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U.S. Securities and Exchange Commission

FY 2015 Service Contract Inventory Analysis

February 21, 2017

Office of Acquisitions

SEC Headquarters

Washington, DC 20549
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Background

The Securities and Exchange Commission (SEC) is a United States Agency with a mission to 

protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. 

In addition to the Securities Exchange Act of 1934 that created the agency, the SEC enforces the 

Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940, 

the Investment Advisers Act of 1940, the Sarbanes–Oxley Act of 2002, the Dodd-Frank Wall 

Street Reform and Consumer Protection Act of 2010, and other statutes.

It is the responsibility of the Commission to:

 interpret federal securities laws;

 issue new rules and amend existing rules;

 oversee the inspection of securities firms, brokers, investment advisers, and ratings 

agencies;

 oversee private regulatory organizations in the securities, accounting, and auditing 

fields; and

 coordinate U.S. securities regulation with federal, state, and foreign authorities. 

The SEC consists of five presidentially-appointed Commissioners, with staggered five-year 

terms. One of them is designated by the President as Chairman of the Commission — the 

commission’s chief executive. By law, no more than three of the Commissioners may belong to 

the same political party, ensuring non-partisanship. The commission’sfunctional responsibilities 

are organized into five divisions and 23 offices, each of which is headquartered in Washington, 

DC. The Commission's approximately 4,425 staff are located in Washington, D.C. and in 11 

Regional Offices throughout the country.

The Commission convenes regularly at meetings that are open to the public and the news 

media unless the discussion pertains to confidential subjects, such as whether to begin an 

enforcement investigation.

Scope

Section 743 of Division C of the FY2010 Consolidated Appropriations Act P.L. 111-117, requires 

civilian agencies to prepare annual inventory of their service contracts. Inventories are required 

to be submitted in accordance with the Office of Management and Budget (OMB) guidance

dated November 5, 2010 and December 19, 2011, and FY 2016 Service Contract Inventory Alert 

September 20, 2016. In addition, agencies are to perform an analysis of their data in their 

inventories for the purpose of determining if contract labor is being used in an appropriate and 

effective manner and if the mix of federal employees and contractors in the agency is 

effectively balanced.
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Per OMB guidance, agency reviews are to give priority consideration to agency use of 

contracted (a) professional and management services and (b) information technology support 

services. Review of professional and management services should include acquisition support 

and an appropriate sampling of policy and program management and development services. 

OMB identified the Special Interest Functions listed below (Table 1) for heightened 

management consideration. This was based on concerns of increased risk of losing control of 

mission and operations as identified through a review of reports issued in recent years, such as 

by the Government Accountability Office, the Commission on Wartime Contracting, agency 

Inspectors General, Congressional Committees, and the Acquisition Law Advisory Panel (also 

referred to as the “SARA Panel”), as well as by OMB’s own analysis. In addition, each agency is

required to identify the top ten Product Service Codes (PSC) that accounted for the agency’s 

greatest percentage of spending (Table 2). 

PSC Product or Service Description

B505 Cost Benefit

D302 Systems Development

D307 Strategy and Architecture

D310 Cyber Security and Data Backup

D314 System Acquisition Support

R406 Policy Review/Development

R407 Program Evaluation Services

R408 Program Management/Support

R409 Program Review/Development Services

R413 Specifications Development

R414 Systems Engineering

R423 Intelligence

R425 Engineering/Technical

R497 Personal Services Contracts

R707 Contract/Procurement/Acquisition Support

Table 1: Special Interest Items
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PSC Product or Service Description

D317 IT AND TELECOM- WEB-BASED SUBSCRIPTION

D399 IT AND TELECOM- OTHER IT AND TELECOMMUNICATIONS

R499 SUPPORT- PROFESSIONAL: OTHER

R424 SUPPORT- PROFESSIONAL: EXPERT WITNESS

D318 IT AND TELECOM- INTEGRATED HARDWARE/SOFTWARE/SERVICES SOLUTIONS, 

PREDOMINANTLY SERVICES

R408 SUPPORT- PROFESSIONAL: PROGRAM MANAGEMENT/SUPPORT

R418 SUPPORT- PROFESSIONAL: LEGAL

D307 IT AND TELECOM- IT STRATEGY AND ARCHITECTURE

D301 IT AND TELECOM- FACILITY OPERATION AND MAINTENANCE

D302 IT AND TELECOM- SYSTEMS DEVELOPMENT

Table 2: SEC’s Top Ten PSCs
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When reviewed in total, there were only two service codes at the detailed level that 

represented the SECs top ten and the special interest product service codes. They are listed as 

follows (Table 3):

Service 

Code –

Detailed 

Level

Service Code 

Description

% of Total 

Obligated

Dollars

# of Contracts Obligated 

Amount

D3 Information 

Technology and 

Telecommunications

51% 467 $182,518,336.50

R4 Support –

Professional

26% 721 $93,104,521.79

Totals 77% $275,622,858.29

Table 3: SEC’s Detailed Level Service Codes

On January 15, 2015, SEC notified OMB of the areas planned for analysis in the FY 2015

inventory. While selecting the PSC’s for review, SEC found that 77% of the services funding fell 

into two of the detailed level services codes; D3 Information Technology (51%) and R4 Support 

– Professional (26%). SEC selected five PSC’s to analyze as part of the FY 2015 Service Contract 

Inventory. SEC focused analysis on three that are on the special interest list and had not 

previously been reviewed, one that is regularly on the top ten obligations and special interest 

but not reviewed in the previous year, and one that is in the top ten obligations but not 

reviewed in the previous year. The functions selected were PSC D301- Facility Operation and 

Maintenance, PSC D307 IT Strategy and Architecture, PSC 410- Program Evaluation/ 

Review/Development, PSC R413- Specifications Development Service and PSC R707-

Management Services/ Contract/Procurement/ Acquisition Support. The details regarding 

SEC’s FY15 Service Contract Inventory are listed as follows (Table 4):
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Service 

Code –

Selected

Service Code 

Description

% of 

Total 

Obligated 

Dollars

# of Contracts 

Reviewed

Obligated 

Amount

D301 Facility Operation and 

Maintenance

13% 4 $48,546,969

D307 IT Strategy and 

Architecture

8% 33 $29,126,100

R410 Program Evaluation/ 

Review/Development

<1% 3 $727,054

R413 Specifications 

Development Service

<1% 5 $406,233

R707 Management Services/ 

Contract/Procurement/ 

Acquisition Support

<1% 3 $1,228,839

Totals 21% 48 $80,035,195 

Table 4: SEC’s Service Contract Inventory Detail 

1. Facility Operation and Maintenance- PSC D301 was selected because it is on the top ten 

obligation each year, but has not been reviewed since FY 2013. Approximately 13%

($48,546,969) of the total service dollars were obligated under this PSC.

2. IT Strategy and Architecture -PSC D307 was selected because it is on the special interest 

list and the top ten obligation list, but has not been reviewed since FY 2012. 

Approximately 8% ($29,126,100) of the total service dollars were obligated under this 

PSC.

3. Program Evaluation/ Review/Development- PSC R410 was selected because it on the 

special interest list and has not been previously reviewed. Approximately 0% ($727,054)

of the total service dollars were obligated under this PSC.

4. Specifications Development Service -PSC R413 was selected because it is on the special 

interest list and not been previously reviewed. Approximately 0% ($406,233) of the 

total service dollars were obligated under this PSC.

5. Management Services/ Contract/Procurement/ Acquisition Support-PSC R707 was

selected because it is on the special interest list and not been previously reviewed. PSC 
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also has potential for personal services, inherently governmental work to be performed 

by contractors and cover some SEC critical functions. Approximately 0% ($1,228,839) of 

the total service dollars were obligated under this PSC.

Methodology

All five PSC analyses were conducted in the same manner. A total of 48 contracts were 

analyzed and this was accomplished in two steps. First, the team reviewed the Statement of 

Work for each of the 48 contracts within the PSCs to determine if inherently governmental 

functions were being performed. Second, the analysis team sent out surveys and set up 

interviews with the Contracting Officer Representatives (CORs) for all contracts selected for this

review. During the SOW Reviews and Survey and Interview process a number of contracts were 

omitted due to the actions being a base BPA or IDIQ contract (work is performed at the Call or 

Task Order/Delivery/Order level for these actions), the action was canceled, or all work was 

performed and there was no activity on the contract in FY 2015 except for closeout. The total 

omitted was 13. The surveys and interviews were conducted to determine the following: the 

approximate number of full time employee equivalents performing under each contract; ifthe 

contractor was performing inherently governmental functions; if there are sufficient 

government personnel for oversight of the contractor’s performance; if the contractor is 

performing critical functions; and whether the COR communicated the SAM service contract 

reporting requirement to the contractors.

The SEC tracked its contractors’ response rate for the annual SAM service contract reporting 

requirement. The team worked with the contracting officers and contract specialists to ensure 

contractors were reporting or to determine any reasons why contractors may not have 

reported their contracts. Analysis was conducted based on data gathered and disseminated by 

OMB.

Findings

The Office of Acquisitions(OA) determined, by reviewing the Statements of Work, and 

conducting surveys and COR interviews,that the contractors were not tasked to perform 

inherently governmental functions or personal services. The contracts reviewed accounted for 

approximately 635 full time employee equivalents, assome of the contracts had turnover and

requirement changes the number fluctuated frequently throughout the fiscal year. The analysis

of the survey responses and COR Reviews conducted as part of the FY15 Inventory determined 

that the government possesses the expertise to perform oversight of the contractor’s 

performance. The analysis revealed that there were some improvements over previous years. 

One notable area of improvement was the availability of training. Several CORs had favorable 
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comments regarding the COR training that is offered by the Office of Acquisitions. Additionally, 

the results showed that 82% of CORs are spending less than 50% percent of their time on COR 

duties. Although many acknowledged improvement from the previous year, there were still 

some areas of concern noted such as, the need for a better way to distinguish COR dutiesfrom 

Project Manager (PM) duties when the same individual serves as both the COR and PM, and 

balancing primary work duties with COR duties/responsibilities. 

The SEC conducted our inventory analyses in accordance with section 743(e) to ensure that:

 Each contract in the inventory that is a personal services contract has been entered into, 

and is being performed, in accordance with applicable laws and regulations;

 The agency is giving special management attention, as set forth in Federal Acquisition 

Regulation (FAR) 37.114, to functions that are closely associated with inherently 

governmental functions;

 The agency is not using contractor employees to perform inherently governmental 

functions; 

 The agency has specific safeguards and monitoring systems in place to ensure that work 

being performed by contractors has not changed or expanded during performance to 

become an inherently governmental function;

 The agency is not using contractor employees to perform critical functions in such a way 

that could affect the ability of the agency to maintain control of its mission and 

operations; and 

 There are sufficient internal agency resources to manage and oversee contracts 

effectively.

PSC D301- Facility Operation and Maintenance - $48,546,969 (13%)

The analysis was centered on 3 contracts which accounted for 98% of the dollars obligated 

under this PSC and 268 full time employee equivalents. The role these contracted services 

played were all for other functions, none were for critical functions or inherently governmental 

functions.
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PSC D307- IT Strategy and Architecture - $29,126,100 (8%) 

The analysis was centered on 25 contracts which accounted for 100% of the dollars obligated 

under this PSC and 246 full time employee equivalents. The role these contracted services 

played were all for other functions, none were for critical functions or inherently governmental 

functions. 

PSC R410 - Program Evaluation/ Review/Development- $727,054 (<1%) 

The analysis was centered on 2 contracts which accounted for 100% of the dollars obligated 

under this PSC and 5 full time employee equivalents. The role these contracted services played 

were all for other functions, none were for critical functions or inherently governmental 

functions.

PSC R413 - Specifications Development Service - $406,233 (<1%)

The analysis was centered on 3 contracts which accounted for 100% of the dollars obligated 

under this PSC and 7 full time employee equivalents. The role these contracted services played 

were all for other functions, none were for critical functions or inherently governmental 

functions.

PSC R707- Management Services/ Contract/Procurement/ Acquisition Support- $1,228,839 

(<1%) 

The analysis was centered on 2 contracts which accounted for 100% of the dollars obligated 

under this PSC and 6 full time employee equivalents. The role these contracted services played 

were all for other functions, none were for critical functions or inherently governmental 

functions.

Service Contract Reporting 

Contractors holding service contracts were required to enter their invoicing data into System 

for Acquisition Management (SAM). Throughout the reporting period, several Contractors

experienced issues with the SAM. The SEC’s Office of Acquisitions and the SEC’s Service 

Contractors worked diligently with the Federal Service Helpdesk in order to get issues resolved 

so that the necessary service contract reporting could be accomplished. In spite of the 

challenges that vendors were experiencing, as of the cut-off date for timely reporting, 

December 15, 2016, the SEC’s compliance rate was roughly 75%. The final report from OMB 

dated February 6, 2017, shows our extensive efforts resulted in an 87% compliance rate. This is 

an increase over FY14’s compliance rate of 62% and is the highest rate that SEC has achieved

since the Service Contract Requirement was introduced.
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Actions Taken or Planned

Several actions will be taken to address/continue to address concerns raised by the CORs. In 

order to address the majority of the findings identified by the CORs, further training on all levels 

has been provided and continues to be available. Training was provided to 

leadership/supervisors in FY16 and the SEC’s OA anticipates providing it again in FY18. The 

Office of Acquisitions provides many opportunities for CORs to attend extensive training and is 

continuing to build upon the training that is available to ensure that CORs are fully equipped to 

perform their duties effectively. Training has been provided to the contracting officers and 

contract specialists, specifically in the area of proper entry of information into FPDS. 

Additional checks of contract actions are conducted throughout the year by way of contract 

reviews and FPDS-V&V. As contracts are found to have areas of concern, for instance 

inaccurate PSC, they are brought to the contracting officer for correction or clarification. 

There are initiatives underway or in place to ensure COR needs/concerns are addressed. One 

such initiative includes a team that was established within the Office of Acquisitions to address 

concerns with the COR program and they met with CORs to better determine what can be done 

to improve the procurement process. One of the outcomes of the Team’s efforts is to provide 

agency specific COR training which started in calendar year 2017. Additionally, in order to help 

with communications and assist with fostering a more collaborative working relationship with 

the CO and COR, the SEC is planning to engage COs in the Service Contract Inventory survey and 

COR Review process for FY 2016. 

Based on the analysis performed it has been determined that adequate controls are currently in 

place to ensure contractors are not performing inherently governmental functions, contractors’

performance under their contracts are satisfactory, and there are adequate government 

personnel to perform oversight of contractors’ performance. It is not necessary to incorporate 

any additional controls into existing procedures.

Accountable Officials

The SEC’s senior management official who is accountable for development of agency policies, 

procedures, and training associated with OFPP Policy Letter 11-01 addressing the performance 

of inherently governmental and critical functions is Vance Cathell, Director of the Office of 

Acquisitions. Mr. Cathell is also the official responsible for ensuring appropriate internal 

management attention is given to the development and analysis of service contract inventories.