Homeland Security
Further Action Needed to Promote Successful Use of Special DHS Acquisition Authority Gao ID: GAO-05-136 December 15, 2004The Homeland Security Act of 2002 authorized the Department of Homeland Security (DHS) to establish a pilot program for the use of acquisition agreements known as "other transactions." Because they are exempt from many of the requirements that apply to government contracts, other transactions can be useful in acquiring cutting-edge technologies from entities that traditionally have declined to do business with the government. The act requires GAO to report to Congress on the use of other transactions by DHS. To fulfill this obligation, GAO (1) determined if DHS has developed policies and established a workforce to manage other transactions effectively and (2) evaluated how effectively DHS has used its other transactions authority to attract nontraditional government contractors.
The Department of Homeland Security has issued policy and is developing a workforce to implement its other transactions authority, but the department's policies need further development and its contracting workforce needs strengthening to promote the successful use of the authority in the future. Soon after it was established, DHS issued other transactions solicitations using some commonly accepted acquisition practices and knowledge-based acquisition principles. Subsequently, the department issued a management directive and drafted guidance for using other transactions, loosely modeled on the practices of the Department of Defense (DOD), one of several other agencies with other transactions authority and the one with the most experience with using these agreements. Unlike DOD, however, DHS has not specified in its policies or guidance when its contracting staff should consider the use of independent audits to help ensure, for example, that payments to contractors are accurate. Similarly, DHS has not established training requirements to aid staff in understanding and leveraging the benefits of other transactions. The DHS contracting workforce is limited in size and capacity, which could impede the department's ability to manage a potential increase in its other transactions workload. DHS is taking steps to enhance the capacity of its contracting workforce. The DHS Science and Technology Directorate included nontraditional government contractors in its first two other transactions projects. The Directorate engaged in extensive outreach efforts, such as conducting briefings on its mission and research needs to industry and academic institutions and using a number of Web-based tools to publicize its solicitations. But DHS has not yet developed mechanisms to capture and assess the knowledge gained about the use of other transactions. As a result, DHS may not be able to leverage information from current projects for use in future solicitations that use other transactions.
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-05-136, Homeland Security: Further Action Needed to Promote Successful Use of Special DHS Acquisition Authority
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
December 2004:
Homeland Security:
Further Action Needed to Promote Successful Use of Special DHS
Acquisition Authority:
GAO-05-136:
GAO Highlights:
Highlights of GAO-05-136, a report to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform:
Why GAO Did This Study:
The Homeland Security Act of 2002 authorized the Department of Homeland
Security (DHS) to establish a pilot program for the use of acquisition
agreements known as ’other transactions.“ Because they are exempt from
many of the requirements that apply to government contracts, other
transactions can be useful in acquiring cutting-edge technologies from
entities that traditionally have declined to do business with the
government.
The act requires GAO to report to Congress on the use of other
transactions by DHS. To fulfill this obligation, GAO (1) determined if
DHS has developed policies and established a workforce to manage other
transactions effectively and (2) evaluated how effectively DHS has used
its other transactions authority to attract nontraditional government
contractors.
What GAO Found:
The Department of Homeland Security has issued policy and is developing
a workforce to implement its other transactions authority, but the
department‘s policies need further development and its contracting
workforce needs strengthening to promote the successful use of the
authority in the future. Soon after it was established, DHS issued
other transactions solicitations using some commonly accepted
acquisition practices and knowledge-based acquisition principles.
Subsequently, the department issued a management directive and drafted
guidance for using other transactions, loosely modeled on the practices
of the Department of Defense (DOD), one of several other agencies with
other transactions authority and the one with the most experience with
using these agreements. Unlike DOD, however, DHS has not specified in
its policies or guidance when its contracting staff should consider the
use of independent audits to help ensure, for example, that payments to
contractors are accurate. Similarly, DHS has not established training
requirements to aid staff in understanding and leveraging the benefits
of other transactions. The DHS contracting workforce is limited in size
and capacity, which could impede the department‘s ability to manage a
potential increase in its other transactions workload. DHS is taking
steps to enhance the capacity of its contracting workforce.
The DHS Science and Technology Directorate included nontraditional
government contractors in its first two other transactions projects.
The Directorate engaged in extensive outreach efforts, such as
conducting briefings on its mission and research needs to industry and
academic institutions and using a number of Web-based tools to
publicize its solicitations. But DHS has not yet developed mechanisms
to capture and assess the knowledge gained about the use of other
transactions. As a result, DHS may not be able to leverage information
from current projects for use in future solicitations that use other
transactions.
Profile of Early DHS Other Transactions Awards:
Countermeasures for Man Portable Air Defense System:
* Prototype project to protect commercial aircraft.
* Estimated total budget: $96 million.
* Three phase I awards and two phase II awards as of October 25, 2004.
Detection Systems for Chemical and Biological Countermeasures:
* Prototype project to protect against chemical and biological attacks.
* Estimated budget for phase I: $6.6 million.
* 17 phase I awards as of August 2, 2004
Source: DHS.
Note: All awards included a nontraditional government contractor at
either the prime or subaward level.
[End of table]
What GAO Recommends:
To promote the efficient and effective use of its other transactions
authority GAO recommends that DHS (1) provide guidance on including
audit provisions in other transactions agreements, (2) develop a
training program in the use of other transactions, and (3) capture
knowledge obtained during the acquisition process for use in planning
and implementing future other transactions projects.
DHS generally concurred with our recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-05-136.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William T Woods at (202)
512-4841 or woodsw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Scope and Methodology:
Background:
DHS Placed Initial Priority on Project Implementation while Developing
Other Transactions Policy and Acquisition Workforce:
DHS Included Nontraditional Government Contractors in Initial Projects,
but Practices May Not Fully Leverage Market Capabilities:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Comments from the Department of Homeland Security:
Tables:
Table 1: DHS's List of Laws Generally Inapplicable to Its Other
Transactions Agreements:
Table 2: DHS's Purposes and Criteria for Using Other Transactions for
Research and Prototype Projects:
Table 3: Composition of Counter-MANPADS Project Phase 1 Contractor
Teams:
Figures:
Figure 1: S&T Directorate's Fiscal Year 2004 Acquisition Activity:
Figure 2: The S&T Directorate's Offices and Overview of
Their Functions:
Figure 3: Mobile Laboratory--Exterior and Interior Views:
Figure 4: Illustration of Commercial Airplane Using Laser Technology to
Deflect MANPADS Missile:
Figure 5: Overview of the S&T Directorate's Acquisition Process for
Other Transactions:
Figure 6: Counter-MANPADS Project Phase 1 and Phase 2 Payable
Milestones:
Figure 7: Timeline of DHS's Development of Policies and Guidance for
Using Other Transactions and Its Ongoing Other Transactions Projects:
Figure 8: Illustration of S&T Directorate's Increasing Other
Transactions Workload and Available In-house Contract Administration
Support, Fiscal Year 2004 to Fiscal Year 2005:
Figure 9: Illustration of S&T Directorate's Current Acquisition
Processes with Possible Knowledge Management Function:
Abbreviations:
BAA: broad agency announcements:
CAS: Cost Accounting Standards:
Chem-Bio: Chemical and Biological Countermeasures:
Counter-MANPADS: Countermeasures for Man Portable Air Defense System:
CPO: Chief Procurement Officer:
DARPA: Defense Advanced Research Projects Agency:
DCAA: Defense Contract Audit Agency:
DHS: Department of Homeland Security:
DOD: Department of Defense:
FAR: Federal Acquisition Regulation:
FTE: full-time equivalent:
HSARPA: Homeland Security Advanced Research Projects Agency:
IP: intellectual property:
IPT: Integrated Product Team:
R&D: research and development:
S&T: Science and Technology:
SED: Systems Engineering and Development:
United States Government Accountability Office:
Washington, DC 20548:
December 15, 2004:
The Honorable Susan M. Collins:
Chairman:
The Honorable Joseph I. Lieberman:
Ranking Minority Member:
Committee on Governmental Affairs:
United States Senate:
The Honorable Tom Davis:
Chairman:
The Honorable Henry A. Waxman:
Ranking Minority Member:
Committee on Government Reform:
House of Representatives:
Protecting the nation against terrorism by researching, developing,
testing, and deploying cutting-edge technologies is a key mission of
the new Department of Homeland Security (DHS). The Homeland Security
Act of 2002[Footnote 1] gave the Secretary of Homeland Security the
authority to establish a 5-year pilot program using special acquisition
authority, known as "other transactions," to carry out research and
development (R&D) and prototype projects.[Footnote 2] Other
transactions are agreements other than government contracts, grants,
and cooperative agreements. Other transactions are exempt from the
Federal Acquisition Regulation (FAR), the government's Cost Accounting
Standards,[Footnote 3] and various federal statutes, and therefore can
be customized to meet an agency's project requirements. Because fewer
government-unique requirements apply, other transactions can be useful
in attracting private-sector entities that traditionally have not done
business with the government.
Section 831(b) of the Homeland Security Act requires that we report to
the House Committee on Government Reform and the Senate Committee on
Governmental Affairs on the use of other transactions by DHS. Based on
discussions with your staff, we (1) determined whether DHS has
developed policies and established a workforce to effectively manage
the use of other transactions, and (2) evaluated how effectively DHS
has used its other transactions authority to attract nontraditional
government contractors.
Results in Brief:
The Department of Homeland Security has issued policy and is developing
a workforce to implement its other transactions authority, but further
development of the department's policies and strengthening of its
workforce are needed to promote successful use of the authority. Soon
after it was established, the department issued solicitations based on
its other transactions authority, using some commonly accepted
acquisition practices and knowledge-based acquisition principles. The
department subsequently issued a management directive and drafted
guidance that together provide a framework for how other transactions
authority should be implemented. These documents, which address such
issues as acquisition planning and determining when other transactions
might best be used, are loosely modeled after the other transactions
policies of the Department of Defense (DOD), one of several other
agencies with other transactions authority and the one with the most
experience using these agreements. Unlike DOD, however, DHS has not
specified in its policies or guidance when its contracting staff should
consider the use of independent audits to help ensure, for example,
that payments to contractors are accurate. The guidance also does not
address training requirements for DHS contracting and program staff to
ensure that they fully understand and leverage the benefits of using
other transactions. Recognizing that the limited size and capacity of
the contracting workforce at DHS could impede the department's ability
to achieve its goal of managing the potential increase in its other
transactions workload with in-house resources, DHS is taking steps to
enhance the capacity of its workforce.
The Science and Technology (S&T) Directorate within DHS included
nontraditional government contractors in its two other transactions
projects thus far. The S&T Directorate penetrated the nontraditional
contractor market by engaging in a variety of outreach efforts, such as
conducting briefings on its mission and research needs to industry and
academic institutions and using a number of Web-based tools to
publicize its solicitations. While the S&T Directorate moved quickly to
establish its organization and initiate several acquisitions involving
other transactions, it has not been effective in capturing and
assessing the knowledge gained about the process of using other
transactions. Without capturing such knowledge, DHS may not be able to
leverage lessons learned from current projects for use in future
solicitations.
To help DHS realize the full benefits of other transactions authority,
we are making several recommendations to improve the department's
policies and procedures. We are recommending that DHS (1) establish
guidance on when it is appropriate to include audit provisions in other
transactions agreements, (2) develop a training program for DHS staff
in the use of other transactions to help ensure the appropriate use of
this authority, and (3) capture knowledge obtained during the
acquisition process for use in planning and implementing future other
transactions projects.
We provided a draft of this report to DHS for review and comment. DHS
agreed with our first two recommendations and noted that it is working
to address them. Regarding our recommendation that DHS capture
knowledge obtained during the acquisition process for use in planning
and implementing future projects that could use other transactions, DHS
agreed with the utility of retaining historical information about its
procurement activities. However, DHS sought clarification about the
types of information we recommend it retain and to what end it is to be
used. We have added information on how DHS could capture and use
information on practices used successfully in the past to attract
nontraditional contractors. DHS also provided technical revisions to
our draft report, which we incorporated as appropriate.
Scope and Methodology:
To determine whether DHS has developed policies and established a
workforce to use other transactions, we analyzed DHS's organization,
and policy and draft guidance for using these authorities. We
interviewed DHS contracting officials and representatives from the DOD
agencies that DHS has used for contracting support, officials in its
S&T Directorate, and contractors to whom it made initial other
transactions awards. We collected and reviewed other transactions
agreement documents for DHS's Countermeasures for Man-Portable Air
Defense System (Counter-MANPADS) and Chemical and Biological
Countermeasures (Chem-Bio) projects, the only two projects with other
transactions awards as of the time of our review. We also reviewed
other S&T Directorate solicitations that could result in other
transactions agreements, but which had not yet resulted in awards as of
the completion of our audit work. We analyzed information obtained from
our interviews and file reviews using criteria that we found are
generally important to federal acquisitions, namely, planning, reviews
and approvals, market knowledge, and monitoring of contractor
performance. We derived these criteria from our prior reports on other
transactions and knowledge-based acquisition principles, DOD's
policies for other transactions, and selected parts of the FAR.
To determine how effectively DHS used its other transactions authority
to attract nontraditional government contractors, we analyzed DHS's
reported results from using these authorities in the Counter-MANPADS
and Chem-Bio programs. We also reviewed other DHS acquisitions that
could result in other transactions awards but for which DHS had not yet
made awards. DHS relies on contractors to self-certify their status as
a nontraditional government contractors during agreement negotiation.
In analyzing the reported results from DHS's other transactions awards,
we did not independently verify a contractor's reported status as a
nontraditional contractor. We also compared DHS's practices to attract
nontraditional government contractors against policies and practices
used by DOD. In addition, we interviewed DHS contracting and project
management officials, contractors that DHS made other transactions
awards to, and representatives from the commercial research and
development and technology communities to gain their perspectives on
DHS's use of other transactions to attract nontraditional government
contractors.
We performed our review from February through October 2004 in
accordance with generally accepted government auditing standards.
Background:
The acquisition function plays a critical role in helping federal
agencies fulfill their missions. DHS is expected to spend billions of
dollars annually to acquire a broad range of products, technologies,
and services from private-sector entities. Other transactions authority
is one of the acquisition tools--in addition to standard FAR contracts,
grants, and cooperative agreements--available to DHS to help support
its mission. Other transactions were created to enhance the federal
government's ability to acquire cutting-edge science and technology.
They help agencies accomplish this, in part, through attracting
nontraditional contractors from the private sector and other areas that
typically have stayed away from pursuing government contracts. There
are two types of other transactions authorities--(1) research and (2)
prototype. Other transactions for research are used to perform basic,
applied, or advanced research. Other transactions for prototypes are
used to carry out projects to develop prototypes used to evaluate the
technical or manufacturing feasibility of a particular technology,
process, or system. A single S&T program could result in multiple
awards using other transactions.
Because they are exempt from certain statutes, other transactions
permit considerable latitude by agencies and contractors in negotiating
agreement terms. For example, other transactions allow the federal
government flexibility in negotiating intellectual property and data
rights, which stipulate whether the government or the contractor will
own the rights to technology developed under the other transactions
agreement. Table 1 shows the statutes that DHS has determined are
generally inapplicable to its other transactions agreements.
Table 1: DHS's List of Laws Generally Inapplicable to Its Other
Transactions Agreements:
Law: Sections 202-204 of the Bayh-Dole Act (35 U.S.C. sections
200-212);
Description: Prescribes the government's rights in patentable
inventions made with government funds.
Law: Competition in Contracting Act (Pub. L. No. 98-369 [1984]), as
amended;
Description: Promotes the use of competitive procurement procedures and
prescribes uniform, governmentwide policies and procedures regarding
contract formation, award, publication, and cost or pricing data.
Law: Contract Disputes Act, Pub. L. No. 95-563 (1978), as amended, 41
U.S.C. 601 et seq;
Description: Provides for the resolution of claims and disputes
relating to government contracts.
Law: Procurement Protest System, Subtitle D of Competition in
Contracting Act, Pub. L. No. 98-369 (1984), 31 U.S.C. 3551 et seq;
Description: Provides statutory basis for procurement protests by
interested parties to the Comptroller General.
Law: 31 U.S.C. 1352, Limitation on the use of appropriated funds to
influence certain federal contracting and financial transactions;
Description: Prohibits the use of funds to influence or attempt to
influence government officials or Members of Congress in connection
with the award of contracts, grants, loans, or cooperative agreements.
Law: Anti-Kickback Act of 1986, 41 U.S.C. 51-58;
Description: Prohibits kickbacks in connection with government
contracts and provides civil and criminal penalties.
Law: Procurement Integrity Provisions, Section 27 of the Office of
Federal Procurement Policy Act, 41 U.S.C. 423;
Description: Imposes civil, criminal, and administrative sanctions
against individuals who inappropriately disclose or obtain source
selection information or contractor bid and proposal information.
Law: Service Contract Act, 41 U.S.C. 351 et seq, Walsh Healey Act, 41
U.S.C. 35-45;
Fair Labor Standards Act of 1938, 29 U.S.C. 201-219;
Description: Provide protections for contractor employees.
Law: Drug-Free Workplace Act of 1988, 41 U.S.C. 701-707;
Description: Eliminates any connection between drug use or distribution
and federal contracts, cooperative agreements, or grants.
Law: Buy American Act, 41 U.S.C. 10a-d;
Description: Provides preferences for domestic end products.
Source: DHS.
Note: According to DHS, this list of key statutes that apply to
procurement contracts that are not necessarily applicable to other
transactions is not intended to be definitive. DHS's other transaction
policy states that contracting officers should review each statute with
regard any particular arrangement using other transactions and consult
their General Counsel to determine its applicability. To the extent a
particular statute is funding-or program-related, or is not tied to the
instrument used, it generally will apply to an other transaction. This
table should not be construed as representing GAO's views concerning
the applicability of statutes to other transactions agreements.
[End of table]
Because other transactions agreements do not have a standard structure
based on regulatory guidelines, they can be challenging to create and
administer. Experts on other transactions and industry officials who
have used these procurement arrangements told us that other
transactions agreement terms are significantly different from FAR
contracts and more closely resemble procurement agreements between
private-sector firms. According to DHS, the unique nature of other
transactions agreements means that federal government acquisition staff
who work with other transactions agreements should have experience in
planning and conducting research and development acquisitions, strong
business acumen, and sound judgment to enable them to operate in a
relatively unstructured business environment.
DHS views the use of other transactions as key to attracting
nontraditional government contractors--typically high-technology firms
that do not work with the government--that can offer solutions to meet
agency needs. As defined by the Homeland Security Act,[Footnote 4] a
nontraditional government contractor is a business unit that has not,
for at least a period of 1 year prior to the date of entering into or
performing an other transactions agreement, entered into or performed:
* any contract subject to full coverage under the cost accounting
standards or:
* any contract in excess of $500,000 to carry out prototype projects or
to perform basic, applied, or advanced research projects for a federal
agency that is subject to compliance with the FAR.
The S&T Directorate of DHS supports the agency's mission by serving as
its primary research and development arm. According to a senior DHS
Chief Procurement Office official, the S&T Directorate currently is the
only DHS organization using the other transactions authority provided
in the Homeland Security Act. As of September 2004, other transactions
agreements accounted for about $125 million (18 percent) of the S&T
Directorate's fiscal year 2004 total acquisition activity of $715.5
million.[Footnote 5] The S&T Directorate's fiscal year 2004 total
acquisition activity is depicted in figure 1.
Figure 1: S&T Directorate's Fiscal Year 2004 Acquisition Activity:
[See PDF for image]
Note: Inter-Agency Agreements are the means by which the S&T
Directorate transfers funds to national or university laboratories to
conduct R&D activities.
[End of figure]
DHS Placed Initial Priority on Project Implementation while Developing
Other Transactions Policy and Acquisition Workforce:
After DHS was established in 2003, the department rapidly established
the S&T Directorate, which issued several solicitations using other
transactions authority. These solicitations used some commonly accepted
acquisition practices and knowledge-based acquisition principles. DHS
issued a management directive, drafted guidance, and recruited
additional program and contracting staff, which now provide a
foundation for using other transactions authority; however, refinements
in these policies and attention to workforce issues are needed to
promote success in the department's future use of other transactions.
DHS's policy guidance does not specify when audit requirements should
be included in its other transactions agreements to help ensure, for
example, that payments to contractors are accurate. Also, the
department's guidance does not address training requirements for its
contracting and program staff to ensure that staff understand and
leverage the use of other transactions. In addition, the limited size
and capacity of DHS's internal contracting workforce to conduct other
transactions may hamper DHS's goal to internally manage its increasing
number of mission programs that could use its other transactions
authority.
DHS Simultaneously Established Its Science and Technology Organization
and Implemented Projects:
DHS was directed by Congress and the executive branch to quickly
initiate and execute R&D projects to help strengthen homeland security.
The S&T Directorate at DHS was largely established to centralize the
federal government's homeland security R&D efforts, a function that was
not the responsibility of any of DHS's legacy agencies. Figure 2
depicts the Directorate's four offices and their functions. The S&T
Directorate initiated various projects to address homeland security
concerns, including two prototype projects using other transactions
authority. Initiating and executing these first projects took priority
over establishing the Directorate's operating procedures. The S&T
Directorate's need to rapidly initiate and execute projects forced a
reliance on other federal agencies' acquisition offices to award and
administer its project agreements.
Figure 2: The S&T Directorate's Offices and Overview of
Their Functions:
[See PDF for image]
[A] HSARPA is managing the Chem-Bio program.
[B] SED is managing the Counter-MANPADS program.
[End of figure]
The S&T Directorate hired program managers and staff with R&D expertise
from other government agencies and the private sector to manage its
other transactions authority and other acquisitions. These initial
hires included several former Defense Advanced Research Projects Agency
(DARPA) officials experienced in R&D and other transactions authority
acquisitions. In the absence of DHS policies and procedures for other
transactions, the S&T Directorate relied on these key officials and
other staff with R&D expertise in their former organizations to
implement its early projects. These experienced staff helped train DHS
program and contracting staff in other transactions and supervised and
managed the acquisition process. For example, one official drafted a
model other transactions agreement and guided program managers and
contracting officers through the other transactions process. In
addition to these officials, the S&T Directorate obtained portfolio and
program managers from other government agencies and federal
laboratories to act in key programmatic positions in their areas of
expertise. Some of these portfolio and program managers serve on detail
from their home agency. The S&T Directorate's workforce strategy is to
have its program and technical staff serve term appointments, most of
which will not be longer than 4 years, in order to promote the influx
of leading-edge science and technology skills to DHS.
DHS's planning and budget documents identified the need to develop
countermeasures and detection systems against chemical-biological
(Chem-Bio) and radiological-nuclear attacks. Under one area of the
Chem-Bio project, being implemented by the S&T Directorate using other
transactions, DHS is developing mobile laboratories to be rapidly
deployed in the field to detect and analyze chemical warfare agents and
toxic industrial chemicals in the environment. Figure 3 depicts a
mobile laboratory being developed for DHS.
Figure 3: Mobile Laboratory--Exterior and Interior Views:
[See PDF for image]
[End of figure]
The S&T Directorate also initiated projects to address homeland
security needs identified by Congress and the executive branch. One
such project is aimed at protecting commercial aircraft against
possible terrorist use of shoulder-fired missiles, sometimes referred
to as man-portable air defense systems (MANPADS). The Counter-MANPADS
other transaction project is a multiyear development and demonstration
program that will produce prototype systems to be used on commercial
aircraft to defend against shoulder-fired missiles. An illustration of
a proposed Counter-MANPADs technology being considered by DHS is
depicted in figure 4.
Figure 4: Illustration of Commercial Airplane Using Laser Technology to
Deflect MANPADS Missile:
[See PDF for image]
[End of figure]
Other Transactions Projects Used a Variety of Acquisition Techniques:
The S&T Directorate and Office of the Chief Procurement Officer (CPO)
used Federal Acquisition Regulation principles as a framework for other
transactions solicitations. The Directorate also utilized additional
acquisition tools commonly used by DARPA and other agencies, such as:
* broad agency announcements (BAA) to serve as general announcements of
the Directorate's research interest, including general principles for
selecting proposals, and soliciting the participation of all offerors
capable of satisfying the S&T Directorate's needs;
* a white paper process under which firms submit to S&T brief synopses
of the main concepts of a proposal introducing technology innovations
or solutions; and:
* payable milestone evaluations under which the S&T Directorate's
managers measure the progress of its projects at key points before
making payments to contractors.
The S&T Directorate modeled its acquisition process after DARPA's to
solicit proposals from as many industry sources as possible to meet its
research needs and hosted technical workshops and bidders conferences
for its early solicitations to help convey its technical needs to
industry. An overview of the S&T Directorate's generally used
acquisition process for other transactions is in figure 5.
Figure 5: Overview of the S&T Directorate's Acquisition Process for
Other Transactions:
[See PDF for image]
Note: According to DHS, not all steps apply for all of its
acquisitions.
[A] For the Counter-MANPADS and Chem-Bio solicitations, other
transactions for prototypes were the only acquisition vehicle
solicited. After the Counter-MANPADS and Chem-Bio projects, HSARPA
modified its solicitation strategy and began issuing BAA solicitations
offering the choice of different acquisition vehicles (contract, grant,
cooperative agreement, or other transaction) for its projects. HSARPA
indicated that the BAA process will be used the most for its future
projects.
[End of figure]
The Homeland Security Advanced Research Projects Agency (HSARPA) and
Office of Systems Engineering and Development (SED) hosted technical
workshops prior to publishing some of their early solicitations to
obtain information from the industry on what technical requirements
were feasible to include in the solicitation. Following the issuance of
the solicitations, HSARPA and SED held bidder's conferences to answer
industry questions about the solicitations.
The S&T Directorate used a white paper review stage in its early
solicitations, including solicitations for the Counter-MANPADS and
Chem-Bio programs. According to DHS's Chem-Bio solicitation, the use of
the white paper approach allows DHS to provide firms with feedback on
their proposed technologies without the firms having to incur the
expense and time of writing complete proposals. For the Chem-Bio
project, HSARPA received over 500 white papers from industry. S&T
officials told us they provided each contractor that submitted a white
paper for this project with feedback, giving the agency's views on the
merits of the proposed technology. HSARPA officials told us that the
white paper process helps ensure that the office gets the best
proposals and represents an inexpensive way for nontraditional firms to
pursue business with DHS.
To rapidly execute its projects, including other transactions
agreements, the S&T Directorate used other federal agencies to award
and administer its contracts to fill DHS's contracting workforce gaps.
DHS has interagency agreements with these agencies for their
contracting services. For example, HSARPA is using the U.S. Army
Medical Research Acquisition Activity, based in Ft. Detrick, Maryland,
which performs acquisition services for the Army, to award other
transactions instruments in support of its Chem-Bio project.[Footnote
6] In addition, DHS is using a contractor who is an expert in other
transactions and R&D procurement to help draft its other transactions
policy guidance and also provide assistance to administer several of
its other transactions projects.
Process for Other Transactions Uses Some Knowledge-Based Approaches:
The S&T Directorate incorporated some knowledge-based acquisition
approaches throughout its acquisition process for using its other
transaction authorities. We previously reported that an agency's use of
a knowledge-based acquisition model is key to delivering products on
time and within budget. By using a knowledge-based approach, an agency
can be reasonably certain about the progress of its project at critical
junctures during development, which helps to ensure that a project does
not go forward before the agency is sure that the project is meeting
its needs.[Footnote 7] For example, some of the knowledge-based
approaches being used by the S&T Directorate and CPO to manage their
Counter-MANPADS and Chem-Bio other transaction projects are as follows:
* Integrated Product Teams (IPTs). Using IPTs to bring together in a
single organization the different functions needed to ensure a
project's success is a knowledge-based acquisition best
practice.[Footnote 8] The S&T Directorate formed IPTs that combine the
expertise of representatives from each of its four offices to analyze
customer requirements and make planning and budget decisions for the
portfolio.
* Contractor Payable Milestone Evaluations. The S&T Directorate's
program managers measure the progress of its projects at key points
before making payments to contractors. These milestones are usually
associated with contractors satisfying certain performance criteria--
commonly referred to as "exit criteria."[Footnote 9] Examples of SED's
four payable milestones for Phase I and six payable milestones for
Phase II of the Counter-MANPADS project are shown in figure 6.
* Design Reviews. HSARPA and SED program managers also use design
review decision points to ensure the contractor's product development
is meeting program expectations and to determine if the product is
ready to proceed to the next stage of development. (See figure 6 for
the design review points in Phase I of the Counter-MANPADS project.)
Figure 6: Counter-MANPADS Project Phase 1 and Phase 2 Payable
Milestones:
[See PDF for image]
Note: Payment milestones depicted above are for illustration only as
provided in DHS's solicitation. According to DHS, proposers were
encouraged to alter the schedule to accommodate their individual
program solutions and this figure does not reflect the individual
milestones that were ultimately negotiated with each of the successful
teams. DHS has negotiated its phase II milestones, which may deviate
from representation above.
[End of figure]
Changes in Policies and Enhancement of Acquisition Workforce Could Help
Sustain Long-Term Use of Other Transactions:
In 2002 we identified key success factors for DHS to effectively create
its organization, including creating strong systems and controls for
acquisition and related business processes.[Footnote 10] The
development of formal policies and procedures for DHS's authority to
use other transactions is guided by statute and DOD's experiences and
practices in using the other transactions authority. DOD's extensive
experiences with and policies for using other transactions provide a
useful framework for the effective management of projects using other
transactions. For example, DOD uses a guidebook for other transactions
prototype projects, which provides detailed policies and procedures in
areas such as criteria for using other transactions, acquisition
planning, agreement execution, and reporting requirements.[Footnote
11]
DHS Is Developing Its Other Transactions Authority Policies:
In 2004 DHS prepared several policy and draft guidance documents, which
should help provide DHS with a structure for using its other
transactions authority. In October 2004, DHS issued an other
transactions management directive, which provides DHS's policy for the
use of other transactions for research and for prototype projects. The
policy is generally consistent with DOD's policy. The management
directive prescribes the responsibilities of key officials in using
other transactions, such as the DHS Under Secretary of Management and
its Chief Procurement Officer. Specifically, under the management
directive, the CPO is responsible for setting policy, conducting
oversight, and approving the use of other transactions authority for
each project. The management directive also provides general policies
and requirements for the documentation of a strategy for using other
transactions and provides the purposes and criteria for using research
and prototype other transactions. DHS's explanation of the types of
other transactions and criteria for their use, if effectively
implemented, should help promote its compliance with the Homeland
Security Act[Footnote 12] by helping to ensure that agency officials
adequately assess the utility of other acquisition vehicles--such as
FAR contracts, grants, or cooperative agreements, prior to using an
other transaction for research. The purposes and criteria for other
transactions use as stated by DHS are shown in table 2.
Table 2: DHS's Purposes and Criteria for Using Other Transactions for
Research and Prototype Projects:
Type of other transaction: Research;
Purposes for use of other transaction: Carry out basic, applied, or
advanced research programs where the main purpose is to stimulate or
support homeland security technologies. Support nonfederal participants
seeking to broaden the homeland security technology knowledge base;
Criteria for use of other transaction:
* To develop innovative approaches when a standard procurement
contract, grant, or cooperative agreement is not appropriate or
feasible;
* Use the flexibility provided in the Homeland Security Act to reduce
government-specific administrative requirements for acquisition or
assistance instruments;
* Require, to the maximum extent practicable, a 50 percent resource
sharing of program costs between DHS and the contractor.
Type of other transaction: Prototype;
Purposes for use of other transaction: Implement prototype projects in
support of systems proposed to be developed or acquired by DHS. Help
DHS achieve the commercial technology integration to reduce the cost of
homeland security items and systems;
Criteria for use of other transaction:
* At least one nontraditional government contractor participates to a
significant extent in the project;
* If not, one of the following circumstances exists:
- At least 1/3 of the total project cost is to be paid by parties to
the transaction other than the federal government;
- DHS's CPO determines, in writing, that exceptional circumstances
justify the use of a transaction that provides for innovative business
arrangements or structures that would not be feasible or appropriate
under a procurement contract.
Source: DHS.
[End of table]
DHS is using a contractor experienced with other transactions to assist
in the preparation of a guidebook for using other transactions for
prototype projects. The draft guidebook, which is loosely based on the
DOD guide on other transactions for prototype projects, provides a
broad framework for DHS to plan and use other transactions. It covers
topics such as acquisition planning, market research, acquisition
strategy, and agreements analyses requirements.[Footnote 13] According
to a DHS official, its draft guidebook, when completed, is not to be
part of the DHS official management directive system.
In addition, the contractor drafted a lessons learned report on other
transactions to help DHS fully leverage the benefits and minimize any
problems associated with using other transactions. DHS's draft lessons
learned report on other transactions summarizes lessons from various
sources, such as federal agencies and think tanks with other
transactions experience, on topics related to those discussed in the
draft guidebook. Figure 7 shows the development of DHS's other
transactions policy.
Figure 7: Timeline of DHS's Development of Policies and Guidance for
Using Other Transactions and Its Ongoing Other Transactions Projects:
[See PDF for image]
Note: In addition to the two programs noted in this figure, the S&T
Directorate issued approximately five additional solicitations from
November 2003 through October 2004 that could result in multiple other
transaction awards.
[End of figure]
Other Transactions Policy Does Not Address Audit and Training
Requirements:
DHS's management directive and draft guidebook for other transactions
does not yet specify roles, responsibilities, and requirements for
agency program and contracting officials in two key areas: audit and
training. Addressing these areas is important since, according to DHS
officials, DHS plans to issue solicitations that could result in other
transactions use at an increasing rate. S&T Directorate and CPO
officials acknowledged the importance of these areas and told us they
intend to address them in the future.
* Audit requirements. While DHS's management directive covers
Comptroller General access to contractor records under certain
conditions, the directive does not address audits by other entities or
specify other circumstances when audits of other transactions
agreements may be needed to protect the government's interest. For
example, audits may be needed in certain other transactions agreements
to help ensure that payments to contractors are accurate. DOD's policy
for auditing prototype other transactions projects,[Footnote 14] by
contrast, provides more complete guidance on audits of other
transactions agreements. For example, the DOD policy states that
contracting officers should include information on the frequency of
audits, scope of audits, and the means by which audits are to be
performed. DOD's policy also recognizes the flexibility in negotiating
other transactions agreements by allowing the contracting officer, in
certain circumstances, to waive the inclusion of audit provisions if it
would adversely affect the execution of the agreement. DHS's management
directive, in contrast, does not address these conditions. A DHS
official told us that its contracting officers negotiate specific
auditing provisions in other transactions agreements with contractors
on a case-by-case basis.[Footnote 15]
Also, the DOD other transactions prototype projects policy has
provisions for its contracting officers to use the Defense Contract
Audit Agency (DCAA)[Footnote 16] or another independent auditor to
audit other transactions agreements. Although DHS has a Memorandum of
Understanding with DCAA to provide contract audit services, neither
DHS's other transactions management directive nor its draft guidance
contain information on the specific conditions when contracting
officers should use DCAA's or another independent auditor's services.
* Training requirements. DHS's management directive requires other
transactions contracting officers to be senior warranted contracting
officers with a Level III acquisition certification[Footnote 17] and
who possess a level of experience, responsibility, business acumen, and
judgment that enables them to operate in this relatively unstructured
business environment. This staffing requirement for other transactions
closely mirrors the contracting workforce staffing qualification used
by DOD. DHS's management directive also requires its contracting staff
to possess a special contracting officer certification, which can be
achieved only after the staff have received appropriate training in
other transactions. However, DHS has not yet developed a training
program on other transactions for its contracting officers or its
program managers expected to work on other transactions projects.
By not establishing other transactions training requirements and
schedules for its contracting and program staff to complete them, DHS
may not be equipping its staff to fully understand and leverage the
benefits of other transactions. We have previously reported on the
importance of training and reported that leading organizations usually
prioritize key processes, identify staff needing training, and
establish requirements to ensure that the appropriate staff are
trained. Furthermore, because S&T's technical program personnel serve
on details from other government agencies and have varying levels of
experience with other transactions, appropriate training is key to help
ensure that such staff uniformly and effectively use other
transactions. DHS's draft lessons learned report on other transactions
states that it is critical to train contracting officers on aspects
such as (1) the flexibilities associated with other transactions to
help ensure the proper and optimal use of the authority, and (2)
negotiating intellectual property (IP) rights, which can vary from
project to project.
Acquisition Workforce Capacity May Limit DHS's Ability To Manage A
Growing Future Other Transactions Workload:
The S&T Directorate plans an increasing number of mission programs that
could use its other transactions authority, but DHS's current
contracting workforce may not be sufficient to manage this workload.
DHS has relied on a small number of key S&T program personnel, who are
experienced other transactions practitioners, to develop or approve
solicitations. In fiscal year 2004, two of the S&T Directorate's
programs resulted in other transactions awards--Counter-MANPADS and
Chem-Bio. In fiscal year 2005, the S&T Directorate could award other
transaction agreements for at least eight additional programs, which
could significantly increase its contracting workload because some
programs could include multiple other transactions awards. (One S&T
program could result in multiple awards using other transactions,
contracts, grants, or cooperative agreements as the acquisition
vehicle.) For example, S&T's ongoing Chem-Bio project has resulted in
17 other transactions awards as of August 2, 2004. Figure 8 depicts the
S&T Directorate's project workload that could involve other
transactions and the corresponding CPO in-house contracting support.
Figure 8: Illustration of S&T Directorate's Increasing Other
Transactions Workload and Available In-house Contract Administration
Support, Fiscal Year 2004 to Fiscal Year 2005:
[See PDF for image]
Note: This figure depicts the scenario where DHS uses only its in-house
contracting staff for its other transactions projects. However, DHS is
currently supplementing these staff by using other federal agencies for
contract award and administration support. At the end of fiscal year
2004 CPO dedicated six contracting staff--some of which are warranted
contracting officers qualified in other transactions agreements--to
support the S&T Directorate's acquisitions; at the start of fiscal year
2004, it had 1 full-time (staffing) equivalent (FTE) supporting S&T's
acquisitions. According to CPO, these staff will help conduct S&T's
acquisitions, which include other transactions. According to CPO and
S&T Directorate officials, they intend to increase this staff support
to 15 staff by the end of fiscal year 2005.
[End of figure]
DHS is currently developing a plan to address contracting workforce
issues. Senior DHS officials told us that their strategy is to
generally have in-house contracting staff award and administer all of
the S&T Directorate's other transactions and R&D projects by fiscal
year 2006. Currently, CPO has dedicated six contracting staff--some of
whom are warranted contracting officers dedicated to conducting other
transactions--to support S&T acquisitions on a temporary basis. CPO and
S&T Directorate officials told us that they intend to increase this
staff support to 15 staff by the end of fiscal year 2005.
As cited in DOD policy and DHS's guidance, acquisition staff that award
and administer other transactions need special skills and experience in
business, market acumen, and knowledge of intellectual property issues.
CPO and S&T Directorate officials told us that contracting officers
with these skills and experience are difficult to find in the current
acquisition workforce. In addition, they noted lengthy delays in DHS's
ability to process needed security clearances for these staff, which
caused some contracting officer candidates to accept positions
elsewhere. DHS's challenges in developing its acquisition workforce are
similar to other federal agencies' experiences in managing attrition
and retirements affecting their acquisition workforces.[Footnote 18]
As a result, DHS will continue to rely on other agencies for
contracting support until the end of fiscal year 2006. For example, for
its Chem-Bio other transactions project, the S&T Directorate is using
DOD's U.S. Army Medical Research Acquisition Activity for contracting
support. According to DHS's S&T Directorate and CPO officials, the
offices are in the process of drafting a Memorandum of Understanding
regarding the contracting personnel that CPO will dedicate to support
the S&T Directorate's projects.
DHS Included Nontraditional Government Contractors in Initial Projects,
but Practices May Not Fully Leverage Market Capabilities:
DHS included nontraditional government contractors in its two initial
other transactions projects. But DHS is not capturing knowledge learned
from these acquisitions that could be used to plan and execute future
projects. The S&T Directorate has conducted outreach to engage
nontraditional government contractors in its early projects, including
briefing industry associations, setting up a Web site to facilitate
contractor teaming, and conducting project-specific workshops.
However, the S&T Directorate does not systematically capture and use
knowledge learned from its acquisition activities for use by program
staff.
Other Transactions Authority Facilitated Inclusion of Nontraditional
Government Contractors in Early Awards:
The S&T Directorate's Counter-MANPADS and Chem-Bio projects included
nontraditional government contractors in all of the initial awards at
the prime and subcontractor levels. For example, in February 2004 DHS
made three Phase I awards for the Counter-MANPADS project to contractor
teams led by BAE Systems, Northrop Grumman, and United Airlines (a
nontraditional contractor). BAE Systems and Northrop-Grumman, which are
traditional contractors, included nontraditional contactors on their
teams. Nontraditional government contractors serve significant roles in
the Counter-MANPADS and Chem-Bio projects, such as leading the aircraft
integration team incorporating the counter measure technology with
commercial aircraft in the Counter-MANPADS project. Table 3 shows the
composition of the Counter-MANPADS project contractor teams.
Table 3: Composition of Counter-MANPADS Project Phase 1 Contractor
Teams:
Prime contractor: Northrop Grumman Systems Corporation;
Other principal team members:
* FedEx Corporation[A];
* Northwest Airlines [A].
Prime contractor: BAE Systems;
Other principal team members:
* Honeywell International's Air Transport Systems[A];
* Delta Airlines Technical Operations[A].
Prime contractor: United Airlines, Inc.[A];
Other principal team members:
* Avisys, Inc.[B];
* ARINC Engineering Services.
Source: DHS.
[A] Nontraditional government contractor.
[B] According to DHS, L3 Communications acquired Avisys, Inc. in June
2004.
[End of table]
An intent of Congress in granting other transactions authority to DHS
was to attract firms that traditionally have not worked with the
federal government. The use of other transactions may help attract
high-tech commercial firms that have shied away from doing business
with the government because of the requirements mandated by the laws
and regulations that apply to traditional procurement contracts.
According to DHS officials, early DHS other transactions award
recipients, and industry association officials, two primary barriers to
nontraditional contractors pursuing government contracts are:
* Intellectual Property (IP) Rights. IP rights refer to access to
information or data used in the performance of work under a contract.
We previously reported on contractors' reluctance to pursue government
R&D funding because the FAR's IP provisions could give the government
rights to certain information and data, which could decrease their
businesses' competitive advantage.[Footnote 19] For example, a
nontraditional contractor without prior federal R&D contracting
experience under the FAR who won one of DHS's early other transactions
awards told us that the flexibility to negotiate IP rights was critical
to its participation because it allowed the contractor to negotiate IP
rights favorable to its company.
* Cost Accounting Standards (CAS). CAS are the federal government's
accounting requirements for the measurement, assignment, and allocation
of costs to contracts. According to contractors and procurement experts
outside the government that we interviewed, nontraditional firms
generally do not operate accounting systems in compliance with the
federal government's CAS, and developing such systems can be cost
prohibitive. For example, a nontraditional contractor who won an
initial DHS other transactions award told us developing a CAS-compliant
accounting system would have required the establishment of a subsidiary
firm to perform its accounting functions.
Extensive Outreach Used to Attract Nontraditional Contractors:
DHS's Science and Technology Directorate used extensive outreach to
attract nontraditional contractors to participate in its projects. It
briefed industry groups, conducted project-specific workshops, and used
Web sites to publicize the agency's needs. In the fall of 2003, shortly
after the S&T Directorate was established, its HSARPA sponsored
separate 1-day briefings to business and academia to help engage the
private sector in R&D to satisfy DHS's needs. These sessions were
designed to gather input on best practices to optimize the
solicitation, procurement, and program execution aspects of its
projects. For example, at these sessions DHS officials presented
information on its:
* organization and approach to program management, such as the roles
and responsibilities of agency officials and managers;
* investment and research priorities;
* available solicitation methods, such as requests for proposals, broad
agency announcements, and research announcements; and:
* possible procurement vehicles, including FAR contracts, grants,
cooperative agreements, and other transactions.
The S&T Directorate supplemented these sessions by conducting project-
specific industry workshops and other outreach events. For example, in
October 2003, the S&T Directorate held an industry day session for its
Counter-MANPADS project. The session provided participants with
background on the project, the structure of the DHS organization that
would manage it, the program's goals and schedule, and an overview of
other transactions for prototypes. DHS presented detailed information
on the nature and requirements of other transactions agreements, firms
that may qualify as a nontraditional contractor, and laws that would
not apply to other transactions. In addition, the S&T Directorate gave
an overview of the other transactions solicitation process to be used
for the project, which covered topics such as the white paper process,
oral presentations, and the proposed other transactions agreement. DHS
attracted almost 200 participants to this event--approximately 85
percent of whom were from industry.
Also, in September 2003, DHS held a bidders conference for its Chem-Bio
project where it described its technical requirements and the
solicitation process for this project. According to an agency official,
the conference gave DHS the opportunity to obtain input from the
private sector on the technical aspects of its solicitation and to
answer participants' questions about the solicitation. Similarly, DHS
held technical workshops for projects that may result in other
transactions awards, such as those intended to counter threats from
truck, suicide, and public transportation bombs and to design cyber
security systems.
DHS also created and used Web sites to publicize its activities and
procurement needs. For example, DHS created the "DHS--Open for
Business" site, which centralizes information on its contracts, grants,
small business opportunities, and R&D efforts. According to DHS, this
site is intended to complement governmentwide portals such as Federal
Business Opportunities, known as FedBizOpps. In addition, HSARPA
created a solicitation and teaming portal Web site to help attract
firms (www.hsarpabaa.com). On this site, HSARPA announces its current
project solicitations and offers a teaming portal where contractors can
learn about possible partners to bid on DHS work. This site also
contains links to other DHS programs to facilitate industry
participation in its projects, such as its Small Business Innovation
Research program, which DHS established in December 2003 to increase
the participation of innovative and creative small businesses in its
R&D programs. Also, the site has a mailing list function where
contractors can register to receive electronic e-mail notices of
upcoming HSARPA solicitations.
We found that industry's views vary on the effectiveness of DHS's
outreach efforts. Some contractors and industry associations we
interviewed said these outreach efforts are having a positive impact on
the procurement process. For example, an industry association head in
the technology field told us that DHS's use of Broad Agency
Announcements and other flexible solicitation methods to publicize its
technology and research needs may help to attract nontraditional
contractors. Officials from two technology associations told us
commercial firms that traditionally do not work with the federal
government believe that government officials have preconceived ideas of
exactly what technology they need and which contractors they want to
work with. However, one of the officials stated that DHS's use of the
BAA process demonstrates to industry that the agency desires to hear
all the possible technology solutions that may meet its needs.
Other industry officials believed that DHS's outreach actions could be
improved, for example, if DHS took additional actions to inform
industry that it has other transactions authority and developed a more
user-friendly process to attract broader interest in its projects.
Representatives of a large industry association we interviewed were not
aware that DHS possesses other transactions authority and said if this
fact were more widely known, it could increase industry's interest in
working with DHS. In addition, representatives of some small companies
told us that the fee DHS charges to attend its outreach events[Footnote
20] could pose a barrier to attending them. Also, several contractors
we interviewed told us that DHS's teaming portal site is a good idea in
concept but found it cumbersome to maneuver in the automated system.
However, two of the nontraditional contractors we interviewed that
received a DHS other transactions award used this site to help identify
industry partners for their team.
Lack of Systematic Assessment of Acquisition Activities Involving Other
Transactions Impairs Ability to Capture and Use Knowledge:
The S&T Directorate's capacity to build and sustain knowledge for use
in its future acquisitions involving other transactions is in the early
stages of development but the Directorate has not yet developed
policies or procedures to ensure that program and portfolio managers
are capturing and assessing critical information and knowledge gained
from its acquisition activities, including the use of other
transactions, for use in future projects.
Knowledge gained from prior other transactions acquisitions on issues
ranging from seeking nontraditional government contractors to assessing
project outcomes is key to planning future projects. A knowledge base
of important lessons learned from outreach to private-sector firms, the
acquisition process, and the design and execution of projects can
facilitate the work of program and acquisition staff in planning future
acquisitions using other transactions authority. DHS's draft guidebook
on other transactions for prototypes acknowledges the importance of
documenting knowledge gained during the acquisition process for
planning future other transactions acquisitions. We have also reported
on the benefits of agencies using systematic methods to collect,
verify, store, and disseminate information for use by their current and
future employees.[Footnote 21] Our previous work has identified the
importance of setting goals and identifying performance indicators that
will inform federal agencies of whether they have achieved the
performance they expected.[Footnote 22] S&T Directorate officials
acknowledge the need to create a "corporate memory" function to provide
future staff with access to information and knowledge obtained from its
current projects and to incorporate such knowledge into its training
efforts.
The S&T Directorate's workforce-staffing strategy necessitates that it
have a policy and procedure in place to capture employees' knowledge.
Under its current workforce strategy, the S&T Directorate's technical
staff serves regularly rotating term appointments that typically do not
exceed 4 years. This approach, according to S&T Directorate officials,
is designed to promote the influx of leading-edge science and
technology skills to DHS. S&T Directorate officials recognize that
these rotations can place a burden on its contracting staff that plan,
conduct, and manage highly specialized other transactions programs by
having to continually guide new technical staff on the workings of the
process. However, these officials have told us that there is no policy
or process yet in place to ensure that the capturing and sharing of
such knowledge occur.
The S&T Directorate's current practices for capturing knowledge gained
from its acquisition efforts vary. In establishing its structure the
S&T Directorate drew its technical staff from a variety of
organizations, each of which used different acquisition approaches.
Consequently, portfolio managers and program managers we spoke with did
not consistently capture knowledge acquired. In addition, the S&T
Directorate's efforts to assess the effectiveness of its industry
outreach activities involving the use of other transactions authority
are not rigorous enough to capture information needed in planning
future outreach. By not assessing its activities, S&T cannot be assured
that it is reaching the broadest base of firms to provide technological
solutions for the S&T Directorate's needs.
Without policies and a supporting process to capture the experiences
and knowledge gained from its acquisition efforts, DHS may not
capitalize on lessons learned from its early use other transactions.
Given the S&T Directorate's planned rotations of its key technical
staff, building and maintaining institutional knowledge are critical to
ensuring that new S&T Directorate staff have the ability to quickly
learn about previous other transactions acquisitions when designing
future projects. For example, the S&T Directorate invests funding and
staff resources to advertise its organization and projects to help
attract firms but does not fully assess the effectiveness of these
activities for use in planning future projects. Figure 9 depicts the
S&T Directorate's acquisition process and a possible knowledge
management function for collecting, storing, and sharing information.
Figure 9: Illustration of S&T Directorate's Current Acquisition
Processes with Possible Knowledge Management Function:
[See PDF for image]
Note: Center of figure depicts the knowledge management function needed
to improve DHS's current practices.
[End of figure]
Conclusions:
Recognizing the flexibility offered by other transactions authority to
tap nontraditional sources to meet its needs for new homeland security
technologies, DHS moved quickly to use this authority to build its
science and technology capabilities. In doing so it signaled its
seriousness about using other transactions authority to advance its
strategic objectives. However, to sustain its progress made to date DHS
needs to take additional actions, such as completing the necessary
foundation of policies and procedures, including guidance on audit
provisions, and ensuring that it has an adequately trained and staffed
acquisition function. Furthermore, given its strategy of using
regularly rotating term appointments in staffing its S&T programs,
long-term success will depend on the department's ability to harness
its institutional knowledge on other transactions. DHS's ability to
identify, prioritize, and access the most promising research and
technologies in the future will depend, in part, on its ability to
capture and make accessible critical knowledge on the agency's use of
other transactions authority to ensure that it is accessing the
broadest and most appropriate technologies in the marketplace. By
completing its foundation for using other transactions and creating a
means for capturing key knowledge and measuring performance, DHS will
be better prepared to capitalize on the full potential of the private
sector to provide the innovative technology it needs to secure the
homeland.
Recommendations:
To promote the efficient and effective use by DHS of its other
transactions authority to meet its mission needs, we have three
recommendations for the Secretary of Homeland Security. The Secretary
should direct the Under Secretary for Management and the Under
Secretary for Science and Technology to:
* establish guidance on when it is appropriate to include audit
provisions in other transactions agreements,
* develop a training program for DHS staff in the use of other
transactions to help ensure the appropriate use of this authority, and:
* capture knowledge obtained during the acquisition process for use in
planning and implementing future other transactions projects.
Agency Comments and Our Evaluation:
We provided a draft of this report to DHS for its review and comment.
DHS provided written comments generally agreeing with the facts and
conclusions expressed in the draft report. DHS agreed with our first
two recommendations and noted that it is already working to address
them. Regarding our recommendation that DHS capture knowledge obtained
during the acquisition process for use in planning and implementing
future projects that could use other transactions, DHS agreed with the
utility of retaining such historical information and "lessons learned"
about its procurement activities, acquisition planning, execution, and
program management activities. DHS stated that while no formal system
for assembling such information is in place within the organization,
this information is being monitored. However, DHS sought further
clarity about the types of information we recommend it retain and to
what end it is to be used.
Based on our review of DHS's early use of its other transactions
authority, we believe that systematically capturing, analyzing, and
making readily available knowledge about using this authority is
needed. We recognize that the S&T Directorate's work and focus cuts
across various technology areas, which are continuously evolving,
making each solicitation's requirements unique. We also recognize and
appreciate DHS's concern over the administrative aspects of collecting,
maintaining, and monitoring this information over time. We believe,
however, that DHS can build upon its current informal system of
monitoring acquisition information. Specifically, we think DHS could
collect and disseminate information on what has worked and not worked
in areas such as outreach efforts. This information could be useful for
future other transactions projects. For example, if DHS wants to ensure
that its outreach attracts firms who have a recognized core competency
desired by S&T, including nontraditional government contractors, it may
want to use forms of outreach that have been used successfully in the
past. We believe this information could be particularly important given
the S&T Directorate's workforce-staffing strategies, under which its
technical staff serves regularly rotating term appointments.
DHS also provided technical revisions to our draft report, which we
incorporated as appropriate. The department's comments are reprinted in
appendix I.
We are sending copies of this report to other interested congressional
committees; the Secretaries of Homeland Security and Defense; and the
Director, Office of Management and Budget. We also will make copies
available to others on request. This report will be available at no
charge on GAO's Web site at http://www.gao.gov.
If you have any questions about this report, please contact me at (202)
512-4841, or John K. Needham, Assistant Director, at (202) 512-5274.
Other major contributors to this report were Rachel Augustine, Eric
Fisher, Alison Heafitz, John Krump, Robert Swierczek, and Anthony J.
Wysocki.
Signed by:
William T. Woods:
Director, Acquisition and Sourcing Management:
[End of section]
Appendix I: Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20528:
December 8, 2004:
Mr. William T. Woods:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
Washington, DC 20548:
Re: Draft Report GAO-05-136, Homeland Security: Further Action Needed
to Promote Successful Use of Special DHS Acquisition Authority (GAO Job
Code 120324):
Dear Mr. Woods:
Thank you for the opportunity to review and comment on the subject
draft report. The Department of Homeland Security (DHS) appreciates the
work done in this draft report to recognize DHS's use of its other
transactions authority to acquire cutting-edge technologies in support
of its mission. The Department generally agrees with the facts and
conclusions expressed in the report and reads the conclusions as fair
and balanced. However, we do have some technical comments for your
consideration which are enclosed with this letter.
With respect to the draft report's three recommendations, while DHS
recognizes the validity of the first two recommendations and is, in
fact, already working to address those recommendations, there is a
general concern with the final recommendation. This recommendation
states DHS should "capture knowledge obtained during the acquisition
process for use in planning, and implementing future projects that
could use other transactions."
DHS agrees that it is useful to retain historical information regarding
solicitations and awards and does keep a great deal of information
regarding response to industry day announcements, solicitations, and
awardees and their status. It is unclear, however, exactly what types
of information GAO is recommending that the agency retain and in what
manner and to what end that information is to be used. The value of
"lessons learned" in acquisition planning, execution and program
management is definitely appreciated within DHS and, while no formal
system for assembling this information is in place within the
organization, this information is being monitored. However, much of the
detailed information including number of proposers, white papers,
attendees at industry days and so forth is of marginal long-term value
but the administrative aspects of collecting, maintaining and
monitoring the information over time could be significant. DHS's
Science and Technology (S&T) Directorate and Homeland Security Advanced
Research Projects Agency's (HSARPA's) focus cuts across so many
technology areas and each solicitation is unique in its requirements
and interests. What happened with a somewhat similarly focused
solicitation a year or two ago will likely have little relevance on a
solicitation issued today. In light of this, DHS requests that GAO
refine this recommendation to be more specific regarding the type of
information it would envision being retained by the agency and consider
carefully the agency's concern regarding the relevance of the
information to its future actions and the high cost of maintaining the
information.
We thank you again for the opportunity to provide comments on this
draft report and look forward to working with you on future homeland
security issues.
Sincerely,
Signed by:
Anna F. Dixon:
Director,
Departmental GAO/OIG Liaison Office of the Chief Financial Officer:
[End of section]
FOOTNOTES
[1] Homeland Security Act of 2002, Pub. L. No. 107-296, Nov. 25, 2002.
[2] Congress authorized the Department of Defense's (DOD) Defense
Advanced Research Projects Agency to use other transactions for
research projects in 1989, and in 1993, authorized DOD to use other
transactions for prototype projects. In fiscal year 2003, the most
recent year for which complete data are available, DOD awarded
approximately 60 other transactions agreements for prototypes, and
several more for research projects. Two other agencies also have other
transactions authority: National Aeronautics and Space Administration
and the Department of Transportation. Recently, the Services
Acquisition Reform Act authorized all federal agencies to use other
transactions to acquire antiterrorism technology.
[3] The Cost Accounting Standards are accounting requirements for the
measurement, assignment, and allocation of costs to contracts.
[4] Section 831(d) of the Homeland Security Act of 2002, Pub. L. No.
107-296, Nov. 25, 2002, referring to section 845 of the National
Defense Authorization Act for Fiscal Year 1994.
[5] DHS estimated that it spent approximately $6.6 billion on
acquisitions in fiscal year 2004.
[6] According to DHS, much of the contract award work done by the U.S.
Army Medical Research Acquisition Activity for its Chem-Bio project is
now being performed by DHS's Office of Procurement Operations, which is
part of its Chief Procurement Office.
[7] GAO, Best Practices: Highlights of the Knowledge-Based Approach
Used to Improve Weapon Acquisition, GAO-04-392SP (Washington, D.C.:
January 2004).
[8] GAO-04-392SP.
[9] Our report on DHS's Counter-MANPADS development program found that
DHS needed to make its Counter-MANPADS exit criteria more knowledge-
based, which would require the contractor to demonstrate that key
product knowledge was obtained at a certain stage. See The Department
of Homeland Security Needs to Fully Adopt a Knowledge-Based Approach to
Its Counter-MANPADS Development Program, GAO-04-341R (Washington,
D.C.: Jan. 30, 2004).
[10] GAO, Homeland Security: Critical Design and Implementation Issues,
GAO-02-957T (Washington, D.C.: July 17, 2002).
[11] DOD, Under Secretary of Defense for Acquisition, Technology and
Logistics, "Other Transaction" (OT) Guide for Prototype Projects,
(August 2002).
[12] The Homeland Security Act requires DHS, as it carries out basic,
applied, and advanced research and development projects, to first
determine that the use of a contract, grant, or cooperative agreement
is not feasible or appropriate prior to using an other transaction for
research. Pub. L. No. 107-296, section 831(a)(1), Nov. 25, 2002.
[13] According to a DHS CPO official, DHS intends to draft a separate
guidebook for other transactions for research in the future.
[14] DOD, Transactions Other Than Contracts, Grants, or Cooperative
Agreements for Prototype Projects, 68 Fed. Reg. 27452, final rule (May
20, 2003).
[15] In our prior work on DOD's use of prototype other transactions we
found that DOD contracting staff included such audit provisions in
almost all of the prototype other transactions agreements it awarded
between fiscal years 1994 and 1998. See GAO, Acquisition Reform: DOD's
Guidance on Using Section 845 Agreements Could Be Improved, GAO/
NSIAD-00-33 (Washington, D.C.: Apr. 7, 2000).
[16] DCAA is a component of DOD that performs contract audits for DOD
and provides accounting and financial advisory services regarding
contracts and subcontracts to all DOD components responsible for
procurement and contract administration. DCAA also provides other
government agencies with contract audit services.
[17] According to DHS policy, there are three levels of contracting
officers: Level 1 (entry-level), Level II (intermediate level), and
Level III (senior level staff capable of performing the most
sophisticated and complex contracting activities).
[18] We previously reported on such acquisition workforce challenges in
Acquisition Workforce: Status of Agency Efforts to Address Future
Needs, GAO-03-55 (Washington, D.C.: Dec. 18, 2002).
[19] GAO, Acquisition Reform: DOD's Guidance on Using Section 845
Agreements Could Be Improved, GAO/NSIAD-00-33 (Washington, D.C.: April
2000).
[20] For the projects we reviewed, we found that DHS's fee for
attending these events was usually between $100 and $150.
[21] GAO, Best Practices: Highlights of the Knowledge-Based Approach
Used to Improve Weapon Acquisition, GAO-04-392SP (Washington, D.C.:
January 2004) and GAO, NASA: Better Mechanisms Needed for Sharing
Lessons Learned, GAO-02-195 (Washington, D.C.: Jan. 30, 2002).
[22] GAO, Results-Oriented Government: GPRA Has Established a Solid
Foundation for Achieving Greater Results, GAO-04-38 (Washington, D.C;
Mar. 10, 2004).
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