What GAO Found
Over the last 5 years, the Department of Defense (DOD) consistently obligated more on services than products. These obligations are significant. For example, in 2014 alone, DOD obligated $85 billion on its three largest types of services—knowledge-based, research and development, and facility-related services. This amount was more than double the amount DOD obligated for aircraft, land vehicles and ships, the three largest product categories DOD acquired.
Comparison of DOD Obligations for Top Products and Services in Fiscal Year 2014
Program offices within each of the military departments that GAO met with maintained data on current and estimated future spending needs for contracted service requirements, but they did not identify service contract spending needs beyond the next year, as there was no requirement to do so. As a result, DOD leadership's insight into future spending on contracted services is limited. DOD programming policy requires the military departments and defense agencies to develop a program objective memorandum (POM) that identifies and prioritizes requirements and total funding needs for the current budget year and then four additional years into the future. This policy and the military departments' supplemental POM guidance, however, do not address contracted services. The military departments have started efforts to collect data on contract services requirements beyond the budget year but these efforts could result in the collection of disparate data. For example, the Army plans to request data from program offices on all service contracts to be awarded over the next 5 years. In contrast, the Air Force plans to continue to collect data only for service contracts using operations and maintenance funds beyond the budget year. Unless DOD establishes a mechanism to coordinate efforts—a key internal control standard—it risks collecting different data leading to inconsistency across the department.
DOD's budget exhibits on contract services provide limited visibility to Congress on planned spending, and the primary exhibit for contracted services does not meet statutory reporting requirements. In 2009, Congress required DOD to develop an exhibit to summarize its service contract spending, in part, to improve oversight by DOD and Congress of DOD's contracted services. In its fiscal year 2014 exhibit, however, DOD excluded up to $100 billion—almost two-thirds—of its estimated spending on contracted services, including those for contingency operations and for medical care, on which it was statutorily required to report. Unlike DOD budget exhibits for weapon systems, DOD's other budget exhibits that contain limited information on contracted services do not include data on projected spending beyond the current budget year. Without a roadmap of future service contract spending needs, Congress has limited visibility into an area that constitutes more than half of DOD's annual contract spending.
Why GAO Did This Study
In 2014, DOD obligated over $156 billion to contractors that provide services, such as for engineering support, to meet needs. These contracted services constituted more than half of DOD's total contract spending. House Report 113-446 contained a provision for GAO to evaluate DOD's management of contracted services. This report assesses (1) trends in DOD spending on contracted services, (2) DOD's insight into its requirements for contracted services, and (3) how DOD reports on contracted services in its budget requests to Congress. GAO analyzed the most recent data available on DOD service contract spending from fiscal years 2010 through 2014, reviewed programming guidance and budget documents as well as a non-generalizable selection of six program office inputs to the budget and planning process for three military commands that spent the most on services in 2013, and interviewed DOD officials.
Congress should consider amending reporting requirements to include estimated spending on services beyond the budget year. GAO recommends that the Secretary of Defense and military departments revise POM guidance, coordinate efforts to forecast services, and fully comply with budget reporting. DOD concurred with the budget reporting recommendation and partially concurred with the two others, citing challenges with estimating future spending, but did not address revised guidance or coordination. GAO believes such actions are needed.
Matter for Congressional Consideration
|Given that the intent of section 235 of Title 10 United States Code was to provide both DOD and Congress with increased oversight of the procurement of services, Congress should consider revising the section to require that DOD report on its projected spending beyond the budget year and consistent with the time period covered by the future year defense program.||The National Defense Authorization Act for Fiscal Year 2019, enacted in August 2018, included a provision to require that, by October 2021, DOD include its planned service contract spending over the years of the future year defense program.|
Recommendations for Executive Action
|Department of the Air Force||
Priority Rec.1. To ensure that senior leadership within the Office of the Secretary of Defense and the military departments are better positioned to make informed decisions regarding the volume and type of services that should be acquired over the future year defense program, the Secretaries of the Army, Navy, and Air Force should revise their programming guidance to collect information on how contracted services will be used to meet requirements beyond the budget year.
|Department of the Navy||
Priority Rec.2. To ensure that senior leadership within the Office of the Secretary of Defense and the military departments are better positioned to make informed decisions regarding the volume and type of services that should be acquired over the future year defense program, the Secretaries of the Army, Navy, and Air Force should revise their programming guidance to collect information on how contracted services will be used to meet requirements beyond the budget year.
|Department of the Army||
Priority Rec.3. To ensure that senior leadership within the Office of the Secretary of Defense and the military departments are better positioned to make informed decisions regarding the volume and type of services that should be acquired over the future year defense program, the Secretaries of the Army, Navy, and Air Force should revise their programming guidance to collect information on how contracted services will be used to meet requirements beyond the budget year.
|Department of Defense||
Priority Rec.4. To ensure the military departments' efforts to integrate services into the programming process and senior service managers efforts to develop forecasts on service contract spending provide the department with consistent data, the Secretary of Defense should establish a mechanism, such as a working group of key stakeholders--which could include officials from the programming, budgeting and requirements communities as well as the senior services managers--to coordinate these efforts.
|Under Secretary of Defense (Comptroller)||5. To ensure DOD fully complies with section 235 of Title 10, United States Code, the Under Secretary of Defense (Comptroller) should modify its approach for reporting contracted services in its budget exhibit to ensure that projected requirements for medical care, other federal purchases, and other contingency operations are included.|