The federal government may consider a wide selection of contract types when purchasing products and services. One of those types is an IDIQ contract. An IDIQ contract provides flexibility in cases where the government cannot determine the exact quantities and required timing of a product or service. Under an IDIQ contract, the government must order, and the contractor must provide, a minimum agreed-upon quantity of products or services, also known as a minimum guarantee. In addition, the contractor must provide any other quantities ordered by the government up to a stated maximum. A contracting officer determines whether, for a specific solicitation, to award multiple IDIQ contracts or only one. The FAR establishes a preference for “multiple-award contracts.” For purposes of this report, we describe these two approaches as “single-award IDIQ contracts” and “multiple-award IDIQ contracts.” “Single-award IDIQ contracts” refers to situations when only one contract is awarded under a solicitation. These contracts may have been competed or may have been awarded on a non-competitive basis. If a contract is awarded without competition, it must follow certain procedures, for example, a justification and approval document must be prepared and approved. In addition, if a single- award IDIQ contract is expected to exceed a certain threshold—raised from $103 million to $112 million on October 1, 2015—a written determination by the head of an agency is required. Single-award IDIQs are used under certain circumstances, such as when only one contractor is capable of providing the products or services. “Multiple-award IDIQ contracts” refers to situations when contracts are awarded to two or more contractors under a single solicitation. These contracts allow agencies to establish a group of prequalified contractors to compete for future orders under streamlined ordering procedures once agencies determine their specific needs. Contracting officers must avoid situations in which contractors specialize in one or a few areas of the work, creating the likelihood that orders would be awarded noncompetitively. An order, which is placed when a concrete need arises, obligates funds and authorizes work. Orders must be within the scope, period of performance, and maximum value and or quantities agreed to in the contract. The ordering processes for a multiple-award IDIQ contract and single-award IDIQ contract differ somewhat. For orders under single award IDIQ contracts, once a requirement is known, contracting officials can place an order following the procedures outlined in the contract. When multiple-award IDIQ contracts have been awarded, and a need arises, the requirement must be generally competed, through “fair opportunity”, among all of the IDIQ contract holders. The specific procedures required to provide fair opportunity differ based on the dollar value of the orders. Contracting officers must provide each contractor a fair opportunity to be considered for each order unless exceptions apply. Exceptions to fair opportunity requirements for orders are permitted in certain circumstances, such as when only one source is capable of providing the particular products or services sought. Beyond the requirement to meet a minimum guarantee, contractors can choose to submit offers or not. The FAR requires that before purchasing supplies and services, contracting officers must determine that the prices proposed by contractors are fair and reasonable. The FAR states that adequate price competition normally establishes a fair and reasonable price, but in some situations contracting officers may need to, or be required to, obtain other types of data to help establish pricing. Generally, the information that is used by contracting officers to determine the reasonableness of price depends on a series of circumstances, including whether the particular product or service procured is for a commercial or noncommercial item, and whether the requirement is being competed or awarded noncompetitively. The data examined could be cost data, such as the cost of materials, labor, and overhead, or pricing information, such as invoices for the same or similar items sold to commercial customers. When required, contracting officers must ask contractors for certified cost and pricing data. Once contracting officers obtain the data needed, there are several techniques they can use—singly or in combination—to determine price reasonableness, such as comparing proposed prices to historical prices paid, or comparing prices to an independent government cost estimate. About one-third of all federal government contract obligations from fiscal years 2011 through 2015 were through IDIQ contracts. Obligations on IDIQ contracts were more than $130 billion annually during these years, with DOD accounting for more than two-thirds of all IDIQ obligations. IDIQs were used more often for services than products across government agencies and most IDIQ contracts and orders were competed. While the FAR states a preference for multiple-award IDIQs, federal agencies obligated more dollars through single-award IDIQs than through multiple-award IDIQs. Most single-award IDIQ contracts were competed. DOD contracting officials cited various reasons for the wide use of IDIQ contracts, including flexibility and administrative ease. From fiscal years 2011 through 2015, the proportion of IDIQ obligations relative to total government contract obligations remained relatively constant, accounting for about a third of total obligations (see figure 1). Total IDIQ obligations ranged from about $180 billion in fiscal year 2011 to about $130 billion in fiscal year 2015. Overall, total contract obligations declined from fiscal year 2011 through 2015, and the changes in IDIQ obligations during this time frame were consistent with this decline. From fiscal years 2011 through 2015, DOD accounted for more than two- thirds of total IDIQ obligations annually, while all civilian agencies combined accounted for less than one-third (see figure 2). The three civilian agencies with the highest amounts of IDIQ obligations were the Departments of Homeland Security (DHS), Health and Human Services (HHS) and Veterans Affairs—(VA). From fiscal years 2011 through 2015, these agencies combined accounted for about 8 to 13 percent of government-wide IDIQ obligations each year. For example, in 2015, DHS, HHS, and VA each accounted for about 4 percent of IDIQ obligations, as shown in figure 3. From fiscal years 2011 through 2015 about two-thirds of government- wide IDIQ obligations were for services, while about one-third were for products. For example, in fiscal year 2015, government-wide IDIQ obligations for services accounted for about 70 percent of total IDIQ obligations. However, the proportion of IDIQ obligations on services versus products differed between DOD and civilian agencies—with IDIQ obligations on services accounting for 62 percent of total 2015 IDIQ obligations at DOD, but 85 percent at the civilian agencies. Figure 4 shows the annual breakdown of products and services by civilian agencies and DOD from fiscal years 2011 through 2015. While the FAR states a preference for multiple-award IDIQs, the majority of all government-wide IDIQ contract dollars were obligated through single-award IDIQ contracts from fiscal years 2011 through 2015. Specifically, across the government, approximately 60 percent of IDIQ obligations were awarded through single-award IDIQs and 40 percent through multiple-award IDIQs. Approximately eighty percent of all single- award IDIQ obligations were at DOD. See figure 5 for a breakdown of single- and multiple-award IDIQs by DOD and civilian agencies. From fiscal years 2011 through 2015, IDIQ contract and order obligations were generally competed. About 70 percent of all single-award contract obligations were competed from fiscal years 2011 through 2015, and that percentage was fairly consistent across DOD and civilian agencies, as shown in figure 6. For multiple-award IDIQ orders government-wide—more than 85 percent of all order obligations were competed from fiscal years 2011 through 2015. In each year, a higher percentage of order obligations were competed at DOD than at civilian agencies, as shown in figure 7. Based on FPDS-NG data, agencies identified a variety of exceptions to fair opportunity for multiple-award IDIQ orders, for example, that only one contractor was capable of providing the products or services required, a noncompetitive order was needed to satisfy a contract’s minimum guarantee, or that there was an urgent need. Our review of DOD contracts revealed several reasons for the use of IDIQ contracts. Contracting officials noted it was easier and faster to place an order under an IDIQ contract than to solicit and award a separate contract each time a need arose. Price and technical approach can still be evaluated at the time of placing an order, but the overall turnaround time, they said, is significantly less than for a new contract. Contracting officials also stated that IDIQ contracts were easier to administer. First, they noted that it was more efficient to track funds and requirements for different customers through orders, rather than making modifications to stand- alone contracts for the same purpose. Second, officials told us that the close-out of orders from IDIQ contracts was much faster, as each order can be closed-out individually when the last payment is made rather than waiting until the entire contract was complete. According to DOD contracting officials, IDIQ contracts also provide more funding flexibility as funds are obligated as needed through orders and not at contract award—as may be required for some other types of contracts. Once the minimum guarantee is satisfied on an IDIQ contract, there is no further government obligation to procure additional products and services under an IDIQ contract. For example, on an Air Force IDIQ contract for roofing services, contracting officials established a pricing structure that allowed for repairs to different types of roofing. The Air Force placed an order only when a specific need arose. These needs may vary—such as when repairs are needed due to wear and tear. This contract allows work to be performed on an as needed basis, which may help the Air Force begin or continue work in an uncertain funding environment. In addition, DOD officials told us that the contracts they used served a broader customer base, for example, multiple commands, other federal agencies, and foreign military sales. By not needing to specify an exact quantity or timing of delivery at the time of contract award, program offices can accommodate unforeseen needs on an ongoing basis through issuance of orders. For example, an Army contract for Aerial Target Systems training and testing is intended for use by all military departments as well as foreign military partners. Since the need for testing and training varies depending on the customer, these requirements were less defined at contract award, and will be more clearly specified at the time of order. DOD can award IDIQ contracts on a competitive or noncompetitive basis. Ten of the 18 single-award IDIQ contracts we reviewed were not competed, generally because only one contractor could meet the need. The remaining single-award IDIQ contracts reviewed were competed. For these contracts, a single-award contract was used for a variety of reasons; for example, orders under the contract were to be for integrally related tasks and therefore there was a need to build knowledge with each order. Orders under multiple-award contracts also can be awarded on a competitive or noncompetitive basis. The orders we reviewed that were not competed cited a variety of reasons, such as that there was an urgent need, there was only one contractor capable of completing the work, or the order was a follow-on to other work. Some orders we reviewed were competed, but only one contract holder chose to submit an offer. In most cases, the competitive orders for which the government received one offer were either in compliance with DOD’s policy that solicitations for competitive actions be open for at least 30 days, or the order met one of the exceptions to that policy. DOD awarded single-award IDIQ contracts—which are awarded to one contractor on a competitive or noncompetitive basis—for a variety of reasons. Of the 18 single-award IDIQ contracts we reviewed at DOD, we found that 10 contracts were awarded noncompetitively because only one contractor was capable of fulfilling the need. Eight single-award IDIQ contracts in our sample were competed (see figure 8). For the 10 single-award IDIQ contracts that were not competed, contract files contained the required justification and approval memorandums in all cases. In terms of the reasons why DOD chose not to compete the contract, in 8 of the 10 contracts we found that the government determined that it did not possess the data rights to proprietary technologies or processes needed to perform a service, for example: The Navy awarded a noncompeted single-award IDIQ contract with a value of up to $15 million per year for the deactivation of Tomahawk missiles, missile testing, and engineering services. Officials stated that they used an IDIQ because they could not determine the number or types of missiles that would be selected for deactivation and added that the manufacturer of the missiles was the only source capable of providing this service as the government lacked the data rights and certified facilities needed to perform this service. The Army awarded a noncompeted single-award IDIQ contract with a value of up to $1.7 billion to procure engines and associated data for several types of helicopters, including the Army’s UH-60 helicopter. The Army anticipates an ongoing need for these products and services over 5 years, but could not pinpoint the exact schedule for these deliveries. In addition, according to DOD, it does not own the manufacturing drawings, specialized processes, or technical data that would be required for production of the engines. For the 8 single-award IDIQ contracts we reviewed that were competed, contracting officials cited various reasons for using a single-award IDIQ contract, such as that orders were being used for interrelated tasks and therefore there was a need to build knowledge over time. For example: The Air Force competitively awarded several single-award IDIQ contracts under its program to procure research and development efforts to improve aviation engine technology. We reviewed one of the single-award IDIQs with a value of up to $75 million. The single-award IDIQ contract we reviewed was part of a larger research and development effort that included several government agencies, including DOD, the National Aeronautics and Space Administration, and the Department of Energy. In this case, the Air Force awarded single-award IDIQs using a broad agency announcement—a general announcement of an agency’s research interest used to procure and advance broad scientific knowledge or understanding, rather than focusing on unique research required to develop a specific system or hardware solution. Contracting officials told us that single-award IDIQs were used rather than multiple-award contracts because each of the contractors had specialized expertise in a specific propulsion research area such as fuel efficiency. Additionally, each order would be built upon prior research; therefore, orders could not be competed among multiple contractors. The Army competitively awarded a single-award IDIQ contract with a value of up to $38 million to procure a suite of seven different aircraft maintenance and repair toolkits. Officials cited the need for commonality among the tool kits and manuals, and the requirement that replacement tools match previous purchases. Nine of 18 single-award IDIQ contracts that we reviewed required a determination and findings document due to an estimated value of over $103 million. All 9 IDIQ contracts met the requirement. To understand the reasons why competition was not obtained, we reviewed 23 multiple-award IDIQ orders where DOD received only one offer. Specifically, we found for 9 of the 23 orders reviewed, contracting officers did not provide IDIQ contractors a chance to compete and cited exceptions to fair opportunity. We found that the remaining 14 orders were all competed, but only one contractor chose to submit an offer. Figure 9 depicts whether or not one-offer orders we reviewed were competed, and the reasons cited for exceptions to fair opportunity. For the 9 orders that were not competed, contracting officers obtained the required justification and approvals that provided reasons for using an exception to fair opportunity. The reasons included: urgent need, only one contractor was capable of completing the work, the order was a logical follow-on to other work, or there was a need to satisfy a minimum order guarantee. We reviewed two contracts awarded by the Navy to procure land- based and sea-based Unmanned Aircraft System (UAS) Intelligence, Surveillance, and Reconnaissance services. Specifically, we reviewed three noncompeted orders that were awarded under these two contracts to provide support for overseas contingency operations. Urgency was the primary factor in not providing fair opportunity in two of the orders. Contracting officials cited the need for flight clearances, explaining that only two of their three contractors possessed this capability. The remaining contractors did not have enough capability at the time to perform the work, and the contracting officer decided to split the work between the two contractors. For the third order, only one contractor was capable of providing the needed services. The Army awarded multiple-award IDIQ contracts that included two contracts for the procurement of aviation systems modifications. We reviewed one order which was for the installation of threat detection systems for the UH-60 helicopters. The contracting officer cited urgency as the reason for not providing fair opportunity. The Army placed the order, describing the threat detection system as survivability equipment, and explained that failure to install the modifications would likely interfere with troop deployments. The Air Force awarded multiple-award IDIQ contracts that included 34 contracts to provide roofing maintenance services across the United States. We reviewed one order with a value of $1,000 to participate in a post-award orientation, which satisfied the IDIQ contract minimum guarantee. According to contracting officials, all 34 contractors were awarded orders to meet the minimum guarantee. As shown in figure 9 above, 14 orders under multiple-award contracts we reviewed, where DOD received only one offer, were competed. In addition, only one offer was received because only one contractor chose to submit an offer. DOD regulations generally require that, when only one offer is received in response to a competitive solicitation, certain steps need to be taken if the solicitation was not open for at least 30 days, including allowing for an additional solicitation period of at least 30 days. DOD allows exceptions to this requirement in certain instances, such as when a contract or order is part of a broad agency announcement, or is a small business set- aside. Of the 14 orders we reviewed that were competed but DOD received only one offer, 7 of them had solicitations that were open for less than 30 days. Of these, 1 order was exempted because it was a broad agency announcement, 3 orders were exempted because they were small business set-asides, and 3 orders did not comply with DOD regulation. These 3 orders were all awarded under the same multiple- award IDIQ vehicle. The contracting officer acknowledged that although the orders did not meet any of the exceptions listed in the DFARS, he did not revise the solicitations or allow for an additional solicitation period. The contracting officer further stated that the orders were not resolicited due his lack of familiarity with the DFARS requirement. The contracting officer added that, apart from delaying award, he did not believe that a 30-day extension would have had any effect on competition. After we discussed our findings and the DFARS requirements with this contracting officer, he stated that he now understands the requirement and will comply with the provision when placing future orders. For the contracts we reviewed, prices for well-defined products and services were typically established at the IDIQ contract level. For less defined products and services, prices were established at the order level. In situations where an IDIQ contract had both well-defined and less defined items, some price elements were established in the IDIQ contract and some were established in the order. Contracting officials use a variety of data and methods to help establish pricing, such as comparing historical prices for similar items, and obtaining certified cost and pricing data, among others. IDIQ prices can be established at the time of contract award, at the time of order award, or both. We reviewed 31 contracts. For 5 of the IDIQ contracts, all of the pricing was established upfront and agreed to at contract award. For 8 contracts pricing was established only at the time of the order. And for 18 IDIQ contracts, pricing was established in both, with some price elements established at IDIQ contract award and some at order award (see figure 10). For the 5 DOD IDIQ contracts for which pricing was established upfront in the IDIQ contract, all had well-defined requirements at the time of contract award. Once prices are established at contract award, those prices were referred to when placing an order, for instance: The pricing for a noncompeted Navy single-award IDIQ contract with a value of up to $420 million to procure commercial radios used in fixed wing aircraft was established in the IDIQ contract. The radio is a well-defined product and has been a requirement for many years. With known requirements and historical knowledge of the need, Navy contracting officials were able to establish prices before contract award. To establish prices, contracting officials compared commercial pricing of the product to the contractor’s proposal, reviewed published prices obtained from federal supply schedules, and reviewed historical prices paid in previous contracts. The 3 orders we reviewed followed the pricing established in the contract. The Navy awarded a competed single-award IDIQ contract with a value of up to approximately $789 million to procure six different variants of sonobouys, devices used to detect and identify underwater objects. Sonobouys are well-defined products that have been used by the Navy since the 1940s. Contracting officials established prices for each variant. The government’s estimate was based on certified cost or pricing data submitted by contractors. In addition, contracting officials also enlisted support from the Defense Contract Audit Agency, and the Defense Contract Management Agency, both of which helped examine and determine if labor rates were reasonable. In addition to reviewing the contract, we reviewed three orders placed under this IDIQ and found that the prices paid for in the orders were consistent with what was agreed to in the IDIQ contract. The Army competitively awarded a single-award IDIQ contract with a value of up to $38 million to procure a suite of seven different aircraft maintenance and repair toolkits. All pricing for this contract was established before contract award as this requirement was well defined. Contracting officials relied on competition to establish pricing. This contract was awarded to the contractor who had the lowest price and whose proposal was deemed technically acceptable. DOD contracting officials established prices at the order level when they were not established at the contract level, primarily for services and undefined products. Within our selected sample of 31 DOD contracts, there were 8 contracts where prices were determined at the order level only, and the contracts only included a ceiling value. Six of these 8 contracts were primarily for research and development efforts. The following are examples where prices were established at the order level. The Air Force awarded a competed single-award IDIQ contract for up to $24.9 million that, according to a program official, was to procure research and development for cybersecurity and malware detection. No prices were established at the time of IDIQ contract award because specific requirements were not known at the time of contract award. The orders we reviewed were for the development of software and hardware to detect malware and other cybersecurity threats within medical equipment. Once a well-defined requirement arose pricing was established at the order level. To establish the pricing on the orders we reviewed, the program office performed a technical evaluation to determine if the proposed labor mix was appropriate. Subsequently, contracting officials collected and analyzed certified cost and pricing data or other cost data provided by the contractor. We reviewed two multiple-award IDIQ contracts awarded by the Navy to procure UAS imagery services. Though it was known that imagery services would be procured, it was not known where, when or for how long these services would be needed until an actual mission need arose. We reviewed 3 orders awarded under these IDIQ contracts. All three orders were noncompeted and were for deployment of personnel to provide imagery services from specific platforms such as ship or ground in specific locations. Since the platforms, locations, and timeframes for the missions could not be known at time of IDIQ contract award, the prices were established at the order level once the scope and location of each mission need was known. To establish pricing for one of the orders, we found that contracting officials compared the contractor’s proposal with historical pricing, as well as verified labor rate information provided by the contractor. Eighteen DOD IDIQ contracts, which include both multiple- and single- award, in our selected sample had some price elements established at the time of contract award and some price elements established at the time of order award. This arrangement occurred in situations where some elements of the requirement were well defined and pricing could be established upfront at the contract level, while other requirements were less defined and the prices were established when the order was placed. For instance, in DOD’s multiple-award IDIQ contracts, some pricing elements may be negotiated upfront at contract award, such as not-to- exceed labor rates; however, since further competition is expected at the order level contractors may offer labor rates below the not-to-exceed rates. Therefore, actual labor rates were determined when an order was placed, for instance: The Air Force established a multiple-award IDIQ vehicle for roofing repairs with a ceiling of $325 million. According to officials, each IDIQ contract has a not-to-exceed price for 11 different roofing scenarios. When a need arises, the contracting officer solicits offers from the multiple-award IDIQ contract holders. According to contracting officials, these contractors submit proposals and base their pricing on defined requirements such as the type of roof, extent of repair, and location. The proposal with the lowest price that is technically acceptable—which cannot exceed a contractor’s not-to-exceed pricing—is awarded the order. A Navy noncompeted single-award IDIQ contract was awarded for the deactivation and disposal of Tomahawk missiles with a value of up to $15 million per year. Pricing for the deactivation of the missiles was established upfront in the IDIQ contract; however, some elements of the contract, such as unscheduled maintenance and testing, were not defined at contract award and therefore no price was established. We found that in one of the orders we reviewed, the contractor was to provide software for missile testing. In order to establish pricing on this order, contracting officials conducted a cost analysis of the proposed offer. They asked the Defense Contract Management Agency to review the labor pricing that was submitted and pricing for similar labor categories the government paid on a different contract. The Army awarded a noncompeted single-award IDIQ contract with a value of up to $42 million that, according to a contracting official, is for a broad range of efficiency management services, such as determining ways to improve the function and efficiency of logistical processes. Not-to-exceed values for labor rates and the fee were determined for the IDIQ contract, but actual prices are determined at the order level. To establish the not-to-exceed rates in the IDIQ contract, contracting officials used certified cost and pricing data and support from the Defense Contract Management Agency to determine reasonable rates. For the 3 orders we reviewed under this IDIQ, a technical evaluation was conducted to ensure that the labor mix was acceptable, and contracting officials compared proposed labor rates with those not-to-exceed rates agreed to in the IDIQ contract. We provided a draft of this report to DOD for review and comment. DOD had no comments. We are sending copies of this report to the Secretary of Defense and interested congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact William T. Woods at (202) 512-4841 or woodsw@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 key contributions to this report are listed in appendix II. This report addresses (1) federal agencies’ use of indefinite delivery / indefinite quantity (IDIQ) contracts from fiscal years 2011 through 2015, the latest year for which complete data were available; (2) the role of competition when awarding and using selected IDIQ contracts and orders at the Department of Defense (DOD); and (3) when and how DOD contracting officials established prices for these contracts and orders. To examine the use of IDIQ contracts by federal agencies, we analyzed government-wide Federal Procurement Data System-Next Generation (FPDS-NG) data on IDIQ obligations from fiscal year 2011 through 2015 to identify information such as overall agency obligations on IDIQ contracts, obligations for products and services, obligations for single-and multiple-award IDIQ contracts, and extent of competition for single-award IDIQ contracts and multiple-award orders. Data that were adjusted for inflation were adjusted to fiscal year 2015 dollars using the Fiscal Year Gross Domestic Product Price Index. To assess the reliability of the FPDS-NG data we used, we electronically tested for missing data, outliers, and inconsistent coding, and we compared data on selected IDIQ contracts to contract documentation we obtained. Based on these steps, we determined the data were sufficiently reliable to present IDIQ contract obligations for fiscal years 2011 through 2015. To provide context on agency use of IDIQ contracts, we also interviewed DOD contracting officials. For our second and third objectives, we focused our review on DOD since DOD was the largest user of IDIQ contracts. Within DOD, we focused on the four DOD components with the highest obligations on IDIQ contracts—the Army, Navy, Air Force, and Defense Logistics Agency. From these components, we selected a nongeneralizable sample of 31 IDIQ contracts, 53 single-award IDIQ orders, and 23 multiple-award IDIQ orders. The 53 single award IDIQ orders were placed under 18 single- award IDIQ contracts, while the 23 multiple-award IDIQ orders were placed under 13 multiple-award IDIQ contracts (see table 1). Only one offer was received on each of the 23 multiple-award orders selected, either because DOD only solicited one contractor or because only one contractor submitted an offer. We selected orders where only one offer was received so as to understand reasons why competition did not take place. We selected these contracts and orders based on factors such as obtaining a mix of products and services and whether the contracts were competed or noncompeted. The selection process for the components, commands, contracts and orders is described in detail below. To address the role of competition when awarding and using selected IDIQ contracts and orders at DOD, we collected and analyzed contract documentation, including acquisition plans, justification and approval documents, and other pertinent information, for contracts in our sample of IDIQ contracts and orders. In addition, we conducted interviews with DOD contracting and program officials to further discuss the reasons why single-award IDIQ contracts were needed, and why the government received only one offer on multiple-award IDIQ orders. To address when and how DOD contracting officials established prices for contracts and orders in our sample, we collected and analyzed contract documentation, including contract and order award documents, price negotiation memoranda, and other pertinent pricing information. In addition, we conducted interviews with contracting and program officials for the selected contracts and orders to discuss changes, if any, to pricing since award and to clarify information found in contract documentation. Furthermore, for orders where prices were established in the contract, we ensured that the orders followed the pricing agreed to in the contract. We selected the following four components within DOD—the Army, Navy, Air Force and the Defense Logistics Agency—because they had the highest obligation dollars on IDIQ contracts within the department from fiscal years 2011 through 2015. Within these components, we selected one command and location for review taking into consideration factors such as the total obligations at the command/location for single-award IDIQs from fiscal years 2011 through 2015, the proportion of contracts for products and for services, and the extent to which contracts at the command/location were competed or noncompeted. With consideration of these factors, we selected the following commands for review—the Army Materiel Command in Redstone Arsenal, Alabama; Navy Air Systems Command in Patuxent River, Maryland; Air Force Materiel Command in Dayton, Ohio; and the Defense Logistics Agency (Energy) in Fort Belvoir, Virginia. Within commands and locations listed above, we selected single-award IDIQ contracts awarded from fiscal years 2011 through 2015, ensuring our selections included a mix of products and services contracts, and competed and noncompeted contracts. We further selected orders from each of the single-award IDIQ contracts that were awarded in fiscal years 2014 and 2015, and were among those with the highest obligations. In addition, within the selected commands and locations, we selected multiple-award IDIQ orders where the government only received one offer and were placed in fiscal years 2014 and 2015. We also selected the multiple-award IDIQ contracts associated with these orders. We conducted this performance audit from January 2016 to April 2017 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 based on our audit objectives. In addition to the contact named above, Janet McKelvey, Assistant Director, Guisseli Reyes-Turnell, Analyst-in-Charge, Karen Cassidy, Lorraine Ettaro, Kurt Gurka, Stephanie Gustafson, Julia Kennon, Victoria Klepacz, Carol Petersen, Roxanna Sun, and Alyssa Weir made key contributions to this report.

Summary: Over the past 5 years, the federal government obligated over a hundred billion dollars annually through the use of IDIQ contracts. IDIQ contracts are awarded to one or more contractors when the exact quantities and timing for products or services are not known at the time of award. DOD uses IDIQ contracts more than all other agencies combined. The FAR establishes a preference for awarding multiple-award IDIQ contracts under a single solicitation such that a number of contract holders compete for subsequent orders. GAO was requested to examine federal agencies' use of IDIQ contracts. This report addresses (1) federal agencies' use of IDIQ contracts from fiscal years 2011 through 2015, the latest year for which complete data were available; (2) the role of competition when awarding selected IDIQ contracts and placing orders at DOD; and (3) when and how DOD contracting officers established prices for these contracts and orders. GAO analyzed Federal Procurement Data System-Next Generation data on civilian and DOD obligations for fiscal years 2011 through 2015; reviewed and analyzed a nongeneralizable sample of 31 IDIQ contracts and 76 IDIQ orders selected across four DOD components—Army, Navy, Air Force and Defense Logistics Agency; and interviewed DOD contracting and program officials. From fiscal years 2011 through 2015, the proportion of spending by federal agencies on indefinite delivery/ indefinite quantity (IDIQ) contracts remained stable and accounted for about a third of total government contract obligations. Agencies obligated more than $130 billion annually on these types of contracts, as shown in the figure. The Departments of Defense (DOD), Homeland Security, Health and Human Services, and Veterans Affairs were the main users of IDIQ contracts, with DOD accounting for about 68 percent of all IDIQ obligations from 2011 through 2015. About two-thirds of government-wide IDIQ obligations were for services, with the remainder for products. Although the Federal Acquisition Regulation (FAR) states a preference for multiple-award IDIQs, the majority of dollars government-wide, approximately 60 percent, were obligated through single-award IDIQs. About 70 percent of single-award IDIQ obligations and more than 85 percent of order obligations under multiple-award contracts were competed. Contracting officials at DOD cited flexibility as the main advantage for using IDIQ contracts, noting that it was easier and faster to place an order under an existing IDIQ contract than to award a separate contract when a specific need arose. Ten of the 18 single-award IDIQ contracts GAO reviewed at DOD were not competed, generally because only one contractor could meet the need. For the competed single-award contracts, contracting officials cited various reasons for choosing a single-award IDIQ approach, such as the need to build and maintain knowledge as orders were awarded over time. For about one-third of the multiple-award IDIQ orders GAO reviewed, DOD did not provide an opportunity for all contract holders to compete due to urgency or other reasons. Prices on IDIQ contracts and orders at DOD were established at different points, depending on how well-defined the requirements were at the time of contract award. For example, for a Navy contract to buy commercial radios used in fixed-wing aircraft, the pricing was established upfront in the contract since the radios were defined products that have been used for many years. In contrast, for an Air Force contract to buy research and development services for cybersecurity and malware detection, all pricing was established at the order level since specific research needs were not known when the contract was awarded. GAO is not making any recommendations at this time. DOD had no comments on a draft of this report.