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U.S. Securities and Exchange Commission

FY 2011 Service Contract Inventory Analysis

December 13, 2012

Office of Acquisition

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 

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

same political party, ensuring non-partisanship. The agency's functional responsibilities are 

organized into five Divisions and 19 Offices, each of which is headquartered in Washington, DC. 

The Commission's approximately 3,500 staff are located in Washington 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.

Introduction

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 were

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

issued guidance dated November 5, 2010 and update guidance dated December 19, 2011. 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.

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 
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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 

was required to identify their top ten Product Service Codes (PSC) that accounted for the 

agency’s greatest percentage of spending in FY 2011 (Table 2). 

PSC Product or Service Description

D302 ADP Systems Development Services

D307 Automated Information Systems Services

D310 ADP Backup and Security Services

D314 ADP System Acquisition Support Services

R408 Program Management/Support Services

R413 Specifications Development Service

R414 Systems Engineering Services

R421 Technical Assistance (Added 8/15/2011)

R423 Intelligence Services

R425 Engineering and Technical Services

R497 Personal Services Contracts

R707 Management Services/Contract & Procurement Support

Table 1: Special Interest Items
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When reviewed in total, there were only four Service Codes at the detailed level that 

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

follows with their agency information (Table 3):

Service Code –

Detailed Level Service Code Description

% 

Obligated

# of 

Contracts Obligated Amount

D3 Information Technology 

and Telecommunications

46% 149 $90,999,113.87

R4 Support – Professional 25% 162 $47,822,712.57

R7 Support – Management 4% 16 $8,792,778.67

S2 Housekeeping 3% 2 $6,273,275.60

Totals 78% 329 $153,887,880.71

Table 3: SEC’s Detailed Level Service Codes

PSC Product or Service Description

D399 Other ADP Telecommunications

R408 Program Management/Support Services

D301 ADP Facility Management

D307 Automated Information System Services

R499 Other Professional Services

R424 Expert Witness

D316 Telecommunication Network Management Services

R710 Financial Services

S206 Guard Services

D302 ADP System Development Services

Table 2: SEC’s Top Ten PSCs
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On August 9, 2012, SEC notified OMB of the areas planned for analysis in the FY 2011 inventory. 

While selecting the PSC’s for review, SEC found that 71% of services funding fell into two of the 

detailed level services codes; D3 Information Technology and Telecommunications (46%) and 

R4 Support – Professional (25%). SEC selected three special functions to analyze as part of the 

FY 2011 Service Contract Inventory. SEC focused analysis on the three PSC’s where the agency 

obligated the most funds, of which one is from the OMB Special Interest Functions. The 

functions selected were PSC D399 Other ADP Telecommunications, R408 Program 

Management/Support Services, and D301 ADP Facility Management.

Analysis

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

• Each contract in the inventory that is a non-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 D399 Other ADP Telecommunications - $42,973,462.92

The Other ADP Telecommunications (PSC D399) function was selected for review due to the 

large amount of dollars obligated under this area. Approximately 22% ($42,973,462.92) of the 

total service dollars were obligated under this PSC. The analysis was centered on ten contracts 

which accounted for 60% of the dollars obligated under this PSC.
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R408 Program Management/Support Services - $25,113,475.55

This function was chosen because the type of services performed in this area had the potential 

to be treated as personal services and is the second highest PSC dollar value. Approximately 

13% ($25,113,475.55) of the total service dollars were obligated under this PSC. The analysis 

focused on twelve contracts which accounted for 66% of the dollars spent in the PSC. 

PSC D301 ADP Facility Management - $20,337,416.12

The ADP Facility Management (PSC D301) function was selected for review due to the amount 

of dollars obligated under this area. Approximately 11% ($20,337,416.12) of the total service 

dollars were obligated under this PSC. The analysis centered on ten contracts which accounted 

for 90% of the dollars obligated under this PSC.

Analysis Process

All three PSC analyses were conducted in the same manner. The analysis was accomplished in 

two steps. First, the team reviewed the Statement of Work for each of the top ten dollar value 

contracts to determine if inherently governmental functions were being performed. It was 

determined from the review of the statements of work that the contractors were not tasked to 

perform inherently governmental functions. Second, the analysis team surveyed and

interviewed the Contracting Officer Representatives (CORs) for a random sample (25 contracts)

of the contracts being reviewed. The surveys and interviews were conducted to determine the 

following: if the contractor was performing inherently governmental functions; if there are 

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

contractor is performing critical functions. The analysis determined that the government 

possesses the expertise and adequate personnel to perform oversight of the contractor’s 

performance. It was also determined that the contractor was not performing inherently 

governmental functions or personal services. Based on the analysis performed it has been 

determined that adequate controls are in place and no additional controls need to be 

incorporated into existing procedures.

Conclusion

In the reviews accomplished SEC has determined that the contractors are not performing 

inherently governmental functions and there are adequate government personnel to perform 

oversight of the contractor’s performance. 

SEC has several controls in place to ensure contractors are not performing inherently 

governmental functions and contractor’s performance under the contract is adequate. 
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CONCURRENCE:

Vance Cathell, Senior Procurement Executive

Lacey Dingman, Director OHR 

Thomas Bayer, Director OIT