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United States Government Accountability Office:
GAO: 

Report to Congressional Committees: 

January 2011: 

Defense Acquisitions: 

Further Action Needed to Better Implement Requirements for Conducting 
Inventory of Service Contract Activities: 

GAO-11-192: 

GAO Highlights: 

Highlights of GAO-11-192, a report to congressional committees. 

Why GAO Did This Study: 

The Department of Defense (DOD) relies on contractors to perform 
myriad functions, which can offer benefits and flexibility for DOD. 
GAO’s work has shown that reliance on contractors to support core 
missions, however, can place the government at risk of transferring 
government responsibilities to contractors. In April 2009, the 
Secretary of Defense announced his intent to reduce the department’s 
reliance on contractors. 

In 2008, Congress required DOD to compile and review an annual 
inventory of the number of contractor employees working under service 
contracts and the functions and activities they performed. The fiscal 
year 2010 National Defense Authorization Act directed GAO to report 
annually on these inventories. GAO assessed (1) the approaches used to 
compile the fiscal year 2009 inventories and how the approaches have 
changed, and (2) how the inventories have been reviewed and used to 
inform workforce decisions. GAO reviewed guidance; compared the 
approaches used to develop the fiscal year 2008 and 2009 inventories; 
and interviewed acquisition and manpower officials from DOD, the 
military departments, and selected defense components. 

What GAO Found: 

DOD implemented a more uniform approach to compile its fiscal year 
2009 inventories to reduce inconsistencies that resulted from DOD 
components using different approaches in fiscal year 2008. To do so, 
in May 2010 the Under Secretary of Defense for Acquisition, Technology 
and Logistics (AT&L) issued guidance to the Navy, Air Force, and other 
components that specified the categories of services to be included in 
the inventories; instructed them to use the Federal Procurement Data 
System–Next Generation (FPDS-NG) as the basis for most of the 
inventory data requirements; and provided a formula to estimate the 
number of contractor full-time equivalent personnel working under 
those contracts. This guidance also authorized the Army to continue to 
use its existing process, which incorporates contractor-reported data, 
including direct labor hours, from its Contractor Manpower Reporting 
Application. The changes in DOD’s approach, in particular how DOD 
reflected research and development services and the use of a new 
formula for estimating contractor personnel for the Air Force and 
Navy, as well as better reporting by the Army, affected the reported 
fiscal year 2009 inventory data. Collectively, these changes make 
comparing the fiscal year 2008 and 2009 inventory data problematic. 
DOD officials acknowledged several continuing limitations associated 
with the fiscal year 2009 inventories, including the inability of FPDS-
NG to provide information for all of the required data elements, and 
concerns about AT&L’s estimating approach. AT&L’s May 2010 guidance 
indicated that it planned to move towards collecting manpower data 
from contractors and indicated AT&L would work with the Office of the 
Under Secretary of Defense for Personnel and Readiness and other 
organizations to issue preliminary guidance and a proposed plan of 
action by August 2010. However, DOD has not yet done so. 

The military departments differ both in their approaches to reviewing 
the activities performed by contractors and the extent to which they 
have used the inventories to inform workforce decisions. The Army has 
implemented a centralized approach to identify and assess the 
functions being performed by contractors and has used such assessments 
to inform workforce decisions, including those related to identifying 
functions being performed by contractors that could be converted to 
performance by DOD civilian personnel. In contrast, the Air Force and 
Navy have implemented decentralized approaches that rely on major 
commands to review their contracted activities and report the results 
back to their respective headquarters. The Air Force implemented its 
initial review but experienced challenges, including that it did not 
obtain adequate information, that will likely cause its approach to 
evolve in the future. The Navy issued guidance on completing reviews 
to its commands in September 2010, but the results of the reviews had 
not been reported as of November 2010. Additionally, Air Force and 
Navy officials said that to date they have made limited use of the 
inventories to date to help inform their workforce decisions. 

What GAO Recommends: 

GAO recommends DOD develop and issue a plan of action to collect 
manpower data and, in the interim, improve its estimating approach. 
DOD concurred with the recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-11-192] or key 
components. For more information, contact John Hutton at (202) 512-
4841 or huttonj@gao.gov or William M. Solis at (202) 512-8365 or 
solisw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DOD's Fiscal Year 2009 Inventories Reflect a More Uniform Approach, 
but Limitations Remain: 

Military Departments Differ in How They Have Reviewed and Used the 
Inventories: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: GAO Contacts and Staff Acknowledgments: 

Table: 

Table 1: Spending on Services and Contractor FTEs as Reported in DOD's 
Fiscal Years 2008 and 2009 Service Contract Inventory: 

Figures: 

Figure 1: Relationship between the Inventory, In-sourcing, and Budget 
Documentation Requirements: 

Figure 2: Estimating the Number of Contractor FTEs on a $400,000 
Contract for Systems Engineering Services Using AT&L's May 2010 
Guidance: 

Figure 3: Comparison of the Number of Contractor FTEs Estimated by 
Fiscal Year 2008 and Fiscal Year 2009 Formulas: 

Abbreviations: 

AFMC: Air Force Materiel Command: 

AT&L: Under Secretary of Defense for Acquisition, Technology and 
Logistics: 

CMRA: Contractor Manpower Reporting Application: 

COR: contracting officer's representative: 

DOD: Department of Defense: 

DPAP: Office of Defense Procurement and Acquisition Policy: 

FAR: Federal Acquisition Regulation: 

FMMR: Office of Force Management Manpower and Resources: 

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

FTE: full-time equivalent: 

IMCOM: Installation Management Command: 

PDC: Panel for the Documentation of Contractors: 

TRADOC: Training and Doctrine Command: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

January 14, 2011: 

Congressional Committees: 

The Department of Defense (DOD) relies on contractors to perform 
functions as varied as professional and management support, 
information technology support, and weapon system and intelligence 
support. DOD's obligations on services have increased in recent years, 
more than doubling from fiscal years 2001 to 2009. Further, Congress 
has raised questions about DOD's management and use of contractors. 
While there are benefits to using contractors to perform services for 
the government, our work has shown that reliance on contractors to 
support core missions can place the government at risk of transferring 
government responsibilities to contractors. In 2008, we concluded that 
the increased reliance on contractors required DOD to engage in a 
fundamental reexamination of when and under what circumstances it 
should use contractors versus civil servants or military 
personnel.[Footnote 1] In April 2009, the Secretary of Defense 
announced his intent to reduce the department's reliance on 
contractors and increase funding for new civilian authorizations. More 
recently, in August 2010 the Secretary of Defense announced plans to 
reduce funding for service support contractors by 10 percent per year 
from fiscal years 2011 to 2013. 

Over the past decade, our work has identified the need for DOD to 
obtain better data on its contracted services to enable it to make 
more strategic decisions. For example, in 2006, we reported that DOD's 
approach to managing services acquisition tended to be reactive and 
had not fully addressed the key factors for success at either a 
strategic or transactional level.[Footnote 2] The strategic level is 
where the enterprise sets a direction for what it needs, captures 
knowledge to make informed management decisions, ensures 
departmentwide goals and objectives are achieved, and assesses the 
resources it has to achieve desired outcomes. The strategic level sets 
the context for the transactional level, where the focus is on making 
sound decisions on individual service acquisitions using valid and 
well-defined requirements, appropriate business arrangements, and 
adequate management of contractor performance. 

DOD has put a number of efforts in place to gain better insights into 
its acquisition of services, but its efforts have had mixed success to 
date. For example, DOD has struggled to obtain accurate and reliable 
information on contracts and the contracted workforce supporting 
contingency operations in Iraq and Afghanistan.[Footnote 3] Further, 
while DOD has long-standing guidance that requires DOD components to 
assess the mix of military, civilian, and contractor personnel, we 
reported in March 2009 that DOD lacks information on the contractor 
component of its total workforce.[Footnote 4] More recently, in 
September 2010, we noted that DOD's civilian strategic human capital 
plan had only partially addressed the statutory requirement to assess 
the appropriate mix of military, civilian and contractor personnel 
capabilities.[Footnote 5] 

Congress has passed legislation in recent years to improve the 
department's ability to manage its services acquisitions; to make more 
strategic decisions about the right workforce mix of military, 
civilian, and contractor personnel; and to better align resource needs 
through the budget process to achieve that mix. For example, Section 
807 of the National Defense Authorization Act for Fiscal Year 2008 
required DOD to annually compile and review an inventory of activities 
performed pursuant to contracts for services to help provide better 
insights into, among other things, the number of contractors providing 
services to the department and the functions they are performing. 
[Footnote 6] 

To date, DOD has submitted annual inventories for fiscal years 2007, 
2008, and 2009. In January 2010, we reported that the military 
departments used different approaches to compile their fiscal year 
2008 inventories, relying on a mixture of existing data systems, 
contractor-entered data, manual compilation of some data elements, or 
estimates.[Footnote 7] Further, we identified differences in the 
approaches taken by the military departments to identify activities 
performed by service contractors, which categories of services were 
included in each of their inventories, and how each military 
department determined the number of contractor full-time equivalents 
(FTE) performing these activities. We also found that the data 
included in each of the fiscal year 2008 inventories were not complete 
and identified other limitations associated with the military 
departments' fiscal year 2008 inventories. As part of this review, we 
did not assess the extent to which DOD components implemented 
processes to review the contracts and activities included in the 
fiscal year 2008 inventories, nor did we make recommendations at that 
time. In May 2010, the Office of the Under Secretary of Defense for 
Acquisition, Technology, and Logistics (AT&L) issued new guidance on 
the approaches to be used by DOD components for compiling the fiscal 
year 2009 inventories. DOD submitted its consolidated fiscal year 2009 
inventory to Congress on July 20, 2010. 

Section 803(c) of the National Defense Authorization Act for Fiscal 
Year 2010 directed GAO to report annually on the inventories submitted 
in each of 2010, 2011, and 2012.[Footnote 8] To satisfy the mandate, 
we assessed (1) the approaches used to compile the fiscal year 2009 
inventories and how the approaches have changed, and (2) how the 
inventories have been reviewed and used to inform workforce decisions. 
Because the military departments represent the majority of the 
spending on services and contractor FTEs reported in the fiscal year 
2009 inventories, we focused our review on the Army, Navy, and Air 
Force. To gain additional insights into the inventory compilation and 
review processes at the command level, we selected a nongeneralizable 
sample of four commands using (1) data from the Federal Procurement 
Data System-Next Generation (FPDS-NG)[Footnote 9] on dollars obligated 
against contracts for professional, administrative, and management 
support services, which may be more likely to be closely associated 
with inherently governmental functions,[Footnote 10] (2) military 
department data on planned in-sourcing activity in fiscal year 2010, 
and (3) recommendations from agency officials. Using these criteria, 
we selected the Army's Training and Doctrine Command (TRADOC) and the 
Installation Management Command (IMCOM), the Air Force Materiel 
Command (AFMC), and the Naval Air Systems Command. 

To conduct our work, we reviewed relevant guidance related to the 
inventory compilation and review processes and analyzed the fiscal 
year 2009 inventory data for the Army, Navy, and Air Force. We 
interviewed officials from AT&L's Office of Defense Procurement and 
Acquisition Policy (DPAP); the Office of the Under Secretary of 
Defense for Personnel and Readiness, Requirements and Program and 
Budget Coordination Directorate; the departments of the Army, Navy, 
and Air Force; and other defense agencies; and from the commands we 
selected those who were responsible for the inventory compilation and 
review processes, as well as for identifying candidates for 
converting, or in-sourcing, functions currently performed by 
contractors to DOD civilian personnel. Using guidance and information 
obtained from these officials, we compared the approaches used to 
compile the fiscal year 2009 inventories with the approaches used to 
compile the fiscal year 2008 inventories. We did not independently 
assess the accuracy or reliability of the underlying data supporting 
the Army, Navy, or Air Force fiscal year 2009 inventories. However, we 
found the data to be sufficiently reliable for the purpose of 
assessing the change in approaches from fiscal years 2008 to 2009. A 
more detailed description of our scope and methodology is included in 
appendix I. 

We conducted this performance audit from May 2010 through November 
2010 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: 

As part of Congress's efforts to improve the availability of 
information on and management of services acquisitions, it enacted 
Section 801 of the National Defense Authorization Act for Fiscal Year 
2002, which required the Secretary of Defense to establish a data- 
collection system to provide management information with regard to 
each purchase of services by a military department or defense agency. 
[Footnote 11] For example, the information to be provided includes the 
services purchased, the total dollar amount of the purchase, and the 
extent of competition provided in making the purchase, among other 
things. 

In 2008, Congress amended this provision in section 807 of the 
National Defense Authorization Act for Fiscal Year 2008 to add a 
requirement for the Secretary of Defense to submit an annual inventory 
of the activities performed pursuant to contracts for services for or 
on behalf of DOD during the preceding fiscal year.[Footnote 12] The 
inventory is to include a number of specific data elements for each 
identified activity, including: 

* the function and missions performed by the contractor; 

* the contracting organization, the component of DOD administering the 
contract, and the organization whose requirements are being met 
through contractor performance of the function; 

* the funding source for the contract by appropriation and operating 
agency; 

* the fiscal year the activity first appeared on an inventory; 

* the number of full-time contractor employees (or its equivalent) 
paid for performance of the activity; 

* a determination of whether the contract pursuant to which the 
activity is performed is a personal services contract; and: 

* a summary of the information required to be collected for the 
activity under 10 U.S.C. § 2330a(a). 

As indicated in AT&L's May 2010 guidance, DOD components are to 
compile an inventory of activities performed on their behalf by 
contractors and submit it to AT&L, which formally submits a 
consolidated DOD inventory to Congress. Once compiled, the inventory 
is to be made public and, within 90 days of the date on which the 
inventory is submitted to Congress, the Secretary of the military 
department or head of the defense agency responsible for activities in 
the inventory is to review the contracts and activities for which they 
are responsible and ensure that any personal services contract 
included in the inventory was properly entered into and is being 
performed appropriately; that the activities in the inventory do not 
include inherently governmental functions; and to the maximum extent 
practicable, activities on the list do not include any functions 
closely associated with inherently governmental functions. In 
addition, the Secretary of the military department or head of the 
defense agency is to identify activities that should be considered for 
conversion to performance by civilian employees pursuant to 10 U.S.C. 
§ 2463 or to an acquisition approach that would be more advantageous 
to the department. 

Congress added Section 2463 to title 10 of the U.S. Code in the 
National Defense Authorization Act for Fiscal Year 2008. This section 
required the Under Secretary of Defense for Personnel and Readiness to 
develop guidelines and procedures to ensure that consideration is 
given to using DOD civilian employees to perform new functions and 
functions that are currently performed by contractors and could be 
performed by DOD civilian employees.[Footnote 13] In particular, these 
guidelines and procedures are to provide special consideration for, 
among other instances, in-sourcing functions closely associated with 
inherently governmental functions that are currently being performed 
by contractors, or new requirements that may be closely associated 
with inherently governmental functions. Congress required the 
Secretary of Defense to make use of the inventories created under 10 
U.S.C. § 2330a(c) for the purpose of identifying functions that should 
be considered for performance by DOD civilian employees under this 
provision. DOD issued initial in-sourcing guidance in April 2008 and 
additional guidance in May 2009 to assist DOD components in 
implementing this legislative requirement.[Footnote 14] 

The National Defense Authorization Act for Fiscal Year 2010 provided 
for a new section 115b in title 10 of the U.S. Code that requires DOD 
to annually submit to the defense committees a strategic workforce 
plan to shape and improve the civilian workforce. Among other 
requirements, the plan is to include an assessment of the appropriate 
mix of military, civilian, and contractor personnel capabilities. The 
Office of the Under Secretary of Defense for Personnel and Readiness 
is responsible for developing and implementing the strategic plan in 
consultation with AT&L.[Footnote 15] 

Finally, Section 803 of the National Defense Authorization Act for 
Fiscal Year 2010 requires the Secretary of Defense to include 
information in DOD's annual budget justification materials related to 
the procurement of contract services. Specifically, the legislation 
requires, for each budget account, to clearly and separately identify 
(1) the amount requested for the procurement of contract services for 
each DOD component, installation, or activity, and (2) the number of 
contractor FTEs projected and justified for each DOD component, 
installation, or activity based on the inventory and associated 
reviews.[Footnote 16] 

Collectively, these statutory requirements indicate that the inventory 
and the associated review process are to serve as a basis for 
identifying candidates for in-sourcing contracted services, supporting 
development of DOD's annual strategic workforce plan, and specifying 
the number of contractor FTEs included in DOD's annual budget 
justification materials. Figure 1 below illustrates the relationship 
between the related statutory requirements. 

Figure 1: Relationship between the Inventory, In-sourcing, and Budget 
Documentation Requirements: 

[Refer to PDF for image: illustration] 

Service contract inventory: 
* Activity performed by contractors; 
* Whether contract is for personal services; 
* Number of contractor FTEs performing activity; 
* Funding source for the contract; 
* Organizations for which activity performed. 

90-day review process: 

Candidates for in-sourcing: 

Identification of: 
* Inherently governmental functions; 
* Unauthorized personal services contract; 
* Closely supporting inherently governmental functions. 

Annual budget justification: 

Identification of: 
* Amount requested for contract services and number of contractor FTEs 
projected and justified for each budget account, by component, 
installation, or activity. 

Source: GAO analysis of 10 U.S.C. § § 235, 2330a, and 2463. 

[End of figure] 

DOD initially planned to use a phased approach to implement the 
inventory requirement, relying first on submission in October 2008 of 
a prototype inventory covering activities performed for the Army 
pursuant to contracted services for fiscal year 2007, and gradually 
producing inventories for the remaining military departments and 
defense agencies over subsequent years. The Army served as the 
prototype as it had started collecting information in 2005 to obtain 
better visibility of its contractor workforce. To do so, the Army 
developed its Contractor Manpower Reporting Application (CMRA), a 
system that is designed to collect information on labor-hour 
expenditures by function, funding source, and mission supported on 
contracted efforts. 

In response to direction from Congress, DOD revised its implementation 
schedule and in July and September 2009 submitted inventories covering 
the fiscal year 2008 service contracting activities of the military 
departments and 13 other defense agencies. For fiscal year 2009, 
inventories were submitted by the military departments, as well as a 
larger group of other defense agencies, 17 in total, as well as the 
U.S. Special Operations Command and the U.S. Transportation Command. 
DOD officials noted that the components submitting inventories are 
those components with acquisition authority. 

DOD's Fiscal Year 2009 Inventories Reflect a More Uniform Approach, 
but Limitations Remain: 

AT&L implemented a more uniform approach for compiling the fiscal year 
2009 inventories compared with fiscal year 2008, and the changes in 
the approach affected both the reported spending on service contracts 
and the number of contractor FTEs. For example, changes in the 
categories of services included in the inventories influenced the Air 
Force's reported increase and the Navy's reported decrease in spending 
on services in fiscal year 2009. Similarly, the use of a new formula 
based on AT&L guidance for estimating contractor FTEs reduced the 
number of contractor FTEs the Navy and Air Force would have reported 
had they used the formulas each used for their fiscal year 2008 
inventories. AT&L's guidance also authorized the Army to continue 
using its existing process, which incorporates data reported by 
contractors through the Army's CMRA system, as the basis for its 
inventory. Army officials attributed the reported increases in 
spending and number of contractor FTEs in the Army's inventory to 
better reporting in the CMRA system in fiscal year 2009. DOD and 
military department officials identified continuing limitations 
associated with the fiscal year 2009 inventories, including the 
inability of FPDS-NG, which was to be used by DOD components other 
than the Army, to provide information for all of the required data 
elements. Similarly, Army officials we spoke with expressed some 
concerns with the process used to ensure the accuracy of data reported 
in CMRA. AT&L characterized its May 2010 guidance as an interim 
measure for circumstances in which actual contractor manpower data 
have not been collected. The department has stated that it plans to 
move towards collecting such data from contractors as the basis for 
future inventories, but it has not issued guidance or a plan of action 
for doing so. 

DOD Implemented a More Uniform Approach to Compile Its Fiscal Year 
2009 Inventories: 

In May 2010, AT&L issued guidance that provided more uniform direction 
to be used by DOD components other than the Army to compile their 
fiscal year 2009 inventories, while allowing the Army to continue 
using its existing process that reports manpower data collected 
directly from its contractors. AT&L noted that the move towards a more 
uniform approach in fiscal year 2009 was meant to reduce 
inconsistencies that resulted from DOD components using different 
approaches in fiscal year 2008 and was an interim measure for 
circumstances in which actual contractor manpower data have not been 
collected. AT&L's guidance for fiscal year 2009 standardized the 
process for compiling the inventories for most DOD components by 
defining: 

* the categories of services to be included in the inventories, 

* the data sources to be used to populate the required data elements, 
and: 

* the method to estimate the number of contractor FTEs. 

For example, the guidance indicated that all categories of services 
identified in FPDS-NG were to be included in the fiscal year 2009 
inventories, with the exception of those associated with the early 
stages of research and development, lease and rental of facilities and 
equipment, and construction. By contrast, for the fiscal year 2008 
inventories, the Air Force did not include any research and 
development services, while the Navy had included all stages of 
research and development services. Further, the guidance required that 
FPDS-NG be used as the source for the majority of the inventory's data 
elements, such as the service purchased, the total dollar amount of 
the purchase, the organization whose requirements are being met by 
contracted performance, and the function and mission being performed 
by the contract. DPAP officials noted that as DOD currently lacks a 
single data source that contains information for all the data elements 
required in the inventories, DOD determined that FPDS-NG provided the 
most readily available data departmentwide, though it acknowledged 
that there were limitations in using FPDS-NG to meet the inventory 
requirements. In instances where FPDS-NG did not contain information 
for the required inventory data element, such as for the funding 
source for the contract, AT&L indicated that DOD components were to 
use other existing data sources. 

Additionally, the AT&L guidance provided a formula and identified 
specific information needed for DOD components other than the Army to 
estimate the number of contractor FTEs paid for the performance of an 
activity.[Footnote 17] In contrast, DOD components used several 
different approaches in fiscal year 2008. For example, the Air Force 
relied on three approaches for fiscal year 2008, though it primarily 
relied on its own formula to estimate the number of contractor FTEs. 
[Footnote 18] Similarly, the Navy relied solely on a formula it had 
developed using a sample of Navy contracts to estimate FTEs. The 
formula provided under the AT&L guidance for fiscal year 2009 
incorporated the amount obligated on the contract as reported in FPDS- 
NG, the estimated portion of those obligations that were associated 
with a contractor's direct labor expense, and the estimated cost of 
that labor. For these two latter factors, DPAP computed averages it 
derived from the Army's CMRA data for each type of service and 
provided them to DOD components to use to estimate contractor FTEs. As 
noted in the AT&L guidance, these averages were used because other DOD 
components currently lack a data system to collect data from 
contractors on the number of direct labor hours associated with the 
services they perform. Figure 2 provides an illustration of how these 
averages were to be used to estimate the number of contractor FTEs on 
a contract for systems engineering services under which approximately 
half of the $400,000 obligated under the contract was the direct labor 
provided by contractor employees. 

Figure 2: Estimating the Number of Contractor FTEs on a $400,000 
Contract for Systems Engineering Services Using AT&L's May 2010 
Guidance: 

[Refer to PDF for image: illustration] 

AT&L formula: 

A. Total obligations: 

times: 

B. Average ratio of direct labor dollars to total invoiced dollars per 
type of service: 

divided by: 

C. Average direct labor rate per type of service: 

equals: 

Contractor FTEs. 

Example: 

A. $400,000: 
times: 
B. 0.51: 
divided by C. $131,000: 
equals: 1.6 Contractor FTEs. 

Source: GAO analysis of May 2010 AT&L guidance. 

[End of figure] 

The AT&L guidance authorized the Army to continue to use its existing 
process to compile its inventory, which differs from the approach used 
by other DOD components, because it relies on contractor-reported data 
from the CMRA data system. CMRA captures data directly reported by 
contractors on services performed at the contract line item level, 
including information on the direct labor dollars, direct labor hours, 
total invoiced dollars, the functions and mission performed, and the 
army unit on whose behalf the services are being performed. In 
instances where contractors are providing different services under the 
same order, or are providing services at multiple locations, they can 
enter additional records in CMRA to capture information associated 
with each type of service or location.[Footnote 19] 

Under its approach, the Army included all categories of research and 
development services in its inventory, rather than the portion 
included by the Air Force and Navy, as well as identified the services 
provided under contracts for goods. To report the number of contractor 
FTEs, the Army indicated that it divided the number of direct labor 
hours reported by a contractor in CMRA for each service provided by 
2,088, the number of labor hours in a federal employee work year. 
[Footnote 20] For other data elements in its inventory, such as the 
funding source and contracting organization, the Army also relied on 
the Army Contract Business Intelligence System and updates from 
resource managers, contracting officer's representatives (COR), and 
other officials. 

Changes in DOD's Approach Affected Reported Inventory Data: 

DOD reported that the amount obligated on service contracts rose to 
about $140 billion in fiscal year 2009, while the number of contractor 
FTEs under those contracts increased to nearly 767,000 FTEs, as shown 
in table 1. However, the changes in DOD's approach, in particular how 
DOD reflected research and development services, and the use of a new 
formula for estimating contractor FTEs, affected the reported changes 
in inventory data from fiscal years 2008 to 2009. Further, while the 
Army approach did not change from fiscal year 2008, Army officials 
stated that the increase in the amount of fiscal year 2009 spending 
reported in the Army inventory reflects better reporting in the CMRA 
system. Consequently, we and DOD officials agree that caution should 
be exercised when making direct comparisons between the fiscal year 
2008 and 2009 inventory data. 

Table 1: Spending on Services and Contractor FTEs as Reported in DOD's 
Fiscal Years 2008 and 2009 Service Contract Inventory: 

(Dollars in billions). 

Reported spending on services: [Empty]. 

Army: 
Reported spending on services: FY 2008: $34.1 billion[A]; 
Reported spending on services: FY 2009: $43.0 billion[A]; 
Reported number of contractor FTEs: FY 2008: 213,133; 
Reported number of contractor FTEs: FY 2009: 262,282. 

Navy: 
Reported spending on services: FY 2008: $41.1 billion; 
Reported spending on services: FY 2009: $39.9 billion; 
Reported number of contractor FTEs: FY 2008: 241,759; 
Reported number of contractor FTEs: FY 2009: 249,821. 

Air Force: 
Reported spending on services: FY 2008: $21.0 billion; 
Reported spending on services: FY 2009: $33.1 billion; 
Reported number of contractor FTEs: FY 2008: 141,327; 
Reported number of contractor FTEs: FY 2009: 189,602. 

Defense agencies and commands: 
Reported spending on services: FY 2008: $31.0 billion; 
Reported spending on services: FY 2009: $24.4 billion; 
Reported number of contractor FTEs: FY 2008: 58,301; 
Reported number of contractor FTEs: FY 2009: 65,027. 

Total: 
Reported spending on services: FY 2008: $127.2 billion; 
Reported spending on services: FY 2009: $140.4 billion; 
Reported number of contractor FTEs: FY 2008: 654,520; 
Reported number of contractor FTEs: FY 2009: 766,732. 

Source: DOD July 2009, September 2009, and June 2010 summary reports 
to Congress on the fiscal year 2008 and 2009 service contract 
inventories. 

Notes: Data for fiscal years 2008 and 2009 are not directly comparable 
due to different approaches used by the Air Force and Navy and better 
reporting by the Army. 

[A] Army data reflect total invoiced dollar amounts reported in CMRA, 
rather than obligations. 

[End of table] 

The Air Force's fiscal year 2009 inventory shows an increase of about 
$12.1 billion, whereas the Navy's inventory shows a decrease of about 
$1.2 billion. Several factors accounted for these changes. For example: 

* Based on the AT&L guidance, the Air Force included $6.7 billion in 
research and development, $2.9 billion in maintenance of real property 
contracts, and $0.1 billion in miscellaneous construction, education 
and training, and transportation contracts in fiscal year 2009 that it 
had previously excluded in fiscal year 2008. The remaining $2.4 
billion increase reflects additional obligations in fiscal year 2009 
on services that were included in both fiscal years. 

* Based on the AT&L guidance, the Navy excluded $5.3 billion of 
services associated with early stages of research and development 
activities in fiscal year 2009 that it had previously included. In 
addition, the Navy included a net increase of about $0.3 billion in 
contract actions under $100,000 and deobligations in fiscal year 2009 
that had previously been excluded. This overall $5 billion decrease, 
however, was partially offset by a $3.8 billion increase in 
obligations in fiscal year 2009 on services that were included in both 
fiscal years. 

The Navy and Air Force reported an increase in the number of 
contractor FTEs in their inventories from fiscal year 2008 to 2009, 
although our analysis found that the Navy's reported increase was in 
error. According to a Navy official, the Navy used a different set of 
labor rates and ratios from those specified under the AT&L approach to 
simplify the FTE calculations. Had the Navy used AT&L's proscribed 
approach, the Navy would have reported 207,604 contractor FTEs for 
fiscal year 2009, a decrease of 14 percent from fiscal year 2008. More 
generally, our analysis indicates that the use of the AT&L formula for 
fiscal year 2009 produced a lower number of contractor FTEs for the 
Navy and Air Force than their respective fiscal year 2008 formulas 
would have produced had the approach not changed, as shown in figure 
3.[Footnote 21] 

Figure 3: Comparison of the Number of Contractor FTEs Estimated by 
Fiscal Year 2008 and Fiscal Year 2009 Formulas: 

[Refer to PDF for image: vertical bar graph] 

Number of contractor FTEs: 

Navy: 
Fiscal year 2008 formula: 239,000; 
Fiscal year 2009 AT&L formula: 208,000. 

Air Force: 
Fiscal year 2008 formula: 200,000; 
Fiscal year 2009 AT&L formula: 190,000. 

Source: GAO analysis of Navy and Air Force data. 

Note: The figures reflect GAO analysis of the number of contractor 
FTEs estimated by applying the fiscal year 2008 and fiscal year 2009 
formulas to the fiscal year 2009 inventory data. 

[End of figure] 

The effect of the change in estimating contractor FTEs was even more 
pronounced on specific categories of services. For example, applying 
AT&L's formula resulted in the Air Force reporting 7,902 contractor 
FTEs associated with systems engineering services for fiscal year 
2009. If the Air Force's fiscal year 2008 formula were applied, the 
inventory would have shown 12,661 FTEs. At the same time, the Air 
Force spent more on systems engineering services in fiscal year 2009 
than it did in fiscal year 2008. For the Navy, even though it 
obligated more for program management support services in fiscal year 
2009, using the AT&L formula would have resulted in 3,374 contractor 
FTEs whereas using the Navy's fiscal year 2008 formula would have 
produced 8,025 FTEs. 

Although the Army's approach for compiling its inventory did not 
change from fiscal year 2008 to 2009, officials attributed the $8.9 
billion increase in the amount of spending reported and the 23 percent 
increase in the number of contractor FTEs to better reporting through 
the CMRA system. In particular, Army officials responsible for CMRA 
said that the fiscal year 2009 inventory contains more data for weapon 
systems support services than was included in the fiscal year 2008 
inventory. These officials also noted that reporting improvements 
resulted from steps taken to identify missing contractor manpower data 
and their efforts to follow up with officials and contractors to 
ensure that required data were reported. For example, subsequent to 
the deadline for reporting data in CMRA, officials responsible for 
CMRA stated that they provide a report identifying contracts that were 
missing data to Army contracting offices and contracting officer's 
representatives (COR), who are to ensure that contractors report 
required data. 

Limitations Persist in Compilation of Inventories: 

DOD noted the approach taken to compile the fiscal year 2009 
inventories, while providing more consistency in certain areas, 
reflected continued limitations. In the absence of a single 
departmentwide data system that could provide data that directly 
responded to the legislative reporting requirements, DPAP officials 
stated that they relied on the best information currently available, 
including data from FPDS-NG. Similarly, Army officials acknowledged 
that they are taking steps to continue to improve the Army's process 
for collecting data in CMRA. In acknowledging limitations associated 
with the fiscal year 2009 inventories, DOD plans to release future 
guidance to move towards the department's stated goal of collecting 
actual contractor manpower data. 

AT&L's use of FPDS-NG as the primary basis for the inventories 
presented several limitations, including that it does not currently 
contain information on the number of contractor FTEs. Further, the 
legislation required information on all activities performed pursuant 
to contracts for services during the fiscal year, but DOD noted that 
because contract actions are recorded in FPDS-NG as being used either 
to purchase goods or services, instances in which services were 
provided under a contract action coded as one for goods were not 
captured in the Air Force, Navy, and defense agencies' inventories. In 
contrast, because the Army's CMRA enables it to identify services 
acquired under contracts for goods, we found that the Army's inventory 
included about $5.5 billion in services that were purchased under 
contracts consistently coded as goods in FPDS-NG in both fiscal year 
2008 and 2009. In addition, components using the AT&L approach were 
instructed to use the funding office as recorded in FPDS-NG as the 
basis for responding to the legislation's requirement to identify the 
requiring organization. However, the organization identified as the 
funding office in FPDS-NG may not necessarily be the organization 
whose requirements are being met through the contract. Similarly, 
AT&L's guidance instructed DOD components to record in the inventory 
the category of service with the predominant amount of dollars, 
although more than one category of service may be purchased under a 
contract action. As a result, this approach may not provide visibility 
into all the services purchased under a contract action. Further, DOD 
acknowledged that it did not account for service contracts that were 
awarded on behalf of DOD by non-DOD agencies, as was the case with its 
fiscal year 2008 inventories. According to FPDS-NG data, non-DOD 
agencies awarded contracts totaling just under $1 billion on behalf of 
the Army, Navy, and Air Force in fiscal year 2009.[Footnote 22] 

Several officials from DOD and the military departments also expressed 
concerns about the formula provided under the AT&L guidance for 
calculating contractor FTEs. For example, Air Force and Navy officials 
expressed concerns that the average direct labor rates and average 
ratios of direct labor dollars to total invoiced dollars specified in 
the AT&L approach may not reflect the services for which they 
contract, because the AT&L averages were derived from data reported in 
the Army's CMRA system. They agreed, however, to implement the AT&L 
approach given the absence of a departmentwide system containing 
information on the number of contractor FTEs paid to perform 
activities under contracts for services. Officials from the Army Force 
Management, Manpower and Resources (FMMR) office, the Office of Cost 
Assessment and Program Evaluation, and the Office of the Under 
Secretary of Defense for Personnel and Readiness raised concerns about 
the use of average labor rates and ratios to estimate contractor FTEs 
given the tendency of those averages to obscure variation in the 
underlying data. 

In this regard, our analysis showed that when applying the AT&L 
formula to the Army's reported fiscal year 2009 inventory data, the 
AT&L formula approximated the aggregate number of contractor FTEs 
reported by the Army, but resulted in significant variations for some 
specific categories of services and particular contracts. At the 
aggregate level, the AT&L formula estimated the number of contractor 
FTEs at about 3 percent below the Army's reported 262,282 FTEs. 
However, the Army reported 113,713 contractor FTEs performing 
professional, administrative, and management support services whereas 
the AT&L formula estimated significantly fewer, 65,408 FTEs. 
Additionally, the Army reported 264 FTEs on an individual $23.6 
million task order for engineering technical services, whereas the 
AT&L formula estimated 115 FTEs. These types of differences occurred 
because the average labor rates and ratios calculated by DPAP for use 
in the AT&L formula were heavily influenced by a small number of large 
dollar value contracts included in the Army's inventory. 

At the same time, officials from the Army's financial management and 
manpower planning offices and the Army commands we spoke with 
expressed some concerns with the process used to ensure the accuracy 
of data reported in CMRA. According to CMRA guidance, CORs are to 
review data entered by contractors in CMRA and edit incorrect data. 
Specifically, Army officials responsible for CMRA stated that CORs are 
to help ensure that contractors report data in CMRA, and are to 
validate entries such as the requiring organization, the function 
performed by the contractor, the funding source, and the total 
invoiced amount. They also noted, however, that CORs are not 
responsible for validating the number of direct labor hours reported 
by contractors, which is used to report contractor FTEs in the Army's 
inventory. This is in part because the CORs do not have direct 
knowledge of or access to contractor information regarding the number 
of direct labor hours for fixed-price or performance-based contracts. 
Officials responsible for CMRA oversight and officials from the Office 
of the Assistant Secretary of the Army for Acquisition, Logistics, and 
Technology and IMCOM stated that they have efforts underway to better 
clarify COR responsibilities with regard to CMRA data, including 
providing additional training to CORs and implementing guidance that 
clearly defines responsibility for ensuring the completeness and 
accuracy of the Army's inventory data. 

AT&L characterized the purpose of its May 2010 guidance as providing 
an interim measure for circumstances in which actual contractor 
manpower data has not been collected. AT&L's guidance stated that the 
department recognizes the need and benefit of doing so, in part to 
help make well-informed in-sourcing decisions, and is committed to 
doing so. In addition, the guidance stated that AT&L planned to work 
with the Office of the Under Secretary of Defense for Personnel and 
Readiness and the Office of Cost Assessment and Program Evaluation to 
issue preliminary guidance and a proposed plan of action by August 
2010. The guidance noted that this process would require close 
collaboration between the component acquisition and manpower 
organizations. At the time of our review, such guidance indicating how 
the department will move towards achieving its stated objectives, 
including anticipated time frames and the necessary resources to do 
so, had not been issued.[Footnote 23] Senior officials from DPAP and 
the Office of the Under Secretary for Personnel and Readiness 
indicated, however, that the approach in the short term will likely 
remain the same until the department implements a longer-term solution. 

Military Departments Differ in How They Have Reviewed and Used the 
Inventories: 

The military departments differ in their approaches to the required 
reviews of the activities performed by contractors and in the extent 
to which they have used the inventories to inform workforce decisions, 
including in-sourcing. The Army has used a centralized, headquarters- 
level approach to identify contractors performing functions that are 
inherently governmental or closely associated with inherently 
governmental functions, unauthorized personal services, and other 
functions on a command-by-command basis. Since January 2009, the Army 
has completed at least one review for 24 of 26 commands and 
headquarters organizations and identified approximately 2,357 
contractor FTEs performing inherently governmental functions, 45,934 
contractor FTEs performing activities closely associated with 
inherently governmental functions, and 1,877 contractor FTEs providing 
unauthorized personal services. Army officials have indicated that 
these reviews contributed to decisions to insource selected functions 
for performance by Army personnel. In contrast, the Air Force and Navy 
have implemented decentralized approaches that rely on their major 
commands to review the activities performed by contractors listed in 
their inventories and report the results back to their respective 
headquarters. The Air Force implemented its initial review in January 
2010, but experienced challenges in doing so, including receiving 
inadequate information for many of its contracts. These challenges 
will likely cause its approach to evolve in the future. Air Force 
officials reported that the inventory has provided limited utility for 
informing decisions such as in-sourcing to date. The Navy issued 
guidance to its commands in September 2010, but the results of the 
Navy's initial review had not yet been reported as of November 2010. 

The Army Has Implemented a Centralized Approach to Review Contracts 
and Activities in Its Inventory: 

The Army has implemented a centralized approach that relies on two 
processes--a review prior to contract award and a headquarters-level 
review of all functions performed by contractors--to meet the 
requirement to annually review the service contracts and activities in 
its inventory. In combination, these processes are intended to inform 
decisions on the use of contractors for services, including in- 
sourcing. Army officials report that they have completed reviews of 24 
of 26 command and headquarters organizations as of November 2010. Army 
officials noted that the length of time to conduct reviews for each 
command and the need to reconcile the various data sources used to 
conduct the reviews have posed challenges that they are working to 
address. 

Both of these processes are relatively recent initiatives. On October 
2, 2008, the Assistant Secretary of the Army for Acquisition, 
Logistics and Technology issued guidance stating that starting in 
fiscal year 2009, officials from requiring activities must receive 
written approval to initiate a contract or exercise an option for 
services from the cognizant General Officer or member of the Senior 
Executive Service.[Footnote 24] To obtain approval, the requiring 
activity must complete a service contract approval form and a series 
of worksheets that are designed to help identify whether the function 
to be performed by the contractor to meet the contract requirement is 
inherently governmental, closely associated with an inherently 
governmental function, or a personal service, and whether the function 
should be insourced. The General Officer or Senior Executive must 
certify that special consideration was given to having federal 
employees perform functions that are closely associated with an 
inherently governmental function, sufficiently trained and experienced 
officials are available to oversee the contract, and that the contract 
is or will be reported in CMRA. 

Additionally, in January 2009, the Army established the Panel for 
Documentation of Contractors (PDC), which was tasked to review 
functions being performed by contractors on an annual basis at each 
command.[Footnote 25] The PDC consists of officials from the Office of 
the Assistant Secretary of the Army for Manpower and Reserve Affairs, 
Force Management, Manpower and Resources (FMMR), along with 
headquarters officials from the acquisition and manpower planning 
communities. Army guidance directed commands to provide data to the 
PDC on the functions being performed by contractors and an assessment 
of whether those functions were inherently governmental, closely 
associated with inherently governmental functions, or unauthorized 
personal services. To carry out this assessment, commands identify 
functions that are being performed by contractors, the organizational 
unit for which the function is being performed, the funding 
information associated with the contract under which the function is 
being performed, and the number of contractor FTEs performing the 
function. In addition, for each function, command officials are to 
include a detailed description and categorize it according to whether 
the function is appropriate for contracting, constitutes an 
unauthorized personal service, is closely associated with an 
inherently governmental function, or is an inherently governmental 
function. The service contract approval form and associated worksheets 
are to inform the commands' categorization of contractor functions. 

In turn, commands provide this information to the PDC officials, who 
make a separate determination as to the appropriate categorization of 
the function being performed by the contractor. FMMR and command 
officials reported that they engage in further discussion in instances 
where there is a difference of opinion on the appropriate 
categorization of a function in order to reach agreement. Once the PDC 
has completed its review, FMMR issues a memorandum to the commands 
summarizing the results of the review, including the number of 
contractor FTEs categorized as performing inherently governmental 
functions, closely associated with inherently governmental functions, 
or providing unauthorized personal services. The command is to use the 
results of the PDC review to inform decisions regarding the need to 
insource certain functions, whether to continue using contractors to 
perform the functions, or in some cases, to determine the command no 
longer requires those functions. FMMR officials noted that commands 
are responsible for integrating the results of the PDC process into 
their manpower planning efforts. 

Since the PDC reviews of contractor functions started in 2009, FMMR 
officials indicated that they have completed reviews for 24 of 26 Army 
commands and headquarters organizations as of November 2010. Through 
its reviews, the Army reported that it identified approximately 2,357 
contractor FTEs performing inherently governmental functions, 45,934 
contractor FTEs performing activities closely associated with 
inherently governmental functions, and 1,877 contractor FTEs providing 
unauthorized personal services. For example, the PDC review completed 
in August 2010 of 12,805 contractor FTEs performing functions for 
TRADOC identified 9 contractor FTEs that were performing inherently 
governmental functions and 53 contractor FTEs performing unauthorized 
personal services. Similarly, in March 2010, the Army completed its 
review of the over 36,000 contractor FTEs performing functions for 
IMCOM, and identified 6 contractor FTEs that were performing 
inherently governmental functions and 657 contractor FTEs providing 
unauthorized personal services.[Footnote 26] Both TRADOC and IMCOM 
officials reported that in-sourcing decisions either have been 
informed by the PDC review, or will be based on PDC reviews going 
forward. For example, TRADOC is in the process of in-sourcing 5 
contractor FTEs that had been performing military analyst functions 
that were identified as candidates in the PDC review. IMCOM officials 
noted, however, that other factors, such as budgetary changes and 
other statutory requirements, also contributed to in-sourcing 
decisions. For example, IMCOM officials said that most in-sourcing for 
fiscal year 2010 will result from a loss of statutory authority to 
contract for certain security guard functions, and in fiscal year 2011 
most in-sourcing decisions will be the result of requirements to 
reduce service contract costs. 

Army FMMR and command officials have identified a number of challenges 
in conducting the initial reviews, including the length of time to 
conduct reviews for each command, and the need to reconcile data used 
to conduct the reviews to data in the inventory. As of October 2010, 
the Army had been working through the PDC reviews for about 18 months, 
and in that time, the PDC has reviewed functions associated with over 
100,000 contractor FTEs across most commands and headquarters 
organizations. FMMR officials noted that the process has taken time to 
implement because they engaged in discussions with command officials 
in a number of instances to revise the initial information provided to 
the PDC to ensure that the criteria for categorizing functions are 
applied appropriately and consistently. TRADOC officials said that 
they went through two rounds of PDC reviews of their contracted 
functions to improve the accuracy of the service contract data the 
command submitted to the PDC for its reviews. Army officials stated 
that for future PDC reviews, it may be possible to focus efforts on 
functions that are new or have changed from prior reviews as a way to 
more efficiently implement the review process. The length of time it 
has taken to implement the PDC reviews has also resulted in challenges 
related to incorporating the final determinations that come out of the 
reviews into Army manpower documents in a way that aligns with the 
annual budget and planning processes, according to Army force 
management officials. 

FMMR and command officials also reported difficulties reconciling 
service contractor information used for the review process with the 
inventory data provided through the Army's CMRA system, including the 
numbers of contractor FTEs reported as performing various activities. 
For example, to help determine whether a contractor is performing an 
inherently governmental function, the commands collect more detailed 
information on the functions being performed by the contractor than is 
collected by CMRA and reported in the Army's inventory of services. 
FMMR and command officials indicated that the inventory data is 
generally used to check whether the data on the total number of 
contractor FTEs reported to the PDC appears reasonable. For example, 
at IMCOM, the number of contractor FTEs it reported to the PDC for 
review was 10,639 higher than the number of contractor FTEs reported 
in CMRA. IMCOM officials stated that this difference occurred because 
contractors were not fully reporting the required data in CMRA and 
contracting officer's representatives (COR) were not verifying whether 
contractors had reported the data. FMMR and IMCOM officials are 
working together to reconcile this discrepancy. FMMR officials also 
stated that they are working with Army commands to better align 
contractor function data provided to the PDC with data in CMRA and 
noted that the use of data from both CMRA and the PDC has been helpful 
in gaining greater insight into the contracted component of the Army's 
workforce. 

Air Force and Navy Utilize Decentralized Inventory Review Approach: 

The Air Force and Navy each issued inventory review guidance that 
delegates responsibility for determining the approach, as well as for 
conducting the actual review, to their major commands. The Air Force 
reported that its commands completed their initial effort at 
conducting the reviews in March 2010, but the department is revising 
its review process to address several issues encountered during this 
process, including a substantial number of contracts in the inventory 
for which inadequate information was provided. The Navy issued 
guidance to its commands in September 2010 requiring them to conduct a 
review, but the results of the commands' reviews were not available as 
of November 2010. 

Initial Air Force Review Affected by Incomplete Information and Other 
Issues: 

In January 2010, the Secretary of the Air Force issued guidance 
instructing its major commands to conduct an initial review of its 
fiscal years 2008 and 2009 activities performed under service 
contracts.[Footnote 27] To do so, Air Force headquarters inventory 
officials provided each major command with a spreadsheet containing 
its portion of the department's inventory from which command officials 
were to review and determine, with a yes or no answer, whether the 
activity performed under the contract was an inherently governmental 
function, closely associated with an inherently governmental function, 
a personal service, or whether the activity is being considered for in-
sourcing. The guidance included broad definitions, based on existing 
DOD guidance and the Federal Acquisition Regulation (FAR), for 
commands to use to make these assessments.[Footnote 28] According to 
an Air Force inventory official, a headquarters review of the initial 
information submitted by the commands in March 2010 in response to the 
January 2010 guidance found that approximately 40 percent of the 
contracts included for review did not contain adequate responses to 
the required review elements. 

Air Force Materiel Command (AFMC) inventory officials explained that 
they experienced a number of difficulties during the initial review 
process, and command data show that AFMC did not provide the required 
determinations for approximately 22 percent of its contract actions. 
An AFMC official noted that in many cases it was difficult to 
determine the requiring activity for a given contract action, which in 
turn made it difficult to determine who was the most appropriate 
manager to provide the required information. Additionally, even when 
AFMC officials were able to identify the appropriate subordinate units 
and responsible managers, the AFMC official expressed concern that the 
managers were not consistently applying the criteria indicated in the 
January 2010 guidance to identify contractors performing inherently 
governmental or services closely associated with inherently 
governmental functions. For example, AFMC identified 152 contract 
actions that potentially involved performance of an inherently 
governmental function, but the official responsible for the command's 
review process was unsure of the extent to which these determinations 
were correct. 

As a result of the challenges experienced throughout the department 
during its initial inventory review, the Secretary of the Air Force 
issued additional guidance in October 2010 requiring major commands to 
complete the review of activities under service contracts reflected in 
its fiscal year 2009 inventory that may have been missed during the 
initial review as well as some activities from fiscal year 2010. 
[Footnote 29] Additionally, Air Force acquisition officials stated 
that the department is considering how to further address the 
challenges encountered. 

Notwithstanding these challenges, Air Force headquarters and AFMC 
officials stated that they rely on other processes to mitigate the 
risk of contractors performing inherently governmental functions. For 
example, they stated that requirements are reviewed prior to contract 
award to prevent contracting for inherently governmental functions in 
accordance with existing Air Force guidance.[Footnote 30] 
Additionally, an AFMC official explained that they rely on the CORs to 
monitor contractor performance and ensure that the functions being 
performed do not evolve into inherently governmental functions. 

Air Force in-sourcing and AFMC officials noted that to-date the 
inventory has provided limited utility during the in-sourcing decision-
making process. AFMC officials indicated that the inventory can 
provide command officials with a list of contracts from which they may 
be able to identify potential cost savings, but Air Force officials 
stated that additional analysis including detailed cost comparisons 
and command stakeholder input is required to make cost-based in-
sourcing decisions. According to the Air Force's fiscal year 2010 in-
sourcing plan, the majority of its decisions to insource were to be 
based on analyses of whether the performance of services by government 
employees would be more cost-effective, which is one of several 
criteria indicated in DOD's guidance on in-sourcing.[Footnote 31] 

Initial Navy Review Not Yet Complete: 

The Navy issued guidance in September 2010 requiring Navy 
organizations to review the fiscal year 2009 inventory and report the 
results within 45 days, but at the time of our review in November 
2010, the department had not yet completed this initial inventory 
review.[Footnote 32] The guidance requires the head of the contracting 
activity to validate that its respective contracts for services were 
reviewed to determine if the contracted functions include inherently 
governmental or closely associated functions, or unauthorized personal 
services, based, for example, on criteria in the FAR.[Footnote 33] 
Following completion, each contracting activity must provide a letter 
to the Assistant Secretary of the Navy for Research, Development, and 
Acquisition certifying that it completed the review, identifying the 
number of contracts that were found to be unacceptable based on the 
review criteria, and including a plan of corrective action for those 
contract activities deemed unacceptable. 

Navy headquarters acquisition and command officials stated although 
the department's initial inventory review remains in progress, other 
processes are used to review contractor functions and inform workforce 
management-related decisions such as in-sourcing. For example, Navy 
officials responsible for organizing the inventory compilation and 
review processes explained that commands review contracts during the 
preaward and option exercise phases in an effort to prevent the award 
of contracts that include inherently governmental functions and 
unauthorized personal services. Additionally, Naval Air Systems 
Command officials reported that CORs are to monitor contracted 
employees during contract performance to ensure that the scope or 
nature of the function does not evolve to include inherently 
governmental functions. Finally, command officials explained that they 
rely on existing command staffing processes, which includes input from 
functional managers to determine the most appropriate blend of 
military, civilian, and contractor personnel to meet command workload 
and mission requirements, as well as identify opportunities for in-
sourcing. 

Conclusions: 

DOD has acknowledged the need to rebalance its workforce, in part by 
reducing its reliance on contractors. To do so, however, the 
department needs good information on the roles and functions played by 
contractors, which the department currently does not have. The 
required inventories that DOD is developing are intended to provide an 
additional source for such information to assist DOD in determining 
whether or not contracted services should be performed by government 
employees, to mitigate the risk of transferring government 
responsibilities to contractors. At this point, DOD has been working 
to implement the inventory requirements since the legislation was 
passed in 2008. With regard to reviewing the functions and activities 
reflected in the inventories, the department's efforts are less 
mature. Given this early state of implementation, the inventories and 
associated review processes are being used to varying degrees by the 
military departments to help inform workforce decisions such as in- 
sourcing. Overall, the Army has used the inventories to a greater 
degree than the other military departments. 

The department's primary focus has been on identifying ways by which 
it can compile the information required by the legislation, and in 
particular, estimating the number of contractor personnel providing 
services. AT&L's latest approach for the fiscal year 2009 inventories 
was intended, in part, to provide the Navy and Air Force with a more 
uniform approach than previously used for estimating the number of 
contractors. To do so, AT&L's guidance provided a formula for them to 
use and specified that FPDS-NG be used as the basis for the majority 
of the data elements in the inventory. DOD officials expressed 
concerns, however, about AT&L's estimating approach, which we found 
resulted in significant variations for specific categories of 
services. DOD officials also expressed concern about the type of data 
that can be obtained through the FPDS-NG to meet the inventory 
requirements. AT&L's guidance also authorized the Army to continue 
using the approach it has put in place to obtain contractor-reported 
data on direct labor hours. For its part, the Army acknowledged that 
it needs to continue to improve its process for collecting contractor-
reported data, including clarifying responsibilities for ensuring the 
completeness and accuracy of the data. 

AT&L stated that its latest approach was an interim measure for 
components that do not currently have the capability to collect actual 
contractor manpower data in a manner similar to that of the Army. To 
move toward the department's stated goal of collecting such data, 
AT&L's guidance noted that it intended to work jointly with the Office 
of the Under Secretary of Defense for Personnel and Readiness and 
other organizations to issue new guidance and plans by August 2010, 
but it has not yet done so. Developing a plan of action, including 
time frames and the resources needed to implement it, would provide an 
important tangible step in meeting the inventory requirements. The 
real benefit of the inventory, however, will ultimately be measured by 
its ability to inform decision-making. At this point, the absence of a 
way forward hinders the achievement of this objective. 

Recommendations for Executive Action: 

To help implement the requirements for conducting the inventory of 
service contract activities, we recommend that the Secretary of 
Defense direct the Under Secretary of Defense for Acquisition, 
Technology and Logistics, and the Under Secretary of Defense for 
Personnel and Readiness to work jointly to take the following two 
actions: 

* develop a plan of action, including anticipated time frames and 
necessary resources, to facilitate the department's stated intent of 
collecting manpower data and to address other limitations in its 
current approach to meeting inventory requirements, including those 
specific to FPDS-NG; and: 

* assess ways to improve the department's approach to estimating 
contractor FTEs until the department is able to collect manpower data 
from contractors. 

Agency Comments and Our Evaluation: 

DOD provided oral comments on a draft of this report. Mr. Shay Assad, 
Director, Defense Procurement and Acquisition Policy, stated that DOD 
concurred with the recommendations. DOD also provided technical 
comments, which were incorporated as appropriate. 

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

If you or your staff have any questions, please contact us at (202) 
512-4841 or huttonj@gao.gov or (202) 512-8365 or solisw@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 contributions to this correspondence are listed in appendix II. 

Signed by: 

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

Signed by: 

William Solis: 
Director, Defense Capabilities and Management: 

List of Committees: 

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

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

[End of section] 

Appendix I: Scope and Methodology: 

Section 803 of the National Defense Authorization Act for Fiscal Year 
2010 directs GAO to report annually on the inventory of activities 
performed pursuant to contracts for services that are to be submitted 
by the Secretary of Defense, in 2010, 2011, and 2012 
respectively.[Footnote 34] To respond to this mandate, we assessed (1) 
the approaches used to compile the fiscal year 2009 inventories and 
how the approaches have changed, and (2) how the inventories have been 
reviewed and used to inform workforce decisions. 

As the military departments accounted for 83 percent of the reported 
obligations on service contracts and 92 percent of the reported number 
of contractor full-time equivalents (FTE) in the fiscal year 2009 
inventories, we focused our efforts on the Army, Navy, and Air Force. 
To gain additional insights into the inventory compilation and review 
processes at the command level, we selected a nongeneralizable sample 
of four commands based on (1) a combination of data from the Federal 
Procurement Data System-Next Generation (FPDS-NG)[Footnote 35] on 
dollars obligated under contracts for professional, administrative, 
and management support services,[Footnote 36] (2) military department 
data on in-sourcing activities planned for fiscal year 2010, and (3) 
recommendations from military department officials. Using these 
criteria, we selected the Army's Training and Doctrine Command and the 
Installation Management Command; the Naval Air Systems Command; and 
the Air Force Material Command. We also selected a nongeneralizable 
sample of other defense components that were among those obligating 
high-dollar amounts under contracts for services in fiscal year 2009 
according to FPDS-NG to gain their perspectives on the inventory 
compilation and review processes, including the TRICARE Management 
Activity, the Defense Information Systems Agency, and the U.S. Special 
Operations Command. While we used information from these components to 
further inform our understanding of the inventory compilation and 
review processes, we did not focus on these organizations for purposes 
of this report. 

To assess the approaches used to compile the fiscal year 2009 
inventories and how the approaches have changed, we reviewed the 
guidance issued in May 2010 by the Office of the Under Secretary of 
Defense for Acquisition, Technology and Logistics (AT&L), as well as 
additional guidance and documents from the military departments, and 
interviewed officials responsible for compiling the inventories. We 
compared this guidance with similar guidance and documents related to 
the fiscal year 2008 inventories, as well as information from our 
January 2010 report that assessed DOD's approach.[Footnote 37] We also 
obtained the inventories submitted by AT&L for each of the military 
departments. For the Navy and Air Force, we replicated the criteria 
included in the AT&L guidance using data we extracted from FPDS-NG on 
service contracts active in fiscal year 2009 to determine whether 
their inventories complied with instructions in the guidance. For 
example, we verified that the Navy and Air Force inventory included 
the contract services specified under AT&L's guidance and that the 
information on the number of and obligations on those contracts were 
consistent with the data reflected in FPDS-NG. The Army used the 
Contractor Manpower Reporting Application (CMRA) data system, which 
captures data reported by contractors at the contract line item level, 
in both of its fiscal year 2008 and 2009 inventories. We did not 
compare the Army's fiscal year 2009 inventory with data in FPDS-NG to 
assess the completeness due to differences in the data captured 
between the two systems. We discussed with Army officials responsible 
for the inventories the factors that contributed to changes in the 
Army's reported spending on services and the number of contractor 
FTEs. We did not independently assess the accuracy or reliability of 
the underlying data supporting the Army, Navy, or Air Force fiscal 
year 2009 inventories. However, we found the data to be sufficiently 
reliable for the purpose of assessing the effect of changes in the 
approach from fiscal year 2008 to 2009. 

In addition, we analyzed the extent to which the change in approach 
from fiscal year 2008 to fiscal year 2009 affected the reported amount 
of obligations on services included in their inventories. Similarly, 
we analyzed the extent to which the change in approach affected the 
estimated number of contractor FTEs reported in the inventories at 
either the aggregate level and for specific types of services by (1) 
applying the formulas used by the Navy and Air Force to estimate the 
number of contractor FTEs in fiscal year 2008 to the contracts 
included in their fiscal year 2009 inventories; and (2) comparing that 
figure with the estimated number of contractor FTEs using the formula 
prescribed by AT&L in the May 2010 guidance.[Footnote 38] Because 
AT&L's approach for estimating contractor FTEs was based, in part, on 
the labor rates and the ratios of direct labor to total expenditures 
derived from the Army's CMRA data system, we assessed the extent to 
which the AT&L approach would have produced similar estimates of the 
number of contractor FTEs as reported by the Army at the summary level 
as well as for specific categories of services. Specifically, we 
applied the average direct labor rates and the average ratios of 
direct labor to total obligations computed by AT&L's Office of Defense 
Procurement and Acquisition Policy (DPAP) to the total invoiced dollar 
amount for each contract included the Army's inventory. We then 
compared the number of contractor FTEs estimated by the AT&L formula 
to the number of contractor FTEs reported in the Army's inventory. 

To assess how the inventories have been reviewed in accordance with 
the requirements contained in 10 U.S.C. § 2330a(e), we reviewed 
guidance and interviewed officials from each of the military 
departments and selected commands to discuss the review processes and 
to identify any challenges encountered in conducting these reviews and 
any steps taken to address those challenges. For the Army and the Air 
Force, we reviewed data on the results of their respective inventory 
reviews as of November 2010. In conducting the inventory reviews, 
officials made determinations as to whether contracts included the 
performance of inherently governmental functions, closely associated 
with inherently governmental functions, or involved the performance of 
unauthorized personal services by contractor personnel. We did not 
independently assess whether such determinations were consistent with 
existing regulations and guidance, but focused our work on the 
processes used to conduct the reviews. To assess how the inventories 
have been used to inform workforce decisions, we focused our work on 
the extent to which the inventories have been used to help identify 
candidates for in-sourcing work currently performed by contractor 
personnel. To do so, we interviewed officials from the Office of the 
Under Secretary of Defense for Personnel and Readiness and from each 
of the military departments who were responsible for in-sourcing 
efforts to determine whether and how information contained in the 
inventories was used as the basis for informing decisions related to 
in-sourcing. 

To conduct our work, we interviewed officials from the following 
offices: 

Office of the Secretary of Defense: 

* Office of the Under Secretary of Defense for Acquisition, Technology 
and Logistics (AT&L), Office of Defense Procurement and Acquisition 
Policy (DPAP); 

* Office of the Under Secretary of Defense for Personnel and 
Readiness, Requirements and Program and Budget Coordination 
Directorate; 

* Office of Cost Assessment and Program Evaluation; 

Department of the Army: 

* Office of the Assistant Secretary of the Army for Manpower and 
Reserve Affairs, Office of Force Management, Manpower and Resources; 

* Office of the Assistant Secretary of the Army for Acquisition, 
Logistics, and Technology, Deputy Assistant Secretary of the Army for 
Procurement; 

* Office of the Deputy Chief of Staff for Personnel; 

* Office of the Deputy Chief of Staff for Programs, Program Analysis 
and Evaluation; 

* Office of the Assistant Secretary of the Army, Financial Management 
and Comptroller, Deputy Assistant Secretary of the Army for Budget, 
Formulation Division; 

* Office of the Deputy Chief of Staff for Operations, Army Force 
Accounting and Documentation Division; 

* Installation Management Command, Resource Management Directorate; 

* Training and Doctrine Command, Resource Management Directorate; 

Department of the Navy: 

* Office of the Assistant Secretary of the Navy for Research, 
Development, and Acquisition, Deputy Assistant Secretary of the Navy 
for Acquisition and Logistics Management; 

* Office of the Assistant Secretary of the Navy for Manpower and 
Reserve Affairs, Office of Civilian Human Resources; 

* Office of the Assistant Secretary of the Navy, Financial Management 
and Comptroller, Office of Budget; 

* Office of the Chief of Naval Operations, Deputy Chief of Naval 
Operations for Manpower, Personnel, Education and Training, Strategic 
Resourcing Branch; 

* Naval Air Systems Command, Analysis and Planning Office, Office of 
the Deputy Assistant Commander for Contracts and Office of Command 
Strategic Force, Planning and Management; 

Department of the Air Force: 

* Secretary of the Air Force, Office of Acquisition Integration; 

* Secretary of the Air Force, Program Executive Office for Combat and 
Mission Support; 

* Directorate of Manpower, Organization and Resources, Strategic 
Sourcing Division; 

* Assistant Secretary of the Air Force for Financial Management and 
Comptroller, Deputy Assistant Secretary for Budget, Directorate of 
Budget Operations; 

* Air Force Materiel Command, Strategic Plans and Programs Business 
Integration Office, Office of Manpower and Personnel; 

TRICARE Management Activity: 

* Office of Acquisition Policy and Compliance; 

* Business Operations Directorate, Operations Department; 

Defense Information Systems Agency: 

* Procurement Directorate, Policy, Quality Assurance and Procedures 
Division; 

* Manpower, Personnel, and Security Directorate, Manpower and 
Personnel Systems Support Division; 

U.S. Special Operations Command: 

* Directorate of Procurement, Procurement Management Division; and: 

* Assessment and Manpower Validation Branch. 

We conducted this performance audit from May 2010 through November 
2010 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: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

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

William Solis, (202) 512-8365 or solisw@gao.gov: 

Staff Acknowledgments: 

In addition to the contacts named above, Timothy J. DiNapoli, 
Assistant Director; Celina Davidson; Morgan Delaney Ramaker; Kathryn 
Edelman; Meriem Hodge; Julia Kennon; John Krump; Jean McSween; Kenneth 
Patton; Roxanna Sun; Grant Sutton; Jeff Tessin; and Rebecca Wilson 
made key contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, Defense Management: DOD Needs to Reexamine Its Extensive 
Reliance on Contractors and Continue to Improve Management and 
Oversight, [hyperlink, http://www.gao.gov/products/GAO-08-572T] 
(Washington, D.C.: Mar. 11, 2008). 

[2] GAO, Defense Acquisitions: Tailored Approach Needed to Improve 
Service Acquisition Outcomes, [hyperlink, 
http://www.gao.gov/products/GAO-07-20] (Washington, D.C.: Nov. 9, 
2006). 

[3] GAO, 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). 

[4] GAO, Department of Defense: Additional Actions and Data Are Needed 
to Effectively Manage and Oversee DOD's Acquisition Workforce, 
[hyperlink, http://www.gao.gov/products/GAO-09-342] (Washington, D.C.: 
Mar. 25, 2009). 

[5] GAO, Human Capital: Further Actions Needed to Enhance DOD's 
Civilian Strategic Workforce Plan, [hyperlink, 
http://www.gao.gov/products/GAO-10-814R] (Washington, D.C.: Sept. 27, 
2010). 

[6] Pub. L. No. 110-181. 

[7] GAO, Defense Acquisitions: Observations on the Department of 
Defense Service Contract Inventories for Fiscal Year 2008, [hyperlink, 
http://www.gao.gov/products/GAO-10-350R] (Washington, D.C.: Jan. 29, 
2010). We conducted this review pursuant to House Armed Services 
Committee Report 111-116, which accompanied the National Defense 
Authorization Act for Fiscal year 2010. 

[8] Pub. L. No. 111-84 (2009). 

[9] FPDS-NG is the federal government's primary data system for 
tracking information on contracting actions. 

[10] Inherently governmental functions, as a matter of policy, are so 
intimately related to the public interest as to require performance by 
government employees, and include functions that require discretion in 
applying government authority or value judgments in making decisions 
for the government. FAR section 7.503(c) provides examples of such 
functions. Closely associated with inherently governmental functions 
are those that, while not inherently governmental, may approach the 
category because of the nature of the function, the manner in which 
the contractor performs the contract, or the manner in which the 
government administers performance under a contract. FAR section 
7.503(d) provides examples of such functions. 

[11] Pub. L. No. 107-107, § 801(c) (2001) (codified as amended at 10 
U.S.C. § 2330a). 

[12] Pub. L. No. 110-181 § 807. 

[13] Pub. L. No. 110-181 § 324 (codified at 10 U.S.C. § 2463). 

[14] Deputy Secretary of Defense, Implementation of Section 324 of the 
National Defense Authorization Act for Fiscal Year 2008--Guidelines 
and Procedures on In-sourcing New and Contracted-Out Functions (Apr. 
4, 2008) and In-sourcing Contracted Services Implementation Guidance 
(May 28, 2009). 

[15] Pub. L. No. 111-84, § 1108(a) (2009). 

[16] Pub. L. No. 111-84 § 803(a) (2009) (codified at 10 U.S.C. § 235). 
We did not assess DOD's implementation of this requirement as part of 
this review. 

[17] DPAP also allowed the TRICARE Management Activity to report 
contractor FTEs based on an actual count of its contractor FTEs, in 
addition to reporting the number of contractor FTEs according to the 
AT&L formula, due to the unique nature of TRICARE's contracts for 
medical services. 

[18] The Air Force also relied on information included in its annual 
budget documentation to identify contractor FTEs for advisory and 
assistance services contracts, and information provided by contracting 
offices on the number of contractor FTEs associated with contract 
actions that were $10 million and above. 

[19] Army Federal Acquisition Regulation Supplement, Subpart 
5137.9601, requires contracting officers to include in Army contracts, 
task orders, and modifications the requirement to report contractor 
manpower information in CMRA. This requirement applies to all 
services, with the exception of those related to foreign military 
sales, utilities, and construction. 

[20] Office of Management and Budget Circular A-11. 

[21] The Air Force used multiple approaches, including a formula for 
the majority of contracts, to determine the number of contractor FTEs 
in its fiscal year 2008 inventory. This analysis does not take into 
account the number of contractor FTEs that would have been reported in 
fiscal year 2009 through the use of information included in its annual 
budget documentation to identify contractor FTEs for advisory and 
assistance services contracts, or information provided by contracting 
offices on the number of contractor FTEs associated with contract 
actions that were $10 million and above. 

[22] Our previous work has found that data in FPDS-NG, more generally, 
were not always accurate and complete.See, for example, GAO, Defense 
Contracting: Enhanced Training Could Strengthen DOD's Best Value 
Tradeoff Decisions, [hyperlink, http://www.gao.gov/products/GAO-11-8] 
(Washington, D.C.: Oct. 28, 2010); and Federal Contracting: 
Observations on the Government's Contracting Data Systems, [hyperlink, 
http://www.gao.gov/products/GAO-09-1032T] (Washington, D.C.: Sept. 29, 
2009). 

[23] The Ike Skelton National Defense Authorization Act for Fiscal 
Year 2011 was signed in January 2011. Section 321 specified that the 
Under Secretary of Defense for Personnel and Readiness, the Under 
Secretary of Defense (Comptroller), and the Under Secretary of Defense 
for Acquisition, Technology and Logistics are responsible for issuing 
guidance for compiling the inventory. Section 321 also states that DOD 
is to use direct labor hours and associated cost data reported by 
contractors as the basis for the number of contractor FTEs identified 
in the inventory, though it provides that DOD may use estimates where 
such data is not available and cannot reasonably be made available in 
a timely manner. Pub. L. No. 111-383, § 321. 

[24] This policy is reflected in the Army Federal Acquisition 
Regulation Supplement Subpart 5107.503. 

[25] Headquarters Department of the Army, DAMO-FMP, FY11 Command Plan 
Guidance, memorandum (Jan. 16, 2009). 

[26] Assessing the extent of any follow-up action on these reviews was 
beyond the scope of our current work. 

[27] Secretary of the Air Force, FY08-15 Service Contract Data Call 
(Jan. 19, 2010). 

[28] For example, the guidance cites Department of Defense Instruction 
1100.22, Policies and Procedures for Determining Workforce Mix and FAR 
subpart 37.104 on personal services contracts. 

[29] Secretary of the Air Force, FY10 Service Contractor Inventory 
Review (Oct. 21, 2010). 

[30] Air Force Instruction 63-101 Acquisition and Sustainment 
Lifecycle Management. 

[31] Deputy Secretary of Defense, In-sourcing Contracted Services 
Implementation Guidance (May 28, 2009). 

[32] Office of the Assistant Secretary of the Navy for Research, 
Development, and Acquisition, Guidance for Determining Whether Service 
Contracts Inventoried Pursuant to Section 807 of the National Defense 
Authorization Act For Fiscal Year 2008 Provide for Unauthorized 
Personal Services, Inherently Governmental Functions, or Closely 
Associated with Inherently Governmental Functions (Sept. 13, 2010). 

[33] For example, the guidance cites FAR subparts 7.503 on inherently 
governmental functions and 37.104 on personal services contracts. 

[34] Pub. L. No. 111-84 (2009). 

[35] FPDS-NG is the primary federal government system for tracking 
information on contracts. 

[36] We previously identified that professional, administrative, and 
management support services contracts are more likely to involve 
activities that may be considered closely associated with inherently 
governmental functions. See, for example, GAO, Department of Homeland 
Security: Improved Assessment and Oversight of Needed to Manage Risk 
of Contracting for Selected Services, GAO-07-990 (Washington, D.C.: 
Sept. 17, 2007). 

[37] GAO, Defense Acqusitions: Observation on the Department of 
Defense Service Contract Inventories for Fiscal Year 2008, [hyperlink, 
http://www.gao.gov/products/GAO-10-350R] (Washington D.C.: Jan. 29, 
2010). 

[38] The Air Force used multiple approaches, including a formula for 
the majority of contracts, to determine the number of contractor FTEs 
in its fiscal year 2008 inventory. This analysis does not take into 
account the number of contractor FTEs that would have been reported in 
fiscal year 2009 through the head count approach or other information 
used by the Air Force in fiscal year 2008. Similarly, there were a 
small number of records contained in the Navy's fiscal year 2009 
inventory for which the Navy had not calculated a labor rate as part 
of its fiscal year 2008 approach, or for which we were not able to 
apply the AT&L formula due to missing information from FPDS-NG. 

[End of section] 

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