Defense Advisory and Assistance Service Contracts

Pursuant to a congressional request, GAO reviewed selected aspects of the Department of Defense's (DOD) use of contracts for advisory and assistance services where subcontractors perform a substantial portion of the work.

GAO noted that: (1) the five prime contractors in GAO's sample were providing advisory and assistance services and did not function principally as intermediaries, but rather performed substantial portions of the contracts' direct work; (2) the five prime contractors' costs and fees for managing subcontractors' efforts ranged from 2 to 8 percent of subcontract costs; (3) the President's budget submission reported fiscal year (FY) 1996 obligations for DOD of about $3 billion for advisory and assistance services contracts; (4) GAO's analysis of data from DOD's contract action reporting system, however, indicated FY 1996 obligations of almost $12 billion for selected categories of services; (5) although the limited information obtained does not allow GAO to reconcile these amounts, GAO's review indicates there may be substantial underreporting to the Congress; (6) the underreporting may be due to difficulties in accurately identifying advisory assistance tasks; (7) several officials observed that the definition of advisory and assistance services was ambiguous, particularly for services related to research and development; (8) at one location, an agency's review of contracts for advisory and assistance services revealed that inaccurate reporting was related to inadequate training of responsible staff; (9) because congressional concern stems from both the cost and nature of advisory and assistance services, the Congress has, on occasion, imposed expenditure ceilings for such contracts; (10) according to Office of Management and Budget guidance, when contractors provide advice and assistance that may affect decision-making, influence policy development, or provide support to project or program management, it is essential to ensure that the contractors' performance is free of potential conflicts of interest and does not impinge on the performance of inherently governmental functions by government employees; and (11) as such, advisory and assistance services require an appropriate degree of enhanced management and oversight.