GAO: Noncompetitive Contracts Need Stronger Oversight

This week, the Government Accountability Office (GAO) issued a report analyzing a type of federal contract awarded without full and open competition.

Many of you know that the Project On Government Oversight has long extolled the virtues of competition in federal contracting. Competition helps taxpayers save money, improves contractor performance, and promotes accountability. However, there are circumstances that permit the award of noncompetitive contracts, one of which is an “unusual and compelling urgency.” Occasionally, agencies find the need to acquire goods or services extraordinarily urgent—so urgent that the delay occasioned by putting the contract up for competitive bidding would result in serious financial or other injury to the government.

According to the GAO, in fiscal year 2013, the federal government obligated more than $459 billion in contracts to purchase goods and services, of which approximately $164 billion (35.7 percent) was awarded noncompetitively. About $3 billion was awarded under the urgency exception.

Using data from a government database, the Federal Procurement Data System-Next Generation, the GAO examined the use of the urgency exception by the Departments of Defense (DoD) and State and the U.S. Agency for International Development (USAID) for fiscal years 2010 through 2012. As the graphic shows, the GAO found that during those three years, DoD obligated $12.5 billion noncompetitively to procure goods and services under the urgency exception (accounting for 3 percent of its noncompetitive contracts), while State and USAID obligated $582 million (12.5 percent) and about $20 million (less than 1 percent), respectively. The most commonly cited urgent circumstances were combat operational needs in Iraq and Afghanistan and avoiding unanticipated gaps in program support, although the GAO found that the agencies sometimes did not clearly state the justification when invoking the exception.

State and USAID used the exception to purchase almost exclusively services (chiefly security services for State, and road/highway construction and education and training services for USAID), while DoD purchased goods and services in roughly equal quantity (everything from guns and ammunition to IT support and garbage collection). According to the GAO, DoD had a far higher percentage of noncompetitive contracts overall than State and USAID—almost twice as high: 43 percent, as compared to 22 and 22.7 percent for State and USAID, respectively. DoD was far and away the largest user of the urgency exception—it accounted for 85 percent of the total dollars obligated under the exception by the entire federal government—but the State Department’s use of exception grew more than twelvefold between FY 2010 and 2011.

Noncompetitive contracts awarded under the urgency exception must be no longer than one year in duration, unless the head of the agency or a designee determines that exceptional circumstances apply. However, almost one-third of the contracts the GAO studied lasted longer than one year and lacked the required exceptional circumstances determination. The GAO also found significant coding errors that raise concerns about the reliability of the government’s data. Nearly half of the contracts that GAO sampled were incorrectly coded as having used the urgency exception. The GAO has reported previously on contracting data quality problems.

The GAO set forth a list of recommendations designed to strengthen oversight and transparency of noncompetitive contracts awarded under the urgency exception. These recommendations were directed to DoD, State, and USAID, but we hope the rest of the agencies will also consider them. Although the government rarely uses the exception, it still amounts to a risky outflow of billions of taxpayer dollars every year on a wide variety of goods and services.