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Interagency Contracting: 

Need for Improved Information and Policy Implementation at the 
Department of State: 

Interagency Contracting: 

Report to Congressional Committees: 

United States Government Accountability Office: 

GAO: 

May 2008: 

GAO-08-578: 

GAO Highlights: 

Highlights of GAO-08-578, a report to congressional committees. 

Why GAO Did This Study: 

Interagency contracting—using another agency’s contracts or contracting 
services—can provide agencies with opportunities to streamline the 
procurement process and achieve savings. However, GAO designated the 
management of interagency contracting a high-risk area in 2005 due, in 
part, to a lack of reliable data on its use and of clarity regarding 
contract management responsibilities. 

In 2002, the Department of State (State) issued the State First policy, 
requiring domestic bureaus to obtain approval from State acquisition 
officials before paying other agencies for contract support services. 
Under the Comptroller General’s authority to conduct evaluations on his 
own initiative, GAO evaluated State’s 1) insight into its use of 
interagency contracts, 2) policies on deciding when to use assisted 
interagency contracts, and 3) ability to ensure oversight. GAO’s work 
included reviewing regulations, analyzing interagency contracting data, 
and conducting 10 case studies of direct and assisted interagency 
contracts that represented a range of State bureaus and servicing 
agencies. 

What GAO Found: 

State officials have limited insight into the extent to which the 
department has used both methods of interagency contracting—direct by 
placing their own orders on another agency’s contract and assisted by 
obtaining contract support services from another agency. State 
officials cannot rely on the federal government’s primary data system 
for tracking procurements to readily identify instances when State has 
used interagency contracts. Further, State’s central procurement and 
accounting systems do not reliably and comprehensively identify when 
interagency contracts have been used. While State officials told GAO 
the most reliable way to identify interagency contract actions would be 
to request data on these actions from bureaus and overseas posts, 
several bureaus and posts had difficulty responding to such a request. 
State reported to GAO over $800 million in interagency contract actions 
in fiscal year 2006, but these data were incomplete. For example, State 
did not report $144 million in assisted contracting performed on its 
behalf by the Department of Defense. GAO has previously reported that 
the lack of reliable information on interagency contracts inhibits 
agencies from making sound contracting decisions and engaging in good 
management practices. 

Due to the way the State First policy has been implemented, State 
cannot ensure that decisions to use assisted interagency contracting 
are made by the appropriate acquisition officials. These officials 
often lack awareness of or involvement in decisions to use assisted 
interagency contracts. First, State acquisition officials have created 
exemptions limiting the assisted contract actions subject to their 
review under the policy. For example, State’s guidance exempts funds 
transfers under the Foreign Assistance Act, under which bureaus 
conducting large amounts of interagency contracting operate. Second, 
bureaus have varying interpretations of when approvals are needed under 
the policy. Some bureaus seek approvals for individual contract actions 
related to specific requirements. Another bureau interprets the policy 
as only requiring approval for a new overarching interagency 
acquisition agreement, which can encompass multiple contract actions 
and fiscal years. Third, State acquisition officials do not monitor 
State First compliance, so they are not positioned to know whether the 
five approval requests received in fiscal year 2006 fully reflected the 
extent of that year’s assisted interagency contracting. 

State’s policies do not ensure that responsibilities for overseeing 
contractor performance on assisted interagency contracts are assigned 
to appropriately trained individuals. State acquisition regulations do 
not require trained oversight personnel to be assigned when using 
assisted interagency contracting. As a result, effective oversight 
depends on factors outside of State’s control, such as the rigor of 
servicing agencies’ oversight requirements, which vary. GAO identified 
cases where State personnel were given responsibility for overseeing 
contractor performance but had not received related training. GAO and 
others have reported that agencies’ interests are put at risk when the 
individuals responsible for overseeing contractor performance are not 
clearly designated and have not been properly trained. 

What GAO Recommends: 

GAO recommends the Secretary of State take action to improve State’s 
tracking of interagency contracting, clarify its State First policy, 
and enhance contract oversight. In written comments on a draft of this 
report, State agreed with the recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-578]. For more 
information, contact John Hutton at (202) 512-4841 or huttonj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

State Has Limited Insight into Its Use of Interagency Contracting: 

State Cannot Ensure That Decisions to Use Assisted Interagency 
Contracting Are Being Made by the Appropriate Acquisition Officials: 

State's Policies Do Not Ensure Contract Oversight for Assisted 
Interagency Contracts: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Scope and Methodology: 

Appendix II: State's Use of Interagency Contracting in Fiscal Year 
2006: 

Appendix III: Comments from the Department of State: 

Appendix IV: GAO Contacts and Staff Acknowledgements: 

Table: 

Table 1: Selected Cases of Interagency Contracting at the Department of 
State: 

Figures: 

Figure 1: Organization Chart for Acquisitions within State: 

Figure 2: State First Policy Review Process for Proposed Assisted 
Interagency Contracting Activities: 

Figure 3: Servicing Agencies Used by State for Assisted Actions: 

Abbreviations: 

AQM: Office of Acquisitions Management: 

COR: contracting officer's representative: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

DS: Bureau of Diplomatic Security: 

DOSAR: Department of State Acquisition Regulations: 

FPDS-NG: Federal Procurement Data System-Next Generation: 

GSA: General Services Administration: 

GSO: general services officer: 

IAA: interagency acquisition agreement: 

INL: Bureau of International Narcotics and Law Enforcement Affairs: 

ITOPII: Information Technology Omnibus Procurement II: 

NIH: National Institutes of Health: 

OPE: Office of the Procurement Executive: 

United States Government Accountability Office: 

Washington, DC 20548: 

May 8, 2008: 

Congressional Committees: 

Interagency contracting, when used correctly, can provide agencies with 
opportunities to streamline the procurement process and achieve 
savings. Agencies can use interagency contracting in two ways--direct 
by placing their own orders on another agency's contract or assisted by 
obtaining contract support services from another agency. However, we 
and several federal inspectors general have identified pervasive 
problems associated with the management of interagency contracting. 
These include a lack of reliable data and transparency regarding when 
and how these contracts are used as well as a lack of clarity in the 
definition of roles and responsibilities for managing contracts when 
multiple agencies are involved. As a result of these and related 
issues, we designated the management of interagency contracting as a 
governmentwide high-risk area in 2005.[Footnote 1] 

In 2002, before the risks associated with interagency contracting were 
widely reported, the Department of State (State) implemented in its 
acquisition regulations 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 for contracting support 
services, unless the appropriate State acquisition officials[Footnote 
2] grant a waiver. Our prior work on interagency contracting has 
included larger procuring agencies--the departments of Defense and 
Homeland Security--and agencies that provide contracting services like 
the General Services Administration, Department of the Treasury, and 
Department of the Interior. We had not examined whether State's policy 
has enabled it to minimize the management risks associated with 
interagency contracting. While State is a smaller procuring agency than 
some of those we have previously focused on, reporting total contract 
obligations of over $5 billion in fiscal year 2006, it is increasingly 
reliant on contractors to help carry out its mission. 

To better understand State's management of interagency contracting, we 
evaluated 1) the extent to which State has insight into its use of 
interagency contracting, 2) State's policies and procedures for 
deciding when to use assisted interagency contracting, and 3) State's 
ability to ensure oversight of assisted interagency contracting. We 
prepared this report under the Comptroller General's authority to 
conduct evaluations on his own initiative and are providing it to you 
because of your interest in this high-risk issue. 

To address these objectives, we reviewed State acquisition regulations, 
policies, and guidance and interviewed agency officials to understand 
their implementation. In addition, we requested data from 35 bureaus, 
as well as 18 of State's 277 overseas posts with authority to conduct 
contracting activities, on fiscal year 2006 purchases of at least 
$25,000 made through both direct and assisted interagency contracts. We 
compared the data reported by State with similar data from the federal 
government's primary procurement data system as well as data from five 
agencies that provided contract support services to State. After 
conducting extensive work to ensure the consistency of the data, we 
determined our final data set to be sufficient for our purposes. To 
address the objectives regarding State's policies and ability to ensure 
oversight, we conducted 10 case studies that represented direct and 
assisted actions as well as a range of State bureaus and servicing 
agencies (see table 1 in app. I for details on the selected cases). For 
each case study, we reviewed contract documentation from State, the 
servicing agency, or both and interviewed relevant officials such as 
contracting officers, individuals performing contract oversight, and 
program officials. A detailed description of our scope and methodology 
is included in appendix I of this report. We conducted this performance 
audit from June 2007 through May 2008 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. 

Results in Brief: 

State officials have limited insight into the extent to which the 
department has used interagency contracting to procure goods and 
services. State officials cannot rely on the Federal Procurement Data 
System-Next Generation--the federal government's primary data system 
for tracking information on procurement actions--to identify instances 
when the department has used interagency contracts. Further, State's 
central procurement and accounting data systems do not reliably and 
comprehensively identify the use of these contracts across the agency. 
While State officials told us that the most reliable way to identify 
interagency contract actions[Footnote 3] would be to request a list of 
these actions from each bureau and overseas post, several bureaus and 
posts had difficulty responding to such a request. State reported to us 
over $800 million in direct and assisted interagency contract actions 
in fiscal year 2006, but these data were incomplete and, in many cases, 
reported data were missing basic information such as the contract 
number. Most notably, State did not report $144 million in assisted 
contracting performed by the Department of Defense (DOD) on State's 
behalf for logistics support in Iraq. We have reported in the past that 
the lack of reliable information on interagency contracting inhibits 
agencies from making sound contracting decisions and engaging in good 
management practices. Without access to complete and reliable data on 
its use of interagency contracting, State does not have the information 
needed to manage its use of such contracts. 

Due to the way the State First policy has been implemented, State 
cannot ensure that decisions to use assisted interagency contracting 
are being made by the appropriate acquisition officials, as called for 
under the policy. These acquisition officials often lack awareness of 
or involvement in decisions to use assisted interagency contracts for 
three main reasons. First, acquisition officials have broadly exempted 
many assisted contract actions from the State First waiver process. For 
example, State's policy guidance exempts from State First review funds 
transfers under the authority of the Foreign Assistance Act, under 
which bureaus conducting large amounts of interagency contracting 
operate. Second, bureaus have varying interpretations of when they need 
to obtain a waiver for proposed assisted interagency contracting 
activities. In some instances, bureaus request waivers for individual 
contract actions related to specific requirements, such as a new task 
order award. Another bureau has interpreted the policy as only 
requiring a waiver for a new overarching interagency acquisition 
agreement, which can encompass many requirements, multiple contract 
actions, and several fiscal years. Third, State's acquisition officials 
have not implemented mechanisms to ensure compliance with the policy. 
They primarily rely on the bureaus to voluntarily submit requests for 
State First waivers, of which acquisition officials received five in 
2006. When State acquisition officials do not have the opportunity to 
review proposed uses of assisted interagency contracting, they cannot 
ensure that decisions to pay another agency for contracting services 
are made in State's best interest. 

State's policies do not ensure that responsibilities for overseeing 
contractor performance on assisted interagency contracts are assigned 
to appropriately trained individuals. State acquisition regulations do 
not require the assignment of oversight personnel when using assisted 
interagency contracting, even though State program officials may be 
best positioned to oversee the delivery of goods and services. As a 
result, effective oversight currently depends on factors outside of 
State's control, such as the rigor of oversight requirements of 
servicing agencies, which vary. Our work and the work of others have 
previously noted that agencies' interests are put at risk by not 
clearly designating who is responsible for providing ongoing oversight 
of contractor performance and ensuring that these individuals are 
properly trained to perform their duties. 

To enable State to improve its management of interagency contracting, 
we are recommending State develop a mechanism to reliably track its use 
of interagency contracting, clarify the State First policy, and require 
bureaus to identify properly trained oversight personnel when seeking a 
State First waiver. In written comments on a draft of this report, 
State concurred with these recommendations. State's comments are 
reprinted in appendix III. 

Background: 

Interagency contracting is designed to leverage the government's 
aggregate buying power and simplify procurement of commonly used goods 
and services. This contracting method has allowed agencies to meet the 
demands for goods and services at a time when they face growing 
workloads, declines in the acquisition workforce, and the need for new 
skill sets. Interagency contracts are awarded under various authorities 
and can take many forms. They typically are used to provide agencies 
with common goods and services, such as office supplies or information 
technology services. In other cases, they may be used to fill 
specialized requirements, particularly if the other agency providing 
the contract support services has unique expertise in a particular type 
of procurement. Agencies that award and administer interagency 
contracts usually charge a fee to support their operations. 

There are two main methods of interagency contracting: direct and 
assisted. For direct acquisitions, rather than going through the 
process to award a new contract--soliciting offers, evaluating 
proposals, and awarding the contract--contracting officers at agencies 
can place orders directly on contracts already established by other 
agencies. With assisted acquisitions, customer agencies can obtain 
contracting services from other agencies, whose contracting officers 
place and administer orders on the customer agencies' behalf. Assisted 
acquisitions can use interagency acquisition agreements (IAA) to 
document and establish general terms and conditions governing 
relationships between the customer agencies, which need the goods or 
services, and the servicing agencies, which provide the contracting 
services. 

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), as shown in figure 1. OPE is responsible for establishing 
acquisition policy at State. This responsibility includes prescribing 
and implementing acquisition policies, regulations, and procedures; 
managing State's procurement reporting system; appointing contracting 
officers; and establishing a system for measuring the performance of 
State contracting offices. 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. Acquisition officials in OPE and 
AQM stated that they work closely on many acquisition activities, but 
there is no direct reporting relationship between the two. 

While AQM is by far the largest contracting office within State, other 
domestic bureaus and offices have varying degrees of contracting 
authority.[Footnote 4] Additionally, 277 of State's overseas posts have 
limited authority to conduct contracting activities in support of the 
bureaus and program office activities carried out at each location. 
Finally, two additional contracting offices, known as Regional 
Procurement Support Offices, report to AQM and provide contracting 
services to the overseas posts. These offices operate as working 
capital funds, charging a fee to the overseas posts and other 
organizations in exchange for providing contracting services. In 
addition to AQM and its regional support offices, only those bureaus 
and posts with contracting authority can conduct direct interagency 
contracting. However, all bureaus and posts can use assisted 
interagency contracting, relying on contracting officers at other 
agencies to conduct procurements. 

Figure 1: Organization Chart for Acquisitions within State: 

This figure is a flowchart showing organization for acquisitions within 
state. 

[See PDF for image] 

Source: GAO analysis of State Foreign Affairs Manual. 

Note: The Assistant Secretary of the Bureau of Administration serves as 
the Chief Acquisition Officer for State and directs administrative 
oversight and services of the Office of the Procurement Executive. 

[End of figure] 

In response to an increase in the amount of acquisition dollars going 
to contract servicing agencies, the Under Secretary of State for 
Management issued a memorandum in May 2002 describing the State First 
policy. The policy was incorporated into the Department of State 
Acquisition Regulations (DOSAR) and clarified later by implementing 
guidance. This policy directs domestic bureaus and offices to first use 
the services of AQM or another appropriate State contracting activity 
before transferring funds to another agency to conduct an 
acquisition.[Footnote 5] The policy states further that domestic 
bureaus or offices may only transfer funds to another agency for 
contracting services after obtaining a waiver from AQM. Application of 
this policy is limited to assisted interagency contracting actions. 
Instances in which a State contracting officer directly places an order 
on another agency's contract are not subject to the policy. 
Additionally, the State First policy does not apply to assisted 
interagency contracting activities conducted by overseas posts. 

The State First policy instructs requesting bureaus to provide 
information about the proposed interagency contract action, including a 
description of the requirement and contracting services to be provided 
by the other agency, the estimated dollar value, the number of option 
years, the reason for using the other agency, and the amount of any 
surcharge or fee to be charged by the other agency for its contracting 
services. AQM, in consultation with OPE, is to review a bureau's 
request and either issue a waiver allowing it to proceed with the 
proposed interagency contracting activity or decline the request and 
direct the bureau to the appropriate State contracting office for 
assistance, as described in figure 2. The State First policy also 
provides AQM with the authority to grant blanket waivers for future 
acquisitions involving the same item so that bureaus do not need to 
request an individual waiver each time they need to procure that item. 
For instance, the policy cites the acquisition of ammunition through 
DOD as an example of this type of recurring need that could be covered 
by a blanket waiver. 

Figure 2: State First Policy Review Process for Proposed Assisted 
Interagency Contracting Activities: 

This figure is a flowchart showing state first review process for 
proposed assisted interagency contracting activities. 

[See PDF for image] 

Source: GAO analysis of State First policy for acquisition. 

[End of figure] 

State Has Limited Insight into Its Use of Interagency Contracting: 

The Department of State has limited insight into the extent to which it 
uses interagency contracting. A key governmentwide data system does not 
fully capture information on interagency contracting, and State's 
internal systems do not comprehensively track its use of these 
contracts. While State reported to us over $800 million in direct and 
assisted interagency contract actions in fiscal year 2006, these data 
were incomplete, and reported data were missing basic information in 
many cases. We have previously reported that the lack of reliable 
information on interagency contracts inhibits agencies from making 
sound contracting decisions and engaging in good management practices. 

State Cannot Rely on Governmentwide or Internal Agency Data for a 
Comprehensive View of Its Use of Interagency Contracts: 

The Federal Procurement Data System-Next Generation (FPDS-NG), the 
federal government's primary database for procurement actions, is not a 
reliable source of information on interagency contracts. We have 
reported in the past on difficulties in obtaining data and generating 
reports on interagency contracting using FPDS-NG.[Footnote 6] 
Similarly, the State Procurement Executive explained to us that it is 
difficult to extract interagency contracting data from FPDS-NG and that 
there is no single report that comprehensively identifies uses of 
interagency contracting. For assisted interagency actions, the 
servicing agency is responsible for entering data into FPDS-NG, but 
such entries do not always indicate that actions involve interagency 
contracts. If a contracting officer at another agency placed an order 
for State, that agency--not State--would be responsible for recording 
the order in FPDS-NG, and the fact that the order was done for State 
would not necessarily be recorded. While the servicing agency can enter 
a funding agency in FPDS-NG, it may identify itself as the funding 
agency instead. For example, we identified records in FPDS-NG for 
certain contract actions entered into by DOD for State that listed DOD 
as the funding agency. A DOD official told us that once funds are 
transferred to DOD, they lose their association with the funding 
agency. For direct contract actions, in which State contracting 
officers placed the orders and recorded the transactions in FPDS-NG, 
there is no data field that reliably indicates that these actions 
involved an interagency contract.[Footnote 7] 

In addition, State cannot rely on the data systems used by its central 
procurement and financial offices to provide complete information on 
its use of interagency contracting. AQM maintains a procurement data 
system; however, bureau officials told us that not all bureaus with 
contracting authority use this system and that assisted acquisitions 
where the contracting officer is at another agency are not recorded in 
this system. For example, a State official noted that a bureau that 
reported to us significant use of assisted interagency contracting does 
not use this system. The State Procurement Executive acknowledged the 
limitations of this system, noting it would be difficult to use it to 
identify interagency contracts. Further, State's accounting system 
cannot be used to identify many interagency contracting actions. State 
officials explained that for direct actions, the accounting system does 
not record whether an interagency contract was used. Similarly, the 
officials said that for assisted actions, a "miscellaneous" data field 
that captures a variety of information may, but does not always, 
indicate that the transfer of funds to another agency is for a 
contract. 

While State officials told us that the most reliable way to identify 
interagency contract actions would be to request a list of these 
actions from each bureau and overseas post, several bureaus and posts 
had difficulty responding to our request for such information. For 
example, one bureau, which has used assisted interagency contracts, 
noted that the bureau had no reasonable means of obtaining information 
on its assisted interagency contract actions. In some cases, bureaus 
did not have a central point of contact responsible for tracking 
interagency contracts and many bureaus reported reviewing paper files 
to assemble the requested information on their assisted actions. 
Additionally, a procurement official expressed concern about another 
bureau's lack of information on interagency contracts, noting that when 
she needed basic information, such as the amounts obligated by the 
bureau on these contracts, she was directed to the servicing agencies. 
Similar challenges were experienced in 2005 when State's Office of 
Inspector General conducted a related review and sought to identify 
bureaus' use of interagency contracts. The official who led that review 
told us he found that it was generally difficult for bureaus to compile 
data on interagency contracts and that a number of bureaus continually 
identified new contract actions throughout the course of the review. 

State-Reported Data on Interagency Contract Actions Were Incomplete, 
and Reported Actions Were Missing Information in Many Cases: 

In the absence of a data system that reliably identifies State's 
interagency contracts, we requested information on all interagency 
contract actions of at least $25,000 conducted in fiscal year 2006 from 
53 State bureaus and overseas posts. Fifty-two of these bureaus and 
posts reported[Footnote 8] a total of over $800 million in interagency 
actions--$577.2 million for direct actions and $234.3 million for 
assisted actions (see app. II for more details on the data reported to 
us by State). However, we found that at least 13 of these bureaus 
provided incomplete data. In these cases, data from a servicing agency 
or FPDS-NG indicated that a particular servicing agency assisted a 
State bureau with interagency contracting in fiscal year 2006, but that 
bureau did not report any actions with that servicing agency. Based on 
our comparison of data State reported with data obtained from five 
servicing agencies and FPDS-NG, we identified at least $186 million in 
assisted interagency contracting that State did not report. Most 
notably, DOD reported assisting State's Bureau of Near Eastern Affairs 
in performing nearly $144 million in contracting for logistics support 
in Iraq that was not included in State's data. 

Furthermore, in many cases the interagency actions that were reported 
by State were missing basic information that would be needed for 
managing contracts and achieving good acquisition outcomes. For 
example, bureaus were not always able to identify the contractor for 
particular actions, and one bureau that reported over $26 million in 
assisted interagency contracting was not able to provide us with the 
contract or order numbers for many of the actions. Also, in some cases, 
obligation amounts reported by bureaus differed widely from those 
reported by servicing agencies or in FPDS-NG. For example, in one case, 
a State bureau reported placing over $15 million on an assisted action, 
while the servicing agency reported actions totaling $9.8 million on 
the same contract and order number. In another case, a State bureau 
reported a lower dollar value than the servicing agency, with State 
reporting a single action of $25,000 and the servicing agency reporting 
multiple actions totaling $471,000 for the same order. Because of such 
discrepancies, we were unable to verify the accuracy of a significant 
portion of State's reported data, particularly for assisted actions. 

A Lack of Comprehensive and Reliable Information Inhibits Agencies from 
Making Sound Contracting Decisions and Engaging in Good Management 
Practices: 

We have previously reported that agencies may not be able to make sound 
contracting decisions or engage in good management practices without 
comprehensive and reliable data on interagency contracting and the 
related costs and fees. Without such data, agencies cannot conduct 
analyses to determine if the use of such contracts is in their best 
interests or if there are opportunities for savings. For example, we 
reported in 2005 that DOD had difficulty making informed decisions 
about the use of other agencies' contracting services because its 
financial systems did not collect data on interagency 
contracting.[Footnote 9] In 2006, we also found that the Department of 
Homeland Security (DHS) did not systematically monitor its spending on 
interagency contracts. As a result, it did not know what fees it was 
paying to other agencies to award contracts on its behalf and whether 
it could achieve savings through alternative contracting 
methods.[Footnote 10] Similarly, without access to complete and 
reliable data on its use of interagency contracting, State does not 
have the information needed to manage its use of interagency contracts 
to achieve good outcomes and ensure that it is receiving value for fees 
it pays to other agencies. 

State Cannot Ensure That Decisions to Use Assisted Interagency 
Contracting Are Being Made by the Appropriate Acquisition Officials: 

Due to the way the State First policy has been implemented, State 
cannot ensure that decisions to use assisted interagency contracts are 
being made by OPE and AQM officials as called for by the policy. These 
acquisition officials often lack awareness of or involvement in 
decisions to use assisted interagency contracts for three main reasons. 
First, these officials have broadly exempted a number of assisted 
interagency contracting actions from the requirement to seek a State 
First waiver. Second, State's bureaus have varying interpretations of 
when they need to obtain waivers for proposed assisted interagency 
contracting activities. Third, State acquisition officials have no 
mechanism to ensure that bureaus comply with the State First policy, 
relying primarily on the bureaus to voluntarily submit requests for 
State First waivers. 

Broad Exemptions Limit Ability to Evaluate the Use of Assisted 
Interagency Contracts: 

State acquisition officials have broadly exempted a number of assisted 
interagency contracting actions from the State First waiver process. By 
creating these broad exemptions, acquisition officials are not fully 
aware of bureaus' use of assisted interagency contracting. The 
exemptions apply to bureaus that are among the largest users of 
assisted interagency contracting. 

OPE issued guidance in 2005 stating that the State First policy does 
not apply to proposed funds transfers conducted under the Foreign 
Assistance Act. The Procurement Executive explained to us that this 
exemption from needing a waiver was intended to apply only to transfers 
of funds under the Foreign Assistance Act where another agency was 
responsible for carrying out the program.[Footnote 11] He said that 
bureaus should still seek State First waivers when transferring funds 
under the Foreign Assistance Act if the transfer is so the other agency 
can purchase goods or services for State. However, AQM and some bureau 
officials have interpreted and applied the guidance in a different way. 
The Director of AQM told us that the exemption from needing a waiver 
applies to all actions--including assisted interagency contracting-- 
funded under the Foreign Assistance Act. Officials in the bureaus of 
Diplomatic Security (DS) and International Narcotics and Law 
Enforcement Affairs (INL)[Footnote 12] informed us that because of this 
exemption they do not seek State First waivers for assisted contract 
actions conducted under this Act. For example, officials in INL did not 
seek a waiver for an order for aviation support, issued in 2006 by DOD 
on their behalf and valued at approximately $51 million. Both DS and 
INL reported using assisted interagency contracting extensively 
compared to other bureaus, and DS and INL officials stated that the 
Foreign Assistance Act is one of the chief authorities under which they 
transfer funds to another agency for contracting services. 

As a result of a series of decisions, acquisition officials have also 
exempted a potentially large amount of DS's assisted interagency 
contracting activity from review under the State First policy. 
Following the initial establishment of the State First policy, AQM 
exempted much of DS's assisted interagency contracting activity from 
the policy. Then in January 2006, acquisition officials met with bureau 
officials to clarify application of the State First policy. Acquisition 
officials agreed to exempt assisted interagency contracting activities 
carried out under existing interagency acquisition agreements from 
review under the State First policy but stipulated that new IAAs would 
need to be reviewed. A bureau official told us that, at this meeting, 
she informed the acquisition officials that many of the bureau's IAAs 
with servicing agencies did not have expiration dates. As a result, new 
requirements could continue to be fulfilled under existing IAAs without 
State First review.[Footnote 13] For example, DS placed a new task 
order in 2006 through another agency under an IAA signed in 2001--this 
order was not reviewed under State First. While aware of DS's 
exemption, State's Procurement Executive noted that the State First 
policy was designed to review such task orders to ensure that using 
another agency's contracting services was in State's best interest. 

Bureaus Differ in When They Seek a State First Waiver: 

Bureaus within State have different interpretations of when they should 
seek the approval of the appropriate acquisition officials to initiate 
assisted interagency contracting activities. Some bureaus request State 
First waivers for individual contract actions related to specific 
requirements, such as issuing a new task order. In one case study we 
reviewed involving the Bureau of Population, Refugees and Migration, a 
program official sought a waiver under the State First policy to have 
another agency issue a new contract action to continue fulfilling the 
program's requirements. Similarly, an INL program official sought a 
State First waiver to use DOD's contracting services to fulfill a new 
requirement, prior to the 2005 exemption for Foreign Assistance Act 
activities. 

DS, however, does not typically seek waivers under the State First 
policy for individual task orders or requirements initiated under IAAs. 
Instead, it is DS officials' understanding that the overarching IAA 
with the servicing agency, rather than the individual requirement, 
requires approval under the State First policy. DS has used IAAs 
broadly to establish relationships with other agencies and these IAAs 
can encompass many requirements, multiple contract actions, and several 
fiscal years. This practice, compounded by the exemption for DS's IAAs 
entered into prior to 2006, has precluded much of DS's interagency 
contracting activity from review under State First. Neither bureau 
officials nor acquisition officials identified a process to review long-
standing agreements over time to determine whether changes have 
occurred or whether it is still appropriate for State to continue 
paying another agency for contracting support. For example, an IAA with 
one servicing agency was signed in 2001, and the servicing agency 
reported that it issued 128 new task orders under this IAA between 
December 2001 and February 2008, none of which was reviewed under State 
First. Because this IAA was never reassessed, DS officials thought they 
were paying a 2.3 percent fee for all actions under this agreement, but 
the actual fee charged had been raised since 2001. Based on our 
analysis of servicing agency data, since October 2004, the average fee 
paid across all contract actions under this IAA was 3.3 percent-- 
meaning State paid almost $160,000 more in fees than DS officials 
thought they were paying. 

Acquisition Officials Lack Mechanisms to Monitor Compliance with the 
State First Policy: 

State acquisition officials do not have mechanisms in place to ensure 
that bureaus are complying with the State First policy. According to 
the acquisition officials, they do not monitor compliance and are 
reliant on bureaus to voluntarily request waivers before using assisted 
interagency contracts. In the absence of such requests, they have no 
other way to obtain reliable information about bureaus' use of assisted 
interagency contracts. For instance, because State does not 
comprehensively track its use of interagency contracting, acquisition 
officials cannot conduct queries to identify actions that should have 
been reviewed under State First. Further, they have no way to determine 
the extent to which bureaus have conducted procurements under various 
exemptions or whether bureaus have applied the exemptions 
appropriately. As a result, acquisition officials cannot independently 
determine whether the five waivers requested in fiscal year 2006 were 
an accurate reflection of assisted interagency contracting for that 
year. 

Problems with State First compliance have previously been reported. In 
2005, the State Inspector General found that 16 of the 19 domestic 
bureaus and offices included in its review did not comply with the 
policy.[Footnote 14] The State Inspector General also reported that 
budget and financial officers in 9 of the 19 bureaus and offices 
indicated that they had no knowledge of the State First policy or its 
requirements. The State Inspector General noted that better compliance 
with State First could result in lower contract costs and the more 
economical utilization of administrative costs associated with the 
contracts. The Procurement Executive issued additional guidance on the 
State First policy as a result of the Inspector General's findings but 
informed us that acquisition officials have not reviewed compliance 
since then to determine if compliance has improved. Officials in AQM 
said they believe the State Inspector General reviews compliance with 
the policy as part of its regular bureau inspections. However, an 
official from the State Inspector General's office said that this is 
not part of the office's routine monitoring activities. 

State's Policies Do Not Ensure Contract Oversight for Assisted 
Interagency Contracts: 

State's policies do not ensure that responsibilities for overseeing 
contractor performance on its assisted interagency contracts are 
assigned to appropriately trained individuals. Contracting officers' 
representatives (COR) play a key role at State in overseeing contractor 
performance, although the decision of whether to appoint a COR is at 
the contracting officer's discretion. When CORs are appointed by State 
contracting officers, State acquisition regulations require contracting 
officers to outline the scope of the COR's authority in an appointment 
memorandum to be maintained in the contract file.[Footnote 15] These 
regulations further specify that only State employees with adequate 
training and experience may serve as CORs on contract actions awarded 
by State contracting officers, a stipulation that would include actions 
under direct interagency contracting. According to State guidance, a 
COR is responsible for several functions related to oversight of 
contractor performance, including: 

* monitoring technical progress and the expenditures of resources 
related to the contract; 

* informing the contracting officer, in writing, of any performance or 
schedule failure by the contractor or of any needed changes to the 
performance work statement or specifications; and: 

* performing inspection and accepting work on behalf of the U.S. 
government and reviewing and approving the contractor's vouchers or 
invoices. 

State acquisition regulations, however, do not contain requirements or 
guidance regarding the assignment or training of CORs when using 
assisted interagency contracting.[Footnote 16] For assisted contracting 
actions, State's acquisition officials view it as solely the servicing 
agency's duty to ensure contractor oversight, rather than a 
responsibility that all involved parties share. Because State does not 
have requirements in place to ensure the assignment of appropriately 
trained oversight personnel, effective oversight depends on factors 
outside of State's direct control. These factors include the rigor of a 
particular servicing agency's policies and procedures and the 
involvement of State personnel who happen to be experienced and 
knowledgeable. 

In most of the seven cases of assisted interagency contracting we 
reviewed, the State personnel who performed oversight duties had 
programmatic knowledge and experience related to the requirements being 
fulfilled. However, servicing agency practices differed regarding COR 
designation and training. The State personnel assigned by the servicing 
agencies to oversee contractor performance had not always received 
training related to contract oversight or had their roles clearly 
designated. In three cases we reviewed, the servicing agencies took 
steps to ensure that oversight personnel were aware of their roles and 
responsibilities and had obtained the requisite training. In two other 
cases, the servicing agencies did not designate CORs, although State 
program officials were assigned some oversight responsibilities. In the 
first of these instances, the State program official told us she had 
already taken contract-related training. In the other instance, 
however, the State official had not received training related to 
contract oversight and explained to us that she often did not 
understand the documents the servicing agency asked her to sign, 
particularly with regard to the contracting terminology. Finally, in 
the last two cases, the servicing agencies designated State personnel 
as CORs but did not ensure that they received required training 
associated with these oversight responsibilities. 

In one of the cases we reviewed where the designated COR had not 
received required training, the servicing agency also did not keep COR 
designations up to date. The contracting officer at the servicing 
agency was not aware that the COR and other oversight personnel were no 
longer employed at State. In addition, the COR stated that he did not 
play a role in monitoring the time sheets or attendance of contract 
personnel, or providing performance feedback to the contracting 
officer. The official explained that, while he worked with the 
contractor to address any deficiencies related to performance, another 
official, who told us she had received COR training but who was not 
designated as the COR for the order, verified the accuracy of invoices. 
Ensuring the designation of appropriately trained CORs was particularly 
important for this order because it was a time-and-materials type 
contract, as were five of the six other assisted actions we reviewed. 
Time-and-materials contracts are considered high risk for the 
government because they offer no profit incentive to the contractor for 
cost control or labor efficiency. Therefore, it is important for the 
government to monitor contractor performance to ensure that the 
contractor is efficiently performing the work and effectively 
controlling costs.[Footnote 17] 

We and others have previously reported on problems with oversight of 
interagency contracting, including the risks of not clearly designating 
individuals responsible for providing oversight of contractor 
performance and of not ensuring that these individuals are properly 
trained to perform their duties. For instance, we reported that when 
the Army purchased interrogation support services through the 
Department of the Interior (Interior), Army personnel in Iraq 
responsible for overseeing contractor performance were not adequately 
trained to exercise their responsibilities. In this case, an Army 
investigative report concluded that the lack of training for the CORs 
assigned to monitor contractor performance at Abu Ghraib prison, as 
well as an inadequate number of assigned CORs, put the Army at risk of 
being unable to control poor performance or become aware of possible 
misconduct by contractor personnel.[Footnote 18] In 2007, the DOD 
Inspector General reported that DOD organizations were deficient in 
contract administration, including the surveillance of contractor 
performance and assignment of CORs when they made purchases through the 
Department of Veterans Affairs. The DOD Inspector General noted that 
interagency contracting requires strong internal controls, clear 
definition of roles and responsibilities, and sufficient training of 
both servicing and requesting activities personnel.[Footnote 19] In 
2005, the State Inspector General identified problems associated with 
the oversight of assisted interagency contracts, noting the lack of 
documentation of activities to determine whether the contractor 
provided the specified deliverables.[Footnote 20] 

Conclusions: 

Lacking information about the extent to which it uses interagency 
contracts, State is not positioned to make informed decisions about 
whether and when additional scrutiny, oversight, or other actions are 
necessary to ensure State's interests are protected. The State First 
policy, put in place before other agencies widely reported the risks of 
interagency contracting, provided State with an opportunity to gain 
increased insight and control over when and how the department uses and 
pays for other agencies' contracts and contracting support. However, 
subsequent exemptions, varying interpretations, and a lack of 
compliance monitoring of the State First policy have significantly 
limited that opportunity and restricted the ability of acquisition 
officials to manage State's use of interagency contracts and the 
associated risks. Properly trained personnel are best positioned to 
oversee the delivery of goods and services, regardless of what agency 
placed the order. Yet State has not taken steps to ensure that such 
personnel are in place, which has exposed State to the same risks faced 
by other agencies. Due to the critical nature of State's mission and 
the importance of contract support to fulfilling this mission, State 
cannot afford to abdicate responsibility for ensuring good acquisition 
outcomes, even when the contracting officer is at another agency. 

Recommendations for Executive Action: 

To enable State to improve its management of interagency contracting, 
we recommend that the Secretary of State direct the Office of the 
Procurement Executive to take the following three actions: 

* Develop, in consultation with the bureaus, a reliable means for 
tracking the use of interagency contracts so that the bureaus and 
acquisition officials can readily and reliably access data, such as the 
costs and associated fees. Analysis of such data could also be used to 
assess whether the State First process provides an accurate reflection 
of bureaus' use of assisted interagency contracting. 

* Work with the Office of Acquisitions Management, in coordination with 
the bureaus that make the most use of assisted interagency contracts, 
to clarify and refine the State First policy, including existing 
exemptions, and provide additional guidance as needed regarding which 
actions need review under the policy. 

* Require bureaus seeking a State First waiver to identify in their 
request individual(s) who will be responsible for contract oversight 
and ensure they are trained to perform this key role. 

Agency Comments: 

We provided a draft of this report to State for review and comment. In 
its written comments, State noted that the report captures the 
challenges posed by interagency contracting and agreed to implement the 
three recommendations. State's comments are reprinted in their entirety 
in appendix III. State officials also provided technical comments that 
were incorporated where appropriate. 

We are sending copies of this report to interested congressional 
committees as well as the Secretary of State and the Director, Office 
of Management and Budget. In addition, this report will be made 
available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report or need 
additional information, 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 IV. 

Signed by: 

John Hutton: 

Director, Acquisition and Sourcing Management: 

List of Committees: 

The Honorable Joseph R. Biden: 
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 Henry A. Waxman: 
Chairman: 
The Honorable Tom Davis: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable Nita M. Lowey: 
Chair: 
The Honorable Frank R. Wolf: 
Ranking Member: 
Subcommittee on State, Foreign Operations, and Related Programs: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

Our objectives were to evaluate (1) the extent to which State has 
insight into its use of interagency contracting; (2) State's policies 
and procedures for deciding when to use assisted interagency 
contracting; and (3) State's ability to ensure oversight of assisted 
interagency contracting. For the purposes of this review, we defined 
interagency contracting as including both direct actions (orders placed 
by one agency's contracting officers on another agency's contracts) and 
assisted actions (obtaining contract support services from other 
agencies). 

To evaluate the extent to which State has insight into its use of 
interagency contracting, we initially attempted to identify data 
systems that would provide reliable information on State's use of 
interagency contracting. In consultation with senior acquisition 
officials at State, we determined that such information could not be 
obtained from existing data systems. We then requested data from 35 
bureaus, as well as 18 of State's 277 overseas posts with authority to 
conduct contracting activities, on fiscal year 2006 purchases of at 
least $25,000 made through both types of interagency contracts. We 
received responses from 34 of the 35 bureaus and all 18 posts.[Footnote 
21] Because data submitted by State bureaus and posts were compiled by 
staff in various positions, we requested that the executive directors 
of the bureaus and the general services officers (GSO) of the overseas 
posts confirm that the data submitted on behalf of their bureaus or 
posts were complete and accurate. We received confirmations from 46 
executive directors and GSOs; the remaining 6 did not respond to our 
request for confirmation. To assess the reliability of the assisted 
actions reported to us by State, we compared State's data with similar 
data we requested and received from five servicing agencies--the 
General Services Administration (GSA), Interior, the Department of the 
Treasury (Treasury), the National Institutes of Health (NIH), and two 
Army commands. These five servicing agencies represented 86 percent of 
the dollar value of assisted actions reported to us by State. In 
addition, we compared both direct and assisted actions reported by 
State with data maintained in FPDS-NG. We considered a State reported 
action to be verified if an action with the same contract and order 
number, and a dollar value difference within 7 percent, could be found 
in either FPDS-NG or in data reported by a servicing agency.[Footnote 
22] In addition, actions that were reported by State, but not within 
the scope of our work, were removed from the final data. Duplicate 
actions--such as those reported by both the Office of Acquisitions 
Management and the requiring bureau--were also deleted from the final 
data. After conducting extensive work to ensure the consistency of the 
data, we determined our final data set to be sufficient for our 
purposes. Because this was not an audit of the servicing agencies or 
FPDS-NG, we used data from these sources only as a point of comparison 
with State-reported data and did not attempt to verify these 
data.[Footnote 23] 

To evaluate State's policies and procedures for deciding when to use 
assisted interagency contracting and State's ability to ensure 
oversight of assisted interagency contracting, we conducted 10 case 
studies of interagency contracting at State. Using the fiscal year 2006 
data reported to us by State and the servicing agencies, as well as our 
preliminary research, we selected 10 cases to represent a range of 
characteristics, as shown in table 1. Three of the 10 cases were direct 
interagency actions, where contracting officers at State's Office of 
Acquisitions Management placed orders off of other agencies' contracts 
on behalf of State bureaus. The other seven consisted of assisted 
interagency actions, where State utilized contracting officers at the 
servicing agencies to place and administer orders on State's behalf. In 
addition, cases were selected to examine a variety of bureaus within 
State as well as a variety of servicing agencies. Our 10 cases 
represented 8 State bureaus and 5 servicing agencies. We did not 
include interagency contracting at overseas posts because the State 
First policy does not apply to overseas posts. For each case, we 
reviewed contract documentation from State, the servicing agency, or 
both. We also interviewed relevant officials including contracting 
officers, individuals performing contract oversight, and other program 
officials as necessary. Finally, we reviewed State acquisition 
regulations, policies, and guidance and interviewed agency officials to 
understand their implementation. We also reviewed relevant GAO and 
Inspectors General reports. 

Table 1: Selected Cases of Interagency Contracting at the Department of 
State: 

State bureau: Direct interagency contract actions: Consular Affairs; 
Description of purchase: Direct interagency contract actions: 
Information technology support for adoptions tracking service; 
Servicing agency: Direct interagency contract actions: National 
Institutes of Health; 
Total order amount, fee inclusive[A]: Direct interagency contract 
actions: $1,225,090. 

State bureau: Direct interagency contract actions: Consular Affairs; 
Description of purchase: Direct interagency contract actions: Passport 
processing services; 
Servicing agency: Direct interagency contract actions: General Services 
Administration[B]; 
Total order amount, fee inclusive[A]: Direct interagency contract 
actions: $150,902,493. 

State bureau: Direct interagency contract actions: Near Eastern 
Affairs; 
Description of purchase: Direct interagency contract actions: Staffing 
support in Iraq; 
Servicing agency: Direct interagency contract actions: General Services 
Administration; 
Total order amount, fee inclusive[A]: Direct interagency contract 
actions: $10,297,921. 

State bureau: Assisted interagency contract actions: Diplomatic 
Security; 
Description of purchase: Assisted interagency contract actions: 
Computer security awareness training; 
Servicing agency: Assisted interagency contract actions: 
General Services Administration; 
Total order amount, fee inclusive[A]: Assisted interagency contract 
actions: 
$1,137,309. 

State bureau: Assisted interagency contract actions: Diplomatic 
Security; 
Description of purchase: Assisted interagency contract actions: 
Firearms and technical security trainers; 
Servicing agency: Assisted interagency contract actions: 
Treasury's FedSource; 
Total order amount, fee inclusive[A]: Assisted interagency contract 
actions: 
$812,468. 

State bureau: Assisted interagency contract actions: Population, 
Refugees and Migration; 
Description of purchase: Assisted interagency contract actions: 
Information technology support for refugee processing; 
Servicing agency: Assisted interagency contract actions: 
General Services Administration; 
Total order amount, fee inclusive[A]: Assisted interagency contract 
actions: 
$44,552,515. 

State bureau: Assisted interagency contract actions: International 
Narcotics and Law Enforcement Affairs; 
Description of purchase: Assisted interagency contract actions: 
Automatic fingerprint identification system; 
Servicing agency: Assisted interagency contract actions: 
Army's CECOM Life Cycle Management Command; 
Total order amount, fee inclusive[A]: Assisted interagency contract 
actions: 
$13,226,624. 

State bureau: Assisted interagency contract actions: Information 
Resources Management; 
Description of purchase: Assisted interagency contract actions: 
Information technology infrastructure support in Iraq; 
Servicing agency: Assisted interagency contract actions: 
Army's CECOM Life Cycle Management Command; 
Total order amount, fee inclusive[A]: Assisted interagency contract 
actions: 
$17,112,565. 

State bureau: Assisted interagency contract actions: Overseas Building 
Operations; 
Description of purchase: Assisted interagency contract actions: 
End-user information technology support; 
Servicing agency: Assisted interagency contract actions: 
National Institutes of Health; 
Total order amount, fee inclusive[A]: Assisted interagency contract 
actions: 
$5,818,579. 

State bureau: Assisted interagency contract actions: International 
Information Programs; 
Description of purchase: Assisted interagency contract actions: 
Publishing services for an Arabic language magazine; 
Servicing agency: Assisted interagency contract actions: 
Interior's GovWorks; 
Total order amount, fee inclusive[A]: Assisted interagency contract 
actions: 
$5,788,612. 

Source: GAO Analysis of State and servicing agency contract files. 

[A] Some of the cases involve ongoing contract actions. These dollar 
values represent the total value at the time of our review. 

[B] This order was placed against the Information Technology Omnibus 
Procurement II (ITOP II) contract. At the time the original order was 
placed, this contract was managed by the Department of Transportation. 
ITOP II was transferred to the General Services Administration in 2004, 
where it is currently managed. 

[End of table] 

We conducted this performance audit from June 2007 to May 2008 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. 

[End of section] 

Appendix II: State's Use of Interagency Contracting in Fiscal Year 
2006: 

We requested data on direct and assisted interagency contract actions 
of at least $25,000 in fiscal year 2006 from 35 State bureaus and 18 
overseas posts. All but one bureau and all 18 posts responded to our 
data request. According to data these State bureaus and posts reported 
to us, State conducted over $800 million in interagency contracting in 
fiscal year 2006--$577.2 million for direct actions and $234.3 million 
for assisted actions. 

For direct actions, State reported the following: 

* 94 percent of the dollar value of these actions was conducted by the 
Office of Acquisitions Management on behalf of 35 bureaus and several 
overseas posts. 

* 98 percent of the reported dollars for direct actions in fiscal year 
2006 were placed on GSA contracts, including schedule 
contracts.[Footnote 24],[Footnote 25] 

* Other actions included orders placed through NIH, National 
Aeronautics and Space Administration, and DOD contracts, among others. 

For assisted actions, State reported the following: 

* Assisted actions were concentrated in less than a third of the 
bureaus and overseas posts that responded to our data request--of the 
52 bureaus and posts that submitted data, only 16 reported assisted 
actions in fiscal year 2006. 

* The most extensive users of assisted interagency contracting in 
fiscal year 2006 included the bureaus of: 

- International Narcotics and Law Enforcement Affairs, which reported 
$95.3 million; 

- Information Resource Management, which reported $72.6 million; 

- Diplomatic Security, which reported $26.5 million; and: 

- Consular Affairs, which reported $12 million. 

* The 16 bureaus that made use of assisted interagency contracting 
conducted these actions through several different servicing agencies, 
including GSA, DHS, Interior, Treasury, NIH, and others. Approximately 
47 percent of the dollar value of assisted actions reported by these 
bureaus was placed by DOD on State's behalf (see fig. 3). 

Figure 3: Servicing Agencies Used by State for Assisted Actions: 

This figure is a pie chart showing servicing agencies used by state for 
assisted actions. 

DOD: 47%; 
GSA: 34%; 
Other: 5%; 
DHS: 5%; 
Interior: 4%; 
NIH: 3%; 
Treasury: 2%. 

[See PDF for image] 

Source: GAO analysis of State reported data. 

[End of figure] 

[End of section] 

Appendix III: Comments from the Department of State: 

United States Department of State: 
Assistant Secretary for Resource Management and Chief Financial 
Officer: 

Washington, D.C. 20520: 

Ms. Jacquelyn Williams-Bridgers: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

April 25, 2008: 

Dear Ms. Williams-Bridgers: 

We appreciate the opportunity to review your draft report, "Interagency 
Contracting: Need for Improved Information and Policy Implementation at 
the Department of State," GAO Job Code 120657. 

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 
Corey Rindner, Procurement Executive, Bureau of Administration, at 
(703) 516-1689. 

Sincerely,

Signed by: 

Bradford R. Miggins: 

cc: GAO — Johana Ayers: 
A — Raj Chellaraj: 
State/OIG — Mark Duda: 

Department Of State Comments On Gao Draft Report: 

Interagency Contracting: Need for Improved Information And Policy 
Implementation at the Department of State (GAO-08-578, GAO Code 120657) 

The Department of State appreciates the opportunity to review and 
comment on the Government Accountability Office draft report entitled, 
"Interagency Contracting: Need for Improved Information and Policy 
Implementation at the Department of State." 

We believe the report captures the challenges posed by interagency 
contracting and agree with the three recommendations. The Department of 
State will take action to clarify our State First Policy to provide 
additional guidance on which actions must be reviewed and available 
exemptions. The revised guidance will also require bureaus seeking the 
procurement services of other agencies to identify a Contracting 
Officer Representative (COR), trained in accordance with Department of 
State requirements, to support significant assisted procurements based 
on complexity and/or dollar value. 

The Department's Office of Acquisitions will maintain an excel 
spreadsheet to track the use of interagency contracts including data 
such as costs and associated fees.

[End of section] 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contact: 

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

Staff Acknowledgments: 

In addition to the contact named above, Johana R. Ayers, Assistant 
Director; Noah Bleicher; Greg Campbell; Theresa Chen; Alexandra Dew; 
Timothy DiNapoli; Kathryn Edelman; Arthur James, Jr; Julia Kennon; and 
Winnie Tsen made key contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: 
January 2005). Also see GAO, High-Risk Series: An Update, GAO-07-310 
(Washington, D.C.: January 2007). 

[2] For the purposes of our review, we refer to officials within the 
Offices of the Procurement Executive and Acquisitions Management as 
State acquisition officials. 

[3] For the purposes of this review, we defined contract actions as 
including new contracts, orders on existing contracts, or modifications 
to existing contracts or orders. 

[4] Bureaus and offices with Heads of Contracting Activities other than 
AQM, overseas posts and Regional Procurement Support Offices include: 
Foreign Service Institute, Office of Foreign Missions within the Bureau 
of Diplomatic Security, and U.S. Mission to the United Nations. Bureaus 
and offices with limited acquisition authority include: Office of 
Language Services; Office of Overseas Schools; Ralph J. Bunche Library; 
Office of International Conferences; Bureau of International Narcotics 
and Law Enforcement Affairs; Office of Small and Disadvantaged Business 
Utilization; Office of Operations within the Bureau of Administration; 
Office of the Inspector General; and Bureau of Diplomatic Security. 

[5] DOSAR § 607.103-70 

[6] See GAO, Improvements Needed to the Federal Procurement Data 
System--Next Generation, GAO-05-960R (Washington, D.C.: Sept. 27, 
2005). 

[7] Recent recommendations made by the Acquisition Advisory Panel 
included a recommendation that the Office of Federal Procurement Policy 
ensure that FPDS-NG reports data on orders under interagency contracts. 
See Acquisition Advisory Panel, Report of the Acquisition Advisory 
Panel to the Office of Federal Procurement Policy and the United States 
Congress (January 2007). 

[8] The Bureau of International Organizations did not submit data. 

[9] GAO, Interagency Contracting: Franchise Funds Provide Convenience, 
but Value to DOD is not Demonstrated, GAO-05-456 (Washington, D.C.: 
July 29, 2005). 

[10] GAO, Interagency Contracting: Improved Guidance, Planning, and 
Oversight Would Enable the Department of Homeland Security to Address 
Risks, GAO-06-996 (Washington, D.C.: Sept. 27, 2006). 

[11] The Procurement Executive cited the transfer of funds from State 
to another agency for the President's Emergency Plan for AIDS Relief as 
one example of when the State First policy would not apply. 

[12] DS is the security and law enforcement arm of State. INL advises 
the President, Secretary of State, other bureaus within State, and 
other departments and agencies within the U.S. government on the 
development of policies and programs to combat international narcotics 
and crime. 

[13] This bureau official also told us that acquisition officials were 
invited to conduct a follow-up review of existing IAAs to determine how 
to proceed under them. However, she said that this review did not occur 
because of limited resources in the acquisition office. 

[14] Department of State, Office of Inspector General, Report of Audit: 
Review of Department's Compliance with State First Policy for 
Acquisitions, Report Number AUD/PP-05-42 (Washington, D.C.: August 
2005). 

[15] DOSAR § 642.270. 

[16] In contrast, DOD's policy requires that a COR be assigned for 
contract actions for services awarded by any other federal agency on 
behalf of DOD. 

[17] For additional information on time-and-materials contracts, please 
see GAO, Defense Contracting: Improved Insight and Controls Needed over 
DOD's Time-and-Materials Contracts, GAO-07-273 (Washington, D.C.: June 
29, 2007). 

[18] GAO, Interagency Contracting: Problems with DOD's and Interior's 
Orders to Support Military Operations, GAO-05-201 (Washington, D.C.: 
Apr. 29, 2005). 

[19] Department of Defense, Office of Inspector General, FY2006 DOD 
Purchases Made Through the U.S. Department of Veterans Affairs, Report 
No. D-2008-036 (Arlington, Va.: Dec. 20, 2007). 

[20] Department of State, Office of Inspector General, Report of Audit: 
Review of the Department's Compliance with State First Policy for 
Acquisitions, Report Number AUD/PP-05-42 (Washington, D.C.: August 
2005). 

[21] We requested data from all of the bureaus beneath the under 
secretaries' offices as well as the Office of Acquisitions Management 
and the two Regional Procurement Support Offices. In addition, the 
Executive Secretariat/Executive Secretary voluntarily submitted data to 
us. The Bureau of International Organizations did not submit data. For 
the overseas posts, we selected the three posts with the highest total 
procurement dollars reported in FPDS-NG for fiscal year 2006 in each of 
the six regions as listed in FPDS-NG--Africa, East Asia and Pacific, 
Europe and Eurasia, Middle East and North Africa, Central and South 
Asia, and the Americas. Two of these posts had both a general services 
officer and a narcotics affairs section that reported data to us. 

[22] Seven percent was chosen as the dollar value threshold because any 
difference within this range could be attributed to the fee charged by 
the servicing agency. Seven percent was the highest fee rate we 
encountered for State interagency contracting actions. 

[23] We have previously reported on the shortcomings of the Federal 
Procurement Data System--both the legacy and the Next Generation 
versions. See GAO, Federal Acquisition: Oversight Plan Needed to Help 
Implement Acquisition Advisory Panel Recommendations, GAO-08-160 
(Washington, D.C.: Dec. 20, 2007) and GAO, Reliability of Federal 
Procurement Data, GAO-04-295R (Washington, D.C.: Dec. 30, 2003). 

[24] Under the GSA schedules program, GSA negotiates contracts with 
vendors for a wide variety of goods and services at varying prices. 
These contracts permit other agencies to place orders directly with 
vendors, providing agencies with a simplified process of acquiring 
goods and services while obtaining volume discounts. 

[25] State reported 88 percent of dollars on actions through GSA and 
another 10 percent on a Department of Transportation contract that, by 
fiscal year 2006, had been transferred to GSA. 

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