Pentagon Still Needs Better Service Contract Inventories

The Government Accountability Office (GAO) has released its third and final review of Department of Defense (DoD) service contract inventories. These annual compilations of contractor data are supposed to help federal agencies determine the true size and cost of their service contractor workforce and whether contractors are performing inherently governmental functions, but as the Project On Government Oversight has repeatedly pointed out, service contract inventories are not living up to their promise. When we blogged last year about the GAO’s second annual review, we noted that DoD seemed to be making progress, but overall its inventories still lacked accuracy, completeness and utility.

The good news this year is that DoD continues to make progress and still claims it will be fully compliant with statutory requirements for service contract inventories by fiscal year 2016.

The bad news is that the GAO again found significant weaknesses in DoD’s procedures to collect, store and review contractor manpower data. This time, the problem is that most DoD components still use the flawed Federal Procurement Data System-Next Generation (FPDS-NG) to collect inventory data. The FPDS-NG has a number of limitations, including the inability to track more than one type of service per contract action and the number of contractor full-time equivalents (CFTE). DoD expects to implement by next year a new data collection system based on the Army’s Contractor Manpower Reporting Application (CMRA), which has no such limitations.

The GAO also found that a significant number of contractors are performing inherently governmental functions, or functions that must be performed by government employees. In FY 2011, the Army and Air Force identified a combined 1,373 contractor CFTEs performing inherently governmental functions. (Unlike last year, much to our disappointment, the GAO did not identify specific examples of these functions.) In addition, DoD components identified thousands more contractor CFTEs performing functions closely associated with inherently governmental functions. Due to the limitations of FPDS-NG, the government is unable to pin down the exact number of contractors performing both kinds of functions.

The stakes are high in this ongoing effort to perfect service contract inventories. DoD and the rest of the federal government rely heavily on contractors to perform a wide variety of services. According to the GAO, DoD spent almost $200 billion on service contracts in FY 2011, and the civilian agencies spent $126 billion. Clear and comprehensive annual assessments of the contractor workforce are crucial for ensuring the government spends taxpayer money wisely and maintains control over its missions and operations.