Department of Homeland Security
Ongoing Challenges in Creating an Effective Acquisition Organization Gao ID: GAO-07-948T June 7, 2007In fiscal year 2006, the Department of Homeland Security (DHS) obligated $15.6 billion to support its broad and complex acquisition portfolio. Since it was tasked with integrating 22 separate federal agencies and organizations into one cabinet-level department, DHS has been working to create an integrated acquisition organization while addressing its ongoing mission requirements and responding to natural disasters and other emergencies. Due to the enormity of this challenge, GAO designated the establishment of the department and its transformation as high-risk in January 2003. This testimony discusses DHS's (1) challenges to creating an integrated acquisition function; (2) investment review process; and (3) reliance on contracting for critical needs. This testimony is based primarily on prior GAO reports and testimonies.
The structure of DHS's acquisition function creates ambiguity about who is accountable for acquisition decisions because it depends on a system of dual accountability and collaboration between the Chief Procurement Officer (CPO) and the component heads. Further, a common theme in GAO's work on acquisition management has been DHS's struggle to provide adequate support for its mission components and resources for departmentwide oversight. In 2006, DHS reported significant progress in staffing for the components and the CPO, though much work remained to fill the positions. In addition, DHS has established an acquisition oversight program, designed to provide the CPO comprehensive insight into each component's acquisition programs and disseminate successful acquisition management approaches departmentwide. However, GAO continues to be concerned that the CPO may not have sufficient authority to effectively oversee the department's acquisitions. In 2003, DHS put in place an investment review process to help protect its major complex investments. In 2005, GAO reported that this process adopted many acquisition best practices that, if applied consistently, could help increase the chances for successful outcomes. However, GAO noted that incorporating additional program reviews and knowledge deliverables into the process could better position DHS to make well-informed decisions. Concerns have been raised about how the investment review process has been used to oversee its largest acquisitions, and DHS plans to revise the process. DHS has contracted extensively for a broad range of services and complex acquisitions. The growing complexity of contracting for technically difficult and sophisticated services increases challenges in terms of setting appropriate requirements and effectively monitoring contractor performance. However, DHS has been challenged to provide the appropriate level of oversight and management attention to its contracting for services and major systems.
GAO-07-948T, Department of Homeland Security: Ongoing Challenges in Creating an Effective Acquisition Organization
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Testimony before the Subcommittee on Oversight of Government
Management, the Federal Workforce, and the District of Columbia,
Committee on Homeland Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 2:30 p.m. EDT:
Thursday, June 7, 2007:
Department Of Homeland Security:
Ongoing Challenges in Creating an Effective Acquisition Organization:
Statement of John P. Hutton, Director:
Acquisition and Sourcing Management:
GAO-07-948T:
GAO Highlights:
Highlights of GAO-07-948T, a testimony before the Subcommittee on
Oversight of Government Management, the Federal Workforce, and the
District of Columbia, Committee on Homeland Security and Governmental
Affairs, U.S. Senate
Why GAO Did This Study:
In fiscal year 2006, the Department of Homeland Security (DHS)
obligated $15.6 billion to support its broad and complex acquisition
portfolio. Since it was tasked with integrating 22 separate federal
agencies and organizations into one cabinet-level department, DHS has
been working to create an integrated acquisition organization while
addressing its ongoing mission requirements and responding to natural
disasters and other emergencies. Due to the enormity of this challenge,
GAO designated the establishment of the department and its
transformation as high-risk in January 2003.
This testimony discusses DHS‘s
(1) challenges to creating an integrated acquisition function; (2)
investment review process; and (3) reliance on contracting for critical
needs. This testimony is based primarily on prior GAO reports and
testimonies.
What GAO Found:
The structure of DHS‘s acquisition function creates ambiguity about who
is accountable for acquisition decisions because it depends on a system
of dual accountability and collaboration between the Chief Procurement
Officer (CPO) and the component heads. Further, a common theme in GAO‘s
work on acquisition management has been DHS‘s struggle to provide
adequate support for its mission components and resources for
departmentwide oversight. In 2006, DHS reported significant progress in
staffing for the components and the CPO, though much work remained to
fill the positions. In addition, DHS has established an acquisition
oversight program, designed to provide the CPO comprehensive insight
into each component‘s acquisition programs and disseminate successful
acquisition management approaches departmentwide. However, GAO
continues to be concerned that the CPO may not have sufficient
authority to effectively oversee the department‘s acquisitions.
In 2003, DHS put in place an investment review process to help protect
its major complex investments. In 2005, GAO reported that this process
adopted many acquisition best practices that, if applied consistently,
could help increase the chances for successful outcomes. However, GAO
noted that incorporating additional program reviews and knowledge
deliverables into the process could better position DHS to make well-
informed decisions. Concerns have been raised about how the investment
review process has been used to oversee its largest acquisitions, and
DHS plans to revise the process.
DHS has contracted extensively for a broad range of services and
complex acquisitions. The growing complexity of contracting for
technically difficult and sophisticated services increases challenges
in terms of setting appropriate requirements and effectively monitoring
contractor performance. However, DHS has been challenged to provide the
appropriate level of oversight and management attention to its
contracting for services and major systems.
Figure: Department of Homeland Security Missions, Assets:
[See PDF for Image]
Source; DHS.
[End of figure]
What GAO Recommends:
While GAO is not making recommendations in this testimony, GAO has made
numerous recommendations over the past few years to help improve DHS‘s
acquisition function. The department has generally concurred with these
recommendations and is taking, or plans to take, action to improve its
acquisitions.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-948T].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact John P. Hutton at (202)
512-4841 or huttonj@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
Thank you for inviting me here today to discuss the Department of
Homeland Security's (DHS) acquisition organization. As you know, DHS is
the result of one of the biggest mergers in the U.S. government and, as
such, involves a variety of transformational efforts, one of which is
to design and implement the necessary management structure and
processes for acquiring goods and services. DHS 's acquisition needs
range from increasingly sophisticated screening equipment for air
passenger security to upgrading the Coast Guard's offshore fleet of
surface and air assets. In fiscal year 2006, the department reported
that it obligated $15.6 billion for goods and services to support its
broad and complex acquisition portfolio. DHS has been working to
develop an integrated acquisition organization while addressing its
ongoing mission requirements and responding to emergencies, including
Gulf Coast recovery from Hurricane Katrina, which caused more damage
than any other natural disaster in the history of the United States.
Due to the enormity of challenges facing the department--and concern
that failure to effectively address DHS's management and program
challenges would seriously compromise our homeland security--we
designated the establishment of the department and its transformation
as high-risk.[Footnote 1]
My testimony today focuses on accountability and management of DHS
acquisitions. Specifically, the department's (1) challenges in creating
an integrated acquisition function; (2) need for improvements in its
investment review process; and (3) reliance on contracting for critical
services. This statement is based primarily on GAO reports and
testimonies performed in accordance with generally accepted government
auditing standards.
Summary:
DHS has recognized the need to improve acquisition outcomes and taken
some positive steps, but continues to lack clear accountability for the
outcomes of acquisition dollars spent. A common theme in our work on
acquisition management is DHS's struggle to provide adequate support
for its mission components and resources for departmentwide oversight.
DHS has not yet accomplished its goal of integrating the acquisition
function across the department. The structure of DHS's acquisition
function creates ambiguity about who is accountable for acquisition
decisions because it depends on a system of dual accountability and
cooperation and collaboration between the Chief Procurement Officer
(CPO) and the component heads. In addition, our work and the work of
the DHS Inspector General has found acquisition workforce challenges
across the department. The CPO has established a departmentwide program
to improve oversight. However, we continue to be concerned that the CPO
may not have sufficient authority to effectively oversee the
department's acquisitions.
In 2003, in an effort to address the need for successful outcomes in
its major programs--in terms of cost, schedule, and performance--DHS
put in place an investment review process. While this process adopts
many acquisition best practices, it does not include critical reviews
and has been under revision since 2005. Concerns have been raised about
how the investment review process has been used to oversee the
department's largest acquisitions. DHS's performance and accountability
report states that changes to the process will be made by the first
quarter of fiscal year 2008.
To obtain necessary expertise to carry out its mission, DHS has had to
contract extensively for a broad range of services and major
acquisitions. The growing complexity of contracting for technically
difficult and sophisticated services increases challenges in terms of
setting appropriate requirements and effectively overseeing contractor
performance. However, DHS has been challenged to provide the
appropriate level of oversight and management attention to its
contracting for services and major systems.
DHS Faces Challenges in Establishing an Integrated Acquisition
Function:
The structure of DHS's acquisition function creates ambiguity about who
is accountable for acquisition decisions. A common theme in our work on
DHS's acquisition management has been the department's struggle from
the outset to provide adequate support for its mission components and
resources for departmentwide oversight.[Footnote 2] Of the 22
components that initially joined DHS from other agencies, 7 came with
their own procurement support. In January 2004, a year after the
department was created, an eighth office, the Office of Procurement
Operations, was created to provide support to a variety of DHS
entities. To improve oversight, in December 2005, CPO established a
departmentwide acquisition oversight program, designed to provide
comprehensive insight into each component's acquisitions and
disseminate successful acquisition management approaches throughout
DHS.
Acquisition Function Is Not Integrated:
DHS has set a goal of integrating the acquisition function more broadly
across the department. Prior GAO work has shown that to implement
acquisition effectively across a large federal organization requires an
integrated structure with standardized policies and processes, the
appropriate placement of the acquisition function within the
department, leadership that fosters good acquisition practices, and a
general framework that delineates the key phases along the path for a
major acquisition. An effective acquisition organization has in place
knowledgeable personnel who work together to meet cost, quality, and
timeliness goals while adhering to guidelines and standards for federal
acquisition. DHS, however, relies on dual accountability and
collaboration between the CPO and the heads of DHS's components.
The October 2004 management directive for its acquisition line of
business--the department's principal guidance for leading, governing,
integrating, and managing the acquisition function--allows managers
from each component organization to commit resources to training,
development, and certification of acquisition professionals.[Footnote
3] It also highlights the CPO's broad authority, including management,
administration, and oversight of departmentwide acquisition. However,
we have reported that the directive may not achieve its goal of
creating an integrated acquisition organization because it creates
unclear working relationships between the CPO and the heads of DHS
components. For example, some of the duties delegated to the CPO have
also been given to the heads of DHS's components, such as recruiting
and selecting key acquisition officials at the components, and
providing appropriate resources to support the CPO's initiatives.
Accountability for acquisitions is further complicated because,
according to DHS, the Coast Guard and Secret Service were exempted from
its acquisition management directive because of DHS's interpretation of
the Homeland Security Act. We have questioned this exemption, and
recently CPO officials have told us that they are working to revise the
directive to make it clear that the Coast Guard and Secret Service are
not exempt. Furthermore, for major investments--those exceeding $50
million--accountability, visibility, and oversight is shared among the
CPO, the Chief Financial Officer, the Chief Information Officer, and
other senior management.[Footnote 4] Recently, the DHS Inspector
General's 2007 semiannual report stated an integrated acquisition
system still does not exist, but noted that that the atmosphere for
collaboration between DHS and its component agencies on acquisition
matters has improved.
Efforts to Address Acquisition Workforce Staffing:
In addition, our work and the work of the DHS Inspector General has
found acquisition workforce challenges across the department. In 2005,
we reported on disparities in the staffing levels and workload among
the component procurement offices. We recommended that DHS conduct a
departmentwide assessment of the number of contracting staff, and if a
workload imbalance were to be found, take steps to correct it by
realigning resources. In 2006, DHS reported significant progress in
providing staff for the component contracting offices, though much work
remained to fill the positions with qualified, trained acquisition
professionals. DHS has established a goal of aligning procurement
staffing levels with contract spending at its various components by the
last quarter of fiscal year 2009.
Staffing of the CPO Office also has been a concern, but recent progress
has been made. According to CPO officials, their small staff faces the
competing demands of providing acquisition support for urgent needs at
the component level and conducting oversight. For example, CPO staff
assisted the Federal Emergency Management Agency in contracting for the
response to Gulf Coast hurricanes Katrina and Rita. As a result, they
needed to focus their efforts on procurement execution rather than
oversight. In 2005, we recommended that the Secretary of Homeland
Security provide the CPO with sufficient resources to effectively
oversee the department's acquisitions.[Footnote 5] In 2006, we reported
that the Secretary had supported an increase of 25 positions for the
CPO to improve acquisition management and oversight. DHS stated that
these additional personnel will significantly contribute to continuing
improvement in the DHS acquisition and contracting enterprise. To
follow-up on some of these efforts, we plan to conduct additional work
on DHS acquisition workforce issues in the near future.
CPO Has Established an Acquisition Oversight Program:
Our prior work has shown that in a highly functioning acquisition
organization, the CPO is in a position to oversee compliance by
implementing strong oversight mechanisms. Accordingly, in December
2005, the CPO established a departmentwide acquisition oversight
program, designed to provide comprehensive insight into each
component's acquisition programs and disseminate successful acquisition
management approaches throughout DHS.[Footnote 6] The program is based
in part on elements essential to an effective, efficient, and
accountable acquisition process: organizational alignment and
leadership, policies and processes, financial accountability,
acquisition workforce, and knowledge management and information
systems. The program includes four recurring reviews, as shown in table
1.
Table 1: DHS Acquisition Oversight Program:
Review: Self assessment;
Purpose: The head of contracting for each component assesses the
component's staff, processes, and programs.
Review: Acquisition planning reviews;
Purpose: Each component's contracting activity annually reviews its
programs and assesses acquisition planning.
Review: Operational status reviews;
Purpose: The CPO and the head of contracting for each component assess,
on a quarterly basis, the status of the acquisition function.
Review: On-site reviews;
Purpose: These reviews, conducted triennially, assess each component's
contracting activity, strategic capability to support DHS' mission, and
compliance with acquisition regulations, policies, and guiding
principles.
Source: GAO analysis of DHS data.
[End of table]
In September 2006, we reported that the CPO's limited staff resources
had delayed the oversight program's implementation, but the program is
well under way, and DHS plans to implement the full program in fiscal
year 2007. Recently, the CPO has made progress in increasing staff to
authorized levels, and as part of the department's fiscal year 2008
appropriation request, the CPO is seeking three additional staff, for a
total of 13 oversight positions for this program. We plan to report on
the program later this month.
While this program is a positive step, we have reported that the CPO
lacks the authority needed to ensure the department's components comply
with its procurement policies and procedures such as the acquisition
oversight program. We reported in September 2006 that the CPO's ability
to effectively oversee the department's acquisitions and manage risks
is limited, and we continue to believe that the CPO's lack of authority
to achieve the department's acquisition goals is of concern.
DHS Investment Review Process Needs Improvement:
In 2003, DHS put in place an investment review process to help protect
its major, complex investments. The investment review process is
intended to reduce risk associated with these investments and increase
the chances for successful outcomes in terms of cost, schedule, and
performance. In March 2005, we reported that in establishing this
process, DHS has adopted a number of acquisition best practices that,
if applied consistently, could help increase the chance for successful
outcomes. However, we noted that incorporating additional program
reviews and knowledge deliverables into the process could better
position DHS to make well-informed decisions on its major, complex
investments. Specifically, we noted that the process did not include
two critical management reviews that would help ensure that (1)
resources match customer needs prior to beginning a major acquisition
and (2) program designs perform as expected before moving to
production. We also noted that the review process did not fully address
how program managers are to conduct effective contractor tracking and
oversight.[Footnote 7] The investment review process is still under
revision, and the department's performance and accountability report
for fiscal year 2006 stated that DHS will incorporate changes to the
process by the first quarter of fiscal year 2008.
Our best practices work shows that successful investments reduce risk
by ensuring that high levels of knowledge are achieved at these key
points of development. We have found that investments that were not
reviewed at the appropriate points faced problems--such as redesign--
that resulted in cost increases and schedule delays. Concerns have been
raised about the effectiveness of the review process for large
investments at DHS. For example, in November 2006, the DHS Inspector
General reported on the Customs and Border Protection's Secure Border
Initiative program, noting that the department's existing investment
oversight processes were sidelined in the urgent pursuit of SBInet's
aggressive schedule.[Footnote 8] The department's investment review
board and joint requirements council provide for deliberative processes
to obtain the counsel of functional stakeholders. However, the DHS
Inspector General reported that for SBInet, these prescribed processes
were bypassed and key decisions about the scope of the program and the
acquisition strategy were made without rigorous review and analysis or
transparency. The department has since announced plans to complete
these reviews to ensure the program is on the right track.[Footnote 9]
DHS Reliance on Contracting For Critical Services Requires Enhanced
Management Attention:
To quickly get the department up and running and to obtain necessary
expertise, DHS has relied extensively on other agencies' and its own
contracts for a broad range of mission-related services and complex
acquisitions. Governmentwide, increasing reliance on contractors has
been a longstanding concern. Recently, in 2006, government, industry
and academic participants in a GAO forum on federal acquisition
challenges and opportunities noted that many agencies rely extensively
on contractors to carry out their basic missions. The growing
complexity of contracting for technically difficult and sophisticated
services increases challenges in terms of setting appropriate
requirements and effectively monitoring contractor
performance.[Footnote 10] With the increased reliance on contractors
comes the need for an appropriate level of oversight and management
attention to its contracting for services and major systems.
Interagency Contracting Needs to be Carefully Managed:
Our work to date has found that DHS faces challenges in managing
services acquisitions through interagency contracting--a process by
which agencies can use another agency's contracting services or
existing contracts often for a fee.[Footnote 11] In 2005, DHS spent
over $6.5 billion on interagency contracts. We found that DHS did not
systematically monitor or assess its use of interagency contracts to
determine whether this method provides good outcomes for the
department.
Although interagency contracts can provide the advantages of timeliness
and efficiency, use of these types of vehicles can also pose risks if
they are not properly managed. GAO designated management of interagency
contracting a governmentwide high risk area in 2005. A number of
factors can make these types of contracts high risk, including their
use by some agencies that have limited expertise with this contracting
method and their contribution to a much more complex procurement
environment in which accountability has not always been clearly
established. In an interagency contracting arrangement, both the agency
that holds and the agency that makes purchases against the contract
share responsibility for properly managing the use of the contract.
However, these shared responsibilities often have not been well
defined. As a result, our work and that of some agency inspectors
general has found cases in which interagency contracting has not been
well managed to ensure that the government is getting good value.
Use of System Integrator Poses Management Challenges:
Government agencies, including DHS components, have turned to a systems
integrator in situations such as when they believe they do not have the
in-house capability to design, develop, and manage complex
acquisitions. This arrangement creates an inherent risk, as the
contractor is given more discretion to make certain program decisions.
Along with this greater discretion comes the need for more government
oversight and an even greater need to develop well-defined outcomes at
the outset. Our reviews of the Coast Guard's Deepwater program have
found that the Coast Guard had not effectively managed the program or
overseen the system integrator.[Footnote 12] Specifically, we expressed
concerns and made a number of recommendations to improve the program in
three areas: program management, contractor accountability, and cost
control through competition.[Footnote 13] While the Coast Guard took
some actions in response to some of our concerns, they have recently
announced a series of additional steps to address problems with the
Deepwater program, including taking on more program management
responsibilities from the systems integrator.
Enhanced Oversight Required for Service Contracts:
We also have ongoing work reviewing other aspects of DHS acquisition
management. For example, we are reviewing DHS's contracts that closely
support inherently governmental functions and the level of oversight
given to these contracts. Federal procurement regulation and policy
contain special requirements for overseeing service contracts that have
the potential for influencing the authority, accountability, and
responsibilities of government officials.[Footnote 14] Agencies are
required to provide greater scrutiny of these service contracts and an
enhanced degree of management oversight, which includes assigning a
sufficient number of qualified government employees to provide
oversight, to better ensure that contractors do not perform inherently
governmental functions. The risks associated with contracting for
services that closely support the performance of inherently
governmental functions are longstanding governmentwide concerns. We are
also reviewing oversight issues related to DHS's use of performance-
based services acquisitions. If this acquisition method is not
appropriately planned and structured, there is an increased risk that
the government may receive products or services that are over cost
estimates, delivered late, and of unacceptable quality.
Conclusion:
Since DHS was established in 2003, it has been challenged to integrate
22 separate federal agencies and organizations with multiple missions,
values, and cultures into one cabinet-level department. Due to the
complexity of its organization, DHS is likely to continue to face
challenges in integrating the acquisition functions of its components
and overseeing their acquisitions--particularly those involving large
and complex investments. Given the size of DHS and the scope of its
acquisitions, we are continuing to assess the department's acquisition
oversight process and procedures in ongoing work.
Mr. Chairman, this concludes my statement. I would be happy to respond
to any questions you or other members of the subcommittee may have at
this time.
Contacts and Acknowledgments:
For further information regarding this testimony, please contact John
Hutton at (202) 512-4841 or huttonj@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this product. Other individuals making key
contributions to this testimony were Amelia Shachoy, Assistant
Director; Tatiana Winger; William Russell; Heddi Nieuwsma; Karen Sloan;
and Sylvia Schatz.
FOOTNOTES
[1] GAO, High-Risk Series: An Update, GAO-03-119 (Washington, D.C.:
January 2003).
[2] GAO, Contract Management: INS Contracting Weaknesses Need Attention
from the Department of Homeland Security, GAO-03-799 (Washington, D.C.:
July 25, 2003); Transportation Security Administration: High-Level
Attention Needed to Strengthen Acquisition Function, GAO-04-544
(Washington, D.C.: May 28, 2004); and Homeland Security: Successes and
Challenges in DHS's Efforts to Create an Effective Acquisition
Organization, GAO-05-179 (Washington, D.C.: Mar. 29, 2005).
[3] DHS Management Directive 0003, Acquisition Line of Business
Integration and Management, October 2004.
[4] DHS Management Directive 1400, Investment Review Process, May 2003.
[5] GAO-05-179
[6] DHS Management Directive 0784, Acquisition Oversight Program,
December 2005.
[7] GAO-05-179.
[8] In November 2005, DHS established the Secure Border Initiative
(SBI), a multiyear, multibillion dollar program aimed at securing U.S.
borders and reducing illegal immigration. One element of SBI is SBInet,
the program responsible for developing a comprehensive border
protection system.
[9] Department of Homeland Security, Office of the Inspector General,
Risk Management Advisory for the SBInet Program Initiation, OIG-07-07
(Washington, D.C.: Nov. 14, 2006).
[10] GAO, Highlights of a GAO Forum: Federal Acquisition Challenges and
Opportunities in the 21st Century, GAO-07-45SP (Washington, D.C.: Oct.
6, 2006).
[11] GAO, Interagency Contracting: Improved Guidance, Planning, and
Oversight Would Enable the Department of Homeland Security to Address
Risks, GAO-06-996 (Washington, D.C.: Sept. 27, 2006).
[12] Deepwater is a 25-year, $24 billion effort to upgrade or replace
existing Coast Guard aircraft and vessels in order to carry out its
missions along our coastlines and farther out at sea.
[13] GAO, Coast Guard: Changes to Deepwater Plan Appear Sound, and
Program Management Has Improved, but Continued Monitoring Is Warranted,
GAO-06-546 (Washington, D.C.: Apr. 28, 2006; Contract Management: Coast
Guard's Deepwater Program Needs Increased Attention to Management and
Contractor Oversight, GAO-04-380 (Washington, D.C.: Mar. 9, 2004); and
Coast Guard: Preliminary Observations on Deepwater Program Assets and
Management Challenges, GAO-07-446T (Washington, D.C.: Feb. 15, 2007).
[14] Federal Acquisition Regulation (FAR) Subpart 37.114. OMB Policy
Letter 93-1: Management Oversight of Service Contracting, Office of
Federal Procurement Policy, May 18, 1994.
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