Each year, DOD relies on the private sector to provide a wide range of services, including consulting and administrative support, information technology services, and weapon system and base operations support to fulfill the requirements needed to deliver important defense capabilities. In fiscal year 2014, DOD obligated over $156 billion on contracted services, which constituted more than half of DOD’s total contract spending. Service contracts directly engage the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply. For example, a service contract can be used to obtain systems engineering support for a major weapons program. Fulfillment of these contract requirements, in turn, enables DOD to provide specific capabilities to meet mission needs. Since 2001, Congress has required and our past work has recommended that DOD take several steps to improve, among other things, service acquisition planning, tracking, and oversight. Specifically, section 2330 of title 10, United States Code, enacted in 2001 and amended in 2006, requires USD(AT&L) and the military departments to establish a management structure for the acquisition of services. USD(AT&L) and the military departments established an initial management structure for the review and approval of service acquisitions in 2002. Similarly, in 2003 and 2006, we made a number of recommendations to DOD, including that it take a more strategic approach to its acquisition and management of services. In 2006, for example, we recommended, among other things, that DOD establish a normative position of how and where service acquisition dollars are currently and will be spent (including volume, type, and trends); and determine areas of specific risk that are inherent in acquiring services and that should be managed with greater attention (including those areas considered sensitive or undesirable in terms of quantity or performance). DOD agreed that a more coordinated, integrated and strategic approach for acquiring services was needed. In particular, DOD noted that it would reassess its strategic approach to acquiring services, including examining the types and kinds of services it acquires and developing an integrated assessment of how best to acquire such services. Since then, USD(AT&L) has taken several actions intended to improve its management of services. For example, in September 2010, USD(AT&L) issued the first of three Better Buying Power memoranda that included steps to improve service acquisitions. In the November 2010 memorandum that followed it, USD(AT&L) directed that each military department establish the position of a Senior Services Manager, responsible for planning, executing, strategically sourcing, and managing service contracts for their military departments, and to serve as the approval authority for service acquisitions valued at less than $250 million. Additionally, in November 2010, the Director of Defense Procurement and Acquisition Policy directed the military departments to organize services spending data into six portfolio groups, later increased to nine, to enhance its ability to analyze service contract spending. In its April 2013 Better Buying Power initiative memorandum, USD(AT&L) also identified that by managing service acquisition by portfolio group, the senior services managers should be able to work with requiring activities to forecast future services requirements. (see table 1 for examples of services within each portfolio group). In June 2013, we found that USD(AT&L) and military department leadership had demonstrated a commitment to improving management of service acquisition, but that it faced challenges in developing goals and metrics to assess outcomes due to limitations with corroborating data between its contracting and financial data systems. DOD concurred with our recommendation in the June 2013 report to identify baseline data on service acquisitions, in part, by using budget and spending data to gauge the effects of improvements. In that report, we also found that DOD was already taking some steps to improve insight into DOD’s contracted services. For example, USD (AT&L) initiated efforts to link contracting system data to financial system data through a January 2013 memorandum that directed all DOD components to assign product and service codes at a contract line item level of detail. According to the memorandum, capturing product service codes at a contract line item level of detail in DOD’s contracting systems will minimize data errors in FPDS-NG and enable linkage of contracting and financial data systems. USD(AT&L) officials stated that improving and linking data within its contract and financial systems could help enable DOD to determine what it planned to spend on a particular service, what it actually spent for that service, and which organizations bought the service. Each year DOD uses the PPBE process to determine and prioritize requirements and allocate resources and funding to the military departments and defense agencies. This process, which is governed by DOD Directive 7045.14 and supplemented by military department guidance, is conducted under four phases (see figure 1). The process includes constructing a 5-year funding plan called the Future Years Defense Program (FYDP). The FYDP provides DOD and Congress a tool for looking at future funding needs beyond immediate budget priorities. The FYDP, which is submitted to Congress, is a DOD database and internal accounting system that contains and summarizes information on DOD’s forces, resources, and equipment that are part of all DOD programs approved by the Secretary of Defense. In 1987, Congress directed the Secretary of Defense to submit the 5-year defense program, in part, to establish a mechanism to help inform DOD and the Congress on current and planned resources as decisions are made. The FYDP reflects decisions made in the DOD PPBE process and represents estimated appropriation needs for the budget year for which funds are being requested from Congress and at least the 4 years following it. Each phase of the PPBE process is dependent on the preceding phase and DOD is always working through multiple phases of the PPBE process for multiple fiscal years at any given time during a calendar year. For example, at the beginning of calendar year 2015, the planning phase began with the development of the Defense Planning guidance for the fiscal year 2018-2022 POM, while DOD was also in the programming and budgeting phases to develop the fiscal year 2017-2021 POM and 2017 budget submission, which all occurred as DOD was in the execution phase of the fiscal year 2015 budget (see figure 2). The planning phase is the first step of the PPBE process and occurs near the beginning of each calendar year. In this phase, DOD is to determine what capabilities are needed in the future. At the end of the planning phase, the Office of the Under Secretary of Defense for Policy is to issue the Defense Planning Guidance to DOD components. This guidance includes major DOD planning objectives and scenarios, strategic factors, and fiscal limitations. The Defense Planning Guidance is then to be factored into the development of component POMs. POMs are to be established by each DOD component for their programs and are 5-year funding plans for the specific capabilities needed to meet planning guidance objectives, and are to be submitted to DOD senior leaders for review. The programming phase follows the planning phase and begins in the April to May time frame. Its purpose includes prioritizing the programs which best meet the military strategy needs, as documented in the Defense Planning Guidance. More specifically, it is when the DOD components, with input from their DOD commands and program offices, are to determine the requirements needed to provide capabilities for national security. This information is then to be presented in the POM. The POM is completed at least two years before the estimated funds will be spent and documents funding needs for 5 years into the future. For example, the fiscal year 2017-2021 POM is to be completed in fiscal year 2015 and document the requirements and resources needed for fiscal years 2017 through 2021. In preparation for this phase, each military department is to issue annual POM guidance to inform commands and program offices of the types of information that should be included in POM submissions, the format, and time frames for completion. Organizations responsible for issuing this guidance are within the programming community and include Army’s G-8, Program Analysis and Evaluation Office of the Chief of Naval Operations Secretary of Air Force Financial Management Other organizations, such a major commands or program executive offices, may issue supplemental guidance based on that organization’s needs. Generally, commands and program offices determine and document requirements, priorities, and funding needs that are used to support their respective command’s POM in the fall. Consolidated POM estimates are to be submitted to the DOD Components in early spring and then to Office of the Secretary of Defense (OSD) in July or August. Before submitting the POM to OSD in July, the Office of the Secretary of Defense, Cost Assessment and Program Evaluation, and other DOD senior leaders, including those in the financial management and programming community, are to review POM documents to validate and prioritize requirements and make department wide resource allocation decisions. The budgeting phase of the PPBE process happens at the same time as the programming phase and its purpose is to decide how much prospective funding to allocate to each of the DOD programs for the next fiscal year. DOD program offices are to convert their requirements in the first year of the POM into the congressional appropriation format, known as the budget estimate submission (BES). The BES and the POM submissions are to be used by each DOD component financial management office and DOD Comptroller to formulate the President’s budget request. The DOD Comptroller and the OMB review the submissions to ensure that program funding aligns with current policy and is justified to Congress. The President’s budget is required to be submitted to Congress no later than the first Monday of February. In the President’s budget, contracted services are identified by eight spending categories, known as object class codes, as shown in table 2. Services within these codes may be associated with more than one of DOD’s portfolio groups.