Defense Acquisitions: DOD's Increased Reliance on Service Contractors Exacerbates Long-standing Challenges
Published: 2008-01-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Defense's (DOD) spending on goods and services has grown significantly since fiscal year 2000, to well over $314 billion annually. GAO has identified DOD contract management as a high-risk area for more than decade. With awards to contractors large and growing, DOD will continue to be vulnerable to contracting fraud, waste, or misuse of taxpayer dollars, and abuse. Prudence with taxpayer funds, widening deficits, and growing long-range fiscal challenges demand that DOD maximize its return on investment, while providing warfighters with the needed capabilities at the best value for the taxpayer. This statement discusses (1) the implications of DOD's increasing reliance on contractors to fill roles previously held by government employees, (2) the importance of the acquisition workforce in DOD's mission and the need to strengthen its capabilities and accountability, and (3) assumptions about cost savings related to the use of contractors versus federal employees. This statement is based on work GAO has ongoing or has completed over the past several years covering a range of DOD contracting issues.
section_title: What GAO Found
paragraphs: DOD has increasingly turned to contractors to fill roles previously held by government employees and to perform many functions that closely support inherently governmental functions, such as contracting support, intelligence analysis, program management, and engineering and technical support for program offices. This trend has raised concerns about what the proper balance is between public and private employees in performing agency missions and the potential risk of contractors influencing the government's control over and accountability for decisions that may be based, in part, on contractor work. Further, when the decision is made to use contractors in roles closely supporting inherently governmental functions, additional risks are present. Contractors are not subject to the same ethics rules as government even when doing the same job, and the government risks entering into an improper personal services contract if an employer/employee relationship exists between the government and the contractor employee. DOD's increasing reliance on contractors exacerbates long-standing problems with its acquisition workforce. GAO has long reported that DOD's acquisition workforce needs to have the right skills to effectively implement best practices and properly manage the acquisition of goods and services. Weaknesses in this area have been revealed in recent contingency situations, but they are present in nonemergency circumstances as well, with the potential to expose DOD to fraud, waste, and abuse. It is important to note that the role of the acquisition function does not end with the award of a contract. Continued involvement of the workforce throughout contract implementation and closeout is needed to ensure that contracted services are delivered according to the schedule, cost, quality, and quantity specified in the contract. GAO has in the past several years reported wide discrepancies in the rigor with which contracting officer's representatives perform these duties, particularly in unstable environments such as the conflict in Iraq and the aftermath of Hurricane Katrina. A key assumption of many of the federal management reforms of the 1990s was that the cost-efficiency of government operations could be improved through the use of contractors. GAO recently reported that sufficient data are not available to determine whether increased service contracting has caused DOD's costs to be higher than they would have been had the contracted activities been performed by uniformed or DOD civilian personnel. GAO recently probed, in-depth, the cost of contractor versus government contract specialists at the Army's Contracting Center for Excellence and found that the Army is paying up to 26 percent more for the contractors as compared to their government counterparts.

section_title: Letter
paragraphs: I am pleased to be here today to discuss challenging issues relating to the  Department of Defense’s (DOD) increasing reliance on contractors for  services to support its mission. Over the past decade, DOD has  experienced dramatic changes in its mission, accompanied by a significant  infusion of funds, with fiscal year 2008 base appropriations of $449 billion.  The President has also requested $189 billion for fiscal year 2008 war  costs. Much of this money is spent buying goods and, increasingly,  services from the private sector. Enhancing governmentwide acquisition  and contracting capability is one of the major areas that we have identified  as necessary for improving the government’s capacity to address 21st  century challenges and deliver real and sustainable results. In examining  our defense work, we have observed 15 systemic acquisition challenges  facing DOD, which I have included in appendix I. These challenges have  been long-standing and are becoming more apparent in recent years as the  department’s reliance on contractors has grown in both size and scope.  Overall trends indicate that DOD’s spending continues to increase. We  reported to you in 2006 that, in fiscal year 2005, DOD’s reported  contracting obligations totaled $270 billion. This amount increased to $314  billion in 2007, representing a 136 percent increase over fiscal year 2000  spending.
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’s service  acquisitions range from basic services such as landscaping and janitorial  services to those that are more complex, like intelligence analysis,  acquisition support, security services, and program office support. We  have reported that the department needs to do a much better job  managing its service acquisitions, and last year made a number of  recommendations to put the department in a position to proactively do so.  Congress, too, has imposed requirements over the past several years  intended to improve DOD’s service acquisition practices. For example, in  January 2006, Congress required DOD to take a number of actions,  including identifying the critical skills and competencies needed to  procure services.
I will address three important points today:    DOD’s increasing reliance on contractors to fill roles previously held by  government employees: This trend has raised issues as to what the proper  balance is between public and private employees in performing agency  missions, as well the need for greater attention given to decisions to  contract for services and the risks associated with these decisions on  work that closely supports inherently government functions. DOD has  three different options in terms of who will perform its functions, namely  military, civilian, or contractor. Today I will focus on the role of  contractors at the department.
The importance of the acquisition workforce to DOD’s mission and the  need to strengthen its capabilities and accountability: Weaknesses in this  area have been revealed in recent contingency situations, but they are  present in non-emergency circumstances as well, with the potential to  expose DOD to significant fraud, waste, and abuse. There may also be  opportunities to provide additional authorities to strengthen the  acquisition workforce, such as the use of term appointments.
Assumptions about cost savings related to the use of contractors versus  federal employees: The savings may not be realized in actual practice, as  some of our current work begins to indicate.
My comments today are based on work that GAO has completed over the  past several years and, in some cases, on ongoing work. All of our related  performance audits were conducted 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: DOD’s Growing Reliance On Contractors
paragraphs: Contractors have an important role to play in the discharge of the  government’s responsibilities, and in some cases the use of contractors  can result in improved economy, efficiency, and effectiveness. However, in  many cases contractors are used because the government lacks its own  personnel to do the job. Long-standing problems with the lack of oversight  and management of contractors are compounded by the growing reliance  on them to perform functions previously carried out by government  personnel.
The government is relying on contractors to perform many tasks that  closely support inherently governmental functions, such as contracting  support, intelligence analysis, security services, program management, and  engineering and technical support for program offices. We recently  surveyed officials from 52 of DOD’s major weapons programs, who  reported that over 45 percent of the program office staff was composed of  individuals outside of DOD. Some program officials expressed concerns  about having inadequate personnel to conduct their program office roles.  In a prior review of space acquisition programs, we found that 8 of 13 cost  estimating organizations and program officials believed the number of  government cost estimators was inadequate and that 10 of those offices  had more contractor personnel preparing cost estimates than government  personnel.
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 include activities that  require either the exercise of discretion in applying government authority,  or the making of  value judgments in making decisions for the government;  as such, they are required to be performed by government employees, not  private contractors. The closer contractor services come to supporting  inherently governmental functions, the greater the risk of contractors  influencing the government’s control over and accountability for decisions  that may be based, in part, on the contractor’s work. This situation may  result in decisions that are not in the best interest of the government and  American taxpayer, while also increasing overall vulnerability to waste,  fraud, or abuse. The Federal Acquisition Regulation provides 19 examples  of services and actions that may approach the category of inherently  governmental because of the nature of the function, the manner in which  the contractor performs the contracted services, or the manner in which  the government administers contractor performance. These include  acquisition support, budget preparation, engineering and technical  services, and policy development.
One way in which DOD has expanded the role of contractors is its use of a  lead systems integrator for major-weapons development. This approach  allows one or more contractors to define a weapon system’s architecture  and then manage both the acquisition and the integration of subsystems  into the architecture. In such cases, the government relies on contractors  to fill roles and handle responsibilities that differ from the more traditional  prime contractor relationship, a scenario that can blur the oversight  responsibilities between the contractor and federal program management  officials. For example, the Army’s Future Combat Systems program is  managed by a lead systems integrator that assumes to some extent 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  in many aspects of the Future Combat Systems program management  process is a potential risk. Moreover, if DOD uses a lead systems  integrator but does not provide effective oversight, DOD is vulnerable to  the risk that the integrator may not make its decisions in a manner  consistent with the government’s and taxpayers’ best interests, especially  when faced with potential organizational conflicts of interest.
subsections: section_title: Potential Risks Associated with Use of Contractors
paragraphs: When the decision is made to use contractors in roles closely supporting  inherently governmental functions, additional risks are present. Defense  contractor employees are not subject to the same laws and regulations  that are designed to prevent personal conflicts of interests among federal  employees. Moreover, there is not a departmentwide requirement for DOD  offices to employ personal conflict of interest safeguards for contractor  employees, although new governmentwide policy implemented in  November 2007 requires that certain contractors receiving awards worth  more than $5,000,000 and 4 months of work have an ethics program. A  separate proposed rule was recently published at the request of the Justice  Department to amend the regulation to require that companies holding  certain types of contracts disclose suspected violations of federal criminal  law in connection with the award or performance of contracts, or face  suspension or debarment. Public comments are due in January 2008. We  will be issuing a report on personal conflicts of interest, as they pertain to  defense contractor employees, shortly.
In addition, personal services contracts are prohibited, unless authorized  by statute. The government is normally required to obtain its employees  by direct hire under competitive appointment or other procedures  required by the civil service laws. GAO bid protest decisions also have  determined that a personal services contract is one that, by its express  terms or as administered, makes the contractor personnel appear to be, in  effect, government employees. Whether a solicitation would result in a  personal services contract must be judged in the light of its particular  circumstances, with the key question being whether the government will  exercise relatively continuous supervision and control over the contractor  personnel performing the requirement.
The Federal Acquisition Regulation lists six elements to be used as a guide  in determining the existence of a personal services contract, which are  shown in table 1.
When contractors work side by side with government employees and  perform the same mission-related duties, the risk associated with such  contracts can be increased.
section_title: Contingency Situations Reveal Acquisition Workforce Shortfalls
paragraphs: In July 2006, we reported that DOD’s acquisition workforce is subject to  certain conditions that increase DOD’s vulnerabilities to contracting fraud,  waste, and abuse, including    growth in overall contracting workload,    pending retirement of experienced government contracting personnel, and    a greater demand for contract surveillance because of DOD’s increasing  reliance on contractors for services.
Fraud is any intentional deception taken for the purpose of inducing DOD  action or reliance on that deception. Fraud can be perpetrated by DOD  personnel—whether civilian or military—or by contractors and their  employees. Trust and access to funds and assets that come with senior  leadership and tenure can become a vulnerability if the control  environment in an organization is weak. We also need to target waste in  government spending. Government waste is growing and far exceeds the  cost of fraud and abuse. Several of my colleagues in the accountability  community and I have developed a definition of waste, which is contained  in appendix II. Although waste does not normally involve a violation of  law, its effects can be just as profound. In response to our July 2006  report, DOD’s Panel on Contracting Integrity reported this month that it  has identified 21 initial actions for implementation in 2008 that it expects  will address areas of vulnerability in the defense contracting system that  allow fraud, waste, and abuse to occur.
Some amount of vulnerability to mismanagement, fraud, waste, or abuse  will always be present in contracting relationships, even with rules and  regulations in place to help prevent it. These vulnerabilities are more  dramatically revealed in contingency situations, such as the conflicts in  Iraq and the aftermath of Hurricane Katrina, when large amounts of money  are quickly made available and actions are hurried. One very significant  weakness is the condition of the government’s acquisition workforce. We  and others have reported for a number of years on the risks posed by a  workforce that has not kept pace with the government’s spending trends.  The Acquisition Advisory Panel, for example, recently noted the significant  mismatch between the demands placed on the acquisition workforce and  the personnel and skills available within that workforce to meet those  demands. To put it another way, at the same time that procurement  spending has skyrocketed, fewer acquisition professionals are available to  award and—just as importantly—administer contracts. Two important  aspects of this issue are the numbers and skills of contracting personnel  and DOD’s ability to effectively oversee contractor performance.
subsections: section_title: Acquisition Workforce Shortfalls
paragraphs: In its January 2007 report, the Acquisition Advisory Panel stated that the  government’s contracting workforce was reduced in size in the 1990s, with  DOD’s declining by nearly 50 percent due to personnel reductions during  that time. Despite recent efforts to hire acquisition personnel, there  remains an acute shortage of federal procurement professionals with  between 5 and 15 years of experience. This shortage will become more  pronounced in the near term because roughly half of the current  workforce is eligible to retire in the next 4 years. We have long noted that  DOD’s acquisition workforce needs to be made a priority. We have  reported that DOD needs to have the right skills in its acquisition  workforce to effectively implement best practices and properly manage  the acquisition of goods and services. We have also observed that the  acquisition workforce continues to face the challenge of maintaining and  improving skill levels to use alternative contracting approaches introduced  by acquisition reform initiatives of the past few decades.
Recent developments indicate that the tide may be turning, with actions  underway to address what is generally agreed to be a problematic state of  the acquisition workforce. For example, DOD’s Panel on Contracting  Integrity, in its 2007 report to Congress, identified the following focus  areas for planned actions, all of which focus on acquisition workforce  issues:  reinforce the functional independence of contracting personnel,  fill contracting leadership positions with qualified leaders,    determine the appropriate size of the contracting workforce and ensure  that it has the appropriate skills, and  improve planning and training for contracting in combat and contingency  environments.
Also, the Commission on Army Acquisition and Program Management in  Expeditionary Operations issued a report in November 2007, entitled  “Urgent Reform Required: Army Expeditionary Contracting.” The  commission found that the acquisition failures in expeditionary operations  require a systemic fix of the Army acquisition system and cited the lack of  Army leadership and personnel (military and civilian) to provide sufficient  contracting support to either expeditionary or peacetime operations. It  noted that only 3 percent of Army contracting personnel are active duty  military and there are no longer any Army contracting career general  officer positions. It found that what should be a core competence— contracting—is treated as an operational and institutional side issue. One  general officer told the commission that “this problem is pervasive DOD- wide, because workload continues to go up while contracting and  acquisition assets go down–there is a cost to these trends that is paid in  risk, and we don’t realize how big the bill is until there’s a scandal.” The  commission recommended increasing the stature, quantity, and career  development of military and civilian contracting personnel. In response to  the commission’s report, the Army approved the creation of an Army  Contracting Command, which will fall under the Army Materiel Command  and be led by a two-star general. The Army also plans to increase its  contracting workforce by approximately 400 military personnel and 1,000  civilian personnel.
We believe that, while there is no way to completely prevent fraud, waste,  abuse, or poor decision making, increasing the numbers and skills of the  acquisition workforce is critical to lessening the likelihood of future  problems and affecting positive change. We must address this soon in  order to prevent additional waste and increased risk.
section_title: Monitoring Contractor Performance
paragraphs: The role of the acquisition function does not end with the award of a  contract. It requires continued involvement throughout contract  implementation and closeout to ensure that contracted services are  delivered according to the schedule, cost, quality, and quantity specified in  the contract. In DOD, oversight—including ensuring that the contract  performance is consistent with the description and scope of the contract—  is provided by both contracting officers and the contracting officers  representative (COR), typically a government employee with technical  knowledge of the particular program.
We have reported wide discrepancies in the rigor with which CORs  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 effectively  deployed to provide adequate oversight. Instability—such as when wants,  needs, and contract requirements are in a state of flux—requires greater  attention to oversight, which in turn relies on a capable government  workforce. Unfortunately, attention to oversight and a capable  government workforce have 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 conflict, the Army  lacked an adequate acquisition workforce in Iraq to oversee the billions of  dollars for which it was responsible. Further, Army personnel who were  responsible for overseeing the performance of contractors providing  interrogation and other services were not adequately trained to properly  exercise their responsibilities. Contractor employees were stationed in  various locations around Iraq, with no COR or assigned representative on  site to monitor their work. An Army investigative report concluded that  the lack of training for the CORs assigned to monitor contractor  performance at Abu Ghraib prison, as well as an inadequate number of  assigned CORs, put the Army at risk of being unable to control poor  performance or become aware of possible misconduct by contractor  personnel.
DOD’s Panel on Contracting Integrity raised similar concerns, noting that  contracting personnel in a combat/contingent environment do not always  have functional independence. Contracting personnel, including CORs, are  sometimes placed in positions where their direct supervisor is not in the  contracting chain of command, thus possibly injecting risk into the  integrity of the contracting process. The report found that CORs are not  sufficiently trained and prepared, and sometimes lack support from their  operational chain of command, to perform effectively. The Commission on  Army Acquisition and Program Management in Expeditionary Operations  also expressed concern about this issue, stating that after contract award  there are “no resources trained” to monitor and ensure that the contractor  is performing and providing the services needed by the warfighter. It  stated that the inability to monitor contractor performance and enforce  contracts are critical problems in an expeditionary environment and cited  an example: “When the critical need is to get a power station running, and  there are no resources to monitor contractor performance, only the  contractor knows whether the completed work is being sabotaged  nightly.”
In December 2006, we reported that while DOD has taken some steps to  improve its guidance on the use of contractors to support deployed forces,  addressing some of the problems we have raised since the mid-1990s, it  continues to face long-standing problems that hinder its management and  oversight of contractors at deployed locations. DOD has not allocated the  organizational resources to review and oversee issues regarding  contractor support to deployed forces. While DOD’s new guidance is a  noteworthy step, a number of problems we have previously reported on  continue to pose difficulties for military personnel in deployed locations.
Lack of visibility by senior leaders into the number and location of  contractors and services provided at deployed locations.  Inadequate number of oversight personnel at deployed locations.
No systematic collection and sharing of DOD’s institutional knowledge on  using contractors to support deployed forces.
Limited or no training for military personnel on the use of contractors as  part of their pre-deployment training or professional military education.
section_title: Cost of Contractors
paragraphs: A key assumption of many of the federal management reforms of the 1990s  was that the cost-efficiency of government operations would be improved.  In addition to a desire for cost savings, the need to meet mission  requirements while contending with limitations on government full-time  equivalent positions and a desire to use contractors’ capabilities and skills  in particular situations were factors in increasing the use of contractors.  We recently reported that sufficient data are not available to determine  whether increased service contracting has caused DOD’s costs to be  higher than they would have been had the contracted activities been  performed by uniformed or DOD civilian personnel.
To learn more about the role and cost of contractors providing contracting  support services, we have recently undertaken new work to look at  contractors providing contract specialist services to the Army Contracting  Agency’s Contracting Center for Excellence (CCE). This agency currently  provides contracting support to 125 DOD customers in the National  Capitol Region, including the Joint Chiefs of Staff, Tricare Management  Activity, Defense Information Systems Agency, DOD Inspector General,  Pentagon Renovation Office, and Office of the Judge Advocate General.  During fiscal year 2007, the agency awarded about 5,800 contract actions  and obligated almost $1.8 billion. CCE is one of many government  agencies that have turned to contractors to support its contracting  functions.
As a part of our review, we examined how the costs of CCE’s contractor  contract specialists compared to those of its government contract  specialists. Our analysis indicates that the government is paying more for  the contractors. At CCE, the contractors are performing the same duties as  their government counterparts and have been used in this role since 2003.  We compared the costs of the government employees at the GS-12 and GS- 13 levels to their equivalent contractor counterparts (referred to as  contract specialists II and III) and found that, on average, the Army is  paying up to 26 percent more for the contractors, as depicted in table 2.
Key elements of our analysis were:    The loaded hourly cost of a government employee includes their salary,  costs of the government’s contributions to the employee’s benefits, the  costs to train the employee, the employee’s travel expenses, and the costs  of operations overhead—which are the costs of the government  employees that provide support services, such as budget analysts or  human capital staff.
Government employee salaries and benefits were based on actual data  from one pay period. These data were then compared to the hourly cost of  contractors ordered during the month of that pay period. The cost of a  contractor employee is the fully loaded hourly rate the government pays  for these services. We reported the weighted average of those hourly rates  because the agency used two contractors at two different rates during the  pay period.
We excluded the costs that the government incurs for both government  and contractor-provided specialists. These include the costs of supplies,  facilities, utilities, information technology, and communications costs.
This example is one illustrative case. In another example, officials at the  Missile Defense Agency told us last year that, according to their  calculations, the average cost of their government employees was  $140,000, compared with an average cost of $175,000 for their  contractors—who accounted for 57 percent of their 8,186 personnel  positions. We will continue to do work in this area.
section_title: Concluding Points
paragraphs: In closing, I believe that we must engage in a fundamental re-examination  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. 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.
And we must elevate the acquisition function within the department. I  would like to emphasize the critical need for actions to be taken to  improve the acquisition workforce. The acquisition workforce’s workload  and complexity of responsibilities have been increasing without adequate  agency attention to the workforce’s size, skills and knowledge, and  succession planning. DOD is experiencing a critical shortage of certain  acquisition professionals with technical skills related to systems  engineering, program management, and cost estimation. Without adequate  oversight by and training of federal employees overseeing contracting  activities, reliance on contractors to perform functions that once would  have been performed by members of the federal workforce carries risk. As  a final note, we are continuing to explore acquisition workforce issues in  ongoing work and we hope to be making recommendations on these  issues.
Mr. Chairman and Members of the subcommittee, this concludes my  statement. I would be happy to answer any questions you might have.
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, 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, succession planning).  12. Incentive and award fees are often paid based on contractor attitudes  and efforts versus positive results (i.e., cost, quality, 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: Appendix II: Definition of Waste
paragraphs: Several of my colleagues in the accountability community and I have  developed a definition of waste. As we see it, waste involves the taxpayers  in the aggregate not receiving reasonable value for money in connection  with any government-funded activities due to an inappropriate act or  omission by players with control over or access to government resources  (e.g., executive, judicial or legislative branch employees; contractors;  grantees; or other recipients). Importantly, waste involves a transgression  that is less than fraud and abuse. Further, most waste does not involve a  violation of law, but rather relates primarily to mismanagement,  inappropriate actions, or inadequate oversight. Illustrative examples of  waste could include the following:    unreasonable, unrealistic, inadequate, or frequently changing    proceeding with development or production of systems without achieving  an adequate maturity of related technologies in situations where there is  no compelling national security interest to do so;  the failure to use competitive bidding in appropriate circumstances;    an over-reliance on cost-plus contracting arrangements where reasonable  alternatives are available;  the payment of incentive and award fees in circumstances where the  contractor’s performance, in terms of costs, schedule, and quality  outcomes, does not justify such fees;  the failure to engage in selected pre-contracting activities for contingent  events; and    congressional directions (e.g., earmarks) and agency spending actions  where the action would not otherwise be taken based on an objective  value and risk assessment and considering available resources.
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