FY 2015 to 2017 Department of Defense Indefinite Delivery Contract Trends

In May 2018, the U.S. Government Accountability Office (GAO) published a brief report on the use of indefinite-delivery contracts by the Department of Defense over the three fiscal years from 2015 to 2017. The report, delivered to Congress as required by the National Defense Authorization Act for 2017, contained several insights that industry should find interesting and, in some cases, encouraging.

Market on the Rise

One of the things that GAO analysts found after crunching defense spending data is that “orders under indefinite-delivery contracts comprised roughly 40% of total DOD obligations in fiscal years 2015 through 2017, totaling more than $100 billion each year.” What GAO did not comment on, given the parameters of their investigation, is that over that same three year period DOD’s spending rose both in total and via indefinite-delivery contracts. The graphic below comes from the GAO report.  It shows a clear upward trend in total DOD obligations.

This graphic says “market recovery” quite clearly. After several years of sequestration and what could be called a bearish defense market, spending has been rising every year since FY 2015. That’s good news for industry.

Competition is Shifting

Sole source contracts are one of the often frustrating realities of the defense market. Millions of dollars flow to select vendors every year as a result of these contracts and while such procurement mechanisms might benefit the recipient they leave everyone else out in the cold.

GAO analysis shows that for at least the three years since FY 2015 the trend in defense contracting has been toward more competition, not less.

In percentage terms, the award of competed indefinite-delivery contracts to a single vendor is up almost 12% from FY 2015 to 2017. Awards of not-competed indefinite-delivery contracts  to a single vendor are up too, but by a much smaller 3.5%. Lastly, the award of competed multiple award indefinite-delivery contracts is down 28.2%.

The award of fewer multiple award contracts is probably attributable to efforts on the DOD’s part to get away from awarding long-term large contracts. Modular contracting has been a point of focus in recent years with DOD actually moving in that direction, perhaps. The latest acquisition guidance out of DOD continues to emphasize the use of short-term prototyping contracts, too, so this is a trend that could continue.

In terms of spending the trend toward competed contracts also holds firm with $27.1B obligated in FY 2015 and $31.3B in FY 2017. That’s a 15.5% rise in obligations on indefinite-delivery contracts that were competed. Over the same period of time spending on non-competed indefinite-delivery contracts rose only 3.6%.

Concluding Thoughts

Summing up, it appears from the GAO’s analysis that the competition of one-off indefinite-delivery contracts is on the rise. This translates into more opportunities. The award of a single contract means there is no “hunting license” required, so to speak, to compete for task orders on multiple-award contracting vehicles. Win a single award contract and the work is your company’s without the need for further competition against a slate of even more qualified vendors. Sole source awards also appear to be declining in use, which is good news in a market that shows signs of being in a sustained recovery.