DoD criticized for relying on one-bid contracts

Large Defense Department information technology contracts are being awarded without fair competition, often because only one contractor submits a bid, according to a new General Accounting Office report.

GAO reviewed 22 orders for Defense information technology contracts valued over $5 million. In 16 of those cases, representing more than 80 percent of the total $553 million in contracts that GAO reviewed, only one contractor submitted a proposal for a contract order.

"We found that few competing proposals were received for millions of dollars' worth of orders we reviewed," GAO said.

Senate Armed Services Subcommittee members James Inhofe, R-Okla., and Charles Robb, D-Va., requested the report as a follow-up to a 1998 GAO report (NSIAD-98-215). The original report showed that agencies did not consistently promote fair competition through multiple-award contracting. Competition for contracts helps ensure that the government receives the best value on orders.

The Federal Acquisition Streamlining Act (FASA) of 1994 requires agencies in most cases to award task- and delivery-order contracts to more than one contractor and to ensure that each contractor has a fair shake in the bid consideration. Task- and delivery-order contracts are for an indefinite quantity and a fixed period of time.

But, in most cases, contracting officers used statutory exceptions to FASA, said the report, "Contract Management: Few Competing Proposals for Large DoD Information Technology Orders (NSIAD-00-56)." Exceptions to the rule are provided in special cases, such as if the agency has an urgent need, a highly specialized order that only one contractor can provide, or because the order is a follow-on to a previous competitively awarded order.

Competition for contracts is also not being leveraged because contractors aren't submitting bids, GAO found. Even in the cases where FASA exceptions were used, only two of the original contract bids had competing offers. Often only one bid is received because incumbent contractors have natural advantages over new bidders.

In one case, a $23.7 million Navy contract proposal received only one bidder, the incumbent. That's because other contractors would have needed to station 40 staff at the naval installation within days after the order was awarded. The incumbent already had the staff in place with required security clearances. The contracting officer admitted that new bidders would have had a hard time putting together a winning proposal.

Contractors told GAO that preparing a bid proposal is costly and that a well-performing incumbent provides a disincentive to go through the bid process.

According to the report, contractors think additional outreach efforts by contracting officials would promote broader competition. One such approach is meeting with potential bidders to explain bid requirements.

"Armed with a good understanding of the program's requirements, a contractor can make a better informed decision on whether to pursue the bid," the report said.

Under the National Defense Authorization Act for fiscal 2000, procurement regulations must be revised to define ways agencies can ensure fair contract opportunity. Based on its findings, GAO recommended that the guidance urge agencies to use more outreach to encourage competition.

GAO also endorsed recommendations made by the Office of Federal Procurement Policy in its guidebook for use of task- and delivery-orders. The guide steers agencies away from awarding excessively costly follow-on orders and encourages them to use fixed-price orders.

DoD and the General Services Administration disagreed with GAO that outreach efforts would have much impact on soliciting more bidders. "It does not seem appropriate to go beyond notification to more active encouragement. It is unlikely that active campaigning on the part of the government will overcome a contractor's business judgment," DoD said.

GSA concurred, saying "Receipt of one proposal when an opportunity was provided to multiple contractors does not automatically constitute a lack of competition. There are many reasons contractors might pass on an opportunity to propose on a specific task."