Federal Acquisition: Progress in Implementing the Services	 
Acquisition Reform Act of 2003 (28-FEB-05, GAO-05-233). 	 
                                                                 
In fiscal year 2004 federal spending on service contracts grew to
over $189 billion governmentwide. This growth, along with cuts in
the acquisition workforce and increases in high-dollar		 
procurement actions, creates a challenging environment. In	 
November 2003 the Services Acquisition Reform Act (SARA) was	 
enacted to provide federal agencies with tools to optimize	 
mission performance in this challenging environment. To implement
the act, regulations and guidance must be developed, and other	 
actions taken. GAO was asked to report on progress in		 
implementing SARA's provisions. 				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-233 					        
    ACCNO:   A18318						        
  TITLE:     Federal Acquisition: Progress in Implementing the	      
Services Acquisition Reform Act of 2003 			 
     DATE:   02/28/2005 
  SUBJECT:   Education						 
	     Federal law					 
	     Federal procurement				 
	     Federal regulations				 
	     Labor force					 
	     Procurement practices				 
	     Service contracts					 
	     Internal controls					 
	     Procurement policy 				 

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GAO-05-233

United States Government Accountability Office

GAO	Report to the Chairman, Committee on Government Reform, House of
Representatives

February 2005

FEDERAL ACQUISITION

      Progress in Implementing the Services Acquisition Reform Act of 2003

GAO-05-233

[IMG]

February 2005

FEDERAL ACQUISITION

Progress in Implementing the Services Acquisition Reform Act of 2003

                                 What GAO Found

Just over a year after the enactment of SARA, progress made on
regulations, guidance, and other implementing actions varies. While nearly
all the key provisions of SARA are being implemented, some provisions are
further along than others.

An Acquisition Workforce Training fund has been established. Efforts are
ongoing to assess the skills and experience needed by the federal
acquisition workforce, and to develop training to address those
requirements.

The Chief Acquisition Officers (CAO) Council, established in May 2004, has
met five times. The council's executive committee meets monthly; and
working groups on human capital, competitive sourcing, electronic
government and small business have been established.

Efforts to complete rulemaking on greater use of performance-based
contracting are underway, with an interim rule issued and a final version
being considered. An online acquisition center of excellence for services
also has been created. Because of the complexities involved, rulemaking
allowing the use of time-and-materials contracts to procure commercial
services is proceeding at a more deliberate pace.

Rules allowing special emergency procurement authority have been
finalized, but actions allowing agencies to use "other transactions"
authority are incomplete.

Provisions of the Services Acquisition Reform Act of 2003

o  Civilian acquisition workforce training fund

o  Acquisition workforce recruitment flexibility

o  	Maintaining architectural and engineering acquisition workforce
expertise

o  Civilian Agency Chief Acquisition Officers (CAO)

o  CAO Council

o  Advisory panel on acquisition laws and regulations

o  Extension of franchise fund programs

o  Contracting for architectural/engineering services

o  Telecommuting for federal contractors

o  Incentives for performance-based contracts

o  Time-and-materials contracts for commercial services

o  Special "other transactions" acquisition authority

o  Public disclosure of noncompetitive contracts for Iraq reconstruction

o  Emergency procurement flexibilities

Source: GAO.

United States Government Accountability Office

Contents

        Letter                                                              1 
                                     Results in Brief                       2 
                                   Scope and Methodology                    3 
                            Agency Comments and Our Evaluation              3 
     Section 1412    Civilian Acquisition Workforce Training Fund      
     Section 1413       Civilian Acquisition Workforce Recruitment     
                                        Flexibility                    
     Section 1414        Maintaining Architectural and Engineering     
                              Acquisition Workforce Expertise          
     Section 1421       Civilian Agency Chief Acquisition Officers     
     Section 1422           Chief Acquisition Officers Council         
     Section 1423         Advisory Panel on Acquisition Laws and       
                                        Regulations                    
     Section 1426          Extension of Franchise Fund Programs        

Section 1427	Contracting for Architectural and Engineering Services 14

             Section 1428 Telecommuting for Federal Contractors 15

Page i GAO-05-233 Services Acquisition

Section 1431	Incentives for Performance-Based Services Contracting 16

Section 1432	Time-and-Materials Contracting to Buy Commercial Services

       Section 1441 Special "Other Transactions" Acquisition Authority 20

Section 1442	Public Disclosure of Noncompetitive Contracting for Iraq
Reconstruction

Section 1443 Emergency Procurement Flexibilities

Table

Table 1: Provisions of the Services Acquisition Reform Act of 2003

                    Page ii GAO-05-233 Services Acquisition

Abbreviations

CAO Chief Acquisition Officer
DAU Defense Acquisition University
DHS Department of Homeland Security
DOD Department of Defense
FACA Federal Advisory Committee Act
FAI Federal Acquisition Institute
FAR Federal Acquisition Regulation
FPDS Federal Procurement Data System
GSA General Services Administration
OFPP Office of Federal Procurement Policy
OMB Office of Management and Budget
OPM Office of Personnel Management
SARA Services Acquisition Reform Act of 2003

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                    Page iii GAO-05-233 Services Acquisition

United States Government Accountability Office Washington, DC 20548

February 28, 2005

The Honorable Tom Davis
Chairman
Committee on Government Reform
House of Representatives

Dear Mr. Chairman:

According to the General Services Administration (GSA), in fiscal year
2004 federal spending on services contracts grew to more than $189 billion
governmentwide. This level of spending on services contracts, combined
with decreases in the acquisition workforce and an increase in the number
of high-dollar procurement actions, creates a challenging acquisition
environment. The Services Acquisition Reform Act of 2003 (SARA), signed
into law on November 24, 2003, as Title XIV of Public Law 108-136, is
intended to provide agencies an array of tools to improve the acquisition
of services in four major areas as shown in table 1.

Table 1: Provisions of the Services Acquisition Reform Act of 2003

Categories Provisions

Acquisition workforce and training  o  Civilian acquisition workforce
training fund

o  Acquisition workforce recruitment flexibility

o  	Maintaining architectural and engineering acquisition workforce
expertise

Business acquisition practices  o  Civilian Agency Chief Acquisition
Officers (CAO)

o  CAO Council

o  	Advisory panel on acquisition laws and regulations

o  Extension of franchise fund programs

o  	Contracting for architectural and engineering services

o  Telecommuting for federal contractors

Commercial item acquisitions  o  Incentives for performance-based
contracts

o  	Time-and-materials contracting for commercial services

Other procurement flexibilities  o  Special "other transactions"
acquisition authority

o  	Public disclosure of noncompetitive contracts for Iraq reconstruction

o  Emergency procurement flexibilities

Source: GAO.

Page 1 GAO-05-233 Services Acquisition

To implement these provisions, the administration needs to promulgate
regulations, provide guidance to agencies, and take other actions. You
asked us to review the status of implementation for each of SARA's
provisions. As agreed with your office, we determined the status of
regulations, guidance, and other actions initiated by the administration
to implement the act. This report includes appendixes for each provision
of SARA summarizing the status of implementation. In addition, for some
provisions, the appendixes include our observations on potential
implementation challenges, additional background information, and
references to related GAO products.

                                Results in Brief

Just over a year after enactment of SARA, progress made by the
administration on regulations, guidance, and other actions required to
implement the act varies. While actions are underway to implement nearly
all of the provisions, the administration is much further along in
implementing some provisions than others. For example, in the area of
acquisition workforce and training, the workforce training fund has been
established. The Office of Personnel Management (OPM), however, has yet to
complete rulemaking that allows agencies to determine if there are
acquisition workforce shortages so they can recruit and directly hire
qualified candidates. Likewise, in the area of business acquisition
practices, the Chief Acquisition Officers (CAO) Council has been
established, but rulemaking to require oversight of certain contracts by
licensed professional engineers has not yet been finalized.

Progress also varies in the area of commercial item acquisition. Efforts
to complete rulemaking to encourage increased use of performance-based
contracting are underway. Further, the Office of Federal Procurement
Policy (OFPP) in the Office of Management and Budget (OMB) has established
a center of excellence for services. Conversely, because of the
complexities involved, rulemaking to allow the use of time-and-materials
and labor-hour contracts for procurement of commercial services is moving
at a more deliberate pace. In the area of other procurement flexibilities,
rulemaking allowing special emergency procurement authority for
contingency operations or to facilitate defense against or recovery from
nuclear, biological, chemical, or radiological attack has been finalized.
But actions required to allow agencies to use other transactions authority
have not been initiated.

This report does not contain recommendations.

                     Page 2 GAO-05-233 Services Acquisition

Scope and Methodology

Agency Comments and Our Evaluation

To determine progress made in implementing each of the SARA provisions, we
obtained information from those organizations charged in the act with
initiating actions: OFPP, GSA, OPM, and DOD. We interviewed officials
within these organizations to identify actions taken pertaining to each of
the provisions. We reviewed documentation such as guidance memos, reports,
and proposed and final changes to the Federal Acquisition Regulation
(FAR). We also attended interagency and public meetings relevant to
implementation efforts. This review does not address how agencies are
applying the rules and guidance issued by the administration; nor does it
evaluate the effect SARA provisions and ongoing implementation activities
may be having on the agencies, their acquisition workforce, or their
acquisitions of services. We conducted our work from August 2004 to
February 2005 in accordance with generally accepted government auditing
standards.

We provided a draft of this report to OMB, GSA, DOD, and OPM for their
review and comment. We received oral comments from OFPP. It concurred with
the report and provided technical comments, which have been incorporated
where appropriate. In e-mail responses, both GSA and OPM provided
technical comments. We revised the report based on these comments where
appropriate. DOD informed us that it had no comments on the report.

As requested by your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days
from the date of this letter. We will then send copies of this report to
the Director, Office of Management and Budget; the Secretary of Defense;
the Administrator of General Services; and the Acting Director, OPM. We
also will make copies available to others on request. In addition, this
report will be available at no charge on GAO's Web site at
http://www.gao.gov.

                     Page 3 GAO-05-233 Services Acquisition

If you have any questions about this report, please contact me at (202)
512-4841, or Carolyn Kirby, Assistant Director, at (202) 512-9843. Other
major contributors to this report were Robert Ackley, Noah Bleicher,
Bob Swierczek, Susan Tindall, and Peter Zwanzig.

Sincerely yours,

William T. Woods
Director, Acquisition and Sourcing Management

                     Page 4 GAO-05-233 Services Acquisition

Section 1412: Civilian Acquisition Workforce Training Fund

                     Page 5 GAO-05-233 Services Acquisition

Section 1412: Civilian Acquisition Workforce Training Fund

Background and Other Information

Civilian agencies have not effectively managed or trained their
acquisition workforce in part because they do not use multidisciplinary
definitions including noncontracting staff (such as program managers and
others) integral to the acquisition process. In 2002, we recommended that
OFPP refine its definition of "acquisition workforce" so training could be
required of noncontracting staff. As we stated in 2003 before the House
Committee on Government Reform, the procuring agencies should adequately
fund training through the normal budgeting process. We supported the
training fund as a way to augment those funds.

In a July 2004 instruction to executive agencies, GSA directed them to
identify their interagency contracts; project fee revenues for 2005 and
2006; and deposit 5 percent of their fee revenues for 2004. OMB reinforced
this requirement later in July 2004, but as late as the following
November, only the GSA schedules program and four agencies with
governmentwide contracts (Health and Human Services/National Institutes of
Health, Department of Veterans Affairs, Commerce, and National Aeronautics
and Space Administration) had made deposits for the first 3 quarters. GSA
is working to identify the appropriate share of the other agency
contracts. As administrator of the fund, GSA will need reliable
information on interagency contract fee revenues. Our 2002 review of fees
charged on governmentwide contracts found that some agencies had not sent
to OMB complete reports on fee revenues.

Related GAO Products

Contract Management: Comments on Proposed Services Acquisition Reform Act.
GAO-03-716T. Washington, D.C.: April 30, 2003.

Acquisition Management: Agencies Can Improve Training on New Initiatives.
GAO-03-281. Washington, D.C.: January 15, 2003.

Acquisition Workforce: Agencies Need to Better Define and Track the
Training of Their Employees. GAO-02-737. Washington, D.C.: July 29, 2002.

Contract Management: Interagency Contract Program Fees Need More
Oversight. GAO-02-734. Washington, D.C.: July 25, 2002.

                     Page 6 GAO-05-233 Services Acquisition

Section 1413: Civilian Acquisition Workforce Recruitment Flexibility

[IMG]

                     Page 7 GAO-05-233 Services Acquisition

                  Section 1414: Maintaining Architectural and
                  Engineering Acquisition Workforce Expertise

Page 8 GAO-05-233 Services Acquisition

Section 1421: Civilian Agency Chief Acquisition Officers

[IMG]

                     Page 9 GAO-05-233 Services Acquisition

Section 1422: Chief Acquisition Officers Council

Section 1423: Advisory Panel on Acquisition Laws and Regulations

Section 1423: Advisory Panel on Acquisition Laws and Regulations

Background and Other Information

On February 1, 2005, OMB announced the advisory panel membership. Panel
members are as follows

Panel Chair: Marcia G. Madsen, Partner, Mayer, Brown, Rowe and Maw;

Louis M. Addeo, President, AT&T Government Solutions;

Frank J. Anderson, Jr., President, Defense Acquisition University;

Allan V. Burman, President, Jefferson Solutions;

Carl DeMaio, President and Founder, The Performance Institute;

Marshall J. Doke, Jr., Partner, Gardere Wynne Sewell;

David A. Drabkin, Deputy Associate Administrator for Acquisition Policy,
General Services Administration;

Jonathan Etherton, Vice President, Legislative Affairs, Aerospace
Industries Association of America, Inc.;

James A. Hughes, Jr., Deputy General Counsel for Acquisition, Department
of the Air Force;

Deidre A. Lee, Director for Defense Procurement and Acquisition Policy,
Department of Defense;

Tom Luedtke, Assistant Administrator for Procurement, National Aeronautics
and Space Administration;

Melanie R. Sabelhaus, Deputy Administrator, Small Business Administration;

Joshua I. Schwartz, Professor of Law and Co-Director of the Government
Procurement Law Program, George Washington University School of Law;

Roger D. Waldron, Director, Acquisition Management Center, General
Services Administration; and

Laura Auletta, Chairperson of the Civilian Agency Acquisition Council,
will

serve as the panel's Designated Federal Officer (Executive Director).

                    Page 12 GAO-05-233 Services Acquisition

Section 1426: Extension of Franchise Fund Programs

[IMG]

Section 1427: Contracting for Architectural and Engineering Services

Section 1428: Telecommuting for Federal Contractors

Section 1431: Incentives for Performance-Based Services Contracting

[IMG]

Section 1431: Incentives for Performance-Based Services Contracting

Background and Other Information

Agencies use performance-based contracts to specify the desired outcomes
and allow contractors to determine how best to achieve those outcomes,
rather than prescribing the methods contractors should use. Although
performance-based contracts can offer significant benefits, such as
encouraging contractors to find innovative ways of delivering services,
historically, the government has not widely used this strategy.

Our review of federal procurement trends showed that in fiscal year 2001,
agencies reported that 24 percent of their eligible service contracts were
performance-based. However, there was wide variation in the extent to
which agencies used these contracts, with 3 of the 10 agencies we reviewed
falling short of OMB's goal that 10 percent of eligible service contracts
be performance-based.

In a 2002 report, we examined the extent to which service contracts
characterized by agencies as performance-based actually contained
performance-based attributes. We found agencies lacked a good
understanding of this contracting approach and how to take advantage of
it. Consequently, we recommended that OFPP clarify existing guidance to
ensure performance-based contracting is appropriately used. Since that
time, OFPP has taken steps to increase awareness and use of
performance-based contracting. For example, a report resulting from an
interagency task force convened by OFPP was issued including
recommendations for changes designed to assist agencies in applying
performance-based service acquisition more effectively. In a September
2004 memo to civilian and defense agencies, OFPP implemented several of
the task force recommendations including instructions for reporting
performance-based contracts and task orders in the FPDS. Additionally,
OFPP encouraged agencies to follow new guidance in development of their
performance-based service acquisitions.

Related GAO Products

Use of Legislative Incentive for Performance-Based Contracting Unknown.
GAO-03-674R. Washington, D.C.: May 22, 2003.

Federal Procurement: Spending and Workforce Trends. GAO-03-443.
Washington, D.C.: April 30, 2003.

                    Page 17 GAO-05-233 Services Acquisition

Section 1431: Incentives for Performance-Based Services Contracting

Contract Management: Guidance Needed for Using Performance-Based Service
Contracting. GAO-02-1049. Washington, D.C.: September 23, 2002.

                    Page 18 GAO-05-233 Services Acquisition

Section 1432: Time-and-Materials Contracting to Buy Commercial Services

Section 1441: Special "Other Transactions" Acquisition Authority

Section 1441: Special "Other Transactions" Acquisition Authority

Background and Other Information

"Other transactions" agreements provide flexibility by being exempt from
the FAR, cost accounting standards, and a variety of other acquisition
requirements. These agreements were authorized to provide flexibility for
the federal government to acquire cutting-edge research and technology.
Because fewer government-unique requirements apply, other transactions can
be useful in attracting private-sector entities that traditionally have
not done business with the government.

Related GAO Products

Homeland Security: Further Action Needed to Promote Successful Use of
Special DHS Acquisition Authority. GAO-05-136. Washington, D.C.: December
15, 2004.

Defense Acquisitions: DOD Has Implemented Section 845 Recommendations but
Reporting Can be Enhanced. GAO-03-150. Washington, D.C.: October 9, 2002.

Acquisition Reform: DOD's Guidance on Using Section 845 Agreements Could
be Improved. GAO/NSIAD-00-33. Washington, D.C.: April 7, 2000.

                    Page 21 GAO-05-233 Services Acquisition

Section 1442: Public Disclosure of Noncompetitive Contracting for Iraq
Reconstruction Section 1443: Emergency Procurement Flexibilities

[IMG]

                (120370) Page 23 GAO-05-233 Services Acquisition

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