The January 2016 instruction calls for the strategic management of the  acquisitions of contracted services. This limited  DOD’s leadership insight into future spending on contracted services. Limited Implementation of Key Leadership Positions Impedes Effective Strategic Management of Service Acquisitions

DOD has not fully implemented the three key leadership positions— FDEs, CLLs, and SSMs—that were identified in DOD’s January 2016  instruction and which were to enable DOD to more strategically manage  service acquisitions. DPAP-SA officials noted that the officials appointed  to be FDEs had multiple responsibilities, and considered their FDE roles  as secondary. Additionally, CLLs largely existed in name only. Consequently, FDEs and CLLs have had a minimal effect on how DOD  manages services. In particular, SSM officials  cited cultural barriers to implementing the hierarchical approach to service  acquisition envisioned in DOD’s January 2016 instruction, in part because  each military department has traditionally taken a decentralized approach  to managing services. DPAP-SA officials responsible for  services were aware of the implementation challenges and have efforts  underway to revise the January 2016 instruction, in part to further clarify  position authorities and responsibilities. The three SSMs we interviewed were  unsure about the value of FDEs and CLLs and how these positions were  to influence decisions made by the commands. In that regard, our  analysis of DOD fiscal year 2016 service contract obligations found that  depending on the organization’s structure and mission, specific  commands within the military departments award the majority of contract  obligations for particular portfolios of services (see table 4). Federal internal control standards state that management should  establish an organizational structure, assign responsibilities, and delegate  authorities to achieve its objectives. SRRB Implementation at the Military Departments Has Had a Minimal Effect on Strategic Management of Service Requirements

DOD’s January 2016 instruction formalized the requirement to hold  SRRBs to validate, prioritize, and approve service requirements from a  holistic viewpoint—an approach that comprehensively considers service  requirements within and across portfolios. We found, however, that the  three military commands we reviewed did not implement SRRBs that  approved service requirements from a holistic perspective, but instead  leveraged their existing contract review boards, which focus their efforts  on assuring proposed contract solicitations and awards are in compliance  with federal acquisition regulations and DOD guidance. As a  result, SRRBs at the three commands we reviewed had a minimal effect  on supporting trade-off decisions in the service portfolios or assessing  opportunities for efficiencies and eliminating duplicative requirements that  could inform the command’s program objective memorandum (POM)  submissions. Federal internal control standards call for agency management to identify,  analyze, and respond to risks related to achieving defined objectives. Until DOD clarifies the  purpose and timing of the SRRB process, DOD components may not be  achieving the expected benefits of DOD’s SRRB process. Recommendations for Executive Action

To help foster strategic decision making and improvements in the  acquisition of services, we recommend that the Under Secretary of  Defense for Acquisition, Technology, and Logistics take the following two  actions as part of its effort to update the January 2016 instruction:
Reassess the roles, responsibilities, authorities, and organizational  placement of key leadership positions, including functional domain  experts, senior services managers, and component level leads; and
Clarify the purpose and timing of the SRRB process to better align it  with DOD’s programming and budgeting processes. Regarding our first recommendation, DOD concurred with the need to  reassess key leadership positions roles and responsibilities.
Why GAO Did This Study

In fiscal year 2016, DOD obligated about $150 billion, or just over half of its total contract spending, on contracted services. In January 2016, DOD issued an instruction on services that identified three key leadership positions, and clarified their roles and responsibilities, and called for Services Requirements Review Boards to holistically approve service requirements above $10 million.
The House Armed Services Committee report accompanying the National Defense Authorization Act for Fiscal Year 2015 included a provision for GAO to report on DOD's acquisition of contracted services. This report assesses implementation of (1) key services acquisitions leadership positions and (2) Services Requirements Review Boards.
GAO reviewed the roles and responsibilities of the three key leadership positions identified in DOD's January 2016 instruction. GAO also selected three military commands with large fiscal year 2015 contracted services obligations based on analysis of federal procurement spending; reviewed Review Board implementation for the selected commands; and interviewed responsible DOD, military department, and command officials.

What GAO Found

The Department of Defense (DOD) has not fully implemented the three key leadership positions—functional domain experts (FDE), component level leads (CLL), and senior services managers (SSM)—that were identified in DOD's January 2016 instruction and which were to enable DOD to more strategically manage service acquisitions (see table).
Defense Procurement and Acquisition Policy officials noted that the officials appointed to be FDEs had multiple responsibilities, and considered their FDE roles as secondary. Additionally, CLLs largely existed in name only. Consequently, FDEs and CLLs had a minimal effect on how DOD manages services. GAO also found that SSMs—who are responsible for implementing the January 2016 instruction within their military departments—were unsure about the value of FDEs and CLLs and how these positions should influence decisions made by the commands. Moreover, the SSMs GAO interviewed cited cultural barriers to implementing the hierarchical, portfolio-management approach to service acquisition envisioned in DOD's January 2016 instruction, in part because each military department has traditionally taken a decentralized approach to managing services. Defense Procurement and Acquisition Policy officials responsible for services were aware of these challenges and have begun efforts to revise the January 2016 instruction, in part to further clarify position authorities and responsibilities. Federal internal control standards state that management should establish an organizational structure, assign responsibilities, and delegate authorities to achieve its objectives.
Services Requirements Review Boards were intended to prioritize and approve services in a comprehensive portfolio-based manner in order to achieve efficiencies, but the military commands GAO reviewed did not do so. Instead, commands largely leveraged existing contract review boards that occurred throughout the year and focused on approving individual contracts. As a result, the Services Requirements Review Boards at these commands had minimal effect on supporting trade-off decisions within and across service portfolios or capturing efficiencies that could inform the command's programming and budgeting decisions. Federal internal control standards call for management to identify, analyze, and respond to risks related to achieving defined objectives. Until DOD clarifies the purpose and timing of the Services Requirements Review Boards process, DOD components will not achieve the expected benefits as anticipated in the January 2016 instruction.

What GAO Recommends

GAO recommends that DOD reassess the roles, responsibilities, authorities, and organizational placement of the three key leadership positions; and clarify policies concerning the purpose and timing of the Review Board process. DOD concurred with the recommendations.