Defense Management: Opportunities to Enhance the Implementation
of Performance-Based Logistics (16-AUG-04, GAO-04-715).
The Department of Defense (DOD) is pursuing a policy that
promotes performance-based logistics at the platform level as the
preferred product support strategy for its weapon systems, based
in part on DOD's perception that this is an industry best
practice. GAO was asked to compare industry practices for
activities using complex and costly equipment with life-cycle
management issues similar to those of military systems to
identify lessons learned that can be useful to DOD. This is the
first of two reports addressing DOD's implementation of
performance-based logistics and is intended to facilitate DOD's
development of new guidance on the use of this approach.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-715
ACCNO: A11590
TITLE: Defense Management: Opportunities to Enhance the
Implementation of Performance-Based Logistics
DATE: 08/16/2004
SUBJECT: Best practices
Comparative analysis
Defense cost control
Defense procurement
Logistics
Military policies
Policy evaluation
Private sector practices
Procurement policy
Weapons systems
Comparative benchmarking products
Performance-based contracting
F-117 Aircraft
Goshawk Aircraft
Javelin Missile System
Osprey Aircraft
Stealth Aircraft
T-45 Aircraft
TOW Missile
V-22 Aircraft
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** 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-04-715
United States Government Accountability Office
GAO Report to the Subcommittee on Readiness and Management Support,
Committee on Armed Services, SenateU.S.
August 2004
DEFENSE MANAGEMENT
Opportunities to Enhance the Implementation of Performance-Based Logistics
a
GAO-04-715
Highlights of GAO-04-715, a report to the Subcommittee on Readiness and
Management Support, Committee on Armed Services, U.S. Senate
The Department of Defense (DOD) is pursuing a policy that promotes
performance-based logistics at the platform level as the preferred product
support strategy for its weapon systems, based in part on DOD's perception
that this is an industry best practice. GAO was asked to compare industry
practices for activities using complex and costly equipment with
life-cycle management issues similar to those of military systems to
identify lessons learned that can be useful to DOD. This is the first of
two reports addressing DOD's implementation of performancebased logistics
and is intended to facilitate DOD's development of new guidance on the use
of this approach.
GAO recommends that DOD (1) revise its policy and guidance to the services
to reflect the industry practice of using performancebased logistics as a
tool to achieve economies at the subsystem or component level, rather than
at the platform-level, and (2) provide for sufficient technical data to
support alternative support options using either the public or the private
sector. DOD concurred with our recommendations, noting that it would
re-emphasize via policy and training the use of performancebased logistics
at the subsystem level and take steps to update acquisition policy to
include guidance on purchasing rights or long-term access to technical
data.
August 2004
DEFENSE MANAGEMENT
Opportunities to Enhance the Implementation of Performance-Based Logistics
DOD's current policy for implementing performance-based logistics as a
preferred support approach at the weapon system platform level does not
reflect the practices of private-sector companies that support expensive
and complex equipment with life-cycle management issues. The companies GAO
interviewed use performance-based contracting as a tool rather than as a
preferred support concept at the weapon system platform level. While 7 of
the 14 companies GAO interviewed use some type of performance-based
contracting, they use it at the subsystem or component level-for
commodities such as engines, wheels, and brakes-when it is cost-effective
and reduces risk in a noncompetitive environment. DOD's proposed policy of
pursuing performance-based logistics as the preferred support approach at
the platform level results in contracting out the program-integration
function-a core process the private-sector firms consider integral to
successful business operations. Further, this proposed policy could limit
opportunities to take advantage of competition when it is available for
subsystems or components as well as limit opportunities to gain purchasing
power from volume discounts on components across an entire fleet and avoid
the administrative costs charged by a prime integrator.
While DOD is proposing the aggressive use of performance-based logistics
on both older and new weapon system platforms, the companies GAO
interviewed use performance-based contracting at the subsystem or
component level when it is cost-effective-often in a noncompetitive
environment when the manufacturer controls expensive repair parts, such as
engines. In general company officials said they rely more widely on other
contracting vehicles, such as time and material contracts, particularly
for new systems. Company officials noted that in the absence of accurate
and reliable information on system performance to establish a baseline for
evaluating the cost-effectiveness of a performance-based contract for new
systems, the risk of the negotiated price's being excessive is increased.
The companies GAO interviewed also emphasized the importance of having
rights to the technical data-such as maintenance drawings, specifications,
and tolerances-needed to support the management of all logistics contracts
and, should the service provider arrangements fail, to support competition
among alternate providers. In contrast, DOD program managers often opt to
spend limited acquisition dollars on increased weapon system capability
rather than on rights to the technical data-thus limiting their
flexibility to perform work in-house or to support alternate source
development should contractual arrangements fail.
www.gao.gov/cgi-bin/getrpt?GAO-04-715.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William M. Solis at (202)
512-8365 or [email protected].
Contents
Letter 1
Results in Brief 3
Background 4
DOD's Current Preferred Approach to Performance-Based
Logistics May Limit Opportunities for Competition and 9
Savings
Conclusions 18
Recommendations for Executive Action 20
Agency Comments and Our Evaluation 20
Scope and Methodology 22
Appendix I Comments from the Department of Defense
Tables
Table 1: Company Use of Contracting Tools to Outsource Subsystem and
Component Support 11
Table 2: Percentage of Maintenance Dollars for Outsourced Subsystems and
Components Managed Using Performance-Based Contracts 12
Abbreviations
APU auxiliary power unit DOD Department of Defense
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
United States Government Accountability Office Washington, DC 20548
August 16, 2004
The Honorable John Ensign
Chairman
The Honorable Daniel Akaka
Ranking Minority Member
Subcommittee on Readiness and Management Support
Committee on Armed Services
United States Senate
In the past 4 to 5 years, the Department of Defense (DOD) has taken steps
to manage the total life-cycle support costs of its weapon systems and to
improve logistics support to the warfighter by reengineering its processes
for both acquiring and sustaining weapon systems. As part of these
reengineered processes, DOD has directed weapon system program
managers to develop acquisition strategies that maximize competition,
innovation, and interoperability and to capitalize on commercial
technologies to reduce costs. Within the area of weapon system
sustainment, DOD is pursuing a policy to implement a concept it calls
performance-based logistics as the preferred support strategy for DOD
weapon systems. This concept is a variation on other contractor logistics
support strategies calling for long-term support of military systems by
the systems' manufacturers.1 The concept involves defining a level of
performance for a weapon system already fielded or about to be fielded
that is to be achieved over a fixed period of time for a fixed level of
annual
funding. More recently, in February 2004, the Deputy Secretary of Defense
issued a memorandum promoting a more aggressive implementation of
performance-based logistics that was in part based on the perception that
this is an industry best practice.
As requested, we are reviewing DOD's process of implementing
performance-based logistics as the preferred support strategy for its
weapon systems. As a part of this review we determined what types of
contractor logistics support arrangements the private sector uses for
activities that have complex and costly equipment with life-cycle
management issues similar to those of military systems, and what
1 There is a performance-based logistics agreement between the program
office and the Tobyhanna Army Depot to support the Common Ground Station.
potential lessons can be learned from a comparison between privatesector
contractor support practices and the contractor logistics support
practices DOD is urging the services to implement. While conducting our
work, we learned that DOD soon will be issuing additional policy guidance
on its use of performance-based logistics. This is the first of two GAO
reports addressing DOD's implementation of performance-based logistics and
is intended to provide the Secretary of Defense with recommendations that
should facilitate DOD's development of new guidance. Our follow-on report
in early 2005 will determine similarities and differences in the way the
identified DOD programs are structured and managed, identify approaches
that appear to offer the greatest opportunities to achieve cost
effectiveness, and evaluate the demonstrated cost savings or improved
responsiveness of the new DOD concept.
As a part of this review, we examined Office of the Secretary of Defense
and service policies and guidance; collected data on performance-based
logistics programs identified by the services; and conducted case studies
on a limited number of the programs. We also reviewed the
logisticscontracting practices of 14 private-sector companies from the air
carrier, maritime shipping, energy exploration, mining, and entertainment
industries-companies that use complex and costly equipment with life-cycle
issues similar to those of military weapon systems and that are motivated
by the desire to minimize costs and maximize profits to choose the most
cost-effective option.2 We held group discussions covering standard
questions about the industries' contractor logistics support practices,
and we compared the results of these interviews with the preliminary
information obtained from our analyses of DOD policies and programs. We
reviewed the reliability of the projected cost and savings data used in
this report and determined that it was sufficient for our purposes. We
performed our work from September 2003 through June 2004 in accordance
with generally accepted government auditing standards. The scope and
methodology section contains more detailed information about the work we
performed.
2 This equipment includes airline and air cargo aircraft, cruise ships and
oil tankers, heavy mining equipment, offshore drilling and production
platforms, and unique electronic equipment.
Results in Brief
DOD's current policy for implementing performance-based logistics as a
preferred support approach at the weapon system platform level does not
reflect the practices of private-sector companies that support expensive
and complex equipment with life-cycle management issues. A Deputy
Secretary of Defense memorandum to the services cites the private sector's
use of performance-based logistics as the basis for aggressively pursuing
this concept. Private-sector companies we interviewed having complex and
expensive assets with life-cycle issues similar to those of military
weapon systems do not use performance-based contracting this way. Although
7 of the 14 companies we interviewed use some type of performance-based
contracting, they use it at the subsystem or component level, when it is
cost-effective and reduces risk in a noncompetitive environment. The
companies rely more widely on other contracting methods to benefit from
competition for those subsystems or components where it is practicable.
DOD's approach supports aggressive implementation of performance-based
logistics at the weapon system platform level and for new as well as older
systems. As a result, DOD's proposed approach to implementing
performance-based logistics could limit opportunities for achieving cost
savings from competition, volume discounts, and reduced administrative
costs. Further, it could result in the contracting out of the
program-integration function-a core process that the private-sector firms
consider integral to successful business operations. Private-sector
company officials we interviewed reported that their firms use the
following approaches:
o Use performance-based contracting selectively when it is
cost-effective- often in a noncompetitive environment when the
manufacturer controls expensive repair parts, such as engines. In general,
company officials said they rely more widely on other contracting
vehicles, such as time and material contracts, particularly for newer
systems that don't have a performance history. DOD's approach, in
contrast, proposes aggressive implementation of performance-based
contracts on both older and newer weapon systems. Company representatives
emphasized that in the absence of accurate and reliable information on
system performance to establish a baseline for evaluating the
cost-effectiveness of a performance-based contract for new systems, the
risk of the negotiated price being excessive is increased.
o Use performance-based logistics at the subsystem or component level,
such as for engines; DOD's approach, in contrast, proposes to support
implementation at the weapon system platform level, such as was tried for
the T-45 trainer aircraft. We found no private-sector performance-based
contracts being used at the platform level. The company representatives
preferred to retain the program integration function that they consider a
core function essential to the success of their business operations.
Additionally, they prefer to (1) take advantage of competition when it is
available for subsystems or components, (2) gain purchasing power from
volume discounts on subsystems or components across their entire fleet,
and (3) avoid the administrative costs that would be charged by a prime
integrator. Indeed, Navy officials told us that the T-45 platform level
performance-based logistics contract resulted in their paying the
contractor for hours that the Navy did not fly and that the contract was
not cost-effective. But by dividing the airframe and engine into separate
contracts, adding a sortie completion metric, and competing the airframe
workload, the Navy projects that savings of $144 million ($118 for the
airframe and $26 million for the engine) can be achieved over 5 years.
o Emphasize the importance of having rights to the technical data needed
to support the management of all logistics contracts-such as detailed
maintenance drawings, specifications, and tolerances-and, should the
companies' service provider arrangements fail, to support competition
among alternate providers. DOD program managers, in contrast, often opt to
spend limited acquisition dollars on increased weapon system capability
rather than on the rights to technical data. This trade-off limits DOD's
flexibility, because although DOD may be obtaining access to technical
data needed to manage performance-based contracts, it may not be
developing product-support strategies that provide for the future delivery
of technical data when required to support competition or alternate source
development if performance-based logistics arrangements were to fail.
We are making recommendations that, if followed and included in the soon
to be issued guidance, should improve the implementation of
performance-based logistics in the department. In commenting on a draft of
this report, DOD concurred with our findings and recommendations. DOD's
response is included as appendix I.
Background Performance-based logistics is the DOD term for the process of
(1) identifying a level of performance required by the warfighter and (2)
negotiating a performance-based contract between the government and the
product support integrator-that is generally the original equipment
manufacturer of the total system-to provide long-term total system support
for a weapon system at a fixed level of annual funding. Instead of buying
spares, repairs, tools, and data in individual transactions, the method in
a performance-based logistics arrangement is to buy a predetermined level
of availability that meets the warfighter's objectives. To implement
performance-based logistics, DOD selects a product support integrator to
serve as the single point of accountability, integrating support from all
sources to achieve the performance outcome metrics specified
in the performance-based support agreement. The metrics used include
operational availability (a measure of the degree to which an item is in
an operable state and can be committed at the start of a mission when the
mission is called for at an unknown point in time); mission capability
(the material condition, indicating that it can perform at least one and
potentially all of its designated missions); and customer wait time (the
total elapsed time between issuance of a customer order and fulfillment of
that order). For example, the Navy now uses two metrics for its
performance-based contract for the T-45 aircraft system3-"ready for
training," which requires that the contractor have a minimum number of
aircraft ready for training at 7:00 AM each business day in order to
achieve a 57 percent aircraft availability; and "sortie completion," which
requires that the contractor meet 98 percent of the requirements for the
scheduled training flights. As an incentive, the contract pays a
performance bonus (maximum of $5 million annually) if the contractor
exceeds the performance metrics. If the contractor only meets-or fails to
meet-the minimum metrics, the contractor then receives none of the annual
performance bonus.
DOD Directive 5000.1, the Defense Acquisition System, highlights the
department's preference for using performance-based logistics at the
platform level, stating, "Program Managers shall develop and implement
performance-based logistics strategies that optimize total system
availability while minimizing cost and logistics footprint." As part of
its implementation of this strategy, in 2003 DOD proposed that the
Congress adopt legislative changes that would allow the services to
increase the appropriations allocation flexibility within a weapon system
program, allowing the program manager to use funds from different accounts
(such as operation and maintenance; research, development, test, and
evaluation; and procurement) to pay for system support costs. Although
this proposal was not adopted, DOD continues to pursue various avenues
that would support the overall objective of having greater flexibility by
using a single line of support funding managed by the program office for
total system operation and maintenance costs. Most recently, on
3 Initially the Navy had one contract for the entire T-45 aircraft system
and had only one metric, aircraft availability, for evaluating the
contract. Under this approach the Navy was paying the contractor based on
its forecasted flying hours rather than actual hours. Because forecasted
hours were more than actual hours, the Navy paid for hours it was not
flying. The Navy added the second metric and a fixed labor rate for
over-and-above work when it revised the T-45 performance approach and
negotiated separate contracts for the aircraft and engine systems.
February 4, 2004, the Deputy Secretary of Defense (1) directed the
Under Secretary of Defense (Acquisition, Technology, and Logistics) in
conjunction with the Under Secretary of Defense (Comptroller) to issue
clear guidance on purchasing using performance criteria; and (2) directed
each service to provide a plan to aggressively implement performance
based logistics, including transferring appropriate funding as needed,4 on
current and planned weapon system platforms for fiscal years 2006-2009.
While this directive does not preclude the services from using
performance-based logistics contracts below the platform level, it does
express DOD's intent to apply the concept at the platform level as a
preferred practice. As we discuss in the next section, DOD has established
separate goals for implementing performance-based service contracts, and
the services have identified many contracts as performance-based logistics
arrangements that are, in fact, below the platform level. However,
according to Office of Secretary of Defense officials, DOD would like to
implement performance-based logistics at the platform level to move from
contracting for material availability to weapon system availability. DOD
considers that the platform level offers the metrics needed to implement a
true performance-based logistics arrangement.
DOD Performance-Based Logistics Evolving from Its Use of Performance-Based
Service Contracting
The Office of Management and Budget indicates that performance-based
service contracting, from which performance-based logistics has evolved,
has been referenced in regulation, guidance, and policy for more than two
decades, and federal agencies have used performance-based contracting to
varying degrees for acquiring a range of services. In 1991 the Office of
Management and Budget issued a policy letter establishing the use of a
performance-based approach for service contracting, and in 1994 it
initiated a governmentwide pilot project to encourage the use of
performance-based service contracts in federal agencies, including DOD.
4 DOD officials suggest this might involve establishing a single line of
accounting for all operations and maintenance funding for a program that
would be managed by the system program office. Today, operation and
maintenance funds are managed by different parties including the
operational commands, the weapon system managers, and the program offices.
We have previously reported that warfighters have expressed a concern
about the loss of flexibility of operational commanders when system
operation and maintenance funding is fenced and controlled by the program
manager. See U.S. General Accounting Office, Defense Logistics: Air Force
Lacks Data to Assess Contractor Logistics Support Approaches, GAO-01-618
(Washington, D.C.: Sept. 7, 2001) and Defense Logistics: Opportunities to
Improve the Army's and Navy's Decision-making Process for Weapons Systems
Support, GAO-02-306 (Washington, D.C.: Feb. 28, 2002).
The use of performance-based service contracts to acquire services offers
a number of potential benefits, particularly when services are acquired by
means of a fixed price agreement. Performance-based contracts can
encourage contractors to be innovative and to find cost-effective ways of
delivering services for a fixed level of funding. By shifting the focus
from process to results, these contracts can potentially produce better
outcomes and reduced costs.
In view of the potential benefits, Congress has been encouraging greater
use of performance-based service contracting.5 In an August 2003
memorandum to the military departments, the Under Secretary of Defense
(Acquisition, Technology and Logistics) stated that DOD should continue to
increase its use of performance-based service acquisitions. He noted that
DOD has a goal to award 50 percent of contract actions and dollars using
performance-based specifications by fiscal year 2005.
The more specific concept of performance-based logistics as an approach
for supporting military systems emerged from DOD's 1999 study, Product
Support for the 21st Century, which identified 30 pilot programs (10 in
each military department) to test logistics support reengineering concepts
that placed greater reliance on the private sector. Many of the pilots
involved various types of contractor logistics support, prime vendor
support, or performance-based type arrangements. Others focused on
including reduced operation and support costs and improved readiness as
performance requirements for new system development.6 The September 30,
2001, Quadrennial Defense Review advanced DOD's move toward this concept
by advocating the implementation of performance-based logistics with
appropriate metrics that would be designed to compress the supply chain
and improve the readiness of major weapon systems and commodities. 7 A
November 2001 Office of the
5 In October 2000, Congress passed section 821 (b) of the National Defense
Authorization Act for Fiscal Year 2001, which allows DOD to treat
performance-based service contracts or task orders as contracts for the
procurement of commercial items under certain conditions (Public Law No.
106-398).
6 U.S. General Accounting Office, Best Practices: Setting Requirements
Differently Could Reduce Total Ownership Costs, GAO-03-57 (Washington,
D.C.: Feb. 11, 2003), emphasized the need to include total ownership cost
goals and readiness rates as performance metrics equal to any others in
the development of major weapon systems.
7 Supply chain management refers to all of the inter-related components
and processes required to ensure that the correct amount of product is in
the correct location at the right time and at the lowest cost.
Deputy Under Secretary of Defense document, Product Support for the
21st Century: A Program Manager's Guide to Buying Performance,
intended as a guide for program managers, stated that program managers
will implement performance-based logistics on all new systems and on
acquisition category I and II fielded systems selected on the basis of a
sound business case.
It is unclear how many performance-based logistics programs the
services have implemented. In response to our inquiries, the Army
identified 74 performance-based logistics programs, the Navy identified
106, the Air Force 4, and the Marine Corps 1. We noted a broad range of
contract arrangements is identified under the performance-based logistics
umbrella, with many of them initiated under a different name, such as
contractor logistics support or total systems support responsibility and
later identified as performance-based logistics arrangements. Most of the
DOD performance-based logistics arrangements currently identified by the
services are used for subsystems or components rather than for weapon
system platforms.
Fiscal years 2003 to 2007 Defense Planning Guidance required the
services to submit plans that identified their implementation schedules
for
performance-based logistics to all new weapon systems and acquisition
category I and II fielded systems. Similarly, a February 13, 2002, letter
from
the Under Secretary of Defense (Acquisition, Technology, and Logistics) to
the services emphasized the need for the plans required by the Defense
Planning Guidance and directed that the plans be issued by May 1, 2002.
But although the services issued plans, they did not take an aggressive
approach toward adopting this concept, according to Office of Secretary
of Defense logistics officials. An October 2003 Defense Business Board
report encouraged the department to move more quickly in adopting the
performance-based logistics, stating, "Performance-based logistics is an
industry best practice and a DOD best practice. DOD should consider
using it for all its weapon systems, new and legacy, provided it is
supported by a business-case analysis."8 This task force was chartered by
the Under Secretary of Defense (Comptroller) and Chief Financial Officer
to describe private-sector best practices used in managing supply chain
8 The Supply Chain/Performance-Based Logistics Task Group's October 15,
2003, report to the Senior Executive Council provided this group's
perspective regarding what needed to be done to implement
performance-based logistics in the Department of Defense.
DOD's Current Preferred Approach to Performance-Based Logistics May Limit
Opportunities for Competition and Savings
partnering arrangements and to propose how to apply such practices to the
supply chain processes used by DOD. Citing this task force report, the
aforementioned February 2004 Deputy Secretary of Defense memorandum to the
military departments stated, "Delay in implementing this practice
complicates our funding, limits industry flexibility, and increases DOD
inventory. We must streamline our contracting and financing mechanisms
aggressively to buy availability and readiness measured by performance
criteria."9
Because DOD proposes using performance-based logistics at the platform
level as the predominant support strategy for its military systems, it may
limit opportunities for savings from competition, volume discounts, and
reduced administrative costs. Also, by often not contracting for long-term
access to technical data, programs officials are further limiting their
support options.
In the private sector, performance-based contracting is a tool used
according to the applicability of subsystem or component and circumstance,
when it is cost-effective and reduces risk in a noncompetitive
environment. DOD, by contrast, proposes using it as the predominant
product support strategy for its military systems. Further, when
private-sector companies use performance-based contracting, they use it at
the subsystem or component level, retaining the program integration
function themselves as a core business function essential to successful
business operations. Conversely, DOD policy memoranda support using
performance-based contracting at the platform level and using the
contractor as the support integrator. Moreover, private sector companies
emphasize the importance of having the rights to contracts and
competition. DOD, in contrast, is frequently not acquiring the same level
of technical data in its acquisition of new programs.
9 Memorandum from the Deputy Secretary of Defense to the Secretaries of
the Military Departments and the Under Secretary of Defense (Comptroller),
February 4, 2004.
Performance-Based Contracting for Logistics Used as a Tool in Industry
Rather Than a Preferred Support Concept as Proposed by DOD
While our review of private sector companies did find that half of those
we interviewed are using performance-based contracting, the industry
approach is much different from DOD's preferred approach for
performance-based logistics. As previously discussed, Office of the
Secretary of Defense guidance has over the past several years encouraged
the services to use performance-based logistics at the weapon system level
as the preferred approach for life-cycle management of military systems.
DOD officials have stated that this is an industry best practice and
should be adopted more aggressively, but in 7 of 14 companies we
interviewed that used some type of performance-based contracting, this
agreement was used at the subsystem or component level-that is, for
engines, auxiliary power units, wheels, or brakes- and it was generally
used for older systems.
The following chart characterizes the companies we interviewed by industry
type, by the extent to which they outsource logistics support activities,
by the predominant contracting practices used, and by the types of
subsystems or components outsourced using performance-based contracting.
Pseudonyms are used rather than the actual company names. These companies
generate annual revenue generally exceeding $1 billion, and they use
complex and expensive equipment for which they require high levels of
availability and reliability as well as efficiency in managing lifecycle
costs. The life-cycle management issues are comparable to those of DOD in
managing its weapon system sustainment programs.
Table 1: Company Use of Contracting Tools to Outsource Subsystem and
Component Support
Percent Predominate type of Subsystem or component Industry/company
outsourced contracting tool outsourced
Air carrier industry
Company A 65 Fixed price-time and material Airframes
Performance-based Engines, auxiliary power units (APUs), avionics, wheels
and brakes
Company B 20 Fixed price-time and material Airframe, engines, avionics
Performance-based APUs, avionics, wheels and brakes Company C 38 Fixed
price-time and material Engines Performance-based Engines, APUs Company D 90
Fixed price-time and material Airframes, engines, APUs, avionics
Performance-based Engines, avionics, wheels and brakes Company E 76 Fixed
price-time and material Airframes, engines, avionics Performance-based Engines,
APUs, wheels and brakes Company F 33 Fixed price-time and material Airframes,
engines, APUs, avionics Performance-based Engines, APUs, brakes
Energy exploration and mining industries
Company G 75 Fixed price-time and material Engines
Performance-based Engines, transmission, torque converters, wheels and
brakes
Company H 5 Fixed price-time and material All components
Company I 65 Fixed price-time Engines, pumps
and material
65 Fixed price-time
Company J and material Engines, hydraulics, pumps,
transmissions
Maritime and entertainment
industries
Company K 75 Fixed price-time Subsystems/components
and material
Company L 75 Fixed price-time Subsystems/components
and material
Company M 35 Fixed price-time Subsystems/components
and material
20 Fixed price-time
Company N and material Subsystems/components
Source: GAO analysis of company data.
As shown above, performance-based contracting in the companies we
interviewed is most widely used in the air carrier industry, and it also
has limited use in the energy exploration and mining industry. According
to air carrier officials, time and material contracts are more prevalent
than performance contracts, because industry prefers to use short-term (2
to 3 years) competitive contracts when possible. In a sole-source
environment companies sometimes use longer-term (10 to12 years)
performance-based contracts for supporting some subsystems such as
engines, if they have sufficient historical data to establish an accurate
baseline. For example, all but one of the air carrier industry companies
had performance-based contracts for one or more engines. The amount of
engine workload managed by performance-based contracts varied from company
to company. For example, Company C, which outsourced 38 percent of its
total maintenance workload, used performance-based contracts for one-fifth
of its outsourced engine work; while Company A, which outsourced 65
percent of its maintenance workload, used performance-based contracts for
all of its engine work. The air carrier companies did not use
performance-based contracts for contracted work on airframes, work that
generally comprises about 30 percent of the commercial aviation
maintenance and repair market.10 Table 2 provides information regarding
the percentage of dollars spent on the repair of each type of subsystem or
component managed using performance-based contracts by the air carrier
companies and the one non-air carrier company that used performance-based
contracts. The subsystems or components for which the companies used
performance-based contracts most widely were auxiliary power units and
wheels and brakes.
Table 2: Percentage of Maintenance Dollars for Outsourced Subsystems and
Components Managed Using Performance-Based Contracts
Companies
Out sourced subsystems and
components A B C D E F G
Engines 100% 0% 20% 90% 57% 28% 45%
Auxiliary power units 90 100 100 0 100 41 N/A
Avionics 36 35 0 5 0 0 N/A
Wheels and brakes 100 100 0 100 100 80a
Transmission and torque converters N/A N/A N/A N/A N/A N/A 100
Source: GAO analysis of company data.
Note: N/A = Not applicable because some subsystems and components are not
applicable to all industries.
aIncludes only brakes. Wheels are maintained in-house.
10 Additionally, 29 percent of the total is for engines, 23 percent for
line maintenance, and 19 percent for components.
Company officials noted that performance-based contracts are a tool most
often used selectively in a noncompetitive environment in an effort to
control cost and reduce risk. Additionally, they said that performance
based contracting works better for subsystems and components where
available cost and performance data are sufficient to establish a good
business case analysis, noting that this is more difficult to accomplish
for
new systems, where performance data are uncertain. Performance-based
contracts differ from traditional logistics contracts by focusing on the
purchase of weapon system sustainment as an integrated package based
on output measures-such as a predetermined level of system availability.
In contrast, traditional transaction-based time and material contracts are
used to purchase logistics inputs-such as quantities of spare parts,
specific repair tasks, and engineering studies. Under transaction-based
contracts, the government pays for each transaction as a separate
deliverable; whereas under a performance-based contract, the contractor
is being paid for achieving an outcome performance metric, regardless of
what he does to achieve that performance.
In concept, performance-based contracts encourage the contractor to
achieve a high level of performance at a fixed cost. However, air carrier
industry officials we interviewed said that entering into a performance
based contract without good baseline data introduces a higher level of
risk
that the arrangement may not be cost-effective. For example, officials
from one company said they used a performance-based contract for the
older of the two types of engines in the company's inventory. Officials
said
they would wait to collect sufficient performance data on the newer
engine before considering a performance-based contract. The officials
noted that they had originally used a performance-based contract on the
newer engine, but found that, because the reliability of the engine was
greater than expected, the contract arrangement was not cost-effective.
The company was able to change the contract to a time and material
contract, to allow time to collect sufficient performance data to support
a
fact-based business case analysis to determine the company's "should"
cost amount for a performance-based contract.
Performance-based contracting offers DOD opportunities to
provide contractors incentives to achieve desired levels of operational
performance at a fixed cost when the department has historical
performance information. But in the absence of reliable and
complete performance data as a baseline, the adoption of this approach
as the preferred support strategy for new weapon systems could
undermine DOD's ability to negotiate cost-effective terms-particularly
since the performance-based contracts at the weapon system level have
cost-reimbursement elements, while the private-sector companies generally
used fixed-price agreements. Private-sector officials noted that it is
important to use fixed prices for materials, since the high price of
materials is a key factor driving the companies to use performance-based
contracts.
Private Sector Applies Performance-Based Logistics at the Subsystem or
Component Level Rather Than at the Platform Level and Retains System
Integrator Function
DOD policy promotes using performance-based contracting differently from
the way private-sector firms use it in supporting complex and expensive
systems. The companies we reviewed generally used performance-based
contracting at the subsystem level for engines and certain other
components rather than at the platform level, as proposed by DOD.
Furthermore, when using performance-based contracting, these companies do
not contract out the program integration function, as the military
services are doing.
We found no performance-based contracts for maintenance of airframes or
maintenance of any equipment platform among the private-sector companies
we reviewed. Industry officials cited three reasons why they believe the
use of performance contracts is more advantageous at the subsystem or
component level. First, they prefer to take advantage of competition
whenever it is available and to manage support contracts through the use
of competitive procedures. For example, because airframe maintenance
support is available from a competitive market, the companies generally
use a combination of fixed price and time and material contracts for this
category of service. Conversely, performancebased contracts are often used
for engine repair because of the high cost of spare and repair parts that
are available only from the original equipment manufacturer. Officials
said that there are too few third-party repair vendors to foster
competition. Second, company officials emphasized the importance of
gaining purchasing power from volume discounts on subsystems or components
across their entire fleet of systems as a reason for not implementing
performance contracting at the platform level. Finally, by having
contracts at the subsystem or component level, companies can avoid the
administrative costs that would be charged by a prime integrator.
Similar to the approach used by the companies we reviewed, we noted that
the Navy has used performance-based contracts primarily at the subsystem
or component level. Navy officials said that implementation at this level
is easier because the service could implement this concept more readily
under DOD's current funding structure. The funding is handled through the
working capital fund, with reimbursement to the fund coming
from the sale of subsystems or components to the fleet. Navy officials
also noted that by implementing performance-based logistics at this level,
they can save money by competing subsystems or components where a
competitive market exists, consolidating the requirements of multiple
programs and leveraging their buying power to obtain a pricing advantage,
and reducing administrative costs-advantages also recognized by the
private sector.
The Navy's history of using a performance-based contract for logistics
support of the T-45 trainer aircraft illustrates how savings may be
achieved by implementing the concept at the subsystem level rather than
the weapon system level. The program office originally had a
performancebased contract for the entire weapon system with the original
equipment manufacturer. The contract was a 5-year firm-fixed price with an
option for a sixth year period. Program office officials said the sole
metric used, ready-for-training aircraft, resulted in there being an
insufficient number of aircraft available to fly scheduled training
sorties. Additionally, because actual flying hours were fewer than
forecasted, the Navy was paying for flying hours it was not flying.
Concluding that benefits weren't as expected, that the costs were too
high, and that savings were achievable by negotiating separate contracts
for the airframe and engine, the program office chose not to exercise the
option. The new engine contract is a performance-based contract awarded on
a sole-source basis to the engine manufacturer, and the airframe
performance-based contract was awarded competitively. According to Navy
program office officials, the revised approach resulted in a projected
savings of $37 million in the first year and projected savings of $144
million at the end of a 5-year period.11 The savings are being achieved
through elimination of the administrative costs charged by the prime
contractor for the engine work and through competition for the aircraft
system.
Another potential adverse effect of awarding a performance-based contract
at the weapon system level is the loss of management control and expertise
over the system that private-sector firms said was essential to
11 The savings estimates were calculated independent of the program office
by the Naval Air System Command's cost estimators within the Research and
Engineering Competency, and they follow a standard methodology called the
"Maintenance and Trade Analysis." A baseline was established by updating
the original baseline cost analysis supporting the initial contract with
actual costs from the 2001 through 2004. The calculation also quantified
the pass-through administrative cost charged by the prime contractor for
the engine work. This analysis identified that the Navy would save $118
million on the new competitively awarded airframe contract and $26 million
on the new engine contract.
the success of their business operations. Industry officials said that
managing their supplier base and ensuring the availability of their
equipment to generate revenue is too critical to entrust to a second
party. Further, they believe that contracting out support at a platform
level by using a system integrator limits the potential to optimize
savings through competition and volume discounts and adds administrative
costs charged by the prime integrator for managing subcontractors.
Not Obtaining Sufficient Rights to Technical Data Could Limit Long-Term
Support Options and Could Increase Long-Term Costs
The spokespersons for every company we visited told us that when they
purchase equipment they make sure to acquire the technical data12
necessary to support it, regardless of whether the company intends to
support the equipment in-house or outsource some of its support
operations. Company officials said that this data was essential to their
own management and oversight functions. For example, officials from a
company that outsources most of its repairs pointed out that its engineers
use the data to perform such tasks as establishing reliability metrics,
evaluating performance, and revising repair standards. Additionally,
officials stated that owning the technical data afforded their companies
the flexibility that enabled them either to perform the work in-house or
to offer the work up for competition. Several company officials said that
it is best to obtain the technical data at the time the equipment is
purchased, when the buyer has the most leverage in its negotiations with
the manufacturer. Trying to obtain the technical data at a later time is
difficult to negotiate and more expensive. These companies do not price
their technical data items separately. DOD program offices, however,
negotiate a price for maintenance-and-repair technical data separately
from the price of the military hardware systems. According to service
competitionadvocate officials, program managers faced with limited
acquisition dollars often make trade-off decisions to buy increased weapon
system capability in lieu of technical data.
We reported in 2002 that DOD program offices have often failed to put
adequate emphasis on obtaining needed technical data during the
acquisition process.13 We recommended that DOD emphasize the
12 Technical data includes detail maintenance drawings and repair
publications containing specifications and tolerances.
13 U.S. General Accounting Office, Defense Logistics: Opportunities to
Improve the Army's and Navy's Decision-making Process for Weapons Systems
Support, GAO-02-306 (Washington, D.C.: Feb. 28, 2002).
importance of obtaining technical data and consider including a priced
option for the purchase of technical data when considering proposals for
new weapon systems or modifications to existing systems. DOD concurred
with our recommendation, noting that there was a requirement in DOD
5000.2R for program offices to provide long-term access to data required
for the competitive sourcing of systems support throughout the life cycle.
Additionally, by implementing total life-cycle systems management, DOD
would strengthen its emphasis on acquiring technical data when negotiating
support agreements with logistics providers. Nonetheless, the DOD has
further diminished the emphasis it places on the need to acquire rights to
technical data. For example, in May 2003, DOD replaced its acquisition
regulation with a streamlined instruction,14 which eliminated the prior
regulation's requirement for the program manager to provide for long-term
access to data required for the competitive sourcing of weapon system
support throughout the life cycle of the system. This language is now
provided as guidance in the Interim Defense Acquisition Guidebook, but it
is not mandatory that this guidance be followed.
According to DOD and service logistics officials, program managers should
develop strategies that provide the government with sufficient and
affordable technical data rights to enable them to put the work out for
competition or develop alternate public or private sources for weapon
system support if performance-based logistics arrangements fail or become
too expensive. Logistics officials recognize that program managers who
implement performance-based logistics contracts on new weapon systems may
wish to delay taking delivery of technical data early in the life of the
system, because unlike the stable designs of commercial equipment
purchased in the private sector, the data for cutting edge technology
lacks maturity and is frequently changed. Alternatively, program managers
sometimes pay the original equipment manufacturers both to maintain the
technical and weapon system configuration data and to provide the program
managers with sufficient access to enable them to manage and oversee the
performance-based logistics contract. However, logistics officials agree
that the product support strategy should clearly provide for the future
delivery of the technical data when required to support competition or
alternative source development.
14 DOD Regulation 5000.2-R, Mandatory Procedures for Major Defense
Acquisition Programs and Major Automated Information System Acquisition
Programs was replaced by DOD instruction 5000.2, Operation of the Defense
Acquisition System, to create a simplified and flexible management
framework for acquisition.
Service logistics and competition-advocate officials said that it is
critical that this strategy be developed during the weapon system
acquisition phase, when the program office has its greatest leverage in
negotiating the price of the technical data and the conditions under which
the manufacturer must deliver the data. For example, in the course of the
acquisition of the V-22 aircraft engine, the Navy program office obtained
a technical data license agreement, according to which the manufacturer
agreed to deliver a complete data package if it failed to perform in
compliance with the statement of work at the agreed-to price and schedule.
Conversely, when the program office does not obtain the technical data at
the time of purchase, the future costs for obtaining these data are not
knowable and, without the leverage of the original package purchase, could
be prohibitively expensive. In our review of data collected from DOD's
performance-based logistics program offices, we noted that DOD had not
negotiated for the maintenance drawing packages for the Javelin missile,
F-117 aircraft, and TOW missile improved target acquisition system, and
DOD would have to purchase them at a later date at a price to be
negotiated.
In April 2004, the Logistics Management Institute reported in a review of
performance-based logistics arrangements that it found no evidence to
indicate either the quantity or the quality of logistics management data-
including technical data-available to the government was compromised by
the use of performance-based logistics arrangements.15 This report also
noted, however, that the acquisition guidance published by the Office of
the Secretary of Defense does not address strategies for terminating
interim contractor support or performance-based logistics contracts. The
Logistics Management Institute report recommended that the Defense
Acquisition Working Group include performance-based logistics "exit
strategy" guidance in the defense acquisition guidebook. Nonetheless, as
we have previously noted, guidance in this handbook is not mandatory.
Conclusions The use of performance-based contracting for the support of
complex and costly military systems offers opportunities for military
program managers to incentivize contractors to achieve desired levels of
weapon system performance. However, our review of the use of the practice
in private-sector firms indicates that DOD's proposed guidance to adopt
15 Logistics Management Institute, Visibility of Maintenance Data in
Performance-Based Logistics Arrangements, LG301L4 (McLean, Va.: Apr.
2004.)
performance-based logistics aggressively at the platform level could limit
competition, and such guidance might not be the most cost-effective
approach for using this concept. Additionally, although DOD based its
rationale for using performance-based logistics at least partially on the
perception that this is an industry best practice, it appears that
perception is not the case. DOD's approach toward implementing the concept
appears inconsistent with the way private-sector companies we interviewed
use performance-based contracting in acquiring support for their
equipment, and DOD's approach has risks that should be addressed as it
develops its guidance for using performance-based logistics.
Using performance-based logistics as the preferred approach for managing
the support of major weapon system programs-even though privatesector
company officials use performance-based contracting selectively, when
appropriate and cost-effective-carries the risk of increasing lifecycle
cost. Both private-and public-sector experiences with performancebased
contracting illuminate the challenges involved in developing a meaningful
baseline for establishing a performance-based arrangement for new systems,
because not enough is known early in the program about performance
characteristics and because there is risk to both the program office and
the contractor that may translate into high cost. Additionally, the use of
performance-based logistics can limit the competition that would be
available for providing logistics support when support decisions are made
at the subsystem or component level rather than at the platform level.
Using performance-based logistics at the platform level also creates risk
by contracting out the program integration function-a core function that
private contractors consider essential for the cost-effective management
of costly and complex systems over their life cycle.
Finally, adopting performance-based logistics at the weapon system
platform level may be influencing program offices to obtain access only to
technical data necessary to manage the performance-based contract during
the acquisition phase-and not to provide a strategy for the future
delivery of technical data in case the performance-based arrangement
fails. In such a case, the program manager would have limited flexibility
in choosing whether to perform maintenance in-house, select an alternative
vendor, or offer the work for competition.
Recommendations for Executive Action
Agency Comments and Our Evaluation
In order for the department to improve the implementation of
performance-based logistics, we recommend that the Secretary of Defense
direct that the Under Secretary of Defense (Acquisition, Technology and
Logistics) and the Under Secretary of Defense (Comptroller) implement the
following two recommendations:
1. Incorporate in DOD's guidance to the services the private sector's
practice of using performance-based logistics as a tool to achieve
economies at the subsystem or component level, rather than as a preferred
practice at the platform level. Also, incorporate the private sector's
practice of using it when sufficient performance data are available to
establish a meaningful cost baseline and
2. Consider requiring program offices, during weapon system acquisition,
to develop acquisition strategies that provide for the future delivery of
sufficient technical data to enable the program office to select an
alternate source-public or private-or to offer the work out for
competition if the performance-based arrangement fails or becomes
prohibitively expensive.
In commenting on a draft of this report, DOD concurred with our
recommendations to enhance the implementation of performance-based
logistics.
Regarding our recommendation to incorporate in its performance-based
logistics guidance to the services the private sector's practice of using
performance-based logistics as a tool to achieve economies at the
subsystem or component level, DOD's response stated that the department
recognizes the need to re-emphasize the use of performance-based logistics
for subsystems and components in its policy memorandum and guide books.
Nonetheless, the response noted that the department believes that it is
still prudent to pursue performance-based logistics strategies at the
platform level where supported by a business case analysis. The private
sector companies we interviewed noted that the more cost effective
alternative is to use competitive procedures where practicable at the
subsystem or component level supported by a cost analysis using reliable
performance data.
Regarding our comment that DOD also incorporate in its guidance the
private sector practice of using performance-based logistics when
sufficient performance data are available to establish a meaningful cost
baseline, DOD stated that its policy is that a business case analysis
should be performed to help make the determination to use
performance-based logistics or traditional logistics support arrangement,
and that the business case analysis incorporate the use of performance
data, if available, in establishing a meaningful cost baseline. DOD stated
that it will emphasize the use of performance data in a revised policy
memorandum on performance-based logistics. However, based on information
we obtained from the private sector companies we interviewed, developing
reliable cost and performance data to support a valid cost analysis at the
platform level for a new system will be a challenge and may not be
reliable in identifying the most cost-effective support option over the
life cycle of the system. As we noted in our report, one company tried a
performancebased contract for a new engine but found that because the
reliability of the engine was greater than expected, this contract
management was not cost-effective. Company officials said they preferred
to collect reliable performance data over a period of time to support
negotiations for a performance-based contract.
In response to our recommendation to consider requiring program offices to
develop acquisition strategies that provide for the future delivery of
sufficient technical data to select an alternate source-public or private-
or to offer the work out for competition if the performance-based
arrangement fails or becomes prohibitively expensive, DOD stated that it
will take steps to address this issue in the next iteration of the DOD
Directive 5000.1 and DOD Instruction 5000.2 acquisition regulation policy.
According to the response, the new policy will require the program manager
to establish a data management strategy that requires access to the
minimum data necessary to sustain the fielded system, recompete or
reconstitute sustainment if necessary, promote real time access vice
delivery of the data, and provide for the availability of quality data at
the point of need for the intended user. According to DOD, for
performancebased logistics arrangements, these actions will include
acquiring the appropriate technical data to support an exit strategy
should the arrangement fail or become too expensive.
Scope and Methodology
The objectives of our review were to determine (1) what types of
contractor support practices the private sector used to support complex
and costly equipment that have life-cycle management issues similar to
military weapons systems and (2) what potential lessons could be learned
through a comparison of private sector contractor logistics support
practices that DOD currently uses, or plans to use, under its
implementation of performance-based logistics.
To identify commercial industries that use complex and costly equipment
with life-cycle management issues similar to military weapon systems, we
interviewed DOD depot maintenance and logistics policy officials. We also
conducted a literature search to identify appropriate industry groups and
interviewed officials from the Industrial College of the Armed Forces, the
Aerospace Industries Association, the American Association of Port
Authorities, International Council of Cruise Lines, the Society for Mining
Metallurgy and Exploration, the Construction Industry Institute, and the
Council of Logistics Management to validate and refine the identified
industries and to identify appropriate candidate companies within the
industry groups. Within the air carrier, maritime shipping, energy
exploration, mining, and entertainment industries, we identified over 250
companies and selected 67 companies based on sales/revenues, production
rankings, and management awards that might be good candidates for our
study. We eliminated three companies that did not outsource significant
amounts of logistics support, and 50 companies either did not respond to
our initial inquires or declined to participate in the study. Fourteen
companies agreed to participate and completed our interviews and follow-up
questions. Thirteen of the 14 companies we interviewed agreed to be
identified and are listed below by industry group: Air carriers
(Continental Airlines, Houston, Texas; Delta Air Lines, Atlanta, Georgia;
FedEx Corp., Memphis, Tennessee; Southwest Airlines, Dallas, Texas; and
United Airlines, San Francisco, California); Energy Exploration and Mining
(British Petroleum, Houston, Texas; Diamond Offshore, Houston, Texas;
Phelps Dodge, Phoenix, Arizona; and Vulcan Material, Birmingham, Alabama);
Maritime (Carnival Cruises, Miami, Florida; Conoco Philips Polar Tanker,
Long Beach, California; and Disney Cruise, Orlando, Florida); and
Entertainment (Disney World, Orlando, Florida).
To identify private sector support practices, including performance-based
logistics, we conducted group discussions with respective company
officials responsible for maintenance and support operations, budgeting,
and contracting. To collect consistent information among the companies, we
developed standard group discussion questions based on our literature
search and discussions with industry experts. We also included questions
to determine how the companies addressed logistics and contracting issues
similar to those that DOD faced in implementing performancebased
logistics. We analyzed the responses to identify the prevailing industry
practices in supporting complex and costly equipment, especially focusing
on the contracting approaches and practices used to outsource support
functions and activities.
We reviewed and discussed with Office of the Secretary of Defense and
military department officials at the headquarters and major acquisition
commands the department's plans, policies, and procedures for using
performance-based logistics. We also collected policy and guidance
(published and under development) by the Office of the Secretary of
Defense as well as the military departments' policies and implementation
plans.
To assess what lessons could be drawn from the private sector companies'
experiences to guide DOD's logistics support efforts, we interviewed DOD
officials and reviewed ongoing logistics programs. We assessed the
reliability of the projected cost and savings data we used in this report
by reviewing supporting documentation and interviewing knowledgeable
personnel; and we determined that it was sufficient for our purposes. We
compared and contrasted the contract logistic approaches and practices
used by private sector activities with those currently used by DOD and
envisioned under its plans for implementing performance-based logistics.
This comparison included such elements as the (1) use of performancebased
contracting and the extent of its application, (2) assigning a single
integrator for equipment or weapons system maintenance and logistics
support on a platform level, (3) management and oversight including the
importance of technical data, and (4) the degree of competitive sourcing
and the importance of leveraging purchasing power. As part of our
continuing review we are also conducting case studies on DOD
performance-based logistics weapon systems to further compare the new DOD
approach and practices with those of the private sector. This work is
continuing and we expect to complete our final report early in 2005.
We performed our work from September 2003 through June 2004 in accordance
with generally accepted government auditing standards.
We are sending copies of this report to the appropriate congressional
committees, and it will be available at no charge on GAO's Web site at
http://www.gao.gov. We are continuing with our review of performance-
based logistics in the private sector and in DOD and plan to report the
results early in 2005.
If you or your staff have any questions on the matters discussed in this
letter, please contact me at (202) 512-8412 or [email protected] or my
assistant director, Julia Denman, at (202) 512-4290 or [email protected].
Larry Junek, Thom Barger, Pamela Valentine, Judith Collins, and Cheryl
Weissman were major contributors to this report.
William Solis, Director
Defense Capabilities and Management
Note: A GAO comment supplementing those in the report text appears at the
end of this appendix.
See comment 1.
Page 25 GAO-04-715 Performance-Based Logistics
Note: Page numbers in the draft report may differ from those in this
report.
Page 26 GAO-04-715 Performance-Based Logistics
Page 27 GAO-04-715 Performance-Based Logistics
Appendix I: Comments from the Department of Defense
GAO's Comment 1. Only 7 of the 14 companies we interviewed use some type
of performance-based contracting arrangements. None of the
performance-based arrangements in the seven companies using them were at
the platform level.
GAO's MissionEURThe Government Accountability Office, the audit,
evaluation and investigative arm of Congress, exists to support Congress
in meeting its constitutional responsibilities and to help improve the
performance and accountability of the federal government for the American
people. GAO examines the use of public funds; evaluates federal programs
and policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding decisions.
GAO's commitment to good government is reflected in its core values of
accountability, integrity, and reliability.
Obtaining Copies of The fastest and easiest way to obtain copies of GAO
documents at no cost
is through GAO's Web site (www.gao.gov). Each weekday, GAO postsGAO
Reports and newly released reports, testimony, and correspondence on its
Web site. To Testimony have GAO e-mail you a list of newly posted products
every afternoon, go to
www.gao.gov and select "Subscribe to Updates."
Order by Mail or PhoneEURThe first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out
to the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:
U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548
To order by Phone: EURVoice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061
To Report Fraud, Contact:~Waste, and Abuse in Web site:
www.gao.gov/fraudnet/fraudnet.htm~
E-mail: [email protected] Programs Automated answering system: (800)
424-5454 or (202) 512-7470
Congressional EURGloria Jarmon, Managing Director, [email protected] (202)
512-4400 U.S. Government Accountability Office, 441 G Street NW, Room 7125
Relations Washington, D.C. 20548
Public Affairs Jeff Nelligan, Managing Director, [email protected] (202)
512-4800 U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
Presorted Standard Postage & Fees Paid GAO Permit No. GI00
United StatesEURGovernment Accountability OfficeEURWashington, D.C.
20548-0001EUR
Official BusinessEURPenalty for Private Use $300EUR
Address Service RequestedEUR
*** End of document. ***