Federal Contracting: Opportunities Exist to Increase Competition and Assess Reasons When Only One Offer Is Received
Published: 2010-07-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Competition is a critical tool for achieving the best return on the government's investment. While federal agencies are generally required to award contracts on the basis of full and open competition, they are permitted to award noncompetitive contracts in certain situations. Agencies are also required to establish competition advocates to promote competition. GAO assessed (1) trends in noncompetitive contracts and those receiving only one offer when competed; (2) exceptions to and factors affecting competition; (3) whether contracting approaches reflected sound procurement practices; and (4) how agencies are instituting the competition advocate role. GAO reviewed federal procurement data and 107 randomly selected contracts at the departments of Defense, Interior, and Homeland Security (which had among the highest noncompetitive obligations in fiscal year 2008) and interviewed contracting and program officials, competition advocates, and contractors.
section_title: What GAO Found
paragraphs: From fiscal years 2005 to 2009, reported obligations for noncompetitive contracts decreased from about 36 to 31 percent of total obligations, while obligations under contracts competed with only one offer received were steady, at about 13 percent of the total in each year. In comparing the data in the federal procurement data system to the information in contract files, we found that about 18 percent of the contracts sampled were coded incorrectly--as either not competed when they had been, or as competed with one offer received when they had not been competed at all. Agencies used a variety of exceptions to competition for the contracts and orders in our sample, with the two most common being "only one responsible source" and sole-source awards under the Small Business Administration's 8(a) business development program. For services supporting DOD weapons programs, the government's lack of access to proprietary technical data and decades-long reliance on specific contractors for expertise limit--or even preclude the possibility of--competition. In other cases, program offices may press for contracts to be awarded to the incumbent contractor without competition, largely due to their relationship and the contractor's understanding of program requirements. For competitive procurements where only one offer is received, factors include a strong incumbent, sometimes coupled with overly restrictive government requirements, or vendors forming large teams to submit one offer for broader government requirements, whereas previously several vendors may have competed. Contracting approaches for nine contracts reviewed did not reflect sound procurement practices and in some instances sound management practices, in some cases not leveraging the effectiveness of the market place. These approaches included ambiguously written justifications for noncompetitive contracts, very limited documentation of the reasonableness of contractors' proposed prices, instances where the contract's cost grew significantly or where labor categories were improperly authorized, and undefinitized contract actions that did not meet definitization requirements. Agencies have much discretion regarding where in the organization the competition advocates should be placed, who should be appointed to this position, and how they should carry out their responsibilities. As a result, agencies have taken a range of approaches regarding the placement of the competition advocates, their skills and expertise, and the methods they use to carry out their responsibilities. Some advocates cited their experience in program offices as helping them to question requirements that may be overly restrictive, while others had been contracting officers or procurement policy officials before assuming the position. Some agency officials said that regulations are vague regarding the role of the competition advocate, and that given the Office of Federal Procurement Policy's (OFPP) recent emphasis on competition, they would like to see more guidance on competition advocate roles and methods of implementing their duties.
section_title: What GAO Recommends
paragraphs: GAO recommends that OFPP take actions regarding assessment of the reasons only one offer is received and issue guidance on competition advocate roles, including their direct involvement with program offices to seek opportunities for competition. OFPP agreed with the recommendations, and DOD generally agreed with our findings and recommendations. Other agencies provided technical comments.

section_title: Letter
paragraphs: Competition is a cornerstone of the acquisition system and a critical tool  for achieving the best possible 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 the  taxpayer money, improve contractor performance, curb fraud, and  promote accountability for results. While federal statute 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 requirements or when a sole source award  is made under specified small business programs. The government  obligates tens of billions of dollars every year under noncompetitive  contracts. Further, the government obligates billions of dollars annually  under contracts that are awarded competitively but for which the  government receives only one offer—situations the Office of Management  and Budget (OMB) has recently cited, along with noncompetitive  contracts, as high risk.
Our prior work has shown that promoting competition in federal  contracting presents the opportunity for significant cost savings, but that  the government has not consistently taken advantage of such  opportunities. For example, our recent review of federal agencies’ use of  blanket purchase agreements (BPA) awarded under General Services  Administration (GSA) schedules program contracts showed that agencies  rarely took advantage of additional opportunities for competition when  placing orders under BPAs, reducing the potential to realize additional  savings for taxpayers. In other reviews, we found that the Army had  issued contracts for security guards at U.S. military installations on a sole- source basis, and the Department of State had issued a sole-source  contract for installation and maintenance of security equipment at U.S.  embassies worldwide. Based on GAO’s recommendations, the  requirements were subsequently competed, resulting in cost savings.  Congress and the executive branch have recently highlighted as an area of  concern the use of noncompetitive contracts and competed contracts  where only one offer is received.
You asked us to review federal agencies’ use of noncompetitive contracts  and competitively awarded contracts in which only one offer was  received. Accordingly, we determined (1) the extent to which agencies  have awarded noncompetitive contracts and contracts awarded  competitively with only one offer received; (2) the exceptions to  competition that agencies used when awarding noncompetitive contracts;  (3) some of the factors that affect competition in federal contracting; and  (4) the extent to which the contracting approaches for the contracts in our  sample reflect sound procurement or management practices. You also  asked us to describe how agencies are instituting the roles of their  competition advocates.
To identify the extent to which agencies have reported obligations under  noncompetitive contracts and those receiving only one offer, we analyzed  data from the government’s procurement database—the Federal  Procurement Data System-Next Generation (FPDS-NG)—for fiscal years  2005 through 2009. To gain insight into the circumstances involving  noncompetitive contracts, we randomly selected a sample of 79 contracts  and orders coded as noncompetitive and reviewed the contract files. To  identify the locations for our contract file reviews, we selected those  agencies with the greatest reported use of noncompetitive contracts  during fiscal year 2008 (the most recent available data at the time) and,  within those agencies, the components that had the largest percentage of  these contracts. Our selection criteria also included those components  with large-dollar-value procurements. For the Department of Defense  (DOD), in order to focus more on services, we narrowed our selection  criteria to those contracts coded as professional, administrative, and  management support services. Our random sample also included 28  contracts and orders that had been coded as competed but had only  received one offer. In all, we reviewed 107 contracts or orders. The  specific locations in our review were as follows.
Redstone Arsenal Army Base    Warner Robins Air Force Base    Los Angeles Air Force Base    China Lake Naval Air Warfare Center Weapons Division    Patuxent River Naval Air Station    Newport Naval Undersea Warfare Center    Department of the Interior’s Acquisition Services Directorate (formerly  GovWorks): this fee-for-service contracting office awards and administers  contracts on behalf of other federal agencies. Included in our sample from  the Acquisition Services Directorate were contracts awarded on behalf of  DOD agencies, the Federal Bureau of Investigation (FBI), and the National  Institutes of Health.
Department of Homeland Security’s (DHS) Immigration and Customs  Enforcement (ICE) and Secret Service.
To determine the exceptions to competition that were used, the factors  affecting competition, and the extent to which the contracting approaches  reflected sound procurement or management practices, we reviewed  documentation in the contract files such as the justification for a  noncompetitive award, acquisition plan, and other key documents, as well  as relevant statutory provisions and the Federal Acquisition Regulation  (FAR), agency guidance and supplements to the FAR, Small Business  Administration (SBA) regulations, and OMB and Office of Federal  Procurement Policy (OFPP) memorandums. We interviewed relevant  contracting officers and contract specialists (when available) and, for  many of the contracts, also interviewed the cognizant program officials to  obtain their views. We also interviewed procurement policy officials at the  department and local levels.
To determine how agencies are instituting the role of the competition  advocate, we reviewed statutory and FAR provisions, a May 2007 OFPP  memorandum pertaining to the role of the competition advocate, pertinent  agency regulations and guidance, and the agencies’ competition reports  from fiscal years 2008 and 2009. We interviewed the competition  advocates at DOD, the Army, Navy, and Air Force, the Department of the  Interior, and DHS, as well as the advocates at the components included in  our review.
A more detailed description of our scope and methodology is presented in  appendix I. We conducted this performance audit from October 2009 to  July 2010 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: Full and open competition is the preferred method for federal agencies to  award contracts. This preference was established through the Competition  in Contracting Act (CICA) of 1984, which required agencies to obtain full  and open competition through the use of competitive procedures in their  procurement activities unless otherwise authorized by law. Contracts  awarded using full and open competition means that all responsible  sources—or prospective contractors that meet certain criteria—are  permitted to submit proposals. Agencies are generally required to perform  acquisition planning and conduct market research to promote and provide  for, among other things, full and open competition. However, Congress, by  enacting CICA, also recognized that there are situations that require or  allow for contracts to be awarded noncompetitively—that is, contracts  awarded without full and open competition. Some of the permitted  exceptions to full and open competition follow.
Supplies and services are only available from one responsible source, such  as unique services from one supplier with unique capabilities, or limited  rights to data that make certain services available from one source.
The government is under unusual and compelling urgency to procure a  good or service, and delaying the award of a contract would result in  serious injury, financial or other, to the government.
A statute expressly authorizes or requires that the acquisition be made  from a specific source or through another agency, such as sole source  awards under the SBA’s 8(a) program—one of the federal government’s  primary means for developing small businesses owned by socially and  economically disadvantaged individuals.
The terms of an international agreement between the United States and a  foreign government, or written directions of a foreign government  reimbursing a federal agency for the cost of an acquisition, preclude  competition.
The disclosure of the agency’s needs would compromise national security.
This exception, however, is not to be used merely because the acquisition  is classified or because access to classified matter is necessary.
Noncompetitive contracts are not permitted in situations in which the  requiring agency has failed to adequately plan for the procurement or in  which there are concerns related to availability of funding for the agency,  such as funds expiring at the end of the year.
Generally, noncompetitive contracts must be supported by written  justifications and approvals 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, for example,    a description of the supplies or services required to meet the agency’s  needs and their estimated value;  identification of the specific 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.
The approval level for these types of noncompetitive contracts varies  according to the dollar value of the procurement. Some contracts do not  require written justifications, including those awarded on a sole source  basis through the 8(a) program under the “authorized or required by  statute” exception.
Although full and open competition is the preferred method to award a  contract, agencies can competitively award contracts after limiting the  pool of available contractors—a process called “full and open competition  after exclusion of sources.” An example of this is when agencies set aside  procurements for small businesses. In fact, agencies are required to set  aside procurements for competition among qualified small businesses if  there is a reasonable expectation that two or more responsible small  businesses will compete for the work.
subsections: section_title: Competitive Requirements for Indefinite Delivery / Indefinite Quantity Contracts
paragraphs: Federal agencies can establish indefinite delivery / indefinite quantity  (IDIQ) contracts, or issue orders under them, using a number of different  authorities. The following is a discussion of some of these authorities  pertinent to the contracts included in our review and any provisions for  exceptions to competition.
The Federal Acquisition Streamlining Act (FASA) of 1994 provided  competition requirements for task order and delivery order contracts,  referred to as IDIQ contracts. IDIQ contracts can be single award or  multiple award contracts, but FASA establishes a preference for multiple  award contracts. Multiple award IDIQ contracts are awarded to multiple  contractors through one solicitation. The number of contract holders  depends on the number of contractors receiving the award, which could  be from two contractors to thousands. Agencies are required to compete  orders on multiple award contracts among all contract holders; however,  agencies can award noncompetitive orders—through a process called an  exception to a fair opportunity to compete—for reasons similar to those  used for awarding contracts without full and open competition, such as  only one contractor being capable of providing the supplies or services  needed, or an urgent requirement. The FAR requires contracting officers  to document, in the contract file, the rationale for awarding the order  noncompetitively, but does not specify what should be included in these  justifications. In addition, approval of the justifications for  noncompetitively awarded orders is not required.
One example of a large, multiple award IDIQ is the Navy’s Seaport  Enhanced (Seaport-e) program with over 1,200 contract holders that can  provide 22 different services, such as engineering, program, and logistics  support. Orders may be issued under Seaport-e by Navy Systems  Commands, and other Navy Commands and offices. Requirements must be  competed among all contractors within a certain geographical area.  Noncompetitive orders are only allowed if no alternative contract vehicle  exists and written approval from the program manager of Seaport-e is  obtained.
GSA, under its schedules program, awards IDIQ contracts to multiple  vendors for commercially available goods and services, and federal  agencies place orders under the contracts. To compete orders over $3,000,  agencies need only survey three schedule contractors that offer services  that will meet their needs. For orders issued noncompetitively under the  schedules program, however, the ordering agency must justify in writing— with specific content required by the FAR—the need to restrict  competition and also obtain approval at the same dollar values and by the  same officials as for contracts awarded without full and open  competition. The Army has established BPAs under GSA schedule  contracts with about 1,200 contractors–called the Express Program—to  provide advisory and assistance services in four domains: business and  analytical, programmatic, logistical, and technical. Requirements are  generally competed within each domain, but orders can be placed  noncompetitively.
section_title: Competitive Procurements Where Only One Offer Is Received
paragraphs: Contracts that are awarded using competitive procedures but where only  one offer is received have recently gained attention as an area of concern.  OFPP recently 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. The Office of  Federal Procurement Policy Act, as amended by CICA, required that  agencies begin separating data collected on contracts that were awarded  using competitive procedures where only one offer was received. The act  stipulated that these contracts be recorded as “noncompetitive  procurements using competitive procedures.” Currently, FPDS-NG  distinguishes these contracts by recording how many offers were received  on any procurement.
section_title: Congressional and Executive Branch Actions
paragraphs: Congress and the executive branch have recently taken actions that  require or encourage more competition in federal contracting and that  bring more scrutiny to noncompetitive contracts. For example, since 2008  Congress has enacted legislation that:  requires justifications for certain noncompetitive awards to be publicly  posted;    enhances competition for task orders on multiple award contracts;  requires acquisition strategies for major defense acquisition programs  to include measures to ensure competition throughout the life cycle of  the program; and  requires justifications, approvals, and notices for sole source contract  awards over $20 million awarded under the authority of SBA’s 8(a)  program.
The executive branch also has brought attention to the importance of  competition. In May 2007, OFPP called for agencies to reinvigorate the  role of the competition advocate, a position required by law at each  executive agency to promote competition. Each competition advocate  must, among other things, submit an annual report on competition to the  agency’s senior procurement executive and chief acquisition officer and  recommend goals and plans for increasing competition.  In March 2009,  the President called on federal agencies to examine their use of  noncompetitive contracting as one of several important steps to improving  the results achieved from government contractors. In July 2009, OMB  instructed agencies to reduce dollars obligated to high-risk contracts— including noncompetitively awarded contracts and contracts competed  with only one offer received—by 10 percent in fiscal year 2010. In October  2009, OFPP followed up with guidelines for agencies to evaluate, in part,  the effectiveness of their agencies’ competition practices.
section_title: Percentage of Reported Noncompetitive Contract Obligations Has Decreased While Competed Contracts with One Offer Received Remained Steady
paragraphs: Total obligations reported in FPDS-NG increased during fiscal years 2005  through 2009, from $430.6 billion to $543.6 billion. For the same 5-year  period, the percentage of obligations reported for noncompetitive  contracts decreased, from 35.6 percent to 31.2 percent of total obligations,  while those reported under contracts that were competed with one offer  received (noncompetitive procurements using competitive procedures)  were steady, at about 13 percent of total obligations.
To determine whether there was any variation in dollars obligated to  noncompetitive contracts during the four quarters of the fiscal year, we  analyzed dollars obligated in each quarter for fiscal years 2005 through  2009. We found that the fourth quarter consistently had the lowest  percentage of obligations to noncompetitive contracts in each fiscal year,  while the first quarter generally had the highest percentage of obligations  to noncompetitive contracts, as shown in figure 2.
In fiscal year 2009, among all federal agencies and DOD services that  obligated over $1 billion, the Navy and Air Force had some of the highest  percentages of total contract obligations that were not competed, at about  45 percent. The agencies with some of the lowest percentages of total  contract obligations to noncompetitive contracts were the Department of  Energy and the Office of Personnel and Management, with 7 percent and 5  percent respectively.
Although our sample is not representative of all federal contract  obligations, we found coding errors in FPDS-NG. Specifically, 19 of the 107  contracts and orders we reviewed, or about 18 percent, were coded  incorrectly. See table 1.
The 9 contracts and orders miscoded as noncompetitive had actually been  competed. For example, one ICE contract had been coded in FPDS-NG as  not competed, but the agency had in fact competed it and received  proposals from 5 vendors. Another 5 of the 9 miscoded noncompeted  contracts were actually orders under single-award IDIQ contracts that  were competed, but the orders were coded as not competed. For  example, three orders at Interior coded as noncompeted in FPDS-NG  turned out to have actually been competed, since their base contracts  were competed. When a single-award IDIQ contract is competed, the  orders under that contract are considered competed. This type of error  appears to have stemmed from a lack of understanding on the part of the  person entering the data, as some agency officials we spoke with admitted  that there was confusion among contracting officials about how to code  these orders. In April 2008, the Department of the Interior issued guidance  clarifying that orders awarded under single-award indefinite delivery  contracts that were awarded under full and open competition should be  coded as competed. However, to address the issue more widely, on  October 31, 2009, systemwide changes were made to FPDS-NG. Now,  coding of the extent of competition under the base contract is  automatically pulled forward to subsequent orders. This action should  mitigate such errors in the data going forward.
Of the 10 contracts and orders that were incorrectly coded as competed  with one offer received, 4 had not been competed at all. Two of the 4 were  sole source contracts awarded on the basis of only one responsible  contractor that could perform the work; one was a sole source contract  award through the 8(a) program; and one was a sole source contract  award on the basis of an international agreement with a foreign  government. For the other 6 contracts and orders miscoded as competed  with one offer received, documentation in the contract file indicated that  they were actually competed with more than one offer received. For  example, two Army contracts were labeled as competed with one offer  received, but one had three offers and the other had four offers. It is not  clear why these contracts and orders were miscoded.
Accounting for the miscoded contracts and orders, our analysis going  forward focused on 74 noncompetitive contracts and 19 contracts that  were competed with one offer received.
section_title: Agencies Used a Variety of Exceptions to Competition and Processes to Award Noncompetitive Contracts
paragraphs: Agencies used a variety of exceptions to full and open competition, and  ordering processes, to award the 74 noncompetitive contracts in our  sample. Table 2 shows the spectrum of exceptions and processes that  agencies used to award these contracts or orders.
As indicated in the table, for 42 of 74 contracts—or 57 percent of the  noncompetitive contracts in our sample—agencies determined, under FAR  Part 6.3, that only one responsible contractor could meet the agency’s  requirements. For example, the National Weather Service—through an  interagency contract awarded by Interior—turned to the original provider  of weather radios to obtain compatible spare parts. In another example at  ICE, only one contractor could provide specified communications  equipment, supplies and services being used in the field at the time.  According to an ICE contracting official, this contractor essentially owns  the market, and until other vendors or products are available, ICE is  bound by the limited availability of items.
The second most frequently used exception to competition—for 20 of the  74 noncompetitive contracts in our sample, or 27 percent—was the  authority to award sole source contracts to qualified firms in SBA’s 8(a)  business development program. Through the 8(a) program, agencies are  encouraged to award sole source contracts under $3.5 million when  procuring services, or $5.5 million for manufacturing, to participating 8(a)  firms. In fact, the FAR encourages agencies not to compete under these  thresholds, requiring agencies to obtain the approval from the SBA  Associate Administrator for 8(a) Business Development for any competed  procurements under the threshold, and this approval is to be given on a  limited basis. One example was a sole source contract for $1.7 million to  an 8(a) firm for lead abatement services for one of the Secret Service’s  training facilities. Our sample also included large dollar value sole source  contracts to 8(a) firms owned by Alaska Native Corporations (ANC) or  tribal entities, such as American Indian tribes, which have special  advantages over other 8(a) firms and can receive sole source contracts for  any dollar amount. Some examples of these 8(a) contracts in our sample  follow.
The Air Force awarded a $75 million sole source award to an 8(a) firm  owned by an American Indian tribe for analysis, integration and technical  support services related to corrosion prevention and control.
The Navy awarded a sole source contract to an 8(a) ANC firm for  operation and management support and analysis and technical support for  $131 million.
In general, awarding noncompetitive contracts through the 8(a) program is  an easy and quick way for agencies to award a contract, rather than using  full and open competition. First, when awarding a sole source contract  through the 8(a) program, a justification for awarding a sole source  contract is generally not required. Second, the agency need only identify  a qualified 8(a) firm and obtain approval from SBA to award it a contract.  For example, a Secret Service contract estimated at $3 million for  information technology services included a description in the contract file  of the market research that had been conducted, which simply stated that  the program office provided the source. In another example from Interior,  a program staff person at the National Institutes of Health suggested a  contractor for building repair services to the Interior contracting officer.
The program staff informed us that although other contractors were  available, he was most comfortable with the vendor he suggested, and  therefore requested—and received—a noncompetitive award through the  8(a) program for approximately $3.5 million.
SBA officials told us that agencies’ procurement activities are encouraged  to direct all work to small businesses as long as they do not run afoul of  the Small Business Act or federal acquisition regulations. The SBA takes  the general position that a procuring agency does not need to document in  a contract file any other prospective sources if the agency selects an 8(a)  participant to perform the requirement, offers it to SBA, and SBA accepts  the requirement into the 8(a) program. SBA officials note that it is the  procuring agency’s responsibility to conduct market research to determine  whether the requirements of the Small Business Act can be met, and then  to determine the appropriate contracting vehicle to use. However, SBA  considers market research requirements to be satisfied when a participant  in the 8(a) program self-markets its abilities to a procuring agency and is  subsequently offered a sole source 8(a) requirement. When we discussed  this issue with procurement policy officials at DHS, they said that, while  these activities may meet the regulatory requirements, in practice they like  to see additional market research so that the offer to the 8(a) firm has a  more solid basis.
subsections: section_title: Agencies Used a Number of Other Exceptions and Processes to Award Noncompetitive Contracts and Orders
paragraphs: Agencies in our review used a number of other exceptions under FAR Part  6.3 (“Other than Full and Open Competition”) to award noncompetitive  contracts, which includes orders issued under noncompetitively awarded  IDIQ contracts. For example,    Three orders at the Air Force were issued under separate sole source  contracts using the justification that disclosure of information on the  program would compromise national security. One of these orders was to  provide spare parts and resolve system failures to sustain the fielded  equipment and software for remote airborne sensors. These orders were  justified as a sole source procurement using a class justification—meaning  one justification is used for consolidated requirements across DOD  activities and multiple programs, such as the U-2 program.
Two contracts in our sample were awarded directly to one company on  behalf of another country through an international agreement, referred to  as foreign military sales. One example was an Army contract to install and  configure software to modernize the logistics system for the Defense  Forces of Saudi Arabia.
One noncompetitive order we reviewed was issued under a contract to a  federally funded research and development center (FFRDC) to look at  work processes and work flow requirements for clinical research and their  interoperability with those of disease-specific research networks,  hospitals, institutions, industry, and government. The exception to  competition that was used is that it was necessary to award the order to a  particular source to establish or maintain an essential engineering,  research, or development capability to be provided by an FFRDC.  Although the contracting officer at Interior identified four FFRDCs that  could do the work, the National Institutes of Health staff determined that  this particular firm best met their needs because this work was a  continuation of research that it was performing for them.
Agencies also used different procedures under the FAR to issue  noncompetitive orders under competitively awarded IDIQ contracts. Four  of the orders at two different agencies were issued under GSA schedules  contracts, using procedures under FAR 8.405-6. Agencies justified not  competing the orders because the work was a follow-on to another  requirement that the company performed, or because there was only one  source that could perform the specific work. In one case, a requiring office  at the Department of the Interior that provides financial services to other  federal agencies (or “federal customers”) needed a contractor to help with  the integration and execution of the financial services provided. The  Interior contracting officer suggested a minicompetition among GSA  schedule contractors; however, the limited sources justification noted that  this procurement was a logical follow-on because this particular company  had partnered with the requiring office to perform these same integration  services with six different federal customers and that, because this  company was already familiar with the customer, it was in the best  position to provide these services.
In two other cases from our sample, orders were awarded through a  process called “exceptions to the fair opportunity process” under FAR  16.505(b)(2). These exceptions allow noncompetitive orders exceeding  $3,000 issued under multiple award contracts using one of four reasons:  (1) only one contractor is capable, (2) urgency, (3) the work is a logical  follow-on to another task, or (4) there is a need to place an order with a  particular contractor to satisfy a minimum guarantee. For example, an  order was awarded for engineering support to redesign the B-1 aircraft  main landing gear wheel and brake assembly because the contractor had  previously worked on this airplane and had the expertise. The program  official explained that when a new type of plane comes in for repair,  requirements are typically competed between the two contractors on the  multiple award contract, but once a contractor has built up expertise on  that airplane’s system, it is logical to have the same contractor perform  additional work on that system.
section_title: Key Factors Affecting Competition Include Reliance on Contractor Expertise and Proprietary Data and Preference for Incumbent
paragraphs: A variety of factors affect competition, including reliance on contractor  expertise and decisions made by officials in program and contracting  offices. For services supporting DOD weapons programs, the  government’s lack of access to proprietary technical data and a heavy  reliance on specific contractors for expertise limit, or even preclude the  possibility of, competition. Contracting officials pointed out that a  program office may be comfortable with the incumbent contractor and  presses the contracting office to remain with that contractor, thus  inhibiting competition. Even for some procurements using competitive  procedures, a strong incumbent coupled with overly restrictively written  requirements can lead to only one offer—from the incumbent—being  received. In other cases, groups of vendors have formed teams to compete  for government requirements. Contracting officials and contractors told us  that whereas previously several vendors might have submitted offers for  more specific requirements, now only one offer—from the prime  contractor on the team—is being received. However, we did find cases in  which contracting and program officials were actively seeking  opportunities to compete requirements.
subsections: section_title: A Lack of Access to Proprietary Technical Data and Reliance on Specific Contractors for Expertise Inhibit Competition
paragraphs: For 27 of the 47 noncompetitive DOD contracts we reviewed, the  government was unable to compete requirements due to a lack of access  to proprietary technical data. This situation, combined with a heavy  reliance on certain contractors’ expertise built over years of experience,  inhibits competition. Most of the contracting and program officials at DOD  that we spoke with pointed to the lack of access to technical data as one  of the main barriers to competition. Some contracting officers described  this condition as essentially being “stuck” with a certain contractor. For  example, a $46 million contract at the Navy for engineering services in the  DOD’s Prowler/Growler aircraft programs could not be competitively  awarded because the government had not procured the technical data  package and only the original contractor, who was one of the developers  of the system, has over 20 years experience and expertise to perform the  work. Several officials pointed out that the situation the government is  currently experiencing is a result of decisions made years ago, when first  acquiring a weapon system, to not purchase critical technical data  packages for reasons that include budgetary constraints or a push toward  streamlined contracting processes by purchasing commercial items. For a  couple of the contracts in our sample, the government had purchased  some of the technical data, but, for budgetary reasons, has not kept those  data packages current over time. Hence, only the original equipment  manufacturer has the technical data needed for follow-on maintenance  and engineering support contracts.
Some contracting and program officials have inquired about the cost of  obtaining the technical data, only to discover that the package is not for  sale or purchase of it would be cost-prohibitive, especially the systems and  equipment that have been contracted out for decades. In one instance, the  Air Force requested an estimate of the cost to the government to purchase  the technical data package for an aircraft program, and the contractor— the original equipment manufacturer that had been working on the system  for over 30 years—replied that while it was not for sale, if they were to sell  it, the estimated cost was $1 billon. On a $4.8 billion contract for  sustainment and support for another Air Force program, the contractor  estimated the cost to purchase the data rights to be more than $1.3 billion.  However, the market research report noted that the contractor refused to  sell the data, and because commercial contracting procedures under FAR  Part 12 were used in this procurement, the contractor was able to retain  strict control over data rights and the government did not have insight into  the work performed by the major subcontractors. In yet another case, a  contractor for an Army missile program informed the program office that  they would charge approximately $30,000 just to put together a cost  estimate for the technical data package, which the contractor later stated  would be $31 million for selected technical data elements of the missile  program, but excluding rights to critical contractor-specific software. The  contractor was the original equipment manufacturer and sole producer of  the missiles since the early 1960s. DOD procurement policy officials told  us they view this issue as a long-standing problem and that any significant  turnaround will need to occur with new programs. They also said they see  refusal to share or sell technical data as a larger problem under  commercial acquisitions, where the government lacks leverage.
Recently, Congress has taken steps to address the lack of access to  technical data. For example, the John Warner National Defense  Authorization Act of Fiscal Year 2007 required DOD program managers for  major weapons systems to assess the long-term technical data needs and  establish corresponding acquisition strategies that provide for the  technical data rights needed to sustain such systems over their life cycle.  Further, Congress enacted legislation in May of 2009 that requires DOD to  include in the acquisition strategy for each major defense acquisition  program measures to ensure competition—or the option of competition— at both the prime contract level and subcontract level throughout the life- cycle of the program. This includes considering the acquisition of  complete technical data packages, among other things. For almost a  decade, we have reported on the limitations to competition when DOD  does not purchase technical data rights for sustainment of weapon  systems and the increased costs as a result. In 2001 and 2002, we  reported that DOD had often failed to put adequate emphasis on obtaining  needed technical data during the acquisition process, and noted officials’  concerns on the potential negative impact on competition and potential  increase in costs. In 2004, we found that not obtaining technical data  limited DOD’s flexibility to perform work in house or support alternate  source development if necessary. In another report, in 2006, we noted that  as a result of the limitations of not having technical data rights, the  military services had to alter their plans for developing new sources of  supply to increase production or to obtain competitive offers for the  acquisition of spare parts and components to reduce sustainment costs. In  that report, we also found that DOD’s acquisition policies did not  specifically address long term needs for technical data rights and  recommended that DOD require program managers to assess long-term  technical data needs and establish corresponding acquisition strategies  that provide for technical data rights needed to sustain weapons systems  over their life cycles.
Even when technical data are not an issue, the government may have little  choice other than to rely on the contractors that were the original  equipment manufacturers, and who, in some cases, designed and  developed the weapon system. A few contracting and program officials we  spoke with noted that for some DOD programs, the government is so  reliant on the contractor that it is difficult for the government to even  make decisions or set requirements anymore. Our prior work has noted  the government’s increasing reliance on contractors and pointed to the  challenges of this increasing reliance, such as identifying and  distinguishing roles and responsibilities and ensuring appropriate  oversight. Most noncompetitive DOD contracts in our sample indicated  that the contractor was the only source of the expertise for the system,  having developed that expertise and the infrastructure over time. For  example:    An engineering contract for the Army’s Hellfire missile program has  current obligations at almost $72 million. According to the justification in  the contract file, the technical data package has been developed, but since  1994, the contractor has been acquiring unique expertise that is not  contained in any documentation.
The contractor for the Army’s Patriot Missile program has been designing  the missile since 1972. The contract for engineering and other support of  the program was worth an estimated $122 million. The contractor that  designed the program was the only contractor capable of performing the  support work because the contractor also developed and manufactured  the system. Over time, the contractor developed the technical expertise,  experience, and the facilities needed for the contract.
The Army awarded a $1.7 billion contract for engineering support and  maintenance for the Chinook and Apache Helicopter Programs. The  contractor for these two helicopters—since 1961 and 1984 respectively—is  the only contractor with the needed skills, technical and engineering  expertise, and the technical data to provide the full range of services  needed. This contract was one of several billion-dollar sole-source Army  contracts we reviewed that had been awarded to large prime contractors  for depot maintenance requirements that had been previously performed  by many small businesses. A business case analysis was performed,  showing that these contracts were burdensome to manage and left the  government without one entity to hold accountable. The contracts were  bundled into one requirement (with the appropriate justifications and  approvals) and the prime contractors’ subcontracting plans emphasized  the need to compete among small businesses at that level.
The Air Force awarded a contract for engineering support and software  maintenance for satellite communication systems with an estimated value  of $404.7 million. The contractor, in place since 1982, has 20 years of  knowledge and experience with extensive hardware, software, and test  facilities needed to support the system.
Further, the cost, including time and money, of changing contractors can  be relatively high. For instance, the sole-source justification for an almost  $1 billion contract awarded in June 2008 for the overhaul and  recapitalization of the Army’s Blackhawk helicopter included a $50 million  estimate as the minimum investment needed to bring on another  contractor and a lead time of 24 to 36 months. The justification further  stated that the current contractor’s knowledge could not be easily  duplicated, even with significant investment and that it was unlikely that  the government would be able to recover the investment cost through  competition. In another example, the sole source justification of an Air  Force contract, estimated at $50 million, for general engineering support  for Military Satellite Communication programs, included an estimate of $5  million for developing another contractor’s knowledge and skill, including  the time to gain familiarity with the software tools and technical  requirements. However, the justification also described that any delays  would result in a cost increase of hundreds of millions of dollars for the  program and any unplanned schedule delays would adversely affect the  warfighter.
section_title: Program Officials’ Preference for Incumbents and Inadequate Acquisition Planning Can Influence Extent of Competition
paragraphs: Program officials play a significant role in the contracting process— developing requirements, performing market research, and interfacing  with contractors. In their 2009 competition reports to OMB, several  agencies in our review recognized the pressure that program offices place  on the contracting process to award new contracts to a specific vendor  without competition. Many contracting officials we spoke with recognized  that program staff sometimes prefer a specific vendor, in some cases  because a relationship had developed between the program office and the  contractor, who understands the program requirements. We also heard  this echoed in discussions with program staff. Program officials from two  program offices at the National Institutes of Health, for example,  described their comfort with certain contractors because of their level of  understanding of requirements and because they could be relied on to  complete the work. A Navy program official stated that, when one  contractor has been performing a requirement for many years, it is easier  to go back to the contractor personnel who understand the requirement  rather than taking the time to find a new vendor. One contracting official  described how, in his former role as a program manager, he did not want  to change contractors for products and services once he found ones he  liked.
Program offices can also influence levels of competition through their  roles in the acquisition planning process, in particular by having sufficient  knowledge of the contract award process and providing contracting  officials with enough time to compete requirements. However in their  competition reports, some agencies in our review pointed to a lack of  acquisition planning, and the role that the program office plays in it, as a  barrier to competition. Further, several contracting officials from  different agencies expressed concern about the fact that they receive short  notices from program offices for acquisitions. Others noted that program  offices sometimes do not allow them 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. According to an official at ICE, in one instance,  he only had a couple of days to complete certain procurements, which he  managed to do, but he believed that the customer would have received a  better product if he had had enough time to obtain more high-quality  proposals from the marketplace. Several contracting officials also pointed  to the experience levels and staffing shortfalls of both the contracting staff  and program staff as affecting the quality of the procurement processes,  and, in turn, the extent of competition. For example, DHS contracting  officials stated that high workloads for limited numbers of staff and  inexperienced staff can hinder the acquisition planning, timing of the  procurements, and market research.
Some agency officials recognize that training on the acquisition process  for program staff may help address some of these issues, but we found  that training on competition issues is often directed to contracting officers  and not necessarily the program staff. For example, DOD has developed  formal training on enhancing competition awareness, but it is required  only for contracting staff and just recommended for others in the  acquisition community. The Navy, however, has made this training  mandatory for Navy personnel engaged in the acquisition process,  including program managers, program executive officers and logistics  personnel. ICE contracting officials said that they regularly reach out to  the program offices—through meetings and supervisor trainings and by  making guidance available—to provide information on the acquisition  process with the goal of increasing competition. They noted, however, that  ICE program offices still struggle to understand the acquisition process.  Other contracting officials, for instance at the location we visited at the  Department of the Interior, stated that they train program staff about the  benefits of competition during regular, informal interactions or do so only  on issues pertaining to a specific procurement.
section_title: Overly-Restrictive Government Requirements Can Limit The Number of Offers Received
paragraphs: From a practical standpoint, for contracts awarded using competitive  solicitation procedures where only one offer is received, the government  does not have the benefit of evaluating more than one competing proposal.  As noted earlier, OMB’s July 2009 instruction to agencies to reduce dollars  obligated to high risk contracts included contracts that had been  competed but where only one offer was received.
The government’s requirements can influence the number of offers  received under competitive solicitations if requirements are written too  restrictively. Some contracting officials noted the challenge of  questioning program office requirements that are written so restrictively  that they are geared towards the incumbent. These contracting officials  informed us that their technical backgrounds and having the assistance of  technical staff in evaluating the requirements can help them determine  whether the requirements can be broadened. They noted that if they lack  technical expertise in the specific area of requirements, it is more difficult  to question whether a statement of work is too restrictive.
The FAR does not require actions to be taken in circumstances where only  one offer is received in response to a competitive solicitation, such as  performing additional market research or determining if the requirements  were overly restrictive. However, contracting officials at two of the  locations we visited noted that they have a local requirement to document  in the contract file the circumstances that may have led to only one offer  being received and actions that will be taken to obtain more competition if  there is a follow-on procurement. None of the contract files we reviewed  where one offer was received included this information.
section_title: Factors Contractors Consider Regarding When to Submit an Offer
paragraphs: Although the government is generally required to make every effort to  obtain as much competition as possible, the contractors themselves make  a business decision about when to submit an offer in response to a  solicitation. The contractors we spoke with told us that they consider a  wide variety of factors before submitting a proposal in response to a  solicitation, such as  the cost of developing proposals;  their ability to provide the services, including key personnel;  their knowledge and history of the requirement;  rapport with the government personnel;    ability to partner with small businesses to meet small business  subcontracting requirements; and  the potential financial gain from the procurement.
There are also certain strategies that companies take when deciding  whether to submit a proposal.  For example, companies may submit a  proposal to test the water or get their name recognized as a potential  contractor for a particular requirement, then bid more aggressively for the  follow-on procurement.  Contractors may also intentionally not submit an  offer on a certain procurement to retain their status as a small business— and thus remain eligible for procurements designated for small businesses.
A predominant factor that contractors consider when deciding whether to  compete for a contract is the performance of the incumbents. Contracting  officers and contractor representatives explained that when an incumbent  is known, contractors may not compete if the incumbent has historically  provided the requirement and is identified as well-performing. The  solicitations for all of the 11 orders we reviewed under the Navy’s Seaport- e Multiple Award Schedule and the Army’s Express Multiple Award  Schedule listed previous contractors’ names and contract numbers, and  only one offer was received for 9 out of the 11 solicitations. In talking to us  about another contract in our sample, an Army program official said she  believed that vendors other than the incumbent could have competed for a  certain contract, but that a short time frame combined with the  incumbent’s history on the contract caused many vendors to be  disinclined to compete. Ultimately, the Army received only one offer in  response to its solicitation. An Army contracting official also noted that  when evaluation factors in the solicitations are based mostly on  experience with the system and technical skills, other competitors may  not submit offers because the cost of developing a proposal is too high to  outweigh the risk of not winning the award.
Furthermore, several contracting officials and contractors told us that  some contractors find it necessary to team up with other contractors in  order to fulfill certain government needs, which can also contribute to  only one offer being received. For example, a Navy requirement for  submarine engineering services was being performed by a large business.  The Navy decided to set aside the follow-on contract, estimated at $34  million, for small businesses. Only one small business submitted a  proposal, which included 10 subcontractors—1 of which was the large- business incumbent, and another of which was a small business that was  originally identified as a possible competitor for the procurement. In  another example, one order under the Army’s Express program, estimated  at $122 million, was awarded to a small business after one offer was  received, helping the Army meet its small business goals. Under a teaming  arrangement involving a number of subcontractors, the small business  prime contractor was going to perform only 7 percent of the work while  one subcontractor was going to perform 87 percent of the work. Under  another Express order, a small business was the prime contractor and a  large business, which had been the prime contractor under a predecessor  contract for the same requirement, was a subcontractor performing the  bulk of the work. Under the Express program, the Army claims full small  business credit for all obligations under these types of arrangements. In  one contractor proposal we reviewed, submitted in response to an  Express program solicitation, the small business prime contractor pointed  out this benefit. According to SBA officials, as long as the procurement  was awarded using full and open competition, the percentage of the work  performed by the small business prime contractor is not relevant.
section_title: Some Agencies Are Seeking Opportunities to Enhance Competition
paragraphs: Some agencies actively seek out opportunities to compete requirements  and contracts that were originally awarded noncompetitively, such as by  breaking out components of the requirement that can be awarded  competitively. We encountered several contracting and program officials  who told us that they broke out pieces of requirements from past sole- source procurements in order to compete them. For example, Coast Guard  contracting officials informed us that they broke one requirement for  aircraft maintenance and repair into one contract and three separate  orders, which they believe will save the government approximately $13  million. In another case, a Navy contracting official informed us that  certain requirements for submarine components had been separated from  a sole-source procurement and are currently in second or third cycles of  competition. We also found one noncompetitive contract at the Navy  where the follow-on requirement was competed. The contract, for  operations and maintenance support and engineering services, was a sole- source award to an ANC 8(a) firm, but the contracting officer who  inherited the contract decided to compete the follow-on contract in the  8(a) program.
In some cases, the government actively sought additional vendors for  certain requirements. For instance, Air Force officials informed us that  they encouraged a second vendor to compete against the incumbent  contractor for production of aluminum pallets. These officials noted that  at the threat of competition, the incumbent—who ultimately won the  contract—”sharpened his pencil,” resulting in savings for the government  through a lower price and improved delivery schedules. In another  example, the Army’s Tube-launched, Optically-tracked, Wire-guided  (TOW) missile has been with one contractor since its inception in the early  1960s. The Army recently made a business case for breaking out a portion  of the requirement and competing it as a separate procurement because it  had identified another capable contractor: one of the subcontractors with  a long history with the program. But other officials noted that it is not  always the best business decision to invest time and money into finding  other vendors; each situation has to be evaluated on its own merits and  future procurements or production lines must be sufficient to warrant the  government’s investment in a second source. The C-130J engine has also  been broken out of the overall Lockheed Martin contract, with a separate  sole source contract to Rolls Royce. According to program and contracting  officials, this decision was made to save money.
Some contracting officials we spoke with recognized the importance of  thorough market research for identifying possible vendors even when it  appears that only one contractor is capable of doing the work. For  example, during the market research phase for the awarding of two  contracts for engineering services for military satellite communications at  the Los Angeles Air Force base, the contracting officers requested that  potential contractors provide information on their abilities to meet the  government’s requirements in an attempt to identify other qualified  contractors. Ultimately, however, the two contracts were awarded using a  sole source justification that only one responsible contractor was capable  of doing the work. The director of contracting at this location informed us  that they typically reach out to the open market when they are not familiar  with a requirement or when a requirement has been procured on a sole  source basis for many years and they wish to test the marketplace to  determine if it has changed over time. He also noted that there have been  instances in which new contractors have expressed interest, but usually  no new contractors come forward. In another case, ICE contracting  officials informed us that the program office wanted a specific vendor for  a requirement for rifle cases. The contracting officer pushed back against  the program’s specific request, competed the requirement, and received  numerous offers. The contract was awarded to a vendor that the program  office was not aware of, and the contracting officer reported that they  were very pleased with the results of the competition.
section_title: Some Contracting Approaches Did Not Reflect Sound Procurement or Management Practices
paragraphs: In reviewing the contracts in our sample, we identified contracting  approaches for nine contracts or orders that did not reflect sound  procurement or management practices, in some cases not leveraging the  effectiveness of the market place. These approaches included ambiguously  written justifications for noncompetitive contracts, very limited  documentation of the reasonableness of contractors’ proposed prices,  instances where the contract’s cost grew significantly, and labor  categories that were improperly authorized because they were not  included in the contract. In addition, our sample contained undefinitized  contract actions (UCA) that did not clearly follow UCA policies or did not  meet the definitization requirements, which puts the government at risk  because contractors lack incentives to control costs during this period.  Finally, during our file review, we found an example of a noncompetitive  contract awarded in an urgent situation that failed to follow sound  procurement practices in several ways, such as drastic increases in ceiling  prices, improper modifications to the contract, inappropriate  communications between the program staff and the contractor, and a  program official serving as the contracting officer’s technical  representative (COTR) without the required training. We also found that  sound management practices were not followed in the administration of  this contract.
subsections: section_title: Ambiguous Justifications for Noncompetitive Contracts
paragraphs: For two contracts in our sample, the justifications for not competing cited  exceptions to competition that were not supported by the circumstances  of the procurement or that were the wrong section of the FAR and thus  created ambiguity about whether circumstances warranted a  noncompetitive award. In the first situation, at ICE, the justification to use  a particular company’s online language learning services cited the wrong  section of the FAR in two different ways. First, the order was placed under  the firm’s GSA schedule contract (pursuant to FAR 8.4) and thus should  have been justified under one of the exceptions in FAR 8.405-6, yet the  FAR citation was to one of the exceptions to full and open competition  under FAR 6.302. Orders placed under GSA schedule contracts are exempt  from the requirements in FAR Part 6. Second, the justification itself was  not even clear as to the circumstances warranting a noncompetitive order.  Specifically, the justification incorrectly cited FAR 6.302-2 as “only one  responsible source.” FAR 6.302-2 is used to justify sole source  procurements that are urgent and compelling; FAR 6.302-1 is for  procurements that have only one responsible source. Further, the  justification should have been reviewed by the competition advocate and  attorney based on the total estimated value of the procurement—the base  year and 2 option years—but it was not. The justification described the  features of the services provided, claiming that it was the best product  available and that a pilot program testing this product had elicited a  positive response. While planning the procurement, the contract specialist  pointed out to the program staff that there were 31 GSA vendors that  could offer these services and recommended that they try to obtain  proposals from at least two other vendors. The contracting officers we  spoke with explained that the program office was insistent on the use of  this contractor for these services. The program office stated that the order  was placed solely with this contractor primarily because DHS had  undertaken a successful pilot program for these services with this  contractor, and they were under time pressure to award the contract  quickly.
In the second example, at the Department of the Interior, the justification  for a noncompetitive order on a GSA schedule contract to lease  information technology licenses was similarly ambiguous because the  citation used was FAR 8.405-6(b)(3), for urgent and compelling  requirements, but the supporting narrative stated that this vendor was the  only distributor that could offer all of the required products and services,  i.e., a certain brand name of licenses. The justification also stated that  this system was one of three that the government could use to meet its  needs. In addition, the program office was pushing for this contractor  because it was offering significant discounts if the award was made in a  certain time frame.
section_title: Other Contracts Had Limited Documentation of Price Analysis, Lack of Reviews, and Growth in Contract Price
paragraphs: The Department of the Interior issued an order under an IDIQ contract for  the Office of Historical Trust Accounting to provide assistance with  historical accounting of trust funds for Indian Tribes. The order was  placed for over $2.2 million noncompetitively through the 8(a) program to  a tribally owned 8(a) firm. The contract specialist sent the firm’s proposal  to the program official for price and technical review, and the program  official responded in less than an hour that the contractor’s proposal  “looked good,” with no documentation or description of what he had  reviewed. The contracting officer at the time put a memo in the file stating  that pricing for the labor categories was found to be in line with another  order on the same contract and the base contract. We discussed this  finding with agency officials, and a policy official at Interior’s Acquisition  Services Directorate told us that she and other managers in her office have  put a renewed emphasis on more detailed price analysis for orders under  IDIQ contracts in their reviews of contract actions. Further, during the  period of performance, the same program official from the Office of  Historical Trust Accounting worked directly with the contractor— significantly overstepping his authority and circumventing the Interior  contracting officer—to obtain services that were not included in an order  by adding labor categories to the scope of work. The IDIQ contract under  which this order had been issued was subsequently transferred to a new  contracting officer, who noticed the unauthorized labor categories in the  contractor’s invoices. This contracting officer modified the order to  incorporate a new statement of work with the additional labor categories  and a corresponding price increase of about $500,000. A more detailed  price analysis was conducted, including development of an independent  government cost estimate for these labor categories which was compared  to the contractor’s proposed prices as a basis for the determination that  the price was fair and reasonable.
In another contract file at the Air Force, no price analysis had been  documented for an order for integrated logistics support and engineering  services in support of the Air Force’s Distributed Common Ground  System. The pricing memorandum in the file for the order contained a  brief note that the information was in the base contract file; however,  when we looked in the base file the information was not there. After we  raised this situation, the former contracting officer prepared a price  negotiation memorandum after-the-fact explaining how the government  arrived at a fair and reasonable price. To do so, however, the contracting  officer had to rely on old e-mails as well as information supplied by the  contractor. According to the current contracting officer, the value of this  order grew from the initial $9.1 million to $18.8 million at the time of our  audit.
In another example, ICE contracting officers purchased communication  equipment through an order under a Secret Service contract. ICE issued  the order noncompetitively, using the justification that only one source  was available. The justification stated that only the contractor could  provide the equipment as the original manufacturer of a system in which  the government had already invested significant resources in training and  software. In the order file, the contracting officer noted that price analysis  and legal review were not performed because the base contract at Secret  Service was competed and prices were determined to be reasonable in  part through competition. The base contract, however, was not competed.  When we brought this to their attention, ICE contracting officials told us  that they had misinterpreted the information in their internal acquisition  planning database and from ICE program and senior management  officials. Only after the order had been issued did they learn that the  underlying contract had not been competed. They recognized that they  should not have pointed to competition as a basis for the fair and  reasonable pricing in the documentation for this order, but noted that they  had compared the prices for this equipment to prices on the open market  and GSA schedules contracts—which was noted in the contract file—and  that this analysis, along with Secret Service’s determination of a fair price  at the time of award of the base contract, would suffice as a determination  that the price was fair and reasonable.
Finally, a sole source contract at the Army for engineering and  maintenance support for the Chinook helicopter program grew over a  number of years from $34.7 million to about $477 million, but the  acquisition plan was not revised in spite of this significant price increase.  The FAR requires that whenever significant changes occur, and no less  often than annually, the planner must review the acquisition plan and, if  appropriate, revise it. The sole source justification prior to award of the  contract, at $34.7 million, was correctly approved by the head of the  contracting activity, which is all that is required for that dollar value.  Although not reflected in the acquisition plan, a second phase of the  requirement was identified and a second justification for this additional  work, citing an estimated value of $134.6 million, was reviewed and  approved by the Army’s senior procurement executive. When the contract  was subsequently modified, however, the value was increased to $477  million with no further notification to the senior procurement executive  about the significant price increase. The attorney reviewing the contract  modification expressed serious concerns, including that the senior  procurement executive was not being notified of the drastic increase in  price. A senior DOD acquisition policy official told us that, given the  significant increase in the contract’s value, additional notification should  have occurred, such as in the form of an amended justification and  approval or acquisition plan.
section_title: Undefinitized Contract Actions
paragraphs: Our sample also contained UCAs. In one case, it was unclear from the  documentation to what extent the agency followed UCA policies; in  another, the agency did not meet the DOD definitization requirements and  key documentation was missing from the contract file. UCAs are binding  commitments that can be entered into using different contract vehicles  (i.e., letter contracts, orders under IDIQ contracts, or modifications to an  existing contract). They are intended to be used only when the  government needs the contractor to start work quickly and there is not  enough time to negotiate all the terms and conditions for a contract. UCAs  are required to be definitized within 180 days, or when the amount of the  funds obligated under the contract action are 50 percent or more of the  not-to-exceed price, to limit the risk to the government.
In one case at the Air Force, an order was undefinitized for 17 months.  This order, to provide F-15 engines to the Royal Saudi Air Force, was  issued under a sole source IDIQ contract for development, production and  other support of the F-15 weapon program. In addition to this lengthy  undefinitized period, the contractor had begun work 7 months before the  UCA was even issued, but neither the contracting officer nor program  office official could locate any documentation showing that the  government had authorized this work to begin. The Defense Federal  Acquisition Regulation Supplement (DFARS) states that, while foreign  military sales are not subject to the DFARS policy for UCAs, including the  definitization requirements, contracting officers should apply the  definitization requirements to the maximum extent practicable. The  original contracting officer was no longer available, but we discussed this  matter with the current contracting officer and an official from the  program office, who were unable to explain the circumstances  surrounding the initial authorization to start work or the lengthy  undefinitized time frame.  In another example, a UCA at the Navy remained undefinitized for 7  months, thereby not meeting DOD definitization requirements. This IDIQ  contract was awarded noncompetitively to an ANC 8(a) firm after the  previous contractor, another 8(a) firm, failed to meet certain contractual  requirements and the government needed to quickly put another contract  in place to avoid a break in service. Further, when the contract was  definitized at an agreed to price of about $131 million, the only  documentation included in the modification definitizing the contract was  the award term plan and some contract line items, but no description of  the scope of work required. The contracting officer explained that after a  reorganization at the Navy, the contract file had been transferred to her  from another contracting office with missing documentation and she could  only make notes where documentation was missing. She said she would  have expected more information to be included in the modification that  definitized the contract.
section_title: One Noncompetitive Contract in an Urgent Situation Highlights Numerous Problems That Can Occur
paragraphs: In one example, the government failed to follow sound procurement  practices in several ways and did not adhere to certain sound management  principles, or internal controls, in others. In the period following the  terrorist attacks of September 11, 2001, Interior initially issued an order in  our sample, on behalf of the Federal Bureau of Investigation (FBI), under  a $50 million contract to an 8(a) ANC firm; the contract value subsequently  grew to $100 million. This order was improperly transferred by the Interior  contracting officer to a second contract—the ceiling price of which  tripled, from $100 million to $300 million—with the same vendor. A  modification in the file stated that “this task order is hereby transferred”  from the first contract to the second contract after the ceiling on the first  contract was reached. The contracting officer subsequently noted that  some requirements under the order were not incorporated into the second  contract, and took steps to modify the second contract. In addition, the  work under the first contract included commercial-off-the-shelf  information technology and telecommunication hardware and software  and support services for civilian and DOD agencies; modifications to the  contract added commercial and institutional building construction. The  work under the second contract included information analysis and  technical assistance support to provide a turnkey solution for operational  support for services to the Foreign Terrorist Tracking Task Force,  including quick reaction support for assessment planning and analysis and  “other special requirements.” Additional labor categories—such as counter  terrorism operations specialists—were later added. Interior contracting  officials and FBI program officials acknowledged that the FBI’s  requirements had changed significantly from a basic information  technology support project to running a 24-hour program to track terrorist  activities. The FBI officials noted that they were responding to a  presidential directive to establish a terrorist watch list within a matter of  months and that there was intense pressure to have this call center up and  running quickly. Also, according to contract file documentation, the  government accepted and paid for an invoice submitted by the contractor  for a service—security guards—that was not within the scope of the first  contract. The Interior contracting officer, in later scrutinizing the  contractor’s invoices, noticed this out-of-scope issue and obtained  reimbursement from the contractor. In another instance, the contracting  officer noticed more improper billing, including an unauthorized expense  for a hotel bar tab, and deducted the costs from the invoices. When the  second contract was about to reach its ceiling price, Interior put in place a  third contract with the same 8(a) ANC firm with an estimated ceiling price  of $1 billion, with the contracting officer noting that after that award they  would no “longer have to worry about contract ceilings” with this vendor.  Finally, the FBI program official designated as the COTR did not have the  necessary training to fulfill this position; the Interior contracting officer  subsequently removed the official from the position.
Apart from the issues with procurement practices discussed above, the  administration of this contract lacked appropriate management controls— also referred to as internal controls. Examples follow.
We found little evidence in the contract file that the contractor’s proposed  prices had been analyzed for price reasonableness at various points during  the life of the order. For example, the FBI program official’s analysis of the  contractor’s proposed price for the order under the initial contract was a  statement in an email that she had reviewed the price and found it  reasonable, with no further documentation supporting the statement.  Further, during preparations to award an option year on this order, an FBI  program official again approved the contractor’s revised price proposal  with a simple “yes” response when asked by the Interior contracting  officer, and also explained to the contracting officer that the independent  estimate—presumably for this option year—was different from the  contractor’s proposed prices in part because the contractor included  additional labor categories that the FBI did not require, but that they  “agreed with.”
Communications between the FBI and Interior were problematic.
Specifically, the program office was communicating directly with the  contractor about the growth in the requirements but not involving the  contracting officers. For example, the contractor informed the Interior  contracting officer that it had been directed by the program office, due to  a change in requirements, to establish an increased level of continuity and  retention within the terrorist screening center— particularly for the  second and third shifts. The contractor proposed additional compensation  for these shifts and told the contracting officer that approval to apply  these shift differentials would be approved by the program office . The  contracting officer told us the program office should have informed her  first of the need for shift differential compensation and that the direction  to the contractor should have come from her rather than from the program  office. Interior contracting officials expressed dismay at the program  office’s lack of communication with them and told us that sometimes they  did not know what was going on with their own contract. Further, when  Interior was preparing to award the second contract to the ANC firm, an  FBI program official told the contracting officer that she understood  delays in the award may be due to Interior’s legal review process; the FBI  official, in an effort to expedite the process, then asked for the legal  representative’s contact information to “move this along smoothly.”
Interior officials told us that after several years of dealing with this  contract, their office had undergone a culture change whereby they were  starting to push back on customer demands instead of simply doing what  the program offices wanted. Eventually, after a dispute about the  interagency contracting fees the FBI was paying to Interior and Interior’s  desire to not award another sole-source contract to the same vendor, the  FBI officials told us that they pulled the requirement in-house and, under  their own contract, awarded the requirement noncompetitively to another  ANC 8(a) firm. FBI officials added that by this time, they had increased  their own contracting staff so were able to handle this requirement  themselves.
section_title: Agencies Institute the Roles of Their Competition Advocates in a Variety of Ways, in Particular with Regard to Placement and Expertise
paragraphs: Statute and regulation require that each executive agency establish an  “advocate for competition,” commonly known as a competition advocate,  at the agency level as well as at each procuring activity. In general, the  agencies in our review have organized their competition advocates into  the required department- and procuring activity levels. For example, the  Department of the Interior has a department-level competition advocate  and competition advocates at the bureaus, including the National Business  Center, which houses the Acquisition Services Directorate. DOD has a  competition advocate at the department level, and additional competition  advocates are in place at the Army, Air Force, and Navy and local  contracting activities. The advocates are to carry out a number of broad  responsibilities, including    promoting full and open competition and challenging barriers to  competition,  reporting to the agency’s senior procurement executive and chief  acquisition officer on opportunities and actions taken to achieve  competition, as well as conditions or actions that unnecessarily restrict it,  such as unnecessarily detailed specifications or restrictive statements of  work, and  recommending to the senior procurement executive and chief acquisition  officer a “system of personal and organizational accountability” for  competition, which may include recognition and awards to program  managers, contracting officers, or others.
Competition advocates are also responsible for approving justifications for  other than full and open competition within certain dollar limits, as  depicted in table 3.
Apart from these duties, agencies are left with much discretion regarding  where in the organization the competition advocates should be placed,  who should be appointed to this position, and how they should carry out  their responsibilities. Some agency officials we spoke with said that,  because the FAR is vague in this regard, and especially given the current  emphasis on competition, more guidance related to this position could be  helpful. For the agencies in our review, we found a range of approaches to  the competition advocate position and placement, skills and expertise, and  methods of implementing their responsibilities.
subsections: section_title: Competition Advocate Placement in the Organization
paragraphs: Officials at the agencies we reviewed generally agreed that placement of  the competition advocate at a high level within agencies is important, as  the person in this role should have the clout to make difficult decisions  regarding proposed sole-source awards and support procuring activity  contracting officers who attempt to do so. A competition advocate who  can exercise this level of leadership at a senior level can be more effective  in the role and, by emphasizing the importance of competition to program  office staff as well as contracting officers, has the potential to affect  competition results. The Air Force competition advocate told us, for  example, that he sees value in being highly placed within the organization;  if people must come to him to explain why a particular procurement needs  to be sole source, they are more likely to do things the right way and less  likely to take short cuts.
At the agencies in our review, competition advocates are in various  positions and placements within the organization. Some are senior leaders  in the acquisition arena. For example, the DOD competition advocate is  the Director of Defense Procurement, Acquisition Policy, and Strategic  Sourcing, and the DHS competition advocate is the Director of Oversight  and Strategic Support within the Office of the Chief Procurement Officer.  We found that the duties of competition advocate can be automatically  tied to the person’s position within the agency. For example, Air Force,  Navy, and Army acquisition regulations designate a specific deputy  assistant secretary position to be the advocate. Agency officials told us  that the ICE Deputy Assistant Secretary for Management is automatically  designated as the competition advocate, and within the Secret Service, it is  the Deputy Assistant Director. Also within DHS, the head of contracting  activity was the competition advocate for the Coast Guard, but because  this person was uncomfortable signing sole source justifications in two  different capacities, she told us that she delegated her role as competition  advocate to another senior official—the Deputy Assistant Commandant for  Acquisition—within the acquisition directorate. Within Interior, the  department competition advocate is a senior procurement analyst who  reports to the senior procurement executive. The competition advocates at  the bureaus, components, or procuring activities included in our review  were, for example, acquisition policy chiefs or senior contracting officers.
We found one situation, at ICE, where the competition advocate is higher  in the organization than the head of contracting activity. Given the  approval thresholds stipulated in the FAR, this means that the head of  contracting approves justifications at a higher dollar threshold than the  competition advocate, but in practice reports to the competition advocate.  The competition advocate explained that ICE does not administer many  high-dollar acquisitions, and therefore, having the competition advocate in  a management position above the head of contracting brings greater  visibility to noncompetitive requirements at lower-dollar thresholds.
Expertise and Background  Agencies can appoint any individual, other than the senior procurement  executive, as a competition advocate as long as the individual’s broader  functions and duties do not conflict with the responsibilities of a  competition advocate as outlined in statute. Agency officials told us that  a competition advocate should have the right skill set, which may include  a background that enables them to recognize and question overly  restrictive requirements which could lead to an unnecessary sole-source  outcome, and the personality to ask tough questions. In general, we found  that no specific qualifications were required for this role, but the Air  Force’s Competition and Commercial Advocacy Program does call for its  competition advocates to have “extensive qualifications and knowledge of  the types of acquisitions” the procuring activity engages in.
The department- and component-level competition advocates we spoke  with had a variety of backgrounds. Several of them had been contracting  officers and program managers, while one was involved in the operations  side of the agency, and another served as an attorney to the agency. Some  competition advocates offered examples of how their background and  expertise influence how they approach their job of promoting competition.
Interior’s competition advocate informed us that her experience as a  contracting officer and bureau competition advocate influences how she  reviews urgent and compelling requirements. During the Army’s  deployment in Bosnia, she was a contingency contracting officer and  processed wartime requirements. She said that because she worked with  urgent and compelling requirements during the deployment, she is more  likely to challenge sole source emergency requirements in her capacity as  the competition advocate. In addition to her experience as a contingency  contracting officer, she also served as the competition advocate for the  U.S. Fish and Wildlife Service during Hurricane Katrina, service that  required her to balance the needs of emergency response with her  responsibility as a competition advocate to promote competition. She  believes that her past experience leads her to have a different attitude  toward her role as a competition advocate in comparison to other  advocates who may be less likely to challenge emergency requirements.
The Coast Guard’s competition advocate explained that his experience as  a program manager allows him to ask questions that a contracting officer  may not think to ask about a requirement. Over 25 years ago, he began  working in structural design and subsequently served in several  supervisory and program manager capacities in the Navy. His experience  in program, fiscal, and technical management influences how he  approaches his role as competition advocate. He reviews contract  documentation strictly from the perspective of promoting competition. He  stated that when a program office tries to solicit a requirement in a way  that precludes certain vendors, his technical background of working with  various platforms leads him to question these restrictive requirements.
The competition advocate at one of the Air Force contracting activities we  visited pointed to her experience as a program manager and her  contracting background as an asset to her current position as competition  advocate. She also noted that the support that she receives and  relationships she has with the command-level and Air Force competition  advocate has helped her challenge sole source requirements when  program managers are pushing for a certain vendor.
At one Navy location, the advocate pointed to her experience and  familiarity with the program offices’ requirements as a plus in enabling her  to question planned sole-source procurements.
The Secret Service’s competition advocate has years of experience in  operations but no experience as a contracting officer or a program  manager. He told us he began working as a criminal investigator and  worked in other positions, such as on the president’s protection detail and  in congressional affairs. After over 20 years of working in operations for  the agency, he told us he is learning about contracting operations and that  he believes more agents who work in operations should hold the position  of competition advocate. He works closely with the head of contracting  activity, relying on her expertise and supporting her efforts to increase  competition within the agency.
section_title: Competition Advocates Use Various Methods for Carrying Out Their Duties
paragraphs: The competition advocates at the agencies in our review are tackling their  jobs in a variety of ways. Most department-level advocates told us that  they review, and in some cases sign, justifications for sole source  procurements that must also be approved by the senior procurement  executive, that is, justifications for the highest dollar amounts, as another  check point in the process to question planned sole-source procurements.  The Army’s competition advocate said that one trigger for potentially  rejecting a justification for a sole-source procurement is when the  evaluation of the market is cursory. For example, a justification for a sole- source award to an 8(a) ANC firm was turned back for additional detail on  market research and further review of the feedback from other potential  offerors, although the same firm ended up with the follow-on contract.
As noted above, competition advocates are required to recommend to the  senior procurement executive and the chief acquisition officer a “system  of personal and organizational accountability” for competition. The Navy  competition advocate and his staff told us that, as part of their review of  high dollar value justifications prior to the senior procurement executive’s  review, they look to see whether program offices have made strides in  improving competition in their programs if a prior justification had made  this claim. Holding the program offices accountable is part of their overall  plan for improving competition, an attitude that is also strongly held by the  Navy’s senior procurement executive. Other competition advocates also  pointed out that strong leadership, from the senior procurement executive  and the competition advocate, can engender results. The DHS competition  advocate, for example, noted that without this level of continued  leadership and the will to enforce accountability, there could be a slip  back to less competition.
Other methods we found that competition advocates are using include:    DOD officials told us that the DOD competition advocate holds quarterly  meetings with competition advocates from the military services and other  DOD agencies to review the progress toward meeting competition  procurement goals and to challenge the barriers they identify as inhibiting  competition.
The Navy competition advocate told us that he holds quarterly contracting  council meetings with senior contracting staff for each of the systems  commands (some of whom are also competition advocates), discussing  various topics including competition.  Interior and DHS do not hold regular meetings with the competition  advocates of bureaus or components, but, according to agency officials,  they have other meetings with procurement staff where competition goals  are discussed.
The DHS competition advocate recently completed an investigation of  noncompetitive contract awards at DHS and found that some contract files  lacked required justifications for sole source procurements. Other  contract files included justifications that did not adequately describe why  only one source could perform the work. The competition advocate  subsequently approved a memorandum signed by the Chief Procurement  Officer that emphasized the need to include the justification in the  contract file and provided examples of inadequate rationale for use of a  noncompetitive contract.
Competition advocates can also offer recognition and awards—including  to program managers—for efforts to increase competition. Some  advocates indicated that their agencies or procuring activities have  competition awards programs that recognize the work of individuals or  teams who increase competition. For example, since July 2007, DHS has  instituted the DHS Competition and Acquisition Excellence Awards  Program “as a means of renewing and increasing acquisition workforce  interest in competition and related innovative procurement practices.” The  Army competition advocate also said the Army was going to add  competition as a metric to the Secretary of the Army’s award program,  awarding contracting activities that raised and exceeded their competition  goals.
For their part, local competition advocates told us that they try to get  involved in acquisitions as early as possible to have a greater impact on  decisions related to competition. For example, the advocate at the Naval  Air Warfare Center Weapons Division said that, for service contracts, she  reviews acquisition strategies before she reviews justifications. If she  identifies a potential issue related to competition in the acquisition  strategy stage, she can have the program make appropriate changes before  the justification is ever developed. The Warner Robins Air Logistics Center  competition advocate and her staff also try to engage program offices  early in the process and, if the procurement must be noncompetitive, the  approval process is faster because they are already familiar with the  support for the justification. The Air Force competition advocate noted  that it is his responsibility to ensure that competition advocates in the field  have a certain level of independence to allow them to push back,  especially with regards to the requirements side, and to make sure there is  a process that allows them to raise issues up the chain when warranted.
section_title: Conclusions
paragraphs: Some degree of noncompetitive contracting is unavoidable, such as when  only one responsible source can perform the work; and in some cases  competition is impractical due to the government’s reliance on contractors  stemming from decisions that were made long ago. Recent congressional  actions to strengthen competition opportunities in major defense  programs may take some time to demonstrate results. Further, OMB’s  efforts to reduce agencies’ use of high risk contract types may help  agencies refocus and reenergize efforts to improve competition. Despite  these actions, other targets of opportunity still exist, but to take full  advantage of them, it will be necessary to challenge conventional thinking  to some extent. Key among these are establishing an effective, adequately  trained team of contracting and program staff working together, starting  early in the acquisition process. Competition opportunities should be  considered when requirements are initially developed, and as complex  programs mature and the government gains more knowledge about what it  needs. Because program officials have an essential role in the acquisition  process, as do contracting officers, it is just as important for them to  advance competition whenever possible. Given the nation’s fiscal  constraints, it is not acceptable to keep an incumbent contractor in place  without competition simply because the contractor is doing a good job, or  to resist legitimate suggestions that competition be imposed even though it  may take longer. As discussed in this report, some agencies have  implemented the leadership and accountability to make progress in this  area, such as breaking out requirements to facilitate competition.  However, there is no requirement to assess the circumstances under  which competitive solicitations receive only one offer to potentially bring  about a greater response from the market place. The competition  advocates, in their unique role and in the context of OFPP’s call to  reinvigorate their role, have the potential to implement changes to practice  and to culture. However, to do so they need to be situated in the right  organizational position and able to bring to bear the acquisition knowledge  and leadership to engender change.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Administrator of the Office of Federal  Procurement Policy take the following three actions:    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 for recurring or other requirements and to  identify additional steps that can be taken to increase the likelihood that  multiple offers will be submitted, with the results of the evaluation  documented in the contract file.
As part of efforts to reinvigorate the role of the competition advocate,  issue guidance to federal agencies regarding appropriate considerations  when appointing competition advocates, such as placement within the  organization, skill set, and potential methods to effectively carry out their  duties.
Direct agencies to require their competition advocates to actively involve  program offices in highlighting opportunities to increase competition.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested comments on a draft of this report from OFPP, the  departments of Defense, Homeland Security, and the Interior, and the  SBA.
In oral comments provided via email, the OFPP Administrator concurred  with our recommendations, noting that they are consistent with the types  of steps agencies have begun to take in response to the President’s  direction to be more fiscally responsible in their contracting practices and  to reduce use of high-risk contracting practices that can lead to taxpayers  paying more than they should. The Administrator noted that there is still  much work ahead and that OMB will periodically meet with agencies to  review progress against their risk reduction goals.  He stated that these  efforts will include a push to achieve greater collaboration between  contracting, program, finance, and other key stakeholder offices in the  acquisition process. The Administrator also said that his office would  continue in its efforts to build the capacity and capability of the  acquisition workforce—including program and project managers and  COTRs—to ensure that agencies are well-equipped to take the actions  necessary to maximize the benefits of competition.  The Administrator  also stated that executive branch actions to draw agency attention to high  risk contracting and establish goals for risk reduction provide a catalyst  for change and that key among these are establishing an effective,  adequately trained team of contracting and program staff working  together, starting early in the acquisition process. Finally, the  Administrator highlighted OFPP’s October 2009 memorandum, which  stated that a spend analysis might be useful for identifying and analyzing  competitions where only one offer is received, by comparing levels of  competition achieved by different organizations within the agency or those  similarly situated in other agencies to determine if more successful  practices may exist for more competition for a given spending category.
DOD also provided oral comments via email.  The Director, Defense  Procurement and Acquisition Policy, stated that, in general, he agrees with  our findings and recommendations concerning opportunities to increase  competition in cases where only one offer is received (a situation DOD  terms “ineffective competition”).  He stated that the department is taking a  number of actions to increase the quality of competition in this regard. For  example, the competition advocates will be required to measure and  report on “ineffective competition,” contracting officers will be directed to  perform cost analysis in all situations where only one offer is received, and  the intent is to form a Contracting Integrity Panel subcommittee to  specifically look at creating opportunities for more effective competition.
In its written comments, Interior pointed out that its September 2008  internal policy, “Enhancing Competition,” is one step the department has  taken to enhance competition. Interior also commented that we should  clarify that noncompetitive orders justified as logical follow-ons are  permitted. We believe our report makes this clear. In addition, Interior  commented that one of the limited sources justifications discussed in our  report, where the wrong FAR citation had been used, was a “minor  typographical error.” We disagree. Because of this error, it is not clear  what exception was being used and, therefore, the rationale is ambiguous,  as we state in the report. Interior provided additional technical comments,  which we incorporated as appropriate. Interior’s comments are included  as appendix II.
DHS had no comment on the draft report.
We received technical comments from the SBA, which we incorporated  where appropriate.
The FBI requested a copy of the draft report and provided technical  comments pertaining to one contract in our sample, which we also  incorporated where appropriate.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution of it until 30 days from  the date of the report. We will then send copies of this report to interested  congressional committees and the Secretaries of Defense, Homeland  Security, and the Interior; and to the Administrators of SBA and OFPP.  This report is also available at no charge on the GAO Web site at  http://www.gao.gov. If you or your staff have any questions about this  report, please contact me at (202) 512-4841 or huttonj@gao.gov. Contact  points for our offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made major  contributions to the report are listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: The objectives of this review were to assess (1) the extent to which  agencies are awarding noncompetitive contracts and contracts awarded  competitively with only one offer received; (2) the exceptions to  competition that agencies used when awarding noncompetitive contracts;  (3) factors that affect competition in federal contracting; and (4) the  extent to which the contracting approaches for the contracts in our  sample reflected sound procurement or management practices. We also  identified how agencies are instituting the roles of their competition  advocates.
To address these objectives, we identified through the Federal  Procurement Data System-Next Generation (FPDS-NG) government-wide  obligations to noncompetitive contracts in fiscal year 2008, the most  recent available when we began our review. We included contracts and  orders coded as “not competed,” “not available for competition,” “follow  on to competed action” and “noncompetitive delivery order.” We found  that a small percentage of obligations for orders under indefinite delivery /  indefinite quantity (IDIQ) contracts were unlabeled in FPDS-NG as to  extent of competition. We were able to match many of these unlabeled  orders to their base contracts to obtain more complete information. In  addition, we identified the fiscal year 2008 obligations under contracts  where only one offer had been received.
To select the agencies to include in our review, we identified the five  agencies with the highest reported percentage of obligations under  noncompetitive contracts in fiscal year 2008. These included the Air Force,  Army, Navy, the National Aeronautics and Space Administration (NASA),  and the Department of Homeland Security (DHS). For these agencies, the  percentage of noncompetitive obligations ranged from 45.2 percent (Navy)  to 25.2 percent (DHS). We performed additional analysis of NASA and  DOD obligations, focusing on the types of services and products  represented by the noncompetitive obligations, and found that the  products were largely what is generally considered to be specialized  equipment. To focus our review on services, for DOD and NASA we  limited our analysis to the “R” codes in FPDS-NG, which reflect  professional, administrative, and management support services. Each of  the DOD agencies and NASA had a significant percentage of  noncompetitive contracts for these services. After discussion with our  congressional requesters, we eliminated NASA from our scope of work  and focused on the DOD agencies, DHS, and the Department of the  Interior.
To identify the components, or specific procuring activities, within each of  these agencies for our contract file reviews, we focused on those whose  percentage of fiscal year 2008 obligations under noncompetitive contracts  exceeded that of the agency (Army, Navy, Air Force, DHS, and Interior) as  a whole. We also focused on those components with $100 million or more  in contract obligations in 2008 and those with higher-dollar procurements,  in order to avoid selecting low-dollar procurements. We then considered  other factors, such as travel expenses, the locations’ percentage of  obligations under noncompetitive contracts, and the locations’ percentage  of obligations under contracts with only one offer received, into account  in making our final selection. Following is more specific criteria applicable  to the agencies in our review.
For the Army, Air Force, and Navy, our analysis of fiscal year 2008  noncompetitive obligations was limited to obligations for professional,  administrative, and management support services.
For DHS: the Coast Guard, the Secret Service, Immigration and Customs  Enforcement (ICE), Customs and Border Protection, the Federal  Emergency Management Agency (FEMA), and the Transportation and  Security Administration met our initial selection criteria. We removed the  Coast Guard and FEMA from the scope of our review due to our continued  audits of the Coast Guard’s Deepwater program, and FEMA because it had  also been the subject of many recent audits. (However, we did speak with  the Coast Guard’s competition advocate and head of contracting activity  as part of our fifth objective, as discussed below.) Further, after discussion  with the DHS Inspector General, we also removed the Customs and Border  Protection and Transportation and Security Administration from our  scope to avoid duplication of effort, as the Inspector General had  completed or had current work underway on noncompetitive contracts at  those locations. Therefore, we focused on the Secret Service and ICE.
At Interior, two components—the Acquisition Services Directorate and  Bureau of Indian Affairs—met our initial selection criteria. We included  the Acquisition Services Directorate in our review due to its proximity to  Washington, D.C. This fee-for-service contracting office (formerly  GovWorks) awards and administers contracts on behalf of other federal  agencies. Included in our contract sample from the Acquisition Services  Directorate were contracts awarded on behalf of DOD agencies, the  Federal Bureau of Investigation, and the National Institutes of Health.
We then randomly selected a sample of 107 contracts and orders to review  in depth. While our focus was on noncompetitive contracts, we also  selected a small sample of competed contracts where only one offer had  been received in order to gain an understanding of the circumstances  leading to that situation. Table 4 shows the specific locations we visited,  along with the number and type of contracts reviewed.
To identify the extent to which agencies have reported obligations under  noncompetitive contracts, we analyzed FPDS-NG data from fiscal years  2005 through 2009 using the fields “not competed,” “not available for  competition,” and “follow on to competed action.” We determined that a  contract or order was miscoded in FPDS-NG if it was coded as not  competed, but our analysis of the contract file documentation showed that  the contract or order was competed. Similarly, if a contract or order was  coded as competed with one offer received, we determined that it was  miscoded if the contract documentation showed that the requirement was  not competed, or that it was competed and received more than one offer.  We did not make a determination whether the “reason not competed” field  in FPDS-NG was coded correctly. We also analyzed reported obligations  under competed contracts where only one offer had been reported for the  same time period. DOD’s total obligations in fiscal year 2009 reflect an  approximately $13.9 billion downward adjustment made by DOD to  correct an administrative error made in fiscal year 2008. As this  adjustment significantly affected DOD’s reported obligations in fiscal years  2008 and 2009, the figures we report reflects what DOD’s total obligations  would have been had the error not occurred. We also analyzed FPDS-NG  data by quarter for fiscal years 2007 and 2008 to identify trends in  obligations under existing and newly awarded noncompetitive contracts.  In reviewing the contract files in our sample, we compared the reported  competition data in FPDS-NG to the actual data in the contract file to  determine if discrepancies existed in the way competition had been coded.  As discussed in the first objective in this report, we found that about 18  percent of the contracts or orders had been miscoded as either competed  or not competed. We found the FPDS-NG data to be adequately reliable for  overall trend analysis on extent of competition and for selection of  locations for our file reviews.
To determine the exceptions to competition that were used, the factors  affecting competition, and the extent to which certain contracting  approaches reflected sound procurement or management practices, we  reviewed documentation in the contract files such as the written  justification, acquisition plan, statement of work, price negotiation  memorandums, records of market research, and other key documents.  Where our sample involved orders under IDIQ contracts, we reviewed the  base contract file as well. We reviewed pertinent legislation, such as the  Competition in Contracting Act, the Federal Acquisition Streamlining Act,  National Defense Authorization Acts, and the Weapon Systems Acquisition  Reform Act. We also reviewed relevant provisions in the Federal  Acquisition Regulation (FAR), specifically Parts 6, 8, 16, and 19, Small  Business Administration regulations, and pertinent agency guidance and  supplements to the FAR. We also reviewed GAO and Inspector General  audit reports dealing with competition. At the locations we visited, we  interviewed the contracting officer and contract specialist responsible for  the files we reviewed (when available) and, for many of the contracts, also  interviewed cognizant program officials to obtain their views. In addition  to discussing the specific issues related to the contracts in our sample, we  also discussed general topics with these officials, such as their views on  barriers to competition and how, if at all, they interact with the agency or  local-level competition advocate. We also interviewed procurement policy  officials at the department and local levels and a limited number of  contractor representatives.
To determine how agencies are instituting the role of the competition  advocate, we reviewed statutory and FAR provisions, Office of  Management and Budget and Office of Federal Procurement Policy  memorandums (such as the May 2007 memorandum on reinvigorating the  role of the competition advocate), pertinent agency regulations and  guidance, and the annual competition reports for fiscal years 2008 and  2009 for the agencies in our review. We interviewed the competition  advocates at DOD, the Army, Navy, and Air Force, the Department of the  Interior, and DHS, as well as the advocates at the components included in  our review. We discussed the competition advocates’ placement within  their organizations, their backgrounds and areas of expertise, their  strategies for promoting competition, and factors they identified as  barriers to competition.
We conducted this performance audit from October 2009 to July 2010, 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: Comments from the Department of the Interior
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Michele Mackin, Assistant  Director; Tatiana Winger; Julia Kennon; Anh Nguyen; Kenneth Patton;  Jared Sippel; Sylvia Schatz; Kristin VanWychen; and Keo Vongvanith made  key contributions to this report.