The department agreed to pay roughly $1.3 billion in sole-source contracts in fiscal 2010, the IG reported, down from $3.4 billion in noncompetitive contracts in fiscal 2009 and $3.5 billion in fiscal 2008.
In response to the report, Richard Gunderson, DHS' deputy chief procurement officer, said the percentage of contracts that have been awarded competitively has increased from 76 percent in fiscal 2009 to 86 percent in fiscal 2010, "by far the highest percentage ever achieved by the department."
All eight DHS contracting offices beat their fiscal 2010 competition goals, he said.
The IG reviewed 40 contract files for noncompeted contracts with a combined value of more than $100 million. The audit found the department generally improved its oversight of those contracts by providing more thorough documentation showing the justification and approval for those awards.
The department also has completed a number of oversight reviews, issued updated guidance to strengthen its internal controls and performed more market research in planning for an acquisition, the IG found.
For example, in fiscal 2009, 79 percent of contract files that the IG reviewed showed deficiencies in market research. In fiscal 2010, that figure plummeted to 7 percent. One contract, an international agreement, contained an analysis of prices in the commercial marketplace to support market research efforts, the report said.
Despite the progress, the internal watchdog also discovered gaps in DHS' acquisition management.
"Acquisition personnel did not always document consideration of contractor past performance when performing background research of eligible vendors," wrote Anne Richards, assistant IG for audits. "As a result, the department cannot be sure that it received the best possible value on the goods and services acquired through these contracts, or that acquisition personnel awarded government contracts to eligible and qualified vendors."
The IG said Homeland Security must do more to ensure the accuracy and completeness of its contract file documentation -- information gathered to support the use of contracts granted using methods other than full and open competition.
Of the 40 contracts the IG examined, 34 required an advance plan showing the efforts of everyone working on the program to obtain the product or service in a timely manner and at a reasonable cost. But, more than 40 percent of those contracts, worth a total of nearly $30 million, did not have documentation in the contract file, the report said.
In addition, 11 of the 40 contracts lacked evidence that the contracting offices considered past performance when making an award determination.
"The department needs to continue its emphasis on better planning and documenting its acquisitions and decision-making processes," Richards wrote.
Gunderson said DHS is conducting an oversight review on noncompetitive contracting to determine whether procurement offices were following department guidelines and requirements. The final report is expected this spring.
Improving its much-maligned contracting process has been a priority for the department. Testifying before the House Homeland Security Committee last week, Secretary Janet Napolitano said DHS had identified more than $800 million in administrative savings, in part by making the acquisition process more efficient and by reducing professional services contracts.
"We are preserving essential front-line operations and bolstering our operational strength by decreasing administration and overhead," Napolitano said.
The department has requested $24.2 million in the fiscal 2012 budget to increase its acquisition workforce by 150 positions, including systems engineers, program managers, logisticians and business cost estimators.