Summary

The Defense Department, which plans to increase its procurement budget by 40 percent to $60 billion in 2001, could acquire better weapon systems faster and cheaper by using "best practices" from the private sector and by changing the incentives that drive behavior in the military acquisition culture. Leading private sector firms have had much success with processes and decision-making practices that are based on knowledge and focused on production. Weapon system acquisitions could be improved if DOD and Congress were able to foster an environment that would give program managers incentives for applying best practices. This testimony discusses (1) the military's experience with the commercial pricing of spare parts, (2) DOD's mentor-protege pilot program, and (3) federal agencies' use of multiple award task- and delivery-order contracts.

GAO noted that: (1) improved outcomes from the weapon system acquisition process--that is, acquiring systems better, cheaper, and faster--are possible if the incentives that drive behaviors are changed; (2) the best commercial companies have found processes and decisionmaking practices that are based on knowledge and focused on production to be successful; (3) employing such processes and practices can improve weapon acquisitions if DOD and Congress are able to foster an environment that provides program managers with incentives for applying best practices; (4) over the last several years, Congress has mandated cuts in DOD's acquisition workforce and called DOD to submit plans to streamline and restructure its acquisition organizations; (5) DOD has been able to reduce the acquisition workforce, but it has had more difficulty changing the structure that underlies decisionmaking in the acquisition process; (6) for an increasing number of sole-source spare parts, DOD is transitioning from a cost-based pricing environment to a market-based or commercial pricing environment where price analysis is the principal means used to negotiate the reasonableness of prices; (7) regarding the sole-source, commercially-priced spare parts for which DOD is the predominant buyer, some DOD contracting personnel expressed concerns about: (a) how to determine whether the prices offered are fair and reasonable; (b) future contract negotiations where recent cost-based historical prices may not be available; and (c) the sometimes conflicting pressures between obtaining fair and reasonable prices and negotiating contracting time to meet customer needs and avoid backlogs; (8) DOD has spent over $200 million on a mentor-protege program to provide incentives for major DOD contractors to furnish disadvantaged small business owners with assistance designed to enhance their capabilities and increase their participation as suppliers under DOD, other federal government, and commercial contracts; (9) however, DOD lacks information needed to determine whether the program is effective; (10) GAO's work on multiple award task- and delivery-order contracts show that federal agencies are not consistently achieving competition when placing orders against these contracts; (11) GAO found that fees charged to agencies that place orders against another agency's contract varied greatly; (12) weaknesses in agency accounting and management systems prevented GAO from determining if the fees were reasonable; and (13) GAO found that the use of multiple award contracts did not impair small business' ability to compete for such contracts.