Competition eludes easy fixes

With less than a month to go until a new president and Congress are elected, candidates are giving renewed attention to reducing sole-source contracts.

Noncompetitive contracts have a long and controversial history in federal procurement because of their potential for favoritism, personal bias and poor performance. However, the contract’s defenders say they are a tool for rapid and efficient results from reliable performers, something that is especially appealing to an overworked acquisition workforce.

The debate is a persistent and, at times, frustrating theme for the acquisition workforce, the contracting community and lawmakers.

“We are seeing increased emphasis on competition,” said Ray Bjorklund, senior vice president and chief knowledge officer at FedSources, a market research firm in McLean, Va.

The interest reflects a mostly cyclical rise and fall in government reform agendas, he said. At the same time, there is little or no consensus on what should be done to boost competition, he added.
“I’m not criticizing anyone,” Bjorklund said. “It is hard to do.”

Some members of Congress are clearly concerned about whether there is adequate competition in contracting, said Stan Soloway, president of the Professional Services Council, a trade organization for service contractors. But Soloway said he believes much of that concern arises from misunderstandings about how officials track and measure competition for contracts.

Taking action
Congress and both presidential nominees are weighing ideas to address the perceived lack of competition for federal contracts.

In the fiscal 2009 National Defense Authorization Act, Congress included language to better identify and regulate noncompetitive contracting. The provision states that within a year officials must amend the Federal Acquisition Regulation to require enhanced competition when agencies buy property and services under multiple-award contracts.

The provision would have some effect, Soloway said. It would require contracting officers to receive three bids for schedules procurements and task orders under multiple-award contracts. Under current rules, the officers must only approach three bidders. The provision applies governmentwide, said Soloway, who called it a “reasonable step to enhance competition.”

The House and Senate passed the bill in September, but the president has not signed it into law.

On the campaign trail, Democratic presidential nominee Sen. Barack Obama, in a reform agenda released Sept. 23, criticized the billions spent on no-bid contracts — a term popularized by Rep. Henry Waxman (D-Calif.) to refer to noncompetitive awards. Obama said he would require agencies to defend every noncompetitive contract to the Office of Management and Budget. In August, Republican nominee Sen. John McCain told the Washington Post that he would limit sole-source contracting if elected president.

Bush administration officials have also been trying to increase competition for government work. In one of his final memos as administrator of the Office of Federal Procurement Policy, Paul Denett urged chief acquisition officers to try to increase full-and-open competition and use their agencies’ competition advocates to help.

Denett also asked the Chief Acquisition Officers Council to create a working group to promote competition, suggesting that the group should analyze procurement data to identify trends in competition for different types of products and services.

Here today, here tomorrow
While the debate continues over whether noncompetitive contracts are a useful tool, a path to abuse, or something in between, various groups are suggesting ways to improve the practice.

For example, the Acquisition Advisory Panel recommended, in a report issued in January 2007, improving requirements definitions, requiring more competition and making it more transparent. Also last year, Waxman, chairman of the Oversight and Government Reform Committee, issued a report stating that no-bid contracts governmentwide doubled to $103 billion from 2000 to 2006. However, the percentage of noncompetitive contracting has been relatively stable at 26 percent from fiscal 2005 through the first half of fiscal 2008, according to public data on USAspending.gov, a Web site of federal spending data.

The need for contractors to assist with urgent work, such as Hurricane Katrina recover and the war in Iraq, has contributed to the increase in such spending, experts say. The expanding popularity of governmentwide acquisition and indefinite-delivery, indefinite-quantity contracts and the mergers and acquisitions among contractors also tend to decrease competition.

In fiscal 2007, the top 33 federal contractors were awarded 52 percent of the $150 billion in government information technology contracts in fiscal 2007, according to FedSources. The percentage rose steadily from 49 percent three years earlier.

At the same time, the percentage of full-and-open competition with one or two bids seems to have decreased in recent years. It averaged 43 percent from fiscal 2005 to 2007, down from an average of 52 percent from fiscal 2000 to 2004.

Some departments might be improving. For example, the Homeland Security Department had full-and-open competition for 47 percent of its contracts in fiscal 2007. That is an increase from a low of 32 percent for such bids in fiscal 2006 and 33 percent in fiscal 2005. Experts blame the drop in competition on the need to quickly award contracts for Hurricane Katrina relief efforts. In 2003, the year the department was launched, 53 percent of its contracts were fully competed.

Competition’s definition
To further hamper efforts to address the problem, definitions and terminology vary from one group to another. In a policy memo released July 18, OFPP wrote that agencies held competitions for an average of 64 percent of all federal contracts in fiscal 2005, 2006 and 2007. That is much higher than USAspending.gov’s listing for full-and-open competitions that receive one or two bids. OFPP might have included categories that USAspending.gov excluded, which would lead to radically different impressions of the contracting landscape, experts say.

“Counting is a serious issue, and it often is used as a political football,” said Jon Desenberg, senior policy director at the Performance Institute, a nonpartisan think tank.

Desenberg said he would like to see a commission address the statistical challenges and Congress and agencies follow through on the Acquisition Advisory Panel’s suggestions. Realistic improvements can be made to increase competition, he said. His suggestions include requiring 30 days’ response time for bids on all contracts rather than just 10 days in some cases.

However, even if officials could resolve the debate over statistics, it seems that trends in competition have not changed much since 2005. And they are not likely to change until acquisition workloads and processes are overhauled, said Sean Moulton, director of federal information policy at OMB Watch, a government watchdog group.

Workers are vital
There likely won’t be a dramatic change in the percentage of contracts awarded competitively until the acquisition workforce is expanded so employees can devote more time and attention to competition, Desenberg and other experts said. Without ample time in which to conduct competitions, acquisition managers are apt to continue using less competitive contracting vehicles, particularly the ones that make it easier for them to do their jobs efficientl .

“You have to find a balance between efficiency and performance,” Desenberg said.

“Competition is work,” Moulton said. “It takes time and money to hold a competition. Sometimes, a procurement officer finds it easier to stick with a good product, at a fair price, that has shown good performance. They are trying to get things done with limited resources.”

You can encourage employees to try harder, but those changes will be relatively small, he said. “Until we get a major change in the process, we won’t see a big shift.” 

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