Expanding the Efficiency Review Program for Commercial Activities Can Save Millions

FPCD-81-77: Published: Sep 30, 1981. Publicly Released: Sep 30, 1981.

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GAO completed a limited survey of the Department of Defense (DOD) program to increase the efficiency of some in-house commercial or industrial-type activities.

The efficiency review program saves money each year by developing and applying performance standards that eliminate unnecessary and inefficient work practices. Before a commercial activity can be converted from in-house to contract operations, or maintained in-house, the Office of Management and Budget Circular A-76 requires agencies to compare costs to determine the most economical source of performance and to review in-house commercial activities to insure that they are organized and staffed for the most efficient performance. DOD has completed more efficiency reviews of commercial activities than any other Federal agency. However, about 80 percent of the DOD 15,000 commercial activities are exempt from the program because efficiency reviews are triggered by a requirement to perform a cost comparison which is required only when it is feasible to convert a commercial activity to a contract operation. GAO believes that DOD could save an additional $350 million by expanding the scope of its program to include these activities. By limiting the efficiency review program to only those commercial activities that can be operated by contractors, DOD has yet to realize the full savings possible from this cost-reduction program. The commercial activities that must continue to be performed in-house present an important opportunity for additional savings.

Recommendation for Executive Action

  1. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should require the military services to conduct efficiency reviews and develop and apply performance work statements for those commercial activities that must remain in-house.

    Agency Affected: Department of Defense


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