Department of Defense Pilot Authority for Acquiring Information
Technology Services under OMB Circular A-76 (29-MAY-08,
GAO-08-753R).
Federal agencies are required to use the procedures contained in
OMB Circular A-76 in determining whether commercial services
should be performed by government personnel or through contracts
with private-sector entities. In general, the circular instructs
agencies to base these decisions on competitions among public and
private-sector entities conducted in accordance with the Federal
Acquisition Regulation (FAR). Under the FAR, agencies have broad
discretion in establishing the criteria they will use to select
the winners of these competitions. An agency may decide, for
example, that selection of the lowest priced, acceptable offer
would best meet its needs. The FAR advises that this may be
appropriate when requirements are clearly defined and the risk of
unsuccessful performance is minimal. On the other hand, the FAR
says that it may be in the best interest of an agency to provide
for selecting other than the low offer when requirements are less
definite, development work is required, or the risk of
unsuccessful performance is high. An evaluation scheme that
allows for considering the relative importance of both price and
technical factors (such as an offeror's management capability,
experience, or ability to apply new technology) is commonly known
as the "best value" tradeoff process. The use of best value
permits tradeoffs between price and non-price factors, allowing
acceptance of other than the lowest-priced proposal. Although the
FAR allows agencies to use different source selection approaches,
public-private competitions at DOD must comply with section 2461
of title 10 of the U.S. Code. That section requires that before a
function being performed by 10 or more DOD civilian personnel may
be converted to performance by a contractor, DOD must determine
that performance of the function by a contractor, rather than by
DOD employees, will result in savings to the government over the
life of the contract. In essence, section 2461 prevents DOD from
using the best value tradeoff process to award a contract that
would cost the government more than continued performance by the
government. The pilot authority in section 336 temporarily
permits DOD to use the best value tradeoff process in
competitions for IT services to award contracts at costs that may
be higher than government performance, when doing so would
provide DOD the greatest overall benefit.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-753R
ACCNO: A82211
TITLE: Department of Defense Pilot Authority for Acquiring
Information Technology Services under OMB Circular A-76
DATE: 05/29/2008
SUBJECT: Accountability
Agency proceedings
Competition
Competitive procurement
Defense procurement
Evaluation criteria
Evaluation methods
Federal agencies
Federal procurement policy
Government contracts
Information technology
Internal controls
Managed competition
Prices and pricing
Private sector
Procurement
Procurement evaluation
Procurement law
Procurement policy
Program evaluation
Program management
Requirements definition
Risk management
Source selection
Strategic planning
Technical proposals
Contract principles
Pilot programs
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GAO-08-753R
This is the accessible text file for GAO report number GAO-08-753R
entitled 'Department of Defense Pilot Authority for Acquiring
Information Technology Services under OMB Circular A-76' which was
released on May 29, 2008.
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GAO-08-753R:
United States Government Accountability Office:
Washington, DC 20548:
May 29, 2008:
Congressional Committees:
Subject: Department of Defense Pilot Authority for Acquiring
Information Technology Services under OMB Circular A-76:
Section 336 of the National Defense Authorization Act for Fiscal Year
2004, Pub. L. No. 108-136, authorized the Department of Defense (DOD)
to conduct a pilot program to use best value source selection criteria
in public-private competitions for information technology (IT) services
under Office of Management and Budget (OMB) Circular A-76. This
authority is scheduled to expire on September 30, 2008. Section 336
also directed us to review the pilot program to determine whether it is
effective and equitable.
Officials from DOD's Office of Housing and Competitive Sourcing, which
has overall responsibility for addressing A-76 issues within DOD, told
us that the section 336 pilot authority has not been used.
Consequently, there is no basis for us to judge the effectiveness or
equity of the program. Our objectives, therefore, were to determine (1)
the reasons why the section 336 authority has not been used, and (2)
given the scheduled expiration of the authority, whether DOD officials
believe the authority should be extended.
Background:
Federal agencies are required to use the procedures contained in OMB
Circular A-76 in determining whether commercial services should be
performed by government personnel or through contracts with private-
sector entities. In general, the circular instructs agencies to base
these decisions on competitions among public and private-sector
entities conducted in accordance with the Federal Acquisition
Regulation (FAR). Under the FAR, agencies have broad discretion in
establishing the criteria they will use to select the winners of these
competitions. An agency may decide, for example, that selection of the
lowest priced, acceptable offer would best meet its needs. The FAR
advises that this may be appropriate when requirements are clearly
defined and the risk of unsuccessful performance is minimal. On the
other hand, the FAR says that it may be in the best interest of an
agency to provide for selecting other than the low offer when
requirements are less definite, development work is required, or the
risk of unsuccessful performance is high. An evaluation scheme that
allows for considering the relative importance of both price and
technical factors (such as an offeror's management capability,
experience, or ability to apply new technology) is commonly known as
the "best value" tradeoff process. The use of best value permits
tradeoffs between price and non-price factors, allowing acceptance of
other than the lowest-priced proposal.
Although the FAR allows agencies to use different source selection
approaches, public-private competitions at DOD must comply with section
2461 of title 10 of the U.S. Code. That section requires that before a
function being performed by 10 or more DOD civilian personnel may be
converted to performance by a contractor, DOD must determine that
performance of the function by a contractor, rather than by DOD
employees, will result in savings to the government over the life of
the contract. In essence, section 2461 prevents DOD from using the best
value tradeoff process to award a contract that would cost the
government more than continued performance by the government. The pilot
authority in section 336 temporarily permits DOD to use the best value
tradeoff process in competitions for IT services to award contracts at
costs that may be higher than government performance, when doing so
would provide DOD the greatest overall benefit.
Results:
According to defense officials, the pilot authority in section 336 has
not been used for a variety of reasons, ranging from the lack of
suitable candidate competitions to the absence of departmentwide
guidance. The Office of the Secretary of Defense (OSD) Office of
Housing and Competitive Sourcing identified 12 competitions (1 Navy, 1
Defense Logistics Agency (DLA), 5 Air Force, 5 Army) that involved IT
services during the pilot program period by querying the Defense
Commercial Activities Management Information System (DCAMIS).[Footnote
1] Presented below are the reasons the authority of section 336 was not
used in those 12 competitions.
* The Navy reported that for the DCAMIS-identified IT services
competition it conducted after the enactment of section 336, it
determined that achieving the best value for the Navy did not require
any trade-offs between price and non-price factors, such as the
application of new technology.
* DLA officials told us that its DCAMIS-identified competition involved
only two IT services positions out of a total of 102 positions it was
competing. Accordingly, DLA did not believe that a best value approach
was justified since the two IT services positions comprised just a
small fraction of the positions it was competing.
* Air Force officials told us that the service did not participate in
the pilot because the DOD Competitive Sourcing Official did not
authorize its use. In its written response to our question, the Air
Force said that although section 336 of Public Law 108-136 allows DOD
to create a pilot program, the statute gives no authority to the
component services. Accordingly, the Air Force position is it has no
authority under the statute to conduct a best value tradeoff source
selection.
* An Army official advised us that using a best value tradeoff process
on an Army Corps of Engineers IT competition that started in 2004 would
have complicated an already complex competition, and the Army therefore
chose not to use the pilot program authority. That competition involved
about 1,300 positions at 50 different locations. The Army's competitive
sourcing official told us that since that time the Army has not used
the pilot authority because it received no OSD guidance regarding the
use of best value tradeoffs in IT competitions. The Army stated that,
absent OSD guidance on using the pilot program, the advice from OSD to
the services and defense agencies has been to use low-price,
technically acceptable acquisition strategies.
Officials at the OSD Office of Housing and Competitive Sourcing did not
seek a legal opinion regarding the Air Force position because they were
unaware of that position until our review disclosed it. OSD officials
confirmed that they issued no guidance concerning the pilot authority,
but said that guidance from OSD was not needed because OMB Circular A-
76 already contains guidance on the use of best value for IT services
competitions. The officials also said that because of the statutes that
affect DOD's use of best value, OSD's expectation was that the DOD
components would seek OSD approval before considering the use of the
best value tradeoff approach. The officials stated that although all of
the DOD components were aware of the pilot program authority, none made
any request to DOD's Competitive Sourcing Official to use it. Had there
been such a request, the OSD officials said they would have considered
supporting a best value competition.
The military services, DLA, and OSD officials have differing views
about extending the best value authority. Army, Navy, and Air Force
competitive sourcing officials see no need for the authority to be
extended. The Air Force, for example, stated that a procurement
decision based on low price among technically acceptable offers is the
fairest way to compare private sector offers against government
resources. According to the Air Force, this approach allows the
government to obtain the performance level and quality required without
paying extra for excessive features not needed or wanted. Only DLA
believes that the authority of the program should be extended. In DLA's
view, the best value approach allows offerors the ability to propose
enhanced performance standards that differ from those in the
solicitation. Although generally supportive of the use of the best
value tradeoff approach, OSD officials have made no request to the
Congress that the authority contained in section 336 be extended.
Scope And Methodology:
In performing our work, we reviewed relevant statutes, regulations,
guidance, and available solicitation documents. We also contacted
officials from the OSD Office of Housing and Competitive Sourcing and
their counterparts in the Army, Navy, Air Force, and DLA to obtain
their views and other information on the pilot program authority.
Officials from OSD's Office of Housing and Competitive Sourcing
identified 12 competitions that involved IT services during the pilot
program period by querying the DCAMIS database. We did not
independently test the reliability of this database, but we determined
that the information in the database was sufficiently reliable for the
purposes of this review. To obtain additional perspective on the use of
best value in the context of A-76 competitions, we interviewed
officials from the American Federation of Government Employees, a
federal employee union; the Professional Services Council, an industry
association; and OMB's Office of Federal Procurement Policy, which
oversees the use of A-76 across the government.[Footnote 2] We
conducted this performance audit from February through May, 2008, in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings
based on our audit objectives.
Agency Comments:
We provided a draft of this letter to DOD for its review and comment.
DOD officials stated that they had no comments.
If you have any questions regarding this letter, please contact me at
(202) 512-8214 or James Fuquay, Assistant Director, at (937) 258-7963.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this letter. Other
contributors to this effort include Myra Watts Butler, Daniel Hauser,
Sylvia Schatz, and Robert Swierczek.
Signed by:
William T. Woods:
Director:
Acquisition and Sourcing Management:
List of Congressional Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Ted Stevens:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable John P. Murtha:
Chairman:
The Honorable C. W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of correspondence]
Footnotes:
[1] DCAMIS is a DOD database used to maintain and report OMB Circular A-
76 data.
[2] In 2006, OMB reported on the benefits achieved through the use of
the best value tradeoff process. Executive Office of the President,
Office of Management and Budget, Competitive Sourcing: Report on the
Use of Best Value Tradeoffs in Public-Private Competitions,
(Washington, D.C.: April 2006).
[End of section]
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