Summary
Department of Defense (DOD) obligations for service contracts rose from $82.3 billion in fiscal year 1996 to $141.2 billion in fiscal year 2005. DOD is becoming increasingly more reliant on the private sector to provide a wide range of services, including those for critical information technology and mission support. DOD must maximize its return on investment and provide the warfighter with needed capabilities and support at the best value for the taxpayer. GAO examined DOD's approach to managing services in order to (1) identify the key factors DOD should emphasize to improve its management of services and (2) assess the extent to which DOD's current approach exhibited these factors.
Several key factors are necessary to improve DOD's service acquisition outcomes--that is, obtaining the right service, at the right price, in the right manner. These factors can be found at both the strategic and the transactional levels and should be used together as a comprehensive, but tailored approach to managing service acquisition outcomes. At the strategic level, key success factors include (1) strong leadership that defines a corporate vision and normative goals; (2) sustained, results-oriented communication and metrics; (3) defined responsibilities and associated support structures; and (4) increased knowledge and focus on spending and data trends. The strategic level also sets the context for the transactional level, where the focus is on making sound decisions on individual transactions. Success factors at this level include having (1) valid and well-defined requirements; (2) properly structured business arrangements; and (3) proactively managed outcomes. DOD's current approach to managing service acquisition has tended to be reactive and has not fully addressed the key factors for success at either the strategic or transactional level. At the strategic level, DOD has yet to set the direction or vision for what it needs, determine how to go about meeting those needs, capture the knowledge to enable more informed decisions, or assess the resources it has to ensure departmentwide goals and objectives are achieved. For example, despite implementing a review structure aimed at increasing insight into service transactions, DOD is not able to determine which or how many transactions have actually been reviewed. The military departments, while having some increased visibility, have only reviewed proposed acquisitions accounting for less than 3 percent of dollars obligated for services in fiscal year 2005 and are in a poor position to regularly identify opportunities to leverage buying power or otherwise change existing practices. Actions at the transactional level continue to focus primarily on awarding contracts and do not always ensure that user needs are translated into well-defined requirements or that post-contract award activities result in expected performance.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Paul L. Francis
Government Accountability Office: Acquisition and Sourcing Management
(202) 512-2811
Recommendations for Executive Action
Recommendation: The Secretary of Defense should adopt a proactive approach to managing service acquisition that leverages strategic and transactional elements. Specifically, the Secretary of Defense should establish a normative position of how and where service acquisition dollars are currently and will be spent (including volume, type, and trends).
Agency Affected: Department of Defense
Status: In process
Comments: DOD agreed that a more coordinated, integrated, and strategic approach to managing service acquisitions was needed. The Director, Defense Procurement and Acquisition Policy, noted that DOD was developing an integrated assessment of how best to acquire services, and expected that this assessment would result in a comprehensive, departmentwide architecture. However, at this time, DOD has not established a normative position that provides the department's vision as to the volume and type of services that should be acquired in the future, and how such services will be managed from an enterprise-wide perspective. GAO is currently assessing elements of DOD's approach to managing major service acquisitions, and will continue to monitor the Department's efforts to establish a normative position of how and where service acquisition dollars are currently and will be spent (including volume, type, and trends).
Recommendation: The Secretary of Defense should adopt a proactive approach to managing service acquisition that leverages strategic and transactional elements. Specifically, the Secretary of Defense should determine areas of specific risk that are inherent in acquiring services and that should be managed with greater attention (including those areas considered sensitive or undesirable in terms of quantity or performance).
Agency Affected: Department of Defense
Status: In process
Comments: The Department agreed that a more coordinated, integrated, and strategic approach to managing service acquisitions was needed. The Director, Defense Procurement and Acquisition Policy, noted that DOD was developing an integrated assessment of how best to acquire services, and expected that this assessment would result in a comprehensive, departmentwide architecture. At this time, however, DOD's services acquisition review process continue to use proposed dollar value as the principal proxy for risk, rather than determining the specific areas of risk that are inherent in services acquisition and that should be managed with greater attention. GAO is currently assessing elements of DOD's approach to managing major service acquisitions, including how risks are assessed and mitigated at the contract and task order level.
Recommendation: The Secretary of Defense should adopt a proactive approach to managing service acquisition that leverages strategic and transactional elements. Specifically, the Secretary of Defense should on the basis of the above, clearly identify and communicate what service acquisition management improvements are necessary and the goals and timelines for completion.
Agency Affected: Department of Defense
Status: In process
Comments: The Department agreed that a more coordinated, integrated, and strategic approach to managing service acquisitions was needed. The Director, Defense Procurement and Acquisition Policy, noted that DOD was developing an integrated assessment of how best to acquire services, and expected that this assessment would result in a comprehensive, departmentwide architecture. Further, DOD officials indicated that they are concurrently revising its training curriculum to address service contracting issues; assessing the skills and capabilities of its acquisition workforce, and reengineering its approach to strategic sourcing. Additionally, DOD officials noted that the military departments and defense agencies are conducting self-assessments of their contract management processes in response to GAO's contract management high-risk issues. DOD officials indicated that, in combination, these efforts will form the basis for improving DOD's acquisition of services. In September 2008, DOD issued a memorandum intended to identify the extent to which the military departments were conducting annual post-award assessments of major service acquisitions, as required under DOD policy. GAO is assessing elements of DOD's approach to managing major services acquisitions and will report on DOD's effort in 2009.
Recommendation: The Secretary of Defense should adopt a proactive approach to managing service acquisition that leverages strategic and transactional elements. Specifically, the Secretary of Defense should ensure that decisions on individual transactions are consistent with DOD's strategic goals and objectives.
Agency Affected: Department of Defense
Status: In process
Comments: GAO will continue to monitor DOD's efforts to address this recommendation. The Department agreed that a more coordinated, integrated, and strategic approach to managing service acquisitions was needed. The Director, Defense Procurement and Acquisition Policy, noted that DOD was developing an integrated assessment of how best to acquire services, and expected that this assessment would result in a comprehensive, departmentwide architecture. At this time, however, DOD has not established a normative position that provides the department's vision as to the volume and type of services that should be acquired in the future, and how such services will be managed from an enterprise-wide perspective. Further, discussions with DOD officials indicated that DOD is in the process of revising its strategic sourcing efforts as part of a broader reengineering effort. Consequently, DOD had not yet incorporated strategic sourcing concepts when it reviews proposed services acquisitions. In September 2008, DOD issued a memorandum intended to identify the extent to which the military departments were conducting annual post-award assessments of major service acquisitions, as required under DOD policy. GAO is assessing elements of DOD's approach to managing major services acquisitions and will report on DOD's effort in 2009.
Recommendation: The Secretary of Defense should adopt a proactive approach to managing service acquisition that leverages strategic and transactional elements. Specifically, the Secretary of Defense should ensure that requirements for individual service transactions are based on input from key stakeholders.
Agency Affected: Department of Defense
Status: In process
Comments: GAO will continue to monitor the Department of Defense's efforts on this recommendation. The Department agreed that a more coordinated, integrated, and strategic approach to managing service acquisitions was needed. The Director, Defense Procurement and Acquisition Policy, noted that DOD was developing an integrated assessment of how best to acquire services, and expected that this assessment would result in a comprehensive, departmentwide architecture. As part of this architecture, DOD intends to establish multi-functional support capabilities within the military departments that are intended to help users and contracting officers apply best practices, better define their requirements, and identify appropriate performance metrics, among other benefits. GAO is assessing elements of DOD's approach to managing major services acquisitions and will report on DOD's effort in 2009.
Recommendation: The Secretary of Defense should adopt a proactive approach to managing service acquisition that leverages strategic and transactional elements. Specifically, the Secretary of Defense should provide a capability to determine whether service acquisitions are meeting their cost, schedule, and performance objectives.
Agency Affected: Department of Defense
Status: In process
Comments: GAO will continue to monitor the Department of Defense's efforts on this recommendation. The Director, Defense Procurement and Acquisition Policy, issued a policy memorandum on October 2, 2006, entitled "Acquisition of Services", which required that senior DOD and military department officials conduct annual execution reviews to assess whether the contracts were meeting their established cost, schedule, and performance metrics. Discussions with DOD officials indicated, however, that DOD has not conducted such reviews for proposed acquisitions that they had approved and they did not have visibility as to whether the military departments or defense agencies had done so for the acquisitions for which they were responsible. In September 2008, DOD issued a memorandum intended to identify the extent to which the military departments were conducting annual post-award assessments of major service acquisitions, as required under DOD policy. GAO is assessing elements of DOD's approach to managing major services acquisitions and will report on DOD's effort in 2009.
