1

U.S. Securities and Exchange 

Commission

FY 2019 Service Contract Inventory Analysis

Office of Acquisitions 

SEC Headquarters 

Washington, DC 20549
2

I. INTRODUCTION

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 fiveyear 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’s 

functional responsibilities are organized into five divisions and 24 offices, each of which is 

headquartered in Washington, DC. The Commission's approximately 4,600 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.

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 the 

FY2020 Service Contract Inventory Instructions for Agencies. 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.

In accordance with 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
3

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

R410 SUPPORT - PROFESSIONAL: PROGRAM 

EVALUATION/REVIEW/DEVELOPMENT (COMBINES R407 & R409)

R413 SPECIFICATIONS DEVELOPMENT

R414 SYSTEMS ENGINEERING

R423 INTELLIGENCE

R425 ENGINEERING/TECHNICAL

R497 PERSONAL SERVICES CONTRACTS

R707 CONTRACT/PROCUREMENT/ACQUISITION SUPPORT

R499 SUPPORT- PROFESSIONAL: OTHER

R699 SUPPORT- ADMINISTRATIVE: OTHER

R799 SUPPORT- MANAGEMENT: OTHER

Table 1: Special Interest Items
4

PSC Product or Service Description

D302 IT AND TELECOM- SYSTEMS DEVELOPMENT

D301 IT AND TELECOM- FACILITY OPERATION AND MAINTENANCE

R408 SUPPORT- PROFESSIONAL: PROGRAM MANAGEMENT/SUPPORT

D318

IT AND TELECOM- INTEGRATED HARDWARE/SOFTWARE/SERVICES 

SOLUTIONS, PREDOMINANTLY SERVICES

D317 IT AND TELECOM- WEB-BASED SUBSCRIPTION

R424 SUPPORT- PROFESSIONAL: EXPERT WITNESS

D307 IT AND TELECOM- IT STRATEGY AND ARCHITECTURE

D399 IT AND TELECOM- OTHER IT AND TELECOMMUNICATIONS

R499 SUPPORT- PROFESSIONAL: OTHER

D308 IT AND TELECOM- PROGRAMMING

Table 2: SEC’s Top Ten PSCs

The analysis in this report provides a listing of the required service contracts with contractrelated information as required in OMB’s Office of Federal Procurement Policy’s (OFPP) 

guidance. This analysis portion of the report is divided into four main parts:

1) Scope – Summarizes the special interest functions and top ten functions studied, 

the dollars obligated to those specific Product and Service Codes (PSCs) in FY 

2019, and the rationale for focusing on the identified functions.

2) Methodology – Discusses the methodology used by the SEC to support the 

analysis, including selection of questionnaire participants and questions included.

3) Findings – Summarizes the findings, including a brief discussion of the extent to 

which the desired outcomes described in section 743(e)(2) are being met. After 

analyzing key factors included in the Service Contract Inventory questionnaire, 

concrete conclusions are provided in order to continue setting effective priorities 

that align with the Agency’s strategic goals.

4) Actions Taken or Planned – Explains the steps the SEC has taken or plans to 

take to address any identified weaknesses or challenges.
5

II. SCOPE

The SEC selected three (3) PSCs for review. None of the selected PSCs were included in 

the FY 2019 review.

PSC Product or 

Service 

Description

Dollars 

Obligated in 

FY 2019

Rationale for Selection

R408 Support

Professional: 

Program 

Management/Sup

port

$63,380,007.00 PSC selected because it is the 

second largest spend with 15% 

SEC obligations, and it has not 

been reviewed since 2016. This is 

also a special interest function.

D318 IT And TelecomIntegrated 

Hardware/Software/S

ervices Solutions, 

Predominantly 

Services

$27,078,664.00 PSC selected because it is the 

fourth largest spend with 7% SEC 

obligations. It has not been 

reviewed since 2016.

R418 Support 

Professional:

Legal

$18,200,046.00 PSC selected because it is the 

sixth largest spend with 4% SEC 

obligations. It has not been 

reviewed since 2016.

Table 3: SEC’s Service Contract Inventory Detail

The SEC reviewed 100% of the contract actions under these PSCs active in FY2019, 

following the methodology prescribed below.

III. METHODOLOGY

There were a total of 187 contracts that fell under the 3 PSCs selected for the SEC’s 2019

Service Contract Inventory. These contracts were first reviewed to determine:

o If there was performance on the contract in FY19,

o If the contract had subsequently been closed out, and

o Who is the COR.

As a result of the initial analysis, 25 contracts were omitted from further review because 

no or very little work was performed during FY 2019. Next, the statements of work for the 

remaining 162 contracts in the inventory were reviewed to determine if there was any

ambiguous language that might cause uncertainty as to whether inherently governmental 

functions were being performed.

Finally, the SEC selected a non-representative sample of ten contracts in which work was 

performed during FY 2019. The contracts included in this sample were selected based on 
6

the statement of work review, to include a variety of different services including those most 

likely to include performance of inherently governmental functions, critical functions, 

closely associated functions, or otherwise require a higher degree of management and 

oversight. The SEC Office of Acquisitions’ Advancing Excellence Team analyzed

information gathered from conversations between the CO and CORs assigned to each of 

these contracts to address the questions listed below to address the OMB’s mandate:

1. Inherently Governmental Functions:

a. Are Contractor Personnel (CP) performing duties such as: providing legal 

advice or development, interpretations and application of regulations and 

statues to agency employees, determination of budget policy, guidance, 

and strategy or making policy decisions for the Agency?

2. Critical Functions:

a. Are CP performing critical functions under this contract? If so, please 

explain functions performed.

i. Are CP involved in such a way that could affect the ability of the 

agency to maintain control of its mission and operations?

b. Are there specific safeguards and monitoring systems in place for those 

contracts under which critical functions are being performed to ensure 

these functions do not become inherently governmental?

3. Closely Associated Functions:

a. Are CP performing the same or similar function(s) as agency staff or 

closely associated functions? If so, please explain functions performed.

b. Are there specific safeguards and monitoring systems in place for those 

contracts under which closely associated functions are being performed 

to ensure these functions do not become inherently governmental?

4. Scope of Work:

a. If a modification to the scope of work has taken place:

i. Was an in scope determination made?

ii. Were the changes significant enough to warrant OGC 

involvement or reaccomplishment of a Pre Award Service 

Contract Checklist?

b. Are there specific safeguards and monitoring systems in place to ensure 

that work being performed by contractors has not changed or expanded 

to become an inherently governmental function?

5. Management and Oversight of Service Contracts:

a. Are there sufficient resources available to you as a COR in order to 

effectively manage and administer service contracts?

b. How many CP are associated with this award?

IV. FINDINGS

The SEC conducted the inventory analyses in accordance with section 743(e) to ensure 

that:
7

1. 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 SEC does not have the authority to enter into personal services contracts;

2. 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;

3. The agency is not using contractor employees to perform inherently governmental 

functions;

4. 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;

5. 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

6. There are sufficient internal agency resources to manage and oversee contracts 

effectively.

Additionally, the following findings were determined from the conversations conducted 

between the CO and the CORs of the ten contracts selected:

1. Contractor Personnel (CP) are not performing duties such as: providing legal advice

or development, interpretations and application of regulations and statues

to agency employees, determination of budget policy, guidance, and strategy or 

making policy decisions for the Agency.

2. CP are not performing critical functions under this contract.

3. In limited circumstances, CP are performing the same or similar function(s) as 

agency staff or closely associated functions on any contracts.

4. Specific safeguards and monitoring systems are in place for those contracts under 

which closely associated functions are being performed to ensure these functions 

do not become inherently governmental.

5. There were no changes significant enough to warrant OGC involvement or 

reaccomplishment of a Pre Award Service Contract Checklist.

6. There are specific safeguards and monitoring systems in place to ensure that work 

being performed by contractors has not changed or expanded to become an 

inherently governmental function. Work is reviewed by SEC personnel to ensure 

there are no changes or expansions, and any requests for new work are validated 

against the scope of the contract. A change request and change proposal process 

are in place to ensure that any requested changes are reviewed by the Program 

Manager, the COR, and the CO.
8

7. Overall, there are sufficient resources available to the COR in order to effectively 

manage and administer service contracts.

8. There are a total of 86 full time equivalent CP associated with the 10 awards for 

which interviews were conducted.

Agency Success

From the analysis of the survey responses received as part of the FY19 Inventory, the 

SEC has determined that:

1. Contract labor is being used in an appropriate and effective manner and the mix of 

Federal employees and Contractors in the Agency are effectively balanced.

2. Service contracts are highly compliant in most areas, with contracts generally 

entered into and performed according to applicable laws.

3. Contractor employees are not being used to perform critical functions in such a way 

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

operations.

4. Overall, the government possesses the expertise to perform oversight of the 

contractor’s performance. 

5. Adequate controls are currently in place to ensure that contractors are not 

performing inherently governmental functions and that contractors’ performance 

under their contracts is satisfactory.

V. SERVICE CONTRACT REPORTING

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

requirement in System for Acquisition Management (SAM). Contractors holding service 

contracts were required to enter their invoicing data. The eTools 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. As of the 

closing date to report, January 31, 2020, the SEC’s compliance rate was 78%.

VI. ACTIONS TAKEN OR PLANNED

The SEC is committed to continued improvements in how the Agency oversees service 

contracts. The Office of Acquisitions (OA) has initiatives underway aimed at ensuring that 

service contracts are managed effectively and that the potential for performing inherently 

governmental function is avoided.

In continuing with the SEC’s focus on Contract Management Excellence (CME), the CME 

Team accomplished the following:

 OA implemented improvements to its Business Clearance Process to strengthen data 

integrity and document collection, including reviews of COR files.
9

 The COR Monthly Newsletter was developed to keep CORs abreast of any regulatory 

updates and provides helpful tips for working with contractor personnel.

 OA automated its CO/COR Check-In form which streamlines the check-in process and 

helps identify trends across the agency. CO/COR Check-ins are required at least 

annually for all Service Contracts. 

 OA improved guidance for managing service contracts and continued to encourage the

use of the new Independent Government Cost Estimate (IGCE) Guide which assists

SEC staff in the preparation and documentation of their IGCEs, required for all 

acquisitions over $250,000.00.

 OA held COR Roundtable discussions about techniques for properly verifying invoices 

for labor hour contracts. OA provided a handout for CORs with tips on how to verify the 

accuracy of hours worked on invoices for Labor Hour contracts. 

VII: RESPONSIBLE OFFICIAL

The SEC has designated the Director of Acquisitions, Vance Cathell, Senior Management 

Official, as the responsible official for ensuring appropriate internal management attention 

is given to the development and analysis of service contract inventories. The SEC’s Senior 

Management Official ensures that Agency policies, procedures, and training associated 

with OFPP Policy Letter 11-01 are in place to assist with continuous improvement of the 

Agency’s compliance with compiling, reviewing, and reporting on service contract 

inventories.