Windfalls of war: Pentagon’s competition for contracts abysmal compared to other agencies

Introduction

In 2010, the Pentagon prepared to award Blackwater, now known as Xe Services, a $1 billion contract for Afghan police training under the Counter Narcoterrorism Technology Program Office.

The contract had nothing to do with counternarcotics or technology; the police were being trained in basic skills such as using weapons and riot control techniques. But by using the CNTPO contract, the Pentagon could avoid holding a new full and open competition.

The Pentagon’s decision raised an immediate issue: DynCorp was the incumbent on the contract, which at the time was being handled by the State Department. But the Pentagon, newly in charge of the police training, wanted to use CNTPO, an indefinite delivery, indefinite quantity contract that allows the Defense Department to award work to five pre-qualified companies.

Since DynCorp wasn’t among those five companies, it couldn’t even compete for the work it was already performing.

That award also came under scrutiny when an investigation by the Senate Armed Services Committee revealed that a Blackwater subsidiary called Paravant was involved in, among other abuses, the use of a South Park character’s name, Eric Cartman, to sign out for 200 weapons as part of its training for the Afghan National Army.

Sen. Carl Levin, the chairman of the Senate Armed Services Committee, wrote to Defense Secretary Robert Gates protesting the imminent award of the police contract to Blackwater under the CNTPO contract. Levin said the committee had evidence of multiple abuses by Blackwater, including that it “may have: used a front company for the contract; made false official statements and misled Department of Defense officials in its proposal documents; misappropriated government weapons and carried weapons without authorization.”

In parallel with the Senate investigation, DynCorp, the incumbent on the State Department contract, protested the Blackwater award to the Government Accountability Office, which sided with DynCorp. The CNTPO contract, the GAO said, never should have included police training that wasn’t directly related to counteract narcoterrorism. “The Army admits that the Ministry of the Interior and Afghan National Police are primarily involved in counter-insurgency activities,” the GAO wrote, in a decision siding with DynCorp. Although the Army argued there was a “nexus” between policing and counter-narcoterrorism, the GAO found the argument specious.

Although the Pentagon is not the only agency to face criticism for non-competitive contracting, its large budget and wartime responsibilities have made it responsible for an outsized portion of such spending. Publicly available federal data show the dollar amount of “non-competed” contracts has nearly tripled since 2001, rocketing to more than $140 billion in fiscal year 2010 from approximately $50 billion in 2001.

While the Pentagon says its level of competition has remained steady over the past 10 years, data available through the Federal Procurement Data System—Next Generation, which provides competition data on federal agencies, show that the dollars flowing into single-bid contracts have almost tripled since the terrorist attacks of 9/11. Nor has that trend been reversed since the 2009 Obama administration memo on competition; Defense Department dollars flowing into noncompetitive procurements continue to grow.

Over the past 10 years, the Pentagon has competed only about 60 percent of its total contract dollars, which stands in stark contrast to other large federal agencies. The State Department, for example, competed 75 percent of its contract dollars in fiscal year 2010, while the Energy Department competed almost 94 percent of its contract dollars. The U.S. Agency for International Development, which faced heavy criticism in the early days of the Afghanistan conflict for handing out sole-source contracts, competed almost 80 percent of its total contract dollars in fiscal year 2010. Even the Department of Homeland Security, which was blasted for a series of disastrous contracts in the wake of Hurricane Katrina, outstripped the Pentagon on competed contracts: it competed almost 77 percent of its contract dollars in 2010.

The Pentagon defends its overall record. “The FY10 competition rate of 61.7 percent is consistent with DoD’s 10 year average competition rate of 61.8 percent,” wrote Cheryl Irwin, a Pentagon spokeswoman, in response to questions about the Pentagon’s competition procurement rates. As part of the Pentagon’s push to increase competition, the various Defense Department buying agencies are supposed to come up with plans to improve competition by 2 percent.

According to data reviewed by iWatch News, the Pentagon, despite promises to improve competition, has made no substantive gains to date in increasing the amount of contracts competed. In fact, it’s actually gotten worse, with competed dollars dropping from 63.5 percent of contracts awarded in 2009, to 61.7 percent in 2010—and just 55 percent in the first half of 2011.

And when it comes to real competition — meaning having companies bid on specific goods and services — even those numbers may be misleading, since the data excludes certain types of contracts. Large umbrella contracts, like the CNTPO indefinite delivery/indefinite quantity contracts, are competitively awarded initially, but typically cover many years, and many different types of work.

A recent report by the Defense Science Board, an independent advisory committee to the Pentagon, found widespread problems with such service contracts. “Approximately 66 percent of services were procured using indefinite delivery/indefinite quantity (IDIQ) contracts in 2010, something that was never contemplated when IDIQs were first proposed,” the report stated.

For Charles Tiefer, a commissioner on the Wartime Contracting Commission, the GAO decision on the Blackwater police training contract was “a major embarrassment to Defense.” As Tiefer describes it, the Defense Department went from using a contract that explicitly excluded DynCorp to holding a full and open competition, which DynCorp then won.

In other words, he said, after first excluding DynCorp from the competition, “the military could not find in all the world a contractor willing to do the job better than DynCorp.”