Tag Archives: GAO

F-35 Full Rate Production Challenges Include Failing Engine Tests And Replacing 1,005 Turkish Parts

 Image: Senior Airman Quay Drawdy/U.S. Air Force


According to the GAO, the number of F-35 parts delivered late skyrocketed from less than 2,000 in August 2017 to upward of 10,000 in July 2019. At one point in 2019, Pratt & Whitney stopped deliveries of the F135 for an unspecified period due to test failures, which also contributed to the reduction of on-time deliveries.

And those supply chain problems could get even worse as Turkish defense manufacturers are pushed out of the program, the Government Accountability Office said in a May 12 report.


 “Lockheed Martin’s F-35 Joint Strike Fighter is on the verge of full-rate production, with a decision slated for early 2021. But a congressional watchdog group is concerned that as the company ramps up F-35 production, its suppliers are falling behind.

The number of parts shortages per month also climbed from 875 in July 2018 to more than 8,000 in July 2019. More than 60 percent of that sum was concentrated among 20 suppliers, it said.

“To mitigate late deliveries and parts shortages — and deliver more aircraft on time — the airframe contractor has utilized methods such as reconfiguring the assembly line and moving planned work between different stations along the assembly line,” the GAO said.

“According to the program office, such steps can cause production to be less efficient, which, in turn, can increase the number of labor hours necessary to build each aircraft,” which then drives up cost, the GAO added.

Those problems could be compounded by Turkey’s expulsion from the F-35 program, which was announced last year after the country moved forward with buying the Russian S-400 air defense system. Although Turkey financially contributed to the development of the F-35 as a partner in the program, the U.S. Defense Department has maintained that Turkey cannot buy or operate the F-35 until it gives up the S-400.

The Pentagon has also taken action to begin stripping Turkish industry from the aircraft’s supply chain, a process that involves finding new companies to make 1,005 parts, some of which are sole-sourced by Turkish companies.

Ellen Lord, the Pentagon’s undersecretary for acquisition and sustainment, had hoped to stop contracting with Turkish suppliers by March 2020, but in January she said that some contracts would extend through the year, according to Defense One.

While the Defense Department has found new suppliers to manufacture the parts currently made in Turkey, it is uncertain whether the price of those components will be more expensive. Furthermore, as of December 2019, the new production rates for 15 components were lagging behind that of the legacy Turkish producers.

“According to program officials, some of these new parts suppliers will not be producing at the rate required until next year, as roughly 10 percent are new to the F-35 program,” the GAO said.

“Airframe contractor representatives stated it would take over a year to stand up these new suppliers, with lead times dependent on several factors, such as part complexity, quantity, and the supplier’s production maturity. In addition, these new suppliers are required to go through qualification and testing to ensure the design integrity for their parts.”

The F-35 Joint Program Office disagreed with the GAO’s recommendation to provide certain information to Congress ahead of the full-rate production decision, including an evaluation of production risks and a readiness assessment of the suppliers that are replacing Turkish companies.

In its statement, the JPO said it is already providing an acceptable number of updates on the program’s readiness for full-rate production.

Hard times for the F-35’s engine supplier

Not all F-35 production trends reported by the GAO were bad for the aircraft. Since 2016, Lockheed has made progress in delivering a greater proportion of F-35s on schedule, with 117 of 134 F-35s delivered on time in 2019.

However, one of the biggest subsystems of the F-35 — the F135 engine produced by Pratt & Whitney — drifted in the opposite direction, with a whopping 91 percent of engines delivered behind schedule.

At one point in 2019, Pratt & Whitney stopped deliveries of the F135 for an unspecified period due to test failures, which also contributed to the reduction of on-time deliveries.

According to the Defense Contracts Management Agency, “there have been 18 engine test failures in 2019, which is eight more than in 2018, each requiring disassembly and rework,” the GAO wrote. “To address this issue, the engine contractor has developed new tooling for the assembly line and has established a team to identify characteristics leading to the test failures. Plans are also in place for additional training for employees.”


Government Accountability Office (GAO) Joins 6 Other Agencies In GSA “Centers Of Excellence” Partnership

Image: SvetaZi/Getty Images


“The Government Accountability Office is joining the GSA’s Centers of Excellence initiative to improve the GAO’s new Innovation Lab.

The GAO marks the seventh agency to partner with the Centers of Excellence, a program started by the GSA to speed up modernization projects at agencies.”


“The CoE’s work, run out of GSA’s Technology Transformation Services (TTS) office, will speed up the GAO’s authority to operate process for its new innovation lab, launched last year to develop enhanced data analytics and emerging technologies capabilities.

The partnership will also help the lab configure “flexible, scalable, and secure computational environment that is responsive to current and future needs.”

“Today’s announcement illustrates the momentum of the CoE to deliver outcomes that drive mission effectiveness,” said TTS Director Anil Cheriyan. “Putting innovation at the core of everything we do, we’re excited to engage with GAO and provide guidance along their exciting journey.”

The CoE program also works with the Departments of Agriculture; Housing and Urban Development; Labor; the Pentagon’s Joint Artificial Intelligence Center; the U.S. Consumer Product Safety Commission; and the Office of Personnel Management.

“With this latest CoE engagement, we look forward to building upon our prior work transforming federal IT to improve services to citizens,” said CoE Executive Director Bob De Luca. “Leveraging the CoE modernization approach will help GAO further its mission of helping the government save money and work more efficiently.”


GAO Finds Foreign Ownership In Government Contract Awards



Foreign-owned contractors have received Defense Department contracts for which they are ineligible due to opaque ownership structures that have gone unnoticed by contracting officers.

Such awards have led to leaks of sensitive information to foreign-owned companies and the acquisition of defective parts, according to a recent report from the Government Accountability Office.


“The Department of Defense (DOD) faces several types of financial and nonfinancial fraud and national security risks posed by contractors with opaque ownership. These risks, identified through GAO’s review of 32 adjudicated cases, include price inflation through multiple companies owned by the same entity to falsely create the appearance of competition, contractors receiving contracts they were not eligible to receive, and a foreign manufacturer receiving sensitive information or producing faulty equipment through a U.S.-based company.

DOD has taken some steps that could address some risks related to contractor ownership in the procurement process but has not yet assessed these risks across the department. DOD, in coordination with other agencies, revised the Federal Acquisition Regulation in 2014 to require contractors to self-report some ownership information. DOD has taken steps to identify and use ownership information—for example, as part of its supply-chain risk analysis when acquiring critical components. DOD has also begun a department-wide fraud risk management program, but it has neither assessed risks of contractor ownership across the department nor identified risks posed by contractor ownership as a specific area for assessment. Assessing risks arising from contractor ownership would allow DOD to take a strategic approach to identifying and managing these risks, make informed decisions on how to best use its resources, and evaluate its existing control activities to ensure they effectively respond to these risks.

Why GAO Did This Study

DOD generally accounts for about two-thirds of federal contracting activity. Some companies doing business with DOD may have an opaque ownership structure that conceals other entities or individuals who own, control, or financially benefit from the company. Opaque ownership could be used to facilitate fraud and other unlawful activity.

The House Armed Services Committee report on the National Defense Authorization Act for fiscal year 2018 included a provision for GAO to examine the risks posed by contractors with opaque ownership and DOD’s processes for identifying ownership. This report identifies types of fraud and other risks that opaque contractor ownership poses to DOD in the procurement process and assesses whether DOD has taken steps to address those risks. GAO reviewed applicable laws and regulations and interviewed DOD officials, including procurement staff and criminal investigators. GAO researched cases from 2012–2018 where contractors may have concealed or failed to disclose ownership information. GAO compared DOD’s efforts to leading practices in GAO’s Fraud Risk Framework. This is a public version of a sensitive report that GAO issued in September 2019. Information that DOD deemed sensitive involving ongoing investigations and certain internal controls and vulnerabilities has been omitted.

What GAO Recommends

GAO recommends that DOD assess risks related to contractor ownership as part of DOD’s ongoing efforts to assess fraud risk. DOD should use this information to inform other types of risk assessments, including national security concerns. DOD concurred with GAO’s recommendation.

For more information, contact Seto J. Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov.”


Other Transaction Authority (OTA) Comes Under GAO Scrutiny


GAO OTA Brakes


“In the wake of Oracle’s successful protest of a $950 million “other transaction authority” award by the Army to REAN Cloud, house appropriators are putting the Defense Department on notice that they’ll be keeping a close eye on future OTA awards.

The issue is the use of such awards for procurements that don’t fit the experimental or prototype model that OTAs were intended to handle.”


“The flexible procurement authority is “an important tool to provide flexibility and agility for cutting-edge research and development projects and prototypes,” lawmakers wrote in a legislative report accompanying the defense funding bill released by the House Appropriations Committee on June 13. “However, the Committee is concerned with the lack of transparency on the use of OTA authority for follow-on production procurements.”

The bill requires that the Secretary of Defense notify House and Senate defense committees 30 days in advance of obligating funds for production contracts under other transaction authority.

In the decision on Oracle’s protest of Army’s cloud award on behalf of U.S. Transportation Command, which was released with redactions on June 4, GAO General Counsel Thomas H. Armstrong concluded “the Army had no authority to award the [production OTA] here.”

GAO found that the solicitation for the prototype, prepared in conjunction with the Defense Innovation Unit Experimental (DIUx), didn’t indicate the possibility for a follow-on production award. The decision also points out that the sole-source production OTA was issued despite the fact that the prototype work of moving Transcom apps and data to cloud enclaves had not been completed.

In a June 12 note to clients, the Washington, D.C., law firm Arnold and Porter said the Oracle decision sends a strong signal to defense agencies that GAO will use its authority to review whether agencies are following the law when it comes to choosing OTA over a competitive procurement.

In the case of Oracle’s complaint, the attorneys wrote, “the GAO identified specific process flaws and implied that had the agency written its prototype OTA award slightly differently, and waited slightly longer for completion of the prototype project before issuing its follow-on production order, there may not have been a problem from the GAO’s perspective.”

The report concludes that “OTAs are not a get-out-of-protests-free card.”


Study: Contractor Protests Have Negligible Impact on Defense Acquisitions




“Defense contractor protests draw disproportionate media attention even though most of them get resolved relatively quickly without causing major disruptions to military procurement programs.

That is one of the takeaways from a new study by the Congressional Research Service that analyzes trends in bid protests filed with the Government Accountability Office.

CRS defense acquisition specialist Moshe Schwartz and legislative attorney Kate Manuel took a deep dive into bid protest trends across the federal government in response to growing congressional interest in the subject. In recent years, lawmakers have become alarmed by blaring headlines about high-profile contractor protests, prompting both the House and Senate in their respective versions of the 2016 National Defense Authorization Act to direct the Pentagon to commission an independent study of bid protests.

Schwartz and Manuel crunched bid protest data from fiscal year 2001 to 2014. In their July 21 report, they find that while the number of bid protests is growing against civilian agencies, Defense Department contracts are now less likely to be protested and, when challenged, are less likely to be ruled by GAO in favor of contractors than is the case with civilian agency contracts. They note that protests against civilian agencies are increasing at a faster rate than protests against Defense.

Under federal law and regulations, contractors can challenge an agency award decision if they believe that the solicitation or the award was unlawful. GAO can dismiss, deny or sustain a protest. Congress requires GAO to resolve disputes within 100 calendar days of the protest being filed. GAO said protests in 2014 were resolved on average within 39 days.

Protests against the Defense Department over the 13-year period studied by CRS have not been detrimental to acquisitions programs, the data shows.

While the number of bid protest cases against the Defense Department increased from 600 in 2001 to 1,200 in 2014, most were dismissed, withdrawn by the protester or negotiated before GAO issued an opinion. GAO issued rulings in only 23 percent of them. In those cases, GAO sustained 11 percent of the protests. During that period, an average of 4 percent of protests filed against Defense received a favorable ruling by GAO.

Over the past four years, the number of protests filed with GAO has been constant — 2,206 in fiscal year 2011 compared to 2,269 in 2014. Most were dismissed, withdrawn by the protester or settled before GAO issued an opinion.

Protesters face tough odds. In recent years, the percentage of protests won by contractors against the Defense Department has dropped by more than half. From 2001 to 2008, GAO sustained an average of 5 percent. From 2009 to 2014, GAO sustained about 2 percent of all protests filed. In 2014, 13 percent of protests were sustained, the lowest rate since 2001. And even when GAO sustains a protest, the company is not guaranteed to win the contract in question.

CRS analysts found that Defense Department procurements are less likely to be protested than those of the rest of the government. From 2008 to 2014, DoD accounted for almost 70 percent of all government contracts but just 55 percent of total protests against the federal government.

Also, protests against DoD are sustained at a lower rate than the rest of the government. From 2008 to 2014, 2.5 percent of protests against DoD were ruled in favor of contractors, compared to 5 percent of protests against civilian agencies. Protests against civilian agencies are growing at a faster rate than those against Defense.

When defense programs are delayed, protests themselves are not the reason, the study said. The impact a protest could have on a program’s schedule mostly occurs outside the 100-day period. Agency actions to address the complaint can delay contract awards for weeks or months. The Navy’s next generation jammer development contract, for instance, was delayed by six months when GAO sustained a protest and recommended the Navy reevaluate proposals.

Even though most protesters lose in GAO rulings, contractors frequently benefit from filing a complaint as contracting agencies may voluntarily act to correct the allegation charged in the protest.

The increasing willingness of agencies to voluntarily take corrective action is one of the most significant trends in bid protests, the study said. Actions include rewriting contract requirements or amend request for proposals. In cases when they believe the procurement was done properly, some agencies still agree to meet with the protesting party to clarify why it lost.

Greater efforts to negotiate disputes have increased the so-called “effectiveness rate” of bid protests. That is the percentage of protesters that obtain relief either through a protest being sustained or voluntary action taken by an agency. From 2001 to 2014, the effectiveness rate of GAO protests grew from 33 to 43 percent. It has averaged 42 percent over that past five years. The relatively large share of protests that are resolved via settlement is a significant trend, the study said.

One possible explanation for the higher effectiveness rate is the unpredictable nature of GAO opinions. Agencies tend to voluntarily take corrective actions rather than wait for GAO to sustain a protest.

Another way to read this, CRS noted, is that corrective action reflects agency risk aversion and fear of losing a protest. In this context, the high likelihood of protests being resolved through voluntary actions encourages companies to file protests. Under this line of thinking, if agencies allowed more cases to be decided on the merits, companies might be less inclined to file protests.

The ups and down of government spending also influence the rate of protests as contractors are more motivated to challenge awards when they see fewer opportunities. When federal spending was on an upswing from 2001 to 2008 — spending grew 100 percent — protests increased by 35 percent. The trend reversed from 2008 to 2014 when government spending dropped by 25 percent and protests increased by 45 percent.

CRS noted that the data that GAO provides to Congress over-represents the number of procurements protested. When more than one protest is filed in connection to a single procurement, each protest is counted separately.  In 2014, GAO processed 2,269 filings but only 2,135 procurements were protested.

The study also delved into the psychological warfare between agencies and contractors.

Federal procurement officials’ aversion to protests drives behavior that may or may not benefit contractors. The prospect of companies filing a protest influences agency behavior in ways that affect contractors sometimes positively but also negatively.
The threat of protests may motivate agency officials to do more rigorous market research, hold a competition instead of awarding a sole-source contract, or conduct more thorough and fair competitions. But fear of protests also could prompt officials to structure contracts in ways that are less likely to be protested, such as using “lowest price technically acceptable” as award criteria, instead of a best-value competition when best value may be more appropriate.”


Photo Credit: Thinkstock

Multiple Companies Protest $1.6 Billion Pentagon Cloud Computing Contract




“Since Feb. 19, Amazon Web Services, Citrix, Nutanix and Minburn Technology Group, a Microsoft reseller, have filed formal bid protests with the Government Accountability Office on the DISA joint enterprise license agreement with VMware, citing an overly broad agreement that stifles competition.

Based on the contracting language, the bid protesters also contend the contract re-up is an improper sole-source request for cloud services that would give VMware an unfair advantage competing for DOD’s growing cloud demand.

While DOD wants physical separation for its classified data, it has been forging ahead with its cloud strategy in an effort to formulate processes for hosting unclassified data in cloud environments. One of the barriers to entry to win cloud contracts in DOD is achieving compliance under the Federal Risk and Authorization Management Program, the government’s standardized cloud computing security requirements.

VMware achieved that feat in early February and because of its success in the virtualization market, VMware figures to be a big player in the growing federal cloud market, which could reach $7.3 billion in 2015.

Yet, the license agreement in question – which calls for “required software support on the existing perpetual licenses and additional licensing” for over 2 million VMware licenses – also requests cloud services. The agreement appears to skirt DISA’s current security requirements guide, which require cloud service providers to be vetted against risk-based standards that increase with rigor as the sensitivity of DOD data does.

One of two things is likely to happen as a result of the uproar. Sources within DISA said the the agreement could be pulled back and tweaked, which seems the most likely scenario.

The other option would be for DISA to push forth, which will result in GAO rendering a decision in the bid protest. GAO has 100 days from a bid protest filing to make a decision.”

(Image via brainpencil / Shutterstock.com)



Pentagon’s Real Estate Inventory Incomplete, Incorrect and Inconsistent


FOB Leatherneck


“The Department of Defense has no idea what’s going on in more than half the properties it owns and it has no plans to figure that information out, according to a new report from the Government Accountability Office.

The DoD’s massive collection of military real estate holdings worldwide includes more than half a million facilities located on more than 5,000 sites valued at about $828 billion. Many of these properties hold important purposes, but an alarming number (about half) are underutilized or completely abandoned. Even worse, the department is terrible at tracking which ones are which.

“Since 1997, [GAO has] designated the Department of Defense’s (DOD) Support Infrastructure Management as a high-risk area, in part due to the challenges DOD faces in reducing excess and obsolete infrastructure,” the report says. The most recent audit is the latest in a string of reports (1997, 2011, 2013) that reveal little to no progress is being made.

Officially, the department’s real estate information is tracked by the Office of the Secretary of Defense using software called the Real Property Assets Database. But in reality, GAO found that more than half of the facilities lack utilization data, and that much of the utilization that does exist is incorrect.

The Pentagon and Congress were aware of the issue even before the GAO report was released. According to Pentagon estimates, the military has more than 20 percent excess infrastructure across the United States—facilities and bases that are sitting unused or unoccupied at a cost of at least $2 billion per year. The Project On Government Oversight, along with a coalition of organizations from across the ideological spectrum, supported an amendment offered by Rep. Patrick Murphy (D-Florida) to this year’s defense spending bill that would prevent the Pentagon from using funds on facilities that are not being utilized and are sitting unused. A final vote on the spending bill is still pending.

“Taxpayers cannot continue paying for unused and underused buildings, especially while the nation is at record debt levels,” Murphy said. “Federal agencies as a whole must do a better job at managing their facilities. I was pleased to see bipartisan support for my common-sense amendment to root out this wasteful spending.”

The recently released GAO report is the result of a GAO audit mandated by the National Defense Authorization Act for Fiscal Year 2014. Auditors visited 11 sites at random from the four branches of the military and compared their findings to the Pentagon’s software.

At the Army’s site, officials showed off software that checks for inconsistencies with the Pentagon property database. For the randomly selected site that the auditors planned to visit, the Army software found 45,000 discrepancies with the DoD’s information. Not to say that the Army’s system is that much more trustworthy—their records indicated that facilities had been reviewed in various years including 0013, 0201, 1776, 2201 and 3013.

The other visits didn’t go much better. Auditors found large, multi-building complexes listed as single structures, buildings that had been demolished but were listed as still in existence, and abandoned structures that were listed as in use.

Unfortunately, the Pentagon’s atrocious property record keeping is far from unique within the federal government. In 2013, GAO released a similarly discouraging investigation into the General Services Administration’s system for keeping track of federal buildings, the Federal Real Property Profile. Auditors discovered that 23 of the 26 federal buildings they visited had inaccurate information about utilization, condition, annual operating costs, and value. Among the 26, 19 had incorrect utilization information, such as a USDA site that has been abandoned since 2009 but was listed as in use both that year and 2010.

All types of errors are problematic, but inaccurate utilization data particularly leads to inordinate and unnecessary government waste. Federal agencies are paying to maintain buildings that could have been sold or leased by the government years ago for thousands or even millions of dollars each.

Old Post Office

The Old Post Office located in Washington, D.C. was identified as an underutilized federal property by the GSA and is being leased to the Trump Organization for the next 60 years.

Thankfully, GSA has made a concentrated effort to offload excess federal properties. According to Federal Times, the agency has identified 14,000 properties that the government no longer needs that cost about $190 million a year to maintain. In perhaps its most high profile project, GSA is leasing the Old Post Office building, located in the Federal Triangle area of Washington, D.C., to the Trump Organization for 60 years to transform it into an upscale hotel. Renovations began in July on the underused building, which previously cost the government $6 million a year in upkeep.

GSA reports that since 2012, property sales have brought in $139 million. The Pentagon needs to follow the lead of GSA and implement a better system to identify underused or abandoned buildings and subsequently sell or lease those facilities.”

Images from Flickr users Wyn Van Devanter and the U.S. Corps of Engineers Europe District.