Information Technology: Agencies Need Better Information on the Use of Noncompetitive and Bridge Contracts

The federal government spends tens of billions of dollars each year on IT products and services. Competition is a key component to achieving the best return on investment for taxpayers. Federal acquisition regulations allow for noncompetitive contracts in certain circumstances. Some noncompetitive contracts act as “bridge contracts”—which can be a useful tool to avoid a lapse in service but can also increase the risk of the government overpaying. There is currently no government-wide definition of bridge contracts.

GAO was asked to review the federal government's use of noncompetitive contracts for IT. This report examines (1) the extent that agencies used noncompetitive contracts for IT, (2) the reasons for using noncompetitive contracts for selected IT procurements, (3) the extent to which IT procurements at selected agencies were bridge contracts, and (4) the extent to which IT procurements were in support of legacy systems. GAO analyzed FPDS-NG data from fiscal years 2013 through 2017 (the most recent and complete data available). GAO developed a generalizable sample of 171 fiscal year 2016 noncompetitive IT contracts and orders awarded by DOD, DHS, and HHS—the agencies with the most spending on IT, to determine the reasons for using noncompetitive contracts and orders, and the extent to which these were bridge contracts or supported legacy systems.

From fiscal years 2013 through 2017, federal agencies reported obligating more than $15 billion per year, or about 30 percent, of information technology (IT) contract spending on a noncompetitive basis (see figure).

GAO found, however, that Departments of Defense (DOD), Homeland Security (DHS), and Health and Human Services (HHS) contracting officials misreported competition data in the Federal Procurement Data System-Next Generation (FPDS-NG) for 22 of the 41 orders GAO reviewed. GAO's findings call into question competition data associated with nearly $3 billion in annual obligations for IT-related orders. DHS identified underlying issues resulting in the errors for its orders and took corrective action. DOD and HHS, however, had limited insight into why the errors occurred. Without identifying the issues contributing to the errors, DOD and HHS are unable to take action to ensure that competition data are accurately recorded in the future, and are at risk of using inaccurate information to assess whether they are achieving their competition objectives.

GAO found that DOD, DHS, and HHS primarily cited two reasons for awarding a noncompetitive contract or order: (1) only one source could meet the need (for example, the contractor owned proprietary technical or data rights) or (2) the agency awarded the contract to a small business to help meet agency goals.

GAO estimates that about 8 percent of 2016 noncompetitive IT contracts and orders at DOD, DHS, and HHS were bridge contracts, awarded in part because of acquisition planning challenges. GAO previously recommended that the Office of Federal Procurement Policy define bridge contracts and provide guidance on their use, but it has not yet done so. GAO believes that addressing this recommendation will help agencies better manage their use of bridge contracts.

Additionally, GAO estimates that about 7 percent of noncompetitive IT contracts and orders were used to support outdated or obsolete legacy IT systems. Officials from the agencies GAO reviewed stated these systems are needed for their mission or that they are in the process of modernizing the legacy systems or buying new systems.

GAO recommended DOD and HHS identify the reasons why competition data for certain orders in FPDS-NG were misreported and take corrective action. DOD and HHS concurred.

The federal government obligates tens of billions of dollars for products  and services related to information technology (IT) each year. Meeting the  federal government’s IT needs is critical to the health, economy, and  security of the nation. Competition for these IT products and services is a  key component to fostering IT innovation and achieving the best return on  investment for taxpayers. Federal agencies are generally required to  award contracts competitively but are permitted to award noncompetitive  contracts under certain circumstances, such as when only one contractor  can meet the need or to eligible small businesses in order to meet  agencies’ small business goals.

In some cases, noncompetitive contracts act as “bridge contracts.” While  there is no government-wide definition for bridge contracts, GAO has  defined it as an extension to an existing contract beyond the period of  performance (including base and option years), or a new, short-term  contract awarded on a sole-source basis to an incumbent contractor to  avoid a lapse in service caused by a delay in awarding a follow-on  contract. Bridge contracts can be a useful tool to avoid a gap in services  and are typically envisioned as short-term. However, in October 2015, we  found that some bridge contracts spanned multiple years, potentially  undetected by approving officials. When noncompetitive bridge contracts  are used frequently or for prolonged periods, the government is at risk of  paying more than it should for products and services. In addition, our past  work found that agencies are investing most of their IT dollars on  maintaining legacy IT systems, which are becoming increasingly  obsolete. For example, in May 2016, we found that many systems use  outdated software languages and hardware parts that are no longer  supported by their vendors. The government, in these instances, runs the  risk of maintaining systems that have outlived their effectiveness.

You asked us to review the federal government’s use of noncompetitive  contracts for IT, including the use of bridge contracts. This report  examines (1) the extent to which agencies used noncompetitive contracts  to procure IT products and services for fiscal years 2013 through 2017;  (2) the reasons for using noncompetitive contracts for selected IT  procurements; (3) the extent to which IT procurements at selected  agencies were bridge contracts; and (4) the extent to which  noncompetitive IT procurements at selected agencies were in support of  legacy systems. For the last objective, you requested that we ascertain  the extent to which our generalizable sample of contracts and orders  were in support of legacy systems as defined by the Modernizing  Government Technology Act (MGT), which was enacted in December  2017, after our work was underway.

To examine the extent to which agencies used noncompetitive contracts  and orders to procure IT products and services, we analyzed  government-wide Federal Procurement Data System-Next Generation  (FPDS-NG) data on IT obligations from fiscal years 2013 through 2017  (the most recent and complete data available). To define IT, we used the  Office of Management and Budget’s (OMB) Category Management  Leadership Council list of IT product and service codes to identify IT- related products and services. To assess the reliability of the FPDS-NG  data, we electronically tested for missing data, outliers, and inconsistent  coding, and compared data on selected noncompetitive contracts to  contract documentation we obtained. Based on these steps, we  determined that FPDS-NG data were sufficiently reliable for describing  general trends in government-wide and IT contract obligations data for  fiscal years 2013 through 2017. We determined, however, that a subset  of noncompetitive obligations were inaccurately coded as noncompetitive  and thus not reliable. We explore this issue further in the body of this  report.

To determine the reasons for using noncompetitive contracts and orders  for selected IT procurements, we selected the three agencies with the  highest reported obligations on IT noncompetitive contracts for fiscal  years 2012 through 2016 (the most recent year of data available at the  time we began our review)—the Departments of Defense (DOD),  Homeland Security (DHS), and Health and Human Services (HHS).  These three agencies collectively accounted for 70 percent of all  noncompetitively awarded contracts for IT during this period. From these  agencies, we selected a generalizable stratified random sample of 171  fiscal year 2016 noncompetitive contracts and orders for IT above the  simplified acquisition threshold of $150,000 to determine the reasons for  using noncompetitive contracts and orders. The sample was  proportionate to the amount of noncompetitive contracts and orders for IT  at each agency. For each of the contracts and orders in our generalizable  sample, we analyzed selected contract documentation, such as  justification and approval documents (J&A), exception to fair opportunity  documents, and small business coordination records. Based on our  review of documentation, we excluded 29 contracts and orders because  they were awarded competitively, but had been miscoded as  noncompetitive or as having an exception to fair opportunity. As a result,  our sample consisted of 142 contracts and orders. See table 1 for a  breakdown by agency.

To determine the extent to which IT procurements at selected agencies  were bridge contracts or in support of legacy systems, we leveraged the  generalizable sample described above to estimate the percentage of  bridge contracts and legacy IT systems at DOD, DHS, and HHS.  Agencies provided information as to whether the contracts and orders  within the generalizable sample met GAO’s definition of a bridge contract  and whether the systems they supported met the definition of legacy IT  systems in OMB’s draft IT Modernization Initiative or the definition  provided under the Modernizing Government Technology Act (MGT).  OMB’s draft IT Modernization Initiative defined legacy systems as  spending dedicated to maintaining the existing IT portfolio excluding  provisioned services such as cloud, while the MGT Act defined them as  an outdated or obsolete IT system. We verified the agencies’  determinations of bridge contracts by reviewing documentation for the  contracts and orders in our generalizable sample. To obtain additional  insights into the bridge contracts and legacy systems, we selected a  nonprobability sample of 26 contracts and orders from our generalizable  sample of 142 contracts and orders for in-depth review. Our selection was  based on factors such as obtaining a mix of bridge contracts and  contracts used in support of legacy IT systems.

For our in-depth review, we collected and analyzed contract file  documentation for the selected contracts and orders. In cases where we  selected a potential bridge contract, we also reviewed the contract  preceding it, additional bridge contracts (if any), and, if awarded at the  time of our review, the follow-on contract. We interviewed contracting and  program officials to gain insights into the facts and circumstances  surrounding the awards of IT noncompetitive contracts and orders. For  bridge contracts and orders, we asked about the reasons why bridge  contracts were needed and status of follow-on contracts; for legacy  contracts, we asked about the nature of the requirement and plans to  move to newer technologies or systems. For more information on our  scope and methodology, see appendix I.

We conducted this performance audit from April 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

The federal government obligates tens of billions annually on IT. Prior IT  expenditures, however, have too often produced failed projects—that is,  projects with multimillion dollar cost overruns and schedule delays and  with questionable mission-related achievements. In our 2017 high risk  series update, we reported that improving the management of IT  acquisitions and operations remains a high risk area because the federal  government has spent billions of dollars on failed IT investments.

Awarding Contracts and Orders Noncompetitively

Agencies are generally required to use full and open competition— meaning all responsible sources are permitted to compete—when  awarding contracts. However, the Competition in Contracting Act of  1984 recognizes that full and open competition is not feasible in all  circumstances and authorizes contracting without full and open  competition under certain conditions. In addition, there are competition- related requirements for other types of contract vehicles, including  multiple award indefinite-delivery/indefinite-quantity (IDIQ) contracts and  the General Services Administration’s (GSA) Federal Supply Schedule  (FSS). The rules regarding exceptions to full and open competition and  other competition-related requirements are outlined in various parts of the  Federal Acquisition Regulation (FAR). For example:

Contracting officers may award a contract without providing for full  and open competition if one of seven exceptions listed in FAR  Subpart 6.3 apply. Examples of allowable exceptions include  circumstances when products or services required by the agency are  available from only one source, when disclosure of the agency’s need  would compromise national security, or when the need for products  and services is of such an unusual and compelling urgency that the  federal government faces the risk of serious financial or other injury.  Generally, exceptions to full and open competition under FAR subpart  6.3 must be supported by written justifications that contain sufficient  facts and rationale to justify use of the specific exception.

Depending on the proposed value of the contract, the justifications  require review and approval at successively higher approval levels  within the agency.

Contracting officers are also authorized to issue orders under multiple  award IDIQ contracts noncompetitively. Generally contracting officers  must provide each IDIQ contract holder with a fair opportunity to be  considered for each order unless exceptions apply. Contracting  officers who issue orders over certain thresholds under an exception  to fair opportunity are required to provide written justification for doing  so. In April 2017 we found that government-wide, more than 85  percent of all order obligations under multiple-award IDIQ contracts  were competed from fiscal years 2011 through 2015.

Orders placed under GSA’s FSS program are also exempt from FAR  part 6 requirements. However, ordering procedures require certain  FSS orders exceeding the simplified acquisition threshold to be  placed on a “competitive basis,” which includes requesting proposals  from as many schedule contractors as practicable. If a contracting  officer decides not to provide opportunity to all contract holders when  placing an FSS order over the simplified acquisition threshold, that  decision must be documented and approved. The FAR allows for  orders to be placed under these circumstances based on the following  justifications: when an urgent and compelling need exists; when only  one source is capable of providing the supplies or services because  they are unique or highly specialized; when in the interest of economy  and efficiency, the new work is a logical follow-on to an original FSS  order that was placed on a “competitive basis;” and when an item is  “peculiar to one manufacturer.”

Agencies may also award contracts on a sole-source basis in  coordination with the Small Business Administration (SBA) to eligible  8(a) program participants. While agencies are generally not required  to justify these sole-source awards, contracts that exceed a total value  of $22 million require a written justification in accordance with FAR  Subpart 6.3.

In certain situations, it may become evident that services could lapse  before a subsequent contract can be awarded. In these cases, because  of time constraints, contracting officers generally use one of two options:  (1) extend the existing contract or (2) award a short-term stand-alone  contract to the incumbent contractor on a sole-source basis to avoid a  lapse in services. While no government-wide definition of bridge  contracts exists, we developed the following definitions related to bridge  contracts that we used for our October 2015 report:

Bridge contract. An extension to an existing contract beyond the  period of performance (including base and option years), or a new,  short-term contract awarded on a sole-source basis to an incumbent  contractor to avoid a lapse in service caused by a delay in awarding a  follow-on contract.

Predecessor contract. The contract in place prior to the award of a  bridge contract.

Follow-on contract. A longer-term contract that follows a bridge  contract for the same or similar services. This contract can be  competitively awarded or awarded on a sole-source basis.

Contracts, orders, and extensions (both competitive and noncompetitive)  are included in our definition of a “bridge contract” because the focus of  the definition is on the intent of the contract, order, or extension.

DOD and some of its components, including the Navy, the Defense  Logistics Agency (DLA), and the Defense Information Systems Agency  (DISA), have established their own bridge contract definitions and  policies. Congress enacted legislation in 2017 that established a definition  of “bridge contracts” for DOD and its components.

For the purposes of this report, we use the same definition as we used in  our October 2015 report to define bridge contracts, unless otherwise  specified. We acknowledge that in the absence of a government-wide  definition, agencies may have differing views of what constitutes a bridge  contract. We discuss these views further in the body of this report.

In our October 2015 report on bridge contracts, we found that the  agencies included in our review—DOD, HHS, and the Department of  Justice—had limited or no insight into their use of bridge contracts. In  addition, we found that while bridge contracts are typically envisioned as  short term, some bridge contracts included in our review involved one or  more bridges that spanned multiple years—potentially undetected by  approving officials. The fact that the full length of a bridge contract, or  multiple bridge contracts for the same requirement, is not readily apparent  from documents that may require review and approval, such as an  individual J&A, presents a challenge for those agency officials  responsible for approving the use of bridge contracts. Approving officials  signing off on individual J&As may not have insight into the total number  of bridge contracts that may be put in place by looking at individual J&As  alone.

In October 2015, we recommended that the Administrator of the Office of  Federal Procurement Policy (OFPP) take the following two actions: (1)  take appropriate steps to develop a standard definition for bridge  contracts and incorporate it as appropriate into relevant FAR sections;  and (2) as an interim measure until the FAR is amended, provide  guidance to agencies on: a definition of bridge contracts, with consideration of contract  extensions as well as stand-alone bridge contracts; and  suggestions for agencies to track and manage their use of these  contracts, such as identifying a contract as a bridge in a J&A when it  meets the definition, and listing the history of previous extensions and  stand-alone bridge contracts.

OFPP concurred with our recommendation to provide guidance to  agencies on bridge contracts, and stated its intention is to work with  members of the FAR Council to explore the value of incorporating a  definition of bridge contracts in the FAR. As of November 2018, OFPP  had not yet implemented our recommendations but has taken steps to  develop guidance on bridge contracts. Specifically, OFPP staff told us  they have drafted management guidance, which includes a definition of  bridge contracts, and provided it to agencies’ Chief Acquisition Officers  and Senior Procurement Executives for review. OFPP staff told us they  received many comments on the draft guidance and were in the process  of addressing those comments.

Agencies Obligated More than $10 Billion Annually for Information Technology on Noncompetitively Awarded Contracts and Orders, but Unreliable Data Obscures Full Picture

Federal agencies reported annually obligating between $53 billion in fiscal  year 2013 to $59 billion in fiscal year 2017 on IT-related products and  services. Of that amount, agencies reported that more than $15 billion  each year—or about 30 percent of all obligations for IT products and  services—were awarded noncompetitively. However, in a generalizable  sample of contracts and orders, we found significant errors in certain  types of orders, which call into question the reliability of competition data  associated with roughly $3 billion per year in obligations. As a result, the  actual amount agencies obligated on noncompetitive contract awards for  IT products and services is unknown.

IT Contract Obligations Totaled More than $50 Billion Annually

From fiscal years 2013 through 2017, we found that total IT obligations  reported by federal agencies ranged from nearly $53 billion in fiscal year  2013 to $59 billion in fiscal year 2017. The amount obligated on IT  products and services generally accounted for about one-tenth of total  federal contract spending (see figure 1).

For fiscal years 2013 through 2017, the three agencies we reviewed in  more depth—DOD, DHS and HHS––collectively accounted for about two- thirds of federal IT spending (see figure 2).

Agencies Reported Obligating More than $15 Billion on Noncompetitive Contracts for IT Annually, but Full Extent of Noncompetitive Dollars Is Not Known Due to Unreliable Data

From fiscal years 2013 through 2017, agencies reported in FPDS-NG  obligating more than $15 billion—about 30 percent of all annual IT  obligations—each year on noncompetitively awarded contracts and  orders. We determined, however, that the agencies’ reporting of certain  competition data was unreliable (see figure 3).

Specifically, we found that contracting officers miscoded 22 out of 41  orders in our sample, of which 21 cited “follow-on action following  competitive initial action” or “other statutory authority” as the legal  authority for using an exception to fair opportunity. DOD contracting  officers had miscoded 11 of the 21 orders, while DHS and HHS  contracting officers had miscoded 4 and 6 orders, respectively. This  miscoding occurred at such a high rate that it put into question the  reliability of the competition data on orders totaling roughly $3 billion per  year in annual obligations. In each of these cases, contracting officers  identified these orders as being noncompetitively awarded when they  were, in fact, competitively awarded. As an assessment of the extent to  which contracts and orders that were identified as being competitively  awarded were properly coded was outside the scope of our review, we  are not in a position to assess the overall reliability of competition  information of IT-related contracts.

For these 21 orders, we found that DHS was aware of issues surrounding  most of their miscodings and had taken actions to fix the problems, while  DOD and HHS generally had limited insights as to why these errors  occurred.

DHS miscoded 4 orders, 3 of which were orders awarded under single  award contracts. DHS officials told us that orders issued from single  award contracts should inherit the competition characteristics of the  parent contract. However, as FPDS-NG currently operates, contracting  officers have the ability to input a different competition code for these  orders. In this case, each of the single award contracts was competitively  awarded and therefore all the subsequent orders issued from these  contracts should be considered competitively awarded, as there are no  additional opportunities for competition. DHS has taken actions to  address this issue. DHS officials stated that in conjunction with DOD they  have asked GSA, which manages the FPDS-NG data system, to modify  FPDS-NG to automatically prefill competition codes for orders awarded  under single award contracts. DHS officials noted that GSA expects to  correct the issue in the first quarter of fiscal year 2019, which should  mitigate the risks of agencies miscoding orders issued under single award  contracts in the future. DHS officials have also provided training to their  contracting personnel that single award orders must inherit the  characteristics of the parent contract.

DOD and HHS officials, on the other hand, had limited insights as to why  their orders were miscoded. For example, DOD miscoded a total of 11  orders (5 orders awarded under single award contracts and 6 awarded  under multiple award contracts). For 8 of these orders, contracting  officers did not provide the reasons as to why these errors occurred. For  the remaining 3 orders awarded—each of which were issued under single  award contracts—contracting officials told us that they had used the  “follow-on action following competitive initial action” because the  underlying contract had been competed. Similarly, at HHS, which  miscoded a total of 6 orders (4 awarded under single award contracts and  2 awarded under multiple award contracts), component officials told us  that these errors were accidental and could not provide any additional  insight as to why these errors were made.

While GSA’s changes in the FPDS-NG system, when implemented, may  help address the issue of miscoding competition data on orders issued  from single award contracts, it will not address errors in coding for  multiple award orders that cited exceptions to competition even when  they were competed.

The FAR notes that FPDS-NG data are used in a variety of ways,  including assessing the effects of policies and management initiatives, yet  we have previously reported on the shortcomings of the FPDS-NG  system, including issues with the accuracy of the data. Miscoding of  competition requirements may hinder the accomplishment of certain  statutory, policy, and regulatory requirements. For example,

The FAR requires agency competition advocates, among other duties  and responsibilities, to prepare and submit an annual report to their  agencies’ senior procurement executive and chief acquisition officer  on actions taken to achieve full and open competition in the agency  and recommend goals and plans for increasing competition.

OMB required agencies to reduce their reliance on noncompetitive  contracts, which it categorized as high-risk, because, absent  competition, agencies must negotiate contracts without a direct  market mechanism to help determine price.

Federal internal control standards state that management should use  quality information to achieve an entity’s objectives. Without identifying  the reasons why contracting officers are miscoding these orders in FPDS-NG, DOD and HHS are unable to take action to ensure that competition  data are accurately recorded, and are at risk of using inaccurate  information to assess whether they are achieving their competition  objectives.

After excluding the $3 billion in annual obligations we determined was not  sufficiently reliable, we found that from fiscal years 2013 through 2017  about 90 percent of noncompetitive IT obligations reported in FPDS-NG  were used to buy services, hardware, and software (see figure 4).

Services include the maintenance and repair of IT equipment as well as  professional technology support. Hardware includes products such as  fiber optic cables and computers, and software includes items such as  information technology software and maintenance service plans.

Agencies Cited That Only One Contractor Could Meet the Need or Small Business Requirements as Most Common Reasons for Awarding Noncompetitive Contracts

The documentation for the contracts and orders at the three agencies we  reviewed generally cited either that only one source could meet their  needs or that they were awarding the contract sole-source to an 8(a)  small business participant when noncompetitively awarding IT contracts  or orders. Specifically, based on our generalizable sample, we estimate  that nearly 60 percent of fiscal year 2016 noncompetitive contracts and  orders at DOD, DHS, and HHS were awarded noncompetitively because  agencies cited that only one contractor could meet the need, and  approximately 26 percent of contracts and orders were awarded sole- source to an 8(a) small business participant. We estimate that agencies  cited a variety of other reasons for not competing approximately 16  percent of noncompetitive contracts and orders, such as unusual and  compelling urgency, international agreement, and national security.

Within our sample of 142 contracts and orders, we analyzed J&As or  similar documents to obtain additional detail as to why the contracts and  orders were awarded noncompetitively. See table 2 for a breakdown of  the overall reasons cited for awarding contracts noncompetitively within  our sample.

For 79 of the 142 contracts and orders we reviewed, agencies cited that  only one source could meet the need. We found that this exception was  the most commonly cited reason for a sole-source IT contract or order at  DOD and DHS, but not at HHS. At HHS, the most common reason was  that the contract or order was awarded on a sole source basis to an 8(a),  which we discuss in more detail later. Agencies justified use of the “only  one source” exception on the basis that the contractor owned the  proprietary technical or data rights; the contractor had unique  qualifications or experience; compatibility issues; or that a brand-name  product was needed (see figure 5).

The following examples illustrate the reasons cited by the agencies as to  why only one contractor could meet their needs:

Proprietary data rights issues and compatibility issues. The Navy  issued a 9-month, approximately $350,000 order under an IDIQ  contract for two data terminal sets. The terminal sets, which according  to Navy officials, have been used by the Navy since the 1990s to  exchange radar tracking and other information among airborne, land- based, and ship-board tactical data systems and with certain allies.  The Navy’s J&A document noted that the contractor owned the  proprietary data rights to the transmitting equipment and software,  and the Navy required the equipment to be compatible and  interchangeable with systems currently fielded throughout the Navy.  Furthermore, the document noted that seeking competition through  the development of a new source would result in additional costs that  would far exceed any possible cost savings that another source could  provide and would cause unacceptable schedule delays.

This example illustrates that decisions the program officials make  during the acquisition process to acquire or not acquire certain rights  to technical data can have far-reaching implications for DOD’s ability  to sustain and competitively procure parts and services for those  systems, as we have previously reported. In our May 2014 report on  competition in defense contracting, we found that 7 of 14 justifications  we reviewed explained that the awards could not be competed due to  a lack of technical data. All 7 of these justifications or supporting  documents described situations, ranging from 3 to 30 years in  duration, where DOD was unable to conduct a competition because  data rights were not purchased with the initial award. We  recommended in May 2014 that DOD ensure that existing acquisition  planning guidance promotes early vendor engagement and allows  both the government and vendors adequate time to prepare for  competition. DOD concurred with our recommendation. In April 2015,  DOD updated its acquisition guidance to incorporate new guidelines  for creating and maintaining a competitive environment. These  guidelines emphasize acquisition planning steps including  involvement with industry in obtaining feedback on draft solicitations,  market research, and requirements development.

Unique qualifications and experience. DHS placed four separate  orders under an IDIQ contract for data center support totaling  approximately $7 million. The requirement was to maintain mission  critical services during a data center support pilot, prototype, and  transition period starting in fiscal year 2015. Among other things,  DHS’s J&A noted that no other contractors had sufficient experience  with DHS’s infrastructure and requirements necessary to maintain  services at the required level during the transition period.

HHS awarded an approximately $4 million contract to buy support  services for an IT center for a 12-month ordering period, including  options. HHS’s J&A noted that only the incumbent contractor had the  requisite knowledge and experience to operate and maintain the  mission and business systems in the IT center during the transition of  operations from one location to another. The justification further stated  that HHS had no efforts underway to increase competition in the  future as this requirement is not anticipated to be a recurring  requirement. Program officials stated that they are migrating from  legacy IT systems to a new commercial off-the-shelf system.

Brand-name products. DOD awarded a 5-month, approximately  $500,000 contract for brand name equipment and installation that  supported various video-teleconference systems. The J&A stated that  this particular brand name product was the only product that would be  compatible with current configurations installed in one of its  complexes. To increase competition in the future, the J&A stated that  technical personnel will continue to evaluate the marketplace for  commercially available supplies and installation that can meet DOD’s  requirements.

For 42 of the 142 contracts and orders we reviewed, we found that  agencies awarded a sole-source contract or order to 8(a) small business  participants. HHS awarded 13 of its 23 sole-source contracts and orders  we reviewed to 8(a) small business participants, DOD awarded 25 of 95,  and DHS 4 of 24. We found that all contracts and orders in our review  that were awarded on a sole-source basis to 8(a) small business  participants were below the applicable competitive thresholds or  otherwise below the FAR thresholds that require a written justification.

As previously discussed, agencies may award contracts on a sole-source  basis to eligible 8(a) participants, either in coordination with SBA or when   they are below the competitive threshold. While agencies are generally  not required to justify these smaller dollar value sole-source 8(a) awards,  contracts that exceed a total value of $22 million require a written  justification. Since none of the 8(a) sole source contracts and orders in  our review required written justifications, the contract files generally did  not provide the rationale behind the sole-source award.

Policy and contracting officials from all three agencies we reviewed stated  they made sole-source awards to 8(a) small business participants to help  meet the agency’s small business contracting goals and save time. HHS  officials further stated that they consider their awards to 8(a) small  business participants a success because they are supporting small  businesses. Officials stated that once a requirement is awarded through  the 8(a) program, the FAR requires that requirement be set aside for an  8(a) contractor unless the requirement has changed or that an 8(a)  contractor is not capable or available to complete the work.

For 23 of the 142 contracts and orders we reviewed, we found that  agencies cited other reasons for awarding contracts and orders  noncompetitively. For example:

Urgent and compelling need. DHS’s Coast Guard awarded an  approximately 10-month, $6.5 million order (encompassing all  options) for critical payroll services in its human resources  management system under a GSA federal supply schedule contract.  The Coast Guard justified the award based on an urgent and  compelling need. A Coast Guard official explained that the efforts to  competitively award a follow-on contract had been delayed as the  Coast Guard had not developed a defined statement of work in a  timely manner, and that the agency had received a larger number of  proposals than initially anticipated. Therefore, the evaluation process  took longer than expected. In addition, the Coast Guard’s competitive  follow-on contract, which was awarded in June 2018, was protested.  In October 2018, GAO denied the protest and the Coast Guard is  currently planning to transition to the newly awarded contract.

International agreement. The Army placed an approximately 8- month, $1 million order under an IDIQ contract for radio systems and  cited international agreement as the reason for a noncompetitive  award. This order was part of a foreign military sales contract with  the Government of Denmark.

Authorized or required by statute. The Defense Logistics Agency  (DLA) cited “authorized or required by statute” when it placed an  approximately $1.5 million, 12-month order under an IDIQ contract for  sustainment support services for an application that is used for  planning and initiating contracting requirements in contingency  environments. DLA noted that this model was contracted under the  Small Business Innovation Research Program, which supports  scientific and technological innovation through the investment of  federal research funds into various research projects.

National security. The U.S. Special Operations Command (SOCOM)  placed an approximately 8-month, $1 million order for radio spare  parts and cited national security as the reason for a noncompetitive  award.

An Estimated Eight Percent of Fiscal Year 2016 IT Noncompetitive Contracts and Orders Were Bridges, and Agencies Have Difficulty Managing Them An Estimated Eight Percent of IT Noncompetitive Contracts and Orders in Fiscal Year 2016 Were Bridge Contracts

We estimate that about 8 percent of contracts and orders above $150,000  in fiscal year 2016 at DOD, DHS, and HHS were bridge contracts.  Consistent with our October 2015 findings, agencies we reviewed face  continued challenges with oversight of bridge contracts, based on 15  contracts and orders we reviewed in-depth. For example, we found that  in 9 of the 15 cases, bridge contracts were associated with additional  bridges not apparent in the documentation related to the contract and  order we reviewed, such as a J&A, and corresponded with longer periods  of performance and higher contract values than initially apparent. Agency  officials cited a variety of reasons for needing bridge contracts, including  acquisition planning challenges, source selection challenges, and bid  protests.

Based on our generalizable sample, we estimate that about 8 percent of  contracts and orders above $150,000 in fiscal year 2016 at DOD, DHS,  and HHS were bridge contracts. We verified, using our definition of  bridge contracts as criteria, that 13 of 142 contracts and orders in our  generalizable sample were bridge contracts based on reviews of J&As,  limited source justifications, or exceptions to fair opportunity, among other  documents. In addition, we found two additional bridge contracts related  to our generalizable sample while conducting our in-depth review,  bringing the total number of bridge contracts we identified during this  review to 15.

Agencies Face Continued Challenges with Oversight of Bridge Contracts

We found that the bridge contracts we reviewed were often longer than  initially apparent from our review of related documentation, such as a  J&A, and sometimes spanned multiple years. Bridge contracts can be a  useful tool in certain circumstances to avoid a gap in providing products  and services, but they are typically envisioned to be used for short  periods of time. When we conducted an in-depth review of the bridge  contracts, such as by reviewing the contract files for the predecessor,  bridge, and follow-contracts, we found that in most cases, these involved  one or more bridges that spanned longer periods and corresponded with  higher contract values than initially apparent. Specifically, we found that 9  of the 15 bridge contracts had additional bridges related to the same  requirement that were not initially apparent from documents requiring  varying levels of approval by agency officials, such as the J&As.  Collectively, agencies awarded bridge contracts associated with these 15  contracts and orders with estimated contract values of about $84 million  (see table 3).

The following examples illustrate contracts we reviewed in which the  periods of performance were longer than initially apparent:

HHS’s Indian Health Service (IHS) awarded a 4-month, approximately  $1.6 million bridge order for project management and support services  for IHS’s resource and patient management system. We found,  however, that the predecessor contract had already been extended by  6 months before the award of the bridge order due to acquisition  planning challenges associated with delays in developing the  acquisition package for the follow-on contract. Subsequently, the 4- month bridge order was extended for an additional 6 months, in part  because the follow-on award—which had been awarded to a new  contractor—was protested by the incumbent contractor due to  concerns over proposal evaluation criteria. Ultimately, the protest was  dismissed. Following the resolution of the bid protest, officials  awarded an additional 2-month bridge order for transition activities. In  total, the bridge orders and extensions spanned 18 months and had  an estimated value of about $4.7 million. Figure 6 depicts the bridge  orders and extensions and indicates the 4-month bridge and 6-month  extension we had initially identified.

The Air Force awarded a 3-month, approximately $630,000 bridge  contract to support a logistics system used to monitor weapon system  availability and readiness. We found, however, that the Air Force had  previously awarded a 3-month bridge contract due to delays resulting  from a recent reorganization, which, according to Air Force officials,  made it unclear which contracting office would assume responsibility  for the requirement. The Air Force subsequently awarded an  additional 3-month bridge contract due to acquisition planning  challenges, such as planning for the award of the follow-on sole- source contract. The total period of performance for the bridges was 9  months with an estimated value of about $1.9 million (see figure 7).

As of August 2018, 13 of the 15 bridge contracts had follow-ons in  place—5 were awarded competitively and 8 were awarded  noncompetitively. Two bridge contracts do not currently have follow-on  contracts in place for various reasons. For example, in one instance, the  Coast Guard’s requirement for human resources and payroll support  services has continued to operate under a bridge contract because the  Coast Guard’s planned follow-on contract—a strategic sourcing IDIQ— was awarded in June 2018, and subsequently protested, among other  delays.

Officials Frequently Cited Acquisition Planning Challenges as Necessitating the Use of a Bridge Contract

Based on our reviews of contract documentation and information provided  by agency officials, we found that acquisition planning challenges were  the principal cause for needing to use a bridge contract across the 15  bridge contracts we reviewed. In particular, acquisition packages  prepared by program offices to begin developing a solicitation were often  not prepared in a timely fashion. Acquisition packages include statements  of work and independent government cost estimates, among other  documents, and are generally prepared by the program office, with the  assistance of the contracting office. In addition to acquisition planning  challenges, officials cited delays in source selection and bid protests,  among others, as additional reasons justifying the need to use a bridge  contract (see figure 8).

The following examples illustrate reasons officials cited for needing a  bridge contract:

DOD’s DISA awarded a bridge contract for IT support services due to  acquisition planning challenges, and specifically, the late submission  of acquisition packages. According to contracting officials, the bridge  contract was originally intended to consolidate 3 of the previous  contracts associated with this requirement, but a fourth was added  much later in the process. DISA contracting officials said that the  program office did not submit acquisition package documentation in a  timely manner, and, once submitted, the documentation required  numerous revisions. These officials added that they had to award an  additional bridge contract to avoid a lapse in service once they  received a completed package from the program office because there  was not enough time to do a competitive source selection and  analysis.

DOD’s SOCOM extended an IDIQ contract for radio supplies and  services due to source selection delays and acquisition workforce  challenges. For example, contracting officials said they extended the  IDIQ for 12 months because the contracting office was working on a  source selection for the follow-on contract for modernized radios and  simply did not have the manpower to award a new sustainment  contract for the existing radios at the same time.

DHS’s Customs and Border Protection (CBP) awarded an  approximately 16-month bridge contract in June 2016 for engineering  and operations support of CBP’s Oracle products and services due to  bid protests associated with March 2016 orders for this requirement.  We found the protests were filed on the basis that CBP had issued the  task order on a sole-source basis, which precluded other contractors  from competing for the award. GAO dismissed the protest in May  2016 as a result of CBP’s stated intent to terminate the task order and  compete the requirement as part of its corrective action plan.

According to CBP contracting officials, they awarded the  approximately16-month bridge contract to the incumbent contractor to  continue services until GAO issued a decision and the services could  be transitioned to the awardee. In September 2017, CBP officials  awarded the competitive follow-on contract to a new vendor, but this  award was also protested due to alleged organizational conflicts of  interest, improperly evaluated technical proposals, and an  unreasonable best-value tradeoff determination. As a result, CBP  officials issued a stop-work order effective October 2017. To continue  services during the protest, CBP officials extended the existing bridge  contract by 3 months and then again by another 6 months. In January  2018, GAO dismissed the protest in its entirety and the stop-work  order was lifted. According to a CBP contracting official, CBP did not  exercise the final 3 months of options of the 6-month extension.

In 2015, we found that the full length of a bridge contract, or multiple  bridge contracts, is not always readily apparent from review of an  individual J&A, which presents challenges for approving officials, as they  may not have insight into the total number of bridges put into place by  looking at individual J&As alone. We found a similar situation in our  current review. For example, the J&As for the 8 bridge contracts with  J&As did not include complete information on the periods of performance  or estimated values of all related bridge contracts.

In the Absence of Government-wide Guidance, Others Have Taken Steps to Define Bridge Contracts

OFPP has not yet taken action to address the challenges related to the  use of bridge contracts that we found in October 2015. At that time, we  recommended that OFPP take appropriate steps to develop a standard  definition of bridge contracts and incorporate it as appropriate into  relevant FAR sections, and to provide guidance to federal agencies in the  interim. We further recommended that the guidance include (1) a  definition of bridge contracts, with consideration of contract extensions as  well as stand-alone bridge contracts, and (2) suggestions for agencies to  track and manage their use of these contracts, such as identifying a  contract as a bridge in a J&A when it meets the definition, and listing the  history of previous extensions and stand-alone bridge contracts back to  the predecessor contract in the J&A. However, as of November 2018,  OFPP had not yet done so. As a result, agencies continue to face similar  challenges with regard to the use of bridge contracts that we identified in  2015 and there is a lack of government-wide guidance that could help to  address them.

In the absence of a federal government-wide definition, others have taken  steps to establish a bridge contracts definition. For example, Congress  has established a statutory definition of bridge contracts that is applicable  to DOD and its components. Specifically, Section 851 of the National  Defense Authorization Act for Fiscal Year 2018 defined a bridge contract  as (1) an extension to an existing contract beyond the period of  performance to avoid a lapse in service caused by a delay in awarding a  subsequent contract; or (2) a new short-term contract awarded on a sole- source basis to avoid a lapse in service caused by a delay in awarding a  subsequent contract. Section 851 requires that, by October 1, 2018, the  Secretary of Defense is to ensure that DOD program officials plan  appropriately to avoid the use of a bridge contract for services. In  instances where bridge contracts were awarded due to poor acquisition  planning, the legislation outlines notification requirements with associated  monetary thresholds for bridge contracts.

Acting on this requirement and in response to our prior bridge contracts  report, DOD established a bridge contracts policy memorandum in  January 2018. The policy defines bridge contracts as modifications to  existing contracts to extend the period of performance, increase the  contract ceiling or value or both, or a new, interim sole-source contract  awarded to the same or a new contractor to cover the timeframe between  the end of the existing contract and the award of a follow-on contract.  The DOD policy excludes extensions awarded using the option to extend  services clause as bridge contracts unless the extension exceeds 6 - months. In addition, DOD’s bridge contract policy directs the military  departments and DOD components to develop a plan to reduce bridge  contracts and to report their results annually to the Office of the Under  Secretary of Defense for Acquisition and Sustainment. As of August  2018, DHS and HHS did not have component- or department-level  policies that define or provide guidance on the use of bridge contracts.

Differing definitions of bridge contracts can lead to varying perspectives  as to what constitutes a bridge contract. For example:

Differing views on whether a contract within the 8(a) program can be a  bridge. In one instance, we reviewed a 3-month, approximately $1.9  million bridge contract that DLA awarded to the incumbent contractor  for a variety of IT contractor support services for DLA’s Information  Operations (J6). This bridge contract was awarded to continue  services until DLA could award a 12-month, roughly $2.9 million sole- source contract (including all options) to an 8(a) small business  participant to consolidate tasks from 20 contracts as part of a  reorganization effort within J6. After that contract expired, DLA  awarded a second 12-month, about $3 million contract (including all  options) to the same 8(a) small business participant to continue these  task consolidation efforts. DLA subsequently awarded a 2-month  $122,000 contract extension to continue services until it could award a  follow-on order under DLA’s J6 Enterprise Technology Services  (JETS) multiple award IDIQ contract, the award of which had also  been delayed.

Although the 8(a) contracts were not awarded to the incumbent of the  initial 3-month bridge, we believe that these contracts could be  considered bridge contracts as they were meant to bridge a gap in  services until the reorganization efforts were complete and the JETS  contract was awarded. DLA contracting officials, however, told us they  do not consider the 8(a) contracts to be bridge contracts as these two  contracts and the follow-on task order under JETS were awarded  sole-source to 8(a) small business participants. DLA officials added  that they plan to keep the requirement in the 8(a) program.

Differing views as to whether contract extension are bridges. DOD’s  policy generally does not include contract extensions using the “option  to extend services” clause as bridges, unless the option is extended  beyond the 6 months allowed by the clause. Navy policy, however,  states that using the option to extend services clause is considered a  bridge if the option was not priced at contract award. Similarly, HHS  officials stated that the department does not consider contract  extensions using the “option to extend services” clause to be bridge  contract actions if the total amount of the services covered are  evaluated in the initial award, and if the length does not extend  beyond the allowable 6 months. The differences among agencies’  views and policies may be due to the extent to which the extensions  are considered “competitive”. For the purposes of our definition, if  the extension—whether it was competed or not—was used to bridge a  gap in service until a follow-on contract could be awarded, then it  would be considered a bridge.

Without agreement as to what constitutes a bridge contract, agencies’  efforts to improve oversight of and to identify challenges associated with  the use of bridge contracts will be hindered. While we are not making any  new recommendations in this area, we continue to believe that our  October 2015 recommendation to OFPP to establish a government-wide  definition and provide guidance to agencies on their use remains valid.

New Definition Narrows Scope of Legacy IT Noncompetitive Contracts and Orders to About Seven Percent

An estimated 7 percent of IT noncompetitive contracts and orders at  selected agencies in fiscal year 2016 were in support of legacy IT  systems as newly defined in statute, which is considerably fewer than we  found when using the previous definition of legacy IT. At the time our  review began, OMB’s draft definition for legacy IT systems stated that  legacy IT spending was spending dedicated to maintaining the existing IT  portfolio, excluding provisioned services such as cloud. Using this  definition, and based on our generalizable sample, we estimated that  about 80 percent of IT noncompetitive contracts and orders over  $150,000 in fiscal year 2016 at DOD, DHS, and HHS were awarded in  support of legacy IT systems. In December 2017, however, Congress  enacted the Modernizing Government Technology Act (MGT) as part of  the National Defense Authorization Act for Fiscal Year 2018. This act  defined a legacy IT system as an “outdated or obsolete system of  information technology.”

Using this new statutory definition of a legacy IT system, we requested  that each agency reassess how it would characterize the nature of the IT  system using the revised definition provided under the MGT Act. For the  142 contracts and orders we reviewed, we found that when using the new  definition, agencies significantly reduced the number of contracts and  orders identified as supporting legacy IT systems. For example, using the  OMB draft definition agencies identified that 118 out of 142 contracts and  orders were supporting legacy IT systems. However, when using the  more recent MGT Act definition, agencies identified only 10 out of 137  contracts and orders as supporting legacy IT systems (see figure 9).

Consequently, using the definition provided under the MGT Act, we  estimate that about 7 percent of IT noncompetitive contracts and orders  over $150,000 in fiscal year 2016 at DOD, DHS, and HHS were awarded  in support of outdated or obsolete legacy IT systems.

Agencies’ program officials said that they are still supporting outdated or  obsolete legacy IT systems (as defined by the MGT Act) because they  are needed for the mission, or they are in the process of buying new  updated systems or modernizing current ones. For example:

Army officials awarded a 5-year, roughly $1.2 million contract to  install, configure, troubleshoot, and replace Land Mobile Radio  equipment at Ft. Sill, Oklahoma. An Army official noted that all  equipment is older than 12 years and is nearing its end of life. The  radio equipment, however, is required to support first responder and  emergency service personnel critical communications. An Army  official did not indicate any plans to modernize, but noted that the  impact of this system not being supported would significantly affect all  of Fort Sill’s land mobile radio communications.

The Air Force awarded a $218,000 order to buy repair services for the  C-130H aircraft’s radar display unit and electronic flight instrument. An  Air Force official noted that legacy hardware that was bought through  the order is part of critical systems that are required to safely fly the  aircraft. The system, however, is obsolete and the associated  hardware is no longer supported by the vendor. The official told us  that there is currently a re-engineering effort to modernize the  systems that use this hardware.

HHS issued a 12–month, nearly $2.5 million order to buy operations  and maintenance support for a Food and Drug Administration (FDA)  system used to review and approve prescription drug applications.  According to an FDA program official, efforts are underway to retire  the system by gradually transferring current business processes to a  commercial-off-the-shelf solution that can better meet government  needs. This official, however, told us that the system currently  remains in use because FDA’s Office of New Drugs is still heavily  reliant on the system.

Competition is a cornerstone of the federal acquisition system and a  critical tool for achieving the best possible return on investment for  taxpayers. In the case of information technology, federal agencies  awarded slightly under a third of their contract dollars under some form of  noncompetitive contract. Further, our current work was able to quantify  that about a tenth of all information technology-related contracts and  orders were made under some form of a noncompetitively awarded  bridge contract, which provides new context for the issues associated  with their use. The challenges themselves, however, remain much the  same since we first reported on the issue in 2015. OFPP has yet to issue  guidance or promulgate revised regulations to help agencies identify and  manage their use of bridge contracts, and our current work finds that the  full scope of bridge contracts or the underlying acquisition issues that  necessitated their use in the first place may not be readily apparent to  agency officials who are approving their use. We continue to believe that  our 2015 recommendation would improve the use of bridge contracts, and  we encourage OFPP to complete its ongoing efforts in a timely fashion.

The frequency of the errors in reporting and their concentration within a  specific type of contract action signals the need for more management  attention and corrective action. These errors resulted in the potential  misreporting of billions of dollars awarded under orders as being  noncompetitively awarded when, in fact, they were competed. One  agency included in our review—DHS—has taken steps to address the  problems that underlie the errors in coding and provided additional  training to its staff. DOD and HHS could benefit from additional insight as  to the reasons behind the high rates of miscoding to improve the  accuracy of this information.

We are making a total of two recommendations, one to DOD and one to  HHS.

The Secretary of Defense should direct the Under Secretary of  Defense for Acquisition and Sustainment to identify the reasons  behind the high rate of miscoding for orders awarded under multiple  award contracts and use this information to identify and take action to  improve the reliability of the competition data entered into FPDS-NG.  (Recommendation 1)

The Secretary of Health and Human Services should direct the  Associate Deputy Assistant Secretary for Acquisition to identify the  reasons behind the high rate of miscoding for orders awarded under  multiple award contracts and use this information to identify and take  action to improve the reliability of the competition data entered into  FPDS-NG. (Recommendation 2)

We provided a draft of this report to DOD, DHS, HHS, and OMB for  review and comment. DOD and HHS provided written comments and  concurred with the recommendation we made to each department.

In its written response, reproduced in appendix II, DOD stated it will  analyze FPDS-NG data in an effort to identify why the miscoding of  orders on multiple award contracts occurs, and use the information to  advise the contracting community of actions to improve the reliability of  competition data.

In its written response, reproduced in appendix III, HHS stated that the  Division of Acquisition within HHS’s Office of Grants and Acquisition  Policy and Accountability uses a data quality management platform to  ensure data accuracy. HHS is currently in the process of performing the  annual data validation and verification of the acquisition community’s  contract data for fiscal year 2018. Once this process is complete the  Division of Acquisition will contact contracting offices that produced  records that were flagged as containing errors and provide  recommendations that should help improve the fiscal year 2019 accuracy  rating. HHS added that it will closely monitor those checks and all others  to ensure contract data are accurate. However, in its letter, HHS did not  specify how its annual data validation and verification process would  specifically address the fact that we found a high rate of miscoding of  competition data for certain orders.

OMB staff informed us that they had no comments on this report. DHS,  HHS and the Air Force provided technical comments, which we  incorporated as appropriate.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of Homeland  Security, the Secretary of Health and Human Services, and the Director  of the Office of Management and Budget. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV.

Our report examines (1) the extent to which agencies used  noncompetitive contracts to procure Information Technology (IT) products  and services for fiscal years 2013 through 2017; (2) the reasons for using  noncompetitive contracts for selected IT procurements; (3) the extent to  which IT procurements at selected agencies were bridge contracts; and  (4) the extent to which noncompetitive IT procurements at selected  agencies were in support of legacy systems.

To examine the extent to which agencies used noncompetitive contracts  and orders to procure IT products and services, we analyzed  government-wide Federal Procurement Data System-Next Generation  (FPDS-NG) data on IT obligations from fiscal years 2013 through 2017.  To define IT, we used the Office of Management and Budget’s (OMB)  Category Management Leadership Council list of IT products and service  codes, which identified a total of 79 IT-related codes for IT services and  products. Data were adjusted for inflation to fiscal year 2017 dollars,  using the Fiscal Year Gross Domestic Product Price Index. To assess the  reliability of the FPDS-NG data, we electronically tested for missing data,  outliers, and inconsistent coding. Based on these steps, we determined  that FPDS-NG data were sufficiently reliable for describing general trends  in government-wide and IT contract obligations data for fiscal years 2013  through 2017.

In addition, as we later describe, we compared data for a generalizable  sample of 171 noncompetitive contracts and orders to contract  documentation, and we determined that 29 of these had been  inaccurately coded in FPDS-NG as noncompetitive. As such, we  determined that the data were not reliable for the purposes of reporting  the actual amount agencies obligated on noncompetitive contracts and  orders for IT products and services. Specifically, we determined, that data  for IT noncompetitive obligations awarded under multiple award contracts  that cited “follow-on action following competitive initial action” or “other  statutory authority” as the legal authority for using an exception to fair  opportunity for the Departments of Defense (DOD), Homeland Security  (DHS), and Health and Human Services (HHS) in fiscal year 2016 were  not reliable. Evidence from our review of this sample suggests there was  a high rate of miscoding for these orders; thus, we applied these findings  to the remaining agencies and fiscal years because we do not have  confidence that the data were more reliable than what we had found.

To determine the reasons for using noncompetitive contracts for selected  IT procurements, we selected the three agencies with the highest  reported obligations on IT noncompetitive contracts for fiscal years 2012  through 2016 (the most recent year of data available at the time we  began our review)—DOD, DHS and HHS. These three agencies  collectively accounted for about 70 percent of all noncompetitively  awarded contracts for IT during this period. From these agencies, we  selected a generalizable stratified random sample of 171 fiscal year 2016  noncompetitive contracts and orders for IT above the simplified  acquisition threshold of $150,000. The sample was proportionate to the  amount of noncompetitive contracts and orders for IT at each agency.

Based on our review of documentation collected for the generalizable  sample, we excluded 29 contracts and orders because they were  awarded competitively, but had been miscoded as noncompetitive or as  having an exception to fair opportunity. As a result, our sample consisted  of 142 contracts and orders. See table 4 for a breakdown by agency.

To determine the extent to which IT procurements at selected agencies  were bridge contracts or in support of legacy systems, agencies provided  information as to whether the contracts and orders met GAO’s definition  of a bridge contract—which we defined as an extension to an existing  contract beyond the period of performance (including base and option  years) or a new, short-term contract awarded on a sole-source basis to  an incumbent contractor to avoid a lapse in service caused by a delay in  awarding a follow-on contract—and whether they met the definitions of  legacy IT systems in OMB’s draft IT Modernization Initiative and the  Modernizing Government Technology Act (MGT). OMB’s draft IT  Modernization Initiative defined legacy systems as spending dedicated to  maintaining the existing IT portfolio but excluding provisioned services,  such as cloud, while the MGT Act defines them as outdated or obsolete.

We verified the agencies’ determinations of whether a contract or order  was a bridge by reviewing documentation, such as justification and  approval and exception to fair opportunity documents, for the contracts  and orders in our generalizable sample, and conducting follow-up with  agency officials as needed. We verified agencies’ determination of  whether or not a contract or order was in support of a legacy system, as  defined in OMB’s draft IT Modernization Initiative by reviewing the  agencies’ determination and comparing these determinations to additional  documentation, such as the statement of work, and conducting follow-up  with program officials about the nature of the requirement where needed.  We verified agencies’ determination of whether a contract or order was in  support of a legacy system as defined in the MGT Act by reviewing  agencies’ rationale for these determinations and following up with agency  officials where we identified discrepancies between the determination and  rationale. To obtain additional insights into bridge contracts and legacy  systems, we selected a nonprobability sample of 26 contracts and orders  from our generalizable sample of 142 contracts and orders for in-depth  review. We selected these contracts based on factors such as obtaining a  mix of bridge contracts and other contracts used in support of legacy IT  systems and location of the contract files.

For our in-depth review of contracts and orders, we collected and  analyzed contract file documentation for the selected contracts and  orders and interviewed contracting and program officials to gain insights  into the facts and circumstances surrounding the awards of IT  noncompetitive contracts and orders. In cases where we selected a  potential bridge contract, we also reviewed the predecessor contract,  additional bridge contracts (if any), and, follow-on contract, if awarded at  the time of our review. For bridge contracts and orders, we asked about  the reasons why bridges were needed and the status of follow-on  contracts. We verified, using the definition of bridge contracts that we  developed for our October 2015 report as criteria, that 13 of 142 contracts  and orders in our generalizable sample were bridge contracts based on  reviews of justification and approval documents, limited source  justifications, or exceptions to fair opportunity, among other documents.   We acknowledge, however, that in the absence of a government-wide  definition, agencies may have differing views of what constitutes a bridge  contract.

In addition, we found 2 additional bridge contracts not included in our  generalizable sample while conducting our in-depth review. For example,  we selected three noncompetitive orders from our generalizable sample  for in-depth review that were used to buy accessories and maintenance  for the U.S. Special Operations Command (SOCOM) PRC-152 and 117G  radios. We found that although the three orders were not bridge  contracts, the underlying indefinite delivery/ indefinite quantity (IDIQ)  contract—which outlines the terms and conditions, including pricing for  the orders—had been extended 12 months to continue services until the  follow-on IDIQ could be awarded. We also selected an Air Force order for  equipment for the Joint Strike Fighter instrumentation pallet for in-depth  review. Further analysis revealed that the underlying IDIQ was extended  for 5 additional months to continue services until officials could award a  follow-on contract for this requirement. Including these 2 additional bridge  contracts brings the total number of bridge contracts we identified during  this review to 15. For legacy contracts and orders we asked about the  nature of the requirement and plan to move to newer technologies or  systems. The selection process for the generalizable sample is described  in detail below.

Selection Methodology for Generalizable Sample

We selected a generalizable stratified random sample of 171 contracts  and orders from a sample frame of 3,671 fiscal year 2016 IT  noncompetitive contracts and orders, including orders under multiple  award indefinite delivery/indefinite quantity contracts over $150,000 to  generate percentage estimates to the population. We excluded contracts  and orders with estimated values below the simplified acquisition  threshold of $150,000 as these contracts have streamlined acquisition  procedures. We stratified the sample frame into nine mutually exclusive  strata by agency and type of award, i.e. contract, order, and multiple  award order for each of the three agencies. We computed the minimum  sample size needed for a proportion estimate to achieve an overall  precision of at least plus or minus 10 percentage points or fewer at the 95  percent confidence level. We increased the computed sample size to  account for about 10 percent of the population to be out of scope, such as  competitive or non-IT contracts or orders. We then proportionally  allocated the sample size across the defined strata and increased sample  sizes where necessary so that each stratum would contain at least 10  sampled contracts or orders. The stratified sample frame and sizes are  described in table 5 below.

We selected contracts and orders from the following components:

DOD: Air Force, Army, Navy, Defense Information Systems Agency,  Defense Logistics Agency, Defense Security Service, Defense Threat  Reduction Agency, U.S. Special Operations Command, and  Washington Headquarter Services;

HHS: Centers for Disease Control, Centers for Medicare and  Medicaid Services, Food and Drug Administration, Indian Health  Service, National Institutes of Health, and the Office of the Assistant  Secretary for Administration;

DHS: Federal Emergency Management Agency, Office of  Procurement Operations, U.S. Citizenship and Immigration Services,  U.S. Coast Guard, U.S. Customs and Border Protection, and the U.S.  Secret Service.

We excluded 29 contracts and orders as we determined they had been  miscoded as noncompetitive or as not having an exception to fair  opportunity. Based on these exclusions, we estimate the number of  noncompetitive contracts and orders in this population was about 3,000  (+/- 6.7 percent). All estimates in this report have a margin of error, at the  95 percent confidence level, of plus or minus 9 percentage points or  fewer.

We conducted this performance audit from April 2017 to December 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Appendix III: Comments from the Department of Health and Human Services

In addition to the contact named above, Janet McKelvey (Assistant  Director), Pete Anderson, James Ashley, Andrew Burton, Aaron Chua,  Andrea Evans, Lorraine Ettaro, Julia Kennon, Miranda Riemer, Guisseli  Reyes-Turnell, Roxanna Sun, Alyssa Weir, and Kevin Walsh made key  contributions to this report.

Competition among companies for federal information technology contracts is critical to achieving the best return on investment for taxpayers. However, noncompetitive contracts—including bridge contracts—are also allowed under certain circumstances.

Federal data estimates 30% of IT spending is noncompetitive—or about $15 billion annually. However, this estimate may not be accurate. We found some agencies misreported whether certain orders were competitive or noncompetitive. This calls the federal estimate into question.

We recommended that selected agencies identify the reason for these errors and correct the problem.