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Noncompetitive Information Technology Contracts at the Defense Health Agency

DODIG-2018-105

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Objective:

We determined whether the Defense Health Agency (DHA) properly awarded noncompetitive Information Technology (IT) contracts.

Background:

Full and open competition is the preferred method for Federal agencies to award contracts. However, the United States Code includes certain exceptions for awarding contracts without full and open competition. For example, Federal agencies may award contracts without full and open competition to a small business participating in a program sponsored by the Small Business Administration (SBA), such as the 8(a) Program for small, disadvantaged businesses.

We reviewed all 27 noncompetitive IT contracts, valued at $329.6 million, awarded by the DHA Contracting Office–Health Information Technology (CO-HIT) at Joint Base San Antonio–Fort Sam Houston, San Antonio, Texas between October 1, 2015 and July 27, 2017.

Findings:

DHA CO-HIT contracting personnel properly awarded 23 noncompetitive IT contracts, valued at $87.2 million, of the 27 contracts reviewed. For 16 contracts, valued at $81.3 million, DHA CO-HIT contracting personnel properly awarded the contracts as sole-source under the 8(a) Program and coordinated with the SBA. Additionally, DHA CO-HIT contracting personnel properly awarded seven contracts, valued at $5.9 million, using another Federal Acquisition Regulation (FAR) authority, which permitted contracting without providing for full and open competition. However, the DHA CO-HIT contracting personnel did not properly award four contracts, valued at $242.3 million, of the 27 contracts reviewed.

For one contract, valued at $237.9 million, the DHA CO-HIT contracting officer did not appropriately apply the sole-source authority cited, include all of the minimum FAR content requirements in the justification, or properly award a bridge contract. This occurred because the DHA used multiple contracting offices before awarding the contract. Furthermore, the DHA knew about the requirement for 2 years; however, it did not adequately communicate the requirement before the previous task order expired. This led the awarding contracting officer to overlook market research that identified other potential capable sources. In addition, the contracting officer stated that he had other priorities that prevented him from determining a fair and reasonable price. The DHA also had minimal guidance on bridge contracts.

For three other contracts, valued at $4.4 million, DHA CO-HIT contracting personnel did not meet one of the FAR criteria for the authority cited by not determining a fair and reasonable price or appropriately advertising award opportunities. DHA CO-HIT contracting personnel stated that this occurred because they had competing priorities from multiple procurements and they overlooked performing all applicable requirements.

As a result, DHA contracting officials should have awarded the contract valued at $237.9 million, using full and open competition. In addition, for all four contracts, the DoD may have paid a lower price for the IT services received or increased future competition, if the DHA CO-HIT contracting personnel had performed their due diligence in determining fair and reasonable prices and appropriately advertised award opportunities.

Recommendations:

We recommend that the Head of the Contracting Activity, Defense Health Agency review the contract actions taken for the one contract, valued at $237.9 million, and determine whether the contract should be terminated and awarded using full and open competition; issue guidance on the use of bridge contracts; and develop procedures for defining minimum timeframes for procurements.

Management Comments and Our Response:

The Acting Component Acquisition Executive (J-4), Defense Health Agency, agreed with our recommendations. The Head of the Contracting Activity reviewed the contract action to sustain Secure Messaging Software as a Service and determined not to terminate and re-announce the contract for competition. The Head of the Contracting Activity plans to publish a Procurement Directive to provide policy guidance on the use of bridge contracts. The Head of the Contracting Activity will also perform a review that considers whether to develop refined procedures that ensure adequate time to properly evaluate and award contracts.

The recommendations are resolved but remain open. The recommendations will be closed when we verify the actions are fully implemented and review the support for the planned or already conducted actions. Additionally, the Acting Component Acquisition Executive commented on the internal control weaknesses we identified and described DHA internal control processes related to the internal control weaknesses we identified. Although some key internal control processes were in place, we concluded that some controls were not always implemented, and some additional controls were required to address problems identified.