Use of Legislative Incentive for Performance-Based Contracting Unknown

GAO-03-674R: Published: May 22, 2003. Publicly Released: May 22, 2003.

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William T. Woods
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The Department of Defense (DOD) spent about $93 billion in fiscal year 2002 to acquire various types of services, such as base operations, logistical support, and information technology. To achieve greater cost savings and better outcomes when agencies acquire these and other services, Congress and the executive branch have encouraged greater use of performance-based contracting. Performance-based contracts specify the desired outcomes and allow the contractors to determine how best to achieve those outcomes, rather than prescribe the methods contractors should use. In October 2000, Congress sought to provide an incentive for the use of performance-based contracts through legislation giving DOD temporary authority to treat certain performance-based service contracts as contracts for commercial items. Contracts for commercial items may be awarded using streamlined procedures under Part 12 of the Federal Acquisition Regulation (FAR). This authority is scheduled to expire in October 2003. As required by the October 2000 legislation, we reviewed DOD's implementation of the temporary authority, including the interim and final implementing regulations, public comments on the interim regulation, and other DOD documents. We also discussed with DOD officials the extent to which the authority had been used. We conducted our review from September 2002 through February 2003 in accordance with generally accepted government auditing standards.

DOD issued regulations to implement the legislative authority, but because there is no tracking mechanism, DOD does know the extent to which the authority has been used. DOD officials believe, however, that use of the authority has been limited, at best. Although a January 2002 DOD policy memorandum indicated that additional guidance on reporting use of the authority would be forthcoming, no additional guidance has been issued to date.

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