The Pros and Cons of Restricting Competition

Why the Government Might Restrict Competition

In a perfect work the government would only get three responses to each solicitation, enough to keep prices down and quality up, not so many that it slows the buying process
More often the government gets a dozen proposals, slowing everything down

Deciding to restrict competition

In the Acquisition planning phase, the government is making decisions to optimize price, quality, speed, and administrative needs.

How Restricting by Set-Aside Impacts:

• Price: In theory reducing competition should drive prices up, and this is true to a degree. However, there are enough companies with each set-aside to keep competitive pressure high
• Quality:As with price competition should push quality up.  So, setting a contract aside could hurt quality, but as noted there are enough companies with each set-aside to keep quality relatively unaffected.
• Note: Large businesses frequently argue that only a large business can deliver a high quality solution (for example, the contract requires significant capital investments, or a broad range of industry experts that small business are unlikely to have)
• Speed: Setting a contract aside requires a sources sought, which adds time. However, set-aside contracts typically receive fewer proposals. So, on balance speed is largely unaffected.
• Administrative:Congress has set spending targets by set-aside type, so if an agency is struggling to meet their spending in a particular set-aside, then there could be some administrative advantage to setting a contract aside. However, most agencies already exceed their spending targets so the advantage here is generally small.

How restricting by MSA impacts:

• Price: The number of companies on each MSA varies (some have thousands of companies while others have only one). If there is only one company, or very few companies on an MSA, then competition may be hurt driving prices up.
• Quality: When a contract is publicly competed, there is always a risk that an unqualified outsider will offer a crazy price and win; that generally doesn’t happen through an MSA. Before companies are allowed onto an MSA they are vetted, so any purchases through that MSA should only get high quality bids.
• Speed: Speed is one of the big benefits of using an MSA.
  • Because all the companies on the MSA have been vetted, and because there is a relatively small group of companies on the MSA, acquisitions can go quickly.
  • There are limitations on bid protests (a challenge to the terms of the solicitation or contract award) under an MSA, speeding the time to award.
• Administration: The companies on an MSA have had their administrative maturity vetted when they competed to get on the MSA, reducing administrative risks for future purchases.

How restricting to a group/ sole-sourcing impacts:

• Price: When the government restricts competition to a small group or makes a direct award, there is significant price risk.
• Quality: If the government truly believes that only a small group of vendors can meet their needs, then restricting competition to a small group can improve outcome quality.
• Speed: In the short-term, sole-source and restricted competition awards allow the government to contract quickly. However, the government often spends more time across the lifetime of the contract due to the enhanced regulatory scrutiny that reduced competition awards receive.
• Administrative: By hyper-restricting competition, the government can target experienced vendors. However, whenever a J&A is published a parade of companies inevitably send nasty emails saying that they could have done the work, and might write letters to their congressmen which can lead to more administrative risk