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United States Government Accountability Office: 
Washington, DC 20548: 

November 19, 2008: 

Congressional Committees: 

Subject: Mandate on the Department of Defense's Contract Award 
Procedures for Directed Spending Items: 

Section 830 of the National Defense Authorization Act for Fiscal Year 
2008[Footnote 1] directed GAO to compare procedures used for awarding 
noncompetitive defense contracts for new projects pursuant to (1) 
congressionally directed spending items or congressional earmarks and 
(2) the special interests of senior executive branch officials. 
Specifically, it states: 

"Not later than one year after the date of the enactment of the Act, 
the Comptroller General of the United States shall submit to the 
congressional defense committees a report on the use of procedures 
other than competitive procedures in the award of contracts by the 
Department of Defense. The report shall compare the procedures used by 
the Department of Defense for the award of funds for new projects 
pursuant to congressionally directed spending items, as defined in rule 
XLIV of the Standing Rules of the Senate, or congressional earmarks, as 
defined in rule XXI of the Rules of the House of Representatives, with 
the procedures used by the Department of Defense for the award of funds 
for new projects of special interest to senior executive branch 

To address the mandate, we obtained documentation and interviewed 
officials from the Congressional Research Service (CRS), the Office of 
Management and Budget (OMB), the Office of the Secretary of Defense 
(OSD), each of the military services, the Joint Chiefs of Staff, one 
combatant command, several subcommands, and other Department of Defense 
(DOD) agencies. We reviewed appropriation bills and related conference 
reports for fiscal years 2005 and 2008 and certain clauses of rule XLIV 
of the Standing Rules of the Senate and rule XXI of the Rules of the 
House of Representatives that pertain to directed spending items and 
earmarks, respectively. We focused on these fiscal years because 2008 
data are the most current data and because 2005 data were subject to 
the most extensive collection and analysis of directed spending items 
and earmarks by OMB and DOD. We also contacted officials and analyzed 
information from groups such as Taxpayers for Common Sense (TCS) and 
Citizens Against Government Waste. In addition, we met with former 
government employees with work experience in the legislative branch and 
at OMB and obtained their perspectives and viewpoints on special 
interest items. We also reviewed and compared the contents of databases 
maintained by OMB, DOD, and TCS that included information on directed 
spending items and earmarks. In addition, we explored various 
approaches for defining the term or phrase "projects of special 
interest to senior executive branch officials" and identifying such 
projects. Finally, we judgmentally selected 29 fiscal year 2005 
congressionally directed spending items and reviewed the procedures DOD 
used to award contracts; the sample of contracts included some awarded 
by each of the military services. Our work was conducted from February 
through October 2008 in accordance with GAO's quality standards and 
generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives. 

As communicated with your staff in July and August 2008, despite our 
diligent efforts in exploring various approaches, we have concluded 
that it is not feasible for us to address the mandate as written. 
First, we have not found a methodologically sound approach for 
systematically identifying "new projects of special interest to senior 
executive branch officials." Second, we were unable to apply the 
definitions of "congressionally directed spending items" and 
"congressional earmarks" recently incorporated in Senate and House 
Rules, respectively, because of data availability and timing issues. 
Finally, with these underlying constraints, the comparison of 
procedures called for in the mandate was not possible.[Footnote 2] The 
following sections summarize the approaches we explored and the reasons 
they were not feasible. 

Unable to Systematically Identify Executive Branch New Special Interest 

Several factors precluded us from performing the analysis on the 
executive branch side specified in the mandate. First, we found no 
commonly accepted definition of the term "new projects of special 
interest to senior executive branch officials" thereby making it 
difficult to identify an acceptable list of such projects.[Footnote 3] 
Second, since senior government officials, in general, have some level 
of management discretion in performing their missions, it is inherently 
difficult to attempt to distinguish decisions related to "new projects 
of special interest" from decisions they make exercising their general 
discretion as senior managers. Further, we found that little evidence 
or documentation exists linking project level decisions back to a 
particular senior government official. 

We explored numerous approaches for identifying and collecting data to 
determine if we could identify new projects of special interest to 
senior government officials. As summarized below, we determined that 
each of these approaches faced significant shortcomings with respect to 
definitions, data availability, or methodology, or a combination 
thereof, that rendered them infeasible. 

* Reviewing the President's budget and the DOD budget process: 
We reviewed the President's budget and aspects of DOD's internal budget 
process and discussed with DOD officials possible revisions made at the 
request of senior government officials before the budget is submitted 
to Congress. For example, we identified military construction projects 
in the President's budget that specify an entity or location. However, 
DOD officials told us that these projects are vetted through the 
budgetary process. According to DOD officials, changes made during 
budget formulation by senior officials do not necessarily correlate to 
new projects of special interest and must meet the agency's overall 
policy goals. Changes made by federal agencies may or may not reflect 
new projects of special interest. It is not possible to determine which 
category a decision falls into without affirmation of the decision 
maker. Without this affirmation, we cannot determine if a budget 
revision reflects an adjustment in high-level policy priorities or 
reflects the effort of an individual to direct funding at a project 

* Reviewing DOD reprogramming actions: 
We reviewed DOD's reprogramming process and selected reprogramming 
actions[Footnote 4] made during the year of execution to determine the 
extent to which these actions occur and how the actions are approved. 
As part of this effort, we reviewed new starts[Footnote 5] included in 
DOD's reprogramming reports for fiscal years 2005 to 2007. We found no 
evidence to link any of these types of reprogramming actions back to a 
project of interest to senior government officials. 

* Discretionary spending by high level officials: 
We held discussions with high-level DOD offices and commands to 
identify instances where budget execution changes might be made at the 
discretion of a senior government official. We found that sufficient 
data are not available to identify and track minor changes. More 
significant changes to budget execution, those above a specified dollar 
threshold, generally result in reprogramming actions that require 
reporting to the congressional defense committees. Further, officials 
representing high-level DOD offices and commands told us that they do 
not award any discretionary funds but instead send the funds out to the 
service level for contract award to support mission requirements. Our 
prior work examined one combatant command with both command and 
acquisition authority--the United States Special Operations Command 
(SOCOM)--the only command with a "checkbook."[Footnote 6] SOCOM funded 
86 acquisition programs from 2001 to 2006 to meet its specific 
battlefield needs. SOCOM assesses proposed programs through a screening 
process that weighs the relative costs, benefits, and risks of each and 
selects those that help SOCOM balance near-and future-term 
opportunities, and other needs. Our prior work found that the 86 
acquisition programs were consistent with SOCOM's mission. 

* Reviewing government and private sector databases: 
We reviewed three earmark databases maintained by OMB, DOD, and TCS to 
see if the databases identified items as projects of special interest 
to a senior government official or officials and were funded through 
allocated appropriations controlled by or under the discretion of those 
officials. We found that these databases did not identify items as new 
projects of special interest to senior government officials. 

* Identifying decisions directing contracts to specific beneficiaries 
or contractors during the contract award process: 
We met with officials from several high-level DOD organizations, such 
as the Office of the Under Secretary of Defense for Acquisition, 
Technology and Logistics, to discuss and obtain information on sole-
source contracts that could link project level decisions to senior 
government officials or to specific contractors. These DOD officials 
told us that they do not have contracting authority or capability and, 
therefore, do not execute the award of contracts; instead, the contract 
award process is delegated to and carried out by military service level 
or other DOD support organizations.[Footnote 7] When we reviewed a 
sample of sole-source contracts awarded by these organizations, we 
found the use of justifications for awarding contracts noncompetitively 
that are specifically required by the Federal Acquisition Regulation 
(FAR),[Footnote 8] but did not find linkages of the awards to 
particular senior government officials. We further attempted to focus 
on cases discussed in the news media of alleged steering of contracts 
by senior DOD officials, but this approach did not allow the 
development of sufficient data sets required to perform an objective 
and methodologically sound analysis. 

House and Senate Rules: 

The Senate and House rules are designed to make the government funding 
process more transparent by more clearly identifying congressionally 
directed spending items and congressional earmarks, respectively. In 
prior reports, the CRS, the DOD Inspector General, and we have noted 
that there are no single commonly accepted definitions of such terms as 
"congressionally directed spending item" and "earmark" and we believe 
that any attempt to define the terms is subject to interpretation and 
challenge. The terms have been defined and used in various ways, 
including the following: 

* GAO's Glossary of Terms Used in the Federal Budget Process defines 
earmarking as dedicating collections by law for a specific purpose or 
program or designating any portion of a lump-sum amount for particular 
purposes by means of legislative language.[Footnote 9] 

* OMB defines earmarking as funds provided by the Congress for projects 
or programs where congressional direction (in bill or report language) 
"circumvents" the merit-based or competitive allocation process or 
specifies the location or recipient, or otherwise curtails the ability 
of the executive branch to control critical aspects of the funds 
allocation process. On January 29, 2008, the President issued Executive 
Order 13457[Footnote 10] directing executive agencies not to commit, 
obligate, or expend funds on the basis of earmarks included in any non- 
statutory source, including requests in reports of congressional 
committees or other congressional documents or communications from or 
on behalf of members of Congress, except when required by law or when 
an agency has itself determined a project, program, activity, grant, or 
other transaction to have merit under statutory criteria or other merit-
based decision making. The executive order applies to appropriations 
laws and other legislation enacted after the date of the order. On 
October 23, 2008, OMB issued a memorandum providing guidance on 
implementing the Consolidated Security, Disaster Assistance, and 
Continuing Appropriations Act, 2009 in accordance with Executive order 
13457 on "Protecting American Taxpayers from Government Spending on 
Wasteful Earmarks." The memo specifies, in implementing the Act, 
agencies are legally obligated to fund an earmark only if it was in the 
statutory text of the fiscal year 2008 appropriation (including 
earmarks that were statutorily incorporated by reference), was of a 
continuing nature (rather than of a one-time, non-recurring nature), 
and could not be carried out by funding the earmark in the remainder of 
fiscal year 2009 if Congress ultimately decides to provide continued 
funding in fiscal year 2009 for that earmark.[Footnote 11] 

* According to DOD officials, the department defines directed spending, 
which they refer to as "add-ons," as an increase in funding levels in 
the bill language included in the appropriations conference report that 
was not originally requested in the President's budget submission. 

* CRS defines earmarks as "funds set aside for a specific purpose, use 
or recipient."[Footnote 12] 

In 2007, both the House and Senate adopted rules to bring greater 
transparency to congressional earmarks and directed spending items. The 
House rules defined the term "congressional earmark" as a provision or 
report language included primarily at the request of a Member, 
Delegate, Resident Commissioner, or Senator providing, authorizing, or 
recommending a specific amount of discretionary budget authority, 
credit authority, or other spending authority for a contract, loan, 
loan guarantee, grant, loan authority, or other expenditure with or to 
an entity, or targeted to a specific state, locality, or congressional 
district, other than through a statutory or administrative formula- 
driven or competitive award process.[Footnote 13] The rules were added 
to explicitly describe what should be declared as congressionally 
directed spending items and congressional earmarks, and established 
public disclosure requirements. Both the House and Senate rules require 
public disclosure of a list of congressional earmarks and 
congressionally directed spending items. The House and Senate 
Appropriations Committees compiled a list of these items for the first 
time in fiscal year 2008. 

We were unable to apply the definitions of congressional earmarks and 
congressionally directed spending items specified in House and Senate 
Rules, respectively, in this review because of data availability and 
timing issues: 

* For years prior to when the rules went into effect, data associated 
with the disclosure requirements are not available to permit us to 
apply the definition to items in particular committee report 
provisions. Specifically, we cannot confirm that (1) the provision was 
included primarily at the request of a Senator or Member, Delegate, or 
Resident Commissioner; (2) whether the spending item in the provision 
was targeted to a specific state, locality, entity, or congressional 
district by its sponsor; and (3) if it was so targeted, whether it 
involved a statutory or administrative formula-driven or competitive 
award process. 

* For fiscal year 2008, the most current year, we could not complete an 
analysis of directed spending items and earmarks because of limited 
time available for DOD to either obligate the funding or award a 
contract. Funds are available for obligation for 1 to 5 years depending 
on the type of funds involved. For example, procurement funds are 
available for obligation for 3 years, which means that fiscal year 2008 
funds might not be obligated until sometime in fiscal year 2010. As a 
result, we believe it would not yet be possible to develop a 
comprehensive perspective of the competitive or noncompetitive award 
status of the congressionally directed spending items or congressional 
earmarks for fiscal year 2008. 

Unable to Compare Directed Spending Items in the Legislative and 
Executive Branches: 

Various federal agencies and nongovernmental organizations have devoted 
considerable resources to identifying and monitoring trends in 
congressionally directed spending items or congressional earmarks and 
both the House and the Senate have recently taken actions to bring 
greater transparency to this area. Little information about directed 
spending by executive level officials is available making transparency 
difficult. DOD officials indicated that executive directed spending 
does not exist because items in the budget are vetted in the normal 
process of developing the budget proposal. OMB representatives told us 
that they look at the defense budget from an overall policy level 
rather than at the budget line item level. Our work on this mandate, as 
discussed throughout this letter, has shown that little information is 
available to identify directed spending by senior executive branch 
officials, should it occur. 

Agency Comments and Our Evaluation: 

DOD and OMB representatives provided oral comments on a draft of this 
letter. Both stated that they agreed with our facts and observations. 
DOD and OMB also provided technical comments, which we incorporated as 

We are sending copies of this report to the Secretary of Defense and 
the Director of the Office of Management and Budget. In addition, the 
correspondence will be available at no charge on the GAO Web site at 

If you have any questions or need additional information, please 
contact me at (202) 512-7252 or Key contributors to 
this report were James Fuquay, Assistant Director; Matt Drerup; Michael 
Hesse; Wendell Hudson; Ken Patton; Sylvia Schatz; Wendy Smythe; and 
Robert Swierczek. 

Signed by: 

Andrew Sherrill:
Acting Director, Acquisition and Sourcing Management: 

List of Committees: 

The Honorable Carl Levin:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate: 

The Honorable Daniel K. Inouye:
The Honorable Thad Cochran:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate: 

The Honorable Ike Skelton:
The Honorable Duncan Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives: 

The Honorable John P. Murtha:
The Honorable C. W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives: 

[End of section] 


[1] Pub. L. No. 110-181. 

[2] In a prior report, GAO describes selected federal agencies' 
procedures for responding to congressional directives. With respect to 
DOD, the report describes the extent to which the department 
identified, categorized, tracked, executed, and reported on funds 
related to congressional directives. See GAO, Congressional Directives: 
Selected Agencies' Processes for Responding to Funding Instructions 
[hyperlink,] (Washington, 
D.C.: Jan. 31, 2008). 

[3] The statute did not define the term "senior executive branch 
official." For purposes of this discussion, we are using the term 
"senior government official" in a general sense. 

[4] Reprogramming enables DOD to shift funds within an appropriation or 
fund account to use them for different purposes than those contemplated 
at the time of appropriation by Congress. It is generally preceded by 
consultation between DOD and the appropriate congressional committees 
and sometimes requires formal notification. 

[5] A new start is the initiation of an effort not previously justified 
to and funded by Congress during the normal budget process. 

[6] GAO, Defense Acquisitions: An Analysis of the Special Operations 
Command's Management of Weapon System Programs, [hyperlink,] (Washington, D.C.: June 
28, 2007). 

[7] Examples of support organizations are the Army Contracting Center 
of Excellence and the Washington Headquarters Service that carry out 
contracting actions for DOD offices, including those located in the 

[8] FAR 6.302 identifies seven statutory authorities for other than 
full and open competition: (1) only one responsible source and no other 
supplies or services will satisfy agency requirements; (2) unusual and 
compelling urgency; (3) industrial mobilization, engineering, 
developmental, or research capability; or expert services; (4) 
international agreement; (5) authorized or required by statute; (6) 
national security; and (7) public interest. 

[9] GAO, A Glossary of Terms Used in the Federal Budget Process, 
(Washington, D.C.: September 2005). GAO's glossary fulfills part of 
GAO's responsibility under 31 U.S.C. § 1112(c)(1) to publish standard 
terms, and classifications for the government's fiscal, budget, and 
program information. The glossary must be developed in cooperation with 
the Secretary of the Treasury, OMB, and the Congressional Budget 

[10] E.O. 13457, 73 Fed. Reg. 6417 (Feb. 1, 2008). 

[11] OMB Memorandum M-09-03, Guidance on implementing P.L. No. 110-329 
in accordance with Executive Order 13457 on "Protecting American 
Taxpayers From Government Spending on Wasteful Earmarks" (Oct. 23, 

[12] In prior work, CRS pointed out that the treatment of earmarks 
reflects procedures established over time that may differ from one 
appropriation bill to another. For some bills, a directed spending item 
may refer to funds set aside within an account. In other bills, the 
application may reflect a narrower set of directives to fund individual 
projects, locations, or institutions. See CRS, Earmarks and Limitations 
in Appropriation Bills, Report 98-518 Gov (updated Dec. 7, 2004); and 
Bush Administration Policy Regarding Congressionally Originated 
Earmarks: An Overview, Report RL34648 (Sept. 4, 2008). 

[13] The Senate rule's definition for "congressionally directed 
spending item" is the same as the House rule's definition for 
"congressional earmark," except the Senate rule does not include a 
"Member, Delegate, or Resident Commissioner" as a requester as in the 
House rule, but instead includes only "Senator" as a requester. 

[End of section] 

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