Federal Agencies Largely Used Existing Contracts and Awarded Most New Recovery Act Contracts Competitively

More than two-thirds of the $26 billion that had been obligated on federal  contracts through May 2010 was obligated on contracts that were already  in place before the Recovery Act. For these orders  and modifications on existing contracts, the decisions to compete or not  compete the underlying contracts predated the Recovery Act. Selected Federal Agencies Focused On Expediency When Choosing Contracting Approaches for Recovery Act Programs

Officials at the five federal agencies we reviewed told us that they chose  their contracting approaches to meet their primary goals of obligating  Recovery Act funds quickly and to high-priority projects, which sometimes  led to using noncompetitive contract actions. the funds were available for obligation. Whether an  existing contract had been competed originally did not influence decisions  about which of these contracts to use since the level of competition had  already been established prior to the availability of Recovery Act funds. Federal Agencies Provided Varying Degrees of Additional Contract Oversight, While IGs Focused On Higher-Risk Areas

The selected agencies added additional review processes, internal  reporting, and coordination steps in response to the Recovery Act. Table 1 shows the  funding provided to the IGs for the five selected agencies. These states rely on their pre-Recovery Act  contracting policies and procedures, which generally require competition. However, the states do not routinely provide state-level  oversight of contracts awarded at the local level, where a portion of the  Recovery Act contracting occurs. State Audit Organizations Might Address Recovery Act Contracting through Annual Single Audits or Program Reviews

Representatives of the five states’ audit organizations said that their  organizations could provide additional oversight of the states’ use of  Recovery Act contracting funds through the internal control work  performed as part of the states’ Single Audits, and some explained that  this could also be done through separate programmatic reviews if  contracting is identified as an area of risk. First, the  8(a) program accounts for the overwhelming majority of noncompetitive  contract obligations under the Recovery Act. We did not intend to suggest that there was anything improper  with agencies deciding to use the 8(a) program in implementing the  Recovery Act. We are sending copies of this report to interested congressional  committees, as well as the Secretaries of the Departments of Defense,  Energy, and Health and Human Services; the Administrators of the  National Aeronautics and Space Administration and the Small Business  Administration; and the Inspectors General of these five agencies. Approximately 17 percent of obligations on new contracts were  obligated to noncompetitively awarded contracts, most of which were  awarded to 8(a) program small businesses. Most of SBA’s  Recovery Act contract dollars were obligated on contracts to 8(a) program  businesses. Appendix III: Objectives, Scope, and Methodology

	Objectives

GAO was asked to examine noncompetitive contract awards under the  American Recovery and Reinvestment Act of 2009 (Recovery Act). In  response, we conducted a review to determine:  the extent to which Recovery Act funding was spent using contracts, and  to what extent these contract actions were awarded noncompetitively;  the reasons selected federal agencies awarded noncompetitive Recovery  Act contracts;  the extent of oversight of Recovery Act contract actions at selected federal  agencies; and    state officials’ level of insight into the use of noncompetitive Recovery Act  contracts within selected states. To determine the level of insight that state officials have into the use of  noncompetitive Recovery Act contracts, we selected five states— California, Colorado, Florida, New York, and Texas—based on the amount  of Recovery Act funds reported as being awarded via contracts on  www.Recovery.gov and our goal of providing information on a variety of  geographic locations.
Why GAO Did This Study

The American Recovery and Reinvestment Act of 2009 (Recovery Act), estimated to cost $862 billion over 10 years, is intended to stimulate the economy and create jobs. The Recovery Act provides funds to federal agencies and states, which in turn may award contracts to private companies and other entities to carry out the purposes of the Recovery Act. Contracts using Recovery Act funds are required to be awarded competitively to the maximum extent practicable. GAO was asked to examine the use and oversight of noncompetitive Recovery Act contracts at the federal and state levels. GAO determined (1) the extent that federal contracts were awarded noncompetitively; (2) the reasons five selected federal agencies (the Departments of Defense, Energy, and Health and Human Services; the National Aeronautics and Space Administration; and the Small Business Administration (SBA)) awarded noncompetitive contracts; (3) the oversight these agencies and their inspectors general (IG) provide for Recovery Act contracts; and (4) the level of insight five selected states (California, Colorado, Florida, New York, and Texas) have into the use of noncompetitive Recovery Act contracts.

What GAO Found

More than two-thirds of the $26 billion obligated for Recovery Act federal contract actions through May 2010 were on contracts that were in place before the enactment of the Recovery Act. Most of these contracts had been awarded competitively. For new federal Recovery Act contract actions, 89 percent of the dollars were obligated on competed actions. Most of the Recovery Act dollars obligated noncompetitively on new contract actions went to socially and economically disadvantaged small businesses under SBA's 8(a) program. The goal of using Recovery Act funds quickly on high-priority projects drove the contracting approaches of the five federal agencies, particularly their use of existing contracts. Officials explained that whether an existing contract had been competed originally did not influence the decision to use a pre-existing contract because the level of competition had been established before Recovery Act funds were available. The selected federal agencies implemented additional review processes, internal reporting, and coordination efforts for the Recovery Act. Some IGs for these agencies focused initial Recovery Act oversight on areas the IGs considered to be higher risk than contracts, such as grant programs. The IG reviews to date have not focused specifically on contracting, including the use of noncompetitive awards to 8(a) program businesses. GAO's recent reviews of the 8(a) program, however, have found that safeguards for ensuring that only eligible firms receive 8(a) contracts may not be working as intended. The five states varied on the type and amount of data routinely collected on noncompetitive Recovery Act contracts. GAO could not determine the full extent to which such contracts are being used. The states generally rely on their pre-Recovery Act contracting policies and procedures, which generally require competition. The states do not routinely provide state-level oversight of contracts awarded at the local level, where a portion of Recovery Act contracting occurs. Officials from the selected states' audit organizations said that if they were to address Recovery Act contracting issues, it could be done through the annual Single Audit or other reviews of programs that involve Recovery Act funds.

What GAO Recommends

GAO recommends that the five IGs assess the need to allocate audit resources to noncompetitive 8(a) Recovery Act contracts. The IGs concurred or had no comment.