This is the accessible text file for GAO report number GAO-02-230 
entitled 'Best Practices: Taking a Strategic Approach Could Improve 
DOD's Acquisition of Services' which was released on January 18, 2002. 

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the 
printed version. The portable document format (PDF) file is an exact 
electronic replica of the printed version. We welcome your feedback. 
Please E-mail your comments regarding the contents or accessibility 
features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States General Accounting Office
GAO: 

Report to the Chairman and Ranking Minority Member, Subcommittee on 
Readiness and Management Support, Committee on Armed Services, U.S. 
Senate: 

January 2002: 

Best Practices: 

Taking a Strategic Approach Could Improve DOD's Acquisition of 
Services: 

GAO-02-230: 

Contents: 

Letter: 

Results in Brief: 

Leading Companies Applied a Strategic Approach to Acquiring
Services: 

Strategic Approach Could Serve As a Framework to Guide DOD's
Service Contracting Initiatives: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments: 

Scope and Methodology: 

Appendix I: Comments From the Department of Defense: 

Appendix II: GAO Contact and Staff Acknowledgments: 
GAO Contact: 
Acknowledgments: 

Tables: 

Table 1: Leading Companies We Studied: 

Table 2: Changes in Senior Management's Involvement in Their
Company's Purchase of Services: 

Table 3: Comparison of Traditional and Strategic Approaches to
Spending Data: 

Table 4: Examples of How Service Spend Analyses Benefited the
Companies We Studied: 

Table 5: The Changing Role of Purchasing in Leading Companies: 

Table 6: Examples of How Leading Companies Restructured Their 
Procurement Organizations: 

Table 7: Examples of Leading Companies' Cross-Functional
Procurement Processes: 

Table 8: Characteristics Promoting Successful Strategic
Reengineering Efforts: 

Figures: 

Figure 1: Key Elements of Strategic Approach Taken by Leading
Companies: 

Figure 2: Principles and Practices of Leading Companies: 

Figure 3: Services Purchased by DOD in Fiscal Year 2000 (dollars
in billions): 

[End of section] 

United States General Accounting Office: 
Washington, DC 20548: 

January 18, 2002: 

The Honorable Daniel K. Akaka: 
Chairman: 
The Honorable James M. Inhofe: 
Ranking Minority Member: 
Subcommittee on Readiness and Management Support: 
Committee on Armed Services: 
United States Senate: 

Federal agencies spend billions of tax dollars each year to buy 
services ranging from clerical support and consulting services, to 
information technology services such as network support, to the 
management and operation of government facilities, such as national 
laboratories. The amount spent on services is growing substantially. 
In fiscal year 2000, the federal government acquired more than $87 
billion in services—a 24-percent growth in real terms from fiscal year 
1990. The Department of Defense (DOD) is, by far, the government's 
largest purchaser of services, acquiring more than $53 billion in 
services in fiscal year 2000. However, our work, and the work of DOD's 
Inspector General, has found that this spending is not being managed 
efficiently. 

The private sector is also increasingly reliant on services. The 
majority of purchasing dollars for some companies now goes to 
acquiring a range of services, including complex services such as 
advertising, information management, and professional consulting 
services to relatively simple services such as lawn mowing, waste 
removal, and temporary clerical services. In 2000, about $2.1 trillion 
in services, including transportation, communications, health, legal, 
and other business services, was sold in the U.S. market place. 

In recent years, leading companies have been examining alternative 
ways to manage their service spending to stay competitive, respond to 
market and stockholder pressures, and deal with economic downturns in 
key overseas markets. In looking at their service acquisitions, these 
companies discovered that they did not have a good grasp of how much 
was actually being spent and where these dollars were going. They 
found that responsibility for acquiring services resided largely with 
individual business units or functions—such as finance, human 
resources, manufacturing, engineering, or maintenance—which hindered 
efforts to coordinate purchases across the company. They also came to 
realize that they lacked the tools needed to make sure that the 
services they purchased met their business needs at the best overall 
value. To turn this situation around, leading companies reengineered 
their approach to buying services. 

You requested that we examine how leading companies reengineered their 
approach to purchasing services and the extent to which DOD is 
pursuing a similar approach. This report describes a strategic 
framework that leading companies have adopted that could help guide 
DOD's efforts. We plan to evaluate how specific best practices could 
be adopted or adapted for use by DOD on future assignments. 

Results in Brief: 

The leading companies we studied made a number of dramatic changes to 
the way they bought services and found that these changes, in turn, 
resulted in significant cost savings and service improvements. These 
changes generally began with a corporate decision to pursue a more 
strategic approach to acquiring services. Taking a strategic approach 
involves a range of activities—from developing a better picture of 
what the company is spending on services, to taking an enterprisewide 
approach to procuring services, to developing new ways of doing 
business (see figure 1). 

Figure 1: Key Elements of Strategic Approach Taken by Leading 
Companies: 

[Refer to PDF for image: illustration] 

The illustrations depicts interaction among all elements: 

Commitment to a strategic approach: 

Obtain improved knowledge on service spending; 
Enable success through leadership, communication and metrics; 
Create supporting structure, processes and roles. 

Source: GAO analysis. 

[End of figure] 

Once top leaders were committed to taking a strategic approach, the 
companies took a hard look at how much they were spending on services 
and from whom. By arming themselves with this knowledge, the companies 
could identify opportunities to leverage their buying power, reduce 
costs, and better manage their suppliers. The companies also 
instituted a series of structural, process, and role changes aimed at 
moving away from a fragmented acquisition process to a more efficient 
and effective enterprisewide process. For example, the companies we 
studied often established or expanded the role of corporate 
procurement organizations to help business managers acquire key 
services and made extensive use of cross-functional teams to help the 
companies better identify service needs, select providers, and manage 
contractor performance. 

Bringing about such changes was not easy. For example, some companies 
spent months piecing together data from various financial and 
management information systems and examining individual purchase 
orders just to get a rough idea of what they were spending on 
services. Other companies found that in establishing new procurement 
processes, they needed to overcome resistance from individual business 
units reluctant to share decision-making responsibility and to involve 
staff that traditionally did not communicate with each other. To do 
so, the companies found they needed to have sustained commitment from 
their senior leadership; to clearly communicate the rationale, goals, 
and expected results from the reengineering efforts; and to measure 
whether the changes were having their intended effects. 

Taking a strategic approach clearly paid off, as companies found that 
they could save millions of dollars and improve the quality of 
services received by instituting these changes. In some cases, 
thousands of suppliers were reduced to a few, enabling the companies 
to negotiate lower rates. In other cases, new information systems 
enabled companies to better match their business managers' needs with 
potential providers. Company officials provided various estimates as 
to how much their companies saved by taking a strategic approach, with 
one official estimating his company had saved more than $210 million 
over the past 5 years from pursuing more strategic approaches to 
purchasing information technology services, while another estimated 
his company typically achieved savings of 15 percent or more on 
efforts that were undertaken using the new processes. 

The strategic approach taken by the leading firms we visited could 
serve as a general framework to guide DOD's service contracting 
initiatives. DOD has certain elements critical to taking a strategic 
approach already in place, such as the commitment by senior DOD 
leadership to improve its practices for acquiring services and to 
adopting best commercial practices. However, DOD has not conducted a 
comprehensive analysis of its spending on services or thoroughly 
assessed its current structure, processes and roles, two elements that 
companies found to be crucial to reengineering their approaches to 
purchasing services. DOD's size, the range and complexity of the 
services it acquires, the capacity of its information and financial 
systems, and the unique requirements of the federal environment are 
among the factors that DOD will need to consider in tailoring a 
strategic approach that meets its diverse needs. 

This report includes a recommendation intended to help DOD assess 
whether a strategic reengineering approach, such as that employed by 
the leading companies we visited, could be used as a framework to 
guide DOD's reengineering efforts. 

DOD commented on a draft of this report and concurred with the views 
expressed in the draft report. The DOD comments can be found in 
appendix I. 

Leading Companies Applied a Strategic Approach to Acquiring Services: 

Over the past decade, federal agencies substantially increased their 
purchases of services, particular for information technology and 
professional, administrative, and management support services. But 
this money may not always be well-spent. Our work, as well as the work 
of other oversight agencies, continues to find that millions of 
service contracting dollars are at risk at DOD and other federal 
agencies because acquisitions are poorly planned, not adequately 
competed, or poorly managed.[Footnote 1] 

To help improve how services are managed at DOD, we studied the 
practices for purchasing services at six leading private sector 
companies. We selected these companies, shown in table 1, based on 
literature searches and discussions with universities, industry 
associations, research organizations, and experts in purchasing 
practices.[Footnote 2] The six companies have been recognized by their 
peers for reengineering their approach to purchasing services. 

Table 1: Leading Companies We Studied: 

Company: Brunswick Corporation; 
Function: A leader in the boating, marine engine, fitness equipment, 
bowling, and billiards industries.	 

Company: The Dun & Bradstreet Corporation; 	
Function: A leading provider of business credit, marketing and 
purchasing information, and receivables management services. 

Company: Electronic Data Systems (EDS) Corporation; 
Function: A leader in the information technology services industry, 
providing business and government clients high-value consulting, 
electronic business solutions, business process management and 
systems, and technology expertise. 

Company: Exxon Mobil Corporation; 
Function: The world's largest integrated oil company, ranking first in 
profits, proven reserves, liquids production, natural gas production, 
oil production, and refining capacity. 

Company: Hasbro, Inc. 
Function: A leader in the design, manufacture, and marketing of toys 
and games, ranging from traditional to high-tech. 

Company: Merrill Lynch & Co., Inc.
Function: A leading provider of investment, financing, advisory, 
insurance, and related products and services, ranking first in U.S. 
and global debt and equity underwriting. 

[End of table] 

Each of these companies is a leader in its respective market, but is 
not immune to market or stockholder pressures to improve performance. 
To respond to these pressures, senior corporate leadership challenged 
their companies to improve their performance, including the manner in 
which they acquired services. In turn, these companies reengineered 
their approach to acquiring services to leverage their buying power, 
reduce costs, better manage their service providers, and improve the 
quality of services acquired. As shown in figure 2, we identified four 
broad principles that were critical to successfully carrying out the 
companies' strategic approach. The companies we studied did not follow 
the exact same approach as they differed in the manner and degree to 
which they employed specific practices. However, the bottom line 
results were the same—substantial savings and service improvements. 

Figure 2: Principles and Practices of Leading Companies: 

[Refer to PDF for image: illustration] 

Commitment: Secure up front commitment from top leaders: 
* Recognize and communicate the urgency to change service spending 
practices; 
* Provide clear and strong executive leadership, including goals and 
targets. 

Knowledge: Obtain improved knowledge on service spending: 
* Develop information system to identify how much is being spent with 
which service provider for what services; 
* Analyze the data to identify opportunities to reduce costs, improve 
service levels, and provide better management of service providers. 

Change: Create supporting structure, processes, and roles: 
* Create or identify organizations responsible for coordinating or 
managing service purchases; 
* Establish proactive business relationships between end users, 
purchasing units, and other stakeholders; 
* Implement more integrated team-based sourcing processes; 
* Create commodity/service experts. 

Support: Enable success through sustained leadership, communication, 
and metrics: 
* Obtain sustaining support from senior leadership to facilitate 
change; 
* Establish clear lines of communication between all affected parties; 
* Demonstrate value and credibility of new processes through use of 
metrics. 

Source: GAO analysis. 

[End of figure] 

The principles and practices largely reflect a common sense approach 
toward almost any business venture, that is, providing good 
leadership, developing and harnessing knowledge, making sure business 
processes maximize return, and measuring results. Yet the practices 
represented significant changes to the way services were traditionally 
acquired. Company officials generally described their previous 
approach to acquiring services as being fragmented, with only limited 
corporate visibility and control over the amount spent on services by 
their business units. Existing information systems provided only scant 
information on services. For the most part, service acquisitions were 
viewed as a mission support activity and peripheral to the bottom 
line, rarely capturing the attention of top management. As one company 
official described it, the traditional approach taken by his company, 
and most companies, resulted in spending for services "just happening." 

Securing Up-front Commitment from Top Leaders: 

In each of the companies we visited, the support and commitment of 
senior management was viewed as essential to facilitating the 
company's efforts to reengineer its approach to acquiring services. 
Company officials indicated senior management provided the direction 
and vision; facilitated the development of common processes and 
approaches; and, when necessary, provided the clout necessary to 
obtain initial buy-in and acceptance of reengineering efforts. Senior 
managers expressed commitment in various ways, ranging from 
restructuring the corporate procurement function, to providing greater 
visibility and authority over the company's service spending to 
issuing a memorandum signaling their support for a new way of doing 
business. Table 2 highlights changes that were common in the companies 
we studied. 

Table 2: Changes in Senior Management's Involvement in Their Company's 
Purchase of Services: 

Traditional: Services viewed as ancillary to core business.
Strategic: Services viewed as central to core business. 

Traditional: Senior managers not actively involved in pursuing changes 
to how the company acquires services.
Strategic: Senior management provides direction and vision for change, 
establishes goals and targets, and devotes increased attention to
services. 

Source: GAO analysis. 

[End of table] 

In general, successful reengineering efforts are spearheaded by a 
company's senior management since they have the authority to require 
employees to accept reengineered roles, the responsibility to set the 
corporate agenda and to define the organization's culture, and the 
ability to remove barriers that block changes to the organization's 
corporate mindset. Prior research has found that the lack of top 
management commitment is the cause of most reengineering failures. 
[Footnote 3] 

Obtaining Better Knowledge on Service Spending: 

The companies we visited analyzed their spending on services to answer 
the basic questions of how much was being spent and where the dollars 
were going. After conducting the analyses, the companies realized that 
they were buying similar services from numerous providers, often at 
greatly varying prices. Such knowledge brought home the need for 
companies to become more strategic in planning and managing their 
service acquisitions to maintain a competitive edge. Table 3 
highlights the differences in the availability and use of spending 
data between the practices traditionally used by companies and those 
pursuing a more strategic approach. 

Table 3: Comparison of Traditional and Strategic Approaches to 
Spending Data: 

Traditional: Financial and information management systems focus on 
components and materials used to make products, but do not provide 
data needed to effectively manage the company's service spending. 	
Strategic: Systems are developed to provide credible, reliable, and 
timely data on acquired services.	 

Traditional: Data is used principally for "after-the-fact" reporting 
purposes.
Strategic: Data is used to identify opportunities to rationalize 
supplier base and reduce costs.	 

Source: GAO analysis. 

[End of table] 

The benefits of having credible and reliable data on service spending 
were substantial. Companies used this data to "rationalize" their 
supplier base, or in other words, to determine the right number of 
suppliers that met their needs. Once the companies determined how many 
suppliers they needed to meet their needs, they could then use this 
data to help them better leverage their buying power. Table 4 
illustrates how companies used spend analyses to identify 
opportunities to rationalize their supplier base and reduce costs. 

Table 4: Examples of How Service Spend Analyses Benefited the 
Companies We Studied: 

Company: Hasbro; 
What the spend analysis revealed: 
Hasbro's spend analysis revealed that it had 17 providers of temporary 
administrative, clerical, and light industrial personnel for 7 
locations. The company also found that it had inconsistent policies 
and processes, multiple contact points, and limited performance 
measures and that information was not being shared across locations. 
What the company did with this knowledge: 
Hasbro consolidated its temporary personnel supplier base to a single 
provider, reduced the number of oversight personnel, established a 
formal communication program, and had the contractor assume 
responsibility for developing consistent policies and processes. 
Further, by leveraging its buying power, Hasbro negotiated an overhead 
rate that was 45 percent lower than previously obtained and reduced 
its total spending on temporary labor from $5 million to $4.3 million. 
A Hasbro official told us its efforts often resulted in savings 
ranging from 15 percent to 45 percent and improved service levels. 

Company: Brunswick; 
What the spend analysis revealed: 
Brunswick conducted a spend analysis to determine the types of 
telecommunication services its business units acquired, monthly usage 
rates, and cost data to help it define its requirements and establish 
a negotiating position. It found its seven business units had three 
different telecommunication providers. 
What the company did with this knowledge: 
Following a competition in which six potential suppliers participated, 
Brunswick awarded a contract to a single supplier. Company officials 
told us their negotiated per minute usage rates were about 60 percent 
less than the average of its prior rates, saving Brunswick $3.2 
million in the first 8 months of the new contract. 

Company: Dun & Bradstreet; 
What the spend analysis revealed: 
Dun & Bradstreet's spend analysis showed that the company employed 
hundreds of providers of temporary labor. While Dun & Bradstreet 
originally planned to reduce the supplier base to a single provider, 
its market research found that no one company could meet its needs. 
What the company did with this knowledge: 
Dun & Bradstreet revised its acquisition strategy to designate a 
preferred supplier that would receive 70 percent of its business and 
the contract with a limited number of second tier suppliers that would 
provide personnel with specialized skills or provide labor to areas 
not served by the preferred supplier. Company officials told us this 
strategy enabled them to acquire more actual labor per dollar since 
the preferred supplier agreed to charge a lower profit and overhead 
rate than it had previously done when it had a smaller portion of Dun 
& Bradstreet's business. 

Company: EDS; 
What the spend analysis revealed: 
Prior to implementing its centralized process for procuring 
information technology services, a spend analysis revealed that EDS 
had more than 3,000 "unleveraged" suppliers. 
What the company did with this knowledge: 
EDS initially conducted a strategic sourcing exercise to better define 
its needs and establish a more manageable number of suppliers and 
instituted various interim process changes. EDS' long-term solution 
was to develop an integrated, web-based, financial and management 
information system capable of systematically matching its business 
managers' needs with potential service providers; capturing spending, 
wage, and overhead data by skill set and supplier; assessing supplier 
performance; and performing various financial management and 
accounting tasks. EDS officials told us that it has reduced its 
supplier base to 14 national suppliers, 6 regional suppliers, and a 
small set of providers of personnel with specialized skills, and it 
typically negotiates overhead rates that are at least one-third less 
than the industry average.[A] EDS officials estimated they had saved 
more than $210 million over the past 5 years by pursuing a more 
strategic approach to purchasing information technology services. 

[A] According to EDS officials, its system contains cost data on more 
than 20 million labor hours, to which data on an additional 500,000 to 
600,000 hours are added monthly. EDS officials indicated that the 
ability to track and analyze the types of skill sets acquired, from 
whom and at what price, provides EDS an ability to aggressively 
negotiate future labor and overhead rates with service providers. 

Source: GAO analysis. 

[End of table] 

Company officials told us spend analyses can vary in the degree and 
type of information provided. At a minimum, a basic spend analysis 
should identify: 

* what types of services are being acquired; 

* how many suppliers for a specific service the company is using; 

* how much they are spending for that service, in total and with each 
supplier; and; 

* which units within the company are purchasing the services. 

Some companies augmented this basic information with more detailed 
data, such as the number of labor hours purchased, the hourly wage rate
paid, and the amount of overhead paid. 

Preparing an initial service spend analysis was challenging. Company 
officials told us their existing financial or management information 
systems generally did not provide the right type of data needed to 
manage service spending. As one official explained, the systems were 
designed to provide detailed information on the components and raw 
materials that were used to make their products but often provided 
only scant information on services. For example, officials at one 
company noted that their systems often reported only a service 
provider's name and the total cost of the effort, but they did not 
identify the type of service acquired or key cost elements of the 
service, such as the number of labor hours supplied, the type or 
category of labor acquired, and the cost per hour of the labor. 
Further, this information was often not maintained in a standardized 
format and was of poor quality, thus hampering efforts to use existing 
information to more effectively manage service spending. Consequently, 
companies had to spend months collecting, validating, and analyzing 
data extracted from their financial or other management systems. 
Officials from one company noted that they spent about 3 months 
analyzing data provided by their accounts payable and purchasing 
systems, and at times, had to review individual purchase orders to 
prepare a spend analysis for just one of their business units. Even 
after analyzing individual purchase orders, they had to make educated 
guesses as to the most likely service the company was buying. 

Officials from the companies we spoke with indicate that they have 
developed, or are in the process of developing, management or 
financial information systems that can provide them reliable spending 
data in a timely fashion. These officials stated they now use spend 
analyses as part of their process to identify additional targets of 
opportunity, measure compliance with preferred supplier agreements, 
respond to customer input, and track progress toward meeting annual 
performance objectives. 

Creating Structure, Processes, and Roles to Support an Enterprisewide 
Perspective: 

The companies we studied found it necessary to change how they 
acquired services, principally in terms of business processes, 
organizational structures, and roles and responsibilities. These 
changes were meant to take the companies from a fragmented approach to 
doing business to one that was more coordinated and strategically-
oriented. The end goal was to institute an enterprisewide perspective—
one that would ensure that the company was getting the best overall 
value. Among other changes, each company elevated or expanded the role 
of the company's procurement organization; designated commodity 
managers to oversee key services; and made extensive use of cross-
functional teams to help identify the company's service needs, conduct 
market research, evaluate and select providers, and manage 
performance. Table 5 illustrates how these changes affected the role 
of purchasing in the companies we studied compared to the traditional 
way of doing business. 

Table 5: The Changing Role of Purchasing in Leading Companies: 

Traditional: Independent, local organizations with limited visibility 
over the company's total service spending. 
Strategic: Central/matrixed organizations responsible for coordinating 
or managing service purchases. 

Traditional: Reactive support role to business units. 
Strategic: Proactive business relationships. 

Traditional: Limited coordination between business and purchasing 
units and other functions such as legal or finance. 
Strategic: Procurement process based on cross-functional teams. 

Traditional: Buyers. 
Strategic: Commodity/service experts. 

Source: GAO analysis. 

[End of table] 

In making such changes, the companies positioned themselves to more 
effectively manage and coordinate their service purchases. These 
changes transformed the role of their purchasing units from one 
focused on mission support to one that was strategically important to 
the company's bottom line. For example, Dun & Bradstreet officials 
told us that, with the support of senior corporate management, their 
procurement function now exercises far more control and responsibility 
over services that traditionally had been the responsibility of the 
business units. These officials indicated they often now act in a 
proactive advisory capacity to their business units, rather than just 
being relied upon for their sourcing and negotiating expertise. 

Elevating Procurement Organizations: 

To cut across traditional organizational boundaries that contributed 
to the fragmented approach to acquiring services, the companies we 
visited generally restructured their procurement organizations, 
typically assigning the organizations greater responsibility and 
authority for strategic planning and management and oversight of the 
companies' service spending. As table 6 illustrates, making this 
change was seen as critical to improving coordination and optimizing 
resources. 

Table 6: Examples of How Leading Companies Restructured Their 
Procurement Organizations: 

Company: Brunswick: 
How the companies restructured their procurement organization: 
Historically, Brunswick had allowed its business units to operate 
fairly independently, with the corporation acting more like a holding 
company. According to Brunswick officials, this decentralized 
structure inhibited its ability to conduct an enterprisewide 
assessment of its procurement processes and effectiveness. Brunswick's 
new chief executive officer believed a more coordinated and 
cooperative approach would help rationalize Brunswick's supplier base 
and leverage the company's buying power. Consequently, Brunswick 
established a corporate procurement organization to provide strategic 
planning for and policy and guidance to its business units and 
elevated the role of procurement to the vice-presidential level within 
its corporate structure. 

Company: ExxonMobil; 
How the companies restructured their procurement organization: 
Senior corporate leadership took the opportunity presented by the 1999 
merger of Exxon and Mobil to develop a procurement organization that 
would provide the company's 11 business units a competitive advantage 
by fully optimizing their supply chain through strategic sourcing of 
key services and gain operating cost efficiencies through a fully 
integrated procurement and payment process. The president of 
ExxonMobil's global services company reports directly to an executive 
vice president. 

Company: EDS; 
How the companies restructured their procurement organization: 
EDS employed an informal, decentralized system for obtaining the 
services of programmers, systems analysts, and other information 
technology professionals employed on a temporary or contract basis. 
This system provided managers in the field almost complete authority, 
but it provided EDS management with only limited visibility over the 
costs, performance, and value of the services acquired. In the mid-
1990s, EDS faced increasing expenditures for labor services needed to 
meet its client needs, Additionally, in 1998, the chairman challenged 
the company to reduce its costs by $1 billion and looked for the 
corporate procurement organization to contribute significantly to this 
goal. While the procurement organization previously had been two to 
three layers from the chief executive officer, the new procurement 
organization now reports directly to the chief financial officer. 
Additionally, EDS established a separate unit specifically responsible 
for developing, managing, and executing a comprehensive sourcing and 
supply process for acquiring information technology professionals, 
which EDS officials estimated represented approximately one-third of 
the services it acquired. 

Source: GAO analysis. 

[End of section] 

Establishing Cross-Functional Procurement Processes: 

The companies we visited generally established new processes for 
conducting tasks typically encountered during any procurement action, 
such as identifying needs and evaluating potential service providers. 
Most importantly, the companies began making extensive use of "cross-
functional" teams to make sure they had the right mix of knowledge, 
technical expertise, and credibility.[Footnote 4] The teams varied in 
size but generally included representatives from the company's 
purchasing unit, its internal clients or users of the service, and its 
budget or finance office. The teams were responsible for analyzing 
spending data, identifying and prioritizing potential opportunities 
for more detailed review, defining internal needs and requirements, 
and conducting market research. This approach helped companies to 
better define their needs and to identify, select, and manage service 
providers, and in turn, helped ensure that users' needs were met at 
the lowest total costs to the companies. Table 7 provides two examples 
of companies' cross-functional procurement processes. 

Table 7: Examples of Leading Companies' Cross-Functional Procurement 
Processes: 

Company: ExxonMobil; 
How the companies use their cross-functional procurement process: 
ExxonMobil, the largest company we visited, established a formal 
procurement process. ExxonMobil officials noted their processes are 
detailed in a sourcing handbook that is intended to be both practical 
and flexible enough to provide the basis and support for innovative 
sourcing strategies. The handbook provides both general guidelines and 
specific procedures and includes a suite of tools, templates, and 
checklists needed to effectively conduct sourcing activities. 
ExxonMobil uses a four-phase, data-driven procurement process 
(opportunity identification, strategy development, strategy execution 
and supplier selection, and relationship management) that involves 
close interaction with the procurement function, internal clients, and 
suppliers. Sourcing strategy development is integrated within the 
business units' annual and long term planning cycles to ensure that 
the strategies, priorities, and cost reduction objectives are fully 
aligned. 

Company: Hasbro; 
How the companies use their cross-functional procurement process: 
Hasbro begins its procurement process almost a year in advance, using 
a team-based approach to identify 12 to 15 opportunities each year for 
a more comprehensive review. According to a Hasbro official, about 30 
people—representatives from purchasing, finance, logistics, and 
affected business units—participate in this exercise and consider, 
among other things, Hasbro's total spending for that service, the 
significance of the service relative to Hasbro's principal product 
lines, and market conditions. Once these opportunities are identified, 
smaller cross-functional teams are formed to conduct more in-depth 
analyses. These teams initially focused their activities on 
identifying Hasbro's requirements and conducting market research; 
however, the teams subsequently obtained and evaluated information 
from potential suppliers, conducted negotiations, and finally selected 
the suppliers. A team member is generally designated to monitor the 
supplier, in part, as a means to provide feedback into the planning 
cycle. 

Source: GAO analysis. 

[End of table] 

Establishing Dedicated Commodity Managers: 

Several companies established full-time dedicated commodity managers 
to provide more effective management over key services, which were 
generally described as those being of high-dollar value or those that 
had a significant impact on the company's operations ExxonMobil, for 
example, has eight commodity managers responsible for groups of 
related materials or services, such as mining and drilling services, 
transportation, information technology, advertising, and promotion. 
Similarly, Brunswick has established five positions to provide a more 
strategic and coordinated approach for key services, including 
telecommunications and information technology services. According to 
Brunswick officials, these managers will serve both as process and 
commodity experts to coordinate Brunswick's service purchases as well 
as change agents to further reengineer Brunswick's procurement 
processes. Merrill Lynch's commodity managers are expected to be 
actively involved in defining requirements with its internal clients, 
negotiating with potential service providers, and assisting in 
resolving performance or other issues arising after a contract is 
awarded. 

Enabling Success Through Sustained Leadership, Communication, and 
Metrics: 

The companies we studied found that three ingredients were critical to 
overcoming resistance, cultural barriers, and other impediments to 
their reengineering efforts: sustained leadership, communication, and 
measurement. Table 8 illustrates how these characteristics differed 
from when the companies were pursuing a traditional approach to 
purchasing services. 

Table 8: Characteristics Promoting Successful Strategic Reengineering 
Efforts: 

Traditional: Corporate leaders not actively engaged in improving 
service acquisitions. 
Strategic: Senior leaders actively reinforce commitment to achieve 
change. 

Traditional: Business units and purchasing organizations do not 
clearly communicate or cooperate. 
Strategic: Clear lines of communication between all affected parties. 

Traditional: Performance measures did not exist.	
Strategic: Performance measures used to demonstrate value and 
credibility of new processes. 

Source: GAO analysis. 

[End of table] 

First, company officials reiterated the need to have the continued 
support of senior management, well beyond just providing the initial 
impetus for making changes to service acquisitions, since the 
companies were engaging in long-term efforts. Specifically, they noted 
that senior managers need to continually back efforts to develop 
common processes and approaches and provide the necessary clout to 
push for acceptance of reengineering efforts. 

Second, communication was viewed as vital to getting and keeping staff 
on board with changes. Company officials explained that up until the 
reengineering effort, the business units and purchasing organizations 
generally did not clearly communicate their needs or work together to 
identify solutions; consequently, working together represented a new 
and potentially challenging way of doing business. To achieve buy-in 
and avoid unforeseen pitfalls, reengineering teams needed to make a 
compelling case for change and clearly communicate the rationale, 
goals, and expected results from the new processes or practices. 
Companies also found that it was important that their reengineering 
teams listen to their business units' and other affected parties' 
needs and concerns and be open to revising plans as appropriate. Doing 
so helped ensure that the changes did not undermine their managers' 
ability to produce results, but rather enhanced their ability to carry 
out their work in terms of (1) more timely delivery of needed 
services, (2) the hiring of better skilled or trained consultants,
(3) reduced costs, or (4) providing an alternative solution to meet 
their needs. 

Third, while used to various degrees, metrics, according to company 
officials, increased the likelihood that reengineering efforts would 
be successful. In general, metrics can be used to: 

* evaluate and understand an organization's current performance level; 

* identify the critical processes that require focused, management 
attention; 

* obtain the knowledge needed to set realistic goals for improvement; 
and; 

* document results over time. 

Companies typically measured total savings, cost avoidances, or some 
other financial measure, which were often reported to senior corporate 
officials. For example, Dun & Bradstreet officials told us that 
measuring savings is a key element of their procurement process. 
Consequently, senior company management sets targets for its 
procurement function at the beginning of the year and regularly 
reviews progress reports. 

Because most companies expanded the traditional role of the 
procurement function, several companies surveyed their business units 
to assess their satisfaction with the quality, timeliness, and value 
of the service provided by their procurement organization. For 
example, ExxonMobil employed an extensive, three-tiered system to 
measure the performance of the procurement function. Specifically, it 
established eight top-level metrics to assess the procurement 
organization's progress in meeting financial, customer satisfaction, 
and business operation objectives. A second tier of metrics is used 
for performance monitoring and internal/external benchmarking, while a 
third tier is used at the local site level to manage day-to-day 
activities, including compliance with best practices. Company 
officials also noted that the measurements needed to be credible to 
prevent disagreements over numbers that could undermine the value of 
the process itself. 

Company officials also cited the need to measure compliance with or 
use of the new processes, especially when in the initial stages of the 
reengineering effort, since the extent to which business units use a 
new, lower cost approach directly affected cost savings. For example, 
EDS officials told us that about half of the information technology 
services are acquired using their new procurement process. They are 
monitoring the degree to which business managers use the process as it 
is introduced in their units. EDS estimates that, if business managers 
meet the company's target of 70 to 80 percent of usage by the end of 
2001, the company would save an estimated $26 million. 

Strategic Approach Could Serve As a Framework to Guide DOD's Service 
Contracting Initiatives: 

Senior DOD leadership has recognized the need to improve its processes 
for acquiring services, especially as it increasingly relies on the 
acquisition of services to meet its needs. However, DOD lacks a 
strategic plan that integrates or coordinates the various initiatives 
underway within the Department or that provides a road map for 
identifying or prioritizing future efforts. In this regard, the 
strategic approach followed by the leading companies we visited could 
serve as a general framework to guide DOD's service contracting 
initiatives. DOD may find that a "one-size-fits-all" approach will not 
work and that it will need to tailor its approach to meet its specific 
needs and requirements. In doing so, DOD officials will need to 
consider DOD's size and the range and complexity of the services it 
acquires, address the existence of insufficient information and 
financial systems, and take into account the unique aspects of the 
federal acquisition environment. 

DOD Leadership Recognizes That Changes Are Needed: 

DOD leadership has recognized the need to change DOD's current 
practices for acquiring services. In January 2001, DOD's Under 
Secretary of Defense (Acquisition, Technology, and Logistics) noted 
that while DOD was making important strides in improving the quality 
of services acquired, DOD had not achieved the level of excellence and 
consistency that it needed to meet its needs. Further, in his annual 
report to the President and the Congress for 2001, the Secretary of 
Defense noted that DOD is working to adapt the same "revolutionary 
business and management practices that helped the commercial sector 
gain a competitive edge in a rapidly changing global marketplace." 

The need for change is due in part to the increasing role that 
services play in DOD. Over the past decade, DOD's total purchases 
declined considerably as the end of the Cold War led it to reduce its 
purchases of supplies and equipment. During this period, however, 
DOD's purchases of services rose by more than 16 percent in real 
terms, largely attributable to increased purchases of information 
technology services and professional, administrative, and management 
support services. Consequently, in fiscal year 2000, DOD purchased 
about $53.1 billion in services, roughly the same amount it spent on 
supplies and equipment. Figure 3 shows where DOD's service contracting 
dollars went in fiscal year 2000. 

Figure 3: Services Purchased by DOD in Fiscal Year 2000: 

[Refer to PDF for image: vertical bar graph] 

Professional, administrative and management support: approximately $12 
billion; 

Construction, repair and maintenance of structure and facilities: 
approximately $11.5 billion; 

Maintenance, repair and rebuilding of equipment: approximately $6 
billion; 

Information technology services: approximately $5.5 billion; 

Utilities and housekeeping services: approximately $2.5 billion; 

Transportation, travel and relocation: approximately $2.5 billion; 
					
Medical services: approximately $2 billion; 

Architect and engineering: approximately $2 billion; 

Operation of government-owned facilities: approximately $1.8 billion; 

Other services: approximately $6 billion; 
		
Source: GAO analysis of data extracted from the Federal Procurement 
Data System for actions exceeding $25,000. Figure excludes actions 
categorized as research, development, test and evaluation activities. 

[End of figure] 

While senior DOD leadership has called for dramatic changes, DOD 
currently operates much like the companies we visited operated before 
they adopted a strategic approach. For example: 

* Responsibility for acquiring services is spread among individual 
military commands, weapon system program offices, or functional units 
on military bases, with little visibility or control at the DOD- or 
military-department level. 

* DOD has an information system that can provide information on the 
amount spent on services, but the reliability of the information is 
questionable and the system itself is seldom used as a tool to manage 
or identify opportunities for managing DOD's supplier base. 

* Procurement processes within DOD are not always carried out 
efficiently and effectively. Our work, as well as that of other 
oversight agencies, continues to show that requirements are not 
clearly defined for many service contracting efforts, alternatives are 
not fully considered, vigorous price analyses are not performed, and 
contractors are not adequately overseen. For example, last year, we 
raised concerns that DOD has avoided competition when acquiring 
services, and the DOD Inspector General found that DOD had not 
adequately performed many basic management tasks, including market 
research, pricing analyses, and contractor surveillance. Such problems 
contributed to our decision to designate contract management as a high-
risk area for DOD.[Footnote 5] 

* There are few service contracting-related enterprisewide annual 
performance metrics. For example, DOD's key metrics for measuring 
changes to its contracting processes include (1) the percentage of 
purchases made by purchase card, (2) the percentage of paperless 
contracting and payment transactions, and (3) the percentage reduction 
in acquisition workforce personnel.[Footnote 6] These metrics do not 
measure the cost effectiveness or quality of services obtained. 

DOD Does Not Have a Strategic Plan for Addressing Service Contracting 
Issues: 

DOD and individual defense components have various initiatives 
underway to better manage their acquisition of services, including 
expanding the use of performance-based contracting approaches. 
However, DOD does not have a strategic plan to coordinate current 
service contracting initiatives or to serve as a road map for 
identifying or prioritizing future efforts.	
		
From a departmentwide perspective, DOD, like other federal agencies, 
is expanding the use of performance-based contracting approaches to 
help improve its processes for acquiring services. Performance-based 
contracting is an approach where the agency specifies the outcome or 
result it desires and lets the service provider decide how best to 
achieve the desired outcome. The government has not widely used this 
process, but it is attempting to do so to attract leading commercial 
companies, gain greater access to technological innovations, and 
better ensure contractor performance. To support this initiative, DOD 
has issued a guidebook and is providing additional training to its 
acquisition personnel. Additionally, in January 2001, DOD chartered a 
senior-level team to identify best practices, guidance, training, and 
additional policy needs for service contracting.[Footnote 7] This team 
has focused its initial efforts on drafting policy to provide better 
oversight on purchases of high-dollar value services.[Footnote 8] 

Additionally, officials from the military departments noted that their 
commands are pursuing a number of service contracting-related 
initiatives. The Naval Supply Systems Command, for example, is 
establishing commodity managers for selected supplies and services 
being purchased via electronic procurements. The Naval Sea Systems 
Command is developing an electronic procurement system for acquiring 
professional services, such as for financial management and logistics 
support, for the command's headquarters. Air Force officials noted 
that they are considering creating a position at the senior executive 
service-level that would have specific responsibility for developing 
policy, reviewing acquisition strategies for high-dollar value 
services, and providing general oversight of the Air Force's spending 
on services. Army officials noted that they are evaluating how to 
centralize the processes for acquiring services within the Office of 
the Secretary of the Army. 

While DOD officials pointed to these initiatives as attempts to 
address various service contracting needs and issues, they 
acknowledged that DOD has not developed a strategic plan to coordinate 
these initiatives or to provide a road map for identifying or 
prioritizing future activities. They noted that DOD is just now 
turning its attention to improving how it acquires services, but they 
believed that DOD has various elements—including the commitment by 
senior DOD leadership—in place that could serve as building blocks for 
taking a more proactive role in managing services. 

Developing a Strategic Approach to Meet DOD's Diverse Needs: 

The strategic approach followed by the leading companies we visited 
could serve as a general framework to guide DOD's service contracting 
initiatives. However, DOD may find that a "one-size-fits-all" approach 
will not work for all services and that it will need to tailor its 
approach to meet its specific needs and requirements. In doing so, DOD 
officials will need to consider DOD's size, the range and complexity 
of the services it acquires, and the existence of insufficient 
information and financial systems and take into account the unique 
aspects of the federal acquisition environment. 

While company officials stressed the need to take an enterprisewide 
perspective on acquiring services, DOD's size and service needs may 
lead it to pursue different approaches depending on the specific 
service. DOD officials noted that within the military departments, 
there are individual commands that are comparable to a Fortune 500 
company, each spending billions of dollars annually on services. 
Further, DOD officials noted some services are acquired 
departmentwide, while other services (such as ship support and 
maintenance) may be unique to specific commands, units, or geographic 
locations. DOD officials agreed that they would need, as a first step, 
to obtain and analyze data on DOD's service spending to identify and 
prioritize specific services where a more coordinated acquisition 
approach may be appropriate. 

Additionally, DOD will need to consider how existing problems in its 
information technology and financial management systems could affect 
its service contracting initiatives. For example: 

* DOD's efforts to deploy a single automated system—the Standard 
Procurement System—to perform numerous contract management-related 
functions have encountered cost overruns, schedule delays, and 
performance issues. DOD expected the system to replace legacy systems 
that supported divergent contracting processes and procedures across 
component organizations and to provide electronic commerce 
capabilities and a common data repository. 

* DOD continues to confront pervasive weaknesses in its financial 
management systems, hindering its ability to produce timely and 
accurate financial information needed to make sound business decisions. 

* DOD envisions using electronic commerce technologies to transform 
and streamline business processes. However, we have reported that 
DOD's electronic commerce vision is at risk because DOD does not have 
an architecture, or common blueprint, that is essential for 
effectively introducing modern electronic commerce operations. 
[Footnote 9] 

Lastly, as a federal agency attempting to reengineer its approach to 
purchasing services, DOD faces challenges that private sector 
organizations do not face. In particular, DOD is subject to statutes 
and regulations governing socio-economic objectives, competition, and 
contracting procedures. Under existing statutes and regulations, for 
example, DOD is subject to goals for contracting with small businesses 
and may be constrained in its ability to consolidate numerous, smaller 
requirements into larger contracts, an approach often taken by the 
companies we visited. Consequently, DOD will need to consider how to 
adapt the practices followed by leading companies to the unique 
federal environment. 

Conclusions: 

The leading companies we visited chose to institute dramatic changes 
to the way services were purchased and managed instead of only making 
incremental improvements and continuing to treat services as being 
peripheral to the bottom line. While difficult and challenging to 
carry out, companies pursued a strategic approach because it was 
viewed as essential to staying competitive. DOD leaders have already 
made a general commitment to adopt best practices and make dramatic 
changes. With this commitment in place, they can take on the more 
difficult tasks of developing a reliable and accurate picture of 
service spending across DOD; determining what structures, mechanisms, 
and metrics can be employed to foster a strategic approach; and 
tailoring those structures to meet DOD's unique requirements. 

Recommendation for Executive Action: 

To achieve significant improvements across the range of services DOD 
purchases, we recommend that the Secretary of Defense evaluate how a 
strategic reengineering approach, such as that employed by the leading 
companies we 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. 

* 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 Comments: 

In commenting on a draft of this report, DOD concurred with the views 
expressed in the draft report. DOD noted that it was committed to 
taking a more strategic approach to acquiring services as well as 
developing an oversight process for the acquisition of services. DOD 
also provided informal technical comments, which we incorporated as 
appropriate. 

Scope and Methodology: 

The Chairman and the Ranking Minority Member, Subcommittee on 
Readiness and Management Support, Senate Committee on Armed Services, 
requested that GAO develop a body of work that examines the practices 
of leading companies and identify "best practices" that could yield 
benefits to DOD. This assignment focused on (1) how leading companies 
reengineered their practices for acquiring services and (2) the extent 
to which DOD is pursuing a similar approach. 

To identify the best practices in the commercial sector, we conducted 
literature searches and contacted universities, industry associations, 
research organizations, and experts in purchasing practices. On the 
basis of these discussions and analyses, we selected several leading 
companies that were recognized for their purchasing practices for 
buying services. We provided a standard agenda to each company to 
obtain general information on its organizational structure; the role, 
structure, and nature of its purchasing organization; the process by 
which it determined its service needs; and the way the company 
selected, managed, and evaluated service providers. We also asked each 
company to discuss in more detail a specific service buy that best 
exemplified its reengineered purchasing practices. After our visits, 
we provided a summary of the information obtained to ensure that we 
had accurately recorded and understood the information each company 
provided. We also provided each company a copy of our draft report for 
review and comment. The companies we visited were 

* Brunswick Corporation, Lake Forest, Illinois; 
* The Dun & Bradstreet Corporation, Murray Hill, New Jersey; 
* Electronic Data Systems Corporation, Plano, Texas; 
* ExxonMobil Corporation, Fairfax, Virginia; 
* Hasbro, Inc., Pawtucket, Rhode Island; and; 
* Merrill Lynch & Co., Inc., Jersey City, New Jersey. 

To assess what lessons can be drawn from these companies' experiences 
to guide DOD's efforts, we interviewed officials within the Office of 
the Secretary of Defense and the military departments to determine 
what efforts they had underway to improve the acquisition of services. 
We also reviewed policy memoranda, guidance, and other documents 
pertaining to ongoing and planned initiatives that affected service 
contracting. We discussed with these officials our assessment of the 
leading companies' approaches and obtained their views on their 
approaches similarities and differences. We also asked them about 
potential barriers to employing the approaches we identified. We plan 
to evaluate how specific best practices could be adopted or adapted 
for use by DOD on future assignments. 

Our report summarizes the approaches and key elements that the 
companies employed to reengineer their purchasing practices for 
services. We did not intend to suggest that all companies have 
followed the same approaches or to imply that other approaches could 
not be taken to achieve similar results. Also, we were limited in our 
ability to obtain and present some relevant data that companies 
considered proprietary in nature. Due to the competitive nature of 
their businesses, the companies did not wish to release details of how 
their reengineered purchasing practices resulted in specific 
successful outcomes. 

We conducted our review from June 2000 to December 2001 in accordance 
with generally accepted government auditing standards. 

We are sending copies of this report to the Secretary of Defense; the 
Secretaries of the Army, Navy, and Air Force; the Director, Office of 
Management and Budget; the Administrator, Office of Federal 
Procurement Policy; and interested congressional committees. We will 
also provide copies to others on request. 

If you have any questions about this report or need additional 
information, please call me on (202) 512-4841. Key contributors to 
this report are listed in appendix II. 

Signed by: 

Jack L. Brock, Jr. 
Managing Director: 
Acquisition and Sourcing Management: 

[End of section] 

Appendix I: Comments From the Department of Defense: 

Office Of The Under Secretary Of Defense: 
Acquisition, Technology And Logistics: 
3000 Defense Pentagon: 
Washington, DC 20301-3000: 

January 16, 2002: 

Mr. Jack Brock: 
Managing Director: 
Acquisition and Sourcing Management: 
U.S General Accounting Office: 
Washington, DC 20548: 

Dear Mr. Brock: 

Attached is the Department of Defense (DoD) response to the General 
Accounting Office (GAO) draft report GAO-02-230, "Best Practices: 
Taking a Strategic Approach Could Improve DoD's Acquisition of 
Services," dated December 12, 2001 (GAO Code 120031). The Department 
concurs in the views express in the GAO draft report; however, 
specific comments concerning your report are attached. 

Sincerely, 

Signed by: 

Donna S. Richbourg: 
Director, Acquisition Initiatives: 

Attachments: As stated: 

[End of letter] 

General Accounting Office Draft Report: 
Dated: December 12, 2001: 
(GAO Code 120031): 

"Best Practices: Taking a Strategic Approach Could Improve DoD's 
Acquisition of Services" 

DOD Comments In Response To The GAO Recommendations: 

Recommendation: The GAO recommended that the Secretary of Defense 
expand the current charter of the senior-level integrated process team 
to include evaluating and reporting on how a strategic reengineering 
approach, such as that employed by the leading companies we visited, 
could be used as a framework to guide DOD's reengineering efforts. 
Specifically, the team should be tasked to assess whether: 

* current or planned financial or management information systems can 
provide the type of spending data that commercial companies believed 
were critical to identify opportunities to leverage their buying 
power, reduce costs, and provide better management and oversight of 
their 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. 

* DOD's current organizational structure, processes, and roles are 
adequate to support a more strategic approach to purchasing services; 
for example, whether cross-functional teams could be used to 
coordinate and manage service purchases and whether DOD could 
establish full-time dedicated commodity/service managers to provide 
more effective management over key services. 

DOD Response: Concur. The Department is committed to taking a more 
strategic approach to the acquisition of services. In that regard, DoD 
is already implementing plans to upgrade the Federal Procurement Data 
System to provide more detail on service acquisitions. The upgrade 
will include all those elements required by Section 801 of the FY2002 
National Defense Authorization Act. As the GAO report accurately 
states, DoD is developing an oversight process for the acquisition of 
services. One of the principal purposes of that oversight process is 
to ensure that acquisitions of services are clear in their 
requirements, are properly planned, and that desired outcomes are 
identified and can be measured. 

[End of section] 

Appendix II: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Ralph Dawn (202) 512-4544: 

Acknowledgments: 

In addition to those named above, Cristina Chaplain, Timothy DiNapoli, 
Gordon Lusby, Ronald Schwenn, and John Van Schaik made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] Contract Management: Trends and Challenges in Acquiring Services 
[hyperlink, http://www.gao.gov/products/GAO-01-753T], May 22, 2001. 

[2] More detailed information about our scope and methodology can be 
found on pp. 23 through 25. 

[3] Reengineering Organizations: Results of a GAO Symposium 
[hyperlink, http://www.gao.gov/products/GAO/NSIAD-95-34], Dec. 13, 
1994. 

[4] For additional information on cross-functional teaming at DOD, see 
Best Practices: DOD Teaming Practices Not Achieving Potential Results 
[hyperlink, http://www.gao.gov/products/GAO-01-510], Apr. 10, 2001. 

[5] Major Management Challenges and Program Risks: Department of 
Defense [hyperlink, http://www.gao.gov/products/GAO-01-244], Jan. 2001. 

[6] DOD is also measuring the percentage of service contracts awarded 
that are considered to be performance-based, but this metric is not 
included as one of DOD's annual performance goals. 

[7] DOD's Services Acquisition Integrated Process Team is co-chaired 
by the Deputy Under Secretary of Defense (Acquisition Initiatives) and 
the Director, Acquisition Resources and Analysis and includes senior 
representatives from each of the military departments, the General 
Counsel's office, and offices responsible for DOD's military 
installations, environmental security, contract policy, information 
technology, and small business issues, respectively. 

[8] DOD officials also identified DOD's TRICARE health care program 
and its efforts to reengineer its acquisition of travel and 
transportation services as efforts to better manage services from a 
DOD-perspective. 

[9] High Risk Series: An Update [hyperlink, 
http://www.gao.gov/products/GAO-01-263], Jan. 2001. 

[End of section] 

GAO’s Mission: 

The General Accounting Office, the investigative arm of Congress, 
exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and 
accountability of the federal government for the American people. GAO 
examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO’s commitment to good government is reflected in its 
core values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO’s Web site [hyperlink, 
http://www.gao.gov] contains abstracts and full text files of current 
reports and testimony and an expanding archive of older products. The 
Web site features a search engine to help you locate documents using 
key words and phrases. You can print these documents in their 
entirety, including charts and other graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as “Today’s Reports,” on 
its Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
[hyperlink, http://www.gao.gov] and select “Subscribe to daily E-mail 
alert for newly released products” under the GAO Reports heading. 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are 
$2 each. A check or money order should be made out to the 
Superintendent of Documents. GAO also accepts VISA and Mastercard. 
Orders for 100 or more copies mailed to a single address are 
discounted 25 percent. Orders should be sent to: 

U.S. General Accounting Office: 441 G Street NW, Room LM: 
Washington, D.C. 20548: 

To order by Phone: 
Voice: (202) 512-6000: 
TDD: (202) 512-2537: 
Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Public Affairs: 

Jeff Nelligan, managing director, 
NelliganJ@gao.gov: 
(202) 512-4800: 
U.S. General Accounting Office: 
441 G Street NW, Room 7149:
Washington, D.C. 20548: