Federal Contracting:

Noncompetitive Contracts Based on Urgency Need Additional Oversight

GAO-14-304: Published: Mar 26, 2014. Publicly Released: Mar 26, 2014.

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What GAO Found

The Departments of Defense (DOD) and State and the U.S. Agency for International Development (USAID) used the urgency exception to a limited extent, but the reliability of some federal procurement data elements is questionable. For fiscal years 2010 through 2012, obligations reported under urgent noncompetitive contracts ranged from less than 1 percent to about 12 percent of all noncompetitive contract obligations. During that time, DOD obligated $12.5 billion noncompetitively to procure goods and services using the urgency exception, while State and USAID obligated $582 million and about $20 million respectively, almost exclusively to procure services. Among the items procured were personal armor, guard services and communications equipment to support missions in Afghanistan and Iraq. GAO found coding errors that raise concerns about the reliability of federal procurement data on the use of the urgency exception. Nearly half—28 of the 62 contracts in GAO's sample—were incorrectly coded as having used the urgency exception when they did not. GAO found that 20 of the 28 miscoded contracts were awarded using procedures that are more simple and separate from the requirements related to the use of the urgency exception. Ensuring reliability of procurement data is critical as these data are used to inform procurement policy decisions and facilitate oversight.

For the 34 contracts in GAO's sample that were properly coded as having used the urgency exception, agencies cited a range of urgent circumstances, primarily to meet urgent needs for combat operations or to avoid unanticipated gaps in program support. The justifications and approvals—which are required by the Federal Acquisition Regulation (FAR) to contain certain facts and rationale to justify use of the urgency exception to competition—generally contained the required elements; however, some were ambiguous about the specific risks to the government if the acquisition was delayed.

Ten of the 34 contracts in GAO's sample had a period of performance of more than one year—8 of which were modified after award to extend the period of performance beyond 1 year. The FAR limits contracts using the urgency exception to one year in duration unless the head of the agency or a designee determines that exceptional circumstances apply. Agencies did not make this determination for the 10 contracts. The FAR is not clear about what steps agencies should take when a contract is modified after award to extend the period of performance over 1 year. Some contracting officials noted that these modifications are treated as separate contract actions and would not require the determination by the head of the agency or designee. Others considered them cumulative actions requiring the determination. Standards for Internal Controls in the Federal Government calls for organizations to maintain proper controls that ensure transparency and accountability for stewardship of government resources. The Office of Federal Procurement Policy (OFPP)—which provides governmentwide policy on federal contracting procedures—is in a position to clarify when the determination of exceptional circumstances is needed to help achieve consistent implementation of this requirement across the federal government. Further, under the urgency exception, the FAR requires agencies to seek offers from as many vendors as practicable given the circumstances. For some contracts in GAO's sample, lack of access to technical data rights and reliance on contractor expertise prevented agencies from obtaining competition.

Why GAO Did This Study

Competition is a critical tool for achieving the best return on the government's investment. Federal agencies are generally required to award contracts competitively but are permitted to award noncompetitive contracts under certain circumstances, such as when requirements are of such an unusual and compelling urgency that the government would suffer serious financial or other injury. Contracts that use the urgency exception to competition must generally be no longer than one year in duration.

The conference report for the National Defense Authorization Act of Fiscal Year 2013 mandated GAO to examine DOD's, State's, and USAID's use of this exception. For the three agencies, GAO assessed (1) the pattern of use, (2) the reasons agencies awarded urgent noncompetitive contracts and the extent to which justifications met FAR requirements; and (3) the extent to which agencies limited the duration. GAO analyzed federal procurement data, interviewed contracting officials, and analyzed a non-generalizable sample of 62 contracts with a mix of obligation levels and types of goods and services procured across the three agencies.

What GAO Recommends

GAO recommends that DOD, State and USAID provide guidance to improve data reliability and oversight for contracts awarded using the urgency exception. GAO also recommends that OFPP provide clarifying guidance to ensure consistent implementation of regulations. Agencies generally agreed with the recommendations.

For more information, contact Belva Martin at (202) 512-4841 or martinb@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In December 2014, DOD updated its policy, guidance and instructions for federal procurement competition data entry. This update reiterates that non-competitive contracts awarded using simplified acquisition procedures on an urgent basis should be coded as using simplified procedures instead of selecting non-competitive on the basis of unusual and compelling urgency.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should provide guidance to contracting staff on the correct procedures for accurately reporting competition data for contracts using simplified acquisition procedures that are awarded on an urgent basis and DOD should re-emphasize existing guidance.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In May 2014, the Procurement Executive issued guidance clarifying the correct procedures for accurately reporting data when awarding non-competitive contracts using simplified acquisition procedures. Specifically, the guidance instructs State officials on the correct data entry selections in the extent competed, solicitation procedures, and other than full and open competition fields in the Federal Procurement Data System-Next Generation.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should provide guidance to contracting staff on the correct procedures for accurately reporting competition data for contracts using simplified acquisition procedures that are awarded on an urgent basis and DOD should re-emphasize existing guidance.

    Agency Affected: Department of State

  3. Status: Open

    Comments: In December 2016, USAID issued an announcement in a weekly agency-wide newsletter to agency acquisition personnel that reminded staff that when using the FAR 6.302-2 Urgent and Compelling Justification for an award or modification, to select the Urgency drop-down in the Federal Procurement Data System. Although helpful as a reminder, the issue that we identified in the report was related to instances where contracts awarded on an urgent basis using simplified acquisition procedures were miscoded as contracts awarded urgently and not using simplified procedures. Thus the announcement in the agency-wide newsletter does not fully meet the intention of the recommendation. We will continue to follow up with USAID on this issue.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should provide guidance to contracting staff on the correct procedures for accurately reporting competition data for contracts using simplified acquisition procedures that are awarded on an urgent basis and DOD should re-emphasize existing guidance.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: In April 2015, the Acting Director of Defense Procurement and Acquisition Policy issued a memorandum encouraging contracting officers to retain documentation in the contract file showing that justification and approval documents were made publicly available. This memorandum was incorporated into the Defense Federal Acquisition Regulations by reference. As a result, we are closing this recommendation as implemented.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should establish a process for documenting that justifications were posted in compliance with the requirements in the FAR.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: In May 2014, the Procurement Executive issued guidance clarifying the actions necessary to document that justifications were made publicly available. Specifically, the guidance requires contracting officers to retain a copy of the FedBizOpps posting of the justification in the contract file to document compliance with the FAR requirement to publicly post justifications within 30 days of the award of a non-competitive contract on the basis of urgency.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should establish a process for documenting that justifications were posted in compliance with the requirements in the FAR.

    Agency Affected: Department of State

  6. Status: Open

    Comments: In September 2016, USAID informed us that it has modified its database which tracks justifications for noncompetitive contracts to include ascertaining that justifications for unusual and compelling urgency were posted in compliance with the requirements in the FAR. USAID's contracting policy office also noted that it will follow-up with the contracting activity in each instance and verify by reviewing Fedbizopps to ensure that the approved justification has been posted as required. If so, this will be documented in the justification tracker database that has been established. Because the justification tracker was not in place during our review, we are following up with USAID to obtain more information on how the tracker is populated and used.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should establish a process for documenting that justifications were posted in compliance with the requirements in the FAR.

    Agency Affected: United States Agency for International Development

  7. Status: Closed - Implemented

    Comments: In April 2015, the Acting Director of Defense Procurement and Acquisition Policy issued a memorandum instructing contracting officers to notify management when approval signatures are not obtained in time to make justification and approval documents publically available within the timeframe required by the FAR. This memorandum was incorporated into the Defense Federal Acquisition Regulations by reference. As a result, we are closing this recommendation as implemented.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should provide guidance to contracting staff on what actions to take when required signatures are not obtained in order to post the justifications within 30 days.

    Agency Affected: Department of Defense

  8. Status: Closed - Implemented

    Comments: In May 2014, the Procurement Executive issued guidance requiring that all justifications for the use of the unusual and compelling exception be publicly posted within 30 days of contract award, regardless of whether all approving signatures have been obtained. Furthermore, the guidance reminds contract officers to include sufficient planning time to obtain required approval signatures and to track the justification to ensure that all signatures are obtained.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should provide guidance to contracting staff on what actions to take when required signatures are not obtained in order to post the justifications within 30 days.

    Agency Affected: Department of State

  9. Status: Open

    Comments: In providing comments on this report, USAID concurred with the recommendation and planned to assess existing guidance, making updates where necessary to address the recommendation. In December 2015, USAID informed us that it had conducted an assessment of contracts awarded on the basis of an unusual and compelling urgency and its current guidance and policy as it relates to specific to actions to take when required signatures are not obtained in order to post the justifications within 30 days. They found no instances of justifications for contracts awarded on the basis of an unusual and compelling urgency without signatures. Accordingly, they concluded that they did not need to update their guidance as there is no need as evidenced by their assessment. We continue to believe that implementing this recommendation is prudent in the event that this situation does arise the contracting officer will have the guidance necessary to address the situation. We will continue to follow up with USAID on this issue.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should provide guidance to contracting staff on what actions to take when required signatures are not obtained in order to post the justifications within 30 days.

    Agency Affected: United States Agency for International Development

  10. Status: Open

    Comments: In April 2015, the Acting Director of Defense Procurement and Acquisition Policy issued a memorandum instructing contracting officers to notify management when the cumulative dollar value of a contract awarded on the basis of urgency increases beyond the initial value at award. Further, the memorandum instructs components to establish an oversight mechanism to ensure the appropriate approval level is obtained. This memorandum was incorporated into the Defense Federal Acquisition Regulations by reference. We will continue to follow up with the Defense Procurement and Acquisition Policy office to determine how and whether the oversight mechanisms were established at the component level.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should develop an oversight mechanism when the cumulative value of noncompetitive contracts awarded on the basis of unusual and compelling urgency increases considerably beyond the initial contract award value.

    Agency Affected: Department of Defense

  11. Status: Closed - Implemented

    Comments: In May 2014, the Procurement Executive issued guidance requiring that contracting officials consider the impact of contract modifications on the cumulative dollar value of contracts awarded non-competitively on the basis of unusual and compelling urgency. Specifically, contracting officials should seek a higher level of approval when modifications raise the cumulative dollar value of a contract awarded on the basis of urgency above the next higher approval threshold.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should develop an oversight mechanism when the cumulative value of noncompetitive contracts awarded on the basis of unusual and compelling urgency increases considerably beyond the initial contract award value.

    Agency Affected: Department of State

  12. Status: Open

    Comments: In September 2016, USAID informed us that it has modified its database which tracks justifications for noncompetitive contracts to include so that the procurement analyst reviewing the justification will determine the cumulative amount of any increases beyond the initial contract value and advise the Agency Competition Advocate (ACA). According to USAID, the ACA provides clearance (or withholds and provides further guidance) on all justifications prior to their being forwarded for approval, and approving officials cannot approve justifications without clearance from the ACA. Because the justification tracker was not in place during our review, we are following up with USAID to obtain more information on how the tracker is populated and used.

    Recommendation: To help improve reporting of federal procurement data and strengthen oversight of contracts awarded on the basis of an unusual and compelling urgency, the Secretaries of Defense and State and the Administrator of the U.S. Agency for International Development should develop an oversight mechanism when the cumulative value of noncompetitive contracts awarded on the basis of unusual and compelling urgency increases considerably beyond the initial contract award value.

    Agency Affected: United States Agency for International Development

  13. Status: Closed - Implemented

    Comments: In July 2015,OMB issued a final rule modifying the FAR to clarify the process for extending contracts awarded using the urgency exception beyond 1 year. The revisions instruct federal agencies to consider all option periods when obtaining a determination of exceptional circumstances and instructs contracting officers to obtain a determination of exceptional circumstances for subsequent modifications that will extend the cumulative period of performance beyond 1 year.

    Recommendation: To help ensure consistent implementation of the FAR requirement to limit the period of performance for noncompetitive contracts using the unusual and compelling urgency exception, the Director of the Office of Management and Budget, through the Office of Federal Procurement Policy, should provide guidance to clarify when determinations of exceptional circumstances are needed when a noncompetitive contract awarded on the basis of unusual and compelling urgency exceeds 1 year, either at time of award or modified after contract award.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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