Multi-award contracts soar as U.S. lines up pools of suppliers
By Nick Taborek,
U.S. government spending on multiple-award contracts rose 49 percent, to $121 billion, in four years, more than double the growth rate of all contracting, a Bloomberg Government study shows.
Little known outside the federal contracting community, these agreements are intended to reduce costs by simplifying the buying process. The Defense Department and other agencies hold competitions to pick multiple suppliers rather than a single provider. Once chosen for the pool, the contractors bid against one another for orders as specific needs arise.
The proliferation of multiple-award contracts, known as MACs, has raised the stakes for government suppliers such as Fluor, CACI International and Computer Sciences Corp. (CSC). The losers miss the opportunity for millions or billions of dollars in revenue for the term of the agreement, often five years or longer. Contractors that secure a seat do not necessarily get the orders.
The government’s fiscal 2010 spending on MACs was 33 percent more than the Government Accountability Office’s estimate of $91 billion, according to the study. Revenue rose to $121 billion in fiscal 2010 from $81 billion in fiscal 2006.
“Multiple-award contracts are starting to become the center of the universe,” said Jaime Gracia, president of Seville Government Consulting, based in Washington. “These vehicles have exploded across government to the point where nobody really knows what they have internally.”
President Obama’s top acquisition official in September ordered more oversight of agencies seeking to set up new MACs. Agencies doing so often establish “overlapping and duplicative contracts,” Dan Gordon, administrator of the Office of Federal Procurement Policy, wrote in a Sept. 29 memo to government acquisition executives.
Large MAC contractors
Companies, particularly government service providers, are increasingly relying on MACs. Among the most dependent are Fluor, the largest U.S. construction and engineering company, and consultants CACI and CSC.
Fluor had at least $1.8 billion from MACs, or 96 percent of its total U.S. contract awards in fiscal 2010, which ended Sept. 30, 2010, according to Bloomberg data. CACI, based in Arlington, had a minimum of $1.98 billion, or 72 percent. CSC, of Falls Church, had at least $2.8 billion, or 65 percent.
A multiple-award contract “streamlines the contract process and speeds delivery,” Jim Cuff, SAIC’s executive vice president of corporate development, wrote in an e-mail. “These contracts give the government access to a top-tier pool of qualified vendors, with the added benefit of another round of competition on individual task order requirements.”
SAIC was the leading company on the Navy’s SeaPort Enhanced multiple-award contract, which represented $5.6 billion in spending in fiscal 2010.
Not all companies are pleased with MACs.
Aegis Technologies Group, a provider of weapons testing services based in Huntsville, Ala., won a seat on the SeaPort contract in 2008. It has yet to win an order.
Steve Swenson, the company’s director of northeast operations, said the Navy hurts vendors trying to break into its service contracting ranks by funneling orders through the MAC rather than holding stand-alone competitions.
It is difficult to find out when SeaPort orders will come up, so contractors have less time to prepare competitive proposals, he said in an interview.
“You have less insight into what’s going on,” Swenson said. “You have less opportunity to go in and socialize yourself as a potential bidder.”
One example of lopsided orders comes from an Army
multiple-award contract for training and simulation services.
Companies received $158 million in awards under the Army’s STOC-II contract in 2009 and 2010, yet almost all that money went to 23 of the 136 companies eligible to bid on orders. The other 113 companies received only the $2,500 guaranteed minimum.
Congress authorized its first MACs, called “supply schedules,” in 1949. They were overseen by the General Services Administration and the Veterans Administration. In the mid-1990s, legislators passed acquisition rules that led to a new class of multiple-award contracts created by military branches and government agencies.
The Bloomberg Government study identified 694 of these newer MACs in use from 2006 to 2010, in addition to the 40
Spending on the newer MACs increased 90 percent, to $72 billion in 2010, from $38 billion in 2006, more than six times as fast as spending on the supply-schedule contracts, according to the study.
The newer contracts are predominantly used to acquire services, while the the older GSA and VA programs include many contracts for buying products, according to the study.
Small businesses, generally defined by the government as companies with less than $7 million in annual revenue, won 21.6 percent of contract dollars awarded under the newer MACs in fiscal 2010, compared with 20.1 percent of total contract award dollars, the study found.
The government’s goal is to award at least 23 percent of total prime contract dollars to small businesses.