The Department of Defense just released a document outlining the Guidelines For Creating and Maintaining a Competitive Environment for Supplies and Services in the Department of Defense. This document is in response partly to the fact that competitive bidding on DoD contracts has slipped to 57% for FY 2013. This means over 40% of the contracts issued by DoD are not competitive contracts. About 2/3 of these “non-competitive” contracts are service contracts. I think that is somewhat of a surprise as the DoD always thought that technology contracts might be sole sourced, depending on the technology and the confidentiality and security requirements. Service contracts, on the other hand, might not have the same restrictions and it is quite a surprise to officials in the Defense Department that competition is not used more. The Under Secretary of Defense for Acquisition, Technology and Logistics, Frank Kendall, wants to increase the amount of competition in purchases by the Defense Department. The guidelines cover not only services but products and commodities as well.
So why is it so hard to get competition on defense acquisitions? Several reasons have been discussed including:
- Suppliers are “turned off” by complicated or ambiguous requirements
- Only one or two suppliers bid on the solicitation
- Deadlines for proposals are viewed as “unrealistic” by companies inexperienced in government contracting
- The cost of business, including contract administration, approved accounting systems, audits, etc.
- Some contracts are seen to be written to “favor” certain companies
Whatever the reason, the Defense Department is taking steps to try and increase the amount of competitive bids within defense acquisition. The DoD is saying all the right things including that competition creates incentive for contractors to provide goods and services at the lowest price and highest quality.
There are people who also think that there are some barriers to getting more competition introduced into the defense acquisition system. One of the reasons is foreign competition. The Defense Department (and to a larger extent, most of the Federal Government) has been moving more and more to a “buy US” mentality. There are some goods (and quite possibly services) that may be provided at a higher quality and lower price by a non-US source. General usage electronics might be one example. General usage automobiles might be another example.
One of the ways the government restricts the entry of more competitors is the use of negotiated contracts (for which the defense acquisition department has been expertly staffed) that tend to give the DoD more access to a company’s data (both technical as well as financial) and to their intellectual property. There are those that believe open competition procurements might take longer than a sole sourced procurement. There is also evidence that once a vendor is selected, it is difficult to move to another source and this is sometimes referred to as “vendor lock”.
Some of the strategies outlined in the published guidelines to help get more competition in buying products include:
- Maintain a competitive environment throughout the life of the program
- Conduct thorough market research to understand competition
- Use Small Business set-asides whenever market research shows it is feasible
- Determine if the product has already been sold to the government (identify data deliverables and licenses)
- Keep industry informed
- Articulate requirements in performance-based terms
- RFP’s clearly define basis for award decision
- Employ Open Systems Architecture approaches whenever the business case analysis supports it
- Intellectual Property Strategy to enable future competition
For services some of the guidelines include:
- Dedicate a trained / certified program manager to lead the effort on the government side
- Structure IDIQ Contracts to remove obstacles to competitive bidding
- Structure evaluation criteria so as not to be unduly restrictive to any one potential awardee