EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, DC 20503

MEMORANDUM FOR THE FEDERAL ACQUISITION REGULATIONS COUNCIL

Recent GAO and DOD Inspector General testimony before the Senate Armed Services Committee revealed that some agencies too often fail to make effective use of competition when issuing orders under multiple award task and delivery order contracts. Ed DeSeve, Acting OMB Deputy Director for Management, is very concerned about this trend and raised his concern in the attached memorandum to the President's Management Council.

In particular, the GAO and DOD IG found that some multiple award contracts (MACs) allow customers to designate a preferred source. As Ed DeSeve noted in his memorandum, this practice discourages other contract holders from competing and deprives the government of the benefit of the innovation and efficiency induced by competition. We are requesting expedited action to address this issue. We suggest revising the guidance in FAR 16.505(b)(1) to prohibit agencies from designating a preferred source just as it presently prohibits agencies from allocating orders.

We would like a proposed rule to be published in the Federal Register not later than June 30, 1998. Should you have questions, please call Linda Williams of my staff on 202-395-3302.

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