.6 billion on  one-offer awards, or 13 percent of all competed fiscal year 2013  obligations. The Army and the Navy had the highest one-offer rates  (21.1 percent and 17.5 percent of competed obligations respectively).  MDA had the lowest one-offer rate (1.3 percent). The Air Force’s rate was  8.6 percent. In total, DOD awarded about 108,000 one-offer awards— about 1 percent of all new competed awards—and of these almost half  were awarded by the Defense Logistics Agency. Across DOD,  approximately 9,300 one-offer awards were valued above the simplified  acquisition threshold—generally $150,000, below which the one-offer  rules would not apply.
The awards in our review followed the one-offer rules regarding  solicitation periods and cost or price analysis, but none were subject to  the program office consultation rule—that the contracting officer consult  with the program office to determine whether requirements should be  modified to promote more competition. For additional details on the  competitive one-offer awards we reviewed, see appendix III. Contracting  officials told us that they almost always keep solicitations open for at least  30 days, and have done so since before the one-offer rules were  established. They also noted that it was standard practice to grant  extensions if a vendor requested one. Twelve of the 15 awards we  reviewed were initially open for 30 days or more. Of the remaining  3 awards:
Two Army awards were not subject to the rules per an exemption for  contingency, humanitarian, or peacekeeping operations.
An Air Force award for software development and support was only  open for 29 days due to miscounting the number of days, and  received a waiver from the resolicitation rule.
None of the awards we reviewed were subject to the June 2012 rule  requiring contracting officers to consult with program offices regarding  whether requirements should be modified to promote more competition.  For two of the awards we reviewed, however, teams re-assessed  requirements even though they were not required to do so. In one award  that was exempt from the one-offer rules, the Army re-evaluated and  changed its requirements to enhance competition and to address funding  concerns. For another award which was initially open for 30 days, so not  subject to the program office consultation rule, the Navy reassessed  requirements because a potential offeror questioned whether the  requirements were overly restrictive. Contracting officials subsequently  determined they were not. However, neither of these awards received  more than one offer.
All 15 awards we reviewed complied with the rule to conduct cost or price  analysis when only one offer is received. In four awards, DOD was able to  negotiate lower prices as part of this process, decreasing costs between  $1 million and $10 million, or 2 to 10 percent of total contract value. Even  when only one offer is received, the government may still obtain some of  the benefits of competition—particularly if the sole offeror is not aware  that no other offers were received. In most cases, contracting officials  said they thought the incumbents likely expected other vendors to offer  proposals. There were several predecessor contracts that had multiple  offers and, in other cases, solicitation time frames were extended at the  request of a different vendor. In another instance, the vendor accepted  contract terms, including government purpose data rights, which it had  not accepted under a previous noncompetitive award. In addition, the  vendor took a greater share of the financial risk for cost overruns than in  the previous sole-source environment. Contracting officials also said they  felt that the offered prices reflected a competitive market. For example, in  six cases, offered prices were 4 to 26 percent lower than the government  estimates.
section_title: One-Offer Requirements Are Directed at Steps That May Occur Too Late in the Acquisition Process to Meaningfully Enhance Competition
paragraphs: DOD’s requirements for competitions that result in only one offer do not  focus on the acquisition planning phase when vendors’ initial engagement  with government and internal business decision processes occur. Rather,  the steps outlined in the one-offer rules all occur after the solicitation is  published, which marks the end of the acquisition planning phase.  Generally, the contracting officials for our cases did not feel that the  length of time the solicitation was open was a reason only one offer was  received, particularly because almost all of them were open for 30 days or  more. In several cases, vendors requested more time and the contracting  office extended the solicitation period beyond the initial 30 days, but the  vendor still did not submit an offer. Vendors explained that they often  have made their decisions whether to bid or not before the final request  for proposals is published and the 30-day solicitation period begins. For  example, in one case, contracting officials told us that a vendor they had  expected to compete called 2 weeks before the solicitation was posted to  tell them they had decided not to submit an offer because they were  reserving their resources to bid on another agency’s contract.
We spoke with some of the vendors identified in market research that did  not submit offers for the awards we reviewed. Vendor representatives  explained to us that the likelihood of their company choosing to make an  offer is increased when they learn of a potential opportunity as early as  possible and can engage with the government during the acquisition  planning phase before the solicitation is issued. For instance, when  sufficient time is allowed, vendors can discuss draft requirements  documents with the government to identify any language that might  unnecessarily preclude their solution from being considered. Further,  vendors need adequate time to conduct internal discussions and analysis  about what they might offer that could compete successfully against an  incumbent. There are also internal management reviews and decision  points prior to approval to submit an offer.
Contracting officials we spoke to identified a number of actions they  generally take to try to increase competition, many of which come early in  the acquisition planning phase. They also stressed that early  communication with industry about planned procurements is critical to  give industry enough time to plan resources and make business decisions  about whether to prepare an offer. Additional actions identified include the  following:
Reviewing requirements internally during the presolicitation phase to  ensure that they are not overly restrictive, including legal review.
Publishing draft requests for proposals and statements of work. For  three awards we reviewed, officials published draft documents more  than 6 months in advance of the solicitation. Contracting officers said  that the questions received from industry in the draft phase help  ensure requirements were not written too restrictively.
Holding industry days, which also allow subcontractors to find teaming  partners.
Allowing access to a “bidders library” of technical data and drawings  to even the playing field with the incumbent contractor.
Allowing for a long transition period to signal an ability and willingness  to bring on a new contractor.
Limiting information requested from vendors to decrease the burden  of preparing proposals.
Previously, we found that allowing enough time in the acquisition planning  process—before a solicitation is published—is important to help ensure  adequate competition. In 2010, we found that program officials play a  significant role in the contracting process—particularly in the acquisition  planning process while developing requirements, performing market  research, and interfacing with contractors—which can influence  competition. Contracting officials noted that program offices sometimes  do not allow enough time to execute a sufficiently robust acquisition  planning process that could increase opportunities for competition. They  told us that program offices are insufficiently aware of the amount of time  needed to properly define requirements or conduct adequate market  research. In 2011, we found that none of the agencies we reviewed had  measured or provided guidance on the time required to perform key steps  during the presolicitation acquisition planning phase. We recommended  that they collect information needed to establish time frames for when  program officials should begin acquisition planning. The agencies we  reviewed had varied responses to this recommendation and one agency  has taken initial steps to establish these time frames.
When a long-standing incumbent contractor has been performing well,  contracting officials said that vendors do not perceive a good chance of  winning regardless of the government’s desire for competition and  therefore do not bid. Contracting officials told us that the most common  questions they get during the solicitation period are about who the  incumbent is and whether their performance has been satisfactory. In  addition, contracting officials said vendors are selective about making  offers to keep proposal costs—which factor into their overhead rates—low  in order to remain competitive on other awards.
In making their business decisions about whether or not to submit offers,  vendors told us that they look for signals about whether the government is  willing to accept some risk by replacing the incumbent. For example, for  one award we reviewed, the solicitation included a 6-month transition  period in an attempt to signal to vendors that the program was willing to  take the time to bring a non-incumbent vendor on board. For another  contract we reviewed, a vendor told us they did not submit an offer  because—based on interactions with government in the acquisition  planning phase—they believed government was unwilling to take risks  with the program that might be introduced by bringing in a new solution,  and therefore the vendor’s chances of unseating the incumbent were too  low to justify the expense of putting together a proposal. In addition, other  vendors have told us they also consider various factors before submitting  a proposal, such as: the cost of developing proposals; their ability to  provide the services; rapport with the government personnel; and the  potential financial gain from the procurement.
section_title: DOD Officials Have Limited Insight into Reasons Only One Offer Was Received
paragraphs: Federal internal control standards call for managers to identify, analyze,  and decide what actions should be taken to manage risk. For  competitive acquisitions, this would include the risk that only one offer  might be received. For the awards we reviewed, however, contracting  officers seldom collected information about reasons only one offer was  received, which could limit their ability to revise acquisition strategies  appropriately or plan for future competitive acquisitions. In most cases,  contracting officials anticipated they would receive more than one offer  and told us they were surprised that they only received one offer.  However, in 11 of 15 awards we reviewed, contracting officials did not  have information from non-bidding vendors to understand why they chose  not to submit an offer. For instance, according to the program director for  one award, MDA has very limited insight into the reasons vendors choose  not to submit offers. However, although they said they had been very  surprised that only one offer was received, MDA officials responsible for  this award had not followed up with the other potential vendors identified  in the almost 2 years they had been preparing for competition. There is  no requirement to engage with the vendor community to learn why they  chose not to submit offers.
In October 2009, OFPP issued guidance to help federal acquisition  leaders evaluate the effectiveness of their agencies’ competition  practices. The guidance included recommendations to engage the  marketplace to determine how barriers to competition can be removed.  This guidance recommended that agencies encourage their contract and  program staff to speak to vendors, including leading competitors and  others that expressed interest in the procurement, but ultimately did not  submit offers to understand the basis for their decision not to participate.  In 2010, we recommended that OFPP determine whether the FAR should  be amended to require agencies to regularly review and critically evaluate  the circumstances leading to only one offer being received and to identify  additional steps that can be taken to increase the likelihood that multiple  offers will be submitted. OFPP agreed with our recommendation but, to  date, has not taken steps to implement it. In addition, DOD has not  conducted a formal study of the reasons only one offer is received and  the one-offer rules do not reflect this type of evaluation.
Understanding the reasons only one offer was received can inform  whether to revise acquisition strategies going forward. In two cases,  contracting teams collected information from vendors that did not bid to  understand what the reasons were. For one award, the contracting office  requested additional information from the eight vendors with “no bid”  responses on a multiple award task order contract. Six vendors felt they  did not have the experience necessary to meet the requirements, and two  vendors stated that they were partnering with the sole offeror as  subcontractors. In another case, contracting officials did not reach out to  potential bidders, but observed from the proposal that they had teamed  with the sole offeror as subcontractors instead of choosing to compete. In  the other instance, contracting officials said they learned that some  vendors were in a teaming relationship with the incumbent that they did  not want to jeopardize. Officials said that another vendor explained the  release of this solicitation coincided with 24 other solicitations, and that if  this solicitation had come out later it would have made it easier for them  to submit an offer. Based in part on this information, the Navy changed  their acquisition strategy to decrease the period of performance from  5 years to 2 years, allowing for another competition sooner than planned.  Officials told us they may make other changes to the acquisition strategy  for the next procurement as well, including breaking the requirement into  pieces and using different contract vehicles. In contrast, we reviewed  another award that was initially planned to be a multiple award task order  contract, under which competition would continue on future task orders.  When only one offer was received, DOD went forward and awarded a  single award task order contract, with 1 base year and 4 option years.  Under this arrangement, the agency will not get the benefit of additional  competition for task orders.
In several instances, too much time had passed for vendors to provide us  with information about the reasons they chose not to bid on our selected  contracts, either because the individuals involved were no longer with the  company or because they could not recall the specific cases. With  workforce turnover in the government and industry, the best time to  collect information about the reasons vendors do not submit offers is  likely before or soon after award. This may be less important if the  requirement is not anticipated to re-occur in the future. For instance, we  reviewed two awards where contracting officials told us they did not seek  information about the reasons only one offer was received because they  expected these to be the last contracts awarded for these requirements.
section_title: Conclusions
paragraphs: DOD’s goal is to increase competition annually and strengthen  competition in its acquisition of products and services. Half of the  justifications we reviewed stated that the lack of technical data rights  resulted in a barrier to competition. DOD’s BBP initiative requires  programs to outline an approach to manage its data rights needs and to  use open systems architecture where feasible. This should help DOD to  obtain the appropriate data rights and use open systems architecture to  increase competition throughout a program’s life cycle to save taxpayer  dollars while providing the best available technology to the warfighter.
DOD also has established a goal of increasing effective competition— where competitive procedures are used and more than one offer is  received. However, the department will have difficulty accomplishing this  goal without focusing its attention on factors that impact vendor business  decisions. DOD’s current regulations help decrease some of the risks of  one-offer awards, but focus on steps that occur too late in the process to  effectively engage industry in competition. Enhancing the department’s  acquisition planning guidance to ensure enough time and attention are  provided for early vendor engagement could help encourage multiple  offers. There will always be instances when the government cannot  change vendors’ business decisions. However, the department is less  able to make an impact on future acquisitions—or to adjust current  acquisition approaches—for specific procurements if it lacks information  about the reasons vendors chose not to submit offers. The department  could mitigate the risk of future limitations on competition by seeking  more information in certain cases, such as for high dollar value  procurements or when it is likely the agency will repeat the procurement  in the future.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense take the following two  actions to continue to enhance competition:
Ensure that existing acquisition planning guidance promotes early  vendor engagement and allows both the government and vendors  adequate time to complete their respective processes to prepare for  competition.
Establish guidance for when contracting officers should assess and  document the reasons only one offer was received on competitive  awards, including reviewing requirements to determine if they are  overly restrictive and collecting feedback from potential vendors about  the reasons they did not submit offers, taking into account dollar value  and the likelihood the requirement is a recurring need.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOD for review and comment. In  written comments, DOD concurred with our recommendations. DOD’s  comments are reprinted in appendix IV. In responding to the first  recommendation, DOD plans to issue guidance to acquisition planners to  provide sufficient time for the vendors to review requirements and interact  with government officials. We agree that it is important for DOD to  effectively engage industry early in the acquisition process to mitigate  factors that may hamper competition. In concurring with our second  recommendation, the department agreed to provide guidance to  contracting officers on the need to obtain feedback from vendors who  expressed interest during the market research phase of competitive  solicitations, but did who not submit a proposal. We believe that it is  important that DOD assess and document the reasons only one offer was  received on competitive awards, because doing so could help to promote  future competition. DOD also provided technical comments that were  incorporated, as appropriate.
We are sending copies of this report to the appropriate congressional  committees and to the Secretary of Defense. This report will also be  available at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or by e-mail at woodsw@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may   be found on the last page of this report. Staff who made key contributions  to this report are listed in appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives for this review were to examine (1) the trends in DOD’s  use of competitive awards, (2) the extent to which justifications for  exceptions to competitive procedures were adequate and the reasons for  the exceptions, (3) how DOD’s strategies aimed at promoting long-term  competition are changing behavior, and (4) the extent to which DOD’s  recent requirements address the reasons why only one offer was  received for competitive solicitations.
To address these objectives, we used data in the Federal Procurement  Data System-Next Generation (FPDS-NG), which is the government’s  procurement database. We assessed the reliability of FPDS-NG data by  (1) performing electronic testing of required data elements, (2) reviewing  existing information about the data and the system that produced them,  and (3) comparing reported data to information from the contract files we  sampled. We determined that the data were sufficiently reliable to  examine the trends in DOD’s use of noncompetitive awards and the  factors influencing DOD’s competition rate, including the number of  awards, dollar amount obligated, and the percentage of contracts  awarded competitively overall and by component.
To further examine the trends in DOD’s use of noncompetitive awards,  we used data from FPDS-NG to identify DOD obligations under  competitive and noncompetitive contracts from fiscal year 2009 through  2013, the five most recent years for which complete data were available.  For the purposes of this report, we defined noncompetitive obligations to  include obligations through contracts that were awarded using the  exceptions to full and open competition listed in Federal Acquisition  Regulation (FAR) Subpart 6.3 (Other than Full and Open Competition).  We also included noncompetitive orders issued under multiple award  indefinite delivery/indefinite quantity contracts or under the General  Service Administration’s schedules program. Specifically, we identified  contracts and task orders funded and contracted by DOD. For competitive  contract actions, we included contracts and orders coded as “full and  open competition,” “full and open after exclusion of sources,” and  “competed under simplified acquisition procedures” as well as orders  coded as “subject to fair opportunity” and as “fair opportunity given,” and  “competitive set aside.” For noncompetitive contract actions, we included  contracts and orders coded as “not competed,” “not available for  competition,” and “not competed under simplified acquisition procedures,”  as well as orders coded as an exception to “subject to fair opportunity”,  including “urgency,” “only one source,” “minimum guarantee,” “follow-on  action following competitive initial action,” “other statutory authority,” and  “sole source.” We calculated competition rates as the percentage of  obligations on competitive contracts and orders over all obligations on  contracts and orders annually. We examined the competition rate at the  DOD level and at four components: Air Force, Army, Missile Defense  Agency (MDA), and Navy from fiscal year 2009 through 2013. We also  reviewed competition reports published by DOD and the military services.
In addition, to obtain insight into what was being purchased  noncompetitively we analyzed product service codes data for the  products or services that has the highest noncompetitive obligations.  These codes indicate what was bought for each contract action reported  in FPDS-NG. We calculated the competition rate as the dollars obligated  annually on competitive contracts and orders as a percentage of dollars  obligated on all contracts and orders. For fiscal years 2009 through 2013,  we analyzed the competition rate for products, non-research and  development (R&D) services, and R&D services. Also, we identified  FPDS-NG data to determine the impact of foreign military sale (FMS)  awards on DOD’s and the components’ competition rates. For FMS  awards, we included contracts and orders coded as “foreign funds FMS”  in FPDS-NG. We also assessed the exceptions cited in FPDS-NG for  new noncompetitive DOD contracts and task orders in fiscal years 2009  through 2013.
To review the extent to which justifications for exceptions were adequate  and the reasons for the exceptions, we examined the FAR Part 6  (Competition Requirements), Subpart 8.405 (Ordering Procedures for  Federal Supply Schedules), and Subpart 16.505 (Indefinite-Delivery  Contracts, Ordering). To determine if recent justification documents  complied with these requirements, we randomly selected 15 contracts  and orders coded as noncompetitive in FPDS-NG. Specifically, we  identified the two-digit product service code categories with the highest  dollar obligations. We then randomly selected one contract or task order  for each of these 15 product service codes from April 1, 2012, through  March 31, 2013. We ensured that our selection contained only contracts  or orders with a base and options values exceeding $650,000 and that it  included at least one award from the Air Force, Army, MDA, and Navy.  We also excluded from our review contracts or orders awarded under  simplified acquisition procedures and noncompetitive orders that were not  subject to multiple award fair opportunity as well as exceptions that do not  require a justification, such as international agreements. Our sample was  reduced to 14 when we removed 1 contract because it was miscoded.  Our final sample included 3 Air Force awards, 5 Army awards, 1 MDA  award, and 5 Navy awards. See appendix II for more details on the  selected noncompetitive awards.
For the awards in our sample, we requested and reviewed the signed  justification and approval documents and additional documentation in the  contract files, including the first page of the signed contract, acquisition  plan, price negotiation memorandum, documentation of market research,  and statement of work/performance work statement and documentation, if  any, that the justification was posted on Federal Business Opportunities  website including the dates posted. We assessed justifications and  additional documentation for the 14 selected contracts or task orders  against elements in the FAR such as content, timing, approval, and public  availability. As needed, we contacted contract officials involved with  awarding these contracts to obtain additional information so we could  better understand the analysis conducted that resulted in the decision to  award these contracts or orders noncompetitively.
To study how DOD’s strategies aimed at promoting long-term competition  are changing behavior we selected a nongeneralizable sample of 10  major weapons systems programs. Our selection was based on 31  responses received from program offices on a questionnaire developed  for GAO’s fiscal year 2013 weapons assessment. We analyzed the  survey responses for programs received for that report, where sent a  questionnaire to 65 defense acquisition programs and sub-elements of  programs to determine the extent to which programs were implementing  acquisition reforms. We selected 10 programs that had responded that  the program may use, will use, or had used open system architecture,  and also responded that the program may acquire, will acquire or had  acquired technical data. We did not select programs that had responded  that use of open systems architecture or acquisition of technical data  rights would not take place or the programs that did not respond to these  questions. We selected five major defense acquisition programs and five  future major defense acquisition programs. Further, we made certain that  our sample contained programs from the Air Force, Army, Navy, and  MDA. To learn how these programs are using open systems architecture  and acquiring effective data rights to promote competition, and what  informed the process that led to these decisions, we contacted officials  from each program to request interviews and we reviewed program  documents. We also interviewed officials from the Office of the Secretary  of Defense and the Office of the Secretary of the Navy on the use of open  systems architecture and acquiring effective data rights. In addition, we  interviewed competition advocates at the Air Force, Army, MDA, and  Navy to discuss recent initiatives to promote long-term competition. We  did not evaluate the entire program or the outcome of actions described  to increase future competition.
To examine the extent to which DOD’s requirements address the reasons  why only one offer was received for competitive solicitations, we  examined DOD policies, regulations, and other related documents. To  determine whether recent awards complied with the requirements, we  reviewed a nongeneralizable sample of 15 contracts and task orders.  Only awards for which one offer was received in response to a solicitation  issued using competitive procedures, as coded in FPDS-NG, were  included in the sample. The sample included the largest dollar value  award from each of the 15 largest product service categories, measured  by obligations, made from April 1, 2012, through March 31, 2013. For one  product service code, we selected the second largest award to ensure  that we reviewed at least one award from the following components: Air  Force, Army, MDA and Navy. The sample included 4 Air Force awards, 5  Army awards, 1 MDA award, and 5 Navy awards. See appendix III for  more details on the selected one-offer awards.
For each selected award, we obtained evidence of the solicitation  issuance and proposal due date, documentation of cost or price analysis,  and other key information. We interviewed contracting officials involved  with each award to understand the competitive environment for each  award and the reasons why one offer was received. We also e-mailed or  interviewed several vendors who had expressed interest in some of these  awards but chose not to submit offers. We assessed recent DOD  implementing regulations to determine whether key reasons for one-offer  awards were addressed.
We conducted this performance audit from May 2013 to May 2014, 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.
section_title: Appendix II: Selection of Noncompetitive Justification and Approval Documents
subsections: section_title: Product or service category Air Force Space vehicles
section_title: Missile Defense Agency Professional support
section_title: Appendix III: Selected One-Offer Awards
section_title: Appendix IV: Comments from the Department of Defense
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Penny Berrier, Assistant Director;  Alexandra Dew Silva; Lisa Fisher; Laura Greifner, Julia Kennon; Jean  McSween; Kenneth Patton; Jose Ramos; Roxanna Sun; and Alyssa Weir  also made key contributions to this report.