Strategic Sourcing: Opportunities Exist to Better Manage Information Technology Services Spending
Published: 2015-09-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: GAO reported in 2012 that the government is not fully leveraging its buying power for high-spending areas such as IT services, which accounted for more than $30 billion in fiscal year 2013. Leading commercial companies use strategic sourcing—a process that moves them away from numerous individual purchases to an aggregate approach—to better manage the services they acquire and achieve savings of 4 to 15 percent annually.
GAO was asked to review strategic sourcing of IT services. This report addresses the extent to which selected agencies (1) manage IT services through strategic sourcing approaches, and (2) have insight into labor rates for similar IT services.
GAO reviewed DOD (including the three military departments), DHS, and NASA, which collectively accounted for 53 percent of reported federal fiscal year 2013 IT services obligations. GAO analyzed agency policies, procurement and contracting data, and interviewed agency and contractor officials. GAO identified a high-spend IT service category and obtained labor rate information from a nongeneralizable sample of 30 contract actions awarded to two of the largest contractors common to these agencies.
section_title: What GAO Found
paragraphs: Efforts by the Departments of Defense (DOD), Homeland Security (DHS), and the National Aeronautics and Space Administration (NASA) to strategically manage spending for information technology (IT) services, such as software design and development, have improved in recent years. Each of the agencies GAO reviewed has designated officials responsible for strategic sourcing and created offices to identify and implement strategic sourcing opportunities, including those specific to IT services. Most of these agencies' IT services spending, however, continues to be obligated through hundreds of potentially duplicative contracts that diminish the government's buying power. These agencies managed between 10 and 44 percent of their IT services spending through preferred strategic sourcing contracts in fiscal year 2013. In contrast, GAO previously reported that leading companies generally strategically managed about 90 percent of their procurement spending, including services.
Further, most of these agencies' efforts to strategically source IT services have not followed leading commercial practices, such as clearly defining the roles and responsibilities of the offices responsible for strategic sourcing; conducting an enterprise-wide spend analysis; monitoring the spending going through the agencies' strategic sourcing contract vehicles; or establishing savings goals and metrics. As a result, the agencies are missing opportunities to leverage their buying power and more effectively acquire IT services.
Contracting officials from the agencies GAO reviewed generally had limited insights into the labor rates paid for similar IT services. GAO's analysis of 30 contract actions for similar IT services in fiscal year 2013 found that the agencies paid widely varying labor rates for similar services with the same contractors. The average difference between the lowest and highest labor rate for the categories GAO reviewed was 62 percent, in part due to geographic or work location, unique security, education or skill requirements, and the contractor unit performing the work. Further, for the 30 contract actions for IT services that GAO reviewed, the two contractors proposed more than 117 discrete labor categories—some with multiple variations—which complicated efforts to compare labor rates. Prior GAO reports on leading commercial practices have noted that companies use standardized labor categories for IT services to enable comparison of labor rates and ultimately realize cost savings. Several government-wide and agency-specific efforts to address aspects of these challenges, including providing tools to assess labor rate variations or streamlining labor categories, are under development or in their early implementation stages.
section_title: What GAO Recommends
paragraphs: To improve efforts to strategically source IT services, GAO recommends that each agency conduct spend analysis, monitor spending, develop savings goals and metrics, and consider the use of standardized labor categories, as appropriate for their agency. The agencies concurred with these recommendations.

section_title: Letter
paragraphs: In fiscal year 2013, federal agencies obligated over $30 billion for  information technology (IT) services such as software design and  development. For over a decade, we have issued reports on how the  private sector has used strategic sourcing—which moves away from  numerous individual procurements of goods and services to a broader  aggregate approach—to reduce costs and improve quality. In 2013, we  found that leading commercial companies achieved savings of 4 to15  percent annually through strategically sourcing the full range of services  they buy, including IT services. Our work also found, however, that  federal agencies had generally been reluctant to strategically source their  high-spend services categories due to the difficulty in standardizing  requirements or a decision to focus on less complex commodities that  can demonstrate success and had not established utilization and savings  goals and metrics. In 2015, the Office of Management and Budget’s  (OMB) Administrator for Federal Procurement Policy observed that far too  often, acquisition professionals continue to make purchases with little  insight into what their counterparts across the government are buying,  who they are buying it from, what they are paying, and how they are  buying it.
You asked us to review government efforts to strategically source IT  services. This report addresses the extent to which (1) selected agencies  manage IT services spending through strategic sourcing approaches, and  (2) acquisition personnel had insight into labor rates for similar IT  services.
We focused our review on three federal agencies that were among the  top spenders for IT services in fiscal year 2013—the Departments of  Defense (DOD) and Homeland Security (DHS), and the National  Aeronautics and Space Administration (NASA). Collectively, these three  agencies obligated about $16.1 billion, or about 53 percent of the total  federal fiscal year 2013 obligations on IT services, as reported in the  Federal Procurement Data System-Next Generation (FPDS-NG). Within  DOD, we focused our review on the departments of the Army, Navy, and  Air Force, which accounted for 62 percent of DOD IT services spending.
To assess the extent to which selected agencies manage IT services  spending through strategic sourcing approaches, we interviewed officials  responsible for agency-wide strategic sourcing efforts, policy, and  guidance. Each agency identified a primary contract vehicle or suite of  contracts covering IT services which they considered to be strategically  sourced:
Army—Computer Hardware, Enterprise Software and Solutions
Navy—IT Services Commodity Strategy;
Air Force—Network-Centric Solutions (NETCENTS);
DHS—Enterprise Acquisition Gateway for Leading Edge Solutions  (EAGLE); and
NASA—IT Infrastructure Integration Program (I3P).
Appendix II provides more information about each of these contract  vehicles. For each contract vehicle, we analyzed fiscal year 2013 IT  services spending based on data reported in FPDS-NG to assess the  extent to which these vehicles were used. We defined IT services to  include 34 relevant product service codes, such as IT strategy and  architecture services, based on our review of prior GAO work. We used  fiscal year 2013 FPDS-NG data because it was the most recent fiscal  year with complete government-wide obligation data when we initiated  our review. To assess the reliability of the FPDS-NG data, we reviewed  existing documentation and electronically tested the data to identify  obvious problems with completeness or accuracy. We determined that  these data were sufficiently reliable for the purpose of reporting  government-wide and agency spending on IT services. We also reviewed  and assessed each vehicle against OMB strategic sourcing guidance and  commercial leading practices identified in GAO prior work. Specifically,  we focused on agency efforts to manage their strategic sourcing efforts  and the extent to which they have policies, goals, and metrics for strategic  sourcing utilization as well as goals and metrics for calculating savings.  For the information technology services component of each vehicle, we  reviewed available acquisition strategy and planning documents,  business case analyses, briefings, relevant agency guidance, policy, and  regulation, and interviewed department level officials responsible for  strategic sourcing, as well as program officials responsible for execution  and administration of the vehicles.
To assess the extent to which agency acquisition personnel have insights  into labor rates for similar IT services, we identified a high-spend IT  service category. We selected IT strategy and architecture services,  which was among the top five spend categories for each of the agencies  we reviewed and among the top two government-wide. IT strategy and  architecture relates to the planning, development, and maintenance of  software and solutions specifically to support government requirements.  We then selected a nongeneralizable sample of 30 contract actions with  two of the largest contractors common to these agencies. For these 30  case studies, we identified 12 categories and experience levels that were  common across at least two contract actions with a common contractor.  To compare the variation in labor rates for each category, we selected the  lowest and the highest rates for the relevant time period. To better  understand the factors that can affect variation in labor rates, we  interviewed officials for 11 of the contract actions and representatives of  the two contractors included in our review. We also provided them  examples of labor rate comparisons for discussion purposes. As a result,  we identified some of the factors that can affect labor rates for the same  labor categories such as whether the work is performed at a government  or contractor site; security clearance requirements; performing business  unit; education, experience, certifications, and skills required; and  contract type. While we did not control for these factors in our labor rate  analysis, we believe that our comparisons are informative because they  illustrate the extent to which agency acquisition personnel have insights  into labor rates for similar IT services.
Finally, we reviewed government-wide and agency efforts to improve  government insight into labor rates for IT services and we compared  government practices to leading commercial practices identified in our  prior work. More details about our objectives, scope and methodology can  be found in appendix I.
We conducted this performance audit from March 2014 to September  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Leading Commercial Strategic Sourcing Practices
paragraphs: Strategic sourcing is a process that moves an organization away from  numerous individual procurements to a broader aggregate approach.  While strategic sourcing may not be suitable for all procurements, we  found that leading companies generally strategically manage about 90  percent of their procurement spending, including the full range of services  they buy.
Strategic sourcing begins with an opportunity assessment—an analysis of  spending and the identification of products and services for which  strategic sourcing should be implemented. Spend analysis provides  knowledge about how much is being spent for which products and  services, who the buyers are, who the suppliers are, and where the  opportunities are for leveraged buying and other tactics to save money  and improve performance. Once a product or service is selected for  strategic sourcing, a standardized process is followed to develop,  implement, and manage the sourcing strategy for that product or service.  Key strategic sourcing practices include processes to track and manage  performance through goals and metrics for utilization and savings to help  ensure that the benefits of strategic sourcing are achieved. Figure 1  illustrates the key steps in the strategic sourcing process.
In our 2013 report on leading commercial practices, we reported that  leading companies do not take a one-size-fits-all approach to strategic  sourcing, but rather they tailor their tactics based on two factors—the  degree of complexity of the service and the number of available  suppliers—to determine the choice of procurement tactics appropriate for  that service. Less complex services, referred to as commodity services,  are those where requirements are relatively easy to define and  performance more clearly measured; for example, housekeeping,  telecommunications, and maintenance services. More complex services,  referred to as knowledge-based services, are those where requirements  are more complex, performance is more difficult to measure, and where  service provider staff skill levels are paramount; for example, information  technology services, engineering and management support, and legal  services. For knowledge-based services with many suppliers, such as  information technology, typical tactics include prequalifying suppliers by  skill level and labor hour rates to eliminate non-competitive companies;  tracking supplier performance over time to inform companies’  prioritization of suppliers based on efficiency; and continually measuring,  tracking, and managing suppliers to ensure optimal performance. In the  long term, companies try to address their procurement constraints by  reducing requirements complexity to commoditize services and  developing new suppliers to increase competition. This allows companies  to more aggressively leverage their buying power for all types of services.  Figure 2 shows how the two factors help companies categorize different  services and select appropriate tactics.
After strategic sourcing contracts are awarded, realizing cost savings and  other benefits depends on utilization of these contracts and efforts to  drive as much applicable spending through the contracts as possible.  Officials from the leading commercial companies we reviewed in our prior  work told us that the key to an effective centralized process is ensuring  that services spending goes through approved contracts. Companies  focus on compliance in order to eliminate unapproved purchases. The  leading companies we reviewed also established annual savings  expectations to drive a corporate culture of savings.
Lastly, our prior work found that private companies had also identified  inefficiencies such as paying different rates for similar services. For  example, we found one company conducted a year-long spend analysis  effort which revealed, among other things, cases where a supplier  charged different rates to different departments for the same service.  Private companies were ultimately able to use this information to reduce  costs and better manage suppliers and to determine the point at which  reduction in price may diminish quality of performance. This dynamic,  strategic approach has helped companies demonstrate annual, sustained  savings of 4 to 15 percent annually for the services they buy.
section_title: OMB Strategic Sourcing Guidance and Government-wide Efforts
paragraphs: Since 2005, OMB has directed federal agencies to take action to leverage  and control government spending through strategic sourcing. OMB’s May  2005 memorandum defined strategic sourcing as the “collaborative and  structured process of critically analyzing an organization’s spending and  using this information to make business decisions about acquiring  commodities and services more effectively and efficiently” and directed  agencies to develop and implement strategic sourcing efforts based on  the results of spend analyses. OMB also directed agencies to establish a  structure for strategic sourcing governance at the agency level and  provided that the Office of Federal Procurement Policy (OFPP) may  identify commodities that could be strategically sourced government-wide.  In response to OMB direction, the General Services Administration  established the Federal Strategic Sourcing Initiative (FSSI) in 2005 to  address government-wide opportunities to strategically source commonly  purchased products and services and eliminate duplication of efforts  across agencies. Current FSSI efforts include office supplies, janitorial  supplies, and domestic delivery services.
In December 2012, OMB further directed agencies to reinforce senior  leadership commitment by designating an official responsible for  coordinating the agency’s strategic sourcing activities. OMB also  established the Strategic Sourcing Leadership Council, comprised of the  seven largest and highest spending agencies to take a leadership role on  strategic sourcing. OMB called upon these agencies to lead government- wide strategic sourcing efforts by taking steps such as recommending  management strategies for specific goods and services—including  several that are IT-related—to ensure that the federal government  receives the most favorable offer possible. Additionally, OMB directed  these agencies to promote strategic sourcing practices inside their  agencies by taking actions including collecting data on procurement  spending. OMB’s memorandum noted that government-wide strategic  sourcing efforts should include minimum characteristics including the  collection of sufficient pricing, usage, and performance data to enable  active commodity management. Further, OMB established a Cross- Agency Priority Goal Statement for Fiscal Years 2013 and 2014 which  directed agencies to reduce the costs of acquiring common products and  services by strategically sourcing at least two new commodities or  services in both 2013 and 2014 that yield at least a 10 percent savings  and increase their use of FSSI vehicles by at least 10 percent in both  fiscal years 2013 and 2014.
In December 2014, OFPP issued a memorandum that directs agencies to  take specific actions to implement category management, an approach  based on leading practices that aims to manage entire categories of  spending across government for commonly purchased goods and  services. The memorandum notes that despite some progress in  implementing strategic sourcing, agencies continue to duplicate  procurement efforts, and award contracts for similar services to the same  vendors, which imposes significant costs on contractors and agencies.  The category management approach includes strategic sourcing and  other strategies to drive performance (i.e., developing common standards  in practices and contracts, driving greater transparency in acquisition  performance, and improving data analysis); and is intended to address  problems including significant contract duplication across government and  limited sharing of pricing and other contract information between agencies  and industry.
As part of this effort, the Strategic Sourcing Leadership Council, which  was renamed the Category Management Leadership Council, approved  breaking down spending into 10 common categories such as IT, travel,  and construction, which, according to OFPP, altogether accounted for  $277 billion in fiscal year 2013 federal procurements. Each category will  be led by a team of experts who will develop a common, government- wide strategy for smarter buying. An online portal called the Common  Acquisition Platform, currently in development by GSA, is intended to  compile all acquisition categories in one place for easier navigation of  purchasing options and include agency provided data on prices paid by  their customers for goods and services; contract performance  assessments; best buying practices; and other contract information to  allow for appropriate comparisons between contracts. Sharing information  on pricing for services contracts is more complex than sharing prices for  commonly available goods offered in the commercial marketplace. As of  March 2015, OMB reported that category management metrics were  under development.
section_title: Agency Efforts to Manage IT Services Spending Strategically Have Evolved, but Opportunities Remain to Improve Efforts
paragraphs: Each of the five agencies we reviewed have initiated efforts to manage IT  services spending using strategic sourcing approaches, but significant  opportunities exist to improve these efforts. At the enterprise level, each  agency has designated officials responsible for strategic sourcing and  have offices dedicated to identifying and implementing strategic sourcing  opportunities, including those specific to IT. At the more tactical,  contracting level, each of the agencies identified a principal contract  vehicle, or suite of contracts, which is their agencies’ preferred strategic  sourcing solution for IT services. Overall, the amount of the individual  agency’s spending being managed through their primary strategic  sourcing vehicle or suite of contracts varied from 10 percent to 44 percent  in fiscal year 2013. However, we found the majority of the agencies’  spending is executed through hundreds of other contracts. Some agency  efforts to strategically source IT services have been executed in a  decentralized manner and without clearly identifying the roles and  resources needed to carry out leading practices such as enterprise-wide  spend analysis or measuring progress in implementing strategic sourcing  approaches based on goals and metrics. Further, the agencies we  reviewed varied in the degree to which they utilized key strategic sourcing  practices, such as tracking savings for their contract vehicles. As a result,  significant opportunities exist to increase the use of existing strategically  sourced vehicles, to measure savings accrued through the use of the  strategic sourcing contracts already in place, and to develop strategies to  reduce duplication by better managing the spending considered  addressable by the existing vehicles.
subsections: section_title: Agencies Have Established Strategic Sourcing Governance, but Some Agencies Have Not Yet Conducted Spend Analyses or Clearly Defined Roles and Responsibilities
paragraphs: In December 2012, OMB directed agencies to designate a strategic  sourcing accountable official with the authority to coordinate the agencies’  internal strategic sourcing activities. In accordance with leading  commercial practices, these activities can include conducting enterprise- wide spend analysis to identify strategic sourcing opportunities,  developing sourcing tactics based on factors including the complexity of  the service and number of suppliers in the market, and continuously  managing the strategy by tracking and enforcing utilization and measuring  savings. Establishing guidance, policies, roles, and responsibilities is a  necessary step to ensure that agencies analyze and address their IT  services spending through strategic sourcing, set utilization and savings  targets, and then reduce contract duplication and achieve savings over  time by monitoring spending patterns to ensure the benefits of strategic  sourcing are achieved. Each of the agencies we reviewed designated an  official and have offices responsible for implementing strategic sourcing  approaches, including for IT services. Table 1 identifies the officials and  offices responsible for strategic sourcing, key policies and guidance, and  selected roles and responsibilities for strategic sourcing for the agencies  we reviewed.
Among the agencies we reviewed, DHS has the most mature strategic  sourcing efforts. For example, DHS established a strategic sourcing office  at its headquarters to centralize strategic sourcing efforts when the  department was created in 2003, and its strategic sourcing program has  been operating under an implemented management directive since 2004.  Over the last decade, DHS has issued policy and guidance that clearly  outlines roles and responsibilities for carrying out strategic sourcing  including an executive governance structure to establish strategic  direction and policies, as well as a strategic sourcing program office  charged with conducting agency-wide spend analysis in coordination with  commodity councils and working groups.
By contrast, in fiscal year 2013, efforts to strategically source IT services  at the Army, Navy, Air Force, and NASA were executed in a decentralized  manner and without clearly defined roles and responsibilities to conduct  enterprise-wide spend analysis or measure progress in implementing  strategic sourcing approaches based on goals and metrics. For example,  we reported in 2012 that the Army established a strategic sourcing board  structure and program in 2011, but had not devoted resources to carry  out strategic sourcing functions. At that time, the Army could not provide  information on all the department’s strategic sourcing efforts because  planning and execution was carried out in a decentralized manner. In  September 2013, the Army issued a charter establishing an executive  committee to set the strategic vision, direction, and priorities for Army  strategic sourcing efforts. The charter also outlines the roles of working  groups responsible for strategic sourcing planning and execution as well  as estimated resources needed to carry out strategic sourcing efforts. As  of June 2015, the Army had not conducted an enterprise-wide spend  analysis for IT services. Similarly, the Air Force and Navy have not  conducted enterprise-wide spend analyses to determine how much IT  services spending should go through their strategically sourced contract  vehicles.
NASA established its strategic sourcing program in 2006, but a 2014  NASA Inspector General report found that the agency failed to follow  critical elements of its program plan; specifically, completing spend  analyses, and measuring performance. Further, the report noted that  NASA had not committed sufficient resources to promote and expand its  strategic sourcing efforts. In September 2014, NASA issued a strategic  sourcing plan aimed at, among other things, addressing the Inspector  General’s recommendation to identify and assign specific responsibilities  and provide guidance on how to carry out spend analysis. After the  Inspector General’s recommendations, NASA conducted an IT services  spend analysis in 2014 that identified top spending categories that may  provide opportunities for strategic sourcing by optimizing use of existing  contracts or creating new strategic sourcing initiatives.
section_title: Agencies Have Efforts in Place to Strategically Source IT Services, but Significant Duplication Remains
paragraphs: At the more tactical, contracting level, each of the agencies identified an  existing principal contract vehicle or suite of contracts, which is each  agency’s preferred strategic sourcing solution for IT services. However,  we found the majority of the agencies’ spending is executed through  hundreds of other contract vehicles. Specifically, the Army, Navy, Air  Force, DHS, and NASA collectively obligated more than $11 billion for IT  services in fiscal year 2013, but managed only between 10 to 44 percent  of their respective IT services spending through strategically sourced  vehicles. Each of the agencies except the Navy had program offices in  place to manage their preferred strategic sourcing contract vehicles.  These offices are responsible for managing their particular contracts and  not responsible for enterprise-wide strategic sourcing planning and  oversight. As a result, significant amounts of IT services spending  remains outside the purview of each agency’s primary strategic sourcing  contract vehicle for IT services (see table 2).
DHS and NASA managed more of their IT spending through their  preferred strategic sourcing contract vehicles than did the military  departments we reviewed, with such spending accounting for about 44  and 35 percent, respectively, of their fiscal year 2013 obligations on IT  services. A senior DHS official responsible for strategic sourcing noted  that fiscal year 2013 was a transition year between EAGLE I and EAGLE  II and not fully representative of the agency’s spending through the  contract vehicles. Specifically, the official noted that EAGLE I could not  accommodate the period of performance needed for some large multi- year task orders, but that the predominant functional categories under  EAGLE II were not yet available which may have affected utilization.
The Army obligated 27 percent of its $3.4 billion on IT services spending  through its CHESS strategic sourcing contacts, but at the same time  obligated about $1 billion on 437 standalone contracts. Similarly, more  than 80 percent of the Air Force’s spending on IT services occurred  outside of its NETCENTS contracts, including more than $400 million  obligated through 295 standalone contracts. Air Force strategic sourcing  officials indicated that the transition between NETCENTS I and II  occurred during fiscal year 2013 which may have affected utilization.  Standalone contracts at both of these agencies were awarded to some of  the same contractors for some of the same services covered by the  agencies’ primary strategic sourcing vehicles. As noted by OFPP,  unnecessary duplication imposes significant costs on contractors and  agencies. Contractors must absorb increased proposal preparation costs  and administrative expenses, which disproportionately affect small  businesses, and agencies cannot take advantage of potential savings, or  leverage their acquisition workforce to support more complex, higher-risk  requirements.
The Navy’s April 2012 IT services commodity strategy is aimed at  addressing IT services requirements, but only 10 percent of the Navy’s IT  services spending was obligated on the contract vehicles called for by  that strategy, leaving 90 percent of the agency’s IT services spending  managed through other contracts. These other contracts include the Navy  Marine Corps Intranet (NMCI) Continuity of Services contract, which  accounted for about 43 percent or $1.4 billion of the agency’s fiscal year  2013 IT services spending. The NMCI Continuity of Services contract is  a bridge contract providing service between the NMCI contract that had a  period of performance form October 2000 to September 2010 and the  follow-on Next Generation Enterprise Network contract which was  awarded in June 2013 for performance through June 2018. The contract  provides hardware and associated services such as enterprise-wide seat  management and help desk support to Navy personnel. NMCI program  and Navy strategic sourcing officials explained that NMCI is strategic in  that it consolidates and manages dispersed Navy IT equipment and  provides a common contractor to meet Navy requirements. As such, Navy  program officials noted that they consider the funds awarded under the  contract to be “spend under management.” Navy officials acknowledge,  however, that the NMCI program does not track spending, measure  utilization, calculate savings, or include other aspects common in  strategic sourcing. In addition, Navy strategic sourcing officials noted that  when developing the 2012 IT services commodity strategy, they were  attempting to better target and manage Navy IT services spending that  occurred outside of NMCI.
section_title: Opportunities Exist to Better Implement Strategic Sourcing Leading Practices for IT Services
paragraphs: Despite efforts to strategically source IT services, our analysis showed  that some of the agency efforts were not developed with strategic  sourcing principles in mind and fall short of incorporating some key  strategic sourcing leading practices—such as establishing use policies,  utilization and savings targets, and accompanying metrics. Of the five  agencies we reviewed, only three agencies had established policies  requiring the mandatory use of their preferred strategic sourcing contract  vehicle for IT services; only one agency had established utilization goals  and metrics; and only two had established a method for calculating  savings. None of the five agencies had established a savings goal.  Overall, DHS strategic sourcing efforts exhibited more of the  characteristics of leading commercial companies than the other agencies  we reviewed. Table 3 summarizes agency policies, goals, and metrics  related to utilization and savings for the strategic sourcing vehicles we  assessed.
DHS’ August 2012 policy requires the use of DHS strategic sourcing  vehicles for purchases of supplies and services, with limited exceptions  and DHS also measures utilization against what it considers to be the  total amount of spending potentially addressable by EAGLE. For  example, DHS strategic sourcing officials estimate that about 80 percent  of the department’s IT services requirements are addressable through  EAGLE since there is some overlap between the products and services  covered by EAGLE and other DHS strategically sourced vehicles. DHS  strategic sourcing officials indicated that they do not have a specific  utilization goal for EAGLE or IT services spending specifically, but instead  for fiscal year 2013, set a utilization goal of 42 percent across all of the  department’s strategic sourcing vehicles. DHS strategic sourcing officials  continually monitor EAGLE utilization by reviewing procurement data from  FPDS-NG and by reviewing waiver requests to the mandatory use policy  to determine the rationale for why the vehicle is not meeting component  needs.
To measure savings for EAGLE, DHS developed a savings factor of 2.9  percent for all spending through EAGLE I, which assumes savings based  on the avoidance of fees charged for GSA schedule use, discounts off of  EAGLE contract ceiling amounts resulting from task order competitions,  and administrative savings resulting from the use of established  contracts. In planning and implementing EAGLE II, DHS refined its  savings methodology and increased the savings factor to 5 percent. To  do so, DHS analyzed historical task orders under EAGLE I and confirmed  that increased task order competition results in additional savings  achieved off of the contract ceiling rates. In fiscal year 2013, EAGLE  reported a total savings of $39 million based on $1.3 billion in obligations  through EAGLE I and EAGLE II. The DHS Chief Information Officer has  also set enterprise-wide savings goals for IT in response to PortfolioStat  expectations and identified a number of approaches to achieve savings  including the use of strategically sourced vehicles. DHS, however, has  not set a utilization and savings goal for IT services, even though that  spending may be managed through EAGLE I and EAGLE II contracts as  well as other DHS strategic sourcing vehicles. In doing so, DHS would be  in a better position to monitor progress in managing its IT services  spending.
Though the Air Force’s May 2011 policy requires the use of NETCENTS  for IT services, the Air Force does not have utilization goals and metrics  for the amount of addressable spending that should be going through the  vehicles and therefore lacks context to determine if the amount of  spending directed to NETCENTS is appropriate. Air Force officials  responsible for strategic sourcing noted that there are plans to look more  closely at NETCENTS spending through a new business intelligence  effort. Specifically, in January 2015, the Secretary of the Air Force  announced plans to create a new Information Technology Business  Analytics Office to collect empirical data and metrics to help with a data- driven approach to better understanding spending. Representatives from  this office reported that the analysis is being used by senior Air Force  leaders to determine by base and major command where spending is  occurring outside of Air Force mandatory use vehicles, to increase  enforcement, and to help project future IT requirements. The Air Force  does not currently track savings associated with the use of NETCENTS  for IT services, even though the total contract ceiling for services is $16.1  billion, more than double the ceiling of $7.4 billion for products. A  NETCENTS program official reported that his office does not have the  resources or data needed to calculate savings for services which would  require a comparison between actual labor rates paid to the maximum  labor rates proposed by vendors, or a comparison of actual labor rates  paid to the independent government cost estimate based on historical  costs, data that is not routinely collected.
The Navy’s April 2012 policy requires the use of certain contracts for IT  services through its IT commodity strategy, though it lacks a utilization  goal regarding the amount of addressable spending that should be going  through these contracts. A senior official from the Navy’s strategic  sourcing program office acknowledged that decisions to initiate new  contracts rather than leverage existing vehicles are not being properly  supported or justified and existing contract solutions could be used more  regularly. The official also noted that while the office reviews Navy  spending based on FPDS-NG data to assess usage of the established  vehicles, it does not play a direct role in managing spending as the  decisions to contract outside of the existing vehicles is made on a  decentralized basis. He recommended that the Navy’s policy be more  directive and authoritative and that exceptions, which are approved at the  major command level, be subject to greater oversight. To calculate the  savings achieved through its IT commodity strategy, the Navy calculated  savings based on comparing the independent government cost estimates  with the actual prices paid for specific IT services acquisitions and  reported savings of $8 million for fiscal year 2013.
The Army does not have a mandatory use policy or attempt to track  savings for IT services under its CHESS contract vehicle. For example,  the Army’s CHESS vehicle is mandatory for purchases of commercially  available hardware, but not for services even though the total contract  ceiling of $20.4 billion for services is about double the $10.5 billion ceiling  for products. A CHESS program official noted that the vehicle provides  users with access to a number of qualified IT services vendors and in  contrast with other non-Army vehicles it does not charge a fee for its use.  The official also stated that CHESS is a preferred source for IT services,  but the rationale for not requiring use of CHESS for IT services is to allow  Army components greater flexibility to select the vendor that can meet  their needs most efficiently, including small businesses, of which there  are few options under CHESS. The next generation of the CHESS  Information Technology Enterprise Solutions-2 Services contract is in the  acquisition planning process and expected to be awarded in 2017. The  Army intends to apply the strategic sourcing process, and the vehicle is  being designed to include more small businesses.
NASA’s IT Infrastructure Integration Program (I3P) contracts were  intended to consolidate a number of previously existing NASA enterprise- wide contracts and center contracts, but they were not created based on  a comprehensive analysis of the agency’s IT services spending. In  August 2011, the NASA Chief Information Officer, Assistant Administrator  for Procurement, and the Deputy Chief Acquisition Officer issued a joint  memorandum directing NASA buyers to consider the use of existing  NASA contracts, including I3P, for the procurement of IT products and  services. In April 2014, NASA also issued policy requiring the use of I3P  for NASA’s end user services, such as help desk and data backup  services. Despite these policies, a senior official from NASA’s office of the  Chief Information Officer noted that NASA centers continue to manage  their own contracts for certain IT services. The official further noted that  NASA is working to develop a better understanding of agency-wide  spending following the 2014 NASA Inspector General report. NASA  officials also noted that they are considering changes for future contract  awards to incorporate lessons learned. These include planning vehicles  with increased scope to further consolidate center-specific IT services  contracts and the expanded use of existing government-wide acquisition  contracts.
section_title: Agencies Lacked Insight into Labor Rates Paid for Similar IT Services and Paid Widely Varying Rates
paragraphs: Contracting officials from the agencies we reviewed generally had limited  insights into the labor rates paid for similar IT services. These officials  stated that having timely and reliable insights into the rates paid for  similar services within their own, or by other federal agencies, would be  beneficial, but they currently lack the tools and data to do so. Our analysis  of 30 IT services contract actions for similar IT services found that the  agencies we reviewed paid widely varying rates for 12 similar labor  categories with the same contractors, with the average difference  between the lowest and highest labor rate being 62 percent. Agency  contracting and contractor officials identified a number of factors that  could contribute to such differences, including geographic or work  location, unique security, education or skill requirements, and the  contractor unit performing the work. Further, we found that the 30 contract  actions for IT services that were awarded to two contractors contained  more than 117 discrete labor categories, many with multiple variations to  account for experience levels. Agency contracting officials identified the  existence of so many different labor categories as hindering their ability to  conduct labor rate comparisons. Several government-wide and agency- specific efforts are under way to address certain aspects of these  challenges, but none are currently addressing the range of challenges our  work identified, which may limit their utility in providing contracting officers  with readily available information that would facilitate labor rate  comparisons.
subsections: section_title: Contracting Officials Generally Lack Insight into the Rates Obtained by Other Federal Contracting Activities
paragraphs: We found significant variation in the labor rates agencies are paying for IT  services. Specifically, we analyzed rates paid for IT strategy and  architecture services in fiscal year 2013 from a sample of 30 contract  actions with the same two contractors, and identified 12 labor categories  and levels that were common to at least two contract actions. For these  12 labor categories, we found differences between the lowest and highest  rates for a single category and level ranging from 18 percent to 183  percent. Across all our comparisons, the highest rates were an average  62 percent higher than the lowest. Table 4 provides examples of  difference in labor rates.
Agency officials and contractor representatives identified several factors  that can affect labor rates, including (1) whether the work was performed  at a government site versus a contractor site; (2) unique personnel  security requirements; (3) the contractor business unit performing the  work; (4) geographic variations; (5) difference in education and/or  experience required; and (6) contract type. Representatives from one of  the contractors we reviewed also told us that the business sector  performing the contract can be an important factor in determining the  labor rate. These representatives explained that one of the contractor’s  business sectors was established to be a leaner alternative, and that may  partially explain differences in labor rates.
We found that consistent with federal acquisition regulations, contract  officials used procedures such as market research and competitive  awards and determined that prices paid for their contracts were fair and  reasonable. However, agency contracting officials stated that having  timely and reliable insights into the rates paid for similar services within  their own agency or by other federal agencies would be beneficial in  helping refine their negotiating position but they currently lack the tools  and data to do so.
Contracting officials noted that while they generally have access to labor  rates obtained under other contracts awarded by the same contracting  activity, the further they were removed from the buying activity, the harder  it was to obtain data on labor rates in a timely fashion. For example, Navy  officials noted that they considered checking labor rates for an IT services  requirement with rates paid under the Army’s CHESS contract, but found  that they had difficulty identifying a point of contact. These officials  stressed that given their workload and the short timeframes generally  afforded to prepare for and negotiate contracts, they need reliable  information they can readily access if the information was to be of any  utility to them.
Some contracting officials cited published GSA schedule rates as their  only source of data on labor rates for similar services outside of their  agencies. As we have recently reported, contracting officers noted that  some GSA schedule vendors set their rates as a ceiling and routinely  discount prices for orders. In these cases, published schedule rates  likely do not represent the lowest rates available. For example, one DOD  component was charged $163.85 per hour for a systems architect and  officials were aware that the rate represented a discount from the GSA  published rate, but did not have access to data showing that another  DOD component obtained a rate of $126.96 with the same contractor for  a systems architect.
Further, contracting officials told us that variations in individual labor  category titles present another barrier to the comparison of labor rates. To  illustrate the variation in labor category titles, our analysis of the 30  contract actions awarded to two contractors for similar IT services  identified 117 discrete labor category titles, coupled with multiple and  differing experience scales, leading to 199 unique labor category and  experience level combinations. For example, when identifying its  proposed systems engineer staff, one contractor used the scale junior or  senior for one task order and systems engineering I, II, or III for another  task order, even though the type of service to be provided was similar.
Our prior work on commercial leading practices noted that without  centralized procurement knowledge such as comparable labor rate  information, companies ran the risk that different parts of the organization  could be unwittingly buying the same item or service, thereby missing an  opportunity to share knowledge of procurement tactics proven to reduce  costs. For example, officials at one company noted a lack of standardized  data on the type or category of labor acquired, and the cost per hour of  the labor, hampered efforts to use existing information to more effectively  manage service spending. In contrast, officials from one company  reported that collecting standardized data on the cost of labor hours by  skill set enabled the company to aggressively negotiate future labor and  overhead rates with service providers.
Similar to these efforts, DHS’s EAGLE II and GSA’s Alliant vehicles have  developed standardized labor categories and descriptions based on  private sector best practices. According to DHS officials, standardized  labor categories facilitate the collection and analysis of labor rates which  the agencies can use to better manage their suppliers and compare  prices paid. DHS officials explained that while EAGLE I used common  labor category names, DHS had difficulty comparing labor rates across  EAGLE I task orders due to variance in experience scales between  contractors. As a result of this lesson learned and to improve ease of  contract use, EAGLE II contractors must adhere to a standard labor  category experience scale. Similarly, according to GSA officials, the  solicitation for GSA’s Alliant II contract will establish 31 standardized labor  categories and four experience levels for contractors to use in their  proposals. GSA also plans to collect transactional data from IT services  contractors which it intends to provide transparency into prices paid and  other factors. Further, GSA used standardized labor categories and  experience levels for Alliant I and provides the median prices paid for  each labor category by contractor for each year of the contract. According  to program officials from the CHESS, NETCENTS, and I3P vehicles we  reviewed, they have not started to collect data to assess variation in labor  rates which limits their knowledge and insights needed to reduce contract  costs and identify other efficiencies.
GSA officials stated that a key principle underlying development of a  standard list of labor categories is to allow for customization at the task  order level. These officials explained that if the standard list is too  detailed, there is a greater chance that it will be viewed as inappropriate  for specialized requirements. One contractor told us that government  specified labor categories and descriptions can be beneficial because  they help the contractor understand the scope of work and what  qualifications the government anticipates as necessary to complete the  task and for price evaluation, it helps ensure that all competitors are on a  level playing field. One drawback noted is that the contractor must map  actual performers to government categories which may be different than  the contractor’s current labor category structure. The result is an  additional layer of justification to align these categories.
section_title: Some Initiatives Are under Way to Improve the Labor Rate Data Available to the Government, but Most Are Early in Development
paragraphs: OMB and some of the agencies we reviewed have initiatives under way to  streamline the number of labor categories or provide more data on labor  rates, but we found that none of the initiatives currently provide the  capability to obtain information on actual prices paid for specific or  standardized labor categories. Consequently, government acquisition  professionals may be missing opportunities to negotiate better labor  rates, and improve their knowledge of agency requirements and potential  cost drivers.
In its December 2014 memorandum on category management, OFPP  announced efforts to enable the federal government to buy smarter and  more like a single enterprise. It involves identifying core categories of  spend, and developing heightened levels of expertise, sharing best  practices, providing streamlined solutions, and managing supply and  demand for each of the categories. The objective is to increase efficiency  and effectiveness while reducing costs and redundancies. The  memorandum directs agencies, including executive agents of  government-wide acquisition contracts and managers of multi-agency and  enterprise-wide contracts, to provide data on rates paid by their  customers; contract performance assessments; and best buying  practices. As part of this effort, GSA created a Common Acquisition  Platform to house information collected, including spending data. GSA  officials explained that there are five IT hallways in the platform including  one for IT services.
Part of the Common Acquisition Platform includes GSA’s Prices Paid  Portal which will allow agencies to view actual prices paid across the  government for commonly purchased goods and services, but the portal  is not yet fully functional. As part of this effort, GSA has begun efforts to  collect IT services data from its contract vehicles such as Alliant as well  as other agency contract vehicles to populate the tool.
In addition, GSA launched the Contract Awarded Labor Category tool in  May 2015 which contains professional services and some IT services  labor categories that are searchable. This tool provide users with price  comparisons based on search parameters including labor category  description, years of experience, education level, business size, and  contractor versus government work site pricing. For example, with the tool  a user can identify prices for a senior engineer with a specific education  level and will generate information such as the average hourly labor rate  as well as the range of prices paid. Although it is too soon to evaluate the  effectiveness of this tool, it has the potential to provide contracting staff  with greater visibility into labor category rates with enough fidelity to  account for many of the same factors we identified as contributing to price  variation.
DOD’s Contract Business Analysis Repository will allow DOD acquisition  personnel to evaluate pricing information for all negotiated contract  actions exceeding $25 million. DOD has issued direction to its contracting  officers requiring that applicable pricing information such as price  negotiation memorandums be uploaded into the repository. However, to  obtain insights into the labor rates, users will have to search through price  negotiation documents to locate similar requirements and comparable  labor categories. DOD officials reported that the repository is currently  designed to simply post scanned versions of such documents and is not  intended to identify specific factors that contributed to any variations in  labor rates.
section_title: Conclusions
paragraphs: Each of the agencies we reviewed—the Army, Navy, Air Force, DHS, and  NASA—have made strides in their efforts to strategically source IT  services, but none have fully incorporated leading commercial practices.  Each agency has designated individuals to serve as their agency’s  strategic sourcing accountable official; established, to varying degrees,  policies governing strategic sourcing efforts; and has designated contract  vehicles as their preferred strategic sourcing solution for IT services. As  such, these agencies are following the path taken by the leading  commercial companies we previously reviewed. However, it takes much  more than putting a contract into place to fully implement strategic  sourcing approaches. At the enterprise level, most agencies have  opportunities to better adopt leading commercial practices by conducting  spend analysis for IT services, monitoring the use of their strategic  sourcing vehicle in comparison to their total spending on IT services,  establishing utilization goals and metrics; establishing policies requiring  the mandatory use or consideration of their preferred strategic sourcing  contract vehicle and taking steps to monitor compliance with such  policies, and identifying methods for calculating savings and setting  savings goals. For example, the amount of spending through these  agencies’ preferred strategic sourcing contract vehicles ranged from 10  percent at the Navy to 44 percent at DHS, which falls far short of the 90  percent that leading commercial companies obtained. Following these  leading practices enabled commercial companies to achieve annual  savings of 4 to 15 percent. Translated into the federal environment,  achieving even a 4 percent savings on the $30 billion federal agencies  obligated on IT services in fiscal year 2013 would result in over $1 billion  in savings or efficiencies. Moreover, these steps can help agencies carry  out responsibilities to reduce the costs and administrative efforts of  maintaining hundreds of potentially duplicative contracts. Until such time  that agencies establish such policies, goals, and metrics, they remain at  risk of missing opportunities to better manage their spending on IT  services.
At the tactical, contracting level, a key practice undertaken by some  leading commercial companies is to obtain better insights into the actual  prices paid for IT services. To do so often required companies to improve  their business intelligence tools, standardize labor categories, and collect  data on the actual prices paid for such services. Federal acquisition and  contracting officials we interviewed believed that such information would  be beneficial, but they acknowledged they currently lack the tools and  capacity to do so in a timely and reliable manner. As a result, the  capability does not currently exist for agency contracting officials to know  how the prices they obtained compare to those obtained by other  contracting officers, including those within their own agency. The goal  should not necessarily to obtain the lowest price, but to have insights  about where a labor rate falls in the spectrum of prices being paid by  other agencies. Armed with this information, contracting officers can  better determine whether a contractor may be charging too much or too  little, but also identify if a requirement is driving contractors to charge  more or less than expected. Either way, such insights are the basis to ask  questions and obtain more in depth knowledge. Further, the hundreds of  labor categories and experience levels we found for the 30 contract  actions reviewed also show the significant challenges contracting officers  face to compare labor rates. Some agencies, such as DHS, have taken  steps to reduce the number of labor categories to which contractors must  propose in order to collect data necessary to assess variation in labor  rates, but the Army and Air Force have not. As a result, these agencies  may be missing opportunities to collect insights needed to reduce  contract costs and identify other efficiencies.
section_title: Recommendations for Executive Action
paragraphs: To improve efforts to strategically source IT services within the Army, the  Secretary of the Army should direct its strategic sourcing accountable  official to take the following four actions:
Conduct a comprehensive analysis of Army IT services spending to  determine the extent to which requirements can be addressed by  CHESS or other strategic sourcing approaches, and based on this  analysis, consider opportunities to reduce duplicative contracts.
Implement utilization metrics and mandatory use or consideration  policies.
Develop guidance and overarching goals and metrics for savings.
Conduct a review of the benefits and disadvantages of standardized  labor categories for CHESS or future contracts.
To improve efforts to strategically source IT services within the Navy, the  Secretary of the Navy should direct its strategic sourcing accountable  official to take the following two actions:
Conduct a comprehensive analysis of IT services spending to  determine the extent to which requirements can be addressed by the  existing contracts or other strategic sourcing approaches and based  on this analysis, reduce duplicative contracts.
Implement utilization metrics and monitor agency efforts to comply  with the Navy’s existing use policies for IT services.
To improve efforts to strategically source IT services within the Air Force,  the Secretary of the Air Force should direct its strategic sourcing  accountable to take the following four actions:
Conduct a comprehensive analysis of IT services spending to  determine the extent to which requirements can be addressed by  NETCENTS or other strategic sourcing approaches, and based on  this analysis, reduce duplicative contracts.
Implement utilization metrics.
Develop guidance and overarching goals and metrics for savings.
Conduct a review of the benefits and disadvantages of standardized  labor categories for primary strategic sourcing vehicles such as  NETCENTS.
To improve efforts to strategically source IT services within NASA, the  Administrator of NASA should direct its strategic sourcing accountable  official to take the following three actions:
Use its 2014 spend analysis to determine the extent to which  requirements can be addressed by I3P or other strategic sourcing  approaches, and based on this analysis, reduce duplicative contracts.
Implement utilization metrics and mandatory use policies.
Develop guidance and overarching goals and metrics for savings.
To improve efforts to strategically source IT services within DHS, the  Secretary of Homeland Security should direct its strategic sourcing  accountable official to take the following two actions:
Establish a utilization goal for the portfolio of strategic sourcing  contracts related to IT services.
Establish a savings goal for the portfolio of strategic sourcing  contracts related to IT services.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of our report to the Secretaries of DOD and DHS,  and the Administrators of NASA and GSA. DOD, DHS, and NASA  concurred with our recommendations to improve efforts to strategically  source IT services within their agencies. The agencies’ comments are  summarized below and written comments from DOD, DHS, and NASA  are reproduced in appendixes III, IV, and V respectively. We also  received technical comments from DHS and NASA which we  incorporated, as appropriate.
In DOD’s written comments, the Director, Defense Procurement and  Acquisition Policy, agreed with our recommendations and identified the  actions that the Army, Navy, and Air Force intended to take to improve  efforts to strategically source IT services. These actions include  conducting spend analysis, developing policy and guidance regarding the  utilization of existing strategic sourcing vehicles, and establishing goals  and metrics to assess the use of the military departments’ strategic  sourcing vehicles and measuring savings. The Director indicated that  these actions are expected to be completed by the end of the third  quarter of fiscal year 2016.
In its written comments, DHS concurred with our recommendations and  plans to establish utilization and savings goals for the portfolio of strategic  sourcing contracts related to IT services by the end of 2015. DHS stated  that is remains committed to ensuring that the needs of the Chief  Information Officer community are met through strategic sourcing vehicles  which are cost effective, generate savings, and support the mission of the  department.
In NASA’s written comments, the Assistant Administrator for Procurement  agreed with our recommendations to use NASA’s 2014 spend analysis to  identify contract duplication and opportunities to leverage existing  strategic sourcing initiatives. The Assistant Administrator indicated these  actions would be completed in February 2016. NASA also agreed with  our recommendation to develop guidance and overarching goals and  metrics for savings and anticipated these actions will be completed in  January 2017. NASA partially concurred with our recommendation to  implement utilization metrics and mandatory use policies. The Assistant  Administrator stated that NASA will review its current policies to develop  and implement metrics and a standardized policy which establishes  mandatory use or consideration of existing contracts, where applicable.  We believe these actions meet the intent of our recommendations.
GSA did not provide comments on the content of the draft report, but  noted in oral comments that GSA’s Federal Acquisition Service Office of  Strategy Management has established a program management office that  will develop government-wide spend analyses in categories including IT  to support category management and efforts to expand strategic sourcing  initiatives.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Defense; the  Secretaries of the Army, Navy and Air Force, respectively; the Secretary  of Homeland Security; the Administrator of the National Aeronautics and  Space Administration; the Administrator of General Services; the Director,  Office of Management and Budget, and the Administrator of Federal  Procurement Policy. In addition, the report will be available at no charge  on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me on (202) 512-4841 or dinapolit@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VI.
section_title: Appendix I: Objectives, Scope and Methodology
paragraphs: We were asked to review the status of the government’s efforts to  strategically source IT services. We assessed the extent to which (1)  selected agencies manage IT services spending through strategic  sourcing approaches, and (2) acquisition personnel had insight into labor  rates for similar IT services.
To evaluate agency strategic sourcing efforts, we selected three  agencies—Department of Defense (DOD), Department of Homeland  Security (DHS), and National Aeronautics and Space Administration  (NASA)—which accounted for 53 percent of total fiscal year 2013 federal  IT services procurement spending, based on data reported in the Federal  Procurement Data System-Next Generation (FPDS-NG). Within DOD, we  focused our review of strategic sourcing efforts on the departments of the  Army, Navy, and Air Force which accounted for 62 percent of total DOD  IT services spending. We defined IT services based on product service  codes which are used to categorize products and services in FPDS-NG.  We selected 34 relevant product service codes based on prior GAO work.  Specifically, we defined IT services based on the following product and  service codes: D301-D399 for automated data processing (ADP) and  telecommunications services; H170, H270, H370, and H970 for quality  control, testing, and inspection of ADP equipment; J070 for maintenance  and repair of ADP equipment; K070 for modification of ADP equipment;  L070 for technical representatives for ADP equipment; N070 for  installation of ADP equipment; and U012 for ADP training.
To assess the extent to which agencies manage IT services spending  through strategic sourcing approaches, we met with officials responsible  for strategic sourcing to identify any strategic sourcing efforts covering IT  services. At the DOD department level, we met with DOD’s Strategic  Sourcing and Services Acquisition Office, which is within DOD’s Office of  the Director, Defense Procurement and Acquisition Policy and with  representatives from the office of the Chief Information Officer. Within the  military departments and civilian agencies, we met with Strategic  Sourcing Accountable Officials responsible for agency-wide strategic  sourcing efforts, policy, and guidance.
Each agency identified a contract vehicle or suite of contracts covering IT  services which they considered to be strategically sourced:
Army—Computer Hardware, Enterprise Software and Solutions
Navy—IT Services Commodity Strategy;
Air Force—Network-Centric Solutions (NETCENTS);
DHS—Enterprise Acquisition Gateway for Leading Edge Solutions  (EAGLE); and
NASA—IT Infrastructure Integration Program (I3P)
We obtained the contract numbers for each of the vehicles which we used  to analyze each agency’s fiscal year 2013 IT services spending based on  data reported in FPDS-NG. We used fiscal year 2013 FPDS-NG data  because it was the most recent fiscal year with complete government- wide obligation data. To assess the reliability of the FPDS-NG data, we  reviewed existing documentation and electronically tested the data to  identify obvious problems with completeness or accuracy. We determined  that these data were sufficiently reliable for the purpose of reporting  government-wide and agency spending on IT services. We also reviewed  and assessed each vehicle against the Office of Management and Budget  strategic sourcing guidance and commercial leading practices for  strategic sourcing identified in GAO prior work. Specifically, we focused  on agency efforts to manage their strategic sourcing efforts and the extent  to which they have policies, goals, and metrics for strategic sourcing  utilization as well as goals and methods for calculating savings. For the  information technology services component of each vehicle, we reviewed  available acquisition strategy and planning documents, business case  analyses, briefings, and any relevant agency guidance, policy, and  regulation.
To assess the extent to which agency acquisition personnel have insights  into labor rates for similar IT services, we used FPDS-NG to identify one  high-spend IT service category—IT strategy and architecture services— that was among the top five IT service spend categories at each of the  agencies we selected and among the top two government-wide. In fiscal  year 2013, DOD, DHS, and NASA obligated $1.3 billion, $127 million, and  $156 million, respectively for IT strategy and architecture services. IT  strategy and architecture relates to the planning, development, and  maintenance of software and solutions to support government  requirements.
From a universe of all DOD, DHS, and NASA contract actions that had  fiscal year 2013 obligations for IT strategy and architecture services in  FPDS-NG, we identified contract actions with two of the top contractors  common to these agencies, in order to allow for the most consistency in  labor categories across contracts. We selected a nongeneralizable  sample of 30 of these contract actions related to 14 base contracts. For  the 30 selected contract actions, we reviewed contract documents and  identified 117 different labor categories and a total of 199 labor category  and experience level combinations. Among those, we identified 12  categories with matching labor categories and levels in at least two  contracts with a common contractor, which included:  2.  IT Certified Professional - Senior  4.  Program Manager 2  5.  Program Manager - Senior  7.  Software Engineer - Senior  8.  Systems Administrator III  10. Systems Engineer III  11. Systems Engineer – Senior  12. Test Engineer - Senior  We compared labor rates for each of these 12 categories. To do so, we  identified labor rates for the selected labor categories applicable to all or  part of fiscal year 2013. Where labor rates were not fully burdened to  include indirect labor costs such as overhead expenses, fringe benefits,  and general and administrative fees, we performed calculations to  incorporate these additional costs. We compared the variation in labor  rates by selecting the lowest and the highest rates among the group of  fully burdened labor rates for the relevant time period.
To better understand the factors that can affect variation in labor rates,  we interviewed contracting officials for 11 of our case study contract  actions and representatives of the two contractors included in the contract  actions we reviewed. We also provided them examples of labor rate  comparisons for discussion purposes. As a result, we identified some of  the factors that can affect labor rates for the same labor categories such  as whether the work is performed at a government or contractor site;  security clearance requirements; performing business unit; education,  experience, certifications, and skills required; and contract type. While we  did not control for these factors in our labor rate analysis we believe that  our comparisons are informative because they illustrate the extent to  which agency acquisition personnel have insights into labor rates for  similar IT services.
Through our interviews with agency contracting officials we identified the  procedures contracting officials used to determine that prices paid were  fair and reasonable and the extent to which data on rates paid by the  government for similar services was available or considered. Finally, we  compared government practices to commercial leading practices  identified in our prior work.
We also met with officials from the General Services Administration to  discuss initiatives and tools to provide government buyers with greater  visibility into prices paid data. In addition, we met with DOD officials  responsible for implementing DOD’s Contract Business Analysis  Repository database, to discuss the current status of the database and  plans for future development. We also met with DHS EAGLE II officials  and GSA Alliant officials to discuss efforts to standardize labor categories  for those vehicles.
We conducted this performance audit from March 2014 to September  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Summary of Agencies’ Primary Vehicles for Strategically Sourcing IT Services
subsections: section_title: Agency / strategic sourcing vehicle Period of performance Total contract value Army—Computer Hardware, Enterprise Software and Solutions (CHESS)/Information Technology Enterprise Solutions Period of performance: 2006-2018. The next generation is in the acquisition planning process and expected to be awarded in 2017. Total contract value: $10.5 billion for products $20.4 billion for services Navy—IT Services Commodity Strategy
paragraphs: Vehicle description  CHESS is the Army’s primary source for commercial IT hardware,  software, and services and is intended to make purchasing more  efficient and to reduce costs through volume buying. The Information  Technology Enterprise Solutions-2 Services and Information  Technology Services-Small Business contracts provide a full range  of IT services and solutions necessary for the Army to satisfy its  support of Army net-centric goals.
In April 2012, the Office of the Assistant Secretary of the Navy for  Research, Development, and Acquisition issued a memorandum that  requires Navy buyers to use existing government-wide and  enterprise-wide acquisition contracts for the acquisition of IT  services including GSA Alliant/Alliant Small Business, Army  Information Technology Enterprise Systems-2 Services, Air Force  Network-Centric Solutions, National Institutes of Health government- wide acquisition contract for IT products, services, and solutions,  and the Navy’s Seaport-Enhanced.
NETCENTS provides the Air Force with a primary source of IT  products, services, and solutions. NETCENTS-I included eight  vendors. NETCENTS-II is organized into six functional categories  with multiple vendors available under each. Under NETCENTS-II, IT  services are primarily covered through the Enterprise Information  and Service Management contract.
section_title: DHS—Enterprise Acquisition Gateway for Leading Edge Solutions (EAGLE) Period of performance EAGLE-I, 2006-2015; EAGLE-II, 2013-2021 Total contract value EAGLE-I, $45 billion EAGLE-II, $22 billion
paragraphs: EAGLE contracts are broadly scoped for IT support services for the  majority of the Department’s enterprise infrastructure and initiatives.
I3P is designed to integrate and consolidate IT requirements across  the agency. The scope of I3P is broad, entailing consolidation and  central management of IT services in the areas of web services and  technologies, enterprise business and management applications,  integrated network/communications services, computing services,  and seat management/end-user services.
section_title: Appendix III: Comments from the Department of Defense
section_title: Appendix IV: Comments from the Department of Homeland Security
section_title: Appendix V: Comments from the National Aeronautics and Space Administration
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, W. William Russell (Assistant  Director), Peter Anderson, David Beardwood, Sonja Bensen, Timothy  Carr, Kristine Hassinger, Julia Kennon, Angie Nichols-Friedman, Daniel  Singleton, Eric Winter, and Ann Marie Udale made key contributions to  this report.