oversight

Defense Contracting: Competition for Services and Recent Initiatives to Increase Competitive Procurements

Published by the Government Accountability Office on 2012-03-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to Congressional Committees




March 2012
             DEFENSE
             CONTRACTING
             Competition for
             Services and Recent
             Initiatives to Increase
             Competitive
             Procurements




GAO-12-384
                                           March 2012

                                           DEFENSE CONTRACTING
                                           Competition for Services and Recent Initiatives to
                                           Increase Competitive Procurements
Highlights of GAO-12-384, a report to
congressional committees




Why GAO Did This Study                     What GAO Found
Competition is a critical tool for         In fiscal year 2011, the competition rate for DOD’s non-R&D services was almost
achieving the best return on               twice the competition rate as that of products, and almost 20 percent higher than
investment for taxpayers. In fiscal year   that of R&D services, as shown below.
2011, the Department of Defense
(DOD) obligated about $375 billion         DOD Competition Rates for All Fiscal Year 2011 Obligations
through contracts; more than half that
amount was for services. Agencies are
required to award contracts on the
basis of full and open competition, but
are permitted to award noncompetitive
contracts in certain situations.
The Senate Armed Services
Committee report on the National
Defense Authorization Act for Fiscal
Year 2012 directed GAO to report on
competition for DOD contracts and
task orders for services. GAO
examined (1) how competition rates for
services compare to competition rates      From fiscal year 2007 through 2011, competition rates for non-R&D services
for products and trends in competition     have been nearly 80 percent and have not changed significantly across DOD, but
for services, (2) the reasons for          have declined at the Air Force, dropping from 75 percent to 59 percent.
noncompetitive contracts and task          According to a DOD procurement policy official, the Air Force competition
orders for services, and (3) steps DOD     advocate is assessing the reasons for lower competition rates. When non-DOD
has taken to increase competition.         agencies procured non-R&D services on behalf of DOD in fiscal year 2011, their
                                           average competition rate was 81 percent, slightly higher than the average rate of
GAO reviewed federal procurement
                                           78 percent for DOD’s own contracting offices.
data for 2007 through 2011 and a non-
generalizable sample of 111                The majority of DOD noncompetitive obligations for non-R&D services in fiscal
justifications for noncompetitive          year 2011 were due to the contractor being the only responsible source for the
awards, which were from different          procurement. The second most cited exception was “authorized by statute,” for
DOD components and for different           example, awards under the Small Business Administration’s 8(a) business
types of services. GAO defines             development program. Based on prior GAO work, a variety of factors can affect
competition rates as the dollars           competition, including reliance on contractor expertise and data rights, the
obligated under competitive contracts      influence of program offices, and unanticipated events such as bid protests. GAO
and task orders as a percentage of all
                                           analysis of the justifications for noncompetitive contracts identified examples of
obligations. GAO focused on non-
                                           these factors affecting competition for DOD procurements in fiscal year 2011.
research and development (R&D)
services to concentrate analysis on        Since 2009, the Office of Management and Budget (OMB) and DOD have
contracts not related to development of    undertaken initiatives related to competition, including actions to address some
weapons systems. GAO reviewed              opportunities GAO previously identified. DOD has taken steps aimed at
DOD policies and competition reports,      increasing competition, in particular “effective competition” which DOD defines as
and prior GAO reports.                     situations where more than one offer is received in response to a competitive
GAO is not making any new                  solicitation. For instance, DOD has implemented requirements to provide
recommendations. DOD responded to          additional response time to solicitations when only one offer is received for a
a draft of this report with no comments.   solicitation that initially provided less than 30 days for receipt of proposals.
                                           Outside of recent efforts to increase competition, OMB and DOD have additional
View GAO-12-384. For more information,     opportunities to address prior GAO recommendations—such as promoting the
contact John Hutton at (202) 512-4841 or   role of program officials in influencing competition and better understanding the
huttonj@gao.gov                            circumstances leading to only one offer on competitive contracts.

                                                                                        United States Government Accountability Office
Contents


Letter                                                                                       1
               Background                                                                    4
               Competition Rates for Non-R&D Services Substantially Higher
                 Than for Products with Little Change over Time                              8
               Majority of Noncompetitive Awards Coded as “Only One
                 Responsible Source” and Competition Rates Were Affected by
                 Several Key Factors                                                       12
               OMB and DOD Are Taking Steps to Increase Competition                        19
               Agency Comments                                                             23

Appendix I     Objectives, Scope, and Methodology                                          25



Appendix II    Fiscal Year 2011 DOD Competition Rates by Service Category and
               Component                                                                   28



Appendix III   GAO Contact and Staff Acknowledgments                                       30



Table
               Table 1: DOD Competition Rates for Non-R&D Service Categories
                        in Fiscal Year 2011                                                28


Figures
               Figure 1: DOD Competition Rates for All Fiscal Year 2011
                        Obligations                                                          8
               Figure 2: Competition Rates for All Obligations for Non-R&D
                        Services from Fiscal Years 2007 through 2011                         9
               Figure 3: Fiscal Year 2011 Competition Rates for Top 10 Assisting
                        Agencies                                                           11
               Figure 4: Competition Exceptions for Fiscal Year 2011 DOD
                        Obligations on Noncompetitive Non-R&D Service
                        Contracts and Task Orders                                          13
               Figure 5: Competition Rates by DOD Component for Non-R&D
                        services in Fiscal Year 2011                                       29




               Page i                               GAO-12-384 Defense Competition for Services
Abbreviations

CICA              Competition in Contracting Act
DOD               Department of Defense
FAR               Federal Acquisition Regulation
FASA              Federal Acquisition Streamlining Act
FPDS-NG           Federal Procurement Data System-Next Generation
GSA               General Services Administration
IDIQ              indefinite delivery / indefinite quantity
J&A               justification and approval
OMB               Office of Management and Budget
R&D               research and development




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Page ii                                       GAO-12-384 Defense Competition for Services
United States Government Accountability Office
Washington, DC 20548




                                   March 15, 2012

                                   The Honorable Carl Levin
                                   Chairman
                                   The Honorable John McCain
                                   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 a cornerstone of the federal acquisition system and a
                                   critical tool for achieving the best possible return on investment for
                                   taxpayers. Competitive contracts can help save money, conserve scarce
                                   resources, improve contractor performance, curb fraud, and promote
                                   accountability. In fiscal year 2011, the Department of Defense (DOD)
                                   obligated about $375 billion through contracts; more than half of that
                                   amount was for services. In 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 the Competition in Contracting Act (CICA) of 1984 generally
                                   requires federal agencies to award contracts using full and open
                                   competition, agencies are allowed to award contracts noncompetitively
                                   under certain circumstances. Generally, noncompetitive contracts must
                                   be supported by written justifications and approvals (J&A) that address
                                   the specific exception to full and open competition that is being applied to
                                   the procurement. In addition, federal agencies can establish indefinite
                                   delivery/indefinite quantity (IDIQ) contracts with one or more contractors
                                   and issue orders under these contracts. When more than one contractor
                                   is involved, agencies are generally required to provide all contractors 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—again with a
                                   documented justification. For purposes of this report, we consider use of
                                   the fair opportunity process to be competition. Finally, the General


                                   Page 1                                GAO-12-384 Defense Competition for Services
Services Administration (GSA), under its schedules program, awards
IDIQ contracts to multiple 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.

The Senate Armed Services Committee report on the National Defense
Authorization Act for Fiscal Year 2012 expressed concerns that DOD may
not be competing service contracts as much as it could. The Senate
committee report directed us to report on competition for DOD contracts
and task orders for services. 1 Accordingly, we examined (1) how
competition rates for services compare to competition rates for products,
and trends in competition for services; (2) the reasons for noncompetitive
contracts and task orders for services; and (3) steps DOD has taken to
increase competition for services.

To address these objectives, we identified through the Federal
Procurement Data System-Next Generation (FPDS-NG) DOD obligations
under competitive and noncompetitive contracts in fiscal years 2007
through 2011, the most recent data available at the time of our review. 2
We identified obligations to noncompetitive contracts primarily through the
“extent competed” and “fair opportunity/limited sources” fields in FPDS-
NG. These fields include contracts coded as not competed or not
available for competition, and noncompetitive task or delivery orders. As a
result, and 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 in Federal Acquisition
Regulation (FAR) Subpart 6.3, and orders issued under multiple award
IDIQ contracts under the exceptions to the fair opportunity process in




1
  Task orders for services (and delivery orders for supplies) are issued under IDIQ
contracts. IDIQ contracts do not procure or specify a firm quantity of supplies or services
(other than a minimum or maximum) and provide for the issuance of orders during the
contract period. FAR § 16.501-1.
2
  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, and (2)
reviewing existing information about the data and the system that produced them. We
determined that the data were sufficiently reliable for the purposes of this report.




Page 2                                         GAO-12-384 Defense Competition for Services
FAR 16.505(b) or under limited sources provisions for orders issued
under GSA’s schedules program in FAR Subpart 8.405-6. 3

We calculated competition rates as the percentage of dollars obligated
annually through competitive contracts and orders to dollars obligated
through all contracts and orders. While we focused our analysis of FPDS-
NG on non-research and development (R&D) services to concentrate our
analysis on contracts not related to development of weapons systems, we
assessed fiscal year 2011 competition rates for R&D services and
compared them to competition rates for non-R&D services and for
products. We also identified trends in competition rates for non-R&D
services at DOD and its components from fiscal year 2007 through 2011.
For the purposes of this report, we divided DOD into four components: Air
Force, Army, Navy, and other defense agencies. 4 We also examined
competition rates for the non-DOD organizations that obligated funds for
services on DOD’s behalf through the use of interagency contracting in
fiscal year 2011. Interagency contracting allows an agency needing
contracting services (the requesting agency) to obtain them from another
agency (the assisting agency) by an assisted or a direct acquisition and,
when used correctly, can offer improved efficiency in the procurement
process. All competition rate information was based on our analysis of
FPDS-NG data. We present the trend data in this report, but did not
determine the reasons for any fluctuations in trends over time. We did not
assess competition rates for contracts related to specific circumstances,
such as contracts in support of contingency operations.

To gain an understanding of the reasons leading to noncompetitive
awards, we reviewed a non-generalizable selection of 111 DOD J&A
documents and exception to fair opportunity documents. We selected
these documents to reflect the non-R&D service categories with the


3
  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.
4
  Other defense agencies data include obligations made by any DOD contracting office
that is not part of the Air Force, Army, or Navy. These include, but are not limited to:
Defense Logistics Agency, Defense Supply Center, Defense Contract Management
Agency, Defense Information Technology Contracting Organization, Missile Defense
Agency, TRICARE Management Activity, and Defense Threat Reduction Agency.




Page 3                                         GAO-12-384 Defense Competition for Services
             highest DOD obligations as well as the J&As requiring the highest level of
             review within the department. We selected justifications that were posted
             to the FedBizOpps.gov website in fiscal year 2011 and also reviewed
             J&As provided by DOD components in response to our request for all
             J&As approved by senior procurement executives in fiscal year 2011. 5
             Some of these documents were for a mix of products and services
             providing weapons system support. We did not evaluate the J&As for
             completeness or reasonableness or validate how they were coded in
             FPDS-NG.

             To identify steps DOD has taken to increase competition, we reviewed
             recently issued GAO reports and previous interviews with DOD
             acquisition officials including component competition advocates. We also
             reviewed Office of Management and Budget (OMB) and DOD policies
             and guidance related to competition, and DOD competition reports for
             fiscal years 2009 and 2010.

             A more detailed description of our scope and methodology is presented in
             appendix I. Appendix II contains additional information on competition
             rates for various categories of services and by DOD component. We
             conducted this performance audit from September 2011 to March 2012,
             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.


             Federal agencies are generally required to use full and open competition
Background   to award contracts, with certain exceptions. This requirement was
             established through CICA, which required agencies to obtain full and
             open competition through the use of competitive procedures in their
             procurement activities unless otherwise authorized by law. 6 Using full


             5
              The FAR generally requires contracting officers to post justifications for noncompetitive
             procurements at FedBizOpps.gov. FAR §§ 6.305 and 16.505(b)(2). This site may be
             accessed via the Internet at https://www.fbo.gov/. The FAR requires justifications to be
             approved by DOD senior procurement executives when the total value of the acquisition is
             expected to exceed $85.5 million.
             6
                 Pub. L. No. 98-369, § 2701.




             Page 4                                       GAO-12-384 Defense Competition for Services
and open competition to award contracts means that all responsible
sources—or prospective contractors that meet certain criteria—are
permitted to submit proposals. Agencies are generally required to perform
acquisition planning and conduct market research to promote and provide
for, among other things, full and open competition. However, Congress,
by enacting CICA, also recognized that there are situations that require or
allow for contracts to be awarded noncompetitively—that is, without full
and open competition. 7 Generally, noncompetitive contracts must be
supported by written J&As that contain sufficient facts and rationale to
justify the use of the specific exception to full and open competition that is
being applied to the procurement. Examples of allowable exceptions
include circumstances where the contractor is the only source capable of
performing the requirement or where an urgent need precludes adequate
time for competition. Justifications generally are required to be published
on the FedBizOpps.gov website and must be approved at levels that vary
according to the dollar value of the procurement. J&As may be made for
an individual procurement or on a class basis for a group of related
acquisitions. 8 Noncompetitive contracts are not permitted in situations in
which the requiring agency has failed to adequately plan for the
procurement or in which there are concerns related to availability of
funding for the agency, such as funds expiring at the end of the year.

Although full and open competition is generally required, 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 set aside procurements for small
businesses. In these cases, agencies are required to set aside
procurements for competition among qualified small businesses if there is




7
 FAR Subpart 6.3 sets forth the circumstances in which a contract is allowed to be
awarded without providing for full and open competition.
8
  Whenever a justification is made and approved on a class basis, the contracting officer
must ensure that each contract action taken under the class J&A’s authority is within the
class J&A’s scope and document the contract file for each contract action accordingly.
The approval level for class justifications is determined by the estimated total value of the
class. FAR § 6.304(c).




Page 5                                         GAO-12-384 Defense Competition for Services
                            a reasonable expectation that two or more responsible small businesses
                            will compete for the work and offer fair market prices. 9


Competitive Requirements    When agencies issue task orders under IDIQ contracts, they are required
for Indefinite Delivery /   to follow different procedures than those for full and open competition. As
Indefinite Quantity         established under the Federal Acquisition Streamlining Act (FASA) of
                            1994, IDIQ contracts can be single award (to one contractor) or multiple
Contracts                   award (to more than one contractor through one solicitation), but FASA
                            establishes a preference for multiple award contracts. Agencies are
                            generally required to compete orders on multiple award contracts among
                            all contract holders. However, agencies can award noncompetitive
                            orders—through a process called an exception to a fair opportunity to be
                            considered—for reasons similar to those used for awarding contracts
                            without full and open competition, such as only one contractor being
                            capable of providing the supplies or services needed, or for an urgent
                            requirement. 10 As with noncompetitive contracts, the reasons for issuing
                            task orders under multiple award IDIQ contracts under an exception to
                            the fair opportunity process must generally be documented in writing and
                            approved at levels that vary according to the dollar value of the
                            procurement. 11

                            GSA, under its schedules program, awards IDIQ contracts to multiple
                            vendors for commercially available goods and services, and federal
                            agencies place orders under the contracts. Ordering procedures under
                            the schedules program vary according to the dollar value of the
                            procurement. For example, to meet competition requirements for orders
                            exceeding the micro-purchase threshold ($3,000) but not exceeding the



                            9
                              See FAR § 19.502-2 (b), which requires that acquisitions over $150,000 be set aside for
                            small businesses if there is a reasonable expectation that offers will be obtained from at
                            least two responsible small business concerns offering the products of different small
                            business concerns and that the award will be made at a fair market price.
                            10
                               See FAR § 16.505(b)(2). Other reasons for allowing a noncompetitive task order are
                            that the requirement is a logical follow-on, or the order is needed to meet a minimum
                            guarantee.
                            11
                              FAR §§ 16.505 (b)(2)(ii)(A)(B)(C). The FAR was revised in March 2011 to enhance
                            competition for orders placed under multiple-award contracts, including GSA’s schedules
                            contracts, and to implement section 863 of the Duncan Hunter National Defense
                            Authorization Act for Fiscal Year 2009. Pub. L. No. 110-417. 76 Fed. Reg. 14542,
                            Summary Presentation of final and interim rules, March 16, 2011.




                            Page 6                                       GAO-12-384 Defense Competition for Services
                           simplified acquisition threshold ($150,000), agencies must survey or
                           request quotes from at least three schedule contractors. 12 However, to
                           meet competition requirements for proposed orders exceeding the
                           simplified acquisition threshold, agencies must post a request for
                           quotation on GSA’s posting website or provide it to as many schedule
                           contractors as practicable to reasonably ensure that agencies receive at
                           least three quotes from contractors that can fulfill the requirement.
                           Agencies must document in the file if fewer than three quotes are
                           received from contractors capable of fulfilling the requirement. 13 For
                           orders issued noncompetitively under the schedules program, the
                           ordering agency must justify in writing—with specific content required by
                           the FAR—the need to restrict competition and also obtain approval at the
                           same dollar values and by the same officials as for contracts awarded
                           without full and open competition. 14


Competitive Procurements   Contracts that are awarded using competitive procedures but for which
Where Only One Offer Is    only one offer is received have recently gained attention as an area of
Received                   concern. 15 OMB’s Office of Federal Procurement Policy recently 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. Under DOD’s Better Buying Power
                           policy, competitive procurements where only one offer to a solicitation
                           was received even when publicized under full and open competition are
                           termed as “ineffective competition.” The Navy has identified the potential
                           for cost savings when effective competition is achieved. Specifically, in
                           2010, the Navy conducted a commodity study on the acquisition of
                           information technology services that identified cost savings when more
                           than one offer was received. Currently, FPDS-NG distinguishes these
                           contracts by recording how many offers were received on any
                           procurement.




                           12
                                FAR § 8.405-1(c)(1).
                           13
                                FAR § 8.405-1(d).
                           14
                                FAR § 8.405-6, Limiting sources.
                           15
                              We have reported on this issue, as well as on competition in general. GAO, Federal
                           Contracting: Opportunities Exist to Increase Competition and Assess Reasons When Only
                           One Offer Is Received, GAO-10-833 (Washington, D.C.: July 26, 2010).




                           Page 7                                     GAO-12-384 Defense Competition for Services
                        In fiscal year 2011, the competition rate for dollars obligated across DOD
Competition Rates for   on contracts and task orders for non-R&D services was substantially
Non-R&D Services        higher than the competition rate for products—78 percent compared to
                        41 percent. 16 R&D services had a competition rate of 59 percent. (See
Substantially Higher    figure 1.) DOD’s overall competition rate for all services and products was
Than for Products       58 percent. According to a DOD procurement policy official, non-R&D
with Little Change      services may be more commercial in nature than products, so there are
                        more providers available to compete for these contracts. In contrast, the
over Time               official said that opportunities for competition for R&D services are limited
                        because they are generally provided by a limited number of vendors,
                        such as university research laboratories, which each have their own area
                        of specialized expertise.

                        Figure 1: DOD Competition Rates for All Fiscal Year 2011 Obligations




                        16
                           For the purposes of this report, we calculated DOD competition rates as the percentage
                        of dollars obligated annually through competitive contracts and task orders to dollars
                        obligated through all contracts and task orders, including those awarded in prior years.
                        This overall competition rate includes all contracts and task orders where competitive
                        procedures were used regardless of the number of offers received. We provide additional
                        comparisons of competition rates for different types of non-R&D services and major DOD
                        components in appendix II.




                        Page 8                                       GAO-12-384 Defense Competition for Services
                                        From fiscal years 2007 through 2011, the rate at which non-R&D services
                                        were competed did not change significantly across DOD, the Army, or the
                                        Navy. Across DOD, competition rates went from 79 percent in 2007 to
                                        78 percent in 2011. Among the major components, the Air Force had a
                                        significant decline, dropping from 75 percent to 59 percent. According to a
                                        DOD procurement policy official, the Air Force competition advocate is
                                        assessing the reasons for lower competition rates. Other defense
                                        agencies had a small increase in competition rates, from 85 percent to
                                        89 percent. (See figure 2.)

Figure 2: Competition Rates for All Obligations for Non-R&D Services from Fiscal Years 2007 through 2011




                                        Page 9                                    GAO-12-384 Defense Competition for Services
Competition rates for obligations on only new contracts and orders for
non-R&D services across DOD over the same 5-year period exhibited the
same general trend as for obligations on all non-R&D services contracts
and orders, with two main exceptions. The competition rate for new
actions at the Navy declined, from 76 percent to 71 percent, and the
competition rate at other defense agencies increased significantly, from
78 percent to 91 percent. In fiscal year 2011, almost half of obligations for
non-R&D services were made on new contracts and task orders awarded
in that year. The remaining obligations were under contracts and task
orders that had been awarded in prior years.

We also examined competition rates for non-DOD agencies providing
assisted acquisition services to DOD. These agencies are commonly
referred to as assisting agencies. For example, in fiscal year 2011,
Department of the Interior (Interior) and GSA contracting offices, among
other agencies, obligated a total of $3.8 billion in DOD funds for non-R&D
services. While the assisting agencies had varying competition rates, their
average competition rate was slightly higher than that of DOD’s
contracting offices—81 percent compared to 78 percent. However, one
non-DOD contracting office within Interior, which was among the assisting
agencies with the highest DOD obligations, had a substantially lower
competition rate for non-R&D services—51 percent. (See figure 3.) A
DOD procurement policy official stated that the competition advocates do
not currently track competition rates by assisting agencies as part of their
overall competition assessments.




Page 10                                GAO-12-384 Defense Competition for Services
Figure 3: Fiscal Year 2011 Competition Rates for Top 10 Assisting Agencies




                                        Page 11                              GAO-12-384 Defense Competition for Services
                          Based on our analysis of FPDS-NG data, in fiscal year 2011 the majority
Majority of               of DOD’s noncompetitive non-R&D services contracts and task orders
Noncompetitive            were coded under the “only one responsible source” category. In addition,
                          based on our prior work, a variety of factors can affect competition,
Awards Coded as           including reliance on contractor expertise and data rights, the influence of
“Only One                 program offices on the acquisition process, and unanticipated events
Responsible Source”       such as bid protests.

and Competition
Rates Were Affected
by Several Key
Factors

Majority of DOD Non-R&D   In fiscal year 2011, the majority of DOD’s non-R&D services obligations
Services Noncompetitive   under noncompetitive contracts and task orders not coded as subject to
Obligations Were Coded    fair opportunity were coded under the competition exception “only one
                          responsible source” in FPDS-NG. 17 The second most cited exception was
under “Only One
                          “authorized by statute.” Together, these two exceptions comprised more
Responsible Source”       than 80 percent of all obligations on noncompetitive contract actions. 18
                          See figure 4 for obligations across competition exceptions for
                          noncompetitive non-R&D services contracts and task orders not subject
                          to fair opportunity.




                          17
                             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 2011 DOD
                          noncompeted non-R&D services obligations on task orders were not coded as subject to
                          fair opportunity in FPDS-NG.
                          18
                             We have previously reported about miscoding errors related to this FPDS-NG field. See
                          GAO-10-833. However, these two categories are so prominent above all others we have
                          determined that the data are sufficiently reliable for the purpose of this analysis. Appendix
                          I contains more detail.




                          Page 12                                        GAO-12-384 Defense Competition for Services
Figure 4: Competition Exceptions for Fiscal Year 2011 DOD Obligations on
Noncompetitive Non-R&D Service Contracts and Task Orders




Note: These noncompetitive obligations do not include instances where competitive procedures were
used but only one offer was received.
a
 “Only one responsible source” includes contracts and orders placed on IDIQ 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 § 6.302-6.
d
 “All others” includes contracts and orders placed on IDIQ contracts that cited the following
competition exceptions: urgency; industrial mobilization, engineering, developmental, or research
capability, or expert services; international agreement; public interest, FAR §§ 6.302-2 through 6.302-
4, and 6.302-7; and not competed using simplified acquisition procedures under FAR § 13.3.


Major weapon systems programs have cited the “only one responsible
source” exception to justify not competing large contract actions in class
J&As. Under a class J&A, one justification supports not competing
consolidated product and service requirements across DOD activities and




Page 13                                             GAO-12-384 Defense Competition for Services
multiple programs. In our review of J&As, we identified several examples
where DOD cited the “only one responsible source” exception,
including: 19

•     The Air Force justified a $200.7 million noncompetitive contract under
      a class J&A to a subcontractor of one of its long-standing incumbent
      contractors for communication equipment and support services for an
      aircraft system. Market research indicated that the subcontractor was
      the only source of the equipment and services, and by eliminating
      pass-through costs associated with subcontracting the Air Force could
      save up to $66 million or 33 percent of the estimated contract value.
•     The Army justified extending an $8.3 million task order
      noncompetitively for training and support services for soldiers going
      into and returning from overseas deployment following a decision to
      change the location where the services would be required under a
      planned follow-on competitive procurement. The J&A noted that
      planning for the follow-on contract had started in December 2009, but
      in late October 2010 the contracting office learned that all required
      support services would be fully transferred to other Army locations by
      December 2011. According to the J&A, officials noted that it would not
      be advantageous to pursue full and open competition for a 1-year
      service contract.
Noncompetitive obligations categorized as “authorized by statute” include
contracts that are authorized or required to be made through another
agency or from a specified source, including awards under the HUBZone
Act of 1997, the Veterans Benefit Act of 2003, and the Small Business
Administration’s 8(a) business development program. 20 For example, the
Defense Commissary Agency cited this exception for a noncompetitive
contract for emergency repairs valued at $308,759 to a service disabled
veteran-owned small business. The agency urgently needed to upgrade
its computer room air conditioning and noted that the contractor had
performed similar work in the past with excellent results.



19
     In each of the “only one responsible source” examples, J&As cited FAR § 6.302-1.
20
   FAR § 6.302-5. The HUBzone program, administered by the Small Business
Administration, is meant to spur economic growth in historically underutilized business
zones by helping qualified small businesses secure federal contracts. In addition, we
recently reported on tribal 8(a) contracting, including noncompetitive contracts awarded to
Alaska Native Corporations, Indian tribes, and Native Hawaiian Organizations. GAO,
Federal Contracting: Monitoring and Oversight of Tribal 8(a) Firms Need Attention,
GAO-12-84 (Washington, D.C.: Jan. 31, 2012).




Page 14                                       GAO-12-384 Defense Competition for Services
                            In addition, 5 percent of noncompetitive obligations on contracts and task
                            orders not subject to fair opportunity were categorized under the “national
                            security” exception, which is used when the disclosure of the agency’s
                            needs would compromise national security. This exception, however, is
                            not to be used merely because the acquisition is classified or because
                            access to classified matter is necessary. 21

                            Task orders issued under multiple award contracts and coded as subject
                            to the fair opportunity process represented only 12 percent of
                            noncompetitive non-R&D services obligations in fiscal year 2011. 22 Of the
                            over $4 billion obligated under noncompetitive non-R&D task orders that
                            were subject to the fair opportunity process, over 80 percent were coded
                            under two exceptions to the fair opportunity process in FPDS-NG.
                            Specifically, “follow-on action following competitive initial action” was cited
                            for 46 percent of the obligations and “only one source” was cited for
                            36 percent. Agencies can noncompetitively award a logical follow-on to
                            an order already issued under an IDIQ contract if all awardees were given
                            a fair opportunity to be considered for the original order. 23


Several Key Factors         In July 2010, we identified key factors affecting competition, including
Influence Competition for   reliance on contractor expertise and proprietary data. Also, program
Service Contracts           officials can influence competition by expressing vendor preferences,
                            planning acquisitions poorly, or specifying overly restrictive
                            requirements. 24 Unanticipated events such as bid protests or unforeseen
                            requirements with time frames that preclude competition can also impact
                            competition.




                            21
                              We recently reported on the use of the national security exception to competition. See
                            GAO, Defense Contracting: Improved Policies and Tools Could Help Increase Competition
                            on DOD’s National Security Exception Procurements, GAO-12-263 (Washington, D.C.:
                            Jan. 13, 2012).
                            22
                                 FAR § 16.505(b).
                            23
                               FAR § 16.505(b)(2)(i)(C). According to Defense Federal Acquisition Regulation
                            Supplement (DFARS) Procedures, Guidance, and Information 216.505-70, a follow-on
                            order is a new procurement placed with a particular contractor to continue or augment a
                            specific program or service.
                            24
                                 GAO-10-833.




                            Page 15                                      GAO-12-384 Defense Competition for Services
Reliance on Contractor           We have previously reported that DOD needs access to technical data
Expertise and Proprietary Data   related to its weapon systems in order to help control costs and maintain
Can Affect Competition           flexibility in the acquisition and sustainment of those weapon systems.
                                 Technical data can enable the government to complete maintenance
                                 work in-house, as well as to competitively award acquisition and
                                 sustainment contracts. For contracts pertaining to DOD weapons
                                 programs, which can involve products as well as support services, the
                                 lack of access to proprietary technical data and a heavy reliance on
                                 specific contractors for expertise limit, or even preclude the possibility of,
                                 competition. 25 Even when technical data are not an issue, the government
                                 may have little choice other than to rely on the contractors that were the
                                 original equipment manufacturers, and that, in some cases, designed and
                                 developed the weapon system.

                                 In our review of selected fiscal year 2011 J&As, we identified many
                                 instances where DOD lacked either the expertise or the technical data
                                 necessary to conduct a full and open competition. Two examples, which
                                 were justified under the “only one responsible source” competition
                                 exception, are:

                                 •    The Navy approved a class J&A for noncompetitive contract actions
                                      valued at $2.3 billion to acquire the next generation of aircraft along
                                      with supporting supplies and services. Officials noted that the
                                      contractor had been the sole designer, developer, and manufacturer
                                      of the system since 1964 and would not sell the government the
                                      technical data required to compete the acquisition.
                                 •    The Army justified a noncompetitive $455.3 million contract to
                                      remanufacture helicopters because the Army lacked the technical
                                      data and expertise necessary to compete the requirement. According
                                      to the J&A, although a related contract from the late 1980s allowed
                                      the government to have technical data packages suitable for
                                      competition, the data was never obtained. According to the J&A, the
                                      contractor’s estimated cost for this data was nearly $4 billion. In
                                      approving the J&A, the senior procurement official noted, “I hope that
                                      all contracting activities can persistently monitor how to be more




                                 25
                                   Technical data is recorded information used to define a design and to produce, support,
                                 maintain, or operate a system. GAO, Defense Acquisition: DOD Should Clarify
                                 Requirements for Assessing and Documenting Technical-Data Needs, GAO-11-469
                                 (Washington, D.C.: May 11, 2011).




                                 Page 16                                      GAO-12-384 Defense Competition for Services
                                        competitive, despite the noncompetitive positions we have gotten
                                        ourselves into over the years.”
Program Offices Can Influence     In 2010, we reported that program officials play a significant role in the
Competition through Vendor        contracting process, particularly in developing requirements and
Preference, Poor Acquisition      interfacing with contractors. Program officials may put pressure on the
Planning, or Overly Restrictive   contracting process to award contracts to a specific vendor without
Requirements                      competition. Contracting officials have said that a program office may be
                                  comfortable with the incumbent contractor because a relationship had
                                  developed between the program office and the contractor, who
                                  understands the program requirements. Program officials pressure the
                                  contracting office to remain with that contractor, thus inhibiting
                                  competition. In one J&A we reviewed, the Office of Military Commissions
                                  expressed a strong preference for the incumbent contractor. Specifically,
                                  the office justified noncompetitively awarding a contract extension valued
                                  at up to $15 million for courtroom services at Guantanamo Bay, under the
                                  competition exception for expert services. 26 According to the J&A, since
                                  2007, the contractor representatives had become fully integrated
                                  members of the litigation teams. These services included handling and
                                  securing sensitive documents and protecting sensitive information in the
                                  courtroom. Given that the government did not expect to need these
                                  services for longer than a year, the government did not want to risk
                                  delays and inefficiencies in the trial process by bringing on a new
                                  contractor.

                                  In 2010, we also reported that, according to contracting officials, program
                                  officials are often insufficiently aware of the amount of time needed to
                                  complete acquisition planning, including performing market research,
                                  properly defining requirements, and allowing contractors time to respond
                                  to requests for proposals, which may hinder opportunities to increase
                                  competition. In 2011, we reported that program officials at civilian
                                  agencies may not know how long these key steps can take, and we have
                                  recommended that agencies establish time frames for when program
                                  officials should begin acquisition planning. 27 Similarly, in one DOD J&A
                                  we reviewed, the Army justified awarding an $11.2 million noncompetitive
                                  bridge contract for mission support services at Ft. Bliss, Texas under the
                                  “only one responsible source” competition exception. Bridge contracts are


                                  26
                                       This J&A cited FAR § 6.302-3.
                                  27
                                    GAO, Acquisition Planning: Opportunities to Build Strong Foundations for Better
                                  Services Contracts, GAO-11-672 (Washington, D.C.: Aug. 9, 2011).




                                  Page 17                                     GAO-12-384 Defense Competition for Services
                               typically short-term to avoid a lapse in service while the award of a follow-
                               on contract is being planned or an awarded contract is being
                               implemented. According to the J&A, this bridge contract was necessary
                               after unexpected delays in the acquisition planning process for a planned
                               competitive follow-on task order. The delays were due to, among other
                               things, the program office changing managers multiple times and
                               difficulties writing requirements that met the contracting officer’s
                               standards, conflicting end-of-year responsibilities for contracting office
                               staff, and the senior procurement officials taking 6 months to approve the
                               acquisition strategy.

                               We have also previously reported that the government’s requirements
                               can influence the number of offers received under competitive
                               solicitations if these requirements are written too restrictively. Contracting
                               officials explained that it is challenging to identify program office
                               requirements that are written so restrictively that they are geared toward
                               the incumbent. These officials said that their technical backgrounds and
                               having the assistance of technical staff in evaluating the requirements can
                               help them determine whether the requirements can be broadened. They
                               noted that if they lack technical expertise in the specific area, it is more
                               difficult to question whether a statement of work is written too restrictively.

Unanticipated Events Have      Finally, we identified instances when unanticipated events stalled planned
Resulted in Noncompetitively   competition, leading to bridge contracts. Unforeseen events that can lead
Awarded Contracts              to bridge contracts include unexpected expansion of requirements and
                               competitors filing bid protests of competitive follow-on contract awards. Of
                               111 J&As we reviewed, 18 were bridge contracts valued at a total of over
                               $9 billion. Five of these bridge contracts were due to bid protests.
                               Examples of bridge contracts due to unanticipated events include:

                               •   DOD’s TRICARE program justified negotiating noncompetitive options
                                   that extended the performance on each of the two existing TRICARE
                                   contracts for 1 year valued at $6.6 billion under the “only one
                                   responsible source” competition exception to provide managed care
                                   support services. 28 According to the J&A, these options were
                                   necessary after unexpected delays in the acquisition process were
                                   triggered by protests at the agency level and to GAO of the prior


                               28
                                  TRICARE is the health care program serving active duty service members, National
                               Guard and Reserve members, retirees, their families, survivors, and certain former
                               spouses worldwide.




                               Page 18                                     GAO-12-384 Defense Competition for Services
                           competitive awards for these services. The extensions allowed
                           TRICARE to compete a large follow-on contract while implementing
                           recommendations stemming from the sustained GAO protest without
                           disrupting the delivery of health care services to TRICARE
                           beneficiaries.
                       •   The U.S. Army Corps of Engineers justified a $22 million
                           noncompetitive modification of an existing contract under the “only
                           one responsible source” competition exception after learning of a
                           major construction requirement in Afghanistan with little notice. As a
                           result, current plans for prison construction already under way were
                           unexpectedly expanded and had to be completed within a short time
                           frame. According to the J&A, the only way to meet this time frame was
                           to not compete a new contract. Officials noted that using the existing
                           contract could save 30 days or more “off an almost unachievable
                           schedule, making every single day saved absolutely critical.”

                       Since 2009, OMB and DOD have implemented efficiency initiatives
OMB and DOD Are        related to competition—including actions to address some opportunities
Taking Steps to        we previously identified. In July 2010, we reported that recent
                       congressional actions to strengthen competition opportunities in major
Increase Competition   defense programs may take some time to demonstrate results.
                       Additionally, we reported that OMB’s efforts to reduce agencies’ use of
                       high-risk contract types may help agencies refocus and reenergize efforts
                       to improve competition. Despite these actions, we identified additional
                       opportunities to increase competition and we recommended that OMB
                       take several actions—including emphasizing the role of program officials
                       in influencing competition, taking steps to better understand the
                       circumstances leading to only one offer on competitive contracts, and
                       examining how competition advocates are appointed.

                       OMB has taken steps to increase efficiency and enhance competition in
                       government contracting, including responding to previous GAO
                       recommendations and issuing guidance to DOD among other agencies.
                       Recent initiatives include:

                       •   In July 2009, OMB implemented an initiative to reduce obligations
                           through new contracts in fiscal year 2010 by 10 percent in certain
                           high-risk categories—including noncompetitive contracts and




                       Page 19                              GAO-12-384 Defense Competition for Services
     competitive procurements that only receive one offer. We recently
     reported on challenges with this initiative. 29
•    In October 2009, OMB established initial guidelines to help chief
     acquisition officers and senior procurement executives evaluate the
     effectiveness of their agencies’ competition practices and processes
     for selecting contract types. 30
•    The Office of Federal Procurement Policy released new guidance with
     respect to competition in establishing GSA schedule blanket purchase
     agreements in December 2009 in response to our recommendation
     that OMB take greater advantage of the opportunities that competition
     provides under schedule blanket purchase agreements. 31
In addition, DOD has taken several actions aimed at increasing
competition in response to Presidential and congressional actions:

•    In June 2010, DOD announced its “Better Buying Power” initiative and
     issued implementing guidance in September 2010, which outlines a
     series of actions and directives to promote competition including:




29
  GAO, Federal Contracting: OMB’s Acquisition Savings Initiative Had Results, but
Improvements Needed, GAO-12-57 (Washington, D.C.: Nov. 15, 2011).
30
  In March 2009, President Obama directed OMB, in collaboration with certain agency
heads and others to develop governmentwide guidance to, among other things, assist
agencies in identifying contracts that are wasteful or inefficient and to formulate
appropriate corrective action in a timely manner.
31
   GAO, Contract Management: Agencies Are Not Maximizing Opportunities for
Competition or Savings under Blanket Purchase Agreements despite Significant Increase
in Usage, GAO-09-792 (Washington, D.C.: Sept. 9, 2009). In March 2011, the FAR
Council issued an interim rule (effective May 16, 2011), amending the FAR to implement
section 863 of the Duncan Hunter National Defense Authorization Act for Fiscal Year
2009, Pub. L. No. 110-417. The interim rule establishes enhanced competition
requirements for placing orders under multiple-award contracts, including schedule
contracts, and competition requirements for the establishment and placement of orders
under schedule blanket purchase agreements. It also restricts the circumstances when
blanket purchase agreements may be established based on a limited-source justification.




Page 20                                     GAO-12-384 Defense Competition for Services
     •    Pursuing open systems architecture and establishing rules for the
          acquisition of technical data rights; 32
     •    Seeking opportunities to increase the role of small businesses in
          defense marketplace competition and opportunities to compete
          multiple award IDIQ service contracts among small businesses;
          and
     •    Presenting a competitive strategy at each program milestone for
          defense acquisition programs.
•    DOD has put particular emphasis on increasing “effective
     competition”—when more than one offer is received under a
     competitive solicitation—and has issued enhanced guidance for
     situations when competitive procedures are used but only one offer is
     received. Specifically, in November 2010 DOD issued a memorandum
     that requires contracting officers to provide additional time for
     contractors to respond to solicitations when only one offer is received,
     if less than 30 days was provided for the receipt of proposals under
     the original solicitation. In addition, if a solicitation allowed at least 30
     days for receipt of offers and only one offer was received, the
     contracting officer must determine prices to be fair and reasonable
     through price or cost analysis or enter negotiations with the offeror. 33
     •    In addition, in July 2010, in response to our recommendations and
          as part of the Better Buying Power initiative, the Chairman of
          DOD’s Panel on Contracting Integrity established a new
          subcommittee tasked with examining improvements for



32
   DOD published a final rule in September 2010 (DFARS § 207.106 (S-72)) amending the
DFARS to implement § 202 of the Weapon Systems Acquisition Reform Act of 2009, Pub.
L. No. 111-23 requiring, among other things, that acquisition plans for major defense
acquisition programs include measures to ensure competition or the option of competition
throughout the program life cycle; the rule stated one way of ensuring competition was
through the acquisition of complete technical data packages. 75 Fed. Reg. 54524, Final
rule, Sept. 8, 2010. DFARS Case 2009-D031 is an interim rule amending the DFARS to
implement section 821 of the National Defense Authorization Act for Fiscal Year 2010,
Pub. L. No. 111-84 (2009), which authorizes certain types of government support
contractors to have access to proprietary technical data belonging to prime contractors
and other third parties, provided that the technical data owner may require the support
contractor to execute a nondisclosure agreement having certain restrictions and remedies.
76 Fed. Reg. 11363, Interim rule, March 2, 2011. We previously recommended that DOD
update policies that clarify requirements for documenting long-term technical-data
requirements in weapons system program acquisition strategies and acquisition plans.
GAO-11-469.
33
  In July 2011, DOD proposed an amendment, which has not yet been made final, to the
DFARS incorporating this requirement. 76 Fed. Reg. 44293, (proposed July 25, 2011).




Page 21                                     GAO-12-384 Defense Competition for Services
          competitive opportunities and ways to be more effective at
          reducing single source buys. According to a DOD procurement
          policy official, the subcommittee is in the process of reviewing and
          responding to comments on the proposed rule on competitive
          procurements with only one offer, which is expected to be finalized
          in late spring 2012.
•   DOD has also taken actions to enhance the competition advocate
    role, such as requiring each component or agency competition
    advocate to develop a plan to improve the overall rate of competition
    by at least two percent per year, and the rate of “effective competition”
    by at least 10 percent per year. DOD also holds quarterly meetings
    where competition advocates from the military services and other
    DOD agencies review the progress toward meeting competition
    procurement goals and discuss challenges and best practices. In
    December 2011, DOD issued a department-wide memorandum
    stating that DOD did not meet its fiscal year 2011 competition goals
    under the Better Buying Power initiative. DOD’s competition advocate
    stated that the department is paying too much for products and
    services and that competition is the key to driving down prices. He
    urged the component competition advocates to continue to identify
    shortcomings in competitive procedures and to communicate new
    ideas with each other on how to implement and improve competition.
    The memorandum also outlines fiscal year 2012 competition goals for
    DOD overall as well as for individual departments and components.
    DOD does not establish separate goals for products and services.
    The fiscal year 2012 goal for DOD overall (60 percent) is lower than
    the fiscal year 2011 goal (62.8 percent). According to a DOD
    procurement policy official, competition goals for fiscal year 2012 were
    established based on actual competition rates over the past few
    years.
During our previous work, DOD officials reported they have taken
additional steps at the component level to enhance competition—such as
efforts to educate and hold program officials accountable and additional
review of individual contract actions under class J&As.

•   In July 2010, we reported that the Navy has made competition training
    mandatory for personnel engaged in the acquisition process, including
    program managers, program executive officers and logistics
    personnel. In addition, in 2009 a senior Navy official told us that the
    Navy is following up with program managers who previously
    submitted J&As but stated that the requirement would be competed
    the next year to see if program managers are actually competing
    these requirements in the future.


Page 22                                 GAO-12-384 Defense Competition for Services
                  •     In January 2012, we reported that the Air Force revised its process for
                        a recently approved national security class justification for an
                        intelligence, surveillance, and reconnaissance program office,
                        requiring individual contract actions over $85.5 million to be submitted
                        to the Air Force senior procurement executive for expedited review.
                        According to an Air Force General Counsel official, the Air Force has
                        not yet determined what type of documentation will be required as
                        part of that review, but it believes the increased review may identify
                        additional opportunities for competition. We recommended that DOD
                        evaluate the Air Force’s new review process for national security
                        exception actions under class justifications and implement a similar
                        process across the department if it is found beneficial; DOD agreed
                        with this recommendation. 34
                  In addition to the recent actions DOD has taken, in July 2010, we
                  identified other opportunities to increase competition across the federal
                  government. These include emphasizing the role of program officials in
                  influencing competition, better understanding the circumstances leading
                  to only one offer on competitive contracts, and examining how
                  competition advocates are appointed. We continue to track the agencies’
                  progress in implementing these recommendations.


                  We provided a draft of this report to DOD and the department responded
Agency Comments   that it had no comments.


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

                  If you or your staff have any questions about this report or need additional
                  information, please contact me at (202) 512-4841 or huttonj@gao.gov.
                  Contact points for our Offices of Congressional Relations and Public




                  34
                       GAO-12-263.




                  Page 23                                 GAO-12-384 Defense Competition for Services
Affairs may be found on the last page of this report. Staff
acknowledgments are provided in appendix III.




John P. Hutton
Director
Acquisition and Sourcing Management




Page 24                               GAO-12-384 Defense Competition for Services
Appendix I: Objectives, Scope, and
              Appendix I: Objectives, Scope, and
              Methodology



Methodology

              The objectives for this review were to examine (1) how competition for
              non-research and development (R&D) services compares to competition
              for products, and trends in competition for non-R&D services at the
              Department of Defense (DOD); (2) the reasons for noncompetitive
              contracts and task orders for services; and (3) steps DOD has taken to
              increase competition for services.

              To address these objectives, we identified through the Federal
              Procurement Data System-Next Generation (FPDS-NG) DOD obligations
              under competitive and noncompetitive contracts in fiscal years 2007
              through 2011, the most recent data available when we conducted our
              review. 1 For competitive contract actions, we included contracts and
              orders coded as “full and open competition,” “full and open after exclusion
              of sources,” “competitive delivery order,” 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,” “follow-on to competed action,” and “non-competitive
              delivery order” 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.” 2 In addition, we identified
              fiscal year 2011 obligations under contracts where more than one offer
              had been received. We calculated competition rates as the percentage of
              obligations on competitive contracts and orders over all obligations on
              contracts and orders. We focused our review on non-research and
              development (R&D) services to concentrate our analysis on contracts not
              related to development of weapons systems, but conducted limited
              analysis to understand competition rates for R&D services as compared
              to non-R&D services and to products, in fiscal year 2011. We also
              identified trends in competition rates for non-R&D services at DOD
              components from fiscal years 2007 through 2011. We assessed


              1
                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, and (2)
              reviewing existing information about the data and the system that produced them. We
              determined that the data were sufficiently reliable for the purposes of this report.
              2
               We have previously reported on miscoding errors related to these fields. However,
              system-wide changes were made to FPDS-NG in October 2009 that should have
              mitigated these errors for the time period we reviewed. See GAO-10-833.




              Page 25                                     GAO-12-384 Defense Competition for Services
Appendix I: Objectives, Scope, and
Methodology




competition rates across the 23 non-R&D service categories in FPDS-NG
as well as across DOD and non-DOD contracting organizations (those
organizations that obligated funds for services on DOD’s behalf in fiscal
year 2011).

We also examined the reasons cited in FPDS-NG for not competing DOD
contracts and orders for services in fiscal year 2011. To do so, we
selected and reviewed a non-generalizable sample of 111 justification
and approval (J&A) and exception to fair opportunity documents to
identify what circumstances led to the award of noncompetitive contracts
and orders. While agencies are generally required to post J&As to the
FedBizOpps.gov website, we did not assess whether the available data
represented the full universe. We used a non-generalizable sample to
provide illustrative examples of J&As, which was an appropriate approach
to meet our reporting objective. The J&A documents we reviewed
included:

•   A selection of 77 documents provided by DOD components in
    response to our request for all justification and approval documents
    approved by the senior procurement executives in fiscal year 2011. 3
    Some of these documents were for a mix of products and services
    providing weapons system support.
•   A selection of 34 DOD J&As posted on the FedBizOpps.gov website.
    We selected these to obtain a mix of J&As from: the non-R&D service
    categories with the highest obligations (Maintenance, Repair, and
    Rebuilding of Equipment, Professional, Administrative and
    Management Support, and Construction of Structures and Facilities);
    each major DOD component (Air Force, Army, Navy, and other
    Defense agencies); and approvals at various points throughout fiscal
    year 2011.
In addition, we reviewed previous GAO reports, Office of Management
and Budget and DOD policies and guidance, and DOD competition
reports for fiscal years 2009 and 2010 to identify reasons for not
competing contracts as well as actions that have been taken to improve
competition at DOD. We also reviewed recent GAO interviews with DOD
officials to identify barriers to competition as well as actions underway or
planned for the future to improve competition. Interviews were conducted


3
  The Federal Acquisition Regulation requires J&As to be approved by DOD senior
procurement executives when the total value of the acquisition is expected to exceed
$85.5 million.




Page 26                                      GAO-12-384 Defense Competition for Services
Appendix I: Objectives, Scope, and
Methodology




as part of previous work related to government-wide competition, national
security competition exception, and acquisition planning. 4

We conducted this performance audit from September 2011 to March
2012, 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.




4
    See GAO-10-833, GAO-12-263, and GAO-11-672.




Page 27                                  GAO-12-384 Defense Competition for Services
Appendix II: Fiscal Year 2011 DOD
              Appendix II: Fiscal Year 2011 DOD Competition
              Rates by Service Category and Component



Competition Rates by Service Category and
Component
              In fiscal year 2011, competition rates varied significantly among the 23
              non-R&D service categories in FPDS-NG—from 43 to 97 percent.
              Competition rates also varied among the three service categories with the
              highest obligations, which together made up over half of all non-R&D
              services obligations. See table 1.

              Table 1: DOD Competition Rates for Non-R&D Service Categories in Fiscal Year
              2011

                                                                                                % of Total Fiscal
                                                                                                 Year 2011 non-
                                                                              Competition         R&D Services
              Service Category                                                      Rate             Obligations
              Purchase of Structures & Facilities                                       43%                      0%
              Technical Representative                                                  53%                      1%
              Quality Control, Testing & Inspection                                     61%                      0%
              Photographic, Mapping, Printing & Publishing                              63%                      0%
              Modification of Equipment                                                 63%                      0%
              Installation of Equipment                                                 64%                      1%
              Special Studies                                                           68%                      2%
              Maintenance, Repair & Rebuilding of Equipment                             68%                    12%
              Utilities and Housekeeping                                                69%                      6%
              Educational & Training                                                    69%                      1%
              ADP & Telecommunication                                                   70%                      9%
              Salvage Equipment                                                         75%                      0%
              Operation of Government-Owned Facilities                                  75%                      2%
              Lease or Rental of Equipment                                              75%                      0%
              Support Services (Professional, Administrative,                           76%                    30%
              Management)
              Maintenance, Repair or Alteration of Real Property                        76%                      6%
              Social Services                                                           79%                      0%
              Natural Resources Management                                              83%                      1%
              Lease or Rental of Facilities                                             85%                      0%
              Medical Services                                                          87%                      9%
              Architect & Engineering                                                   90%                      2%
              Construction of Structures & Facilities                                   90%                    12%
              Transportation, Travel & Relocation Services                              97%                      6%
              Total                                                                     78%                   100%
              Source: GAO analysis of FPDS-NG data.

              Note: Service categories where the percent of obligations is zero had less than 0.5 percent of total
              DOD non-R&D services obligations in fiscal year 2011.




              Page 28                                             GAO-12-384 Defense Competition for Services
Appendix II: Fiscal Year 2011 DOD Competition
Rates by Service Category and Component




In fiscal year 2011, the major DOD components had varying competition
rates for non-R&D services. The Air Force had the lowest overall
competition rate (59 percent) while other defense agencies had the
highest (89 percent). Effective competition—a subset of overall
competition which DOD defines as competed actions that received more
than one offer in response to a solicitation—rates also varied across the
major components (52 percent at the Air Force to 82 percent at other
defense agencies). The Navy had the highest percentage of competed
actions with only one offer (16 percent). See figure 5 for competition
percentages at each major DOD component.

Figure 5: Competition Rates by DOD Component for Non-R&D services in Fiscal
Year 2011




Page 29                                         GAO-12-384 Defense Competition for Services
Appendix III: GAO Contact and Staff
                  Appendix III: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  John P. Hutton, (202) 512-4841 or huttonj@gao.gov
GAO Contact
                  In addition to the contact names above, Michele Mackin, Acting Director;
Staff             Alexandra Dew Silva; Peter Anderson; Georgeann Higgins; Julia Kennon;
Acknowledgments   Jean McSween; Cary Russell; Kenneth Patton; Sylvia Schatz; Roxanna
                  Sun; and Andrea Yohe made key contributions to this report.




(121015)
                  Page 30                               GAO-12-384 Defense Competition for Services
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