The Department of Defense (DOD) should make major improvements to how it acquires and manages contracting for services, according to a report from the Defense Science Board’s (DSB) Task Force on Improvements to Services Contracting. 

The DSB noted that current acquisition laws, policies, and training policies and procedures, for the most part, focus on buying products, not services.  But, the report emphasized, purchasing services is fundamentally different than buying weapons.  And, this focus on products has led to a “one size fits all” approach to managing contracting that does not address major differences between contracting for goods and contracting for a wide variety of services.  For example, contracting for services is a continuous process over the contract period, whereas product acquisition ends when delivery is concluded.  Also, the report noted the effective use of services depends on optimizing people rather than the characteristics of products. 

In addition, acquisition regulations and policies often do not differentiate between products and services.  Not only is the line blurred between determining goods and services for contracting purposes, especially in information technology services, there are many differences in the types of services themselves.  The report notes that buying engineering design services is not the same as buying base maintenance support services, as one example.

These conditions have produced a process and procedures imbalance skewed toward products that has hindered the effective management of service contracts, the report surmises.  As a result, under existing procedures, the contract type chosen for a services contract may not provide the components needed to incentivize the contractor.  The DSB report also found that service contracts often do not have dedicated contract managers who have the skills and experience to understand the unique nature of complicated service contracts.  The effect of these problems has worsened as contracting for services has increased to over 50 percent of the DoD acquisition budget (some $200 billion in FY2010), the report cautioned.

To remedy service contracting management problems, the DSB report makes four major recommendations: 1) Develop meaningful and useful definitions, guideline, performance standards, and outcomes measures for each type of service, and integrate proven commercial best practices and strategies; 2) Designate roles and responsibilities for senior leadership in the area of services contracting, such as a senior OSD point of contact for services contracting and senior “strategic sourcing of services executives” for each military service; 3) Strengthen the skills and capabilities of personnel overseeing services contracting through enhanced training of existing personnel and hiring experienced personnel from outside government; and 4) Establish separate policies and procedures for the management and oversight of services contracting.

The DSB report also considered the question of what services should be contracted out rather than performed within the department.  It stated that the lack of clear, concise guidance was a major impediment to managers’ decisionmaking.  The report  recommends the development of “up-to-date guidance” to clarify the definition of inherently government functions.  In particular, such guidance would avoid the ongoing confusion in determining whether or not work is “crucial” or “closely associated with” inherently government function, according to DSB.