This post was also written by Joelle E.K. Laszlo.

Full and open competition is a bedrock principle in federal contracting, so government initiatives to expand competition, like the interim rule on multiple-award schedule (“MAS”) contracts that took effect this summer, should come as no surprise. But competition breeds a lot of different things, and enhanced competition for orders placed under MAS contracts could have a number of unintended consequences. Schedule contractors will do best to keep their heads about them in this brave new world.

The interim rule, issued on March 16th and effective two months later, applies only to MAS contracts with civilian agencies, including the General Services Administration’s and the Department of Veterans Affairs’ Federal Supply Schedule contracts. (Department of Defense agencies already follow competitive procedures similar to those set forth in the interim rule.) The interim rule amends the MAS ordering procedures in the Federal Acquisition Regulation (“FAR”) to require contracting agencies to take certain steps when placing MAS orders valued above $3,000 (the current micropurchase threshold). For example, for orders valued between the micropurchase threshold and the simplified acquisition threshold (“SAT,” currently $150,000), an agency must request quotes from at least three schedule contractors (or, for orders to be issued with a statement of work (“SOW”), provide the SOW to at least three schedule contractors), and must justify in writing any decision not to solicit its requirement so broadly. For any order above the SAT, an agency must post a request for quotations (“RFQ”) to GSA eBuy, or provide the RFQ to “as many schedule contractors as practicable.” As with orders under the SAT, an agency is only permitted in specified circumstances to limit competition, and must document its reasons for doing so.

The interim rule sets out similar competition requirements for placing orders under existing Blanket Purchase Agreements (“BPAs”), and for establishing new BPAs. In addition, where new BPAs are to be established the interim rule expresses a preference for multiple-award BPAs, and limits such awards to five years in duration. Except in limited circumstances single-award BPAs over $100 million are no longer permitted, and any new single-award BPA may only be awarded for a year (with up to four, one-year options).

The new competition requirements implement Section 863 of the 2009 National Defense Authorization Act, which was promulgated in part to respond to criticism that has continued to build over the insufficiency of competition under MAS contracts. In a September 2009 report on BPAs, the Government Accountability Office (“GAO”) essentially found that the lack of competition in MAS ordering was based on the absence of regulations and procedures requiring it, and the failure by contracting officers to follow existing regulations and procedures. It thus stands to reason that without at least better training of contracting officers, the new competition requirements won’t make the positive difference for which they are designed. At the same time, the increased competition may force schedule contractors into low-bidding wars, especially for BPAs which, with their new durational limits, may end before a contractor is able to break even (let alone make a profit). And with GAO’s recent determination that it has the authority to hear bid protests of task orders of any value (and Congress expected to pass a bill to this end), any order that doesn’t hue closely to the new competition requirements may be up for challenge. These factors together could make the future of MAS contracting a tempestuous one, even for the most seasoned offerors.