Defense Contracting
Army Case Study Delineates Concerns with Use of Contractors as Contract Specialists Gao ID: GAO-08-360 March 26, 2008In 2007, the Department of Defense (DOD) paid contractors $158.3 billion for a range of services, including contract specialists. To better understand the use of contractors in this role, GAO initiated a case study, under the authority of the Comptroller General, at the Army Contracting Agency's (ACA) Contracting Center of Excellence (CCE). GAO determined (1) the extent to which and why CCE relies on contractor contract specialists, (2) how risks of contractor use are mitigated, (3) how the cost of the contractors compares to that for CCE's government employees, and (4) whether the contract vehicles were appropriate. GAO reviewed a random sample of contract files to understand the contractors' duties and responsibilities, compared compensation costs, and reviewed documents from the General Services Administration (GSA), under whose contracts CCE ordered the contract specialists.
CCE has relied on contractor contract specialists since it began hiring them in 2003. In August 2007, contractors--who work side by side and perform the same functions as their government counterparts--comprised 42 percent of CCE's contract specialists. CCE officials cited difficulties hiring and retaining government personnel in light of the competition from government and the private sector for this competency. While CCE officials said that they prefer to use government employees, they have not considered the appropriate balance of contractor versus government contract specialists. Furthermore, CCE has not addressed the need for more training of its government employees to strengthen their skills in conducting CCE's increasingly more complex procurements. Methods to mitigate the risks of using contractors have been mixed in effect. First, the line separating contractor from government employee is blurry, and contractors did not always clearly identify themselves as such when dealing with the public. Second, the potential for the work being done under a personal services contract, which the Federal Acquisition Regulation generally prohibits because of the government-contractor relationship it creates, was clearly present. While contractor managers retained control over matters such as approving leave requests, CCE took steps to further strengthen the management distinction between government and contractor employees based on GAO's findings. Finally, risks of organizational and personal conflicts of interest were mitigated to some extent, but in practice the government relies on individual contractor employees to identify potential conflicts. These types of risks must be mitigated to ensure that the government does not lose accountability over policy and program decisions. CCE is paying up to almost 27 percent more for its contractor-provided contract specialists than for similarly graded government employees. This comparison took into account government salary, benefits, and overhead and the loaded hourly labor rates paid to contractors. Our review of available r?sum?s showed that six contractor employees supporting CCE in fiscal year 2007 had on average more contracting experience than CCE's five recent government hires. Despite CCE's legal counsel's concerns, CCE has been inappropriately ordering contract specialists under a GSA contract because the services were out of scope of those contracts. GAO found additional problems, such as a contractor advertising contract specialist services on GSA's Web site that it was not authorized to provide. Due to what it characterizes as the growing demand by federal agencies for contractor contract specialists, GSA recently posted a revised contract category, under which government agencies can procure contract specialists to provide acquisition management services, such as cost estimating and proposal evaluation support. In response to GAO's findings, GSA contacted each of the contractors involved in our review about their out-of-scope services and plans further follow-ups with them.
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-08-360, Defense Contracting: Army Case Study Delineates Concerns with Use of Contractors as Contract Specialists
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
March 2008:
Defense Contracting:
Army Case Study Delineates Concerns with Use of Contractors as Contract
Specialists:
GAO-08-360:
GAO Highlights:
Highlights of GAO-08-360, a report to congressional committees.
Why GAO Did This Study:
In 2007, the Department of Defense (DOD) paid contractors $158.3
billion for a range of services, including contract specialists. To
better understand the use of contractors in this role, GAO initiated a
case study, under the authority of the Comptroller General, at the Army
Contracting Agency‘s (ACA) Contracting Center of Excellence (CCE). GAO
determined (1) the extent to which and why CCE relies on contractor
contract specialists, (2) how risks of contractor use are mitigated,
(3) how the cost of the contractors compares to that for CCE‘s
government employees, and (4) whether the contract vehicles were
appropriate. GAO reviewed a random sample of contract files to
understand the contractors‘ duties and responsibilities, compared
compensation costs, and reviewed documents from the General Services
Administration (GSA), under whose contracts CCE ordered the contract
specialists.
What GAO Found:
CCE has relied on contractor contract specialists since it began hiring
them in 2003. In August 2007, contractors”who work side by side and
perform the same functions as their government counterparts”comprised
42 percent of CCE‘s contract specialists. CCE officials cited
difficulties hiring and retaining government personnel in light of the
competition from government and the private sector for this competency.
While CCE officials said that they prefer to use government employees,
they have not considered the appropriate balance of contractor versus
government contract specialists. Furthermore, CCE has not addressed the
need for more training of its government employees to strengthen their
skills in conducting CCE‘s increasingly more complex procurements.
Methods to mitigate the risks of using contractors have been mixed in
effect. First, the line separating contractor from government employee
is blurry, and contractors did not always clearly identify themselves
as such when dealing with the public. Second, the potential for the
work being done under a personal services contract, which the Federal
Acquisition Regulation generally prohibits because of the government-
contractor relationship it creates, was clearly present. While
contractor managers retained control over matters such as approving
leave requests, CCE took steps to further strengthen the management
distinction between government and contractor employees based on GAO‘s
findings. Finally, risks of organizational and personal conflicts of
interest were mitigated to some extent, but in practice the government
relies on individual contractor employees to identify potential
conflicts. These types of risks must be mitigated to ensure that the
government does not lose accountability over policy and program
decisions.
CCE is paying up to almost 27 percent more for its contractor-provided
contract specialists than for similarly graded government employees.
This comparison took into account government salary, benefits, and
overhead and the loaded hourly labor rates paid to contractors. Our
review of available résumés showed that six contractor employees
supporting CCE in fiscal year 2007 had on average more contracting
experience than CCE‘s five recent government hires.
Despite CCE‘s legal counsel‘s concerns, CCE has been inappropriately
ordering contract specialists under a GSA contract because the services
were out of scope of those contracts. GAO found additional problems,
such as a contractor advertising contract specialist services on GSA‘s
Web site that it was not authorized to provide. Due to what it
characterizes as the growing demand by federal agencies for contractor
contract specialists, GSA recently posted a revised contract category,
under which government agencies can procure contract specialists to
provide acquisition management services, such as cost estimating and
proposal evaluation support. In response to GAO‘s findings, GSA
contacted each of the contractors involved in our review about their
out-of-scope services and plans further follow-ups with them.
What GAO Recommends:
GAO recommends that the Secretary of Defense issue guidance regarding
personal services contracts and that the Secretary of the Army direct
ACA to work with CCE to develop a plan that addresses the appropriate
mix of government and contractors, implement a training program, and
ensure that contractors identify themselves as such. GAO also
recommends that GSA implement controls to prevent contractors from
improperly advertising their services. In written comments on a draft
of this report, DOD and GSA agreed with the recommendations.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-360]. For more information, contact John
Hutton at (202) 512-4841 or huttonj@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
CCE Is Using Contractors to Supplement Its Workforce without
Considering the Right Balance of Contractors versus Government
Employees:
Risks Associated with Using Contractors for Acquisition Services Are
Being Mitigated to a Mixed Degree:
CCE Is Paying More for Contractor Contract Specialists Than Its
Government Employees:
Contract Vehicles Inappropriately Issued and Used to Order Contract
Specialists:
Conclusion:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: Comments from the General Services Administration:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: The Six FAR Personal Services Contract Elements Compared with
CCE's Working Environment:
Table 2: Comparison of the Average Cost of CCE's Government and
Contractor Contract Specialists:
Table 3: Comparison of Labor Categories in Two Contractors' GSA MOBIS
Contracts with Requirement in CCE's Performance Work Statement:
Abbreviations:
ACA: Army Contracting Agency:
BPA: blanket purchase agreement:
CCE: Contracting Center of Excellence:
DAU: Defense Acquisition University:
DAWIA: Defense Acquisition Workforce Improvement Act:
DOD: Department of Defense:
FAR: Federal Acquisition Regulation:
GAO: Government Accountability Office:
GSA: General Services Administration:
JCC-I/A: Joint Contracting Command-Iraq/Afghanistan:
MOBIS: Mission Oriented Business Integrated Services:
OCI: organizational conflict of interest:
RFQ: request for quotations:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
March 26, 2008:
Congressional Committees:
Over the past 10 years, Department of Defense (DOD) spending on
services has increased 76 percent--to $158.3 billion in fiscal year
2007--and now outpaces its spending on supplies and equipment,
including major weapon systems.[Footnote 1] One effect of the
escalation in service spending has been to place greater demands on a
shrinking acquisition workforce, which is increasingly faced with the
need to manage more complex contracting approaches. Agencies have dealt
with these trends by relying more heavily on contractors, particularly
those that provide professional, administrative, and management support
services, an area where DOD's spending more than tripled from fiscal
years 1998 through 2007. One example of a function DOD is acquiring
through contracts is contract specialists, who perform a range of
acquisition services in support of government contracting officers.
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
risk of loss of government control over and accountability for mission-
related policy and program decisions when contractors provide services
that closely support inherently governmental functions. Contract
specialist services are an example of such a service, whereas the
contracting officer, who obligates the government's money, is
performing an inherently governmental function that cannot be obtained
through a contract. Other concerns include an increased potential for
conflicts of interest, both organizational and personal; the potential
for improper use of personal services contracts, which the Federal
Acquisition Regulation (FAR) generally prohibits because of the
employer-employee relationship they create between the government and
contractor personnel; and the cost to the government of hiring
contractors rather than government personnel.
To learn more about the use and roles of contractors providing contract
specialist services, we conducted a case study, under the authority of
the Comptroller General to conduct evaluations on his own initiative,
of the Army's Contracting Center of Excellence's (CCE) use of
contractors in this role. Organizationally, CCE falls under the Army
Contracting Agency (ACA), a field operating agency reporting to the
Assistant Secretary of the Army for Acquisition, Logistics, and
Technology. We determined (1) the extent to which and the reasons CCE
is relying on contractors, (2) what actions have been taken to mitigate
the risks associated with using contractors in contract specialist
roles, (3) how the costs of CCE's contract specialists compared to that
of its government contract specialists, and (4) whether the contract
vehicles used to acquire the specialists were appropriate. This report
presents our findings at CCE as an example of the challenges faced by
agencies in an environment of increased reliance on contractors to help
meet the contracting mission.
We identified CCE as a government agency using contractors as contract
specialists through a bid protest that involved CCE's predecessor
organization awarding a contract for contract specialists.[Footnote 2]
In fiscal year 2007, CCE obligated almost $1.8 billion in contract
actions. To conduct our work, we interviewed CCE and ACA officials and
contractor representatives. We obtained information on CCE's contract
specialist staffing levels in fiscal year 2007, and we reviewed CCE's
orders issued under blanket purchase agreements (BPA)[Footnote 3]
established in 2006 for contract specialist services, as well as
billing information. To identify the roles and responsibilities of
contractor contract specialists, we interviewed government and
contractor contract specialists and government contracting officers,
and we reviewed 42 randomly selected CCE contract files for work
performed by the contractor contract specialists in fiscal years 2006
and 2007 to understand the contractors' day-to-day duties. We also
reviewed contractor policies and procedures regarding organizational
and personal conflicts of interest. In addition, we reviewed FAR
provisions pertaining to conflicts of interest, as well as those
relating to personal services contracts. To compare costs, we
calculated an average loaded hourly rate (including benefits, overhead,
and other costs) for CCE's government contract specialists who perform
the same tasks and have similar qualifications as the contractor-
provided contract specialists, and compared it to the weighted average
labor hour rate that two contractors charged CCE for contract
specialists in August 2007. The contractors' labor hour rates include
wages, benefits, overhead, general and administrative expenses, and
profit. We also reviewed résumés to compare experience levels of
contractor and government contract specialists. Résumés were available
for six contractor contract specialists who had supported the agency
for at least 6 months; we also reviewed the résumés of the five
contract specialists CCE had recently hired. We reviewed CCE's
contracting strategies to determine whether new contracts were awarded
to obtain contract specialists or whether interagency contracts through
other federal agencies, such as the General Services Administration's
(GSA) schedule program, were used. We analyzed contract documents,
including CCE's BPAs with four contractors, related task orders, and
underlying GSA schedule contracts. We spoke with GSA officials
responsible for overseeing the Mission Oriented Business Integrated
Services (MOBIS) schedule and with CCE officials. We also examined the
FAR section on the use of GSA schedules.
While CCE has established BPAs with four contractors to provide
contract specialist services, nearly all of the contractor-provided
contract specialists at CCE during our review were employees of CACI
International, Inc. (CACI); thus, our primary focus was on the CACI
contract, related BPA, and orders.
We conducted this performance audit from May 2007 to March 2008 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. See appendix I for
additional information on our scope and methodology.
Results in Brief:
CCE has relied on contractor contract specialists since it began hiring
them in 2003 to help meet its increasing workload and plans to continue
doing so, although officials told us that they would prefer an all-
government workforce. CCE's contractor employees supported from 24 to
30 percent of its contract actions from fiscal years 2005 through 2007
and, in August 2007, represented 42 percent of the agency's contract
specialists. The contractors work side by side with government contract
specialists and perform the same activities. CCE and ACA officials
noted that they face chronic difficulties in recruiting and retaining
contract specialists, given the high demand for this skill set in the
Washington, D.C., area. They said that it is a struggle to compete with
other agencies as well as with the contractors supplying the
specialists to the government. Further, while the agency has a 2-year
training program for interns, it lacks a formal training program for
its other contract specialists, despite officials' acknowledgment that
skills need to be improved. Finally, CCE has not considered what would
be an appropriate and feasible balance of the number of contractor and
government employees. A recent Defense Acquisition University (DAU)
study recommended that agencies assess the proper balance of contractor
to government contract specialists to avoid overreliance on
contractors.
We found mixed results in terms of policies, procedures, and actions in
place to mitigate the risks of using contractors in the contract
specialist role at CCE:
* The line separating contractor from government employee is blurry,
and we found situations in which contractor employees were not clearly
identified as such to the general public and cases where they were
listed as the government's point of contact on contract documents. In
situations such as these, contractor employees may appear to be
speaking for the government, a situation that could create the
impression in the general public that they are government employees. As
a result of our findings, CCE has taken initial steps to more clearly
delineate the contractor employees.
* The work being done by CCE's contractor contract specialists reflects
each of the descriptive elements listed in the FAR as a guide in
assessing the existence of personal services contracts--which are
generally prohibited unless authorized--including work performed under
the direct, day-to-day supervision of the government. However,
determinations as to whether a personal services contract is present
must be made based on the facts and circumstances of each situation. In
this case, the contractor maintains control over a number of
supervisory and management functions, such as the approval of time
cards and leave requests. As a result of our review, CCE has taken
several actions, such as reorganizing the contractor employees so that
their work is now assigned by a supervisor employed by the contractor.
We found no DOD guidance that elaborated on the factors to be
considered in determining whether a personal services contract exists
or how to mitigate that risk when contractors work side by side with
their government counterparts.
* To mitigate the risk of organizational and personal conflicts of
interest, CCE requires contractors to submit mitigation plans when
appropriate, and contractor employees sign agreements not to disclose
proprietary or sensitive information belonging to the government or
other contractors, such as cost and pricing data, government spend plan
data, and contractor technical proposal data, and not to engage in any
conduct prohibited by provisions of the Procurement Integrity Act as
implemented by the FAR.[Footnote 4] In practice, the government must
rely heavily on individual contractor employees to identify potential
organizational conflicts of interest, such as where they are assigned
to a procurement on which their company is bidding. The same holds true
for personal conflicts of interest, because, although a new FAR subpart
states that contractors should have a written code of business ethics
and conduct, neither the FAR nor DOD contracting policy requires that
contractor employees be free from conflicts of interest or that they
deploy other safeguards to help ensure that the advice and assistance
the employees provide is not tainted by personal conflicts of interest.
CCE is paying more on average for contractor-provided contract
specialists than for its government contract specialists who are doing
equivalent work. We found that on average and taking into account
benefits and overhead rates, the cost of a GS-12 CCE contract
specialist is $59.21 per hour, as compared to the contractors' average
loaded hourly labor rate of $74.99, or about 17 percent more. The
average cost of CCE's GS-13 specialists is $72.15 per hour, while it is
paying the contractor specialists $84.38 per hour, or about 27 percent
more. We also reviewed available résumés of six contract employees
supporting CCE for at least 6 months and found that they had from 5 to
32 years, or an average of 18 years, of contracting-related experience.
In comparison, the five CCE government contract specialists hired in
fiscal year 2007 had from 6 to 17 years, or an average of about 12
years, of contracting-related experience. All six contract employees
had previously worked for, and were trained by, the federal government
before being hired by the contractor.
The contract vehicles CCE has used since 2003 to acquire its contract
specialists--orders issued under GSA's MOBIS schedule contracts--were
inappropriate because the services were out of scope of those
contracts. The labor category descriptions in the vendors' GSA schedule
contracts are, in most cases, substantially different from the
descriptions in CCE's performance work statements and did not
accurately represent the work that the contractors were performing. For
example, one contractor's negotiated GSA contract was for "senior
business analysts," but it is providing CCE with contract specialist
support--a completely different description. Acquiring services outside
the scope of the underlying contract circumvents the government's
competition requirements and limits the government's ability to know if
it is paying a fair and reasonable price. CCE's legal counsel and a
senior procurement analyst raised concerns about the scope of services,
but the agency issued the BPAs without resolving their concerns. When
we brought the issue of the out-of-scope services to GSA's attention,
as well as other issues we found, such as a contractor that had
advertised services on GSA's Web site that it was not under contract to
provide, GSA began contacting the contractors to rectify the
situations. Because of the high demand for contract specialists, GSA
has revised the MOBIS schedule to add acquisition management support
services, including assistance in supporting proposal evaluations and
reviews of contractor performance. Finally, CCE failed to follow Army
policy for certifying that work ordered under a non-DOD contract--in
this case, a GSA contract--is within scope of the contract.
We are recommending that the Secretary of the Army direct ACA to work
with CCE to take several actions, including identifying the appropriate
mix of contractor and government personnel and developing a plan to
achieve the desired balance, implementing a training program for its
employees, and putting in place procedures to ensure that contractors
identify themselves as such in all interactions external to CCE. We are
also recommending that DOD issue guidance to clarify the circumstances
under which contracts risk becoming improper personal services
contracts and to provide direction on how the risk should be mitigated.
Finally, we are recommending that GSA, as the entity responsible for
the MOBIS schedules, strengthen controls to guard against situations
where contractors improperly advertise services on GSA's Web site that
they are not under contract to provide. In written comments on a draft
of this report, DOD and GSA concurred with the recommendations and
outlined actions they plan to take or have taken to address them. DOD's
and GSA's comments are reprinted in their entirety in appendixes II and
III, respectively.
Background:
CCE, which falls organizationally under ACA, provides contracting
support to 125 DOD customers in the National Capitol Region, including
the Joint Chiefs of Staff, TRICARE Management Activity, Defense
Information Systems Agency, DOD Inspector General, Pentagon Renovation
Office, and Office of the Judge Advocate General. During fiscal year
2007, the agency awarded about 5,800 contract actions and obligated
almost $1.8 billion. CCE is one of many government agencies that have
turned to contractors to support their contracting functions.
While use of contractors provides the government certain benefits, such
as increased flexibility in fulfilling immediate needs, we and others
have raised concerns about the federal government's services
contracting, in particular for professional and management support
services.[Footnote 5] A major concern is the risk of loss of government
control over and accountability for mission-related policy and program
decisions when contractors provide services that closely support
inherently governmental functions. Inherently governmental functions
require discretion in applying government authority or value judgments
in making decisions for the government, such as approving contractual
requirements; as such, they must be performed by government employees,
not private contractors. 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. Decisions may
be made that are not in the best interest of the government and may
increase vulnerability to waste, fraud, or abuse.
The FAR[Footnote 6] sets forth examples of services closely supporting
inherently governmental functions. These include acquisition support
services, such as:
* services in support of acquisition planning,
* services that involve or relate to the evaluation of another
contractor's performance,
* contractors providing assistance in contract management (such as
where the contractor might influence official evaluations of other
contractors), and:
* contractors working in any situation that permits or might permit
them to gain access to confidential business information, any other
sensitive information, or both.
It is now commonplace for agencies to use contractors to perform
activities historically performed by federal government contract
specialists. Although these contractors are not authorized to obligate
government money, they provide acquisition support to contracting
officers, the federal decision makers who have the authority to bind
the government contractually. Among other things, contract specialists
perform market research, assist in preparing statements of work,
develop and manage acquisition plans, and prepare the documents the
contracting officer signs, such as contracts, solicitations, and
contract modifications.
In its 2007 report to Congress, DOD's Panel on Contracting
Integrity[Footnote 7] noted that the practice of using contractors to
support the contracting mission merits further study because it gives
rise to questions regarding potential conflicts of interest and
appropriate designation of governmental versus nongovernmental
functions. The panel concluded that potential vulnerabilities may exist
that could result in fraud, waste, and abuse.
A November 2005 DAU study[Footnote 8] cited four top reasons that
federal agencies are contracting out for procurement services: (1) to
meet workload surge requirements, (2) inability to hire adequate
resources to meet workload, (3) relative speed of contracting versus
hiring to meet workload, and (4) ability to select specific required
expertise. The DAU data showed that contractors performed duties across
the spectrum of contracting functions, from acquisition planning to
contract closeout. The study's authors noted that as DOD's personnel
levels have dropped, activity rates for procurement organizations have
increased, driving a gap between the requirements and government
capability in many DOD contracting offices. The report warned that the
government must be careful when contracting for the procurement
function to ensure that government leaders retain thorough control of
policy and management functions and that contracting does not
inappropriately restrict agency management in its ability to develop
and consider options.[Footnote 9]
CCE Is Using Contractors to Supplement Its Workforce without
Considering the Right Balance of Contractors versus Government
Employees:
CCE has relied on contractors to help meet its increasing workload
requirements since 2003 and plans to continue doing so, although agency
officials would prefer an all-government workforce. The roles and
responsibilities of the contractor contract specialists mirror those of
the government contract specialists. In fact, contractor and government
contract specialists work side by side and perform the same duties. CCE
has not taken into consideration what constitutes a reasonable and
feasible balance of the number of government versus contractor
personnel or developed a training program for its permanent government
employees.
CCE Has Relied on Contractors to Meet Its Increasing Workload and Plans
to Continue Doing So:
According to agency officials, CCE began using contractor contract
specialists in 2003 as a stopgap measure to meet an increase in
workload, but the agency has continued to rely heavily on their
support. Our analysis of CCE's contract actions showed that contractors
supported from 24 to 30 percent of all actions from fiscal year 2005
through 2007. In fiscal year 2007, CCE spent over $2.8 million on over
32,600 hours (approximately 15.6 full-time-equivalent
employees)[Footnote 10] of contracting support services from two
contractors--CACI and The Ravens Group. In August 2007, 42 percent of
CCE's contract specialists were contractors.[Footnote 11] CCE officials
stated that the agency plans to continue relying on contractors,
although they would prefer an all-government workforce.
CCE officials told us that prior to 2005, the majority of the agency's
contracting activity consisted of issuing orders against GSA schedule
contracts--a relatively simple contracting method. After a DOD policy
memorandum placed limitations on the use of non-DOD contract vehicles
because of widely reported misuse of interagency contracts, CCE began
relying less on using contract vehicles awarded by other agencies. Our
analysis of Federal Procurement Data System-Next Generation data found
that from fiscal years 2005 to 2007, the number of CCE contract actions
through other agency contract vehicles decreased by 55 percent and
obligations through use of these vehicles decreased by 45 percent.
According to agency officials, CCE began awarding more of its own
contracts through full and open competition, but the contracting staff
generally lacked experience with these more complex types of
procurements. Much of the workload had to be assigned to a limited
number of more experienced staff, creating a situation where officials
believed they had no choice but to turn to contractor support.
Activities and Responsibilities of Contractor Contract Specialists
Mirror Those of Government Personnel:
Contractor contract specialists at CCE perform the same tasks as
government contract specialists. Typical tasks include pre-procurement
research and planning, preparing contract documents, monitoring
contracts, assisting with negotiations, and closing out contracts.
These "cradle-to-grave" procurement activities are performed as support
for a government contracting officer, who performs an inherently
governmental function with the ability to bind the government by
contract. According to CCE contracting officers, the work is generally
assigned based on knowledge and experience, not whether the specialist
is a government or contractor employee, with the only exception being
cases where there could be a potential organizational conflict of
interest (such as when the contractor employee's company could bid on
the contract in question).
We reviewed contract files for 42 randomly selected contract actions on
which contractor contract specialists worked during fiscal years 2006
and 2007 and found that the contractors had prepared a range of
contracting documents, such as contract modifications, requests for
legal review, small business coordination records, cover sheets to
route contract actions for approval, award decision memorandums, and
memorandums to the file. Contractors also had requested or received
documents from vendors or other DOD entities, such as proposals,
technical evaluations, and past performance questionnaires, and
assisted in preparing statements of work.
The contracting officers and government and contractor-provided
contract specialists we interviewed at CCE emphasized that while the
contractors can recommend a course of action, the contracting officers
make the decisions, such as deciding on an acquisition strategy and
making contract award determinations. The contracting officers and
specialists also told us that although contractors may assist in
negotiations, the contracting officer takes the lead role in
negotiating the terms of the contract.
CCE Has Faced Difficulties Hiring Government Contract Specialists:
CCE officials informed us that the agency has had trouble recruiting
and retaining government contract specialists. For example, an official
told us that as of October 2007 the agency had 10 contract specialist
positions that have been vacant for as long as 5 months, as well as
another 12 vacancies, such as procurement analysts and a cost/price
analyst. According to the official, from August 2006 through August
2007, 24 contract specialists--more than one-quarter of its government
contracting workforce[Footnote 12] during the period--left the agency.
Agency officials stated that some of these personnel retired, but many
had gone to work for private contractors that support the federal
government. In fact, CCE officials said that they cannot compete with
the private sector when it comes to offering some employment
incentives. Additionally, both CCE and ACA officials stated that the
government's hiring process takes too long and that potential
candidates are often hired by a contractor or another agency before CCE
can make an offer. For example, it took CCE over 5 months, from
solicitation to job offer and placement, for two recent contract
specialist hires. In contrast, a CCE official told us that they can
order and have a contractor employee in place within as little as a
couple of weeks.
CCE officials stated that the agency's recruitment difficulties are in
large part caused by the high demand for contract specialists--by both
the many federal agencies in Washington, D.C., and contractors from
which the government purchases these services--making it difficult to
compete for them. Contractor representatives, too, reiterated that the
employment market for well-qualified contract specialists is extremely
competitive. CACI employees who were supporting CCE as contract
specialists confirmed that there is a high demand for their skill set,
and several of these individuals stated that a well-qualified person
can be selective when searching for a new employer. In addition, these
employees said CACI offers some better benefits than the federal
government, including higher salaries, fewer responsibilities, and
shorter work weeks (because of contract restrictions on extended
hours). Senior managers from The Ravens Group told us that their firm
recruits contract specialists who have worked for and been trained by
the government and hires them at a higher rate of pay.
CCE Has Not Considered the Appropriate Balance of Contractor to
Government Employees and Lacks a Training Plan to Help Build Government
Staff's Skills:
CCE plans to continue relying on contractors to help meet its mission,
but has not considered the appropriate and feasible ratio of government
employees to contractors. In a November 2005 study on contracting out
the procurement function, DAU concluded that it is reasonable to
contract out functions or tasks that are not inherently governmental to
meet a sudden or temporary increase in workload or when special
expertise is required. However, the study cautioned that contracted
procurement support needs to be maintained at a "reasonable" level. The
study recommended that each contracting activity be limited in the
percentage of its workforce that may be contractors, acknowledging that
the appropriate limitation is a matter for debate.[Footnote 13] It
noted that using contractors only in limited situations would:
* provide contracting agencies with flexibility to quickly react to
surge workload situations,
* enable managers to assign the contractors to lower-priority tasks so
that government employees would handle the more sensitive procurement
tasks, and:
* help address the concern that extensive contracting out of the
contracting function could reduce, in the long term, the opportunity to
develop adequate numbers of government personnel with a full range of
contracting experience.
Defining the right mix of contractor to government contract specialists
is not just a matter of numbers, but also of skill sets. The DAU study
envisions contractors playing a limited role and performing lower-
priority tasks. However, at CCE, complex, high-priority work is often
assigned to the contractors, whose role has been ongoing since 2003. In
part, according to agency officials, this is because many of the
government employees lack experience with complex procurements.
However, we found that while CCE has implemented a 2-year training
program for its contract specialist interns, the agency does not have
in place a training program for its permanent staff. In fact, according
to CCE's former Commander and the current Director of Contracting,
contracting staff have had to learn these practices on the job, which
has resulted in some performance problems. An agency's overall training
strategy--including planning, developing, implementing, and continuous
improvement of its programs--is an important factor in ensuring that
the staff has the skills, knowledge, and experience to meet agency
missions.
Risks Associated with Using Contractors for Acquisition Services Are
Being Mitigated to a Mixed Degree:
Three broad areas of risk of using contractors as contract specialists
are present at CCE, with the risks being mitigated to various degrees.
First, we found that the blurred lines demarcating contractor from
government personnel could result in creating the impression that
contractor employees are government personnel. Contractor employees
were not always identified as such to the public and in some cases were
named on documents as the government's point of contact. Second, the
work being done reflects the descriptive elements listed in the FAR as
guidance for assessing the existence of personal services contracts,
which are prohibited unless authorized. However, a determination as to
whether a personal services contract exists must be made on a case-by-
case basis; here, CACI's on-site managers retain control over
supervisory and managerial functions, such as approving time cards and
making hiring and firing decisions, thus negating the existence of a
personal services contract. We found no DOD guidance that elaborated on
the factors to be considered in determining whether an unauthorized
personal services contract exists or how to mitigate that risk.
Finally, although policies and procedures are in place to help mitigate
organizational and personal conflicts of interest, in practice, CCE
relies on contractor employees to self-identify potential conflicts.
Contractor Contract Specialists Not Always Identified as Such:
To avoid confusion by vendors and customers over whether they are
speaking to a government employee, it is important to clearly
distinguish between contractors and government employees in all
interactions. Contractor personnel attending meetings, answering
government telephones, and working in other situations where their
contractor status is not obvious to third parties should identify
themselves as such to avoid creating the impression that they are
government officials.[Footnote 14] In addition, the FAR states that
agencies must ensure that all documents or reports contractors produce
are suitably marked as contractor products or that contractor
participation is appropriately disclosed. Further, in December 2005,
the Assistant Secretary of the Army issued a memorandum, "Contractors
in the Government Workplace," stating that "while it is preferred that
contractor personnel work in company office space, if Government and
contractor personnel must be co-located in the same office space, then,
to the maximum extent possible, the contractor personnel should have
separate, and separated, space."
At CCE, we found the line separating government from contractor
personnel to be blurry. There is no physical separation; the two work
side by side in identical office space, and contractor employees are
not identified as such on their cubicles. The only apparent distinction
is their different badge color.
In addition, contractors were not always identified as such on
contracting documents they had prepared. We reviewed 23 contract
modifications[Footnote 15] prepared by contractor employees and found
that their status as contractors was not indicated on the documents.
Further, on 16 of these modifications, the contractor was identified as
administering the contract, and on four, the contractor was listed as
the point of contact without identification as a contractor--for
example, as the "CCE contact" or "government point of contact."
Instances such as these, where the contractor is not identified as such
or is misidentified, can cause confusion about the contractor's status
and create an impression that the contractor is speaking or acting for
the government. For example, we found a situation in which a vendor, in
submitting a proposal to the government, listed the contractor contract
specialist as the contracting officer, who has the contract source
selection authority for the government. Another contract file contained
e-mails between a contractor employee and third-party entities--
correspondence with a CCE customer agency and notification to a vendor
that its bid would not be considered--with no contractor identification
at all.
CCE officials told us that the agency has no requirement that
contractor employees identify themselves as contractors in the e-mail
signature line, which could help ensure that outside parties know they
are dealing with a contractor. Further, although the FAR and CCE's
orders for contract specialists under the BPAs specifically cite
telephone contacts as situations in which contractors should identify
themselves as such, a CCE management official did not know whether this
was occurring in practice.
When we brought these issues to CCE's attention, the agency began to
establish policies to mitigate the risk of contractors being mistaken
for government employees and appearing to be speaking for the
government. It has since issued a policy that contractor support
personnel are not to communicate orally or in writing with other
contractors, such as vendors. The contractor contract specialists will
still communicate with CCE's federal customers. In addition, the CACI
on-site senior manager notified CACI employees at CCE that they are to
identify themselves as contractors in all correspondence, including e-
mail and voice mail, and documents.
Determination of Whether Personal Services Contract Exists Must Be Made
on Case-by-Case Basis:
At CCE, the work of the contractor contract specialists, performed in
direct support of the government contracting officer and under his or
her day-to-day supervision, results in an arrangement that can have
characteristics of a personal services contract. Personal services
contracts are generally prohibited, unless authorized by statute. The
government is normally required to obtain its employees by direct hire
under competitive appointment or other procedures required by the civil
service laws. Section 37.104 of the FAR lists six descriptive elements
to be used as a guide in assessing the existence of a personal services
contract.[Footnote 16] The presence of any or all of these elements
does not necessarily establish the existence of a personal services
contract. Such a finding can only be established based on a case-by-
case analysis of the totality of the circumstances of each case. The
FAR elements are shown in table 1 along with the working environment of
the contract employees at CCE. We found that the actual working
environment for the contractor contract specialists at CCE touched on
all six elements.
Table 1: The Six Far Personal Services Contract Elements Compared With
CCE'S Working Environment:
FAR elements suggesting personal services contracts exist:
1. Performance on-site;
CCE contracting environment: Contractors are on-site at CCE and sit
among government personnel performing the same tasks.
FAR elements suggesting personal services contracts exist:
2. Principal tools and equipment furnished by the government;
CCE contracting environment: Contractors use government equipment and
facilities.
FAR elements suggesting personal services contracts exist:
3. Services are applied directly to the integral effort of the agency
or an organizational subpart in the furtherance of its assigned
function or mission;
CCE contracting environment: CCE's core mission is providing contract
support directly to DOD entities. Contractors fulfill capability and
workforce gaps at CCE.
FAR elements suggesting personal services contracts exist:
4. Comparable services, meeting comparable needs, are performed in the
same or similar agencies using civil service personnel;
CCE contracting environment: Other than reassigning work when a
potential organizational conflict of interest exists, there is no
difference between the work of a government employee and a contractor
employee.
FAR elements suggesting personal services contracts exist:
5. The need for the type of service provided can reasonably be expected
to last beyond 1 year;
CCE contracting environment: CCE has contracted for contract specialist
support on an ongoing basis since 2003.
FAR elements suggesting personal services contracts exist:
6. The inherent nature of the service, or the manner in which it is
provided, reasonably requires, directly or indirectly, government
direction or supervision of contractor employees in order to (1)
adequately protect the government's interest, (2) retain control of the
function involved, or (3) retain full personal responsibility for the
function supported in a duly authorized federal officer or employee;
CCE contracting environment: CCE uses time-and-materials contracts for
these services. Because there is no profit incentive for cost control
or labor efficiencies when these contracts are used, they require the
government to ensure appropriate surveillance over the contractor's
performance. Contractor tasks are issued by the government directly to
the contractor employee performing the work. The contractors' work is
directly reviewed by the government contracting officer. The
contractors are performing tasks that are defined by the FAR as closely
supporting inherently governmental functions. CCE contracting officers
retain the responsibility for making contract awards.
Sources: FAR subpart 37.104(d), CCE data, and GAO analysis.
[End of table]
The FAR provides that each contract arrangement be judged in the light
of its own facts and circumstances, with the key question always being
whether the government will exercise relatively continuous supervision
and control over the contractor personnel performing the contract.
[Footnote 17] For example, GAO bid protest decisions have considered,
along with the existence of other factors, the fact that government
"managers interviewed and selected contractor personnel for assignment
to positions, and routinely requested pay increases and promotions for
contractor personnel" to be contributing factors in the existence of a
personal services contract.[Footnote 18] Another bid protest decision
considered that "the contractor's right to hire and fire employees, to
grant or deny individual leave requests, and to reassign employees
negate the existence of a personal services contract as defined in the
FAR."[Footnote 19] CACI's performance, in this case, of supervisory and
management functions, such as approving time cards and leave requests,
preparing performance evaluations, and making hiring and firing
decisions, means a personal services contract does not exist, even if
the six FAR elements are present. Although the distinction between a
personal services contract and a non-personal services contract is
somewhat murky and requires a case-by-case analysis based on the facts
of each circumstance, we found no additional DOD guidance that
elaborated on the factors contracting officers or program officials
should consider in determining whether a personal services contract
exists and how to mitigate against this risk when contractors are
working side by side with their government counterparts, perhaps even
receiving their daily task assignments from a government supervisor.
Because of the type of contract and nature of the contract services
provided along with the presence of the FAR's descriptive elements, the
CACI contract runs the risk of becoming a personal services contract if
the government does not carefully monitor the manner in which services
are provided.[Footnote 20]
When we brought these issues to the attention of CCE, the agency began
to take actions to strengthen the management distinction between
government and contractor personnel. Before, the contractor personnel
were assigned to a team consisting of government and contractor
employees, and they generally worked for one contracting officer most
of the time. Now, all of the contractor personnel are on a separate
team, and the contractors' managers on-site are responsible for
assigning work to the contractor employees--unlike the previous
situation where the government contracting officer assigned the work.
Under this arrangement, contractor contract specialists can work for
several different contracting officers, according to a CCE official. In
addition, CCE has plans to situate contractors together in an area
separate from government personnel and to put nameplates on cubicles to
clearly distinguish between contractor and government employees, but
these plans have not yet been implemented.
The Acquisition Advisory Panel[Footnote 21] recently reported that as
the extent of service contracting has grown, the current ban on
personal services contracts has created two responses--government
managers may find themselves crafting cumbersome and inefficient
processes to manage the work of contractor personnel to avoid the
appearance that they are exercising continuous supervisory control, or
they may simply ignore the ban. The panel recommended replacing the ban
with guidance on the appropriate and effective use of personal services
contracts. The panel stated that in implementing the recommendation,
the government should be allowed to supervise the work performed by the
contractor workforce, but current prohibitions on government
involvement in purely supervisory or management activities--such as
hiring, leave approval, and performance ratings--should be retained.
Mitigations of Organizational and Personal Conflicts of Interest Must
Rely Heavily on Individual Contractor Specialists:
Reliance on contractor support to meet agency missions can raise the
risk of organizational and personal conflicts of interest.[Footnote 22]
In fact, the Acquisition Advisory Panel noted that the government's
increased reliance on contractors, coupled with increased contractor
consolidations, has escalated the potential for organizational
conflicts of interest (OCI). With respect to protecting contractor
confidential or proprietary data, the panel recognized the increased
threat of improper disclosure as more contractor employees support the
government's acquisition function. The panel also found that while
there are numerous statutory and regulatory provisions that apply to
federal employees to protect against personal conflicts of interest,
most do not apply to contractor personnel.
An OCI may be present when a contractor organization has other
interests that either directly or indirectly (because of business or
relationships with other contractor organizations) relate to the work
to be performed under a contract and (1) may diminish its capacity to
give impartial, technically sound, objective assistance or advice or
(2) may result in it having an unfair competitive advantage. The FAR
and GAO bid protest decisions provide guidance for contracting officers
to mitigate three types of OCIs: unequal access to nonpublic
information as part of its performance under a government contract that
might provide the contractor firm unfair competitive advantage in a
future competition; biased ground rules, such as the firm being in a
position to write a statement of work that might provide it an unfair
advantage in a future competition; and impaired objectivity when the
contractor firm's work under a contract entails evaluating its own work
or that of a competitor either through an assessment of performance
under another contract or through an evaluation of proposals.[Footnote
23]
As required under its BPA with CCE, CACI submitted an OCI risk
mitigation plan, which lays out the elements of its plan to mitigate
the risk of an OCI. According to the plan, the contractor has
established a separation, or "firewall," between the business unit that
provides contract specialists and program support services to CCE and
all other divisions and corporations owned by the company. As a part of
the firewall, the business unit's employees are physically separated
from the company's other operating groups, proposal databases are
separated, and the business unit's employee financial incentives do not
depend on the performance of the company's other operating
organizations. Also, the business unit providing contract specialists
is precluded from submitting proposals in response to solicitations
issued by CCE, except for those related to the BPA for contract
specialists. In addition, the company provides its employees with OCI
training and instructions to immediately notify the contracting officer
of a potential OCI; requires them to sign conflict of interest and
nondisclosure agreements to protect proprietary or sensitive
information belonging to the government or other contractors--for
example, cost and pricing data, government spend plan data, and
contractor technical proposal data--and not use this information to
violate procurement integrity rules; and limits where employees can
work within CACI for 2 years after leaving CCE. The nondisclosure
agreement also addresses personal conflicts of interest, as the
contractor employee must agree not to engage in any conduct prohibited
by the Procurement Integrity Act as implemented in FAR 3.104. Finally,
a group internal to the company conducts annual reviews of the
effectiveness of and adherence to the OCI risk mitigation plan.
Although CCE and the contractor have taken steps to mitigate OCI risks,
in practice, identifying and mitigating the risks necessarily relies,
to a large extent, on individual contractor personnel. Contractor
officials indicated that it is the responsibility of the contractor
contract specialists to immediately notify the company supervisor and
contracting officer of potential OCIs. CACI officials and employees
told us of cases where contractor contract specialists had been exposed
to potential conflicts of interest, that is, they were assigned to
procurements that the company planned to bid on. We were told these
employees were subsequently removed from working on the procurements
after notifying contractor management and government officials of a
potential conflict. Despite these instances, CCE officials told us that
they are careful about what procurements they assign to the
contractors. For example, the CCE contracting officer's
representative[Footnote 24] told us that she screens requirements
packages to determine which ones would present a potential conflict if
assigned to a contractor. However, she does not have visibility to the
subcontract level, where the contractor could be a subcontractor to a
potential bidder.
For purposes of this report, we define a personal conflict of interest
as a situation when an individual, employed by an organization in a
position to materially influence research findings, recommendations, or
both, may lack objectivity or be perceived to potentially lack
objectivity because of his or her personal activities, relationships,
or financial interests. For example, a conflict can occur when a
government employee contacts an offeror during the conduct of an
acquisition since this could be construed as seeking employment.
Defense contractor employees are not subject to the same laws and
regulations that are designed to prevent federal employee conflicts of
interests. Moreover, although a new FAR subpart states that contractors
should have a written code of business ethics and conduct, neither the
FAR nor DOD contracting policy requires that contractor employees be
free from conflicts of interest or that they deploy other safeguards to
help ensure that the advice and assistance the employees provide is not
tainted by personal conflicts of interest.[Footnote 25] Therefore,
mitigating the risks associated with personal conflicts of interest
depends on the integrity of the contractors and their employees. For
example, one of the contractors providing contract specialists to CCE
has an internal policy for standards of employee ethics and business
conduct that addresses personal conflicts of interest. In addition, the
company provides mandatory ethics training that covers personal
conflicts of interest. According to a company official, rather than
having a formal financial disclosure process, its employees are
equipped with knowledge of what constitutes a personal conflict of
interest, and it is the employees' responsibility to self-report if
they have a personal conflict of interest. The company also has a
moonlighting policy that requires employees to obtain company approval
prior to forming any relationship with a for-profit company.
CCE Is Paying More for Contractor Contract Specialists Than Its
Government Employees:
CCE is paying more on average for contractor-provided contract
specialists than for its government specialists. We reviewed the hours
of contractor services CCE purchased under orders pursuant to the four
BPAs it established at the end of fiscal year 2006. By the end of
fiscal year 2007, CCE had purchased contract support services only from
CACI and The Ravens Group, with the vast majority being from CACI.
Agency officials informed us that CCE has purchased services of two
types of contract specialists: (1) contract specialists II, which are
Defense Acquisition Workforce Improvement Act (DAWIA)[Footnote 26] II-
certified/GS-12 equivalents, and (2) contract specialists III, which
are DAWIA III-certified/GS-13 equivalents. Because the orders issued
pursuant to the BPAs are time-and-materials contracts, payments to
contractors are based on the number of labor hours billed at a fixed
hourly rate--which includes wages, benefits, and the company's
overhead; general and administrative expenses; and profit.[Footnote 27]
Because agency officials stated that CCE has government contract
specialists with the same certifications and GS levels as the
contractor contract specialists, we determined that these specialists
were comparable. Therefore, we compared the costs and experience of the
government and contractor employees within these two categories. We
found that the average hourly cost of a contract employee is higher
than a government specialist performing the same duties, as shown in
table 2.
Table 2: Comparison Of The Average Cost Of CCE's Government And
Contractor Contract Specialists:
DAWIA certification/GS level or equivalent: II/GS-12;
Average hourly cost of a government employee[A]: $59.21;
Average hourly cost of a contract employee[B]: $74.99;
Percentage difference: 26.65.
DAWIA certification/GS level or equivalent: III/GS-13;
Average hourly cost of a government employee[A]: $72.15;
Average hourly cost of a contract employee[B]: $84.38;
Percentage difference: 16.95.
Source: GAO analysis based on government information.
[A] This rate is based on actual salaries and benefits paid during the
pay period ending on August 18, 2007, and 68.3 productive hours per pay
period. The rate does not include the government's costs of managing
the payroll of government employees.
[B] This rate is based on the weighted average rate CCE paid during
August 2007 and does not include CCE's cost of managing the contracts
for these services.
[End of table]
Key elements of our analysis were as follows:
* The loaded hourly cost of a government employee includes salary,
costs of the government's contributions to the employee's benefits, the
costs to train the employee, the employee's travel expenses, and the
costs of operations overhead--which are the costs of government
employees who provide support services, such as budget analysts or
human capital staff.
* Government employee salaries and benefits were based on actual data
from one pay period. These data were then compared to hourly cost of
contractor employees ordered during that same pay period. The cost of a
contractor employee is the fully loaded hourly rate the government pays
for these services. We reported the weighted average of those hourly
rates because the agency used two contractors at two different rates
during that pay period.
* We excluded the costs that the government incurs for both government
and contractor-provided specialists. These include the costs of
supplies, facilities, utilities, information technology, and
communications.
Based on a limited number of résumés we reviewed, the contractors
generally had more contracting experience than their government
counterparts. Résumés were available for six CACI employees supporting
CCE as contract specialists for at least 6 months during fiscal year
2007; they had from 5 to 32 years, or an average of about 18 years, of
contracting-related experience. In contrast, the five CCE government
contract specialists hired during fiscal year 2007 had from 6 to 17
years, or an average of about 12 years, of contracting-related
experience prior to joining the agency. All six contract employees
previously worked for, and were trained by, the federal government
before being hired by the contractor.
Contract Vehicles Inappropriately Issued and Used to Order Contract
Specialists:
CCE's issuance of the BPAs with four contractors for contract
specialists under GSA's MOBIS schedule was inappropriate as some of the
services required in CCE's performance work statements were outside the
scope of the underlying contracts. The labor category descriptions in
the vendors' GSA schedule contracts were, in most cases, significantly
different from the description on CCE's performance work statements
and, for the two contractors who have been issued task orders, did not
accurately represent the work performed.[Footnote 28] A GSA official
confirmed that contract specialist services were not within the scope
of the MOBIS schedule but said it is the responsibility of the ordering
agency to ensure that orders are within scope. In addition, we found
that one of the other contractors had improperly advertised on GSA's
Web site that its contract contained contract specialist services. GSA
has initiated corrective actions with the four contractors based on our
findings. Because of federal agencies' demand for contract support
services, GSA recently implemented a revised MOBIS category for
acquisition management support, which includes contract specialist
services. Finally, CCE did not comply with Army policy requiring an
assertion that work performed by a contractor under a non-DOD contract
is within scope of the contract.
Orders for Contract Specialists Were Out of the Scope of the Underlying
Contract:
The four contractors' BPAs with CCE (CACI, The Ravens Group, Tai Pedro
& Associates, and Government Contracts Consultants), established under
the GSA schedule contracts, were inappropriately issued as some of the
services required in the performance work statements were outside the
scope of these underlying contracts. Specifically, their labor category
descriptions differed significantly from those required in CCE's
performance work statements, and they did not accurately represent the
work that the contractor was to perform. Moreover, CCE has issued task
orders for contract specialists against CACI's and The Ravens Group's
MOBIS contracts that were outside the scope of those contracts. Where
an agency announces its intention to order from an existing GSA
contractor, all items ordered are required to be within the scope of
the vendors' contracts.[Footnote 29] Orders issued outside the scope of
the underlying GSA contract do not satisfy legal requirements under the
Competition in Contracting Act for competing the award of government
contracts and limit the government's ability to know if it is paying a
fair and reasonable price. In such cases, the out-of-scope work should
have been awarded using competitive procedures or supported with a
justification and approval for other than full and open competition.
[Footnote 30]
CCE has issued task orders for contract specialists against CACI's and
The Ravens Group's MOBIS contracts. Table 3 provides examples of the
differences between the GSA schedule contract labor category
descriptions and CCE's statements of work for these contractors for a
contract specialist--level 3 position. Although the performance work
statement does not delineate responsibilities that are specific to the
contract specialist, level 3 position, it contains responsibilities for
all contract specialist positions as described in the table.
Table 3: Comparison Of Labor Categories In Two Contractors' GSA MOBIS
Contracts With Requirement In CCE'S Performance Work Statement:
MOBIS labor category description:
CACI: senior program control analyst;
Responsibilities: Maintains current project documentation and record of
changes, including status reports. Assists in establishing budgets and
monitoring performance. Directs all or most activities related to
financial and administrative functions, such as budgeting, manpower and
resource planning, and financial reporting. May research, report on,
and recommend solutions to contractual issues. Provides expert
functional advice and direction to functional/user area management and
project teams working on complex systems;
Experience/education: Experience in the preparation and analysis of
financial statements, working with acquisition systems, or complex
vertical business, purchasing applications, or both. General experience
required includes progressively more responsible experience in general
accounting, acquisition, or management activities;
The Ravens Group: senior budget/business analyst;
Responsibilities: Reviews expenditures and prepares operating budgets
for various departments to ensure conformance to budgetary limits.
Performs a variety of tasks;
Experience/education: Requires a bachelor's degree in business,
finance, accounting or economics with 8 years of experience in federal
government budgeting; the DOD Planning, Programming and Budgeting
System; or equivalent budgeting experience. Knowledge of automated
systems used in budget formulations and execution is required. Relies
on extensive experience and judgment to plan and accomplish goals.
CCE requirements: Contract specialist - level 3;
Responsibilities: Provides support and assistance in essentially all
areas of FAR-based federal procurement in which advanced or complex
knowledge and expertise is required, such as preparing or reviewing pre-
procurement packages; actively participating in integrated process
teams; developing and managing acquisition plans; preparing/researching
support documentation; making recommendations to the contracting
officer; handling complex problems through resolution; validating data;
and otherwise completing actions needed to successfully advertise,
solicit, construct, award, administer, and close out government
contract vehicles;
Experience/education: Master's degree. An advanced degree or
acquisition certification is preferred. Eight years of progressive
experience supporting and developing large, major, or complex
government procurements. In-depth knowledge of the FAR, agency-specific
regulations, and current and demonstrated experience with acquisition
streamlining initiatives and reforms. Practical knowledge of various
acquisition approaches. Ability to formulate appropriate documentation
for the various approaches. Experience leading and managing other
acquisition professionals.
Source: GAO analysis based on GSA contracts and CCE BPAs.
[End of table]
Our review of the contract file shows that during acquisition planning,
CCE's policy and legal offices raised concerns about the use of the GSA
MOBIS schedule to meet CCE's requirements.[Footnote 31] Specifically,
in a September 1, 2006, letter to the contracting officer and
government contract specialist, CCE's Acting Chief Attorney expressed
concern that the schedule "may not provide the right personnel for this
requirement," and cited an applicable GAO decision in which the protest
was sustained on the basis that vendors' quoted services were outside
the scope of their GSA contracts.[Footnote 32] The CCE attorney
determined that the request for quotations (RFQ) was "legally
insufficient" because of this and other issues and indicated that the
out-of-scope issue, among others, should be considered. According to
the legal office, despite this determination, CCE contracting personnel
issued the RFQ without returning it to the attorney for further review.
According to the Army's internal policies and a March 2006 CCE
memorandum regarding legal review procedures, where the contracting
officer makes a decision or takes a proposed action that is contrary to
legal advice, the contract file must include written evidence to that
effect, including a statement of the contracting officer's rationale
for proceeding contrary to such legal advice. No such evidence was
included in the contract file in this case.
Contractor representatives told us that the linkage between labor
categories and the work to be performed is more of an art than a clean-
cut science. They told us that they attempted to match the labor
categories as best they could by using their GSA labor rates and CCE's
requirements. Although acknowledging that the mapping was strained,
CACI officials pointed out that it was disclosed in their proposal to
CCE and that the company provided CCE with résumés that more closely
matched the agency's requirements. CACI officials told us that they
have had discussions in the past with GSA about offering contracting
support skill sets and what schedule is appropriate. The Ravens Group
officials said that the key is the evaluation of the qualifications and
level of effort required and relating those factors to the various
MOBIS schedule job descriptions and labor rates.
GSA agreed that CCE's orders for contract specialists were issued out
of scope of the vendors' underlying MOBIS contracts, but a senior
official stated that it is the responsibility of the ordering agency to
ensure that orders are within scope of the vendors' contracts. The
official told us that while GSA has ownership of the MOBIS schedule, it
is only able to perform limited oversight of the orders issued under
schedule contracts. The official acknowledged that GSA is aware of
instances where agencies have improperly used the MOBIS schedule to
hire contract specialists, although it does not know the extent to
which this has occurred.
We found that other DOD agencies had used the MOBIS schedule to procure
contract specialists but stopped doing so because of concerns about out-
of-scope work. In 2004, ACA's Capital District Contracting Center in
Fort Belvoir, Virginia, used the MOBIS schedule to hire contract
specialists in support of what is now the Joint Contracting Command-
Iraq/Afghanistan (JCC-I/A). However, in 2005, the contracting center
changed its approach, awarding a similar contract for additional
support using full and open competition instead of continuing to issue
orders under the MOBIS contract. When the period of performance
expired, JCC-I/A awarded its own contract in 2006 for contract
specialists, again using full and open competition. According to a
former JCC-I/A official involved in the award, the driving factor in
the decision to issue a competitive solicitation was the determination
that contract specialist services were not in the scope of the MOBIS
schedule.[Footnote 33]
Based on our findings, CCE is planning to solicit a new contract for
contract specialists using full and open competition, under the FAR's
commercial item acquisition procedures, with a target award date of
June 30, 2008. In the interim, according to a CCE official, no more
orders are being placed under the current BPAs for contract
specialists.
Although CCE has not placed orders for contract specialists with two
other firms with which it has established BPAs--Tai Pedro & Associates
and Government Contracts Consultants--we found troublesome issues
related to their schedule contracts as well. Tai Pedro & Associates'
MOBIS contract actually includes a labor category for "contract
specialist" services under a category for competitive sourcing support,
which allows contractors to perform competitive sourcing surveys or to
assist agencies in developing A-76 procurement strategies.[Footnote 34]
According to GSA officials, the competitive sourcing support category
allows contractor contract specialists to assist with A-76 projects and
outsourcing efforts, but not with other efforts.
Government Contracts Consultants' MOBIS contract did not contain
acquisition support categories. However, the contractor advertised that
its contract contained these categories--including contract
specialists--on the GSA Advantage Web site, the agency's portal for Web-
based procurement. The contractor took this action despite having
affirmed in writing to GSA prior to its contract award its
understanding that "contract support services are not authorized" under
the contract. Until we informed GSA officials of this situation in
September 2007, they were unaware that it had occurred. They told us
that they normally check postings on GSA Advantage against awarded
contracts to ensure that inappropriate services are not advertised, but
in this case the situation was overlooked.
GSA Has Initiated Corrective Actions:
Based on our findings, GSA began in the fall of 2007 to notify the four
contractors that contract specialist services are out of scope of their
schedule contracts. For example, GSA notified Government Contracts
Consultants that it had been found to be performing out-of-scope
services. GSA sent its internal reviewers to the company's facilities
to review its task orders to determine what services the company was
offering federal customers under its GSA contract. GSA also directed
Government Contracts Consultants to remove the incorrect labor
categories from its posting on the GSA Advantage Web site, which the
company has since done. GSA also notified both CACI and The Ravens
Group that they had been found to be performing services outside the
scope of their schedule contracts and informed Tai Pedro & Associates
that acquisition support services are out of the scope of its MOBIS
schedule contract, which is limited to support for competitive sourcing
efforts. GSA told CACI, The Ravens Group, and Tai Pedro & Associates
that internal reviewers would visit their facilities in fiscal year
2008 to ensure that they are performing within the scope of their
contracts and that GSA may periodically ask for copies of recently
awarded task orders to be reviewed for scope appropriateness. GSA
advised all four companies--Government Contracts Consultants, The
Ravens Group, CACI, and Tai Pedro & Associates--that if any new out-of-
scope work is performed, GSA will take appropriate action, up to and
including canceling their contracts or initiating termination for cause
proceedings.
Because of the demand for contract support services, GSA recently
implemented a revised Special Item Number category--Acquisition
Management Support--under the MOBIS schedule. Contract specialist
services can be ordered under this category to perform functions such
as cost estimating; preparing price negotiation memorandums and
statements of work; assisting with acquisition planning, including
performing market research and recommending procurement strategies;
providing expert assistance in supporting proposal evaluations;
assisting with reviews of contractor performance; and investigating
reports of contract discrepancies. GSA has links on its Web site for
special ordering instructions and an ordering guide for the revised
category. These documents primarily discuss mitigating conflicts of
interest and ensuring that contractors do not perform inherently
governmental functions.
CCE Did Not Properly Justify Use of Interagency Contracting Vehicle:
In placing the orders for contract specialist services, CCE did not
follow ACA policy and guidance pertaining to interagency contracts.
After a number of reports by inspectors general and others regarding
problems with interagency contracting, DOD established requirements in
October 2004[Footnote 35] for reviewing and approving the use of non-
DOD contract vehicles when procuring supplies and services for amounts
greater than the simplified acquisition threshold.[Footnote 36] These
requirements included determining that the tasks to be accomplished or
supplies to be provided were within the scope of the contract to be
used. ACA's implementing guidance, issued before CCE established the
BPAs with the four contractors, required that specific certifications
be made when using non-DOD contracts, including procedures for direct
acquisitions (i.e., orders placed by an Army contracting or ordering
officer against a non-DOD contract), such as CCE's orders against the
vendors' GSA schedule contracts. Prior to the contracting officer's
placement of a direct acquisition order for supplies and services, the
head of the requiring activity must execute, among other things, a
written certification that the supplies, services, or both, are within
the scope of the non-DOD contract. Additionally, for the acquisition of
services, (1) the requiring activity must obtain written concurrence
from the non-DOD contracting officer at the servicing organization (in
this case, GSA) that the services to be provided are within the scope
of the non-DOD contract, unless the DOD contracting office has access
to the non-DOD contract, and (2) the contracting officer must obtain
written coordination from supporting legal counsel prior to placement
of the order.
CCE's certification for use of a non-DOD contract was undated but
signed by the contracting officer. It stated that the services were
within the scope of the non-DOD contract, despite the fact that there
was a clear disconnect between the descriptions in the contractors' GSA
contract labor categories and the services CCE required. In addition,
we could find no evidence that CCE obtained written concurrence from a
GSA contracting officer, as required, or written coordination from its
legal counsel. In fact, the certification listed the point of contact
at the non-DOD agency as "to be determined."
Conclusion:
The CCE example delineates two major areas of concern in today's
environment: hiring contractors for sensitive positions in reaction to
a shortfall in the government workforce rather than as a planned
strategy to help achieve an agency mission, and the need to properly
manage those contractors once they are hired. When contractors are
performing duties closely supporting inherently governmental functions--
such as those performed by contract specialists at CCE-- risks are
present that can result in loss of government control and decision
making, absent proper mitigation and government vigilance. CCE and its
contractors alike bear responsibility for helping to mitigate risks,
such as ensuring that measures are in place to prevent conflicts of
interest and that contractor personnel are clearly identified as such.
Given the blurred lines separating government from contractor employees
in such situations as that at CCE, an additional risk is that the work
may be done under an improper personal services contract. DOD guidance
on this issue--which could help contracting and program officials look
beyond the FAR elements to determine the condition and mitigate the
risk--is lacking. Because CCE has not considered the appropriate
balance of contractor and government personnel performing specific
functions, or adequately trained its government workforce, the agency
runs the risk of over reliance on contractors to meet its mission and
of paying more in the long run. If CCE relies too heavily on
contractors and cannot adequately develop its own workforce, it may not
be able to support its DOD customers. The cost of decreased mission
capability could be far higher than paying more for contractors. And
GSA, as the agency responsible for the schedule program, needs to take
steps to ensure that contractors appropriately advertise their
available services.
Recommendations for Executive Action:
We recommend that the Secretary of Defense issue guidance to clarify
the circumstances under which contracts risk becoming improper personal
services contracts and to provide direction on how the risk should be
mitigated.
To help ensure that CCE has sufficient qualified government personnel
to meet its mission, and uses contractors appropriately, we recommend
that the Secretary of the Army direct ACA to work with CCE in taking
the following three actions:
* identify the appropriate mix of contractor and government contract
specialists over the long term and develop a plan to help fill
positions to achieve the desired balance;
* implement a training program designed to ensure that CCE's permanent
employees develop and maintain needed skills; and:
* implement formal oversight procedures to ensure that contractors
identify themselves as such in all interactions external to CCE,
including telephone communications, e-mail signature lines, and
documents, as required by the FAR.
Finally, we recommend that the Administrator of GSA strengthen internal
controls to guard against situations where contractors advertise
services on the GSA Advantage Web site that are not in their underlying
GSA schedule contracts.
Agency Comments and Our Evaluation:
DOD and GSA provided written comments on a draft of this report. Their
comments are reprinted in appendixes II and III, respectively.
DOD's Director, Defense Procurement, Acquisition Policy, and Strategic
Sourcing, concurred with all four of our recommendations and outlined
actions DOD plans to take or has taken to address them. The Director
stated that contractors performing as contract specialists is viewed as
a matter of grave concern. While one of our recommendations called for
ACA to work with CCE to identify the appropriate mix of contractor and
government contract specialists over the long term, the Director stated
that he plans to meet with the Army's Senior Procurement Executive in
an effort to eliminate, within 180 days, contractors acting as contract
specialists at CCE. If this time frame cannot be met, the Director
plans to urge the Army to transfer the workload within CCE to other DOD
contracting agencies or sister federal agencies so that contract
specialist functions are performed solely by government employees. In
response to our recommendation that formal oversight procedures be
implemented to ensure that contractors are identified as such in all
interactions external to CCE, DOD stated that CCE had recently
distributed to its government personnel and support contractors an
information paper reinforcing such a policy. DOD's response states that
CCE provided GAO with this information paper in February 2008. We did
not receive such a paper. After seeing this reference in DOD's
comments, we contacted CCE to request a copy of this document, but as
of our report issuance date, we had not received it.
GSA agreed with our recommendation that the agency strengthen controls
to guard against situations where contractors advertise services on the
GSA Advantage Web site that are not in their underlying schedule
contracts. GSA noted that while it provides limited oversight of the
orders issued under schedule contracts, it takes actions to educate
customers about how best to use the contracts. GSA also pointed out
that because the revised Special Item Number category "Acquisition
Management Support" has been implemented under the MOBIS schedule,
contracting for contract specialist work is now within the scope of
that schedule.
We are sending copies of this report to interested congressional
committees; the Secretary of Defense; the Secretary of the Army; the
Commander, ACA; the Commander, CCE; the Administrator of GSA; and the
Director, Office of Management and Budget. We will provide copies to
others on request. This report will also be available at no charge on
GAO's Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report or need
additional information, please contact me at (202) 512-4841 or
huttonj@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report. Staff acknowledgments are provided in appendix IV.
Signed by:
John Hutton:
Director:
Acquisition and Sourcing Management:
List of Congressional Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Ted Stevens:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable Henry A. Waxman:
Chairman:
The Honorable Tom Davis:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable John P. Murtha:
Chairman:
The Honorable C.W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
The Honorable Bernard Sanders:
United States Senate:
[End of section]
Appendix I: Scope and Methodology:
To learn more about the use and roles of contractors providing contract
specialist services, we conducted a case study under the authority of
the Comptroller General to conduct evaluations on his own initiative.
We selected the Army's Contracting Center of Excellence (CCE), in the
Washington, D.C., area, as one Department of Defense (DOD) agency using
contractors in this role based on a bid protest that had been submitted
to our office. The protest, which was denied, challenged the Defense
Contracting Command-Washington's (now known as CCE) acceptance of CACI,
International's (CACI) organizational conflict-of-interest mitigation
plan and the evaluation of proposals for contract specialist
services.[Footnote 37] In fiscal year 2007, CCE obligated almost $1.8
billion in contract actions. Because nearly all of the contractor-
provided contract specialists at CCE during the performance of our
review were employees of CACI, our primary focus was on the CACI
contract. CCE had also ordered a few contract specialists from another
firm, The Ravens Group. In all, CCE had established blanket purchase
agreements (BPA) with four contractors in September 2006, under General
Services Administration (GSA) schedule contracts, to provide contract
specialist services.
To determine the extent to which and the reasons CCE is relying on
contractors, we obtained contract specialist staffing levels in fiscal
year 2007. We reviewed CCE's task orders issued under schedule
contracts using the agency's BPAs for contracting support services and
agency billing information. We also interviewed CCE's commander and
contracting, training, and human capital officials and spoke with
officials from the Army Contracting Agency (ACA), which is CCE's parent
organization. We analyzed information from the Federal Procurement Data
System-Next Generation to determine trends in CCE's use of other
agencies' contracts from fiscal years 2005 through 2007. To identify
the roles and responsibilities of the contractor contract specialists,
we randomly selected 42 contract actions worked on by contractor
contract specialists during fiscal year 2006 and fiscal year 2007
through June 13 to determine what work they perform on a daily basis.
The intent of this file review was to understand the contractors' day-
to-day duties; we selected the files randomly to avoid selection bias.
We interviewed management officials from CACI and The Ravens Group. We
also interviewed CACI's contract specialists at CCE, but The Ravens
Group management would not allow us to interview their employees. We
did not consider this to be a scope limitation because of the small
number (2 to 3) of The Ravens Group's contract specialists at CCE
during the time of our review. For comparison, we interviewed
government contract specialists at CCE regarding their roles and
responsibilities. We also interviewed government contracting officers
about the roles and responsibilities of the government and contractor-
provided contract specialists. To obtain information on the general
demand for contract specialists in today's marketplace, we interviewed
contractor management representatives, and we reviewed a Defense
Acquisition University report on contracting out the procurement
function,[Footnote 38] an Air Force-sponsored study to assess the
status of contracting out procurement functions within DOD and federal
agencies. We also looked at job postings on USA Jobs, the federal
government's Web site for job vacancies.
To determine what actions have been taken to mitigate the risks
associated with using contractors in contract support roles, we
interviewed CCE managers and contracting officers and CACI contract
specialists at CCE. We reviewed CACI's organizational conflicts of
interest (OCI) mitigation plan and interviewed employees about their
knowledge of policies and procedures regarding OCIs. We interviewed
CACI officials regarding the company's policies and procedures to
mitigate personal conflicts of interest, and we examined related
documents--such as CACI's Standards of Ethics and Business Conduct--and
the ethics training provided by CACI to its employees. We also reviewed
other documents, such as the Acquisition Advisory Panel's 2007
report.[Footnote 39] In addition, we reviewed sections of the Federal
Acquisition Regulation (FAR) pertaining to organizational and personal
conflicts of interest, as well as those related to personal services
contracts. We conducted a legal review of CCE's performance work
statement, BPAs, and orders for contract specialists and compared the
elements of personal services contracts in FAR Subpart 37.104 with the
environment in which contractors are working at CCE as contract
specialists.
To compare the cost of contractor contract specialists to their
government counterparts, we reviewed CCE's fiscal year 2007 task orders
with CACI and The Ravens Group and agency billing information to
identify the hourly labor rate the government is paying for these
positions. Because the orders issued pursuant to the BPAs are time-and-
materials contracts, payments to the contractors are based on the
number of labor hours billed at a fixed hourly rate, which includes
wages, benefits, overhead, general and administrative expenses, and
profit. We identified the number of hours purchased from each
contractor during August 2007 and calculated the weighted average
hourly cost for contract specialist II and III positions. We reported
the weighted average hourly cost because the agency used two
contractors at two different rates in August 2007. To compare these
costs to those for a government contract specialist, we identified two
groups of CCE employees that perform the same tasks and share similar
qualifications, those who were GS-12s with Defense Acquisition
Workforce Improvement Act (DAWIA) II certification--which are
equivalent to contractor-provided contract specialist II positions--
and those who were GS-13s with DAWIA III certification--which are
equivalent to contractor-provided contract specialist III positions. We
obtained the actual salaries and the government's contributions to the
benefits of those contract specialists during the pay period ending on
August 18, 2007.[Footnote 40] We used data from one pay period to
capture the costs of government contract specialists because CCE has
had turnover in these positions, making it difficult to capture costs
throughout the year. From those data, we determined the average hourly
rate and costs of benefits for these two groups based on 68.3
productive hours[Footnote 41] during the pay period. To determine the
government's overhead costs, we used the actual costs of support
services--salaries and government contributions to the benefits of
human capital personnel, manpower personnel, and other support staff as
identified by ACA during the pay period ending on August 18, 2007. CCE
also provided the agency's expenditures on travel and training during
fiscal year 2007. We then determined the average travel and training
costs per person per hour for only those government employees who were
directly associated with these costs. This average travel and training
cost estimate was applied to all government contract specialists
supporting CCE and may be higher than the agency's actual cost per
person. We excluded from our analysis the costs for supplies,
information technology, and communication services because the
government pays these costs for contractors as well. We also excluded
the costs of facilities and utilities because the Director of Resource
Management told us that ACA could not specifically identify these costs
(which the government also covers for contractor employees). We
compared the average hourly cost--actual salary, government's
contribution to benefits, and overhead--of the two groups of CCE
contract specialists to the weighted average hourly rate paid for the
respective contractor positions. To determine how CACI and CCE employee
contracting experience differs, we reviewed available résumés of
contractor and government contract specialists. Résumés were available
for six CACI contract specialists who have supported CCE for at least 6
months and were identified by CCE officials as doing the same work as
government contract specialists. Five résumés were available for CCE
contract specialists hired in fiscal year 2007, who were identified by
agency officials as doing the same work as the contractors. In
reviewing these résumés, we considered previous contracting experience
to be the time spent in jobs related to the field of contracting.
To determine whether the contract vehicles used to acquire the
specialists were appropriate, we reviewed CCE's contracting strategies
to determine whether new contracts were awarded to obtain contract
specialists or whether interagency contracts through other federal
agencies, such as GSA's schedule program, were used. We analyzed CCE's
BPAs with four contractors--CACI, The Ravens Group, Tai Pedro &
Associates, and Government Contracts Consultants--and their underlying
GSA Mission Oriented Business Integrated Services (MOBIS) schedule
contracts to which the BPAs were tied. We also reviewed CCE's
performance work statements and analyzed the task orders that have been
issued for contract specialists. We reviewed the contract files to
obtain documentation, such as legal reviews and compliance with DOD
policies on interagency contracting. We interviewed CCE officials and
GSA officials, including the Director of GSA's Management Services
Center, Region 10, who is responsible for the MOBIS schedule. We
reviewed reports by GAO and others concerning the use of interagency
contracts. We also reviewed FAR Subpart 8.4, which sets forth the
regulations pertaining to GSA's schedule program.
We conducted this performance audit from May 2007 through March 2008 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: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
Acquisition, Technology And Logistics:
3000 Defense Pentagon:
Washington, DC 20301-3000:
March 24, 2008:
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-08-360, "Defense Contracting: Army Case Study Delineates
Concerns with Use of Contractors as Contract Specialists," dated
February 20, 2008 (GAO Code 120654).
We fully concur with the recommendations provided in the report.
Recently, I testified at House Armed Service Committee Subcommittee on
Readiness on the matter of inherently governmental responsibilities. I
expressed my concern that we had a small number of contracting
organizations that had contractors performing as contract specialists.
I view this to be a matter of grave concern. I plan to meet with the
Army's Senior Procurement Executive in an effort to accelerate the
transition of contractors out of the contract specialist role. If we
can not eliminate the role of contractors acting as contract
specialists within 180 days, I plan to urge the Army to transfer the
workload within that office to other DoD contracting agencies or sister
federal agencies so that contract specialists function arc performed
solely by Government employees.
Detailed comments on the report recommendations are attached. The
Department of the Army Contracting Agency, Contracting Center of
Excellence (CCE), provided a response for each recommendation directed
to the Secretary of the Army.
We appreciate the opportunity to provide comments on the draft report.
My point of contact for this issue is Janice E. Sullivan who is
available at (703) 614-4840 and janice.sullivan@osd.mil.
Signed by:
Shay D. Assad:
Director:
Defense Procurement, Acquisition Policy, and Strategic Sourcing:
Attachment: As stated
GAO Draft Report – Dated February 20, 2008:
GAO-08-360 (GAO CODE 120654):
"Defense Contracting: Army Case Study Delineates Concerns with Use of
Contractors as Contract Specialists"
Department Of Defense Comments To The GAO Recommendations:
Recommendation 1: The GAO recommended that the Secretary of Defense
issue guidance to clarify the circumstances under which contracts risk
becoming improper personal services contracts and to provide direction
on how the risk should be mitigated.
DOD Response: Concur. DoD concurs with the need to provide guidance
regarding the appropriate use of personal service contracts and how to
mitigate the risks of unauthorized personal service contracts. We are
in the process of developing such guidance.
Recommendation 2: The GAO recommended that the Secretary of the Army
direct the Army Contracting Agency to work with their Contracting
Center of Excellence to identify the appropriate mix of contractor and
government contract specialists over the long term and develop a plan
to help fill positions to achieve the desired balance.
DOD Response: Concur. The Army advises that the Contracting Center of
Excellence (CCE) long term goal is to staff the organization solely
with government contract specialists. We have put forth an aggressive
recruitment effort to fill all vacant government positions with highly
qualified contract specialists. Towards this goal, CCE. decreased the
number of contractor personnel from thirty-one in 2007 to seventeen
currently (as of February 26, 2008). Today, however, CCE still needs
contractor personnel who, on average, possess greater experience and/or
expertise than available in the government workforce. We anticipate the
continued reduction of contractors in the CCE workplace over the next
two years as the Gansler Commission recommendations are implemented;
improving the Army's acquisition workforce and developing Government
acquisition personnel who are better trained and more capable of
handling the complex requirements of our customers.
Recommendation 3: The GAO recommended that the Secretary of the Army
direct the Army Contracting Agency to work with their Contracting
Center of Excellence to implement a training program designed to ensure
its permanent employees develop and maintain needed skills.
DOD Response: Concur. The Army advises that CCE has implemented the
recommendation that will ensure Government employees receive training
and needed skills as outlined:
a. In-House Training: All managers are required to meet with their
employees to discuss career goals and objectives and to ensure that all
Individual Development Plans are updated and reflect the desired and
required training to remain current. An assessment of major trends and
weaknesses in the organization is made and a determination on how to
best utilize limited funds available to improve or update the skill
levels of all of CCE contracting personnel. Training is conducted
through various methods to include lunch time sessions, train-the-
trainer, on-the-job training and mentoring. Some of the in-house
training provided in FY 2007 included Team Building; Continuous
Learning Course (CLC) 033, Contract Format and Structure; CLC 007,
Contract Source Selection; Cost and Pricing; lunch time training on
various subjects provided by acquisition professional, and monthly
luncheons with speakers from National Contract Management Agency
(NCMA); and Small Business Training.
b. Defense Acquisition Workforce Improvement Act: Certification
requirements are reviewed annually to ensure all personnel are
certified at their required level. Over 97% of CCE's personnel meet or
exceed their required level.
c. Formal Training: Formal training is conducted at least once a
quarter. Four formal training sessions are scheduled for FY 2008.
Additional training include web-based courses and paying for personnel
to attend outside training. For example, CCE hosts a monthly NCMA
professional development opportunity. CCE also established an on the
job training and mentoring program within the CCE Directorate of
Contracting. On the job training and mentoring provide unique
opportunities to our specialists who already possess some job-related
skills and the knowledge to learn from their peers. Training schedule
for FY 2008 includes Best Values and Source Selection, Performance
Based Contract, Performance Work Statement, Commercial Contracting, and
Review of Contractor Cost and Pricing Data. When available, CCE funds
college tuition for courses related to acquisition or contracting.
Recommendation 4: The GAO recommended that the Secretary of the Army
direct the Army Contracting Agency to work with their Contracting
Center of Excellence to implement formal oversight procedures to ensure
that contractors identify themselves as such in all interactions
external to CCE, including telephone communications, emails signature
lines, and documents, as required by the Federal Acquisition Regulation
(FAR).
DOD Response: Concur. The Army advises that CCE recently provided all
CCE Government personnel and the CCE support contractors with an
information paper which, among other topics, explicitly re-enforced the
long-standing policy that contractor employees identify themselves as
required by the FAR. A copy was provided to GAO in February 2008.
Consistent with Army policy, CCE has always required contractor
employee email addresses contain the contractor's company name. Most
correspondence (electronic or hard copy) leaving CCE is signed by
warranted contracting officers. Those documents and emails signed by
contractor employees will be reviewed to ensure that the contractor's
identity is evident. Ensuring contractor identity was added to CCE's
contract file checklist. In addition, telephonic spot checks will be
conducted monthly. Finally, CCE took additional steps to ensure that
contractor employee identity is known, including having the contractor
program manager assign all work to his/her contractor personnel and
physically assigning all contractor personnel to the same work area.
CCE's legal office also prepared policy documents on the duties and
responsibilities of the contractor specialist to include contractor
personnel.
[End of section]
Appendix III: Comments from the General Services Administration:
GSA Administrator:
U.S. General Services Administration:
900 F Street NW:
Washington, DC 20405-0002:
Telephone: (202) 501-0600
Fax (202) 219-1243
[hyperlink, http://www.gsa.gov].
March 19, 2008:
The Honorable Gene L. Dodaro:
Acting Comptroller General of the United States:
Government Accountability Office:
Washington, DC 20548:
Dear Mr. Dodaro:
The General Services Administration (GSA) appreciates the opportunity
to review and comment on the draft report, "Defense Contracting: Army
Case Study Delineates Concerns with Use of Contractors as Contract
Specialists" (GAO-08-360) We also appreciate the Government
Accountability Office's (GAO's) acknowledgement of the actions GSA has
already taken as a result of the report findings.
The GAO draft report includes one recommendation to GSA, namely that
GSA strengthen internal controls to guard against situations where
contractors advertise services on the GSA Advantage! website that are
not in their underlying GSA schedule contracts. We agree with the
recommendation and will take appropriate action.
Technical comments that update and clarify statements in the draft
report are enclosed and incorporated herein by reference. If you have
any questions, please contact me. Staff inquiries may be directed to
Mr. Kevin Messner, Associate Administrator, Office of Congressional and
Intergovernmental Affairs, at (202) 501-0563.
Cordially,
Signed by:
Lurita Doan:
Administrator:
Enclosure:
cc: John Hutton, Director, Acquisition and Sourcing Management
Government Accountability Office Draft Report, 'Defense Contracting:
Army Case Study Delineates Concerns with Use of Contractors as Contract
Specialists" (GAO-08-360):
GSA Comments:
Page 22, paragraph 3: Beginning at 'GSA agreed that CCE's orders for
contract specialist were issued out of scope ... but a senior official
stated ... it is only able to perform limited oversight of the orders
issued under the schedule contracts."
GSA Comment:
The report correctly notes that GSA performs limited oversight.
However, GSA does take extensive action to educating customers in how
to best use Schedule contracts. In managing the schedules, GSA:
* Develops and manages Special Item Numbers (SIN) descriptions to
ensure that they clearly convey what services are covered and what
services are not covered;
* Operates GSA Advantage!;
* Provides guidance on best use of schedules via many channels;
* Leads regulation in Federal Acquisition Regulation (FAR) 8.4. This
provides ordering procedures for agencies to use schedules
appropriately;
*Evaluates contractor performance and compliance with scope through the
Customer Assessment Initiative (CACI) Report Card;
* Delivers regular customer training courses, in person and via
webinar;
* Publishes Multiple Award Schedule (MAS) Owners Manual (updated
edition coming soon);
* Consults to advise customer agencies on best way to use schedules;
* Conducts annual compliance surveys to identify on-going opportunities
to improve schedule usage;
* Issues Frequently Asked Questions (FAQ's) for all of our schedules;
* Conducts scope review, consultations and assists with acquisition
planning to customers when requested.
Nonetheless, it is the responsibility of the ordering activity to
follow ordering procedures and stay within scope. It is also the
responsibility of the contractor to follow Terms & Conditions of its
contract.
Page 24, paragraph 2: Because of the demand for contract support
services, GSA recently implemented a revised Special Item Number
category”"Acquisition Management Support"”under the MOBIS schedule.
GSA Comment:
We appreciate GAO's acknowledgement of recent actions undertaken, but
we note that the information GSA posts on its website also provides
guidance that is directed to ordering activities, as well as
contractors, to ensure that both parties are aware of their
responsibilities and limitations under the regulations. As a result of
the change to MOBIS last month, contracting for contract specialist
work is now within the scope of the schedule.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
John Hutton, (202) 512-4841 or huttonj@gao.gov:
Acknowledgments:
In addition to the individual named above, Michele Mackin, Assistant
Director; Erin Schoening; William Allbritton; Timothy Carr; Daniel
Chen; Justin Jaynes; Kenneth Patton; Charles Perdue; and Sylvia Schatz
made key contributions to this report.
[End of section]
Footnotes:
[1] We have reported that to a large extent, DOD has not proactively
managed this growth, meaning that it cannot know whether its
investments in service contracts are achieving the desired outcomes.
GAO, Defense Acquisitions: Tailored Approach Needed to Improve Service
Acquisition Outcomes, GAO-07-20 (Washington, D.C.: Nov. 9, 2006).
[2] LEADS Corporation, B-292465, September 26, 2003, 2003 CPD 197 at 1.
The protest was denied.
[3] BPAs are a simplified method of filling anticipated repetitive
needs for supplies and services. For example, agencies can establish
"charge accounts" with qualified vendors. FAR 13.303-1(a). BPAs
established under a Federal Supply Schedule apply the BPA procedures
under subpart 8.4 of the FAR.
[4] 41 U.S.C. § 423, FAR 3.104.
[5] GAO, Department of Homeland Security: Improved Assessment and
Oversight Needed to Manage Risk of Contracting for Selected Services,
GAO-07-990 (Washington, D.C.: Sept. 17, 2007).
[6] The FAR is the primary regulation for use by all federal executive
agencies in their acquisition of supplies and services with
appropriated funds.
[7] Department of Defense, Office of the Under Secretary of Defense for
Acquisition, Technology, and Logistics, Panel on Contracting Integrity,
2007 Report to Congress. Also, see the John Warner National Defense
Authorization Act for Fiscal Year 2007, § 813.
[8] Defense Acquisition University, Contracting Out Procurement
Functions: An Analysis, DAU Research Report 06-001 (Fort Belvoir, Va.:
Defense Acquisition University Press, November 2005).
[9] In Urgent Reform Required: Army Expeditionary Contracting (November
2007), the Commission on Army Acquisition and Program Management in
Expeditionary Operations reported similar findings specifically for the
Army. It noted that there were significant reductions in the Army's
contracting workforce from 1990 to 2006, while workload increased over
654 percent from 1992 to 2006. The commission recommended increasing
the stature, quantity, and career development of military and civilian
contracting personnel. In response to the commission's report, the Army
approved the creation of an Army Contracting Command, which will fall
under the Army Materiel Command and be led by a two-star officer. The
Army also plans to increase its contracting workforce by approximately
400 military personnel and 1,000 civilian personnel.
[10] Based on 2087 hours for a full-time-equivalent employee.
[11] This percentage does not include three contractor employees for
whom CCE was billed 16 hours or less in August 2007.
[12] CCE's government contracting workforce includes contract
specialists, procurement analysts, and cost/price analysts.
[13] The authors suggested that contractor employees should not exceed
25 percent of an activity's total procurement workforce in other than
exceptional situations. The authors did not specifically set forth
their rationale for recommending this percentage.
[14] FAR 37.114(c).
[15] Contract modifications are documents that amend or modify existing
contract conditions and are signed by the government contracting
officer. Bilateral contract modifications are also signed by the vendor
providing the goods or services.
[16] FAR Subpart 37.104(d).
[17] FAR 37.104(c)(2).
[18] Encore Management, Inc., B-278903.2, February 12, 1999, 99-1 CPD ¶
33 at 3.
[19] W.B. Joley, B-234146, March 31, 1989, 89-1 CPD ¶ 339 at 2.
[20] We note the inherent tension between the government's
responsibility to refrain from exercising relatively continuous
supervision and control over contractor employees under FAR 37.104, the
government's obligation to ensure sufficient surveillance of contractor
performance for time-and-materials contracts under FAR 16.601(c)(1),
and the government's responsibility to ensure enhanced oversight when
contracting for functions that closely support inherently governmental
functions. See FAR 7.503(d) and FAR 37.114(b).
[21] Acquisition Advisory Panel, Report of the Acquisition Advisory
Panel to the Office of Federal Procurement Policy and the United States
Congress (January 2007). Also, see National Defense Authorization Act
for Fiscal Year 2004, Pub. L. No. 108-136, § 1423 (2003).
[22] Whether the contractor providing contract specialist support had
an adequate organizational conflict of interest mitigation plan in
place has been the subject of GAO bid protests, for example, The LEADS
Corporation v. CACI, B-292465, September 26, 2003.
[23] FAR Subpart 9.5.
[24] If contract performance will be ongoing, a contracting officer's
representative--generally an official at the requiring agency with
relevant technical expertise--is normally designated by the contracting
officer to monitor the contractor's performance and serve as the
liaison between the contracting officer and the contractor.
[25] See GAO, Defense Contracting: Additional Personal Conflict of
Interest Safeguards Needed for Certain DOD Contractor Employees, GAO-08-
169 (Washington, D.C.: Mar. 7, 2008).
[26] In 1990, Congress enacted DAWIA to enhance the quality and
professionalism of the defense acquisition workforce (Pub. L. No. 101-
510). Most of DAWIA was codified in Title 10 of the United States Code,
and it has been amended a few times since enactment. DAWIA requires the
Secretary of Defense to establish the minimum qualification standards
of those personnel performing functions integral to the acquisition
process, formalizes career paths for personnel who wish to pursue
careers in acquisition, and defines critical or senior management
acquisition positions. See GAO, Defense Space Activities: Management
Actions Are Needed to Better Identify, Track and Train Air Force Space
Personnel, GAO-06-908 (Washington, D.C.: Sept. 21, 2006). The
certification levels are based on an individual's education,
experience, and training. National Defense Authorization Act for Fiscal
Year 1991, Pub. L. No. 101-510 (1990). See also DOD Manual 5000.52M.
[27] We recently reported on DOD's use of time-and-materials and labor-
hour contracts. GAO, Defense Contracting: Improved Insight and Controls
Needed over DOD's Time-and-Materials Contracts, GAO-07-273 (Washington,
D.C.: June 29, 2007).
[28] Contract specialists are available under GSA's Temporary
Administrative and Professional Staffing Support Services Schedule, but
these services are limited to a maximum of 240 work days.
[29] Tarheel Specialties, Inc., B-298197, 298197.2, July 17, 2006, 2006
CPD ¶ 140.
[30] See, generally, FAR Subpart 6.3.
[31] Although CCE has been procuring contract specialists from the GSA
MOBIS schedule since 2003, it established the BPAs with four
contractors in September 2006; the contract files contained no evidence
of legal objections prior to 2006.
[32] In American Systems Consulting, Inc., B-294644, December 13, 2004,
2004 CPD ¶ 247, GAO determined that an award of a BPA based on a
competition of GSA schedule contract vendors, using schedule program
procedures, was improper because the awardee's quotation contained
services not identified in its contract. We found the services offered
to be outside of the contract's scope because the labor categories
identified in the awardee's schedule contract as "most nearly equating"
to the labor categories in the performance work statement did not match
the positions as described in the performance work statement.
[33] We and others have raised concerns about the use of interagency
contracts, such as GSA schedule contracts, for the acquisition of
services. For example, in April 2005, we reported on breakdowns in the
issuance and administration of task orders, issued by the Department of
the Interior under a GSA schedule information technology contract, for
interrogation and other services in Iraq on behalf of DOD. These
breakdowns included issuing task orders that were beyond the scope of
underlying contracts, in violation of competition rules, and not
properly justifying the decision to use interagency contracting. GAO,
Interagency Contracting: Problems with DOD's and Interior's Orders to
Support Military Operations, GAO-05-201 (Washington, D.C.: Apr. 29,
2005). Also see GAO, Interagency Contracting: Improved Guidance,
Planning, and Oversight Would Enable the Department of Homeland
Security to Address Risks, GAO-06-996 (Washington, D.C.: Sept. 27,
2006). We placed interagency contracting on our high-risk list in
January 2005.
[34] Office of Management and Budget Circular A-76 prescribes policies
and procedures for use by agencies as they select service providers
through competitions among public and private sector sources.
[35] Memorandum from the Office of the Secretary of Defense, "Proper
Use of Non-DOD Contracts," October 29, 2004.
[36] The simplified acquisition threshold is $100,000, except for
acquisitions of supplies or services that as determined by the head of
the agency, are to be used to support a contingency operation or to
facilitate defense against or recovery from nuclear, biological,
chemical, or radiological attack. FAR 2.101.
[37] LEADS Corporation, B-292465, September 26, 2003, 2003 CPD 197 at
1. LEADS Corporation challenged the Defense Contracting Command-
Washington's (now known as CCE) acceptance of CACI's organizational
conflict-of-interest mitigation plan and the evaluation of proposals.
GAO denied the protest.
[38] Defense Acquisition University, Contracting Out Procurement
Functions: An Analysis. DAU Research Report 06-001 (Fort Belvoir, Va.:
Defense Acquisition University Press, November 2005).
[39] Acquisition Advisory Panel, Report of the Acquisition Advisory
Panel to the Office of Federal Procurement Policy and the United States
Congress.
[40] We included CCE's contributions to employee benefits. These are
Thrift Savings Plan, Thrift Savings Plan Basic, Civil Service
Retirement System, Federal Employees Retirement System, Social
Security, Medicare, Federal Employee Health Benefits, and Federal
Employee Group Life Insurance.
[41] Office of Management and Budget Circular A-76, which establishes
federal policy for the competition of commercial activities, states
that staffing of federal civilian employee positions shall be expressed
in terms of annual productive work hours (1,776) rather than annual
available hours that include nonproductive hours (2,080 hours). For the
purposes of this analysis, which analyzes the costs during one pay
period rather than a full year, we are using an equivalent 68.3
productive hours per pay period to determine the hourly rate.
[End of section]
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