FEDERAL CONTRACT LAW

FEDERAL CONTRACT LAW

Congress issues a warning on task order contracts

By Joseph J. Petrillo

A congressional clampdown is looming over the increased abuse of task order contracts.

These are agreements in which the government knows generally what goods or services it needs but not specifically where, when or how much. It awards an umbrella contract and then issues periodic task or delivery orders containing details.

This standard procurement vehicle got a boost in 1994, when Congress enacted the Federal Acquisition Streamlining Act. FASA turned the spotlight on such contracts and added some parameters. Generally, the law favored awarding more than one contract to ensure competition for individual task orders. Some agencies had been awarding single contracts and then issuing sole-source task orders.

No protests

Under FASA, agencies need not worry about repercussions. If a contractor feels it was unfairly denied a chance to compete for an order, it has but a single remedy: complaining to an ombudsman. FASA prohibits protests unless an order exceeds the contract's scope, period or maximum value.

Since these provisions were implemented, three important patterns have emerged.

First, the contracts tend to have a broad and indefinite scope. Statements of work are general and inclusive. The minimum order the government must place is often a mere token amount, yet dollar ceilings on total orders can be astronomical. Also, contracts are routinely open to other agencies.

Second, multiple awards have become common. It is not unusual for agencies to award a half-dozen contracts from a single solicitation. Sometimes every bidder gets a contract.

Third, it has become increasingly clear that many task orders are awarded without competition. In FASA, Congress expressly permitted sole sourcing of orders under certain circumstances. But an agency that disregarded these rules did not have to worry about anything more burdensome than the complaint to its ombudsman.

Of particular significance is a recent report by the Defense Department inspector general. It reported no competition at all for large numbers of task orders. The report concludes that in many cases, military buyers are observing neither FASA nor the Federal Acquisition Regulation'and that they are paying higher prices as a result.

In its current incarnation, the task order contract system is reminiscent of another procurement method'prequalification. FAR permits agencies to limit certain purchases to a list of approved suppliers. But such systems must have important protections to keep competition open.

Any interested company can find out what tests it must satisfy and can have the tests conducted at its own expense. The cost of testing can be waived for small businesses. Agencies therefore use this technique only when there is compelling need. Multiple-award task order contracts operate without the protections of the qualified product list.

The network of multiple-award task order contracts marks a return to the discredited notion of efficient competition. In the debates that led to the Competition in Contracting Act, Congress rejected the notion of letting federal agencies limit competition in the name of efficiency. Instead, CICA mandated full-and-open competition. With an exception for competitive-range determinations, this continues to be the legal standard. But vigorous exploitation of the special rules for task order contracts effectively nullifies the full-and-open standard.

A red flag

The IG's report, among other things, led the Senate to add a provision to the pending fiscal 2000 Defense authorization bill directing the Office of Federal Procurement Policy to issue more guidance on task order contracts. This amounts to a warning. If things don't improve, then Congress may start to rewrite the law itself.

Whether more regulations will cure the problem is doubtful. After all, the IG found DOD buyers ignoring existing rules. And concern over noncompetitive orders, however well-intentioned, addresses only one part of a complex apparatus.

But as Congress acts to close one loophole, another opens. There's a trend away from task order contracts and toward blanket purchasing agreements under the General Services Administration's Multiple-Awards Schedule program. MAS contracts now include services as well as goods, and limits on order size are essentially gone. Agencies seem willing to pay GSA's service charge in exchange for access to unlimited orders with few restrictions.

Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo & Powell, PLLC. E-mail him at jp@petrillopowell.com.

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