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GAO Report Finds Federal Agencies Must Improve Service Contract Inventories

The Government Accountability Office (GAO) released a report finding that the civilian agencies are not doing enough to keep track of their service contractor workforce. The GAO reviewed 49 executive agencies’ procedures for compiling and reviewing service contract inventories—data compilations of service contracting activities most federal departments and agencies are required to maintain and release to the public every year—and found numerous problems that limit their accuracy and utility. The GAO found similar problems in its review of the Department of Defense’s (DoD) service contract inventories, which the Project On Government Oversight blogged about back in April.

POGO has repeatedly called for the government to improve the quality of service contract inventories. These inventories are crucial for determining the true size and cost-effectiveness of the federal service contractor workforce and whether contractors are performing inherently governmental functions (functions required by law to be performed by federal government employees).

In fiscal year 2011, civilian agencies spent $126 billion for services such as professional management and information technology support. The 49 agencies the GAO reviewed are not fully complying with statutory requirements for compiling and reviewing FY 2011 service contract inventories.

Nine of the 49 agencies did not submit a required inventory review report. One agency, the Court Services and Offender Supervision Agency for the District of Columbia (CSOSA), did not compile inventories for two straight years, an inexcusable oversight for an agency that spends millions of dollars every year on service contracts.

None of the agencies the GAO examined are collecting such required data as the role the services play in achieving agency objectives, the total dollar amount invoiced for services under the contracts, and the number and work locations of contractor and subcontractor personnel. Such data gaps diminish the utility of inventories. If the government does not have a clear picture of the number of its contractor personnel or their role in supporting agency activities, agencies are at greater risk of “losing control of their missions and operations,” according to the GAO.

Another problem is that agencies are using different methodologies to compile their inventories. “In the absence of a consistent methodology,” the GAO warns, “OMB [Office of Management and Budget] and Congress cannot meaningfully compare service contract obligations among agencies or develop spending trends for agencies.”

According to the GAO, many agencies compile their inventories from a review of 50 or fewer service contracts. However, the OMB does not require agencies to provide the number or percentage of contracts or contract obligations they reviewed. Therefore, we don’t know whether, for example, NASA’s inventory, which was compiled from 8 contracts representing more than 70 percent of its service contract spending that year, is more comprehensive and accurate than the Department of the Interior’s inventory, which was compiled from more than 2,000 contracts, because Interior did not report the percentage of service contract spending covered by those contracts.

Still another problem is that some agencies did not follow OMB guidance when compiling their inventories, causing several of those agencies to significantly underreport service contract fiscal obligations. The GAO cites the extreme case of the General Services Administration (GSA), whose inventory excluded an incredible $6.4 billion in service contracts—nearly half of its total contract spending that year. Perhaps we shouldn’t be surprised by the GAO’s finding that the GSA does not use its inventories for department-level decision-making.

Five agencies identified three contracts where contractors could be performing inherently governmental functions. One of the contracts identified in the report was a State Department security services contract. In stark contrast, as the GAO reported in April, the DoD identified more than 2,000 instances of contractors performing inherently governmental functions. Like the DoD, civilian agencies are not able to take corrective action—either insourcing the work or redefining the contractor’s roles and responsibilities—due to resource limitations.

If service contract inventories contain comprehensive, accurate, and actionable data, they can be an extremely beneficial management tool. Consider the example of the Department of Health and Human Services (HHS), which uses its inventories to help identify and eliminate contracting redundancies and duplications. In one instance cited in the GAO report, HHS was able to consolidate 15 service contracts into 4, resulting in estimated savings of $20 million.

Despite uncovering many problems in civilian agencies’ service contract inventories, the GAO seems optimistic. Service contract inventories are a relatively new requirement, having been implemented in 2007 for DoD and in 2009 for the rest of the federal agencies. Refining the methods of collecting, analyzing, and sharing service contract data will be an ongoing process.