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Oversight Needed to Manage Risk of Contracting for Selected Services' 
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United States Government Accountability Office:

GAO:

Report to Congressional Requesters:

September 2007:

Department Of Homeland Security:

Improved Assessment and Oversight Needed to Manage Risk of Contracting 
for Selected Services:

GAO-07-990:

GAO Highlights:

Highlights of GAO-07-990, a report to congressional requesters. 

Why GAO Did This Study:

In fiscal year 2005, the Department of Homeland Security (DHS) 
obligated $1.2 billion to procure four types of professional and 
management support services—program management and support, engineering 
and technical, other professional, and other management support. While 
contracting for such services can help DHS meet its needs, there is 
risk associated with contractors closely supporting inherently 
governmental functions—functions that should be performed only by 
government employees.

This report (1) describes the contracted services, (2) identifies 
potential risk and the extent to which DHS considered risk when 
deciding to contract for these services, and (3) assesses DHS’s 
approach to managing and overseeing these services.

GAO analyzed 117 judgmentally selected statements of work and 9 cases 
in detail for contracts awarded in fiscal year 2005 by the Coast Guard, 
the Office of Procurement Operations (OPO), and the Transportation 
Security Administration (TSA). 

What GAO Found:

More than half of the 117 statements of work that GAO reviewed provided 
for reorganization and planning activities, policy development, and 
acquisition support—services that closely support the performance of 
inherently governmental functions. Other such services supporting a 
broad range of programs and operations at Coast Guard, OPO, and TSA 
included budget preparation, regulation development, and employee 
relations.

Decisions to contract for professional and management support services 
were driven by the need for staff and expertise to get programs and 
operations up and running. However, for the nine cases we reviewed, 
program officials did not assess the risk that government decisions may 
be influenced by, rather than independent from, contractor judgments. 
These cases included services that have the potential to increase this 
risk. For example, contractors directly supported DHS missions and 
performed on an ongoing basis work comparable to that of government 
employees. Most of the nine contracts also lacked detail or covered a 
wide range of services. Conditions such as these need to be carefully 
monitored to ensure the government does not lose control over and 
accountability for mission-related decisions. DHS has not explored ways 
to manage the risk of these contractor services, such as through total 
workforce deployment across the organization. 

The level of oversight DHS provided did not always ensure 
accountability for decisions or the ability to judge whether the 
contractor was performing as required. Federal acquisition policy 
requires enhanced oversight of contracts for services that can affect 
government decision making, policy development, or program management. 
While contracting officers and program officials acknowledged their 
professional and management support services contracts closely 
supported inherently governmental functions, they did not see a need 
for increased oversight. Insufficient oversight increases the potential 
for a loss of management control and the ability to ensure intended 
outcomes are achieved. 

Range of Contracted Services and Related Risk Level:

Low risk level:
Basic services: 
* Custodial; 
* Food; 
* Landscaping; 
* Snow removal; 
* Storage; 
* Trash collection.

Medium risk level:
Professional and management support services that do not closely 
support inherently governmental functions: 
* Advertising; 
* Banking; 
* Parking; 
* Records maintenance. 

High risk level: 
Professional and management support services that closely support 
inherently governmental functions: 
* Acquisition support; 
* Budget preparation; 
* Developing or interpreting regulations; 
* Engineering and technical services; 
* Intelligence services; 
* Policy development; 
* Reorganization and planning. 

Source: GAO analysis. 

What GAO Recommends:

GAO recommends that DHS take actions to improve its ability to manage 
risk and ensure government control over and accountability for 
decisions resulting from services that closely support inherently 
governmental functions. DHS generally agreed with these 
recommendations. 

[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-990].

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

[End of section] 

Contents:

Letter:

Results in Brief:

Background:

DHS Contracts for Selected Services Covered a Range of Activities 
Closely Supporting Inherently Governmental Functions:

DHS Did Not Consider Risk when Deciding to Contract for Selected 
Services:

Management of Contracts for Selected Services May Not Have Been 
Sufficient to Mitigate Risk:

Conclusions:

Recommendations for Executive Action:

Agency Comments and Our Evaluation:

Appendix I: Scope and Methodology:

Appendix II: Examples of Inherently Governmental and Approaching 
Inherently Governmental Functions:

Appendix III: Department of Homeland Security Inspector General 
Oversight:

Appendix IV: Comments from the Department of Homeland Security:

Tables:

Table 1: Range of Contracted Services and Related Risk Level:

Table 2: Examples of Limited Control over and Accountability for 
Contracts for Selected Services:

Table 3: Requested Fiscal Year 2005 Contract Statements of Work:

Table 4: Fiscal Year 2005 Contracts Reviewed:

Table 5: Examples of Inherently Governmental Functions:

Table 6: Examples of Services That May Approach Being Inherently 
Governmental Functions:

Figures:

Figure 1: DHS Contracting in Fiscal Year 2005:

Figure 2: Coast Guard, OPO, and TSA Contracting for Selected 
Professional and Management Support Services in Fiscal Year 2005:

Figure 3: Professional and Management Support Services Closely 
Supporting Inherently Governmental Functions in Nine Cases Reviewed:

Figure 4: Inspector General Coverage of DHS Offices and Management 
Challenges:

Abbreviations:

COTR: Contracting Officer's Technical Representative: 
DHS: Department of Homeland Security: 
DOD: Department of Defense: 
DOE: Department of Energy: 
FAR: Federal Acquisition Regulation: 
FEMA: Federal Emergency Management Agency: 
FPDS-NG: Federal Procurement Data System-Next Generation: 
OFPP: Office of Federal Procurement Policy: 
OMB: Office of Management and Budget: 
OPO: Office of Procurement Operations: 
TSA: Transportation Security Administration: 

[End of section]

United States Government Accountability Office: Washington, DC 20548:

September 17, 2007:

The Honorable Joseph I. Lieberman: Chairman: 
The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: United States 
Senate: 

The Honorable Daniel K. Akaka: 
Chairman: 
The Honorable George V. Voinovich: Ranking Member: 
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia:  Committee on Homeland 
Security and Governmental Affairs: United States Senate: 

The Honorable Bennie G. Thompson: 
Chairman: 
Committee on Homeland Security: 
House of Representatives:

In fiscal year 2006, the Department of Homeland Security (DHS) 
obligated $15.7 billion for the procurement of goods and 
services,[Footnote 1] making it the third largest department in terms 
of procurement spending in the federal government. Of this amount, DHS 
obligated over $5 billion on contracts for services categorized as 
professional and management support, such as strategic planning, human 
resources development, and acquisition support.

While there are benefits to using contractors to perform services for 
the government--such as increased flexibility in fulfilling immediate 
needs--GAO and others have raised concerns about the federal 
government's increasing reliance on contractor services. Of key concern 
is the risk associated with contractors providing services that closely 
support inherently governmental functions: the loss of government 
control over and accountability for mission-related policy and program 
decisions. Federal guidance requires agencies to assess this risk and 
provide oversight accordingly.

Given the dollars obligated for professional and management support 
services contracts and the associated risk, you asked us to review 
DHS's use of contracts for services that closely support inherently 
governmental functions. Specifically, you asked us to (1) describe the 
types of services DHS requested through these contracts, (2) identify 
potential risk in these contracts and the extent to which DHS 
considered risk when deciding to use these contracts, and (3) assess 
DHS's approach to managing and overseeing contracts for these types of 
services.

To conduct our work, we reviewed applicable federal procurement 
policies and data from the Federal Procurement Data System-Next 
Generation (FPDS-NG) for fiscal year 2005, the most recent year for 
which complete data were available at the time we began our review. To 
identify services that closely support inherently governmental 
functions, we reviewed federal acquisition guidance that describes 
these functions and FPDS-NG service codes. We selected the four 
professional and management support services for which DHS obligated 
the most dollars in fiscal year 2005--program management and support 
services, engineering and technical services, other professional 
services, and other management support services. Because FPDS-NG does 
not provide definitions for service codes, to better understand the 
services provided, we judgmentally selected 125 contract statements of 
work for the four types of professional and management support 
services. We selected contracts and orders[Footnote 2] awarded by DHS 
components, excluding the Federal Emergency Management Agency 
(FEMA)[Footnote 3] that had obligated the most on these services at the 
time we began our review--the Coast Guard, the Office of Procurement 
Operations (OPO), and the Transportation Security Administration (TSA). 
From our selected statements of work, we received and reviewed 117 
statements and judgmentally selected and conducted a more detailed 
review of 9 cases from the three components. These cases totaled over 
$82.1 million, ranging in value from $1.3 million to $42.4 million, and 
represented a variety of services that closely support inherently 
governmental functions. For the 9 cases, we reviewed contract files and 
interviewed contracting officers, program officials, and contractors. 
In addition, we interviewed staff from the Office of Management and 
Budget's (OMB) Office of Federal Procurement Policy (OFPP), the 
component heads of contracting activity at OPO and TSA, and the Chief 
of the Office of Procurement Policy at the Coast Guard. Appendix I 
provides more information on our scope and methodology. We conducted 
our review between April 2006 and August 2007 in accordance with 
generally accepted government auditing standards.

Results in Brief:

More than half of the 117 statements of work we reviewed provided for 
reorganization and planning activities, policy development, and 
acquisition support--services that closely support the performance of 
inherently governmental functions. For example, contractors provided 
reorganization and planning services for the Coast Guard's fleet 
modernization effort--the Integrated Deepwater System. In another case, 
contractors provided a range of professional services including 
strategic planning and legislative support for TSA's Transportation 
Worker Identification Credential Program. Employee relations, budget 
preparation, and regulation development were also among the services 
provided at the Coast Guard, OPO, and TSA.

Decisions to contract for professional and management support services 
were driven by the need for staff and expertise to get programs and 
operations up and running. However, for the nine cases we reviewed, 
program officials did not assess the risk that government decisions may 
be influenced by, rather than independent from, contractor judgments. 
Long-standing federal procurement policy requires attention to this 
risk. Each of the nine cases we reviewed included services that have 
the potential to increase this risk. Specifically, the contracts 
included services that directly supported DHS missions; in some cases, 
contractors were performing on an ongoing basis work also performed by 
government employees, such as intelligence analysis and strategic 
planning. And in most cases, we found the original justification for 
contracting, such as immediate need, had changed, but components 
continued to use contractors without reassessing who--private companies 
or federal employees--should perform a given function. In addition, six 
of the nine contracts lacked detail or covered a wide range of 
services. These conditions need to be carefully monitored to ensure the 
government does not lose control over and accountability for mission- 
related decisions. DHS has not explored ways to manage the risk of 
contracting for these services, such as through total workforce 
deployment across the organization, which includes the flexible use of 
the workforce to reduce skill gaps.

DHS management and oversight of contracts for selected services did not 
provide assurance that DHS had adequately mitigated the related risk. 
Federal acquisition policy requires enhanced oversight of contractors 
providing professional and management support services that can affect 
government decision making, support or influence policy development, or 
affect program management. However, most contracting officers and 
program officials we spoke with were unaware of this requirement and, 
in general, did not see a need for enhanced oversight of their 
professional and management support services contracts--even though 
they acknowledged these contracts closely supported inherently 
governmental functions. According to some officials, their contracting 
experience and training enabled them to determine if enhanced oversight 
was needed. However, we found the level of oversight provided did not 
always ensure accountability for decisions or the ability to judge 
whether the contractor was performing as required. In addition, 
training was not targeted to provide the necessary skills to determine 
whether enhanced oversight was needed. Failure to ensure appropriate 
oversight increases the potential for a loss of management control and 
ability to ensure intended outcomes are achieved.

To improve DHS's ability to manage the risk of selected services that 
closely support inherently governmental functions as well as government 
control over and accountability for decisions, we are recommending that 
the Secretary of Homeland Security take several actions. These actions 
include establishing strategic-level guidance on and routinely 
assessing the risk of using contractors for selected services, more 
clearly defining contract requirements, and assessing the ability of 
the workforce to provide sufficient oversight when using selected 
services. In written comments on a draft of this report, DHS concurred 
with most of our recommendations and provided information on what 
action would be taken to address them. However, DHS partially concurred 
with our recommendation to assess the risk of selected services as part 
of the acquisition planning process and modify existing guidance and 
training, noting that its acquisition planning guidance already 
provides for the assessment of risk. However, our review found that 
this guidance does not address the specific risk of services that 
closely support the performance of inherently governmental functions. 
DHS also partially concurred with our recommendation to review selected 
services contracts as part of the acquisition oversight program, 
stating that instead, the Chief Procurement Officer will direct a 
special investigation on selected issues as needed. We did not intend 
for the formal oversight plan to be modified and leave it to the 
discretion of the Chief Procurement Officer to determine how to 
implement the recommendation. DHS's comments are reproduced in their 
entirety in appendix IV.

Background:

Governmentwide, spending on services contracts has grown substantially 
over the past several years. At DHS, in fiscal year 2005 services 
accounted for $7.9 billion, or 67 percent, of total procurement 
obligations,[Footnote 4] with $1.2 billion obligated for four types of 
professional and management support services: program management and 
support, engineering and technical, other professional, and other 
management support (see fig. 1). More than two-thirds of DHS's 
obligations for these services ($805 million) were to support the Coast 
Guard, OPO, and TSA.

Figure 1: DHS Contracting in Fiscal Year 2005:

[See PDF for image] 

This figure is a pie-chart depicting the following data:

Services: $7.9 billion; 
Products: $3.9 billion; 
Four selected professional and management support services: $1.2 
billion. 

Source: GAO analysis of FPDS-NG data.

[End of figure]

The services federal agencies buy are organized under more than 300 
codes in FPDS-NG and range from basic services, such as custodial and 
landscaping, to more complex professional and management support 
services, which may closely support the performance of inherently 
governmental functions. Inherently governmental functions require 
discretion in applying government authority or value judgments in 
making decisions for the government; as such, they should be performed 
by government employees, not private contractors.[Footnote 5] The 
Federal Acquisition Regulation (FAR) provides 20 examples of functions 
considered to be, or to be treated as, inherently governmental, 
including:

* determining agency policy and priorities for budget requests,

* directing and controlling intelligence operations,

* approving contractual requirements, and:

* selecting individuals for government employment.

The closer contractor services come to supporting inherently 
governmental functions, the greater the risk of their influencing the 
government's control over and accountability for decisions that may be 
based, in part, on contractor work. This may result in decisions that 
are not in the best interest of the government, and may increase 
vulnerability to waste, fraud, or abuse. The FAR provides 19 examples 
of services and actions that may approach the category of inherently 
governmental because of the nature of the function, the manner in which 
the contractor performs the contracted services, or the manner in which 
the government administers contractor performance.[Footnote 6] Table 1 
provides examples of these services and their relative risk of 
influencing government decision making.

Table 1: Range of Contracted Services and Related Risk Level: 

Low risk level:
Basic services: 
* Custodial; 
* Food; 
* Landscaping; 
* Snow removal; 
* Storage; 
* Trash collection.

Medium risk level:
Professional and management support services that do not closely 
support inherently governmental functions: 
* Advertising; 
* Banking; 
* Parking; 
* Records maintenance. 

High risk level: 
Professional and management support services that closely support 
inherently governmental functions: 
* Acquisition support; 
* Budget preparation; 
* Developing or interpreting regulations; 
* Engineering and technical services; 
* Intelligence services; 
* Policy development; 
* Reorganization and planning. 

Source: GAO analysis of selected FPDS-NG and FAR subpart 7.5 categories 
of services, and OFPP Policy Letter 93-1.

Note: Professional and management support services consists of 42 codes 
in FPDS-NG.

[End of table] 

FAR and OFPP guidance address contracting for services that closely 
support the performance of inherently governmental functions, including 
professional and management support services, due to their potential 
for influencing the authority, accountability, and responsibilities of 
government officials. In particular, the guidance states that services 
that tend to affect government decision making, support or influence 
policy development, or affect program management are susceptible to 
abuse and require a greater level of scrutiny. Such services include 
advisory and assistance, which includes expert advice, opinions, and 
other types of consulting services. The guidance requires agencies to 
provide greater scrutiny of these services and an enhanced degree of 
management oversight. This would include assigning a sufficient number 
of qualified government employees to provide oversight and to ensure 
that agency officials retain control over and remain accountable for 
policy decisions that may be based in part on a contractor's 
performance and work products.[Footnote 7]

The potential for the loss of government management control associated 
with contracting for services that closely support the performance of 
inherently governmental functions or that should be performed by 
government employees is a long-standing governmentwide concern. For 
example, in 1981, GAO found that contractors' level of involvement in 
management functions at the Departments of Energy (DOE) and Defense 
(DOD) was so extensive that the agencies' ability to develop options 
other than those proposed by the contractors was limited.[Footnote 8] A 
decade later, in 1991, GAO reported that DOE had contracted extensively 
for support in planning, managing, and carrying out its work because it 
lacked sufficient resources to perform the work itself.[Footnote 9] We 
noted that while support service contracts are appropriate for 
fulfilling specialized needs or needs of a short-term or intermittent 
nature, the contracts we reviewed at DOE were not justified on these 
bases. In that same year, GAO reported that three agencies--DOE, the 
Environmental Protection Agency, and the National Aeronautics and Space 
Administration--may have relinquished government control and relied on 
contractors to administer some functions that may have been 
governmental in nature.[Footnote 10]

More recently, government, industry, and academic participants in GAO's 
2006 forum on federal acquisition challenges and opportunities[Footnote 
11] and the congressionally mandated Acquisition Advisory 
Panel[Footnote 12] noted how an increasing reliance on contractors to 
perform services for core government activities challenges the capacity 
of federal officials to supervise and evaluate the performance of these 
activities. The panel also noted that contracts for professional 
services are often performed with close contact between the federal 
government and contractor employees, which approaches the line between 
personal and nonpersonal services. Personal services are prohibited by 
the FAR, unless specifically authorized, and are indicated when the 
government exercises relatively continuous supervision and control over 
the contractor. Both the panel and GAO acquisition forum participants 
noted the large growth in contracting for complex and sophisticated 
services has increased attention to the appropriate use of contractors.

DHS Contracts for Selected Services Covered a Range of Activities 
Closely Supporting Inherently Governmental Functions:

A broad range of activities related to specific programs and 
administrative operations was performed under the professional and 
management support services contracts we reviewed. In most cases, the 
services provided--such as policy development, reorganization and 
planning activities, and acquisition support--closely supported the 
performance of inherently governmental functions. Contractor 
involvement in the nine cases we reviewed in detail ranged from 
providing two to three supplemental personnel to staffing an entire 
office.

Of the $805 million obligated by the Coast Guard, OPO, and TSA in 
fiscal year 2005 to procure four types of professional and management 
support services, more than one-half of the obligations was for 
engineering and technical services--most of which was contracted by the 
Coast Guard and OPO. Figure 2 provides a breakdown of contracting 
dollars for the four selected professional and management support 
services by the three DHS components.

Figure 2: Coast Guard, OPO, and TSA Contracting for Selected 
Professional and Management Support Services in Fiscal Year 2005:

[See PDF for image]

This figure is a vertical bar graph with three bars depicted in each of 
four categories. The vertical axis of the graph represents dollars in 
millions from 0 to 250. The horizontal axis of the graph represents the 
four categories. The following data is depicted:

Program management/support services: 
Coast Guard: $12.3; 
Office of Procurement Operations: $76.4; 
Transportation Security Administration: $42.5. 

Engineering and technical services: 
Coast Guard: $201.2; 
Office of Procurement Operations: $183.3; 
Transportation Security Administration: $30.7. 

Other professional services: 
Coast Guard: $38.1; 
Office of Procurement Operations: $32.7; 
Transportation Security Administration: $17. 

Other management services: 
Coast Guard: $15.8; 
Office of Procurement Operations: $74.1; 
Transportation Security Administration: $81.2. 

Source: GAO analysis of FPDS-NG data. 

[End of figure]

Some of the 117 statements of work we reviewed were for services that 
did not closely support inherently governmental functions. These 
included a TSA contract for employee parking services at airports and a 
Coast Guard contract to maintain historic human resource records and 
perform data entry. However, most of the selected statements of work we 
reviewed did request reorganization and planning activities, 
acquisition support, and policy development--services that closely 
supported inherently governmental functions.[Footnote 13] Of the 117 
statements of work that we reviewed, 71 included a total of 122 
services that fell into these three categories--with reorganization and 
planning activities requested most often. For example, the Coast Guard 
obligated $500,000 for a contractor to provide services for the 
Nationwide Automatic Identification System to identify and monitor 
vessels approaching or navigating in U.S. waters. The services included 
advising and providing recommendations on strategies for project 
planning, risk management, and measuring the performance and progress 
of the system. Additionally, the tasks included assisting with the 
development of earned value management reviews, life-cycle cost 
estimates, and cost-benefit analyses. In another example, TSA obligated 
$1.2 million to acquire contractor support for its Acquisition and 
Program Management Support Division, which included assisting with the 
development of acquisition plans and hands-on assistance to program 
offices to prepare acquisition documents.

Because contract statements of work can be broad, or contain 
requirements that the contractor may not ultimately perform, we 
conducted a more detailed review of nine cases to verify the work 
performed. In these nine cases, we found that contractors provided a 
broad array of services to sustain a range of programs and 
administrative operations, with the categories of reorganization and 
planning, policy development, and acquisition support requested most 
often. For example, $2.1 million in orders supporting the Coast Guard's 
fleet modernization effort--the Integrated Deepwater System--included 
modeling and simulation services to analyze the operational performance 
and effectiveness of various fleet scenarios for program planning. A 
$42.4 million OPO order for professional, technical, and administrative 
services for multiple offices in DHS's Information Analysis and 
Infrastructure Protection Directorate[Footnote 14] included tasks to 
assist in developing policies, budget formulation, and defining 
information technology requirements.[Footnote 15] Specifically, 
contractor personnel provided general acquisition advice and support to 
the Information Analysis and Infrastructure Protection business office, 
which included the management, execution, process improvement, and 
status reporting of procurement requests. For another office, the 
contractor provided an analysis of intelligence threats. A $7.9 million 
OPO human capital services order provided a full range of personnel and 
staffing services to support DHS's headquarters offices, including 
writing position descriptions, signing official offer letters, and 
meeting new employees at DHS headquarters for their first day of work.

The extent of contractor involvement in the nine case studies varied 
from providing two to three supplemental personnel to staffing an 
entire office, and in most cases contractor staff performed services on-
site at DHS facilities. Figure 3 shows the type and range of services 
provided in the nine case studies and the location of contractor 
performance.

Figure 3: Professional and Management Support Services Closely 
Supporting Inherently Governmental Functions in Nine Cases Reviewed:

[See PDF for image]

DHS program or office supported, by component, Coast Guard: Integrated 
Deepwater System, Modeling and Simulation Services: Total[a] dollars in 
billions: $2.1; Service provided: Budget preparation: [Empty]; Service 
provided: Policy developent: [Empty]; Service provided: Acquisition 
support: [Empty]; Service provided: Developing or interpreting 
regulations: [Empty]; Service provided: Reorganization and planning: 
[Check]; Service provided: Contractor representing component[b]: 
[Empty]; Service provided: Contractor responding to Freedom of 
Information Act request: [Empty]; Service type: Program support: 
[Check]; Service type: Administrative operations: [Empty]; Location: 
Performed on-site at DHS: [Empty]; Location: Performed at contractor 
facility: [Check]. 

DHS program or office supported, by component, Coast Guard: Competitive 
Sourcing Program: 
Total[a] dollars in billions: $1.7; 
Service provided: Budget preparation: [Check]; 
Service provided: Policy development: [Check]; 
Service provided: Acquisition support: [Check]; 
Service provided: Developing or interpreting regulations: [Empty]; 
Service provided: Reorganization and planning: [Check]; 
Service provided: Contractor representing component[b]: [Empty]; 
Service provided: Contractor responding to Freedom of Information Act request: [Empty]; 
Service type: Program support: [Check]; 
Service type: Administrative operations: [Empty]; 
Location: Performed on-site at DHS: [Check]; 
Location: Performed at contractor facility: [Empty]. 

DHS program or office supported, by component, Coast Guard: Office of 
Standards, Evaluation, and Development: 
Total[a] dollars in billions: $1.3; 
Service provided: Budget preparation: [Empty]; 
Service provided: Policy development: [Check]; 
Service provided: Acquisition support: [Empty]; 
Service provided: Developing or interpreting regulations: [Check]; 
Service provided: Reorganization and planning: [Empty]; 
Service provided: Contractor representing component[b]: [Empty]; 
Service provided: Contractor responding to Freedom of Information Act request: [Empty]; 
Service type: Program support: [Check]; 
Service type: Administrative operations: [Empty]; 
Location: Performed on-site at DHS: [Check]; 
Location: Performed at contractor facility: [Empty]. 

DHS program or office supported, by component, Office of Procurement 
Operations: Information Analysis and Infrastructure Protection 
Directorate: 
Total[a] dollars in billions: $42.4; 
Service provided: Budget preparation: [Check]; 
Service provided: Policy development: [Check]; 
Service provided: Acquisition support: [Check]; 
Service provided: Developing or interpreting regulations: [Check]; 
Service provided: Reorganization and planning: [Check]; 
Service provided: Contractor representing component[b]: [Check]; 
Service provided: Contractor responding to Freedom of Information Act request: [Check]; 
Service type: Program support: [Check]; 
Service type: Administrative operations: [Check]; 
Location: Performed on-site at DHS: [Check]; 
Location: Performed at contractor facility: [Empty]. 

DHS program or office supported, by component, Office of Procurement 
Operations: U.S. Visitor and Immigration Status Indicator Technology: 
Total[a] dollars in billions: $11.8; 
Service provided: Budget preparation: [Empty]; 
Service provided: Policy development: [Empty]; 
Service provided: Acquisition support: [Check]; 
Service provided: Developing or interpreting regulations: [Empty]; 
Service provided: Reorganization and planning: [Check]; 
Service provided: Contractor representing component[b]: [Empty]; 
Service provided: Contractor responding to Freedom of Information Act request: [Empty]; 
Service type: Program support: [Check]; 
Service type: Administrative operations: [Empty]; 
Location: Performed on-site at DHS: [Empty]; 
Location: Performed at contractor facility: [Check]. 

DHS program or office supported, by component, Office of Procurement 
Operations: DHS Headquarters Human Capital Services: 
Total[a] dollars in billions: $7.9; 
Service provided: Budget preparation: [Empty]; 
Service provided: Policy development: [Empty]; 
Service provided: Acquisition support: [Empty]; 
Service provided: Developing or interpreting regulations: [Empty]; 
Service provided: Reorganization and planning: [Check]; 
Service provided: Contractor representing component[b]: [Check]; 
Service provided: Contractor responding to Freedom of Information Act request: [Empty]; 
Service type: Program support: [Empty]; 
Service type: Administrative operations: [Check]; 
Location: Performed on-site at DHS: [Check]; 
Location: Performed at contractor facility: [Check]. 

DHS program or office supported, by component, Transportation Security 
Administration: Transportation Worker Identification Credential 
Program: 
Total[a] dollars in billions: $7.9; 
Service provided: Budget preparation: [Check]; 
Service provided: Policy development: [Check]; 
Service provided: Acquisition support: [Check]; 
Service provided: Developing or interpreting regulations: [Check]; 
Service provided: Reorganization and planning: [Check]; 
Service provided: Contractor representing component[b]: [Check]; 
Service provided: Contractor responding to Freedom of Information Act request: [Empty]; 
Service type: Program support: [Check]; 
Service type: Administrative operations: [Empty]; 
Location: Performed on-site at DHS: [Check]; 
Location: Performed at contractor facility: [Empty]. 

DHS program or office supported, by component, Transportation Security 
Administration: Employee Relations Support Services: 
Total[a] dollars in billions: $5.4; 
Service provided: Budget preparation: [Empty]; 
Service provided: Policy development: [Check]; 
Service provided: Acquisition support: [Empty]; 
Service provided: Developing or interpreting regulations: [Empty]; 
Service provided: Reorganization and planning: [Empty]; 
Service provided: Contractor representing component[b]: [Check]; 
Service provided: Contractor responding to Freedom of Information Act request: [Empty]; 
Service type: Program support: [Empty]; 
Service type: Administrative operations: [Check]; 
Location: Performed on-site at DHS: [Check]; 
Location: Performed at contractor facility: [Empty]. 

DHS program or office supported, by component, Transportation Security 
Administration: Secure Flight: 
Total[a] dollars in billions: $1.6; 
Service provided: Budget preparation: [Check]; 
Service provided: Policy development: [Empty]; 
Service provided: Acquisition support: [Check]; 
Service provided: Developing or interpreting regulations: [Check]; 
Service provided: Reorganization and planning: [Check]; 
Service provided: Contractor representing component[b]: [Check]; 
Service provided: Contractor responding to Freedom of Information Act request: 
[Empty]; 
Service type: Program support: [Check]; 
Service type: Administrative operations: [Check]; 
Location: Performed on-site at DHS: [Check]; 
Location: Performed at contractor facility: [Empty]. 

Source: GAO analysis. 

Note: Categories are based on services that approach being inherently 
governmental in FAR subpart 7.5 and therefore may not include all the 
services provided by contractors in each of the nine cases.

[A] Obligations based on information provided by DHS at the time of our 
review.

[B] Situations in which contractors might be assumed to be agency 
employees or representatives. FAR section 7.503(d)(13).

[End of figure]

DHS Did Not Consider Risk when Deciding to Contract for Selected 
Services:

A lack of staff and expertise to get programs and operations up and 
running drove decisions to contract for professional and management 
support services. While program officials generally acknowledged that 
these contracts closely supported the performance of inherently 
governmental functions, they did not assess the risk that government 
decisions may be influenced by, rather than independent from, 
contractor judgments. In the nine cases we reviewed, we found 
contractors providing services integral to an agency's mission and 
comparable to those provided by government employees, and contracts 
with broadly defined requirements. These conditions need to be 
carefully monitored to ensure the government does not lose control over 
and accountability for mission related decisions. DHS has not explored 
ways to manage the risk of contracting for these services such as 
determining the right mix of government-performed and contractor- 
performed services or assessing total workforce deployment across the 
department. DHS's human capital strategic plan notes the department has 
identified core mission critical occupations and plans to reduce skill 
gaps in core and key competencies. However, it is unclear how this will 
be achieved and whether it will inform the department's use of 
contractors for services that closely support inherently governmental 
functions.

DHS Contracting Decisions Were Largely Driven by a Lack of Staff and 
Expertise and Immediacy of Need:

The reasons most often cited by program officials for contracting for 
services was the need for employees--to start up a new program or 
administrative operation, provide specific expertise, or meet immediate 
mission needs. When DHS was established in 2003, it was charged with 
developing strategies, programs, and projects to meet a new mission 
while facing skill gaps in core and key competencies. For example, at 
TSA--a component built from the ground up--according to program 
officials, the lack of federal staff to provide acquisition support led 
to hiring contractors for its Secure Flight program. Federal staff 
limitations was also a reason for TSA's contract for employee relations 
support services. Many TSA, DHS human capital, and Information Analysis 
and Infrastructure Protection program officials said that contracting 
for services was necessary because they were under pressure to get 
program and administrative offices up and running quickly, and they did 
not have enough time to hire staff with the right expertise through the 
federal hiring process. In another case, in prior work we found that 
when OPO was established, the office had only seven staff to serve more 
than 20 organizations.[Footnote 16] Since that time, OPO has expanded 
and adjusted the use of contractors for specific functions, such as 
acquisition support.

In the case of TSA, the agency needed to immediately establish an 
employee relations office capable of serving 60,000 newly hired airport 
screeners--an undertaking TSA Office of Human Resources officials said 
would have taken several years to accomplish if they hired qualified 
federal employees. In another case, DHS human capital officials said 
there were only two staff to manage human resources for approximately 
800 employees, and it would have taken 3 to 5 years to hire and train 
federal employees to provide the necessary services. Similarly, the 
Coast Guard, a more established agency, lacked the personnel needed to 
address new requirements for its competitive sourcing program. 
According to Coast Guard program officials, only one federal employee 
was in place when the new requirements were established. An acquisition 
plan for modeling and simulation services in support of the Coast 
Guard's Integrated Deepwater System cited the need for technological 
expertise as one of the reasons for hiring contractors. According to 
program officials, contracting for such technological capabilities is 
routine at the Coast Guard.

Several officials also described a perception of a management 
preference for contracting. For example, an OPO contracting officer 
said governmentwide strategies to use contractors influenced program 
decisions to award services contracts. TSA program and senior officials 
also said decisions to contract were in keeping with a conscious 
decision to build a lean organization. For example, in prior work, we 
found that TSA contracted extensively to manage human resource needs, 
develop and manufacture screening equipment, and provide the 
information technology systems it uses to manage day-to-day operations. 
In fact, such service contracts represented about 48 percent of TSA's 
fiscal year 2003 budget.[Footnote 17]

Selected Cases May Have Been at Risk of Contractors Influencing 
Government Decisions:

To ensure the government does not lose control over and accountability 
for mission-related decisions, long-standing federal procurement policy 
requires attention to the risk that government decisions may be 
influenced by, rather than independent from, contractor actions when 
contracting for services that closely support inherently governmental 
functions. Distinguishing roles and responsibilities of contractors and 
government employees and carefully defining requirements for contractor 
services become especially important when contracting for professional 
and management support services since contractors often work closely 
with government employees to provide these services. To manage risk, 
participants in GAO's acquisition forum stated that agencies need to 
determine the right mix of government-performed and contractor- 
performed work in particular settings, and that planning for 
contracting outcomes and measurable results is a critical element in 
managing a multisector workforce of government employees and 
contractors. The nine cases we reviewed provided examples of 
contractors performing services integral to an agency's mission and 
comparable to those performed by government employees, contractors 
providing ongoing support, and broadly defined contract requirements-- 
conditions that need to be carefully monitored to ensure the government 
does not lose control over and accountability for mission-related 
decisions.

Contractor Services Integral to DHS's Mission and Comparable to Work 
Performed by Government Employees:

In seven of the nine cases, contractors provided services that were 
integral to DHS's mission or comparable to work performed by government 
employees. For example:

* A contractor directly supported DHS efforts to hire federal 
employees, including signing offer letters.

* The contractor for the component's employee relations office provided 
advice to supervisors on cases, a function also performed by federal 
employees in that office.

* A contractor provided acquisition advice and support to the 
Information Analysis and Infrastructure Protection Directorate business 
office, working alongside federal employees and performing the same 
tasks.

In some of these cases officials said contractors were used to fill 
staff shortages. We also found that government employees may have 
supervised contractor employees. For example, one contractor performed 
mission-related budget, program management, and acquisition services 
and was located at government operations centers to provide 
opportunities for direct review of the contractor's activities. This 
type of close supervision of contractor personnel may constitute 
personal services--a contracting arrangement that is prohibited by the 
FAR, unless specifically authorized.[Footnote 18]

Ongoing Contractor Support:

In all nine cases, the contractor provided services that lasted for 
more than 1 year. Given the risk of contracting for selected services, 
it is appropriate to periodically reexamine who--private companies or 
federal employees--should perform certain services. However, in five of 
the nine cases, the original justification for contracting--to quickly 
establish a new office or function--had changed, but the components 
extended or recompeted services without considering this change. For 
example:

* To establish a competitive sourcing program, the Coast Guard hired a 
contractor to provide budget, policy, acquisition support, and 
reorganization and planning for more than 5 years. These services have 
been extended through August 2009.

* OPO established a temporary "bridge" arrangement without competition 
to avoid disruption of critical support including budget, policy, and 
intelligence services. Although this arrangement was intended to be 
temporary, the order was modified 20 times and extended for almost 18 
months. Subsequently, these services were competed and awarded to the 
original contractor under six separate contracts. DHS provided 
information stating that five of the six contracts expire by the end of 
September 2007. However, as of August 2007 DHS had yet to provide a 
plan for carrying out these services in the future.

* In another OPO case, a contractor was hired to develop a strategic 
plan for the US-VISIT program. While the task was completed in less 
than a year, the contractor continued to provide related services in 
two subsequent orders.

Continuing to contract for these types of services is particularly 
risky since the initial contracting decisions did not include an 
assessment of risk.

Broadly Defined Requirements:

Describing in detail the work to be performed under a contract helps to 
minimize the risk of paying too much for services provided, acquiring 
services that do not meet needs, or entering too quickly into sensitive 
arrangements. Well-defined contract requirements can also help minimize 
the risk of contractors performing inherently governmental functions. 
Defining requirements is a part of the acquisition planning process and 
prior GAO work has emphasized the importance of clearly defined 
requirements to obtain the right outcome.[Footnote 19]

Broadly defined requirements were also apparent in the 117 statements 
of work that we reviewed. For example, at TSA we found multiple 
statements of work requesting a similar set of services--including 
acquisition and strategic planning, contingency planning, program 
oversight, and government cost estimating--in support of different 
program offices.

In six of our nine case studies, the requirements as written in the 
statements of work were often broadly defined. In four cases, the 
statements of work lacked specific details about activities that 
closely support inherently governmental functions. For example, the 
initial statement of work for a $7.9 million OPO order for human 
resources support broadly stated that the contractor would rank 
candidates for DHS positions. Without specifying how the contractor was 
to perform this task, it was unclear how OPO would hold the contractor 
accountable for outcomes. The later contract specified how the 
contractor was to rank candidates, including the criteria, processes, 
and policies to be used. In the other two cases, the statements of work 
included an indiscriminate mix of services.

* A $7.9 million TSA contract included program management support 
activities, including professional and technical advice, strategic 
planning, performance monitoring, conference support, briefing 
preparation, project documentation, technical research and analysis, 
and stakeholder relations. Some of these activities fit the description 
of advisory and assistance services.

* Similarly, a single $42.4 million OPO order included 58 tasks to 
provide a diverse range of services throughout the Information Analysis 
and Infrastructure Protection Directorate in support of over 15 program 
offices and 10 separate directoratewide administrative efforts. 
Services included providing strategic communications planning expertise 
and representing the directorate as a member of the DHS-wide Homeland 
Security Operations Center, providing intelligence analysis for 
Immigration and Customs Enforcement and Customs and Border Protection, 
supporting administrative functions such as acquisition planning and 
human capital management, and defining information technology 
requirements for the directorate. Other services included helping 
respond to congressional and Freedom of Information Act requests and 
preparing budget justification documents and related briefing materials.

Several program officials noted that the statements of work did not 
accurately reflect the program's needs or the work the contractors 
actually performed. For example, one statement of work for a $1.7 
million Coast Guard order included advisory and assistance services. 
However, program officials said the contractor never provided these 
services. Another Coast Guard statement of work for a $1.3 million 
order initially included developing policy, conducting cost-benefit 
analyses, and conducting regulatory assessments, though program 
officials told us the contractors provided only technical regulatory 
writing and editing support. The statement of work was revised in a 
later contract to better define requirements.

Officials Generally Did Not Address Risk when Contracting for Selected 
Services:

Contracting officers and program officials for the nine case studies 
generally acknowledged that their professional and management support 
services contracts closely supported the performance of inherently 
governmental functions. However, none assessed whether these contracts 
could result in the loss of control over and accountability for mission-
related decisions. DHS has not explored ways to address the risk of 
contracting for these services such as determining the right mix of 
government performed or contractor performed services or assessing 
total workforce deployment across the department.

Federal acquisition guidance highlights the risk inherent in service 
contracting--particularly those for professional and management 
support--and federal internal control standards require assessment of 
risks. Internal control standards provide a framework to identify and 
address areas at greatest risk of mismanagement, waste, fraud, and 
abuse.[Footnote 20] OFPP staff we met with also emphasized the 
importance of assessing the risk associated with contracting for 
services that closely support the performance of inherently 
governmental functions and establishing effective internal management 
controls to ensure agency staff are aware of this risk consistent with 
the OFPP guidance. While DHS acquisition planning guidance requires 
identification of such acquisition risks as cost, schedule, and 
performance, or political or organizational factors, it does not 
address the specific risk of services that closely support the 
performance of inherently governmental functions.[Footnote 21] Prior 
GAO work has found that cost, schedule, and performance--common 
measures for products or major systems--may not be the most effective 
measures for assessing services.[Footnote 22]

DHS's human capital strategic plan notes the department has identified 
core mission critical occupations and plans to reduce skill gaps in 
core and key competencies. However, prior GAO work found that DHS had 
not provided details on the specific human capital resources needed to 
achieve its long-term strategic goals.[Footnote 23] Human capital 
planning strategies should be linked to current and future human 
capital needs, including the total workforce of federal employees and 
contractors; its deployment across the organization; and the knowledge, 
skills, and abilities needed by agencies.[Footnote 24] Deployment 
includes the flexible use of the workforce, such as putting the right 
employees in the right roles according to their skills, and relying on 
staff drawn from various organizational components and functions and 
using "just-in-time" or "virtual" teams to focus the right talent on 
specific tasks. We have also noted the importance of focusing greater 
attention on which types of functions and activities should be 
contracted out and which ones should not while considering other 
reasons for using contractors, such as a limited number of federal 
employees. DHS's human capital plan is unclear as to how this could be 
achieved and whether it will inform the department's use of contractors 
for services that closely support the performance of inherently 
governmental functions.

Management of Contracts for Selected Services May Not Have Been 
Sufficient to Mitigate Risk:

None of the program officials and contracting officers we spoke with 
were aware of the federal acquisition policy requirement for enhanced 
oversight of contracts for services that closely support the 
performance of inherently governmental functions. Further, few believed 
that their professional and management support service contracts 
required an enhanced level of scrutiny. For the nine cases we reviewed, 
the level of oversight DHS provided did not always ensure 
accountability for decisions--as called for in federal guidance--or the 
ability to judge whether contractors were performing as required. DHS's 
Chief Procurement Officer and Inspector General each have ongoing 
efforts to improve procurement oversight. These efforts have the 
potential to include reviews of contracting for services that closely 
support the performance of inherently governmental functions.

Officials Did Not Provide Required Oversight of Contracts for Selected 
Services:

The FAR and OFPP require agencies to provide enhanced oversight of 
contracts for services that closely support the performance of 
inherently governmental functions to ensure these services do not 
compromise the independence of government decision making.[Footnote 25] 
DHS contracting officers and program officials from our nine case 
studies were unaware of these oversight policies. While these officials 
acknowledged the professional and management support services provided 
under these contracts closely supported the performance of inherently 
governmental functions, most did not believe enhanced oversight of the 
contracts was warranted.

According to DHS contracting officers and program officials, cost, 
complexity, and visibility are risk factors that trigger the need for 
enhanced oversight. Neither these officials nor DHS acquisition 
planning guidance cite services that closely support the performance of 
inherently governmental functions as a risk factor. In five of the nine 
cases we reviewed, contract documents outlined routine oversight 
responsibilities for the Contracting Officer's Technical Representative 
(COTR) but did not address the need for enhanced oversight as a result 
of the type of service. Prior GAO work has found that because services 
involve a wide range of activities, management and oversight of service 
acquisitions may need to be tailored to the specific circumstances, 
including developing different measures of quality or 
performance.[Footnote 26]

In four of the case studies, contracting officers and program officials 
believed their experience and training enabled them to determine 
whether or not enhanced oversight was needed. However, none of the 
training policies and documents we reviewed--including DHS's directive 
for COTR certification and the Defense Acquisition University's 
training curriculum--alerted COTRs to federal policy requiring enhanced 
oversight for contracts that closely support inherently governmental 
functions or to the risk of such contracts.

Control and Accountability Were Limited:

Federal acquisition guidance requires agencies to retain control over 
and remain accountable for decisions that may be based, in part, on a 
contractor's performance and work products. This includes making sound 
judgments on requirements, costs, and contractor performance. Both the 
FAR and OFPP policy state that when contracting for services-- 
particularly for professional and management support services that 
closely support the performance of inherently governmental functions-- 
a sufficient number of qualified government employees assigned to plan 
and oversee contractor activities is needed to maintain control and 
accountability. However, we found cases in which the components lacked 
the capacity to oversee contractor performance due to limited expertise 
and workload demands (see table 2). These deficiencies may have 
resulted in a lack of control over and accountability for decisions.

Table 2: Examples of Limited Control over and Accountability for 
Contracts for Selected Services:

DHS program or office supported, by component: Coast Guard: Integrated 
Deepwater System, Modeling and Simulation Services; 
Total dollars (in millions): $2.1; 
Example of limited control and accountability: Coast Guard program 
officials said they lacked the technical expertise needed to determine 
what it would take to perform a particular task. In one case, they 
anticipated that it would take about 4 hours to modify a simulation. 
Later, the contractor estimated the modification would take 120 hours. 
Such a discrepancy illustrates the potential problems that can occur
--such as underestimating costs--when government personnel lack the 
expertise needed to independently plan for contracted work.

DHS program or office supported, by component: Office of Procurement 
Operations: Information Analysis and Infrastructure Protection 
Directorate; 
Total dollars (in millions): 42.4; 
Example of limited control and accountability: One COTR was assigned 
to oversee 58 different tasks, ranging from acquisition support to 
intelligence analysis to budget formulation and planning, across multiple 
offices and locations. Program and contracting officials noted the resulting 
oversight was likely insufficient. To provide better oversight for one 
of the follow-on contracts, the program official assigned a new COTR to 
oversee just the intelligence work and established monthly meetings 
between the COTR and program office to discuss the contract. However, 
according to the program official, this change was made to ensure that 
the contract deliverables and payments were in order rather than to 
address the inherent risk of the services performed.

DHS program or office supported, by component: Office of Procurement 
Operations: DHS Headquarters Human Capital Services; 
Total dollars (in millions): 7.9; 
Example of limited control and accountability: The COTR assigned to 
oversee the extensive range of personnel services provided by the 
contractor lacked technical expertise, which the program manager 
believed affected the quality of oversight provided. To improve 
oversight for the follow-on contract, the program manager assigned a 
COTR with more human resources experience along with an employee with 
human resources expertise to assist the COTR.

Source: GAO analysis.

[End of table]

Prior GAO work has shown similar examples of oversight deficiencies 
that can contribute to poor outcomes. For example, in work examining 
contracts undertaken in support of response and recovery efforts for 
Hurricanes Katrina and Rita, we found that the number of monitoring 
staff available at DHS was not always sufficient or effectively 
deployed to provide oversight.[Footnote 27] Similarly, in work at DOD, 
we have found cases of insufficient numbers of trained contracting 
oversight personnel, and cases in which personnel were not provided 
enough time to complete surveillance tasks, in part due to limited 
staffing.[Footnote 28]

Establishing measurable outcomes for services contracts and assessing 
contractor performance are necessary to ensure control and 
accountability. DHS components were limited in their ability to assess 
contractor performance in a way that addressed the risk of contracting 
for professional and management support services that closely support 
the performance of inherently governmental functions. Assessing 
contractor performance requires a plan that outlines how services will 
be delivered. However, none of the related oversight plans and contract 
documents we reviewed contained specific measures for assessing 
contractors' performance of these services.

DHS Is Implementing Oversight Initiatives:

DHS's Chief Procurement Officer and the Inspector General each have 
ongoing efforts to assess DHS contract management. The Chief 
Procurement Officer is in the process of implementing an acquisition 
oversight program, which is intended to assess (1) compliance with 
federal acquisition guidance, (2) contract administration, and (3) 
business judgment.[Footnote 29] This program was designed with 
flexibility to address specific procurement issues, as necessary, and 
is based on a series of reviews at the component level. For example, 
the on-site review incorporates assessments of individual procurement 
actions. These reviews have potential to include contracting for 
services that closely support inherently governmental functions.

The Inspector General also has recently increased its procurement 
oversight (see app. III). Common themes and risks emerged from this 
work, primarily the dominant influence of expediency, poorly defined 
requirements, and inadequate oversight that contributed to ineffective 
or inefficient results and increased costs. Inspector General reviews 
also noted that many DHS procurement offices reported that their lack 
of staffing prevents proper procurement planning and severely limits 
their ability to monitor contractor performance and conduct effective 
contract administration. While these findings have broad application to 
services, OFPP Policy Letter 93-1 encourages the Inspectors General to 
also conduct vulnerability assessments of services contracting--which 
would include services that closely support inherently governmental 
functions--to ensure compliance with related guidance.

Conclusions:

When DHS was established in 2003, it faced an enormous challenge to 
quickly set up numerous offices and programs that would provide wide- 
ranging and complex services critical to ensuring the nation's 
security. With limited staffing options, the department relied on 
contractors to perform mission-related services that closely support 
the performance of inherently governmental functions. However, the 
tasks assigned to contractors were not always clearly defined up front, 
and the breadth and depth of contractor involvement were extensive in 
some cases. Four years later, the department continues to rely heavily 
on contractors to fulfill its mission with little emphasis on assessing 
the risk and ensuring management control and accountability. Given its 
use of contractors to provide selected services, it is critical for DHS 
to strategically address workforce deployment and determine the 
appropriate role of contractors in meeting its mission. Until the 
department emplaces the staff and expertise needed to oversee selected 
services, it will continue to risk transferring government 
responsibility to contractors.

Recommendations for Executive Action:

To improve the department's ability to manage the risk of selected 
services that closely support inherently governmental functions as well 
as government control over and accountability for decisions, we 
recommend that the Secretary of Homeland Security implement the 
following five actions:

* establish strategic-level guidance for determining the appropriate 
mix of government and contractor employees to meet mission needs;

* assess the risk of selected contractor services as part of the 
acquisition planning process, and modify existing acquisition guidance 
and training to address when to use and how to oversee those services 
in accordance with federal acquisition policy;

* define contract requirements to clearly describe roles, 
responsibilities, and limitations of selected contractor services as 
part of the acquisition planning process;

* assess program office staff and expertise necessary to provide 
sufficient oversight of selected contractor services; and:

* review contracts for selected services as part of the acquisition 
oversight program.

Agency Comments and Our Evaluation:

We provided a draft of this report to OMB and DHS for review and 
comment. In written comments, DHS generally concurred with our 
recommendations and provided information on what action would be taken 
to address them. The department's comments are reprinted in appendix 
IV. OMB did not comment on the findings or conclusions of this report.

DHS concurred with three of our recommendations, and partially 
concurred with the other two. Regarding the first recommendation, to 
establish strategic guidance for determining the appropriate mix of 
government and contractor employees, DHS agreed and stated that its 
Chief Human Capital and Chief Procurement Officers plan to initiate 
staffing studies and recommend the number and skill sets of federal 
employees required to successfully manage its long-term projects and 
programs. We agree that such action should provide the basis for 
developing a strategic approach to managing the risk of contracting for 
selected services.

DHS partially concurred with our recommendation to assess the risk of 
selected contractor services as part of the acquisition planning 
process and to modify existing acquisition guidance and training 
accordingly. DHS agreed that its training for contracting officers and 
contracting officer's technical representatives should include the 
guidance in OFPP Policy Letter 93-1. DHS stated the Chief Procurement 
Officer plans to emphasize this requirement to the component Heads of 
Contracting Activity and to department contracting personnel and to 
coordinate with the Defense Acquisition University to ensure that 
guidance is also included in its training. However, DHS stated that its 
Acquisition Planning Guide already provides for the assessment of risk. 
Our review of the acquisition planning guidance found that it addresses 
risk factors such as cost, schedule, and performance, but it does not 
address the specific risk of services that closely support the 
performance of inherently governmental functions. As we note in our 
report, these types of services carry additional risk that should be 
considered when making contracting decisions.

Concerning the third recommendation, to define contract requirements to 
clearly describe roles, responsibilities, and limitations of selected 
contractor services, DHS concurred and anticipated that the risk of 
contracting for selected services will be appropriately addressed more 
often in the future. However, DHS did not specify related initiatives. 
Because developing well-defined requirements can be challenging but is 
essential for obtaining the right outcome, we believe this effort will 
require sustained attention from DHS.

DHS also concurred with our fourth recommendation, to assess the 
program office staff and expertise necessary to provide sufficient 
oversight of selected contractor services. DHS stated that this process 
has already begun at TSA and that it plans to proceed on a larger-scale 
initiative as part of its overall human capital planning.

With respect to our recommendation that DHS review selected services 
contracts as part of the acquisition oversight program, DHS agreed that 
these types of services require special assessment, but stated that the 
Chief Procurement Officer will direct a special investigation on 
selected issues as needed rather than as part of the routine 
acquisition oversight reviews. We did not intend that the formal 
oversight plan be modified. Rather, we recognize that the acquisition 
oversight program was designed with flexibility to address specific 
procurement issues as necessary. We leave it to the discretion of the 
Chief Procurement Officer to determine how to implement the 
recommendation to ensure proper oversight.

As agreed with your offices, unless you publicly announce the contents 
of this report, we plan no further distribution for 30 days from the 
report date. At that time, we will send copies of this report to the 
Secretary of Homeland Security, the Director of the Office of 
Management and Budget, and other interested congressional committees. 
We will also make copies available to others upon request. In addition, 
this report will be available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov].

If you have questions about this report or need additional information, 
please contact me at (202) 512-4841 or huttonj@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. Other staff making key 
contributions to this report were Amelia Shachoy, Assistant Director; 
Katherine Trimble; Jennifer Dougherty; Cardell Johnson; Matthew 
Saradjian; David Schilling; Karen Sloan; Julia Kennon; Alison Martin; 
Noah Bleicher; and Kenneth Patton.

Signed by: 

John P. Hutton: 
Director: 
Acquisition and Sourcing Management:

[End of section]

Appendix I: Scope and Methodology:

To describe the types of services the Department of Homeland Security 
(DHS) requested through these contracts, we compiled information from 
the Federal Procurement Data System-Next Generation (FPDS-NG) on 
procurement spending at DHS and its components for fiscal years 2005 
and 2006. To supplement our review of information from FPDS-NG, we 
reviewed 117 statements of work and conducted more detailed reviews of 
nine cases from fiscal year 2005--the year for which the most complete 
data were available at the time we began our review. For the 117 
statements of work, we used federal acquisition guidance on services 
that closely support the performance of inherently governmental 
functions as criteria to describe the types of services DHS requested. 
Within those services, we selected three broad categories for more 
detailed review--reorganization and planning activities, policy 
development, and acquisition support.

To identify potential risk and the extent to which DHS considered risk 
when deciding to use contracts for selected professional and management 
support services that closely support the performance of inherently 
governmental functions, and to assess DHS's management and oversight of 
contracts for these types of services, we conducted a detailed review 
of nine case studies--three at each component. For each case study, we 
reviewed contract documentation, including available acquisition plans, 
oversight plans, and records, and interviewed procurement and program 
officials at the three components about the decision to use contractors 
and contractor oversight, including any processes and guidance used. We 
interviewed contractors for seven of the nine cases about their working 
relationship with the component offices, the work performed, and the 
oversight provided by the component. For the other two cases, we 
requested interviews, but the contractors were not available. We also 
spoke with the heads of contracting activity at the Office of 
Procurement Operations (OPO) and the Transportation Security 
Administration (TSA), the Chief of the Office of Procurement Policy at 
the Coast Guard, and staff at the Office of Management and Budget's 
(OMB) Office of Federal Procurement Policy (OFPP).

Selection of Services and Contracts:

To develop criteria for services that closely support the performance 
of inherently governmental functions, we reviewed Federal Acquisition 
Regulation (FAR) subpart 7.5 on inherently governmental functions and 
FAR section 37.114 on special acquisition requirements, and the Office 
of Management and Budget's Office of Federal Procurement Policy Letter 
93-1 on management oversight of service contracts.[Footnote 30]

To select services to review, a GAO contracting officer reviewed the 
FPDS-NG Product and Service Codes Manual and identified over 30 
services considered to closely support the performance of inherently 
governmental functions across the following categories: research and 
development; special studies and analyses; professional, 
administrative, and management support services; and education and 
training. To confirm the selection, we then compared each of the 
services to federal acquisition guidance that describes inherently 
governmental functions and services approaching inherently governmental 
functions. On the basis of this review, we gathered and analyzed data 
from the FPDS-NG on DHS's fiscal year 2005 obligations for 29 services. 
Sixteen of the 29 services fell into the professional, administrative, 
and management support services category. From this category, we 
selected the 4 services for which DHS obligated the most in fiscal year 
2005--program management and support services, engineering and 
technical services, other professional services, and other management 
support services. We reviewed these criteria with DHS acquisition 
policy and oversight officials, focusing on the link between the 4 
selected services and federal acquisition guidance. Finally, we 
selected the three DHS components, excluding the Federal Emergency 
Management Agency (FEMA), that had obligated the most for those 
services at the time we began our review--the Coast Guard, OPO, and 
TSA.[Footnote 31]

To select contracts to review, we compiled data from FPDS-NG on all 
fiscal year 2005 contract actions as of the time we began our review 
for the 4 services at the three components. Using the brief contract 
description available through FPDS-NG, we used FAR guidance to identify 
services that closely support the performance of inherently 
governmental functions to select a total of 125 statements of work for 
the 4 services: 42 from Coast Guard, 43 from OPO, and 40 from TSA (see 
table 3).

Table 3: Requested Fiscal Year 2005 Contract Statements of Work:

Component: Coast Guard; 
Program management/support services: 8; 
Engineering and technical services: 14; 
Other professional services: 11; 
Other management support services: 9; 
Total by component: 42.

Component: OPO; 
Program management/support services: 6; 
Engineering and technical services: 8; 
Other professional services: 6; 
Other management support services: 23; 
Total by component: 43.

Component: TSA; 
Program management/support services: 17; 
Engineering and technical services: 1; 
Other professional services: 10; 
Other management support services: 12; 
Total by component: 40.

Component: Total by service type; 
Program management/support services: 31; 
Engineering and technical services: 23; 
Other professional services: 27; 
Other management support services: 44; 
Total by component: 125.

Source: GAO analysis of fiscal year 2005 FPDS-NG data.

[End of table]

Of the 125 requested, we received 117 statements of work within the 11- 
week time period we allowed. In some cases, DHS was unable to locate 
files or FPDS-NG entries were unclear or incorrect. Using the more 
detailed description of services included in the 117 statements of 
work, we again used FAR guidance to identify services that appeared to 
closely support the performance of inherently governmental functions to 
select three contracts from each component on which to perform a total 
of nine case studies. The nine cases we reviewed in detail represented 
the 4 types of professional and management support services and ranged 
in value from $1.3 million to $42.4 million. Table 4 provides details 
on the case study selection process and the cases reviewed.

Table 4: Fiscal Year 2005 Contracts Reviewed:

Dollars in millions.

For Coast Guard, OPO, and TSA: Contracts for four selected professional 
and management support services; 
Cases: 942; 
Total dollars: $805.6; 
Selection criteria: All contracts with dollars obligated in fiscal year 
2005, as reported in FPDS-NG.

For Coast Guard, OPO, and TSA: Statements of work for four selected 
professional and management support services; 
Cases: 125; 
Total dollars: $229.2; 
Selection criteria: Nonprobability sample selected from 942 contracts 
in FPDS-NG. Selection based on comparing the contract description with 
FAR guidance for services closely supporting inherently governmental 
functions. We selected 110 contracts as potentially supporting 
inherently governmental functions and an additional 15 contracts based 
on the contract description and to represent a range of dollar values.

For Coast Guard, OPO, and TSA: Case studies for four selected 
professional and management support services; 
Cases: 9; 
Total dollars: $82.1; 
Selection criteria: Nonprobability sample selected from 117 statements 
of work received from DHS. Selection based on comparing the statement 
of work description to FAR guidance that describes services closely 
supporting inherently governmental functions. Cases represent a variety 
of services and dollar values among the three components.

Source: GAO.

Note: Of the 125 statements of work requested, DHS provided 117, 
totaling $207.1 million.

[End of table]

We conducted our review between April 2006 and August 2007 in 
accordance with generally accepted government auditing standards.

[End of section]

Appendix II: Examples of Inherently Governmental and Approaching 
Inherently Governmental Functions:

Federal Acquisition Regulation section 7.503 provides examples of 
inherently governmental functions and services or actions that are not 
inherently governmental, but may approach being inherently governmental 
functions based on the nature of the function, the manner in which the 
contractor performs the contract, or the manner in which the government 
administers contractor performance. These examples are listed in tables 
5 and 6 below.

Table 5: Examples of Inherently Governmental Functions:

1: Directly conduct criminal investigations; 
2: Control prosecutions and perform adjudicatory functions other 
than arbitration; 
3: Command military forces; 
4: Conduct foreign relations and determine foreign policy; 
5: Determine agency policy, including regulations; 
6: Determine federal program priorities for budget requests; 
7: Direct and control federal employees; 
8: Direct and control intelligence and counterintelligence operations; 
9: Select individuals for federal government employment; 
10: Approve position descriptions and performance standards for federal 
employees; 
11: Determine the disposal of government property; 
12: In federal procurement activities with respect to prime contracts: 
Determine the supplies or services acquired by the government; participate 
as a voting member on any source selection boards; approve contractual 
documents, including documents defining requirements, incentive plans, 
and evaluation criteria; award contracts; administer contracts; 
terminate contracts; determine whether contract costs are reasonable, 
allocable, and allowable; and participate as a voting member on 
performance evaluation boards; 
13: Approve agency responses to Freedom of Information Act requests; 
14: Conduct administrative hearings to determine eligibility for security 
clearances, or that affect personal reputation or eligibility to participate 
in government programs; 
15: Approve federal licensing actions and inspections; 
16: Determine budget policy, guidance, and strategy; 
17: Collect, control, and disburse public funds, unless authorized by statute. 
Does not include the collection of public charges to mess halls, national 
parks, and similar entities and routine voucher and invoice examination; 
18: Control treasury accounts; 
19: Administer public trusts; 
20: Draft congressional testimony, responses to congressional correspondence, 
or agency responses to audit reports. 

Source: GAO analysis of FAR section 7.503(c).

[End of table]

Table 6: Examples of Services That May Approach Being Inherently 
Governmental Functions:

1: Involve or relate to budget preparation; 
2: Involve or relate to reorganization and planning activities; 
3: Involve or relate to analyses, feasibility studies, and strategy options 
to be used in developing policy; 
4: Involve or relate to developing regulations; 
5: Involve or relate to evaluating another contractor's performance; 
6: Support acquisition planning; 
7: Assist in contract management; 
8: Provide technical evaluation of contract proposals; 
9: Assist in developing statements of work; 
10: Support the preparation of responses to Freedom of Information Act requests; 
11: Work in situations that may permit access to confidential business 
information; 
12: Provide information regarding agency policies or regulations; 
13: Participate in situations where contractors may be assumed to be agency 
employees or representatives; 
14: Participate as technical advisors to source selection boards or as members 
of a source evaluation board; 
15: Serve as arbitrators or provide alternative methods of dispute resolution; 
16: Construct buildings intended to be secure; 17: Provide inspection services; 
18: Provide legal advice and interpret regulations and statutes for government
officials; 
19: Provide non-law enforcement security activities that do not directly involve 
criminal investigations. 

Source: GAO analysis of FAR section 7.503(d):

[End of table]

[End of section]

Appendix III: Department of Homeland Security Inspector General 
Oversight:

GAO designated DHS as a high-risk organization in 2003 due to the 
serious implications for our national security that result from the 
management challenges and program risks associated with implementing 
and transforming the department from 22 agencies. In addition, the DHS 
Inspector General has identified major management challenges facing the 
department, which are updated annually as required by the Reports 
Consolidation Act of 2000.[Footnote 32]

Acquisition and contract management are included as a management 
challenge identified by the Inspector General. Other management 
challenges identified by the Inspector General include catastrophic 
disaster response and recovery including FEMA activities and grants 
management; financial management; information technology management, 
including the National Asset Database to coordinate infrastructure 
protection activity; border security; transportation security; and 
trade operations and security mainly through the work of customs and 
border protection.

The Inspector General provided oversight coverage of DHS and the 
identified management challenges during fiscal years 2005 and 2006 
through audits, inspections, memos, management reports, and 
investigations. The Inspector General issued 106 reports during fiscal 
year 2005 and closed 639 investigations. In fiscal year 2006 the 
Inspector General issued 133 reports and closed 507 investigations. As 
a result, the Inspector General reported over $271.7 million in 
questioned costs, unsupported costs, and better use of funds, and over 
$157 million in recoveries, fines, and restitutions resulting from 
investigations over the 2-year period.

On August 29, 2005, Hurricane Katrina hit the Gulf Coast states, 
causing catastrophic damage to the region, and by September 2005, 
Congress had passed legislation that provided approximately $63 billion 
for disaster relief, the bulk of which went to the Federal Emergency 
Management Agency. Consequently, the DHS Inspector General issued a 
significant number of reports that addressed FEMA operations and 
grantees (see fig. 4).

The DHS Inspector General increased the number of reports related to 
contract and acquisition management from 3 in fiscal year 2005 to 32 in 
fiscal year 2006 (see fig. 4). These reports ranged from audits of 
specific contracts to overall acquisition management by DHS. For 
example, the Inspector General reviewed individual contracts for 
disaster recovery from Hurricane Katrina, including debris removal, and 
also provided a review of the weaknesses in the procurement and program 
management operations throughout DHS. In addition to the DHS Inspector 
General's reports, the Defense Contract Audit Agency increased the 
number of DHS contract audits from 83 reports to 121 reports over the 
same fiscal years.

Figure 4: Inspector General Coverage of DHS Offices and Management 
Challenges:

[See PDF for image]

This figure is a vertical bar graph with bars depicting number of 
reports in ten categories for fiscal years 2005 and 2006. The vertical 
axis of the graph represents number of reports from 0 to 80. The 
horizontal axis of the graph represents fiscal year 2005 and 2006 
reports in the ten categories. The data depicted is as follows:

Acquisition and contract management: 
Number of reports, fiscal year 2005: 3; 
Number of reports, fiscal year 2006: 32; 

Citizenship and Immigrations Services (CIS): 
Number of reports, fiscal year 2005: 5; 
Number of reports, fiscal year 2006: 7; 

Coast Guard: 
Number of reports, fiscal year 2005: 7; 
Number of reports, fiscal year 2006: 7; 

Customs and Border Protection (CBP): 
Number of reports, fiscal year 2005: 10; 
Number of reports, fiscal year 2006: 20; 

FEMA Operations: 
Number of reports, fiscal year 2005: 57; 
Number of reports, fiscal year 2006: 76; 

FEMA grants management: 
Number of reports, fiscal year 2005: 53; 
Number of reports, fiscal year 2006: 54; 

Immigration and Customs Enforcement (ICE): 
Number of reports, fiscal year 2005: 6; 
Number of reports, fiscal year 2006: 9; 

Information technology: 
Number of reports, fiscal year 2005: 18; 
Number of reports, fiscal year 2006: 24; 

Secret Service: 
Number of reports, fiscal year 2005: 3; 
Number of reports, fiscal year 2006: 3; 

Transportation Security Administration (TSA): 
Number of reports, fiscal year 2005: 12; 
Number of reports, fiscal year 2006: 16. 

Source: GAO analysis of DHS Inspector General audits, memos, and 
management reports. 

[End of figure]

[End of section]

Appendix IV: Comments from the Department of Homeland Security:

U.S. Department of Homeland Security: [hyperlink, http://www.dhs.gov]: 
Washington, DC 20528: 

September 10, 2007:

Mr. John P. Hutton: 
Director, Acquisition and Sourcing Management: U.S. Government 
Accountability Office: 441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Hutton: 

RE: Draft Report GAO-07-990, Department of Homeland Security: Improved 
Assessment and Oversight Needed to Manage Risk of Contracting for 
Selected Services (GAO Job Code 120544): 

The Department of Homeland Security (DHS) appreciates the opportunity 
to review and comment on the draft report referenced above. The U.S. 
Government Accountability Office (GAO) makes five recommendations to 
improve the Department's ability to manage the risk of selected 
services that closely support inherently governmental functions as well 
as government control over and accountability for decisions. As 
detailed below, we agree with three recommendations and partially agree 
with the other two.

Recommendation 1: Establish strategic level guidance for determining 
the appropriate mix of government and contractor employees to meet 
mission needs.

We agree with the recommendation. In concert with the DHS Chief Human 
Capital Officer, personnel within the Office of the Chief Procurement 
Officer (OCPO) plan to initiate staffing studies related to the skill 
sets of individuals and staffing levels of programs under the purview 
of the Department. The outcome of this study will include 
recommendations for the number and skill sets of federal employees 
required to successfully manage long term projects and programs at the 
Department. This effort, in conjunction with overall human capital 
planning at the Department, should address the concerns relative to 
this recommendation.

Recommendation 2: Assess the risk of selected contractor services as 
part of the acquisition planning process, and modify existing 
acquisition guidance and training to address when to use and how to 
oversee those services in accordance with federal acquisition policy.

We partially agree with the recommendation. The DHS Acquisition 
Planning Guide already provides for the assessment of risk with respect 
to the planned acquisition processes and this requirement will be 
emphasized during OCPO discussions with the Heads of Contracting 
Activities as well as through an acquisition alert to Department 
contracting personnel.

As a result of the information provided by the GAO during the 
engagement, the application of OFPP Letter 93-1, Management Oversight 
of Service Contracting (May 18, 1994) was brought to the Department's 
attention. Further research on the part of OCPO officials led to the 
realization that this particular guidance was not part of the regular 
training process for acquisition personnel, not only at DHS but also at 
the Defense Acquisition University (DAU). We have taken steps to ensure 
that this guidance is disseminated and discussed during DHS training 
for Contracting Officers and Contracting Officer Technical 
Representatives (COTRs) prior to the certification of the COTRs. DHS 
officials have also coordinated with the DAU course director for the 
COTR training to ensure that OFPP Letter 91.3 guidance is included in 
training at the university. Since DHS officials rely on DAU training 
and certification to a certain extent for COTRs, we intend to follow-up 
on the inclusion of the guidance in OFPP Letter 93-1 in the DAU 
training regimen.

Recommendation 3: Define contract requirements to clearly describe 
roles, responsibilities, and limitations of selected contractor 
services as part of the acquisition planning process.

OCPO officials agree that implementing this recommendation is the key 
to the eventual success of the efforts to address the risks of 
contracts for services. As part of the initiatives begun by DHS in the 
areas of program and project management, and in conjunction with the 
staffing studies discussed above, OCPO officials anticipate that an 
increased awareness and understanding of the risks associated with 
contracted services will be appropriately addressed more often in the 
future. There has already been evidence of this recognition occurring 
at the Coast Guard, where the Statement of Work for the contract for 
the Office of Standards Evaluation and Development support was 
completely revised for the most recent award in order to address the 
very issue covered in this report. Better requirements definition for 
service contracts will lead to fewer Time and Materials type contracts 
and more effective use of Performance Based Service Contracts 
throughout DHS. This objective will be very difficult to achieve, and 
it is far too early to place such progress on a timeline for 
completion. Nevertheless, DHS officials recognize the criticality of 
the need and have begun to chart a way forward on the broad front of 
requirements definition.

Recommendation 4: Assess program office staff and expertise necessary 
to provide sufficient oversight of selected contractor services.

We agree. This process has already begun at the Transportation Security 
Administration (TSA). The TSA Assistant Administrator for Acquisition 
has developed a notional staffing plan for program and project offices 
that incorporates both ethical aspects, such as conflicts of interest, 
and the examination of inherently governmental functions in the 
development of a staffing plan for a program office. The notional plan 
is accompanied by a training program as well as guides to the numbers, 
skill sets and assignments of federal employees necessary to maintain 
program control, provide oversight and ensure that no inherently 
governmental functions are performed by service contractors. While this 
effort is being implemented on a component scale at TSA, the Department 
is proceeding on a larger scale initiative to address many of the same 
issues as mentioned in our response to the first recommendation.

Recommendation 5: Review contracts for selected services as part of the 
acquisition oversight program.

We partially agree with the recommendation in so far as to agree that 
the Director of Acquisition Oversight at the direction of the Chief 
Procurement Officer intends to specifically assess the issue raised in 
the report and related recommendation. DHS does not concur that the 
recommended practice should be incorporated into the routine 
acquisition oversight reviews contemplated, planned and executed in 
accordance with DHS Directive 0784, Acquisition Oversight Plan and 
Guidance. It would be counterproductive to modify the formal Oversight 
Plan for each issue raised by an individual GAO or DHS Office of 
Inspector General engagement. To do so would disrupt the workflow of 
routine oversight assessments and inevitably result in the devolution 
of the corporate wide plan into a series of special reports and 
jeopardize the intended planned assessments. OCPO senior personnel 
agree that the issue of the appropriate use of service contracts is 
worthy of special interest as the rest of the responses to this report 
are implemented and will direct a special investigation on selected 
issues at the appropriate time.

Sincerely, 

Signed by: 

Steven J. Pecinovsky: 
Director: 
Departmental GAO/OIG Liaison Office: 

[End of section] 

Footnotes: 

[1] This amount includes procurement obligations as reported by DHS in 
the Federal Procurement Data System-Next Generation, the governmentwide 
database for federal procurement spending. This system does not include 
all actions, such as those under interagency agreements.

[2] Order refers to a task order for services placed against an 
established contract.

[3] FEMA obligated the third highest amount for the selected services 
in fiscal year 2005. We excluded FEMA from our sample because of 
atypical fiscal year 2005 spending on hurricane relief efforts.

[4] In fiscal year 2006, obligations for services increased to 82 
percent of DHS's total procurement obligations, largely due to spending 
by FEMA for Gulf Coast hurricane relief efforts.

[5] Federal acquisition policy states that contracts shall not be used 
for the performance of inherently governmental functions.

[6] FAR section 7.503 includes examples of both inherently governmental 
functions and services that may approach being inherently governmental. 
See appendix II for a complete list of these services. 

[7] FAR section 37.114, Special acquisition requirements; OFPP Policy 
Letter 93-1: Management Oversight of Service Contracting, Office of 
Federal Procurement Policy, May 18, 1994.

[8] GAO, Civil Servants and Contract Employees: Who Should Do What for 
the Federal Government? FPCD-81-43 (Washington, D.C.: June 19, 1981).

[9] GAO, Energy Management: Using DOE Employees Can Reduce Costs for 
Some Support Services, GAO/RCED-91-186 (Washington, D.C.: Aug. 16, 
1991). 

[10] GAO, Government Contractors: Are Service Contractors Performing 
Inherently Governmental Functions? GAO/GGD-92-11 (Washington, D.C.: 
Nov. 18, 1991).

[11] GAO, Highlights of a GAO Forum: Federal Acquisition Challenges and 
Opportunities in the 21st Century, GAO-07-45SP (Washington, D.C.: Oct. 
6, 2006).

[12] Report of the Acquisition Advisory Panel to the Office of Federal 
Procurement Policy and the United States Congress, January 2007; see 
Services Acquisition Reform Act of 2003, Pub. L. No. 108-136, Title 
XIV, § 1423. 

[13] For the purposes of our review, acquisition support includes 
assisting with acquisition planning, contract management, and 
developing contract requirements such as statements of work.

[14] In July 2005, DHS announced that the information analysis function 
of the Information Analysis and Infrastructure Protection Directorate 
would be moved to the newly created Office of Intelligence and Analysis 
in an effort to strengthen intelligence functions and information 
sharing. Infrastructure protection became a component within the 
National Protection and Programs Directorate.

[15] The Department of Veterans Affairs awarded and originally managed 
this order on behalf of DHS; OPO assumed administration duties for DHS 
in December 2004.

[16] GAO, Homeland Security: Successes and Challenges in DHS's Efforts 
to Create an Effective Acquisition Organization, GAO-05-179 
(Washington, D.C.: Mar. 29, 2005).

[17] GAO, Transportation Security Administration: High-Level Attention 
Needed to Strengthen Acquisition Function, GAO-04-544 (Washington, 
D.C.: May 28, 2004).

[18] See FAR section 37.104 regarding personal services. Under certain 
circumstances, DHS is authorized to procure personal services; the 
contracts we reviewed were not awarded under this authority.

[19] GAO, Defense Acquisitions: Tailored Approach Needed to Improve 
Service Acquisition Outcomes, GAO-07-20 (Washington, D.C.: Nov. 9, 
2006), and GAO, Interagency Contracting: Franchise Funds Provide 
Convenience, but Value to DOD Is Not Demonstrated, GAO-05-456 
(Washington, D.C.: July 29, 2005). 

[20] GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).

[21] DHS requires acquisition planning and documentation for all 
procurements and a formal, written, and approved plan for acquisitions 
exceeding $5 million.

[22] GAO-07-20.

[23] GAO, Results-Oriented Government: Improvements to DHS's Planning 
Process Would Enhance Usefulness and Accountability, GAO-05-300 
(Washington, D.C.: Mar. 31, 2005).

[24] GAO, Human Capital: A Self-Assessment Checklist for Agency 
Leaders, GAO/GGD-99-179 (Washington, D.C.: September 1999). 

[25] FAR subpart 37.5 and OFPP Policy Letter 93-1 state that 
contracting officers should ensure that "best practices" techniques are 
used when contracting for services and in contract management and 
administration.

[26] GAO-07-20.

[27] GAO, Hurricane Katrina: Improving Federal Contracting Practices in 
Disaster Recovery Operations, GAO-06-714T (Washington, D.C.: May 4, 
2006).

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

[29] GAO, Department of Homeland Security: Progress and Challenges in 
Implementing the Department's Acquisition Oversight Plan, GAO-07-900 
(Washington, D.C.: June 13, 2007).

[30] While TSA is exempt from the FAR, it follows the Acquisition 
Management System, developed by the Federal Aviation Administration, 
which adheres as a matter of policy to certain governmentwide laws, 
regulations, and executive agency requirements.

[31] The Federal Emergency Management Agency obligated the third 
highest amount for the selected services in fiscal year 2005. We 
excluded FEMA from our sample because of atypical fiscal year 2005 
spending on hurricane relief efforts. 

[32] Pub. L. No. 106-531, 114 Stat. 2537 (Nov. 22, 2000). 

[End of section] 

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