Army Procurement: Status of Commercial Activities Study at White Sands Missle Range

Published by the Government Accountability Office on 1990-05-03.

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


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                                                               Status of Commercial
                                                               Activities Study at
                                                               White Sands Missile

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                   United States
                   General Accounting Office
                   Washington, D.C. 20648

                   National Security and
                   International Affairs Division


                   May 3,199O

                   The Honorable John Conyers, Jr.
                   Chairman, Committee on Government
                   House of Representatives

                   Dear Mr. Chairman:

                   This responds to your October 11, 1989, request and subsequent discus-
                   sions with your office regarding the status of the ongoing commercial
                   activities study at the White Sands Missile Range. You had expressed
                   concern about the prolonged nature of this study. On February 26, 1990,
                   we briefed your office on the results of our work. The purpose of this
                   letter is to summarize the information discussed at that meeting.

                   The commercial activities study at White Sands has been ongoing for
Results in Brief   over 6 years and has been in a test mode for the past 2 years. Regardless
                   of the decision to keep the functions in-house or contract them out,
                   White Sands officials do not believe that it can accomplish the body of
                   work that needs to be performed with the expected funding level. Addi-
                   tionally, it does not appear that White Sands will be able to make a deci-
                   sion on whether or not to contract out the functions by August 1990, as
                   directed by the fiscal year 1990 Appropriations Conference Committee.

                   Office of Management and Budget Circular A-76-“Performance        of
Background         Commercial Activities” -requires agencies to study their existing com-
                   mercial activities to determine whether it is more economical to perform
                   these activities in-house or under contract with commercial sources.

                   An initial step in this study is to define and describe the government’s
                   work requirements in a performance work statement, which serves as
                   the basis for soliciting contractor bids. In addition, the agency must con-
                   duct a management study of its existing activity to determine the most
                   efficient organization needed to accomplish the performance work state-
                   ment tasks with in-house personnel. The resulting organizational plan is
                   used to develop the in-house cost estimate, which is compared to bids
                   received from contractors. The comparison of in-house and contractor
                   costs serves as the basis for deciding whether to retain the activities in-
                   house or to award a contract. Before in-house activities can be converted

                   Page 1                      GAO/NSIAD-90-165   White Sands Commercial   Activities   Study

                                         to commercial contracts, the contractor’s proposal must indicate at least
                                         a lo-percent savings in personnel costs.

                                         In August 1983, the Department of the Army notified the Congress of its
Events Affecting the                     intent to conduct a commercial activities study of installation support
White Sands                              activities at White Sands to determine whether functions such as main-
Commercial Activities                    tenance of real property and equipment and supply and transportation
                                         services might be performed more economically under contract. Since its
Study                                    announcement, a reduction-in-force, personnel hiring freezes, and con-
                                         strained funding levels have taken effect at White Sands. As a result,
                                         White Sands has not been able to complete the commercial activities
                                         study. Table 1 shows the schedule White Sands established for con-
                                         ducting the study and making a decision on whether to keep the work
                                         in-house or contract it out. White Sands has been unable to meet this
                                         timetable. It does not favor continuing the study, but it has not been
                                         successful in convincing higher headquarters of the need to cancel the
Table 1: Key Events In the White Sands
Study                                    Event                                                                   Date
                                         White Sands study announced to the Congress                             August 1983
                                         Performance work statement and most efficient organization              January 1987
                                         Pilot test approved for testing the most efficient organization         March 1987
                                         Most efficient organization and pilot test implemented                  September 1987
                                         Test extended                                                           December 1988
                                         Bids solicited                                                          April 1990a
                                         Solicitation closed                                                     August 1990
                                         Proposals evaluated                                                     September 1990
                                         f%st and final offers received                                          April 1991
                                         Cost comparison completed                                               July 1991
                                         Decision announced                                                      October 1991
                                         Contract awarded                                                        November 1991
                                         aEvent had not yet occurred as of April 6, 1990.

                                         A matter that needs to be considered is the recent direction by the fiscal
Recent Appropriations                    year 1990 Appropriations Conference Committee in response to con-
Conference Committee                     cerns regarding the length of time required to complete commercial
Direction *                              activities studies. In this regard, the conferees directed that commercial
                                         activities studies that exceed 2 years for a single function or 4 years for
                                         a multifunction study must reach an initial decision by August 31, 1990,

                                         Page 2                              GAO/NSIAD-90-165   White Sands Commercial   Activities   Study



                       or be terminated and the activity converted to the most efficient organi-
                       zation The White Sands’ study, which is a multifunction study, has been
                       ongoing for over 6 years, and a decision is not anticipated until late

                       The Department of Defense (DOD) plans to issue a policy statement on its
                       interpretation of the conference report language regarding the termina-
                       tion of ongoing commercial activities studies. At the time we completed
                       our review on April 6, 1990, DOD had not issued its policy statement.

                       After reviewing the 1987 most efficient organization and performance
ResourceConstraints    work statement, White Sands was concerned that the documents did not
Affected Testing the   adequately capture the staffing and work load requirements and that
Most Efficient         implementation of the most efficient organization would not support the
                       mission, Because of these concerns, it was decided to conduct a l-year
Organization and the   test of the organization to refine it, as well as the performance work
Performance Work       statement, based on the actual experience gained during the test period.
Statement              According to White Sands officials, it has not been able to fully imple-
                       ment and test the organizational plan and performance work statement
                       because it has not had the necessary resources-personnel         and funds-
                       to accomplish the identified work. Before the most efficient organization
                       was implemented, a reduction-in-force took effect at White Sands to
                       bring the staffing level in line with it. Then a hiring freeze was insti-
                       tuted, which prevented White Sands from hiring personnel with the
                       needed skills. As a result, it has not been able to fill the positions. Fur-
                       thermore, the hiring freeze and budget constraints have continued dur-
                       ing most of the pilot test period. Therefore, in December 1988, the Army
                       agreed to extend the test period for an additional year.

                       White Sands officials also told us that constrained budgetary resources
                       during the second year of the test continued to prevent it from staffing
                       up to the 1987 level and performing the work identified in the work
                       statement. One official said that, during the 2-year test period, White
                       Sands was operating at 86 to 96 percent of the 1987 staffing level.

                       Page 8                     GAO/NSIAIMO-165   White Sands Commercial   Activities   Study


                                                                                                                                  ’ :

                        At the time the test period was extended, an April 1990 milestone for
Milestones for          soliciting bids from outside sources was established. White Sands offi-
Completing the Study    cials now say that this milestone cannot be met because the current hir-
and Soliciting Bids     ing freeze prevented it from filling 11 vacant positions that are needed
                        to complete the in-house cost study. At the time we completed our work,
Cannot Be Met           White Sands officials had not yet revised the milestones for completing
                        the study or soliciting bids. Furthermore, the officials do not believe
                        that an initial decision to keep the work in-house or contract it out can
                        be made by the August 1990 deadline established in the conference

                        Officials also told us that the 1987 work statement and organizational
                        plan have been updated to reflect the fiscal year 1989 work load per-
                        formed by the Directorate of Engineering, Housing and Logistics. Addi-
                        tionally, in certain cases the work load has been adjusted to reflect an
                        increase in the frequency of some tasks-such as the maintenance of
                        vehicles, heaters, and boilers-over what is currently being performed’
                        by the Directorate of Engineering, Housing and Logistics.

                        The revised work statement has been approved by White Sands officials
                        but has not been submitted to the U.S. Army Test and Evaluation Com-
                        mand or the Department of Army for approval. The revised organiza-
                        tional plan is expected to be submitted to White Sands officials for its
                        approval in mid-April.

                        Initially, the Chairman of the Committee on Government Operations
Objectives, Scope,and   asked us to determine the status of the study and to evaluate whether
Methodology             White Sands was properly defining the scope of work for which it
                        planned to solicit bids from outside sources. However, because the study
                        is still ongoing and had not reached the point of approval for soliciting
                        bids, we cannot state an opinion on whether the scope of the work will
                        properly reflect the work for which bids will be sought.

                        To address the status of the study and the progress being made to com-
                        plete it, we held discussions with officials at the Office of the Secretary
                        of Defense; Headquarters, Department of the Army; and the White
                        Sands Missile Range, New Mexico. We reviewed documents, regulations,
                        and other pertinent records related to the activities and functions
                        included in the White Sands study. We also interviewed union officials

                        ‘The frequency of these tasks was reduced because of insufficient funding and personnel levels.

                        Page 4                             GAO/NSIAJMO-105      White Sands Commercial     Activities       Study

    at White Sands and at the union’s headquarters in Washington, DC., to
    obtain their views of the study.

    As requested, we did not obtain official agency comments on this report.
    However, we discussed its contents with Army Headquarters and DOD
    officials and incorporated their views where appropriate.

    We conducted our review between November 1989 and April 1990 in
    accordance with generally accepted government auditing standards.

    We are sending copies of this report to interested congressional commit-
    tees, other Members of Congress, and the Secretaries of Defense and the
    Army. Copies will be made available to other parties upon request.

    If you or your staff have any questions concerning the information
    presented in this letter, please call me at (202) 2764141. Other major
    contributors are listed in appendix I.

    Sincerely yours,

    Richard Davis
    Director, Army Issues

    Page 5                   GAO/NSIAIMJO-165   White Sands Commercial   Activities   Study
  Appendix I

  Major Contributors to This Report

                          Robert J. Lane, Assistant Director, Army Issues
 National Security and    Nancy T. Lively, Evaluator-in-Charge
 International Affairs
 Division, Washington,

(393373)                 Page 6                   GAO/NSIAD4O-165   White Sands Cknnmercial   Activities   Study
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