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Interagency Acquisitions Are Effectively Managed and Comply with 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

August 2012: 

Iraq and Afghanistan: 

State and DOD Should Ensure Interagency Acquisitions Are Effectively 
Managed and Comply with Fiscal Law: 

GAO-12-750: 

GAO Highlights: 

Highlights of GAO-12-750, a report to congressional committees. 

Why GAO Did This Study: 

State has taken on unprecedented responsibilities in Iraq and 
Afghanistan. In doing so, it has relied heavily on contractors. For 
some critical goods and services, such as fuel, security, and basic 
support like dining and laundry services, State turned to DOD to 
acquire the goods and services on its behalf through interagency 
acquisitions. Because of the risks associated with assisted 
interagency acquisitions, agencies need to carefully consider whether 
their use is a sound business decision and formally document roles and 
responsibilities in interagency agreements. 

To better understand how State is managing its responsibilities in 
Iraq and Afghanistan, GAO evaluated (1) the nature and extent of 
State’s reliance on DOD for the acquisition of critical goods and 
services, (2) factors that contributed to this reliance, and (3) 
whether State and DOD are making and implementing decisions regarding 
this reliance consistent with regulation and guidance. GAO reviewed 
documentation for 22 acquisitions, including State’s requests for 
assistance, comparing them to regulation and guidance. 

What GAO Found: 

To help the Department of State (State) meet its requirements for 
critical goods and services in Iraq and Afghanistan, the Department of 
Defense (DOD) supported State on 22 acquisitions. On State’s behalf, 
DOD awarded and manages 20 acquisitions, known as assisted interagency 
acquisitions, under the authority of the Economy Act with an estimated 
value of almost $1 billion for basic support goods and services and 
security services. DOD also supported two of State’s acquisitions for 
medical services and unmanned aerial vehicles. Across the 22 
acquisitions, DOD has been involved in one or more aspects of the 
acquisition cycle, including planning, award, management, and 
oversight. GAO identified at least 128 DOD personnel with contracting 
and subject matter expertise who provided support for these 
acquisitions. 

In justifying requests in 2010 for DOD’s acquisition assistance, State 
officials cited the urgency of ensuring requirements were met as the 
two departments prepared for U.S. military forces to withdraw from 
Iraq at the end of 2011. Underlying that sense of urgency was the 
insufficient capacity and expertise of State’s acquisition workforce. 
Specifically, State and DOD concluded that State lacked sufficient 
personnel, both in numbers and expertise, to conduct acquisition 
activities and that it did not have the requisite time to increase its 
workforce to the capacity required to have contracts in place 
following the transition to a State-led presence in Iraq. State has 
taken some steps to address the acquisition workforce gaps that 
prompted it to seek DOD’s help. However, State has not fully assessed 
whether its effort to increase its workforce is sufficient to meet 
requirements; it has the proper skill and government/contractor mix; 
or it has sufficient numbers of qualified oversight personnel to 
support its own acquisition efforts in Iraq and Afghanistan in the 
future. 

State and DOD did not comply with requirements for use and management 
of assisted acquisitions. For 12 of the 20 assisted acquisitions GAO 
reviewed, State did not comply with Office of Management and Budget 
and Federal Acquisition Regulation requirements for determining that 
using DOD contracts was the best procurement approach. For example, 
State did not assess the cost-effectiveness of using DOD’s contracts 
for five of the interagency acquisitions. Further, State and DOD did 
not meet requirements for interagency acquisition agreements in 13 
cases, resulting in confusion regarding oversight responsibilities and 
payment for DOD’s assistance. Accordingly, the departments’ positions 
regarding State’s payment of DOD’s costs prior to 2012 in connection 
with the award and administration of some acquisitions remain 
unresolved and the departments risk noncompliance with fiscal law. 
Some lessons have been learned since State’s 2010 requests for DOD’s 
acquisition assistance in Iraq. However, poor compliance with 
interagency acquisition requirements and missed opportunities to fully 
understand costs and needs for goods and services continue to limit 
State’s ability to conduct acquisition planning. Over the next 18 
months, as key contracts for Iraq are set to expire and the U.S. 
presence in Afghanistan evolves, the departments’ opportunity is 
shrinking to determine whether continued reliance is appropriate or 
State should develop its own capacity. Otherwise, State risks again 
relying on assisted acquisitions with DOD by default rather than 
through sound business decisions. 

What GAO Recommends: 

GAO recommends that State assess its planning for sufficient and 
appropriate acquisition personnel and that State and DOD take certain 
steps to bring existing and planned interagency acquisitions into 
compliance with regulation and guidance and resolve their positions on 
State’s payment for DOD’s services. Both State and DOD agreed with the 
recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-12-750]. For more 
information, contact John P. Hutton at (202) 512-4841 or 
huttonj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

State Has Relied Heavily on DOD for the Acquisition of Critical Goods 
and Services: 

State's Reliance on DOD to Respond to Urgent Requirements Stemmed from 
Limitations in Its Acquisition Workforce Capacity That Persist: 

State and DOD Did Not Comply with Requirements for Use and Management 
of Assisted Acquisitions: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Comments from the Department of Defense: 

Appendix II: Comments from the Department of State: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: State and DOD Roles in Acquisitions of Critical Goods and 
Services Currently Supporting the U.S. Missions in Iraq and 
Afghanistan: 

Table 2: Number of Personnel in AQM from 2008 to 2012: 

Table 3: Summary of Noncompliance with OMB and FAR Requirements for 
Determination of Best Procurement Approach for 12 Assisted 
Acquisitions: 

Table 4: Status of Interagency Agreements for 20 Assisted Acquisitions: 

Figures: 

Figure 1: Phases of the Acquisition Process and Associated Activities: 

Figure 2: DOD and State Contracting and Oversight Personnel Involved 
in the Planning, Award, and Oversight of the LOGCAP Task Order 
Supporting State in Iraq: 

Abbreviations: 

AQM: Office of Acquisitions Management: 

CENTCOM: U.S. Central Command: 

COR: contracting officer's representative: 

DCAA: Defense Contract Audit Agency: 

DCMA: Defense Contract Management Agency: 

DLA: Defense Logistics Agency: 

DOD: Department of Defense: 

FAR: Federal Acquisition Regulation: 

FIRST: Field and Installation Readiness Support Team: 

LOGCAP: Logistics Civil Augmentation Program: 

OMB: Office of Management and Budget: 

OPE: Office of the Procurement Executive: 

SSS-I: Security Support Services-Iraq: 

TWISS: Theater Wide Internal Security Services: 

UAV: Unmanned Aerial Vehicle: 

[End of section] 

August 2, 2012: 

Congressional Committees: 

The Department of State (State) has taken on unprecedented 
responsibilities in support of U.S. government efforts in Iraq and 
Afghanistan. In December 2011, when the last U.S. military brigade 
left Iraq pursuant to the Security Agreement between the United States 
and the Government of Iraq, State and the Department of Defense (DOD) 
completed the largest military-to-civilian transition since the 
Marshall Plan at the end of World War II. In assuming responsibility 
from DOD for leading the U.S. presence, State has primary 
responsibility for not only carrying out its diplomatic mission but 
also providing critical goods and services to support all U.S. 
government personnel in Iraq, as well as some contractor personnel. 
These critical goods and services include security, medical, and basic 
support such as food, fuel, dining, laundry, and waste management. In 
Afghanistan, as DOD plans for a reduction in U.S. military forces, 
State plans to draw on its experiences in Iraq to prepare for 
similarly expanded responsibilities. In the future, such 
responsibilities may not be unique to Iraq and Afghanistan. In the 
2010 Quadrennial Diplomacy and Development Review, State noted that an 
expeditionary capacity to address complex conflicts and crises must 
become part of the "new normal" for the department and its personnel. 
[Footnote 1] 

Over the years, State has relied heavily on contractors to help 
accomplish its missions in both Iraq and Afghanistan. For example, 
State's reported obligations on contracts to help it carry out its 
missions in Iraq and Afghanistan were a combined $2.8 billion in 
fiscal year 2011 alone, representing 30 percent of its total contract 
obligations worldwide. Of the approximately 16,000 personnel State had 
planned as of summer 2011 to constitute the U.S. mission in Iraq, 
about 14,000 were contractors. In Afghanistan, the planned U.S. 
diplomatic presence after the realignment of DOD forces in 2014 is 
expected to include approximately 4,400 personnel, of which 
approximately 2,700 would be contractors. Contractors are working to 
support the U.S. diplomatic presence in both countries, but not all of 
them are working under contracts awarded and administered by State. 
Instead, State has turned to DOD to acquire some critical goods and 
services through interagency acquisitions--also known as interagency 
contracting. 

Interagency acquisitions, such as State's use of DOD's acquisition 
assistance, can provide a number of benefits to agencies, including to 
help them streamline the procurement process, leverage unique 
expertise in a particular type of procurement, and achieve savings. 
However, such acquisitions also pose a variety of risks. GAO has 
designated the management of interagency contracting as a high risk 
area since 2005, in part because of the need for stronger internal 
controls, clear definitions of roles and responsibilities, and 
training to ensure proper use of this contracting method.[Footnote 2] 
To this end, federal acquisition regulation and guidance require, 
among other things, that agencies carefully consider whether an 
interagency acquisition is a sound business decision and formally 
document the terms and conditions in an interagency agreement. 
[Footnote 3] 

The risks of interagency acquisitions are compounded by the challenges 
of contracting in environments such as Iraq and Afghanistan. The 
Commission on Wartime Contracting in Iraq and Afghanistan noted in its 
final report that interagency coordination requires "clear delineation 
of roles and responsibilities … effective interagency processes, and 
sufficient staff to perform the coordination tasks," while also noting 
that "the volume and complexity of contract actions have overwhelmed 
the ability of government to plan for, manage, and oversee 
contractors."[Footnote 4]We have previously reported on State's 
challenges with both interagency acquisitions and contracting in Iraq 
and Afghanistan. For example, we reported in 2008 that State had 
limited insights into its use of interagency acquisitions, including 
those with performance in Iraq, which hindered contract oversight. 
[Footnote 5] In reports issued annually since 2008, we consistently 
found that State lacked reliable sources and methods to report on its 
contracts and contractor personnel in Iraq and Afghanistan.[Footnote 
6] Further, we reported in 2010 that State did not always provide 
enhanced oversight as required for certain contracts in Iraq and 
Afghanistan, despite the potential for loss of government control and 
accountability for mission-related policy and program decisions. 
[Footnote 7] 

Because of broad congressional interest in U.S. efforts in Iraq and 
Afghanistan, we performed our work under the authority of the 
Comptroller General of the United States to conduct work on his own 
initiative. In this report, to better understand how State is managing 
its increased responsibilities for the missions in Iraq and 
Afghanistan with respect to the acquisition of critical goods and 
services, we evaluated (1) the nature and extent of State's reliance 
on DOD for the acquisition of critical goods and services, (2) factors 
that contributed to this reliance, and (3) whether State and DOD are 
making and implementing decisions regarding this reliance consistent 
with regulation and guidance. 

To describe the nature and extent of State's reliance on DOD for the 
acquisition of critical goods and services in Iraq and Afghanistan, we 
reviewed documentation, including lists of contracts supporting 
State's presence in the two countries, agency correspondence, 
interagency acquisition agreements, memorandums of understanding and 
agreement, and other authorizations to use DOD resources. We also 
interviewed State and DOD officials in the United States, Iraq, and 
Afghanistan responsible for acquisition activities. For Iraq, our 
scope was limited to those critical goods and services supporting 
State's assumption of responsibility to lead the U.S. mission. For 
Afghanistan, we limited our scope to services for which State relied 
on DOD for the acquisition of critical services at the time of our 
review and reviewed the one associated contract and task order. We 
identified a subset of 22 acquisitions for which DOD performed one or 
more of the steps in the acquisition process. Among these, we 
identified 20 assisted interagency acquisitions, including some for 
Iraq that State requested of DOD beginning in April 2010.[Footnote 8] 

To identify factors that contributed to reliance, we reviewed State 
and DOD transition planning documents for Iraq and Afghanistan and 
interviewed State and DOD officials regarding rationales for reliance 
on DOD. On the basis of the information obtained through these 
documents and interviews, we collected detailed data on the 
composition of State's acquisition workforce and processes State uses 
to develop its workforce. We compared these data and processes to 
acquisition activities, personnel, and expertise that ultimately were 
needed to acquire critical goods and services in Iraq. We also 
compared State's processes for developing its workforce--including 
using a working capital fund to increase staff--with its own planned 
improvements and with practices for assessing performance of working 
capital funds. 

To determine whether State is making decisions regarding its reliance 
on DOD for the acquisition of critical goods and services and both 
departments are implementing these decisions consistent with 
regulation and guidance, we reviewed documentation of coordination and 
decision making since April 2010 related to Iraq. We also interviewed 
State and DOD officials in the United States, Iraq, and Afghanistan. 
To determine how State made decisions to rely on interagency 
acquisitions with DOD, we compared documentation on coordination, 
assessment, and approval of interagency acquisitions to Federal 
Acquisition Regulation (FAR) requirements and Office of Management and 
Budget (OMB) guidance for ensuring that an interagency acquisition is 
the best procurement approach and a sound business decision. To assess 
the departments' arrangements for implementing decisions to use 
interagency acquisitions, we compared agency documentation to FAR 
requirements and OMB guidance for having written agreements for 
assisted interagency acquisitions, including certain features of those 
agreements. We also compared payment arrangements and activities 
between State and DOD with respect to the interagency acquisitions 
with the statutory requirement under the Economy Act for payment on 
the basis of actual costs.[Footnote 9] To identify State's efforts to 
determine whether it should continue to rely on DOD contracts, we 
reviewed available documentation on existing interagency acquisitions 
and interviewed State and DOD officials responsible for acquisition 
planning activities. We then compared these efforts with the FAR 
requirements and OMB guidance on interagency acquisitions and 
regulations on acquisition planning. 

We conducted this performance audit from March 2011 to August 2012 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: 

State's Presence in Iraq and Afghanistan: 

The Security Agreement between the United States and the Government of 
Iraq directed that DOD was to complete the withdrawal of forces and 
transition the lead role for a fully diplomatic U.S. presence in Iraq 
to State by December 31, 2011.[Footnote 10] As we reported in 
September 2011, for DOD to focus on the final drawdown phase, DOD had 
set a condition that State become "mission capable" for its civilian-
led presence in Iraq by October 1, 2011.[Footnote 11] State determined 
that to reach independent mission capability, each of its sites 
throughout the country must have: 

* secure and protected facilities, 

* secure ground and air movement, 

* quick reaction capability, 

* communications, 

* medical care and evacuation, and, 

* infrastructure and life support.[Footnote 12] 

Prior to the withdrawal of U.S. forces from Iraq, DOD had provided 
many of the critical goods and services State needed to support its 
missions. Although State had responsibility for providing some 
services to its own personnel, DOD personnel and contractors had been 
providing basic life support services, medical services, and Iraq-wide 
security capabilities and infrastructure. For example, while State had 
a single health unit providing primary care at the embassy, DOD had 
responsibility for emergency care as well as medical evacuation. In 
addition, State had a contracted embassy guard force and provided for 
movement security of its own personnel using contractors but relied on 
DOD for general security across the country. Military forces provided 
theater security, operating a range of technologies such as unmanned 
aerial vehicles (UAV) for intelligence, surveillance, and 
reconnaissance; radars to detect and warn of incoming rocket and 
mortar attacks; and systems to help conduct background investigations 
on local national staff and contractors. Further, leading up to the 
transition of responsibility to State, a wide range of basic support 
services, including dining, laundry, and waste management, had been 
provided to U.S. government and contractor personnel through DOD 
contracts, including the Army's Logistics Civil Augmentation Program 
(LOGCAP) contract. Several LOGCAP task orders supported State's needs 
at the embassy.[Footnote 13] 

With the withdrawal of U.S. military forces from Iraq in December 
2011, State would become solely responsible in January 2012 for 
supporting its presence throughout the country. To ensure goods and 
services were in place for the transition of responsibility to State, 
acquisition activities--such as planning, defining requirements, 
developing cost estimates, and preparing solicitations--needed to 
occur for each of the critical goods and services in advance. In 2010, 
as the departments' planning for DOD's withdrawal and transition to a 
State-led presence in Iraq got underway, and throughout the following 
year, security conditions were such that State's traditional means of 
ensuring basic services in posts around the world--relying on the 
local economy--were not available, and State's security capabilities 
were insufficient to support the planned presence. Senior DOD and 
State officials have acknowledged that coordination occurred late in 
the process and the delays made the transition more challenging. 
[Footnote 14] Adding to the challenge was uncertainty as to whether 
DOD would reach agreement with the Government of Iraq for a follow-on 
presence of U.S. military forces, which would also have required 
support services if agreed to. To help State identify critical 
requirements for which it had previously relied on DOD and address 
other issues associated with the transition, the two departments 
established an Executive Steering Group co-chaired by the Deputy 
Assistant Secretaries for Program Support (DOD) and Logistics 
Management (State) in September 2010. The group proposed solutions to 
fulfill State's requirements, including acquisition of needed 
capabilities through a combination of State acquisitions and 
interagency acquisitions with DOD under the authority of the Economy 
Act, as well as equipment transfers from DOD. The group received 
guidance from the Principal Deputy Under Secretary of Defense for 
Acquisition, Technology, and Logistics and the Under Secretary of 
State for Management. 

In Afghanistan, State and DOD currently share responsibility for the 
U.S. presence. State's presence includes the U.S. embassy in Kabul and 
regional consulates, as well as civilian personnel assigned to 
locations throughout Afghanistan. State currently provides security 
for its own facilities and personnel, although DOD continues to 
provide for countrywide security. Current U.S. strategy calls for 
provinces and districts to transition to greater Afghan government 
control as local capacity improves and conditions allow.[Footnote 15] 
Further, the United States, along with its North Atlantic Treaty 
Organization partners, has committed to fully transferring lead 
security responsibility to the Afghan government by the end of 2014. 
In May 2012, a United States-Afghanistan Strategic Partnership 
Agreement was signed that provides for the possibility of U.S. forces 
in Afghanistan after 2014, to be determined in a follow-on bilateral 
security agreement.[Footnote 16] As the United States plans for a 
reduction in U.S. forces, State is making plans for realignment of its 
diplomatic enduring presence to meet policy objectives. 

An interagency acquisition takes place when an agency needing supplies 
or services (the requesting agency) obtains them from another agency 
(the servicing agency). The term includes interagency acquisitions 
under the Economy Act and non-Economy Act acquisitions completed under 
other statutory authority.[Footnote 17] Statutory authority, such as 
the Economy Act, is required for federal agencies to conduct 
interagency acquisitions to avoid running afoul of federal fiscal law. 
[Footnote 18] The Economy Act provides general authority for federal 
agencies to undertake interagency acquisitions when a more specific 
statutory authority does not exist. Interagency acquisitions 
authorized by the Economy Act can save the government duplicative 
effort and costs when appropriately used. Circumstances under which an 
Economy Act interagency acquisition may be appropriately used include 
when one agency already has a contract for goods or services similar 
to those needed by another agency or when an agency has unique 
capabilities or expertise that qualify it to enter into a contract. 

State has its own policy for making and implementing decisions 
regarding the use of interagency acquisitions. In 2002, before the 
risks associated with interagency acquisition were widely reported, 
State implemented the State First policy for acquisition that directs 
State's domestic bureaus and offices to use State contracting offices, 
as opposed to paying another agency to conduct an acquisition, unless 
the appropriate State acquisition and procurement policy officials 
grant a waiver. In April 2008, State updated its State First policy 
noting that GAO, State's Inspector General, and OMB had all identified 
the interagency acquisition process as an area of high risk requiring 
active management. In doing so, State implemented GAO recommendations 
to strengthen and clarify the policy by updating it to cover a wider 
range of interagency acquisitions and to require that when requesting 
a waiver, a bureau identify a contracting officer's representative 
(COR) who would provide technical oversight of the interagency 
acquisition. 

Interagency Acquisitions: 

As part of the Duncan Hunter National Defense Authorization Act for 
Fiscal Year 2009, Congress enacted section 865 on preventing abuse of 
interagency acquisitions, which resulted in OMB's issuance of 
comprehensive guidance in June 2008 and revisions to the FAR in 
2010.[Footnote 19] OMB's guidance recognized the risks of interagency 
acquisitions, noting that "lack of clear lines of responsibility 
between agencies with requirements (requesting agencies) and the 
agencies which provide acquisition support and award contracts on 
their behalf (servicing agencies) has contributed to inadequate 
planning, inconsistent use of competition, weak contract management, 
and concerns regarding financial controls."[Footnote 20] The guidance 
directed agencies to: 

* ensure the use of an interagency acquisition is a sound business 
decision by requiring consideration of certain factors and: 

* strengthen the management of assisted interagency acquisitions by 
requiring formal agreements between requesting and servicing agencies 
that contain certain elements, such as roles and responsibilities for 
acquisition activities. 

The FAR's requirements for interagency acquisitions were amended in 
2010, as directed by Congress, and reflect the 2008 OMB guidance. 
Under the FAR, agencies are to determine an interagency acquisition is 
the best procurement approach among alternative procurement approaches 
through a determination that an interagency acquisition: 

* satisfies the requesting agency's schedule, performance, and 
delivery requirements (taking into account the servicing agency's 
authority, experience, and expertise as well as customer satisfaction 
with the servicing agency's past performance), 

* is cost-effective (taking into account reasonableness of the 
servicing agency's fees), and: 

* will result in the use of funds in accordance with appropriation 
limitations and compliance with the requesting agency's laws and 
policies.[Footnote 21] 

In addition, for assisted interagency acquisitions, the FAR requires 
that the servicing agency and requesting agency sign a written 
interagency agreement, which establishes the general terms and 
conditions governing the relationship, and that they refer to the OMB 
guidance in preparing these agreements.[Footnote 22] 

Support provided by one agency to another can span across the 
acquisition cycle, including acquisition planning, contract award, 
contract management, and contract oversight (see figure 1). 

Figure 1: Phases of the Acquisition Process and Associated Activities: 

[Refer to PDF for image: illustration] 

Planning:  

Presolicitation: 
* Conduct market research; 
* Define requirements in a statement of work; 
* Develop cost estimates; 
* Develop a written acquisition plan, if required. 

Procurement request: 
* Consider the appropriate contract type;  
* Determine how competition requirements will be met. 
 
Solicitation: 
* Develop a solicitation to request bids or proposals.   

Award: 

Source selection: 
* Evaluate contractors' proposals; 
* Select contractor. 
 
Contract formation: 
* Negotiate the terms of the contract. 

Administration: 

Management: 
* Issue contract modifications
* Review and approve contractors' request for payments; 
* Ensure contractor compliance with contractual quality assurance 
requirements. 

Oversight: 
* Monitor technical performance and inform the contracting officer of 
any difficulties encountered during performance; 
* Perform inspection and acceptance of all final work required under 
the contract. 

Source: GAO analysis of the Federal Acquisition Regulation. 

[End of figure] 

Acquisition Management Structure and Challenges at State: 

Responsibility for acquisition policy and management at State is 
shared by two offices within the Bureau of Administration--the Office 
of the Procurement Executive (OPE) and the Office of Acquisitions 
Management (AQM). For example, OPE is responsible for establishing 
acquisition policy, such as the State First policy that AQM is to 
implement with OPE's concurrence through waivers or exceptions to that 
policy. Other OPE responsibilities include prescribing and 
implementing acquisition policies, regulations, and procedures; 
managing State's procurement reporting system; appointing contracting 
officers; establishing a system for measuring the performance of State 
contracting offices; and managing the acquisition career program to 
improve the competence of the department's acquisition workforce. AQM 
is responsible for providing a full range of contracting services to 
support activities across State, including acquisition planning, 
contract negotiations, cost and price analysis, and contract 
administration. AQM is responsible for over 98 percent of State's 
acquisitions. State's Under Secretary for Management has overall 
responsibility for AQM, OPE, and the functional bureaus that have 
requirements for contracted services in Iraq and Afghanistan. These 
functional bureaus include Diplomatic Security, which is State's 
security and law enforcement arm, and the Office of Medical Services, 
which provides health care at embassies worldwide. The Under Secretary 
for Political Affairs has responsibility for identifying the needs for 
goods and services to support the presences in Iraq and Afghanistan 
through the Bureaus of Near Eastern Affairs and South and Central 
Asian Affairs, respectively. 

State acknowledged in its 2010 Quadrennial Diplomacy and Development 
Review that it needed to change the way it awards, manages, and 
monitors contracts to ensure that contracts serve its strategic 
interests and deliver results for the American taxpayer. Similarly, we 
and others have reported on long-standing acquisition management 
challenges at State. For example, State's Inspector General has 
identified contracting and procurement as one of the most serious 
management and performance challenges facing the department, noting 
with particular concern that AQM continues to experience an increase 
in the number of procurement transactions processed and considerable 
growth in the dollar value of procurement actions issued without a 
corresponding increase in contracting personnel to handle the 
workload. The Inspector General found that frequent turnover of 
contract support staff, especially overseas, has resulted in waste, a 
lack of adequate coordination, and a loss of institutional memory and 
that his office has identified several instances in which contract 
administration and oversight were not adequate, including in Iraq and 
Afghanistan. 

State Has Relied Heavily on DOD for the Acquisition of Critical Goods 
and Services: 

To help State meet its requirements for critical goods and services in 
Iraq and Afghanistan, DOD supported State on 22 acquisitions, as shown 
in table 1. 

Table 1: State and DOD Roles in Acquisitions of Critical Goods and 
Services Currently Supporting the U.S. Missions in Iraq and 
Afghanistan: 

Roles in acquisition activities: 
Acquisitions (number): 
Critical service: 

Iraq: 

Critical service: Basic services/goods; 
Acquisitions (number): Logistics Civil Augmentation Program (1); 
Contract value[A]: $506.5 million; 
Roles in acquisition activities: 
Planning: DOD lead; 
Award: DOD lead; 
Administration: Management: DOD lead; 
Administration: Oversight: Shared responsibility. 

Critical service: Basic services/goods; 
Acquisitions (number): Food and Fuel (7); 
Contract value[A]: $273.0 million[B]; 
Roles in acquisition activities: 
Planning: Shared responsibility; 
Award: DOD lead; 
Administration: Management: DOD lead; 
Administration: Oversight: Shared responsibility. 

Critical service: Security; 
Acquisitions (number): Security Support Services-Iraq (2); 
Contract value[A]: $73.0 million; 
Roles in acquisition activities: 
Planning: DOD lead; 
Award: DOD lead; 
Administration: Management: DOD lead; 
Administration: Oversight: Shared responsibility. 

Critical service: Security; 
Acquisitions (number): Theater Wide Internal Security Services(5); 
Contract value[A]: $20.1 million; 
Roles in acquisition activities: 
Planning: DOD lead; 
Award: DOD lead; 
Administration: Management: DOD lead; 
Administration: Oversight: Shared responsibility. 

Critical service: Security; 
Acquisitions (number): Sense and Warn(2); 
Contract value[A]: $74.1 million; 
Roles in acquisition activities: 
Planning: DOD lead; 
Award: DOD lead; 
Administration: Management: DOD lead; 
Administration: Oversight: Shared responsibility. 

Critical service: Security; 
Acquisitions (number): Field and Installation Readiness Support Team 
Maintenance (1); 
Contract value[A]: $37.4 million; 
Roles in acquisition activities: 
Planning: Shared responsibility; 
Award: DOD lead; 
Administration: Management: DOD lead; 
Administration: Oversight: DOD lead. 

Critical service: Security; 
Acquisitions (number): Vetting Services (1); 
Contract value[A]: $7.0 million; 
Roles in acquisition activities: 
Planning: Shared responsibility; 
Award: DOD lead; 
Administration: Management: DOD lead; 
Administration: Oversight: State lead. 

Critical service: Security; 
Acquisitions (number): Unmanned Aerial Vehicles (1); 
Contract value[A]: $28.0 million; 
Roles in acquisition activities: 
Planning: Shared responsibility; 
Award: State lead; 
Administration: Management: State lead; 
Administration: Oversight: State lead. 

Critical service: Medical; 
Acquisitions (number): Medical Support Services-Iraq (1); 
Contract value[A]: $467.5 million; 
Roles in acquisition activities: 
Planning: Shared responsibility; 
Award: State lead; 
Administration: Management: State lead; 
Administration: Oversight: State lead. 

Afghanistan: 

Critical service: Basic services; 
Acquisitions (number): Logistics Civil Augmentation Program (1); 
Contract value[A]: $6.9 million; 
Roles in acquisition activities: 
Planning: DOD lead; 
Award: DOD lead; 
Administration: Management: DOD lead; 
Administration: Oversight: DOD lead. 

Source: GAO analysis of State and DOD contract documentation, data, 
and discussion with officials. 

[A] Contract value, for the purpose of this table, is the estimated 
value at award plus priced options and modifications as of April 30, 
2012. 

[B] These DOD supply contracts serve multiple agencies, so we report 
State's total estimated cost per fiscal year, including direct costs 
and overhead, not value as of April 30, 2012. 

[End of table] 

DOD awarded and managed 20 interagency acquisitions on State's behalf 
under the authority of the Economy Act with an estimated value of $1 
billion for basic support services and goods as well as security 
services.[Footnote 23] DOD also provided support on two State 
acquisitions for medical services and UAV operations. Across the 22 
acquisitions, DOD has been involved in one or more aspects of the 
acquisition cycle, including planning, award, management, and 
oversight. Based on our review of documents and interviews with 
officials, we identified at least 128 DOD personnel with contracting 
and subject matter expertise who provided support for these 
acquisitions--46 in the United States and 82 in Iraq. 

Of the 22 acquisitions, 20 were assisted acquisitions in which DOD 
executed one or more contract actions on State's behalf and had the 
lead in managing the contract. 

* Basic Services--Logistics Civil Augmentation Program (LOGCAP): DOD's 
LOGCAP program office and Rock Island Contracting Center led planning, 
award, and management of a task order for basic services at multiple 
locations across Iraq. LOGCAP provides for a wide range of utilities 
and maintenance services including dining, laundry, and waste 
management. State participated in planning and leads contract 
oversight, with quality assurance support from the Defense Contract 
Management Agency (DCMA).[Footnote 24] In Kabul, Afghanistan, DOD is 
performing all acquisition activities on State's behalf supporting its 
requirement for three dining facilities. 

* Basic Goods--Supplies of Food and Fuel: The Defense Logistics Agency 
(DLA) awarded seven contracts for food and fuel that the LOGCAP 
contractors use to provide their services in Iraq. DLA is responsible 
for awarding the contracts, with DLA and State sharing planning and 
oversight responsibilities. 

* Security--Security Support Services-Iraq (SSS-I), Theater Wide 
Internal Security Services (TWISS), and Sense and Warn: Multiple DOD 
contracting offices have taken actions to provide State with security 
capabilities in Iraq. The Rock Island Contracting Center led planning 
and award of two SSS-I task orders. The U.S. Central Command's 
(CENTCOM) Joint Theater Support Contracting Command modified five 
existing TWISS task orders for guard and movement security 
services.[Footnote 25] DOD's Redstone Contracting Center and the 
Defense Information Technology Contracting Organization modified two 
existing Sense and Warn task orders for the installation and operation 
of a capability to detect incoming rocket, artillery, and mortar 
attacks. A DOD program office conducted a survey of State facilities 
in Iraq to determine Sense and Warn requirements. DOD and State share 
oversight responsibilities. 

* Security--Field and Installation Readiness Support Team (FIRST) 
Maintenance: The Rock Island Contracting Center modified an existing 
task order to provide for maintenance of the Sense and Warn capability 
and biometrics equipment, as well as other DOD-loaned equipment. State 
participated in planning to meet its requirements, but DOD leads 
contract management and oversight. 

* Security--Vetting Services: The Rock Island Contracting Center 
awarded a task order for additional screeners and counterintelligence 
specialists to support State's vetting of Iraqi nationals working 
under the LOGCAP contract. According to State officials, both State 
and DOD contributed to acquisition planning and oversight. DCMA 
manages the task order on State's behalf, while a State regional 
security officer serves as a COR to provide oversight. 

Across all of these assisted acquisitions, in addition to DCMA's 
contract management support, the Defense Contract Audit Agency (DCAA) 
provides audit support.[Footnote 26] 

State independently awarded and administers two of the acquisitions we 
reviewed, with DOD providing acquisition planning support in both 
cases: 

* Unmanned Aerial Vehicles: State's decision to operate UAVs in Iraq 
led it to independently award, manage, and oversee its first contract 
for UAV operations and maintenance after DOD assisted in market 
research and requirements definition. 

* Medical Support Services-Iraq: Contracting for medical services on 
such a large scale was a new and unfamiliar task to State. However, it 
independently awarded and manages its own contract for primary and 
emergency medical care to State personnel and some contractors. DOD's 
medical command officials assisted with requirements development, and 
DOD personnel participated as nonvoting members on the technical panel 
evaluating contractor proposals. 

State's Reliance on DOD to Respond to Urgent Requirements Stemmed from 
Limitations in Its Acquisition Workforce Capacity That Persist: 

In justifying its 2010 requests for support from DOD in acquiring 
critical goods and services, State cited the urgency of ensuring 
requirements were met as the U.S. military withdrew from Iraq. 
Underlying that sense of urgency was the insufficient capacity and 
expertise of State's acquisition workforce. Specifically, State and 
DOD concluded that State lacked sufficient personnel, both in numbers 
and expertise, to conduct acquisition activities and that it did not 
have the requisite time to increase workforce capacity required to 
have contracts in place following the transition. State has taken some 
steps to address the acquisition workforce challenges that prompted it 
to seek DOD's assistance by increasing the number of acquisition 
professionals. However, State has not fully assessed whether (1) the 
effort to increase its acquisition workforce is sufficient to meet 
surge requirements, (2) its acquisition workforce has the proper skill 
and government/contractor mix, and (3) it has sufficient numbers of 
qualified oversight personnel to support its own contracting efforts 
in Iraq and Afghanistan in the future. For example, State's workforce 
planning through 2014 does not address specific needs for contract 
oversight personnel to support complex acquisitions in environments 
like Iraq or Afghanistan, even though DOD expects State to assume 
additional oversight responsibilities at the start of 2014. 

Requirements to Acquire Goods and Services for Iraq Exceeded Capacity 
and Expertise of State's Acquisition Workforce: 

State lacked sufficient personnel, both in terms of numbers and 
expertise, to conduct acquisition activities. State was not able to 
increase its capacity in time to support the transition to a State-led 
civilian presence. In the justification accompanying the Under 
Secretary of State for Management's April 2010 request for the 
continued use of LOGCAP, State noted that (1) if it was not able to 
rely on LOGCAP, it would be forced to redirect its resources to 
develop, implement, and oversee a new basic support infrastructure 
throughout the country and (2) doing so would place the civilian 
presence at risk given the magnitude, uncertainties, and complexities 
involved. State had explored awarding its own contract for its post-
2011 support services as an alternative, but discontinued the effort 
in June 2010, in part because it could not develop its contract 
management and oversight capabilities quickly enough. In August 2010, 
after an assessment of the critical support needs in Iraq, DOD 
concluded that State's organizational shortfalls in contracting placed 
the transition at a potential for significant risk if State had to 
assume responsibility for independently contracting for basic support 
services. The following month DOD agreed to provide the requested 
support to prevent mission degradation. 

For most of the 22 acquisitions we reviewed, State did not have the 
contracting or subject matter expertise necessary to plan, manage, or 
oversee the contracts, so the department sought DOD personnel's 
expertise. For example, when State requested DOD's assistance for the 
continuation of DOD's LOGCAP and associated food and fuel contracts to 
support establishing an exclusively diplomatic presence, State 
recognized that it did not have the sufficient experience and 
expertise to perform the necessary contract oversight. LOGCAP provides 
for dining and laundry service as well as light construction, 
comprehensive utilities services (power, water, sewage, fuel, and 
waste management), airfield operations (including air traffic 
control), ground transportation and vehicle maintenance, and shipping 
and receiving. A senior State official explained to us that DCMA 
assistance was needed to help oversee this wide range of services, in 
part because State personnel are not accustomed to overseeing, for 
example, dining facilities or power plants. A comparison of DOD and 
State contracting and oversight personnel supporting the award, 
administration, and oversight of State's LOGCAP task order in Iraq 
illustrates the extent of State's personnel shortfalls. As shown in 
figure 2, DOD provided 71 contracting and oversight personnel over the 
acquisition cycle to support this task order, while State provided 
fewer than 20 oversight personnel. 

Figure 2: DOD and State Contracting and Oversight Personnel Involved 
in the Planning, Award, and Oversight of the LOGCAP Task Order 
Supporting State in Iraq: 

[Refer to PDF for image: illustration] 

DOD: 

26 quality assurance representative; 
15 Logistics management specialists; 
13 Acquisition professional who perform or support procuring 
contracting office functions; 
11 Administrative contract officers; 
6 Property administrators; 
Total: 71 (all full-time). 

State: 

2 CORs dedicated to providing oversight on LOGCAP contracts; (full-
time); 
16 Provide oversight of LOGCAP in addition to other duties (part-time); 
Total: 18. 

Source: GAO analysis of State and DOD data. 

[End of figure] 

In addition, when developing its own contract for medical support 
services, State relied on DOD medical planning experts in Iraq in part 
because of DOD's expertise operating in a conflict environment. 
State's medical officials tasked with developing the requirements 
informed us that they were not prepared to write requirements for the 
medical services contract on their own because they had little to no 
experience related to contracting. Further, they stated that no one 
within AQM could assist them because State did not have contracting 
personnel with expertise related to medical services. 

State Has Not Fully Addressed Factors That Contributed to Reliance on 
DOD Acquisition Support: 

State Has Not Assessed Whether the Effort to Increase Its Acquisition 
Workforce Is Sufficient: 

State has taken some steps to address its long-standing shortage of 
acquisition professionals by using a dedicated source of funding for 
its acquisition workforce. Until 2008, AQM's operations were funded by 
annual appropriations, which State acquisition officials believed did 
not provide a basis to obtain sufficient government or contractor 
personnel. In 2008, AQM began using a working capital fund--a shared 
services model that provides procurement services on a fee-for-service 
basis to both domestic and overseas customers.[Footnote 27] A one 
percent fee is charged to State's internal customers, which is then 
used to finance all of AQM's operations, including salaries and 
travel. According to State AQM officials, State began using the fund 
because it needed to be able to quickly respond to acquisition 
workload increases--including those specifically associated with 
operations in Iraq--and the fund would generate a volume of resources 
directly proportional to AQM's workload. 

State's expectation that the working capital fund would allow AQM to 
be more responsive to increased demands on its acquisition workforce 
has been partially met. Between February 2008, when AQM began using 
the working capital fund, and April 2010, when State requested DOD's 
support for acquisitions in Iraq, AQM added 21 full-time government 
personnel and 60 support contractors. By February 2012, shortly after 
State took lead responsibility in Iraq, AQM added 25 more staff. This 
represents a 59 percent increase in AQM's workforce overall since the 
implementation of the fund in 2008 (see table 2). 

Table 2: Number of Personnel in AQM from 2008 to 2012: 

Number of government personnel; 
February 2008: 141; 
April 2010: 162; 
February 2012: 200. 

Number of contract support staff; 
February 2008: 39; 
April 2010: 99; 
February 2012: 86. 

Total; 
February 2008: 180; 
April 2010: 261; 
February 2012: 286. 

Source: State data. 

[End of table] 

Even with these increases, State's Inspector General reported in 
November 2010 and 2011 that the department lacked sufficient 
contracting personnel to handle the increase in the number of 
procurement transactions processed and the rise in the dollar value of 
procurement actions issued over the past decade. The Inspector General 
also identified associated challenges in acquisition planning, 
administration, and oversight in places like Iraq. Further, the 
relationship at State between procurement obligations and the number 
of government contracting professionals--a ratio that State has used 
to track its progress towards the goal of eliminating its long-
standing shortage of acquisition professionals--worsened from 2008 to 
2010. Over the two years, this ratio rose from about $47 million per 
government contracting professional in 2008 to about $57 million in 
2010.[Footnote 28] In 2010, the department assessed its 2008 ratio as 
unfavorable compared with that of other federal agencies, but it has 
not established the target ratio it hopes to achieve. 

State has not assessed how well the working capital fund has met 
expectations to surge the workforce for situations like Iraq and 
Afghanistan. State established the fund's one percent fee after 
assessing AQM's expenses in 2007, and according to officials, 
anticipated demands for an increase in contract services for Iraq. 
While State's Under Secretary for Management has repeatedly testified 
that the fund is helping State to "surge" its resources to respond to 
contingency requirements, State has not assessed the extent to which 
the fund has helped AQM's workforce surge to meet requirements for 
Iraq and Afghanistan. In an April 2012 assessment of the fund, State 
identified some improvements as a result of its use of the fund, such 
as hiring additional staff that allowed for overall faster processing 
of contract actions, but did not address whether the fund has enabled 
AQM to surge its acquisition workforce capacity. This lack of an 
assessment of the fund's ability to help AQM respond to contingency 
requirements is inconsistent with our prior conclusions that agencies 
should establish performance measures for working capital funds that 
align with strategic goals.[Footnote 29] 

State Has Not Assessed the Skills and Workforce Mix Needed to Meet 
Future Requirements: 

Although State has acknowledged a shortage of contracting and subject-
matter expertise in its requests for DOD's support in acquiring 
critical goods and services, the department has not assessed the 
expertise needed to support future contracting operations in Iraq and 
Afghanistan as part of its acquisition workforce planning efforts. We 
have previously reported that understanding where workforce gaps exist 
in the competencies and skills required to meet programmatic goals is 
key to helping agencies develop effective workforce strategies. 
[Footnote 30] State's acquisition workforce human capital plan for 
fiscal years 2010 through 2014 does not address the need for 
additional skills or expertise for contracting personnel or subject-
matter experts to support contracts in complex acquisition 
environments such as Iraq or Afghanistan. 

State also has not fully leveraged DOD's expertise to further build 
its own capacity for managing complex acquisitions in environments 
like Iraq. For example, according to DOD and State officials, prior to 
the award of the LOGCAP task order, a State official from the embassy 
in Baghdad was working with contracting personnel at the Rock Island 
Contracting Center to facilitate the refinement of requirements and 
source selection process. However, according to Rock Island 
Contracting Center officials responsible for planning and awarding the 
task order, State's AQM officials had minimal involvement in these 
activities, which limited their opportunities to gain insight and 
expertise. While State AQM officials are working with personnel at the 
embassy in Baghdad to identify continuing requirements beyond LOGCAP, 
DOD officials told us and State officials confirmed as of April 2012, 
AQM personnel were not working directly with their DOD counterparts at 
the Rock Island Contracting Center to build expertise even though 
State anticipates taking over the contracting function for these 
services within the next few years. State officials explained that 
there are no unique functions or processes for contracting in 
contingency environments such as Iraq and Afghanistan and, therefore, 
State does not need to develop a separate workforce expertise or 
capability for its efforts in those countries. 

Approximately half of the personnel added to AQM's workforce since 
2008 are support contractors. While we did not assess the specific 
roles being performed by these contractors, some of them may be 
performing contract administration functions. However, State has not 
assessed the extent to which it is appropriate for contractors to 
perform contract administration functions, which we recommended in 
April 2010 the department do.[Footnote 31] As of February 2012, these 
support contractors accounted for approximately one-third of AQM's 
staff. State's Office of Inspector General attributed the increased 
reliance on contractors in part to delays and other difficulties 
associated with the hiring process for government employees, citing 
lead times of up to 18 months to hire government personnel. While 
contractors provide valuable support, they do not have the authority 
to perform certain types of acquisition activities such as awarding 
contracts or approving contractual documents. Moreover, State's Deputy 
Inspector General testified in April 2012 that the use of contractors 
to supplement staffing in support of acquisition management has 
increased risk related to potential conflict of interest. Without 
determining the extent to which support contractors should perform 
contract administration functions, State is limited in its ability to 
ensure that it has sufficient government contracting personnel to meet 
future needs in Iraq and Afghanistan. 

State Has Not Sufficiently Planned for Contract Oversight in Iraq and 
Afghanistan: 

State has not conducted the planning necessary to ensure it has 
sufficient contract oversight capacity for Iraq and Afghanistan in the 
future, even though it has acknowledged a lack of personnel with 
requisite experience and expertise to meet its current oversight 
needs. Contract oversight was in State's scope of planned activities 
in Iraq, but the extent of planning for oversight functions was 
inconsistent among contracted services we reviewed. To carry out 
contract oversight, State generally relies on CORs appointed from 
programs within the department's regional and functional bureaus to 
help ensure that the contractor accomplishes the required work. These 
CORs are funded through programmatic and bureau budgets, as opposed to 
AQM's working capital fund. State typically assigns COR duties to 
staff whose primary duties are program management, so these staff 
perform COR duties part-time. The practice of having personnel perform 
their COR duties on a part-time basis is also used at other agencies, 
including DOD for its oversight of contracts in Iraq and Afghanistan. 
According to State contracting and regional bureau officials, State 
conducts general planning for CORs as part of the department's human 
capital planning process to meet its overall mission and generally 
determines the number of CORs necessary to oversee a specific contract 
during early acquisition planning meetings. 

Because State officials had limited involvement in the acquisition 
planning, they did not have sufficient insight into the oversight 
required for basic support services in Iraq. According to DOD 
officials directly involved in the planning and award of the LOGCAP 
task order, State's limited involvement in acquisition planning led to 
State's difficulty in understanding the full extent of contract 
oversight needed. This included identifying the minimum number of CORs 
needed and their training. State's limited acquisition planning for 
the extent of oversight needed is reflected in State's fiscal year 
2012 congressional budget justification, as well as State's fiscal 
year 2013 Mission and Strategic Resource Plan for the U.S. Mission to 
Iraq. In neither case did State identify funding or the number of 
personnel expected to perform contract oversight supporting the LOGCAP 
task order. It was only after extensive negotiation between State and 
DOD officials and the award of the LOGCAP task order that State agreed 
to assign the number of oversight personnel DOD considered sufficient. 
Providing the agreed upon level of oversight for the LOGCAP task order 
and other DOD awarded and managed contracts resulted in an unplanned 
allocation of staff for State. As a result of the negotiations with 
DCMA, State dedicated four of its personnel in Baghdad as full-time 
CORs rather than having them perform COR duties in addition to other 
responsibilities. Finally, even with new understanding of the level of 
contract oversight required for the LOGCAP task order, State's fiscal 
year 2013 congressional budget justification for Iraq does not request 
funding for additional positions to conduct oversight. As a result, 
State may need to again redirect personnel from other duties to 
perform as CORs for State's LOGCAP task order until its expiration at 
the end of 2013. 

In contrast, State has improved its planning for contract oversight of 
private security contractors. We previously reported on improvements 
State made to its oversight of private security contractors in Iraq by 
increasing the number of diplomatic security personnel stationed in 
Iraq to oversee contractor activities and requesting and receiving 
funding to hire and train 100 additional agents.[Footnote 32]To ensure 
it could sustain this progress, State conducted extensive planning to 
oversee its Worldwide Protective Services contract for guard and 
movement security services, which informed decisions to increase 
resources and personnel. For example, in 2010, State requested funding 
to add 15 full-time positions specifically for oversight of its 
worldwide personal protective services contracts. Similarly, for 
fiscal year 2011, State's Bureau of Diplomatic Security requested 
additional funding for costs associated with oversight personnel for 
contracts that provide protective security services throughout Iraq. 

DOD documentation indicates an expectation that oversight and other 
acquisition support roles for basic support and other critical goods 
and services in Iraq should transition from DOD to State no later than 
the start of 2014. However, State has not determined its future 
requirements for oversight personnel and the funding needed to fulfill 
those needs. For example, State has not conducted an overall 
assessment of the number of personnel needed to replace DOD personnel 
conducting contract oversight on State's behalf in Iraq. Similarly, 
there has not been an assessment of the skills, expertise, and 
training such oversight personnel would need; whether other employees 
can be redirected to fulfill the oversight role; or requests for 
funding to ensure sufficient contract oversight capability for these 
contracts as they transition from DOD to State oversight. For example, 
State's Acquisition Workforce Human Capital Plan for Fiscal Years 2010 
through 2014 does not address any specific needs for contract 
oversight personnel to support complex acquisition environments such 
as Iraq or Afghanistan. Without conducting planning for contract 
oversight, State is not well positioned to determine whether it has 
sufficient time to hire or otherwise develop its capacity to meet 
future oversight needs or whether it again must rely on DOD to 
supplement its acquisition workforce. A decision to proceed with 
acquiring needed services without sufficient oversight personnel in 
place puts the agency at risk of being unable to identify and correct 
poor contractor performance in a timely manner and ensure consistent 
delivery of goods and services critical to maintaining State's 
presence in Iraq. 

State and DOD Did Not Comply with Requirements for Use and Management 
of Assisted Acquisitions: 

In deciding to rely on DOD for 20 assisted acquisitions, State did not 
always comply with requirements for determining whether an assisted 
acquisition was the best procurement approach. For 12 of the assisted 
acquisitions, we found that determinations were not consistent with 
FAR and OMB requirements in terms of the extent to which certain 
factors were considered. For example, in deciding to use DOD's LOGCAP 
contract in Iraq, State did not assess cost-effectiveness. We also 
found that State and DOD did not prepare and sign interagency 
agreements for 13 of the 20 assisted acquisitions that contained 
certain factors designed to ensure strong management. For example, 
State and DOD did not identify roles and responsibilities as part of 
an interagency acquisition agreement prior to solicitation of the 
LOGCAP task order in January 2011. The State First policy for making 
and implementing decisions regarding interagency acquisitions has not 
been updated since 2008 to reflect current OMB guidance and FAR 
requirements for determinations of best procurement approach or 
interagency acquisition agreements. Furthermore, the Economy Act--
which the departments cited as their authority for interagency 
acquisitions--requires that State reimburse DOD based on the actual 
costs of awarding and managing interagency acquisitions. In April 
2012, the Army's Rock Island Contracting Center began tracking the 
staff-hours dedicated to assisted acquisitions supporting State in 
Iraq and Afghanistan and expects to submit the associated costs to 
State for payment. However, the departments have unresolved positions 
over whether State should reimburse DOD for the costs DOD incurred 
prior to January 2012. These positions could have been resolved if the 
departments had prepared and signed the required interagency 
acquisition agreements. The lack of compliance with guidance and 
regulation has implications for State's ability to make sound 
acquisition decisions. Specifically, State lacks the insight needed to 
assess alternative acquisition approaches and has not provided 
evidence of taking key acquisition planning steps. The expiration of 
key contracts supporting its presence in Iraq and changes to the U.S. 
presence in Afghanistan over the next 18 months compresses the time 
available for State to gain insights, plan, and make sound decisions 
about whether to continue to rely on interagency acquisitions or 
independently acquire critical goods and services. 

State Did Not Comply with Requirements for Determining Best 
Procurement Approach: 

The OMB guidance issued in 2008 and the FAR provisions regarding 
interagency acquisitions require agencies to make a determination that 
the use of an interagency acquisition represents the best procurement 
approach. In making this determination, the requesting agency--in this 
case, State--is to consider certain factors prior to requesting that a 
servicing agency--in this case, DOD--conduct an acquisition on its 
behalf. State officials told us they regard the justifications 
contained in the approved "waiver packets" prepared under the State 
First policy to be sufficient to meet FAR and OMB requirements. 
[Footnote 33] However, the State First policy has not been updated 
since the issuance of OMB's 2008 guidance on improving the use of 
interagency acquisitions or the 2010 amendment to the FAR requiring a 
determination of best procurement approach.[Footnote 34] These 
differences have implications for assisted interagency acquisitions, 
such as those we reviewed. OMB's guidance is intended to help agencies 
make sound business decisions to support the use of interagency 
acquisitions, and the purpose of the amendment to the FAR provisions 
on interagency acquisitions is to prevent abuse of interagency 
contracts by requiring a best procurement approach determination. The 
State First policy is silent with respect to how requesting bureaus 
wanting to enter into an interagency acquisition should make and 
document a determination of best procurement approach, putting the 
agency at risk for moving forward with an interagency acquisition that 
is not a sound business decision. 

We found that for 12 of the 20 assisted acquisitions we reviewed, 
determinations of best procurement approach--documented through the 
State First waiver packets--were not made in accordance with the FAR 
and OMB requirements. In one case, a determination of best procurement 
approach was not made at all. In September 2010, State's mission in 
Afghanistan requested to receive dining facility services through 
DOD's LOGCAP contract. State's AQM and OPE did not approve a State 
First waiver or make any other determination of best procurement 
approach for this interagency acquisition. In the case of LOGCAP Iraq, 
the Near Eastern Affairs bureau's requirements for services under 
LOGCAP were not approved through a State First waiver before DOD 
proceeded with that interagency acquisition and State transferred 
funds to DOD.[Footnote 35] Further, as shown in table 3, State did not 
always consider, as required, its full scope of requirements or cost-
effectiveness when making a determination of best procurement approach. 

Table 3: Summary of Noncompliance with OMB and FAR Requirements for 
Determination of Best Procurement Approach for 12 Assisted 
Acquisitions: 

Contract, task order, or modification: LOGCAP (Afghanistan)[A]; 
Considered full scope of requirements?: No; 
Considered cost-effectiveness?: No. 

Contract, task order, or modification: LOGCAP (Iraq); 
Considered full scope of requirements?: No; 
Considered cost-effectiveness?: No. 

Contract, task order, or modification: Sense and Warn Installation; 
Considered full scope of requirements?: Yes; 
Considered cost-effectiveness?: No. 

Contract, task order, or modification: Sense and Warn Operations; 
Considered full scope of requirements?: Yes; 
Considered cost-effectiveness?: No. 

Contract, task order, or modification: FIRST Maintenance; 
Considered full scope of requirements?: Yes; 
Considered cost-effectiveness?: No. 

Contract, task order, or modification: Food; 
Considered full scope of requirements?: No; 
Considered cost-effectiveness?: Yes. 

Contract, task order, or modification: Fuel (6 contracts); 
Considered full scope of requirements?: No; 
Considered cost-effectiveness?: Yes. 

Source: GAO analysis of State and DOD documents. 

[A] No determination of best procurement approach was made. 

[End of table] 

In the April and September 2010 letters from State to DOD requesting 
that DOD acquire goods and services on State's behalf and in the 
subsequent coordination activities between the departments, there was 
extensive discussion of some of the factors agencies are to consider 
when making a best procurement approach determination under the FAR 
requirements and OMB guidance. For example, State's request letters 
documented an urgent need that could be filled using DOD's contracts, 
and State indicated it had been satisfied with DOD's acquisition of 
the services as an existing customer. While these are among the 
factors agencies are to consider when making their determinations, 
subsequent events revealed that State did not have a full 
understanding of other factors, such as how its requirements would be 
met, when it decided to pursue interagency acquisitions with DOD. 

This lack of full understanding can be illustrated by State's 
experience working with DOD to acquire basic support goods and 
services to support its mission in Iraq. In State's April 2010 letter 
to DOD requesting continued use of LOGCAP for basic services and use 
of associated food and fuel supply contracts, State highlighted how 
those contracts would meet its requirements. However, it appears that 
State did not have a full understanding of the scope of services and 
limitations of the contracts when it made its request. For example, 
under the terms of DLA's food contract, consistent with regulations 
regarding supply, certain goods cannot be acquired from the local 
economy.[Footnote 36] According to State and DOD officials, State 
subsequently became aware of this limitation when it sought to have 
DOD modify the contract so that it could procure goods locally. In 
addition, by requesting to use the LOGCAP contract, State unknowingly 
took on additional security requirements because the contract requires 
that contractor personnel travel with a security escort. DOD had 
previously arranged for this security, but with DOD's withdrawal from 
Iraq, State had to make other security arrangements. According to 
State and DOD officials, including those in Iraq, after unsuccessful 
efforts to modify or eliminate security requirements from the 
contract, State requested that DOD award a task order under its 
existing SSS-I contract. Furthermore, State officials did not believe 
it was necessary to provide security for convoys of food and fuel. 
However, State ultimately decided to do so based on discussions with 
DOD and coordination with supplier companies. In requesting and 
justifying its use of LOGCAP and DLA supply contracts, State did not 
acknowledge these additional requirements or their implications as 
part of its decision to rely on DOD. 

Similarly, we found that State First waiver packets and other 
documentation did not fully implement the FAR's requirement that cost-
effectiveness be considered in making the determination of best 
procurement approach. For example, neither the State First waiver 
prepared for use of DOD's contract for sustainment of equipment nor 
the waiver prepared for use of DOD's Sense and Warn capability 
assessed cost-effectiveness. Further, there is evidence that State's 
decision to rely on DOD's LOGCAP contract in Iraq did not consider 
cost-effectiveness. In State's April 2010 request to use LOGCAP, the 
justification does not refer to cost-effectiveness. A subsequent 
September 2010 DOD memorandum authorizing DOD components' 
implementation of that request concluded, "DOD cannot provide the 
[requested] support at a lower cost or more quickly than could State 
contracting independently." DOD's assessment of the costs also noted 
that "the amounts requested by State are likely to be significantly 
less than the actual cost of the support," which were estimated at the 
time to be at least $63 million annually. Indeed, over the 15 months 
following State's initial request to use LOGCAP, requirements for 
services changed and associated costs rose to an estimated $219 
million for 2012 at the time DOD awarded State's LOGCAP task order. 
However, the State First waiver submitted by the Bureau of Diplomatic 
Security in July 2011 stated, in the cost-benefit analysis section, 
that market research or other comparison methods were not used because 
of the urgency of the requirement. Although State's decision to 
request LOGCAP to sustain critical goods and services to avoid mission 
failure may have been reasonable under the circumstances, the absence 
of any subsequent effort to assess cost-effectiveness is not only 
contrary to acquisition regulation but also limits the department's 
understanding of expected resource needs, ability to plan and budget 
for future costs, and evaluate other options in the future for meeting 
this requirement. 

State and DOD Did Not Fully Meet Requirements for Assisted Interagency 
Acquisition Agreements: 

Although State and DOD coordinated to identify State's acquisition 
needs for Iraq and made a series of decisions on what DOD would 
provide, how the departments documented and implemented these 
decisions was in some cases inconsistent with the FAR and OMB guidance 
intended to ensure effective management of interagency acquisitions. 
Specifically, the regulation and guidance require agencies to enter 
into written agreements to govern assisted interagency acquisitions. 
For 13 of the 20 assisted acquisitions we reviewed, State and DOD 
either did not prepare an agreement, did not both sign the agreement, 
or the agreement did not contain required elements designed to ensure 
effective management. 

Formal interagency acquisition agreements establishing roles and 
responsibilities help ensure strong management. We previously reported 
that a lack of clear definitions of roles and responsibilities is a 
significant risk with interagency acquisitions.[Footnote 37] To help 
mitigate that risk, the FAR and OMB's 2008 guidance on strengthening 
the management of interagency acquisitions direct agencies to have in 
place prior to solicitation of a contract or task order a written 
interagency acquisition agreement that, among other things:[Footnote 
38] 

* defines roles and responsibilities for contract management, 

* describes goods or services covered in order to demonstrate a bona 
fide need, 

* includes funding information from both the requesting and servicing 
agency to ensure the proper transfer and obligation of funds, and: 

* identifies unique terms and conditions that apply for the requesting 
agency. 

Under the State First policy, once AQM and OPE approve a bureau's 
State First waiver, AQM is required to work with the bureau to prepare 
an interagency acquisition agreement with the servicing agency. The 
agreement may be prepared on a State standard form and must contain 
(1) a description of the supplies or services required, (2) delivery 
requirements, (3) a funds citation, (4) a payment provision, and (5) 
acquisition authority as may be appropriate. The State First policy 
generally aligns with the FAR provisions regarding interagency 
acquisitions under the Economy Act in effect prior to the 2010 
amendment to FAR. However, the State First policy has not been updated 
since the issuance of OMB's 2008 guidance on improving the management 
of interagency acquisitions by ensuring interagency agreements for 
assisted acquisitions contain certain elements or the FAR amendment 
requiring a written agreement on responsibility for management and 
administration for assisted acquisitions. Under State's policy, an 
interagency agreement may be documented on a standard one-page form. 
Completion of this form does not meet the requirements for a written 
interagency agreement delineated in the FAR and OMB guidance because 
the form does not require details such as roles and responsibilities 
for contract administration and management. Among other things, 
identifying roles and responsibilities is critical to ensuring 
effective management of an interagency acquisition. 

DOD policy also mandates the use of interagency acquisition 
agreements. The Director, Defense Procurement and Acquisition Policy, 
issued a memorandum in October 2008 to implement OMB's 2008 guidance, 
and we found it to be consistent with that guidance and current FAR 
provisions. In addition, for all interagency acquisitions over 
$500,000--which includes all of the interagency acquisitions we 
reviewed--DOD's memorandum directs that interagency acquisition 
agreements contain the elements or follow the model in the interagency 
acquisition agreement template provided in OMB's guidance. 

Although written interagency acquisition agreements were required for 
all 20 of the assisted acquisitions we reviewed, State and DOD did not 
consistently prepare them in accordance with acquisition regulation 
and guidance, as shown in table 4. 

Table 4: Status of Interagency Agreements for 20 Assisted Acquisitions: 

Contract, task order, or modification: Food; 
Agreement prepared: Yes; 
Signed by both departments: Yes. 

Contract, task order, or modification: Fuel (6 contracts); 
Agreement prepared: Yes; 
Signed by both departments: Yes. 

Contract, task order, or modification: LOGCAP (Iraq); 
Agreement prepared: Did not meet one or more requirements; 
Signed by both departments: No. 

Contract, task order, or modification: SSS-I(for LOGCAP); 
Agreement prepared: Did not meet one or more requirements; 
Signed by both departments: No. 

Contract, task order, or modification: SSS-I (for food and fuel); 
Agreement prepared: Did not meet one or more requirements; 
Signed by both departments: No. 

Contract, task order, or modification: LOGCAP (Afghanistan); 
Agreement prepared: No; 
Signed by both departments: No. 

Contract, task order, or modification: TWISS(5 task orders); 
Agreement prepared: No; 
Signed by both departments: No. 

Contract, task order, or modification: Sense and Warn Installation; 
Agreement prepared: No; 
Signed by both departments: No. 

Contract, task order, or modification: Sense and Warn Operations; 
Agreement prepared: No; 
Signed by both departments: No. 

Contract, task order, or modification: FIRST Maintenance; 
Agreement prepared: No; 
Signed by both departments: No. 

Contract, task order, or modification: Vetting; 
Agreement prepared: No; 
Signed by both departments: No. 

Source: GAO analysis of State and DOD documents. 

[End of table] 

Seven of the 20 acquisitions were covered by an interagency 
acquisition agreement between State and DLA that contained the 
required elements, such as roles and responsibilities, designed to 
ensure effective management of the acquisition. Of the remaining 13, 
interagency acquisition agreements were prepared for 3, but these 
agreements were not signed by both departments prior to solicitation 
and did not contain roles and responsibilities or other elements. For 
example, State officials prepared standard one-page Department of 
State forms for the LOGCAP task order and two SSS-I task orders, but 
DOD officials did not sign the forms. Further, these forms did not 
specify State's requirements for the acquisition or the respective 
roles and responsibilities for State and DOD. The other 10 assisted 
acquisitions were not covered by any interagency acquisition 
agreement, which contributed to confusion and limited effective 
management of the acquisitions.[Footnote 39] 

According to State and DOD officials, in lieu of formal interagency 
acquisition agreements, DOD's acquisition assistance was implemented 
at the lowest possible organizational level. State and DOD officials 
identified the Executive Steering Group, which was established in 
September 2010, as well as the associated Embassy Support and Enduring 
Base Transition Board, as the primary mechanisms of coordinating and 
implementing DOD's acquisition support. The Executive Steering Group 
meets on at least a bi-weekly basis. According to Executive Steering 
Group leadership, it does not have any decision-making authority but 
rather helps identify issues and relevant officials or organizations 
that might address them and tracks the progress of the issues to 
resolution. The departments' Principal Under Secretary of Defense for 
Acquisition, Technology, and Logistics and Under Secretary of State 
for Management provide guidance and make decisions pertaining to 
issues raised in the group on an as-needed basis. Though a draft 
charter for the group was prepared, officials noted a determination 
was made not to finalize it, as they believed the goodwill between the 
departments was sufficient to resolve any disagreements. 

While the Executive Steering Group facilitated discussion and 
identified acquisition issues, the group's activities did not replace 
the departments' responsibilities under the FAR and OMB guidance for 
formalizing written interagency acquisition agreements. Executive 
Steering Group members from both departments informed us that they did 
not consider State's reliance on DOD to acquire critical goods and 
services in these instances as constituting assisted acquisitions that 
required interagency agreements, even though group membership included 
State acquisition officials and DOD acquisition and financial 
management officials. For example, senior State and DOD officials told 
us that the departments did not enter into written interagency 
acquisition agreements for LOGCAP or SSS-I because of their 
understanding that the Military Interdepartmental Purchase Requests 
submitted by State were sufficient to facilitate agreement and 
associated reimbursement.[Footnote 40] However, Diplomatic Security 
officials responsible for preparing waivers and processing payment for 
the assisted acquisitions acknowledged that interagency acquisition 
agreements were required. They stated that AQM did not pursue 
agreements due to the urgency of the needs and the limited time for 
DOD to execute contract actions on State's behalf. Standard one-page 
interagency agreement forms were prepared for both LOGCAP and SSS-I, 
indicating recognition at some level within AQM that these 
acquisitions were interagency acquisitions. These one-page forms, 
however, did not meet FAR requirements and OMB guidance, such as 
specifying the departments' respective roles and responsibilities. 

By not having formalized agreements in place prior to solicitation, 
State and DOD experienced significant expectation gaps about roles and 
responsibilities. These gaps delayed establishment of contract 
oversight responsibility and contractor performance standards. 
Although the departments eventually reached mutual understanding 
through discussions at the Executive Steering Group, the process was 
inefficient and the delays were avoidable. For example: 

* A one-page interagency agreement form for the use of LOGCAP in Iraq 
was prepared by State in January 2011 but never signed by DOD. The 
form did not define the roles and responsibilities for acquisition 
activities between State and DOD, including contract oversight. 
Resulting disagreements between DOD and State regarding which 
department would provide CORs persisted for several months, leading to 
DCMA not entering into an agreement to support State without State 
first identifying its CORs and agreeing to train them to DOD 
standards. State eventually agreed to provide 18 full-and part-time 
oversight personnel, and DCMA provided 26 quality assurance 
representatives with specific subject matter expertise for overseeing 
the contractor, in support of the State personnel. Although that 
agreement was reached in February 2012, it was delayed over a year 
beyond solicitation of the LOGCAP task order as State and DCMA 
officials resolved issues related to the oversight roles and 
responsibilities, as well as the associated payment for DCMA's 
services. 

* State prepared a one-page interagency agreement form covering two 
SSS-I task orders DOD awarded on State's behalf, which DOD did not 
sign. The form did not identify unique terms and conditions that 
applied to State, as required by the FAR and OMB guidance, which in 
this case pertained to security contracts. Given the transition in 
responsibility from DOD to State for the mission in Iraq, DOD 
contracting officials raised concerns throughout the summer of 2011 
over the continued use of DOD security contractor performance 
standards, such as rules of engagement. State ultimately decided to 
use its own performance standards, but the delay in reaching agreement 
regarding security standards delayed task order award by 2 months. 

In contrast, DCAA and DCMA entered into agreements with State, 
covering their specific roles in administration, oversight, and audits 
across the 20 assisted acquisitions. DCAA and DCMA provide support 
across multiple organizations both within and outside DOD and 
regularly use agreements to formalize that support. Since 1983, State 
has received DCAA's contract audit services under an agreement 
generally renewed annually. In addition, since 2003, DCAA's Iraq 
Branch Office has been supporting both DOD's and State's acquisitions 
in Iraq; the agreement was modified in December 2011 to support 
State's requirements following DOD's departure. In February 2012, 
State entered into a memorandum of agreement with DCMA for contract 
administration support for the contracts awarded on behalf of State 
with performance in Iraq, including LOGCAP. The agreements with DCAA 
and DCMA pertain to only those agencies' specific activities with 
respect to the covered acquisitions. As such, these agreements do not 
fulfill OMB and FAR requirements for interagency acquisition 
agreements as they do not cover other activities and responsible 
parties, such as performing contract award and administration on 
State's behalf. 

Payment for Certain Costs Associated with Assisted Interagency 
Acquisitions Remain Unresolved: 

The actual costs to a servicing agency in an Economy Act assisted 
interagency acquisition generally include both the costs of the 
contracted goods or services, as well as the costs associated with the 
servicing agency's commitment of personnel and other resources to plan 
and execute the contract action on the requesting agency's behalf. For 
example, beginning with State's requests in 2010 for DOD's assistance 
under the Economy Act, DOD committed personnel and other resources to 
plan and execute the contract actions on State's behalf. State 
provided payments to DOD for the costs of the contracted goods and 
services for the 20 assisted interagency acquisitions in our review. 
For some of these acquisitions, however, State has not yet paid DOD 
for other direct or indirect costs of providing goods and services. 
After we raised questions regarding State's payment for actual costs, 
DOD legal officials have taken the position that State should pay DOD 
for these costs and are now in the process of determining the amount 
State should pay going back to 2010. In contrast, State legal 
officials have taken the position that State is prohibited from paying 
DOD for the costs associated with awarding and supporting the 
interagency acquisitions prior to 2012. These positions are 
unresolved. Had the departments formalized interagency acquisition 
agreements in accordance with the FAR and OMB guidance, these issues 
could have been resolved prior to moving forward with these 
acquisitions. Furthermore, unresolved positions on the terms and 
extent of State's payment to DOD place the departments at risk of non-
compliance with fiscal law.[Footnote 41] 

Departments Have Not Resolved Whether State Is Required to Pay DOD for 
Certain Costs Prior to 2012: 

The Economy Act was the authority used for the interagency 
acquisitions in our review. For interagency acquisitions under the 
authority of the Economy Act, the requesting agency is required to pay 
the servicing agency on the basis of the actual cost of entering into 
and administering the contract on the requesting agency's behalf. 
[Footnote 42] In determining actual costs, agencies must avoid the 
unauthorized augmentation of their appropriations, as charging too 
much would augment the servicing agency's appropriations, while 
charging too little would augment the requesting agency's 
appropriations. The Economy Act requires that the actual costs include 
all direct costs attributable to the performance of a service or 
furnishing of materials, regardless of whether the servicing agency's 
expenditures were thereby increased.[Footnote 43] Direct costs include 
salaries for employees doing the work.[Footnote 44] Actual cost also 
includes certain indirect costs (overhead) proportionately allocable 
to the transaction, such as administrative overhead applicable to 
supervision.[Footnote 45] 

Legal officials from both departments informed us that State paid the 
Army's Rock Island Contracting Center for the costs of the LOGCAP, SSS-
I, vetting, and FIRST maintenance contracted services. However, these 
officials informed us that State has not paid for the Center's costs 
associated with the personnel working on these acquisitions on State's 
behalf or other indirect overhead costs. The departments have not 
resolved their positions with respect to whether State should pay DOD 
for these costs going back to 2010, when coordination activities began 
for these interagency acquisitions. DOD legal officials told us they 
had determined that the Economy Act requires State to pay DOD for the 
costs associated with award and management of the task orders and 
contract modification on State's behalf, as these costs are part of 
the interagency acquisitions' actual costs. In response to our 
questions regarding State's payment for these costs, the Army's Rock 
Island Contracting Center established a process in April 2012 to 
document time expended in support of State acquisitions going forward 
and has also identified those personnel who have been providing 
support to State. For example, Center officials estimated that 
approximately 12 full-time equivalent staff had been supporting 
State's LOGCAP task order alone since the summer of 2010, when 
acquisition planning activities began. The Center has not yet 
finalized its calculation of the hours and associated costs but has 
indicated that upon finalization it will submit this information to 
State for payment. 

State legal officials agreed that the department is required, in 
accordance with the Economy Act, to pay DOD on the basis of actual 
costs--to include costs associated with contract award and management--
but believe this applies only to costs incurred after December 31, 
2011. State legal officials informed us that State is prohibited from 
paying DOD for support provided prior to December 31, 2011, because 
doing so would improperly augment DOD's appropriations. State legal 
officials point to language in National Security Presidential 
Directive 36 directing departments to provide support to U.S. 
activities in Iraq on a non-reimbursable basis and stating that the 
Director of OMB shall ensure budget submissions shall request funding 
necessary to support the U.S. mission in Iraq. State legal officials 
maintain that DOD was directed to include support costs--such as the 
cost of personnel who awarded and administer task orders on State's 
behalf and other indirect overhead costs--in its budget requests so 
DOD would receive adequate appropriations for these purposes. These 
officials further maintain that providing payment to DOD for the same 
costs would augment DOD's appropriations. State and DOD's positions 
regarding payment requirements have not yet been resolved, which 
leaves the departments vulnerable to non-compliance with fiscal law. 

Departments Missed Opportunities to Clarify and Resolve Payment Terms: 

The departments' positions with respect to payment for certain costs 
associated with the assisted interagency acquisitions we reviewed 
should have been resolved prior to moving forward with the 
acquisitions through formalizing agreements between them. In the 
September 2010 meeting establishing the Executive Steering Group, a 
draft charter was presented to provide organization and operating 
guidance for DOD to transfer equipment and develop sourcing solutions 
for State requirements. This draft charter notes that the Office of 
the Secretary of Defense, Comptroller will advise the group to ensure 
statutory compliance with the Economy Act, with general counsel to 
assist. This charter was never finalized, and thus, the departments' 
leadership missed an opportunity to formalize the role of the 
Comptroller, who could have clarified the terms of payment associated 
with DOD's support. Senior State and DOD officials who participated in 
the Executive Steering Group told us they understood there to be an 
agreement in principle for State to pay DOD for actual costs. However, 
they could not provide evidence that DOD was being paid for any costs 
other than the costs of the contracted goods and services. 

Further, had the departments executed interagency acquisition 
agreements containing the elements enumerated in the FAR and OMB 
guidance, the departments' positions regarding payment would have been 
aligned. Under OMB guidance, an interagency acquisition agreement 
should contain specific terms for payment to ensure agreement on these 
terms between the agencies.[Footnote 46] Without these agreements, 
terms for payment were unclear, resulting in the departments' 
positions being unresolved for these five interagency acquisitions. 
For example, the September 2010 memorandum signed by the Deputy 
Secretary of Defense authorized the provision of basic life support to 
State through the Army's LOGCAP contract on a reimbursable basis; 
however, Army officials indicated that there was an open question as 
to whether associated support costs were to be reimbursed. Had the 
departments executed an interagency acquisition agreement prior to 
issuance of the solicitation for the LOGCAP task order supporting 
State, as required under the FAR, the departments would have 
established a mutual understanding with respect to reimbursable costs. 
In contrast, the annual renewals to the memorandum of agreement that 
State has in place with DCAA provide for State to reimburse DCAA for 
the services provided to State in 2011 and 2012 under the Economy Act. 
The memorandum of agreement that State has with DCMA provides for the 
reimbursement of services in fiscal year 2012 under the Economy Act. 

State Lacks Insight to Assess Alternative Approaches for Future 
Acquisitions: 

In sustaining its presence in Iraq and Afghanistan, State faces 
important decisions for how to acquire critical goods and services as 
it goes forward. To be consistent with FAR requirements, State's 
decision to continue relying on DOD for the acquisition of critical 
goods and services should entail assessing procurement approaches--
such as independently acquiring the goods and services--to determine 
the best approach.[Footnote 47] However, State has had limited insight 
into the acquisition process for the basic support and security 
services provided under DOD contracts. Further, while the Rock Island 
Contracting Center has recently begun tracking the hours its personnel 
spend supporting assisted acquisitions on State's behalf, DOD has not 
yet reported the associated costs to State. State's ability to assess 
approaches and make informed decisions about whether to continue 
relying on DOD's contracts through interagency acquisitions is 
hindered until State can fully evaluate the actual costs of DOD's 
acquisition support. 

To help State identify available procurement alternatives to meet its 
continuing requirements in Iraq, State and DOD established a 
Transition Phase II Working Group in early 2012. However, the amount 
of time available for State to make and implement acquisition 
decisions is shrinking as key contracts are set to expire over the 
next 18 months. If State is to independently acquire needed fuel, 
food, and basic support services, it would need to perform acquisition 
planning and market research under the FAR, as soon as the need is 
identified.[Footnote 48] State officials have taken some steps to 
determine whether independently acquiring fuel and food may be a cost-
effective procurement alternative to DOD-awarded contracts. State 
officials informed us of plans to award their own fuel contract to 
replace DOD's contract that expires in September 2012. Additionally, 
in January 2012, State awarded a contract for market research on local 
sources of food, considering factors such as quality assurance 
standards, reliability, and pricing. However, State's current efforts 
to assess procurement approaches for basic support services may not be 
sufficient to determine whether LOGCAP or a State-awarded contract is 
the best approach. According to DOD acquisition officials, State would 
need at least 11 to 12 months of acquisition planning to independently 
acquire basic support services given their complexity. State officials 
have not provided evidence that they are taking key acquisition 
planning steps, such as estimating the costs of directly acquiring the 
services or drafting an acquisition plan to identify alternatives. 
Even though DOD's LOGCAP contract expires in December 2013, State's 
April 2010 request for LOGCAP anticipated using it beyond 2013 and 
potentially until 2015. In May 2012 State acquisition officials 
informed us of their intent to transition from LOGCAP to State 
contracts by October 2013; however, they provided no documentation of 
this acquisition planning. With respect to security capabilities, DOD 
has an expectation that State will assume contract oversight and 
sustainment support operations for the FIRST maintenance contract in 
September 2012, leaving State only months to identify a procurement 
alternative and make a decision. Not only does State have limited time 
to identify and pursue an alternative, but State officials have also 
acknowledged that DOD's expertise better positions it to acquire 
services related to military capabilities, such as Sense and Warn. 

For Afghanistan, as the departments prepare to realign their presence 
to meet national security policy objectives, State's current planning 
efforts similarly may not be sufficient to identify procurement 
alternatives and determine a best procurement approach. State has 
incorporated some knowledge gained through acquiring critical goods 
and services in Iraq to inform planning for Afghanistan. For example, 
State and DOD officials told us they established an Executive Steering 
Group for Afghanistan modeled on the group for Iraq. In addition, 
State established the Management Transition Office in June 2011 to 
help with transition planning in Afghanistan for a post-2014 presence. 
As part of this office, a Logistics Support and Services Working Group 
is expected to determine detailed requirements for support areas such 
as fuel and life support. The group will also take on specific tasks, 
such as developing food service contract alternatives that eliminate 
reliance on DOD contracts. The Executive Steering Group and State's 
working group responsibilities represent a key acquisition-planning 
step--developing requirements. However, State has not yet provided 
evidence that it has taken steps to address other key elements of 
acquisition planning, such as estimating the costs of either 
independently acquiring the goods and services or relying on DOD for 
support. In addition, the description of the working group's 
membership and activities do not include State's AQM. As a result, 
State is not formally including key contracting staff responsible for 
determining the best procurement approach as called for in the FAR and 
OMB guidance. 

Conclusions: 

The Departments of Defense and State faced many challenges in 
completing the transition from a U.S. military to a civilian-led 
presence in Iraq. In particular, planning for the State-led presence 
in Iraq while negotiating for a potential follow-on military force of 
an unknown size placed State and DOD in an uncertain position to make 
decisions on how best to arrange for medical, security, and basic 
support services and associated goods critical to maintaining State's 
mission. At the same time, both departments were also engaged in 
carrying out their respective missions in Afghanistan. In assisting 
State with acquisitions to support its presence in both Iraq and 
Afghanistan, DOD leveraged its acquisition capacity and expertise to 
award and manage contracts to meet complex requirements in conflict 
environments. State and DOD officials extensively collaborated and 
took extraordinary measures in some cases to ensure that the delivery 
of critical contracted goods and services were not interrupted to 
prevent mission failure. However, the way State made decisions to 
request and rely on DOD's acquisition assistance and how the two 
departments went about implementing those decisions did not comply 
with regulation and guidance. In particular, the departments missed 
opportunities to ensure that sound decisions were made after fully 
considering cost effectiveness and requirements and that agreements 
for the effective management and sufficient oversight of those 
acquisitions were in place. These missed opportunities can be 
attributed, in part, to an outdated State First policy that does not 
reflect current regulation and guidance intended to improve the 
management of interagency acquisitions, as well as efforts by 
officials under challenging circumstances to manage these acquisitions 
through more informal means. 

Because the departments did not follow relevant guidance and 
regulation in implementing the interagency acquisitions we reviewed, 
DOD and State now have unresolved positions regarding payment for 
DOD's assistance. Both departments cited the authority of the Economy 
Act as the mechanism enabling DOD's assistance, which requires that 
State pay DOD for certain costs incurred in awarding and managing the 
assisted acquisitions on State's behalf. However, the departments' 
positions regarding whether State should reimburse DOD for task order 
award and contract management activities in 2010 and 2011 supporting 
State's current presence in Iraq are unresolved. Without resolution of 
these positions, the departments are at risk of not being in 
compliance with fiscal law. 

How State and DOD made and implemented decisions regarding the 
interagency acquisitions supporting State's presence in Iraq and 
Afghanistan also has implications for future acquisitions. State is 
not well positioned to make informed decisions as to whether it should 
continue to rely on DOD or independently pursue acquiring critical 
goods and services to maintain its presence in Iraq and Afghanistan. 
It is important for State to determine whether and to what extent 
interagency acquisitions are the appropriate means not only to support 
its evolving presence in Iraq and Afghanistan but also to support the 
development of the expeditionary capacity to address any future 
conflicts and crises around the world called for by State's 
Quadrennial Diplomacy and Development Review. Such determinations are 
to be informed by the consideration of various factors as to whether 
interagency acquisitions are the best procurement approach to fulfill 
a specific need. Limitations in State's planning for future basic 
support services currently provided under DOD's LOGCAP contract 
increases the risk of repeating the same sequence of events that led 
State to urgently request DOD's acquisition assistance in April 2010. 
The Army's Rock Island Contracting Center is now tracking personnel 
hours expended in the award and management of assisted acquisitions on 
State's behalf. Use of such information, if provided in time, can 
better inform State's evaluation of procurement approaches for basic 
support goods and services and security services. 

For State to independently contract for any of the goods and services 
currently provided through DOD contracts to support its presence in 
Iraq and Afghanistan, time is short to plan for how it will proceed 
after current assisted acquisitions end. This planning requires a 
robust understanding of both the support State currently relies on DOD 
to provide and the limitations of State's own acquisition capacity--
including contracting and subject matter expertise. Yet State has not 
taken a number of steps to ensure that its acquisition workforce can 
support future contracting efforts in Iraq, Afghanistan, or similar 
environments, including assessing whether its working capital fund is 
a sufficient mechanism to meet surge requirements; it has the proper 
skill and government/contractor mix in its acquisition workforce; and 
it has sufficient numbers of qualified oversight personnel. Both State 
and DOD currently have an opportunity to assess and reach agreement on 
whether continued reliance is appropriate or whether State should 
develop its own capacity. It is imperative that the departments do so 
now before the lessons from recent experiences are lost. Without 
taking steps to inform those assessments that consider the costs and 
time to build requisite expertise, State risks continued reliance on 
DOD assisted acquisitions by default rather than through sound 
business decisions. 

Recommendations for Executive Action: 

To ensure that current and future assisted interagency acquisitions in 
support of State's missions in Iraq and Afghanistan are consistent 
with regulatory requirements and guidance designed to improve the 
management and use of such acquisitions, we recommend that the 
Secretary of State and Secretary of Defense undertake a comprehensive 
review of all existing and proposed assisted interagency acquisitions 
in support of State's missions in Iraq and Afghanistan to identify and 
implement corrective measures to bring the acquisitions into 
compliance and to strengthen management. Specifically, this should 
entail: 

* the Department of State assessing the cost effectiveness and full 
range of requirements, which can be used to inform future best 
procurement approach determinations, 

* the Departments of State and Defense preparing and signing 
interagency acquisition agreements that address the elements 
established in the FAR and OMB guidance, such as roles and 
responsibilities for contract management and oversight, and: 

* the Department of State planning for sufficient personnel to perform 
contract oversight. 

To better inform future decisions regarding the use of assisted 
interagency acquisitions and to better manage and more consistently 
implement their use, we recommend that the Secretary of State revise 
the State First policy to fully align with current FAR and OMB 
requirements regarding interagency acquisitions. 

To ensure proper payment between the departments in accordance with 
fiscal law, we recommend that the Secretary of Defense and the 
Secretary of State work to jointly resolve their positions with 
respect to payment for DOD's direct and indirect costs of providing 
the goods and services to State under the interagency acquisitions we 
reviewed and take appropriate action according to their resolution. 

To ensure that its acquisition workforce has sufficient capacity to 
meet the need for acquiring critical goods and services for unique and 
complex environments like Iraq and Afghanistan that the Department of 
State may choose to independently acquire, we recommend that Secretary 
of State: 

* identify, in consultation with DOD, areas of contracting and subject 
matter expertise needed, along with the number of personnel needed, to 
acquire goods and services in such environments; assess the extent to 
which the current acquisition workforce meets those needs; and based 
on the results of that assessment, incorporate efforts to build that 
expertise and personnel numbers into State's acquisition workforce 
planning and: 

* based on those identified needs and resulting workforce planning, 
assess whether the acquisition workforce working capital fund as it 
currently operates is a sufficient mechanism to surge State's 
acquisition workforce capacity with the appropriate personnel, both in 
terms of expertise and numbers, and mix of government and contractor 
personnel to support State's missions in such environments and 
evaluate whether changes to the fund or other actions are needed. 

Agency Comments: 

We provided a draft of this report to DOD and State for their review 
and comment. Both DOD and State concurred with our recommendations in 
their written comments, which are reproduced in appendix I and 
appendix II respectively. In concurring with our recommendations, 
State noted it is revising its policies to align with current FAR and 
OMB requirements and it has engaged with DOD to ensure proper payment 
between the departments in accordance with fiscal law. State also 
indicated an expectation to use our assessment and a recently 
initiated State Office of Inspector General review to guide its 
efforts to address our recommendation regarding its acquisition 
workforce. DOD also provided a technical comment that was incorporated 
into the final report. 

We are sending copies of this report to interested congressional 
committees, the Secretary of State, and the Secretary of Defense. In 
addition, the report will be available at no charge on GAO's website 
at [hyperlink, http://www.gao.gov]. 

If you or your staff have questions about this report, 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. GAO staff who made major contributions 
to this report are listed in appendix III. 

Signed by: 

John P. Hutton:
Director:
Acquisition and Sourcing Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable John Kerry: 
Chairman: 
The Honorable Richard G. Lugar: 
Ranking Member: 
Committee on Foreign Relations: 
United States Senate: 

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

The Honorable Claire McCaskill: 
Chairman: 
The Honorable Rob Portman: 
Ranking Member: 
Ad Hoc Subcommittee on Contracting Oversight: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Howard P. "Buck" McKeon: 
Chairman: 
The Honorable Adam Smith: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable Ileana Ros-Lehtinen: 
Chairman: 
The Honorable Howard Berman: 
Ranking Member: 
Committee on Foreign Affairs: 
House of Representatives: 

The Honorable Darrell E. Issa: 
Chairman: 
The Honorable Elijah E. Cummings: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

[End of section] 

Appendix I: Comments from the Department of Defense: 

Office of The Under Secretary Of Defense: 
Acquisition, Technology and Logistics: 
3000 Defense Pentagon
Washington, DC 20301-3000 

July 31, 2012: 

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

Dear Mr. Hutton: 

This is the Department of Defense (DOD) response to the GAO Draft 
Report, GA0-12-750SU, "Iraq and Afghanistan: State and DOD Should 
Ensure Interagency Acquisitions are Effectively Managed and Comply 
with Fiscal Law," dated June 27, 2012, (GAO Code 120976). Detailed 
comments on the report recommendations are enclosed. Technical 
comments were provided separately for your consideration. 

Sincerely, 

Signed by: 

Richard Ginman: 
Director, Defense Procurement and Acquisition Policy: 

Enclosure: as stated. 

[End of letter] 

GAO Draft Report Dated JUNE 27, 2012: 
GAO-12-750SU (GAO CODE 120976): 

"Iraq and Afghanistan: State and DOD Should Ensure Interagency 
Acquisitions are Effectively Managed and Comply With Fiscal Law" 

Department of Defense Comments To The GAO Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of State and 
Secretary of Defense undertake a comprehensive review of all existing 
and proposed assisted interagency acquisitions in support of State's 
missions in Iraq and Afghanistan to identify and implement corrective 
measures to bring the acquisitions into compliance and to strengthen 
management. Specifically this should entail the Departments of State 
and Defense preparing and signing interagency acquisition agreements 
that address the elements established in the FAR and OMB guidance, 
such as roles and responsibilities for contract management and 
oversight. 

DoD Response: DoD concurs with this recommendation. 

Recommendation 2: The GAO recommends that the Secretary of Defense and 
the Secretary of State work to jointly resolve their positions with 
respect to payment for DOD's direct and indirect costs of providing 
the goods and service to State under the interagency acquisitions we 
reviewed, and take appropriate action according to their resolution. 

DoD Response: DoD concurs with this recommendation. 

[End of section] 

Appendix II: Comments from the Department of State: 

United States Department of State: 
Comptroller: 
1969 Dyess Avenue: 
Charleston, SC 29405: 

July 25, 2012: 

Dr. Loren Yager: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

Dear Dr. Yager: 

We appreciate the opportunity to review your draft report, "Iraq and 
Afghanistan: State and DOD Should Ensure Interagency Acquisitions are 
Effectively Managed and Comply with Fiscal Law" GAO Job Code 120976. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Renee Bemish, Special Assistant, Bureau of Administration at (202) 647-
4461. 

Sincerely, 

Signed by: 

James L. Millette: 

cc: GAO — John P. Hutton; 
A — Joyce A. Barr; 
State/OIG — Evelyn Klemstine. 

[End of letter] 

Department of State Comments on GAO Draft Report: 

Department of State: Iraq and Afghanistan: State and DOD Should Ensure 
Interagency Acquisitions are Effectively Managed and Comply with 
Fiscal Law (GAO-12-750SU, GAO Code 120976): 

The Department of State appreciates the opportunity to comment on 
GAO's draft report on the management of State and DOD interagency 
acquisitions relating to unprecedented responsibilities in Iraq and 
Afghanistan. 

Recommendation: To ensure that current and future assisted interagency
acquisitions in support of State's missions in Iraq and Afghanistan 
are consistent with regulatory requirements and guidance designed to 
improve the management and use of such acquisitions, we recommend that 
the Secretary of State and Secretary of Defense undertake a 
comprehensive review of all existing and proposed assisted interagency 
acquisitions in support of State's missions in Iraq and Afghanistan to 
identify and implement corrective measures to bring the acquisitions 
into compliance and to strengthen management. Specifically, this 
should entail 

* the Department of State assessing the cost effectiveness and full 
range of requirements, which can be used to inform future best 
procurement approach determinations, 

* the Departments of State and Defense preparing and signing 
interagency acquisition agreements that address the elements 
established in the FAR and OMB guidance, such as roles and 
responsibilities for contract management and oversight, and, 

* the Department of State planning for sufficient personnel to perform 
contract oversight. 

Response: The Department concurs with the recommendation to identify
and implement corrective measures to bring all acquisitions into 
compliance and to strengthen contract management and oversight. 

Recommendation: To better inform future decisions regarding the use of
assisted interagency acquisition and to better manage and more 
consistently implement their use, we recommend that the Secretary of 
State revise the State First policy to fully align with current FAR 
and OMB requirements regarding interagency acquisitions. 

Response: The Department concurs and is revising Department policies to
fully align with current FAR and OMB requirements. 

Recommendation: To ensure proper payment between the departments in
accordance with fiscal law, we recommend that the Secretary of Defense 
and the Secretary of State work to jointly resolve their positions 
with respect to payment for DOD's direct and indirect costs of 
providing the goods and services to State under the interagency 
acquisitions we reviewed, and take appropriate action according to 
their resolution. 

Response: The Department concurs with the recommendation and has
engaged DOD to resolve this issue. 

Recommendation: To ensure that its acquisition workforce has sufficient
capacity to meet the need for acquiring critical goods and services 
for unique and complex environments like Iraq and Afghanistan that the 
Department of State may choose to independently acquire, we recommend 
that Secretary of State: 

* identify, in consultation with DOD, areas of contracting and subject 
matter expertise needed, along with the number of personnel needed, to 
acquire goods and services in such environments; assess the extent to 
which the current acquisition workforce meets those needs; and based 
on the results of that assessment, incorporate efforts to build that 
expertise and personnel numbers into State's acquisition workforce 
planning; and; 

* based on those identified needs and resulting workforce planning, 
assess whether the acquisition workforce working capital fund as it 
currently operates is a sufficient mechanism to surge State's 
acquisition workforce capacity with the appropriate personnel, both in 
terms of expertise and numbers, and mix of government and contractor 
personnel to support State's missions in such environments and 
evaluate whether changes to the fund or other actions are needed. 

Response: The Department concurs with this recommendation. We continue 
to hire additional USDH contracting staff; from 2008 until June 2012, 
State used its working capital fund (WCF) to hire an additional 66
staff, with 19 more in the pipeline. The Department of State's Office of
Inspector General (OIG) conducted an entrance conference with A Bureau 
offices in July 2012, to specifically address the Department's 
application of the WCF to achieve key Procurement Shared Services 
goals, including workforce capacity. This just concluded GAO study and 
just initiated OIG study will be used to guide the Department's 
efforts to effectively support our acquisition needs. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

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

Acknowledgments: 

In addition to the contact named above, Johana R. Ayers, Assistant 
Director; Jessica Bull; Carole Coffey; Tara Copp; Thomas Costa; David 
Hancock; Meg Hardy; Kristine Hassinger; Melissa Hermes; Brandon L. 
Hunt; Hynek Kalkus; Gilbert Kim; Claire Li; Felicia M. Lopez; Judith 
A. McCloskey; Anne McDonough-Hughes; Lisa McMillen; Christopher 
Mulkins; Kenneth Patton; Jared Sippel; Roxanna T. Sun; Daniel Ramsey; 
Michael Rohrback; Anna Russell; Gwyneth B. Woolwine; and Matthew R. 
Young made key contributions to this report. 

[End of section] 

Related GAO Products: 

The following is a list of related products. For a full list of the 
most recent publications related to Iraq and Afghanistan, see 
[hyperlink, 
http://www.gao.gov/docsearch/featured/oif.html]. 

Contingency Contracting: Agency Actions Needed to Address 
Recommendations by the Commission on Wartime Contracting in Iraq and 
Afghanistan. [hyperlink, http://www.gao.gov/products/GAO-12-854R]. 
Washington, D.C.: August 1, 2012. 

Mission Iraq: State and DOD Face Challenges in Finalizing Support and 
Security Capabilities. [hyperlink, 
http://www.gao.gov/products/GAO-12-856T]. Washington, D.C.: June 28, 
2012. 

Operational Contract Support: Management and Oversight Improvements 
Needed in Afghanistan. [hyperlink, 
http://www.gao.gov/products/GAO-12-290]. Washington, D.C.: March 29, 
2012. 

Afghanistan: Improvements Needed to Strengthen Management of U.S. 
Civilian Presence. [hyperlink, 
http://www.gao.gov/products/GAO-12-285]. Washington, D.C.: February 
27, 2012. 

Iraq Drawdown: Opportunities Exist to Improve Equipment Visibility, 
Contractor Demobilization, and Clarity of Post-2011 DOD Role. 
[hyperlink, http://www.gao.gov/products/GAO-11-774]. Washington, D.C.: 
September 16, 2011. 

Iraq and Afghanistan: DOD, State, and USAID Cannot Fully Account for 
Contracts, Assistance Instruments, and Associated Personnel. 
[hyperlink, http://www.gao.gov/products/GAO-11-886]. Washington, D.C.: 
September 15, 2011. 

Contingency Contracting: Observations on Actions Needed to Address 
Systemic Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-11-580]. Washington, D.C.: April 25, 
2011. 

Contingency Contracting: Improvements Needed in Management of 
Contractors Supporting Contract and Grant Administration in Iraq and 
Afghanistan. [hyperlink, http://www.gao.gov/products/GAO-10-357]. 
Washington, D.C.: April 12, 2010. 

Warfighter Support: DOD Needs to Improve Its Planning for Using 
Contractors to Support Future Military Operation. [hyperlink, 
http://www.gao.gov/products/GAO-10-472]. Washington, D.C.: March 30, 
2010. 

Rebuilding Iraq: DOD and State Department Have Improved Oversight and 
Coordination of Private Security Contractors in Iraq, but Further 
Actions Are Needed to Sustain Improvements. [hyperlink, 
http://www.gao.gov/products/GAO-08-966]. Washington, D.C.: July 31, 
2008. 

Interagency Contracting: Need for Improved Information and Policy 
Implementation at the Department of State. [hyperlink, 
http://www.gao.gov/products/GAO-08-578]. Washington, D.C.: May 8, 2008. 

[End of section] 

Footnotes: 

[1] The Quadrennial Diplomacy and Development Review is an assessment 
by State and the U.S. Agency for International Development on how 
those two agencies can become more efficient, accountable, and 
effective in light of new threats and opportunities. It provides a 
blueprint for elevating American "civilian power" to better advance 
U.S. national interests and to be a better partner to the U.S. 
military. U.S. Department of State, Leading through Civilian Power, 
The First Quadrennial Diplomacy and Development Review (Washington, 
D.C.: 2010). 

[2] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-05-207] (Washington, D.C.: January 
2005). 

[3] Federal Acquisition Regulation (FAR) §17.502 and Office of 
Management and Budget (OMB), Office of Federal Procurement Policy, 
Improving the Management and Use of Interagency Acquisitions 
(Washington, D.C.: June 6, 2008). 

[4] Commission on Wartime Contracting in Iraq and Afghanistan, 
Transforming Wartime Contracting: Controlling Costs, Reducing Risks, 
Final Report to Congress (Arlington, VA Aug. 31, 2011). 

[5] GAO, Interagency Contracting: Need for Improved Information and 
Policy Implementation at the Department of State, [hyperlink, 
http://www.gao.gov/products/GAO-08-578] (Washington, D.C.: May 8, 
2008). 

[6] See GAO, Iraq and Afghanistan: DOD, State, and USAID Cannot Fully 
Account for Contracts, Assistance Instruments, and Associated 
Personnel, [hyperlink, http://www.gao.gov/products/GAO-11-886] 
(Washington, D.C.: Sept. 15, 2011); Iraq and Afghanistan: DOD, State, 
and USAID Face Continued Challenges in Tracking Contracts, Assistance 
Instruments, and Associated Personnel, [hyperlink, 
http://www.gao.gov/products/GAO-11-1] (Washington, D.C.: Oct. 1, 
2010); Contingency Contracting: DOD, State, and USAID Continue to Face 
Challenges in Tracking Contractor Personnel and Contracts in Iraq and 
Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-10-1] 
(Washington, D.C.: Oct. 1, 2009); and Contingency Contracting: DOD, 
State, and USAID Contracts and Contractor Personnel in Iraq and 
Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-09-19] 
(Washington, D.C.: Oct. 1, 2008). 

[7] GAO, Contingency Contracting: Improvements Needed in Management of 
Contractors Supporting Contract and Grant Administration in Iraq and 
Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-10-357] 
(Washington, D.C.: Apr. 12, 2010). 

[8] An assisted acquisition is a type of interagency acquisition where 
a servicing agency performs acquisition activities on a requesting 
agency's behalf, such as awarding and administering a contract, task 
order, or delivery order. FAR § 2.101. 

[9] 31 U.S.C. § 1535; FAR § 17.502-2(d). The Economy Act provides 
general authority for federal agencies to undertake interagency 
acquisitions when a more specific statutory authority does not exist. 

[10] Agreement on the Withdrawal of United States Forces from Iraq and 
the Organization of Their Activities during Their Temporary Presence 
in Iraq, United States-Iraq, art. 24, para. 1 (Nov. 17, 2008). 

[11] GAO, Iraq Drawdown: Opportunities Exist to Improve Equipment 
Visibility, Contractor Demobilization, and Clarity of Post-2011 DOD 
Role, [hyperlink, http://www.gao.gov/products/GAO-11-774] (Washington, 
D.C.: Sept. 16, 2011). 

[12] As of June 2012, this exclusively diplomatic presence consisted 
of 14 sites: 8 maintained by State for diplomatic purposes and 6 
additional sites maintained by DOD (5 for the Office of Security 
Cooperation-Iraq, and 1 for the Office of Security Cooperation-Iraq 
and State's consulate in Kirkuk), which is managing security 
assistance and cooperation with the Government of Iraq. For additional 
information on the status of establishing support at these sites, see 
GAO, Mission Iraq: State and DOD Face Challenges in Finalizing Support 
and Security Capabilities, [hyperlink, 
http://www.gao.gov/products/GAO-12-856T] (Washington, D.C.: June 28, 
2012). 

[13] A task order is an order for services placed against an 
established contract or with government sources. FAR § 2.101. 

[14] [hyperlink, http://www.gao.gov/products/GAO-11-774]. 

[15] The U.S. strategy for Afghanistan refers to the strategy 
announced in a March 2009 speech by the President, which was 
reiterated in a December 2010 strategic review. 

[16] Enduring Strategic Partnership Agreement, United States-
Afghanistan, § III, para. 6, (May 2, 2012). 

[17] Economy Act of 1932, 31 U.S.C. § 1535; FAR § 17.502-2. 

[18] Fiscal law provides that an agency generally must use its 
appropriated funds for the purposes for which the appropriations were 
made. 31 U.S.C. § 1301(a). In addition, an agency receiving goods or 
services funded by another agency's appropriations must reimburse the 
servicing agency to avoid improperly augmenting the requesting 
agency's appropriations. Furthermore, payments received by the 
servicing agency for goods or services provided, without other 
statutory authority, must be deposited into the Treasury as 
miscellaneous receipts. 31 U.S.C. § 3302(b). 

[19] Pub. L. No. 110-417, § 865 (2008). 

[20] OMB, Office of Federal Procurement Policy, Improving the 
Management and Use of Interagency Acquisitions (Washington, D.C.: June 
6, 2008). 

[21] FAR §17.502-1(a)(1). 

[22] FAR §17.502-1(b). 

[23] The 20 assisted interagency acquisitions include DOD contracts 
under which State is a customer, task orders awarded by DOD under DOD 
indefinite delivery/indefinite quantity contracts on behalf of State, 
and modifications to DOD contracts and task orders made on behalf of 
State. When the same DOD task order was modified multiple times on 
State's behalf, we counted the task order that was modified on State's 
behalf as one interagency acquisition and did not count each 
individual modification as a separate interagency acquisition. 

[24] DCMA provides contract administration services such as quality 
assurance oversight, when delegated that authority by the contracting 
officer. DCMA has an organization dedicated to supporting contingency 
contracts. DCMA is responsible for ensuring the integrity of 
contractual processes and providing a broad range of contract 
management and administration services. We reported in November 2011 
that, amid DCMA's ongoing efforts to rebuild its capacity, several 
factors presented challenges, including that officials believe 
contingency missions have a constraining effect on DCMA's domestic 
mission. GAO, Defense Contract Management Agency: Amid Ongoing Efforts 
to Rebuild Capacity, Several Factors Present Challenges in Meeting Its 
Missions, [hyperlink, http://www.gao.gov/products/GAO-12-83] 
(Washington, D.C.: Nov. 3, 2011). 

[25] State independently planned and awarded four task orders under 
its Worldwide Protective Services contracts to provide security for 
its facilities and personnel in Iraq, and its personnel are 
responsible for contract management and oversight. However, when 
mobilization of State's Worldwide Protective Services contractors was 
delayed, State requested that DOD extend performance under its TWISS 
task orders at five locations throughout Iraq to ensure continuation 
of critical security services. 

[26] DCAA provides accounting and financial advisory services for DOD 
in connection with the negotiation, administration, and settlement of 
contracts and subcontracts. DCAA also provides contract audit services 
to other federal government agencies as appropriate. 

[27] 22 U.S.C. § 2684. 

[28] State calculates a procurement ratio by dividing procurement 
obligations by the number of government employees classified in the 
General Schedule Contracting series (GS-1102). The GS-1102 series is 
important for federal agencies because these personnel develop the 
knowledge of the legislation, regulations, and methods of federal 
contracting and skills to conduct central acquisition responsibilities 
such as to manage, supervise, perform, or develop policies and 
procedures for procurement. 

[29] GAO, Department of Justice: Working Capital Fund Adheres to Some 
Key Operating Principles but Could Better Measure Performance and 
Communicate with Customers, [hyperlink, 
http://www.gao.gov/products/GAO-12-289] (Washington, D.C.: Jan. 20, 
2012); and Intergovernmental Revolving Funds: Commerce Departmental 
and Census Working Capital Funds Should Better Reflect Key Operating 
Principles, [hyperlink, http://www.gao.gov/products/GAO-12-56] 
(Washington, D.C.: Nov. 18, 2011). 

[30] GAO, Department of Homeland Security: A Strategic Approach Is 
Needed to Better Ensure the Acquisition Workforce Can Meet Mission 
Needs, [hyperlink, http://www.gao.gov/products/GAO-09-30] (Washington, 
D.C.: Nov. 19, 2008). 

[31] [hyperlink, http://www.gao.gov/products/GAO-10-357]. 

[32] GAO, Rebuilding Iraq: DOD and State Department Have Improved 
Oversight and Coordination of Private Security Contractors in Iraq, 
but Further Actions Are Needed to Sustain Improvements, [hyperlink, 
http://www.gao.gov/products/GAO-08-966] (Washington, D.C.: July 31, 
2008). 

[33] In response to GAO requests for documentation of compliance with 
FAR and OMB requirements for a determination of best procurement 
approach for the assisted acquisitions within the scope of our review, 
State provided "waiver packets" prepared under its State First policy. 
Waiver packets provided included one or more of the following: waiver, 
internal memo, Economy Act determination and findings, Military 
Interdepartmental Purchase Request(s), and /or State standard form 
1921 for award or modification of an interagency acquisition 
agreement. For our analysis of compliance with the requirement for a 
determination of best procurement approach, we reviewed waivers and 
internal memos because the other documents included in the waiver 
packets go to requirements other than the determination of best 
procurement approach. Under the State First policy, the waiver must 
contain certain information such as a description of the requirement, 
duration of the requirement, estimated value, and reason that using 
another agency for the acquisition is in the best interest of State. 

[34] An interim rule was issued on December 13, 2010 and the final 
rule was issued on January 3, 2012. 75 Fed. Reg. 77,733, 77, 735; 77 
Fed. Reg. 183. 

[35] State prepared two waivers in support of its task order under 
LOGCAP Iraq. One waiver was for the Bureau of Diplomatic Security's 
requirements, which was approved in July 2011. The second waiver was 
for the Bureau of Near Eastern Affairs' requirements, which has not 
been approved and, according to AQM and Near Eastern Affairs 
officials, remains in draft form. 

[36] Under the Javits-Wagner-O'Day Act, the Committee for Purchase 
from People Who Are Blind or Severely Disabled, that implements the 
AbilityOne program, maintains a procurement list of all supplies and 
services required to be purchased from AbilityOne participating 
nonprofit organizations. Supply distribution facilities in DLA are 
required to obtain supplies on the procurement list from the central 
nonprofit organization identified or its designated AbilityOne 
participating nonprofit organization. 41 U.S.C. § 8503-04; FAR § 8.705-
1. 

[37] GAO, High-Risk Series: An Update, GAO 11-278 (Washington, D.C.: 
February 2011). 

[38] FAR § 17.502-1(b)(1) and OMB, Office of the Federal Procurement 
Policy, Improving the Management and Use of Interagency Acquisitions 
(Washington, D.C.: June 6, 2008). The OMB guidance provides that part 
A of an interagency agreement, which sets out the general terms and 
conditions, may cover multiple assisted acquisitions. 

[39] With respect to State's use of LOGCAP in Afghanistan, the U.S. 
Forces-Afghanistan and the U.S. mission in Afghanistan entered into a 
memorandum of agreement in August 2009 for the support of personnel 
acting under the authority of the chief of mission to implement the 
U.S. strategy in Afghanistan. The agreement is an umbrella agreement 
intended to provide a baseline direction for support responsibilities, 
rather than an interagency acquisition agreement for a specific 
interagency acquisition. 

[40] Although OMB's guidance identifies Military Interdepartmental 
Purchase Requests as one of the forms that can facilitate interagency 
transfers, it also directs that these requests incorporate by 
reference or attachment the terms and conditions of an overarching 
interagency acquisition agreement, which State did not do for these 
acquisitions. 

[41] Fiscal law provides that an agency generally must use its 
appropriated funds for the purposes for which the appropriations were 
made. 31 U.S.C. § 1301(a). In addition, an agency receiving goods or 
services funded by another agency's appropriations must reimburse the 
servicing agency to avoid improperly augmenting the requesting 
agency's appropriations. Furthermore, payments received by the 
servicing agency for goods or services provided, without other 
statutory authority, must be deposited into the Treasury as 
miscellaneous receipts. 31 U.S.C. § 3302(b). 

[42] 31 U.S.C. § 1535(b); FAR § 17.502-2(d)(4). Although precise 
calculations of actual costs are not required, the amount to be paid 
should result from a bona fide attempt to determine actual cost and 
should reasonably approximate actual cost. For a discussion of payment 
requirements under the Economy Act, see GAO, Principles of Federal 
Appropriations Law, 3rd ed. Vol. 3, ch. 12.B.1. [hyperlink, 
http://www.gao.gov/products/GAO-08-978SP] (Washington, D.C.: September 
2008). 

[43] Otherwise, the servicing agency would be penalized to the extent 
that its funds are used to finance the cost of performing another 
agency's work, while the requesting agency's appropriations are 
augmented to the extent that they now may be used for some other 
purpose. 57 Comp. Gen. 674, 682. 

[44] 12 Comp. Gen. 442. 

[45] Specifically, indirect costs which are funded out of currently 
available appropriations and bear a significant relationship to the 
service or work performed or the materials furnished are recoverable 
in an Economy Act transaction the same as direct costs. 56 Comp. Gen. 
275. 

[46] OMB's guidance provides that an interagency agreement must 
include financial information that is required to authorize the 
transfer and obligation of funds for both the acquisition and the 
assistance provided by the servicing agency in connection with the 
acquisition. 

[47] FAR § 17.502-1(a)(1). 

[48] FAR § 7.102. FAR Part 10 describes the policies and procedures 
for conducting market research to determine the most suitable approach 
to acquiring, distributing, and supporting supplies and services. GAO 
has also reported on important elements of successful acquisition 
planning, such as developing requirements, cost estimating, 
incorporating lessons learned, and allowing sufficient time to conduct 
acquisition planning. See GAO, Acquisition Planning: Opportunities to 
Build Strong Foundations for Better Services Contracts, [hyperlink, 
http://www.gao.gov/products/GAO-11-672] (Washington, D.C.: Aug. 9, 
2011). 

[End of section] 

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