The Sole-Source Justification That Survives an Audit

Federal procurement defaults to full and open competition under FAR 6.301. Sole source (or "other than full and open competition") is allowed only when one of seven specific authorities applies under FAR 6.302. Each has its own documentation requirements and approval thresholds. The seven authorities:

Full text: FAR Part 6 (Competition Requirements). State and local procurement codes track the federal pattern with local variations.

The justification and approval document (called a J&A in federal procurement) is the audit trail. The structure adapts directly to private sector sole source justifications. Six sections:

1. Description of the requirement. What is being acquired. Quantity, scope, period of performance. Why the requirement exists. This is the foundation; without a clear description, the justification cannot be evaluated.
2. Authority cited. The specific FAR 6.302 paragraph or state code section being relied on. For each authority, the elements the law requires must be addressed individually.
3. Market research conducted. What sources were reviewed, what vendors were considered, why each alternative was rejected. The market research is the most scrutinised element; weak market research is the most common audit finding on sole source.
4. Estimated value and cost reasonableness. Total acquisition value. The basis for cost reasonableness without competition (independent cost estimate, catalogue pricing, historical benchmark, should cost analysis). For higher value awards, a written cost analysis is typically required.
5. Actions to remove the sole source basis. What steps will be taken to support competition for future procurements (developing alternative sources, releasing proprietary specifications when restrictions expire, breaking the requirement into competitively procurable elements). Auditors look for evidence the buyer is not perpetuating the sole source dependency.
6. Approvals. Signatures at the level of authority required by the procurement policy. Federal awards above defined thresholds require successively senior signatures up to the head of the contracting activity.

Auditors looking at sole source awards apply pattern recognition. Five patterns appear repeatedly in IG and GAO findings:

For the GAO bid-protest database and patterns of successful sole-source challenges, see gao.gov/legal/bid-protests.

When only one vendor can perform but pricing discipline is needed, several substitutes for competition serve the discipline purpose without competing for the work.

• Independent cost estimate. Your team's analysis of what the work should cost based on labour rates, materials, productivity standards, and historical benchmarks. Used as the anchor in price negotiation with the sole source vendor.
• Published catalogue price. Vendor commits that the sole source price is the published catalogue rate available to similarly situated customers (most-favoured-customer pricing equivalent). Demand vendor representation in writing.
• Historical benchmark. What did the same vendor charge for similar work in the past. What did other vendors charge for comparable work in similar procurements. Provides a baseline for negotiation.
• Should-cost analysis. Line-item review with the vendor of what each cost element actually requires. Time, materials, overhead, profit. The work is more intensive than a price negotiation but produces a defensible price.
• Open-book pricing with audit rights. Vendor charges actual cost plus an agreed fee or profit margin, with client audit rights. Used for long-term sole-source relationships where the alternative would be repeated price negotiation.

For the decision before this one, see when to issue an RFP; for the comparison framework, see RFP vs RFI.