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entitled 'Federal Acquisition: Progress in Implementing the Services 
Acquisition Reform Act of 2003' which was released on March 31, 2005. 

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Report to the Chairman, Committee on Government Reform, House of 
Representatives: 

United States Government Accountability Office: 

GAO: 

February 2005: 

Federal Acquisition: 

Progress in Implementing the Services Acquisition Reform Act of 2003: 

GAO-05-233: 

GAO Highlights: 

Highlights of GAO-05-233, a report to the Chairman, Committee on 
Government Reform, House of Representatives: 

Why GAO Did This Study: 

In fiscal year 2004 federal spending on service contracts grew to over 
$189 billion governmentwide. This growth, along with cuts in the 
acquisition workforce and increases in high-dollar procurement actions, 
creates a challenging environment. 

In November 2003 the Services Acquisition Reform Act (SARA) was enacted 
to provide federal agencies with tools to optimize mission performance 
in this challenging environment. To implement the act, regulations and 
guidance must be developed, and other actions taken. GAO was asked to 
report on progress in implementing SARA’s provisions. 

What GAO Found: 

Just over a year after the enactment of SARA, progress made on 
regulations, guidance, and other implementing actions varies. While 
nearly all the key provisions of SARA are being implemented, some 
provisions are further along than others. 

An Acquisition Workforce Training fund has been established. Efforts 
are ongoing to assess the skills and experience needed by the federal 
acquisition workforce, and to develop training to address those 
requirements. 

The Chief Acquisition Officers (CAO) Council, established in May 2004, 
has met five times. The council’s executive committee meets monthly; 
and working groups on human capital, competitive sourcing, electronic 
government and small business have been established. 

Efforts to complete rulemaking on greater use of performance-based 
contracting are underway, with an interim rule issued and a final 
version being considered. An online acquisition center of excellence 
for services also has been created. Because of the complexities 
involved, rulemaking allowing the use of time-and-materials contracts 
to procure commercial services is proceeding at a more deliberate pace. 

Rules allowing special emergency procurement authority have been 
finalized, but actions allowing agencies to use “other transactions” 
authority are incomplete. 

Provisions of the Services Acquisition Reform Act of 2003: 

* Civilian acquisition workforce training fund; 
* Acquisition workforce recruitment flexibility; 
* Maintaining architectural and engineering acquisition workforce 
expertise; 
* Civilian Agency Chief Acquisition Officers (CAO); 
* CAO Council; 
* Advisory panel on acquisition laws and regulations; 
* Extension of franchise fund programs; 
* Contracting for architectural/engineering services; 
* Telecommuting for federal contractors; 
* Incentives for performance-based contracts; 
* Time-and-materials contracts for commercial services; 
* Special “other transactions” acquisition authority; 
* Public disclosure of noncompetitive contracts for Iraq 
reconstruction; 
* Emergency procurement flexibilities; 

Source: GAO. 

www.gao.gov/cgi-bin/getrpt?GAO-05-233. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact William T. Woods at (202) 
512-4841 or woodsw@gao.gov. 

[End of section]

Contents: 

Letter: 

Results in Brief: 

Scope and Methodology: 

Agency Comments and Our Evaluation: 

Section 1412: Civilian Acquisition Workforce Training Fund: 

Section 1413: Civilian Acquisition Workforce Recruitment Flexibility: 

Section 1414: Maintaining Architectural and Engineering Acquisition 
Workforce Expertise: 

Section 1421: Civilian Agency Chief Acquisition Officers: 

Section 1422: Chief Acquisition Officers Council: 

Section 1423: Advisory Panel on Acquisition Laws and Regulations: 

Section 1426: Extension of Franchise Fund Programs: 

Section 1427: Contracting for Architectural and Engineering Services: 

Section 1428: Telecommuting for Federal Contractors: 

Section 1431: Incentives for Performance-Based Services Contracting: 

Section 1432: Time-and-Materials Contracting to Buy Commercial 
Services: 

Section 1441: Special "Other Transactions" Acquisition Authority: 

Section 1442: Public Disclosure of Noncompetitive Contracting for Iraq 
Reconstruction: 

Section 1443: Emergency Procurement Flexibilities: 

Table: 

Table 1: Provisions of the Services Acquisition Reform Act of 20031: 

Abbreviations: 

CAO: Chief Acquisition Officer: 

DAU: Defense Acquisition University: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

FACA: Federal Advisory Committee Act: 

FAI: Federal Acquisition Institute: 

FAR: Federal Acquisition Regulation: 

FPDS: Federal Procurement Data System: 

GSA: General Services Administration: 

OFPP: Office of Federal Procurement Policy: 

OMB: Office of Management and Budget: 

OPM: Office of Personnel Management: 

SARA: Services Acquisition Reform Act of 2003: 

[End of section]

United States Government Accountability Office: 

Washington, DC 20548: 

February 28, 2005: 
The Honorable Tom Davis: 
Chairman: 
Committee on Government Reform: 
House of Representatives: 

Dear Mr. Chairman: 

According to the General Services Administration (GSA), in fiscal year 
2004 federal spending on services contracts grew to more than $189 
billion governmentwide. This level of spending on services contracts, 
combined with decreases in the acquisition workforce and an increase in 
the number of high-dollar procurement actions, creates a challenging 
acquisition environment. The Services Acquisition Reform Act of 2003 
(SARA), signed into law on November 24, 2003, as Title XIV of Public 
Law 108-136, is intended to provide agencies an array of tools to 
improve the acquisition of services in four major areas as shown in 
table 1. 

Table 1: Provisions of the Services Acquisition Reform Act of 2003: 

Categories: Acquisition workforce and training; 
Provisions: 
* Civilian acquisition workforce training fund; 
* Acquisition workforce recruitment flexibility; 
* Maintaining architectural and engineering acquisition workforce 
expertise. 

Categories: Business acquisition practices; 
Provisions: 
* Civilian Agency Chief Acquisition Officers (CAO); 
* CAO Council; 
* Advisory panel on acquisition laws and regulations; 
* Extension of franchise fund programs; 
* Contracting for architectural and engineering services; 
* Telecommuting for federal contractors. 

Categories: Commercial item acquisitions; 
Provisions: 
* Incentives for performance-based contracts; 
* Time-and-materials contracting for commercial services. 

Categories: Other procurement flexibilities; 
Provisions: 
* Special "other transactions" acquisition authority; 
* Public disclosure of noncompetitive contracts for Iraq 
reconstruction; 
* Emergency procurement flexibilities. 

Source: GAO. 

[End of table]

To implement these provisions, the administration needs to promulgate 
regulations, provide guidance to agencies, and take other actions. You 
asked us to review the status of implementation for each of SARA's 
provisions. As agreed with your office, we determined the status of 
regulations, guidance, and other actions initiated by the 
administration to implement the act. This report includes appendixes 
for each provision of SARA summarizing the status of implementation. In 
addition, for some provisions, the appendixes include our observations 
on potential implementation challenges, additional background 
information, and references to related GAO products. 

Results in Brief: 

Just over a year after enactment of SARA, progress made by the 
administration on regulations, guidance, and other actions required to 
implement the act varies. While actions are underway to implement 
nearly all of the provisions, the administration is much further along 
in implementing some provisions than others. For example, in the area 
of acquisition workforce and training, the workforce training fund has 
been established. The Office of Personnel Management (OPM), however, 
has yet to complete rulemaking that allows agencies to determine if 
there are acquisition workforce shortages so they can recruit and 
directly hire qualified candidates. Likewise, in the area of business 
acquisition practices, the Chief Acquisition Officers (CAO) Council has 
been established, but rulemaking to require oversight of certain 
contracts by licensed professional engineers has not yet been 
finalized. 

Progress also varies in the area of commercial item acquisition. 
Efforts to complete rulemaking to encourage increased use of 
performance-based contracting are underway. Further, the Office of 
Federal Procurement Policy (OFPP) in the Office of Management and 
Budget (OMB) has established a center of excellence for services. 
Conversely, because of the complexities involved, rulemaking to allow 
the use of time-and-materials and labor-hour contracts for procurement 
of commercial services is moving at a more deliberate pace. In the area 
of other procurement flexibilities, rulemaking allowing special 
emergency procurement authority for contingency operations or to 
facilitate defense against or recovery from nuclear, biological, 
chemical, or radiological attack has been finalized. But actions 
required to allow agencies to use other transactions authority have not 
been initiated. 

This report does not contain recommendations. 

Scope and Methodology: 

To determine progress made in implementing each of the SARA provisions, 
we obtained information from those organizations charged in the act 
with initiating actions: OFPP, GSA, OPM, and DOD. We interviewed 
officials within these organizations to identify actions taken 
pertaining to each of the provisions. We reviewed documentation such as 
guidance memos, reports, and proposed and final changes to the Federal 
Acquisition Regulation (FAR). We also attended interagency and public 
meetings relevant to implementation efforts. This review does not 
address how agencies are applying the rules and guidance issued by the 
administration; nor does it evaluate the effect SARA provisions and 
ongoing implementation activities may be having on the agencies, their 
acquisition workforce, or their acquisitions of services. We conducted 
our work from August 2004 to February 2005 in accordance with generally 
accepted government auditing standards. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to OMB, GSA, DOD, and OPM for their 
review and comment. We received oral comments from OFPP. It concurred 
with the report and provided technical comments, which have been 
incorporated where appropriate. In e-mail responses, both GSA and OPM 
provided technical comments. We revised the report based on these 
comments where appropriate. DOD informed us that it had no comments on 
the report. 

As requested by your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution of it until 30 
days from the date of this letter. We will then send copies of this 
report to the Director, Office of Management and Budget; the Secretary 
of Defense; the Administrator of General Services; and the Acting 
Director, OPM. We also will make copies available to others on request. 
In addition, this report will be available at no charge on GAO's Web 
site at [Hyperlink, http://www.gao.gov]. 

If you have any questions about this report, please contact me at (202) 
512-4841, or Carolyn Kirby, Assistant Director, at (202) 512-9843. 
Other major contributors to this report were Robert Ackley, Noah 
Bleicher, Bob Swierczek, Susan Tindall, and Peter Zwanzig. 

Sincerely yours,

Signed by: 

William T. Woods: 
Director, Acquisition and Sourcing Management: 

[End of section]

Section 1412: Civilian Acquisition Workforce Training Fund: 

Summary of Provision: 

Section 1412 requires GSA to establish an acquisition workforce 
training fund. Managed by GSA's Federal Acquisition Institute (FAI), 
the fund will be used to develop acquisition training resources for 
civilian agencies and support acquisition workforce initiatives 
designed to ensure that the acquisition workforce acquires skills 
necessary to function effectively. 

Each quarter, 5 percent of the fees collected by executive agencies 
under governmentwide task-and-delivery-order contracts, governmentwide 
information technology contracts, and GSA's schedule contracts are to 
be deposited into the fund. These amounts are available for 3 fiscal 
years and exist separately from funds appropriated to agencies for 
education and training. 

Because DOD does not participate in the workforce training fund, fees 
charged to DOD for contracts covered by section 1412 are to be reduced 
by 5 percent. 

Authority for the fund expires in November 2008 under a 5-year sunset 
provision. 

Implementation Steps: 

* GSA Administrator is required to establish the training fund. 

* Civilian agencies must make quarterly deposits to the fund equal to 5 
percent of fees collected under governmentwide contracts. 

* GSA, through FAI, must manage the fund in consultation with OFPP. 

Status of Implementation: 

* GSA established the training fund in March 2004 and sent instructions 
to all civilian agencies for making deposits into it. 

* Total fund deposits for fiscal year 2004 were $5.2 million. 

* The CAO Council Human Capital Working Group is working to assess the 
skills required in the federal acquisition workforce, identify skill 
gaps, and target training funds towards those gaps. 

* FAI and the Defense Acquisition University (DAU) are collaborating to 
capitalize on existing civilian and defense training and avoid 
duplication. 

* FAI is also working in conjunction with the OFPP, GSA, and DOD to 
develop education, training and experience requirements that will apply 
throughout the federal acquisition workforce. 

GAO Observations: 

* GSA needs reliable information on fees charged and revenues generated 
by governmentwide service contracts to ensure agencies are 
appropriately contributing to the training fund. However, information 
on fee revenues generated has been incomplete. 

* As the legislation requires, and as GAO has testified, the training 
fund should be used to augment acquisition training provided through 
the normal agency budgeting process. 

* Traditionally civilian agencies have narrowly defined their 
acquisition workforce, excluding staff such as program, financial, and 
legal. OFPP is working with agencies to rewrite the definition of 
acquisition workforce to address this issue. 

Background and Other Information: 

Civilian agencies have not effectively managed or trained their 
acquisition workforce in part because they do not use multidisciplinary 
definitions including noncontracting staff (such as program managers 
and others) integral to the acquisition process. In 2002, we 
recommended that OFPP refine its definition of "acquisition workforce" 
so training could be required of noncontracting staff. As we stated in 
2003 before the House Committee on Government Reform, the procuring 
agencies should adequately fund training through the normal budgeting 
process. We supported the training fund as a way to augment those 
funds. 

In a July 2004 instruction to executive agencies, GSA directed them to 
identify their interagency contracts; project fee revenues for 2005 and 
2006; and deposit 5 percent of their fee revenues for 2004. OMB 
reinforced this requirement later in July 2004, but as late as the 
following November, only the GSA schedules program and four agencies 
with governmentwide contracts (Health and Human Services/National 
Institutes of Health, Department of Veterans Affairs, Commerce, and 
National Aeronautics and Space Administration) had made deposits for 
the first 3 quarters. GSA is working to identify the appropriate share 
of the other agency contracts. As administrator of the fund, GSA will 
need reliable information on interagency contract fee revenues. Our 
2002 review of fees charged on governmentwide contracts found that some 
agencies had not sent to OMB complete reports on fee revenues. 

Related GAO Products: 

Contract Management: Comments on Proposed Services Acquisition Reform 
Act. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-716T] 
Washington, D.C.: April 30, 2003. 

Acquisition Management: Agencies Can Improve Training on New 
Initiatives. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-281] 
Washington, D.C.: January 15, 2003. 

Acquisition Workforce: Agencies Need to Better Define and Track the 
Training of Their Employees. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-737] 
Washington, D.C.: July 29, 2002. 

Contract Management: Interagency Contract Program Fees Need More 
Oversight. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-734] 
Washington, D.C.: July 25, 2002. 

[End of section]

Section 1413: Civilian Acquisition Workforce Recruitment Flexibility: 

Summary of Provision: 

Section 1413 authorizes the head of civilian agencies (i.e., other than 
DOD) to determine if a shortage exists in certain federal acquisition 
positions so that persons with high qualifications can be recruited and 
directly hired. 

Direct-hire authority allows an agency the flexibility to appoint 
individuals to positions without adherence to certain competitive 
examination requirements. 

Authority to use the flexibility provided by this section expires in 
September 2007. 

Section 1413 also requires OPM to consult with OFPP and report to 
Congress by March 2007 on the use and effectiveness of this recruitment 
flexibility and whether the authority should be extended past September 
2007. 

Implementation Steps: 

* OPM must issue regulations to implement civilian agencies' authority 
for determining that a shortage exists in certain acquisition 
positions. 

* Civilian agency heads determine if such a shortage exists and 
directly hire highly qualified persons in response to their shortage 
determinations. 

Status of Implementation: 

* OPM is developing rulemaking to amend its direct hire regulations to 
permit civilian agencies to determine whether a shortage exists for 
certain federal acquisition positions. 

* OPM anticipates an interim rule to be published in the Federal 
Register in Spring 2005. 

GAO Observations: 

* Civilian agencies cannot use their authority to determine if a 
shortage exists in acquisition positions until OPM completes interim 
rulemaking. 

Related GAO Products: 

Human Capital: Additional Collaboration Between OPM and Agencies Is Key 
to Improved Federal Hiring. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-797] 
Washington, D.C.: June 7, 2004. 

Acquisition Workforce: Status of Agency Efforts to Address Future 
Needs. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-55] 
Washington, D.C.: December 18, 2002. 

[End of section]

Section 1414: Maintaining Architectural and Engineering Acquisition 
Workforce Expertise: 

Summary of Provision: 

Section 1414 requires OFPP to consult with DOD, GSA, and OPM to develop 
and implement a plan to ensure that the federal government maintains 
the necessary capability with respect to acquisitions of architectural 
and engineering services to: 

* determine agency requirements;
* establish priorities and acquisition plans;
* establish professional standards;  
* develop scopes of work; and: 
* award and administer contracts: 

Implementation Steps: 

* OFPP must consult with other agencies to develop a plan for 
maintaining architectural and engineering acquisition expertise. 

* OFPP must consult with other agencies to implement the plan. 

Status of Implementation: 

* OFPP turned to GSA's Public Building Service to take the lead to 
draft the plan as part of an anticipated interagency task force with 
OFPP, DOD, GSA, and OPM. 

* In August 2004, GSA drafted its plan for implementing each of the 
five architectural and engineering personnel expertise planning 
objectives listed in SARA. 

* GSA has circulated the draft plan for review to representatives of 
OFPP, OPM, DOD, and the DAU. FAI officials are helping coordinate and 
facilitate this effort. 

* GSA subsequently formed an interagency task force to develop the 
required plan with members from GSA, DOD, OFPP, and OPM. The task force 
began meeting in January 2005. 

GAO Observations: 

* The August 2004 draft addresses all of SARA's planning objectives for 
maintaining architectural and engineering expertise, but is limited 
only to GSA rather than a broader plan for implementation across the 
federal government. 

[End of section]

Section 1421: Civilian Agency Chief Acquisition Officers: 

Summary of Provision: 

Section 1421 requires the designation of a noncareer Chief Acquisition 
Officer (CAO) within certain civilian executive agencies. CAOs must 
have management of acquisition as their primary duty. 

CAO responsibilities include: 

* evaluating the performance of acquisition programs and advising the 
agency head on business strategy;

* increasing competition and performance-based contracting;  

* directing acquisition policy for the agency; 

* developing agency acquisition career management programs; and  

* addressing acquisition workforce needs and strategies as part of 
strategic planning and performance results processes. 

The provision also requires executive agencies to have a senior 
procurement executive responsible for management of the agency's 
procurement system. If an agency has a CAO, the senior procurement 
executive may be the CAO or must report directly to the CAO. 

Implementation Steps: 

* Seventeen civilian agencies are required to appoint or designate a 
noncareer employee as CAO. 

Status of Implementation: 

* In May 2004, OMB requested agency heads required to designate a CAO 
to submit the name and title of their agency's CAO in June 2004. 

* Each of the 17 agencies required to designate a CAO has done so. 

GAO Observations: 

* Many of the CAOs also have other responsibilities, such as Chief 
Financial Officer or Assistant Secretary for Administration or 
Management, and may not have management of acquisition as their primary 
duty as required by SARA. 

* Our work identifying a set of private sector best practices for 
taking a strategic approach to acquisition indicates that a CAO plays a 
critical role in changing the organization's culture and practices. 

Related GAO Products: 

Best Practices: Using Spend Analysis to Help Agencies Take a More 
Strategic Approach to Procurement. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-870] 
Washington, D.C.: September 16, 2004. 

Best Practices: Improved Knowledge of DOD Service Contracts Could 
Reveal Significant Savings. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-661] 
Washington, D.C.: June 9, 2003. 

Best Practices: Taking a Strategic Approach Could Improve DOD's 
Acquisition of Services. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-230] 
Washington, D.C.: January 18, 2002. 

[End of section]

Section 1422: Chief Acquisition Officers Council: 

Summary of Provision: 

Section 1422 establishes a Chief Acquisition Officers (CAO) Council as 
the principal interagency forum for monitoring and improving the 
federal acquisition system. 

The CAO Council is chaired by the Deputy Director for Management at 
OMB. Members include the OFPP Administrator; the Under Secretary of 
Defense for Acquisition, Technology, and Logistics; the civilian agency 
CAOs; senior procurement executives of the military departments; and 
other designated senior agency officials. 

The functions of the CAO Council include: 

* developing recommendations on acquisition policies and requirements; 

* sharing experiences, ideas, best practices and innovative approaches;

* assisting in multi-agency projects and innovative initiatives; 

* promoting effective business practices that ensure timely and best 
value products and services; 

* furthering acquisition integrity, fairness, competition, openness, 
and efficiency; and: 

* working with OPM on acquisition workforce hiring, training, and 
professional development needs. 

Implementation Steps: 

* OMB charters the CAO Council and requests agency heads to designate 
representative members. 

* OMB's chair convenes CAO Council members for organizational and 
ongoing meetings. 

Status of Implementation: 

* In May 2004, OMB notified agency heads of the establishment of the 
CAO council and requested they identify members. 

* Agencies responded by designating their CAO Council principal and 
alternate representatives. 

* From August 2004 to February 2005, the CAO Council met five times, 
discussing items such as the integrated acquisition environment, the 
"Get it Right" campaign, and the Federal Procurement Data System-Next 
Generation. 

* The CAO Council has working groups to address particular issues and 
initiatives. Currently, the working groups include human capital, 
competitive sourcing, electronic government/performance management, and 
small business. 

* The CAO Council Executive Committee--comprised of the OFPP 
Administrator, CAO Council Vice-Chair, working group committee chairs, 
and representatives from DOD and GSA--is meeting monthly. 

GAO Observations: 

* The purposes, roles and responsibilities of the CAO Council are 
consistent with the functions outlined in SARA. 

* The structure and purpose of the CAO Council are comparable to the 
Chief Financial Officers and Chief Information Officers councils. 

[End of section]

Section 1423: Advisory Panel on Acquisition Laws and Regulations: 

Summary of Provision: 

Section 1423 requires the OFPP Administrator to establish an advisory 
panel to review acquisition laws and regulations regarding the use of 
commercial practices, performance-based contracting, the performance of 
acquisition functions across agency lines, and the use of 
governmentwide contracts. 

The panel is to have at least nine experts in acquisition law and 
policy who represent diverse public and private sector experiences. 

OFPP's Administrator was to establish the panel within 90 days of 
enactment. Once established, the provision allows the panel 1 year to 
conduct its review and report findings and recommendations to OFPP and 
listed congressional committees. 

Implementation Steps: 

* OFPP must consult with the Secretary of Defense, the GSA 
Administrator, and congressional armed services and governmental 
affairs and government reform committees in making panel appointments. 

* OFPP was required to establish the panel by the 90-day deadline. 

* OFPP determined that they must also follow Federal Advisory Committee 
Act (FACA) requirements concerning panel membership, public notice, and 
access to meetings. 

Status of Implementation: 

* In 2004, OFPP completed executive branch and congressional 
consultations on potential appointees. 

* On February 1, 2005, which was later than the 90-day deadline, OMB 
announced appointment of 14 advisory panel appointees. 

* OFPP has developed and provided to Congress the panel charter as 
required by FACA. 

* The two initial panel meetings, which were open to the public, took 
place or are scheduled to take place in February 2005. 

* OFPP officials say the advisory panel delay was in part due to 
compliance with FACA administrative procedures. 

* Since section 1423 did not address funding or support for the panel, 
OFPP requested CAO Council member organizations to provide funding 
and/or staff to support panel operations. GSA and DOD have provided 
five employees to support the panel. GSA has also provided office space 
and equipment. 

Background and Other Information: 

On February 1, 2005, OMB announced the advisory panel membership. Panel 
members are as follows: 

Panel Chair: Marcia G. Madsen, Partner, Mayer, Brown, Rowe and Maw; 
Louis M. Addeo, President, AT&T Government Solutions; 
Frank J. Anderson, Jr., President, Defense Acquisition University; 
Allan V. Burman, President, Jefferson Solutions; 
Carl DeMaio, President and Founder, The Performance Institute; 
Marshall J. Doke, Jr., Partner, Gardere Wynne Sewell; 
David A. Drabkin, Deputy Associate Administrator for Acquisition 
Policy, General Services Administration; 
Jonathan Etherton, Vice President, Legislative Affairs, Aerospace 
Industries Association of America, Inc; 
James A. Hughes, Jr., Deputy General Counsel for Acquisition, 
Department of the Air Force; 
Deidre A. Lee, Director for Defense Procurement and Acquisition Policy, 
Department of Defense; 
Tom Luedtke, Assistant Administrator for Procurement, National 
Aeronautics and Space Administration; 
Melanie R. Sabelhaus, Deputy Administrator, Small Business 
Administration; 
Joshua I. Schwartz, Professor of Law and Co-Director of the Government 
Procurement Law Program, George Washington University School of Law; 
Roger D. Waldron, Director, Acquisition Management Center, General 
Services Administration; 
and Laura Auletta, Chairperson of the Civilian Agency Acquisition 
Council, will serve as the panel's Designated Federal Officer 
(Executive Director). 

[End of section]

Section 1426: Extension of Franchise Fund Programs: 

Summary of Provision: 

Section 1426 extended through December 31, 2004, the franchise fund 
programs first authorized under the Federal Financial Management Act of 
1994 (Public Law 103-356, Title IV). 

Franchise fund programs operate as fully self-supporting, business-like 
entities within the federal government to deliver common administrative 
support services--such as contracting--to federal customers. 

Authorization of the franchise funds originally was set to expire on 
October 1, 1999. However, a series of amendments, including this 
provision, has extended the termination date. 

The Consolidated Appropriations Act, 2005 (Public Law 108-447), 
Division H, section 632) extended authority for franchise fund programs 
until October 1, 2005. 

Congress continues to consider whether to authorize the franchise fund 
programs on a long-term or permanent basis. 

Implementation Steps: 

* None required. 

Status of Implementation: 

* None required. 

GAO Observations: 

* As directed by the conference report that accompanied section 1426, 
GAO is reviewing DOD use of franchise fund programs for contracting 
services, including accountability and oversight issues. GAO's results 
are anticipated by May 2005. 

Related GAO Products: 

High-Risk Series: Management of Interagency Contracting. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-207] 
Washington, D.C.: January 2005. 

Budget Issues: Franchise Fund Pilot Review. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1069] 
Washington, D.C.: August 22, 2003. 

[End of section]

Contract Management: Interagency Contract Program Fees Need More 
Oversight. GAO-02-734, Washington, D.C.: July 25, 2002. 

Section 1427: Contracting for Architectural and Engineering Services: 

Summary of Provision: 

Section 1427 provides that architectural and engineering services can 
not be offered under a GSA multiple-award schedule contract or under 
governmentwide task-and-delivery-order contracts unless performed under 
the supervision of a licensed, professional architect or engineer and 
awarded pursuant to quality-based selection procedures. 

This section also raises to $300,000 the threshold for a participation 
incentive for small businesses in architectural and engineering 
services and construction design in connection with a military 
construction project or a military family housing project. 

Implementation Steps: 

* Amend the FAR to address architect-engineer services contracting 
under GSA schedule and governmentwide contracts. 

Status of Implementation: 

* In September 2004, a draft interim rule to amend the FAR was 
submitted to OMB for advance review and clearance prior to public 
issuance. 

* OMB completed its clearance process in November 2004. According to 
GSA, the FAR Council anticipates publishing an interim rule as part of 
the issuance of the next Federal Acquisition Circular. 

[End of section]

Section 1428: Telecommuting for Federal Contractors: 

Summary of Provision: 

Section 1428 required the FAR to be amended within 180 days of 
enactment to permit telecommuting by employees of federal contractors. 

Specifically, the provision requires that solicitations for federal 
contracts should not contain any requirement or evaluation criteria 
that would preclude or reduce the score of a proposal that includes a 
contractor's plan to allow employees to telecommute, unless the 
contracting officer determines in writing that the agency's needs, 
including security requirements, could not be met. 

Implementation Steps: 

* This section requires an amendment to the FAR to allow telecommuting 
by federal contractors. 

Status of Implementation: 

* In October 2004, an interim rule was published amending the FAR; 
comments were requested by December 2004, to be considered in 
finalizing the rule. 

* According to GSA, as of February 2005, the final rule is at OMB for 
clearance. 

GAO Observations: 

* The FAR Council did not meet the 180-day deadline for issuing the 
interim rule. 

* The interim changes to the FAR are consistent with section 1428 
provisions. 

[End of section]

Section 1431: Incentives for Performance-Based Services Contracting: 

Summary of Provision: 

Section 1431 provides an incentive for the use of performance-based 
contracting for services by giving executive agencies authority to 
treat qualifying contracts or task orders as contracts for commercial 
items. 

To qualify for these incentives, the contract or task order must be 
valued at $25 million or less; describe the work in measurable, mission-
related terms; identify the specific output; contain a firm, fixed-
price; and be awarded to a contractor that provides similar services to 
the public under similar terms. 

This provision also requires agencies to collect data on contracts or 
task orders treated as contracts for commercial items. Additionally, 
OMB must report to Congress, not later than 2 years from enactment, on 
the use of this incentive. 

The provision also required OFPP to establish a center of excellence in 
service contracting within 180 days from enactment. 

Implementation Steps: 

* An amendment to the FAR to allow use of this incentive and require 
agencies to collect and maintain reliable data. 

* OFPP is required to establish an acquisition center of excellence for 
services by the 180-day deadline. 

* The Director of OMB must report to Congress on the contracts or task 
orders using this incentive. 

Status of Implementation: 

* In June 2004, an interim rule amending the FAR was issued; comments 
are being considered. 

* According to GSA, FPDS will be updated by February 2005 to allow 
agencies to report data on performance-based services contracts or task 
orders treated as procurements for commercial items. 

* OFPP established an online acquisition center of excellence for 
services in November 2004. The center's Web site is available at 
[Hyperlink, http://www.acqnet.gov/ace/]. 

* In September 2004, OFPP sent a memorandum to federal acquisition 
leaders targeting 40 percent of service contract actions for use of 
performance-based methods and providing instructions for reporting 
these actions in FPDS. 

GAO Observations: 

* In September 2002, GAO recommended that OFPP clarify guidance to 
ensure performance-based contracting is appropriately used. 

* OFPP has since taken steps to clarify and expand the guidance. 

Background and Other Information: 

Agencies use performance-based contracts to specify the desired 
outcomes and allow contractors to determine how best to achieve those 
outcomes, rather than prescribing the methods contractors should use. 
Although performance-based contracts can offer significant benefits, 
such as encouraging contractors to find innovative ways of delivering 
services, historically, the government has not widely used this 
strategy. 

Our review of federal procurement trends showed that in fiscal year 
2001, agencies reported that 24 percent of their eligible service 
contracts were performance-based. However, there was wide variation in 
the extent to which agencies used these contracts, with 3 of the 10 
agencies we reviewed falling short of OMB's goal that 10 percent of 
eligible service contracts be performance-based. 

In a 2002 report, we examined the extent to which service contracts 
characterized by agencies as performance-based actually contained 
performance-based attributes. We found agencies lacked a good 
understanding of this contracting approach and how to take advantage of 
it. Consequently, we recommended that OFPP clarify existing guidance to 
ensure performance-based contracting is appropriately used. Since that 
time, OFPP has taken steps to increase awareness and use of performance-
based contracting. For example, a report resulting from an interagency 
task force convened by OFPP was issued including recommendations for 
changes designed to assist agencies in applying performance-based 
service acquisition more effectively. In a September 2004 memo to 
civilian and defense agencies, OFPP implemented several of the task 
force recommendations including instructions for reporting performance-
based contracts and task orders in the FPDS. Additionally, OFPP 
encouraged agencies to follow new guidance in development of their 
performance-based service acquisitions. 

Related GAO Products: 

Use of Legislative Incentive for Performance-Based Contracting Unknown. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-674R] 
Washington, D.C.: May 22, 2003. 

Federal Procurement: Spending and Workforce Trends. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-443] 
Washington, D.C.: April 30, 2003. 

Contract Management: Guidance Needed for Using Performance-Based 
Service Contracting. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-1049] 
Washington, D.C.: September 23, 2002. 

[End of section]

Section 1432: Time-and-Materials Contracting to Buy Commercial 
Services: 

Summary of Provision: 

Section 1432 amends the Federal Acquisition Streamlining Act of 1994 
(Public Law 103-355) to authorize time-and-materials or labor-hour 
contracts for buying commercial services under certain circumstances. 
With time-and-materials contracts, an agency buys services on the basis 
of fixed-price direct labor hours plus the actual cost of materials. 

This section would allow a time-and-materials or labor-hour contract 
for procurement of certain commercial services if the contracting 
officer determines no other contract type is suitable and includes a 
ceiling price in the contract that cannot be exceeded without written 
justification by the contracting officer. 

Implementation Steps: 

* Amend the FAR to authorize use of time-and-materials and labor-hour 
contracts to buy commercial services. 

Status of Implementation: 

* In September 2004, the Civilian Agency Acquisition Council and 
Defense Acquisition Regulations Council jointly published an advanced 
notice of proposed rulemaking to seek public comments by November 2004 
to help draft amendments to the FAR. 

* In October 2004, the two councils, in collaboration with OFPP, held a 
public hearing to discuss possible changes to the FAR and safeguards to 
manage the risks associated with time-and-materials contracting. 

* In November 2004, comments received from the public were published by 
GSA. In December GSA told us it was working closely with OFPP on this 
but had not set a timeframe for issuing an interim or proposed rule. 

GAO Observations: 

* The FAR currently requires government surveillance of time-and- 
materials contractor performance to give reasonable assurance that 
efficient methods and effective cost controls are being used. 

* Because of the enhanced surveillance required, agencies facing 
acquisition workforce shortages will have to ensure they have 
sufficient resources to properly oversee time-and-materials contracts. 

* The conference report accompanying this section emphasizes that the 
option to use time-and-materials contracting is not intended to 
supplant the preference for performance-based, fixed-price contracting 
for buying commercial services. Also in the conference report, GAO is 
directed to review the use of section 1432 time-and-materials 
contracting. 

[End of section]

Section 1441: Special "Other Transactions" Acquisition Authority: 

Summary of Provision: 

Section 1441 authorizes civilian agencies to enter into agreements 
called "other transactions" for research and development and prototype 
projects related to defense against or recovery from terrorism, or 
nuclear, biological, chemical, or radiological attacks. Use of this 
authority will require OMB approval. 

Other transactions are flexible agreements that are not procurement 
contracts, grants, or cooperative agreements, and are generally not 
subject to federal laws and regulations governing standard procurement 
contracts. Similar authority has already been granted to the 
departments of Defense and Homeland Security; section 1441 expands 
other transactions authority to other agencies for specified purposes. 

The flexibilities authorized under section 1441 expire in September 
2008. 

Implementation Steps: 

* OMB must prescribe regulations to implement section 1441 before 
civilian agencies can utilize the "other transactions" agreement 
authority. 

* The OMB Director is required to authorize agencies to use other 
transaction agreements for specific prototype or research and 
development projects. 

* Civilian agencies using this authority must report annually to 
specified congressional committees. 

Status of Implementation: 

* OFPP is reviewing guidance pertaining to similar authority previously 
granted to the departments of Defense and Homeland Security and intends 
to base section 1441 regulations on the same guidance. 

GAO Observations: 

* DOD has had some success in using other transactions to attract 
nontraditional firms to do business with the government. The Department 
of Homeland Security (DHS) has had much less time to gain experience 
using other transaction agreements, but has attracted nontraditional 
government contractors in two such prototype projects since 2002. 

* The guidance developed by DOD and DHS in using other transactions may 
prove helpful to other agencies. 

Background and Other Information: 

"Other transactions" agreements provide flexibility by being exempt 
from the FAR, cost accounting standards, and a variety of other 
acquisition requirements. These agreements were authorized to provide 
flexibility for the federal government to acquire cutting-edge research 
and technology. Because fewer government-unique requirements apply, 
other transactions can be useful in attracting private-sector entities 
that traditionally have not done business with the government. 

Related GAO Products: 

Homeland Security: Further Action Needed to Promote Successful Use of 
Special DHS Acquisition Authority. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-136] 
Washington, D.C.: December 15, 2004. 

Defense Acquisitions: DOD Has Implemented Section 845 Recommendations 
but Reporting Can be Enhanced. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-150] 
Washington, D.C.: October 9, 2002. 

Acquisition Reform: DOD's Guidance on Using Section 845 Agreements 
Could be Improved. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-33] 
Washington, D.C.: April 7, 2000. 

[End of section]

Section 1442: Public Disclosure of Noncompetitive Contracting for Iraq 
Reconstruction: 

Summary of Provision: 

Section 1442 requires agencies to publicly disclose information about 
noncompetitive contracts awarded for the repair, maintenance, or 
construction of infrastructure in Iraq from October 2002 through 
September 2005. 

Within 30 days of contract award or enactment of SARA, agencies must 
publish: 

* the amount of the contract;

* a description of the scope of the contract;

* a list of contractors solicited for offers and a discussion of how 
the agency identified and solicited offers from these potential 
contractors; and: 

* the justification and determination to use other than full and open 
competition. 

Agencies do not have to publicly disclose classified information, but 
this information must be made available to certain congressional 
committees. 

Implementation Steps: 

* Defense and civilian agencies that award noncompetitive contracts for 
reconstruction of infrastructure in Iraq between October 2002 and 
September 2005 must publish information in the Federal Register or 
FedBizOpps, or otherwise make it available, within the required 
timeframe. 

Status of Implementation: 

* In a January 2004 letter to the Civilian Agency Acquisition Council, 
the Council Chair informed civilian agencies about the SARA publishing 
requirement for noncompetitive Iraq-related contracting. 

* In November 2004, the Army project contracting headquarters began 
developing instructions for Iraq contracting personnel of all Army 
commands and agencies on submitting information regarding 
noncompetitive contract awards using appropriated funds. An Army 
official told us they did not have a time frame or a plan yet for 
publishing the information. 

* According to a State Department official in December 2004, one 
noncompetitive action was publicly reported in January 2004, in 
response to separate legislative disclosure requirements of the 2004 
emergency supplemental appropriations (Public Law 108-106). 

[End of section]

Section 1443: Emergency Procurement Flexibilities: 

Summary of Provision: 

Section 1443 gives agencies special emergency procurement flexibilities 
to buy supplies or services to support contingency operations or to 
defend against, or recover from nuclear, biological, chemical, or 
radiological attacks. 

In addition, this section increased certain thresholds for these 
procurements; authorized agencies to treat procurements relating to 
defense or recovery from attack as procurements of commercial items; 
and raised the dollar limit for the use of simplified acquisition test 
program procedures for the procurement of items covered by this 
section. 

Last, section 1443 extends through January 1, 2006, the authority to 
use the test program procedures for commercial item purchases below 
established thresholds. 

Implementation Steps: 

* Amend the FAR to implement the special emergency procurement 
authorities. 

Status of Implementation: 

* In December 2003, in a technical change to the FAR, GSA implemented 
the extension of the test program through January 2006. 

* In February 2004, an interim rule was issued to amend the FAR. The 
interim rulemaking increases the micropurchase and simplified 
acquisition thresholds and limitations for using the simplified 
acquisition test program. Comments were requested for the FAR Council's 
consideration in finalizing the changes. 

* Section 817 of the Ronald W. Reagan National Defense Authorization 
Act for Fiscal Year 2005 (Public Law 108-375) extends to January 1, 
2008, the authority to use the simplified acquisition test program. 

* According to GSA, the January 2008 extension under section 817's 
simplified acquisition test program authority will be implemented when 
the next Federal Acquisition Circular is published. 

* In December 2004 the interim rule was converted to a final rule, 
implementing section 1443, and also incorporating the higher micro- 
purchase and simplified acquisition thresholds authorized for contracts 
awarded or performed outside the U.S. by section 822 of Public Law 108- 
375. 

Related GAO Products: 

Agencies' Use of Procurement Flexibilities Provided in the Homeland 
Security Act of 2002 (Public Law 107-296). 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-447R] 
Washington, D.C.: March 31, 2004. 

Contract Management: No Reliable Data to Measure Benefits of the 
Simplified Acquisition Test Program. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1068] 
Washington, D.C.: September 30, 2003. 

Contract Management: Benefits of Simplified Acquisition Test Procedures 
Not Clearly Demonstrated. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-517] 
Washington, D.C.: April 20, 2001. 

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