Mandate on the Department of Defense's Contract Award Procedures for Directed Spending Items
Gao ID: GAO-09-113R November 19, 2008Section 830 of the National Defense Authorization Act for Fiscal Year 2008 directed GAO to compare procedures used for awarding noncompetitive defense contracts for new projects pursuant to (1) congressionally directed spending items or congressional earmarks and (2) the special interests of senior executive branch officials.
As communicated with congressional staff in July and August 2008, despite our diligent efforts in exploring various approaches, we have concluded that it is not feasible for us to address the mandate as written. First, we have not found a methodologically sound approach for systematically identifying "new projects of special interest to senior executive branch officials." Second, we were unable to apply the definitions of "congressionally directed spending items" and "congressional earmarks" recently incorporated in Senate and House Rules, respectively, because of data availability and timing issues. Finally, with these underlying constraints, the comparison of procedures called for in the mandate was not possible. The following sections summarize the approaches we explored and the reasons they were not feasible.
GAO-09-113R, Mandate on the Department of Defense's Contract Award Procedures for Directed Spending Items
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GAO-09-113R:
United States Government Accountability Office:
Washington, DC 20548:
November 19, 2008:
Congressional Committees:
Subject: Mandate on the Department of Defense's Contract Award
Procedures for Directed Spending Items:
Section 830 of the National Defense Authorization Act for Fiscal Year
2008[Footnote 1] directed GAO to compare procedures used for awarding
noncompetitive defense contracts for new projects pursuant to (1)
congressionally directed spending items or congressional earmarks and
(2) the special interests of senior executive branch officials.
Specifically, it states:
"Not later than one year after the date of the enactment of the Act,
the Comptroller General of the United States shall submit to the
congressional defense committees a report on the use of procedures
other than competitive procedures in the award of contracts by the
Department of Defense. The report shall compare the procedures used by
the Department of Defense for the award of funds for new projects
pursuant to congressionally directed spending items, as defined in rule
XLIV of the Standing Rules of the Senate, or congressional earmarks, as
defined in rule XXI of the Rules of the House of Representatives, with
the procedures used by the Department of Defense for the award of funds
for new projects of special interest to senior executive branch
officials."
To address the mandate, we obtained documentation and interviewed
officials from the Congressional Research Service (CRS), the Office of
Management and Budget (OMB), the Office of the Secretary of Defense
(OSD), each of the military services, the Joint Chiefs of Staff, one
combatant command, several subcommands, and other Department of Defense
(DOD) agencies. We reviewed appropriation bills and related conference
reports for fiscal years 2005 and 2008 and certain clauses of rule XLIV
of the Standing Rules of the Senate and rule XXI of the Rules of the
House of Representatives that pertain to directed spending items and
earmarks, respectively. We focused on these fiscal years because 2008
data are the most current data and because 2005 data were subject to
the most extensive collection and analysis of directed spending items
and earmarks by OMB and DOD. We also contacted officials and analyzed
information from groups such as Taxpayers for Common Sense (TCS) and
Citizens Against Government Waste. In addition, we met with former
government employees with work experience in the legislative branch and
at OMB and obtained their perspectives and viewpoints on special
interest items. We also reviewed and compared the contents of databases
maintained by OMB, DOD, and TCS that included information on directed
spending items and earmarks. In addition, we explored various
approaches for defining the term or phrase "projects of special
interest to senior executive branch officials" and identifying such
projects. Finally, we judgmentally selected 29 fiscal year 2005
congressionally directed spending items and reviewed the procedures DOD
used to award contracts; the sample of contracts included some awarded
by each of the military services. Our work was conducted from February
through October 2008 in accordance with GAO's quality standards and
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
As communicated with your staff in July and August 2008, despite our
diligent efforts in exploring various approaches, we have concluded
that it is not feasible for us to address the mandate as written.
First, we have not found a methodologically sound approach for
systematically identifying "new projects of special interest to senior
executive branch officials." Second, we were unable to apply the
definitions of "congressionally directed spending items" and
"congressional earmarks" recently incorporated in Senate and House
Rules, respectively, because of data availability and timing issues.
Finally, with these underlying constraints, the comparison of
procedures called for in the mandate was not possible.[Footnote 2] The
following sections summarize the approaches we explored and the reasons
they were not feasible.
Unable to Systematically Identify Executive Branch New Special Interest
Projects:
Several factors precluded us from performing the analysis on the
executive branch side specified in the mandate. First, we found no
commonly accepted definition of the term "new projects of special
interest to senior executive branch officials" thereby making it
difficult to identify an acceptable list of such projects.[Footnote 3]
Second, since senior government officials, in general, have some level
of management discretion in performing their missions, it is inherently
difficult to attempt to distinguish decisions related to "new projects
of special interest" from decisions they make exercising their general
discretion as senior managers. Further, we found that little evidence
or documentation exists linking project level decisions back to a
particular senior government official.
We explored numerous approaches for identifying and collecting data to
determine if we could identify new projects of special interest to
senior government officials. As summarized below, we determined that
each of these approaches faced significant shortcomings with respect to
definitions, data availability, or methodology, or a combination
thereof, that rendered them infeasible.
* Reviewing the President's budget and the DOD budget process:
We reviewed the President's budget and aspects of DOD's internal budget
process and discussed with DOD officials possible revisions made at the
request of senior government officials before the budget is submitted
to Congress. For example, we identified military construction projects
in the President's budget that specify an entity or location. However,
DOD officials told us that these projects are vetted through the
budgetary process. According to DOD officials, changes made during
budget formulation by senior officials do not necessarily correlate to
new projects of special interest and must meet the agency's overall
policy goals. Changes made by federal agencies may or may not reflect
new projects of special interest. It is not possible to determine which
category a decision falls into without affirmation of the decision
maker. Without this affirmation, we cannot determine if a budget
revision reflects an adjustment in high-level policy priorities or
reflects the effort of an individual to direct funding at a project
level.
* Reviewing DOD reprogramming actions:
We reviewed DOD's reprogramming process and selected reprogramming
actions[Footnote 4] made during the year of execution to determine the
extent to which these actions occur and how the actions are approved.
As part of this effort, we reviewed new starts[Footnote 5] included in
DOD's reprogramming reports for fiscal years 2005 to 2007. We found no
evidence to link any of these types of reprogramming actions back to a
project of interest to senior government officials.
* Discretionary spending by high level officials:
We held discussions with high-level DOD offices and commands to
identify instances where budget execution changes might be made at the
discretion of a senior government official. We found that sufficient
data are not available to identify and track minor changes. More
significant changes to budget execution, those above a specified dollar
threshold, generally result in reprogramming actions that require
reporting to the congressional defense committees. Further, officials
representing high-level DOD offices and commands told us that they do
not award any discretionary funds but instead send the funds out to the
service level for contract award to support mission requirements. Our
prior work examined one combatant command with both command and
acquisition authority--the United States Special Operations Command
(SOCOM)--the only command with a "checkbook."[Footnote 6] SOCOM funded
86 acquisition programs from 2001 to 2006 to meet its specific
battlefield needs. SOCOM assesses proposed programs through a screening
process that weighs the relative costs, benefits, and risks of each and
selects those that help SOCOM balance near-and future-term
opportunities, and other needs. Our prior work found that the 86
acquisition programs were consistent with SOCOM's mission.
* Reviewing government and private sector databases:
We reviewed three earmark databases maintained by OMB, DOD, and TCS to
see if the databases identified items as projects of special interest
to a senior government official or officials and were funded through
allocated appropriations controlled by or under the discretion of those
officials. We found that these databases did not identify items as new
projects of special interest to senior government officials.
* Identifying decisions directing contracts to specific beneficiaries
or contractors during the contract award process:
We met with officials from several high-level DOD organizations, such
as the Office of the Under Secretary of Defense for Acquisition,
Technology and Logistics, to discuss and obtain information on sole-
source contracts that could link project level decisions to senior
government officials or to specific contractors. These DOD officials
told us that they do not have contracting authority or capability and,
therefore, do not execute the award of contracts; instead, the contract
award process is delegated to and carried out by military service level
or other DOD support organizations.[Footnote 7] When we reviewed a
sample of sole-source contracts awarded by these organizations, we
found the use of justifications for awarding contracts noncompetitively
that are specifically required by the Federal Acquisition Regulation
(FAR),[Footnote 8] but did not find linkages of the awards to
particular senior government officials. We further attempted to focus
on cases discussed in the news media of alleged steering of contracts
by senior DOD officials, but this approach did not allow the
development of sufficient data sets required to perform an objective
and methodologically sound analysis.
House and Senate Rules:
The Senate and House rules are designed to make the government funding
process more transparent by more clearly identifying congressionally
directed spending items and congressional earmarks, respectively. In
prior reports, the CRS, the DOD Inspector General, and we have noted
that there are no single commonly accepted definitions of such terms as
"congressionally directed spending item" and "earmark" and we believe
that any attempt to define the terms is subject to interpretation and
challenge. The terms have been defined and used in various ways,
including the following:
* GAO's Glossary of Terms Used in the Federal Budget Process defines
earmarking as dedicating collections by law for a specific purpose or
program or designating any portion of a lump-sum amount for particular
purposes by means of legislative language.[Footnote 9]
* OMB defines earmarking as funds provided by the Congress for projects
or programs where congressional direction (in bill or report language)
"circumvents" the merit-based or competitive allocation process or
specifies the location or recipient, or otherwise curtails the ability
of the executive branch to control critical aspects of the funds
allocation process. On January 29, 2008, the President issued Executive
Order 13457[Footnote 10] directing executive agencies not to commit,
obligate, or expend funds on the basis of earmarks included in any non-
statutory source, including requests in reports of congressional
committees or other congressional documents or communications from or
on behalf of members of Congress, except when required by law or when
an agency has itself determined a project, program, activity, grant, or
other transaction to have merit under statutory criteria or other merit-
based decision making. The executive order applies to appropriations
laws and other legislation enacted after the date of the order. On
October 23, 2008, OMB issued a memorandum providing guidance on
implementing the Consolidated Security, Disaster Assistance, and
Continuing Appropriations Act, 2009 in accordance with Executive order
13457 on "Protecting American Taxpayers from Government Spending on
Wasteful Earmarks." The memo specifies, in implementing the Act,
agencies are legally obligated to fund an earmark only if it was in the
statutory text of the fiscal year 2008 appropriation (including
earmarks that were statutorily incorporated by reference), was of a
continuing nature (rather than of a one-time, non-recurring nature),
and could not be carried out by funding the earmark in the remainder of
fiscal year 2009 if Congress ultimately decides to provide continued
funding in fiscal year 2009 for that earmark.[Footnote 11]
* According to DOD officials, the department defines directed spending,
which they refer to as "add-ons," as an increase in funding levels in
the bill language included in the appropriations conference report that
was not originally requested in the President's budget submission.
* CRS defines earmarks as "funds set aside for a specific purpose, use
or recipient."[Footnote 12]
In 2007, both the House and Senate adopted rules to bring greater
transparency to congressional earmarks and directed spending items. The
House rules defined the term "congressional earmark" as a provision or
report language included primarily at the request of a Member,
Delegate, Resident Commissioner, or Senator providing, authorizing, or
recommending a specific amount of discretionary budget authority,
credit authority, or other spending authority for a contract, loan,
loan guarantee, grant, loan authority, or other expenditure with or to
an entity, or targeted to a specific state, locality, or congressional
district, other than through a statutory or administrative formula-
driven or competitive award process.[Footnote 13] The rules were added
to explicitly describe what should be declared as congressionally
directed spending items and congressional earmarks, and established
public disclosure requirements. Both the House and Senate rules require
public disclosure of a list of congressional earmarks and
congressionally directed spending items. The House and Senate
Appropriations Committees compiled a list of these items for the first
time in fiscal year 2008.
We were unable to apply the definitions of congressional earmarks and
congressionally directed spending items specified in House and Senate
Rules, respectively, in this review because of data availability and
timing issues:
* For years prior to when the rules went into effect, data associated
with the disclosure requirements are not available to permit us to
apply the definition to items in particular committee report
provisions. Specifically, we cannot confirm that (1) the provision was
included primarily at the request of a Senator or Member, Delegate, or
Resident Commissioner; (2) whether the spending item in the provision
was targeted to a specific state, locality, entity, or congressional
district by its sponsor; and (3) if it was so targeted, whether it
involved a statutory or administrative formula-driven or competitive
award process.
* For fiscal year 2008, the most current year, we could not complete an
analysis of directed spending items and earmarks because of limited
time available for DOD to either obligate the funding or award a
contract. Funds are available for obligation for 1 to 5 years depending
on the type of funds involved. For example, procurement funds are
available for obligation for 3 years, which means that fiscal year 2008
funds might not be obligated until sometime in fiscal year 2010. As a
result, we believe it would not yet be possible to develop a
comprehensive perspective of the competitive or noncompetitive award
status of the congressionally directed spending items or congressional
earmarks for fiscal year 2008.
Unable to Compare Directed Spending Items in the Legislative and
Executive Branches:
Various federal agencies and nongovernmental organizations have devoted
considerable resources to identifying and monitoring trends in
congressionally directed spending items or congressional earmarks and
both the House and the Senate have recently taken actions to bring
greater transparency to this area. Little information about directed
spending by executive level officials is available making transparency
difficult. DOD officials indicated that executive directed spending
does not exist because items in the budget are vetted in the normal
process of developing the budget proposal. OMB representatives told us
that they look at the defense budget from an overall policy level
rather than at the budget line item level. Our work on this mandate, as
discussed throughout this letter, has shown that little information is
available to identify directed spending by senior executive branch
officials, should it occur.
Agency Comments and Our Evaluation:
DOD and OMB representatives provided oral comments on a draft of this
letter. Both stated that they agreed with our facts and observations.
DOD and OMB also provided technical comments, which we incorporated as
appropriate.
We are sending copies of this report to the Secretary of Defense and
the Director of the Office of Management and Budget. In addition, the
correspondence will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you have any questions or need additional information, please
contact me at (202) 512-7252 or sherrilla@gao.gov. Key contributors to
this report were James Fuquay, Assistant Director; Matt Drerup; Michael
Hesse; Wendell Hudson; Ken Patton; Sylvia Schatz; Wendy Smythe; and
Robert Swierczek.
Signed by:
Andrew Sherrill:
Acting Director, Acquisition and Sourcing Management:
List of Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable John P. Murtha:
Chairman:
The Honorable C. W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of section]
Footnotes:
[1] Pub. L. No. 110-181.
[2] In a prior report, GAO describes selected federal agencies'
procedures for responding to congressional directives. With respect to
DOD, the report describes the extent to which the department
identified, categorized, tracked, executed, and reported on funds
related to congressional directives. See GAO, Congressional Directives:
Selected Agencies' Processes for Responding to Funding Instructions
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-209] (Washington,
D.C.: Jan. 31, 2008).
[3] The statute did not define the term "senior executive branch
official." For purposes of this discussion, we are using the term
"senior government official" in a general sense.
[4] Reprogramming enables DOD to shift funds within an appropriation or
fund account to use them for different purposes than those contemplated
at the time of appropriation by Congress. It is generally preceded by
consultation between DOD and the appropriate congressional committees
and sometimes requires formal notification.
[5] A new start is the initiation of an effort not previously justified
to and funded by Congress during the normal budget process.
[6] GAO, Defense Acquisitions: An Analysis of the Special Operations
Command's Management of Weapon System Programs, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-620] (Washington, D.C.: June
28, 2007).
[7] Examples of support organizations are the Army Contracting Center
of Excellence and the Washington Headquarters Service that carry out
contracting actions for DOD offices, including those located in the
Pentagon.
[8] FAR 6.302 identifies seven statutory authorities for other than
full and open competition: (1) only one responsible source and no other
supplies or services will satisfy agency requirements; (2) unusual and
compelling urgency; (3) industrial mobilization, engineering,
developmental, or research capability; or expert services; (4)
international agreement; (5) authorized or required by statute; (6)
national security; and (7) public interest.
[9] GAO, A Glossary of Terms Used in the Federal Budget Process,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-734SP]
(Washington, D.C.: September 2005). GAO's glossary fulfills part of
GAO's responsibility under 31 U.S.C. § 1112(c)(1) to publish standard
terms, and classifications for the government's fiscal, budget, and
program information. The glossary must be developed in cooperation with
the Secretary of the Treasury, OMB, and the Congressional Budget
Office.
[10] E.O. 13457, 73 Fed. Reg. 6417 (Feb. 1, 2008).
[11] OMB Memorandum M-09-03, Guidance on implementing P.L. No. 110-329
in accordance with Executive Order 13457 on "Protecting American
Taxpayers From Government Spending on Wasteful Earmarks" (Oct. 23,
2008).
[12] In prior work, CRS pointed out that the treatment of earmarks
reflects procedures established over time that may differ from one
appropriation bill to another. For some bills, a directed spending item
may refer to funds set aside within an account. In other bills, the
application may reflect a narrower set of directives to fund individual
projects, locations, or institutions. See CRS, Earmarks and Limitations
in Appropriation Bills, Report 98-518 Gov (updated Dec. 7, 2004); and
Bush Administration Policy Regarding Congressionally Originated
Earmarks: An Overview, Report RL34648 (Sept. 4, 2008).
[13] The Senate rule's definition for "congressionally directed
spending item" is the same as the House rule's definition for
"congressional earmark," except the Senate rule does not include a
"Member, Delegate, or Resident Commissioner" as a requester as in the
House rule, but instead includes only "Senator" as a requester.
[End of section]
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