Federal Advertising Contracts: Agencies Have Discretion in Setting Work
Scope and Requirements (Letter Report, 09/08/2000, GAO/GGD-00-203).

Pursuant to a congressional request, GAO reviewed federal advertising
contracts awarded to advertising firms, focusing on: (1) the discretion
that federal agencies have in determining a contract's scope of work and
the contractor requirements for awarding advertising contracts; (2)
whether contractor requirements in the solicitations for contracts were
consistent with the scope of work described in the solicitations for the
advertising contracts with first-time obligations in fiscal years 1998
and 1999 that were awarded to large advertising firms through full and
open competition; and (3) whether there was required documentation for
the sole-source justification and approval for the advertising contracts
with first-time obligations in fiscal years 1998 and 1999 that were
awarded through sole-source procedures.

GAO noted that: (1) while federal legislation and regulations prescribe
various steps to be taken and factors to be considered in establishing
contract requirements and selecting contractors, agencies have broad
discretion in establishing the scope of work and requirements for
prospective contractors; (2) this discretion may affect which
contractors realistically can bid on a contract and win the award; (3)
for example, if an agency determines that an advertising campaign must
be conducted nationwide to effectively meet the agency's work needs or
mission, then advertising firms without that capability would
effectively be eliminated from competition; (4) acquisition reforms give
contracting officers additional discretion in source selection; (5) for
example, the Clinger-Cohen Act of 1996 gives contracting officers the
authority to eliminate offerors by narrowing the range of offerors
considered to be competitive if a contracting officer deems that there
are too many offerors to evaluate efficiently; (6) in addition,
contracting officers can consider factors beyond price in determining
which offeror presents the best value; (7) legislation and regulations
encourage contracting officers to use this discretion in order to
satisfy agency requirements with regard to cost, quality, and timeliness
of delivered product or service while continuing to conduct business
with integrity, fairness, and openness; (8) the solicitations for the
advertising contracts with first-time obligations in fiscal years 1998
and 1999 that were awarded to large advertising firms through full and
open competition contained general evaluation criteria for prospective
contractors, such as consideration of past performance; (9) in addition,
every solicitation had more specific contractor requirements; (10) these
included such requirements as that the contractor be a full-service
advertising firm or have nationwide capability; (11) these specific
contractor requirements seemed to be consistent with the scope of work
requirements outlined in the solicitations; (12) for the 12 sole-source
contracts that received first-time obligations during fiscal years 1998
or 1999, the justifications were prepared, as required, by the procuring
agencies; and (13) also, all sole-source procurements had the required
approval at the appropriate level within the agencies.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-203
     TITLE:  Federal Advertising Contracts: Agencies Have Discretion in
	     Setting Work Scope and Requirements
      DATE:  09/08/2000
   SUBJECT:  Advertising
	     Solicitation specifications
	     Federal procurement
	     Sole source procurement

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GAO/GGD-00-203

FEDERAL ADVERTISING CONTRACTS

Agencies Have Discretion in Setting Work Scope and Requirements

United States General Accounting Office

GAO Report to Congressional Requesters

September 2000 GAO/ GGD- 00- 203

United States General Accounting Office General Government Division
Washington, D. C. 20548

Page 1 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope and
Requirements

B- 285272 September 8, 2000 The Honorable John D. Dingell Ranking Minority
Member Committee on Commerce House of Representatives

The Honorable Carolyn Cheeks Kilpatrick House of Representatives

The Honorable Robert Menendez House of Representatives

This report responds to your request for a review of federal advertising
contracts awarded to advertising firms. As we reported to you in April 2000,
from fiscal year 1995 through fiscal year 1998, the share of federal
advertising prime contract obligations to small disadvantaged businesses,
which are generally minority– owned businesses, declined from $3
million, or 3.1 percent of total advertising contract obligations, to $1.2
million, or 0.3 percent. 1 This small percentage and the downward trend
triggered your concern that the ability of minority- owned advertising firms
to respond to requests for proposals (solicitations) for advertising
contracts might be restricted by the contractor requirements in the
solicitations. 2 In response to your concern, we agreed to (1) describe the
discretion that federal agencies have in determining a contract's scope of
work and the contractor requirements for awarding advertising contracts, (2)
determine whether contractor requirements in the solicitations for contracts
were consistent with the scope of work described in the solicitations for
the advertising contracts with first- time obligations in fiscal years 1998
and 1999 that were awarded to large advertising firms 3 through full and
open

1 Federal Advertising Contracts: Distribution to Small Disadvantaged
Businesses (GAO/ GGD- 00- 102R, Apr. 17, 2000). 2 Contractor requirements as
used in this report means all of the general and specific capabilities
required of a contractor to accomplish a specified scope of work as set
forth by the procuring agency in the request for proposals for a specific
procurement.

3 The Federal Procurement Data System reporting manual requires that any
business or concern, as defined in the Federal Acquisition Regulation (FAR)
19.001, be classified as large if it does not meet the definitions for a
small business concern or individual. The annual sales threshold for small
advertising agencies is $5 million.

B- 285272 Page 2 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

competition, 4 and (3) determine whether there was required documentation
for the sole- source justification and approval for the advertising
contracts with first- time obligations in fiscal years 1998 and 1999 that
were awarded through sole- source procedures.

While federal legislation and regulations prescribe various steps to be
taken and factors to be considered in establishing contract requirements and
selecting contractors, agencies have broad discretion in establishing the
scope of work and requirements for prospective contractors. This discretion
may affect which contractors realistically can bid on a contract and win the
award. For example, if an agency determines that an advertising campaign
must be conducted nationwide to effectively meet the agency's work needs or
mission, then advertising firms without that capability would effectively be
eliminated from competition. Acquisition reforms give contracting officers
additional discretion in source selection. For example, the Clinger- Cohen
Act of 1996 (P. L. 104- 106) gives contracting officers the authority to
eliminate offerors by narrowing the range of offerors considered to be
competitive if a contracting officer deems that there are too many offerors
to evaluate efficiently. In addition, contracting officers can consider
factors beyond price in determining which offeror presents the best value.
Legislation and regulations encourage contracting officers to use this
discretion in order to satisfy agency requirements with regard to cost,
quality, and timeliness of delivered product or service while continuing to
conduct business with integrity, fairness, and openness.

The solicitations for the advertising contracts with first- time obligations
in fiscal years 1998 and 1999 that were awarded to large advertising firms
through full and open competition contained general evaluation criteria for
prospective contractors, such as consideration of past performance. In
addition, every solicitation had more specific contractor requirements.
These included such requirements as that the contractor be a full- service
advertising firm or have nationwide capability. These specific contractor
requirements seemed to be consistent with the scope of work requirements
outlined in the solicitations.

For the 12 sole- source contracts that received first- time obligations
during fiscal years 1998 or 1999, the justifications were prepared, as
required, by the procuring agencies. Also, all sole- source procurements had
the required approval at the appropriate level within the agencies.

4 Full and open competition is defined by FAR as competitions that permit
all responsible sources to compete. Results In Brief

B- 285272 Page 3 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

The Office of Federal Procurement Policy at the Office of Management and
Budget, the General Services Administration (GSA), and contracting officials
at other agencies from whom we collected data generally agreed with the
information in this report.

Total obligations to federal advertising contracts increased from $139
million in fiscal year 1994 to $548 million in fiscal year 1999. 5 In fiscal
years 1998 and 1999, more than 90 percent of all advertising contract
obligations involved contracts with large advertising firms. These contracts
generally had been awarded to these large firms through full and open
competition. 6

Using the Federal Procurement Data System (FPDS) database, 7 we determined
that 24 advertising contracts received first- time obligations during fiscal
years 1998 or 1999, and received total obligations of about $351 million
during the 2- year period. Table 1 shows the type of solicitation procedures
agencies used to award these advertising contracts and the total amounts
obligated, by solicitation type, for fiscal years 1998 and 1999.

Category Number of contracts Percent FYs 1998 and 1999 obligations ($ 000)
Percent

Full and open competition- large firms a 8 33.3% $204,724 58.3% Full and
open competitionsmall firms 1 4.2 2,537 0.7 8( a) set- asides 3 12.5 270
<0.1 Other than full and open competition b 12 50.0 143,661 40.9

Total c 24 100% $351,192 100%

a Full and open competition is defined by FAR as competitions that permit
all responsible sources to compete. b This is the category used for sole-
source contracts. Sole- source acquisition as defined by FAR is a contract
for the purchase of supplies or services that is entered into by an agency
after soliciting and negotiating with only one source. c There were an
additional 56 contracts for advertising purposes awarded through either
purchase orders or blanket purchase agreements. FPDS does not

provide any information on the nature of competition for these contracts.
Obligations under these contracts totaled about $3. 2 million over the 2
fiscal years.

Source: GAO analysis of FPDS- and agency- provided data.

5 Federal Advertising Contracts: Distribution to Small Disadvantaged
Businesses (GAO/ GGD- 00- 102R, Apr. 17, 2000) provides detailed trend
information on obligations for fiscal years 1994- 1998. 6 Information on the
amount of advertising obligations going to large firms holding contracts
awarded through full and open competition was not readily available for
periods prior to fiscal year 1998. 7 FPDS tracks federal contracting costs
based on contract actions that affect obligations of funds for contracts.
The Federal Procurement Data Center manages FPDS. A center program analyst
advised us to use the year that contracts received obligations for the first
time to determine when a contract became active. Background

Table 1: Solicitations for Advertising Contracts With First- Time
Obligations in Fiscal Year 1998 or Fiscal Year 1999

B- 285272 Page 4 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

While federal legislation and regulations prescribe various steps that
agencies must take and factors that must be considered in complying with the
federal procurement process, legislation and regulations give the agencies
broad discretion in establishing the scope of work and requirements for
prospective contractors. This discretion is designed to give agencies the
flexibility to use their best business judgment in contract development and
award while continuing to conduct business with integrity, fairness, and
openness.

The agency first identifies a need to support its mission. Once the agency
determines, through market research, that contracting out is the best
alternative to provide for the need, it is to develop requirements to be
contained in the contract's scope of work. Market research should be
conducted to help ensure that legitimate needs are identified and tradeoffs
evaluated to acquire items to meet those needs. The contracting officer is
to select the type of contract that best meets the need of the acquisition.
Contracting officers are required to promote and provide for full and open
competition in soliciting offers and awarding government contracts. However,
FAR allows contracting officers to exclude some sources in order to meet
legal requirements, such as set- asides for small businesses. In addition,
the contracting officer can award sole- source contracts under certain
conditions, such as unusual and compelling urgency.

For full and open competitions, the solicitations are to be publicized. The
solicitations are to contain the scope of work to be performed and the
evaluation criteria, or factors, for assessing bids and contractor
qualifications. The contracting officer is to establish an evaluation team
to evaluate offerors' proposals responding to the solicitation and to rate
the proposals' strengths, deficiencies, significant weaknesses, and risks
relative to factors specified in the solicitation.

Throughout the process, the agency and contracting officer have discretion
that may affect which offerors realistically can bid on a contract and win
the award. For example, scope of work requirements determined from the start
of the process establish how an advertising campaign is to be run and the
type of services that are required. This may have a great deal of influence
over the kind of advertising firm the agency decides is required to conduct
such a campaign. If the agency determines, for instance, that an advertising
campaign must be conducted nationwide to meet the agency's needs or mission,
then advertising firms without that capability may effectively be eliminated
from competition. By the same token, an advertising campaign that has a
specific target location or Agencies Have

Discretion in Establishing Criteria

B- 285272 Page 5 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

requires a specific type of service may be best suited for firms that
specialize in that area or service.

Moreover, acquisition reforms have given contracting officers additional
discretion in source selection. For example, the Clinger- Cohen Act of 1996
gives contracting officers the authority to eliminate offerors from
consideration if the contracting officer determines that the number of
offerors that would otherwise be considered are too many to evaluate
efficiently. The contracting officer may limit the number of offerors
considered to be competitive to the greatest number that will permit an
efficient competition among the offerors rated most highly.

In addition, contracting officers can evaluate contractors by determining
best value, a concept which includes factors other than price. Legislation
and regulations encourage contracting officers to use this discretion in
order to satisfy the customer's needs with regard to cost, quality, and
timeliness of delivered product or service while continuing to conduct
business with integrity, fairness, and openness.

When contractors believe that agencies have not conducted contract
solicitation or award appropriately, there are several forums to hear and
decide protests involving the interpretation and application of federal
laws, rules, and regulations that apply to contracts. We are one of these
forums in that we decide protests and may prepare recommendations for
consideration by the agency. These decisions on protests often function as
precedents for interpreting statutes and other legal requirements.

Our analysis of solicitations for advertising contracts with first- time
obligations in fiscal years 1998 and 1999 indicated that there were specific
contractor requirements that could limit the type of contractors to be
considered in the eight solicitations for contracts awarded to large
contractors through full and open competition. These requirements, however,
seemed consistent with the scope of work described in the solicitations.

FPDS data showed that in fiscal years 1998 and 1999 first- time obligations
went to seven large firms that had been awarded eight advertising contracts
through full and open competition. During the 2- year period, a total of
about $205 million in obligations went to these seven firms. Table 2
provides details concerning these eight contracts. Contractor

Requirements for Advertising Contracts Competitively Awarded Seemed
Consistent With Scope of Work Requirements

B- 285272 Page 6 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

Funds obligated ($ 000) Agency

Advertising firm contractors 1998 1999 Total

Health and Human Services 1 Ogilvy, Inc. $128,846 $128,846 Department of the
Navy BBDO Worldwide, Inc. $19,273 40,416 59,689

Food and Drug Administration Arnold Communications,

Inc. 10,494 10,494 Federal Bureau of Investigation

Miller Advertising Agency, Inc. 2,000 2,000 4,000

Internal Revenue Service Hodes, Bernard

Advertising, Inc. 775 775 Health Care Financing Administration

Transportation Display, Inc. 446 446

Nuclear Regulatory Commission Hodes, Bernard

Advertising, Inc. 300 46 346 Peace Corps Periscope, Inc. 122 6 128

Total $32,189 $172,535 $204,724

1 Health and Human Services awarded this contract on the behalf of the
Office of National Drug Control Policy. Source: GAO analysis of FPDS- and
agency- provided data.

Generally, evaluation factors specified in the solicitations for these
contracts included factors relating to past performance, technical merit,
personnel capabilities, and price. However, each of the solicitations
contained more detailed specifications in the scope of work and contractor
requirement sections. The scopes of work laid out the types of advertising
campaigns envisioned by the agency. Scopes of work for these eight contracts
often described the use of multiple services, such as marketing, consulting,
and creative development, as well as the use of nationwide campaigns.
Consistent with these scopes of work, the most frequent contractor
requirements for these solicitations included the need for (1) a full-
service contractor, (2) a contractor with experienced personnel and relevant
work experiences, and (3) a contractor with nationwide service delivery
capability.

Table 3 shows our summarization of contract purpose and the detailed
contractor requirements we found in the solicitations for each of the eight
contracts.

Table 2: Contracts Awarded to Large Firms Through Full and Open Competition
With First Time Obligations in Fiscal Years 1998 and 1999

B- 285272 Page 7 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

Agency Contract purpose Fullservice

contractor Contractor work

force capability National capability for

target audiences Specific location

Health and Human Services 1 Youth Anti- Drug Media

Campaign ï¿½ ï¿½ ï¿½

Department of the Navy Recruiting ï¿½ ï¿½ ï¿½

Food and Drug Administration Tobacco Retailer Compliance

Outreach Campaign ï¿½

Federal Bureau of Investigation

Seized/ Forfeiture Property Program Campaign ï¿½

Internal Revenue Service Recruiting ï¿½ ï¿½ ï¿½

Health Care Financing Administration

Children's Health Insurance and Flu Programs Campaign ï¿½

Nuclear Regulatory Commission Recruiting ï¿½ ï¿½ ï¿½

Peace Corps Recruiting ï¿½ ï¿½

1 Health and Human Services awarded this contract on the behalf of the
Office of National Drug Control Policy. Source: GAO analysis of agency-
provided data.

A requirement for a full service contractor that could perform multiple
services was part of five of the solicitations– the four recruiting
solicitations and the Youth Anti- Drug Media Campaign solicitation. While
the precise services for each contract varied, the detailed requirements
were clearly stated in each solicitation. For example, the Internal Revenue
Service solicitation for recruiting services specified that contract
services included, but were not limited to, (1) marketing, consulting, and
strategic development as necessary to develop, implement, and maintain an
effective recruitment plan; (2) creative development, including writing
copy, art work, graphics, and, other creative work; (3) placing advertising
in periodicals, newspapers, radio, television, or other advertising media;
and (4) ongoing project management. The requirement for full service
contractors in these five solicitations seemed to be consistent with their
scope of work requirements.

In addition, these same five solicitations had contractor requirements aimed
at the capability of the contractor or its personnel. These provisions
typically provided that prospective contractors should have experience
performing the type of work specified in the solicitations. Sometimes, the
contractor requirements were quite specific. For example, in the Navy
solicitation, the contractor requirement specified that in assessing whether

Table 3: Bidder Requirements Included in Solicitations

B- 285272 Page 8 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

the potential contractor had sufficient capability and experience to handle
an account of the size and complexity envisioned, the agency would review
the number of contracts a contractor had been awarded that were over $1
million, $5 million, and $20 million. The potential contractors for the Navy
contract were also required to list gross billings, although there were no
required minimums. The Health and Human Services solicitation provided that,
in assessing corporate stability, the agency would review the number of
years in business and size of the contractors' accounts, but again there
were no stated minimums. 8 The same solicitation said that the agency would
evaluate past experience on two “relevant advertising
campaigns.” The Peace Corps solicitation required submission of
information about two advertising campaigns within the past 2 years
“within the $60,000 to $100,000 price range.” These requirements
seemed consistent with the scopes of work because they required that
contractors demonstrate that they had performed work similar to that
required in the contract.

Requirements concerning specific capabilities that key personnel must have
included the Health and Human Services solicitation that required that the
project manager must have demonstrated experience in managing national,
behavior- change- oriented, integrated communication contracts. The
solicitation provided detailed information on the various management
experiences that the project manager must possess. The Navy solicitation, by
contrast, required key personnel to have a relevant B. A. degree, 2 years
general work experience, and 2 years working on multifaceted advertising
campaigns. The Nuclear Regulatory Commission solicitation required that the
contractor personnel assigned to this contract have demonstrated experience
in recruitment advertising, with specialized experience in high technology
and nuclear- related fields. These requirements seemed consistent with the
contracts' scopes of work because their object was to have the contractors
show that they had personnel who had the experience or expertise to perform
the specific requirements of the contracts.

Five of the solicitations had scopes of work that outlined the use of
nationwide advertising campaigns. Consistent with that requirement, the
solicitations required that a contractor have the nationwide capability to

8 According to a Department of Army official, the Army required that
advertising agencies must have had $350 million in annual billings to
compete for an advertising contract that was awarded in fiscal year 2000.
Firms below this threshold could partner with larger advertising firms to
compete. The contract was awarded to Leo Burnett Worldwide in Chicago and
two minority- owned subcontractors. We did not include this contract in our
examination because it was outside the time period of our review.

B- 285272 Page 9 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

reach defined target audiences. The Youth Anti- Drug Media Campaign
solicitation, for example, required a nationwide focus on youths, parents
and other primary caregivers, and other youth- influential adults. To ensure
effective communication with youths and adults, as well as with minority
racial and ethnic groups, the solicitation required that at least one
minority communication specialist be on staff to take into account the
suitability of different media for different audiences. In addition, the
Navy solicitation for recruiting required that a contractor have the
nationwide capability to conduct an advertising effort targeted to a diverse
audience that included minorities and women.

Two solicitations were scoped for target audiences in designated cities.
Specifically, the Internal Revenue Service solicitation was for advertising
of seasonal positions in the Atlanta, Cincinnati, and Memphis Service
Centers and their satellite offices. The Health Care Financing
Administration's solicitation also required advertising services in several
specific cities. These solicitations required that contractors have the
ability to conduct advertising campaigns in those locations.

For the 12 sole- source contracts that received first time obligations
during fiscal years 1998 or 1999, the justifications were prepared, as
required, by the procuring agencies. Also, as required, all sole- source
procurements had been approved at the appropriate level within the agencies.

As shown in table 4, a total of about $144 million was obligated during
fiscal years 1998 and 1999 to 12 sole- source contracts that received
firsttime obligations during those fiscal years.

Funds obligated ($ 000) Agency Contractor Contract purpose 1998 1999 Total

Health and Human Services a Bates Advertising USA, Inc. b Youth Anti- Drug
Media Campaign $119,848 $19,900 $139,748 Health and Human Services a The
Advertising Council, Inc. c, d Youth Anti- Drug Media Campaign 1,398 1,398
Department of the Army The Advertising Council, Inc. b Promote Employer
Support of Guard

and Reserve 818 818

Department of the Army The Advertising Council, Inc. b Get- Out- The- Vote
Campaign 650 650 Education The Advertising Council, Inc. b National
Education Excellence

Partnership 168 150 318

State Department Japan Association of Travel Agents e Travel Trade Show 230
230

Sole- Source Contracts Had Necessary Documentation for Justification and
Approvals

Table 4: Sole- Source Contracts With First- Time Obligations In Fiscal Year
1998 or Fiscal Year 1999

B- 285272 Page 10 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

Funds obligated ($ 000) Agency Contractor Contract purpose 1998 1999 Total

Internal Revenue Service Cox Enterprise, Inc. b Recruiting 196 196 Housing
and Urban Development Nashville Tennessean Banner b Sale of HUD- Acquired
Properties 100 100 Veterans Affairs The Hearst Corporation b Recruiting 52
48 100 Smithsonian The Yellow Book b Phone Book Advertisement 26 26 Office
of Personnel Management

College Placement Council, Inc. f Government Employment Awareness

44 44 Housing and Urban Development

The Real Estate Couriere g Sale of HUD- Acquired Properties 35 35

Total $120,203 $23,460 $143,663

a Health and Human Services awarded this contract on the behalf of the
Office of National Drug Control Policy. b Large Business. c Other Nonprofit
Organization. d The scope of work to be performed by The Advertising
Council, Inc., required it to perform the public service announcement
functions for the Youth AntiDrug Media Campaign. The scope of work for the
Bates Advertising contract required it to perform the commercial advertising
portion of the campaign. e Foreign Contractor.

f Nonprofit Educational Organization. g Other Small Business.

Source: GAO analysis of FPDS and agency provided data.

Two different reasons were cited by the agencies as justifications for
awarding these 12 contracts as sole- source procurements. Eleven of the
contracts were justified on the basis that there was only one responsible
source. 9 The remaining contract was awarded by Health and Human Services
and justified as needed because of what the agency considered an unusual and
compelling urgency.

FAR requires that contracting officers justify the use of sole- source
procurements in writing, certify the accuracy and completeness of the
justification, and obtain approval of the procurement from designated agency
officials. 10 Depending on the award amount of the contract, solesource
justifications must be approved by different officials within an agency.
Table 5 shows the different approval categories required by FAR.

9 Responsible source means a prospective contractor that meets the standards
set forth for contractors in subpart 9. 104 of FAR. This includes such
standards as whether the prospective contractor has the financial resources
to perform and has a satisfactory performance record.

10 FAR subparts 6.303 and 6.304.

B- 285272 Page 11 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

Approving authority Award amount of contract

Senior procurement executive of agency Over $50,000,000 Head of the
procuring activity Over $10,000,000 up to $50,000,000 Competition advocate
for procuring activity Over $500,000 up to $10,000,000 Contracting officer,
unless agency directs otherwise $500,000 or less

Source: GAO analysis of FAR.

For sole- source contracts over $50 million, the senior procurement
executive of an agency is required to approve in writing the justification
for awarding a sole- source contract. The Health and Human Service's Youth
Anti- Drug Media Campaign contract which totaled almost $140 million, was
the only contract in this category. The sole- source contract was awarded to
Bates Advertising USA, Inc., as a follow- on contract to a prior contract
that Bates had been awarded through full and open competition. The follow-
on sole- source contract was awarded based on what the agency concluded was
an unusual and compelling urgency to keep the anti- drug campaign active
while the agency developed a solicitation for a subsequent contract that
would be awarded through full and open competition. Also, the justification
document noted that having the sole- source contract in place would save $20
to $30 million through the purchase of fall television time during the
summer when costs were lower. The sole- source contract justification was
approved by the Health and Human Services Assistant Secretary for Management
and Budget as required.

When a sole- source procurement is over $500, 000 but does not exceed $10
million, the competition advocate for the procuring agency must approve the
justification for a sole- source contract in writing. Three of the 12
solesource contracts were in this cost range. They were all awarded to The
Advertising Council, Inc., based on the firm's unique qualifications and
position in the advertisement sector. This firm is a not- for- profit
organization founded and supported by the American business, media, and
advertising sectors that conducts a variety of public service advertising
campaigns. The organization secures volunteer creative talent from a wide
range of advertising agencies and associations and facilitates the
furtherance of a number of timely national causes. For those federal
agencies it chooses to represent, The Advertising Council, Inc., offers free
advertising placement, among other free or low cost services. Because of the
firm's ability to access high quality advertising services for free or at
low cost and its experience with public service campaigns, the agencies

Table 5: Sole- Source Contract Justification Approval Categories

B- 285272 Page 12 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

considered the firm the only responsible source and noted that the firm is
in a “unique” position to satisfy the government's requirements.
In all three cases, justification for sole- source procurement was approved
as required.

Sole- source procurements of $500,000 or less are required to be justified
and approved by contracting officers unless agency procedures require
otherwise. Eight of the 12 sole- source contracts were within this cost
range. Four of these contracts were with large advertising firms, and the
other four were with foreign, non- profit, or other small firms. We obtained
and reviewed letters of justification and approval for seven of the eight
contracts that required such documentation. All seven justification and
approvals were authorized and signed by the contracting officer or a higher
approving official. The justification and approvals stated that the sole-
source contractor was the only responsible source available to perform the
statement of work.

No justification and approval documents were required for the eighth
contract. The Office of Personnel Management awarded this contract under
simplified acquisition procedures to a nonprofit educational organization
for a total of $44,300. In this case, the simplified acquisition procedures
permitted the contracting officer to award a sole- source contract if the
contracting officer determined that only one source was reasonably
available. In such cases, justification and approval documentation is not
required.

We provided a draft of this report to the Acting Deputy Administrator of the
Office of Federal Procurement Policy at the Office of Management and Budget,
and to the Administrator of GSA, for their review and comment. On August 31,
2000, we received oral comments from the Associate Administrator for
Procurement, Law, Legislation, and Innovation, Office of Federal Procurement
Policy, and from the Chief, Customer Liaison Branch, of GSA's Federal
Procurement Data Center. Both officials stated that they generally concurred
with the information included in the draft report. We also obtained comments
from agency contracting officials regarding our reporting of the
solicitation and contracting data that they provided. Responding officials
generally concurred with our presentation of the information they had
provided. Several officials provided clarifying technical information that
we have included as appropriate.

To describe the extent that federal agencies have discretion in determining
the scope of work and contractor requirements in their advertising contract
solicitations, we reviewed pertinent legislation and regulations. Agency
Comments

Scope and Methodology

B- 285272 Page 13 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

To determine the consistency of contractor requirements with the scope of
work as defined by the federal agencies, we obtained and reviewed
solicitation packages for eight advertising contracts awarded to large firms
that received their first contract obligations during fiscal years 1998 and
1999 as recorded in the FPDS database. This review included comparisons such
as whether a requirement for a contractor with national capabilities was
consistent with the scope of work describing the geographical locations
where the contractor would be required to provide services during the
contract. In performing the comparison, three individuals independently
reviewed the scope of work and the specific contractor requirements to
determine if the requirements seemed consistent with the scope of work.

To determine whether justifications and approvals of sole- source
advertising contracts were properly documented, we obtained and reviewed
justifications and approvals on file for all sole- source contracts recorded
in the FPDS database as receiving their first contract obligations in fiscal
year 1998 or fiscal year 1999. We compared the documented justification and
approval with requirements outlined in FAR regarding when these were needed
and who must approve them.

We did not validate the work needs included in the solicitations that we
examined, nor did we try to determine the impact of the work needs on
prospective contractors' willingness to respond to the solicitations. Also,
we did not validate the sole- source justifications. Moreover, we did not
verify the FPDS data provided to us by officials at the Federal Procurement
Data Center. However, we did compare the FPDS data with the specific type of
solicitation indicated in agency documentation. When we found errors in FPDS
regarding the solicitation type used, we reclassified the contracts
accordingly.

We conducted our work from March 2000 to August 2000 in accordance with
generally accepted government auditing standards.

We are sending copies of this report to Representative Tom Bliley, Chairman,
House Committee on Commerce; Senator John McCain, Chairman, and Senator
Ernest Hollings, Ranking Minority Member, Senate Committee on Commerce,
Science and Transportation; Senator Christopher Bond, Chairman, and Senator
John Kerry, Ranking Minority Member, Senate Committee on Small Business; and
Representative Jim Talent, Chairman, and Representative Nydia Velazquez,
Ranking Minority Member, House Committee on Small Business. We are also
sending copies of this report to the Honorable Adia Alvarez, Small Business

B- 285272 Page 14 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope
and Requirements

Administration, and other interested parties. Copies will also be made
available to others on request.

If you have any questions regarding this report, please call me at (202)
512- 8387, or Hilary Sullivan at (214) 777- 5600. Other contributors are
acknowledged in appendix I.

JayEtta Z. Hecker Associate Director, Government

Business Operations Issues

Page 15 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope and
Requirements

Page 16 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope and
Requirements

Contents 1 Letter 18 Appendix GAO Contacts and Staff Acknowledgments

Table 1: Solicitations for Advertising Contracts With First- Time
Obligations in Fiscal Year 1998 or Fiscal Year 1999

3 Table 2: Contracts Awarded to Large Firms Through Full

and Open Competition With First Time Obligations in Fiscal Years 1998 and
1999

6 Table 3: Bidder Requirements Included in Solicitations 7 Table 4: Sole-
Source Contracts With First- Time

Obligations In Fiscal Year 1998 or Fiscal Year 1999 9

Table 5: Sole- Source Contract Justification Approval Categories

11 Tables

Abbreviations

FAR Federal Acquisition Regulation FPDS Federal Procurement Data Service GSA
General Services Administration

Page 17 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope and
Requirements

Appendix GAO Contacts and Staff Acknowledgments

Page 18 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope and
Requirements

JayEtta Z. Hecker (202) 512- 8984 Hilary Sullivan (214) 777- 5652 In
addition to those named above, Thomas E. Baril, Jr., William R. Chatlos,
Victor B. Goddard, Billy W. Scott, and William T. Woods made key
contributions to this report. GAO Contacts

Acknowledgments

Page 19 GAO/ GGD- 00- 203 Federal Advertising Contracts Work Scope and
Requirements

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