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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

March 2013: 

Defense Contracting: 

Actions Needed to Increase Competition: 

GAO-13-325: 

GAO Highlights: 

Highlights of GAO-13-325, a report to congressional committees. 

Why GAO Did This Study: 

Competition is the cornerstone of a sound acquisition process and a 
critical tool for achieving the best return on investment for 
taxpayers. In fiscal year 2012, DOD obligated $359 billion through 
contracts and task orders, of which 57 percent was competed. DOD also 
obligates billions of dollars annually on contracts that are awarded 
competitively, but for which the government received only one offer. 
DOD implemented the Better Buying Power initiative in 2010, in an 
effort to increase competition. 

The conference report for the National Defense Authorization Act for 
Fiscal Year 2012 directed GAO to report on DOD’s non-competitive and 
one-offer contracts. GAO examined (1) trends in DOD’s use of 
noncompetitive awards; (2) factors influencing DOD’s competition rate; 
(3) the extent to which justifications provided insight into the 
reasons for noncompetitive awards; and (4) the impact of DOD’s new 
requirement for competitive solicitations that only elicit one offer. 
GAO analyzed federal procurement data for fiscal years 2008 through 
2012, reviewed DOD policy and competition reports, examined 
nongeneralizable samples of awards, and interviewed DOD officials. 

What GAO Found: 

The Department of Defense’s (DOD) competition rate for all contract 
obligations declined over the past five fiscal years, from 62.6 
percent in fiscal year 2008 to 57.1 percent in fiscal year 2012. GAO 
also found that the competition rate in fiscal year 2012 varied by 
specific DOD component with the Air Force having the lowest at 37.1 
percent and the Defense Logistics Agency the highest at 83.3 percent. 
The majority of the noncompetitive awards cited the availability of 
only one responsible source to meet the government’s needs as the 
reason for using noncompetitive procedures. 

A number of factors affect DOD’s competition rate, but these factors 
are not always considered when setting DOD’s annual competition goals. 
For example, reliance on an original equipment manufacturer throughout 
the life cycle of a program has been a long-standing challenge for DOD 
competition, and budget uncertainty can also hinder DOD’s ability to 
compete. Noncompetitive purchases that DOD makes on behalf of foreign 
governments can also affect DOD’s competition rate. DOD does not 
systematically consider these and other factors when setting its 
annual competition goals. For example, it sets competition goals for 
individual DOD components by simply adding two percentage points to 
the rate achieved in the previous year. Without identifying and 
tracking the specific factors affecting competition DOD cannot set 
meaningful goals for improving competition or accurately gauge its 
progress toward achieving them. 

Many of the noncompetitive justifications GAO reviewed included the 
required elements as defined by the Federal Acquisition Regulation; 
however, the level of insight into the reasons for noncompetitive 
awards varied. For example, some justifications included clear 
descriptions of market environments where only one source was 
available to meet the government’s needs or described planned actions 
that could help improve competition in the future. However, other 
justifications provided limited insight into the reasons for the 
noncompetitive award or did not fully describe actions that the agency 
could take to increase future competition. Without this information, 
DOD may be missing opportunities to gain a fuller understanding of why 
past acquisitions were not competitive and may be unable to apply 
those lessons to effectively facilitate competition for future 
acquisitions. 

In 2010, DOD introduced a new requirement that applies to competitive 
awards that elicit only one offer (one-offer awards); however, the 
impact of the requirement is unknown because of unreliable data. To 
address the risk associated with one-offer awards, the requirement 
established rules that were intended to help ensure adequate 
solicitation time, ensure that contract requirements are not 
unnecessarily restrictive, and verify that offers received are fair 
and reasonable. However, GAO’s analysis of 35 one-offer awards 
determined that contracting officers had incorrectly coded 10 of these 
awards in the procurement database that DOD relies on to measure the 
impact of its new requirement. Six of the 10 awards were 
noncompetitive awards and the remaining 4 had received multiple 
offers. As a result, GAO determined that DOD’s data cannot be used to 
accurately calculate the amount obligated on one-offer awards during 
fiscal year 2012. Without reliable data, DOD cannot accurately measure 
the impact of its new requirement. 

What GAO Recommends: 

GAO recommends that DOD identify, track, and consider the specific 
factors that affect competition when setting competition goals; 
develop guidance to apply lessons learned from past procurements to 
help achieve competition in the future; and collect reliable data on 
one-offer awards. DOD concurred with these recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-13-325]. For more 
information, contact Michael J. Courts at (202) 512-4841 or 
courtsm@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DOD's Competition Rate Continues to Decline: 

Multiple Factors Affect DOD's Competition Rate, but They Are Not 
Always Considered When Setting Competition Goals: 

Justifications Provided Varied Levels of Insight: 

Impact of DOD'S One-Offer Requirement Is Unknown: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Department of Defense: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Organizational Level of Approval for Justifications for Other 
than Full and Open Competition: 

Table 2: New Noncompetitive Awards in Fiscal Year 2012: 

Figures: 

Figure 1: DOD Competition Rate for All Contract Obligations from 
Fiscal Years 2008 through 2012: 

Figure 2: DOD's Competition Rate and Competitive Contract Dollars 
Obligated for Products, Non-R&D Services and R&D Services in Fiscal 
Year 2012: 

Figure 3: Competition Rates by DOD Component for Fiscal Years 2008 
through 2012: 

Figure 4: Competition Exceptions for New Fiscal Year 2012 DOD 
Noncompetitive Contracts and Task Orders on Single Award Contracts: 

Figure 5: Impact of Foreign Military Sales Awards on the Air Force's 
Competition Rate and Noncompetitive Obligations for New Awards in 
Fiscal Year 2012: 

Figure 6: DOD's One-Offer Requirement Includes Three Rules: 

Abbreviations: 

CICA: Competition in Contracting Act: 

DFARS: Defense Federal Acquisition Regulation Supplement: 

DLA: Defense Logistics Agency: 

DOD: Department of Defense: 

FAR: Federal Acquisition Regulation: 

FMS: foreign military sales: 

FPDS-NG: Federal Procurement Data System-Next Generation: 

GSA: General Service Administration: 

IDIQ: indefinite delivery/indefinite quantity: 

NASA: National Aeronautics and Space Administration: 

OMB: Office of Management and Budget: 

R&D: research and development: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

March 28, 2013: 

The Honorable Carl Levin: 
Chairman: 
The Honorable James M. Inhofe: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Howard P. "Buck" McKeon: 
Chairman: 
The Honorable Adam Smith: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

Competition is the cornerstone of a sound acquisition process and a 
critical tool for achieving the best return on investment for 
taxpayers. The benefits of competition in acquiring goods and services 
from the private sector are well established. Competitive contracts 
can help save taxpayer money, conserve scarce resources, improve 
contractor performance, curb fraud, and promote accountability for 
results. In fiscal year 2012, the Department of Defense (DOD) 
obligated $359 billion through contracts and task orders, of which 57 
percent was competed. Recognizing the need to make more efficient use 
of resources, DOD's 2010 "Better Buying Power" initiative placed an 
emphasis on maximizing opportunities for competition in the 
acquisition of products and services. 

While federal statute and acquisition regulations generally require 
that contracts be awarded on the basis of full and open competition, 
they also permit federal agencies to award noncompetitive contracts in 
certain circumstances, for example, when only one vendor can supply 
the requirements or when a sole-source award is made under specified 
small business programs. Generally, noncompetitive contracts must be 
supported by written justifications and approvals (justifications) 
that address the specific exception to full and open competition that 
is being applied to the procurement. Also, the government obligates 
billions of dollars annually under contracts and task orders that are 
awarded using competitive procedures but for which the government 
receives only one offer--situations the Office of Management and 
Budget (OMB) has recently cited as high risk. DOD has termed this 
"ineffective competition" and has issued a new policy requiring that 
additional steps be taken before a contract may be awarded when only 
one offer is received. 

Since 2009, OMB and DOD have implemented initiatives to increase 
competition--including actions to address some opportunities we 
previously identified.[Footnote 1] The conference report for the 
National Defense Authorization Act for Fiscal Year 2012 directed us to 
report annually for the next three years on DOD's noncompetitive 
awards and competitive awards based on receipt of only one offer. 
[Footnote 2] Accordingly, we examined (1) the trends in DOD's use of 
noncompetitive awards; (2) the factors affecting DOD's competition 
rate; (3) the extent to which justifications for exceptions to 
competitive procedures provided insight into the reasons for 
noncompetitive awards; and (4) the impact of DOD's new requirement on 
contracts awarded using competitive procedures but for which only one-
offer was received. 

To identify trends in DOD's use of noncompetitive awards, we used the 
Federal Procurement Data System-Next Generation (FPDS-NG) to identify 
DOD obligations under competitive and noncompetitive contracts in 
fiscal years 2008 through 2012.[Footnote 3] For the purposes of this 
report, we defined noncompetitive obligations to include obligations 
through contracts that were awarded using the exceptions to full and 
open competition listed in Federal Acquisition Regulation (FAR) 
Subpart 6.3, orders issued under multiple award indefinite 
delivery/indefinite quantity (IDIQ) contracts under the exceptions to 
the fair opportunity process in section 16.505(b) of the FAR, or under 
limited sources provisions for orders issued under the General Service 
Administration's (GSA) schedules program in section 8.405-6 of the 
FAR.[Footnote 4] We also used FPDS-NG data to identify the specific 
exceptions to full and open competition that were cited for 
noncompetitive awards in fiscal year 2012. We calculated the 
competition rate as the dollars obligated annually on competitive 
contracts and orders as a percentage of dollars obligated on all 
contracts and orders. For the purposes of this report, we divided DOD 
into five components: Air Force, Army, the Defense Logistics Agency 
(DLA), Navy, and other defense agencies.[Footnote 5] 

To understand the factors affecting DOD's competition rate, we used 
FPDS-NG data to examine obligations for new awards and foreign 
military sale awards to understand the impact on the competition rate 
across DOD and within each component included in our review. We also 
spoke with component competition advocates and other DOD officials to 
understand how DOD calculates its competition rate and how various 
factors may impact it. 

To assess the extent to which justifications for exceptions to 
competitive procedures provided insight into the reasons for 
noncompetitive awards, we randomly selected a nongeneralizable sample 
of 56 contracts and orders coded as noncompetitive in FPDS-NG. Our 
sample included the largest noncompetitive contracts and task orders, 
measured by obligations, as well as a random selection of awards 
across DOD. For awards in our sample, we reviewed documentation in the 
contract files such as the signed justification and approval 
memorandum, the acquisition plan, documentation of market research, 
the price negotiation memorandum, and other key information. We 
reviewed the justifications for these awards to determine whether they 
met criteria in the FAR for the contents, timing, approval, and 
whether they were made publicly available. In particular, we assessed 
whether the justifications contained sufficient information to justify 
the use of the specific authority cited as required by the FAR. In 
addition, we conducted e-mail and telephone follow-up with contracting 
and program officials involved in these awards to obtain additional 
information as needed. 

To examine the impact of DOD's new requirement on contracts awarded 
using competitive procedures but for which only one-offer was 
received, we reviewed a nongeneralizable sample of 25 contracts and 
task orders. The sample included the 25 largest awards, measured by 
obligations, made between April 1, 2011, and March 31, 2012. Only 
awards for which one offer was received in response to a solicitation 
issued using competitive procedures, as coded in FPDS-NG, were 
included in the sample. For each selected award, we obtained evidence 
of the solicitation issuance and response due date, price negotiation 
memorandum, and other key information. If necessary, we contacted 
contracting and program officials to obtain additional information. We 
also reviewed FPDS-NG data to determine if there had been a decline in 
the number of contract awards for which only one offer had been 
received in response to the competitive solicitation. In addition, we 
spoke with DOD officials about the implementation and impact of the 
new requirement. 

A more detailed description of our scope and methodology is presented 
in appendix I. We conducted this performance audit from May 2012 to 
March 2013, in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

Federal agencies are generally required to use full and open 
competition to award contracts, with certain exceptions. The 
Competition in Contracting Act (CICA) of 1984 requires agencies to 
obtain full and open competition through the use of competitive 
procedures in their procurement activities unless otherwise authorized 
by law.[Footnote 6] Using competitive procedures to award contracts 
means that all prospective contractors that meet certain criteria are 
permitted to submit proposals. Agencies generally are required to 
perform acquisition planning and conduct market research to promote 
full and open competition. 

While CICA generally requires federal agencies to award contracts 
using full and open competition, agencies are allowed to award 
contracts noncompetitively under certain circumstances. Generally, 
these awards must be supported by written justifications that address 
the specific exception to full and open competition that is being used 
in the procurement. In addition, federal agencies can establish IDIQ 
contracts with one or more contractors and may issue orders under 
these contracts. For multiple award IDIQ contracts, agencies are 
generally required to provide all contractors on the IDIQ contract a 
fair opportunity to be considered for each order above certain dollar 
thresholds; however, agencies can award noncompetitive orders under a 
process called an exception to the fair opportunity process--which 
must be supported with a documented justification. Also, GSA 
administers IDIQ contracts with vendors for commercially available 
goods and services, and federal agencies place orders under the 
contracts. When doing so noncompetitively, procuring agencies must 
justify the need to restrict the number of vendors considered, known 
as a limited sources justification and approval. Finally, agencies can 
also competitively award contracts after limiting the pool of 
available contractors--a process called full and open competition 
after exclusion of sources. For example, agencies are required to set 
aside procurements for small businesses if there is a reasonable 
expectation that two or more responsible small businesses will compete 
for the work and will offer fair market prices. 

The justifications are to provide sufficient facts and rationale to 
justify the use of the specific exception to competition. For example, 
under FAR part 6, justifications must include, at a minimum, 12 
elements.[Footnote 7] Examples of these required elements include: 

* a description of the supplies or services required to meet the 
agency's needs and their estimated value; 

* identification of the statutory authority permitting other than full 
and open competition; 

* a determination by the contracting officer that the anticipated cost 
to the government will be fair and reasonable; 

* a description of market research conducted, if any; and: 

* a statement of the actions, if any, the agency may take to remove or 
overcome any barriers to competition before any subsequent 
acquisitions for the supplies or services required. 

Examples of allowable exceptions to full and open competition include 
circumstances when the contractor is the only source capable of 
performing the requirement or when an agency's need is of such unusual 
and compelling urgency that the government would be seriously injured 
unless the agency is permitted to limit the number of sources. The FAR 
generally requires that justifications be published on the Federal 
Business Opportunities (FedBizOpps.gov) website and be approved at 
various levels within the contracting organization. These levels vary 
according to the dollar value of the procurement (see table 1). 

Table 1: Organizational Level of Approval for Justifications for Other 
than Full and Open Competition: 

Estimated value of proposed contract action: $650,000 or less; 
Approval by: Contracting officer[A]. 

Estimated value of proposed contract action: Over $650,000 but not 
exceeding $12.5 million; 
Approval by: Competition advocate for the procuring activity[B]. 

Estimated value of proposed contract action: Over $12.5 million but 
not exceeding $62.5 million ($85.5 million for DOD, NASA, and Coast 
Guard)[C]; 
Approval by: Head of the procuring activity, or designee. 

Estimated value of proposed contract action: More than $62.5 million 
(or $85.5 million for DOD, NASA, and Coast Guard); 
Approval by: Agency senior procurement executive. 

Source: GAO analysis of FAR § 6.304, Approval of the justification. 

[A] Agency procedures may require approval of the justification at a 
level higher than what is required by the FAR. 

[B] The justification may be approved by the competition advocate of 
the procuring activity, the head of the procuring activity or the 
agency senior procurement executive. Competition advocates are 
responsible for promoting the acquisition of commercial items, 
promoting full and open competition, and challenging barriers to the 
acquisition of commercial items and full and open competition, such as 
unnecessarily restrictive statements of work or unnecessarily detailed 
specifications among other things. FAR § 6.502(a). 

[C] National Aeronautics and Space Administration. 

[End of table] 

Justifications can be made on an individual or class basis; a class 
justification generally covers programs or sets of programs and has a 
dollar limit and time period for all actions taken under the 
authority. Each justification, individual or class, must be approved 
through the same process. Once a class justification has been 
approved, award of an individual contract can generally be approved 
for sole-source award by the local procuring activity, as long as the 
amount is within the scope of the class justification.[Footnote 8] 

Contracts that are awarded using competitive procedures but for which 
only one offer is received (one-offer awards) recently have gained 
attention as an area of concern. OMB's Office of Federal Procurement 
Policy noted that competitions that yield only one offer in response 
to a solicitation deprive agencies of the ability to consider 
alternative solutions in a reasoned and structured manner. In DOD's 
September 2010 Better Buying Power initiative memorandum, competitive 
procurements for which only one offer to a solicitation was received 
even when publicized under full and open competition are termed 
"ineffective competition." In November 2010, DOD introduced a new 
policy containing two new requirements concerning competitive one-
offer awards. In June 2012, DOD codified the policy in the Defense 
Federal Acquisition Regulation Supplement (DFARS) adding a third 
requirement as follows: [Footnote 9] 

* If a solicitation allowed for fewer than 30 days and only one offer 
is received, then the contracting officer shall: 

1. consult with the requiring activity as to whether the requirements 
document should be revised in order to promote more competition, and: 

2. resolicit for an additional period of at least 30 days. 

* If a solicitation allowed for at least 30 days and only one offer is 
received, the contracting officer shall determine through cost or 
price analysis whether the offered price is fair and reasonable and 
that adequate price competition exists or if cost and price data have 
not been waived obtain necessary cost and pricing data and enter into 
negotiations with the offeror to establish a fair and reasonable price. 

DOD's Better Buying Power initiative also outlines a series of actions 
and directives to achieve greater efficiencies in part through the 
promotion of competition, such as: 

* presenting a competitive strategy at each program milestone for 
defense acquisition programs; 

* removing obstacles to competition; and: 

* establishing rules for the acquisition of technical data rights. 

The Better Buying Power initiative increased the role of the DOD 
competition advocates by directing them to develop a plan to improve 
the overall rate of competition for each component by at least 2 
percent per year, and the rate of effective competition--when more 
than one offer is received under a competitive solicitation--by at 
least 10 percent per year. 

DOD's Competition Rate Continues to Decline: 

DOD's overall competition rate has declined over the past five years, 
and the competition rate differs among the specific DOD components. 
Among the components, in fiscal year 2012, DLA had the highest 
competition rate for all awards, while the Air Force had the lowest. 
Based on FPDS-NG data we found that noncompetitive awards cited 
several exceptions from competitive procedures. 

Competition Rate Has Declined and Varies by Component: 

DOD's competition rate for all contract obligations generally has 
declined over the last five fiscal years. Since fiscal year 2008 the 
competition rate has declined 5.5 percentage points, from 62.6 percent 
in fiscal year 2008 to 57.1 percent in fiscal year 2012 (see figure 
1). In fiscal year 2012, DOD obligated $205.3 billion on competitive 
awards from a total of $359.7 billion for all contract obligations. 

Figure 1: DOD Competition Rate for All Contract Obligations from 
Fiscal Years 2008 through 2012: 

[Refer to PDF for image: line graph] 

Fiscal year: 2008; 
Competition rate for all contract obligations: 62.57%. 

Fiscal year: 2009; 
Competition rate for all contract obligations: 60.96%. 

Fiscal year: 2010; 
Competition rate for all contract obligations: 60.92%. 

Fiscal year: 2011; 
Competition rate for all contract obligations: 58.45%. 

Fiscal year: 2012; 
Competition rate for all contract obligations: 57.07%. 

Source: GAO analysis of FPDS-NG data. 

[End of figure] 

In fiscal year 2012, the majority of DOD's new noncompetitive award 
obligations were on contracts or task orders issued under single award 
contracts (see table 2). 

Table 2: New Noncompetitive Awards in Fiscal Year 2012: 

Type of new noncompetitive award: Contracts; 
Number of awards: 86,734; 
Dollars obligated: $29.6 billion. 

Type of new noncompetitive award: Task orders issued under single 
award contracts; 
Number of awards: 1,818,545; 
Dollars obligated: $33 billion. 

Type of new noncompetitive award: Task orders issued under multiple 
award contracts and subject to the fair opportunity process; 
Number of awards: 16,725; 
Dollars obligated: $3.9 billion. 

[End of table] 

Source: GAO analysis of FPDS-NG data. 

We found that a majority of all DOD's obligations in fiscal year 2012 
were to purchase services ($185.7 billion, or 51.6 percent). As we 
have previously reported, DOD's competition rate for non-research and 
development (R&D) services was higher than the competition rate for 
products.[Footnote 10] Specifically, the competition rate was 75.5 
percent for non-R&D services compared to 40.8 percent for products. 
The competition rate for R&D services was 59.3 percent (see figure 2). 

Figure 2: DOD's Competition Rate and Competitive Contract Dollars 
Obligated for Products, Non-R&D Services and R&D Services in Fiscal 
Year 2012: 

[Refer to PDF for image: vertical bar graph] 

Category: Products; 
Competition rate: 40.8%; 
Contract dollars obligated by category: $71 billion. 

Category: Research & development services; 
Competition rate: 75.5; 
Contract dollars obligated by category: $112.5 billion. 

Category: Non-research & development services; 
Competition rate: 59.3; 
Contract dollars obligated by category: $21.7 billion. 

Source: GAO analysis of FPDS-NG data. 

[End of figure] 

We also found that the competition rate for all contract obligations 
varied by DOD component in fiscal year 2012. Of the five major 
components we reviewed--Air Force, Army, Navy, DLA and other defense 
agencies--in fiscal year 2012, the Air Force had the lowest rate of 
competition, 37.1 percent, whereas DLA had the highest, 83.3 percent. 
A 2011 Air Force report on competition highlights a number of 
challenges to competition, noting that reliance on original equipment 
manufacturers of existing major weapon systems for large sole-source 
awards was a particular concern. Figure 3 outlines the competition 
rate by component for fiscal years 2008 through 2012. 

Figure 3: Competition Rates by DOD Component for Fiscal Years 2008 
through 2012: 

[Refer to PDF for image: multiple line graph] 

Competition rate: 

Fiscal year: 2008; 
Air Force: 51.9%; 
Army: 64.8%; 
Defense Logistics Agency: 86.2%; 
Navy: 53.9%. 

Fiscal year: 2009; 
Air Force: 47.9%; 
Army: 62%; 
Defense Logistics Agency: 86.3%; 
Navy: 53.9%. 

Fiscal year: 2010; 
Air Force: 45.1%; 
Army: 65.2%; 
Defense Logistics Agency: 77.5%; 
Navy: 54.5%. 

Fiscal year: 2011; 
Air Force: 42.4%; 
Army: 63.5%; 
Defense Logistics Agency: 80.8%; 
Navy: 48.4%. 

Fiscal year: 2012; 
Air Force: 37.1%; 
Army: 62.9%; 
Defense Logistics Agency: 83.3%; 
Navy: 45.8%. 

Source: GAO analysis of FPDS-NG data. 

[End of figure] 

Majority of New Noncompetitive Awards Coded as "Only One Responsible 
Source": 

Based on our analysis of FPDS-NG data in fiscal year 2012 the majority 
of DOD's noncompetitive contracts and task orders on single award 
contracts were coded under the "only one responsible source" 
exception.[Footnote 11] The next two most frequently cited exceptions 
were "authorized by statute" or "international agreement" (see figure 
4). 

Figure 4: Competition Exceptions for New Fiscal Year 2012 DOD 
Noncompetitive Contracts and Task Orders on Single Award Contracts: 

[Refer to PDF for image: stacked vertical bar graph] 

Reason not completed: Only one responsible source[A]; 
Contracts: $16.6 billion; 
Task orders on single award contracts: $21.1 billion. 

Reason not completed: Authorized by statute[B]; 
Contracts: $3.1 billion; 
Task orders on single award contracts: $8.1 billion. 

Reason not completed: International agreement[C]; 
Contracts: $7.8 billion; 
Task orders on single award contracts: $1.0 billion. 

Reason not completed: All others[D]; 
Contracts: $2.0 billion; 
Task orders on single award contracts: $3.0 billion. 

Source: GAO analysis of FPDS-NG data. 

[A] "Only one responsible source" includes contracts and orders placed 
on single award contracts that cited the following categories in FPDS-
NG: unique source, follow-on contract, patent or data rights, 
utilities; standardizations; only one source-other; and brand name 
description. FAR § 6.302-1. 

[B] FAR § 6.302-5. 

[C] FAR § 6.302-4. 

[D] "Other" includes contracts and orders placed on single award 
contracts that cited the following competition exceptions: urgency; 
industrial mobilization; engineering, developmental or research 
capability; expert services; national security; public interest, FAR 
§§ 6.302-2, 6.302-3, 6.302-6 and 6.302-7; and not competed using 
simplified acquisition procedures under FAR subpart 13.3. 

[End of figure] 

Based on our analysis, the majority of noncompetitive task orders 
issued under multiple award contracts and subject to the fair 
opportunity process reported two exceptions to the fair opportunity 
process. Specifically, "follow-on actions," orders for the same good 
or service with the original vendor, was cited for 41 percent of the 
obligations and "only one source" was cited for 40 percent.[Footnote 
12] 

Multiple Factors Affect DOD's Competition Rate, but They Are Not 
Always Considered When Setting Competition Goals: 

There are a number of factors that affect DOD's competition rate. For 
example, reliance on an original equipment manufacturer throughout the 
life cycle of a program and budget uncertainty are long-standing 
challenges impacting DOD's ability to compete. Noncompetitive 
purchases that DOD makes on behalf of foreign governments affect DOD's 
competition rate as well. DOD does not systematically identify, track, 
and consider the specific factors that are affecting competition when 
setting its annual competition goals. 

A long-standing factor impacting DOD's competition rate is its 
reliance on an original equipment manufacturer throughout the life 
cycle of a program because of a previous decision not to purchase 
proprietary technical data. Technical data is recorded information 
used to define a design and to produce, support, maintain or operate 
an item.[Footnote 13] Prior GAO work has noted that technical data can 
help control costs and maintain flexibility.[Footnote 14] Without the 
technical data rights, it can be difficult to compete a new award, 
because another vendor would need the technical data in order to meet 
the government's needs. DOD has recognized the ownership of technical 
data as a challenge and is addressing this through its Better Buying 
Power initiative. DOD now requires program officials to present a 
business case analysis prior to the official start of the program that 
outlines an approach for purchasing technical data. For example, this 
business case analysis is intended to ensure consideration of 
competition throughout a weapon system's life cycle. The Better Buying 
Power initiative also added a new requirement that a competitive 
strategy be presented at each milestone for defense acquisition 
programs. These strategies may include identifying work currently 
performed by subcontractors and competing it separately. At the 
component level, a DOD official told us that they have begun to 
examine sole-source acquisitions to determine what pieces can be 
"broken out" from a noncompetitive requirement and competed 
separately. For example, a Navy surveillance system program identified 
an opportunity to break out commercial components. They noted that 
this resulted in lower pricing and a larger, more stable supplier 
base. While these initiatives are intended to reduce the use of 
noncompetitive procurements, the effect of this Better Buying Power 
initiative may not be felt for several years. 

A more recent factor affecting DOD is budget uncertainty. GAO has 
previously reported on the impact of uncertain budget environments on 
agencies' ability to plan.[Footnote 15] DOD officials told us that 
continuing resolutions often delay new awards until later in the 
fiscal year because program offices do not know if they will receive 
funding for a new award. Also, with uncertain budgets, program offices 
may struggle to adequately plan for future procurements. For example, 
one official told us his program planned to compete a new award to 
replace aging equipment. However, due to budget issues, the program 
office may have to abandon competition plans for new equipment and 
continue with a noncompetitive award to maintain the existing 
equipment. 

Another factor that impacts DOD's competition rate is the amount of 
noncompetitive foreign military sales (FMS). FMS awards are government 
to government sales of defense articles or defense services, from DOD 
stocks or through new procurements under DOD-managed contracts, 
regardless of the source of financing.[Footnote 16] FMS awards may 
provide a benefit to DOD. For example, when an FMS award is in 
addition to products or services that DOD is already purchasing, it 
may help DOD to obtain a lower price with a vendor which can result in 
a better value for the government. 

FMS awards are generally noncompetitive and are included in DOD's 
competition rate calculation. In fiscal year 2012, one-fifth of DOD's 
obligations on new, noncompetitive awards were for FMS. A DOD 
component competition advocate explained that to the extent a 
component has noncompetitive FMS obligations in a fiscal year it will 
lower the competition rates. We analyzed FPDS-NG data for fiscal year 
2012 to determine the impact of FMS on component competition rates and 
noted a negative impact across DOD, with the Air Force being affected 
the most. Using DOD's method for calculating the competition rate by 
measuring all contract obligations, we noted an 8 percentage point 
increase in the Air Force competition rate by removing FMS awards from 
the calculation. An even greater improvement is indicated when 
calculating competition for new awards only. For example, we found 
that the Air Force's competition rate for new awards improves from 
34.8 percent to 49.8 percent when FMS are removed from the 
calculation, almost a 15 percentage point increase (see figure 5). 

Figure 5: Impact of Foreign Military Sales Awards on the Air Force's 
Competition Rate and Noncompetitive Obligations for New Awards in 
Fiscal Year 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Obligations including FMS: 
Competed obligations: $9.84 billion; 34.8%;     
Non-competed obligations: $18.41 billion; 65.2%. 

Obligations not including FMS: 
Competed obligations: $9.23 billion; 49.8%;     
Non-competed obligations: $9.31 billion; 50.2%. 

Source: GAO analysis of FPDS-NG data. 

[End of figure] 

DOD does not currently consider the impact of these or other factors 
that affect the competition rate when establishing competition goals 
for each fiscal year. For example, DOD officials explained that a 
major noncompetitive weapon system contract award, such as the Joint 
Strike Fighter or an aircraft carrier, would have a significant impact 
on the component's competition rate. Currently, DOD sets component 
competition goals by increasing the prior fiscal year's achieved 
competition rate, as measured by all contract obligations, by 2 
percentage points. However, a component competition advocate told us 
that this results in goals that are not as meaningful as they could be 
because they do not address nor account for the specific factors a 
particular component is facing. For example, in its fiscal year 2011 
competition report, the Air Force noted that it expected a significant 
impact to its fiscal year 2012 competition rate as the result of an 
anticipated $10 billion FMS award. DOD officials told us that 
individual components have an opportunity to discuss and raise 
concerns about the competition goals with the Defense Procurement and 
Acquisition Policy officials who set the annual competition goals. For 
example, DOD officials noted that the Army raised concerns about the 
proposed monetary competition goal for fiscal year 2013 and noted that 
declining budgets would impact its ability to meet the goal. However, 
DOD does not systematically identify, track, and consider the key 
factors that may impact a component's competition rate when setting 
the annual competition goals. 

Justifications Provided Varied Levels of Insight: 

Generally, noncompetitive awards must be supported by written 
justifications and approvals that contain the facts and rationale to 
justify the use of the specific exception to full and open 
competition. While justifications for the noncompetitive awards in our 
sample generally met FAR requirements, they varied in providing 
insight into the reasons for noncompetitive awards. Some 
justifications in our sample provided clear descriptions of sole-
source environments where only one source was available to meet the 
government's needs, and others included detailed descriptions of 
planned actions that could help improve competition in the 
future.[Footnote 17] However, other justifications provided limited 
insight into the reasons for the noncompetitive award or did not fully 
describe actions that the agency could take to increase future 
competition. 

Justifications Generally Met FAR Requirements: 

DOD contracting officials prepared a written justification for 55 of 
the 56 noncompetitive contract awards in our sample, as required by 
the FAR. However, in 1 instance a justification was not prepared due 
to an administrative oversight. Of the 55 awards with justifications, 
we reviewed 59 justification documents--2 awards had multiple 
justifications.[Footnote 18] 

Many--but not all--justifications typically met FAR requirements. Of 
the 59 justifications that we reviewed, we found a number of instances 
where justifications did not fully conform to FAR requirements. For 
example, nearly a third of the justifications in our sample were not 
made publicly available as required by the FAR. Generally, 
justifications are required to be made publicly available within 14 
days of contract award except for information exempt from public 
disclosure.[Footnote 19] This is a relatively recent requirement that 
generally applies to contract actions awarded on or after February 17, 
2009, the effective date of the rule. In some instances contracting 
officials told us that justifications were not made publicly available 
due to lack of familiarity with posting requirements or an 
administrative oversight. The public availability of justifications 
increases transparency into the contracting process and provides the 
opportunity for the review of justifications for contracts awarded 
noncompetitively. 

In addition, one justification that we reviewed was not approved 
within required time frames.[Footnote 20] Specifically, the contract 
action was awarded before the justification was approved by the 
authorized authority within the agency. This error was discovered by 
contracting officials during an annual contract file review, and at 
that point corrective action was taken to obtain the authorized 
approver's signature. 

Some Justifications Provided Detailed Information: 

In addition to generally meeting FAR requirements, some justifications 
provided detailed descriptions of the reasons for noncompetitive 
awards. Further, in some instances justifications also described 
actions that could help improve future competition or documented 
lessons learned for future acquisitions. For example, we observed the 
following in our sample: 

* Clear descriptions of sole-source environments where only one source 
was available to meet the government's needs. These circumstances were 
generally rooted in earlier competition decisions made at the outset 
of the program, especially for weapon systems acquisitions. For 
example, we reviewed justifications for 10 awards ranging from $22.4 
million to $921.5 million that clearly described sole-source 
environments where only one source could meet agency requirements 
because the government did not own the proprietary technical data. 

* Detailed descriptions of proactive, future steps to move the 
procurement, or parts of it, to a competitive scenario for the follow-
on contract, including efforts to develop new suppliers or acquire 
technical data. For example, we reviewed a justification for two 
Missile Defense Agency awards for radar hardware production for $582.5 
million and $359.9 million. The justification for these awards stated 
that the government intended to compete future acquisitions and 
described a six-step process for determining the viability of 
competition including time frames. 

* Thorough explanations of the cost-benefit analysis conducted to 
determine that the time and money required for purchasing technical 
data rights and developing a new supplier could not be recouped 
through savings from competition, and in some instances would result 
in unacceptable delays. For example, the Air Force awarded a 
noncompetitive contract for $647.8 million for missile production. The 
class justification clearly described the cost-benefit analysis 
conducted to determine that the cost to purchase data rights and 
establish a second source--$750 million--did not justify the 
investment. 

Other Justifications Provided Limited Insight: 

Some justifications in our sample provided limited insight into the 
reasons for noncompetitive awards. In addition, justifications did not 
always fully describe actions that the agency can take to increase 
competition in the future. In our sample we observed the following: 

* Justifications for lower-dollar awards--which only required 
certification by the contracting officer--typically contained less 
specificity and detail than higher-dollar awards, which are required 
to be approved by component competition advocates or senior 
procurement executives.[Footnote 21] Further, some lower-dollar awards 
in our sample had template justifications that allowed contracting 
officials to check applicable boxes for boilerplate language and fill 
in blanks with information. While the template provided space for 
additional information, contracting officials did not consistently 
provide such information; thus, these justifications provided limited 
insight into the specific reasons why the particular award could not 
be competed or planned efforts to remove barriers to competition in 
the future. We have previously identified the importance of fully 
documenting acquisition decisions to provide insight for any 
subsequent awards given the frequent staff turnover in the acquisition 
workforce.[Footnote 22] 

* One justification was not clearly written and cited an exception to 
competition that was not fully supported by the circumstances of the 
procurement. Specifically, a justification for a $312,000 sole-source 
Army award for information technology equipment cited the exception 
"authorized or required by statute." However, the information provided 
in the justification did not support the authority cited and a 
contracting official confirmed that the exception that appears to 
apply was "logical follow-on to an order already issued under the 
contract." Further, the justification indicates that there were other 
manufacturers for this requirement; however, the requiring activity 
requested to stay with the existing equipment manufacturer. Therefore, 
it is unclear what circumstances warranted a noncompetitive order. 

* Other justifications documented limited information about market 
research findings. For example, the Army awarded a $200,000 sole-
source contract for a specific dental gold alloy. The justification 
stated that market research was conducted via the internet but there 
was no additional information regarding market research findings. 
Further, the justification indicated that six different alloys could 
potentially meet the requirement, but it was unclear in the 
justification why these and other commercially available dental alloys 
were not considered. During a follow-up discussion, Army contracting 
and program officials explained that only one source was determined to 
meet the requirement because every gold alloy has a unique 
composition. Therefore, using an alloy from another source would 
require the development of new dental fabrication processes which 
officials determined would not be cost effective. As a result of our 
review, Army officials indicated that they would include additional 
information in future justifications to better document reasons for 
why only one source could provide a product that is commercially 
available. 

* Awards contained varying documentation to support why the award was 
within the scope of a class justification. Whenever a contract award 
is made pursuant to the authority of a class justification, the 
contracting officer must ensure that the action is within the scope of 
the class justification and shall document the contract file 
accordingly.[Footnote 23] We previously reported that concerns about 
the level of review of individual noncompetitive contracts under class 
justifications have led to efforts to revise the review process for 
activity under class justifications at the Air Force.[Footnote 24] Our 
sample included 12 class justifications for awards ranging from 
$266,000 to $2.6 billion. The period of actions covered by these 
justifications ranged from 8 months to 9 years, and 3 contracts in our 
sample had justifications that were prepared 5 or 6 years prior to 
award. We identified that contracting officials have different methods 
for documenting that contract actions are within the scope of the 
class justifications. In some instances, officials told us that 
although there was no explicit documentation of a scope determination, 
this determination was documented by multiple references to the class 
justification in other contract file documents, such as the pre-
business clearance memorandum. 

DOD's Better Buying Power initiative guidance emphasizes the 
importance of removing obstacles from competition. Most noncompetitive 
awards are required to be supported by written justifications that 
among other things document the actions an agency may take to overcome 
such barriers to competition. Some of the justifications that we 
reviewed provided limited insight into the reasons for the 
noncompetitive award or did not fully describe actions that the agency 
could take to bring about competitive awards in future acquisitions of 
the same goods or services. Without this information, DOD may be 
missing opportunities to learn why past acquisitions were not 
competitive and to employ that knowledge to help remove obstacles to 
competition in future acquisitions. 

Impact of DOD'S One-Offer Requirement Is Unknown: 

DOD's one-offer requirement is intended to reduce the number of 
contracts awarded using competitive procedures but for which only one 
offer is received. Although the one-offer requirement has the 
potential to promote multiple offers, some awards are not subject to 
all of the rules established by the requirement. In addition, DOD's 
ability to accurately measure the impact and effectiveness of the 
requirement is limited by unreliable data. 

DOD Introduced New Rules, but Some Awards Are Not Subject to All of 
Them: 

DOD's new one-offer requirement seeks to reduce the number of, and 
amount obligated on, one-offer awards by establishing three rules. The 
new rules attempt to ensure adequate solicitation time (i.e., 
resolicitation rule), ensure that contract requirements are not 
unnecessarily restrictive (i.e., program office consultation rule), 
and verify that offers received are fair and reasonable (i.e., 
cost/price analysis rule). Based on our review of one-offer awards, we 
determined that the awards generally complied with the new 
requirement; however, some awards did not comply with the 
resolicitation rule. We also found that the one-offer requirement will 
likely have a limited impact on unnecessarily restrictive solicitation 
requirements because many awards are not subject to the program office 
consultation rule. Figure 6 illustrates the three rules included in 
DOD's one-offer requirement. 

Figure 6: DOD's One-Offer Requirement Includes Three Rules: 

[Refer to PDF for image: illustration] 

Only one offer in response to a competitive solicitation: 

Did solicitation allow 30 or more days for responses? 

If yes: 

Cost/Price Analysis Rule: 
The contracting officer shall determine through cost/price analysis 
whether the offer is fair and reasonable; 
* Conduct negotiations if necessary, and finalize acquisition process. 

If no: 

Program Office Consultation Rule: 
The contracting officer shall consult with program office to determine 
whether requirements are unnecessarily restrictive and should be 
revised to promote competition. 

Resolicitation Rule: 
The contracting officer shall resolicit, allowing for at least 30 
additional days for responses. 

Cost/Price Analysis Rule[A]: 
The contracting officer shall determine through cost/price analysis 
whether the offer is fair and reasonable; 
* Conduct negotiations if necessary, and finalize acquisition process. 

Source: GAO analysis of DFARS Subpart 215.371. 

[A] This cost/price analysis rule only applies to solicitations that 
result in one offer. Thus, if multiple offers are received after 
completing the resolicitation rule, then the contracting officer 
should conduct negotiations, if necessary, and finalize the 
acquisition process. 

[End of figure] 

Our analysis of 25 one-offer awards from April 1, 2011, to March 31, 
2012, shows that all 25 contract awards were conducted in accordance 
with the new cost/price analysis rule; however, 5 contracts were 
awarded despite failing to comply with the resolicitation rule. 
Specifically, in the case of two contract awards, contracting 
officials simply did not resolicit after receiving just one offer 
during the initial solicitation period; in the case of three contract 
awards, agency officials resolicited for a period shorter than the 
required 30 days. Our analysis did not consider whether the awards 
complied with the program office consultation rule because the rule 
was not implemented until June 2012 and did not apply to the awards in 
our sample. In addition to our review, the DOD Inspector General 
performed a similar compliance review on 78 one-offer awards from 
fiscal year 2011. The review found that 15 awards did not comply with 
the cost/price analysis rule and 23 did not comply with the 
resolicitation rule.[Footnote 25] 

The new one-offer requirement may result in lower prices and more 
accurate cost information when only one offer is received. For 
example, during our review of one-offer awards, we identified a 
proposal that initially requested a 10 percent profit rate. Cost and 
price analyses determined that the rate was unreasonable, and 
subsequent negotiations resulted in a 1.4 percentage point reduction 
in the profit rate. In addition, as a result of the analyses, the 
government identified a discrepancy in the offeror's cost data that 
further reduced the price. 

Officials at multiple DOD components told us that, since the 
implementation of the new requirement, more contracting officers allow 
at least 30 days for responses in order to avoid the resolicitation 
and program office consultation rules. Specifically, as illustrated in 
figure 6, if a solicitation allows 30 or more days for responses, the 
contracting officer is required to follow only one of the three rules 
established in the new requirement. Senior DOD officials said that 
allowing for 30 days is a positive outcome of the requirement. In the 
past, some solicitations allowed less than a week for responses, 
potentially discouraging contractors from submitting offers. According 
to the officials, the new requirement incentivizes contracting 
officers to keep solicitations open for at least 30 days, while still 
allowing the flexibility for fewer than 30 days when multiple offers 
are likely--for example, routine procurements that consistently elicit 
multiple offers. 

Although DOD's one-offer requirement has potential to result in 
contracts at lower prices and to lengthen the period for responding to 
solicitations, the impact on overly restrictive requirements is 
limited because many awards are not subject to the program office 
consultation rule. We previously reported that the government's 
requirements can influence the number of offers received if the 
requirements are written too restrictively.[Footnote 26] DOD 
established the new program office consultation rule which could 
potentially ensure that solicitation requirements language does not 
discourage multiple offers; however, as illustrated in figure 6, this 
requirement applies only to solicitations that require responses in 
fewer than 30 days. Due to unreliable data within FPDS-NG, we cannot 
quantify the number of one-offer awards in fiscal year 2012 that were 
not subject to the program consultation rule.[Footnote 27] However, 
the following bullets highlight some of the reasons why a solicitation 
would not be subject to the program consultation rule, in effect 
reducing the impact of DOD's effort to increase the number of offers 
received by revising overly restrictive requirements: 

* The FAR generally requires that solicitations allow at least 30 days 
for responses. Although there are many exceptions--for example, 
commercially available items, and orders under IDIQ contracts and 
Federal Supply Schedules--awards that comply with the FAR requirement 
to advertise for 30 days or more will not be subject to the program 
office consultation rule.[Footnote 28] 

* DOD officials in multiple components told us that prior to the one-
offer requirement, their contracting branch already had a policy or 
long-standing practice to advertise for 30 or more days. Thus, even 
when a shorter period is permitted, these branches may advertise for 
30 days in any case, thereby avoiding the program office consultation 
rule. 

* Since the implementation of the one-offer requirement, DOD officials 
told us that more contracting officers allow 30 or more days to 
respond to solicitations in order to avoid the program office 
consultation rule. 

Unreliable Data Make It Difficult to Measure New Requirement's Impact: 

Unreliable data within FPDS-NG hinder DOD's ability to accurately 
measure the impact of its one-offer requirement. According to FPDS-NG, 
DOD awarded 115,242 one-offer contracts and task orders in fiscal year 
2012. The agency obligated $14.7 billion on new one-offer awards in 
fiscal year 2012, representing 13.8 percent of all new contract 
obligations during the period. Our analysis of 35 one-offer awards 
determined that 10 of these awards were incorrectly coded in FDPS-NG 
by contracting officers. As a result, we determined that DOD's data 
were unreliable for certain analyses. Furthermore, we believe DOD 
cannot use the data to accurately calculate the amount obligated on 
one-offer awards during fiscal year 2012. Thus, the agency is not in a 
position to accurately measure the quantitative impact of the one-
offer requirement since it was implemented. 

Based on our analysis of 35 one-offer awards, 10 awards totaling 
$271.8 million were incorrectly coded in FPDS-NG. Six of the 10 awards 
were incorrectly coded as subject to competition in FPDS-NG, when they 
were actually noncompetitive awards. The remaining 4 awards received 
multiple offers, but the contracting officer incorrectly coded them as 
receiving one offer. Since our review focused on large dollar awards, 
which are typically subject to a more rigorous review process within 
DOD, the results of our assessment suggest that more errors may exist 
in unselected awards. In 2010 we reported that similar coding errors 
existed in FPDS-NG one-offer award data.[Footnote 29] In addition, the 
DOD Inspector General determined that 27 percent of the 107 one-offer 
awards it reviewed from fiscal year 2011 were miscoded in FPDS-NG. 

DOD relies on FPDS-NG data to make important decisions regarding its 
new requirement on one-offer awards. For example, DOD directed the 
services to increase their effective competition rates--the proportion 
of competitive obligations based on multiple offers--by 10 percent per 
year as part of the Better Buying Power initiative. The one-offer 
requirement is intended to be a means to achieve this goal. However, 
DOD's ability to calculate the quantitative impact of the requirement 
and improvements toward effective competition goals is limited by 
unreliable FPDS-NG data. Without reliable data, DOD cannot accurately 
measure the impact of the new requirement. 

Conclusions: 

The competition indicators that DOD currently employs shed 
insufficient light on the department's efforts to maximize full and 
open competition for the goods and services that it acquires. Although 
DOD's overall and individual component competition rates provide broad 
indicators of competitive contracts and task orders, they provide 
limited insight into the underlying reasons for competition or its 
decline since fiscal year 2008. For example, while foreign military 
sales accounted for about a fifth of new, noncompetitive obligations 
in fiscal year 2012, DOD's current calculations do not consider their 
impact on its competition rates. We found the Air Force competition 
rate for new awards increased by 15 percentage points in fiscal year 
2012, when foreign military sales were removed from the calculations. 
DOD does not systematically identify, track, and consider the specific 
factors that may be affecting competition when setting its annual 
competition goals. Lacking a set of measures that provide meaningful 
insight into the specific factors that drive competition rates, it is 
difficult for DOD to accurately gauge the relative effectiveness of 
its multifaceted efforts to enhance competition. Without this 
information it is also more difficult for DOD to chart a path to 
improved competition that offers a greater likelihood of success and 
to make the necessary course corrections along the way. 

While the justifications and approvals for noncompetitive awards that 
we reviewed generally met FAR requirements, they varied in the level 
of insight that they provided into the reasons for noncompetitive 
awards. In addition, some justifications did little to describe 
planned actions to bring about competitive awards in future 
acquisitions of the same goods or services. Others provided little 
information about the market research findings that helped justify the 
decision to pursue a noncompetitive award. Without this information, 
DOD may be missing opportunities to gain a richer understanding of why 
past acquisitions were not competitive and to apply those lessons to 
effectively facilitate competition for future acquisitions. 

Lastly, due to unreliable data in FPDS-NG, DOD's ability to measure 
the effectiveness of its new one-offer requirement is limited. Without 
knowing its impact, DOD risks continued investment in a requirement 
that may not address the most significant factors leading to one-offer 
awards. 

Recommendations for Executive Action: 

To better inform DOD's efforts to enhance competition, we recommend 
that the Secretary of Defense take the following three actions: 

* identify and track the specific factors that affect the competition 
rate, such as foreign military sales, and consider this information 
when setting annual competition goals for each DOD component; 

* develop guidance that could enable DOD components to apply lessons 
learned from past procurements to increase competition for the same 
good and services in the future; and: 

* develop an action plan for DOD components to collect reliable data 
on competitive procurements for which only one offer is received, so 
that the department can determine the effect of its new requirement on 
one-offer contracts. 

Agency Comments: 

We provided a draft of this report to DOD for review and comment. In 
written comments, DOD concurred with our recommendations. DOD's 
comments are reprinted in appendix II. DOD described actions it plans 
to take the address the recommendations. In particular, DOD indicated 
that it will consider specific factors affecting competition in 
setting annual competition goals. In addition, the department noted 
that it will work with components to develop guidance and tools to 
analyze procurement data to apply lessons learned to increase 
competition for the same good and services in the future. To address 
our third recommendation, the department indicated that it will take 
two actions. First, it will review existing training and procedures 
for reporting of contract actions in FPDS-NG. Second, it will update 
guidance on the reporting of competitive procurements in which only 
one offer is received to increase the reliability of the data and 
better understand the impact of the new requirement on one-offer 
contracts. 

We are sending copies of this report to the Secretary of Defense and 
interested congressional committees. This report will also be 
available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-4841 or by e-mail at courtsm@gao.gov. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. Staff who made key 
contributions to this report are listed in appendix III. 

Signed by: 

Michael J. Courts: 
Director, Acquisition and Sourcing Management: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

The objectives for this review were to examine (1) trends in the 
Department of Defense's (DOD) use of noncompetitive awards; (2) 
factors influencing DOD's competition rate; (3) the extent to which 
justifications for exceptions to competitive procedures provided 
insight into the reasons for noncompetitive awards; and (4) the impact 
of DOD's new requirement on contracts awarded using competitive 
procedures but for which only one offer was received. 

To address these objectives, we used data in the Federal Procurement 
Data System-Next Generation (FPDS-NG), which is the government's 
procurement database. We assessed the reliability of FPDS-NG data by 
(1) performing electronic testing of required data elements, (2) 
reviewing existing information about the data and the system that 
produced them, and (3) comparing reported data to information from the 
contract files we sampled. We determined that the data were 
sufficiently reliable to examine the trends in DOD's use of 
noncompetitive awards and the factors influencing DOD's competition 
rate, including the number of awards, dollar amount obligated, and the 
percentage of contracts awarded competitively overall and by 
component. However, as described in this report and later in this 
appendix, we found the data on one-offer awards not sufficiently 
reliable. 

To further examine the trends in DOD's use of noncompetitive awards, 
we used data from FPDS-NG to identify DOD obligations under 
competitive and noncompetitive contracts from fiscal year 2008 through 
2012. Specifically, we identified contracts and task orders funded by 
DOD. For competitive contract actions, we included contracts and 
orders coded as "full and open competition," "full and open after 
exclusion of sources," and "competed under simplified acquisition 
procedures" as well as orders coded as "subject to fair opportunity" 
and as "fair opportunity given." For noncompetitive contract actions, 
we included contracts and orders coded as "not competed," "not 
available for competition," "not competed under simplified acquisition 
procedures," and "follow-on to competed action" as well as orders 
coded as "subject to fair opportunity" and under an exception to fair 
opportunity, including "urgency," "only one source," "minimum 
guarantee," "follow-on action following competitive initial action," 
and "other statutory authority." We calculated competition rates as 
the percentage of obligations on competitive contracts and orders over 
all obligations on contracts and orders annually. We examined the 
competition rate at the DOD level and at each component from fiscal 
year 2008 through 2012. For fiscal year 2012, we analyzed the 
competition rate for products, non-research and development (R&D) 
services, and R&D services. For new noncompetitive awards in fiscal 
year 2012, we determined the dollars obligated by award type. We also 
assessed the exceptions cited in FPDS-NG for new noncompetitive DOD 
contracts and task orders in fiscal year 2012. 

To examine the factors influencing DOD's competition rate, we analyzed 
FPDS-NG data to determine the impact of foreign military sale awards 
on DOD's competition rate. For foreign military sale (FMS) awards, we 
included contracts and orders coded as "foreign funds FMS" in FPDS-NG. 
We defined the competition rate as the ratio of new obligations at the 
time of award on competitive contracts and task orders over all new 
obligations at the time of award on all new contracts and task orders 
in a fiscal year. We also examined DOD's Better Buying Power 
initiative, DOD's fiscal year 2011 competition report, which was the 
most recent report available at the time of our review, and prior GAO 
reports. To gain insight into how DOD sets competition goals, we 
reviewed DOD policy and spoke with DOD officials. 

To examine the extent to which justifications for exceptions to 
competitive procedures provided insight into the reason for 
noncompetitive awards, we reviewed a nongeneralizable sample of 56 
contracts and orders awarded noncompetitively by DOD from April 1, 
2011, to March 31, 2012, as coded in FPDS-NG. At the time our review 
began, data was not available for the last two quarters of fiscal year 
2012. In order to review justifications for contracts and task orders 
awarded in all four fiscal year quarters, our sample included awards 
from fiscal years 2011 and 2012. We excluded from our sample: 

* contracts and orders under the simplified acquisition threshold of 
$150,000; 

* noncompetitive orders that were not submitted under multiple award 
indefinite-delivery/indefinite-quantity (IDIQ) contracts, because 
these orders would not require a justification since the decision not 
to compete was made and presumably justified when the base IDIQ 
contract was awarded to one contractor; 

* noncompetitive contracts and orders justified under the 8(a) program 
because we recently reported on challenges implementing new 
requirements for these types of justifications[Footnote 30]; 

* noncompetitive contracts that do not require a justification, 
including awards not competed under simplified acquisition procedures, 
justified under the "international agreement" exception or certain 
contracts awarded under the "authorized or required by statute" 
exception. 

We initially selected 75 contracts and orders, including: the five 
largest contracts from the Air Force, Army, Defense Logistics Agency 
(DLA), Navy, and other defense agencies; the two largest orders from 
each of these components; and eight randomly selected contracts and 
orders from each component. In addition, we added five contracts to 
our sample which we had initially selected as part of our review of 
competitive one-offer awards, but were miscoded in FPDS-NG and 
actually awarded noncompetitively. Of these 80 awards, we removed 24 
from our review because either they were miscoded and awarded 
competitively, a justification was not required, or the justification 
was classified for national security reasons. For the 56 remaining 
awards, we reviewed 59 justifications--in one case a justification was 
required but not prepared; and in two cases awards had multiple 
justifications. 

We reviewed these 59 justifications to determine whether they met 
criteria in the FAR for content, timing, approval, and public 
availability. In particular, we assessed whether the justifications 
contained sufficient information to justify the use of the specific 
authority cited as required by the FAR. To gain additional insight 
into the rationale for noncompetitive awards, we also reviewed other 
contract file documentation such as the acquisition plan, statement of 
work, price negotiation memorandums, records of market research, and 
other key documents. We conducted e-mail and telephone follow-up with 
contracting and program officials involved in these awards to obtain 
additional information as needed. 

To examine the impact of DOD's new requirement on competitive 
procurements that received one offer, we examined DOD policies, 
regulations, and other related documents. To determine whether recent 
awards complied with the requirement, we selected a nongeneralizable 
sample of 25 contracts and task orders that received one offer in 
response to a solicitation issued using competitive procedures, as 
coded in FPDS-NG. In order to review awards from each fiscal quarter, 
we selected awards issued between April 1, 2011, and March 31, 2012. 
We planned to review a sample of the 25 awards with the highest 
obligations, across DOD--5 each from the Army, Navy, Air Force, DLA, 
and other defense agencies. However, as we selected awards, we 
identified 10 that were out of scope due to coding errors in FPDS-NG. 
Using the original selection criteria, we continued to select awards 
until we reached a sample size of 25 awards. As previously noted, we 
found the data on one-offer awards not reliable for certain analyses. 

For the awards in our sample, we obtained and reviewed award 
documentation, including the solicitation and evidence of a cost/price 
analysis to determine whether the awards complied with DOD's new 
requirement. Our analysis did not consider whether the awards complied 
with the new rule to consult about whether requirements may be 
unnecessarily restrictive because the rule was not in effect at the 
time of our review and therefore did not apply to the awards in our 
sample. In addition, we spoke with officials at the Army, Air Force, 
Navy, and DLA about the implementation and impact of the new 
requirement. 

We conducted this performance audit from May 2012 to March 2013, in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
Acquisition, Technology And Logistics: 
3000 Defense Pentagon: 
Washington, DC 20301-3000: 

March 22, 2013: 
        
Mr. Michael J. Courts: 
Director, Acquisition and Sourcing Management: 
U.S. Government Accountability Office:
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Courts: 

This is the Department of Defense (DoD) response to the GAO Draft 
Report, GAO-13325, "Defense Contracting: Actions Needed to Increase 
Competition," dated March 5, 2013 (GAO Code 121071). Detailed comments 
on the report recommendations are enclosed. 

Sincerely, 

Signed by: 

Richard Ginman: 
Director, Defense Procurement and Acquisition Policy: 

Enclosure: As stated: 

GAO Draft Report Dated March 5, 2013: 
GAO-13-325 (GAO CODE 121071): 

"Defense Contracting: Actions Needed to Increase Competition" 

Department Of Defense Comments To The GAO Recommendation: 

To better inform DOD's efforts to enhance competition, we recommend 
that the Secretary of Defense take the following three actions: 

Recommendation 1: Identify and track the specific factors that affect 
the competition rate, such as foreign military sales, and consider 
this information when setting annual competition goals for each DOD 
component. 

DoD Response: Concur. The Department will consider specific factors 
affecting competition in setting annual component competition goals. 

Recommendation 2: Develop guidance that could enable DOD components to 
apply lessons learned from past procurements to increase competition 
for the same good and services in the future. 

DoD Response: Concur. The Department will work with components to 
develop guidance and tools that analyze past procurements and Federal 
Procurement Data System (FPDS), Product Service Code data to help 
identify opportunities to increase competition for goods and services. 
This information will also be discussed at future Competition 
Advocates meetings. 

Recommendation 3: Develop an action plan for DOD components to collect 
reliable data on competitive procurements for which only one offer is 
received, so that the department can determine the effect of its new 
requirements on one-offer contracts. 

DoD Response: Concur. The Department will review existing training and 
procedures for reporting of contract actions in FPDS, and update the 
guidance to incorporate instructions on reporting competitive 
procurements in which only one-offer is received to increase the 
reliability of the data and better understand the impact of the new 
only one-offer requirements. This information will also be discussed 
at future Competition Advocates meetings. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Michael J. Courts, (202) 512-4841 or courtsm@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Penny Berrier, Assistant 
Director; Richard Burkard; Alissa Czyz; Alexandra Dew Silva; Jeffrey 
Fiore; Danielle Greene; Julia Kennon; Jean McSween; Kenneth Patton; 
Roxanna Sun; Kristin Van Wychen; and Andrea Yohe also made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, Federal Contracting: Opportunities Exist to Increase 
Competition and Assess Reasons When Only One Offer Is Received, 
[hyperlink, http://www.gao.gov/products/GAO-10-833] (Washington, D.C.: 
July 26, 2010). 

[2] H.R. Conf. Rep. No. 112-329, at 676 (2011). 

[3] FPDS-NG is the government's procurement database. We assessed the 
reliability of FPDS-NG data by (1) performing electronic testing of 
required data elements, (2) reviewing existing information about the 
data and the system that produced them, and (3) comparing reported 
data from FPDS-NG to information from contract files in our review. We 
determined that the data were sufficiently reliable for the purposes 
of this report, except where noted. For additional information, see 
appendix I. 

[4] IDIQ contracts do not procure or specify a firm quantity (other 
than a minimum or maximum) and provide for the issuance of task orders 
(services) or delivery orders (supply) during the contract period. FAR 
§§ 16.501-1;16.504. Multiple award IDIQ contracts are awarded to 
multiple contractors through one solicitation. For task orders subject 
to fair opportunity, generally the contracting officer must provide 
each contractor a fair opportunity to be considered for each order 
under multiple-award IDIQ contracts, with certain statutory exceptions 
which must be documented in writing. For task orders not subject to 
fair opportunity, including those on single award IDIQ contracts, the 
competition data for task orders in FPDS-NG is derived from the 
competition data for the underlying IDIQ contract. 

[5] Other defense agencies data include obligations made by any DOD 
contracting office that are not part of the Air Force, Army, DLA, or 
Navy. These include, but are not limited to: Defense Contract 
Management Agency, Missile Defense Agency, TRICARE Management 
Activity, and Defense Threat Reduction Agency. 

[6] Pub. L. No. 98-369, § 2701. 

[7] FAR § 6.303-2(d). The FAR requires that justifications for 
noncompetitive awards under Subpart 8.4 (Federal Supply Schedules) and 
16.5 (Indefinite-Delivery Contracts) contain similar information. See 
FAR § 8.405-6(c)(2) and FAR § 16.505(b)(2)(ii). 

[8] When a justification is made and approved on a class basis, the 
contracting officer must ensure that each contract action taken under 
that authority is within the class justification's scope and must 
document the contract file for each contract action accordingly. FAR § 
6.303-1(d). The approval level within an organization for class 
justifications is determined by the estimated total dollar value of 
the class. FAR § 6.304(c). 

[9] DFARS § 215.371; 77 Fed. Reg. 39126, (June 29, 2012). 

[10] GAO, Defense Contracting: Competition for Services and Recent 
Initiatives to Increase Competitive Procurements, [hyperlink, 
http://www.gao.gov/products/GAO-12-384] (Washington, D.C.: Mar. 15, 
2012). 

[11] Not all task orders are subject to fair opportunity, including 
those on single award IDIQ contracts. In these cases, the competition 
data for task orders in FPDS-NG is derived from the competition data 
for the underlying IDIQ contract. Most fiscal year 2012 DOD 
noncompeted obligations on task orders were not coded as subject to 
fair opportunity in FPDS-NG. 

[12] "Follow-on action following competitive initial action" captures 
awards made under FAR § 16.505(b)(2)(i)(C). Specifically, these awards 
are "issued on a sole-source basis in the interest of economy and 
efficiency because it is a logical follow-on to an order already 
issued under the contract, provided that all awardees were given a 
fair opportunity to be considered for the original order." 

[13] DFARS § 252.227-7013 defines technical data as "recorded 
information, regardless of the form or method of the recording, of a 
scientific or technical nature (including computer software 
documentation)… [but not including] computer software or data 
incidental to contract administration, such as financial and/or 
management information." Technical data for weapon systems includes 
drawings, specifications, standards, and other details necessary to 
ensure the adequacy of item performance, as well as manuals that 
contain instructions for installation, operation, maintenance, and 
other actions needed to support weapon systems. 

[14] GAO, Defense Acquisition: DOD Should Clarify Requirements for 
Assessing and Documenting Technical-Data Needs, [hyperlink, 
http://www.gao.gov/products/GAO-11-469] (Washington, D.C.: May 11, 
2011). 

[15] GAO, Continuing Resolutions: Uncertainty Limited Management 
Options and Increased Workload in Selected Agencies, [hyperlink, 
http://www.gao.gov/products/GAO-09-879] (Washington, D.C.: Sept. 24, 
2009). 

[16] Defense Security Cooperation Agency, Security Assistance 
Management Manual, CO.7, Glossary, accessed February 15, 2013, 
[hyperlink, http://www.dsca.mil/samm/ESAMM/C00/0.07.htm]. 

[17] FAR § 6.303-2(d). The FAR requires that justifications under 
Subpart 8.4 (Federal Supply Schedules) and 16.5 (Indefinite-Delivery 
Contracts) contain similar information. See FAR § 8.405-6(c)(2) and 
FAR § 16.505(b)(2)(ii). 

[18] One Army award in our sample had two justifications and a DLA 
award had four justifications. For more information on the number of 
contracts and justifications included in our review, see appendix I. 

[19] FAR § 6.305(a). In the case of noncompetitive contracts awarded 
on the basis of unusual and compelling urgency, the justification must 
be posted within 30 days after contract award. 

[20] The FAR states that a contracting officer shall not commence 
negotiations for a sole-source contract, commence negotiations for a 
contract resulting from an unsolicited proposal, or award any other 
contract without providing for full and open competition unless the 
contracting officer justifies, if required in section 6.302, the use 
of such actions in writing; certifies the accuracy and completeness of 
the justification; and obtains the required approval. FAR § 6.303-1. 

[21] The FAR states that for a proposed contract not exceeding 
$650,000, the contracting officer's certification required by 6.303-
2(b)(12) will serve as approval unless a higher approving level is 
established in agency procedures. FAR § 6.304(a)(1). 

[22] GAO, Acquisition Planning: Opportunities to Build Strong 
Foundations for Better Services Contracts, [hyperlink, 
http://www.gao.gov/products/GAO-11-672] (Washington, D.C.: Aug. 9, 
2011). 

[23] FAR § 6.303-1(d). Class justifications can cover multiple awards 
made over many years and sometimes combine a complex mix of products 
and services, which streamlines the acquisition process. 

[24] GAO, Defense Contracting: Improved Policies and Tools Could Help 
Increase Competition on DOD's National Security Exception 
Procurements, [hyperlink, http://www.gao.gov/products/GAO-12-263] 
(Washington, D.C.: January 13, 2012). 

[25] Inspector General, Department of Defense, Improvement Needed With 
DOD Single-Bid Program to Increase Effective Competition for Contracts 
(Alexandria, Va.: Oct. 4, 2010). 

[26] [hyperlink, http://www.gao.gov/products/GAO-10-833]. FAR § 11.105 
states "agency requirements shall not be written so as to require a 
particular brand name, product, or feature of a product, peculiar to 
one manufacturer, thereby precluding consideration of a product 
manufactured by another company unless the particular brand name, 
product, or feature is essential to the Government's requirements, and 
market research indicates other companies' similar products, or 
products lacking the particular feature, do not meet, or cannot be 
modified to meet, the agency's needs." 

[27] As described later in the report, we identified unreliable one-
offer award data within FPDS-NG and determined that the data were not 
sufficient for certain analysis. 

[28] FAR § 5.203(c). 

[29] [hyperlink, http://www.gao.gov/products/GAO-10-833]. 

[30] GAO, Federal Contracting: Slow Start to Implementation of 
Justification for 8(a) Sole-Source Contracts, [hyperlink, 
http://www.gao.gov/products/GAO-13-118] (Washington, D.C.: Dec 12, 
2012). 

[End of section] 

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