Contract Management
DLA Properly Implemented Best Value Contracting for Clothing and Textiles and Views the Supplier Base as Uncertain Gao ID: GAO-03-440 February 28, 2003The Defense Logistics Agency (DLA) supplies the nation's military services and certain civilian agencies with critical resources needed to accomplish their worldwide missions. During fiscal year 2001, DLA contracts totaled $14.8 billion--$1.2 billion of which was for clothing and textiles. The House Committee on Armed Services directed GAO to determine whether DLA is properly implementing applicable statutory and regulatory guidance for "best value" purchases--those that in the federal government's view provide the greatest overall benefits, not just the lowest price. GAO was also asked to obtain DLA officials' views on the domestic supplier base for key clothing and textile items.
Based on a random sample of clothing and textile procurements conducted in fiscal year 2001 by DLA's Defense Supply Center Philadelphia (DSCP), GAO estimates that DSCP generally complied with statutory and regulatory requirements for best value contracting. For example, all of the procurements in GAO's sample considered past performance as an evaluation factor in the source selection process. While GAO noted some discrepancies in several of these procurements, mitigating circumstances lessened the impact of the discrepancies in most cases. DSCP has employed several techniques to promote compliance with best value contracting procedures. For example, in 1996, DSCP published Guiding Principles for Best Value Source Selection, a handbook that outlines the functions and responsibilities of key personnel in the best value source selection process, as well as various approaches to source selection. According to DLA officials at DSCP, the ability of the domestic clothing and textile supplier base to meet future military requirements is uncertain. The officials said that, at present, DLA's domestic supplier base for clothing and textiles is more robust than ever, as numerous domestic suppliers who did not traditionally do business with DSCP are now competing for its contracts. However, they characterized this increased competition as the "last gasp of a dying industry." Domestic clothing and textile suppliers are competing for DSCP's business as the industry copes with a decline in employment and production and as the supplier base increasingly moves overseas. DSCP officials fear that as the clothing and textile industry faces increased imports, second- and third-tier suppliers that provide input to domestic producers of end items may go out of business, thus eroding the domestic supplier base for these items. They stated, however, that the "Berry Amendment," which requires DOD to purchase certain items such as food, clothing, and textiles from domestic sources, is helping to maintain the domestic supplier base at present.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-03-440, Contract Management: DLA Properly Implemented Best Value Contracting for Clothing and Textiles and Views the Supplier Base as Uncertain
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Report to the Chairman and Ranking Minority Member, Committee on Armed
Services, House of Representatives:
United States General Accounting Office:
GAO:
February 2003:
Contract Management:
DLA Properly Implemented Best Value Contracting for Clothing and Textiles and Views the Supplier Base as Uncertain:
GAO-03-440:
Highlights:
Highlights of GAO-03-440, a report to the Chairman and Ranking
Minority Member, Committee on Armed Services, House of Representatives.
Why GAO Did This Study:
The Defense Logistics Agency (DLA) supplies the nation‘s military
services and certain civilian agencies with critical resources needed
to accomplish their worldwide missions. During fiscal year 2001, DLA
contracts totaled $14.8 billion”$1.2 billion of which was for clothing
and textiles. The House Committee on Armed Services directed GAO to
determine whether DLA is properly implementing applicable statutory
and regulatory guidance for ’best value“ purchases”those that in the
federal government‘s view provide the greatest overall benefits, not
just the lowest price. GAO was also asked to obtain DLA officials‘
views on the domestic supplier base for key clothing and textile items.
What GAO Found:
Based on a random sample of clothing and textile procurements conducted
in fiscal year 2001 by DLA‘s Defense Supply Center Philadelphia (DSCP),
GAO estimates that DSCP generally complied with statutory and
regulatory requirements for best value contracting. For example, all of the procurements in GAO‘s sample considered past performance as an
evaluation factor in the source selection process. While GAO noted
some discrepancies in several of these procurements, mitigating
circumstances lessened the impact of the discrepancies in most cases.
DSCP has employed several techniques to promote compliance with best
value contracting procedures. For example, in 1996, DSCP published
Guiding Principles for Best Value Source Selection, a handbook that
outlines the functions and responsibilities of key personnel in the
best value source selection process, as well as various approaches to
source selection. According to DLA officials at DSCP, the ability of
the domestic clothing and textile supplier base to meet future military
requirements is uncertain. The officials said that, at present, DLA‘s
domestic supplier base for clothing and textiles is more robust than
ever, as numerous domestic suppliers who did not traditionally do
business with DSCP are now competing for its contracts. However, they
characterized this increased competition as the ’last gasp of a dying
industry.“ Domestic clothing and textile suppliers are competing for
DSCP‘s business as the industry copes with a decline in employment and
production and as the supplier base increasingly moves overseas. DSCP
officials fear that as the clothing and textile industry faces
increased imports, second- and third-tier suppliers that provide input
to domestic producers of end items may go out of business, thus eroding
the domestic supplier base for these items. They stated, however, that
the ’Berry Amendment,“ which requires DOD to purchase certain items
such as food, clothing, and textiles from domestic sources, is helping
to maintain the domestic supplier base at present.
What GAO Recommends:
GAO recommends that the Secretary of Defense require the DLA Director
to monitor the health of the clothing and textile supplier base and,
if warranted, keep the Congress informed on the implications for future
defense clothing and textile procurements. One means of informing the
Congress may be through the Department of Defense‘s (DOD) Annual
Industrial Capabilities Report. In commenting on a draft of this
report, DOD concurred with the recommendation.
To view the full report, including the scope and methodology, click on the link above. For more information, contact David Cooper at (202) 512-4841 or cooperd@gao.gov.
Contents:
Letter:
Results in Brief:
Background:
DSCP Generally Followed Best Value Guidance and Has Taken Actions to
Promote Compliance:
DLA Views Clothing and Textile Supplier Base as Uncertain:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Sample of Clothing and Textile Procurements:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Procurements in Our Sample:
Abbreviations:
DLA: Defense Logistics Agency:
DOD: Department of Defense:
DSCP: Defense Supply Center Philadelphia:
FAR: Federal Acquisition Regulation:
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United States General Accounting Office:
Washington, DC 20548:
February 28, 2003:
The Honorable Duncan Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
The Defense Logistics Agency (DLA) supplies the nation‘s military
services and certain civilian agencies with critical resources needed
to accomplish their worldwide missions. During fiscal year 2001, DLA
contracts totaled $14.8 billion--$1.2 billion of which was for clothing
and textiles. In a report on the Bob Stump National Defense
Authorization Act for Fiscal Year 2003, the House Committee on Armed
Services directed us to determine whether DLA is properly implementing
applicable statutory and regulatory guidance for ’best value“ purchases
of clothing and textile items.[Footnote 1] Best value procurements are
those that in the federal government‘s view provide the greatest
overall benefits, not just the lowest price. In addition, in subsequent
discussions with Committee staff, we were asked to obtain DLA‘s views
on the domestic supplier base for key clothing and textile items.
To conduct our work, we evaluated DLA‘s implementation of statutory and
regulatory guidance for best value purchases of clothing and textiles
in fiscal year 2001 with an emphasis on past performance--a key element
of best value procurements--as an evaluation factor, as agreed to by
the Committee. We took a random sample of 15 of the 142 clothing and
textile procurements, each exceeding $100,000, conducted by DLA‘s
Defense Supply Center Philadelphia (DSCP) in fiscal year 2001. Based on
this sample, we were able to make projections about how well DSCP
complied with best value guidance for its fiscal year 2001 clothing and
textile procurements. Twelve of the procurements in our sample used a
tradeoff process to make the award decision, considering factors in
addition to price and technical acceptability. The remaining three
procurements were awarded based on price and technical acceptability
alone. We also solicited DLA‘s views on the domestic supplier base for
clothing and textiles. Additional information on our scope and
methodology appears in appendix I. Appendix II lists the procurements
included in our sample.
Results in Brief:
Based on our random sample, we estimate that the clothing and textile
procurements conducted in fiscal year 2001 by the Defense Supply
Center Philadelphia generally complied with statutory and regulatory
requirements for best value contracting. For example, all of the
procurements in our sample considered past performance as an evaluation
factor in the source selection process. We noted some discrepancies in
several of the procurements, but, in most cases, these procurements had
mitigating circumstances that lessened the impact of the discrepancies.
For example, in about half of the cases using a tradeoff source
selection process, the solicitation did not provide for a ’neutral“
rating of prospective suppliers without relevant past performance. In
some of these cases, however, when the suppliers‘ proposals were
evaluated, a neutral rating was provided for each proposal. In the
remaining cases, a neutral rating was not an issue in evaluating past
performance because either the offerors had some type of past
performance or they were rated unacceptable because they did not
provide other required information. The Defense Supply Center
Philadelphia has employed several techniques to promote compliance with
best value contracting procedures. For example, in 1996, the center
published Guiding Principles for Best Value Source Selection, known as
the ’Best Value Handbook,“ which outlines the functions and
responsibilities of key personnel in the best value source selection
process, as well as various approaches to source selection.
According to Defense Supply Center Philadelphia officials, the ability
of the domestic clothing and textile supplier base to meet future
military requirements is uncertain. The officials said that, at
present, the Defense Logistics Agency‘s domestic supplier base for
clothing and textiles is more robust than ever, as numerous contractors
who did not traditionally do business with the Defense Supply Center
Philadelphia are now competing for its contracts. However, they stated
that this increase in competition among domestic suppliers is the ’last
gasp of a dying industry.“ Domestic clothing and textile suppliers are
competing for the center‘s business as the industry copes with a
decline in employment and production and as the supplier base
increasingly moves overseas. Defense Supply Center Philadelphia
officials fear that as the clothing and textile industry faces
increased imports, second-and third-tier suppliers that provide input
to domestic producers of end items may go out of business, thus eroding
the supplier base for these items. They stated that the ’Berry
Amendment,“[Footnote 2] which requires the Department of Defense (DOD)
to purchase certain items such as food, clothing, and textiles from
domestic sources, is helping to maintain the domestic supplier base at
present.
We are recommending that the Defense Logistics Agency monitor the
health of the clothing and textile industrial base and, if warranted,
keep the Congress informed on the implications for future defense
clothing and textile procurements. In commenting on a draft of this
report, DOD concurred with the recommendation. DOD stated that the
Defense Logistics Agency will include the health of the clothing and
textile industrial base as a topic in the next DOD Annual Industrial
Capabilities Report, which is due March 1, 2004.
Background:
DLA has three defense supply centers located in Philadelphia,
Pennsylvania; Richmond, Virginia; and Columbus, Ohio. DSCP is the only
center responsible for clothing and textiles, medical, subsistence, and
general/industrial items.
According to the Federal Acquisition Regulation (FAR) Part 15,
Contracting by Negotiation, an agency can obtain best value in
negotiated procurements by using any one or a combination of source
selection processes. In different types of procurements, the relative
importance of cost or price may vary. For example, in procurements
where the requirement is clearly defined and the risk of unsuccessful
contract performance is minimal, cost or price may play a dominant role
in source selection, such as in the lowest price/technically acceptable
source selection process. In procurements where the requirement is not
easily defined or the risk of unsuccessful contract performance is
relatively high, technical capability and other factors such as past
performance considerations may play a dominant role. In those
procurements, it may be in the government‘s best interest to consider
award to other than the lowest priced or highest technically rated
supplier and to evaluate the relative importance of other factors,
including past performance,[Footnote 3] in a ’tradeoff“ process.
The FAR requires that past performance be evaluated in all source
selections for negotiated competitive acquisitions expected to exceed
$100,000, unless the contracting officer documents the reason past
performance is not an appropriate evaluation factor.[Footnote 4] While
DOD obtained a FAR deviation in 1999 that raised the threshold for
requiring evaluation of past performance in procurements to those
expected to exceed $5 million, DSCP‘s ’Best Value Handbook“ requires
past performance to be included as an evaluation factor for all
negotiated competitive acquisitions exceeding $100,000.
DSCP Generally Followed Best Value Guidance and Has Taken Actions to
Promote Compliance:
Based on our random sample, we estimate that procurements conducted by
DSCP in fiscal year 2001 generally complied with best value statutes
and regulations with an emphasis on past performance, as implemented in
major provisions of the FAR[Footnote 5] as well as DLA‘s implementing
acquisition directive. These criteria pertain to four functional areas
of the contracting process: acquisition planning, solicitation content,
proposal evaluation, and source selection decision documentation. DSCP
has been proactive in taking steps to encourage contracting officers to
comply with best value guidance.
DSCP Generally Followed Best Value Statutory and Regulatory Guidance:
Of the 15 procurements in our sample, 12 were based on a tradeoff
source selection process that considered factors other than price and
technical acceptability, while 3 were based on the lowest price/
technically acceptable source selection process. We found that the 15
procurements adequately addressed past performance based on FAR and DLA
criteria. For each procurement based on a tradeoff process, past
performance was the first or second evaluation factor in order of
importance. For procurements based on the lowest price, the contracting
officers considered past performance in general terms as part of the
determination of the contractors‘ eligibility for award.
All 15 of the procurements in our sample were required to have written
acquisition plans under DLA‘s acquisition directive implementing the
FAR.[Footnote 6] Thirteen procurements had written acquisition plans,
while 2 procurements awarded using simplified acquisition procedures
under a test program for acquisitions of certain commercial items did
not.[Footnote 7] A DSCP policy memorandum, dated August 21, 2002,
reminded buyers and contracting officers of the need to prepare written
acquisition plans for contract actions expected to exceed the
simplified acquisition threshold, as the procurements here did.
However, this memorandum was issued after the procurements included in
our review had been completed.
The 12 procurements that were based on a tradeoff source selection
process were subject to further requirements pertaining to solicitation
content, proposal evaluations, and source selection
decisions.[Footnote 8] Despite overall compliance with major regulatory
provisions of the FAR, we found some cases where specific requirements
were not met. However, mitigating circumstances lessened the effect of
the lack of compliance. The results of our evaluation in each
functional area are presented on the following pages.
Solicitation Content Criteria:
[See PDF for Image]
[End of Figure]
Source: FAR Part 15, Contracting by Negotiation.
The 12 procurements in our sample that were based on a tradeoff source
selection process generally complied with the solicitation content
criteria. Five solicitations, however, did not authorize prospective
suppliers to provide information on problems encountered on prior
contracts and corrective actions taken. Nevertheless, in these five
solicitations, some suppliers identified problems and corrective
actions taken, while others did not report any problems on their prior
contracts. DSCP officials noted that offerors generally submit this
information with their proposals even when it is not specifically
authorized in the solicitation.
In addition, the solicitations for 7 of the 12 procurements that were
based on a tradeoff process did not describe DLA‘s approach for
evaluating past performance of offerors with no relevant past
performance history. The solicitations should have provided that a
’neutral“ rating be assigned to such offerors.[Footnote 9] The effect
of not describing a neutral rating in the solicitation was mitigated in
most of these cases, however. In two cases, DSCP officials did apply
neutral ratings when evaluating the proposals. In four cases, neutral
ratings generally were not an issue in the evaluation of past
performance, because nearly all offerors provided relevant past
performance information in their proposals. In one case, where
simplified acquisition procedures were used based on a tradeoff
analysis, the contracting officer assigned unacceptable ratings to the
proposals with no past performance history because they did not provide
other information required by the solicitation.
On March 1, 2002, DSCP implemented a new proposal rating system to be
used in evaluating clothing and textile best value acquisitions. It
includes notice to offerors that a neutral rating will be assigned to
an offeror with no relevant past performance. DSCP officials expect
that all future solicitations will properly cite the neutral rating
approach for offerors lacking relevant past performance history.
Proposal Evaluation Criteria:
[See PDF for Image]
[End of Figure]
Source: FAR Part 15.
The 12 procurements that were based on a tradeoff source selection
process generally complied with FAR requirements on proposal
evaluations. For one of the procurements, however, DSCP did not
evaluate and assess past performance on all of the factors and
subfactors found in the solicitation. For that procurement, while the
solicitation listed customer satisfaction as a subfactor, this
subfactor was not considered when the proposals were evaluated. In
addition, a commercial item procurement, conducted under the FAR
simplified acquisition test program, did not evaluate past performance
as discussed in the solicitation. While the solicitation stated that
performance on prior contracts in subcontracting and assisting small
businesses would be evaluated as a part of past performance, the
evaluation of proposals did not consider these factors. Because these
instances involved lower evaluation subfactors in the overall
evaluation scheme, it is unclear whether the evaluation of these
factors would have ultimately affected the source selection decisions.
Source Selection Decision Criteria:
[See PDF for Image]
[End of Figure]
Source: FAR Part 15.
The 12 procurements that were based on a tradeoff source selection
process complied with the FAR in documenting the source selection
decision. For example, a comparative analysis was made of the potential
suppliers, as appropriate. DSCP has taken further steps to document
the basis of source selection decisions by conducting training for its
contracting personnel on the need to thoroughly document all
factors considered in making final awards in the source selection
decision document.
DSCP Has Employed Techniques to Promote Compliance:
A recent DLA review of DSCP procurements found that the center is doing
a good job of documenting best value tradeoff decisions in the files.
DSCP has employed several techniques to promote compliance with best
value contracting procedures. It has provided specific guidance on best
value contracting, and a contract support group provides advice and
review as procurements are planned and executed.
First, to provide its contracting personnel with detailed procedures
for competitive negotiated procurements, DSCP developed and published
in 1996 its own Guiding Principles for Best Value Source Selection,
known as the ’Best Value Handbook.“ The handbook outlines the functions
and responsibilities of key personnel in the best value source
selection process as well as various approaches to source selection
that are available for use. As stated in the handbook, best value is
the preferred method of source selection and should be used to the
maximum extent possible. While other supply centers have issued policy
guidance to implement the FAR as well as DOD directives, a DLA official
said that DSCP is the only DLA center that has developed a handbook on
best value contracting.
Second, like all the Directorates at DSCP, the Directorate of Clothing
and Textiles has its own contract support team. Headed by a supervisory
procurement analyst, the team consists of five procurement analysts, a
contract price/cost analyst, an industrial specialist, and a
procurement technician. The team supports the Directorate by providing
contracting guidance and direction, developing procurement policies and
procedures, and developing and administering procurement training. For
example, a training program for contracting personnel emphasizes the
need to thoroughly document all factors considered in making the final
award. The team also encourages the Directorate to use past performance
as an evaluation factor for all purchases over $100,000.[Footnote 10]
Further, DLA‘s procurement management review program is designed to
provide local, periodic, and specific subject/area reviews of the
agency‘s contracting offices by an independent and objective team of
contracting professionals from the headquarters and field contracting
staff. In April 2002, a DLA team reviewed DSCP‘s Directorate of
Clothing and Textiles procurements. The DLA team found the Directorate
had substantially improved its documentation of tradeoff decisions
related to best value source selection in the contract files. The best
value tradeoff decisions documented in the files were characterized by
the DLA team as among the best that the team had seen in the entire
agency.
DLA Views Clothing and Textile Supplier Base as Uncertain:
DLA officials view the future of the clothing and textile supplier base
as uncertain. They noted that the Berry Amendment, which requires DOD
to purchase certain items such as food, clothing, and textiles from
domestic sources, helps maintain a domestic supplier base to meet some
of DOD‘s unique military requirements. They also stated that
competition for DOD‘s clothing and textile contracts has never been
stronger, as clothing and textile companies that have traditionally not
done business with DOD are now competing for DLA contracts. In fact,
they informed us that some U.S. companies produce items only for DOD.
However, they stated that this increase in competition among domestic
suppliers is the ’last gasp of a dying industry.“ An increasing number
of domestic suppliers are competing for DSCP‘s clothing and textile
contracts for a variety of reasons as the industry copes with a decline
in employment and production, consolidations and bankruptcies,
increased imports, and domestic suppliers moving overseas. If an item
cannot be acquired from a domestic supplier, DLA can obtain a waiver
from the Berry Amendment, allowing it to purchase the item from a
foreign supplier.[Footnote 11] To better understand the future of the
clothing and textile supplier base and to identify potential solutions
to keep the industry viable, DSCP has initiated an industrial base
study on the health of the clothing and textile industry.
Over the past few years, various free trade agreements have been
implemented that have affected the clothing and textile supplier base.
DSCP officials said that a further complication to the outlook for the
clothing and textile supplier base is a World Trade Organization
agreement that will eliminate quotas for many imported clothing and
textile items by January 1, 2005.[Footnote 12] According to DSCP
officials, the implementation of free trade agreements and the removal
of the quotas may threaten second-and third-tier suppliers. For
example, they stated that one U.S. company supplies wool fabrics to
many domestic companies, including contractors that make coats for the
military services. However, other U.S. companies are purchasing
inexpensive wool fabrics imported from foreign countries, thus
competing with the U.S. supplier. Because this U.S. supplier is losing
business to foreign competitors, it may not have enough business to
keep its factories operating. According to DSCP officials, if the
supplier cannot keep its factories operating, it may eventually go out
of business and those contractors that make coats for the military
services will not have the company as a domestic supplier of wool.
In response to the World Trade Organization agreement, DSCP has
initiated an industrial base study of the domestic clothing and textile
industry to determine what will happen when quotas are removed at the
beginning of 2005. The study‘s preliminary findings support DSCP‘s
concern about the overall health of the U.S. supplier base for clothing
and textile products. For example, DSCP has found that an increasing
number of DSCP contractors are totally dependent on government work.
Further, DSCP found that about 300 U.S. textile mills, which performed
weaving and finishing and supplied yarn, closed from 1995 to 2001. DSCP
is exploring whether the Berry Amendment will be sufficient to protect
the domestic industrial base or whether there are other possible
solutions to keep the industry viable and support readiness.
In those situations that involve critical military clothing and textile
items, DSCP officials said that DLA, in the future, could strengthen
the supplier base by increasingly providing contracts to a number of
suppliers for national defense purposes to achieve industrial
mobilization. For example, in fiscal year 2002, two industrial
mobilization contracts were awarded at a cumulative value of $2.7
million for cold-weather underclothing.
DLA provides input to DOD‘s Annual Industrial Capabilities Report,
which is to be submitted to the Congress by March 1 of each year.
Section 2504 of title 10, U.S. Code, requires the report to include,
among other things, a description of the methods and analyses being
undertaken by DOD to identify and address concerns regarding
technological and industrial capabilities of the national technology
and industrial base. DLA‘s input generally focuses on specific items
that are being procured. However, a DLA official told us that it would
be possible to include a discussion of the clothing and textile
industrial base if the situation warranted. Ultimately, the official
said that it is up to DOD as to whether such information will be
presented in the final report submitted to the Congress.
Recommendation for Executive Action:
We recommend that the Secretary of Defense require the DLA Director to
monitor the health of the clothing and textile industrial base and, if
warranted, keep the Congress informed of the implications for future
defense clothing and textile procurements. One means of informing the
Congress may be DOD‘s Annual Industrial Capabilities Report, which is
submitted annually to the Congress.
Agency Comments and Our Evaluation:
DOD provided written comments on a draft of this report. DOD generally
agreed with the draft report and concurred with the recommendation. DOD
stated that DLA will include the health of the clothing and textile
industrial base as a topic in the next DOD Annual Industrial
Capabilities Report, which is due March 1, 2004. DOD‘s comments appear
in appendix III.
We are sending copies of this report to interested congressional
committees, the Secretary of Defense, and the Director, DLA. We also
will make copies available to others upon request. In addition, the
report will be available at no charge on the GAO Web site at http://
www.gao.gov.
Please contact me at (202) 512-4841 if you have questions regarding
this letter. An additional contact and staff acknowledgements are
listed in appendix IV.
David E. Cooper, Director
Acquisition and Sourcing Management:
Signed by David E. Cooper:
[End of section]
Appendix I: Scope and Methodology:
To determine whether the Defense Logistics Agency‘s (DLA) Defense
Supply Center Philadelphia (DSCP) Directorate of Clothing and Textiles
complied with selected statutory and regulatory guidance for best value
contracting, including the use of past performance as an evaluation
factor, we took a random sample of 15 of the 142 competed clothing and
textile procurements in fiscal year 2001, each exceeding $100,000. Our
sample size was based upon the assumption that the incidence of
problems in source selection competition procedures would be 10 percent
or less. This assumption gives a 95 percent confidence interval for the
sample estimate that is accurate to within plus or minus 15 percent.
The assumption of a low incidence of problems was accepted because DLA
had just conducted a management review of DSCP prior to the start of
fiscal year 2001 and found few problems.
Of the 15 procurements selected for our sample, 12 involved a tradeoff
source selection process comparing price and other factors using
criteria found in the Federal Acquisition Regulation (FAR) Part 15,
Contracting by Negotiation or FAR Part 13, Simplified Acquisition
Procedures--Test Program for Certain Commercial Items, for purchases of
commercial items exceeding the simplified acquisition threshold but not
exceeding $5 million. In addition, 3 were awarded based on a lowest
price/technically acceptable source selection process using criteria
found in (1) FAR Part 12, Acquisition of Commercial Items, (2) FAR Part
13, Simplified Acquisition Procedures--Test Program for Certain
Commercial Items, or (3) FAR Part 15.
To assess whether DLA properly implemented statutory and regulatory
guidance for best value purchases, we reviewed FAR Part 7, Acquisition
Planning; FAR Part 12; FAR Part 13; FAR Part 15; and the Defense
Logistics Acquisition Directive. We identified and applied major
provisions of the FAR and the DLA acquisition directive pertaining to
acquisition planning, solicitation content, proposal evaluation, and
source selection decision documentation, with a focus on past
performance. Finally, we reviewed DSCP‘s 1996 Guiding Principles for
Best Value Source Selection, known as the ’Best Value Handbook.“
To obtain DLA‘s views on the domestic supplier base for clothing and
textiles, we contacted DLA officials from DSCP. We also spoke with
officials from the American Apparel and Footwear Association to obtain
a general understanding of the industry. We did not independently
verify the information the officials provided to us. During our review,
DSCP was conducting a clothing and textile study of the industrial base
and officials provided us with documentation dealing with the supplier
base. This study has not yet been completed. In addition, we gathered
information on DOD‘s Annual Industrial Capabilities Report submitted to
the Congress by March 1 of each year.
We performed our work from August 2002 to January 2003 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Sample of Clothing and Textile Procurements:
The table below lists the procurements included in our sample. Dollar
amounts shown for the improved physical fitness uniform pants and sound
protector procurements represent actual obligations placed against the
contracts in fiscal year 2001. Dollar amounts shown for the remaining
procurements represent estimated contract values, including the basic
contract period and all option periods.
Table 1: Procurements in Our Sample:
Contract: SP010001D4014;
Contractor: Armorworks, LLC;
Product: Body armor;
Dollar: $35,907,825.
Contract: SP010001D4017;
Contractor: Harris Mfg. Co., Inc.;
Product: Coveralls;
Dollar: $20,000,000.
Contract: SP010001D4002;
Contractor: Mine Safety Appliances Company;
Product: Goggles;
Dollar: $10,000,000.
Contract: SP010001D0317;
Contractor: Propper International, Inc.;
Product: Shirts;
Dollar: $9,500,000.
Contract: SP010001D4020;
Contractor: AOTEC, LLC;
Product: Spectacles;
Dollar: $6,500,000.
Contract: SP010001D0306;
Contractor: J H Rutter-Rex Mfg. Co., Inc.;
Product: Trousers;
Dollar: $6,300,000.
Contract: SP010001DCB17;
Contractor: Olympic Mills;
Product: Undershirts;
Dollar: $4,100,000.
Contract: SP010001D0328;
Contractor: Ashland Sales and Service Co.;
Product: Trousers;
Dollar: $3,000,000.
Contract: SP010001MCA17
Contractor: American Apparel Inc.
Product: Improved physical fitness uniform pants;
Dollar: $2,967,498
Contract: SP010001D0305;
Contractor: M & B Headwear Company Inc.;
Product: Sun hat;
Dollar: $2,500,000.
Contract: SP010001D4022;
Contractor: Action Embroidery Corp.;
Product: Insignia;
Dollar: $2,300,000.
Contract: SP010001D5063;
Contractor: Propper International, Inc.;
Product: Coveralls;
Dollar: $2,000,000.
Contract: SP010001C5009;
Contractor: Silencio Safety Direct, Inc.;
Product: Sound protectors;
Dollar: $685,800.
Contract: SP010001D4029;
Contractor: Precision Polymer Mfg.;
Product: Clipboards;
Dollar: $500,000.
Contract: SP010001D5017;
Contractor: Jacqueline Embroidery Company;
Product: Insignia;
Dollar: $250,000.
[End of table]
Source: DLA Management Information System.
[End of section]
Appendix III: Comments from the Department of Defense:
Deputy Under Secretary Of Defense For Logistics And Materiel Readiness:
3500 Defense Pentagon:
Washington, DC 20301-3500:
February 25 2003:
Mr. David E. Cooper:
Director, Acquisition and Sourcing Management:
U.S. General Accounting Office:
441 G Street, NW:
Washington, D.C. 20548:
Dear Mr. Cooper:
This is the Department of Defense (DoD) response to the General
Accounting Office (GAO) draft report, ’Contract Management: DLA
Properly Implemented Best Value Contracting for Clothing and Textiles
and Views the Supplier Base As Uncertain,“ dated February 7, 2003 (GAO
Code 120176/GAO-03-440).
The DoD generally agrees with the draft report. A detailed response to
the GAO recommendation is included in the enclosure. The DoD
appreciates the opportunity to comment on the draft report.
Sincerely,
Allen W. Becke Principal Assistant:
Signed by Allen W. Becke:
Enclosure:
GAO Draft Report - Dated February 7, 2003 GAO Code 120176/GAO-03-440:
’Contract Management: DLA Properly Implemented Best Value Contracting
For Clothing and Textiles and Views the Supplier Base As Uncertain“:
Department Of Defense Comments To The Recommendation:
Recommendation: The GAO recommended that the Secretary of Defense
require the DLA Director to monitor the health of the clothing and
textile industrial base and, if warranted, keep Congress informed of
the implications for future defense procurements. One means of
informing Congress may be DoD‘s Annual Industrial Capabilities Report
that is submitted annually to Congress. (p. 10/GAO Draft Report):
DOD Response: The DoD concurs with the recommendation. The Defense
Logistics Agency will include the health of the clothing and textile
industrial base as a topic in the next DoD Annual Industrial
Capabilities Report, which is due March l, 2004.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Michele Mackin (202) 512-4309:
Acknowledgments:
In addition to the name above, Robert L. Ackley, Marie P. Ahearn, Carl
S. Barden, Charles D. Groves, John D. Heere, and William E. Petrick,
Jr. made key contributions to this report.
Footnotes:
[1] H.R. Report 107-436 on H.R. 4546, Bob Stump National Defense
Authorization Act for Fiscal Year 2003.
[2] 10 U.S.C. 2533a, as implemented by Defense Federal Acquisition
Regulation Supplement, Subpart 225.7002.
[3] Past performance information is relevant information regarding a
contractor‘s actions under previously awarded contracts. It includes,
for example, the contractor‘s record of conforming to contract
requirements and commitment to customer satisfaction. (FAR 42.1501.)
[4] FAR 15.304(3).
[5] The FAR references the statutory requirements it implements and
those statutory citations will not be repeated here.
[6] While the FAR does not specifically require written acquisition
plans, it does direct agencies to prescribe procedures specifying cases
in which a written plan shall be prepared (FAR 7.103(d)). Defense
Logistics Acquisition Directive 7.102 requires written acquisition
plans for all proposed contract actions expected to exceed the
simplified acquisition threshold, which is $100,000.
[7] These two procurements were conducted under the test program, which
was authorized by FAR Subpart 13.5 and which allows contracting
officers discretion in procuring commercial items exceeding the
simplified acquisition threshold but not exceeding $5 million.
[8] One procurement, conducted as a tradeoff analysis under the test
program, was not subject to all of the criteria we cite in the
following sections.
[9] The FAR requires that such offerors may not be evaluated favorably
or unfavorably on past performance and that the solicitation describe
the approach for evaluating past performance (FAR 15.305(a)(2)).
[10] Currently, the group responsible for awarding contracts for
military insignia procurements uses the higher threshold of $500,000
for best value contracting.
[11] During fiscal years 2001 and 2002, DSCP‘s Directorate of Clothing
and Textiles obtained 12 Berry Amendment waivers.
[12] The Uruguay Round Agreement on Textiles and Clothing, approved by
Congress as part of the Uruguay Round Agreements Act, 19 U.S.C.
3511(a)(1), provides for the integration of the clothing and textile
sectors into the general rules of the General Agreement of Tariffs and
Trade 1994.
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