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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