FYDP Shows Partial Costs and Savings Estimates From BRAC and Competitive Sourcing

DOD expects savings from individual DRIs but has not incorporated  specific savings from these initiatives in the FYDP, except in the areas of  potential BRAC and competitive sourcing. Both have significant up-front  investment costs that can limit net savings in the short term. While  personnel reductions are programmed in the 1999-2003 FYDP and are  expected to represent a portion of savings from DRIs, DOD has not  required the services to link specific personnel reductions to individual  initiatives. Projected Competitive Sourcing Savings Are Significant but Do Not Fully Account for Investment Costs

DOD’s 1999-2003 FYDP projected $6.2 billion in savings from competitive  sourcing between fiscal year 1997 and 2003. Competitive Sourcing Savings Were Projected Using Historic Experience But Were Not Linked to Specific Study Plans

Savings from ongoing and future competitive sourcing studies as projected  in the 1999 FYDP were the result of broad-based estimates drawn from  previous experience. When the FYDP was being prepared, the projections  were not linked to specific functions then under study or planned for future  study. Our previous work has already shown that there are  important limitations to using historical savings estimates because they  may not provide an accurate indication of likely future savings. Actual savings data has not been captured. Specific Study Plans Continue to Evolve

Study plans of most Defense components linking the number of positions  to be studied with specific functions and locations are still evolving, and  estimated savings will not be known until the studies are completed. Consequently, it is not feasible to identify the current costs of functions to  be studied and their potential savings rates. 2461 requirements for congressional  notification. Other than specific cases brought to our attention,  procurement and commercial activities data systems do not identify the  extent to which Defense components may be outsourcing functions  without complying with these procedures or requirements. Conclusions

The costs and savings associated with Defense Reform Initiatives  incorporated in DOD’s 1999-2003 FYDP include partial costs and savings  from competitive sourcing and additional BRAC initiatives. There is no systematic way to identify whether components outsource  functions without following the requirements of OMB Circular A-76 or the  procedures of 10 U.S.C. Such cases can be identified only when they  are specifically raised. To determine whether Defense components outsourced inherently  governmental functions without allowing civilian employees to compete or  did not meet the requirements of 10 U.S.C. The A-76 Process

In general, the A-76 process consists of six key activities: (1) developing a  performance work statement and quality assurance surveillance plan; (2)  conducting a management study to determine the government's most  efficient organization (MEO); (3) developing an in-house government cost  estimate for the MEO; (4) issuing a Request for Proposals or Invitation for  Bids; (5) evaluating the proposals or bids and comparing the in-house  estimate with a private-sector offer or interservice support agreement and  selecting the winner of the cost comparison; and (6) addressing any  appeals submitted under the administrative appeals process, which is  designed to ensure that all costs are fair, accurate, and calculated in the  manner prescribed by the A-76 handbook.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO provided information on the Department of Defense's (DOD) Future Years Defense Program (FYDP), focusing on: (1) whether savings in DOD's fiscal year (FY) 1999-2003 FYDP were the result of DOD's Defense Reform Initiatives (DRI); (2) the extent to which savings and personnel reductions from competitive sourcing in the 1999-2003 FYDP were based on ongoing or planned studies of functions specifically identified under the Office of Management and Budget Circular A-76, and what percentage of the current costs of performing those functions were included from the projected savings from these studies; and (3) whether DOD components outsourced activities that included inherently governmental functions, without allowing civilian employees to compete under Circular A-76 procedures, or without following the study and notification requirements of 10 U.S.C. 2461.

What GAO Found

GAO noted that: (1) DOD expects savings from individual DRIs, but has not incorporated specific savings in the 1999-2003 FYDP from these initiatives, except in the areas of competitive sourcing and estimates relating to future base realignment and closure (BRAC) decisions; (2) DOD's 1999-2003 FYDP incorporated $6.2 billion of estimated savings from competitive sourcing between FY 1997 and 2003, but these estimated savings do not fully account for up-front investment costs, which could reduce the amount of actual savings in the short term; (3) the FYDP does provide a fuller estimate of the impact of investment costs associated with BRACs; (4) while DOD has requested additional BRAC rounds, Congress has not authorized them; (5) the Office of the Secretary of Defense expects DRIs to reduce personnel requirements but has not required the services to link specific reductions with individual initiatives; (6) savings from competitive sourcing reflected in the 1999 FYDP were not linked to specific functions under study or targeted for future studies; (7) in addition, DOD does not yet have the systems in place that can provide reliable cost information needed to precisely identify savings; (8) consequently, it is not feasible to accurately identify the current costs of functions to be studied or the potential savings as a percentage of these costs; (9) according to DOD, savings estimates incorporated in the FYDP represented broad projections based on the numbers of positions expected to be studied and historic savings data; (10) GAO's work has shown that historic savings estimates may have important limitations and may not accurately indicate likely current and future savings; (11) study plans of most DOD components have evolved over time, but in many cases they have not linked positions to be studied to specific functions and locations; (12) firm savings estimates probably will not be possible until individual studies are completed; (13) even then, these estimates would be subject to change; (14) procurement and commercial activities data systems do not identify the extent to which DOD components may be outsourcing functions without complying with Circular A-76 procedures or 10 U.S.C. 2461 congressional reporting requirements; and (15) such cases can be identified only when they are specifically raised by affected parties.