Federal Contracting: Commercial Item Test Program Beneficial, but Actions Needed to Mitigate Potential Risks
Highlights
What GAO Found
Federal agencies use the test program for a relatively small portion of all commercial items and services bought. In fiscal year 2011, of the $90 billion agencies obligated on new awards for commercial items and services, federal agencies obligated $1.9 billion or about 2 percent using the test program, based on data reported in the Federal Procurement Data System-Next Generation (FPDS-NG). Within the largest reported users of the test program--the Departments of Defense (DOD), Homeland Security (DHS), and the Interior (DOI)--the five components GAO reviewed used the test program for about 9 percent of obligations, and 12 percent of the components' new commercial awards that fell within test program thresholds in fiscal year 2011. Agency officials cited the types of goods and services being acquired, the complexity of the acquisition, and the existence of other contracting approaches as factors affecting test program use. For example, the Coast Guard's Aviation Logistics Center used the test program for 139 of 370 new awards that fell within test program thresholds, whereas its Headquarters Contract Operations used the test program for only 3 of 164 new awards. Coast Guard officials explained that the commercial nature of the parts and services bought by the Aviation Logistics Center lends itself to using the test program, while the headquarters office used existing contracts, which can be another means to fulfill recurring needs for commercial supplies such as information technology services. DOD, DHS, and DOI officials acknowledge that they do not collect or assess data to determine whether the test program is used to the maximum extent practicable. As such, its limited use may indicate missed opportunities.
GAO found that the test program reduced contracting lead time and administrative burdens and generally did not incur additional risks above those on other federal acquisition efforts for those contracts GAO reviewed. GAO compared agencies' estimated timeframes for awarding contracts using negotiated procedures--which officials reported would be used in the absence of the test program--with actual lead times for eight competitively awarded test program contracts and found that test program contracts were generally awarded in fewer days. For example, the Army awarded a $1.3 million contract for blast barriers and bunkers in 20 days, about 160 days less than suggested by command guidance. According to officials from the agencies and components GAO reviewed, test program contracts are reviewed using existing internal controls and standard contract review processes. GAO found that contracting officers generally documented their efforts to identify commercial sources, but 16 of the 26 test program contracts GAO reviewed were awarded noncompetitively. While these awards were justified and approved in accordance with federal regulations when required, GAO and others have found that noncompetitive contracting poses risks of not getting the best value because these awards lack a direct market mechanism to help establish pricing. In some cases, DOD requires contracting officers to prepare a determination that the acquisition meets the commercial item definition. Neither DHS nor DOI have a similar requirement, potentially increasing their risks. Not ensuring the proper classification of an item as commercial can leave the government vulnerable to accepting prices that may not be the best value.
Why GAO Did This Study
Federal agencies rely on the commercial marketplace for a range of goods and services. In 1996, Congress authorized the use of simplified acquisition procedures for commercial items now valued up to $6.5 million under the Test Program for Certain Commercial Items. The test program is currently authorized until January 2015. However, due to a lack of reliable data, Congress has had limited insights into the actual use and benefits of the test program.
The House Armed Services Committee report that accompanied the National Defense Authorization Act for Fiscal Year 2013 mandated GAO to report on the use of the authority provided under the test program. This report addresses (1) the extent to which federal agencies have used the test program, and (2) its benefits and risks, if any. DOD, DHS, and DOI accounted for 74 percent of test program use in fiscal year 2011 based on data reported in FPDS-NG. For five components within these three agencies, GAO assessed data, reviewed regulations and agency policies, analyzed 26 of the largest test program contracts, and interviewed contracting officials.
Recommendations
GAO recommends that (1) DOD, DHS, and DOI collect and assess data to evaluate program use; and (2) DHS and DOI require a commercial item determination for certain acquisitions to better manage risk. DOD concurred, but DHS and DOI did not, stating that current procedures were adequate. GAO maintains that both recommended actions are still warranted for DHS and DOI.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Homeland Security | To increase the potential benefits from using the test program and mitigate potential risks, the Secretaries of Defense, Homeland Security, and the Interior should collect and assess data to determine whether their agencies are using the simplified procedures authorized by the test program to the maximum extent practicable, as required by the Federal Acquisition Regulation. |
In providing comments on this report, the Department of Homeland Security (DHS) disagreed with the recommendation stating that collecting and assessing data on test program use would likely not result in findings that could be broadly addressed through policy changes or internal controls. In March 2014, however, the DHS Office of the Chief Procurement Officer issued an acquisition alert that reminds Heads on Contracting Activities to use the commercial item test program to the maximum extent practicable for the acquisition of commercial items that fall within test program thresholds. The action taken should encourage the use of the test program in the future, though it does not address the collection and assessment of data.
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| Department of Defense | To increase the potential benefits from using the test program and mitigate potential risks, the Secretaries of Defense, Homeland Security, and the Interior should collect and assess data to determine whether their agencies are using the simplified procedures authorized by the test program to the maximum extent practicable, as required by the Federal Acquisition Regulation. |
Since issuance of this report, the Department of Defense has collected data for fiscal year 2014 and year to date data for fiscal year 2015 on actions using the test program authority, which was made permanent in the FY 2014 National Defense Authorization Act. After fiscal year 2015 data are collected, the Department of Defense plans to convene a working group to assess the use and effectiveness of the permanent authority. The Department expects to complete its assessment in March 2016.
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| Department of the Interior | To increase the potential benefits from using the test program and mitigate potential risks, the Secretaries of Defense, Homeland Security, and the Interior should collect and assess data to determine whether their agencies are using the simplified procedures authorized by the test program to the maximum extent practicable, as required by the Federal Acquisition Regulation. |
The Federal Acquisition Circular 2005-83 implemented Federal Acquisition Regulation Case 2015-010, providing permanent authority for use of simplified acquisition procedures for certain commercial items. DOI noted that the Federal Acquisition Regulation removed all references to the "test program" including the requirement to use the test program to the maximum extent practicable. No further action is needed to address the recommendation.
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| Department of Homeland Security | To increase the potential benefits from using the test program, and to mitigate the potential risk of improperly designating a good or service as a commercial item, the Secretaries of Homeland Security and the Interior should require contracting officers within their agencies to make a written commercial item determination at a level that they determine appropriate for their agencies. |
In response to this recommendation, the Department of Homeland Security established training in June 2016 to target and mitigate potential risks arising from improper designation of a good or service as a commercial item. This action meets the underlying intent of this recommendation; therefore, we are closing it as implemented.
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| Department of the Interior | To increase the potential benefits from using the test program, and to mitigate the potential risk of improperly designating a good or service as a commercial item, the Secretaries of Homeland Security and the Interior should require contracting officers within their agencies to make a written commercial item determination at a level that they determine appropriate for their agencies. |
The Department of Interior has not taken any action to implement this recommendation.
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