WASHINGTON—A 1984 law to encourage competition among defense contractors has forced federal agencies to become aware of the importance of evaluating all possible bidders for contracts, but also has slowed the procurement process and angered many industry officials.

The Competition in Contracting Act was an attempt by Congress to end "sweetheart" deals between the Pentagon and individual defense contractors. Its requirement that agencies seek bids from a range of contractors has led some agencies to give out fewer, but larger, awards. Although research, including money to university-based contractors, forms only, a small portion of the Defense Department's $300 billion annual budget, it is expected to amount to $10 billion in the coming fiscal year—$3 billion for basic technology and $7 billion for advanced technology and development.

Some industry officials believe the cure has been worse than the disease. Two federal agencies, in fact, are experimenting with procedures to streamline a...

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