IG finds conflict in the acquisition regulation

The Federal Acquisition Regulation (FAR) may have conflicting language, Defense Department auditors have said in a report.

The FAR requires that small businesses get an advantage over other companies if a contracting officer can find two responsible small companies that can offer reasonable bids. That is known as the Rule of Two, and last year the Government Accountability Office ruled that it applies to task and delivery orders.

Meanwhile, another section of the FAR states: “The contracting officer must provide each awardee a fair opportunity to be considered for each order exceeding $3,000 issued under multiple delivery-order contracts or multiple task-order contracts.”

In a report released May 6, DOD's inspector general’s office found the conflict as it audited the Navy’s SeaPort Enhanced (SeaPort-e) indefinite-delivery/indefinite-quantity contracts.

The IG’s auditors said the SeaPort-e program manager failed to adequately compete 39 of 133 audited task orders when the manager allowed small business set-asides. The 39 orders were worth $469.3 million. The program manager deviated from the FAR by not ensuring contracting officers performed adequate market research on the small business set-aside task order contracts. As a result, Navy officials may not always receive the best value for the SeaPort-e customer, the IG said.

However, the manager argued that the Small Business Administration supported the set-asides and large contractors signed agreements that included language on the set-asides. Nevertheless, the IG wrote, “Neither the SeaPort-e program manager nor the Small Business Administration has the authority to override” the fair opportunity provision of the FAR or the statute on which it's based.

The Defense Acquisition Regulations Council and the Federal Acquisition Regulations Council should determine if the FAR needs more specificity on what’s allowed when setting aside a task order for small businesses, the IG wrote. Navy Department officials intend to bring up the conflict to regulators for a clarification, the report states.

In the IG’s discussions with GAO's General Counsel Office, GAO said its October 2008 decision on the Rule of Two has caused confusion on the topic of small-business set-asides and full competition. GAO officials said legislative action will likely be necessary to clarify the intent of the Rule of Two, according to the IG’s report.

The Rule of Two is in FAR Part 19. The fair opportunity provision is in FAR Part 16.

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Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Mon, May 11, 2009 Jim

Several agencies I have worked for have handled MAC contracts this way. Although competed (full & open) included in the master solicitation was language explaining that individual task orders may be set-aside for small businesses in order to meet agency goals. Large businesses were aware of and given opportunity to protest this language prior to award of the basic contracts. This is just another case of an IG trying to flex its muscle. The language is clear, all parties have agreed to it, and it provides everyone adequate opportunity for Govt. dollars while still allowing acquisition organizations a way to meet mandatory socio-economic goals. Sometimes the IG just needs to get off their high horse and accept the fact that we do the best we can with the rules we are given.

Fri, May 8, 2009

What is the point of fully competing a task/delivery order type of contract in the first place if you are then forced to re-compete every task/delivery order requirement under the contract anyway? Seems to me that we have met the competition requirement prior to task/delivery issuance if the contract was properly competed and awarded in the first place. The requirement to then compete - again - the tasks doubles the work.

Fri, May 8, 2009

It is a matter of interpretation. The first applies to all full and open acquisitions, the second applies to task orders on multiple award contracts. When awarding a task order on an MAC you must give all awardees a fair opportunity. It prevents agencies from favoring one vendor over the others.

Thu, May 7, 2009 Jaime Gracia Washington, DC

The intent is simple, ensure you have adequate small business participation by identifying at least two small businesses that have the capability to perform the requirement. Adequate market research will ensure this gets done, but market research not getting done properly or adequately I think is more to blame that conflicting regulations. Any reviews of the FAR, or subsequent updates, will hopefully ensure or expand small business participation.

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