Defense Science and Technology:
Actions Needed to Enhance Use of Laboratory Initiated Research Authority
GAO-19-64: Published: Dec 20, 2018. Publicly Released: Dec 20, 2018.
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The Department of Defense relies on its laboratories to help keep the military on the cutting edge of technology. Congress has given DOD's labs special "authorities"—flexibilities that lab directors can use to foster innovation and improve efficiency.
We looked at how DOD labs use authorities to:
fund high priority research projects
speed up lab hiring processes
manage labs with greater efficiency and less red tape
make small purchases to support lab activities more quickly
While labs have taken advantage of most of these authorities, we recommended that they find ways to maximize their use.
A military research project to develop a more fuel efficient engine with advanced propulsion
A photograph of an aircraft engine prototype in a test facility.
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What GAO Found
Congress has provided the Department of Defense's (DOD) research labs with several authorities to enhance management and operations. Four authorities that GAO examined provide lab directors with greater ability to make their own decisions regarding the funding of projects, hiring, lab management, and purchasing of equipment or services.
1. Laboratory initiated research authority. This authority, as implemented, provides labs with a means to fund new science and technology projects that they consider a priority. Labs may use a percentage of all funds available to the lab and are permitted to charge customers of the lab a percentage fee of the costs for activities performed by the lab for the customer.
2. Direct hire authority. This authority enables labs to compete with private industry for high-quality talent. For example, it provides for streamlined hiring of applicants with relevant advanced degrees, or students enrolled in science, technology, engineering, and mathematics programs.
3. Laboratory enhancement pilot program authority. This authority generally allows lab directors to propose alternative methods that might lead to more effective lab management, and waive certain policies or procedures that might affect implementation of these methods.
4. Micro-purchase authority. This authority raises the threshold for small purchases for DOD research lab activities from $3,500 to $10,000 to facilitate acquisitions.
While labs have used these authorities, their use has sometimes been limited, particularly with the laboratory initiated research authority. DOD lab directors at Air Force, Navy, and Army cited several obstacles that impede wider use of that authority, specifically:
Air Force: Financial management officials at the Air Force stated that the service's accounting system does not currently have an automated capability to transfer the allowable percentage fee of costs to a central account at the Air Force Research Laboratory. This lack of capability, officials noted, creates a significant administrative burden related to charging these fees.
Navy: In fiscal year 2017, Navy labs invested $7.3 million in lab infrastructure projects, compared to $32.9 million and $53.7 million at the Air Force and Army, respectively. Navy lab officials told us that they were restricted in their use of infrastructure funds available under the laboratory initiated research authority due to a lack of clear guidance as to whether and how to use this authority within the Capital Investment Program of the Navy Working Capital Fund.
Army: The Army requires its labs to use a similar percentage of funds from two sources: (1) what it refers to as directly appropriated funds and (2) funds labs charge for customer activities. Some Army lab directors reported assessing a lower rate on customer funds than allowed so as not to drive customers away. The labs then generally charge a lower than desired rate on their directly appropriated funds, which further constrains the total funding available to them.
Why GAO Did This Study
Congress created several authorities that provide DOD research labs with ways to increase efficiency and foster innovation.
Senate report 114-255 contained a provision for GAO to study governance models used by federal labs. This report evaluates DOD labs' use of authorities to foster innovation and efficiency.
GAO selected four authorities that recent work on best practices for science and technology management and expedited defense lab hiring have shown to be the most crucial for supporting innovation; administered a survey to 44 lab directors to gain insight into their use of the authorities; interviewed key lab officials and contractors; and reviewed relevant policies and guidance.
What GAO Recommends
GAO is making three recommendations to enhance DOD's use of laboratory initiated research authority, including that the Air Force assess potential accounting system improvements, the Navy clarify how labs can use the authority for infrastructure improvements, and the Army assess its policy to determine whether changes are needed to remove disincentives for labs to use the authority. DOD concurred with the recommendations.
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Recommendations for Executive Action
Comments: In December 2018, DOD agreed with our recommendation. The Air Force planned to establish a special account within the Department of the Treasury to properly receive and expend these fixed percentage fees and begin collecting fees from Air Force Research Laboratory's customers by July 1, 2019. However, the request to establish that account was not made to the Department of Treasury until July 15, 2019. According to a senior Air Force official, as of August 2019, the Department of Treasury had not yet approved the Air Force's request. As a result, the Air Force Research Laboratory has not yet collected any fees from customer work under the laboratory initiated research authority.
Recommendation: The Secretary of the Air Force should assess the potential costs and benefits of implementing accounting system improvements that would allow the Air Force Research Laboratory to charge customers a fixed percentage fee on provided science and technology activities to the extent allowed under the laboratory initiated research authority. (Recommendation 1)
Agency Affected: Department of Defense: Department of the Air Force
Comments: In December 2018, DOD agreed with our recommendation that the Secretary of the Navy should clarify whether and how to use the laboratory initiated research authority within the Capital Investment Program. In March 2019, DOD reported that the Navy was working on establishing a process for its laboratories to use the funds made available to them through the laboratory initiated research authority and planned to have this new policy in place by September 1, 2019. However, a senior official with the Department of Navy reported in July 2019 that discussions within the Navy were ongoing and that they were unlikely to meet this planned September 2019 date. Instead, the Navy currently plans to have this new policy ready by October 1, 2019.
Recommendation: The Secretary of the Navy should clarify whether and how to use the laboratory initiated research authority within the Capital Investment Program. (Recommendation 2)
Agency Affected: Department of Defense: Department of the Navy
Status: Closed - Implemented
Comments: In December 2018, DOD agreed with our recommendation stating that the Army would initiate a study by January 2, 2019. The Army then initiated the planned study in January 2019 and completed it in June 2019. As part of its study, the Army evaluated 9 years of financial reporting data across Army laboratories. The Army also distributed questionnaires to its laboratories, and found that the laboratory initiated research authority has a positive impact on laboratory operations. However, Army laboratories acknowledged that the funds they collect from charging for customer activities is one challenge associated with implementing this authority. In addition, the Army recognized that limits on using this authority for capital investments may not sufficiently address all infrastructure requirements of its laboratories. As a result of this study, in November 2019, the Army identified two follow-on actions: 1) Senior Army leadership will work with the laboratories to gain a better understanding of implementation challenges of the laboratory initiated research authority as it relates to collecting funds from charging for customer activities, and 2) Senior Army leadership will work with the laboratories to determine alternative approaches to manage resources for major military construction projects. Based on the actions the Army has taken, we consider this recommendation to be implemented and closed.
Recommendation: The Secretary of the Army should assess existing Army policy for laboratory initiated research authority and determine whether to implement changes to eliminate disincentives for lab usage of the authority. (Recommendation 3)
Agency Affected: Department of Defense: Department of the Army