Competition in Federal Contracting: An Overview of the ...

1 Competition in Federal contracting : An Overview of the Legal Requirements Kate M. Manuel Legislative Attorney June 30, 2011. Congressional Research Service 7-5700. R40516. CRS Report for Congress Prepared for Members and Committees of Congress Competition in Federal contracting : An Overview of the Legal Requirements Summary Competition in Federal procurement contracting has become a topic of increased congressional and public interest, in part because of alleged misconduct involving noncompetitive contracts and reports that the number of noncompetitive contract actions has increased. President Obama also emphasized Competition in his March 4, 2009, memorandum on government contracting . Additionally, prominent officials within the Department of Defense (DOD), which accounts for some 70% of Federal procurement spending per year, have expressed their commitment to reducing DOD's use of noncompetitive contracts. The Competition in contracting Act (CICA) of 1984 generally governs Competition in Federal procurement contracting .

2 Any procurement contract not entered into through the use of procurement procedures expressly authorized by a particular statute is subject to CICA. CICA. requires that contracts be entered into after full and open Competition through the use of competitive procedures unless certain circumstances exist that would permit agencies to use noncompetitive procedures. Full and open Competition can be obtained through the use of sealed bids, competitive proposals, or other procures defined as competitive under CICA ( , procurement of architectural or engineering services under the Brooks Act). Full and open Competition under CICA also encompasses full and open Competition after exclusion of sources, such as results when agencies engage in dual sourcing or set aside acquisitions for small businesses. Any contract entered into without full and open Competition is noncompetitive, but noncompetitive contracts can still be in compliance with CICA when circumstances permitting other than full and open Competition exist.

3 CICA recognizes seven such circumstances, including (1) single source for goods or services; (2) unusual and compelling urgency; (3) maintenance of the industrial base; (4) requirements of international agreements; (5) statutory authorization or acquisition of brand-name items for resale; (6) national security; and (7) contracts necessary in the public interest. CICA also allows agencies to use special simplified procedures when acquiring goods or services whose expected value is less than $150,000, or commercial goods or services whose expected value is less than $ million ($12 million in emergencies). Issuance of orders under task order and delivery order (TO/DO) contracts is not subject to CICA, although award of TO/DO contracts is. However, the Federal Acquisition Streamlining Act (FASA) of 1994 established a preference for multiple-award TO/DO contracts; required that agencies provide contractors a fair opportunity to compete for orders in excess of $3,000 under multiple-award contracts; and authorized the Government Accountability Office (GAO) to hear protests challenging the issuance of task or delivery orders that increase the scope, period, or maximum value of the underlying contract.

4 The National Defense Authorization Act (NDAA) for FY2008 further limited the use of single-award TO/DO contracts. It also specified what constitutes a fair opportunity to be considered for orders in excess of $ million under multiple-award contracts and granted GAO jurisdiction to hear protests of orders valued in excess of $10 million. While the provision authorizing GAO to hear such protests regarding the orders of civilian agencies sunset in May 2011, GAO recently found that it has jurisdiction over these protests because the NDAA for FY2008 amended FASA to provide that all limitations on GAO's jurisdiction over task and delivery order protests expired in May 2011, not just its authority over protests of task and delivery orders valued in excess of $10 million. The 111th Congress enacted legislation extending the sunset date for GAO's jurisdiction over protests of orders valued in excess of $10 million issued by defense agencies until September 30, 2016 ( 111-383, 825).

5 Congressional Research Service Competition in Federal contracting : An Overview of the Legal Requirements Contents Introduction ..1. Background ..2. Contracts Not Subject to CICA ..6. Contracts Subject to CICA ..7. Full and Open Competition Defined ..7. Competitive Procedures Resulting in Full and Open Competition ..8. Full and Open Competition After Exclusion of Sources ..9. Circumstances Permitting Other Than Full and Open Competition .. 11. Justifications & Approvals .. 13. Special Simplified Procedures for Small Purchases .. 15. Other Competition Requirements .. 18. Competition Requirements for Task and Delivery Order Contracts .. 20. Legislative Initiatives .. 23. Figures Figure 1. Contracts Subject and Not Subject to Figure 2. Simplified Acquisition Procedures: Competition Requirements at Various Price Thresholds .. 17. Figure 3. TO/DO Contracts: Competition Requirements at Various Price Thresholds .. 23. Tables Table 1.

6 Approving Officials for Noncompetitive Contracts in 13. Table 2. Approving Officials for Noncompetitive Contracts Under the Simplified Acquisition Procedures .. 17. Table 3. Types of Competition Under CICA .. 18. Table A-1. Potential Applications and Limitations .. 26. Appendixes Appendix. Circumstances Permitting Other Than Full and Open Competition Under CICA .. 26. Contacts Author Contact Information .. 29. Congressional Research Service Competition in Federal contracting : An Overview of the Legal Requirements Introduction Procurement describes the process whereby the government obtains goods and services from private parties that it does not produce or provide for itself. Competition in government procurement means that the government determines from whom to buy goods and services and thus with whom to contract by solicit[ing] or entertain[ing] offers from two or more competitors, compar[ing] them, and accept[ing] one based on its relative value.

7 1 Competition in Federal procurement contracting has recently become a topic of increased congressional and public interest, in part because of high-profile incidents of alleged misconduct by contractors or agency officials involving noncompetitive contracts and reports that the number of noncompetitive contract actions by the Federal government has Hearings in the 110th and 111th Congresses addressed agencies' alleged failures to compete contracts properly,3 and members enacted or proposed legislation addressing reported deficiencies in the laws governing Competition in Federal contracting , or agencies' compliance with these President Obama also emphasized Competition in his March 4, 2009, memorandum on government Additionally, prominent officials within the Department of Defense (DOD), which accounts for 1. Ralph C. Nash, Jr., Steve L. Schooner, Karen R. O'Brien-DeBakey, and Vernon J. Edwards, The Government Contracts Reference Book: A Comprehensive Guide to the Language of Procurement 109-110 (2d ed.)

8 2007). 2. See, , Robert O'Harrow, Jr., FDA Takes End Run to Award Contract to PR Firm, Wash. Post, Oct. 2, 2008, available at (reporting that the Food and Drug Administration made a noncompetitive award to ensure the work would go to a Washington public relations firm with ties to the FDA official arranging the deal ); Alice Lipowicz, Agencies Spent Billions of Stimulus Money on Noncompetitive Contracts, Fed. Computer Week, Oct. 15, 2009, available at (reporting widespread use of noncompetitive contracts under the American Recovery and Reinvestment Act). 3. See, , Failed Homeland Security Contracts: Hearings Before the Subcomm. on Mgmt., Investigations & Oversight of the House Comm. on Homeland Security, 110th Cong. (Sept. 17, 2008) (testimony of James L. Taylor, Deputy Inspector General, DHS) (noting that DHS did not comply with Federal regulations when it awarded a sole-source contract to Chenega Technology Services Corporation); contracting Revision Bills: Hearing before the Subcomm.

9 On Government Mgmt., Organization & Procurement of the H. Comm. on Oversight & Government Reform, 110th Cong. (Feb. 27, 2008) (testimony of Paul A. Denett, Administrator, Office of Federal Procurement Policy) (highlighting recent executive branch efforts to increase Competition in contracting ). 4. See infra notes 120 to 131 and accompanying text. 5. The White House, Office of the Press Secretary, Government contracting : Memorandum for the Heads of Executive Departments and Agencies, Mar. 4, 2009, available at the-Heads-of-Executive-Departments-and-A gencies-Subject-Government- contracting . This memorandum also called for the Director of the Office of Management and Budget to develop guidance to govern the appropriate use and oversight of sole-source and other types of noncompetitive contracts and to maximize the use of full and open Competition and other competitive procurement processes. Id. This guidance was issued on October 27, 2009, and calls for agencies to focus on requirements development and outreach to potential vendors; use performance-based acquisitions and commercial solutions; evaluate alternative Competition strategies for larger and more complex requirements; use strategic sourcing; ensure consistent maximization of Competition at the task and delivery order level; give maximum practicable consideration to small businesses; limit the length of any noncompetitive contracts.

10 Ensure price reasonableness in noncompetitive contracts; regularly assess contractor performance under noncompetitive contracts; engage with the marketplace to determine how barriers to Competition can be removed; and analyze the agencies' largest spend categories. Executive Office of the President, Office of Management and Budget, Increasing Competition and Structuring Contracts for Best Results, Oct. 27, 2009, available at assets/procurement_gov_ The October memorandum also required agencies reduce by at least 10 percent the combined share of dollars obligated through new contracts in FY 2010 that are awarded non-competitively and/or receive only one bid in response to a solicitation or request for quote, among other things. Id. Congressional Research Service 1. Competition in Federal contracting : An Overview of the Legal Requirements some 70% of Federal procurement spending per year,6 have expressed their commitment to reducing DOD's use of noncompetitive This report describes the Competition requirements currently governing the procurement activities of Federal agencies.