New procurement techniques remain unproved, GAO says

Congress should think twice before giving agencies permanent authority to bypass certain procurement rules on small and medium-sized purchases, according to the General Accounting Office. In a new report, "Contract Management: Benefits of Simplified Acquisition Test Procedures Not Clearly Demonstrated," (GAO-01-517) GAO found the Defense Department used a trial program intended to streamline the acquisition process to sidestep rules governing the award of sole-source contracts. Authorized under the 1996 Clinger-Cohen Act, the program enables agencies to use simplified acquisition procedures on contracts worth $5 million or less over a five-year test period that ends on Jan. 1, 2002. Simplified procurement methods allow agencies to skip steps in the solicitation process for contracts under the $5 million threshold. The 1994 Federal Acquisition Streamlining Act directs procurement officers to use simplified acquisition methods on contracts of $100,000 or less. While procurement officers believe the program has helped eliminate the red tape that holds up small purchases, GAO found no hard data demonstrating the benefits of the program. "Federal agencies would like permanent authority to purchase commercial items using these simplified procedures and have argued that there are benefits associated with using the test program. However, these benefits have not been demonstrated," the report stated. The report noted a 1999 Office of Federal Procurement Policy survey on the test program lacked data establishing the program's effectiveness. In the absence of any data, GAO reviewed 12 Defense Department contracts awarded through the program, eight of which were awarded on a sole-source basis. Each of these sole-source contracts raised a red flag with auditors. Sole-source contracts are awarded to a single contractor, bypassing the competitive bidding process. They are permitted only for unusually urgent needs, such as when only one contractor can meet a requirement, or when the order is a follow-on to a previously competed order. In one case, the Air Force awarded a sole-source contract for management consulting services without first announcing it in the Commerce Business Daily, a violation of simplified acquisition procedures. The Air Force also relied entirely on labor rates previously charged by the contractor to negotiate the $2.4 million award, a method that can fail to account for the full costs of a contract, according to GAO. "Government buyers did not always demonstrate that prices were fair and reasonable for the eight sole-source contracts included in our review," the report said. Congress should require OFPP to demonstrate the benefits of using simplified procurement methods before making the 1996 test program a permanent part of procurement law, according to GAO. The watchdog agency suggested that Congress extend the test program until 2005 to give OFPP time to conduct such a study. Congress may be inclined to follow GAO's recommendation, according to Rep. Bob Stump, R-Ariz., Chairman of the House Armed Services Committee. "I am particularly pleased by GAO's recommendation to implement qualitative measures with which we may more effectively assess the true value of the program," he said. "Indeed, the committee will strongly consider the recommendations made in this report as part of the annual defense authorization legislation." The Pentagon agreed with GAO's suggestions to Congress. OFPP did not take a position on GAO's recommendations.