CM Magazine - 809 Corner — Recommendation #35: When “Full and Open” Competition Is Neither, It’s Time for a Change

 

Competition in government procurement is supposed to drive down prices, improve the quality of products and services, and reduce opportunities for fraud or collusion. These outcomes are essential to maintaining integrity in what and how the federal government buys. 

However, the current definition of competition in federal procurement is so antiquated that it results in limited competition, provides a false sense of fairness, and often incentivizes the use of anticompetitive means to efficiently acquire many readily available goods and services. The Section 809 Panel recommends a new approach to defense acquisition that redefines competition with a focus on outcomes rather than process that is long overdue.

The requirement for “full and open” competition using competitive procedures is codified in Title 10 and Title 41 of the U.S. Code as a result of the 1984 Competition in Contracting Act,but it was first used in the 18th Century, and first codified into U.S. law in the early 1800s — back when all federal procurement was done through sealed bidding. Today, federal procurement procedures are considered “competitive” only if an agency provides a public synopsis of each procurement, which in theory allows for all potential offerors to submit a quote or proposal. In this system, a solicitation is posted to a government website and those interested in selling to the federal government can submit a quote or offer. A procurement conducted by any other means is considered “noncompetitive.” 

18th-Century Procurement Methods in a 21st-Century Marketplace

The internet has revolutionized the way consumers select and acquire most readily available products and services from the open market, but the Department of Defense (DOD) is forced to continue using an 18th-Century procurement method — codified into law in the early 19th Century — to buy 21st Century technology and other solutions abundant in the commercial marketplace. Sealed bidding under Federal Acquisition Regulation (FAR) Part 14 has been effectively abandoned, but the requirement to synopsize each procurement above $25,000 remains fully intact with no signs of decay — like the Twinkie of federal procurement policy.

It is difficult to pinpoint why this requirement has been so impervious to modernization — including, for example, just raising the $25,000 threshold. While other procurement policy thresholds have been regularly updated, this threshold has not changed since 1984. The micropurchase threshold has more than doubled over the same time period. The simplified acquisition threshold and the threshold for using simplified acquisition procedures to procure commercial items have both been raised significantly, but with limited benefit because of the failure to update the public advertising requirement.  

 Congress has repeatedly told DOD to rely on more commercial products and services to meet its needs, and has adapted many procurement-related authorities to enable DOD to better leverage innovation and competitive forces found in the commercial marketplace. Authorizing the simplified acquisition procedures found in FAR Part 13 and expanding their application to commercial buys valued up to $7 million is just one example. In FAR Part 13, full and open competition is replaced by the direction to promote competition to the maximum extent practicable, and contracting officers are directed to use oral solicitations and allowed to rely on standing price quotations. Yet these tools are limited to only those procurements that fall below the $25,000 synopsizing threshold — which is far below the $250,000 simplified acquisition threshold, not to mention the $7 million threshold for using simplified procedures to acquire commercial items.

“Full” and “Open” Competition is Neither

Today’s full and open competition is neither “full” nor “open.” It is limited to a competition between those companies that know where to look for the solicitation, have successfully navigated the process for registering to do business with the federal government, and are willing to submit a quote or proposal that complies with the government-unique and compliance-focused requirements of the solicitation. As the Panel’s research has shown, this process excludes many nontraditional contractors seeking to do business with DOD, or the federal government in general, in an era when time is money. It also does not incentivize government buyers to be supply chain managers, like their private-sector counterparts, seeking out the best products and services from the most capable vendors in the private-sector marketplace.

The Panel’s Recommendation #35

“Readily Available”

When it comes to procuring products and services that are readily available in the marketplace, the federal government should be required to leverage competitive forces that exist in the marketplace. What we think of today as a sole-source award, if informed by robust market research, could reap the benefits of competition to a much greater extent than a “competitive” procurement resulting from the public synopsizing of an obscure request for proposals. The prevalence of internet-available pricing and information about past performance and product quality means that buyers conducting market research for a readily available product or service could compare 20 or more products from multiple different sources on one screen. 

Conversely, a buyer using a publicly posted solicitation waits the obligatory number of days for responses, then reviews the responses from whatever subset of the marketplace was aware of the solicitation and understands how to respond. If the buyer gets at least two quotes or proposals, the buyer may confidently say that full and open competition was achieved. 

Full and open competition has come to be more about the fairness of the procedures than it is about maximizing the benefits associated with competition. Congress and policymakers can stand behind the existing competition standards as “fair,” because any responsible company can submit a quote or proposal and be considered for a contract. Every company must overcome the same bureaucratic hurdles to do business with the government. For some companies with business models focused on winning government contracts, investment in the resources to navigate the government’s byzantine competitive process pays off. In high-tech marketplaces where startups and small businesses are leading in innovation, however, DOD is often not part of the business strategy. To harvest the innovation necessary to win the great power competition this nation finds itself in, DOD needs a procurement process that incentivizes buyers to proactively leverage market-based competition to make best-value-based decisions.  

One of the unintended consequences of relying on an onerous 18th-Century process to buy in today’s marketplace is that buyers and requirement owners rely more and more on workarounds. Other transaction agreements (OTs) and the reliance on large indefinite delivery/indefinite quantity (IDIQ) contracts and federal supply schedules make it possible to avoid the requirements of full and open competition, and these vehicles appear to provide efficient access to the market that DOD needs. However, OTs are limited in their application, and it can take over 12 months for a small business to get on an approved schedule (with no guarantee they will get any business as a result of their efforts). Greater reliance on IDIQs and schedules further shrinks the industrial base and is inherently anticompetitive.

The “Marketplace Framework”

The Section 809 Panel recommends moving to a market-based competition model that empowers contracting officers to conduct robust market research and make best-value determinations based on that market research, where appropriate. In this model, contracting activities would distribute widely — not just to an obscure government portal — periodic notices of products and services they intend to acquire from the open market during the next 90 to 180 days. This would give businesses an opportunity to actively brand themselves, to be discoverable online, and market their products to government procuring activities. These notices serve a market research purpose but do not create the false sense of competition that the current use of public notices for every procurement creates. They also contribute to how the Panel proposes to achieve greater transparency than what is available today. 

Greater Transparency Without Public Pre-Award Notices?

The government contractor community, and many DOD acquisition professionals, will likely have a difficult time reconciling the idea of government procurement without publishing pre-award notices for every procurement. Even so, in fiscal year 2017, one-third of DOD obligations were awarded under IDIQ task and delivery orders, which are not subject to individual pre-award notices. Over $100 billion was obligated under limited or no competition through multiple- or single-award IDIQs. With task and delivery orders only subject to protest if the order is valued above $25 million, there is very limited transparency into these acquisitions. Even in a traditional procurement with a published pre-award notice, there is little transparency into the outcome of the procurement — unless a contractor files a protest. 

Publicly posting procurement information after the contract is awarded could provide much greater transparency than is available in the current system via public notices and bid protests. Currently, much of this information is only provided to an interested party in litigation at the Court of Federal Claims or the Government Accountability Office. Post-award release of this information would allow for much greater public scrutiny of DOD procurement practices, making it difficult for DOD acquisition professionals or government contractors to get away with engaging in nefarious or unfair business practices. Anticompetitive trends would also be readily identifiable, making it possible for DOD to revise its policies and practices to correct course.    

It’s Time for a Revolution

The Section 809 Panel has made a series of recommendations that call for revolutionizing the way DOD does business within the dynamic marketplace. Part of this revolution involves modernizing what the term competition means in the context of federal procurement — but it is worth noting that this common-sense approach is only “revolutionary” to the federal government. Federal contracts can benefit from true, market-based competition, rather than suffer through a process that offers competition in name only and delivers suboptimal outcomes. Enhanced competition and the integrity that accompanies it can increase DOD’s ability to deliver readily available products and services, as well as innovative solutions, to warfighters at the speed of relevance. CM

 

Ralph Nash 

Professor emeritus, The George Washington University Law School — where he founded its Government Contracts Program in 1960. 

Lt. Col. Sam Kidd (USAF)

U.S. Air Force Judge Advocate.

Served as general counsel, senior research analyst, and the final executive director for the Section 809 Panel. 

 

The opinions expressed in this article are those of the authors and do not reflect the official position of the U.S. Air Force or the Department of Defense.

 

Endnotes

 

 

1.) 41 USC 253, FAR Subpart 6.1 (“Full and Open Competition”).

2.) The full text of Recommendation 35 is: “Replace commercial buying and the existing simplified acquisition procedures and thresholds with simplified readily available procedures for procuring readily available products and services and readily available products and services with customization.” (Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations, Volume 3 of 3 (Washington, DC: January 2019): Recommendation 35, available at https://section809panel.org/wp-content/uploads/2019/02/Recommendation_35.pdf.)