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3,100 | of shared services, should be directed toward the achievement of cost savings. Several of DOD’s other shared service projects present a clear linkage between (1) a stated problem, (2) proposed process changes, and (3) an estimate of benefits, costs, and risks. For example, DOD’s third submission on the implementation of DHA, states that the pharmacy shared service will address rising costs due to variation in drug purchasing, staffing, and formulary management (the problem) through the introduction of MHS-w |
3,101 | ide standards and business rules (the new processes), which will result in cost savings. Similarly, the plan states that the contracting shared services will address rising costs due to fragmentation in its acquisition strategy (the problem) through a common approach to acquisition planning, program management, contract execution, management, and administration (the new processes). In contrast, DOD listed the new processes the Directorate will employ, but it did not explain the problem its proposed new proc |
3,102 | esses will address, and how they will achieve cost savings. DOD officials stated that they believe that a central problem for the Directorate to address is unnecessary variation of practice between the services, and they believe that efficiencies could be generated through the consolidation of training. However, in its official plans for the Directorate, DOD has not identified this issue or any other challenge related to cost savings as the problem its shared service will address. DOD also lacks the informa |
3,103 | tion to assess its current performance to then identify a problem. Specifically, DOD officials stated that they lack data on the cost of DOD’s education programs and potential redundancy within its portfolio of courses, which would allow them to identify a problem and develop processes to address these challenges. In fact, officials stated they have identified the need for developing a baseline of current medical education and training courses and associated spending as a goal for the Directorate, and there |
3,104 | fore have acknowledged the lack of such information. In addition, some officials cast doubt on the potential cost savings that could be achieved. Several DOD officials told us that the creation of the Directorate represents a logical step in the course of further cooperation among the services in the area of medical training. However, senior service officials stated that the Directorate was unlikely to achieve significant savings and that its creation serves more as a functional realignment than a cost savi |
3,105 | ngs endeavor. For example, officials stated that the Directorate provides an opportunity to assign a parent agency to METC, JMESI, and DMRTI, which they described as “orphan” agencies that lack a parent organization. Officials made similar comments during our 2012 review, in which we found that DOD was not able to demonstrate potential financial savings from the creation of METC, but agency officials stated at the time that they believed combining several training sites into the formation of METC had saved |
3,106 | money and that other efficiencies had been achieved. GAO-14-49. particular, given that DOD continues to lack an understanding of how the establishment of the DHA will affect staff levels, its challenges in identifying cost savings and a clear mission for its education reforms could result in increases in staff levels without any savings. As we noted in our reviews of DOD’s plans for the implementation of the DHA, DOD’s submissions did not include critical information necessary to help ensure that DOD achiev |
3,107 | es the goals of its reform of the MHS. Accordingly, in a recent report, the House Committee on Armed Services has expressed concern regarding DHA’s staffing requirements, cost estimates, performance metrics, and medical education and training shared service. Without a business case analysis that links (1) a stated problem, (2) proposed process changes, and (3) an estimate of benefits, costs, and risks, the role of the Directorate remains ambiguous, and it is unclear how DOD will measure its accomplishments |
3,108 | and hold the Directorate accountable for achieving cost savings by sharing training and education services. Without such information, the Directorate also potentially risks increasing staff levels without achieving any cost savings. DOD established METC as part of the 2005 BRAC process to provide interservice training for enlisted service members and to achieve cost savings. However, DOD is unable to determine whether the consolidation of medical education and training for enlisted personnel at METC has res |
3,109 | ulted in cost savings because it did not establish a baseline for spending on education and training prior to METC’s establishment. METC has designed processes to assess the effectiveness of its training and is taking action to improve them. DOD cannot demonstrate whether the consolidation of training at METC has resulted in cost savings. However, officials stated that while they could not document cost savings, they believe that the consolidation of training at METC has led to cost savings because of (1) i |
3,110 | ncreased equipment sharing; (2) personnel reductions; and (3) cost avoidances, such as those associated with the closure of medical education facilities that were service-specific. In contrast, officials also identified areas where the consolidation of training at METC may have resulted in cost increases because of, for example, (1) the construction of new facilities; (2) relocation of students to METC; and (3) replacement of personnel within their organizations who had been transferred to METC. To fund tra |
3,111 | ining at METC, the services transferred funding to a single METC budget managed by the Air Force over 3 years from fiscal year 2010 through fiscal year 2012. The services continue to fund compensation for military instructors at METC. Civilian funding was transferred to the Air Force, and officials told us that this funding is likely to be transferred to the DHA. When METC was established, the services transferred funding for their enlisted medical programs being consolidated at METC into a single METC budg |
3,112 | et. However, some officials stated they are unsure whether the services’ transfers were representative of their true costs for the transferred programs prior to the creation of METC. Additionally, the funding transfers from the services were not sufficient to fund training at METC, and the Office of the Assistant Secretary of Defense for Health Affairs provided additional funding to cover this shortfall. For instance, of the total METC budget of $26.6 million in fiscal year 2012, Health Affairs provided 28 |
3,113 | percent; the Air Force, 22 percent; the Army, 36 percent; and the Navy, 14 percent. Table 1 shows the funding amounts transferred by each service to fund METC, from fiscal year 2010, the first year in which the services transferred funds, until fiscal year 2012, when the services completed a permanent transfer of their funds to METC. GAO’s Business Process Reengineering Assessment Guide states that performance measures are a critical part of a comprehensive implementation process to ensure that a new proces |
3,114 | s is achieving the desired results. Additionally, through our prior work on performance metrics, we have identified several important attributes of these assessment tools, including the need to develop a baseline and trend data to identify, monitor, and report changes in performance and to help ensure that performance is viewed in context. By tracking and developing a performance baseline for all measures, agencies can better evaluate progress made and whether goals are being achieved, such as cost savings |
3,115 | targets. DOD did not establish and monitor baseline cost information as part of its metrics to assess performance to ensure that the establishment of METC provided costs savings. Officials told us that their focus in establishing METC was to ensure that DOD met the BRAC recommendation to co- locate enlisted medical training, not to ensure that this consolidation led to cost savings. However, the METC business plan, developed in response to the BRAC recommendation, noted that the intent of establishing METC |
3,116 | was to reduce costs while leveraging best practice training programs of the three services. We found in April 2012 that DOD was unable to provide documented savings associated with the establishment of METC. We recommended that DOD employ key management practices in order to show the financial and nonfinancial outcomes of its reform efforts, and DOD concurred with our recommendation. DOD noted that it would employ key management practices in order to identify those outcomes; however, as of June 2014, DOD of |
3,117 | ficials have not documented the financial outcome of the establishment of METC. DOD justified its request for the 2005 BRAC round in part based on anticipated savings. For example, DOD submitted to the 2005 BRAC Commission a recommendation for the consolidation of 26 military installations operated by individual military services into 12 joint bases to take advantage of opportunities for efficiencies arising from such consolidation and elimination of similar support services on bases located close to one an |
3,118 | other. However, we found in 2012 that DOD did not have a plan for achieving cost savings. For example, during our review of DOD’s effort to implement this BRAC recommendation, joint base officials provided us with anecdotal examples of efficiencies that had been achieved at joint bases, but it was unclear whether DOD had achieved any significant cost savings to date, due in part to weaknesses in such areas as DOD’s approach to tracking costs and estimated savings. Specifically, it did not establish quantifi |
3,119 | able and measurable implementation goals for how to achieve cost savings or efficiencies through joint basing. We recommended that DOD develop and implement a plan that provides measurable goals linked to achieving savings and efficiencies at the joint bases and provide guidance to the joint bases that directs them to identify opportunities for cost savings and efficiencies. DOD did not concur with our recommendation, and we noted that this position contradicts DOD’s position that joint basing would realize |
3,120 | cost savings. Similarly, the co-location and consolidation of training at METC was, in part, premised on the achievement of cost savings, but DOD did not establish baseline costs as part of its metrics for assessing performance. It is now likely not possible to develop baseline cost information for fiscal year 2009 to determine the extent to which the establishment of METC resulted in cost savings. However, without developing baseline cost information before undergoing future course consolidation of traini |
3,121 | ng at METC and within the Education and Training Directorate, DOD will be unable to accurately assess cost savings in the future. METC has designed quality assurance processes to provide continuous, evaluative feedback related to improvements in education and training support, and is taking action to address issues regarding course accreditation and the post-graduation survey process. Certification Rates: METC monitors the national certification exam pass rates of its students, both to meet national require |
3,122 | ments and to make comparisons with national averages. According to METC officials, certification rates are generally higher since the consolidation of training at METC. Currently, certification rates for seven programs exceed the national average. Internal Metrics: According to METC officials, METC regularly monitors a number of internal metrics, such as attrition, course repetition, and graduation rates. To manage performance information for all of their courses, officials produce a monthly snapshot of the |
3,123 | se data to track trends in performance over time. Additionally, all of METC’s courses are to be reviewed through a comprehensive program review process conducted by the Health Care Interservice Training Office.ensure, for example, that all service and accreditation requirements are met; that faculty meet all required qualifications; and that internal and external surveys are conducted, analyzed, reported, and acted on according to policy. This office is to review 30 specific standards to help Accreditation |
3,124 | Standards: METC is institutionally accredited by the Council on Occupational Education and is officially an affiliated school within the Community College of the Air Force (CCAF). Most METC courses are accredited by a relevant external accrediting body, such as the American Council on Education (ACE) or the CCAF. Surveys: The METC Memorandum of Agreement states that METC and the services will conduct external evaluations to document program efficacy and to facilitate curriculum review, by gathering feedback |
3,125 | to measure whether the training received was relevant and to determine whether the graduates are proficient in their job duties. METC solicits this feedback through surveys sent by the services to the supervisors of METC graduates at the gaining commands to gauge satisfaction with the training they received at METC. These surveys ask such questions as whether the graduates have the cognitive skills necessary to do their jobs, whether they have met the entry-level practice requirements of their organization |
3,126 | s, and whether any job tasks should be added to the METC curriculum for their programs of study. METC officials told us that some training courses were awarded fewer recommended credits by the ACE than similar service-run courses had received prior to METC’s consolidation. Officials also stated that the consolidation of service-run curricula into single programs at METC was conducted by a contractor, and that these consolidated curricula could be improved. METC officials further noted that the ACE review of |
3,127 | METC’s consolidated curricula occurred after a change to that body’s process for recommending credits, and that they are unaware whether the decrease in the number of recommended credits was due to the consolidated curricula or changes to ACE’s process. METC officials told us that they are attempting to improve their programs through their regular process of curriculum review ahead of future ACE reviews of recommended credits for their courses. METC officials also told us that the post-graduate survey proc |
3,128 | ess has been ongoing since before METC was established; however, these surveys have historically exhibited low response rates. For instance, one sample survey provided by METC officials had a 14 percent student response rate and a 0 percent supervisor response rate. To improve the level of feedback received from these surveys, METC officials have begun a pilot process to conduct their own post-graduation surveys, using an online survey program that can be sent directly to the students’ and supervisors’ pers |
3,129 | onal email addresses. Depending on the success of the pilot, METC officials plan to extend the process throughout all of METC. DHA’s Education and Training Directorate is scheduled to begin operations in August 2014 to oversee medical education and training reform, but DOD does not have key information necessary to assess its progress in realizing the reform effort’s goal of achieving cost savings. When DOD responded to the 2005 BRAC recommendation to relocate some medical education and training programs fo |
3,130 | r enlisted servicemembers at METC, DOD similarly did not have key information necessary to determine whether the consolidation of training there had resulted in cost savings. Although DOD’s plans for the implementation of the DHA acknowledge the benefits of conducting business case analyses, it has not done so for its medical education and training reforms. DOD’s inability to demonstrate that cost savings had resulted from the consolidation of training at METC risks being repeated on a larger scale in the r |
3,131 | eform effort of the DHA’s Education and Training Directorate. Specifically, absent analysis demonstrating how the Directorate’s efforts will result in cost savings, the creation of the Directorate could increase costs by increasing staff levels without achieving any cost savings. In addition, without baseline cost information prior to future course consolidation of training at METC and within the Education and Training Directorate, DOD will be unable to assess potential cost savings. The risk of cost growth |
3,132 | also exists for any future consolidations of training at METC, which could require significant investment of time and resources without any long-term efficiencies. To help realize the reform effort’s goal of achieving cost savings, we recommend that the Assistant Secretary of Defense for Health Affairs direct the Director of the DHA to conduct a fully developed business case analysis for the Education and Training Directorate’s reform effort. In this analysis the Director should identify the cost-related p |
3,133 | roblem that it seeks to address by establishing the Education and Training Directorate, explain how the processes it has identified will address the cost- related problem, and conduct and document an analysis of benefits, costs, and risks. To help ensure that DOD has the necessary information to determine the extent to which cost savings result from any future consolidation of training within METC or the Education and Training Directorate, we recommend that Assistant Secretary of Defense for Health Affairs |
3,134 | direct the Director of the DHA to develop baseline cost information as part of its metrics to assess achievement of cost savings. We provided a draft of this product to DOD for comment. The Acting MHS Chief Human Capital Officer provided DOD’s comments in an email dated July 21, 2014. In that email, DOD concurred with the draft report's findings, conclusions, and recommendations. Additionally, noted in the email was that Medical Education and Training is the only shared service that has never had any type o |
3,135 | f oversight by the Office of the Assistant Secretary of Defense for Health Affairs or the pre-DHA TRICARE Management Activity. Further, in that email, DOD noted that that much credit goes to the sub-working group which has worked numerous hours over the past 2 years to put this shared service together so the MHS can realize efficiencies and garner maximum value, exploit best practices from the services, and achieve standardization where it makes sense. We are sending copies of this report to the appropriate |
3,136 | congressional committees; the Secretary of Defense; the Assistant Secretary of Defense for Health Affairs; the Director, DHA; and the Surgeons General of the Army, the Navy, and the Air Force. In addition, the report is available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3604 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of th |
3,137 | is report. GAO staff who made major contributions to this report are included in appendix II. The Medical Education and Training Campus (METC) is the result of the 2005 Base Realignment and Closure (BRAC) Commission legislation that required the bulk of enlisted medical training in the Army, Air Force, and the Navy to be co-located at Fort Sam Houston, Texas. As a result, four major learning institutions for Navy and Air Force relocated to Fort Sam Houston, where the Army was already training its enlisted m |
3,138 | edical force under the Army Medical Department Center & School’s (AMEDD C&S) Academy of Health Sciences. The Naval School of Health Sciences in San Diego, California; Naval School of Health Sciences in Portsmouth, Virginia; Navy Hospital Corps School in Great Lakes, Illinois; and the 882nd Training Group (now the 937th Training Group) at Sheppard Air Force Base moved to Fort Sam Houston, Texas. METC is now the largest military medical education and training facility in the world. METC started operating on J |
3,139 | une 30, 2010. Its initial training course was radiography specialist. Other courses were phased in throughout the rest of the year and into 2011. METC became fully operational on September 15, 2011. The longest program offered is cytology, which is the study of cells, at 52 weeks; and the shortest, at 4 weeks, is patient administration. METC offers about 50 medical training programs, which are listed in table 2 along with the course participants. In addition to the contact named above, Lori Atkinson, Assist |
3,140 | ant Director; Rebecca Beale; Jeffrey Heit; Mae Jones; Carol Petersen; Michael Silver; Adam Smith; and Sabrina Streagle made key contributions to this report. Military Health System: Sustained Senior Leadership Needed to Fully Develop Plans for Achieving Cost Savings. GAO-14-396T. Washington, D.C.: February 26, 2014. Defense Health Care Reform: Additional Implementation Details Would Increase Transparency of DOD’s Plans and Enhance Accountability. GAO-14-49. Washington, D.C.: November 6, 2013. Defense Health |
3,141 | Care: Additional Analysis of Costs and Benefits of Potential Governance Structures Is Needed. GAO-12-911. Washington, D.C.: September 26, 2012. Defense Health Care: Applying Key Management Practices Should Help Achieve Efficiencies within the Military Health System. GAO-12-224. Washington, D.C.: April 12, 2012. 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue. GAO-12-342SP. Washington, D.C.: February 28, 2012. Follow-up on 2011 Report, |
3,142 | Status of Actions Taken to Reduce Duplication, Overlap, and Fragmentation, Save Tax Dollars, and Enhance Revenue. GAO-12-453SP. Washington, D.C.: February 28, 2012. Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue. GAO-11-318SP. Washington, D.C.: March 1, 2011. Military Personnel: Enhanced Collaboration and Process Improvements Needed for Determining Military Treatment Facility Medical Personnel Requirements. GAO-10-696. Washington, D.C.: July 29, |
3,143 | 2010. Defense Health Care: DOD Needs to Address the Expected Benefits, Costs, and Risks for Its Newly Approved Medical Command Structure. GAO-08-122. Washington, D.C.: October 12, 2007. |
3,144 | Federal agencies can use a variety of different approaches to purchase office supplies. For relatively small purchases, generally up to $3,000, authorized users can use their government purchase cards. For larger purchases, agencies may use other procedures under the Federal Acquisition Regulation, such as awarding a contract. Alternatively, GSA provides federal agencies with a simplified method for procuring office supplies through its Federal Supply Schedule program, also known as the Multiple Award Sched |
3,145 | ules (MAS) or schedules program. Under the schedules program, the federal government’s largest interagency contracting program, GSA awards contracts to multiple vendors for a wide range of commercially available goods and services. The schedules program can leverage the government’s significant aggregate buying power. Also, under the schedules program, to ensure the government is getting the most value for the taxpayer’s dollar, GSA seeks to obtain price discounts equal to those that vendors offer their “mo |
3,146 | st favored customers.” In November 2007, GSA initiated another approach for buying office supplies by creating blanket purchase agreements (BPA) under the schedules program. BPAs are a simplified method of fulfilling repetitive needs for supplies and services that also provide an opportunity to seek reduced pricing from vendors’ schedule prices. The approach was part of the government’s Federal Strategic Sourcing Initiative (FSSI). GSA officials acknowledged they could have done a better job promoting this |
3,147 | initiative. Ultimately, GSA determined that the initiative did not meet its expectations and initiated a second strategic sourcing initiative known as FSSI Office Supplies II (OS II) in 2010. By July 2010, GSA competitively awarded 15 BPAs to 13 small businesses and 2 other businesses to support the OS II initiative. The GSA study on office supply purchases reviewed 14 categories of mostly consumable office supplies, ranging from paper and writing instruments to calendars and filing supplies. The report did |
3,148 | not include non-consumable items such as office furniture and computers because they are not part of the standard industry definition of office supplies. The GSA report estimated that the 10 agencies with the highest spending on office supplies accounted for about $1.3 billion, about 81 percent of the total $1.6 billion spent governmentwide on the 14 categories of office supplies during fiscal year 2009. The amounts spent by the top 10 agencies are shown in figure 1. The report found that about 58 percent |
3,149 | of office supply purchases were made outside of the GSA schedules program, mostly at retail stores. The report also found that agencies often paid more—a price premium—than they would have by using the GSA schedules program or OS II. On average, GSA found that agencies paid 75 percent more than schedule prices and 86 percent more than OS II prices for their retail purchases. Table 1 shows the 14 categories of office supplies, the number of different items in each of the categories, and the retail price prem |
3,150 | iums that GSA calculated for each category when compared to schedule prices. The report also concluded that buyers engaged in at least some level of price comparisons before making purchasing decisions. More specifically, the report stated that buyers may compare prices across different vendors when ordering through an electronic medium, or across available items when purchasing directly through a vendor’s online or retail store. GSA used several sources of data to analyze and compare the prices paid for 21 |
3,151 | 9 items across 14 categories of office supplies through various purchasing options. The GSA report acknowledged some limitations with the data, but we identified additional data and other limitations that lead us to question the magnitude of some of GSA’s reported price premiums. We were not able to fully quantify the impact of these limitations. Other agencies also questioned the study’s specific findings related to price premiums, but their own studies of price premiums support GSA’s conclusion that bette |
3,152 | r prices can be obtained through consolidated, leveraged purchasing. The GSA study also concluded that buyers compared prices before making purchases, but this conclusion was not based on information from actual purchase card holders. Purchasing of office supplies is highly decentralized with about 270,000 purchase cardholders and others across the government making purchases in fiscal year 2009. Because of this, GSA obtained data for its study from multiple government sources, and purchase card information |
3,153 | provided by the commercial banks that issue the government purchase cards. To determine the funds spent on office supplies and to conduct related analyses, GSA sorted through data from these various sources, which included about 7 million purchase transactions involving over 12 million items. GSA took a number of steps to clean the data prior to using them. For example, because a single purchase might have been reported in more than one data source, GSA removed duplicate purchases prior to its analysis. Th |
3,154 | e data were further cleaned to remove items and their related costs that did not meet GSA’s definition of office supplies. To determine retail price premiums, GSA focused its analyses on 219 office supply items that were purchased in 2009 from retailers and the GSA schedules. In its report, GSA acknowledged that the data used to analyze governmentwide purchases of office supplies in 2009 had limitations, in part due to the decentralized data sources for office supply purchases and the limited time GSA had t |
3,155 | o conduct its study. A significant issue GSA faced was attempting to control for variation in quantities; in other words, GSA tried to ensure that when comparing prices, it was using transactions that involved identical quantities. A purchase of pens, for example, could involve a single pen, a package of three pens, a box of a dozen, or any other quantity. GSA officials told us that the primary means they used to control for quantities was the use of the manufacturer’s part number. They explained that they |
3,156 | searched available databases to identify items with identical part numbers. They told us that when they found large variations in retail prices for apparently identical items, they excluded transactions they considered to be outliers. This approach, however, may not have been adequate to account for variations in quantity. When we contacted a national organization representing manufacturers, a senior staff director told us that there is no consistent approach among manufacturers for assigning part numbers. |
3,157 | Some manufacturers may assign one part number to individual items and different part numbers to packages of those same items containing different quantities, while other manufacturers may assign the same part number both to individual items and to packages of items. In addition, when we reviewed some of the individual transaction data GSA obtained for retail purchases, we identified substantial price variations for a number of drawing and graphic arts supplies and writing instruments that carried the same m |
3,158 | anufacturer’s part number. Specifically, when we reviewed GSA’s retail transaction data for 10 items within the writing instruments category, we found that retail prices for 6 of the 10 items varied by more than 300 percent. For instance, for one item involving black Rollerball pens, GSA’s retail transaction data showed prices ranging from $9.96 to $44.96 for items listed with the same part number. These transactions were all with the same nationwide retailer. When asked about such substantial price differe |
3,159 | nces for items with the same part number, GSA officials acknowledged that the purchase card data they used for retail prices did not always accurately identify the quantity of items involved in each transaction. The existence of substantial price differences for a number of items indicates that GSA’s attempts to compare prices may not have adequately controlled for variations in quantities. We also identified a weakness with the clarity of the GSA report with regard to how price premium estimates were calcu |
3,160 | lated. Specifically, GSA’s study described a specific formula that was used to calculate the price premiums, but our review of the study’s supporting documents found that the GSA actually used a different formula to calculate price premiums for 10 of the 14 office supply categories. In a discussion with GSA officials, they agreed that the study did involve the use of two different formulas. When we used the formula described in the study to recalculate the retail price premiums for those 10 categories of of |
3,161 | fice supplies, we found the price premiums would have changed from what GSA reported by less than 5 percentage points for all categories except drawing and graphic arts supplies. For that category, the recalculated price premium was 68 percent, as compared to the 278 percent reported in the study. The use of this unreported formula did not have a substantial impact on the retail price premium calculations for most categories of office supplies or the overall conclusions of the study, but the GSA report coul |
3,162 | d have been more complete had it fully disclosed all the formulas used for all categories of office supplies. On the basis of their own studies, Air Force, Army, Navy, and DHS officials also questioned the specific price premiums and savings reported by GSA. Officials from these agencies told us they believed that the price premiums reported by GSA when buying outside the GSA schedule were overstated. However, the agencies agreed with GSA’s overall conclusion that better prices can be obtained through lever |
3,163 | aged buys. In addition, all four agencies in our review found that the prices available through the new OS II BPAs were better than the prices available from their existing agency BPAs. For example, a DHS study found savings of about 20 percent when analyzing the prices associated with a mix of 348 items. The Air Force determined that the OS II BPAs could save about 7 percent in a study of the 125 most commonly purchased items. On the basis of this analysis, the Air Force decided to let its existing office |
3,164 | supply contracts expire. Similarly, the Navy’s comparison of 71 items found that using the OS II BPAs could save about 6 percent, which led Navy officials to move purchasing to the OS II BPAs. Army officials did not provide study results, but they told us their analysis found lower price premiums than reported by GSA. An Army official said they plan to continue using existing BPA's while they transition to OS II. GSA interviewed senior-level acquisition officials to determine how office supply purchasing de |
3,165 | cisions were made within their respective agencies and concluded that purchase cardholders compared costs at some level prior to making a purchase. While these officials may have had a broad understanding of agency procurement policies and practices based on their positions in their respective agencies, they were not representative of the approximately 270,000 credit cardholders making the purchasing decisions. The GSA report did not identify or collect any data about price comparisons conducted by the card |
3,166 | holders. Collecting information from buyers, even through interviews or a survey of government purchase cardholders who actually made the purchases, could have provided another perspective on buyer behavior, including the extent to which price comparisons were made. GSA officials said that, given the reporting timeframe for the study, they did not have the resources or time that would have been needed to conduct a study that would have included a representative sample of the 270,000 purchase card holders. A |
3,167 | ccording to initial available data, GSA’s new OS II BPAs have produced savings. The OS II initiative, more so than past efforts, is demonstrating that leveraged buying can produce greater savings and has provided improvements for managing ongoing and future strategic sourcing initiatives. GSA is using a combination of agency and vendor involvement to identify key requirements and cost drivers, increase the ease of use, and obtain the data necessary to manage the program. For example, a key aspect of the ini |
3,168 | tiative is that participating vendors provide sales and other information to GSA to help monitor prices, savings, and vendor performance. On the basis of the sales data provided by OS II vendors, GSA estimates the federal government saved $16 million from June 2010 through August 2011 by using these BPAs. These savings were estimated by comparing the lowest prices of a set of over 400 items available on GSA’s schedules program contracts before OS II with prices and discounts being offered for the same items |
3,169 | on the OS II BPAs. Importantly, and unlike GSA’s report, GSA’s conclusions about savings realized under OS II are based on data from vendors—which they are required to collect and provide in the normal course of business—and not on data collected after the fact from sources not designed to produce information needed to estimate savings. GSA’s comparison of the market basket of best schedule prices against the OS II BPA vendors’ prices found that the BPA vendors offered prices that were an average of 8 perc |
3,170 | ent lower, and the average savings is expected to fluctuate somewhat as the OS II initiative continues to be implemented. The expected fluctuation is based on anticipated changes in the mix of vendors, products, and agencies. For example, GSA found the savings, as a percentage, declined slightly as agencies with historically strong office supplies management programs increased their use of OS II. Conversely, they expect the savings percentage to increase as agencies without strong office supplies management |
3,171 | programs increase their use. In addition to the savings from the BPAs, GSA representatives told us that they are also seeing prices decrease on schedules program contracts as vendors that were not selected for the OS II program react to the additional price competition created by the OS II initiative by reducing their schedule prices. After the first year the OS II BPAs were in use, GSA extended the BPAs for an additional year after negotiating additional price discounts. As a result of these discussions, |
3,172 | 13 of the 15 BPA vendors decreased their prices by an additional 3.9 percent on average. Additionally, the BPAs included tiered discounts, which apply when specific sales volume thresholds are met. Sales realized by one of the BPA vendors reached the first tier discount level in September 2011, and the vendor has since adjusted its prices to provide the corresponding price discounts. GSA anticipates additional vendor sales to exceed the first tier discount threshold in the first option year, which will trig |
3,173 | ger additional discounts. GSA expects that OS II will result in lower government-wide costs for office supplies as more agencies move from their agency-specific BPAs for office supplies to the OS II BPAs. Many agencies that had their own BPAs for office supplies did not renew their BPAs and have opted to use the OS II instead. As these agencies move to OS II, their contract management costs should decrease. For example, according to Air Force officials, instead of having personnel in every agency administer |
3,174 | their own BPAs for office supplies, personnel at GSA will administer the OS II program on behalf of other agencies. While this may create some additional burden for GSA, officials believe the overall government costs to administer office supply purchases should decrease. GSA has incorporated a range of activities representative of a strategic procurement approach into the OS II initiative, including aspects of managing the suppliers. These activities range from obtaining a better picture of spending on ser |
3,175 | vices, to taking an enterprisewide approach, to developing new ways of doing business. All of these activities involve some level of centralized oversight and management. In addition, this approach involves activities associated with the management of the supply chain, which includes planning and managing all activities involved in sourcing and procurement decisions, as well as logistics management activities. These include coordination and collaboration with stakeholders, such as suppliers or vendors, inte |
3,176 | rmediaries sometimes referred to as resellers, third party service providers, and customers or buying agencies. As part of the planning process for OS II, GSA assessed its schedules program office supply vendor pool and determined a sufficient number of vendors could meet its critical requirements. As part of the overall strategy, in addition to savings, GSA through its commodity council also identified five overarching goals for the OS II initiative, to facilitate overall management, as shown in table 2. A |
3,177 | s part of preparing for the competition for OS II, GSA obtained input from the interested vendors before issuing the request for quotations by holding an industry day. For example, based on vendor input that identified shipping as a key cost driver, a $100 minimum order level was included as part of the BPA. A reverse auction process was used to carry out the competition for the BPAs, which GSA anticipated would result in more pricing discounts offered by vendors. As part of the reverse auction process, the |
3,178 | vendors submitted an initial quote. After GSA evaluated the quotes, the vendors were notified of the lowest quotes and provided at least one opportunity to revise their quotes, resulting in price reductions. GSA obtained commitments from agencies and help set goals for additional discounts to let businesses know that the agencies were serious in their commitment to the BPAs. This also helped GSA determine the number of BPAs that would be awarded. Because government purchase cards were the most common way t |
3,179 | o purchase office supplies, OS II includes a point of sale discount, under which BPA prices are automatically charged whenever a government purchase card is used for an item covered by the BPA rather than having the buyers ask for a discount. Additionally, purchases are automatically tax exempt if the purchases are made using a government purchase card. State sales taxes were identified by GSA’s report as costing the federal agencies at least $7 million dollars in fiscal year 2009. To address concerns about |
3,180 | vendor oversight and management, OS II has attempted to clearly define program implementation responsibilities, including laying out GSA, vendor, and buying agency responsibilities. A key aspect of a successful acquisition program is managing the vendors or suppliers to ensure that they are meeting terms and conditions of the contract or BPA and that the program or initiative is meeting its overall goals. This includes defining performance metrics, capturing or collecting data, preparing analysis and relat |
3,181 | ed reports, communicating the results of the analysis, and initiating corrective actions. GSA is capturing data on purchases and vendor performance that is assimilated and tracked through dashboards, which are high-level indicators of overall program performance. The dashboard information is used by the GSA team members responsible for oversight and is shared with agencies using OS II. Our review of GSA’s OS II vendor files found that GSA has taken a more active role in oversight and is holding the vendors |
3,182 | accountable for performance. For example, GSA has issued Letters of Concern to four vendors and has issued one Cure Notice to a vendor. These letters and notices are used to inform vendors that the agency has identified a problem with the vendor’s compliance with the terms and conditions of the BPA. To support the OS II management responsibilities, GSA charges a 2 percent management fee, which is incorporated into the vendor prices. This fee, which is higher than the .75 percent fee normally charged on GSA |
3,183 | schedules program sales, covers the additional program costs, such as the cost of the six officials responsible for administering the 15 BPAs, as well as their contractor support. GSA is learning lessons from OS II, its first of the second generation of strategic sourcing initiatives, and is attempting to incorporate these lessons into other strategic sourcing initiatives. While some of the lessons learned as OS II has progressed are not directly transferable to other initiatives, there are some aspects of |
3,184 | it that can be applied to any strategic sourcing initiative. To this end, GSA established an office supplies commodity council to identify agencies’ goals and needs. The input provided by the commodity team was incorporated into all aspects of the program from the vendor requirements to the selection criteria. This experience is being applied to other strategic sourcing initiatives. For example, GSA took a more collaborative approach as it moved to Federal Strategic Sourcing Initiative Second Generation Dom |
3,185 | estic Delivery Services II (DDS2). More specifically, GSA set up a commodity council that helped identify the program requirements and provide input on how the program operates. Vendor input was also sought and incorporated into the requirements. GSA’s office supplies report contained some data and other limitations, but it showed that federal agencies were not using a consistent approach in both where and how they bought office supplies and often paid a price premium as a result of these practices. The mag |
3,186 | nitude of the price premium may be debatable, but other agencies that have conducted studies came to the same basic conclusion about the savings potential from leveraged buying. The GSA study helped set the course for a more strategic approach to buying office supplies—an approach that provides data to oversee the performance of vendors, monitor prices, and estimate savings. Additional savings are expected as more government agencies participate in the OS II initiative and further leverage the government’s |
3,187 | buying power. We provided a draft of this report to GSA, DHS, and DOD. We received written comments from GSA and DHS, which are included as appendices I and II, respectively. DOD had no comments. In its comments, GSA said it was pleased that our report affirmed that savings can be achieved through leveraged purchasing and better understanding of spend data. GSA also provided additional information on its strategic sourcing initiatives. GSA noted that it would have been very resource intensive for the agency |
3,188 | to obtain information from a representative sample of the 270,000 purchase card holders for little added benefit. We revised our report to reflect GSA’s comment. GSA provided some suggested language and technical changes to help clarify the report, which we incorporated as appropriate. We did not use GSA's suggested language concerning the limitations we identified in its study because we believe the language in our report accurately reflects our finding on this issue. DHS stated that it appreciated our wo |
3,189 | rk and provided additional information on its respective strategic sourcing initiatives. DHS also stated that it has realized savings from the OS II initiative and expects to continue to do so. We are sending copies of this report to the Administrator of General Services, the Secretaries of the Department of Homeland Security and Defense as well as the Air Force, Army, and Navy. In addition, the report is also available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have |
3,190 | any questions about this report, please contact me at (202) 512-4841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix III. In addition to the contact named above, James Fuquay, Assistant Director; Marie Ahearn; Morgan Delaney Ramaker; Joseph Fread; Jean Lee; Jean McSween; Kenneth Patton; Carol Petersen; Raffaele Roffo; William Russel |
3,191 | l; Roxanna Sun; Jeff Tessin; and Ann Marie Udale made significant contributions to this report. |
3,192 | The 31 DFEs we surveyed were established in various statutes as commissions, boards, authorities, corporations, endowments, institutions, agencies, and administrations. Their heads may be individuals, such as a chairperson or a director, or groups, such as commissions or boards. Individuals and members of commissions and boards are generally appointed by the President and confirmed by the Senate, but members for some entities are set statutorily without additional appointment and confirmation. For instance, |
3,193 | the Pension Benefit Guaranty Corporation’s statute sets the corporation’s board members as the Secretary of Labor, Secretary of the Treasury, and Secretary of Commerce, all of whom are appointed to their cabinet positions by the President and confirmed by the Senate. Each year, the Office of Management and Budget (OMB) determines and publishes a list of DFEs and their heads. OMB uses the definition under the IG Act, as amended, for the head of a DFE, which is any person or persons designated by statute as |
3,194 | the head of the DFE or if no such designation exists, the chief policymaking officer or board of the DFE. It is important to note that the term governing body for purposes of this report is broad and therefore could include members in addition to the entity head under the IG Act, as amended. Table 1 shows the 31 DFEs categorized by organizational structure and entity head for 2008. Governance can be described as the process of providing leadership, direction, and accountability in fulfilling an organization |
3,195 | ’s mission, meeting its objectives, and providing stewardship of public resources, while establishing clear lines of responsibility for results. Accountability represents the processes, mechanisms, and other means—including financial reporting and internal controls—by which an entity’s management carries out its stewardship and responsibility for resources and performance. Commonly accepted governance practices for federal entities and nonprofit corporations have significantly evolved since the financial sc |
3,196 | andals at large public companies in the early 2000s and passage of the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act outlined a framework for more effective corporate governance and introduced reforms to public company financial reporting and auditing. Although the act strengthened corporate governance only in the private sector, the federal government and nonprofit sectors have also strengthened governance and internal control requirements and practices. According to OMB, passage of the Sarbanes-Oxley |
3,197 | Act served as an impetus for the federal government to reevaluate its current policies related to internal control over financial reporting and management’s related responsibility. The Inspector General Act of 1978 (1978 IG Act) created offices of inspectors general at major departments and agencies to prevent and detect fraud and abuse in their departments’ and agencies’ programs and operations; conduct audits and investigations; and recommend policies to promote economy, efficiency, and effectiveness. In |
3,198 | 1988, the 1978 IG Act was amended to establish additional IG offices in certain federal entities designated by the legislation. Generally, the DFE IGs have the same authorities and responsibilities as those established by the 1978 IG Act, but there is a clear distinction—they are appointed and removed by their agency heads rather than by the President and are not subject to Senate confirmation. The 31 DFE IGs make up about half of all IG offices established under the IG Act, as amended, and in fiscal year |
3,199 | 2007 were responsible for oversight with respect to gross agency budgets that ranged from $10 million to $80.2 billion. The IG Reform Act of 2008 (2008 Reform Act) was enacted on October 14, 2008, to, among other things, enhance the independence of the inspectors general. (We have reported several times on independence issues and challenges for the IG community.) Specifically, the 2008 Reform Act provides that both the President and DFE heads must give written reasons to Congress for removing an IG at least |
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