DOD Competitive Sourcing: Potential Impact on Emergency Response
Operations at Chemical Storage Facilities Is Minimal (Letter Report,
03/28/2000, GAO/NSIAD-00-88).

Pursuant to a legislative requirement, GAO reviewed the Army's
competitive sourcing studies, focusing on the: (1) Army plans for
competitive sourcing studies at five chemical munitions facilities and
the extent to which emergency response or chemical defense industrial
positions are included in the competitive sourcing studies; and (2)
status of the Army's assessment and GAO's assessment of how competitive
sourcing would impact emergency response capabilities and environmental
permits associated with the destruction of the chemical agents and
munitions.

GAO noted that: (1) the Army has competitive sourcing studies underway
at five of the eight facilities where chemical munitions are stored, but
only a relatively small number of the activities being studied at these
locations include emergency response duties; (2) these studies focus
principally on base operations support functions such as facilities
maintenance, supply, and information management; (3) the Army had plans
to study activities involving manufacturing positions at only one of
these facilities, Pine Bluff Arsenal, Arkansas, but cancelled those
plans in November 1999; (4) the Army has not completed its assessment of
how the transition from the current organizational structure to either a
most efficient government organization or contractor workforce would
affect emergency response capabilities; (5) however, GAO's analysis
indicates that there should be minimal potential for a degradation of
emergency response capabilities because of the small number and types of
positions with emergency response duties potentially affected; (6) the
Army should be able to mitigate any degradation of emergency capability
by requiring that transition plans provide for adequate training and
phasing in of any replacement personnel who will be performing emergency
response duties; and (7) Army officials believe that the scope of the
competitive sourcing studies should not affect environmental permits as
long as the Army maintains its emergency response capabilities.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-00-88
     TITLE:  DOD Competitive Sourcing: Potential Impact on Emergency
	     Response Operations at Chemical Storage Facilities Is
	     Minimal
      DATE:  03/28/2000
   SUBJECT:  Chemical warfare
	     Munitions
	     Emergency preparedness
	     Licenses
	     Privatization
	     Environmental monitoring
	     Property disposal
IDENTIFIER:  OMB Circular A-76 Program

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GAO/NSIAD-00-88

Appendix I: The A-76 Process

14

Appendix II: Comments From the Department of Defense

18

Appendix III: GAO Contacts and Staff Acknowledgments

20

Table 1: Installation Emergency Response Team Organization 7

Table 2: Positions With Emergency Response Duties Potentially
Affected by Competitive Sourcing Studies 9

Figure 1: Original Stockpile of Chemical Agents and Munitions in the United
States 6

Figure 2: Overview of the A-76 Process 15

National Security and
International Affairs Division

B-284636

March 28, 2000

The Honorable John Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Floyd Spence
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

The Army maintains eight industrial facilities in the continental United
States whose mission in whole or in part involves the storage of chemical
agents and munitions that are required to be disposed of over the next
several years. Some of these facilities have other missions such as
ammunition storage, manufacturing, and maintenance of some chemical defense
equipment. While the Army considers the likelihood of a chemical release at
one of these facilities to be extremely small, the health effects of an
accident could be severe. Before constructing or operating a chemical weapon
destruction facility, the Army must obtain permits to comply with federal,
state, and local environmental laws and regulations. These permits require
facilities to maintain emergency response plans. Accordingly, Army
officials, working with state and local officials, have developed emergency
response plans for the unlikely event of a chemical accident. Government
employees at the eight locations typically have collateral emergency
response duties assigned under the emergency response plans.

Five of the eight facilities that store chemical munitions are participating
in the Army's program to study whether functions currently performed by
federal employees could be performed more cost effectively in-house or by
the private sector. As part of this program, the Army is conducting studies,
known as competitive sourcing studies, in accordance with guidance
established by the Office of Management and Budget Circular A-76. (See app.
I for a description of the A-76 process). Once the studies are complete,
each installation will develop a plan to transition from the current
organizational structure to either a most efficient government organization
or a contractor workforce. The plans are designed to minimize disruption and
adverse impacts.

However, several members of Congress have expressed concern about the impact
of competitive sourcing on emergency response capabilities at the chemical
storage facilities and the impact on manufacturing capabilities related to
chemical and biological defense. The National Defense Authorization Act for
Fiscal Year 20001 required that we assess the Army's competitive sourcing
study plans at the five facilities and the potential operational impact.
Accordingly, this report addresses (1) Army plans for competitive sourcing
studies at the five facilities and the extent to which emergency response or
chemical defense industrial positions are included in the competitive
sourcing studies and (2) the status of the Army's assessment and our
assessment of how competitive sourcing would impact emergency response
capabilities and environmental permits associated with the destruction of
the chemical agents and munitions.

The Army has competitive sourcing studies underway at five of the eight
facilities where chemical munitions are stored, but only a relatively small
number (ranging from 0 to 12 percent) of the activities being studied at
these locations include emergency response duties. These studies focus
principally on base operations support functions such as facilities
maintenance, supply, and information management. The Army had plans to study
activities involving manufacturing positions at only one of these
facilities, Pine Bluff Arsenal, Arkansas, but canceled those plans in
November 1999.

The Army has not completed its assessment of how the transition from the
current organizational structure to either a most efficient government
organization or contractor workforce would affect emergency response
capabilities. However, our analysis indicates that there should be minimal
potential for a degradation of emergency response capabilities because of
the small number and types of positions with emergency response duties
potentially affected. In addition, the Army should be able to mitigate any
degradation of emergency capability by requiring that transition plans
provide for adequate training and phasing in of any replacement personnel
who will be performing emergency response duties. Army officials believe
that the scope of the competitive sourcing studies should not affect
environmental permits as long as the Army maintains its emergency response
capabilities.

We are making a recommendation to the Secretary of Defense to require that
the Army's transition plans include provisions to identify and train
replacement personnel at each of the affected installations to ensure the
continuity and viability of emergency response capabilities as the results
of the competitive sourcing studies are implemented.

Since World War I, the United States has maintained a stockpile of chemical
weapons and agents. The stockpile consists of rockets, bombs, projectiles,
spray tanks, and bulk containers that contain various chemical agents. Most
of the stockpile is stored at eight facilities in the continental United
States, as seen in figure 1.

Figure 1: Original Stockpile of Chemical Agents and Munitions in the United
States

Note: As of December 31, 1999, Deseret Chemical Depot, Utah had destroyed
325,459 items and 4,636 tons of agent.

Source: Program office for chemical demilitarization.

In November 1985, the Congress directed the Department of Defense to destroy
the U.S. stockpile of chemical agents and munitions in a manner that would
provide maximum protection for the general public and the environment.2 The
Army is responsible for this program. The Army has weapons destruction
activities underway or planned over the next several years at each of the
eight facilities. Although the Army considers the likelihood of an accident
at its storage facilities extremely small, it has developed a contingency
emergency response plan with a trained emergency response team at each of
the sites. Installation emergency response teams serve as the initial
response force for any chemical accident or incident. The teams are
organized into command, response, and support groups, as shown in table 1.

Table 1: Installation Emergency Response Team Organization

 Group    Role                        Functions

 Command  Perform command and         Legal, public affairs, safety, and
          control.                    chaplain.
          Apply and control           Toxic material handlers, hotline and
 Response emergency response          contamination control, firefighters,
          resources.                  and security.
          Provide services and
 Support  supplies to the emergency   Administration, communications,
          force.                      transportation and engineering.

Source: Department of the Army.

Typically, personnel in the response group are referred to as first line
responders. The teams vary in size, depending on the type and quantity of
chemical munitions and agents stored as well as the potential threat. They
are staffed with personnel from the chemical activity at each site whose
primary jobs are to monitor the stockpile. Other personnel who provide
day-to-day base operations services, such as public works and information
management, are also team members on a part-time basis. All team members
participate in quarterly exercises and receive training to ensure they are
prepared to respond to a chemical accident or incident.

At five of the storage facilities--Aberdeen, Anniston, Blue Grass, Pine
Bluff, and Tooele--the Army is conducting competitive sourcing studies of
the base operation functions to determine if government employees or a
contractor workforce is the most cost-effective means of obtaining these
services. Currently, the Army has no plans to conduct competitive sourcing
studies at the other three storage facilities. The functions being studied
include supply operations, storage and warehousing, and information
management. Some of the activities being studied at each location, with the
exception of Aberdeen Proving Ground, are sources of personnel for the
emergency response teams in the event of a chemical accident or incident.
The study at Aberdeen Proving Ground does not include any positions with
emergency response duties. The competitive sourcing studies at Aberdeen,3
Anniston, Blue Grass, and Tooele are scheduled for completion in fiscal year
2000; and Pine Bluff in fiscal year 2002.

The Army has obtained the required environmental permits to construct and
operate chemical weapons destruction facilities at Aberdeen Proving Ground,
Anniston Army Depot, Pine Bluff Arsenal, and Tooele Army Depot. However, the
Army has not obtained the required permits at Blue Grass Army Depot because
the method that will be used to dispose of the chemical munitions has not
been agreed upon.

Competitive sourcing studies are underway at the five storage facilities,
and only a limited number of positions with emergency response duties are
now potentially affected by the studies. These studies focus on base
operations support activities such as facilities maintenance, supply, and
information management. Further, those positions under study with collateral
emergency response duties generally are not first line emergency responders
but rather provide administrative and communications support and operate
heavy equipment if needed in the event of an accident. In November 1999, the
Army decreased the scope of the study at Pine Bluff Arsenal, which
significantly reduced the number of positions potentially affected.

The Army had initially planned to study base operations functions at all
five facilities and other base functions, including manufacturing
operations, at Pine Bluff Arsenal. The broader study at Pine Bluff would
have potentially affected 106 positions with collateral emergency response
duties or about 44 percent of Pine Bluff's emergency response capability.
However, in November 1999, the Commander, Army Materiel Command, decided to
study only base operation functions at Pine Bluff because of concern about
the potential impact on readiness of competing the manufacturing operations.
Currently, the number of positions with collateral emergency response duties
potentially affected by the competitive sourcing studies range from 3 at
Tooele Army Depot to 22 at Pine Bluff Arsenal, as shown in table 2.

Table 2: Positions With Emergency Response Duties Potentially Affected by
Competitive Sourcing Studies

              Number of positions
              With emergency   Included
 Installation                            Percentage potentially
              response duties  in study  affected
 Aberdeen     78               0         0
 Tooele       611              3         1
 Blue Grass   117              15        13
 Anniston     451              21        5
 Pine Bluff   243              22        9

Source: Army data.

The table reflects the number of positions with emergency response duties
that could be affected if a contractor workforce were to replace the
existing government employees. Army officials noted that, if a contractor
becomes responsible for base operation activities, the actual number of
affected positions with these duties could be higher depending on the number
of government personnel who retire and take early out incentives,4 and the
results of a reduction-in-force,5 if required. On the other hand, the Army
officials stated that the number of affected positions with emergency
response duties could be less if government employees continue to perform
the base operation functions as a most efficient organization.

We found that the majority of the relatively few positions with emergency
response duties are not first line responders. Rather these positions
involve providing administrative and communications support or operating
heavy equipment such as backhoes or cranes in the event of a chemical
accident. For example, the emergency response duties of 6 of the 15
positions at Blue Grass Army Depot under study provide administrative
support in the emergency operations center, and the emergency response
duties of 8 of the 21 positions at Anniston Army Depot involve heavy
equipment operators. Likewise, the emergency response duties of the affected
positions at Pine Bluff primarily involve heavy equipment operation,
driving, and administrative support. Whatever the outcome of the competitive
sourcing study, these duties will continue to be performed either by the
government's most efficient organization or by the contractor work force.

Emergency Response Capability or Environmental Permits

The Army has not completed its assessment of the potential impact that the
competitive sourcing studies will have on emergency response capabilities.
However, our assessment indicates that there should be minimal potential for
a degradation of emergency response capabilities because of the small number
of positions with emergency response duties involved. In addition, the Army
should be able to mitigate any degradation of emergency capability by
ensuring that transition plans provide for adequate training and phasing in
of any replacement personnel, whether government or contractor, who will be
performing the emergency response duties. Army officials also believe that
the competitive sourcing studies should not affect environmental permits as
long as the Army maintains its emergency response capabilities.

The Commanding General of the Army Materiel Command directed his staff to
assess the potential impact the competitive sourcing studies would have on
the emergency response capabilities at the installations that store chemical
munitions. The assessment should be completed in March 2000. Officials
preparing the Army assessment believe that there is minimal potential for
degradation of emergency response capabilities at the chemical storage
installations undergoing competitive sourcing studies. They stated that
there might not be sufficient numbers of trained personnel during the
transition to either a most efficient government organization or a
contractor workforce. However, they indicated that they could mitigate any
potential degradation of capabilities by transition planning addressing the
training and phasing in of any replacement personnel with emergency response
duties. As previously noted, we found that only a relatively small number of
positions with emergency response duties would likely be affected by the
competitive sourcing studies. Also, the initial training for the majority of
these positions is limited to a one-week course, and can thus be readily
accomplished by replacement personnel, whether government or contractor.

Once the results of the competitive sourcing studies are known, each
installation is required to develop a plan to transition from the current
organizational structure to either a most efficient government organization
or a contractor workforce. Office of Management and Budget Circular A-76
provides broad guidance that states these plans should be designed to
minimize disruption and adverse impacts of transitioning to a new workforce.
Army officials intend to develop plans to transition the base operations
functions to the replacement workforce, whether government or contractor.
However, to avoid any possible gaps in emergency response coverage, we
believe these plans should also include strategies to train personnel who
would replace any existing emergency responders.

Army officials stated that the environmental permits the Army has obtained
to construct or operate facilities to destroy chemical weapons should not be
affected by the studies. An official in the Office of Program Management for
Chemical Demilitarization at Anniston Army Depot stated that he does not
anticipate any problems with permits because either government or contractor
personnel can perform the required emergency response functions. Likewise,
an official in the Office of Program Management for Chemical
Demilitarization at Tooele Army Depot stated that the permits would not be
affected because only 3 of 611 emergency response positions are potentially
affected by the study of base operation functions.

Finally, an official in the Office of Program Management for Chemical
Demilitarization at Pine Bluff Arsenal stated that the permit for chemical
demilitarization activities at that facility should not be affected by the
outcome of the competitive sourcing study. This official stated that the
permit requires the Army to have and maintain certain equipment, such as
backhoes, in the event of a chemical accident. He stated that as long as
this type of equipment is available and maintained, regardless of whether by
a government of contractor workforce, the permit should not be affected.

Available information indicates that the competitive sourcing studies should
not affect the Army's emergency response capabilities at the chemical
storage facilities as long as there is adequate advanced transition
planning. The Army's transition plans for implementing the results of the
competitive sourcing studies should include the proper designation and
training of replacement personnel, whether government or contractor, to fill
emergency response positions, as needed, to ensure that there are no
possible gaps in emergency response capabilities.

To ensure that adequate emergency response capabilities are maintained when
competitive sourcing studies are being conducted at installations that store
chemical munitions, we recommend that the Secretary of Defense require that
the Army's transition plans contain a strategy for training personnel to
fill emergency response positions affected by those studies.

In written comments on a draft of this report, the Department of Defense
concurred with our recommendation. The Department's comments are reprinted
in their entirety in appendix II.

To determine the extent to which emergency response positions were included
in the competitive sourcing studies, we compared the emergency response
positions to the positions included in the study universe at each
installation. We obtained data on the positions included in the study
universe from Army officials at Aberdeen Proving Ground, Maryland; Anniston
Army Depot, Alabama; Blue Grass Army Depot, Kentucky; Pine Bluff Arsenal,
Arkansas; and Tooele Army Depot, Utah. We also obtained a list of emergency
response positions from the chemical activities at each location. To
determine the potential impact on industrial missions, we verified that only
base operation functions were being studied at each location and also
obtained documentation to support the Army's decision not to study the
manufacturing operation at Pine Bluff Arsenal.

To determine if the Army had conducted risk assessments, we interviewed
officials at the Army Materiel Command headquarters, Alexandria, Virginia,
and the Soldier and Biological Chemical Command, Aberdeen, Maryland. Our
assessment was based upon our review of the risk assessments conducted by
the Soldier and Biological Chemical Command, the Blue Grass Army Depot, the
Pine Bluff Arsenal, and the Tooele Army Depot, and our analysis of the
numbers and types of emergency response positions included in the
competitive sourcing studies. Aberdeen Proving Ground and Anniston Army
Depot did not prepare risk assessments. To determine the potential impact on
environmental permits, we interviewed officials in the Office of Program
Management for Chemical Demilitarization at each site.

We conducted our review from October 1999 through February 2000 in
accordance with generally accepted government auditing standards.

We are sending copies of this report to the Honorable William S. Cohen,
Secretary of Defense; the Honorable Louis Caldera, Secretary of the Army;
and the Honorable Jacob Lew, Director, Office of Management and Budget.
Copies will also be available to others upon request.

If you or your staff have any questions concerning this report, please
contact me at (202) 512-8412. Key contributors are listed in appendix III.

David R. Warren
Defense Management Issues

The A-76 Process

In general, the A-76 process consists of six key activities: (1) developing
a performance work statement and quality assurance surveillance plan;
(2) conducting a management study to determine the government's most
efficient organization; (3) developing an in-house government cost estimate
for the most efficient organization; (4) issuing a Request for Proposals or
Invitation for Bids; (5) evaluating the proposals or bids and comparing the
in-house estimate with a private sector offer or an interservice support
agreement and selecting the winner of the cost comparisons; and
(6) addressing any appeals submitted under the administrative appeals
process, which is designed to ensure that all costs are fair, accurate, and
calculated in the manner prescribed by the A-76 handbook.

Figure 2 shows an overview of the process. The solid lines indicate the
process used when the government issues an Invitation for Bids or Request
for Proposals requesting bids or proposals on the cost of performing a
commercial activity. This type of process is normally used for more routine
commercial activities such as grass cutting or cafeteria operations, where
the work process and requirements are well defined. The dotted lines
indicate the additional steps that take place when the government wants to
pursue a negotiated, "best value" procurement. This type of process is often
used when a commercial activity involves high levels of complexity,
expertise, and risk.

Figure 2: Overview of the A-76 Process

Source: Air Force Air Education and Training Command Documents.

The circular requires the government to develop a performance work
statement. This statement, which is incorporated into either the Invitation
for Bids or Request for Proposals, serves as the basis for both government
estimates and private sector offers. Each private sector company develops
and submits a bid or proposal, giving its price for performing the
commercial activity. The government activity performs a management study to
determine the most efficient and effective way of performing the activity
with in-house staff. On the basis of this "most efficient organization," the
government develops a cost estimate and submits it to the selecting
authority. The selecting authority concurrently opens the government's
estimate and the bids or proposals of all the private sector firms.

According to Office of Management and Budget's A-76 guidance, the activity
will be converted to performance by the private sector if the private sector
offer is either lower by an amount equal to 10 percent of the direct
personnel costs of the in-house cost estimate or is $10 million less over
the performance period than the in-house estimate, whichever is less. The
Office of Management and Budget established this minimum cost differential
to ensure that the government would not convert performance for marginal
estimated savings.

If a best value process is used, the Federal Acquisition Regulation and the
A-76 supplemental handbook require several additional steps. The private
sector offerors submit proposals that often include a technical performance
proposal as well as the price. The government prepares an
in-house management plan and a cost estimate that are based strictly on the
performance work statement. On the other hand, private sector proposals can
offer a higher level of performance or service. The government's selection
authority reviews the private sector proposals to determine which one
represents the best overall value to the government based on such
considerations as (1) performance levels, (2) proposal risk, (3) past
performance, and (4) price. After the completion of this analysis, the
selection authority prepares a written justification supporting its
decision. This includes the basis for selecting a contractor other than the
one that offered the lowest price to the government. Next, the authority
evaluates the government's estimate and determines whether it can achieve
the same level of performance and quality as the selected private sector
proposal. If not, the government must then make changes to meet the
performance standards accepted by the authority. This is to ensure that the
in-house cost estimate is based upon the same scope of work and performance
levels as the best value private sector offer. After determining that the
government estimate and selected private offer are based on the same level
of performance, the estimated costs are compared.

Following an A-76 cost comparison decision, participants in the cost
comparison may appeal the selection authority's decision if they believe the
costs submitted by one or more of the participants were not fair, accurate,
or calculated in compliance with the requirements and procedures of A-76.
Appeals must be submitted in writing and within 20 days after the date that
all supporting documentation is made publicly available. The appeal period
may be extended to 30 days if the cost comparison is particularly complex.
Appeals are supposed to be adjudicated within 30 days after they are
received.

Comments From the Department of Defense

GAO Contacts and Staff Acknowledgments

Barry Holman, (202) 512-5581
William Crocker, (202) 512-4533

In addition to those named above, Michael Kennedy, Paul Newton, John
Brosnan, and Adam Vodraska made key contributions to this report.

(709450)

Figure 1: Original Stockpile of Chemical Agents and Munitions in the United
States 6

Figure 2: Overview of the A-76 Process 15

Table 1: Installation Emergency Response Team Organization 7

Table 2: Positions With Emergency Response Duties Potentially
Affected by Competitive Sourcing Studies 9
  

1. Public Law 106-65, section 142.

2. Department of Defense Authorization Act, 1986, P.L. 99-145, section 1412,
codified at
50 U.S.C. 1521.

3. The Army completed its competitive sourcing study at this location, but
the results were protested to GAO. Aberdeen Technical Services, B-283727.2,
Feb. 22, 2000. GAO found that the Army's cost comparison was done improperly
and recommended that the Army either revise the in-house cost estimate or
reopen the competition.

4. These incentives could include voluntary early retirement and voluntary
separation incentive pay.

5. Under a reduction-in-force, personnel included in the competitive
sourcing study may have seniority to take positions not included in the
study that also could be part of the emergency response force.
*** End of document. ***