oversight

Command and Control: Defense's Use of Engineering Contractors for Acquiring Automated Systems

Published by the Government Accountability Office on 1990-12-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

    .~I“.“. l._ll..-...---_- . - -....-- .-.... _.   _-_-- .._._ .^ _.




                                                                         Defense’s Use of
                                                                         Engineering
                                                                         Contractors for
                                                                         Acquiring Automated
                                                                         Systems




                                                                                                  RELEASED
                                                                    RESTRICTED --Not      to be released outside the
                                                                    General Accounting Office unless speclflcally
,                                                                   approved by the Office of Congressional
                                                                    Relations.


    GAO,‘IM’I‘E(:-91-19
---
                   United States
GAO                General Accounting  Office
                   Washington, D.C. 20648

                   Information    Management    and
                   Technology    Division

                   B-242025

                   December 27,199O

                   The Honorable William V. Roth, Jr.
                   United States Senate

                   Dear Senator Roth:

                   The Department of Defense depends on in-house and outside technical
                   expertise to design and develop highly complex command, control, com-
                   munications, and intelligence (@I) systems. Defense relies on engineering
                   support contractors for advice and direction on automated data
                   processing software engineering, system architecture, and hardware
                   design and development. In November 1989 you asked us to determine
                   the extent to which Defense uses engineering support contractors. As
                   agreed in later discussions with your office, this report describes the
                   kinds of services these contractors perform and the cost of the
                   contracts.

                   Defense did not know the overall extent to which its components use
                   outside engineering and technical support services. To obtain this infor-
                   mation, we developed and gave a data collection instrument to Defense
                   components that acquire c31 systems. Appendix I details our objective,
                   scope, and methodology. As used in this report, engineering and tech-
                   nical support services include (1) systems engineering, which often
                   includes system integration functions; (2) task engineering, which usu-
                   ally deals with specific areas of responsibility, such as preparing test
                   specifications and documents; and (3) technical support services, which
                   support different functions, such as acquisition support and data man-
                   agement. (See app. II.)


                   Defense provided data showing that from fiscal years 1985 through
Results in Brief   1989 it spent about $3.4 billion for engineering and technical services in
                   support of @I acquisitions. The Air Force was by far the largest user,
                   accounting for over $2 billion of the $3.4 billion spent. Defense’s annual
                   expenditures went from $494.5 million in fiscal year 1985 to $891.7 mil-
                   lion in fiscal year 1989, an 80-percent increase.


                   Defense supplements its own efforts to develop and acquire automated
Background   Y     c31 systems by relying on engineering support contractors for advice and
                   direction. The support contractors are for-profit companies, and non-



                   Page 1             GAO/IMTEC91-19   Defense’s Use of Contractors   for Automated   Systems
                    B242026




                    profit entities including federally-funded research and development cen-
                    ters such as the Mitre Corporation in Massachusetts and the Oak Ridge
                    National Laboratory in Tennessee. These centers are government-spon-
                    sored institutions set up to meet a special long-term need that neither
                    government agencies nor the private sector can meet.

                    Support contractors offer a wide range of engineering and technical ser-
                    vices. Mitre, for example, serves most often as general systems engineer
                    and integrator for the Air Force’s Electronic Systems Division’s major C”I
                    systems acquisitions and, as such, assumes full technical responsibility
                    for program success. The Electronic Systems Division uses for-profit
                    contractors for task engineering and technical support services-only
                    rarely does the Division use them in the role of systems engineer.

                    Defense officials responsible for acquiring @I systems differed on how
                    they defined engineering and technical support services. In order to
                    establish a common definition, we met with Defense officials and agreed
                    on the following support categories: (1) systems engineering, (2) task
                    engineering, and (3) technical support services.

                    Typically, Defense’s accounting systems do not capture the costs for
                    engineering and technical support services for @I system acquisitions.
                    Consequently, we designed a data collection instrument to obtain cost
                    data on a contract-by-contract basis from each component. The Office of
                    the Assistant Secretary of Defense distributed it to Defense components
                    that acquire 61 systems.


                    For fiscal years 1985 through 1989, Defense had active engineering and
Defense’s Use of    technical support service contracts totaling about $4.7 billion.’ Defense
Engineering and     spent over $3.4 billion to support @I acquisitions during these 5 years.
Technical Support   As figure 1 shows, the Air Force accounted for over 59 percent of these
                    expenditures.
Services




                    ‘This total includes a small amount for non-C31acquisitions. Further, because some contracts cover
                    several years, the total includes some engineering and technical support services that may have
                    occurred before fiscal year 1986, or after fiscal year 1989.



                    Page 2                  GAO/IMTEC-91-19     Defense’s Use of Contractors    for Automated   Systems
                                      0242025                                                    R




Figure 1: Percentage of @ I Support
Expenditure8 by Defense Component
(Fiscal Years 1985-1989)                                                           9.4%
                                                                                   Defense Communications Agency
                                                                                   .9%
                                                                                   Defense Intelligence Agency
                                                                                   6.2%
                                                                                   Defense Mapping Agency
                                                                                  9.7%
                                                                                   Navy

                                                     7                            &!%of       the Secretary of Defense




                                                                                  Air Force




                                                I                                 Army


                                      As appendix III shows, Defense expenditures for engineering and tech-
                                      nical support increased by about $397 million, or 80 percent, from fispal
                                      year 1985 to fiscal year 1989. The Navy showed the largest increase, up
                                      308 percent, from $27.7 million in fiscal year 1985 to $113 million in
                                      fiscal year 1989. The Defense Communications Agency increased the
                                      least, up about 15 percent, from $61.4 million to $70.3 million over the
                                      same period.

                                      W ithin the specific support categories, systems engineering expenhi-
                                      tures far exceeded the sum of the other two support categories-task
                                      engineering and technical support. Defense reported expenditures for
                                      systems engineering, task engineering, and technical support services
                                      separately and in various combinations. For support that was reported


                                      Page 3             GAO/IMTEGDl-19   Defense’s Use of Contra&m     for Automated    Systems
5242025




exclusively as systems engineering, Defense expended almost $2.3 bil-
lion (66 percent of total expenditures). Similarly, technical support and
task engineering accounted for about $388.3 million and about $40.4
million, respectively. Defense also reported $728.3 million of support
expenditures as some combination of the three categories. (See app. IV.)

Nonprofit contractors accounted for almost $2 billion (58 percent of
total expenditures), with over 99 percent of the money going to the
Mitre and Aerospace corporations. For-profit contractors accounted for
the remaining 42 percent (about $1.45 billion), with General Electric
Co., International Telephone and Telegraph Corp., Analytic Sciences
Corp., and Planning Research Corporation among the largest recipients.
More specific details can be found in appendixes IV and V.


Our review was conducted from January through November 1990, in
accordance with generally accepted government auditing standards. We
did not obtain official agency comments; however, we discussed the con-
tents of the report with Defense officials, and made changes where
appropriate.

As arranged with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days from
the date of this letter. At that time, we will send copies of this report to
the Secretary of Defense; the Secretaries of the Air Force, Army, and
Navy; the Director of the Office of Management and Budget; and the
heads of the other Defense components discussed in this report. Copies
will also be made available to others upon request. If you have any
questions about this report or require additional information, please
contact me at (202) 275-4649. Major contributors to this report are listed
in appendix VII.

Sincerely yours,




Samuel W. Bowlin
Director, Defense and Security
  Information Systems




Page 4             GAO/IMTEC91-19   Defense’s Use of Contractors   for Automated   Systems
w




    Page 6   GAO/IMTEG91-19   Defense’s   Use of Contractors   for Automated   Syeteme
Contents


Letter                                                                                                 1

Appendix I                                                                                             8
Objective, Scope, and
Methodology
Appendix II
Department of
Defense Agreed-upon
Definitions for
Engineering and
Technical Support
Services
Appendix III
Engineering and
Technical Support
Contract Expenditures
Appendix IV
Types of Support
Services Available
Appendix V
For-Profit and Non-
Profit Expenditures
Appendix VI                                                                                           16
Engineering and
Technical Support
Contract Expenditures
by Contractor

                        Page 6   GAO/lMTEGSl-19   Defense’s Use of Contractors   for Automated   Systems
                        Content0




Appendix VII                                                                                                   17
Major Contributors to
This Report
Tables                  Table III. 1: Engineering and Technical Support Contract                               11
                            Expenditures by Defense Component
                        Table IV. 1: System Engineering, Task Engineering, and                                 13
                            Technical Support Service Expenditures
                        Table V. 1: Engineering and Technical Support Contract                                 15
                            Expenditures by For-Profit and Nonprofit Status

Figures                 Figure 1: Percentage of 01 Support Expenditures by                                      3
                             Defense Component (Fiscal Years 1985-1989)
                        Figure III. 1: Trends in Engineering and Technical Support                             12
                             Contract Expenditures by Defense Component for
                             Fiscal Years 1986 Through 1989
                        Figure IV.l:Trends in Expenditures for Systems                                         14
                             Engineering, Task Engineering, and Technical
                             Support Services for Fiscal Years 1985 Through 1989
                        Figure V. 1 :Trends in Engineering and Technical Support                               15
                             Contract Expenditures by For-Profit and Nonprofit     ’
                             Entities for Fiscal Years 1986 Through 1989




                        Abbreviations

                        C31        command, control, communications and intelligence
                        GAO        General Accounting Office
                        IMTEC      Information Management and Technology Division


                        Page 7            GAO/IMTEG91-19   Defense’s Use of Contractors   for Automated   Systems
Appendix I

Objective, Scope, and Methodology


               In November 1989, Senator William V. Roth, Jr., asked us to determine
               the extent to which Defense relies on engineering support contractors to
               provide advice and direction on automated data processing software
               engineering, system architecture, and hardware design and develop-
               ment. In subsequent discussions with his office, we agreed that this
               report would describe contract costs and types of services provided
               during fiscal years 1986 through 1989 (October 1,1984, through Sep-
               tember 30,1989).

               Our primary objective was to obtain and analyze engineering support
               contract data in support of the acquisition of automated @I systems. c31
               systems are significant users of automated data processing hardware
               and software, and it is during system development that engineering sup-
               port has the most impact on system requirements and technical per-
               formance. To identify appropriate contracts, we asked Defense officials
               to define engineering support. However, Defense officials did not have a
               generally accepted definition of engineering support. Often what is engi-
               neering support to one official is technical support to another. Working
               with Defense officials, we developed definitions of systems engineering,
               task engineering, and technical support. (See app. II.)

               We sought to obtain from Defense officials the contract data, including
               total expenditures for systems engineering, task engineering, and tech-
               nical support services, for each Defense component from fiscal years
               1986 through 1989. However, Defense procuring components do not
               capture overall expenditure data. Instead, information was only avail-
               able on a contract-by-contract basis. Consequently, we developed a data
               collection instrument to gather data on the cost of engineering support
               contracts and the types of services provided. Officials from the Defense
               Inspector General’s Office coordinated data collection and designated
               individuals to serve as points-of-contact for each reporting component.

               Defense tasked its components to collect the data and report it to us by
               July 31, 1990. As of November 6, 1990, we had not received contract
               data from the Defense Advanced Research Projects Agency and the
               Navy laboratories that provide engineering support to Navy programs.
               A Navy official said that because accounting for the laboratories’ work
               is documented only by thousands of hard-copy military interdepart-
               mental procurement requests, the Navy could not devote the necessary
               resources to the effort. Total contract value information provided by the
               National Security Agency for fiscal years 1988 and 1989 is included in
               the $4.7 billion total contract value discussed in the letter. Further, the
               Defense Intelligence Agency submitted several contract data sheets, one


               Page 8           GAO/IMTEC91-19   Defense’s Use of Contractors   for Automated   Systems
Appendix I
Objective, Scope, and Methodology




                                                                                         -
of which is classified, More specific information about these contracts is
classified and has not been included in the report.

In addition, the Air’Force submitted incomplete information. Air Force
officials said they did not have fiscal year 1986 and 1986 support con-
tract expenditures because they did not keep summary records during
that time. Also, only aggregate totals of all support contracts were avail-
able for fiscal years 1987 and 1988. Air Force officials said that their
data bases were inadvertently destroyed and individual contract data
were lost. To estimate contract expenditures for each year, we multi-
plied Air Force’s average staff year.cost for these services by the actual
staff years used.

We did not independently validate the information, nor did we evaluate
any documentation related to individual Defense contracts. While we did
not obtain official agency comments, we checked responses for consis-
tency with the instructions we provided, discussed the submissions with
Defense points-of-contact, and made changes where appropriate.




Page 9                GAO/IMTEGOl-19   Defense’s Use of Chntractmw   for Automated   Systems
Appendix II

Department of Defense Agreed-upon Definitions
for            and Technical Support Services
       l!Cngineering




Systems Engineering    Systems engineering, which often includes system integration functions,
                       can also include (1) overall system and program definition; (2) specifica-
                       tion of technical performance requirements; (3) analysis and verification
                       of system and subsystem design; (4) assessment of design compromises
                       and tradeoffs; (5) definition of system interfaces; (6) reviews of hard-
                       ware and software specifications, tests, and test results; (7) appraisal of
                       contractors’ technical performance; and (8) integration within a system
                       or within associated systems or subsystems.


Task Engineering       Task engineering involves less than overall engineering responsibility. It
                       defines specific areas of responsibility such as (1) preparing plans or
                       specifications; (2) serving as non-government advisers in the evaluation
                       of technical proposals, plans, or system development progress; (3) pre-
                       paring test specifications and test documents; (4) supervising or
                       directing tests; (6) analyzing and evaluating technical problems or defi-
                       ciencies; and (6) monitoring and preparing guidance for specified con-
                       tractor activities.


Technical Support      Technical support services include (1) development planning (e.g.,
                       requirements analysis and baseline development); (2) acquisition sup-
                       port (e.g., source selection advice and contractor monitoring); (3) spe-
                       cialty engineering (e.g., systems safety, human factors, reliability and
                       maintainability, and electromagnetic compatibility); (4) manufacturing
                       engineering (e.g., various productivity and producibility analyses); (5)
                       program control (e.g., program and budget analysis, and schedule
                       assessments); (6) logistics support; (7) configuration and data manage-
                       ment; (8) cost estimating services, and (9) independent verification and
                       validation.




                       Page 10           GAO/IM’IECSl-19   Defense’s Use of Contractora   for Automated   Systems
Appendix III

Engineering and Technical Support
Contract Expenditures

Table 111.1:Engineering and Technlcal Support Contract Expenditures by Defense Component
Dollars in millionsa
                                                                                                                                               Percent
                                                                                                                      Perce;;tz;             increase,
                                                                  Fiscal Year                                                             fiscal 1985-
Defense component                                   1985      1986     1987   1988          1989            Total expenditures                    1989
Air Force                                           279.1    346.7     425.0     465.9      518.8        2,035.4               59.1      “.       85.9
A&     ---                                            93.1    82.6      79.6      95.7      108.4          459.5               13.3               16.4
Defense Cohmkications           Agency                61.4    57.4      66.9      66.9       70.3          322.9                9.4               14.5
Defense Intelligence Agency                 _______--- 3.8     5.8       7.9       5.7        7.4           30.6                0.9               94.7
Defense Mapping Agency
                     _...-_ _.--...--.-__-~           29.3    33.8      34.9      56.2       50.6          212.8                6.2              100.0
Navy.                                                 27.7    25.1      75.0      93.6      113.0          334.4                9.7              308.0
Office of Secretary
           _ _.     of
                    ..~ Defense
                        .._-...                          0       0      18.6      14.5       15.2           48.3                1.4                N/A
Total                                              494.5     551.3     707.9     798.5      891.7        3,443.g              100.0               80.3
                                                   aFigures may not add due to rounding




                       Y




                                                   Page 11                GAO/IMTEGI)l-19      Defense’s Use of Contractors    for Automated   Systems
                                      .



                                          Appendix III
                                          EngLneerln~S and Technical        Support
                                          Contract Expenditures




Figure 111.1:Trends in Engineerlng and Technical Suppoti Contract Expenditures by Defense Component for Fiscal Years 1985
Through 1989

850   Total Expanditum   In Mllllom




 Dofonr   Component


      I       FY 1885
              Fyi988
              FY IQ87
              FY 1988
              FY lQ89




                                          Page 12               GAO/IMTEGVl-19        Defense’s Use of Contractors   for Automated   Systems



                                                                                                                                ’
                                                                       :,
Appendix IV

Types of Support Services Available


Table IV.1: System Engineering, Task Engineering, and Technical Support Service Expenditures
Dollars in millionsa            _. ._...- .._.-.--.--_l__---
                                                                                                                                                             Percent
                                                                                                                                  Percent of               increase,
                                                                              Fiscal Year                                               total           fiscal 1985
Type of supportb
           -..              - -~.- --~-. - .._ ..---____-1985             1988    1987    1988             1989           Total expenditures                    1989
                                                                                                                                                              __--
Systems engineering        __ -~~~.~.--.~_--__----.- 370.2                411.6      466.9      500.6      537.6        2,288.g              66.4                 45.2
Task’engineenng        ..                              4.8                   6.8
                                                                            ____.      6.3       10.9       11.6           40.4               1.2                140.0
                                                                                                                                                                   -
Technical support services                            36.2                 23.6       81.6      112.9      133.9          388.3              11.3                269.6
sul.iotsi   ..                                      411.2                442-O- 554.8           824.4      683.1        2,715.6
Systems engineenng
             .__        and  task- engineering
                          __....-_. .._...----_-----._____.       4.6       5.5          9.6     12.9       15.7           48.4               1.4 -____.         239.0
Systems engineering and technical support
services
 ._ ._ .”         _ ~..-- .._..-..-~__-                  ~~      25.5      29.9        26.9      43.4       50.7          176.4               5.1                 99.2
Task engineering and technical support
services
._ _ _      .-. ___- .                                            1.8        1.7
                                                                                    -.-.- 5.6     7.6       38.0           54.7               1.6           ____2068.6
Systems engineering, task engineering, and
technical
._-.ll”l. support ..“._
                  services
                       --__----.              -.--..------      51.4       72.2       111.1     110.2      104.0          448.8              13.0                102.5
Subtotal                                                        83.3     109.3       153.2      174.1      208.4          728.3
Total                                                          494.5     551.3       708.0      798.5      891.7        3.443.9             100.0
                                                               BFigures may not add due to rounding.
                                                               bWhile we requested that information be reported separately as either systems engineering, task engi-
                                                               neering, or technical support services, some Defense components reported this information as some
                                                               combination of the three categories.




                                                               Page 13                   GAO/IMTEC-91.19     Defense’s Use of Contractors   for Automated     Systems
                                             Appendix IV
                                             Types of Support   Services Available




Flgure IV.l:l’rends in Expenditure8 for
Systems Engineering, Task Engineering,
and Technical Support Services for           Expmdlturoa in Mllllons
Fiscal Yesrr 1985 Through 1989




                                          Pmdomlnxnl Typ of servlca


                                                   cl       FY lD85
                                                            FY 1988
                                                             FY 1997
                                                            FY1999

                                                   m        FY 1999




                                             Page 14                   GAO/IMTEGSl-19   Defense’s Use of Contractors   for Automated   Systems
Appendix V

For-Profit and Nonprofit Expenditures


Table V.1: Engineering and Technical
Support Contract Expenditures by For-      Dollars in millionsa
Profit and Nonprofit Status                                                             Fiscal Year
                                           Profit Status                 -1985      1986     1987   1988           1989         Total      Percent
                                           For-Profit                       178.8   197.2      300.4     356.2     420.0      1,452.6            42.2
                                           Nonprofit                       315.7    354.2      407.5     442.3     471.6      1,991.3            57.8
                                           Total                           494.5    551.3      707.9     790.5     891.7      3,443.g           100.0
                                           aFigures may not add due to rounding.



Figure V.l:Trends In Engineering and
Technical Support Contract Expenditures
by For-Profit and Nonproflt Entities for   fl00    Expandltun8 In Mllllans
Fiscal Year8 1985 Through 1989             466

                                           400

                                           SW

                                           SW

                                           266

                                           200

                                           I60

                                           loo

                                            50

                                             0

                                                   Nonprotlt
                                                   Contractor Protit Status

                                                   I      I FYI985
                                                               WI966
                                                               FY 1997
                                                               FY 1989
                                                               FYI989




                                           Page 15                       GAO/LMTEG91-19     Defense’s Use of Contractors   for Automated   Systems



                                                                                                                                           ‘.
Appendix VI

II!lnginwring and Technical Support Contract
IExpentitures by Contractor

                Dollars in millionsa
                                                                                         Total           Perce;Jt;;
                Contractor                                                       expenditures
                Top 5 Nonprofit Contractors
                Mitre Corp.                                                             $1,403.9                70.5
                Aerospace Corp.                                                            581 .I               29.2
                Lincoln Laboratories                                                         2.4                 0.1
                Oak Ridge National Laboratory                                                1 .o                0.1
                SRI International                                                            0.8                 0.0
                Others                                                                       2.0                 0.1
                Total                                                                   $1,991.3              100.0
                Top 20 For-Profit Contractors
                General Electric Co.                                                      $191.8                13.2
                International Telephone and Telegraph Corp.                                183.1                12.6
                Analytic Sciences Corp.                                                     53.6                 3.7
                Planning Research Corp.                                                     50.7                 3.5
                Harris Corp.                                                                44.4                 3.1
                Telos Corp.                                                                 36.6                 2.5
                American Telephone and Telegraph Technologies, Inc.                         31.8                 2.2
                Booz, Allen & Hamilton, Inc.                                                25.2                 1.7
                Teledyne Brown Engineering                                                  22.8                 1.6
                lnfotec Development, Inc.                                                   20.2                 1.4
                General Telephone & Electronics, Inc.                                       19.8                 1.4
                Emerson Electric                                                            17.7                 1.2
                Analvtics.
                      ,     Inc.                                                            17.5                 1.2
                RMS Technoloaies                                                            17.3                 1.2
                ESL, Inc.                                                                   16.2                 1.1
                Horizons Technology, Inc.                                                   15.5                 1.1
                Comouter
                ..-   ’
                            Sciences Core.                                                  14.2                 1 .o
                Ford Aerospace and Communications Corp.                                     11.0                 0.8
                EG&G Washington Analytical Services Center                                  10.6                 0.7
                Atlantic
                .~        Research Corp.                                                    10.3                 0.7
                Others
                --.                                                                        642.4                44.2
                Total                                                                   $1.452.6     ’        100.0
                BFigures do not add due to rounding.




                Page 16                 GAO/IMTEC91-19   Defense’s Use of Contractors    for Automated     Systema



                                                                   ,.   .’
    Appendix VII

    Major Contributors to This Report


                             Michael Blair, Assistant Director
    Information
    Management and
    Technology Division,
    Washington, D.C,

                             Fred Cross, Jr., Regional Management Representative
    Boston Regional Office   Arthur Fine, Evaluator-in-Charge
                             Diana Gilman, Staff Evaluator




.




    (aloall)                 Page 17          GAO/IMTEC91-19     Defense’s Uee of Contractors   for Automated   Systems
,-_-._.   --_..---   -.-....- -...         ----




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