Defense Contractors:

Additional Actions Needed to Facilitate the Use of DOD's Inventory of Contracted Services

GAO-15-88: Published: Nov 19, 2014. Publicly Released: Nov 19, 2014.

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Timothy J. DiNapoli
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dinapolit@gao.gov

 

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What GAO Found

The Department of Defense (DOD) continues to face challenges in assuring that it conducts and reports on the results of its required inventory reviews. As of September 2014, 32 of the 33 components that were required to conduct an inventory review certified that they had done so and generally addressed more of the required reporting elements than in fiscal year 2011. However, GAO found limitations with the inventory review results. For example, the Air Force did not submit a fiscal year 2012 inventory certification letter and the Army's review was incomplete at the time its Secretary signed the certification. Further, components may not have fully identified all instances in which contractors were providing services that are closely associated with inherently governmental functions, a key review objective to help ensure that the DOD is not overly reliant on contractors to support core missions. DOD's March 2014 guidance, which is applicable to the fiscal year 2013 inventory, does not fully address some of the shortcomings GAO identified, including how to identify contracts for review or approaches to ensure that components adequately assess contractor activities. As a result, components may not fully identify instances of contractors providing services that are closely associated with inherently governmental functions.

A key factor hindering the components' inventory reviews is the lack of accurate and reliable data. DOD has not resolved issues with implementing its planned common data system based on the Army's existing system. Further, in September 2014, DOD initiated a new review, due by December 2014, to identify and develop options to collect these data. This review raises a question of whether DOD will continue to implement a common data system modeled after the Army's system or attempt to develop a new system. DOD continues to lack a plan with timeframes and milestones to measure its progress toward implementing a common data system. These factors jeopardize DOD's goal to have all components, by 2016, collect statutory-required contractor manpower data. Further delays in resolving these issues will undermine the inventory's usefulness.

The military departments generally have not developed plans to use the inventory of contracted services to facilitate DOD's strategic workforce planning, workforce mix, and budget decision-making processes, as statutorily required. Numerous offices are responsible for the various decision-making processes at the military departments, and the Secretaries of the military departments have not assigned specific responsibility for coordinating among these offices to do so. The absence of officials who are accountable for integrating the use of the inventory leaves the department at continued risk of not complying with the applicable legislative requirements to use the inventory to support management decisions. Internal control standards state that management should assign responsibility to enable an organization to achieve management objectives and to comply with laws.

Why GAO Did This Study

DOD is the government's largest purchaser of contractor-provided services. In 2008, Congress required DOD to compile and review an annual inventory of its contracted services to include the number of contractors providing services to DOD and the functions these contractors performed, and in 2011, amended this statute to require DOD to plan to use that inventory to inform certain department-wide decision making processes. The National Defense Authorization Act for Fiscal Year 2014 mandated GAO to report on the required reviews and plans to use these inventories.

For this report, GAO assessed the extent to which DOD components (1) reviewed contracts and activities in the fiscal year 2012 inventory of contracted services and (2) developed plans to use the inventory for decision-making. GAO reviewed relevant laws and guidance, reviewed component certification letters from 32 components, and interviewed DOD acquisition, manpower, programming, and budgeting officials.

What GAO Recommends

GAO recommends DOD revise inventory guidance to improve the review of contract functions, approve a plan of action with milestones and timeframes to establish a common data system to collect contractor manpower data, and designate a senior management official at the military departments to develop plans to use inventory data to inform management decisions. DOD concurred with GAO's recommendations.

For more information, contact Timothy J.DiNapoli at (202) 512-4841 or dinapolit@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: DOD's December 2014 guidance for the fiscal year 2014 inventory of contracted services, the most recent guidance since this recommendation, did not clearly identify the basis for selecting contracts for review or provide approaches the components may use to ensure the nature of how the contract is being performed is adequately considered in the inventory review. We will continue to monitor the Department's progress.

    Recommendation: To better implement the requirements for reviewing the inventory of contracted services, the Under Secretary of Defense for Acquisition, Technology and Logistics and the Under Secretary of Defense for Personnel and Readiness should work jointly to revise annual inventory review guidance to clearly identify the basis for selecting contracts to review and to provide approaches the components may use to conduct inventory reviews that ensure the nature of how the contract is being performed is adequately considered. If DOD intends for components to review less than 100 percent of its contracts, then the guidance should clearly identify the basis for selecting which contracted functions should be reviewed.

    Agency Affected: Department of Defense: Office of the Under Secretary for Personnel and Readiness

  2. Status: Open

    Comments: DOD's December 2014 guidance for the fiscal year 2014 inventory of contracted services, the most recent guidance since this recommendation, did not clearly identify the basis for selecting contracts for review or provide approaches the components may use to ensure the nature of how the contract is being performed is adequately considered in the inventory review. We will continue to monitor the Department's progress.

    Recommendation: To better implement the requirements for reviewing the inventory of contracted services, the Under Secretary of Defense for Acquisition, Technology and Logistics and the Under Secretary of Defense for Personnel and Readiness should work jointly to revise annual inventory review guidance to clearly identify the basis for selecting contracts to review and to provide approaches the components may use to conduct inventory reviews that ensure the nature of how the contract is being performed is adequately considered. If DOD intends for components to review less than 100 percent of its contracts, then the guidance should clearly identify the basis for selecting which contracted functions should be reviewed.

    Agency Affected: Department of Defense: Office of the Under Secretary of Defense for Acquisition, Technology and Logistics

  3. Status: Open

    Comments: The strategic review, directed by the Under Secretary of Defense for Personnel and Readiness, concluded in December 2014. The Department has not determined the planned approach for developing a common data collection system and, therefore, has not developed a plan of action, with timeframes and milestones, for supporting such a system. We will continue to monitor the Department's progress.

    Recommendation: To help facilitate the department's stated intent to develop a common data collection system to fully collect statutorily required data, the Under Secretary of Defense for Personnel and Readiness should approve a plan of action, with timeframes and milestones, for rolling out and supporting a department-wide data collection system as soon as practicable after December 1, 2014. Should a decision be made to use or develop a system other than the Enterprise-wide Contractor Manpower Reporting Application system currently being fielded, the Under Secretary of Defense for Personnel and Readiness should document the rationale for doing so and ensure that the new approach will provide data that satisfies the statutory requirements for the inventory.

    Agency Affected: Department of Defense: Office of the Under Secretary for Personnel and Readiness

  4. Status: Open

    Comments: This recommendation will remain open. The Department of the Air Force is taking steps to address this recommendation, but it did not provide timeframes for completion.

    Recommendation: To help ensure that the inventory of contracted services is integrated into key management decisions as statutorily required, the Secretaries of the Army, Navy, and Air Force should identify an accountable official within their departments with responsibility for leading and coordinating efforts across their manpower, budgeting, and acquisition functional communities and, as appropriate, revise guidance, develop plans and enforcement mechanisms, and establish processes.

    Agency Affected: Department of Defense: Department of the Air Force

  5. Status: Open

    Comments: This recommendation will remain open. The Department of the Navy is taking steps to address this recommendation, and it anticipates finalizing the memorandum of agreement appointing an official by August 25, 2015.

    Recommendation: To help ensure that the inventory of contracted services is integrated into key management decisions as statutorily required, the Secretaries of the Army, Navy, and Air Force should identify an accountable official within their departments with responsibility for leading and coordinating efforts across their manpower, budgeting, and acquisition functional communities and, as appropriate, revise guidance, develop plans and enforcement mechanisms, and establish processes.

    Agency Affected: Department of Defense: Department of the Navy

  6. Status: Open

    Comments: This recommendation will remain open. The Department of the Army is taking steps to address this recommendation, but it did not provide timeframes for completion.

    Recommendation: To help ensure that the inventory of contracted services is integrated into key management decisions as statutorily required, the Secretaries of the Army, Navy, and Air Force should identify an accountable official within their departments with responsibility for leading and coordinating efforts across their manpower, budgeting, and acquisition functional communities and, as appropriate, revise guidance, develop plans and enforcement mechanisms, and establish processes.

    Agency Affected: Department of Defense: Department of the Army

 

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