U.S. Securities and Exchange Commission
 

FY 2013 Service Contract Inventory Analysis
 

January 15, 2015
 

Office of Acquisitions
 

SEC Headquarters
 

Washington, DC 20549
 

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Background

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

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

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

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

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

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

It is the responsibility of the Commission to:

 interpret federal securities laws;

 issue new rules and amend existing rules;

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

agencies;

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

fields; and

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

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

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

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 4,300 staff are located in Washington, D.C. and in 11 Regional

Offices throughout the country.

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

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

enforcement investigation.

Scope

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

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

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

dated November 5, 2010 and December 19, 2011, a Federal Procurement Policy Letter dated

November 25, 2014. In addition, agencies are to perform an analysis of their data in their

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

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

effectively balanced.

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

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

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

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

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

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

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

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

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

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

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

greatest percentage of spending (Table 2).

PSC Product or Service Description

B505 Cost Benefit

D302 Systems Development

D307 Strategy and Architecture

D310 Cyber Security and Data Backup

D314 System Acquisition Support

R406 Policy Review/Development

R407 Program Evaluation Services

R408 Program Management/Support

R409 Program Review/Development Services

R413 Specifications Development

R414 Systems Engineering

R423 Intelligence

R425 Engineering/Technical

R497 Personal Services Contracts

R707 Contract/Procurement/Acquisition Support

Table 1: Special Interest Items

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PSC Product or Service Description

D301 Facility Operation and Maintenance

D307 IT Strategy and Architecture

D311 Data Conversion

D399 Other IT and Telecommunications

R408 Program Management/Support

R424 Expert Witness

R499 Other

R612 Information Retrieval

R710 Financial

S206 Guard

Table 2: SEC’s Top Ten PSCs

When reviewed in total, there were only five 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

33% 176 $106,590,436.66

R4 Support – Professional 17% 394 $55,637,990.71

R6 Support – Administrative 3% 18 $10,847,522.52

R7 Support – Management 7% 28 $21,247,483.50

S2 Housekeeping 2% 8 $4,819,342.83

Totals 62% 624 $199,142,776.22

Table 3: SEC’s Detailed Level Service Codes

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On December 31, 2013, SEC notified OMB of the areas planned for analysis in the FY 2013

inventory. While selecting the PSC’s for review, SEC found that 50% of services funding fell into

two of the detailed level services codes; D3 Information Technology and Telecommunications

(33%) and R4 Support – Professional (17%). SEC selected four PSC’s to analyze as part of the

FY13 Service Contract Inventory. SEC focused analysis on the two PSC’s where the agency

obligated the most funds, one from the OMB Special Interest Functions that was not reviewed

in the previous year and one from the top ten most funds that was not reviewed in the previous

year. The functions selected were PSC D399 Other ADP Telecommunications, D301 ADP Facility

Management, D310 ADP Backup and Security Services and R710 Management: Financial.

1.	 The Other IT and Telecommunications PSC D399 function was selected for review due to

the dollar amount obligated under this area and because it was not reviewed last year.

Approximately 13% ($41,722,184.18) of the total service dollars were obligated under

this PSC.

2.	 The Facility Operation and Maintenance Support Program/Management Support PSC

D301 function was selected for review due to the dollar amount obligated under this

area and because it was not reviewed last year. Approximately 8% ($25,551,745.56) of

the total service dollars were obligated under this PSC.

3.	 The Financial Management PSC R710 function was selected for review due to the dollar

amount obligated under this area and because it was not reviewed last year.

Approximately 4% ($13,397,560.14) of the total service dollars were obligated under

this PSC.

4.	 The Cyber Security and Data Backup PSC D310 function was selected for review due to

the dollar amount obligated under this area and because it was not reviewed last year.

Approximately 1% ($2,570,292.02) of the total service dollars were obligated under this

PSC.

Methodology

All four 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 92 contracts that

remain current within the PSCs to determine if inherently governmental functions were being

performed and the approximate number of full time employee equivalents. Contract that were

only for closeout which had expired and no work performed during FY 2013, were omitted from

the survey. Second, the analysis team surveyed and interviewed the Contracting Officer

Representatives (CORs) for 82 contracts being reviewed. The additional ten contracts not

reviewed were due to the contracts having been closed since FY 2013 and the COR is no longer

available. A new COR was not assigned to these awards since they were closed. The surveys

and interviews were conducted to determine the following: if the contractor was performing

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inherently governmental functions; if there are sufficient government personnel for oversight

of the contractor’s performance; and if the contractor is performing critical functions.

Findings

It was determined from the review of the Statements of Work, surveys and COR interviews that

the contractors were not tasked to perform inherently governmental functions or personal

services. The contracts reviewed accounted for approximately 720 full time employee

equivalents. The analysis also determined that the government possesses the expertise to

perform oversight of the contractor’s performance. There was a finding that in some areas,

mainly IT, that CORs felt there may not have adequate personnel to perform oversight of the

contractor’s performance due to employee turn‐over and changes in job duties.

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

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

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

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

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

governmental functions;

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

functions;

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

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

become an inherently governmental function;

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

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

operations; and

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

effectively.

PSC D399 IT and Telecom – Other IT and Telecommunications ‐ $41,722,184.18

The analysis was centered on 59 contracts which accounted for 94% of the dollars obligated

under this PSC. The role these contracted services played were primarily for other functions,

with only two serving critical functions and three for closely associated to inherently

governmental functions. Between these five contracts, there were approximately nine full time

employee equivalents.

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PSC D301 IT and Telecom – Facility Operation and Maintenance Support – Professional:

Program/Management Support ‐ $25,551,745.56

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

under this PSC. The role these contracted services played were primarily for other functions,

with only one for closely associated to inherently governmental functions. There were

approximately seven full time employee equivalents contracted for on the contract containing

closely associated to inherently governmental functions.

PSC R710 Support – Management: Financial ‐ $13,397,560.14

The analysis centered on 14 contracts which accounted for 100% of the dollars obligated under

this PSC. The role these contracted services played were primarily for other functions, with

only one for closely associated to inherently governmental functions. There were no full time

employee equivalents as part of the contract containing closely associated to inherently

governmental functions.

PSC D310 IT and Telecom – Cyber Security and Data Backup ‐ $2,570,292.02

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

under this PSC. The role these contracted services played were all for other functions.

Actions Taken or Planned

Due to the concern of inadequate personnel (too few COR’s) these findings were explored

further. The finding was discussed with IT management to determine a path forward. In the

past year, additional personnel have been hired and the workload has been more evenly

distributed. Based on the analysis performed it has been determined that adequate controls

are currently in place to ensure contractors are not performing inherently governmental

functions, contractor’s performance under the contract is satisfactory and there are adequate

government personnel to perform oversight of the contractor’s performance. No additional

controls are found necessary to be incorporated into existing procedures.

Accountable Officials

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

policies, procedures, and training associated with OFPP Policy Letter 11‐01 addressing the

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

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

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

inventories.

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