What GAO Found
DODs use of the national security exception is smallabout 2 percent of the dollar value of its total use of exceptions to full and open competition, but gaps in federal procurement data limit GAOs ability to determine the full extent of DODs use. DOD procures a range of goods and services under this exception, and according to federal procurement data, the Air Force accounted for about 74 percent of DODs use during fiscal years 2007 through 2010. However, DOD intelligence agencies and special access programs frequently use the exception, but are generally excluded from reporting procurement data. While an Office of the Secretary of Defense memorandum exempts three of the intelligence agencies from reporting such data, DOD policy on reporting sensitive procurements for other military department programs is not clear.
For most national security exception contract actions GAO reviewed, DOD used a single justification and approval document that applies to multiple contractsknown as a class justification. Among those reviewed, $3.3 billion of $3.4 billion was obligated under contracts that used class justifications, which reduce the steps required to proceed with individual contract actions that do not use full and open competition. According to contracting officials, the increased flexibility of national security exception class justifications helps meet mission needs. However, in the Air Force, concerns about the reduced management review of these contracts have led to changes in the process for approving individual contract actions using class justifications. Nevertheless, all of the justifications GAO reviewed met Federal Acquisition Regulation requirements.
GAOs analysis of federal procurement data on about 11,300 contract actions found that, from fiscal years 2007 through 2010, only 16 percent of all obligations under those actions by the military departments under the national security exception received more than one proposal. Contract files and contracting officials cited a limited pool of companies with the right capabilities, the difficulty of changing from an established vendor, and limited tools for soliciting competitive bids as reasons for their inability to obtain more competition. Twelve of the 27 military department contract files GAO reviewed did not include a record of market research, and others included few details on the results. Two intelligence agencies that reported using the national security exception for all contracting reported achieving comparatively high levels of competition. Both have systems that catalogue firms, capabilities, and solicitations that are used to facilitate security sensitive market research.
Why GAO Did This Study
Competition is a critical tool for achieving the best return on the governments investment. Federal agencies are generally required to award contracts competitively, but they are permitted to use other than full and open competition in certain situations, such as when open competition would reveal information that would harm national security. GAO examined DODs use of this provision, known as the national security exception. It requires the use of competition to the greatest extent practicable. GAO assessed (1) the pattern of DODs use of the national security exception;
(2) DODs processes for using the exception; and (3) the extent to which DOD achieved competition under the exception. GAO analyzed federal procurement data; reviewed a selection of 27 contract files and justifications citing the exception from the Army, Navy, and Air Force, based on largest obligations, frequent users, and a range of procurement types, as well as five contracts from DOD intelligence agencies; and interviewed DOD contracting and program officials.
GAO recommends that DOD issue guidance clarifying when security sensitive contracting data must be reported, monitor the impact of new Air Force class justification processes, and consider using tools that facilitate market research in a secure environment. DOD concurred with two recommendations and partially concurred with the recommendation on clarifying guidance, citing pending revisions to regulations. GAO continues to believe that clarifying guidance is needed.
Recommendations for Executive Action
|Department of Defense||The Secretary of Defense should issue guidance establishing the circumstances under which security sensitive contracting data are required to be reported to the Office of the Secretary of Defense (OSD) and in the Federal Procurement Data System-Next Generation (FPDS-NG), including the decision authority for excluding a given program or contract from the database.|
|Department of Defense||The Secretary of Defense should evaluate the effect of the Air Force's new review process on competition and management oversight of national security exception actions under a class justification; if the changes are found to be beneficial, consider implementing similar changes across DOD.|
|Department of Defense||The Secretary of Defense should assess the feasibility of providing contracting officials in military department programs that routinely use the national security exception with access to tools that facilitate market research and competitive solicitation in a secure environment, either through development of new tools or access to existing intelligence community systems.|