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Is DoD ignoring lessons learned from insourcing?
Monday - 6/7/2010, 4:31pm EDT
The Defense Department has been trying to improve efficiencies and cut costs by using both competitions with the private sector and High Performance Organizations (HPOs), a solution based in-house rather than on a public-private competition.
But have HPOs fallen by the wayside? And are vital opportunities for lessons learned being lost?
John Pendleton the director of defense capabilities and management at the GAO, which recently examined the issue in a report for Congress.
He explains that an HPO pilot program was created in 2003 to counter OMB's A-76, which establishes policy for the competition of commercial activities.
Thus, if an agency could prove that it could do the work more efficiently in-house with an HPO, it would have to compete the work through the A-76 process.
The GAO has found, however, that there have been serious flaws with the information that DoD has gathered to assess the HPOs so far.
"Half of the reports that have been submitted thus far failed to include information that was required for things like customer satisfaction or the skills of their workforce, but some of the data that was actually in the reports didn't withstand scrutiny. . . . In one instance, we looked at an HPOs annual report that claimed savings, but when we had visited the site, we got the rest of the story. The savings were actually the result of 300 vacant positions and those vacancies were not really the result of the reengineering effort associated with the HPO process, but were really due to high turnover and a slow, lengthy hiring process."
DoD has issued guidance, though Pendleton says this could have been improved, but, more importantly, the Defense Department needs to gather reliable information about whether or not HPOs save money.
"This was required by the original legislation. The idea of a pilot is to test things and see how it works. Now, DoD acknowledged our findings, partially concurred with the lingo that we used with our recommendation and is planning on taking some steps, but they were pretty up front about the fact that their interest in the program is waning. DoD, in fact, expressed a reluctance to assert oversight."
Part of this has to do with the fact that A-76 has been suspended since last year. Since the HPOs were supposed to be an alternative to A-76, now that A-76, for all practical purposes, no more, DoD isn't as interested in the HPOs.
And this is what has GAO worried.
"We're concerned about this situation because DoD officials are skeptical that the HPOs will follow through and meet their commitments to save money and make efficiency gains. Despite this, again, given the moratorium, they really don't plan much oversight to evaluate the pilot."
Another challenge has to do with the fact that the organizations within DoD that are involved in the HPO pilot program are extremely different from one another. This makes comparing and contrasting successes and failures a bit tough.
In 2005, the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (OSD) asked for nominations from organizations within DoD that were seeking HPO designation.
Nine were chosen:
- Defense Contract Management Agency: Procurement Technicians
- Defense Finance and Accounting Service: Accounting Services,
- Defense Logistics Agency: Document Automation Production and Service,
- Defense Logistics Agency: Human Resources,
- Washington Headquarters Services: Federal Facilities Division,
- U.S. Air Force: Edwards Air Force Base Aircraft Maintenance,
- U.S. Army: Corps of Engineers Logistics Management,
- U.S. Army, Fort Hood: Directorate of Aviation Operations, and
- U.S. Army: Fort Huachuca Installation Personnel Management
"In providing guidance about what kind of information to get, they're all so different that it's hard to set anything that's consistent and would apply to everyone. . . . Now, DoD officials did say to us in their response that their past experience with reegineering efforts in the absence of the threat of a public/private competition really don't save a lot of money, but they didn't provide us much detail on why they reached those conclusions. So, again, our concern is you've got these nine organizations out there that have hundreds of people working in them, but the program overall is in this sort of limbo."
Thus, the GAO is recommending that DoD make an effort to gather reliable data and use that to assess whether or not the HPO initiative is worth it.
Pendleton says the congressional watchdog will follow up annually, if not more often, and has also been in contact with lawmakers on the Hill.
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