Rule adds competition to defense spending

Government and information technology industry officials are anxiously awaiting a new federal procurement rule, to be issued June 26, that is meant to ensure adequate competition on Defense Department multiple-award contracts.

The rule will implement Section 803 of the National Defense Authorization Act of 2002 and applies to contracts for services worth more than $100,000.

An earlier draft of the rule drew strong criticism because it did not provide clear guidance for structuring competition, raising concerns that procurement officers will simply stop using multiple-award contracts to avoid second-guessing and confusion, concerned officials said.

A Defense Department review of 423 multiple-award task orders awarded in fiscal 2001 and 2000 found that 72 percent were awarded on a sole-source or directed-source basis, according to a Sept. 30, 2001, report by the Defense Department Office of Inspector General. The contracts were worth a total of $451.4 million, according to the report.

Section 803 requires that the Defense Department, when buying a service, must notify all contractors, or as many contractors as practical, who offer the service under the multiple-award contract. If notice is not given to all contractors, a purchase can only be made if at least three qualified contractors submit bids, or a contracting officer determines in writing that no additional contractors could be identified despite reasonable efforts to do so.

Industry and government officials said they are concerned that the proposed rule reiterates the legislative language without providing adequate guidance to contracting officers about how notice should be provided and how they should document efforts to obtain adequate competition.

Seventy-two comments were made on the proposed rule offered by the Defense Acquisition Regulations Council, which was published in the Federal Register April 1.

Director of Defense Procurement Deirdre Lee wrote in her comments that the rule should require "a detailed description of what efforts were made by the government to obtain three offers. As written, a contracting officer could simply state, 'I think we did an adequate job,' " Lee said.

Lee was not available for comment before press time. But speaking before industry executives last month, she said procurement officials had brought Section 803 upon themselves by awarding many jobs without adequate competition, including releasing requests for proposals on Fridays and expecting responses the following Mondays.

Stan Soloway, president of the Professional Services Council in Arlington, Va., said Lee's suggestions did not go far enough. The rule should include more specific guidance to acquisition personnel about how to implement the rule and document the actions it requires, he said.

Otherwise, acquisition personnel may think the requirement is overly onerous or difficult, and they will use other contracting vehicles that are less useful to the government, he said.

PSC represents the technical and professional services industry, including information technology and consulting firms.

"[Contracting officers] may go to six or eight vendors and only get one response. There may be a very good reason for that," Soloway said. "The market research of other vendors may reveal that the incumbent is doing a very good job, and they choose not to compete. That is competition. That requires a few sentences in the contract file. [The rule should] explain that and give some clear examples."

The General Services Administration, which provides multiple-award contracting vehicles for governmentwide use, expressed similar concerns in its comments.

"The proposed rule essentially implements the statutory language as it is written and, therefore, is silent as to the guidance necessary to ensure proper implementation," wrote Al Matera, director of GSA's Acquisition Policy Division.

The problem isn't contacting all the schedule holders, it's ensuring that contracting officers don't get inundated with 70 or 80 responses, said Olga Grkavac, executive vice president of the Information Technology Association of America in Arlington, Va., which represents more than 500 IT industry companies.

"How will this person have the time and resources to analyze them?" she asked. Like Soloway, Grkavac fears contracting officers will respond by stopping use of the GSA schedules.

The DAR Council could issue a final rule or an interim rule June 26.

"We are eager to see what [the rule] is," Soloway said. "If it is done wrong, it could have a serious impact on the schedules. If it is done right, it could actually strengthen the schedules. But the devil is in the details."

Staff Writer Gail Repsher Emery can be reached at gemery@postnewsweektech.com.