Contract Management:

High-Level Attention Needed to Transform DOD Services Acquisition

GAO-03-935: Published: Sep 10, 2003. Publicly Released: Sep 10, 2003.

Additional Materials:

Contact:

David E. Cooper
(617) 788-0555
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The Department of Defense's (DOD) spending on service contracts approaches $100 billion annually, but recent legislation directs DOD to manage its services procurement more effectively. Leading companies transformed management practices and achieved major savings after they analyzed spending patterns and coordinated procurement. This report evaluates DOD's implementation of the legislation in light of congressional interest in promoting the use of best commercial practices for acquiring services.

DOD and the military departments each have a management structure in place for reviewing individual services acquisitions valued at $500 million or more, but that approach does not provide a departmentwide assessment of how spending for services could be more effective. Greater attention is needed by DOD management to promote a strategic orientation by setting performance goals, including savings goals, and ensuring accountability for achieving them. To support management decisions and improve visibility over spending on service contracts, DOD is developing an automated system to collect and analyze data by piloting a spend analysis. The analysis views spending from a DOD-wide perspective and identifies large-scale savings opportunities, but its scope is limited, and it is too early to tell how the department can make the best use of its results. The military departments are in the early stages of separate initiatives that may lead them to adopt a strategic approach to buying services, but DOD lacks a plan that coordinates these initiatives or provides a road map for future efforts.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In January 2005, partly in response to GAO's recommendation, DOD approved a concept of operations (i.e., strategic plan) for a "DOD-Wide Strategic Sourcing" (DWSS) program to implement enterprise-wide sourcing of services and products. Set up under the direction of the Deputy Secretary of Defense, DOD's goal for the DWSS program is to ensure improved efficiencies and economies in acquisitions resulting in reduced costs and improved effectiveness. Consistent with GAO's recommendation, the Office of the Undersecretary of Defense for Acquisitions, Technology, and Logistics (AT&L) developed the DWSS strategic plan with input from the military departments and the defense agencies. As recommended by GAO, the DWSS program will accomplish cost savings and improved effectiveness goals by implementing strategic sourcing processes on a department-wide basis, with commodity-based sourcing strategies developed by cross-functional teams established in the military departments and defense agencies. Consistent with GAO's recommendations, the new plan calls for greatly expanding the number of commodity teams across DOD that will promote collaboration by breaking down DOD's traditionally stove-piped and fragmented approach to purchasing. Under the plan, and driven by a deep understanding of internal purchasing needs based on spend analysis, the commodity teams are expected to facilitate the collaborative development of DOD-wide or intra-agency sourcing strategies for target commodities.

    Recommendation: The Secretary of Defense should also direct the Under Secretary to develop a strategic plan with guidance for the military departments and the defense agencies on how to carry out their responsibilities for managing acquisition of services. Key elements of this guidance should address promoting collaboration across DOD and within military departments and defense agencies by establishing cross-functional teams to carry out coordinated purchasing of services.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In January 2005, partly in response to GAO's recommendation, DOD approved a concept of operations (i.e., strategic plan) for a "DOD-Wide Strategic Sourcing" (DWSS) program to implement enterprise-wide sourcing of services and products. Set up under the direction of the Deputy Secretary of Defense, DOD's goal for the DWSS program is to ensure improved efficiencies and economies in acquisitions resulting in reduced costs and improved effectiveness. Consistent with GAO's recommendation, the Office of the Undersecretary of Defense for Acquisitions, Technology, and Logistics (AT&L) developed the DWSS strategic plan with input from the military departments and the defense agencies. Also, the DWSS program will accomplish cost savings and improved effectiveness goals by implementing strategic sourcing processes on a department-wide basis, with commodity-based sourcing strategies driven by a deep understanding of internal purchasing needs based on spend analysis. Specifically, DOD's new plan defines a six-phase strategic sourcing process the DWSS program participants will follow in developing, implementing, and managing commodity sourcing strategies. Consistent with GAO recommendations in this and prior reports, spend analysis will provide a knowledge-based approach to ensure success across the strategic sourcing phases: (1) conduct opportunity assessment, (2) profile commodity, (3) conduct supply market analysis, (4) develop commodity strategy, (5) issue request for proposals and negotiate, and (6) implement and manage performance.

    Recommendation: The Secretary of Defense should also direct the Under Secretary to develop a strategic plan with guidance for the military departments and the defense agencies on how to carry out their responsibilities for managing acquisition of services. Key elements of this guidance should address improving knowledge of services spending by collecting and analyzing data about services procurements across DOD and within military departments and defense agencies.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: Since 2003, the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L) has been working with the military departments and the defense agencies to further strengthen the management structure, completing a series of actions that should lead to significant improvements across the range of services DOD purchases. In Fall 2003, AT&L launched the DOD-Wide Services Sourcing (DWSS) Program to pilot the use of best commercial practices such as centralizing key functions, conducting spend analyses, expanding the use of cross-functional commodity teams, achieving strategic orientation, achieving savings by reducing purchasing costs, and improving service contracts' performance. The program included two pilots to achieve these objectives. One was the Spend Analysis Technical Solution project to build an information technology system that will pull data from disparate databases for analysis by DOD buying teams. The other is the Spend Analysis Operational Solution to test the use of cross-functional teams to coordinate and manage services purchases in the same way as commercial best practices identified by GAO. This initially focused on analyzing the Administrative Services commodity and was to define how, from an operational perspective, a commodity group would be analyzed for identifying strategic sourcing opportunities. In 2004, DOD also established a multi-tiered governance structure that should strengthen management for the program and ultimately lead to the permanent transformation of DOD services acquisitions as recommended by GAO. The structure included an "Acquisition Governance Board" led by the Director, Defense Acquisition and Procurement Policy and Senior Acquisition Executives for the Army, Navy, Air Force, Missile Defense Agency, and Defense Logistics Agency. Finally, in January 2005, consistent with GAO's recommendation and after completing the DWSS pilot, DOD approved a concept of operations (i.e., strategic plan) for the full implementation of the DWSS program (re-named the DOD-Wide Strategic Sourcing Program) which further strengthens the department's management structure for the acquisition of services. For example, in addition to the high-level governance board, the new plan establishes a permanent program management office in AT&L to ensure overall change management, communication, and coordination across DOD. The new plan also establishes a senior level "Strategic Sourcing Directors Board". The directors board's membership consists of senior individuals within each military department and defense agency responsible for the oversight of their respective strategic sourcing programs and will report to the governance board. The directors board will be the primary body within the DWSS program for vetting and approving sourcing strategies developed by established commodity teams, as well as setting up strategic sourcing processes and standards. Under the new plan, DOD plans to further strengthen the management structure for acquiring key services and products by creating "Strategic Sourcing Coordinating Groups" within each military department and other defense agencies running commodity teams, responsible for a specific portfolio of commodities (e.g., administrative clerical support services or wireless communications services). According to DOD, this expanded governance structure will be formally kicked off in July 2005, and will replace the ad-hoc integrated process team that was in place under the pilot between 2003 and 2005. As part of the expanded governance structure, DOD's DWSS strategic plan also calls for the Directors Board to oversee the ongoing commodity councils launched under the earlier pilot and to develop a strategy for the establishment of future commodity councils.

    Recommendation: To achieve significant improvements across the range of services DOD purchases, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics to work with the military departments and the defense agencies to further strengthen the management structure. This structure, established in response to section 801 of the National Defense Authorization Act for Fiscal Year 2002, should promote the use of best commercial practices such as centralizing key functions, conducting spend analyses, expanding the use of cross-functional commodity teams, achieving strategic orientation, achieving savings by reducing purchasing costs and other efficiencies, and improving service contracts' performance and outcomes.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: In January 2005, partly in response to GAO's report, DOD approved a concept of operations (i.e., strategic plan) for a "DOD-Wide Strategic Sourcing" (DWSS) program. The new plan not only implements an enterprise-wide approach for sourcing of services and products advocated by this and other GAO reports, the plan also implements this GAO recommendation by providing for the measurement of savings and performance results and ensuring accountability by assigning high-level responsibility for monitoring results. Set up under the direction of the Deputy Secretary of Defense, DOD's goal for the DWSS program is to ensure improved efficiencies and economies in acquisitions resulting in reduced costs and improved effectiveness. Consistent with GAO's recommendation, the new strategic plan assigns accountability by outlining the roles and responsibilities of key DWSS program executives, managers, and other participants who will be involved in developing, implementing, and managing DOD-wide or intra-agency commodity sourcing strategies. Also consistent with GAO's recommendation, the new strategic plan defines the overarching DWSS governance structure that will engage and connect the right people from across the DOD organization and create a sustainable framework for long-term collaboration and commodity sourcing strategy implementation. Finally, as recommended by GAO, the new strategic plan establishes a framework of performance metrics that are critical to ensuring success of the DWSS program. Under DOD's plan, the DWSS-program level metrics are higher level and generic in nature, while commodity-level metrics are expected to vary by commodity and will be tracked separately. The primary DWSS program metrics DOD has established include (1) number of commodity teams; (2) number of commodity strategies developed; (3) number of commodity strategies implemented or being implemented; (4) total DOD spending in dollars covered by commodity teams; (5) total DOD expected strategic sourcing savings identified; (6) total DOD strategic sourcing savings achieved; (7) number of contracts consolidated with individual suppliers; (8) small business utilization impact; (9) number of staff trained; and (10) overall customer satisfaction.

    Recommendation: The Secretary of Defense should also direct the Under Secretary to develop a strategic plan with guidance for the military departments and the defense agencies on how to carry out their responsibilities for managing acquisition of services. Key elements of this guidance should address establishing strategic savings and performance goals, measuring results, and ensuring accountability by assigning high-level responsibility for monitoring those results.

    Agency Affected: Department of Defense

 

Explore the full database of GAO's Open Recommendations »

Dec 19, 2014

Dec 16, 2014

Dec 12, 2014

Dec 11, 2014

Dec 1, 2014

Nov 21, 2014

Nov 20, 2014

Nov 19, 2014

Nov 18, 2014

Looking for more? Browse all our products here