You are given two reports by the government agency.  

Report 1:
Agencies generally acquire equipment from commercial vendors and through GSA, which contracts for the equipment from commercial vendors. In acquiring heavy equipment from a commercial vendor or GSA, agencies can purchase or lease the equipment. Generally, agencies use the term “lease” to refer to acquisitions that are time-limited and therefore distinct from purchases. The term “lease” is used to refer to both long-term and short-term leases. For example, the three agencies we reviewed in-depth use the term “rental” to refer to short-term leases of varying time periods. According to Air Force officials, they define rentals as leases that are less than 120 days while FWS and NPS officials said they generally use the term rental to refer to leases that are a year or less. For the purposes of this report, we use the term “rental” to refer to short-term leases defined as rentals by the agency and “long-term lease” to refer to a lease that is not considered a rental by the agency. (See fig. 1.) In 2013, GSA began offering heavy equipment through its Short-Term Rental program, which had previously been limited to passenger vehicles, in part to eliminate ownership and maintenance cost for infrequently used heavy equipment. Under this program, agencies can request a short-term equipment rental (less than a year) from GSA, and GSA will work with a network of commercial vendors to provide the requested heavy equipment. Unlike for some other types of federal property, there are no central reporting requirements for agencies’ inventories of heavy equipment. However, each federal agency is required to maintain inventory controls for its property, which includes heavy equipment. Agencies maintain inventory data through the use of agency-specific databases, and each agency can set its own requirements for what data are required and how these data are maintained. For example, while an agency may choose to maintain data in a headquarters database, it could also choose to maintain data at the local level. As another example, an agency may decide to track and maintain data on the utilization of its heavy equipment (such as the hours used) or may choose not to have such data or require any particular utilization levels. The Federal Acquisition Regulation (FAR) governs the acquisition process of executive branch agencies when acquiring certain goods and services, including heavy equipment. Under the FAR, agencies should consider whether to lease equipment instead of purchasing it based on several factors. Specifically, the FAR provides that agency officials should evaluate cost and other factors by conducting a “lease-versus-purchase” analysis before acquiring heavy equipment. Additionally, DOD’s regulations require its component agencies to prepare a justification supporting lease-versus-purchase decisions if the equipment is to be leased for more than 60 days. Twenty agencies reported data on their owned heavy equipment, including the (1) number, (2) types, (3) acquisition year, and (4) location of agencies’ owned heavy equipment in their inventories as of June 2017. The 20 agencies reported owning over 136,000 heavy equipment items. DOD reported owning most of this heavy equipment—over 100,000 items, about 74 percent. (See app. I for more information on agencies’ ownership of these items.) The Department of Agriculture reported owning the second highest number of heavy equipment items—almost 9,000 items, about 6 percent. (See fig. 2.) Four agencies—the Nuclear Regulatory Commission, the Department of Housing and Urban Development, the Office of Personnel Management, and the Agency for International Development—reported owning five or fewer heavy equipment items each. The 20 agencies reported owning various types of heavy equipment, such as cranes, backhoes, and road maintenance equipment in five categories: (1) construction, mining, excavating, and highway maintenance equipment; (2) airfield-specialized trucks and trailers; (3) self-propelled warehouse trucks and tractors; (4) tractors; and (5) soil preparation and harvesting equipment. Thirty-eight percent (almost 52,000 items) were in the construction, mining, excavating, and highway maintenance category (see fig. 3). Fifteen of the 20 agencies reported owning at least some items in this category. Twenty-four percent (over 33,000 items) were in the airfield- specialized trucks and trailers category, generally used to service and re-position aircraft on runways. DOD reported owning 99 percent (over 32,000) of these items, while 9 other agencies, including the Department of Labor and the National Aeronautics and Space Administration, reported owning the other one percent (317 items). Twenty-two percent (over 29,000 items) were in the self-propelled warehouse trucks and tractors category, which includes equipment such as forklift trucks. All 20 agencies reported owning at least one item in this category, and five agencies—the Agency for International Development, Department of Housing and Urban Development, the Environmental Protection Agency, the Nuclear Regulatory Commission, and the Office of Personnel Management—reported owning only items in this category. (For additional information on agencies’ ownership of heavy equipment in various categories, see app. I.) The twenty agencies reported acquiring their owned heavy equipment between 1944 and 2017, with an average of about 13 years since acquisition (see fig. 4). One heavy equipment manager we interviewed reported that a dump truck can last 10 to 15 years, whereas other types of equipment can last for decades if regularly used and well-maintained. The 20 agencies reported that over 117,000 heavy equipment items (86 percent) were located within the United States or its territories. Of these, about one-fifth (over 26,000) were located in California and Virginia, the two states with the most heavy equipment (see fig. 5). Of the equipment located outside of the United States and its territories, 94 percent was owned by the Department of Defense. The rest was owned by the Department of State (714 items in 141 countries from Afghanistan to Zimbabwe) and the National Science Foundation (237 items in areas such as Antarctica). The twenty agencies reported spending over $7.4 billion in 2016 dollars to acquire the heavy equipment they own (see table 1). However, actual spending was higher because this inflation-adjusted figure excludes over 37,000 heavy equipment items for which the agencies did not report acquisition cost or acquisition year, or both. Without this information, we could not determine the inflation-adjusted cost and therefore did not include the cost of these items in our calculation. The Army owns almost all of these items, having not reported acquisition cost or acquisition year, or both, for 36,589 heavy equipment items because, according to Army officials, the data were not available centrally but may have been available at individual Army units and would have been resource- intensive to obtain. The heavy equipment items reported by the 20 agencies ranged in acquisition cost from zero dollars to over $2 million in 2016 dollars, with an average acquisition cost in 2016 dollars of about $78,000, excluding assets with a reported acquisition cost of $0. Of the items which we adjusted to 2016 dollars and for which non-zero acquisition costs were provided: 94 percent cost less than $250,000 and accounted for 57 percent of the total adjusted acquisition costs (See fig. 6.) 6 percent of items cost more than $250,000 and accounted for 43 percent of the adjusted acquisition costs. (See fig. 6.) High-cost items included a $779,000 hydraulic crane acquired by the National Aeronautics and Space Administration in 1997 ($1.2 million in 2016 dollars), a $1.4 million ultra-deep drilling simulator acquired by the Department of Energy in 2009 ($1.6 million in 2016 dollars), and several $2.2 million well-drilling machines acquired by the Air Force in 2013 ($2.3 million in 2016 dollars). In calendar years 2012 through 2016, the Air Force, FWS, and NPS purchased almost 3,500 pieces of heavy equipment through GSA and private vendors at a total cost of about $360 million to support mission needs. (See table 2.) These agencies also spent over $5 million on long- term leases and rentals during this time period. The Air Force spent over $300 million to purchase over 2,600 heavy equipment assets in calendar years 2012 through 2016 that were used to support and maintain its bases globally. For example, according to Air Force officials, heavy equipment is often used to maintain runways and service and reposition aircraft on runways. While the majority of Air Force heavy equipment purchased in this time period is located in the United States, 41 percent of this heavy equipment is located outside the United States and its territories in 17 foreign countries to support global military bases. The Air Force could not provide complete information on its heavy equipment leases for fiscal years 2012 through 2016. Specifically, the Air Force provided data on 33 commercial heavy equipment leases that were ongoing as of August 2017 but could not provide cost data for these leases because this information is not tracked centrally. Additionally, the Air Force could not provide any data on leases that occurred previously because, according to Air Force officials, lease records are removed from the Air Force database upon termination of the lease. Officials said that rentals are generally handled locally and obtaining complete data would require a data call to over 300 base contracting offices. Air Force officials stated that rentals are generally used in unique situations involving short- term needs such as responding to natural disasters. For example, following Hurricane Sandy, staff at Langley Air Force Base in Virginia used rental equipment to clean up and repair the base. Although Air Force did not provide complete information on rentals, data we obtained from GSA’s Short-Term Rental program indicated that Air Force rented heavy equipment in 46 transactions not reflected in the Air Force data we received totaling over $3.7 million since GSA began offering heavy equipment through its Short-Term Rental program, which had previously been limited to passenger vehicles, in part program in 2013. FWS spent over $32 million to purchase 348 heavy equipment assets from calendar years 2012 through 2016. FWS used its heavy equipment to maintain refuge areas throughout the United States and its territories, including maintaining roads and nature trails. FWS also used heavy equipment to respond to inclement weather and natural disasters. Most of the heavy equipment items purchased by FWS were in the construction, mining, excavating, and highway maintenance equipment category and include items such as excavators, which were used for moving soil, supplies, and other resources. FWS officials reported that they did not have any long-term leases for any heavy equipment in fiscal years 2012 through 2016 because they encourage equipment sharing and rentals to avoid long-term leases whenever possible. FWS officials provided data on 228 rentals for this time period with a total cost of over $1 million. Information regarding these rentals is contained in an Interior-wide property management system, the Financial Business Management System (FBMS). FWS officials told us that they have not rented heavy equipment through GSA’s program because they have found lower prices through local equipment rental companies. NPS spent over $27 million to purchase 471 heavy equipment assets from calendar years 2012 through 2016. NPS uses heavy equipment— located throughout the United States and its territories—to maintain national parks and respond to inclement weather and natural disasters. For example, NPS used heavy equipment such as dump trucks, snow plows, road graders, and wheel loaders to clear and salt the George Washington Memorial Parkway in Washington, D.C., following snow and ice storms. Most of the heavy equipment items purchased by NPS were in the construction, mining, excavating, and highway maintenance equipment category and include items such as excavators, which are used for moving soil, supplies, and other resources. NPS reported spending about $360,000 on 230 long-term leases and rentals in fiscal years 2012 through 2016, not including rentals through GSA’s Short-Term Rental program, which had previously been limited to passenger vehicles, in part program. As with FWS, NPS leases and rentals are contained in FBMS, which is Interior’s property management system. Data we obtained from GSA’s Short-Term Rental program, which had previously been limited to passenger vehicles, in part program indicated that NPS rented heavy equipment in 26 transactions totaling over $200,000 since GSA began offering heavy equipment through its Short-Term Rental program, which had previously been limited to passenger vehicles, in part program in 2013, for a potential total cost of over $560,000 for these long-term leases and rentals. As mentioned earlier, the FAR provides that executive branch agencies seeking to acquire equipment should consider whether it is more economical to lease equipment rather than purchase it and identifies factors agencies should consider in this analysis, such as estimated length of the period that the equipment is to be used, the extent of use in that time period, and maintenance costs. This analysis is commonly referred to as a lease-versus-purchase analysis. While the FAR does not specifically require that agencies document their lease-versus-purchase analyses, according to federal internal control standards, management should clearly document all transactions and other significant events in a manner that allows the documentation to be readily available for examination and also communicate quality information to enable staff to complete their responsibilities. As discussed below, we found that most acquisitions we reviewed from FWS, NPS, and the Air Force did not contain any documentation of a lease-versus-purchase analysis. Specifically, officials were unable to provide documentation of a lease-versus-purchase analysis for six of the eight acquisitions we reviewed. FWS officials were able to provide documentation for the other two. Officials told us that a lease-versus- purchase analysis was not conducted for five of the six acquisitions and did not know if such analysis was conducted for the other acquisition. According to agency officials, the main reason why analyses were not conducted or documented for these six acquisitions is that the circumstances in which such analyses were to be performed or documented were not always clear to FWS, NPS, and Air Force officials. In addition to the FAR, Interior has agency guidance stating that bureaus should conduct and document lease-versus-purchase analyses. This July 2013 guidance—that FWS and NPS are to follow—states that requesters of equipment valued at $15,000 or greater should perform a lease-versus- purchase analysis when requesting heavy equipment. According to the guidance, this analysis should address criteria in the FAR and include a discussion of the financial and operating advantages of alternate approaches that would help contracting officials determine the final appropriate acquisition method. At the time the guidance was issued, Interior also provided a lease-versus-purchase analysis tool to aid officials in conducting this analysis. Additionally, in April 2016, Interior issued a policy to implement the July 2013 guidance. The 2016 policy clarifies that program offices are required to complete Interior’s lease-versus-purchase analysis tool and provide the completed analysis to the relevant contracting officer. Within Interior, bureaus are responsible for ensuring that procurement requirements are met, including the requirements and directives outlined in Interior’s 2013 guidance and 2016 policy on lease-versus-purchase analyses, according to agency officials. Within FWS, local procurement specialists prepare procurement requests and ensure that procurement requirements are met and that all viable options have been considered. Regional equipment managers review these procurement requests, decide whether to purchase or lease the requested equipment, and prepare the lease-versus-purchase analysis tool if the procurement specialist has indicated that it is required. Within NPS, local procurement specialists are responsible for ensuring that all procurements adhere to relevant requirements and directives, including documenting the lease- versus-purchase analysis. Of the three FWS heavy equipment acquisitions we reviewed for which the 2013 Interior guidance was applicable, one included a completed lease-versus-purchase analysis tool; one documented the rationale for purchasing rather than leasing, although it did not include Interior’s lease- versus-purchase analysis tool; and one did not include any documentation related to a lease-versus-purchase analysis. (See table 3.) Regarding the acquisition for which no documentation of a lease-versus- purchase analysis was provided—a 12-month lease of an excavator and associated labor costs for over $19,000—FWS officials initially told us that a lease-versus-purchase analysis was not required because the equipment lease was less than $15,000, and Interior’s guidance required a lease-versus-purchase analysis for procurements of equipment valued at $15,000 or greater. However, we found the guidance did not specify whether the $15,000 threshold includes the cost of labor. We also found that Interior’s guidance did not specify if a lease-versus-purchase analysis was required if the total cost of a rental is less than the purchase price. FWS officials acknowledged that Interior guidance is not clear and that it would be helpful for Interior to clarify whether these leases require a lease-versus-purchase analysis. NPS officials were unable to provide documentation of a lease-versus- purchase analysis for the single heavy equipment acquisition we reviewed—the purchase of a wheeled tractor in 2015 for $43,177. According to these officials, they could not do so because of personnel turnover in the contracting office that would have documented the analysis. In addition, they told us that they believe that such analyses are not always completed for heavy equipment acquisitions because responsibility for completing these analyses is unclear. Specifically, they told us that it was unclear whether the responsibility lies with the official requesting the equipment, the contracting personnel who facilitate the acquisition, or the property personnel who manage inventory data. However, when we discussed our findings with Interior and NPS officials, NPS officials were made aware of the 2016 Interior policy that specifically requires program offices—the officials requesting the equipment—to complete the lease-versus-purchase analysis and provide documentation of this analysis to the contracting officer. As a result, NPS officials told us at the end of our review that program office officials will now be required to complete the lease-versus-purchase analysis tool and document this analysis. According to Air Force officials responsible for managing heavy equipment, financial or budget personnel at individual bases are responsible for conducting lease-versus-purchase analyses, also called economic analyses, to support purchase and lease requests. Air Force fleet officials told us that they then review these requests from a fleet perspective, considering factors such as whether the cost information provided in the request is from a reputable source, expected maintenance costs, and whether a requesting base has the capability to maintain the requested equipment. However, they said they do not check to ensure that a lease-versus-purchase analysis was completed or review the analysis. Equipment rentals can be approved at individual bases. In our review of four Air Force heavy equipment acquisitions, we found no instances in which Air Force officials documented a lease-versus- purchase analysis (see table 4). For the acquisitions that we reviewed, Air Force officials told us they did not believe a lease-versus-purchase analysis was required because the new equipment was either replacing old equipment that was previously approved or could be deployed. Accordingly, the Air Force purchased two forklifts in 2013 without conducting lease-versus-purchase analyses because the forklifts were replacing old forklifts that were authorized in 1997 and 2005. Furthermore, Air Force officials told us that both of these forklifts could be deployed and indicated that lease-versus-purchase analyses are not required for deployable equipment. However, the Air Force does not have guidance that describes the circumstances that require either a lease-versus-purchase analysis or documentation of the rationale for not completing such analysis. Although we identified several instances in which officials in the three selected agencies did not document lease-versus-purchase analyses, officials from these agencies stated that they consider mission needs and equipment availability, among other factors, when making these decisions. For example, Air Force officials told us following Hurricane Sandy, staff at Langley Air Force Base in Virginia used rental equipment to clean and repair the base because the equipment was needed immediately to ensure the base could meet its mission. Moreover, availability of heavy equipment for lease or rental, which can be affected by factors such as geography and competition for equipment, is a key consideration. For example, FWS officials told us that the specialized heavy equipment sometimes needed may not be available for long-term lease or rent in remote areas such as Alaska and the Midway Islands, so the agency purchases the equipment. In addition, some agency officials told us that they may purchase heavy equipment even if that equipment is needed only sporadically if there is likely to be high demand for rental equipment. For example, following inclement weather or a natural disaster, demand for certain heavy equipment rentals can be high and equipment may not be available to rent when it is needed. While we recognize that mission needs and other factors are important considerations, without greater clarity regarding when to conduct or document lease-versus-purchase analyses, officials at FWS, NPS, and Air Force may not be conducting such analyses when appropriate and may not always make the best acquisition decisions. These agencies could be overspending on leased equipment that would be more cost- effective if purchased or overspending to purchase equipment when it would be more cost-effective to lease or rent. Moreover, without documenting decisions on whether to purchase or lease equipment, they lack information that could be used to inform future acquisition decisions for similar types of equipment or projects. Air Force guidance requires that fleet managers collect utilization data for both vehicles and heavy equipment items, such as the number of hours used, miles traveled, and maintenance costs. The Air Force provided us with utilization data for over 18,000 heavy equipment items and uses such data to inform periodic base validations. Specifically, Air Force officials said that every 3 to 5 years each Air Force base reviews the on- base equipment to ensure that the installation has the appropriate heavy equipment to complete its mission and reviews utilization data to identify items that are underutilized. If heavy equipment is considered underutilized, the equipment is relocated—either moved to another location or sent to the Defense Logistics Agency for reuse or transfer to another agency. According to Air Force officials the Air Force has relocated over 700 heavy equipment items based on the results of the validation process and other factors such as replacing older items and agency needs since 2014. Similarly, FWS guidance for managing heavy equipment utilization sets forth minimum utilization hours for certain types of heavy equipment and describes requirements for reporting utilization data. FWS provided us with utilization data on over 3,000 heavy equipment items. According to officials, condition assessments of heavy equipment are required by FWS guidance every 3 to 5 years. According to FWS officials, condition assessments inform regional-level decision making about whether to move equipment to another FWS location or dispose of the equipment. In contrast, NPS does not require the collection of utilization data to evaluate heavy equipment use and does not have guidance for managing heavy equipment utilization. However, NPS officials told us that they recognize the need for such guidance. NPS officials shared with us draft guidance that they have developed, which would require collection of utilization data for heavy equipment such as hours or days of usage each month. According to NPS officials, they plan to send the guidance to the NPS policy office for final review in March 2018. Until this guidance is completed and published, NPS is taking interim actions to manage the utilization of its heavy equipment. For example, NPS officials stated that they have asked NPS locations to collect and post monthly utilization data, discussed the collection of utilization data at fleet meetings, and distributed job aids to support this effort. During the course of our review, NPS officials provided us with some utilization data for about 1,400 of the more than 2,400 NPS heavy equipment items. Specifically, for the 1,459 heavy equipment items for which NPS provided utilization data, 541 items had utilization data for each month. For the remaining 918 items, utilization data were reported for some, but not all months. The federal government has spent billions of dollars to acquire heavy equipment. There is no requirement that agencies report on the inventory of this equipment, as there is no standard definition of heavy equipment. When deciding how to acquire this equipment, agencies’ should conduct a lease-versus-purchase analysis as provided in the FAR, which is a critical mechanism to ensure agencies are acquiring the equipment in the most cost-effective manner. Because FWS, NPS and the Air Force were unclear when such an analysis was required, they did not consistently conduct or document analyses of whether it was more economical to purchase or lease heavy equipment. In the absence of clarity on the circumstances in which lease-versus-purchase analyses for heavy equipment acquisitions are to be conducted and documented, the agencies may not be spending funds on heavy equipment cost- effectively. We are making two recommendations—one to the Air Force and one to the Department of the Interior. The Secretary of the Air Force should develop guidance to clarify the circumstances in which lease-versus-purchase analyses for heavy equipment acquisitions are to be conducted and documented. (Recommendation 1) The Secretary of the Interior should further clarify in guidance the circumstances in which lease-versus-purchase analyses for heavy equipment acquisitions are to be conducted and documented. (Recommendation 2) We provided a draft of this report to the Departments of Agriculture, Defense, Energy, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, State, and Veterans Affairs; General Services Administration; National Aeronautics and Space Administration; National Science Foundation; Nuclear Regulatory Commission; Office of Personnel Management; and U.S. Agency for International Development. The departments of Agriculture, Energy, Homeland Security, Housing and Urban Development, Justice, State and Veterans Affairs, as well as the General Services Administration, National Aeronautics and Space Administration, National Science Foundation, Nuclear Regulatory Commission, Office of Personnel Management; and U.S. Agency for International Development did not have comments. The Department of Labor provided technical comments, which we incorporated as appropriate. In written comments, reproduced in appendix III, the Department of Defense stated that it concurred with our recommendation and plans to issue a bulletin to Air Force contracting officials. In written comments, reproduced in appendix IV, the Department of the Interior stated that it concurred with our recommendation and plans to implement it. If you or members of your staff have any questions about this report, please contact me at (202) 512-2834 or RectanusL@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix V. Specialized Trucks and Trailers 37 . Self-Propelled Warehouse Trucks and Tractors 1,733 3 . . . . . . . . . . . . . . . . . . . Specialized Trucks and Trailers 7 . Self-Propelled Warehouse Trucks and Tractors 2,925 134 . . . . . . . . . . . . . . . . . . Specialized Trucks and Trailers . Self-Propelled Warehouse Trucks and Tractors 146 . . . . . . 7 . . . - 109 . . . Self-Propelled Warehouse Trucks and Tractors 575 64 40 . . . . . . . . . . . 4 . . . . . . . . . Nuclear Regulatory Commission Office of Personnel Management Social Security Administration United States Agency for International Development Grand Total . . . . This report addresses: (1) the number, type, and cost of heavy equipment items that are owned by the 24 CFO Act agencies; (2) the heavy equipment items selected agencies have recently acquired and how selected agencies decided to purchase or lease this equipment; and (3) how selected agencies manage the utilization of their heavy equipment. To identify the number, type, and cost of heavy equipment owned by federal agencies, we first interviewed officials at the General Services Administration to determine whether there were government-wide reporting requirements for owned heavy equipment and learned that there are no such requirements. We then obtained and analyzed data on agencies’ spending on equipment purchases and leases from the Federal Procurement Data System–Next Generation (FPDS-NG), which contains government-wide data on agencies’ contracts. However, in reviewing the data available and identifying issues with the reliability of the data, we determined that data on contracts would not be sufficient to answer the question of what heavy equipment the 24 CFO Act agencies own. We therefore conducted a data collection effort to obtain heavy equipment inventory information from the 24 CFO Act agencies, which are the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, the Treasury, and Veterans Affairs; Environmental Protection Agency; General Services Administration; National Aeronautics and Space Administration; National Science Foundation; Nuclear Regulatory Commission; Office of Personnel Management; Small Business Administration; Social Security Administration; and Agency for International Development. Because there is no generally accepted definition of heavy equipment, we identified 12 federal supply classes in which the majority of items are self- propelled equipment but not passenger vehicles or items that are specific to combat and tactical purposes, as these items are generally not considered to be heavy equipment. (See table 5.) We then vetted the appropriateness of these selected supply classes with Interior, FWS, NPS, and Air Force agency officials, as well as with representatives from a fleet management consultancy and a rental company, and they generally agreed that items in selected federal supply classes are considered heavy equipment. Federal supply classes are used in FPDS- NG and are widely used in agencies’ inventory systems. Overall, about 90 percent of the heavy equipment items that agencies reported were assigned a federal supply class in the agency’s inventory data. In discussing heavy equipment categories in the report, we use the category titles below. To identify points of contact at the 24 CFO Act agencies, we obtained GSA’s list of contact information for agencies’ national utilization officers, who are agency property officers who coordinate with GSA. As a preliminary step, we contacted these individuals at each of the 24 CFO Act agencies and asked them to either confirm that they were the appropriate contacts or provide contact information for the appropriate contact and to inform us if they do not own heavy equipment. Officials at 4 agencies—Department of Education, Department of the Treasury, General Services Administration, and Small Business Administration— indicated that the agency did not own any items in the relevant federal supply classes. Officials at 16 of these agencies indicated that they would be able to respond on a departmental level because the relevant inventory data are maintained centrally, while officials at 4 agencies indicated that we would need to obtain responses from officials at some other level because the relevant inventory data are not maintained centrally. (See table 7 for a list of organizations within the 20 CFO Act agencies that indicated they own relevant equipment and responded to our data collection effort.) After identifying contacts responsible for agencies’ heavy-equipment inventory data, we prepared data collection instruments for requesting information on heavy equipment and tested these documents with representatives from 4 of the 20 CFO Act agencies that indicated they own heavy equipment to ensure that the documents were clear and logical and that respondents would be able to provide the requested data and answer the questions without undue burden. These agency representatives were selected to provide a variety of spending on federal supply group 38 equipment as reported in FPDS-NG, civilian and military agencies, and different levels at which the agency would be responding to the data collection effort (e.g., at the departmental level or at a sub- departmental level). Our data collection instrument requested the following data on respondent organizations’ owned assets in 12 federal supply classes as of June 2017: Respondents provided data on original acquisition costs in nominal terms, with some acquisitions occurring over 50 years ago. In order to provide a fixed point of reference for appropriate comparison, we present in our report inflation-adjusted acquisition costs using calendar year 2016 as the reference. To adjust these dollar amounts for inflation, we used the Bureau of Labor Statistic’s Producer Price Index by Commodity for Machinery and Equipment: Construction Machinery and Equipment (WPU112), compiled by the Federal Reserve Bank of St. Louis. We conducted the data collection effort from July 2017 through October 2017 and received responses from all 20 agencies that indicated they own heavy equipment. In order to assess the reliability of agencies’ reported data, we collected and reviewed agencies’ responses regarding descriptions of their inventory systems, frequency of data entry, agency uses of the data, and agencies’ opinions on potential limitations of the use of their data in our analysis. We conducted some data cleaning, which included examining the data for obvious errors and eliminating outliers. We did not verify the data or responses received; the results of our data collection effort are used only for descriptive purposes and are not generalizable beyond the 24 CFO Act agencies. Based on the steps we took, we found these data to be sufficiently reliable for our purposes. To determine the heavy equipment items that selected agencies recently acquired and how these agencies decided whether to purchase or lease this equipment, we first used data from the FPDS-NG to identify agencies that appeared to have the highest obligations for construction or heavy equipment, or both, and used this information, along with other factors, to select DOD and Interior. At the time, in the absence of a generally accepted definition of heavy equipment, we reviewed data related to federal supply group 38—construction, mining, excavating, and highway maintenance equipment—because (1) we had not yet defined heavy equipment for the purposes of our review; (2) agency officials had told us that most of what could be considered heavy equipment was in this federal supply group; and (3) our analysis of data from usaspending.gov showed that about 80 percent of spending on items that may be considered heavy equipment were in this federal supply group. In meeting with officials at these departments, we learned that agencies within each department manage heavy equipment independently, so we requested current inventory data for Interior bureaus and the DOD military departments and selected three agencies that had among the largest inventories of construction and/or heavy equipment at the time, among other criteria: the U.S. Air Force (Air Force); the Fish and Wildlife Service (FWS); and the National Park Service (NPS). We then used information from our data collection effort—which included the number, type, cost, acquisition year and other data elements—to determine heavy equipment items that these agencies acquired during 2012 through 2016. We interviewed agency officials to determine what lease data were available from the three selected agencies. We assessed the reliability of these data with agency official interviews and reviewed the data for completeness and potential outliers. We determined that the data provided were sufficiently reliable for the purposes of documenting leased and rental heavy equipment. We also obtained data from GSA’s Short- Term Rental program, which had previously been limited to passenger vehicles, in part program for August 2012, when the first item was rented under this program, to February 2017, when GSA provided the data. We used these data to identify selected agencies’ rentals of heavy equipment through GSA’s Short-Term Rental program, which had previously been limited to passenger vehicles, in part program and associated costs. We interviewed officials from GSA’s Short-Term Rental program to discuss the program history as well as the reliability of their data on these rented heavy equipment items. We determined that the data were sufficiently reliable for our purposes. To determine how the three selected agencies decide whether to purchase or lease heavy equipment, we interviewed fleet and property managers at these selected agencies and asked them to describe their process for making these decisions as well as to identify relevant federal and agency regulations and guidance. We reviewed relevant federal and agency regulations and guidance regarding how agencies should make these decisions, including: Federal Acquisition Regulation, Office of Management Budget’s A-94, Guidelines and Discount Rates for Benefit- Cost Analysis of Federal Programs, Defense Federal Acquisition Regulation Supplement, Air Force Manual 65-506, Air Force Guidance Memorandum to Air Force Instruction 65-501, and Interior’s Guidance On Lease Versus Purchase Analysis and Capital Lease Determination for Equipment Leases. We also reviewed the Standards for Internal Control in the Federal Government for guidance on documentation as well as past GAO work that reviewed agencies’ lease-versus-purchase analyses. To determine whether the three selected federal agencies documented lease-versus-purchase decisions for selected acquisitions and adhered to relevant agency guidance, we selected and reviewed a non-generalizable sample of 10 heavy equipment acquisitions—two purchases each from the Air Force, FWS, and NPS, and two leases each from the Air Force and FWS. Specifically, we used inventory data obtained through our data collection effort, described above, to randomly select two heavy equipment purchases from each selected agency using the following criteria: calendar years 2012 through 2016; the two federal supply classes most prevalent in each selected agency’s heavy equipment inventory, as determined by the data collection effort described above; and for NPS and FWS, acquisition costs of over $15,000. In addition, we used lease data provided by the Air Force and FWS to randomly selected two heavy equipment leases per agency. Because NPS could not provide data on heavy equipment leases, we did not select or review any NPS lease decisions. To select the Air Force and FWS leases we used the following criteria: fiscal years 2012 through 2016; for the Air Force, which included federal supply classes in the lease data provided, the two federal supply classes most prevalent in the lease data and for FWS, which did not include federal supply class in the lease data provided, the two federal supply classes most prevalent in the purchase data; and for FWS, leases over $15,000. After selecting these acquisitions, we determined that one FWS lease and one NPS purchase we selected pre-dated Interior’s 2013 guidance on lease-versus-purchase analysis and excluded these acquisitions from our analysis for a total of eight acquisitions. In reviewing agencies’ documentation related to these acquisitions, we developed a data collection instrument to assess the extent to which agencies documented lease-versus-purchase analyses and, in the case of FWS and NPS, adhered to relevant Interior guidance. We supplemented our review of these acquisition decisions with additional information by interviewing officials at the three selected agencies and requesting additional information to understand specific circumstances surrounding each procurement. Our findings are not generalizable across the federal government or within each selected department. To determine how selected agencies manage heavy equipment utilization, we interviewed officials at the three selected agencies to identify departmental and agency-specific guidance and policies and to determine whether utilization requirements exist. We reviewed guidance identified by these officials, including Interior and Air Force vehicle guidance, both of which apply to heavy equipment, and FWS’s Heavy Equipment Utilization and Replacement Handbook. We also compared their practices to relevant Standards for Internal Control in the Federal Government. For the selected agencies with guidance for managing heavy equipment—Air Force and FWS—we reviewed the guidance to determine if and how selected agencies measured and documented heavy equipment utilization. For example, we reviewed whether selected agencies developed reports for managing heavy equipment utilization such as Air Force validation reports and FWS conditional assessment reports. We also reviewed Air Force, FWS, and NPS utilization data for heavy equipment but we did not independently calculate or verify the utilization rate for individual heavy equipment items because each heavy equipment item (backhoe, forklift, tractor, etc.,) has different utilization requirements depending on various factors such as the brand, model, or age of equipment. However, we did request information about agency procedures to develop and verify utilization rates. We assessed the reliability of the utilization data with agency official interviews and a review of the data for completeness and potential outliers. We determined that the data were sufficiently reliable for the purposes of providing evidence of utilization data collection for heavy equipment assets. We also visited the NPS George Washington Memorial Parkway to interview equipment maintenance officials regarding the procurement and management of heavy equipment and to document photos of heavy equipment. We selected this site because of its range of heavy equipment and close proximity to the Capital region. We conducted this performance audit from October 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, John W. Shumann (Assistant Director), Rebecca Rygg (Analyst in Charge), Nelsie Alcoser, Melissa Bodeau, Terence Lam, Ying Long, Josh Ormond, Kelly Rubin, Crystal Wesco, and Elizabeth Wood made key contributions to this report.

 

 Report 2:
Since 2001, DOD’s total workforce has changed in size and composition. DOD’s military, civilian, and contractor workforces peaked around 2011 and have since decreased in size, as shown in figure 1. Several factors have contributed to changes in the size of the workforces including varying levels of U.S. involvement in the conflicts in Iraq and Afghanistan, military to civilian and contractor conversions, contractor insourcing, and the growth in certain workforces such as acquisition and cyber. DOD’s management of its workforce is governed by several workforce management statutes, including sections 129, 129a, and 2463 of Title 10 of the United States Code. Section 129 directs that DOD civilian personnel be managed each fiscal year on the basis of, and consistent with, total-force management policies and procedures established under section 129a, the workload required to carry out the functions and activities of the department, and the funds made available to the department each fiscal year. Section 129a directs the Secretary of Defense to establish policies and procedures for determining the most appropriate and cost-efficient mix of military, civilian, and contracted services to perform the mission of the department. Finally, Section 2463 directs the Under Secretary of Defense for Personnel and Readiness to devise and implement guidelines and procedures to ensure that consideration is given to using, on a regular basis, DOD civilian employees to perform new functions and functions performed by contractors that could be performed by DOD civilian employees. DOD Instruction 1100.22, Policy and Procedures for Determining Workforce Mix (April 12, 2010) (Change 1, Dec. 1, 2017) establishes policy, assigns responsibilities, and prescribes procedures for determining the appropriate workforce mix of the military, civilian, and contracted services. The instruction provides criteria for workforce-mix decisions and directs DOD components to conduct a cost comparison to determine the low-cost provider for all new or expanding mission requirements and for functions that have been contracted but could be performed by DOD civilian employees. In addition, over the past 10 years DOD has taken steps to better understand the costs associated with its workforces. For example, we found in September 2013 that DOD had improved its methodology for estimating and comparing the full cost of work performed by military and civilian personnel and contractor support, but the methodology continued to have certain limitations, such as the lack of guidance for certain cost elements related to overhead. We made five recommendations, including for DOD to assess the advantages and disadvantages of allowing the continued use of different cost-estimation tools across the department or directing department-wide application of one tool, and revise its guidance in accordance with the findings of its assessment. DOD implemented this recommendation but has not yet implemented the other four recommendations although it concurred or generally concurred with them. DOD’s Cost-Comparison Report addressed three elements and partially addressed one element concerning the accounting for the fully-burdened, or full, cost of federal civilian and service contractor personnel performing functions at the selected installations, as shown in table 1. DOD concluded that for the 21,000 federal civilians and service contractors compared, neither federal civilians nor service contractors were predominately more or less expensive, with the costs being dependent upon the function being performed, location, and level of expertise. DOD noted that the results were not generalizable across the department. Each of the elements and our assessment are discussed below. We believe that DOD addressed the reporting element to assess performance of functions performed by civilian and contractor personnel by developing a methodology to assess performance of functions performed by federal civilians and service contractors at organizations within nine geographic regions including two locations outside the continental United States. Organizations included in DOD’s methodology include the following: Fort Belvoir Community Hospital Defense Threat Reduction Agency US Army Intelligence and Security Command Aviation and Missile Research, Development, and Engineering Center Naval Medical Center San Diego Space and Naval Warfare Systems Command Ogden Air Logistics Complex 75th Air Base Wing Naval Facilities Engineering Command Tripler Army Medical Center DOD’s methodology included the following: Selecting installations and organizations: DOD used data from the Defense Civilian Personnel Data System to identify military installations with large reported numbers of federal civilians. According to DOD officials, they eliminated from consideration those installations that had no reported contractors. From this subset of installations, DOD selected organizations to represent all three military departments and diverse geographical locations, to include two locations outside the continental United States. Assessing the functions performed by civilians and contractors to identify federal civilians and service contractors performing similar functions: DOD assessed the performance of functions at these selected locations to identify federal civilians and service contractors performing similar functions as there is no direct mapping or perfect match between existing taxonomies used to quantify federal civilian positions and contracted services. Further, DOD reported that the day-to-day functions performed by federal civilian employees do not always directly correlate to the designated occupational series or the job title for their position. For example, an individual with an occupational series assigned as an accountant may actually perform work more consistent with that of a financial analyst. According to DOD’s Cost-Comparison Report, DOD did not rely on occupational series names or job titles alone to determine the actual work being performed by federal civilians. Specifically, DOD conducted site visits with each organization and relied on local managers’ direct knowledge of the actual tasks that their federal civilians and service contractor personnel performed. According to DOD’s Cost-Comparison Report, DOD determined that personnel need to perform at least 80 percent common tasks to be able to make a comparison. For the organizations selected, DOD compared the costs of all federal civilians and service contractors identified as performing similar functions. The challenges DOD identified in DOD’s Cost-Comparison Report on determining the functions performed by contractor personnel are similar to those we encountered in our prior work on DOD’s efforts to compile and review of an inventory of contracted services. Section 2330a of Title 10 of the U.S. Code directs the Secretary of Defense to annually prepare an inventory of activities performed during the preceding fiscal year pursuant to staff augmentation contracts. Section 2330a also directs the secretary of each military department and head of each defense agency responsible for activities in the inventory to, within 90 days after the Secretary of Defense submits the inventory, review the contracts and activities in the inventory for which that secretary or agency head is responsible, in part to identify activities that should be considered for conversion. Our prior work has identified, among other issues, that the absence of a complete and accurate inventory of contracted services hinders DOD’s management of these services. According to DOD officials, the Office of the Under Secretary of Defense (Personnel and Readiness) has also recognized the challenges associated with the various taxonomies and lexicons associated with articulating the size and composition of federal civilian, military, and contracted services workforces, and has efforts underway with the goal of better aligning those to enable more holistic total force management of all sources of labor. According to DOD officials, by improving available workforce data, DOD can support better-informed leadership decisions, improve accuracy of analyses, and provide consistent explanations of the department’s workforce resources. DOD officials told us that this effort has an estimated completion of December 2018. We believe that DOD partially addressed the reporting element to account for the full cost of civilian and contractor personnel by providing an accounting of the labor costs of selected federal civilian and service contractor full-time equivalents for personnel performing similar functions at government-owned facilities during calendar year 2015, but excluding certain non-labor costs from its cost calculations. According to DOD officials, 2015 was the last year for which complete data were available. DOD developed a methodology for identifying labor costs associated with federal civilian and service contractor full-time equivalents during calendar year 2015 at government-owned facilities for its cost comparisons. Based on reviews of applicable guidance and consultations with the Office of the Under Secretary of Defense – Comptroller, DOD included numerous federal civilian costs collected from several sources in DOD’s Cost Comparison Report, as shown in table 2. In addition, to assure data quality, DOD officials told us that they took steps to identify data errors in the data collected including identifying missing data fields and data entries that might indicate data errors. For example, DOD officials told us that they verified that they had pay records for every pay period in calendar year 2015 by identifying potential errors and outliers and sharing these with the Defense Finance and Accounting Service and the selected DOD organizations for review. Officials also stated that DOD sent its complete calculated data sets to each organization for review against their own pay records and that all errors were corrected or outliers were explained. Additionally, according to our analysis, DOD excluded overtime from its costs related to federal civilians in accordance with Office of Management and Budget Circular A-11. However, DOD included overtime pay in its report separately for context and noted that overtime pay is a significant part of civilian compensation for some organizations. Officials noted that those funded via a working capital fund arrangements, such as depots, use overtime to handle surges in demand throughout the year. DOD noted in its report that selected service contracts at government facilities and developed three methodologies to identify labor costs associated with service contractor full-time equivalents during calendar year 2015, as shown in table 3. DOD stated in its report that identifying service contractor full-time equivalents is a significant challenge because the level of detail available in each contract varied such that DOD could not employ a single methodology, and unlike federal civilian pay data, there is no centralized database on service-contractor pay. DOD reported that contracts are rarely written to address the cost-per-contractor as a full-time equivalent, and some contracts do not differentiate between labor and non-labor costs. DOD noted in its report that the negotiated price of the contract includes direct costs, including labor and non-labor costs, and indirect costs such as overhead. Further, the contract costs include service contractor profit. Based on our review of DOD’s Cost-Comparison Report, DOD used non- excludable contract costs as a basis in two of its methodologies. These costs to DOD are associated with labor, and include pay and benefits provided to service contractor personnel, contractor profit, and overhead the contractor included in the cost of the contract. When the number of service contractor full-time equivalents and full costs for a contract was known, DOD used the first method, dividing contract costs by the number of service contractor full-time equivalents to arrive at the cost per service contractor full-time equivalent. When the number of billable hours was known, DOD used the second method, multiplying the ratio of contract costs divided by billable hours by a standard number of annual billable hours. For contracts in which the labor rate was known but costs could not be disaggregated, DOD multiplied the labor rate by a standard 1,880 annual billable hours unless a contract specified the labor rate as a number of annual billable hours. For example, Defense Logistics Agency contractor-labor rates for wage grade equivalent contractor full-time equivalents are based on 2,080 annual labor hours. We assessed DOD’s report as partially addressing the reporting element to account for the full cost of federal civilian and contractor personnel because DOD excluded certain non-labor costs from its costs calculations—(1) direct non-labor costs for government owned facilities and government provided supplies, (2) indirect costs for general and administrative and overhead for civilians, and (3) costs to manage contracts—from its costs calculations. Senate Report 114-49 stated that DOD is to include an accounting of the full cost of DOD federal civilian and service contractors performing similar functions, including facility overhead. DOD stated in its report that the methodology utilized to compare the costs of federal civilian and service contractor full-time equivalents was consistent with DOD Instruction (DODI) 7041.04, Estimating and Comparing the Full Costs of Civilian and Active Duty Military Manpower and Contract Support (July 3, 2013), hereafter referred to DODI 7041.04. However, DODI 7041.04 states that the full cost of personnel should include direct and indirect non-labor costs, such as those referenced previously. DOD officials stated that they considered including non-labor costs in their calculations but did not because they believe these costs would add approximately the same to both federal civilian and service contractor costs. DODI 7041.04 instructs that if a function is performed on government property, the costs of goods, services, and benefits that are common costs may be excluded provided the number of government and contactor personnel is equivalent. DODI 7041.04 further instructs that when the number of government and contractor personnel differs, adjustments must be made to the cost estimates to account for the difference in number of government and contractor personnel. While there were some instances where it was the case that DOD’s cost estimates involved an equal number of civilian and contractor personnel performing functions on government property, there were many instances in where the personnel numbers differed and common costs should not have been excluded. For example, in DOD’s comparisons of federal civilians and service contractors at Fort Belvoir Community Hospital, DOD conducted comparisons of 19 functions where 2 functions had equal numbers of federal civilian and service contractors and 17 functions had differing numbers of federal civilian and service contractors. In one comparison, the number of contractors was over three times the number of civilians. DOD officials also stated that they believe their methodology is in accordance with DODI 7041.04 because DODI 7041.04 states that the cost elements in the instruction can be modified or augmented in each specific case as necessary, but DOD components should be prepared to support such decisions with sufficient justification. We acknowledge that DODI 7041.04 states that the cost elements can be modified, but by excluding non-labor costs in its cost comparisons, DOD did not account for the full cost of federal civilians and service contractors as requested in the mandate. We believe that DOD addressed the reporting element to compare costs by comparing its calculated costs of selected federal civilians and service contractors performing similar functions at selected installations. DOD reported that its results represent selected personnel performing functions within selected organizations and are not generalizable across the department. DOD concluded that for the federal civilian and contractor full-time equivalents included in the study, the costs varied by organization, location, and function being performed. DOD presented comparisons of federal civilian and service contractor full-time equivalents costs and expressed these results as a cost ratio. However, it is not clear how the results would be different if all costs that encompass full costs of personnel would have been included in DOD’s comparisons. See tables 4 and 5 below for examples of greater costs for the performance of functions by federal civilians or service contractors at Fort Belvoir Community Hospital in Fort Belvoir, Virginia. We believe that DOD addressed the reporting element by assessing the flexible employment authorities for the employment and retention of federal civilian employees at the same 17 organizations used for the cost comparison. Specifically, DOD sent questionnaires to DOD hiring officials and human resource professionals to collect information on flexible employment authorities. DOD included a broad spectrum of organizational missions in its query of management and human resource officials regarding the use and availability of flexible hiring authorities. Noting that this assessment is more subjective than the others in DOD’s Cost-Comparison Report, DOD queried senior leaders, middle managers, front-line supervisors and human resource professionals regarding which authorities are being used and the effectiveness of each. According to DOD’s report, in this way, DOD was able to gauge the extent to which each type of authority was used as well as the satisfaction with and effectiveness of each. DOD’s Cost-Comparison Report made several conclusions regarding flexible hiring authorities and made one recommendation. The findings included that there was a variance in the authorities used between organizations, management unfamiliarity with all available authorities, and a belief among managers that expanded use of some authorities is needed to produce more quality hires. DOD’s Cost- Comparison Report recommended DOD and OPM should explore opportunities to refine, consolidate, or reduce unused, inefficient, or cumbersome hiring authorities. We provided a draft of this report to DOD for review and comment. In written comments, DOD non-concurred with our assessment that DOD partially addressed the mandated reporting element to provide an accounting of the fully-burdened cost of federal civilian and service contractor personnel performing functions at the selected installations to include training, benefits, reimbursable costs, and facility overhead. DOD’s comments are reproduced in their entirely in appendix I. DOD also provided technical comments, which we incorporated as appropriate. DOD stated that we presented the three reporting elements identified in the congressional mandate absent the full context and congressional intent. Specifically, DOD stated that in the congressional mandate, the list of elements to be included in the report is not a stand-alone list and DOD stated that we present the elements as a stand-alone list. DOD further stated that the list of elements in the mandate is preceded by a paragraph that we did not reproduce in our report, but which provides context and congressional intent for the reporting elements. We do not believe that the language omitted from our report changes the meaning of the reporting elements to be included in DOD’s cost comparison report because the paragraph omitted clearly states that the purpose of the report is to provide the results of a study that includes a comparison of the fully-burdened cost of the performance of functions by DOD civilian personnel with the fully-burdened cost of the performance by DOD contractors. The paragraph preceding the reporting elements and the elements reads as follows: The committee directs the Secretary of Defense to submit to the Committees on Armed Services of the Senate and the House of Representatives, and to the Comptroller General of the United States, a report setting forth the results of a study, conducted by the Secretary for the purposes of the report, of a comparison of the fully-burdened cost of performance of functions by Department of Defense (DOD) civilian personnel with the fully-burdened cost of the performance of functions by DOD contractors by no later the February 1, 2016. The study shall include: (1) An assessment of performance of such functions at six DOD installations selected by the Secretary for purposes of the study from among DOD installations at which functions are performed by an appropriate mix of civilian personnel and contractors, with four such installations to be located in the continental United States and two such installations to be located outside the continental United States; (2) An accounting of the fully-burdened cost of DOD civilian personnel and contractors performing functions for DOD (including costs associated with training, benefits, reimbursable costs under chapter 43 of title 41, United States Code, and facility overhead) in order to permit a direct comparison between the cost of performance of functions by DOD civilian personnel and the cost of the performance of functions by contractors; (3) A comparison of the cost of performance of the full range of functions, required expertise, and managerial qualities required to adequately perform the function to be compared, including: a. Secretarial, clerical, or administrative duties, including data entry; b. Mid-level managers and other personnel possessing special expertise or professional qualifications; c. Managers and other leadership; and d. Personnel responsible for producing congressionally-directed reports. The committee recommends that, in conducting the study, the Secretary should take into account the policy that inherently governmental functions vital to the national security of the United States may not be performed by contractor personnel. The report required shall include an assessment of the flexible employment authorities available to the Secretary for the employment and retention of civilian employees of the DOD, including an identification of such additional flexible employment authorities as the Secretary considers appropriate to shape the civilian personnel workforce of the DOD. Not later than 120 days after receipt of such report, the Comptroller General shall submit to Congress a report that includes an assessment of the adequacy and sufficiency of the report submitted by the Secretary, including any recommendations for policy or statutory change as the Comptroller deems appropriate. As we reported, DOD noted in its cost comparison report that it identified labor costs used in its comparisons. However, DOD did not include direct and indirect non-labor costs and DODI 7041.04 states that the full cost of personnel should include these non-labor costs as we discussed earlier in the report. Therefore, DOD only partially addressed the reporting provision. In addition, DOD stated that we omit relevant language related to congressional intent for the second reporting element (i.e., an accounting of the fully-burdened cost of DOD civilian personnel and contractors). DOD stated that the text, “. . . in order to permit a direct comparison between the cost of performance of functions by DOD civilian personnel and the cost of the performance of the function by contractors,” conveys the congressional intent that the study is for comparison and our exclusion of the text in our restatement of the element omitted language indicating relevant Congressional intent. We do not believe that the language omitted in our report changed the meaning of the reporting element, which is that DOD was to include an accounting of the fully- burdened costs of federal civilians and service contractors in its cost comparisons. DOD further stated that we did not assess the second reporting element (i.e., an accounting of the fully-burdened cost of DOD civilian personnel and contractors) as it is directly stated but rather that we assessed the element by redefining it and then asserting that DOD partially addressed it. DOD noted that the direct language of the second reporting element is for DOD to include an “accounting” of the fully burdened cost of DOD civilian personnel and contractors. DOD asserted that we misinterpreted the meaning of “accounting” when we determined that DOD partially addressed the mandate because it did not “calculate” certain non-labor costs. We disagree. As we discuss in our report, DOD did account for the labor costs associated with federal civilian and service contractors by gathering labor cost data from several sources, but it did not include non- labor costs in its cost calculations. In order to account for the fully burdened costs of federal civilians and service contractors, as directed to do so by the preamble to the reporting elements, as well as the second reporting element, DOD should have included all labor and non-labor costs in the cost calculations. DOD also stated that our assessment incorrectly implies that to “account” for costs is equivalent to “calculating” costs as evidenced by the following quote from our draft report, "We acknowledge that DODI 7041.04 states that the cost elements can be modified, but by excluding non-labor costs in its cost comparisons, DOD did not account for the full cost of federal civilians and service contractors as requested in the mandate." DOD stated that although DOD did not “calculate” some non-labor costs, they did “account” for them in accordance with DODI 7041.04 and as directed in the congressional mandate. DOD asserted that in multiple places, DODI 7041.04 states that common costs "are excluded" and "may be excluded" from cost comparisons. DOD provided facility costs as an example of non-labor costs accounted for but not calculated in its cost comparisons. DOD stated that in its report, all of the civilian positions and contractor functions are performed at government-owned facilities. Thus, facility costs are common costs and may be excluded. DOD stated that their report accounted for facility costs by recognizing that such costs exist and are common costs, thus, DOD properly excluded such costs in accordance with DODI 7041.04, and their report satisfied the Congressional mandate. We disagree. As mentioned above, the preamble to the mandated reporting elements and the second reporting element specifically directed that DOD account for the fully-burdened cost of DOD civilian and contractor personnel. Because there are multiple costs associated with civilian and contractor personnel, calculations are necessary in order to account for the full cost of these workforces. DODI 7041.04 instructs that if a function is performed on government property, the costs of goods, services, and benefits that are common costs may be excluded provided the number of government and contactor personnel is equivalent. While there were some instances where it was the case that DOD’s cost estimates involved an equal number of civilian and contractor personnel performing functions on government property, there were many instances where the personnel numbers differed and common costs should not have been excluded. For example, in DOD’s comparisons of federal civilians and service contractors at Fort Belvoir Community Hospital, DOD conducted comparisons of 19 functions where 2 functions had equal numbers of federal civilian and service contractors and 17 functions had differing numbers of federal civilian and service contractors. In one comparison, the number of contractors was over three times the number of civilians. DODI 7041.04 further instructs that when the number of government and contractor personnel differs, adjustments must be made to the cost estimates to account for the difference in number of government and contractor personnel. DOD did not make these adjustments in is calculations and as result non-labor costs should not have been excluded; therefore, DOD did not account for the fully- burdened costs, as directed by Congress. We are sending copies of this report to the appropriate congressional committees. We are also sending copies to the Secretary of Defense, the Director of the Office of Cost assessment and Program Evaluation and other interested parties. This report will also be available at no charge on our Web site at http://www.gao.gov. Should you or your staff have any questions concerning this report, please contact Brenda S. Farrell at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Vincent Balloon, Assistant Director; Timothy Carr, Felicia Lopez, Clarice Ransom, Michael Silver, and Norris “Traye” Smith made key contributions to this report. Department of Defense: Actions Needed to Address Five Key Mission Challenges, GAO-17-369 (Washington, D.C.: June 13, 2017) DOD Civilian and Contractor Workforces: Additional Cost Savings Data and Efficiencies Plan Are Needed, GAO-17-128 (Washington, D.C.: October 12, 2016) Federal Hiring: OPM Needs to Improve Management and Oversight of Hiring Authorities, GAO-16-521 (Washington, D.C.: August 2, 2016) DOD Service Acquisition: Improved Use of Available Data Needed to Better Manage and Forecast Service Contract Requirements, GAO-16-119 (Washington, D.C.: February 18, 2016) Civilian and Contractor Workforces: Complete Information Needed to Assess DOD’s Progress for Reductions and Associated Savings, GAO-16-172 (Washington, D.C.: December 23, 2015) DOD Inventory of Contracted Services: Actions Needed to Help Ensure Inventory Data Are Complete and Accurate, GAO-16-46 (Washington, D.C.: November 18, 2015) Sequestration: Comprehensive and Updated Cost Savings Would Better Inform DOD Decision Makers if Future Civilian Furloughs Occur, GAO-14-529 (Washington, D.C.: June 17, 2014) Human Capital: Opportunities Exist to Further Improve DOD’s Methodology for Estimating the Costs of Its Workforces, GAO-13-792 (Washington, D.C.: September 25, 2013) Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD’s Total Workforce, GAO-13-470 (Washington, D.C.: May 29, 2013) Defense Outsourcing: Better Data Needed to Support Overhead Rates for A-76 Studies, GAO/NSIAD-98-62 (Washington, D.C.: Feb. 27, 1998)

Question: Write a one-page summary of the report 1.

Answer: Federal agencies use heavy equipment such as cranes and forklifts to carry out their missions, but there is no government-wide data on federal agencies' acquisition or management of this equipment. GAO was asked to review federal agencies' management of heavy equipment. This report, among other objectives, examines: (1) the number, type, and costs of heavy equipment items that are owned by 20 federal agencies and (2) the heavy equipment that selected agencies recently acquired as well as how they decided whether to purchase or lease this equipment. GAO collected heavy equipment inventory data as of June 2017 from the 24 agencies that have chief financial officers responsible for overseeing financial management. GAO also selected three agencies (using factors such as the heavy equipment fleet's size) and reviewed their acquisitions of and guidance on heavy equipment. These agencies' practices are not generalizable to all acquisitions but provide insight into what efforts these agencies take to acquire thousands of heavy equipment items. GAO also interviewed officials at the three selected agencies. Of the 24 agencies GAO reviewed, 20 reported owning over 136,000 heavy equipment items such as cranes, backhoes, and forklifts, and spending over $7.4 billion (in 2016 dollars) to acquire this equipment. The remaining 4 agencies reported that they do not own any heavy equipment. The three selected agencies GAO reviewed in-depth—the Air Force within the Department of Defense (DOD), and the Fish and Wildlife Service and the National Park Service within the Department of the Interior (Interior)—spent about $360 million to purchase about 3,500 heavy equipment assets in calendar years 2012 through 2016 and over $5 million to lease heavy equipment from fiscal years 2012 through 2016. Officials from all three agencies stated that they consider mission needs and the availability of equipment leases when deciding whether to lease or purchase heavy equipment. Federal regulations provide that agencies should consider whether it is more economical to lease or purchase equipment when acquiring heavy equipment, and federal internal control standards require that management clearly document all transactions in a manner that allows the documentation to be readily available for examination. However, in reviewing selected leases and purchases of heavy equipment from these three agencies, GAO found that officials did not consistently conduct or document lease-versus-purchase analyses. Officials at the Air Force and Interior said that there was a lack of clarity in agency policies about when they were required to conduct and document such analyses. Without greater clarity on when lease-versus-purchase analyses should be conducted and documented, these agencies may not be spending funds on heavy equipment effectively. The Department of the Interior and the Air Force should clarify the circumstances in which lease-versus-purchases analyses for heavy equipment acquisitions are to be conducted and documented. The Departments of the Interior and Defense concurred with these recommendations.