DOD INVENTORY OF 

CONTRACTED 

SERVICES

Timely Decisions and 

Further Actions 

Needed to Address 

Long-Standing Issues

Report to Congressional Committees

October 2016

GAO-17-17

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-17, a report to 

congressional committees

October 2016

DOD INVENTORY OF CONTRACTED 

SERVICES

Timely Decisions and Further Actions Needed 

to Address Long-Standing Issues

What GAO Found

In fiscal year 2014, 40 Department of Defense (DOD) components in total 

certified that they had conducted an inventory review. Components are required 

by DOD guidance to address six elements in their certification letters, including, 

for example, identifying any inherently governmental functions and unauthorized 

personal services contracts. More components—21 out of 40—addressed all of 

the required review elements compared to prior years. However, DOD 

components may continue to underreport the extent to which contractors were 

providing services that are closely associated with inherently governmental 

functions, a key review objective to help ensure that DOD has proper oversight in 

place. For example, GAO’s analysis indicates that DOD obligated about $28 

billion for contracts in 17 categories—such as professional and management 

support services—that the Office of Federal Procurement Policy and GAO 

identified as more likely to include closely associated with inherently 

governmental functions. In comparison, components identified a total of $10.8 

billion in obligations or dollars invoiced for contracts that included work identified 

as closely associated with inherently governmental functions—either within the 

17 categories or for any other category of service. Most of these functions were 

identified by the Army using its long-standing review process.

The military departments have not yet developed plans to use the inventory to 

inform workforce mix, strategic workforce planning, and budget decision-making 

processes, as statutorily required. DOD has made some recent progress on

requiring components to identify an accountable official to lead efforts to develop 

plans and establish processes for using their inventories in decision making, a 

step GAO recommended in November 2014. However, DOD faces continued 

delays in deciding on the path forward for its underlying inventory data collection 

system, staffing its inventory management support office, and formalizing the 

roles and responsibilities of that office and stakeholders (see figure).

Timeline of Major Inventory of Contracted Services Efforts

GAO previously recommended that DOD address these issues to improve the 

usefulness of the inventory. DOD concurred with these recommendations but 

has not yet addressed them. These continued delays hinder DOD’s ability to use 

the inventory of contracted services as intended, including using the inventory 

data to inform workforce and budget decision-making processes.

View GAO-17-17. For more information, 

contact Timothy J. DiNapoli at (202) 512-4841 

or dinapolit@gao.gov.

Why GAO Did This Study

DOD is the government’s largest 

purchaser of contractor-provided

services. In 2008, Congress required 

DOD to compile and review an annual 

inventory of its contracted services to 

identify the number of contractors 

performing services and the functions 

contractors performed. In 2011, 

Congress required DOD to use that 

inventory to inform certain decisionmaking processes, including workforce 

planning and budgeting. GAO has 

previously reported on the challenges 

DOD faces in compiling, reviewing, 

and using the inventory. Since 2011, 

GAO made 13 recommendations 

intended to improve DOD’s use of the 

inventory. Of these, DOD has yet to 

fully address 8 open 

recommendations.

Congress included a provision in 

statute for GAO to report on DOD’s 

required reviews and plans to use the 

inventory. This report assesses the 

extent to which DOD components (1) 

reviewed contracts and activities in the 

fiscal year 2014 inventory of contracted 

services, and (2) developed plans to

use the inventory for decision making.

GAO reviewed relevant laws and 

guidance and 40 components’

inventory review certification letters, 

and interviewed DOD acquisition, 

manpower, and programming officials. 

What GAO Recommends

GAO is not making new 

recommendations in this report. In its 

comments, DOD noted that it intends 

to address GAO’s eight open

recommendations, including those

related to determining its approach for 

compiling the inventory and defining 

the roles and responsibilities of a key 

support office and stakeholders. 
Page i GAO-17-17 Service Contract Inventories

Letter 1

Background 5

Components’ Reporting of Inventory Review Elements Continued 

to Improve, but Limitations with the Resulting Information 

Provided in Certification Letters Persist 11

Continued Delays on Key Management Decisions Hinder Efforts 

to Develop Statutorily Required Plans to Use the Inventory to 

Inform Workforce and Budget Decisions 19

Agency Comments 26

Appendix I Past GAO Reports and Recommendations on the Inventory of 

Contracted Services 29

Appendix II Summary of Prior Findings on the Military Departments’ 

Implementation of Plans to Facilitate Use of the Inventory 32

Appendix III Comments from the Department of Defense 38

Appendix IV GAO Contact and Staff Acknowledgments 39

Tables

Table 1: Estimated Number of Contractor Full-Time Equivalents 

(FTE) and Obligations as Reported in the Department of 

Defense’s (DOD) Inventory of Contracted Services, Fiscal 

Years 2008-2015 6

Table 2: Percentage of Contractor Full-Time Equivalents in the 

Inventory Submission Reported by the Military 

Departments as Based on the Contractor Manpower 

Reporting Application 25

Table 3: Past GAO Reports and Recommendations on the 

Inventory of Contracted Services 29

Table 4: Role of the Inventory of Contracted Services in Existing 

Strategic Workforce Planning Guidance and Processes at 

the Three Military Departments 33

Contents
Page ii GAO-17-17 Service Contract Inventories

Table 5: Role of the Inventory of Contracted Services in Existing 

Workforce Mix and Insourcing Guidance and Processes at 

the Three Military Departments 34

Table 6: Role of the Inventory of Contracted Services in Existing 

Budgeting Guidance and Processes at the Three Military 

Departments 37

Figures

Figure 1: Requirements under Title 10 Section 2330a 

Subsection (f) 9

Figure 2: Percentage of Components That Addressed Each 

Department of Defense (DOD) Required Element for 

Certifying a Review of the Inventory of Contracted 

Services by Fiscal Year 13

Figure 3: Number and Percentage of Department of Defense 

(DOD) Reporting Components That Addressed All 

Required Elements in Certification Letters by Fiscal Year 14

Figure 4: Department of Defense Components’ Reporting of 

Obligations for Contracts that Included Closely 

Associated with Inherently Governmental Functions in 

Fiscal Year 2014 16

Figure 5: Key Events Related to Department of Defense (DOD) 

Establishing a Common Manpower Data System for the 

Inventory 22

Figure 6: Key Events Related to Standing Up the Support Office 23
Page iii GAO-17-17 Service Contract Inventories

Abbreviations

CMRA Contractor Manpower Reporting Application

DOD Department of Defense

ECMRA Enterprise-wide Contractor Manpower Reporting

Application

FAR Federal Acquisition Regulation

FPDS-NG Federal Procurement Data System – Next Generation

FTE full-time equivalent

OFPP Office of Federal Procurement Policy

TFMSO Total Force Management Support Office

USD(AT&L) Under Secretary of Defense for Acquisition, Technology,

and Logistics

USD(P&R) Under Secretary of Defense for Personnel and Readiness

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Page 1 GAO-17-17 Service Contract Inventories

441 G St. N.W.

Washington, DC 20548

October 31, 2016

Congressional Committees

The Department of Defense (DOD) is the federal government’s largest 

purchaser of contractor-provided services, with $156 billion in obligations 

for service contracts reported for fiscal year 2014 and $144 billion 

reported in fiscal year 2015. DOD relies on contractors to perform various 

functions, such as professional and management support, information 

technology support, and weapon system support. Contractor personnel 

constitute a key portion of DOD’s total workforce, which also includes 

DOD active and reserve forces and DOD civilian employees, and are vital 

to helping DOD meet its mission. While there are benefits to using 

contractors to perform services for the government, the government can 

become overly reliant on contractors in some situations, such as when a 

contractor performs functions that put an agency at risk of losing control 

over functions that are core to its mission and operations.

In recent years, Congress enacted legislation to improve DOD’s ability to 

manage its acquisitions of contracted services, to make more strategic 

decisions about the appropriate workforce mix, and to better align 

resource needs through the budget process to achieve that mix. As part 

of these efforts, section 2330a of title 10 of the U.S. Code requires DOD 

to annually compile, and the military departments and defense agencies 

to review, an inventory of services contracted for or on behalf of DOD 

during the preceding fiscal year. This inventory is intended, in part, to help 

provide better insight into the number of contractor full-time equivalents 

(FTE) providing services to the department and the functions they are 

performing, and determine whether any of these functions warrant 

conversion to DOD civilian performance.1 Further, this section also 

requires DOD to undertake certain actions using these inventories. 

Specifically, subsections (e) and (f), respectively, direct the secretaries of 

 1

An FTE is a standard measure of labor that equates to one year of full-time work (labor 

hours as defined by the Office of Management and Budget Circular A-11 each year). To 

report the number of contractor FTEs, one would divide the number of direct labor hours 

reported by a contractor for each contracted service by the number of labor hours in a 

federal employee work year, which was 2,080 in fiscal year 2014.

Letter
Page 2 GAO-17-17 Service Contract Inventories

the military departments or heads of the defense agencies to, among 

other things

• review the inventory to ensure that personal services contracts on the 

list are performed under applicable statutes and regulations and 

identify contracted functions that DOD should consider for conversion; 

and

• develop a plan, including an enforcement mechanism and approval 

process, to use the inventory for strategic workforce planning, 

workforce mix, and budgeting decisions.

Section 951(a) of the National Defense Authorization Act for Fiscal Year 

2014 included a provision for us to report on DOD’s implementation of 

title 10 section 2330a subsections (e) and (f).2 This report assesses 

DOD’s efforts to implement these subsections, specifically (1) subsection 

(e) to review contracts and activities in the inventory of contracted 

services for the fiscal year 2014 inventory and (2) subsection (f) to 

develop plans and processes to use the inventory for strategic workforce 

planning, workforce mix, and budget decisions.

To assess the extent to which DOD components—which include the three 

military departments and the defense agencies—complied with the 

requirements to review applicable contracts and activities in its inventory 

of contracted services pursuant to subsection (e), we focused on DOD’s 

fiscal year 2014 inventory and associated review, which was the latest 

inventory and review available when we initiated our work. We reviewed 

DOD’s fiscal year 2014 inventory submission and review guidance, 

issued on December 29, 2014 by the Under Secretary of Defense for 

Acquisition, Technology, and Logistics (USD(AT&L)) and the Under 

Secretary of Defense for Personnel and Readiness (USD(P&R)). This 

guidance required the military departments and defense agencies to 

certify—through submission of a certification letter to the USD(P&R)—that 

their review was conducted in accordance with subsection (e). The 

guidance also required components to report on six elements, such as 

the extent to which contractors were found to be performing inherently 

governmental functions and those closely associated with inherently 

governmental functions, among other elements. The number of DOD 

 2

Pub. L. No. 113-66 (2013). 
Page 3 GAO-17-17 Service Contract Inventories

components submitting annual inventories and the associated review 

certification letters has varied since fiscal year 2011 in part because, prior 

to its fiscal year 2014 guidance, DOD had not identified a list of 

components required to submit and review an inventory. For this report, 

we focused on the 40 components that compiled a fiscal year 2014 

inventory and submitted an unclassified review certification letter to 

USD(P&R) by July 2016. We analyzed these 40 unclassified certification 

letters to determine if components addressed all six required elements. 

We also interviewed officials at USD(P&R) and USD(AT&L) responsible 

for the inventory to assess changes made to the inventory guidance and 

the review and certification process. We interviewed officials at each of 

the military departments—the Army, Navy, and Air Force—responsible for 

compiling and reviewing the inventory regarding internal guidance on the 

inventory of contracted services. We also reviewed relevant DOD Office 

of the Inspector General reports on the inventory of contracted services.3

To gauge the extent to which DOD components identified instances in 

which contractors may be performing activities closely associated with 

inherently governmental functions, we identified total obligations for 

contracts in the inventory that were categorized under the 17 product 

service codes that the Office of Federal Procurement Policy (OFPP) and 

GAO identified as likely to include closely associated with inherently 

governmental functions.4 We compared these obligations to total 

obligations certified by DOD components as for contractors performing 

closely associated with inherently governmental functions in the fiscal 

year 2014 certification letters.5 To assess the reliability of the inventory 

 3

For example, see Department of Defense Inspector General, Independent Auditor’s 

Report on Agreed-Upon Procedures for DOD Compliance with Service Contract Inventory 

Compilation and Certification Requirements for FY 2014, DODIG-2016-092 (Alexandria, 

Va.: May 19, 2016).

4

Office of Management and Budget, Office of Federal Procurement Policy, Memorandum 

for Chief Acquisition Officers and Senior Procurement Executives, Service Contract 

Inventories (Nov. 5, 2010); and GAO, Managing Service Contracts: Recent Efforts to 

Address Associated Risks Can Be Further Enhanced, GAO-12-87 (Washington, D.C.: 

Dec. 7, 2011). Closely associated with inherently governmental functions are those 

functions that, while not inherently governmental, may approach being in that category 

because of the nature of the function, the manner in which the contractor performs the 

contract, or the manner in which the government administers performance under the 

contract. Section 7.503(d) of the Federal Acquisition Regulation (FAR) provides examples 

of such functions.

5

For the Army, we compared invoiced dollars rather than obligations because the Army’s 

inventory and review is based on invoiced dollars rather than obligations.
Page 4 GAO-17-17 Service Contract Inventories

submission data, we compared the submission data to the Federal 

Procurement Data System – Next Generation (FPDS-NG) data for fiscal 

year 2014, reviewed related documentation, and interviewed DOD 

officials knowledgeable about the data. Based on these steps, we 

determined the data were sufficiently reliable for the purposes of our 

reporting objective. We did not independently assess the accuracy or 

reliability of the underlying data supporting the components’ inventories of 

contracted services and associated reviews.

To assess the extent to which DOD components have developed plans 

and enforcement mechanisms to use the inventory to inform management 

decisions pursuant to subsection (f), we used the data we collected for 

our November 2014 report on this issue to establish the extent to which 

each military department’s strategic workforce planning, manpower mix,

and budgeting guidance and processes required or cited the use of the 

inventory of contracted services.6 We then interviewed officials from each 

military department to determine what updates, if any, had been made to 

the guidance and processes. We confirmed whether the guidance 

identified in our November 2014 report remained current as of July 2016, 

and identified any changes made subsequent to that report. We also 

interviewed acquisition and manpower officials at each military 

department to assess the status of the military department’s plans to 

identify an accountable official to lead and coordinate efforts to develop 

plans and enforcement mechanisms. We reviewed components’ fiscal 

year 2014 inventory submissions to determine the extent to which 

components increased their use of the Contractor Manpower Reporting 

Application (CMRA) for developing their inventories compared to prior 

years. We also assessed DOD’s efforts to develop and implement the 

Enterprise-wide Contractor Manpower Reporting Application (ECMRA)—

a common data system based on four separate CMRA systems within 

DOD—and to establish an office to support these efforts—the Total Force 

Management Support Office (TFMSO)—by interviewing officials from 

USD(P&R), the military departments, and TFMSO.

We conducted this performance audit from February 2016 to October 

2016 in accordance with generally accepted government auditing 

 6

GAO, Defense Contractors: Additional Actions Needed to Facilitate the Use of DOD’s 

Inventory of Contracted Services, GAO-15-88 (Washington, D.C.: Nov. 19, 2014).
Page 5 GAO-17-17 Service Contract Inventories

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

In part to improve the information available and management of DOD’s 

acquisition of services, in 2001 Congress enacted section 2330a of title 

10 of the U.S. Code, which required the Secretary of Defense to establish 

a data collection system to provide management information on each 

purchase of services by a military department or defense agency.7

Congress amended section 2330a in 2008 to add a requirement for the 

Secretary of Defense to submit an annual inventory of the activities 

performed pursuant to contracts for services on behalf of DOD during the 

preceding fiscal year.8

The inventory is to include a number of specific data elements for each 

identified activity, including

• the function and missions performed by the contractor;

• the contracting organization, the component of DOD administering the 

contract, and the organization whose requirements are being met 

through contractor performance of the function;

• the funding source for the contract by appropriation and operating 

agency;

• the fiscal year the activity first appeared on an inventory;

 7

National Defense Authorization Act for Fiscal Year 2002, Pub. L. No. 107-107, §801(c) 

(2001).

8

National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110-181, §807(a).

Background

Inventory Compilation 

Requirements
Page 6 GAO-17-17 Service Contract Inventories

• the number of contractor employees (expressed as FTEs) for direct 

labor, using direct labor hours and associated cost data collected from 

contractors;9

• a determination of whether the contract pursuant to which the activity 

is performed is a personal services contract;10 and

• a summary of the information required by subsection 2330a(a) of title 

10 of the U.S. Code.11

Within DOD, USD(AT&L), USD(P&R), and the Office of the Under 

Secretary of Defense (Comptroller) have shared responsibility for issuing 

guidance for compiling and reviewing the inventory. USD(P&R) compiles 

the inventories prepared by the components, and USD(AT&L) is to submit 

a consolidated DOD inventory to Congress no later than June 30 of each 

fiscal year. DOD has submitted annual, department-wide inventories for 

fiscal years 2008 through 2015,12 the most recent submitted on 

September 20, 2016 (see table 1).

Table 1: Estimated Number of Contractor Full-Time Equivalents (FTE) and 

Obligations as Reported in the Department of Defense’s (DOD) Inventory of 

Contracted Services, Fiscal Years 2008-2015

Fiscal year Estimated number of 

contractor FTEs

Total obligations

(in billions)

2008 655,000 $127

2009 767,000 $155

2010 623,000 $121

2011 710,000 $145

2012 670,000 $129

2013 629,000 $123

 9

Estimates of full-time equivalents may be used where such data are not available and 

cannot reasonably be made available in a timely manner for the purposes of the inventory. 

10 U.S.C. § 2330a(c)(2)(E).

10A personal services contract is a contract that, by its express terms or as administered, 

makes the contractor personnel appear to be, in effect, government employees. Agencies 

shall not award personal services contracts unless specifically authorized by statue to do 

so. FAR §§ 2.101, 37.104(b).

1110 U.S.C. § 2330a(c)(2).

12The Army also submitted an inventory of contracted services for fiscal year 2007.
Page 7 GAO-17-17 Service Contract Inventories

Fiscal year Estimated number of 

contractor FTEs

Total obligations

(in billions)

2014 641,000 $131

2015 561,000 $115

Source: DOD’s inventory of contracted services. | GAO-17-17

Notes: Army’s inventory data reflects total invoiced dollar amounts rather than obligations. Two 

components reported using both obligations and invoiced dollar amounts in their fiscal year 2014 

inventory data. In addition, some components used data input by contractors into DOD’s Contractor 

Manpower Reporting Application to supplement derived contractor FTEs.

The changes in DOD’s overall approach, in particular how DOD as a whole reflected research and 

development services and the use of different formulas for estimating contractor FTEs, among other 

factors, affected the reported changes in inventory data from year to year. Consequently, we and 

DOD officials agree that caution should be exercised when making direct comparisons between fiscal 

years 2008 through 2015 inventory data. All FTE figures are rounded to the nearest thousand.

As we previously reported, the service contract obligations reported in the inventory of contracted 

services for a given fiscal year may not match the amount of contract obligations from the Federal 

Procurement Data System – Next Generation (FPDS-NG), in part because the FPDS-NG obligation 

amount for services captures categories of services that are not reported in the inventory. See 

GAO-13-491.

Since DOD began reporting on the department-wide inventory of 

contracted services in fiscal year 2008, the primary source used by most 

DOD components to compile their inventories, with the exception of the 

Army, has been FPDS-NG.13 The Army developed its CMRA system in 

2005 to collect information on labor-hour expenditures by function, 

funding source, and mission supported on contracted efforts, and has 

used its CMRA as the basis for its inventory. The Army’s CMRA is 

intended to capture data directly reported by contractors on services 

performed at the contract line item level, including information on the 

direct labor dollars, direct labor hours, total invoiced dollars, the functions 

performed, and the organizational unit for which the services are being 

performed. In instances where contractors are providing different services 

under the same contract action, or are providing services at multiple 

locations, contractors can enter additional records in CMRA to capture 

information associated with each type of service or location. It also allows 

for the identification of services provided under contracts for goods.

 13Our previous work identified data limitations with those DOD components using data 

from FPDS-NG as the basis for their inventories. GAO, Defense Acquisitions: Continued 

Management Attention Needed to Enhance Use and Review of DOD’s Inventory of 

Contracted Services, GAO-13-491 (Washington, D.C.: May 23, 2013).
Page 8 GAO-17-17 Service Contract Inventories

Subsection 2330a(e) of title 10 of the U.S. Code requires the secretaries 

of the military departments or heads of the defense agencies to complete 

a review of the contracts and activities in the inventory for which they are 

responsible within 90 days of the inventory being submitted to Congress. 

USD(P&R), as supported by the Comptroller, is responsible for, among 

other things, developing guidance for the conduct and completion of this 

review.14 As part of this review, the military departments and defense 

agencies are to ensure that

• any personal services contracts in the inventory were properly entered 

into and performed appropriately;

• the activities on the list do not include any inherently governmental 

functions;15 and

• to the maximum extent practicable, the activities in the inventory do 

not include any functions closely associated with inherently 

governmental functions.

This review also requires the secretaries of the military departments and 

heads of defense agencies to identify activities that should be considered 

for conversion to government performance, or insourced, pursuant to 

section 2463 of title 10 of the U.S. Code, or to a more advantageous 

acquisition approach. Section 2463 specifically requires the Secretary of 

Defense to make use of the inventory to identify critical functions, 

acquisition workforce functions, and closely associated with inherently 

governmental functions performed by contractors—and to give special 

consideration to converting those functions to DOD civilian performance.

In addition, subsection 2330a(f) of title 10 of the U.S. Code requires the 

secretaries of the military departments or heads of the defense agencies 

responsible for contracted services in the inventory to develop a plan, 

 1410 U.S.C. § 2330a(c)(1)(A)(iii).

15Inherently governmental function means, as a matter of policy, a function that is so 

intimately related to the public interest as to mandate performance by government 

employees and includes functions that require the exercise of discretion in applying 

government authority, or making value judgements in making decisions for the 

government. Section 7.503(c) of the FAR provides examples of such functions. Contracts 

shall not be used for the performance of inherently governmental functions. FAR § 

7.503(a). See also, FAR § 2.101.

Inventory Review and Use 

Requirements
Page 9 GAO-17-17 Service Contract Inventories

including an enforcement mechanism and approval process, for using the 

inventory to inform management decisions (see figure 1).

Figure 1: Requirements under Title 10 Section 2330a Subsection (f)

Collectively, these statutory requirements mandate the use of the 

inventory and the associated review process to enhance the ability of 

DOD to identify and track services provided by contractors, achieve 

accountability for the contractor sector of DOD’s total workforce, help 

identify contracted services for potential conversion from contractor 

performance to DOD civilian performance, support DOD’s determination 
Page 10 GAO-17-17 Service Contract Inventories

of the appropriate workforce mix, and project and justify the number of 

contractor FTEs included in DOD’s annual budget justification materials.

Over the past five years, we have issued several reports on DOD’s efforts 

to compile and review its inventory of contracted services and made 

recommendations on a variety of issues related to the inventories. For 

example, in January 2011, we found that the military departments had 

differing approaches to reviewing the activities performed by contractors, 

and the department stated it had a goal of collecting manpower data from 

contractors for future inventories.16 We recommended that the 

department develop a plan of action to facilitate the department’s intent of 

collecting manpower data and address other limitations to its current 

approach to meeting inventory requirements. The department concurred 

with our recommendation but had not addressed it as of August 2016. In 

November 2015, we found that the lack of documentation on whether a 

proposed contract includes closely associated with inherently 

governmental functions may result in inventory review processes 

incorrectly reporting these functions, and recommended that DOD require 

acquisition officials to document, prior to contract award, whether the 

proposed contract action includes activities that are closely associated 

with inherently governmental functions.17 DOD concurred with our 

recommendation, but has not yet implemented it. A full list of our prior 

reports on DOD’s inventory of contracted services, the recommendations 

from those reports, and the current status of those recommendations—

including eight that remain open—is included in appendix I.

Our prior work has also consistently found that the absence of a complete 

and accurate inventory of contracted services hinders DOD’s ability to 

improve its management of these services. For example, in a June 2016 

report on DOD headquarters personnel reduction efforts, we found that 

DOD does not have reliable data for assessing headquarters functions 

and associated costs, including those performed by contractor 

 16GAO, Defense Acquisitions: Further Action Needed to Better Implement Requirements 

for Conducting Inventory of Service Contract Activities, GAO-11-192 (Washington, D.C.: 

Jan. 14, 2011).

17GAO, DOD Inventory of Contracted Services: Actions Needed to Help Ensure Inventory 

Data Are Complete and Accurate, GAO-16-46 (Washington, D.C.: Nov. 18, 2015).

Prior GAO Work
Page 11 GAO-17-17 Service Contract Inventories

personnel.18 We concluded that without reliable information, DOD may 

not be able to accurately assess specific functional areas or identify 

potential streamlining and cost savings opportunities. In a December 

2015 report on civilian and contractor personnel reductions, we found that 

limitations in the methodology for contractor FTE estimates in the 

inventory may hinder efforts to implement statutorily mandated reporting 

on reductions in contractor personnel.19 Further, in a February 2016 

report on DOD efforts to forecast service contract requirements, we found 

that existing data on DOD’s future spending for contracted service 

requirements was not fully captured by DOD’s programming and budget 

processes, an effort the inventory of contracted services is intended to 

support. We noted that critical to being more strategic is knowing what 

DOD is spending today and what DOD intends to spend in the future.20

More DOD components conducted and certified the completion of an 

inventory review as required by subsection 2330a(e) of title 10 of the U.S. 

Code and DOD’s guidance, respectively, in fiscal year 2014 as compared 

to previous years. Overall, we found that the 40 components’ certification 

letters addressed more of DOD’s required elements in comparison to 

prior years, with over half of the components including all six of the 

required elements. In some areas, however, we continued to find 

limitations with the information provided in the certification letters. For 

example, the level of detail and input provided on the use of the inventory 

to inform annual program reviews and budget processes varied. In 

addition, we continued to find significant differences and potential 

underreporting in the extent to which components identified instances of 

contractors providing services that are closely associated with inherently 

governmental functions in their inventories. For example, through its 

review process, the Army identified $8.1 billion in invoiced dollars for 

 18GAO, Defense Headquarters: Improved Data Needed to Better Identify Streamlining and 

Cost Savings Opportunities by Function, GAO-16-286 (Washington, D.C.: June 30, 2016).

19GAO, Civilian and Contractor Workforces: Complete Information Needed to Assess 

DOD’s Progress for Reductions and Associated Savings, GAO-16-172 (Washington, D.C.: 

Dec. 23, 2015).

20GAO, DOD Service Acquisition: Improved Use of Available Data Needed to Better 

Manage and Forecast Service Contract Requirements, GAO-16-119 (Washington, D.C.:

Feb. 18, 2016). 

Components’

Reporting of 

Inventory Review 

Elements Continued 

to Improve, but 

Limitations with the 

Resulting Information 

Provided in 

Certification Letters 

Persist
Page 12 GAO-17-17 Service Contract Inventories

contracts that include closely associated with inherently governmental 

functions, nearly three times the amount identified by the Navy, Air Force, 

and other defense agencies collectively for similar types of contracts.

USD(AT&L) and USD(P&R)’s December 29, 2014, guidance governing 

the fiscal year 2014 inventory of contracted services required the military 

departments and defense agencies to certify—through submission of a 

certification letter to the USD(P&R)—that their review was conducted in 

accordance with subsection 2330a(e) of title 10 of the U.S. Code. As of 

July 2016, 40 DOD components reporting for fiscal year 2014 certified 

that they had reviewed their inventories. Notably, the Air Force, which 

represented close to 18 percent of DOD’s contract obligations for services 

in fiscal year 2014, submitted a review certification letter for the first time 

since the fiscal year 2011 inventory. The Army submitted an interim 

certification letter in April 2016 based on a review of the contracted 

functions performed by 73 percent of its contractor FTEs from its fiscal 

year 2014 inventory.

DOD’s guidance for fiscal year 2014, among other things, requires 

components to include six elements in their certification letters.21 DOD 

components’ certification letters have generally improved each year since 

2011 in terms of the number of elements addressed. See figure 2 for the 

list of required elements and the percentage of components that 

addressed each element in their certification letters for fiscal years 2011 

to 2014.

 21DOD’s guidance for the fiscal year 2012 and 2013 inventories instructed components to 

report on the same six elements, in addition to a seventh which required components to 

delineate review results in accordance with all applicable title 10 provisions and the 

guidance. DOD officials responsible for developing the fiscal year 2014 guidance stated 

that they removed this element because it was considered redundant.

Certification Letters 

Included More Required 

Elements but Level of 

Detail in Review Results 

Varied
Page 13 GAO-17-17 Service Contract Inventories

Figure 2: Percentage of Components That Addressed Each Department of Defense (DOD) Required Element for Certifying a 

Review of the Inventory of Contracted Services by Fiscal Year

a

The number of DOD components submitting a certification letter has varied since fiscal year 2011 in 

part because, prior to its fiscal year 2014 guidance, DOD had not identified a list of components 

required to submit an inventory. This analysis focuses on those components that submitted both an 

inventory and an associated unclassified certification letter for a given fiscal year.

b

DOD’s guidance instructing components to report on a set of required elements in their certification 

letters has also varied. For example, the guidance for the fiscal year 2011, 2012, and 2013 

inventories included an element requiring components to delineate their review results in accordance 

with all applicable title 10 provisions and the guidance. This element was not required in DOD’s fiscal 
Page 14 GAO-17-17 Service Contract Inventories

year 2014 inventory guidance. In addition, DOD did not begin requiring components to include a 

review results table in their certification letters until the fiscal year 2012 inventory.

Overall, in fiscal year 2014 components addressed more of DOD’s 

required elements in comparison to prior years, as 21 of the 40 

components—or over half—addressed all required elements in their 

certification letters (see figure 3).

Figure 3: Number and Percentage of Department of Defense (DOD) Reporting 

Components That Addressed All Required Elements in Certification Letters by 

Fiscal Year

Note: Reporting components represent those that actually submitted a review certification letter for 

the fiscal year inventory of contracted services. Within each bar, the numbers represent the number 

of reporting components that addressed all of the required elements out of the total number of 

components reporting for that fiscal year.

While these findings demonstrate that improvements have been made in 

terms of compliance with the review requirements, review results reported 

in certification letters varied in terms of the level of detail and insights 

provided on certain elements, in particular for the element that requires 

components to provide input on actions being taken or considered with 

regard to annual program review and budget processes based on the 

inventory review results. For example, of the 23 components that we 

found addressed this requirement in their fiscal year 2014 certification 

letters,

• the Navy and one other component discussed specific actions taken 

or plans based on the inventory review results to inform existing or 

future program and budget processes;

• nine components, including the Air Force, discussed their existing or 

planned program review or budget processes, but did not explicitly 

state how the review results would be used to inform those processes;
Page 15 GAO-17-17 Service Contract Inventories

• ten components, including the Army, described the inventory as one 

source of information available to inform programming and budget 

matters, but did not provide input on whether specific actions were 

taken or considered based on those review results; and

• in two cases, components reiterated language from DOD’s review 

guidance in their certification letters to affirm that they had addressed 

the required element, but did so without adding any componentspecific information.

Of the 17 components that we found did not address the requirement in 

their fiscal year 2014 certification letters, 12 did not include any narrative 

related to the required element and therefore it is not clear whether the 

component had considered the use of the inventory in program reviews 

and budget processes. Three components’ certification letters stated 

explicitly that no actions were taken or considered based on the fiscal 

year 2014 review results, nor did they provide additional narrative to 

indicate whether the inventory review information is used generally to 

inform programming and budget matters. Two components each 

submitted a consolidated inventory and certification letter consisting of the 

collective review results and responses for the components under their 

purview, in which not all of the individual responses addressed the 

requirement.

Similar to our November 2015 report, we found that components may 

continue to be underreporting instances of contractors providing services 

that are closely associated with inherently governmental functions in their 

inventory review. In this regard, our analysis indicates that DOD obligated 

about $28 billion for contracts in the 17 product service codes that OFPP 

and GAO identified as more likely to include closely associated with 

inherently governmental functions. In comparison, of the 40 components 

reporting for fiscal year 2014, 25 components identified a total of 

$10.8 billion in obligations or dollars invoiced for contracts that included 

work identified as closely associated with inherently governmental 

functions—either within the 17 product service codes or for any other 

Components May 

Continue to Be 

Underreporting 

Contractors Performing 

Closely Associated with 

Inherently Governmental 

Functions
Page 16 GAO-17-17 Service Contract Inventories

category of service.22 We also found significant disparity among the 

components’ reporting of these functions (see figure 4).

Figure 4: Department of Defense Components’ Reporting of Obligations for 

Contracts that Included Closely Associated with Inherently Governmental 

Functions in Fiscal Year 2014

Note: Army’s inventory data reflects total invoiced dollar amounts rather than obligations. Two other 

DOD components reported using both obligations and invoiced dollar amounts in their fiscal year 

2014 inventory data.

Specifically, through its review process, the Army identified $8.1 billion in 

invoiced dollars for contracts that include closely associated with 

 22The remaining 15 components reporting for fiscal year 2014 did not identify any 

instances in which closely associated with inherently governmental functions were being 

performed. 
Page 17 GAO-17-17 Service Contract Inventories

inherently governmental functions.23 In comparison, our analysis of 

Army’s inventory data identified $10.2 billion in invoiced dollars for Army 

contracts in the 17 product service codes. In contrast, the Navy, Air 

Force, and other defense agencies collectively identified only about 

$2.7 billion in obligations and invoiced dollars for contracts that include 

closely associated with inherently governmental functions in their 

inventories, while our analysis of each component’s inventory data 

identified $17.9 billion in collective obligations for contracts in the 17 

product service codes.24

We previously found shortcomings with DOD’s annual inventory review 

guidance, such as a lack of specific guidance on how to identify or review 

contract functions, and concluded that, as a result, components may be 

missing opportunities to properly identify contractors performing closely 

associated with inherently governmental functions. In November 2014, we 

recommended, in part, that DOD revise its guidance to clearly identify the 

basis for selecting contracts to review and to provide approaches the 

components may use to conduct inventory reviews to ensure that the 

nature of how the contract is being performed is adequately considered.25

In November 2015, we reported that DOD’s December 2014 guidance for 

the fiscal year 2014 inventory did not address our recommendation to 

provide such clarification; however, DOD officials noted that a risk-based 

approach to select which contracts to review may be appropriate. As 

 23The Army’s April 2016 interim certification letter, which includes data from a review of 

the functions performed in 73 percent of contractor FTEs in its fiscal year 2014 inventory, 

was used for this analysis. The certification letter did not include review data from five 

commands: the Army Materiel Command, Army North, the Army Corps of Engineers, the 

Army Reserve Command, and the Army National Guard. As a result, the data reported 

here may not reflect all of the Army’s invoiced dollars for contracts identified as including 

closely associated with inherently governmental functions for its fiscal year 2014 

inventory.

24We previously reported that the Army uses a two-pronged approach to reviewing 

activities in their inventory. First, it uses a pre-award checklist to help assess whether the 

proposed contract includes closely associated with inherently governmental functions, 

among others. Second, it uses a post-award review, the Panel for Documentation of 

Contractors, to review information provided by commands to make certain determinations 

such as whether a contractor’s performance of closely associated with inherently 

governmental functions has evolved into the performance of inherently governmental 

functions. The Panel for Documentation of Contractors also evaluates whether sufficient 

in-house capacity exists to oversee the contracted workforce. GAO-13-491.

25GAO-15-88.
Page 18 GAO-17-17 Service Contract Inventories

such, we recommended that DOD ensure that components review, at a 

minimum, those contracts within the product service codes identified as 

requiring heightened management attention and as more likely to include 

closely associated with inherently governmental functions.26 DOD’s March 

2016 guidance for the review of the fiscal year 2015 inventory—the first 

issued after our recommendation—requires components to review those 

contracts; however, it is too soon to determine what effect the revised 

guidance will have on the components’ forthcoming inventory reviews.

In addition to the lack of specific inventory review guidance, our 

November 2015 review also identified other factors that may also 

contribute to components incorrectly identifying contracts that may 

include closely associated with inherently governmental functions during 

the pre-contract award process. Specifically, we concluded that the lack 

of a requirement for acquisition officials to document, during the preaward process, whether a proposed contract includes closely associated 

with inherently governmental functions hinders a component’s ability to 

both identify and report on contractors performing such functions.27 The 

Army’s pre-award process, specifically the Request for Services Contract 

Approval form, requires documentation of a determination whether a 

contract includes closely associated with inherently governmental 

functions; however, the Air Force and Navy do not have department-wide 

requirements to document this determination in their contract files. DOD 

concurred with both of our November 2015 recommendations to require 

acquisition officials to document, prior to contract award, whether contract 

actions include such activities, and to provide clear instructions on how 

the service requirement review boards will be used to identify whether 

contracts contain such functions. Officials from the Office of Defense 

Procurement and Acquisition Policy—the office within USD(AT&L) 

responsible for contracting and acquisition policy—indicated at that time 

 26GAO-16-46.

27DOD is required to take certain steps to mitigate the risk of using contractors for closely 

associated with inherently governmental functions before entering into a contract for such 

functions, and accurate identification before contract award of contracts that may include 

such functions is critical to carrying out these steps. 10 U.S.C. § 2383; DOD Federal 

Acquisition Regulation Supplement § 207.503 S-70. Further, the FAR and OFPP Policy 

Letter 11-01 require agencies to ensure appropriate oversight of contractors performing 

closely associated with inherently governmental functions. FAR § 37.114; and OFPP 

Policy Letter 11-01, Performance of Inherently Governmental and Critical Functions, 

Appendix C, 76 Fed. Reg. 56227, 56242.
Page 19 GAO-17-17 Service Contract Inventories

that a forthcoming DOD Instruction on service acquisitions would include 

direction to consider planned activities under a contract during the service 

requirement review boards. DOD Instruction 5000.74, issued in January 

2016, includes discussion related to identifying closely associated with 

inherently governmental functions in the inventory, but not in the context 

of the service requirement review boards.28

The military departments generally have not developed plans to use the 

inventory of contracted services to inform workforce mix, strategic 

workforce planning, and budget decision-making processes, as required 

by the National Defense Authorization Act for Fiscal Year 2012.29 DOD 

has recently made progress in identifying accountable officials to develop 

plans and establish processes for using the inventories in decision 

making, a step we recommended in November 2014 to help ensure the 

inventory is integrated into key management decisions. Despite this effort, 

DOD faces continued delays to key steps in the implementation of the 

inventory process, including choosing the path forward for its underlying 

inventory data collection system, staffing its inventory management 

support office, and formalizing the roles and responsibilities of that office 

and its relationship to the military departments and other stakeholders. 

Collectively, these persistent delays hinder the department’s ability to use 

the inventory of contracted services as intended.

The military departments generally have not developed plans and 

enforcement mechanisms as required by subsection 2330a(f) of title 10 of 

the U.S. Code to use the inventory of contracted services to inform 

workforce mix, strategic workforce planning, and budget decision-making 

processes. Our November 2014 report on the fiscal year 2012 inventory 

found that the military departments—with the exception of the Army, 

which used the inventory to inform decisions about workforce mix and 

insourcing—lacked plans and processes to incorporate the inventory into 

 28DOD Instruction 5000.74, Defense Acquisition of Services (Jan. 5, 2016), establishes a 

Services Requirements Review Board process for developing, analyzing, reviewing, and 

validating requirements for the acquisition of services, pursuant to section 2330 of title 10 

of the U.S. Code. We have an ongoing review examining, in part, how the Service 

Requirements Review Boards are being implemented.

29Pub. L. No. 112-81, § 936 (2011).

Continued Delays on 

Key Management 

Decisions Hinder 

Efforts to Develop 

Statutorily Required 

Plans to Use the 

Inventory to Inform 

Workforce and 

Budget Decisions

Military Departments Have 

Not Developed Plans to 

Facilitate Use of the 

Inventory
Page 20 GAO-17-17 Service Contract Inventories

decision making.30 While DOD’s December 2014 guidance for the fiscal 

year 2014 inventory more explicitly required components to use the 

inventory reviews to inform programming and budget matters, and to 

inform their strategic workforce planning efforts—which carried through to 

their fiscal year 2015 guidance—our current work found that the military 

departments generally continue to lack plans and processes to do so. 

Appendix II presents the findings of the November 2014 report on these 

plans and processes, with updates, where appropriate.

At the department level, in January 2016, USD(AT&L) issued DOD 

Instruction 5000.74, Defense Acquisition of Services, which establishes 

policy, assigns responsibilities, and provides direction for the acquisition 

of contracted services. In commenting on our November 2015 report, 

DOD stated that this instruction would provide guidance on identifying 

closely associated with inherently governmental activities.31 The 

instruction notes that DOD components will submit an annual inventory of 

contracted services, and that the inventory and associated review are to 

be used to inform acquisition planning and workforce shaping decisions, 

but does not provide any specific guidance as to how the inventories are 

to contribute to such decisions, including guidance for identifying closely 

associated with inherently governmental activities. DOD officials more 

recently stated that this instruction is intended as policy for acquisition 

officials, not as a document on workforce planning.

We previously found that the responsibility for developing plans and 

enforcement mechanisms to use the inventory for decision-making 

processes was not clearly assigned and was divided across multiple 

offices. In our November 2014 report, we recommended that the 

secretaries of the military departments identify an accountable official to 

lead and coordinate efforts across the functional communities to develop 

plans and establish processes for using the inventory for decision making. 

DOD concurred with this recommendation. No components identified an 

accountable official with their fiscal year 2014 inventory submission. 

However, DOD’s March 2016 guidance for the fiscal year 2015 inventory 

explicitly required the identification of an accountable official to help 

ensure that the inventory is integrated into key management decisions. 

 30GAO-15-88.

31GAO-16-46.
Page 21 GAO-17-17 Service Contract Inventories

As of July 2016, 41 components had submitted their fiscal year 2015 

inventories, of which 30 identified an accountable official in their 

transmittal letter. However, none of the three military departments, which 

represent 73 percent of service contract obligations reported in the fiscal 

year 2014 inventory, have yet identified an accountable official. In its 

transmittal letter for fiscal year 2015, the Air Force stated that it first 

needs to better understand the roles and responsibilities of the inventory 

management support office. The Army’s fiscal year 2015 transmittal letter 

states that it is in the process of identifying an appropriate official. As of 

July 2016, the Navy has not yet submitted its fiscal year 2015 transmittal 

letter.

DOD has twice conducted reviews in the past two years to assess its 

approach to conducting the inventory. DOD officials noted that, to some 

degree, these reviews have contributed to delays in choosing the path 

forward for its underlying inventory data collection system, staffing the 

support office, and formalizing the roles and responsibilities of that office 

and its relationship to the military departments and other stakeholders. 

These delays may, in turn, hinder the development and implementation of 

plans and enforcement mechanisms for using inventory data to inform 

workforce and budget decision-making processes.

As shown in figure 5, DOD has struggled since 2011 to determine the 

best way forward for collecting data for the inventories.

Slow Pace of Finalizing an 

Approach for Collecting 

Inventory Data Hinders 

Progress in Using 

Inventory for Decision 

Making
Page 22 GAO-17-17 Service Contract Inventories

Figure 5: Key Events Related to Department of Defense (DOD) Establishing a Common Manpower Data System for the 

Inventory

In September 2014, DOD undertook an internal review of strategic 

options to identify, develop, and consider all reasonable options, in both 

the short and long terms, and propose courses of action for appropriate 

enterprise solutions to facilitate data collection for the inventory. However, 

DOD’s strategic review of options in 2014 did not lead to a definitive way 

forward. In November 2014, we found that DOD’s strategic review of 

options raised questions as to whether DOD will continue to implement 

ECMRA—a DOD-wide inventory data collection system modeled after the 

Army’s CMRA system—or attempt to develop a new system. We 

concluded that, until such time as DOD components are able to collect 

the required data for their inventories, the utility of the inventory for 

making workforce decisions will be hindered. We recommended that, 

should a decision be made to use or develop a system other than the 
Page 23 GAO-17-17 Service Contract Inventories

ECMRA system currently being fielded, USD(P&R) should document the 

rationale for doing so and ensure that the new approach provides data 

that satisfies the statutory requirements for the inventory. In 2015, the 

Joint Explanatory Statement to the National Defense Authorization Act for 

Fiscal Year 2016 mandated that DOD report on the approach the 

department is taking to comply with the inventory requirement and 

whether it is producing a product that enhances oversight of service 

contracting activities. DOD contracted with the RAND National Defense 

Research Institute in December 2015 to assess the methods used by 

DOD to produce the inventory of contracted services and to recommend 

improvements, including alternative methods of collecting, processing, 

and reporting data on contracted services. RAND provided preliminary 

briefings to DOD in March and May of 2016, and its final report is 

expected to be delivered later this year.

While awaiting the results of its internal review and, subsequently, the 

RAND review, DOD delayed fully staffing its support office and defining its 

specific roles, authorities, and relationships to the military departments 

and other stakeholders, as shown in figure 6.

Figure 6: Key Events Related to Standing Up the Support Office

In 2014, a USD(P&R) official told us that DOD would defer the use of 

additional resources for the support office until such time as there had 
Page 24 GAO-17-17 Service Contract Inventories

been a decision whether to pursue a new approach or continue forward 

with implementation of ECMRA. Similarly, in 2016, USD(P&R) officials 

told us that they wanted to be more confident of the planned direction for 

the inventories before committing to additional hiring.

Further, more than two years since the support office was funded, DOD 

has yet to define the roles and responsibilities of the office. In November 

2015, we recommended that USD(P&R) clearly identify these longer term 

relationships between the support office, military departments, and other 

stakeholders with respect to collection and use of inventory data. DOD 

concurred and told us that the release of a memorandum of agreement 

between the Assistant Secretary of Defense for Manpower and Reserve 

Affairs and the Director of the Defense Human Resource Activity on short 

term roles and responsibilities for the support office would do so, but as of 

August 2016, the memorandum of agreement had yet to be formalized. 

Additionally, DOD officials indicated that the memorandum of agreement 

will not address the roles to be played by the support office, the military 

departments, and other stakeholders in exploring the longer term solution 

to collecting contractor manpower data and integrating inventory data 

within the military departments’ decision-making processes. 

Supplemental agreements will be necessary to formalize these 

relationships. The absence of clearly identified relationships between the 

support office and other stakeholders has hindered efforts to implement 

ECMRA and integrate the data into decision-making processes that will 

meet user needs and expectations.

In addition to these uncertainties about finalizing an approach to the 

inventory, our review found that DOD components’ reliance on data 

captured in their CMRA systems for their inventories has varied. DOD’s 

March 2014 guidance for the fiscal year 2013 inventory, as well as 

guidance for subsequent inventories, required components to include the 

percentage of their total contracts that were reported by contractors in 

their CMRA system and the extent to which reported data were used to 

support their inventory submission. Contractors are required to report 

labor hour data by the end of October for work executed during the period 

of performance within the one year period beginning October 1 of the 

prior year and ending September 30. DOD components are then 

supposed to use this contractor-reported data from CMRA to help 

develop their inventories. We found that 22 out of the 40 components, 

comprising about 96 percent of total FTEs reported in the DOD inventory, 

reported using CMRA data for the fiscal year 2014 inventory submission. 

In contrast, only nine components reported using CMRA to do so in the 
Page 25 GAO-17-17 Service Contract Inventories

fiscal year 2013 inventory. Table 2 identifies changes in use of CMRA 

data by the military departments from fiscal year 2013 to fiscal year 2015.

Table 2: Percentage of Contractor Full-Time Equivalents in the Inventory 

Submission Reported by the Military Departments as Based on the Contractor 

Manpower Reporting Application

Fiscal year 2013 Fiscal year 2014 Fiscal year 2015

Air Force 24 28 28

Army 100 100 100

Navy <1 15 25

Source: GAO analysis of Air Force, Army, and Navy reported data. | GAO-17-17

Air Force and Navy both continue to rely heavily on FPDS-NG data to 

derive the contractor FTEs for those contracts not entered into CMRA. 

Navy officials stated that they do not view all contractor-reported CMRA 

data to yet be robust enough to support consistent, reliable use for the 

inventory. However, as we have previously reported, the FPDS-NG 

system has several limitations that limit its utility for purposes of compiling 

a complete and accurate inventory, including

• not being able to identify and record more than one type of service 

purchased for each contracting action entered into the system,

• not being able to capture any services performed under contracts that 

are predominantly for supplies,

• not being able to identify the requiring activity specifically,32

• not capturing service contracts awarded on behalf of DOD by nonDOD agencies, and

• not being able to determine the number of contractor FTEs used to 

perform each service.33

Since 2011, we have made 13 recommendations to help improve how 

DOD collects, reviews, and uses the data from the inventory of contracted 

 32The requiring activity is the organization charged with fulfilling a mission for or on behalf 

of DOD, and is responsible for delivering the service to satisfy the mission, even if the 

effort is contracted to the private sector.

33GAO-12-357.
Page 26 GAO-17-17 Service Contract Inventories

services (see appendix I for a complete list and the status of DOD’s 

actions to address them). We are not making any new recommendations 

in this report, but rather we underscore the need to address the 8 

recommendations that remain open. In particular, DOD needs to resolve 

the long-standing delays and uncertainties regarding implementation of 

the ECMRA system—or an alternative to that system—which have 

hindered efforts to provide reliable and accurate data. Over five years 

ago, we recommended that DOD develop a plan of action with 

timeframes and necessary resources to measure DOD’s progress in 

implementing a common data system and we offered a similar 

recommendation two years ago when it began to explore options for an 

appropriate enterprise solution to facilitate data collection. Delays in

making that decision have had a cascading effect on fully staffing its 

management support office, as well as defining the roles, responsibilities, 

and relationships between this office, the military departments, and other 

stakeholders. Continued delays in making a decision increase the risk 

that DOD will remain unable to collect and analyze service contract data 

and develop associated business processes in a manner that supports 

workforce and budget planning. Conversely, choosing a path forward, 

providing a rationale for that choice, and developing a plan of action with 

implementation timeframes and milestones could help the department 

move toward an environment in which it can stop endlessly agonizing on 

whether to use ECMRA or an alternative system and focus on what data 

to collect and how best to use that data once collected. As we concluded 

in January 2011, the real benefit of the inventory will ultimately be 

measured by its ability to inform decision making. We further noted that 

the absence of a way forward was hindering the achievement of this 

objective. More than five years later, those conclusions remain 

unchanged.

We are not making new recommendations in this report. We provided a 

draft of this report to the Department of Defense for comment. In its 

written comments, which are reprinted in appendix III, DOD stated that it 

is committed to improving its processes surrounding the inventory and to 

working to close the eight open recommendations discussed in the report. 

DOD also provided technical comments, which we incorporated as 

appropriate.

We are sending copies of this report to the appropriate congressional 

committees, the Secretary of Defense; the Secretaries of the Army, Air 

Force, and Navy; the Under Secretary of Defense for Personnel and 

Agency Comments
Page 27 GAO-17-17 Service Contract Inventories

Readiness; and the Under Secretary of Defense for Acquisition, 

Technology, and Logistics. In addition the report is available at no charge 

on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix IV.

Timothy J. DiNapoli

Director, Acquisition and Sourcing Management
Page 28 GAO-17-17 Service Contract Inventories

List of Committees

The Honorable John McCain

Chairman

The Honorable Jack Reed

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Thad Cochran

Chairman

The Honorable Richard J. Durbin

Ranking Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Mac Thornberry

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

The Honorable Rodney Frelinghuysen

Chairman

The Honorable Pete Visclosky

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Appendix I: Past GAO Reports and 

Recommendations on the Inventory of 

Contracted Services

Page 29 GAO-17-17 Service Contract Inventories

Table 3: Past GAO Reports and Recommendations on the Inventory of Contracted Services

Report name Recommendation Status Status description

Defense Acquisitions: 

Further Action Needed to 

Better Implement 

Requirements for 

Conducting Inventory of 

Service Contract Activities, 

GAO-11-192

Develop a plan of action, including 

anticipated time frames and necessary 

resources, to facilitate the department’s 

stated intent of collecting manpower data 

and to address other limitations in its 

current approach to meeting inventory 

requirements, including those specific to 

Federal Procurement Data System – Next 

Generation.

 The Department of Defense (DOD) still 

lacks a comprehensive plan with 

timeframes and necessary resources to 

measure its progress toward a common 

data system and associated business 

processes. In our November 2014 report, 

GAO-15-88, we made a similar 

recommendation to DOD to approve a plan 

of action, with timeframes and milestones, 

for rolling out and supporting a departmentwide data collection system.

Assess ways to improve the department’s 

approach to estimating contractor full-time 

equivalents (FTE) until the department is 

able to collect manpower data from 

contractors.

 In December 2011, the Under Secretary of 

Defense for Acquisition, Technology, and 

Logistics (USD(AT&L)) and the Under 

Secretary of Defense for Personnel and 

Readiness (USD(P&R)) issued guidance 

that identified five methodologies 

components could use to estimate or 

calculate contractor FTEs. Subsequently, in 

November 2012, the USD(P&R) and 

USD(AT&L) issued a joint memorandum 

that instructed components to require 

contractors to report all contractor labor 

hours into an Enterprise-wide Contractor 

Manpower Reporting Application.

Defense Acquisitions: 

Further Actions Needed to 

Improve Accountability for 

DOD’s Inventory of 

Contracted Services, 

GAO-12-357

Ensure that the military departments and 

defense components issue guidance to 

their commands that provides clear lines 

of authority, responsibility, and 

accountability for conducting an inventory 

review and resolving instances where 

functions being performed by contractors 

are identified as inherently governmental 

functions.

 In February 2013, DOD added a new 

reporting element to their inventory 

guidance that requires components to 

report on the actions taken with respect to 

inherently governmental functions.

Ensure that the instances where 

contractors were still performing functions 

previously identified as inherently 

governmental are properly resolved.

 Army and Air Force officials told us that the 

eight collective instances identified in that 

report had been resolved.

Defense Acquisitions: 

Continued Management 

Attention Needed to 

Enhance Use and Review 

of DOD’s Inventory of 

Contracted Services, 

GAO-13-491

Ensure that all required inventory review 

data elements, including a comprehensive 

description of their inventory review 

methodology, are addressed in their 

certification letters.

 Inventory guidance has been clarified to 

support this recommendation.

Provide updated information in 

certification letters on how they resolved 

the instances of contractors performing 

inherently governmental functions or 

unauthorized personal services in prior 

inventory reviews.

◐ The table required by inventory guidance 

provides information on the instances, but 

not on how they were resolved.

Appendix I: Past GAO Reports and 

Recommendations on the Inventory of 

Contracted Services
Appendix I: Past GAO Reports and 

Recommendations on the Inventory of 

Contracted Services

Page 30 GAO-17-17 Service Contract Inventories

Report name Recommendation Status Status description

Defense Contractors: 

Additional Actions Needed 

to Facilitation the Use of 

DOD’s Inventory of 

Contracted Services, 

GAO-15-88

Revise annual inventory review guidance 

to clearly identify the basis for selecting 

contracts to review and to provide 

approaches the components may use to 

conduct inventory reviews that ensure the 

nature of how the contract is being 

performed is adequately considered. If 

DOD intends for components to review 

less than 100 percent of its contracts, then 

the guidance should clearly identify the 

basis for selecting which contracted 

functions should be reviewed.

◐ Inventory guidance states that components 

are to review all contracts, but does not 

provide approaches the components may 

use to ensure the nature of how the 

contract is being performed is adequately 

considered in the inventory review. Also, 

some components are not reporting on the 

percentage of contracts reviewed or are not 

reviewing 100 percent.

Approve a plan of action, with timeframes 

and milestones, for rolling out and 

supporting a department-wide data 

collection system as soon as practicable 

after December 1, 2014. Should a 

decision be made to use or develop a 

system other than the Enterprise-wide 

Contractor Manpower Reporting 

Application system currently being fielded, 

document the rationale for doing so and 

ensure that the new approach will provide 

data that satisfies the statutory 

requirements for the inventory.

 DOD still lacks a comprehensive plan with 

timeframes and milestones to measure its 

progress toward a common data system 

and associated business processes. 

Further, DOD has not made a final decision 

on the approach going forward.

Identify an accountable official within the 

departments with responsibility for leading 

and coordinating efforts across their 

manpower, budgeting, and acquisition 

functional communities and, as 

appropriate, revise guidance, develop 

plans and enforcement mechanisms, and 

establish processes.

◐ As of July 2016, 30 of the 41 components 

that have submitted a fiscal year 2015 

inventory have identified an accountable 

official. However, the three military 

departments have yet to do so.

DOD Inventory of 

Contracted Services: 

Actions Needed to Help 

Ensure Inventory Data Are 

Complete and Accurate, 

GAO-16-46

Provide clear instructions, in a timely 

manner, on how the services 

requirements review boards are to identify 

whether contract activities include closely 

associated with inherently governmental 

functions.

 DOD Instruction 5000.74 discusses 

processes for the services requirements 

review boards, but does not mention 

closely associated with inherently 

governmental functions in that context.

Require acquisition officials to document,

prior to contract award, whether the 

proposed contract action includes 

activities that are closely associated with 

inherently governmental functions.

 DOD has not yet issued supplemental 

direction to require acquisition officials to 

document whether the proposed contract 

action includes activities that are closely 

associated with inherently governmental 

functions.
Appendix I: Past GAO Reports and 

Recommendations on the Inventory of 

Contracted Services

Page 31 GAO-17-17 Service Contract Inventories

Report name Recommendation Status Status description

Ensure that military departments and 

defense agencies review, at a minimum, 

those contracts within the product service 

codes identified as requiring heightened 

management attention and as more likely 

to include closely associated with 

inherently governmental functions.

◐ The fiscal year 2015 guidance on the 

inventory of contracted services explicitly 

requires this, but it is too soon to know 

whether this approach will be effective.

Clearly identify the longer term 

relationships between the support office, 

military departments, and other 

stakeholders.

 A primary memorandum of agreement and 

secondary agreements with the military 

departments to clearly identify relationships 

and roles of the various stakeholders have 

not been finalized.

Legend:

 - Open, Not Implemented

◐ - Open, Partially Implemented

 - Closed, Not Implemented

 - Closed, Implemented

Source: GAO. | GAO-17-17
Appendix II: Summary of Prior Findings on the 

Military Departments’ Implementation of Plans 

to Facilitate Use of the Inventory

Page 32 GAO-17-17 Service Contract Inventories

In November 2014, GAO reported on the status of efforts by the military 

departments to develop plans with enforcement mechanisms to use the 

inventory of contracted services to inform management decisions in three 

primary areas: strategic workforce planning; workforce mix; and 

budgeting. In November 2015, we updated these findings. In those 

reports, we determined that the military departments generally had not 

developed plans and enforcement mechanisms to use the inventory to 

inform these decisions, as required by subsection 2330a(f) of title 10 of 

the U.S. Code.1 Our current work found minimal updates to these 

guidance with specific reference to use of the inventory of contracted 

services for management decisions. The primary exception relates to 

budgeting, where the Army’s Command Program Guidance memorandum 

for the Fiscal Years 2018-2022 Program Objective Memorandum requires 

the Army to use the inventory review when formulating budget requests 

for contracted services. The following summarizes the degree to which 

the Department of Defense (DOD) and the military departments’ guidance 

currently require the use or consideration of the inventory in these areas 

and identifies where DOD or the military departments have updated their 

guidance since our November 2015 report. Updates since our November 

2015 report are italicized in the following tables.

The Under Secretary of Defense for Personnel and Readiness 

(USD(P&R)) has overall responsibility for developing and implementing 

DOD’s strategic workforce plan to shape and improve DOD’s civilian 

workforce, including an assessment of the appropriate total force mix. 

USD(P&R) issued guidance that designated responsibility for the 

development of the strategic workforce plan to the Deputy Assistant 

Secretary of Defense for Civilian Personnel Policy, but did not require use 

of the inventory. The guidance pre-dates the statutory requirement to use 

the inventory to inform strategic workforce planning. For example, the 

Fiscal Years 2013-2018 Strategic Workforce Plan, the most recent plan 

available at the time of our November 2014 and 2015 reviews, stated that 

DOD’s plans for identifying and assessing workforce mix will leverage the 

 1

GAO, Defense Contractors: Additional Actions Needed to Facilitate the Use of DOD’s 

Inventory of Contracted Services, GAO-15-88 (Washington, D.C.: Nov. 19, 2014); and 

DOD Inventory of Contracted Services: Actions Needed to Help Ensure Inventory Data 

Are Complete and Accurate, GAO-16-46 (Washington, D.C.: Nov. 18, 2015).

Appendix II: Summary of Prior Findings on 

the Military Departments’ Implementation of 

Plans to Facilitate Use of the Inventory

Strategic Workforce 

Planning, Workforce Mix, 

and Insourcing Guidance 

Generally Do Not Require 

the Use of the Inventory
Appendix II: Summary of Prior Findings on the 

Military Departments’ Implementation of Plans 

to Facilitate Use of the Inventory

Page 33 GAO-17-17 Service Contract Inventories

inventory of contracted services, but did not provide any additional details

on using the inventory.

None of the three military departments had developed a statutorily 

required plan or enforcement mechanism to use the inventory of 

contracted services for strategic workforce planning and generally they 

had not developed guidance or processes for these purposes (see table 

4).

Table 4: Role of the Inventory of Contracted Services in Existing Strategic Workforce Planning Guidance and Processes at the 

Three Military Departments

Air Force Army Navy

Plans and enforcement 

mechanisms

No documented plan and enforcement mechanism to provide for the use of the inventory of 

contracted services.

Guidance No department-unique strategic 

workforce guidance. The Air 

Force issued a broad framework 

in July 2014 to guide long-range 

planning, but it did not mention 

the inventory of contracted 

services.

No department-unique strategic 

workforce guidance.

No department-unique strategic 

workforce guidance.

Processes Air Force acquisition and 

manpower officials report that 

data derived from the 

inventory—such as contractor 

name, direct labor hours, and 

full-time equivalents—are 

entered into a manpower 

document to provide historical 

perspective on where contracts 

were performed. The inventory 

data were not used in a 

planning capacity.

No processes in place to use 

the inventory to inform strategic 

workforce planning.

In 2012, the Navy formed a 

Total Force Integration Board 

for managing the total force. 

The charter for this board, 

however, does not mention the 

inventory of contracted services 

and a manpower official 

reported that the board did not 

meet regularly.

Source: GAO analysis of military department guidance and processes. | GAO-17-17

DOD has two department-wide policies for determining workforce mix—

DOD Directive 1100.4 and DOD Instruction 1100.22—but neither 

currently requires the use of the inventory to inform workforce mix 

planning. DOD Directive 1100.4, dated February 2005, provides general 

guidance concerning determination of manpower requirements, managing 

resources, and manpower affordability. According to USD(P&R) officials, 

revisions to this directive, which are currently under review, will explicitly 

require use of the inventory to inform budgeting and total force 

management decisions. DOD Instruction 1100.22, dated April 2010, 

provides manpower mix criteria and guidance for determining how 

individual positions should be designated based on the work performed. 
Appendix II: Summary of Prior Findings on the 

Military Departments’ Implementation of Plans 

to Facilitate Use of the Inventory

Page 34 GAO-17-17 Service Contract Inventories

This instruction does not direct the military departments to develop a plan 

to use the inventory to inform management decisions, as DOD issued it 

before the enactment of the requirement for developing such plans.

DOD’s primary insourcing guidance is reflected in April 4, 2008, and May 

28, 2009, memorandums.2 These memorandums reiterate statutory 

requirements by calling for DOD components and the military 

departments to use the inventory of contracted services to identify 

functions for possible insourcing and to develop a plan for converting 

these functions within a reasonable amount of time. Among the military 

departments, however, only Army has guidance and a process that 

requires use of the inventory of contracted services for insourcing. 

However, the military departments have not issued guidance for 

managing workforce mix that requires the use of the inventory of 

contracted services (see table 5).

Table 5: Role of the Inventory of Contracted Services in Existing Workforce Mix and Insourcing Guidance and Processes at 

the Three Military Departments

Air Force Army Navy

Plans and enforcement 

mechanisms

No documented plan and enforcement mechanism to provide for the use of the inventory of contracted 

services.

Guidance Three Air Force Instructions—38-

201, issued in January 2014, 38-2 

and 38-203, issued and updated in 

February 2013—provide guidance 

on complying with DOD’s 

manpower mix policy, but did not 

discuss the inventory of contracted 

services in a planning capacity.

Army Regulation 570-4 

“Manpower Management,”

issued in February 2006, 

implements DOD’s manpower 

mix directive, but pre-dates the 

requirements of subsection (f) 

and did not discuss the 

inventory of contracted 

services in a planning capacity.

Army’s July 2009 

memorandum, “Army Policy for 

Civilian Workforce 

Management and Service 

Contracts,” identifies 

responsibility for development 

and execution of Army 

No department-unique workforce 

mix and insourcing guidance.

 2

The insourcing memorandums are the April 4, 2008, memorandum, “Implementation of 

Section 324 of the National Defense Authorization Act for Fiscal Year 2008 (FY 2008 

NDAA)—Guidelines and Procedures on In-Sourcing New and Contracted Out Functions”

and the May 28, 2009, memorandum, “In-Sourcing Contracted Services – Implementation 

Guidance.”
Appendix II: Summary of Prior Findings on the 

Military Departments’ Implementation of Plans 

to Facilitate Use of the Inventory

Page 35 GAO-17-17 Service Contract Inventories

Air Force Army Navy

insourcing plans based on the 

inventory of contracted 

services.

Army’s September 2014 

Delegation of In-Sourcing 

Approval Authority 

memorandum delegates 

approval authority for all 

insourcing proposals to the 

Assistant Secretary of the 

Army (Manpower and Reserve 

Affairs) but does not mention 

the inventory of contracted 

services.

Army’s November 2014 

memorandum, “Guidance for 

Justifying Transfers of 

Workload” provides guidance 

on justified and unjustified 

transfers of workload in 

accordance with statutes and 

policies to achieve an 

appropriate and cost-effective 

mix of manpower, but does not 

mention the inventory of 

contracted services.

Processes Air Force officials stated that the 

department holds service contract 

review boards which have a role in 

the requirement approval process, 

among other things. According to 

the officials, the review was in the 

beginning stages at the time of our 

review in November 2014. More 

recently, the Air Force reported in 

its combined fiscal year 2014 

inventory review and fiscal year 

2015 inventory submission that it 

has institutionalized the Support 

Services Requirements Review 

(SSRR) process which includes the 

inventory review questions. 

However, it is still not using the 

inventory to inform workforce mix 

and insourcing decisions.

Army used the Panel for 

Documentation of Contractors 

review process to determine 

whether to insource a 

contracted function.

Additionally, Army used the 

Request for Services Contract 

Approval form, developed in 

2009, to inform contract award 

and insourcing decisions. 

Navy was implementing DOD-wide 

policy through its Service 

Requirement Review Boards, 

which include a process to 

consider whether requirements 

encompass inherently 

governmental or closely 

associated with inherently 

governmental functions, among 

other things, but did not require 

use of the inventory of contracted 

services to do so.

Source: GAO analysis of Department of Defense (DOD) guidance and processes. | GAO-17-17
Appendix II: Summary of Prior Findings on the 

Military Departments’ Implementation of Plans 

to Facilitate Use of the Inventory

Page 36 GAO-17-17 Service Contract Inventories

DOD’s Financial Management Regulation provided, among other things, 

guidance to the military departments on budget formulation and 

presentation; however, these regulations did not require the military 

departments to use the inventory in formulating and presenting their 

budgets.3 At the military department level, the Air Force had issued 

additional instructions in terms of budget formulation and presentation. 

However, the Air Force’s guidance did not require the use of the 

inventory. More recently, the Army’s February 2016 guidance, Command 

Program Guidance Memorandum for the Fiscal Years 2018-2022 

Program Objective Memorandum, requires the use of the inventory 

review certification in budget formulation.

The Comptroller issued supplemental guidance requiring, among other 

things, that the military departments and defense components provide 

information on the number of FTEs as required under section 235 of title 

10 of the U.S. Code, but this guidance did not require reporting the 

amount of funding requested for contracted services. The Comptroller 

guidance for budget submissions from all components instructed DOD 

components to ensure that contractor FTEs reported in the budget exhibit 

were consistent with those in DOD’s inventory of contracted services.4

Both Navy and Air Force officials reported that they used the inventory of 

contracted services to estimate the number of contractor FTEs for 

inclusion in their budget request. The Army budget office could not 

identify how the Army estimated FTEs in the Army’s budget submission 

(see table 6).

 3

DOD 7000.14-R Department of Defense Financial Management Regulation. 

4

The Comptroller’s guidance was issued in three memorandums: the December 16, 2011 

memorandum, “Fiscal Year (FY) 2013 President’s Budget Submission”; the February 5, 

2013 memorandum, “Fiscal Year (FY) 2014 President’s Budget Submission”; and the 

January 29, 2014 memorandum, “Fiscal Year (FY) 2015 President’s Budget Submission.”

Programming and Budget 

Decisions Generally Do 

Not Require the Use of the 

Inventory, Though Data on 

Estimated Contractor FullTime Equivalents (FTE) 

Are Included in the Budget
Appendix II: Summary of Prior Findings on the 

Military Departments’ Implementation of Plans 

to Facilitate Use of the Inventory

Page 37 GAO-17-17 Service Contract Inventories

Table 6: Role of the Inventory of Contracted Services in Existing Budgeting Guidance and Processes at the Three Military 

Departments

Air Force Army Navy

Plans and enforcement 

mechanisms

No documented plan and enforcement mechanism to provide for the use of the inventory of contracted 

services.

Guidance Air Force Instructions 65-601, 

Volumes 1-3 on financial 

management did not link to using 

the inventory of contracted 

services. The Air Force also 

followed guidance issued by the 

DOD Comptroller.

The Army followed guidance 

issued by the DOD 

Comptroller. In addition, the 

Army’s Command Program 

Guidance Memorandum 

(CPGM) for the Fiscal Years 

2018-2022 Program Objective 

Memorandum, issued in 

February 2016, requires the 

Army to use the inventory 

review when formulating 

budget requests for contracted 

services.

No Navy-specific budget guidance. 

The Navy followed guidance 

issued by the DOD Comptroller. 

Processes

Budget formulation and 

execution

The Air Force did not have a 

process for using the inventory of 

contracted services for budget 

formulation and execution. 

The Army is to use the 

inventory review when 

formulating their budget 

request for contracted 

services, pursuant to the 

CPGM referenced above. 

The Navy did not have a process 

for using the inventory of 

contracted services for budget 

formulation and execution.

Estimating contractor fulltime equivalents (FTE)To estimate contractor FTEs, the 

Air Force budget office used the 

inventory to arrive at an average 

cost of contractors. The Air Force 

then divided the contractor dollar 

amounts reported in the budget 

submission to arrive at an 

estimated number of contractor 

FTEs and submitted this number 

for the DOD budget exhibit. 

The Army budget office did not 

use the inventory of contracted 

services to inform budgeting or 

estimate contractor FTEs.

To estimate contractor FTEs, the 

Navy budget office used the 

inventory to arrive at average cost 

of contractors. The Navy then 

divided the contractor dollar 

amounts reported in the budget 

submission to arrive at an 

estimated number of contractor 

FTEs and submitted this number 

for the DOD budget exhibit.

Source: GAO analysis of Department of Defense (DOD) programming and budget guidance. | GAO-17-17
Appendix III: Comments from the Department 

of Defense

Page 38 GAO-17-17 Service Contract Inventories

Appendix III: Comments from the 

Department of Defense 
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 39 GAO-17-17 Service Contract Inventories

Timothy J. DiNapoli, (202) 512-4841 or dinapolit@gao.gov

In addition to the contact named above, Janet McKelvey (Assistant 

Director); Emily Bond; Virginia Chanley; Mackenzie Doss; Kristine 

Hassinger; Julia Kennon; Scott Purdy; and Roxanna Sun made significant 

contributions to this review.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(100638)
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