OFPP sets new rules for creating multiple-award contracts

Friday - 9/30/2011, 1:03pm EDT

Starting Jan. 1, agencies must justify any new multiple award contracts with a total value of more than $250 million over the life of the procurement.

The Office of Federal Procurement Policy is trying to slow down the growth and limit the duplication of agencywide, governmentwide and other types of large indefinite delivery, indefinite quantity type contracts.

Dan Gordon, OFPP administrator, issued guidance to agency chief acquisition officers and senior procurement executives yesterday detailing long-awaited rules for creating new multiple award contracts (MACs).

"OFPP's new guidance will aid agencies in eliminating waste and carrying out the reviews ordered by the Vice President by addressing concerns, raised by the Government Accountability Office and others, that agencies may be unnecessarily duplicating each other's contracting efforts," Gordon wrote in a blog post on OMB.gov.

"This guidance requires agencies to prepare 'business cases'— analyses to ensure they aren't duplicating an existing contract and that they are getting the best value for taxpayers — before they establish or renew certain interagency and agency-specific contracts for commonly-used goods and services, such as office supplies and wireless services," Gordon wrote. "In the business case, agencies are required to balance the value of creating a new contract against the benefit of using an existing one, and whether the expected return from investment in the proposed contract is worth the taxpayer resources. Insisting on that cost/benefit analysis in the business cases should go a long way to avoiding duplicative contracts."

Federal law already requires agencies submit a business case for new or to renew governmentwide acquisition contracts (GWACs) such as the General Services Administration's Alliant. OFPP is extending that requirement to multi-agency contracts, such as GSA's Federal Supply Schedules, and interagency contracts, where there could be overlap with existing contracts for governmentwide use.

"Too often, however, agencies establish new overlapping and duplicative contracts for supplies or services, because the agencies have not adequately considered the suitability of existing interagency contract vehicles: governmentwide acquisition contracts, multi-agency contracts, and blanket purchase agreements (BPAs)," Gordon wrote in the memo. "Similarly, in those situations when a suitable interagency vehicle does not exist, agencies have not adequately considered the opportunity to leverage the agency's own buying power, and achieve administrative efficiencies, through the use of an agency-specific contract. This failure to make maximum appropriate use of interagency vehicles and agency-specific contracts results in higher prices and unnecessary administrative costs."

Contract duplication and the proliferation of MACs has long been a problem across government. GAO found in April 2010 the total number of MACs is unknown and it's costing agencies and vendors millions of dollars to run and bid on these contracts.

Gordon has made it a priority to curb the growth and add more oversight of multiple award contracts.

OFPP's guidance comes after the Federal Acquisition Regulations Council issued an interim rule last December requiring business cases. The FAR Council has not yet issued a final rule.

"We are supplementing the FAR rule, as we often do, by providing more specific guidance," Gordon said in an interview with Federal News Radio in July. "It will be telling the agencies, and we developed it with the agencies so it will be no surprise, they need to think about duplication before they start their own contract, especially if their own contract will be a large dollar one."

In the guidance, OFPP developed a four-step business case process.

  • Prepare a preliminary business case, including scope, value of the MAC, the period of performance and other existing contracts that may be for the same goods or services.

  • Post the preliminary business case on the OMB MAX intranet site for at least 15 days so other federal agencies can review and comment on it.

  • Based on feedback from the OMB MAX review, the agency should decide whether to move forward with the procurement.

  • Post the agency's decision on OMB MAX, including the approval from a senior procurement official to move forward with a request for proposal.

"Other than draft solicitations, agencies shall not issue solicitations for proposed BPAs, multi-agency contracts, and agency-specific contracts until the business case has been finalized and approved by the appropriate agency official(s)," Gordon wrote in the guidance. "In the case of other types of multi-agency contracts and BPAs as well as agency-specific contracts and BPAs, OMB reserves the discretion to require the agency to submit the approved business case to OMB, for review, prior to the agency releasing a final solicitation."