Competitive Services Industry

1. Competitive Services Industry Brad Nelson Bradley.nelson@osd.mil Office of the Under Secretary of Defense for Industrial Policy Industrial Base Assessments Directorate

2. Agenda • Services Scope • Defense-Industry Group/Commercial-Industry Group • Competition by Sector • Business Size by Sector • Competitive Trends for past decade • Summary

3. Bottom Line Up Front Goal 5.2.4 Characterize competitive services industry – Characterize and assess the industry segments supporting DoD acquisition of services. • Services and RDT&E >50% of DoD contracts. • Commercial-industry group and a Defense-industry group. • Competition greater in commercial industry group. • Mid-tier companies win larger share in the commercial industry group. • Competitive contracting procedures have increased. • But, single offers on competitive contracts have also increased. IP Objective: Encourage acquisition policies and decisions that remove barriers to entry and promote competition and innovation.

4. DoDSupplies/Services/RDT&E Finding: Services and RDT&E >50% of DoD contracts. RDT&E – Research, Development, Test & Evaluation FR – Facilities Related MSPA –Management Support, Professional and Administrative ER –Equipment Related CR – Construction related Eng – Engineering and Systems Engineering ICT - Information and Communications Technology Med - Medical Trans - Transportation FY06 DD350 Data

5. Defense-Industry/Commercial-Industry GroupsService Sector Horizontal Integration Finding: defense-industry much more horizontally integrated than commercial industry. Defense Industry 10 largest DoD contractors: Commercial Industry FY06 DD350 Data

6. Defense-Industry/Commercial-IndustryCompetition by Service Industry Segment Finding: Much less industry competition for DoD dollars in defense-industry group than in commercial industry group. Blue Line: Shortage of Competing Offers Defense Industry Commercial Industry RDT&E – Research, Development, Test & Evaluation FR – Facilities Related MSPA –Management Support, Professional and Administrative ER –Equipment Related CR – Construction related Eng – Engineering and Systems Engineering ICT - Information and Communications Technology Med - Medical Trans - Transportation FY07 FPDS Data ex-medical

7. Defense-Industry/Commercial-IndustryBusiness Size-Relative Share Finding: Substantially larger representation of medium sized companies in commercial-industry services than in defense-industry services. Defense Industry Commercial Industry FY06 DD350 Data

8. Defense-Dominant/Commercial-DominantBusiness Size-Competitiveness in Services Industry Finding: Mid tier companies compete the hardest for contracts. FY06 DD350 Data

9. DoD Service SectorsDefense-Industry Commercial Industry Finding: Defense-industry and commercial-industry groupings split about 50-50 on total contract cost. FY06 DD350 Data

10. Contracting Procedure and Competitive Offer Trends Finding: Clear improvement in DoD use of competitive contracting procedures over the past decade but the good news is off-set somewhat by an increase in the number of competitive contracts receiving only a single industry offer. FY 96-06 DD350 Data

11. Summary Goal 5.2.4 Characterize competitive services industry – Characterize and assess the industry segments supporting DoD acquisition of services. • Services and RDT&E >50% of DoD contracts. • Commercial-industry group and a Defense-industry group. • Competition greater in commercial industry group. • Mid-tier companies win larger share in the commercial industry group. • Competitive contracting procedures have increased. • But, single offers on competitive contracts have also increased. IP Objective: Encourage acquisition policies and decisions that remove barriers to entry and promote competition and innovation.

12. Backup

13. Bibliography • Audit Report; Multiple Award Contracts for Services; Office of the Inspector General, Department of Defense; Report No. D-2001-189; September 30, 2001. • Best Practices: Taking a Strategic Approach Could Improve DOD’s Acquisition of Services; GAO Report GAO-02-230; January 2002. • Contract Management: High-Level Attention Needed to Transform DOD Services Acquisition; GAO Report GAO-03-935; September 2003. • High-Risk Series: An Update; GAO Report GAO-05-207; January 2005. • Interagency Contracting: Problems with DOD’s and Interior’s Orders to Support Military Operations; GAO Report GAO-05-201, April 2005. • Senate Report 109-069 – NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2006. • Structure and Dynamics of the U.S. Federal Professional Services Industrial Base 1995—2004; Center for Strategic and International Studies; Pierre A. Chao; May 2006. • Acquisition of Services Policy; Under Secretary of Defense; October 2, 2006. • Defense Acquisitions: Tailored Approach Needed to Improve Service Acquisition Outcomes; GAO Report GAO-07-20, November 2006. • Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy and the United States Congress; draft; December 2006. • Testimony Before the Subcommittee on Readiness and Management Support, Committee on Armed Services, U.S. Senate; DEFENSE ACQUISITIONS: DOD Needs to Exert Management and Oversight to Better Control Acquisition of Services; Statement of Katherine V. Schinasi, Managing Director Acquisition and Sourcing Management; January 17, 2007. • Defense Contracting in Iraq: Issues and Options for Congress; Congressional Research Service Report for Congress RL33834; January 26, 2007. • Interview with Stan Soloway and Alan Chvotkin; Professional Services Council; February 5, 2007. • Statement Before The Committee On Oversight And Government Reform Hearing On Iraq Reconstruction: Reliance On Private Military Contractors; Alan Chvotkin, Vice President And Counsel, Professional Services Council; FEBRUARY 7, 2007.

14. Bibliography cont. • Defense Acquisition: Use of Lead System Integrators (LSIs) _ Background, Oversight Issues, and Options for Congress, CRS Report for congress, March 26, 2007. • DD Form 350 Contract Action data files. • Federal Procurement Data System – Next Generation. • Defense Acquisition: Overview, Issues, and Options for Congress, CRS Report for congress, June 20, 2007.

15. Industrial PolicyGoal 5: Reliable and Cost-Effective Industrial Capabilities Sufficient to Meet Strategic Objectives 5.1 Effects of DoD policy and program decisions on the industrial base, and the extent to which industry decisions limit or expand DoD options, understood. 5.2 DoD research and development, acquisition, and logistics decisions expand and sustain the industrial base to encourage competition and innovation for essential industrial and technological capabilities. 5.3 Statutory processes and decisions leveraged to enable a capable, competitive, and reliable industrial base. 5.4 Contract finance and profit policies drive desired results.

16. Percentage of FY06 Contract Actions on FY06 ContractsAddressable Market? Note: Data assumes adherence to contract numbering convention for fiscal year of award; discrepancies expected. FY 06 DD350 Data

17. Percentage of FY06 Contract Actions on all Contracts Note: Data assumes adherence to contract numbering convention for fiscal year of award; discrepancies expected. FY 06 DD350 Data

18. Contracting Procedure and Competitive Offer Trends(with Multiple Award) Finding: Lack of documentation on competition for orders within Federal Schedule and multiple award contracts has created an expanding cone of uncertainty on the level of competition.

19. Services DataDoD Contracting Shares Finding: As a portion of DoD Contracting, Services is relatively steady, RDT&E declining, supplies increasing.

20. Spend TrendRelative Share Change-Services and RDTE Finding: Medical services is the fastest growing share of the service segment and Construction Related is fastest shrinking share of the service segment. Shrinking Growing

21. Services DataRelative Segment Size in DoD Finding: Facilities Related spending is the largest services contracting segment. RDT&E – Research, Development, Test & Evaluation FR – Facilities Related MSPA –Management Support, Professional and Administrative ER –Equipment Related CR – Construction related Eng – Engineering and Systems Engineering ICT - Information and Communications Technology Med - Medical Trans - Transportation Note: There are no official DoD service segment groupings at this time. FY06 DD350 Data

22. Services DataField Leading Companies FY06 DD350 Data

23. Services DataLargest Contract in eachService Category FY06 DD350 Data

24. RDT&E Sole Source Top 10

25. RDT&E Competed Single Offer Top 10

26. RDT&E Not Competed – Other Top 10

27. ER Sole Source Top 10

28. ER Competed Single Offer Top 10

29. ER Not Competed – Other Top 10

30. FR Sole Source Top Ten

31. FR Competed Single Offer Top 10

32. FR Not Competed – Other Top 10

33. MPAS Sole Source Top 10

34. MPAS Competed Single Offer Top 10

35. MPAS Not Competed – Other Top 10

36. Engineering Sole Source Top 10

37. Engineering Competed Single Offer Top 10

38. Engineering Not Competed Other Top 10

39. ICT Sole SourceTop 10

40. ICT Competed Single Offer Top 10

41. ICT Not Competed Other Top 10

42. Services DataComplete List of FSC Groups

43. Defense-Dominant/Commercial-DominantNot Competed Breakdown Finding: Small Business Services contracting much more reliant on statutory authorizations; Large business much more reliant on one-source.

44. Industry Competition for Contracts Finding: FY 96-06 DD350 Data

45. Hardware Overall Finding: while the use of competitive procedures over the past decade has held steady, the Department is having more difficulty identifying more than one source or attracting more that one competitive bidder. FY 96-06 DD350 Data

46. RDT&E Overall Finding: while the use of competitive procedures over the past decade has held steady, the Department is having more difficulty identifying more than one source or attracting more that one competitive bidder. FY 96-06 DD350 Data

47. Services-Only Overall Finding: while the use of competitive procedures over the past decade has held steady, the Department is having more difficulty identifying more than one source or attracting more that one competitive bidder. FY 96-06 DD350 Data

48. Competition for Contracts Finding: FY 96-06 DD350 Data

49. Commercial Item Procedures

50. Commercial Item Procedure Distribution Finding: Commercial Item (CI) procedures much more common in Hardware contracting than Services contracting.