	Separating Wants from Needs

Given the current fiscal environment, agencies need to learn to separate  wants from needs to ensure that programs and investments provide the  best return within fiscal constraints. Our work has shown that agencies sometimes budget and allocate  resources incrementally, largely based on historical precedents, rather  than conduct bottom-up reviews and allocate resources based on the  broader goals and objectives of agency strategic plans. We have also seen examples of agencies having fragmented decision- making processes for acquisition investments, failing to consider  agencywide needs and resource limitations. Such spending can circumvent careful planning and  divert resources from more critical needs. This can also serve to  exacerbate our serious long-range fiscal imbalance. Establishing and Supporting Realistic Program Requirements

After differentiating their unlimited wants from their true needs, agencies  need to translate their needs into appropriate, executable programs. They also need to ensure that  programs proceed through the acquisition process based on having  requisite knowledge and that programs are funded adequately. I believe that even if more funding were provided, it would not be a  solution because wants will usually exceed the funding available. Although U.S.  weapon systems are the best in the world, the programs to acquire them  often take significantly longer and cost significantly more than promised  and often deliver smaller quantities and different capabilities than  planned. Using Contractors in Appropriate Circumstances and Contracts as a Management Tool

The next set of systemic acquisition challenges relate to those faced at the  contract management level. Once the decision to contract has been made, we have observed  challenges in setting contract requirements, using the appropriate contract  with the right incentives given the circumstances, and ensuring proper  oversight of these arrangements—especially considering the evolving and  enlarging role of contractors in federal acquisitions. The failure to  adequately address these challenges explains, in part, why agencies  continue to experience poor acquisition outcomes in buying major  systems, goods, and services. Compounding this risk is the growing reliance on contractors to  perform functions previously carried out by government personnel. Creating a Capable Workforce and Holding It Accountable

The last set of challenges I will discuss relate to having a capable  acquisition workforce and holding it accountable. The acquisition workforce’s workload and complexity of responsibilities  have been increasing without adequate agency attention to the  workforce’s size, skills and knowledge, and succession planning. At the same time that the federal acquisition workforce has decreased in  numbers and the size of its investments in goods and services has  increased significantly, the nature of the role of the acquisition workforce  has been changing and, as a result, so have the skills and knowledge  needed in that workforce to manage more complex contracting  approaches. 2. 4. Illustrative examples of  waste could include the following:    unreasonable, unrealistic, inadequate, or frequently changing    proceeding with development or production of systems without  achieving an adequate maturity of related technologies in situations  where there is no compelling national security interest to do so;  the failure to use competitive bidding in appropriate circumstances;    an over-reliance on cost-plus contracting arrangements where  reasonable alternatives are available;  the payment of incentive and award fees in circumstances where the  contractor’s performance, in terms of costs, schedule, and quality  outcomes, does not justify such fees;  the failure to engage in selected pre-contracting activities for contingent  events; and    congressional directions (e.g., earmarks) and agency spending actions  where the action would not otherwise be taken based on an objective  value and risk assessment and considering available resources. Department of Defense: Sustained Leadership Is Critical to Effective  Financial and Business Management Transformation. Contract Management: DOD Vulnerabilities to Contracting Fraud, Waste,  and Abuse.
Why GAO Did This Study

In fiscal year 2006, the federal government spent over $400 billion for a wide variety of goods and services, with the Department of Defense (DOD) being the largest purchaser. Given the large and growing structural deficit, the government must get the best return it can on its investment in goods and services. For decades, GAO has reported on a number of systemic challenges in agencies' acquisition of goods and services. These challenges are so significant and wide-ranging that GAO has designated four areas of contract management across the government to be high-risk. This testimony highlights four key acquisition challenges agencies face: (1) separating wants from needs, (2) establishing and supporting realistic program requirements, (3) using contractors in appropriate circumstances and contracts as a management tool, and (4) creating a capable workforce and holding it accountable.

What GAO Found

Given the current fiscal environment, agencies must separate wants from needs to ensure that programs provide the best return on investments. Our work has shown that some agencies budget and allocate resources incrementally, largely based on historical precedents, rather than conducting bottom-up reviews and allocating resources based on agencywide goals. We have also seen examples of agencies using fragmented decision-making processes for acquisition investments. Agency spending actions that would not otherwise be taken based on an objective value and risk assessment and considering available resources, work against good strategic planning. Such spending can circumvent careful planning and divert resources from more critical needs, and can serve to exacerbate our serious long-range fiscal imbalance. Agencies also need to translate their true needs into executable programs by setting realistic and stable requirements, acquiring requisite knowledge as acquisitions proceed through development, and funding programs adequately. However, agencies too often promise capabilities they cannot deliver and proceed to development without adequate knowledge. As a result, programs take significantly longer, cost more than planned, and deliver fewer quantities and different capabilities than promised. Even if more funding were provided, it would not be a solution because wants will usually exceed the funding available. No less important is the need to examine the appropriate circumstances for using contractors and address contract management challenges. Agencies continue to experience poor acquisition outcomes in buying goods and services in part because of challenges in setting contract requirements, using the appropriate contract with the right incentives, and ensuring sufficient oversight. Exacerbating these challenges is the evolving and enlarging role of contractors in performing functions previously carried out by government personnel. Further, while contract management challenges can jeopardize successful acquisition outcomes in normal times, they also take on heightened importance and significantly increase risks in the context of contingency operations such as Afghanistan, Iraq, or Hurricane Katrina. Finally, it is imperative that the federal government develop an accountable and capable workforce, because the workforce is ultimately responsible for strategic planning and management of individual programs and contracts. Yet much of the acquisition workforce's workload and complexity of responsibilities have been increasing without adequate attention to the workforce's size, skills and knowledge, and succession planning. Sustained high-level leadership is needed to set the right tone at the top in order to address acquisition challenges and ultimately, prevent fraud, waste, and abuse.