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U.S. Securities and Exchange 

Commission

FY 2018 Service Contract Inventory Analysis

Office of Acquisitions

SEC Headquarters

Washington, DC 20549
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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 FY 

2019 Service Contract Inventory Checklist dated September 25, 2019 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 
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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
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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 

contract-related 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 obligates to those specific Product and Service Codes (PSCs) in FY 

2018, 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 – Summarize 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. 
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II. SCOPE

The SEC selected four (4) PSCs for review. None of the selected PSCs were included in 

the FY 2017 review. 

PSC Product or Service 

Description

Dollars 

Obligated in 

FY 2017

Rationale for Selection

D301 IT AND TELECOMFACILITY 

OPERATION AND 

MAINTENANCE

$52,483,396.09

PSC selected because it is on the 

top ten biggest percentages of 

obligations and has not been 

reviewed since 2015.

D307 IT AND TELECOM- IT 

STRATEGY AND 

ARCHITECTURE

$19,100,404.13

PSC selected because it is on the 

top ten biggest percentages of 

obligations and the special 

interest list and has not been 

reviewed since 2015.

R699 SUPPORTADMINISTRATIVE: 

OTHER

$5,099,020.26

PSC selected because it has 

been added to the special interest 

list and has never been reviewed.

R799 SUPPORTMANAGEMENT: 

OTHER

$1,400,789.41 PSC selected because it has 

been added to the special interest 

list and has never been reviewed.

Table 3: SEC’s Service Contract Inventory Detail

The SEC reviewed 100% of the contract actions under these PSCs awarded in FY2018, 

following the methodology prescribed below.

III. METHODOLOGY

There were a total of 82 contracts falling under the 4 PSCs selected for the SEC’s 2018

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

o If there was performance on the contract in FY18,

o If the contract had subsequently been closed out, and

o Who is the COR. 

As a result of the initial analysis, 26 contracts were omitted from further review because 

no or very little work was performed during FY 2018. Next, the statements of work for the 

remaining 56 contracts in the inventory were reviewed to determine if there was any 
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ambiguous language that might cause uncertainty as to whether inherently governmental 

functions were being performed. 

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

was performed during FY 2018. The contracts included in this sample were selected 

based on 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 conducted meetings with 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?
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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:

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.

The statement of work reviews revealed two contracts included questionable or 

ambiguous language regarding performance of inherently governmental functions. Both 

Contracting Officers agreed to review and update the Statement of Work via a 

modification or when the requirement is recompeted to remove the ambiguity.

Additionally, the following findings were determined from the interviews conducted with 

the CO and CORs of the six contracts selected: 

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

advice or development, interpretations and application of regulations and statues 
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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. CP are performing the same or similar function(s) as agency staff or closely 

associated functions on one contract- a COR stated there is some overlap 

between project management roles.

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. One contract had a modification to the scope of work, but an in scope 

determination was not necessary.

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

reaccomplishment of a Pre Award Service Contract Checklist.

7. 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. One COR cited any requests for new work are 

validated against the scope of the contract. A change request and change 

proposal process is in place that ensures that it is reviewed by the Program 

Manager, COR, and CO. 

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

manage and administer service contracts. 

9. There are a total of 346 full time equivalent CP associated with the 6 awards for 

which interviews were conducted.

Agency Success

From the analysis of the survey responses received as part of the FY18 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.
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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 contractors are not performing 

inherently governmental functions and that contractors’ performance under their 

contracts are 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 75%.

VI. ACTIONS TAKEN OR PLANNED

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

contracts. The Office of Acquisitions 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 Contract Management Excellence (CME), the CME Team 

accomplished the following:

• OA hosted a brown bag session for CORs on working with contractor personnel back 

in August covering functions contractors can and can’t perform, maintaining 

impartiality, protecting sensitive information, and interacting with contractor personnel 

when performing work.

• OA introduced the CO/COR Check-In, required at least annually for all Service 

Contracts in FY19, and is currently working to automate documentation for it going 

forward in order to identify trends across the agency. By automating the 

documentation process, the CO/COR check-in becomes much more streamlined. 

• OA developed a new Independent Government Cost Estimate (IGCE) Guide to 

assist SEC staff in the preparation and documentation of their IGCEs, which are 

required for all acquisitions over $250,000.00.
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• OA had a COR Roundtable discussion 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. 

__________________________________ 

Vance Cathell, Director OA 

__________________________________ 

James McNamara, Director OHR 

02/12/2020

02/12/2020