Tough to handle

Congress, contractors grapple with increasing competition

On March 12, Sen. Hillary Clinton (D-N.Y.)
urged the Senate to tighten rules on large government
contracts awarded without competition.
She introduced a provision to rein in such
"wasteful" and "abusive" contracts.

It is one of many recent attempts in Congress
to slow what some see as an increase in noncompetitive
contract awards under the Bush
administration. But
although most capitalist
economists agree
that full and open competition is ideal in theory,
the reality is more complex.

Just days before Clinton debuted her pro-competition
measure, several Democrats criticized
Sen. John McCain (R-Ariz.) for his alleged
role in influencing the Air Force's competitively
awarded $35 billion contract for refueling
tankers, won by a consortium led by Europe-based
Airbus. The loser was U.S.-based Boeing
Co., which has since filed a protest.

McCain opposed a previous Air Force tanker
deal with Boeing. He also reportedly urged the
Air Force to ignore European subsidies to
Airbus despite Boeing's argument that they
helped unfairly lower Airbus' price. McCain has
defended the award as the result of fair and
open competition.

However, House Speaker Nancy Pelosi (DCalif.)
and Rep. Rahm Emanuel (D-Ill.) blamed McCain for Boeing's loss. "The person who
stopped [the tanker deal] from going to a U.S.
company was Sen. McCain," Emanuel told the
Seattle Post-Intelligencer. "And now we are
going to send major high-paying jobs overseas."

The episode illustrates lawmakers' contradictory
feelings about competition, said Kenneth
Allard, a retired Army colonel and senior associate
at the Center for Strategic and International
Studies. If the drive for more competition is
viewed as being in conflict with other needs,
such as supplying jobs or receiving funding, it
could fall by the wayside, he said.

"Everyone believes in competition until it
affects his or her own district," Allard said.

Experts say increasing the proportion of contracts
awarded with full and open competition
presents other challenges. For example, at the
Homeland Security Department, 27.2 percent of
contracts in 2007 were awarded through full
and open competition with two or more bids
received, according to the USAspending.gov
Web site. Another 20 percent were awarded
competitively but with only a single bid received.

Those figures are an improvement from
2006, when DHS awarded 18 percent of contracts
with two or more bids and 12 percent with
a single bid. In 2005, there were 17 percent with
two or more bids and 16 percent with one bid.
The department had greater competition in its
first two years, but the percentage has dropped
since then. In 2003, 53 percent of the contracts
had two or more bids.

DHS has always struggled to make its contracting
fully competitive, said Charles Tiefer,
professor and government contracts specialist at
the University of Baltimore School of Law.

"In the early years, the explanation was that
DHS was in an emergency situation," he said.
"Now, five years later, those reasons have lost
their credibility."

Secretary Michael Chertoff has not made procurement
reform a priority, Tiefer said, and as a
result, DHS continues to exhibit a "shockingly
low" level of competition in contracting.

Rep. Henry Waxman (D-Calif.), chairman of
the Oversight and Government Reform Committee,
conducted a study that found no-bid
contracts governmentwide doubled to $103 billion
from 2000 to 2006. In 2006, 50 percent of
procurement spending was awarded without
full and open competition, the study states.

"It is a huge problem," said Scott Amey, general
counsel at the Project on Government Oversight.
"We need competition." Urgent needs for
contractor help, including Hurricane Katrina
recovery and the Iraq war, have contributed to
the rise in noncompetitive bidding, he added.

However, Alan Chvotkin, senior vice president
of the Professional Services Council, said a
significant percentage of the noncompetitive
contracts at DHS are likely the result of followon
contracts and task orders.

For example, the Secure Border Initiative's
multibillion-dollar SBInet surveillance system
contract was designed as a series of relatively
small-value task orders to the prime contractor,
Boeing. After the initial award, subsequent
awards could be seen as noncompetitive,
Chvotkin said. But that reflects the chosen procurement
strategy rather than a failure.

"Competition is not simple," he said. "You can
always find numbers to support your argument."

Furthermore, designing a way to enforce
competition has proven to be tricky. Under
Clinton's provision, a parliamentary point of
order would be permitted against any spending
bill in fiscal 2009 that does not explicitly require
an agency's compliance with competitive contracting
rules. The head of each agency would
also be required to certify in a sworn affidavit
that its decisions comply with open and competitive
contracting rules.

Still, it will be difficult for those rules to alter
contracting patterns, Chvotkin said.

Amey said Congress most likely will not succeed
in increasing competition until there are
broader procurement reforms, such as increased
acquisition staff and appropriate training.
Clinton failed to attach her contracting provision
to a Senate budget bill. But she might take
advantage of other opportunities to win support
for competitive contracting because other contract
reform issues are still up for consideration.

A House subcommittee recently heard testimony
on three bills that would create a database
on contractor performance, sanction contractors
that do not pay federal taxes, and require
disclosure of executives' compensation.

The reformist mood could spread to contract
competition, Tiefer said, especially because the
front-runners in each party have typically shown
interest in it during elections.

"This could be a year in which the Republicans
and Democrats compete to offer procurement
reform proposals," he said.

Alice Lipowicz (alipowicz@1105govinfo.com) is a staff
writer at Washington Technology.

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

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