Defense Management: DOD Needs to Reexamine Its Extensive Reliance on Contractors and Continue to Improve Management and Oversight
Published: 2008-03-11T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The federal government, including the Department of Defense (DOD), is increasingly relying on contractors to carry out its missions. Governmentwide spending on contractor services has more than doubled in the last 10 years. DOD has used contractors extensively to support troops deployed abroad. The department recently estimated the number of contractors in Iraq and Afghanistan to be about 196,000. DOD also relies heavily on contractors for various aspects of weapon system logistics support. While contractors, when properly used, can play an important role in helping agencies accomplish their missions, GAO has identified long-standing problems regarding the appropriate role and management of contractors, particularly at DOD. This testimony highlights the challenges federal agencies face related to the increased reliance on contractors and the specific challenges DOD has had in managing its increased reliance on contractors who support deployed troops and who provide logistics support for weapons systems. This testimony also highlights some of the recommendations GAO has made over the past several years to improve DOD's management and oversight of contractors, as well as DOD's actions in response to those recommendations.
section_title: What GAO Found
paragraphs: While there are benefits to using contractors to perform services for the government--such as increased flexibility in fulfilling immediate needs--GAO and others have raised concerns about the increasing reliance on contractors to perform agency missions. GAO's body of work shows that agencies face challenges with increased reliance on contractors to perform core agency missions, and these challenges are accentuated in contingency operations such as Iraq, in emergency situations such as Hurricane Katrina, or in cases where sufficient government personnel are not available. In making the decision to use contractors, agencies have experienced challenges such as: determining which functions and activities should be contracted out and which should not to ensure institutional capacity; developing a total workforce strategy to address the extent of contractor use and the appropriate mix of contractor and government personnel; identifying and distinguishing the roles and responsibilities of contractors and civilian and military personnel; and ensuring appropriate oversight, including addressing risks, ethics concerns, and surveillance needs. DOD's increased reliance on contractors to support forces deployed for military operations and to perform maintenance and other logistic support for weapon systems has highlighted challenges that DOD faces in managing this component of its total force. With regard to contractor support for deployed forces, DOD's primary challenges have been to provide effective management and oversight, including failure to follow planning guidance, an inadequate number of contract oversight personnel, failure to systematically capture and distribute lessons learned, and a lack of comprehensive training for military commanders and contract oversight personnel. These challenges have led to negative operational and monetary impacts at deployed locations. For example, several military commanders GAO met with in 2006 said their pre-deployment training did not provide them with sufficient information on the extent of contractor support that they would be relying on in Iraq and were therefore surprised by the substantial number of personnel they had to allocate to provide on-base escorts, convoy security, and other force protection support to contractors. Although DOD has taken some steps to address these issues, many of these issues remain a concern and additional actions are needed. With respect to weapon system support, the challenges have been to resolve questions about how much depot maintenance and other logistics work needs to be performed in-house and to what extent outsourcing for DOD logistics has been cost-effective. While DOD has a process for defining core maintenance capability, GAO has identified shortcomings with this process and found that core maintenance capability has not always been developed. Finally, although increased contractor reliance for maintenance and other logistics activities was justified by DOD based on the assumption that there would be significant cost savings, it is uncertain to what extent cost savings have occurred or will occur.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the increased reliance on  contractors to conduct more and more of the business of the federal  government. In fiscal year 2007, the federal government spent about $254  billion on contractor services, an amount that has more than doubled over  the past decade. The Department of Defense’s (DOD) obligations on  service contracts, expressed in constant fiscal year 2006 dollars, rose from  $85.1 billion in fiscal year 1996 to more than $151 billion in fiscal year  2006, a 78 percent increase. With this growth in spending, DOD has  become increasingly reliant on contractors both overseas and in the  United States. For example, the department has relied extensively on  contractors for services that include communication services, interpreters  who accompany military patrols, base operations support (e.g., food and  housing), weapon systems maintenance, and intelligence analysis to  support military operations in Southwest Asia. The U.S. military has long  used contractors to provide supplies and services to deployed forces, but  the scale of contractor support DOD relies on in deployed locations today  has increased considerably. DOD has recently estimated the number of  contractors in Iraq and Afghanistan to be about 196,000. Further, DOD  currently has the equivalent of three brigades of contractors providing  security services in Iraq, as well as another brigade equivalent supporting  these contractors—a total of about 12,000 personnel. Put another way,  there are more private security contractors in Iraq today than the total  number of contractors (about 9,200) that were deployed to support  military operations in the 1991 Gulf War. In addition to the support  contractors provide for military forces deployed overseas, DOD has also  increasingly relied on contractors for other services. For example, we  have reported in recent years on DOD’s increasing reliance on the private  sector for various aspects of weapon system logistics support, including  depot-level maintenance.
While contractors, along with military personnel and civilians, are part of  DOD’s total force and fulfill many vital functions that enable DOD to  accomplish its missions, the increased reliance on contractors has raised a  number of issues and concerns that warrant continued attention. Our  previous work has highlighted long-standing problems regarding the  appropriate role and management and oversight of contractors in the  federal workforce—particularly at DOD—and I have identified 15 systemic  acquisition challenges facing DOD (see app. I). These challenges range  from separating agency wants from needs to creating a capable workforce  and holding it accountable. Since 1992, we have designated DOD contract  management as a high-risk area, in part due to concerns over the adequacy  of the department’s acquisition workforce, including contract oversight  personnel. Congress has expressed increasing concerns about DOD’s  management and oversight of contractors as well. For example, the  National Defense Authorization Act for Fiscal Year 2008 called for the  creation of a Commission on Wartime Contracting to make assessments of  the government’s reliance on contractors in Iraq and Afghanistan and  certain contract performance and management issues related to those  contracts. The act also created a contingency contractor training  requirement for military personnel outside the acquisition workforce.  Congress also has taken steps to improve oversight by increasing the  budgets for the Defense Contract Audit Agency, Defense Contract  Management Agency, and the Defense Department’s Inspector General in  the fiscal year 2008 DOD appropriations. As I have noted previously, given  DOD’s heavy and increasing reliance on contractors in Iraq and elsewhere,  and the risks this reliance entails, it may be appropriate to ask if DOD has  become too reliant on contractors to provide essential services. To help  frame this issue today, I will highlight governmentwide challenges we have  identified related to the increased reliance on contractors. Next, I will  focus more specifically on challenges DOD has had in managing the  increased reliance on contractors who support deployed troops and who  provide logistics support for weapons systems. I will conclude with some  broad observations that Congress and DOD may wish to consider in  addressing these important issues.
My statement today is based primarily on our prior work and the work of  others at agencies across the federal government. Our work includes  reviews at the Departments of Defense, Homeland Security, and Energy,  the Environmental Protection Agency, and the National Aeronautics and  Space Administration. The work of others includes the congressionally  mandated Acquisition Advisory Panel and the Defense Acquisition  University. A list of related GAO products is provided at the end of this  statement. As part of ongoing work, we obtained updated information on  DOD’s actions to address issues we have previously raised. We developed  this statement from February to March 2008 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
paragraphs: Acquisition of products and services from contractors consumes about a  quarter of discretionary spending governmentwide, with services making  up roughly 60 percent. These services range from basic functions, such as  landscaping and janitorial, to those that are more complex, like  intelligence analysis, acquisition support, security services, and program  office support. The acquisition of services differs from that of products in  several key respects and can be particularly challenging in terms of  defining requirements and assessing contractor performance. DOD is by  far the largest federal purchaser of service contracts—ranging from  housing to intelligence to security.
Contractors can play an important part in helping agencies accomplish  their missions. For example, agencies use service contracts to acquire  special knowledge and skills not available in the government, obtain cost- effective services, or obtain temporary or intermittent services. The  congressionally mandated Acquisition Advisory Panel has cited a number  of developments that have led federal agencies to increase the use of  contractors as service providers: limitations on the number of authorized  full-time equivalent positions; unavailability of certain capabilities and  expertise among federal employees; desire for operational flexibility; and  the need for “surge” capacity. According to DOD and service officials,  several factors have contributed to the department’s increased use of  contractors for support services: (1) the increased requirements  associated with the Global War on Terrorism and other contingencies; (2)  policy to rely on the private sector for needed commercial services that  are not inherently governmental in nature; and (3) DOD initiatives, such as  competitive sourcing and utility privatization programs.
The Office of Management and Budget (OMB), procurement law, and the  Federal Acquisition Regulation (FAR) provide guidance on contracting for  services. OMB Circular A-76 details a process for federal agencies to  obtain commercially available services currently performed by  government employees from the private sector when it is cost-effective to  do so. The Circular reinforces that government personnel shall perform  inherently governmental activities. This process does not apply to private  sector performance of a new requirement, expanded activity, or continued  performance of a commercial activity. As such, this process effectively  applies to a small percentage of the government’s contracting activity.  Most of the growth in service contracting has occurred outside of the A-76  process. The Federal Activities Inventory Reform (FAIR) Act of 1998  further requires agencies annually to determine and list which  government-provided agency activities are not inherently governmental  functions. Federal procurement regulation states that functions that are  so intimately related to the public interest are considered inherently  governmental and should only be performed by government personnel.  These functions include those activities which require either the exercise  of discretion in applying government authority or the use of value  judgment in making decisions for the government, and should not be  performed by contractors. The FAR and OMB also require agencies to  provide greater scrutiny and management oversight when contracting for  services that closely support the performance of inherently governmental  functions. The closer contractor services come to supporting inherently  governmental functions, the greater the risk of their influencing the  government’s control over and accountability for decisions that may be  based, in part, on contractor work. This may result in decisions that are  not in the best interest of the government, and may increase vulnerability  to waste, fraud, and abuse.
Before I go into more detail on the issues surrounding the federal  government’s and DOD’s reliance on contractors, I would like to touch on  another subject of interest to the Subcommittee—DOD’s application of  enhanced use leases. DOD’s longstanding leasing authority is codified at  10 U.S.C. 2667.  The law provides general authority for the Secretary of a  military department to enter into a lease upon such terms he considers will  promote the national defense or be in the public interest. The Secretary of  a military department is authorized to lease real property up to five years  unless the Secretary determines that a lease for a longer period will  promote the nation defense or be in the public interest. Over time,  Congress has expanded DOD’s leasing authority several times  to provide a  lessee the first right to buy the property and provide for payment in cash  or in kind by the lessee of consideration in an amount not less than the fair  market value.  Most recently, the National Defense Authorization Act for  Fiscal Year 2008 amended 10 U.S.C. 2667 in several ways; for example, the  authority to accept facilities operation support as in-kind consideration  was eliminated, and a requirement that leases meeting certain criteria be  competitively awarded was added.  The services have leased real property  on their bases for years as a means to reduce infrastructure and base  operating costs. For example, the military services have leased space for  banks, credit unions, ATMs, storage, schools, and agricultural grazing. As  you know, Mr. Chairman, we are conducting a review of DOD’s land use  planning activities, and will have more to say on this issue later.
section_title: Federal Agencies Have Faced Challenges with Increased Reliance on Contractors to Perform Agency Missions
paragraphs: While there are benefits to using contractors to perform services for the  government—such as increased flexibility in fulfilling immediate needs— GAO and others have raised concerns about the increasing reliance on  contractors to perform agency missions. Our work shows that agencies  face challenges with increased reliance on contractors to perform core  agency missions, especially in contingency or emergency situations or in  cases where sufficient government personnel are not available. As I have  previously stated, prior to making the decisions to use contractors, agency  officials should focus greater attention on which functions and activities  should be contracted out and which should not. To guide this approach,  agencies need to consider developing a total workforce strategy to meet  current and future human capital needs, and address the extent of  contractor use and the appropriate mix of contractor and civilian and  military personnel. I have also noted that identifying and distinguishing the  responsibilities of contractors and civilian and military personnel are  critical to ensure contractor roles are appropriate. Finally, once  contractors are in place, agencies must ensure appropriate oversight of  contractors, including addressing risks, ethics concerns, and surveillance  needs.
subsections: section_title: Institutional Capacity: Agencies Face Challenges in Determining What Functions and Activities Can be Contracted Out and What Should be Provided by Government Personnel
paragraphs: In order to determine what functions and activities can be contracted out,  the FAIR Act requires agencies annually to identify government-performed  agency activities that are not inherently governmental functions. At GAO’s  2006 forum on federal acquisition challenges and opportunities, some  participants noted that it might be more appropriate for agencies to  develop guiding principles or values to determine which positions could  be contracted out and which should be performed in-house. Forum  participants further noted that many corporate organizations carefully  deliberate up-front and at the highest management levels about what core  functions they need to retain and what non-core functions they should  buy, and the skill sets needed to procure non-core functions.
DOD’s Panel on Contracting Integrity, in its 2007 report to Congress, noted  that the practice of using contractors to support the government  acquisition function merits further study because it gives rise to questions  regarding the appropriate designation of government versus  nongovernment functions. A November 2005 report by the Defense  Acquisition University warned that the government must be careful when  contracting for the acquisition support function to ensure that the  government retains thorough control of policy and management decisions  and that contracting for the acquisition support function does not  inappropriately restrict agency management in its ability to develop and  consider options. Additionally, our prior work has found that when  federal agencies, including DOD, believe they do not have the in-house  capability to design, develop, and manage complex acquisitions, they  sometimes turn to a systems integrator to carry out these functions,  creating an inherent risk of relying too much on contractors to make  program decisions. For example, the Army’s Future Combat System  program is managed by a lead systems integrator that assumes the  responsibilities of developing requirements; selecting major system and  subsystem contractors; and making trade-off decisions among costs,  schedules, and capabilities. While this management approach has some  advantages for DOD, we found that the extent of contractor responsibility  makes DOD vulnerable to decisions being made by the contractor that are  not in the government’s best interests.
In September 2007, we reported that an increasing reliance on contractors  to perform services for core government activities challenges the capacity  of federal officials to supervise and evaluate the performance of these  activities. I recently noted that this may be a concern in the intelligence  community. Specifically, while direction and control of intelligence and  counter-intelligence operations are listed as inherently governmental  functions, the Director of National Intelligence reported in 2006 that the  intelligence community finds itself in competition with its contractors for  employees and is left with no choice but to use contractors for work that  may be “borderline inherently governmental.” We have also found  problems with contractors having too much control at other federal  agencies. Unless the federal government pays the needed attention to the  types of functions and activities performed by contractors, agencies run  the risk of losing accountability and control over mission-related  decisions.
section_title: Workforce Planning: Agencies Face Challenges in Developing an Appropriate Mix of Contractor and Government Personnel to Meet Current and Future Needs
paragraphs: Along with determining the functions and activities to be contracted out,  agencies face challenges in developing a total workforce strategy to  address the extent of contractor use and the appropriate mix of contractor  and civilian and military personnel. We have found that agencies need  appropriate workforce planning strategies that include contractor as well  as federal personnel and are linked to current and future human capital  needs. These strategies should be linked to the knowledge, skills, and  abilities needed by agencies and how the workforce will be deployed  across the organization. Deployment includes the flexible use of the  workforce, such as putting the right employees in the right roles according  to their skills, and relying on staff drawn from various organizational  components and functions using “just-in-time” or “virtual” teams to focus  the right talent on specific tasks.
As agencies develop their workforce strategies, they also need to consider  the extent to which contractors should be used and the appropriate mix of  contractor and federal personnel. Over the past several years, there has  been increasing concern about the ability of agencies to ensure sufficient  numbers of staff to perform some inherently governmental functions. The  Department of Homeland Security’s human capital strategic plan notes the  department has identified core mission-critical occupations and plans to  reduce skill gaps in core and key competencies. However, it is unclear  how this will be achieved and whether it will inform the department’s use  of contractors for services that closely support inherently governmental  functions. The Department of Homeland Security has agreed with the need  to establish strategic-level guidance for determining the appropriate mix of  government and contractor employees to meet mission needs.
section_title: Roles and Responsibilities: Agencies Face Challenges in Defining the Relationship between Contractors and Government Employees
paragraphs: Agencies are challenged to define the roles and responsibilities of  contractors vis-à-vis government employees. Defining the relationship  between contractors and government employees is particularly important  when contracting for professional and management support services since  contractors often work closely with government employees to provide  these services. This definition begins during the acquisition planning  process when contract requirements are determined. We have  recommended that agencies define contract requirements to clearly  describe roles, responsibilities, and limitations of selected contractor  services. Well-defined contract requirements can also help minimize the  risk of contractors performing inherently governmental functions. Yet  contracts, especially service contracts, often do not have definitive or  realistic requirements at the outset. Because the nature of contracted  services can vary widely, from building maintenance to intelligence, a  tailored approach should be used in defining requirements to help ensure  that risks associated with a requirement are fully considered before  entering into a contract arrangement. In our recent review of the  Department of Homeland Security’s service contracts, we found that some  contracts included requirements that were broadly defined and lacked  detail about activities that closely support inherently governmental  functions. We found instances in which contractors provided services that  were integral to the department’s mission or comparable to work  performed by government employees, such as a contractor directly  supporting the department’s efforts to hire federal employees, including  signing offer letters.
Our work on contractors in acquisition support functions has found that it  is now commonplace for agencies to use contractors to perform activities  historically performed by federal government contract specialists.
Although these contractors are not authorized to obligate government  funds, they provide acquisition support to contracting officers, the federal  decision makers who have the authority to bind the government  contractually. Contract specialists perform tasks that closely support  inherently governmental functions, such as assisting in preparing  statements of work; developing and managing acquisition plans; and  preparing the documents the contracting officer signs, such as contracts,  solicitations, and contract modifications. Therefore, it is important to  clearly define the roles contractors play in supporting government  personnel to ensure they do not perform inherently governmental  functions.
section_title: Management and Oversight: Agencies Face Challenges in Assessing Risks, Minimizing Potential Ethics Concerns, and Ensuring Quality Surveillance
paragraphs: Our work has also identified a number of practices that are important to  effectively managing and overseeing contractors once contractors are in  place. These include assessing risks, minimizing potential ethics concerns,  and ensuring quality through adequate surveillance. However, agencies  face challenges in all these areas.
Risk is innate when contractors closely support inherently governmental  functions. Federal procurement policy requires enhanced oversight of  services that closely support the performance of inherently governmental  functions to ensure that government decisions reflect the independent  judgment of agency officials and that agency officials retain control over  and remain accountable for policy decisions that may be based on  contractor work products. However, our work has shown that agency  officials do not always assess these risks to government decision making.  For example, in 2007 we reported that while Department of Homeland  Security program officials generally acknowledged that their professional  and management support services contracts closely supported the  performance of inherently governmental functions, they did not assess the  risk that government decisions may be influenced by rather than  independent from contractor judgments. Further, most of the program  officials and contracting officers we spoke with were not aware of the  requirement to provide enhanced oversight, and did not believe that their  professional and management support services needed enhanced  oversight.
Contractors are generally not subject to the same ethics rules as  government employees even when they are co-located and work side-by- side with federal employees and perform similar functions. Federal ethics  rules and standards have been put in place to help safeguard the integrity  of the procurement process by mitigating the risk that employees  entrusted to act in the best interest of the government will use their  positions to influence the outcomes of contract awards for future gain.  In  addition, as we reported in 2005, contractors we met with indicated that  DOD did not monitor their recruiting, hiring, and placement practices for  current and former government employees. Consequently, DOD could not  be assured that potential conflicts of interest would be identified. A lack of  awareness among government employees of procurement integrity rules  and conflict-of interest considerations creates additional risk. For  example, in 2005 we reported that DOD did not know the content or  frequency of ethics training and counseling or which employees received  information on conflict-of-interest and procurement integrity. DOD also  lacked knowledge on reported allegations of potential misconduct. In  2007, the Acquisition Advisory Panel recommended training for  contractors and government employees, and the development of standard  conflicts of interest clauses to include in solicitations and contracts.
Quality assurance, especially regular surveillance and documentation of its  results, is essential to determine whether goods or services provided by  the contractor satisfy the contract requirements and to minimize risks that  the government will pay the contractor more than the value of the goods  and services. However, DOD officials have expressed concerns about the  current state of the acquisition workforce to support surveillance and  mentioned that surveillance remains an “other duty as assigned” and,  consequently, is a low-priority task. We have also reported wide  discrepancies in the rigor with which officials responsible for surveillance  perform their duties, particularly in unstable environments. For example,  in the aftermath of Hurricanes Katrina and Rita, the number of government  personnel monitoring contracts was not always sufficient or adequately  deployed to provide effective oversight. Unfortunately, attention to  oversight has not always been evident in a number of instances, including  during the Iraq reconstruction effort. We have reported that, particularly in  the early phases of the Iraq reconstruction effort, several agencies  including the Army lacked an adequate acquisition workforce in Iraq to  oversee billions of dollars for which they were responsible. Further, Army  personnel who were responsible for overseeing contractor performance of  interrogation and other services were not adequately trained to properly  exercise their responsibilities. Contractor employees were stationed in  various locations around Iraq, with no assigned representative on site to  monitor their work. An Army investigative report concluded that the  number and training of officials assigned to monitor contractor  performance at Abu Ghraib prison was not sufficient and put the Army at  risk of being unaware of possible misconduct by contractor personnel.
section_title: DOD Faces Challenges in Managing the Increased Role of Contractors Performing Support Functions for Military Operations and Weapons Systems
paragraphs: DOD’s increasing use of contractors to perform mission-support functions,  including contractors who support forces deployed for military operations  and contractors who perform maintenance and other logistic support for  weapon systems, has highlighted several challenges that DOD faces in  managing the increased role of this component of its total force. With  regard to contractor support to deployed forces, DOD’s primary challenges  have been to provide effective management and oversight. With respect to  weapon system support, the challenges have been to resolve questions  about how much depot maintenance and other logistic work needs to be  performed in-house and about to what extent outsourcing for DOD  logistics has been cost-effective.
subsections: section_title: DOD has Experienced Long-Standing Problems with its Management and Oversight of Contractors Supporting Deployed Forces, But Has Taken Some Actions to Address these Problems
paragraphs: Since 1997, we have reported on DOD’s management and oversight  challenges related to its use of contractor support to deployed forces. In  December 2006, we issued a comprehensive review of DOD’s management  and oversight of contractor support to deployed forces. We reported that  despite making progress in some areas, DOD continued to face long- standing problems that hindered its management and oversight of  contractors at deployed locations. Those problems included issues  regarding visibility of contractors, numbers of contract oversight  personnel, lessons learned, and training of military commanders and  contract oversight personnel. More recently, we testified that DOD’s  leadership needs to ensure implementation of and compliance with  guidance on the use of contractors to support deployed forces.
While DOD has long relied on contractors to support forces deployed for  military operations, the large influx of contractors in support of operations  in Iraq has exacerbated problems that DOD has had in managing and  overseeing their activities. Significantly, the individual services and a wide  array of DOD and non-DOD agencies can award contracts to support  deployed forces. For example, although DOD estimated that as of the first  quarter of fiscal year 2008, 163,590 contractors were supporting deployed  forces in Iraq, no one person or organization made a decision to send  163,590 contractors to Iraq. Rather, decisions to send contractors to  support forces in Iraq were made by numerous DOD activities both within  and outside of Iraq. This decentralized process, combined with the scope  and scale of contract support to deployed forces, contributes to the  complexity of the problems we have identified in our past work on this  topic.
DOD has taken a number of actions to implement recommendations that  we have made to improve its management of contractors. For example, in  response to our 2003 recommendation that DOD develop comprehensive  guidance to help the services manage contractors supporting deployed  forces, the department issued the first comprehensive guidance dealing  with contractors who support deployed forces in October 2005.  Additionally, in October 2006, DOD established the office of the Assistant  Deputy Under Secretary of Defense for Program Support to serve as the  office with primary responsibility for contractor support issues. This office  has led the effort to develop and implement a database which, when fully  implemented, will allow by-name accountability of contractors who deploy  with the force. This database implements recommendations we made in  2003 and 2006 to enhance the department’s visibility over contractors in  locations such as Iraq and Afghanistan. Although DOD has taken these and  other steps to address these issues, we recently testified that many of  these issues remain a concern and additional actions are needed.
subsections: section_title: DOD Has Not Followed Long- Standing Planning Guidance Regarding the Use of Contractors to Support Deployed Forces
paragraphs: As we have noted in previous reports and testimonies, DOD has not  followed long-standing planning guidance, particularly by not adequately  factoring the use and role of contractors into its planning. For example,  we noted in 2003 that the operations plan for the war in Iraq contained  only limited information on contractor support. However, Joint  Publication 4-0, which provides doctrine and guidance for combatant  commanders and their components regarding the planning and execution  of logistic support of joint operations, stresses the importance of fully  integrating into logistics plans and orders the logistics functions  performed by contractors along with those performed by military  personnel and government civilians.
Additionally, we reported in 2004 that the Army did not follow its planning  guidance when deciding to use the Army’s Logistics Civil Augmentation  Program (LOGCAP) in Iraq. This guidance stresses the need to clearly  identify requirements and develop a comprehensive statement of work  early in the contingency planning process. Because this Army guidance  was not followed, the plan to support the troops in Iraq was not  comprehensive and was revised seven times in less than 1 year.
Our 2003 report also concluded that essential contractor services had not  been identified and backup planning was not being done. DOD policy  requires DOD and its components to determine which contractor-provided  services will be essential during crisis situations, develop and implement  plans and procedures to provide a reasonable assurance of the  continuation of essential services during crisis situations, and prepare a  contingency plan for obtaining the essential service from an alternate  source should the contractor be unable to provide it. Without such plans,  there is no assurance that the personnel needed to provide the essential  services would be available when needed.
Moreover, as we reported in 2003 and 2006, senior leaders and military  commanders need information about the contractor services they are  relying on in order to incorporate contractor support into their planning.  For example, senior military commanders in Iraq told us that when they  began to develop a base consolidation plan for Iraq, they had no source to  draw upon to determine how many contractors were on each installation.  Limited visibility can also hinder the ability of commanders to make  informed decisions about base operations support (e.g., food and housing)  and force protection for all personnel on an installation.
DOD has taken some action to address this problem. DOD is developing a  database of contractors who deploy with U.S. forces. According to senior  DOD officials familiar with this database, as of February 2008, the  database had about 80,000 records. DOD is working with the State  Department to include additional contractors, including private security  contractors, in the database. In addition, Joint Contracting Command  Iraq/Afghanistan has created the Theater Business Clearance process that  reviews and approves all contracts for work in Iraq or Afghanistan. Joint  Contracting Command Iraq/Afghanistan officials stated that this has  helped military commanders know ahead of time when contractors are  coming to work on their bases and ensure sufficient facilities are available  for them. According to senior DOD officials, the department is also  developing a cadre of contracting planners to ensure that contractor  support is included in combatant commanders’ operational and  contingency planning.
section_title: DOD Lacks an Adequate Number of Trained Contract Oversight Personnel
paragraphs: As we noted in several of our previous reports, having the right people  with the right skills to oversee contractor performance is crucial to  ensuring that DOD receives the best value for the billions of dollars spent  each year on contractor-provided services supporting forces deployed to  Iraq and elsewhere. However, since 1992, we have designated DOD  contract management as a high-risk area, in part due to concerns over the  adequacy of the department’s acquisition workforce, including contract  oversight personnel. While this is a DOD-wide problem, having too few  contract oversight personnel presents unique difficulties at deployed  locations given the more demanding contracting environment as  compared to the United States.
Having an inadequate number of contract oversight personnel has  hindered DOD’s ability to effectively manage and oversee contractors  supporting deployed forces and has had monetary impacts as well. For  example, in 2004 we reported that DOD did not always have enough  contract oversight personnel in place to manage and oversee its logistics  support contracts such as LOGCAP and the Air Force Contract  Augmentation Program (AFCAP). As a result, the Defense Contract  Management Agency was unable to account for $2 million worth of tools  that had been purchased using the AFCAP contract. During our 2006  review, several contract oversight personnel we met with told us DOD  does not have adequate personnel at deployed locations. For example, a  contracting officer’s representative for a linguistic support contract told us  that although he had a battalion’s worth of people with a battalion’s worth  of problems, he lacked the equivalent of a battalion’s staff to deal with  those problems. Similarly, an official with the LOGCAP Program Office  told us that, had adequate staffing been in place early, the Army could  have realized substantial savings through more effective reviews of the  increasing volume of LOGCAP requirements.
More recently, we reported that the Army did not have adequate staff to  oversee an equipment maintenance contract in Kuwait. According to  Army officials, vacant and reduced inspector and analyst positions meant  that surveillance was not being performed sufficiently in some areas and  the Army was less able to perform data analyses, identify trends in  contractor performance, and improve quality processes. In addition, the  2007 report of the Commission on Army Acquisition and Program  Management in Expeditionary Operations stated that the Army lacks the  leadership and military and civilian personnel to provide sufficient  contracting support to either expeditionary or peacetime missions. As a  result, the commission found that the vital task of post-award contract  management is rarely being done. As we noted in our 2006 report,  without adequate contract oversight personnel in place to monitor its  many contracts in deployed locations such as Iraq, DOD may not be able  to obtain reasonable assurance that contractors are meeting their contract  requirements efficiently and effectively.
DOD has taken some actions to address this problem. In February 2007,  the Deputy Assistant Secretary of the Army (Policy and Procurement)  issued guidance that required, among other things, contracting officers to  appoint certified contracting officer’s representatives in writing before  contract performance begins, identify properly trained contracting  officer’s representatives for active service contracts, and ensure that a  government quality assurance surveillance plan is prepared and  implemented for service contracts exceeding $2,500. Joint Contracting  Command Iraq/Afghanistan officials stated they are in the process of  adding 39 personnel to provide additional contractor oversight. Similarly,  the Defense Contract Management Agency has deployed an additional 100  people and plans to deploy approximately 150 more people to provide  contract oversight and management to both ongoing and future contracts  in Iraq. The agency is providing oversight for DOD’s private security  contracts as well as other theaterwide contracts. Additionally, senior DOD  officials stated that the department has created a task force to address the  recommendations of the October 2007 report by the Commission on Army  Acquisition and Program Management in Expeditionary Operations.
section_title: DOD Is Not Systematically Collecting and Distributing Lessons Learned
paragraphs: Although DOD and its components have used contractors to support  deployed forces in several prior military operations, DOD does not  systematically ensure that institutional knowledge on the use of  contractors to support deployed forces, including lessons learned and best  practices, is shared with military personnel at deployed locations. We  previously reported that DOD could benefit from systematically collecting  and sharing its institutional knowledge to help ensure that it is factored  into planning, work processes, and other activities. Although DOD has  policy requiring the collection and distribution of lessons learned to the  maximum extent possible, we found in our previous work that no  procedures were in place to ensure that lessons learned are collected and  shared.
Moreover, although the Army regulation which establishes policies,  responsibilities, and procedures for the implementation of the LOGCAP  program makes customers that receive services under the LOGCAP  contract responsible for collecting lessons learned, we have repeatedly  found that DOD is not systematically collecting and sharing lessons  learned on the use of contractors to support to deployed forces. Despite  years of experience using contractors to support forces deployed to the  Balkans, Southwest Asia, Iraq, and Afghanistan, DOD has made few efforts  to leverage this institutional knowledge. As a result, many of the problems  we identified in earlier operations have recurred in current operations.
During the course of our 2006 work, we found no organization within DOD  or its components responsible for developing procedures to capture  lessons learned on the use of contractor support at deployed locations.  We noted that when lessons learned are not collected and shared, DOD  and its components run the risk of repeating past mistakes and being  unable to build on the efficiencies and effectiveness others have  developed during past operations that involved contractor support. We  also found a failure to share best practices and lessons learned between  units as one redeploys and the other deploys to replace it. As a result, new  units essentially start at ground zero, having to resolve a number of  difficulties until they understand contractor roles and responsibilities.
section_title: DOD Does Not Comprehensively Train Military Commanders and Contract Oversight Personnel
paragraphs: DOD does not routinely incorporate information about contractor support  for deployed forces in its pre-deployment training of military personnel,  despite the long-standing recognition of the need to provide such  information. We have discussed the need for better pre-deployment  training of military commanders and contract oversight personnel since  the mid-1990s and have made several recommendations aimed at  improving such training. Moreover, according to DOD policy, personnel  should receive timely and effective training to ensure they have the  knowledge and other tools necessary to accomplish their missions.  Nevertheless, we continue to find little evidence that improvements have  been made in terms of how DOD and its components train military  commanders and contract oversight personnel on the use of contractors to  support deployed forces prior to their deployment. Without properly  trained personnel, DOD will continue to face risks of fraud, waste, and  abuse.
Limited or no pre-deployment training on the use of contractor support  can cause a variety of problems for military commanders in a deployed  location. As we reported in 2006, with limited or no pre-deployment  training on the extent of contractor support to deployed forces, military  commanders may not be able to adequately plan for the use of those  contractors. Similarly, in its 2007 report, the Commission on Army  Acquisition and Program Management in Expeditionary Operations  concluded that the Army needs to educate and train commanders on the  important operational role of contracting. Several military commanders  we met with in 2006 said their pre-deployment training did not provide  them with sufficient information on the extent of contractor support that  they would be relying on in Iraq and were therefore surprised by the  substantial number of personnel they had to allocate to provide on-base  escorts, convoy security, and other force protection support to  contractors. In addition, limited or no pre-deployment training for military  commanders can result in confusion over their roles and responsibilities in  managing and overseeing contractors. For example, we found some  instances where a lack of training raised concerns over the potential for  military commanders to direct contractors to perform work outside the  scope of the contract, something commanders lack the authority to do.  This can cause the government to incur additional charges because  modifications would need to be made to the contract.
We also found that contract oversight personnel such as contracting  officer’s representatives received little or no pre-deployment training on  their roles and responsibilities in monitoring contractor performance.  Many of the contracting officer’s representatives we spoke with in 2003  and 2006 said that training before they assumed these positions would  have better prepared them to effectively oversee contractor performance.  In most cases, deploying individuals were not informed that they would be  performing contracting officer’s representative duties until after they had  deployed, which hindered the ability of those individuals to effectively  manage and oversee contractors. For example, officials from a corps  support group in Iraq told us that until they were able to get a properly  trained contracting officer’s representative in place, they experienced  numerous problems regarding the quality of food service provided by  LOGCAP. In addition, the 2007 report of the Commission on Army  Acquisition and Program Management in Expeditionary Operations  discussed the need to train contracting officer’s representatives and  warned that the lack of training could lead to fraud, waste, and abuse.
DOD has taken some steps to address this problem. In DOD’s response to  our 2006 report, the Director of Defense Procurement and Acquisition  Policy stated that the Army is making changes to its logistics training  programs that would incorporate contracting officer’s representatives  training into its basic and advanced training for its ordnance,  transportation, and quartermaster corps. In addition, the Defense  Acquisition University has updated its contingency contracting course to  include a lesson on contractors accompanying the force. Further, the  Defense Contract Management Agency is adding personnel to assist in the  training and managing of contracting officer’s representatives.
section_title: Increased Reliance on Contractors for Weapon System Support Raises Questions about Core Functions and Cost Effectiveness
paragraphs: DOD has moved over the years toward greater use of the private sector to  perform maintenance and other logistics support for weapon systems.  Factors influencing this increased reliance on contractors include changes  in DOD’s guidance and plans that emphasized the privatization of logistics  functions, a lack of technical data and modernized facilities needed to  perform maintenance on new systems, and reductions in maintenance  workers at government-owned depots. The move toward greater reliance  on contractors has raised questions regarding how much depot  maintenance and other logistics work needs to be performed in-house and  about the cost-effectiveness of outsourcing DOD logistics.
subsections: section_title: DOD Has Increasingly Relied on Contractors for Maintenance and Other Logistic Support of Weapon Systems
paragraphs: DOD has increasingly relied on contractors for maintenance and other  logistic support of weapon systems. For example, funding for private  sector contractors to perform depot maintenance increased in then-year  dollars from about $4.0 billion in fiscal year 1987 to about $13.8 billion in  fiscal year 2007, or 246 percent. In contrast, during this same time period,  the amount of funding for depot maintenance performed at government  (public) depots increased from about $8.7 billion to about $16.1 billion, or  85 percent. This trend toward greater reliance on the private sector for  depot maintenance was most evident during the period from fiscal years  1987 to 2000, when the amount of funding for public depot maintenance  largely stayed flat and private sector funding increased by 89 percent.  Since 2001, military operations in support of the Global War on Terrorism  have resulted in large funding increases for maintenance performed by  both public and private sector activities.
One potential future limitation to continued contracting out of depot  maintenance activities is the statutory limit on the amount of funding for  depot maintenance work that can be performed by private sector  contractors. Under 10 U.S.C. 2466(a), not more than 50 percent of funds  made available in a fiscal year to a military department or defense agency  for depot-level maintenance and repair may be used to contract for the  performance by non-government personnel of such workload for the  military departments and defense agencies. As the contractors’ share has  increased over time, managing within this limitation has become more  challenging—particularly for the Air Force and, to a lesser extent, the  Army. Another potential limitation to contracting out is a requirement that  DOD maintain a core logistics capability within government facilities.  However, as I will discuss, our work has revealed problems in DOD’s  implementation of this requirement.
DOD also has experienced significant growth in the overall use of  contractors for long-term logistics support of weapon systems. While the  department does not collect and aggregate cost data specifically on these  support arrangements, available data illustrate this growth. For example,  Air Force data show an increase in funding for these support  arrangements from $910 million in fiscal year 1996 to a projected $4.1  billion in fiscal year 2013. Many DOD acquisition program offices have  been adopting long-term support strategies for sustaining new and  modified systems that rely on contractors. Our ongoing review of core  logistics capability indicates that performance-based logistics or some  other type of partnership is a frequently used weapon system sustainment  approach.
section_title: Multiple Factors Have Influenced DOD’s Increased Reliance on Contracting
paragraphs: The move toward increased use of contractors to perform maintenance  and other logistics support for weapon systems has been influenced by  multiple factors. A significant factor has been the shift in DOD’s guidance  and plans that placed greater emphasis on privatizing logistics functions.  In 1996, for example, DOD issued a report, Plan for Increasing Depot  Maintenance Privatization and Outsourcing, which provided a  framework for substantially increasing reliance on the private sector for  depot maintenance. In addition, both the 1995 report by the Commission  on Roles and Missions and a 1996 report by a Defense Science Board  task force recommended that DOD outsource almost all depot  maintenance and other logistics activities. Both study teams assumed large  cost savings would result from increased privatization. Today, DOD  guidance provides that performance-based logistics is now DOD’s  preferred approach for providing long-term total system support for  weapon systems. DOD describes performance-based logistics as the  process of (1) identifying a level of performance required by the warfighter  and (2) negotiating a performance-based arrangement to provide long- term total system support for a weapon system at a fixed level of annual  funding.
Another factor in the move toward greater reliance on contractors has  been the lack of technical data and other elements of support, such as  modernized facilities, required to establish a maintenance capability for  new systems. Technical data for weapon systems include drawings,  specifications, standards, and other details necessary to ensure the  adequacy of item performance, as well as manuals that contain  instructions for installation, operation, maintenance, and other actions  needed to support weapon systems. As a result of not having acquired  technical data rights from the equipment manufacturers, the military  services in some instances have had difficulty establishing a maintenance  capability at government depots. For example, the Air Force identified a  need to develop a core capability to perform maintenance on the C-17  aircraft at government depots, but lacked the requisite technical data  rights. Consequently, the Air Force has sought to form partnerships with  C-17 subvendors to develop a depot maintenance capability, but these  efforts have had mixed results. Based on our ongoing review of DOD core  capability, we found that the Air Force continues to have challenges  establishing core capability for C-17 commodities because of technical  data issues.
A third factor influencing DOD’s increasing reliance on contractor support  has been reductions in government depot maintenance personnel available  to perform the work. Personnel downsizing has greatly reduced the  number of depot maintenance workers and has limited the amount of  work that could be performed in the depots. Since 1987 the number of  depot-level maintenance personnel was reduced by 56 percent from a high  of 163,000 in 1987 to about 72,000 in 2002, after which the depots began to  see some personnel increases to support the Global War on Terrorism. In  comparison, in the 13 years between 1989 and 2002, DOD’s total civilian  workforce had a 38 percent reduction. While some downsizing was  essential, given reductions in depot maintenance workloads over the same  period, mandated reductions in the number of personnel were taken even  though the depots may have had funded workload to support an increased  number of personnel. For example, in a review of Army depot personnel  reductions in 1998, we found that efforts to implement the reductions at  the Corpus Christi Army Depot were poorly managed and more direct  labor employees were reduced than intended—adversely affecting the  depot’s productivity. We found that while Army regulations on manpower  management provide that staffing levels are to be based on the workloads  performed, the Army’s reduced staffing plan was developed in response to  affordability concerns and a desire to lower the depot’s rates and did not  support the depot’s funded workload requirement.
section_title: Uncertainties Exist About Maintaining Core Capability for Depot Maintenance and Other Logistics Work
paragraphs: Because DOD has not clearly and comprehensively identified what depot  maintenance and other logistics activities the department should be  performing itself, it is unclear how much of the work that has been  contracted out may be work that should be done in-house by government  personnel. Additionally, DOD has not identified core logistics capability  requirements for other logistics functions, such as supply chain  management and engineering.
With regard to depot maintenance, we previously reported that DOD lacks  assurance that core logistics capabilities were being maintained as needed  to ensure timely and effective response to national defense emergencies  and contingencies, as required by 10 U.S.C. 2464, noting that several  factors precluded this assurance. First, DOD’s existing policy, which  establishes a process for identifying core maintenance capability, was not  comprehensive in that it did not provide for a forward look at new weapon  systems and associated future maintenance capability requirements.  Second, the various procedures and practices being used by the services  to implement the existing policy were also affecting the establishment of  core capability. For example, the Air Force reduced its core requirement  as a result of its consideration of maintenance work performed in the  private sector, even though core work is supposed to be performed in  military facilities and by government personnel. In addition, we have noted  that DOD has had other limitations, including a lack of technical data  rights and a lack of sufficient investment in facilities, equipment, and  human capital to ensure the long-term viability of the military depots.
To improve its process for identifying core maintenance capability  requirements, in January 2007 DOD issued an instruction on how to  identify required core capabilities for depot maintenance, which generally  mirrored previous guidance. Also, in March 2007 DOD issued its depot  maintenance strategy, which delineated the actions DOD is undertaking to  identify and sustain core maintenance capability. We have an ongoing  engagement to assess the effectiveness of the current policy and  procedures as well as the services’ implementation.
To address issues inhibiting the establishment of core capability, Congress  has taken recent actions to address problems with technical data and  depot facilities. We previously recommended that DOD improve its  acquisition policies for assessing technical data needs to support weapon  systems. The John Warner National Defense Authorization Act for Fiscal  Year 2007 (2007 Defense Authorization Act) mandated that DOD require  program managers for major weapon systems to assess long-term  technical data needs for weapon systems and to establish corresponding  acquisition strategies that provide for technical data rights needed to  sustain such systems over their life cycle. DOD subsequently issued a  new policy in July 2007 to implement this requirement. Potential benefits  from this action are long term because of the time frames required for  developing and acquiring weapon systems, and it is uncertain what actions  may have been taken by program offices as a result of this policy change  or the extent in which any actions taken could improve the availability of  required data in the future. To address inadequacies in the military’s  investments in its maintenance depots, the 2007 Defense Authorization Act  required military departments to invest each fiscal year in the capital  budgets of certain depots a total amount equal to at least 6 percent of the  average total combined workload funded at all of the depots over the  preceding 3 fiscal years. As a part of an ongoing engagement, we are  reviewing the military departments’ implementation of this mandate.
We have also reported that DOD has not established policies or processes  for determining core requirements for non-maintenance logistics  capabilities for activities such as supply support, engineering, and  transportation. Without identifying those core logistics activities that  need to be retained in-house, the services may not be retaining critical  capabilities as they proceed with contracting initiatives. For example, if  DOD implements performance-based logistics—its preferred weapon  system support arrangement—at the platform level, this can result in  contracting out the program integration function, a core process which the  private sector firms we interviewed during a 2004 review considered  integral to their successful business operations. Another potential adverse  effect of awarding a performance-based contract at the platform level is  the loss of management control and expertise over the system that private  sector companies told us were essential to retain in-house. In an earlier  engagement, Army, Navy, and Air Force operational command officials  told us that among their concerns with various types of long-term  contractor logistics support arrangements were (1) retaining the ability to  maintain and develop critical technical skills and knowledge, (2) limiting  operational authority, and (3) reducing the program office’s ability to  perform essential management functions. Thus, without well-defined  policy and procedures for identifying core requirements for critical  logistics areas, the department may not be in a position to ensure that it  will have the needed capabilities for the logistics system to support  essential military weapons and equipment in an emergency.
section_title: Uncertainties Exist About Projected Cost Effectiveness of Outsourcing Initiatives for DOD Logistics
paragraphs: Although DOD justified its logistics outsourcing initiatives based on the  assumption that there would be significant cost savings, it is uncertain to  what extent cost savings have occurred or will occur. Overall funding for  depot maintenance costs and other logistics support costs are increasing  significantly, both for work that is performed in military depots and by  contractors. However, sufficient data are not available to determine  whether increased contracting has caused DOD’s costs to be higher than  they would have been had the contracted activities been performed by  DOD civilians. As noted earlier, assumptions about savings were a key part  of DOD’s shift in policy toward the performance of defense logistics by the  private sector.
While the 1995 Commission on Roles and Missions projected savings of 20  percent from outsourcing, we questioned this group’s savings  assumptions, noting that its data did not support its depot privatization  savings assumptions. These assumptions were based on reported savings  from public-private competitions for commercial activities under Office of  Management and Budget Circular A-76. The commercial activities were  generally dissimilar to depot maintenance activities because they involved  relatively simple, routine, and repetitive tasks that did not generally  require large capital investments or highly skilled and trained personnel.  Public activities were allowed to compete for these workloads and won  about half the competitions. Additionally, many private sector firms  generally made offers for this work due to the highly competitive nature of  the private sector market, and estimated savings were generally greater in  situations where there were larger numbers of private sector offerors. In  contrast, most depot maintenance work is awarded without competition  to the original equipment manufacturer. We noted that in the absence of a  highly competitive market, privatizing unique, highly diverse, and complex  depot maintenance workloads that require large capital investments,  extensive technical data, and highly skilled and trained personnel would  not likely achieve expected savings and could increase the costs of depot  maintenance operations. We also questioned the Defense Science Board’s  projections of $30 billion in annual savings from privatizing almost all  logistics support activities.
We have also reported that whereas DOD expected to achieve large  savings from its contracting out of more of its depot-level maintenance  work, depot maintenance contracting represented a challenge to relying  on commercial market forces. Whereas DOD was attempting to rely on  competitive market forces, about 91 percent of the depot maintenance  contracts we reviewed were awarded noncompetitively. We also noted  that difficulties in precisely defining requirements also affected DOD’s  efforts to rely on competitive market forces. Further, we cautioned that  DOD would need to increase the use of competitively awarded depot  maintenance contracts and to address how best to assure product quality  and reasonable prices when competitive market forces were not present.
We have also raised questions about cost savings from DOD’s increased  use of performance-based logistics. Although DOD guidance recommends  that program offices perform a business case analysis before adopting a  performance based logistics approach to support weapon system, our  reviews of the implementation of this approach show these analyses are  not often done and DOD program offices could not demonstrate that they  had achieved cost savings. Of the 15 programs we reviewed, 11 program  offices had developed a business case analysis—prior to entering into a  performance-based logistics arrangement—which projected achieving  significant cost savings. Only one of these programs offices had updated  its business case analysis with actual cost data as recommended by DOD  guidance. The one program office that did update its business case  analysis determined that the contract did not result in the expected cost  savings and subsequently restructured the program. Program office  officials acknowledged limitations in their own information systems in  providing reliable data to closely monitor contractor costs. While existing  systems are capable of collecting some cost information, they are not  capturing sufficiently detailed cost information for monitoring the  performance-based logistics contracts.
Our 2005 report on DOD’s implementation of performance-based logistics  included a recommendation on the validation of business case decisions to  demonstrate whether they are resulting in reduced costs and increased  performance. Also, given the stated limitations in cost information, we  recommended that program offices be required to improve their  monitoring of performance-based logistics arrangements by verifying the  reliability of contractor cost and performance data. Although DOD  concurred with our recommendations, we are currently evaluating the  corrective actions taken. In addition, DOD currently does not require  detailed reporting of contractor logistics support costs, including for  performance based arrangements.
section_title: Concluding Observations
paragraphs: In closing, I believe that we must engage in a fundamental reexamination  of when and under what circumstances we should use contractors versus  civil servants or military personnel. This is a major and growing concern  that needs immediate attention. In general, I believe there is a need to  focus greater attention on what type of functions and activities should be  contracted out and which ones should not. Inherently governmental  functions are required to be performed by government personnel, not  private contractors. Government officials, in making decisions about  whether to use contractors for services closely supporting inherently  governmental functions, should assess risk and consider the need for  enhanced management and oversight controls. Once the decision to  contract has been made, we must address challenges we have observed in  ensuring proper oversight of these arrangements—especially considering  the evolving and enlarging role of contractors in federal acquisitions.  These concerns, identified in our work at several federal agencies  including DOD, are more complex to address and may take on greater  significance in contingency or military operations. As we have witnessed  with contractors in Iraq, a specific decision made by a contractor can  impact U.S. strategic and operational objectives in ways that were not  considered in making the initial contracting decision.
To address these concerns with regard to contractor support to deployed  forces, we believe that in the immediate future, DOD’s leadership needs to  ensure implementation of and compliance with relevant existing guidance.  In the longer term, we believe a broader examination of the use and role of  contractors to support deployed forces is in order. As I stated in April  2007, it may be appropriate to ask if DOD has become too reliant on  contractors to provide essential services. What is needed is a  comprehensive, forward-looking, and integrated review of contractor  support to deployed forces that provides the proper balance between  contractor support and the core capabilities of military forces over the  next several years. In a November 2007 briefing on DOD transformation, I  called on DOD to employ a total force management approach to planning  and execution (e.g. military, civilian, and contractors). Many of the  problems we have identified regarding the management and oversight of  contractor support to deployed forces stem from DOD’s reluctance to plan  for contractors as an integral part of the total force. One way DOD could  begin to address this issue is by incorporating the use and role of  contractors into its readiness reporting. DOD regularly reports on the  readiness status, capabilities assessments, and other reviews of the status  and capabilities of its forces. Given the reality that DOD is dependent on  contractors for much of its support in deployed locations, the department  should include information on the specific missions contractors will be  asked to perform, the operational impacts associated with the use of  contractors, and the personnel necessary to effectively oversee and  manage those contractors.
Mr. Chairman, this concludes my prepared statement. I would be happy to  respond to any questions you or other Members of the Subcommittee may  have at this time.
section_title: Contacts and Acknowledgments
paragraphs: For further information regarding this testimony, please contact William  M. Solis at (202) 512-8365 or (solisw@gao.gov) or John Hutton at (202)  512-4841 or (huttonj@gao.gov). Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this product. Staff making key contributions to this statement were Julia  Denman, Tom Gosling, Amelia Shachoy, Assistant Directors; Carleen  Bennett, Laura Holliday, Randy Neice, Janine Prybyla, James Reynolds,  Bill Russell, Karen Sloan, and Karen Thornton.
section_title: Appendix I: Systemic Acquisition Challenges at the Department of Defense
paragraphs: 1.  Service budgets are allocated largely according to top line historical  percentages rather than Defense-wide strategic assessments and  current and likely resource limitations.  2.  Capabilities and requirements are based primarily on individual service  wants versus collective Defense needs (i.e., based on current and  expected future threats) that are both affordable and sustainable   over time.  3.  Defense consistently overpromises and underdelivers in connection  with major weapons, information, and other systems (i.e., capabilities,  costs, quantities, and schedule).  4.  Defense often employs a “plug and pray approach” when costs escalate  (i.e., divide total funding dollars by cost per copy, plug in the number  that can be purchased, then pray that Congress will provide more  funding to buy more quantities).  5.  Congress sometimes forces the department to buy items (e.g., weapon  systems) and provide services (e.g., additional health care for non- active beneficiaries, such as active duty members’ dependents and  military retirees and their dependents) that the department does not  want and we cannot afford.  6.  DOD tries to develop high-risk technologies after programs start  instead of setting up funding, organizations, and processes to conduct  high-risk technology development activities in low-cost environments,   (i.e., technology development is not separated from product  development). Program decisions to move into design and production  are made without adequate standards or knowledge.  7.  Program requirements are often set at unrealistic levels, then changed  frequently as recognition sets in that they cannot be achieved. As a  result, too much time passes, threats may change, or members of the  user and acquisition communities may simply change their mind. The  resulting program instability causes cost escalation, schedule delays,  smaller quantities and reduced contractor accountability.  8.  Contracts, especially service contracts, often do not have definitive or  realistic requirements at the outset in order to control costs and  facilitate accountability.  9.  Contracts typically do not accurately reflect the complexity of projects  or appropriately allocate risk between the contractors and the  taxpayers (e.g., cost plus, cancellation charges).  10. Key program staff rotate too frequently, thus promoting myopia and  reducing accountability (i.e., tours based on time versus key  milestones). Additionally, the revolving door between industry and the  department presents potential conflicts of interest.  11. The acquisition workforce faces serious challenges (e.g., size, skills,  knowledge, and succession planning).  12. Incentive and award fees are often paid based on contractor attitudes  and efforts versus positive results (i.e., cost, quality, and schedule).  13. Inadequate oversight is being conducted by both the department and  Congress, which results in little to no accountability for recurring and  systemic problems.  14. Some individual program and funding decisions made within the  department and by Congress serve to undercut sound policies.  15. Lack of a professional, term-based Chief Management Officer at the  department serves to slow progress on defense transformation and  reduce the chance of success in the acquisitions/contracting and other  key business areas.
section_title: Related GAO Products
subsections: section_title: Acquisition Management
paragraphs: Defense Contracting: Additional Personal Conflict of Interest Safeguards  Needed for Certain DOD Contractor Employees. GAO-08-169. Washington,  D.C.: March. 7, 2008.
Intelligence Reform: GAO Can Assist the Congress and the Intelligence  Community on Management Reform Initiatives. GAO-08-413T.  Washington, D.C.: February 29, 2008.
Federal Acquisition: Oversight Plan Needed to Help Implement  Acquisition Advisory Panel Recommendations. GAO-08-160. December  20, 2007.
Department of Homeland Security: Improved Assessment and Oversight  Needed to Manage Risk of Contracting for Selected Services. GAO-07-990.  Washington, D.C.: September 17, 2007.
Federal Acquisitions and Contracting: Systemic Challenges Need  Attention. GAO-07-1098T. Washington, D.C.: July 17, 2007.
Defense Acquisitions: Role of Lead Systems Integrator on Future Combat  Systems Program Poses Oversight Challenges. GAO-07-380. Washington,  D.C.: June 6, 2007.
Highlights of a GAO Forum: Federal Acquisition Challenges and  Opportunities in the 21st Century. GAO-07-45SP. Washington, D.C.: Oct.  6, 2006.
Contract Management: DOD Vulnerabilities to Contracting Fraud,  Waste, and Abuse. GAO-06-838R. Washington, D.C.: July 7, 2006.
Agency Management of Contractors Responding to Hurricane Katrina  and Rita, GAO-06-461R. Washington, D.C.: March 16, 2006.
Defense Ethics Program: Opportunities Exist to Strengthen Safeguards  for Procurement Integrity. GAO-05-341. Washington, D.C.: April 29, 2005.
Interagency Contracting: Problems with DOD’s and Interior’s Orders to  Support Military Operations. GAO-05-201. Washington, D.C.: April 25,  2005.
Rebuilding Iraq: Fiscal Year 2003 Contract Award Procedures and  Management Challenges. GAO-04-605. Washington, D.C.: June 1, 2004.
Human Capital: Key Principles for Effective Strategic Workforce  Planning. GAO-04-39. Washington, D.C.: December 11, 2003.
Human Capital: A Self-Assessment Checklist for Agency Leaders.  GAO/GGD-99-179. Washington, D.C.: September 1, 1999.
Government Contractors: Are Service Contractors Performing Inherently  Governmental Functions? GAO/GGD -92-11. Washington, D.C.: November  18, 1991.
Energy Management: Using DOE Employees Can Reduce Costs for Some  Support Services. GAO/RCED 91-186. Washington, D.C.: August 16, 1991.
Civil Servants and Contractor Employees: Who Should Do What for the  Federal Government? FPCD-81-43. Washington, D.C.: June 19, 1981.
section_title: Reliance on Contractors to Support Deployed Forces
paragraphs: Military Operations: Implementation of Existing Guidance and Other  Actions Needed to Improve DOD’s Oversight and Management of  Contractors in Future Operations. GAO-08-436T. Washington, D.C.:  January 24, 2008.
Defense Logistics: The Army Needs to Implement an Effective  Management and Oversight Plan for the Equipment Maintenance  Contract in Kuwait. GAO-08-316R. Washington, D.C.: January 23, 2008.
Defense Acquisitions: Improved Management and Oversight Needed to  Better Control DOD's Acquisition of Services. GAO-07-832T. Washington,  D.C.: May 10, 2007.
Military Operations: High-Level DOD Action Needed to Address Long- standing Problems with Management and Oversight of Contractors  Supporting Deployed Forces. GAO-07-145. Washington, D.C.: December  18, 2006.
Rebuilding Iraq: Continued Progress Requires Overcoming Contract  Management Challenges. GAO-06-1130T. Washington, D.C.: September 28,  2006.
Military Operations: Background Screenings of Contractor Employees  Supporting Deployed Forces May Lack Critical Information, but U.S.  Forces Take Steps to Mitigate the Risks Contractors May Pose. GAO-06- 999R. Washington, D.C.: September 22, 2006.
Rebuilding Iraq: Actions Still Needed to Improve the Use of Private  Security Providers. GAO-06-865T. Washington, D.C.: June 13, 2006.
Rebuilding Iraq: Actions Needed to Improve Use of Private Security  Providers. GAO-05-737. Washington, D.C.: July 28, 2005.
Interagency Contracting: Problems with DOD’s and Interior’s Orders to  Support Military Operations. GAO-05-201. Washington, D.C.: April 29,  2005.
Defense Logistics: High-Level DOD Coordination Is Needed to Further  Improve the Management of the Army’s LOGCAP Contract. GAO-05-328.  Washington, D.C.: March 21, 2005.
Contract Management: Opportunities to Improve Surveillance on  Department of Defense Service Contracts. GAO-05-274. Washington, D.C.:  March 17, 2005.
Military Operations: DOD’s Extensive Use of Logistics Support  Contracts Requires Strengthened Oversight. GAO-04-854. Washington,  D.C.: July 19, 2004.
Military Operations: Contractors Provide Vital Services to Deployed  Forces but Are not Adequately Addressed in DOD Plans. GAO-03-695.  Washington, D.C.: June 24, 2003.
Contingency Operations: Army Should Do More to Control Contract Cost  in the Balkans. GAO/NSIAD-00-225. Washington, D.C.: September 29, 2000.
Contingency Operations: Opportunities to Improve the Logistics Civil  Augmentation Program. GAO/NSIAD-97-63. Washington, D.C.: February  11, 1997.
section_title: Reliance on Contractors for Weapon System Logistic Support
paragraphs: Defense Management: DOD Needs to Demonstrate That Performance- Based Logistics Contracts Are Achieving Expected Benefits. GAO-05-966.  Washington, D.C.: September 9, 2005.
Defense Management: Opportunities to Enhance the Implementation of  Performance-Based Logistics. GAO-04-715. Washington, D.C.: August 16,  2004.
Depot Maintenance: Key Unresolved Issues Affect the Army Depot  System’s Viability. GAO-03-682. Washington, D.C.: July 7, 2003.
Depot Maintenance: Public-Private Partnerships Have Increased, but  Long-Term Growth and Results Are Uncertain.  GAO-03-423. Washington,  D.C: April 10, 2003.
Defense Logistics: Opportunities to Improve the Army’s and the Navy’s  Decision-making Process for Weapons Systems Support.  GAO-02-306.   Washington, D.C.: February 28, 2002.
Defense Logistics: Actions Needed to Overcome Capability Gaps in the  Public Depot System. GAO-02-105.  Washington D.C.: October 12, 2001  Defense Logistics: Air Force Lacks Data to Assess Contractor Logistics  Support Approaches. GAO-01-618.  Washington, D.C.: September 7, 2001.
Army Industrial Facilities: Workforce Requirements and Related Issues  Affecting Depots and Arsenals. GAO/NSIAD-99-31. Washington. D.C.:  November 30, 1998.
Defense Depot Maintenance: DOD Shifting More Workload for New  Weapon Systems to the Private Sector. GAO/NSIAD-98-8. Washington,  D.C.: March 31, 1998.
Defense Depot Maintenance: Commission on Roles and Missions’  Privatization Assumptions Are Questionable. GAO/NSIAD-06-161.  Washington, D.C.: July 15, 1996.
Defense Depot Maintenance: DOD’s Policy Report Leaves Future Role of  Depot System Uncertain. GAO/NSIAD-96-165. Washington, D.C.: May 21,  1996.
Defense Depot Maintenance: Privatization and the Debate Over the  Public-Private Mix. GAO/T-NSIAD-96-146. Washington, D.C.: April 16,  1996.
Depot Maintenance: Issues in Allocating Workload Between the Public  and Private Sectors. GAO/T-NSIAD-94-161.  Washington, D.C.: April 12,  1994.
Depot Maintenance: Issues in Management and Restructuring to  Support a Downsized Military. GAO/T-NSIAD-93-13. Washington, D.C.:  May 6, 1993.
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