Army Contracting: Leadership Lacks Information Needed To Evaluate and Improve Operations
Fast Facts
The Army relies extensively on contracting operations to execute its missions—in fiscal year 2016 alone, it obligated over $74 billion through contracts. We reviewed the Army's contracting operations and found that senior leaders haven't consistently evaluated contracting effectiveness and efficiency. Instead, they have primarily focused on efforts to obligate funds before they expire.
We recommended that the Army develop metrics to determine whether its contracts are meeting schedule, cost, and performance goals; and that it assess the impact of its frequent organizational changes (such as centralizing decision-making) on contracting operations.
Number of Major Organizational Changes Affecting Army Contracting Operations, 2008-2016
Timeline showing an increasing number of organizational changes in the past 5 years.
Highlights
What GAO Found
Top Army leaders conduct department-wide contracting reviews, but they have not consistently evaluated the efficiency and effectiveness of the department's contracting operations. Instead, they have primarily focused on efforts to obligate funds before they expire, as well as competition rates and small business participation. In 2014, one of the Army's key strategic planning documents established that contracting operations should adhere to schedule, cost, and performance objectives, but Army leaders have not established the timeliness, cost savings, and contractor quality metrics needed to evaluate contracting operations against such objectives. Without adequate metrics, Army leaders will not have the information needed to determine whether Army contracting operations are meeting the department's objectives. Since 2012, Army leaders, including successive Assistant Secretaries of the Army (Acquisition, Logistics and Technology) (ASA(ALT)), have acknowledged a need for improvements in contracting and have taken positive intermittent steps, but GAO found that these leaders did not sustain the efforts or—alternately—provide a rationale for not doing so. GAO has previously found that leadership must provide clear and consistent rationales to effectively drive organizational transformations. If Army leadership does not document its rationale for key decisions, the Army's contracting organizations may be missing critical information to effectively improve operations going forward.
Top Army leaders have not evaluated the effects of major organizational changes on contracting operations despite repeatedly changing reporting relationships across contracting organizations since 2008, when the Secretary of the Army created the Army Contracting Command. The number of changes has increased since 2012, with five major changes in 2016.
Number of Major Organizational Changes Affecting Army Contracting Operations, 2008-2016
Some Army leaders made organizational changes to centralize contracting decision-making, while others made changes intended to improve support to field operations. When Army leaders made these changes, they did not establish measurable objectives in accordance with federal standards for internal control, and officials from eight different Army organizations told GAO that the numerous changes disrupted contracting operations and caused confusion. Further, GAO found that disagreements over the associated risks and benefits have increased tensions among officials in the ASA(ALT) office and at the Army Materiel Command (AMC). In the absence of measurable objectives and authoritative data, it is unclear whether the benefits of the changes outweighed the costs to implement them.
Why GAO Did This Study
In recent years, GAO and other organizations have raised concerns about Army contracting operations, which directly affect a wide range of Army activities. In fiscal year 2016 alone, the Army obligated more than $74 billion through contract actions.
GAO was asked to examine the Army's contracting operations. This report assesses the extent to which Army leaders have evaluated (1) the efficiency and effectiveness of contracting operations and (2) the effects of organizational changes on contracting operations.
GAO reviewed reports on Army contracting commissioned by the Secretary of the Army and an ASA(ALT); ASA(ALT) memos; Army guidance reorganizing AMC; and Army-wide contracting oversight briefings from fiscal years 2015 and 2016. GAO also interviewed personnel in the Office of the ASA(ALT), at AMC, and other contracting organizations.
Recommendations
GAO is making eight recommendations to improve the Army's contracting operations such as: developing metrics to assess contracting operations for timeliness, cost savings, and contractor quality; documenting rationales for key decisions; and establishing measurable objectives to assess the effects of organizational changes on contracting operations. The Army generally concurred with GAO's recommendations, but did not agree to establish a contractor quality metric because contracting organizations cannot control all variables that affect quality. GAO continues to believe this action is needed as discussed in the report.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Army | To help Army leadership obtain the information needed to evaluate and improve contracting operations, the Secretary of the Army should ensure the ASA(ALT) and Deputy Assistant Secretary of the Army (Procurement) (DASA(P)) establish and implement Contracting Enterprise Review (CER) metrics to evaluate the timeliness of contract awards, cost savings attributable to contracting activities, and the quality of contractors' products and services. |
The Army partially concurred with our recommendation. It stated it would develop a metric to evaluate the timeliness of contract awards, and as of the 2nd quarter, fiscal year 2019 CER, DASA(P) has incorporated this metric into its reviews. The Army also stated it would develop a metric to evaluate cost savings attributable to contracting activities, but DASA(P) officials have indicated that they no longer intend to incorporate such a metric into the CER due to the current focus on timeliness and workforce metrics. We continue to believe that the Army should implement a CER metric to evaluate cost savings attributable to contracting activities. The Army did not concur with our recommendation to establish a metric to evaluate the quality of contractors' products and services. The Army stated that the CER is not an appropriate mechanism to communicate this type of information. We continue to believe the Army should use the CER to evaluate the quality of contractors' products and services. Because the Army does not plan to move forward with CER metrics for cost savings attributable to contracting activities or the quality of contractors' products and services, we will close this recommendation as not implemented.
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| Department of the Army | To help Army leadership obtain the information needed to evaluate and improve contracting operations, the Secretary of the Army should ensure the ASA(ALT) and DASA(P) formally establish May 2018 as the required deadline for DASA(P) representatives to establish department-wide Procurement Action Lead Time (PALT) guidelines. |
The Army concurred with our recommendation, and ultimately established department-wide PALT guidelines in the 2nd quarter, fiscal year 2019 Contracting Enterprise Review (CER). The guidelines are divided by product and service categories, as well as dollar-level thresholds for the contracting actions.
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| Department of the Army | To help Army leadership obtain the information needed to evaluate and improve contracting operations, the Secretary of the Army should ensure the ASA(ALT) and DASA(P) establish a standard methodology for Principal Assistant Responsible for Contracting (PARCs) to calculate the cost savings they report in CER briefings; and ensure PARCs from the National Guard Bureau, U.S. Army Medical Command, and U.S. Army Corps of Engineers use the methodology to report their respective cost savings. |
The Army concurred with our recommendation. In January 2022, DASA(P) officials implemented a metric to determine cost savings attributable to contracting based on competition rates and negotiated savings. DASA(P) officials told us the metric assumes competition provides 30 percent savings, on average, and that the negotiated savings is the difference between the proposal amount and the final negotiated value of the contract. Implementing the metric will involve the utilization of the Virtual Contracting Enterprise to measure and track the savings. Because all Army contracting activities are required to use the Virtual Contracting Enterprise, the methodology for calculating cost savings is standard across the Principal Assistants Responsible for Contracting, including those at the National Guard Bureau, U.S. Army Medical Command, and U.S. Army Corps of Engineers. The DASA(P) officials demonstrated that they have applied the metric to these PARCs. DASA(P) officials also stated that cost savings attributable to contracting could be reported through mechanisms such as the Annual Summary Health Reports in the future, explaining that they may not continue quarterly CER briefings moving forward.
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| Department of the Army | To help Army leadership obtain the information needed to evaluate and improve contracting operations, the Secretary of the Army should ensure the ASA(ALT) and DASA(P) identify an effective means to collect and report contractor performance data. |
The Army concurred with our recommendation, and DASA(P) officials noted that the Contractor Performance Assessment Reporting System (CPARS) is the government-wide database for processing and collecting contractor performance information. However, they also previously expressed concern that the information contained in the system may not be reliable for assessing contractor performance. In March 2021, DASA(P) officials identified steps they are taking to improve the reliability of CPARS and monitor its use. For example, DASA(P) officials stated that they plan to incorporate aspects of CPARS oversight into their performance management reviews in order to help mitigate the risk of inaccurate reporting, and they now consider CPARS an effective tool for collecting contractor performance data.
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| Department of the Army | To help Army leadership obtain the information needed to evaluate and improve contracting operations, the Secretary of the Army should ensure the ASA(ALT) accurately determines the department's contracting workforce requirements in accordance with the Army's needs. |
The Army concurred with our recommendation. In response to this recommendation, the ASA(ALT) planned to develop and implement a contracting workforce model to predict workforce requirements throughout the organization. However, DASA(P) officials told us that this workforce model development effort was ultimately abandoned due in part to a lack of confidence in the underlying data. DASA(P) officials also told us that they plan to implement metrics related to workforce issues such as job satisfaction, retention, and institutional knowledge. These metrics, however, do not address the size the department's contracting workforce should be based on its workload, and DASA(P) officials told us that they do not plan to pursue an approach to address overall workforce requirements. We continue to believe that the ASA(ALT) should accurately determine the department's contracting workforce requirements in accordance with the Army's needs. Because the Army does not plan to move forward to determine the department's total contracting workforce requirements, we will close this recommendation as not implemented.
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| Department of the Army | To help Army leadership obtain the information needed to evaluate and improve contracting operations, the Secretary of the Army should ensure the future ASA(ALT)s document their reasons for not implementing their predecessors' contracting policies, as applicable. |
The Army concurred with our recommendation. DASA(P) officials have developed a standard operating procedure (SOP) that establishes that when policy remains unimplemented, DASA(P) officials will provide incoming ASA(ALT)s with information explaining why the policy was directed, actions taken, and actions remaining. The SOP states that the DASA(P) officials will obtain written concurrence to continue policy development or document the rationale why new leadership wants to terminate any remaining actions.
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| Department of the Army | To help Army leadership obtain the information needed to evaluate and improve contracting operations, the Secretary of the Army should ensure the ASA(ALT)s consistently chair or otherwise provide feedback on quarterly CERs in order to demonstrate commitment to improving contracting operations. |
The Army concurred with our recommendation. DASA(P) officials provided documentation showing the ASA(ALT) or the ASA(ALT)'s representatives--Principal Deputy and Principal Military Deputy--attended the quarterly CERs from the second quarter to fourth quarter of fiscal year 2018.
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| Department of the Army | To help Army leadership obtain the information needed to evaluate and improve contracting operations, the Secretary of the Army should ensure that Army leaders establish measurable objectives for organizational changes, such as (a) the February 2016 Army Materiel Command Operation Order, and (b) the December 2016 Head of Contracting Activity delegations. |
The Army concurred with our recommendation. DASA(P) officials stated that they plan to use their new CER metrics to measure the impacts of organizational changes: Procurement Action Lead Time, talent management, small business, and competition. According to DASA(P) officials, these metrics touch all aspects of acquisition reform and are essential for evaluating change. DASA(P) plans to track these metrics in order determine improvements to further drive efficiencies.
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