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Summary of "Quality of Competition for Defense Contracts under 'Better Buying Power'"

Core Content

This document analyzes the effectiveness of competition in U.S. Department of Defense (DoD) contracting under the Better Buying Power (BBP) 2.0 and 3.0 initiatives. It highlights that while recent reports suggest a decline in competition, the Center for Strategic and International Studies (CSIS) provides a more nuanced view based on data from the Federal Procurement Data System (FPDS).

Main Points

• Defense Contract Obligations Decline: From 2009 to 2013, defense contract obligations dropped by over 25 percent. With budget caps in place, the focus has shifted to improving efficiency and value with existing funds.

• BBP 2.0 and 3.0 Emphasize Competition: Frank Kendall, Under Secretary of Defense for Acquisition, Technology, and Logistics, has continued to promote competition as a key goal of the BBP initiative. New guidelines and policy steps were introduced to enhance competition in DoD contracting.

• Definition of Effective Competition: CSIS defines "effective competition" as competitively solicited awards that received two or more offers. This excludes single-offer competitions, which are less likely to yield competitive benefits.

• Overall Effective Competition Rate: CSIS data shows that the rate of effective competition has remained relatively stable between 48 percent and 50 percent over the past six years. This contrasts with DoD's own data, which indicates a decline from 62 percent in 2010 to 57 percent in 2013.

• Component-Level Trends: There are significant differences in effective competition rates among the major DoD components:

  • Army: Effective competition rates increased from 45 percent in 2008 to 57 percent in 2013. This was largely due to a shift in contracting from products to services.
  • Navy: Effective competition rates declined from 43 percent in 2008 to 34 percent in 2013. This was driven by a shift toward product contracts, which are often sole-source.
  • Air Force: Effective competition rates for services declined sharply from 56 percent in 2008 to 42 percent in 2013. The decline was broad-based across all service categories, except for medical services.

• Products, Services, and R&D: Effective competition rates vary by the type of contract:

  • Products: Lower competition rates due to limited demand for complex defense platforms.
  • Services: Higher competition rates, with the Army and Navy showing strong performance.
  • R&D: Slightly lower than services, but showing some improvement in recent years.

Key Information

• CSIS Analysis: CSIS’s analysis suggests that recent declines in competition rates may not reflect a true reduction in competition, but rather a shift in the types of contracts being awarded.

• Single-Offer Contracts: These are excluded from the effective competition rate as they are less likely to provide competitive benefits. They accounted for up to 11 percent of DoD contract obligations in recent years.

• Trends by Component:

  • The Army has seen a notable increase in effective competition, driven by a shift toward services.
  • The Navy has experienced a decline in effective competition, attributed to an increase in product contracts.
  • The Air Force has had a significant drop in effective competition for services, with no clear cause identified yet.

• Future Research: CSIS plans to release updated findings in the Defense Contract Trends report and present broader research on defense competition at the 2015 Naval Postgraduate School Acquisition Research Symposium.

Conclusion

While the overall rate of effective competition in DoD contracting has not increased significantly, the data also do not support the claim that it has declined to the extent suggested by some recent commentary. The changes in effective competition rates are largely due to shifts in the types of contracts being awarded, particularly a move toward services in the Army and Navy, and a decline in service competition for the Air Force. The study emphasizes the need for further analysis to understand the underlying causes of these trends, especially in the Air Force, and to identify potential policy improvements.