	DOD Faces Longstanding and Systemic Contract Management Challenges

DOD faces a number of longstanding and systemic challenges that have  hindered its ability to achieve more successful acquisition outcomes— obtaining the right goods and services, at the right time, at the right cost. These challenges include addressing the issues posed by DOD’s reliance  on contractors, ensuring that DOD personnel use sound contracting  approaches, and maintaining a workforce with the skills and capabilities  needed to properly manage the acquisitions and oversee contractors. The  issues encountered in Iraq and Afghanistan are emblematic of these  systemic challenges, though their significance and effect are heightened in  a contingency environment. DOD’s Increased Reliance on Contractors Poses Risks

Our concerns about DOD’s acquisition of services, including the  department’s reliance on contractors and the support they provide to  deployed forces, predate the operations in Iraq and Afghanistan. We  identified DOD contract management as a high-risk area in 1992 and since  then we continued to identify a need for DOD to better manage services  acquisitions at both the strategic and individual contract levels. Similarly,  in 1997 we raised concerns about DOD’s management and use of  contractors to support deployed forces in Bosnia. Our reviews of SPOT, however, have  highlighted shortcomings in the system’s implementation in Iraq and  Afghanistan. DOD’s Efforts Have Not Yet Resolved Contract Management Challenges or Fully Addressed Its Reliance on Contractors

DOD has recognized the need to take action to address the challenges it  faces regarding contract management and its reliance on contractors,  including those related to operational contract support. Over the past  several years, the department has announced new policies, guidance and  training initiatives, but not all of these actions have been implemented and  their expected benefits have not yet been fully realized. Specifically we concluded that DOD needs to  take steps to strategically manage services acquisition, including  defining and measuring against desired outcomes, and developing the  data needed to do so;   determine the appropriate mix, roles, and responsibilities of  contractor, federal civilian, and military personnel; assess the effectiveness of efforts to address prior weaknesses with  specific contracting arrangements and incentives; ensure that its acquisition workforce is adequately sized, trained, and  equipped to meet the department’s needs; and fully integrate operational contract support throughout the department  through education and predeployment training. DOD has generally agreed with the recommendations we have previously  made and has actions under way to implement them. Furthermore, DOD has taken several steps intended to improve planning  for the use of contractors in contingencies and to improve contract  administration and oversight. In June 2010, we called for a cultural change in DOD that  emphasizes an awareness of operational contract support throughout all  aspects of the department to help it address the challenges it faces in  ongoing and future operations. In a January 2011 memorandum, the Secretary of Defense  expressed concern about the risks introduced by DOD’s current level of  dependency on contractors, future total force mix, and the need to better  plan for operational contract support in the future. The Secretary’s recognition and directions  are significant steps, yet cultural change will require sustained  commitment from senior leadership for several years to come. State and USAID Confront Similar Contracting Challenges

While my statement has focused on the challenges confronting DOD, our  work involving State and USAID has found similar issues, particularly  related to not planning for and not having insight into the roles performed  by contractors and workforce challenges. More generally, in June 2010, we reported  that USAID’s 5-year workforce plan for fiscal years 2009 through 2013 had  a number of deficiencies, such as lacking supporting workforce analyses  that covered the agency’s entire workforce, including contractors, and not  containing a full assessment of the agency’s workforce needs, including  identifying existing workforce gaps and staffing levels required to meet  program needs and goals. Similarly, in April 2010, we noted that State’s departmentwide workforce  plan generally does not address the extent to which contractors should be  used to perform specific functions, such as contract and grant  administration. The agencies have generally agreed with the recommendations we have  made to address these challenges. To their credit, senior agency leaders  acknowledged that they came to rely on contractors and other  nongovernmental organizations to carry out significant portions of State  and USAID’s missions. As part of this effort, the QDDR called for  State and USAID to ensure that work that is critical to carrying out their  core missions is performed by an adequate number of government  employees.
Why GAO Did This Study

The Department of Defense (DOD) obligated about $367 billion in fiscal year 2010 to acquire goods and services to meet its mission and support its operations, including those in Iraq and Afghanistan. GAO's work, as well as that of others, has documented shortcomings in DOD's strategic and acquisition planning, contract administration and oversight, and acquisition workforce. These are challenges that need to be addressed by DOD and by the Department of State and the U.S. Agency for International Development (USAID) as they carry out their missions in Iraq and Afghanistan and prepare for future contingencies. Today's statement discusses (1) contract management challenges faced by DOD, including those that take on heightened significance in a contingency environment; (2) actions DOD has taken and those needed to address these challenges; and (3) similar challenges State and USAID face. The statement is drawn from GAO's body of work on DOD contingency contracting, contract management, and workforce, as well as prior reports on State and USAID's contracting and workforce issues.

What GAO Found

DOD faces a number of longstanding and systemic challenges that hinder its ability to achieve more successful acquisition outcomes--obtaining the right goods and services, at the right time, at the right cost. These challenges include addressing the issues posed by DOD's reliance on contractors, ensuring that DOD personnel use sound contracting approaches, and maintaining a workforce with the skills and capabilities needed to properly manage acquisitions and oversee contractors. The issues encountered with contracting in Iraq and Afghanistan are emblematic of these systemic challenges, though their significance and impact are heightened in a contingency environment. GAO's concerns regarding DOD contracting predate the operations in Iraq and Afghanistan. GAO identified DOD contract management as a high-risk area in 1992 and raised concerns in 1997 about DOD's management and use of contractors to support deployed forces in Bosnia. In the years since then, GAO has continued to identify a need for DOD to better manage and oversee its acquisition of services. DOD has recognized the need to address the systemic challenges it faces, including those related to operational contract support. Over the past several years, DOD has announced new policies, guidance, and training initiatives, but not all of these actions have been implemented and their expected benefits have not yet been fully realized. While DOD's actions are steps in the right direction, DOD needs to (1) strategically manage services acquisition, including defining desired outcomes; (2) determine the appropriate mix, roles, and responsibilities of contractor, federal civilian, and military personnel; (3) assess the effectiveness of efforts to address prior weaknesses with specific contracting arrangements and incentives; (4) ensure that its acquisition workforce is adequately sized, trained, and equipped; and (5) fully integrate operational contract support throughout the department through education and predeployment training. In that regard, in June 2010 GAO called for a cultural change in DOD that emphasizes an awareness of operational contract support throughout all aspects of the department. In January 2011, the Secretary of Defense expressed concerns about DOD's current level of dependency on contractors and directed the department to take a number of actions. The Secretary's recognition and directions are significant steps, yet instilling cultural change will require sustained commitment and leadership. State and USAID face contracting challenges similar to DOD's, particularly with regard to planning for and having insight into the roles performed by contractors. In April 2010, GAO reported that State's workforce plan did not address the extent to which contractors should be used to perform specific functions. Similarly, GAO reported that USAID's workforce plan did not contain analyses covering the agency's entire workforce, including contractors. The recently issued Quadrennial Diplomacy and Development Review recognized the need for State and USAID to rebalance their workforces and directed the agencies to ensure that they have an adequate number of government employees to carry out their core missions and to improve contract administration and oversight.

What GAO Recommends

GAO has made multiple recommendations to the agencies to address contracting and workforce challenges. The agencies have generally agreed with the recommendations and have efforts under way to implement them.