Defense Services Acquisition
Questions for the Record Gao ID: GAO-07-640R March 26, 2007On January 17, 2007, GAO testified before Congress on the Department of Defense's (DOD) management of its acquisition of services. GAO made several key points during the hearing. First, DOD's long-standing problems with contract management have become more prominent as DOD's reliance on contractors to provide services continues to grow. Second, DOD lacks sound contracting practices when acquiring services. Third, DOD's acquisition workforce has been downsized without sufficient attention to requisite skills and competencies. Fourth, DOD's acquisitions have resulted in outcomes that have cost the department valuable resources. And, finally, while DOD is taking some steps to address these problems, it does not know how well its services acquisition processes are working, which part of its mission can best be met through buying services, and whether it is obtaining the services it needs while protecting DOD's and the taxpayer's interests. Within this context, members of Congress requested that GAO provide additional comments on DOD's efforts regarding the following topics: interagency contracting, acquisition of services, acquisition reform, and the acquisition workforce.
Congress's questions and our answers are provided in appendix I. The responses are generally based on work associated with previously issued GAO products, which were conducted in accordance with generally accepted government auditing standards. Because the responses are based on prior work, we did not obtain comments from DOD.
GAO-07-640R, Defense Services Acquisition: Questions for the Record
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March 26, 2007:
The Honorable Daniel K. Akaka:
Chairman:
The Honorable John Ensign:
Ranking Member:
Subcommittee on Readiness and Management Support:
Committee on Armed Services:
United States Senate:
Subject: Defense Services Acquisition: Questions for the Record:
On January 17, 2007, I testified before the Subcommittee on the
Department of Defense's (DOD) management of its acquisition of
services.[Footnote 1] I made several key points during the hearing.
First, DOD's long-standing problems with contract management have
become more prominent as DOD's reliance on contractors to provide
services continues to grow. Second, DOD lacks sound contracting
practices when acquiring services. Third, DOD's acquisition workforce
has been downsized without sufficient attention to requisite skills and
competencies. Fourth, DOD's acquisitions have resulted in outcomes that
have cost the department valuable resources. And, finally, while DOD is
taking some steps to address these problems, it does not know how well
its services acquisition processes are working, which part of its
mission can best be met through buying services, and whether it is
obtaining the services it needs while protecting DOD's and the
taxpayer's interests.
Within this context, members of the Subcommittee requested that GAO
provide additional comments on DOD's efforts regarding the following
topics: interagency contracting, acquisition of services, acquisition
reform, and the acquisition workforce. The questions and our answers
are provided in appendix I. The responses are generally based on work
associated with previously issued GAO products, which were conducted in
accordance with generally accepted government auditing standards.
Because the responses are based on prior work, we did not obtain
comments from DOD.
We will make copies of this letter available to others upon request,
and it 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 contact me on (202) 512-4841 or
schinasik@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
letter. Key contributors to this letter were Timothy DiNapoli, James
Fuquay, Sara Margraf, Sylvia Schatz, Amelia Shachoy, and William Woods.
Signed by:
Katherine V. Schinasi:
Managing Director:
Acquisition and Sourcing Management:
Attachment:
Appendix I: GAO Responses to Questions for the Record:
Interagency Contracting:
Question: What is the potential effectiveness of two corrective actions
DOD has recently taken to improve oversight of interagency contracting-
-a December 2006 memorandum from the Director of Defense Procurement
and an October 2006 memorandum from the Defense Comptroller's office?
The October 2006 memorandum from the Comptroller, which was sent to DOD
components, established policies and procedures for ordering goods and
services that are not subject to the Economy Act that are purchased
from non-DOD agencies. For example, it requires officials to provide
evidence of market research and acquisition planning, and a statement
of work that is specific, definite, and certain for non-Economy Act
orders above the simplified acquisition threshold. The memorandum also
included a checklist and responsibilities for DOD officials to use as
guidance when placing orders through interagency contracts. These
actions should help to address prior GAO recommendations for better
defining contract requirements and outcomes, and the need for guidance
on the use of interagency contracts.
The December 2006 Memorandum of Agreement between DOD and the General
Services Administration (GSA) serves to establish expectations for the
parties involved in an interagency contracting transaction. For
example, the memorandum proscribes that statements of work are
complete, interagency agreements describe the work to be performed, and
surveillance and oversight requirements are defined and implemented.
The planned quarterly meetings for DOD and GSA to evaluate the
effectiveness of the Memorandum of Agreement are a positive step.
However, as the Acting Inspector General, DOD, pointed out during the
January 2007 hearing, the risks associated with interagency contracting
are not new and require sustained attention. The use of these types of
contracts continues to increase governmentwide, and our work and the
work of the Inspector General have found that users and administrators
lack expertise about how to use these contracts. In addition, adequate
oversight is lacking. For example, DOD issued guidance that was signed
in October 2004 (effective January 1, 2005) that outlines procedures to
be developed and general factors to consider in making the decision to
use another agency's contract. However, recent Inspector General audits
have found that the guidance is not always followed. In March 2006, the
DOD Comptroller issued a memorandum to the military departments,
defense agencies, and other components stating that DOD purchases made
through non-DOD entities continue to violate policies, existing
regulations, and practices regarding the use and control of DOD funds
under interagency agreements; the memorandum also stated that this
situation needed improvement. Therefore, although recent DOD actions
are welcome, DOD will need to continue to monitor its use of
interagency contracts and do more to define who is responsible for what
in the contracting process.
Acquisition of Services:
Question: How do recent steps taken by DOD, such as the Under Secretary
of Defense's October 2006 memorandum concerning the reform of services
acquisitions, compare to your recommendations regarding strategic and
tactical management?
DOD has taken a number of steps to improve its acquisition of services,
but these steps do not fully address our recommendations regarding
strategic and tactical management. For example, DOD's October 2006
memorandum identified a number of improvements in its current
management structure, including providing lower dollar thresholds for
reviewing proposed services acquisitions and requiring senior DOD
officials to annually review whether service contracts were meeting
established cost, schedule, and performance objectives. Further, in its
comments to our November 2006 report[Footnote 2]on DOD services
acquisitions, DOD noted that it had made organizational changes to
improve its strategic sourcing efforts; it was assessing the skills and
competencies needed by its workforce to acquire services; and the
military departments and defense agencies were conducting self-
assessments intended to address contract management issues we
identified in our high-risk report. Each of these efforts are steps in
the right direction, but in our view, appeared to be primarily
incremental improvements to DOD's current approach to acquiring
services.
Question: What do you think DOD needs to do to further address the
problems in the acquisition of services?
At a fundamental level, we believe DOD needs to begin to proactively
manage services acquisitions outcomes, an action that will involve
making changes at both the strategic and transactional levels. In
contrast, DOD's approach to managing the acquisition of services has
tended to be reactive, and, as noted above, DOD's reform efforts appear
to be primarily incremental improvements to existing processes. In our
view, such incremental improvements will not place DOD in a position to
proactively manage services.
As we noted in our November 2006 report, DOD stated that it was
examining the types and kinds of services it acquired and developing an
integrated assessment of how best to acquire such services. DOD
expected that this assessment would result in a comprehensive,
departmentwide architecture for acquiring services that would, among
other improvements, help refine the processes to develop requirements,
ensure that individual transactions are consistent with DOD's strategic
goals and initiatives, and provide a capability to assess whether
services acquisitions were meeting their cost, schedule and performance
objectives. DOD expected this assessment would be completed in early
2007. Our discussions with DOD officials indicated that this
architecture may hold potential for making the more fundamental change
at the strategic and transactions levels that we have recommended. We
cautioned, however, that the extent to which DOD successfully
integrated the elements we identified would be key to fostering the
appropriate attention and action needed to make services acquisitions a
managed outcome.
Question: Do you have any recommendations that Congress should consider
to ensure that the progress made endures?
Congressional oversight, including hearings such as this, plays a
significant and important role in helping to assess progress, identify
challenges, focus senior management attention, and hold DOD accountable
for its actions.
Acquisition Reform:
Question: How do, or should, reforms in the acquisition of services fit
within this Committee's broader acquisition reform efforts?
We believe that three elements transcend the type of goods or services
DOD buys: recognizing that mission success depends heavily on a
successful acquisition function and elevating senior leadership
attention and accountability accordingly; ensuring that the government
negotiates the best deal possible, a precursor of which is the market-
based discipline of competition; and monitoring the outcome of
acquisition decisions to ensure that the government gets what it pays
for. Although improvements should be targeted according to facts and
circumstances, the line between acquiring goods and acquiring services
is blurring as DOD contracts out the management of its major systems
acquisitions. The Subcommittee's efforts to promote good practices are
relevant for both the acquisition of goods and the acquisition of
services.
Question: Are there common lessons learned or processes to be applied
between major weapon systems acquisition and services acquisitions
reform?
Services acquisitions parallel major weapon system acquisitions in that
both should start with well-defined requirements, conduct sufficient
market research, maximize competition, use qualified contractors,
appropriately incentivize contractor performance, provide oversight or
surveillance of the contractor's performance, and accept and pay for
only quality outcomes. Our work has repeatedly found weaknesses in
these processes. As we noted in our January 2007 testimony before the
Subcommittee, DOD does not know how well its services acquisition
processes are working and whether it is obtaining the services it needs
while protecting DOD's and the taxpayers' interests. Key to achieving
better outcomes will be DOD's ability to translate well-meaning
guidance and policy into actual practice. In trying to improve the
acquisition of both goods and services, the underlying incentives that
drive behavior--particularly funding--are most often ignored.
Acquisition Workforce:
Question: The DOD workforce is an aging workforce and is losing much of
its talent through retirement. The talent that does remain may not
match up well with the skills needed to buy software-intensive, net-
centric weapons. What are your views on the health and composition of
the acquisition workforce?
Although defining the acquisition workforce as the focus of attention
is appropriate in some respects, the problems facing DOD today are
broader as the increased demands on the acquisition workforce also
stem, in part, from declines in the capacity of the overall DOD
workforce and, in part, from the demands emanating from the
requirements process. That said, we have raised concerns about the
health and composition of DOD's acquisition workforce for several
years. DOD's acquisition workforce must have the right skills and
capabilities if it is to effectively implement best practices and
properly manage the goods and services it buys. We noted in reports
issued in 2003 and July 2006, however, that procurement reforms,
changes in staffing levels, workload, and the need for new skill sets
have placed unprecedented demands on the acquisition workforce.
Further, DOD's current civilian acquisition workforce level reflects
the considerable downsizing that occurred in the 1990s. DOD carried out
this downsizing without ensuring that it had the specific skills and
competencies needed to accomplish DOD's mission. As a result, these
factors have challenged DOD's ability to maintain a workforce with the
requisite knowledge of market conditions and industry trends, the
ability to prepare clear statements of work, an understanding of the
technical details about the services they buy, and the capacity to
manage and oversee contractors. In the case of the $160-billion Future
Combat Systems program, for example, the Army chose to use a lead
systems integrator because it did not believe it had the in-house
resources or flexibility to field such a complex system in the time
required.[Footnote 3]
DOD has acknowledged that it faces significant workforce challenges
that if not effectively addressed could impair the responsiveness and
quality of acquisition outcomes. In June 2006, DOD issued a human
capital strategy that identified a number of steps planned over the
next 2 years to more fully develop a long-term approach to managing its
acquisition workforce, including developing a comprehensive competency
model for each functional career field including the technical tasks,
knowledge, skills, abilities, and personal characteristics required of
the acquisition workforce.
Question: What are the immediate priorities that must be addressed to
ensure that the workforce can meet the demands of today's acquisitions?
First, we have reported that senior DOD leaders need to set the
appropriate tone at the top and ensure that its personnel adhere to
sound contracting practices.[Footnote 4] Senior leadership is a
critical factor in providing direction and vision as well as in
maintaining the culture of the organization. As such, senior leaders
have the responsibility to communicate and demonstrate a commitment to
sound practices deemed acceptable for the acquisition function. Without
sustained and prominent senior leadership, DOD increases its
vulnerability to contracting fraud, waste, and abuse if it does not
ensure that its decision makers, personnel, and contractors act in the
best interests of DOD and taxpayers. DOD has emphasized making contract
awards quickly; sometimes, however, the focus on speed has come at the
expense of sound contracting techniques.
Second, DOD needs to determine what skill sets its current workforce
has, and what skill sets the workforce needs, to carry out DOD's
mission. As I previously noted, DOD's June 2006 strategic human capital
plan identified a number of steps planned over the next 2 years to more
fully develop a long-term approach to managing its acquisition
workforce, including developing a comprehensive competency model for
each functional career field. The model should identify the technical
tasks, knowledge, skills, abilities, and personal characteristics
required of the acquisition workforce. As part of this effort, DOD also
needs to assess whether it has sufficient numbers of adequately trained
personnel to plan, negotiate and award contracts, and to manage and
assess contractor performance.
Question: Are you concerned that we are relying too much on service
contractors to augment DOD program offices?
We have expressed concern about DOD's growing reliance on contractors.
This reliance is a governmentwide phenomenon and is occurring across a
wide variety of activities and functions, including support for program
offices. In recent years, for example, DOD has been using a lead
systems integrator approach that allows one or more contractors to
define weapon system's architecture and then manage both the
acquisition and integration of subsystems into the architecture. This
approach relies on contractors to fill roles and handle
responsibilities that differ from the more traditional prime contractor
relationship the contractors had with the program offices and can blur
the oversight responsibilities between the lead systems integrator and
DOD program management representatives. To illustrate this point, the
Army's Future Combat Systems program is managed by a lead systems
integrator that assumes the responsibilities of developing
requirements, selecting major system and subsystem contractors, and
making trade-off decisions among costs, schedules, and capabilities.
While this management approach has some advantages for DOD, we found
that the extent of contractor responsibility in many aspects of program
management is a potential risk.Given the growing role of contractors,
we believe it is important for DOD to identify the functions and tasks
contractors are performing, the reasons or justifications for choosing
a contractor instead of using a government employee, and the costs and
risks inherent in such choices. In addition, we believe it is important
for DOD to identify and mitigate the risks that can accompany increased
reliance on contractors--risks such as organizational or personal
conflicts of interest and insufficient in-house capacity to ensure that
contractors meet cost, schedule, and performance requirements. We are
conducting work to explore these issues.
Question: The Congress has provided many different tools to DOD to
improve the hiring and training of acquisition personnel. Have the
tools for rapid hiring authority been given to the acquisition
workforce?
We have not evaluated the use of the tools that have been provided to
DOD for rapid hiring authority.
Question: In your opinion, do the new authorities under the National
Security Personnel System (NSPS) for performance management offer an
opportunity for improved accountability? If, so, have you made such a
recommendation to DOD leadership?
Our past testimonies and work indicate that evaluating the effect of
NSPS will be an ongoing challenge. However, we believe NSPS does offer
an opportunity for improved accountability. In our July 2005 report on
DOD's efforts to design NSPS, we recommended that DOD develop
procedures for evaluating NSPS that contain results-oriented
performance measures and reporting requirements.[Footnote 5] Our prior
work also indicates that involving employees and other stakeholders
helps to improve overall confidence and belief in the fairness of the
system, enhance their understanding of how the system works, and
increases their understanding and ownership of organizational goals and
objectives. Organizations have found that the inclusion of employees
and their representatives needs to be meaningful, not just pro forma.
Results-oriented performance measures and reporting requirements along
with employee involvement can improve accountability.
Recruitment and Retention:
Question: The vast number of retirement-eligible federal employees
presents a manpower challenge across the federal government, and
specifically in adequately replacing members of the acquisition
workforce. What innovative recruitment, retention, hiring, and/or
training methods have been employed to address the inevitable reduction
in the acquisition workforce? What methods have proved successful thus
far? What limitations stymie more robust recruiting and retention
results, and are there legislative changes or authorities that would
enhance DOD's efforts in this area?
Our prior work has shown that DOD needs to conduct comprehensive
acquisition workforce planning to address recruitment, hiring,
retention, and training issues. We reported in April 2002 that DOD
recognized the need as well as the substantial challenges involved in
implementing a strategic approach to shaping the acquisition
workforce.[Footnote 6] In June 2004, we reported that DOD had taken
steps to develop and implement civilian strategic workforce plans to
address future civilian workforce needs, but these plans generally
lacked some key elements essential to successful workforce
planning.[Footnote 7] None of the plans included analyses of the gaps
between critical skills and competencies currently needed by the
workforce and those that will be needed in the future. Without
including analyses of gaps in critical skills and competencies, DOD and
its components may not be able to design and fund the best strategies
to fill its talent needs through recruiting and hiring or to make
appropriate investments to develop and retain the best possible
workforce. Such gap analyses need to be completed to address
acquisition workforce shortcomings and to identify methods that might
prove successful for recruiting and retention. While we made several
recommendations to improve DOD's strategic workforce planning efforts,
the work we have completed has not identified the need for legislative
changes or authorities to enhance DOD's efforts in the areas of
recruitment and retention. However, we continue to be concerned about
strategic human capital issues at DOD, as well as across the federal
government, as we point out in our recently issued high-risk
report.[Footnote 8]
Acquisition Practices:
Question: The Administration has made clear the priority of success in
the global war on terrorism, and the DOD has an enormous role in this
fight. Given your finding that DOD needs significant improvement in
both contract oversight and interagency contracting practices, DOD
clearly faces multiple challenges on the contracting front as part of
its role in global war on terrorism support. What are your
recommendations for how DOD might simultaneously improve contract
practices in its Iraq reconstruction mission and develop and implement
strategic acquisition processes?
As the Comptroller General noted during testimony in February 2007, the
challenges faced by DOD on its reconstruction and support contracts in
Iraq often reflected systemic and long-standing shortcomings in DOD's
capacity to manage contractor efforts.[Footnote 9] Such shortcomings
result from various factors, including poorly defined or changing
requirements; the use of poor business arrangements; the absence of
senior leadership and guidance; and an insufficient number of trained
contracting, acquisition, and other personnel to manage, assess, and
oversee contractor performance. In turn, these shortcomings manifest
themselves in higher costs to taxpayers, schedule delays, unmet
objectives, and other undesirable outcomes.
Through the years, we have made recommendations to help DOD address
these shortcomings, including recommendations intended to assure that
adequate acquisition staff and other resources are available to support
future operations, to emphasize the need to clearly define contract
requirements in a timely manner, to improve the management of
interagency contracting, and to resolve long-standing issues with
regard to the management and use of support contractors. DOD has
generally agreed with our recommendations and has some actions underway
to address them. However, senior DOD leadership is needed to address
these issues on a systemic level and ensure that subsequent changes in
DOD's policies and practices are implemented, as appropriate, in Iraq.
FOOTNOTES
[1] GAO, Defense Acquisitions: DOD Needs to Exert Management and
Oversight to Better Control Acquisition of Services, GAO-07-359T
(Washington, D.C.: Jan. 17, 2007).
[2] GAO, Defense Acquisitions: Tailored Approach Needed to Improve
Service Acquisition Outcomes, GAO-07-20 (Washington, D.C.: Nov. 9,
2006).
[3] The Future Combat Systems program is a family of weapons, including
14 manned and unmanned ground vehicles, air vehicles, sensors and
munitions that will be linked by an information network.
[4] GAO, Contract Management: DOD Vulnerabilities to Contracting Fraud,
Waste, and Abuse, GAO-06-838R (Washington, D.C.: July 7, 2006).
[5] GAO, Human Capital: DOD's National Security Personnel System Faces
Implementation Challenges,
GAO-05-730 (Washington, D.C.: July 14, 2005).
[6] GAO, Acquisition Workforce: Department of Defense's Plans to
Address Workforce Size and Structure Challenges, GAO-02-630
(Washington, D.C.: April 30, 2002).
[7] GAO, DOD Civilian Personnel: Comprehensive Strategic Workforce
Plans Needed, GAO-04-753 (Washington, D.C.: June 30, 2004).
[8] GAO, High Risk Series: An Update, GAO-07-310 (Washington, D.C.:
January 2007).
[9] GAO, Rebuilding Iraq: Reconstruction Progress Hindered by
Contracting, Security, and Capacity Challenges, GAO-07-426T
(Washington, D.C.: Feb. 15, 2007).
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