How Much Uncle Sam Spends on Contracts Each Year. First the Good News...The Chief Visionary
When you go to industry and government-hosted conferences and seminars aimed at conveying how to do business with our Uncle Sam and just how much the U.S. Government obligates to contracts each year, it's not hard to come away astounded at the numbers, right? I mean, for the record, the Federal Procurement Data System (FPDS-NG) shows $518B obligated during FY12, $461B in FY13 and for the current fiscal year, we're staring at $260B already obligated. Now the original title of this piece was going to be "Just How Much Are We Fighting For?" but I opted for less drama in the title, this time. However, that sentiment is exactly what I'm going to discuss.
Most of us in government contracting are familiar with the various ways agencies can compete or not compete requirements. Agencies can apply down-selects to narrow the field of respondents, they can prepare a justification for a sole source, or they can put it on the street to the world at-large, or just for a select group of vendors who made the cut for an agency-specific or governmentwide contract vehicle. That's just business as usual.
But what if the piece of the pie for which you have a hankering, is not nearly as big as you think? For example, let's say of a two billion dollar program you are tracking, $750M is in your swim lane.As best you can tell, all signs point to these dollars being competitively awarded. The first requirement hits the street and is awarded in the amount of $200M to another company. That's not too bad as there is still $550M still up for grabs, right? Now imagine over the next year, the rest of those dollars are added to the previous contract, not as task orders, but as modifications.
Based on a review of spending for the current fiscal year and the previous one, that is a reality. But before I show you the numbers, let me tell you what modifications are according to the Federal Acquisition Regulations. There are two types of modifications agencies can leverage. They are either 'bilateral' or 'unilateral' with one being signed by both the contractor and contracting officer while the other is only signed by the contracting officer. Bilateral modifications are used to:
- make negotiated equitable adjustments when change orders are issued;
- definitize letter contracts; and
- reflect other agreements of the parties modifying the terms of contracts.
Unilateral modifications are used, for example, to:
- make administrative changes;
- issue change orders;
- make changes authorized by clauses other than a change clause (e.g., Property clause, Options clause or Suspension of Work clause); and
- issue termination notices.
Within the FPDS-NG system agencies are required to enter a unique number for each modification executed under a contract. When you process an ezSearch in FPDS-NG and review the results summary, the initial award or base contract for indefinite delivery vehicles, will have a 'zero' in parentheses indicating it as the first action associated with a specific award. When you see records with a number other than zero, that tells you some bilateral or unilateral action has occurred. It does not always result in dollars being added to the contract, but it can, and that's what I'm here to tell you about!
In the spirit of "Just How Much Are We Fighting For?" here is a snapshot for Fiscal Years 2013 and 2014 (year-to-date). The first dollar amount represents total dollars obligated including modifications and the second number indicates initial obligations where no modifications have occurred. Additionally, I have included the amount of the initial obligations that were competitive versus sole source or not competed:
- FY2013 - $462B in total obligations including modifications and $192B in initial obligations ($138B competitive)
- FY2014 - $260B in total obligations including modifications and $88B in initial obligations YTD ($66B competitive)
It is conceivable some of the modifications that resulted in additional obligations to a contract may have started as a a competitive opportunity. As a result of market research or even having received offers from industry, it may have been found to be more advantageous for the government to issue a change if the additional work was within scope. Regardless, on paper, it looks like far fewer dollars are 'hitting the street' and it's not relegated to established contract vehicles (IDVs) it's happening on standalone contracts (contracts that cannot have recurring orders placed against them) as well.
I hear from more and more companies, large and small, about increased agency market research that never amounts to anything tangible. Perhaps the delta between initial award dollars and obligations via modifications can explain away some of the mystery of the Sources Sought Notices and Requests For Information (RFI) black hole that has so many in industry very concerned.
"The person who says it cannot be done should not interrupt the person doing it."