Pentagon Single-Bid Contracting Hurting Taxpayers

By SCOTT AMEY

Last week, the Department of Defense (DoD) Inspector General released a report finding that single-bid guidance isn’t being followed and, as a result, “the Services have not realized potential cost savings associated with increased competition and re-competing $390.9 million in contract modifications. DoD also cannot accurately assess the percent of improvements in DoD achieving effective competition.” Specifically, the DoD IG found:

The Services did not follow DoD single-bid guidance when awarding 31 contracts, valued at approximately $656.1 million, out of the sample of 78 contracts awarded as competitive, valued at approximately $1 billion, that we reviewed. Specifically, contracting offices:

• issued 16 of 31 single-bid contracts, valued at $165.3 million, without advertising solicitations for 30 days;
• issued 8 of 31 single-bid contracts, valued at $471.0 million, without adequately determining price reasonableness; and
• issued 7 of 31 single-bid contracts, valued at $19.8 million, without advertising solicitations for 30 days and adequately determining price reasonableness.

In addition, the IG found that DoD did not “develop specific steps to prevent 39 of 47 contract modifications, valued at $390.9 million, from exceeding the 3-year limitation on awarding contract modifications without first recompeting.”

This news is startling because, according to FPDS-NG (it’s not my number, so don’t shoot the messenger), single-bid offers accounted for $185 billion spent in base contracts and exercised options by DoD in FY 2011, and rules were violated in 31 of the 78 contracts sampled by the IG.

This news comes after DoD attempts to improve contracting competition. One way has been to offer guidance to maximize competition when only one bid is received, including rules to resolicit bids and/or conduct a price reasonableness analysis. For years, POGO has promoted the idea that the government must avoid sole source and single-bid contracts to better protect taxpayers. Full and open competition in government contracting allows for innovation, aggressive negotiations, and better deals for the taxpayer. Despite those known benefits, competition in federal contracting is often the exception to the rule.

That’s a big chunk of contracts that were not actually competed, and considering that, from 2000 to the present, nearly 40 percent of DoD contracts were awarded without full and open competition, the agency has a genuine problem getting the best deals that protect taxpayers.

Although competition is the prime focus of the latest IG report, there is another take-away. The government is severely limited in its ability to gain access to contractor cost or pricing data. POGO has voiced concerns in this area as it relates to commercial item procurements, but as the IG report found, this is also a problem when single-bid contracts are awarded. The report stated that “it was common practice within DoD to conclude that a bid submitted by a single contractor in response to full and open competition met the standard for adequate price competition because the contracting officer expected that two or more contractors would submit offers.”

So you are most likely thinking …“what does all of this mean?”

Here’s a simple hypothetical. Imagine going to only one car dealer to buy a car and doing so without seeing a window sticker or entering into an aggressive price negotiation. That is how DoD is buying, despite guidance from DoD procurement officials and the White House. There is no competition helping to drive down costs, and there is no cost or pricing data that ensures the government is paying fair and reasonable prices. That’s a recipe for waste, fraud, and abuse, if I ever heard one.

Scott Amey is the general counsel for the Projet On Government Oversight. Image by Flickr user eyesontheroad.

Follow @SAmeyJD

Comments

[Dfens]

When your contracting system does not work, then pretending like "competing" a contract will improve things is nothing but a joke on top of a joke. Proposals are nothing but a pack of lies. Sure, you can get 3 or 4 or 10 proposals if you want. The proposals that lose will be the proposals that tell the truth. So what have you gained by all the effort to compete the contract? All you've done is rewarded the best liar. Sure, slap yourselves on the back for that, you've really done us all a favor.

The Joint Strike Fighter was competitively bid. One airplane wouldn't do a vertical take-off, despite years of assurances it would. The "winner" is just a piece of crap. How much money did that save us? None. The program continues to careen out of control. Aerial Common Sensor program was competitively bid. One company bid a foreign built airplane that was half big enough to do the job, the other company bid an American built plane that was one quarter big enough. Thanks for making sure we got to spend a bunch of money evaluating those proposals.

Competitively bidding for a pig in a poke is stupid. All it really amounts to is smoke and mirrors to hide the bigger problem. Our government should never pay a for-profit company for promises. It is an obvious conflict of interest. The more promises the government pays for, the more lies it receives. The government should only pay for-profit companies for delivered goods. All development expenses should either be covered by the for-profit companies themselves, or the development should be performed by government design bureaus such as NASA, the Air Force, and the Navy all at one time had. You remember those times, back when NASA was sending men to the Moon, the Air Force was designing aircraft to break the sound barrier, and the Navy had 500+ formidable ships, not 250 tin cans floating in the water.

[Scott Amey]

Thank you Govconmaven and Carly! I have heard about the bridge contracts issue, but stalling to use urgent and compelling is a new one. Thanks for the comment and the FOIA request tip.

On the issue of hourly rates paid to IT specialists - is that the hourly rate paid to the contractor, which would be a fully burdened rate, or is that the hourly rate paid to the contract employee? I would love to hear more on that subject ([email protected]). We have an interest in this subject, if you have time to talk:

http://www.pogo.org/pogo-files/reports/contract-oversight/bad-business/co-gp-20110913.html

[carly]

I am a retired contracting officer who worked for several agencies. One tactic that everyone needs to be aware of that agencies use with frequency is "urgent and compelling" and this is done to avoid competition. The VA used it by delaying the development of procurement requirements and then when the deadline of the current contract was about to expire, guess what, urgent and compelling basis to award a new contract to the VA's favorite vendor. A tactic used by the Forest Service is to also allow contracts to get to the end date and then extend the current contracts by another year, which again avoids competition and the favorites are kept. Many of these actions remain "hidden" that is not posted on FedBizOps so vendors are unaware these activities are happening. As another note, I know that when I worked at the Forest Service, we were paying hourly rates for IT specialists that exceeded the hourly rates we paid for VA doctors. There aren't enough IG's to detect this fraud waste and abuse. I hardly met an IG in 30 years.

[GovConMaven]

Good job Scott.