Contract Management:

Not Following Procedures Undermines Best Pricing Under GSA's Schedule

GAO-01-125: Published: Nov 28, 2000. Publicly Released: Nov 28, 2000.

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The Department of Defense (DOD) spends millions of dollars each year to acquire information technology (IT) services through the General Services Administration's (GSA) Federal Supply Schedule (FSS). However, DOD has not been taking steps critical to ensuring that it gets the best services at the best prices. GAO's review of 22 DOD orders revealed that 17 of them were placed without seeking competitive quotes. GSA's established procedures require that agencies seek competitive quotes to ensure that the government gets the best price for IT services. Many DOD contracting officers were unaware of this requirement and placed orders under FSS contracts without seeking quotes from multiple contractors. The Federal Acquisition Regulation covering FSS contracts does not provide clear guidance to contracting officers on these special ordering procedures.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Effective July 19, 2004, the Federal Acquisition Regulation (FAR) for the Federal Supply Schedule incorporates policies for buying services that should substantially improve the application of competition for orders, and when competition is not possible, require proper justification and higher-level approval of sole-source orders. Specifically, FAR 8.405-6 (Sole source justification and approval) provides instructions on what steps contracting officers should follow to buy services through sole source orders only if the the need to do so (e.g., urgency, exclusive licensing agreement, industrial mobilization) is justified in writing and reviewed and approved in advance at levels specified by dollar threshold. For proposed sole-source orders between $100,000 and $500,000, the contracting officer shall approve unless the ordering agency establishes a higher-level official to approve. For proposed sole-source orders between $500,000 and $10 million, the agency's designated "Competition Advocate" must approve the justification. For proposed sole-source orders between $10 million and $50 million, the head of the procuring agency must approve the justification. For proposed sole-source orders over $50 million, the agency's Senior Procurement Executive must approve the justification. In addition, FAR 8.405-7 (Documentation) requires additional documentation beyond the justification for using a sole source that will ensure that prices are fair and reasonable and that the sole-source order results in the lowest overall cost alternative meeting the government's needs. Specifically, the ordering office must document its price reasonableness determination.

    Recommendation: The Federal Acquisition Regulation should address whether sole-source orders for services may be placed using the Federal Supply Schedule. If sole-source orders are allowed, the guidance should provide instructions on what steps contracting officers should take to ensure that prices are fair and reasonable and that orders result in the lowest overall cost alternative meeting the government's needs.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  2. Status: Closed - Implemented

    Comments: The General Services Administration's (GSA) written comments on the draft report indicated that GSA has conducted a wide range of outreach efforts to educate agencies on the ordering procedures and will continue these outreach programs and pursue additional efforts to educate customers about ordering procedures and best practices for managing their buys. In addition, effective July 19, 2004, the Federal Acquisition Regulation (FAR) for the Federal Supply Schedule incorporates policies for buying services that should strongly encourage agencies to maximize competition for orders to acquire information technology as well as all other services. To encourage greater transparency of agency's request for quotes (RFQ) to buy services amongst schedule contractors, FAR 8.402 (General) now highlights the availability of e-Buy, the GSA's electronic RFQ system. E-Buy allows ordering agencies to post requirements (RFQs), obtain quotes, and award contract orders electronically.

    Recommendation: Pending these changes to the Federal Acquisition Regulation, the Administrator, General Services, should contact contracting agencies to ensure that the agencies are aware of the ordering procedures for services and emphasize the need for seeking competitive quotes.

    Agency Affected: General Services Administration

  3. Status: Closed - Implemented

    Comments: Effective July 19, 2004, the Federal Acquisition Regulation (FAR) for the Federal Supply Schedule incorporates policies for buying services that should strongly encourage agencies to maximize competition for orders to acquire information technology (IT) as well as all other services. Specifically, FAR 8.405-2 (Ordering procedures for services requiring a statement of work) includes requirements to outreach and obtain competitive quotes when ordering services valued over $2,500. For example, for orders that do not exceed the applicable "maximum order threshold", the ordering agency must provide the Request for Quote (RFQ) to at least three schedule contractors that offer the required service. The RFQ must contain a statement of work and the selection criteria for evaluating offers. For larger dollar orders, the ordering agency must provide the RFQ to more than three schedule contractors that offer the required service. The ordering agency must also provide the RFQ to any schedule contractor who requests a copy. Finally, the ordering agency must evaluate all responses received using the RFQ's selection criteria. In addition, to encourage greater transparency of agency's RFQs to buy services amongst schedule contractors, FAR 8.402 (General) highlights the availability of e-Buy, the General Services Administration's (GSA) electronic RFQ system. E-Buy allows ordering agencies to post requirements (RFQs), obtain quotes, and award contract orders electronically.

    Recommendation: To encourage agencies to maximize competition in acquiring information technology services, the Administrator, Office of Federal Procurement Policy, should, as chair of the Federal Acquisition Regulatory Council, take steps to revise the Federal Acquisition Regulation to incorporate the requirements contained in the ordering procedures for services to obtain competitive quotes. The regulation should clearly describe the procedures and when they should be used.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

 

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