DOD Competitive Sourcing:

Some Progress, but Continuing Challenges Remain in Meeting Program Goals

NSIAD-00-106: Published: Aug 8, 2000. Publicly Released: Aug 8, 2000.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) progress in implementing its A-76 program and the impact of strategic sourcing on the program, focusing on: (1) progress DOD has made in achieving its A-76 goals and the extent to which strategic sourcing is affecting these goals; and (2) the extent to which savings from A-76 and strategic sourcing are likely to be achieved.

GAO noted that: (1) DOD has made progress in implementing its A-76 program, but it has not advanced as quickly as initially expected; (2) while the goals have changed over time, DOD now projects studying activities which would encompass about 203,000 positions under A-76 during fiscal years 1997-2005; (3) also, because they could not identify activities with enough positions to study under the A-76 program, most of DOD components are planning to use the broader strategic sourcing approach to meet some of the study goals previously associated with just the A-76 program; (4) however, to date, only the Navy has identified specific strategic sourcing goals; it plans to review activities involving about 42,000 positions under this expanded program, including some positions previously targeted for A-76 studies; (5) because of the Navy's shift in emphasis, DOD is now planning to study activities involving about 25,000 fewer positions under A-76 during fiscal years 1997-2005--a reduction of about 11 percent of the 229,000 previously reported; (6) however, the A-76 studies are taking longer than the expected average of 2 years to complete; (7) GAO's work continues to show that while savings are being achieved, DOD's savings estimates are overstated, at least in the short term, and that strategic sourcing has added to uncertainties regarding the overall magnitude of savings; (8) DOD projects the A-76 program will generate savings of about $9.2 billion during the period 1997-2005, with recurring savings of almost $2.8 billion each year thereafter; (9) together, the A-76 and strategic sourcing study goals are expected to produce an estimated cumulative savings of almost $11.7 billion, with about $3.5 billion in recurring savings; (10) however, these estimates do not fully account for costs associated with completing the studies or implementing the results, which will reduce the amount of savings realized in the short term; (11) DOD components have begun to reduce their operating budgets based on projected savings from these programs; (12) in addition, the services are not planning to reduce military personnel end-strength as a result of these studies; (13) rather, the services will reinvest military spaces freed up as the result of these studies in other areas where personnel shortfalls exist; and (14) this practice will make additional funding for operation and maintenance accounts necessary to fund replacement civilian or contractor personnel.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: OSD officials from both the Competitive Sourcing and the budget office said that DOD has no plans to periodically determine if savings are being realized commensurate with the reductions being made in the Services' operating accounts. The official from the Competitive Sourcing office said that DOD, as in the past, will continue to to rely on the savings estimates determined by studies done by the CNA Corporation. CNA is currently doing a study to determine savings from large A-76 studies. Therefore, DOD will not be implementing this recommendation.

    Recommendation: Considering the delays in implementing the studies and offsetting the initial investment costs, the Secretary of Defense should require DOD components to periodically determine if savings are being realized commensurate with the reductions being made in the operating accounts.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: Based on information from the DOD Comptroller's office, DOD does not believe any action is necessary to provide additional funding for civilian or contractor personnel replacing military positions transferred to meet other needs. The level of funding for operation and maintenance accounts is part of the budget review process, and it is not possible to determine if shortfalls are a result of A-76 competitions. Moreover, because of the variable nature of the O&M budgets, the services have been able to fund the resources to take care of any shortfall in funding resulting from moving military personnel.

    Recommendation: The Secretary of Defense should take steps to ensure that the services increase funding for operation and maintenance accounts, as necessary, to fund the civilian or contractor personnel replacing military positions which have been transferred to meet other needs.

    Agency Affected: Department of Defense

 

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