Efforts Needed to Address Air Force Commercial Acquisition Risk
GAO-06-995, Sep 29, 2006
The Department of Defense (DOD) has been urged by commissions, legislation, and a panel to make increased use of commercial acquisition to achieve certain benefits. To help ensure the increased use of commercial acquisition, the Office of the Secretary of Defense (OSD) established and the Air Force implemented two commercial acquisition goals to be achieved by the end of fiscal year 2005. In setting these goals, OSD expected that the increased use of commercial acquisition would provide DOD with greater access to commercial markets (products and service types) with increased competition, better prices, and new market entrants and/or technologies. The committee asked GAO to identify (1) the extent to which the Air Force has increased its use of commercial acquisition to obtain expected benefits and (2) the risks that are associated with this use.
From 2001 to 2005, the Air Force increased spending using commercial acquisition from $4.8 billion to over $8 billion in an effort to provide greater access to commercial markets to increase competition, obtain better prices, and attract new market entrants (nontraditional contractors) and/or technologies. Even though the Air Force has significantly increased this spending, it has not measured the extent to which this increased use resulted in the benefits that were expected. For example, our analysis shows that for at least one of the expected benefits, attracting new market entrants, the expected benefit has not materialized. For the most part, traditional defense contractors received these contracts. Government contracting officials face risks in using commercial acquisition. For example, improperly classifying an acquisition as a commercial acquisition can leave the Air Force vulnerable to accepting prices that may not be the best value for the department. A high-ranking DOD acquisition official testified that he is concerned about items and services being identified as commercial that are not sold in an existing marketplace because under these circumstances, the government lacks assurances that the price is reasonable. At times, Air Force officials have disagreed about the classification of some acquisitions as commercial. The Air Force's use of commercial acquisition has also been accompanied by an increased amount of dollars being awarded for sole-source contracts. Despite DOD policy to avoid sole-source commercial acquisitions because of increased risk, sole-source commercial acquisition dollars awarded by the Air Force have more than doubled from 2000 to 2005. Further, of the 20 larger Air Force commercial product awards in 2004, half were awarded as sole-source.
- Review Pending
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To help ensure that it is able to measure the benefits expected from commercial acquisition, the Air Force should collect information that would allow evaluating the extent of cost savings, increased access to commercial markets, and greater access to nontraditional contractors. For example, the Air Force could measure the number of nontraditional contractors it reaches using commercial acquisition.
Agency Affected: Department of Defense: Department of the Air Force
Comments: DOD concurred with this recommendation but has not yet completed implementation. The Air Force has determined that until there are standard DOD-wide definitions of traditional and non-traditional contractors, they are not able to accurately identify the number of non-traditional contractors the Air Force is attracting to its procurement opportunities, including commercial acquisitions. To that end, DOD took actions in March and April 2008 to seek input from the Services, Defense Agencies, and other sources in developing a DOD-wide definition for non-traditional defense contractors. In a draft DFARS case issued in the fall of 2010 in the Federal Register, DOD proposed to amend the Defense Federal Acquisition Regulation Supplement (DFARS) with a definition for non-traditional contractors. In May 2011, this proposed change to the DFARS was sent to the Office of Management and Budgets Office of Information and Regulatory Affairs and they subsequently sent it to other agencies for comment. DOD received comments and addressed them in late 2011. However, DOD has described this effort as unsuccessful and has been unable to get to the next step, which would be to publish the case as a DFARS Final Rule. If this DFARS Final Rule is eventually published, the Air Force should be able to use this new definition to collect information on non-traditional contractors by creating a new data collection "field" to be included in all commercial item solicitations, to which offerors would respond by identifying themselves as non-traditional contractors. DOD officials said they are planning to continue their efforts to move this issue to a rightful conclusion.
Recommendation: To help improve commercial acquisition and reduce the potential for risk by limiting situations where commercial acquisition contracts are being awarded sole-source, the Secretary of the Air Force should strive to limit the acquisition of commercial products and services in sole-source environments in concert with OSD guidance. However, in the cases where it is necessary to award sole-source, the Secretary should collect the information necessary to evaluate the benefit(s) of awarding commercial verses a noncommercial contract.
Agency Affected: Department of Defense: Department of the Air Force
Status: Closed - Implemented
Comments: The Air Force will limit the acquisition of commercial products and services in sole source environments in accordance with DOD guidance. The Air Force also issued Mandatory Procedure 5334.7002, Acquisition of Major Weapons Systems as Commercial Items, on August 23, 2007. This procedure will allow the Air Force to collect information to evaluate the benefits of awarding a commercial verses a non-commercial contract. Specifically, in the acquisitions of major weapon systems as commercial items the Air Force must provide supporting documentation including projections of the extent the Air Force, by using commercial practices in FAR Part 12, will (1) increase competition, (2) have greater access to commercial markets, and (3) receive better prices and/or new market entrants or technologies. Also, this procedure requires that annually after the award of this type of commercial acquisition, the program manager or contracting officer shall identify whether increases in competition, greater access to commercial markets, better prices, and new market entrants or technologies have been realized.