Agencies ordered to ensure competition in contracts

The Clinton administration is lowering the boom on contracts that allow agencies to direct their business to favored contractors without competition.

A proposed rule published in the Sept. 9 Federal Register prohibits agencies from steering task orders issued under multiple award contracts, especially governmentwide acquisition contracts (GWACs). While the rule does not require formal evaluation plans or scoring to ensure fairness, the rule says any method "that would result in less than fair consideration being given to all awardees prior to placing each order is prohibited."

GWACs are particularly popular as vehicles for buying information technology equipment and services. Agencies create GWACs by contracting with more than one vendor for indefinite quantities of products and services and then allowing other agencies to use the contracts for a fee, usually 1 to 2 percent of the total purchase amount.

GWACs have stirred outcry in recent years because some sponsoring agencies have issued directed task orders to preferred vendors without competition. Acquisition law requires that the multiple vendors holding contracts under any GWAC be given a fair opportunity to compete for task orders under most conditions.

In March, the General Accounting Office and the Defense Department inspector general told a Senate Armed Services subcommittee panel about a number of cases in which GWACs were giving preference to certain vendors. In April, the Office of Management and Budget asked agencies sponsoring multiple award contracts to stop the practice. The proposed regulation followed. It would prohibit "methods such as allocation, or designation in any way of any preferred awardees, that would result in less than fair consideration being given to all awardees prior to placing each order."

A September GAO report, "Acquisition Reform: Multiple Award Contracting at Six Federal Organizations" (NSIAD-98-215), found that sole-source orders were 64 percent of all orders placed through the end of fiscal 1997 under the Transportation Department's Information Technology Omnibus Procurement GWAC.

After tightening its requirements for justifying exceptions to fair opportunity requirements, Transportation reduced sole-source orders to 38 percent of those issued during the first half of fiscal 1998. Until October 1997, the National Institutes of Health normally preferred a contractor when announcing plans to place orders on its GWACs. Consequently, only one contractor bid on most orders. NIH changed its procedures to require at least two contractors be listed when a "suggested/recommended" vendor was designated, but GAO found just one firm bid on each of 10 orders issued in December 1997 and January 1998 under the new procedures.

Congressional auditors also found GWAC fees vary widely and often bear little relationship to the cost of processing other agencies' orders. NIH charged its own components a flat fee of $125 per order, while charging other agencies 1 percent of order value. Fees to other agencies ranged as high as $99,000 for an order, GAO found. Transportation, on the other hand, couldn't isolate the costs and revenues of processing orders and based its fees, ranging from 1.3 percent to 3.25 percent, on the dollar value of orders with low-value orders paying the highest fees.

The General Services Administration's 0.5 percent to 10 percent fees on its "Can't Beat GSA Leasing and Renovations" contract covered only half the expense of processing other agencies' orders, GAO found. On the other hand, the Air Force found the fees for its Desktop V contract exceeded costs and therefore lowered them to avoid profiting from the contract.

Small businesses have criticized the consolidation of contracts under multiple award pacts, but GAO found the small business share of federal contracts has increased since the 1994 Federal Acquisition Streamlining Act encouraged awards to multiple firms.