No-Bid Contracts and the Age of Transparency

Scott Honiberg and Jeffrey Weinstein, for HealthLeaders Media, May 10, 2010

The "no-bid" contract: The phrase evokes all kinds of connotations about federal contracting: sweetheart deals for big corporations; the revolving door from government to industry and just about everything else wrong with federal contracting.

Just think of the controversial billion dollar "no-bid" contracts awarded to Halliburton or KBR throughout the wars in Afghanistan and Iraq; allegations about contracts being wired to those with connections, and you get the picture. While the majority of the most controversial no-bid contracts that come under scrutiny tend to be large defense contracts, healthcare contracts are also routinely awarded without competition—you don't hear about them as frequently, primarily because they tend to be smaller by comparison, and as a result, manage to fly under the radar a lot easier.

While the public at large tends to see media reports of such contracts as fairly blatant abuse of the "system," the reality, however, is not quite so black and white once you get beyond the five-second sound bite of the latest "procurement scandal" for the evening news. Indeed, the reality is that there are about seven or eight circumstances specified by statute when no-bid contracts can be legally awarded without competition.

For organizations interested in federal business, it's important to understand how a no-bid contract can be legitimately awarded and how the process can be abused. In this article, we offer a brief primer on "no-bid" contracts to set the record straight, de-mystify the process and offer a simple, practical suggestion for how you may be able to actually get a shot at something that's proposed to be awarded without competition.

First, a little terminology: While we frequently hear the term "no-bid", the phrase is a bit of a misnomer; in federal contracting parlance, the term is more accurately referred to as a "sole-source" contract, a phrase taken from the statute. In general, an agency can award to a firm without competition under certain circumstances such as if the firm is the "sole" (i.e., only) source that can fulfill an agency's requirements—with a number of caveats (the proverbial "fine print").

Two things are supposed to happen before a sole source contract is awarded:

  1. The government is supposed to prepare a Justification and Approval (the "J&A") citing which of the applicable standards listed in the statute justifies waiving the requirements for competition.
  2. The agency is supposed to provide public notice of its plans, in advance, so that information can be submitted by an interested party.

Until recently, most of the J&As were not routinely published for the public to view and remained hidden behind the scenes. It was like pulling teeth to get agency contracting personnel to release them. One very real change that has occurred with the new administration, however, is the public—and voluntary—release of many of the J&As prepared by agencies. It is a significant step forward, and represents another layer of procurement "fog" getting peeled away from the onion. But lest we congratulate ourselves for having finally arrived at the gates of transparency prematurely, let's also be frank about exactly what it is that we can now see more clearly.

When "Urgent and Compelling" Applies
While it is true that we can now see more clearly how agencies justify awards without competition, unfortunately, we also see how dense the fog really is, and how many additional layers of the onion we may need to peel off before we reach transparency. Perhaps the most frequently cited reason for entering into a sole source contract is that there is an "urgent and compelling" need for the government to move forward without putting a contract up for competitive bid in order to avoid an interruption in critically needed services. In our opinion, this particular "justification" is among the most egregiously and flagrantly abused provisions in federal contracting.

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