United States General Accounting Office

GAO Report to the Honorable

Tom Harkin, U.S. Senate

July 1998 ACQUISITION

MANAGEMENT

Workforce Reductions

and Contractor

Oversight

GAO/NSIAD-98-127

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-279516 

July 31, 1998

The Honorable Tom Harkin

United States Senate

Dear Senator Harkin:

In response to your request, we (1) compared the workforce reductions

taken in the Department of Defense’s (DOD) acquisition organizations1

from fiscal year 1993 through fiscal year 1997 with the reductions taken in

DOD’s overall workforce during that time frame and (2) identified

initiatives the Defense Contract Audit Agency (DCAA) and the Defense

Contract Management Command (DCMC) have taken in their contract

oversight responsibilities to compensate for the reduction in their staff.

We briefed your office previously. This report updates the information

presented at those briefings. Additional information requested by your

office regarding reductions in the number of computer specialists is

contained in appendix II. We provided information that you requested

regarding potential savings from workforce reductions in our June 1998

report.2

Background In recent years, DOD has substantially reduced the size of its total and

acquisition workforces. Many of these reductions were made pursuant to

the National Defense Authorization Acts for Fiscal Years 1996 and 1997

(P.L. 104-106 and P.L. 104-201, respectively). Among other things, section

906 of the 1996 act required DOD to submit a plan on how it would

restructure its acquisition organizations so that 25 percent of their

personnel could be reduced over a 5-year period, beginning October 1,

1995. Section 902 of the 1997 act amended section 906 to require total

reductions of 30,000 employees in fiscal years 1996 and 1997 combined. In

addition, section 912 of the National Defense Authorization Act for Fiscal

Year 1998 (P.L. 105-85) required a reduction of 25,000 employees in fiscal

year 1998. The act allowed the Secretary of Defense to reduce as few as

10,000 employees on certification that cost-effective management and

military readiness would be impaired. The Federal Workforce

1

DOD’s 20 acquisition organizations employed roughly 270,000 civilian and military acquisition

personnel at the end of fiscal year 1997 (see app. I for a complete list of these organizations). This total

excludes civilians employed in maintenance depots, who are not included in the workforce reductions

required by the National Defense Authorization Act for Fiscal Year 1998. Including these employees

would increase the total to about 355,000.

2

See Defense Acquisition Organizations: Status of Workforce Reductions (GAO/NSIAD-98-161, June 29,

1998).

Page 1 GAO/NSIAD-98-127 Workforce Reductions
B-279516 

Restructuring Act of 1994, passed in March 1994 and mandating

governmentwide reductions of 272,900 full-time equivalent positions

through fiscal year 1999, also affected DOD’s acquisition workforce. DOD

agencies responsible for contractor oversight, DCAA and DCMC, were not

exempted from these reductions.

Results in Brief DOD’s acquisition workforce is decreasing slightly faster than DOD’s overall

workforce. From fiscal year 1993 through fiscal year 1997, the number of

personnel in DOD’s overall workforce decreased by 17.5 percent. During

the same time frame, civilian personnel in DOD’s acquisition workforce

decreased by 24 percent, while the military personnel in the acquisition

workforce decreased by 28 percent. Throughout this 5-year period, DOD’s

civilian acquisition workforce remained at roughly 30 percent of DOD’s

overall civilian workforce.

Since 1993, the two organizations directly associated with contractor

oversight, DCAA and DCMC, have had personnel reductions of roughly 19 and

27 percent, respectively. According to DCAA and DCMC officials, the

organizations have implemented a variety of risk-based initiatives and

reengineering programs during this time frame as their respective

workforces have been reduced. For example, DCAA has implemented risk

assessment procedures based on contractor size (the dollar value of

contracts) and process reengineering activities in the areas of contractor

self-governance and contractor billing. Similarly, DCMC has instituted

risk-based initiatives and initiatives aimed at improving efficiency. For

example, DCMC’s Performance-Based Assessment Model determines how

often and to what extent contractors should be reviewed based on risk

potential; the Single Process Initiative encourages the consolidation of

common processes in facilities that produce commercial and DOD

products.

DOD’s Acquisition

Workforce Is

Decreasing

From fiscal year 1993 through fiscal year 1997, DOD has reduced steadily

the number of authorized positions and the actual number of personnel in

its workforce. During this period, DOD’s acquisition workforce was reduced

at a slightly faster rate than DOD’s overall workforce, but civilians in the

acquisition workforce remained at roughly 30 percent of DOD’s overall

civilian workforce.

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DOD Has Steadily Reduced

the Size of Its Overall

Workforce

Both DOD’s authorized positions and the number of personnel employed

have decreased steadily since fiscal year 1993 (see fig. 1).3

 For example,

between fiscal years 1993 and 1997, the number of authorized positions

decreased from 3,746,900 to 3,126,600 (by 620,300 or 16.6 percent) while

the number of employees decreased from 3,718,400 to 3,068,700 (by

649,700 or 17.5 percent). By breaking these numbers down, we found that

civilian and military positions were reduced by 198,300 (20.2 percent) and

422,000 (15.3 percent), respectively; while the number of civilian and

military employees were reduced by 187,300 (20.3 percent) and 462,400

(16.5 percent), respectively.

3

DOD’s “authorized positions” refers to its annual workload requirement presented in the President’s

annual budget submission. DOD’s “actual end strength” is the number of people employed at the end of

a particular period.

Page 3 GAO/NSIAD-98-127 Workforce Reductions
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Figure 1: DOD’s Overall Workforce (Fiscal Years 1993-97)

1993 1994 1995 1996 1997

0

1,000

2,000

3,000

4,000

3,746.9

3,525.3

3,329.2 3,209.6 3,126.6

Fiscal year

Authorized in thousands

Civilian Active Military Reserve

1993 1994 1995 1996 1997

0

1,000

2,000

3,000

4,000

3,718.4

3,514.8

3,265.3 3,154.9 3,068.7

Fiscal year

 Actual in thousands 

Civilian Active Military Reserve

Sources: Office of the Secretary of Defense (Personnel & Readiness) and Defense Manpower

Data Center.

DOD’s Acquisition

Workforce Has

Experienced Slightly

Greater Reductions Than

DOD’s Overall Workforce

From fiscal year 1993 through fiscal year 1997, DOD reduced the overall

number of its employees by 649,700 (or 17.5 percent). During this period,

DOD reduced the civilian and military personnel employed in acquisition

organizations by 70,552 (about 24 percent) and 18,338 (about 28 percent),

respectively (see fig. 2).

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Figure 2: DOD’s Acquisition Workforce (Fiscal Years 1993-97)

1993 1994 1995 1996 1997

0

50

100

150

200

250

300 292.7

274.1

253.3

242.3

222.1

65.8 67.3 64.7 60.5

47.5

Fiscal year

Actual in thousands 

Civilian Military

Note: Data excludes civilians in maintenance depots in accordance with section 912 of the 1998

Defense Authorization Act.

Source: Defense Manpower Data Center.

During fiscal years 1996 and 1997, DOD accomplished over one-half of the

25-percent reduction planned for its acquisition workforce pursuant to the

1996 National Defense Authorization Act. DOD does not expect to maintain

this rate of acquisition workforce reduction throughout the next 3 years.

Our analysis of data provided by the Defense Manpower Data Center

shows that DOD’s civilian acquisition workforce represents roughly

30 percent of DOD’s overall civilian workforce (see fig. 3). This ratio has

remained relatively steady throughout the 5-year period. For example, it

was at 31.8 percent in 1993 and at 30.3 percent in 1997.

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Figure 3: DOD’s Civilian Acquisition Workforce Compared With DOD’s Total Civilian Workforce (Fiscal Years 1993-97)

1993 1994 1995 1996 1997

0

250

500

750

1,000

1,250

1,500

Fiscal year

Actual in thousands

Acquisition Civilian Total Civilian

920.8 876.3

292.7 274.1

814.1

253.3

776.9

242.3 222.1

733.5

Note: Data excludes civilians in maintenance depots in accordance with section 912 of the 1998

Defense Authorization Act.

Source: Defense Manpower Data Center.

Contractor Oversight

Agencies Are

Implementing Risk

Management

Approaches

The workforces of DCAA, which performs defense contract audits and

provides accounting and financial advisory services, and DCMC, which

provides defense contract management services, have also been reduced

substantially over recent years. At the same time, DOD has implemented

various risk management approaches in the oversight of contractors..

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DCAA Workforce Trends DCAA is responsible for performing contract audits and providing

accounting and financial advisory services on contracts for all DOD

components responsible for procurement and contract administration.

DCAA reports to the Under Secretary of Defense (Comptroller). DCAA’s

actual end strength decreased from 5,616 in fiscal year 1993 to 4,557 in

fiscal year 1997, about a 19-percent reduction (see fig. 4).

Figure 4: Decrease in DCAA’s Actual

Workforce (Fiscal Years 1993-97)

1993 1994 1995 1996 1997

0

1,000

2,000

3,000

4,000

5,000

6,000

Fiscal year

Employees

Note: Totals are in actual end strength.

Source: DCAA.

DCAA projects continued work year reductions through fiscal year 2002.

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Key DCAA Risk

Management and Process

Reengineering Activities

According to DCAA officials, in response to workforce reductions and

acquisition reform initiatives, DCAA focused its efforts on implementing

risk assessment procedures and process reengineering activities. For

example, DCAA established risk assessment procedures for three categories

of contractors:

• Major contractors. These contractors (roughly 250) have over $70 million

in DOD contracts. DCAA assesses them on their internal controls for such

business systems as compensation, billing, labor, material, and purchasing.

DCAA reviews and rates all major contractors at least once a year.

• Non-major contractors. These contractors (roughly 1,750) have between

$5 and $70 million in DOD contracts. DCAA assesses them on an “as-needed

basis.” According to DCAA officials, risk factors such as evidence of

budgetary control and indications of financial instability are used as

criteria for determining the need for assessment.

• Small contractors. These contractors (roughly 2,000) have less than

$5 million in DOD contracts. They are assessed based on a random sample.

DCAA has also implemented process reengineering activities intended to

improve the efficiency of its workforce, including the following:

• Integrated product teams. These teams are composed of DCAA and

contractor personnel through which DCAA provides real-time advice and

feedback on estimating methods, proposal reviews, and audit results.

• Contractor self-governance. These programs are designed to strengthen

contractor internal controls and the government’s reliance on related

systems. These programs also promote reduced audit cycle time, reduced

oversight, and improved communications and working relationships

between DCAA and contractor personnel.

• Contractor direct billing. This program allows qualified contractors to

submit public vouchers directly to paying offices rather than through DCAA.

While DCAA will continue provide oversight by periodically reviewing

contractors and examining a sampling of paid vouchers, this program is

expected to substantially reduce audit time without putting accountability

at risk.

DCMC Workforce Trends DCMC provides contract management services for DOD contracting officers

and program managers throughout the acquisition life cycle. DCMC is under

the organizational umbrella of the Defense Logistics Agency. DCMC’s actual

end strength decreased from 19,822 in fiscal year 1993 to 14,523 in fiscal

year 1997, about a 27-percent reduction (see fig. 5).

Page 8 GAO/NSIAD-98-127 Workforce Reductions
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Figure 5: Decrease in DCMC’s Actual

Workforce (Fiscal Years 1993-97)

1993 1994 1995 1996 1997

0

5,000

10,000

15,000

20,000

Fiscal year

Employees

Note: Totals are in actual end strength.

Source: DCMC.

The period also saw decreases in the number of contract administration

offices (34 percent) and the number of prime contracts (6 percent). DCMC

projects a continual work year decrease through fiscal year 2002.

Key DCMC Risk

Management and

Workforce Efficiency

Activities

In response to mandates requiring DCMC to reduce its workforce and

promote acquisition reform, DCMC officials stated that they have focused

their initiatives on managing risk and fostering efficient operations. The

risk-based initiatives are designed to coincide with DCMC’s focus on more

process review and less product inspection. DCMC reduced its quality

assurance specialist staff by 54 percent from fiscal year 1990 to fiscal year

1996. As a result, DCMC emphasized initiatives that are designed to promote

risk management in order to better identify customer requirements, focus

Page 9 GAO/NSIAD-98-127 Workforce Reductions
B-279516 

on critical processes, and rely on data analysis. Risk management

initiatives include the following:

• Contractor Self-Oversight. Contractor self-oversight is designed to make

contractors more responsible for contract compliance and to reduce DCMC

surveillance. Test cases have been completed for property, production

surveillance, and quality assurance sites.

• Engineering Change Proposals. Because 98 percent of all Class II

Engineering Change Proposals are accepted by the government,4 DCMC is

questioning the necessity of the current review process and is looking to

reduce the level of review in this arena. DCMC is also trying to resolve the

contractual implications of reduced oversight of this issue.

• Performance-Based Assessment Model. This model is intended to

determine the level and frequency of review on the basis of contractors’

risk potential. The level of risk is based on the extent to which end

products meet cost, schedule, and performance goals.

Acquisition reform initiatives intended to promote efficient operations

include the following:

• Single Process Initiative. This initiative allows contractors to have existing

contracts modified to replace multiple government-unique management

and manufacturing systems with common, facilitywide systems. The

initiative is designed to promote reductions in contractor operating costs

by encouraging the consolidation of common processes in facilities that

produce commercial and DOD products. DOD anticipates that these actions

will result in cost, schedule, and performance benefits.

• Government Source Inspection. Government inspectors have been

required to review stock items at a contractor’s facility prior to acceptance

and delivery. This inspection represents a significant cost. To eliminate

unnecessary inspections, DCMC waived mandatory inspections for

contractors that perform at quality levels higher than those specified in

their contracts.

• Early Contract Administration Services. This initiative involves DCMC

personnel in nontraditional contract administration services early in the

acquisition process (typically in the pre-award stages). The purpose is to

minimize downstream acquisition problems by helping buying offices

select more capable contractors, construct more effective solicitations,

and develop more executable contacts. Examples include developing and

4

Class II Engineering Change Proposals are proposed changes that do not affect an item’s form, fit,

function, cost, schedule, or other critical characteristics.

Page 10 GAO/NSIAD-98-127 Workforce Reductions
B-279516 

reviewing solicitation packages and contracts, participating on source

selection teams, and performing software capability evaluations.

Agency Comments We provided DOD officials with a draft of this report. DOD concurred fully

with its contents. DOD also provided technical comments that we

incorporated into our final report, as appropriate. DOD’s comments are

included in appendix III.

Scope and

Methodology

To compare DOD’s acquisition workforce reductions from fiscal year 1993

through fiscal year 1997 to overall workforce reductions, we compared

authorized work years to acquisition workforce actual end strengths. To

determine DOD’s authorized work years, which represent the annual

workload requirement presented by the President’s annual budget

submission, we interviewed and obtained data from personnel in the

Office of Under Secretary of Defense (Personnel and Readiness). To

determine DOD’s overall and acquisition workforce actual end strengths,

which represent the actual inventory of people on the payroll at the end of

a particular period, such as at the end of a fiscal year, we analyzed DOD

documents and data provided by the Defense Manpower Data Center,

which collects and maintains an archive of DOD’s automated manpower,

training, and financial databases. We also interviewed and obtained data

from personnel in the Office of Under Secretary of Defense (Acquisition

and Technology) and (Acquisition Reform) and in the military services.

To identify initiatives the DCAA and the DCMC have taken in their contract

oversight responsibilities to compensate for the reduction in their staff, we

obtained information from and interviewed officials at the headquarters of

those agencies. We also reviewed other documents addressing DCAA and

DCMC management and oversight issues.

We did not independently review the reliability of the Defense Manpower

Data Center’s management information systems or databases. However,

we discussed quality control procedures used to minimize sources and

chances for error with Defense Manpower Data Center officials. Further,

we independently obtained the data and compared the results of our

analyses with those of other users of the same database. Checking and

matching this independently derived information gave us assurance that

the data were consistent. Lastly, we ascertained the extent to which DOD

assessed the reliability of the Data Center’s products.

Page 11 GAO/NSIAD-98-127 Workforce Reductions
B-279516 

We performed our work from February to May 1998 in accordance with

generally accepted government auditing standards.

As arranged with your office, we plan no further distribution of this report

until 30 days from its issue date unless you publicly announce the report’s

contents earlier. At that time, we will send copies to DOD and other

interested parties.

Please contact me on (202) 512-4841 if you or your staff have any

questions concerning this letter. Major contributors to this report were

Raymond H. Denmark, Jr.; James L. Morrison; Arnett Sanders; and Clifton

E. Spruill.

Sincerely yours,

Katherine V. Schinasi

Associate Director,

Defense Acquisitions Issues

Page 12 GAO/NSIAD-98-127 Workforce Reductions
Page 13 GAO/NSIAD-98-127 Workforce Reductions
Contents

Letter 1

Appendix I 

Defense Acquisition

Organizations

16

Appendix II 

Information on

Computer Specialists

and Contracting for

Computer-Related

Support Services

17

Appendix III 

Comments From the

Department of

Defense

18

Figures Figure 1: DOD’s Overall Workforce 4

Figure 2: DOD’s Acquisition Workforce 5

Figure 3: DOD’s Civilian Acquisition Workforce Compared with

DOD’s Total Civilian Workforce

6

Figure 4: Decrease in DCAA’s Actual Workforce 7

Figure 5: Decrease in DCMC’s Actual Workforce 9

Abbreviations

DCAA Defense Contract Audit Agency

DCMC Defense Contract Management Command

DOD Department of Defense

Page 14 GAO/NSIAD-98-127 Workforce Reductions
Page 15 GAO/NSIAD-98-127 Workforce Reductions
Appendix I 

Defense Acquisition Organizations

The Department of Defense (DOD) Instruction 5000.58 states that the

mission of an acquisition organization, with its subordinate elements,

includes planning, managing, and/or executing acquisition programs that

are governed by DOD Directive 5000.1 (reference [n]), DOD Instruction

5000.2 (reference [o]), and related issuances. Specifically, these

organizations (and any successor organization of these commands) are as

follows:

• Office of the Under Secretary of Defense (Acquisition and Technology)

• Army Information Systems Command5

• Army Materiel Command

• Army Strategic Defense Command (now the Army Space and Strategic

Defense Command)

• Army Acquisition Executive

• Office of the Assistant Secretary of the Navy (Research, Development, and

Acquisition)

• Naval Sea Systems Command

• Naval Air Systems Command

• Naval Supply Systems Command

• Naval Facilities Engineering Command

• Office of the Chief of Naval Research

• Space and Naval Warfare Systems Command

• Navy Program Executive Officers/Direct Reporting Program Manager

Organization

• Marine Corps Systems Command

• Office of the Assistant Secretary of the Air Force (Acquisition)

• Air Force Systems/Air Force Logistics Commands (now the Air Force

Materiel Command)

• Air Force Program Executive Organization

• Strategic Defense Initiative Organization (now the Ballistic Missile

Defense Organization)

• Defense Logistics Agency

• Special Operations Command (now the Special Operations Command

Acquisition Center)

5

Disestablished as of October 1, 1996, and realigned as a major subordinate command under the Army

Forces Command, a nonacquisition organization.

Page 16 GAO/NSIAD-98-127 Workforce Reductions
Appendix II 

Information on Computer Specialists and

Contracting for Computer-Related Support

Services

In our October 1997 product on DOD’s acquisition organizations, we

reported that the largest concentration of reductions in DOD’s civilian

acquisition workforce were concentrated in seven occupational fields:

electronics engineering, secretary, miscellaneous-clerk, computer

specialist, contracting, management analyst, and miscellaneousadministration.6

 In our June 1998 product on the status of workforce

reductions, we reported that the overall dollar value of DOD’s support

services contract awards in areas related to some of those same

occupational fields increased from fiscal years 1993 to 1997.7

Using data provided by the Defense Manpower Data Center and the

Individual Contracting Action Report-DD Form 350 database for fiscal

years 1993 through 1997,8

 we more closely examined the reductions in the

number of DOD’s computer specialists and contracts for computer related

support services. Although we did not correlate occupational fields to

specific support services contracts, we found that while the number of

civilian computer specialists in acquisition organizations decreased by

about 28 percent from the end of fiscal year 1993 to the end of fiscal year

1997, the dollar value of contract awards for computer-related services

increased steadily from 1993 through 1996 before declining slightly in

1997.

6

See Defense Acquisition Organizations: Reductions in Civilian and Military Workforce

(GAO/NSIAD-98-36R, Oct. 23, 1997).

7

We have also reported that, where audited, projected savings from work contracted out generally

have not been achieved and, in some cases, the work was more expensive. See Defense Outsourcing:

Challenges Facing DOD as It Attempts to Save Billions in Infrastructure Costs (GAO/T-NSIAD-97-110,

Mar. 12, 1997) and Defense Depot Maintenance: Commission on Roles and Mission’s Privatization

Assumptions Are Questionable (GAO/NSIAD-96-161, July 15, 1996) for more details.

8

DOD’s procurement of commodities and services is reported on the Individual Contracting Action

Report-DD Form 350. The form includes codes that describe or characterize various categories of

procurements.

Page 17 GAO/NSIAD-98-127 Workforce Reductions
Appendix III 

Comments From the Department of Defense

(707333) Page 18 GAO/NSIAD-98-127 Workforce Reductions
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