DOD Acquisitions: Opportunities May Exist to Increase Utility of Nondevelopmental Items Pilot Program
Published: 2015-01-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Section 866 of the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 established a pilot program authorizing DOD to award contracts for MPNDI to nontraditional defense contractors—companies that had not contracted with DOD for at least a year. The pilot program was designed to streamline acquisition procedures and to serve as an incentive for nontraditional defense contractors to innovate in areas useful to DOD.
Section 866 mandated that GAO assess DOD's use of the pilot program to acquire items that otherwise might not have been available to DOD, assisted in meeting urgent operational needs, and protected the interests of the U.S. in paying fair and reasonable prices. This report addresses the extent to which DOD awarded contracts that met these goals and issues potentially affecting use of the pilot program. To conduct this work, GAO reviewed applicable laws, the Federal Acquisition Regulation, the Defense Federal Acquisition Regulation Supplement, DOD's annual reports to Congress on the pilot program from fiscal years 2011 to 2013, and DOD's implementing guidance. GAO collected information from DOD, the military departments, and selected defense organizations.
section_title: What GAO Found
paragraphs: Since the Department of Defense (DOD) implemented a pilot program in 2011 to award contracts for military purpose nondevelopmental items (MPNDI), it has not awarded any contracts using the authority. An MPNDI is generally an item that meets a validated military requirement and has been developed exclusively at private expense. GAO's analysis identified a number of issues that may be contributing to the lack of use of the pilot program, including the following:
Limited awareness of the pilot program : In several instances, DOD officials from commands and contracting activities that GAO interviewed were unaware of the pilot program prior to GAO's review. Further, the Air Force noted that the program had not been well publicized within the department.
Challenges in meeting all the criteria required to use the pilot program : DOD program and contracting officials that GAO contacted stated that it was difficult to identify proposed acquisitions that could meet all the criteria for using the pilot program, which include that the items must be developed at private expense, the initial lot of items be delivered within nine months after contract award, contractors be nontraditional defense contractors, competitive procedures be used, and contracts are $50 million or less.
The ability to use other flexibilities to obtain needed items: Contracting officials from the military departments with whom GAO spoke identified other existing authorities—such as commercial item acquisition procedures—that they would use to acquire items they identified as potentially covered by the pilot program.
DOD officials told GAO that they were aware of these issues but had no ongoing efforts to address them. GAO's prior work has identified several sound management practices to effectively implement or assess pilot programs, including developing objectives that link to the goals of the pilot and ensuring the results of the pilot are communicated to stakeholders. In the case of the MPNDI pilot program, DOD has not proactively identified opportunities to use the pilot program in areas useful to DOD—a goal of the pilot—such as by identifying specific industries, technologies or capability gaps where its use may provide an additional incentive for nontraditional defense contractors to do business with DOD. Additionally, DOD has not determined whether the pilot program provides new flexibilities or the opportunity to use streamlined acquisition procedures that are not already available under other authorities. Lastly, DOD's annual reports to Congress have not identified whether there are specific requirements under the pilot program, such as the need to award contracts competitively, that might hinder its use. Determining whether the pilot program provides meaningful value to the department requires that DOD do more than make the authority available for use by its personnel. Unless DOD takes action to identify opportunities to use the authority and report on issues hindering its use, DOD may miss an opportunity to make an informed decision as to whether the authority provided under the pilot program would provide value to the department.
section_title: What GAO Recommends
paragraphs: GAO recommends that DOD identify how the pilot program can help DOD attract nontraditional contractors, to test flexibilities or streamlined procedures not otherwise available under existing authorities, and include issues hindering its use in its annual reports to Congress. DOD concurred with GAO's recommendations.

section_title: Letter
paragraphs: In its 2010 Quadrennial Defense Review of strategies and priorities, the  Department of Defense (DOD) found that it needed to better involve  commercial and small business companies so that it could acquire  innovative solutions to meet military requirements. As recognized by  Congress, federal regulations included a preference for acquiring  commercial items and other nondevelopmental items, but there were no  procedures that incentivized private companies to develop items to  exclusively meet a military purpose. To address this gap, Section 866 of  the Ike Skelton National Defense Authorization Act (NDAA) for Fiscal  Year 2011 established a pilot program that authorized DOD to award  contracts for military purpose nondevelopmental items (MPNDI) to  companies that had not contracted with DOD for at least a year. The pilot  program was designed to test whether streamlined acquisition procedures  similar to those available for commercial items can serve as an incentive  for these “nontraditional defense contractors” to innovate in areas useful  to DOD.
Section 866 of the NDAA for Fiscal Year 2011 mandated GAO to assess  DOD’s use of the pilot program. Specifically, GAO was to assess the  extent to which the pilot program (1) enabled DOD to acquire items that  otherwise might not have been available to DOD; (2) assisted the  department in the rapid acquisition and fielding of capabilities needed to  meet urgent operational needs; and (3) protected the interests of the  United States in paying fair and reasonable prices for the item or items  acquired. This report addresses the extent to which DOD awarded  contracts that met these goals and issues potentially affecting use of the  pilot program.
To determine the extent to which DOD awarded contracts under the pilot  program that met these goals, we reviewed Section 866 of the NDAA and  other applicable laws, the Federal Acquisition Regulation (FAR), Defense  Federal Acquisition Regulation Supplement (DFARS), DOD’s annual  reports to Congress on the pilot program from fiscal years 2011 to 2013  (the most recent year for which DOD submitted a report at the time of our  review), DOD’s preliminary data gathered in preparation for its fiscal year  2014 report, and DOD’s implementing guidance. To test whether DOD’s  annual reports accurately reflected the use of the pilot program, we  requested that the Office of the Assistant Secretary of the Air Force  (Acquisition); Office of the Assistant Secretary of the Army for Acquisition,  Logistics and Technology; and the Office of the Deputy Assistant  Secretary of the Navy (Acquisition and Procurement) determine the  extent to which their respective military departments had awarded any  contracts under the pilot program. Based on the actions taken by the  military departments in response to our request, we determined that the  data, as originally provided to the congressional defense committees, of  DOD’s reported use of the authority from fiscal years 2011 to 2013 were  sufficiently reliable for the purposes of this report. We interviewed DOD  and military department officials to determine how they implemented the  pilot program, including the extent to which the pilot program enabled  DOD to acquire items that might otherwise not be available to DOD and  assisted DOD in fielding capabilities to meet urgent operational needs.
To identify issues that potentially affected the use of the pilot program, we  reviewed the input provided by the military departments and defense  agencies to the Office of the Under Secretary of Defense for Acquisition,  Technology and Logistics-Defense Procurement and Acquisition Policy  (DPAP) to help support the preparation of the fiscal year 2013 annual  report to Congress, and reviewed the input to the fiscal year 2014 report  that had been submitted to DPAP as of December 5, 2014. We also  collected information and interviewed officials from DOD, the military  departments, a command and contracting activity within each military  department, and other defense organizations. Overall, we selected 11  components based on various factors, including their potential use or  knowledge of the pilot program and their responsibilities for fulfilling  urgent operational needs. We also met with representatives from an  industry group to gather their views on the pilot program. Section 866 of  the NDAA also required that we assess the extent to which DOD  protected the interests of the U.S. in paying fair and reasonable prices for  items acquired, but we determined that there was not sufficient  information available to make such an assessment. To help determine  whether DOD followed sound management practices when developing,  implementing, and evaluating the pilot program, we used GAO’s prior  work on pilot programs as criteria. Additional details on our scope and  methodology are provided in appendix I.
We conducted this performance audit from September 2014 to January  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Congress authorized the five-year MPNDI pilot program in Section 866 of  the NDAA for Fiscal Year 2011 with the intent to test whether streamlined  acquisition procedures, similar to those available for commercial items,  can serve as an effective incentive for “nontraditional defense  contractors” to innovate in areas useful to DOD. Congress extended  authority for the pilot program through December 31, 2019 in Section 814  of the National Defense Authorization Act for Fiscal Year 2014.
Section 866 defined a number of terms for the purposes of the pilot  program, such as MPNDI and nontraditional defense contractor, as  shown in table 1.
Section 866 also required that contracts awarded under the pilot program  meet a number of contract requirements as outlined in table 2.
To help encourage nontraditional defense contractors to offer items to  DOD under streamlined procedures, Congress exempted contracts  awarded under the pilot program from the requirement to submit certified  cost or pricing data and from the federal Cost Accounting Standards, two  requirements that have previously been identified as increasing contractor  costs or discouraging such companies from competing for federal  contracts. Certified cost or pricing data, by regulation, is to be provided to  the government by contractors and subcontractors, at certain threshold  contract levels unless an exception applies, to support their proposed  prices and to certify that the data are accurate, complete, and current.  Certified cost or pricing data documentation requirements can be  extensive. Cost Accounting Standards are mandatory for use by  executive agencies and by contractors and subcontractors in estimating,  accumulating, and reporting costs in connection with pricing and  administration of, and settlement of, disputes generally concerning all  negotiated prime contract and subcontract procurements with the  government in excess of the thresholds for submission of certified cost or  pricing data.
Congress required that DOD provide information on contracts awarded  under the pilot program not later than 60 days after the end of each fiscal  year in which the pilot program is in effect. Each report is to include the  contractor, the item or items to be acquired, the military purpose to be  served by the item(s), the amount of the contract, and the actions taken to  ensure that the price paid is fair and reasonable.
Attracting contractors that do not traditionally pursue government  contracts due to the cost and impact of complying with government  procurement requirements has been a longstanding concern within the  government. Congress and others have taken various steps, including  creation of the MPNDI pilot program, to address these concerns. For  example, in 1996 Congress established a commercial item test program  to provide contracting officers with additional procedural discretion and  flexibility to acquire commercial items. Commercial items and services  are those generally available in the commercial marketplace in contrast  with items developed to meet specific federal government requirements.  Commercial items are generally exempt from the requirement to provide  certified cost or pricing data or comply with cost accounting standards.  Similarly, Congress provided DOD the authority to enter into “other  transactions” to take advantage of technological advances made by the  private sector. Other transactions are generally not subject to federal  laws and regulations governing standard procurement contracts. Further,  in May 2013, the Deputy Secretary of Defense asked the Defense  Business Board to begin studying ways to encourage broader  participation in DOD acquisitions from the private sector for the purpose  of encouraging innovation.
section_title: DOD Has Not Used the Pilot Program or Addressed Issues that Limit Its Use
paragraphs: DOD reported that it has not awarded any contracts using the authority  provided by the pilot program since it was initiated in 2011. As a result,  the pilot program has not resulted in DOD obtaining items that otherwise  might not have been available to it nor assisted DOD in the rapid  acquisition and fielding of capabilities to meet urgent operational needs.  Our review of input provided by the military departments and defense  agencies to DPAP and our interviews with DOD program and contracting  officials identified a number of factors that may be contributing to the lack  of use of the pilot program, including limited awareness of the program,  challenges in meeting all the criteria needed to use the program, and the  ability to use other flexibilities to obtain needed items. DOD has not taken  steps to address these concerns, however, which may continue to limit  the future use of the pilot program.
subsections: section_title: DOD Has Not Awarded Any Contracts Under the Pilot Program
paragraphs: DOD initiated the pilot program in June 2011 through an interim rule to  the DFARS. Under this interim rule, DOD created DFARS subpart  212.71, which generally reiterated the pilot program requirements as  prescribed by Section 866. The subpart provided that a new clause,  DFARS 252.212-7002, be used in all solicitations that would meet the  criteria of the pilot program. The subpart also required that departments  and agencies prepare a consolidated annual report to provide information  about contracts awarded under the pilot program authority and submit it  by October 31 of each year. The interim rule was finalized without change  in January 2012.
The military departments also provided varying levels of guidance that  generally reiterated the pilot program rules as stated in DFARS. For  example, the Navy Marine Corps Acquisition Regulation Supplement  requires that contracts awarded under the pilot program during the  preceding fiscal year be reported annually to the Deputy Assistant  Secretary of the Navy for Acquisition and Procurement. Air Force Materiel  Command restated the requirements of the pilot program in their  February 2012 and April 2014 Contracting Bulletins, which are distributed  to contracting personnel across the command, and also issued  corresponding training slides that restated the requirements of the pilot  program. In addition, during the course of our audit, the Army distributed  a policy alert on the proper use of the pilot program by restating the  requirements.
Over the past three years, the Under Secretary of Defense for  Acquisition, Technology and Logistics has reported to Congress that DOD  has not awarded contracts under the authority provided by the pilot  program during each of the prior fiscal years. To prepare its annual  reports, DPAP requests data from each of the military departments,  defense agencies, and other defense offices on all instances of use of the  pilot program during the relevant fiscal year. Each DOD component is  required to provide information for each contract awarded under the pilot  program, including the contractor, item(s) acquired, price, military purpose  served by the item(s) acquired, and steps taken to ensure fair and  reasonable pricing. DPAP also requires the components to report if they  have not used the pilot program during the course of the prior fiscal year.  DOD’s annual reports found, and our discussions with military department  and defense agency officials confirmed, that DOD has not used the  authority from fiscal years 2011 to 2013. As a result, the pilot program  has not resulted in DOD obtaining items that otherwise might not have  been available to it nor assisted in the rapid acquisition and fielding of  capabilities to meet urgent operational needs. The absence of contracts  awarded under the pilot program precludes us from determining how  DOD protected the government’s interests in paying fair and reasonable  prices for the item(s) acquired.
section_title: DOD Has Not Addressed Issues Potentially Limiting the Use of the Pilot Program
paragraphs: Our review of the input provided by the defense components, as well as  our information from interviews with policy, program, and contracting  officials at the 11 components we contacted, identified a number of issues  that may be contributing to the lack of use of the pilot program, including  limited awareness of the pilot program, challenges in meeting all the  criteria required to use the pilot program, and the ability to use other  flexibilities to obtain needed items. DOD is aware of a number of issues  but has no ongoing efforts to address them. The following examples  illustrate these issues.
Limited awareness of the pilot program: In several instances, DOD  officials from commands and contracting activities that we interviewed  were generally unaware of the pilot program prior to our review, noting  that the program had not been well publicized or could only cite its  inclusion into DFARS. For example, the program officials from the  Army’s Rapid Equipping Force told us that they were notified of the  pilot program on October 1, 2014 as a result of our review. Similarly,  program officials from the Joint Improvised Explosive Device Defeat  Organization were unaware of the pilot program until we had  contacted them for information. Further, the Air Force noted in its  response to the fiscal year 2014 DPAP data call on the pilot program  that the program had not been well publicized within the department  and identified this issue as one of several reasons why the program  had not been used.
Challenges in meeting all the criteria required to use the pilot  program: Program and contracting officials from commands and  contracting activities we interviewed stated that it was difficult to  identify proposed acquisitions that met all the requirements for using  the pilot program. Officials from 5 of the 11 offices that we spoke with  provided examples or told us that in their experience the items they  acquire generally need to be modified for government use and  therefore may not meet the requirement that the item was developed  exclusively at private expense. For example, officials from the Army  Rapid Equipping Force told us about a 2011 need to identify and field  a sensor package that could measure, collect, and store data on  improvised explosive device blast pressure experienced by soldiers  inside and outside of vehicles. These officials noted that doing so  would enable the Army to advance research and treatment on mild  traumatic brain injuries. The Army determined that no existing  nondevelopmental items suitably measured such forces, so they  modified an existing commercial item to meet the need, which in turn  was deployed to Afghanistan in June 2012. In another example, a  contracting official from the Air Force Materiel Command identified a  commercially-available airplane landing system that was modified by  the government for military-use. In its response to the fiscal year 2014  DPAP data call, the Air Force noted that the many requirements of the  pilot program that must be met, such as delivery within nine months,  use of nontraditional contractors, the required use of competitive  procedures, and the restriction not to exceed $50 million, limited the  applicability of the program.
Additionally, several DOD officials cited the requirement to use  competitive procedures as a limiting factor. DPAP officials noted that  Section 866 requires the use of “competitive procedures” without  further definition. These officials noted that 10 U.S.C. 2302 defines  competitive procedures as acquisitions conducted under full and open  competition—that is, under which all responsible bidders or offerors  are eligible to compete. As such, DPAP officials did not believe that  the use of Section 866 allowed acquisitions to be conducted using  one of the exceptions to competitive procedures, such as awarding a  contract on a sole-source basis. However, some DOD officials  stated that they thought the program may be more useful if exceptions  to competition could be used. They noted that the ability to use  exceptions to competition would make one of the key features of the  pilot program—the exemption from the need to provide certified cost  and pricing data—more applicable because certified cost and pricing  data would generally apply to contracts that are awarded non- competitively.
The ability to use other flexibilities to obtain needed items:  Contracting officials from the military departments with whom we  spoke identified other existing authorities—such as commercial item  acquisition procedures—that they would use to acquire items that they  identified as potentially covered by the pilot program. In several  cases, officials provided examples of nondevelopmental items  developed at private expense that they acquired through competitive  commercial item acquisition procedures. As such, DOD would  generally be precluded from obtaining certified cost or pricing data or  from requiring the contractor to adhere to federal cost accounting  standards, two benefits that the pilot program was to provide to attract  commercial firms. For example, during our interview with the Naval  Surface Warfare Center, contracting officials initially identified data  recorders as potentially meeting the requirements of the pilot program  but ultimately concluded that acquisition of these recorders would  most likely be acquired as a commercial item. Further, in another  example, DPAP officials told us that military purpose aviation fuel  tanks were acquired as a commercial item rather than under the pilot  program, because DOD determined the fuel tanks met the definition of  a commercial item. As we found in our February 2014 report on  DOD’s commercial item test program, DOD contracting officers have  many tools in their toolkit and the decision regarding the appropriate  contracting method for a commercial item is left to the contracting  officers’ discretion. We found that several factors influence the  contracting officer’s decision, such as the estimated value of the  contract at award, the urgency of the requirement, the availability of  existing contracts or contracting vehicles, as well as the nature of the  item or service being acquired.
GAO has issued several reports on DOD’s urgent needs processes. See, for example,  GAO, Warfighter Support: DOD’s Urgent Needs Processes Need a More Comprehensive  Approach and Evaluation for Potential Consolidation, GAO-11-273 (Washington, D.C.:  Mar. 1, 2011); and GAO, Warfighter Support: Improvements to DOD’s Urgent Needs  Processes Would Enhance Oversight and Expedite Efforts to Meet Critical Warfighter  Needs, GAO-10-460 (Washington, D.C.: Apr. 30, 2010). some modifications to the design. As a result, these officials were not  certain whether the items could have been acquired using the pilot  program.
DPAP officials noted that they are aware of many of these issues, but  have no ongoing efforts to specifically address them. GAO’s prior work  has identified several sound management practices when developing,  implementing, and assessing pilot programs, including developing  objectives that link to the goals of the pilot and ensuring the results of the   In the case of the MPNDI pilot  pilot are communicated to stakeholders.program, DOD has not proactively identified opportunities to use the pilot  program in areas useful to DOD—a goal of the pilot—such as by  identifying how the authority might help DOD attract nontraditional  contractors to fill needs in specific industries, technologies, or for certain  capabilities that are not met by existing authorities. The pilot program was  also intended to test whether streamlined acquisition procedures, similar  to those available for commercial items, can serve as an incentive for  “nontraditional defense contractors” to innovate in areas useful to DOD.  DOD has not determined whether the pilot program provides new  flexibilities or the opportunity to use streamlined acquisition procedures  that are not already available under other authorities. Lastly, DOD’s prior  annual reports to Congress have not identified whether there are specific  requirements under the pilot program, such as the need to award  contracts competitively, that might hinder its use. Taking action to identify  how the pilot program authority may assist in (1) attracting nontraditional  contractors, (2) testing the use of new flexibilities or streamlined  procedures, and (3) identifying and reporting to Congress on specific  requirements of the pilot program that may hinder its use, could better  position DOD to determine whether the pilot program provides meaningful  value to the department.
section_title: Conclusions
paragraphs: DOD has had a longstanding concern to better involve commercial and  small business companies so that it can acquire innovative solutions to  meet military requirements. Congress created and later extended the  MPNDI pilot program as a way of providing additional flexibilities to assist  DOD in acquiring needed items, to spur innovation and participation from  nontraditional defense contractors, such as by using streamlined  acquisition procedures or eliminating certain requirements that had been  identified as barriers to attracting firms that traditionally did not do  business with DOD. However, DOD has not yet used the program in the 3  years since it was initiated. Determining whether the pilot program  provides meaningful value to the department requires that DOD do more  than make the authority available for use by its personnel. In that regard,  DOD has not provided assistance to its program and contracting officials  to help identify opportunities to use the pilot program as currently  structured, nor has it reported to Congress on issues that hinder its use,  such as the requirement to use competitive procedures. Further, DOD  identified a number of existing authorities that enabled them to acquire  needed goods and services quickly from the private sector. Identifying  whether there are targets of opportunities in terms of industries,  technologies or capabilities that remain untapped, or gaps in existing  authorities or procedures that could be met, or limitations in the pilot  program’s current structure that hinder its use can help shape the future  of the pilot program. Unless DOD takes such action, the remaining 5  years of the authority may not produce results that differ from those  reported over the past 3 years. If so, DOD will have missed an  opportunity to make an informed decision as to whether authority  provided under the pilot program would provide value to the department.  On the other hand, if DOD concludes, on the basis of a robust pilot  program, that the authority does not add value, then that conclusion  should stand.
section_title: Recommendations for Executive Action
paragraphs: To maximize the potential value of the MPNDI pilot program, we  recommend that the Under Secretary of Defense for Acquisition,  Technology and Logistics take the following three actions:  identify how this authority, as currently structured, may assist DOD in  attracting nontraditional contractors in specific industries,  technologies, or capabilities;  identify whether there are opportunities to test flexibilities or  streamlined procedures that are not otherwise available under existing  authorities; and  if DOD believes changes are needed to the current structure of the  pilot program to increase its utility, to identify such issues in its  subsequent annual reports to Congress.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOD for comment. In its written  comments, which are reprinted in appendix II, DOD concurred with each  of our recommendations. DOD stated that it found meeting all the criteria  needed to use the authority, and in particular, the need to use  “competitive procedures,” as limiting the department’s ability to effectively  use the pilot program authority and its ability to test flexibilities or  streamlined procedures not otherwise available to the department. DOD  stated it would identify such issues in future reports to Congress. DOD  also stated it would continue to examine how the pilot program may assist  in attracting nontraditional contractors, but did not specify how it would do  so. As we indicated in the report, identifying potential targets of  opportunity, such as specific industries, technologies, or capabilities gaps  where the program’s use may provide an additional incentive for  nontraditional contractors to do business with DOD, can help shape the  future of the pilot program. DOD also provided technical comments, which  we incorporated in the report as appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Under Secretary of Defense  for Acquisition, Technology and Logistics, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Section 866 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2011 mandated that GAO assess DOD’s use of the pilot program.  Specifically, Section 866 mandated that GAO assess whether the pilot  program (1) enabled DOD to acquire items that otherwise might not have  been available to DOD; (2) assisted the department in the rapid  acquisition and fielding of capabilities needed to meet urgent operational  needs; and (3) protected the interests of the United States in paying fair  and reasonable prices for the item or items acquired. This report  addresses the extent to which DOD awarded contracts that met these  goals and issues potentially affecting use of the pilot program.
To determine the extent to which DOD awarded contracts under the pilot  program that met these goals, we reviewed Section 866 of the NDAA and  other applicable laws, the Federal Acquisition Regulation (FAR), Defense  Federal Acquisition Regulation Supplement (DFARS), DOD’s annual  reports to Congress on the pilot program from fiscal years 2011 to 2013  (the most recent fiscal year for which DOD submitted a report at the time  of our review), DOD’s preliminary data gathered in preparation for its  fiscal year 2014 report, and DOD’s implementing guidance. To test  whether DOD’s annual reports accurately reflected the use of the pilot  program, we requested data from the military departments (Office of the  Assistant Secretary of the Air Force (Acquisition); Office of the Assistant  Secretary of the Army for Acquisition, Logistics and Technology; and the  Office of the Deputy Assistant Secretary of the Navy (Acquisition and  Procurement)) on contracts that included the DFARS clause 252.212- 7002, Pilot Program for Acquisition of Military-Purpose Nondevelopmental  Items, which is to be included on contracts awarded under the pilot  program. This effort identified 105 contracts awarded from fiscal years  2011 to 2013 that included the clause. The military departments,  however, subsequently determined that none of the contracts identified  had used the pilot program authority, and provided us information on how  they identified the contracts that included the clause, the steps they took  to verify the information in their contracting systems with cognizant  contracting officials, and the steps they were taking to correct these  errors, including modifying the contracts to delete the clause and issuing  additional guidance. Based on the actions taken by the military  departments in response to our request for data, we determined that the  data, as originally provided to the defense committees, of DOD’s reported  use of the authority from fiscal years 2011 to 2013 were sufficiently  reliable for the purposes of this report. We interviewed DOD and military  department officials to determine how they implemented the pilot  program, including the extent to which the pilot program enabled DOD to  acquire items that otherwise might not have been available to DOD and  assisted DOD in the rapid acquisition and fielding of capabilities to meet  urgent operational needs.
To identify issues that potentially affected the use of the pilot program, we  reviewed the input provided by the military departments and defense  agencies to the Office of the Under Secretary of Defense for Acquisition,  Technology and Logistics-Defense Procurement and Acquisition Policy  (DPAP) to help support the preparation of the fiscal year 2013 annual  report to Congress and reviewed the input to the fiscal year 2014 report  that had been submitted to DPAP as of December 5, 2014. We also  collected information and interviewed officials from DOD, the military  departments, a command and contracting activity within each military  department, and other defense organizations. Selected commands,  activities, and defense organizations included the Air Force Materiel  Command; Air Force Life Cycle Management Center; Army Program  Executive Office for Command, Control and Communications-Tactical;  Army Program Manager Tactical Radios; Naval Sea Systems Command;  Naval Surface Warfare Center-Port Hueneme Division; Army Rapid  Equipping Force; the Joint Improvised Explosive Device Defeat  Organization; the Joint Rapid Acquisition Cell; Special Operations  Command-Special Operations Research, Development, and Acquisition  Center; and Central Command-Joint Theatre Support Contracting  Command. These 11 components were selected based on various  factors, including potential use of the pilot program, knowledge of the pilot  program, and fulfillment of urgent operational needs. Further, we  collected information and met with officials from Department of the Navy- Office of Small Business Programs and the Program Executive Office for  Simulation, Training and Instrumentation. We also met with  representatives from an industry group to gather their views on the pilot  program. Section 866 of the NDAA also required that we assess the  extent to which the pilot program protected the interests of the U.S. in  paying fair and reasonable prices for the item(s) acquired, but we  determined that there was not sufficient information available to make  such an assessment. To help determine whether DOD followed sound  management practices when developing, implementing and evaluating  the pilot program, we used GAO’s prior work on pilot programs as  criteria. These practices include developing objectives that link to the  goals of the pilot and ensuring the results of the pilot are communicated  to stakeholders.
We conducted this performance audit from September 2014 to January  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Janet McKelvey (Assistant  Director), James Kim, Dina Shorafa, Marie Ahearn, Virginia Chanley,  Julia Kennon, Pete Anderson, and Cary Russell made key contributions  to this report.