	Background

Federal agencies are generally required to use full and open competition  to award contracts, with certain exceptions. Competition Rates for Non-R&D Services Substantially Higher Than for Products with Little Change over Time

In fiscal year 2011, the competition rate for dollars obligated across DOD  on contracts and task orders for non-R&D services was substantially  higher than the competition rate for products—78 percent compared to  41 percent. R&D services had a competition rate of 59 percent. According to a  DOD procurement policy official, the Air Force competition advocate is  assessing the reasons for lower competition rates. While the assisting agencies had varying competition rates, their  average competition rate was slightly higher than that of DOD’s  contracting offices—81 percent compared to 78 percent. In addition,  based on our prior work, a variety of factors can affect competition,  including reliance on contractor expertise and data rights, the influence of  program offices on the acquisition process, and unanticipated events  such as bid protests. Majority of DOD Non-R&D Services Noncompetitive Obligations Were Coded under “Only One Responsible Source”

In fiscal year 2011, the majority of DOD’s non-R&D services obligations  under noncompetitive contracts and task orders not coded as subject to  fair opportunity were coded under the competition exception “only one  responsible source” in FPDS-NG. Noncompetitive obligations categorized as “authorized by statute” include  contracts that are authorized or required to be made through another  agency or from a specified source, including awards under the HUBZone  Act of 1997, the Veterans Benefit Act of 2003, and the Small Business  Administration’s 8(a) business development program. Despite these actions, we identified additional  opportunities to increase competition and we recommended that OMB  take several actions—including emphasizing the role of program officials  in influencing competition, taking steps to better understand the  circumstances leading to only one offer on competitive contracts, and  examining how competition advocates are appointed. Specifically, in November 2010 DOD issued a memorandum  that requires contracting officers to provide additional time for  contractors to respond to solicitations when only one offer is received,  if less than 30 days was provided for the receipt of proposals under  the original solicitation. The fiscal year 2012 goal for DOD overall (60 percent) is lower than  the fiscal year 2011 goal (62.8 percent). Agency Comments

We provided a draft of this report to DOD and the department responded  that it had no comments. Appendix I: Objectives, Scope, and Methodology

The objectives for this review were to examine (1) how competition for  non-research and development (R&D) services compares to competition  for products, and trends in competition for non-R&D services at the  Department of Defense (DOD); (2) the reasons for noncompetitive  contracts and task orders for services; and (3) steps DOD has taken to  increase competition for services. To address these objectives, we identified through the Federal  Procurement Data System-Next Generation (FPDS-NG) DOD obligations  under competitive and noncompetitive contracts in fiscal years 2007  through 2011, the most recent data available when we conducted our  review. We focused our review on non-research and  development (R&D) services to concentrate our analysis on contracts not  related to development of weapons systems, but conducted limited  analysis to understand competition rates for R&D services as compared  to non-R&D services and to products, in fiscal year 2011. In addition, we reviewed previous GAO reports, Office of Management  and Budget and DOD policies and guidance, and DOD competition  reports for fiscal years 2009 and 2010 to identify reasons for not  competing contracts as well as actions that have been taken to improve  competition at DOD. Effective competition—a subset of overall  competition which DOD defines as competed actions that received more  than one offer in response to a solicitation—rates also varied across the  major components (52 percent at the Air Force to 82 percent at other  defense agencies).
Why GAO Did This Study

Competition is a critical tool for achieving the best return on investment for taxpayers. In fiscal year 2011, the Department of Defense (DOD) obligated about $375 billion through contracts; more than half that amount was for services. Agencies are required to award contracts on the basis of full and open competition, but are permitted to award noncompetitive contracts in certain situations.
The Senate Armed Services Committee report on the National Defense Authorization Act for Fiscal Year 2012 directed GAO to report on competition for DOD contracts and task orders for services. GAO examined (1) how competition rates for services compare to competition rates for products and trends in competition for services, (2) the reasons for noncompetitive contracts and task orders for services, and (3) steps DOD has taken to increase competition.
GAO reviewed federal procurement data for 2007 through 2011 and a non-generalizable sample of 111 justifications for noncompetitive awards, which were from different DOD components and for different types of services. GAO defines competition rates as the dollars obligated under competitive contracts and task orders as a percentage of all obligations. GAO focused on non-research and development (R&D) services to concentrate analysis on contracts not related to development of weapons systems. GAO reviewed DOD policies and competition reports, and prior GAO reports.
GAO is not making any new recommendations. DOD responded to a draft of this report with no comments.

What GAO Found

In fiscal year 2011, the competition rate for DODs non-R&D services was almost twice the competition rate as that of products, and almost 20 percent higher than that of R&D services.
From fiscal year 2007 through 2011, competition rates for non-R&D services have been nearly 80 percent and have not changed significantly across DOD, but have declined at the Air Force, dropping from 75 percent to 59 percent. According to a DOD procurement policy official, the Air Force competition advocate is assessing the reasons for lower competition rates. When non-DOD agencies procured non-R&D services on behalf of DOD in fiscal year 2011, their average competition rate was 81 percent, slightly higher than the average rate of 78 percent for DODs own contracting offices.
The majority of DOD noncompetitive obligations for non-R&D services in fiscal year 2011 were due to the contractor being the only responsible source for the procurement. The second most cited exception was authorized by statute, for example, awards under the Small Business Administrations 8(a) business development program. Based on prior GAO work, a variety of factors can affect competition, including reliance on contractor expertise and data rights, the influence of program offices, and unanticipated events such as bid protests. GAO analysis of the justifications for noncompetitive contracts identified examples of these factors affecting competition for DOD procurements in fiscal year 2011.
Since 2009, the Office of Management and Budget (OMB) and DOD have undertaken initiatives related to competition, including actions to address some opportunities GAO previously identified. DOD has taken steps aimed at increasing competition, in particular effective competition which DOD defines as situations where more than one offer is received in response to a competitive solicitation. For instance, DOD has implemented requirements to provide additional response time to solicitations when only one offer is received for a solicitation that initially provided less than 30 days for receipt of proposals. Outside of recent efforts to increase competition, OMB and DOD have additional opportunities to address prior GAO recommendationssuch as promoting the role of program officials in influencing competition and better understanding the circumstances leading to only one offer on competitive contracts.