Defense Contractors: Additional Actions Needed to Facilitate the Use of DOD's Inventory of Contracted Services
Highlights
What GAO Found
The Department of Defense (DOD) continues to face challenges in assuring that it conducts and reports on the results of its required inventory reviews. As of September 2014, 32 of the 33 components that were required to conduct an inventory review certified that they had done so and generally addressed more of the required reporting elements than in fiscal year 2011. However, GAO found limitations with the inventory review results. For example, the Air Force did not submit a fiscal year 2012 inventory certification letter and the Army's review was incomplete at the time its Secretary signed the certification. Further, components may not have fully identified all instances in which contractors were providing services that are closely associated with inherently governmental functions, a key review objective to help ensure that the DOD is not overly reliant on contractors to support core missions. DOD's March 2014 guidance, which is applicable to the fiscal year 2013 inventory, does not fully address some of the shortcomings GAO identified, including how to identify contracts for review or approaches to ensure that components adequately assess contractor activities. As a result, components may not fully identify instances of contractors providing services that are closely associated with inherently governmental functions.
A key factor hindering the components' inventory reviews is the lack of accurate and reliable data. DOD has not resolved issues with implementing its planned common data system based on the Army's existing system. Further, in September 2014, DOD initiated a new review, due by December 2014, to identify and develop options to collect these data. This review raises a question of whether DOD will continue to implement a common data system modeled after the Army's system or attempt to develop a new system. DOD continues to lack a plan with timeframes and milestones to measure its progress toward implementing a common data system. These factors jeopardize DOD's goal to have all components, by 2016, collect statutory-required contractor manpower data. Further delays in resolving these issues will undermine the inventory's usefulness.
The military departments generally have not developed plans to use the inventory of contracted services to facilitate DOD's strategic workforce planning, workforce mix, and budget decision-making processes, as statutorily required. Numerous offices are responsible for the various decision-making processes at the military departments, and the Secretaries of the military departments have not assigned specific responsibility for coordinating among these offices to do so. The absence of officials who are accountable for integrating the use of the inventory leaves the department at continued risk of not complying with the applicable legislative requirements to use the inventory to support management decisions. Internal control standards state that management should assign responsibility to enable an organization to achieve management objectives and to comply with laws.
Why GAO Did This Study
DOD is the government's largest purchaser of contractor-provided services. In 2008, Congress required DOD to compile and review an annual inventory of its contracted services to include the number of contractors providing services to DOD and the functions these contractors performed, and in 2011, amended this statute to require DOD to plan to use that inventory to inform certain department-wide decision making processes. The National Defense Authorization Act for Fiscal Year 2014 mandated GAO to report on the required reviews and plans to use these inventories.
For this report, GAO assessed the extent to which DOD components (1) reviewed contracts and activities in the fiscal year 2012 inventory of contracted services and (2) developed plans to use the inventory for decision-making. GAO reviewed relevant laws and guidance, reviewed component certification letters from 32 components, and interviewed DOD acquisition, manpower, programming, and budgeting officials.
Recommendations
GAO recommends DOD revise inventory guidance to improve the review of contract functions, approve a plan of action with milestones and timeframes to establish a common data system to collect contractor manpower data, and designate a senior management official at the military departments to develop plans to use inventory data to inform management decisions. DOD concurred with GAO's recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of the Under Secretary for Personnel and Readiness | To better implement the requirements for reviewing the inventory of contracted services, the Under Secretary of Defense for Acquisition, Technology and Logistics and the Under Secretary of Defense for Personnel and Readiness should work jointly to revise annual inventory review guidance to clearly identify the basis for selecting contracts to review and to provide approaches the components may use to conduct inventory reviews that ensure the nature of how the contract is being performed is adequately considered. If DOD intends for components to review less than 100 percent of its contracts, then the guidance should clearly identify the basis for selecting which contracted functions should be reviewed. |
DOD issued guidance in March 2016 (which applied to the fiscal year 2015 inventory of contracted services) that stated components are to review all contracts. More recently, the National Defense Authorization Act of 2017 revised inventory requirements to focus data collection on four service acquisition portfolio groups--logistics management services, equipment-related services, knowledge-based services, and electronics and communications services.
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| Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics | To better implement the requirements for reviewing the inventory of contracted services, the Under Secretary of Defense for Acquisition, Technology and Logistics and the Under Secretary of Defense for Personnel and Readiness should work jointly to revise annual inventory review guidance to clearly identify the basis for selecting contracts to review and to provide approaches the components may use to conduct inventory reviews that ensure the nature of how the contract is being performed is adequately considered. If DOD intends for components to review less than 100 percent of its contracts, then the guidance should clearly identify the basis for selecting which contracted functions should be reviewed. |
DOD issued guidance in March 2016 (which applied to the fiscal year 2015 inventory of contracted services) that stated components are to review all contracts. More recently, the National Defense Authorization Act of 2017 revised inventory requirements to focus data collection on four service acquisition portfolio groups--logistics management services, equipment-related services, knowledge-based services, and electronics and communications services.
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| Office of the Under Secretary for Personnel and Readiness | To help facilitate the department's stated intent to develop a common data collection system to fully collect statutorily required data, the Under Secretary of Defense for Personnel and Readiness should approve a plan of action, with timeframes and milestones, for rolling out and supporting a department-wide data collection system as soon as practicable after December 1, 2014. Should a decision be made to use or develop a system other than the Enterprise-wide Contractor Manpower Reporting Application system currently being fielded, the Under Secretary of Defense for Personnel and Readiness should document the rationale for doing so and ensure that the new approach will provide data that satisfies the statutory requirements for the inventory. |
DOD concurred with this recommendation. DOD has made a decision to take an approach other than use of the Enterprise-wide Contractor Manpower Reporting Application system and documented its rationale. Specifically, in October 2019, the Under Secretary of Defense for Acquisitions and Sustainment issued a memo directing the military services to have contractors report manpower data related to contracts for services into the government-wide System for Award Management. In addition, in June 2020 DOD released a proposed rule in the Federal Register to amend the Defense Federal Acquisition Regulation Supplement with regards to data collection and inventory for service contracts. The proposed rule stated that since the publication of a separate proposed rule, DOD has elected to use an approach used by other federal agencies to collect service contract data. This approach is to use the Federal Procurement Data System, an existing source of contract information for the federal government, to provide a majority of the required data, with contractor-reported data in the System for Award Management filling any gaps. According to the proposed rule, this approach will continue to allow DOD to collect the required data while eliminating the additional burden on contractors of reporting data into different systems for military and civilian contracts, improving data integrity and accuracy, and reforming DoD's business practices for greater performance and affordability.
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| Department of the Air Force | To help ensure that the inventory of contracted services is integrated into key management decisions as statutorily required, the Secretaries of the Army, Navy, and Air Force should identify an accountable official within their departments with responsibility for leading and coordinating efforts across their manpower, budgeting, and acquisition functional communities and, as appropriate, revise guidance, develop plans and enforcement mechanisms, and establish processes. |
DOD concurred with this recommendation. As of August 2018, the Air Force's 2018 submission for the inventory of contracted services includes the identification of an official accountable for these responsibilities, which meets the intent of the recommendation.
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| Department of the Navy | To help ensure that the inventory of contracted services is integrated into key management decisions as statutorily required, the Secretaries of the Army, Navy, and Air Force should identify an accountable official within their departments with responsibility for leading and coordinating efforts across their manpower, budgeting, and acquisition functional communities and, as appropriate, revise guidance, develop plans and enforcement mechanisms, and establish processes. |
DOD concurred with this recommendation. As of March 2016, DOD guidance on the inventory of contracted services requires the designation of an accountable official. In its July 2019 submission for the fiscal year 2017 inventory of contracted services, the Navy designated the Principal Deputy Assistant Secretary of the Navy for Manpower and Reserve Affairs as the accountable official.
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| Department of the Army | To help ensure that the inventory of contracted services is integrated into key management decisions as statutorily required, the Secretaries of the Army, Navy, and Air Force should identify an accountable official within their departments with responsibility for leading and coordinating efforts across their manpower, budgeting, and acquisition functional communities and, as appropriate, revise guidance, develop plans and enforcement mechanisms, and establish processes. |
DOD concurred with this recommendation. As of March 2016, DOD guidance on the inventory of contracted services requires the designation of an accountable official and in September 2018, the Army designated the Assistant Secretary of the Army for Manpower and Resource Affairs as the accountable official.
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