IG questions DOD awards

Defense Department contracting officials have engaged in "questionable" procurement practices, costing taxpayers millions of dollars in higher prices and denying some vendors a fair opportunity to be considered for DOD contracts, according to a report released this month.

Between fiscal 1995 and fiscal 1998, DOD contracting officials awarded task orders to contractors who had higher-cost bids nearly two-thirds of the time—36 out of 58 contracts—resulting in at least $3 million in unnecessary costs to DOD, according to the DOD inspector general report, "DOD Use of Multiple-Award Task-Order Contracts."

In addition, the inspector general identified 66 out of 124 sole-source task orders that did not provide all interested contractors with a "fair opportunity" to be considered for the work. "Only eight of the 66 orders, valued at $8.8 million, had valid justification for sole-source award," the report concluded. "As a result, DOD did not achieve the full benefits associated with the multiple-award mechanism."

The Federal Acquisition Streamlining Act of 1994 authorized government agencies to issue multiple-award contracts, which allow the government to procure products and services quickly while also using competition between vendors to attain the lowest possible price. A contract is considered multiple-award when two or more contracts are awarded from one solicitation. In addition, federal statutory requirements governing multiple awards call for each contractor to be given the opportunity to be considered for all task orders worth more than $2,500, according to the IG.

The IG report evaluated 50 DOD contracts covering 156 task orders valued at $143.7 million. Of the 36 contracts awarded to higher-priced contractor bids, four were conducted by the Army, five by the Navy, 11 by the Air Force, nine by the Special Operations Command and seven by other DOD organizations, according to the report.

"Once contractors were selected, primarily on their technical capabilities, it would be logical that cost would be a substantial factor during award of task orders," the IG report said. "However, instead of using the task-order award phase to establish better pricing, contracting officials re-emphasized technical issues and downplayed or did not consider cost."

In addition, the report found that delivery orders for goods were awarded to the low-cost bidder for only 78 percent of the orders, and it questioned the fairness of the government selection process. "While the regulations allow orders under multiple-award contracts to be issued without competition, we believe it is not in the best interest of DOD that price consideration in task orders has become the exception rather than the rule," the IG report concluded.

Contracting officials throughout DOD also "routinely" relied on "questionable" technical evaluations to award task orders without regard to price differences, the report said. In fact, in one instance an Air Force contracting official made an award to a contractor whose price was 134 percent higher than another offer, causing an internal legal reviewer to call for a "sanity check" on the process, according to the report. The report also identified a Navy contracting office that selected a "preferred" contractor without performing a cost/technical trade-off analysis.

"In the worst cases, technical evaluators were able to technically 'disqualify' contractors before cost was even considered," according to the IG. DOD program office influence "eliminated lower-priced contractors and discouraged other contractors from bidding on task orders," the report said.

In a letter responding to the findings of the IG report, Eleanor R. Spector, director of Defense procurement in the Office of the Undersecretary of Defense for Acquisition and Technology, wrote, "If timely performance or specific technical expertise is crucial and the low-priced task-order offeror does not have a good past-performance record on recent tasks, it might be better to pay more for a better assurance of timeliness and quality performance."

Likewise, Spector said she does not believe that it is appropriate to "dictate that price must be the primary factor in source selection without knowing the circumstances of the particular case."Chip Mather, senior vice president at Chantilly, Va.-based Acquisition Solutions Inc., said that while he agrees that agencies need to pay attention to how orders are being placed on their task-order contracts, he thinks "a little oversight could be all that is required to fix the competition issue."

But Mather said the IG's recommendations and findings on the use of price in the selection process "are way off base." According to Mather, "The [IG] feels that because every contractor on a multiple-award contract can perform the contract functions, price should be the primary factor for selection. [However], they miss the point of task-order competition for services. While all contractors on a multiple-award contract have been selected as highly qualified, that does not mean they are all equal."

According to Mather, best-value criteria also include past performance, individual vendor technical approaches and a vendor's reputation as a world-class provider of services in a specific technical area of expertise.

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