Base Operations: Contracting for Firefighters and Security Guards
(Briefing Report, 09/12/97, GAO/NSIAD-97-200BR).

Pursuant to a congressional request, GAO provided information about
contracting for firefighter and security guard services within the
Department of Defense (DOD), focusing on: (1) the military services'
positions on contracting for firefighters and security guards; (2)
lessons learned from using contract firefighters and security guards at
military bases; and (3) the cost-effectiveness of contracting for these
services.

GAO noted that: (1) DOD has previously asked Congress to repeal the
prohibition against contracting for firefighter and security guard
services, but DOD did not make this request in fiscal year 1997; (2) DOD
officials believe that significant savings can be realized if the
services were allowed to compete these services and that repealing the
law would promote more efficient and effective use of military
personnel; (3) GAO found that in those instances in which the services
had been contracted the results have been mixed; (4) at one Navy
facility with an omnibus contract (before 1983) for all base operation
services, firefighter service inspection reports showed satisfactory
performance, and contract evaluation reports for both firefighter and
security guard services showed outstanding performance; (5) the senior
military official responsible for these functions at the base stated
that he was satisfied with the contract services received; (6) another
Navy facility that has contracted for security guard services since
before 1983, however, has experienced problems with contractor
performance, including one contractor who went bankrupt; (7) according
to service representatives from the Air Force, Navy, and Army,
contractor performance has been generally satisfactory, although some
minor problems have occured; (8) the representatives generally believe
that the problems could have been resolved through better contracting
and contract oversight practices; (9) the best way to determine if
savings can be achieved from contracting firefighter and security guard
services is by completing an A-76 study at each base where these
services are being considered for conversion to contract; (10) because
of the law, DOD has not performed any new A-76 studies for firefighters
or security guards; (11) these studies are necessary because every base
is unique in terms of the mission that it must support; (12) the cost of
the services at each base is affected by the specialized fire prevention
and protection services required; (13) similarly, local economic factors
affect costs; (14) although GAO could not determine the overall
effectiveness of contracting for firefighter and security guard
services, GAO has previously reported that competitions produce savings,
regardless of whether they are won by the government or the private
sector; (15) savings occur as each competitor strives to design the most
efficient organization for doing the work--often with fewer personnel
than before; and (16) the Army has reported that about one-half of the
commercial activities studied for outsourcing had lower contract than
in-house costs.

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

 REPORTNUM:  NSIAD-97-200BR
     TITLE:  Base Operations: Contracting for Firefighters and Security 
             Guards
      DATE:  09/12/97
   SUBJECT:  Privatization
             Fire fighters
             Security services contracts
             Human resources utilization
             Cost effectiveness analysis
             Defense cost control
             Military personnel
             Defense procurement
             Competitive procurement

             
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Cover
================================================================ COVER


Briefing Report to Congressional Requesters

September 1997

BASE OPERATIONS - CONTRACTING FOR
FIREFIGHTERS AND SECURITY GUARDS

GAO/NSIAD-97-200BR

Base Operations

(709256)


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense
  OMB - Office of Management and Budget

Letter
=============================================================== LETTER


B-277056

September 12, 1997

The Honorable James M.  Inhofe
Chairman
The Honorable Charles S.  Robb
Ranking Minority Member
Subcommittee on Readiness
Committee on Armed Services
United States Senate

This report responds to your request for information about
contracting for firefighter and security guard services within the
Department of Defense (DOD).  Specifically, you asked us to provide
information on (1) the military services' positions on contracting
for firefighters and security guards, (2) lessons learned from using
contract firefighters and security guards at military bases, and (3)
the cost-effectiveness of contracting for these services. 


   BACKGROUND
------------------------------------------------------------ Letter :1

Federal agencies have been encouraged since 1955 to contract with the
private sector for goods and services, also known as outsourcing.  In
1966, the Office of Management and Budget (OMB) issued Circular A-76,
which established the federal policy for the government's performance
of commercial activities.  In a 1983 supplemental handbook, OMB
established procedures for determining whether commercial activities
should be contracted.  In 1996, OMB revised the supplemental handbook
to streamline and improve the A-76 decision-making process. 

Since late 1982, Congress has, for the most part, generally
prohibited DOD from contracting for firefighters and security
guards.\1 According to the legislative history, the prohibition was
enacted because of concerns about the uncertain quality and
reliability of private firefighter and security guard services, base
commanders' control over contractor personnel, and the right of
contractor personnel to strike.  Under 10 U.S.C.  2465, the
prohibition against contracting for these services does not apply (1)
when the contract is to be performed overseas, (2) when the contract
is to be performed on government-owned but privately operated
installations, and (3) when the contract (or renewal of the contract)
is for the performance of a function already under contract as of
September 24, 1983.  In addition, there is an exception for contracts
for these services with local governments with respect to closing
bases.  At present, 44 military bases in the United States and its
territories and possessions contract for firefighter and/or security
guard services under various exclusions from the requirements of 10
U.S.C.  2465.  A listing of these facilities appears in appendix I. 
Most of the bases were excluded because they contracted for these
services before September 1983. 

Because of continuing budgetary and personnel limitations and the
need to fund weapons modernization, DOD has increased its emphasis on
outsourcing support activities.  Between October 1995 and January
1997, the services announced plans to begin A-76 studies during
fiscal years 1996 and 1997.  These studies will involve over 34,000
positions, most of which are associated with base support activities. 
Additional studies involving more than 100,000 positions will be
started over the next 6 years. 


--------------------
\1 These prohibitions were included in Public Laws 97-252, 98-94,
99-145, and 99-661 and codified in
10 U.S.C.  2465. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

DOD has previously asked Congress to repeal the prohibition against
contracting for firefighter and security guard services, but DOD did
not make this request in fiscal year 1997.  DOD officials believe
that significant savings can be realized if the services were allowed
to compete these services and that repealing the law would promote
more efficient and effective use of military personnel. 

Our visits to two Navy bases that contract and discussions with
service personnel responsible for firefighter and security guard
services found that in those instances in which the services had been
contracted the results have been mixed.  At one Navy facility with an
omnibus contract (before 1983) for all base operation services,
firefighter service inspection reports showed satisfactory
performance, and contract evaluation reports for both firefighter and
security guard services showed outstanding performance.  The senior
military official responsible for these functions at the base stated
that he was satisfied with the contract services received.  Another
Navy facility that has contracted for security guard services since
before 1983, however, has experienced problems with contractor
performance, including one contractor who went bankrupt.  According
to service representatives from the Air Force, the Navy, and the
Army, contractor performance has been generally satisfactory,
although some minor problems have occurred.  The representatives
generally believe that the problems could have been resolved through
better contracting and contract oversight practices. 

The best way to determine if savings can be achieved from contracting
firefighter and security guard services is by completing an A-76
study at each base where these services are being considered for
conversion to contract.  Because of the law, DOD has not performed
any new A-76 studies for firefighters or security guards.  These
studies are necessary because every base is unique in terms of the
mission that it must support.  The cost of the services at each base
is affected by the specialized fire prevention and protection
services required (e.g., shipboard or structural firefighting,
aircraft crash or water rescue, and the need for armed guards). 
Similarly, local economic factors, such as base location, cost of
living, and the availability of qualified personnel and interested
contractors in the community, affect costs. 

Because of these reasons, we could not determine the overall
effectiveness of contracting for firefighter and security guard
services.  However, we previously reported on prior experience with
the A-76 process.  Our report stated that competitions produce
savings, usually through a reduction in personnel, regardless of
whether they are won by the government or the private sector.\2
Savings occur as each competitor strives to design the most efficient
organization for doing the work--often with fewer personnel than
before.  The report also concluded that the magnitude of the savings
from outsourcing over time is likely to be less than projected from
the initial cost comparison.  The Army has reported that about
one-half of the commercial activities studied for outsourcing had
lower contract than in-house costs. 


--------------------
\2 Base Operations:  Challenges Confronting DOD as It Renews Emphasis
on Outsourcing (GAO/NSIAD-97-86, Mar.  11, 1997). 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :3

DOD reviewed a draft of this report and generally concurred with our
conclusions.  DOD's comments appear in appendix II.  DOD also
provided technical comments, which we incorporated as appropriate. 
DOD stated that it does not have extensive data for predicting the
outcome of A-76 competitions for contracting for firefighter and
security guard services but that it has benefited from competition on
other commercial activities. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :4

To gather information on DOD's and the services' positions on
contracting firefighter and security guard services, we interviewed
officials from the Offices of the Deputy Under Secretary of Defense
for Industrial Affairs and Installations, the Army Assistant Chief of
Staff for Installations and Management, the Air Force Deputy Chief of
Staff for Plans and Programs, the Deputy Chief of Naval Operations
for Logistics, and the Marine Corps Deputy Chief of Staff for
Installations and Logistics, all located in the Washington, D.C.,
area. 

To identify lessons learned from contracting for firefighter and
security guard services, we visited Kings Bay Naval Submarine Base,
Georgia, and Jacksonville Naval Base, Florida, and interviewed
contracting officers and base officials responsible for overseeing
these functions.  We also interviewed contractor officials to obtain
their views.  In addition, we visited Mayport Naval Station, Florida,
where both firefighter and security guard services are provided by
DOD civilians, to obtain officials' views on contracting for
firefighter services. 

To obtain information on the cost-effectiveness of contracting for
firefighter and security guard services, we reviewed the criteria in
OMB Circular A-76 and held discussions with service officials
responsible for A-76 studies and service privatization programs.  We
also reviewed our prior work on this issue. 

We performed our review from April to May 1997 in accordance with
generally accepted government auditing standards. 


---------------------------------------------------------- Letter :4.1

We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Appropriations and House
Committees on National Security and Appropriations; the Secretaries
of Defense, the Air Force, the Army, and the Navy; and the Director
of OMB. 

Please contact me at (202) 512-8412 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix III. 

David R.  Warren
Director, Defense Management Issues


Briefing Section I BACKGROUND
============================================================== Letter 



   (See figure in printed
   edition.)


   GOVERNMENT CONTRACTING POLICY
------------------------------------------------------------ Letter :5

Federal policy regarding the performance of commercial activities was
established in 1966 by OMB Circular A-76.  The Circular states that
the government should generally rely on commercial sources to supply
the products and services it needs.  To implement this policy, the
Circular requires that cost comparisons, referred to as A-76 studies,
be made to determine whether agencies should use contractors or
government employees to perform commercial activities, such as
automatic data processing, guard and protection services, and
maintenance and repair services.  An A-76 cost study involves
comparing estimated contract and in-house costs for the specific work
to be performed to determine the most cost-effective approach. 

OMB's Performance of Commercial Activities Handbook, a supplement to
Circular A-76, furnishes the guidance for computing cost comparison
amounts.  Agencies considering contracting are to prepare a
performance work statement defining the function being requested, the
performance standards and measures, time frames required, and a
description of the government's in-house organization for performing
the activity.  The agencies then use these data and other estimated
costs to prepare a total estimated cost for in-house performance.  To
estimate contractor performance costs, the selected bid or offer is
added to other estimated costs, such as contract administration, to
develop a total projected cost.  The Circular requires agencies to
compare the two estimates to determine which alternative is more
cost-effective.  On average, DOD takes 18 to 24 months to complete an
A-76 study. 



   (See figure in printed
   edition.)


   POLICY FOR CONTRACTING FOR
   FIREFIGHTERS AND SECURITY
   GUARDS
------------------------------------------------------------ Letter :6

The prohibition against contracting out firefighter and security
guard services first appeared in the fiscal year 1983 Defense
Authorization Act (P.L.  97-252).  The fiscal year 1984 Defense
Authorization Act
(P.L.  98-94) extended the prohibition for 2 additional years and
included two exceptions:  DOD could contract for these functions at
locations outside the United States and at government-owned but
privately operated installations.  The fiscal year 1986 Defense
Authorization Act
(P.L.  99-145) extended these prohibitions for 1 additional year. 
The fiscal year 1987 Defense Authorization Act (P.L.  99-661) made
the prohibitions permanent.  Finally, the 1994 Defense Authorization
Act
(P.L.  103-160) added a provision permitting DOD to contract with
local governments for police and fire protection services at military
installations that were being closed within 180 days. 



   (See figure in printed
   edition.)


   NUMBER OF POSITIONS EXEMPT FROM
   CONTRACTING IN FISCAL YEAR 1996
------------------------------------------------------------ Letter :7


DOD's fiscal year 1996 inventory of civilian and military personnel
involved in commercial activities shows that 9,979 firefighters and
12,204 security guards were exempt from outsourcing because of the
law and other considerations, such as mobility requirements. 


Briefing Section II DOD'S POSITION
ON THE LAW
============================================================== Letter 



   (See figure in printed
   edition.)


   DOD'S POSITION ON 10 U.S.C. 
   2465
------------------------------------------------------------ Letter :8

DOD officials state that they would like Congress to repeal the
prohibition against contracting for firefighter and security guard
services.  However, although DOD has previously asked Congress to
repeal the law, it did not specifically make this request in fiscal
year 1997.  DOD officials believe that significant savings can be
realized from competing these functions with the private sector and
that repealing the law would promote more efficient and effective use
of military personnel.  Officials from the Offices of the Army
Assistant Chief of Staff for Installation Management, the Deputy
Chief of Naval Operations for Logistics, the Air Force Deputy Chief
of Staff for Plans and Programs, and the Marine Corps Deputy Chief of
Staff for Installations and Logistics also stated that their
respective services support DOD's position. 


Briefing Section III LESSONS
LEARNED FROM CONTRACTING FOR
FIREFIGHTER AND SECURITY GUARD
SERVICES
============================================================== Letter 



   (See figure in printed
   edition.)


   DOD'S EXPERIENCE AT TWO BASES
   THAT CONTRACT
------------------------------------------------------------ Letter :9

Visits to two Navy facilities, discussions with cognizant personnel
in the Office of the Secretary of Defense and the services, and a
review of inspection reports and other documents from the facilities
showed that the results of contracting for firefighter and security
guard services have been mixed. 

Kings Bay Naval Submarine Base, Georgia, has been contracting for
firefighter and security guard services as part of an omnibus base
operating services contract since the early 1980s.  Each quarter, a
panel of senior officers assesses the contractor's performance as
part of the contract award fee process.  Our review of this data
since the first quarter of fiscal year 1992 showed that the
contractor received an average of 100 percent of the award fee for
firefighter services and an average of 98.9 percent of the award fee
for security services. 

Command Readiness Inspections of the base's fire department,
conducted by the Naval Facilities Engineering Command between 1986
and 1994, showed that the contractor provided satisfactory service.\1
The base's Director of Facilities and Environment also stated that
the contractor provided excellent service.  The contractor has a
contingency plan for potential work stoppages, but it has not been
used.  Also, the recent transition among contractors, as a result of
recompeting the contract, went smoothly. 

Jacksonville Naval Base, Florida, has contracted a portion of the
security guard functions for three tenant commands located on the
base for more than 15 years.  In 1996, the existing contractor went
bankrupt, which abruptly terminated the service.  A new contract was
quickly awarded, and no major disruptions in service occurred during
the transition.  Jacksonville officials also expressed concerns about
the age and physical condition of some personnel provided by previous
contractors.  According to the contracting officer, these problems
could have been avoided with a better pre-award survey, improvements
in the contract statement of work, and better contract oversight. 

Service officials told us of a few other bases that have experienced
similar problems but stated that the problems are not widespread. 
For example, Los Angeles Air Force Base experienced problems with its
security guard contract, and the contractor at the Navy facility at
Andros Island had difficulty providing adequate numbers of
firefighters.  The officials agreed that the problems could be
avoided through better contracting practices. 

Briefing Section IV

--------------------
\1 These inspections are conducted every 4 years and rate the
firefighter services as satisfactory or unsatisfactory in various
functional areas. 


COST-EFFECTIVENESS OF CONTRACTING
FOR FIREFIGHTER AND SECURITY GUARD
SERVICES
============================================================== Letter 



   (See figure in printed
   edition.)


   COST-EFFECTIVENESS OF
   CONTRACTING WILL VARY BY BASE
----------------------------------------------------------- Letter :10

Office of the Secretary of Defense officials generally believe that
they can save money by conducting public/private competitions for
firefighter and security guard services.  However, the best way to
determine if savings can be achieved is to conduct an A-76 study at
each base that may consider converting these functions to contract. 

Because of the requirements of 10 U.S.C.  2465, DOD has not performed
new studies for firefighters and security guards.  Individual studies
would be necessary because each base is unique in terms of the
mission it must support and the nature of its local economy.  For
example, the two bases we visited are less than 100 miles apart, but
the average cost for security guard services differs greatly.  At
Jacksonville Naval Station, the contractor is paid approximately $1.4
million annually for 72 security guards (an average of $19,444 per
guard), whereas the contractor at Kings Bay Naval Submarine Base is
paid approximately $4 million per year for 102 security guards (an
average of $39,216 per guard).  We did not analyze the reasons for
the difference, but contracting officers at the bases told us that
the gap is probably due to differences in personnel qualifications,
work requirements, and economic factors at the respective bases. 

In another example, officials at Onizuka Air Force Base, California,
performed a cost comparison in 1994 of the contracted security police
function.  The comparison projected that the base could save
approximately $9.5 million over 55 months (the contract period) by
performing the function in house. 



   (See figure in printed
   edition.)


   FACTORS THAT INFLUENCE SAVINGS
   IN THE OUTSOURCING PROCESS
----------------------------------------------------------- Letter :11

Because each base is unique in terms of its mission and the nature of
its local economy, we could not determine the overall
cost-effectiveness of contracting for firefighter and security guard
services.  However, our March 1997 report on DOD's contracting
program identified some factors that influence savings in the
outsourcing process.  According to the report, outsourcing
competitions usually generate cost savings regardless of whether the
competitions are won by the government or the private sector.  The
savings achieved through the competitive process were the result of
closely examining the work to be done and determining how to do it
with fewer personnel, whether inhouse or contracted. 

The report also cautioned that the magnitude of savings from
contracting over time is likely to be less than projected from
initial cost comparisons.  Estimates in cost comparisons are often
heavily premised on initial savings estimates from previous
outsourcing efforts, and such estimates change as the scope of the
work and wages change.  Furthermore, continuing budget and personnel
reductions could make it difficult to sustain the levels of
previously projected savings. 

The Army has reported that about one-half of its past commercial
activity cost comparisons had lower contract than in-house costs. 


U.S.  BASES THAT CONTRACT FOR
FIREFIGHTER AND/OR SECURITY GUARD
SERVICES
=========================================================== Appendix I

FIREFIGHTER SERVICES

Air Force

Cavalier Air Force Base, North Dakota
Vance Air Force Base, Oklahoma

Army

Redstone Arsenal, Alabama
Presidio Monterey, California
Picatinny Arsenal, New Jersey

Navy

Atlantic Underwater Test and Evaluation Center, Andros Island
Pacific Missile Facility, Barking Sands, Hawaii
National Naval Medical Center, Bethesda, Maryland

SECURITY GUARD SERVICES

Air Force

Edwards Air Force Base, California
Hill Air Force Base, Utah

Army

Fort Rucker, Alabama
Space and Strategic Defense Command, Huntsville, Alabama
Yuma Proving Ground, Arizona
Aviation Support Command, Illinois
Fort Riley, Kansas
Fort Knox, Kentucky
New Orleans Gulf Outport, Louisiana
Fort Meade, Maryland
Aviation Support Command, Missouri
White Sands Missile Range, New Mexico
Fort Bragg, North Carolina
McAlester Army Ammunition Plant, Oklahoma
Fort Buchanan, Puerto Rico
Army Crime Records Center, Fort Belvoir, Virginia
Fort McNair, Washington, D.C. 


Navy

Construction Battalion Center, Port Hueneme, California
Naval Air Facility, El Centro, California
Naval Oceanographic Systems Center, California
Fleet and Industrial Supply Center, Jacksonville, Florida
Naval Air Station, Key West, Florida
Naval Surface Warfare Center, White Oak, Maryland
Submarine Maintenance, Engineering, Planning and Procurement,
 New Hampshire Navy Weapons Station, Earle, New Jersey
Navy Inventory Control Point, Pennsylvania
Naval Station, Roosevelt Roads, Puerto Rico
Navy Undersea Warfare Center, Newport, Rhode Island
Navy Medical Center, Portsmouth, Virginia
Navy Undersea Warfare Center, Keypo, Washington

FIREFIGHTER AND SECURITY GUARD
SERVICES

Air Force

Arnold Air Force Base, California
Los Angeles Air Force Base, California
Cape Canaveral Air Force Base, Florida
Gila Bend Air Force Base, New Mexico

Navy

Naval Submarine Base, Bangor, Washington
Naval Submarine Base, Kings Bay, Georgia




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
=========================================================== Appendix I


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

James F.  Wiggins
John J.  Klotz
Glenn D.  Furbish

NORFOLK FIELD OFFICE

John L.  Peacock
Willie J.  Cheely, Jr. 


*** End of document. ***