Vital Shot use can be tricky. For a Sharpshooter, it's a rotation filler to use when you're at or near max energy and everything else is on CD, or when you're having to be on the move dodging stuff. One thing to remember about it though, is that since it's dealing internal damage, it doesn't face the same sort of damage mitigation normal attacks do. Even if you're only throwing a few Vital Shots up there, you can still do a ton of damage over a long fight with it. It's all about timing--don't hit it except when the one you've got on it is about to or has run out, and don't hit it when you're going to be doing a big chain of abilities before your energy has a tick or two to replenish itself.
To address the main point of this thread... if your GS is doing far less damage in operations than against the dummy, he's probably letting his rotation go to shambles. I find that often times (especially factoring in all the running around) I actually do more damage against bosses than the dummy, because in real battles you get to use Quickdraw, which is a great ability, especially if you have the energy reduction from armor sets. You've got to get yourself into a place where your rotation is pretty much automatic. Also, looking at his gear... with Surge like that, you should be rocking a higher crit chance. What's the point of having huge criticals if you're not popping them off one after another? Also, he can stand to lose a little accuracy. In PVE, 100% is all you need.