What GAO Found
GAO found that the number and value of sole-source contracts over $20 million awarded by the Department of Defense (DOD) through the Small Business Administration's 8(a) Business Development program remained low in fiscal year 2013 after a significant decrease from fiscal years 2009 through 2012. DOD awarded 27 such contracts, valued at over $2 billion, in fiscal year 2009 and 4 contracts, valued at about $221 million, in fiscal year 2013. Between April 1, 2012--the date of GAO's last assessment of this contract type at DOD--and June 19, 2014, DOD awarded five 8(a) sole-source contracts, each with a value of over $20 million. All five contained written justifications explaining why a sole-source contract was necessary, but not all fully met the requirements in the Federal Acquisition Regulation (FAR). The justification for an 8(a) sole-source contract over $20 million must address five specific elements and generally be approved by a high-level procurement official prior to contract award. The 8(a) justification differs from a justification for sole-source contracts awarded under one of the other exceptions to full and open competition, notably in that it must include a determination that the use of a sole-source contract is in the best interest of the government. Two of the 8(a) justifications met all of the requirements. Of the three that did not fully meet the requirements, one justification was signed by the approving official after the contract was awarded, while the other two justifications were the incorrect type. For three of the five contracts GAO reviewed, contracting officers cited limited time frames to award the contract as a primary factor for determining that an 8(a) sole-source contract award was in the best interest of the government. In the other two cases, one contracting officer stated that the 8(a) firm was uniquely qualified to provide the services, while the other told us that the 8(a) firm was capable of performing the work and awarding the contract on a sole-source basis was an available option.
Why GAO Did This Study
In fiscal year 2013, DOD obligated about $8.7 billion to contracts awarded through the 8(a) Business Development program. This program is one of the federal government's primary means for developing small businesses owned by socially and economically disadvantaged individuals. Contract awards under this program may be competed among eligible 8(a) firms or awarded on a sole-source basis to 8(a) firms in certain instances, such as when the firm is owned by an Alaska Native Corporation or Indian tribe.
The National Defense Authorization Act (NDAA) for Fiscal Year 2010, enacted on October 28, 2009, required the FAR to be amended to include a new requirement for a written justification of 8(a) sole-source awards over $20 million. The requirement was implemented in the FAR on March 16, 2011. Previously, no justification was required for 8(a) sole-source awards of any amount. Agencies were not required to implement the justification requirement until it was incorporated into the FAR.
GAO's prior work has found that DOD and other federal agencies were slow to implement the justification requirement, even after it had been incorporated into the FAR. In December 2012, GAO reported that of the 14 8(a) sole-source contracts over $20 million awarded from March 2011 through March 2012, only 3 included an 8(a) justification. GAO found that contracting officials were not aware of the requirement or completed the wrong type of justification. In February 2013, primarily drawing on the findings from GAO's December 2012 report, GAO assessed DOD's implementation of the requirement. Of the eight DOD contracts in that review, only two met the justification requirement.
The conference report accompanying the NDAA for Fiscal Year 2012 required, among other things, DOD to submit a report on its use of 8(a) sole-source contracts over $20 million no later than March 1, 2013, and mandated GAO to assess DOD's implementation of the justification requirement no later than 90 days after DOD submitted its report to the Senate and House Committees on Armed Services. DOD issued the report on May 16, 2014, over a year late. This report (1) identifies the trends in 8(a) sole-source contract awards over $20 million at DOD from fiscal years 2009 to 2013, (2) assesses the extent to which DOD has implemented the justification requirement since April 2012, and (3) identifies the factors DOD used to determine whether the sole-source contracts were awarded in the best interest of the government. To address these objectives, GAO analyzed contract data from the government's procurement database, reviewed justifications and other contract documents, and interviewed contracting officials.
In GAO's December 2012 report, GAO made recommendations to the Administrator of the Office of Federal Procurement Policy (OFPP) to promulgate guidance to clarify the circumstances in which an 8(a) justification is required to help mitigate future confusion. OFPP generally agreed with GAO's recommendations and in response has started the process to amend the FAR. GAO is not making any additional recommendations to DOD in this report.
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