Pension Benefit Guaranty Corporation
Some Steps Have Been Taken to Improve Contracting, but a More Strategic Approach is Needed
GAO-08-871, Sep 18, 2008
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The Pension Benefit Guaranty Corporation (PBGC) insures the pensions of more than 44 million workers in over 30,000 employer-sponsored defined benefit pension plans. In response to growing workloads, PBGC has come to rely heavily on contractors to conduct its work. GAO was asked to report on (1) the role that contracting plays in PBGC's efforts to accomplish its mission, (2) the steps PBGC has taken to improve its acquisition infrastructure and develop a strategic approach to guide its contracting activities, and (3) the steps PBGC has taken to improve its contract oversight processes to ensure accountability. To address these issues, we interviewed PBGC officials and selected contractors, reviewed data on PBGC's contracting activities; identified changes PBGC is making to contracting procedures; and identified strategies PBGC uses to monitor contracts.
Contracting plays a central role in helping PBGC achieve its mission and address unpredictable workloads. Since the mid-1980s, PBGC has had contracts covering a wide range of services, including the administration of terminated plans, payment of benefits, customer communication, legal assistance, document management, and information technology. PBGC's workforce currently consists of about 800 federal employees and utilizes the services of about 1,500 contract employees. From fiscal year 2000 through 2007, PBGC's contract spending increased steadily along with its overall budget and workload, and its use of contract employees has outpaced its hiring of federal employees. As its workloads have grown due to a significant number of large pension plan terminations, PBGC has relied on contractors to supplement its workforce, acknowledging that it has difficulty anticipating its workloads due to unpredictable economic conditions. PBGC is taking steps to improve its acquisition infrastructure, but the Procurement Department is not yet part of PBGC's strategic decision-making process. In 2007, PBGC began to take steps to realign its Procurement Department, update contracting policies and processes, upgrade the skills of Procurement Department staff, and better track contracting data. PBGC's efforts begin to provide an improved foundation for the contracting function; however, these efforts are early steps and more remains to be done. PBGC has not fully integrated its contracting function at the corporate level; the Procurement Department is not included in corporate-level strategic planning and does not have a presence on PBGC's relevant strategic teams. PBGC has made improvements to contractor oversight and has begun to implement performance-based contracting that offers the potential for better contract outcomes, but also creates new challenges for contract oversight and monitoring efforts. PBGC has implemented new contract monitoring activities, improved oversight activities for some of its major contracts, and developed comprehensive procedures to direct contracting activities. For its field benefit administration office contracts, PBGC developed performance measures and scorecards, providing feedback about contractor performance in terms of timeliness and accuracy of benefit payments. Despite these improvements, most of PBGC's current contracts still lack performance incentives and methods to hold contractors accountable. PBGC recently began awarding more performance-based contracts, as a means to achieve better outcomes. Although performance-based contracting is recognized as a viable way toward getting better results from contractors, GAO and others have identified common challenges agencies face when implementing this approach--from deciding which contracts are appropriate for a performance-based approach to deciding which outcomes to measure and emphasize. PBGC procurement officials recognize the benefits and challenges of performance-based contracting, and that they must provide additional oversight of contracts and a different approach to contract monitoring that focuses on outcomes rather than processes.
Status Legend:
Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
- In Process
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To improve PBGC's contract management as it implements a performance-based approach to contracting, the Director of PBGC should develop practices to help ensure accountability for the Procurement Department staff carrying out contract monitoring responsibilities.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Open
Comments: GAO is currently reviewing the agency's response to this recommendation as part of an ongoing study on the agency's management of contracting activity (GAO job code 130959). In 2008, PBGC stated that Procurement Department staff work closely with departmental representatives to ensure that statements of work and resulting contracts are properly structured to achieve desired outcomes. In FY10, PBGC reported that in November 2008, 3 new FTEs (OPM series 1102 Contract Administrators) were added to the Procurement Department staff. In May 2009, a contract was issued to Martek to provide two contract close-out specialists. According to PBGC, these additional assets, which comprise the newly-created Policy Compliance/Contract Administration Division within the Procurement Department, are dedicated to the proper administration and accountability of PBGC contracts. It is, however, unclear how PBGC will ensure that contracts are structured to include quality monitoring and mechanisms to ensure that deficiencies can be corrected and good performance is rewarded. In addition, it is unclear how PBGC will ensure that monitoring plans are developed and that contract monitoring is occurring.
Recommendation: To improve PBGC's contract management as it implements a performance-based approach to contracting, the Director of PBGC should provide comprehensive training on performance-based contracting for PBGC's Procurement Department staff, managers, and acquisition-related workforce.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Open
Comments: GAO is currently reviewing the agency's response to this recommendation as part of an ongoing study on the agency's management of contracting activity (GAO job code 130959). In 2008, PBGC reported that it began training Procurement Department staff of developing performance-based statements of work. In 2010, PBGC noted that the PBGC Training Institute provides a wide range of procurement-related training for Procurement Department personnel and COTRs, such as training on performance-based contracting. The Training Institute contracted with Management Concepts, Inc., which provided on-site performance-based service acquisition training to the PBGC acquisition workforce from October 5-9, 2009. PBGC plans to offer this course annually as initial and refresher training. In addition, the Procurement Department has incorporated training in performance-based contracting in its Acquisition Excellence Workshops.
Recommendation: To improve PBGC's performance in an environment of heavy contractor use, the Director of PBGC should revise its strategic plan and, in drafting the corporation's human capital strategic plan, reflect the importance of contracting and PBGC's use of contractors, project its vision of future contractor use, and better link staffing and contracting decisions at the corporate level. In drafting the plan, the Director of PBGC should develop metrics for PBGC's annual performance plan that document how the acquisition function supports PBGC's missions and goals. These could include metrics related to acquisition efficiency and customer satisfaction.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Open
Comments: GAO is currently reviewing the agency's response to this recommendation as part of an ongoing study on the agency's management of contracting activity (GAO job code 130959). PBGC states that it currently has metrics relating to contracting performance in individual performance plans of senior executives with major contracting projects, as well as in those of Procurement Department employees. PBGC will review whether these measures can be incorporated into the annual performance budget to document how the acquisition function supports PBGC's mission and goals.
Recommendation: To improve PBGC's performance in an environment of heavy contractor use, the Director of PBGC should revise its strategic plan and, in drafting the corporation's human capital strategic plan, reflect the importance of contracting and PBGC's use of contractors, project its vision of future contractor use, and better link staffing and contracting decisions at the corporate level. In drafting the plan, the Director of PBGC should assess PBGC's contract information to determine if additional information is needed to support strategic acquisition management decisions. This could include more complete information on goods and services purchased, as well as suppliers and spending patterns. In addition, contract spending information should be integrated into PBGC's financial system, to allow acquisition staff to obtain real-time information on the availability of funds, status of obligations and expenditures, and payments for the receipt of goods and services.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Open
Comments: GAO is currently reviewing the agency's response to this recommendation as part of an ongoing study on the agency's management of contracting activity (GAO job code 130959). In 2008, PBGC stated it would assess existing contract information to determine whether additional information is needed to support strategic acquisition management decisions. PBGC also stated that existing financial systems provide extensive information on contract spending. In FY10, PBGC reported that information needed to support strategic acquisition management decisions is available from the Procurement Department. The information is retrievable from data archived in Comprizon, PBGC's requisition and contract writing system, and the Federal Procurement Data System. Current procurement actions are captured on the Procurement Department's Procurement Status Chart. While PBGC is seeking funds to integrate Comprizon with CFS, information regarding the availability of funds, status of obligations and expenditures, and payments for the receipts of goods and services is already available within CFS. Contracting officers in the Procurement Department and COTRs have access to and use this information.
Recommendation: To improve PBGC's performance in an environment of heavy contractor use, the Director of PBGC should revise its strategic plan and, in drafting the corporation's human capital strategic plan, reflect the importance of contracting and PBGC's use of contractors, project its vision of future contractor use, and better link staffing and contracting decisions at the corporate level. In drafting the plan, the Director of PBGC should include in PBGC's human capital plan detailed plans for how contract support will be obtained.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Open
Comments: GAO is currently reviewing the agency's response to this recommendation as part of an ongoing study on the agency's management of contracting activity (GAO job code 130959). In FY10, PBGC reported that human capital management, including contractor support, is a planned process that is strategically linked to their goals. However, PBGC's Human Capital Strategic Plan for 2010-2014 does not include any detail about how contractor support will be used to meet PBGC's goals. The plan acknowledges that the heavy reliance on contractor support is a challenge, but none of the actions to be taken explicitly address how the contractor workforce will be utilized. The list of actions to be taken focuses on the federal workforce, which currently makes up about 1/3 of the agency's workforce. PBGC also stated that it issued Directive GA 15-4: "Guidelines for Determining Whether to use Contractors or Government Employees and Contracting with PBGC Retirees" in August 2009, which details the employment of, and method of obtaining contractor support. While Directive GA 15-4 is a positive step in helping PBGC decide whether to use contractors or federal employees going forward, it addresses the issue in isolation as individual needs arise. PBGC also needs to address the use of contractors from a more strategic level, including current and future needs.
Recommendation: To improve PBGC's performance in an environment of heavy contractor use, the Director of PBGC should revise its strategic plan and, in drafting the corporation's human capital strategic plan, reflect the importance of contracting and PBGC's use of contractors, project its vision of future contractor use, and better link staffing and contracting decisions at the corporate level. In drafting the plan, the Director of PBGC should broaden the Procurement Department's May 2007 staffing study to include as part of PBGC's agency-wide acquisition workforce those positions outside of the Procurement Department that have a significant impact on procurement outcomes (i.e., requirements staff, program managers, financial managers, and individuals involved in contract monitoring). The study should determine appropriate staffing levels for these positions as the May 2007 study did for Procurement Department staff.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Closed - Implemented
Comments: As part of PBGC's human capital strategic planning process, PBGC conducted a comprehensive review of necessary staffing levels across the agency relating to procurement functions and future contracting needs. In response to our recommendation, the agency expanded it to include acquisition positions outside of the Procurement Department. They identified the universe of acquisition positions at PBGC; conducted a review of best practices using GAO's Framework for Assessing the Acquisition Workforce; and assessed their acquisition staffing levels using data from the Federal Procurement Data System and the Federal Acquisition Institute, including supplemental analysis of PBGC's Contracting Officer Technical Representative's workload data.
Recommendation: To improve PBGC's performance in an environment of heavy contractor use, the Director of PBGC should revise its strategic plan and, in drafting the corporation's human capital strategic plan, reflect the importance of contracting and PBGC's use of contractors, project its vision of future contractor use, and better link staffing and contracting decisions at the corporate level. In drafting the plan, the Director of PBGC should ensure that the Procurement Director sits on PBGC's three strategic teams--the Operations Integration Board, the Budget and Planning Integration Team, and the Capital Planning for Information Technology Team.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Open
Comments: GAO is currently reviewing the agency's response to this recommendation as part of an ongoing study on the agency's management of contracting activity (GAO job code 130959). In 2010, PBGC reported that the Director of the Procurement Department regularly provides advice and consultation on procurement-related issues to the 3 strategic planning and coordination teams, among others: the Operations Integration Board (OIB), the Budget and Planning Integration Team (BPIT), and the Information Technology Investment Resources Board (previously known as the Capital Planning for Information and Technology Team). According to PBGC, when contracting plans or requirements are involved in meetings with these groups, appropriate coordination with the Procurement Department occurs. The Director also participates in weekly Department Director meetings and regularly participates in agency-wide strategic planning sessions. PBGC believes there are greater gains to be realized by continuing to emphasize executive-level awareness of procurement issues in decision-making than by requiring the Director of Procurement Department to sit on specific corporate committees. GAO acknowledges that it is important to emphasize executive-level awareness of procurement issues. However, the procurement department's role in the organization is not consistent with the role that procurement plays in achieving the agency's mission, both in terms of dollars spent and in terms of the size of the contractor workforce. By not involving the Procurement Department until it is clear that the agency will be contracting for the good or service, PBGC misses the opportunity to use the procurement department's expertise to focus more strategically on how the Procurement Department can help PBGC achieve its strategic goals.
Recommendation: To improve PBGC's performance in an environment of heavy contractor use, the Director of PBGC should revise its strategic plan and, in drafting the corporation's human capital strategic plan, reflect the importance of contracting and PBGC's use of contractors, project its vision of future contractor use, and better link staffing and contracting decisions at the corporate level. In drafting the plan, the Director of PBGC should include the Procurement Department in agency-wide strategic planning.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Open
Comments: GAO is currently reviewing the agency's response to this recommendation as part of an ongoing study on the agency's management of contracting activity (GAO job code 130959). PBGC believes its current strategic plan is sufficiently comprehensive to address the recommendation. In response, GAO stated that the strategic plan only briefly mentions performance-based contracting, flexible staffing and metrics for specific contracts, and therefore it does not reflect the important role contracting is playing in achieving PBGC's mission. In January 2010, PBGC reported that its final Human Capital Strategic Plan for 2010-2014 (HCSP) recognizes the importance of contracting by including procurement specialists in its list of 8 mission critical occupations. According to PBGC, the plan: 1) emphasizes identifying current and future staffing needs, developing strategies for attracting and retaining top talent, and providing for meaningful career development; 2) recognizes the key role that contractors and their employees play in supporting PBGC; and 3) emphasizes PBGC's ability to maintain an effective cadre of contract specialists and COTRs to provide effective oversight of contractor activities. While PBGC's Human Capital Strategic Plan for 2010-2014 does acknowledge the challenge of balancing the contractor and federal workforce, it's list of actions to be taken is focused primarily on the federal workforce, which currently makes up one-third of PBGC's workforce. Further, the Procurement Department provides input to the corporate strategic planning process in various ways, including review and concurrence on all advance procurement plans where the estimated value is greater than $100,000. The Director of the Procurement Department has direct access to Department Directors (weekly meetings) and, reporting directly to the Chief Management Officer, advises the Executive Management Committee on procurement-related issues. The Director also participates in PBGC's strategic planning sessions. By involving the Director after a decision to procure has been made to procure a good or service valued greater than $100,000, PBGC misses the opportunity to gain the Procurement Department's insight very early in the process before the decision has been made.
Recommendation: To improve PBGC's contract management as it implements a performance-based approach to contracting, the Director of PBGC should ensure that future contracts measure performance in terms of outcomes, provide incentives for the accomplishment of desired outcomes, and ensure payment of award fees only for excellent performance.
Agency Affected: Pension Benefit Guaranty Corporation
Status: Open
Comments: GAO is currently reviewing the agency's response to this recommendation as part of an ongoing study on the agency's management of contracting activity (GAO job code 130959). In FY10, PBGC reported that its Procurement Department staff works closely with its customers to properly analyze requirements and to ensure that, when possible, requirements are staffed in performance-based terms and resulting contracts are structured to achieve desired outcomes. To ensure proper review of future requirements, PBGC has implemented, through Directive FM 15-1, a process for the Advance Procurement Planning (APP) of all requirements with an estimated value greater than $100,000. FM 15-1 also includes provisions related to justification and approval of labor-hour contracts. The APP requires concurrence by the Acquisition Division Chief and approval by the Department Director. It is not clear, however, that PBGC has implemented a performance-based approach to contracting, that contracts measure performance in terms of outcomes, or provide incentives for accomplishment of desired outcomes.