Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
MANAGEMENT OF THE MILITARY FACILITIES PROCUREMENT PROGRAM Prepared f o r the U S Department of Defense by the Special Advisory Conunittee on Management of M i l i t a r y Construction â¢Building Research Advisory Board Division of Engineering--National Research Council JUN 3 2009 THE GEORGE B BROWN, JR. LBRARY National Academy of Sciences Washington, D C February 1971 I m A S - N A E FEB 2 8 1977 LIBRARY
â¢Ì1 This I S a report o f work under Contract No DAHC IS 70 C 0198 between the U S Department of Defense and the National AcadenQr of Sciences Inquiries concerning t h i s report should be addressed to The Executive Director, Building Research Advisory Board, Division o f Engineering- National Research Council, 2101 Constitution Avenue, N W , Washington, D C 20418
NATIONAL ACADEMY OF SCIENCES Ì NATIONAL RESEARCH COUNCIL DIVISION OF ENGINEERING BUILDING RESEARCH ADVISORY BOARD SPECIAL ADVISORY COMMITTEE ON MANAGEMENT OF MILITARY CONSTRUCTION ANDREW J WATT, Chairman Exeauttve V%Qe Preatdent, U S Gypsum Company Chicago, I l l i n o i s MARTIN DAVID DUBIN, Partner, Dubin, Dubin, Black and Moutoussamy, Chicago, I l l i n o i s ROBERT R JONES, PartTt^r, Syska and Hennessy, Inc , Washington, D C NATHANIEL MACON MARTIN, Preaxdentt Sheraton Design and Development Corporation, Boston, Massachusetts PHILIP JAMES MEATHE, Exeaubtve V%oe Preezdent, Smith, Hinchman § Grylls Associates, Inc , Det r o i t , Michigan DAVID S MILLER, Semor V%oe Preaxdenty The E F Hauserman Company, Cleveland, Ohio GERALD McKEE, Preaidsnt, McKee, Berger and Mansueto, Inc , New York, N Y GUY F TOZZOLI, Dvreator, World Trade Department, The Port o f New York Authority, New York, N Y HOWARD S TURNER, Chatman and Ckvef Exeautvoe Offxaev^ Turner Construc- t i o n Company, New York, N Y ALFRED T WAIDELICH, E!cecui?i,ve V-Loe Preaxdent, Engineering and Research, The Austin Company, Cleveland, Ohio FRANK L WHITNEY, Preszdent, Walter Kidde Constructors, Inc , New York, N Y Staff WILLIAM A COSBY, Program Manager--Special Projects R BARRY ASHBY, BRAB Consultant WILLIAM A CARSWELL, BRAB Consultant CHARLES E SCHAFFNER, BRAB Consultant MICHAEL SUMICHRAST, BRAB Consultant DONALD M WEINROTH, BRAB Consultant JAMES R SMITH, BRAB Assistant DirectorâTechnical Operations JOAN D FINCH, Staff Associate ROY A DUNHAM, Staff Editor i l l
FOREWORD This report was prepared by the Building Research Advisoiy Board Special Advisory Committee on Management o f M i l i t a r y Construction, sppomted by the Chairman o f the Board with approval o f the Chairman o f the National Researdi Council Division o f Engineering, and the President o f the National Academy of Sciences I t has been reviewed, accepted, and approved f o r tra n s m i t t a l t o the Office o f the Assistant Secretary o f Defense ( I n s t a l l a t i o n s and Logistics) by the Advisory Services Subcommittee o f the Board, acting on behalf o f the Board The Board appreciates the contributions that members o f i t s Special Advisory Committee have made and takes t h i s opportunity to express i t s gratitude f o r t h e i r e f f o r t John P Gnaedinger, Chairman Building Researdi Advisory Board IV
CONTENTS Section Page I INTRODUCTION . . 1 1 0 STUDY OBJECTIVES 1 2 0 STUDY SCOPE 2 3 0 STUDY CONDUCT . 2 4 0 REPORT ORGANIZATION . 4 I I CONCLUSIONS AND RECOMMENDATIONS . S 1 0 MANAGEMENT CONCEPT AND RESPONSIBILITIES 6 1 1 FACILITIES PROCUREMENT BY MANAGEMENT 6 1 2 MANAGEMENT RESPONSIBILITIES 6 1 2 1 Office of the Secretary of Defense 6 1 2 2 Offices of the Secretaries o f the M i l i t a r y Departments 6 1 2 3 Offices o f the F a c i l i t i e s Procurement Agents 7 2 0 PROGRAM MANAGEMENT 7 2 1 COST INFORMATION FOR MANAGEMENT 7 2 1 1 Cost Accounting System 7 2 1 2 Use of Cost Information for Management Purposes 8 2 2 PERSONNEL REQUIREMENTS 8 2 3 COMPREHENSIVE PLANNING 8 2 3 1 Master Planning 8 2 3 2 The Long-Range Construction Program 9 2 4 ANNUAL PLANNING AND FUNDING 9 2 4 1 Responsibility f o r and Quality of I n i t i a l Estimates 9 2 4 2 Small Projects of a Routine Nature 9 2 4 3 Authorization, Appropriation, and Apportionment 10 2 4 4 Self-Compensating Projects 10
2 5 DESIGN AND CONSTRUCTION PROCUREMENT 11 2 5 1 Procurement of Design and Construction Services 2 5 2 Practices and Procedures which I n h i b i t Design and Construction 2 6 TECHNOLOGY I I I SUPPORTING DISCUSSION 1 0 MANAGEMENT CONCEPT AND RESPONSIBILITIES 1 1 FACILITIES PROCUREMENT BY MANAGEMENT 1 2 MANAGEMENT RESPONSIBILITIES 1 2 1 Office of the Secretary of Defense 1 2 2 Offices of the Secretaries of the M i l i t a r y Departments 1 2 3 Offices o f the F a c i l i t i e s Procurement Agents 2 0 PROGRAM MANAGEMENT 2 1 COST INFORMATION FOR MANAGEMENT 2 1 1 Cost Accounting System 2 1 2 Use of Cost Information f o r Management Purposes 2 2 PERSONNEL REQUIREMErfTS 2 3 COMPREHENSIVE PLANNING 2 3 1 Master Planning 2 3 2 The Long-Range Construction Program 2 4 ANNUAL PLANNING AND FUNDING 2 4 1 Responsibility f o r and Quality o f I n i t i a l Estimates 2 4 2 Small Projects of a Routine Nature 2 4 3 Authorization, Appropriation, and Apportionment 2 4 4 Self-Compensating Projects 2 5 DESIGN AND CONSTRUCTION PROCUREMENT 2 5 1 Procurement of Design and Construction Services 2 5 2 Practices and Procedures which I n h i b i t Design and Construction 2 6 TECHNOLOGY 11 11 12 13 16 16 19 19 22 23 30 30 30 35 36 38 39 46 49 49 50 54 57 58 59 66 73 VI
APPENDICES A Excerpts of "Statement of Work" from Contract between the U S Department of Defense and the National Academy of Sciences . . . A-1 B Industrialized Building Technology B-1 C An Analysis of the Existing System f o r Obtaining M i l i t a r y F a c i l i t i e s and a Review of Construction Practices and Methods Employed by Other Federal and Nonfederal Organ- izations, August 1970 Progress Report of the Special Advisory Committee on Management of M i l i t a r y Construction (Revised) . . . . . C-1 V l l
I INTRODUCTION At the request of the Office o f the Assistant f o r Construction Operations, Office of the Assistant Secretary o f Defense ( I n s t a l l a t i o n s and L o g i s t i c s ) , and under a contract between the U S Department of Defense and the National Academy of Sciences, the Building Research Advisory Board undertook a study of the management of the m i l i t a r y f a c i l i t i e s procure- ment program The stated need f o r the study was the urgency f o r reducing costs while continuing to meet m i l i t a r y construction goals 1 0 STUDY OBJECTIVES* The study objectives, accepted by the Building Research Advisory Board, were given as follows 1 Conduct an in-depth study of the existing systems of managing the design and execution of m i l i t a r y construction programs, 2 Recommend improved or new construction management system or systems consisting of p o l i c i e s , procedures, and techniques that w i l l r e s u l t m lowest design and construction management costs consistent with obtaining adequate bids and construction q u a l i t y , 3 I d e n t i f y and depict i n d e t a i l the role of the engineering and con- str u c t i o n agents and the m i l i t a r y Departments and other government agencies as c l i e n t s , 4 Id e n t i f y currently available techniques and procedures that appear most cost beneficial when compared to feasible alternatives, 5 Develop and recommend a procedural schedule f o r e f f e c t i n g trans- i t i o n from existing t o recommended approaches, s p e c i f i c a l l y con- cerning changes to exis t i n g systems that can be effected over the near term, including those which would e n t a i l removal of constraints, changes i n ex i s t i n g systems that can be effected over the longer term, including those which would e n t a i l removal of constraints, and actions which would need t o be taken by e n t i t i e s â¢See Appendix A for a complete "Statement of Work" excerpted from the contract between the U S Department of Defense and the National Academy of Sciences
other than the Department o f Defense m order t o make the recommended approach attainable i n i t s ideal form 2 0 STUDY SCOPE The Committee's work was lim i t e d p r i n c i p a l l y to the procurement of m i l i t a r y f a c i l i t i e s t o be located w i t h i n the continental United States, while maintaining cognizance of the need f o r providing an ef f e c t i v e base f o r mobilization i n time of war or national emergency, a ca p a b i l i t y f o r recovery i n the wake of natural and man-made disasters, and a capa b i l i t y f o r continued operation and maintenance of continental U S bases S p e c i f i c a l l y , t h i s work entailed the following 1 A study of a l l aspects of m i l i t a r y construction management of the three m i l i t a r y Departments, from program or project d e f i n i t i o n through acceptance of the completed program or pro;|ect, 2 An evaluation of current design procedures and t h e i r underlying r a t i o n a l e , current construction management techniques, and current p o l i c i e s and t h e i r impact on program execution, 3 An analysis of construction management systems used by other agencies of the government and by private organizations, t o ascertain de- sirable elements which may be adaptable t o the m i l i t a r y construction system(s), 4 I d e n t i f i c a t i o n and evaluation of promising construction management techniques, procedures, and organizational relationships, to include the free exercise of imagination and ingenuity m devising new procedures and techniques that might contribute to achieving an ideal m i l i t a r y f a c i l i t i e s procurement program 3 0 STUDY CONDUCT The study was carried out f o r the U S Department of Defense by the Special Advisory Committee on Management of M i l i t a r y Construction, appointed fo r the purpose by the Chairman of the Building Research Ad- visory Board with the approval of the Chairman of the National Research Council Division of Engineering, and the President of the National Academy of Sciences As a f i r s t step, a report addressing the study concept as perceived by the Building Research Advisory Board, including a detailed program f o r Committee work, meetings, and agency v i s i t a t i o n s , was prepared and trans- mitted t o the Office of the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) i n May 1970 To provide the basis for an analysis of the organization and operation of the existing system for obtaining m i l i t a r y f a c i l i t i e s , an i n i t i a l series of interviews was held i n Washington, D C , with persons
associated w i t h the n l l i t a r y f a c i l i t i e s procurement program and working w i t h i n the Office of the Chief of Engineers (Army]» the Naval F a c i l i t i e s Engineering Command (Navy), and the Office o f the Directorate o f C i v i l Engineering (Air Force) Extensive interviews also were held with personnel working with i n f i e l d d i s t r i c t s and divisions of the Corps of Engineers, engineering f i e l d divisions of the Naval F a c i l i t i e s Engineer- ing Command, and regional f i e l d o f f i c e s of the A i r Force Directorate o f C i v i l Engineering, with personnel involved i n the m i l i t a r y f a c i l i t i e s ' procurement program of at least two bases or i n s t a l l a t i o n s o f each m i l i t a r y -Department, and representatives of users o f f a c i l i t i e s constructed at I those bases or i n s t a l l a t i o n s , and, with personnel associated with I several architect-engineer and contractor firms that had performed work f o r the m i l i t a r y Departments In addition t o the above, i n order to provide the basis f o r a review of procurement methods and practices employed by nonmilitary federal and nonfederal organizations, interviews were held with individuals involved i n the design, construction, or acquisition o f f a c i l i t i e s f o r the Veterans Administration, the Department o f Housing and Urban Development, the U S Postal Service, and the General Services Administration, and with a representative sample of private organizations The results o f a l l interviewing and a review o f pertinent information and l i t e r a t u r e , much of which was provided by the m i l i t a r y Departments upon request, were presented i n a comprehensive progress report i n August 1970 Also included i n that progress report were the results of the investigation of the operation of the ex i s t i n g m i l i t a r y f a c i l i t i e s procurement management system, and the results o f the investigation of management systems used by other federal and nonfederal organizations Following transmittal of the progress report, the Advisory Committee continued to provide guidance t o i t s s t a f f , t o review study progress, to i d e n t i f y problems, t o analyze promising techniques and approaches, and t o propose solutions On 1 November 1970, another progress report was prepared to advise the Office o f the Assistant Secretary of Defense (I n s t a l l a t i o n s and Logistics) as to the outline o f the Committee's f i n a l report and princ i p a l recommendations that were emerging On 11, 14, and 15 December 1970, a formal series of interviews were held with representatives o f the three m i l i t a r y Departments t o enable the Coipmittee t o consider revisions to the aforementioned August 1970 progress report At the 16-17 December 1970 Committee meeting, a d r a f t of the f i n a l report was prepared and subsequently transmitted to the Office of the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) on 31 December 1970 for review and comment The Committee met again on 20-21 January 1971, considered the comments received from the Office of the Assistant Secretary o f Defense ( I n s t a l l a t i o n s and Lo g i s t i c s ) , and drafted revisions as i t deemed appropriate i n l i g h t of those comments Fi n a l l y , t h i s report was prepared, reviewed, and approved by the Committee f o r transmittal t o the Office o f the Assistant Secretary of Defense (I n s t a l l a t i o n s and Logistics) through the Building Research Advisory Board and the National Academy of Sciences
4 0 REPORT ORGANIZATION This report consists of two pr i n c i p a l sections m addition to t h i s Introduction Section I I contains the conclusions and recommendations of the Special Advisory Committee, and Section I I I contains the support f o r those conclusions and recommendations Both Sections I I and I I I are prefaced by remarks setting f o r t h b r i e f l y the manner i n which the Committee approached i t s task and those fundamental concepts which form the basis f o r i t s conclusions and recommendations The several appendices contain background material Appendix A presents excerpts of the Statement o f Work which was presented to the Committee Appendix B presents an integrated treatment of ind u s t r i a l i z e d building technology prepared by BRAB and adapted f o r t h i s report t o provide a vehicle f o r setting f o r t h m more d e t a i l than possible i n the body of the report, the reasons f o r the current i n d u s t r i a l i z e d building movement m the United States, the history o f t h i s recent surge o f interest and action, and the relationship of ind u s t r i a l i z e d and systems building t o the m i l i t a r y f a c i l i t i e s procurement program and to the technology program recommended f o r the Department o f Defense Appendix C contains the revised progress report ci t e d under 3 0 above
I I CONCLUSIONS AND RECOMMENDATIONS The basic charge to the Special Advisory Committee was to study the current Department of Defense system f o r procurement of m i l i t a r y f a c i l i t i e s and to advise on how better t o manage that system I n response to that charge, the Committee Conducted an in-depth study of the exi s t i n g system Isolated and analyzed what i t believed to be the three fundamental purposes to be served by the m i l i t a r y f a c i l - i t i e s procurement program namely, procurement and real property management per se, maintenance of an eff e c t i v e mobilization base f o r national emergencies, and person- nel t r a i n i n g to serve these two objectives and the m i l i - tary missions as well Made an assessment of the present and projected climate of change which i s a f f e c t i n g b u i l d i n g , real property management, and f a c i l i t i e s procurement processes Explored emerging procurement management philosophies and the potential effects of new building technology The Committee concluded that the single, most important action that could be taken by the Department of Defense, and the F a c i l i t i e s Pro- curement Agents* of the three m i l i t a r y Departments, would be t o adopt more f u l l y the fundamental concept that t h e i r r o l e i s that of managers of the processes of real property and f a c i l i t i e s procurement In so doing, the Committee believes that the Department of Defense would be better able to continuously seek out and exploit the widest possible variety of procurement options and to provide both a more responsive mobilization base and an effective personnel t r a i n i n g program F u l l adoption of the concept requires changes i n the roles of the Office of the Assistant Secretary of Defense ( I n s t a l l a t i o n s and *As used herein, the F a c i l i t i e s Procurement Agents of the m i l i t a r y Departments are as follows the Corps of Engineers f o r the Department of the Army, the Naval F a c i l i t i e s Engineering Command for the Depart- ment of the Navy, and, the Directorate of C i v i l Engineering f o r the Department of the Air Force
L o g i s t i c s ) , the Offices o f the Assistant Secretaries of the m i l i t a r y Departments ( I n s t a l l a t i o n s and Logisti c s ) , and the Offices of the three F a c i l i t i e s Procurement Agents, i n s t i t u t i o n of certain new, and improve- ment of certain e x i s t i n g , management control practices, a reduction of the current in-house execution capa b i l i t y , elimination of certain con- s t r a i n t s and re s t r a i n t s i n h i b i t i n g use of more innovative procurement practices and techniques, and, i n s t i t u t i o n of an aggressive technology program The recommendations which follow address those requirements i n d e t a i l The Committee recognizes that implementation of the recommendations must be accomplished i n an evolutionary manner so as not to adversely affect the maintenance of national defense preparedness, however, complete t r a n s i t i o n should be accomplishable withm three years 1 0 MANAGEMENT CONCEPT AND RESPONSIBILITIES 1 1 FACILITIES PROCUREMENT BY MANAGEMENT I t i s recommended that the Department of Defense, the three m i l i t a r y Departments, and the F a c i l i t i e s Procurement Agents and t h e i r related regional f i e l d o f f i c e s , insofar as i s practicable withm the constraints imposed by overriding mission requirements and by those outside the Department, assume a pure management posture with respect to the procure- ment of m i l i t a r y f a c i l i t i e s I t i s further recommended that a management program be structured along the lines set f o r t h i n the Supporting Dis- cussion section of t h i s report (1 1, Management Concept and Responsi- b i l i t i e s ) and implemented as rapidly as possible 1 2 MANAGEMENT RESPONSIBILITIES 1 2 1 Office of the Secretary of Defense I t i s recommended that the Office of the Secretary of Defense, through the Office of the Assistant Secretary of Defense ( I n s t a l l a - tions and Logistics) execute i t s role of top management i n the m i l i t a r y f a c i l i t i e s procurement program by (1) emphasizing the functions of overall planning and policy development, (2) delegating a l l aspects of policy implementation to the three m i l i t a r y Depart- ments, and (3) coordinating and evaluating the implementation thereof 1 2 2 Offices of the Secretaries of the M i l i t a r y Departments I t i s recommended that the Office of the Secretary of each m i l i t a r y Department, through the Office of the Assistant Secretary ( I n s t a l l a - tions and Logistics), execute i t s role of top management by (1) em- phasizing the function of developing departmental policyâconsistent with that established by the Office of the Secretary of Defense, (2) delegating a l l aspects of policy implementation to the F a c i l i t i e s
Procurement Agent i n that Department, and (3) evaluating the imple- mentation thereof 1 2 3 Offices of the F a c i l i t i e s Procurement Agents 1 2 3 1 Headquarters of the F a c i l i t i e s Procurement Agents - I t I S recommended that the Headquarters of each F a c i l i t i e s Procure- ment Agent continue t o , but more f u l l y , execute i t s r o l e of middle management by (1) emphasizing the function of develop- ing c r i t e r i a and guidelines f o r use i n administering, on behalf of the Chief of the Department (or his designated representa- t i v e ) , a l l aspects of the planning, programming, funding, design, construction, operation, maintenance, and retirement of m i l i t a r y f a c i l i t i e s and f o r evaluating the accomplishment thereof, and (2) by delegating, except i n unusual cases, the r e s p o n s i b i l i t y f o r execution t o an appropriate regional f i e l d o f f i c e 1 2 3 2 Regional Field Offices of the F a c i l i t i e s Procurement Agents - I t I S recommended that the regional f i e l d o f f i c e s of each of the F a c i l i t i e s Procurement Agents, i n t h e i r p o s i t i o n of l i n e management (1) maintain a minimal cadre of procure- ment-management and technical-management s p e c i a l i s t s , and (2) except m those unusual instances noted, contract f o r a l l goods and services necessary t o the actual provision of m i l i t a r y facilities--examining a l l alternative procurement modes and selecting those most cost e f f e c t i v e I t i s further recommended that the Office of the Secretary of Defense press f o r the iimnediate removal of a l l r e s t r a i n t s , such as are embodied m Public Law 91-142, Section 704, which pre- vent the F a c i l i t i e s Procurement Agent o f the A i r Force from serving i n the capacity of an "engineering and construction agent" as do the F a c i l i t i e s Procurement Agents of the other two m i l i t a r y Departments 2 0 PROGRAM MANAGEMENT 2 1 COST INFORMATION FOR MANAGEMENT 2 1 1 Cost Accounting System I t I S recommended that the Office of the Assistant Secretary of Defense (I n s t a l l a t i o n s and Logistics), coordinate the modification of and, to the extent possible, s i m p l i f i c a t i o n of the exi s t i n g cost accounting systems f o r the three Departments so that a l l costs f o r a l l a c t i v i t i e s relevant t o the planning, programming, funding, design, construction, and where possible, operation, maintenance, and retirement of m i l i t a r y f a c i l i t i e s , w i l l be available
2 1 2 Use of Cost Information f o r Management Purposes I t I S recommended that the Office of the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) d i r e c t and coordinate the development of a common cost information system based on uniform budgeting and estimating procedures and common h i s t o r i c data that can be stored and retrieved i n various combinations fo r use by management i n such areas as (1) f a c i l i t y cost control, (2) per- sonnel administration and overhead labor control, (3) selection of procurement mode, (4) establishment of optimum c r i t e r i a f o r methods of charging such costs as government construction supervision, inspection, and overhead (SIOH), and (5) f a c i l i t y l i f e - c y c l e cost- benefit analyses 2 2 PERSONNEL REQUIREMENTS I t i s recommended that the Office of the Assistant Secretary of Defense (I n s t a l l a t i o n s and Logistics) dir e c t and coordinate through the F a c i l i t i e s Procurement Agents a reexamination and establishment of personnel requirements i n terms of quantity, q u a l i t y , and placement to achieve f u l l implementation of the recommended management concept I t i s further recommended that a concurrent reevaluation be made of the premises upon which mobilization base and t r a i n i n g manpower needs are founded and that personnel requirements for the f a c i l i t i e s procurement program be i n - fluenced only as results of t h i s reevaluation indicate that such i s absolutely essential 2 3 COMPREHENSIVE PLANNING 2 3 1 Master Planning 2 3 1 1 Scope of Master Planning - I t i s recommended that the analysis of existing conditions, now performed as part of the i n s t a l l a t i o n master planning process, be expanded to include assessment of physical condition, functional value, and oper- ating and maintenance expenses of buildings and structures, as well as more detailed investigation and evaluation of under- ground u t i l i t i e s and foundation conditions I t i s also recom- mended that the projection of requirements, now performed as part of i n s t a l l a t i o n master planning, be expanded to include evaluation of alternative five-year capital improvement pro- grams based on rigorous forecasts of economic, s o c i a l , and technological trends, and how these programs w i l l a t f e c t , or be affected by any surrounding community 2 3 1 2 Funding of Comprehensive Planning - I t i s recommended that adequate funds f o r creating and maintaining comprehensive plans f o r the development of i n s t a l l a t i o n s be authorized and appropriated annually as a separate item, usable only f o r the purpose of comprehensive planning
2 3 1 3 Responsibility f o r Comprehensive Planning - I t i s recommended that r e s p o n s i b i l i t y f o r development of comprehensive plans for i n s t a l l a t i o n s be assigned t o the regional f i e l d o f f i c e of the appropriate F a c i l i t i e s Procurement Agent serving the geo- graphic region i n which the i n s t a l l a t i o n i s located, i n accor- dance with c r i t e r i a and guidelines provided by the headquarters o f f i c e of that Agent 2 3 2 The Long-Range Construction Program 2 3 2 1 Establishment of Standard C r i t e r i a f o r Project Evalu- ation - I t i s recommended that the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) coordinate the develop- ment of standard c r i t e r i a f o r r e l a t i n g f a c i l i t y requirements to i n s t a l l a t i o n mission performance or preparedness These c r i t e r i a should be used i n the p r i o r i t y ordering of f a c i l i t i e s now performed as part of the development of the five-year construction program, and as part of the planning and program- ming of the annual m i l i t a r y f a c i l i t i e s procurement program 2 4 ANNUAL PLANNING AND FUNDING 2 4 1 Responsibility f o r and Quality o f I n i t i a l Estimates I t I S recommended that r e s p o n s i b i l i t y f o r preparation of the i n i t i a l cost estimates required f o r DD Form 1391 be delegated t o the regional f i e l d offices of each of the F a c i l i t i e s Procurement Agents I t i s further recommended that the q u a l i t y of the i n i t i a l cost estimates made f o r DD Form 1391 be upgraded so th a t , t o the extent possible they can serve, without modification, f o r a l l planning, programming, and budgeting purposes p r i o r t o inclusion of a pro;iect i n the annual m i l i t a r y f a c i l i t i e s procurement program of the respective Department, which I S submitted to the Office of the Assistant Secretary of Defense (I n s t a l l a t i o n s and Logistics) 2 4 2 Small Projects of a Routine NatureâLess Than $500,000 2 4 2 1 Cost Estimates - I t i s recommended that the i n i t i a l cost estimates formulated f o r DD Form 1391 serve as the sole cost information to be generated f o r projects considered to be routine i n nature and costing less than $500,000 each, during the annual planning, programming, and funding cycle 2 4 2 2 Review of Small Projects of Routine Nature - 2 4 2 2 1 Review by the M i l i t a r y Departments - I t i s recommended that a l l projects considered to be routine i n nature and estimated t o cost less than $500,000 each, be aggregated during the annual planning and programming cycle at each approving m i l i t a r y command level and pre- sented to each successive command level as a single l i n e
Item, delineated only by the t o t a l d o l l a r amount and a l i s t of projects by f a c i l i t y c l a s s i f i c a t i o n (e g , opera- t i o n a l f a c i l i t y , maintenance f a c i l i t y ) 2 4 2 2 2 Department of Defense Reviews - I t i s recom- mended that the Office of the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) review the content of the packages of small, routine projects submitted by each m i l i t a r y Department only to ensure policy compliance 2 4 2 2 3 Congressional Review - I t i s recommended that the Office of the Secretary of Defense request Congres- sional authorization and appropriation f o r a l l packaged Items i n the annual m i l i t a r y f a c i l i t i e s procurement pro- gram costing less than $500,000 each, as a single l i n e Item f o r each m i l i t a r y Department 2 4 3 Authorization, Appropriation, and Apportionment 2 4 3 1 Congressional Appropriations and Authorizations - I t i s recommended that the Office of the Secretary of Defense request that the Armed Services and Appropriation Committees of each body of Congress hold j o i n t hearings on the annual m i l i t a r y f a c i l i t i e s procurement program I t i s further recom- mended that the Office of the Secretary of Defense request of Congress that a p a r t i a l appropriation of funds f o r the annual m i l i t a r y f a c i l i t i e s program be provided immediately at the outset of each f i s c a l year, allocation of such funds to be subject to the discretion of the Office o f the Secretary of Defense and used only f o r projects of highest p r i o r i t y 2 4 3 2 Apportionment of Funds - I t i s recommended, i n order to f a c i l i t a t e the continuity of construction, that the Office of the Secretary of Defense request the Office of Management and Budget and require the Office of the Assistant Secretary of Defense (Comptroller) to release a s i g n i f i c a n t portion of the t o t a l amount of the funds appropriated by Congress f o r the annual f a c i l i t i e s procurement program as soon as possible a f t e r appropriation and p r i o r to completion of allocation considerations 2 4 4 Self-Compensating Projects I t I S recommended that the Office of the Secretary of Defense request that Congress grant to each m i l i t a r y Department a continuing author- i z a t i o n and annual appropriation under provisions of 10 U S C 2674, to allow immediate construction of self-compensating projects that would otherwise have to be funded through the m i l i t a r y f a c i l i t i e s procurement program at some l a t e r date 10
2 5 DESIGN AND CONSTRUCTION PROCUREMENT 2 5 1 Procurement of Design and Construction Services I t I S recommended that the Assistant Secretary of Defense ( I n s t a l - lations and Logistics) establish a policy that alternate procurement modes such as phased construction, design/construct, two-step, and construction management be considered with conventional sequential design and construction bidding, and that the spec i f i c mode used be selected and j u s t i f i e d on the basis of cost effectiveness 2 5 2 Practices and Procedures which I n h i b i t Design and Construction 2 5 2 1 Procurement of Design Services Factors Affecting Quality, Cost and Timing - I t i s recommended that regulations concerning the form of contract used and payments f o r design services, whether intended to be procured independently from architect-engineers or as part of an alternative design and construction procurement mode, be reviewed and adjusted as necessary so that a l l aspects of the design process can be negotiated on the basis of scope, q u a l i t y , and timing of the services to be performed, and on the q u a l i f i c a t i o n s of the source of the design service I t I S further recommended that the design c r i t e r i a issued by the F a c i l i t i e s Procurement Agents f o r use by the private sector emphasize the description of the expected r e s u l t of the design e f f o r t , and avoid to the degree possible, describing how to achieve the design r e s u l t 2 5 2 2 Review of Design Drawings and Specifications - I t i s recommended that , irrespective of procurement mode used, a l l functional and technical reviews of design drawings and con- str u c t i o n specifications be performed concurrently, and that the design process be continuous throughout these reviews 2 5 2 3 Selection of Construction Contractors - I t i s recom- mended that the Office of the Assistant Secretary of Defense (I n s t a l l a t i o n s and Logistics), as a matter of policy and irrespective of the procurement mode used, coordinate the development by the m i l i t a r y Departments of a set of standard contractor and subcontractor selection c r i t e r i a which includes but should not be li m i t e d to (1) the previous experience and performance of contractors i n terms of project size and nature, and (2) the f i s c a l i n t e g r i t y of the contractor to handle the project, i n terms o f available working capital and i d l e re- sources I t I S further recommended that the Office of the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) establish 11
policy f o r rigorously enforcing implementation of and compliance with the standard contractor selection c r i t e r i a 2 5 2 4 Assurance o f Quality Control - I t i s recommended that each F a c i l i t i e s Procurement Agent maintain the p r i n c i p a l respon- s i b i l i t y f o r assuring q u a l i t y of construction m behalf of i t s m i l i t a r y Department, but that these offi c e s exercise every opportunity t o u t i l i z e supervision and inspection services procurable from other sources i n l i e u of maintaining and using in-house personnel 2 6 TECHNOLOGY I t I S recommended that each of the F a c i l i t i e s Procurement Agents include, as an i n t e g r a l part of i t s f a c i l i t i e s procurement program, a building technology program that i s designed t o support and improve the management of f a c i l i t i e s procurement and re a l property and that i s based on the con- cept of the systems approach I t I S also recommended that the Office of the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) ensure that appropriate mechanisms exist w i t h i n each F a c i l i t i e s Procurement Agent f o r feeding needs i n t o an integrated Department of Defense program on a continuing basis, and f o r transferring the results of the three technology programs i n t o the procurement process of each F a c i l i t i e s Procurement Agent I t I S further recommended that funds f o r the integrated Department of Defense building technology program be sought annually from the Congress under separate authorization, appropriation, and accountability, and that funding f o r each F a c i l i t i e s Procurement Agent program be coordinated by the Office of the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) m order to maximize results and avoid needless duplication of e f f o r t 12
I l l SUPPORTING DISCUSSION In i t s in-depth study of how better to manage the procurement o f m i l i t a r y f a c i l i t i e s , the Committee f i r s t endeavored to document and understand the existing system m the context of the t o t a l structure, missions, and ro l e of the Department of Defense, and, to isolate those aspects of the whole which were wi t h i n i t s scope of study I n so doing, the Committee isolated and analyzed what i t believed t o be the three fundamental purposes to be served by the m i l i t a r y f a c i l i t i e s procurement system, namely, procurement o f f a c i l i t i e s required t o enable the militaxy Departments to accomplish t h e i r respective m i l i t a r y missions, maintenance of an m-house mobilization base f o r expansion o f procure- ment capability i n times o f emergency, and personnel t r a i n i n g t o serve these two purposes In addition, the Committee ascertained t o i t s s a t i s f a c t i o n the reasons fo r the seeming complexity o f the present f a c i l i t i e s procurement system These reasons, i t believes, can be summarized as follows 1 The size, scope and geographic d i s t r i b u t i o n of the real property management and f a c i l i t i e s procurement program 2 The blending with i n the f a c i l i t i e s procurement program o f the basic purpose of providing f a c i l i t i e s per se with the purposes of maintaining an in-house mobilization base, and of personnel t r a i n - ing 3 Adaptations made through the years to accommodate changes i n m i l i t a r y roles and missions, and the corollary constraints imposed i n t e r n a l l y and externally i n an e f f o r t to keep the system respon- sive t o the needs and accountable t o the public Because some of these reasons r e f l e c t p r i o r i t y Department o f Defense res p o n s i b i l i t i e s outside the scope of Committee concern, e f f o r t was made to avoid creating the p o t e n t i a l f o r undesirable impact on the discharge o f these other r e s p o n s i b i l i t i e s As a consequence, the Committee f e l t that maximum effectiveness would be achieved i f i t s recommendations f o r improvement of the m i l i t a r y f a c i l i t i e s procurement program were developed and offered i n the context of the present over- a l l policy and organizational environment o f the Department Hie Committee next made an assessment of the present day and projected climate of change that is affecting the t o t a l b u i l d i n g and construction 13
community and thus a l l who are responsible f o r real property management and f a c i l i t i e s procurement The p r i n c i p a l force that i s producing t h i s change i s the obvious need t o make s i g n i f i c a n t p r o ductivity gams i n the entire process of f a c i l i t i e s procurement production management However, there are additional forces at work, such as the increasing desire f o r higher qualit y environment i n the context o f both the f a c i l i t i e s them- selves and the immediate and surrounding environs, the complex problems posed by the ever-changing mix of available htmian and natural resources, and the increasing need f o r m o b i l i t y , a l l of which are reflected m the overall need f o r a wider variety of f a c i l i t i e s that are more adaptable t o modification and relocation In order to assist the Department of Defense i n addressing needs i n the years ahead wi t h i n t h i s complex and v o l a t i l e climate, the Coimnittee gave p a r t i c u l a r attention to development of an appropriate real property and f a c i l i t i e s procurement management philosophy F i n a l l y , the Committee explored emerging construction management philosophies and methods used by other agencies of government, m the private sector, and within the Department o f Defense i t s e l f Concur- r e n t l y , I t explored a broad range of new bu i l d i n g technology programs ThS re s u l t o f these e f f o r t s i s embodied m the conclusion that the Department and the F a c i l i t i e s Procuroment Agents should more f u l l y adopt the role o f real property and f a c i l i t i e s procurement managers so as t o leave them free to continuously seek out and exploit the greatest possible variety of procurement and new technology options Having so concluded, the Committee has recommended that the Department accept the real property and f a c i l i t i e s procurement manager role as i t s fundamental operating philosophy The remaining recommendations were developed to give substance to and augment that role even though each of those recommendations can i n the Committee's opinion stand on i t s own merit Although the effectiveness, p a r t i c u l a r l y quantitative cost effectiveness, of t h i s approach cannot be f i r m l y documented, the Committee, on the basis of i t s knowledge and e^enence, i s convinced that the v a l i d i t y and soimdness o f t h i s philosophy have been amply demonstrated The discussion which follows addresses the detailed recommendations of the Committee The material i s presented i n two parts The f i r s t . Management Concept and Responsibilities, addresses a management approach to f a c i l i t i e s procurement and the appropriate roles of the principals w i t h i n the Department of Defense who participate s i g n i f i c a n t l y i n the procurement process This includes the Office of the Assistant Secretary of Defense ( I n s t a l - lations and Logistics), the Offices o f the F a c i l i t i e s Procurement Agents, and t h e i r regional f i e l d o f f i c e s The second. Program Management, addresses the actual operational aspects of the M i l i t a i y Construction Program and treats accounting, 14
personnel requirements, long-range planning, annual planning and funding, design and construction, and advancement of technology A l l o f the related recommendations, i n the Committee's view are v a l i d i n any event but would be most e f f e c t i v e i f the recommended management concept i s adopted While at present one or more o f the m i l i t a r y Departments may use the various practices and proce- dures t o some extent, i t i s the intent o f the Committee that these recommended practices and procedures be implemented by a l l m i l i t a r y Services, and m a manner s u f f i c i e n t l y consistent to permit compar- ison and appraisal of results Comment herein on existing Department of Defense practices i s i n most instances based on evaluation o f those practices i n l i g h t o f the real property and f a c i l i t i e s procurement manager role Concepts such as avoiding v e r t i c a l dTq>lication, delegation o f authority, increased use o f services available from the private sector, reducing m-house execution capability whidi would tend t o i n h i b i t management choice o f procurement option, a l l derive from t h i s philosophy and are believed t o be essential to the development o f a consistent, o v e r a l l management plan As previously noted, i t was not possible t o demonstrate the cost effec- tiveness o f many of the recommendations This w?a due i n p a r t , f i r s t to the basic i n v a l i d i t y of demonstrating cost effectiveness o f recom- mended individual and essential features of a management system, because / o f t h e i r intangible value w i t h i n an integrated program Second, since / cost effectiveness as related t o f a c i l i t i e s procurement i s derived from a relationship o f qua l i t y t o cost, i t i s v i r t u a l l y impossible t o ascertain cost effectiveness o f f a c i l i t i e s procured under the present system because (a) the q u a l i t y of e x i s t i n g f a c i l i t i e s cannot be related t o the q u a l i t y desired at conception, and (b) the manner i n which cost data are maintained by the three Services, i n other agencies of government, and m the private sector, precludes the making of v a l i d quantitative cost comparisons However, the Committee believes that a f a c i l i t i e s procurement operation managed i n accordance with the recommendations set forth, assuming optimum levels o f s t a f f and s t a f f performance, w i l l prove to be more cost e f f e c t i v e than the current system As already indicated, the Committee recognized that the national defense policy o f the Department of Defense requires that the F a c i l i t i e s Procurement Agents maintain a mobilization base and a t r a i n i n g function In the opinion o f the Committee, however, attempts to s a t i s f y these needs may have reinforced each other so as t o v i r t u a l l y define a level o f needed in-house technical execution capability The Committee believes such an in-house capability l i m i t s f a c i l i t y procurement options and management freedom and therefore believes these needs should be c r i t i c a l l y ^evaluated m l i g h t o f the procurement management concept recommended Although i t i s f u l l y aware of the l i m i t a t i o n s o f i t s own competence i n t h i s area o f defense requirements, the Committee believes that such reevaluation by the Department of Defense w i l l reveal that 15
even these contingent needs can be better met through the recommended management system than i s currently the case 1 0 MANAGEMENT CONCEPT AND RESPONSIBILITIES 1 1 FACILITIES PROCUREMENT BY MANAGEMENT There are a number o f reasons why many of those who have had continuing responsibility f o r real property management and f a c i l i t i e s procurement have created an m-house csqpability to s a t i s ^ a l l or a portion o f t h e i r own needs, p a r t i c u l a r l y i n the areas of design, contracting, supervision and inspection, and maintenance and operation In the area of design, i t i s often considered easier to execute the design, p a r t i c u - l a r l y when the projects are small and/or few i n nuniber, than i t i s to delineate needs and desires s u f f i c i e n t l y well t o enable external designers t o execute the design adequately Further, occasional dis- appointing performance ^from outside designers, contractors, and service agencies tends to encourage m-house execution i n the hope o f achieving better q u a l i t y control Then too, i t i s often f e l t that cost e f f e c t i v e - ness can be improved by eliminating the need f o r what i s viewed as unnecessary diq>lication of a c t i v i t i e s , and the payment of overhead and p r o f i t of private-sector organizations And, i t i s often f e l t that an m-house execution c t ^ a b i l i t y provides a means to compare and measure the efficiency and effectiveness of those from whom s i m i l a r services are procured Fi n a l l y , i t i s often reasoned that i f a certain number o f people are required t o execute the procurement process, and i f that number and the types of individuals constitute an "execution«vcapable" team, they might as well execute the work, p a r t i c u l a r l y when the work load I S small and they otherwise would be nonproductive To some extent a l l of these reasons are v a l i d and, as has previously been noted, tend t o be reinforced w i t h i n the Department o f Defense because o f the i n t e r p r e t a t i o n placed on the requirement to maintain a mobilization base and t o t r a m personnel f o r that purpose The potential disadvantage o f maintaining a substantial in-house capability i s that i t tends to become s e l f j u s t i f y i n g and i t f u r t h e r tends to grow t o the point that i t i s equal t o a l l but the unusual demands, either m terms of work-load level or specialized s k i l l s This s i t u a t i o n tends t o discourage the private sector from accepting I t s responsibility f o r f u l l and adequate p a r t i c i p a t i o n and performance However, among the more s i g n i f i c a n t developments i n recent years has been the growth i n the nimiber of large f a c i l i t i e s developersâowner/user representativesâboth p u b l i c l y and p r i v a t e l y owned More and more t h e i r response t o f a c i l i t y needs, and often even to maintenance and operation needs, i s to serve as the "manager" of the procurement process and t o avoid or relinquish any s i g n i f i c a n t role as executer o f the conventional buil d i n g production processes As a consequence, i n the opinion o f the Committee, those i n the private sector who perform the roles of planner, designer, materials producer, and constructor have been able to evolve 16
a c ^ a b i l i t y f o r delivering the goods and services demanded i n a variety of ways The task of the F a c i l i t i e s Procurement Agent i s to purchase that caqpability and t o i n s i s t upon performance There are adequate means to measure and compare cost and performance effectiveness, and t o get adequate performance, provided that the procurement program addresses those concerns from, the outset The primary benefit o f the owner/user/manager team approach i s that by shedding the r e s p o n s i b i l i t y of b u i l d i n g production functions, the manager o f procurement can more e f f e c t i v e l y concentrate on i d e n t i f i c a - t i o n o f owner and/or user needs and on s a t i s f a c t i o n o f those needs i n the most cost-effective manner The procurement manager i s i n a position t o effect maximum f a c i l i t y q u a l i t y at minimum cost i f his p r i n c i p a l r e s p o n s i b i l i t i e s as an owner/user representative are defined m terms of the systems approach and directed toward System Analysis, i e , Description o f sociological/economic/technological f a c i l i t i e s objectives Description o f a l l a l t e r n a t i v e , available strategies f o r attaining those objectives Evaluation of benefits versus consequences of a l l a lternative strategies Selection of the most ef f e c t i v e strategy System Engineering, i e , Description o f a l l alternative coinbinations of available resources that could be used to implement the selected strategy Evaluation of benefits versus consequences of a l l alternative combinations Selection of the most eff e c t i v e combination Organization of the selected combination Scheduling of the selected combination Production, i e , Procurement of a l l f a c i l i t i e s , including land development, design and development of systems, subsystems and/or components, and construction/erection Supervision o f field-assembly of f a c i l i t y components Assessment, i e , Evaluation of the appropriateness o f the sociological/economic/ technological f a c i l i t y objectives o r i g i n a l l y selected Evaluation of the effectiveness of the selected strategy f o r attaining the described objejctives â Evaluation of performance o f the resource combination selected t o implement the selected strategy n 17
Additional benefit would r e s u l t from the minimal use o f production- oriented in-house personnel, equipment, and operations which are, or can become, duplicative o f services and capa b i l i t i e s available else- where, and which cannot be u t i l i z e d t o maximum ef f e c t i v e capacity over long' periods of time through cycles of high and low demand Further, the extensive use o f such m-house personnel tends to l i m i t t o a s i g n i f i c a n t extent the options available f o r f a c i l i t i e s procurement Cre a t i v i t y , time-saving, and performance attainment are c r i t i c a l i n today's economy, and, i n the Committee's judgment, i t i s the large owner/user/manager team u t i l i z i n g an e f f i c i e n t , f l e x i b l e procurement system operated by highly competent, management-oriented personnel that i s best able t o optimize use o f available knowledge, natural and human resources, s k i l l s , techniques, and money The Department of Defense i s i n fact one of the Nation's largest owner/ users and, f o r t h i s reason, the Committee believes that the cumrent system* f o r procurement of m i l i t a r y f a c i l i t i e s needs refinement consis- tent with I t s needs and demands upon, and position w i t h i n , the bi u l d i n g and construction community Adoption of the owner/user/manager concept requires commitment on the part o f the Department of Defense to a policy of delegation o f authority to the lowest p r a c t i c a l l e v e l , procurement o f required services when they are readily available outside the Department of Defense, and, development and maintenance o f procurement-management and technical-management s k i l l s of h i g ^ q u a l i t y To achieve the most effective management posture, the Committee believes the Department of Defense procurement system should possess the following characteristics 1 A management system under which top management establishes goals, p o l i c i e s , and programs, middle management determines acceptable modes of procurement and siipervises t h e i r execution, and, l i n e management executes the procurement function, a l l with minimum v e r t i c a l confusion o f res p o n s i b i l i t y or dtiplication o f e f f o r t 2 A management system which provides f o r the greatest possible variety of procurement options 3 A management system which provides f o r separate i d e n t i f i c a t i o n o f a F a c i l i t i e s Procurement Agent f o r each m i l i t a r y Department fimction- mg wi t h i n a cooperative t n - s e r v i c e program under which common needs are routinely joined and targeted f o r an appropriate solution, and, under which each F a c i l i t i e s Procurement Agent s h a l l have shared access t o essential data 4 A management system which provides f o r common or compatible procedures and objectives, directed toward avoiding costly diq)lica- t i o n and permitting comparison o f cost effectiveness of various procurement modes, while retaining the i n d i v i d u a l i t y o f each of the F a c i l i t i e s Procurement Agents 18
The Committee, while cognizant o f the many innovations i n construction management and procurement introduced by the Department o f Defense and the F a c i l i t i e s Procurement Agents i n recent years, believes that such a management system w i l l provide an environment withm which such innovation can be given greater encouragement and i n which cost effectiveness of the various procurement modes can be e f f e c t i v e l y and routinely compared Accordingly, i t has been recommended that the Department o f Defense, the three m i l i t a r y Departments, and the F a c i l i t i e s Procurement Agents and t h e i r related regional f i e l d o f f i c e s , insofar as i s practicable w i t h i n the constraints imposed by overriding mission requirements and by those outside the Department, assume a pure management posture with respect t o the procurement of m i l i t a r y f a c i l i t i e s I t fu r t h e r has been recommended that a management program be structured along the lines of the r e s p o n s i b i l i t i e s and characteristics set f o r t h (on previous page), and implemented as rapidly as possible 1 2 MANAGEMENT RESPONSIBILITIES The discussion which follows is directed toward i d e n t i f i c a t i o n o f the res p o n s i b i l i t i e s of the various management levels of the Department of Defense involved i n the f a c i l i t i e s procurement system The responsibi- l i t i e s are more a reaffirmation rather than a reorientation o f the present roles of these offi c e s * This reaffirmation i s believed necessary, not because o f f a i l u r e o f these p r i n c i p a l o f f i c e s to meet the e x i s t i n g r e s p o n s i b i l i t i e s , but because they embrace more than i s necessaiy f o r the proper functioning of the management concept at the di f f e r e n t management levels, thereby r e s u l t i n g i n overlapping of r e s p o n s i b i l i t i e s , communication d i f f i c u l t i e s , and redundant action 1 2 1 Office of the Secretary of Defense In 1949 (5 U S C 171), the Department of Defense was created as a part of a comprehensive program designed t o provide f o r the future security o f the United States througji the establishment of i n t e - grated policies and procedures f o r the Departments, agencies, and functions of the government r e l a t i n g t o national security In enacting the l e g i s l a t i o n , i t was the stated int e n t o f the Congress to provide three m i l i t a r y Departments under the d i r e c t i o n , authority, and control of the Secretary of Defense, t o provide f o r separate organization w i t h i n each Department, t o provide f o r un i f i e d c i v i l i a n control, and, to eliminate d i ^ l i c a t i o n and waste wherever possible ** In addition, the Office o f the Secretary of Some degree o f reorientation w i l l be required due t o the additional authority ascribed t o the A i r Force and discussed l a t e r m t h i s report, however, th i s reorientation i s . viewed as conceptual rather than-organizational since the A i r Force presently has an adequate base t o provide for the new authority ** United States Government Organization Manual, 1970/71, U S Government Printing Office, Washington! D C 19
Defense has codified regulations* f o r r e s p o n s i b i l i t i e s and operations which the Committee clearly feels establishes the position of the Office of the Secretary of Defense as one o f a policy maker and of evaluating the implementation thereof Further, as indicated by the following paragraph from the United States Government Organization Manual, and as indicated i n many interviews held with personnel during the conduct of t h i s study, the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) i s the p n n c i p a l s t a f f assistant t o the Secretary of Defense f o r matters of m i l i t a i y f a c i l i t i e s procurement, and i s currently assigned the policy-making r e s p o n s i b i l i t y on behalf o f the Department o f Defense r e l a t i v e t o that a c t i v i t y The Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) I S the p n n c i p a l s t a f f assistant to the Secretary of Defense i n the functional f i e l d s of materiel requirements, production planning and scheduling, acquisition, inventory management, storage, maintenance, d i s t r i b u t i o n , movement, and disposal of materiel, s i p p l i e s , t o o l s , and equipment, small business matters, transportation, telecommunica- t i o n s , petroleum, and other l o g i s t i c a l services, supply cataloging, standardization, and q u a l i t y con t r o l , commercial and i n d u s t r i a l a c t i v i t i e s and f a c i l i t i e s , including fi x e d i n d u s t r i a l equipment, m i l i t a r y construction, including Reserve Forces F a c i l i t i e s , family housing, and real estate and real property, including general purpose space He performs functions i n his assigned f i e l d s of responsibility such as and guidance governing (1) recommending policies Department o f Defense plan- ning and program development, (2) developing systems and standards f o r the administration and management of approved plans and programs, (3) reviewing programs of the m i l i t a r y departments f o r carrying out approved p o l i c i e s , (4) evaluating the administration and management of approved policies and programs, and (5) recommending appropriate steps (including the transfer, reassignment, a b o l i t i o n , and consolidation of functions) which w i l l provide m the Department of Defense f o r more e f f e c t i v e , e f f i c i e n t , and economical administration and operation, w i l l eliminate unnecessary duplication, or w i l l contribute t o improve m i l i t a r y preparedness As defined above, the Office o f the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics), on behalf o f the Department of Defense for matters relevant to f a c i l i t i e s . â¢Defined m the Code of Federal Regulations, T i t l e 32, Chapter 1, Office o f the Federal Register, Washington, D C 20
clearly i s assigned the top-management, policy-making posit i o n m the f a c i l i t i e s procurement program Further, i t i s the only o f f i c e w i t h i n the Department of Defense where one m i l i t a r y Department can defend i t s f a c i l i t y needs against those o f another, where the entire m i l i t a r y f a c i l i t i e s procurement program can be and i s coordinated, and where a proper and equitable d i s t r i b u t i o n can be made o f available funds i n l i g h t of the needs of one m i l i t a r y Department r e l a t i v e t o those of another However, on many occasions during the conduct of t h i s study. Department personnel responsible f o r management of various aspects of the m i l i t a r y f a c i l i t i e s procurement program expressed concern about instances where the operations of the Office o f the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) were not r e s t r i c t e d to those of top management, and the Office became deeply involved i n policy implementation, as f o r instance, i n the develop- ment o f d e f i n i t i v e housing specifications I t i s believed by the Committee that the Office i n t h i s case assumed a policy inqplemen- tat^on role rather than e f f e c t i n g necessary changes i n the implementing agency For the management system to be f u l l y e f f e c t i v e , the Office o f the Assistant Secretary of Defense ( I n s t a l l a t i o n s and Logistics) must assume to the greatest degree possible, the role o f top management by strengthening, i f necessary, i t s a c t i v i t i e s concerning i d e n t i - f i c a t i o n o f Department o f Defense goals and short- and long-range objectives, by developing related policy and monitoring i t s imple- mentation, and by establishing the overall t n - s e r v i c e f a c i l i t i e s procurement program and coordinating the a c t i v i t i e s of each Service to ensure against unnecessary diq)lication o f e f f o r t Further, the Office o f the Assistant Secretary of Defense ( I n s t a l - lations and Logistics) should rel y on the professional competence wit h i n the F a c i l i t y Procurement Agents f o r the coordinated development of procedures and practices requiring commonality among the m i l i t a r y Departments, p a r t i c u l a r l y those which mig^t become a matter o f policy A c t i v i t i e s where such coordination i s needed are addressed m siibsequent portions of t h i s report, including, among others, establishment of a common accomtmg system, determination o f personnel requirements, development o f standard c r i t e r i a f o r p r i o r i t y ranking of projects, development o f contractor selection c r i t e r i a , and i d e n t i f i c a t i o n o f research needs Accordingly, i t has been recommended that the Office of the Secretary of Defense, through the Office of the Assistant Secre- tary of Defense ( I n s t a l l a t i o n s and Logistics) execute i t s role o f top management i n the m i l i t a r y f a c i l i t i e s procurement program by (1) emphasizing the functions of overall planning and policy development, (2) delegating a l l aspects o f policy implementation tio the three m i l i t a r y Departments, and'(3) coordinating and evaluating the implementation thereof 21
1 2 2 Offices of the Secretaries of the M i l i t a r y Departments In keeping with the recommended management concept and the present organizational structure o f the Department o f Defense, each of the m i l i t a r y Departments requires top management f o r i n t e r p r e t a t i o n o f Department of Defense policy and f o r development of policy necessary f o r the proper implementation thereof In addition, i t i s often necessary to develop policy positions on matters peculiar t o one m i l i t a r y Department and consequently not o f concern to the other m i l i t a r y Departments The United States Government Organization Manual 1970/1971 clearly establishes that the Secretaries of the m i l i t a r y Departments are responsible f o r and have authority to conduct a l l a f f a i r s of that Department Further, as determined from the Organization Manual and excerpted m the following paragraphs, within each m i l i t a r y Department the Office o f the Assistant Secretary of the m i l i t a r y Department ( I n s t a l l a t i o n s and Logistics)--along with other duties--is currently designated the pr i n c i p a l s t a f f assistant to the Department Secretary f o r matters r e l a t i n g t o m i l i t a r y f a c i l i t i e s Department of the Army--" The Assistant Secretary of the Amy ( I n s t a l l a t i o n s and Logistics) i s also responsible fo r i n s t a l l a t i o n planning and programming, f a c i l i t i e s and real property management and construction, family housing and Homeowners Assistance Program, " Department of the Navy--" The Assistant Secretary of the Navy (I n s t a l l a t i o n s and Logistics) i s responsible fo r a l l matters related to the procurement, production, supply, d i s t r i b u t i o n , a l t e r a t i o n , maintenance, and disposal of material, the acquisition, construction, u t i l i z a t i o n , improvement, a l t e r a t i o n , maintenance, and disposal of real estate and f a c i l i t i e s , including capital equipment, u t i l i t i e s , housing and public quarters, " Department of the A i r Forceâ" The Assistant Secretary of the A i r Force ( I n s t a l l a t i o n s and Logistics) i s responsible f o r â i n s t a l l a t i o n s planning and programming I n addition, he i s responsible f o r the acqiusition and disposal of real estate, construction of bases and f a c i l i t i e s , family housing, maintenance o f real property, " Though there are variations from one m i l i t a r y Department to another with regard to the spec i f i c and detailed r e s p o n s i b i l i t i e s of the Assistant Secretary ( I n s t a l l a t i o n s and Logistics) of each Department m the f a c i l i t i e s procurement program, the above clearly assigns on behalf o f the m i l i t a r y Departments the top management position m the program t o these off i c e s 22
Based on interviews held and observations made during conduct o f t h i s study, the Committee sensed that the Office o f the Assistant Secretary ( I n s t a l l a t i o n s and Logistics) of each Department places primary emphasis on the l o g i s t i c s aspects o f i t s mission and, t o a great extent, relegates many of i t s f a c i l i t i e s procurement respon- s i b i l i t i e s d i r e c t l y t o the F a c i l i t i e s Procurement Agent o f the Department because o f the t a l e n t available there While reliance on the s t a f f available m the Offices of the F a c i l i t i e s Procurement Agents i s recognized as a desirable feature, and i t s continuation is urged by the Committee, i n order f o r the recommended management system to be f u l l y e f f e c t i v e , the Offices of the Assistant Secretaries ( I n s t a l l a t i o n s and Logistics) must assume to a greater degree the role o f top management of the f a c i l i t i e s procurement program of the respective m i l i t a r y Departments Accordingly, i t has been recommended that the Office o f the Secretary of each m i l i t a r y Department, through the Office o f the Assistant Secretary ( I n s t a l l a t i o n s and Lo g i s t i c s ) , execute i t s role o f top management by (1) emphasizing the function'of developing departmental policy--consistent with that established by the Office o f the Secret^ary of Defense, (2) delegating a l l aspects of policy implementation t o the F a c i l i t i e s Procurement Agent i n that Department, and (3) evaluating the implementation thereof 1 2 3 Offices of the F a c i l i t i e s Procurement Agents As used i n t h i s report, the F a c i l i t i e s Procurement Agents of the m i l i t a r y Departments are as follows the Corps of Engineers f o r the Department of the Army, the Naval F a c i l i t i e s Engineering Command f o r the Department o f the Navy, and the Directorate o f C i v i l Engineering f o r the Department of the A i r Force Each of these offices serves the Chief o f S t a f f o f i t s respective m i l i t a r y Department (or, f o r the Navy, Chief of Naval Operations) i n the capacity of primary r e s p o n s i b i l i t y f o r the m i l i t a r y f a c i l i t i e s procurement program Each of the F a c i l i t i e s Procurement Agents has regional f i e l d offices located throughout the United States t o provide a base of operations Organization o f the offi c e s of the F a c i l i t i e s Procurement Agents vanes s i g n i f i c a n t l y from one m i l i t a r y Department to another, as do t h e i r s p e c i f i c and detailed responsibilities with respect t o the f a c i l i t i e s procurement program o f t h e i r Department and t h e i r position r e l a t i v e to the Chief o f the Department This vari a t i o n i s not i n i t s e l f viewed as a problem though more consistency i n t h i s regard would better define communication channels and res p o n s i b i l i t i e s between Services The roles and respo n s i b i l i t i e s of both the Headquarters offi c e s and the f i e l d offices of the F a c i l i t i e s Procurement Agents, as * See Appendix C for more detailed description of the organizational structure o f the m i l i t a r y Departments and the offices of the F a c i l i t y Procurement Agents and t h e i r functions 23
they relate to the recoimnended management concept, axe considered i n the discussion which follows ' 1 2 3 1 Headquarters of the Faci l i t ies Procurement Agents - As already mentioned, there are variations i n the specific and detailed responsibilities of the Faci l i ty PTOcuren|ent Agents of the mi l i ta ry Departments However, each is respon- sible for the administration o f the f a c i l i t i e s procurement program of i t s Department As such, eadi is s ignif icant ly involved i n a l l aspects of the program, including the planning, programming, funding, design, construction, operation, maintenance, and retirement of mi l i ta ry f a c i l i t i e s As determined from interviews held and observations made during conduct of this study, the headquarters of each of the Faci l i t ies Procurement Agents currently translates Department of Defense and mil i tary Department policy relevant to the mil i tary f a c i l i t i e s program into c r i t e r i a , standards, and guidelines as reqiured for procurement execution, and dele- gates responsibility for procurement almost entirely to regional f i e l d offices The headquarters of the Facil i t ies Procurement Agents unquestionably are now serving i n the position of middle management Other recommendations made and discussed m this report treat the specific operational aspects of the mi l i ta ry f a c i l i t i e s program in some detail However, the increased need to give attention to development of inplementation c r i t e r i a and guidelines is worthy of special note here To realize maximum benefit from the management concept--particu- la r ly i n l i£^ t of the fact that the concept implies a hig^ degree of reliance on the procurement of services as well as goods from external sources--the headquarters of the Fac i l i - t ies Procurement Agents w i l l need to give h i ^ p r i o r i t y to these c r i t e r i a and guidelme-settmg tasks For example, to implement the i r own responsibilities for the to t a l real property and f a c i l i t i e s procurement management function, the ~Each Facili t ies Procurement Agent is involved m the planning o f f a c i l i t i e s operation and maintenance needs and i n certain instances, e g , as i n operation and maintenance contract work, has authority over the expenditure of funds However, for the most part , expenditure IS subject to the discretion of the ins ta l la t ion commander, over which the Facil i t ies Procurement Agents have l i t t l e or no authority Because of the long-term nature of f a c i l i t i e s and their separation from day-to- day mil i tary ac t iv i t ies , the Committee did consider the possibi l i ty of recommending that the Facil i t ies Procurement Agents be given more authority over operation and maintenance programs, even though the operations and maintenance of f a c i l i t i e s was not within the scope of I t s studty The f u l l impact, however, of such a recommendation on the mil i tary commands and instal lat ion operations could not be adequately assessed 24
headquarters offices w i l l need to develop c r i t e r i a fo r both policy translation and program implementation, and fo r program monitoring This w i l l reqiure that special attention be given to such matters as iden t i fy ing , documenting, and expressing user needs and the f a c i l i t i e s market, and to comprehensive planning and overall program planning, budgeting, funding, scheduling and performance assessment To enable maximum delegation o f procurement execution to f i e l d o f f i c e s , the headquarters f i e l d offices w i l l need to develop c r i t e r i a and giudelmes that w i l l adequately define the performance to be achieved from f a c i l i t i e s to be procured and the manner i n which performance attainment is to be predicted, and, adequately define each procurement mode which may be used, and procedures fo r selecting the appropriate procurement mode Together with this guidance, there also should be c r i t e r i a fo r providing performance feedback to headquarters on results adiieved The intent o f the feedback would be to measure the effectiveness of the c r i t e r i a provided and provide the basis for their amendment where necessary, and to measure the performance of the f i e l d off ices themselves The Committee believes that the mi l i ta ry f a c i l i t i e s procure- ment program is of suf f ic ien t size to warrant s ignif icant e f f o r t to develop such c r i t e r i a and to keep them current The d i f f i c u l t i e s inherent i n this essential part o f the management concept are f u l l y recognized, and, i f models fo r such act ivi ty are lacking, the Facil i t ies Procurement Agent can provide much needed leadership Accordingly, i t has been recommended that the Headquarters of each Faci l i t ies Procurement Agent continue t o , but more f u l l y , execute i t s role of middle management by (1) emphasizing the function of developing c r i t e n a and guidelines fo r use m administer- ing, on behalf of the Chief of the Department (or his designa- ted representative), a l l aspects of the planning, programming, funding, design, construction, operation, maintenance, and retirement of mil i tary f a c i l i t i e s and f o r evaluating the accomplishment thereof, and by (2) delegating, except m un- usual cases, the responsibility for procurement to an appropriate regional f i e l d o f f i ce 1 2 3 2 Regional Field Offices of the Faci l i t ies Procurement Agents - Inasmuch as execution of the procurement process would be delegated to the regional f i e l d off ices of the Facil i t ies Procurement Agents, this would clearly designate these offices as positions of l ine management m the recommended management concept The role of the f i e l d off ices i n comprehensive planning and cost estimating w i l l be dis- cussed i n detail subsequently Only the procurement function IS addressed here 25
The f i e l d offices of the Cozps of Engineers and the Naval Facil i t ies Engineering Command currently perform a consider- able amount of design in-house and maintain a signif icant s t a f f to perform construction supervision and inspection services An e f f o r t was made during the Committee's invest i - gation to determine the specific level of design performed in-house but this understandably vanes with the size o f the annual program and from one mil i tary Department to another Levels ranging from 15 percent to as high as 60 percent were quoted to the Committee and, while the exact amount could not be established, i t i s significant The e:q>ressed relationship between maintenance of an in-house design s t a f f and a mobili- zation base capability is undei^stood by the Committee, how- ever. I t believes that the requirements f o r a mobilization base should be c r i t i c a l l y reexamined by the Department of Defense m l i£^ t of the management concept recommended Specifically, the Committee questions whether a design s t a f f per se constitutes an essential mobilization element, particu- l a r ly i f a procurement-management-onented s t a f f is available The c n t i c a l i t y of need fo r competent and reliable personnel to perform design, construction, and supervision services also IS understood by the Committee and this aspect has been addressed independently The Committee wishes to make the point , tiowever, that commitment to a policy of maintenance of sudi in-house s t a f f tends to l i m i t the procurement options available to the Facil i t ies Procurement Agents In keeping with the fundamental mana^ment concept recommend- ed, the f i e l d off ices of the Facil i t ies Procurement Agents should stress development of a cadre o f specialists i n a l l management areas (acbanistrative, legal , tedinical) essential to the conduct of the f a c i l i t i e s procurement program The s t a f f , therefore, must have the capability of relating statements of needs and objectives to c r i t e r i a and guidelines provided by headquarters, and translating them into specific contract procurement doctmients such that goods and services required (including goods and services required for operation and maintenance projects handled by the f i e l d off ices) can be properly procured, without undue reliance on an m-house design s t a f f The cadre ou^ t to include specialists that are capable o f evaluating architectural and engineering designs to deteimine agreement with Department of Defense policy and mil i tary Department c r i t e r i a and guidelines, and must be capable of developing recommendations fo r appropriate diange In the opinion of the Committee, i t has been amply demonstrated that i t does not require professional architects and engineers that are actively engaged m actual design to perform thorou^ and adequate reviews of designs prepared by others 26
The Connnittee is aware of the many problems associated with small design and construction projects and rehabil i tat ion and alteration projects, of which the mil i tary Departments have a great number I t is also aware that there occasionally are or may be highly singular and security-type projects that would require in-house design, but these instances should be few and of suf f ic ient iraportance to cal l for a directive from or at least authorization by the Secretary of the mi l i ta ry Department involved Accordingly, i t has been recommended that the regional f i e l d offices of each of the Facil i t ies Procurement Agents, in their position of line management, should effect a minimal cadre of procurement-management and technical-management specialists, and, except i n those uniisual instances noted above, contract for a l l goods and services necessary to the actual provision of mil i tary facilitiesâexamining a l l alternative procurement modes and selecting those most cost effective Presently, both the Naval Facil i t ies Engineering Command and the Corps of Engineers are designated "engineering and construction agents" in the Department of Defense As such, these offices have f u l l authority and responsibility to procure design and construction services required i n the conduct of the mil i tary f a c i l i t i e s procurement program Public Law 91-142, Section 704, specif ical ly prohibits the establishment of a separate "engineering and construction agent" within the Air Force To comply with the law, there- fore, either the Corps of Engineers or the Naval Facil i t ies Engineering Command is reqmred to procure the design and construction services required fo r conduct of the Air Force mil i tary construction program, except that the Air Force is allowed to serve as i t s own "engineering and construction agent" for i t s family housing Further, the Air Force is permitted, with permission of the Secretary of Defense, to procure design and construction services required for special f a c i l i t i e s in i t s mil i tary construction program when such is more cost effective than using the designated "engineering and construction agents " Before these projects can be accomplished, the Secretary of the Air Force submits a complete description and cost estimate of the projects to the Secretary of Defense and copies of the information to the Secretary of the Army and Secretary of the Navy For Air Force mil i tary construction projects handled by either of the "engineering and construction agents," the Facili t ies Procurement Agent for the Air Force (Office of Civ i l Engineering) provides cost estimates, design funds, f a c i l i t y s i t ing c r i t e r i a , functional layout, cost l imi ta t ion , and design considerations The design process of an Air Force project is in i t i a t ed by issuance from Headquarters of 27
I t s Facil i t ies Procurement Agent of a design instruction to the appropriate regional f i e l d o f f i ce The f i e l d o f f i ce in turn transmits the design instruction to the f i e l d o f f i ce of the appropriate "engineering and construction agent " When design of the Air Force project is performed by an architect- engineer f i rm, the "engineering and construction agent" supplies the information furnished by the Air Force to the design f i rm, negotiates the fee, and lets the contract On completion of various stages of the design, the architect- engineer siibmits drawings for functional and technical review and these are performed by personnel of both the Air Force and the "engineering and construction agent " The Air Force regional f i e l d o f f i ce consolidates Air Force comments and forwards these to the "engineering and construction agent" who m turn consolidates a l l comments and forwards them to the architect-engineer When the design is performed by personnel of the "engineering and construction agent," the same redundancy of review occurs since the "engineering and construction agent" also performs a review of in-house designs Once funds are appropriated for construction of the designed Air Force project, construction is in i t i a t ed by issuance from the Ai r Force Facili t ies Procurement Agent to the "engineer- ing and construction agent" of instructions to receive construction bids When bids are received, they are sent to the appropriate regional f i e l d o f f i ce of the Air Force by the "engineering and construction agent" to obtain authority to le t the construction contract i f the bid was under the government estimate or to determine what action to take i f the bid was over the estimate Once construction of the project IS completed, the "engineering and construction agent" inspects for acceptance by the government The Air Force also inspects for acceptance and furnishes a l i s t i n g of deficiences to the "engineering and construction agent," i f such are found They are in turn forwarded to the contractor through the "engineering and construction agent," as appropriate The Air Force is authorized to communicate direct ly with the "engineering and construction agents" at a l l levels How- ever, when mutual agreement cannot be readied, the matter must be resolved by the Secretary of the Air Force and the Secretary of the other involved Department This describes in a very cursory manner the procedure for obtaining Air Force f a c i l i t i e s contained in the mil i tary construction program In the course of this study, many interviews and discussions were held with personnel within the offices of each of the Facil i t ies Procurement Agents I t IS apparent that the role of the Air Force m i t s construction program has been a subject of debate among the Services for many years While the anomalous situation of the Air Force results primarily from the relat ively recent creation of the 28
Air Force as a separate mil i tary Department, i t s current mil i tary construction program, whidi is on the order of two or three hundred mil l ion dollars annually without consideration of family housing, is nearly^as large as the program o f . either the Army or the Navy The Committee sought cost information and study results that could be helpful in determining the cost effectiveness of the system as i t now is operated as opposed to the cost effect ive- ness of a system modified to allow the Air Force to procure design and construction services required for i t s construction program Satisfactory data could not be found In searching for other information, the Committee found that when consideration is given to the entire f a c i l i t i e s program of the Air Force--i e , f a c i l i t i e s work funded out of the operations and maintenance accoiont, emergency minor construc- t ion , and the mil i tary construction program--approximately 25 percent is procured by Air Force personnel without involve- ment of either of the engineering and construction agents Services are procured directly by Air Force base level personnel and can routinely include repair projects costing up to $250,000 each From the interviews conducted, i t was clear that the present operational procedures involved in the procurement of Ai r Force f a c i l i t i e s i n the Mil i tary Construction Program posed problems Further, considering that the Air Force Facil i t ies Procurement Agent presently develops a project to the point that I t is ready to be delivered to the designer, i t seemed only logical that i t would be more cost effect ive to go directly to the designer rather than through either of the "engineering and construction agents " Therefore, i t has been recommended that the Office of the Secretary of Defense press for the immediate removal of a l l restraints, such as are embodied in Public Law 91-142, Section 704, which prevent the Facilit ies Procurement Agent of the Air Force from serving in the capacity of an "engineering and construction agent" in a manner comparable to the Facil i t ies Procurement Agents of the other two mil i tary Departments The anomalous situation of the Air Force in large part was responsible for consideration by the Committee of alternative organizational structures such as a single construction agency for the federal government, a single construction agency for the Department of Defense, a single "engineering and construction agent" for the three mil i tary Departments without Department a f f i l i a t i o n , and, a public corporation from which a l l government design and construction services would be provided The total impact of the major organizational change inherent in any one of these alternatives on the overall Department of Defense operations and missions could not be f u l l y assessed m the time provided 29
2 0 PROGRAM MANAGEMENT The preceding section, 1 0, dealt specif ical ly with the concept of mil i tary f a c i l i t i e s procurement by management and the responsibilities of the principal participants in the procurement program This section deals with particular needs of management in the operational conduct of the procurement program as well as with specific act ivi t ies or proce- dures that can be modified or adapted to y ie ld either better quality or reduction in the cost of construction Specifically addressed here are accounting, personnel requirements, long-range planning, annual planning and funding, design and construction, and advancement of technology Though a l l of the pertinent recommendations were presented because of their value within an integrated management system, the Committee believes that, i f implemented, each could bring about i n d i v i - dually, a significant improvement in the current mil i tary f a c i l i t i e s procurement system, and thus can stand on i t s own merit A significant finding from the Committee's analysis, which deserves special note here, was that in the recent past approximately 50 percent of a l l projects in the Mili tary Construction Program involved less than $500,000 each These projects, nevertheless, received substantially the same planning and review treatment as the larger projects How these projects are handled has had a significant effect upon the procurement program Therefore, both the problems and opportunities "they pose w i l l be given considerable attention throughout this section of the report 2 1 COST INFORMATION FOR MANAGEMENT I t is axiomatic to say that financial and operational accounting is essential to good management and is an act ivi ty that is part icularly necessary in achieving maximiom cost effectiveness in any f a c i l i t i e s procurement system Proper accounting not only fac i l i ta tes management and control of the expenditure of funds but also provides a mechanism for collecting and recording data essential for management analysis The type of accounting system needed and i t s uses are worthy of careful delineation 2 1 1 Cost Accounting System To obtain maximum benefit from a cost accovinting system, i t is imperative that i t accommodate, to the extent pract ical , a l l costs attributable to specific projects This would, for the Mil i ta ry Construction Program, include the separate and detailed i d e n t i f i - cation of a l l costs associated with the planning, programming, funding, designing, constructing, operating, maintaining, and eventual re t i r ing of each project or f a c i l i t y I t also would require the collecting and recording of a l l indirect costs, by fimction, that usually are not equitably chargeable to an i n d i v i - dual project or f a c i l i t y When such information is available, a cost information system can be most effect ively used for manage- ment decisions 30
The Committee ascertained that a common cost accounting system is not now employed by the three mi l i ta ry Departments The accounting system used by the Corps of Engineers, for example, has been approved by the Government Accounting Off ice , the Naval Faci l i t ies Engineering Command ut i l izes an accounting system that is approved by the Office of the Secretary of Defense, the Air Force Office of C iv i l Engineering is awaiting approval of i t s accounting system by the Government Accounting Office For the Facil i t ies Procurement Agents of the mi l i ta ry Departments, the Committee views commonality in accounting procedures to be of paramount importance Only with a common system can true costs of l ike f a c i l i t i e s procured by the different mili tary Departments be coirpared or can one Department e3q»eriment with a procurement, design, construction, or management technique and pass the benefit on to the others I t could not be determined during the Committee's study whether a l l costs associated with a l l f a c i l i t i e s procurement functions are accounted against a specific project or f a c i l i t y , or against the f a c i l i t i e s procurement program i t s e l f As described in Appendix C, funds fo r the Department of Defense are appropriated i n the following accounts Procurement, Operation and Maintenance, Mil i tary Payroll, Research, Development, Test, and Engineering CRDT§E), and Mil i tary Construction The Mil i tary Construction account involves only a small portion (generally 2 to 8 percent) of the to ta l defense budget, but the monies in this account do not ref lect the actual expenditure for real property or for i t s improvements from inception to retirement That i s , each of the five accounts may involve funds which in some manner support the mil i tary f a c i l i t i e s procurement program e g , f a c i l i t i e s opera- tion and maintenance expenditures are fimded out of the Operation and Maintenance account, some research svqjport e f for t s are fmded out of the RDTSE account, salaries of mil i tary personnel involved are fimded out of the Mil i tary Payroll account, and so on A l l such costs must be collected and recorded on an equivalent basis This should be done either as a direct or indirect charge against a specific project or f a c i l i t y , or against the f a c i l i t i e s procure- ment program, by detailed function, i f the cost data are to be of significant value to the program managers Only with such deta i l - ed cost information w i l l management be able to effect appropriate policy and management decisions concerning the entire f a c i l i t i e s procurement system i e , ident i fy obsolete or ineffect ive practices so that they may be abandoned, recognize and encourage promising innovations, and, indeed, compare the true costs of specific f a c i l i t i e s The Department of Defense must account to the Congress That the present accounting procedures employed by the mi l i ta ry Departments have not been adequate for this purpose is apparent from the Congressional Record (Senate Report No 91-527, Calendar No 520, Mil i tary Construction Authorization for Fiscal Year 1970) 31
This year the committee has amended this provision to permit the Secretary of Defense to designate either the Corps of Engineers, the Naval Facil i t ies Engineering Command or such other Government department or agency he deems advisable to assure the most e f f i c i e n t , e:q)editious, and cost-effective accomplishment of the construction authorized The depart- ments involved w i l l be required to report annually to the Congress a breakdown of dollar value of construction contracts awarded by each of the several construction agencies selected together with the design, construction supervision, and over- head fees charged by each in the execution of the awarded contracts In this regard the reporting fo r any annual period should be on the basis of projects "closed out" during the period in question The committee believes this revision of existing law is necessary to assist each Secretary of a mil i tary department to better manage the construction program for which he is held accountable to the Congress, permit rea l i s t i c conpetition for the most timely, most cost-effective, and most responsive execution of the construction program, and provide the Congress annually with the distr ibution of construction executed and the price paid for design and construction siq>ervision fees I t I S f irmly believed this change w i l l insure greater cost savings m overhead, thus freeing maximum dollars for construction For quite some time the committee has been deeply concerned over the increasing cost of mil i tary construction To a great extent this is due to inflat ionary trends, the high cost of labor and materials which make i t a l l the more imperative that there be some real self-appraisal on the part of construction agencies to reduce their costs fo r design, supervision, and overhead I t is believed a potent source for reducing costs would be the stripping down of in-house organizations, giving a greater amount of work to architect and engineering firms and eliminating to a major extent the in-house layer of sv;qpervision over the architect and engineers by wri t ing into and enforcing contract provisions that w i l l hold the architect and engineers responsible for designing a f a c i l i t y that stays within the scope, c r i t e r i a , and cost There should perhaps be more experimentation with the less conventional methods of construction than those that have t radi t ional ly have followed by the construction agencies Without a common system which routinely accounts fo r costs on an equivalent basis, the Department of Defense w i l l not be able to account to Congress in a satisfactory manner For example, comparison of the costs of two similar design ef for ts is of l i t t l e value when i n one case the associated management and 32