Key Issues > High Risk > DOD Contract Management
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DOD Contract Management

The Department of Defense (DOD) faces challenges in how it defines, strategically manages, and budgets for its contracted services, which typically account for about half of the department’s $300 billion in annual contract obligations.

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DOD obligates hundreds of billions of dollars annually on contracts for goods and services. We added DOD’s contract management to our High-Risk List in 1992 and have identified three major areas of challenges: acquisition workforce, service acquisitions, and operational contract support.

DOD reduced the size of its acquisition workforce in the mid-1990s as defense budgets decreased. Amid concerns about skill gaps and a growing reliance on contractors, DOD has been rebuilding its workforce since 2009. A skilled acquisition workforce is vital to maintaining military readiness, increasing DOD’s buying power, and achieving savings.

DOD’s long-standing challenges in managing service contracts are evident in its difficulties clearly defining requirements, a fragmented and uncoordinated approach to acquiring services, and limited information on what the department plans to spend on specific types of contracted services in its budget forecasts.

DOD has spent billions of dollars on contractors to support military activities it conducts around the world. Since 2010, we have reported that DOD has faced difficulties in identifying capability gaps, developing guidance, and integrating operational contractor support into plans and training.

DOD Contract Management

Since our 2017 High-Risk Report, our assessment of all five criteria remains unchanged for DOD Contract Management. DOD continues to demonstrate top leadership support for addressing challenges in its (1) acquisition workforce, (2) service acquisitions, and (3) operational contract support (OCS), which is defined as planning for and obtaining supplies, services, and construction from commercial sources in support of joint operations.

DOD has taken steps to improve its capacity, but continues to face challenges. DOD’s progress on the action plan criterion was mixed across the segments. While the monitoring criterion remains partially met overall, we saw significant improvement within the OCS segment as DOD changed its strategy for addressing tasks that we previously found would be difficult to monitor. DOD continues to take action to meet the demonstrated progress criterion—with additional management attention needed for service acquisition.

Over the years since we added this area to our High-Risk List, we have made numerous recommendations related to this high-risk issue, 18 of which were made since the last high-risk update in February 2017. As of November 2018, 41 recommendations related to this high-risk area are open.

Acquisition Workforce

DOD Contract ManagementRatings for this segment remain unchanged since our 2017 High-Risk Report, with DOD meeting one criterion and making mixed progress on the other four criteria.

Leadership commitment: met. DOD continues to exhibit leadership commitment to sustaining the size and improving the professionalism of its acquisition workforce. Specifically, DOD issued an updated acquisition workforce strategic plan in October 2016. Additionally, DOD issued a workforce rationalization plan in September 2017, which reinforces the need for the department to ensure that the civilian workforce is sized appropriately to complement its military personnel and to avoid artificial constraints on civilian workforce size and arbitrary reductions.

Capacity: partially met. DOD increased the size of its acquisition workforce beyond its initial 2015 target of 147,000 to more than 169,000 as of the third quarter of fiscal year 2018. It has also taken steps to ensure that the acquisition workforce has the requisite skills, tools, and training to perform key tasks. For example, DOD is conducting follow-up career field competency assessments to determine which skill gaps identified in initial assessments have been addressed based on a recommendation we made in December 2015.

However, other improvements need to be made. For example, while DOD’s October 2016 strategic plan provides an overall framework for the acquisition workforce, it does not identify time frames, metrics, or projected budgetary requirements associated with key goals or strategic priorities. Further, in a February 2018 report, we recommended ways the military departments could improve how they train, mentor, retain, and ultimately select program managers—a critical acquisition career field—based upon practices used by leading organizations. The military departments agreed with those recommendations but have not yet identified a strategy for how they will be implemented.

Action plan: partially met. In October 2016, DOD issued an updated acquisition workforce strategic plan which, among other things, assessed its current capacity and capability, and identified risks that DOD needed to manage to meet future needs. In addition, in September 2017, DOD issued its workforce rationalization plan. However, neither the October 2016 strategic plan nor the September 2017 workforce rationalization plan established specific targets.

Further, we reported in March 2018 that the military departments generally had not developed plans to use an annual inventory of contracted services for workforce and budget decisions, as statutorily required. Using an annual inventory could help it make more strategic decisions about the right workforce mix of military, civilian, and contractor personnel, and better align resource needs through the budget process to achieve that mix. DOD stated in its comments on that report that it is committed to improving its inventory processes.

Monitoring: partially met. DOD continues to track workforce growth metrics, as well as education and training metrics, on a quarterly basis. DOD acknowledged that it will need to develop and implement other metrics to track progress toward meeting the goals identified in its October 2016 strategic workforce plan, including those related to shaping the future acquisition workforce.

Demonstrated progress: partially met. Metrics tracked by DOD provide evidence that DOD is sustaining the size of the acquisition workforce and making progress in improving the workforce quality. DOD has not, however, verified that the current composition of the workforce will meet its future requirements. Until DOD develops metrics to track progress associated with shaping the future acquisition workforce, such as workforce targets as a whole or by specific career fields, it will not be able to demonstrate that their strategic workforce planning efforts and associated initiatives are successful.

Service Acquisitions

DOD Contract ManagementRatings for this segment have not changed since our 2017 High-Risk Report. DOD has met one criterion and made mixed progress on the other four criteria.

Leadership commitment: met. DOD has demonstrated sustained leadership commitment through its ongoing efforts to revise its January 2016 service acquisition instruction. This instruction established policy, assigned responsibilities, and provided procedures for defining, assessing, reviewing, and validating requirements for service acquisitions. The instruction formalized a hierarchical approach to more strategically manage service acquisitions at both the DOD and the component level. Our August 2017 report concluded that DOD’s efforts, simply stated, were not successful, in part because it was met with strong cultural resistance to changing DOD’s traditional decentralized approach to managing services. Our prior work had cautioned that a top-down, one-size-fits-all approach may not work.

Further, our August 2017 report showed that certain commands already managed or awarded the majority of a particular service, and were more closely aligned to the commanders that are responsible for executing the mission. In turn, this finding suggested that these commands might be in a better position to strategically manage specific service portfolios. A DOD official stated that DOD expects to issue a revised instruction by early to mid-2019. Further, DOD’s Chief Management Office is assessing ways to improve how it manages service acquisitions, including aligning its portfolios with those established under the Office of Management and Budget’s (OMB’s) category management initiative.

Capacity: partially met. In 2013, DOD established leadership positions in the Office of the Secretary of Defense (OSD) and at the military departments that were intended to strategically manage service acquisitions by portfolio. In August 2017 we reported, however, that individuals in these positions had multiple responsibilities and limited capacity to do so. We recommended DOD reassess the roles, responsibilities, authorities, and organizational placement of these positions. DOD concurred and is rewriting its 2016 service acquisition instruction to address our recommendation, among other things.

Action plan: not met. DOD does not have a comprehensive action plan but has or is undertaking a number of specific efforts to improve how it acquires services. These efforts, however, have produced limited results. For example, DOD’s January 2016 services acquisition instruction required that OSD-level leaders for each portfolio of services develop appropriate metrics to actively manage and report improvements in service acquisition. Similarly, senior leaders at the component level were to use portfolio metrics and data to effectively monitor cost and post-award performance to improve the efficiency and effectiveness of the contracted services. Further, the instruction developed a process to implement Services Requirements Review Boards to prioritize and approve services in a portfolio-based manner, but we found that they had minimal effect on supporting trade-off decisions within and across service portfolios or helping inform budgeting decisions. DOD is revising its instruction, in part to address these issues, which it hopes to issue by early- to mid-2019.

As part of its ongoing efforts, DOD intends to align its services portfolios with OMB’s category management initiative, which is intended to streamline and manage entire categories of spending across the government more like a single enterprise. DOD has established goals and metrics associated with the use of OMB’s designated “best-in-class” contracting vehicles (contracting vehicles recommended for agency use) and the amount of services that it considers to be strategically managed. DOD is also assessing ways to include its projected spending on services in its future-years defense plan, which we recommended in 2016. Relatedly, Congress has mandated that, effective October 2021, DOD include certain information on amounts requested for services contracts in the future-years defense program.

Monitoring: partially met. Because DOD lacks an action plan and cannot determine how future budgetary requirements are affected by its ongoing initiatives, it is not yet positioned to fully assess its progress in improving service acquisition overall. DOD is monitoring, however, its use of best-in-class vehicles and the amount of services it considers to be strategically managed under the category management initiative.

Demonstrated progress: partially met. While DOD’s fiscal year 2018 performance results are not expected to be finalized until January 2019, a DOD official reported that DOD expects that it will meet OMB’s target that nearly $60 billion in DOD contract obligations would be considered to be strategically managed, but will fall short of OMB’s target that about $12 billion would be obligated under OMB’s designated best-in-class vehicles.

Operational Contract Support

DOD Contract Management

For this segment, the monitoring criterion improved to met since our 2017 High-Risk Report. The ratings for the other four criteria remain unchanged.

Leadership commitment: met. DOD continues to demonstrate sustained commitment and strong leadership support in addressing OCS issues. For example, in August 2018, the Joint Requirements Oversight Council issued an OCS memorandum approving 15 critical actions to institutionalize OCS across DOD, strengthen DOD’s ability to perform OCS, and ensure OCS contributes to all phases and ranges of joint military operations. DOD transitioned OCS responsibilities of the Deputy Assistant Secretary of Defense (Program Support) to the newly established Office of the Deputy Assistant Secretary of Defense (Logistics) in the summer of 2018. DOD officials stated that this change was due to the reorganization of the Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics).

Moving forward, it will be important for DOD to demonstrate that this reorganization supports a continued commitment to OCS at the level of senior leadership. DOD officials stated in November 2018 that the Functional Capabilities Integration Board would still serve as the governance forum for OCS issues. DOD is in the process of revising and expanding the board’s charter, which it anticipates completing in 2019.

Capacity: partially met. DOD continues to face challenges in OCS capability shortfalls that create risk to operational effectiveness, timelines, and resource expenditures, and prevent DOD from reaching full OCS capacity. However, efforts are underway to address these shortfalls. For example, one of the 15 critical actions identified in the August 2018 Joint Requirements Oversight Council memorandum is the development of a functional competency model to capture OCS skill sets that according to DOD will be used to inform DOD-wide budgeting and manpower decisions.

Action plan: met. In September 2017, DOD issued its fifth OCS Action Plan, which is organized around 10 capability gaps that needed to be closed to institutionalize OCS capability. The action plan is DOD’s primary mechanism for measuring progress toward closing the capability gaps.

Monitoring: met. DOD monitors and documents progress against the OCS Action Plan’s identified tasks and goals. Because of these efforts, DOD has now met the monitoring criterion. In addition, DOD adjusted certain approaches to allow it to better gauge progress. For example, in our 2017 High-Risk Report, we reported that some of the subtasks in a Joint Staff annex supplementing the 2016 OCS Action Plan were not clearly defined and would be difficult to monitor. In response, the 2017 action plan noted that those efforts would be addressed directly under a logistics working group that would track performance measures. To better integrate OCS into guidance, the 2017 OCS Action Plan identified a new effort to develop and implement procedures to analyze, update, and create tools to support integration of OCS data into (1) planning and deployment systems, and (2) training on accessing and using OCS data.

Demonstrated progress: partially met. DOD continues to make progress in addressing recommendations we have previously identified as high priority. For example, DOD issued a directive-type memorandum in April 2018 that identified several key DOD offices to jointly develop comprehensive, department-wide vendor vetting guidance, among other things. A dedicated working group is developing the guidance.

Additionally, DOD is revising instructions detailing how OCS should be integrated into plans and training, among other things. Senior DOD officials expect to issue the instruction in 2019. Moreover, in response to our recommendation that the military departments develop OCS guidance, the Army, Air Force, Navy, and Marine Corps have done so.

Acquisition Workforce

As of November 2018, 14 recommendations related to this high-risk area had not been implemented. To help ensure DOD’s acquisition workforce has sufficient capacity and capability to meet future needs, DOD needs to

  • conduct follow-up competency assessments to assess whether identified skill gaps have been closed, and
  • continue efforts to improve the utility of the inventory of contracted services.

Service Acquisitions

As of November 2018, 10 recommendations related to this high-risk area had not been implemented. To improve the acquisition of services, DOD needs to

  • define desired outcomes for service acquisitions by establishing goals and measures and obtaining data needed to measure progress;
  • ensure that components revise their requirements review processes so that service acquisitions are prioritized and approved in a comprehensive, portfolio-based manner;
  • reassess the roles, responsibilities, and organizational placement of key leadership positions as it revises its January 2016 instruction; and
  • establish milestones to measure progress toward achieving the statutory requirement to include projected spending on services in its future-years defense program.

Service Acquisitions

As of November 2018, 17 recommendations related to this high-risk area had not been implemented. To enhance DOD’s ability to effectively manage OCS for current and future operations, DOD needs to

  • address identified OCS capability shortfalls,
  • develop comprehensive vendor vetting guidance, and
  • integrate lessons learned into existing OCS guidance.
Looking for our recommendations? Click on any report to find each associated recommendation and its current implementation status.
  • portrait of Timothy J. DiNapoli
    • Timothy J. DiNapoli
    • Director, Contracting and National Security Acquisitions
    • (202) 512-4841