**GAO-10-566R**                      Published: May 27, 2010. Publicly Released: May 27, 2010.                  

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## Highlights

The Department of Defense (DOD) has sought improved efficiencies and cost reductions in its delivery of services that could be provided by the private sector, using both competitions with private companies and processes to create high performing organizations (HPO). The Office of Management and Budget's (OMB) Circular A-76 establishes federal policy for the competition of commercial activities. According to the circular, the longstanding policy of the federal government has been to rely on the private sector for needed commercial services. To ensure that the American people receive maximum value for their tax dollars, it is the federal government's policy that commercial activities should be subject to the forces of competition. As the largest federal agency, DOD has conducted more A-76 competitions than any other federal agency. However, the A-76 process has drawn criticism from both the public and private sectors. These criticisms largely center on the costs and length of time required to conduct competitions and the manner in which long-term savings are calculated. In light of these concerns, a panel of public and private sector experts convened in 2001 to identify ways in which the federal government could improve the A-76 process and included an option that focused on improving efficiencies in-house through the creation of HPOs rather than seeking improved efficiencies through public-private competitions. Although the A-76 process has been DOD's preferred method for ensuring the most efficient operation of a function, it is currently subject to a number of recently enacted statutory limitations. Given these relatively new developments and the potential for HPOs to serve as an alternative to the A-76 process, you asked us to examine the extent to which the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (OSD) has made progress in implementing and evaluating DOD's HPO initiative.

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## GAO Contacts

John Pendleton
pendletonj@gao.gov

(202) 512-3489

## Office of Public Affairs

Sarah Kaczmarek
kaczmareks@gao.gov

(202) 512-4800

## Topics

National Defense

CompetitionContract performanceContractsDefense capabilitiesDefense cost controlDefense economic analysisFederal agency reorganizationInternal controlsPrivate sectorPrivate sector procurementPublic-private competitions