For example, under FAR part  6, justifications must include, at a minimum, 12 elements.these required elements include: a description of the supplies or services required to meet the agency’s  needs and their estimated value;  identification of the statutory authority permitting other than full and  open competition; a determination by the contracting officer that the anticipated cost to  the government will be fair and reasonable; a description of market research conducted, if any; and a statement of the actions, if any, the agency may take to remove or  overcome any barriers to competition before any subsequent  acquisitions for the supplies or services required. Since fiscal year 2008 the competition rate  has declined 5.5 percentage points, from 62.6 percent in fiscal year 2008  to 57.1 percent in fiscal year 2012 (see figure 1). We also found that the competition rate for all contract obligations varied  by DOD component in fiscal year 2012. Based on our analysis of FPDS-NG data in fiscal year 2012 the majority  of DOD’s noncompetitive contracts and task orders on single award  contracts were coded under the “only one responsible source”  exception. Multiple Factors Affect DOD’s Competition Rate, but They Are Not Always Considered When Setting Competition Goals

There are a number of factors that affect DOD’s competition rate. For  example, reliance on an original equipment manufacturer throughout the  life cycle of a program and budget uncertainty are long-standing  challenges impacting DOD’s ability to compete. Noncompetitive  purchases that DOD makes on behalf of foreign governments affect  DOD’s competition rate as well. DOD does not systematically identify,  track, and consider the specific factors that are affecting competition  when setting its annual competition goals. The Better Buying Power  initiative also added a new requirement that a competitive strategy be  presented at each milestone for defense acquisition programs. For example, in its fiscal year 2011 competition report, the Air  Force noted that it expected a significant impact to its fiscal year 2012  competition rate as the result of an anticipated $10 billion FMS award. Some justifications in our sample provided clear  descriptions of sole-source environments where only one source was  available to meet the government’s needs, and others included detailed  descriptions of planned actions that could help improve competition in the  future. However, other justifications provided limited insight into the  reasons for the noncompetitive award or did not fully describe actions that  the agency could take to increase future competition. The  new rules attempt to ensure adequate solicitation time (i.e., resolicitation  rule), ensure that contract requirements are not unnecessarily restrictive  (i.e., program office consultation rule), and verify that offers received are  fair and reasonable (i.e., cost/price analysis rule). Our analysis of 35 one-offer awards determined that 10  of these awards were incorrectly coded in FDPS-NG by contracting  officers. Furthermore, we believe DOD cannot use the data to  accurately calculate the amount obligated on one-offer awards during  fiscal year 2012. The remaining 4 awards received  multiple offers, but the contracting officer incorrectly coded them as  receiving one offer. The one-offer requirement is  intended to be a means to achieve this goal. Without reliable data, DOD cannot accurately measure the impact of the  new requirement. While the justifications and approvals for noncompetitive awards that we  reviewed generally met FAR requirements, they varied in the level of  insight that they provided into the reasons for noncompetitive awards. Without this information, DOD may be missing opportunities to gain a  richer understanding of why past acquisitions were not competitive and to  apply those lessons to effectively facilitate competition for future  acquisitions. Recommendations for Executive Action

To better inform DOD’s efforts to enhance competition, we recommend  that the Secretary of Defense take the following three actions:  identify and track the specific factors that affect the competition rate,  such as foreign military sales, and consider this information when  setting annual competition goals for each DOD component; develop guidance that could enable DOD components to apply  lessons learned from past procurements to increase competition for  the same good and services in the future; and develop an action plan for DOD components to collect reliable data on  competitive procurements for which only one offer is received, so that  the department can determine the effect of its new requirement on  one-offer contracts. In  written comments, DOD concurred with our recommendations. Appendix I: Objectives, Scope, and Methodology

The objectives for this review were to examine (1) trends in the  Department of Defense’s (DOD) use of noncompetitive awards; (2)  factors influencing DOD’s competition rate; (3) the extent to which  justifications for exceptions to competitive procedures provided insight  into the reasons for noncompetitive awards; and (4) the impact of DOD’s  new requirement on contracts awarded using competitive procedures but  for which only one offer was received. We determined that the data were sufficiently reliable to  examine the trends in DOD’s use of noncompetitive awards and the  factors influencing DOD’s competition rate, including the number of  awards, dollar amount obligated, and the percentage of contracts  awarded competitively overall and by component. To gain  insight into how DOD sets competition goals, we reviewed DOD policy  and spoke with DOD officials.
Why GAO Did This Study

Competition is the cornerstone of a sound acquisition process and a critical tool for achieving the best return on investment for taxpayers. In fiscal year 2012, DOD obligated $359 billion through contracts and task orders, of which 57 percent was competed. DOD also obligates billions of dollars annually on contracts that are awarded competitively, but for which the government received only one offer. DOD implemented the Better Buying Power initiative in 2010, in an effort to increase competition.
The conference report for the National Defense Authorization Act for Fiscal Year 2012 directed GAO to report on DODs non-competitive and one-offer contracts. GAO examined (1) trends in DODs use of noncompetitive awards; (2) factors influencing DODs competition rate; (3) the extent to which justifications provided insight into the reasons for noncompetitive awards; and (4) the impact of DODs new requirement for competitive solicitations that only elicit one offer. GAO analyzed federal procurement data for fiscal years 2008 through 2012, reviewed DOD policy and competition reports, examined nongeneralizable samples of awards, and interviewed DOD officials.

What GAO Found

The Department of Defenses (DOD) competition rate for all contract obligations declined over the past five fiscal years, from 62.6 percent in fiscal year 2008 to 57.1 percent in fiscal year 2012. GAO also found that the competition rate in fiscal year 2012 varied by specific DOD component with the Air Force having the lowest at 37.1 percent and the Defense Logistics Agency the highest at 83.3 percent. The majority of the noncompetitive awards cited the availability of only one responsible source to meet the governments needs as the reason for using noncompetitive procedures.
A number of factors affect DODs competition rate, but these factors are not always considered when setting DODs annual competition goals. For example, reliance on an original equipment manufacturer throughout the life cycle of a program has been a long-standing challenge for DOD competition, and budget uncertainty can also hinder DODs ability to compete. Noncompetitive purchases that DOD makes on behalf of foreign governments can also affect DODs competition rate. DOD does not systematically consider these and other factors when setting its annual competition goals. For example, it sets competition goals for individual DOD components by simply adding two percentage points to the rate achieved in the previous year. Without identifying and tracking the specific factors affecting competition DOD cannot set meaningful goals for improving competition or accurately gauge its progress toward achieving them.
Many of the noncompetitive justifications GAO reviewed included the required elements as defined by the Federal Acquisition Regulation; however, the level of insight into the reasons for noncompetitive awards varied. For example, some justifications included clear descriptions of market environments where only one source was available to meet the governments needs or described planned actions that could help improve competition in the future. However, other justifications provided limited insight into the reasons for the noncompetitive award or did not fully describe actions that the agency could take to increase future competition. Without this information, DOD may be missing opportunities to gain a fuller understanding of why past acquisitions were not competitive and may be unable to apply those lessons to effectively facilitate competition for future acquisitions.
In 2010, DOD introduced a new requirement that applies to competitive awards that elicit only one offer (one-offer awards); however, the impact of the requirement is unknown because of unreliable data. To address the risk associated with one-offer awards, the requirement established rules that were intended to help ensure adequate solicitation time, ensure that contract requirements are not unnecessarily restrictive, and verify that offers received are fair and reasonable. However, GAOs analysis of 35 one-offer awards determined that contracting officers had incorrectly coded 10 of these awards in the procurement database that DOD relies on to measure the impact of its new requirement. Six of the 10 awards were noncompetitive awards and the remaining 4 had received multiple offers. As a result, GAO determined that DODs data cannot be used to accurately calculate the amount obligated on one-offer awards during fiscal year 2012. Without reliable data, DOD cannot accurately measure the impact of its new requirement.

What GAO Recommends

GAO recommends that DOD identify, track, and consider the specific factors that affect competition when setting competition goals; develop guidance to apply lessons learned from past procurements to help achieve competition in the future; and collect reliable data on one-offer awards. DOD concurred with these recommendations.