DOD puts final touches on controversial 'rule of 3'

The Defense Department last month put its final stamp of approval on a rule to increase competition in procurement.

Section 803 of the 2002 National Defense Authorization Act was published in the Federal Register on Oct. 25. It requires full competition in which 'many more than three contractors' would be invited to compete, said Deidre A. Lee, Defense procurement director.

The new rule requires procurement officials to contact as many schedule holders as possible when purchasing service orders of more than $100,000 under multiple-award contracts, Lee said.

The purpose of the rule is to prevent Defense officials from choosing a contractor without holding an open competition when they buy services from the General Services Administration's Federal Supply Service schedules.

Previously, the department required contracting officers to contact three GSA schedule holders when placing task orders of more than $100,000. Many times only one vendor would respond, officials said.

Today, contracting officers must receive at least three responses, which may require the officer to contact more than three GSA schedule holders.

'I think it strikes a nice balance. The government gets good competition, and it enables business to move forward in a reasonable manner,' said Larry Allen, executive vice president for the Coalition for Government Procurement in Washington.

If a contracting officer fails to receive at least three responses when placing orders, 'he or she must determine in writing that no additional qualified contractors were able to be identified despite reasonable efforts to do so,' Lee said.

The process will be subject to review by auditors.

For months, DOD and the Office of Federal Procurement Policy have debated the language of the final Section 803 rule.

OFPP initially prepared a provision that would have required DOD, when buying commercial items through schedule contracts, to use only firm-fixed-price contracts instead of time and materials contracts, which many Defense procurement officials prefer.

That provision, which was left out of the final Section 803 rule, likely will be addressed through a separate rule, officials said.

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