Competition in contracting remains steady

The top-spending federal agencies used a competitive process to award nearly two-thirds of their contract dollars in fiscal 2007, representing little change from the previous two years, the Office of Management and Budget reported this week.

Of the more than $414 billion in contracts issued last year by these agencies, nearly $266 billion -- or 64 percent -- was subject to some form of competition, OMB procurement chief Paul A. Denett stated in a memorandum to federal acquisition officials. The memo focused on 18 agencies that awarded at least $700 million in contracts last year. For agencies that spent less, the competition rate was 75 percent, OMB said.

Denett said the figures were encouraging, but more needs to be done to increase competition.

"Competition is the cornerstone of our acquisition system and is a critical tool for achieving the best return on investment possible for our taxpayers," Denett wrote. "We need to do more to promote the appropriate use of tools and effective practices to improve and increase the use of competition."

The rate of competition among the big-spenders was about the same last year as in fiscal 2006 and fiscal 2005; competition increased slightly compared to fiscal 2004 and 2003.

The Energy Department had the highest rate of competitive contracts last year, at 85 percent. The agency ranked eighth the preceding two years.

The Labor Department, which previously led the pack, fell to second place last year, where it was joined by the Education Department. Both awarded 84 percent of their contract dollars competitively.

The Veterans Affairs Department ranked last, competing only 39 percent of its contract dollars, and NASA was also on the low end, at 49 percent.

While only three big-spending agencies were below the 64 percent threshold, the governmentwide numbers were brought down somewhat by the Defense Department, which awarded 62 percent of its contract dollars competitively. The Pentagon is far and away the top spender, with $314 billion in contracts last year, representing 75 percent of the government's total.

The memorandum identified a number of successful tactics used by agency officials responsible for promoting competition.

For example, the Homeland Security Department's Tom Mason said his agency now places restrictions on extensions of contracts that were awarded noncompetitively.

"This practice encourages ongoing competition advocacy at the contracting officer level and ensures that a careful examination of the market is conducted that focuses on obtaining better prices or a more advantageous offer through the use of competition," the memo said. "In fiscal 2007, DHS successfully awarded several contracts competitively after choosing not to exercise options on contracts that had been awarded noncompetitively."

Meanwhile, Kevin Youel Page said the Treasury Department recently drafted a rules change that will allow his office to review the justification when an acquisition official awards a contract without full and open competition, regardless of the value of the contract.

"This will serve to provide better insight into the quantity and quality of justifications, support identification of trends across bureaus and support reporting requirements," OMB stated.

The memo also announced plans for a new competition working group, which would be organized by the Chief Acquisition Officers Council. The working group would collaborate on best practices and analyze governmentwide trend data.

"The analysis conducted by the working group will help individual agencies create more purposeful goals for their respective agencies and also help the acquisition community understand how individual agency buying patterns affect governmentwide competition achievements," Denett stated. "We must continue to do everything we can to help our agencies use competition whenever possible."