Pension Benefit Guaranty Corporation:

Some Steps Have Been Taken to Improve Contracting, but a More Strategic Approach is Needed

GAO-08-871: Published: Aug 18, 2008. Publicly Released: 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.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: PBGC has consistently maintained that its existing processes are sufficient to ensure adequate involvement of the Procurement Department in its agency-wide strategic planning. However, GAO has maintained that to date, the agency's strategic plans have not adequately reflected the importance of contracting, especially with respect to workforce planning. GAO reviewed the agency's response to this recommendation as part of a subsequent report on the agency's management of contracting activity (GAO-11-588), and concluded that further efforts are needed to improve the integration of procurement in agency-wide strategic planning.

    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

  2. Status: Closed - Not Implemented

    Comments: PBGC has consistently maintained that having the Procurement Director sit on PBGC's three strategic teams is not needed to ensure adequate communication and involvement of the Procurement Department in its agency-wide strategic planning. However, GAO has maintained that the agency's strategic plans have not adequately reflected the importance of contracting, especially with respect to workforce planning, and that having the Procurement Director on these teams is one way to promote increased attention to contracting issues. GAO reviewed the agency's response to this recommendation as part of a subsequent report on the agency's management of contracting activity (GAO-11-588), and concluded that further efforts are needed to improve the integration of procurement in agency-wide strategic planning.

    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

  3. 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 this review 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 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

  4. Status: Closed - Implemented

    Comments: PBGC has consistently maintained that its existing processes for managing human capital, including contractor support, ensure adequate linkage between staffing and contracting decisions at the corporate level. Nevertheless, in its 2010 update concerning this recommendation, PBGC noted that in August 2009, the agency issued Directive GA 15-4: "Guidelines for Determining Whether to Use Contractors or Government Employees and Contracting with PBGC Retirees," detailing the employment of, and method of obtaining contractor support. Moreover, in its 2011 update, PBGC noted that the basis for whether contract support is needed relative to use of federal employees is now required to be documented as part of the Advanced Procurement Plan (APP), which requires that service contracts include a federal employees versus contractors' decision documentation. As noted in a recent GAO report on the agency's management of contracting activity (GAO-11-588), this new requirement was implemented beginning in February 2011.

    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

  5. Status: Closed - Implemented

    Comments: In response to this recommendation, PBGC stated it would assess existing contract information to determine whether additional information is needed to support strategic acquisition management decisions. In 2010, PBGC reported that the information needed to support strategic acquisition management decisions is available from the Procurement Department, retrievable from data archived in Comprizon, PBGC's requisition and contract writing system, and the Federal Procurement Data System. In its 2011 update, PBGC reported that the system is operating as designed, and that as of June 20, 2011, Comprizon has been integrated with CFS, the system that provides information regarding the availability of funds, status of obligations and expenditures, and payments for the receipts of goods and services. 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 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

  6. Status: Closed - Not Implemented

    Comments: PBGC stated that it would review whether metrics related to contracting performance in individual performance plans and those included in the automated customer service questionnaire, can be used to document how the acquisition function supports PBGC's mission and goals. In its 2011 update, PBGC reported that in December 2010, the agency issued Directive PM 25-05: "Selection, Appointment, Training and Management of Contracting Officer Technical Representatives (COTRs) and Task Monitors (TMs)," mandating the evaluation of COTR responsibilities in employee's performance appraisals with corresponding metrics. While Directive PM 25-05 is a positive step toward holding employees accountable for their contract-related responsibilities, and may provide useful metrics that may also be used to document how the acquisition function supports PBGC's mission and goals, measuring individual employee's contract-related performance is not the same as measuring the contractor's quality of service. GAO reviewed the agency's response to this recommendation as part of a subsequent report on the agency's management of contracting activity (GAO-11-588), and concluded that further efforts are needed to improve the documentation of how the acquisition function supports PBGC's missions 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 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

  7. Status: Closed - Implemented

    Comments: PBGC agreed with this recommendation and has now implemented more comprehensive training on performance-based contracting for PBGC staff. In its 2010 update, PBGC noted that the PBGC Training Institute was providing a wide range of procurement-related training for Procurement Department personnel and COTRs, such as training on performance-based contracting, and that the Training Institute had 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 noted that it planned to offer this course annually as initial and refresher training. Performance-based contracting was offered again on August 9-13, 2010, and on August 3-4, 2011, to staff, managers, and acquisition-related workers agency-wide. In addition, as noted in our subsequent report, GAO-11-588, the Procurement Department has also incorporated training in performance-based contracting in its Acquisition Excellence Workshops.

    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

  8. Status: Closed - Implemented

    Comments: In response to this recommendation, PBGC has implemented various practices to help ensure accountability for the Procurement Department staff carrying out contract monitoring responsibilities. For example, PBGC reported adding three new Procurement Department staff in November 2008 (OPM series 1102 Contract Administrators). In its 2010 update, PBGC also noted that in May 2009, a contract was issued to Martek to provide two contract close-out specialists to conduct annual reviews of COTR files. In its 2011 update, PBGC provided data indicating that these annual reviews had been conducted on 182 of 242 total COTR files, and 48 of 50 purchase cards files. These reviews help ensure that COTRs are properly certified and meeting on-going training requirements, and that the COTR files are complete and appropriately document relevant contract actions. Once the reviews are complete, a memo is sent by the Procurement Department to the Contracting Officer, COTR and the COTR's supervisor advising them of the results. If deficiencies are noted, corrective actions are specified for management follow-up. In addition, PBGC's new directive issued in December 2010 (Directive PM 25-05: "Selection, Appointment, Training and Management of Contracting Officer Technical Representatives (COTRs) and Task Monitors (TMs)") mandates the evaluation of COTR responsibilities in employee's performance appraisals with corresponding metrics, thus also serving to help hold COTRs accountable.

    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

  9. Status: Closed - Not Implemented

    Comments: PBGC has maintained that existing processes are sufficient to ensure that future contracts adequately measure performance in terms of outcomes, and that award fees are paid only for excellent performance. PBGC noted that Procurement Department staff work closely with departmental representatives to ensure that statements of work and resulting contracts are properly structured to achieve the desired outcomes. In its 2010 update, PBGC added that the agency ensures proper review of future requirements through the Advance Procurement Planning process, laid out in Directive FM 15-1 (effective September 2007). However, GAO has maintained that this planning process does not ensure adequate performance goals, time frames for implementation, or a way to measure success. GAO reviewed the agency's response to this recommendation as part of a subsequent report on the agency's management of contracting activity (GAO-11-588), and concluded that further efforts are needed to ensure that adequate performance measures and proper incentives are in place to promote excellent performance in future contracts.

    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

 

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