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DOD Contract Management

This information appears as published in the 2015 High Risk Report.

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The Department of Defense (DOD) obligates more than $300 billion annually on contracts for goods and services, including major weapon systems, support for military bases, information technology, consulting services, and commercial items. Contracts also include those in support of contingency operations, such as those in Afghanistan. Our work and that of others has identified challenges DOD faces within four segments of contract management: (1) the acquisition workforce, (2) contracting techniques and approaches, (3) service acquisitions, and (4) operational contract support. Ensuring DOD has the people, skills, capacities, tools, and data needed to make informed acquisition decisions is essential if DOD is to effectively and efficiently carry out its mission in an era of more constrained resources. We added this area to our High Risk List in 1992.

DOD Contract Management

DOD has demonstrated sustained leadership commitment to addressing its contract management challenges. This commitment has been reflected in several ways, including a continued emphasis on growing and training the acquisition workforce, the appointment of senior officials within the Office of the Secretary of Defense and the military departments to improve service acquisitions, and the issuance of policies and guidance. Overall, we assessed that DOD has partially met each of the other four criteria for removal from the High Risk List—having the people and resources to reduce risk, the development of an action plan to identify and address root causes, the use of measures and data to monitor progress, and demonstrated progress in implementing corrective actions. DOD has made varying progress addressing challenges in the four segments that comprise this high-risk area. For one segment—contracting techniques and approaches—DOD has met all the criteria. In the three other segments, however, DOD has not met one or more of the criteria. For example, DOD lacks an action plan to guide its efforts in improving the acquisition workforce and service acquisitions, and the department has not resolved capacity shortfalls or the lack of performance measures to address operational contract support issues. Continued DOD leadership is essential to building on the progress DOD made in recent years and to effectively addressing ongoing challenges.




Acquisition Workforce

Acquisition Workforce

To properly manage the acquisition of goods and services, an agency needs a workforce with the right skills and capabilities. The commitment of DOD’s leadership to addressing challenges with the acquisition workforce is underscored by the department’s emphasis on growing and training the acquisition workforce through its Better Buying Power initiative. For example, DOD has made progress in building the capacity of the acquisition workforce by increasing its size from about 126,000 in 2008 to more than 150,000 in 2014. As noted in our 2013 high-risk update, DOD has also completed competency assessments that identified the current skills and capabilities of the acquisition workforce and helped identify areas needing further management attention. In that regard, in areas such as cost estimating and systems engineering, our work found that DOD may not have adequate resources to fully implement recent weapon system reform initiatives.

Further, in July 2014, we found that DOD had taken steps to address or partially address 27 of 32 statutory reporting requirements, such as conducting assessments of critical skills and competencies, in its 2013-2018 strategic civilian workforce plan. However, DOD had not yet addressed the other 5 requirements, including the requirement to assess the appropriate mix of civilian, military, and contractor capabilities in its plan. Additionally, DOD has delayed the planned issuance of an updated strategic plan specific to the acquisition workforce. The department has not issued the biennial plan since April 2010 nor has it demonstrated that it has aligned its workforce needs with projected funding. Consequently, while DOD does collect data and monitor the size of its acquisition workforce, particularly the civilian acquisition workforce, it is unclear whether DOD has determined the appropriate size of the workforce and has sufficient funds budgeted to meet its workforce requirements. As a result, DOD cannot fully monitor its progress in meeting its goals for the acquisition workforce. As we previously reported, workplace planning provides agencies with the information they need to ensure that their annual budget requests include adequate funds to implement human capital strategies.

Contracting Techniques and Approaches

Contracting Techniques and Approaches

DOD has made substantial progress in addressing concerns we have previously raised in addressing the management and oversight of contracting techniques and approaches. Contracting techniques and approaches encompass the broad array of options available to DOD acquisition and contracting personnel to acquire goods and services. These options include choosing the most appropriate contract type and the effective use of competition. These and other techniques and approaches are critical to the successful acquisition of goods and services. In the past, we have found weaknesses in several of these areas. For example, we have identified weaknesses in DOD’s use of undefinitized contract actions (which authorize contractors to begin work before reaching a final agreement on contract terms), time-and-materials contracts (which compensate contractors based on hours of effort rather than outcomes achieved), award fees, and competition. We made numerous recommendations to address the specific issues we identified. DOD leadership has generally taken actions to address our recommendations.

Over the past several years, DOD’s top leadership has taken significant steps to plan and monitor progress in the management and oversight of contracting techniques and approaches. Through its Better Buying Power initiatives, for example, DOD leadership identified a number of actions to promote effective competition and better utilize specific contracting techniques and approaches. In that regard, in 2010 DOD issued a policy containing new requirements for competed contracts that received only one offer—a situation the Office of Management and Budget has noted deprives agencies of the ability to consider alternative solutions in a reasoned and structured manner and which DOD has termed “ineffective competition.” These changes were codified in DOD’s acquisition regulations in 2012. In May 2014, we concluded that DOD’s regulations help decrease some of the risks of one-offer awards, but also that DOD needed to take additional steps to continue to enhance competition, such as establishing guidance for when contracting officers should assess and document the reasons only one offer was received. DOD concurred with the two recommendations we made in our report and has since implemented one of them.

DOD officials reported that DOD has been using its Business Senior Integration Group (BSIG)—the Under Secretary of Defense for Acquisition, Technology, and Logistics’ executive-level leadership forum for providing oversight in the planning, execution, and implementation of DOD’s Better Buying Power initiatives—as a mechanism to review ongoing and emerging issues, including competition and other weaknesses in contracting techniques and approaches. For example, in March 2014, the Director of the Office of Defense Procurement and Acquisition Policy presented an assessment of DOD competition trends that provided information on competition rates across DOD and for selected commands within each military department and proposed specific actions to improve competition. Further, in June 2014, DOD issued its second annual assessment of the performance of the defense acquisition system, which included data on its competition rate and goals, assessments of the effect of contract type on cost and schedule control, and the impact of competition on the cost of major weapon systems.

An institution as large, complex and diverse as DOD, and one that obligates hundreds of billions of dollars on contracts each year, will continue to face challenges with its contracting techniques and approaches. We will maintain our focus on identifying these challenges and proposing solutions. At this point, however, DOD’s continued commitment and demonstrated progress in this area, including the establishment of a framework by which DOD can address ongoing and emerging issues associated with the appropriate use of contracting techniques and approaches, provide a sufficient basis to remove this segment from the DOD contract management high-risk area.

Service Acquisition

Service Acquisition

DOD has made a number of changes to its approach to managing the acquisition of services, which accounted for more than 50 percent of DOD’s contract obligations in fiscal year 2013. These changes include designating the Principal Deputy Under Secretary of Defense for Acquisition, Technology, and Logistics as the department’s senior manager for service acquisition, as well as building capacity to address service acquisition issues by designating a senior manager for service acquisitions in each military department and adopting a standard approach for categorizing spending on services. DOD also has ongoing efforts to develop a new department-wide policy that will govern the acquisition of services. DOD acknowledged in 2010 the need for a cohesive, integrated strategy for acquiring services but continues to lack such a strategy, as well as reliable data to inform decision making. For example, in June 2013 we reported that while DOD had taken many actions intended to improve service acquisition, it was not yet positioned to determine the effects of these actions, in part because DOD did not have adequate data on the current state of service acquisition, including spending analyses by each category of service it buys.

Further, DOD does not have an action plan that would enable it to assess progress toward achieving its goals. We have continued to find that DOD faces challenges in meeting its statutory requirement to prepare an annual inventory of contracted services—one that could help it manage its acquisitions of services; make more strategic decisions about the right workforce mix of military, civilian, and contractor personnel; and better align resource needs through the budget process to achieve that mix. For example, in November 2014 we found that DOD still did not have an accurate inventory of contractor personnel, including those that closely support inherently governmental activities. Further, we have found that DOD has made some progress in acquiring services through strategic sourcing—a process of moving away from numerous individual procurements to a broader aggregate approach—but has more to do. As of March 2014, we found that DOD had identified some high-spend categories as candidates for strategic sourcing, but the department still needed to issue guidance establishing goals and metrics to track its progress.

Operational Contract Support

Operational Contract Support

We have identified long-standing issues in DOD’s use of contractors to support contingency operations, such as those in Iraq and Afghanistan. In light of these issues, we found in our 2013 high-risk update that DOD needs to sustain efforts throughout the department to integrate operational contract support through policy, planning, and training for both current and future contingency operations. DOD has demonstrated leadership commitment in addressing these issues as evidenced in several new or revised policies aimed at improving operational contract support, but several areas still need continued management attention. For example, in a September 2012 manpower study to determine the number of dedicated civilian operational contract support analysts and planners needed at the strategic and operational level, the Joint Staff identified a shortfall of 70 positions which have not been addressed.

Further, in February 2013 we recommended that DOD further integrate operational contract support into contingency planning in the military services and combatant commands. The department generally concurred with our recommendations, but with the exception of the Army, the military departments have not yet developed operational contract support guidance, a key step in integrating operational contract support into the military department planning process. According to service officials, one reason that they have not issued comprehensive guidance similar to the Army’s guidance is because the Navy, Marine Corps, and Air Force have not been the lead service for contracting in recent operations; however, these three services combined spent over a billion dollars under contracts for services in Afghanistan in fiscal year 2011. Without specific, service-wide guidance, the other services’ future planning efforts may not reflect the full extent of the use of contract support and the attendant cost and need for oversight. Also, according to some geographic combatant command officials, the combatant commands have made some progress in including operational contract support in their plans, but some plans do not include operational contract support considerations.

DOD issued an update to its 2013 Operational Contract Support action plan which refines actions needed to address 10 critical operational contract support capability gaps that the department must close before it can effectively and efficiently conduct operational contract support tasks in support of contingency operations. While the update provides information on more than 170 tasks that have been assigned to the Office of the Secretary of Defense and other DOD agencies against a target completion date, not all tasks contain metrics of success that are clear and measurable. For example, in the update to the action plan, DOD stated that the establishment of an operational contract support joint lessons learned process was complete, citing the development of operational contract support universal joint tasks. While the establishment of universal joint tasks supports lessons learned through the joint operation planning process, the lack of clear and measurable metrics makes it unclear how this establishes and provides formal oversight of the operational contract support joint lessons learned process.

To further improve outcomes on the billions of dollars spent annually on goods and services, DOD needs to

  • continue efforts, including strategic planning and alignment of funding, to increase the department’s capacity to manage and oversee contracts by ensuring that its acquisition workforce is appropriately sized and trained to meet the department’s needs;
  • determine the appropriate mix of military, civilian, and contractor personnel;
  • strategically manage its acquisition of services by defining desired outcomes, establishing goals and measures, and obtaining the data needed to monitor progress; and
  • sustain efforts throughout the department to integrate operational contract support through policy, planning, training, and application of necessary resources for both current and future contingency operations.
Looking for our recommendations? Click on any report to find each associated recommendation and its current implementation status.
Defense Contracting: Actions Needed to Increase Competition
http://gao.gov/products/GAO-13-325

GAO-13-325: Published: Mar 28, 2013. Publicly Released: Mar 28, 2013.
  • portrait of Timothy J. DiNapoli
    • Timothy J. DiNapoli
    • Director, Acquisition and Sourcing Management
    • dinapolit@gao.gov
    • (202) 512-4841