oversight

Government Is Analyzing Alternatives for Contractor Identification Numbers

Published by the Government Accountability Office on 2012-06-12.

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

United States Government Accountability Office
Washington, DC 20548



           June 12, 2012


           The Honorable E. Benjamin Nelson
           Chairman
           Subcommittee on Legislative Branch
           Committee on Appropriations
           United States Senate

           Subject: Government Is Analyzing Alternatives for Contractor Identification Numbers


           In 2011, the federal government spent more than $1 trillion on contracts and grants.
           To help manage and oversee these activities, the government relies on a number of
           data systems which are used, for example, to advertise solicitations, report awards,
           and track performance. The government needs a way to distinguish between the
           numerous entities with which it does business. For decades, the government has
           relied on Dun & Bradstreet’s Data Universal Numbering System (DUNS) as a unique
           identifier. The General Services Administration (GSA) contracts with Dun &
           Bradstreet for use of DUNS numbers in governmentwide data systems. Over time,
           DUNS numbers have become embedded in various government data systems and
           processes, and all prospective contractors, grantees, and other federal aid recipients
           generally are required to have a DUNS number in order to do business with the
           government. In recent years, government officials have expressed concerns about
           the rising costs of using DUNS numbers. In addition, other companies that offer
           unique identifier numbering systems have questioned why the government will not
           consider their products and services as an alternative to DUNS numbers.


           You asked us to review the federal government’s use of DUNS numbers. In
           response, we examined (1) how the government currently contracts for and uses
           DUNS numbers; (2) the challenges posed by the government’s use of DUNS
           numbers; and (3) steps GSA has taken to mitigate these challenges. To address
           these objectives, we analyzed GSA documents such as analyses of alternatives and
           contracts and interviewed officials from GSA, other agencies, and Dun & Bradstreet.
           We also interviewed officials from companies that compete with Dun & Bradstreet in
           commercial markets.


           We conducted this performance audit from January 2012 to June 2012 in
           accordance with generally accepted government auditing standards. Those

                                                                                    GAO-12-715R
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.


Results in Brief
In recent years, the government’s reliance on DUNS numbers has increased
significantly. There has been a dramatic increase in the number and types of entities
that are required to have DUNS numbers to do business with the government. GSA
also has expanded the level of business information services that it acquires from
Dun & Bradstreet. These services include data verification and monitoring as well as
corporate linkage information to support enhanced reporting capabilities. As GSA
has increased its use of the DUNS number and business information services, its
costs have increased from about $1 million in 2002 to approximately $19 million per
year under the current contract. The current contract for DUNS numbers is a sole-
source contract awarded to Dun & Bradstreet in 2010 for a 3-year base period with
options for 5 additional years—the contract now totals up to $154 million.


There are several challenges associated with GSA’s contract for unique
identification numbers. GSA believes that Dun & Bradstreet effectively has a
monopoly for government unique identifiers that has contributed to higher costs. This
effective monopoly results in part from government regulations and directives that
require contractors, grantees, and other entities seeking to do business with the
government to obtain a DUNS number. Also, due to the proprietary nature of DUNS
numbers, Dun & Bradstreet has placed restrictions on how GSA can use DUNS
numbers. This limits the purposes for which the government can use the data and
hampers the ability to switch to a new numbering system. Dun & Bradstreet’s
competitors have raised concerns regarding the government’s use of DUNS
numbers as its unique identification number. These companies believe that the
integral role of DUNS numbers in government systems has provided Dun &
Bradstreet with unfair advantages in the government or commercial markets for
business data. Other organizations have expressed concerns about the
government’s use of DUNS numbers as well. For example, one organization noted
that DUNS numbers are not subject to transparency requirements such as Freedom
of Information Act requests so it is difficult to determine independently the accuracy
or comprehensiveness of DUNS information.


To address concerns about the high costs and proprietary restrictions associated
with the government’s use of DUNS numbers, GSA recently began an analysis of
alternatives for unique numbering systems. In its ongoing analysis, GSA has
conducted market research and plans to conduct a cost-benefit analysis and
feasibility study for alternatives to using DUNS numbers by September 2012. GSA
has concluded that it is not in the best interests of the government to change from
one proprietary number to another. The agency is therefore evaluating the
advantages and disadvantages of replacing DUNS numbers with a government-
owned numbering system. GSA also will be considering a hybrid approach utilizing


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both DUNS numbers and a government-owned numbering system, which could be a
viable alternative. A key factor in deciding whether to replace DUNS numbers in
government data systems is the cost of switching. In the event of a change, GSA
and dozens of other agencies would have to modify their data systems, replace all
DUNS-related data in those systems, and update policies and procedures that refer
to DUNS numbers. GSA officials have said switching costs could be substantial and,
while they have outlined steps for capturing costs, they are still developing their
methodology for estimating these costs. Meanwhile, even as GSA continues using
DUNS numbers, the agency may be able to ease current restrictions on their use,
such as the requirement to delete associated DUNS data when the contract with
Dun & Bradstreet ends. We are recommending that GSA initiate negotiations with
Dun & Bradstreet to that end. GSA agreed with our recommendation.


Background
Governmentwide acquisition systems, finance systems, and other data systems
depend on the ability to assign a unique identification number to businesses and
other organizations seeking to do business with the government. The federal
government has contracted with Dun & Bradstreet since 1978 to provide DUNS
identification numbers for all government contractors. A DUNS number is a unique
nine-digit number that is assigned to every business entity in Dun & Bradstreet’s
global business database, which according to Dun & Bradstreet contains more than
166 million records. Many businesses have multiple DUNS numbers since Dun &
Bradstreet assigns a number to each physical location of an organization (such as
branches, divisions, and headquarters). In addition to the right to use DUNS
numbers as a unique identification number, GSA also contracts with Dun &
Bradstreet to provide business information and related services on all existing and
potential government contractors and awardees. This information is linked to the
business entity through the DUNS number. The DUNS number and associated
business information are owned and controlled by Dun & Bradstreet, but licensed to
the government to be used for selected acquisition purposes.


The federal government began using DUNS numbers in the 1970s to identify and
track contractors. During the late 1980s and early 1990s, the government replaced
the DUNS number and established its own database of Contractor Establishment
Code (CEC) numbers. The government contracted with Dun & Bradstreet to operate
and maintain this database. In 1996, the government made a determination to
replace the CEC numbers and use the commercially available DUNS number to
fulfill its needs; a Federal Acquisition Regulation (FAR) interim rule was issued to
implement this determination. 1 Government officials said the decision was based on
several factors, most notably that the DUNS number was widely used and accepted,
both domestically and internationally, and that the DUNS number was viewed as the
only reliable mechanism for cross-walking to other numbering systems. In 1998, the
FAR was amended with a final rule to replace the CEC with the DUNS number as
the means of identifying contractors in the government’s main reporting data system,


1
61 Fed. Reg. 67,412 (Dec. 20, 1996).


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the Federal Procurement Data System (FPDS). 2 In 2003, another amendment to the
FAR specified that contractors must obtain and submit a DUNS number in order to
register in the Central Contractor Registration (CCR), a data system in which all
prospective contractors generally must register to be eligible for government
contracts. 3


GSA is the agency responsible for managing the Dun & Bradstreet contract. That
contract provides the rights to use DUNS numbers in CCR, the Federal Procurement
Data System-Next Generation (FPDS-NG), and several other governmentwide
acquisition data systems. In 2002, the contract became part of the Integrated
Acquisition Environment (IAE), a GSA-led initiative to bring together different
acquisition data systems. IAE consists of several data systems that support actions
integral to the acquisition process, such as posting contracting opportunities,
registering prospective contractors, assessing contractor performance, and reporting
contract actions. 4 GSA uses memorandums of understanding with the 24
departments and agencies now covered by the Chief Financial Officers Act of 1990
to collect funding contributions, which pay for the development, operations, and
maintenance of IAE’s portfolio, including the Dun & Bradstreet contract. GSA is
currently working to consolidate its portfolio of data systems into one single system
known as the System for Award Management (SAM). The first phase of SAM will
incorporate the functionality of three IAE data systems—CCR, the Excluded Parties
List System (EPLS), and the Online Representations and Certifications Application
(ORCA). GAO recently reported on GSA’s progress in implementing SAM and found
that higher than anticipated costs and constrained resources have resulted in delays
and pose a risk to the future viability of the project. 5 In response to our
recommendations, GSA is currently reassessing its approach to developing and
implementing SAM.


The DUNS Number Has Become an Increasingly Integral Component in How
Government Data Systems Operate
In recent years, the government’s reliance on DUNS numbers has increased and
they have become an integral component in how government data systems operate.
For instance, there has been a dramatic increase in the number and type of entities
that are required to have DUNS numbers to do business with the government. When
the DUNS number was incorporated into the FAR as a final rule in 1998, only

2
 63 Fed. Reg. 9,049 (Feb. 23, 1998). The final rule is currently implemented at FAR § 4.605(b) which
identifies the DUNS number as the Contractor Identification Number for reporting the successful
offeror in the Central Contractor Registration database.
3
 FAR § § 4.1102; 52.204-7. Exceptions to registration in the CCR database for prospective offerors
are in FAR 4.1102
4
 The nine systems of IAE include Federal Business Opportunities (FedBizOpps), FPDS-NG, Wage
Determinations OnLine (WDOL), Past Performance Information Retrieval System (PPIRS), Excluded
Parties List System (EPLS), Central Contractor Registration (CCR), Federal Agency Registration
(FedReg), Electronic Subcontract Reporting System (eSRS), and Online Representations and
Certifications Application (ORCA).
5
 GAO, Effort to Consolidate Government Acquisition Data Systems Should Be Reassessed, GAO-12-
429 (Washington, D.C.: March 2012)



Page 4                                                                                 GAO-12-715R
prospective contractors were required to obtain DUNS numbers. In 2003, the Office
of Management and Budget (OMB) issued guidance that also required grant and
cooperative agreement applicants to obtain DUNS numbers. 6 OMB expanded this
policy in 2008 when it required DUNS numbers for recipients of loans and other
types of financial assistance. 7 In January 2006, there were 403,000 contractors
registered in CCR. There are approximately 625,000 entities currently registered in
CCR, including contractors, grantees, and other federal assistance recipients and
each had to obtain a DUNS number in order to register.


In addition to an increase in the number of entities required to obtain a DUNS
number, the level of business information services that GSA acquires from Dun &
Bradstreet also expanded. These services include verifying basic information such
as an entity’s name and address, providing corporate linkages, and monitoring
changes to entity names or corporate ownership. 8 Previously, GSA’s contract with
Dun & Bradstreet only provided business information services for the acquisition
community and the IAE systems associated with it. This changed when the Federal
Funding Accountability and Transparency Act of 2006 (Transparency Act) required
OMB to ensure the existence and operation of a website at which the public could
search certain data about government financial awards, including contracts, grants,
and loans. 9 Among the required searchable elements for each award is a unique
identifier of the entity receiving the award and of the parent entity of the recipient.
OMB chose the DUNS number to fulfill the unique identifier requirement. With this
action the number of entities for which Dun & Bradstreet provides corporate linkage
information expanded from just contractors to all recipients of federal awards. Later,
in 2010, OMB also began requiring all federal awardees to register in CCR, which
increased the level of business verification information provided by Dun &
Bradstreet. 10 Finally, the American Recovery and Reinvestment Act of 2009
(Recovery Act) temporarily increased the number of entities receiving federal
awards, thereby increasing the number of entities registering in CCR for which the
government collected DUNS information. 11



6
 Office of Management and Budget Memorandum M-03-16, “OMB Issues Grants Management
Policies” (July 15, 2003); Use of a Universal Identifier by Grant Applicants, 68 Fed. Reg. 38,402 (June
27, 2003) Grantees were not required to register in CCR at that time, but were directed to do so by
OMB in August 2010. OMB Memorandum, “Open Government Directive—Federal Spending
Transparency and Subaward and Compensation Data Reporting” (Aug. 27, 2010); Financial
Assistance Use of Universal Identifier and Central Contractor Registration, 75 Fed. Reg. 55,671
(Sept. 14, 2010).
7
 OMB Memorandum M-08-19, “Authority to Collect DUNS Number to Meet Requirements of the
Federal Funding Accountability and Transparency Act of 2006” (May 30, 2008).
8
 The corporate family information allows the government and the public, through the Federal
Procurement Data System-Next Generation (FPDS-NG) and USAspending.gov, to aggregate data to
show the total amount of contracts or awards a company has received. The linkage information also
enhances the effectiveness of the Excluded Parties List System (EPLS), the list designed to identify
individuals and entities that have been debarred or suspended from obtaining government awards.
9
 Pub. L. No. 109-282, as amended by Pub. L. No. 110-252 § 6202. The website became
USAspending.gov.
10
  75 Fed.Reg. 55,671 (Sept. 14, 2010).
11
  Pub. L. No. 111-5.


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The DUNS number has also become embedded in agencies’ internal data systems
and is used to support other agency missions. IAE officials report that most of the
more than 60 agencies that use IAE acquisition systems rely on DUNS numbers in
their internal financial and contract writing systems. For example, CCR contains
information on contractors, including DUNS numbers and entity name and address,
which agencies download and use to make payments. The DUNS number has
become so integrated and common in government financial systems that GAO
recommended its use in a report that provided guidelines on properly functioning
financial processes. 12 In addition, some agencies have separate contracts with Dun
& Bradstreet for DUNS numbers and business information services to support their
specific missions. GSA officials said that agencies may use Dun & Bradstreet data
from CCR or other IAE systems for acquisition purposes. However, if they need
DUNS related information or services that are not covered by the GSA contract, they
must enter into their own contract with Dun & Bradstreet. For instance, the Small
Business Administration has a contract with Dun & Bradstreet to use DUNS
numbers and related data to help provide financial oversight of its loan programs.
Other agencies have their own contracts with Dun & Bradstreet for data used for
visa fraud detection, financial fraud detection, and air cargo risk management.


As use of the DUNS number and business information services has increased,
GSA’s costs have increased as well. Between 2002 and 2004, the cost of the DUNS
number contract was tied to the number of CCR registrants and cost about $1 million
per year. In response to the new demands for business information services
required by the Transparency Act, GSA signed a contract with Dun & Bradstreet in
2007 that changed the pricing structure from a per-transaction model, where costs
were based on the number of CCR registrants, to an “enterprise” model where the
government is provided with access to Dun & Bradstreet business data for a fixed
price. GSA officials told us that the requirements in the Transparency Act to make
corporate linkage information available on a public website also resulted in higher
prices since Dun & Bradstreet needed to be compensated for making proprietary
information publicly accessible. While GSA believes this pricing structure is more
cost effective given the new requirements, it has resulted in a large increase in
payments to Dun & Bradstreet, which average $19 million per year under the current
contract (see figure 1). There was a temporary drop in payments in fiscal year 2011
because GSA modified its contract with Dun & Bradstreet to defer payments to later
years. Under the terms of the contract, GSA had been scheduled to pay Dun &
Bradstreet $18 million in August 2011. In order to support efforts related to the
development of SAM, GSA negotiated two modifications to the contract that allowed
GSA to defer $14 million from fiscal year 2011 to fiscal year 2012. This action was a
result of the fiscal challenges GSA has faced as it consolidates its portfolio of data
systems into its new unified data system, SAM.




12
  GAO, Core Financial System Requirements: Checklist for Reviewing Systems under the Federal
Financial Management Improvement Act, GAO-05-225G (Washington, D.C.: February 2005).


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Figure 1: IAE Payments to Dun & Bradstreet by Fiscal Year




Source: GAO analysis of GSA information.
Note: The dotted line indicates the future payment schedule identified in the Dun & Bradstreet contract. Also, the
final option ends on June 29, 2018, so the fiscal year 2018 payment does not cover the final 3 months of the
fiscal year.



The current contract, which was awarded in 2010 for up to 8 years (3-year base
period plus options for 5 additional years) and is now worth up to $154 million, is the
latest in a series of sole-source, multiple-year contracts awarded to Dun &
Bradstreet. GSA officials told us the DUNS contracts have been sole-source awards
because of the FAR requirement that all government contractors obtain a DUNS
number, and because they have been unable to identify an acceptable alternative. In
addition to assigning DUNS numbers and providing related services, Dun &
Bradstreet operates a help desk to support current and new registrants and carries
out special analyses and ad hoc projects. GSA officials reported that assigning
DUNS numbers and the help desk represent about 20 percent of the contract price.
The remaining 80 percent of the price primarily pays for the business verification and
corporate linkage information that Dun & Bradstreet provides.


The Government Faces Several Challenges Associated with Using DUNS
Numbers
The government faces several challenges associated with GSA’s contract for unique
identification numbers. GSA believes that Dun & Bradstreet effectively has a
monopoly that has contributed to higher costs. This effective monopoly results in
part from the FAR requirement and OMB directives that require all contractors,
grantees, and other entities seeking to do business with the government to acquire a
DUNS number. GSA officials have said that as long as the FAR requirement is in
place they must use the DUNS number and cannot hold a competition for unique
identification numbers. GSA officials said that the current sole-source environment
results in higher prices to the government, and that a competitive acquisition likely
would result in lower prices to GSA. They also expressed concern that Dun &



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Bradstreet’s prices may continue to rise as the government’s use of its services
continues to expand. Additionally, members of the Acquisition Committee for e-Gov
(ACE), IAE’s governance committee, have also questioned the high costs for DUNS
numbers as Dun & Bradstreet’s contract is IAE’s largest expense. 13 In response to
cost concerns, GSA officials held discussions with a Dun & Bradstreet competitor in
2008 to help gauge the reasonableness of the prices that Dun & Bradstreet charged.
GSA officials found that Dun & Bradstreet’s prices were relatively high compared to
this competitor, which offered another proprietary product, and the officials said they
used this information to negotiate a better price from Dun & Bradstreet for the
contract awarded in 2010. GSA officials said they negotiated a 25 percent reduction
in prices in exchange for a longer contract length and changes in how GSA
administers the contract. However, despite the lower prices, GSA officials are still
concerned with the high costs associated with the use of DUNS numbers relative to
other IAE program costs.


Another challenge the government faces involves the proprietary limitations that Dun
& Bradstreet has placed on GSA’s use of DUNS numbers. Specifically, GSA’s
contract with Dun & Bradstreet limits how and where Dun & Bradstreet data can be
used. For example, the contract specifies that Dun & Bradstreet data may only
reside in IAE data systems and on federal agency acquisition systems, and can be
used only for acquisition purposes. Any other uses or disclosure of data outside of
the contract scope and licensing terms, even if the activity is government related,
would require either a contract modification or a new separate contract. In at least
one case, this has hampered the government’s ability to effectively use DUNS
numbers. In 2009 Congress requested that the Department of Defense (DOD) report
on the total value of DOD contracts entered into with contractors that have been
indicted for, settled charges of, or had been fined or convicted of fraud in connection
with any contract entered into with the federal government over the past 10 years. 14
In responding to this directive, DOD obtained fraud case data from the Department
of Justice that did not contain DUNS numbers. DOD used the company names to
search for contract obligation data in FPDS-NG. Without DUNS numbers and their
associated corporate linkage information, however, DOD was unable to identify the
parent company of all offending companies and could not capture all the obligation
data. DOD was unable to use corporate linkage information since this use of data fell
outside the scope of GSA’s contract with Dun & Bradstreet. 15



13
  The ACE is a subcommittee of the Chief Acquisition Officer’s Council which was established to
provide a senior level forum for monitoring and improving the federal acquisition system.
14
  Explanatory Statement of the House of Representatives Subcommittee on Defense Appropriations
H.R. 3326, Department of Defense Appropriations Act, 2010 (the Act). 155 Cong. Rec. H15,042,
H15,043 (2009). As enacted, the Act provided that the Explanatory Statement shall have the same
effect as if it were a joint explanatory statement of a committee of conference. Public Law No. 111-
118 § 1014 (2009).
15
  GSA officials told us that the Dun & Bradstreet contract was modified to clarify GSA’s liability in the
event that another agency used Dun & Bradstreet data in ways that were not allowed under GSA’s
contract. Specifically, they said that GSA was not responsible for the misuse of Dun & Bradstreet’s
data by non-GSA users. GSA officials said other government agencies would have to determine
whether their use of Dun & Bradstreet’s data complied with the terms of the contract.


Page 8                                                                                      GAO-12-715R
Additionally, there are other restrictions in the contract that could cause challenges
for the government if it were to change to an alternative numbering system.
According to GSA, the contract specifies that the government would have to delete
certain Dun & Bradstreet provided data from its databases at the end of the GSA
contract. GSA officials said that under the terms of the contract, GSA is not required
to delete the DUNS numbers, but could have to purge associated data. This would
include data elements such as business name and address. 16 GSA officials said this
would apply to the IAE systems in addition to agency acquisitions systems if GSA
ended the Dun & Bradstreet contract and moved to a new numbering system. Given
the widespread use of DUNS numbers and associated data in government data
systems, this could be very disruptive.


Dun & Bradstreet’s competitors have raised concerns regarding the government’s
use of DUNS numbers as its unique identification number. We spoke with three
companies that compete in the commercial market with Dun & Bradstreet and each
of these companies raised issues that they believe provide Dun & Bradstreet unfair
advantages in the government or commercial markets for business data. For
instance, one company noted that some federal agency officials have interpreted the
DUNS requirement in the FAR to mean that DUNS numbers are required in other
contexts as well. The company provided several examples, one of which was a
solicitation to create a new agency-specific database that required the database to
use DUNS numbers. Although this solicitation was using full and open competition,
the company told us that including the DUNS number requirement in the solicitation
ensured that only Dun & Bradstreet could qualify for the contract. Additionally, the
same company also pointed out that the requirement to register in CCR means that
thousands of companies provide Dun & Bradstreet with their business information,
while Dun & Bradstreet’s competitors have to discover this information using their
own resources. Because of this, the competitor believes that Dun & Bradstreet has a
monopoly for government identifiers which gives Dun & Bradstreet an unfair
advantage in the competitive commercial market for business data as well.


Organizations concerned about transparency in government activities also have
raised concerns related to using a numbering system that does not enable the public
to fully track entities doing business with the government. For example, in a 2008
letter to OMB, the National Association of State Auditors, Comptrollers, and
Treasurers (NASACT) noted that Dun & Bradstreet is not accountable to any
government authority, yet DUNS numbers play a vital role in providing a
governmentwide identifying system. NASACT also cited data reliability concerns with
Dun & Bradstreet’s process for assigning DUNS numbers to state government
agencies and other entities. OMB Watch, a nonprofit organization, also has criticized
the lack of transparency associated with using the DUNS numbers. For example, the
organization noted that DUNS numbers are not subject to transparency
requirements such as Freedom of Information Act requests so it is difficult to

16
 When entities register in CCR, they only need to enter their DUNS number for their entity name and
address information to be imported from Dun & Bradstreet’s database. GSA officials said that
because these data come from Dun & Bradstreet, they are subject to the limitations specified in the
Dun & Bradstreet contract.


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determine independently the accuracy or comprehensiveness of DUNS information.
OMB Watch encouraged the government to develop its own unique identification
number rather than remain dependent on a privately owned system that is
inaccessible to the public.


GSA Is Analyzing Alternatives to Mitigate DUNS Challenges, but Results Yet to
Be Determined
Concerns about the high costs associated with the government’s use of DUNS
numbers have led GSA to consider using alternative unique numbering systems. In
2009, GSA issued a sources sought notice to measure the interest and availability of
companies capable of providing a system for unique identification numbers. 17 GSA
officials did not know whether any companies other than Dun & Bradstreet offered
unique identifiers and related services that were comparable to DUNS numbers.
GSA received two responses to its 2009 sources sought notice (and a third from
Dun & Bradstreet) and determined that one of the companies was a viable
competitor to Dun & Bradstreet. However, in their evaluation of the responses, GSA
officials concluded that they could not conduct a competition for unique identifiers
until the FAR was modified to remove the DUNS requirement. These officials
recommended that GSA initiate a FAR change and then conduct a full and open
competition for unique identifiers once the change had been completed. GSA
officials said they developed a proposal to change the FAR, but the Federal
Acquisition Regulatory Council recommended suspending the effort to change the
FAR until the completion of a comprehensive cost and schedule analysis. 18 GSA
had not evaluated the costs of changing numbering systems at that time although
some agencies had voiced concerns that switching costs could be significant.
Shortly after the FAR change was put on hold, GSA awarded the current sole-source
contract to Dun & Bradstreet in 2010. In explaining its rationale for awarding a sole-
source contract, the agency noted that the FAR required the use of DUNS numbers
and Dun & Bradstreet was the only source of DUNS numbers.


In 2011, GSA initiated another effort to identify possible alternatives for unique
identification numbers and expects to issue a report on its findings and
recommendations by September 2012. This latest effort consists of a sources
sought notice as well as a cost-benefit analysis and feasibility study of alternative
approaches to acquiring numbering systems. The different approaches that GSA
has considered include:
•    Continue to use DUNS numbers and services,


17
  A sources sought notice is a form of market research that is designed to allow agencies to describe
a specific need and get input from industry to determine if there are sources capable of meeting the
need, whether commercial solutions are available, and whether a particular approach is viable. See
FAR Part 10. Responses to these notices are not offers that could result in a contract. See generally
FAR 15.201(e).
18
   The Federal Acquisition Regulatory Council is made up of representatives from OMB, GSA, DOD,
and the National Aeronautics and Space Administration (NASA). The Council is responsible for
managing, coordinating, controlling, and monitoring the maintenance of, issuance of, and changes in
the FAR.


Page 10                                                                                   GAO-12-715R
•    Conduct a full-and-open competition, if the sources sought assessment identifies
     potential competitors,
•    Change to a non-proprietary solution, either using a non-proprietary numbering
     system or obtaining services from one or more vendors, and
•    Change to a government-owned number and obtain data services from one or
     more vendors.


GSA issued a sources sought notice in October 2011 and received six responses,
including one from Dun & Bradstreet. Based on the responses, GSA determined that
there are potential competitors for unique identification numbers. However, GSA has
ruled out conducting a full and open competition for numbering systems after
concluding that it is not in the government’s best interest to move from one
proprietary numbering system (DUNS numbers) to another one. GSA officials said
the additional costs and data system disruptions encountered each time it changed
numbering systems would at least partially offset any potential cost savings
achieved by introducing competition. GSA also has ruled out changing to a non-
proprietary numbering system because none of the sources sought responses
included a non-proprietary alternative. 19


GSA is currently considering two strategies as part of its analysis—continuing to use
DUNS numbers or changing to a government-owned numbering system. The first
option is to continue the current Dun & Bradstreet contract “as-is.” However, this
alternative does not address a key concern raised about the use of DUNS numbers.
The Dun & Bradstreet contract limits the purposes for which the government may
use DUNS information and according to GSA requires the government to delete Dun
& Bradstreet data such as business name and address when the contract ends. Two
of Dun & Bradstreet’s competitors indicated that they do not require that clients
delete their data when a contract ends, but it is unclear what they would offer in a
formal contract. Continuing to use DUNS numbers does not prevent GSA from
taking steps to ease some of the restrictions that Dun & Bradstreet has placed on
the government’s use of DUNS information. GSA officials said that simply by asking
Dun & Bradstreet for a discount they were able to negotiate a significant price
reduction for the current contract. However, they said they did not raise the issue of
expanding the government’s data rights during negotiations.


GSA is also considering changing to a government-owned numbering system. There
are several possible government-owned numbers that GSA could use, such as SAM
numbers. SAM is scheduled to begin operation in 2012 and once operational,
contractors, grantees and other entities seeking to do business with the government
will have to register in SAM, which will replace CCR. As entities register, they will
automatically be assigned a SAM number. The SAM number was not initially

19
  Some of the responding companies offered numbering systems that have non-proprietary aspects.
For example, one company indicated that its identification numbers and data are non-proprietary, but
its process for generating that information is. Another company told GSA that its numbers are not
proprietary, but the associated information including name, address, and phone number is.


Page 11                                                                                   GAO-12-715R
intended to serve as a unique identifier and like other government-owned numbers,
GSA would have to add capability to make them viable alternatives to DUNS
numbers. For example, SAM does not currently have a registration system to collect
name, address, and other information on businesses and other entities so a
registration system would have to be created. Similarly, SAM numbers would not
provide corporate linkage information or the ability to verify or monitor data so GSA
would have to add those capabilities. GSA officials said that if they were to change
to government-owned number, they would likely award one or more competitive
contracts to manage the numbering system and provide services similar to those
that Dun & Bradstreet currently provides. They said that other adjustments and
associated costs, both internal to the government and otherwise, could be involved
as well. They also said that there could be other solutions not yet identified.


Although there may be numerous benefits to changing to a government-owned
numbering system, including long-term cost savings, unlimited data rights, and
greater transparency, the switching costs from using DUNS numbers could be
prohibitively high. We asked GSA whether it would be feasible to use a hybrid
approach in which GSA would continue to use DUNS numbers in addition to a
government-owned number for an extended period of time. Under this alternative,
GSA would continue its current contract with Dun & Bradstreet while it phases in the
use of a government-owned number. Entities registering in SAM would have both a
DUNS number and a number from the new system. Once the new numbering
system is fully established, GSA would have the option of phasing out DUNS
numbers. A hybrid approach could avoid or defer a significant portion of the
switching costs, minimize disruptions to agencies, and better position the
government to introduce competition for unique identifiers in the future. GSA officials
agreed that a hybrid approach was a viable alternative and now are considering it as
part of the analysis of alternatives.


GSA officials are planning to assess the feasibility of the alternatives and then begin
coordinating with federal agencies to develop a cost estimate for changing
numbering systems. Changing to a new numbering system would include costs
associated with the following actions:
•   Adding capabilities to a government-owned number. As noted above, changing
    to a government-owned number would require GSA to establish a registration
    process and add the ability to provide corporate linkage information and add data
    verification and monitoring capabilities.
•   Modifying data systems. To accommodate a new number, GSA and other
    agencies would have to change the name of data fields and possibly add new
    data fields or modify the format of the existing DUNS field in their data systems.
    For example, DUNS numbers are numeric whereas SAM numbers are alpha-
    numeric and therefore may not be compatible with current DUNS data fields.
•   Replacing DUNS information with information from a new numbering system.
    Changing numbering systems could require agencies to delete DUNS
    information, including contractor name and address, from their data systems and
    replace it with information from the new numbering system. This process could


Page 12                                                                      GAO-12-715R
    be complicated by the data restrictions in GSA’s contract with Dun & Bradstreet.
    GSA officials said that they are uncertain whether the terms of the contract with
    Dun & Bradstreet would allow the government to use the existing DUNS
    information to transition to a new numbering system. If GSA is unable to use
    DUNS information for transition purposes, it would have to match the new
    numbering system to existing contractor information without the benefit of using
    the contractor’s name or address. GSA is planning to discuss with Dun &
    Bradstreet what rights the government would have in the event of a transition.
•   Updating policies and procedures. GSA would have to modify the FAR to remove
    the DUNS requirement and agencies would have to update their FAR
    supplements. Agencies would also have to update acquisition-related policies,
    procedures, and documents that refer to DUNS numbers.


GSA provided documents to us reflecting some initial steps it will take to assess
switching costs. A GSA official said the agency plans to estimate the costs of
changing its own internal systems and then extrapolate the costs to other agencies.
GSA’s analysis is still ongoing. The agency has identified potential cost drivers, but it
is still developing a methodology for quantifying them. Determining an accurate
estimate of switching costs could be difficult due to the number of agencies and data
systems involved. GSA identified approximately 80 data systems that contained
DUNS information extracted from CCR and would therefore have to be modified in
the event of a transition to a new numbering system. There are also many more
subsystems within agencies that could potentially be affected by changing DUNS
numbers. GSA is still determining how best to capture switching costs associated
with these agency data systems.


Conclusions
Rising costs, restrictions on the government’s data rights, and a lack of competition
have raised concerns about the government’s use of DUNS numbers as a unique
identifier. Those concerns have prompted GSA, not for the first time, to analyze
options for changing how it acquires unique identifiers. GSA has a difficult task
ahead as it evaluates the legal, contractual, and technical challenges associated
with changing identification numbering systems. GSA is still developing its
methodology for conducting its analysis so it is too soon to comment on how
comprehensive GSA’s analysis will be. Further, choosing an alternative may only be
the first step in a process that GSA expects could take years to complete. If GSA
decides to change how it acquires unique identifiers, it would need to develop a
detailed plan for executing the transition. GSA would need to develop an acquisition
plan for acquiring additional services, plan and budget for any additional resources
necessary to effect the change, and define the roles and responsibilities for
numerous stakeholders. If GSA is able to successfully complete its analysis and a
transition plan, it may be able to mitigate the challenges posed by the government’s
use of DUNS numbers as a unique identifier. Alternatively, the analysis may
demonstrate that GSA’s current approach is the best for the government.




Page 13                                                                        GAO-12-715R
Meanwhile, there may be an opportunity to negotiate better terms for the
government under the existing arrangement with Dun & Bradstreet. Even as GSA
continues to use Dun & Bradstreet as the provider of unique identifier services, the
agency may be able to ease the current contractual restrictions on the use of DUNS
numbers, such as the requirement to delete data at the end of the contract, by
bringing these provisions more in line with prevailing industry practices.


Recommendation for Executive Action
To ensure that government agencies have improved access to information needed
to effectively fulfill their missions, we recommend that the Administrator of GSA
initiate discussions with Dun & Bradstreet on ways to reduce current restrictions on
the use of DUNS numbers.


Agency Comments and Our Evaluation
We provided a draft of this report to GSA. The agency agreed with our
recommendation and indicated it would take appropriate action. GSA’s written
comments appear in enclosure I. GSA also provided technical comments that we
incorporated as appropriate.
                                    ----------


We are sending copies of this report to other interested congressional committees,
the Acting Administrator of General Services, and the Office of Management and
Budget. In addition, this report will be available at no charge on the GAO website at
http://www.gao.gov.


If you or your staff have questions about this report, please contact me at (202) 512-
4841 or by email at woodsw@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page of this
report. Key contributors to this report were John Oppenheim, Assistant Director; E.
Brandon Booth; Jeffrey Sanders; Benjamin Shattuck; Deanna Laufer; and Marie
Ahearn.




William T. Woods
Director
Acquisition and Sourcing Management
Enclosures – 1




Page 14                                                                     GAO-12-715R
Enclosure I: Comments from the General Services Administration




Page 15                                                          GAO-12-715R
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