DOD Sole-Source 8(a) Contract Awards over $20 Million Have Declined While the Number of Competitive 8(a) Awards Has Increased in Recent Years

From fiscal years 2006 through 2015, the number of sole-source 8(a)  contract awards over $20 million at DOD started to decline in 2011 and  remained low through 2015, while the number of competitive contract  awards over $20 million increased in recent years. We found that DOD awarded two sole-source 8(a) contracts over $20  million with a total value of over $87 million in fiscal year 2015, one of  which did not complete the 8(a) justification as required. In one case, a Marine Corps contracting officer awarded a $24 million  sole-source 8(a) contract for vehicle maintenance and repair to the  incumbent contractor. She further noted that there will not be a follow-on contract for this  particular requirement, as the service is no longer needed. In addition, since 2011, tribal 8(a) firms have consistently won  higher value awards than other 8(a) firms for competitive 8(a) contracts  over $20 million. Five of the 9 sole- source 8(a) contracts we reviewed were competed in the follow-on  contracts, and, for most of the remaining 4 contracts with follow-on sole- source contracts, officials stated that they plan to competitively award  future procurements or are already in the process of doing so. In addition,  DOD officials from almost half of the offices noted that a decline in their  budgets or a decline in the size of their requirements rendered the 8(a)  justification not applicable because most of their contracts fall below the  $20 million threshold. See figure 2. The Army competitively awarded a 4-year $140 million contract for  base operations support, which was previously met by a 10-year $397  million sole-source 8(a) contract. The follow-on award went to an 8(a) firm owned by the same  tribal entity as the incumbent firm. The current contracting  officer did not know why the previous contracting officer awarded  separate contracts for this requirement. The contracting officer told us that he intends  to competitively award future follow-on contracts. DOD Officials’ Opinions Varied on Whether the 8(a) Justification Will Affect Future Awards of Sole- Source 8(a) Contracts over $20 Million

DOD contracting and small business officials had differing views about  whether the 8(a) justification was a deterrent to awarding sole-source 8(a)  contracts over $20 million. Agency Comments

The Department of Defense had no comments on a draft of this report. Appendix I: Objectives, Scope, and Methodology

The objectives of this review were to determine (1) trends among  Department of Defense (DOD) sole-source and competitive 8(a) awards  over $20 million from fiscal year 2006 through fiscal year 2015; and (2)  the factors to which DOD officials attribute these trends. The  Consolidated and Further Continuing Appropriations Act of 2015  contained a provision for us to assess the impact of the justification and  approval for sole-source 8(a) contracts over $20 million, which we refer to  as 8(a) justification. These contracts were identified in our past  work on this topic.
Why GAO Did This Study

The Small Business Administration's 8(a) program is one of the federal government's primary vehicles for developing small businesses. Tribal 8(a) firms, such as firms owned by Alaska Native Corporations, can win sole-source contracts for any dollar amount in the 8(a) program, while other 8(a) firms generally must compete for contracts valued above certain dollar thresholds.
In March 2011, the Federal Acquisition Regulation was amended to include a new requirement for a written justification for sole-source 8(a) awards over $20 million, where previously no justification was required. GAO has previously reported on tribal 8(a) contracting and recommended improved oversight.
The Appropriations Act of 2015 contained a provision for GAO to assess the impact of the 8(a) justification at DOD. This report addresses: (1) trends among DOD sole-source and competitive 8(a) awards from fiscal years 2006 through 2015; and (2) the factors to which DOD officials attribute these trends. GAO analyzed data from the Federal Procurement Data System-Next Generation, reviewed 14 sole-source 8(a) contracts over $20 million—9 of which had been followed by additional contracts for the same requirement, and spoke with contracting officials. GAO judgmentally selected most of the 14 contracts from offices that had awarded numerous sole-source 8(a) contracts in the past.
GAO is not making any recommendations in this report. The Department of Defense had no comments on a draft of this report.

What GAO Found

The number of sole-source contracts over $20 million that the Department of Defense (DOD) awards to small businesses under the 8(a) program has been steadily declining since 2011 when the new requirement for a written justification for these contracts went into effect. In contrast, the number of competitive 8(a) contracts over $20 million has increased in recent years (see figure).
Between GAO's last report on this topic in September 2014 and the end of fiscal year 2015, DOD awarded two sole-source 8(a) contracts over $20 million—one for vehicle maintenance and repair and one for engineering services. The contracting officer for the vehicle repair contract told GAO that the service will not be needed in the future, while the contracting officer for engineering services stated that he intends to competitively award the next contract for these services. Tribal 8(a) firms eligible for sole-source contracts over $20 million have won a growing number of competed 8(a) contracts since the justification went into effect in 2011.
DOD contracting officials GAO spoke to overwhelmingly cited an agency-wide emphasis on using competition to obtain benefits, such as better pricing, as a reason for the decline in the use of sole-source 8(a) contracts over $20 million. Further, officials from almost half of the offices also noted that a decline in their budgets or the amount of goods and services needed rendered the 8(a) justification not applicable because most of their contracts fall below the $20 million threshold. Of the 9 sole-source 8(a) contracts GAO reviewed with subsequently awarded contracts, over half were ultimately competed. For example, the Army competitively awarded a 4-year $140 million contract for base operations support, a service that had been previously met by a 10-year $397 million sole-source 8(a) contract.