Federal agencies issue too many contracts without doing basic market research, reviewing a contractor’s prior history or its ability to deliver needed products or services, according to the Government Accountability Office.
While the agencies surveyed by GAO made an effort to research competitive prices in the market for most, but not all, contract awards over $10 million, they examined competitive industry forces in just a quarter of the sample’s lower-dollar contracts.
GAO officials couldn’t find the “basic elements” of market research in half of all sampled contracts — including documentation of a firm’s capabilities or the methods used to arrive at stated costs.
The federal government spends more than $500 billion every year on procurements. The GAO report was made public Oct. 9, 2014.
Conflicting guidelines for what constitutes a sufficient survey of available options cause agencies to collect different levels of data on their contractors, resulting in potential “missed opportunities to promote competition.”
For the Federal Aviation Administration, “a telephone call” can serve as acceptable market research, GAO said.
Department of Transportation guidelines don’t specify the type of information, if any, contracting officers should track when determining awards, putting the agency at an “increased risk” for lacking necessary data in future procurements.
Only the Department of Homeland Security required contracting officers to review prior acquisition history when settling on a contractor.
DHS is the only agency that compels its officials to document their specific efforts to evaluate the market, the report said.
GAO cited a 2011 example in which a Defense Logistics Agency contract shut out competition when the officials who awarded it declined to perform market research.
The $210 million contract to provide tax-free fuel in Italy required potential contractors to have at least 1,000 fuel stations and the ability to accept printed coupons from military personnel.
One of the two firms that qualified refused to submit a bid because accepting printed coupons would have been “cumbersome.”
The DLA then awarded the contract to the only firm who bid — an “incumbent” from a prior contract — without analyzing whether swapping the coupon requirement for a credit card system would have driven down prices through competition.
Another example revealed DHS officials offered a no-bid $1.5 million contract to a firm that creates “business guidelines” by basing price evaluations on a previous contract.
But DHS officials later admitted the previous contract’s scope was different, preventing an accurate price comparison. The report discovered that the price the agency paid was more than 10 times higher than it needed to be.
A July 2010 GAO report found competition was further hindered by agency officials’ preference for individual firms.
“Several agencies in our review recognized the pressure that program offices place on the contracting process to award new contracts to a specific vendor without competition,” the 2010 report found.
Officials cited “comfort” and the ease of opting for the same contractor instead of going through the process of finding a new one as reasons why they steered their agency’s contracts to the same firms.
A 2013 GAO analysis of procurement practices in the private sector projected conservative annual savings of $12 billion if they were applied to the government.
While the report touted companies like Dell, which negotiates “cost drivers” like labor rates when few suppliers are available, it noted “that large procurement agencies such as the Department of Defense and Veterans Affairs leveraged only a fraction of their buying power.”
