Trends and Future Outlook of Task Order Contracts in Federal Government Contracting: Executive Summary. Dana Pinkava

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1 Trends and Future Outlook of Task Order Contracts in Federal Government Contracting: Executive Summary Dana Pinkava

2 Scope and Methodology Scope: This report provides an overview of trends in Federal Agency buying patterns through Task Order (TO) Contracts, GSA Schedule Contracts, GWACs and other contracts. This report also includes analysis of Task Order Contract obligations in the Information Technology (IT), Professional Services and Architecture Engineering & Construction (AEC) industry segments as well as information on the top contract vehicles utilized by Federal agencies. Methodology: This report was developed using: Federal Procurement Data System (FPDS) spending data reported as of May 2012 OMB s Office of Federal Procurement Policy (OFPP) FAR/DFAR GAO Reports GovWin IQ Content Various government websites and documentation 2

3 Executive Summary The Government utilizes TO contracts to streamline the acquisition process, to speed up order fulfillment and to reduce costs by consolidating contracts with similar requirements into Multiple-Award Contracts (MACs), Government-Wide Acquisition Contracts (GWACs), GSA Multiple Award Schedule (MAS) Contracts or Multi-Agency Contracts (MACs). Trends in TO contract obligations indicate that Federal agencies have been and will continue to rely on contract vehicles to fulfill their IT and professional services requirements. During March 2009, the President directed agencies to become more fiscally responsible in their contract actions and take immediate steps to achieve real and sustainable improvements. A critical building block for meeting the President s mandate is the Federal Government s sound use of interagency contracting where an agency buys goods and services using a contract established by another agency or with its assistance. When used properly, interagency contracting allows agencies to leverage their buying power and achieve administrative efficiencies to reduce costs and produce savings for our taxpayers. In the current budget environment, Federal agencies are turning to TO contracts for cost savings. However, as agencies continue to utilize existing contract vehicles or creating new ones, winning contracts as a prime contractor or a teaming partner will become increasingly important. Jeffrey D. Zients, Acting Director of OMB OFPP Contractors that are not on teams may miss out on significant contract dollars in the future as there will likely be fewer individual contract opportunities. 3 7/16/ Deltek, Inc. All Rights Reserved

4 Contract Vehicles in Government Contracting: Costs and Benefits for the Government and Contractors Costs and Benefits to the Government There are costs and benefits of utilizing TO contracts for Federal agencies: They can streamline agency acquisition processes and lower their costs by leveraging pre-established contracts. Allows the ordering activity to focus on requirements development rather than the administrative aspects associated with setting up an entirely new contract. Agency-specific contracts can be used to eliminate fees that are typically associated with using GSA or another agency s contract vehicles. These contracts can allow agencies with stretched or a shortage of acquisition staff to leverage the acquisition staff of other organizations. As agencies setup their own vehicles, there is the possibility of duplicate efforts and unnecessary costs in establishing redundant contracts. Costs and Benefits to Industry There are also costs and benefits to contractors when agencies utilize contract vehicles: According to GAO, some vendors stated that the additional cost of being on multiple contracts ranged from $10,000 to $1,000,000 per contract due to increased bid and proposal as well as administrative costs. Therefore, contractors can benefit from an increase in TO contracts which will likely lead to lower prices for Government customers. As agencies continue to consolidate programs, there is a risk that there will be fewer opportunities in which to bid, and small and mid-sized businesses may be left behind. One benefit of holding a prime contract is that the pool of competitors on task order competitions tends to be smaller. 4 Source: OMB, GovWin IQ Source: GovWin IQ Source: GAO, GovWin

5 Top 10 Agencies by Percentage (%) of Spending on TO Contracts in the IT Industry Segment FY 2009-FY 2011 Though IT contract spending is typically highest in defense agencies, civilian agencies had a higher percentage of spending on TO contracts than defense agencies. 5 Source: FPDS, GovWin IQ Source: OMB, GovWin IQ Source: GovWin IQ

6 Top 10 Agencies by Percentage (%) of Spending on TO Contracts in the Professional Services Industry Segment FY 2009-FY Source: FPDS, GovWin IQ Source: GovWin IQ

7 Conclusions As the Federal Government continues to invest its resources in improving communication between agencies on interagency contracting and reducing the duplication of contracts within agencies and agency-to-agency, it is no surprise that task order contract obligations for both the IT and Professional Services industry segments are on the rise. The IT industry segment has received the most attention as the Government tries to identify ways to leverage the combined buying power of multiple agencies to meet the Government s IT requirements. The IT industry segment has seen the most growth in the value and usage of task order contracts followed by the Professional Services industry segment. Over the last several years, agencies have made a concerted effort to streamline and reduce wasteful contracting spending. In doing so, many agencies have consolidated multiple incumbent efforts together to curb spending and in some cases reduce the number of contracts awarded for follow-on procurements. This has been particularly common in the IT and Professional Services segments. Spending obligations indicate that TO contract spending has remained relatively stable over the last five years. Even with budget cuts looming, TO contracts will likely continue to be used not only as a cost savings strategy, but also an effective way to speed up order fulfillment for the customer. While this can result in cost savings for the Government, it can also create some challenges for contractors. Since the consolidation of multiple efforts into a single contract vehicle can reduce the number of contracts, it is crucial to be on a winning team either as the prime or as a subcontractor so that contractors do not miss out on future contract dollars with the agency or agencies. 7