GAO Analysis on Government Contracting

Published: March 15, 2017

Contract AwardsForecasts and Spending

The congressional watchdog released a report examining the spending, contract type and competition trends in the government contract market.

On March 9, 2017, the Government Accountability Office (GAO) released the “Contracting Data Analysis: Assessment of Government-wide Trends” report that details procurement trends using a full data set from FPDS-NG from FY 2011 to FY 2015. Included within the report is the analysis into the types of spending, competition and contract types that took place within that time period as well as procurement analysis of the top ten civilian agencies with the highest contract obligations in FY 2015 and the three military departments under DoD.

Spending Trends and Types of Purchases

The federal government spent approximately $2.5 trillion in contract obligations between FY 2011 and FY 2015. Defense spent 64% of that total at $1.6 trillion while Civilian makes up the remaining percentage of the total market with $824 billion in obligations during the five year time frame. Though a larger percentage of contract dollars rests in its space, the Defense sector saw a 32% decrease in spending in the stated time span versus the steadier spending patterns within the Civilian market. Understandably, the largest decreases in both markets occurred at and thereafter for Defense, the time of sequestration in 2013:

In terms of products, a total of 40% of total contract obligations was spent from FY 2011 through FY 2015 by both government markets. Looking specifically at FY 2015, Air craft and structural components lead the type of products purchased by Defense at 23.6% and Medical, dental and veterinary equipment and supplies lead the products at 38.8% within Civilian. However, the information technology equipment category did not make it to Defense’s top five product listing and is rated somewhere under the 6% rate of total Defense obligations on products. Meanwhile, information technology equipment ranked second in the Civilian market at 15.8% of total obligations in products.

As the above chart depicts, services make up the larger portion of spending in both markets; over 50% in Defense and over 70% in Civilian. Professional support services topped the percentage of total obligations within both markets services. Meanwhile, information technology and telecommunications ranked second Civilian but only fourth in the Defense atmosphere:

Competition Trends

Typically, acquiring goods and services on a competitive rather than sole source basis helps ensure low-cost driven and high-quality awards for the government. In FY 2015, almost 65% of government-wide spending was awarded in a competitive manner, marking a slight increase since FY 2011. In addition to this, the below graph also represents the competitive rate trends in the Defense and Civilian markets during the FY 2011 and FY 2015 time frame:

The Civilian market saw a steady, upwards trend in competitive contracts between FY 211 and FY 2015, however, the GAO explains that the relatively steep decrease in competitive rates under Defense between FY 2014 and FY 2015 is brought down by lower percentages of competitive rates in the Air Force and Navy due to buying major weapons systems that are not economically viable to obtain on a competitive basis.

In taking a closer look at the government-wide competitive awards made in FY 2015, the GAO found that an astounding 14% of those contracts only received one offer in response to a competed solicitation. While the GAO did not cite what types of contracts tended to receive one offer in response to a competition, it did state past recommendations made to agencies to avoid this dilemma, including requesting feedback from vendors that responded in a market research phase but did not ultimately submit a bid on the acquisition.

Switching gears to small business trends, most agencies tend to meet their overall small business goals in a given fiscal year. However, in the FY 2011 – FY 2015 time frame, Defense obligations to small businesses decreased from $64.4 billion to $54 billion (it is worth noting that obligations among large business under Defense also decreased) – likely due to the overall decline in spending in this sector during the five year time period. While small business obligations in the Civilian space decreased from $46.1 billion to $41.7 billion from FY 2011 to FY 2012, obligations rose for those businesses between FY 2012 and FY 2015 from $41.7 billion to $43.4 billion, respectively.

The GAO also looked at trends across the Defense and Civilian markets and analyzed the percentage of total obligations in FY 2015 that went to top vendors across different agencies. In its analysis, it found that the top ten vendors in Defense were awarded 36.7% of total obligations in FY 2015 while top Civilian vendors received 17.5% of total obligations. Specifically, the Air Force and Navy spent over 50% of their FY 2015 obligations on their top vendors while similarly,  Energy and NASA top vendors also received more than half of those agencies’ obligations.

Contract Type and Types of Procurement Trends

From FY 2011 to FY 2015, federal agencies used firm-fixed price contract types for more than 60% of total contract obligations in each year. The second largest contract types, cost-reimbursement, time and materials (T&M) and labor hour (LH) contracts, accounted for 37% of contract obligations across the government during the five year period. These other cost type contracts are considered high risk by OMB due to the lack of incentive to control costs by contractors. Drilling down into the types of markets, Defense did a better job of awarding firm-fixed price contracts in FY 2015 with 67% of obligations under the fixed price contract type. Meanwhile, Civilian awarded 56% of total obligations on firm-fixed price contracts. Interestingly enough, the civilian agencies that obligated more than 70% of FY 2015 obligations on other cost type contracts include Energy, NSF, USAID and NASA.

From a noncompetitive perspective, the use of cost-reimbursement, T&M and LH contracts waivered at 11 and 12 percent of total government contract obligations between FY 2011 and FY 2015. In these instances, it is Defense that spent a larger amount on these cost type contracts under the noncompetitive category than Civilian:

The utilization of Indefinite Delivery Vehicles (IDV) allows for flexibility in obtaining good and services over fixed contracts or purchase orders. Specifically, Contracting Offices have strongly been held to using existing vehicles such as the GSA Federal Supply Schedule and Government Wide Acquisition Contracts (GWAC) for IDV acquisitions due to the cost-effective and efficient ways these options provide. The GAO report cites that in FY 2015, 47.3% of total contract obligations under Defense were spent on indefinite delivery vehicles (IDV); 1.6% of those dollars were spent under the GSA Schedule program, 0.9% on GWACs and 39.4% on other Indefinite Delivery, Indefinite Quantity (IDIQ) contracts.  Civilian spent a total of 54.6% of its obligations on IDV type contracts in FY 2015; 7.9% under the Schedules program, 4.2% on GWACs and 36.7% on other IDIQ contracts.

Agency Procurement Analysis

The GAO reports dedicates two pages or “snapshots” into the top ten civilian agencies in contract obligations for FY2015 and the three military departments under DoD. Included in these snapshots are the background and mission for each agency as well as methods of procurement and types of vendors for each. This type of agency information and more can also be found for each of these agencies plus many more under the GovWin IQ Agency Profile tool.  While that level of detail will not be provided here, below is a breakdown from the GAO report of FY 2015 obligations by military department and top civilian agencies in billions:

The reporting agency did not make any direct recommendations to agencies in this report. Instead, it cited previous reports with recommendations to both defense and civilian agencies on a variety of topics within government contracting. Looking forward, the Trump administration’s goals of restructuring the government and its programs, increasing spending for defense agencies and cutting funds for non-defense agencies, coupled with the potential to form more public-private partnerships and decrease the overall size of the federal government could prove that a future watchdog report on contracting data analysis under the years of this administration will look increasingly different, particularly in terms of spending trends!