Base operations support services, generally called commercial activities, are the functions necessary to support, operate, and maintain DOD installations. Although the Office of Management and Budget (OMB) identifies 29 services as base support functions, DOD does not have a generally accepted definition of base support services, and the military services differ in how they define them. Without a common definition it is difficult to accurately determine the size and cost of DOD’s base support workforce; however, DOD estimates that base support activities such as facilities and vehicle maintenance, food services, and local transportation cost more than $30 billion in fiscal year 1997. Numerous studies from the 1993 Bottom-Up Review through the recent Quadrennial Defense Review, Defense Reform Initiative, and National Defense Panel have concluded that DOD could realize significant savings by outsourcing commercially available support services. Some studies have concluded that DOD could achieve the largest savings by using a single contract, rather than several smaller contracts, to encompass multiple base operations support services. Although a subject of increasing emphasis in recent years, federal agencies have been encouraged, since 1955, to obtain commercially available goods and services from the private sector through outsourcing, or contracting out, whenever they determine it is cost-effective. In 1966, OMB issued Circular A-76, which established federal policy for the government’s performance of commercial activities and set forth the procedures for studying commercial activities for potential contracting. Later, in 1979, OMB issued a supplemental handbook to the circular that included the procedures for competitively determining whether commercial activities should be performed in-house, by another federal agency through an interservice support agreement, or by the private sector. OMB updated this handbook in 1983 and again in March 1996. Most of the multiple service contracts were initiated when the installation performed a commercial activities study and all but one were established in the 1980s or earlier. As shown in table 1, the estimated costs of the contracts range from $5.4 million to $100 million annually and most were awarded on a fixed-price basis. Single contracts for multiple support services were critical to meeting the overall requirements for base operations support at all 10 installations we reviewed; however, none used a single contract to meet all of its requirements. At 7 of the 10 installations we reviewed, we were told that the decisions to use single contracts for multiple services occurred when the installations performed formal studies to determine whether the commercial activities should be performed in-house or by a contractor. All of these contracting efforts, except one, were initiated in the 1980s. At the other three locations, officials told us that the decision to use a single contract for multiple services was made at the time that the installation or its current mission was established. Of the installations we visited, Laughlin Air Force Base was the one that most recently made a decision to use a single contract for multiple services in connection with a commercial activities study. A contracting official at Laughlin stated that the study had been done as a result of a DOD Management Review Directive. The study, conducted from April 9, 1992, to July 12, 1996, resulted in a contract awarded in 1996 pursuant to a small business set-aside. The contract initially is for about $5.4 million annually and will provide for functions dealing with supply, civil engineering, fuels management, and vehicle operation and maintenance. Naval Air Station Fallon went to a multiple service contract in 1987 following a commercial activities study that was conducted from May 1981 until January 1984. Officials at Fallon could not say for certain but believed the study was conducted because of the priority placed on contracting out at the time. The current contract is the third multiple service contract and is worth about $15 million annually. The contract covers such functions as food service, supply, pest control, custodial, housing, and airfield services, as well as operating a combined bachelor quarters facility. At the U.S. Army Tank-Automotive and Armaments Command in Michigan, we found that the Army had two contracts for multiple base operations support services that followed separate commercial activities studies conducted in 1981 and 1982. Each of the contracts covered services at separate locations that are approximately 20 miles apart. Each contract was competitively awarded until fiscal year 1989 when a decision was made that it would be in the best interest of the government to combine the requirements under a single multiple service contract and reduce overhead and contract administration costs. The current contract for approximately $15 million annually covers such functions as freight, supply, warehousing, facility engineering, housing, and administrative services at the two locations. At three installations—Vance Air Force Base, Arnold Air Force Base, and Naval Submarine Base Bangor—the decision to use multiple service contracts was made at the time the installation was established. The decision at Vance was based on an Air Force decision to evaluate the success of contracting out as compared to another base that performed the services with in-house personnel. At Arnold Air Force Base, the decision was based on a 1950 study by the Scientific Advisory Board of how the engineering development and test center should be operated. According to contracting officials, the study recommendation and a lack of qualified Air Force personnel at the time led the Secretary of the Air Force to direct that the services be provided through a contract. Naval Submarine Base Bangor was activated in 1976 and the decision to contract out base operations support services, according to a contracting official, was based on a study by a private Seattle company that determined a contract operation would be more cost-effective. At 7 of 10 installations we reviewed, contracting officials have awarded fixed-price contracts for multiple base operations support services (see table 2). At the other three locations, contracting officials have awarded cost type contracts. In some instances, incentives or award fees were included within each of these types of contracts to contain or reduce costs. Regardless of the contract type, eight have been awarded on a 5-year basis. A firm-fixed price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. It remains firm for the life of the contract unless revised pursuant to the changes clause in the contract. It places maximum risk on the contractor and minimum risk on the government. The contractor is responsible for all costs incurred and the resulting profit or loss. The cost contract places more risk on the government and less risk on the contractor. Under cost contracts, the contractor is reimbursed for all reasonable and allowable costs incurred. In conjunction with these contracts, award fees are often used to provide incentives for outstanding performance in areas such as timeliness, quality, and cost effectiveness. The maximum amount of the award, periods of evaluation, and the officials who determine the fee are specified in an award-fee plan that is part of the contract. With the exception of three contracts, an award fee provision was included to foster maximum contractor performance based upon the government’s subjective evaluation of the contractor’s level of performance. At Fort Irwin, contracting officials decided that a cost-type contract was preferable to fixed price because the workload and workforce were continually changing and requirements could not be adequately defined beforehand. At Vance, the decision to use a fixed-price contract was due to the nature of the contract requirements, where the contractor provides mainly labor, and the number of employees, their respective labor rates, and expected hours were all known. This allowed contracting officials and offerors to estimate the cost of the contract with a higher degree of confidence. The multiple service contracts we reviewed were generally awarded for 5 years (1 base year and 4 option years). However, we did find two contracts with longer performance periods. At Arnold Air Force Base its cost-plus-award-fee contract was awarded in 1995 for 8 years (5 years and a single 3-year option) to foster workforce stability and morale. At the other, Naval Submarine Base Bangor, a 10-year fixed-price-award-fee contract (1 base year and 9 option years) was awarded in 1997. Based on suggestions from contractors during a presolicitation conference, the Bangor contract was increased from 5 to 10 years to save money over the life of the contract by allowing contractors to spread their costs over more years. Officials also expected that the change would encourage more companies to compete for the contract. The contract also includes incentives for the contractor to reduce costs. It further includes a provision for the contractor to meet ISO 9000 standards to better ensure it can meet customer requirements and help reduce contract monitoring costs. At the 10 installations we reviewed, base operations support requirements were being met through a variety of means, including in-house personnel, as well as single contracts for multiple services, single contracts for specific services, and regional contracts. Several of the installations, including Arnold Air Force Base and Naval Submarine Base Bangor, rely heavily on single contracts for multiple base operations support services. In contrast, Fort Belvoir and Naval Air Station Whiting Field use single contracts for multiple services but also rely heavily on other contracts or in-house personnel to meet these support requirements. Arnold has used a single contract for virtually all base operations support services from the time the installation was established. The first multiple service contract was awarded in 1951 and provided for all testing and support services at the installation. In fiscal year 1981, the contract was separated into three contracts—two testing contracts and one for multiple base operations support services. The support services contract includes a wide variety of functions such as central computer operations, base support and maintenance, environmental, utilities, logistics, transportation, base security, and fire protection. In addition, Arnold uses in-house personnel to perform morale, welfare, and recreation services. Similarly, Bangor accomplishes nearly all base operations support service requirements through a single contract. The current contract for multiple support services spans 10 years and provides a wide range of base support services, including administrative support, various public works services, utility and supply services, and security services.