Defense Acquisitions: How and Where DOD Spends Its Contracting Dollars

Summary

The Department of Defense (DOD) has long relied on contractors to provide the U.S. military with a wide range of goods and services, including weapons, food, uniforms, and operational support. Without contractor support, the United States would be currently unable to arm and field an effective fighting force. Understanding costs and trends associated with contractor support could provide Congress more information upon which to make budget decisions and weigh the relative costs and benefits of different military operations—including contingency operations and maintaining bases around the world.

Obligations occur when agencies enter into contracts, employ personnel, or otherwise commit to spending money. The federal government tracks money obligated on federal contracts through a database called the Federal Procurement Data System-Next Generation (FPDS). There is no public database that tracks DOD contract outlays (money spent) as comprehensively as obligations.

Total DOD Contract Obligations

In FY2014, DOD obligated more money on federal contracts ($285 billion) than all other government agencies combined. DOD’s obligations were equal to 8% of federal spending. Services accounted for 45% of total DOD contract obligations, goods for 45%, and research and development (R&D) for 10%. This distribution is in contrast to the rest of the federal government, which obligated a significantly larger portion of contracting dollars on services (68%), than on goods (22%) or research and development (9%).

According to FPDS data, from FY2000 to FY2014, DOD contract obligations increased from $190 billion to $290 billion (FY2015 dollars). However, the increase in spending has not been steady. DOD contract obligations over the last 15 years are marked by a steep increase of $260 billion from FY2000 to FY2008 (averaging 11% annual increases), followed by a substantial drop of $160 billion (averaging 7% annual decreases) from FY2008 to FY2014. This boom-and-bust trend of DOD contract obligations, which makes budget cutting more difficult due to relatively large budget swings, is in marked contrast to the rest of the federal government, which has had more gradual increases and less drastic contract spending cuts.

For almost 20 years, DOD has dedicated an ever-smaller share of its contracting dollars to R&D, with such contracts dropping from 18% of total contract obligations in FY1998 to 10% in FY2014.

Understanding the Limitation of FPDS Data

Decision-makers should be cautious when using obligation data from FPDS to develop policy or otherwise draw conclusions. In some cases, the data itself may not be reliable. For example, according to DOD officials, the data in FPDS over-represents FY2008 obligations by $13 billion and under-represents FY2009 obligations by the same amount. Depending on the query, understanding and pulling reports from FPDS can be confusing and difficult to interpret. In some instances, a query for particular data may return differing results, depending on the type of query used.

Despite the limitations of FPDS, imperfect data is sometimes better than no data. A number of foreign observers have noted that despite its shortcomings, FPDS data is substantially better than what is available in virtually any other country in the world. FPDS data can be used to identify some broad trends and rough estimations, or to gather information about specific contracts. Understanding the limitations of data—knowing when, how, and to what extent to rely on data—could help policymakers incorporate FPDS data more effectively into their decision-making process.

GSA is undertaking a multi-year effort to improve the reliability and usefulness of the information contained in FPDS and other federal government information systems. This effort, if successful, could significantly improve DOD’s ability to engage in evidence- and data-based decision-making.

This report examines (1) how much money DOD obligates on contracts, (2) what DOD is buying, and (3) where that money is being spent. This report also examines the extent to which these data are sufficiently reliable to use as a factor when developing policy or analyzing government operations.