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Report: Agencies Often Neglect Basic Market Research When Awarding Contracts

A Government Accountability Office (GAO) report shows that federal agencies routinely issue contracts to firms while neglecting to conduct even the most basic market research.

Federal agencies issuing contracts constitutes a substantial part of the budget, totaling $500 billion dollars every year. But guidelines as to how contracts ought to be issued differ per agency. Standards can vary wildly. To their credit, most agencies did do research for the majority of contracts over the sum of $10 million, but for amounts lower, the rate plummets. Only a quarter of smaller contracts were subject to any market examination, whatsoever.

“Agencies did not take advantage of many available market research techniques on lower dollar value contracts, and as a result may have missed opportunities to promote competition,” the report stated. And even for high-value contracts, the report detailed how basic parts of market research procedure were often absent.

The GAO in part placed the blame on conflicting recommendations for what a satisfactory survey of the market looks like. For instance, the accountability report found that market research for the Federal Aviation Administration (FAA) could be as little as a single telephone call, which is startling when compared to ordinary, private sector practices. The Department of Transportation doesn’t even list what type of information government employees should be on the lookout for in determining which firm to award.

Out of the four agencies surveyed, reviewing prior acquisition history was only a requirement for the Department of Homeland Security (DHS). The DHS further mandates that its employees must document market research. The reason prior acquisition is important is because the GAO cited an example in which the DHS paid 10 times more than they needed to for a firm to develop “business guidelines.”

A 2010 GAO report shed light on some of the pressures government employees face when awarding contracts.

“Several agencies in our review recognized the pressure that program offices place on the contracting process to award new contracts to a specific vendor without competition,” the 2010 report found. “Comfort” was also listed as a reason for why employees neglect looking at prior acquisition history to determine the best deals for the agency.

Moving forward, the GAO recommended that agencies draw up clear requirements for conducting and documenting basic market research, which should at minimum include a methodology, a timeframe, an actual analysis of firms available, and a conclusion.

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