Our prior work has found that DOD’s approach to managing service acquisition has tended to be reactive and has not fully addressed key factors for success at either the strategic or transactional level. The strategic level is where the enterprise sets the direction or vision for what it needs, captures knowledge to enable more informed management decisions, ensures enterprisewide goals and objectives are achieved, determines how to go about meeting those needs, and assesses the resources it has to achieve desired outcomes. The strategic level also sets the context for the transactional level, where the focus is on making sound decisions on individual acquisitions. Congress has required USD(AT&L) to take a number of steps to improve service acquisition. Specifically in 10 U.S.C. § 2330, enacted in 2001 and amended in 2006, Congress required USD(AT&L) and the military departments to establish a management structure for the acquisition of services. Since 2003, we have evaluated DOD’s implementation of 10 U.S.C. § 2330 and efforts to establish the management structure and service acquisition approval process twice. First, in September 2003, we concluded that DOD’s approach to managing service acquisition did not provide a departmentwide assessment of how spending for services could be more effective. We therefore recommended that DOD give greater attention to promoting a strategic orientation by setting performance goals for improvements and ensuring accountability for results. DOD concurred in principle with our recommendation and agreed that additional actions could strengthen the management structure and acquisition approval process but also identified challenges for doing so based on its organizational size, complexity, and the acquisition environment. Subsequently, in November 2006, we found continued weaknesses associated with DOD’s management of service acquisitions at the strategic and transactional level. Specifically, we found that DOD’s approach to managing service acquisition tended to be reactive and that the department had not developed a means for evaluating whether ongoing and planned efforts were achieving intended results. DOD had not developed a strategic vision and lacked sustained commitment to managing service acquisition risks and fostering more efficient outcomes. DOD also had not developed metrics to assess whether any changes to improve service acquisition actually achieved the expected outcomes. As a result, DOD was not in a position to determine whether investments in services were achieving their desired outcomes. Moreover, the results of individual acquisitions were generally not used to inform or adjust the strategic direction. We recommended that, among other actions, DOD take steps to understand how and where service acquisition dollars are currently and will be spent, in part, to assist in adopting a proactive approach to managing service acquisition. We also recommended that DOD take steps to provide a capability to determine whether service acquisitions are meeting cost, schedule, and performance objectives. At that time, DOD concurred with our recommendations. USD(AT&L), however, acknowledged in 2010 that DOD still needed a cohesive, integrated strategy for acquiring services. DOD contract management has remained on our High Risk List, in part, because DOD has not developed such a strategy and continues to lack reliable services spending data to inform decision making. While Congress has required USD(AT&L) to take steps to improve service acquisition, USD(AT&L) has taken actions on its own initiative as well. For example, USD(AT&L) established its Better Buying Power Initiative in a September 2010 memorandum to provide guidance for obtaining greater efficiency and productivity in defense spending. In its memorandum, USD(AT&L) emphasized that DOD must prepare to continue supporting the warfighter through the acquisition of products and services in potentially fiscally constrained times. In its own words, USD(AT&L) noted that DOD must “do more without more.” USD(AT&L) organized the Better Buying Power Initiative around five major areas, including an area focused on improving tradecraft in service acquisition. This area identified actions to improve service acquisition, such as categorizing acquisitions by portfolio groups and assigning new managers to coordinate these groups. USD(AT&L) issued another memorandum in April 2013 to update the Better Buying Power Initiative. This memorandum identifies seven areas USD(AT&L) is pursuing to increase efficiency and productivity in defense spending. One area is to improve service acquisition and the memorandum identifies a number of related actions, such as increasing small business participation in service acquisitions and improving how DOD conducts services-related market research. Over the last decade, DOD has taken actions to address legislative requirements to improve the acquisition and management of services. Senior officials we spoke with across the military departments credit USD(AT&L)’s leadership and commitment as the driving force behind many of the actions taken to improve service acquisition. A number of these actions were intended to strengthen DOD’s management structure and approach to reviewing service acquisitions, as required by 10 U.S.C. § 2330. For example, both USD(AT&L) and the military departments established new senior management positions to improve oversight and coordination of service acquisition. With this management structure and review process in place, USD(AT&L) is focusing on efforts to improve the process for how requirements for individual service acquisitions are developed and training to respond to legislative direction. USD(AT&L) also created a senior-level team to identify and determine the training needs for DOD personnel responsible for developing service acquisition requirements. USD(AT&L) did not develop a specific implementation plan as required by section 807, but officials identified a number of actions that they regard as addressing the eight elements specified. Since 2002, DOD has increased its management attention on high dollar value service acquisitions by instituting new policies and review processes. In response to the initial requirements to establish a management structure for the acquisition of services, USD(AT&L) issued a guidance memorandum in May 2002. This memorandum required that service acquisitions be reviewed and approved based on dollar thresholds and that the acquisition strategy—addressing things such as the requirements to be satisfied and any potential risks—be approved prior to initiating any action to commit the government to the strategy. Under this policy, USD(AT&L) was responsible for reviewing and approving all proposed service acquisitions with an estimated value of $2 billion or more. Following the 2006 amendment to 10 U.S.C. § 2330, USD(AT&L) issued a revised memorandum in October of that year. Under the revised policy, which remains in effect, USD(AT&L) lowered the threshold for its review to service acquisitions valued at over $1 billion. The military departments have developed internal policies for reviewing and approving service acquisitions below USD(AT&L)’s threshold. Further, USD(AT&L) required that acquisition strategies be reviewed before contract award and that these and other acquisition planning documents include a top-level discussion of the source selection process as well as noting any waivers and deviations. USD(AT&L) and military department officials informed us that while these reviews are conducted, they have not tracked the total number of service acquisitions reviewed to date. In 2008, USD(AT&L) incorporated these requirements into DOD Instruction 5000.02, which is part of DOD’s overarching policy governing the operation of the defense acquisition system. This instruction currently requires that senior officials across DOD consider a number of factors when reviewing a service acquisition, including the source of the requirement, the previous approach to satisfying the requirement, the total cost of the acquisition, the competition strategy, and the source selection planning. USD(AT&L) expects to issue a stand-alone instruction in 2014 for service acquisition policy to replace Enclosure 9 of DOD Instruction 5000.02. Additionally, in a February 2009 memorandum, USD(AT&L) refined its guidance on conducting service acquisition strategy reviews. Specifically, USD(AT&L)’s memorandum identified criteria that service acquisitions must adhere to and that reviewers are to assess, such as use of appropriate contract type, maximization of competition, and inclusion of objective criteria to measure contractor performance. DOD also established new senior-level management positions, in part, to address legislative requirements, although some roles and responsibilities are still being defined. For example, the 2006 amendment to 10 U.S.C. § 2330 required that USD(AT&L) and the military departments establish commodity managers to coordinate procurement of key categories of services. In 2010 and 2012, USD(AT&L) revised how it organized its contracted services under nine key categories. These categories of services, referred to as portfolio groups, are (1) research and development, (2) knowledge based, (3) logistics management, (4) electronic and communication, (5) equipment related, (6) medical, (7) facility related, (8) construction, and (9) transportation. In 2011, the military departments began establishing commodity manager positions to improve coordination and assist requiring activities with their procurement of services within these portfolio groups. By July 1, 2013, USD(AT&L) expects to establish similar positions responsible for supporting the DOD- wide procurement of services, but their authorities and responsibilities are not yet fully defined. Additionally, as part of its Better Buying Power Initiative, USD(AT&L) assigned the Principal Deputy Under Secretary of Defense for Acquisition, Technology, and Logistics as DOD’s senior manager for service acquisition, responsible for policy, training, and oversight across DOD. Table 1 summarizes the established positions and accompanying responsibilities in descending order of their hierarchy within DOD. While these positions have a role in reviewing, approving, or coordinating individual service acquisitions, senior USD(AT&L) and military department officials explained that they do not have responsibility or authority for making departmentwide decisions, such as determining current or future resources allocated to contracted services. These officials explained that the military departments’ commands and requiring activities are responsible for determining their requirements and how best to meet them, as well as requesting and allocating budgetary resources. For example, while USD(AT&L) officials and the military department senior services managers are responsible for reviewing service acquisitions to determine whether the planned acquisition strategy clearly defines the military department’s requirement, they do not determine what contracted services are needed or whether an alternative acquisition approach could better meet their need. USD(AT&L) officials and the military department senior services managers stated they do not have insight into each requiring activity’s specific needs and are not positioned to validate those needs. For additional details on the actions that USD(AT&L) and the military departments have taken to address the specific requirements of 10 U.S.C. § 2330, see appendix I. USD(AT&L) has planned and implemented actions to improve DOD’s process for developing requirements for individual service acquisitions, as required by the 2006 amendment to 10 U.S.C. § 2330. USD(AT&L) officials noted that it has collaborated with DAU officials to develop new tools and training to help DOD personnel develop better acquisitions. For example, USD(AT&L) collaborated with DAU to create the Acquisition Requirements Roadmap Tool (ARRT) in 2012. The ARRT is an online resource designed to help personnel write performance-based requirements and create several pre-award documents, including performance work statements and quality assurance surveillance plans. The ARRT guides users through a series of questions to develop the pre-award documents using a standardized template tailored to the specific requirement for services. Although using the ARRT is not required across DOD, DAU officials told us they have integrated its use into other DAU training, such as the Performance Requirements for Service Acquisitions course. DAU officials did not have data on the effectiveness of the ARRT but noted that feedback has been positive. For example, they have heard that performance work statements are better reflecting requirements as a result of personnel using the tool. In 2009, DAU introduced its Services Acquisition Workshop (SAW) to provide training and guidance on developing service acquisition requirements. The SAW is a 4-day workshop tailored to proposed service acquisitions. Upon request from commands or requiring activities, DAU officials travel to the requestor and convene the multifunctional team responsible for an acquisition, including general counsel, individuals associated with the acquisition requirements, contracting personnel, and oversight personnel. This team is then to develop the language that will be used to articulate the service requirement using the ARRT. By the end of the 4 days, the command is to have drafts of its performance work statement, quality assurance surveillance plan, and performance requirement summary. A key aspect of the workshop DAU officials identified is that it brings together the key personnel responsible for the acquisition to discuss the service requirements and how they will know if a contractor has met those requirements. From fiscal years 2009 through 2012, DAU conducted 78 SAWs. In 2012, USD(AT&L) mandated use of the SAW for service acquisitions valued at $1 billion and above and is encouraging its use for acquisitions valued at $100 million or more. USD(AT&L) has directed the Director of Defense Procurement and Acquisition Policy (DPAP) and the senior services managers to assess the effectiveness of the SAW and develop lessons learned and best practices by October 1, 2013. In addition to implementing the ARRT and the SAW, USD(AT&L) established the Acquisition of Services Functional Integrated Product Team (Services FIPT) in August 2012, in part, to address training requirements in 10 U.S.C. § 2330. According to its charter, the Services FIPT is comprised of the Director of DPAP, DAU officials, and other officials responsible for acquisition career management within the DOD. The Services FIPT is to provide input toward the development and dissemination of training products and practical tools to assist personnel responsible for acquiring services. In addition, the Services FIPT is to explore the feasibility of certification standards and career development for all personnel who acquire services, including personnel within and outside of the defense acquisition workforce. USD(AT&L) officials explained that non-acquisition personnel are most often involved in the requirements development portion of the acquisition process but may not be trained on how DOD buys services. In 2011, we found that non- acquisition personnel with acquisition-related responsibilities represented more than half of the 430 personnel involved in the 29 services contracts we reviewed. While we found that non-acquisition personnel received some acquisition training, this training was largely related to contract oversight as opposed to requirements development. According to its charter, one of the Services FIPT’s first tasks will be to identify DOD’s non-acquisition personnel involved in service acquisitions and determine how best to train them. The Services FIPT, however, has made little progress to date, and has met once since it was established. USD(AT&L) officials could not provide a time line for when the Services FIPT may fully address the training requirements in 10 U.S.C. § 2330. The officials explained that they expect the team to make more progress in 2013 when the Principal Deputy Under Secretary for Acquisition, Technology, and Logistics assumes leadership of the Services FIPT. Section 807 of the NDAA for Fiscal Year 2012 required USD(AT&L) to develop a plan by June 28, 2012, for implementing the recommendations of the DSB to include, to the extent USD(AT&L) deemed appropriate, the following eight elements: 1. incentives to services contractors for high performance at low cost, 2. communication between the government and the services contracting industry while developing requirements for services contracts, 3. guidance for defense acquisition personnel on the use of appropriate 4. formal certification and training requirements for services acquisition 5. recruiting and training of services acquisition personnel, 6. policies and guidance on career development for services acquisition 7. ensuring the military departments dedicate portfolio-specific 8. ensuring DOD conducts realistic exercises and training that account for services contracting during contingency operations. USD(AT&L) officials told us they did not develop a specific plan to address the section 807 requirement. They explained, however, that the April 2013 Better Buying Power Initiative memorandum addresses seven of the eight elements and that they have addressed the last element through a separate effort. In reviewing the April 2013 memorandum, we also found that it reflects actions to address all of the elements except the one pertaining to training and exercises during contingency operations. USD(AT&L) also identified 23 different actions it has taken or plans to take that officials regard as addressing all of the elements the plan was to include, some of which pre-date the April 2013 Better Buying Power Initiative memorandum. For example, In January 2012, USD(AT&L) issued guidance to improve how DOD communicates with the vendor community. In April 2013, USD(AT&L) directed that new guidance be developed to help acquisition personnel select the appropriate contract type and contractor performance incentives in DOD’s service acquisitions. DOD plans to conduct a joint mission rehearsal exercise in 2014 that will include training for services contracting during contingency operations. See appendix II for a more detailed description of the actions USD(AT&L) took to address the section 807 elements. While DOD has taken a number of actions to address legislative requirements, DOD is not yet positioned to determine what effects its actions have had on improving service acquisition. Specifically, USD(AT&L) has not yet fully addressed two key factors—a desired end state for the future with specific goals and associated metrics that would enable it to assess progress toward achieving those goals and determine whether service acquisition is improving. USD(AT&L) is challenged in addressing these key factors, in part, because it has limited insight into the current status of service acquisition in terms of the volume, type, location, and trends. While they have not established metrics to assess departmentwide progress, USD(AT&L) officials rely on reviews of individual service acquisitions, command level assessments, and feedback from the military departments as means to gauge whether DOD’s efforts are contributing to better service acquisitions. DOD has not established aggregated results or trends which could be used to provide a departmentwide perspective on the effects of its actions. USD(AT&L) and military department leadership have demonstrated a commitment to improving service acquisition, but USD(AT&L) officials stated that they have not defined the desired end state or specific goals its actions were intended to achieve. In our November 2006 report, we found, based on assessments of leading commercial firms, that identifying and communicating a defined end state or specific goals can significantly improve service acquisition. This work also found that being able to define a desired end state or what goals are to be achieved at a specified time necessitates knowledge of the current volume, type, location, and trends of service acquisitions. USD(AT&L) and the military department senior services managers acknowledge that they are challenged in defining the desired end state, in part, because limitations within DOD’s contracting and financial data systems hinder their insight into where service acquisition is today. USD(AT&L) and military department officials explained that DOD’s primary source of information on contracts, the Federal Procurement Data System-Next Generation (FPDS-NG), has a number of data limitations, including that it only reflects the predominant service purchased on a service does not reveal any services embedded in a contract for goods, does not fully identify the location of the requiring activity contracting for the service. Additionally, DOD’s financial systems do not provide detailed information on DOD’s budget and actual spending on specific types of contracted services and are not linked to the data maintained in FPDS-NG. According to USD(AT&L) officials and the senior services managers, collectively, the limitations of both FPDS-NG and DOD’s financial systems create challenges in identifying the current volume, type, location, and any potential trends in service acquisition. For example, USD(AT&L) stated that DOD wants to more strategically manage its nine portfolio groups of contracted services but does not have adequate insight into what services DOD currently buys within these portfolio groups. To improve insight into DOD’s contracted services, USD(AT&L) is linking DOD’s contract and financial data systems and increasing the level of detail these systems provide. For example, DOD is updating its financial systems to provide data on each service purchased under a contract. USD(AT&L) officials stated that improving and linking data within its contract and financial systems will enable DOD to determine what it budgeted for a particular service, what it actually spent for that service, and which organizations bought the service. Officials, however, do not expect to have this capability until at least 2014. USD(AT&L) officials noted that this effort could help provide better insight into future budget requirements for services. USD(AT&L) officials also stated that they are exploring how to use Electronic Document Access—a DOD online document access system for acquisition related information—to provide them with better insight into the different types of services DOD buys under each of its contracts. USD(AT&L) identified that, collectively, these efforts will help them to improve the management of its nine portfolio groups of contracted services, thereby enabling the department to better leverage its buying power, provide insight into the marketplace and buying behaviors, and identify opportunities for cost savings. In its April 2013 Better Buying Power Initiative memorandum, USD(AT&L) also identified that by managing service acquisition by portfolio group, the senior services managers should be able to work with requiring activities to forecast future services requirements. While the military departments have taken some steps to forecast or track future contracted services requirements, these efforts are too new to determine their utility in identifying what services DOD plans to buy. For example, in 2012, the Army senior services manager requested that Army commands provide an estimate for contracted services valued over $10 million to be purchased over the next five fiscal years in an effort to identify any potential cost savings. Air Force officials also track information on service acquisitions that they expect will be awarded over the next three years to aid in planning acquisition strategy reviews. The Navy is developing its own approach to forecast future contracted services requirements, which officials stated will be implemented in 2013. While it is too early to assess the effects of these forecast or tracking efforts, they have the potential to help the military departments better understand what services will be purchased and facilitate DOD in identifying its desired end state for service acquisition. USD(AT&L) has not established departmentwide metrics to assess the effects of its actions to improve service acquisition. Our prior work found that metrics linked to specified outcomes are another key factor to (1) evaluating and understanding performance levels, (2) identifying critical processes that require attention, (3) documenting results over time, and (4) reporting information to senior officials for decision making purposes. In lieu of such metrics, USD(AT&L) and military department officials stated that they rely on results from reviews of individual service acquisitions, command level assessments, and feedback from the military departments to gauge whether the department’s actions to improve services acquisitions, such as those required by Congress or established under DOD’s Better Buying Power Initiative, are having a positive effect. USD(AT&L) officials have acknowledged the need to establish departmentwide metrics but explained that developing such metrics has proven challenging. They further indicated that metrics used by leading commercial companies, which often focus on reducing spending for services to improve a company’s financial position, may not be appropriate for DOD. USD(AT&L) officials noted that DOD’s budget is based on an assessment of its missions and the resources needed to achieve its objective. These officials noted that while DOD is continuously looking for ways to improve its efficiency, it is difficult to set goals and measure actual reductions in spending as any savings or cost avoidances will generally be invested in other unfunded or high priority activities. Further, USD(AT&L) officials noted that since DOD’s budget is appropriated by Congress rather than derived from the sale of goods and services, changes in its resources are often outside its direct control. While developing goals and metrics is challenging, it is not impossible. DOD has acknowledged the need to establish departmentwide metrics. For example, our recent work on strategic sourcing—a process that moves an organization away from numerous individual acquisitions to a broader, aggregate approach—found that federal agencies, including DOD, could expand the use of this approach. Strategic sourcing enables federal agencies to lower costs and maximize the value of services they buy, which is consistent with DOD’s Better Buying Power Initiative. We found that some agencies, including DOD, did not address the categories that represented their highest spending, the majority of which exceeded $1 billion and were for services. To improve its strategic sourcing efforts at DOD, we recommended, among other things, that DOD set goals for the amount of spending managed through strategically sourced acquisitions, link strategic sourcing to its Better Buying Power Initiative, and establish metrics, such as utilization rates, to track progress toward these goals. DOD concurred with the recommendations and stated it would establish goals and metrics by September 2013. In the absence of departmentwide metrics, USD(AT&L) officials and senior services managers identified several ongoing efforts they rely on to gauge the effects of their actions to improve service acquisition. For example, USD(AT&L) and the military departments conduct pre- and post-award independent management reviews, or peer reviews, to ensure individual service acquisitions are conducted in accordance with applicable laws, regulations, and policies. USD(AT&L) and military department officials stated that through these peer reviews, they can determine if individual service acquisitions have resulted in the intended outcomes. For example, during the post-award phase, reviewers are to assess whether cost, schedule, and performance measures associated with individual service acquisitions are being achieved. We have previously found, however, that cost or schedule performance measures may not be as effective for service acquisitions as they are for product or weapon system acquisitions. Further, while peer reviews provide DOD with insight into the performance of a single service acquisition, DOD does not have information on how many post-award peer reviews have been completed by the military departments and has not aggregated the results or identified trends from all of DOD’s peer reviews. Additionally, the Air Force and the Navy are conducting assessments at the command level to evaluate organizations that buy and manage service acquisitions. These assessments are intended to identify performance levels, needed improvements, and best practices. For example, the Air Force implemented health assessments to review a command’s timeliness of contract awards, creation and use of standardized templates, implementation of internal and external recommendations and new policy requirements, and quality of communication. According to officials, the Air Force first implemented its health assessments in approximately 2009 to rate or score each of its commands in a number of different performance areas, such as program management and fiscal responsibility. Air Force officials reported, however, that they have not established baselines or identified any quantifiable trends from these health assessments. That said, Air Force officials told us that these assessments have contributed to improvements in the service acquisition process. For example, in a 2011 health assessment, the Air Force found that one program office reduced the use of bridge contracts—a potentially undesirable contract that spans the time between an expiring contract and a new award—by 50 percent from fiscal year 2010 to 2011.2012. During this assessment, the Navy identified a requirements development tool created and used within a command that was potentially a best practice and is being considered for Navy-wide use. The Army’s senior services manager is in the process of determining how to assess the health of the Army’s service acquisition organizations and expects to implement an approach in 2013. The Navy completed its first health assessment in USD(AT&L) officials also plan to assess the health of service acquisition across the military departments, potentially down to the program office level, using a number of indicators of risks, referred to as tripwires. Tripwires are established thresholds for measurable risk or performance indicators related to the acquisition of goods or services that, when triggered, could result in further review. USD(AT&L) officials stated that tripwires are still under development but could include thresholds for the number of days FPDS-NG data was input past deadlines or the number of contract modifications within 30 days of contract award. USD(AT&L) officials explained that tripwires alone are not sufficient to assess service acquisition performance, but tripwires could provide insight into what may or may not be going well and provide trend data over time. Further, USD(AT&L) annually reviews the military departments and other DOD components to understand the effects of its actions and policies related to improving service acquisitions and solicit recommendations for changes. For example, in 2012, USD(AT&L) inquired about the actions that have been taken to comply with various defense acquisition regulations or policies, such as the Better Buying Power Initiative. The Army’s and Navy’s responses noted that actions to improve competition led to an 11 and 12 percent increase, respectively, in the rate of effective competition—situations where more than one offer is received in response to a competitive solicitation—for service contracts from fiscal year 2010 through 2012. In response to an open-ended question on recommendations for improvements, each military department suggested that USD(AT&L) take additional actions to increase departmentwide coordination on service acquisitions. Specifically, the Army and the Air Force recommended departmentwide service acquisition management meetings to coordinate on issues such as emerging regulations, directives, and policies to improve service acquisitions. In response, USD(AT&L) officials told us that the Director of DPAP meets with the military departments’ senior services managers regularly. DOD’s ongoing efforts to gauge the effects of their actions to improve service acquisition also offer opportunities for DOD to develop baseline data, establish goals, and identify departmentwide metrics to measure progress. For example, by analyzing and aggregating the results of its health assessments, each military department could establish baselines against which to assess individual commands and over time, identify trends to determine if its commands are improving how they acquire services. Similarly, in coordination with the military departments, USD(AT&L) could use its tripwire approach to determine what percent of DOD’s service acquisition strategies are not approved or require changes before approval. DOD could then use such information to help identify reasons for why certain service acquisitions are not approved and determine appropriate corrective actions. DOD could further develop metrics associated with actions outlined in the Better Buying Power Initiative. For example, using its established services portfolio groups, DOD could develop baseline data on the degree of effective competition for services within each group. Depending on the results of that analysis, DOD could determine whether it would be appropriate to establish effective competition goals and metrics for each portfolio group or specific types of services within each group. In light of the billions of dollars DOD spends each year on services and the constrained fiscal environment, it is critical for DOD to identify how it can best utilize its financial resources and acquire services more efficiently and effectively. DOD leadership has demonstrated a commitment to improving service acquisition and management and has taken a number of actions to address legislative requirements. For example, USD(AT&L) and the military departments have focused more management attention on improving service acquisitions through new policies and guidance, reviews of high-dollar service acquisitions, and new tools and training for personnel who acquire services. Further, DOD recently designated the Principal Deputy Under Secretary of Defense for Acquisition, Technology, and Logistics as the department’s senior manager for service acquisition and has established similar positions, including senior services managers, within each of the military departments. In some cases, however, DOD remains in the process of defining the duties and responsibilities of these positions. When taken collectively, DOD has taken action to address the requirements of 10 U.S.C. § 2330 and section 807 of the NDAA for Fiscal Year 2012. DOD, however, does not know whether or how these actions, individually or collectively, have resulted in improvements to service acquisition. This is due, in part, to the fact that DOD continues to have limited knowledge and baseline data on the current state of service acquisition. To address this shortfall, DOD expects to obtain better service acquisition data by improving and linking data within its contract and financial systems, but this effort will not be complete until at least 2014. Having baseline budget and spending data can provide a foundation for measuring progress, but other factors such as articulating its desired end state and developing specific and measurable goals are also important for assessing progress. While developing specific goals and departmentwide metrics is challenging, it is not impossible. For example, DOD concurred with the need to set goals for the amount of spending managed through strategically sourced acquisitions, link strategic sourcing to its Better Buying Power Initiative, and establish metrics, such as utilization rates, to track progress toward these goals. However, DOD is currently missing opportunities to fully leverage its command-level assessments, feedback from the military departments, and other ongoing efforts it relies on to gauge the effects of its actions to improve service acquisition. Each of these efforts has merit and value in their own regard. Nevertheless, until DOD utilizes them to develop baseline data, goals, and associated metrics, similar to what it has committed to do for its strategic sourcing efforts, DOD will continue to be in a position where it does not know whether its actions are sufficient to achieve desired outcomes. To better position DOD to determine whether its actions have improved service acquisition, we recommend that the Principal Deputy Under Secretary of Defense for Acquisition, Technology, and Logistics, in consultation with the military departments’ senior services managers, take the following three actions: identify baseline data on the status of service acquisition, in part, by using budget and spending data and leveraging its ongoing efforts to gauge the effects of its actions to improve service acquisition, develop specific goals associated with their actions to improve establish metrics to assess progress in meeting these goals. DOD provided us with written comments on a draft on this report, which are reprinted in appendix III. DOD concurred with the three recommendations, noting that they are consistent with DOD’s ongoing Better Buying Power Initiative. DOD also stated that as it improves its management of service acquisition, it should be able to measure performance, track productivity trends, and establish consistent best practices across the department. We agree that DOD has the opportunity to leverage its ongoing efforts as it works to implement our recommendations. By incorporating our recommendations into those efforts, DOD will be better positioned to determine whether its actions are improving service acquisition. DOD also provided technical comments, which were incorporated as appropriate. We are sending copies of this report to the Secretary of Defense; the Secretaries of the Army, Air Force, and the Navy; the Principal Deputy Under Secretary of Defense for Acquisition, Technology, and Logistics; and interested congressional committees. This report will also be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or by e-mail at dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Staff who made key contributions to this report are listed in appendix IV. In 2001, Congress required the Secretary of Defense to implement a management structure for the acquisition of services under section 2330, title 10, United States Code (U.S.C.). This provision requires, among other things, the Department of Defense (DOD) to develop a process for approving individual service acquisitions based on dollar thresholds and other criteria to ensure that DOD acquires services by means that are in the government’s best interest and managed in compliance with applicable statutory requirements. Under DOD’s initial May 2002 guidance for implementing the required management structure and service acquisition approval process, the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) was to review all proposed service acquisitions with an estimated value of $2 billion or more. The military departments and other defense components were to review service acquisitions below that threshold. The military departments each subsequently developed their own service acquisition approval processes that had several elements in common. Chief among these elements was the requirement that acquisition strategies be reviewed and approved by senior officials before contracts are awarded. Acquisition strategies to be reviewed were to include, among other things, information on contract requirements, anticipated risks, and business arrangements. Once acquisition strategies were approved, DOD contracting offices may continue the acquisition process, including soliciting bids for proposed work and awarding contracts. In January 2006, Congress amended 10 U.S.C. § 2330 to include additional requirements for DOD’s management of the acquisition of services. The amendment requires, among other things, that the senior officials responsible for management of acquisition of contract services assign responsibility for the review and approval of procurements based on estimated value of the acquisition. Senior officials within DOD are identified as USD(AT&L) and the service acquisition executives of the military departments. In response to these requirements, USD(AT&L) issued an October 2006 memorandum to update its 2002 acquisition of services policy. The revised policy identifies categories of service acquisitions, based on dollar thresholds and related roles and responsibilities within USD(AT&L) and the military departments. The policy requires all proposed service acquisitions with a value estimated at more than $1 billion be referred to USD(AT&L) and formally reviewed at the discretion of USD(AT&L). Acquisitions with a value estimated under that threshold are subject to military department acquisition approval reviews. USD(AT&L)’s 2006 acquisition of services policy was incorporated into Enclosure 9 of DOD’s 5000.02 acquisition instruction. In 2010, USD(AT&L) required that each of the military departments establish senior managers to be responsible for the governance in planning, execution, strategic sourcing, and management of service contracts. Additionally, these senior managers are to review service acquisitions valued at $10 million but less than $250 million. USD(AT&L) expects to issue a stand-alone instruction in 2014 for service acquisition policy to replace Enclosure 9 of DOD Instruction 5000.02. See table 2 for a summary of service acquisition review thresholds and approval authorities. The 2006 amendments to 10 U.S.C. § 2330 require DOD to take a number of other actions. For example, DOD is to develop service acquisition policies, guidance, and best practices; appoint full-time commodity managers for key categories of services; and ensure competitive procedures and performance-based contracting be used to the maximum extent practicable. In table 3, we summarize the actions that DOD took in response to the requirements in 10 U.S.C. § 2330. To do so, we collected USD(AT&L) and each military department’s self- reported information using a data collection template; corroborated reported actions with related documentation when available; and conducted interviews with knowledgeable agency officials to clarify responses. We did not evaluate the appropriateness or sufficiency of any actions taken or planned by DOD. Section 802 of the National Defense Authorization Act (NDAA) for Fiscal Year 2010 required the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) to direct the Defense Science Board (DSB) to independently assess improvements to the Department of Defense’s (DOD) acquisition and oversight of services. The resulting March 2011 DSB report, “Improvements to Services Contracting,” contained 20 recommendations aimed at improving DOD’s contracting for services. These recommendations focused on developing new policies and processes to strengthen management and oversight of services contracting, designating roles and leadership responsibilities, and strengthening the skills and capabilities of personnel involved in services contracting, including those in contingency environments. Subsequently, section 807 of the NDAA for Fiscal Year 2012 required USD(AT&L) to develop a plan, by June 28, 2012, to implement the DSB recommendations. The plan was to address, to the extent USD(AT&L) deemed appropriate, eight different elements most of which align with the DSB recommendations. USD(AT&L) officials told us they did not develop a specific plan to address the section 807 requirement, but that the April 2013 Better Buying Power Initiative memorandum addresses seven of the eight elements. In reviewing the memorandum, we also found that it reflects actions to address all of the elements except the one pertaining to training and exercises during contingency operations. USD(AT&L) also identified 23 different actions it has taken or plans to take that officials regard as addressing all of the elements the plan was to include, a number which pre-date the April 2013 Better Buying Power Initiative memorandum. Table 4 provides a summary of the actions USD(AT&L) reported as addressing each of the eight section 807 elements. To determine if USD(AT&L) has taken or planned actions to address the elements in section 807, we collected USD(AT&L)’s self-reported information using a data collection template, corroborated reported actions with related documentation when available, and conducted interviews with knowledgeable USD(AT&L), military department, and Defense Acquisition University officials to clarify responses. We did not evaluate the appropriateness or sufficiency of any actions taken or planned by USD(AT&L). In addition to the contact name above, the following staff members made key contributions to this report: Johana R. Ayers; Helena Brink, Burns Chamberlain Eckert, Danielle Greene, Kristine Hassinger; Justin Jaynes; and Roxanna Sun.

Summary: In fiscal year 2012, DOD obligated more than $186 billion for contracted services, making it the federal governments largest buyer of services. GAOs prior work found that DODs use of contracted services has been the result of thousands of individual decisions, not strategic planning across the department. Over the years, Congress has legislated a number of requirements to improve DODs service acquisitions. For example, Congress required DOD to implement a service acquisition management structure, approval process, and policies. Congress also directed DOD to develop a plan to implement the Defense Science Boards recommendations for improving service acquisition. The National Defense Authorization Act for Fiscal Year 2012 mandated that GAO report on DODs actions to improve service acquisition and management. GAO examined (1) the actions DOD has taken to respond to legislative requirements and (2) how DOD determines the effects of its actions to improve service acquisition. GAO reviewed documentation and interviewed DOD officials on the actions taken in response to the legislative requirements. GAO also assessed whether DOD addressed key factors, including establishing goals and metrics, to help it determine if it has improved service acquisition. Over the last decade, the Department of Defense (DOD) has taken several actions to address legislative requirements to improve the acquisition and management of services. In 2001, as amended in 2006, Congress required DOD to implement a management structure for the acquisition of services. In response, DOD implemented such a structure and service acquisition review and approval process. Recently, DOD also established new positions within its management structure, including senior managers within the office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) and the military departments, to oversee and coordinate service acquisition. With a management structure and review process in place, USD(AT&L) is focusing on efforts to improve the process for how requirements for individual service acquisitions are developed and enhancing training to respond to several legislative directives. USD(AT&L) also created its Acquisition of Services Functional Integrated Product Team, in part, to determine how to address legislative requirements to provide training for personnel acquiring services. USD(AT&L) did not develop a plan to implement the Defense Science Board recommendations to improve service acquisition but identified 23 different actions, including its Better Buying Power Initiative, it has planned or taken that officials regard as addressing what the plan was to include. For example, USD(AT&L) is updating its guidance on using incentives to improve contractor performance, which addresses one of the elements that was to be in the plan. While DOD has taken a number of actions that address legislative requirements, DOD is not yet positioned to determine what effects these actions have had on improving service acquisition. Specifically, USD(AT&L) has not identified specific goals and associated metrics that would enable it to assess progress toward achieving those goals. USD(AT&L) has identified improving service acquisition as a priority but has not defined a desired end state for its actions or the measurable characteristics that would embody achieving such a goal. It is challenged in defining a desired end state for its actions, in part, because it has not determined the current status of service acquisition in terms of the volume, type, location, and trends. DOD is taking steps to improve its contract and financial systems to obtain such data, but these efforts will not be complete until at least 2014. Further, DOD has not established departmentwide metrics to assess its progress in improving service acquisition but has acknowledged the need to do so, which officials described as challenging. Nevertheless, despite the challenges in doing so, it is not impossible. For example, DOD has agreed to set goals for the amount of spending managed through strategically sourced acquisitions, link strategic sourcing to its Better Buying Power Initiative, and establish metrics, such as utilization rates, to track progress toward these goals. However, DOD is not fully leveraging the command-level assessments, feedback from the military departments, and other ongoing efforts it relies on to gauge the effects of its actions to improve service acquisition. By using its budget and spending data and leveraging these efforts, DOD could develop baseline data and identify trends over time, enabling it to develop measurable goals and gain more insight into whether its actions are improving service acquisition. Until then, DOD will continue to be in a position where it does not know whether its actions are sufficient to achieve desired outcomes. GAO recommends that DOD establish baseline data, specific goals for improving service acquisition, and associated metrics to assess its progress. DOD concurred with the three recommendations.