Federal agencies spent more than $235 billion in fiscal year 2001 to buy goods and services ranging from weapon systems and medical equipment to information technology services and the operation of government facilities. This is an 11 percent increase over the amount spent in 1997. This growth is expected to continue as federal agencies address emerging threats and acquire enhanced information technology. The significance of contracting in the federal government is reflected by the sheer magnitude and the degree to which contracting consumes agencies’ discretionary resources. Overall, contracting for goods and services accounted for about 24 percent of the government’s discretionary resources in fiscal year 2001. However, contract spending consumed between 34 percent and 73 percent of the discretionary resources available to the four largest acquisition spending federal agencies. Federal contracting increased by 11 percent during the 5-year period we studied, from about $213 billion in fiscal year 1997 to over $235 billion in fiscal year 2001. As shown in figure 1, DOD is the largest agency in terms of contracting dollars spent, accounting for about two-thirds of the government’s total spending on goods and services. In fiscal year 2001, DOD contracted for more than $152.6 billion of goods and services, or more than twice the amount spent by the next nine largest federal agencies combined. The three military departments—the Air Force, Army, and Navy—individually spend more than the largest civilian agency, the Department of Energy (DOE). From fiscal years 1997 through 2001, purchases of goods increased by 17 percent. This was due in large measure to DOD’s increased spending on weapon systems and other defense-related items. Overall, however, agencies continued to purchase far more services than goods. Purchases of services grew by about 11 percent, as agencies modernized their information systems and obtained various professional, administrative, and management support services. Nine of the 10 agencies we reviewed increased their spending on services. The other agency, the National Aeronautics and Space Administration (NASA), experienced a 4 percent decrease, reflecting significant reductions in spending for research and development and for professional, administrative, and management support services. As shown in figure 2, agencies varied in the degree to which they contracted for services. For example, DOE spent more than 98 percent of its contract dollars on services in fiscal year 2001, while the Department of Agriculture’s (USDA) spending for services accounted for only about 30 percent of its acquisition spending. The degree to which individual agencies contract for services underscores the importance of ensuring that service acquisitions are managed properly. For example, we noted in May 2001 that some service procurements were not being conducted efficiently, putting taxpayer dollars at risk. Last year, we reported that leading commercial companies had taken a strategic approach to acquiring services, which in turn resulted in significant cost savings and service improvements. Taking a strategic approach involves a range of activities—from developing a better picture of what the company is spending on services, to taking an enterprisewide approach to procuring services, to developing new ways of doing business. Based in part on our report, the National Defense Authorization Act For Fiscal Year 2002 required that DOD develop enhanced data collection and management processes for services acquisitions. Additionally, as will be discussed in greater detail in the next section, Congress and the administration are encouraging the use of performance-based approaches to acquiring services as a way of improving the acquisition of services. Agencies rely to various degrees on private vendors to provide the goods and services needed to carry out their missions and support their operations. Overall, contracting for goods and services accounted for 24 percent of the government’s discretionary resources in fiscal year 2001. For four agencies included in our review—DOE, NASA, GSA, and DOD— the acquisition function is central to accomplishing their mission-related goals. About 76 percent of DOE’s funds, for example, are spent on the management and operation of over 30 government-owned laboratories and other nuclear facilities. NASA contracts account for about 72 percent of its discretionary budget resources, and one of GSA’s primary missions is to help federal agencies procure goods and services. However, spending on contracts accounted for less than 23 percent at each of the other six agencies in our review, as shown in figure 3. Further growth in contract spending, at least in the short term, is likely given the President’s request for additional funds for defense and homeland security, agencies’ plans to update their information technology systems, and other factors. For example, the President’s fiscal year 2004 budget request reflects steady increases in DOD’s discretionary budget authority, as well as increases in the budgets of other agencies involved in homeland security. Additionally, the President’s budget request reflects increased investment in information technology both for new systems and for related support. Further, the administration’s emphasis on competitive sourcing could increase agencies’ reliance on services provided by the private sector. Competitive sourcing in the federal government is conducted under guidance provided in OMB Circular A-76, which outlines procedures for determining whether to perform a commercial activity with government employees or by contract. Additionally, the circular provides policy for standardizing how and when an agency competes a commercial activity with the private sector. OMB’s current 2-year goal is to compete 15 percent of the federal government’s commercial-type positions. This effort could result in significant increases in the number of service contracts, given that in the past the private sector has won over half of the competitions. The past decade has seen the emergence of several procurement trends that have changed the way the government acquires goods and services, as Congress and the administration have sought ways to simplify the acquisition process, shorten procurement times, reduce administrative burdens and costs, and improve acquisition outcomes. In particular, federal agencies are increasingly relying on contracts awarded by other federal agencies to obtain goods and services and have turned to using government purchase cards for many of their low dollar value procurements. The growth in these procurement methods has been dramatic, and is apparent in nearly every agency we reviewed. Additionally, agencies have begun to increase their use of commercial contracting methods and performance- based acquisition approaches. As we have reported previously, taking full advantage of these methods and approaches requires that agencies have adequate guidance and training, a strong internal control environment, and data that can be used by agency management to make informed decisions. Our work at selected agencies has found that these conditions have not always been present, thereby contributing to agencies missing opportunities to achieve savings, reduce administrative burdens, and improve acquisition outcomes. Federal agencies are increasingly using contracts and acquisition services offered by other agencies, a fact that is most notably demonstrated in the growth of GSA’s Federal Supply Schedule and governmentwide acquisition contracts (GWAC). These interagency contracts are being used in a variety of situations, from those in which a single agency provides limited contracting assistance to a more comprehensive approach in which the provider agency’s contracting officer handles all aspects of the procurement. Agencies charge users of these contracts a fee to cover administrative expenses. GSA’s schedule program enables federal agencies to quickly acquire goods and services, thereby helping them to, among other objectives, reduce lead times and lower administrative costs. GSA does this by awarding contracts to vendors and making these contracts available for use by other agencies. GWACs are intended to facilitate purchases of information technology-related products and services, such as network maintenance and technical support, systems engineering, and integration services. As shown in figure 4, sales under the schedule program have more than tripled over the past 5 years, increasing from $4.3 billion in fiscal year 1997 to about $14.4 billion in fiscal year 2001. Agency officials at each of the agencies we reviewed reported increases in their use of the schedules program over the past 5 years, driven largely by increased purchases of information technology and professional, administrative, and management support services. As shown in table 1, DOD and GSA, the largest users of the schedules program, accounted for about 75 percent of schedule sales in fiscal year 2001. GSA’s increased share is largely attributable to the growth of GSA’s Federal Technology Service, which places orders under the schedule for information technology services and equipment on behalf of other federal agencies. However, orders placed by the Federal Technology Service are counted as spending by GSA, rather than as spending by the federal agency that will ultimately receive the service or equipment. Agency officials also reported that their use of GWACs increased considerably over the 5-year period between fiscal years 1997 and 2001. For example, USDA reported an increase from about $5.1 million to $44 million, and Treasury reported an increase from $92 million to $155 million. Officials at the other eight agencies we reviewed reported that they also increased their use of GWACs; however, they could not provide detailed GWAC information because this spending was not an integral part of their management information systems. While GSA officials indicated that they have not modified the FPDS to collect specific information on GWAC spending, several officials at other agencies stated that they either are collecting or will begin to collect additional information on their agencies’ GWAC use. While use of these interagency contracting methods can allow agencies to meet their needs quickly, our past work has shown that agencies are not adequately adhering to guidelines on competition. Further, recent agency Inspector General reports noted that DOD, VA, and NASA personnel did not consistently follow procedures intended to promote competition or ensure fair and reasonable prices when using these interagency contract methods to acquire information technology services, medical equipment, or research and development projects. Purchase card spending has increased significantly governmentwide. This program provides federal agencies a low-cost and efficient means for quickly obtaining goods and services directly from vendors. Under the Federal Acquisition Regulation, the commercial purchase card is now the preferred method of paying for micropurchases. The purchase card may also be authorized to be used in greater dollar amounts and may be used to make payments under existing contracts. As figure 5 shows, governmentwide purchase card use increased from $5.3 billion in fiscal year 1997 to $13.8 billion in fiscal year 2001—a 160 percent rise. Increases in purchase card use in the agencies we reviewed ranged from 45 percent to 344 percent. As figure 6 shows, agencies used purchase cards to varying degrees. DOD was the largest user of purchase cards, spending about $6.1 billion in fiscal year 2001. VA was the largest civilian agency user of the purchase card program, spending about $3.8 billion. VA officials noted that due to VA’s organizational structure and its continuous need for disposable medical and surgical supplies, purchase cards are one of VA’s key procurement techniques and are used extensively as a payment mechanism. During the past 2 years, we found that significant internal control weaknesses in several agency purchase card programs allowed cardholders to make fraudulent, improper, abusive, or questionable purchases that resulted in lost, missing, or misused government property. Agencies are responding to the recommendations that we and others have made regarding internal control weaknesses. For example, the Navy has reduced the number of cardholders by more than 50 percent, from 59,000 in June 2001 to 25,000 by March 2002, thus improving the likelihood of effective program management. Additionally, DOD has begun implementing new training and approval processes. For example, DOD implemented automated controls during fiscal year 2002 to help with monitoring credit limits, cardholder reconciliation, and approving officials’ review of monthly statements. Further, OMB requires that agencies provide quarterly reports on their efforts to improve the management oversight of government-issued purchase and travel cards. In recent years, there has been a significant increase in agencies’ use of streamlined procedures to acquire commercial items. Many procurement reform advocates have recommended that federal agencies purchase commercial items to save money and reduce acquisition time, rather than pay companies to develop unique items for the government’s use. The Federal Acquisition Streamlining Act established a preference for the acquisition of commercial items. Because commercial items are subject to competitive market forces, they may be acquired using streamlined solicitation and evaluation procedures generally provided for under part 12 of the Federal Acquisition Regulation (FAR). For example, contracting officers may reduce the time needed to solicit bids and award contracts by combining certain steps in the solicitation process, using streamlined evaluation techniques, and eliminating certain administrative requirements. In fiscal year 2001, the purchase of commercial items using FAR part 12 procedures accounted for 19 percent of the spending for goods and services by federal agencies, up from 9 percent 5 years earlier. From fiscal year 1997 through fiscal year 2001, governmentwide use of part 12 procedures increased by 148 percent. As shown in table 2, 9 of the 10 agencies in our review increased their use of part 12 procedures by at least 100 percent. Significant growth in service contracts has led Congress and the administration to encourage greater use of performance-based service contracting to achieve greater cost savings and better outcomes. Under performance-based approaches, the contracting agency specifies the outcome or result it desires and lets the contractor decide how best to achieve the desired outcome. Performance-based contracts offer significant benefits, such as encouraging contractors to innovate and find cost-effective ways of delivering services. In fiscal year 2001, agencies reported that 24 percent of their eligible service contracts, by dollar value, were considered performance based. There was wide variation in the extent to which agencies used performance-based contracts. As figure 7 shows, 3 of the 10 agencies in our review fell short of OMB’s goal that 10 percent of their eligible service contracts be performance based in fiscal year 2001. We recently found that some agencies achieved only mixed success in incorporating four basic performance-based attributes into their contracts. These attributes include describing desired outcomes rather than how the services should be performed, setting measurable performance standards, describing how the contractor’s performance will be evaluated, and establishing positive and negative incentives, as appropriate. Our review raised questions as to whether agencies have an adequate understanding of performance-based contracting and how to take full advantage of this approach. Agency officials themselves pointed to the need for better guidance on performance-based contracting and better criteria for identifying which contracts should be called “performance based.” In response to our recommendations, the Office of Federal Procurement Policy is developing new guidance to help agencies improve their use of performance-based contracting. Over the last decade, the federal acquisition workforce has had to adapt to changes in staffing levels, workloads, and the need for new skill sets. Procurement reforms have placed unprecedented demands on the acquisition workforce. For example, contracting specialists are required to have a greater knowledge of market conditions, industry trends, and the technical details of the commodities and services they procure. Governmentwide data indicate that in fiscal year 2001 both the number of acquisition workforce employees and the number of contract actions declined slightly from fiscal year 1997 levels. However, the extent to which these changes occurred varied from agency to agency. Ensuring that agencies will have the right people with the right skills to successfully meet the increasingly complex demands expected in the future has become a priority at most of the agencies we reviewed. While agencies still face many hurdles, our recent work has found that most agencies have taken steps to address their strategic human capital planning challenges. As of September 2001, the federal acquisition workforce included about 103,000 individuals, reflecting an overall 5 percent decline from 1997 levels. As shown in table 3, changes in the acquisition workforce varied by agency; for example, 6 of the 10 agencies we reviewed lost between 2 percent and 9 percent of their acquisition workforces, while the other 4 agencies increased their acquisition workforces by between 8 percent and 11 percent. DOD experienced the largest personnel decrease in its acquisition workforce, declining by 9 percent to just over 68,500 personnel. Changes in the acquisition workforce have been accompanied by changes in the types of actions being managed. The total number of contract actions processed in fiscal year 2001 decreased 6 percent from fiscal year 1997 levels. As shown in table 3, our analysis indicates that while most agencies are processing fewer smaller actions—those valued at less than $25,000— most agencies are also managing an increased number of larger actions. Agencies have made far greater use of purchase cards for making their smaller dollar purchases, which accounts for the declining rate of smaller dollar actions. While we have not evaluated how these changes have affected federal agencies as a whole, the DOD Inspector General noted in 2000 that the increased contract workload was adversely affecting contract oversight by creating imbalances and backlogs in closing out completed contracts. The changes in staffing levels and workload come at a time when the role of the government’s acquisition staff is changing considerably. Federal agency officials expect their acquisition personnel to analyze business problems and help develop strategies in the early stages of the acquisition process. Industry and government experts recognize that a key to making a successful transformation toward a more sophisticated acquisition environment is having the right people with the right skills. To accomplish this, leading public organizations in the United States and abroad have found that strategic human capital management must be the centerpiece of any serious change management initiative. Strategic management of human capital is a key governmentwide initiative in the President’s Management Agenda. One aspect of strategic human capital planning is succession planning, where an agency identifies its future needs in terms of workforce skills and numbers. Our prior work has shown that when workforce reductions do not consider future needs—such as a staff reduction at DOD during the 1990s—the result is a workforce that is not balanced with regard to experience and skill sets. The need for planning is underscored by the fact that, similar to human capital challenges across a variety of occupation categories, all agencies face the prospect of losing many of their skilled acquisition personnel over the next 5 years. As shown in figure 8, about 38 percent of acquisition personnel governmentwide are either already eligible to retire or will be eligible by September 30, 2007. At DOD and DOE—the two largest contracting agencies in our review—39 percent of the acquisition workforce will be eligible to retire by fiscal year 2008; at the other eight agencies, between 30 to 36 percent of their current workforces will be eligible to retire. Our recent reviews of how agencies are addressing their future acquisition workforce needs found that all of the agencies we reviewed have made progress. For example, the agencies have either published or drafted human capital strategic plans for their overall workforces or for their acquisition workforces, and some are revamping training, recruitment, and retention programs to address future workforce needs. However, these agencies have encountered challenges, in part due to shifting priorities, missions, and budgets that make it difficult to predict with any certainty the specific skills and competencies their acquisition workforces will need. Further, many agencies simply lack good data on their workforces, such as size and location, knowledge and skills, and attrition and retirement rates. This information is critical to mapping out the current condition of the workforce and deciding what needs to be done to ensure that each agency has the right mix of skills and talent for the future. Effectively managing federal contracts is essential to ensuring that the more than $235 billion spent annually through contracts provides high- quality goods and services that meet the users’ needs in a timely fashion. While managing spending effectively is always a key management responsibility, the need for effective management is more acute in agencies that rely heavily on acquiring goods and services to carry out their missions or support their operations. Changes in what the government buys, its contracting approaches and methods, and its acquisition workforce combine to create a dynamic acquisition environment. The purpose of introducing or expanding streamlined purchase methods, such as GWACs, purchase cards, and supply schedules, was to enhance contracting efficiency, reduce administrative burdens, lower transaction costs, and shorten procurement times. However, our work has found that the lack of proper training, guidance, and internal controls can increase an agency’s procurement risk and lead to reduced public confidence. While agencies are taking corrective actions to address these concerns, many actions remain in the early stages of implementation. We requested comments on a draft of this report from each of the agencies we reviewed, as well as from the Office of Federal Procurement Policy. Each agency provided comments, generally via electronic mail. Agency officials concurred with our analyses and provided technical comments, which we incorporated as appropriate. Some agencies noted that their internal data systems contained procurement data that differed from that contained in the Federal Procurement Data System or contained workforce data that differed from that reflected in the Central Personnel Data File. For example, DOE and VA officials noted that their systems indicated higher use of performance- based contracting than the data contained in Federal Procurement Data System. We have noted these differences where appropriate in the report. Additionally, HHS and DOT officials noted that their definitions of their acquisition workforces differed from what we used. Because there is no commonly accepted definition of the acquisition workforce, we elected to use a consistent definition, as discussed in our scope and methodology, to better enable cross-agency comparisons. We are sending copies of this report to the Director, Office of Management and Budget; the Administrator, Office of Federal Procurement Policy; the Secretaries of Agriculture, Defense, Energy, Health and Human Services, Transportation, Treasury, and Veterans Affairs; the Administrator of General Services; the Administrator, National Aeronautics and Space Administration; the Attorney General; and interested congressional committees. We will also provide copies to others on request. This report will also be available at no charge on GAO’s Web site at http://www.gao.gov. Major contributors to this report were Don Bumgardner, Chad Holmes, Kevin Heinz, Robert L. Ackley, Julia Kennon, Gary Middleton, John W. Mingus, Jr., John Van Schaik, Greg Wilmoth, and Suzanne Melancon. If you have any questions about this report, please contact me at (202) 512-4841 or Timothy J. DiNapoli at (202) 512-3665. To identify spending, procurement methods, and acquisition workforce trends, we judgmentally selected 15 data elements. These elements are not intended to be all-inclusive or exhaustive; rather, they reflect data relevant to key issues and trends identified in prior GAO reports or that provide basic information valuable to understanding an agency’s procurement function and approach. We reviewed these elements with senior procurement officials at each of the agencies we reviewed; these officials generally agreed that such elements provided useful and relevant information for gauging their agencies’ procurement activities. We obtained data on these elements from the General Services Administration’s Federal Procurement Data Center (FPDC), agency officials, and the Office of Management and Budget (OMB). FPDC administers the Federal Procurement Data System (FPDS), which is the federal government’s central database on contracting actions. FPDS contains detailed information on contracting actions over $25,000, including contract type, amount obligated, the types of goods or services purchased, and various vendor characteristics. FPDS contains less detailed information on actions of $25,000 or less. Because FPDC relies on federal agencies for procurement information, these data are only as reliable, accurate, and complete as the information reported by the agencies. We did not independently verify the information contained in the database. However, in 1998, FPDC conducted an accuracy audit, which showed that the average rate of accurate reporting in the FPDS database was 96 percent. GAO used data from FPDS that covered the 5-year period fiscal year 1997 through fiscal year 2001, the last year for which complete data were available. We subsequently adjusted the data provided by DOD to FPDS to correct for a fiscal year 2001 reporting error. We obtained additional information from agency procurement officials for certain data elements that were not readily available from FPDS, such as their agency’s use of governmentwide acquisition contracts. Additionally, we obtained data from the Federal Aviation Administration, which is not required to submit information to the FPDC. We reflected this data in the governmentwide analyses, as well as in the Department of Transportation’s profile. We also asked each agency to provide a description of its key procurement initiatives undertaken during the past 2 years. We did not independently verify the information provided or assess the degree to which agency-reported initiatives achieved their objectives. We collected information on each agency’s discretionary resources from the Office of Management and Budget’s MAX Budget Information System, which is used to collect, validate, analyze, model, and publish federal budget information. Discretionary budget resources reflect the budget amount that the agency is appropriated for a current fiscal year plus the budget authority that the agency carries over from prior fiscal years. Unless otherwise noted, all figures were adjusted for inflation and represent constant fiscal year 2001 dollars. To determine trends in the acquisition workforce, we analyzed data obtained from the Office of Personnel Management’s Central Personnel Data File (CPDF), which is the governmentwide human resources reporting system. The data we used reflect information on permanent employees reported to the CPDF as of September 30 of the particular year. The CPDF relies on agencies to ensure that the data are timely, accurate, complete, and edited in accordance with OPM standards. There is no standard definition of what constitutes an agency’s acquisition workforce, and agencies have defined their workforces in various ways. To provide consistency and comparability among agencies, we defined the acquisition workforce as those individuals serving in the following 14 occupation series: 1. GS-246: Industrial relations 2. GS-346: Logistics management 3. GS-511: Auditors 4. GS-1101: General business 5. GS-1102: Contracting series 6. GS-1103: Industrial property manager 7. GS-1104: Property disposal 8. GS-1105: Purchasing officer 9. GS-1106: Procurement clerical support 10. GS-1150: Industrial specialists 11. GS-1152: Production control 12. GS-1910: Quality assurance 13. GS-2003: Supply management 14. GS-2010: Inventory management Table 4 provides additional information on the data elements we included in each agency’s profile. We reviewed each agency profile with senior agency procurement officials and incorporated their comments where appropriate. We conducted this work between September 2002 and March 2003 in accordance with generally accepted government auditing standards. Mission: To support and defend the Constitution of the United States; provide for the common defense of the nation, its citizens, and its allies; and protect and advance U.S. interests around the world. The following departments combine for the majority of Department of Defense’s (DOD) fiscal year 2001 total discretionary budget resources: The Army accounted for 25 percent. The Air Force accounted for 23 percent. The Navy accounted for 21 percent. Other defense agencies account for 31 percent. DOD’s discretionary resources increased by 10 percent from fiscal year 1997 through fiscal year 2001 and totaled $446.3 billion in fiscal year 2001. Over the 5-year period, the proportion of DOD’s discretionary resources spent under contracts remained stable at 34 percent. DOD’s purchases of goods have increased by 23 percent and totaled $66.1 billion in fiscal year 2001. Purchases of services for contracts over $25,000 increased by 7 percent over the 5-year period, accounting for more than 54 percent of DOD’s contracts, or about $77.0 billion, in fiscal year 2001. Over the 5-year period, DOD’s service spending was driven by increased spending for information technology (46 percent); professional, administrative, and management support (21 percent); and medical services (22 percent). Although slightly declining since fiscal year 1997, research and development contracts accounted for about 28 percent, or $21.5 billion, of DOD’s total service spending in fiscal year 2001. Over the 5-year period, spending changed on the following goods: ships (128 percent) and aircraft DOD spent about $143.1 billion on contracts over $25,000 in fiscal year 2001, with firm fixed-price and other kinds of fixed-price contracts accounting for over 63 percent of DOD’s contract dollars. Since fiscal year 1997, the amount of contract dollars awarded under competitive procedures was about 58 percent of DOD’s total contract dollars over $25,000. Purchase card use has increased by 169 percent over the 5-year period, totaling $6.1 billion in fiscal year 2001. In fiscal year 2001, DOD authorized the use of 230,646 purchase cards. In fiscal year 2001, about 23 percent of DOD’s eligible contracts were performance based. DOD’s total workforce and acquisition workforce have declined by 9 percent since fiscal year 1997, continuing a decade-long decline that began in the early 1990s. DOD’s total workforce decreased to about 629,000 and the acquisition workforce decreased to about 69,000 in fiscal year 2001. Over 90 percent of DOD’s acquisition workforce has at least 10 years of federal service; by fiscal year 2008, 39 percent will be eligible to retire. Improve the credibility and effectiveness of the acquisition and logistics support process. Change budgeting, procurement, program management, and logistics processes and policies to support implementation of evolutionary acquisition and reduce cycle time. Improve logistics responsiveness and supply chain integration to make DOD’s logistics system Implement reforms to increase efficiency and effectiveness in the acquisition of services and improve support of socioeconomic programs. Revitalize the quality and morale of the DOD acquisition workforce. Improve training and education by building a new learning environment designed to empower each DOD acquisition workforce member with more control over learning needs. Establish a life-cycle workforce management approach to the civilian workforce, including human capital Use new outreach and communication strategies to create better awareness and knowledge of acquisition Improve the health of the defense industrial base. Establish a strategic approach to adopt commercial acquisition processes. Sourcing and Acquisition: Challenges Facing the Department of Defense. GAO-03-574T. Washington, D.C.: March 19, 2003. Major Management Challenges and Program Risks: Department of Defense. GAO-03-98. Washington, D.C.: January 2003. Purchase Cards: Control Weaknesses Leave Army Vulnerable to Fraud, Waste, and Abuse. GAO-02-732. Washington, D.C.: June 27, 2002. Acquisition Workforce: Department of Defense’s Plans to Address Workforce Size and Structure Challenges. GAO-02-630. Washington, D.C.: April 30, 2002. Contract Management: DOD Needs Better Guidance on Granting Waivers for Certified Cost or Pricing Data. GAO-02-502. Washington, D.C.: April 22, 2002. Purchase Cards: Continued Control Weaknesses Leave Two Navy Units Vulnerable to Fraud and Abuse. GAO-02-506T. Washington, D.C.: March 13, 2002. Best Practices: Taking A Strategic Approach Could Improve DOD’s Acquisition of Services. GAO-02-230. Washington, D.C.: January 18, 2002. DOD Systems Modernization: Continued Investment in the Standard Procurement System Has Not Been Justified. GAO-01-682. Washington, D.C.: July 31, 2001. Contract Management: Not Following Procedures Undermines Best Pricing Under GSA’s Schedule. GAO-01-125. Washington, D.C.: November 28, 2000. Acquisition Reform: DOD’s Guidance on Using Section 845 Agreements Could Be Improved. GAO/NSIAD-00-33. Washington, D.C.: April 7, 2000. Contract Management: Few Competing Proposals for Large DOD Information Technology Orders. GAO/NSIAD-00-56. Washington, D.C.: March 20, 2000. Report Number D-2002-075—Controls Over the DOD Purchase Card Program, March 29, 2002. Report Number D-2000-100—Contracts for Professional, Administrative, and Management Support Services, March 10, 2000. Report Number D-2000-088—DOD Acquisition Workforce Reduction Trends and Impacts, February 29, 2000. The Air Force’s total discretionary budget resources, after declining between fiscal years 1997 and 1999, increased by 8 percent between fiscal years 2000 and 2001 and totaled $101.1 billion in fiscal year 2001. Over the 5-year period, the proportion of the Air Force’s discretionary resources spent through contracts increased from 36 percent to about 40 percent. Since fiscal year 1997, Air Force spending has been driven by a 16 percent increase in the purchases of goods. In fiscal year 2001, service contracts remained steady at $20.9 billion, or about 53 percent of Air Force’s contracts over $25,000. Research and development contracts decreased by 7 percent during the 5-year period, totaling $8.9 billion in The Air Force increased its combined purchases of aircraft components and related parts by 64 percent— spending about $13.0 billion on these items in fiscal year 2001. In addition, the Air Force changed its spending in other categories: information technology services (94 percent); aircraft engines and related parts (71 percent); professional, administrative, and management support (15 percent); and repair of equipment (-41 percent). The Air Force spent about $40 billion through contracts over $25,000 in fiscal year 2001, with firm fixed-price and other kinds of fixed-price contracts accounting for about 62 percent of the Air Force’s total contract dollars. About 24 percent of the Air Force’s eligible service contracts are performance based. Purchase card spending increased by almost 200 percent over the 5-year period. In fiscal year 2001, the Air Force authorized the use of 79,762 purchase cards. The Air Force’s significant increase in its use of the federal supply schedule has been driven by purchases The Air Force’s total workforce and acquisition workforce decreased by 9 percent from fiscal year 1999 through fiscal year 2001. By fiscal year 2008, about 38 percent of the current acquisition workforce will be eligible to retire. The Army’s total discretionary budget resources decreased 4 percent from fiscal year 1997 to fiscal year 2001 and totaled $113.1 billion in fiscal year 2001. The amount spent through contracts accounted for more than one-third of the Army’s discretionary resources in fiscal year 2001. Spending on goods increased by about 29 percent over fiscal year 1997 levels. In particular, the Army nearly tripled its spending on aircraft and increased its spending on ground vehicles by 66 percent. Spending on services increased by about 15 percent over the 1997 level, driven by a 55 percent increase in spending for professional, administrative, and management support contracts. Such contracts now account for 16 percent of the Army’s service contract spending, up from less than 12 percent in fiscal year 1997. The Army’s spending for research and development increased by about 8 percent over fiscal year Of the $37 billion the Army spent on contracts over $25,000 in fiscal year 2001, $21.7 billion, or 59 percent, was spent using firm fixed-price contracts. Between fiscal years 1997 and 2001, purchase card use increased 139 percent, to $2.5 billion in fiscal year 2001. In fiscal year 2001, the Army authorized the use of 109,446 purchase cards. During the 5-year period, about 59 percent of the Army’s contract dollars were spent on competitively In fiscal year 2001, 25 percent of the Army’s service contracts were performance based. The Army’s use of the federal supply schedule program increased by more than 190 percent over the 5-year period. This increase was driven primarily by the increased purchases of services, which rose from about $604 million in fiscal year 1997 to over $1.7 billion in fiscal year 2001. From fiscal year 1997 through fiscal year 2001, the Army’s total workforce and acquisition workforce decreased by 6 and 7 percent, respectively. Throughout this period, the acquisition workforce accounted for about 8 percent of the total workforce. In fiscal year 2001, 61 percent of the acquisition workforce had 20 years or more of federal service, while 4 percent had fewer than 5 years of federal service. By fiscal year 2008, 40 percent of the current acquisition workforce will be eligible to retire. The Navy’s total discretionary budget resources increased 12 percent from fiscal year 1997 to fiscal year 2001 and totaled $95.3 billion in fiscal year 2001. The proportion of the Navy’s discretionary resources spent through contracts was about 45 percent in fiscal year 2001. From fiscal years 1997 through 2001, a 25 percent increase in spending for goods, coupled with a 6 percent decline in spending on services, resulted in the Navy spending nearly as much on goods as on services in fiscal year 2001. The principal causes of this shift were significant increases in spending on ships (up 133 percent) and decreased spending on research and development (down 17 percent). The Navy relies on a mix of fixed-price and cost-type contracts to achieve its mission. For example, in fiscal year 2001, firm fixed and other kinds of fixed-price contracts accounted for more than 53 percent of the Navy’s total contract dollars, while another 42 percent was spent under cost-type contracts. In fiscal year 2001, more than half of the Navy’s contract dollars were awarded under noncompeted contracts. Further, 16 percent of the Navy’s competitively awarded dollars were made on contracts in which only 1 offer was received. The Navy’s use of the federal supply schedule program increased by more than 227 percent over the 5-year period. This increase was driven primarily by the increased purchases of services, which rose from about $132 million in fiscal year 1997 to over $1.1 billion in fiscal year 2001. Purchase card use has increased by 185 percent over the 5-year period. In fiscal year 2001, the Navy spent about $1.8 billion with 27,926 purchase cards. About 15 percent of Navy’s eligible service contracts were considered performance based in Since fiscal year 1997, both the Navy’s total workforce and its acquisition workforce have declined by about 10 percent, to about 176,000 and 15,000, respectively. In fiscal year 2001, more than 60 percent of the Navy’s acquisition workforce had 20 years or more of service; conversely, only 11 percent had fewer than 10 years of service. By fiscal year 2008, about 40 percent of the Navy’s acquisition workforce will be eligible to retire. Mission: To support agriculture production by ensuring a safe, affordable, nutritious, and accessible food supply; caring for agricultural, forest, and range lands; supporting sound development of rural communities; providing economic opportunities for farm and rural residents; expanding global markets for agricultural and forest products and services; and working to reduce hunger in America and throughout the world. The following components account for the majority of the Department of Agriculture’s (USDA) fiscal year 2001 total discretionary budget resources: The Forest Service manages public lands in national forests and grasslands. In fiscal year 2001, the Forest Service accounted for 21 percent of USDA’s discretionary resources. Food and Nutrition Service provides better access to food and a more healthful diet through its food assistance programs and comprehensive nutrition education efforts. In fiscal year 2001, the Food and Nutrition Service accounted for 20 percent of USDA’s discretionary resources. Other key components, which combined to account for about 21 percent of USDA’s discretionary resources, include the Farm Service, the Rural Housing Service, and the Rural Development Service. USDA’s discretionary resources increased by 18 percent between fiscal years 1997 and 2001 and totaled $23.5 billion in fiscal year 2001. Over the 5-year period, the proportion of USDA’s discretionary resources spent through contracts increased from 14 percent to about 16 percent. About 70 percent of USDA’s contract spending went for purchases of goods, while about 30 percent was spent on services. For contracts valued over $25,000, spending on goods increased by 53 percent from fiscal year 1997 through fiscal year 2001. This increase was driven by purchases of food-related products and nonmetallic crude materials, such as cereal grains. Overall, purchases of food accounted for nearly half of USDA’s contract spending. Similarly, spending on services increased by 44 percent over the same period, primarily as a result of increased purchases of services related to natural resources and conservation and property maintenance and construction. Since fiscal year 1997, USDA’s spending has increased significantly in the following categories: natural resources and conservation (152 percent), nonmetallic crude materials (145 percent), construction (43 percent), and food (40 percent). USDA spent about $3.7 billion through contracts in fiscal year 2001, with firm fixed-price and other kinds of fixed-price contracts accounting for about 99 percent of USDA’s contract dollars. Purchase card spending between fiscal years 1997 and 2001 quadrupled, rising from $140.2 million to $564.2 million. In fiscal year 2001, USDA authorized the use of 22,865 purchase cards. Spending on commercial items using FAR part 12 procedures increased by about 93 percent from fiscal years 1997 through 1999, but decreased by 79 percent from fiscal years 1999 through 2001. USDA officials indicated that this decrease was a result of USDA reclassifying certain items as noncommercial. In fiscal year 2001, 93 percent of USDA’s contracts over $25,000 were competed. USDA’s total workforce in fiscal year 2001 was slightly higher than its fiscal year 1997 level. Over the same period, its acquisition workforce decreased by about 6 percent, to about 5,700 personnel. By fiscal year 2008, 29 percent of USDA’s current acquisition workforce will be eligible to retire. Purchase Card Oversight: To strengthen its oversight of purchase card transactions, USDA officials reported that they are: scanning the USDA Purchase Card Management System database for questionable transactions and requesting USDA agencies to justify these transactions as appropriate; issuing revised regulations to tighten card use and oversight procedures—for example, employees who fail to reconcile their accounts within 60 days will have their cards deactivated; and forming an interagency working group to define criteria for both automated alerts and preformatted reports for agency use in identifying questionable transactions. Performance-Based Service Contracting: USDA is emphasizing the use of performance-based service contracting procedures by using a monthly “report card,” which is furnished to senior management in each contracting activity’s headquarters. This report card addresses how well each USDA agency is doing in meeting established goals. In fiscal year 2002, USDA reported that more than 20 percent of its eligible service contracts were performance based, exceeding the governmentwide goal. Integrated Acquisition System: USDA is working to deploy its first corporate procurement automation system to support electronic requisitioning and contract document generation. The system is expected to interface with USDA’s corporate financial system and help improve the timeliness and accuracy of USDA’s financial statements. The system is currently undergoing pilot testing in locations within two USDA agencies. Workforce: To deal with the potential retirement of a large percentage of its skilled procurement workforce over the next few years, USDA is developing new regulations addressing classroom training, on-the-job experience, and education requirements for its acquisition workforce. USDA also recently added information on training resources and on-line classes to its procurement Web site’s home page. Major Management Challenges and Program Risks: Department of Agriculture. GAO-03-96. Washington, D.C.: January 2003. Mission: To foster a secure and reliable energy system that is environmentally and economically sustainable; to be a responsible steward of the nation’s nuclear weapons and nuclear materials; to clean up the department’s facilities; to lead in the physical sciences and advance the biological, environmental, and computational sciences; and to provide scientific instruments important to the Department of Energy (DOE). DOE groups its activities into three areas, which together comprised more than 90 percent of its fiscal year 2001 total discretionary budget resources. National Nuclear Security Administration (NNSA) maintains and enhances the safety, reliability, and performance of the U.S. nuclear weapons stockpile, including the ability to design, produce, and test weapons, to meet national security requirements. NNSA also engages in nonproliferation activities and the operation of Navy reactors. In fiscal year 2001, NNSA accounted for 35 percent of DOE’s discretionary resources. Energy Programs include nondefense environmental management, scientific research and development regarding renewable energy resources and nuclear energy, the remediation and maintenance of uranium facilities, and nuclear waste disposal. In fiscal year 2001, Energy Programs accounted for 31 percent of DOE’s discretionary resources. Environmental and other defense activities include defense-related environmental restoration and waste management, nuclear waste disposal, facilities closure projects, and environmental management privatization. In fiscal year 2001, these activities accounted for 29 percent of DOE’s discretionary resources. DOE’s discretionary resources rose by about 6 percent from fiscal year 1997 through fiscal year 2001 and totaled $25.5 billion in fiscal year 2001. DOE relies heavily on contracting to support its mission. For example, during the 5-year period, an average of 73 percent of its discretionary resources were spent on contracts. In fiscal year 2001, about 98 percent of DOE’s contracts over $25,000 were spent on services, of which three- quarters went to the management and operation of over 30 government-owned laboratories and nuclear facilities. DOE’s spending on natural resources and conservation services rose from $331.7 million in fiscal year 1997 to $1.35 billion in fiscal year 2001, a 306 percent increase. This increase was mostly driven by three large contracts for the cleanup, removal, and disposal of hazardous substances. DOE ranks as one of the largest agencies in research and development contracting, spending almost $1.1 billion in fiscal year 2001. DOE has historically relied on cost-type contracts as its primary contracting vehicle. In fiscal year 2001, $17.4 billion of the $18.6 billion—or 93 percent—that DOE spent on contracts over $25,000 was spent on cost-type contracts. Nearly all of DOE’s contracts for managing and operating its laboratories and facilities were cost-type. DOE continues to increase the amount awarded under competed contracts. For example, in fiscal year 2001, 64 percent of DOE’s contracts were competed. The use of purchase cards grew by an average of 12 percent annually from fiscal year 1997 through fiscal year 2001, and totaled approximately $220 million in fiscal year 2001. In fiscal year 2001, DOE authorized the use of 6,250 purchase cards. DOE’s total workforce, as well as its acquisition workforce, remained relatively stable from fiscal year 1997 through fiscal year 2001. In fiscal year 2001, DOE’s total workforce was 15,997, with 1,449, or 9 percent, in the acquisition workforce. In fiscal year 2001, 57 percent of the acquisition workforce had 20 years or more of federal service, while 7 percent had fewer than 5 years of federal service. Contract Management: To address both pre-award and post-award contract administration issues, a Contract Administration Division was formed to provide guidance and seek out and resolve contract administration issues. During fiscal year 2002, the division conducted a review of over 50 internal DOE directives. As a result of this review, a significant number of directives will be revised, canceled, or consolidated in an effort to be more consistent with performance-based management principles. Acquisition Career Development Program: To ensure that workforce skills stay current, DOE adopted the requirement for 80 hours of continuous learning every two years. As of the first quarter of 2002, 88 percent of the covered workforce met the certification requirements. Electronic Procurement: To streamline and eliminate redundant processes and develop paperless solutions, DOE developed DOE/C-Web, a Web-based electronic small purchase system, and the Industry Interactive Procurement System (IIPS), a Web-based system for large contracts (over $100,000) to issue solicitations, receive proposals, conduct negotiations, and make awards via the Internet. The systems have allowed DOE to achieve the following results: 100 percent of all synopses and notices requiring posting in FedBizOpps were posted electronically through IIPS. The number of solicitations posted on IIPS increased from 88 in fiscal year 1999 to approximately 900 in fiscal year 2002. The number of transactions conducted via DOE/C-Web increased from approximately 1,800 in fiscal year 1998 to 2,743 in fiscal year 2002. Department of Energy: Status of Contract and Project Management Reforms. GAO-03-570T. Washington, D.C.: March 20, 2003. Major Management Challenges and Program Risks: Department of Energy. GAO-03-100. Washington, D.C.: January 2003. Contract Reform: DOE Has Made Progress, but Actions Needed to Ensure Initiatives Have Improved Results. GAO-02-798. Washington, D.C.: September 13, 2002. Department of Energy: Contractor Litigation Costs. GAO-02-418R. Washington, D.C.: March 8, 2002. IG-0538–Management Challenges at the Department of Energy, December 21, 2001. IG-0510–Use of Performance-Based Incentives at Selected Departmental Sites, July 9, 2001. IG-0509–Integrated Planning, Accountability, and Budgeting System-Information System, June 28, 2001. Mission: The Department of Health and Human Services (HHS) is the United States government’s principal agency for protecting the health and welfare of all Americans. The following bureaus account for the majority of HHS’ fiscal year 2001 discretionary budget resources: National Institutes of Health (NIH) is responsible for conducting scientific research regarding the nature and behavior of living systems to extend healthy life and reduce the burdens of illness and disability. In fiscal year 2001, NIH accounted for 36 percent of HHS’ discretionary resources. Administration for Children and Families is responsible for promoting the economic and social well being of families, children, individuals, and communities. In fiscal year 2001, the administration accounted for 21 percent of HHS’ discretionary resources. Other key bureaus: Food and Drug Administration, Centers for Medicare and Medicaid Services, Centers for Disease Control and Prevention, and Indian Health Service. HHS’ discretionary budget increased by 47 percent from fiscal year 1997 through fiscal year 2001, and totaled $61 billion in fiscal year 2001. Over the 5-year period, the proportion of HHS’ discretionary resources spent under contracts decreased slightly, dropping from more than 9 percent in fiscal year 1997 to 8 percent in fiscal year 2001. HHS relied heavily on services from fiscal years 1997 through 2001. Although HHS’ spending on goods increased 127 percent, from $159 million to $360 million during the 5-year period, spending on services increased 19 percent, from $3.3 billion to $3.9 billion, between fiscal years 1997 and 2001. HHS spent about $1.1 billion on research and development projects in fiscal year 2001, or about 27 percent of total contract spending. The amount spent on these projects remained relatively stable during the 5-year period. From fiscal years 1997 through 2001, HHS experienced significant spending increases in three categories: medical, dental, and veterinary equipment (363 percent); professional, administrative, and management support (123 percent); and IT services (115 percent). HHS spent about $4.3 billion through contracts over $25,000 in fiscal year 2001. HHS relies on cost-type contracts as its primary contracting vehicle, accounting for 66 percent of these contract dollars. Purchase card spending increased by 258 percent over the 5-year period, from $95.2 million in fiscal year 1997 to $341.2 million in fiscal year 2001. HHS’ significant increase in its use of the federal supply schedule has been driven by purchases of services, which increased from about $6 million to over $98 million, during the 5-year period. The total HHS workforce has been increasing, particularly at NIH and the Food and Drug Administration, due to bio-defense initiatives. This trend is expected to continue, given the current focus on combating the threat of biological or chemical terrorism. In fiscal year 2002, more than 80 percent of the acquisition workforce had more than 10 years of federal service; the majority has 20 years or more of service. By fiscal year 2008, about 33 percent of the current acquisition workforce will be eligible to retire. Reverse auctioning: Reverse auctioning is a process that allows many sellers to compete for the business of a single buyer. However, unlike a traditional auction, bid prices go down. HHS claimed cost savings of more than $1.3 million from fiscal year 2000 through 2001 using reverse auctioning techniques. Performance-based service contracting: HHS officials reported significant increases in their use of performance-based contracting, including contracts with Medicare intermediaries and carriers. Major Management Challenges and Program Risks: Department of Health and Human Services. GAO-03-101. Washington, D.C.: January 2003. Medicare: Comments on HHS’ Claims Administration Contracting Reform Proposal. GAO-01-1046R. Washington, D.C.: August 17, 2001. Medicare Contracting Reform: Opportunities and Challenges in Contracting for Claims Administration Services. GAO-01-918T. Washington, D.C.: June 28, 2001. Medicare: Opportunities and Challenges in Contracting for Program Safeguards. GAO-01-616. Washington, D.C.: May 18, 2001. Inspector General Report Number A-04-99-05561—-Audit of Medicare Administrative Costs Claimed by Blue Cross Blue Shield of Florida for Fiscal Years 1995 through 1998, July 31, 2002. Mission: Enforcing laws in the public interest and protecting the public from criminal activity. The following bureaus account for the majority of the Department of Justice’s (DOJ) fiscal year 2001 total discretionary budget resources: Office of Justice Programs develops programs that improve law enforcement’s ability to prevent and control crime, improve the criminal and juvenile justice systems, increase knowledge about crime and related issues, and assist crime victims. In fiscal year 2001, the office accounted for 24 percent of DOJ’s discretionary resources. Federal Bureau of Prisons seeks to provide safe, efficient, and humane correctional services and programs. In fiscal year 2001, the bureau accounted for 18 percent of DOJ’s discretionary resources. Federal Bureau of Investigation (FBI) conducts investigations and enforces federal laws. In fiscal year 2001, the FBI accounted for 16 percent of DOJ’s discretionary resources. Other key bureaus: Immigration and Naturalization Service, Drug Enforcement Administration, and the DOJ’s discretionary resources increased 16 percent from fiscal year 1997 through fiscal year 2001 and totaled $26.4 billion in fiscal year 2001. Over the 5-year period, the proportion of DOJ’s discretionary resources spent under contracts increased slightly, rising from 15 percent in fiscal year 1997 to 17 percent in fiscal year 2001. For contracts valued over $25,000, spending on services increased 64 percent from fiscal year 1997 through fiscal year 2001. This growth was driven by increases in the following services: professional, administrative and management support services (128 percent); building construction (125 percent); information technology services (64 percent). DOJ spent about $3.9 billion on contracts over $25,000 in fiscal year 2001. DOJ relied on firm fixed-price and other kinds of fixed-price contracts as the agency’s primary contracting vehicles. On average from fiscal year 1997 through fiscal year 2001, fixed-price contracts accounted for 85 percent of DOJ’s contract dollars. DOJ’s use of the federal supply schedule and contracts awarded by other agencies increased considerably during the 5-year period. For example, DOJ spent $234 million in fiscal year 1997 using the federal supply schedule; in fiscal year 2001, it had spent $470 million. Purchase card spending increased by 179 percent over the 5-year period, from $190.9 million in fiscal year 1997 to $533.4 million in fiscal year 2001. In fiscal year 2001, DOJ authorized the use of 16,073 purchase cards. DOJ’s use of FAR part 12 to purchase commercial items grew more than 400 percent over the last 5 years. This increase was due to DOJ’s increased emphasis on (1) commercial purchases, and (2) more accurate reporting of data to FPDS. Workforce From fiscal year 1997 through fiscal year 2001, DOJ’s total workforce increased by 11 percent—growing from about 110,000 to 123,000. However, DOJ’s acquisition workforce remained relatively stable, decreasing 2 percent over the 5-year period. In fiscal year 2002, more than 85 percent of the acquisition workforce had 10 years or more of By fiscal year 2008, about 30 percent of the current acquisition workforce will be eligible to retire. Acquisition-related electronic government initiatives: Since October 2000, DOJ has implemented several e-government programs to improve its procurement processes. These programs include: Federal Business Opportunities, which is a GSA-managed Web-based system that provides for electronic notice of agency requirements and solicitations for contract opportunities. This system has been deployed departmentwide, and all DOJ synopses for contracts over $25,000 are now posted to that site. Central Contractor Registration is a Web-based governmentwide database of vendor information. DOJ is the administrator for two programs used to track contractor performance: Contractor Past Performance System: an electronic federal report card collection system that is used to collect and record past performance information for subsequent use in determining contractor eligibility and selection. Past Performance Information Retrieval System: A Web-enabled application that allows the retrieval of contractor past performance information from various databases. Departmentwide guidelines for evaluating candidates for GS-1102 contract specialist positions: Over the last 5 years, guidelines were issued to bureau personnel officers for evaluating candidates for GS-1102 contract specialist positions. Key elements include new education standards and certification processes. Major Management Challenges and Program Risks: Department of Justice. GAO-03-105. Washington, D.C.: January 2003. Information Technology: INS Needs to Strengthen Its Investment Management Capability. GAO-01-146. Washington, D.C.: December 29, 2000. Border Patrol: Procurement of MD 600N Helicopters Should Be Reassessed. GGD-00-201. Washington, D.C.: September 29, 2000. Report Number 02-32–Federal Bureau of Prisons Management of Construction Contracts, August 2002. Report Number 01-16–Justice’s Reliance on Private Contractors for Prison Services, July 31, 2002. Mission: To promote a stable economy, manage the government’s finances, and safeguard federal financial systems and our nation’s leaders. The following bureaus account for the majority of Treasury’s fiscal year 2001 total discretionary budget resources: Internal Revenue Service (IRS)—responsible for determining, assessing, and collecting tax revenue in the United States. In fiscal year 2001, the IRS accounted for 51 percent of Treasury’s total discretionary budget resources. U.S. Customs Service—responsible for enforcing laws to safeguard U.S. borders against the illegal entry of goods and of regulating legitimate commercial activity. In fiscal year 2001, Customs accounted for 20 percent of Treasury’s total discretionary budget resources. Other key bureaus—the U.S. Mint, the Secret Service, and the Bureau of Alcohol, Tobacco, and Firearms. Treasury’s total discretionary budget resources increased by 32 percent from fiscal year 1997 through fiscal year 2001 and totaled $19.7 billion in fiscal year 2001. Over the same period, the amount spent through contracts increased slightly, both in real terms and as a share of Treasury’s discretionary resources. For example, in fiscal year 1997, contract obligations accounted for about 14 percent of Treasury’s discretionary resources; by fiscal year 2001, contract obligations accounted for 17 percent. For contracts valued over $25,000, spending on services increased by 71 percent from fiscal year 1997 through fiscal year 2001, while spending on goods increased by 44 percent. Treasury’s spending on goods increased significantly during fiscal year 1999; this was attributed to (1) the U.S. Mint’s development of the “state quarters” program, (2) the Secret Service’s upgrade in hand weapons, and (3) preparation for Y2K-related incidents. Since fiscal year 1997, Treasury experienced significant spending increases in four categories: information technology (IT) equipment (181 percent), communication detection equipment (144 percent), administrative and management support services (138 percent), and IT services (81 percent). Treasury has changed its procurement approach in several key areas since fiscal year 1997: Treasury’s use of contracts awarded or administered by other agencies has doubled over this period and accounted for about 16 percent of Treasury’s contract obligations in fiscal year 2001. After increasing by about 53 percent from fiscal years 1997 through 1999, purchase card use remained relatively stable through fiscal year 2001. In fiscal year 2001, Treasury authorized the use of 16,558 purchase cards. Treasury’s workforce size has remained relatively stable over the 5-year period. Between fiscal years 1997 through 2001, Treasury’s total workforce grew about 2 percent from about 156,000 employees to almost 159,000. Treasury’s acquisition workforce represents about 1.5 percent of its total workforce. In fiscal year 2001, 47 percent of the acquisition workforce had 20 years or more of federal service, while only 4 percent of the workforce had fewer than 5 years of service. By fiscal year 2008, approximately 30 percent of Treasury’s acquisition workforce will be eligible to retire. Performance-based Service Contracting (PBSC): To increase its use of PBSC methods, Treasury developed PBSC training and a handbook, presented information on PBSC to all bureaus, and worked with bureaus on individual procurements. Procurement officials at Treasury stated that these efforts resulted in increasing Treasury’s use of performance-based contracts to 20 percent in fiscal year 2002. Improving procurement system reviews: Treasury developed the Acquisition Management Assistance Review program to assess three key areas (people, process, and tools) to determine the health of Treasury’s procurement systems. Procurement Intern Program: Because its acquisition workforce is aging, Treasury developed a procurement intern program to identify and develop new talent for the bureaus. Major Management Challenges and Program Risks: Department of the Treasury. GAO-03-109. Washington, D.C.: January 2003. Acquisition Workforce: Status of Agency Efforts to Address Future Needs. GAO-03-55. Washington, D.C.: December 18, 2002. IRS Contracting: New Procedure Adds Price or Cost as a Selection Factor for Task Order Awards. GAO-03-218. Washington, D.C.: December 10, 2002. Business Systems Modernization: IRS Needs to Better Balance Management Capacity with System Acquisition Workload. GAO-02-356. Washington, D.C.: February 28, 2002. OIG-02-074—General Management: The Mint Leased Excessive Space For Its Headquarters Operation, March 29, 2002. Mission: To ensure a fast, safe, efficient, accessible, and convenient transportation system that meets our vital national interests and enhances the quality of life of the American people, today and into the future. Two administrations account for the majority of the Department of Transportation’s (DOT) fiscal year 2001 total discretionary budget resources: The Federal Aviation Administration (FAA) regulates civil aviation to promote safety and fulfill the requirements of national defense; encourages and develops civil aeronautics, including new aviation technology; operates a common system of air traffic control and navigation for both civil and military aircraft; implements programs to control aircraft noise and other environmental effects of civil aviation; and regulates U.S. commercial space transportation. In fiscal year 2001, the FAA accounted for 41 percent of DOT’s total discretionary budget resources. The United States Coast Guard (USCG) is responsible for maritime search and rescue, recreational boating safety, vessel traffic management, at-sea enforcement of living marine resource laws and treaty obligations, at-sea drug and illegal migrant interdiction, and port security. In fiscal year 2001, the USCG accounted for 15 percent of DOT’s total discretionary budget resources. Other key organizations: Federal Transit Administration and Federal Highway Administration. DOT’s discretionary resources decreased 28 percent from $51.8 billion in fiscal year 1997 to $37.3 billion in fiscal year 2001. This was due largely to changes brought about by the Transportation Equity Act for the 21st Century (TEA-21). TEA-21, which was enacted in June 1998, shifted a significant amount of discretionary funds to mandatory spending categories. While discretionary resources decreased during the 5-year period, the amount spent through contracts increased by 26 percent. In fiscal year 2001, the DOT spent almost $5.6 billion, or 15 percent of its discretionary resources, through contracting. Spending on goods decreased by 29 percent from fiscal year 1997 to fiscal year 2001, while spending on services increased 49 percent. In fiscal year 2001, 85 percent of the amount spent through contracts over $25,000 was for services. DOT relies on a mix of contract types to achieve its mission; slightly more than half of DOT’s fiscal year 2001 contracts were fixed-price, while more than a quarter were cost-type. Another 14 percent were labor hours or time and materials contracts. In fiscal year 2001, 19 percent of DOT’s service contracts were performance based. In fiscal year 2001, DOT authorized the use of 21,728 purchase cards. The amount spent using FAR part 12 procedures increased from $297 million in fiscal year 1997 to $1.6 billion in fiscal year 2001, a 437 percent increase. In fiscal year 2001, DOT’s total workforce was 64,509, a 2 percent increase from fiscal year 1997. About 2 percent of the total workforce was made up of the acquisition workforce, which decreased by 7 percent during the 5-year period, from 1,634 in fiscal year 1997 to 1,514 in fiscal year 2001. In fiscal year 2001, 56 percent of the acquisition workforce had 20 years or more of federal service, while 5 percent had fewer than 5 years of service. By fiscal year 2008, approximately 36 percent of DOT’s acquisition workforce will be eligible to retire. Security: To support the current security crisis within our country after September 11, 2001, DOT: (1) helped stand up the Transportation Security Administration (TSA) by assisting in creating a TSA Acquisition Management System, developing a standard set of TSA contract provisions and clauses, and providing operational support in the solicitation and award of TSA contracts; and (2) continues to address security issues relating to controlling access to sensitive information and background checks on contractor personnel in positions where sensitive information or national security interests are present. Procurement Performance Management System: DOT continues its major initiative to improve procurement performance by implementing DOT’s procurement performance management program. This program assists managers in targeting areas for improvement based on the results of specified metrics chosen for their importance to the administration, DOT management, or DOT customers. Major Management Challenges and Program Risks: Department of Transportation. GAO-03-108. Washington, D.C.: January 2003. National Airspace System: Status of FAA’s Standard Terminal Automation Replacement System. GAO-02-1071. Washington, D.C.: September 17, 2002. National Airspace System: FAA’s Approach to Its New Communications System Appears Prudent, but Challenges Remain. GAO-02-710. Washington, D.C.: July 15, 2002. FAA Alaska: Weak Controls Resulted in Improper and Wasteful Purchases. GAO-02-606. Washington, D.C.: May 30, 2002. Coast Guard: Budget and Management Challenges for 2003 and Beyond. GAO-02-538T. Washington, D.C.: March 19, 2002. Coast Guard: Progress Being Made on Deepwater Project, but Risks Remain. GAO-01-564. Washington, D.C.: May 2, 2001. National Airspace System: Persistent Problems in FAA’s New Navigation System Highlight Need for Periodic Re-evaluation. GAO/RCED/AIMD-00-130. Washington, D.C.: June 12, 2000. FI-2002-092–FAA Oversight of Cost Reimbursable Contracts, May 8, 2002. FI-2002-089–DOT’s Information Technology Omnibus Procurement Program (ITOP), April 15, 2002. FI-2001-057–FRA E-Mail System Replacement Contracts, May 3, 2001. FI-2000-125–Inactive Obligations on Contracts, September 25, 2000. AV-2000-127–Technical Support Services Contract: Better Management Oversight and Sound Business Practices Are Needed, September 28, 2000. Mission: To restore the capability of those who suffered harm during their military service; to ensure a smooth transition as veterans return to civilian life in their communities; to honor and serve all veterans for the sacrifices they made on behalf of the nation; to contribute to the public health, socioeconomic well being, and history of the nation. The following administrations account for nearly all of the Department of Veterans Affairs’ (VA) fiscal year 2001 total discretionary budget resources. Veterans Health Administration is responsible for medical care, education, and research, and serves as medical backup to the Department of Defense. In fiscal year 2001, VHA accounted for 89 percent of VA’s discretionary resources. Veterans Benefits Administration provides benefits and services to veterans and their dependents, including compensation and pensions, education benefits, loan guarantees, and insurance. National Cemetery Administration provides burial benefits to veterans and eligible dependents and Presidential Memorial Certificates to deceased veterans’ next of kin. VA’s discretionary resources rose by about 20 percent from fiscal years 1997 through fiscal year 2001 and totaled $26.5 billion in fiscal year 2001. In fiscal year 2001, contract obligations accounted for 22 percent, or $5.9 billion, of VA’s discretionary resources. VA spends almost half of its contract dollars on medical and dental equipment and supplies. Since fiscal year 1997, spending for these supplies has grown by 92 percent due in large part to an increase in patient workload. Spending on services grew by about 14 percent, largely driven by increased spending for information technology (226 percent) and medical services (24 percent). VA relies heavily on firm fixed-price contracts. In fiscal year 2001, $3.9 billion—or 91 percent—of the $4.3 billion that VA obligated for contracts over $25,000 was obligated on firm fixed-price contracts. Purchase card spending increased from $855 million in fiscal year 1997 to $3.8 billion in fiscal year 2001, a 344 percent increase. In fiscal year 2001, VA authorized the use of 34,090 purchase cards. VA spent $3.4 billion, 79 percent of total contracting dollars, on competed contracts in fiscal year 2001. VA typically received two or more offers on more than 90 percent of its competed contracts. At 202,414 personnel in fiscal year 2001, VA’s total workforce was about the same level as fiscal year 1997. VA’s acquisition workforce decreased by 6 percent from its fiscal year 1997 level and totaled about 2,562 personnel in fiscal year 2001. In fiscal year 2001, 52 percent of the acquisition workforce had 20 years or more of federal service, while 5 percent had fewer than 5 years of federal service. Computer, hardware and software procurement: VA requires that computer hardware and software vendors offer products to VA at a cost equal to or lower than those offered any other customers. Prices that are found to be too high are required to be lowered before they are accepted. According to VA officials, this initiative resulted in savings of $33 million in the period of June through October 2002. The prices paid by VA over this time period average 21.6 percent below the vendors’ GSA Federal Supply Schedule prices for the same items. Vocational rehabilitation and employment service national acquisition strategy: To address concerns related to contracting for services in the field, a task force developed the National Acquisition Strategy to provide uniform prices and services at the 58 Veterans Benefit Administration regional offices. In September 2002 VA awarded 249 performance-based service contracts using a uniform format. According to VA officials, over 95 percent of the awards went to small businesses, veteran-owned businesses, and service-disabled, veteran-owned businesses. Joint contracting between VA and DOD: In March 2001 VA had 34 joint contracts for pharmaceuticals between VA and DOD. In November 2002, that number more than doubled, to 76. In addition, there are 18 pending joint contracts for pharmaceuticals, vital sign monitors, and radiation therapy equipment. VA Federal Supply Schedule Program: The VA Federal Supply Schedule Program was expanded in late 2000, to include professional health care services. This schedule is open to all federal agencies and provides for temporary contract services of surgeons, specialists, nurses, radiologists, pharmacists, and dentists. Recently, allied health services (nursing assistants, pharmacy technicians, and dental assistants) were added to this schedule. Major Management Challenges and Program Risks: Department of Veterans Affairs. GAO-03-110. Washington, D.C.: January 2003. VA and DOD Health Care: Factors Contributing to Reduced Pharmacy Costs and Continuing Challenges. GAO-02-969T. Washington, D.C.: July 22, 2002. VA and Defense Health Care: Potential Exists for Savings through Joint Purchasing of Medical and Surgical Supplies. GAO-02-872T. Washington, D.C.: June 26, 2002. DOD and VA Pharmacy: Progress and Remaining Challenges in Jointly Buying and Mailing Out Drugs. GAO-01-588. Washington, D.C.: May 25, 2001. VA Laundry Service: Consolidations and Competitive Sourcing Could Save Millions. GAO-01-61. Washington, D.C.: November 30, 2000. 01-00504-9–Summary Report–Combined Assessment Program Reviews at Veterans Health Administration Medical Facilities (January 1999–March 2001), October 10, 2001. 01-01855-75–Evaluation of the Department of Veterans Affairs Purchasing Practices, May 15, 2001. 9R3-E99-037–Audit Of The Department Of Veterans Affairs Purchase Card Program, February 12, 1999. 8D2-E01-002–Audit of VA Procurement Initiatives For Computer Hardware, Software, and Services (PCHS/PAIRS) and Selected Information Technology Investments, January 22, 1998. Mission: To provide policy leadership and expertly managed space, products, services, and solutions, at the best value, to enable federal agencies to accomplish their missions. The following services account for the majority of the General Services Administration’s (GSA) fiscal year 2001 total discretionary budget resources. Federal Technology Service (FTS) provides information technology solutions and network services to support federal agencies. In fiscal year 2001, FTS accounted for 46 percent of GSA’s total discretionary budget resources. The Public Building Service (PBS) oversees the construction, development, and maintenance of federal buildings and manages the leasing of commercial office space. In fiscal year 2001, PBS accounted for 51 percent of GSA’s total discretionary budget resources. Federal Supply Service (FSS) provides agencies with numerous supplies and services, including commercial products, professional services, vehicle acquisition and leasing, and travel and transportation services. FSS manages the Federal Supply Schedule program, which provides federal agencies with access to more than 4 million products and services and coordinates the governmentwide travel and purchase card programs. The FSS accounts for none of GSA’s discretionary resources, because the service is financed by a revolving fund. With a revolving fund, the FSS obtains most of its funding from the fees paid by other agencies to buy from the FSS program. GSA’s discretionary resources increased by 38 percent from fiscal year 1997 through fiscal year 2001 and totaled $19.3 billion in fiscal year 2001. Over the 5-year period, the proportion of GSA’s discretionary resources spent under contracts increased from 59 percent to about 64 percent. GSA relies heavily on service contracts, which accounted for more than 80 percent of all contracts over $25,000 in fiscal year 2001. For contracts valued over $25,000, spending on services increased by 75 percent from fiscal year 1997 through fiscal year 2001. Spending on goods increased by 13 percent. The increase in service spending was driven by increased purchases of IT services, which grew from $594.0 million in fiscal year 1997 to $4.7 billion in fiscal year 2001. GSA’s increased share is largely attributable to the growth of GSA’s Federal Technology Service. However, orders placed by the Federal Technology Service are counted as spending by GSA, rather than spending by the federal agency that will ultimately receive the service or equipment. Since fiscal year 1997, GSA’s spending has undergone significant increases in the following categories: IT and telecommunication services (691 percent), motor vehicles (24 percent), IT equipment (19 percent), and lease of facilities (17 percent). GSA spent about $11.7 billion through contracts in fiscal year 2001, with firm fixed-price and other kinds of fixed-price contracts accounting for over 90 percent of GSA’s contract dollars. Purchase card spending doubled since fiscal year 1997, and totaled nearly $160 million in fiscal year 2001. In fiscal year 2001, GSA authorized the use of 3,776 purchase cards. GSA’s total workforce has remained relatively stable over the 5-year period, at about 14,100. Over this same period, its acquisition workforce has increased by more than 10 percent. More than 91 percent of GSA’s acquisition workforce has more than 10 years of federal service; by fiscal year 2008, 34 percent will be eligible to retire. Construction Brain Trust. The Construction Brain Trust was implemented in fiscal year 2001 to reduce the time, cost and complexity of the construction contracting process. The membership consists of representatives from GSA policy offices, GSA regions, and construction-related associations, surety companies, and law firms. Agency-wide performance-based contracting program. To improve GSA’s use of performance-based contracts, it established a Web site and developed additional training materials, such as the Seven Steps to Performance-based Service Acquisition Guide, for use by its acquisition personnel. Applied Learning Center. This initiative was implemented in 2001. The long-term goal of the center is to assist acquisition professionals perform their jobs, identify skill gaps, and broaden the knowledge base of acquisition professionals into areas such as budget, finance, and program management. Contract Management: Government Faces Challenges in Gathering Socioeconomic Data on Purchase Card Merchants. GAO-03-56. Washington, D.C.: December 13, 2002. Acquisition Workforce: Status of Agency Efforts to Address Future Needs. GAO-03-55. Washington, D.C.: December 18, 2002. Acquisition Workforce: Agencies Need to Better Define and Track the Training of Their Employees. GAO-02-737. Washington, D.C.: July 29, 2002. Contract Management: Interagency Contract Program Fees Need More Oversight. GAO-02-734. Washington, D.C.: July 25, 2002. Contract Management: Roles and Responsibilities of the Federal Supply Service and Federal Technology Service. GAO-02-821R. Washington, D.C.: June 7, 2002. Telecommunications: GSA Action Needed to Realize Benefits of Metropolitan Area Acquisition Program. GAO-02-325. Washington, D.C.: April 4, 2002. Contract Management: Not Following Procedures Undermines Best Pricing Under GSA’s Schedule. GAO-01-125. Washington, D.C.: November 28, 2000. Special Report on FSS’s Multiple Award Schedule Pricing Practices, August 24, 2001. Report Number A995288–Audit of Federal Technology Service’s Use of Multiple Award Indefinite Delivery Indefinite Quantity Contracts, September 19, 2000. Report Number A995175–Audit of the Federal Protective Service’s Contract Guard Program, March 28, 2000. Mission: To develop human exploration of space, advance and communicate scientific knowledge, and research and develop aeronautics and space technologies. Two accounts account for the majority of the National Aeronautics and Space Administration’s (NASA) fiscal year 2001 total discretionary budget resources: Science, Aeronautics and Technology (SAT) provides funds for research and development in the offices of Space Science, Earth Science, Biological and Physical Research, and Aerospace Technology, respectively. SAT also funds academic programs that NASA has established in elementary and secondary schools, as well as research conducted at more than 100 universities in the United States. In fiscal year 2001, SAT accounted for 44 percent of NASA’s discretionary resources. Human Space Flight (HSF) primarily provides funds for the construction and operation of the international space station and the operation of the space shuttle program. Other programs include developing expendable launch vehicles, improving space communications and data systems, and providing safety and mission support. HSF also provides for the design, repair, rehabilitation, and modification of facilities and construction of new facilities. In fiscal year 2001, HSF accounted for 45 percent of NASA’s discretionary resources. NASA’s discretionary resources decreased by about 6 percent from fiscal year 1997 through fiscal year 2001, totaling $15.8 billion in fiscal year 2001. The amount spent through contracts decreased slightly, both in real terms and as a share of NASA’s discretionary resources. Nevertheless, NASA relies on contracts to achieve its mission to a greater extent than most federal agencies. NASA contracts primarily for services. Of NASA’s $11 billion spent on contracts over $25,000 in fiscal year 2001, about $9.6 billion—or 86 percent—were for services, including operating various government-owned facilities, providing professional and administrative support, and conducting research and development activities. Overall, NASA’s spending for services declined by 7 percent between fiscal years 1997 and 2001, though there were significant variations in individual service categories. NASA uses a variety of methods in carrying out its procurement functions. Due to the nature of the items and services needed to carry out its mission, NASA relies heavily on cost-type contracts; 83 percent of contract obligations over $25,000 for fiscal year 2001 were made under cost-type contracts. NASA spent slightly more than half of its contracts over $25,000 on competed contracts, a relatively lower percentage than other federal agencies. For those contracts it competes, NASA receives two or more bids nearly 90 percent of the time. NASA reports that 64 percent of eligible service contracts were performance based in fiscal year 2001. NASA’s use of purchase cards grew since fiscal year 1997, but accounts for a small percentage of its budget While NASA generally acquires government-unique items, it increased its purchases using FAR part 12 procedures from $225 million in fiscal year 1997 to about $794 million in fiscal year 2001. The size of NASA’s workforce remained relatively stable from fiscal year 1997 through fiscal year 2001, decreasing by about 4 percent. NASA’s acquisition workforce, which represented about 7 percent of its total workforce, experienced a similar trend. In fiscal year 2001, 56 percent of the acquisition workforce had 20 years or more of federal service, while only 3 percent had fewer than 5 years of service. By fiscal year 2008, approximately 33 percent of NASA’s acquisition workforce will be eligible to retire. Risk-based acquisition management: To reduce the incidence and severity of impacts arising from unforeseen programmatic events, NASA recently developed this process to integrate risk principles when developing the acquisition strategy, selecting sources, choosing contract type, structuring fee incentives, and conducting contractor surveillance. Award term contracting: NASA is using this approach to reward contractor performance by enabling contract extension for excellent performance and reduced costs. In addition to profit, a continuing relationship becomes a prime motivator for the contractor. Evaluate and Improve Performance-Based Service Contracting: NASA has initiated an agencywide awareness program and training sessions for government and contractor employees relating to performance-based service contracting. Major Management Challenges and Program Risks: National Aeronautics and Space Administration. GAO-03-114. Washington, D.C.: January 2003. Space Station: Actions Under Way to Manage Cost, but Significant Challenges Remain. GAO-02-735. Washington, D.C.: July 17, 2002. NASA: Compliance With Cost Limits Cannot Be Verified. GAO-02-504R. Washington, D.C.: April 10, 2002. IG-03-003–NASA Contracts for Professional, Administrative, and Management Support Services, October 16, 2002. IG-02-027–NASA’s Contract Audit Follow-up System, September 30, 2002. IG-02-011–Review of Performance-Based Service Contract Quality Assurance Surveillance Plans, June 24, 2002. IG-02-011–International Space Station Spare Parts Costs, March 22, 2002. IG-02-002–Restructuring of the International Space Station Contract, November 8, 2001. IG-01-027–Acquisition of the Space Station Propulsion Module, May 21, 2001.

Summary: The federal government, comprised of more than 60 agencies and nearly 1.7 million civilian workers, acquires most of its goods and services through contracts. Recent changes in what the government buys, its contracting approaches and methods, and its acquisition workforce have combined to create a dynamic acquisition environment. Many of these recent changes enhance contracting efficiency and offer a number of benefits, such as reduced administrative burdens. However, GAO's past work has found that if these changes are not accompanied by proper training, guidance, and internal controls, agency procurements may be at greater risk. While effectively managing contracts is always a key management responsibility, this responsibility is more acute in those agencies that rely heavily on acquisitions to accomplish their missions. The goal of this report is to identify for Congress, the administration, and accountability organizations those procurement-related trends and challenges that may affect federal agencies. Specifically, GAO analyzed recent federal procurement patterns, the use of various procurement methods, and changes in the acquisition workforce. Federal agencies procured more than $235 billion in goods and services during fiscal year 2001, reflecting an 11 percent increase over the amount spent 5 years earlier. Further growth in contract spending, at least in the short term, is likely to increase given the President's request for additional funds for defense and homeland security, agencies' plans to update their information technology systems, and other factors. Overall, contracting for goods and services accounted for about 24 percent of the government's discretionary resources in fiscal year 2001. Federal agencies are taking advantage of the streamlined acquisition processes that were developed in the 1990s, including relying on contracts awarded by other federal agencies to obtain goods and services. The increase in the use of this acquisition method is driven largely by purchases of information technology and by professional, administrative, and management support services. Similarly, agencies are increasingly using purchase cards for many of their low dollar value procurements. Over the last decade, the federal acquisition workforce has had to adapt to changes in staffing levels, workloads, and the need for new skill sets. Procurement reforms have required contracting specialists to have a greater knowledge of market conditions, industry trends, and the technical details of the commodities and services they procure. A priority at most agencies we reviewed was attracting and retaining the right people with the right skills to successfully address the increasingly complex actions expected in the future. Many agencies have made progress with strategic human capital planning efforts. We reviewed 10 agencies that represent over 90 percent of the federal government's acquisition spending. All agencies provided comments on our report and concurred with our analyses.