Managing the Service Supply Chain in the Department of Defense: Opportunities and Challenges

Abstract

The services acquisition volume in the US Department of Defense (DoD) has continued to increase in scope and dollars in the past decade. Between FY 1999 to FY 2003, DoD's spending on services increased by 66%, and in FY 2003, the DoD spent over $118 billion (or approximately 57% of total DoD procurement dollars) on services. In recent years, the DoD has spent more on services than on supplies, equipment and goods, even considering the high value of weapon systems and large military items. These services belong to a very broad set of activities, ranging from grounds maintenance to space launch operations. The major categories include professional, administrative, and management support; construction, repair, and maintenance of facilities and equipment; information technology; research and development, and medical care. As the DoD's services acquisition volume continues to increase in scope and dollars, the agency must pay greater attention to proper acquisition planning, adequate requirements definition, sufficient price evaluation, and proper contractor oversight. In many ways, these are the same issues affecting the acquisition of physical supplies and weapon systems. However, the unique characteristics of services and the increasing importance of services acquisition offer a significant opportunity for conducting research in the management of the service supply chain in the Department of Defense. The objectives of the exploratory research presented in the paper are to (1) analyze the size, structure and trends in the DoD's service supply chain, (2) understand the challenges faced by contracting officers, program managers and end-users in services acquisition, (3) develop a conceptual framework for understanding and analyzing the supply chain in services, and (4) provide policy recommendations that can lead to more effective and efficient management of the DoD's spending on services. In addition to the analysis of service acquisition-related data and theory development, this research also includes empirical work in terms of site visits and interviews at Navy, Army and Air Force bases.. Addressing issues related to both theory and practice, this paper makes a modest contribution towards more effective and efficient management of service acquisition in the Department of Defense.