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3/4/2003
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GAO Sees Good And Bad In Defense Department Outsourcing Practices

The General Accounting Office approves of Defense's outsourcing practices, but says it needs to share lessons learned.

The Department of Defense--the largest government outsourcer--does a generally good job of issuing and managing projects performed by outsiders, according to a new General Accounting Office report.

The GAO says the Defense Department implemented 88% of commercial best practices in a GAO framework that includes determining sourcing strategy, defining an operational model, developing the contract, selecting providers, transitioning to providers, managing providers' performances, and ensuring that vendors provide services.

"Although implementing the leading commercial practices in our framework does not guarantee the success of an outsourcing project, the consensus view of the leading commercial activities that we studied is that these practices are the most critical to success when acquiring IT services," Randolph Hite, GAO director of IT architecture and systems issues, wrote in the report. "In addition, not implementing or only partially implementing particular practices can produce negative consequences or add risk to a project."

Hite cited, for instance, the failure of the Navy to assess legacy apps when planning an outsourcing project in which project managers relied on a pre-existing inventory developed to address year 2000 remediation. "The Navy subsequently found that it had substantially underestimated the number of legacy applications, which, according to program officials, later contributed to the transition period slipping from 2-1/2 years to 3-1/2 years," Hite said.

Although Defense has gathered and disseminated lessons learned and best practices on general acquisition issues, the GAO report said, these efforts generally do not focus on outsourcing or include sharing the lessons learned from IT outsourcing projects across the department. By not capturing and disseminating such information in a systematic manner across the department, the GAO said, it is losing the opportunity to leverage the knowledge gained on IT services projects.

"We are making recommendations to the secretary of defense aimed at leveraging lessons learned across the department from its components' IT services outsourcing experiences," Hite wrote.

The Defense Department's deputy CIO, in a written statement to GAO, agrees that capturing lessons learned in the development and implementation of IT outsourcing initiatives is important to continually improving outsourcing methods and results achieved. The department also intends to explore a variety of mechanisms for best exploiting lessons learned from its IT outsourcing initiatives. "It is prudent to consider alternative means to leveraging these lessons learned," Hite wrote.

Defense is the government's largest purchaser of IT services. In fiscal 2001, the department spent more than $6.2 billion on IT services, and this amount is expected to grow substantially. "Given the magnitude of DOD's spending on such services," Hite wrote, "it is critical that the department adopt effective practices for acquiring IT services."

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