Agencies are making concerted efforts to reduce the money spent through high-risk contracts - contracts that are not fixed price or are awarded without receiving more than one bid - so that the government faces no greater financial risk than necessary in its contracting. To meet the President's direction to address contracting risk, every agency took steps to reduce the share of dollars obligated through new contracts in FY 2010 that are awarded (1) noncompetitively, (2) after a competition that received only one bid, (3) using a cost-reimbursement contract, and (4) using a time-and-materials/labor hour (T&M/LH) contract. USAID's results, comparing FY 2009 to FY 2010, are shown below.
Total government-wide spending on noncompetitive contracts increased significantly from $73 billion in FY 2000 to $170 billion in FY 2008. Dollars obligated under contracts that were open to competition but generated only one bid also increased dramatically from $14 billion in FY 2000 to $81 billion in FY 2008. To meet the President’s direction to reduce contracting risk, every agency took steps to decrease by 10 percent the share of dollars obligated through new contracts in FY 2010 that are awarded noncompetitively or after a competition that received only one bid. The chart to the right shows the percentage of dollars that the U.S Agency for International Development obligated to new contracts awarded noncompetitively. To put progress on use of competition into a larger context, the U.S Agency for International Development competed 79% of total obligations, which include new and existing contracts, in FY 2010. However, among the competed dollars, a subset has received only one offer. The chart also shows the percentage of dollars that were obligated government-wide to new competed contracts that received only one offer. The data is from the Federal Procurement Data System (FPDS). More information is provided in the Frequently Asked Questions.
Agencies made progress on decreasing noncompetitive contracting, though the 10 percent goal was not achieved in FY 2010. Agencies continue to work to increase competition in acquisitions. To attract new sources and bidders, for example, some agencies broke out pieces of requirements that are most likely to attract additional bidders, encouraging long-time subcontractors – who are in many cases small businesses – to consider competing as prime contractors, and restructuring requirements in ways that more closely reflect how work is performed commercially. Others have worked to improve their outreach to small businesses to help them more easily navigate the federal marketplace and identify opportunities that best fit their capabilities.
Between FY 2000 and FY 2008, total government-wide spending on cost-reimbursement contracts increased from $71 billion to $151 billion. Dollars obligated under time-and-materials/labor-hour contracts (T&M/LH) shot up from just $8 billion to $29 billion. Agencies are now committed to increasing their use of fixed-price contracts, where appropriate, which provide greater incentive for contractors to control costs and perform efficiently than cost-reimbursement and T&M/LH contracts. The chart to the right shows the percentage of dollars that U.S Agency for International Development obligated for new non-fixed-price contracts in FY 2009 and FY 2010. To put progress into a larger context, U.S Agency for International Development awarded 11% of total obligations, which include new and existing contracts, as time-and-materials contracts and 73% as cost-reimbursement contracts in FY 2010. The percentages of total dollars obligated for these contract types are typically larger than new awards, because additional funding is awarded as the contracts progress and costs become known. Data is from the Federal Procurement Data System (FPDS). More information is provided in the Frequently Asked Questions.
Cost-reimbursement contracting increased slightly government-wide between FY 2009 and FY 2010. The Office of Management and Budget is working with agencies that did not meet the targets to identify ways to make progress. However, in certain instances, cost reimbursement contracts may present less risk to the Government than other contract types. First, on the risk continuum for types of government contracts, cost-reimbursement contracts present less risk to the government than T&M/LH contracts. In addition, some agencies are utilizing “hybrid contract types”, which allow the parties to choose the appropriate pricing structure – fixed-price, cost-reimbursement or T&M/LH – for individual work orders. These contracts enable agencies to move part of the requirement to a lower risk pricing structure without awarding a new contract, but this conversion to lower risk contract types is not captured in FPDS. Recently published changes to acquisition regulations will help to ensure that cost-reimbursement contracts are used only when circumstances warrant, such as to help agencies obtain critical research, leading-edge innovation, and other needs where there is considerable uncertainty regarding the agency’s requirements.