Competitive Sourcing and Savings: Are We on Target
Abstract
Faced with limited budgets and aging weapon systems, the Department of Defense (DoD) is pursuing competitive sourcing (CS) as a way to reduce operating costs and free up resources for its modernization programs. The military has high expectations for its re-energized CS program and programmed over $6.2 billion of savings to procure new aircraft, helicopters, warships, and upgrades to Army ground combat vehicles. However, Congress and the General Accounting Office have criticized this approach and claim the savings are not achievable. An examination of CS programs indicates competition does create savings; however, the timing and magnitude of the savings are not guaranteed. Based on a review of lessons learned from CS programs, savings are influenced by (1) increased work requirements, (2) mandated wage increases, (3) problems with performance work statements, (4) inflexible pricing arrangements, (5) oversight issues, and (6) limited visibility into government cost accounting systems. This paper highlights specific examples where the services encountered difficulties in each problem area and provides recommendations to avoid future problems. While some of these factors are outside of its immediate control, the DoD can better manage the CS process by (1) establishing well-trained, multi-functional teams, (2) hiring independent firms to develop the cost baseline for current operations, (3) soliciting early contractor involvement, (4) seeking flexible pricing arrangements, (5) improving budgeting for CS efforts, and (6) recompeting functions even if they remain in-house. The CS program presents the military with one of its most challenging tests, and we cannot afford to fail.
Document Details
- Document Type
- Technical Report
- Publication Date
- Apr 01, 2000
- Accession Number
- ADA381866
Entities
People
- George A. Coggins
Organizations
- Air Command and Staff College