Defence
Around the world, defence agencies have a long history of contracting with the private sector for the delivery of equipment and support services. Competition in defence support has received less academic attention than it has in some other areas of defence activity, such as weapons acquisition and contracting with private military companies. However, it is an important area of government spending and the large-scale competition initiatives that have been pursued in some countries have attracted a degree of attention from audit bodies and other institutions interested in understanding their financial implications. The reports in this section examine the financial impact of contracting in the defence sector, with a particular focus on support services.
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USA
Logistics Support for Deployed Military Forces (PDF) Congressional Budget Office, 2005 A report on the US Army LOGCAP contract for the provision of logistics support to deployed military personnel. The CBO's own estimates projected a total cost for the contract over 20 years of $41bn, as opposed to $78bn for Army provision ($37bn, or roughly 47%, lower). However, this CBO study questions some of the assumptions made in arriving at those figures, changes to which could affect the estimated savings rates significantly. USA
Competitive Sourcing: What Happens to Federal Employees? (PDF) Gansler, Jacques S. and Lucyshyn, William , 2004 IBM Center for the Business of Government A major study surveying all A-76 Department of Defense competitions from 1995 to 2004 and analysing the effect on federal employees USA
Long-Run Costs and Performance Effects of Competitive Sourcing (CRM D0002765.A2) (PDF)
Clark, Frances; Rosenblum, Cheryl; Coast, Murrel; Smallwood, Elaina, 2001
Virginia: Center for Naval Analyses
DOD Competitive Sourcing: Effects of A-76 Studies on Federal Employees' Employment, Pay, and Benefits Vary (GAO-01-388) (PDF)
Report to Congressional Requesters, 2001
Washington D.C.: United States General Accounting Office
Reducing Government Spending with Privatization Competitions: A Study of the Department of Defense Experience
Snyder, Christopher M.; Trost, Robert P. & Trunkey, R. Derek, 2001
The Review of Economics and Statistics, Vol. 83, Issue 1, February 2001, pp. 108-117.
Personnel Savings in Competitively Sourced DOD Activities: Are They Real? Will They Last?
Gates, Susan M., Robbert, Albert A., 2000
RAND Monograph Report
Competitive Sourcing (PDF)
Hynes, Michael; Kirby, Shiela Nataraj; Sloan, Jennifer, 2000
A Casebook of Alternative Governance Structures and Organizational Forms, RAND, pp. 69-84
Outsourcing the Helicopter Combat Support Mission Aboard Military Sealift Command Ships: A Cost Comparison Study (PDF) Kneisler, David J., 2000 Naval Postgraduate School, Monterey, California, Thesis A thesis examining the relative costs and differences in services of contractor and in-house provision of Helicopter Combat Support functions aboard Military Sealift Command Ships. The first trial outsourcing occurred in 1997 and the paper examines experiences from that date. USA
DOD Competitive Sourcing: Savings Are Occurring, but Actions Are Needed to Improve Accuracy of Savings Estimates (PDF) GAO, 2000 The US Department of Defense expected to achieve about $9.2 billion in savings during fiscal years 1997 to 2005 and $2.8 billion in annual recurring savings thereafter. This GAO report reviews a sample of nine competitions to assess the extent to which actual savings were achieved from the competitions. It concludes that savings resulted in seven of the cases, albeit less than initially projected. USA
Results of A-76 Studies Over the Past 5 Years (PDF) GAO, 2000 A review of DoD data on 286 A-76 studies completed between 1995 and 2000. DoD had concluded that the competitions generated savings of $290m in fiscal year 1999. However, the GAO reported that limitations in the available data made it difficult to reach precise estimates. USA
DOD Competitive Sourcing: Results of Recent Competitions (GAO-NSIAD-99-44) (PDF)
Report to the Chairman, Subcommittee on Readiness and Management Support, Committee on Armed Services, U.S. Senate, 1999
United States General Accounting Office
DOD Competitive Sourcing: Questions about Goals, Pace, and Risks of Key Reform Initiative (GAO/NSIAD-99-46) (PDF)
Report to the Chairman, Subcommittee on Military Readiness, Committee on Armed Services, House of Representatives, 1999
United States General Accounting Office
Bidding Behaviour in the Department of Defense's Commercial Activities Competitions
Snyder, Christopher M., Trost, Robert P., Trunkey, R. Derek, 2001
Journal of Policy Analysis and Management, Vol. 20, No. 1 (Winter 2001), pp.21-42
Federal Productivity: DOD's Experience in Contracting Out Commercially Available Activities (GAO/GGD-89-6) (PDF) Report to the Chairman, Subcommittee on Federal Services, Post Office, and Civil Service, Committee on Governmental Affairs, U.S. Senate, 1998 Washington D.C.: United States General Accounting Office This report evaluates the implementation of the A-76, examining key implementation issues, progress in attaining cost study goals, and the way in which the process affects government employees and operations. USA
Base Operations: Challenges Confronting DOD as it Renews Emphasis on Outsourcing (GA/NSIAD-97-86) (PDF) Report to the Chairman, Subcommittee on Military Readiness, Committee on National Security House of Representatives, 1999 United States General Accounting Office
This report examines the extent to which the US Department of Defence and military services emphasise the outsourcing of base support services, factors that influence savings in the outsourcing process, and impediments to DOD's outsourcing.
USAOutsourcing TA-4J Maintenance: Cost and Quality Experience (PDF) Reeger, Christopher, 1997 Center for Naval Analyses A case study of US Navy competitions for maintenance services for TA-4J naval training aircraft. It covers three successive contracts, let to different contractors, in 1985, 1989 and 1993. The author found that the contractors used fewer resources to deliver equivalent services. At the start of the first contract, performance declined, but this did not occur with subsequent changes of contractor. Over the long-term contractors performed as well, if not better, than in-house teams in almost every case. USA
A Privatization Primer: Issues and Evidence (PDF) Tighe, Carla E.; Moore, Carol S.; Marcus, Alan J.; Silk, Julia and Trost, Robert., 1997 Center for Naval Analyses A study, sponsored by the US Deputy Chief of Naval Operations for Logistics, on the lessons learned in outsourcing and privatization. The study looks at the Department of Defense experience, as well as that of other federal government departments. USA
Implementing A-76 Competitions: Lessons Learned from DoD Experiences (PDF)
Tighe, Carla; Trunkey, Derek & Kleinman, Samuel, 1996
Center for Naval Analyses
Analysis of DOD's Commercial Activities Program Trunkey, R Derek, Trost, Robert P., Snyder, Christopher M., 1996 Virginia: Centre for Naval Analyses
This paper presents the results of all completed Department of Defense comprehensive A-76 competitions between 1978 and 1994.
USA
Defense Depot Maintenance:Privatization and the Debate Over the Public-Private Mix (PDF)
General Accounting Office (GAO), 1996
Issues Concerning Public and Private Provision of Depot Maintenance (PDF) Keenan, John D.; Kleinman, Samuel D.; Leland, Jonathan W.; Tighe, Carla E. & Tripathi, Micky., 1994 Center for Naval Analyses A cross-Service evaluation of DoD A-76 competitions, using DoD data and CNA savings estimates from 1978-1994. The study found that the competition process had delivered large, permanent savings of 30% savings on average, with slightly higher savings from larger competitions. In-house teams won about half of all competitions. USA
Competition in Procurement
Leitzel, Jim, 1990
Policy Sciences 25: 43-56
Measuring the Effectiveness of Competition in Defense Procurement: A Survey of the Empirical Literature Anton, James J. and Yao, Dennis, A., 1990 Journal of Policy Analysis and Management, Vol. P, No. 1, 60-79. John Wiley & Sons, Inc. A survey of the empirical literature on the financial impact of competition in US defence procurement, with a particular focus on equipment procurement. USA
Army Procurement: No Savings From Contracting for Support Services at Fort Eustis, Virginia (PDF) GAO, 1988 A case study of the experience of contracting out support services under OMB Circular A-76 at Fort Eustis Army Base, awarded in 1982. USA
Evidence on Government Efficiency
Carrick, Paul M., 1988
Journal of Policy Analysis and Management, Vol. 7, No. 3, Spring 1988, pp. 518-528.
A Pilot Study of the Impact of OMB Circular A-76 on Motor Vehicle Maintenance Cost and Quality in the U.S. Air Force
Berry, Sandra H., Stolzenberg, Ross, 1985
Rand Corporation/Rand Report
This report analyses the impact of the A-76 procurement approach, designed to encourage the use to private firms to provide services to the government where this is viable. This study, using interviews and administrative data, finds that the application of A-76 leads to significant savings on cost with no effects on quality.
DOD Functions Contracted Out Under OMB Circular A-76: Contract Cost Increases and the Effects on Federal Employees (GAO/NSIAD-85-49) (PDF)
Report by the United States General Accounting Office, 1985
Washington D.C.: United States General Accounting Office
DOD Functions Contracted Out Under OMB Circular A-76: Costs and Status of Certain Displaced Employees (GAO/NSIAS-85-90) (Web Page)
Report by the United States Government Accountability Office, 1985
Washington D.C.: United States General Accounting Office
Contracting of Various Functions Under OMB Circular A-76 at Selected Air Force Installations in San Antonio Texas (PDF) GAO, 1984 A review of five commercial functions at two Air Force bases in San Antonio, Texas: food services, clothing alterations and hospital housekeeping at Lackland AFB, first contracted-out in 1958; and the motor pool and Precision Measurement Equipment Laboratory at Kelly AFB, first contracted in 1974. The study examines whether savings from contracting were realised, the sources of any savings, the effect on personnel and the level of competition for the contracts. USA
How Winners Win: Lessons Learned From Contract Competitions in Base Operations Support (PDF) Handy, John B. & O'Connor, Dennis J., 1984 Logistics Management Institute An independent review of the Commercial Activities Program, looking at competitions to provide Base Operations Support services. The authors use statistical analysis to examine 921 base support competitions between February 1979 and December 1983, to determine how the winners realised efficiencies. USA
Review of DoD Contracts Awarded Under OMB Circular A-76 (PDF) GAO, 1981 A review of 18 contracts awarded by DoD under OMB Circular A-76 between April 1978 and October 1980. The purpose of the study was to determine whether decisions to contract out the functions might have been different, had subsequent price increases and performance shortfalls been known when the awards were made. USA
Shaping the Defense Civilian Work Force: Economics, Politics and National Security Binkin, Martin; Kanter, Herschel and Clark, Rolf H., 1978 Studies in Defense Policy, The Brookings Institution Against a background of Pentagon budget constraints, this report explores the nature of the defence civilian workforce and options for achieving efficiencies, including the use of privately employed personnel to deliver certain services. Evidence from specific services converted to contract during FY1974 showed savings of 39% each from contracting out laundry and custodial services, 47% for refuse and waste disposal, and 22% for food services. USA
UK - Support Services
List of Resources:
The Economics of Military Outsourcing Hartley, Keith, 2004 Defence Studies, Vol. 4, No.2, pp. 199-206. A study of the UK experience of military outsourcing, with references to reported savings from competitive tendering. UK
The Management of UK Defence Uttley, Matthew, 2001 in Croft, S.; Dorman, A.; Rees, W. and Uttley, M.R.H., Britain and Defence 1945-2000:A Policy Re-Evaluation, pp. 88-102, London: Longman. An analysis of the management of the UK defence sector, including an examination of 'hierarchies versus markets', with a discussion of budgetary issues. ISBN 0-582-330377-X UK
Market Testing and Contracting out of Defence Support Functions House of Commons Defence Committee, 1995 In 1995, the Defence Committee reviewed the MOD's progress against the 'Competing for Quality' Initiative. The Department aimed to market test activities with a value of £1.2bn in the four years from April 1992, the biggest such programme in Whitehall. UK
Ministry of Defence: Competition in the Provision of Support Services House of Commons Committee of Public Accounts, 1993 The PAC issued this report in 1993 in follow-up to the 1992 NAO study of competition in the provision of MOD support services. UK
Competition in the provision of Defence Support Services: the UK Experience Uttley, Matthew, 1993 Defence Analysis, Vol. 9, No. 3, 1993, pp. 271-288. This study reviews the UK experience of competition in defence support services up to the time of writing, including a full discussion of the contracting-out and market testing debate. UK
Contracting-Out and Market-Testing in the UK Defence Sector: Theory, Evidence and Issues Uttley, Matthew, 1993 Public Money & Management, January-March 1993, pp. 55-60. A review of the economic consequences of MOD contracting and market testing initiatives between 1979 and the time of writing in 1993. UK
Defence Hartley, Keith, 1993 Published in A. Harrison (ed.), From Hierarchy to Contract, London: Policy Journals, 1993, p.56. An examination of the nature and achievements of MOD contracting throughout the 1980s up until 1991, looking at where and how contracting had been applied, and its achievements in terms of efficiency benefits. UK
Competition in the Provision of Support Services
Committee of Public Accounts, 1992
The Stationery Office
UK - Private Finance Initiative
List of Resources:
Private Finance Initiative: Redevelopment of MOD Main Building (PDF)
House of Commons Committee of Public Accounts, Fourth Report of Session 2002-03, HC 298, 2003
London: The Stationery Office Limited
Ministry of Defence: Redevelopment of MOD Main Building (PDF)
Report by the Comptroller and Auditor General, National Audit Office, HC 748 Session 2001-02, 2002
London: The Stationery Office
The NAO's analysis of the redevelopment project for the MOD Main Building. The PFI contract was let in May 2000 for a 30-year period. The study concluded that the financial benefits of the deal would be similar to that of conventional procurement, but that other factors (in particular, risk transfer) tipped the balance in favour of PFI.
Ministry of Defence: Building an Air Manoeuvre Capability: The Introduction of the Apache Helicopter (HC 1246 Session 2001-2002) (PDF)
National Audit Office: Report by the Comptroller and Auditor General, 2002
London: The Stationery Office
Ministry of Defence: Major Project Reports 2002 (HC 91 Session 2002-2003) (PDF)
National Audit Office: Report by the Comptroller and Auditor General, 2002
London: The Stationery Office
Ministry of Defence: The Joint Services Command and Staff College (HC 537 Session 2001-2002) (PDF)
National Audit Office: Report by the Comptroller and Auditor General, 2002
London: The Stationery Office
Transaction costs, relational contracting and public private partnerships: a case study of UK defence Parker, David and Hartley, Keith, 2002 Journal of Purchasing Supply and Management A paper on the economics of public private partnerships, with a particualr focus on the role of transaction costs and the importance of trust in relational contracting. The paper is written with reference to the UK defence sector. UK
The Private Finance Initiative: The Contract for the Defence Fixed Telecommunications System Public Accounts Committee, 2000 Public Accounts Committee HC413, 26th Report Following from the NAO's report, the PAC concluded that the MOD had maintained an effective competition and obtained a good price for the final contract the Defence Fixed Communications System. HC413 UK
The Private Finance Initiative: The Contract for the Defence Fixed Telecommunications System (Report) National Audit Office, 2000 National Audit Office HC328 An analysis of the MOD PFI contract for a Defence Fixed Communications System, which was let as a ten-year contract in July 1997. The MOD had estimated cost reductions from the deal of around £30m (20%) against a public sector comparator. The NAO was unable to test this figure fully, but concluded that the Department had secured the contracted services at a 'generally reasonable' price. HC328 UK
The Procurement of Non-Combat Vehicles for the Royal Air Force (Report) (Web Page)
National Audit Office (NAO), 1999
The Stationery Office
A value for money study of the PFI project for the supply of non-combat vehicles for the Royal Air Force. The contract was notable as one of the first fleet management contracts procured by the MOD through the PFI route.
Medium Support Helicopter Aircrew Training Facility: PFI Case Study
Treasury Taskforce, 1998
Office of Government Commerce
This report is a case study examining the PFI contract for the provision of aircrew training for the RAF Support Helicopter force. The project was felt to offer valuable lessons, being the first PFI contract involving defence-specific assets that had been awarded by the Defence Procurement Agency (DPA).
Australia
List of Resources:
Commercial Support Program -Department of Defence (PDF) Australian National Audit Office (ANAO), 1998 Audit Report No. 2, Performance Audit An examination of the overall success of the Commercial Support Programme. The Department's estimates for the programme projected annual savings of A$155m. The ANAO found exact savings hard to quantify, but concluded that, whether the winning bid came from an in-house or an external supplier, the competition process under the CSP increased the cost-effectiveness of supplying Defence support services. Australia
Cost Case Study - Amberley RAAF Base (Web Page) Appendix F, Competitive Tendering and Contracting by Public Sector Agencies, Industry Commission Inquiry Report, Report No. 48, 1996 Melbourne: Australian Government Publishing Service This case study appeared as an appendix to a cross-sectoral Industry Commission study of competitive tendering and contracting (CTC) by public sector agencies. The case study examined the change in cost to the Royal Australian Air Force and the Department of Defence resulting from the contracting out of several aircraft maintenance and repair services at RAAF Base Amberly as part of the Commercial Support Programme (CSP), and the sources of any changes. Australia
Submission to the Industry Commission Inquiry into Contracting Out
Department of Defence, 1995
The Commercial Support Program in the Department of Defence McNamara, Michael, 1995 Paper for the RIPAA National Conference This paper examines the implementation of the CSP from its inception to the time of writing in November 1995, including the contribution of the programme to more efficient and effective management in Defence. Australia
Case Study: Defence's Commercial Support Program (CSP), Examining Contestability Within the APS: Initial Information - Concepts, Case Studies and Lessons Learned Commonwealth Department of Finance, Resource Management Improvement Branch, 1995 RMI Management Improvement Discussion Series Paper No. 3, Appendix D: Case Study Experiences Relating to Contestability An examination of the results, in terms of efficiency gains, of the Commercial Support Program, from its inception in 1991 to the date of publication of this report in November 1995, as part of a wider study of contestability in the Australian Public Service. Australia
Defence Procurement (Web Page)
Industry Commission, Report No. 41, 1994
Canberra: Australian Government Publishing Service
This report reviews the efficiency and effectiveness of current defence procurement in Australia in achieving value for money, and the impact of procurement programmes on particular industries. It includes an analysis of procurement policy, programs and procedures, and future trends in procurement expenditure and longer term supplier arrangements.
The Defence Commercial Support Program: Saving $200 Million a Year for Defence Procurement? (PDF) Shephard, Allan, 1993 Parliamentary Research Service, Paper No. 2 A study of projected cost savings from Commercial Support Program competitions, published by the Department of Defence in 1993 for Tier One of the initiative. Australia
Report to the Department of Defence: A Review of the Commercial Support Program and its Performance Ernst & Young Consulting, 1993 The Australian Department of Defence commissioned Ernst and Young Consulting to undertake a review of the CSP, to determine to what extent the program was meeting its central aim and objectives of ensuring that Defence support services were provided in the most cost-effective manner and transferring appropriate activities to the civilian sector. Australia
New Zealand
List of Resources:
Examining the Magnitude and Sources of Cost Savings Associated with Outsourcing Domberger, Simon; Jensen, Paul H. and Stonecash, Robin E., 2002 Public Performance and Management Review, Vol 26, No. 2 (December) Analysis of cost savings from outsourcing of vehicle maintenance and warehousing services at Trentham army base in New Zealand using detailed cost and output data, including all transition and transaction costs. Australia