High-performing organizations fade into the A-76 sunset

A pilot initiative established during the George W. Bush administration as an alternative to public-private job contests could be on life support, according to new watchdog agency findings.

In a report (GAO-10-566R) released Thursday to the leadership of the House Armed Services Committee, the Government Accountability Office said the Defense Department's interest in managing and overseeing high-performing organizations to improve internal efficiency has waned, because the ongoing moratorium on competitions under the rules in Office of Management and Budget Circular A-76 has reduced the motivation for significant reforms.

"Absent public-private competition, HPOs have little incentive to make difficult management decisions," wrote Joseph Sikes, director of housing and competitive sourcing at Defense, in response to the report. "While evaluation of HPO performance data as submitted by the components will be performed, experience with earlier reengineering efforts suggest savings will be minimal."

Congress established high-performing organizations in 2004 as a way to overhaul operations without undertaking the time-consuming and controversial competitive sourcing process. Defense selected a handful of components where employees would voluntarily reengineer their business processes to improve efficiencies and cost effectiveness, instead of competing directly with the private sector for their jobs.

Between 2006 and 2009, the Pentagon named nine HPOs for functions at the Army, Defense Logistics Agency, Army Corps of Engineers, Air Force, Defense Contract Management Agency and Defense Finance and Accounting Service.

The Office of the Undersecretary of Defense, Acquisition, Technology and Logistics collects annual performance information from the organizations. But investigators said it's not clear if the information is useful or reliable.

GAO found that more than half the reports HPOs submitted during the past three years omitted key performance metrics, including details about workforce skills, experience or customer satisfaction. The reports also included unreliable and incomplete data that presented "a misleading and inaccurate picture of performance," the watchdog found.

For example, one HPO identified cost savings that were achieved by functioning with a smaller workforce than was authorized. GAO found the personnel reduction "was not the result of a reengineering effort but due to the organization's lengthy hiring process and a high turnover of employees. As a result, the 300 vacant positions were claimed as cost savings."

At another HPO location, managers claimed more than $6 million in savings in their annual report but failed to identify the extra costs associated with hiring several hundred temporary workers to perform a workaround operation when a project to automate a portion of the work processes failed, the report said.

The lack of program supervision by Defense officials might not be inadvertent. "According to [Office of Secretary of Defense] officials, their interest in establishing oversight over the HPOs has waned because they believe that incentives for organizations to participate have been lost," GAO said.

The department said it would continue to encourage efficiency initiatives through the program, but without the threat of a competition, HPOs would be less likely to continue working toward their earlier performance commitments. Pentagon officials also indicated that as long as the moratorium is in effect, they will not select any new HPOs for the program.