No-Bid Contracts and the Age of Transparency

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

For instance, in August of 2008, a federal agency in the Midwest issued a "sole source" contract "extension" for an interventional radiology contract. Because we were following this for a local IR group, we did a little research and quickly discovered that the contract was first put up for competitive bid and awarded in 2004, originally for a base year, plus two option years scheduled to end in 2007. So, if it takes, say, several months to plan an acquisition, solicit bids and evaluate offers, then you might reasonably assume that the government would start the re-procurement process some five or six months before the contract expires, so that they would be in a position to have a contractor in place and ready to begin as soon as the old contract expires. Well, guess what happens when you don't (or won't) plan ahead and are not ready to put a new contract in place? If you're a government agency, you issue the proverbial J&A claiming there's an "urgent and compelling" need to award the contract to the incumbent to avoid interruption of critical services.

In the example above, a contract that was known at the outset to run for three years is extended through a series of successive "interim" or "bridge" contracts for, say, three months, then six months, then another six months, etc. Before you know it, the incumbent has had its original three-year, competitively awarded contract extended by another three years without competition. And this is because of an "urgent and compelling need" that somehow unexpectedly occurs, almost like clockwork, right around the time when the current interim contract is about to expire. It seems that three years is woefully inadequate for an agency to plan well enough in advance to have put the contract up for competitive bid and select a new contractor, or even select the incumbent through a legitimate competition.

Virtually every administration—including the current one—pledges to rid the government of waste, fraud and abuse in contracting, and yet somehow, no-bid contracts seem to continue uninterrupted. It happens all the time. Shortly after President Obama came into office, he issued an executive order putting agencies and contractors on notice that there was a new "sheriff" in town, that no-bid contracts were shortly to be a thing of the past and that he had directed the OMB to issue guidelines to agencies that would clamp down on unnecessary abuse of contract abuses, such as inappropriate use of sole source contracts.

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