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United States Government Accountability Office: 
GAO: 

Report to the Committee on Homeland Security and Governmental Affairs, 
U.S. Senate: 

December 2011: 

Managing Service Contracts: 

Recent Efforts to Address Associated Risks Can Be Further Enhanced: 

GAO-12-87: 

GAO Highlights: 

Highlights of GAO-12-87, a report to the Committee on Homeland 
Security and Governmental Affairs, U.S. Senate. 

Why GAO Did This Study: 

In fiscal year 2010, civilian agencies obligated $136 billion on 
service contracts, including obligations for professional and 
management support services such as program evaluation and acquisition 
support. Many of these services increase the risk that contractors may 
inappropriately influence the government’s authority, control, and 
accountability for inherently governmental decisions. GAO was asked to 
(1) determine the extent to which civilian agencies use professional 
and management support service contracts and the types of activities 
acquired, (2) determine if agencies consider and mitigate risks 
associated with contractors providing these services, and (3) assess 
agencies’ response to recent Office of Management and Budget (OMB) 
efforts related to acquiring these services. GAO analyzed Federal 
Procurement Data System – Next Generation (FPDS-NG) data and selected 
a nongeneralizable sample of 230 statements of work and 12 case 
studies from five agencies with one-third of obligations for these 
services in fiscal year 2010. GAO also reviewed agency and 
governmentwide guidance and met with agency and OMB officials. 

What GAO Found: 

From fiscal years 2005 through 2010, civilian agency obligations on 
contracts for professional and management support services increased 
44 percent, from $22 billion to $32 billion (in 2010 dollars), more 
than twice the rate of increase for other services. For the five 
agencies GAO reviewed—the Departments of Homeland Security, 
Transportation, and Housing and Urban Development, the United States 
Agency for International Development, and the National Science 
Foundation—more than half of the 230 statements of work for 
professional and management support service contracts requested 
services that closely support the performance of inherently 
governmental functions. Using these services can inappropriately 
influence government decisionmaking if proper oversight is not 
provided. 

Figure: Professional and Management Support Service Contracting 
Obligations at Civilian Agencies: 

[Refer to PDF for image: line graph] 

Fiscal year: 2005; 
Contracting Obligations: $22.2 billion. 

Fiscal year: 2006; 
Contracting Obligations: $25.2 billion. 

Fiscal year: 2007; 
Contracting Obligations: $25.1 billion. 

Fiscal year: 2008; 
Contracting Obligations: $27.2 billion. 

Fiscal year: 2009; 
Contracting Obligations: $28.8 billion. 

Fiscal year: 2010; 
Contracting Obligations: $32.1 billion. 

Source: GAO analysis of FPDS-NG data. 

[End of figure] 

The five agencies generally did not consider and mitigate risks of 
acquiring professional and management support services prior to 
awarding the 12 contracts GAO reviewed. The Federal Acquisition 
Regulation requires agencies to provide enhanced management oversight 
for contracts that closely support inherently governmental functions. 
For the 12 contracts, few of the officials said they considered 
whether contracted services included such functions. In some cases, 
officials said they later became concerned that contractors might 
perform inherently governmental functions or that government employees 
lacked expertise to oversee contracted work, and took steps to 
mitigate risks. Guidance from four of the five agencies did not 
include processes to identify risks or ensure enhanced management 
oversight when contractors perform such services. 

Recent congressional and OMB guidance has emphasized the need for 
agencies to examine their use of service contracts and the related 
risks. The five agencies have participated in these efforts, including 
service contract inventories and multisector workforce pilots, to 
varying degrees, but only DHS has taken steps to incorporate related 
OMB efforts into processes that examine their use of professional and 
management support services. A September 2011 OMB policy letter 
requires agencies to develop procedures to improve their management of 
risks when contracting for these services, but does not include an 
implementation deadline. Further, two OMB efforts have focused on 
selected professional and management support service codes from FPDS-
NG that require increased agency attention, but the efforts exclude 
two related codes that accounted for significant obligations and that 
may similarly contain risks. 

What GAO Recommends: 

GAO recommends that OMB establish a deadline for its recent 
requirement that agencies develop procedures for services, including 
those that closely support inherently governmental functions, and 
include two FPDS-NG codes in guidance for agencies’ use of service 
contracts and in the cost savings initiative for management support 
services. OMB generally agreed with the recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-12-87]. For more 
information, contact John Hutton at (202) 512-4841 or huttonj@gao.gov. [End of section] 

Contents: 

Letter: 

Background: 

Civilian Agencies Have Increasingly Acquired a Wide Range of 
Professional and Management Support Services, Which May Include Risks: 

Agency Officials Generally Did Not Consider and Mitigate Risks 
Associated with Contracts for Professional and Management Support 
Services: 

OMB Multisector Workforce Efforts Seek to Improve Agency Management of 
Professional and Management Support Service Contracts: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Examples of Inherently Governmental and Closely 
Supporting Inherently Governmental Functions and Associated Special 
Acquisition Requirements: 

Appendix III: Service Codes for Professional and Management Support 
Services: 

Appendix IV: List of Services Requiring Special Consideration in OMB 
Inventory Guidance and Services Identified in OMB Cost Savings 
Initiative: 

Appendix V: Comments from Department of Homeland Security: 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Examples of Service Categories and Codes: 

Table 2: Professional and Management Support Service Contracts at 
Selected Agencies, Fiscal Year 2010: 

Table 3: Professional and Management Support Service Contracts and 
Task Orders Reviewed: 

Table 4: Selected OMB Guidance Related to Professional and Management 
Support Service Contracts: 

Table 5: Services Requested in Contracts Coded as Other Professional 
Services or Other Management Support Services: 

Table 6: Professional and Management Support Service Codes Included in 
Selection Sample: 

Table 7: FAR-Identified Services That May Closely Support Inherently 
Governmental Functions Included in Our Review: 

Table 8: Examples of Inherently Governmental Functions: 

Table 9: Examples of Services That May Closely Support Inherently 
Governmental Functions: 

Table 10: Special Acquisition Requirements for Services That Have the 
Potential for Influencing the Authority, Accountability, and 
Responsibilities of Government Officials: 

Table 11: Service Codes for Professional and Management Support 
Services: 

Table 12: Service Codes Identified in Recent OMB Initiatives: 

Figures: 

Figure 1: Risk Associated with Professional and Management Support 
Services: 

Figure 2: Professional and Management Support Service Contracting 
Obligations at Civilian Agencies, Fiscal Years 2005 through 2010: 

Figure 3: Civilian Agencies' Professional and Management Support 
Service Contract Obligations, Fiscal Year 2010: 

Abbreviations: 

AMS: Acquisition Management System: 

COTR: contracting officer's technical representative: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

DOT: Department of Transportation: 

FAIR Act: Federal Activities Inventory Reform Act: 

FAR: Federal Acquisition Regulation: 

FPDS-NG: Federal Procurement Data System - Next Generation: 

HUD: Department of Housing and Urban Development: 

NSF: National Science Foundation: 

OFPP: Office of Federal Procurement Policy: 

OMB: Office of Management and Budget: 

SOW: statement of work: 

USAID: United States Agency for International Development: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

December 7, 2011: 

The Honorable Joseph I. Lieberman: 
Chairman: 
The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The government relies on contractor services to meet a variety of 
mission needs, and these contracts account for the majority of 
agencies' contract dollars. In fiscal year 2010, almost 80 percent, or 
$136 billion, of civilian agency contract obligations were used to 
purchase contractor services. This includes contracts for professional 
and management support services, a category of services in which 
contractors perform functions ranging from program evaluation and 
acquisition support to systems engineering services.[Footnote 1] 

While there are benefits to using contractors, such as addressing 
surge capacity needs, the use of many of the services categorized as 
professional and management support increases the risk that 
contractors may inappropriately influence the government's authority, 
control, and accountability for decisions. Our prior work has examined 
these issues at the Departments of Defense (DOD) and Homeland Security 
(DHS).[Footnote 2] More recently, Congress has enacted a law to ensure 
that special consideration be given to using federal employees to 
perform certain functions, and the executive branch has raised 
specific concerns about the governmentwide use of professional and 
management support services and whether agencies rely too heavily on 
contractors to provide these services. In 2009, Congress directed 
agencies to give special consideration to using federal employees 
rather than contractors for functions closely associated with the 
performance of inherently governmental work, which may be found in 
contracts for professional and management support services.[Footnote 
3] Inherently governmental functions require discretion in applying 
government authority or value judgments in making decisions for the 
government; as such they must be performed by government employees and 
not contractors. The Office of Management and Budget (OMB) has 
initiated several efforts to improve how agencies manage their 
multisector workforce of federal employees and contractor personnel 
and which address the inherent risk involved in contracting for 
functions closely associated with the performance of inherently 
governmental functions. In this context, you asked us to review how 
civilian agencies manage their use of contracts for professional and 
management support services. Specifically, you asked us to (1) 
determine to what extent civilian agencies use professional and 
management support service contracts and what types of activities are 
being acquired, (2) determine if agencies considered and mitigated 
risks associated with contractors providing such services, and (3) 
assess agencies' responses to recent governmentwide efforts related to 
contracting for professional and management support services. 

To conduct this work, we analyzed contract data from the Federal 
Procurement Data System - Next Generation (FPDS-NG) and selected and 
reviewed 230 contract statements of work (SOW) for professional and 
management support services, from which we selected 12 contracts and 
task orders for more in-depth case-study reviews. We also reviewed 
agency and governmentwide guidance related to professional and 
management support services and their related risks and spoke with 
agency and OMB officials. 

To determine the extent to which civilian agencies contract for 
professional and management support services, we reviewed FPDS-NG data 
for fiscal years 2005 through 2010 for contracts categorized as 
"Professional, Administrative, and Management Support Services." We 
selected five civilian agencies to provide a closer review: the 
Departments of Homeland Security (DHS), Transportation (DOT), and 
Housing and Urban Development (HUD), the U.S. Agency for International 
Development (USAID), and the National Science Foundation (NSF). They 
were chosen in part to represent a variety of agency missions and 
based on the proportion of their obligations for professional and 
management support services in relation to their overall service 
obligations. Together, these agencies accounted for one-third of 
civilian agency obligations for professional and management support 
services in fiscal year 2010. Because FPDS-NG does not provide 
definitions for service codes, to better understand the services 
provided we judgmentally selected a nongeneralizable sample of 235 
SOWs from the five agencies, selecting 50 each from DHS, DOT, HUD, and 
USAID and 35 from NSF (which had fewer contracts and task orders to 
select from compared to the other four agencies). To obtain a range of 
services and contract sizes, the selection factors included varying 
contract obligation amounts and types of services, and, when 
available, descriptions of the services that indicated the requested 
services closely supported inherently governmental functions or 
functions that might be close to their agencies' missions. Five of the 
235 SOWs were either not available from the agencies during the course 
of our audit work or not sufficiently detailed for our review 
purposes, so we ultimately reviewed 230 SOWs. 

To determine if agencies consider and mitigate risks associated with 
professional and management support services, we judgmentally selected 
12 contracts and task orders for further review as case studies based 
on a range of factors, including comparing the contract description to 
guidance in the Federal Acquisition Regulation (FAR) to help ensure we 
selected services that might closely support inherently governmental 
functions. For each case study, we met with contracting officers, 
contracting officer's technical representatives (COTR), and other 
program officials and reviewed selected contract documents for 
evidence of risk consideration and mitigation. We also reviewed agency 
guidance and interviewed senior agency officials in procurement, 
management, and human capital offices and reviewed agency documents to 
learn about guidance that assists in mitigating risks associated with 
professional and management support services contracting. We compared 
these policies and practices to OMB and FAR guidance. 

To assess agencies' response to OMB efforts, we met with Office of 
Federal Procurement Policy (OFPP) officials and reviewed statutes and 
OMB documents, memos, and policy letters that address service 
contracting. We interviewed agency officials and reviewed available 
documentation about steps taken to respond to these efforts. See 
appendix I for a more in-depth description of our scope and 
methodology. 

We conducted this performance audit from December 2010 to December 
2011 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

The Federal Procurement Data System - Next Generation (FPDS-NG) uses 
more than 300 codes, organized in 23 categories, to describe the 
services purchased by federal agencies. Among these categories--which 
capture services ranging from utilities and housekeeping services to 
medical services--are professional and management support services. 
Examples of service categories and codes are listed in table 1. 

Table 1: Examples of Service Categories and Codes: 

Examples of FPDS-NG categories of services: Housekeeping Services; 
Examples of service codes in each category: 
* Food Services (S203); 
* Interior Plantscaping (S217); 
* Other Housekeeping Services (S299). 

Examples of FPDS-NG categories of services: Medical Services; 
Examples of service codes in each category: 
* Nursing Services (Q401); 
* Anesthesiology Services (Q501); 
* Pediatric Services (Q516). 

Examples of FPDS-NG categories of services: Professional, 
Administrative, and Management Support Services; 
Examples of service codes in each category: 
* Program Management/Support Services (R408); 
* Legal Services (R418); 
* Other Management Services (R799). 

Source: FPDS-NG and U.S. General Services Administration data. 

Note: Data are from FPDS-NG and the U.S. General Services 
Administration's Federal Procurement Data System Product and Service 
Codes Manual. 

[End of table] 

For almost 20 years, OMB procurement policy has indicated that 
agencies should provide a greater degree of scrutiny when contracting 
for professional and management support services, which include 
acquisition support, program evaluation, and other services that can 
affect the government's decision-making authority.[Footnote 4] Without 
proper management and oversight, such services risk inappropriately 
influencing the government's control over and accountability for 
decisions that may be supported by contractors' work. Thus, the policy 
directs agencies to ensure that they maintain sufficient government 
expertise to manage the contracted work. The FAR also addresses the 
greater need for management oversight associated with contractors 
providing services that have the potential to influence the authority, 
accountability, and responsibilities of government employees. 
Contractors are prohibited from performing inherently governmental 
functions, such as determining agency policy, directing federal 
employees, and approving contractual documents, which require such 
discretion in applying government authority or value judgments in 
making decisions that they can only be performed by government 
employees.[Footnote 5] The FAR also identifies services that can 
approach being inherently governmental, based on the nature of the 
function or the manner in which the work is performed or administered. 
Contractors can provide services that closely support inherently 
governmental functions, but agencies must provide greater scrutiny and 
enhanced management oversight to ensure that the contractors' work 
does not limit the authority, accountability, and responsibilities of 
government employees. The FAR includes an illustrative list of 19 
services that closely support inherently governmental functions, many 
of which--such as supporting policy development and providing legal 
advice--are captured in FPDS-NG codes in the professional and 
management support services category. See appendix II for examples of 
inherently governmental and closely supporting inherently governmental 
functions outlined in the FAR. Figure 1 illustrates how the risk of 
contractors influencing government decision making is increased as 
professional and management support services move closer toward 
supporting inherently governmental functions. 

Figure 1: Risk Associated with Professional and Management Support 
Services: 

[Refer to PDF for image: illustration] 

With each risk, there is increasing risk of influencing government 
decisionmaking: 

Professional and management support service contracts; 

Closely supporting inherently governmental functions; 

Inherently governmental functions. 

Source: GAO. 

[End of figure] 

Long-standing FAR and OMB guidance addresses the need for enhanced 
oversight, but in prior work we found that DOD and DHS officials were 
often unaware of this policy.[Footnote 6] The guidance states that 
having a sufficient number of trained and experienced government 
employees is necessary when contracting for professional and 
management support services, but does not describe how agencies should 
provide enhanced management oversight for such contracts. 

Civilian Agencies Have Increasingly Acquired a Wide Range of 
Professional and Management Support Services, Which May Include Risks: 

Federal civilian agencies have increasingly relied on contractors to 
provide professional and management support services--such as program 
management and evaluation, engineering and technical services, and 
acquisition support--with a growth rate of obligations in this 
category that is more than twice the growth rate of all other service 
contract obligations over a 5-year period. From fiscal year 2005 
through fiscal year 2010, civilian agency obligations for professional 
and management support service contracts increased $9.9 billion 
dollars, or 44 percent, to $32 billion (adjusted for inflation to 2010 
dollars). (See figure 2.) This was more than double the 19 percent 
increase experienced by all other service contracts, which increased 
from $87.8 billion to $104 billion in inflation-adjusted dollars 
during the same time period. 

Figure 2: Professional and Management Support Service Contracting 
Obligations at Civilian Agencies, Fiscal Years 2005 through 2010: 

[Refer to PDF for image: line graph] 

Fiscal year: 2005; 
Contracting Obligations: $22.2 billion. 

Fiscal year: 2006; 
Contracting Obligations: $25.2 billion. 

Fiscal year: 2007; 
Contracting Obligations: $25.1 billion. 

Fiscal year: 2008; 
Contracting Obligations: $27.2 billion. 

Fiscal year: 2009; 
Contracting Obligations: $28.8 billion. 

Fiscal year: 2010; 
Contracting Obligations: $32.1 billion. 

Source: GAO analysis of FPDS-NG data. 

[End of figure] 

The five agencies selected for review--DHS, USAID, DOT, HUD, and NSF-- 
obligated a larger percentage of their fiscal year 2010 service 
contract dollars on professional and management support services 
compared to all civilian agencies, including the five reviewed. (See 
table 2.) 

Table 2: Professional and Management Support Service Contracts at 
Selected Agencies, Fiscal Year 2010: 

HUD; 
Obligations for all service contracts: $1.6 billion; 
Professional and management support service contracts: 
Obligations: $1.3 billion; 
Obligations as a percentage of all service contracts: 80%; 
Primary services requested: More than 85 percent of professional and 
management support service obligations were for services coded as 
Other Professional Services, Personal Property Management Services, 
and Financial Services. 

USAID; 
Obligations for all service contracts: $6.3 billion; 
Professional and management support service contracts: 
Obligations: $4.7 billion; 
Obligations as a percentage of all service contracts: 75%; 
Primary services requested: Technical Assistance contracts accounted 
for three-quarters of professional and management support service 
contract obligations. 

NSF; 
Obligations for all service contracts: $0.4 billion; 
Professional and management support service contracts: 
Obligations: $0.2 billion; 
Obligations as a percentage of all service contracts: 36%; 
Primary services requested: Two contract codes--Other Professional 
Services and Logistics Support Services--accounted for more than two-
thirds of professional and management support service contract 
obligations. 

DHS; 
Obligations for all service contracts: $10.4 billion; 
Professional and management support service contracts: 
Obligations: $3.1 billion; 
Obligations as a percentage of all service contracts: 30%; 
Primary services requested: Nearly two-thirds of professional and 
management support service contract obligations were for services in 
three codes: Program Management/Support Services, Engineering and 
Technical Services, and Other Professional Services. 

DOT; 
Obligations for all service contracts: $4.7 billion; 
Professional and management support service contracts: 
Obligations: $1.4 billion; 
Obligations as a percentage of all service contracts: 30%; 
Primary services requested: Engineering and Technical Services 
contracts accounted for slightly more than half of professional and 
management support service contract obligations. 

Total for selected agencies; 
Obligations for all service contracts: $23.4 billion; 
Professional and management support service contracts: 
Obligations: $10.7 billion; 
Obligations as a percentage of all service contracts: 46%. 

Total for all civilian agencies; 
Obligations for all service contracts: $136.4 billion; 
Professional and management support service contracts: 
Obligations: $32.1 billion; 
Obligations as a percentage of all service contracts: 24%. 

Source: GAO analysis of FPDS-NG data. 

[End of table] 

Professional and Management Support Service Contracts Frequently 
Included Services That Closely Support Inherently Governmental 
Functions: 

For the five agencies we reviewed, the activities contractors provided 
through agencies' professional and management support service 
contracts often appeared to closely support the performance of 
inherently governmental functions. Use of these services can result in 
the loss of government accountability and control if proper oversight 
is not provided. Of the 230 professional and management support 
service contract statements of work (SOW) we reviewed from the five 
agencies, at least 120 contracts--or more than half--requested 
services that the FAR identifies as closely supporting inherently 
governmental functions, including services related to budget 
preparation, reorganization and planning activities, evaluation of 
another contractor's performance, and acquisition support.[Footnote 7] 
For example, a DOT contract requested support for acquisition 
functions, including the creation of independent government cost 
estimates and analysis and recommendations related to new 
acquisitions. In another contract, HUD requested that contractors 
assist management and staff in developing a new strategic plan for the 
agency. The SOW called for contractors to work with stakeholders 
inside and outside the agency by conducting interviews, documentation 
reviews and surveys to understand the agency's current operational 
environment and associated challenges, risks, and opportunities. Tasks 
also included assisting in the identification of agency priorities and 
transformation initiatives. The remaining SOWs we reviewed included 
services that did not closely support inherently governmental 
functions, such as a contract for records management and processing at 
DHS. 

Five Professional and Management Support Services Codes Accounted for 
The Majority of Obligations: 

A significant portion of the growth in civilian agency contracts for 
professional and management support services was driven by an increase 
in obligations for contracts coded in FPDS-NG as Other Professional 
Services. This category accounted for $3.4 billion of the $9.9 billion 
increase in contract obligations for professional and management 
support services from fiscal year 2005 to fiscal year 2010. Overall, 5 
of the 56 codes for professional and management support services 
accounted for 70 percent of civilian agency obligations for these 
services in fiscal year 2010, representing over $22 billion in overall 
obligations. (See figure 3.) 

Figure 3: Civilian Agencies' Professional and Management Support 
Service Contract Obligations, Fiscal Year 2010: 

[Refer to PDF for image: pie-chart] 

Other Professional Services: $7.86 billion (24.5%); 
Other Management Support Services: $1.94 billion (6%); 
Program Management/Support Services: $3.44 billion (10.7%); 
Technical Assistance: $4.03 billion (12.6%); 
Engineering and Technical Services: $5.28 billion (16.5%); 
Remaining Professional and Management Support Services Code: $9.51 
billion (29.7). 

Source: GAO analysis of FPDS-NG data. 

[End of figure] 

Of the 230 contract SOWs we reviewed, 171 contracts were in the top 
five codes and covered a wide range of services. For example: 

* Other Professional Services. SOWs requested support including risk 
management and analysis, records management, assistance to a foreign 
government, physical and administrative security, budget and program 
management support, financial and information technology audits, 
strategic planning, program administration, acquisition support, 
project management, technical assistance and training, workforce 
analysis, and website development and content management. 

* Engineering and Technical Services. SOWs requested services 
including architectural planning and construction, testing and 
evaluation of radar and weather systems, ship inspection services, and 
information technology systems support. 

* Technical Assistance. SOWs requested services including support to 
foreign governments, such as support for security and governance in 
Nepal and local government capacity building in unstable areas of 
Afghanistan, as well as contracts to update information technology 
systems and manuals and provide technical and administrative support 
to meet information technology security requirements.[Footnote 8] 

* Program Management/Support Services. SOWs requested services 
including support to evaluate internal controls, manage audit 
compliance and the tracking of audit recommendations, and provide 
project management oversight to ensure grantee compliance in 
administering federally funded programs. 

* Other Management Support Services. SOWs requested services including 
technical and program expertise related to technologies' compliance 
with federal laws and guidelines; support to develop a program 
management plan for project monitoring and oversight; information 
systems, hardware, and software support; technical expertise to 
improve data collection and program evaluation; and loan servicing 
activities including payment collection, risk management, and customer 
service. 

Officials Identified Various Reasons for Contracting for Services: 

We conducted a more in-depth review of 12 contracts or task orders for 
professional and management support services. On the basis of our 
review, at least 9 of the 12 contracts or task orders involved 
services that closely support inherently governmental functions, 
including acquisition support, reorganization and planning support, 
and support for policy development. The selected contracts or task 
orders originated from 2005 through 2009 and included a mix of both 
long-standing and new contract requirements. For example, the DOT 
project management oversight contracts at the Federal Transit 
Administration include services that have been performed by 
contractors for more than 20 years. 

Contracting and program officials identified several reasons why their 
agencies chose to award contracts for these professional and 
management support services. Six of the 12 contracts or task orders 
were issued or expanded in response to new requirements or workload 
increases, such as the watch officer positions created to provide 
surge capacity at DHS' Transportation Security Administration, an 
expanded Sudan mission support contract at USAID, and short-term need 
for procurement office support at HUD. The 12 case-study contracts and 
task orders are described in table 3. 

Table 3: Professional and Management Support Service Contracts and 
Task Orders Reviewed: 

Agency/contracting organization: DHS: Citizenship and Immigration 
Services; 
Obligations in fiscal year 2009: $20.6 million; 
Service code: Other Professional Services; 
Fiscal year of award: 2007; 
Program office supported: Office of Administration; 
Summary of services provided: Acquisition and program support services. 

Agency/contracting organization: DHS: Office of the Secretary; 
Obligations in fiscal year 2009: $10.9 million; 
Service code: Program Management/Support Services; 
Fiscal year of award: 2009; 
Program office supported: Office of Intelligence and Analysis; 
Summary of services provided: Intelligence and analytic support. 

Agency/contracting organization: DHS: Transportation Security 
Administration; 
Obligations in fiscal year 2009: $2.6 million; 
Service code: Intelligence Services; 
Fiscal year of award: 2007; 
Program office supported: Transportation Security Operations Center; 
Summary of services provided: Watch Officer support. 

Agency/contracting organization: HUD: 
Obligations in fiscal year 2009: $27.5 million; 
Service code: Financial Services; 
Fiscal year of award:2006; 
Program office supported: Government National Mortgage Association 
(Ginnie Mae); 
Summary of services provided: Administration of mortgage-backed 
securities programs. 

Agency/contracting organization: HUD: 
Obligations in fiscal year 2009: $0.3 million; 
Service code: Other Professional Services; 
Fiscal year of award: 2009; 
Program office supported: Office of the Chief Procurement Officer; 
Summary of services provided: Acquisition support services. 

Agency/contracting organization: DOT: Federal Aviation Administration; 
Obligations in fiscal year 2009: $1.2 million; 
Service code: Engineering and Technical Services; 
Fiscal year of award: 2009; 
Program office supported: Western Logistics Service Area Field Offices; 
Summary of services provided: Logistics support services, including 
acquisition support and management. 

Agency/contracting organization: DOT: Federal Transit Administration; 
Obligations in fiscal year 2009: $6.0 million; 
Service code: Program Management/Support Services; 
Fiscal year of award: 2009; 
Program office supported: Region 2; 
Summary of services provided: Project management oversight for grants 
to state and local governments. 

Agency/contracting organization: DOT: Office of the Secretary; 
Obligations in fiscal year 2009: $2.5 million; 
Service code: Other Professional Services; 
Fiscal year of award: 2009; 
Program office supported: Office of Airline Information, Research and 
Innovative Technology Administration; 
Summary of services provided: Analytic and technical services, 
including database administration. 

Agency/contracting organization: NSF;
Obligations in fiscal year 2009: $0.7 million; 
Service code: Other Professional Services; 
Fiscal year of award: 2009; 
Program office supported: National Nanotechnology Coordination 
Office[A]; 
Summary of services provided: Analytical, operational, technical, and 
administrative support. 

Agency/contracting organization: NSF;
Obligations in fiscal year 2009: $4.7 million; 
Service code: Other Administrative Support Services; 
Fiscal year of award: 2005; 
Program office supported: National Coordination Office for Information 
Technology Research and Development[A]; 
Summary of services provided: Technical assistance, meeting 
facilitation, communications, information technology, and 
administrative support. 

Agency/contracting organization: USAID;
Obligations in fiscal year 2009: $9.3 million; 
Service code: Technical Assistance; 
Fiscal year of award: 2008; 
Program office supported: Program Office, USAID Sudan Mission; 
Summary of services provided: Performance evaluation, technical, 
logistical support. 

Agency/contracting organization: USAID;
Obligations in fiscal year 2009: $0.6 million; 
Service code: Program Management/Support Services; 
Fiscal year of award: 2009; 
Program office supported: Chief Operating Officer, Bureau for Policy, 
Planning and Learning; 
Summary of services provided: Administrative and analytic support. 

Source: GAO analysis of FPDS-NG data and other federal agency data. 

Notes: For task orders, data shown are related to the individual task 
order and not the overall contract. 

[A] The National Coordination Office for Information Technology 
Research and Development and the National Nanotechnology Coordination 
Office are interagency coordinating offices that receive payments from 
participating agencies. While these offices are not technically a part 
of NSF, they use NSF's procurement office to obtain contracted 
services, and as such are subject to the acquisition guidance and 
rules of NSF. 

[End of table] 

Agency officials noted that the temporary nature of some work or the 
need for surge capacities made contracting preferable to using federal 
employees because of the flexibility it offers, such as the ability to 
increase or decrease scope in response to program needs. Often, agency 
officials pointed to constraints on the use of federal employees such 
as limitations for hiring federal staff or budget restrictions as a 
factor that led to contracting for services. For example, NSF provides 
support to two interagency offices established by memorandums of 
understanding, which program officials told us have the effect of 
limiting the number of government personnel who can work in the 
offices, so the majority of the work is performed by contractors. 
Similarly, a senior Federal Transit Administration official said that 
while Congress has authorized a portion of annual program funds to be 
used for oversight services, the administration is constrained from 
using these funds to hire federal employees for this purpose.[Footnote 
9] In another case, officials from HUD's Government National Mortgage 
Association said that the agency increasingly used contractors for 
data analysis related to mortgage-backed securities, in part because 
their hiring authority had not increased in several years, so they did 
not have enough government staff to meet their increased workload. 

Agency Officials Generally Did Not Consider and Mitigate Risks 
Associated with Contracts for Professional and Management Support 
Services: 

Agency officials generally did not consider the risks of acquiring 
professional and management support services before awarding the 12 
contracts we reviewed. In some cases, however, officials later became 
concerned and took steps to mitigate potential risks that contractors 
might perform inherently governmental functions, or that government 
employees might lack sufficient expertise to oversee the contractors' 
work. Four of the five agencies did not have guidance to help identify 
risks prior to award and ensure enhanced oversight is provided when 
services closely support inherently governmental functions. 

Few Officials Considered Risks When Awarding Contracts That Closely 
Support Inherently Governmental Functions: 

For the contracts we reviewed, few of the contracting or program 
officials said they considered whether the services they were 
contracting for closely supported inherently governmental functions or 
took steps to address the related risks before award. In almost all of 
the cases, officials explained that they conducted reviews, as 
required by the FAR, to determine if the services requested included 
inherently governmental functions, but none stated that these review 
processes specifically determined whether services might closely 
support inherently governmental functions and thus require enhanced 
management oversight[Footnote 10]. The FAR guidance requiring enhanced 
management oversight when contracting for services that closely 
support inherently governmental functions is located in a different 
part of the FAR than that on inherently governmental functions, and 
agencies did not seem to link the two FAR sections, as none of the 
officials identified services that closely support inherently 
governmental functions as triggering a need for increased oversight. 
[Footnote 11] 

Some Officials Raised Concerns during Contract Performance: 

During the performance period of the contract, contracting and program 
officials said they relied on routine oversight procedures, such as 
assigning COTRs, reviewing contractors' work products, and reviewing 
contractor invoices and status reports. In cases where officials did 
have additional oversight measures in place, they did not link their 
actions to concerns associated with risks from acquiring professional 
and management support services. For example, the Federal Transit 
Administration program office at DOT had developed standard oversight 
procedures to address the contractors' roles and responsibilities for 
overseeing grant recipients, including their responsibilities for 
conducting assessments of the grantees and providing recommendations 
to the agency. While the procedures acknowledge the government's 
decision-making role, they are an application of long-standing 
guidance that officials said was created to ensure that each project 
meets its goals, rather than additional oversight to address the risk 
of contractors supporting inherently governmental functions. For other 
contracts, contracting or program officials became concerned during 
the course of contract performance that contractors were at risk of 
performing inherently governmental functions, or that government 
personnel might lack the expertise needed to oversee contractors' 
work, and took various steps to help mitigate those risks. In these 
cases, we found that concerns were generally raised by officials who 
were new to a program office or contracting officials who had assumed 
responsibilities for an existing contract. For example: 

* A senior official in DOT's Office of Airline Information became 
concerned about the lack of government employee expertise to oversee 
information technology functions that had been developed and 
exclusively operated by contractors for several years. The office is 
planning to convert some of the contractor duties to federal employee 
positions, but efforts to hire new employees have not been completed 
because of budget constraints and competing priorities within the 
Research and Innovative Technology Administration. 

* The contracting officer and COTR in USAID's Sudan Mission had 
concerns about interaction among federal employees and contractor 
staff in a newly established mission office, fearing that security and 
logistic challenges had left the government overly reliant on 
contractors' expertise. To prevent the performance of inherently 
governmental work by contractors and to ensure appropriate oversight 
and capacity among the federal employee workforce, they developed a 
mission order nearly 3 years after the contract was awarded that 
outlined the government's responsibilities and provided training for 
all personnel in the mission office. 

* In the two NSF contracts we reviewed, contracting and program 
officials developed policy and procedure manuals after the contracts 
were awarded to outline the responsibilities and workflow among 
contractor and federal staff. Officials said that because each of 
these offices is staffed primarily by contractors, with only one or 
two federal employees, these technical documents primarily serve a 
business continuity function. However, officials also said they help 
to ensure that contractors will not accidentally perform or be tasked 
with inherently governmental work. 

* In two of the DHS contracts we reviewed, officials identified risks 
associated with some of the activities performed by contractors and 
are now requiring the work to be performed by government employees. 
According to a senior procurement official with Citizenship and 
Immigration Services, the component has reduced the number of 
contractors supporting the contract from 90 to approximately 22, 
primarily by insourcing work--moving it from contractor to government 
performance--such as acquisition and budget support. The contract 
positions that remain are largely administrative specialist positions 
that officials determined do not support inherently governmental 
functions. Likewise, the Transportation Security Administration 
insourced 12 contracted watch officer support positions, which involve 
collecting information and monitoring domestic events that affect air 
passenger security, and program officials said they plan to insource 
the remaining call center positions in the near future. 

According to agency officials, at least 6 of the 12 contracts we 
reviewed have been recently recompeted or will be in the coming year. 
Officials identified various changes to the contracts going forward, 
but only a few indicated that the changes were due to concerns with 
contractors providing professional and management support services. 
For example, USAID's policy office is changing some of the types of 
work performed by contractors in that office, but officials indicated 
that these changes are determined by how contract support can most 
effectively help the office function, not by consideration of risk or 
reliance on contractors. Similarly, HUD's Office of the Chief 
Procurement Officer ended its use of contractors when it received 
additional funding for federal employees, though program officials did 
not express any concerns about the type of work done by those 
contractors. DOT's Office of Airline Information is rolling its 
current contract into a larger, administrationwide contract vehicle 
for the sake of potential cost savings, not to address its concerns 
about the type of work being performed. Although the DHS Office of 
Intelligence and Analysis contract we reviewed expired, officials said 
that the succeeding contract, which is classified, contains similar 
types of services. 

Four Agencies' Guidance Did Not Address Risks Related To Professional 
and Management Support Services: 

Agencies use a variety of tools to guide procurement practices prior 
to contract award and during contract performance, including agency-
specific FAR supplements, acquisition manuals, and COTR handbooks, and 
some of the materials we reviewed mention professional and management 
support services. The FAR requires agencies to provide enhanced 
management oversight for contracts that closely support inherently 
governmental functions, and federal internal control standards require 
assessments of risks. However, four of the five agencies reviewed did 
not have processes, through guidance or other means, to help identify 
risks or ensure greater scrutiny and enhanced management oversight 
when contractors provide expertise or perform services that closely 
support inherently governmental work. 

In 2007, we recommended that DHS assess the risk of selected 
contractor services as part of the acquisition planning process and 
modify existing acquisition guidance to address when to use and how to 
oversee those services in accordance with federal acquisition policy. 
[Footnote 12] DHS did not have guidance when two of the three 
contracts we reviewed were awarded,[Footnote 13] but it subsequently 
established a review process for all professional and management 
support service contracts over $1 million to identify related risks, 
including services that closely support inherently governmental 
functions.[Footnote 14] The review is required before contracts are 
awarded or option years are exercised. According to an official from 
one of the three DHS components we reviewed, this process helped 
contracting officials pay closer attention to oversight capacities of 
government staff, such as whether there were a sufficient number of 
employees available. 

Beyond DHS, one other agency--USAID--had established contract review 
processes, but it did not address risks related to professional and 
management support services. USAID's process requires a review of some 
service contracts for institutional support before the initial 
contract award and before exercising option years, but these reviews 
were intended to ensure all contracts were essential and efficient 
rather than to address risks related to contractors performing 
services that closely support inherently governmental functions. 
[Footnote 15] In the few cases where agencies' acquisition guidance 
specifically touches on issues related to professional and management 
support services, the guidance did not appear to affect risk 
assessment related to closely supporting inherently governmental 
functions. For example, HUD's contract monitoring manual for 
government technical representatives specifically mentions 
professional and management support services, but contracting and 
program officials did not acknowledge the guidance or cite it as 
influencing any oversight they provided. Similarly, one DOT component 
we reviewed had established acquisition guidance that specifically 
identifies support services, including professional and management 
support, and states that they require expertise to monitor contractor 
performance.[Footnote 16] However, the guidance does not have a 
process for providing enhanced management oversight for services that 
closely support inherently governmental functions. 

OMB Multisector Workforce Efforts Seek to Improve Agency Management of 
Professional and Management Support Service Contracts: 

Through several efforts that address agencies' multisector workforce 
of federal employees and contractor personnel, OMB addresses 
professional and management support service risks, including recent 
guidance that establishes agency management responsibilities for 
services that closely support inherently governmental functions. The 
five agencies we reviewed have responded to these efforts to varying 
degrees, but only DHS has taken steps to incorporate all of these 
efforts. In recent initiatives, OMB may have missed opportunities to 
address risks associated with two specific codes for professional and 
management support services. 

Recent OMB Efforts Establish Guidance That Addresses Risks Associated 
with Service Contracts: 

OMB has initiated a number of interrelated efforts that address 
agencies' use of service contractors, including contractors for 
professional and management support services, in the context of 
maintaining a balanced workforce with the appropriate mix of federal 
employees and contractors. Primarily in response to congressional 
requirements, since 2009 OMB has developed guidance and facilitated 
efforts to improve how agencies manage their multisector workforce, 
which includes addressing the risks that overreliance on contractors 
can pose to government control and accountability. Through these 
efforts, Congress and OMB have emphasized the need to examine 
contracted functions where agencies risk becoming overreliant on 
contractors, such as professional and management support service 
contracts. By focusing on the role that both government and contractor 
employees have in performing work that supports agency missions, these 
efforts emphasize the need to consider how contracted functions fit 
into agency goals and priorities as part of strategic planning 
processes. The resulting multisector workforce efforts seek to broaden 
decisions about the use of contractors from primarily a procurement 
office function, or a series of individual, program-office-level 
decisions, to a shared agency responsibility that requires the 
involvement of human capital, budget, and program, as well as 
procurement offices. Recent efforts that address professional and 
management support services are described in table 4. 

Table 4: Selected OMB Guidance Related to Professional and Management 
Support Service Contracts: 

OMB guidance: Insourcing guidance: OMB Memo, Managing the Multisector 
Workforce (M-09-26); July 29, 2009; 
Source of guidance: Congress; Omnibus Appropriations Act, 2009; Pub. 
L. No. 111-8, Div. D, § 736; 
Summary: OMB issued criteria to help civilian agencies respond to the 
statute, which requires that they develop procedures to ensure that 
they regularly give special consideration to using federal employees 
for certain functions, including those that closely support inherently 
governmental functions. This guidance identifies professional and 
technical service contracts as areas agencies should routinely monitor 
for risks; 
Agencies' implementation status (as of August 2011): 
* DHS issued guidance in 2009; 
* USAID developed an insourcing plan and guidelines in 2010 and 
piloted the planning process in two offices in 2011; 
* DOT, HUD, and NSF have not issued guidance. 

OMB guidance: Multisector workforce pilot: OMB Memo, Managing the 
Multisector Workforce (M-09-26); July 29, 2009; 
Source of guidance: OMB; 
Summary: This OMB-initiated effort directs agencies to study an office 
or program that may be reliant on contractors to gain experience with 
multisector workforce analysis and planning. Approximately one-third 
of the 24 pilots examined functions that are generally considered to 
be professional and management support services; 
Agencies' implementation status (as of August 2011): 
* All five agencies completed the pilot and submitted reports to OMB 
in 2010. 

OMB guidance: Service contract inventories and analysis: OFPP Memo, 
Service Contract Inventories; November 5, 2010; 
Source of guidance: Congress; Consolidated Appropriations Act, 2010; 
Pub. L. No. 111-117, Div. C, § 743; 
Summary: In response to statutory requirement for civilian agencies 
subject to the Federal Activities Inventory Reform Act (FAIR Act) to 
submit to OMB an annual inventory of their service contracts, OMB 
guidance requires agencies to collect and analyze data on their 
service contracts to promote better decisions about their use and to 
help agencies give special management attention where contractors 
perform services that closely support inherently governmental 
functions. It also identifies specific professional and management 
support service codes that pose an increased risk to loss of 
government control; 
Agencies' implementation status (as of August 2011): 
* All five agencies completed the fiscal year 2010 inventory data 
collection efforts; 
* Agencies' analyses are due to OMB by December 2011. 

OMB guidance: OFPP Policy Letter 11-01: Performance of Inherently 
Governmental and Critical Functions; 76 Fed. Reg. 56227, September 12, 
2011; 
Source of guidance: Congress; Duncan Hunter National Defense 
Authorization Act for Fiscal Year 2009; Pub. L. No.110-417, § 321; 
Summary: In response to statutory requirement, OMB revised the 
definition for inherently governmental functions and established 
criteria for identifying critical functions. The policy also 
establishes agency management responsibilities for contracts that are 
closely associated with inherently governmental functions or are 
critical functions; 
Agencies' implementation status (as of August 2011): 
* The effective date of OFPP Policy 11-01 is October 12, 2011. 

Source: GAO analysis of OMB data. 

[End of table] 

OMB established criteria to help agencies respond to the statutory 
requirement to develop a process for reviewing service contractor 
activities to consider if contractor performance is appropriate, 
referred to as insourcing guidance. OMB's guidance identifies 
professional services as an area of risk, thus requiring increased 
agency monitoring. In 2009, OMB also required agencies to conduct 
multisector workforce planning pilots in one office or unit to gain 
experience with determining optimal workforce balance and submit 
summary reports on their workforce analysis.[Footnote 17] More 
recently, in 2010, OMB issued guidance to help agencies conduct 
inventories of their fiscal year 2010 service contracts and an 
analysis of the inventory, which provides a more detailed list of 
professional and management support service codes, including program 
management support and intelligence services that require increased 
attention from agencies. OMB stated that it will issue additional 
guidance to agencies for the preparation of the fiscal year 2011 
inventories, taking into consideration experiences with the 
development and use of the initial fiscal year 2010 inventories 
effort. The recent OMB OFPP Policy Letter 11-01 seeks to broaden 
agencies' focus to include critical functions, which can pose a risk 
if not carefully monitored. Similar to the risks associated with 
contractors performing work that closely supports inherently 
governmental functions, OMB states that relying on contractors for 
critical functions can affect the government's control of mission and 
operations, unless the government maintains sufficient in-house 
capability to manage and oversee the contractors' work. The policy 
letter requires agencies to develop and maintain internal procedures 
to address the requirements of the guidance, but does not state when 
the procedures should be implemented. 

According to a senior OMB official, these pieces of guidance, working 
together, are intended to build the different capacities agencies need 
to examine their use of contractors and balance their workforce. For 
example, the insourcing guidance helps agencies develop the procedures 
needed to determine the appropriate use of public and private labor 
resources. The workforce analysis pilots were intended, in part, to 
help agencies build relationships among key stakeholders, furthering 
the collaboration needed to implement strategic approaches. Similarly, 
the contract inventories and analysis are ongoing efforts to collect 
and share the information stakeholders need to understand their areas 
of greatest risk. The official also said that the policy letter ties 
all of these efforts together and provides agencies with instructions 
regarding their responsibilities to address risks associated with 
contractors performing services that closely support inherently 
governmental functions or are considered critical functions. 

Agencies Have Responded to Multisector Workforce Initiatives to 
Varying Degrees: 

The five agencies we reviewed have participated in many of OMB's 
efforts related to the multisector workforce, but only DHS has taken 
steps to incorporate guidance to examine its use of contractors and 
balance its workforce. The four remaining agencies we reviewed--DOT, 
HUD, NSF, and USAID--are increasingly responding to the various 
segments of OMB's guidance by participating in the multisector 
workforce pilots and developing an inventory of service contracts, but 
have not fully implemented insourcing guidance that could provide 
greater scrutiny of professional and management support service 
contracts. Through the multisector workforce pilots, all five agencies 
we reviewed conducted a limited workforce analysis to gain an 
understanding of the steps needed to achieve a balanced workforce and 
submitted reports on the pilots to OMB in April 2010. While OMB 
initially stated that a summary of agency best practices would result 
from the pilot efforts, agencies have not yet received feedback from 
OMB on their reports and results have not been made public. The 
agencies we reviewed also completed their initial service contract 
inventory, which is an annual requirement of all of the civilian 
agencies subject to the FAIR Act of 1998 to understand how contractors 
are being used and to help identify contracted functions that may 
require workforce rebalancing due to overreliance on contractors. An 
additional analysis of this inventory is due at the end of 2011. 
[Footnote 18] OMB is planning to provide updated guidance to the 
agencies for the fiscal year 2011 inventory analysis, but it had not 
been issued as of November 2011. 

As of August 2011, three agencies--DOT, HUD, and NSF--had not yet 
developed the insourcing guidance that was due in 2009 for considering 
whether government or contractor employees are best suited for certain 
functions, particularly professional support services and services 
that closely support inherently governmental functions or are similar 
to work already performed by federal employees.[Footnote 19] USAID has 
developed insourcing guidance, but is implementing it incrementally 
through its operating units with the assistance of a workforce 
planning contractor. According to USAID officials, the process has 
been piloted in two offices to date. In its most recent guidance, 
OMB's OFPP Policy Letter 11-01 reiterates a statutory requirement that 
agencies must give special consideration to using federal employees to 
perform work that closely supports inherently governmental functions. 
[Footnote 20] 

DHS developed insourcing guidance in 2009, and later expanded its 
efforts by introducing a strategy that provides a more comprehensive 
review process to help program offices balance their use of contracted 
and government personnel. The Balanced Workforce Strategy includes a 
decision-making tool intended to help program offices and the 
department assess various risks associated with service contracts, 
including whether the service supports a critical agency function. 
Using the tool, DHS program offices are systematically reviewing all 
of their existing service contracts to determine, among other factors, 
whether the services requested closely support inherently governmental 
functions, their degree of criticality, and the appropriate number of 
government personnel needed to maintain workforce balance. According 
to DHS officials, the review is being conducted in segments and 
contracts considered to be at higher-risk--including professional and 
management support service contracts--were prioritized for the initial 
reviews. 

The Balanced Workforce Strategy leverages the efforts of DHS reviews, 
including the Quadrennial Homeland Security Review and Bottom-Up 
Review completed in 2010. According to DHS officials, it is also in 
response to congressional concerns about their use of contracted 
services and our 2007 report on their use of professional and 
management support services.[Footnote 21] However, DHS is also 
developing the strategy to meet the various statutory and OMB 
requirements associated with the multisector workforce, such as 
developing insourcing guidelines as required in statute and 
identifying critical functions, as was outlined in OMB's OFPP Policy 
Letter 11-01. At the time of our review, DHS officials said the 
strategy was moving forward, but they considered the guidance to be a 
draft because it had been based on OMB's notice of proposed policy 
letter, and they were anticipating the final policy letter might 
require changes to the DHS strategy.[Footnote 22] 

OMB May Have Missed Opportunities to Address Cost Savings and Risk in 
Two Recent Initiatives: 

Two recent OMB efforts have highlighted a group of service codes for 
increased attention as agencies address their use of service 
contracts, but do not contain two codes--Other Professional Services 
and Other Management Support Services--that accounted for a 
significant amount of dollars obligated by civilian agencies on 
professional and management support service contracts in fiscal year 
2010 and may contain risks to the government's control of mission and 
operations. At a White House forum in July 2011, OMB announced an 
effort to achieve cost savings by reducing agencies' spending on 
management support service contracts by 15 percent by the end of 
fiscal year 2012.[Footnote 23] OMB later identified 12 service codes 
to define management support service functions, but did not include 
these two codes, which together comprised 30 percent of dollars 
obligated on professional and management support service contracts in 
fiscal year 2010.[Footnote 24] The two codes were also not included in 
a similar list of service codes provided in OMB's November 2010 
guidance for conducting service contract inventories and analysis. 
[Footnote 25] In the guidance, OMB states that agencies should give 
priority consideration to reviewing contracts for professional and 
management support services and provides the list to illustrate codes 
that should be considered in agencies' analysis.[Footnote 26] 
According to OMB, these codes were identified for heightened 
management attention due to concerns of their increased risk to the 
government's control of mission and operations. See appendix IV for a 
complete list of the service codes identified in both initiatives. 

While OMB took steps to provide agencies with guidance on codes for 
certain services that may have increased risks, our analysis of 230 
contract SOWs, which included 83 contracts categorized as Other 
Professional Services or Other Management Support Services, showed 
that contracts in these codes include some of the same functions 
identified in the inventory guidance as requiring heightened 
management attention. (See table 5.) For example, requests for 
acquisition support were included in contracts in the two codes at all 
five of the agencies we reviewed. Additionally, because contracts in 
these codes can include a wide range of functions, they may include 
multiple activities that potentially support inherently governmental 
functions. For example, a DHS contract coded Other Professional 
Services requested services ranging from supporting program 
development and implementation, policy, workforce analysis, 
statistical and financial analysis, and economic analysis, to 
technical writing, web maintenance, mail and file operations, 
training, and information technology support for various programs. 

Table 5: Services Requested in Contracts Coded as Other Professional 
Services or Other Management Support Services: 

Total contracts reviewed; 
DHS: 22; 
DOT: 11; 
USAID: 16; 
HUD: 18; 
NSF: 16; 
Total: 83. 

Services that closely support inherently governmental functions 
requested in one or more contract statements of work: 

Acquisition support[A]: 
DHS: [Check]; 
DOT: [Check]; 
USAID: [Check]; 
HUD: [Check]; 
NSF: [Check]; 
Total: [Check]. 

Support for policy development[A]: 
DHS: [Check]; 
DOT: [Empty]; 
USAID: [Empty]; 
HUD: [Check]; 
NSF: [Check]; 
Total: [Check]. 

Budget preparation: 
DHS: [Check]; 
DOT: [Check]; 
USAID: [Check]; 
HUD: [Check]; 
NSF: [Check]; 
Total: [Check]. 

Reorganization and planning activities: 
DHS: [Check]; 
DOT: [Empty]; 
USAID: [Check]; 
HUD: [Check]; 
NSF: [Check]; 
Total: [Check]. 

Evaluating another contractor's performance: 
DHS: [Empty]; 
DOT: [Empty]; 
USAID: [Check]; 
HUD: [Empty]; 
NSF: [Empty]; 
Total: [Check]. 

Responding to FOIA requests: 
DHS: [Empty]; 
DOT: [Empty]; 
USAID: [Empty]; 
HUD: [Check]; 
NSF: [Empty]; 
Total: [Check]. 

Inspection services: 
DHS: [Check]; 
DOT: [Empty]; 
USAID: [Empty]; 
HUD: [Check]; 
NSF: [Empty]; 
Total: [Check]. 

Contracts requesting these services: 
DHS: 18; 
DOT: 3; 
USAID: 7; 
HUD: 8; 
NSF: 5; 
Total: 41. 

Dollars obligated in fiscal year 2009 on contracts requesting these 
services (in millions); 
DHS: $336.6; 
DOT: $2.5; 
USAID: $200.0; 
HUD: $15.2; 
NSF: $78.1; 
Total: $632.3. 

Source: GAO analysis of FPDS-NG data and agency data. 

[A] Indicates a service aligned with codes identified by OMB for 
special management attention. 

[End of table] 

According to a senior OMB official, OMB kept its list of inventory 
service codes concise to help agencies focus their attentions on a 
manageable number of services. However, by omitting these codes from 
receiving priority attention in agencies' inventory analysis, 
particularly considering that many of the services requested under 
these codes may closely support inherently governmental functions, 
agencies may not conduct a full analysis of risks related to loss of 
control and operations. While the services specified in the inventory 
analysis list are intended to be illustrative, the significant amount 
of obligations spent in the two excluded codes also warrants 
attention, particularly for efforts aimed at reducing spending for 
such services. 

Conclusions: 

Long-standing OMB and FAR guidance has established the need for 
federal agencies to consider risks associated with contractors 
providing professional and management support services, particularly 
with services that closely support inherently governmental functions. 
However, the five agencies we reviewed generally did not consider 
these risks prior to contract award. Additionally, only one of the 
five agencies had developed guidance or practices over time to improve 
management of these risks. Recent OMB efforts associated with the 
multisector workforce look to increase agency focus on services 
acquired, not necessarily to reduce the number of contractors, but to 
ensure agencies have sufficient knowledge of the activities performed 
by contractors. The efforts particularly focus on whether the 
government may be overly reliant on contractors for certain functions 
and whether such reliance presents risks to government control and 
accountability for decision making. OMB's most recent policy guidance, 
OFPP Policy Letter 11-01, requires agencies to develop procedures to 
address these issues. Such procedures are an important step toward 
improved agency consideration of risks. However, OMB has not 
established a deadline for when agencies need to complete these 
procedures, which, if established, may help better focus agency 
efforts to address risks. 

In the context of better managing the multisector workforce, there are 
further opportunities to enhance the results of OMB's efforts. 
Agencies are required to conduct inventory analyses to help them 
understand the extent to which contractors support their work. Under 
current OMB inventory guidance, agencies have been asked to focus on a 
detailed list of professional and management support service codes, 
but not two codes that account for one-third of fiscal year 2010 
obligations under this services category. According to our analysis, 
these codes contain the same risks to mission and operation that OMB 
is intending to address. The same two codes are also not cited in 
OMB's more recent effort to reduce agency spending for management 
support service contracts. 

Recommendations for Executive Action: 

To address these issues, we are making two recommendations to the 
Director of OMB. To better focus agencies' efforts to manage the risks 
related to professional and management support service contracts we 
recommend that the Director of OMB, through the Office of Federal 
Procurement Policy: 

* establish a near-term deadline for agencies to develop internal 
procedures required by OFPP Policy Letter 11-01, including for 
services that closely support inherently governmental functions. 

To ensure that the risks of professional and management support 
service contracts are more fully considered and addressed, we 
recommend that the Director of OMB, through the Office of Federal 
Procurement Policy: 

* include contracts coded in the Federal Procurement Data System -Next 
Generation (FPDS-NG) as Other Professional Services and Other 
Management Support Services in the cost savings initiative for 
management support services and planned service contract inventory 
guidance to agencies for conducting analysis of special interest 
functions. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to OMB, DHS, DOT, HUD, USAID, and 
NSF for review and comment. DHS provided a written response stating 
that it is committed to ensuring risks related to professional and 
management support service contracts are mitigated (see appendix V) 
and technical comments that were incorporated into the report as 
appropriate. DOT, HUD, and NSF also provided technical comments that 
were incorporated into the report as appropriate. USAID responded that 
it did not have comments. 

OMB's Office of Federal Procurement Policy (OFPP) provided comments by 
e-mail on this report. OFPP generally agreed with our findings and 
recommendations, but provided technical comments on our 
recommendations. For our first recommendation, OFPP commented that the 
OFPP Policy Letter 11-01 addresses multiple management 
responsibilities related to professional and management support 
service contracts and it would likely establish agency time frames for 
agencies to develop the required internal procedures more broadly, not 
just for services that closely support inherently governmental 
functions. In recognition of the interrelatedness of the critical 
functions that may be performed by contractors, including those that 
closely support inherently governmental functions, we modified the 
recommendation to reflect the broader scope of OMB's policy letter. 

For our second recommendation, OFPP commented that it would consider 
addressing contracts coded in FPDS-NG as Other Professional Services 
and Other Management Support Services in the planned service contract 
inventory guidance to agencies, but expressed concerns with including 
these contracts under its current cost savings initiative for 
management support services contracts. OFPP noted that the initiative 
is focused on this fiscal year's spending and that changing the 
baseline several months into the fiscal year would create confusion at 
the agencies. OFPP stated that it viewed having clear and consistent 
baselines as consistent with our recommendations on OMB's fiscal year 
2010 contracts savings initiative and that it could consider expanding 
the list of codes for a future service contract cost savings 
initiative.[Footnote 27] As our analysis has shown, Other Professional 
Services and Other Management Support Services accounted for a 
significant amount of dollars obligated by civilian agencies on 
professional and management support services contracts in fiscal year 
2010 and may contain risks to the government's control of mission 
operations. Including them in the planned service contract inventory 
guidance to civilian agencies will be a good step in expanding the 
agencies' focus on the use of contractors. In recognition that 
agencies may have already started to respond to the cost savings 
initiative for this fiscal year, we modified the recommendation to 
provide OMB some flexibility for including these codes under the cost 
savings initiative in the subsequent years. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to the 
appropriate congressional committees and the Director of OMB, the 
Secretaries of DHS, DOT, and HUD, and the Administrators of USAID and 
NSF. In addition, the report will be available at no charge on the GAO 
website at [hyperlink, http://www.gao.gov]. 

If you or your staff have 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. Other staff making key contributions to this report are listed 
in appendix VI. 

Signed by: 

John P. Hutton: 
Director Acquisition and Sourcing Management: 

[End of section] 

Appendix I: Scope and Methodology: 

To conduct this work, we analyzed contract data from the Federal 
Procurement Data System - Next Generation (FPDS-NG) and selected and 
reviewed 230 contract statements of work (SOW) for professional and 
management support services, from which we selected 12 contracts and 
task orders for more in-depth case-study reviews. To assess the 
reliability of FPDS-NG data fields used in our analysis, we confirmed 
through the SOWs that selected contracts and task orders were 
correctly categorized as professional and management support services. 
We determined that the data were sufficiently reliable for overall 
trend analysis of these services. We also reviewed agency and 
governmentwide guidance and spoke with agency and Office of Management 
and Budget (OMB) officials. 

To determine the extent to which civilian agencies contract for 
professional and management services, we compiled information from 
FPDS-NG on procurement spending at civilian agencies for fiscal years 
2005 through 2010. For the purposes of this report, contracts 
described as professional and management support services are 
contracts categorized as "Professional, Administrative and Management 
Support Services" in the Federal Procurement Data System Product and 
Service Codes Manual. To gain greater insight into the types of 
activities included in contracts under these codes, we judgmentally 
selected five civilian agencies, the Departments of Homeland Security 
(DHS), Transportation (DOT), and Housing and Urban Development (HUD), 
the U.S. Agency for International Development (USAID), and the 
National Science Foundation (NSF), based in part on their obligations 
for professional and management support services in fiscal year 2009 
as a proportion of overall service obligations, as well as to 
represent varying agency missions and amounts of service contract 
obligations. Using the same criteria, we selected three components 
each at DHS and DOT, as these two agencies had FPDS-NG data available 
at these levels. The DHS components are the Office of the Secretary, 
the Transportation Security Administration, and U.S. Citizenship and 
Immigration Services. At DOT, we selected the Office of the Secretary 
of Transportation, the Federal Aviation Administration, and the 
Federal Transit Administration. 

From these agencies, we reviewed FPDS-NG data on obligations in fiscal 
year 2009, which at the time was the most recent full year data 
available, to select professional and management support service 
contracts and task orders for further review. To focus our analysis, 
we obtained FPDS-NG data on contract obligations from 20 specific 
service codes for professional and management services, which included 
codes identified in prior GAO work and services listed in OMB's 
inventories guidance as requiring heightened management attention. We 
also included service codes that were frequently used by the five 
agencies and that might relate to specific agency missions. See table 
6 for a list of service codes considered. 

Table 6: Professional and Management Support Service Codes Included in 
Selection Sample: 

Professional and management support services: Identified in OMB 
contract inventories guidance as requiring special management 
attention; 

Service code: R406; 
Description: Policy Review/Development Services. 

Service code: R407; 
Description: Program Evaluation Services. 

Service code: R408; 
Description: Program Management/Support Services. 

Service code: R409; 
Description: Program Review/Development Services. 

Service code: R413; 
Description: Specifications Development Services. 

Service code: R414; 
Description: Systems Engineering Services. 

Service code: R423; 
Description: Intelligence Services. 

Service code: R425; 
Description: Engineering and Technical Services. 

Service code: R497; 
Description: Personal Services Contracts. 

Service code: R707; 
Description: Contract, Procurement, and Acquisition Support Services. 

Professional and management support services: "Other" professional, 
administrative, and management services; 

Service code: R499; 
Description: Other Professional Services. 

Service code: R699; 
Description: Other Administrative Support Services. 

Service code: R799; 
Description: Other Management Support Services. 

Professional and management support services: Services that may relate 
to individual agency's mission; 

Service code: R402; 
Description: Real Estate Brokerage Services. 

Service code: R411; 
Description: Real Property Appraisals. 

Service code: R421; 
Description: Technical Assistance. 

Service code: R426; 
Description: Communication Services. 

Service code: R498; 
Description: Patent and Trademark Services. 

Service code: R706; 
Description: Logistics Support Services. 

Service code: R710; 
Description: Financial Services. 

Source: GAO analysis of OMB, FPDS-NG, and U.S. General Services 
Administration data. 

Note: Data are from OMB guidance, FPDS-NG product service codes data, 
and the U.S. General Services Administration's Federal Procurement 
Data System Product and Service Codes Manual. 

[End of table] 

From the contract obligations included under the selected codes, we 
judgmentally selected a nongeneralizable sample of 235 contracts and 
task orders to cover a range of services and obligation amounts. We 
also included contracts and task orders with descriptions, when 
available, that indicated the requested services closely supported 
inherently governmental functions or could be considered functions 
close to agencies' missions. We requested 50 contract and task order 
SOWs each from DHS, DOT, USAID, and HUD. We requested 35 SOWs from 
NSF, which had a smaller number of contracts and task orders from 
which to select in these codes. Of the 235 contracts and task orders 
requested across the five agencies, five SOWs were either not 
available from the agencies during the course of our audit work or not 
sufficiently detailed for our review purposes.[Footnote 28] 

We reviewed the SOWs from the 230 contracts and task orders provided 
and compared the services requested to the descriptions of services 
that closely support the performance of inherently governmental 
functions that are available in federal acquisition guidance. After 
conducting an initial SOW review for all of the categories describing 
services that closely support inherently governmental functions, we 
judgmentally identified 10 of the categories for more detailed review, 
including 4 categories that we addressed collectively as acquisition 
support. (See table 7.) These categories were primarily selected 
because their descriptions available in federal acquisition 
regulations allowed for a more definitive determination of services 
supporting inherently governmental functions, based on the 
descriptions available in the SOWs. 

Table 7: FAR-Identified Services That May Closely Support Inherently 
Governmental Functions Included in Our Review: 

Number: 1; 
Description: Services that involve or relate to budget preparation, 
including workload modeling, fact finding, efficiency studies, and 
should-cost analyses, etc. 

Number: 2; 
Description: Services that involve or relate to reorganization and 
planning activities. 

Number: 3; 
Description: Services that involve or relate to analyses, feasibility 
studies, and strategy options to be used by agency personnel in 
developing policy. 

Number: 5; 
Description: Services that involve or relate to the evaluation of 
another contractor's performance. 

Number: 6[A]; 
Description: Services in support of acquisition planning. 

Number: 7[A]; 
Description: Contractors providing assistance in contract management 
(such as where the contractor might influence official evaluations of 
other contractors). 

Number: 8[A]; 
Description: Contractors providing technical evaluation of contract 
proposals. 

Number: 9[A]; 
Description: Contractors providing assistance in the development of 
statements of work (SOW). 

Number: 10; 
Description: Contractors providing support in preparing responses to 
Freedom of Information Act requests. 

Number: 17; 
Description: Contractors providing inspection services. 

Source: GAO. 

Notes: The numbers associated with each service correspond to their 
placement in the list of services identified in FAR section 7.503(d). 
See appendix II for the complete list of services. 

[A] For the purposes of our review, we refer to these services 
collectively as acquisition support services. 

[End of table] 

To determine if agency officials consider and mitigate risks 
associated with using contracts for selected professional and 
management support services, we reviewed available agency guidance and 
conducted a detailed review of 12 contracts or task orders as case 
studies. From the 230 SOWs reviewed, we judgmentally selected the 12 
contracts or task orders to provide a range of obligation amounts and 
service codes, and to include cases in which the services requested 
might closely support inherently governmental functions, or represent 
contracting activity that might be typical or indicative of types of 
work contracted by that agency. We selected three contracts or task 
orders each from DHS and DOT, one from each of the selected 
components, and two contracts or task orders from each of the three 
remaining agencies. For each case study, we reviewed contract 
documentation, including available acquisition plans, oversight plans, 
and records, and interviewed contracting and program officials about 
the decision to use contractors and contractor oversight, including 
any processes and guidance used and the extent to which they 
considered potential risks. To review agency guidance and practices, 
we interviewed agency officials, including procurement, management, 
and human capital offices, to help identify available guidance. We 
requested and reviewed agency-level guidance documents, including FAR 
supplements and acquisition manuals, to identify guidance that 
addresses risks associated with professional and management support 
services contracting. We also requested and reviewed available 
guidance from the component organizations we reviewed in DHS and DOT. 

To assess agency responses to OMB efforts to address professional and 
management support services, we met with officials from the Office of 
Federal Procurement Policy and reviewed statutes and OMB documents, 
memos and policy letters that address the multisector workforce, as 
well as contracting for professional and management support services. 
We interviewed agency procurement and human capital officials about 
actions taken to respond to OMB's efforts and reviewed available 
documentation. 

[End of section] 

Appendix II: Examples of Inherently Governmental and Closely 
Supporting Inherently Governmental Functions and Associated Special 
Acquisition Requirements: 

The Federal Acquisition Regulation (FAR) section 7.503 provides 
examples of inherently governmental functions and services or actions 
that are not inherently governmental but may approach being inherently 
governmental functions based on the nature of the function, the manner 
in which the contractor performs the contract, or the manner in which 
the government administers contractor performance. These examples are 
listed in tables 8 and 9, respectively. 

Additionally, FAR section 37.114 requires agencies to provide special 
management attention to contracts for services that require the 
contractor to provide advice, opinions, recommendations, ideas, 
reports, analyses, or other work products, as they have the potential 
for influencing the authority, accountability, and responsibilities of 
government officials. It directs agencies to take steps to ensure 
these contracts do not result in performance of inherently 
governmental functions by the contractor and that government officials 
properly exercise their authority. Table 10 lists the steps agencies 
must take. 

Table 8: Examples of Inherently Governmental Functions: 

Number: 1; 
Description: The direct conduct of criminal investigations. 

Number: 2; 
Description: The control of prosecutions and performance of 
adjudicatory functions other than those relating to arbitration or 
other methods of alternative dispute resolution. 

Number: 3; 
Description: The command of military forces, especially the leadership 
of military personnel who are members of the combat, combat support, 
or combat service support role. 

Number: 4; 
Description: The conduct of foreign relations and the determination of 
foreign policy. 

Number: 5; 
Description: The determination of agency policy, such as determining 
the content and application of regulations, among other things. 

Number: 6; 
Description: The determination of Federal program priorities for 
budget requests. 

Number: 7; 
Description: The direction and control of Federal employees. 

Number: 8; 
Description: The direction and control of intelligence and counter-
intelligence operations. 

Number: 9; 
Description: The selection or non-selection of individuals for Federal 
Government employment, including the interviewing of individuals for 
employment. 

Number: 10; 
Description: The approval of position descriptions and performance 
standards for Federal employees. 

Number: 11; 
Description: The determination of what Government property is to be 
disposed of and on what terms (although an agency may give contractors 
authority to dispose of property at prices within specified ranges and 
subject to other reasonable conditions deemed appropriate by the 
agency). 

Number: 12; 
Description: In Federal procurement activities with respect to prime 
contracts: (i) Determining what supplies or services are to be 
acquired by the Government (although an agency may give contractors 
authority to acquire supplies at prices within specified ranges and 
subject to other reasonable conditions deemed appropriate by the 
agency); (ii) Participating as a voting member on any source selection 
boards; (iii) Approving any contractual documents, to include 
documents defining requirements, incentive plans, and evaluation 
criteria; (iv) Awarding contracts; (v) Administering contracts 
(including ordering changes in contract performance or contract 
quantities, taking action based on evaluations of contractor 
performance, and accepting or rejecting contractor products or 
services); (vi) Terminating contracts; (vii) Determining whether 
contract costs are reasonable, allocable, and allowable; and (viii) 
Participating as a voting member on performance evaluation boards. 

Number: 13; 
Description: The approval of agency responses to Freedom of 
Information Act requests (other than routine responses that, because 
of statute, regulation, or agency policy, do not require the exercise 
of judgment in determining whether documents are to be released or 
withheld), and the approval of agency responses to the administrative 
appeals of denials of Freedom of Information Act requests. 

Number: 14; 
Description: The conduct of administrative hearings to determine the 
eligibility of any person for a security clearance, or involving 
actions that affect matters of personal reputation or eligibility to 
participate in Government programs. 

Number: 15; 
Description: The approval of Federal licensing actions and inspections. 

Number: 16; 
Description: The determination of budget policy, guidance, and 
strategy. 

Number: 17; 
Description: The collection, control, and disbursement of fees, 
royalties, duties, fines, taxes, and other public funds, unless 
authorized by statute, such as 31 U.S.C. 952 (relating to private 
collection contractors) and 31 U.S.C. 3718 (relating to private 
attorney collection services), but not including: (i) Collection of 
fees, fines, penalties, costs, or other charges from visitors to or 
patrons of mess halls, post or base exchange concessions, national 
parks, and similar entities or activities, or from other persons, 
where the amount to be collected is easily calculated or predetermined 
and the funds collected can be easily controlled using standard case 
management techniques; and (ii) Routine voucher and invoice 
examination. 

Number: 18; 
Description: The control of the treasury accounts. 

Number: 19; 
Description: The administration of public trusts. 

Number: 20; 
Description: The drafting of Congressional testimony, responses to 
Congressional correspondence, or agency responses to audit reports 
from the Inspector General, the Government Accountability Office, or 
other Federal audit entity. 

Source: FAR section 7.503(c). 

[End of table] 

Table 9: Examples of Services That May Closely Support Inherently 
Governmental Functions: 

Number: 1; 
Description: Services that involve or relate to budget preparation, 
including workload modeling, fact finding, efficiency studies, and 
should-cost analyses, etc. 

Number: 2; 
Description: Services that involve or relate to reorganization and 
planning activities. 

Number: 3; 
Description: Services that involve or relate to analyses, feasibility 
studies, and strategy options to be used by agency personnel in 
developing policy. 

Number: 4; 
Description: Services that involve or relate to the development of 
regulations. 

Number: 5; 
Description: Services that involve or relate to the evaluation of 
another contractor's performance. 

Number: 6; 
Description: Services in support of acquisition planning. 

Number: 7; 
Description: Contractors providing assistance in contract management 
(such as where the contractor might influence official evaluations of 
other contractors). 

Number: 8; 
Description: Contractors providing technical evaluation of contract 
proposals. 

Number: 9; 
Description: Contractors providing assistance in the development of 
statements of work. 

Number: 10; 
Description: Contractors providing support in preparing responses to 
Freedom of Information Act requests. 

Number: 11; 
Description: Contractors working in any situation that permits or 
might permit them to gain access to confidential business information 
and/or any other sensitive information (other than situations covered 
by the National Industrial Security Program described in 4.402(b)). 

Number: 12; 
Description: Contractors providing information regarding agency 
policies or regulations, such as attending conferences on behalf of an 
agency, conducting community relations campaigns, or conducting agency 
training courses. 

Number: 13; 
Description: Contractors participating in any situation where it might 
be assumed that they are agency employees or representatives. 

Number: 14; 
Description: Contractors participating as technical advisors to a 
source selection board or participating as voting or nonvoting members 
of a source evaluation board. 

Number: 15; 
Description: Contractors serving as arbitrators or providing 
alternative methods of dispute resolution. 

Number: 16; 
Description: Contractors constructing buildings or structures intended 
to be secure from electronic eavesdropping or other penetration by 
foreign governments. 

Number: 17; 
Description: Contractors providing inspection services. 

Number: 18; 
Description: Contractors providing legal advice and interpretations of 
regulations and statutes to Government officials. 

Number: 19; 
Description: Contractors providing special non-law enforcement, 
security activities that do not directly involve criminal 
investigations, such as prisoner detention or transport and non-
military national security details. 

Source: FAR section 7.503(d). 

[End of table] 

Table 10: Special Acquisition Requirements for Services That Have the 
Potential for Influencing the Authority, Accountability, and 
Responsibilities of Government Officials: 

Agencies must ensure that: 

(a) A sufficient number of qualified government employees are assigned 
to oversee contractor activities, especially those that involve 
support of government policy or decision making. During performance of 
service contracts, the functions being performed shall not be changed 
or expanded to become inherently governmental; 

(b) A greater scrutiny and an appropriate enhanced degree of 
management oversight is exercised when contracting for functions that 
are not inherently governmental but closely support the performance of 
inherently governmental functions (see 7.503(c)); 

(c) All contractor personnel attending meetings, answering government 
telephones, and working in other situations where their contractor 
status is not obvious to third parties are required to identify 
themselves as such to avoid creating an impression in the minds of 
members of the public or Congress that they are government officials, 
unless, in the judgment of the agency, no harm can come from failing 
to identify themselves. They must also ensure that all documents or 
reports produced by contractors are suitably marked as contractor 
products or that contractor participation is appropriately disclosed. 

Source: GAO analysis of FAR section 37.114. 

[End of table] 

[End of section] 

Appendix III: Service Codes for Professional and Management Support 
Services: 

Executive departments and agencies are responsible for collecting and 
reporting data to the Federal Procurement Data System - Next 
Generation (FPDS-NG). Contracting officers must submit data to FPDS-
NG, including selecting a product or service code from the product 
service code field to describe the items or services requested by the 
contract. If more than one code is applicable, officials must report 
the code that describes the predominance of dollars obligated for the 
contract. Table 11 lists the codes for Professional and Management 
Support Services as defined in the Federal Procurement Data System 
Product and Service Codes Manual, both the August 1998 edition that 
was in effect at the time of our review and the August 2011 edition 
that became effective October 1, 2011. 

Table 11: Service Codes for Professional and Management Support 
Services: 

August 1998 manual: 
Product Service Code: R401; 
Description: Personal Care Services (includes such services as barber 
and beauty shop, shoe repairs, tailoring, etc.); 
August 2011 manual: 
Product Service Code: R401; 
Description: Support-Professional: Personal Care (Non-Medical); 
Includes: Barber and Beauty Shop, Shoe Repairs, Tailoring; 
Excludes: Medical Services (PSC Q). 

August 1998 manual: 
Product Service Code: R402; 
Description: Real Estate Brokerage Services; 
August 2011 manual: 
Product Service Code: R402; 
Description: Support-Professional: Real Estate Brokerage. 

August 1998 manual: 
Product Service Code: R404; 
Description: Land Surveys, Cadastral Services (non-construction); 
August 2011 manual: 
Product Service Code: R404; 
Description: Support-Professional: Land Surveys-Cadastral (Non-
Construction). 

August 1998 manual: 
Product Service Code: R405; 
Description: Operations Research and Quantitative Analysis Services; 
August 2011 manual: 
Product Service Code: R405; 
Description: Support-Professional: Operations Research/Quantitative 
Analysis. 

August 1998 manual: 
Product Service Code: R406; 
Description: Policy Review/Development Services; 
August 2011 manual: 
Product Service Code: R406; 
Description: Support-Professional: Policy Review/Development. 

August 1998 manual: 
Product Service Code: R407; 
Description: Program Evaluation Services; 
August 2011 manual: 
Product Service Code: [Empty]; 
Description: Merged with R409 into new code R410. 

August 1998 manual: 
Product Service Code: R408; 
Description: Program Management/Support Services; 
August 2011 manual: 
Product Service Code: R408; 
Description: Support-Professional: Program Management/Support; 
Includes: Situations Where The Contractor Is Solely Responsible for 
Program Management As Well As Situations Where The Contractor Provides 
Program Management Support to A Government Program Manager; 
Excludes: Program Evaluation/Review/Development (PSC R410), 
Contract/Procurement/Acquisition Support (PSC R707). 

August 1998 manual: 
Product Service Code: R409; 
Description: Program Review/Development Services; 
August 2011 manual: 
Product Service Code: [Empty]; 
Description: Merged with R407 into new code R410. 

August 2011 manual: 
Product Service Code: R410; 
Description: Support-Professional: Program 
Evaluation/Review/Development; 
Excludes: Program Management/Support (PSC R408), 
Contract/Procurement/Acquisition Support (PSC R707). 

August 1998 manual: 
Product Service Code: R411; 
Description: Real Property Appraisals Services (SIC 6531); 
August 2011 manual: 
Product Service Code: R411; 
Description: Support-Professional: Real Property Appraisals. 

August 1998 manual: 
Product Service Code: R412; 
Description: Simulation; 
August 2011 manual: 
Product Service Code: R412; 
Description: Support-Professional: Simulation. 

August 1998 manual: 
Product Service Code: R413; 
Description: Specifications Development Services; 
August 2011 manual: 
Product Service Code: R413; 
Description: Support-Professional: Specifications Development. 

August 1998 manual: 
Product Service Code: R414; 
Description: Systems Engineering Services; 
August 2011 manual: 
Product Service Code: [Empty]; 
Description: Merged with R421 into R425 based on FAR definition. 

August 1998 manual: 
Product Service Code: R415; 
Description: Technology Sharing/Utilization Services; 
August 2011 manual: 
Product Service Code: R415; 
Description: Support-Professional: Technology Sharing/Utilization. 

August 1998 manual: 
Product Service Code: R416; 
Description: Veterinary/Animal Care Services; 
August 2011 manual: 
Product Service Code: R416; 
Description: Support-Professional: Veterinary/Animal Care. 

August 1998 manual: 
Product Service Code: R418; 
Description: Legal Services; 
August 2011 manual: 
Product Service Code: R418; 
Description: Support-Professional: Legal; 
Includes: Attorney Services, Such As Testimony Preparation; 
Adjudication; Arbitration; Mediation; 
Excludes: Environmental Legal Support (PSC F115), Expert Witness (PSC 
R424), Court Reporting (PSC R606). 

August 1998 manual: 
Product Service Code: R419; 
Description: Educational Services; 
August 2011 manual: 
Product Service Code: [Empty]; 
Description: Duplicate of PSC U009. 

August 1998 manual: 
Product Service Code: R420; 
Description: Certifications and Accreditations for products and 
institutions other than educational institutions; 
August 2011 manual: 
Product Service Code: R420; 
Description: Support-Professional: Certifications and Accreditations 
(Other Than Educational Institutions or Info Tech C&A); 
Excludes: Educational Institutions and Information Technology 
Certifications and Accreditations. 

August 1998 manual: 
Product Service Code: R421; 
Description: Technical Assistance; 
August 2011 manual: 
Product Service Code: [Empty]; 
Description: Merged with R414 into R425 based on FAR definition. 

August 1998 manual: 
Product Service Code: R422; 
Description: Market Research and Public Opinion Services (includes 
telephone and field interviews, focus testing, and surveys); 
August 2011 manual: 
Product Service Code: R422; 
Description: Support-Professional: Market Research/Public Opinion; 
Includes: Telephone and Field Interviews, Focus Testing, and Surveys. 

August 1998 manual: 
Product Service Code: R423; 
Description: Intelligence Services; 
August 2011 manual: 
Product Service Code: R423; 
Description: Support-Professional: Intelligence. 

August 1998 manual: 
Product Service Code: R424; 
Description: Expert Witness; 
August 2011 manual: 
Product Service Code: R424; 
Description: Support-Professional: Expert Witness. 

August 1998 manual: 
Product Service Code: R425; 
Description: Engineering and Technical Services; 
August 2011 manual: 
Product Service Code: R425; 
Description: Support-Professional: Engineering/Technical; 
Includes: Systems Engineering, Technical Assistance, and Other 
Services Used to Support The Program Office During The Acquisition 
Cycle. 

August 1998 manual: 
Product Service Code: R426; 
Description: Communications Services; 
August 2011 manual: 
Product Service Code: R426; 
Description: Support-Professional: Communications; 
Excludes: Language Translation and Sign Language Interpretation (PSC 
R608). 

August 1998 manual: 
Product Service Code: R427; 
Description: Weather Reporting/Observation Services; 
August 2011 manual: 
Product Service Code: R427; 
Description: Support-Professional: Weather Reporting/Observation. 

August 1998 manual: 
Product Service Code: R428; 
Description: Industrial Hygienics; 
August 2011 manual: 
Product Service Code: R428; 
Description: Support-Professional: Industrial Hygienics. 

August 2011 manual: R429; 
Description: Support-Professional: Emergency Response, Disaster 
Planning, and Preparedness Support. 

August 2011 manual: R430; 
Description: Support-Professional: Physical Security and Badging. 

August 2011 manual: R431; 
Description: Support-Professional: Human Resources. 

August 1998 manual: 
Product Service Code: R497; 
Description: Personal Services Contracts; 
August 2011 manual: 
Product Service Code: R497; 
Description: Support-Professional: Personal Services Contracts. 

August 1998 manual: 
Product Service Code: R498; 
Description: Patent and Trademark Services; 
August 2011 manual: 
Product Service Code: R498; 
Description: Support-Professional: Patent and Trademark. 

August 1998 manual: 
Product Service Code: R499; 
Description: Other Professional Services; 
August 2011 manual: 
Product Service Code: R499; 
Description: Support-Professional: Other. 

August 1998 manual: 
Product Service Code: R602; 
Description: Courier and Messenger Services; 
August 2011 manual: 
Product Service Code: R602; 
Description: Support-Administrative: Courier/Messenger. 

August 1998 manual: 
Product Service Code: R603; 
Description: Transcription Services; 
August 2011 manual: 
Product Service Code: R603; 
Description: Support-Administrative: Transcription; 
Excludes: Court Reporting (PSC R606), Stenographic (PSC R609). 

August 1998 manual: 
Product Service Code: R604; 
Description: Mailing and Distribution Services; 
August 2011 manual: 
Product Service Code: R604; 
Description: Support-Administrative: Mailing/Distribution; 
Excludes: Courier/Messenger (PSC R602). 

August 1998 manual: 
Product Service Code: R605; 
Description: Library Services; 
August 2011 manual: 
Product Service Code: R605; 
Description: Support-Administrative: Library. 

August 1998 manual: 
Product Service Code: R606; 
Description: Court Reporting Services; 
August 2011 manual: 
Product Service Code: R606; 
Description: Support-Administrative: Court Reporting; 
Excludes: Transcription (PSC R603), Stenographic (PSC R609). 

August 1998 manual: 
Product Service Code: R607; 
Description: Word Processing/Typing Services; 
August 2011 manual: 
Product Service Code: R607; 
Description: Support-Administrative: Word Processing/Typing. 

August 1998 manual: 
Product Service Code: R608; 
Description: Translation and Interpreting Services (Including Sign 
Language); 
August 2011 manual: 
Product Service Code: R608; 
Description: Support-Administrative: Translation and Interpreting; 
Includes: Language Translation; Sign Language Interpretation. 

August 1998 manual: 
Product Service Code: R609; 
Description: Stenographic Services; 
August 2011 manual: 
Product Service Code: R609; 
Description: Support-Administrative: Stenographic; 
Excludes: Court Reporting (PSC R606), Transcription (PSC R603). 

August 1998 manual: 
Product Service Code: R610; 
Description: Personal Property Management Services; 
August 2011 manual: 
Product Service Code: R610; 
Description: Support-Administrative:-Personal Property Management. 

August 1998 manual: 
Product Service Code: R611; 
Description: Credit Reporting Services; 
August 2011 manual: 
Product Service Code: R611; 
Description: Support-Administrative: Credit Reporting. 

August 1998 manual: 
Product Service Code: R612; 
Description: Information Retrieval; 
August 2011 manual: 
Product Service Code: R612; 
Description: Support-Administrative: Information Retrieval; 
Includes: Services Related to Search and Storage of Text, Images, 
Video, and Other Such Data. 

August 1998 manual: 
Product Service Code: R613; 
Description: Post Office Services; 
August 2011 manual: 
Product Service Code: R613; 
Description: Support-Administrative: Post Office. 

August 1998 manual: 
Product Service Code: R614; 
Description: Paper Shredding Services; 
August 2011 manual: 
Product Service Code: R614; 
Description: Support-Administrative: Paper Shredding. 

August 2011 manual: 
Product Service Code: R615; 
Description: Support-Administrative: Background Investigation. 

August 1998 manual: 
Product Service Code: R699; 
Description: Other Administrative Support Services; 
August 2011 manual: 
Product Service Code: R699; 
Description: Support-Administrative: Other. 

August 1998 manual: 
Product Service Code: R701; 
Description: Advertising Services; 
August 2011 manual: 
Product Service Code: R701; 
Description: Support-Management: Advertising. 

August 1998 manual: 
Product Service Code: R702; 
Description: Data Collection Services; 
August 2011 manual: 
Product Service Code: R702; 
Description: Support-Management: Data Collection; 
Excludes: Market Research/Public Opinion, to Include Telephone and 
Field Interviews, Focus Testing, and Surveys (PSC R422). 

August 1998 manual: 
Product Service Code: R703; 
Description: Accounting Services (NOTE: New code created for Financial 
Services See R710 below); 
August 2011 manual: 
Product Service Code: R703; 
Description: Support-Management: Accounting. 

August 1998 manual: 
Product Service Code: R704; 
Description: Auditing Services; 
August 2011 manual: 
Product Service Code: R704; 
Description: Support-Management: Auditing. 

August 1998 manual: 
Product Service Code: R705; 
Description: Debt Collection Services; 
August 2011 manual: 
Product Service Code: R705; 
Description: Support-Management: Debt Collection. 

August 1998 manual: 
Product Service Code: R706; 
Description: Logistics Support Services; 
August 2011 manual: 
Product Service Code: R706; 
Description: Support-Management: Logistics Support. 

August 1998 manual: 
Product Service Code: R707; 
Description: Contract, Procurement, and Acquisition Support Services; 
August 2011 manual: 
Product Service Code: R707; 
Description: Support-Management: Contract/Procurement/Acquisition 
Support. 

August 1998 manual: 
Product Service Code: R708; 
Description: Public Relations Services (includes writing services, 
event planning and management, media relations, radio and television 
analysis, and press services); 
August 2011 manual: 
Product Service Code: R708; 
Description: Support-Management: Public Relations; 
Includes: Writing Services, Event Planning and Management, Media 
Relations, Radio and Television Analysis, Press Services. 

August 1998 manual: 
Product Service Code: R709; 
Description: Ongoing Audit Operations Support; 
August 2011 manual: 
Product Service Code: [Empty]; 
Description: Duplicate of R704. 

August 1998 manual: 
Product Service Code: R710; 
Description: Financial Services (includes credit card services and any 
other financial services. See revision to description for code R703 
above); 
August 2011 manual: 
Product Service Code: R710; 
Description: Support-Management: Financial; 
Includes: Credit Card Services. 

August 1998 manual: 
Product Service Code: R711; 
Description: Banking Services (includes accepting and cashing 
government checks and other payment instruments, accepting direct 
deposits, accepting payments to the government from the public such as 
excise taxes and duties, maintaining bank accounts); 
August 2011 manual: 
Product Service Code: R711; 
Description: Support-Management: Banking; 
Includes: Accepting and Cashing Government Checks and Other Payment 
Instruments, Accepting Direct Deposits, Accepting Payments to The 
Government From The Public. 

August 1998 manual: 
Product Service Code: R712; 
Description: Coin Minting; 
August 2011 manual: 
Product Service Code: R712; 
Description: Support-Management: Coin Minting. 

August 1998 manual: 
Product Service Code: R713; 
Description: Banknote Printing; 
August 2011 manual: 
Product Service Code: R713; 
Description: Support-Management: Banknote Printing. 

August 1998 manual: 
Product Service Code: R799; 
Description: Other Management Support Services; 
August 2011 manual: 
Product Service Code: R799; 
Description: Support-Management: Other. 

Source: U.S. General Services Administration. 

Note: Information obtained from the U.S. General Services 
Administration's Federal Procurement Data System Product and Service 
Codes Manual, August 1998 edition and August 2011 edition. 

[End of table] 

[End of section] 

Appendix IV: List of Services Requiring Special Consideration in OMB 
Inventory Guidance and Services Identified in OMB Cost Savings 
Initiative: 

In November 2010, the Office of Management and Budget (OMB) issued an 
Office of Federal Procurement Policy (OFPP) memo with guidance to help 
agencies conduct a required service contract inventory for fiscal year 
2010.[Footnote 29] According to the guidance, the insight obtained 
from conducting the inventories is especially important for contracts 
whose performance may involve critical functions or functions closely 
associated with inherently governmental functions, as may be the case, 
for example, with contracts for various professional, administrative 
and management services falling within "Code R" of the Federal 
Procurement Data System Product and Services Codes Manual. The 
guidance further states that agencies should conduct an analysis of 
their inventories, giving priority consideration to functions that 
require increased management attention due to heightened risk of 
workforce imbalance. It provided an illustrative list of functions and 
their service code identified by OMB for heightened management 
consideration, based on concerns of increased risk of losing control 
of mission and operations as identified through a review of reports 
issued in recent years. 

In July 2011, OMB announced a cost savings initiative focused on 
agency contracts for management support services.[Footnote 30] 
Agencies were directed to reduce their spending on such services by 15 
percent by the end of fiscal year 2012. In November 2011, OMB issued 
guidance identifying 12 service codes that describe management support 
services.[Footnote 31] Table 12 shows the list of service codes from 
both initiatives. 

Table 12: Service Codes Identified in Recent OMB Initiatives: 

Service Code: B505; 
Description: Cost Benefit Analyses; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Empty]. 

Service Code: D302; 
Description: ADP Systems Development Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: D307; 
Description: Automated Information Systems Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: D310; 
Description: ADP Backup and Security Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: D314; 
Description: ADP System Acquisition Support Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: R406; 
Description: Policy Review/Development Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Empty]. 

Service Code: R407; 
Description: Program Evaluation Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Empty]. 

Service Code: R408; 
Description: Program Management/Support Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: R409; 
Description: Program Review/Development Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Empty]. 

Service Code: R413; 
Description: Specifications Development Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: R414; 
Description: Systems Engineering Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: R421; 
Description: Technical Assistance; 
Codes in inventory guidance: [Empty]; 
Codes in cost savings initiative: [Check]. 

Service Code: R423; 
Description: Intelligence Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: R425; 
Description: Engineering and Technical Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: R497; 
Description: Personal Services Contracts; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Service Code: R707; 
Description: Contract, Procurement, and Acquisition Support Services; 
Codes in inventory guidance: [Check]; 
Codes in cost savings initiative: [Check]. 

Source: GAO analysis of Federal Procurement Data System - Next 
Generation (FPDS-NG) and OMB data. 

[End of table] 

Appendix V: Comments from Department of Homeland Security: 

U.S. Department of Homeland Security: 
Washington, DC 20528: 

November 15, 2011: 

John P. Hutton: 
Director, Acquisition and Sourcing Management: 
441 G Street, NW: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Re: Draft Report GAO-12-87, "Managing Service Contracts: Recent Efforts
to Address Associated Risks Can be Further Enhanced" 

Dear Mr. Hutton: 

Thank you for the opportunity to review and comment on the subject 
draft report. The U.S. Department of Homeland Security (DHS) 
appreciates the U.S. Government Accountability Office's (GAO's) work 
in planning and conducting its review and issuing this report. 

The Department is pleased to note that GAO found that of the five 
agencies reviewed, DHS alone had taken steps to incorporate all 
related Office of Management and Budget efforts into processes that 
examine the use of professional and management support services. In 
addition, the report also recognizes that DHS was the only agency with 
a policy in place for reviewing service contracts to help program 
offices balance their use of contracted and government personnel. 

Although the draft report contains no recommendations for DHS, the 
Department remains committed to ensuring risks related to professional 
and management support service contracts are mitigated to the maximum 
extent reasonably possible. For example, since the Office of
Federal Procurement Policy (OFPP) Policy Letter (PL) 11-01 was issued 
in September, DHS has: 

* Issued a new Acquisition Alert 11-30, rescinding Acquisition Alert 
09-06, which allows each Head of Contracting Activity to establish 
implementing policies, processes, and procedures including internal 
controls and review processes. The new Alert 11-30 is currently being 
amended to include legal concurrence for service contracts equal to or 
exceeding the Simplified Acquisition Threshold of $150,000. 

* Expanded its Special Interest Function Codes to include R499, 8699, 
and R799. 

* Compiled with the training requirement outlined in OFPP PL 11-01. 
DHS provided training on November, 2011, to the acquisition workforce 
on Balanced Workforce Strategy Guidance as well as Acquisition Alert 
11-30. Training is on-going and additional sessions have been 
scheduled for November, December, and January. 

Again, thank you for the opportunity to review and comment on this 
draft report. General, technical and sensitivity comments were 
previously provided under separate cover. We look forward to working 
with you on future Homeland Security issues. 

Sincerely, 

Signed by: 

Jim H. Crumpacker: 
Director: 
Departmental GAO-OIG Liaison Office: 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John P. Hutton, (202) 512-4841 or huttonj@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Katherine Trimble, Assistant 
Director; Jennifer Dougherty; Jacques Arsenault; Robert Campbell; 
Kristin Van Wychen; Sarah Viranda; Laura Greifner; Julia Kennon; 
Sylvia Schatz; and Kenneth Patton made key contributions to this 
report. 

[End of section] 

Footnotes: 

[1] For the purpose of this report, professional and management 
support service contracts refers to contracts categorized as 
"Professional, Administrative and Management Support Services" in the 
Federal Procurement Data System Product and Service Code Manual. See 
appendix III for a list of these product service codes. 

[2] GAO, Defense Acquisitions: Further Actions Needed to Address 
Weakness in DOD's Management of Professional and Management Support 
Contracts, [hyperlink, http://www.gao.gov/products/GAO-10-39] 
(Washington, D.C.: Nov. 20, 2009) and Department of Homeland Security: 
Improved Assessment and Oversight Needed to Manage Risk of Contracting 
for Selected Services, [hyperlink, 
http://www.gao.gov/products/GAO-07-990] (Washington, D.C.: Sept. 17, 
2007). 

[3] Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, Division D, § 
736. 

[4] Office of Federal Procurement Policy, Inherently Governmental 
Functions, OFPP Policy Letter 92-1 (Sept. 23, 1992 [Rescinded]); 
Office of Federal Procurement Policy, Management Oversight of Service 
Contracting, OFPP Policy Letter 93-1 (May 18, 1994). 

[5] FAR 7.503(c) includes a list of functions that are considered to 
be inherently governmental. See appendix II for the complete list. 

[6] [hyperlink, http://www.gao.gov/products/GAO-10-39] and [hyperlink, 
http://www.gao.gov/products/GAO-07-990]. 

[7] For the purposes of our review of contract statements of work 
(SOW), acquisition support includes assisting with acquisition 
planning, contract management, technical evaluation of contract 
proposals, and developing contract requirements such as SOWs. 

[8] In fiscal year 2010, USAID accounted for 83 percent of civilian 
agency obligations for contracts coded as Technical Assistance. The 
majority of SOWs we reviewed in this code (21 out of 27) were USAID 
contracts. The Technical Assistance code was merged into the code for 
Engineering and Technical Services effective October 1, 2011. See 
appendix III for a list of professional and management support service 
codes and a crosswalk showing changes that took effect October 1, 2011. 

[9] Under 49 U.S.C. § 5327(c), Congress authorizes the Federal Transit 
Administration to use a percentage of annual program funds to contract 
for oversight services. According to a senior agency official, 
approximately $77,000,000 was available to contract for oversight 
services in fiscal year 2011. The official said that employees are 
paid through a separate Administrative Expense Account. 

[10] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). The federal internal control 
standards provide a framework to identify and address areas at 
greatest risk of mismanagement, waste, fraud, and abuse, and require 
assessments of risks. 

[11] A senior OFPP official told us that it anticipates potential FAR 
changes as a result of the OFPP Policy Letter 11-01. These changes may 
include cross-references to better link the FAR section that describes 
services that closely support the performance of inherently 
governmental functions (FAR 7.503(d)) and the section describing the 
need for enhanced management oversight (FAR 37.114(b)). 

[12] [hyperlink, http://www.gao.gov/products/GAO-07-990]. 

[13] The third DHS task order we reviewed was awarded in 2009, shortly 
after the issuance of DHS guidance. 

[14] DHS requires all contract awards, options, and task or delivery 
orders with an annual value greater than $1 million but less than $50 
million to be reviewed by the applicable Head of Contracting Activity. 
Awards, options, and orders with an annual value greater than $50 
million must be reviewed by the Component Acquisitions Executive, with 
concurrence from the Chief Procurement Officer. 

[15] USAID's institutional support contracts can include program 
support functions similar to professional and management support 
services. USAID defines institutional support contractor as a non-
personal-services contractor, funded by USAID to support agency 
operations or to augment the agency's direct hire and personal 
services staff, or both. Personnel employed by an Institutional 
Support Contractor may be seated within USAID space, space rented by 
or on behalf of the agency, or in the Institutional Support 
Contractor's space. Institutional Support Contractors may be funded by 
either program or operating expense. While the majority of these 
individuals provide administrative and information technology support 
to the agency, some personnel employed by non-personal-services 
contractors in headquarters provide program-related support. 

[16] The Federal Aviation Administration is exempt from the FAR and 
follows the guidance of the Acquisition Management System (AMS). AMS 
incorporates FAR language regarding prohibition on contractors 
performing inherently governmental functions but does not specifically 
call for greater scrutiny or enhanced oversight when contracting for 
services that closely support inherently governmental functions. 

[17] This requirement applied to the 24 agencies subject to the Chief 
Financial Officers Act. 

[18] GAO, OMB Service Contracts Inventory Guidance and Implementation, 
[hyperlink, http://www.gao.gov/products/GAO-11-538R] (Washington, 
D.C.: May 27, 2011). 

[19] In 2009, we reported that nine civilian agencies we reviewed 
(including DHS and DOT) had not met the statutory date for developing 
and implementing their insourcing guidelines and procedures. GAO, 
Civilian Agencies' Development and Implementation of Insourcing 
Guidelines, [hyperlink, http://www.gao.gov/products/GAO-10-58R] 
(Washington, D.C.: Oct. 6, 2009). 

[20] Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, Division D, 
§ 736. 

[21] [hyperlink, http://www.gao.gov/products/GAO-07-990]. 

[22] OMB Notice of Proposed Policy Letter, Work Reserved for 
Performance by Federal Government Employees, 75 Fed. Reg. 16188 (Mar. 
31, 2010). 

[23] White House Forum on Accountability in Federal Contracting, July 
7, 2011. 

[24] OMB Memorandum, Reduced Contract Spending for Management Support 
Services (Nov. 7, 2011). 

[25] OFPP Memorandum, Service Contract Inventories (Nov. 5, 2010). 

[26] Two-thirds of the codes identified by OMB are professional and 
management support services, including program management support, 
acquisitions support, and policy development services. 

[27] GAO, Federal Contracting: OMB's Acquisition Savings Initiative 
Had Results, but Improvements Needed, [hyperlink, 
http://www.gao.gov/products/GAO-12-57] (Washington, D.C.: Nov. 15, 
2011). 

[28] Two of the five SOWs that were not reviewed were placed under 
simplified acquisition procedures and did not provide enough detail 
for our review. For the three remaining SOWs, in one case agency 
officials told us an SOW was awarded by an agency component that we 
did not select for our review. For another SOW, an agency official 
said that it did not use a SOW for an order for a licensing agreement; 
we did not look into the circumstances under which that order was 
placed. Finally, one SOW was not provided by the agency in a timely 
manner. 

[29] OFPP Memorandum, Service Contract Inventories (Nov. 5, 2010). 

[30] White House Forum on Accountability in Federal Contracting, July 
7, 2011. 

[31] OMB Memorandum, Reduced Contract Spending for Management Support 
Services (Nov. 7, 2011). 

[End of section] 

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