A new study shows federal agency spending through non-schedule multiple-award contracts (MACs) has more than doubled in five years, adding to the ongoing debate on whether there ought to be brakes on the trend.

Non-schedule MACs are contracts in which vendors compete for a position on the vehicle, and then the winning vendors compete again for task orders, with no guarantee of revenues.

While the government claims savings and efficiency gains by using MACs, vendors complain that the proliferation of MACs makes it more costly to win work.

“It is a tough spot for vendors, because you are chasing a bunch of programs,” said Tom Sisti, chief legislative counsel at SAP, said at a recent Coalition for Government Procurement event. “And if you win a MAC, what do you win?”

A small business contractor for Veterans Affairs who asked not to be named was even more blunt: “MACs are killing us.”

“For small companies with limited bid and proposal dollars, it’s life or death whether you get on a (MAC) vehicle. If your customer decides to use that vehicle—and you did not bid—you are out,” said David Drabkin, director of acquisition policy for Northrop Grumman Corp..

Agencies spent $83.2 billion on non-schedule MACs in fiscal 2011, up from $40.9 billion in fiscal 2006, according to a recent study by Bloomberg Government.

The small business share of that MAC spending more than doubled during that time, from $7.4 billion to $19.7 billion, Bloomberg Government reported.

About $77 billion of the total was on single-agency MACs, while $6 billion went for government-wide MACs.

Meanwhile, revenues from GSA schedules increased from $35.3 billion in 2006 to $38.6 billion in 2011, while VA schedule sales rose from $8.2 billion to $10.3 billion during the same period.

Agencies award MACs to several companies, which may be limited to small firms. Agencies believe the pre-selection allows them to fill orders more quickly and also drives down costs.

Industry executives say MACs increase costs because they have to prepare applications for a spot on the MACs, and also for each task order.

The White House Office of Federal Procurement Policy initiated a new review process last year, in which agencies submit a business case for new MACs. The reviews applied only to MACs with expected revenues of at least $250 million this year, but next year the threshold will be $100 million, and the year after, $50 million.

The new reviews had not led to any MACs being rejected yet, as of June, said Brian Friel, Bloomberg Government analyst and author of the MAC report.

Congress has promoted MACs to save money. Under federal law (FAR 8.405-3), contracts worth $103 million or more must be awarded as MACs unless the head of an agency waives the requirement.

More MACs continued to be created this year, and more are pending. The new contracts included night vision equipment at the Army, unmanned aerial vehicle services at the Navy, radio equipment at DHS and solar power equipment at the Marine Corps.

Along with MACs, some agencies are creating mega-MACs, Friel said.

Friel cites the Navy’s Seaport-e set up in 2004. The Marine Corps is allowing its central professional services contract to expire, and will place orders through Seaport-e instead, Friel said. Also, the Army is consolidating five logistics MACs into a mega-contract called Enhanced Army Global Logistics Enterprise, worth up to $23.5 billion over five years, he said.

Continued consolidation at agencies will result in fewer, larger MACs, Friel said.

The administration could encourage agencies to use some MACs over others to reduce duplication, Friel said. For example, the GSA, NASA, National Institutes of Health and the Army each run a MAC for technology products.

Dana Pinkava, senior analyst with GovWin, said in a recent report that vendors’ costs of being on MACs ranged from $10,000 to $1,000,000 per contract due to increased bid, proposal and administrative costs.

As agencies continue to create MACs, there is a risk of fewer opportunities in which to bid, and small and mid-sized businesses may be left behind, Pinkava said.

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Major MAC recompetes
Air Force: NETCENTS-2
Army: ARMY EAGLE, ITES 3H, GTACS
Defense Dept.: CNTPO
Homeland Security: EAGLE II, FIRSTSOURCE II, TSA III
NASA: SEWP V
National Institutes of Health: CIO-NEW
Office of Personnel Management: CHRS

New MAC vehicles
Army: D3I TESLA, TACOM S3
Homeland Security: TABSS
Justice: MEGA III
Navy (SPAWAR): PILLAR

Source: Bloomberg Government
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