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DOD Contract Management

This information appears as published in the 2013 High Risk Report.

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The Department of Defense (DOD) obligated approximately $360 billion on contracts for goods and services in fiscal year 2012. Contracts were used for basic goods and services, such as office supplies and base maintenance, and for more complex goods and services, such as information technology systems and weapon systems maintenance. Contracts also included those in support of contingency operations, such as Operation Enduring Freedom in Afghanistan. At times, the lack of an adequate number of trained acquisition and contract oversight personnel, the use of ill-suited contracting arrangements, and the absence of a strategic approach for acquiring services placed DOD at risk of not getting needed goods and services in a timely manner or potentially paying more than necessary. This area was added to GAO’s High Risk List in 1992.

The ability to properly manage the acquisition of goods and services depends upon having a workforce with the right skills and capabilities. In recent years, DOD has made progress in building the capacity of the acquisition workforce by adding about 17,500 civilians from fiscal year 2009 to December 2011. DOD has identified the Defense Acquisition Workforce Development Fund (the Fund) as a key tool to address acquisition workforce gaps through additional hiring and training initiatives. However, GAO reported in June 2012 that DOD’s ability to effectively execute hiring and other initiatives using the Fund has been hindered by delays in the funding and allocation processes and the absence of clear guidance on the Fund’s availability and use. DOD also has completed competency assessments that identify the current skills and capabilities of the workforce and help identify areas needing further management attention. However, DOD has delayed its planned issuance of an updated strategic workforce plan for the acquisition workforce, in part because of future budget uncertainties. As GAO has previously reported, workforce planning provides agencies with the information they need to ensure that their annual budget requests include adequate funds to implement human capital strategies. Until DOD determines its future workforce needs, it will be difficult to determine what funding levels will be necessary to achieve the department’s planned acquisition workforce growth and implement associated training initiatives.

DOD has continued its efforts to improve competition in the procurement of goods and services and to change its business practices to address previously identified weaknesses with contracting arrangements. In GAO’s 2011 high risk update, GAO noted that DOD needed to assess the effectiveness of efforts to improve competition and address prior weaknesses with specific contracting arrangements. Doing so should involve developing an effective action plan that provides baseline data, goals, milestones, and metrics for assessing the effectiveness of these efforts. However, DOD continues to lack such a plan. As a result, DOD is not well positioned to determine whether its policies are having the intended effects, readily identify when policies are not being appropriately implemented, or take corrective actions. For example, through its 2010 Better Buying Power initiative, DOD has put particular emphasis on increasing “effective competition”—receiving more than one offer or bid under a competitive solicitation—and has issued guidance for situations when competitive procedures are used but only one offer or bid is received. Implementation of these policies, however, has been incomplete. As noted in an October 2012 DOD Inspector General’s report, contracting officers did not follow applicable single-bid guidance when awarding more than $656 million in contracts and monitoring of implementation was not adequate. As a result, the military departments did not realize potential cost savings associated with increased competition.

DOD has made numerous changes to its approach for managing the acquisition of services, which accounted for more than 50 percent of DOD’s contract obligations in fiscal year 2012. These services were acquired, in part, to augment DOD’s workforce in critical areas, including its acquisition workforce. These changes include designating a senior manager for services acquisitions in each DOD component and adopting a standard approach for categorizing spending on 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 September 2012, GAO reported that DOD had not made a sufficient commitment to identifying and taking advantage of opportunities to aggregate purchases and had not established goals and performance metrics for managing its spending, thereby missing opportunities to achieve cost savings. Further, DOD is statutorily required to prepare an annual inventory of contracted services. The inventory and the associated review can help DOD 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. GAO concluded in April 2012 that although DOD has made incremental improvements to its inventory-related processes, as a whole DOD has much further to go in addressing the requirements for compiling and reviewing the inventory of contracted services.

In light of longstanding and recurring issues GAO identified in DOD’s use of contractors to support contingency operations, such as those in Iraq and Afghanistan, in June 2010, GAO called for DOD to emphasize operational contract support throughout all aspects of the department’s responsibilities, including planning, training, and personnel requirements. In January 2011, the Secretary of Defense issued a memorandum in which he expressed concern about the risks introduced by DOD’s level of dependency on contractors and the need to better plan for operational contract support in the future. DOD also issued regulations in 2011 establishing policy, assigning responsibilities, and providing procedures for operational contract support and also began revising core guidance to further integrate operational contract support into planning military efforts. However, as GAO concluded in September 2012, sustained DOD leadership is needed in three areas to achieve meaningful change and effectively prepare for the next contingency. These areas pertain to (1) planning for the use of operational contract support, including ensuring through professional military education that commanders are cognizant of the roles contractors have in supporting DOD and DOD’s role in overseeing contractors; (2) ensuring that DOD possesses the workforce needed to effectively manage and oversee contracts and contractors; and (3) improving DOD’s ability to account for contracts and contractors.

DOD has generally agreed with GAO’s prior recommendations pertaining to contract management and has efforts underway to implement them. DOD has also demonstrated sustained leadership to address contract management issues through, for example, the Better Buying Power initiative and the issuance of memorandums aimed at improving operational contract support. 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;
  • develop and implement an action plan to assess the effectiveness of efforts to improve competition and address prior weaknesses with specific contracting arrangements;
  • strategically manage its acquisitions of services by defining desired outcomes, establishing goals and measures, and obtaining the data needed to monitor progress;
  • determine the appropriate mix of military, civilian, and contractor personnel; and
  • sustain efforts throughout the department to integrate operational contract support through policy, planning, and training for both current and future contingency operations.
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  • portrait of Timothy J. DiNapoli
    • Timothy J. DiNapoli
    • Director, Acquisition and Sourcing Management
    • (202) 512-4841