To help ensure the increased use of  commercial acquisition, OSD established and the Air Force implemented  two commercial acquisition goals to be achieved by the end of fiscal year  2005. In setting these goals, OSD expected that the increased use of commercial  acquisition would provide DOD with greater access to commercial  markets (products and service types) with increased competition, better  prices, and new market entrants and/or technologies. The Air Force Has Increased Commercial Acquisition Spending

As its overall spending has increased, the Air Force has increased  spending using commercial acquisition, from $4.8 billion in fiscal year 2001  to over $8 billion in fiscal year 2005 (see fig. 2). However, our analysis indicates  that for at least one of the expected benefits, attracting new market  entrants, the expected benefit has not materialized. Benefits Expected from Commercial Acquisition Have Not Been Measured

OSD has indicated that the increased use of commercial acquisition should  bring about the benefits of greater access to commercial markets,  including increased competition, getting better prices, and access to new  market entrants (contractors) and/or technologies. For example, improperly classifying an acquisition as a  commercial acquisition leaves the Air Force vulnerable to accepting prices  that may not be the best value for the department because under  commercial acquisition regulations, the government is precluded from  requesting cost or pricing information. Our review of Air Force contract  files and DOD Inspector General reports showed that Air Force officials  disagreed about the designation of some acquisitions as commercial. Furthermore, the director of Defense Procurement and Acquisition Policy  recently testified before the Federal Acquisition Advisory Panel that he is  concerned about some items and services being identified as commercial  that are not sold in an existing marketplace because there are no  assurances that the price is reasonable. The Air Force use of commercial  acquisition has been accompanied by an increased amount of dollars being  awarded sole-source. Also, of the 20  new commercial awards for products over $5 million in fiscal year 2004,  half were awarded sole-source, with traditional contractors receiving most  of those sole-source awards. Furthermore, at least one  of the expected benefits of commercial acquisition—attracting new  market entrants—has not materialized through the Air Force’s use of sole- source commercial acquisitions for products in fiscal year 2004. For  example, the Air Force could measure the number of nontraditional  contractors it reaches using commercial acquisition. Appendix VII: Comments from the Department of Defense
Why GAO Did This Study

The Department of Defense (DOD) has been urged by commissions, legislation, and a panel to make increased use of commercial acquisition to achieve certain benefits. To help ensure the increased use of commercial acquisition, the Office of the Secretary of Defense (OSD) established and the Air Force implemented two commercial acquisition goals to be achieved by the end of fiscal year 2005. In setting these goals, OSD expected that the increased use of commercial acquisition would provide DOD with greater access to commercial markets (products and service types) with increased competition, better prices, and new market entrants and/or technologies. The committee asked GAO to identify (1) the extent to which the Air Force has increased its use of commercial acquisition to obtain expected benefits and (2) the risks that are associated with this use.

What GAO Found

From 2001 to 2005, the Air Force increased spending using commercial acquisition from $4.8 billion to over $8 billion in an effort to provide greater access to commercial markets to increase competition, obtain better prices, and attract new market entrants (nontraditional contractors) and/or technologies. Even though the Air Force has significantly increased this spending, it has not measured the extent to which this increased use resulted in the benefits that were expected. For example, our analysis shows that for at least one of the expected benefits, attracting new market entrants, the expected benefit has not materialized. For the most part, traditional defense contractors received these contracts. Government contracting officials face risks in using commercial acquisition. For example, improperly classifying an acquisition as a commercial acquisition can leave the Air Force vulnerable to accepting prices that may not be the best value for the department. A high-ranking DOD acquisition official testified that he is concerned about items and services being identified as commercial that are not sold in an existing marketplace because under these circumstances, the government lacks assurances that the price is reasonable. At times, Air Force officials have disagreed about the classification of some acquisitions as commercial. The Air Force's use of commercial acquisition has also been accompanied by an increased amount of dollars being awarded for sole-source contracts. Despite DOD policy to avoid sole-source commercial acquisitions because of increased risk, sole-source commercial acquisition dollars awarded by the Air Force have more than doubled from 2000 to 2005. Further, of the 20 larger Air Force commercial product awards in 2004, half were awarded as sole-source.