oversight

DOD Competitive Sourcing: Results of Recent Competitions

Published by the Government Accountability Office on 1999-02-23.

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

                  United States General Accounting Office

GAO               Report to the Chairman, Subcommittee
                  on Readiness and Management Support,
                  Committee on Armed Services,
                  U.S. Senate

February 1999
                  DOD COMPETITIVE
                  SOURCING
                  Results of Recent
                  Competitions




GAO/NSIAD-99-44
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548

                   National Security and
                   International Affairs Division

                   B-279580

                   February 23, 1999

                   The Honorable James M. Inhofe
                   Chairman, Subcommittee on Readiness
                     and Management Support
                   Committee on Armed Services
                   United States Senate

                   Dear Mr. Chairman:

                   In late 1995, the Department of Defense (DOD) began encouraging the
                   services and defense agencies to conduct competitions between the public
                   and private sectors to determine who would be responsible for performing
                   selected functions currently being provided in-house. These competitions
                   were to be done in accordance with the Office of Management and
                   Budget’s (OMB) Circular A-76, which provides guidance for the
                   competitions, and were expected to yield significant savings that could be
                   used to fund other priority needs such as modernization. Currently, DOD
                   components are beginning a significant number of these public-private
                   competitions using the A-76 process.

                   As you requested, we (1) determined the number of sourcing competitions
                   completed between October 1995 and March 1998 and whether the
                   competitions had been done in accordance with applicable procedures;
                   (2) compared characteristics such as outcomes of recent competitions
                   with previous competitions in terms of winners of the competitions, time
                   required to complete the competitions, savings produced, and other
                   relevant metrics; and (3) identified the extent of any problems in
                   implementing the results of the competitions, and plans for government
                   monitoring of contracts awarded as a result of outsourcing.


                   The Air Force held the vast majority of competitions completed between
Results in Brief   October 1995 and March 1998—41 of 53. Likewise, 85 percent of the
                   positions competed were in the Air Force. While the number of recently
                   completed competitions is small, the agency procedures and our analysis
                   of a sample of completed cases indicate that DOD components are
                   conducting these competitions in accordance with OMB Circular A-76
                   guidelines. Additionally, we identified only 10 appeals under the A-76
                   administrative appeal process, with only 1 being upheld.




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             The private sector won about 60 percent of recent competitions compared
             to about 50 percent prior to 1995. Also, the time to complete single and
             multiple function competitions was 18 and 30 months, respectively,
             compared to an average of about 51 months for all prior competitions.
             Further, the competitions show significant potential for savings, largely
             driven by personnel reductions. However, the data is too limited at this
             point to reach any conclusions about trends, and questions exist about the
             precision and consistency of savings estimates. Moreover limitations
             continue to exist in DOD databases used to record savings from A-76
             competitions and their usefulness for tracking changes over time. Actions
             are still required to ensure that improvements are made in these databases
             and savings estimates from completed competitions are tracked over time.

             The relatively few implementation problems were independent of whether
             the private or public sector had won the competition. For example, a
             storage and warehousing contract was terminated for poor performance
             after a 19-month performance period. In another case, full implementation
             of a public maintenance operation was delayed 17 months due to a delay
             in being able to recruit enough personnel to perform the work. Lastly,
             resources expected to be devoted to monitoring contracts awarded to the
             private sector varied depending on the size and complexity of the
             functions being reviewed.


             For many years, federal agencies have been encouraged to consider the
Background   potential for significant savings by contracting with the private sector for
             commercial type goods and services rather than relying on government
             employees to provide them. Because competitive outsourcing can
             potentially displace thousands of government employees, federal agencies,
             including DOD components, traditionally approached competitive sourcing
             hesitantly.1 Thus, with a combination of institutional preference to
             maintain in-house control over activities, along with restrictive legislative
             provisions in effect between the late 1980s through 1994, DOD activities
             placed relatively little emphasis on competitive sourcing during that time.
             The limited competitions that did occur most often involved the Air Force.
             However, in 1995, with congressional and administration initiatives
             placing more emphasis on competitive sourcing as a means of achieving
             greater economies and efficiencies in operations, DOD’s senior leadership
             embraced it as a means of achieving savings and freeing up funds for other
             priority needs. In August 1995, the Deputy Secretary of Defense directed
             the services to make outsourcing a priority. Subsequently, DOD placed

             1
              Instead of the term outsourcing, DOD currently uses the term competitive sourcing.



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                             emphasis on competitive sourcing, recognizing that both the public and
                             private sectors are parties to the competitions. This new emphasis led to
                             plans by the services to consider studying over 200,000 positions by the
                             end of fiscal year 2003.


Circular A-76 Process        DOD’s competitive sourcing is guided by OMB’s Circular A-76, issued in 1966.
                             In 1979, OMB supplemented the circular with a handbook that included
                             procedures for competitively determining whether commercial activities
                             should be performed in-house, by another federal agency through an
                             interservice support agreement, or by the private sector. OMB updated this
                             handbook in August 1983 and in March 1996. The latest revision was
                             intended to reduce the administrative burden of performing A-76
                             competitions and to make cost comparisons between private sector
                             proposals and government estimates more equitable. For example, in
                             response to industry concerns that agencies were not fully accounting for
                             their overhead costs, OMB imposed the requirement that government
                             overhead costs be calculated based on a standard rate of 12 percent of
                             direct labor costs and placed increased emphasis on the use of best value
                             criteria in competitions.2

                             To compare costs of in-house versus contractor performance, OMB’s
                             supplemental handbook requires the government to determine the most
                             efficient and effective way of performing an activity with in-house staff.
                             Based on this most efficient organization (MEO), the government prepares
                             an in-house cost estimate and compares it with the offer selected from the
                             private sector. OMB’s A-76 guidance stipulates that work will remain
                             in-house unless the private sector offer meets a threshold of savings that is
                             at least 10 percent of personnel costs or $10 million over the performance
                             period. The minimum cost differential was established by OMB to ensure
                             that the government would not contract out for marginal estimated
                             savings. Appendix I contains a more detailed description of the A-76
                             process.


DOD’s Historical Data Base   DOD records the results of its competitive sourcing program in the
for A-76 Competitions        Commercial Activities Management Information System (CAMIS). Each
                             service and defense agency maintains its own version of CAMIS, but each
                             system must contain DOD’s required minimum set of data elements for

                             2
                              We previously addressed in a separate report the potential use of best value under A-76, questions
                             concerning the basis for OMB’s new 12-percent overhead rate, as well as long-term challenges facing
                             DOD as it attempts to produce accurate and reliable cost data. See Defense Outsourcing: Better Data
                             Needed to Support Overhead Rates for A-76 Studies (GAO/NSIAD-98-62, Feb. 27, 1998).



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                            individual A-76 competitions, including numbers and length of individual
                            competitions, numbers of in-house military and civilian positions affected,
                            comparisons of in-house and contractor estimated costs, contract award
                            dates, and changes in costs for 3 years after a contract award. DOD also
                            requires that each service enter the original baseline cost of the function
                            and the estimated dollar savings from each of the competitions into CAMIS
                            and track actual costs and savings from the completed competitions for
                            3 years. We have previously reported some concerns about the accuracy
                            and completeness of data contained in the CAMIS system.3 A list of our
                            recent reports on competitive sourcing issues is included at the end of this
                            report.

                            DOD’s data on cost comparisons completed between fiscal year 1978 and
                            1994 show that estimated savings occurred—usually through a reduction
                            in personnel—regardless of whether the government or a private sector
                            company was awarded the work. These estimated savings were achieved
                            primarily by closely examining the work to be done and reengineering the
                            activities to do them with fewer personnel, whether in-house or
                            outsourced.4 DOD’s data showed the government won about half of the
                            A-76 competitions, and the private sector the other half.


Past Analysis Suggests      The Army, Navy, and Air Force project they will each achieve between
Caution Regarding Savings   20 to 30 percent savings from competitive sourcing, based on prior
                            experience and/or Center for Naval Analyses study data.5 While we believe
                            that competitive sourcing competitions are likely to produce savings, we
                            have urged caution regarding the magnitude of savings likely to be
                            achieved. In March 1997, we reported that prior savings estimates were
                            based on initial savings estimates from competitive sourcing competitions,
                            but that expected savings can change over time with changes in scope of
                            work or mandated wage changes. Further, we noted that continuing
                            budget and personnel reductions could make it difficult to sustain the
                            levels of previously projected savings. At the same time, we noted two
                            areas of competitive sourcing that appeared to offer the potential for
                            significant savings. These areas included giving greater emphasis to (1) the
                            use within the applicable legal standards of a single contract to cover


                            3
                             OMB Circular A-76: DOD’s Reported Savings Figures Are Incomplete and Inaccurate
                            (GAO/GGD-90-58, Mar. 15, 1990).
                            4
                             Base Operations: Challenges Confronting DOD as It Renews Emphasis on Outsourcing
                            (GAO/NSIAD-97-86, Mar. 11, 1997).
                            5
                             The Center for Naval Analyses is a federally funded research and development center sponsored by
                            the Department of the Navy.



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                                           multiple requirements, rather than multiple contracts, for support services
                                           and (2) the conversion of military support positions to civilian or
                                           contractor positions.


                                           We identified 53 competitions completed between October 1995 and
Overview of Recent                         March 1998, involving 5,757 positions (3,226 military and 2,531 civilian).6
Competitions                               Of the 53 competitions, 43 involved single functions such as grounds
                                           maintenance, storage and warehousing, and child care centers; and
                                           10 involved multiple functions such as base operating support and shelf
                                           stocking, receiving, and storage at commissaries.

                                           A majority (77 percent) of the competitions were held by the Air Force.
                                           Many of these competitions were initiated prior to or close to the time that
                                           DOD began to emphasize competitive sourcing. Table 1 shows the number
                                           of government positions competed for under recently completed
                                           competitions along with those announced for competition during fiscal
                                           years 1996, 1997, and 1998.

Table 1: Civilian and Military Positions
Competed in Recent Completed                                                         Positions competed            Positions announced in
Competitions and Those Announced                                                   between October 1995            fiscal years 1996, 1997,
for Competition in Fiscal Years 1996,      Defense component                         through March 1998                     and all of 1998
1997, and 1998                             Army                                                            94                           27,437
                                           Navy                                                           154                           20,893
                                           Air Force                                                   4,895                            20,772
                                           Marine Corpsa                                                    0                                  0
                                           Defense agencies                                               614                              5,402
                                           Total                                                       5,757                            74,504
                                           a
                                            Since the Marine Corps did not have any completed competitions, it was not reviewed for this
                                           report.

                                           Source: Our analysis is based on Army, Navy, Air Force, Defense Logistics Agency, Defense
                                           Commissary Agency, Defense Health Plan, and Defense Finance and Accounting Service
                                           information.



                                           Although most (85 percent) of the recently completed competitions
                                           belonged to the Air Force, table 1 shows that most of the defense
                                           components, reacting to the August 1995 guidance from the Deputy
                                           Secretary of Defense, have mounted an aggressive program. Most

                                           6
                                            As noted in our scope and methodology, the 53 competitions represented those identified from the
                                           CAMIS database as well as competitions not included in the database but which were identified in
                                           discussions with agency officials. Appendix II provides summary statistical data for each of the
                                           53 competitions.



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                          components can be expected to complete considerably more competitions
                          each year for the next several years. However, unlike the most recently
                          completed competitions, most future competitions are expected to involve
                          civilian rather than military positions.


Extent to Which Appeals   In examining the results of the 53 completed A-76 competitions, we found
or Other Concerns Were    that 10 appeals had been filed; half were filed by government and half by
Raised About the          private sector firms.7 These appeals were based on questions regarding
                          compliance with the requirements of Circular A-76 and its supplemental
Competitions              handbook, and/or questions regarding costs entered on the cost
                          comparison form. One appeal, however, did not meet this criteria and was
                          dismissed. Of the appeals accepted for consideration, only one resulted in
                          a reversal of the original award decision. The private sector competitor
                          stated that the government in-house estimate did not include all relevant
                          costs, and the agency’s reviewing authority agreed. When these costs were
                          included in the government’s estimate, the private sector firm’s price was
                          lower. In addition to the 10 appeals cited above, we identified one protest
                          to GAO from one of the private sector competitors.8 GAO upheld the
                          service’s decision to retain the activity in-house.

                          We also examined the files of a sample of nine completed competitions
                          and conducted interviews with officials associated with completing the
                          competitions and satisfied ourselves that the required cost comparisons
                          were made as required by A-76 guidelines. In eight instances, we found
                          that the agencies had elected to conduct public/private competitions and
                          cost comparisons even where the number of civilian employees involved
                          was less than 10, and according to A-76 guidance, direct conversions could
                          have been made without competition. Agency officials said that they
                          conducted a cost comparison on these functions, because they felt it was
                          fairer to the employees. At the same time, service and defense agency

                          7
                           OMB Circular A-76 provides an administrative appeal process for federal employees (or their
                          representatives) and contractors that have submitted bids or offers who would be affected by a
                          tentative cost comparison decision to convert to or from in-house, contract or performance under an
                          interservice support agreement. In the appeal of a tentative cost comparison decision, the designated
                          appeal authority must be independent of the activity under review or at least two organizational levels
                          above the official who certified the Government’s Management Plan and MEO.
                          8
                           Generally, we decline to review an agency’s decision whether to perform a commercial activity
                          in-house or through use of a contractor. However, where the A-76 process has included the issuance of
                          a competitive solicitation for purposes of conducting a cost comparison, GAO will review agency
                          decisions to determine whether the agency performed the cost comparison in the manner required by
                          the terms of the solicitation. Only those parties who are otherwise eligible to file a protest under
                          GAO’s Bid Protest Regulations may avail themselves of this option and only if they have already
                          exhausted the administrative appeals process. GAO will recommend corrective action only if the
                          record indicates that the agency did not accurately perform the cost comparison and that this failure
                          could have materially affected its outcome. See Madison Servs., Inc., B-277614, Nov. 3, 1997.



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                                      officials indicated that during the period covered by our review, they
                                      directly converted to contract 119 functions, each involving 10 or fewer
                                      positions.


                                      Most services and defense agencies have completed few competitions.
Characteristics of                    Accordingly, these competitions cannot be viewed as representing a trend
Completed                             or necessarily indicative of future outcomes. Nevertheless, they provide
Competitions and                      some initial data for limited comparison on a variety of metrics such as
                                      outcomes won by the public and private sectors, time required to
Historical Trends                     complete the competitions, use of best value, and indications of savings.


Competition Winners                   Overall, 60 percent of the competitions were won by the private sector.
                                      Table 2 summarizes the number of competitions and results by individual
                                      defense activities.

Table 2: Competitions Completed and
Results By Defense Components                                                  Number of
                                                                             competitions               Private sector winners
Between October 1995 and March 1998
                                      Defense component                        completed                   Number                  Percent
                                      Army                                                 3                       2                         67
                                      Navy                                                 3                       3                     100
                                      Air Force                                           41                      24                         59
                                      Defense Commissary
                                      Agency                                               4                       3                         75
                                      Defense Finance and
                                      Accounting Service                                   2                       0                          0
                                      Total                                               53                      32                         60
                                      Source: Our analysis is based on Army, Navy, Air Force, Defense Commissary Agency, and
                                      Defense Finance and Accounting Service information.



                                      The aggregate data shows an increase in the number of competitions won
                                      by the private sector, compared with the historic trend of about 50 percent
                                      for all services.9 However, the percent won by the private sector was
                                      closer to the Air Force’s historic average of 60 percent. At the same time,
                                      when considering all competitions completed in the October 1995 through
                                      March 1998 time frame, the percentage of competitions won by the private
                                      and public sectors fluctuated over time. For example, for 26 competitions
                                      completed in fiscal years 1996 and 1997, 77 percent were won by the


                                      9
                                      Our analysis also showed that the private sector won 53 percent ($390.1 million) of the value of the
                                      winning bids.



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                          private sector. This contrasted with 27 competitions completed between
                          October 1997 and March 1998, where 56 percent were won by the private
                          sector.

                          We also analyzed the results to determine whether any differences existed
                          among winners depending on whether competitions involved single or
                          multiple functions. We found that 43 of the competitions involved single
                          functions, while 10 involved multiple functions. However, the outcomes
                          were the same for each grouping, with 60 percent being won by the private
                          sector.

                          We further analyzed the results to determine to what extent the use of a
                          standardized 12-percent overhead rate imposed on government cost
                          estimates may have affected the outcome of the competitions. As
                          previously noted, the private sector has historically registered concerns
                          about the extent to which government activities fully account for costs of
                          their operations in developing MEOs under the A-76 process. Also, some
                          concerns existed on the public side that the new overhead rate could
                          cause more competitions to be won by the private sector. As noted in our
                          February 1998 report, in reviewing development of this overhead rate, we
                          found that the 12-percent rate lacked an analytical basis. As a result, it
                          could either understate or overstate overhead costs in any
                          specific/particular competition.10

                          We found that 39 (74 percent) had used the 12-percent overhead rate. Of
                          those, 54 percent were won by the private sector. The remaining 14
                          competitions were not required to use this rate because they were either
                          completed prior to its implementation or were in the final stages of the
                          process. Of these, 10 did not use any overhead rate, and the 4 others used
                          overhead rates ranging from 0.1 percent to 12.4 percent.


Competition Time Frames   Because there were no required time frames to perform A-76 competitions,
                          a provision was included in the Department of Defense Appropriations Act
                          for Fiscal Year 1991 (Public Law 101-511) and subsequent DOD


                          10
                            In our February 1998 report, we noted limitations in DOD’s accounting systems and its inability to
                          fully identify the costs of operations. Efforts are underway to improve government cost data and
                          supporting systems. Recent legislative and management reform initiatives, such as the Chief Financial
                          Officers Act and the Federal Financial Accounting Standards Board Statement 4, have emphasized the
                          need for better information, including cost data, to support federal decision-making and measure the
                          results of program operations. Standard 4 requires that agencies use full costing in their managerial
                          accounting systems so that total operational costs and unit costs of outputs can be determined.
                          However, at that time we reported efforts to improve these systems in DOD are underway but may
                          require several years to be fully completed.



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                                      appropriations acts, directing that single function A-76 competitions be
                                      completed within 24 months and multi-function competitions within
                                      48 months. In July 1991, we reported that DOD averaged 51 months to
                                      complete A-76 competitions during fiscal years 1987 to 1990.11 We found
                                      that the time to complete the competitions in our review has decreased to
                                      an average time of 18 months for single function competitions and 30
                                      months for multiple function competitions. Table 3 indicates the average
                                      length of time required to complete the recent A-76 competitions.

Table 3: Average Number of Months
Required to Complete Competitions                                Number of
Between October 1995 and March 1998                             competitions                Average time for         Average time for
                                                                 completed                   single function         multiple function
                                      Defense activity         Single      Multiple            competitions             competitions
                                      Army                           3             0                        11                            0
                                      Navy                           3             0                        19                            0
                                      Air Force                     36             5                        18                           27
                                      Defense agencies               1             5                        23                           33
                                                                                                               a
                                      Overall average               43           10                         18                           30a
                                      a
                                       Average time based on summarizing study times for individual competitions within the applicable
                                      category.

                                      Source: Our analysis is based on Army, Navy, Air Force, Defense Commissary Agency, and
                                      Defense Finance and Accounting Service information.



                                      While the Army had few completed competitions, all involving single
                                      functions, they averaged 11 months to complete. While this figure shows
                                      that some competitions can be completed relatively quickly, it must be
                                      viewed with caution because the number reflects a very limited number of
                                      completed competitions. Additionally, other data suggests that many
                                      competitions are likely to take much longer than the competitions
                                      included in this review. For example, a recent Army Audit Agency report
                                      noted that the Army’s installations and major commands currently
                                      estimate that it will take about 50 percent longer than the Army’s goal of
                                      completing competitions with up to 100 positions within 13 months and
                                      competitions involving over 600 positions within 21 months.12

                                      The Navy’s goal is to complete its competitions between 12 to 36 months.
                                      Again, while our review shows that the Navy completed its competitions,

                                      11
                                       OMB Circular A-76: Legislation Has Curbed Many Cost Studies in Military Services
                                      (GAO/GGD-91-100, July 30, 1991).
                                      12
                                       Observations and Lessons Learned on A-76 Cost Competition Studies (U.S. Army Audit Agency
                                      AA 98-340, Sept. 22, 1998).



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                             on average, in 19 months, only three single function competitions had been
                             completed—not enough competitions to draw any conclusions about how
                             long future competitions will take.

                             Air Force officials currently project completing competitions within 24 to
                             48 months. Our review showed that to date the Air Force has completed,
                             on average, its recent single function competitions in 18 months, and its
                             multiple function competitions in 27 months.

                             The Defense Finance and Accounting Service’s goal is to complete its
                             competitions in 12 months. Its single function competition took 23 months,
                             and its multiple function competition took 27 months to complete. The
                             Defense Commissary Agency’s goal is to complete the competitions
                             sooner, but they do not have a set target. Its multiple function
                             competitions have taken an average of 34 months.


Use of Best Value Criteria   The most recent revision to OMB’s Circular A-76 supplemental handbook
                             heightened attention to the consideration of “best overall value to the
                             government” competitions. When best value criteria are considered, the
                             government expects to obtain a better value by comparing the private
                             sector’s technical proposals and making trade-offs between various factors
                             such as past performance and costs. The best private sector offer is then
                             selected. Next, the government’s in-house offer is reviewed to ensure that
                             it meets the same level of performance and performance quality as the
                             private sector offeror. If it does not, the government is required to change
                             its offer and cost estimate before the final comparison is made to
                             determine which represents the winner of the cost comparison. Sixteen of
                             the 53 completed competitions competed between October 1995 and
                             March 1998 used best value criteria.


Uncertainty About the        Recently completed competitions continue to show that sourcing
Magnitude of Savings From    competitions can produce significant savings, particularly in reducing
Competitions Continues       personnel requirements, even when these competitions are won by
                             in-house organizations. However, the data is too limited at this point to
                             reach any conclusions about trends. At the same time, the services are
                             inconsistent in how they calculate savings. Also, while initial savings
                             estimates may sometimes be understated, changes do occur in outsourcing
                             contracts, sometimes fairly soon after contracts are awarded, which can
                             reduce the magnitude of savings expected over time. As indicated in our
                             previous reports, we continue to express caution about the extent to



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                                 which the level of initial savings will continue over time given changes that
                                 occur, and the previous lack of attention in DOD to tracking savings over
                                 time. Our current work also reinforces previous concerns expressed about
                                 the adequacy and reliability of the CAMIS databases used by the services to
                                 record savings from A-76 competitions, and their usefulness for tracking
                                 changes over time.

Initial Savings Estimates From   Data available from the services and defense agencies for their recently
Recent Competitions Are          completed competitions suggests that the 53 completed competitions were
Expected to Be Substantial       projected to result in savings of $528 million over the life of the multiyear
                                 awards and would average 42 percent; similar savings were projected
                                 regardless of whether the competitions were won by the private sector or
                                 in-house.

                                 While most savings from sourcing competitions are related to reduced
                                 personnel costs, the extent to which the work can be done with fewer
                                 personnel is most clearly shown when in-house organizations win.13 While
                                 some of the recent competitions won by in-house organizations resulted in
                                 fairly small personnel reductions, a few show the potential for significant
                                 reductions in personnel, in some instances totaling over 50 percent,
                                 assuming, as discussed later, these planned reductions hold up over time.
                                 Such reductions show the benefit of studying in-house operations to
                                 identify the most efficient organizations. However, in one instance
                                 personnel requirements increased because the function being competed
                                 was not fully staffed at the time it was competed. See appendix II for
                                 position reductions associated with competitions won in-house and by the
                                 private sector.

Variations in How Savings Are    In examining the competitions, we found that the Air Force, the Army, and
Calculated                       the Defense Finance and Accounting Service had tried to identify the costs
                                 of their current operations to provide a baseline for projecting claimed
                                 savings. The Air Force determined a baseline personnel cost—usually the
                                 largest cost associated with performing a function—and then deducted
                                 either the winning contract price or MEO estimate to calculate an estimated
                                 savings figure, according to an Air Force official. The Army does not have
                                 official guidance on determining savings. However, we found the Army
                                 calculates the baseline cost by multiplying baseline workyears by the
                                 average cost per workyear in the MEO estimate. Savings are then calculated
                                 by subtracting the winning contract price or MEO estimate from the

                                 13
                                   Where competitions are won by the private sector, government positions are eliminated as the work
                                 is transferred to private sector employees under contract; in those situations, the number of
                                 government positions eliminated does not represent the actual reduction in personnel required to
                                 perform the function being outsourced.



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                                baseline cost. By using the average cost per workyear in the MEO estimate,
                                savings are determined in terms of current year dollars.

                                Projected Defense Finance and Accounting Service savings were
                                calculated using an estimate of baseline costs prior to the competitions,
                                while projected savings of the Defense Commissary Agency were
                                calculated by taking the difference between the MEO and the private sector
                                contractor’s offer, according to respective agency officials.

                                A Navy official told us there is currently no official Navy guidance on how
                                to determine savings. He also said that if an activity has determined a
                                baseline cost of operations, savings can be determined by subtracting the
                                winning offer from the baseline. However, if no baseline information is
                                available, the difference between the MEO and a winning contractor’s offer,
                                for example, may be used to estimate savings. For two of the three Navy
                                competitions we reviewed, the Center for Naval Analyses developed an
                                estimate of savings using baseline estimates. A savings estimate for the
                                third Navy competition was computed by subtracting the MEO estimate
                                from the contractor’s offer.

Projected Savings Are Subject   DOD’s projection of savings from A-76 competitions have historically been
to Change Over Time             derived from savings projections identified at the conclusion of
                                competitions. DOD and the services have not traditionally tracked cost
                                changes that occurred afterwards and revised projected savings. In
                                March 1997, we reported that historic difficulties in preparing good
                                performance work statements had often required revisions. We noted that
                                those revisions and changes in required labor rates and other factors can
                                require contract modifications and adjustments to costs of work to be
                                done. To the extent performance work statements need to be subsequently
                                adjusted because they do not adequately capture the scope of work to be
                                done, initial savings baseline estimates are overstated.

                                Although most of the competitions included in our review had only been
                                completed for about 15 months or less, we found that changes in
                                performance work statements had occurred in 18 of the 53 competitions.
                                Some changes were due to inadequate initial statements of work; many
                                others were due to new missions or work requirements that were not
                                known at the time the performance work statement was written.

                                Two contracts had to be recompeted because of inadequate performance
                                work statements. For example, a contract for grounds maintenance at
                                Keesler Air Force Base, Mississippi, had to be terminated because the



                                Page 12                            GAO/NSIAD-99-44 Defense Competitive Sourcing
                       B-279580




                       performance work statement did not adequately reflect the work that had
                       to be done. Subsequently, it has taken a year to rewrite this statement and
                       resolicit the function, according to a base official. In another instance, a
                       performance work statement was modified after award for aircraft
                       maintenance according to an Altus Air Force Base, Oklahoma, official, to
                       increase inspections on C-141 aircraft included in the original statement of
                       work, as well as adding work involving support for the C-17 aircraft. The
                       C-17 aircraft was assigned to Altus after the cost comparison had been
                       completed. An Air Force official said that they do not adjust estimated
                       savings once performance periods begin because changes frequently occur
                       in performance work statements that make it difficult to determine actual
                       savings.

                       Also, since savings estimates are based on the winner successfully
                       performing the function for the entire award period, savings from the
                       competitions may diminish, for example, if contracts are terminated
                       before the end of this period. Of the 32 competitions that were won by the
                       private sector, 4 were terminated within 14 to 26 months. In one instance,
                       a contract for storage and warehousing services at Fort Riley, Kansas, was
                       terminated after 19 months due to unsatisfactory performance. This work
                       is now being done by a contractor as part of an Air Force regional
                       maintenance contract.


Data Systems Provide   DOD’s projections of savings from A-76 competitions have typically been
Inadequate Basis for   drawn from CAMIS data. Available information indicates that the savings,
Tracking Savings       once captured in CAMIS, are not modified and are being used continuously
                       without updating the data to reflect changes in or even termination of
                       contracts. DOD officials have noted that they could not determine from the
                       CAMIS data if savings were actually being realized from the A-76
                       competitions. Our work continues to show important limitations in CAMIS
                       data.

                       Our March 1990 report stated that CAMIS contained inaccurate and
                       incomplete data. We further stated that it did not accurately track baseline
                       costs or reasons for contract changes, and contained inaccurate and
                       incomplete data on items such as program implementation or contract
                       administration costs. For example, we found that although DOD required
                       components to report staff hours expended to perform individual
                       competitions, most of the data was not being reported or did not appear
                       reasonable. Our current work and recent work by others have shown that
                       the situation has not changed appreciably. In a 1996 report, the Center for



                       Page 13                             GAO/NSIAD-99-44 Defense Competitive Sourcing
B-279580




Naval Analyses found that the data in CAMIS was incomplete and
inconsistent between the services and recommended that the data
collection process be more tightly controlled so that data is consistently
recorded.14

During our review, we found that CAMIS did not always record completed
competitions and sometimes incorrectly indicated that competitions were
completed where they had not yet begun or were still underway. We also
identified instances where savings data recorded for completed
competitions were incorrect based on other data provided by the
applicable service. For example, the system listed the annual savings from
the competition of the base operating support and aircraft maintenance at
Tyndall Air Force Base, Florida, as approximately $80 million; however,
our analysis of data provided on this competition estimated the projected
annual savings to be about $22 million. Air Force officials indicated that an
error had been made when this information was entered into CAMIS.

We also found that the Air Force’s CAMIS savings projections were not
adjusted and removed from the system when bases were closed or
realigned, thereby, artificially raising the total savings figure. Air Force
officials agreed that these savings should not be included in their system.
Our analysis indicated that the erroneous figures amount to about
14 percent of the Air Force’s total claimed position savings from A-76
competitions since 1979.

DOD officials have recognized significant limitations in CAMIS and are
currently making plans to improve the system. A recent DOD review
indicated that only about 20 percent of the Army and Air Force’s systems
contained complete cost data on competitions after they were
implemented. Further, it found these competition results were not
typically tracked for 3 years and not over the life of the contract, which is
usually 5 years. As a result, DOD officials anticipate issuing new guidance
to the services to improve the system. DOD officials indicate that they plan
to make changes to better track cost and savings information. They also
plan to obtain cost data for 5 years. This is in keeping with requirements
imposed as part of the National Defense Authorization Act for Fiscal
Year 1998 amendments to 10 U.S.C. 2463. Further, they plan to strengthen
their oversight responsibilities. Their objective is to have all changes
implemented by the fall of 1999.



14
 An Examination of the DOD Commercial Activities Competition Data (Center for Naval Analyses
CIM 472, Dec. 1996).



Page 14                                      GAO/NSIAD-99-44 Defense Competitive Sourcing
                            B-279580




                            Most of the competitions included in our study have been concluded for a
Performance                 relatively short period of time—21 contracts have been in effect, on
Problems Have Thus          average, 15 months or less—making it difficult to provide a meaningful
Far Been Limited            assessment of performance over any significant period of time.
                            Nonetheless, we identified a few situations where problems had arisen
                            whether competitions were won in-house or by the private sector. Plans
                            for government monitoring of private sector contract awards varied by
                            size and complexity of the functions outsourced.


Few Implementation          We identified only a few performance problems on contracts awarded as
Problems Identified         the result of competitions won by the private sector. We also found that
                            implementation problems can also arise when competitions are won by
                            in-house organizations.

                            In one instance involving a storage and warehousing contract at Fort
                            Riley, Kansas, the contract was terminated after the first full performance
                            period (19 months) because of poor contractor performance, according to
                            contract officials. In another instance, a grounds maintenance contract at
                            Keesler Air Force Base, Mississippi, was terminated. Officials there
                            attributed the cause partly to contractor performance and also partly due
                            to a poorly written performance work statement.

                            We also identified a problem in implementing an in-house MEO where the
                            government activity had won the competition. This involved the
                            conversion of an aircraft maintenance operation at Altus Air Force Base,
                            Oklahoma, from a mostly military operation to one to be operated by
                            government civilians. Full implementation of the aircraft maintenance
                            most efficient organization at Altus Air Force Base had to be extended
                            17 months—from December 1996 to April 1998—due to a delay in being
                            able to recruit enough personnel for the work. During this transition, the
                            Air Force had to arrange for some of the maintenance work to be done by
                            other organizations. In addition, while this transition was going on, the Air
                            Force consolidated its personnel function into one location, which caused
                            further delays in hiring.


Monitoring Plans Depend     The performance criteria or standards used to monitor contractor, as well
on Size and Complexity of   as in-house, performance are laid out in the quality assurance surveillance
Workload                    plans, which accompany the performance work statements developed for
                            competitive sourcing competitions. These plans also include the resources
                            needed to conduct performance reviews. The number of personnel



                            Page 15                             GAO/NSIAD-99-44 Defense Competitive Sourcing
                  B-279580




                  assigned to the monitoring of contracts won by the private sector will vary
                  depending upon the size and complexity of the functions being competed.
                  For example, a single location, single function competition at the Naval
                  Telecommunications Station, Stockton, California, had only two
                  government personnel assigned to oversee the contract. While, a multiple
                  location, multiple function competition involving the Defense Finance and
                  Accounting Service’s facilities, logistics, and administrative services had
                  plans for 15 government personnel to oversee its implementation at 5
                  different locations—3 people at each location. For selected competitions
                  we reviewed in detail, DOD officials told us they believed that the number
                  of oversight personnel had been adequate.


                  Defense components appear to be conducting competitive sourcing
Conclusions       competitions in accordance with OMB Circular A-76 guidelines. While the
                  results of recently completed competitions included in our review may not
                  be indicative of future competitions, they do indicate that both the public
                  and private sector competitors each continue to win a great number of the
                  competitions; that recent competitions have taken less time than in the
                  past, but longer than the current DOD goals for competitions. These
                  competitions show the potential for significant savings; however, various
                  factors cause the initial savings projections to be imprecise. How well the
                  level of savings hold up over time remains to be determined, as work
                  requirements and costs change. Improvements are still needed in DOD’s
                  database to ensure that results from A-76 competitions and savings
                  estimates are tracked over time, with adjustments made as needed for
                  competitions won by the private as well as the public sector.


                  We recommend that the Secretary of Defense establish specific guidance
Recommendations   and milestones for defense components to follow in making needed
                  improvements to their CAMIS databases to ensure accurate and complete
                  information is developed and maintained. Likewise, we recommend that
                  the Secretary provide defense components guidance for monitoring and
                  making periodic adjustments to savings estimates resulting from
                  competitive sourcing competitions whether won by the private or public
                  sectors. The guidance should specify that changes in costs of work, other
                  than changes in costs unrelated to the competitions such as mission
                  changes and/or new work, should be used to adjust estimated savings.




                  Page 16                            GAO/NSIAD-99-44 Defense Competitive Sourcing
                     B-279580




                     DOD concurred with the report’s findings concerning the need for
Agency Comments      improvements to the Commercial Activities Management Information
and Our Evaluation   System and the necessity to provide components guidance for adjusting
                     savings. It also indicated it planned to implement our recommendations as
                     part of overall improvements planned for its management information
                     system. DOD’s written comments on a draft of this report are included in
                     appendix III.


                     To determine the results of the A-76 competitions and related appeals, we
Scope and            spoke with officials from the Office of the Secretary of Defense,
Methodology          Departments of the Army, the Navy, and the Air Force; the Marine Corps;
                     the Defense Finance and Accounting Service; and the Defense
                     Commissary Agency to obtain listings of competitions completed from
                     October 1995 through March 1998 and the performance and oversight of
                     the winners. We obtained information on the 53 A-76 competitions
                     completed within DOD from October 1995 to March 1998.15 We also
                     judgmentally selected nine of these competitions to more fully assess
                     whether they were conducted in accordance with OMB Circular A-76
                     guidelines, and if DOD officials felt that contractor oversight was adequate.
                     We made our selection of cases to ensure we had coverage for military
                     services and defense agencies.

                     In this report, we considered a competition to be completed when an
                     award was made to a contractor or the final decision was made to keep
                     the function in-house between October 1, 1995, through March 31, 1998.
                     The Marine Corps did not have any completed competitions that met this
                     criteria. Therefore, the Marine Corps was not reviewed for this report.

                     Because of our concerns about the reliability of the CAMIS database, to
                     obtain details on each competition we contacted the contracting officials
                     or officials in charge for each of the completed cases. We also met with
                     contracting and other installation officials at four installations and the
                     Defense Finance and Accounting Service where the A-76 competitions
                     were conducted to review and discuss in detail the process followed for
                     the nine selected competitions. To determine if the nine competitions
                     were in compliance, we compared agency procedures with the protocols
                     outlined in the A-76 handbook. The competitions selected for detailed
                     review were storage and warehousing, Fort Riley, Kansas; dining facility,
                     Fort Sam Houston, Texas; Naval Computer and Telecommunications

                     15
                      Because of the difficulties encountered with the reliability of CAMIS, we cannot be certain that our
                     universe of 53 competitions is complete.



                     Page 17                                          GAO/NSIAD-99-44 Defense Competitive Sourcing
B-279580




Station, Stockton, California; aircraft maintenance, Altus Air Force Base,
Oklahoma; base operating support, Laughlin Air Force Base, Texas; base
operating support and aircraft maintenance, Tyndall Air Force Base,
Florida; regional jet engine maintenance, Laughlin Air Force Base, Texas;
base operating support, Columbus Air Force Base, Mississippi; and
facilities, logistics, and administration services, Defense Finance and
Accounting Service, Denver, Colorado; Indianapolis, Indiana; Kansas City,
Missouri; Cleveland, Ohio; and Columbus, Ohio. With the exception of the
Air Force, to determine the estimated dollar savings from each of the
competitions, we contacted the contracting officials who were responsible
for each of the A-76 competitions. The savings information for all Air
Force competitions is determined centrally at the Air Force’s Innovations
Center, Randolph Air Force Base, Texas. In addition, for two of the three
competitions completed by the Navy, we obtained the estimated dollar
savings from Center for Naval Analyses reports. We also discussed the
methodology used to determine savings with officials from the Army, the
Navy, the Air Force, the Defense Finance and Accounting Service, and the
Defense Commissary Agency. We did not independently verify the savings
estimates or the number of positions reduced.

To determine the factors that could affect the actual savings achieved
from the competitions, we analyzed the data obtained on each of the
competitions, and reviewed prior reports on outsourcing.

We performed our review from September 1997 to November 1998 in
accordance with generally accepted government auditing standards.


We are sending copies of this report to the Secretaries of Defense, the
Army, the Navy, and the Air Force; the Commandant of the Marine Corps;
the Director, Office of Management and Budget; and other interested
congressional committees. Copies will also be made available to others
upon request. Please contact me on (202) 512-8412 if you or your staff have
any questions concerning this report. Major contributors to this report are
listed in appendix IV.

Sincerely yours,




David R. Warren, Director
Defense Management Issues

Page 18                            GAO/NSIAD-99-44 Defense Competitive Sourcing
Page 19   GAO/NSIAD-99-44 Defense Competitive Sourcing
Contents



Letter                                                                                               1


Appendix I                                                                                          22
The A-76 Process
Appendix II                                                                                         26
List of OMB Circular
A-76 Competitions
Completed October
1995 Through
March 1998
Appendix III                                                                                        31
Comments From the
Department of
Defense
Appendix IV                                                                                         32
Major Contributors to
This Report
Related GAO Products                                                                                35


Tables                  Table 1: Civilian and Military Positions Competed in Recent                  5
                          Completed Competitions and Those Announced for Competition
                          in Fiscal Years 1996, 1997, and 1998
                        Table 2: Competitions Completed and Results By Defense                       7
                          Components Between October 1995 and March 1998
                        Table 3: Average Number of Months Required to Complete                       9
                          Competitions Between October 1995 and March 1998


Figure                  Figure I.1: Overview of the A-76 Process                                    23




                        Page 20                            GAO/NSIAD-99-44 Defense Competitive Sourcing
Contents




Abbreviations

CAMIS      Commercial Activities Management Information System
DOD        Department of Defense
MEO        most efficient organization
OMB        Office of Management and Budget


Page 21                          GAO/NSIAD-99-44 Defense Competitive Sourcing
Appendix I

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 the MEO; (4) issuing a Request for Proposals or Invitation for
              Bids; (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.

              Figure I.1 shows an overview of the process. The solid lines indicate the
              process used when the government issues an Invitation for Bids,
              requesting firm bids on the cost of performing a commercial activity. This
              type of process is normally used for more routine commercial activities,
              such as grass-cutting or cafeteria operations, where the work process and
              requirements are well defined. The dotted lines indicate the additional
              steps that take place when the government wants to pursue a negotiated,
              “best value” procurement. While it may not be appropriate for use in all
              cases, this type of process is often used when the commercial activity
              involves high levels of complexity, expertise, and risk.




              Page 22                             GAO/NSIAD-99-44 Defense Competitive Sourcing
                                                      Appendix I
                                                      The A-76 Process




Figure I.1: Overview of the A-76 Process




                                                                 Prepare in-house
                                                                 cost estimate




                                    MEO                                                                                 Revise
                                                                 Prepare technical              Revise
                                    management study                                                                    in-house
                                                                 proposal                       MEO
                                                                                                                        cost estimate




   Issue performance
   work statement
   and RFP or IFB
                                                                                           Compare selected
                                                                Conduct technical          Best Value and MEO
                                                                evaluation of MEO          technical proposals



                                     Accept                     Conduct technical              Compare
                                                                                                                         Select lowest
                                     contractor                 evaluation of                  costs/select
                                                                                               contractor                cost alternative
                                     bids/proposals             bids/proposals




          Most Efficient Organization (MEO) activities

          Government technical evaluation activities

          Process for invitation for bid (IFB)

          Additional steps required for request for
          proposals (RFP)



                                                      Source: Air Force Air Education and Training Command documents.




                                                      Page 23                                     GAO/NSIAD-99-44 Defense Competitive Sourcing
Appendix I
The A-76 Process




The circular requires the government to develop a performance work
statement. This statement, which is incorporated into either the Invitation
for Bids or Request for Proposals, serves as the basis for both government
estimates and private sector offers. If the Invitation for Bid process is
used, each private sector company develops and submits a bid, giving its
firm price for performing the commercial activity. While this process is
taking place, the government activity performs a management study to
determine the most efficient and effective way of performing the activity
with in-house staff. Based on this “most efficient organization,” the
government develops a cost estimate and submits it to the selecting
authority. The selecting authority concurrently opens the government’s
estimate along with the bids of all private sector firms.

According to OMB’s A-76 guidance, the government’s in-house estimate
wins the competition unless the private sector’s offer meets a threshold of
savings that is at least 10 percent of direct personnel costs or $10 million
over the performance period. This minimum cost differential was
established by OMB to ensure that the government would not contract out
for marginal estimated savings.

If the Request for Proposals—best value process—is used, the Federal
Procurement Regulation and the A-76 supplemental handbook require
several additional steps. The private sector offerors submit proposals that
often include a technical performance proposal and a price. The
government prepares an in-house management plan and cost estimate
based strictly on the performance work statement. On the other hand,
private sector proposals can offer a higher level of performance or service.

The government’s selection authority reviews the private sector proposals
to determine which one represents the best overall value to the
government based on such considerations as (1) higher performance
levels, (2) lower proposal risk, (3) better past performance, and (4) cost to
do the work. After the completion of this analysis, the selection authority
prepares a written justification supporting its decision. This includes the
basis for selecting a contractor other than the one that offered the lowest
price to the government. Next, the authority evaluates the government’s
offer and determines whether it can achieve the same level of performance
and quality as the selected private sector proposal. If not, the government
must then make changes to meet the performance standards accepted by
the authority. This ensures that the in-house cost estimate is based upon
the same scope of work and performance levels as the best value private
sector offer. After determining that the offers are based on the same level
of performance, the cost estimates are compared. As with the Invitation


Page 24                             GAO/NSIAD-99-44 Defense Competitive Sourcing
Appendix I
The A-76 Process




for Bids process, the work will remain in-house unless the private offer is
(1) 10 percent less in direct personnel costs or (2) $10 million less over the
performance period.

Participants in the process—for either the Invitation for Bids or Request
for Proposals process—may appeal the selection authority’s decision if
they believe the costs submitted by one or more of the participants were
not fair, accurate, or calculated in the manner prescribed by the A-76
handbook.




Page 25                              GAO/NSIAD-99-44 Defense Competitive Sourcing
Appendix II

List of OMB Circular A-76 Competitions
Completed October 1995 Through
March 1998

Dollars in millions
Defense                                                       Positions      Positions                    Amount of       Total
component/ major                         Function             competed       reduced                      multi-year multi-year
commands              Location           competed             (Civ./mil.)a   (Civ./mil.)a    Winner          award    savings
Fiscal year 1996
Army
Forces                Fort Riley, KS     Storage &            29 civ.        29 civ.         Contractor          3.0           4.3
Command                                  warehousing
Medical               Fort Sam           Dining facility      13 civ.        15 civ.         Contractor          5.4           3.0
Command               Houston, TX
Navy
Bureau of Medicine    San Diego, CA      Child care center    22 civ.        22 civ.         Contractor          0.4           0.7
& Surgery
Air Force
Air Combat            Davis Monthan      Military family      1 mil.         1 mil.          Contractor          5.1           1.7
Command               AFB,b AZ           housing              30 civ.        29 civ.
                                         maintenance
Air Force Materiel    Eglin AFB, FL      Range mobile target 23 civ.         39 civ.         Contractor          5.9           3.2
Command                                  support
Air Education &       Little Rock AFB,   Transient aircraft   11 civ.        11 civ.         Contractor          2.2         0.26
Training Command      AR                 maintenance
Air Education &       Maxwell AFB, AL    Fuels management     16 mil.        11 mil.         In-house            2.2           2.1
Training Command                                              7 civ.                         MEO
Air Education &       Goodfellow AFB,    Ground maintenance Under            Under           Contractor          0.9           0.5
Training Command      TX                                    contract for     contract for
                                                            last 10 years    last 10 years
Air Education &       Laughlin AFB, TX Base operating         177 mil.       177 mil         Contractor         29.4         29.8
Training Command                       support                101 civ.       93 civ.
Air Education &       Keesler AFB, MS    Ground               13 civ.        29 civ.         Contractor          2.1           1.6
Training Command                         maintenance
Air Education &       Altus AFB, OK      Aircraft             1,401 mil.     692 mil.        In-house         165.5          99.6
Training Command                         maintenance          43 civ.        17 civ.         MEO
Pacific Air Forces    Anderson AFB,      Refuse collection    14 civ.        13 civ.         Contractor          0.4           3.2
                      Guam
Pacific Air Forces    Anderson AFB,      Military family      34 civ.        32 civ.         Contractor         11.0           4.9
                      Guam               housing
                                         maintenance
                                                                                                                       (continued)




                                            Page 26                                 GAO/NSIAD-99-44 Defense Competitive Sourcing
                                               Appendix II
                                               List of OMB Circular A-76 Competitions
                                               Completed October 1995 Through
                                               March 1998




Dollars in millions
Defense                                                           Positions       Positions                      Amount of       Total
component/ major                            Function              competed        reduced                        multi-year multi-year
commands                Location            competed              (Civ./mil.)a    (Civ./mil.)a      Winner          award    savings
Marines
None
DECAc
  None
DFASd
  None
Fiscal year 1997
Army
None
Navy
Naval Computer &        Rough & Ready       Telecommunications 15 mil.            27 civ.           Contractor          7.8           4.2
Telecommunications      Island, Stockton,   center             29 civ.
Command                 CA
Air Force
Air Combat              Nellis AFB, NV      Military family       29 civ.         33 civ.           Contractor          8.4           1.0
Command                                     housing
                                            maintenance
Air Force Materiel      Eglin AFB, FL       Library services      8 civ.          8 civ.            Contractor          1.4           0.1
Command
Air Education &         Laughlin AFB, TX Regional jet engine      50 civ.         63 civ.           Contractor         31.4         25.5
Training Command                         maintenance
Air Education &         Lackland AFB, TX Animal caretaking        26 civ.         24 civ.           Contractor          3.8           1.7
Training Command
Air Education &         Maxwell AFB, AL     General library       12 civ.         3 civ.            In-house            1.9           0.1
Training Command                                                                                    MEO
Air Force District of   Bolling AFB, D.C. Military family         31 civ.         36 civ.           Contractor          4.5           4.4
Washington                                housing
                                          maintenance
Air Force Material      Tinker AFB, OK      Ground                21 civ.         10 civ.           In-house            9.5           1.3
Command                                     maintenance                                             MEO
Air Combat              Tyndall AFB, FL     Base operating        796 mil.        796 mil.          Contractor       130.6          88.4
Command                                     support & aircraft    238 civ.        221 civ.
                                            maintenance
Air Mobility            Andrews AFB, MD Administrative            8 civ.          8 civ.            Contractor          0.6           0.7
Command                                 support for medical
                                        records
Marines
  None
DECA
                                                                                                                              (continued)




                                               Page 27                                     GAO/NSIAD-99-44 Defense Competitive Sourcing
                                            Appendix II
                                            List of OMB Circular A-76 Competitions
                                            Completed October 1995 Through
                                            March 1998




Dollars in millions
Defense                                                         Positions      Positions                      Amount of       Total
component/ major                         Function               competed       reduced                        multi-year multi-year
commands              Location           competed               (Civ./mil.)a   (Civ./mil.)a      Winner          award    savings
Defense               Fort Lewis, WA     Shelf stocking         44 civ.        44 civ.           Contractor          6.0           1.2
Commissary Agency                        custodial receiving,
                                         storage & holding
                                         area
Defense               San Onofre         Shelf stocking         6 civ.         2 civ.            In-house            0.8           0.1
Commissary Agency     Marine Corps       custodial receiving,                                    MEO
                      Base, CA           storage & holding
                                         area
DFAS
Defense Finance       Denver, CO         Facilities logistics   279 civ.       92 civ.           In-house           41.5         20.5
and Accounting        Indianapolis, IN   and administration                                      MEO
Service               Kansas City, MO    services
                      Cleveland, OH
                      Columbus, OH
Fiscal year 1998
Army
Materiel Command      Redstone           Missile maintenance 13 mil.           13 mil.           In-house            3.2           0.1
                      Arsenal, AL                            39 civ.           21 civ.           MEO
Navy
U.S. Pacific Fleet    San Diego, CA    Family service           10 mil.        75 civ.           Contractor         15.7         10.1
                      Three locations— centers                  78 civ.
                      N. Island, 32nd
                      Street, &
                      Point Loma
Air Force
Air Education &       Columbus AFB,      Base operating         231 mil.       114 mil.          In-house           37.2         21.4
Training Command      MS                 support                110 civ.                         MEO
Air Force Materiel    Hanscom AFB,       Laboratory support     1 mil.         1 mil.            In-house            2.6           2.4
Command               MA                 services               14 civ.        6 civ.            MEO
Air Force Materiel    Hanscom AFB,       Audio-visual           2 mil.         2 mil.            In-house            2.5           2.2
Command               MA                                        18 civ.        9 civ.            MEO
Air Force Materiel    Kirtland AFB,      Precision              33 mil.        32 mil.           In-house            4.5           5.3
Command               NM                 measurement            18 civ.                          MEO
                                         equipment lab
Air Force Materiel    Wright-Patterson   Base operating         88 mil.        88 mil.           Contractor         40.4         57.6
Command               AFB, OH            support                411 civ.       406 civ.
Air Force Materiel    Hanscom AFB,       Vehicle O&M            30 mil.        26 mil.           In-house           10.1           2.7
Command               MA                                        34 civ.                          MEO
Air Force Materiel    Tinker AFB, OK     Communication          48 mil.        69 mil.           Contractor          8.8           6.2
Command                                  functions              22 civ.
Air Force Materiel    Hill AFB, UT       Grounds                38 civ.        36 civ.           Contractor          4.7           3.4
Command                                  maintenance
                                                                                                                           (continued)




                                            Page 28                                     GAO/NSIAD-99-44 Defense Competitive Sourcing
                                           Appendix II
                                           List of OMB Circular A-76 Competitions
                                           Completed October 1995 Through
                                           March 1998




Dollars in millions
Defense                                                        Positions      Positions                      Amount of       Total
component/ major                        Function               competed       reduced                        multi-year multi-year
commands              Location          competed               (Civ./mil.)a   (Civ./mil.)a      Winner          award    savings
Air Force Materiel    Los Angeles       Education services     13 mil.        13 mil.           In-house            3.4           4.4
Command               AFB, CA                                  22 civ.        5 civ.            MEO
Air Force Materiel    Robins AFB,       Audio-visual           39 civ.        5 civ.            In-house           10.0           1.4
Command               GA                                                                        MEO
Air Force Materiel    Robins AFB,       Military family        4 mil.         4 civ.            In-house            2.7         0.04
Command               GA                housing                9 civ.                           MEO
                                        maintenance
Air Force Space       Onizuka AFB,      Utilities plant        4 mil.         4 mil.            In-house            7.5           0.5
Command               CA                                       21 civ.        5 civ.            MEO
Air Force Materiel    Edwards AFB,      Base supply            223 mil.       211 mil.          Contractor         30.0         29.2
Command               CA                                       116 civ.       109 civ.
Air Force Special     Hurlburt Field,   Transient aircraft     11 mil.        11 mil.           Contractor          0.3           0.4
Operations            FL                maintenance
Command
Air Force Space       Patrick AFB, FL   Base operating         90 mil.        49 mil.           In-house           13.3           6.2
Command                                 support                28 civ.                          MEO
                                        communications
Air Force Space       Falcon AFB, CO    Utilities plant        16 mil.        8 mil.            In-house            4.3           0.4
Command                                                        5 civ.                           MEO
Air Force Space       Vandenberg        Housing                14 civ.        6 civ.            In-house            3.1           1.3
Command               AFB, CA           management                                              MEO
Air Force Mobility    McGuire AFB,      Military family        19 civ.        19 civ            Contractor         10.1           7.1
Command               NJ                housing
                                        maintenance
Air Force Space       Vandenberg        Civil engineering      8 civ.         7 civ             Contractor          1.0           0.3
Command               AFB, CA           (CE)
Air Force Space       Vandenberg        CE: materiel           3 mil.         3 mil.            In-house            1.3           0.1
Command               AFB, CA           acquisition            8 civ.         4 civ.            MEO
Air Force Mobility    Grand Forks       Base operating         13 civ.        12 civ.           Contractor          2.8           1.3
Command               AFB, ND           support
Pacific Air Forces    Elmendorf AFB,    Power production       41 civ.        34 civ.           Contractor         10.7           8.7
                      AK
Marines
None
DECA
Defense               Camp Pendleton    Shelf stocking         28 civ.        28 civ.           Contractor          3.2           0.5
Commissary Agency     Marine Corps      custodial receiving,
                      Base, CA          storage & holding
                                        area
Defense               Kaneohe Bay       Shelf stocking         17 civ.        17 civ.           Contractor          2.1           0.5
Commissary Agency     Marine Corps      custodial receiving,
                      Base, HI          storage & holding
                                        area
                                                                                                                          (continued)


                                           Page 29                                     GAO/NSIAD-99-44 Defense Competitive Sourcing
                                        Appendix II
                                        List of OMB Circular A-76 Competitions
                                        Completed October 1995 Through
                                        March 1998




Dollars in millions
Defense                                                        Positions         Positions                         Amount of       Total
component/ major                      Function                 competed          reduced                           multi-year multi-year
commands              Location        competed                 (Civ./mil.)a      (Civ./mil.)a      Winner             award    savings
DFAS
Defense Finance       Ft. Lee, VA     Defense                  240 civ.          165 civ.          In-house                13.2           50.5
and Accounting        Kelly AFB, TX   commissary vendor                                            MEO
Service                               pay

                                        a
                                         Civ = civilian; mil = military. In some instances, the number of positions reduced was greater
                                        than those competed for a variety of reasons, such as counting the reduction in temporary
                                        employees when they had been used to fully staff a function.
                                        b
                                            AFB = Air Force Base.
                                        c
                                         DECA = Defense Commissary Agency.
                                        d
                                            DFAS = Defense Finance and Accounting Service.




                                        Page 30                                         GAO/NSIAD-99-44 Defense Competitive Sourcing
Appendix III

Comments From the Department of Defense




               Page 31    GAO/NSIAD-99-44 Defense Competitive Sourcing
Appendix IV

Major Contributors to This Report


                        Barry W. Holman
National Security and   Marilyn K. Wasleski
International Affairs   David W. Rowan
Division, Washington,   Marjorie L. Pratt
                        David B. Best
D.C.
                        John G. Brosnan
Office of the General   B. Behn Miller
Counsel
                        Cheryl K. Andrew
Chicago Field Office    Neal H. Gottlieb




                        Page 32               GAO/NSIAD-99-44 Defense Competitive Sourcing
Appendix IV
Major Contributors to This Report




Page 33                             GAO/NSIAD-99-44 Defense Competitive Sourcing
Appendix IV
Major Contributors to This Report




Page 34                             GAO/NSIAD-99-44 Defense Competitive Sourcing
Related GAO Products


              OMB Circular A-76: Oversight and Implementation Issues (GAO/T-GGD-98-146,
              June 4, 1998).

              Quadrennial Defense Review: Some Personnel Cuts and Associated
              Savings May Not Be Achieved (GAO/NSIAD-98-100, Apr. 30, 1998).

              Competitive Contracting: Information Related to the Redrafts of the
              Freedom From Government Competition Act (GAO/GGD/NSIAD-98-167R,
              Apr. 27, 1998).

              Defense Outsourcing: Impact on Navy Sea-Shore Rotations
              (GAO/NSIAD-98-107, Apr. 21, 1998).

              Defense Infrastructure: Challenges Facing DOD in Implementing Defense
              Reform Initiatives (GAO/T-NSIAD-98-115, Mar. 18, 1998).

              Defense Management: Challenges Facing DOD in Implementing Defense
              Reform Initiatives (GAO/T-NSIAD/AIMD-98-122, Mar. 13, 1998).

              Base Operations: DOD’s Use of Single Contracts for Multiple Support
              Services (GAO/NSIAD-98-82, Feb. 27, 1998).

              Defense Outsourcing: Better Data Needed to Support Overhead Rates for
              A-76 Studies (GAO/NSIAD-98-62, Feb. 27, 1998).

              Outsourcing DOD Logistics: Savings Achievable but Defense Science
              Board’s Projections Are Overstated (GAO/NSIAD-98-48, Dec. 8, 1997).

              Financial Management: Outsourcing of Finance and Accounting Functions
              (GAO/AIMD/NSIAD-98-43, Oct. 17, 1997).

              Base Operations: Contracting for Firefighters and Security Guards
              (GAO/NSIAD-97-200BR, Sept. 12, 1997).

              Terms Related to Privatization Activities and Processes (GAO/GGD-97-121,
              July 1997).

              Defense Outsourcing: Challenges Facing DOD as It Attempts to Save
              Billions in Infrastructure Costs (GAO/T-NSIAD-97-110, Mar. 12, 1997).

              Base Operations: Challenges Confronting DOD as It Renews Emphasis on
              Outsourcing (GAO/NSIAD-97-86, Mar. 11, 1997).



              Page 35                             GAO/NSIAD-99-44 Defense Competitive Sourcing
           Related GAO Products




           Public-Private Mix: Effectiveness and Performance of GSA’s In-House and
           Contracted Services (GAO/GGD-95-204, Sept. 29, 1995).

           Government Contractors: An Overview of the Federal Contracting-Out
           Program (GAO/T-GGD-95-131, Mar. 29, 1995).

           Government Contractors: Are Service Contractors Performing Inherently
           Governmental Functions? (GAO/GGD-92-11, Nov. 18, 1991).

           OMB Circular A-76: Legislation Has Curbed Many Cost Studies in Military
           Services (GAO/GGD-91-100, July 30, 1991).

           OMB Circular A-76: DOD’s Reported Savings Figures Are Incomplete and
           Inaccurate (GAO/GGD-90-58, Mar. 15, 1990).




(709298)   Page 36                            GAO/NSIAD-99-44 Defense Competitive Sourcing
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