Sourcing and Acquisition:

Challenges Facing the Department of Defense

GAO-03-574T: Published: Mar 19, 2003. Publicly Released: Mar 19, 2003.

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The Department of Defense (DOD) is on the brink of operations in Iraq while seeking to respond to changes in security threats and still meeting the challenges transforming the military. DOD spends an average of $150 billion annually on acquisitions that support these and other missions. Moreover, this investment is expected to grow considerably in the future as DOD works to keep legacy systems while investing in future capabilities such as unmanned aircraft, satellite networks, and information and communications systems. Such demands clearly require DOD to be as efficient and effective as possible in obtaining the systems, services, and equipment it needs to carry out its mission. But GAO's reviews continue to show that DOD is not carrying out acquisitions cost-effectively and that the acquisitions themselves are not always achieving DOD's objectives. Pervasive problems persist regarding high-risk acquisition strategies and unrealistic cost, schedule, and performance estimates. This testimony focuses on two aspects fundamental to successful acquisitions in DOD: (1) the implementation of sound policies for making sourcing decisions, and (2) the adoption of best practices.

Government agencies increasingly are relying on services to accomplish their missions. The Department of Defense now spends more than half its contracting dollars acquiring services, about $77 billion in fiscal year 2001, the latest year for which complete data are available. In addition, the Department reports that it has over 400,000 employees performing commercial-type services. Determining whether to obtain required services using federal employees or through contracts with the private sector is an important economic and strategic decision. In fact, competitive sourcing is a key component of the President's Management Agenda. But historically, the process for determining whether the public or the private sector should perform services needed by federal agencies--set forth in Office of Management and Budget (OMB) Circular A-76--has been difficult to implement. The impact such decisions have on the federal workforce has been profound, and there have been concerns in both the public and private sectors concerning the fairness of the process and the extent to which there is a "level playing field" for conducting public-private competitions. DOD could significantly improve its performance in a number of areas by adopting some of the best practices we have identified. Specifically, DOD could improve its performance in the areas of information technology outsourcing, acquiring information technology systems, acquiring services, major weapon system acquisitions, and acquisition workforce challenges.

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