Interagency Contracting

Because of past abuses of off-loading at federal agencies, the Defense Department (DOD) was required to strengthen its controls over its interagency orders for goods and services. A February 1994 DOD memorandum specified that DOD's interagency orders be (1) as convenient and cheap as other alternatives and (2) approved at a level no lower than senior executive service, general officers, flag officer, or activity commander. In November 1994, the Coast Guard independently developed similar reforms. DOD is still adjusting to these changes. Abundant guidance is available to Air Force, Army, and Navy contracting activities, but a sample of fiscal year 1995 Volpe Center purchases made by the military services revealed that not all files contained the information required by the DOD memorandum. In addition, DOD has not yet implemented a statutorily mandated monitoring system for its interagency purchases. The monitoring system is now scheduled for implementation in October 1995. DOD contracting with the Volpe Center has been on the downswing since fiscal year 1992. Although it is difficult to pinpoint the exact causes for the downward trend, more recent declines appear to be due to DOD's implementation of the restrictions on interagency orders. Likewise, a recent decline in Coast Guard purchases at the Volpe Center appears to be related to the Coast Guard reforms.

GAO found that: (1) because of past practices, the National Defense Authorization Act for Fiscal Year 1994 required the Secretary of Defense to issue regulations that strengthened controls over DOD's interagency orders for goods and services; (2) in a February 1994 memorandum, and in advance of the statutorily required regulations, the Secretary took additional steps to increase DOD's interagency transaction controls by requiring, among other things, that DOD's interagency orders be as convenient and cheap as other alternatives and approved at a level no lower than senior executive service, general officer, flag officer, or activity commander; (3) in November 1994, the Coast Guard independently developed reforms that paralleled these DOD initiatives; (4) DOD is still adjusting to the changes introduced by Congress and the Secretary; (5) there is an abundance of guidance available to Air Force, Army, and Navy contracting activities, but a sample of fiscal year (FY) 1995 Volpe Center purchases showed that not all files contained the information required by the Secretary's memorandum; (6) in addition, DOD has not yet implemented a statutorily mandated monitoring system for its interagency purchases; (7) the monitoring system is currently scheduled for implementation in October 1995; (8) DOD contracting with the Volpe Center has been declining since FY 1992; (9) while it is difficult to pinpoint exact causes for the downward trend, more recent declines appear to be a result of DOD's implementation of the more restrictive environment for interagency orders; (10) likewise, a similar recent decline in Coast Guard purchases at the Volpe Center appears to be related to the introduction of the Coast Guard reforms; (11) the Federal Acquisition Streamlining Act (FASA) generally extended the restrictive interagency transaction controls applicable to DOD to other federal agencies; and (12) the implementing draft regulation, while consistent with FASA, is not as stringent as the DOD or Coast Guard cost policies.