DOD Revised Section 845 Guide as Recommended

In December 2000, the Under Secretary of Defense for Acquisition and Technology issued a revised guide that sets out the conditions and framework for using Section 845 agreements. The guide is effective for all solicitations issued after January 5, 2001, and provides a useful framework for tailoring the terms and conditions appropriate for each agreement. DOD agreements officers view the new guide as a significant improvement over the prior version. Number of Nontraditional Contractors Is Captured as a Performance Metric

After exploring a number of performance indicators for Section 845 agreements, DOD selected one quantitative performance metric—the extent of nontraditional contractor participation—which is tracked by the Office of Defense Procurement. Because information on nontraditional participants—DOD’s key performance metric—is not summarized, it is difficult for Congress to assess how successful DOD has been in achieving this metric. DOD also is not regularly reporting on or assessing the benefits derived from completed Section 845 agreements. DOD officials commented that the law only requires them to report on projects awarded in the previous fiscal year. Further, in the absence of regular assessments of the benefits derived from completed projects, DOD and the Congress lack vital information on the results the government is deriving from this flexible procurement strategy. The experience that DOD has gained from the use of Section 845 authority can be useful to Congress as it makes decisions about subsequent extensions of this authority to DOD and in future congressional deliberations. To determine whether Congress is receiving adequate information on the number of nontraditional defense contractors participating in Section 845 agreements and whether DOD is assessing the benefits derived from completed projects, we reviewed the Section 845 portion of the annual reports for fiscal years 1999 through 2001 and the supplemental reports provided to Congress in fiscal years 1999 and 2000. Appendix I: Comments from the Department of Defense

Appendix II: Report of Other Transactions for Prototype Projects
What GAO Found

In April 2000, GAO reported on the Department of Defense's (DOD) use of Section 845 agreements, also referred to as "other transactions" for prototype projects. These are transactions other than contracts, grants, or cooperative agreements that generally are not subject to federal laws and regulations applicable to procurement contracts. In December 2000, DOD revised its Section 845 guide. The guide specifies when Section 845 agreements may be used and provides criteria for tailoring terms and conditions for each agreement. Officials from the military services and defense agencies have found the new guide useful and a significant improvement over the prior version. The Secretary of Defense has required a metric--the number of participating nontraditional defense contractors--which is measurable and directly related to each agreement. This metric is tracked and reported internally. DOD explored additional metrics, but concluded that the number of nontraditional contractors was the only one that was quantifiable and tied directly to Section 845 outcomes. DOD's annual report to Congress on Section 845 agreements consists of summaries on each agreement. However, the key metric--the number of nontraditional contractors--is not clearly presented in these reports, making it difficult to gauge DOD's progress in achieving success on this objective. Further, DOD is not regularly assessing reporting on the benefits derived from completed Section 845 projects. In the absence of such assessments, congressional and DOD decision makers lack a vital piece of information that would help them determine whether this flexible procurement authority is achieving expecting results.