Defense Acquisitions
Further Actions Needed to Address Weaknesses in DOD's Management of Professional and Management Support Contracts Gao ID: GAO-10-39 November 20, 2009In fiscal year 2008, the Department of Defense (DOD) obligated $200 billion on services contracts, including $42 billion for professional and management services. The Government Accountability Office (GAO) previously identified weaknesses in DOD's management and oversight of services contracts, contributing to DOD contract management being on GAO's high-risk list. For selected professional and management support contracts, GAO was asked to examine (1) the extent to which DOD considered the risks of contractors closely supporting inherently governmental functions at key decision points, (2) how DOD implemented performance-based practices, (3) the extent to which DOD designated trained surveillance personnel, and (4) whether a new review process may improve DOD's management of such contracts. GAO reviewed federal regulations, agency policies and guidance, and analyzed seven acquisitions approved from 2004 to 2007 and 64 related task orders for services.
DOD policies do not require assessments of the risks associated with contractors closely supporting inherently governmental functions as part of its management reviews of acquisition strategies nor when task orders are issued for professional and management services. Such risks include the potential loss of government control over and accountability for mission-related policy and program decisions. Though all seven acquisitions and more than 75 percent of the task orders GAO reviewed provided for such services, GAO found no evidence that these risks were among those considered in the documentation reviewed. DOD guidance issued after these acquisitions were approved requires that consideration be given to using civilian personnel rather than contractors when the activities closely support inherently governmental functions. This guidance, however, does not require DOD personnel to consider and document risks posed when contractors perform these activities. Further, DOD personnel were unaware of the need to provide enhanced oversight when contracting for such services. DOD faces challenges in defining requirements and outcome-based measures when acquiring professional and management services. DOD personnel generally expressed task order requirements in terms of a broad range of activities that contractors may perform, but used standards and measures that were not always well-suited to assess outcomes. DOD made more use of objective measures to assess cost and schedule performance, but generally relied on subjective measures to assess the quality of the contractors' work. For example, DOD often measured quality based on the number of complaints lodged against the contractor, which provided little detail into how desired outcomes were achieved. DOD also missed opportunities to include objective measures that may have been better suited to assess outcomes. DOD officials stated that developing outcome-based, objective measures is challenging, but noted that initiatives are under way to better utilize such approaches. DOD has made progress in ensuring that trained surveillance personnel are assigned to monitor contract performance. Surveillance personnel were assigned to all 64 of the task orders GAO reviewed, and all but 3 had received required training. GAO identified, however, 3 instances of surveillance personnel who were not assigned before the contractor began work on a task order and 20 instances of personnel who did not receive training prior to beginning surveillance duties. In September 2008, DOD implemented a new peer review process that is tasked to address, among other issues, contractors closely supporting inherently governmental functions, the use of performance-based practices, and contractor surveillance. As of October 2009, four pre-award reviews and one post-award review of professional and management support contracts have been conducted and it is too early to tell whether such reviews will encourage DOD personnel to address these issues across the range of DOD's services contracts.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-10-39, Defense Acquisitions: Further Actions Needed to Address Weaknesses in DOD's Management of Professional and Management Support Contracts
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
November 2009:
Defense Acquisitions:
Further Actions Needed to Address Weaknesses in DOD's Management of
Professional and Management Support Contracts:
GAO-10-39:
GAO Highlights:
Highlights of GAO-10-39, a report to congressional requesters.
Why GAO Did This Study:
In fiscal year 2008, the DOD obligated $200 billion on services
contracts, including $42 billion for professional and management
services. GAO previously identified weaknesses in DOD‘s management and
oversight of services contracts, contributing to DOD contract
management being on GAO‘s high-risk list.
For selected professional and management support contracts, GAO was
asked to examine (1) the extent to which DOD considered the risks of
contractors closely supporting inherently governmental functions at key
decision points, (2) how DOD implemented performance-based practices,
(3) the extent to which DOD designated trained surveillance personnel,
and (4) whether a new review process may improve DOD‘s management of
such contracts.
GAO reviewed federal regulations, agency policies and guidance, and
analyzed seven acquisitions approved from 2004 to 2007 and 64 related
task orders for services.
What GAO Found:
DOD policies do not require assessments of the risks associated with
contractors closely supporting inherently governmental functions as
part of its management reviews of acquisition strategies nor when task
orders are issued for professional and management services. Such risks
include the potential loss of government control over and
accountability for mission-related policy and program decisions. Though
all seven acquisitions and more than 75 percent of the task orders GAO
reviewed provided for such services, GAO found no evidence that these
risks were among those considered in the documentation reviewed. DOD
guidance issued after these acquisitions were approved requires that
consideration be given to using civilian personnel rather than
contractors when the activities closely support inherently governmental
functions. This guidance, however, does not require DOD personnel to
consider and document risks posed when contractors perform these
activities. Further, DOD personnel were unaware of the need to provide
enhanced oversight when contracting for such services.
DOD faces challenges in defining requirements and outcome-based
measures when acquiring professional and management services. DOD
personnel generally expressed task order requirements in terms of a
broad range of activities that contractors may perform, but used
standards and measures that were not always well-suited to assess
outcomes. DOD made more use of objective measures to assess cost and
schedule performance, but generally relied on subjective measures to
assess the quality of the contractors‘ work. For example, DOD often
measured quality based on the number of complaints lodged against the
contractor, which provided little detail into how desired outcomes were
achieved. DOD also missed opportunities to include objective measures
that may have been better suited to assess outcomes. DOD officials
stated that developing outcome-based, objective measures is
challenging, but noted that initiatives are under way to better utilize
such approaches.
DOD has made progress in ensuring that trained surveillance personnel
are assigned to monitor contract performance. Surveillance personnel
were assigned to all 64 of the task orders GAO reviewed, and all but 3
had received required training. GAO identified, however, 3 instances of
surveillance personnel who were not assigned before the contractor
began work on a task order and 20 instances of personnel who did not
receive training prior to beginning surveillance duties.
In September 2008, DOD implemented a new peer review process that is
tasked to address, among other issues, contractors closely supporting
inherently governmental functions, the use of performance-based
practices, and contractor surveillance. As of October 2009, four pre-
award reviews and one post-award review of professional and management
support contracts have been conducted and it is too early to tell
whether such reviews will encourage DOD personnel to address these
issues across the range of DOD‘s services contracts.
What GAO Recommends:
GAO recommends that DOD consider and document how contractors closely
support inherently governmental functions during management reviews and
to mitigate related risks before issuing task orders, provide
additional guidance on enhanced oversight techniques, and better
monitor the designation of trained surveillance personnel. DOD
concurred with each of the recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-10-39] or key
components. For more information, contact John P. Hutton at (202) 512-
4841 or huttonj@gao.gov.
[End of section]
Contents:
Letter:
Background:
DOD Policies Do Not Require an Assessment of Risk of Contractors
Closely Supporting Inherently Governmental Functions at Key Acquisition
Decision Points:
DOD Faces Challenges In Implementing Performance-Based Practices on
Professional and Management Support Task Orders:
DOD Efforts to Designate Trained Surveillance Personnel Show Progress,
but Concerns Remain:
Recent Initiative May Improve DOD's Insight into Issues Affecting
Professional and Management Support Contracts:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Examples of Inherently Governmental and Approaching
Inherently Governmental Functions:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: DOD Acquisition Workforce--Military and Civilian Personnel for
Fiscal Years 2001 and 2008:
Table 2: Range of Contracted Services and Related Risk Level:
Table 3: Examples of Performance Requirements in DOD's Guidebook for
Performance-Based Services Acquisition in the Department of Defense:
Table 4: Principal Measures Used to Assess Selected Performance
Objectives:
Table 5: Focus Areas of the Peer Review Process:
Table 6: Award of Contracts and Issuance of Task Orders from Fiscal
Years 2004 through 2008 Subsequent to the Military Departments'
Approval of Acquisition Strategies:
Table 7: Reviewed Services Acquisitions and Total Task Orders Issued
and Obligations from Fiscal Year 2004 through 2008:
Table 8: Examples of Inherently Governmental Functions:
Table 9: Examples of Services That May Approach Being Inherently
Governmental Functions:
Figures:
Figure 1: Comparison of DPAP's Peer Reviews and Management Reviews for
Services Acquisitions for Acquisitions Estimated to be Valued at $1
Billion or More:
Abbreviations:
DAU: Defense Acquisition University:
DFARS: Defense Federal Acquisition Regulation Supplement:
DOD: Department of Defense:
DPAP: Defense Procurement and Acquisition Policy:
FAR: Federal Acquisition Regulation:
OFPP: Office of Federal Procurement Policy:
USD(AT&L): Under Secretary of Defense for Acquisition, Technology, And
Logistics:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
November 20, 2009:
The Honorable Evan Bayh:
Chairman:
The Honorable Richard Burr:
Ranking Member:
Subcommittee on Readiness and Management Support:
Committee on Armed Services:
United States Senate:
The Honorable Daniel K. Akaka:
United States Senate:
The Honorable John Thune:
United States Senate:
The Department of Defense (DOD) is the federal government's largest
purchaser of contractor-provided services, obligating more than $200
billion on services contracts in fiscal year 2008. DOD obligated $42
billion (21 percent) of its 2008 obligations for services on
professional, administrative, and management support. Examples of such
services include budget and program management and contracting support.
Often these services are procured through performance-based acquisition
approaches, which encourage the private sector to develop innovative
solutions to meet DOD's needs.
DOD's reliance on contracted services to support its missions makes
effective management and oversight of these contracts essential. Our
work over the past several years, however, has identified weaknesses in
DOD's management and oversight. For example, in 2005, we found that
DOD's surveillance of service contractors needed improvement as staff
responsible for assessing contractor performance were not always
appointed or trained.[Footnote 1] In 2006, we found that DOD's approach
to managing services acquisitions did not put the department in a
position to determine whether its investments in services were
achieving the desired outcomes.[Footnote 2] These shortfalls stemmed,
in part, from the limitations of the management reviews DOD established
to review and approve high-dollar services acquisitions.[Footnote 3]
Additionally, our recent work has shown that reliance on contractors,
including professional and management support contractors, to support
core missions can place the government at risk of transferring
government responsibilities to contractors.[Footnote 4] Collectively,
such issues continue to place DOD at high risk of fraud, waste, abuse,
and mismanagement and result in DOD contract management being on our
high-risk list.[Footnote 5]
In response to your interest in whether DOD's policies and actions to
improve the management of services contracts addressed issues affecting
professional and management support contracts, we examined (1) the
extent to which DOD considered the risks associated with contractors
closely supporting inherently governmental functions at key acquisition
decision points; (2) how DOD was implementing performance-based
acquisition practices, such as identifying requirements in terms of
expected and measurable outcomes; (3) the extent to which DOD
designated trained surveillance personnel; and (4) whether recent
actions to implement a peer review process may improve DOD's management
and use of such contracts.
To assess the extent to which DOD's management reviews and policies
addressed the risks associated with contractors closely supporting
inherently governmental functions at key acquisition points, we
reviewed DOD's May 2002 and October 2006 guidance that established its
processes for reviewing and approving proposed acquisitions to obtain
contractor support. To assess how these risks were addressed during
reviews of specific services acquisitions, we reviewed a DOD-provided
list of 102 services acquisitions approved by the Air Force, Army, or
Navy from fiscal years 2004 through 2007. Using contract data from the
Federal Procurement Data System-Next Generation,[Footnote 6] we
determined that 32 of these acquisitions, with almost $15 billion in
total combined obligations from fiscal years 2004 through 2008,
included contracts for the purchase of professional, administrative,
and management support. From these 32 acquisitions, we selected 7 for
our review based on the percentage of total obligations that went
towards professional, administrative, and management support services;
the specific types of services acquired; and the military department
responsible for the acquisition. We also determined that the military
departments obligated over $4.3 billion on 1,874 task orders from these
7 acquisitions from fiscal years 2004 through 2008. We randomly
selected and reviewed 64 task orders that had obligations of $500,000
or more and were issued during fiscal years 2004 through 2007 from
these acquisitions to assess how such risks were addressed prior to
DOD's decision to award a contract or issue a task order for
professional and management support contracts. We did not review
acquisitions approved after fiscal year 2007 since our analysis
indicated that it was often a year or more from the time that the
acquisition strategy was approved to the time when task orders were
actually issued. We reviewed the acquisition strategy, base contract,
task order, statements of work, and other documentation supporting the
need to acquire contract support and any risk assessments prepared. We
also interviewed officials who managed these acquisitions to obtain
information on why these services were purchased, the risks that were
considered, and any steps taken for enhanced contractor oversight.
We assessed the reliability of the Federal Procurement Data System-Next
Generation to identify acquisitions and to select task orders that were
within the scope of our review by verifying (1) the contract and task
order identification numbers, (2) the contract award date, (3) that the
task orders associated with the acquisitions were for professional and
management support services, and (4) that the task orders had
obligations exceeding $500,000. On the basis of this assessment, we
determined that the data were sufficiently reliable for the purposes of
this review.
To assess how DOD was implementing performance-based acquisitions
practices on professional and management support contracts, we reviewed
Federal Acquisition Regulation (FAR) requirements and DOD guidance on
developing performance work statements and specifically on how to
identify contract requirements in terms of expected and measurable
outcomes. We then reviewed performance work statements for the 64 task
orders to assess whether contract requirements were measurable and
outcome based. We interviewed contracting and program officials who
managed these task orders to identify how requirements and performance
measures were developed and analyzed documentation to determine how
contractor performance was measured.
To assess the extent to which DOD designated trained surveillance
personnel[Footnote 7] on professional and management support contracts,
we reviewed the Defense Federal Acquisition Regulation Supplement
(DFARS) and DOD policies and procedures to identify the department's
surveillance and training requirements. We analyzed surveillance
personnel appointment and training documentation associated with each
of the 64 task orders to determine whether these requirements were met.
To identify how recent actions to implement a new peer review process
may improve DOD's management and use of professional and management
support contracts, we reviewed relevant legislation and the
department's implementation policy and guidance to identify the scope
and content of these reviews. We also interviewed officials from the
Under Secretary of Defense for Acquisition, Technology, and Logistics'
(USD(AT&L)) Office of Defense Procurement and Acquisition Policy (DPAP)
and the military departments and reviewed memoranda summarizing the
findings and recommendations of reviews performed on professional and
management support services contracts. Additional information on our
scope and methodology may be found in appendix I.
We conducted this performance audit from July 2008 through November
2009 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Background:
DOD Obligations and Workforce Trends:
From fiscal years 2001 through 2008, DOD's reported obligations on
contracts for services, when measured in real terms, more than doubled--
from roughly $92 billion to slightly over $200 billion. These
obligations accounted for over half of the department's total contract
obligations in fiscal year 2008. Over that same time period, DOD's
obligations on professional, administrative, and management support
contracts nearly tripled from $14.2 billion to $42 billion. These
services represented about 15 percent of DOD's total obligations on
services contracts in 2001 and 21 percent in 2008. As we have reported
in the past, this increased use of contractor-provided services has
been the result of thousands of individual decisions, not the result of
strategic, comprehensive planning for the whole department in which the
volume and composition of contracted services have been measured
outcomes.[Footnote 8] We also noted that the absence of well-defined
requirements, sound contracting arrangements, or effective management
and oversight has contributed to schedule delays, cost overruns, and
unmet expectations.
Despite substantial increases in spending on both goods and services
from fiscal year 2001 through 2008, DOD's acquisition workforce has
declined by 2.6 percent (see table 1). Without an adequate workforce to
manage DOD's billion-dollar acquisitions, there is an increased risk of
poor acquisition outcomes and vulnerability to fraud, waste, and abuse.
We reported in March 2009 that DOD lacked critical, departmentwide
information needed to ensure that its acquisition workforce was
sufficient to meet its national security mission.[Footnote 9] We found,
for example, that DOD did not collect or track information on
contractor personnel, despite the fact that those personnel providing
professional and management support services make up a key segment of
the total acquisition workforce. Additionally, DOD lacked complete
information on the reasons personnel are contracted, thus limiting its
ability to determine whether decisions to augment the in-house
acquisition workforce with contractors were appropriate.
Table 1: DOD Acquisition Workforce--Military and Civilian Personnel for
Fiscal Years 2001 and 2008:
Acquisition workforce by functional career field: Program Management;
Fiscal year 2001: 14,031;
Fiscal year 2008: 12,781;
Percentage change fiscal years 2001 to 2008: -8.9%.
Acquisition workforce by functional career field: Contracting;
Fiscal year 2001: 25,413;
Fiscal year 2008: 26,680;
Percentage change fiscal years 2001 to 2008: 1.1.
Acquisition workforce by functional career field: Industrial/Contract
Property Management;
Fiscal year 2001: 620;
Fiscal year 2008: 451;
Percentage change fiscal years 2001 to 2008: -27.3.
Acquisition workforce by functional career field: Purchasing;
Fiscal year 2001: 4,121;
Fiscal year 2008: 1,196;
Percentage change fiscal years 2001 to 2008: -71.0.
Acquisition workforce by functional career field: Facilities
Engineering;
Fiscal year 2001: 0;
Fiscal year 2008: 4,920;
Percentage change fiscal years 2001 to 2008: n/a.
Acquisition workforce by functional career field: Production Quality
and Manufacturing;
Fiscal year 2001: 10,547;
Fiscal year 2008: 9,138;
Percentage change fiscal years 2001 to 2008: -13.4.
Acquisition workforce by functional career field: Business, Cost
Estimating, and Financial Management;
Fiscal year 2001: 10,279;
Fiscal year 2008: 7,085;
Percentage change fiscal years 2001 to 2008: -31.1.
Acquisition workforce by functional career field: Life Cycle Logistics;
Fiscal year 2001: 11,060;
Fiscal year 2008: 13,361;
Percentage change fiscal years 2001 to 2008: 20.8.
Acquisition workforce by functional career field: Information
Technology;
Fiscal year 2001: 5,612;
Fiscal year 2008: 3,934;
Percentage change fiscal years 2001 to 2008: -29.9.
Acquisition workforce by functional career field: System Planning,
Research, Development, and Engineering--Systems Engineering;
Fiscal year 2001: 34,899;
Fiscal year 2008: 34,537;
Percentage change fiscal years 2001 to 2008: -1.0.
Acquisition workforce by functional career field: System Planning,
Research, Development, and Engineering--Science and Technology Manager;
Fiscal year 2001: 0;
Fiscal year 2008: 480;
Percentage change fiscal years 2001 to 2008: n/a.
Acquisition workforce by functional career field: Test and Evaluation;
Fiscal year 2001: 5,113;
Fiscal year 2008: 7,420;
Percentage change fiscal years 2001 to 2008: 45.1.
Acquisition workforce by functional career field: Auditing;
Fiscal year 2001: 3,457;
Fiscal year 2008: 3,638;
Percentage change fiscal years 2001 to 2008: 5.2.
Acquisition workforce by functional career field: Unknown/Other;
Fiscal year 2001: 4,097;
Fiscal year 2008: 1,258;
Percentage change fiscal years 2001 to 2008: -69.3.
Acquisition workforce by functional career field: Total;
Fiscal year 2001: 129,249;
Fiscal year 2008: 125,879;
Percentage change fiscal years 2001 to 2008: -2.6%.
Source: DOD data.
[End of table]
Risks of Contractors Closely Supporting Inherently Governmental
Functions:
Federal agencies acquire basic services, such as custodial and
landscaping, to more complex professional and management support
services, which may closely support the performance of inherently
governmental functions. Tasks that require discretion in applying
government authority or value judgments in making decisions for the
government are defined by the FAR as inherently governmental functions;
as such they are required to be performed by government employees, not
private contractors.[Footnote 10] The FAR provides 20 examples of such
work functions, including determining agency policy or federal program
budget request priorities; directing and controlling federal employees;
and awarding, administering or terminating federal contracts.[Footnote
11]
The FAR also provides examples of functions that, while not inherently
governmental, approach the category due to the nature of the function,
the manner in which a contractor performs the task, or methods used by
the government to administer performance under a contract (see app.
II).[Footnote 12] Services that closely support inherently governmental
functions include professional and management support services, such as
those that involve or relate to supporting budget preparation; program
planning; acquisition planning; technical evaluation for contract
proposals or source selections; and development of statements of work.
The decision to turn to contractors can, in some cases, create risks
that the government needs to consider and manage. Of key concern is the
loss of government control over and accountability for mission-related
policy and program decisions when contractors provide services that
closely support inherently governmental functions. The closer
contractor services come to supporting inherently governmental
functions, the greater the risk of their influencing the government's
control over and accountability for decisions that may be based, in
part, on contractor work. This may result in decisions that are not in
the best interest of the government and may increase vulnerability to
waste, fraud, and abuse. Given this risk, the FAR and Office of Federal
Procurement Policy (OFPP) guidance state that a greater scrutiny and an
enhanced degree of management oversight is required when contracting
for functions that closely support the performance of inherently
governmental functions.[Footnote 13] Additionally, the Ronald W. Reagan
National Defense Authorization Act for Fiscal Year 2005 required, among
other things, that prior to entering into a contract for performance of
acquisition functions that closely support inherently governmental
functions, DOD must ensure that its personnel cannot reasonably be made
available to perform these activities, that appropriate DOD personnel
supervise contractor performance and perform all inherently
governmental functions, and that DOD address any potential
organizational conflict of interest of the contractor when performing
these tasks.[Footnote 14] Table 2 provides examples of contracted
services and their relative risk of influencing government decision
making.
Table 2: Range of Contracted Services and Related Risk Level:
Basic services (Risk level: low):
* Custodial;
* Food;
* Landscaping;
* Snow removal;
* Storage;
* Trash collection.
Professional and management support services that do not closely
support inherently governmental functions (Risk level: medium):
* Advertising;
* Banking;
* Parking;
* Records maintenance.
Professional and management support services that closely support
inherently governmental functions (Risk level: high):
* Acquisition support;
* Contracting support;
* Budget preparation;
* Developing or interpreting regulations;
* Engineering and technical services;
* Intelligence services;
* Policy development;
* Reorganization and planning.
Source: GAO analysis.
[End of table]
Our previous work has identified that the use of contractors for
services that closely support inherently governmental functions
introduces other risks due to a potential loss of government control
over program decisions.[Footnote 15] Such concerns include an increased
potential for conflicts of interest, both organizational and personal;
the potential for improper use of personal services contracts, which
the FAR generally prohibits because of the employer-employee
relationship they create between the government and contractor
personnel; and the potential additional cost to the government of
hiring contractors rather than government personnel.
DOD Management and Peer Reviews:
The National Defense Authorization Act for Fiscal Year 2002 required
the Secretary of Defense to establish a review process for the approval
of DOD services acquisitions.[Footnote 16] USD(AT&L) issued guidance in
May 2002 establishing its management reviews, intending to ensure that
DOD's services acquisitions are based on clear, performance-based
requirements with measurable outcomes and that acquisitions are planned
and administered to achieve intended results.[Footnote 17] Under this
initial guidance USD(AT&L) was to review all proposed services
acquisitions with an estimated value of $2 billion or more, and
military department and other defense component officials were to
review those below that threshold. The military departments each
subsequently developed their own management review processes for
acquisitions that contained several of the same elements. Chief among
these was the requirement that written acquisition strategies must be
reviewed and approved by senior officials before contracts may be
awarded. The content of these strategies included, among other things,
information on contract requirements, risks, and business
arrangements.[Footnote 18] Once the acquisition strategies are
approved, DOD contracting offices may continue the acquisition process,
including soliciting bids for proposed work and subsequently awarding
contracts.
Based on further requirements in the National Defense Authorization Act
for Fiscal Year 2006,[Footnote 19] in October 2006, USD(AT&L) issued a
memorandum updating DOD's acquisition of services policy.[Footnote 20]
Under the updated policy, all proposed services acquisitions with a
value estimated at more than $1 billion or designated as "special
interest" should be referred to USD(AT&L) for review. The dollar
threshold for military department reviews was also lowered. While the
substance of the management reviews remained largely unchanged from the
2002 policy, it did incorporate a few additional, specific, acquisition
strategy requirements concerning inclusion of any required waivers and
top-level discussion of source selection processes.
In 2006, we reported that although DOD had established formal
management reviews for the approval of services acquisitions, issues
with services contracts at the strategic and transactional level
remained.[Footnote 21] We reported that DOD's approach to managing
services acquisitions tended to be reactive and that it had not
developed a means for gauging whether ongoing and planned efforts were
achieving intended results. At the transactional level, DOD focused
primarily on elements associated with awarding contracts, with much
less attention paid to requirements or the assessment of the actual
delivery of contracted services. Moreover, the results of individual
acquisitions were generally not used to inform or adjust strategic
direction. We recommended that, among other actions, DOD take steps to
determine areas of specific risk that were inherent in acquiring
services and that should be managed with greater attention. DOD agreed
with this recommendation and has identified actions under way to
address our concerns.
In response to a requirement in Section 808 of the National Defense
Authorization Act for Fiscal Year 2008, USD(AT&L) established a
multiphased, pre-and post-contract award independent management review,
or peer review, process for services acquisitions.[Footnote 22] In
December 2008, DOD Instruction 5000.02, Operation of the Defense
Acquisition System, was revised and incorporated these peer reviews as
well as the management reviews and dollar thresholds established in the
October 2006 acquisition of services policy.
DOD Policies Do Not Require an Assessment of Risk of Contractors
Closely Supporting Inherently Governmental Functions at Key Acquisition
Decision Points:
DOD and the military departments are to assess a number of risks when
developing an acquisition strategy for services, but DOD policy does
not require an assessment of risks associated with contractors closely
supporting inherently governmental functions at two key decision
points--when approving acquisition strategies or issuing task orders.
All 7 of the proposed acquisitions for professional, administrative,
and management services and more than 75 percent of the 64 related task
orders we reviewed required the contractor to provide services that
closely supported inherently governmental functions. A DOD instruction
issued after the approval of the acquisition strategies we reviewed
requires that consideration be given to using civilian personnel rather
than contractors, specifically when the activities to be performed
cannot be separated or distinguished from inherently governmental
functions. However, once the decision to rely on contractors is made,
DOD personnel are not required to identify and document risks posed
when contractors are given responsibility for closely supporting
inherently governmental functions or take steps to mitigate those
risks.
Risks Associated with Contractors Closely Supporting Inherently
Governmental Functions Are Not among Those Assessed in Acquisition
Strategies Submitted for Management Reviews:
DPAP representatives we met with noted that the acquisition strategy is
a "big picture" document that examines whether the proposed methods for
acquiring services are sound and how the acquisition compares with
previous acquisitions. The strategy is developed, in part, with the
assistance of both program office representatives, who identify the
requirements, and contracting personnel, who will develop the basic
contracts and subsequently issue task orders. Agency personnel are
required to document in the acquisition strategy their assessment of
current and potential technical, cost, schedule, and performance risks;
the level of those risks; and a mitigation plan. As part of the
acquisition strategy, this assessment is subsequently reviewed by
senior DOD officials during management reviews. Documentation for all
seven acquisition strategies we reviewed included a discussion of these
risks as well as methods to mitigate their impact, as required in
policy.
DOD policy, however, does not require the military departments to
consider and document in their acquisition strategies the extent to
which the proposed services will be used to closely support inherently
governmental functions. As a result, none of the acquisition strategies
or related risk assessment documentation reviewed under DOD's
management reviews that we analyzed identified such concerns or any
related mitigation strategies. The acquisition strategies and
supporting documentation we reviewed included broad descriptions of the
services to be provided over the course of the acquisition, which
included acquisition, contracting, and policy development support
services. Each of these services are identified in the FAR as examples
of those that closely support inherently governmental functions.
[Footnote 23]
DOD and military department officials we spoke with indicated that, to
some degree, DOD's management review is not well suited to assess the
risks of contractors closely supporting inherently governmental
functions. These officials noted that the acquisition strategies
generally described requirements in broad terms and that the timing of
the review--often months before DOD actually solicits bids from the
contractors or awards contracts and issues task orders for specific
services--makes it challenging to know what specific risks might be
encountered or whether a mitigation strategy is warranted. These
officials indicated that identifying such risks would be more
appropriate during the planning for the subsequent award of contracts
or issuance of task orders, when the program offices have more clearly
defined their specific needs and requirements.
In most cases, however, the military departments had prior knowledge
about their expected use of contractors to provide such services. For
example, all of the acquisition strategies and supporting documentation
we reviewed justified the need to obtain contractor support to perform
these functions due to a lack of government resources needed to meet
daily mission requirements. These documents and contracting officials
indicated that the offices supported by these acquisitions have long
relied, in some cases for over a decade, on contractor support to
augment the government workforce and perform tasks that closely support
inherently governmental functions. For example, although the
Professional Acquisition Support Services strategy that supports the
Air Force's Electronic Systems Center was approved in 2006, the center
has contracted for similar acquisition support services continuously
since 1984. Likewise, the acquisition management services provided to
the Air Force's Air Combat Command through the Technical Acquisition
Management Support 3 acquisition have been obtained through previous
acquisitions dating back to 1989. Although officials stated that
documentation explaining the need to contract for these services in the
past was often unavailable, contracting officers and program officials
indicated that reductions in government personnel have led to the
increased use of contractors to perform activities government personnel
would have performed in the past.
Program and contracting officials stated that they would now prefer to
use government personnel to perform these activities, but they noted
the length of time it takes to hire federal employees and the lack of
available personnel funds or positions necessitates them to use
contractor support. Program and contract officials also informed us
that the decision not to pursue additional federal employees instead of
contractors was made by the supported programs before these officials
became involved with the acquisition process. Further, they indicated
they were not provided with the analyses used to support these
decisions. We did not find any analysis or discussion of how these
decisions were made in the acquisition strategies or supporting
documentation submitted for the management review.
Risks of Contractors Closely Supporting Inherently Governmental
Functions Are Not Considered and Documented by DOD Personnel When
Awarding Contracts or Issuing Task Orders:
According to DOD officials, personnel are not required to consider and
document the risks associated with contractors closely supporting
inherently governmental functions when awarding contracts or issuing
task orders. Forty-nine of the 64 task orders we reviewed included
services that, as described in the FAR, are examples of activities that
closely support inherently governmental functions, including support
for developing statements of work or contract documents; or budget
preparation.[Footnote 24] Program managers and contracting officers we
spoke with acknowledged that contractors closely supported inherently
government functions, but none of the contract files identified them as
such or indicated if any steps were taken to address related risks.
The associated contract files for each of the task orders we reviewed
included provisions specifically prohibiting the contractor from
performing inherently governmental functions. Program managers and
contracting officers informed us that they were aware of the importance
of preventing contractors from performing inherently governmental
functions as required by the FAR.[Footnote 25] These officials
acknowledged that without contractor support, fulfilling mission
requirements or conducting certain program activities could not
continue and some recognized that the close working relationships that
develop between government and contractor support personnel increase
the risks of contractors performing inherently governmental functions.
To prevent contractors from performing such tasks, program and
contracting officials indicated that they reviewed task order
requirements to ensure that they are within the scope of the
acquisition and do not require contractors to perform tasks that should
be left only to government employees. Officials further stated that
when developing performance work statements they emphasize that the
contractors' role is to provide assistance to the government rather
than make program decisions.
Program and contract personnel that we interviewed who were responsible
for overseeing the work done under the task orders were unaware,
however, of the FAR requirement to provide greater scrutiny and an
enhanced degree of management oversight and surveillance when
contracting for services that closely support inherently governmental
functions.[Footnote 26] Additionally, federal internal control
standards require that agencies conduct an assessment of risks, such as
risks that result from heavy reliance on contractors to perform
critical agency operations.[Footnote 27] According to DOD officials,
however, no specific guidance has been provided by DOD that defines how
contracting and program officials should conduct such enhanced
oversight. DPAP officials noted that additional information on how to
oversee contractors that closely support inherently governmental
functions would be useful to the military departments, but acknowledged
that they have no ongoing efforts do so.
Recent Guidance Requires DOD to Consider Using Civilian or Military
Employees to Perform Activities That Closely Support Inherently
Governmental Functions:
In May 2009, DOD issued guidance[Footnote 28] in response to
legislation requiring DOD to devise and implement guidelines and
procedures to ensure that consideration is given to converting, or in-
sourcing, functions currently performed by contractors to DOD civilian
personnel.[Footnote 29] This in-sourcing guidance instructs DOD
personnel to prioritize the conversion of any currently contracted
services to DOD civilian performance if the functions: are valid and
enduring mission requirements; are inherently governmental functions;
are exempted functions;[Footnote 30] are unauthorized personal
services; have problems with contract administration; or are services
that require "special consideration" for in-sourcing. Under the law and
the guidance, one of the categories of services that should be given
"special consideration" for in-sourcing is services that closely
support inherently governmental functions.
The May 2009 guidance also states that when making certain in-sourcing
decisions, agency personnel should consult workforce management
officials, as specified in DOD's Guidance for Determining Workforce
Mix.[Footnote 31] This instruction requires DOD personnel to pay
particular attention when contracting for activities that closely
support inherently governmental functions. If an activity is so closely
associated with an inherently governmental function that it cannot be
separated or distinguished from it, the instruction requires that the
function be identified as inherently governmental and precluded from
private sector performance. This safeguard is intended to prevent the
transferring of governmental authority, responsibility, or
accountability to the private sector. However, neither the May 2009 in-
sourcing guidance nor DOD's Guidance for Determining Workforce Mix
require DOD contracting and program personnel to identify, document, or
mitigate risks posed when contractors will be relied on to closely
support inherently governmental functions.
Further, under the May 2009 in-sourcing guidance, the conversion of
services that require "special consideration" to government performance
is to be based solely on cost and not risk; that is, these services may
be in-sourced only if a cost analysis shows that performance by DOD
civilian employees is more cost-effective. Officials from the Office of
the Director for Cost Assessment and Program Evaluation[Footnote 32]
stated that guidance for standardizing how these cost analyses should
be performed was expected to be issued by December 2009. The May 2009
in-sourcing guidance also requires that when cost analyses indicate
that the private sector is the more cost-effective provider of
services, a written confirmation should be provided to contracting
officers. Further, the guidance states that all documents leading to
the decision to contract for such services should be retained in
contract files. DPAP and military department officials stated that cost
analyses are not required to be submitted in the documentation
supporting management reviews.
DOD Faces Challenges In Implementing Performance-Based Practices on
Professional and Management Support Task Orders:
DOD faces challenges in defining requirements and outcome-based
measures when using a performance-based approach to acquire
professional and management support services. DOD personnel generally
expressed task order requirements in terms of a broad range of services
that the contractors might be required to perform and used a mix of
objective and subjective measures to determine whether the contractor
achieved assigned tasks within expected cost, schedule, and quality
parameters. For example, 63 percent of the task orders that assessed
contractor cost performance principally used objective performance
measures, while two-thirds of the task orders that assessed the quality
of contractor performance principally used subjective measures. We
found objective measures generally provided more discrete information
to assess contractor performance. In contrast, subjective measures,
especially those to assess the quality of contractor work, tended to
rely on customer feedback, such as the number of complaints lodged
against the contractor. In several instances, DOD missed opportunities
to include objective performance measures that may have been better
suited to assess contract outcomes, in part because DOD personnel used
the performance measures established in the base contract rather than
attempt to measure the specific services being provided under the task
order. DOD officials acknowledged there are challenges in developing
measures that assess the outcomes of professional and management
support contracts and noted recent actions to improve existing
guidance.
FAR and DOD Guidance Established Preference for Performance-Based
Services Acquisition:
In 2000, Congress established performance-based approaches as the
preferred acquisition method for acquiring most services.[Footnote 33]
Under the FAR, all performance-based acquisitions should include:
* a performance work statement that describes outcome-oriented
requirements in terms of results required rather than the methods of
performance of the work;
* measurable performance standards describing how to measure contractor
performance in terms of quality, timeliness, and quantity; and:
* the method of assessing contract performance against performance
standards, commonly accomplished through the use of a quality assurance
surveillance plan.[Footnote 34]
DOD issued its Guidebook for Performance-Based Services Acquisition in
the Department of Defense in December 2000 to educate DOD personnel on,
and promote the use of, performance-based practices. The guidebook
suggests that personnel develop performance objectives that encompass
at a top level all the tasks that must be completed to arrive at the
desired outcome. The guidebook states that performance standards should
be identified for the performance objectives so personnel will know if
the desired outcome was satisfactorily achieved. It further states that
determining an appropriate performance standard is a judgment call
based on the needs of the mission and available expertise. DOD's
guidance also identifies that surveillance personnel may use various
measures to assess the contractor's performance, such as random or
periodic sampling of the contractor's work as well as customer
feedback. The guidebook indicates, however, that customer feedback
should be used prudently as it is subjective and does not always relate
to the requirements of the contract. Lastly, the guidebook provides
examples of performance objectives with corresponding standards and
measures for various services and activities, but not specifically for
professional and management support services (see table 3).
Table 3: Examples of Performance Requirements in DOD's Guidebook for
Performance-Based Services Acquisition in the Department of Defense:
Type of service: Call center operations;
Performance objective: Maintain all equipment and materials;
Performance standard: Equipment failures, non-availability, or
maintenance shall not interfere with operations for more than x minutes
during a month (day, etc.);
Assessment methods: Random inspection; audit or review by third party.
Type of service: Call center operations;
Performance objective: Assure customers are satisfied with quality of
service;
Performance standard: At least x percent of customers contacted must be
satisfied with service;
Assessment methods: Review and validate customer surveys; conduct
independent surveys.
Type of service: Reporting to the government;
Performance objective: Deliver required reports;
Performance standard: No more than x (or x percent) of the reports to
appropriate government contact may be later than the specified time
period;
Assessment methods: Review reports and logs.
Type of service: Satellite control center service;
Performance objective: Conduct an effective position certification
program to ensure qualified personnel are provided for orbital
analysis;
Performance standard: 95 percent of personnel certified within x
timelines per year;
Assessment methods: Not specified.
Source: DOD's Guidebook for Performance-Based Services Acquisition in
the Department of Defense, 2000.
[End of table]
Performance Standards and Measures Were Not Always Well Suited to
Assess the Outcomes of the Broad Range of Contracted Services:
While DOD identified as performance-based all but one of the task
orders we reviewed, we found that almost all of the task orders had
broadly defined requirements that listed various categories of services
and related activities the contractor may be required to perform over
the course of the order rather than expected results. The task orders
we reviewed were issued from base contracts that identified the
categories of support services a contractor may be required to perform.
The task orders then identified a broad range of activities that the
contractor may be required to perform based on the customer program
office's needs. For example, the base contract for one task order
identified four different categories of support services: acquisition,
financial management, contracting, and administrative and human
resources support. In turn, the task order identified several
activities the contractor could perform, such as preparing acquisition-
related documents, updating commanders on policies and procedures,
tracking and analyzing funds, maintaining contract files, and preparing
travel orders.
DOD generally grouped contractor performance into a number of different
performance objectives, including cost, schedule, and quality, and set
standards that the contractor had to meet. These performance objectives
required the contractor to, among other things, maintain control of
costs by completing work within an acceptable range of projected costs,
adhere to the government's schedule by delivering products on time, and
provide the government with high-quality work products. DOD personnel
used a mix of objective and subjective measures to assess the
contractors' performance against the cost, schedule, and quality
standards in 54 of the 64 task orders we reviewed; not all task orders
established performance measures in all three categories (see table 4).
The measures used varied depending on the area of performance assessed.
For example, 63 percent of the task orders that assessed the
contractor's cost performance principally used objective performance
measures, while two-thirds of the task orders that assessed the quality
of the contractor's performance principally used subjective measures.
Table 4: Principal Measures Used to Assess Selected Performance
Objectives:
Performance objective: Maintain cost control;
Performance standard measured objectively: 34;
Performance standard measured subjectively: 20;
Performance objective not included or assessed[A]: 10.
Performance objective: Meet schedule requirements;
Performance standard measured objectively: 29;
Performance standard measured subjectively: 25;
Performance objective not included or assessed[A]: 10.
Performance objective: Provide high-quality services;
Performance standard measured objectively: 20;
Performance standard measured subjectively: 40;
Performance objective not included or assessed[A]: 4.
Source: GAO analysis of 64 selected task orders.
[A] In lieu of measuring cost, schedule, or performance, contractors
were assessed in such areas as maintaining good business relations with
the government and how well the contractor retained and replaced its
personnel.
[End of table]
We found that the objective performance measures yielded better
information on how well the contractor met desired cost and schedule
contract outcomes than subjective measures. For example, the objective
performance standards in one task order required the contractor to
remain within projected costs and perform tasks within schedule 97
percent of the time. In this instance, the surveillance personnel
maintained a database of the contractor's cost and periodically
contacted customers to identify if the contractor's work was completed
on time. The other task orders that included cost and schedule
performance standards were assessed subjectively, based on the number
of complaints lodged against the contractor. According to task order
documentation and surveillance personnel we spoke with, a customer
complaint is generated when a contractor fails to meet performance
requirements. Ten of these task orders required the contractor to
provide accurate cost forecasts and accomplish tasks with minimum delay
to program mission objectives. None of these task orders, however,
identified what would constitute a level of performance that would
result in a valid customer complaint. Contractor performance
documentation we reviewed for these task orders indicated that DOD
assessed the contractor as having met performance requirements, but
provided little to no information on what the contractor accomplished.
Both the subjective and objective performance measures used to assess
the quality of the contractors' services provided little insight into
the outcomes of the contractors' work. DOD personnel relied on
subjective measures to assess the quality of contractor services
provided in 40 of the 64 task orders we reviewed. For example, 30 of
these tasks orders directed surveillance personnel to assess quality
based on the number of customer complaints a contractor received.
Surveillance personnel we spoke with indicated that they regularly
contacted government customers to inquire about their overall
satisfaction with the contractor's performance. Some surveillance
personnel explained that it was difficult to determine if the
contractor met or exceeded performance standards because guidance on
making these determinations was not available. Consequently, they
generally documented the contractor's performance as acceptable if the
customer said they were satisfied with the contractor's performance. We
found that when the contractor's performance was rated as meeting
requirements, surveillance personnel documented little detail about the
quality of the contractor's work because such descriptions were often
required only when the contractor either exceeded or did not meet
expectations. In another 10 task orders involving the purchase of
engineering, technical, business, and acquisition support services,
such as helping to identify the program office's contracting
requirements and assisting with developing requests for proposals and
statements of work to fill those requirements, quality performance
standards required the contractor to complete task order activities
with little rework and with few minor and no significant problems at
least 80 percent of the time. According to the documentation we
reviewed, surveillance personnel indicated they periodically sampled
the contractor's work to verify the percentage that was redone and
often rated the quality of the work as exceptional because little
rework was reported.
On four task orders for translation services in Afghanistan, Cuba, and
other areas, DOD personnel did not attempt to measure the quality of
the contractor's services. In these cases, the task orders'
requirements included that the contractor deploy translators in
response to mission requirements. The corresponding performance
standard required the contractor to meet staffing requirements[Footnote
35] no less than 95 percent of the time, which was measured and
documented by surveillance personnel. The task orders, however, did not
include a performance objective for obtaining high-quality translation
services. Contracting and program officials explained that they did not
try to measure the quality of the translations provided because DOD
lacks the personnel with translation skills necessary to make such an
assessment. These officials stated that ensuring qualified personnel
are provided in a timely manner is the best alternative to determining
if the translations provided are of high quality.
The military departments may have missed opportunities to include and
use objective performance measures that were better suited to assess
contract outcomes in several of the task orders we reviewed. In part,
this occurred because DOD personnel used the general performance
measures that were established in the base contract rather than develop
measures that were tailored for the specific work required in the task
orders in more than 80 percent of the task orders we reviewed.
Consequently, in each of the following examples, the quality of the
contractor's performance was measured based on the number of validated
complaints submitted by government personnel.
* Four task orders issued for acquisition, financial management,
contracting, and administrative support required contractors to
indicate at the end of each contract year at least two lessons learned,
best practices, or improvements it made to the government's processes
in areas including acquisition and program management. The requirements
did not, however, identify at the outset of the task order the type or
extent of the improvements that DOD desired, such as reductions in the
time required to complete activities or costs savings.
* In a $1.8 million task order for information and project management
support, the contractor was required to identify and reduce the
government's unliquidated obligations by 25 percent in 6 months and by
50 percent in a year when measured against an identified baseline.
Nevertheless, the task order did not include any performance measures
that were directly related to whether the contractor met the reduction
targets. The official responsible for assessing the contractor's
performance noted, however, that he considered the contractor's efforts
to reduce unliquidated obligations when he assessed the contractor's
performance.
* In four other task orders for acquisition and information management
support, the contractor was required to review technical proposals and
validate prices submitted by other contractors and make recommendations
on the acceptance or rejection of these proposals as part of the
support it provided to the program office's pre-award activities. The
task orders, however, did not include objective performance measures to
assess the contractor's performance, such as whether the contracting
officer returned the contractor's work to correct deficiencies or
whether the reviews resulted in reducing the government's costs.
DOD Officials Identified Challenges in Developing Objective, Outcome-
Oriented Measures:
Our previous work at the Department of Homeland Security noted that
defining outcome-oriented requirements and measurable performance
standards may be challenging for professional and management support
services.[Footnote 36] We found similar concerns expressed by the DOD
contracting, program, and surveillance officials we interviewed. These
officials acknowledged that they find it difficult to identify and
objectively measure the outcomes of professional and management support
services contracts due to the broad range of support provided. They
stated that these task orders encompassed a range of activities which,
while not inherently governmental, would typically be performed by
federal employees. Consequently, officials stated the performance work
statements needed to be written broadly to provide the flexibility to
obtain specific support as needed and that contractors were often
viewed as simply augmenting the government's workforce. Further, these
officials noted that it was often not practical to measure the work
contractors performed and that subjective measures, such as the number
of customer complaints received, are frequently used as an alternative
to assess whether the contractor met the government's requirements. As
a result, they generally considered the outcome of these task orders to
be obtaining qualified people rather than a specific result the
contractor was required to achieve.
To address the challenges of developing performance-based requirements
and measures for professional and management support, a Defense
Acquisition University (DAU) official noted that DAU was reviewing
performance work statements and surveillance plans from professional
and management support contracts across DOD to identify good examples
of outcome-based performance objectives, standards, and measures. DAU
plans to launch a Web site in January 2010 that includes templates
derived from these examples for contracting and program officials
across DOD to tailor to their own needs. Additionally, this official
noted that since January 2009, DAU has offered a 4-day services
acquisition workshop tailored to individual acquisitions developed by
program offices across DOD. According to the DAU official, the workshop
brings together key acquisition personnel, from contracting officers to
customers, to support the development of new acquisition strategies
before they are reviewed by the military departments. The official
added that by the end of the workshop, the requiring activity has a
draft performance work statement and a quality assurance surveillance
plan that meets performance-based requirements.
DOD Efforts to Designate Trained Surveillance Personnel Show Progress,
but Concerns Remain:
DOD's efforts to ensure that trained surveillance personnel are
assigned to monitor contractor performance on services contracts have
shown progress, though on a number of task orders personnel were not
always designated or trained in a timely fashion. Surveillance
personnel are required to be qualified by training and designated in
writing.[Footnote 37] In response to our and inspector general reports
on continued shortcomings in DOD's contract surveillance
practices,[Footnote 38] DOD issued guidance on December 6, 2006,
requiring that surveillance personnel be properly trained and
designated before contract performance begins, and that properly
trained surveillance personnel are identified on active contracts for
services.[Footnote 39]
At the time of our review, trained surveillance personnel were
designated to all 64 task orders. DOD personnel responsible for five of
the seven acquisitions we reviewed, however, did not maintain
documentation on all surveillance personnel assigned over the task
orders' entire period of performance. DOD officials stated that in some
cases additional personnel may have been designated to the task orders,
and that some personnel may have received surveillance training on a
date earlier than was indicated in the contract files, but were unable
to provide documentation.
In most cases, DOD was able to provide documentation of the first
person designated to conduct surveillance and the person assigned at
the time of our review. On the basis of this information, we found that
surveillance personnel were designated after contract performance began
on 3 of the 37 task orders awarded after the issuance of the December
2006 guidance.[Footnote 40] In 1 of these 3 cases, the person was
designated more than 90 days after performance began on the task order.
We also found that 61 of the 64 surveillance personnel designated on
the task orders we reviewed had received training. For 1 of the 3
instances where personnel were not trained, a program official
explained that the person was recently assigned and had been notified
of the training requirements, but had not completed the training. In
the 2 other instances, DOD officials were not able to identify a reason
for the lack of training. For the 61 task orders with trained personnel
assigned, 20 personnel had not received training prior to beginning
their assignments. Furthermore, in 3 of these cases, surveillance
personnel did not receive the required training until at least a year
after they were assigned to monitor a contractor's performance.
The training that surveillance personnel received varied across and
within the military departments, ranging in duration from 2 hours to 1
week, and included, among other things, reviewing training slides,
completing an on-line course offered through DAU's Web site, and
completing an in-class course tailored by the program office
responsible for the acquisition. There are no DOD-wide requirements for
the content of surveillance training and personnel we spoke with
provided mixed feedback on how well their training prepared them to
conduct surveillance. Surveillance personnel noted that training
provided an adequate basis for conducting their duties, but did not
always provide enough instruction on how to effectively oversee
contractors, especially for those who had little to no previous
experience with assessing contractor performance. Several personnel
stated that the most useful information that training provided was the
contact information for personnel in the contracting offices that
surveillance personnel could speak with if they had questions. DPAP
officials acknowledged that the type and content of the training
surveillance personnel receive varied and indicated that DOD is
considering a certification system for these personnel that may include
both training and experience requirements.
Surveillance personnel identified a number of challenges that may
affect their surveillance duties, such as numerous contractors to
oversee in multiple locations and surveillance responsibilities being
secondary to primary duties. For example, on one task order for
translation services in Afghanistan, surveillance personnel were each
responsible for monitoring over 1,000 contractors dispersed throughout
the country. An official who oversaw this task order stated the ratio
of surveillance personnel to contractors was so large that it affected
the government's ability to assess contractor performance.[Footnote 41]
For a task order for translation services in Cuba, the contracting
officer's letter of designation to the contracting officer's
representative stressed the importance of on-site surveillance.
Nevertheless, we found that there was an 8-month period during which
surveillance personnel were absent from the site of contractor
performance. Despite the absence of on-site surveillance personnel,
contracting officials determined that the contractor should receive the
full award fee based upon performance reports submitted before and
after this 8-month period. Several personnel from other commands we
visited told us they did not have sufficient time to focus on their
surveillance responsibilities in addition to their primary duties.
Finally, surveillance personnel at many of the commands we visited
stated that they were unaware of requirements to provide enhanced
oversight of contractors that closely support inherently governmental
functions.
Recent Initiative May Improve DOD's Insight into Issues Affecting
Professional and Management Support Contracts:
DOD is in the process of implementing additional processes to review
services contracts both prior to and after contract award, which may
provide additional insight into DOD's management and oversight of
professional and management support contracts. These reviews are
intended to assess a number of issues that are not currently addressed
by DOD's management review, including contractors that closely support
inherently governmental functions, implementation of performance-based
practices, and proper surveillance of contractors.
The National Defense Authorization Act for Fiscal Year 2008 required
DOD to issue guidance to implement an independent management review of
services contracts.[Footnote 42] In response, the Director of DPAP
issued memorandums in September 2008 outlining pre-and post-award peer
reviews and in February 2009 detailing criteria for the peer reviews
for services acquisitions with estimated values of $1 billion or more,
consistent with the threshold for reviewing proposed services
acquisitions.[Footnote 43] To do so, DOD convenes peer review teams
that consist of senior contracting leaders from across DOD as well as
legal counsel to work closely with the offices responsible for
developing acquisition strategies. This policy also required the
military departments to establish their own procedures to conduct peer
reviews for service acquisitions valued at less than $1 billion. As of
October 2009, DPAP conducted 48 pre-award peer reviews on 31 different
proposed supplies and services acquisitions. DPAP also conducted three
post-award reviews on approved and ongoing services acquisitions, which
included a review of task order documents. Of the 51 reviews conducted
by DPAP, four pre-award reviews and one post-award review were
conducted on three different professional and management support
services acquisitions.[Footnote 44]
The peer review process differs from DOD's management reviews in a
number of areas that may provide opportunities for the department to
address key aspects of managing and overseeing professional and
management support contracts. Whereas the premise of the management
review is to assess and approve proposed acquisition strategies, the
peer reviews are conducted after strategies have been approved and are
intended to be advisory in nature. Peer reviews are designed to help:
* ensure that contracting officers across DOD implement policy and
regulations in a consistent and appropriate manner;
* improve the quality of DOD's contracting processes; and:
* facilitate cross-sharing of best practices and lessons learned.
Currently, a peer review team summarizes the results of its review in a
memorandum provided to both the contracting office responsible for the
acquisition and DPAP. According to DPAP officials, DOD is still
determining how to share best practices and lessons learned from these
reviews with the department's acquisition community.
While both the peer reviews and the management reviews contain pre-
award components, the multiple phases of the peer reviews provide DOD
the opportunity to address additional issues and examine documents not
available during the management review (see fig. 1). For example, the
pre-award management review of proposed services acquisitions occurs
before performance work statements and quality assurance surveillance
plans are developed. As a result, the management reviews do not include
an assessment of how performance-based practices are implemented and
whether proper contractor surveillance is conducted. Further, as
previously noted, DOD's management review guidance does not require
department personnel to identify whether the services to be provided
closely support inherently governmental functions or how the risks
associated with contractors providing such services will be addressed.
In contrast, the pre-award peer reviews occur later in the acquisition
cycle and include the review of additional documents that may provide
reviewers an opportunity to recommend improvements to performance work
statements and surveillance plans.
Figure 1: Comparison of DPAP's Peer Reviews and Management Reviews for
Services Acquisitions for Acquisitions Estimated to be Valued at $1
Billion or More:
[Refer to PDF for image: illustrated table]
Peer review:
Phase 1: Prior to issuance of the solicitation: Documents typically
reviewed: performance work statement, quality assurance surveillance
plan, request for proposal, and source selection plan.
Milestone for service acquisition:
Development of acquisition strategy and supporting documentation
begins.
Phase 2: Prior to request for final proposal revisions:Documents
typically reviewed: instructions for proposals and proposal evaluation
criteria, source selection evaluation guide, source selection plan, and
evaluations of contractor proposals.
Milestone for service acquisition:
Solicitation issued.
Phase 3: Prior to contract award: Documents typically reviewed:
proposal analysis reportand selection decision document.
Milestone for service acquisition:
Final request for proposals issued.
Phase 4: Post-award review: Documentstypically reviewed: any
documentation related to the program, such as task orders, award fee
plan, and performance assessments.
Milestone for service acquisition:
Contract awarded.
One year after contract award:
Management review:
Acquisition strategy review and approval: Documents typically reviewed:
draft acquisition strategy, instructions for proposals, and proposal
evaluation criteria.
Source: GAO analysis of DOD policy and guidance.
[End of figure]
Additionally, the peer review process provides for a post-award phase
for services that expands upon the management review requirements. The
post-award peer review has eight metrics that provide criteria that
reviewers use to evaluate ongoing acquisitions in terms of how
contractor performance is assessed, including the use of objective
criteria; whether surveillance personnel are appropriately staffed; and
the extent of reliance on contractors to perform tasks closely
associated with inherently government functions. Table 5 shows the
various areas of focus of the peer reviews.
Table 5: Focus Areas of the Peer Review Process:
Before contract award:
* Clearly defined requirements;
* Contractors performing functions closely associated with inherently
governmental functions;
* Contractor conflicts of interest;
* Utilization of performance-based characteristics;
* Contract surveillance.
After contract award:
* Contractor cost, schedule, and performance assessments;
* Maintaining competition;
* Contractor's management of subcontractors;
* Contract surveillance;
* Pass-through charges[A];
* Contractors performing certain functions closely associated with
inherently governmental functions;
* Contractor conflicts of interest;
* Objective criteria for contracts with award or incentive fee.
Source: GAO analysis based on DOD policy.
[A] Pass-through charges are contractor charges for the costs
associated with subcontracting work.
[End of table]
Our review of the summary memoranda for the five peer reviews conducted
on professional and management support contracts found that while the
memoranda generally focused on business aspects, some memoranda made
recommendations related to performance-based approaches and
surveillance issues specific to the individual acquisition. For
example, a pre-award peer review team recommended that the contracting
office work with DAU to develop performance-based statements of work.
The peer review team for the one post-award review recommended that the
program office identify objective performance measures and present them
to the contractor. Another pre-award peer review team recommended that
the contracting office appoint surveillance personnel prior to the
award of a contract. None of the memoranda we reviewed noted issues
with contractors closely supporting inherently governmental functions.
DOD officials stated that these issues were discussed, but that none
appeared to warrant inclusion in the memoranda.
While DPAP has completed peer reviews on 34 individual supplies and
services acquisitions since September 2008, developing an approach that
will lead to the achievement of the peer review's objectives
enterprisewide may prove challenging given the nature and volume of
service contract activity. Nearly 1,900 task orders were issued under
the seven professional and management support services acquisitions we
reviewed, all of which required a contractor to perform multiple and
varying tasks. Furthermore, we identified thousands of individual task
orders associated with the professional and management support services
acquisition strategies approved by the military departments from fiscal
years 2004 through 2007, all of which require management and oversight
by the department. These numbers are even greater when looking at all
services acquisition strategies approved by the military departments in
that same time period (see table 6).
Table 6: Award of Contracts and Issuance of Task Orders from Fiscal
Years 2004 through 2008 Subsequent to the Military Departments'
Approval of Acquisition Strategies:
Type of contract: Professional and management support services[B];
Acquisitions approved[A]: 32;
Base contracts awarded: 192;
Task orders issued: 8,817;
Total obligations: $15.0 billion.
Type of contract: All services;
Acquisitions approved[A]: 91[C];
Base contracts awarded: 361;
Task orders issued: 13,650;
Total obligations: $27.3 billion.
Source: GAO analysis of DOD contract data reported in the Federal
Procurement Data System-Next Generation.
[A] These acquisitions were approved by DOD during fiscal years 2004
through 2007.
[B] Other services may have been purchased in these contracts and tasks
orders.
[C] An additional 11 acquisitions were approved during fiscal years
2004 through 2007, but had not awarded any contracts during the period
covered by our review.
[End of table]
Conclusions:
DOD's reliance upon contractor-provided professional, administrative,
and management services to support its missions makes effective
management and oversight of these contracts critical. Certain
activities such as budget preparation, acquisition planning, and policy
development can create risks that the government needs to consider and
effectively manage. Of key concern is the loss of government control
over and accountability for policy and program decisions. Nevertheless,
DOD's policies do not require that DOD personnel include an assessment
of these risks when their proposals for contractor support are
submitted for approval under DOD's management review process. While
recent legislation and DOD's implementing guidance require that DOD
consider whether to continue the use of contractors for critical
services, including conducting a cost analysis if the situation
warrants, these determinations and analyses are largely disconnected
from the acquisition review process. Consequently, senior DOD
leadership does not have the benefit of such analyses when making
strategic decisions on obtaining long-term, high-dollar-value
professional and management support.
Similarly, key decisions at the transactional level--such as to award a
contract or to issue a task order--are made with the recognition that
DOD is dependent on contractors to support its missions and operations.
Despite this dependency, DOD officials generally did not consider
whether contractors may be unduly or inappropriately influencing
government decision making. Further, while these services were often
acquired through performance-based approaches, such efforts were
hindered by DOD's use of broad statements of work and the use of
performance measures established in the base contract rather than
attempting to measure the specific services being provided under the
task order. Within DOD's acquisition community, there is widespread
recognition that developing outcome-oriented measures is particularly
difficult for professional and management support contracts. DOD has
efforts under way to help develop better outcome-oriented measures for
professional and management support contracts, but it is too soon to
know whether this effort will prove successful. Perhaps the most
critical tool in assessing contractor performance is having properly
trained personnel in sufficient numbers to effectively monitor
contractor performance. While improvements were evident, lapses in
designating such personnel, in particular during the initial stages of
the contract, continue to expose DOD to an increased risk of poor
contractor performance.
DOD consideration, at both the strategic and transactional levels, of
the risks of using contractors to closely support inherently
governmental functions can help improve the context for successful
professional and management support outcomes. DOD's peer review process
is beginning to assess this issue just prior to and then after contract
award, but with only a handful of reviews performed on such contracts,
it is too early to gauge whether the process will be successful in
encouraging DOD personnel to address these issues across the range of
DOD's services contracts. Having similar information provided at a
level of detail appropriate for when senior DOD and military department
leadership review proposed acquisition strategies would inform decision
makers and engender more proactive consideration earlier in the
acquisition cycle. As DOD gets closer to awarding contracts or issuing
task orders for specific services, risks move from potential to the
more tangible. Reducing the possibility that DOD would enter into a
contractual arrangement that exposes it to unintentional and undesired
consequences requires that DOD personnel consider--based on the facts
and circumstances of a particular acquisition--whether such risks are
present and, if so, how best to mitigate them. The fact that DOD
program and contracting personnel we contacted were generally unaware
of the long-standing requirement to provide greater scrutiny and
enhanced oversight on services closely supporting inherently
governmental functions underscores the need to address these problems
at multiple levels and manners.
Recommendations for Executive Action:
To better inform acquisition decisions, assist DOD personnel in
performing their management oversight responsibilities, and improve
DOD's surveillance of services contracts, we recommend that the
Secretary of Defense take the following four actions:
* revise documentation requirements for DOD's current management review
to include information on the extent to which services to be provided
will closely support inherently governmental functions as well as the
consideration given to using DOD civilian employees to perform such
functions;
* require before the award of any contract or issuance of task order
for services closely supporting inherently governmental functions that
program and contracting officials consider and document their
assessment of the unique risks of these services and the steps that
have been taken to mitigate such risks;
* develop guidance to identify approaches that DOD should take to
enhance management oversight when contractors provide services that
closely support inherently governmental functions; and:
* direct the military departments to review their procedures to ensure
that properly trained surveillance personnel have been assigned prior
to and throughout a contract's period of performance.
Agency Comments and Our Evaluation:
DOD provided written comments on a draft of this report. DOD concurred
with the four recommendations and also identified a number of actions
that would be taken to address them. DOD acknowledged the need to
continually refine its policies and procedures regarding the management
of support contracts. DOD noted that while it intended to decrease
funding for contracted support and scale back the use of contractors,
DOD will continue to rely on service contracts to support its mission,
making the effective management of professional, administrative, and
management support contracts critical. DOD also provided technical
comments, which were incorporated as appropriate. DOD's comments are
reprinted in appendix III.
We are sending copies of this report to the Secretary of Defense; the
Secretaries of the Air Force, Army, and Navy; the Administrator of the
Office of Federal Procurement Policy; and interested congressional
committees. In addition, the report will be made available at no charge
on GAO's Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions concerning this report, please
contact me at (202) 512-4841. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix III.
Signed by:
John P. Hutton:
Director Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
To determine whether the Department of Defense's (DOD) policies and
actions to improve its management of services contracts addressed
issues affecting professional and management support contracts, we
examined (1) the extent to which DOD considered the risks associated
with contractors closely supporting inherently governmental functions
at key acquisition decision points;(2) how DOD was implementing
performance-based acquisitions practices, such as identifying
requirements in terms of expected and measurable outcomes; (3) the
extent to which DOD designated trained surveillance personnel; and (4)
whether recent actions to implement a peer review process may improve
DOD's management and use of such contracts.
To assess the extent to which DOD considered the risks associated with
contractors closely supporting inherently governmental functions at key
acquisition decision points, we reviewed relevant provisions of the
National Defense Authorization Acts for fiscal years 2002 through 2009
that pertained to DOD's acquisition of services. We also reviewed
guidance issued by DOD in May 2002 and October 2006, as well as DOD
Instruction 5000.02, Operation of the Defense Acquisition System,
reissued in December 2008, which collectively established DOD's
management review processes to identify the risks that should be
considered during these reviews. Further, we reviewed Office of Federal
Procurement Policy Letter 93-1, Management and Oversight of Service
Contracting and Federal Acquisition Regulation (FAR) requirements for
the management and oversight of contractors that closely support
inherently governmental functions. We also reviewed DOD Instruction
1100.22, Guidance for Determining Workforce Mix and DOD's May 2009 in-
sourcing guidance, In-Sourcing Contracted Services--Implementation
Guidance, to determine how personnel should consider and document the
risks of contractors performing activities that closely support
inherently governmental functions and assess the appropriate mix of DOD
civilian, military, and contractor personnel. We interviewed
representatives from the Office of Defense Procurement and Acquisition
Policy (DPAP), and representatives from each of the military
departments that are responsible for implementing these policies,
guidance, and reviews to identify how these risks are accounted for
prior to approval of the proposed acquisition strategy.
To assess how these risks were addressed under DOD's management review
for specific services acquisitions, we reviewed a DOD-provided list of
102 services acquisition strategies that were reviewed and approved by
the Air Force, Army, or Navy from fiscal years 2004 through 2007. We
obtained information from the military departments on the contracts
that had been awarded after these 102 strategies had been approved.
Using this information and data derived from the Federal Procurement
Data System-Next Generation,[Footnote 45] we determined that the
military departments had awarded 361 contracts and issued 13,650 task
orders from these 102 acquisitions during fiscal years 2004 through
2007. We then identified product service codes associated with these
contracts and used the Federal Procurement Data System-Next Generation
to determine the number of contract actions and obligations for
professional and management support services. We found that 32 of these
acquisitions, with almost $15 billion in total combined obligations
from fiscal years 2004 through 2008, included contracts for
professional and management support. From these 32 acquisitions, we
selected 7 acquisitions based on such factors as the percentage of
obligations that were made for professional and management support
services, the specific types of services acquired, and the agency
awarding the contract.[Footnote 46] The 7 acquisitions we selected had
over $4.3 billion in total combined obligations from fiscal years 2004
through 2008 (see table 7 for more information on these acquisitions).
Table 7: Reviewed Services Acquisitions and Total Task Orders Issued
and Obligations from Fiscal Year 2004 through 2008:
Services acquisition (year approved) and supported command:
Consolidated Acquisition of Professional Services (2005);
Air Force, Aeronautical Systems Center, Wright-Patterson Air Force
Base, Ohio;
Total task orders: 317;
Total obligations: $290,059,894;
Total number of task orders reviewed[A]: 10;
Total obligations for task orders reviewed: $19,129,251.
Services acquisition (year approved) and supported command: Global
Engineering Integration and Technical Assistance 5 (2004);
Air Force, Center for Engineering and the Environment, Brooks City Air
Force Base, Texas;
Total task orders: 974;
Total obligations: $377,343,260;
Total number of task orders reviewed[A]: 10;
Total obligations for task orders reviewed: $12,786,624.
Services acquisition (year approved) and supported command:
Professional Acquisition Support Services (2006);
Air Force, Electronic Systems Center, Hanscom Air Force Base,
Massachusetts;
Total task orders: 48;
Total obligations: $167,184,450;
Total number of task orders reviewed[A]: 10;
Total obligations for task orders reviewed: $19,147,786.
Services acquisition (year approved) and supported command: Technical
and Acquisition Management Support 3 (2004);
Air Force, Material Command, Eglin Air Force Base, Florida;
Total task orders: 75[B];
Total obligations: $97,136,450;
Total number of task orders reviewed[A]: 10[B];
Total obligations for task orders reviewed: $32,889,624.
Services acquisition (year approved) and supported command: AMCOM
Express (2003);
Army, Aviation and Missile Command, Redstone Arsenal Army Base,
Alabama;
Total task orders: 272;
Total obligations: $2,468,630,948;
Total number of task orders reviewed[A]: 10;
Total obligations for task orders reviewed: $121,247,457.
Services acquisition (year approved) and supported command: INSCOM
Linguistics [Part 2] (2006);
Army, Intelligence and Security Command, Fort Belvoir, Virginia;
Total task orders: 66;
Total obligations: $826,095,932;
Total number of task orders reviewed[A]: 4[C];
Total obligations for task orders reviewed: $247,618,693.
Services acquisition (year approved) and supported command: Systems
Engineering and Technical Assistance (2005);
Navy, Space and Naval Warfare Systems Center, New Orleans, Louisiana;
Total task orders: 122;
Total obligations: $83,440,664;
Total number of task orders reviewed[A]: 10;
Total obligations for task orders reviewed: $11,959,827.
Services acquisition (year approved) and supported command: Total;
Total task orders: 1,874;
Total obligations: $4,309,891,598;
Total number of task orders reviewed[A]: 64;
Total obligations for task orders reviewed: $464,779,262.
Source: GAO.
[A] The task orders we reviewed were issued during fiscal years 2004
through 2007 and had obligations over $500,000.
[B] Task orders were not issued from the contracts awarded for services
purchased under Technical and Acquisition Management Support 3. The
program office used contract modifications, which it referred to as
tasks, to purchase services and provided us a list of these tasks. For
the purposes of our review, we randomly selected 10 contract
modifications or tasks that met our selection criteria and are
referring to these as task orders.
[C] At the time of our review, the Army Intelligence and Security
Command had issued only four task orders with total obligations over
$500,000 during fiscal years 2004 through 2007.
[End of table]
The seven acquisition strategies we reviewed were approved under DOD's
May 2002 acquisition of services policy, which required the Under
Secretary of Defense for Acquisition, Technology, and Logistics to
review acquisitions with an expected value of over $2 billion and for
each of the DOD components, which includes the military departments, to
review those acquisitions that were under that threshold. None of the
acquisition strategies we selected were approved after DOD issued its
October 2006 acquisition of services policy, which lowered the dollar
thresholds for management reviews. The substance of the management
reviews remained largely unchanged, incorporating a few additional,
specific, acquisition strategy requirements, such as the inclusion of
any required waivers and top-level discussion of source selection
processes that were not significant to the objectives of our review.
To assess how such risks were addressed at the contract or task order
level, we used data from the Federal Procurement Data System-Next
Generation to determine the number of task orders that had obligations
of $500,000 or more that were issued from fiscal years 2004 through
2007 from each of these seven acquisitions. From that list, we randomly
select 10 task orders for each acquisition, with the exception of the
INSCOM Linguistics Part 2 acquisition for which we selected all four
task orders that had been issued as of September 2007 that exceeded
this threshold. Overall, we selected 64 task orders, which ranged from
$530,000 to $227 million in obligations, for review. We did not review
acquisitions approved after fiscal year 2007 since our analysis
indicated that it was often a year or more from the time that the
acquisition strategy was approved to the time when task orders were
actually issued. For each of the task orders, we reviewed the
acquisition strategy, base contract, task orders, statements of work,
and other documentation supporting the need to acquire contract support
and any risk assessments prepared. We also interviewed program and
contracting officials who managed these acquisitions to obtain
information concerning why these services were contracted for, the
risks that were considered, and any additional steps that had been
taken to enhance oversight of the contractors.
We assessed the reliability of the Federal Procurement Data System-Next
Generation to identify acquisitions and to select task orders that were
within the scope of our review by verifying (1) the contract and task
order identification numbers; (2) the contract award date; (3) that the
task orders associated with the acquisitions were for professional and
management support services; and (4) that the task orders had
obligations exceeding $500,000. On the basis of this assessment we
determined that the data were sufficiently reliable for the purposes of
this review.
To assess how DOD implemented performance-based acquisitions practices
on contracts for professional and management support, we reviewed
relevant provisions in the FAR and DOD guidance. We interviewed DOD and
military department officials responsible for reviewing and approving
services acquisitions to identify how these reviews addressed the
implementation of performance-based practices. We reviewed performance
work statements from each of the 64 task orders to assess whether
contract requirements and performance measures were consistent with
performance-based guidance, such as whether contract requirements were
measurable and outcome based. We also analyzed documentation to
determine how contractor performance was measured. We interviewed
contracting and program officials associated with these acquisitions to
identify how contract requirements and performance measures were
developed. Finally, we interviewed DPAP officials and a representative
from the Defense Acquisition University to obtain information on
efforts to develop additional DOD guidance for implementing performance-
based services acquisitions.
To assess the extent to which DOD designated trained surveillance
personnel, we reviewed the Defense Federal Acquisition Regulation
Supplement and DOD policies and procedures to identify the department's
surveillance and training requirements. We then analyzed surveillance
personnel appointment letters and training documentation associated
with each of the 64 task orders to determine whether these requirements
were met. We also interviewed DOD officials who were designated as
surveillance personnel on one or more of the task orders we reviewed to
obtain information on their training and responsibilities.
To identify how actions to implement additional reviews of services
acquisitions may improve DOD's management and use of services
contracts, we reviewed provisions contained in the National Defense
Authorization Act for Fiscal Year 2008 that required DOD to establish
an independent management review process. We review memoranda issued by
DOD in September 2008 and February 2009 that provided guidance on the
scope of these reviews, which DOD refers to as peer reviews. To obtain
information on how peer reviews differ from the management reviews, we
spoke with officials from DPAP and the military departments responsible
for these reviews. We also obtained copies of the memoranda summarizing
the findings and recommendations of the five peer reviews performed on
professional and management support contracts as of September 2009.
We conducted this performance audit from July 2008 through November
2009 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Examples of Inherently Governmental and Approaching
Inherently Governmental Functions:
[End of section]
Federal Acquisition Regulation section 7.503 provides examples of
inherently governmental functions as well as services or actions that
are not inherently governmental, but may approach being inherently
governmental functions based on the nature of the function, the manner
in which the contractor performs the contract, or the manner in which
the government administers contractor performance. These examples are
listed in tables 8 and 9 below.
Table 8: Examples of Inherently Governmental Functions:
1. Directly conduct criminal investigations.
2. Control prosecutions and performance of adjudicatory functions other
than those relating to arbitration.
3. Command military forces.
4. Conduct foreign relations and determine foreign policy.
5. Determine agency policy, including regulations.
6. Determine federal program priorities for budget requests.
7. Direct and control federal employees.
8. Direct and control intelligence and counterintelligence operations.
9. Select or interview individuals for federal government employment.
10. Approve position descriptions and performance standards for federal
employees.
11. Determine the disposal of government property.
12. In federal procurement activities with respect to prime contracts:
Determine the supplies or services acquired by the government;
participate as a voting member on any source selection boards; approve
contractual documents, including documents defining requirements,
incentive plans, and evaluation criteria; award contracts; administer
contracts; terminate contracts; determine whether contract costs are
reasonable, allocable, and allowable; and participate as a voting
member on performance evaluation boards.
13. Approve agency responses to Freedom of Information Act requests.
14. Conduct administrative hearings to determine eligibility for
security clearances, or that affect personal reputation or eligibility
to participate in government programs.
15. Approve federal licensing actions and inspections.
16. Determine budget policy, guidance, and strategy.
17. Collect, control, and disburse public funds, unless authorized by
statute. Does not include the collection of public charges to mess
halls, national parks, and similar entities and routine voucher and
invoice examination.
18. Control treasury accounts.
19. Administer public trusts.
20. Draft congressional testimony, responses to congressional
correspondence, or agency responses to audit reports.
Source: GAO analysis of Federal Acquisition Regulation section
7.503(c).
[End of table]
Table 9: Examples of Services That May Approach Being Inherently
Governmental Functions:
1. Involve or relate to budget preparation.
2. Involve or relate to reorganization and planning activities.
3. Involve or relate to analyses, feasibility studies, and strategy
options to be used in developing policy.
4. Involve or relate to developing regulations.
5. Involve or relate to evaluating another contractor's performance.
6. Support acquisition planning.
7. Assist in contract management.
8. Provide technical evaluation of contract proposals.
9. Assist in developing statements of work.
10. Support the preparation of responses to Freedom of Information Act
requests.
11. Work in situations that may permit access to confidential business
information.
12. Provide information regarding agency policies or regulations.
13. Participate in situations where contractors may be assumed to be
agency employees or representatives.
14. Participate as technical advisors to source selection boards or as
members of a source evaluation board.
15. Serve as arbitrators or provide alternative methods of dispute
resolution.
16. Construct buildings intended to be secure.
17. Provide inspection services.
18. Provide legal advice and interpret regulations and statutes for
government officials.
19. Provide non-law enforcement security activities that do not
directly involve criminal investigations.
Source: GAO analysis of Federal Acquisition Regulation section
7.503(d).
[End of table]
[End of section]
Appendix III: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
Acquisition, Technology And Logistics:
3000 Defense Pentagon:
Washington, DC 20301-3000:
November 20, 2009:
Mr. John Hutton:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Hutton:
This is the Department of Defense (DoD) response to the GAO Draft
Report, GAO-10-39, "Defense Acquisitions: Further Actions Needed to
Address Weaknesses in DoD's Management of Professional and Management
Support Contracts," dated October 20, 2009 (GAO Code 120745). Detailed
comments on the report recommendations are enclosed.
The Department appreciates the work of the GAO in this important area.
Your report underscores the need for continued refinement of our
policies and procedures regarding the management of support contracts.
Despite the fact the Department is currently implementing a Total Force
Management strategy that involves decreased funding for contracted
support and a scaled back role for contractors performing support
services in favor of in-sourcing new civilian manpower authorizations,
the Department will continue to rely on service contracts to support
the mission. Therefore, our effective management of these contracts,
particularly the professional, administrative and management support
service contracts, remains critical.
Finally, in reviewing the draft, we identified a few items to call to
your attention. We provided informal feedback to your staff on these
technical points of clarification.
Sincerely,
Signed by:
Shay D. Assad:
Director, Defense Procurement and Acquisition Policy:
Enclosure: As stated:
[End of letter]
GAO Draft Report Dated October 20, 2009:
GAO-10-39 (GAO Code 120745):
"Defense Acquisitions: Further Actions Needed To Address Weaknesses In
DOD'S Management Of Professional And Management Support Contracts"
Department Of Defense Comments To The Gao Recommendations:
Recommendation 1: The GAO recommends that the Secretary of Defense
revise documentation requirements for DoD's current management review
to include information on the extent to which services to be provided
will closely support inherently governmental functions as well as the
consideration given to using DoD civilian employees to perform such
functions.
DOD Response: Concur. The Department will revise documentation
requirements for management reviews to ensure consideration is given to
address the extent to which contracted services support functions that
closely support inherently governmental functions. Furthermore, revised
documentation will account for consideration given to the use of DoD
civilian employees to perform such functions.
Recommendation 2: The GAO recommends that the Secretary of Defense
require before the award of any contract or issuance of task order for
services closely supporting inherently governmental functions that
program and contracting officials consider and document their
assessment of the unique risks of these services and the steps that
have been taken to mitigate such risks.
DOD Response: Concur. The Department will institute a required
procedure to consider and document an assessment of unique risks
associated with contracts and task orders for services closely
supporting inherently governmental functions. [Currently, DoD
Instruction 1100.22, Guidance for Determining Workforce Mix (paragraph
5.3.3), requires the Heads of DoD Components to "ensure that guidance
in this Instruction is considered before contracting for support
services so that activities that are inherently governmental or exempt
from private sector performance are not contracted." Defense Federal
Acquisition Regulation Supplement (DFARS), Subpart 207.5 requires a
written determination that none of the functions to be performed by
contract are inherently governmental.]
Recommendation 3: The GAO recommends that the Secretary of Defense
develop guidance to identify approaches that DoD should take to enhance
management oversight when contractors provide services that closely
support inherently governmental functions.
DOD Response: Concur. The Department will develop guidance to identify
approaches that can be taken to enhance management oversight of
contractors that closely support inherently governmental functions.
This guidance will be developed in conjunction with guidance that is
being developed to address issues relating to personal services as
required by the Fiscal Year 2009 National Defense Authorization Act,
section 831.
Recommendation 4: The GAO recommends that the Secretary of Defense
direct the military departments to review their procedures to ensure
that properly trained surveillance personnel have been assigned prior
to and throughout a contract's period of performance.
DOD Response: Concur. The Department will direct military departments
to review procedures to ensure that properly trained surveillance
personnel have been assigned prior to and throughout the period of
performance of a given contract. This matter will be addressed in
conjunction with policy direction currently in development to institute
contracting officer representative (COR) standard training and
certification requirements.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
John P. Hutton, (202) 512-4841 or huttonj@gao.gov:
Acknowledgments:
In addition to the individual named above, key contributors to this
report were Timothy DiNapoli, Assistant Director; Gary Guggolz; Justin
Jaynes; Christopher Mulkins; Thomas Twambly; Richard Winsor; Arthur
James, Jr.; Julia Kennon; Susan Neil; and Noah Bleicher.
[End of section]
Footnotes:
[1] GAO, Contract Management: Opportunities to Improve Surveillance on
Department of Defense Service Contracts, [hyperlink,
http://www.gao.gov/products/GAO-05-274] (Washington, D.C.: Mar. 17,
2005).
[2] GAO, Defense Acquisitions: Tailored Approach Needed to Improve
Service Acquisition Outcomes, [hyperlink,
http://www.gao.gov/products/GAO-07-20] (Washington, D.C.: Nov. 9,
2006).
[3] The National Defense Authorization Acts for Fiscal Years 2002 and
2006, respectively, required DOD to establish and implement a
management structure to review its procurement of services. For the
purposes of this report, we use the term management review to
collectively refer to the review and approval procedures established by
DOD and the military departments pursuant to this legislation.
[4] GAO, Defense Management: DOD Needs to Reexamine its Extensive
Reliance on Contractors and Continue to Improve Management and
Oversight, [hyperlink, http://www.gao.gov/products/GAO-08-572T]
(Washington, D.C.: Mar. 11, 2008); and DOD's High Risk Areas: Actions
Needed to Reduce Vulnerabilities and Improve Business Outcomes,
[hyperlink, http://www.gao.gov/products/GAO-09-460T] (Washington, D.C.:
Mar. 12, 2009). Inherently governmental functions are defined by the
Federal Acquisition Regulation as those functions that are so
intimately related to public interest that they must be performed by
government employees.
[5] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January
2009).
[6] The Federal Procurement Data System-Next Generation is the federal
government's current system for tracking information on contracting
actions.
[7] The military departments, including the contracting offices we
visited during this review, use different terms to describe personnel
involved in contractor surveillance including: Quality Assurance
Personnel, Contracting Officer's Representative, Functional Area
Evaluator, and Task Order Contracting Officer's Representative. For
purposes of this report, we refer to all these positions as
surveillance personnel.
[8] GAO, Defense Acquisitions: Actions Needed to Ensure Value for
Service Contracts, GAO-09-643T (Washington, D.C.: Apr. 23, 2009) and
[hyperlink, http://www.gao.gov/products/GAO-07-20].
[9] GAO, Department of Defense: Additional Actions and Data are Needed
to Manage and Oversee DOD's Acquisition Workforce, [hyperlink,
http://www.gao.gov/products/GAO-09-342] (Washington, D.C.: Mar. 25,
2009).
[10] FAR § 7.503(a).
[11] FAR § 7.503(c).
[12] FAR § 7.503(d).
[13] FAR § 37.114 and OFPP Policy Letter 93-1, Management Oversight of
Service Contracting, May 18, 1994.
[14] Section 804 of Public Law 108-375 added section 2383 to Title 10,
U.S. Code, which placed limitations on when defense agencies may enter
into contracts for the performance of acquisition functions that
closely support inherently governmental functions.
[15] GAO, Department of Homeland Security: Improved Assessment and
Oversight Needed to Manage Risk of Contracting for Selected Services,
[hyperlink, http://www.gao.gov/products/GAO-07-990] (Washington, D.C.:
Sept. 17, 2007) and Defense Contracting: Army Case Study Delineates
Concerns with Use of Contractors as Contract Specialists, [hyperlink,
http://www.gao.gov/products/GAO-08-360] (Washington, D.C.: Mar. 26,
2008).
[16] Pub. L. No. 107-107, § 801 (2001). See 10 U.S.C. § 2330 (2002).
[17] Office of the Under Secretary of Defense for Acquisition,
Technology, and Logistics, Acquisition of Services, May 31, 2002.
[18] According to the FAR, acquisition planning is a process by which
the efforts of all personnel responsible for an acquisition are
coordinated and integrated through a comprehensive plan for fulfilling
the agency need in a timely manner and at a reasonable cost. It
includes developing the overall strategy for managing the acquisition.
FAR Subpart 2.1. Acquisition planning is required for all acquisitions,
and the FAR includes general procedures and content requirements for
written acquisition plans or strategies.
[19] Pub. L. No. 109-163, § 812, rewriting 10 U.S.C. § 2330 (2006).
[20] Office of the Under Secretary of Defense for Acquisition,
Technology, and Logistics, Acquisition of Services Policy, October 2,
2006.
[21] The strategic level is where the enterprise--DOD--sets a direction
for what it needs, captures knowledge to make informed management
decisions, ensures that departmentwide goals and objectives are
achieved, and assesses the resources it has to achieve desired
outcomes. The strategic level sets the context for the transactional
level, where the focus is on making sound decisions on individual
service acquisitions using valid and well-defined requirements,
appropriate business arrangements, and adequate management of
contractor performance. [hyperlink,
http://www.gao.gov/products/GAO-07-20].
[22] Pub. L. No. 110-181 § 808 (2008).
[23] FAR § 7.503(d).
[24] FAR Subpart 7.5.
[25] FAR Subpart 7.5.
[26] FAR Part 37.114 states that the government must provide greater
scrutiny and enhanced oversight of contractor activities that closely
support inherently governmental functions in order to ensure that
contractors do not actually perform the inherently government functions
and that government officials properly exercise their authority. OFPP
Policy Letter 93-1 also requires that agency officials provide an
enhanced degree of management controls and oversight when contracting
for such services.
[27] GAO, Internal Control: Standards for Internal Control in the
Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.:
November 1999) supplemented by GAO, Internal Control Standards:
Internal Control Management and Evaluation Tool, [hyperlink,
http://www.gao.gov/products/GAO-01-131G] (Washington, D.C.: February
2001).
[28] Deputy Secretary of Defense, In-Sourcing Contracted Services--
Implementation Guidance, May 28, 2009.
[29] Pub. L. No. 110-181, § 324. See 10 U.S.C. § 2463.
[30] Certain commercial functions are exempted from private sector
performance by law, Executive Order, treaty, or international agreement
and should be performed by DOD civilian or military personnel.
[31] Department of Defense Instruction 1100.22, Guidance for
Determining Workforce Mix, April 6, 2007.
[32] This office was previously known as the Office of the Director for
Program Analysis and Evaluation.
[33] Floyd D. Spence National Defense Authorization Act for Fiscal Year
2001, Pub. L. No. 106-398, § 821(a) (2000), required that the FAR be
revised to establish a preference for the use of a performance-based
approach in the acquisition of services. The requirement was
implemented in FAR § 37.102(a).
[34] FAR Subpart 37.6.
[35] According to the performance standards in the task orders we
reviewed, translators were to arrive at a designated place of duty with
all required documentation, equipment, training, logistical support,
and information required to begin work not later than the time and date
specified on movement and deployment orders.
[36] GAO, Department of Homeland Security: Better Planning and
Assessment Needed to Improve Outcomes for Complex Service Acquisitions,
[hyperlink, http://www.gao.gov/products/GAO-08-263] (Washington, D.C.:
Apr. 22, 2008).
[37] DFARS Subpart 201.6 requires that a contracting officer's
representative (COR) be qualified by training and experience
commensurate with the responsibilities delegated and the COR
designation must be in writing. Senior DOD officials stated that when
DOD regulations use the term "COR", that such policy applies to all
surveillance personnel throughout DOD.
[38] For example, in 2005, we found that DOD's surveillance personnel
were not designated on 15 of the 90 services contracts reviewed, and
that 13 of the 104 surveillance personnel did not receive the required
training before beginning their assignments. See GAO-05-274.
[39] Office of the Secretary of Defense, Designation of Contracting
Officer's Representatives on Contracts for Services in Support of
Department of Defense Requirements (Dec. 6, 2006).
[40] We found that 7 of the 27 task orders that were issued prior to
the issuance of the December 2006 guidance also lacked designated
surveillance personnel before work was to begin.
[41] We and the DOD Inspector General have previously reported on the
challenges in providing contract oversight during contingency
operations. See GAO, Military Operations: DOD Needs to Address Contract
Oversight and Quality Assurance Issues for Contracts Used to Support
Contingency Operations, [hyperlink,
http://www.gao.gov/products/GAO-08-1087] (Washington, D.C.: Sept. 26,
2008) and Office of the Inspector General, Department of Defense,
Logistics Support Contracting for the United States Special Operations
Command, D-2009-083 (May 28, 2009).
[42] Pub. L. No. 110-181, § 808. The Act also requires GAO to report on
DOD's implementation guidance, which we will do under a separate
engagement.
[43] Office of the Under Secretary of Defense, Peer Reviews of
Contracts for Supplies and Services (Sept. 29, 2008) and Office of the
Under Secretary of Defense, Review Criteria for the Acquisition of
Services (Feb. 18, 2009).
[44] As of October 2009, the Air Force and Navy have established
policies for conducting pre-and post-award peer reviews. The Army has
established policies for conducting pre-award peer reviews but has not
yet done so for post-award peer reviews.
[45] Federal Procurement Data System-Next Generation is the federal
government's current system for tracking information on contracting
actions.
[46] We used the following product service codes in the Federal
Procurement Data System-Next Generation to identify acquisitions for
professional, administrative, and management support services: R408 for
Program Management/Support Services; R706 for Management Services/
Logistics Support; R707 for Management Services/Contract and
Procurement Support; R425 for Engineering and Technical Services; R799
for Other Management Support Services; and AD25 for Services
(Operational).
[End of section]
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