Defense urged to promote more competition on task orders

Pentagon officials need to flesh out guidelines on when it is appropriate to grant companies multiple-award or federal supply schedule contracts without making them face competition, according to a recent Government Accountability Office report.

The Defense Department is granting too many waivers to a fiscal 2002 authorization act requirement that contracting officers seek offers from all potential service providers before placing a multiple-award order worth more than $100,000, or buying off the federal supply schedule, GAO concluded in the report (GAO-04-874). Department officials should provide more complete instructions on when it is permissible to grant a waiver, and should require officers to provide more thorough justifications when they allow exceptions, auditors recommended.

"Striking the right balance between achieving the benefits of competition and retaining contractors that are satisfying customer needs is a challenge for the Defense Department," GAO stated in the report. "The frequent use of waivers to competition may be hindering [the department's] ability to obtain innovative solutions to problems, and the best value for the taxpayer."

The watchdog arm of Congress based its recommendations on a study of 74 randomly selected multiple-award and federal supply schedule orders that fall under the rules in the 2002 National Defense Authorization Act, Section 803. That law is designed to ensure that Pentagon officials get the best deal on billions of dollars' worth of annual purchases made off multiple-award contracts and supply schedules, both contracting vehicles intended to simplify and expedite procurements.

In multiple-awards, "contractors compete under a single solicitation to be awarded similar contracts for certain types of products or services, such as information technology services," the GAO report explained. The federal supply schedule is a catalogue of prenegotiated agreements available to agencies.

The Defense Department filled 34 of the 74 multiple-award and supply schedule orders studied by GAO without making companies compete for the work. Most often, contract officers justified the lack of competition by stating there was only one qualified contractor, or by contending that the work followed a "previously competed" order.

But GAO found that in a number of these cases, officers were bowing to requests to keep current contractors on the job. Such practices prevent Defense from reaping the benefits of competition, including "improved levels of service, market-tested prices and the best overall value," the report said.

The process for filling task orders at the Pentagon lacks safeguards against improper use of waivers from competition, GAO said. Current guidelines don't "sufficiently describe the circumstances under which a waiver of competition could be used" and don't provide adequate details on how contacting officers should document reasons for granting a waiver, the auditors found.

Defense officials should improve existing instructions and should also require more senior officials to approve competition waivers for large multiple-award contracts. Currently, contracting officers are authorized to sign off on the agreements.

Defense officials agreed with GAO's recommendations, and are in the process of developing supplemental guidelines for granting and documenting waivers. The department is also working out rules to approve multiple-award contract waivers, and those rules will take effect this October.