Sole-sourcing, reform collide

"Multiple Award Contracts for Services"

Two provisions in the Senate's version of the fiscal 2002 Defense authorization bill would hogtie the Defense Department's ability to use governmentwide, multiple-award contracts — including the General Services Administration's schedule contracts.

One of the provisions in the bill, Section 803, would require DOD contracting officers to compete all task orders of $50,000 among all eligible schedule contract vendors. The other provision, Section 801, would require that all governmentwide acquisition contract buys be approved by a newly created DOD GWAC czar.

If the provisions become law, a contracting officer who decides to use the GSA schedule contracts would have to seek bids from all eligible schedule contract vendors. Larry Allen, executive director of the Coalition for Government Procurement, a Washington, D.C., industry group, said the section would require task orders go out to hundreds of companies, "virtually grinding to a halt" DOD's ability to use GSA schedule contracts.

The provisions were included to cut down on agencies sole-sourcing task orders, or directing work to specific vendors without taking advantage of competition. Lawmakers, led by Sen. Carl Levin (D-Mich.), chairman of the Senate Armed Services Committee, have raised concerns for years that agencies are not opening task orders on multiple-award contracts to competition — and possibly not locking in the best deal.

Experts have been baffled that DOD continues to not compete task orders. GSA requires agencies to compete task orders among at least three schedule contract vendors, and given the streamlined procurement rules, those bids can be obtained quickly.

A new report from DOD's inspector general seems to indicate that sole-sourcing continues to be a problem. Despite continued warnings that these problems could result in limitations being put on the procurement reforms enacted in recent years, the DOD IG audit found that many buys for services are still going uncontested. The report, "Multiple Award Contracts for Services," found that 66 of 124 task orders in fiscal 2001 were issued on a sole-source basis without providing contractors a fair opportunity to be considered.

During fiscal 2000 and 2001, the DOD IG found that 304 of 423 task orders, or 72 percent, were awarded on a sole-source or directed-source basis, of which 264 were improperly supported. Only 119 of 423 task orders were competed, and only 82, or 69 percent, of these orders received multiple bids.

"Contracting organizations continued to direct awards to selected sources without providing all multiple-award contractors a fair opportunity to be considered," the DOD IG audit report said. "As a result, DOD was not obtaining the benefits of sustained competition and the reduced costs envisioned when Congress provided the authority for multiple-award contracts."

The future of the provisions remains unclear. A House/Senate conference committee was scheduled to meet as early as Oct. 12, but the process was delayed when the House was evacuated because of an anthrax scare.

Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee's Technology and Procurement Policy Subcommittee and a member of the DOD authorization bill conference committee, said the DOD appropriations bill might pass first, rendering the authorization bill unnecessary.

Davis said he is opposed to the two provisions and believes the bill can be modified to make it more workable. But he said the issue of sole-sourcing needs to be addressed.

Steve Kelman, former administrator of the Office of Federal Procurement Policy in the Clinton administration and now a professor of public management at Harvard University's John F. Kennedy School of Government, suggested a more moderate measure that would require agencies to collect at least three bids when issuing a task order on multiple-award contracts.

But regardless of whether the provision becomes law, DOD is "going to be more judicious in how it uses" these contract vehicles, and there will be a "substantial push" to ensure that these contracts are used correctly, said Deidre Lee, DOD's procurement director, during a presentation this month at the Federal Contracting 2002 conference presented by the Government Contracting Institute.