Acquisition Reform

The Defense Department (DOD) contracted with the management consulting firm of Coopers and Lybrand to study the impact of the military's acquisition regulations and oversight requirements on its contracts. Coopers and Lybrand's 1994 report cited more than 120 regulatory and statutory "cost drivers" that increased the prices that DOD paid for goods and services by 18 percent. In response, DOD established a working group to address the issue of cost drivers. The working group is tracking many reforms initiated by DOD to reduce the cost of managing and overseeing DOD contracts. Although DOD expects substantial savings from these reforms, the actual savings may be significantly less than the 18-percent cost premium noted by Coopers and Lybrand. In December 1995, contractors participating in DOD's Reducing Oversight Costs Reinvention Laboratory noted that current measures would yield savings of only about one percent. DOD said that the one-percent cost savings was based on "work in progress" and that it would be inappropriate to use these results to draw conclusions about DOD's ability to reduce the cost premium. DOD fully expects the savings from laboratory activities to exceed the level reported in December 1995.

GAO found that: (1) in response to the Coopers and Lybrand study, DOD established the Regulatory Cost Premium Working Group to coordinate DOD-wide efforts to address the cost drivers; (2) the working group is tracking many reforms initiated by DOD to reduce the cost of managing and overseeing DOD's contracts; (3) although DOD expects substantial savings from reforming its management and oversight requirements, the savings resulting from current DOD initiatives may be significantly less than the 18-percent cost premium identified by Coopers and Lybrand; (4) as of December 31, 1995, contractors seeking to address the cost drivers through DOD's Reducing Oversight Costs Reinvention Laboratory had identified actions that would achieve targeted savings totaling only about 1 percent; (5) DOD stated that the 1-percent cost savings reported by the reinvention laboratory is based on "work-in-progress" results and that it would be inappropriate to use these results to draw conclusions about DOD's ability to reduce the cost premium; and (6) DOD fully expects the savings from laboratory activities to exceed the level reported in December 1995.