Base Operations:

Challenges Confronting DOD as It Renews Emphasis on Outsourcing

NSIAD-97-86: Published: Mar 11, 1997. Publicly Released: Mar 11, 1997.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) outsourcing savings, focusing on: (1) the extent to which DOD and the services emphasize the outsourcing of base support services; (2) the factors that influence savings in the outsourcing process; and (3) impediments to DOD's outsourcing.

GAO noted that: (1) DOD's efforts to outsource base support activities were constrained by legislation and other factors in the past; (2) because of the continuing budgetary and personnel limitations, the need to fund weapons modernization, and the elimination of key legislative constraints, DOD is now increasing its emphasis on outsourcing support activities; (3) senior leadership within the Office of the Secretary of Defense (OSD) and the services are strongly supporting renewed efforts to outsource base support activities; (4) from October 1, 1995, to January 15, 1997, the services announced plans to begin outsourcing studies during fiscal years 1996 and 1997; (5) these studies will involve over 34,000 positions, most of which were associated with base support activities; (6) additional studies involving more than 100,000 positions will be started over the next 6 years; (7) although the outsourcing studies have yet to be completed, some of the services have programmed outsourcing savings projections into their budgets; (8) GAO recognizes that outsourcing can be cost-effective because outsourcing competitions generate savings, usually through a reduction in personnel, whether competitions are won by the government or the private sector; (9) however, GAO questions the magnitude of savings projections cited in various DOD studies, as well as the services' current savings projections; (10) these estimates are heavily premised on initial savings estimates from previous outsourcing efforts, and such estimates change as the scope of the work and wages change; (11) furthermore, continuing budget and personnel reductions could make it difficult to sustain the levels of previously projected savings; (12) thus, the extent to which the services may achieve these savings is questionable; (13) at the same time, two areas of outsourcing appear to offer the potential for significant savings, but the extent to which the services are exploring them is mixed; (14) they involve giving greater emphasis to: (a) the use of omnibus contracts, rather than multiple contracts, for support services; and (b) the conversion of military support positions to civilian or contractor positions; (15) although guidance for performing outsourcing studies has recently been changed to streamline and improve the process, the extent to which the guidance will lead to increased outsourcing remains to be seen; and (16) also, federal contracting law may affect some DOD efforts to outsource, and some services preclude some activities from outsourcing because of military requirements.

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