Contingency Contracting:

Improvements Needed in Management of Contractors Supporting Contract and Grant Administration in Iraq and Afghanistan

GAO-10-357: Published: Apr 12, 2010. Publicly Released: Apr 12, 2010.

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The Departments of Defense (DOD) and State and the U.S. Agency for International Development (USAID) have relied extensively on contractors in Iraq and Afghanistan, including using contractors to help administer other contracts or grants. Relying on contractors to perform such functions can provide benefits but also introduces potential risks, such as conflicts of interest, that should be considered and managed. Pursuant to the National Defense Authorization Act for Fiscal Year 2008, GAO reviewed (1) the extent to which DOD, State, and USAID rely on contractors to perform contract and grant administration in Iraq and Afghanistan; (2) the reasons behind decisions to use such contractors and whether the decisions are guided by strategic workforce planning; and (3) whether agencies considered and mitigated related risks. GAO analyzed relevant federal and agency policies and agency contract data, and conducted file reviews and interviews for 32 contracts selected for case studies.

DOD, State, and USAID'suse of contractors to help administer contracts and grants was substantial, although the agencies did not know the full extent of their use of such contractors. GAO found that the agencies had obligated nearly $1 billion through March 2009 on 223 contracts and task orders active during fiscal year 2008 or the first half of fiscal year 2009 that included the performance of administration functions for contracts and grants in Iraq and Afghanistan. The specific amount spent to help administer contracts or grants in Iraq and Afghanistan is uncertain because some contracts or task orders included multiple functions or performance in various locations and contract obligation data were not detailed enough to allow GAO to isolate the amount obligated for other functions or locations. Overall, the agencies relied on contractors to provide a wide range of services, including on-site monitoring of other contractors' activities, supporting contracting or program offices on contract-related matters, and awarding or administering grants. For example, Air Force Center for Engineering and the Environment officials noted that contractors performed quality assurance for all of the center's construction projects in Iraq and Afghanistan. In another example, USAID contractors awarded and administered grants on USAID's behalf to support development efforts in Iraq and Afghanistan. Decisions to use contractors to help administer contracts or grants are largely made by individual contracting or program offices on a case-by-case basis. In doing so, the offices generally cited the lack of sufficient government staff, the lack of in-house expertise, or frequent rotations of government personnel as key factors contributing to the need to use contractors. Offices also noted that using contractors in contingency environments can be beneficial, for example, to meet changing needs or address safety concerns regarding the use of U.S. personnel in high-threat areas. GAO has found that to mitigate risks associated with using contractors, agencies have to understand when, where, and how contractors should be used, but offices' decisions were generally not guided by agencywide workforce planning efforts. DOD, State, and USAID took actions to mitigate conflict of interest and oversight risks associated with contractors helping to administer other contracts or grants, but did not always fully address these risks. For example, agencies generally complied with requirements related to organizational conflicts of interest, but USAID did not include a contract clause required by agency policy to address potential conflicts of interest in three cases. Also, some State officials were uncertain as to whether federal ethics laws regarding personal conflicts of interest applied to certain types of contractors. In almost all cases, the agencies had designated personnel to provide contract oversight. DOD, State, and USAID contracting officials generally did not, however, ensure enhanced oversight as required for situations in which contractors provided services closely supporting inherently governmental functions despite the potential for loss of government control and accountability for mission-related policy and program decisions.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Department of State updated its Foreign Affairs Manual in 2012 and 2013 to incorporate new guidelines and procedures for assessing the appropriate mix of contractor and federal employees in accordance with principles outlined in the Office of Management and Budget's July 2009 multi-sector workforce guidance. The Department also issued a report in December 2013 analyzing its fiscal year 2012 service contract inventory, including its use of contractors by specific functions, to help identify any over-reliance on contractors.

    Recommendation: To improve State and USAID's ability to plan effectively for the use of contractors to perform contract or grant administration functions and to improve oversight of contracts that closely support inherently governmental functions in Iraq, Afghanistan, and future contingency environments where the agencies rely heavily on contractors, the Secretary of State and Administrator of USAID should determine the extent to which contractors should perform administration functions for other contracts and grants in accordance with strategic human capital planning principles outlined in the Office of Management and Budget's July 2009 multisector workforce guidance.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: In June 2011, the Department of State issued a Procurement Information Bulletin that clarified the application of federal ethics laws to personal services contractors and requires that personal services contracts include a contract clause specifying which ethics requirements are applicable to personal services contractors.

    Recommendation: To improve State's ability to mitigate risks related to potential personal conflicts of interest among personal services contractors, the Secretary of State should clarify the department's policies regarding the application of federal ethics laws to personal services contractors.

    Agency Affected: Department of State

  3. Status: Closed - Not Implemented

    Comments: In 2013, the US Agency for International Development (USAID) released an analysis of its fiscal year 2012 service contract inventory to help determine whether contractors were being utilitzed in an appropriate manner. USAID determined in its analysis that it was not using contractor employees to perform critical functions in such a way that could affect the agency's ability to maintain control of its missions and operations, and that there were sufficient resources to manage and oversee contracts . However, the agency did not address in the analysis the extent to which contractors should perform contract or grant administration functions and or the methodolgy that it would use to make such a determination in the future.

    Recommendation: To improve State and USAID's ability to plan effectively for the use of contractors to perform contract or grant administration functions and to improve oversight of contracts that closely support inherently governmental functions in Iraq, Afghanistan, and future contingency environments where the agencies rely heavily on contractors, the Secretary of State and Administrator of USAID should determine the extent to which contractors should perform administration functions for other contracts and grants in accordance with strategic human capital planning principles outlined in the Office of Management and Budget's July 2009 multisector workforce guidance.

    Agency Affected: Department of State: Agency for International Development

  4. Status: Closed - Implemented

    Comments: USAID updated its acquisition policy effective April 2013 to require that contracting and program personnel comply with Office of Federal Procurement Policy Policy Letter 11-01, including the Responsibilities Checklist For Functions Closely Associated with Inherently Governmental Functions. This checklist provides approaches that contracting and program officials should take to enhance management oversight when nonpersonal services contractors provide services that closely support inherently governmental functions.

    Recommendation: To improve State and USAID's ability to plan effectively for the use of contractors to perform contract or grant administration functions and to improve oversight of contracts that closely support inherently governmental functions in Iraq, Afghanistan, and future contingency environments where the agencies rely heavily on contractors, the Secretary of State and Administrator of USAID should develop guidance to identify approaches that contracting and program officials should take to enhance management oversight when nonpersonal services contractors provide services that closely support inherently governmental functions.

    Agency Affected: Department of State: Agency for International Development

  5. Status: Closed - Implemented

    Comments: In June 2011, the Department of State issued a Procurement Information Bulletin that provides potential oversight strategies to mitigate risks of contractors performing tasks closely related to inherently governmental functions.

    Recommendation: To improve State and USAID's ability to plan effectively for the use of contractors to perform contract or grant administration functions and to improve oversight of contracts that closely support inherently governmental functions in Iraq, Afghanistan, and future contingency environments where the agencies rely heavily on contractors, the Secretary of State and Administrator of USAID should develop guidance to identify approaches that contracting and program officials should take to enhance management oversight when nonpersonal services contractors provide services that closely support inherently governmental functions.

    Agency Affected: Department of State

  6. Status: Closed - Implemented

    Comments: USAID updated its acquisition policy effective April 2013 to require completion of template for each contract over the simplified acquisition threshold prior to contract award that certifies that if the contract involves performance of functions closely associated with inherently governmental functions, special consideration has been given to using federal employees, the agency has the capacity and capabilities to provide enhanced oversight for the contract, and the agency will comply with the oversight steps in Office of Federal Procurement Policy Policy Letter 11-01, Appendix C (Responsibilities Checklist For Functions Closely Associated With Inherently Governmental Functions).

    Recommendation: To improve State and USAID's ability to plan effectively for the use of contractors to perform contract or grant administration functions and to improve oversight of contracts that closely support inherently governmental functions in Iraq, Afghanistan, and future contingency environments where the agencies rely heavily on contractors, the Secretary of State and Administrator of USAID should before the award of any nonpersonal services contract or task order for services closely supporting inherently governmental functions, require that program and contracting officials document their consideration of related risks and the steps that have been taken to mitigate such risks.

    Agency Affected: Department of State: Agency for International Development

  7. Status: Closed - Implemented

    Comments: In June 2011, the Department of State issued a Procurement Information Bulletin that requires that acquisition plans for contracts that include the support of contract administration and other tasks closely related to inherently governmental functions must include a risk mitigation strategy and a determination that the services being requested are not inherently governmental.

    Recommendation: To improve State and USAID's ability to plan effectively for the use of contractors to perform contract or grant administration functions and to improve oversight of contracts that closely support inherently governmental functions in Iraq, Afghanistan, and future contingency environments where the agencies rely heavily on contractors, the Secretary of State and Administrator of USAID should before the award of any nonpersonal services contract or task order for services closely supporting inherently governmental functions, require that program and contracting officials document their consideration of related risks and the steps that have been taken to mitigate such risks.

    Agency Affected: Department of State

 

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