What’s Up with DoD’s Faux Contracting Competitions?

I like the word faux. It means imitation, artificial, even fake. It is rare to be able to use a word like faux in a blog focused on national security. So when the opportunity arises, I have to take it.

The Department of Defense (DoD) appears to be engaged in what can only be described as faux contracting competitions. The department takes large, very important contracts, some of which have been operating successfully for years on a sole source basis, and breaks them into pieces. Then it competes each of the pieces. So far, this seems reasonable. Except that, in case after case, the new contract is awarded to the company that had the old contract. In some instances, the company that had the old contract has been awarded all the new, albeit smaller, contracts.

The most recent example of faux competitions is the Air Force’s Survivability/Vulnerability Information Analysis Center, or SURVIAC. Booz Allen Hamilton (BAH) had done the work on this contract as a sole source awardee for more than 30 years, providing an array of technical services focused on the survivability of aeronautical and surface systems. You can bet that BAH was performing well if it held the contract for some thirty years and had built an experienced and skilled workforce.

This year, the Air Force ended its sole source relationship with BAH, breaking the single contract into multiple competitive awards. So far, so good. Except, BAH has won all the pieces of the new bundle of contracts. Nevertheless, BAH expects to lose up to a third of the $600 million in annual revenues it once earned on SURVIAC. BAH’s costs will undoubtedly rise, too, as it is forced to manage multiple contracts. The same is certainly true for the government.

Another example of a faux competition is the Navy’s NextGen contract, the successor to the decade long Navy-Marine Corps Intranet (NMCI) contract. The new contract supports some 300,000 users of the Navy’s enterprise IT architecture. The NMCI contractor was HP (which acquired the original support contractor, EDS). Under NextGen, the Navy broke the single contract into several pieces, each of which was opened up to competition. Guess who won all the big, important pieces? That’s right, HP. It turned out that HP was best qualified to provide the Navy the services it desired at an acceptable price. Unfortunately, the Navy had to go through several years’ worth of contracting work and spend millions of dollars to find this out.

Try as hard as it might, DoD is finding that it cannot meet its objectives for the percentage of all contracts awarded competitively. The primary reason for this, as noted in a recent Government Accountability Office report, is because of the generally challenging and technically complex nature of the work required. There are very few companies left in the defense industrial base both qualified and willing to take on such tasks.

It is evident that program managers feel under pressure to create competitive contracting opportunities even if they know that the incumbents are best suited to do the work. In the examples above, it is clear that both the Air Force and the Navy had the good sense to pick the erstwhile incumbent for the new contracts. I am sure that there are lots of cases in which DoD components suffer through the process of competing a contract just so they will not be accused of favoritism.

So what does DoD get for these exercises in faux competition? Well, the particular service gets to be the overall program manager and integrator. Of course, it is not clear that they possess the management experience and personnel needed to perform this function. The real answer is less work for its money, increased overhead costs and more bureaucracy.