Federal Acquisition: Oversight Plan Needed to Help Implement Acquisition Advisory Panel's Recommendations
Published: 2008-02-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: A growing portion of federal spending is related to buying services such as administrative, management, and information technology support. Services accounted for about 60 percent of total fiscal year 2006 procurement dollars. The Services Acquisition Reform Act (SARA) of 2003 established an Acquisition Advisory Panel to make recommendations for improving acquisition practices. In January 2007, the panel proposed 89 recommendations to improve federal acquisition practices. GAO was asked to testify on how the panel recommendations compare to GAO's past work and identify how the Office of Federal Procurement Policy (OFPP) expects the recommendations to be addressed. This statement is based on GAO's analysis of the advisory panel's report. GAO's analysis is included in its December 2007 report titled, Federal Acquisition: Oversight Plan Needed to Help Implement Acquisition Advisory Panel Recommendation, (GAO-08-160).
section_title: What GAO Found
paragraphs: The SARA Panel, like GAO, has made numerous recommendations to improve federal government acquisition--from encouraging competition and adopting commercial practices to improving the accuracy and usefulness of procurement data. The recommendations in the SARA Panel report are largely consistent with GAO's past work and recommendations. The panel and GAO have both pointed out the importance of a robust requirements definition process and the need for competition; the need to establish clear performance requirements, measurable performance standards, and a quality assurance plan to improve the use of performance-based contracting; the risks inherent in the use of interagency contracts because of their rapid growth and their improper management; stresses on the federal acquisition workforce and the need for a strategy to assess these workforce needs; concerns about the role of contractors engaged in managing acquisition and procurement activities performed by government employees and the proper roles of federal employees and contractor employees in a "blended" workforce; and the adverse effects of inaccurate and incomplete federal procurement data, such as not providing a sound basis for conducting procurement analyses. The panel also made recommendations that would change the guidance for awarding contracts to small businesses. While GAO's work has addressed some small business policy issues, GAO has not made recommendations that would change the guidance to be used for awarding contracts to small businesses. OFPP representatives told GAO that OFPP agrees with almost all of the panel recommendations and expected that most of the 89 panel recommendations would be implemented through one of the following means: congressional actions; changes to the Federal Acquisition Regulation; OFPP actions, such as issuing new or revised policy; and federal agency actions. OFPP has already acted on some SARA recommendations, while other actions are pending or under consideration. Milestones and reporting requirements are in place to help OFPP gauge the implementation status of some recommendations but not for others. Moreover, OFPP does not have a strategy or plan to allow it to exercise oversight and establish accountability for implementing all of the panel's recommendations and to gauge their effect on federal acquisitions.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our review of the Services  Acquisition Reform Act’s Acquisition Advisory Panel report. Each year the  federal government—the single largest buyer in the world—spends  billions of dollars to procure goods and services. In fiscal year 2006, it  spent over $400 billion. A growing portion of this spending is related to  buying services, such as administrative, management, and information  technology support. Services now account for about 60 percent of total  procurement dollars.
Congress passed the Services Acquisition Reform Act of 2003 (SARA),  which provided federal agencies an array of tools to improve how they  acquire services. The act also established an acquisition advisory panel,  which began work in February 2005, to review acquisition laws and  regulations and make recommendations to improve federal acquisition  practices. The SARA Acquisition Advisory Panel issued its final report  dated January 2007, making 89 recommendations to improve federal  acquisition in the following seven areas: commercial practices,  performance-based acquisitions, interagency contracting, small business,  the federal acquisition workforce, the role of contractors supporting  government, and federal procurement data. The panel directed most of its  recommendations to the Office of Federal Procurement Policy (OFPP)  within the Office of Management and Budget (OMB) for implementation,  while the others were directed to Congress and federal agencies.
As you requested, my testimony will focus on our review of the panel’s  report. Specifically, I will address (1) how the panel recommendations  compare with our past work and recommendations and (2) how OFPP is  addressing the recommendations. My statement is based on our report  issued in December 2007.
subsections: section_title: Most SARA Panel Recommendations Are Consistent with GAO’s Past Work
paragraphs: The 89 recommendations in the panel report are largely consistent with  our past work and recommendations. I will now discuss each of the seven  areas the panel reviewed, the general thrust of the panel’s  recommendations, and our views on them.
subsections: section_title: Commercial Practices
paragraphs: The first area the panel reviewed was commercial practices. According to  the panel, the bedrock principle of commercial acquisition is competition.  The panel found that defining requirements is key to achieving the benefits  of competition because procurements with clear requirements are far  more likely to produce competitive, fixed-price offers that meet customer  needs. Further, the panel found that commercial organizations invest the  time and resources necessary to understand and define their requirements.  They use multidisciplinary teams to plan their procurements, conduct  competitions for award, and monitor contract performance. Commercial  organizations rely on well-defined requirements and competitive awards to  reduce prices and obtain innovative, high-quality goods and services.  Hence, practices that enhance and encourage competition were the basis  of the panel recommendations. The panel recommended, among other  things, that the requirements process be improved and competitive  procedures be strengthened.
Our work is generally consistent with the panel’s recommendations, and  we have issued numerous products that address the importance of a  robust requirements definition process and the need for competition. For  example, in January 2007, we testified that poorly defined or broadly  described requirements have contributed to undesired services acquisition  outcomes. To produce desired outcomes within available funding and  required time frames, our work has shown that DOD and its contractors  need to clearly understand acquisition objectives and how they translate  into the contract’s terms and conditions. The absence of well-defined  requirements and clearly understood objectives complicates efforts to  hold DOD and contractors accountable for poor acquisition outcomes.  This has been a long-standing issue.
Regarding competition, we have stated that competition is a fundamental  principle underlying the federal acquisition process. Nevertheless, we have  reported numerous times on the lack of competition in DOD’s acquisition  of goods and services. For example, we noted in April 2006 that DOD  awarded contracts for security guard services supporting 57 domestic  bases, 46 of which were let on an authorized sole-source basis. The sole- source contracts were awarded by DOD despite recognizing it was paying  about 25 percent more than previously paid for the contracts awarded  competitively.
section_title: Improving Implementation of Performance-Based Acquisition
paragraphs: The second area the panel reviewed was improving the implementation of  performance-based acquisitions. The panel reported that performance- based acquisition (PBA) has not been fully implemented in the federal  government even though OMB has encouraged greater use of it—setting a  general goal in 2001 of making performance-based contracts 40 percent or  more of all eligible service acquisitions for fiscal year 2006. The panel  reported that agencies were not clearly defining requirements, not  preparing adequate statements of work, not identifying meaningful quality  measures and effective incentives, and not effectively managing the  contract. The panel noted that a cultural emphasis on “getting to award”  still exists within the government, an emphasis that precludes taking the  time to clarify agency needs and adequately define requirements. The  panel recommended that OFPP issue more explicit implementation  guidance and create a PBA “Opportunity Assessment” tool to help  agencies identify when they should consider using PBA contracts.
Like the panel, we have found that agencies have faced a number of issues  when using PBA contracts. For example, we reported in April 2003 that  there was inadequate guidance and training, a weak internal control  environment, and limited performance measures and data that agencies  could use to make informed decisions on when to use PBA. We have made  recommendations similar to the panel’s. For example, we have  recommended that the Administrator of OFPP work with agencies to  periodically evaluate how well agencies understand PBA and how they can  apply it to services that are widely available in the commercial sector,  particularly more unique and complex services. The panel’s concern that  agencies are not properly managing PBA contracts is also consistent with  our work on surveillance of service contracts. In a March 2005 report, we  found that proper surveillance of service contracts, including PBAs, was  not being conducted, leaving DOD at risk of being unable to identify and  correct poor contractor performance. Accordingly, we recommended that  the Secretary of Defense ensure the proper training of personnel in  surveillance and their assignment to contracts no later than the date of  contract award. We further recommended the development of practices to  help ensure accountability for personnel carrying out surveillance  responsibilities. We have also found that some agencies have attempted to  apply PBA to complex and risky acquisitions, a fact that underscores the  need to maintain strong government surveillance to mitigate risks.
section_title: Interagency Contracting
paragraphs: The third area the panel reviewed was interagency contracting. The panel  found that reliance on interagency contracts is significant. According to  the panel report, 40 percent of the total 2004 obligations, or $142 billion,  was obligated through the use of interagency contracts. The panel also  found that a significant reason for the increased use of these contracts has  been reductions in the acquisition workforce accompanied by increased  workloads and pressures to reduce procurement lead times. Accordingly,  the panel made numerous recommendations to improve the use of  interagency contracts with the intent of enhancing competition, lowering  prices, improving the expertise of the acquisition workforce, and  improving guidance for choosing the most appropriate interagency  contract for procurements.
Our work is generally consistent with the panel’s recommendations on  interagency contracting. In fact, 15 of our reports on interagency  contracting were cited in the panel report. These included numerous  recommendations that are consistent with the panel’s recommendations.  Our reports recognize that interagency contracts can provide the  advantages of timeliness and efficiency by leveraging the government’s  buying power and providing a simplified and expedited method of  procurement. However, our prior work has found that agencies involved in  the interagency contracting process have not always obtained required  competition, evaluated contracting alternatives, or conducted adequate  oversight. A number of factors render the use of interagency contracts  high risk; these factors include their rapid growth in popularity, their use  by some agencies that have limited expertise with this contracting method,  and the number of parties that might be involved. Taken collectively, these  factors contribute to a much more complex procurement environment— one in which accountability is not always clearly established. In 2005,  because we found that interagency contracts can pose risks if they are not  properly managed, we designated the management of interagency  contracting a governmentwide high-risk area.
section_title: Small Business
paragraphs: The fourth area the panel reviewed was small business. The panel made  recommendations to change the guidance to contracting officers for  awarding contracts to small businesses. These recommendations are  intended to improve the policies and, hence, address the socioeconomic  benefits derived from acquiring services from small businesses. OFPP has  taken the position that all but one of the recommendations requires  legislation to implement. While our work on small business has addressed  a number of policy issues, we have not made recommendations for  statutory and regulatory changes when arguments for such changes are  based on value judgments, such as those related to setting small business  contracting goals.
section_title: Federal Acquisition Workforce
paragraphs: The fifth area the panel reviewed was the federal acquisition workforce.  The panel recognized a significant mismatch between the demands placed  on the acquisition workforce and the personnel and skills available within  the workforce to meet those demands. The panel found, for example, that  demands on the federal acquisition workforce have grown substantially  while at the same time, the complexity of the federal acquisition system as  a whole has increased. Accordingly, the panel made a number of  recommendations designed to define, assess, train, and collect data on the  acquisition workforce and to recruit talented entry level personnel and  retain its senior workforce.
Our work is generally consistent with the panel’s findings and  recommendations on the acquisition workforce. On the basis of  observations made by acquisition experts from the federal government,  private sector, and academia, we reported in October 2006 that agency  leaders have not recognized or elevated the importance of the acquisition  profession within their organizations. The agency leaders further noted  that a strategic approach had not been taken across government or within  agencies to focus on workforce challenges, such as creating a positive  image essential to successfully recruit and retain a new generation of  talented acquisition professionals. In September 2006, we testified that  while the amount, nature, and complexity of contract activity has  increased, DOD’s acquisition workforce, the largest component of the  government’s acquisition workforce, has remained relatively unchanged in  size and faces certain skill gaps and serious succession planning  challenges. Further, we testified that DOD’s acquisition workforce must  have the right skills and capabilities if it is to effectively implement best  practices and properly manage the goods and services it buys. In July 2006,  we reported that in the ever-changing DOD contracting environment, the  acquisition workforce must be able to rapidly adapt to increasing  workloads while continuing to improve its knowledge of market  conditions, industry trends, and the technical details of the goods and  services it procures. Moreover, we noted that effective workforce skills  were essential for ensuring that DOD receives fair and reasonable prices  for the goods and services it buys and identified a number of conditions  that increased DOD’s vulnerabilities to contracting waste and abuse.
section_title: Contractors Supporting the Federal Government
paragraphs: The sixth area the panel reviewed was contractors supporting the federal  government. The panel reported that, in some cases, contractors are solely  or predominantly responsible for the performance of mission-critical  functions that were traditionally performed by government employees,  such as acquisition program management and procurement, policy  analysis, and quality assurance. Further, the panel noted that this  development has created issues with respect to the proper roles of, and  relationships between, federal employees and contractor employees in the  “blended” workforce. The panel stated that although federal law prohibits  contracting for activities and functions that are inherently governmental,  uncertainty about the proper scope and application of this term has led to  confusion, particularly with respect to service contracting outside the  scope of OMB’s Circular A-76, which provides guidance on competing  work for commercial activities via public-private competition. Moreover,  according to the panel, as the federal workforce shrinks, there is a need to  ensure that agencies have sufficient in-house expertise and experience to  perform inherently governmental functions by being in a position to make  critical decisions on policy and program management issues and to  manage the performance of contractors. The panel recommended (1) that  the FAR Council consider developing a standard organizational conflict-of- interest clause for solicitations and contracts that sets forth a contractor’s  responsibility concerning its employees and those of its subcontractors,  partners, and any other affiliated organization or individual; (2) that OFPP  update the principles for agencies to apply in determining which functions  government employees must perform; and (3) that OFPP ensure that the  functions identified as those that must be performed by government  employees are adequately staffed.
On the basis of our work, we have similar concerns to those expressed by  the panel, and our work is generally consistent with the panel’s  recommendations on the appropriate role of contractors supporting the  federal acquisition workforce. We have testified and reported on the issues  associated with an unclear definition of what constitutes inherently  governmental functions, inadequate government experience and expertise  for overseeing contractor performance, and organizational conflicts of  interest related to contractor responsibilities. We found that there is a  need for placing greater attention on the type of functions and activities  that could be contracted out and those that should not, for reviewing the  current independence and conflict-of-interest rules relating to contractors,  and for identifying the factors that prompt the government to use  contractors in circumstances where the proper choice might be the use of  government employees or military personnel. In our recent work at DHS,  we found that more than half of the 117 statements of work we reviewed  provided for services that closely supported the performance of inherently  governmental functions. We made recommendations to DHS to improve  control and accountability for decisions resulting in buying services that  closely support inherently governmental functions. Accordingly, our work  is consistent with panel recommendations to update the principles for  agencies to apply in determining which functions government employees  must perform; and to ensure that the functions identified as those that  must be performed by government employees are adequately staffed.
section_title: Report on Federal Procurement Data
paragraphs: Finally, the seventh and last area the panel reviewed was federal  procurement data. The Federal Procurement Data System-Next  Generation (FPDS-NG) is the federal government’s primary central  database for capturing information on federal procurement actions.  Congress, Executive Branch agencies, and the public rely on FPDS-NG for  a wide range of information including agencies’ contracting actions,  governmentwide procurement trends, and how procurement actions  support socioeconomic goals and affect specific geographical areas and  markets. The panel reported that FPDS-NG data, while insightful when  aggregated at the highest level, continue to be inaccurate and incomplete  at the detailed level and cannot be relied on to conduct procurement  analyses. The panel believes the processes for capturing and reporting  FPDS-NG data need to be improved if that data is to meet user  requirements. As a result, the panel made 15 recommendations aimed at  increasing the accuracy and the timeliness of the FPDS-NG data. For  example, the panel recommended that an independent verification and  validation should be undertaken to ensure all other validation rules are  working properly in FPDS-NG.
Our work has identified similar concerns as those expressed by the panel.  In fact, the panel cited our work numerous times in its report. Like the  panel, we have pointed out that FPDS-NG data accuracy has been a long- standing problem and have made numerous recommendations to address  this problem. As early as 1994, we reported that the usefulness of federal  procurement data for conducting procurement policy analysis was limited.
More recently, in 2005, we again raised concerns about the accuracy and  timeliness of the data available in FPDS-NG. We have also reported that  the use of the independent verification and validation function is  recognized as a best business practice and can help provide reasonable  assurance that the system satisfies its intended use and user needs.
section_title: OFPP Plans to Address Most SARA Panel Recommendations
paragraphs: OFPP representatives told us the office agrees with almost all of the 89  panel recommendations and has already acted on some, while potential  actions are pending on others. OFPP identified legislative actions and FAR  cases that could address over one third of the recommendations. OFPP  expects to address at least 51 of the remaining recommendations and  plans to work with the chief acquisition officer or senior procurement  official within each agency to do so. In some cases, OFPP has established  milestones and reporting requirements to help provide it with visibility  over the progress and results of implementing the recommendations.  Although OFPP has taken some steps to track the progress of selected  recommendations, it does not have an overall strategy or plan to gauge the  successes and shortcomings in how the panel’s recommendations are  implemented and how they improve federal acquisitions. Table 1 shows  how OFPP expected the 89 recommendations to be implemented.
In October 2007, OFPP representatives noted that while the panel directed  17 recommendations to Congress, legislative actions could address as  many as 23 panel recommendations. Panel recommendations directed to  Congress include potential legislative changes such as authorizing the  General Services Administration to establish a new information  technology schedule for professional services and enacting legislation to  strengthen the preference for awarding contracts to small businesses. An  example of the latter is amending the Small Business Act to remove any  statutory provisions that appear to provide for a hierarchy of small  business programs. According to the panel, this is necessary because an  agency would have difficulty meeting its small business goal if any one  small business program takes a priority over the others. Since October  2007, some panel recommendations have been addressed by legislative  actions. For example, the panel recommended that protests of task and  delivery orders valued in excess of $5 million be permitted. Section 843 of  the National Defense Authorization Act for Fiscal Year 2008 allows for  such protests, but raised the dollar threshold to orders valued in excess of  $10 million.
For those recommendations that were expected to be addressed by  legislative actions but have not yet been the subject of congressional  action, OFPP representatives told us the office could take administrative  actions, such as issuing a policy memorandum or initiating a FAR case, to  implement most of them.
section_title: Conclusions and Recommendation
paragraphs: In closing, the SARA Panel, like GAO, has made numerous  recommendations to improve federal government acquisition—from  encouraging competition and adopting commercial practices to improving  the accuracy and usefulness of procurement data. Our work is largely  consistent with the panel’s recommendations, and when they are taken as  a whole, we believe the recommendations, if implemented effectively, can  bring needed improvements in the way the federal government buys goods  and services. OFPP, as the lead office for responding to the report, is now  in a key position to sustain the panel’s work by ensuring that panel  recommendations are implemented across the federal government in an  effective and timely manner. To do this, we recommended in our recent  report that OFPP work with the chief acquisition officers and senior  procurement officials across all the federal agencies to lay out a strategy  or plan that includes milestones and reporting requirements that OFPP  could use to establish accountability, exercise oversight, and gauge the  progress and results of implementing the recommendations.
Mr. Chairman and members of the subcommittee this concludes my  statement. I would be pleased to respond to any questions you might have.
For questions regarding this testimony, please call John P. Hutton at (202)  512-4841 or huttonj@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this testimony.
Key contributors to this testimony include James Fuquay, Assistant  Director, Daniel Hauser, John Krump, Robert Miller, and Robert  Swierczek.
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