Despite this huge investment in buying services, our work—and the  work of the DOD Inspector General—has found that DOD’s spending on  services could be more efficient and more effectively managed. Pursuing such a strategic approach clearly pays off. Private sector experience demonstrates the  need to change how services are acquired—by modernizing management  structure and business processes—and setting performance goals,  including savings, and establishing accountability for achieving them. I for a  descriptive comparison of DOD and military department policies.) In response to the legislative requirement to develop an automated system  to collect and analyze data, DOD has started a spend analysis pilot that  views spending from a DOD-wide perspective and identifies large-scale  savings opportunities. DOD has not established a strategic plan that provides a  road map for transforming its services contracting process and recognizes  the integrated nature of services contracting management problems and  their related solutions. Given that DOD’s spending on services  contracts is approaching $100 billion annually, the potential benefits for  enhancing visibility and control of services spending are significant. DOD expects that various initiatives being pursued to enhance services  acquisition management structures and processes—such as the  management structure for reviewing individual service acquisitions valued  at more than $500 million and the spend analysis pilot assessed in this  report—will ultimately provide the information with which to decide  what overarching joint management and business process changes are  necessary. However, it is too early to tell if these  early efforts will lead DOD and the military departments to make the type  of long-term changes that are necessary to achieve significant results in  terms of savings and service improvements. As described in the  legislative history, these requirements provide tools with which the  department can promote the use of best commercial practices to reform  DOD’s services procurement management and oversight and to achieve  significant savings.
Why GAO Did This Study

The Department of Defense's (DOD) spending on service contracts approaches $100 billion annually, but recent legislation directs DOD to manage its services procurement more effectively. Leading companies transformed management practices and achieved major savings after they analyzed spending patterns and coordinated procurement. This report evaluates DOD's implementation of the legislation in light of congressional interest in promoting the use of best commercial practices for acquiring services.

What GAO Found

DOD and the military departments each have a management structure in place for reviewing individual services acquisitions valued at $500 million or more, but that approach does not provide a departmentwide assessment of how spending for services could be more effective. Greater attention is needed by DOD management to promote a strategic orientation by setting performance goals, including savings goals, and ensuring accountability for achieving them. To support management decisions and improve visibility over spending on service contracts, DOD is developing an automated system to collect and analyze data by piloting a spend analysis. The analysis views spending from a DOD-wide perspective and identifies large-scale savings opportunities, but its scope is limited, and it is too early to tell how the department can make the best use of its results. The military departments are in the early stages of separate initiatives that may lead them to adopt a strategic approach to buying services, but DOD lacks a plan that coordinates these initiatives or provides a road map for future efforts.