DoD targets 10 percent cut in service contracts for ‘fourth estate’

Through a system once known as contract court and now called Services Requirements Review Boards (SRRBs), the Defense Department is looking to cut 10 percent of its spending on contracted services within DoD’s “fourth estate” this year.

In fiscal 2016, all of the DoD elements outside the military departments, including the Office of the Secretary of Defense and the Defense agencies, are going through SRRB process for the first time. The boards are meant to unearth and scrutinize every service contract worth $10 million or more, ask whether there’s still a valid requirement for that contract and whether the money could be better used elsewhere within the same organization.

Ken Brennan, the deputy director of Defense Procurement and Acquisition Policy for services, told Federal News Radio that the early targets are based on the Army, Navy and Air Force departments’ experience with SRRBs over the last few years. The boards found anywhere between 12 percent and 25 percent of services spending could be cut and reprioritized.

“We have identified full contracts, full capabilities, full requirements that were stopped because they were either redundant or were unneeded or just not a high priority compared to some of the other requirements that entity had,” Brennan said in an interview for a forthcoming edition of On DoD (the full interview airs Wednesday, Feb. 24 at 11 a.m. EST).

But redundancy was the most common factor the boards found when they went looking for excess services spending, and the boards’ greatest value might rest with informing DoD components about where their scattered services spending is actually going.

“In one case, we had a government-to-government agreement where the facility owner was supposed to provide security and infrastructure support, but when we did the review of the requirements we found out that we were paying a contractor to provide the same services that were already part of the lease agreement. So one thing this does is makes sure you’re holding all the parties accountable to provide what they’ve agreed to.”

As an incentive to ferret out unneeded contract spending, DoD is generally allowing Defense components to keep whatever savings they find through the SRRBs and put them to wiser use within their own organizations. Also, the 10 percent target is not a firm mandate to cut their own service contracting budgets, Brennan said.

“Risk needs to be involved in the discussion, and the requirements owner needs to have some say in whether they want to take the risk of eliminating a contract and move on to the next unfunded priority, or is that risk too high and maybe we want to keep doing what we’re doing but with a change in the contract structure,” he said. “So while we’re talking about efficiencies and the numbers are pretty big, we’re trying to allow the executors of the process to make those decisions in an informed manner.

The SRRBs are a key component of a new instruction DoD issued last month — the first it has ever promulgated to lay out specific procedures and guidelines specifically for services acquisition in an effort to bring more management rigor to an area of DoD contracting that’s highly decentralized and, historically, poorly tracked.

The data deficiencies were highlighted Thursday in a report from the Government Accountability Office. GAO noted that while DoD plans for almost every category of its spending in five-year budget cycles, services are a glaring exception.

The department doesn’t forecast its requirements for services beyond the next fiscal year even though they make up more than half of what the Pentagon spends on procurement. Or, as GAO puts it: “In 2014 alone, DoD obligated $85 billion on its three largest types of services — knowledge-based, research and development, and facility-related services. This amount was more than double the amount DoD obligated for aircraft, land vehicles and ships.”

Brennan said better data on the department’s requirements for services was one objective of the SRRBs and of the overall instruction DoD just issued.

For the SRRBs the military services have already conducted, DoD does not know how much of the 12 percent to 25 percent in potential savings they identified actually culminated in real savings.

“I was still with the Navy when they did theirs and I know that they got rid of deliverables that were unused and restructured the contracts, but we still don’t have a dataset that says, for example, ‘Organization A saved 18 percent by eliminating requirement number 7 and then put it onto requirement number 14.’ But we’re working on exactly that kind of tracking for the SRRBs that are happening in the fourth estate right now.”

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