DOD dives deep into sole-source contracting data

Defense Department officials are going back to their record books to gather information on their decisions to award sole-source contracts to small businesses, in light of recent controversies involving Alaska Native Corporations (ANCs).

Defense agencies and the military services have been told to conduct top-down reviews of all active sole-source contracts that were awarded to ANCs and other 8(a) businesses before March 16, wrote Richard Ginman, director of defense procurement and acquisition policy at the Defense Department, in a memo on Nov. 7.

Federal policy allows agencies to award contracts worth up to $20 million to businesses in certain socio-economic categories without competition or justification. Contracts worth more than $20 million require justification and high-level approval within the agency. In the case of ANCs, on the other hand, there are no such limits.

A growing number of acquisition officials and lawmakers are concerned that these set-aside programs are creating opportunities for fraud.

Related articles:

Alaska Native Corp. program: The case for and against

Does EyakTek scandal mean trouble for Alaskan firms?

In March, the government amended the Federal Acquisition Regulation to require stricter justifications and official approvals before awarding sole-source contracts. The changes were based on a provision in the fiscal 2010 National Defense Authorization Act, which was signed into law in October 2009.

The current review was prompted by a letter that two senators sent to Frank Kendall, acting undersecretary of defense for acquisition, technology, and logistics, on October 12.

Sens. Claire McCaskill (D-Mo.) and John McCain (R-Ariz.), both members of the Armed Services Committee, raised lingering concerns about the unique set-aside privileges that ANCs have. The senators wrote the letter after reading a Washington Post story about alleged fraud by abusing those privileges since 2007 by EyakTek, an ANC, and contracting officers at the U.S. Army Corps of Engineers.

In these reviews, Ginman wants to know how many sole-source contracts worth more than $20 million each agency has awarded since 2006 to small businesses, including ANCs. He has asked for details on the contracts, such as the cost, what was purchased, and the approvals before awarding the sole-source contracts.

Digging deeper, Ginman is inquiring about the subcontracting aspect of these contracts. He’s interested in how much of the work the prime contractor shipped to subcontractors and, more broadly, how much of the work was done by companies other than the prime contractor. He also wants answers about the money paid to the subcontractors under these contracts.

He’s interested in protection too. He has asked agencies about the ways they are protecting their source selection boards from being manipulated by a bidder. Responses are due Nov. 30.

McCaskill has had her eyes on ANCs for several years.

In an investigation of the overall ANC program in 2009, the chairwoman of the Homeland Security and Governmental Affairs Committee’s Contracting Oversight Subcommittee and her staff found the same abuses that agencies’ inspectors general and the Government Accountability Office have found though the years. McCaskill has introduced legislation to make ANCs abide by the same rules as other small-business programs. It has not been passed.