Over the past decade, federal  agencies have substantially increased their purchases of services,  particularly for information technology and professional, administrative,  and management support. In fiscal year 2001 alone, the federal  government acquired about $109 billion in services. This money, however,  is not always well-spent. In view of these problems, we examined how leading companies changed  their approach to acquiring services. They were spending a substantial amount of money  on services—ranging from routine maintenance, to advertising, to  information management—but did not have a good grasp of how much  was being spent and where these dollars were going. The companies we studied were able to turn this situation around by  adopting a more strategic perspective to service spending; that is, each  company focused more on what was good for the company as a whole  rather than just individual business units, and each began making  decisions based on enhanced knowledge about service spending. Specifically, the companies we visited analyzed their spending on services  to answer basic questions about how much was being spent and where the  dollars were going. In doing so, they realized that they were buying similar  services from numerous providers, often at greatly varying prices. The  companies used this data to rationalize their supplier base, or in other  words, to determine the right number of suppliers that met their needs.
Why GAO Did This Study

The Service Acquisition Reform Act of 2002 seeks to strengthen the acquisition workforce by moving toward a performance-based contracting environment and improving service acquisitions management. During the past decade, federal agencies have substantially increased their purchases of services, particularly for information technology and professional, administrative, and management support. In fiscal year 2001 alone, the federal government acquired $109 billion in services. This money, however, is not always well-spent. GAO continues to find that defense and civilian acquisitions are poorly planned, not adequately completed, and poorly managed. Some leading companies have changed their approach to acquiring services after finding themselves spending a lot of money on services without knowing how much was being spent and where these dollars were going.

What GAO Found

GAO found that these companies were able to turn this situation around by adopting a more strategic perspective to service spending. Each company focused more on what was good for the company as a whole rather than just individual business units, and each began making decisions using enhanced knowledge about service spending. The companies analyzed their spending services to answer basic questions about how much was being spent and where the money was going. In doing so, they realized that they were buying similar services from many providers, often at different prices. The companies used this data to determine the right number of suppliers that met their needs.