Volpe Center contracting is regulated by the Federal Acquisition Regulation. DOD Cost Initiative Expanded Statutory Requirements

In advance of promulgating regulations, the Secretary issued a policy memorandum in February 1994 that imposed limitations on the use of Economy Act orders by DOD activities. The Secretary’s policy, which addressed Economy Act orders released outside of DOD for contract action, was, however, more stringent than either the National Defense Authorization Act for Fiscal Year 1994 or the Economy Act in the area of cost considerations by requiring a determination that the supplies or services cannot be provided “as conveniently and cheaply” by contracting directly with a private source. Coast Guard Has Initiated Cost Reforms Similar to DOD

The Coast Guard, which is a component of the Department of Transportation, has acquired services from the Volpe Center. In November 1994, the Coast Guard issued an instruction providing guidance on its use of the center. DOD Is Still Adjusting to Contracting Changes

The Air Force, Army, and Navy have each taken a different approach to implementing the Secretary’s policy memorandum. While there is considerable up-to-date guidance available to contracting officials on interagency purchases, not all DOD files on Volpe Center projects we reviewed contained required information. In addition, DOD has not yet implemented a statutorily mandated monitoring system for interagency purchases; the monitoring system is currently scheduled for implementation in October 1995. The D&F must be approved at a level no lower than senior executive service, flag or general officer, or activity commander. However, the more recent declines may be a result of the 1993 Subcommittee hearing, resulting legislation, and the 1994 implementation of a more restrictive contracting environment by the Secretary of Defense. As with the DOD data, it is difficult to identify exact causes for the downward trend. FASA did not require the more stringent “and” language applicable within DOD. Such procedures are consistent with FASA. We performed work at the Department of Transportation’s Volpe National Transportation Systems Center, Cambridge, Massachusetts, and Headquarters, United States Coast Guard, Washington, D.C. We also contacted policy representatives within the Office of the Assistant Secretary of the Air Force for Acquisition; the Office of the Assistant Secretary of the Army for Research, Development, and Acquisition; and the Office of the Assistant Secretary of the Navy for Research, Development, and Acquisition.
Why GAO Did This Study

Pursuant to a congressional request, GAO examined the: (1) impact of the Department of Defense's (DOD) policy changes for interagency orders on the Department of Transportation's Volpe National Transportation Systems Center; and (2) Coast Guard's recent initiatives and legislative changes extending the statutory requirements on interagency orders to other federal agencies.

What GAO Found

GAO found that: (1) because of past practices, the National Defense Authorization Act for Fiscal Year 1994 required the Secretary of Defense to issue regulations that strengthened controls over DOD's interagency orders for goods and services; (2) in a February 1994 memorandum, and in advance of the statutorily required regulations, the Secretary took additional steps to increase DOD's interagency transaction controls by requiring, among other things, that DOD's interagency orders be as convenient and cheap as other alternatives and approved at a level no lower than senior executive service, general officer, flag officer, or activity commander; (3) in November 1994, the Coast Guard independently developed reforms that paralleled these DOD initiatives; (4) DOD is still adjusting to the changes introduced by Congress and the Secretary; (5) there is an abundance of guidance available to Air Force, Army, and Navy contracting activities, but a sample of fiscal year (FY) 1995 Volpe Center purchases showed that not all files contained the information required by the Secretary's memorandum; (6) in addition, DOD has not yet implemented a statutorily mandated monitoring system for its interagency purchases; (7) the monitoring system is currently scheduled for implementation in October 1995; (8) DOD contracting with the Volpe Center has been declining since FY 1992; (9) while it is difficult to pinpoint exact causes for the downward trend, more recent declines appear to be a result of DOD's implementation of the more restrictive environment for interagency orders; (10) likewise, a similar recent decline in Coast Guard purchases at the Volpe Center appears to be related to the introduction of the Coast Guard reforms; (11) the Federal Acquisition Streamlining Act (FASA) generally extended the restrictive interagency transaction controls applicable to DOD to other federal agencies; and (12) the implementing draft regulation, while consistent with FASA, is not as stringent as the DOD or Coast Guard cost policies.