Factors Influencing DOD Decisions To Convert Activities From In-House to Contractor Performance

GAO reviewed the Department of Defense's (DOD) implementation of Office of Management and Budget (OMB) Circular A-76 to find out how much contracting out is taking place because of: (1) personnel ceilings; (2) wage differentials between Federal blue-collar and contractor employees; and (3) other significant influences.

GAO found that: (1) the most significant influence on decisions to contract out was a cost comparison showing lower costs for contractor performance; (2) estimated cost savings were generally attributable to the contractors' plans to use fewer employees and to pay lower wages; (3) the military services recognize that the Commercial and Industrial-Type Activities program is a valuable means of reducing their civilian personnel work force; (4) there was no evidence that the desire to circumvent personnel ceilings led to contracting-out decisions; (5) the Army disregarded serious shortcomings in the contractor's proposal in making its cost comparison; (6) required reviews were not made in 5 of the 12 cases to ensure that the in-house cost estimates were based on the most efficient and cost effective organization and staffing; (7) in one case, an incomplete statement of work in a solicitation for bids significantly overstated the estimated cost comparison savings from contracting out; (8) in one case, the contract price was understated because the most current Service Contract Act wage rates were not used; and (9) six of the 12 cost comparisons included contract administration cost estimates which were lower than the actual costs that could be expected.

Recommendations

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