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In April 2000, GAO reported on the Department of Defense's (DOD) use of Section 845 agreements, also referred to as "other transactions" for prototype projects. These are transactions other than contracts, grants, or cooperative agreements that generally are not subject to federal laws and regulations applicable to procurement contracts. In December 2000, DOD revised its Section 845 guide. The guide specifies when Section 845 agreements may be used and provides criteria for tailoring terms and conditions for each agreement. Officials from the military services and defense agencies have found the new guide useful and a significant improvement over the prior version. The Secretary of Defense has required a metric--the number of participating nontraditional defense contractors--which is measurable and directly related to each agreement. This metric is tracked and reported internally. DOD explored additional metrics, but concluded that the number of nontraditional contractors was the only one that was quantifiable and tied directly to Section 845 outcomes. DOD's annual report to Congress on Section 845 agreements consists of summaries on each agreement. However, the key metric--the number of nontraditional contractors--is not clearly presented in these reports, making it difficult to gauge DOD's progress in achieving success on this objective. Further, DOD is not regularly assessing reporting on the benefits derived from completed Section 845 projects. In the absence of such assessments, congressional and DOD decision makers lack a vital piece of information that would help them determine whether this flexible procurement authority is achieving expecting results.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense 1. The Secretary of Defense should incorporate in the annual report to Congress summary information on the extent of nontraditional contractor participation.
Closed - Implemented
In complying with GAO's recommendation, DOD, in its Annual Report to Congress on Cooperative Agreements and Other Transactions for fiscal year 2002, included summary information on the extent of nontraditional contractor participation. This was completed in January 2003.
Department of Defense 2. The Secretary of Defense should periodically report to Congress the results of studies on the benefits derived from completed Section 845 projects, including how key private sector participants contributed to the results.
Closed - Not Implemented
In 2003, DOD initiated a review of 50 other transactions (OTs) to assess the usefulness of these types of transactions. The 50 transactions under review were randomly selected and included a variety of large and small OTs. In 2004, a DOD official stated that the review was an informal look at how DOD used OTs and was not based on statistical concepts. The official told GAO that the DOD/IG was going to perform a review of prototype OTs that would be a more comprehensive analysis of the benefits of OTs. GAO has not been able to obtain evidence that a review and a resulting report have been completed.

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