Brian S. Gocial, Sara N. Gerber, and Tjasse L. Fritz
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As the federal government prepares to roll out infrastructure grants and contracts in amounts not seen since the New Deal and the defense industrial base (“DIB”) gears up to support billions in new spending to support Ukraine, a new Department of Defense (“DoD”) report raises serious concerns about the state of competition within the DIB. The report recently released by the Office of the Under Secretary of Defense for Acquisition and Sustainment analyzes the state of competition within the DIB and concluded that it can be summarized in one word: poor. The report discusses the causes for the lack of competition and makes recommendations for improving the solicitation process to increase competition, inspire innovation, reduce prices, and improve quality.
Consolidation
Foremost among the causes for the lack of competition identified by the report is consolidation of the DIB. Of 51 aerospace and defense prime contractors in the 1990s only five exist today. Although the report failed to find significant correlation between this consolidation and increased pricing, the consolidation raises additional concerns for DoD, such as national security, mission risk, and strategic technology innovation. The report notes that “having only a single source or a small number of sources for a defense need can pose mission risk and, particularly in cases where the existing dominant supplier or suppliers are influenced by an adversary nation, pose significant national security risks.” The report recommends that when a merger is likely to harm one of these interests, DoD work closely with the Federal Trade Commission and Department of Justice to take structural or behavioral measures deemed necessary, up to and including blocking the merger.
Continue reading “Report on the State of Competition within the Defense Industrial Base”
Although firms that offer coronavirus COVID-19 solutions can use many routes to access the federal marketplace, very few of these routes can lead to a sole source contract. One such vehicle is the unsolicited proposal. An unsolicited proposal can result in a sole source contract if the firm’s proposed solution is unique enough to support a Contracting Officer’s sole source Justification and Approval. Recent case law has established that the government has a legal obligation to fairly evaluate unsolicited proposals, so in effect, submission of an unsolicited proposal creates an implied contract with the government that obligates the government to evaluate the firm’s proposal fairly (but not necessarily to award a contract to the firm). Scott v. U.S., No. 17-471C, 2017 WL 4785353 (Fed. Cl. Oct. 24, 2017).