Defense Acquisitions: DOD's Practices and Processes for Multiyear Procurement Should Be Improved

DOD concurred with this recommendation. An August 17, 2011 memo from the Director of Defense Procurement and Acquisition Policy (through the DOD IG) discusses a series of actions taken by the department since 2008 and states that expanded guidance on multiyear procurement is expected to be issued. In August 2012, the Director of Defense Procurement and Acquisition Policy released a draft version of the guidance that addresses our recommendation. This guidance amplifies existing multiyear guidance and provides clarification regarding many of the issues associated with the use of multiyear procurement contracts.

DOD partially concurred with this recommendation, stating that cost and savings are reviewed during the proposal stage and after contract negotiations, and that the CAIG can perform independent cost assessments on selected programs. DOD agreed to consider whether the benefits of requiring 3rd party validation of cost and savings data for MYP candidates warrants the associated delays and expense of such a validation. An August 17, 2011 memo from the Director of Defense Procurement and Acquisition Policy (through the DOD IG) discusses a series of actions taken by the department since 2008 and states that current hiring initiatives, improved continuing education, and a new pricing tool achieves the objective and intent of our recommendation. Specifically, the Defense Contract Management Agency has hired 300 pricing analysts to assist contracting officers during negotiations. This effort should result in a much expanded, well-trained workforce with the competence and tools to accurately estimate and compare multiyear procurement and annual contract costs. In addition, the Defense Acquisition University has developed new curriculum for acquisition personnel that provides more rigorous training and certification for analyzing contract costs and price analyses. Also, a new cash-flow analysis tool is available for all to use to better and more consistently quantify internal rate of return and net present value, two key measures for evaluating and justifying multiyear packages. We agree that these actions collectively satisfy the intent and desired outcome of our recommendation.

DOD concurred with this recommendation. An August 17, 2011 memo from the Director of Defense Procurement and Acquisition Policy (through the DOD IG) discusses a series of actions taken by the department since 2008 to centrally obtain, analyze, and document data on multiyear contracts from the military departments. This information helped OSD document historical multiyear contract information, outcomes, and after-action assessments. DOD also instituted a peer review process for all contracts with an estimated value of $1 billion or more. This would cover most multiyear contracts. The peer review process involves cross-departmental teams reviewing contracts and multiyear candidates at several stages of contracting to ensure compliance with policy and share lessons learned. One of the primary goals we had in mind when recommending a central database was to enable DOD to capture and share lessons learned that could improve overall quality of decision making. We agree with the Department that these actions substantially meet the intent of our recommendation.

DOD partially concurred with this recommendation in commenting on our draft report, acknowledging that after action assessments may be of value for certain programs, but questioning the timing and ability to do so on all programs. However, in DOD's 60-day response letter to our final report, the Department changed its position to fully concur and stated that they would implement an after-action assessment process on multiyear contracts. An August 17, 2011 memo from the Director of Defense Procurement and Acquisition Policy and follow up memo on August 7, 2012 discuss a series of actions taken by the department since 2008 that satisfactorily meets the intent of our recommendation. Relevant actions included (1) collecting and analyzing multiyear contract data from the military departments; (2) establishing a lessons learned data base capturing best practices; and (3) implementing a peer review process. Peer review involves cross-departmental teams reviewing contracts at various stages of completion to ensure consistent application of policy and regulations and to share lessons learned and best practices across the Department. Furthermore, DOD policy now requires post-audits by the Defense Contract Management Agency of completed multiyear contracts and new proposal reviews by the Cost Assessment and Program Evaluation office. Collectively, these actions meet the intent of our recommendation. From several sources and perspectives, the Department is gathering and applying lessons learned on prior multiyear programs.