Federal Contracting: Improvements Needed in How Some Agencies Report Personal Services Contracts
Fast Facts
Contractors hired under personal services contracts operate like government employees. The federal government reported spending about $1.5 billion on personal services contracts for FYs 2011-2015. The Air Force, Army, Navy, and USAID together were responsible for most of this reported spending.
We found that USAID spent over $123 million on these contracts in FY 2015. However, we could not confirm how much DOD spent on them because the Air Force and Army did not record these contracts accurately in federal databases.
We recommended that the Air Force and Army take steps to ensure that personal services contracts are recorded accurately.
DOD Personal Services Contracts, FY 2014
Graphic showing numbers of FY2014 personal services contracts in two federal databases
Highlights
What GAO Found
The United States Agency for International Development (USAID) spent more than $123 million on personal services contracts in fiscal year 2015, according to the Federal Procurement Data System-Next Generation (FPDS-NG). But GAO cannot confirm the extent that personal services contacts are awarded by the Department of Defense (DOD) because GAO identified significant reporting errors at two DOD agencies—the Air Force and the Army. Specifically, 4 of the 15 Air Force contracts and 13 of the 15 Army contracts GAO reviewed were incorrectly recorded in FPDS-NG as personal services contracts. Defense officials agreed with this assessment. Further, the fiscal year 2014 inventories of contracted services at Air Force, Army, and Navy contained personal services contracts not captured in FPDS-NG, as shown in the figure below. Apart from the inaccuracies of the reported data, GAO observed and agency officials agreed that additional undercounting could exist since some contracts for nonpersonal services could become personal services contracts, depending on whether the contract involves direct supervision by government employees. In the absence of accurate data, proper management of personal services and other contracts becomes more difficult.
DOD Personal Service Contracts as Reported in FPDS-NG and Inventories, Fiscal Year 2014
Military departments and USAID use personal services contracts differently. DOD personal services contracts GAO reviewed were mostly for health care services. As permitted under its regulations, USAID uses personal services contracts for a broader range of functions such as program management, security analysis, and logistics, some of which are considered tasks that only government employees should perform—inherently governmental activities. Federal regulations that prohibit contractors from performing such activities do not apply to authorized personal services contracts. DOD's practice is not to use personal services contracts for inherently governmental tasks. DOD and USAID have multiple authorities for awarding personal services contracts, but none of the files GAO reviewed at USAID cited the correct authority for personal services contracts performed in the United States. USAID has taken steps to address this issue but has not yet determined whether these steps will be effective.
Why GAO Did This Study
A personal services contract is one that makes contractor personnel appear to be government employees. These contracts must be authorized by federal law. According to FPDS-NG, the government reported obligating about $1.5 billion on personal services contracts in fiscal years 2011 through 2015.
GAO was asked to examine the federal government's use of personal services contracts. This report discusses (1) the extent to which selected federal agencies award personal services contracts, and (2) how those agencies use them.
GAO identified the four agencies spending the most on personal services contracts—the Air Force, Army, Navy, and USAID—as reported in FPDS-NG. These agencies account for about 60 percent of total spending on these contracts. GAO also reviewed the service contract inventories these agencies prepared for fiscal year 2014, the latest year available at the time of this review. GAO reviewed the files for a nongeneralizable sample of 60 personal (15 at each agency) and 40 nonpersonal services contracts (10 at each agency) and interviewed agency officials. GAO did not review the administration of the contracts.
Recommendations
GAO recommends that the Secretary of Defense direct the Air Force and Army to take steps to ensure the accurate recording of personal services contracts in FPDS-NG; and that USAID ensure the correct authority is cited for personal services contracts performed in the United States. DOD and USAID concurred with our recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | To ensure accurate reporting of personal services contracts, the Secretary of Defense should direct the Secretaries of the Air Force and the Army take steps to ensure the accurate recording of personal services contracts in the Federal Procurement Data System-Next Generation. |
The Department of Defense concurred with the recommendation in our report. On August 25, 2017, the Acting Director Defense Procurement and Acquisition Policy in a memorandum to the Deputy Secretary of the Air Force (Contracting) and the Deputy Secretary of the Army (Procurement) directed the two services to review processes and implement procedures to ensure accurate reporting of Personal Service Contracts. The Acting Director further directed that the Deputy Secretaries conduct an assessment in the second quarter of fiscal year 2018 to ensure that the process improvements result in completely accurate coding of all Personal Services contracts awarded after October 1, 2016. This memorandum and the actions outlined address the report recommendation to the Department of Defense.
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| U.S. Agency for International Development | To ensure accurate reporting of personal services contracts, the Administrator, United States Agency for International Development should implement periodic reviews of selected personal services contracts to ensure the effectiveness of steps taken to assist contracting officers to cite the correct statutory authority for personal services contracts. |
The United State Agency for International Development concurred with this recommendation. Officials stated that USAID's Bureau for Management, Office of Acquisition and Assistance Evaluation Division performs regular reviews the Agency's Procurement System in each of the contracting activities using a checklist that identifies key functions and validates that they are being performed correctly. USAID has added a test factor to this checklist to determine whether the appropriate authority is cited for each personal services contract it reviews. Through this change, which is a response to the GAO recommendation, each of the annual Procurement System reviews will verify that the correct authority is cited. USAID will review the Procurement System review findings over the next six months to confirm that the correct authorities continue to be cited for the Agency's personal services contracts. USAID used the checklist during its Fiscal Year 2017 procurement reviews. Officials provided a copy of the checklist showing that an item for determining whether the proper authority was cited was present and a copy of the results of the Fiscal Year 2017 review. Documents provided and email discussion with officials provide sufficient information to demonstrate that the agency complied with the recommendation.
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