The military services and DOD have long procured and operated multiple types of telecommunication services to meet their individual mission needs. DOD guidance defines telecommunications as circuits or equipment used to transmit or receive information via voice, data, video, integrated telecommunication transmission, wire, or radio. Telecommunication equipment and services collectively include such items as telephones, switching systems and circuit termination equipment. Overall, telecommunications can be thought of broadly in two categories— base and long-haul telecommunications. Also, DOD has been using and paying for some special category types of services—cell phones and calling cards—that can usually be used to access either the base or long-haul infrastructure or both. DOD defines base telecommunications as facilities, equipment, and services used to support the distribution, transmission, or reception of information via voice, data, video, integrated telecommunications, wire, or radio within the confines of an area, such as an installation. This may include local interconnecting lines to the first commercial central office providing service to the local community and to other DOD component facilities in the local area. Calls originating and ending within the local calling area are considered local service calls and activities pay a flat monthly fee for such service. The fee that is paid to vendors is based upon the number of circuits billed and not the number of calls made. DISA does not have direct responsibility for acquiring and managing base telecommunication equipment and services, although it does have some oversight responsibilities. Long-haul telecommunications are the facilities, equipment, and services (in addition to those described for base telecommunications) that are used for the transmission or receipt of information that crosses the boundary of a facility’s local calling community. DOD service components are required to contract for their long-haul services through DITCO, DISA’s contracting organization. DITCO charges the components the actual costs for the services it provides them, plus a surcharge (which is currently 2 percent) to cover DITCO’s cost of administering the program. Cell phones allow DOD personnel, including Navy personnel, to make official calls when other alternatives are unavailable or are uneconomical. They can be used to access a local as well as a long-distance network, but it is generally more economical to use other service for local service, when possible. Navy activities generally either contract directly for cellular phone service or procure the phones under an already established GSA negotiated contract. Vendors normally offer various service plan packages to their customers with a range of rates, depending on the types of service and options provided. Items that can cause rates to vary are geographical location, the user’s calling area, and the number of telephones requested. Cellular phones differ from conventional telephone systems in the way charges for calls accrue. For cellular phones, activities are usually charged a fixed fee for a specific plan package, which includes a limited number of available minutes. After using all of the available minutes in a month, activities then pay a per-minute charge for any excess minutes, not included in the contracted amount. When callers exceed the number of minutes allowed in the plan package, they generally pay a very high premium per minute for the minutes in excess of the plan. Generally, charges for cellular phone services include (1) charges for airtime for all completed outgoing and incoming calls and (2) charges (known as roaming charges) for calls made when the caller is outside his or her home service area. In addition, cellular phones may incur long-distance charges for calls made where the number called is outside the local area in which the caller is physically located or if this service is not included in the service contract. Calling cards are used to access telecommunication services at a location where DOD-owned services are unavailable or where it is desired that the calls be charged to an account other than the one from which the calls are being made. Navy calling cards are issued to individual Navy employees for their official use in conducting government business. The card provides the user with access to the Federal Telecommunications System (FTS) and offers a variety of available services. Navy activities generally procure the calling cards through DITCO in bulk and they are stored by the activities until issued. DITCO obtains the calling cards through a prenegotiated GSA contract. The cards incur no charges until issued and activated. The Navy activities are responsible for issuing the cards to individuals and the individuals activate the cards. Once issued, the activities are responsible for reviewing and certifying the calling card charges, just as they are for all other types of telecommunication service charges. DOD and its components have long acquired telecommunication systems to meet their individual mission needs, resulting in a fragmented and redundant telecommunication environment. To eliminate costly duplication and improve the effectiveness and efficiency of its communication services, in 1991 DOD began to plan and implement the Defense Information Systems Network (DISN) as the common-user, long­ haul telecommunication network for all DOD components. Under the DISN program, DOD’s service components and Defense agencies are still responsible for acquiring local base telecommunication services for their local bases and installations; however, DISA is to be the sole provider of long-haul telecommunication services for all DOD components. To improve the interoperability of DOD’s long-haul telecommunication networks and service as well as to reduce costs, the Assistant Secretary of Defense for Command, Control, Communications, and Intelligence (ASD/C3I)established policies and procedures that (1) directed DOD components to develop comprehensive inventories of their own long-haul telecommunication networks and directed DISA to develop a Defense-wide inventory of long-haul networks; (2) directed DISA to report annually on telecommunication services, acquisitions, trends, and associated costs; (3) mandated components to use common-user networks such as DISN or FTS 2000 for long-haul communications; (4) directed DISA to establish a waiver process to let components procure independent networks when their telecommunication needs could not be met by common-user networks; and (5) directed DOD components to periodically review and revalidate their long-haul telecommunication requirements. In a previous review of the DISN program,and during our work on this audit, we found that DOD had not effectively implemented any of these directives. In response, DOD agreed to address our concerns and to implement these policies and procedures. However, as discussed in this report, the Navy has not yet established an accurate and complete telecommunication inventory or created a database of information on acquisition, trends, and associated costs, which are necessary to plan for future growth and cost effectively purchase new telecommunication equipment and services. The Navy did not know exactly how much it was spending on telecommunication services nor did it know much about its telecommunication service vendors. The Navy’s lack of detailed cost data prevented us from analyzing its telecommunication expenditures on an aggregate level. For this reason, we were unable to comprehensively sample and test the adequacy of the Navy’s controls or perform effective data mining of its telecommunication expenditures. More importantly, this lack of adequate information also prevented the Navy from obtaining the knowledge needed to take steps to leverage its buying power, even though it is a large customer for telecommunication services. Moreover, obtaining knowledge of current requirements and usage, as well as developing forecasts of users’ future telecommunication needs, would assist Navy acquisition planning to ensure those future needs can be met in a more cost-effective manner. Our past work has identified specific practices that can be employed by DOD agencies to manage services acquisitions—including telecommunication services—from a more strategic perspective, thereby enabling DOD organizations to leverage buying power and achieve significant savings.These include establishing a central agent or manager for acquiring services, gaining visibility over spending, and revising business processes to enable the organization to leverage its buying power. Our past work showed that leading organizations that applied a strategic approach to their purchases of services found it necessary to develop new “spend analysis” information systems that could provide them with reliable data in a timely fashion. Spend analysis is a tool that answers basic questions about how much is being spent for what goods and services and helps to identify both buyers and suppliers, as well as opportunities to leverage buying, save money, and improve performance. Having the type of information discussed above would enable the Navy to perform spend analysis on the purchase and use of its telecommunication assets, which would provide the Navy with a complete picture of what is being spent on telecommunications—the cornerstone to identifying what can be done to improve the purchasing process and to leverage the Navy’s buying power. The task of gaining accurate visibility over spending will be difficult for the Navy given the lack of information systems available to provide spending data and the magnitude, breadth, and complexity of spending involved with multiple types and sources of telecommunication services. However, leading companies we studied that developed formal, centralized spend analysis programs found that they could overcome similar difficulties of piecing together incomplete and inaccurate data from various information systems through the use of key processes involving automating, extracting, supplementing, organizing, and analyzing data.Currently, the Navy lacks the needed information to perform effective cost/spend analysis. Recognizing that the best practices experiences of leading companies could help improve the cost effectiveness of DOD’s acquisition of services, Congress includedprovisions in the National Defense Authorization Act for Fiscal Year 2002that require, among other things, that DOD establish an automated system to collect and analyze data to support management decisions in contracting for services. The provisions were intended to put DOD in a position to gain visibility over services contract spending and more effectively leverage its buying power, thus (1) improving the performance of its service contractors, (2) organizing its supplier base, and (3) achieving significant savings and ensuring that its dollars are used more effectively.