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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

May 2013: 

Human Capital: 

Additional Steps Needed to Help Determine the Right Size and 
Composition of DOD’s Total Workforce: 

GAO-13-470: 

GAO Highlights: 

Highlights of GAO-13-470, a report to congressional committees. 

Why GAO Did This Study: 

The federal government’s growing fiscal challenges underscore the 
importance of DOD employing a strategic approach to determining the 
appropriate mix of its military, civilian, and contractor personnel to 
perform its mission, and determining the functions that are critical 
for the department to achieve its missions. A committee report 
accompanying the National Defense Authorization Act for Fiscal Year 
2013 directed GAO to assess the measures DOD is taking to balance its 
workforce against its requirements. GAO examined (1) historical and 
projected workforce trends, (2) the actions DOD has taken to determine 
an appropriate workforce mix, (3) the analysis DOD performs to 
identify core or critical functions, and (4) how DOD used its 
inventory of contracted services to inform budget submissions. GAO 
performed trend analysis to determine historical and future workforce 
levels. GAO also reviewed relevant statutes, DOD and military 
department guidance, and budgetary submissions, and interviewed 
officials from DOD and the Office of Management and Budget (OMB). 

What GAO Found: 

Since fiscal year 2001, the Department of Defense’s (DOD) military and 
civilian workforces peaked in fiscal year 2011 at 3.1 million 
personnel combined, and is projected to decrease over the next five 
years to below the fiscal year 2001 level of 2.9 million. Comparable 
historical data on DOD’s contractor workforce are not available. In 
fiscal year 2011, DOD reported that it contracted for services 
performed by an estimated 710,000 contractor full time equivalents 
(FTEs)—-a workforce equal to about 90 percent of the size of DOD’s 
civilian workforce of 807,000 FTEs. Using fiscal year 2013 constant 
dollars, GAO’s analysis of DOD spending on contracted services shows 
obligations peaked in fiscal year 2010 at about $195 billion, more 
than twice the amount spent in fiscal year 2001. This spending 
decreased to about $174 billion in fiscal year 2012. 

DOD has taken some steps to improve its understanding and management 
of its total workforce; however, several shortcomings remain. 
Specifically, DOD has yet to assess the appropriate mix of its 
military, civilian, and contractor personnel capabilities in its 
strategic workforce plan as required by law. Further, DOD has not 
updated its policies and procedures to reflect current statutory 
requirements to use its civilian strategic workforce plan and the 
inventory of contracted services to determine the appropriate mix of 
personnel to perform DOD’s mission. Moreover, DOD’s strategic human 
capital plan does not contain certain required elements and 
information and several factors limit the accuracy of its inventory of 
contracted services. As a result, the department is hampered in making 
more informed strategic workforce mix decisions, which is crucial to 
meeting DOD’s congressional mandate to manage its total workforce. 

Although DOD is not required to perform analysis to identify a list of 
core or critical functions across the department as a whole, DOD has 
identified broad core mission areas of the department. However, its 
current policies do not fully reflect federal policy concerning the 
identification of critical functions. Office of Federal Procurement 
Policy Policy Letter 11-01 requires agencies to identify and ensure 
that they retain control over critical functions that are core to the 
agency’s mission, but may be contracted out to the private sector. 
DOD’s policies and procedures predate the publication of this 
requirement, and consequently contain no reference to it. Absent 
specific policies and procedures on this process, DOD may lack 
assurance that it retains enough government employees to maintain 
control over these important functions. 

DOD components used various methods and data sources, including their 
inventories of contracted services, to estimate contractor FTEs for 
budget submissions, but GAO’s analysis found that the contractor FTE 
estimates have significant limitations and do not accurately reflect 
the number of contractors providing services to DOD. Components 
encountered challenges, to include the use of estimating techniques 
based on inventory data that may not be accurate and the lack of a 
crosswalk between the inventory and specific budget codes. While the 
Army has a process that addresses these challenges, it may be several 
years before the remaining DOD components are able to do the same. DOD 
is taking steps to help the remaining components address these 
challenges, but, in the meantime, the budget does not provide an 
explanation of how the contractor FTE estimates are derived and what 
limitations apply. 

What GAO Recommends: 

GAO recommends that DOD revise its policies and procedures to 
incorporate (1) legislative requirements for workforce planning and 
(2) federal requirements for the identification of critical functions. 
GAO also recommends that DOD provide better information regarding 
contractor FTEs used in budget submissions. DOD noted actions that it 
has underway or planned to respond to these recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-13-470]. For more 
information, contact Brenda S. Farrell at (202) 512-3604 or 
farrellb@gao.gov or Timothy J. DiNapoli at (202) 512-4841 or 
dinapolit@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DOD Projects Its Military and Civilian Workforce to Decrease, but 
Comparable Data on DOD’s Contractor Workforce Are Not Available 15 
DOD Has Taken Some Steps Useful for Determining the Appropriate Mix of 
Its Workforce, but Shortcomings Remain 28 DOD Defines the Core 
Missions of the Department, but Current Policy Does Not Fully Reflect 
the Need to Identify Critical Functions: 

DOD Components Used the Inventory of Contracted Services and Other 
Data in Budget Submissions, but the Projections Have Significant 
Limitations 39 Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Recent GAO Recommendations for DOD’s Strategic Workforce 
Management: 

Appendix II: Scope and Methodology: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: Numbers and Percentages of Active Component, Reserve 
Component, and Civilian Workforce Changes from Fiscal Year 2001 to 
Fiscal Year 2011 and Projected Numbers and Percentages from Fiscal 
Year 2012 to Fiscal Year 2017 (workforce numbers in thousands): 

Table 2: Percentage of Active Component End Strength and Civilian Full 
Time Equivalent (FTE) Growth and Decline from Fiscal Year (FY) 2001 to 
Fiscal Year 2011 by Force and Infrastructure Category: 

Table 3: Estimated Number of Contractor Full Time Equivalents (FTE) 
and Obligations as Reported in DOD’s Inventory of Contracted Services: 

Table 4: Processes Used to Develop Contractor Full Time Equivalent 
(FTE) Projections in Fiscal Year 2013 Budget Submissions: 

Figures: 

Figure 1: DOD’s Reported Number of Active Component End Strength, 
Reserve Component End Strength, Civilian Full Time Equivalents (FTE), 
and Contractor FTEs, Fiscal Year 2011: 

Figure 2: Active and Reserve Components End Strength and Civilian Full 
Time Equivalents (FTE), Fiscal Years 2001 through 2017: 

Figure 3: Obligations for Contracted Service Actions, Fiscal Years 
2001 through 2014: 

Abbreviations: 

CAPE: Cost Assessment and Program Evaluation: 

CIS: Comptroller Information System: 

CMRA: Contractor Manpower Reporting Application: 

DAWDF: Defense Acquisition Workforce Development Fund: 

DISA: Defense Information Systems Agency: 

DLA: Defense Logistics Agency: 

DOD: Department of Defense: 

FAIR Act: Federal Activities Inventory Reform Act of 1998: 

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

FTE: Full time equivalent: 

FYDP: Future Years Defense Program: 

OFPP: Office of Federal Procurement Policy: 

OSD: Office of the Secretary of Defense: 

SAMAS: Structure and Manpower Allocation System: 

[End of section] 

United States Government Accountability Office: 
GAO: 
441 G St. N.W. 
Washington, DC 20548: 

May 29, 2013: 

The Honorable Carl Levin: 
Chairman: 
The Honorable James M. Inhofe: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

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

The Department of Defense (DOD) is one of the largest and most complex 
organizations in the federal government, and it is consequently one of 
the nation’s largest employers. DOD’s total workforce consists of 
three main components: military personnel (including the active 
military and the reserve and guard forces)[Footnote 1], civilians, and 
contractors providing support to the department. For fiscal year 2012, 
DOD budgeted for a military workforce of about 2.3 million active and 
reserve servicemembers and a civilian workforce of about 800,000 full 
time equivalents (FTEs),[Footnote 2] including foreign nationals and 
indirect hires. The active military and reserve and guard forces are 
charged with implementing the National Military Strategy and 
performing military essential functions in support of DOD’s various 
missions. DOD’s civilian workforce performs a wide variety of 
responsibilities, including providing care for active duty personnel, 
their dependents, and wounded servicemembers; managing financial 
accounting systems; and providing mission-essential combat-support 
functions that traditionally have been performed by the uniformed 
military, such as logistics support, maintenance, and carrying out 
cyber and intelligence efforts. In addition, a key component of this 
workforce also provides deployable civilian experts to Afghanistan and 
other theaters of operation. Augmenting the military and civilian 
workforces, DOD has increasingly relied on contractors both overseas 
and in the United States to perform many of the same functions as 
civilian employees, including management support, communication 
services, interpreters who accompany military patrols, base operations 
support (e.g., food and housing), weapon systems maintenance, and 
intelligence. In its inventory of contracted services, DOD reported 
that it spent about $145 billion for contracted services in fiscal 
year 2011, provided by an estimated 710,000 contractor FTEs.[Footnote 
3] DOD’s workforce management is governed by a complex statutory and 
regulatory framework, and each component of DOD’s total workforce is 
governed by different rules that direct how the department manages its 
total workforce. 

Presently, at the end of a decade that has seen two wars and growth in 
DOD’s costs for military and civilian personnel as well as contracted 
services, DOD faces increasing competition for resources as the 
federal government confronts growing fiscal challenges. For example, 
we previously reported that in fiscal year 2012, DOD budgeted 
approximately $72 billion for its civilian personnel[Footnote 4], an 
increase of approximately $12.6 billion, or 21 percent, since fiscal 
year 2002.[Footnote 5] In 2011, we reported that the active duty total 
compensation costs increased 32 percent from about $143.8 billion in 
fiscal year 2000 to about $189.4 billion in fiscal year 2008, and that 
the federal government’s total estimated compensation for reserve and 
national guard members grew over 31 percent from about $17.8 billion 
in fiscal year 2001 to nearly $23.5 billion in fiscal year 2008. 
[Footnote 6] Further, DOD’s obligations for contracted services more 
than doubled from fiscal years 2001 to 2009.[Footnote 7] The 
sequestration as a result of the Budget Control Act of 2011[Footnote 
8] requires spending cuts in fiscal year 2013 totaling about $40 
billion through across-the-board, proportional reductions in funding 
provided in the appropriations acts for most defense accounts, 
including accounts related to DOD’s civilian workforce and contracted 
services. To prepare for the sequestration, the Secretaries of the 
Military Departments issued guidance in January 2013 to their 
respective departments to direct actions intended to reduce costs. 
Further, section 955 of the National Defense Authorization Act for 
Fiscal Year 2013[Footnote 9] calls for the Secretary of Defense to 
develop an efficiencies plan to achieve savings in funding for 
contractor and civilian workforces commensurate with the savings in 
military pay due to currently planned reductions to active duty end 
strength. 

The current and long-term future fiscal pressures facing DOD 
underscore the importance of a strategic approach to recruit, develop, 
and retain the right number of individuals with the necessary skills 
and competencies for DOD to meet its mission and contract for services 
where appropriate. While progress has been made since we first placed 
strategic human capital management on our high risk list in 2001 
[Footnote 10]-—for example, through the various authorities and 
flexibilities provided to agencies for managing the federal workforce—
this area remains one of significant concern. As we noted in February 
2013, strategic human capital management in DOD and across the federal 
government continues to be a GAO high-risk area because critical skill 
and competency gaps could undermine agencies’ abilities to accomplish 
their missions.[Footnote 11] Current budget and long-term future 
fiscal pressures coupled with a potential wave of employee retirements 
could produce gaps in leadership and institutional knowledge that may 
threaten the government’s capacity to effectively address complex 
challenges. Strategic human capital planning that is integrated with 
broader organizational strategic planning is essential for ensuring 
that agencies have the talent, skills, and experience they need to 
cost-effectively execute their current and future mission and program 
goals. Specifically, with regard to DOD, our work has emphasized that 
effective planning can enable the department to have the right people, 
with the right skills, doing the right jobs, in the right places, at 
the right time by making flexible use of its military and civilian 
workforces and appropriate use of contractors.[Footnote 12] 

Two key aspects of DOD’s implementation of total force management are 
determining the appropriate mix of its military, civilian, and 
contractor workforces and determining the functions that are critical 
for the department to achieve its missions. Congress has taken many 
steps to help ensure DOD appropriately manages its total workforce, 
and has passed legislation requiring DOD to conduct human-capital 
planning efforts for its civilian workforce. Specifically, since 2006, 
legislation has required DOD to periodically develop and submit to 
congressional defense committees a strategic workforce plan to shape 
and better manage the department’s civilian workforce.[Footnote 13] 
Further, legislation encouraged DOD to take a more holistic approach 
to its workforce requirements to achieve the appropriate balance, 
using all three components—-military, civilian, and contractor-—of its 
total workforce, and prioritize the achievement of a workforce 
sufficiently sized and of the appropriate mix to carry out DOD’s 
mission over cost.[Footnote 14] Congress has also enacted new 
requirements and amended existing DOD workforce planning legislation 
to require inclusion of contracted services information in DOD’s total 
force planning efforts. The background section of this report provides 
an overview of these requirements, as well as other relevant 
legislation, requirements, and guidance that directs DOD to take steps 
regarding its strategic workforce management. Additionally, we have 
made a series of recommendations to DOD to better manage its total 
workforce and improve its strategic workforce plan. Appendix I lists 
our recent relevant recommendations made to DOD. 

A committee report accompanying a bill for the National Defense 
Authorization Act for Fiscal Year 2013 directed GAO to assess DOD’s 
efforts to appropriately balance its current and future workforce 
structure against its requirements.[Footnote 15] In this report, we 
examine: (1) the historical trends of the levels of military, 
civilian, and contractor personnel and the future projected trends for 
DOD’s workforce in light of shifts in departmental priorities; (2) the 
extent to which DOD has taken action to determine the appropriate 
workforce mix necessary to accomplish its mission; (3) the extent to 
which DOD conducts analysis to identify core or critical functions of 
the department; and (4) how the military departments and defense 
agencies used the inventory of contracted services to inform their 
fiscal year 2013 and 2014 budget submissions. 

To examine the historical and projected trends of the levels of 
military, civilian and contractor personnel in light of shifts in 
departmental priorities, we obtained data on active component end 
strength; the selected reserve within the reserve component end 
strength;[Footnote 16] and civilian personnel FTEs, including foreign 
nationals and indirect hires;[Footnote 17] and performed trend 
analysis on this data from fiscal year 2001 to fiscal year 2017. We 
relied on data from DOD’s fiscal year 2013 Future Years Defense 
Program (FYDP), the Comptroller Information System (CIS) from the 
Office of the Under Secretary of Defense, Comptroller, and other DOD 
budget documents. We determined that these data, collectively, were 
sufficiently reliable for use in discussing historical and future 
trends of the military and civilian workforces. We assessed the 
reliability of the data by comparing the data against other available 
data sources, conducting electronic testing of the data, and 
discussing any limitations of the data with appropriate DOD officials. 
DOD does not have comparable information on DOD’s contractor 
workforce, but to determine the size of the contractor workforce, we 
obtained estimates of contractor FTEs from DOD’s inventory of 
contracted services from fiscal year 2008 to fiscal year 2011. To 
report on obligated dollars for contracted services, we reviewed the 
obligated dollars for contracted services from fiscal year 2001 to 
fiscal year 2012 and the projected obligations for contracted services 
from fiscal year 2013 to fiscal year 2014. We relied on budget data on 
obligations for contracted services. Based on discussions with 
appropriate DOD officials and our comparison of the trends in the 
budget data against other data sources, we believe the contracted 
service obligation data are sufficiently reliable to serve as context 
of overall trends for contracted services. In addition, we interviewed 
officials from the Office of the Secretary of Defense (OSD) and 
military services regarding how shifts in departmental priorities are 
expected to impact workforce requirements. 

To determine the extent to which DOD has taken action to determine the 
appropriate workforce mix to accomplish its mission, we reviewed 
relevant legislation that governs DOD total workforce management and 
departmental guidance concerning requirements for DOD to carry out 
such an assessment.[Footnote 18] We also interviewed OSD and military 
service officials to assess the actions DOD has taken to ensure it is 
employing the appropriate workforce mix. Specifically, we discussed 
the process DOD uses to determine which sector of the workforce should 
perform a given task based on the nature of the work involved, DOD’s 
process for identifying mission critical occupations as part of its 
strategic workforce planning process, and efforts by the services to 
improve their total workforce management in the future. We reviewed 
selected statutory requirements concerning the processes by which DOD 
is to determine its appropriate workforce mix. We then compared these 
requirements to the department’s efforts to date, and noted any 
differences. 

To determine the extent to which DOD conducts analysis to identify 
core and critical functions, we reviewed relevant legislation[Footnote 
19] and federal policy and other guidance that requires the 
identification of inherently governmental and critical functions, 
including the Office of Federal Procurement Policy Policy Letter 11-
01.[Footnote 20] Further, we reviewed departmental guidance concerning 
the need and process for identifying critical functions. We 
interviewed OSD and military service officials to determine the 
actions DOD has taken to define core or critical functions and respond 
to these requirements. Additionally, we met with officials from the 
Office of Federal Procurement Policy within the Office of Management 
and Budget to discuss their views on DOD’s implementation of those 
requirements contained in the 2011 policy letter regarding critical 
functions. We compared federal policy concerning the identification of 
critical functions to DOD’s efforts to date, and noted any differences. 

To determine how the military departments and defense agencies used 
the inventory of contracted services to inform their fiscal year 2013 
and 2014 budget submissions, we focused our efforts on five DOD 
components—-the departments of the Army, the Navy, and the Air Force, 
the Defense Logistics Agency (DLA), and the Defense Information 
Systems Agency (DISA). We selected these components based on the 
amount of their obligations for contracted services and the large 
number of contractor FTEs they identified in their fiscal year 2011 
inventory of contracted services, the most current inventory available 
at the time of our review. We reviewed relevant guidance that directed 
the DOD components on how to use the inventory of contracted services 
to provide contractor FTE information in their budget submissions for 
fiscal years 2013 and 2014. We also interviewed DOD officials 
regarding the guidance and ongoing initiatives intended to improve the 
accuracy of the inventory data to inform future budget submissions. In 
addition, we interviewed relevant budget and manpower officials from 
the five components we included in our review regarding the use of 
their inventories in the development of their fiscal year 2013 and 
2014 budget submissions, and we obtained corroborating documentation 
from the three components that could provide it to determine the 
processes used to develop contractor FTE information included in these 
budget submissions. 

We conducted this performance audit from October 2012 to May 2013 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. A more in 
depth discussion of our scope and methodology appears in appendix II 
of this report. 

Background: 

DOD’s total workforce is made up of three main components: military 
personnel (including the active military and the reserve and guard 
forces), DOD civilian employees[Footnote 21], and contractor support. 
Figure 1 shows the number of the active and reserve components of the 
military, civilians, and estimated contractor FTEs that comprised 
DOD’s total workforce in fiscal year 2011. 

Figure 1: DOD’s Reported Number of Active Component End Strength, 
Reserve Component End Strength, Civilian Full Time Equivalents (FTE), 
and Contractor FTEs, Fiscal Year 2011: 

[Refer to PDF for image: stacked vertical bar graph] 

Number of personnel: 

Personnel group: Active component personnel[A]; 
Full-time end strength: 1,425,000. 

Personnel group: Reserve component personnel[B, C]; 
Full-time end strength: 76,000; 
Part-time end strength: 772,000. 

Personnel group: Civilians[C, D]; 
FTE's: 807,000. 

Personnel group: Contractors[e]; 
FTE's: 710,000. 

Source: GAO analysis of DOD data. 

Notes: 

[A] Active component end strength includes Army, Navy, Marine Corps, 
and Air Force servicemembers as of the end of fiscal year 2011. 

[B] The reserve component end strength includes the approximately 
772,000 part-time and the approximately 76,000 full-time Army Reserve, 
Navy Reserve, Marine Corps Reserve, Air Force Reserve, Army National 
Guard and Air National Guard servicemembers in the selected reserve as 
of the end of fiscal year 2011. The reported reserve component end 
strength does not include the Individual Ready Reserve or the Inactive 
National Guard. 

[C] Civilian FTEs is an estimate of full time direct hires, indirect 
hires, and foreign nationals for fiscal year 2011. Foreign nationals 
account for about 49,000, or 6 percent of the civilian workforce. 

[D] Dual status technicians are included in both the selected reserve 
part-time end strength and the civilian FTEs. 

[E] The number of contractor FTEs is DOD’s estimate based on data 
reported in its inventory of contracted services for fiscal year 2011. 

[End of figure] 

Over the last decade, Congress has enacted or amended several laws 
that govern DOD’s management of its total workforce. These 
interconnected provisions provide a framework for DOD total workforce 
management that requires DOD to adopt and enforce specific policies. 
In addition to those policy requirements, DOD is also required to 
submit information to Congress about its workforce and workforce 
planning, including, among other things, a strategic plan for shaping 
its civilian workforce, an annual inventory of contracted services and 
budget justification information concerning its contractor workforce. 
Other provisions govern the overall composition of DOD’s workforce, 
and outline the circumstances under which it is appropriate to convert 
performance of functions from one of the three workforce components to 
another. This section provides a high level overview of selected 
relevant provisions, as well as the major responsibilities regarding 
workforce management assigned to departmental leadership and 
organizations. 

* 10 U.S.C. § 129a governs DOD’s general policy for total force 
management and was significantly amended in December of 2011. Section 
129a now requires the Secretary of Defense to establish policies and 
procedures for determining the most appropriate and cost efficient mix 
of military, civilian, and contractor personnel to perform the mission 
of the department. These policies and procedures are required to 
clearly provide that attainment of a DOD workforce sufficiently sized 
and comprised of the appropriate mix of personnel necessary to carry 
out the mission of the department and the core mission areas of the 
armed forces takes precedence over cost. The law also specifies that 
these procedures shall specifically require DOD to use, among other 
things, the civilian strategic workforce plan (see 10 U.S.C. § 115b 
below) and the inventory of contracted services (see 10 U.S.C. § 2330a 
below) when making determinations regarding the appropriate workforce 
mix. 

* 10 U.S.C. § 115b requires the biennial submission of a strategic 
workforce plan to shape and improve DOD’s civilian workforce. Among 
other things, the plan is required to address the appropriate mix of 
military, civilian, and contractor personnel capabilities, a 
requirement that DOD’s plan submissions have not addressed to date. 
[Footnote 22] 

* 10 U.S.C. § 2330a requires the Secretary of Defense to submit an 
annual inventory of activities performed pursuant to contracts for 
services, which, among other things, is required to include 
information concerning the number of contractor employees, expressed 
as full-time equivalents, subject to certain exceptions. Section 2330a 
also requires that the DOD component heads perform a review of the 
contracts and activities in the inventory to ensure that the 
activities on the list do not include inherently governmental 
functions or illegal personal services contracts, and, to the maximum 
extent practicable, do not include functions closely associated with 
inherently governmental functions.[Footnote 23] The inventory is also 
to be used to identify additional categories of functions for possible 
conversion to civilian performance pursuant to 10 U.S.C. § 2463 
(below). Additionally, section 2330a requires DOD component heads to 
develop a plan, including an enforcement mechanism and approval 
process, to use the inventory to implement 10 U.S.C. § 129a (above), 
to inform strategic workforce planning, such as the plan required by 
10 U.S.C. § 115b (above), to facilitate the use of the inventory in 
the submission of budgetary information in compliance with 10 U.S.C. § 
235 (below), and to perform conversions identified during the review 
described above. 

* 10 U.S.C. § 2463 requires the Secretary of Defense make use of the 
inventory of contracted services, compiled pursuant to 10 U.S.C. § 
2330a (above), for the purpose of identifying certain functions 
performed by contractors, to include closely associated with 
inherently governmental functions, critical functions and acquisition 
workforce functions, that should be given special consideration for 
conversion to civilian performance. 

* 10 U.S.C. § 235 requires that the Secretary of Defense include (in 
the budget justification materials submitted to Congress) information 
that clearly and separately identifies both the amount requested for 
the procurement of contract services for each DOD component, 
installation, or activity and the number of contractor FTEs projected 
and justified for each DOD component, installation, or activity based 
on the inventory of contracts for services and the statutorily 
required reviews of the inventory data (see 10 U.S.C. § 2330a and 10 
U.S.C. § 2463 above). 

Following DOD’s fiscal year 2010 announcement of its efficiency 
initiatives (including a cap on its civilian workforce FTEs at fiscal 
year 2010 levels),[Footnote 24] and in light of the planned drawdown 
of military personnel, Congress enacted two additional provisions that 
shape the composition of DOD’s total workforce. 

* Section 808 of the National Defense Authorization Act for Fiscal 
Year 2012 (Pub. L. No. 112-81 (2011)) requires, among other things and 
subject to certain exceptions, that the total amount obligated by DOD 
for contract services in fiscal years 2012 and 2013 may not exceed the 
total amount requested for contract services in the fiscal year 2010 
President’s budget. The fiscal year 2010 president’s budget was the 
baseline DOD used in developing its civilian workforce cap; the effect 
of this provision is to provide a parallel cap on contracted services 
working from a similar baseline.[Footnote 25] 

* Section 955 of the National Defense Authorization Act for Fiscal 
Year 2013 (Pub. L. No. 112-239 (2013)) requires the Secretary of 
Defense to, among other things, develop an efficiencies plan for the 
civilian and contract workforces. The plan is required to achieve 
savings in the total funding of those workforces not less than savings 
achieved for basic military personnel pay from reductions in end 
strength over the same period of time, subject to certain exceptions. 
Among these exceptions are expenses for personnel performing critical 
functions identified by the Secretary of Defense as requiring 
exemption in the interest of the national defense. 

Additionally, there is a body of guidance that relates to determining 
what work should be performed by each sector of the total DOD 
workforce, including an Office of Federal Procurement Policy Letter, 
and several DOD guidance documents. These documents, collectively, 
require that migration of work between DOD’s three workforce 
components be supported by analysis, and provide when the relevant 
components should be considered for performing new requirements. 

* Office of Federal Procurement Policy Policy Letter 11-01: This 
policy letter, among other things, (1) clarifies what functions are 
inherently governmental, (2) explains how agencies must manage work 
that is “closely associated” with inherently governmental functions, 
and (3) requires agencies to identify “critical functions” to ensure 
that they have enough internal capability to retain control over 
functions that are core to the agency’s mission and operations. 

* DOD Directive 1100.4: This directive outlines manpower requirements 
determination noting that national military objectives shall be 
accomplished with a minimum of manpower that is organized and employed 
to provide maximum effectiveness and combat power. It requires that 
military (active and reserve) and civilian manpower resources be 
programmed in accordance with validated manpower requirements, and 
within fiscal limits and acceptable levels of risk identified in 
defense planning and programming guidance. 

* DOD Instruction 1100.22: This instruction outlines DOD policy and 
procedures for determining the appropriate mix of manpower (military 
and civilian) and private sector support (contractors). 

* DOD Directive Type Memorandum 09-007: Provides business rules for 
use in estimating and comparing the full costs of military and DOD 
civilian manpower and contract support. It requires components to use 
certain business rules when performing an economic analysis in support 
of workforce decisions, which include determining the workforce mix of 
new or expanding mission requirements that are not inherently 
governmental or exempt from private-sector performance.[Footnote 26] 
10 U.S.C. §§ 2461 and 2463 and OMB circular A-76 are also relevant to 
the subject of transitions between workforce types, depending on the 
type of transition. 

Collectively, this body of law and guidance requires DOD to collect a 
variety of information for its decision makers to review and use in 
making strategic workforce management decisions. These requirements 
are especially significant in light of the current and long-term 
future fiscal pressures facing DOD, which will require identification 
of all of those functions currently being performed by each workforce 
sector, prioritization of those functions, and strategic 
determinations as to whether the performance of functions is 
appropriately distributed across these three sectors. 

Several offices have responsibility for implementing these laws and 
regulations and managing the department’s total workforce. The Office 
of the Under Secretary of Defense, Personnel and Readiness (USD, P&R), 
has overall responsibility for issuing guidance on manpower management 
to be used by the DOD components, providing guidance on manpower 
levels of the components, and developing manpower mix criteria and 
other information to be used by the components to determine their 
workforce mix. The Under Secretary of Defense (Comptroller) and the 
Director, Cost Assessment and Program Evaluation (CAPE) play key roles 
in determining the amounts budgeted for military and civilian 
personnel, as well as contracted services. The Under Secretary of 
Defense (Comptroller) is responsible for ensuring that the budget for 
DOD is consistent with the total force management policies and 
procedures.[Footnote 27] The Secretaries of the military departments 
and heads of the defense agencies have overall responsibility for the 
requirements determination, planning, programming, and budgeting for 
total force management policies and procedures,[Footnote 28] as well 
as having numerous responsibilities related to manpower management as 
detailed in DOD guidance.[Footnote 29] For example, they are 
responsible for designating an individual with full authority for 
manpower management including: (1) implementing fiscal year guidance 
and manpower management policy within their respective component, (2) 
ensuring manpower levels are programmed to optimize readiness, (3) 
developing annual manpower requests for Congress, including the 
consideration of converting from one form of manpower to another, (4) 
conducting continuous review of manpower utilization plans and 
programs, and (5) establishing and maintaining manpower data systems 
that account for all manpower resources. 

DOD Projects Its Military and Civilian Workforce to Decrease, but 
Comparable Data on DOD’s Contractor Workforce Are Not Available: 

DOD’s data shows that since fiscal year 2001, its combined active, 
reserve, and civilian workforce peaked in fiscal year 2011 at 3.1 
million personnel, and is projected by DOD to gradually decrease over 
the next five years to below its fiscal year 2001 level.[Footnote 30] 
Comparable historical data on the contractor component of DOD’s total 
workforce are not available, in part because DOD was not required to 
compile an annual inventory of activities performed pursuant to 
contracts for services until 2008. In its inventory for fiscal year 
2011, DOD reported that about 710,000 contractor FTEs were performing 
various functions under contracts for services—which is equal to about 
90 percent of the size of DOD’s civilian workforce of 807,000 FTEs for 
that same fiscal year. Our analysis of DOD’s obligations for 
contracted services using fiscal year 2013 constant dollars shows 
DOD’s spending peaked in fiscal year 2010 at about $195 billion, more 
than twice the amount spent in fiscal year 2001. Such spending 
decreased to about $174 billion in fiscal year 2012. 

DOD’s Military and Civilian Workforce Peaked in Fiscal Year 2011, but 
Is Projected by DOD to Decrease: 

Our analysis of DOD’s military and civilian workforce data indicates 
that the collective growth in DOD’s military and civilian workforce 
peaked in fiscal year 2011 and is projected by DOD to gradually 
decrease over the next five years to below its fiscal year 2001 level, 
which was about 2.9 million servicemembers and DOD civilians combined. 
In fiscal year 2011, DOD’s military and civilian workforce totaled 
about 3.1 million servicemembers and civilians, or about 139,000 more 
than fiscal year 2001, with the most growth occurring within the 
civilian workforce. Specifically, in fiscal year 2011, DOD’s civilian 
workforce numbered about 807,000 FTEs, an increase of 17 percent or 
120,000 FTEs over fiscal year 2001 levels. The active component of the 
military workforce increased by 3 percent, or about 40,000 personnel, 
to about 1.425 million, and the reserve component of the military 
workforce decreased by 2 percent, or about 21,000 personnel, to about 
848,000 during this same time period. By fiscal year 2017, DOD 
projects that its active component end strength will fall below its 
fiscal year 2001 level to about 1.32 million, and its reserve 
component end strength will continue to be below its fiscal year 2001 
level. DOD projects that the civilian workforce will also decrease by 
fiscal year 2017 to about 784,000 FTEs—-about 14 percent above its 
fiscal year 2001 level. Historically, the size of the civilian 
workforce has represented about a quarter of DOD’s combined military 
and civilian workforce.[Footnote 31] This ratio has remained 
relatively constant, ranging from 23 to 27 percent since the 1960s and 
reflects substitution between these workforces. Figure 2 shows the 
active component and reserve component end strength and civilian FTEs 
from fiscal year 2001 through 2017. 

Figure 2: Active and Reserve Components End Strength and Civilian Full 
Time Equivalents (FTE), Fiscal Years 2001 through 2017: 

[Refer to PDF for image: multiple line graph] 

Personnel: 

Actual: 

Fiscal year: 2001; 
Active component end strength: 1,385,000; 
Reserve component end strength: 869,000; 
Civilian FTEs: 687,000. 

Fiscal year: 2002; 
Active component end strength: 1,412,000; 
Reserve component end strength: 874,000; 
Civilian FTEs: 687,000. 

Fiscal year: 2003; 
Active component end strength: 1,434,000; 
Reserve component end strength: 875,000; 
Civilian FTEs: 690,000. 

Fiscal year: 2004; 
Active component end strength: 1,427,000; 
Reserve component end strength: 851,000; 
Civilian FTEs: 690,000. 

Fiscal year: 2005; 
Active component end strength: 1,389,000; 
Reserve component end strength: 821,000; 
Civilian FTEs: 692,000. 

Fiscal year: 2006; 
Active component end strength: 1,385,000; 
Reserve component end strength: 826,000; 
Civilian FTEs: 701,000. 

Fiscal year: 2007; 
Active component end strength: 1,380,000; 
Reserve component end strength: 828,000; 
Civilian FTEs: 695,000. 

Fiscal year: 2008; 
Active component end strength: 1,402,000; 
Reserve component end strength: 838,000; 
Civilian FTEs: 707,000. 

Fiscal year: 2009; 
Active component end strength: 1,419,000; 
Reserve component end strength: 846,000; 
Civilian FTEs: 745,000. 

Fiscal year: 2010; 
Active component end strength: 1,431,000; 
Reserve component end strength: 849,000; 
Civilian FTEs: 777,000. 

Fiscal year: 2011; 
Active component end strength: 1,425,000; An increase of 3% or 
about 40,000 personnel over fiscal year 2001 levels; 
Reserve component end strength: 848,000; An decrease of 2% or 
about 21,000 personnel under fiscal year 2001 levels; 
Civilian FTEs: 807,000; An increase of 17% or about 120,000 
personnel over fiscal year 2001 levels. 

Projected: 

Fiscal year: 2012; 
Active component end strength: 1,423,000; 
Reserve component end strength: 847,000; 
Civilian FTEs: 801,000. 

Fiscal year: 2013; 
Active component end strength: 1,401,000; 
Reserve component end strength: 837,000; 
Civilian FTEs: 790,000. 

Fiscal year: 2014; 
Active component end strength: 1,364,000; 
Reserve component end strength: 833,000; 
Civilian FTEs: 785,000. 

Fiscal year: 2015; 
Active component end strength: 1,347,000; 
Reserve component end strength: 830,000; 
Civilian FTEs: 786,000. 

Fiscal year: 2016; 
Active component end strength: 1,332,000; 
Reserve component end strength: 828,000; 
Civilian FTEs: 785,000. 

Fiscal year: 2017; 
Active component end strength: 1,320,000; An decrease of 5% or about 
65,000 personnel under fiscal year 2001 levels; 
Reserve component end strength: 826,000; An decrease of 5% or about 
43,000 personnel under fiscal year 2001 levels; 
Civilian FTEs: 784,000; An increase of 14% or about 97,000 personnel 
over fiscal year 2001 levels. 

Source: GAO analysis of DOD data. 

Note: Data used for fiscal years 2001 through 2011 are actuals; those 
for fiscal years 2012 through 2017 are DOD projections, as presented 
in the fiscal year 2013 Future Years Defense Program, the fiscal year 
2013 President’s Budget, and certain data from the Comptroller 
Information System. Active component end strength includes the Army, 
the Navy, the Marine Corps, and the Air Force servicemembers as of the 
end of each fiscal year. The reserve component end strength represents 
the selected reserve and includes the part-time and the full-time Army 
Reserve, the Navy Reserve, the Marine Corps Reserve, the Air Force 
Reserve, the Army National Guard and the Air National Guard 
servicemembers as of the end of each fiscal year. Civilian FTEs is an 
estimate of full time direct hires, indirect hires, and foreign 
nationals for each fiscal year. Dual status technicians are included 
in both reserve component end strength and civilian FTEs. 

[End of figure] 

Among each of the military services, military and civilian workforce 
growth differed over the course of the conflicts in Iraq and 
Afghanistan; however, most military services project a decrease in the 
military and civilian components of the workforce through fiscal year 
2017. For example, from fiscal year 2001 through fiscal year 2011, the 
Army and the Marine Corps significantly increased the number of active 
component personnel to execute the warfighting effort, whereas during 
this same time period, the Navy and the Air Force decreased the number 
of active component personnel by 14 and 6 percent, respectively. 
During this period of time, the civilian workforce for all of the 
military services also increased. In light of the withdrawal from Iraq 
and planned withdrawal from Afghanistan, as well as changing 
priorities and missions, the Army, the Navy, and the Marine Corps 
project decreases among both the active component and civilian 
workforce by 2017. The Air Force also projects a decrease in the 
number of active component personnel, but projects a civilian 
workforce increase of approximately 1 percent by fiscal year 2017. 
Collectively, the defense-wide organizations, which include the Office 
of the Secretary of Defense, the Joint Staff, and the Defense Agencies 
and Field Activities, project an increase of approximately 1 percent 
for their civilian workforce by fiscal year 2017. Table 1 shows the 
changes in the number and percentage of the military and civilian 
components of the workforce between fiscal years 2001 and 2011, with 
projected changes for fiscal years 2012 through 2017 by service. 

Table 1: Numbers and Percentages of Active Component, Reserve 
Component, and Civilian Workforce Changes from Fiscal Year 2001 to 
Fiscal Year 2011 and Projected Numbers and Percentages from Fiscal 
Year 2012 to Fiscal Year 2017 (workforce numbers in thousands): 

Active component: Army; 
Actuals: 
FY 2001 FTE/end strength: 481,000; 
FY 2011 FTE/end strength: 565,000; 
FTE/end strength change from FY 2001 to FY 2011: 85,000; 
Percentage change from FY 2001 to FY 2011: 18
Projection: 
FY 2012 FTE/end strength: 562,000; 
FY 2017 FTE/end strength: 490,000; 
FTE/end strength change from FY 2012 to FY 2017: (72,000)[A]; 
Percentage change from FY 2012 to FY 2017: (13%)[A]. 

Active component: Navy; 
Actuals: 
FY 2001 FTE/end strength: 378,000; 
FY 2011 FTE/end strength: 325,000; 
FTE/end strength change from FY 2001 to FY 2011: (53,000)[A]; 
Percentage change from FY 2001 to FY 2011: (14%)[A]; 
Projection: 
FY 2012 FTE/end strength: 326,000; 
FY 2017 FTE/end strength: 320,000; 
FTE/end strength change from FY 2012 to FY 2017: (6,000)[A]; 
Percentage change from FY 2012 to FY 2017: (2%)[A]. 

Active component: Marine Corps; 
Actuals: 
FY 2001 FTE/end strength: 173,000; 
FY 2011 FTE/end strength: 201,000; 
FTE/end strength change from FY 2001 to FY 2011: 28,000; 
Percentage change from FY 2001 to FY 2011: 16%; 
Projection: 
FY 2012 FTE/end strength: 202,000; 
FY 2017 FTE/end strength: 182,000; 
FTE/end strength change from FY 2012 to FY 2017: (20,000)[A]; 
Percentage change from FY 2012 to FY 2017: (10%)[A]. 

Active component: Air Force; 
Actuals: 
FY 2001 FTE/end strength: 354,000; 
FY 2011 FTE/end strength: 333,000; 
FTE/end strength change from FY 2001 to FY 2011: (20,000)[A]; 
Percentage change from FY 2001 to FY 2011: (6%)[A]; 
Projection: 
FY 2012 FTE/end strength: 333,000; 
FY 2017 FTE/end strength: 329,000; 
FTE/end strength change from FY 2012 to FY 2017: (4,000)[A]; 
Percentage change from FY 2012 to FY 2017: (1%)[A]. 

Total active components: 
Actuals: 
FY 2001 FTE/end strength: 1,385,000; 
FY 2011 FTE/end strength: 1,425,000; 
FTE/end strength change from FY 2001 to FY 2011: 40,000; 
Percentage change from FY 2001 to FY 2011: 3%; 
Projection: 
FY 2012 FTE/end strength: 1,423,000; 
FY 2017 FTE/end strength: 1,320,000; 
FTE/end strength change from FY 2012 to FY 2017: (102,000)[A]; 
Percentage change from FY 2012 to FY 2017: (7%)[A]. 

Reserve component[D, E]: Army Reserve; 
Actuals: 
FY 2001 FTE/end strength: 206,000; 
FY 2011 FTE/end strength: 205,000; 
FTE/end strength change from FY 2001 to FY 2011: (1,000)[A]; 
Percentage change from FY 2001 to FY 2011: (0%)[A]; 
Projection: 
FY 2012 FTE/end strength: 205,000; 
FY 2017 FTE/end strength: 205,000; 
FTE/end strength change from FY 2012 to FY 2017: none; 
Percentage change from FY 2012 to FY 2017: 0%. 

Reserve component[D, E]: Navy Reserve; 
Actuals: 
FY 2001 FTE/end strength: 88,000; 
FY 2011 FTE/end strength: 65,000; 
FTE/end strength change from FY 2001 to FY 2011: (23,000)[A]; 
Percentage change from FY 2001 to FY 2011: (26%)[A]; 
Projection: 
FY 2012 FTE/end strength: 66,000; 
FY 2017 FTE/end strength: 57,000; 
FTE/end strength change from FY 2012 to FY 2017: (9,000)[A]; 
Percentage change from FY 2012 to FY 2017: (14%)[A]. 

Reserve component[D, E]: Marine Corps Reserve; 
Actuals: 
FY 2001 FTE/end strength: 40,000; 
FY 2011 FTE/end strength: 40,000; 
FTE/end strength change from FY 2001 to FY 2011: 0[A]; 
Percentage change from FY 2001 to FY 2011: 0%[A]; 
Projection: 
FY 2012 FTE/end strength: 40,000; 
FY 2017 FTE/end strength: 40,000; 
FTE/end strength change from FY 2012 to FY 2017: none; 
Percentage change from FY 2012 to FY 2017: 0%. 

Reserve component[D, E]: Air Force Reserve; 
Actuals: 
FY 2001 FTE/end strength: 75,000; 
FY 2011 FTE/end strength: 71,000; 
FTE/end strength change from FY 2001 to FY 2011: (4,000)[A]; 
Percentage change from FY 2001 to FY 2011: (5%)[A]; 
Projection: 
FY 2012 FTE/end strength: 71,000; 
FY 2017 FTE/end strength: 70,000; 
FTE/end strength change from FY 2012 to FY 2017: (2,000)[A]; 
Percentage change from FY 2012 to FY 2017: (3%)[A]. 

Reserve component[D, E]: Army National Guard; 
Actuals: 
FY 2001 FTE/end strength: 352,000; 
FY 2011 FTE/end strength: 362,000; 
FTE/end strength change from FY 2001 to FY 2011: 10,000; 
Percentage change from FY 2001 to FY 2011: 3%; 
Projection: 
FY 2012 FTE/end strength: 358,000; 
FY 2017 FTE/end strength: 353,000; 
FTE/end strength change from FY 2012 to FY 2017: (5,000)[A]; 
Percentage change from FY 2012 to FY 2017: (1%)[A]. 

Reserve component[D, E]: Air Force National Guard; 
Actuals: 
FY 2001 FTE/end strength: 108,000; 
FY 2011 FTE/end strength: 106,000; 
FTE/end strength change from FY 2001 to FY 2011: (3,000)[A]; 
Percentage change from FY 2001 to FY 2011: )3%)[A]; 
Projection: 
FY 2012 FTE/end strength: 107,000; 
FY 2017 FTE/end strength: 101,000; 
FTE/end strength change from FY 2012 to FY 2017: (6,000)[A]; 
Percentage change from FY 2012 to FY 2017: (5%)[A]. 

Total reserve components: 
Actuals: 
FY 2001 FTE/end strength: 869,000; 
FY 2011 FTE/end strength: 848,000; 
FTE/end strength change from FY 2001 to FY 2011: (21,000)[A]; 
Percentage change from FY 2001 to FY 2011: (2%)[A]; 
Projection: 
FY 2012 FTE/end strength: 847,000; 
FY 2017 FTE/end strength: 826,000; 
FTE/end strength change from FY 2012 to FY 2017: (22,000)[A]; 
Percentage change from FY 2012 to FY 2017: (3%)[A]. 

Civilian[B, E]: Army; 
Actuals: 
FY 2001 FTE/end strength: 220,000; 
FY 2011 FTE/end strength: 284,000; 
FTE/end strength change from FY 2001 to FY 2011: 64,000; 
Percentage change from FY 2001 to FY 2011: 29%; 
Projection: 
FY 2012 FTE/end strength: 265,000; 
FY 2017 FTE/end strength: 248,000; 
FTE/end strength change from FY 2012 to FY 2017: (18,000)[A]; 
Percentage change from FY 2012 to FY 2017: (7%)[A]. 

Civilian[B, E]: Navy; 
Actuals: 
FY 2001 FTE/end strength: 177,000; 
FY 2011 FTE/end strength: 189,000; 
FTE/end strength change from FY 2001 to FY 2011: 12,000; 
Percentage change from FY 2001 to FY 2011: 7%; 
Projection: 
FY 2012 FTE/end strength: 190,000; 
FY 2017 FTE/end strength: 189,000; 
FTE/end strength change from FY 2012 to FY 2017: (2,000)[A]; 
Percentage change from FY 2012 to FY 2017: (1%)[A]. 

Civilian[B, E]: Marine Corps; 
Actuals: 
FY 2001 FTE/end strength: 17,000; 
FY 2011 FTE/end strength: 23,000; 
FTE/end strength change from FY 2001 to FY 2011: 7,000; 
Percentage change from FY 2001 to FY 2011: 38%; 
Projection: 
FY 2012 FTE/end strength: 24,000; 
FY 2017 FTE/end strength: 24,000; 
FTE/end strength change from FY 2012 to FY 2017: (1,000)[A]; 
Percentage change from FY 2012 to FY 2017: (3%)[A]. 

Civilian[B, E]: Air Force; 
Actuals: 
FY 2001 FTE/end strength: 160,000; 
FY 2011 FTE/end strength: 184,000; 
FTE/end strength change from FY 2001 to FY 2011: 24,000; 
Percentage change from FY 2001 to FY 2011: 15%; 
Projection: 
FY 2012 FTE/end strength: 186,000; 
FY 2017 FTE/end strength: 187,000; 
FTE/end strength change from FY 2012 to FY 2017: 2,000; 
Percentage change from FY 2012 to FY 2017: 1%. 

Civilian[B, E]: Defense-wide organizations[C]; 
Actuals: 
FY 2001 FTE/end strength: 113,000; 
FY 2011 FTE/end strength: 128,000; 
FTE/end strength change from FY 2001 to FY 2011: 14,000; 
Percentage change from FY 2001 to FY 2011: 12%; 
Projection: 
FY 2012 FTE/end strength: 801,000; 
FY 2017 FTE/end strength: 784,000; 
FTE/end strength change from FY 2012 to FY 2017: (17,000)[A]; 
Percentage change from FY 2012 to FY 2017: (2%)[A]. 

Total civilians: 
Actuals: 
FY 2001 FTE/end strength: 687,000; 
FY 2011 FTE/end strength: 807,000; 
FTE/end strength change from FY 2001 to FY 2011: 120,000; 
Percentage change from FY 2001 to FY 2011: 17%; 
Projection: 
FY 2012 FTE/end strength: 801,000; 
FY 2017 FTE/end strength: 784,000; 
FTE/end strength change from FY 2012 to FY 2017: (17,000)[A]; 
Percentage change from FY 2012 to FY 2017: (2%)[A]. 

Total active, reserves, and civilians: 
Actuals: 
FY 2001 FTE/end strength: 2,941,000; 
FY 2011 FTE/end strength: 3,080,000; 
FTE/end strength change from FY 2001 to FY 2011: 139,000; 
Percentage change from FY 2001 to FY 2011: 5%; 
Projection: 
FY 2012 FTE/end strength: 3,071,000; 
FY 2017 FTE/end strength: 2,930,000; 
FTE/end strength change from FY 2012 to FY 2017: (141,000)[A]; 
Percentage change from FY 2012 to FY 2017: (5%)[A]; 

Source: GAO analysis of DOD data. 

Notes: All end strength and FTE figures are rounded to the nearest 
thousand. Totals might not add due to rounding. 

[A] All figures in parentheses represent declines. 

[B] Civilian FTEs is an estimate of full time direct hires, indirect 
hires, and foreign nationals for each fiscal year. Combatant command 
civilians are included in service totals 

[C] Defense-wide organizations include the Office of the Secretary of 
Defense, the Joint Staff, the Defense Agencies and Field Activities 

[D] The reserve end strength represents the selected reserve and 
excludes the Individual Ready Reserve and the Inactive National Guard 

[E] Dual status technicians are included in both reserve end strength 
and civilian FTEs. 

[End of table] 

Several Factors Affect the Size of DOD’s Workforce: 

DOD and military service officials identified several factors that 
contributed to changes in the size of the military and civilian 
components of the workforce since fiscal year 2001. For example, DOD 
officials noted that the conflicts in Iraq and Afghanistan, as well as 
recognition of the need to rebuild the acquisition workforce, which 
had been significantly reduced during the 1990s, and reduce DOD’s 
reliance on contractors contributed to the shape and size of the 
military and civilian sectors of the workforce over the past decade. 
Further, DOD cited other factors that led to growth within the 
civilian workforce, such as the department’s new cyber mission and 
areas specifically designated by Congress. The following are examples 
that DOD officials have cited as contributing to the change in the 
size and mix of DOD’s workforce. 

* Military to civilian/contractor conversion: DOD officials stated 
that about 50,000 military positions were converted to DOD civilian 
positions or contractor performance since fiscal year 2004 to devote 
more military positions to support of ongoing military operations. 
Conversion to civilian performance may not be one-for-one due to 
differences in military and civilian availability and productivity 
rates. For example, civilians who are typically hired must be 
qualified for their position, whereas military personnel often require 
on-the-job training in addition to technical training received prior 
to assignments. DOD’s military to civilian conversions were partly due 
to the high pace of operations that occurred after September 11, 2001, 
which created significant stress on the military’s operating forces. 
Further, in late 2003, DOD reported that studies had found thousands 
of military personnel were being used to accomplish work tasks that 
were not military essential. DOD found that civilians or contractors 
could perform these tasks in a more efficient and cost-effective 
manner than military personnel. The Navy and the Air Force reduced 
their military end strength when functions performed by military 
billets, or positions, were converted to civilian or contractor 
performance. Conversely, when the Army and the Marine Corps converted 
functions performed by military billets to DOD civilians, they 
retained these military billets to be used in the operating force. 

* Contractor to civilian conversion (in-sourcing): DOD officials noted 
that in-sourcing, or converting previously contracted functions to 
performance by civilians, has been an effective tool for the 
department to rebalance its workforce, realign inherently governmental 
and other critical and core functions to government performance, and 
in many cases, generate resource efficiencies for higher priority 
goals. In April 2009, the Secretary of Defense announced his intention 
to reduce the department’s reliance on contractors and increase 
funding for new civilian authorizations. In our February 2012 report, 
DOD officials stated that they could not determine the number of 
contractor FTEs whose functions were in-sourced because DOD contracts 
for services, not positions,[Footnote 32] and the number of contractor 
FTEs used to perform a service is determined by each private sector 
provider. Nonetheless, one of the data elements DOD is required to 
collect and include in its inventory of contracted services is the 
number of contractor FTEs performing each identified activity pursuant 
to a contract. 

* Growth of acquisition workforce: DOD officials noted that rebuilding 
the acquisition workforce is another reason for growth. In our June 
2012 report, we reported that according to DOD officials, the civilian 
acquisition workforce gained about 17,500 positions from fiscal year 
2009 to December 2011.[Footnote 33] As noted previously, a portion of 
this growth was attributed to in-sourcing. The acquisition workforce 
had experienced significant erosion in some areas of expertise due to 
a nearly 50 percent cut in its workforce during the 1990s. This 
reduction took place as part of DOD’s larger effort to reduce its 
civilian workforce by nearly 20 percent overall during that time. When 
we evaluated DOD’s approach to this force reduction in 1992, we found 
that it was not oriented toward shaping the makeup of the workforce, 
resulting in significant imbalances in terms of shape, skills, and 
retirement eligibility.[Footnote 34] At that time, we found that the 
department’s efforts were hampered by incomplete data and lacked a 
clear strategy for avoiding the adverse effects of downsizing and 
minimizing skills imbalances. The downsizing produced serious 
imbalances in the skills and experience of the highly talented and 
specialized civilian acquisition workforce, putting DOD on the verge 
of a retirement-driven talent drain that has had long-lasting 
implications. To help alleviate some of these long standing challenges 
and provide additional funds for the recruitment, training, and 
retention of acquisition personnel, in 2008, Congress established the 
Defense Acquisition Workforce Development Fund (DAWDF).[Footnote 35] 
DOD officials stated that of the approximately 17,500 positions, about 
5,850 were hired using DAWDF funds. 

* Growth of cyber security workforce: DOD officials stated that focus 
on the new cyber mission increased the size of the cyber workforce. 
DOD’s 2010 Quadrennial Defense Review designated cyberspace operations 
as a key mission area and discussed steps the department was taking to 
strengthen capabilities in the cyber domain, including developing a 
department-wide comprehensive approach to DOD operations in cyberspace 
that will help build an environment in which cyber security and the 
ability to operate effectively in cyberspace are viewed as priorities 
for DOD. According to the Quadrennial Defense Review, to aid its 
efforts in countering cyberspace threats, DOD established the U.S. 
Cyber Command in 2010 to lead, integrate and better coordinate the day-
to-day defense, protection, and operation of DOD networks. In November 
2011, we reported that DOD established a cybersecurity workforce plan 
but faced challenges in determining the size of its cybersecurity 
workforce because of variations in how work is defined and the lack of 
an occupational series specific to cybersecurity.[Footnote 36] For 
these reasons, in February 2013, we included workforce planning for 
cybersecurity personnel as a factor in designating human capital 
management as a high risk area for the federal government.[Footnote 37] 

The withdrawal from Iraq and planned withdrawal from military 
operations in Afghanistan will impact both the military and, to some 
extent, the civilian workforce. DOD currently projects a reduction in 
its civilian workforce by 2 percent from fiscal year 2012 through 
fiscal year 2017. Several factors have prompted the department to 
develop plans to reshape and possibly reduce the numbers of civilians 
performing certain functions, while other needs may require additional 
civilian positions. DOD and military service officials identified the 
following factors as key drivers of projected future change within 
DOD’s total workforce. 

* Shift in focus to Pacific region: DOD is refocusing its strategy in 
the Asia-Pacific region in the interest of promoting regional security 
with its allies in the area. DOD officials stated that this 
restructuring could result in a reshaped force and might require 
changes to installations and support as forces are restructured. 

* Budget constraints and uncertainty: DOD, as well as the entire 
federal government, is currently operating in a fiscally constrained 
environment. The Office of the Secretary of Defense, the military 
departments, and other organizations within DOD have issued guidance 
to their commands on immediate actions that can be taken to mitigate 
some, but not all, of the effects of a constrained budget in the near-
term. Actions include implementing a civilian hiring freeze, reducing 
temporary employees, and furloughing the civilian workforce. 

* Efficiency initiatives: As the federal government confronts growing 
fiscal challenges and DOD faces competition for funding, DOD announced 
efficiency initiatives in 2010, which the Secretary of Defense stated 
were to reduce duplication, overhead, and excess, and instill a 
culture of savings and restraint across the department. Some of the 
efficiency initiatives focused directly on civilian workforce levels, 
including the goals of reducing civilian positions in offices and 
commands across DOD, attempting to hold the civilian workforce level 
constant at fiscal year 2010 levels, the elimination of some civilian 
senior executive positions, and the disestablishment of the Business 
Transformation Agency and Joint Forces Command. 

* Continued growth of cyber workforce: According to officials we spoke 
to from each of the services, DOD is continuing to focus its resources 
on emerging threats such as cyber attacks. For example, efforts are 
underway to further develop and implement the cyber mission. Each 
service has its own part in this mission and expects a continued 
hiring increase in civilian personnel with skills in cybersecurity. 
Further, the Secretary of Defense recently stated that the cyber 
mission is critical for the department and will continue to be an 
investment priority. 

* Equipment reset: Military service officials stated that the 
equipment that returns from the military operations in Afghanistan 
will be sent to depots for repair and maintenance. Reset work, which 
is performed, in part, by the civilian workforce, will take two to 
three years to complete.[Footnote 38] 

* Medical assistance for returning servicemembers: More than a decade 
of fighting two wars has resulted in a large number of soldiers, 
marines, sailors, and airmen needing medical care, including, among 
other things, adjusting to the use of prosthetic limbs and treatment 
for post traumatic stress disorder and traumatic brain injuries. DOD 
officials stated that it will be important to retain and recruit 
additional medical personnel to continue to provide for the medical 
needs of servicemembers, who can sometimes require long-term care. 

We analyzed the active component of the military and civilian 
workforce to provide further perspectives on areas of growth between 
fiscal years 2001 and 2011. Our analysis of active component end 
strength and civilian FTEs by force and infrastructure categories 
[Footnote 39] shows that between fiscal years 2001 and 2011, the 
civilian workforce generally grew while the active component workforce 
generally declined in most force and infrastructure categories 
compared to fiscal year 2001. For example, from fiscal year 2001 
through fiscal year 2011, the acquisition infrastructure 
workforce[Footnote 40] and the defense health program civilian 
workforce grew by 15 percent and 57 percent respectively, while the 
active component declined in those categories by 16 percent and 3 
percent respectively. Further, according to DOD officials, the growth 
from fiscal year 2001 through fiscal year 2011 of the civilian 
workforce in certain categories such as operating forces and command 
and intelligence was in large part due to military to civilian 
conversions. Table 2 shows the growth and decline of various force and 
infrastructure categories. 

Table 2: Percentage of Active Component End Strength and Civilian Full 
Time Equivalent (FTE) Growth and Decline from Fiscal Year (FY) 2001 to 
Fiscal Year 2011 by Force and Infrastructure Category: 

Force and Infrastructure Category: Operating Forces; 
Growth/decline from FY 2001 to FY 2011: 
Active component: 17% 
Civilian: 58%. 

Force and Infrastructure Category: Acquisition Infrastructure;
Growth/decline from FY 2001 to FY 2011: 
Active component: (16%)[A]; 
Civilian: 15%. 

Force and Infrastructure Category: Central Logistics; 
Growth/decline from FY 2001 to FY 2011: 
Active component: (46%)[A]; 
Civilian: (10%)[A]. 

Force and Infrastructure Category: Central Personnel Administration; 
Growth/decline from FY 2001 to FY 2011: 
Active component: (31%)[A]; 
Civilian: 23%. 

Force and Infrastructure Category: Central Personnel Benefits Programs;
Growth/decline from FY 2001 to FY 2011: 
Active component: (27%)[A]; 
Civilian: (7%)[A]. 

Force and Infrastructure Category: Central Training; 
Growth/decline from FY 2001 to FY 2011: 
Active component: (13%)[A]; 
Civilian: (24%)[A]. 

Force and Infrastructure Category: Command and Intelligence; 
Growth/decline from FY 2001 to FY 2011: 
Active component: 23%
Civilian: 93%. 

Force and Infrastructure Category: Communications and Information; 
Infrastructure; 
Growth/decline from FY 2001 to FY 2011: 
Active component: (29%)[A]; 
Civilian: (11%)[A]. 

Force and Infrastructure Category: Defense Health Program; 
Growth/decline from FY 2001 to FY 2011: 
Active component: (3%)[A]; 
Civilian: 57%. 

Force and Infrastructure Category: Departmental Management;
Growth/decline from FY 2001 to FY 2011: 
Active component: (5%)[A]; 
Civilian: 13%. 

Force and Infrastructure Category: Force Installations; 
Growth/decline from FY 2001 to FY 2011: 
Active component: (52%)[A]; 
Civilian: 32%. 

Force and Infrastructure Category: Science and Technology Program; 
Growth/decline from FY 2001 to FY 2011: 
Active component: (13%)[A]; 
Civilian: 35%. 

Source: GAO analysis of DOD data. 

[A] All figures in parentheses represent declines. 

[B] Projected end strength by force and infrastructure category does 
not include end strength funded in supplemental appropriations. 

[End of table] 

Comparable Historical Data on Contractor Workforce Are Not Available, 
but Spending on Contracted Services Has Increased Significantly Since 
2001: 

Historical information on the trends of the contractor component of 
DOD’s total workforce since 2001 that would be comparable to 
information known about the military and civilian components is not 
available. This has occurred in part because DOD contracts for 
services, not individuals, and because DOD was not required to track 
such information until 2008 when Congress required DOD to compile its 
first annual inventory of contracted services, starting with the 
services DOD contracted for in fiscal year 2007. To date, DOD has 
submitted annual inventories of contracted services to Congress for 
fiscal years 2007,[Footnote 41] 2008, 2009, 2010, and 2011[Footnote 
42] However, DOD officials cautioned against comparing the number of 
contractor FTEs reported across fiscal years because of differences in 
the estimating formula, changes in reporting for the research and 
development category, and other factors.[Footnote 43] In fiscal year 
2011, DOD reported that about 710,000 contractor FTEs were performing 
various functions pursuant to contracts for services—-about 90 percent 
of the size of DOD’s civilian workforce of 807,000 FTEs. Further, in 
its fiscal year 2011 inventory, DOD reported that these 710,000 
contractor FTEs provided services to DOD under contracts with 
obligations totaling about $145 billion.[Footnote 44] Table 3 shows 
the total number of estimated contractor FTEs reported and obligation 
dollars reported in DOD’s inventory of contracted services for fiscal 
years 2008 through 2011. 

Table 3: Estimated Number of Contractor Full Time Equivalents (FTE) 
and Obligations as Reported in DOD’s Inventory of Contracted Services: 

Fiscal Year: 2011; 
Number of contractor FTEs reported: 710,000 
Obligation Total: $145 billion[A]. 

Fiscal Year: 2010; 
Number of contractor FTEs reported: 623,000 
Obligation Total: $121 billion[A]. 

Fiscal Year: 2009; 
Number of contractor FTEs reported: 767,000 
Obligation Total: $155 billion[A]. 

Fiscal Year: 2008; 
Number of contractor FTEs reported: 655,000 
Obligation Total: $127 billion[A]. 

Source: DOD’s inventory of contracted services. 

Notes: The changes in DOD’s overall approach, in particular how DOD as 
a whole reflected research and development services and the use of 
different formulas for estimating contractor FTEs, among other 
factors, affected the reported changes in inventory data from year to 
year. Consequently, we and DOD officials agree that caution should be 
exercised when making direct comparisons between fiscal years 2008 
through 2011 inventory data. All full time equivalent figures are 
rounded to the nearest thousand. 

[A] The Army’s inventory data reflects total invoiced dollar amounts 
rather than obligations. 

[End of table] 

In terms of DOD’s obligations for contracted services, our analysis of 
DOD budget documentation using fiscal year 2013 constant dollars shows 
that DOD’s obligations on contracted services peaked in fiscal year 
2010 at about $195 billion, more than twice the amount spent in fiscal 
year 2001, before decreasing to about $174 billion in fiscal year 
2012. Figure 3 shows the obligated dollars for contracted services for 
fiscal years 2001 through 2012 and the projected obligated dollars for 
fiscal years 2013 and 2014. 

Figure 3: Obligations for Contracted Service Actions, Fiscal Years 
2001 through 2014: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2001; 
Actual obligated dollars: $96 billion. 

Fiscal year: 2002; 
Actual obligated dollars: $110 billion. 

Fiscal year: 2003; 
Actual obligated dollars: $141 billion. 

Fiscal year: 2004; 
Actual obligated dollars: $148 billion. 

Fiscal year: 2005; 
Actual obligated dollars: $158 billion. 

Fiscal year: 2006; 
Actual obligated dollars: $154 billion. 

Fiscal year: 2007; 
Actual obligated dollars: $174 billion. 

Fiscal year: 2008; 
Actual obligated dollars: $185 billion. 

Fiscal year: 2009; 
Actual obligated dollars: $190 billion. 

Fiscal year: 2010; 
Actual obligated dollars: $195 billion. 

Fiscal year: 2011; 
Actual obligated dollars: $184 billion. 

Fiscal year: 2012; 
Actual obligated dollars: $174 billion. 

Fiscal year: 2013; 
Projected obligated dollars: $164 billion. 

Fiscal year: 2014; 
Projected obligated dollars: $124 billion. 

Source: GAO analysis of DOD object class 25 data from budget documents. 

Note: Fiscal year 2001 through 2012 are actual obligations, while 
fiscal year 2013 and 2014 represent projections. We relied on budget 
data on obligations for contracted services (object class 25). We 
excluded object class 25.3 that represents dollars obligated for goods 
and services from federal sources. We adjusted the current dollars to 
constant fiscal year 2013 dollars using the Gross Domestic Product 
price index to eliminate the effects of inflation. 

[End of figure] 

In addition to the withdrawal from military operations in Iraq and 
Afghanistan, the decline since fiscal year 2010 and projected decline 
through fiscal year 2014 in obligations for contracted services can be 
attributed, in part, to several actions taken by Congress and DOD over 
the past several years. For example, in August 2010, the Secretary of 
Defense announced plans to reduce funding for a subset of service 
contracts, service support contracts, by 10 percent per year from 
fiscal years 2011 to 2013. Moreover, DOD is subject to a statutory cap 
on obligations for contracted services for fiscal years 2012 and 2013, 
which may not exceed the amount requested in the President’s budget 
for fiscal year 2010, and we are required to report on the results of 
this effort later this year. More recently, in February 2013, the 
Office of the Assistant Secretary of Defense for Readiness and Force 
Management issued guidance stating that during this time of continued 
budget uncertainty, contracted services must continue to be reviewed 
to ensure the most appropriate, cost effective, and efficient support 
aligned to mission. 

DOD Has Taken Some Steps Useful for Determining the Appropriate Mix of 
Its Workforce, but Shortcomings Remain: 

DOD has taken some steps to improve its understanding and management 
of its workforce, including service-specific efforts to obtain better 
data about the workforce; however, several shortcomings remain. 
Specifically, DOD has yet to include an assessment of the appropriate 
mix of military, civilian, and contractor personnel capabilities in 
its strategic workforce plan as required by law. Further, DOD has not 
updated its policies and procedures to reflect the most current 
statutory requirements to use its civilian strategic workforce plan 
and the inventory of contracted services to help determine the 
appropriate mix of personnel in its workforce. 

DOD’s Efforts to Obtain Better Information on Workforce Capacity 
Continue to Face Challenges: 

DOD has taken some steps to develop better information and data about 
the size, capabilities, and skills possessed and needed by its 
workforce, but gaps remain. As part of the statutory requirement to 
develop a civilian strategic workforce plan, DOD has been mandated 
since 2006 to assess the critical skills and competencies of its 
current and future civilian workforce and to assess gaps in those 
areas.[Footnote 45] To date, DOD has developed and updated its 
strategic workforce plan four times. In its latest strategic plan 
issued in March 2012, DOD identified 22 mission critical occupations, 
which according to DOD are civilian personnel occupations that merit 
special attention based on their importance and the presence of human 
capital challenges. In September 2012, we issued a report on DOD’s 
March 2012 plan that found that DOD had conducted competency gap 
analyses for just 8 of the 22 mission critical occupations identified 
in the plan, and it still did not contain an assessment of the 
appropriate workforce mix as required by law.[Footnote 46] Examples of 
occupations where DOD did not report conducting gap analyses included 
budget analysis, information technology management, and logistics 
management. Many of the occupations are associated with areas 
identified in our high-risk report.[Footnote 47] We recommended that 
DOD conduct and report on gap analysis of its mission critical 
occupations, and DOD partially concurred with this recommendation and 
stated that it plans to complete competency gap analysis for mission 
critical occupations and other major civilian occupations by fiscal 
year 2015. 

Further, section 115b of title 10 of the United States Code requires 
DOD to include in its strategic workforce plan an assessment of the 
appropriate mix of military, civilian, and contractor personnel 
capabilities.[Footnote 48] However, as we have previously reported, 
DOD did not include an assessment of the appropriate mix of military, 
civilian, and contractor personnel or an assessment of the 
capabilities of each of these workforces.[Footnote 49] In the most 
recent version of the strategic workforce plan issued in March 2012, 
DOD included information submitted by 11 functional communities, which 
are groups of employees who perform similar functions. We found that 2 
of the 11 functional communities included in the plan-—the medical and 
human resources functional communities—provided data on the mix of 
their workforces, while 9 communities provided partial or no data. For 
example, the logistics and information-technology functional 
communities provided only the military and civilian workforce data and 
did not include contractor workforce data. In September 2012, we 
recommended that DOD direct the functional communities to collect 
information that identifies not only the number or percentage of 
personnel in its military, civilian, and contractor workforces but 
also the capabilities of the appropriate mix of those three 
workforces, and DOD partially concurred with this recommendation. 
Further, in January 2013, we recommended that DOD use competency gap 
analyses to assist in decision making regarding the size of its 
civilian workforce.[Footnote 50] 

Congress has also required several actions to provide more complete 
and accurate information about DOD’s contractor workforce similar to 
the type of information DOD already has about its civilian and 
military workforces, such as the requirement, as noted previously, to 
compile an inventory of contracted services, including the number of 
contractor FTEs performing services for DOD and the type of functions 
they perform.[Footnote 51] Section 2330a of title 10 of the United 
States Code requires DOD to submit to Congress an annual inventory of 
contracted services. This section further requires each DOD component 
head to conduct comprehensive reviews of these services to determine, 
for example, whether they are inherently governmental, critical, or 
acquisition workforce functions, and whether performance of such 
functions by contractors should be converted to performance by the 
civilian workforce. Additionally DOD component heads are required to 
develop a plan, including an enforcement mechanism and approval 
process, to provide for the use of the inventory to implement the 
requirements of 10 U.S.C. § 129a, such as using the inventory in 
making workforce mix decisions, to inform strategic workforce 
planning, such as the strategic workforce plan required by 10 U.S.C. § 
115b, and to facilitate the use of the inventory for compliance with 
10 U.S.C. § 235, which requires the inclusion of certain contractor 
information in budget submissions. We previously reported that while 
DOD made a number of changes to improve the inventory, there were 
still factors that limited the utility, accuracy, and completeness of 
the inventory data. Therefore, we made a series of recommendations to 
DOD to further improve its inventory of contracted services.[Footnote 
52] 

During the course of this review, we found that some of the military 
services are taking additional steps to better manage their civilian 
or total workforces. For example, Army officials stated that they 
developed a list of nearly 40 mission critical occupations that are 
specific to the Army, which are in addition to the department wide 
mission critical occupations identified in the most recent version of 
the civilian strategic workforce plan, and that they plan to complete 
competency gap analyses for the Army-specific mission critical 
occupations by the end of 2014. Officials from the Marine Corps 
reported that they are developing a six step process for strategic 
workforce management planning to be implemented at the command level 
by late 2013. These officials stated that the process would include 
steps such as assessing current and future missions, performing gap 
analysis, and developing action plans to address gaps. 

DOD Has Not Updated Its Workforce Policies to Reflect the Most Recent 
Statutory Requirements for Workforce Mix Determinations: 

DOD’s primary policies for determining workforce mix-—DOD Directive 
1100.4 and DOD Instruction 1100.22—-largely reflect statutory 
requirements for DOD policies concerning workforce mix, though there 
are several recent amendments that have yet to be incorporated. 
[Footnote 53] The directive provides general guidance concerning 
determining requirements, managing resources, and future planning, 
while the instruction provides manpower mix criteria and guidance for 
determining how individual positions should be designated based on the 
work performed. For example, the latter provides guidance concerning 
how to identify whether a task is inherently governmental, and 
consequently must be performed by military personnel or civilians, or 
whether a commercial activity should be performed by the contractor 
workforce or meets DOD criteria to exempt the activity from contract 
performance. Officials from the Office of the Undersecretary of 
Defense, Personnel and Readiness told us that they review shifts in 
trends among the various segments of the workforce, and that they rely 
upon the oversight of the military services to determine which segment 
of the workforce should perform specific types of work in accordance 
with DOD guidance. 

Various OSD officials further noted that the requirements 
determination process is associated with the department’s Planning, 
Programming, Budgeting and Execution processes to help ensure fully 
informed risk and cost decisions are translated into justified and 
transparent manpower requirements. DOD Instruction 1100.22 states that 
the heads of the DOD components shall require their designated 
manpower authority to issue implementing guidance that requires the 
use of the instruction when manpower officials determine the workforce 
mix for current, new, or expanded missions, or when revalidating 
manpower requirements, among other circumstances. Each military 
service has issued service-specific workforce management guidance that 
implements the DOD-wide instruction as required and officials we spoke 
with from each service stated that the DOD-wide guidance was used when 
making workforce mix decisions. To make workforce decisions, manpower 
officials within the components are to identify the appropriate 
workforce component to perform the activity based on the nature of the 
work and circumstances of its performance as outlined in the 
instruction. Criteria are reviewed to determine if the work associated 
with the activity is an inherently governmental function, exempt from 
commercial performance, or suitable for performance by contractors, 
and for work that is inherently governmental or exempt from commercial 
performance, whether the work should be performed by military 
personnel or civilian personnel. The focus of the process of 
determining the workforce mix is primarily at the position level, as 
opposed to a holistic view of the overall appropriate mix of military, 
civilian, and contractor personnel. 

DOD issued its directive and instruction in February 2005 and April 
2010, respectively, prior to significant changes to relevant 
legislation in December of 2011.[Footnote 54] Prior to these 2011 
changes, the legislation governing DOD’s personnel required that the 
department use the least costly form of personnel consistent with 
military requirements and other departmental needs. Section 129a was 
revised to clarify that when determining the most appropriate and cost 
efficient mix of military, civilian, and contractor personnel to 
perform the mission of the department, that the attainment of a DOD 
workforce sufficiently sized and comprised of the appropriate mix of 
personnel necessary to carry out DOD’s mission and the core mission 
areas of the armed forces takes precedence over cost. The law also 
specifies that the Secretary of Defense shall establish policies and 
procedures that shall specifically require DOD to use, among other 
things, the civilian strategic workforce plan[Footnote 55] and the 
inventory of contracted services[Footnote 56] when making 
determinations regarding the appropriate workforce mix. Although DOD 
Instruction 1100.22 had already addressed the requirement that risk 
mitigation take precedence over cost in making workforce decisions 
prior to the enactment of section 129a, DOD has not yet implemented 
the new requirement that determinations regarding the appropriate 
workforce mix be made using the civilian strategic workforce plan and 
the inventory of contracted services. As a result, DOD decision makers 
may lack key elements necessary to make appropriate, informed 
decisions concerning DOD’s mix of personnel because the department has 
not updated its existing policies and procedures or issued new 
guidance for determining workforce mix that reflects the new statutory 
requirements. OSD officials stated that both DOD Directive 1100.4 and 
DOD Instruction 1100.22 are currently under revision, and stated that 
they intend to revise DOD Directive 1100.4 to require the use of the 
inventory of contracted services to inform budget requests and 
decisions for total force management. The officials provided a draft 
of the directive for our review and stated that is was in the early 
stages of coordination and review. DOD did not provide a draft of the 
instruction or discuss timelines for issuance of a revised instruction. 

Related to the statutory changes to departmentwide workforce 
management, similar legislation requires certain defense components to 
use the inventory of contracted services as part of their strategic 
workforce management. Specifically, 10 U.S.C. § 2330a(e) requires that 
DOD component heads perform a review of the contracts and activities 
in the inventory to ensure that the activities on the list do not 
include inherently governmental functions or illegal personal services 
contracts, and, to the maximum extent practicable, do not include 
functions closely associated with inherently governmental functions. 
The review is also required to identify activities that should be 
considered for conversion to civilian performance pursuant to 10 
U.S.C. § 2463. In 2012, our review of DOD’s fiscal year 2010 inventory 
of contracted services found that the military departments’ required 
reviews of their fiscal year 2009 inventories were incomplete, and 
that with the exception of the Army, DOD had much further to go in 
addressing the requirements for compiling and reviewing the 
inventories of contracted services.[Footnote 57] 

Additionally 10 U.S.C. § 2330a(f) requires the secretaries of the 
military departments and heads of the defense agencies to develop a 
plan, including an approval process and enforcement mechanism, to 
provide for the use of the inventory of contracted services to 
implement the requirements of 10 U.S.C. § 129a, to ensure the 
inventory is used to inform strategic workforce planning, such as the 
strategic workforce plan (as required by 10 U.S.C. § 115b), and to 
determine the appropriate workforce mix necessary to perform its 
mission. However, the extent to which the military departments have 
developed the required plans and accompanying approval process and 
enforcement mechanism varies. Some military department officials 
indicated that they are in the final stages of developing a plan to 
integrate the required information, and other military department 
officials stated that they plan to move forward once better 
information on contractors required by the inventory of contracted 
services becomes available. For example, 

* Army manpower officials stated that the Army had conducted analyses 
that could support the required plan. Regarding the required 
enforcement mechanism and approval process, an Army official stated 
that the Army has established its Panel for the Documentation of 
Contractors review process, which requires commands to fill in a pre-
award contract approval form in order to justify a request to procure 
services. This form asks executives to certify that contracted 
services do not include inherently governmental functions, among other 
things. In addition, the official stated that the Army’s annual 
inventory of contracted services, and its inventory review process, 
the Panel for the Documentation of Contractors, are intended to inform 
strategic workforce planning, provide information for in-sourcing 
decisions, and to the extent possible, inform budget requests. 

* Air Force manpower officials stated that while the Air Force lacks a 
single plan, a number of separate efforts are moving towards the 
required elements of the plan. The officials stated that the Air Force 
plans to modify its manpower data system to accommodate the important 
contractor information captured in and required by the inventory of 
contracted services, and then define the utilization, approval and 
enforcement process in an Air Force Instruction. 

* Navy manpower officials stated that the Navy has authorized the 
establishment of a Total Force Integration Board, including multiple 
stakeholders, to address all required elements. Marine Corps personnel 
officials stated that the Marine Corps is awaiting guidance from the 
Department of the Navy on a proposed plan and the related enforcement 
mechanism. 

Given the absence of updated guidance and key data concerning each 
segment of its workforce, DOD lacks assurance that the performance of 
key functions is properly balanced across the military, civilian, and 
contractor segments of its workforce to achieve the total force 
management objectives and avoid inappropriate operational risk. The 
absence of updated guidance and lack of accurate information 
concerning the activities performed by each segment of DOD’s workforce 
means that in the context of challenging fiscal realities, DOD leaders 
may lack knowledge to determine the most appropriate overall mix of 
military, civilian, and contractor personnel and competencies that 
could help them make more informed decisions concerning departmental 
priorities and associated costs. Our prior work has identified the 
need for DOD to obtain better data on its contracted services to 
enable it to make more strategic workforce decisions and ensure that 
it maintains appropriate control of government operations. For 
example, we previously reported in April 2012 that reviews conducted 
by the Army and Air Force of their inventory of contracted services 
identified 1,935 and 91 instances, respectively, in which contractors 
were performing inherently governmental functions. However, in our 
2012 report, we found that in several of those cases contractors were 
still performing that work and there were no clear lines of 
responsibility for addressing those instances.[Footnote 58] Army 
officials also noted that DOD’s decision to freeze civilian FTEs at 
fiscal year 2010 levels was an impediment to resolving the performance 
of these inherently governmental functions by contractors. We note, 
however, that in January 2013 we found that despite obtaining 
exceptions to adjust their fiscal year 2012 targets above the fiscal 
year 2010 civilian FTE level, the Army exceeded its target; the Air 
Force and Navy met their target civilian FTE levels.[Footnote 59] 
Without better guidance and data that informs the determination of the 
appropriate mix, DOD may be challenged to fully meet legislative 
requirements regarding the management of its workforce 

DOD Defines the Core Missions of the Department, but Current Policy 
Does Not Fully Reflect the Need to Identify Critical Functions: 

DOD clearly identifies the core mission areas of the armed forces, 
which cover broad areas of military activity that the department is 
statutorily required to identify, but given the wide range of missions 
and responsibilities of its various components, DOD has not developed 
a list of “core or critical functions” for the department as a whole, 
nor is it required to do so. OMB policy requires executive agencies to 
identify critical functions in the context of contracting; but DOD’s 
current workforce mix policies do not fully reflect the need to 
identify critical functions, and as such the department may not have 
assurance that it properly identifies and retains the ability to 
maintain control over critical functions. 

DOD Clearly Defines Core Mission Areas: 

DOD clearly identifies the core mission areas of the armed forces, but 
it does not perform analysis to specifically identify a list of “core 
or critical functions.” Section 129a of Title 10 of the United States 
Code requires that the Secretary of Defense adopt policies that 
clearly provide that the attainment of a workforce sufficiently sized 
and comprised of the appropriate mix of personnel necessary to carry 
out the mission of the department and the core mission areas of the 
armed forces takes precedence over cost.[Footnote 60] The core mission 
areas of the armed forces are broad strategic military activities 
required to achieve strategic objectives of the National Defense 
Strategy and National Military Strategy, such as providing homeland 
defense and carrying out major combat operations, in support of DOD’s 
overall mission to deter war and provide for the security of the 
nation.[Footnote 61] The core mission areas are identified in DOD’s 
Quadrennial Roles and Missions Review Report which is issued near the 
end of implementation of the department’s quadrennial defense review 
cycle. DOD manpower officials we spoke with stated that this top-level 
direction is communicated throughout the department. 

Determining the core or critical work of the department can be 
complicated by the various contexts under which the terms “core” or 
“critical,” are used. For example, as discussed previously in this 
report, DOD identifies “mission critical occupations” in its strategic 
workforce plan. These are occupations that merit special attention 
based on their importance and the presence of human capital 
challenges, and only apply to the civilian workforce. On the other 
hand, OMB policy requires that the executive agencies define “critical 
functions to ensure that they have sufficient internal capability to 
maintain control over certain functions that are core to the agency’s 
mission and operations. 

DOD Policy Does Not Fully Reflect Federal Requirements to Identify 
Critical Functions: 

DOD’s current workforce mix policy, DOD Instruction 1100.22, does not 
fully reflect the need to identify critical functions. Office of 
Federal Procurement Policy Policy Letter 11-01 (OFPP 11-01),[Footnote 
62] issued in September 2011, requires agencies to identify “critical 
functions” to ensure that they have sufficient internal capability, in 
DOD’s case civilian and military personnel, to maintain control over 
functions that are core to the agency’s mission and operations, but 
are otherwise permissible to contract out to the private sector. 
[Footnote 63] The identification of critical functions would help 
ensure that DOD can accomplish its mission even if contractors are 
unable to perform or otherwise default on their contractual 
responsibilities. While critical functions often represent important 
functions that may be necessary in support of the department’s 
mission, they do not include functions that are inherently 
governmental in nature, or functions that are closely associated with 
inherently governmental functions. 

DOD officials stated that they do not plan to develop a list of 
critical functions for the department as a whole because the missions 
of organizations within a department as large as DOD vary 
considerably, and that other designations serve the same purpose. 
Further, they stated a function that might be critical for one 
organization may be a lesser priority, and therefore not critical, for 
another. DOD officials told us that the designation of billets or 
positions as exempt from commercial performance (commercial-exempt 
billets) meets the intention of identifying critical functions. Based 
on guidance in DOD Instruction 1100.22, DOD components review all 
billets on an annual basis to determine which segment of the workforce 
should perform certain types of work. The Instruction provides for a 
variety of reasons for which a billet may be given a commercial-exempt 
designation, thereby reserving that billet for performance by civilian 
or military personnel. However, under this Instruction, positions may 
be designated as commercial exempt for a variety of reasons aside from 
their possible consideration as critical, including reasons such as 
esprit d’ corps and professional development. It is therefore unclear 
how DOD can determine if the exemption of individual positions from 
commercial performance ensures that DOD maintains sufficient internal 
capability to retain control over critical functions. 

DOD’s current guidance does not fully reflect the need to identify 
critical functions as required by federal policy because DOD has not 
updated its workforce policies and procedures to reflect the 
requirements of OFPP 11-01. Officials from OFPP stated that many of 
the general principles behind OFPP 11-01 were reflected in DOD’s 
current guidance, but acknowledged that current DOD guidance may not 
specifically incorporate the concept of critical functions as defined 
by the policy letter. Part of the impetus for the guidance was the 
need to provide a consistent understanding of the term “critical 
functions”. Ensuring that DOD maintains sufficient internal capability 
to maintain control over its mission is a key aspect of ensuring that 
departmental officials have enough information and expertise to be 
accountable for the work product and can continue critical operations 
with in-house resources should contractor assistance be withdrawn. 
Absent specific policies and procedures that delineate requirements 
relating to critical functions and explain how components should 
identify these functions, DOD may lack assurance that it properly 
identifies and retains the ability to maintain control over critical 
functions. These efforts may be further hampered by the lack of 
sufficient information necessary for DOD to make strategic 
determinations of an appropriate workforce mix, as it may be difficult 
for the department to determine if it has sufficient internal 
capability to perform a critical function should contractors default 
on their responsibilities. 

DOD Components Used the Inventory of Contracted Services and Other 
Data in Budget Submissions, but the Projections Have Significant 
Limitations: 

DOD components we reviewed used various methods and data sources, 
including their inventories of contracted services, to project 
contractor FTEs for their fiscal year 2013 and 2014 budget 
submissions, but our analysis found that the components’ contractor 
FTE projections have significant limitations. DOD’s Comptroller 
directed DOD components to report contractor FTEs in their budget 
submissions that were consistent with both the inventories, and 
funding levels of contracted services. Among the challenges 
encountered by the DOD components in using the inventory of contracted 
services, however, are the use of estimating techniques based on 
inventory data that may not be accurate or current, and the lack of a 
crosswalk between the inventory of contracted services and specific 
budget lines of accounting. While the Army has a process that 
addresses these challenges, it may be several years before the 
remaining DOD components are able to do the same. DOD is taking steps 
to help the remaining components address these challenges, but, in the 
meantime, the budget does not provide an explanation of how the 
contractor FTE estimates are derived and what limitations apply. 
Disclosure of this information would help ensure that decision makers 
draw informed conclusions. 

DOD Components’ Budget Submissions Included Contractor FTE Information 
for Fiscal Years 2013 and 2014, but the Accuracy of these Projections 
Is Questionable: 

In December 2011, the Comptroller issued guidance to defense 
components instructing them to report contractor FTEs and funding 
levels for contracted services in their fiscal year 2013 budget 
submissions in accordance with 10 U.S.C. § 235.[Footnote 64] 
Specifically, the guidance directed the components to: 

* provide contractor FTE data that were consistent with the inventory 
of contracted services they submit annually to the Congress, 

* provide contractor FTEs that were consistent with the funding levels 
for contracted services, and; 

* report contractor FTE data and funding levels for contracted 
services in two separate budget exhibits in the operation and 
maintenance budget account.[Footnote 65] 

Though the Comptroller’s guidance does not specifically refer to it, 
10 U.S.C. § 235(b)(2) requires that contractor FTE projections for the 
budget submissions are to be based on both the inventory data and the 
reviews of that data that DOD components are required to conduct to 
identify whether contractors are performing services that should be 
converted to civilian performance. 

DOD’s fiscal year 2013 budget, submitted in February 2012, included 
the information on contractor FTEs and related funding levels from the 
two operation and maintenance budget exhibits. Overall, DOD requested 
about $72 billion for contracted services in the operations and 
maintenance account and projected that roughly 285,000 contractor FTEs 
would be funded with that amount.[Footnote 66] 

Two of the five components we reviewed—the Air Force and the Navy— 
used their inventories of contracted services as a starting point to 
derive the contractor FTE projections, but the data they relied on has 
significant limitations. To derive their projections, Air Force and 
Navy budget officials obtained the operation and maintenance budget 
requests for sub activity groups prepared by resource managers for 
fiscal year 2013 and divided these by an average contractor FTE cost 
figure derived from their fiscal year 2010 inventories. This resulted 
in estimates of contractor FTEs for the corresponding sub activity 
groups. For example, the Navy requested $166 million for contracted 
services related to mission and other flight operations activities for 
fiscal year 2013. Using the fiscal year 2010 inventory and applying 
inflationary factors, the Navy used an average contractor FTE cost of 
$180,119 to derive a contractor FTE figure of 924 for this sub 
activity group. Navy budget officials told us they used the same 
average contractor FTE cost for all of its different types of services. 

Both services’ fiscal year 2010 inventories were based primarily on 
data from the Federal Procurement Data System-Next Generation (FPDS-
NG) system.[Footnote 67] DOD has acknowledged that FPDS-NG has a 
number of limitations that affect the utility, accuracy, and 
completeness of the inventory data. For example, FPDS-NG does not 
identify more than one type of service purchased for each contract 
action, is not able to capture any services performed under contracts 
that are predominantly for supplies, and cannot provide the number of 
contractor FTEs used to perform each service, among other things. DOD 
officials acknowledge that the use of derived average cost figures can 
result in inaccurate reporting of contractor FTEs. For example, Navy 
budget officials noticed that the funding for satellite lease services 
had decreased significantly, but the contractor FTE estimate related 
to the services remained stable. The budget officials believed that 
since the program had moved from the development phase of its life 
cycle to the maintenance phase, the number of contractor FTEs needed 
for the program would be less than 10 compared to the approximately 
1,000 FTEs calculated for budget purposes. The budget officials 
decided not to make adjustments to the projections because they wanted 
to use a consistent approach to derive the contractor FTEs. In January 
2011, we reported that Army manpower and OSD officials raised concerns 
about the use of average labor rates and ratios to project contractor 
FTEs given the tendency of those averages to obscure variations in the 
underlying data.[Footnote 68] Further, our analysis showed that the 
use of these averages resulted in significant variations for some 
specific categories of services and particular contracts.[Footnote 69] 

For the fiscal year 2013 budget submissions, budget officials from the 
remaining three components we examined used other data sources they 
considered to be more reliable for their contractor FTE projections. 
These officials explained that the fiscal year 2010 inventories were 
not aligned to their budget data, were outdated or were not 
appropriate for budget projection purposes. For example, DISA and DLA 
budget officials noted that the most current inventory data available 
at the time the components were preparing their fiscal year 2013 
budgets reflected contracts that were active in fiscal year 2010. 
Further, component budget officials noted that object class codes 
(used in preparing the budget) and product service codes (used in 
tracking contracts in FPDS-NG) often did not have a direct 
relationship, making the translation between the two categories 
subjective. For example, object class 25.1, which is used to delineate 
advisory and assistance services, is broad enough to encompass 
numerous product service codes associated with multiple categories of 
services. As a result, DISA and DLA relied on program managers to 
provide their projections on what level of contractor FTEs would be 
funded by the operation and maintenance budget requests. 

Army budget officials explained that they did not use the inventory 
data compiled from the Army’s Contractor Manpower Reporting 
Application (CMRA) system when preparing their fiscal year 2013 budget 
submission. The CMRA system is intended to capture data directly 
reported by contractors on each service 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 contractors are 
performing the services. It also captures selected information from 
FPDS-NG and the Army’s accounting systems (to include budget codes). 
While DOD’s AT&L and P&R leadership considers the Army as currently 
having a reporting process and infrastructure in place that fully 
complies with inventory legislative requirements, CMRA data was not 
available in time. Instead, budget officials relied on the Army’s 
Structure and Manpower Allocation System (SAMAS), which according to 
budget and program officials contains civilian, military, and 
contractor personnel information and is used during the Army’s program 
and budget development process. However, an Army manpower official 
explained that SAMAS does not include object class data, dollars 
projected for contracted services, or information on inherently 
governmental and closely associated with inherently governmental 
functions. Table 4 summarizes the methods used by DOD components in 
our review to derive their respective contractor FTE projections. 

Table 4: Processes Used to Develop Contractor Full Time Equivalent 
(FTE) Projections in Fiscal Year 2013 Budget Submissions: 

DOD Component: Air Force; 
Source for contractor FTE estimate: Inventory of Contracted Services; 
Processes used to develop contractor FTEs provided in budget 
submissions: Used inventory to develop an average contractor FTE cost 
estimate. The cost estimate was then divided into the dollar value of 
specific budget activity groups to derive contractor FTE projections 
for those activity groups. 

DOD Component: Navy; 
Source for contractor FTE estimate: Inventory of Contracted Services; 
Processes used to develop contractor FTEs provided in budget 
submissions: Used inventory to develop an average contractor FTE cost 
estimate. The cost estimate was then divided into the dollar value of 
specific budget activity groups to derive contractor FTE projections 
for those activity groups. 

DOD Component: Army; 
Source for contractor FTE estimate: Structure and Manpower Allocation 
System; 
Processes used to develop contractor FTEs provided in budget 
submissions: Extracted contractor personnel information from Army’s 
manpower system. 

DOD Component: DISA; 
Source for contractor FTE estimate: Program Managers; 
Processes used to develop contractor FTEs provided in budget 
submissions: Estimated contractor FTEs based on data provided by 
program managers and statements of work 

DOD Component: DLA; 
Source for contractor FTE estimate: Program Managers; 
Processes used to develop contractor FTEs provided in budget 
submissions: Used contractor FTEs provided by program managers. 

Source: GAO analysis of DOD information. 

[End of table] 

The Comptroller issued updated guidance in June 2012 for the fiscal 
year 2014 through 2018 budget submissions. The updated guidance 
incorporated two significant changes from the 2011 guidance. The 
components are now required to (1) include contractor FTE estimates 
for not only the operation and maintenance account, but also for non-
operation and maintenance accounts including the procurement and 
research, development, test and evaluation budget accounts[Footnote 
70] and (2) report contractor FTE and budget data together, rather 
than separately for different budget accounts. 

According to Navy and Air Force officials, for the fiscal year 2014 
budget submission, they followed the same approach used to project 
contractor FTEs that they did for their fiscal year 2013 budget 
submission; that is, they derived an average contractor FTE cost from 
their fiscal year 2011 inventory data. Therefore, the resulting 
projections will have the same limitations as their fiscal year 2013 
projections. Navy and Air Force officials indicated that they used an 
average contractor FTE cost derived from their inventory to generate 
estimates for procurement and research, development, test and 
evaluation contractor FTEs in the same manner as they did for 
operation and maintenance-related activities. DLA and DISA officials 
indicated that they followed the same process as they did for their 
fiscal year 2013 budget submission whereby they relied on inputs from 
their program managers. 

According to Army budget officials, the Army used a different process 
to project contractor FTEs for their fiscal year 2014 budget 
submission. These officials told us that the Army used information 
contained in its inventory of contracted services, which was compiled 
using data from its CMRA system, as well as the results of its reviews 
as the basis for its fiscal year 2014 contractor FTE projections. Army 
budget and manpower officials noted that several factors facilitated 
the use of CMRA data for its fiscal year 2014 budget contractor FTE 
projections. First, Army budget officials noted that they received 
fiscal year 2011 CMRA data in sufficient time to use for the fiscal 
year 2014 budget submission. Further, as part of the Army’s inventory 
review process, when the individual commands reviewed the inventory 
data associated with their contracted services, they had assigned 
budget codes to the CMRA data so that it could be aligned with the Army’
s budget lines of accounting. In this regard, during the Army’s 
inventory review process, Army command officials assigned budget codes 
to the CMRA contract data through a web based application. This 
process allowed budget officials to gain additional insight into the 
types of services included in each line of accounting, and align 
contractor FTES in the budget submissions in an easier and more 
transparent manner. 

At the conclusion of our review, DOD released the fiscal year 2014 
Operation and Maintenance Overview, which reported that DOD requested 
about $52.5 billion for contracted services in the operations and 
maintenance account and projected that about 223,000 contractor FTEs 
would be funded with that amount. During our review of the document, 
we found that the funding amounts and the contractor FTE summary 
information for each military department did not match the figures 
that the military departments reported as part of their individual 
fiscal year 2014 budget submissions. When we inquired as to the 
possible reasons for the discrepancies, a Comptroller official, with 
knowledge of the Operation and Maintenance Overview document, told us 
that a variety of factors could have contributed to the differences, 
including that the overview document excluded Health Program and 
Research and Development contracts that the military services included 
in their budget documents. The Comptroller official, however, did not 
know the exact reasons for the discrepancies. 

DOD Is Taking Steps to Improve the Accuracy of Contractor FTE 
Projections Included in Future Budget Submissions: 

DOD officials recognize that the contractor FTE information provided 
in their fiscal year 2013 and 2014 budget submissions had significant 
limitations, but noted that DOD has initiatives underway to improve 
the accuracy of components’ inventories of contracted services and the 
linkage between the inventories and budget data. However, according to 
DOD officials, these initiatives are not expected to be fully 
implemented for several years. 

DOD officials stated that having a reliable, current inventory of 
contractor FTEs is a fundamental building block for developing future 
contractor FTE estimates. DOD has initiated efforts to improve 
inventory data by collecting manpower data directly from contractors, 
using the Army’s CMRA system as the model. To do so, DOD directed its 
components in November 2012 to include a reporting requirement in new 
and current contracts for services to collect direct labor hours from 
contractors, which can subsequently be used to calculate contractor 
FTEs performing each service or function. In addition, DOD is 
developing a department-wide CMRA system to collect and house this 
data. DOD officials expect to have a fully functional system available 
for all components to begin to use in fiscal year 2014 and that 
components will be in compliance with the reporting requirement by 
2016. 

One challenge identified by Comptroller and manpower officials is the 
need to link contractor manpower information in the inventories of 
contracted services to specific budget lines of accounting. There are 
approximately 2,200 contract codes, referred to as product and service 
codes, in the FPDS-NG inventory and the CMRA inventory that correspond 
to specific types of services which, according to acquisition 
officials, need to be linked to roughly 21 budget codes. According to 
an Army official, the Army CMRA as implemented contains both budget 
codes and product service codes; therefore, it is not be dependent on 
DOD’s crosswalk effort. For example, the Defense Acquisition 
University has mapped 17 product and service codes to one budget code 
related to printing and reproduction. According to an acquisition 
official, the department recently formed a working group comprised of 
officials from the acquisition community and the Comptroller’s office 
to develop a more complete crosswalk between the product and service 
codes and the budget lines of accounting. This acquisition official 
also told us that formal guidance related to the crosswalk is expected 
to be issued in April 2013 and modifications to financial systems to 
capture product and service code information should occur in 2014. 

Finally, although DOD officials do not expect these initiatives to be 
fully implemented for several years, one could expect to see 
incremental improvements in the fidelity of contractor FTE projections 
as DOD components compile more accurate and complete inventories and 
conduct the required reviews of that inventory data. 

Conclusions: 

DOD manages a large and diverse workforce that is tasked with 
accomplishing a wide variety of missions, from shipyard maintenance to 
cybersecurity. Over the past decade and in the context of fighting two 
wars, both the military and civilian parts of this workforce have 
grown in number, as has spending on contracted services, but the 
department now faces a changing environment that includes a strategic 
shift and a period of fiscal constraint that will likely last for some 
time. As DOD decides how to face these changes, total workforce 
management and planning will be important elements of ensuring the 
department’s continued ability to meet the unique requirements of its 
missions. To be successful, the department must carefully consider 
what critical skills and competencies are needed to meet these 
requirements, and what strategies it can use to monitor and plan for 
retaining those skills in its workforce. Ensuring that its guidance is 
up to date would aid the department in assessing an appropriate 
workforce mix, properly identifying critical functions as required by 
the Office of Federal Procurement’s Policy’s September 2011 
memorandum, and mitigating inappropriate risks that may be posed by 
contractors performing certain functions. 

Congress, recognizing the importance of identifying the extent to 
which DOD relies on contractors to help carry out its mission, has 
enacted new legislative requirements over the past five years 
requiring DOD to collect data on its contractor workforce and make 
determinations about the nature of the activities that contractors 
perform, and amended legislation to require DOD to include contractor 
workforce information in DOD’s strategic planning and total force 
management efforts and budget requests. DOD’s approach to including 
projected contractor FTE information in its fiscal year 2013 and 2014 
budget requests had a number of limitations and DOD acknowledges that 
the FTE information does not accurately reflect the number of 
contractors performing work in support of DOD. The department is 
taking steps to improve the accuracy of the data contained in its 
inventory of contracted services and enable the inventory and required 
reviews to be used to project contractor FTEs for budgetary purposes, 
but it may be several years before DOD is able to do so. 

Recommendations for Executive Action: 

To help ensure DOD’s workforce mix guidance reflects the current 
statutory requirements for total force management policy set forth in 
10 U.S.C. § 129a as well as the regulatory requirements set forth in 
the Office of Federal Procurement Policy’s September 2011 policy 
letter, we recommend that the Secretary of Defense direct the Under 
Secretary of Defense for Personnel and Readiness to revise DOD’s 
existing workforce policies and procedures to address the 

* determination of the appropriate workforce mix, and; 

* identification of critical functions. 

Until such time that DOD is able to accurately project contractor FTE 
estimates it presents in budget submissions using the inventories and 
required reviews, we recommend that the Secretary of Defense direct 
the Under Secretary of Defense (Comptroller) to include an explanation 
in annual budget exhibits of the methodology used to project 
contractor FTE estimates and any limitations of that methodology or 
the underlying information to which the methodology is applied. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DOD partially concurred 
with both recommendations. DOD’s comments are reprinted in appendix 
III. Additionally, DOD provided technical comments on the draft 
report, which we incorporate as appropriate. We provided a draft of 
this report to the Office of Management and Budget, but we did not 
receive comments. 

DOD made two overarching comments in its agency response to our draft 
report. First, DOD commented that it is concerned by the emphasis we 
placed on the strategic workforce plan as it relates to the department’
s total force management and resulting workforce size and structure. 
DOD stated that the plan is an integral tool in informing policies and 
procedures for retention, recruitment, and accession planning and it 
helps inform the demographic makeup of its civilian personnel 
inventory, including the talent, competencies, education, and skills 
of that workforce. DOD stated that it uses a capabilities-based 
approach to determine the size and structure of the workforce needed 
to implement national military and security strategies. These 
capabilities are based on the department’s mission, function, and task 
hierarchy, and are informed by workload, risk mitigation, and resource 
availability. According to DOD, it justifies its workforce size based 
on mission workload, rather than competency or skill gaps. We agree 
that DOD’s mission workload should determine the size of its total 
workforce. However, the type of personnel—military, civilian, or 
contractor-—that performs the work is dependent on the nature of the 
work and circumstances of its performance. DOD is required by law to 
establish policies and procedures that require the use of the 
strategic workforce plan when making determinations of the appropriate 
mix of total workforce personnel necessary to perform its mission, and 
to include in the strategic workforce plan an assessment of the 
appropriate mix of military, civilian, and contractor personnel 
capabilities, which it has not included to date. While the primary 
focus of this report is not on DOD’s strategic workforce plan, we have 
reported in this and a body of prior work, that without knowledge of 
the skills and competencies that are necessary to perform its mission 
workload and any associated gaps in those skills and competencies, DOD 
may be challenged to appropriately identify its current and future 
civilian workforce needs. Moreover, without assurance that its 
civilian workforce possesses the necessary skills and competencies, 
DOD may not be able to readily convert the performance of a function 
from contractor to civilian personnel, should DOD determine that it 
would be more appropriate to do so. Therefore, a fully developed 
strategic workforce plan that addresses the statutory requirements to 
include an assessment of the appropriate mix of military, civilian, 
and contractor personnel capabilities and report on the results of 
competency and skill gap analysis, could serve as an important 
resource for the department as it makes workforce mix decisions, 
especially in light of current fiscal constraints and budgetary 
pressures. 

DOD commented that it is also concerned by the apparent lack of 
reference in our draft report to the Planning, Programming, Budgeting, 
and Execution process carried out annually across the department, 
especially as these processes relate to the size and shape of the 
department’s total force. DOD explained that the process provides 
direction on spending levels, mission priorities, and strategic goals, 
which then impact decisions regarding force structure and operational 
capabilities, and ultimately addresses prioritization and resource 
alignment. We agree with DOD that the Planning, Programming, 
Budgeting, and Execution process is an important aspect of workforce 
planning and decisionmaking; both requirements and resources drive 
workforce decisions. We noted in our draft report that various OSD 
officials stated that the workforce requirements determination process 
is part of the department’s Planning, Programming, Budgeting and 
Execution process to help ensure fully informed risk and cost 
decisions are translated into justified and transparent manpower 
requirements. Further, we noted the roles and responsibilities of the 
various offices involved in developing workforce requirements, 
including as part of the budget process. However, we also noted that a 
recently enacted statute requires that DOD and prioritize the 
attainment of a workforce sufficiently sized and comprised of the 
appropriate mix of military, civilian and contractor personnel to 
carry out DOD’s mission over cost. Our report addresses steps DOD is 
taking to implement statutory requirements to develop and utilize 
certain policies, analyses, and tools to aid in making such workforce 
mix determinations. As DOD stated, the budgeting process involves 
prioritization of requirements and making trade-offs among competing 
needs as part of resource allocation. Therefore, having the most 
reliable and accurate information is imperative for making well 
informed budgetary and other workforce planning decisions. 
Consequently we believe, DOD should continue to take steps to obtain 
and develop the information and data that will allow it to make more 
informed and strategic workforce mix decisions, such as analyses of 
the gaps in skills and competencies within the civilian workforce, 
identification of the functions that are critical to the department’s 
mission, and the collection of more accurate and complete information 
regarding contractors performing work in support of DOD. 

DOD partially concurred with our recommendation to revise the 
department’s existing workforce policies and procedures to address the 
determination of the appropriate workforce mix and identification of 
critical functions. As we noted in our report, DOD has not issued new 
guidance or revised existing guidance to reflect the current statutory 
and other federal requirements for total force management policy. 
Specifically, we reported that DOD’s primary policies for determining 
workforce mix—DOD Directive 1100.4 and DOD Instruction 1100.22—largely 
reflect current statutory requirements set forth in 10 U.S.C. § 129a 
for DOD policies concerning workforce mix, though there are several 
recent amendments that have yet to be incorporated, such as that DOD 
has not yet implemented the new requirements that determinations 
regarding the appropriate workforce mix be made using the civilian 
strategic workforce plan and the inventory of contracted services. 
Further, we reported that the guidance similarly does not reflect 
federal requirements for the identification of critical functions as 
required by Office of Federal Procurement Policy’s Policy Letter 11-
01. In response to our draft report, DOD stated in its agency comments 
that DOD Directive 1100.4. is currently undergoing revision and 
entering the formal issuance process for signature by the Deputy 
Secretary of Defense. Further, DOD stated that the updated directive 
will authorize and direct the revision of the instruction. We noted in 
our report that OSD officials told us that they were in the process of 
revising both the directive and instruction, and they provided us with 
a draft of the revised directive. DOD should issue this revised 
guidance in a timely manner and ensure that revisions to both guidance 
documents address statutory requirements related to determinations of 
the appropriate mix of the department’s workforce and federal 
requirements to identify critical functions in order for 
decisionmakers to make better informed decisions regarding the mix of 
personnel and ensure that the department retains enough government 
employees to maintain control of functions that are critical to its 
mission. 

DOD also partially concurred with our recommendation to include an 
explanation in annual budget exhibits of the methodology used to 
project contractor FTE estimates and any limitations of that 
methodology or the underlying information to which the methodology is 
applied. DOD stated in its agency comments that its financial 
management regulations and annual budget submission guidance 
memorandums issued by the Office of the Under Secretary of Defense 
(Comptroller) are the means used to explain budget exhibit preparation 
methodologies and the guidance directs how components are to develop 
and display budgetary estimates. DOD stated in its comments that this 
office will strengthen the annual guidance as improvements are made in 
the inventory of contracted services. Further, DOD stated that if a 
component’s methodology deviates from the process defined in the 
annual guidance, a footnote explaining the deviation will be included 
in the contracted services section of the Operation and Maintenance 
Overview book within the budget. We recognize DOD has efforts underway 
to improve its inventory of contracted services, including its use in 
providing contractor FTEs within its annual budget exhibits. While 
footnoting any component methodologies that deviate from DOD’s 
guidance is a step in the right direction, most components use 
methodologies that reflect inherent limitations that undermine the 
utility and accuracy of the FTE estimate. DOD acknowledged during the 
course of this review that the contractor FTE information provided in 
their fiscal year 2013 and 2014 budget submissions had significant 
limitations. Consequently, to improve transparency, we continue to 
believe that DOD should disclose the methodologies used and any 
limitations thereof until such time DOD is able to accurately project 
contractor FTEs. 

We are sending copies of this report to the Secretary of Defense, the 
Under Secretary of Defense for Personnel and Readiness, the Under 
Secretary of Defense for Acquisition, Technology and Logistics, the 
Under Secretary of Defense Comptroller, the Office of Management and 
Budget, and appropriate congressional committees. In addition, this 
report will also be available at no charge on the GAO website at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have any questions regarding this report, please 
contact us at (202) 512-3604 or farrellb@gao.gov or (202) 512-4841 or 
dinapolit@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 V. 

Signed by: 

Brenda S. Farrell: 
Director: 
Defense Capabilities and Management: 

Signed by: 

Timothy J. DiNapoli: 
Director: 
Acquisition and Sourcing Management: 

[End of section] 

Appendix I: Recent GAO Recommendations for DOD’s Strategic Workforce 
Management: 

GAO Product: Human Capital: Critical Skills and Competency Assessments 
Should Help Guide DOD Civilian Workforce Decisions, GAO-13-188 (Jan. 
17, 2013); 
Prior Recommendation: Involve functional community managers and to the 
extent possible, use information from gap assessments of its critical 
skills and competencies as they are completed, to make informed 
decisions for possible future reductions or justify the size of the 
force that it has. 
DOD Response: Partially Concurred. 

Prior Recommendation: Document its efforts to strategically manage its 
civilian workforce and maintain critical skills and competencies for 
future reductions. 
DOD Response: Partially Concurred; 
GAO Product: Human Capital: DOD Needs Complete Assessments to Improve 
Future Civilian Strategic Workforce Plans, GAO-12-1014 (Sept. 27, 
2012). 

Prior Recommendation: Direct the Under Secretary of Defense for 
Personnel and Readiness to include in the guidance that it 
disseminates for developing future strategic workforce plans clearly 
defined terms and processes for conducting these assessments. 
DOD Response: Concurred. 

Prior Recommendation: Conduct competency gap analyses for DOD’s 
mission-critical occupations and report the results. When managers 
cannot conduct such analyses, we recommend that DOD report a timeline 
in the strategic workforce plan for providing these assessments. 
DOD Response: Partially Concurred. 

Prior Recommendation: Establish and adhere to timelines that will 
ensure issuance of future strategic workforce plans in accordance with 
statutory timeframes. 
DOD Response: Partially Concurred. 

Prior Recommendation: Provide guidance for developing future strategic 
workforce plans that clearly directs the functional communities to 
collect information that identifies not only the number or percentage 
of personnel in its military, civilian, and contractor workforces but 
also the capabilities of the appropriate mix of those three workforces. 
DOD Response: Partially Concurred. 

Prior Recommendation: Enhance the department’s results-oriented 
performance measures by revising existing measures or developing 
additional measures that will more clearly align with DOD’s efforts to 
monitor progress in meeting the strategic workforce planning 
requirements in section 115b of Title 10 of the United States Code. 
DOD Response: Partially Concurred. 

GAO Product: Human Capital: Complete Information and More Analyses 
Needed to Enhance DOD’s Civilian Senior Leader Strategic Workforce 
Plan, GAO-12-990R (Sept. 19, 2012); 
Prior Recommendation: Conduct assessments of the skills, competencies, 
and gaps within all five career civilian senior leader workforces and 
report them in DOD’s future strategic workforce plans. 
DOD Response: Concurred. 

Defense Acquisitions: Further Actions Needed to Improve Accountability 
for DOD’s Inventory of Contracted Services, GAO-12-357 (Apr. 6, 2012); 
Prior Recommendation: Ensure that the military departments and defense 
components issue guidance to their commands that provides clear lines 
of authority, responsibility, and accountability for conducting an 
inventory review and resolving instances where functions being 
performed by contractors are identified as inherently governmental 
functions. 
DOD Response: Partially Concurred. 

Prior Recommendation: To ensure that the six instances we reviewed in 
which the Army identified that contractors were still performing 
functions it deemed inherently governmental, as well as those at 
Kwajalein Atoll, have been properly resolved, we recommend that the 
Secretary of the Army review these functions, determine the status of 
actions to resolve the issues, and, as appropriate, take necessary 
corrective actions. 
DOD Response: Concurred 

Prior Recommendation: To ensure that the two instances we reviewed 
where contractors were still performing functions the Air Force had 
previously identified as inherently governmental are properly 
resolved, we recommend that the Secretary of the Air Force review 
these functions, determine the status of actions to resolve the 
issues, and, as appropriate, take necessary corrective actions. 
DOD Response: Concurred. 

GAO Product: Defense Workforce: DOD Needs to Better Oversee In-
sourcing Data and Align In-sourcing Efforts with Strategic Workforce 
Plans, GAO-12-319 (Feb. 9, 2012); 
Prior Recommendation: To enhance insights into and facilitate 
oversight of the department’s in-sourcing efforts, we recommend that 
the Secretary of Defense direct the Under Secretary of Defense for 
Personnel and Readiness to issue guidance to DOD components requiring 
that the components establish a process to help ensure the accuracy of 
any data collected on future in-sourcing decisions. 
DOD Response: Partially Concurred. 

Prior Recommendation: To improve DOD’s strategic workforce planning, 
we recommend that the Secretary of Defense direct the Under Secretary 
of Defense for Personnel and Readiness to better align the data 
collected on in-sourcing with the department’s strategic workforce 
plans and establish metrics with which to measure progress in meeting 
any in-sourcing goals. 
DOD Response: Partially Concurred. 

Source: GAO. 

[End of table] 

[End of section] 

Appendix II: Scope and Methodology: 

To determine the historical trends and future projections of the 
levels of military, civilian, and contractor personnel, we obtained 
relevant data and performed trend analysis. For our analysis of 
historical trends, we included fiscal year 2001 through fiscal year 
2011 and, for our analysis of future projections, we included fiscal 
year 2012 through fiscal year 2017. At the time of our review, the 
fiscal year 2013 president’s budget contained the most recent data 
available for projections and it included actuals through fiscal year 
2011 and projections for fiscal years 2012 through fiscal year 2017. 
For our analysis of military end strength and civilian personnel FTEs, 
we relied on data from DOD’s Future Years Defense Program (FYDP), 
Office of the Under Secretary of Defense Comptroller’s Comptroller 
Information System (CIS) and DOD budget documents. For our analysis of 
growth within type of activity performed, we used force and 
infrastructure categories from the FYDP to provide further 
perspectives on areas of workforce growth from fiscal years 2001 to 
2011. We determined that these data were sufficiently reliable for use 
in discussing historical and future trends of the military and 
civilian workforce. Specifically, we reviewed previous GAO reports 
using workforce data, compared military and civilian personnel levels 
to published data, performed electronic testing, and discussed the 
reliability of the data with knowledgeable DOD and service officials. 

Further, we interviewed DOD officials to obtain their views on the 
major drivers for workforce changes. For our analysis of historical 
trends of the contractor workforce, we reviewed DOD’s inventory of 
contracted services for fiscal years 2008, 2009, 2010, and 2011. We 
did not independently assess the accuracy or reliability of the 
underlying data supporting the fiscal year inventories. However, we 
reviewed our prior work, which addressed limitations of the inventory 
data. Due to the lack of consistent reporting of contractor FTE data, 
we reviewed the obligated dollars for contracted services from fiscal 
year 2001 through fiscal year 2012 and the projected obligations for 
contracted services from fiscal year 2013 through fiscal year 2014. We 
relied on budget data on obligations for contracted services (object 
class 25). Based on discussions with various OSD officials, we 
excluded object classes 25.3 that represent dollars obligated for 
goods and services from federal sources. We adjusted the current 
dollars to constant fiscal year 2013 dollars using the Fiscal Year GDP 
Price Index to eliminate the effects of inflation. GAO has designated 
DOD’s financial management area as high risk due to long-standing 
deficiencies in DOD’s systems, processes, and internal controls. Since 
some of these systems provide the data used in the budgeting process, 
there are limitations to the use of DOD budget data. However, based on 
discussions with appropriate DOD officials and our comparison of the 
trends in the budget data against other data sources, we believe the 
contracted service obligation data are sufficiently reliable for 
showing overall trends for contracted services. 

To determine the extent to which DOD has taken action to determine the 
appropriate workforce mix to accomplish its mission, we reviewed 
relevant legislation[Footnote 71] and departmental guidance[Footnote 
72] concerning requirements for DOD to carry out such analysis. We 
also interviewed DOD and military service officials to assess the 
actions DOD has taken to ensure it is employing the appropriate 
workforce mix. Specifically, we discussed the process of categorizing 
parts of the workforce based on the nature of the work they perform, 
DOD’s process for identifying mission critical occupations as part of 
its strategic workforce planning process, and efforts by the services 
to improve implementation of its total workforce management in the 
future. We compared statutory requirements concerning the processes by 
which DOD is to determine its appropriate workforce mix to its efforts 
to date, and noted any differences. 

To determine the extent to which DOD conducts analysis to identify 
core or critical functions, we reviewed relevant legislation,[Footnote 
73] federal policy,[Footnote 74] and departmental guidance[Footnote 
75] concerning the process for identifying core or critical functions. 
We interviewed DOD and military service officials to explore the 
various ways in which “core” or “critical” functions could be defined 
and reviewed documents that supported those definitions.6 We 
interviewed DOD and military service officials to determine the 
actions DOD has taken to define critical functions and respond to 
federal requirements. Additionally, we met with officials from the 
Office of Federal Procurement Policy within the Office of Management 
and Budget to discuss their views on DOD’s implementation of those 
requirements. We compared federal policy concerning the identification 
of critical functions to DOD’s efforts to date, and noted any 
differences. 

To determine how the military departments and defense agencies used 
the inventory of contracted services to inform their fiscal year 2013 
and 2014 budget submissions, we focused our efforts on five DOD 
components—the departments of the Army, Navy, and Air Force, and the 
Defense Logistics Agency (DLA) and Defense Information Systems Agency 
(DISA). We selected these components based on the amount of their 
obligations for contracted services and the large number of contractor 
full time equivalents they identified in their fiscal year 2011 
inventory of contracted services, the most current inventory available 
at the time of our review. We reviewed relevant guidance that directed 
the DOD components on how to use the inventory of contracted services 
to provide contractor FTE information in their budget submissions for 
fiscal years 2013 and 2014. We also interviewed officials from the 
Office of the Under Secretary of Defense for Acquisition, Technology 
and Logistics, Office of Defense Procurement and Acquisition Policy; 
the Office of the Under Secretary of Defense for Personnel and 
Readiness; and the Office of the Under Secretary of Defense 
(Comptroller) regarding the guidance and ongoing initiatives that will 
impact how the inventory data can be used to inform future budget 
submissions. In addition, we interviewed relevant budget and workforce 
officials from the five components we included in our review regarding 
the use of the inventory in the development of their fiscal year 2013 
and 2014 budget submissions, and we obtained corroborating 
documentation from the three components that could provide it to 
determine the processes used to develop contractor FTE information 
included in these budget submissions. 

We conducted this performance audit from October 2012 to May 2013 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 III: Comments from the Department of Defense: 

Office of The Assistant Secretary of Defense: 
Readiness and Force Management: 
4000 Defense Pentagon
Washington, DC 20301-4000 

May 17, 2013: 

Ms. Brenda Farrell: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Ms. Farrell, 

This is the Department of Defense (DoD) response to the GAO Draft 
Report, GAO-13470, "Human Capital: Additional Steps Needed to Help 
Determine the Right Size and Composition of DoD's Total Workforce," 
dated Apri126, 2013 (GAO Code 351758). The Department appreciates the 
opportunity to review and comment on this draft report. The Department 
has two general concerns with the outcome and findings of the GAO in 
this report. 

First, the Department remains concerned by the emphasis the GAO places 
on the strategic human capital plan as it relates to the Department's 
Total Force management and subsequent workforce size and structure. As 
noted in the Department's January 2013 response to GAO-13188, "HUMAN 
CAPITAL: Critical Skills and Competency Assessments Should Help Guide 
DOD Civilian Workforce Decisions" (GAO Code 351695), we are committed 
to delivering a comprehensive Strategic Workforce Plan that helps 
address the demographic (talent, competency, education, skill) make-up 
of our civilian personnel inventory. However, the Department's Total 
Force of military (active and reserve), government civilians, and 
contract support is sized and structured based on the capabilities 
necessary to implement the national military and security strategies 
of the United States; as well as delivering the readiness and support 
to organize, train, and equip a force capable of executing operational 
plans in support of those strategies. This capabilities-based approach 
is predicated on a mission, function, and task hierarchy, and informed 
by current and projected workload, risk mitigation, and resource 
availability. The Department aligns its workforce (both in size and 
structure) to mission and, as such, justifies the current size or 
possible reductions/increases to that workforce based on mission 
workload; rather than competency or skills gaps. For example, a 
competency gap might be addressed through training or targeted 
recruitment. This gap would not change the fundamental workload 
demand. As such, the Strategic Workforce Plan is an integral tool in 
informing the Department's policies and procedures for recruitment; 
retirement and accession planning; professional training and 
education; and retention in order to guard against a skill shortfall 
or erosion of competencies as workforce actions are implemented. 

Second, the Department is concerned by the apparent lack of reference 
in the GAO's report to the Planning, Programming, Budgeting, and 
Execution (PPBE) process executed annually across the Department, 
specifically as these processes relate to the sizing and shaping of
the Total Force. This process, beginning with the annual Defense 
Planning Guidance (from the Secretary of Defense) and subsequent 
budgetary guidance, provides direction on spending levels, mission 
priorities and strategic goals of the Department. Subsequent force 
structure, operational capabilities, and workforce constructs are 
driven by this process, which includes Service development of their 
Program Objective Memorandums and a "corporate" assessment during the 
Program and Budget Review. This assessment addresses priorities and 
resource alignment, including Total Force allocation and apportionment.
With regard to the two recommendations offered by the GAO, the 
Department provides the following: 

Recommendation 1: To help ensure DoD's workforce mix guidance reflects 
the current statutory requirements for total force management policy 
set forth in 10 U.S.C. § 129a as well as the regulatory requirements 
set forth in the Office of Federal Procurement Policy's September 2011 
policy letter, GAO recommends that the Secretary of Defense
direct the Under Secretary of Defense for Personnel and Readiness to 
revise DoD's existing workforce policies and procedures to address the 
determination of the appropriate workforce mix and identification of 
critical functions. 

DoD Response: The Department partially concurs with this 
recommendation. Updates to DoD Directive 1100.4, "Guidance for 
Manpower Management", have already been proposed and informally 
reviewed by all Components of the Department. The directive is now 
entering the formal issuance process for signature by the Deputy 
Secretary of Defense. Among other things, the updated directive 1100.4 
will authorize and direct the updating of DoD Instruction 1100.22, 
"Policy and Procedures for Determining Workforce Mix". At this time, 
additional direction from the Secretary of Defense is not necessary. 

Recommendation 2: Until such time that DoD is able to accurately 
project contractor FTE estimates it presents in budget submissions 
using the inventories and required reviews, GAO recommends that the 
Secretary of Defense direct the Comptroller to include an explanation 
in annual budget exhibits of the methodology used to project
contractor FTE estimates and any limitations of that methodology or 
the underlying information to which the methodology is applied. 

DoD Response: The Department partially concurs with this 
recommendation. The Office of the Under Secretary of Defense, 
Comptroller (OUSD(C)) Financial Management Regulation and annual 
budget submission guidance memorandums are the vehicles for explaining 
budget exhibit preparation methodologies. The guidance provides 
instructions for how to develop and display the estimate, and provides 
any special supporting material requirements. In addition, 
"supplementary instruction" memorandums are issued on an "as needed" 
basis to amplify guidance included in the OUSD(C) memorandum. 

The purpose of budget exhibits is to explain the program requirements. 
The explanations include key assumptions used to derive the estimates 
and any program changes that will result in increases or decreases to 
the program requirement. The explanations also include a discussion of 
the type of resource needed, e.g., civilian labor, travel, supplies, 
contract labor, equipment. 

OUSD(C) will continue to strengthen the annual guidance as 
improvements are made in the inventory of contracts for services. To 
the extent Component contracted services data is based on a 
methodology that deviates from the annual guidance, a footnote 
explaining the deviation will be included in the contract services 
section of the O&M Overview book. 

Should you have any questions, please contact my primary action 
officer Mr. Thomas Hessel, Associate Director of Total Force 
Requirements & Sourcing Policy, at 703-697-3402, or at 
thomas.hessel@osd.mil. 

Sincerely, 

Signed by: 

Rich Robbins: 
Director, Total Force Planning & Requirements: 

[End of section] 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov Timothy 
DiNapoli, (202) 512-4841 or dinapolit@gao.gov 

Staff Acknowledgments: 

In addition to the contacts named above, Margaret A. Best, Assistant 
Director; Cheryl K. Andrew, Jerome Brown, Katheryn S. Hubbell, LeAnna 
Parkey, Suzanne M. Perkins, Carol D. Petersen, Guisseli Reyes-Turnell, 
Terry L. Richardson, Stephanie J. Santoso, Adam G. Smith, Erik Wilkins-
McKee, and Michael Willems made key contributions to this report. 

[End of section] 

Footnotes: 

[1] Within DOD’s military personnel component of its total workforce, 
the reserve and guard forces are comprised of the Army, the Navy, the 
Marine Corps, and the Air Force reserves and the Army and Air Force 
National Guards. 

[2] An FTE is a standard measure of labor that equates to one year of 
full-time work (labor hours as defined by the Office of Management and 
Budget Circular A-11 each year). 

[3] DOD is required to annually compile an inventory of contracted 
services, pursuant to 10 U.S.C § 2330a, to include, among other data, 
the functions performed, the number of contractor FTEs performing the 
function, and the total dollar amount of the services purchased. For 
fiscal year 2011, we note that obligations reported for contracted 
services in budget justification materials and obligations reported in 
the inventory of contracted services differ. We have previously 
reported that a number of factors limit the accuracy and completeness 
of the inventory data, see, for example, GAO, Defense Acquisitions: 
Further Actions Needed to Improve Accountability for DOD's Inventory 
of Contracted Services, GAO-12-357 (Washington, D.C.: Apr. 6, 2012). 

[4] Civilian personnel include foreign nationals, which can be hired 
directly by DOD or indirectly hired under agreement or contract with 
foreign governments to provide personal services to the United States 
government. 

[5] GAO, Human Capital: Critical Skills and Competency Assessments 
Should Help Guide DOD Civilian Workforce Decisions, GAO-13-188 
(Washington, D.C.: Jan. 17, 2013). 

[6] GAO, Opportunities to Reduce Potential Duplication in Government 
Programs, Save Tax Dollars, and Enhance Revenue, GAO-11-318SP 
(Washington, D.C.: Mar. 1, 2011). Both estimates used fiscal year 2008 
constant dollars. 

[7] GAO, Defense Acquisitions: Further Action Needed to Better 
Implement Requirements for Conducting Inventory of Service Contract 
Activities, GAO-11-192 (Washington, D.C.: Jan. 14, 2011). 

[8] Pub. L. No. 112-25 (2011) as amended. 9Pub. L. No. 112-239, § 955 
(2013). 10GAO, High-Risk Series: An Update, GAO-01-263 (Washington, 
D.C.: January 2001). 11GAO, High-Risk Series: An Update, GAO-13-283 
(Washington, D.C.: February 2013). 

[12] GAO, DOD Civilian Workforce: Observations on DOD’s Efforts to 
Plan for Civilian Workforce Requirements, GAO-12-962T (Washington, 
D.C.: July 26, 2012). 

[13] The National Defense Authorization Act for Fiscal Year 2010, Pub. 
L. No. 111-84, § 1108 (2009) (codified as amended at 10 U.S.C. §115b) 
codified a previous strategic workforce plan requirement that was 
originally enacted by section 1122 of the National Defense 
Authorization Act for Fiscal Year 2006, Pub. L. No. 109-163 (2006). 

[14] 10 U.S.C. §129a. 

[15] H.R. Rep. No. 112-479 (2012). 

[16] For the reserve component, we included servicemembers from the 
Selected Reserve and excluded certain categories such as the 
Individual Ready Reserve and Inactive National Guard. 

[17] According to DOD’s glossary of workforce terms, foreign national 
employees are local citizens of the host country or citizens of a 
third country. Foreign nationals can be direct or indirect hires. 
Direct hired employees are hired directly by an agency of DOD. 
Indirect hire civilians are foreign nationals assigned to support U.S. 
forces through contracts or agreements with foreign governments (or 
agencies thereof). These personnel are employees of the foreign 
governments involved. 

[18] 10 U.S.C. §115b. 

[19] 10 U.S.C. §129a. 

[20] Office of Federal Procurement Policy Policy Letter 11-01, 
Performance of Inherently Governmental and Critical Functions (Sept. 
12, 2011). 

[21] Civilian personnel include foreign nationals, which can be hired 
directly by DOD or indirectly hired under agreement or contract with 
foreign governments to provide personal services to the United States 
government. 

[22] GAO, Human Capital: DOD Needs Complete Assessments to Improve 
Future Civilian Strategic Workforce Plans, GAO 12-1014 (Washington, 
D.C.: Sept. 27, 2012). 

[23] Inherently governmental functions are defined by law as functions 
that are so intimately related to the public interest as to require 
performance by federal government employees. Federal Activities 
Inventory Reform (FAIR) Act of 1998, Pub. L. No 105-270, § 5 (1998) 
(appended as a note below 31 U.S.C. § 501). There is currently an open 
Federal Acquisition Regulation case (2012-001) under consideration to 
implement a September 2011 Office of Federal Procurement Policy Policy 
Letter that, among other things, clarified the definition of 
“inherently governmental function” (consistent with the FAIR Act 
definition). Office of Federal Procurement Policy, Policy Letter 11-
01, Performance of Inherently Governmental and Critical Functions 
(Sept. 12, 2011). In addition, 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. Federal Acquisition Regulation § 7.503(d) provides examples 
of such functions. 

[24] The initial cap announced in 2010 was directed to the Office of 
the Secretary of Defense and other headquarters commands. In fiscal 
year 2011, the cap was extended to include military departments. 

[25] The two caps are not directly comparable because section 808 
limits DOD’s expenditures for contracted services, whereas the 
civilian cap was focused on the number of civilian FTEs, not 
expenditures. 

[26] This is the subject of another, ongoing, GAO review in response 
to a mandate in the conference report accompanying the National 
Defense Authorization Act for Fiscal Year 2013. 

[27] 10 U.S.C. § 129a(c)(4). 

[28] 10 U.S.C. § 129a(c)(2). 

[29] See e.g. Department of Defense Directive 1100.4, Guidance for 
Manpower Management (Feb. 12, 2005). 

[30] For purposes of this report, military workforce represents the 
end strength of the active components and the selected reserve in the 
reserve components. Civilian workforce is represented by civilian FTEs 
and includes full time direct hires, indirect hires, and foreign 
nationals. Dual-status technicians are included in both the selected 
reserve part-time end strength and the civilian FTEs. 

[31] We note that the size of a workforce does not equate to costs; an 
analysis of total compensation of pay and benefits associated with a 
workforce would be necessary to compare the costs of each workforce. 

[32] GAO, Defense Workforce: DOD Needs to Better Oversee In-sourcing 
Data and Align In-sourcing Efforts with Strategic Workforce Plans, GAO-
12-319 (Washington, D.C.: Feb. 9, 2012). 

[33] GAO, Defense Acquisition Workforce: Improved Processes, Guidance, 
and Planning Needed to Enhance Use of Workforce Funds, GAO-12-747R 
(Washington, D.C.: June 20, 2012). 

[34] GAO, Defense Force Management: Expanded Focus in Monitoring 
Civilian Force Reductions Is Needed, GAO/T-NSIAD-92-19 (Washington, 
D.C.: Mar. 18, 1992). 

[35] National Defense Authorization Act for Fiscal Year 2008, Pub. L. 
No. 110-181, § 852 (2008), codified at 10 U.S.C. § 1705. 

[36] GAO, Cybersecurity Human Capital: Initiatives Need Better 
Planning and Coordination, GAO-12-8 (Washington, D.C.: Nov. 29, 2011). 

[37] GAO-13-283. 

[38] Reset refers to the repair, recapitalization, and replacement of 
military equipment in order to restore units’ equipment to a desired 
level of combat capability commensurate with mission requirements and 
availability of resources. 

[39] Force and infrastructure categories group forces—the warfighting 
tools of the Combatant Commanders—into broad operational categories 
according to their intended use and groups infrastructure, the set of 
activities needed to create and sustain forces, based upon the type of 
support activity it performs (such as force installations or central 
logistics). 

[40] The acquisition infrastructure includes activities that develop, 
test, evaluate, and manage the acquisition of military equipment and 
supporting systems. These activities also provide technical oversight 
throughout a system’s useful life. 

[41] The Army was the only DOD component to submit information for 
DOD’s inventory of fiscal year 2007 contracted services. 

[42] In December 2011, section 936 of the National Defense 
Authorization Act for Fiscal Year 2012 amended section 2330a of title 
10 of the U.S. Code to clarify the types of contracted services to be 
inventoried include contracts for goods to the extent services are a 
significant component in a separate line item of the contract. 

[43] GAO-12-357. 

[44] DOD is required to annually compile an inventory of contracted 
services, pursuant to 10 U.S.C § 2330a, to include, among other data, 
the functions performed, the number of contractor FTEs performing the 
function, and the total dollar amount of the services purchased. For 
fiscal year 2011, we note that obligations reported for contracted 
services in budget justification materials and obligations reported in 
the inventory of contracted services differ. We have previously 
reported that a number of factors limit the accuracy and completeness 
of the inventory data; see for example, GAO-12-357. 

[45] National Defense Authorization Act for Fiscal Year 2006, Pub. L. 
No. 109-163 §1122 (2006) (codified as amended at 10 U.S.C. § 115b). 

[46] GAO-12-1014. 

[47] GAO-13-283. 

[48] 10 U.S.C. § 115b. 

[49] GAO-12-1014; GAO, Human Capital: Further Actions Needed to 
Enhance DOD’s Civilian Strategic Workforce Plan, GAO-10-814R 
(Washington, D.C.: Sept. 27, 2010); Human Capital: Opportunities Exist 
to Build on Recent Progress to Strengthen DOD’s Civilian Human Capital 
Strategic Plan, GAO-09-235 (Washington, D.C.: Feb. 10, 2009); and The 
Department of Defense’s Civilian Human Capital Strategic Plan Does Not 
Meet Most Statutory Requirements, GAO-08-439R (Washington, D.C.: Feb. 
6, 2008). 

[50] GAO-13-188. 

[51] 10 U.S.C. § 2330a. 

[52] GAO-12-357 and GAO-11-192. 

[53] DOD Directive 1100.4, Guidance for Manpower Management (Feb. 12, 
2005) and DOD Instruction 1100.22, Policy and Procedures for 
Determining Workforce Mix (Apr. 12, 2010). 

[54] National Defense Authorization Act for Fiscal Year 2012, Pub. L. 
No. 112-81, § 931 (2011) amending 10 U.S.C. §129a. 

[55] As required by 10 U.S.C. § 115b. 

[56] As required by 10 U.S.C. § 2330a. 

[57] GAO-12-357. 

[58] GAO-12-357. 

[59] GAO-13-188. 

[60] 10 U.S.C. §129a. 

[61] The identification of core mission areas is pursuant to 10 U.S.C. 
§ 118b. 

[62] Office of Management and Budget, Office of Federal Procurement 
Policy-Policy Letter 11-01, Performance of Inherently Governmental and 
Critical Functions, September 2011. 

[63] In the context of strategic workforce management, the term 
“critical” has been used to describe a number of separate efforts. As 
noted above, mission critical occupations are civilian personnel 
occupations that merit special attention based on their importance and 
the presence of human capital challenges. The term “critical functions”
refers to a function that is necessary to the agency being able to 
effectively perform and maintain control of its mission and operations. 

[64] Office of the Under Secretary of Defense (Comptroller), Fiscal 
Year 2013 President’s Budget Submission (Dec. 16, 2011). 

[65] The guidance specified that the contractor FTE data were to be 
shown in budget exhibit OP-5, which provides detail by budget sub 
activity group, and that contracted services funding shown in OP-32, 
which provides an appropriation summary of price and program growth, 
were to be consistent with the OP-5 contractor FTEs. 

[66] Office of the Under Secretary of Defense (Comptroller), Fiscal 
Year 2013 Operation and Maintenance Overview (February 2012). 

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

[68] GAO-11-192. 

[69] For example, our January 2011 report found that the Army, which 
does not use FPDSNG to compile its inventory, reported 113,713 
contractor FTEs performing professional, administrative and management 
support services in their fiscal year 2009 inventory, but would have 
reported significantly fewer-—65,408 FTEs—-if they had used the 
average labor rates and ratios used by the Office of the Under 
Secretary of Defense for Acquisition, Technology and Logistics. See 
GAO-11-192. 

[70] Contractor FTE data that are informed by the inventory of 
contracted services are to be provided in the PB-32 budget exhibit, 
which provides a summary of price and program growth for the 
procurement and research, development, test and evaluation budget 
accounts, in addition to the OP-32 exhibit. 

[71] Including 10 U.S.C. §129a and 10 U.S.C. § 2330a. 

[72] DOD Directive 1100.4, Guidance for Manpower Management, (Feb. 12, 
2005) and DOD Instruction 1100.22, Policy and Procedures for 
Determining Workforce Mix, (Apr.12, 2010). 

[73] Including 10 U.S.C. §§ 129a, 235, 2330a, and 2463. 

[74] Office of Federal Procurement Policy Policy Letter 11-01, 
Performance of Inherently Governmental and Critical Functions-(Sept. 
12, 2011, effective date Oct. 12, 2011). 

[75] For example, DODI 1100.22 (Apr. 12, 2010). 

[76] For example, DOD, Quadrennial Defense Review Report, February 
2010. DOD, Quadrennial Roles and Missions Review Report, January 2009. 

[End of section] 

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