This is the accessible text file for GAO report number GAO-05-201 
entitled 'Interagency Contracting: Problems with DOD's and Interior's 
Orders to Support Military Operations' which was released on April 29, 
2005.

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov.

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

Report to Congressional Committees:

United States Government Accountability Office:

GAO:

April 2005:

Interagency Contracting:

Problems with DOD's and Interior's Orders to Support Military 
Operations:

GAO-05-201:

GAO Highlights:

Highlights of GAO-05-201, a report to congressional committees.

Why GAO Did This Study:

In recent years, federal agencies have increasingly turned to 
interagency contracts—where one agency, for example, places an order 
under an existing contract for another agency—as a way to streamline 
the procurement process. Interagency contracting can offer benefits of 
improved efficiency, but this approach needs to be effectively managed.

To learn more about some of the challenges of interagency contracting, 
we reviewed the process that the Department of Defense (DOD) used to 
acquire interrogation and certain other services through the Department 
of the Interior to support military operations in Iraq. On behalf of 
DOD, Interior issued 11 task orders, valued at over $66 million, on an 
existing contract.

This report identifies breakdowns in the procurement process, 
contributing factors that led to the breakdowns, and the extent to 
which recent actions by Interior and DOD address these contributing 
factors. 

What GAO Found:

DOD, faced with an urgent need for interrogation and other services in 
support of military operations in Iraq, turned to the Department of the 
Interior for contracting assistance. Numerous breakdowns occurred in 
the issuance and administration of the orders for these services. The 
breakdowns included 

* issuing orders that were beyond the scope of the underlying contract, 
in violation of competition rules; 
* not complying with additional DOD competition requirements when 
issuing task orders for services on existing contracts; 
* not properly justifying the decision to use interagency contracting;
* not complying with ordering procedures meant to ensure best value for 
the government; and
* inadequate monitoring of contractor performance. 

Because the officials at Interior and the Army responsible for the 
orders did not fully carry out their roles and responsibilities, the 
contractor was allowed to play a role in the procurement process 
normally performed by the government. 

A lack of effective management controls—in particular insufficient 
management oversight and a lack of adequate training—led to the 
breakdowns. When these management controls are not in place, 
particularly in an interagency fee-for-service contracting environment, 
more emphasis can be placed on customer satisfaction and revenue 
generation than on compliance with sound contracting policy and 
required procedures. Significant problems in the way Interior’s 
contracting office carried out its responsibilities in issuing the 
orders for interrogation and other services on behalf of DOD were not 
detected or addressed by management. Further, the Army officials 
responsible for overseeing the contractor, for the most part, lacked 
knowledge of contracting issues and were not aware of their basic 
duties and responsibilities. 

In response to the above concerns, Interior and DOD have taken actions 
to strengthen management controls. For example, Interior has re-issued 
or clarified several policies for its contracting personnel and has 
required them to take training on the proper use of General Service 
Administration contracts. DOD has issued a new policy requiring that 
military departments and defense agencies establish procedures for 
reviewing and approving the use of other agencies’ contracts. These 
actions are a positive step toward addressing some of the contributing 
causes to the breakdowns GAO found, but it is too soon to tell how 
effective they will be. 

What GAO Recommends:

A number of corrective actions are already underway, such as clarifying 
policies and adding training requirements. GAO makes recommendations on 
steps that Interior and DOD should take to further refine their efforts. 
In written comments, both agencies agreed with the recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-05-201.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact David E. Cooper at 
(202)-512-4841or cooperd@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

Breakdowns Occurred When Interior Procured Interrogation and Other 
Services for DOD:

Need for Strong Management Controls:

Too Early to Tell If Actions to Increase Oversight and Improve Training 
Will Be Effective:

Recommendations:

Agency Comments and Our Evaluation:

Appendix I: Scope and Methodology:

Appendix II: Comments from the Department of Defense:

Appendix III: Comments from the Department of the Interior:

Appendix IV: Comments from CACI International Inc.

Appendix V: Summary of Task Orders Issued to CACI for Work in Iraq:

Table:

Table 1: Comparison of Labor Categories from DOD's Statements of Work 
to the Information Technology Contract:

Abbreviations:

BPA: blanket purchase agreement:

CACI: CACI International, Inc.

CJTF-7: Coalition Joint Task Force Seven:

COR: contracting officer's representative:

DOD: Department of Defense:

FAR; Federal Acquisition Regulation:

GSA: General Services Administration:

IG: Inspector General:

United States Government Accountability Office:

Washington, DC 20548:

April 29, 2005:

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

The Honorable Duncan Hunter: 
Chairman: 
The Honorable Ike Skelton: 
Ranking Minority Member: 
Committee on Armed Services: 
House of Representatives:

In recent years, federal agencies have made a major shift in the way 
they buy goods and services, turning increasingly to interagency 
contracts as a way to streamline the procurement process. Interagency 
contracting occurs when an agency needing supplies or services obtains 
them from another agency, often for a fee. For example, an agency can 
use an existing contract that has already been awarded by another 
agency, or turn to another agency to issue and administer task orders 
on its behalf.[Footnote 1] Interagency contracting can offer the 
benefits of improved efficiency and timeliness, but this approach needs 
to be effectively managed. Use of these contracts demands a high degree 
of business acumen and flexibility on the part of the federal 
acquisition workforce. Due to the challenges associated with 
interagency contracts, we recently designated interagency contracting 
as a governmentwide high-risk area.[Footnote 2]

The process that the Department of the Interior used to acquire 
interrogation and certain other services for the Department of Defense 
(DOD) during military operations in Iraq provides insight into aspects 
of interagency contracting that need careful attention. By August 2003, 
DOD was faced with a critical and largely unforeseen need for 
interrogators and screeners, some of whom were needed at Abu Ghraib 
prison. DOD had in place only a contingency contracting office in Iraq 
at the time, whose efforts were focused on obtaining basic necessities 
such as portable sanitation facilities and water trucks. To obtain 
interrogation and other services quickly, DOD relied on an Interior 
contracting office that specializes in awarding and administering 
contracts for other agencies through fee-for-service arrangements. Over 
an 8-month period, the Interior contracting office issued 11 task 
orders, valued at over $66 million, to CACI International, Inc. (CACI) 
on behalf of DOD. Of the 11 orders, 6 were for interrogation, 
screening, and other intelligence-related services, and 5 were for 
logistics support services. Interior placed the task orders on an 
information technology contract that CACI had in place with the General 
Services Administration (GSA) under GSA's Schedule program.[Footnote 3] 
The Interior Inspector General (IG) and GSA subsequently determined 
that 10 of the 11 orders were out of scope of the information 
technology contract. Following the disclosure of the prisoner abuse at 
Abu Ghraib and the implication of contractor employees in the abuse, 
questions arose about how DOD used Interior to acquire interrogators 
and screeners on an information technology contract and, more 
generally, about the integrity of the federal procurement process.

To learn more about some of the challenges associated with interagency 
contracting, we assessed (1) breakdowns that occurred in the 
procurement process when Interior placed orders with CACI for 
interrogation and other services in Iraq, (2) factors that led to the 
breakdowns, and (3) the extent to which recent or planned actions by 
Interior and DOD address these factors. To help ensure that the 
corrective actions underway will fully address the problems, we are 
recommending steps Interior and DOD can take to further refine those 
efforts.

We conducted our work at Interior, DOD, and GSA. In addition, we spoke 
with Army program officials who were responsible for overseeing the 
contractor's performance in Iraq and with contractor employees and 
representatives. Appendix I contains more detail on our scope and 
methodology. Appendix V contains a summary of the 11 orders for 
interrogation and other services in Iraq. We conducted our review from 
July 2004 to January 2005 in accordance with generally accepted 
government auditing standards.

Results in Brief:

Numerous breakdowns occurred in the issuance and administration of 
Interior's task orders for interrogation and other services on behalf 
of DOD for military operations in Iraq. These breakdowns included:

* orders for services beyond the scope of the underlying contract, in 
violation of competition rules;

* not complying with additional DOD competition requirements when 
issuing task orders for services on existing contracts;

* not properly justifying the decision to use interagency contracting;

* not complying with ordering procedures meant to ensure best value for 
the government; and:

* inadequate monitoring of contractor performance.

Because DOD and Interior officials effectively abdicated certain 
contracting responsibilities, the contractor was allowed to play a 
large role in aspects of the procurement process normally performed by 
government personnel.

The situation in Iraq at the time the orders for interrogation and 
other services were placed was extraordinary--a wartime environment and 
an atmosphere of turmoil and urgency. Nevertheless, a lack of 
management controls--in particular insufficient management oversight 
and a lack of adequate training--led to the breakdowns. When these 
controls are not in place, particularly in an interagency fee-for-
service contracting environment, more emphasis can be placed on 
customer satisfaction and revenue generation than on compliance with 
sound contracting policy and required procedures. Significant problems 
in the way Interior's contracting office carried out its 
responsibilities in issuing the orders for interrogation and other 
services on behalf of DOD were not detected or addressed by management. 
Further, the Army officials responsible for overseeing the contractor, 
for the most part, lacked knowledge of contracting issues and were not 
aware of their basic duties and responsibilities in administering the 
orders.

The high-profile nature of the interrogation orders has served to focus 
attention on ways to improve the use of interagency contracts. Interior 
and DOD have taken actions to strengthen management controls. For 
example, Interior has re-issued or clarified several policies for its 
contracting personnel and has required them to take training on the 
proper use of GSA contracts. DOD has issued a new policy designed to 
improve oversight of its use of other agencies' contracts, but it has 
left implementation to the individual departments and agencies and does 
not have a mechanism in place to provide for departmentwide monitoring 
of the policy's implementation. While these actions are a positive step 
toward addressing some of the causes to the breakdowns with the orders, 
it is too soon to tell how effective they will be.

Because a number of corrective actions are already underway, we make 
recommendations in this report on steps that Interior and DOD should 
take to further refine their efforts to improve management oversight 
and training. In written comments on a draft of this report, both 
agencies agreed with the recommendations and discussed actions they are 
taking to implement them. We also received written comments from CACI. 
While acknowledging that our report identifies a number of areas where 
the government can improve its contracting processes, CACI raised 
several issues that it believes we did not adequately address. The 
comments from DOD, Interior, and CACI are discussed beginning on page 
21 and are reproduced in their entirety in appendices II, III, and IV, 
respectively.

Background:

In recent years, agencies have increasingly placed orders against 
existing contracts that have been awarded by another agency to save 
time and administrative effort. Rather than going through the often 
lengthy process involved in awarding a new contract for services--
soliciting offers, evaluating proposals, and awarding the contract--
agencies can place task orders against established indefinite quantity 
contracts that meet their needs. When placing orders against multiple-
award task order contracts, agencies are generally required to ensure 
that contractors have a fair opportunity to be considered for each 
order with certain exceptions (such as urgency or logical follow-on). 
For GSA Schedule contracts, agencies are required to follow ordering 
procedures such as reviewing prices from at least three contractors, 
evaluating prices for services requiring a statement of work, and 
seeking price reductions for large orders.

Interagency contracting is often handled by entrepreneurial, fee-for-
service organizations, where agency contracting units operate like a 
business and provide contracting assistance to other agencies for a 
fee. The Interior contracting office that placed the orders for 
interrogation and other services--the Southwest Branch of Interior's 
National Business Center, located in Fort Huachuca, Arizona--is one 
such organization. This office's contracting activity, primarily on 
behalf of other agencies, has increased substantially over the past 3 
years, with reported obligations increasing from $609 million in fiscal 
year 2002 to $1.02 billion in fiscal year 2004.

The fee-for-service procurement process generally involves three 
parties: the agency requiring a good or service; the agency placing the 
order or awarding the contract; and contractors providing the goods and 
services the government needs. The requiring agency officials determine 
the goods or services needed and, if applicable, prepare a statement of 
work, sometimes with the assistance of the ordering organization. The 
contracting officer at the ordering office ensures that the contract or 
order is properly awarded or issued (including any required 
competition), and administered under applicable regulations and agency 
requirements. If contract performance will be ongoing, a contracting 
officer's representative--generally an official at the requiring agency 
with relevant technical expertise--is normally designated by the 
contracting officer to monitor the contractor's performance and serve 
as the liaison between the contracting officer and the contractor.

At the same time as use of interagency contracting has increased, DOD 
has also increased its use of contractors in military operations. 
Particularly since the 1991 Gulf War, contractors have taken over 
support positions that were traditionally filled by government 
personnel. For example, a company that CACI later acquired began 
providing intelligence support to the Army in Germany in 1999.[Footnote 
4] When the Army in Europe deployed intelligence personnel to the Iraq 
theater in 2003, CACI employees went with them. Following the 
announcement of the end of major combat in May 2003, the Army, as part 
of the Coalition Joint Task Force Seven (CJTF-7), was expecting a non-
hostile situation and did not plan for an insurgency.[Footnote 5] It 
was unprepared for the volume of Iraqi detainees and the need for 
interrogation and other intelligence and logistics services. An Army 
investigative report from August 2004 noted that the CJTF-7 
headquarters in Iraq lacked adequate personnel and equipment and that 
the military intelligence units at Abu Ghraib were severely under-
resourced.

The out-of-scope orders for interrogation and other services issued by 
Interior have been terminated. However, the Army has continued 
contracting for intelligence functions and logistics services through 
bridge contracts awarded on a sole source basis to CACI. The original 
term of the contracts was 4 months, and the Army subsequently exercised 
options for an additional 2 months, through early 2005. According to an 
Army official, the contract terms were recently extended further to 
allow the Army adequate time to competitively award contracts for these 
services.[Footnote 6]

Recently, in the Ronald W. Reagan National Defense Authorization Act 
for Fiscal Year 2005, [Footnote 7] Congress took steps to ensure the 
proper use of interagency contracts by DOD, the largest customer for 
these types of contract arrangements. The act prohibits DOD from 
procuring goods and services above the simplified acquisition threshold 
(generally $100,000) through a contract entered into by an agency 
outside DOD, unless the procurement is done in accordance with 
procedures prescribed by DOD for reviewing and approving the use of 
such contracts.[Footnote 8] The conference report accompanying the 
legislation established expectations that:

* DOD's procedures will ensure that any fees paid by DOD to the 
contracting agency are reasonable in relation to work actually 
performed;

* the supplies or services are consistent with the appropriated funds 
being used;

* the goods and services procured are within the scope of the non-DOD 
contract vehicle; and:

* such orders are in compliance with all applicable DOD-unique 
statutes, regulations, directives, and other requirements prior to 
approval.

Further, the act required reviews of certain non-DOD contracting 
offices to determine if they are compliant with Defense procurement 
requirements. [Footnote 9] If an office is deemed non-compliant, DOD 
could be prohibited from ordering, purchasing or otherwise procuring 
property or services in excess of $100,000 through that contracting 
office. In addition, a recent change to the Federal Acquisition 
Regulation (FAR), effective July 2004, added language to make it clear 
that a contracting officer placing an order against a GSA Schedule on 
another agency's behalf is responsible for applying that agency's 
regulatory and statutory requirements.[Footnote 10]

Breakdowns Occurred When Interior Procured Interrogation and Other 
Services for DOD:

The process of procuring interrogation and other services for DOD broke 
down at numerous points. In general, breakdowns in the procurement 
process, such as not following competition requirements and not 
properly justifying the decision to use interagency contracting, 
occurred when the orders were issued. The process also broke down 
during the administration of the contract, as the contractor's 
performance was not adequately monitored. Because the officials at 
Interior and the Army responsible for the orders did not fully carry 
out their roles and responsibilities, the contractor was allowed to 
play a role in the procurement process normally performed by the 
government. This situation increased the risk that the government would 
not get the services it needed at reasonable prices and in compliance 
with competition and other contracting requirements.

Task Orders Were Out of Scope of Underlying Contract:

Orders issued outside the scope of the underlying contract do not 
satisfy legal requirements under the Competition in Contracting Act for 
competing the award of government contracts.[Footnote 11] In such 
cases, the out-of-scope work should have been awarded using competitive 
procedures or supported with a justification and approval for other 
than full and open competition. The Interior IG and GSA have determined 
that 10 of the 11 task orders issued by Interior to CACI for 
interrogation and other services in Iraq were outside the scope of the 
underlying GSA information technology contract.[Footnote 12] The Army 
has also determined that interrogation services were outside the scope 
of the contract.

The labor category descriptions in the GSA contract were, in most 
cases, significantly different from the descriptions on DOD's 
statements of work and do not accurately represent the work that the 
contractor performed. Table 1 demonstrates some of the disparities 
between the labor categories in DOD's statements of work and the 
information technology contract.

Table 1: Comparison of Labor Categories from DOD's Statements of Work 
to the Information Technology Contract:

Statements of work: Screening/Interrogation Operations Coordinator; 
Information technology contract: Senior System Engineer.

Statements of work: Senior Counterintelligence Agent; 
Information technology contract: Senior Analyst.

Statements of work: Counterintelligence Agent; 
Information technology contract: Senior Functional Analyst.

Statements of work: Screener; 
Information technology contract: Training Specialist.

Statements of work: Interrogator; 
Information technology contract: Senior Functional Analyst.

Statements of work: Tactical/Strategic Interrogator; 
Information technology contract: Senior System Planner.

Source: GAO analysis of Interior's task order files.

[End of table]

CACI representatives stated that they determined the salary and 
benefits the company would pay interrogators and screeners and then 
selected the GSA information technology contract labor categories that 
would sufficiently cover the company's employee salary and benefits 
expenses, overhead, and profit. In other words, CACI selected the labor 
categories in the contract for cost and pricing purposes, rather than 
as a reflection of the work to be performed. Army representatives in 
Iraq told us that the services on the orders for interrogators, 
screeners, and logistics support were not information technology 
services. The Interior contracting officer also had concerns about 
whether the orders were within scope, asking the contractor for a 
verbal and, later, written explanation as to how the labor categories 
in the contract were related to the services the company was to provide 
in Iraq.

The contracting officer neglected to follow a requirement for legal 
review that could have raised questions about whether the orders were 
within scope. A July 2001 Interior policy requires legal review for all 
proposed solicitations in excess of $500,000 for non-commercial items 
and $2 million for commercial items. Interior contracting officials 
stated that they did not believe this requirement extended to orders 
placed on GSA contracts. Representatives from Interior's offices of 
general counsel and acquisition policy, however, told us that orders 
placed on GSA contracts are subject to legal review and that the orders 
for interrogation and other services should have been reviewed.

Further, the Interior contracting officer did not perform the required 
evaluation of the contractor's proposed approach for addressing DOD's 
requirements. Normally, when ordering services from GSA Schedules that 
require a statement of work, the ordering office is responsible for 
evaluating the contractor's level of effort and mix of labor proposed 
to perform the specific tasks being ordered and for making a 
determination that the price is reasonable. In this situation, however, 
the Interior contracting officer did not evaluate the mix of labor 
categories or establish that the level of effort was reasonable. 
Although documents in Interior's contract files provided that 
"technical review does not take exception to the proposal," no 
documentation exists to support the statement that an evaluation was 
performed and, in fact, Interior contracting officials told us that no 
such review was done.

DOD Task Order Competition Requirements Were Not Followed:

In addition to violating competition rules by placing orders that were 
not in the scope of the underlying contract, Interior contracting 
officials also did not comply with requirements contained in section 
803 of the National Defense Authorization Act for Fiscal Year 2002 
relating to DOD's purchase of services from GSA Schedule 
contracts.[Footnote 13] Specifically, for DOD orders for services over 
$100,000 placed on GSA contracts, notice must be provided to all GSA 
Schedule contractors offering the required services or to as many 
contractors as practicable to ensure that offers will be received from 
at least three contractors. If three offers are not received, a written 
determination must be made that no additional contractors could be 
identified despite reasonable attempts to do so. The requirements that 
DOD orders be placed on a competitive basis can be waived in writing 
for certain circumstances such as urgency. Section 803 requirements 
applied to the Iraq orders, even though Interior was the contracting 
agency, because DOD regulations require application of section 803 
provisions to orders placed by non-DOD agencies on behalf of 
DOD.[Footnote 14] The Interior contracting office, however, placed the 
orders directly with CACI without notifying other prospective 
contractors. Interior did not make any written determination that no 
additional contractors could be identified or that the competition 
requirement should be waived in this case.

Decision to Use Interagency Contracting Was Not Properly Justified:

In contracting through Interior, the Army did not follow requirements 
to justify use of interagency contracts. According to procurement 
regulations, an Economy Act determination and findings should have been 
approved by an Army contracting officer or another designated official 
to justify the use of Interior to acquire the services for the 
Army.[Footnote 15] The Economy Act authorizes agencies to enter into 
mutual agreements to obtain supplies or services by interagency 
acquisition.[Footnote 16] The FAR mandates that the requiring activity 
document that an Economy Act order is in the agency's best interest and 
that it cannot obtain the goods and services as conveniently or 
economically by contracting directly with a private source. However, 
Army personnel did not prepare the determination and findings, as 
required.[Footnote 17]

Ordering Procedures Meant to Ensure Best Value Were Not Followed:

Interior placed the orders with CACI by using a blanket purchase 
agreement (BPA) established under the GSA Information Technology 
Schedule contract in 1998.[Footnote 18] BPAs, a simplified method of 
filling anticipated repetitive needs for supplies and services, allow 
agencies to establish "charge accounts" with qualified vendors. The BPA 
in this case was improperly established and improperly used. Interior's 
contracting office did not comply with required BPA procedures meant to 
ensure the government receives the best value for its dollars and that 
competition is encouraged. Under procedures referred to in the Schedule 
contract, ordering offices that establish a single BPA are required to 
select a contractor that represents the best value and results in 
lowest overall cost, and to inform other contractors of the basis for 
the selection. We found no evidence, either in the BPA files or in our 
discussions with Interior contracting staff, that these requirements 
were followed, even though documents in the contract files state that 
the BPA is "best value." In essence, the BPA was used to direct 
business to the company on a sole source basis.

Contracting officials also failed to seek discounts from CACI's 
established GSA contract prices, as required. Applicable procedures in 
the contract stipulate, for example, that discounts are to be sought 
when orders exceed $500,000.[Footnote 19] We found that no discounts 
were sought, even though the value of the orders for work in Iraq 
ranged from $953,000 to $21.8 million. In addition, the procedures in 
the GSA contract require that BPAs are reviewed annually to ensure the 
government continues to receive best value. These annual reviews were 
never conducted. Further, the BPA was improper because it did not 
contain defined requirements, as stipulated in the GSA contract. 
Rather, the BPA states that "the categories of service provided by this 
BPA may include but are not limited to" various classes of information 
technology services. Finally, in 2001, Interior added several items and 
services to the BPA. This action improperly expanded the scope of 
services contained in the underlying GSA contract. According to GSA 
guidance, such scope expansions are a potential violation of the 
Competition in Contracting Act. When we asked Interior's contracting 
officials--including the contracting officer who signed the BPA--about 
these additions, they were unable to explain how or why the additions 
had been made.

Contractor's Performance Was Not Adequately Monitored:

One of the contracting officer's key responsibilities is ensuring that 
the government monitors the contractor's performance. The contracting 
officer may assign this responsibility to a contracting officer's 
representative (COR). At Interior, the contracting officer is required 
to verify that the COR has the appropriate training and to issue a 
designation letter to the COR outlining the duties to be performed. 
These duties can include:

* verifying that the contractor performs the technical requirements of 
the contract in accordance with the contract terms, conditions, and 
specifications;

* monitoring the contractor's performance, notifying the contractor of 
deficiencies observed during surveillance, and directing appropriate 
action to effect correction; and:

* reporting to the contracting officer in a monthly report the 
performance of services rendered under the contract.

We found that Interior's contracting officials never verified that the 
Army personnel serving as CORs had the appropriate training and, with 
one exception, sent the COR designation letter either months after the 
fact or not at all. Interior officials, including the contracting 
officer who placed the orders for DOD, had no explanation for why 
contractor surveillance policies were not followed. Moreover, the 
contracting officer had little to no communication with the CORs in 
Iraq and did not follow up to obtain monthly reports from them on the 
contractor's performance.

Proper surveillance of the contractor's performance under the orders 
was especially critical because the work was done on a time and 
materials basis, where services are billed on the basis of direct labor 
hours at specified fixed hourly rates (which includes wages, overhead, 
general and administrative expenses, and profit). According to the FAR, 
time and materials contracts require appropriate government oversight 
because there is no incentive for the contractor to control costs or be 
efficient.[Footnote 20] This requirement was recently reiterated in a 
September 2004 memo from DOD's Director, Defense Procurement and 
Acquisition Policy, which states that, because labor hour and time and 
materials contracts usually require significant surveillance to ensure 
the government receives good value, CORs should be appointed to verify 
the appropriateness of labor categories and the reasonableness of the 
number of hours worked.

In Iraq, the Army CORs responsible for the orders for interrogation and 
other services performed limited surveillance of the contractor's 
performance. Contractor employees were stationed in various locations 
around Iraq, with no COR or assigned representative on site to monitor 
their work. One contractor interrogator who had been located at the Abu 
Ghraib prison told us that, although he interacted with military 
personnel at the prison, he had no interaction with the COR. Further, 
although the COR in Baghdad stated that he relied on other military 
personnel on site to report back to him, a recent Army investigative 
report showed that the military personnel on site were not given 
guidance on how to oversee the contractors. In fact, one of the 
military interrogators at Abu Ghraib prison indicated that the primary 
point of contact for the contractors was the contractor's on-site 
manager, with no mention of the COR. The Army investigative report 
pointed to this lack of contractor surveillance at the Abu Ghraib 
prison as a contributing factor to the environment in which the 
prisoner abuse occurred. The report noted that it is very difficult, if 
not impossible, to effectively administer a contract when the COR is 
not on site and that the Army needs to improve its oversight of 
contractors' performance to ensure that the Army's interests are 
protected.

Contractor Played a Role in the Procurement Process Normally Performed 
by Government Personnel:

In procuring the interrogation and other services in Iraq, Interior and 
Army officials abdicated their contracting responsibilities to a large 
degree. In this void, the contractor played a significant role in 
developing, issuing, and administering the orders, including:

* developing requirements;

* identifying the contractor's BPA with Interior as the contract 
vehicle to provide the services;

* drafting statements of work;

* suggesting that Army officials use the company's rough order of 
magnitude price as the government cost estimate;

* acting as a conduit for information from the Army in Iraq to the 
Interior contracting office;

* providing the Interior contracting office with a draft justification 
and approval to award additional work to the company on a sole source 
basis;

* sending invoices directly for payment; and:

* requesting that construction work be performed under the BPA, which 
would have also been out of scope from the GSA Schedule contract, 
although subsequent discussions between CACI and Interior contracting 
officials resulted in the work being awarded separately on a sole 
source basis due to urgency.

By acting in this manner, the contractor effectively replaced 
government decision-makers in several aspects of the procurement 
process. For example, a contractor employee proposed the initial 
requirements package for human intelligence, which included 
interrogators, and provided information to the Army personnel regarding 
skill sets needed for positions. Contractor employees also identified 
the company's BPA with Interior as the contract vehicle to provide the 
services. Contractor officials acknowledge they helped to draft 
statements of work, with contractor employees in Iraq sending the 
statements of work to company headquarters in the United States for 
suggestions. In fact, one of the statements of work we found in 
official contract files was on the contractor's letterhead. We also 
found that contractor employees wrote a draft justification and 
approval for Interior to award additional work noncompetitively to the 
company. Such a level of participation by the contractor creates a 
conflict of interest and undermines the integrity of the competitive 
contracting process.

Contractor officials explained that they marketed their services 
directly to Army intelligence and logistics officials in Iraq because 
of relationships they had developed over time. According to contractor 
officials, Army officials told them to work directly with the Interior 
contracting office because the DOD contingency contracting office in 
Iraq was focused on obtaining other necessary services. They also told 
us that, because military communication channels were not adequate, 
they communicated directly with the Interior contracting office. 
Interior contracting officials went along with this arrangement, citing 
problems in reaching Army officials in Iraq. The contract files contain 
emails between the contractor and Interior contracting officials on 
matters such as funding requests, statements of work, and COR 
assignments. Further, a COR responsible for the logistics orders told 
us that contractor officials informed him that Interior had merged two 
task orders; he was unaware that this had occurred. According to 
contractor officials, because Army and Interior officials allowed 
contractor personnel to act as the go-between, the contractor sent its 
invoices directly to Interior for payment after the COR signed them, as 
opposed to the normal practice of having government personnel perform 
this task.

Need for Strong Management Controls:

Although use of streamlined contracting vehicles can be beneficial, 
they must be effectively managed to ensure compliance with the FAR and 
to protect the government's interests. When a requiring agency's 
contracting needs are being handled by an outside agency, effective 
management controls become even more critical due to the more complex 
environment involved. Management controls, synonymous with internal 
controls, are an integral component of an organization's management 
that provide reasonable assurance that operations are effective and 
efficient and that employees comply with applicable laws and 
regulations. Two controls include management oversight and training. 
When these controls are not in place, particularly in a fee-for-service 
environment, more emphasis can be placed on customer satisfaction and 
revenue generation than on compliance with sound contracting policy and 
required procedures. We found an absence of these management controls 
for the 11 orders that were issued and administered for interrogation 
and other services.

Lack of Management Oversight:

Significant problems in the way Interior's contracting office carried 
out its responsibilities in issuing these orders were not detected or 
addressed by management. Further, managers at this office told us that 
they intentionally created an office culture of providing inexperienced 
staff with the opportunity to learn contracting by taking on 
significant responsibilities. More experienced contracting officers 
were responsible for overseeing and reviewing less experienced and 
trained purchasing agents and contract specialists. However, some staff 
told us that the contracting officers' reviews were not always thorough 
and appeared to be a "rubber stamp." Further, some staff indicated 
discomfort at the level of responsibility given to less experienced 
personnel and believed oversight of the activities of these employees 
was inadequate.

Moreover, Interior's headquarters did not exercise thorough oversight 
of the contracting activity that placed the orders. An April 2003 
Interior Acquisition Management Review concluded that the contracting 
office was highly effective, despite the fact that the review 
identified a number of problems where contracting personnel did not 
comply with sound contracting practices. Nonetheless, an Interior 
headquarters official told us that the contracting office did not 
require extensive oversight, based in part on the determination that 
the office was highly effective. The review cited the following:

* A conscious decision was made not to comply with Interior's 
requirements for legal review because the office believed the reviews 
took too long.[Footnote 21]

* A general weakness in cost support was noted. For instance, "best 
value" analysis was cited in sole source awards.[Footnote 22] Also, the 
contracting office accepted contractors' proposed prices without 
analyzing the cost and pricing data in depth to ensure that the prices 
were fair and reasonable. Further, the contractor's proposed cost and 
the government's cost estimate were identical without any explanation.

* Labor rates included in contracts and orders were not adequately 
justified.

* Competition requirements were not followed when placing orders using 
BPAs.

The review's conclusion that the office was highly effective was based 
in part on the office's peer review process, where contracting actions 
were reviewed by a second person as a management control. However, the 
review found no consistent methodology or format for the peer reviews 
and little or no information on results. Rather, the process for 
conducting and reporting the results of the reviews varied from 
individual to individual. Based on our interviews with Interior 
employees, we found that the peer reviews were often conducted by 
personnel with little contracting experience and training.

Adequate management oversight is particularly critical to ensuring that 
interagency fee-for-service contracting organizations, such as the 
Interior contracting office, comply with procurement regulations. The 
fee-for-service arrangement creates an incentive to increase sales 
volume in order to support other programs of the agency that awards and 
administers an interagency contract. This may lead to an inordinate 
focus on meeting customer demands at the expense of complying with 
required ordering procedures. The managers at Interior's contracting 
office promote a business-like entrepreneurial philosophy modeled after 
the private sector and empower employees to market services, interact 
with contractors, and make decisions in support of acquisitions. We 
found examples where the Interior contracting office marketed its BPA 
with CACI to federal agencies as a way to obtain services quickly 
without competition. Further, the performance measures for individual 
employees at Interior's contracting office, which measure quality, 
teamwork, and customer service, specifically state that customer 
satisfaction is a high priority in achieving good customer service. In 
fact, Interior's Acquisition Management Review of the contracting 
office focused heavily on customer satisfaction as a performance 
metric. Several of the office's customers were interviewed, and their 
compliments were summarized in detail as a key section of the review.

The Army also lacked management oversight of the contracting activity 
for interrogation and other services. This lack of oversight is 
evidenced by some questions that were raised by the Army's Chief of 
Contracts in Iraq in February 2004, about 6 months after the initial 
orders were placed. The Chief of Contracts asked the Interior 
contracting office:

* whether the orders were against a GSA contract and what the contract 
number was,

* what labor rates were included in the contract,

* whether there was a performance description for contractor personnel 
providing services,

* whether all contractor employees in Iraq were in accordance with the 
statements of work,

* who had been keeping track of the labor hours the contractor billed 
to the government,

* whether Interior had received monthly status reports on the 
contractor's performance, and:

* whether an Economy Act determination and findings had been prepared.

Further, DOD is required to have a management structure in place for 
the procurement of services that provides for a designated official in 
each military department and defense agency to exercise responsibility 
for the management of the procurement of services by that department or 
agency.[Footnote 23] This management structure is to include a means by 
which employees of the departments and defense agencies are accountable 
to the designated officials for carrying out certain requirements. 
These requirements include ensuring that services are procured by means 
of contracts or task orders that are in the best interest of DOD and 
are entered into or issued and managed in compliance with applicable 
statutes, regulations, directives, and other requirements, regardless 
of whether the services are procured by DOD directly or through a non-
DOD contract or task order. These requirements also include approving, 
in advance, any procurement of services above certain thresholds that 
is to be made through the use of a contract entered into, or a task 
order issued, by a government official outside DOD. Notwithstanding the 
requirement for this management structure, it is clear that DOD's 
implementation did not ensure that these requirements were met in 
procuring the interrogation and other services through Interior.

Lack of Adequate Training:

Interior's contracting office personnel and Army personnel in Iraq that 
were responsible for the orders for interrogation and other services 
lacked adequate training on their contracting responsibilities. While a 
warranted contracting officer at Interior signed the orders, certain 
requirements were not understood or followed, such as the need for 
legal review and competition. Further, an inexperienced purchasing 
agent administered the BPA on a day-to-day basis, including preparing 
various contracting documents. The employee had taken only one basic 
contracting course, even though the contracting office's training 
requirements require purchasing agents to take three contracting 
courses. Moreover, one staff member who had not taken the required 
training for a purchasing agent position was promoted to a contract 
specialist position. Several contracting employees we spoke with were 
concerned about the frequency and consistency of training they had 
received. We found that employees took training on their own initiative 
and that the training was not monitored or enforced by managers.

Army personnel in Iraq responsible for overseeing CACI employees' 
performance in Iraq were not adequately trained to properly exercise 
their responsibilities. An Army investigative report concluded that the 
lack of training for the CORs assigned to monitor contractor 
performance at Abu Ghraib prison, as well as an inadequate number of 
assigned CORs, put the Army at risk of being unable to control poor 
performance or become aware of possible misconduct by contractor 
personnel. We found that the personnel acting as CORs did not, for the 
most part, have the requisite training and were unaware of the scope of 
their duties and responsibilities. For example, they did not know that 
they were required to monitor and verify the hours worked by the 
contractor and instead just signed off on the invoices provided by the 
contractor. During the course of our work, we found confusion about 
whether the CORs were required to meet Interior's or DOD's training 
requirements. DOD and Interior officials told us that no policy or 
guidance exists on this matter when interagency contracting is used.

One COR for the logistics orders in Iraq, who had prior contracting 
experience, observed problems with two orders as soon as he was 
designated COR in February 2004. The concerns included: (1) a "clear 
mismatch" between the underlying contract and the statement of work, 
(2) the fact that no invoices had been submitted for work that began 
several months earlier, (3) Army personnel not overseeing and verifying 
time cards, (4) significant delays and issues in communicating with 
Interior's contracting office, and (5) significant problems with the 
administration of the orders by both the government and the contractor.

Too Early to Tell If Actions to Increase Oversight and Improve Training 
Will Be Effective:

The discovery of the problems with the Iraq orders encouraged Interior 
and DOD to take corrective actions aimed at improving management 
oversight and training, particularly as they pertain to interagency 
contracting. However, due to the recent nature of these efforts, it is 
too soon to tell how effective they will be.

In June 2004, Interior issued a policy memorandum prohibiting its 
contracting officers from acquiring interrogation or human intelligence 
services "regardless of the dollar value" for internal or external 
customers. Further, to focus attention on proper use of GSA contracts, 
Interior plans to evaluate its use of GSA contracts in its fiscal year 
2006 agencywide targeted performance review, an annual self-reported 
review by each of its contracting activities focusing on issues that 
are deemed important by top executives.

Also in June 2004, Interior's National Business Center, which has 
direct oversight responsibility for the contracting office that placed 
the orders for DOD in Iraq, clarified for its contracting activities 
the requirements for competition when ordering on behalf of DOD. At the 
same time, it updated its policy outlining COR requirements, 
emphasizing the need for written designation letters; issued new 
guidance for using BPAs and GSA contracts; and clarified its legal 
review policy. Moreover, the National Business Center intends to hire 
an additional manager whose responsibilities will include overseeing 
the contracting activities under the Center's purview. Officials at 
Interior agree that management controls are critical in fee-for-service 
contracting offices with a focus on customer service, and, in comments 
on this report, Interior stated that the National Business Center has 
established a new performance rating system that provides incentives to 
contracting officials to exercise due diligence.

Officials at the Interior contracting office that ordered the services 
for the Army told us that they are no longer placing orders against the 
CACI BPA. Once all orders expire, the BPA will be terminated. In 
addition, in December 2004, the contracting office released a revised 
independent quality review process to include specific checks for GSA 
contract actions, including whether the maximum order threshold is 
exceeded, section 803 competition compliance, and scope determination 
with a labor category verification. Officials also plan to review the 
amount of activity on all existing BPAs to determine if these BPAs are 
still needed and to assess whether prices are competitive. Interior, in 
commenting on this report, stated that the contracting office has also 
established a policy to ensure that BPAs are reviewed annually.

In addition, Interior has taken steps to improve training for its 
contracting officers. For fiscal year 2005, Interior has required each 
of its contracting activities to certify that all warranted contracting 
officers have taken two training courses on GSA contract use. Further, 
the contracting office that placed the orders for the Army has re-
instituted regular, formal training seminars for newer contracting 
staff. It has also implemented a new mentoring program to augment 
training standards and assist new employees in learning on the job. 
However, a mechanism is not yet in place to track or monitor the 
training.

DOD, for its part, issued a policy in October 2004, signed by high-
level officials from the Office of the Comptroller and the Office of 
Acquisition, Technology, and Logistics, requiring that military 
departments and defense agencies establish procedures for reviewing and 
approving the use of other agencies' contracts. The procedures are to 
ensure that the use of another agency's contract is in the best 
interest of DOD; tasks are within the scope of the contract being used; 
funding is being used in accordance with appropriation limitations; 
unique terms and conditions are provided to the ordering activity; and 
data are collected on the use of outside ordering activities. The 
procedures took effect in January 2005. Most military services have 
outlined procedures where the requiring activity is responsible for 
coordinating with the contracting office, and in some cases the legal 
and financial offices, when planning to use interagency contracting and 
for documenting compliance with the policy's guidelines. While the 
policy does not include a mechanism for monitoring the departments' 
implementation plans, ensuring ongoing compliance with the policy, or 
sharing information across DOD, agency officials stated that these 
functions are being performed informally.

Recommendations for Executive Action:

While the actions Interior and DOD have recently put in place or plan 
to initiate are positive steps, additional actions are needed to 
further refine these efforts. Accordingly, we recommend that:

The Secretary of the Interior take the following four actions:

* Ensure that management reviews of Interior contracting offices 
emphasize and assess whether contracting officials are trained 
adequately and BPAs are used appropriately.

* Ensure that performance measures for contracting officials provide 
incentives to exercise due diligence and comply with applicable 
contracting rules and regulations.

* Ensure that CORs are properly designated when contracts are awarded 
or orders are issued for other agencies and that they have met 
appropriate training requirements.

* Direct the National Business Center at Fort Huachuca to take the 
following three actions:

* Establish a consistent methodology for conducting peer reviews of 
contracting actions and ensure that experienced and trained contracting 
officials perform the reviews.

* Ensure that reviews of BPAs are done annually, as required by the 
FAR, to determine whether they still represent best value.

* Ensure that the contracting staff are properly trained and effective 
mechanisms are in place to track the training.

The Secretary of Defense take the following action:

* Develop a mechanism to track implementation of the new policy that 
establishes procedures for reviewing and approving the use of non-DOD 
contracts and to ensure that the military services and defense agencies 
have the opportunity to share information on how they are implementing 
it.

Agency Comments and Our Evaluation:

We provided a draft of this report to DOD, Interior, and CACI for 
review and comment. Their written comments are included as appendices 
II, III, and IV, respectively.

DOD agreed with our recommendation to develop a mechanism to track 
implementation of the new policy that establishes procedures for 
reviewing and approving the use of non-DOD contracts. DOD plans to post 
implementation policies on its web site and is considering establishing 
a community of practice on this issue. Our draft report contained a 
second recommendation to ensure that CORs are properly assigned, as 
appropriate, for all orders that DOD places on interagency contracts 
and that they are provided requisite training. Because DOD recently 
concurred with a similar recommendation in another GAO report,[Footnote 
24] we have deleted this recommendation.

Interior agreed with all of our recommendations and outlined actions 
and plans to address the issues that we identified in our 
report.[Footnote 25] In general, Interior is taking actions to improve 
oversight and training for its contracting staff, in particular for the 
National Business Center offices. In some cases, officials initiated 
corrective actions during the course of our review, as we brought 
issues to their attention.

While acknowledging that our report identified a number of areas where 
the government can improve its contracting processes, CACI took issue 
with several aspects of the report:

CACI suggested that our report does not adequately take into account 
the impact of the wartime environment in Iraq. We believe that our 
report adequately references the wartime situation. As CACI pointed 
out, the wartime circumstances may have justified the government's use 
of non-competitive contracting procedures. However, such authorized 
flexibilities were not employed by the agencies involved. Instead, as 
described in the report, Interior improperly used CACI's GSA contract 
in servicing its DOD customer.

CACI offered a number of detailed comments to support its position that 
the orders fell within the scope of the GSA contract. We did not find 
these arguments convincing. Every government agency involved determined 
that most of the work performed on the orders was out of scope. 
Contrary to CACI's assertion, our finding was not based merely on a 
comparison of the labor categories in CACI's GSA contract and those in 
the orders' statements of work, but on the material differences between 
the services authorized by the GSA contract and the services actually 
ordered by Interior and provided by CACI. While some of the services 
involved information technology, that, by itself, does not mean that 
those services (such as interrogation of detainees) can be ordered from 
CACI's GSA contract. The GSA contract is for the performance of certain 
commercial-type information technology services, not for any service 
that happens to involve the use of information technology. As noted in 
our report, the Army officials we spoke with stated that the services 
were not information technology services. In addition, while CACI's 
earlier orders from GSA's Federal Technology Service may help explain 
how the services in Iraq came to be ordered by Interior, it is not 
determinative of the proper use of that contract in this situation.

On the issue of the contractor playing an unusually large role in 
actions normally performed by government officials, CACI defends its 
actions as being appropriate in the wartime environment. The intent of 
that section of our report is not to suggest that the contractor acted 
with malfeasance; rather, we highlight the fact that, because the 
government officials did not exercise due diligence in carrying out 
their duties, the contractor was either allowed or encouraged to step 
in to fill the void. Further, CACI refers to our description of out-of-
scope construction work and the drafting of the sole source 
justification as "incomplete and out of context." Based on our audit 
work with Interior and CACI officials, we found that CACI intended to 
include the construction work on the order for intelligence services 
under the BPA. However, because subsequent decisions by CACI 
contracting personnel and Interior's contracting office led to a 
separate, sole source award, we revised the wording in our report to 
reflect this outcome. The contractor did--as CACI's response confirms-
-draft a sole source justification for additional construction work. As 
stated above, we included this in our report to demonstrate how the 
contractor was encouraged to perform duties normally fulfilled by 
government personnel.

CACI questioned whether our findings on the lack of adequate contractor 
surveillance were well-founded. Our findings are not based solely on 
our discussion with the contractor interrogator who had been located at 
Abu Ghraib prison; rather, they are based on our file reviews and a 
number of discussions with DOD officials.

We are sending copies of this report to the Director, Office of 
Management and Budget, the Secretaries of Defense and the Interior, and 
CACI. We will make copies available to others on request. In addition, 
this report will be available at no charge on GAO's Web site at 
http://www.gao.gov.

If you have any questions about this report, please contact me on (202) 
512-4841 or Michele Mackin on (202) 512-4309. Other major contributors 
to this report were Alexandra Dew, James Kim, Adam Vodraska, and 
Tatiana Winger.

Signed by: 

David E. Cooper, 
Director, Acquisition and Sourcing Management:

[End of section]

Appendix I: Scope and Methodology:

We conducted our work at the Department of the Interior, including its 
National Business Center headquarters and office at Fort Huachuca, 
Arizona; and the Department of Defense (DOD), including the Defense 
Procurement and Acquisition Policy office and the Department of the 
Army. We also met with representatives of CACI, International, Inc. 
(CACI) and the General Services Administration (GSA).

To determine what breakdowns occurred in the process of procuring 
interrogation and other services and the contributing factors to the 
breakdowns, we reviewed contract files on the 11 orders issued to CACI 
to understand the facts about how the orders were issued. We also 
reviewed internal controls and guidance to assess what safeguards were 
in place to ensure compliance with regulations, including training 
requirements and performance evaluation factors at the National 
Business Center's office in Fort Huachuca. We reviewed the two orders 
for interrogators, placed in August and December 2003, to corroborate 
GSA's and Interior's determination that the orders were out of the 
scope of the GSA contract. We also identified and analyzed pertinent 
policies and regulatory requirements governing the contracting process 
to assess whether Interior, Army, and contractor officials operated in 
compliance with those requirements. We interviewed Army representatives 
who were responsible for overseeing the contractor's performance in 
Iraq. We spoke with officials at the Interior's Offices of Acquisition 
and Property Management, National Business Center, and employees of the 
Fort Huachuca office who were involved with the orders for 
interrogation and other services. Additionally, we interviewed several 
CACI employees, including a contractor interrogator, and attorneys 
representing CACI. We used GAO's Standards for Internal Control in the 
Federal Government (GAO/AIMD-00-21.3.1, November 1999) as criteria to 
demonstrate the importance of management controls such as oversight and 
training.

To evaluate the extent to which actions taken by Interior and DOD 
address contributing factors to breakdowns in the procurement process, 
we identified and reviewed steps taken by these agencies, such as newly 
released policies and guidance. In particular, we reviewed recently 
issued policies from Interior's headquarters, National Business Center, 
and the contracting office at Fort Huachuca, as well as DOD.

We conducted our review from July 2004 to January 2005 in accordance 
with generally accepted government auditing standards.

[End of section]

Appendix II: Comments from the Department of Defense:

OFFICE OF THE UNDER SECRETARY OF DEFENSE:
ACQUISITION TECHNOLOGY AND LOGISTICS:

3000 DEFENSE PENTAGON: 
WASHINGTON, DC 20301-3000:

APR 13 2005:

Mr. David E. Cooper:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office: 
441 G. Street, NW:
Washington, DC 20548:

Dear Mr. Cooper:

This is the Department of Defense (DoD) response to the GAO draft 
report, INTERAGENCY CONTRACTING: Problems with DoD's and Interior's 
Orders to Support Military Operations, dated March 9, 2005, (GAO Code 
120371/GAO-05-201). Our comments on the report are enclosed.

We are currently collaborating with the Department of the Interior 
(DOI) to ensure that the issues identified in the report are 
effectively addressed and resolved. Earlier this year we initiated 
reviews of civilian agencies that provide contracting support to DoD.

The National Business Center and "Gov Works," the two DOI providers of 
contracting services for DoD, volunteered to be one of the first 
organizations to participate in the DoD review. A representative from 
Defense Procurement and Acquisition policy visited each site to 
initiate the review process. While the reviews are still ongoing our 
collaborative effort and open communication at the most senior levels 
should ensure our future success.

Thank you for the opportunity to review and comment on the subject 
draft report. For further questions concerning this report, please 
contact Mike Canales, on 703-695-8571 or via e-mail at Michael. 
Canales@osd.mil.

Sincerely,

Signed by: 

Deidre A. Lee:

Director, Defense Procurement and Acquisition Policy:

Enclosure: As stated:

GAO DRAFT REPORT-DATED MARCH 9, 2005 GAO CODE 120371/GAO-05-201:

"INTERAGENCY CONTRACTING: PROBLEMS WITH DOD'S AND INTERIORS ORDERS TO 
SUPPORT MILITARY OPERATIONS'

DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:

RECOMMENDATION 1: The GAO recommended that the Secretary of Defense 
develop a mechanism to track implementation of the new policy that 
establishes procedures for reviewing and approving the use of non-DoD 
contracts and to ensure that the military services and defense agencies 
have the opportunity to share information on how they are implementing 
it. (p.21/GAO Draft Report):

RESPONSE: Concur. The Director, Defense Procurement and Acquisition 
Policy, will post all implementation policies of the Military 
Department and Defense Agencies on the website, http://www.acq.osd.mil/
dpap/specificpolicy/index.htm, established for the policy on the 
"Proper Use of Non-DoD Contracts." In addition, we are exploring the 
feasibility of establishing a community of practice through the Defense 
Acquisition University on this same policy.

RECOMMENDATION 2: The GAO recommended that the Secretary of Defense 
ensure that Contracting Officer's Representatives (CORs) are assigned, 
as appropriate, for all orders that DoD places on interagency contracts 
and that they are provided requisite training for performing their 
duties and responsibilities.

(p. 21/GAO Draft Report):

RESPONSE: Partially concur. Consistent with the DoD response to GAO-05-
274, "Contract Management: Opportunities to Improve Surveillance on 
Department of Defense Services Contracts," we will require that 
properly trained contracting officer representatives must be appointed 
for all contracts for services including those awarded by other federal 
agencies. DoD will modify DFARS to require that, unless a waiver is 
approved in writing, contracting officers must appoint a properly 
trained contracting officer representative (COR) in writing before 
performance commences on any contract action for services awarded by a 
DoD component or by another federal agency on behalf of DoD. We do not 
agree that a COR be appointed for all orders for supplies because most 
orders for supplies clearly define the deliverables and don't require 
as much oversight during contract performance as contracts for 
services. The appointment of a COR on orders for supplies will be 
discretionary. 

[End of section]

Appendix III: Comments from the Department of the Interior:

United States Department of the Interior:

OFFICE OF THE ASSISTANT SECRETARY:
POLICY, MANAGEMENT AND BUDGET: 
Washington, DC 20240: 

APR 08 2005:

Mr. David E. Cooper:
Director, Acquisition and Sourcing Management: 
U. S. Government Accountability Office: 
Washington, DC 20548:

Dear Mr. Cooper:

Thank you for giving us the opportunity to review and comment on the 
draft report entitled "Interagency Contracting: Problems with DOD's and 
Interior's Orders to Support Military Operations." We concur with the 
recommendations contained in the report and have made notable strides 
in improving our acquisition operations to date. The report's 
recommendations, as well as a previous report by Interior's Inspector 
General, helped us focus on necessary corrective actions so the 
deficiencies identified in the report do not recur in the future.

We are currently collaborating with the Department of Defense (DOD) to 
ensure that the issues raised in the report are effectively addressed 
and resolved. For example, a provision in the FY 2005 National Defense 
Authorization Act (NDAA) requires review of certain non-DOD contracting 
offices to determine if they are compliant with Defense procurement 
requirements. In early 2005, DOD initiated reviews of civilian agency 
contracting offices providing contracting support to DOD customers. The 
National Business Center (NBC), as one of two Department of the 
Interior (DOI) providers of contract services for DOD, volunteered to 
be one of the first organizations to participate in the DOD reviews. A 
representative from the Office of the Secretary of Defense visited 
NBC's acquisition office at Fort Huachuca on March 8-10, 2005, to 
initiate the review process. This review is currently on-going. 
Further, as evidence of both parties' commitment to compliance with 
this new Act, NBC and DOD are establishing a Memorandum of Agreement 
delineating the responsibilities and expectations of both parties when 
the NBC provides contracting services to DOD clients.

We also appreciate GAO's willingness to incorporate DOI comments 
provided during the audit exit briefing on December 15, 2004. As a 
result, we believe the draft report is a more accurate presentation of 
the issues. However, there are still a few comments in the body of the 
draft report which give us concern. All of these concerns, except one, 
are addressed in Enclosure 1.

Page Two:

Enclosure 2 contains a description of actions completed and actions 
remaining to be completed. We are working very closely with DOD to 
aggressively implement all recommendations of the report to ensure full 
compliance with all existing rules and regulations when providing 
contracting support. The end result will be an acquisition function 
that adheres to policy and procedures while providing effective, 
efficient, and mission-critical acquisition support.

Mr. John Nyce, Assistant Director for Administrative Operations, NBC, 
is available at 202-208-3932 to answer any questions your staff may 
have regarding this issue.

Sincerely, 

Signed for: 

P. Lynn Scarlett: 
Assistant Secretary for Policy, Management, and Budget: 

Enclosures (2):

cc: Douglas J. Bourgeois, Director, NBC:

Debra E. Sonderman, Director, Office of Acquisition and Property 
Management:

John Nyce, Assistant Director for Administrative Operations, NBC:

Response to Audit Recommendations:

Recommendation 1: Ensure that management reviews of Interior 
contracting offices emphasize and assess whether contracting officials 
are trained adequately and BPAs are used appropriately.

Response: Concur:

Departmental Action:

Existing management control guidance/checklists used by DOI bureaus in 
the course of management reviews assess whether Interior contracting 
officials are trained adequately and BPA's are used appropriately. (See 
checklists at the following Office of Acquisition and Property 
Management Internet site: http://www.doi.gov/pam/acgqual.html). The FY 
2005 DOI Management Control Review mandates that all warranted GS-1102 
Contract Specialists and GS-1105 Purchasing Agents, Department-wide, 
complete two training courses: (1) Using GSA Schedules-Customers 
(Online) and (2) Using GSA Schedules-Customers (FAR 8.4 Revisions). 
The FY 2006 DOI Management Control Review reporting cycle will, at 
minimum, mandate that: (1) all remaining warranted personnel (i.e., 
those not in the GS-1102 or GS-1105 series) and non-warranted GS-1102 
and GS-1105 complete the above referenced coursework; and (2) bureaus/
offices review and evaluate their BPA award, administration, and review 
processes for compliance with FAR requirements.

NBC Action:

Actions Completed:

* NBC developed management review criteria tailored specifically to 
assess the process and procedures being utilized at the four NBC 
Acquisition Offices when issuing orders under GSA schedules or under 
internally created BPA/IDIQ contracting instruments. Review criteria 
also assesses whether files contain proper documentation and that 
contracting personnel are following all applicable rules and 
regulations.

* NBC established a local policy at Southwest Acquisition Office (Fort 
Huachuca) on December 16, 2004 to ensure that reviews of BPA's are 
accomplished annually.

* NBC developed management review schedules for all four NBC Acquisition 
Offices. All reviews will be completed by June 30, 2005.

Action plans will be developed by each Office in accordance with the 
results of each review.

* NBC collaborated with DOD to complete the first of the scheduled NBC 
management reviews from March 8-10, 2005 at the Southwest Acquisition 
Office. The results of the review are being finalized and an action 
plan will be created based on these results.

* All NBC contracting officials at Ft. Huachuca and the majority of 
contracting officials across the entire organization completed the two 
day GSA-sponsored training course on the use of schedules.

On-going Actions:

* A review is currently being performed at the Southwest Branch on all 
open BPA's to determine if appropriate to remain active. The review 
will be completed by June 17, 2005.

* BPA policy is being developed to reinforce that the award, 
administration and annual review requirements are being followed at all 
sites. The policy will be completed and implemented by June 1'7, 2005.

* NBC will perform process reviews at all NBC Acquisition sites during 
FYo6 as required by the DOI Acquisition Management Control Review 
guidelines.

Recommendation 2: Ensure that performance measures for contracting 
officials provide incentives to exercise due diligence and comply with 
applicable rules and regulations.

Response: Concur:

Departmental Action:

The DOI acquisition and human resources policy, including the DOI 
Contracting Officers Warrant Manual System, identifies incentives to 
exercise due diligence and comply with applicable contracting rules and 
regulations as well as disincentives for non-compliance, e.g., warrant 
suspension and termination. The DOI Office of Acquisition and Property 
Management (PAM) will issue policy to DOI bureaus and offices 
reiterating the importance of including the exercise of due diligence 
and compliance with applicable contracting rules and regulations as 
performance measures in all reviews/assessments of contracting 
activities. The policy will be completed by June 30, 2005.

NBC Action:

In accordance with Departmental guidance for FY 2005, NBC established a 
new five-tier performance rating system for all employees. The 
performance ratings established for contracting officials 
specifically provide for incentives to exercise due diligence and to 
assure compliance with applicable rules and regulations. The specific 
performance element and fully successful criteria are listed below:

Critical Element 2-Quality Contract Execution and Administration.

1) Work with customers in developing proper acquisition strategies. 2) 
Show sound business judgment in making various acquisition or business 
decisions throughout the entire process.

3) Properly document files when awarding contracting actions. 4) 
Demonstrate quality analysis and negotiate in good faith to achieve 
mutually satisfactory resolution of issues.

Performance Standard-Fully Successful-Complies with federal 
acquisition laws and regulations including the FAR, DIAR, DOI/PAM 
policies, NBC policies and when applicable, external customer rules and 
regulations. Achieves satisfactory rating on FY 2005 Acquisition 
Management Review (AMR). Develops plan to correct any deficiencies 
found in the AMR and demonstrates progress in implementing plan.

Recommendation 3: Ensure that COR's are properly designated when 
contracts are awarded or orders are issued for other agencies and that 
they have met appropriate training requirements.

Response: Concur:

Departmental Action:

The DOI Office of Acquisition and Property Management will issue policy 
requiring that contracting activities that award or issue orders for 
other agencies ensure that Contracting Officer Representatives (CORs) 
are properly designated and meet appropriate training requirements. The 
policy will be completed by June 30, 2005.

NBC Action:

* On June 4, 2004, the NBC Acquisition and Property Management (A&PMD) 
Division Head issued the "Administrative Guidelines Relating to 
Contracting Officer Representative (COR's or COTR's), Invoices, and 
Performance Reporting" policy.

* This process is being reviewed as part of the FY 2005 AMR discussed 
above.

Recommendation 4: Direct the NBC at Fort Huachuca take the following 
three actions:

(a) Establish a consistent methodology for conducting peer reviews of 
contracting actions and ensure that experienced and trained contracting 
officials perform the reviews.

Response: Concur:

NBC Action:

On December 2, 2004, NBC Southwest Acquisition Office (Fort Huachuca) 
established a detailed policy and procedure for conducting peer 
reviews.

The implementation of this policy was specifically reviewed during the 
AMR at the Southwest Acquisition Office on March 8-9, 2005.

An action plan will be developed when the findings are received in the 
final AMR.

(b) Ensure that reviews of BPA's are done annually, as required by FAR, 
to determine whether they still represent best value.

Response: Concur:

NBC Action:

* NBC developed management review criteria tailored specifically to 
assess the process and procedures being utilized at the four NBC 
Acquisition Offices when issuing orders under GSA schedules or under 
internally created BPA/IDIQ contracting instruments. The review 
criteria also assesses whether files contain proper documentation and 
that contracting personnel are following all applicable rules and 
regulations.

* On December 16, 2004, the NBC Southwest Acquisition Office established 
a local policy to ensure that reviews of BPAs are accomplished 
annually.

* An NBC-wide BPA policy is being developed to reinforce that the award 
administration and annual review requirements are being followed at all 
sites. The policy will be completed by June 17, 2005. NBC will perform 
a process review at all NBC Acquisition Offices during FY 2006 as 
required by the PAM management control review guidance.

(c) Ensure that the contracting staff is properly trained, and 
effective mechanisms are in place to track training.

Response: Concur:

NBC Action:

* On December g, 2005, the NBC Southwest Acquisition Office implemented 
a local procedure requiring that a training plan be developed for an 
individual within two weeks of employment at that office. Specific 
guidelines, timeframes for completion, and annual assessment of 
training are addressed in this procedure.

* NBC has completed updating the warrant-related training history for 
all NBC acquisition offices personnel who hold warrants, and is working 
diligently to complete a training inventory for all staff across the 
acquisition function.

* NBC continues to work with the Department's Office of Acquisition and 
Property Management (PAM) and the other DOI bureau procurement chiefs 
to continually review and revise the warranted contracting officers 
training requirements and qualification standards.

[End of section]

Appendix IV: Comments from CACI International Inc.

CACI:

April 07, 2005:

Mr. David E. Cooper, Director: 
Acquisition and Sourcing Management: 
United States Government Accountability Office: 
441 G. Street, N.W.
Washington, D.C. 20548:

Dear Mr. Cooper:

Re: CACI Comments on Draft GAO Report:

I. Executive Summary:

CACI International Inc and CACI Premier Technology, Inc. (collectively 
"CACI") submit the following comments on the GAO's draft report, 
Interagency Contracting, Problems with DOD's and Interior's Orders to 
Support Military Operations (GAO-05-201) ("GAO Report" or "Report"). 
CACI believes that the GAO Report has identified a number of areas in 
which the Government can improve its contracting processes. CACI also 
believes, however, that several aspects of the Report require 
clarification or revision, as discussed further below.[NOTE 1] In 
summary:

1. CACI recommends that the final Report more fully acknowledge the 
impacts of the urgent, wartime circumstances on the contracting 
practices used by the Army and Department of the Interior ("DOI") and 
on the relationships between CACI and the Army and DOI.

2. CACI believes it acted reasonably and in good faith in accepting and 
performing the delivery orders ("DOs") for intelligence support 
services in Iraq that were awarded pursuant to a Blanket Purchase 
Agreement ("BPA") established under CACI Premier Technology, Inc.'s 
("CACI-PTI") GSA Federal Supply Schedule Information Technology ("IT") 
contract, particularly given the exigent wartime circumstances and 
prior course of dealing among the parties. Likewise, CACI believes that 
the DOI acted reasonably under the circumstances in awarding those DOS 
to CACI.

3. CACI submits that prior Government determinations that the DOs for 
intelligence support services in Iraq were "outside the scope" of CACI-
PTI's GSA schedule contract, did not properly consider:

* The prior course of dealing between the Army and CACI's predecessor, 
Premier Technology Group, Inc. ("PTG"), in using the GSA IT contract, 
and its related BPA, for the acquisition of intelligence support 
services; and:

* The importance of IT in the performance of intelligence support work, 
including interrogation.

4. CACI believes that it (i) acted reasonably and with full disclosure 
to the DOI and the Army in its selection of GSA labor categories and 
labor rates for interrogation support services provided under the 
Statements of Work ("SOWS"), and that (ii) contract scope 
determinations should not be based on unduly narrow and mechanical 
comparison of SOWS and GSA contract labor categories.

5. The suggestions in the Report that CACI's employees improperly 
displaced Government employees in the acquisition process or had a 
"conflict of interest" that undermined the integrity of the competitive 
procurement process, are both unfair and unwarranted in that they fail 
to consider all the relevant circumstances surrounding the award and 
performance of the DOs and the contributions that CACI made to filling 
an urgent need on the ground in Iraq.

6. CACI has enhanced its contracting policies and procedures as a 
result of various Government reviews of those DOs, and believes that 
the Report provides a baseline for improving the interagency 
acquisition process.

II. Importance of the Unique Wartime Environment:

The GAO Report includes some recognition of the fact that the Army's 
acquisition of the intelligence and other services discussed in the 
Report occurred in unique, wartime circumstances. As the Report 
correctly points out:

* "[At] the end of major combat in May 2003, the Army ... was expecting 
a non-hostile situation and did not plan for an insurgency," Report at 
5;

* The situation in Iraq at that time "was extraordinary-a wartime 
environment and an atmosphere of turmoil and urgency," id. at 3; and,

* "[The Army] was unprepared for the volume of Iraqi detainees and the 
need for interrogation and other intelligence and logistics services." 
Id. at 5. [NOTE 2]

CACI believes, however, that the Report does not fully capture the 
impact that the wartime conditions had on the parties-Government and 
Contractor-and how they affected the contracting process used by the 
Army. In order to provide a fully accurate picture of the situation, 
this should be given additional emphasis in GAO's final report.

For example, the GAO Report criticizes DOI (and the Army) for awarding 
the task orders to CACI without competition, citing the Competition in 
Contracting Act ("CICA") and § 803 of the FY 2002 DOD Authorization Act 
(P.L. 107-107). See Report at 3 & 8-9. Although the Report nominally 
acknowledges that both CICA and § 803 permit awards without 
competition, id. at 8-9, it does not recognize that the exigent 
circumstances which the Army confronted in Iraq fell squarely within 
the exemptions available under those statutes.

In this regard, CICA and its implementing regulations expressly permit 
awards without competition where "the agency's need for the property or 
services is of such an unusual and compelling urgency that the United 
States would be seriously injured unless the agency is permitted to 
limit the number of sources from which it solicits bids or proposals." 
10 U.S.C. § 2304(c)(2); see also FAR 6.302-2.[NOTE 3] Similarly, § 803 
and its implementing regulations include an exception to the special 
ordering procedures applicable to DOD purchases of services under a GSA 
schedule contract where "[t]he ... need for the ... services is so 
urgent that [placing orders on a competitive basis] would result in 
unacceptable delays." FAR 16.505(b)(2)(i); see also DFARS 208.404-70(b)
(1).

CACI recognizes that these statutes and their implementing regulations 
require a procuring activity to comply with certain justification, 
approval, and/or documentation requirements (see FAR 6.302-2(c); DFARS 
208.404-70(b)), and CACI is not suggesting that agencies can or should 
ignore those requirements when contracting without competition. 
Further, CACI is not in a position to question GAO's conclusion that 
DOI (and the Army) did not prepare the required documentation here. 
CACI does believe, however, that the final GAO Report should more 
clearly acknowledge that, while the two agencies apparently did not 
comply with all of the procedural requirements applicable to an award 
without competition, the exigent wartime circumstances in Iraq fully 
supported a sole-source award to CACI.

As discussed further below, the unique wartime circumstances also 
impacted and influenced other aspects of the working relationships 
among CACI, DOI and the Army in connection with the acquisition.

III. The Conclusion That the Task Orders Were "Outside the Scope" of 
CACI's Contract:

The Report focuses on 11 DOs that were issued to CACI between August 
2003 and March 2004, by DOI's National Business Center ("NBC") at Ft. 
Huachuca pursuant to a BPA that had been established under a GSA IT 
schedule contract. [NOTE 4] The Report states that the DOI IG and GSA 
determined that 10 of the 11 DOs were outside the scope of CACI-PTI's 
GSA IT contract and that the Army also concluded that certain of the 
services called for under the DOs were outside the scope of that 
contract. Report at 7. CACI notes that all of those determinations were 
made nearly a year after the initial DOs were awarded and after the 
agencies involved had come under intense public scrutiny as a result of 
the events at Abu Ghraib. [NOTE 5] Further, those after-the-fact 
determinations were made without prior consultation with CACI; for 
example, the DOI IG never requested any information from or 
communicated with CACI regarding its review of the DOs, and CACI was 
not previously even aware that the Army had reached any conclusion on 
the contract scope issue. CACI did subsequently address GSA's concerns 
regarding the use of the GSA IT contract in discussions with GSA's 
Suspension and Debarment Official, and CACI has enhanced its internal 
procedures for addressing contract scope issues.

Contrary to the after-the-fact determinations discussed above, CACI 
understands that the DOI Contracting Officer ("CO") had determined that 
the intelligence support and other services covered by the DOs were 
within the scope of the GSA contract at the time they were issued. 
[NOTE 6] For example, a DOI official was quoted as stating that "[i]n 
this case, the contracting officer determined that the interrogators 
would be using IT equipment provided by the contract by entering 
information into databases, analyzing the information collected using 
IT software and disseminating the intelligence to other military 
commands using the IT systems." Army's Use of IT Contract to Hire 
Interrogators Questioned, Computerworld (May 31, 2004). As discussed 
below, CACI submits that the DOI CO's determination was reasonable in 
light of all the facts and circumstances, as was CACI's acceptance of 
those DOs.

As GAO itself has recognized, whether work is within the scope of a 
particular contract is "primarily an issue of contract interpretation 
and judgment by the contracting officer." Rebuilding Iraq, Fiscal Year 
2003 Contract Award Procedures and Management Challenges, GAO-04-605 at 
15 (June 2004). In addition, there are "no statutory or regulatory 
criteria or procedures that guide a contracting officer in making this 
determination," id., but rather only "guiding principles" as set forth 
in GAO and judicial bid protest decisions. Id. [NOTE 7] Further, as the 
Federal Circuit has stated, in deciding whether a contract modification 
is subject to a requirement for competition (i.e., is within the scope 
of an existing contract):

The analysis thus focuses on the scope of the entire original 
procurement in comparison to the scope of the contract as modified. 
Thus, a broad original competition may validate a broader range of 
later modifications without further bid procedures.

AT&T v. Wiltel, 1 F.3d at 1205. Accordingly, a CO should have more 
latitude in making contract scope determinations under a GSA Schedule 
70 (IT) contract, as such contracts necessarily cover a very broad 
range of potentially available services. As stated by GSA, Schedule 70 
includes "[t]housands of companies offering several million products 
and services." [NOTE 8]

CACI submits that, for the reasons set out below, the "out-of-scope 
determinations" referenced by GAO do not reflect the kind of careful 
interpretation and judgment necessary for determining whether the work 
called for under the DOs was within the scope of CACI-PTI's IT schedule 
contract.

A. Failure to Consider the Prior Course of Dealing:

Because contract scope determinations involve issues of contract 
interpretation, the prior course of conduct between the parties is 
relevant to such determinations, just as it is to any other issue of 
contract interpretation. See G&H Mach. Co. v. United States, 16 Cl. Ct. 
568, 577-78 (1989) (where the Government argued that the course of 
dealing between the parties should be given "controlling weight" on an 
issue of contract scope under a contract administered by GSA). [NOTE 9] 
As the courts and boards have frequently observed, the course of 
performance before a dispute arises reflects a "practical 
interpretation of the contract by the parties ... [that] is entitled to 
great, if not controlling weight." Montana Power Co. v. United 
States, 8 Cl. Ct. 730, 735 (1985) (quoting Inland Empire Builders, Inc. 
v. United States, 191 Ct. Cl. 742, 755 (1970)). Indeed, the conduct of 
the parties can provide the basis from which a court or board can infer 
that they have agreed to modify its terms. See, e.g., id. at 735-36; 
Carabetta Enter., Inc. v. United States, 58 Fed. Cl. 563, 567 (2003); 
G&HMach. v. U.S., 16 Cl. Ct. at 578 (same). Here, however, the post hoc 
contract scope determinations made by the DOI, GSA and, we assume, the 
Army, failed to consider the prior course of dealing between the Army 
and CACI-PTI's predecessor, PTG, as described below.

PTG obtained its first order for intelligence-related services under 
its GSA contract on May 27, 1999. That order was issued by GSA's FTS 
Office of Information Security, Washington, DC, pursuant to a 
competitive solicitation. (GSA RFQ No. TIB-99133-JF1, May 13, 1999.) 
[NOTE 10] The CO and COTR involved with that contract action were 
both GSA employees. [NOTE 11] The RFQ for the work clearly contemplated 
an award under a GSA schedule contract.

The subject GSA RFQ was issued to support U.S. Army Europe ("USAREUR") 
Office of Deputy Chief of Staff, Intelligence ("DCSINT"). The SOW 
provided that its "objective" was "to provide the full scope of 
intelligence analysis required for battle staff planning concerning 
intelligence preparation of the battlefield (IPB) support[ing] 
contingency operations in the European Theater of Operations." 
Functional requirements included, among others, signals analysis (all 
sources) and HUMNIT/Counterintelligence. The RFQ defined the "skill 
set" required for HUMNIT/Counterintelligence positions, for example, to 
include personnel:

Capable of providing the full range of CVHUMINT expertise including 
collection, management, analysis and tasking. Focused on support to 
contingency operations and the force protection aspects of those 
operations. Experienced with counterterrorism, subversion, sabotage 
and espionage threats posed by various entities within the area of 
operations. Familiar with threat analysis, operations, related systems: 
MDITDS, IIR production, VCHPAS and DIAMS.

RFQ SOW § 2, Functional Requirements.

That original GSA DO required PTG to provide 25 Senior Intelligence 
Analysts and five Intelligence Analysts who could meet the functional 
requirements of the SOW, and specifically incorporated the SOW into the 
order. Moreover, GSA awarded the work even though PTG's GSA schedule 
had no labor category listing for "Senior Intelligence Analyst" or 
"Intelligence Analyst," and the job requirements in the SOW did not 
"match" those in PTG's GSA contract. Further, PTG's proposal made clear 
that it was using labor rates from its GSA IT contract in responding to 
the RFQ. [NOTE 12]

GSA issued this initial DO for a period of 90 days and subsequently 
extended it for an additional nine months, through May 31, 2000. 
Shortly after the award of that GSA DO, PTG received a DO to provide 
additional intelligence support services to the USAREUR's DCSINT that 
was issued by the Army's contracting office at Ft. Huachuca pursuant to 
the PTG GSA contract BPA. PTG continued to provide intelligence support 
services to the Army (and to other DOD components) under the PTG GSA 
contract through, and subsequent to, the time that the contracts of PTG 
were acquired by CACI. This included intelligence support services 
provided under DOs issued under the GSA contract BPA by the contracting 
office at Ft. Huachuca. [NOTE 13]

The intelligence support services called for under the DOs addressed in 
the GAO Report are similar to those which PTG had been providing to its 
Army customers for several years prior to its acquisition by CACI. Yet 
DOI and GSA apparently summarily determined that all the intelligence-
related DOs were out of scope and did so without any apparent 
consideration of established practice. [NOTE 14] CACI submits that the 
screening and interrogation services called for in the DOs that are the 
subject of the GAO Report are not inconsistent with past practice, as 
they, too, are and were understood by CACI's employees to be 
intelligence support services. Accordingly, given the prior course of 
dealing and exigent wartime circumstances, it was not unreasonable for 
the Army (acting through DOI'S NBC) to award CACI-PTI task orders for 
intelligence support services under its GSA contract, even if the labor 
categories listed in that contract did not precisely match those in the 
Army's SOWs for work in Iraq.

B. Failure to Acknowledge that Intelligence Support Work Involves IT:

CACI believes the post hoc judgments that the intelligence support DOs 
were outside the scope of its GSA IT contract reflect an unduly narrow 
view of intelligence support and of the requirements of the DOS. 
Moreover, CACI does not believe that mechanical comparisons of labor 
categories from the Army's SOWS with those from the GSA contract like 
that in Table 1 of the GAO Report, provide an adequate basis for 
concluding that the DOs were outside the scope of the GSA contract. For 
example, in a recent DOD-sponsored report on IT occupations in the 
military, the Rand Corporation included "intelligence" in its list of 
military "IT related" occupations, i.e., those "that rely extensively 
on IT in duty performance." Rand Corp., National Defense Research 
Institute, Attracting the Best, How the Military Competes for 
Information Technology Personnel (2004) ("Rand Report") at 9; see also 
id. at 24 & 97. [NOTE 15] In discussing intelligence as an IT-related 
occupation, the Rand Report stated:

We view intelligence as IT related for two main reasons. First, signal 
intelligence seems to fit naturally with the IT classification, given 
its heavy use of IT systems. The other aspect of intelligence, human 
intelligence, can also be interpreted as an IT occupation, because it 
includes not only the gathering of information through interrogation, 
but also the compilation and access to that information, which are 
assisted now by IT.

Id. at 24 (emphasis added).

To our knowledge, the after-the-fact Government determinations 
(including GAO's) that the work was "out of scope," did not consider or 
recognize the importance of IT in performing the intelligence support 
work required under the DOs. For example, the SOWS for the two DOS for 
interrogation support services specifically required CACI to provide 
ADP equipment and recognized that such equipment was "required for 
effective [interrogation support] operations." See DO 35 (Interrogation 
Support), SOW at 6; DO 71 (HUMINT Support Teams), SOW at 4. In 
addition, DO 71 required CACI to provide personnel experienced with 
various databases and systems (see DO 71, SOW at 2-3), and DO 72 (C2 
Intelligence Support Staff) specifically called for an Information 
Management Specialist and an Intelligence Architecture and 
Communications Engineer, both of whom were required to have extensive 
IT experience and who provided "critical and unique technical skills in 
the management of CJTF-7 intelligence and information management 
architectures." DO 72, SOW at 4. [NOTE 16]

More generally, the necessity to track, cross-reference, link and 
transmit large volumes of data in a timely fashion makes IT a critical 
component of successful interrogation operations. See also Rand Report, 
supra, at 24. For example, in describing the screening process, the SOW 
for DO 36 (Screening Cell Support) stated that Phase I, " Preparation," 
begins by "[c]onducting name check of [Host Country Nationals ("HCNs")] 
scheduled for screening using the HCN data base and any other 
applicable agencies to obtain pertinent information needed to conduct 
the interview." DO 36, SOW at 1. The SOW goes on to state that in Phase 
II, Reporting Results, "[a]fter conducting the interviews, the data 
base administrator (or screener, where applicable) will update the 
information on the HCN . . . from the interview in the locally held HCN 
database." Id. at 2. Similarly, successful interrogation requires a 
broad range of skills, including good questioning techniques, a good 
memory, report-writing abilities, the capability to research, and IT 
hardware, software and skill sets. This is because no single 
interrogation of a detainee stands on its own. He and his story, 
background, family, personal and professional alliances, and his 
activities may be connected to other detainees, present, past and 
future. Moreover, a historical and evidentiary file must follow the 
detainee from the time he is apprehended, until he is either turned 
over to host-nation authorities or released into the general 
population.

CACI personnel working in Iraq regularly used IT equipment in 
performing intelligence support work, including screening and 
interrogation. [NOTE 17] For example:

* IT is needed at even the lowest levels to begin tracking a detainee's 
record from the time of apprehension (including, in particular, 
circumstances of capture) until release.

* At the lowest level where equipment and connectivity can be 
supported, detainee biometric data (photo, fingerprints, and iris scan) 
is collected and entered into a large database with controlled 
accessibility, to further the intelligence collection mission.

Retrievable historical and empirical data is required to adequately 
prepare for, conduct and follow up on interrogation and screening 
operations. IT also enables interrogators to conduct research on the 
detainee himself, his organization, affiliations, and other detainees 
who may be connected to him in any way, shape or form before going into 
the "booth." Similarly, additional research is always conducted after 
the interrogation is finished, as databases, message traffic, other 
interrogation reports, and intelligence websites are reviewed to check 
the veracity of the detainee's information. These areas are also 
reviewed to prepare the interrogator and analyst for the next time the 
same detainee is interrogated.

The interrogator and the analyst both use IT software and hardware to 
produce intelligence information reports and put them into a larger 
database so others can use the information to further the overall 
intelligence cycle.

Finally, the IT systems used by interrogators, screeners and 
intelligence analysts supporting interrogation operations include: 
Biometric Automated Toolset Suite ("BATS"); analysts Notebook (used to 
conduct link analysis of detainees and other human sources and their 
activities, such as meetings, phone calls and vehicle usage); various 
classified and unclassified intelligence web sites; mapping and photo 
programs; open-source websites; and message-handling systems.

C. CACI's Selection of Contract Labor Categories Was Reasonable:

As noted above, CACI does not believe that a determination of whether 
the work was in or out of scope should be based on a mechanical 
comparison of the labor categories in the SOWs with those in the IT 
contract. Similarly, CACI submits that the assertion in the Report (at 
8), that "CACI selected the labor categories in the contract for cost 
and pricing purposes rather than as a reflection of the work to be 
performed," while accurate, has been taken out of context, and that 
CACI's approach was reasonable under the circumstances.

In providing professional services to support the Army's requirements 
for intelligence personnel and related services in Iraq, it was 
necessary for CACI to relate the positions identified in the Army's 
SOWS to labor categories on its GSA schedule contract. In other words, 
CACI had to relate labor categories from its GSA schedule contract to 
the job descriptions in the SOWs. This was similar to the practice that 
CACI's predecessor, PTG, followed in providing intelligence support 
services to the Army since the first DO was issued by GSA in 1999.

More generally, the specific labor category elements included within a 
SOW for an IT task order are rarely worded so as to create an exact 
match with the labor categories on a GSA schedule contract. As a 
result, a contractor typically will attempt to "match" or relate the 
requirements in a SOW to its existing job descriptions and contract 
labor categories. Typically, however, there is not a perfect, word-for-
word correspondence between the SOW job title/requirements and the GSA 
schedule labor categories, nor is one required. We believe this is 
consistent with GSA's view. For example, GSA recently responded to an 
allegation in a bid protest that an offeror had proposed services that 
were outside the scope of its GSA Schedule 70 IT contract because the 
offeror did not have a specific labor category on its contract for the 
services required by the user agency. In doing so, GSA's Deputy 
Director of the Information Technology Acquisition Center, and longtime 
GSA CO, stated:

The Group 70 Information Technology Schedule does not solicit specific 
labor categories. Offerors are asked to respond to the Solicitation 
with their commercial services, identifying . . . the general nature of 
the services. GSA does not define labor categories, but rather asks the 
vendor to provide a description of the background and capabilities of 
each offered category.

As such, an ordering activity is advised not to specify a particular 
labor category. The [ordering activity's] requirement should be stated 
as a need or problem to be solved, with the vendor left to formulate 
and articulate a solution to meet the requirement.

Letter from Robert D. Bourne, Jr., Deputy Director, Information 
Technology Acquisition Center, Federal Supply Service, to Sharon 
Larkin, GAO Procurement Law Control Group, Subject: Protest of American 
Systems Consulting Group, Inc. (ASCI), B-294644 (Nov. 22, 2004). We 
submit that this is a sensible and practical interpretation of the 
relationship between the positions set out in a particular SOW and in 
the GSA IT schedule contract labor categories.

The process of relating the positions in the Army's SOWS for 
intelligence support services to the labor categories in CACI-PTI's GSA 
contract was further complicated by the fact that CACI had to recruit 
and retain employees for work in the Iraq war zone where they were (and 
still are) under constant threat of attack, as well as risk of capture 
and possible execution. Thus, CACI had to determine what salary/
benefits it would need to pay to attract qualified individuals to serve 
in Iraq in the positions identified in the SOWs. [NOTE 18] After 
determining the required salary/benefits for a given position, CACI 
then identified a labor category on its GSA schedule contract that, in 
light of the number of hours the individual filling the position was 
expected to work, provided a rate that was sufficient to cover the 
anticipated salary and benefit costs and applicable margin. That labor 
rate from the GSA schedule would then be used in invoicing for work 
performed under the DO. (Individuals working in Iraq also received 
certain allowances that are treated as ODCs.)

Accordingly, the selected GSA schedule contract labor categories were 
not intended to suggest a precise congruence between the job 
responsibilities of the positions called for in the Army's SOWS and the 
job titles/responsibilities of the labor categories on the GSA 
schedule. Moreover, the proposals that CACI submitted to DOI fully 
disclosed that it was using the labor rates from the GSA schedule 
contract for the positions specified in the SOWs.

For example, the cover letter to CACI's proposal for DO 35 
(Interrogation Support Cell) clearly stated that "[t]he estimated costs 
. . . are based upon CACI's GSA IT Schedule No. GS-35F-5872H." 
Similarly, one of the proposal's "Assumptions and Clarifications" (No. 
14) stated that "[t]his order is priced using CACI-PTI's currently 
approved GSA Schedule Pricelist." That proposal also included tables 
which (i) showed the applicable GSA IT contract labor categories, 
corresponding hourly rates from that contract, and estimated hours for 
each position, and (ii) paired the "functional" labor categories in the 
SOW with the applicable hourly labor rates from the GSA contract. In 
short, both DOI and the Army were fully aware CACI was using labor 
categories from its GSA IT contract in providing personnel to perform 
the work specified under the DOs, including interrogation and screening 
support. Moreover, those GSA contract labor rates were the same as the 
rates that had been used in previous acquisitions of intelligence 
support services from PTG. [NOTE 19]

IV. The Suggestions that CACI Employees Improperly Displaced Government 
Employees or Had "Conflicts of Interest" that "Undermin[ed] the 
Integrity of the Competitive Contracting Process" are Unfair and 
Unwarranted:

The Report asserts that "the contractor effectively replaced government 
decision-makers in several aspects of the procurement process" and that 
this participation in the procurement "creates a conflict of interest 
and undermines the integrity of the competitive contracting process." 
Report at 13-14. CACI is concerned that this assertion provides an 
incomplete presentation of the activities of its employees that fails 
to set out all of the relevant facts and that is based on a failure to 
recognize the unique facts and circumstances surrounding the award and 
performance of the subject task orders.

As discussed above, the acquisition was conducted in urgent, wartime 
circumstances when the Army found itself with an immediate need for 
intelligence support services, including interrogation services, which 
it could not fill internally. These difficulties were compounded by the 
fact that the Army's local, in-country contracting personnel were 
focused on providing basic necessities and unable to devote time and 
resources to the acquisition of intelligence support services. Further, 
as the GAO Report acknowledges (at 14), communications between Iraq and 
Ft. Huachuca were problematic. Under these circumstances, in an effort 
to assist Army personnel stretched thin dealing with the situation, 
CACI employees did step into the breach and provided information and 
assistance to Army and DOI personnel involved in the acquisition. While 
those involvements may have been different from, or even more 
substantial than, those found in a typical domestic, peacetime 
procurement, we submit that peacetime procurements are not an 
appropriate basis for assessing the appropriateness of the action 
taken. In addition, and most important, while CACI provided information 
and assistance, there is no question that all procurement decisions 
were made by the responsible Government (DOI and Army) personnel.

As discussed more fully below, we are concerned that the Report fails 
to acknowledge the contributions that contractors such as CACI have 
made in meeting the DOD's urgent, wartime need for additional 
intelligence capabilities. In that regard, we call GAO's attention to a 
recent report by Vice Admiral Albert T. Church, III, Naval Inspector 
General, on DOD's interrogation operations that was issued after the 
GAO completed its draft Report. See Executive Summary of review of 
Department of Defense interrogation operations, Vice Admiral Albert T. 
Church, Naval Inspector General (Mar. 2005) ("Church Report") (http://
www.defenselink.mil/news/Mar2005/d2005O3IOexe.pdf). In his report, 
Admiral Church concluded that:

* "It is clear that contract interrogators and support personnel are 
`bridging gaps' in the DoD force structure in GTMO, Afghanistan and 
Iraq. As a senior intelligence officer at CENTCOM stated: `[s]imply 
put, interrogation operations in Afghanistan, Iraq and Guantanamo 
cannot be reasonably accomplished without contractor support,' id. at 
17;

* "Overall, we found that contractors made a significant contribution to 
U.S. intelligence efforts," id.; and, Contractor personnel "often 
served longer tours than DoD personnel, creating continuity and 
enhancing corporate knowledge at their commands." Id.

A. Involvement in Defining Requirements and SOWs:

CACI personnel did assist the Army in defining its requirements for 
intelligence support services and in developing the SOWS for those DOs. 
They also provided ROM estimates of the cost of that work prior to 
award.[NOTE 20] However, these involvements were at the request of 
responsible Army personnel and subject to their review and approval. 
Further, these involvements need to be seen in the context of the facts 
on the ground in Iraq. [NOTE 21]

There is no general prohibition on prospective contractors providing 
information or input to procuring agencies regarding their requirements 
or SOWS. See generally FAR 15.201 (permitting exchanges between 
Government and industry, including on matters relating to requirements, 
industry capabilities, and SOWs). Moreover, DOD and its services have 
recognized the need for flexibility and expeditious action to meet the 
needs of its war fighters. Accordingly, we submit that it is in the 
Government's interest to interpret existing regulations in a manner 
that does not deter its in-country personnel from utilizing the 
contractor expertise available to it under such circumstances.

CACI recognizes that FAR Subpart 9.5 imposes certain ground rules on a 
contractor's participation in procurements for which it prepared or 
assisted in preparing the SOW, see FAR 9.505-2, and CACI has policies 
and procedures in place to comply with those ground rules. CACI does 
not believe, however, that any input its employees had in the 
preparation of SOWs for the Iraq DOs implicated the concerns identified 
in FAR Subpart 9.505-2(b)(1), which is the only provision of FAR 9.505 
that is potentially applicable here.

The mere fact that a contractor had some input in preparation of the 
SOW for a procurement does not create an impermissible conflict of 
interest under FAR 9.505-2(b)(1). Further, the limitations in FAR 
Subpart 9.505-2(b)(1) relating to contractor preparation of SOWS are 
directed at competitive procurements and aimed at preventing one 
offeror from obtaining an unfair competitive advantage over its 
competitors. FAR 9.505-2(b)(1)(i) specifically recognizes that a 
contractor's preparation of or assistance in preparation of a SOW for 
supplies or services does not create a conflict of interest where "[i]t 
is the sole source." See also Litton Computer Serv., B-256225, 94-2 
C.P.D. 36 (July 21, 1994) (where GAO applied this exception to a sole 
source award based on urgent and compelling circumstances). As 
discussed above, the decision to award the DOs to CACI on a sole source 
basis was made by the Government, not CACI, and that judgment was fully 
consistent with applicable laws and regulations, given the exigent 
wartime conditions on the ground in Iraq. That said, CACI agrees that 
having a SOW on CACI "letterhead" was a mistake and simply should not 
have happened. However, that error did not, for the reasons noted 
above, undermine the integrity of any competitive procurement process.

FAR Subpart 9.5 imposes a duty on Government acquisition officials to 
identify, evaluate and take steps to avoid or mitigate potential 
conflicts of interest. See FAR 9.504 & 9.506. At no time was CACI 
informed that the Army or DOI believed that any input by a CACI 
employee in the definition of requirements or development of the SOWS 
presented an impermissible conflict of interest or required any kind of 
mitigation effort. Indeed, given the urgent wartime conditions, it 
appears that the Government concluded that it was in the best interest 
of the Government to obtain input from experienced CACI employees in 
defining its requirements and developing the SOWs. Moreover, the SOWs 
for the Iraq DOs were subject to review and approval by the Government, 
and the decision to proceed with the procurement and issue the DOs to 
CACI was made by appropriate Government personnel in Iraq (including 
the Coalition Acquisition Review Board) and at DOI's NBC at Ft. 
Huachuca. Finally, as the discussion below demonstrates, CACI does not 
believe that any of the other activities cited by GAO even remotely 
created any kind of "conflict of interest" or otherwise "undermined" 
the integrity of the procurement process.

B. Other Activities neither Replaced Government Decision-Making nor 
Undermined the Integrity of the Procurement Process:

1. Identification of the BPA as a Potential Contract Vehicle:

The Report implies that CACI employees acted inappropriately in 
identifying the DOI BPA as a possible contract vehicle for acquiring 
the intelligence support services. This is mistaken. There is simply 
nothing improper with a contractor informing Government personnel of 
the availability of a contract vehicle that the Government could use to 
acquire particular supplies or services. See also FAR 15.201(c) 
(encouraging exchanges with industry to, inter alia, "identify and 
resolve concerns regarding the acquisition strategy, including [among 
other things] proposed contract type [and] terms and conditions").

Further, CACI's discussions with Army contracting personnel in Iraq and 
Kuwait need to be seen in context. As discussed above, when queried 
about providing contracting assistance, those Army contracting offices 
indicated they were overwhelmed and not in a position to contract 
directly for the types of intelligence support services that the Army 
needed. Thus, the Army's in-country contracting officials reasonably 
asked if CACI had an existing contract vehicle that could be used to 
procure those services, and when they were informed of the BPA 
administered by Ft. Huachuca, told CACI to deal directly with Ft. 
Huachuca. This was extremely reasonable under the circumstances. 
Moreover, as discussed above, the Army had a well-established practice 
of acquiring intelligence support services under the PTG/CACI-PTI BPA 
through the Ft. Huachuca contracting office (which had previously been 
operated by the Army). Thus, it is not surprising that CACI was 
encouraged to use that familiar vehicle to fill the requirements in 
Iraq. See also Report at 5, 10 n.17.

2. Facilitating Communications and Submission of Invoices:

The Report's criticism of the involvement of CACI personnel in 
facilitating communications between the Army users in Iraq and the DOI 
contracting office in Arizona, is similarly misplaced. It simply 
ignores the fact-apparently confirmed by DOI (see Report at 14)-
that it was difficult for DOI to communicate directly with Iraq. While 
the level of contractor involvement in communicating information was 
perhaps unusual, it was done as an accommodation to the Government. 
Given that the acquisition was conducted on a sole source basis, there 
was no prejudice to the competitive procurement process.

Regarding submission of invoices, CACI submitted them to the COR for 
review and approval in accordance the terms of the DOS. [NOTE 22] While 
the contract contemplated that the COR would forward invoices to the 
payment office, the circumstances in Iraq made that difficult, slow and 
chancy. Accordingly, CACI personnel assisted by carrying the invoices 
out of Iraq and forwarding them to the DOI payment office. While 
perhaps atypical, these actions were entirely ministerial, and CACI 
categorically rejects any suggestion that this accommodation was in any 
way improper.

3. Out-of-Scope "Construction" Work and Draft Justification for Sole 
Source Award:

The Report's comments on a "request" to perform out-of-scope 
construction work under the BPA, and preparation of a draft 
Justification and Approval ("J&A") for additional, sole source work, 
are incomplete and out of context. In the Fall of 2003, after 
consultation with the COR and other Army officials, CACI was asked to 
undertake certain building renovation work that was needed to provide 
facilities for performance of its (LEP) screening work. Consideration 
was initially given to performing this work under a modification to DO 
36, on the ground that the work was incidental to performance of the 
LEP screening effort required by that DO. The GAO Report, however, 
fails to mention that relevant DOI and Army personnel were directly 
involved in that process and were clearly prepared to have the work 
done under that DO. Moreover, as documents which CACI provided to GAO 
show, it was CACI's contracts officials who concluded that such 
renovation work was not within the scope of CACI's GSA IT contract and 
should be done under a separate contract. That determination was 
communicated to DOI, which concurred and issued a separate contract to 
CACI for that work. Further, the value of this effort was indeed not 
material in amount, approximately $199,000.

CACI understands that the draft J&A referenced at page 13 of the Report 
relates to another facility rehabilitation project that was undertaken 
by CACI shortly after the one described above. Again in this case, CACI 
was asked to renovate certain space for use by CACI personnel who were 
involved in the intelligence support effort. Consistent with the 
decision on the previous renovation project, the parties (DOI and CACI) 
planned to have this work performed under a separate contract and not 
under the BPA. CACI submitted a draft sole source justification to DOI 
for that work. DOI subsequently sent CACI the DOI's sole source 
justification from the prior renovation project so it could be adapted 
for the new work. CACI accommodated DOI's request and returned the 
revised sole source justification to DOI. More important, according to 
CACI's final cost proposal, the cost of this work was about $99,500, 
well below the applicable simplified acquisition threshold and, as 
such, not subject to a requirement for competition or the need for a 
sole source justification. See 10 U.S.C. §2304(a)(1) & (g)(1)(A); FAR 
6.001(e); FAR 2.101, 48 C.F.R. §2.101 (2003) (defining simplified 
acquisition threshold, which, for the work at issue here, was at least 
$200,000); see also Information Ventures, Inc., B-290785, 2002 C.P.D. 
152 (Aug. 26, 2002). Moreover, given the limited nature, location and 
urgency of the effort, CACI does not believe that there is any basis 
for suggesting that its action here compromised the integrity of the 
competitive contracting process.

Finally, we note that, due to poor coordination and delays in 
paperwork, CACI completed the work before a contract was issued. Ft. 
Huachuca then took the position that, since the work had been 
completed, it would not issue a contract and told CACI to pursue a 
ratification with the Army. CACI has paid about $60,000 to an Iraqi 
subcontractor for the work, but has not received any payment from the 
Government for that work.

V. Monitoring of Contractor Performance:

CACI recognizes that the Report's comments regarding surveillance of 
contractor performance are directed principally at DOI and the Army. 
CACI does not disagree that the Government is responsible for oversight 
of contractor performance and that such oversight is appropriate. CACI 
believes, however, that the criticisms of the Army are somewhat unfair 
given the circumstances in Iraq.

As the Report notes, contractor employees were, and continue to be, 
stationed at multiple locations throughout Iraq. While the Army perhaps 
ideally should have had a COR at each of those sites, conditions in 
Iraq were not ideal and, as noted above, the Army was operating in an 
environment in which its internal resources were already stretched 
thin. Moreover, while the Army may not have had a formal COR assigned 
to each location, CACI employees worked under the supervision of 
military personnel.

In addition, the Army's COR assigned to administer CACI's work has 
indicated that he was very pleased with the support provided by CACI. 
[NOTE 23] Further, as discussed above, Admiral Church recently 
concluded that contractors such as CACI "[have] made a significant 
contribution to U.S. intelligence efforts." Church Report at 17.

CACI agrees with the general statement that Government oversight is 
appropriate where work is performed on a Time and Materials ("T&M") 
basis. We believe, however, that CACI's work was subject to adequate 
surveillance in this regard, and do not understand the Report to 
suggest that the Government did not get "good value" from CACI. Report 
at 12.

VI. Conclusion:

CACI appreciates the opportunities which GAO has afforded to CACI to 
provide information and input, including the opportunity to submit 
these comments. As discussed above, CACI believes that the Army's and 
DOI's use of the CACI GSA contract BPA was reasonable given the exigent 
wartime circumstances that existed in Iraq in 2003 and the established 
practice of use of PTG's GSA contract for the acquisition of 
intelligence support services. As we have noted, however, CACI has 
learned a number of lessons from reviews by GSA and other agencies and 
has taken steps to enhance its contracting practices. CACI also 
believes that the recommendations in GAO's Report will provide a 
baseline for enhancement in the Government's acquisition processes.

Sincerely, 

Signed by: 

Jeffrey P. Elefante: 
Executive Vice President, Secretary and General Counsel:

NOTES: 

[1] These comments focus primarily on matters in the Report relating to 
CACI and do not address GAO's comments and recommendations relating 
solely to internal Government processes and controls.

[2] These findings are consistent with those in an earlier Army report, 
which concluded that, although there had been a declaration of the end 
of hostilities, the war had not ended. Rather, the Army found itself 
confronting a complex counterinsurgency operation, which generated 
significant, and unanticipated, numbers of detainees and a need for 
intelligence for which the Army was not prepared in terms of personnel, 
equipment and organization. AR 15-6, Investigation of the Abu Ghraib 
Prison and 205th Military Intelligence Brigade, LTG Anthony R. Jones 
(2004) at 8 & 10-11.

[3] As discussed below, CACI disagrees with the Report's contention (at 
7) that the work covered by the task orders should have been competed 
because it was outside the scope of the GSA contract held by CACI-PTI. 
However, even assuming, arguendo, that the work at issue was outside 
the scope of that contract, the award of that work to CACI-PTI without 
competition was fully consistent with CICA due to the "unusual and 
compelling urgency" that existed on the ground in Iraq.

[4] The BPA was originally awarded by the Army to PTG and was later 
assumed and extended by DOI when it took over responsibility from the 
Army for the contracting office at Ft. Huachuca. CACI acquired 
substantially all of the assets of PTG, including its GSA contract and 
the subject BPA, in mid-May 2003, shortly before DOI placed the DOs at 
issue. See Report at 10 n.17.

[5] Those determinations were also made against a background of 
heightened sensitivity to issues relating to the use of GSA schedule 
contracts more generally, as a result of other audits released in 2004. 
See, e.g., GSA Office of Inspector General, Audit of Federal Technology 
Service's Client Support Centers, No. A020144/T/5/Z04002 (Jan. 8, 
2004); DOD Office of Inspector General, Contacts Awarded for Coalition 
Provisional Authority by the Defense Contracting Command-Washington 
D.C. (D-2004-057) (Mar. 18, 2004).

[6] See "GSA Fact Sheet" (which was provided to GAO and which refers to 
the DOI CO's determination); Federal Contracts Report, Vol. 81, No. 21 
at 645-46 (June 1, 2004) (same). We do not read the GAO Report as 
concluding otherwise on this point. See Report at 8. In addition, as 
discussed below, the CO's determination that the orders were in scope 
was consistent with the established practice of the parties.

[7] Those GAO and court bid protest decisions arose out of actions 
brought by potential competitors contending that a modification was 
"outside the scope" of the original contract and that the supplies or 
services covered by the modification therefore should have been 
competed. As the Court of Appeals for the Federal Circuit has observed, 
"CICA sets forth no standard for determining when modification of an 
existing contact requires a new competition or falls within the scope 
of the original competitive procurement," AT&T Comm. Inc. v. Wiltel, 
Inc., 1 F.3d 1201, 1205 (Fed. Cir. 1993), and each case must be decided 
on its particular facts. See also n.3, supra, noting that out-of-scope 
work does need to be competed where, as here, a CICA exemption applies.

[8] http://www.gsa.gov/Portal/gsa/ep/channelView.do?
pageTypeId=8199&channelPage=%252Fep%252Fchannel%FgsaOverview.jsp&
channelId=-13472. Schedule 70 includes "general purpose commercial 
information technology, equipment, software and services." Special Item 
Number ("SIN")132-51, Information Technology Services, includes 
"resources and facilities management, database planning and design, 
systems analysis and design, network services, programming, . . . 
network services project management, data/records management, 
subscriptions/publications (electronic media) and other services." 
http://www.gsaelibrary.gsa.gov/ElibMain/ScheduleSummary?
scheduleNumber=70&x=5&y=6.

[9] G&H Mach apparently involved a GSA supply schedule contract and the 
issue was whether repairs of certain types of equipment requested by 
various user agencies were within the scope of the contract. See id. at 
570 & n2. As noted above, the Government relied on the course of 
dealing in opposing the contractor's contention that certain work was 
out of scope. According to the Court, the Government contended that 
"[the contractor's] acceptance of the equipment over the life of the 
contract indicates that [the contractor] considered repair of the 
equipment to be within the scope of the contract." Id. at 578. The 
Court also looked to the course of conduct of the parties in concluding 
that they considered the equipment at issue to be within the scope of 
the contract, and went on to state that "[e]ven assuming that the 
parties had not originally intended to include this equipment within 
the scope of these classifications, the parties were free to modify the 
existing obligations, in this case to expand the scope of the 
classifications . . . ." Id. at 578.

[10] CACI understands that two or three other offerors also responded 
to GSA's solicitation.

[11] GAO had information and documents provided by CACI relating to 
this order, but the GAO Report includes only a very limited discussion 
of this important background information. See Report at 5.

[12] GSA's competitive award of a task order for intelligence support 
services that was priced on the basis of PTG's GSA contract labor rates 
provides further confirmation that those rates were fair and reasonable 
for the intelligence support work, see FAR 15.402(a) & (a)(1). Further, 
the parties continued to rely on those rates in the pricing of 
subsequent DOs.

[13] PTG also had an established practice-which continued after the 
acquisition by CACI-of providing logistics support services to the 
Army under the GSA BPA that were similar to those called for under Iraq 
DOs 64, 67, 73 and 80 that are also the subject of the GAO Report. Even 
assuming, arguendo, that those four logistics DOs were not within the 
scope of the CACI-PTI IT schedule contract, however, those services 
could-as both GAO and GSA have recognized-have been acquired under 
a GSA logistics schedule contract (which CACI also has). Further, as 
noted above, an order for those services could have been issued 
directly to CACI pursuant to the urgent-circumstances exception in § 
803 and its implementing regulations.

[14] This included the three intelligence DOs-open source 
intelligence support and analysis (DO 37), special security office 
assistance (DO 38), and general C-2 intelligence staff support (DO 72) 
--that did not include any interrogation and/or screening effort.

[15] The Rand Report focused on the issues relating to the adequacy of 
the supply of IT workers to meet manpower requirements of military and 
intelligence agencies, and focused on occupations which the military 
considered to be "IT" occupations.

[16] The duties of the Information Management Specialist included, 
among other things, management of database development, review and 
recommendations on software and hardware modifications, and 
coordination and support of information management systems and network 
enhancements project technical service requirements. See id. at 4-5. 
The Intelligence Architecture and Communications Engineer's duties 
included managing the overall intelligence and communications 
architecture for CJTF-7 intelligence operations, and management of the 
"Information Technology (IT) infrastructure and . . . CJTF-7 IT system 
design and implementation effort, which includes all systems, 
applications, and all local and wide area network connections in the 
CJTF-7 areas of operation." Id. at 6.

[17] GAO reports that "Army representatives in Iraq" have said that 
services for interrogators, screeners and logistics were "not 
information technology services." Report at 8. We do not know who these 
individuals were or the basis on which they reached that conclusion.

[18] The data available for making those determinations was limited at 
that time. For example, there were no market surveys of salary and 
benefits for the required positions in a war zone, and those addressing 
positions outside a war zone were of limited use in determining the 
salary and allowances necessary to attract an applicant to a position 
in Iraq (as an applicant typically would expect a much higher 
compensation package to work in a war zone than he or she would in a 
more conventional setting).

[19] CACI understands that PTG received two economic price adjustments 
(per Mod 0001, effective August 1999, and Mod 0004 in January 2002) to 
its GSA labor rates between the date of the GSA-issued intelligence DO 
in May 1999 and its acquisition by CACI. The "PTG" rates were used in 
pricing DOs issued to CACI through September 15, 2003, which included 
the initial DOs for work in Iraq.

[20] CACI does not understand the statement in the Report that CACI 
personnel "suggest[ed] that Army officials use the company's rough 
order of magnitude price as the government cost estimate." If the 
Government used the cost estimates provided by CACI at Government's 
request as the "government cost estimate," that was the Government's 
decision. The Report also seems to imply that the Government was 
required to prepare its own, independent cost estimate. We are not 
aware, however, of any such requirement in relevant FAR provisions, 
such as Subparts 8.4, 15.4 or 16.6.

[21] One of the CACI employees involved in these efforts had deployed 
to Iraq with the Army's V Corps, for which he was providing 
intelligence support services under a DO issued under PTG's GSA IT 
contract by an Army contracting office in Germany. That employee had an 
established working relationship with the Army officers who were 
involved in defining the requirement for intelligence support services 
and developing the SOWs. It is interesting to note that this employee 
initially proposed a limited contractor intelligence support effort and 
was told by Army personnel that they needed a much more substantial 
level of contractor support.

[22] Consistent with its proposals and the requirements of its GSA 
contract and accompanying BPA, CACI used the labor rates from the GSA 
schedule in invoicing for work performed under the DOS. The invoices 
that were submitted to the COR for approval and signature listed the 
labor categories from the CACI-PTI GSA schedule contract (e.g., Sr. 
Systems Engineer), the hours being billed, and the applicable labor 
rates from the GSA IT contract. They also included a supporting 
schedule in which the individual employees whose time was being billed 
were paired, by name, with the GSA IT labor category and applicable 
labor rate under which they were being billed.

[23] In that regard, we question whether GAO's observation (Report at 
12), that one interrogator said that he had "no interaction with COR," 
is probative of a lack of adequate Government oversight. 

[End of section]

Appendix V: Summary of Task Orders Issued to CACI for Work in Iraq:

Order number and date: 35 (8/2003); 
Maximum order value: $19,915,407; 
Description of order: Provide interrogation support; 
Selected labor categories from the CACI contract: Senior System 
Engineer, Training Specialist, Senior System Planner; 
Department of Defense customer: Intelligence.

Order number and date: 36 (8/2003); 
Maximum order value: $3,222,503; 
Description of order: Provide screening cell management and support; 
Selected labor categories from the CACI contract: Senior Security 
Computer Specialist, Training Specialist, Database Manager; 
Department of Defense customer: Intelligence.

Order number and date: 37 (8/2003); 
Maximum order value: $1,254,367; 
Description of order: Provide support to man, organize, and execute as 
members of the Open Source Intelligence Team; 
Selected labor categories from the CACI contract: Senior Systems 
Engineer, Senior Computer Security Specialist, Database Manager; 
Department of Defense customer: Intelligence.

Order number and date: 38 (8/2003); 
Maximum order value: $998,117; 
Description of order: Provide special security and security support to 
the intelligence function; 
Selected labor categories from the CACI contract: Senior Security 
Computer Specialist, Communications Analyst; 
Department of Defense customer: Intelligence.

Order number and date: 64 (9/2003); 
Maximum order value: $952,695; 
Description of order: Provide and maintain an operational property book 
team; 
Selected labor categories from the CACI contract: Project Manager, 
Senior Editor/Writer; 
Department of Defense customer: Logistics.

Order number and date: 67 (10/2003); 
Maximum order value: $6,191,315; 
Description of order: Provide technical and functional knowledge of the 
total property book system; 
Selected labor categories from the CACI contract: Principal Engineer/
Project Manager, Senior Computer Security Specialist; 
Department of Defense customer: Logistics.

Order number and date: 70 (11/2003); 
Maximum order value: $1,189,100; 
Description of order: Provide technical and training support services 
for a military information technology system; 
Selected labor categories from the CACI contract: Program/Project 
Manager, Database Manager; 
Department of Defense customer: Logistics.

Order number and date: 71 (12/2003); 
Maximum order value: $21,799,921; 
Description of order: Assist in performance of human intelligence and 
counterintelligence missions; 
Selected labor categories from the CACI contract: Senior System 
Engineer, Senior Analyst, Senior Functional Analyst; 
Department of Defense customer: Intelligence.

Order number and date: 72 (12/2003); 
Maximum order value: $4,895,478; 
Description of order: Assist in intelligence support staff and 
analytical functions; 
Selected labor categories from the CACI contract: Senior Functional 
Analyst, Senior Analyst, Senior Systems Engineer; 
Department of Defense customer: Intelligence.

Order number and date: 73 (12/2003); 
Maximum order value: $1,822,240; 
Description of order: Establish and staff a Command Automation 
Logistics Assistance/Instructional Team; 
Selected labor categories from the CACI contract: Program/Project 
Manager, Subject Matter Expert II; 
Department of Defense customer: Logistics.

Order number and date: 80 (3/2004); 
Maximum order value: $3,980,000; 
Description of order: Provide technical and functional knowledge of the 
total property book system; 
Selected labor categories from the CACI contract: Program/Project 
Manager, Subject Matter Expert I; 
Department of Defense customer: Logistics.

Total; 
Maximum order value: $66,221,143.

Source: GAO analysis of documents obtained from the Department of the 
Interior.

Notes: The Department of the Interior Inspector General and the General 
Services Administration determined that Order 70 was not out of scope.

Maximum order values include order modifications made subsequent to the 
order date. 

[End of table]

FOOTNOTES

[1] Task orders are placed against established contracts that provide 
for the issuance of orders for the performance of tasks during the 
period of the contract. In a prior report, we examined the fees charged 
for some types of interagency contracting vehicles. See GAO, Contract 
Management: Interagency Contract Program Fees Need More Oversight, 
GAO-02-734 (Washington, D.C.: July 25, 2002).

[2] GAO, High Risk Series: An Update, GAO-05-207 (Washington, D.C.: 
January 2005). 

[3] Schedule contracts allow agencies to quickly procure commonly 
available commercial goods and services at prices associated with 
volume buying.

[4] In 1999, the Army acquired intelligence analysis support from 
Premier Technology Group. CACI acquired the assets of Premier 
Technology Group in May 2003, including the GSA contract. 

[5] The CJTF was designed to conduct offensive operations to defeat 
remaining noncompliant forces and neutralize destabilizing influences 
in the Iraq theater to create a secure environment in direct support of 
the Coalition Provisional Authority. Previous reports demonstrate that 
DOD did not adequately plan for the acquisition support required to 
perform its mission in Iraq. In fact, in June 2004, we recommended that 
the Secretary of Defense develop a strategy for assuring that adequate 
acquisition staff and other resources can be made available in a timely 
manner to improve the delivery of acquisition support in future 
operations. GAO, Rebuilding Iraq: Fiscal Year 2003 Contract Award 
Procedures and Management Challenges, GAO-04-605 (Washington, D.C.: 
June 1, 2004).

[6] The intelligence contract was extended until July 2005 and the 
logistics contract was extended until April 2005.

[7] P.L. 108-375.

[8] Section 854.

[9] Section 802. 

[10] Federal Acquisition Circular 2001-24, Item V--Federal Supply 
Schedule Services and Blanket Purchase Agreements (BPA) (FAR Case 1999-
603). 

[11] We recently described these competition requirements in the 
context of out-of-scope orders (GAO-04-605). 

[12] GSA determined that the orders for interrogation services could 
not be purchased through any of the GSA Schedules, but the orders for 
logistics services could have been procured through GSA's Logistics 
Worldwide Schedule.

[13] P.L. 107-107. 

[14] DFARS § 208.404-70 (effective Oct. 25, 2002).

[15] FAR Subpart 17.5.

[16] 31 U.S.C. § 1535; FAR § 17.502(a). 

[17] An Economy Act determination and findings is not required when the 
agency needing the services uses certain required or optional sources 
of supply (such as GSA Schedule contracts) or for acquisitions using 
government wide acquisition contracts (FAR § 17.500). These conditions 
were not met in this instance because the Army--the agency needing the 
services--was not ordering directly from the GSA Schedules and because 
a government wide acquisition contract was not used. 

[18] The BPA in question was originally established in 1998 between 
Premier Technology Group Inc. (the assets of which were acquired by 
CACI in May 2003) and the Army Directorate of Contracting at Fort 
Huachuca, Arizona. In 2001, Interior's National Business Center assumed 
responsibility for the contracting staff at Fort Huachuca, and the BPA 
was transferred to Interior. Interior subsequently extended the BPA in 
2003 to match the time frame of the underlying GSA contract.

[19] The maximum order threshold cited in the contract is $500,000. The 
maximum order threshold is the point at which ordering agencies are to 
seek additional price reductions beyond those offered under the 
vendor's GSA contract.

[20] FAR § 16.601(b)(1).

[21] At the time, the contracting office did not have an attorney on 
site and had to turn to Interior headquarters for legal advice. An 
attorney was assigned to the office in September 2003.

[22] A best value determination is not typically involved in a sole 
source award since there is no evaluation of competing proposals to 
determine which prospective contractor's approach would represent the 
best value to the government, price and technical factors considered. 
In contrast, the price of a sole source award is determined to be fair 
and reasonable using other techniques such as comparison to prices 
known to be reasonable, cost realism analysis, or a detailed review of 
the contractor's cost and pricing data, as described in FAR Subpart 
15.4.

[23] 10 U.S.C. § 2330, as added by section 801 of the National Defense 
Authorization Act for Fiscal Year 2002 (P.L. 107-107).

[24] GAO, Contract Management: Opportunities to Improve Surveillance on 
Department of Defense Service Contracts, GAO-05-274 (Washington, D.C.: 
Mar. 17, 2005).

[25] Interior's response includes a reference to enclosure 1, which 
consisted of technical comments on our report and, as agreed with 
Interior, is not reproduced in this report. We incorporated changes to 
the draft based on the comments as appropriate. Further, the response 
refers to one concern that was not included in enclosure 1. This word 
choice was explained by Interior as an oversight that should have been 
deleted from the response.

GAO's Mission:

The Government Accountability Office, the investigative arm of 
Congress, exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony:

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics.

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order 
GAO Products" heading.

Order by Mail or Phone:

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to:

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548:

To order by Phone:

Voice: (202) 512-6000:

TDD: (202) 512-2537:

Fax: (202) 512-6061:

To Report Fraud, Waste, and Abuse in Federal Programs:

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470:

Public Affairs:

Jeff Nelligan, managing director,

NelliganJ@gao.gov

(202) 512-4800

U.S. Government Accountability Office,

441 G Street NW, Room 7149

Washington, D.C. 20548: