Military services falter on single-bid contract guidance

The military services have missed out on savings in recent years, the Defense Department inspector general has found, because defense agencies often did not resubmit solicitations when they received only one bid.

In a report released Oct. 5, the IG reported that the services did not follow DOD’s single-bid guidance in awarding 31 contracts out of 78 that the audit considered. The 31 awards were worth $656.1 million, more than half of the total $1 billion value of the 78. Further, the IG found the department awarded more than half of the 31 single-bid contracts without advertising the bid for 30 more days, as the guidance calls for.

The military services may also be giving up potential savings because they have not recompeted 39 contract modifications, worth $390.9 million. The military services can increase competition by re-competing single-bid contracts that exceed the three-year limit.

The Obama administration listed the number of DOD’s single-bid awards as a high risk area. When only receiving one bid, officials cannot compare other options for a solicitation and determine if the price is fair and reasonable. In 2010, DOD released its Better Buying Power Initiative, which told defense procurement officials to scrutinize these single-bid awards. DOD issued further related memos. One memo requires contracting officers to re-compete the solicitation for at least another 30 days if they waited less than a month to receive bids and received only one. Then, if a competition is re-advertised and there is still only one bid, the officers would have to determine prices to be reasonable through price or cost analysis. They may also choose to enter negotiations with the bidder.

However, the IG found officials who are agencies’ advocates for competition failed to make the single-bid guidance into an everyday practice. More specifically, the competition advocates, who often are senior department officials, did not develop exact steps to improve competition rates in their plans. Nor did they adequately monitor whether their commands’ contracting officers followed the guidance.

The advocates also didn’t take steps to prevent 39 of the 47 contract modifications from exceeding the three-year limitation without first a re-competed solicitation. In addition, the IG reported the Defense Procurement and Acquisition Policy (DPAP) office did not oversee how the service implemented their plans.

The IG also found the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics reported inaccurate competition rates. The office said the Army, Navy and Air Force achieved rates of 80 percent, 77.7 percent, and 85 percent, respectively, in fiscal 2011. However, the services included contracts improperly coded as single-bid awards and did not recognize other types of solicitations, such as small business innovation research. This type of contract is competed differently than a standard procurement. As a result, the IG concluded DOD cannot accurately assess how it has improved in effective competition.

 Read the reports:

DOD IG report

VA IG report

Those types of problems are not unique to DOD. An audit released Sept. 30 by the Veterans Affairs Department’s inspector general found the department reported inaccurate and unsupported savings. VA officials did not fully lay out how they would abide by the Office of Management and Budget’s initiative to cut agencies procurement spending by fiscal 2011. OMB told agencies in 2009 to develop a plan to reduce fiscal 2008 spending figures by 10.5 percent. They wanted agencies to eliminate inefficient contracts, and improve both contractor performance and their own acquisition work.

Auditors determined the Veterans Health Administration incorrectly reported $710 million of roughly $1.1 billion in savings under the OMB initiative. That is 65 percent of the savings. Procurement savings were reported multiple times. Officials reported items that OMB considered out of bounds. Other times, VA provided too little supporting information.

W. Todd Grams, executive in chief at VA’s Office of Management and Chief Financial Officer, told the IG the department would issue a memo in the coming months, telling offices to appoint a senior official to certify all savings claims.

As for DOD, Richard Ginman, director of DPAP, said he will continue his office’s review of the services’ competition reports, including the quarterly competition advocate meetings. He will also have agencies exclude unique procurements, such as the SBIR awards, from the competition report calculations. In addition, he will tell officials to review their contracts that have exceeded the three-year limitation.