Contingency Contracting
Observations on Actions Needed to Address Systemic Challenges Gao ID: GAO-11-580 April 25, 2011The Department of Defense (DOD) obligated about $367 billion in fiscal year 2010 to acquire goods and services to meet its mission and support its operations, including those in Iraq and Afghanistan. GAO's work, as well as that of others, has documented shortcomings in DOD's strategic and acquisition planning, contract administration and oversight, and acquisition workforce. These are challenges that need to be addressed by DOD and by the Department of State and the U.S. Agency for International Development (USAID) as they carry out their missions in Iraq and Afghanistan and prepare for future contingencies. Today's statement discusses (1) contract management challenges faced by DOD, including those that take on heightened significance in a contingency environment; (2) actions DOD has taken and those needed to address these challenges; and (3) similar challenges State and USAID face. The statement is drawn from GAO's body of work on DOD contingency contracting, contract management, and workforce, as well as prior reports on State and USAID's contracting and workforce issues.
DOD faces a number of longstanding and systemic challenges that hinder its ability to achieve more successful acquisition outcomes--obtaining the right goods and services, at the right time, at the right cost. These challenges include addressing the issues posed by DOD's reliance on contractors, ensuring that DOD personnel use sound contracting approaches, and maintaining a workforce with the skills and capabilities needed to properly manage acquisitions and oversee contractors. The issues encountered with contracting in Iraq and Afghanistan are emblematic of these systemic challenges, though their significance and impact are heightened in a contingency environment. GAO's concerns regarding DOD contracting predate the operations in Iraq and Afghanistan. GAO identified DOD contract management as a high-risk area in 1992 and raised concerns in 1997 about DOD's management and use of contractors to support deployed forces in Bosnia. In the years since then, GAO has continued to identify a need for DOD to better manage and oversee its acquisition of services. DOD has recognized the need to address the systemic challenges it faces, including those related to operational contract support. Over the past several years, DOD has announced new policies, guidance, and training initiatives, but not all of these actions have been implemented and their expected benefits have not yet been fully realized. While DOD's actions are steps in the right direction, DOD needs to (1) strategically manage services acquisition, including defining desired outcomes; (2) determine the appropriate mix, roles, and responsibilities of contractor, federal civilian, and military personnel; (3) assess the effectiveness of efforts to address prior weaknesses with specific contracting arrangements and incentives; (4) ensure that its acquisition workforce is adequately sized, trained, and equipped; and (5) fully integrate operational contract support throughout the department through education and predeployment training. In that regard, in June 2010 GAO called for a cultural change in DOD that emphasizes an awareness of operational contract support throughout all aspects of the department. In January 2011, the Secretary of Defense expressed concerns about DOD's current level of dependency on contractors and directed the department to take a number of actions. The Secretary's recognition and directions are significant steps, yet instilling cultural change will require sustained commitment and leadership. State and USAID face contracting challenges similar to DOD's, particularly with regard to planning for and having insight into the roles performed by contractors. In April 2010, GAO reported that State's workforce plan did not address the extent to which contractors should be used to perform specific functions. Similarly, GAO reported that USAID's workforce plan did not contain analyses covering the agency's entire workforce, including contractors. The recently issued Quadrennial Diplomacy and Development Review recognized the need for State and USAID to rebalance their workforces and directed the agencies to ensure that they have an adequate number of government employees to carry out their core missions and to improve contract administration and oversight. GAO has made multiple recommendations to the agencies to address contracting and workforce challenges. The agencies have generally agreed with the recommendations and have efforts under way to implement them.
GAO-11-580, Contingency Contracting: Observations on Actions Needed to Address Systemic Challenges
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United States Government Accountability Office:
GAO:
Testimony before the Commission on Wartime Contracting in Iraq and
Afghanistan:
For Release on Delivery:
Expected at 9:30 a.m. EDT:
Monday, April 25, 2011:
Contingency Contracting:
Observations on Actions Needed to Address Systemic Challenges:
Statement of Paul L. Francis, Managing Director:
Acquisition and Sourcing Management:
GAO-11-580:
GAO Highlights:
Highlights of GAO-11-580, a statement before the Commission on Wartime
Contracting in Iraq and Afghanistan.
Why GAO Did This Study:
The Department of Defense (DOD) obligated about $367 billion in fiscal
year 2010 to acquire goods and services to meet its mission and
support its operations, including those in Iraq and Afghanistan. GAO‘s
work, as well as that of others, has documented shortcomings in DOD‘s
strategic and acquisition planning, contract administration and
oversight, and acquisition workforce. These are challenges that need
to be addressed by DOD and by the Department of State and the U.S.
Agency for International Development (USAID) as they carry out their
missions in Iraq and Afghanistan and prepare for future contingencies.
Today‘s statement discusses (1) contract management challenges faced
by DOD, including those that take on heightened significance in a
contingency environment; (2) actions DOD has taken and those needed to
address these challenges; and (3) similar challenges State and USAID
face. The statement is drawn from GAO‘s body of work on DOD
contingency contracting, contract management, and workforce, as well
as prior reports on State and USAID‘s contracting and workforce issues.
What GAO Found:
DOD faces a number of longstanding and systemic challenges that hinder
its ability to achieve more successful acquisition outcomes”obtaining
the right goods and services, at the right time, at the right cost.
These challenges include addressing the issues posed by DOD‘s reliance
on contractors, ensuring that DOD personnel use sound contracting
approaches, and maintaining a workforce with the skills and
capabilities needed to properly manage acquisitions and oversee
contractors. The issues encountered with contracting in Iraq and
Afghanistan are emblematic of these systemic challenges, though their
significance and impact are heightened in a contingency environment.
GAO‘s concerns regarding DOD contracting predate the operations in
Iraq and Afghanistan. GAO identified DOD contract management as a high-
risk area in 1992 and raised concerns in 1997 about DOD‘s management
and use of contractors to support deployed forces in Bosnia. In the
years since then, GAO has continued to identify a need for DOD to
better manage and oversee its acquisition of services.
DOD has recognized the need to address the systemic challenges it
faces, including those related to operational contract support. Over
the past several years, DOD has announced new policies, guidance, and
training initiatives, but not all of these actions have been
implemented and their expected benefits have not yet been fully
realized. While DOD‘s actions are steps in the right direction, DOD
needs to (1) strategically manage services acquisition, including
defining desired outcomes; (2) determine the appropriate mix, roles,
and responsibilities of contractor, federal civilian, and military
personnel; (3) assess the effectiveness of efforts to address prior
weaknesses with specific contracting arrangements and incentives; (4)
ensure that its acquisition workforce is adequately sized, trained,
and equipped; and (5) fully integrate operational contract support
throughout the department through education and predeployment
training. In that regard, in June 2010 GAO called for a cultural
change in DOD that emphasizes an awareness of operational contract
support throughout all aspects of the department. In January 2011, the
Secretary of Defense expressed concerns about DOD‘s current level of
dependency on contractors and directed the department to take a number
of actions. The Secretary‘s recognition and directions are significant
steps, yet instilling cultural change will require sustained
commitment and leadership.
State and USAID face contracting challenges similar to DOD‘s,
particularly with regard to planning for and having insight into the
roles performed by contractors. In April 2010, GAO reported that State‘
s workforce plan did not address the extent to which contractors
should be used to perform specific functions. Similarly, GAO reported
that USAID‘s workforce plan did not contain analyses covering the agency
‘s entire workforce, including contractors. The recently issued
Quadrennial Diplomacy and Development Review recognized the need for
State and USAID to rebalance their workforces and directed the
agencies to ensure that they have an adequate number of government
employees to carry out their core missions and to improve contract
administration and oversight.
What GAO Recommends:
GAO has made multiple recommendations to the agencies to address
contracting and workforce challenges. The agencies have generally
agreed with the recommendations and have efforts under way to
implement them.
View [hyperlink, http://www.gao.gov/products/GAO-11-580] for key
components. For more information, contact Paul L. Francis at (202) 512-
4841 or francisp@gao.gov.
[End of section]
Chairman Thibault, Chairman Shays, and Commissioners:
Thank you for inviting me here today to discuss improvements needed in
contracting and planning for the use of contractors in contingency
environments. The Department of Defense (DOD) obligated about $367
billion in fiscal year 2010 to acquire goods and services to meet its
mission and support its operations, including those in Iraq and
Afghanistan. Our work, as well as that of the inspectors general and
the commission itself, has documented critical shortcomings in DOD's
strategic and acquisition planning, contract administration and
oversight, and acquisition workforce. Addressing these challenges is
essential if DOD is to meet the warfighters' needs in a timely and
cost-conscious manner; mitigate the risks of fraud, waste, and abuse;
and minimize the operational risks associated with contractors not
only in today's operations but also in future contingencies. These
challenges not only need to be addressed by DOD but also by the
Department of State and the U.S. Agency for International Development
(USAID) as these agencies carry out the U.S. government's diplomatic
and development efforts in Iraq and Afghanistan.
My statement today will discuss (1) contract management challenges DOD
has faced, including those that take on heightened significance in a
contingency environment; (2) actions DOD has taken and those remaining
to address these challenges; and (3) similar challenges facing State
and USAID. This statement is drawn from our broad body of work on DOD
contingency contracting, contract management, and acquisition
workforce, including work reflected in our February 2011 high-risk
update and our June 2010 testimony on operational contract support
issues.[Footnote 1] Additionally, we relied on our work on State and
USAID's contracting and workforce efforts relevant to Iraq and
Afghanistan. Our prior work was prepared in accordance with generally
accepted government auditing standards. Those standards require that
we plan and perform the audits 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.
DOD Faces Longstanding and Systemic Contract Management Challenges:
DOD faces a number of longstanding and systemic challenges that have
hindered its ability to achieve more successful acquisition outcomes--
obtaining the right goods and services, at the right time, at the
right cost. These challenges include addressing the issues posed by
DOD's reliance on contractors, ensuring that DOD personnel use sound
contracting approaches, and maintaining a workforce with the skills
and capabilities needed to properly manage the acquisitions and
oversee contractors. The issues encountered in Iraq and Afghanistan
are emblematic of these systemic challenges, though their significance
and effect are heightened in a contingency environment.
DOD's Increased Reliance on Contractors Poses Risks:
Our concerns about DOD's acquisition of services, including the
department's reliance on contractors and the support they provide to
deployed forces, predate the operations in Iraq and Afghanistan. We
identified DOD contract management as a high-risk area in 1992 and
since then we continued to identify a need for DOD to better manage
services acquisitions at both the strategic and individual contract
levels.[Footnote 2] Similarly, in 1997 we raised concerns about DOD's
management and use of contractors to support deployed forces in
Bosnia.[Footnote 3] We issued a number of reports on operational
contract support since that time, and our recent high-risk update
specifically highlighted the need for increased management attention
to address operational contract support.
Contractors can provide many benefits, such as unique skills,
expertise, and flexibility to meet unforeseen needs, but relying on
contractors to support core missions can place the government at risk
of transferring government responsibilities to contractors. In 2008,
we concluded that the increased reliance on contractors required DOD
to engage in a fundamental reexamination of when and under what
circumstances it should use contractors versus civil servants or
military personnel.[Footnote 4] Earlier this year, we reported that
the department lacked good information on the roles and functions
fulfilled by contractors.[Footnote 5] Our work has concluded that
DOD's reliance on contractors is still not fully guided by either an
assessment of the risks using contractors may pose or a systematic
determination of which functions and activities should be contracted
out and which should be performed by civilian employees or military
personnel.
The absence of systematic assessments of the roles and functions that
contractors should perform is also evident in contingency
environments. For example, in June 2010 we reported that DOD had not
fully planned for the use of contractors in support of operations in
Iraq and Afghanistan and needed to improve planning for operational
contract support in future operations.[Footnote 6] In addition, we
reported that while U.S. Forces-Iraq had taken steps to identify all
the Army's Logistics Civil Augmentation Program (LOGCAP) contract
support needed for the drawdown in Iraq, it had not identified the
other contractor support it may need. We found that the May 2009
drawdown plan had delegated responsibility for determining contract
support requirements to contracting agencies rather than to
operational personnel. However, DOD contracting officials told us that
they could not determine the levels of contractor services required or
plan for reductions based on those needs because they lacked
sufficient, relevant information on requirements for contractor
services during the drawdown. Similarly for Afghanistan, we found that
despite the additional contractors that would be needed to support the
troop increase, U.S. Forces-Afghanistan was engaged in very little
planning for contractors with the exception of planning for the
increased use of LOGCAP.
Further, we have reported on limitations in DOD's ability to track
contractor personnel deployed with U.S. forces.[Footnote 7] In January
2007, DOD designated the Synchronized Predeployment and Operational
Tracker (SPOT) as its primary system for tracking data on contractor
personnel deployed with U.S. forces. SPOT was designed to account for
all U.S., local, and third-country national contractor personnel by
name and to contain a summary of services being provided and
information on government-provided support. Our reviews of SPOT,
however, have highlighted shortcomings in the system's implementation
in Iraq and Afghanistan. For example, we found that varying
interpretations by DOD officials as to which contractor personnel
should be entered into the system resulted in SPOT not presenting an
accurate picture of the total number of contractor personnel in Iraq
or Afghanistan. In addition, we reported in 2009 that DOD's lack of a
departmentwide policy for screening local or third-country nationals--
who constitute the majority of DOD contractor personnel in Iraq and
Afghanistan--poses potential security risks.[Footnote 8] We are
currently assessing DOD's process for vetting firms that are
supporting U.S. efforts in Afghanistan.
Regarding planning for the use of contractors in future operations,
since February 2006 DOD guidance has called for the integration of an
operational contract support annex--Annex W--into certain combatant
command operation plans, if applicable to the plan. However, 4 years
later we reported that of the potential 89 plans that may require an
Annex W, only 4 operation plans with Annex Ws had been approved by the
department.[Footnote 9] As a result, DOD risks not fully understanding
the extent to which it will be relying on contractors to support
combat operations and being unprepared to provide the necessary
management and oversight of deployed contractor personnel. Moreover,
the combatant commanders are missing an opportunity to fully evaluate
and react to the potential risks of reliance on contractors.
Weaknesses in Contracting Approaches and Oversight Increase Risk:
While the strategic level defines the direction and manner in which an
organization pursues improvements in services acquisition, it is
through the development, execution, and oversight of individual
contracts that the strategy is implemented. Keys to doing so are
having clearly defined and valid requirements, a sound contract, and
effective contractor management and oversight. In short, DOD, like all
organizations, needs to assure itself that it is buying the right
thing in the right way and that doing so results in the desired
outcome. Our work over the past decade identified weaknesses in each
of these key areas, whether for services provided in the United States
or abroad, as illustrated by the following examples:
* In June 2007, we reported that DOD understated the extent to which
it used time-and-materials contracts, which can be awarded quickly and
adjusted when requirements or funding are uncertain.[Footnote 10] We
found few attempts to convert follow-on work to less risky contract
types and found wide discrepancies in DOD's oversight.
* That same month we also reported that DOD personnel failed to
definitize--or reach final agreement on--contract terms within
required time frames in 60 percent of the 77 contracts we reviewed.
[Footnote 11] Until contracts are definitized, DOD bears increased
risk because contractors have little incentive to control costs. We
then reported in July 2007 that DOD had not completed negotiations on
certain task orders in Iraq until more than 6 months after the work
began and after most of the costs had been incurred, contributing to
its decision to pay the contractor nearly all of the $221 million
questioned by auditors.[Footnote 12] We subsequently reported in 2010
that DOD had taken several actions to enhance departmental insight
into and oversight of undefinitized contract actions; however, data
limitations hindered DOD's full understanding of the extent to which
they are used.[Footnote 13]
* As early as 2004, we raised concerns about DOD's ability to
effectively administer and oversee contracts in Iraq. We noted that
effective contract administration and oversight remained challenging
in part because of the continued expansion of reconstruction efforts,
staffing constraints, and need to operate in an unsecure and
threatening environment.[Footnote 14] In 2008, we reported that the
lack of qualified personnel hindered oversight of contracts to
maintain military equipment in Kuwait and provide linguistic services
in Iraq and questioned whether DOD could sustain increased oversight
of its private security contractors.[Footnote 15] During our 2010
visits with deployed and recently returned units, we found that units
continue to deploy to Afghanistan without designating contracting
officer's representatives beforehand and that those representatives
often lacked the technical knowledge and training needed to
effectively oversee certain contracts.[Footnote 16] Several units that
had returned from Afghanistan told us that contracting officer's
representatives with no engineering background were often asked to
oversee construction projects and were unable to ensure that the
buildings and projects they oversaw met the technical specifications
required in the drawing plans. We are currently assessing the training
on the use of contract support that is provided to military
commanders, contracting officer's representatives, and other
nonacquisition personnel before they deploy.
Continuing Acquisition Workforce Challenges Hinder DOD's Ability to
Properly Manage Acquisitions:
Underlying the ability to properly manage the acquisition of goods and
services is having a workforce with the right skills and capabilities.
DOD recognizes that the defense acquisition workforce, which was
downsized considerably through the 1990s, faces increases in the
volume and complexity of work because of increases in services
contracting, ongoing contingency operations, and other critical
missions. For example, while contract spending dramatically increased
from fiscal years 2001 through 2008, DOD reported that its acquisition
workforce decreased by 2.6 percent over the same period.
In April 2010, DOD issued an acquisition workforce plan that
identified planned workforce growth, specified recruitment and
retention goals, and forecasted workforce-wide attrition and
retirement trends. As part of that plan, DOD announced that it would
increase the size of two oversight organizations--the Defense Contract
Audit Agency and the Defense Contract Management Agency--over the next
several years to help reduce the risk of fraud, waste, and abuse in
DOD contracts. However, we reported in September 2010 that DOD had not
completed its assessment of the critical skills and competencies of
its overall acquisition workforce and that it had not identified the
funding needed for its initiatives until the conclusion of our
review.[Footnote 17] The current budget situation raises questions as
to whether DOD will be able to sustain its projected workforce growth
and related initiatives. We are currently reviewing the Defense
Contract Management Agency's capacity for oversight and surveillance
of contracting activity domestically in light of its role in
contingency operations.
DOD's Efforts Have Not Yet Resolved Contract Management Challenges or
Fully Addressed Its Reliance on Contractors:
DOD has recognized the need to take action to address the challenges
it faces regarding contract management and its reliance on
contractors, including those related to operational contract support.
Over the past several years, the department has announced new
policies, guidance and training initiatives, but not all of these
actions have been implemented and their expected benefits have not yet
been fully realized. While these actions are steps in the right
direction, we noted in our February 2011 high-risk update that to
improve outcomes on the billions of dollars spent annually on goods
and services, sustained DOD leadership and commitment are needed to
ensure that policies are consistently put into practice.[Footnote 18]
Specifically we concluded that DOD needs to:
* take steps to strategically manage services acquisition, including
defining and measuring against desired outcomes, and developing the
data needed to do so;
* determine the appropriate mix, roles, and responsibilities of
contractor, federal civilian, and military personnel;
* assess the effectiveness of efforts to address prior weaknesses with
specific contracting arrangements and incentives;
* ensure that its acquisition workforce is adequately sized, trained,
and equipped to meet the department's needs; and:
* fully integrate operational contract support throughout the
department through education and predeployment training.
DOD has generally agreed with the recommendations we have previously
made and has actions under way to implement them. I would like to
touch on a few of the actions already taken by DOD. On a broad level,
for example, improved DOD guidance, DOD's initiation and use of
independent management reviews for high-dollar services acquisitions,
and other steps to promote the use of sound business arrangements have
begun to address several weaknesses, such as the department's
management and use of time-and-materials contracts and undefinitized
contract actions. Further, DOD has identified steps to promote more
effective competition in its acquisitions, such as requiring
contracting officers to take additional actions when DOD receives only
one bid in response to a solicitation and revising its training
curriculum to help program and acquisition personnel develop and
better articulate the department's requirements.
Similarly, efforts are under way to reduce the department's reliance
on contractors. In April 2009, the Secretary of Defense announced his
intent to reduce the department's reliance on contractors by hiring
new personnel and by converting, or in-sourcing, functions currently
performed by contractors to DOD civilian personnel. To help provide
better insights into, among other things, the number of contractors
providing services to the department and the functions they perform
and to help make informed workforce decisions, Congress enacted
legislation in 2008 requiring DOD to annually compile and review an
inventory of activities performed pursuant to contracts for
services.[Footnote 19] In January 2011, we reported that while DOD had
taken actions to reduce prior inconsistencies resulting from DOD
components using different approaches to compile the inventory, it
still faced data and estimating limitations that raised questions
about the accuracy and usefulness of the data.[Footnote 20] Given this
early state of implementation, the inventory and associated review
processes are being used to various degrees by the military
departments to help inform workforce decisions, with the Army
generally using the inventories to a greater degree than the other
military departments. Later this year we will review DOD's strategic
human capital plans for both its civilian and acquisition workforces,
the status of efforts to in-source functions previously performed by
contractor personnel, and DOD's upcoming inventory of services.
Furthermore, DOD has taken several steps intended to improve planning
for the use of contractors in contingencies and to improve contract
administration and oversight. For example, in the area of planning for
the use of contractors, in October 2008 the department issued Joint
Publication 4-10, Operational Contract Support, which establishes
doctrine and provides standardized guidance for and information on
planning, conducting, and assessing operational contract support
integration, contractor management functions, and contracting command
and control organizational options in support of joint operations. DOD
also provided additional resources for deployed contracting officers
and their representatives through the issuance of the Joint
Contingency Contracting Handbook in 2007 and the Deployed Contracting
Officer's Representative Handbook in 2008. In 2009, the Army issued
direction to identify the need for contracting officer's
representatives, their roles and responsibilities, and their training
when coordinating operational unit replacements.
Our work found that beyond issuing new policies and procedures, DOD
needs to fundamentally change the way it approaches operational
contract support. In June 2010, we called for a cultural change in DOD
that emphasizes an awareness of operational contract support
throughout all aspects of the department to help it address the
challenges it faces in ongoing and future operations.[Footnote 21]
This view is now apparently shared by the department. In a January
2011 memorandum, the Secretary of Defense expressed concern about the
risks introduced by DOD's current level of dependency on contractors,
future total force mix, and the need to better plan for operational
contract support in the future. Toward that end, he directed the
department to undertake a series of actions related to force mix,
contract support integration, planning, and resourcing. According to
the Secretary, his intent was twofold: to initiate action now and to
subsequently codify the memorandum's initiatives in policy and through
doctrine, organization, training, materiel, leadership, education,
personnel, and facilities changes and improvements. He concluded that
the time was at hand, while the lessons learned from recent operations
were fresh, to institutionalize the changes necessary to influence a
cultural shift in how DOD views, accounts for, and plans for
contractors and personnel support in contingency environments. The
Secretary's recognition and directions are significant steps, yet
cultural change will require sustained commitment from senior
leadership for several years to come.
State and USAID Confront Similar Contracting Challenges:
While my statement has focused on the challenges confronting DOD, our
work involving State and USAID has found similar issues, particularly
related to not planning for and not having insight into the roles
performed by contractors and workforce challenges. The need for
visibility into contracts and contractor personnel to inform decisions
and oversee contractors is critical, regardless of the agency, as each
relies extensively on contractors to support and carry out its
missions in Iraq and Afghanistan.
Our work has identified gaps in USAID and State's workforce planning
efforts related to the role and extent of reliance on contractors. We
noted, for example, in our 2004 and 2005 reviews of Afghanistan
reconstruction efforts that USAID did not incorporate information on
the contractor resources required to implement the strategy, hindering
its efforts to make informed resource decisions.[Footnote 22] More
generally, in June 2010, we reported that USAID's 5-year workforce
plan for fiscal years 2009 through 2013 had a number of deficiencies,
such as lacking supporting workforce analyses that covered the
agency's entire workforce, including contractors, and not containing a
full assessment of the agency's workforce needs, including identifying
existing workforce gaps and staffing levels required to meet program
needs and goals.[Footnote 23]
Similarly, in April 2010, we noted that State's departmentwide
workforce plan generally does not address the extent to which
contractors should be used to perform specific functions, such as
contract and grant administration.[Footnote 24] As part of State's
fiscal year 2011 budget process, State asked its bureaus to focus on
transitioning some activities from contractors to government
employees. State officials told us, however, that departmentwide
workforce planning efforts generally have not addressed the extent to
which the department should use contractors because those decisions
are left up to individual bureaus. State noted that in response to
Office of Management and Budget guidance, a pilot study was underway
regarding the appropriate balance of contractor and government
positions, to include a determination as to whether or not the
contracted functions are inherently governmental, closely associated
to inherently governmental, or mission critical.
In the absence of strategic planning, we found that it was often
individual contracting or program offices within State and USAID that
made case-by-case decisions on the use of contractors to support
contract or grant administration functions.[Footnote 25] For example,
USAID relied on a contractor to award and administer grants in Iraq to
support community-based conflict mitigation and reconciliation
projects, while State relied on a contractor to identify and report on
contractor performance problems and assess contractor compliance with
standard operating procedures for its aviation program in Iraq. State
and USAID officials generally cited a lack of sufficient number of
government staff, the lack of in-house expertise, or frequent
rotations among government personnel as key factors contributing to
their decisions to use contractors.
Our work over the past three years to provide visibility into the
number of contractor personnel and contracts associated with the U.S.
efforts in Iraq and Afghanistan found that State and USAID continue to
lack good information on the number of contractor personnel working
under their contracts.[Footnote 26] State and USAID had agreed to use
the SPOT database to track statutorily-required information. The
system still does not reliably track the agencies' information on
contracts, assistance instruments, and associated personnel in Iraq or
Afghanistan. As a result, the agencies relied on other data sources,
which had their own limitations, to respond to our requests for
information. We plan to report on the agencies' efforts to track and
use data on contracts, assistance instruments, and associated
personnel in Iraq or Afghanistan later this year.
The agencies have generally agreed with the recommendations we have
made to address these challenges. To their credit, senior agency
leaders acknowledged that they came to rely on contractors and other
nongovernmental organizations to carry out significant portions of
State and USAID's missions. For example, the Quadrennial Diplomacy and
Development Review (QDDR), released in December 2010, reported that
much of what used to be the exclusive work of government has been
turned over to private actors, both for profit and not for profit. As
responsibilities mounted and staffing levels stagnated, State and
USAID increasingly came to rely on outsourcing, with contracts and
grants to private entities often representing the default option to
meet the agencies' growing needs. Further, the QDDR recognized the
need for the agencies to rebalance the workforce by determining what
functions must be conducted by government employees and what functions
can be carried out by nongovernment entities working on behalf of and
under the direction of the government. As part of this effort, the
QDDR called for State and USAID to ensure that work that is critical
to carrying out their core missions is performed by an adequate number
of government employees. The review also recommended that for
contractor-performed functions, the agencies develop well-structured
contracts with effective contract administration and hold contractors
accountable for performance and results. Along these lines, the
Administrator of USAID recently announced a series of actions intended
to improve the way USAID does business, including revising its
procurement approach.
The acknowledgment of increased contractor reliance and the intention
to examine their roles is important, as is developing well-structured
contracts and effectively administering contracts. Left unaddressed,
these challenges may pose potentially serious consequences to
achieving the U.S. government's policy objectives in Iraq and
Afghanistan. For example, in March 2011, the Secretary of State
testified that the department is not in an "optimal situation," with
contractors expected to comprise 84 percent of the U.S. government's
workforce in Iraq. We recently initiated a review of State's capacity
to plan for, award, administer, and oversee contracts with performance
in conflict environments, such as Iraq and Afghanistan. As part of
this review, we will assess the department's workforce both in terms
of number of personnel and their expertise to carry out acquisition
functions, including contractor oversight. We will also assess the
status of the department's efforts to enhance its workforce to perform
these functions.
Concluding Observations:
The issues I discussed today--contract management, the use of
contractors in contingency environments, and workforce challenges--are
not new and will not be resolved overnight, but they need not be
enduring or intractable elements of the acquisition environment. The
challenges encountered in Iraq and Afghanistan are the result of
numerous factors, including poor strategic and acquisition planning,
inadequate contract administration and oversight, and an insufficient
number of trained acquisition and contract oversight personnel. These
challenges manifest in various ways, including higher costs, schedule
delays, and unmet goals, but they also increase the potential for
fraud, waste, abuse, and mismanagement in contingency environments
such as Iraq and Afghanistan. While our work has provided examples
that illustrate some effects of such shortcomings, in some cases,
estimating their financial effect is not feasible or practicable. The
inability to quantify the financial impact should not, however,
detract from efforts to achieve greater rigor and accountability in
the agencies' strategic and acquisition planning, internal controls,
and oversight efforts. Stewardship over contingency resources should
not be seen as conflicting with mission execution or the safety and
security of those so engaged.
Toward that end, the agencies have recognized that the status quo is
not acceptable and that proactive, strategic, and deliberate analysis
and sustained commitment and leadership are needed to produce
meaningful change and make the risks more manageable. DOD has
acknowledged the need to institutionalize operational contract support
and set forth a commitment to encourage cultural change in the
department. State and USAID must address similar challenges, including
the use and role of contractors in contingency environments. The
recent QDDR indicates that the agencies have recognized the need to do
so. These efforts are all steps in the right direction, but agreeing
that change is needed at the strategic policy level must be reflected
in the decisions made by personnel on a day-to-day basis.
Chairman Thibault, Chairman Shays, this concludes my prepared
statement. I would be happy to respond to any questions you or the
other commissioners may have.
Contacts and Acknowledgments:
For further information about this statement, please contact me at
(202) 512-4841 or francisp@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this statement. Individuals who made key contributions to this
statement include Johana R. Ayers, Vince Balloon, Jessica Bull, Carole
Coffey, Timothy DiNapoli, Justin Jaynes, Sylvia Schatz, Sally
Williamson, and Gwyneth Woolwine.
[End of section]
Footnotes:
[1] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February
2011) and Warfighter Support: Cultural Change Needed to Improve How
DOD Plans for and Manages Operational Contract Support, [hyperlink,
http://www.gao.gov/products/GAO-10-829T] (Washington, D.C.: June 29,
2010).
[2] For example, see GAO, Best Practices: Taking a Strategic Approach
Could Improve DOD's Acquisition of Services, [hyperlink,
http://www.gao.gov/products/GAO-02-230] (Washington, D.C.: Jan. 18,
2002); 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); and Defense Acquisitions: Further Actions Needed to Address
Weaknesses in DOD's Management of Professional and Management Support
Contracts, [hyperlink, http://www.gao.gov/products/GAO-10-39]
(Washington, D.C.: Nov. 20, 2009).
[3] GAO, Contingency Operations: Opportunities to Improve the
Logistics Civil Augmentation Program, [hyperlink,
http://www.gao.gov/products/GAO/NSIAD-97-63] (Washington, D.C.: Feb.
11, 1997).
[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).
[5] GAO, Defense Acquisitions: Further Action Needed to Better
Implement Requirements for Conducting Inventory of Service Contract
Activities, [hyperlink, http://www.gao.gov/products/GAO-11-192
(Washington, D.C.: Jan. 14, 2011).
[6] [hyperlink, http://www.gao.gov/products/GAO-10-829T].
[7] GAO, Iraq and Afghanistan: DOD, State, and USAID Face Continued
Challenges in Tracking Contracts, Assistance Instruments, and
Associated Personnel, [hyperlink,
http://www.gao.gov/products/GAO-11-1] (Washington, D.C.: Oct. 1,
2010); Contingency Contracting: DOD, State, and USAID Continue to Face
Challenges in Tracking Contractor Personnel and Contracts in Iraq and
Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-10-1]
(Washington, D.C.: Oct. 1, 2009); and Contingency Contracting: DOD,
State, and USAID Contracts and Contractor Personnel in Iraq and
Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-09-19]
(Washington, D.C.: Oct. 1, 2008).
[8] GAO, Contingency Contract Management: DOD Needs to Develop and
Finalize Background Screening and Other Standards for Private Security
Contractors, [hyperlink, http://www.gao.gov/products/GAO-09-351]
(Washington, D.C.: July 31, 2009).
[9] GAO, Warfighter Support: DOD Needs to Improve Its Planning for
Using Contractors to Support Future Military Operations, [hyperlink,
http://www.gao.gov/products/GAO-10-472] (Washington, D.C.: Mar. 30,
2010).
[10] GAO, Defense Contracting: Improved Insight and Controls Needed
over DOD's Time-and-Materials Contracts, [hyperlink,
http://www.gao.gov/products/GAO-07-273] (Washington, D.C.: June 29,
2007).
[11] GAO, Defense Contracting: Use of Undefinitized Contract Actions
Understated and Definitization Time Frames Often Not Met, [hyperlink,
http://www.gao.gov/products/GAO-07-559] (Washington, D.C.: June 19,
2007).
[12] GAO, Defense Contract Management: DOD's Lack of Adherence to Key
Contracting Principles on Iraq Oil Contract Put Government Interests
at Risk, [hyperlink, http://www.gao.gov/products/GAO-07-839]
(Washington, D.C.: July 31, 2007).
[13] GAO, Defense Contracting: DOD Has Enhanced Insight into
Undefinitized Contract Action Use, but Management at Local Commands
Needs Improvement, [hyperlink, http://www.gao.gov/products/GAO-10-299]
(Washington, D.C.: Jan. 28, 2010).
[14] GAO, Rebuilding Iraq: Fiscal Year 2003 Contract Award Procedures
and Management Challenges, [hyperlink,
http://www.gao.gov/products/GAO-04-605] (Washington, D.C.: June 1,
2004).
[15] 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).
[16] While the responsibility for ensuring that a contractor meets the
requirements as set forth in the contract rests with the contracting
officer, a contracting officer's representative may be appointed to
provide day-to-day oversight. Contracting officer's representatives
are not normally contracting specialists, and often their oversight
responsibility is an additional duty. Unlike the contracting officer,
they cannot direct the contractor by making commitments or changes
that affect price, quality, quantity, delivery, or other terms and
conditions of the contract; instead, they act as the "eyes and ears"
of the contracting officer and serve as the liaison between the
contractor and the contracting officer.
[17] GAO, Human Capital: Further Actions Needed to Enhance DOD's
Civilian Strategic Workforce Plan, [hyperlink,
http://www.gao.gov/products/GAO-10-814R] (Washington, D.C.: Sept. 27,
2010).
[18] [hyperlink, http://www.gao.gov/products/GAO-11-278].
[19] National Defense Authorization Act for Fiscal Year 2008, Pub. L.
No. 110-181, § 807.
[20] [hyperlink, http://www.gao.gov/products/GAO-11-192].
[21] [hyperlink, http://www.gao.gov/products/GAO-10-829T].
[22] GAO, Afghanistan Reconstruction: Deteriorating Security and
Limited Resources Have Impeded Progress; Improvements in U.S. Strategy
Needed, [hyperlink, http://www.gao.gov/products/GAO-04-403]
(Washington, D.C.: June 2, 2004) and Afghanistan Reconstruction:
Despite Some Progress, Deteriorating Security and Other Obstacles
Continue to Threaten Achievement of U.S. Goals, [hyperlink,
http://www.gao.gov/products/GAO-05-742] (Washington, D.C.: July 28,
2005).
[23] GAO, Foreign Assistance: USAID Needs to Improve Its Strategic
Planning to Address Current and Future Workforce Needs, [hyperlink,
http://www.gao.gov/products/GAO-10-496] (Washington, D.C.: June 30,
2010).
[24] GAO, Contingency Contracting: Improvements Needed in Management
of Contractors Supporting Contract and Grant Administration in Iraq
and Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-10-357]
(Washington, D.C.: Apr. 12, 2010).
[25] [hyperlink, http://www.gao.gov/products/GAO-10-357].
[26] [hyperlink, http://www.gao.gov/products/GAO-11-1], [hyperlink,
http://www.gao.gov/products/GAO-10-1], and [hyperlink,
http://www.gao.gov/products/GAO-09-19].
[End of section]
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