DOD and GSA Do Not Know the Full Extent to Which They Are Reporting Consolidated Contracts

DOD and GSA accounted for more than 80 percent of the reported  consolidated contracts in fiscal years 2011 and 2012, but DOD and GSA  overstated their use of consolidated contracts in those two years. In our sample of 157 DOD and GSA  contracts that were identified as consolidated in FPDS-NG, we found and  agency officials confirmed that approximately 34 percent of the DOD  contracts and all of the GSA contracts were miscoded and in fact were  not consolidated. We also identified four consolidated DOD contracts,  including one that was also bundled, that were not reported as such in  FPDS-NG. Most DOD Consolidated Contracts Complied with Existing Acquisition Regulations, but Regulations Do Not Reflect Changes in the Law

Most of the 100 DOD contracts from fiscal years 2011 and 2012 that we  identified as consolidated complied with existing acquisition regulations  by justifying the need to consolidate contract requirements over $6  million. Most of the contracts that did not comply were justified, but the  determinations were not made by an official at a level senior enough to  meet defense regulation requirements. In fiscal years 2011 and 2012,  existing DOD regulations also did not fully reflect the 2010 changes in the  law, including those that lowered the dollar amount at which DOD  consolidations must be justified from over $6 million to over $2 million if  DOD failed to meet small business goals and required the agencies to  identify small business impacts. DOD and GSA Are Waiting for SBA Final Rulemaking before Updating or Establishing Consolidation Guidance

While most DOD consolidated contracts were justified in accordance with  existing DFARS, these regulations have not been fully updated to reflect  new provisions on consolidating contract requirements in the 2010 Jobs  Act. In October 2013, DOD issued instructions to lower the  consolidated threshold to $2 million. However, unlike DOD, GSA was  not required to justify its consolidated contracts before the Jobs Act,  which enacted contract consolidation requirements for the first time for all  federal agencies. DOD and SBA Officials Took Various Actions to Address the Impact of Contract Consolidation on Small Businesses

Our review of 100 consolidated and bundled contracts and orders issued  by DOD found that slightly more than half—or 52—were awarded to small  businesses. Of the 48 contracts and orders awarded to large businesses,  DOD and SBA officials often addressed small business impacts through  measures such as small business subcontracting plans. SBA Collects Incomplete Information on Bundled Contracts and Has Not Reported to Congress as Required

The Small Business Act requires SBA to track information on bundled  contracts and annually report to Congress on these contracts. Specifically, SBA is required to:
Maintain a database containing data and information regarding each  bundled contract awarded by a federal agency and each small  business concern displaced as a prime contractor as a result of such  bundling;
For bundled contracts that are recompeted as a bundled contract,  determine the amount of savings and benefits achieved through the  bundling of contract requirements, whether they would continue to be  realized if the contract remains bundled, and whether the savings  would be greater if procurement requirements were divided into  separate solicitations suitable for award to small business concerns;  and
Provide an annual report to the Congressional Committees on Small  Business of the House and Senate each March on the number of  small business concerns displaced as prime contractors as a result of  bundled contracts awarded by federal agencies and provide  information related to these contracts, such as the cost savings  realized by bundling over the life of the contract and the extent to  which they complied with the contracting agency’s small business  subcontracting plan. SBA recently published the applicable final rule,  which takes effect no later than December 31, 2013. According to the Federal Procurement Data System- Next Generation (FPDS-NG), DOD and the General Services  Administration (GSA) accounted for more than 80 percent of the reported  use of consolidated and bundled contracts and orders awarded in fiscal  years 2011 and 2012. For this report, we assessed the extent to which (1)  DOD and GSA have consolidated contracts; (2) DOD and GSA  justifications for contract consolidation complied with relevant laws and  regulations; (3) DOD, GSA, and the Small Business Administration (SBA)  addressed small business impacts of consolidation, including bundling;  and (4) SBA collected and reported information on consolidated contracts  that are considered bundled.
Why GAO Did This Study

Federal agencies sometimes can achieve savings by consolidating requirements from separate, smaller contracts into fewer, larger contracts. However, consolidation may negatively impact small businesses. Generally, when consolidation makes a contract unsuitable for small businesses, the contract is considered bundled, which is a subset of consolidation. Agencies must justify their actions for both consolidated and bundled requirements.
Recent National Defense Authorization Acts and a related committee report mandated that GAO review federal agency use of consolidated contracts. According to federal procurement data, DOD and GSA accounted for the vast majority of all contracts reported as consolidated in fiscal years 2011 and 2012. This report examines the extent to which (1) DOD and GSA have consolidated contracts; (2) DOD and GSA justifications complied with relevant laws and regulations; (3) DOD, GSA, and SBA addressed small business impacts as required; and (4) SBA collected and reported information on bundled contracts. GAO identified relevant laws and regulations; analyzed federal procurement data from fiscal years 2011 and 2012; reviewed consolidated, bundled, and other contracts; and interviewed DOD, GSA, and SBA officials.

What GAO Found

The Department of Defense (DOD) and the General Services Administration (GSA)--which accounted for more than 80 percent of the consolidated contracts reported by all federal agencies in fiscal years 2011 and 2012--do not know the full extent to which they are awarding consolidated contracts. This is the result of contracts being misreported in the federal procurement data system. GAO reviewed 157 contracts--more than half of all DOD and GSA contracts that were reported as consolidated--and found that 34 percent of the DOD contracts and all of the GSA contracts in fact were not consolidated. GAO also identified four DOD contracts with consolidated requirements that were not reported as such.
DOD generally justified contracts with consolidated requirements in accordance with existing regulations, but DOD and GSA have not yet implemented 2010 changes in the law. GAO found that 82 percent of the 100 DOD contracts confirmed as consolidated followed existing regulations pertaining to conducting market research, identifying alternatives, and justifying decisions. Most of the contracts that did not comply were justified, but the determinations were not made by an official at a level senior enough to meet defense regulation requirements. However, DOD regulations and guidance did not reflect the reduction in the value at which consolidated contracts must be justified--from over $6 million to over $2 million--as called for in the law. In October 2013, DOD lowered the dollar threshold. DOD and GSA are waiting for the Small Business Administration (SBA) to issue a final rule to implement all of the statutory changes before updating regulations. SBA issued a final rule on October 2, 2013, which takes effect no later than December 31, 2013.
DOD and SBA officials took a range of actions to address the impact of consolidation on small business. Federal law requires contracting agencies to facilitate the participation of small businesses on consolidated contracts. GAO found that half of the 100 DOD consolidated contracts reviewed were awarded to small businesses, most of which were awarded through small business set asides. Additionally, many of the consolidated contracts awarded to large businesses included measures, such as small business subcontracting plans, to address small businesses that were potentially affected by the consolidation. For the consolidated contracts considered to be bundled--for which agencies and SBA officials are specifically required to maximize small business contracting opportunities--DOD required subcontracting plans as well.
SBA does not collect complete information on bundled contracts and has not reported to congressional committees as required. Federal law requires SBA to take several actions for bundled contracts, including annual reporting to the small business committees on the extent of bundling, maintaining a database to track small business impacts, and determining if benefits were achieved through bundling. SBA officials said they have not sent reports to the committees since 2010 due to an administrative oversight. Further, SBA has not collected all required information, such as the number of small businesses affected by bundled contracts. SBA officials explained that they cannot fulfill some requirements because of limitations in existing data sources, such as the federal procurement data system, which do not collect the information needed to meet reporting requirements.

What GAO Recommends

GAO recommends that DOD update and GSA establish guidance after SBA rulemaking is complete to reflect changes in the law and that SBA comply with congressional reporting requirements for bundled contracts. DOD, GSA, and SBA concurred with the recommendations.