Agencies lean on contracts without competition to meet COVID response needs

The federal government has spent $17.8 billion on contracts in response to the COVID-19 pandemic through June 11, according to the latest data from the Government Accountability Office.

That alone is a big number which doesn’t count loans and payouts through initiatives such as the Paycheck Protection Program.

Sixty-two percent has gone to medical and surgical equipment such as masks, ventilators and gowns. That lines up with the fact that most of the money so far has been spent through the Health and Human Services Department with $8.9 billion in contract obligations.

Next was the Defense Department at $3 billion, followed by Homeland Security Department at $1.7 billion, Veterans Affairs at $1.5 billion. Another $2.7 billion has been spent by 38 other agencies combined.

The GAO report doesn't make recommendations or point to areas where potential errors are occurring. Those reports will likely come later. This is more of an accounting of how much was spent and on what.

My main area of potential concern is regarding the rate of competition. But this spending is happening in the midst of a crisis.

Of the $17.8 billion in contract awards, 47 percent were awarded through competition. GAO found that the other 53 percent or $9.4 billion in contracts were awarded non-competitively. For two-thirds of the non-competitive awards, agencies used the “unusual and compelling urgency exception,” GAO said.

Purchases of products and goods saw the least competition, with only 39 percent competed. Purchases of services saw 61 percent competed.

GAO will likely revisit the level of competition as the pandemic continues. It states that “awarding contracts under the unusual and compelling urgency exception to full and open competition can be necessary in certain circumstances, but our prior work has noted that promoting competition -- even in a limited form -- increases the potential for quality goods and services at a lower price in urgent situations.”

Another interesting finding is that 78 percent of the contract obligations were made through fixed-price contracts. This makes sense considering how many products and goods were being purchased. Another 17 percent were awarded through cost-reimbursement contracts.

Cost-reimbursement and time and materials/labor hour contracts were used on 48 percent of the services contracts.

Agencies also used new contracts, rather than existing vehicles, to make these awards. GAO found that $11.7 billion was spent through new contractors, compared to $6.1 billion that went through pre-existing vehicles. The new contracts also saw less competition. Of the work that went through existing contracts, 72 percent was competed.

This might be an area GAO explores further. “Our prior work has noted that agencies can leverage contracts awarded in advance of a disaster to rapidly and cost-effectively mobilize resources, and that these contracts can help preclude the need to procure critical goods and services noncompetitively,” the agency wrote.

Obligations went to more than 6,200 vendors, but the top 10 recipients accounted for one-third or $5.6 billion in obligations. The top 10 reflect the goods and product heavy nature of the spending as well as the need to acquire drugs and biologics for test kits.

The top 10 are:

• Phillips Electronics North America with $702.7 million
• Emergent Biosolutions with $642.8 million
• Janssen Pharmaceuticals with $607.1 million
• Hamilton Bonaduz AG with $596.8 million
• Parkdale Advanced Materials Inc. with $595.1 million
• Thermo Fisher Scientific with $539 million
• Hanesbrands with $523.5 million
• RER Solutions with $500 million
• General Motors with $476.1 million
• Modernatx with $430.3 million

GAO included an interesting note to that list. GM’s total is from a single contract action, while Thermo Fisher’s is from 201 actions.

The agency said it expects to look more at how agencies acquired goods and services including contract types and techniques. These will include the use of “undefinitized contract actions” and other transaction authority actions.

Other items they will look at include how closely agencies followed the guidance issued on how to buy during the pandemic and how agencies used their authority to reimburse contractors so they can maintain readiness.

So unsurprisingly, there is more to come.