Contract Management: Service Contracting Trends and Challenges	 
(22-AUG-01, GAO-01-1074R).					 
								 
GAO reviewed several issues concerning service contracting trends
and challenges facing the government. The government has had	 
long-standing difficulties in managing service contracts, and it 
is clear that agencies are not doing all they can to ensure that 
they are acquiring services that meet their needs in a timely and
cost-effective manner. Agencies have begun efforts to address	 
their strategic human capital needs; however, no agency has	 
completed a strategic human capital management plan for their	 
acquisition workforce. Overall, agencies' plans reflected	 
different levels of attention to human capital, ranging from	 
merely identifying human capital challenges to putting forward	 
solutions to address those challenges, such as by defining actual
plans, committing resources, and assigning accountability.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-1074R					        
    ACCNO:   A01654						        
  TITLE:     Contract Management: Service Contracting Trends and      
             Challenges                                                       
     DATE:   08/22/2001 
  SUBJECT:   Government contracts				 
	     Service contracts					 
	     Strategic planning 				 
	     Contract administration				 
	     Performance measures				 
	     Human resources utilization			 
	     Federal Supply Schedule				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Testimony.                                               **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-01-1074R
     
GAO- 01- 1074R Contract Management United States General Accounting Office

Washington, DC 20548

August 22, 2001 The Honorable Tom Davis Chairman Subcommittee on Technology
and Procurement Policy Committee on Government Reform House of
Representatives

Subject: Contract Management: Service Contracting Trends and Challenges Dear
Mr. Chairman: On June 13, 2001, you asked me to provide additional comments
on several issues that I raised in my May 22 testimony before your
subcommittee on the service contracting trends and challenges facing the
government. I am pleased to submit the following comments for your
consideration.

1. In your testimony, you indicate ?In particular, agencies are not clearly
defining requirements, fully considering alternative solutions, performing
rigorous analysis, and adequately overseeing contractor performance.? In
your view, how can agencies do a better job of achieving these goals? Beyond
aggressive oversight, do you believe there is the need for additional
legislation to achieve these goals?

The government has had long- standing difficulties in managing service
contracts and it is clear that agencies are not doing all they can to ensure
that they are acquiring services that meet their needs in a timely and cost-
effective manner. We believe agencies can do a better job of achieving this
goal by:

Ensuring that acquisition teams consisting of all key stakeholders- which
can include the customer or end user, the contracting officer,
representatives from the budget or finance offices, and legal counsel, among
others- devote sufficient time early in the acquisition process to clearly
define their requirements and consider alternative solutions.

Putting in place performance management and compensation systems that link
performance to the agency?s mission.

Having a training program that provides the workforce with the right skills
and tools needed to perform their tasks. And,

Developing performance metrics that provide feedback on how well the
agency?s goals are being achieved.

GAO- 01- 1074R Contract Management Page 2 With regard to legislative or
regulatory changes, we are monitoring executive

agencies? response to Section 804 of the National Defense Authorization Act
for Fiscal Year 2000. 1 This section required the Federal Acquisition
Regulation be revised to provide guidance to agencies on the appropriate use
of task order and deliver order contracts, and was prompted, in part, by our
work at six federal organizations. 2 We recently found that Department of
Defense (DOD) contracting officers were still acquiring information
technology services without receiving competing proposals and by using
overly broad work descriptions, 3 and were unaware of special ordering
procedures applicable to ordering services using the General Services
Administration?s (GSA) Federal Supply Schedule program. 4 We made
recommendations to the Office of Federal Procurement Policy (OFPP) and to
GSA intended to improve the guidance available to the acquisition workforce.
While OFPP and GSA have efforts underway to implement our recommendations,
neither agency has done so as yet. Additionally, we will assess the need for
additional legislative or regulatory changes as we conduct further work on
service contracting- related issues.

2. In your statement, you repeatedly stressed the importance of strategic
human capital management particularly with the acquisition workforce. To the
best of your knowledge, has any federal agency completed a strategic plan
for their acquisition workforce and if so, have you reviewed it?

As I noted in my testimony, agencies have begun efforts to address their
strategic human capital needs; however, to the best of our knowledge, no
agency has completed a strategic human capital management plan for their
acquisition workforce. For example, earlier this year, we reported on the
extent to which the 24 agencies covered by the Chief Financial Officers? Act
discussed human capital issues in their fiscal year 2001 performance plans.
5 Overall, agencies? plans reflected different levels of attention to human
capital, ranging from merely identifying human capital challenges to putting
forward solutions to address those challenges, such as by defining actual
plans, committing resources, and assigning accountability. When viewed
collectively, we found that there was a need to increase the breadth, depth,
and specificity of many related human capital goals and strategies and to
better link them to the agencies? strategic and programmatic planning. For
example, very few of the agencies? plans addressed

succession planning to ensure reasonable continuity of leadership;

performance agreements to align leaders? performance expectations with the
agency?s mission and goals;

1 P. L. 106- 65, October 5, 1999. 2 Acquisition Reform: Multiple- award
Contracting at Six Federal Organizations

(GAO/ NSIAD- 98- 215, Sept. 30, 1998). 3 Contract Management: Few Competing
Proposals for Large DOD Information Technology Orders

(GAO/ NSIAD- 00- 56, Mar. 20, 2000). 4 Contract Management: Not Following
Procedures Undermines Best Pricing Under GSA?s Schedule

(GAO- 01- 125, Nov. 28, 2000). 5 Managing for Results: Human Capital
Management Discussions in Fiscal Year 2001 Performance

Plans (GAO- 01- 236, Apr. 24, 2001). As part of the Government Performance
and Results Act annual performance planning requirements, agencies are to
establish results- oriented performance goals and describe the strategies
and resources- including human capital- needed to accomplish those goals.

GAO- 01- 1074R Contract Management Page 3

competitive compensation systems to help the agency attract, motivate,
retain, and reward the people it needs;

workforce deployment to support the agency?s goals and strategies;

performance management systems, including pay and other meaningful
incentives, to link performance to results;

alignment of performance expectations with competencies to steer the
workforce towards effectively pursuing the agency?s goals and strategies;
and

employee and labor relations to ground a mutual effort on the strategies to
achieve the agency?s goals and to resolve problems and conflicts fairly and
effectively.

Currently, we are preparing a summary of agencies? attention to human
capital issues in their fiscal year 2002 performance plans. Although the
summary is not yet complete, our preliminary review indicates that the
agencies continue to have difficulty in linking their human capital goals to
meaningful performance measures or programmatic results.

In July 2001, we met with representatives from the Departments of Defense
and Energy and the National Aeronautics and Space Administration to discuss
the status of their efforts to develop a comprehensive strategic human
capital management plan for their acquisition workforce. These officials
acknowledged that they still have considerable amount of work to do before
they complete their plans.

3. In your testimony, most of the evidence reviewed pointed to contract
management problems within the Department of Defense. Is this due to a
significant amount of work being DOD- oriented? If so, do you believe that
GAO should be doing additional work examining contract management within the
civilian agencies?

As the largest buyer within the federal government, DOD receives a
considerable degree of attention from GAO. Nevertheless, since January 2000,
we have issued reports discussing service contract- related issues affecting
GSA, Veterans Affairs, Housing and Urban Development, the National Park
Service and the Pension Benefit Guaranty Corporation, as well as general
contract management issues at the Department of Energy and the National
Aeronautics and Space Administration. The issues that we and other oversight
agencies identified indicate that service contracting- related issues are
not limited to a specific agency, but rather are governmentwide in nature.

To meet this governmentwide challenge, our goal is to identify work that
maximizes the use of our resources and look for opportunities to leverage
the work of other oversight agencies. In particular, we are focusing efforts
to help minimize contracting risks faced by government agencies. Last year,
GAO formed a new team, Acquisition and Sourcing Management, in part, to
better focus our defense and civilian contract management work. The team?s
ongoing work includes identifying best commercial practices for purchasing
services, determining how GSA?s Federal Supply Service and Federal
Technology Service are leveraging the government?s buying power for
acquiring information technology services, and assessing the fees that
federal agencies charge other agencies to use their multiagency contracts.

GAO- 01- 1074R Contract Management Page 4 - - - - If

you have any questions about this letter or need additional information,
please call me on (202) 512- 4841. Copies of this letter are also available
on GAO?s homepage at http:// www. gao. gov. Key contributors to this letter
included Ralph Dawn, Timothy DiNapoli and Gordon Lusby.

Sincerely yours, David E. Cooper Director, Acquisition and Sourcing
Management

(120080)
*** End of document. ***