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Testimony: 

Before the Subcommittee on Government Management, Organization, and 
Procurement, Committee on Oversight and Government Reform, House of 
Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 10 a.m. EST: 
Wednesday, February 27, 2008: 

Federal Acquisition: 

Oversight Plan Needed to Help Implement Acquisition Advisory Panel's 
Recommendations: 

Statement of John P. Hutton Director, Acquisition and Sourcing 
Management: 

GAO-08-515T: 

GAO Highlights: 

Highlights of GAO-08-515T, a testimony before the House Subcommittee on 
Government Management, Organization, and Procurement, Committee on 
Oversight and Government Reform, House of Representatives. 

Why GAO Did This Study: 

A growing portion of federal spending is related to buying services 
such as administrative, management, and information technology support. 
Services accounted for about 60 percent of total fiscal year 2006 
procurement dollars. The Services Acquisition Reform Act (SARA) of 2003 
established an Acquisition Advisory Panel to make recommendations for 
improving acquisition practices. In January 2007, the panel proposed 89 
recommendations to improve federal acquisition practices. 

GAO was asked to testify on how the panel recommendations compare to 
GAO’s past work and identify how the Office of Federal Procurement 
Policy (OFPP) expects the recommendations to be addressed. This 
statement is based on GAO’s analysis of the advisory panel’s report. 
GAO’s analysis is included in its December 2007 report titled, Federal 
Acquisition: Oversight Plan Needed to Help Implement Acquisition 
Advisory Panel Recommendation, (GAO-08-160). 

What GAO Found: 

The SARA Panel, like GAO, has made numerous recommendations to improve 
federal government acquisition—from encouraging competition and 
adopting commercial practices to improving the accuracy and usefulness 
of procurement data. The recommendations in the SARA Panel report are 
largely consistent with GAO’s past work and recommendations. The panel 
and GAO have both pointed out 

* the importance of a robust requirements definition process and the 
need for competition; 

* the need to establish clear performance requirements, measurable 
performance standards, and a quality assurance plan to improve the use 
of performance-based contracting; 

* the risks inherent in the use of interagency contracts because of 
their rapid growth and their improper management; 

* stresses on the federal acquisition workforce and the need for a 
strategy to assess these workforce needs; 

* concerns about the role of contractors engaged in managing 
acquisition and procurement activities performed by government 
employees and the proper roles of federal employees and contractor 
employees in a “blended” workforce; and; 

* the adverse effects of inaccurate and incomplete federal procurement 
data, such as not providing a sound basis for conducting procurement 
analyses. 

The panel also made recommendations that would change the guidance for 
awarding contracts to small businesses. While GAO’s work has addressed 
some small business policy issues, GAO has not made recommendations 
that would change the guidance to be used for awarding contracts to 
small businesses. 

OFPP representatives told GAO that OFPP agrees with almost all of the 
panel recommendations and expected that most of the 89 panel 
recommendations would be implemented through one of the following 
means: congressional actions; changes to the Federal Acquisition 
Regulation; OFPP actions, such as issuing new or revised policy; and 
federal agency actions. OFPP has already acted on some SARA 
recommendations, while other actions are pending or under 
consideration. Milestones and reporting requirements are in place to 
help OFPP gauge the implementation status of some recommendations but 
not for others. Moreover, OFPP does not have a strategy or plan to 
allow it to exercise oversight and establish accountability for 
implementing all of the panel’s recommendations and to gauge their 
effect on federal acquisitions. 

What GAO Recommends: 

In its December 2007 report, GAO recommended that OFPP develop an 
oversight strategy or plan with milestones and reporting requirements 
to help it ensure the implementation of the SARA Panel recommendations 
and to gauge how they improve federal acquisition. OFPP agreed in 
principle with GAO’s recommendation. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-515T]. For more information, contact John 
Hutton at (202) 512-7773 or huttonj@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss our review of the Services 
Acquisition Reform Act's Acquisition Advisory Panel report. Each year 
the federal government--the single largest buyer in the world--spends 
billions of dollars to procure goods and services. In fiscal year 2006, 
it spent over $400 billion. A growing portion of this spending is 
related to buying services, such as administrative, management, and 
information technology support. Services now account for about 60 
percent of total procurement dollars. 

Congress passed the Services Acquisition Reform Act of 2003 (SARA), 
which provided federal agencies an array of tools to improve how they 
acquire services. The act also established an acquisition advisory 
panel, which began work in February 2005, to review acquisition laws 
and regulations and make recommendations to improve federal acquisition 
practices. The SARA Acquisition Advisory Panel issued its final report 
dated January 2007, making 89 recommendations to improve federal 
acquisition in the following seven areas: commercial practices, 
performance-based acquisitions, interagency contracting, small 
business, the federal acquisition workforce, the role of contractors 
supporting government, and federal procurement data. The panel directed 
most of its recommendations to the Office of Federal Procurement Policy 
(OFPP) within the Office of Management and Budget (OMB) for 
implementation, while the others were directed to Congress and federal 
agencies. 

As you requested, my testimony will focus on our review of the panel's 
report. Specifically, I will address (1) how the panel recommendations 
compare with our past work and recommendations and (2) how OFPP is 
addressing the recommendations. My statement is based on our report 
issued in December 2007.[Footnote 1] 

Summary: 

The recommendations in the SARA Panel report are largely consistent 
with GAO's past work and recommendations. Like the panel report, our 
past work pointed out: 

* the importance of a robust requirements definition process; 

* the need for competition, which is a mandate that runs through the 
statutes and regulations governing federal procurement; 

* the need for clear performance requirements, measurable performance 
standards, and a quality assurance plan to improve the use of 
performance-based contracting; 

* the risks inherent in the use of interagency contracts because of 
their rapid growth and their improper management; 

* the stresses on the federal acquisition workforce and the need for a 
strategic approach to assess workforce needs; 

* concerns about the role of contractors engaged in managing 
acquisition and procurement activities traditionally performed by 
government employees and the proper roles for contractor employees in a 
"blended" workforce; and: 

* the adverse effects of inaccurate and incomplete federal procurement 
data, that cannot be relied on to conduct procurement analyses. 

Like the panel, we have made numerous recommendations to address many 
of these issues and bring improvement to government procurement. The 
panel also made recommendations that would change the guidance for 
awarding contracts to small businesses. While our work on small 
business has addressed a number of these policy issues, we have not 
made recommendations that would change the guidance for awarding 
contracts to small businesses. 

OFPP agrees with almost all of the 89 panel recommendations and has 
already acted on some of them, while other actions are pending or under 
consideration. Generally, OFPP expects implementation of the 
recommendations to fall into the broad categories of (1) legislative 
action; (2) changes to the Federal Acquisition Regulation (FAR); (3) 
OFPP actions, such as issuing or revising policy; and (4) federal 
agency action. OFPP noted that legislative actions and pending FAR 
cases could address about one-third of the recommendations. OFPP is 
expected to address most of the remaining recommendations and plans to 
work with the chief acquisition officer or senior procurement official 
within each agency to do so. 

Based on the information OFPP provided, an overall strategy or plan 
with milestones and reporting requirements has not yet been established 
to help provide visibility over the progress and results of 
implementing the recommendations. Without an overall strategy or plan, 
it is unclear how OFPP will gauge how the panel recommendations are 
being implemented and their successes and shortcomings in improving 
federal acquisitions. 

Most SARA Panel Recommendations Are Consistent with GAO's Past Work: 

The 89 recommendations in the panel report are largely consistent with 
our past work and recommendations. I will now discuss each of the seven 
areas the panel reviewed, the general thrust of the panel's 
recommendations, and our views on them. 

Commercial Practices: 

The first area the panel reviewed was commercial practices. According 
to the panel, the bedrock principle of commercial acquisition is 
competition. The panel found that defining requirements is key to 
achieving the benefits of competition because procurements with clear 
requirements are far more likely to produce competitive, fixed-price 
offers that meet customer needs. Further, the panel found that 
commercial organizations invest the time and resources necessary to 
understand and define their requirements. They use multidisciplinary 
teams to plan their procurements, conduct competitions for award, and 
monitor contract performance. Commercial organizations rely on well- 
defined requirements and competitive awards to reduce prices and obtain 
innovative, high-quality goods and services. Hence, practices that 
enhance and encourage competition were the basis of the panel 
recommendations. The panel recommended, among other things, that the 
requirements process be improved and competitive procedures be 
strengthened. 

Our work is generally consistent with the panel's recommendations, and 
we have issued numerous products that address the importance of a 
robust requirements definition process and the need for competition. 
For example, in January 2007, we testified that poorly defined or 
broadly described requirements have contributed to undesired services 
acquisition outcomes. To produce desired outcomes within available 
funding and required time frames, our work has shown that DOD and its 
contractors need to clearly understand acquisition objectives and how 
they translate into the contract's terms and conditions. The absence of 
well-defined requirements and clearly understood objectives complicates 
efforts to hold DOD and contractors accountable for poor acquisition 
outcomes. This has been a long-standing issue. 

Regarding competition, we have stated that competition is a fundamental 
principle underlying the federal acquisition process. Nevertheless, we 
have reported numerous times on the lack of competition in DOD's 
acquisition of goods and services. For example, we noted in April 2006 
that DOD awarded contracts for security guard services supporting 57 
domestic bases, 46 of which were let on an authorized sole-source 
basis. The sole-source contracts were awarded by DOD despite 
recognizing it was paying about 25 percent more than previously paid 
for the contracts awarded competitively. 

Improving Implementation of Performance-Based Acquisition: 

The second area the panel reviewed was improving the implementation of 
performance-based acquisitions. The panel reported that performance- 
based acquisition (PBA) has not been fully implemented in the federal 
government even though OMB has encouraged greater use of it--setting a 
general goal in 2001 of making performance-based contracts 40 percent 
or more of all eligible service acquisitions for fiscal year 2006. The 
panel reported that agencies were not clearly defining requirements, 
not preparing adequate statements of work, not identifying meaningful 
quality measures and effective incentives, and not effectively managing 
the contract. The panel noted that a cultural emphasis on "getting to 
award" still exists within the government, an emphasis that precludes 
taking the time to clarify agency needs and adequately define 
requirements. The panel recommended that OFPP issue more explicit 
implementation guidance and create a PBA "Opportunity Assessment" tool 
to help agencies identify when they should consider using PBA 
contracts. 

Like the panel, we have found that agencies have faced a number of 
issues when using PBA contracts. For example, we reported in April 2003 
that there was inadequate guidance and training, a weak internal 
control environment, and limited performance measures and data that 
agencies could use to make informed decisions on when to use PBA. We 
have made recommendations similar to the panel's. For example, we have 
recommended that the Administrator of OFPP work with agencies to 
periodically evaluate how well agencies understand PBA and how they can 
apply it to services that are widely available in the commercial 
sector, particularly more unique and complex services. The panel's 
concern that agencies are not properly managing PBA contracts is also 
consistent with our work on surveillance of service contracts. In a 
March 2005 report, we found that proper surveillance of service 
contracts, including PBAs, was not being conducted, leaving DOD at risk 
of being unable to identify and correct poor contractor performance. 
Accordingly, we recommended that the Secretary of Defense ensure the 
proper training of personnel in surveillance and their assignment to 
contracts no later than the date of contract award. We further 
recommended the development of practices to help ensure accountability 
for personnel carrying out surveillance responsibilities. We have also 
found that some agencies have attempted to apply PBA to complex and 
risky acquisitions, a fact that underscores the need to maintain strong 
government surveillance to mitigate risks. 

Interagency Contracting: 

The third area the panel reviewed was interagency contracting. The 
panel found that reliance on interagency contracts is significant. 
According to the panel report, 40 percent of the total 2004 
obligations, or $142 billion, was obligated through the use of 
interagency contracts. The panel also found that a significant reason 
for the increased use of these contracts has been reductions in the 
acquisition workforce accompanied by increased workloads and pressures 
to reduce procurement lead times. Accordingly, the panel made numerous 
recommendations to improve the use of interagency contracts with the 
intent of enhancing competition, lowering prices, improving the 
expertise of the acquisition workforce, and improving guidance for 
choosing the most appropriate interagency contract for procurements. 

Our work is generally consistent with the panel's recommendations on 
interagency contracting. In fact, 15 of our reports on interagency 
contracting were cited in the panel report. These included numerous 
recommendations that are consistent with the panel's recommendations. 
Our reports recognize that interagency contracts can provide the 
advantages of timeliness and efficiency by leveraging the government's 
buying power and providing a simplified and expedited method of 
procurement. However, our prior work has found that agencies involved 
in the interagency contracting process have not always obtained 
required competition, evaluated contracting alternatives, or conducted 
adequate oversight. A number of factors render the use of interagency 
contracts high risk; these factors include their rapid growth in 
popularity, their use by some agencies that have limited expertise with 
this contracting method, and the number of parties that might be 
involved. Taken collectively, these factors contribute to a much more 
complex procurement environment--one in which accountability is not 
always clearly established. In 2005, because we found that interagency 
contracts can pose risks if they are not properly managed, we 
designated the management of interagency contracting a governmentwide 
high-risk area. 

Small Business: 

The fourth area the panel reviewed was small business. The panel made 
recommendations to change the guidance to contracting officers for 
awarding contracts to small businesses. These recommendations are 
intended to improve the policies and, hence, address the socioeconomic 
benefits derived from acquiring services from small businesses. OFPP 
has taken the position that all but one of the recommendations requires 
legislation to implement. While our work on small business has 
addressed a number of policy issues, we have not made recommendations 
for statutory and regulatory changes when arguments for such changes 
are based on value judgments, such as those related to setting small 
business contracting goals. 

Federal Acquisition Workforce: 

The fifth area the panel reviewed was the federal acquisition 
workforce. The panel recognized a significant mismatch between the 
demands placed on the acquisition workforce and the personnel and 
skills available within the workforce to meet those demands. The panel 
found, for example, that demands on the federal acquisition workforce 
have grown substantially while at the same time, the complexity of the 
federal acquisition system as a whole has increased. Accordingly, the 
panel made a number of recommendations designed to define, assess, 
train, and collect data on the acquisition workforce and to recruit 
talented entry level personnel and retain its senior workforce. 

Our work is generally consistent with the panel's findings and 
recommendations on the acquisition workforce. On the basis of 
observations made by acquisition experts from the federal government, 
private sector, and academia, we reported in October 2006 that agency 
leaders have not recognized or elevated the importance of the 
acquisition profession within their organizations. The agency leaders 
further noted that a strategic approach had not been taken across 
government or within agencies to focus on workforce challenges, such as 
creating a positive image essential to successfully recruit and retain 
a new generation of talented acquisition professionals. In September 
2006, we testified that while the amount, nature, and complexity of 
contract activity has increased, DOD's acquisition workforce, the 
largest component of the government's acquisition workforce, has 
remained relatively unchanged in size and faces certain skill gaps and 
serious succession planning challenges. Further, we testified that 
DOD's acquisition workforce must have the right skills and capabilities 
if it is to effectively implement best practices and properly manage 
the goods and services it buys. In July 2006, we reported that in the 
ever-changing DOD contracting environment, the acquisition workforce 
must be able to rapidly adapt to increasing workloads while continuing 
to improve its knowledge of market conditions, industry trends, and the 
technical details of the goods and services it procures. Moreover, we 
noted that effective workforce skills were essential for ensuring that 
DOD receives fair and reasonable prices for the goods and services it 
buys and identified a number of conditions that increased DOD's 
vulnerabilities to contracting waste and abuse. 

Contractors Supporting the Federal Government: 

The sixth area the panel reviewed was contractors supporting the 
federal government. The panel reported that, in some cases, contractors 
are solely or predominantly responsible for the performance of mission- 
critical functions that were traditionally performed by government 
employees, such as acquisition program management and procurement, 
policy analysis, and quality assurance. Further, the panel noted that 
this development has created issues with respect to the proper roles 
of, and relationships between, federal employees and contractor 
employees in the "blended" workforce. The panel stated that although 
federal law prohibits contracting for activities and functions that are 
inherently governmental, uncertainty about the proper scope and 
application of this term has led to confusion, particularly with 
respect to service contracting outside the scope of OMB's Circular A- 
76, which provides guidance on competing work for commercial activities 
via public-private competition. Moreover, according to the panel, as 
the federal workforce shrinks, there is a need to ensure that agencies 
have sufficient in-house expertise and experience to perform inherently 
governmental functions by being in a position to make critical 
decisions on policy and program management issues and to manage the 
performance of contractors. The panel recommended (1) that the FAR 
Council consider developing a standard organizational conflict-of- 
interest clause for solicitations and contracts that sets forth a 
contractor's responsibility concerning its employees and those of its 
subcontractors, partners, and any other affiliated organization or 
individual; (2) that OFPP update the principles for agencies to apply 
in determining which functions government employees must perform; and 
(3) that OFPP ensure that the functions identified as those that must 
be performed by government employees are adequately staffed. 

On the basis of our work, we have similar concerns to those expressed 
by the panel, and our work is generally consistent with the panel's 
recommendations on the appropriate role of contractors supporting the 
federal acquisition workforce. We have testified and reported on the 
issues associated with an unclear definition of what constitutes 
inherently governmental functions, inadequate government experience and 
expertise for overseeing contractor performance, and organizational 
conflicts of interest related to contractor responsibilities. We found 
that there is a need for placing greater attention on the type of 
functions and activities that could be contracted out and those that 
should not, for reviewing the current independence and conflict-of- 
interest rules relating to contractors, and for identifying the factors 
that prompt the government to use contractors in circumstances where 
the proper choice might be the use of government employees or military 
personnel. In our recent work at DHS, we found that more than half of 
the 117 statements of work we reviewed provided for services that 
closely supported the performance of inherently governmental functions. 
We made recommendations to DHS to improve control and accountability 
for decisions resulting in buying services that closely support 
inherently governmental functions. Accordingly, our work is consistent 
with panel recommendations to update the principles for agencies to 
apply in determining which functions government employees must perform; 
and to ensure that the functions identified as those that must be 
performed by government employees are adequately staffed. 

Report on Federal Procurement Data: 

Finally, the seventh and last area the panel reviewed was federal 
procurement data. The Federal Procurement Data System-Next Generation 
(FPDS-NG) is the federal government's primary central database for 
capturing information on federal procurement actions. Congress, 
Executive Branch agencies, and the public rely on FPDS-NG for a wide 
range of information including agencies' contracting actions, 
governmentwide procurement trends, and how procurement actions support 
socioeconomic goals and affect specific geographical areas and markets. 
The panel reported that FPDS-NG data, while insightful when aggregated 
at the highest level, continue to be inaccurate and incomplete at the 
detailed level and cannot be relied on to conduct procurement analyses. 
The panel believes the processes for capturing and reporting FPDS-NG 
data need to be improved if that data is to meet user requirements. As 
a result, the panel made 15 recommendations aimed at increasing the 
accuracy and the timeliness of the FPDS-NG data. For example, the panel 
recommended that an independent verification and validation should be 
undertaken to ensure all other validation rules are working properly in 
FPDS-NG. 

Our work has identified similar concerns as those expressed by the 
panel. In fact, the panel cited our work numerous times in its report. 
Like the panel, we have pointed out that FPDS-NG data accuracy has been 
a long-standing problem and have made numerous recommendations to 
address this problem. As early as 1994, we reported that the usefulness 
of federal procurement data for conducting procurement policy analysis 
was limited. More recently, in 2005, we again raised concerns about the 
accuracy and timeliness of the data available in FPDS-NG. We have also 
reported that the use of the independent verification and validation 
function is recognized as a best business practice and can help provide 
reasonable assurance that the system satisfies its intended use and 
user needs. 

OFPP Plans to Address Most SARA Panel Recommendations: 

OFPP representatives told us the office agrees with almost all of the 
89 panel recommendations and has already acted on some, while potential 
actions are pending on others. OFPP identified legislative actions and 
FAR cases that could address over one third of the recommendations. 
OFPP expects to address at least 51 of the remaining recommendations 
and plans to work with the chief acquisition officer or senior 
procurement official within each agency to do so. In some cases, OFPP 
has established milestones and reporting requirements to help provide 
it with visibility over the progress and results of implementing the 
recommendations. Although OFPP has taken some steps to track the 
progress of selected recommendations, it does not have an overall 
strategy or plan to gauge the successes and shortcomings in how the 
panel's recommendations are implemented and how they improve federal 
acquisitions. Table 1 shows how OFPP expected the 89 recommendations to 
be implemented. 

Table 1: OFPP Expectations for SARA Panel Recommendations as of October 
2007: 

Legislative action: 
Number of recommendations: 23. 

Changes to the FAR: 
Number of recommendations: 9. 

OFPP actions: 
Number of recommendations: 51. 

Agency actions: 
Number of recommendations: 6. 

Total: 
Number of recommendations: 89. 

Source: GAO analysis of OFPP data. 

[End of table] 

In October 2007, OFPP representatives noted that while the panel 
directed 17 recommendations to Congress, legislative actions could 
address as many as 23 panel recommendations. Panel recommendations 
directed to Congress include potential legislative changes such as 
authorizing the General Services Administration to establish a new 
information technology schedule for professional services and enacting 
legislation to strengthen the preference for awarding contracts to 
small businesses. An example of the latter is amending the Small 
Business Act to remove any statutory provisions that appear to provide 
for a hierarchy of small business programs. According to the panel, 
this is necessary because an agency would have difficulty meeting its 
small business goal if any one small business program takes a priority 
over the others. Since October 2007, some panel recommendations have 
been addressed by legislative actions. For example, the panel 
recommended that protests of task and delivery orders valued in excess 
of $5 million be permitted. Section 843 of the National Defense 
Authorization Act for Fiscal Year 2008 allows for such protests, but 
raised the dollar threshold to orders valued in excess of $10 million. 

For those recommendations that were expected to be addressed by 
legislative actions but have not yet been the subject of congressional 
action, OFPP representatives told us the office could take 
administrative actions, such as issuing a policy memorandum or 
initiating a FAR case, to implement most of them. 

Conclusions and Recommendation: 

In closing, the SARA Panel, like GAO, has made numerous recommendations 
to improve federal government acquisition--from encouraging competition 
and adopting commercial practices to improving the accuracy and 
usefulness of procurement data. Our work is largely consistent with the 
panel's recommendations, and when they are taken as a whole, we believe 
the recommendations, if implemented effectively, can bring needed 
improvements in the way the federal government buys goods and services. 
OFPP, as the lead office for responding to the report, is now in a key 
position to sustain the panel's work by ensuring that panel 
recommendations are implemented across the federal government in an 
effective and timely manner. To do this, we recommended in our recent 
report that OFPP work with the chief acquisition officers and senior 
procurement officials across all the federal agencies to lay out a 
strategy or plan that includes milestones and reporting requirements 
that OFPP could use to establish accountability, exercise oversight, 
and gauge the progress and results of implementing the recommendations. 

Mr. Chairman and members of the subcommittee this concludes my 
statement. I would be pleased to respond to any questions you might 
have. 

For questions regarding this testimony, please call John P. Hutton at 
(202) 512-4841 or huttonj@gao.gov. Contact points for our Office of 
Congressional Relations and Public Affairs may be found on the last 
page of this testimony. 

Key contributors to this testimony include James Fuquay, Assistant 
Director, Daniel Hauser, John Krump, Robert Miller, and Robert 
Swierczek. 

[End of section] 

Footnote: 

[1] GAO, Federal Acquisition: Oversight Plan Needed to Help Implement 
Acquisition Advisory Panel Recommendations, GAO-08-160 (Washington, 
D.C.: Dec. 20, 2007). 

[End of section] 

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