GAO

United States General Accounting Office

Report to Congressional Committees

July 1999 DOD COMPETITIVE 

SOURCING

Lessons Learned 

System Could 

Enhance A-76 Study 

Process

GAO/NSIAD-99-152

Page 1 GAO/NSIAD-99-152 DOD Competitive Sourcing

United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-282637 Letter

July 21, 1999

Congressional Committees

In late 1995, after a lull in emphasis for several years, the Department of 

Defense (DOD) began encouraging the services and defense agencies to 

intensify competitive sourcing efforts as provided for in the Office of 

Management and Budget’s (OMB) Circular A-76. Pursuant to A-76, DOD 

components conduct cost comparison studies of commercial activities 

being performed by government personnel to determine whether it would 

be more cost efficient to maintain them in-house or contract with the 

private sector for their performance. Government officials, business 

leaders, and the Congress have expressed concern that these cost 

comparisons take too long and that DOD needs to find ways to expedite the 

process. The Congress, in enacting the National Defense Authorization Act 

for Fiscal Year 1998 (P.L. 105-85), encouraged DOD to develop standardized 

performance work statements as a means of expediting these competitive 

sourcing studies. This legislation also required us to report on DOD’s 

progress.

As requested, this report addresses efforts by DOD to (1) improve 

performance work statements, including encouraging the use of standard 

templates, and (2) implement other efforts to improve the competitive 

sourcing process, as well as gather and disseminate lessons learned that 

could benefit the competitive sourcing program DOD-wide. Our scope and 

methodology are included in appendix I.

Results in Brief DOD has focused on improving the quality of its performance work 

statements, with limited emphasis on developing standardized work 

statements. According to various DOD officials, the need to tailor 

performance work statements to individual circumstances and locations, 

as well as the increasing emphasis on grouping multiple activities for 

competitions under single solicitations, limits the usefulness of 

standardized work statements. Many officials stated that while previously 

developed work statements provide useful guidance, they are best used as 

a frame of reference for, but not in place of, developing new performance 

work statements.

Letr
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In addition to efforts devoted to developing improved performance work 

statements, DOD components and activities are pursuing a variety of 

approaches on their own to improve competitive sourcing studies. Some of 

these may not shorten the study process, but they are intended to improve 

the efficiency and long-term cost-effectiveness of the process. Approaches 

range from combining multiple functions together under single 

solicitations to using new tools to improve the development of key A-76 

documents. However, DOD and its components have devoted limited 

efforts and resources to documenting and disseminating lessons learned 

and best practices from the various efforts that could be useful DOD-wide.

We are recommending that DOD develop a more systematic approach for 

evaluating, compiling, and disseminating best practices and lessons learned 

from competitive sourcing activities. 

Background Since 1955, federal agencies have been encouraged to obtain commercially 

available goods and services from the private sector, if doing so is 

cost-effective. In 1966, OMB issued Circular A-76, which established federal 

policy for the government's performance of commercial activities and 

procedures for studying them for potential conversion to performance by 

the private sector. In 1979, OMB issued a supplemental handbook to the 

circular that included procedures for cost comparison studies to determine 

whether commercial activities should be performed in-house, by another 

federal agency, or by the private sector. OMB updated this handbook in 

1983 and again in March 1996.

Through much of the 1980s, DOD encouraged the services and the defense 

agencies to conduct A-76 competitive sourcing studies. Subsequently, 

DOD’s emphasis on these studies was limited from the late-1980s to the 

mid-1990s due to legislative actions and internal constraints. However, in 

1995 DOD renewed its competitive sourcing study program with the 

expectation of achieving savings that could be used to fund modernization 

and other priority needs. Over the next several years, DOD expects to study 

about 230,000 positions under this program, compared with about 90,000 

positions studied over an almost 20-year period. It also expects to achieve 

$11.2 billion in cumulative savings between fiscal year 1997 and 2005 and 

$3.3 billion in annual recurring savings each year thereafter. We have 

reported that in launching the renewed emphasis on competitive sourcing 

studies, DOD faces a greater challenge than that posed by the

Letr
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significant increase in the numbers of positions to be studied.1 That is, 

despite the major emphasis being given to competitive sourcing studies, 

many Defense components report that DOD’s downsizing has resulted in 

far fewer personnel being devoted to conducting studies and the 

elimination of much of the expertise in this area.

Generally, the A-76 process requires (1) developing a performance work 

statement and a quality assurance surveillance plan; (2) conducting a 

management study to determine the government’s most efficient 

organization (MEO), the federal entity that will compete with the selected 

private sector offeror; (3) developing an in-house government cost estimate 

for the MEO; (4) issuing Request for Proposals (RFP) or Invitation for Bids 

(IFB);2

 (5) evaluating the RFPs or IFBs and comparing the in-house 

estimate with a private sector offer or interservice support agreement and 

selecting the winner of the cost comparison; and (6) addressing any 

appeals submitted under the administrative appeals process, which is 

designed to ensure that all costs are fair, accurate, and calculated in the 

manner prescribed by A-76 procedures.

A key component of the A-76 study process affecting both costs and work 

performance involves developing the performance work statement that 

defines the government’s requirements. This statement is used as the 

technical performance section of a solicitation for private-sector offers and 

is the basis for the government’s development of its own management plan 

and in-house cost estimate to be used in the cost comparison. In March 

1997, we reported that defense installations often prepared performance 

work statements that inadequately captured requirements and required 

revision after contracts had been awarded.3

 Those revisions sometimes led 

to increased costs—making it more difficult to assess the savings actually 

realized from the A-76 process. 

A 1997 Air Force Audit Agency report on cost growth in service contracts, 

for instance, stated that 65 percent of cost growth was due to post 

contracting revisions. Revisions were needed to add existing work that was 

1

DOD Competitive Sourcing: Questions About Goals, Pace, and Risks of Key Reform Initiative

(GAO/NSIAD-99-46, Feb. 22, 1999).

2

An RFP or IFB is used to solicit offers from the private sector and contains the performance work 

statement.

3

Base Operations: Challenges Confronting DOD as It Renews Emphasis on Outsourcing

(GAO/NSIAD-97-86, Mar. 11, 1997).
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not addressed in the performance work statement or work not anticipated 

at the time the statement was developed. The remaining 35 percent of cost 

growth was due to wage increases mandated by the Department of Labor 

or labor contracts. The report concluded that more comprehensive 

performance work statements were needed. Later, in 1998, an Office of the 

Secretary of Defense (OSD) sponsored report stated that more than 

one-half of 156 performance work statements reviewed were not 

performance based4

 and that personnel who wrote the statements often 

lacked experience and training. To assist in the development of quality 

performance work statements, OSD recommended that DOD establish a 

central repository for sample performance-based performance work 

statements. Time lines for implementation of this repository have not been 

established, however.

Development of performance work statements and other initial steps in the 

competitive sourcing study process historically have taken extended 

periods of time. Concern over the slow pace led to legislation in 1991, as 

part of the Department of Defense Appropriations Act for Fiscal Year 1991 

(P.L. 101-511) and subsequent DOD appropriations acts, requiring that DOD 

complete single activity A-76 competitions within 24 months and multiple 

activity competitions within 48 months.

More recently, various DOD and industry officials have continued to 

express concerns about what they perceive is excessive time required to 

complete competitive sourcing studies, and thus have cited the need to 

streamline the process. The Congress, in enacting the National Defense 

Authorization Act for Fiscal Year 1998, authorized DOD to develop 

standard forms to use when studying commercial activities for conversion 

to private-sector performance. Specifically, the law authorized and 

encouraged DOD to develop standard performance work statements and 

RFPs for each commercial function studied, giving priority to functions 

that repeatedly have been converted successfully to contractor 

performance.

4

The Office of Federal Procurement Policy defines “performance based” work statements as those 

containing specifications structured around the purpose of the work to be performed. 

Performance-based work statements should not include detailed procedures that dictate how work is 

to be accomplished and should avoid ambiguous and imprecise statements. For example, a 

performance work statement should not specify that “lawns be mowed weekly” and “trees be pruned 

each fall,” nor should it include ambiguous requirements, such as “clear snow as required” or “mow 

grass as necessary.” Rather, such a statement should read “keep driveways clear of snow so that depth 

does not exceed 2 inches” or “maintain grass between 2 and 3 inches high.”
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Greater Efforts 

Devoted to Quality 

Performance Work 

Statements Than to 

Standardization 

As DOD components give renewed emphasis to competitive sourcing 

studies, various commands and field level activities are working to 

strengthen their development of performance work statements in the 

competitive sourcing process. They are also devoting some efforts to 

incorporating outcome measures that are less prescriptive and more 

performance based into those statements. Limited efforts, however, have 

been devoted to developing standardized performance work statements or 

templates. Many officials stated that while previous performance work 

statements provide useful guidance, they are best used as a frame of 

reference for, rather than in place of, developing new statements.

Efforts Devoted to 

Developing Performance 

Work Statements

Because performance work statements are used to establish the MEO and 

the basis for the RFP in an A-76 cost comparison study, their quality is 

critical and considerable attention needs to be devoted to their 

development to ensure they adequately capture the work that is required. 

At the same time, these statements have sometimes been so prescriptive 

that contractors complained they were left with little flexibility or room for 

creativity in meeting requirements. Various DOD components are 

addressing these issues in their new competitive sourcing studies.

Each of the services has issued comprehensive written guidance on 

developing performance work statements. The guidance defines the terms, 

purpose, scope, elements, and structure of the statement, including steps to 

writing it. For example, the Army provides a methodology for diagramming 

work processes, and the Navy provides an interview guide to use in 

gathering workload data. Service guidance does not specifically require the 

use of standardized performance work statement templates, however.

DOD components also emphasize writing performance-based work 

statements. Component guidance defines such statements variously as 

“performance-oriented . . . specifying what outputs or measures are desired 

and limiting directions as to how the results are achieved,” and permitting 

“innovation that can lead to increased efficiency and improved levels of 

quality.” Marine Corps guidance contains examples of performance-based 

requirements, while Air Force guidance refers a reader to a worldwide web 

site containing sample language. To help a reader understand what a 

performance-based work statement should look like, Marine Corps and 

Navy guidance includes an illustration of one for a transportation 

maintenance and repair activity. Air Force guidance directs a reader to 

review performance work statements on worldwide web sites. However, 
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according to an Air Force headquarters official, the statements on the 

worldwide web are not necessarily performance-based, but they provide a 

basis to start writing a performance work statement. 

Major commands and field headquarters we visited have also assisted those 

involved in writing performance work statements. In most cases, command 

assistance continues the emphasis on writing performance-based 

specifications, as well as developing comprehensive performance work 

statements with quantifiable measures. Recognizing limitations in field 

staff expertise, some commands have sent teams of experts to the field to 

help field level officials conduct A-76 studies, including providing 

assistance to write performance work statements.

Various officials described their success in writing comprehensive 

performance work statements with quantifiable measures and 

performance-based specifications as mixed. Officials at some commands 

told us they believe that performance work statements have improved, 

while others told us improvements are still needed. Army, Navy, and Air 

Force officials at various levels told us that some performance-based work 

statements are being written but that most work statements continue to be 

largely prescriptive; that is, they define how the work is to be accomplished 

rather than the results to be achieved. Officials attributed the use of 

prescriptive wording to a lack of training and understanding of what 

constitutes a performance-based work statement. Army officials said the 

use of prescriptive language continues because installation officials want 

to ensure that specifications accurately represent the installations’ work 

requirements.

We found that performance work statements were seldom reviewed above 

local levels to ensure they were performance based. In the few instances 

where officials told us that the statements were reviewed above the local 

level, officials at both the local and major command levels said they 

believed that such reviews helped improve the quality of the documents.

Use of Standardized 

Performance Work 

Statements Likely to Be 

Limited

Although some DOD component headquarters have recently cited the need 

for standardized performance work statement templates, officials at 

various levels have suggested that previously developed statements have 

limited value as a substitute for new statements. They noted that overuse of 

templates can, in fact, create problems and that the changing nature of 

competitive sourcing studies suggests the usefulness of templates will 

likely be as a general guide. 
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Most field commands and installations have received generalized templates 

as part of headquarters’ service guidance. Further, OSD and most DOD 

components maintain worldwide web sites containing performance work 

statements from prior studies for use as models. Command and field level 

officials stated that templates were useful as a frame of reference or a 

guide for formatting new statements. However, they urged caution about 

over reliance on previously developed statements or templates. Some were 

aware of selected instances where overuse of templates had limited 

management initiative, as those preparing the performance work statement 

simply lifted the language from the template without reevaluating 

requirements and considering alternative approaches to accomplishing the 

mission. Some major command officials recalled instances where 

contracting officers at some locations had relied on templates to the point 

where the statements were not specific in that they did not fully reflect 

their activities’ unique requirements. For example, officials at an Air Force 

installation described instances where the template was not changed to 

reflect the activity’s requirements, but was used as is, including 

requirements that were not performed at the installation. 

Various officials also noted that most competitive sourcing studies focused 

on individual commercial activities performed on military installations, 

such as grass cutting. Now, increasing emphasis is being given to 

combining multiple activities under single A-76 competitive sourcing 

studies. This makes it more difficult to use standardized templates other 

than as a frame of reference for formatting purposes. 

Efforts Are Underway 

to Improve 

Competitive Sourcing 

Studies, but Actions to 

Identify Best Practices 

and Disseminate 

Lessons Learned Are 

Limited

The services, the defense agencies, and local installations are individually 

taking and considering steps to improve the efficiency and effectiveness of 

the competitive sourcing process. These steps range from combining 

multiple activities together under single solicitations to using new tools to 

improve the development of A-76 study documents, including the 

performance work statement and the in-house MEO. However, DOD and its 

components have devoted limited efforts and resources to documenting 

and disseminating lessons learned and best practices from the various 

efforts that could be useful DOD-wide.
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Efforts to Improve the 

Competitive Sourcing 

Process 

In visiting service command and field locations, we identified a variety of 

efforts being undertaken to improve the competitive sourcing process. 

Examples include combining multiple activities under single A-76 studies, 

addressing small business competition issues, establishing the MEO based 

on modeling estimated costs of in-house activities, streamlining 

solicitations to reduce cycle time, and building quality metrics into the 

requirements of the performance work statement to assure better 

performance once a competition has been completed. These examples are 

not all inclusive, but they are indicative of efforts to strengthen the 

process—efforts that if successful could have wider application throughout 

DOD.

Multiple Activity Cost 

Comparison Studies 

DOD has endorsed competitions involving multiple activity studies, even 

though they take longer to complete than studies involving single activities, 

because of their perceived potential to yield greater savings. While the 

majority of A-76 studies underway involve a single activity, Army, Air Force, 

and Marine Corps officials identified more than 50 studies underway in 

mid-fiscal year 1999 involving a mix of commercial activities on military 

installations.5

 Further, according to a Navy headquarters official, most of 

the Navy’s more than 280 ongoing A-76 studies involve (1) more than one 

commercial activity on an installation or (2) activities at more than one 

location. We found various instances of multiple activity studies that 

involve or involved several sites or that were regional in nature. For 

example: 

• The Defense Logistics Agency (DLA) is conducting a single study of 

logistics activities at 10 sites in the northeastern part of the United 

States.

• The Air Force is conducting single studies of activities such as training 

and library services currently performed at multiple installations. It is 

also conducting a single A-76 study of its precision measurement 

equipment laboratories, which provide weapon systems’ calibration and 

are located at roughly 120 sites across 39 states, 1 U.S. territory, 5 

countries, and the District of Columbia.

• In 1998, the Navy conducted a single A-76 study of child care services 

provided at two Marine Corps bases, a hospital, and various naval 

5

DOD headquarters officials estimated a total of about 660 A-76 studies were underway during 

mid-fiscal year 1999 in the four services and two defense agencies, DLA and the Defense Finance and 

Accounting Service. Some officials cautioned that the actual number of studies could vary, however, 

because field level officials are still reviewing how to group some activities for study. 
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activities within an area covering two western states. Currently, the 

Navy is conducting eight A-76 studies in four regions across the United 

States and its territories involving child care; family services; and 

activities related to morale, welfare, and recreation.

Experience gained from these diverse studies will likely provide important 

information about practices that may be desirable to replicate in other 

studies, as well as practices that may need to be reconsidered.

Dealing With Competition Issues Because the study process includes issuance of an RFP or IFB, when 

multiple activities are to be consolidated into one cost comparison study, 

issues concerning competition are raised. The use of a contract that 

bundles several requirements must be consistent with the mandate for full 

and open competition contained in the Competition in Contracting Act of 

1984. The use of a bundled solicitation could restrict competition because 

multiple requirements are combined into a single award, potentially 

eliminating those firms that can only furnish a portion of the requirement. 

In order to be deemed acceptable, such a solicitation must represent DOD’s 

legitimate needs, rather than administrative convenience or unsupported 

claims of economy.

As we have reported, the effect of grouping multiple activities for 

competitive sourcing studies has been a concern to the small business 

community because of its potential to exclude small business participation 

as prime contractors. In 1997, the Congress amended the Small Business 

Act to specifically address the consolidation, or bundling, of procurement 

requirements into one solicitation.6 Generally, these amendments provided 

that procurement strategies used by government agencies, to the maximum 

extent practicable, shall facilitate the maximum participation of small 

business concerns as prime contractors, subcontractors, and suppliers. If 

the procurement strategy involves bundling, an agency must determine that 

it is necessary and justified. If substantial bundling is involved, the 

procurement strategy must also specify actions designed to maximize small 

business participation as subcontractors. These statutory provisions may 

affect an agency’s ability to conduct multiple activity studies.

Various officials have pointed to the need for more effective strategies for 

engaging small business communities in the early stages of the studies to 

mitigate concerns and potential problems. Concerned about fewer small 

6

See sections 411-417 of the Small Business Reauthorization Act of 1997 (P.L. 105-135). 
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businesses participating in DOD’s competitive sourcing program, the Air 

Force established an outreach program office in November 1998 to 

encourage small business participation in A-76 competitions. The Air Force 

hopes to capitalize on a change to the Small Business Act that allows small 

businesses to team in order to compete for large multiple activity 

contracts.7 The Air Force plans to (1) work with the small business 

community to promote cooperation and (2) conduct market research to 

identify small business teaming relationships capable of competing for 

large A-76 contracts. If successful, this effort could provide some important 

lessons or guides for approaching small business issues in competitive 

sourcing efforts.

Using Modeling Tools to Perform 

A-76 Studies

Various DOD component headquarters and field commands have 

encouraged the use of activity-based costing as a management tool for 

installation officials to improve analyses and business decisions based on a 

better understanding of costs associated with performing individual 

activities. Activity-based costing is a method of deriving the costs of a 

firm’s output by identifying processes used in the production and delivery 

of the output and the resources used in the performance of these 

processes. This method contrasts with more traditional accounting 

approaches of spreading indirect/overhead costs evenly across direct costs 

according to some allocation formula, such as a percentage of direct labor 

hours. According to DOD proponents of activity-based costing, this tool 

can help managers analyze organizational requirements and structures by 

focusing on the costs to perform individual activities. 

Historically, concerns have been expressed about how accurately in-house 

cost estimates reflect actual costs. We have previously noted limitations in 

DOD’s accounting systems affecting its ability to accumulate and report on 

the total costs of its activities.8

 Absent efforts to improve DOD’s overall 

accounting systems, it is not clear to what extent efforts to implement 

activity-based costing will be meaningful given the limitations in DOD’s 

accounting systems. Nevertheless, activities that have explored the use of 

this tool view it as useful for analyzing individual work segments and better 

7

15 U.S.C. 644, as amended by section 413 of the Small Business Reauthorization Act of 1997

(P.L. 105-135).

8

See Defense Outsourcing: Better Data Needed to Support Overhead Rates for A-76 Studies

(GAO/NSIAD-98-62, Feb. 27, 1998) and Performance and Accountability Series: Major Management 

Challenges and Program Risks–Department of Defense (GAO/OCG-99-4, Jan. 1999).
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identifying the costs of performing them or of alternative approaches to 

accomplishing them.

The Air Force presented the following hypothetical example of how 

activity-based costing can be applied to commercial activities. A military 

medical center has various resources such as personnel, supplies, and 

facilities. Each of these resources has known funding levels, such as 

personnel salaries. Under this concept, analysts allocate resources and 

associated funding among the center’s various activities, such as taking 

blood samples and filling prescriptions, by breaking down funding among 

activities mainly by conducting interviews and workflow analyses. They 

then link activities to resulting outputs, such as primary care patient visits, 

and estimate the cost of each output by totaling the funding of contributing 

activities. The relative differences between estimated costs of different 

outputs provide managers with the information to make business decisions 

and change work processes.

According to Defense Finance and Accounting Service (DFAS) 

headquarters officials, activity-based costing helps develop the MEO by 

providing the information necessary to reengineer the in-house 

organization. Officials at one installation that used this tool to conduct an 

A-76 study said the information helped to structure the performance work 

statement in terms of outputs or activities, instead of along organizational 

or functional lines. Others said the tool helped to develop a better MEO by 

improving in-house operations and identifying potential efficiencies. 

Officials at various component headquarters and major commands told us 

they did not know of any activity using activity-based costing to conduct 

A-76 studies. For example, we found only one Army, one Air Force, and six 

DFAS studies in which this tool had been used or was being used to create 

MEOs and prepare performance work statements. Installation officials 

expressed concerns about the cost and time to develop activity-based 

costing models, especially in conjunction with an A-76 study. For example, 

DLA officials told us it took 10 staff members working 6 months full time to 

identify individual activities, conduct interviews, and enter the data to an 

activity-based costing model for one installation. (The DLA model was not 

prepared as part of an A-76 study.) Because of the time and effort involved 

in constructing an activity-based costing model, most officials said that this 

tool should be used in A-76 studies only when a model is already in place. 

Conducting an A-76 study and developing the model at the same time 

consumes a lot of resources, officials said. Proponents of activity-based 

costing acknowledge that maintaining a model can consume significant 
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resources, but they point out that such efforts should lessen as more 

automated processes are applied, such as using computerized surveys of 

employees to identify the time they spend performing various activities.

Although DOD has encouraged the use of activity-based costing to study 

commercial activities, it has not fully assessed how much time and 

resources are needed to develop models or whether they produce 

worthwhile improvements in the A-76 study process. Assessments of 

ongoing and previous use of this tool could identify best practices and 

lessons learned as well as give a better indication of the potential of the 

tool for facilitating A-76 studies. 

Shortening the Solicitation 

Process

To accomplish DOD’s ambitious time lines for completing A-76 studies, 

several components we visited were pursuing various approaches to 

reduce the time it takes to complete some tasks. Officials at both major 

command and field levels attributed timesaving to measures to streamline 

the solicitation process, such as requiring oral presentations from offerors 

and limiting the size of proposals received. Air Force command officials 

told us they allowed offerors to forgo restating the performance work 

statement in their proposals, thereby reducing the size of proposals to 

one-fifth the usual number of pages. Various field level officials said they 

plan to require oral presentations and a short written proposal to eliminate 

voluminous written proposals and shorten the government’s time line for 

proposal evaluations. Because the government’s in-house technical 

performance plan must be compared to the selected private sector firm’s 

offer to ensure the same level of performance and quality is contained in 

the government’s offer, the use of oral presentations may make the 

comparison difficult. Information on whether oral presentations proved 

workable in the A-76 context would be useful to others undertaking A-76 

studies. 

As field activities incorporate these approaches into A-76 studies, it would 

be useful for DOD to assess the actual time saved, determine the 

usefulness, and disseminate information about these approaches so that 

other field activities may capitalize on those that prove successful. 

Use of ISO 9000 Type Quality 

Standards 

DOD component headquarters have begun to emphasize the use of 

commercial quality standards when conducting A-76 studies. We found that 

officials at several installations were considering requiring federal 

contractors to comply with the International Organization for 

Standardization (ISO) 9000 series, a set of international commercial 

standards for quality management and reliability, or a similar standard. 
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Some DOD officials said that less oversight of contractor performance 

would be necessary if they required contractors to be certified as meeting 

quality standards. DOD’s service contracting community has had limited 

experience with ISO 9000, however, and DOD has not settled all the issues 

surrounding such certification requirements, including how contract 

quality assurance will be affected.

A key unresolved issue is whether and how to require the MEO to become 

certified and ensure a level playing field in competitions between the public 

and private sectors. At least one official expressed concern about the time 

it would take an in-house organization to become certified and the 

possibility of delaying the overall A-76 study time line. Other contracting 

officials told us they plan to require an in-house organization to obtain 

certification or at least comply with the standards.

Some DOD officials expressed concerns about the time and cost to the 

contractor to become ISO 9000 certified and the implications for 

competition. The ISO 9000 certification process can take up to 1 year and 

the total cost estimates for certification, which includes periodic 

reassessments, range from about $22,000 to $32,000. These cost estimates 

are in addition to any internal costs to develop and implement a quality 

system and pay for a consultant. Further, various DOD officials said 

requiring certification might limit competition because some firms will not 

be able to afford certification. 

Although some officials said they were considering ISO 9000 or a similar 

type of certification or compliance, how this requirement will be 

implemented is uncertain. We cannot comment on the viability of this 

approach given the unanswered questions that exist and the potential 

competition issues it raises. However, because ISO is an emerging concept 

within federal contracting for service-type activities and is being 

considered for inclusion in A-76 studies, an assessment of its viability could 

be beneficial to organizations DOD-wide as large numbers of positions and 

activities are subjected to competitive sourcing studies.

Efforts to Identify and 

Disseminate Lessons 

Learned Are Limited

Each of these approaches could offer important insights into practices that 

work well and others that might not work so well in future competitive 

sourcing studies. While DOD has encouraged improving and streamlining 

the A-76 study process, it has generally relied upon its components to 

develop the means for doing so. In many instances, this stance and the 

limited personnel devoted to managing the competitive sourcing program 
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at OSD, components, and major command headquarters have resulted in 

limited, largely decentralized and uncoordinated efforts to improve the 

competitive sourcing process. 

Some efforts have been made to gather and disseminate lessons learned, 

but they have been limited, particularly as they pertain to sharing 

information on a DOD-wide basis.

• Since 1997, Air Force headquarters has worked to build a knowledge 

management system. Although the Air Force has competed commercial 

activities for years, there is no system to capture and incorporate 

lessons learned into existing processes, an Air Force headquarters 

official said. The Air Force is developing a website for information 

sharing.

• In a February 1999 report, the Army acknowledged the need to establish 

forums to share competitive sourcing lessons learned, tools, and best 

practices. The report contained a recommendation that the Army 

exchange ideas across the service and with the other services, OMB, and 

private industry. This recommendation is under development.

• A DLA official told us that lessons are discussed during video 

conferences with field personnel and, where appropriate, incorporated 

into the competitive sourcing process. However, DLA officials told us 

the agency does not have a formal process to collect and disseminate 

competitive sourcing lessons learned.

• Navy headquarters officials told us that contracting officials maintain 

lessons learned on an informal basis. The Navy does not, however, have 

a formal process to capture and disseminate these lessons learned. 

Headquarters officials told us they do not intend to disseminate lessons 

learned until they have assessed the lessons and their potential to 

improve the competitive sourcing process.

OSD has recently stated that it needs to do more than encourage process 

improvement; it needs to lead competitive sourcing efforts and provide 

guidance and direction on how A-76 studies are accomplished in the field 

and initiatives are implemented. Yet, the OSD office with primary 

responsibility for DOD’s competitive sourcing program operates with a 

full-time staff of two persons. Officials in that office told us that they 

recognize the need to identify and disseminate lessons learned, but they do 

not have sufficient resources to devote to the effort. Similarly, officials in 

the service headquarters’ A-76 offices generally recognized the need to 

better disseminate lessons learned but also told us they were constrained 

by available resources. 
B-282637

Page 15 GAO/NSIAD-99-152 DOD Competitive Sourcing

Conclusions Standardized performance work statements provide useful guidance but 

are best used as a frame of reference, not in place of developing new 

performance work statements. Significant DOD efforts are underway, 

however, to improve the statements by making them performance based. 

Each of the services has issued comprehensive written guidance on 

developing performance work statements and emphasized the need to 

write performance-based work statements. However, DOD needs to devote 

more effort to ensure that the statements are truly performance based.

In addition, various efforts are underway at different DOD levels to 

improve the competitive sourcing process. Some may shorten the process, 

while others may improve the efficiency and long-term cost-effectiveness 

of the process. Most of these efforts are in the early stages of 

implementation. As DOD components determine whether these efforts are 

successful and under which scenarios they are most helpful, it is likely that 

they would be more widely employed if information concerning lessons 

learned and best practices were widely disseminated among DOD 

components. However, despite a recognized need, there is no DOD-wide 

effort to identify lessons learned by activities with experience in carrying 

out these initiatives.

Recommendations To ensure that components pursue the A-76 study process with maximum 

efficiency and effectiveness, we recommend that the Secretary of Defense, 

in conjunction with DOD components, establish a framework for 

identifying and analyzing best practices and lessons learned from 

competitive sourcing studies and disseminating them DOD-wide to foster 

improvements in competitive sourcing studies.

Agency Comments and 

Our Evaluation

In written comments on a draft of this report (see app. II), DOD generally 

agreed with our recommendation to establish a framework for identifying 

and analyzing best practices and lessons learned. DOD indicated that it 

planned to develop a web page that would promote sharing of best 

practices and lessons learned and consider other measures to foster 

improvements in the conduct of competitive sourcing studies. While a web 

page could be useful in disseminating information, we believe OSD needs 

to evaluate the relative merits of potential lessons learned before widely 

disseminating such information to components. This would better ensure 

that components are provided information on the most appropriate and 

viable best practices that could enhance their competitive sourcing studies.
B-282637

Page 16 GAO/NSIAD-99-152 DOD Competitive Sourcing

We are sending copies of this report to Senator James M. Inhofe, Chairman, 

and Senator Charles Robb, Ranking Minority Member, Subcommittee on 

Readiness and Management Support, Senate Committee on Armed 

Services; and Representative Herbert Bateman, Chairman, and 

Representative Solomon Ortiz, Ranking Minority Member, Subcommittee 

on Military Readiness, House Committee on Armed Services. We are also 

sending copies of this report to the Honorable William S. Cohen, Secretary 

of Defense; the Honorable Louis Caldera, Secretary of the Army; the 

Honorable Richard Danzig, Secretary of the Navy; the Honorable F.W. 

Peters, Acting Secretary of the Air Force; General James L. Jones, 

Commandant of the Marine Corps; and the Honorable Jacob Lew, Director, 

Office of Management and Budget. Copies will also be available to others 

upon request. GAO points of contact concerning this report and other key 

contributors are listed in appendix III.

David R. Warren, Director

Defense Management Issues
B-282637

Page 17 GAO/NSIAD-99-152 DOD Competitive Sourcing

List of Congressional Committees

The Honorable John Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Ted Stevens

Chairman

The Honorable Daniel Inouye

Ranking Minority Member

Subcommittee on Defense 

Committee on Appropriations

United States Senate

The Honorable Floyd Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives

The Honorable Jerry Lewis

Chairman

The Honorable John Murtha

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Page 18 GAO/NSIAD-99-152 DOD Competitive Sourcing

Contents

Letter 1

Appendix I

Scope and 

Methodology

20

Appendix II

Comments From the 

Department of Defense

21

Appendix III

GAO Contacts and 

Staff 

Acknowledgments

22

Related GAO Products 23

Tables Table 1: Locations Visited 20

Abbreviations

DFAS Defense Finance and Accounting Service

DLA Defense Logistics Agency

DOD Department of Defense

IFB Invitation for Bid

MEO most efficient organization

OSD Office of the Secretary of Defense

OMB Office of Management and Budget

RFP Request for Proposal
Page 19 GAO/NSIAD-99-152 DOD Competitive Sourcing
Page 20 GAO/NSIAD-99-152 DOD Competitive Sourcing

Appendix I

Scope and Methodology ApendxIi

To report on the Department of Defense’s (DOD) efforts to improve 

development of performance work statements, including the use of 

standard templates, and other actions to improve the competitive sourcing 

process and the gathering and disseminating of lessons learned, we 

discussed DOD’s process for competing commercial activities, including 

new A-76 study and contracting techniques and initiatives, with 

headquarters and field level officials from the military services and two 

major defense agencies. At the headquarters level, we interviewed officials 

from the Office of the Secretary of Defense; the Departments of the Army, 

the Navy, and the Air Force; the Defense Logistics Agency (DLA) and the 

Defense Finance and Accounting Service (DFAS). At the field level, we 

visited commands and installations that headquarters officials identified as 

using innovative efforts to improve the process or that were competing 

relatively more positions performing commercial activities (see table I.1).

Table I.1: Locations Visited

a

Although we did not visit Maxwell Air Force Base, Ala., we talked with officials at Randolph Air Force 

Base that worked on Maxwell’s A-76 study. 

We conducted our review from August 1998 to May 1999 in accordance 

with generally accepted government auditing standards. 

Army Navy Air Force DLA

Commands Army Training 

and Doctrine 

Command, Fort 

Monroe, Va.; 

Army Forces 

Command, Fort 

McPherson, Ga.

Navy Region 

Southwest, San 

Diego, Calif.; 

Naval Facilities 

Engineering 

Command, San 

Bruno, Calif. 

Air Force Materiel 

Command, 

Dayton, Ohio; Air 

Education and 

Training 

Command, San 

Antonio, Tex.a

Defense Supply 

Center, 

Columbus, Ohio

Installations Fort Knox, Ky.; 

Fort Polk, La.

Naval Air Station 

Lemoore, Calif.; 

Camp Pendleton 

Marine Corps 

Base, Calif.

Wright-Patterson 

Air Force Base, 

Dayton, Ohio

Defense 

Distribution 

Depot, 

Columbus, Ohio
Page 21 GAO/NSIAD-99-152 DOD Competitive Sourcing

Appendix II

Comments From the Department of Defense ApendxIi
Page 22 GAO/NSIAD-99-152 DOD Competitive Sourcing

Appendix III

GAO Contacts and Staff Acknowledgments ApendxIi

GAO Contacts Barry Holman, (202) 512-5581

Marilyn Wasleski, (202) 512-8436 

Acknowledgments In addition to those named above, Christine Frye, RuthAnn Hijazi, Arnett 

Sanders, and Jonathan Silverman made key contributions to this report.
Page 23 GAO/NSIAD-99-152 DOD Competitive Sourcing

Related GAO Products

Defense Reform Initiative: Organization, Status, and Challenges

(GAO/NSIAD-99-87, Apr. 21, 1999).

Quadrennial Defense Review: Status of Efforts to Implement Personnel

Reductions in the Army Materiel Command (GAO/NSIAD-99-123, Mar. 31, 

1999).

Defense Reform Initiative: Progress, Opportunities, and Challenges

(GAO/T-NSIAD-99-95, Mar. 2, 1999).

Force Structure: A-76 Not Applicable to Air Force 38th Engineering

Installation Wing Plan (GAO/NSIAD-99-73, Feb. 26, 1999).

Future Years Defense Program: How Savings From Reform Initiatives

Affect DOD’s 1999-2003 Program (GAO/NSIAD-99-66, Feb. 25, 1999).

DOD Competitive Sourcing: Results of Recent Competitions

(GAO/NSIAD-99-44, Feb. 23, 1999).

DOD Competitive Sourcing: Questions About Goals, Pace, and Risks of Key

Reform Initiative (GAO/NSIAD-99-46, Feb. 22, 1999).

OMB Circular A-76: Oversight and Implementation Issues

(GAO/T-GGD-98-146, June 4, 1998).

Quadrennial Defense Review: Some Personnel Cuts and Associated

Savings May Not Be Achieved (GAO/NSIAD-98-100, Apr. 30, 1998).

Competitive Contracting: Information Related to the Redrafts of the

Freedom From Government Competition Act (GAO/GGD/NSIAD-98-167R, 

Apr. 27, 1998).

Defense Outsourcing: Impact on Navy Sea-Shore Rotations

(GAO/NSIAD-98-107, Apr. 21, 1998).

Defense Infrastructure: Challenges Facing DOD in Implementing Defense

Reform Initiatives (GAO/T-NSIAD-98-115, Mar. 18, 1998).

Defense Management: Challenges Facing DOD in Implementing Defense

Reform Initiatives (GAO/T-NSIAD/AIMD-98-122, Mar. 13, 1998).

Letr
Related GAO Products

Page 24 GAO/NSIAD-99-152 DOD Competitive Sourcing

Base Operations: DOD’s Use of Single Contracts for Multiple Support

Services (GAO/NSIAD-98-82, Feb. 27, 1998).

Defense Outsourcing: Better Data Needed to Support Overhead Rates for

A-76 Studies (GAO/NSIAD-98-62, Feb. 27, 1998).

Outsourcing DOD Logistics: Savings Achievable but Defense Science

Board's Projections Are Overstated (GAO/NSIAD-98-48, Dec. 8, 1997).

Financial Management: Outsourcing of Finance and Accounting Functions

(GAO/AIMD/NSIAD-98-43, Oct. 17, 1997).

Base Operations: Contracting for Firefighters and Security Guards

(GAO/NSIAD-97-200BR, Sept. 12, 1997).

Terms Related to Privatization Activities and Processes (GAO/GGD-97-121, 

July 1997).

Defense Outsourcing: Challenges Facing DOD as It Attempts to Save

Billions in Infrastructure Costs (GAO/T-NSIAD-97-110, Mar. 12, 1997).

Base Operations: Challenges Confronting DOD as It Renews Emphasis on

Outsourcing (GAO/NSIAD-97-86, Mar. 11, 1997).

Public-Private Mix: Effectiveness and Performance of GSA's In-House and

Contracted Services (GAO/GGD-95-204, Sept. 29, 1995).

Government Contractors: An Overview of the Federal Contracting-Out

Program (GAO/T-GGD-95-131, Mar. 29, 1995).

Government Contractors: Are Service Contractors Performing Inherently

Governmental Functions (GAO/GGD-92-11, Nov. 18, 1991).

OMB Circular A-76: Legislation Has Curbed Many Cost Studies in Military

Services (GAO/GGD-91-100, July 30, 1991).

OMB Circular A-76: DOD's Reported Savings Figures Are Incomplete and

Inaccurate (GAO/GGD-90-58, Mar. 15, 1990).

(709359) Letr
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