Strategic Sourcing:

Opportunities Exist to Better Manage Information Technology Services Spending

GAO-15-549: Published: Sep 22, 2015. Publicly Released: Oct 22, 2015.

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What GAO Found

Efforts by the Departments of Defense (DOD), Homeland Security (DHS), and the National Aeronautics and Space Administration (NASA) to strategically manage spending for information technology (IT) services, such as software design and development, have improved in recent years. Each of the agencies GAO reviewed has designated officials responsible for strategic sourcing and created offices to identify and implement strategic sourcing opportunities, including those specific to IT services. Most of these agencies' IT services spending, however, continues to be obligated through hundreds of potentially duplicative contracts that diminish the government's buying power. These agencies managed between 10 and 44 percent of their IT services spending through preferred strategic sourcing contracts in fiscal year 2013. In contrast, GAO previously reported that leading companies generally strategically managed about 90 percent of their procurement spending, including services.

Fiscal Year 2013 IT Services Obligations through Strategic Sourcing Contracts

Agency

Army

Navy

Air Force

DHS

NASA

Total IT services obligations ($ in millions)

$3,454

3,251

1,394

2,219

855

Percentage obligated through preferred IT strategic sourcing contract vehicles

27%

10

17

44

35

Source: GAO analysis of FPDS-NG data | GAO-15-549

Further, most of these agencies' efforts to strategically source IT services have not followed leading commercial practices, such as clearly defining the roles and responsibilities of the offices responsible for strategic sourcing; conducting an enterprise-wide spend analysis; monitoring the spending going through the agencies' strategic sourcing contract vehicles; or establishing savings goals and metrics. As a result, the agencies are missing opportunities to leverage their buying power and more effectively acquire IT services.

Contracting officials from the agencies GAO reviewed generally had limited insights into the labor rates paid for similar IT services. GAO's analysis of 30 contract actions for similar IT services in fiscal year 2013 found that the agencies paid widely varying labor rates for similar services with the same contractors. The average difference between the lowest and highest labor rate for the categories GAO reviewed was 62 percent, in part due to geographic or work location, unique security, education or skill requirements, and the contractor unit performing the work. Further, for the 30 contract actions for IT services that GAO reviewed, the two contractors proposed more than 117 discrete labor categories—some with multiple variations—which complicated efforts to compare labor rates. Prior GAO reports on leading commercial practices have noted that companies use standardized labor categories for IT services to enable comparison of labor rates and ultimately realize cost savings. Several government-wide and agency-specific efforts to address aspects of these challenges, including providing tools to assess labor rate variations or streamlining labor categories, are under development or in their early implementation stages.

Why GAO Did This Study

GAO reported in 2012 that the government is not fully leveraging its buying power for high-spending areas such as IT services, which accounted for more than $30 billion in fiscal year 2013. Leading commercial companies use strategic sourcing—a process that moves them away from numerous individual purchases to an aggregate approach—to better manage the services they acquire and achieve savings of 4 to 15 percent annually.

GAO was asked to review strategic sourcing of IT services. This report addresses the extent to which selected agencies (1) manage IT services through strategic sourcing approaches, and (2) have insight into labor rates for similar IT services.

GAO reviewed DOD (including the three military departments), DHS, and NASA, which collectively accounted for 53 percent of reported federal fiscal year 2013 IT services obligations. GAO analyzed agency policies, procurement and contracting data, and interviewed agency and contractor officials. GAO identified a high-spend IT service category and obtained labor rate information from a nongeneralizable sample of 30 contract actions awarded to two of the largest contractors common to these agencies.

What GAO Recommends

To improve efforts to strategically source IT services, GAO recommends that each agency conduct spend analysis, monitor spending, develop savings goals and metrics, and consider the use of standardized labor categories, as appropriate for their agency. The agencies concurred with these recommendations.

For more information, contact Timothy J. DiNapoli at (202) 512-4841 or dinapolit@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: The Deputy Assistant Secretary of the Army (Procurement) reported that the Army is currently collecting data and conducting analyses to address duplication, overlap, and fragmentation in Army information technology acquisitions. In addition, representatives from the Army and the Secretary of Defense are working to support the Office of Management and Budget's Category Management efforts to manage government-wide information technology acquisitions more strategically.

    Recommendation: To improve efforts to strategically source IT services within the Army, the Secretary of the Army should direct its strategic sourcing accountable official to conduct a comprehensive analysis of Army IT services spending to determine the extent to which requirements can be addressed by Computer Hardware, Enterprise Software and Solutions (CHESS) or other strategic sourcing approaches, and based on this analysis, consider opportunities to reduce duplicative contracts.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Open

    Comments: In providing comments on this report, the Army concurred with this recommendation but has not yet taken any actions necessary to implement it.

    Recommendation: To improve efforts to strategically source IT services within the Army, the Secretary of the Army should direct its strategic sourcing accountable official to implement utilization metrics and mandatory use or consideration policies.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Open

    Comments: In providing comments on this report, the Army concurred with this recommendation but has not yet taken any actions necessary to implement it.

    Recommendation: To improve efforts to strategically source IT services within the Army, the Secretary of the Army should direct its strategic sourcing accountable official to develop guidance and overarching goals and metrics for savings.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Open

    Comments: The Deputy Assistant Secretary of the Army (Procurement) reported that the Army is in the process of determining if standardized labor categories should be used to ensure realistic and reasonably priced labor rates for Computer Hardware, Enterprise Software and Solutions (CHESS) contracts and other strategic sourcing contracts for information technology services.

    Recommendation: To improve efforts to strategically source IT services within the Army, the Secretary of the Army should direct its strategic sourcing accountable official to conduct a review of the benefits and disadvantages of standardized labor categories for CHESS or future contracts.

    Agency Affected: Department of Defense: Department of the Army

  5. Status: Open

    Comments: The Assistant Secretary of the Navy (Research, Development, and Acquisition) reported that the Navy is in the process of reviewing and updating its information technology spend data and analysis. Based on this analysis, the Navy will take steps to reduce duplicative contracts where appropriate and practicable.

    Recommendation: To improve efforts to strategically source IT services within the Navy, the Secretary of the Navy should direct its strategic sourcing accountable official to conduct a comprehensive analysis of IT services spending to determine the extent to which requirements can be addressed by the existing contracts or other strategic sourcing approaches and based on this analysis, reduce duplicative contracts.

    Agency Affected: Department of Defense: Department of the Navy

  6. Status: Open

    Comments: The Assistant Secretary of the Navy (Research, Development, and Acquisition) reported that the Navy is in the process of reviewing and updating its information technology spend data and analysis. Based on this analysis, the Navy will establish metrics and monitor agency efforts to comply with the Navy information technology services policy and strategy.

    Recommendation: To improve efforts to strategically source IT services within the Navy, the Secretary of the Navy should direct its strategic sourcing accountable official to implement utilization metrics and monitor agency efforts to comply with the Navy's existing use policies for IT services.

    Agency Affected: Department of Defense: Department of the Navy

  7. Status: Open

    Comments: The Air Force reported that it will conduct an in-depth analysis of information technology services spending and the extent to which those services requirements can be met by Network-Centric Solutions (NETCENTS) and other strategically sourced contracts. Based upon the results of the analysis, the Air Force will identify those contracts that can be issued using NETCENTS and other strategic sourcing vehicles.

    Recommendation: To improve efforts to strategically source IT services within the Air Force, the Secretary of the Air Force should direct its strategic sourcing accountable to conduct a comprehensive analysis of IT services spending to determine the extent to which requirements can be addressed by Network-Centric Solutions (NETCENTS) or other strategic sourcing approaches, and based on this analysis, reduce duplicative contracts.

    Agency Affected: Department of Defense: Department of the Air Force

  8. Status: Open

    Comments: The Air Force has a mandatory use policy in place for information technology services as well as business intelligence tools and data analysis efforts underway to track utilization metrics. The Air Force will use these tools to more closely monitor compliance with the mandatory use policy for Network-Centric Solutions (NETCENTS) and drive higher usage rates and savings.

    Recommendation: To improve efforts to strategically source IT services within the Air Force, the Secretary of the Air Force should direct its strategic sourcing accountable to implement utilization metrics.

    Agency Affected: Department of Defense: Department of the Air Force

  9. Status: Open

    Comments: The Air Force reported that it will develop overarching goals and metrics for savings using data analysis and business intelligence tools. Savings goals will include the reduced administrative costs associated with contract award, access fees paid to other agencies.

    Recommendation: To improve efforts to strategically source IT services within the Air Force, the Secretary of the Air Force should direct its strategic sourcing accountable to develop guidance and overarching goals and metrics for savings.

    Agency Affected: Department of Defense: Department of the Air Force

  10. Status: Open

    Comments: The Air Force reported that it will conduct a review of the use of standardized labor categories for the Network-Centric Solutions-2 contracts. The Air Force will also continue to share and analyze data on labor rates paid for information technology services to support the Office of Management and Budget's Category Management efforts. Based on this analysis, the Air Force will determine if additional labor category standardization is required to ensure realistic and reasonably priced labor rates on the Network-Centric Solutions-2 contracts.

    Recommendation: To improve efforts to strategically source IT services within the Air Force, the Secretary of the Air Force should direct its strategic sourcing accountable to conduct a review of the benefits and disadvantages of standardized labor categories for primary strategic sourcing vehicles such as NETCENTS.

    Agency Affected: Department of Defense: Department of the Air Force

  11. Status: Open

    Comments: In providing comments on this report, the Assistant Administrator for Procurement agreed with our recommendation. In a September 2016 update, the agency noted that an implementation plan was approved in March 2016 which details how strategic sourcing will be implemented for information technology.

    Recommendation: To improve efforts to strategically source IT services within NASA, the Administrator of NASA should direct its strategic sourcing accountable official to use its 2014 spend analysis to determine the extent to which requirements can be addressed by the IT Infrastructure Integration Program or other strategic sourcing approaches, and based on this analysis, reduce duplicative contracts.

    Agency Affected: National Aeronautics and Space Administration

  12. Status: Open

    Comments: In providing comments on this report, NASA concurred with this recommendation but has not yet taken any actions necessary to implement it.

    Recommendation: To improve efforts to strategically source IT services within NASA, the Administrator of NASA should direct its strategic sourcing accountable official to implement utilization metrics and mandatory use policies.

    Agency Affected: National Aeronautics and Space Administration

  13. Status: Open

    Comments: In providing comments on this report, NASA concurred with this recommendation but has not yet taken any actions necessary to implement it.

    Recommendation: To improve efforts to strategically source IT services within NASA, the Administrator of NASA should direct its strategic sourcing accountable official to develop guidance and overarching goals and metrics for savings.

    Agency Affected: National Aeronautics and Space Administration

  14. Status: Closed - Implemented

    Comments: In response to our recommendation, the DHS Office of Chief Procurement Officer assessed its portfolio of strategic sourcing contract vehicles related to information technology services and established a target utilization goal for fiscal year 2016.

    Recommendation: To improve efforts to strategically source IT services within DHS, the Secretary of Homeland Security should direct its strategic sourcing accountable official to establish a utilization goal for the portfolio of strategic sourcing contracts related to IT services.

    Agency Affected: Department of Homeland Security

  15. Status: Closed - Implemented

    Comments: In response to our recommendation, the DHS Office of Chief Procurement Officer assessed its portfolio of strategic sourcing contract vehicles related to information technology services and established a target savings goal for fiscal year 2016.

    Recommendation: To improve efforts to strategically source IT services within DHS, the Secretary of Homeland Security should direct its strategic sourcing accountable official to establish a savings goal for the portfolio of strategic sourcing contracts related to IT services.

    Agency Affected: Department of Homeland Security

 

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