	Background

The federal government obligates tens of billions annually on IT. In our October 2015 report on bridge contracts, we found that the  agencies included in our review—DOD, HHS, and the Department of  Justice—had limited or no insight into their use of bridge contracts. However, in a generalizable  sample of contracts and orders, we found significant errors in certain  types of orders, which call into question the reliability of competition data  associated with roughly $3 billion per year in obligations. Agencies Reported Obligating More than $15 Billion on Noncompetitive Contracts for IT Annually, but Full Extent of Noncompetitive Dollars Is Not Known Due to Unreliable Data

From fiscal years 2013 through 2017, agencies reported in FPDS-NG  obligating more than $15 billion—about 30 percent of all annual IT  obligations—each year on noncompetitively awarded contracts and  orders. We determined, however, that the agencies’ reporting of certain  competition data was unreliable (see figure 3). DHS has taken actions to  address this issue. Without identifying  the reasons why contracting officers are miscoding these orders in FPDS-NG, DOD and HHS are unable to take action to ensure that competition  data are accurately recorded, and are at risk of using inaccurate  information to assess whether they are achieving their competition  objectives. Agencies Cited That Only One Contractor Could Meet the Need or Small Business Requirements as Most Common Reasons for Awarding Noncompetitive Contracts

The documentation for the contracts and orders at the three agencies we  reviewed generally cited either that only one source could meet their  needs or that they were awarding the contract sole-source to an 8(a)  small business participant when noncompetitively awarding IT contracts  or orders. DOD concurred with our recommendation. National security. An Estimated Eight Percent of Fiscal Year 2016 IT Noncompetitive Contracts and Orders Were Bridges, and Agencies Have Difficulty Managing Them An Estimated Eight Percent of IT Noncompetitive Contracts and Orders in Fiscal Year 2016 Were Bridge Contracts

We estimate that about 8 percent of contracts and orders above $150,000  in fiscal year 2016 at DOD, DHS, and HHS were bridge contracts. Agencies’ program officials said that they are still supporting outdated or  obsolete legacy IT systems (as defined by the MGT Act) because they  are needed for the mission, or they are in the process of buying new  updated systems or modernizing current ones. Conclusions

Competition is a cornerstone of the federal acquisition system and a  critical tool for achieving the best possible return on investment for  taxpayers. Appendix I: Objectives, Scope, and Methodology

Our report examines (1) the extent to which agencies used  noncompetitive contracts to procure Information Technology (IT) products  and services for fiscal years 2013 through 2017; (2) the reasons for using  noncompetitive contracts for selected IT procurements; (3) the extent to  which IT procurements at selected agencies were bridge contracts; and  (4) the extent to which noncompetitive IT procurements at selected  agencies were in support of legacy systems. To examine the extent to which agencies used noncompetitive contracts  and orders to procure IT products and services, we analyzed  government-wide Federal Procurement Data System-Next Generation  (FPDS-NG) data on IT obligations from fiscal years 2013 through 2017. To determine the reasons for using noncompetitive contracts for selected  IT procurements, we selected the three agencies with the highest  reported obligations on IT noncompetitive contracts for fiscal years 2012  through 2016 (the most recent year of data available at the time we  began our review)—DOD, DHS and HHS. To determine the extent to which IT procurements at selected agencies  were bridge contracts or in support of legacy systems, agencies provided  information as to whether the contracts and orders met GAO’s definition  of a bridge contract—which we defined as an extension to an existing  contract beyond the period of performance (including base and option  years) or a new, short-term contract awarded on a sole-source basis to  an incumbent contractor to avoid a lapse in service caused by a delay in  awarding a follow-on contract—and whether they met the definitions of  legacy IT systems in OMB’s draft IT Modernization Initiative and the  Modernizing Government Technology Act (MGT).
Why GAO Did This Study

The federal government spends tens of billions of dollars each year on IT products and services. Competition is a key component to achieving the best return on investment for taxpayers. Federal acquisition regulations allow for noncompetitive contracts in certain circumstances. Some noncompetitive contracts act as “bridge contracts”—which can be a useful tool to avoid a lapse in service but can also increase the risk of the government overpaying. There is currently no government-wide definition of bridge contracts.
GAO was asked to review the federal government's use of noncompetitive contracts for IT. This report examines (1) the extent that agencies used noncompetitive contracts for IT, (2) the reasons for using noncompetitive contracts for selected IT procurements, (3) the extent to which IT procurements at selected agencies were bridge contracts, and (4) the extent to which IT procurements were in support of legacy systems. GAO analyzed FPDS-NG data from fiscal years 2013 through 2017 (the most recent and complete data available). GAO developed a generalizable sample of 171 fiscal year 2016 noncompetitive IT contracts and orders awarded by DOD, DHS, and HHS—the agencies with the most spending on IT, to determine the reasons for using noncompetitive contracts and orders, and the extent to which these were bridge contracts or supported legacy systems.

What GAO Found

From fiscal years 2013 through 2017, federal agencies reported obligating more than $15 billion per year, or about 30 percent, of information technology (IT) contract spending on a noncompetitive basis (see figure).
GAO found, however, that Departments of Defense (DOD), Homeland Security (DHS), and Health and Human Services (HHS) contracting officials misreported competition data in the Federal Procurement Data System-Next Generation (FPDS-NG) for 22 of the 41 orders GAO reviewed. GAO's findings call into question competition data associated with nearly $3 billion in annual obligations for IT-related orders. DHS identified underlying issues resulting in the errors for its orders and took corrective action. DOD and HHS, however, had limited insight into why the errors occurred. Without identifying the issues contributing to the errors, DOD and HHS are unable to take action to ensure that competition data are accurately recorded in the future, and are at risk of using inaccurate information to assess whether they are achieving their competition objectives.
GAO found that DOD, DHS, and HHS primarily cited two reasons for awarding a noncompetitive contract or order: (1) only one source could meet the need (for example, the contractor owned proprietary technical or data rights) or (2) the agency awarded the contract to a small business to help meet agency goals.
GAO estimates that about 8 percent of 2016 noncompetitive IT contracts and orders at DOD, DHS, and HHS were bridge contracts, awarded in part because of acquisition planning challenges. GAO previously recommended that the Office of Federal Procurement Policy define bridge contracts and provide guidance on their use, but it has not yet done so. GAO believes that addressing this recommendation will help agencies better manage their use of bridge contracts.
Additionally, GAO estimates that about 7 percent of noncompetitive IT contracts and orders were used to support outdated or obsolete legacy IT systems. Officials from the agencies GAO reviewed stated these systems are needed for their mission or that they are in the process of modernizing the legacy systems or buying new systems.

What GAO Recommends

GAO recommended DOD and HHS identify the reasons why competition data for certain orders in FPDS-NG were misreported and take corrective action. DOD and HHS concurred.