Taking a Strategic Approach Could Improve DOD's Acquisition of Services
GAO-02-230: Published: Jan 18, 2002. Publicly Released: Jan 18, 2002.
GAO studied several leading companies in the private sector that have made dramatic changes to their process for acquiring services. GAO found that these changes generally began with a corporate decision to pursue a more strategic approach to acquiring services--from developing a better picture of what the company was actually spending on services to developing new ways of doing business. The Defense Department (DOD), the government's largest purchaser of services, already has some elements in place that are essential to such a strategic approach, such as a commitment by top management to adopting best practices. However, DOD has yet to conduct a comprehensive analysis of its spending on services or thoroughly assess it's current structure, processes, and roles. DOD's size, the range and complexity of the services that it acquires, the capacity of its information and financial systems, and the unique requirements of the federal government are among the factors that DOD will need to consider as it tailors a strategic approach to its diverse needs.
Recommendations for Executive Action
Status: Closed - Implemented
Comments: In 2004, DOD assessed its current and planned financial and management information systems and determined that they could not provide the type of spending data that commercial companies believe are critical to identifying opportunities to leverage services acquisition buying power, reduce costs, and provide better management and oversight of DOD services suppliers. As a result, in December 2003, DOD launched an 11-month project to build a spend analysis system that will pull data from disparate databases for analysis by DOD buying teams. Specifically, DOD initiated the Spend Analysis Pilot-Technical Solution to implement a tool that aggregates spend data from multiple DOD procurement systems. According to DOD, pilot objectives include (1) developing an enterprise spend analysis capability that can be scalable across the DOD, (2) proving that it is possible, from a DOD-wide perspective, to reduce the complexity of data integration, (3) increasing the amount of information used to support DOD's second pilot effort to define how, from an operational perspective, a commodity group will be analyzed for strategic sourcing opportunities, and (4) demonstrating the network-centric attributes in DOD's acquisition information system domain. DOD's vision for the future spend environment is to have a spend analysis tool that provides a complete view of spend data, real-time analysis; standard, repeatable process; and common definition of spend across DOD components.
Recommendation: To achieve significant improvements across the range of services DOD purchases, the Secretary of Defense should evaluate how a strategic reengineering approach, such as that employed by the leading companies GAO visited, could be used as a framework to guide DOD's reengineering efforts. Specifically, the Secretary of Defense should assess whether current or planned financial or management information systems can provide the type of spending data that DOD needs to identify opportunities to leverage its buying power, reduce costs, and provide better management and oversight of its suppliers. Such data would include what types of services are being acquired; how many suppliers are being used for specific services; and how much DOD is spending on specific services, in total and with each supplier.
Agency Affected: Department of Defense
Status: Closed - Implemented
Comments: In 2003, DOD completed efforts to assess the current, tactical and decentralized approach to procurement, processes, and roles and found them to be inadequate to support a more strategic approach to purchasing services. As a result of this assessment, DOD launched a pilot now underway that will operationally test the use of cross-functional teams to coordinate and manage services purchases, along the very same lines of commercial best practices identified by GAO and recommended for consideration by DOD. Specifically, in 2003, DOD launched the Services Acquisition Spend Analysis Pilot-Operational Solution to define how, from an operational perspective, a commodity group will be analyzed for identifying strategic sourcing opportunities. The pilot will initially focus on analyzing the Administrative Services commodity, which represents about $1 billion in procurement spending across DOD organizations. According to DOD, the objectives of the pilot are to (1) develop a repeatable, operational process for analyzing commodity groups for sourcing opportunities, (2) baseline the current procurement data quality and identify data quality improvement opportunities, and (3) identify a strategic sourcing strategy for the Administrative Services category. With this pilot, DOD intends to use the type of disciplined, strategic sourcing approach based on commercial best practices recommended by GAO. DOD's pilot of a strategic sourcing approach to services acquisitions includes analyzing historical spend patterns and forecasting future requirements to identify sourcing opportunities to more efficiently manage the supply chain in support of the warfighter. Key tenets of DOD's strategic sourcing approach include (1) thorough analysis of historical spend by organization, dollar value, volume, and source, (2) collaborative planning across weapon systems and organizational boundaries with a focus on commodity requirements with similar characteristics, budgets, and needs, and (3) examination of total cost of ownership--not price alone. DOD's vision for its future services acquisition environment similarly mirrors the best practices of leading companies identified by GAO, including training procurement staff to be strategic buyers with an enterprise perspective, increasing the efficiency of acquisition process, achieving better relationship management and partnership with suppliers, forging strategic sourcing relationships with the right number of suppliers and socioeconomic mix, and better leveraging budgeted dollars for the procurement of services.
Recommendation: To achieve significant improvements across the range of services DOD purchases, the Secretary of Defense should evaluate how a strategic reengineering approach, such as that employed by the leading companies GAO visited, could be used as a framework to guide DOD's reengineering efforts. Specifically, the Secretary of Defense should assess whether DOD's current organizational structure, processes, and roles are adequate to support a more strategic approach to acquiring services; for example, whether cross-functional teams would improve the coordination and management of service acquisitions and whether it would be beneficial to establish full-time dedicated commodity/service managers to provide more effective management of key services.
Agency Affected: Department of Defense