Defense Contracting:

Army Case Study Delineates Concerns with Use of Contractors as Contract Specialists

GAO-08-360: Published: Mar 26, 2008. Publicly Released: Mar 26, 2008.

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In 2007, the Department of Defense (DOD) paid contractors $158.3 billion for a range of services, including contract specialists. To better understand the use of contractors in this role, GAO initiated a case study, under the authority of the Comptroller General, at the Army Contracting Agency's (ACA) Contracting Center of Excellence (CCE). GAO determined (1) the extent to which and why CCE relies on contractor contract specialists, (2) how risks of contractor use are mitigated, (3) how the cost of the contractors compares to that for CCE's government employees, and (4) whether the contract vehicles were appropriate. GAO reviewed a random sample of contract files to understand the contractors' duties and responsibilities, compared compensation costs, and reviewed documents from the General Services Administration (GSA), under whose contracts CCE ordered the contract specialists.

CCE has relied on contractor contract specialists since it began hiring them in 2003. In August 2007, contractors--who work side by side and perform the same functions as their government counterparts--comprised 42 percent of CCE's contract specialists. CCE officials cited difficulties hiring and retaining government personnel in light of the competition from government and the private sector for this competency. While CCE officials said that they prefer to use government employees, they have not considered the appropriate balance of contractor versus government contract specialists. Furthermore, CCE has not addressed the need for more training of its government employees to strengthen their skills in conducting CCE's increasingly more complex procurements. Methods to mitigate the risks of using contractors have been mixed in effect. First, the line separating contractor from government employee is blurry, and contractors did not always clearly identify themselves as such when dealing with the public. Second, the potential for the work being done under a personal services contract, which the Federal Acquisition Regulation generally prohibits because of the government-contractor relationship it creates, was clearly present. While contractor managers retained control over matters such as approving leave requests, CCE took steps to further strengthen the management distinction between government and contractor employees based on GAO's findings. Finally, risks of organizational and personal conflicts of interest were mitigated to some extent, but in practice the government relies on individual contractor employees to identify potential conflicts. These types of risks must be mitigated to ensure that the government does not lose accountability over policy and program decisions. CCE is paying up to almost 27 percent more for its contractor-provided contract specialists than for similarly graded government employees. This comparison took into account government salary, benefits, and overhead and the loaded hourly labor rates paid to contractors. Our review of available r?sum?s showed that six contractor employees supporting CCE in fiscal year 2007 had on average more contracting experience than CCE's five recent government hires. Despite CCE's legal counsel's concerns, CCE has been inappropriately ordering contract specialists under a GSA contract because the services were out of scope of those contracts. GAO found additional problems, such as a contractor advertising contract specialist services on GSA's Web site that it was not authorized to provide. Due to what it characterizes as the growing demand by federal agencies for contractor contract specialists, GSA recently posted a revised contract category, under which government agencies can procure contract specialists to provide acquisition management services, such as cost estimating and proposal evaluation support. In response to GAO's findings, GSA contacted each of the contractors involved in our review about their out-of-scope services and plans further follow-ups with them.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Army concurred with the recommendation and stated that an information paper re-enforces policies on contractor identification. The information paper requires contractors to identify themselves as contractors, and include the name of their firm, in all written correspondence and telephone communications. Contracting Center of Excellence (CCE) plans to review emails sent by contractor employees to ensure they are properly identified; such identification was added to CCE's contract file checklist. CCE has also re-organized the way that work is assigned, so that contractor representatives, not government contracting officers, assign work to contractor employees.

    Recommendation: To help ensure that CCE has sufficient qualified government personnel to meet its mission, and uses contractors appropriately, the Secretary of the Army should direct ACA to work with CCE in implementing formal oversight procedures to ensure that contractors identify themselves as such in all interactions external to CCE, including telephone communications, e-mail signature lines, and documents, as required by the Federal Acquisition Register.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: Army response stated that Contracting Center of Excellence (CCE) has implemented the recommendation, including formulation of individual development plans, a variety of training mechanisms, compliance with DOD certification requirements, and formal training at least once a quarter. In addition, during fiscal year 2009, CCE implemented once-a-month training provided by its legal office and training by the Directorate of Contracting in areas where issues have arisen on Wednesdays (when the office is closed).

    Recommendation: To help ensure that CCE has sufficient qualified government personnel to meet its mission, and uses contractors appropriately, the Secretary of the Army should direct ACA to work with CCE in implementing a training program designed to ensure that CCE's permanent employees develop and maintain needed skills.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: Agency response indicates that it agrees with the recommendation and that the long-term goal is to staff Contracting Center of Excellence (CCE) with government contract specialists. CCE has put forth an aggressive recruitment effort and states that it has decreased the number of contractor personnel from 31 in 2007 to 17 as of Feb. 2008. Further reductions in contractor personnel are anticipated. We consider this recommendation implemented, as the "appropriate mix" of the contract specialists over the long term, in the Army's view, is an all-government workforce.

    Recommendation: To help ensure that CCE has sufficient qualified government personnel to meet its mission, and uses contractors appropriately, the Secretary of the Army should direct ACA to work with CCE in identifing the appropriate mix of contractor and government contract specialists over the long term and develop a plan to help fill positions to achieve the desired balance.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Closed - Implemented

    Comments: Based on our report, Congress included a provision in Section 831 of the National Defense Authorization Act for Fiscal Year 2009 requiring DOD to develop guidance related to personal services contracts to (1) require a clear distinction between employees of the DOD and employees of DOD contractors, (2) provide appropriate safeguards with respect to when, where, and to what extent DOD may enter into a contract for the procurement of personal services, and (3) assess and take steps to mitigate the risk that, as implemented and administered, non-personal services contracts may become personal services contracts. Pursuant to Section 831, the Defense Federal Acquisition Regulation Supplement (DFARS) was amended in May 2011 to provide the required guidance on personal services contracts. In addition to amending DFARS, DOD added a section to DOD Instruction 1100.22, revised in April 2010, that describes an inappropriate personal services contractual arrangement and provides guidance on assessing whether or not the work is personal in nature.

    Recommendation: The Secretary of Defense should issue guidance to clarify the circumstances under which contracts risk becoming improper personal services contracts and to provide direction on how the risk should be mitigated.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: GSA agreed with the recommendation. In the 60-day letter it stated that GSA will conduct a survey of contractor postings on GSA Advantage to determine the extent to which contractors are advertising products or services not awarded in their contracts. Based on the survey results, GSA said it would develop appropriate remedial actions to address the identified concerns. GSA said it would also consider the extent to which it may be necessary to conduct similar compliance surveys on a periodic and random basis going forward. On October 21, 2009, GSA informed GAO of survey and analysis completion, and the agency forwarded the results to GAO. GSA found minor discrepancies in the rates set forth in some Advantage files and planned to take immediate steps to ensure that the correct rates were posted to Advantage for the particular contracts. GSA found no instance in which a contractor advertised products or services that had not been awarded in its underlying schedule contract and, concluding that there was not a systemic problem, decided that no further action was needed.

    Recommendation: The Administrator of GSA should strengthen internal controls to guard against situations where contractors advertise services on the GSA Advantage Web site that are not in their underlying GSA schedule contracts.

    Agency Affected: General Services Administration

 

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