Force Structure: A-76 Not Applicable to Air Force 38th Engineering Installation Wing Plan

Published by the Government Accountability Office on 1999-02-26.

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

                  United States General Accounting Office

GAO               Report to Congressional Requesters

February 1999
                  FORCE STRUCTURE
                  A-76 Not Applicable to
                  Air Force
                  38th Engineering
                  Installation Wing Plan

                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548

                   National Security and
                   International Affairs Division


                   February 26, 1999

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

                   The Honorable Floyd D. Spence
                   The Honorable Ike Skelton
                   Ranking Minority Member
                   Committee on Armed Services
                   House of Representatives

                   This report responds to the request of the Chairman of the Senate
                   Subcommittee on Readiness and Management Support, Committee on
                   Armed Services, that we determine whether the Air Force complied with
                   relevant policy and congressional notification requirements in reaching a
                   decision to deactivate the 38th Engineering Installation Wing (EIW) at
                   Tinker Air Force Base (AFB), Oklahoma, and reassign its work elsewhere.
                   It also fulfills a requirement of the House National Security Committee’s1
                   report on the National Defense Authorization Act for Fiscal Year 1999,
                   which directed us to analyze and determine whether information provided
                   by the Air Force supports this proposed action. Specifically, this report
                   discusses (1) the scope of the Air Force’s planned action, (2) whether it is
                   subject to the requirements of Office of Management and Budget (OMB)
                   Circular A-76 and 10 U.S.C. 2461, and (3) whether an analysis was
                   completed to examine the cost-effectiveness of the planned action.

                   The Air Force plans to deactivate the 38th EIW, headquartered at Tinker Air
Results in Brief   Force Base, Oklahoma, and transfer its wartime mission to the Air
                   National Guard (ANG) without increasing the Guard’s authorized
                   end-strength. About 75 percent, or 1,752, of the unit’s authorized positions
                   will be eliminated, while 591 positions will be reassigned to existing or
                   new organizations to assume responsibilities previously assigned to the
                   38th EIW. These changes are expected to result in one-time savings of
                   $33 million and annual recurring savings of $28 million.

                    Now known as the House Armed Services Committee.

                   Page 1                                              GAO/NSIAD-99-73 Force Structure

                 Concerning questions raised about the need for notice and cost studies
                 related to the proposed action, we found:

             •   The proposed action is a comprehensive restructuring of an active
                 component unit, largely transferring its wartime mission to the Air
                 National Guard. It is not the type of action historically associated with OMB
                 Circular A-76 and is not a conversion as envisioned under the circular.
                 Accordingly, a cost comparison under that circular is not required.
             •   Likewise, the planned action is not a change in the performance from
                 civilian personnel to contractor employees of the kind subject to the
                 requirements of 10 U.S.C. 2461; accordingly, the Air Force was not
                 required to perform the cost study and provide congressional notification
                 under that provision.
             •   At the same time, the Air Force’s business case analysis supports the
                 cost-effectiveness of the proposed action, with the reduction of a
                 significant number of personnel.

                 Since 1955, federal agencies have been encouraged to obtain commercially
Background       available goods and services from the private sector if doing so is
                 cost-effective. In 1966, OMB issued Circular A-76, which established federal
                 policy for the government’s performance of commercial activities and set
                 forth the procedures for studying them for potential contracting. In 1979,
                 OMB issued a supplemental handbook to the circular that included cost
                 comparison procedures for 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 1983 and again in March 1996.

                 The March 1996 Revised Supplemental Handbook clarified numerous
                 areas, including the application of the A-76 cost comparison requirements.
                 The handbook’s introduction describes a wide range of options
                 government officials must consider as they contemplate reinventing
                 government operations. They include “the consolidation, restructuring or
                 reengineering of activities, privatization options, make or buy decisions,
                 the adoption of better business management practices, the development of
                 joint ventures with the private sector, asset sales, the possible devolution
                 of activities to state and local governments and the termination of obsolete
                 services or programs.” The introduction also explains that “in the context
                 of this larger reinvention effort, the scope of the Supplemental Handbook

                 Page 2                                          GAO/NSIAD-99-73 Force Structure

                        is limited to conversion of recurring commercial activities to or from
                        in-house, contract or interservice support agreement performance.”2

                        Where A-76 cost comparison procedures apply, the initial step is to
                        develop a performance work statement describing what is needed to
                        perform the activity. That statement is used as the technical performance
                        section of a solicitation for private-sector offers. The government also
                        develops a management plan that describes the most efficient organization
                        for in-house performance of the activity described in the performance
                        work statement. The cost of performance by the government in
                        accordance with the most efficient organization is compared to the cost
                        proposed by the private-sector source selected pursuant to the
                        solicitation. The activity will be converted to performance by the private
                        sector if the private sector’s offer represents a reduction of at least
                        10 percent of direct personnel costs or $10 million over the performance
                        period. Further information about the A-76 process is included in
                        appendix I.

                        In addition to A-76, the Department of Defense (DOD) must consider the
                        effect of 10 U.S.C. 2461 when it plans changes to an industrial or
                        commercial type function performed by its civilian employees.
                        Section 2461, as amended by the Strom Thurmond National Defense
                        Authorization Act for Fiscal Year 1999, Public Law 105-261, requires an
                        analysis of the activity, including a comparison of the cost of performance
                        by DOD civilian employees and by a contractor, to determine whether
                        contractor performance could result in a savings to the government. It also
                        requires DOD to notify Congress of the analysis and to provide other
                        information prior to instituting a change in performance.3

                        The 38th EIW is an active component Air Force unit with a wartime support
Process of              mission that has been greatly diminished since the end of the Cold War.
Deactivating 38th EIW   Deactivation of the 38th EIW will involve multiple actions to realign the
Involves Multiple       wartime mission and reassign other peacetime roles.
Actions                 The 38th EIW provides engineering and installation (E&I) services in support
                        of the Air Force’s communications needs. It supports flight facilities,
                        intrusion detection, ground radio, wideband/satellite systems, local area

                         While A-76 addresses conversions in both directions, for purposes of this report, we will focus on
                        conversions from performance by government employees to the private sector.
                         Further, section 8014 of the Department of Defense Appropriations Act for Fiscal Year 1999, Public
                        Law 105-262, requires that DOD certify its in-house estimate to congressional committees before
                        converting any activity performed by more than 10 DOD civilian employees to contractor performance.

                        Page 3                                                           GAO/NSIAD-99-73 Force Structure

                                    networks, cable/fiber optic distribution systems, switching systems, and
                                    other communications systems. The 38th EIW is an Air Force Materiel
                                    Command unit headquartered at Tinker AFB, Oklahoma, with squadrons at
                                    Keesler AFB, Mississippi; Kelly AFB, Texas; and McClellan AFB, California. In
                                    addition, an active duty military advisor is stationed at each of the 19 ANG
                                    units—units that also provide engineering and installation services.
                                    Currently, the 38th EIW consists of 2,343 personnel (1,358 military and 985
                                    civilian) at these bases and various ANG locations. Table 1 shows the active
                                    component military and civilian personnel authorized for the 38th EIW at
                                    each location.

Table 1: Current 38th EIW Active
Component Manpower Authorizations   Location                                              Military             Civilian                Total
                                    Keesler AFB,
                                    Mississippi                                                293                  111                  404
                                    Kelly AFB, Texas                                           290                   24                  314
                                    McClellan AFB, California                                  290                   24                  314
                                    Tinker AFB, Oklahoma                                       466                  826                1,292
                                    ANG units, various locations                                19                     0                  19
                                    Total                                                   1,358                   985                2,343
                                    Source: Air Force Engineering and Installation Reengineering Briefing Document, June 18, 1998.

                                    The squadrons at Keesler, Kelly, and McClellan AFBs are composed
                                    primarily of military personnel. About a third of the total EIW authorized
                                    personnel (726 military and 40 civilian) perform installation services. The
                                    remainder of the military and civilian personnel perform engineering;
                                    logistics; and other support functions.

                                    The 19 ANG units noted above have 2,314 authorized guard personnel: they
                                    perform peacetime installation services as part of their training. Further,
                                    the Air Force relies on the private sector to provide E&I services using
                                    approximately 40 different indefinite delivery/indefinite quantity contracts.4

                                    The 38th EIW’s structure was premised on its cold war mission of
                                    reconstituting damaged fixed communications systems (radars, phone
                                    lines, cables, etc.) at overseas bases. However, under the new Air
                                    Expeditionary Force concept, existing military forces will go into bare
                                    bases and use tactical, or mobile, communications gear. Consequently, the

                                     An indefinite delivery/indefinite quantity contract provides for an indefinite quantity, within stated
                                    limits, of supplies or services to be furnished during a fixed period with deliveries or performance to
                                    be scheduled by placing orders with the contractor. See Federal Acquisition Regulation 16.504.

                                    Page 4                                                            GAO/NSIAD-99-73 Force Structure

    need to repair these fixed communications is reduced and there is greater
    reliance on tactical communications.

    Based on the reassessment of its wartime mission requirements and the
    Quadrennial Defense Review process (which recommended DOD improve
    the efficiency and performance of support activities by reengineering), the
    Air Force decided that the wartime E&I mission could be transferred to the
    ANG. At the same time, the Air Force would retain a minimal active-duty
    capability, provided by a new rapid response squadron at Keesler AFB.
    Since there will no longer be a need for the 38th EIW to supply the Air
    Force’s peacetime E&I needs in order to maintain wartime skills, the Air
    Force no longer has a requirement to maintain the large E&I infrastructure
    of the 38th EIW.5

    As currently proposed, the deactivation of the 38th EIW would eliminate
    1,200 of its 1,358 military positions and 552 of its 985 civilian positions.
    After the wing is deactivated, the remaining 158 military personnel and 433
    civilian personnel will be reassigned to existing or new organizations,
    located principally at Tinker and Keesler AFBs. With the deactivation of the
    38th EIW and transfer of the wartime mission to the ANG, other actions will
    also occur:

•   The Kelly and McClellan squadrons will be disestablished concurrent with
    the realignment and closure actions being implemented as part of the 1995
    base realignment and closure decision.
•   All 19 active-duty authorizations at the ANG units will be eliminated.
•   The squadron at Keesler AFB will become a rapid response squadron whose
    mission would be wartime deployment, and also provide a quick reaction
    E&I capability for emergency needs, and provide specialized engineering.
•   A portion of the positions formerly with the 38th EIW will be reassigned to
    a new organizational unit at Tinker AFB that will become a base
    communication and information infrastructure planning and program
    management office.
•   Fifty civilian authorizations which are being eliminated at Tinker will be
    transferred to the Air Force Communications Agency at Scott AFB, Illinois,
    to more closely align their telecommunications sustainment workload
    with the Air Force unit responsible for telecommunications policy.
•   The wartime E&I mission will be substantially transferred to the existing
    ANG E&I units without an increase in authorized positions.

    Figure 1 portrays the planned actions.

     The Air Force proposed deactivating the 38th EIW by July 2000.

    Page 5                                                            GAO/NSIAD-99-73 Force Structure

Figure 1: Actions Affecting Positions Formerly Associated With the 38th EIW

                                          Source: Air Force Engineering and Installation Reengineering Briefing Document, June 18, 1998.

                                          Viewed another way, of 1,358 authorized military positions, over
                                          88 percent would be eliminated and out of the 985 authorized civilian
                                          positions, 56 percent would be eliminated, while the remainder would be
                                          shifted to other organizations.6 Table 2 shows the number of 38th EIW
                                          military and civilian positions that would be reduced at affected bases and
                                          the numbers reassigned to other organizations.

                                           Air Force officials told us that military end-strength would be reduced along with the civilian
                                          positions that are not being reassigned elsewhere. The Air Force did notify Congress of these changes
                                          through the annual force structure announcement of February 10, 1998.

                                          Page 6                                                          GAO/NSIAD-99-73 Force Structure

Table 2: 38th EIW Active Component Personnel Reductions and Transfers to Other Organizations
                                                 Civilian          Total          Military      Civilians
                                 Military  reductions or   reductions or      assigned to    assigned to                                 Total
Location                      reductions            gain            gain         new org.       new org.                           reassigned
Keesler AFB                          (136)                (76)              ( 212)                 157                   35                  192
Kelly AFB                           ( 290)               ( 24)              ( 314)                    0                    0                      0
McClellan AFB                       ( 290)               ( 24)              ( 314)                    0                    0                      0
Tinker AFB                          ( 465)             ( 478)               ( 943)                    1                 348                  349
Scott AFB                               0                 50                   50                     0                  50                      50
ANG units at various
locations                             (19)                  0                  (19)                   0                    0                      0
Total                              (1,200)              (552)              (1,752)                 158                  433                  591
                                         Source: Air Force Engineering and Installation Reengineering Briefing Document, June 18, 1998.

                                         As a result of the deactivation and restructuring, 1,752, or 75 percent, of
                                         the unit’s 2,343 positions would be eliminated, while 591 would be
                                         reassigned elsewhere.

                                         Following the deactivation of the 38th EIW, the responsibility for obtaining
                                         peacetime E&I services will be transferred to the individual major
                                         commands. These commands may acquire such services from
                                         (1) contracts, (2) the ANG E&I units, or (3) the rapid response squadron at
                                         Keesler, based on availability. The military units will need to perform some
                                         of this peacetime work to maintain their wartime skills.

                                         OMB  Circular A-76 and the cost comparison requirements of its
Applicability of OMB                     accompanying handbook apply to the conversion of the performance of a
Circular A-76 and 10                     commercial activity from government civilian employees to the private
U.S.C. 2461                              sector. According to the Air Force, A-76 does not apply to its plan because
                                         the deactivation of the 38th EIW does not constitute a conversion of the
                                         performance of an activity by civilian DOD employees as envisioned under
                                         the circular. The Air Force’s changed wartime requirements have caused it
                                         to propose a realignment of the responsibilities and missions of the 38th
                                         EIW. Consequently, the original function of the 38th EIW has been
                                         fundamentally altered and the need for civilian employee support is
                                         significantly reduced. We find the Air Force’s conclusion that A-76 does
                                         not apply to be reasonable. 7

                                          However, this is not to say other business case analyses or cost-effectiveness studies should not be
                                         done to validate the benefits of the proposed change as a matter of prudent management practice.

                                         Page 7                                                           GAO/NSIAD-99-73 Force Structure

                          The Air Force made a reasonable judgment in deciding that its
                          deactivation of the 38th EIW and the restructuring of the delivery of E&I
                          services is not subject to the requirements of 10 U.S.C. 2461 since the plan
                          does not constitute a change from performance of a particular workload
                          by DOD civilian employees to private sector performance.

Air Force Plan Does Not   The handbook does not provide detailed guidance as to what constitutes a
Constitute an A-76        conversion of a commercial activity for purposes of A-76. Between 1979
Conversion                and 1994, DOD conducted over 2,000 competitions using the A-76 process.
                          Most of these involved activities, such as groundskeeping, laundry, and
                          food service, where the conversions proposed were straightforward
                          exchanges of a government employee workforce for a contractor
                          workforce to perform a particular service. An agency must base its
                          judgment about whether A-76 applies on the individual facts of each
                          initiative. As each case usually involves a unique situation, an agency has
                          the discretion to determine the applicability of A-76 to its particular
                          initiative as long as the agency has exercised its judgment reasonably.8

                          The handbook introduction explains that a commercial activity is a
                          process resulting in a product or service that may be obtained from the
                          private sector and that some management initiatives, such as
                          “reengineering,” “privatization,” or “restructuring,” involving such
                          activities are beyond conversions and are not subject to the
                          cost-comparison requirements of A-76.9 Therefore, it is reasonable to
                          interpret the guidance to mean that A-76 conversions are not intended to
                          encompass every initiative that results in the loss of civilian government
                          jobs. Further, the handbook provides that it is not to apply to the
                          conversion of activities performed by uniformed military personnel.10

                          The Air Force plan to deactivate the 38th EIW and transfer its E&I activities
                          to other organizations within the Air Force or to the ANG is a
                          comprehensive change to the missions and responsibilities of the 38th EIW.
                          The Air Force has decided that the 38th EIW’s wartime mission should be
                          transferred to the ANG. As a result, it appears that the Air Force no longer
                          has a requirement to maintain a large, centralized E&I infrastructure to
                          train personnel to meet this mission. The peacetime E&I work was

                           Department of the Air Force—Reconsideration, 72 Comptroller General 241 (1993).
                           A-76 does not define “restructuring” or “reengineering.” It does provide that “privatization” is a
                          change of a public entity or enterprise to private control or ownership.
                              OMB Circular No. A-76 Revised Supplemental Handbook (Mar. 1996), chapter 1, section D.7.

                          Page 8                                                             GAO/NSIAD-99-73 Force Structure

                            performed by the 38th EIW, in large part, to maintain its skills and
                            capabilities to perform its wartime mission. This included a large civilian
                            workforce performing peacetime E&I work to support the wartime mission
                            of the uniformed military personnel. Now that this wartime mission has
                            been transferred to the ANG, which does not need this civilian support,
                            there is no longer a requirement to maintain the infrastructure.

                            The type of E&I work being impacted by the Air Force plan would generally
                            fit within the definition of commercial activity for A-76 purposes.
                            However, the Air Force plan is not simply a changeover of this commercial
                            activity from performance by civilian employees to private sector workers.
                            In fact, the majority of positions affected are uniformed military personnel,
                            which are not subject to A-76. Of 1,358 military personnel assigned to the
                            38th EIW, only 158 will remain. The civilians in the 38th EIW were primarily
                            performing commercial E&I activities to provide continuity during
                            contingencies and support for military personnel to enhance their wartime
                            skills. Absent the military requirement, the E&I services could have been
                            supplied by contract with the private sector.

                            Under the restructuring, civilian positions will be lost and the different Air
                            Force units could meet some of their new responsibilities by obtaining E&I
                            services through contractors.11 However, this is an incidental result of a
                            plan that primarily involves the reassignment of uniformed military
                            personnel and the transfer of their responsibilities to other organizations.
                            The civilian performance of the commercial E&I activity was essentially an
                            adjunct of the military mission. The civilians who remain will be
                            reassigned to different organizations and locations. Thus, we find
                            reasonable the Air Force decision that its plan to change the wartime
                            mission of the 38th EIW is not the type of management initiative that is
                            subject to A-76.

Air Force Plan Does Not     We believe that the Air Force made a reasonable judgment in deciding that
Constitute Change in        its deactivation of the 38th EIW and the restructuring of the delivery of E&I
Performance of a Function   services which that necessitates is not subject to the requirements of
                            section 2461 since the plan does not constitute a change from performance
Under 10 U.S.C. 2461        of a particular workload by DOD civilian employees to private-sector

                              The handbook provides that new requirements are generally to be obtained by contract. See chapter
                            1, section D.2.
                              See Israel Aircraft Industries, Ltd.—Reconsideration (B-258229, July 26, 1995).

                            Page 9                                                           GAO/NSIAD-99-73 Force Structure

                        Section 2461 requires that before any commercial or industrial type
                        function is changed from performance by DOD civilian employees to
                        private-sector performance, DOD must report to Congress and perform an
                        analysis showing that private sector performance will result in a savings to
                        the government over the life of the contract. As under A-76, the cost of
                        performance of the function by the government employees is to be based
                        on an estimate of their most cost-effective manner for performance of the

                        Section 2461 applies to initiatives that result in functions performed by
                        DOD civilian employees being changed to performance by private-sector
                        employees. As discussed earlier, the Air Force proposal is more than just a
                        change of the 38th EIW function from DOD civilian employees to
                        contractors. Rather, it is a transfer of the E&I wartime mission to the ANG
                        units which primarily affects uniformed military personnel who are not
                        subject to 10 U.S.C. 2461. Once this occurs, there will no longer be a need
                        for the 38th EIW, which was designed to support the military personnel and
                        their wartime mission. The action being taken in this case is not a change
                        of the kind contemplated by section 2461.13

                        While neither an A-76 cost comparison nor a section 2461 cost study was
Cost-Effectiveness of   required, the Air Force nevertheless did complete a business case analysis
the Change Proposed     to estimate the cost-effectiveness of restructuring the 38th EIW. That
by the Air Force        analysis showed an estimated annual recurring savings of approximately
                        $28 million, based on reported fiscal year 1997 costs and projected costs
                        (including contract costs) of the restructured organizations. The estimated
                        contract costs were based on existing negotiated contract rates for an
                        equivalent level of effort. The analysis showed that most of the recurring
                        savings would result from engineer and installer manpower cuts and unit
                        operations and maintenance reductions. Also, the business case analysis
                        found that the Air Force will realize an estimated one-time savings of
                        $33 million, of which $28 million is due to the cancellation of planned Base
                        Realignment and Closure construction projects associated with the future
                        realignment of Kelly AFB and the closure of McClellan AFB. (These
                        construction projects were planned at other bases in order to
                        accommodate the E&I workload being transferred from the squadrons at
                        McClellan and Kelly AFBs as the result of 1995 base realignment and
                        closure decisions.) The study also found that another $5 million will be

                         For the same reasons we believe that the requirement to certify the government estimate in section
                        8014 of the 1999 DOD Appropriations Act is not applicable.

                        Page 10                                                        GAO/NSIAD-99-73 Force Structure

                     saved due to the cancellation of building construction projects at Tinker

                     The Air Force Audit Agency performed a management advisory review of
                     the 38th EIW business case analysis.14 The Audit Agency sampled two of the
                     five wing functions, representing 78 percent of the wing’s total functions.
                     It concluded that the methodology the Air Force had used for its analysis
                     was sound and that the analysis was materially correct and well
                     documented. It also concluded that the estimate of expected savings was
                     conservative because the Air Force used the most conservative rates in
                     place. We also found the analysis to be reasonable based on the cost
                     factors and type of methodology the Air Force used.

                     The Air Force’s proposal concerning the 38th EIW is a comprehensive
Conclusions          change to the missions and responsibilities performed by the 38th EIW and
                     does not constitute a conversion of civilian to contractor personnel as
                     envisioned under A-76. Thus, the Air Force was reasonable in concluding
                     that it did not have to undergo the A-76 process in this instance. Similarly,
                     the planned action is not a change of the kind contemplated by 10 U.S.C.
                     2461. Accordingly, the Air Force was not required to perform the cost
                     study and provide congressional notification under that provision. At the
                     same time, the Air Force’s business case analysis supports the
                     cost-effectiveness of the proposed action, with the reduction of a
                     significant number of personnel.

                     We requested comments on a draft of this report from the Secretary of
Agency Comments      Defense or his designee. On February 11, 1999, DOD officials concurred
and Our Evaluation   with the report findings. They also provided technical comments which
                     have been incorporated as approriate.

                     To determine whether the planned action was subject to the requirements
Scope and            of OMB Circular A-76, we reviewed the Air Force’s programming and
Methodology          implementation plans and reviewed and analyzed Circular A-76. Also, we
                     interviewed senior officials at Air Force Headquarters, Washington, D.C.;

                       A management advisory review is done in accordance with the Air Force Audit Agency’s management
                     advisory service. This service does not follow the traditional audit process and is not subject to formal
                     reporting requirements. Instead, the service is completed in response to specific management requests
                     for independent data gathering and analysis on taskings such as evaluating management alternatives,
                     performing fact finding, and scoping known problems. The results are communicated in a briefing or

                     Page 11                                                          GAO/NSIAD-99-73 Force Structure

the 38th EIW, Tinker AFB, Oklahoma; and the Office of Management and
Budget, Washington, D.C. We also reviewed our prior work reviewing
A-76 issues.

To determine whether the Air Force action was subject to the
requirements of 10 U.S.C. 2461, we identified and reviewed relevant
legislation and discussed the applicability of section 2461 with senior
officials of the Office of Management and Budget and the Air Force’s
Office of General Counsel.

To determine whether the Air Force analyzed the cost-effectiveness of the
proposed action, we reviewed its business case analysis and discussed it
with the Air Force Audit Agency. We also reviewed the Air Force’s rates
and cost methodology.

We conducted our review from May 1998 to January 1999 in accordance
with generally accepted government auditing standards.

We are sending copies of this report to the Ranking Minority Member of
the Subcommittee on Readiness and Management Support, Senate Armed
Services Committee; Chairmen and Ranking Minority Members of the
Senate and House Committees on Appropriations; the Secretaries of
Defense and the Air Force; and the Director of OMB. We will make copies
available to others upon request.

Please contact me at 202-512-8412 if you or your staff have any questions
concerning this report. Major contributors to this report are listed in
appendix II.

David R. Warren, Director
Defense Management Issues

Page 12                                         GAO/NSIAD-99-73 Force Structure
Page 13   GAO/NSIAD-99-73 Force Structure

Letter                                                                                             1

Appendix I                                                                                        16
The A-76 Process
Apppendix II                                                                                      20
Major Contributors to
This Report
Tables                  Table 1: Current 38th EIW Active Component Manpower                        4
                        Table 2: 38th EIW Active Component Personnel Reductions and                7
                          Transfers to Other Organizations

Figures                 Figure 1: Actions Affecting Positions Formerly Associated with             6
                          the 38th EIW
                        Figure I.1: Overview of the A-76 Process                                  17


                        AFB        Air Force Base
                        ANG        Air National Guard
                        DOD        Department of Defense
                        EIW        Engineering Installation Wing
                        E&I        Engineering and Installation
                        IFB        Invitation for Bid
                        MEO        most efficient organization
                        OMB        Office of Management and Budget
                        RFP        Request for Proposals

                        Page 14                                       GAO/NSIAD-99-73 Force Structure
Page 15   GAO/NSIAD-99-73 Force Structure
Appendix I

The A-76 Process

              In general, the A-76 process consists of six key activities. They are:
              (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
              (RFP) or Invitation for Bid (IFB); (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 IFB, requesting firm bids on
              the cost of performing a commercial activity. This 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
              process is often used when the commercial activity involves high levels of
              complexity, expertise, and risk.

              Page 16                                        GAO/NSIAD-99-73 Force Structure
                                                      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 17                                                    GAO/NSIAD-99-73 Force Structure
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 IFB or RFP,
serves as the basis for both government estimates and private sector
offers. If the IFB 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 RFP—best value process—is used, the Federal Procurement
Regulations 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 IFB process,
the work will remain in-house unless the private offer is (1) 10 percent less

Page 18                                         GAO/NSIAD-99-73 Force Structure
                             Appendix I
                             The A-76 Process

                             in direct personnel costs or (2) $10 million less over the performance

                             Participants in the process—for either the IFB or RFP 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. Appeals must be submitted in
                             writing and within 20 days after the date that all supporting documentation
                             is made publicly available. The appeal period may be extended to 30 days
                             if the cost comparison is particularly complex. Appeals are supposed to be
                             adjudicated within 30 days after they are received.

Waivers of Cost              The A-76 Supplemental Handbook provides that, under certain
Comparison Requirement       circumstances, agencies may authorize cost comparison waivers and
                             direct conversions to or from in-house, contract or interservice support
                             agreements. A waiver may be granted where:

                         •   The conversion will result in a significant financial or service quality
                             improvement and a finding that the conversion will not serve to reduce
                             significantly the level or quality of competition in the future award or
                             performance of work; or
                         •   The waiver will establish why in-house or contract offers have no
                             reasonable expectation of winning a competition conducted under the
                             cost comparison procedures of the Handbook.

                             Additionally, the supplemental handbook provides that under certain
                             circumstances, such as situations involving 65 or less full time equivalent
                             personnel, streamlined cost comparisons may be permitted.

                             Page 19                                         GAO/NSIAD-99-73 Force Structure
Apppendix II

Major Contributors to This Report

                        Barry Holman, Associate Director
National Security and   Marilyn Wasleski, Assistant Director
International Affairs   Debra McKinney, Evaluator-in-Charge
Division, Washington,   Bonita Page, Senior Evaluator
                        John Brosnan, Assistant General Counsel
Office of the General   Stephanie May, Senior Attorney
                        Kimberly Seay, Site Senior
Dallas Field Office     Bonnie Carter, Senior Evaluator

(709353)                Page 20                                   GAO/NSIAD-99-73 Force Structure
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