United States Government Accountability Office

Washington, DC 20548 

March 26, 2007 

The Honorable Daniel K. Akaka 

Chairman 

The Honorable John Ensign 

Ranking Member 

Subcommittee on Readiness and Management Support 

Committee on Armed Services 

United States Senate 

Subject: Defense Services Acquisition: Questions for the Record 

On January 17, 2007, I testified before the Subcommittee on the Department of

Defense’s (DOD) management of its acquisition of services.1

 I made several key 

points during the hearing. First, DOD’s long-standing problems with contract 

management have become more prominent as DOD’s reliance on contractors to 

provide services continues to grow. Second, DOD lacks sound contracting 

practices when acquiring services. Third, DOD’s acquisition workforce has been 

downsized without sufficient attention to requisite skills and competencies. 

Fourth, DOD’s acquisitions have resulted in outcomes that have cost the 

department valuable resources. And, finally, while DOD is taking some steps to 

address these problems, it does not know how well its services acquisition 

processes are working, which part of its mission can best be met through buying 

services, and whether it is obtaining the services it needs while protecting DOD’s 

and the taxpayer’s interests. 

Within this context, members of the Subcommittee requested that GAO provide 

additional comments on DOD’s efforts regarding the following topics: interagency 

contracting, acquisition of services, acquisition reform, and the acquisition 

workforce. The questions and our answers are provided in appendix I. The 

responses are generally based on work associated with previously issued GAO 

products, which were conducted in accordance with generally accepted 

government auditing standards. Because the responses are based on prior work, 

we did not obtain comments from DOD. 

We will make copies of this letter available to others upon request, and it will be

available at no charge on the GAO Web site at http://www.gao.gov. If you have any 

questions about this letter or need additional information please contact me on

 1

GAO, Defense Acquisitions: DOD Needs to Exert Management and Oversight to Better Control Acquisition 

of Services, GAO-07-359T (Washington, D.C.: Jan. 17, 2007). 

Page 1 GAO-07-640R
(202) 512-4841 or schinasik@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page of this 

letter. Key contributors to this letter were Timothy DiNapoli, James Fuquay, Sara 

Margraf, Sylvia Schatz, Amelia Shachoy, and William Woods. 

Katherine V. Schinasi 

Managing Director 

Acquisition and Sourcing Management 

Attachment 

Page 2 GAO-07-640R 
Appendix I: GAO Responses to Questions for the Record 

Interagency Contracting

Question: What is the potential effectiveness of two corrective actions 

DOD has recently taken to improve oversight of interagency contracting—

a December 2006 memorandum from the Director of Defense Procurement 

and an October 2006 memorandum from the Defense Comptroller’s office? 

The October 2006 memorandum from the Comptroller, which was sent to DOD 

components, established policies and procedures for ordering goods and services 

that are not subject to the Economy Act that are purchased from non-DOD 

agencies. For example, it requires officials to provide evidence of market research 

and acquisition planning, and a statement of work that is specific, definite, and 

certain for non-Economy Act orders above the simplified acquisition threshold. 

The memorandum also included a checklist and responsibilities for DOD officials 

to use as guidance when placing orders through interagency contracts. These 

actions should help to address prior GAO recommendations for better defining 

contract requirements and outcomes, and the need for guidance on the use of 

interagency contracts. 

The December 2006 Memorandum of Agreement between DOD and the General 

Services Administration (GSA) serves to establish expectations for the parties 

involved in an interagency contracting transaction. For example, the 

memorandum proscribes that statements of work are complete, interagency 

agreements describe the work to be performed, and surveillance and oversight 

requirements are defined and implemented. The planned quarterly meetings for 

DOD and GSA to evaluate the effectiveness of the Memorandum of Agreement are 

a positive step. 

However, as the Acting Inspector General, DOD, pointed out during the January 

2007 hearing, the risks associated with interagency contracting are not new and 

require sustained attention. The use of these types of contracts continues to 

increase governmentwide, and our work and the work of the Inspector General 

have found that users and administrators lack expertise about how to use these 

contracts. In addition, adequate oversight is lacking. For example, DOD issued

guidance that was signed in October 2004 (effective January 1, 2005) that outlines 

procedures to be developed and general factors to consider in making the 

decision to use another agency’s contract. However, recent Inspector General 

audits have found that the guidance is not always followed. In March 2006, the 

DOD Comptroller issued a memorandum to the military departments, defense 

agencies, and other components stating that DOD purchases made through nonDOD entities continue to violate policies, existing regulations, and practices 

regarding the use and control of DOD funds under interagency agreements; the 

memorandum also stated that this situation needed improvement. Therefore, 

although recent DOD actions are welcome, DOD will need to continue to monitor 

Page 3 GAO-07-640R 
its use of interagency contracts and do more to define who is responsible for what 

in the contracting process. 

Acquisition of Services

Question: How do recent steps taken by DOD, such as the Under 

Secretary of Defense’s October 2006 memorandum concerning the reform 

of services acquisitions, compare to your recommendations regarding 

strategic and tactical management? 

DOD has taken a number of steps to improve its acquisition of services, but these 

steps do not fully address our recommendations regarding strategic and tactical 

management. For example, DOD’s October 2006 memorandum identified a 

number of improvements in its current management structure, including 

providing lower dollar thresholds for reviewing proposed services acquisitions 

and requiring senior DOD officials to annually review whether service contracts 

were meeting established cost, schedule, and performance objectives. Further, in 

its comments to our November 2006 report2

on DOD services acquisitions, DOD 

noted that it had made organizational changes to improve its strategic sourcing 

efforts; it was assessing the skills and competencies needed by its workforce to 

acquire services; and the military departments and defense agencies were 

conducting self-assessments intended to address contract management issues we 

identified in our high-risk report. Each of these efforts are steps in the right 

direction, but in our view, appeared to be primarily incremental improvements to 

DOD’s current approach to acquiring services. 

Question: What do you think DOD needs to do to further address the 

problems in the acquisition of services? 

At a fundamental level, we believe DOD needs to begin to proactively manage 

services acquisitions outcomes, an action that will involve making changes at both 

the strategic and transactional levels. In contrast, DOD’s approach to managing 

the acquisition of services has tended to be reactive, and, as noted above, DOD’s 

reform efforts appear to be primarily incremental improvements to existing 

processes. In our view, such incremental improvements will not place DOD in a 

position to proactively manage services. 

As we noted in our November 2006 report, DOD stated that it was examining the 

types and kinds of services it acquired and developing an integrated assessment of 

how best to acquire such services. DOD expected that this assessment would 

result in a comprehensive, departmentwide architecture for acquiring services 

that would, among other improvements, help refine the processes to develop 

requirements, ensure that individual transactions are consistent with DOD’s 

strategic goals and initiatives, and provide a capability to assess whether services 

acquisitions were meeting their cost, schedule and performance objectives. DOD 

 2

GAO, Defense Acquisitions: Tailored Approach Needed to Improve Service Acquisition Outcomes, GAO-07-

20 (Washington, D.C.: Nov. 9, 2006).

Page 4 GAO-07-640R 
expected this assessment would be completed in early 2007. Our discussions with 

DOD officials indicated that this architecture may hold potential for making the 

more fundamental change at the strategic and transactions levels that we have 

recommended. We cautioned, however, that the extent to which DOD successfully 

integrated the elements we identified would be key to fostering the appropriate 

attention and action needed to make services acquisitions a managed outcome. 

Question: Do you have any recommendations that Congress should 

consider to ensure that the progress made endures? 

Congressional oversight, including hearings such as this, plays a significant and 

important role in helping to assess progress, identify challenges, focus senior 

management attention, and hold DOD accountable for its actions. 

Acquisition Reform

Question: How do, or should, reforms in the acquisition of services fit 

within this Committee’s broader acquisition reform efforts? 

We believe that three elements transcend the type of goods or services DOD buys: 

recognizing that mission success depends heavily on a successful acquisition 

function and elevating senior leadership attention and accountability accordingly; 

ensuring that the government negotiates the best deal possible, a precursor of 

which is the market-based discipline of competition; and monitoring the outcome 

of acquisition decisions to ensure that the government gets what it pays for. 

Although improvements should be targeted according to facts and circumstances, 

the line between acquiring goods and acquiring services is blurring as DOD 

contracts out the management of its major systems acquisitions. The 

Subcommittee’s efforts to promote good practices are relevant for both the 

acquisition of goods and the acquisition of services. 

Question: Are there common lessons learned or processes to be applied 

between major weapon systems acquisition and services acquisitions 

reform? 

Services acquisitions parallel major weapon system acquisitions in that both 

should start with well-defined requirements, conduct sufficient market research, 

maximize competition, use qualified contractors, appropriately incentivize 

contractor performance, provide oversight or surveillance of the contractor’s 

performance, and accept and pay for only quality outcomes. Our work has 

repeatedly found weaknesses in these processes. As we noted in our January 2007 

testimony before the Subcommittee, DOD does not know how well its services 

acquisition processes are working and whether it is obtaining the services it needs 

while protecting DOD’s and the taxpayers’ interests. Key to achieving better 

outcomes will be DOD’s ability to translate well-meaning guidance and policy into 

actual practice. In trying to improve the acquisition of both goods and services, 

the underlying incentives that drive behavior—particularly funding—are most 

often ignored. 

Page 5 GAO-07-640R 
Acquisition Workforce

Question: The DOD workforce is an aging workforce and is losing much of 

its talent through retirement. The talent that does remain may not match 

up well with the skills needed to buy software-intensive, net-centric 

weapons. What are your views on the health and composition of the 

acquisition workforce? 

Although defining the acquisition workforce as the focus of attention is 

appropriate in some respects, the problems facing DOD today are broader as the 

increased demands on the acquisition workforce also stem, in part, from declines 

in the capacity of the overall DOD workforce and, in part, from the demands 

emanating from the requirements process. That said, we have raised concerns 

about the health and composition of DOD’s acquisition workforce for several 

years. DOD’s acquisition workforce must have the right skills and capabilities if it 

is to effectively implement best practices and properly manage the goods and 

services it buys. We noted in reports issued in 2003 and July 2006, however, that 

procurement reforms, changes in staffing levels, workload, and the need for new 

skill sets have placed unprecedented demands on the acquisition workforce. 

Further, DOD’s current civilian acquisition workforce level reflects the 

considerable downsizing that occurred in the 1990s. DOD carried out this 

downsizing without ensuring that it had the specific skills and competencies 

needed to accomplish DOD’s mission. As a result, these factors have challenged 

DOD’s ability to maintain a workforce with the requisite knowledge of market 

conditions and industry trends, the ability to prepare clear statements of work, an 

understanding of the technical details about the services they buy, and the 

capacity to manage and oversee contractors. In the case of the $160-billion Future 

Combat Systems program, for example, the Army chose to use a lead systems 

integrator because it did not believe it had the in-house resources or flexibility to 

field such a complex system in the time required.3

DOD has acknowledged that it faces significant workforce challenges that if not 

effectively addressed could impair the responsiveness and quality of acquisition 

outcomes. In June 2006, DOD issued a human capital strategy that identified a 

number of steps planned over the next 2 years to more fully develop a long-term 

approach to managing its acquisition workforce, including developing a 

comprehensive competency model for each functional career field including the 

technical tasks, knowledge, skills, abilities, and personal characteristics required 

of the acquisition workforce. 

 3

The Future Combat Systems program is a family of weapons, including 14 manned and unmanned ground

vehicles, air vehicles, sensors and munitions that will be linked by an information network. 

Page 6 GAO-07-640R 
Question: What are the immediate priorities that must be addressed to 

ensure that the workforce can meet the demands of today’s acquisitions? 

First, we have reported that senior DOD leaders need to set the appropriate tone 

at the top and ensure that its personnel adhere to sound contracting practices.4

Senior leadership is a critical factor in providing direction and vision as well as in 

maintaining the culture of the organization. As such, senior leaders have the 

responsibility to communicate and demonstrate a commitment to sound practices 

deemed acceptable for the acquisition function. Without sustained and prominent 

senior leadership, DOD increases its vulnerability to contracting fraud, waste, and 

abuse if it does not ensure that its decision makers, personnel, and contractors act 

in the best interests of DOD and taxpayers. DOD has emphasized making contract 

awards quickly; sometimes, however, the focus on speed has come at the expense 

of sound contracting techniques. 

Second, DOD needs to determine what skill sets its current workforce has, and 

what skill sets the workforce needs, to carry out DOD’s mission. As I previously 

noted, DOD’s June 2006 strategic human capital plan identified a number of steps 

planned over the next 2 years to more fully develop a long-term approach to 

managing its acquisition workforce, including developing a comprehensive 

competency model for each functional career field. The model should identify the 

technical tasks, knowledge, skills, abilities, and personal characteristics required 

of the acquisition workforce. As part of this effort, DOD also needs to assess 

whether it has sufficient numbers of adequately trained personnel to plan, 

negotiate and award contracts, and to manage and assess contractor 

performance. 

Question: Are you concerned that we are relying too much on service 

contractors to augment DOD program offices? 

We have expressed concern about DOD’s growing reliance on contractors. This 

reliance is a governmentwide phenomenon and is occurring across a wide variety 

of activities and functions, including support for program offices. In recent years, 

for example, DOD has been using a lead systems integrator approach that allows 

one or more contractors to define weapon system’s architecture and then manage 

both the acquisition and integration of subsystems into the architecture. This 

approach relies on contractors to fill roles and handle responsibilities that differ 

from the more traditional prime contractor relationship the contractors had with 

the program offices and can blur the oversight responsibilities between the lead 

systems integrator and DOD program management representatives. To illustrate 

this point, the Army’s Future Combat Systems program is managed by a lead 

systems integrator that assumes the responsibilities of developing requirements, 

selecting major system and subsystem contractors, and making trade-off 

decisions among costs, schedules, and capabilities. While this management 

 4

GAO, Contract Management: DOD Vulnerabilities to Contracting Fraud, Waste, and Abuse, GAO-06-838R 

(Washington, D.C.: July 7, 2006). 

Page 7 GAO-07-640R 
approach has some advantages for DOD, we found that the extent of contractor

responsibility in many aspects of program management is a potential risk.Given 

the growing role of contractors, we believe it is important for DOD to identify the 

functions and tasks contractors are performing, the reasons or justifications for 

choosing a contractor instead of using a government employee, and the costs and 

risks inherent in such choices. In addition, we believe it is important for DOD to 

identify and mitigate the risks that can accompany increased reliance on 

contractors—risks such as organizational or personal conflicts of interest and 

insufficient in-house capacity to ensure that contractors meet cost, schedule, and 

performance requirements. We are conducting work to explore these issues. 

Question: The Congress has provided many different tools to DOD to 

improve the hiring and training of acquisition personnel. Have the tools 

for rapid hiring authority been given to the acquisition workforce? 

We have not evaluated the use of the tools that have been provided to DOD for 

rapid hiring authority. 

Question: In your opinion, do the new authorities under the National 

Security Personnel System (NSPS) for performance management offer an 

opportunity for improved accountability? If, so, have you made such a 

recommendation to DOD leadership? 

Our past testimonies and work indicate that evaluating the effect of NSPS will be 

an ongoing challenge. However, we believe NSPS does offer an opportunity for 

improved accountability. In our July 2005 report on DOD’s efforts to design NSPS, 

we recommended that DOD develop procedures for evaluating NSPS that contain 

results-oriented performance measures and reporting requirements.5

 Our prior 

work also indicates that involving employees and other stakeholders helps to 

improve overall confidence and belief in the fairness of the system, enhance their 

understanding of how the system works, and increases their understanding and 

ownership of organizational goals and objectives. Organizations have found that 

the inclusion of employees and their representatives needs to be meaningful, not 

just pro forma. Results-oriented performance measures and reporting 

requirements along with employee involvement can improve accountability. 

Recruitment and Retention

Question: The vast number of retirement-eligible federal employees 

presents a manpower challenge across the federal government, and 

specifically in adequately replacing members of the acquisition workforce. 

What innovative recruitment, retention, hiring, and/or training methods 

have been employed to address the inevitable reduction in the acquisition 

workforce? What methods have proved successful thus far? What 

limitations stymie more robust recruiting and retention results, and are 

 5

GAO, Human Capital: DOD’s National Security Personnel System Faces Implementation Challenges, 

GAO-05-730 (Washington, D.C.: July 14, 2005).

Page 8 GAO-07-640R 
there legislative changes or authorities that would enhance DOD’s efforts 

in this area? 

Our prior work has shown that DOD needs to conduct comprehensive acquisition 

workforce planning to address recruitment, hiring, retention, and training issues. 

We reported in April 2002 that DOD recognized the need as well as the substantial 

challenges involved in implementing a strategic approach to shaping the 

acquisition workforce.6

 In June 2004, we reported that DOD had taken steps to 

develop and implement civilian strategic workforce plans to address future 

civilian workforce needs, but these plans generally lacked some key elements 

essential to successful workforce planning.7

 None of the plans included analyses 

of the gaps between critical skills and competencies currently needed by the 

workforce and those that will be needed in the future. Without including analyses 

of gaps in critical skills and competencies, DOD and its components may not be 

able to design and fund the best strategies to fill its talent needs through 

recruiting and hiring or to make appropriate investments to develop and retain the 

best possible workforce. Such gap analyses need to be completed to address 

acquisition workforce shortcomings and to identify methods that might prove 

successful for recruiting and retention. While we made several recommendations 

to improve DOD’s strategic workforce planning efforts, the work we have 

completed has not identified the need for legislative changes or authorities to 

enhance DOD’s efforts in the areas of recruitment and retention. However, we 

continue to be concerned about strategic human capital issues at DOD, as well as 

across the federal government, as we point out in our recently issued high-risk 

report.8

 

Acquisition Practices

Question: The Administration has made clear the priority of success in 

the global war on terrorism, and the DOD has an enormous role in this 

fight. Given your finding that DOD needs significant improvement in both 

contract oversight and interagency contracting practices, DOD clearly 

faces multiple challenges on the contracting front as part of its role in 

global war on terrorism support. What are your recommendations for how 

DOD might simultaneously improve contract practices in its Iraq 

reconstruction mission and develop and implement strategic acquisition 

processes? 

As the Comptroller General noted during testimony in February 2007, the 

challenges faced by DOD on its reconstruction and support contracts in Iraq often 

 6

GAO, Acquisition Workforce: Department of Defense’s Plans to Address Workforce Size and Structure

Challenges, GAO-02-630 (Washington, D.C.: April 30, 2002). 

7

GAO, DOD Civilian Personnel: Comprehensive Strategic Workforce Plans Needed, GAO-04-753 

(Washington, D.C.: June 30, 2004). 

8

GAO, High Risk Series: An Update, GAO-07-310 (Washington, D.C.: January 2007). 

Page 9 GAO-07-640R 
reflected systemic and long-standing shortcomings in DOD’s capacity to manage 

contractor efforts.9

 Such shortcomings result from various factors, including 

poorly defined or changing requirements; the use of poor business arrangements; 

the absence of senior leadership and guidance; and an insufficient number of 

trained contracting, acquisition, and other personnel to manage, assess, and 

oversee contractor performance. In turn, these shortcomings manifest themselves 

in higher costs to taxpayers, schedule delays, unmet objectives, and other 

undesirable outcomes. 

Through the years, we have made recommendations to help DOD address these 

shortcomings, including recommendations intended to assure that adequate 

acquisition staff and other resources are available to support future operations, to 

emphasize the need to clearly define contract requirements in a timely manner, to 

improve the management of interagency contracting, and to resolve long-standing 

issues with regard to the management and use of support contractors. DOD has 

generally agreed with our recommendations and has some actions underway to 

address them. However, senior DOD leadership is needed to address these issues 

on a systemic level and ensure that subsequent changes in DOD’s policies and 

practices are implemented, as appropriate, in Iraq. 

 9

GAO, Rebuilding Iraq: Reconstruction Progress Hindered by Contracting, Security, and Capacity 

Challenges, GAO-07-426T (Washington, D.C.: Feb. 15, 2007).

(120627) Page 10 GAO-07-640R 
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