DOD has not systematically tracked or updated the savings estimates from competitions. OMB has recognized DOD as the pacesetter among government agencies in the use of competitions to gain economies and efficiencies in operations and to reduce support costs. Prior to establishing the competition goal of 229,000 positions, DOD aimed for cumulative savings of about $6 billion between fiscal years 1997 and 2003. That goal still existed at the time we completed our review and DOD has already begun to reduce future years operating budgets of components in anticipation of these savings and to transfer the expected savings to their research and development and procurement accounts to increase funding for weapon system modernization. Initial Savings Are Likely to Be Less Than Estimated

The projections of competition savings that DOD provided to Congress in fiscal year 1998 appear overstated. While the components are registering concern about these costs, they have not yet developed comprehensive assessments of them. Rather, it expects to use military personnel released as a result of the competitions to fill other priorities. Some components have expressed concerns about these goals. Reductions are also planned as a result of legislative requirements. Another Air Force official said that most major commands are concerned about the effects of funding A-76 competitions and of personnel separation costs on their installations. However, comprehensive planning among the services to identify specific functions and locations for competition has been limited. Consequently, the estimated savings between fiscal year 1997 and 2003 are overstated. Also, the number of competitions DOD expects to complete over the next several years continues to increase, even as difficulties in meeting previous goals grow. Scope and Methodology

For this report, we (1) identified the Department of Defense’s (DOD) competitive sourcing study and savings goals, (2) assessed the accuracy of the savings estimates provided to Congress, and (3) evaluated the adequacy of program planning to support the overall program. The A-76 Process

In general, the A-76 process consists of six key activities—(1) developing a performance work statement and quality assurance surveillance plan; (2) conducting a management study to determine the government’s most efficient organization (MEO); (3) developing an in-house government cost estimate for MEO; (4) issuing a Request for Proposals or Invitation for Bid; (5) evaluating the proposals or bids and comparing the in-house estimate with a private sector offer or interservice support agreement and selecting the winner of the cost comparison; and (6) addressing any appeals submitted under the administrative appeals process, which is designed to ensure that all costs are fair, accurate, and calculated in the manner prescribed by the A-76 handbook. 11, 1997).
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) use Office of Management and Budget Circular A-76 as a means of realizing an estimated $6 billion savings in support costs between fiscal years (FY) 1997 and 2003, focusing on: (1) identifying the competition and savings goals; (2) assessing the accuracy of the savings estimates provided to Congress; and (3) evaluating the adequacy of planning to support the overall program.

What GAO Found

GAO noted that: (1) DOD has underway an unprecedented program to use competitions to gain economies and efficiencies in its operations and to reduce support costs; (2) while the numbers have evolved over time, as of now, DOD is planning to open over 229,000 government positions to competition within the public and private sectors over the next several years; (3) it estimates $6 billion cumulative savings between FY 1997 and FY 2003, and $2.3 billion in recurring savings each year thereafter, as a result of these efforts; (4) however, estimates of competitive savings provided to Congress in FY 1998 are overstated, and several issues are likely to reduce the estimated savings, at least in the short-term; (5) DOD has not fully calculated either the investment costs associated with undertaking these competitions or the personnel separation costs likely to be associated with implementing them; (6) further, there are numerous indications that DOD components have already begun to experience difficulties in launching and completing the competitions within the timeframes they initially projected; (7) as a result, the achievement of savings may be delayed; (8) various officials have expressed concern about the effects of not achieving the expected savings because reductions in future operating budgets have already been planned in anticipation of these savings; (9) comprehensive planning to identify specific functions and locations for competition among the services has been limited; (10) within individual military services, it has largely been up to individual installations or major commands to identify and prioritize specific activities and functions for study and to conduct competitions; and (11) the one service that has carried out a comprehensive assessment, the Air Force, has identified a potential shortfall in viable candidates for competition.