In a series of recent reports, the U.S. Government Accountability Office (GAO) and Office of Inspector General (OIG) found widespread delays, cost overruns, and non-compliance in government procurement projects across a broad range of portfolios. These reports reflect ongoing endemic failures in the ability to achieve government operational objectives on time, on budget, and by the rules.
For example, in its March 2020 report entitled Navy Shipbuilding – Increasing Focus on Sustainment Early in the Acquisition Process Could Save Billions, the GAO found that the entrenched optimism bias in the US Navy shipbuilding program resulted in the failure to take long-term operating costs into account when planning for new ships, which in turn resulted in billions in unplanned costs. The report noted 150 examples of class-wide problems, including unreliable systems, in the new ships deployed by the Navy in the last ten years, and estimated that it would cost an additional $4.2 billion to address just 30 percent of those issues. In fact, in the six shipbuilding programs it reviewed, the GAO found that the Navy underestimated its total sustainment costs by $130 billion. The report identified a need for better life cycle cost planning and the need to include technical experts earlier in the planning process. The report also warned that the Navy’s current project approval process does not factor long-term costs into its decisions, and that those approvals tend to focus on short-term build and delivery schedules.
In its March 2020 report entitled Audit of the Army’s Base Life Support Contract for Camp Taji, Iraq, the OIG at the U.S. Department of Defense (DoD) raised multiple concerns over a support services contract at a military base in Iraq. The report found millions of dollars in overbilling, poor performance standards, including the burning of solid waste in open burn pits, and poor food quality standards in the food delivered from local supply chains. As the report explained, after Iraq took over the military base, its prime minister awarded the exclusive contract for base support services and then failed to respond to U.S. Embassy requests to issue a new solicitation and award a contract through a fair and open competition. As of August 2019, no actions were taken to rescind the existing exclusive contract notwithstanding ongoing requests from the U.S. Embassy. The OIG noted that the ongoing contract problems included the failure to supply food in accordance with DoD regulations and source the food from the Defense Logistics Agency, the failure to use incinerators to dispose solid waste, and $116 million in overpayments for personnel that were not actually at the base. While the DoD disputed the report’s findings regarding the alleged use of an open pit burn site to deal with solid waste, many of the other contractual issues were not disputed and remained outstanding.
In its April 2020 report entitled DOD Utilities Privatization – Improved Data Collection and Lessons Learned Archive Could Help Reduce Time to Award Contracts, the GAO found widespread delays in the award of contracts for the privatization of utility systems, such as electric, natural gas, water, and wastewater, in US military bases. In fact, the report found that in fiscal years 2016 through 2018, the Department of Defense (DoD) awarded 21 new contracts for privatized utility services and that the contracting process generally took an average of four years from solicitation to contract award. Furthermore, the report found that the entire pre-award contracting process could be taking much longer but that the DoD does not maintain complete data on the time taken to conduct its acquisition planning phase. The GAO recommended that DoD collect information on the total time taken in awarding the contracts and develop a mechanism to store and archive lessons learned from across the department.
In its April 2020 annual report entitled NASA – Assessment of Major Projects, the GAO found that the cost overruns on NASA’s major projects were getting worse and that the agency had only marginally improved on its ongoing launch delays. As the report noted, in May 2019, the GAO found that the cost of NASA’s major projects had grown by almost 28 percent since they were baselined, and that those projects faced an average launch delay of 13 months. In the new report, the GAO found that the cost growth had increased and was now “approximately 31 percent over project baselines—the third consecutive year that cost growth has worsened” and that the average launch delay had only slightly improved to “12 months, compared to 13 months last year.” The report noted that NASA “plans to assess and update its cost and schedule estimates at more points in the acquisition process and bolster its training for analysts who oversee projects.” The GAO stated that such actions “will help to provide a better foundation for decision-making, but it will take time to assess the extent to which these efforts are having an effect.” The GAO also warned that “success also hinges on leadership commitment, accountability, and demonstrated progress.”
In its May 2020 report entitled F-35 Joint Strike Fighter – Actions Needed to Address Manufacturing and Modernization Risks, the GAO found that the “F-35 program is at risk of missing its test schedule and not meeting manufacturing leading practices.” The GAO noted that the delay difficulties stemmed, in part, from issues arising out of the contractor’s development of a testing simulator. As the report details, in August 2017, the program decided to develop its own simulator after the contractor’s price proposal proved too costly. That development fell three years behind schedule due to an intellectual property rights dispute with the contractor over the aircraft sensor data, which delayed the testing until the dispute was resolved in 2019. As the result of the ongoing delays, the project extended the testing schedule by nine months, which delayed the program’s full-rate production decision to between September 2020 and March 2021.
In its May 2020 report entitled Hanford Waste Treatment Plan: DOE Is Pursuing Pre-treatment Alternatives, but Its Strategy Is Unclear While Costs Continue to Rise, the GAO found that the stalled construction of a nuclear waste pre-treatment facility in Washington State was turning into a sinkhole of ongoing construction delay costs. As the GAO report noted, in late 2012, the Department of Energy (DOE) stopped work on the facility after encountering technical challenges. By 2018, the U.S. Army Corps of Engineers reported that, at current annual funding levels, completing the facility on time would not be possible. As the report calculated, since construction was stopped in 2012, the DOE spent $752 million in fiscal years 2013 through 2018 on the stalled facility, with over half of those funds going to “overhead, oversight, procurements, and facility maintenance” while the rest was spent on “resolving the technical challenges.” These figures include $176 million in project management overhead costs, $118 million in equipment purchases and management, and $19 million on general facility maintenance. While these overhead costs continued to mount, the construction remained stalled and the technical issues remained unresolved.
In its May 2020 report entitled Cost-Type Contracts – Procedures Needed for Sharing Information on Contract Choice among Military Departments, the GAO found that, when compared to proceeding with weak planning and incomplete designs that require mid-project changes, proper planning reduces costs irrespective of the contract structure used in the specific project. As the report observed, the Department of Defense (DoD) has historically struggled to manage its major acquisition programs, which resulted in “billions in cost growth and schedule delays in providing systems”. In its report, the GAO analyzed program cost and schedule outcomes for 21 major acquisition programs, but “did not find a clear relationship between these outcomes and contract types used.” However, the GAO noted that proper pre-development design planning led to better cost controls irrespective of the contact structure since “the majority of cost growth occurs after production start” due to a lack of design stability.
In its May 2020 report entitled Small Business Subcontracting – Oversight of Contractor Compliance with Subcontracting Plans Needs Improvement, the GAO found weak enforcement of the federal government’s small business subcontractor quota rules since agencies were not following up to confirm whether their contractors were actually assigning the required percentage of their work to small subcontractors. After reviewing 26 contracts across the Defense Logistics Agency, General Services Administration, National Aeronautics and Space Administration, and Department of the Navy, the report determined that the government needed to improve its program oversight since those agencies failed to “consistently follow all required procedures for oversight of small business subcontracting plans, both before and after contracts were awarded.” In fact, the report found that in half of the 26 contracts, the agencies could not demonstrate that review procedures were followed, and that in over half of those contracts, “contracting officers did not ensure contractors submitted required subcontracting reports.” The GAO made a series of recommendations for ensuring that in the future, the program procedures are followed, and compliance reviews are clearly documented and maintained.
In its June 2020 report entitled VA Acquisition Management – Supply Chain Management and COVID-19 Response, the GAO highlighted how the 2020 COVID-19 crisis exposed serious weaknesses in the supply chain practices of the Department of Veterans Affairs (VA). The report found that these weaknesses caused significant delays in the purchase of personal protective equipment during the pandemic. As the GAO stated, “implementation delays for key initiatives, including a new, enterprise-wide inventory management system, limit VA’s ability to have an agile, responsive supply chain.” The GAO found that VA’s medical supply management practices were not in line with those employed by leading private sector hospital networks. The GAO also raised concerns over VA’s antiquated inventory management system, which would not be replaced in the foreseeable future. As the report stated, since 2015, the GAO made 40 recommendations to improve VA’s acquisition management, but VA had only implemented 22 of those recommendations.
In its June 2020 report entitled Audit of GSA’s Controls to Prevent Contracting With Suspended and Debarred Contractors, the OIG at the US General Services Administration (GSA) found that the government’s failure to quickly update its list of debarred bidders resulted in contract awards to suspended suppliers. The report recommended that the GSA’s information technology office identify “the root cause(s) for failures to update exclusion statuses of suspended and debarred contractors” and take corrective action to ensure that these systems are properly updated on a daily basis.
As these recent reports reveal, public sector procurement operations face a high degree of scrutiny over whether they meet their contracting objectives on time, on budget, and by the rules. Meeting these standards requires proactive strategic planning at both the institutional and project level. Failing to leverage lessons learned from these and similar reports simply increases the risk of becoming the next non-compliance case study.
