Audit: ITES-2S miscode leaves out small businesses

The Army tied too many contracts together to form a $20 billion contract without justifying it, restricting small businesses from competing for the contract, a new audit found.

The Defense Department's Office of the Inspector General determined that the Army Contracting Agency coded its Information Technology Enterprise Solutions-2 Services (ITES-2S) contract too liberally. The Army should have selected an industry classification system code that better describes the principal nature of the services it wants to buy, the IG said. The miscoding led to a bundled contract unsuitable for small businesses, according to the Aug. 9 audit.

The ITES-2S contract is a multiple-award, indefinite-delivery, indefinite-quantity (IDIQ) contract with a ceiling of $20 billion over nine years. Its scope encompasses requirements for IT service solutions to telecommunications to hardware and software with end-to-end solutions.

The IG concluded that if contracting officers had coded ITES-2S correctly, "they would have realized that the contract was bundled."

The audit recommends a revised classification code. It also wants the Army to follow the Defense Federal Acquisition Regulation Supplement for consolidating contracts, or simply break it up into separate smaller contracts.

But the Army disagrees with the IG.

Claude Bolton, assistant secretary of the Army for acquisition, logistics and technology, wrote in response to the audit, that the classification poses a challenge for large IDIQ vehicles such as ITES-2S. They're extremely broad in scope and have no defined requirements until individual task orders are placed.

"Quite simply, the U.S. Army can only make its best estimate," he wrote.

In attempting to code the contract, there is no single code large enough to cover the complexity and the worldwide magnitude of ITES-2S, he added. So, the officer made the appropriate choice.

Furthermore, Bolton wrote that numerous overseers did not object to the code. The Army, DOD's Small and Disadvantaged Business Utilization Office, and the Small Business Administration approved the code. The House and Senate small-business committees did not disagree with the selection either.

The smaller small businesses would not have met the requirements of ITES-2S, but more importantly none of them even submitted a proposal, Bolton wrote.

The original ITES-2S award in 2006 went to eight large businesses and three small ones. After a protest five more companies were added to the contract.

Matthew Weigelt writes for Federal Computer Week, an 1105 Government Information Group publication.