	Early Initiatives to Leverage Buying Power and Small Business Programs Fostered Collaboration Among DHS Organizations

In the three years since its creation, DHS realized some successes among  its various acquisition organizations in opening communication through its  strategic sourcing and small business programs. DHS’ disparate acquisition  organizations quickly collaborated on leveraging spending for various  goods and services, without losing focus on small businesses. This use of  strategic sourcing—formulating purchasing strategies to meet  departmentwide requirements for specific commodities, such as office  supplies, boats, energy, and weapons—helped DHS leverage its buying  power, with savings expected to grow. We also found that the small business program, whose reach  is felt across DHS, was off to a good start. Representatives have been  designated in each DHS procurement office to help ensure that small  businesses have opportunities to compete for DHS’ contract dollars. DHS Faces Key Challenges In Creating An Integrated Acquisition Organization

DHS continues to faces challenges in creating a unified, accountable  acquisition organization due to policies that create ambiguity as to  accountability for acquisition decisions, inadequate staffing to conduct  department-wide oversight, and heavy reliance on interagency contracting  in the Office of Procurement Operations, which is responsible for a large  portion of DHS’ contracting activity. Policy Directive Relies on Dual Accountability and Exempts Coast Guard and Secret Service

Achieving a unified and integrated acquisition system is hampered because  an October 2004 policy directive relies on a system of dual accountability  between the CPO and the heads of the department’s principal  organizations. The Coast Guard is one of the largest  organizations within DHS, with obligations accounting for about $2.2  billion in fiscal year 2005, nearly 18 percent of the department’s total. We reported in March 2005 that the CPO lacked sufficient staff  to ensure compliance with DHS’ acquisition oversight regulations and  policies. To a great extent, the various acquisition organizations within the  department were still operating in a disparate manner, with oversight of  acquisition activities left primarily up to each individual organization. We have ongoing work in this area  and will be reporting on the department’s progress in the near future. We found that the Office of Procurement Operations lacked adequate  internal controls to provide oversight of its interagency contracting  activity. As reported by DHS, the Office of Procurement Operations’ obligations  transferred to other agencies had decreased to 72 percent in fiscal year  2005.

	Review Process for Major Investments, Despite Use of Best Practices, Was Inconsistent and Lacked Some Management Controls

To protect its major, complex investments, DHS has put in place a review  process that adopts many acquisition best practices—proven methods,  processes, techniques, and activities—to help the department reduce risk  and increase the chances for successful investment outcomes in terms of  cost, schedule, and performance. While DHS’ framework includes key tenets of this approach, in March 2005  we reported that it did not require two critical management reviews. However, DHS policy does not establish cost  and schedule estimates for the acquisition based on knowledge from  preliminary designs. We have  cited the need for increased contractor tracking and oversight for several  large DHS programs. While many of DHS’ major investments use  commercial, off-the-shelf products that do not require the same level of  review as a complex, developmental investment would, DHS is investing in  a number of major, complex systems, such as TSA’s Secure Flight program  and the Coast Guard’s Deepwater program, that incorporate new  technology. Our work on these two systems highlights the need for  improved oversight of contractors and greater adherence to a best  practices approach to management review. TSA reports it has identified contract management as a key risk factor  associated with the development and implementation of Secure Flight. However, the steps taken so far are not enough to ensure that the  department is effectively managing the acquisition of the multitude of  goods and services it needs to meet its mission. This is a work of the U.S. government and is not subject to copyright protection in the  United States.
Why GAO Did This Study

The Department of Homeland Security (DHS) has some of the most extensive acquisition needs within the U.S. government. In fiscal year 2005, the department reported that it obligated almost $17.5 billion to acquire a wide range of goods and services. DHS's acquisition portfolio is broad and complex, including procurements for sophisticated screening equipment for air passenger security; technologies to secure the nation's borders; trailers to meet the housing needs of Hurricane Katrina victims; and the upgrading of the Coast Guard's offshore fleet of surface and air assets. This testimony summarizes GAO reports and testimonies, which have reported on various aspects of DHS acquisitions. It addresses (1) areas where DHS has been successful in promoting collaboration among its various organizations, and (2) challenges it still faces in integrating the acquisition function across the department; and (3) DHS' implementation of an effective review process for its major, complex investments. The information in this testimony is based on work that was completed in accordance with generally accepted government auditing standards.

What GAO Found

Since its establishment in March 2003, DHS has been faced with assembling 23 separate federal agencies and organizations with multiple missions and cultures into one department. This mammoth task involved a variety of transformational efforts, one of which is to design and implement the necessary management structure and processes for the acquisition of goods and services. We reported in March 2005 that DHS had opened communication among its acquisition organizations through its strategic sourcing and small business programs. With strategic sourcing, DHS' organizations quickly collaborated to leverage spending for various goods and services--such as office supplies, boats, energy, and weapons--without losing focus on small businesses, thus leveraging its buying power and increasing savings. Its small business program, whose reach is felt across DHS, is also off to a good start. Representatives have been designated in each DHS procurement office to ensure small businesses can compete effectively for the agency's contract dollars. We also reported that DHS' progress in creating a unified acquisition organization has been hampered by policy decisions that create ambiguity about who is accountable for acquisition decisions. To a great extent, we found that the various acquisition organizations within DHS were still operating in a disparate manner, with oversight of acquisition activities left primarily up to each individual organization. DHS continues to face challenges in integrating its acquisition organization. Specifically, dual accountability for acquisitions exists between the Chief Procurement Officer (CPO) and the heads of each DHS component; a policy decision has exempted the Coast Guard and Secret Service from the unified acquisition organization; the CPO has insufficient capacity for department-wide acquisition oversight; and staffing shortages have led the Office of Procurement Operations, which handles a large percentage of DHS's contracting activity, to rely extensively on outside agencies for contracting support--often for a fee. We found that this office lacked the internal controls to provide oversight of this interagency contracting activity. This last challenge has begun to be addressed with the hiring of additional contracting staff. Some of DHS's organizations have major, complex acquisition programs that are subject to a multi-tiered investment review process intended to help reduce risk and increase chances for successful outcomes in terms of cost, schedule, and performance. While the process includes many best practices, it does not include two critical management reviews, namely a review to help ensure that resources match customer needs and a review to determine whether a program's design performs as expected. Our prior reports on large DHS acquisition programs, such as the Transportation Security Administration's Secure Flight program and the Coast Guard's Deepwater program, highlight the need for improved oversight of contractors and adherence to a rigorous management review process.