Pentagon Single-Bid Contracting Hurting Taxpayers

Last week, the Department of Defense (DoD) Inspector General released a report finding that single-bid guidance isn’t being followed and, as a result, “the Services have not realized potential cost savings associated with increased competition and re-competing $390.9 million in contract modifications. DoD also cannot accurately assess the percent of improvements in DoD achieving effective competition.” Specifically, the DoD IG found:

The Services did not follow DoD single-bid guidance when awarding 31 contracts, valued at approximately $656.1 million, out of the sample of 78 contracts awarded as competitive, valued at approximately $1 billion, that we reviewed. Specifically, contracting offices:

• issued 16 of 31 single-bid contracts, valued at $165.3 million, without advertising solicitations for 30 days;
• issued 8 of 31 single-bid contracts, valued at $471.0 million, without adequately determining price reasonableness; and
• issued 7 of 31 single-bid contracts, valued at $19.8 million, without advertising solicitations for 30 days and adequately determining price reasonableness.

In addition, the IG found that DoD did not “develop specific steps to prevent 39 of 47 contract modifications, valued at $390.9 million, from exceeding the 3-year limitation on awarding contract modifications without first recompeting.”

This news is startling because, according to FPDS-NG (it’s not my number, so don’t shoot the messenger), single-bid offers accounted for $185 billion spent in base contracts and exercised options by DoD in FY 2011, and rules were violated in 31 of the 78 contracts sampled by the IG.

This news comes after DoD attempts to improve contracting competition. One way has been to offer guidance to maximize competition when only one bid is received, including rules to resolicit bids and/or conduct a price reasonableness analysis. For years, POGO has promoted the idea that the government must avoid sole source and single-bid contracts to better protect taxpayers. Full and open competition in government contracting allows for innovation, aggressive negotiations, and better deals for the taxpayer. Despite those known benefits, competition in federal contracting is often the exception to the rule.

That’s a big chunk of contracts that were not actually competed, and considering that, from 2000 to the present, nearly 40 percent of DoD contracts were awarded without full and open competition, the agency has a genuine problem getting the best deals that protect taxpayers.

Although competition is the prime focus of the latest IG report, there is another take-away. The government is severely limited in its ability to gain access to contractor cost or pricing data. POGO has voiced concerns in this area as it relates to commercial item procurements, but as the IG report found, this is also a problem when single-bid contracts are awarded. The report stated that “it was common practice within DoD to conclude that a bid submitted by a single contractor in response to full and open competition met the standard for adequate price competition because the contracting officer expected that two or more contractors would submit offers.”

So you are most likely thinking …“what does all of this mean?”

Here’s a simple hypothetical. Imagine going to only one car dealer to buy a car and doing so without seeing a window sticker or entering into an aggressive price negotiation. That is how DoD is buying, despite guidance from DoD procurement officials and the White House. There is no competition helping to drive down costs, and there is no cost or pricing data that ensures the government is paying fair and reasonable prices. That’s a recipe for waste, fraud, and abuse, if I ever heard one.