House blasts DOD over savings claims

A bipartisan group of lawmakers last week assailed Defense Department outsourcing and privatization initiatives, labeling DOD an inept financial planner and questioning the department's savings from reform efforts.

Rep. Herbert Bateman (R-Va.), who presided over a meeting of the House Military Readiness Subcommittee, said DOD has been banking on savings that have not yet accrued from reform programs and the outsourcing of certain functions.

"The DOD practice of funding future Defense budgets by relying on projected savings from programs that have not yet proven that they will save money is troubling," Bateman said. "The committee does not oppose the concept of outsourcing.... However, savings estimates must be based on proven program results."

The hearing came one day after Defense Secretary William Cohen announced that DOD's plan to outsource up to 229,000 jobs by fiscal 2005 would save DOD as much as $11.2 billion. However, members of Congress attacked Cohen's optimistic appraisal of DOD's reform efforts after a series of General Accounting Office reports cast significant doubt on DOD's process for estimating savings from the Defense Reform Initiative, a program introduced in 1997 to save money by making DOD business processes more efficient.

"Who's kidding who?" asked Rep. Norman Sisisky (D-Va.). If DOD cannot balance its checkbook, it has little chance of accurately estimating savings from reform initiatives, Sisisky said. "Then all of these [estimated savings] are just fake figures."

In one report, "DOD Competitive Sourcing: Questions About Goals, Pace and Risks of Key Reform Initiatives," GAO concluded that DOD's "estimates of competitive savings provided to Congress in fiscal 1998 are overstated." GAO added that DOD did not consider the costs of conducting outsourcing studies, known as A-76 studies, or the costs associated with the time it will take DOD to complete some competitions.

Barry Holman, assistant director for GAO's National Security and International Affairs Division, said most of the savings that result from outsourcing and privatization come from reductions in personnel. However, "DOD components have not fully calculated the investment costs associated with undertaking these competitions or the personnel separation costs likely to be associated with...these competitions," Holman said.

According to GAO, DOD competed 5,757 jobs between October 1995 and March 1998. GAO also found that the database used by DOD to track savings from A-76 competitions contained inconsistencies and inaccurate data, causing DOD to overestimate savings from competitions.

Many of the political concerns about outsourcing involve military depots, which typically are prime candidates for outsourcing. Olga Grkavac, senior vice president of the Information Technology Association of America's Enterprise Solutions Division, said the rhetoric surrounding depot jobs is not unusual. But the information technology industry needs to be more aggressive in showing Congress that the benefits of outsourcing go beyond simply saving money, she said.

Stan Soloway, deputy undersecretary of Defense for acquisition reform, tried to allay the committee's fears that DOD's overriding goal is to outsource everything. "Our goal is not outsourcing; it is competition," Soloway said. "Our competitions must be fair and clear and conducted in such a manner that all parties - public and private - walk away, win or lose, feeling they have been given a fair shake."

However, Rep. Tillie Fowler (R-Fla.) said that as a first step toward realistic savings estimates, DOD should better estimate the number of contractors upon which it relies.

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DOD progressing, but not enough, on Y2K

By Bob Brewin

The Defense Department continues to make pro-gress in fixing Year 2000 problems in its 2,300 mission-critical systems and will have all but six systems ready by the turn of the century, Deputy Defense Secretary John Hamre said at a congressional hearing last week.

Officials of watchdog agencies testifying at the same hearing praised DOD for its progress but said the Pentagon still remains behind the curve on Year 2000 fixes.

The six remaining systems will be fixed but not fielded by the end of the year, Hamre said. But those systems, which Hamre did not identify, will be compliant by the time they are installed on ships and other mobile platforms, he said.

The Pentagon had fixed and tested more than 1,700 systems as of last week, said Hamre, testifying before a joint hearing of the House Government Management, Information and Technology Subcommittee and the Technology Subcommittee.

Jack Brock, director of governmentwide and Defense information systems at the General Accounting Office, told the hearing that the Pentagon has made "considerable progress" in putting its Year 2000 house in order. But, Brock added, DOD remains well behind schedule.

The DOD inspector general's office, which has conducted 50 Year 2000-related audits of DOD critical systems in the past six months, also said the Pentagon has made considerable progress in Year 2000 fixes and management. Robert Lieberman, the DOD assistant IG for auditing, said the forthcoming results of the audits "are generally much more positive than those from last year and are another indicator that the pace and effectiveness of the DOD Y2K program have improved significantly."

But much work remains to be done, Lieberman added. "No assessment of overall progress is entirely credible in the absence of significant test results, which will not be available for a few more months."

Hamre acknowledged the problems and said the Pentagon "will test everything from paying service members to exercising vital command and control capabilities from 'sensor to shooter.' "

DOD plans 31 end-to-end tests of mission-critical systems in its combatant commands, such as the Pacific Command and the Central Command - six more than mandated by Congress.