Competition in Pentagon contracting declines

Introduction

Promoting competition among military contractors is the “single most powerful tool available” to the Pentagon to improve productivity and drive down costs, the U.S. government’s chief weapons buyer Frank Kendall declared in March 2011 testimony to a Senate subcommittee.

Moreover, auditors and government officials have repeatedly described the routine use of noncompetitive contracts as one of the signal mistakes of the U.S. interventions in Iraq and Afghanistan, contributing to the waste of billions of dollars in those conflicts.

Yet the cold reality, as spelled out in a recent Government Accountability Office (GAO) report, is that the Pentagon’s use of competitively-bid contracts has been declining steadily for the past five years and last year stood at just 57 percent of its total contract spending. In fiscal year 2008, it was 62.6 percent.

The Air Force rate was the lowest — just 37 percent — followed by the Navy and the Army. The Defense Logistics Agency, which buys weapons parts and supplies troops in the field, did much better, achieving a rate of 83 percent for its spending in 2012.

Nobody knows why the rate is steadily going down, the GAO report said, although it noted that the number of sole-source — or noncompetitive —contracts in the Pentagon’s database is inflated somewhat by purchases made by foreign governments, which typically specify a particular weapon and supplier. Also, the Air Force and Navy tend to buy large equipment in small numbers from specialized suppliers, such as the makers of ships and planes.

Nonetheless, the information compiled by the Defense Department provides “limited insight into the underlying reasons for competition or its decline since fiscal year 2008,” the GAO said. And when foreign sales are removed from the data, the Air Force competition rate still was only 49.8 percent.

The worsening statistics belie a concerted effort under Kendall, the undersecretary of defense for acquisition, technology, and logistics, to goad the military services into putting more of their contracts up for competitive bid, even in circumstances where only one good supplier appears to exist. That effort has been provoked by mergers that have reduced the overall number of military vendors in recent years.

The Pentagon has implemented its reforms in such a loose fashion that it cannot “systematically identify, track and consider the key factors that may impact” their competition rate, according to the GAO.

Regulations require that justifications for sole-source contracting be publicly released within two weeks, but in a third of all cases, the information was not disclosed, the GAO said. It urged the Pentagon to work harder at all aspects of the problems, provoking an official in Kendall’s office to promise in an official response included in the GAO report that it would.