March 19 Hearing on Sourcing and Acquisition--Questions for the Record
Gao ID: GAO-03-771R May 23, 2003GAO appeared before the Subcommittee on Readiness and Management Support, House Committee on Armed Services on March 19, 2003, to discuss various sourcing and acquisition issues. This letter responds to a request for our views on the following questions for the record.
GAO found that between fiscal years 1990 and 2001, the Department of Defense's (DOD) acquisition workforce was reduced significantly--by more than 50 percent. At the same time, DOD's contracting workload increased by 12 percent. While the Congress and the executive branch have looked for ways to streamline the acquisition process and generate savings, many of our recent reviews indicate that DOD has missed out on opportunities to reduce administrative burdens and enhance its acquisition outcomes. Although we have not evaluated the extent to which reductions in the size of the acquisition workforce may have contributed to these results, DOD's Inspector General has identified a number of adverse impacts attributable to reductions in DOD's acquisition workforce. The 12-member Commercial Activities Panel produced two sets of recommendations for improving the way federal agencies make sourcing decisions. The first set, which the panel unanimously agreed to, consisted of a set of principles to guide sourcing policy for the federal government. The second set involved use of the Federal Acquisition Regulation to conduct public-private competitions, limited changes to Circular A-76, and the promotion of high-performing organizations across the federal government. GAO also shared its opinion that all parties, both public and private, be privy to the bid protest process. Finally, GAO emphasized that the administration's goals for conducting public-private competitions could have a significant impact on the acquisition workforce.
GAO-03-771R, March 19 Hearing on Sourcing and Acquisition--Questions for the Record
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May 23, 2003:
The Honorable John Ensign:
Chairman:
The Honorable Daniel Akaka:
Ranking Minority Member:
Subcommittee on Readiness and Management Support:
Committee on Armed Services:
United States Senate:
Subject: March 19 Hearing on Sourcing and Acquisition--Questions for
the Record:
It was a pleasure to appear before the Subcommittee on March 19, 2003,
to discuss various sourcing and acquisition issues. This letter
responds to your request for my views on the following questions for
the record.
Q. How would you assess the impact of the reductions in the defense
acquisition workforce over the last decade?
Between fiscal years 1990 and 2001, the Department of Defense's (DOD)
acquisition workforce was reduced significantly--by more than 50
percent. At the same time, DOD's contracting workload increased by 12
percent. As we reported last month, governmentwide reductions in the
acquisition workforce along with a number of procurement reforms--
including an increased reliance on services provided by commercial
firms, changes to federal acquisition processes, and the introduction
or expansion of alternative contracting approaches--have placed
unprecedented demands on the federal acquisition workforce.[Footnote 1]
Underlying these challenges is DOD's need to address serious imbalances
in the skills of its remaining workforce and the potential loss of
highly specialized knowledge as its procurement specialists retire.
During the last decade, the Congress passed several significant pieces
of acquisition reform legislation, including the Federal Acquisition
Streamlining Act of 1994 and the Clinger-Cohen Act of 1996, to provide
agency officials with greater flexibility and tools to acquire goods
and services more efficiently. Today, contracting specialists must have
a greater knowledge of market conditions, industry trends, and the
technical details of the commodities and services they procure. The
Department of Defense, like other federal agencies, has had difficulty
adjusting to the significant changes in the federal acquisition
environment--particularly in regard to improving its acquisition of
services and ensuring the appropriate use of contracting techniques and
approaches. As a result, earlier this year we reported that DOD's
contract management remains a high-risk area, which we originally
designated as such in 1992.[Footnote 2]
While the Congress and the executive branch have looked for ways to
streamline the acquisition process and generate savings, many of our
recent reviews indicate that DOD has missed out on opportunities to
reduce administrative burdens and enhance its acquisition outcomes. For
example:
DOD contracting officials have not consistently followed established
procedures for ensuring fair and reasonable prices when using the
General Services Administration's (GSA) Federal Supply Schedule to
purchase services. Specifically, we reported in November 2000 that 77
percent of the orders we reviewed, valued at $60.5 million, were placed
without seeking competitive quotes from multiple contractors, as
required by GSA's procedures.[Footnote 3] The key reason that
established procedures were not followed is that many contracting
officers were not even aware of GSA's requirement to seek competitive
quotes. Also, guidance for the program has not been clear. A recent
proposed change to the Federal Acquisition Regulation should help make
distinctions between buying services and buying products, and the
proposed change should help inform contracting officers that
competitive quotes should be sought when acquiring services with a
statement of work.
DOD has also been challenged to implement performance-based service
contracting--an approach to contracting that is intended to achieve
greater cost savings and better acquisition outcomes. We reported in
September 2002 that DOD, like other agencies we reviewed, had achieved
mixed success in incorporating four basic performance-based attributes
into its contracts.[Footnote 4] For example, two of the five DOD
contracts that it identified as models of performance-based contracting
did not clearly exhibit all four performance-based attributes. Our
report also raised concern as to whether agencies have a good
understanding of performance-based contracting and how to take full
advantage of it. We recommended that the OFPP Administrator clarify
existing guidance to ensure that performance-based contracting is
appropriately used, particularly when acquiring more unique and complex
services that require strong government oversight.
Several reports we have issued since 1999 have indicated that
inadequate guidance and poor training played a role when DOD personnel
did not use sound techniques to obtain the best prices for DOD. These
situations are largely in areas where DOD cannot, or chooses not to,
rely on cost-based pricing techniques for contracts awarded without
competition. For example, in June 1999 we reported that in our review
of 65 sole-source purchases of commercial items, contracting officers'
price analyses were often too limited to ensure that the prices were
fair and reasonable.[Footnote 5] In April 2002, we reported that DOD
was waiving the requirement for contractors to submit certified cost or
pricing data--a key requirement meant to ensure that the government has
the data it needs to effectively negotiate with the contractor in
contracts awarded without competition.[Footnote 6] DOD's guidance was
inadequate to help contracting officers determine whether a waiver
should be granted, what type of data and analyses are acceptable, and
what kind of expert assistance should be obtained.
Although we have not evaluated the extent to which reductions in the
size of the acquisition workforce may have contributed to these
results, DOD's Inspector General has identified a number of adverse
impacts attributable to reductions in DOD's acquisition workforce.
Specifically, in February 2000, the Inspector General reported on:
increased backlogs in closing out completed contracts;
increased program costs resulting from contracting for technical
support versus using in-house technical support;
insufficient personnel to fill in for employees on deployments;
insufficient staff to manage requirements, reduced scrutiny and
timeliness in reviewing acquisition actions, personnel retention
difficulty;
increased procurement action lead time; and:
lost opportunities to develop cost savings initiatives.[Footnote 7]
The Inspector General's report noted that while DOD had improved
efficiency in contracting through acquisition reform initiatives,
concern was still warranted because "staffing reductions have clearly
outpaced productivity increases and the acquisition workforce's
capacity to handle its still formidable workload." In a May 2001
report, DOD's Inspector General concluded that the lack of planning,
shortages in staffing, and the absence of senior leadership oversight
contributed to poor pricing analysis and the inappropriate use of
waivers in a significant number of contracts reviewed.[Footnote 8]
DOD is taking a number of actions to address its acquisition
challenges. Most of these actions are at the early stages, however, and
it is uncertain whether they can be fully and successfully implemented
in the near term. Because effective acquisition management plays a key
role in creating and sustaining high-performing organizations, a
critical issue for DOD is whether it has today, or will have tomorrow,
a workforce with the skills needed to manage DOD's acquisitions.
Q. Do you view the recommendations of the Commercial Activities Panel
as a menu from which it is appropriate to pick and choose
recommendations to implement on a piecemeal basis, or as a cohesive set
of principles, which should be considered on a comprehensive basis?
The 12-member Commercial Activities Panel produced two sets of
recommendations for improving the way federal agencies make sourcing
decisions. The first set, which the panel unanimously agreed to,
consisted of a set of principles to guide sourcing policy for the
federal government. The panel specifically noted that while each
principle is important, no single principle stands alone and that the
principles were adopted as a package. The second set of recommendations
was adopted by a two-thirds supermajority of the panel. These
recommendations involved use of the Federal Acquisition Regulation to
conduct public-private competitions, limited changes to Circular A-76,
and the promotion of high-performing organizations across the federal
government. This set of recommendations was also intended to be adopted
as a package, rather than on a piecemeal basis.
Q. The Inspector General of the Department of Defense reported that a
"consultant's error in a public-private competition resulted in the
award of an A-76 contract with potential 10-year value of $346 million
to a contractor rather than to the lower in-house bid." Does this
episode reinforce the recommendation of the Commercial Activities Panel
that all parties to a public-private competition, including
representatives of federal employees, should have the same access to
the bid protest process to challenge the way a competition has been
conducted?
It is quite appropriate for both sides to be able to challenge the
results of public-private competitions. In fact, public employees, like
private-sector vendors, have long had the right under Circular A-76 to
file an appeal at their agency challenging the results of a public-
private cost comparison. It is true, though, that only private-sector
vendors can go on--if they lose an agency-level appeal--to file a bid
protest at GAO or in court. As your question notes, the Commercial
Activities Panel recommended that all parties to a public-private
competition should have rights as nearly equal as possible to challenge
the way the competition was conducted, including protest rights. The
panel noted, however, that granting protest rights should be part of an
effort to address the full range of issues related to competing for and
performing government contracts. The panel also recognized that, if a
decision were made to permit public-sector bid protests of the results
of public-private competitions, the question of who would have
representational capacity to file such a protest would have to be
carefully considered.
Q. Would you agree that the challenges of meeting the Administration's
goals for public-private competition, and of managing services
contracts that result from such competition, are more likely to require
an increase in acquisition resources than a decrease?
The Administration's goals for conducting public-private competitions
could have a significant impact on the acquisition workforce in a
number of ways. First, as noted by the Commercial Activities Panel, the
current process for conducting these competitions is complicated, and
therefore requires a skilled acquisition workforce to support the
studies. Any changes to the process will require additional resources
for training and perhaps additional personnel. Second, the number of
positions proposed for study in the coming years is significantly
higher than in the past, greatly increasing the competitive sourcing
workload at many agencies. At DOD, for example, the number of positions
proposed for study during the next 5 years is double what the
department has been able to review over the between fiscal years 1997
and 2002. Civilian agencies, which have not conducted nearly as many
public-private competitions as DOD, will face even greater challenges
in building the necessary infrastructure to conduct these
competitions.[Footnote 9] Finally, to the extent that an increase in
competitive sourcing studies results in an increase in the award of
service contracts to the private sector, agencies will need to ensure
that they have a sufficient acquisition workforce in numbers and
abilities to administer those contracts effectively. In this regard,
the private sector historically has won half the public-private
competitions.
- - - --:
We are sending copies of this report to the Administrator, Office of
Federal Procurement Policy; the Director, Defense Procurement and
Acquisition Policy; and interested congressional committees. We will
also make copies available to others upon request. In addition, this
report will be available at no charge on the GAO Web site at http://
www.gao.gov.
If you have any questions about this letter or need additional
information, please call me or Jack Brock, Managing Director,
Acquisition and Sourcing Management, on (202) 512-4841. Key
contributors to this letter included Vijay Barnabas, Ralph Dawn, and
Karen Sloan.
David M. Walker:
Comptroller General of the United States:
Signed by David M. Walker:
FOOTNOTES
[1] U.S. General Accounting Office, Federal Procurement: Spending and
Workforce Trends, GAO-03-443 (Washington, D.C.: Apr. 30, 2003).
[2] U.S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Defense, GAO-03-98 (Washington, D.C.:
January 2003).
[3] U.S. General Accounting Office, Contract Management: Not Following
Procedures Undermines Best Pricing Under GSA's Schedule, GAO-01-125
(Washington, D.C.: Nov. 28, 2000).
[4] U.S. General Accounting Office, Contract Management: Guidance
Needed for Using Performance-Based Service Contracting, GAO-02-1049
(Washington, D.C.: Sept. 23, 2002).
[5] U.S. General Accounting Office, Contract Management: DOD Pricing of
Commercial Items Needs Continued Emphasis, GAO/NSIAD-99-90
(Washington, D.C.: June 24, 1999).
[6] U.S. General Accounting Office, Contract Management: DOD Needs
Better Guidance on Granting Waivers for Certified Cost or Pricing Data,
GAO-02-502 (Washington, D.C.: Apr. 22, 2002).
[7] Department of Defense, Inspector General, DOD Acquisition Workforce
Reduction Trends and Impacts, Report No.D-2000-088 (Arlington, VA.:
Feb. 29, 2000).
[8] Office of the Inspector General, Department of Defense, Contracting
Officer Determinations of Price Reasonableness When Cost or Pricing
Data Were Not Obtained, Report No. D-2001-129 (Arlington, Va.: May 30,
2001).
[9] The costs for additional training or personnel needed to conduct
public-private competitions could be offset, of course, through the
savings realized from conducting the competitions.
