Contract Management:

Guidance Needed to Promote Competition for Defense Task Orders

GAO-04-874: Published: Jul 30, 2004. Publicly Released: Jul 30, 2004.

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The Department of Defense (DOD) spends billions of dollars each year acquiring services through task orders issued under multiple-award contracts or the General Services Administration's federal supply schedule program. However, previous GAO and DOD Inspector General reports found that DOD was not obtaining the level of competition on these task orders that Congress had envisioned. Congress responded by enacting section 803 of the National Defense Authorization Act for Fiscal Year 2002, which requires procedures to promote competition and provides when waivers of competition are allowed. In response to a congressional mandate, GAO identified the extent to which selected DOD buying organizations waived the competition requirements of section 803 and determined the level of competition on orders available for competition. For this review, GAO randomly selected 74 orders at five DOD buying organizations.

Competition requirements were waived for nearly half (34 of 74) of the multiple-award contract and federal supply schedule orders GAO reviewed. Often, contracting officers waived competition based on requests from the program offices to retain the services of contractors currently performing the work. In addressing these requests, safeguards to ensure that waivers were granted only under appropriate circumstances were lacking. Specifically, guidance for granting waivers did not sufficiently describe the circumstances under which a waiver of competition could be used. In addition, the requirements for documenting the basis for waivers were not specific, and there was no requirement that waivers be approved above the level of the contracting officer. Competition was limited on the 40 orders available for competition. For 16 orders, only one offer was received in response to agency solicitations. For 15 orders, the buying organizations received two or more offers. For nine orders, contracting officials did not solicit competitive offers on individual orders. Instead, the nine orders were awarded based on data previously submitted to the government. Striking the right balance between achieving the benefits of competition and retaining contractors that are satisfying customer needs is a challenge for DOD. The frequent use of waivers to competition may be hindering DOD's ability to obtain innovative solutions to problems, and the best value for the taxpayer. On the other hand, requests by program offices to waive competition to retain the services of incumbent contractors are strong indications that contractors are satisfying customer needs.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: In order to promote more competition in the award of orders under multiple-award and federal supply schedule contracts and to ensure that waivers of competition are used only in appropriate cases, the Secretary of Defense should develop additional guidance on the circumstances under which the logical follow-on and unique services waivers may be used.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: Between September 2004 and March 2006, consistent with GAO's recommendation and to implement Section 803 requirements, DOD developed additional guidance on acceptable and justifiable circumstances for waiving competition when acquiring services through task orders under multiple-award contracts or the General Services Administration's federal supply schedule program. For example, prompted by GAO's report examples of DOD's lack of adequate support when using the logical follow-on circumstance for waiving competition, in September 2004 the Director of Defense Procurement and Acquisition Policy issued written guidance to DOD agencies and senior procurement executives regarding sole source (i.e., noncompetitive) task orders under multiple-award contracts and the federal supply program. The purpose of the September 2004 action was to promote competition for Defense task orders by tightening or clarifying guidance or appropriately excepting cases for waiving competition for follow-on services contracting. For example, the guidance stated that contracting officers must ensure that program offices who request to retain the services of contractors currently performing the work provide adequate information for justifying and approving waivers. Information specifically called for includes the results of market research and other data supporting why competition is not in the government's best interest. In addition, on March 21, 2006 DOD completed revision of the Defense Federal Acquisition Regulation (DFARS) and corresponding DFARS procedures that implement Section 803 requirements by incorporating detailed guidance on acceptable follow-on task order contract actions where waivers of competition are allowed. Specifically, DFARS 208.405.70(2) references new procedures at PGI 216.505-70(2)that explicitly state examples of acceptable circumstances under which the logical follow-on and unique services waivers may be used. For example, the March 2006 guidance cites examples, such as awarding the task order to a different firm would cause unacceptable delays or a contractor is already at work on a site and it would not be practical to allow another contractor to work on the same site. This new guidance should be helpful in providing safeguards for ensuring that waivers are granted only under appropriate circumstances and thus should promote more competition for Defense task orders.

    Recommendation: In order to promote more competition in the award of orders under multiple-award and federal supply schedule contracts and to ensure that waivers of competition are used only in appropriate cases, the Secretary of Defense should require that all waiver determinations be supported by documentation describing in detail the circumstances that warrant the use of a waiver.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In September 2004, consistent with GAO's recommendation, DOD issued guidance that included a requirement that all competition waiver determinations be sufficiently documented when acquiring services through task orders under multiple-award contracts or the General Services Administration's federal supply schedule program. Specifically, prompted by GAO's report examples of DOD's lack of adequate support for waiving competition, in September 2004 the Director of Defense Procurement and Acquisition Policy issued written guidance to DOD agencies and senior procurement executives that required any determination waiving competition must solidly support the action taken with adequate information in the contract files. The determination must include the results of market research and data to support why further competition is not in the government's best interest. The September 2004 guidance referred to FAR 6.303-2 for content requirements for the justification and approval to include in the contract files and also assigned responsibility for the contract file documentation to the contracting officer. The September 2004 guidance should be helpful in providing safeguards for ensuring that waivers are granted only under appropriate circumstances and thus should promote more competition for Defense task orders.

    Recommendation: In order to promote more competition in the award of orders under multiple-award and federal supply schedule contracts and to ensure that waivers of competition are used only in appropriate cases, the Secretary of Defense should establish approval levels for waivers under multiple-award contracts that are comparable to the approval levels for sole-source federal supply schedule orders under subpart 8.4 of the Federal Acquisition Regulation.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: Between September 2004 and March 2006, consistent with GAO's recommendation and to implement Section 803 requirements, DOD took action to establish approval thresholds for waiving competition when acquiring higher dollar-value task order services under multiple-award contracts that match the approval thresholds for sole-source federal supply schedule orders required by subpart 8.405-6 of the Federal Acquisition Regulation. For example, prompted by GAO's report examples of DOD's lack of adequate support for waiving competition, in September 2004 the Director of Defense Procurement and Acquisition Policy issued written guidance to DOD agencies and senior procurement executives establishing approval thresholds for sole source task orders under multiple-award contracts consistent with requirements already in place for orders through the federal supply program. Specifically, the September 2004 guidance stated that the same approval levels under FAR 8.405-6 apply whether a sole-source task order is placed through the federal supply schedule program by DOD or through a multiple-award contract by a non-DOD agency on behalf of DOD. In addition, on March 21, 2006 DOD completed revision of the Defense Federal Acquisition Regulation (DFARS) to implement Section 803 requirements by changing the approval levels for consistency with FAR 8.405-6. This new guidance for sole-source orders through multiple-award contracts should be helpful in providing safeguards for ensuring that waivers are granted only under appropriate circumstances and thus should promote more competition for Defense task orders.

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