DOD CONTRACTED 

SERVICES 

Long-Standing Issues 

Remain about Using 

Inventory for 

Management 

Decisions

Report to Congressional Committees

March 2018

GAO-18-330

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-18-330, a report to 

congressional committees

March 2018

DOD CONTRACTED SERVICES

Long-Standing Issues Remain about Using Inventory

for Management Decisions 

What GAO Found

GAO found that the Department of Defense (DOD) used the same sources as 

it did in prior years to collect data and create an inventory of fiscal year 2016 

contracted services, which is intended, in part, to help DOD make more 

strategic workforce decisions and better align resources. Office of the Secretary 

of Defense (OSD) guidance, issued in September 2017 to implement 

congressional direction, required the military departments to include in their

submissions, at a minimum, purchases of services with a total contract value of

$3 million or more, and in four services acquisition portfolio groups—logistics

management, equipment-related, knowledge-based, and electronics and

communications.

As permitted under OSD’s inventory guidance, the military departments varied 

somewhat in how they reported their contracted services data to OSD. For 

example, the Army and Air Force included purchases both over and under $3 

million and the Air Force also identified purchases by the four portfolio groups. 

The Navy submitted summary data of contracted services but did not provide a 

list of purchases in time to be included in an inventory summary for Congress. 

An OSD official said, however, that the information provided was sufficient to 

prepare the inventory summary, which OSD submitted to Congress in February 

2018. The Navy subsequently provided a list of its fiscal year 2016 service 

purchases to OSD in March 2018.

Military departments generally have not developed plans to use the inventory for 

workforce and budget decisions, as statutorily required. This is consistent with

what GAO found in November 2014 and October 2016. GAO’s analysis found 

that the military departments’ guidance generally does not require using the 

inventory in workforce and budget decisions (see table). 

Military Department Guidance for Workforce and Budget Decisions, as of February 2018

Total number of guidance documents for workforce and budget decisions 14 

Number of guidance documents that direct use of the inventory 2 

Source: GAO analysis of military department documents. | GAO-18-330

Army manpower officials told GAO that inventory information such as the number 

of contractor full-time equivalents and the functions performed can be used to 

inform workforce mix decisions. However, workforce and budget officials at the 

Army, Navy, and Air Force stated they make limited use of the inventory to 

inform decision-making, in part because by the time the inventory is available, 

the data reflected are often too outdated to inform strategic decisions. GAO has 

previously recommended ways to improve use of the inventory. In November 

2014, for example, GAO found that a lack of officials at the military departments 

who are accountable for integrating the use of the inventory leaves the 

department at continued risk of not complying with the legislative requirement to 

use the inventory to support management decisions. This issue persists, as the 

military departments have not made final designations for accountable officials 

responsible for developing plans and enforcement mechanisms to use the 

inventory. 

View GAO-18-330. For more information, 

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

or dinapolit@gao.gov. 

Why GAO Did This Study

DOD obligated about $150 billion on 

contracted services—such as 

information technology support and

maintenance of defense facilities—in 

fiscal year 2016. DOD has faced longstanding challenges in effectively 

managing its service acquisitions. 

The National Defense Authorization 

Act for Fiscal Year 2017 amended 

existing requirements for DOD to 

annually collect data on contracted 

services and to compile and review an 

inventory of the functions performed by 

contractor personnel. The Act also 

contained a provision for GAO to report 

on the status of this data collection and 

to assess DOD’s use of the inventory. 

This report addresses how DOD (1) 

collected data to create an inventory of 

fiscal year 2016 contracted services 

and (2) used the inventory to inform 

workforce planning, workforce mix, and 

budget decisions. GAO has reported 

on DOD’s inventory of contracted 

services since 2010. 

GAO reviewed OSD and the military 

departments’ guidance, as well as the

military departments’ inventory 

submissions to OSD. GAO also

analyzed contracted services data and 

interviewed OSD and military 

department officials.

What GAO Recommends

GAO is not making new

recommendations in this report. Seven

of 18 prior GAO recommendations 

related to the inventory remain open, 

including a recommendation for DOD 

to identify officials at the military 

departments responsible for 

developing plans and enforcement 

mechanisms to use the inventory. In its 

comments, DOD stated it is committed 

to improving its inventory processes.
Page i GAO-18-330 DOD Contracted Services

Letter 1

Background 5

DOD Collected Data for the Inventory of Fiscal Year 2016 

Contracted Services Using the Same Sources as in Prior Years 12

Military Departments Have Not Developed Statutorily Required 

Plans and Continue to Make Limited Use of the Inventory to 

Inform Management Decisions 14

Agency Comments 19

Appendix I Comments from the Department of Defense 22

Appendix II GAO Contact and Staff Acknowledgments 23

Tables

Table 1: Key Changes Related to the Contracted Services Data 

Collection and Inventory Process as Directed by Section 

812 of the National Defense Authorization Act (NDAA) for 

Fiscal Year 2017 8

Table 2: Key Steps in DOD’s Contracted Services Data Collection 

and Inventory Process 9

Table 3: Role of the Inventory of Contracted Services in Current 

Military Department Guidance for Workforce and Budget 

Decisions 15

Contents
Page ii GAO-18-330 DOD Contracted Services

Abbreviations

Comptroller Under Secretary of Defense (Comptroller)

DOD Department of Defense

DPAP Defense Procurement and Acquisition Policy

ECMRA Enterprise-wide Contractor Manpower Reporting 

Application

FAR Federal Acquisition Regulation

FPDS-NG Federal Procurement Data System-Next Generation

FTE full-time equivalent

FY fiscal year

NDAA National Defense Authorization Act

OSD Office of the Secretary of Defense

POM program objective memorandum

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

and Logistics

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

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-18-330 DOD Contracted Services

441 G St. N.W.

Washington, DC 20548

March 29, 2018

Congressional Committees

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

purchaser of contractor-provided services, which obligated about $150 

billion on contracted services in fiscal year 2016. DOD relies on 

contractors to provide a wide array of services, including support for 

management, information technology, and weapon systems. There are 

benefits to using contractors to perform services for the government, but 

the government can become overly reliant on contractors and risk 

contractors performing inherently governmental functions. This risk is 

increased for certain types of services, including program evaluation, 

systems engineering, and information technology support services, as the 

Office of Federal Procurement Policy and our prior work has found.1

Beginning in 2001, 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 conduct certain activities, including:

• establishing a data collection system to provide management 

information with regard to service purchases by the military 

departments and defense agencies;2 and

• annually compiling 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-

 1

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

Contract Inventories, Memorandum for Chief Acquisition Officers and Senior Procurement 

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

Associated Risks Can Be Further Enhanced, GAO-12-87 (Washington, D.C.: Dec. 7, 

2011). 

2

10 U.S.C. § 2330a(a).

Letter
Page 2 GAO-18-330 DOD Contracted Services

time equivalents (FTE) providing services to the department and the 

functions they are performing.3

Further, this section requires the military departments and defense 

agencies to undertake certain actions using the inventory, including:

• reviewing the contracts and activities in the inventory for which the 

secretary or agency head is responsible to ensure that personal 

services contracts in the inventory are performed under applicable 

statutes and regulations and to identify contracted functions that DOD 

should consider for conversion to government performance, also 

known as insourcing;4 and

• developing a plan, including an enforcement mechanism and approval 

process, to use the inventory for strategic workforce planning, 

workforce mix determinations, and budget decisions.5

Section 812 of the National Defense Authorization Act (NDAA) for Fiscal 

Year 2017 amended these requirements by changing the scope of the 

data to be collected and the type of activities to be reported to Congress.6

Specifically, section 812 increased the minimum value of service 

purchases for which information is to be collected from those in excess of 

$150,000 to those in excess of $3 million, reduced the types of services 

included, and changed DOD’s reporting requirements. Section 812 also 

contained a provision for us to report on the status of data collection and 

assess DOD’s efforts to develop a plan and enforcement mechanism to 

use the inventory.7 This report addresses how DOD (1) collected data on 

its service purchases to create an inventory of fiscal year 2016 contracted 

services and (2) used the inventory to inform workforce planning, 

workforce mix, and budget decisions.

 3

10 U.S.C. § 2330a(c). 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 A11 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 were 2,096 in fiscal year 2016.

4

10 U.S.C. § 2330a(d).

5

10 U.S.C. § 2330a(e).

6

Pub. L. No. 114-328 (2016). 

7

10 U.S.C. § 2330a(f).
Page 3 GAO-18-330 DOD Contracted Services

To determine how DOD collected data to create an inventory of fiscal 

year 2016 contracted services (fiscal year 2016 inventory), we reviewed 

relevant legislation and the Office of the Secretary of Defense’s (OSD) 

Fiscal Year 2016 Guidance Related to the Inventory and Tracking of 

Contracted Services (OSD’s inventory guidance), issued in September 

2017.8 We focused on the fiscal year 2016 inventory because it was the 

most recent inventory at the time of our review and is the inventory to 

which the September 2017 guidance pertains. We interviewed officials at 

the Under Secretary of Defense offices for Personnel and Readiness 

(USD(P&R)); Acquisition, Technology, and Logistics (USD(AT&L)); and 

the Under Secretary of Defense (Comptroller) about their roles in 

establishing OSD’s inventory guidance for fiscal year 2016 and other 

aspects of the inventory process.9 We focused our review of the process 

for compiling data for the inventory on the military departments because 

they represented about 79 percent of overall service contract obligations 

in fiscal year 2016, though other DOD components, such as combatant 

commands and defense agencies, are also responsible for creating 

inventories under OSD’s inventory guidance. We interviewed officials at 

the military departments—Army, Navy, and Air Force—to understand 

their approach to collecting contracted services data, including their use 

of data systems, and compiling their inventories.

To understand the potential impact on data collection of the recent 

statutory changes, as implemented in OSD’s inventory guidance, we 

reviewed and analyzed information from USD(AT&L)’s Defense 

Procurement and Acquisition Policy (DPAP) office. Specifically, we 

analyzed the contracted services data from the Federal Procurement 

Data System-Next Generation (FPDS-NG) that DPAP posted on its 

website in sets showing fiscal year 2016 service purchases before and 

after scope changes were applied.10 To ascertain the reliability of the 

 8

Department of Defense, Office of the Secretary of Defense, Fiscal Year 2016 Guidance 

Related to the Inventory and Tracking of Contracted Services, Memorandum (Washington, 

D.C.: Sept. 25, 2017). 

9

The National Defense Authorization Act for Fiscal Year 2017 eliminated the position of 

USD(AT&L) effective February 1, 2018. The position has been divided into the Under 

Secretary of Defense for Research and Engineering and the Under Secretary of Defense 

for Acquisition and Sustainment. Pub. L. No. 114-328, § 901(a) and (b) (2016) (codified at 

10 U.S.C. §§ 133a and 133b). We generally use USD(AT&L) in this report to reflect the 

office’s structure during the time the fiscal year 2016 inventories were to be collected and 

submitted.

10FPDS-NG is the government’s central repository for contracting data. 
Page 4 GAO-18-330 DOD Contracted Services

data, we replicated USD(AT&L)’s process for extracting data from FPDSNG based on officials’ descriptions of that process and compared the 

results with the data on USD(AT&L)’s website. We found minimal 

differences (0.4 percent or less) in the number of and amounts of fiscal 

year 2016 obligations for service purchases between the two data sets 

and determined the data were reliable for estimating the potential 

changes in the amount of data reported. We also reviewed the military 

departments’ inventory submissions to OSD to determine how they 

incorporated key aspects of OSD’s inventory guidance, such as the dollar 

value and types of contracts included.

To determine how DOD used the inventory for workforce planning, 

workforce mix, and budget decisions, we updated the information we 

collected for our October 2016 report on this issue to establish the extent 

to which each military department’s strategic workforce planning, 

workforce mix, and budgeting guidance and processes required or cited 

the use of the inventory of contracted services, as of February 2018.11 To 

do so, we interviewed and obtained information from manpower and 

budget officials at the military departments about the status of their efforts 

to develop plans and to use the inventory, confirmed whether the 

guidance identified in our October 2016 report remained current as of 

February 2018, and, as appropriate, obtained and reviewed any new or 

revised guidance issued after our October 2016 report. In responding to 

our draft report, the Navy provided additional information about its 

guidance in March 2018. In addition, we interviewed USD(P&R), 

USD(AT&L), and Comptroller officials regarding their department-wide 

perspectives on the utility of the inventory to inform management 

decisions.

We conducted this performance audit from June 2017 to March 2018 in 

accordance with generally accepted government auditing 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.

 11GAO, DOD Inventory of Contracted Services: Timely Decisions and Further Actions 

Needed to Address Long-Standing Issues, GAO-17-17 (Washington, D.C.: Oct. 31, 2016).
Page 5 GAO-18-330 DOD Contracted Services

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

acquisition of services, Congress enacted section 2330a of title 10 of the 

U.S. Code in 2001, 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.12

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.13

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 military department or defense 

agency 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;

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

labor hours and associated cost data collected from contractors;14

 12National Defense Authorization Act for Fiscal Year 2002, Pub. L. No. 107-107, § 801(c) 

(2001).

13National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110-181, § 807(a). 

Congress made additional amendments to various aspects of the requirements in section 

2330a in the National Defense Authorization Acts for Fiscal Years 2010, 2011, 2012, and 

2017.

14Estimates of FTEs 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).

Background

Contracted Services Data 

Collection and Inventory 

Requirements and 

Process
Page 6 GAO-18-330 DOD Contracted Services

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

is performed is a personal services contract;15 and

• a summary of the contracted services data required to be collected in 

subsection 2330a(a) of title 10 of the U.S. Code.16

The secretaries of the military departments and heads of the defense 

agencies are required to review the contracts and activities in the 

inventory for which they are responsible to ensure that personal services 

contracts were performed appropriately and that the activities listed do 

not include inherently governmental functions, among other factors.17 In 

addition, in 2011 Congress amended section 2330a to add a requirement 

that the secretaries of the military departments and heads of the defense 

agencies develop a plan, including an enforcement mechanism and 

approval process, to

• provide for the use of the inventory by the military department or 

defense agency to implement requirements of section 129a of title 10, 

U.S. Code (section 129a requires policies and procedures for 

determining the appropriate mix of military, civilian, and contractor 

personnel to perform DOD’s mission);

• facilitate the use of the inventory for compliance with section 235 of 

title 10, U.S. Code (section 235 requires budget justification materials 

to include the amount requested for procurement of contract services 

and the number of full-time contractor employees projected);

• provide for appropriate consideration of the conversion of activities 

identified under section 2463 of title 10, U.S. Code (section 2463 

requires procedures to ensure civilian employees are considered for 

performing critical functions); and

 15A 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 statute to do 

so. Federal Acquisition Regulation (FAR) §§ 2.101, 37.104(b).

1610 U.S.C. § 2330a(c)(2).

1710 U.S.C. § 2330a(d). Inherently 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.
Page 7 GAO-18-330 DOD Contracted Services

• ensure that the inventory is used to inform strategic workforce 

planning.18

In section 812 of the National Defense Authorization Act for Fiscal Year 

2017, enacted in December 2016, Congress further amended section 

2330a by reducing the scope of the required data collection, specifying 

the type of contracted services to be included in an inventory summary 

submitted to Congress, and calling for particular attention to the military 

departments’ review of certain high-risk contracts (see table 1).19

 1810 U.S.C. § 2330a(e). Section 1102 of the National Defense Authorization Act for Fiscal 

Year 2017, Pub. L. No. 114-328, repealed a different statutory requirement, previously 10 

U.S.C. § 115b, for DOD to submit a strategic workforce plan. However, the requirement 

under section 2330a of title 10, U.S. Code, to use the inventory to inform strategic 

workforce planning, was not repealed or amended and remains in effect. 

19National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-328, § 812 

(2016).
Page 8 GAO-18-330 DOD Contracted Services

Table 1: Key Changes Related to the Contracted Services Data Collection and Inventory Process as Directed by Section 812 

of the National Defense Authorization Act (NDAA) for Fiscal Year 2017

Requirement prior to fiscal year 2017 NDAA Requirement after fiscal year 2017 NDAA

Data collection required for service purchases...

• in excess of the simplified acquisition threshold (generally 

$150,000);

• no acquisition portfolio groups specified.

• in excess of $3 million; and

• in the following four service acquisition portfolio 

groups:

a

1. logistics management services;

2. equipment-related services;

3. knowledge-based services;b and

4. electronics and communications services.

Secretary of Defense required to ...

• Submit to Congress an annual inventory of the activities 

performed during the preceding fiscal year pursuant to contracts 

for services.

• Prepare an annual inventory, and submit to Congress a 

summary of the inventory, of activities performed during the 

preceding fiscal year pursuant to staff augmentation 

contracts.

c

Secretaries of the military departments and heads of defense agencies required to review...

• The contracts and activities in the inventory under their 

responsibility.

The contracts and activities in the inventory under their 

responsibility with particular focus on the following high-risk 

product service codes:

d

A. special studies or analysis that is not research and 

development;

B. information technology and telecommunications; and

C. support, including professional, administrative, and 

management.

Source: GAO summary of selected provisions in 10 U.S.C. § 2330a, as amended by section 812 of the fiscal year 2017 NDAA. | GAO-18-330

a

Nine portfolio groups are assigned to the acquisition of services in DOD: transportation services, 

logistics management services, equipment-related services, electronic and communication services, 

medical services, facilities-related services, knowledge-based services, research and development, 

and construction services.

b

Knowledge-based services include engineering and technical services, program management 

services, management support services, administrative and other services, professional services, and 

education and training.

c

Section 812 of the fiscal year 2017 NDAA defined staff augmentation contracts as services contracts 

for personnel who are physically present in a government work space on a full-time or permanent 

part-time basis, for the purpose of advising on, providing support to, or assisting a government 

agency in the performance of the agency’s missions, including authorized personal services contracts 

as defined in section 2330a of title 10 of the U.S. Code.

d

A single contract may include more than one product or service. The product service code selected 

in the Federal Procurement Data System-Next Generation represents the predominant product or 

service being purchased.
Page 9 GAO-18-330 DOD Contracted Services

To address the requirements of section 2330a of title 10, U.S. Code, DOD 

is to conduct several key steps for each fiscal year (see table 2).

Table 2: Key Steps in DOD’s Contracted Services Data Collection and Inventory Process 

DOD action 

Approximate 

timeframe

Responsible 

parties Description

Enter data Throughout the fiscal 

year, but no later than 

September 30 for 

FPDS-NG and 

October 31 for 

ECMRA.

DOD contracting 

officers, contractors

The Federal Procurement Data System-Next Generation (FPDSNG) is a comprehensive, web-based tool for contracting officers to 

report contract transactions. It is the primary data source for 

DOD’s inventory of contracted services, though it was created 

prior to the inventory’s existence and is used for a range of other 

purposes across the federal government. For the purpose of the 

inventory, DOD uses FPDS-NG to capture data on the type of 

service purchased and the obligated amount of the purchase, 

among other things.

The Enterprise-wide Contractor Manpower Reporting Application 

(ECMRA) is a DOD-wide system intended primarily to support 

DOD’s inventory of contracted services. ECMRA is used to 

augment data extracted from FPDS-NG and other systems. 

ECMRA captures data input from contractors, such as direct labor 

hours, direct labor costs, location where the service is performed, 

and the requiring activity. In November 2012, the Office of the 

Secretary of Defense issued a memorandum that instructed DOD 

components, including the military departments, to require 

contractors to report all contractor labor hours into ECMRA and 

ensure the accuracy of the contractor-reported data.

Issue inventory 

guidance

Varies; generally 

winter or spring

USD(AT&L), 

USD(P&R), 

Comptroller

The Office of the Secretary of Defense—through the Under 

Secretaries of Defense for Acquisition, Technology, and Logistics 

(USD(AT&L)); Personnel and Readiness (USD(P&R)); and 

(USD)Comptroller—issues guidance to DOD components. 

Compile 

inventory

Varies DOD components, 

USD(AT&L), 

USD(P&R)

DOD components compile inventories of their respective service 

purchases, drawing primarily from the data collected in FPDS-NG 

and ECMRA, and submit them to USD(AT&L) and USD(P&R). 

Submit 

inventory 

summary to 

Congress

Required by June 30 USD(AT&L) USD(AT&L) submits an inventory summary to Congress. 

Review 

inventory

Required by 

September 28

Secretaries of the 

military departments 

and defense agency 

heads

Secretaries of the military departments and defense agency 

heads review the inventory for activities closely associated with 

inherently governmental functions, and identify those that should 

be considered for conversion to performance by civilian 

employees, among other aspects. Military departments and 

defense agencies certify completion of their review to USD(P&R).

Develop plans 

and 

enforcement 

mechanisms

Ongoing Secretaries of the 

military departments 

and defense agency 

heads

Secretaries of the military departments and defense agency 

heads develop plans and enforcement mechanisms to use the 

inventory for management decisions regarding workforce 

planning, workforce mix, and budgeting.

Source: GAO summary of DOD documents and information. | GAO-18-330
Page 10 GAO-18-330 DOD Contracted Services

DOD has submitted to Congress annual, department-wide inventories for 

fiscal years 2008 through 2015. As shown in table 2, each inventory is 

required to be submitted to Congress by June 30, and is to reflect 

activities performed during the preceding fiscal year. DOD has not always 

submitted the inventory to Congress on time. For example, DOD was 

required to submit the fiscal year 2015 inventory to Congress on June 30, 

2016, but did not do so until September 20, 2016. For the inventory of 

fiscal year 2016 contracted services, the department submitted its 

summary of the inventory to Congress in February 2018.20

Over the past 8 years, we have issued several reports on DOD’s efforts to 

compile and review its inventory of contracted services. We have made 

18 recommendations, 7 of which are still open, on a variety of issues 

related to the inventory.

21 Key findings and recommendations in our prior 

work that pertain to this review are included below.

• In November 2014, we found the military departments generally had 

not developed plans to use the inventory to facilitate DOD’s workforce 

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

that numerous offices were responsible for the various decisionmaking processes at the military departments.22 This, in turn, left the 

department at risk of not complying with legislative requirements. We 

recommended that secretaries of the military departments identify an 

accountable official within their 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. DOD concurred with the recommendation, but as of 

January 2018, the Army and Navy still had not identified accountable 

officials. The Air Force has identified an interim accountable official in 

its Program Executive Office for Combat and Mission Support, 

according to an Air Force official.

 20This is later than what is required in 10 U.S.C. § 2330a(c), which directs the Secretary of 

Defense to submit the summary by the end of the third quarter of the fiscal year, or June 

30, 2017. 

21In October 2016, we summarized our past reports and recommendations on the 

inventory of contracted services. See GAO-17-17, appendix I. The current status of those 

recommendations can be found on our website, www.gao.gov. 

22GAO, 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). 

Prior GAO Work
Page 11 GAO-18-330 DOD Contracted Services

• In November 2015, we found that DOD’s effort to establish an office to 

implement and support a common, enterprise-wide contractor 

manpower data system had encountered a number of challenges and 

lacked clearly defined roles and responsibilities for the office.23 DOD 

had not outlined the relationships between the support office, military 

departments, and other stakeholders in exploring the longer-term 

solution to collect contractor manpower data and integrate inventory 

data within the military departments’ decision-making processes. We 

recommended DOD clearly identify the longer-term relationships 

between the support office, military departments, and other 

stakeholders. DOD concurred and has since stood up the support 

office (now called the Total Force Management Support Division) and 

implemented the Enterprise-wide Contractor Manpower Reporting 

Application (ECMRA) department-wide. However, DOD has not yet 

fully identified longer-term relationships. By doing so, DOD would help 

ensure that efforts to integrate contracted services data into decisionmaking processes will meet user needs and expectations.

• Most recently, in October 2016, we found that DOD components 

(which include the military departments) continued to improve their 

reviews of the inventory compared to prior years, but that they may 

continue to underreport contractors providing services that are closely 

associated with inherently governmental functions.24 Specifically, our 

analysis found that in fiscal year 2014 DOD obligated about $28 billion 

for contracts in the product service codes that the Office of Federal 

Procurement Policy and GAO identified as more likely to include 

closely associated with inherently governmental functions. In 

comparison, the components identified a total of $10.8 billion in 

obligations or dollars invoiced for contracts that included such work. 

We also found that the military departments had not yet developed 

plans to use the inventory to inform workforce mix, strategic workforce 

planning, and budget decision-making. We did not make new 

recommendations in that report.

 23GAO, DOD Inventory of Contracted Services: Actions Needed to Help Ensure Data Are 

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

24GAO-17-17. 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. FAR § 7.503(d).
Page 12 GAO-18-330 DOD Contracted Services

To facilitate DOD’s submission of an inventory summary to Congress, 

OSD’s inventory guidance required each military department to submit to 

the offices of the USD(AT&L) and USD(P&R) a list of all services 

provided under contract consistent with the guidance and within the 

scope of section 2330a of title 10, U.S. Code, as amended by section 812 

of the fiscal year 2017 NDAA. The military departments collected data for 

the fiscal year 2016 inventory using the same data sources—FPDS-NG 

and ECMRA—as they had in prior years, though each department used 

slightly different processes from one another.

OSD’s inventory guidance provided for flexibility in how the military 

departments compiled and submitted data. For example, the guidance 

required that the inventory submissions include, at a minimum, all 

purchases of services with a total contract value of $3 million or more and 

in the following service acquisition portfolio groups: logistics management 

services; equipment-related services; knowledge-based services; and 

electronics and communications services.25 It did not, however, preclude 

the military departments from submitting additional information beyond 

the minimum threshold. In addition, under the guidance, military 

departments were encouraged to augment FPDS-NG data with data from 

ECMRA, as has been the process in the past. We analyzed the effect of 

the recent statutory changes, as implemented in OSD’s inventory 

guidance, on fiscal year 2016 contracted services data reported in FPDSNG and compiled by USD(AT&L). We found that the number of service 

purchases reported under the inventories across the department would 

be reduced to about 2 percent of the total service purchases if the 

components reported only the minimum information required under 

OSD’s guidance. This approach would capture about 30 percent of the 

total service contract dollars.

Officials responsible for overseeing the data collection effort within each 

of the three military departments stated that for fiscal year 2016 they 

collected data captured in FPDS-NG and ECMRA, as they have done for 

previous inventories. The military departments varied somewhat in how 

they collected and reported their data, which is permitted under OSD’s 

guidance. The following is a description of the military departments’

processes for collecting data and key aspects of their inventories:

 25OSD’s inventory guidance identified a minimum threshold value of service purchases 

with a total value of $3 million or more, a slight variation from the fiscal year 2017 NDAA, 

which specified purchases in excess of $3 million. 

DOD Collected Data 

for the Inventory of 

Fiscal Year 2016 

Contracted Services 

Using the Same 

Sources as in Prior 

Years
Page 13 GAO-18-330 DOD Contracted Services

• Army officials stated that they extracted their inventory data for fiscal 

year 2016 primarily from ECMRA and used FPDS-NG data to fill gaps

in data not collected in ECMRA, such as data on aspects of contract 

competition (e.g., number of offers and small business 

considerations). Army officials estimated that the total invoices in 

ECMRA represented approximately 80 percent of contracted services 

obligations for fiscal year 2016.26 In its inventory, submitted to OSD in

January 2018, the Army reported services purchased under contract 

actions with fiscal year 2016 invoiced amounts both above and below 

$3 million. The Army reported that its fiscal year 2016 inventory 

accounts for $31 billion in invoiced amounts and 157,000 contractor 

FTEs.

• Navy officials stated that they captured nearly all of their inventory

data for fiscal year 2016 from FPDS-NG and combined it with ECMRA 

data. Navy officials estimated that approximately 75 percent of the 

Navy services contracts that it believed should have been reported in 

ECMRA were reported during fiscal year 2016. The Navy submitted 

summary data, including fiscal year 2016 obligations and contractor 

FTEs by command and in total, to OSD in December 2017. The Navy 

did not provide a list of its fiscal year 2016 service purchases in time 

to be included in the inventory summary for Congress, but a 

USD(AT&L) official said the information provided was sufficient to 

allow OSD to prepare the summary. The Navy subsequently 

submitted its full inventory of fiscal year 2016 contracted services to 

OSD in March 2018 and reported over $6.5 billion in obligations and 

over 45,000 contractor FTEs.

• Air Force officials stated that they drew approximately 75 percent of 

the data elements required for the inventory for fiscal year 2016 from 

FPDS-NG. Air Force officials stated that they also extracted data from 

the Air Force financial management system, such as total contracted 

dollar amounts, and manpower data from ECMRA. Air Force officials 

did not have an estimate of the percentage of service contracts that 

were reported in ECMRA in fiscal year 2016. The Air Force submitted 

its inventory to OSD in December 2017 and included services 

purchased under contract actions with fiscal year 2016 invoiced 

amounts or obligations both above and below $3 million. In addition, 

the Air Force specifically identified purchases within each of the four 

service acquisition portfolio groups specified in OSD’s inventory 

 26OSD guidance for prior inventories directed components to report the percentage of 

their total contracts reported by contractors in ECMRA, though this was not required in 

OSD’s inventory guidance for the fiscal year 2016 inventory.
Page 14 GAO-18-330 DOD Contracted Services

guidance. The Air Force reported approximately $14.6 billion in 

obligations with an estimated 73,400 contractor FTEs in its fiscal year 

2016 inventory.

A USD(AT&L) official stated that he used the information provided by the 

military departments and defense components to help create the 

inventory summary required by section 812 of the fiscal year 2017 NDAA. 

OSD submitted this inventory summary to Congress in February 2018. 

This official added that OSD will discuss whether changes in its guidance 

for the next inventory are needed to clarify what information the military 

departments and defense components should submit.

The military departments generally have not developed plans to use the 

inventory to inform management decisions as required by subsection 

2330a(e) of title 10 of the U.S. Code and OSD’s inventory guidance. 

Further, manpower and budget officials said they make limited use of the 

inventory to inform strategic workforce planning, workforce mix, and 

budget decisions. This situation is similar to what we have found in our 

past work. Manpower and budget officials we spoke with stated the 

inventory is often too outdated to inform their decision-making, though the 

inventory provides a single source of certain types of information that are 

not readily available elsewhere. This limited use may also reflect, in part, 

the lack of accountable officials responsible for developing plans and 

enforcement mechanisms to use the inventory, as we recommended in 

November 2014.

Subsection 2330a(e) of title 10 of the U.S. Code, DOD Instruction 

5000.74, and OSD’s inventory guidance direct the military departments 

and defense agencies to use the inventory to inform workforce and 

budget decisions.27 When we last reported on this issue in October 2016, 

we identified 12 guidance documents from the military departments 

related to strategic workforce planning, workforce mix, and budget 

decisions. Our current work found that 14 documents, some of which are 

the same as what we reported in October 2016, make up the current set 

 27DOD Instruction 5000.74, Defense Acquisition of Services (Jan. 5, 2016, incorp. change 

1, Oct. 5, 2017).

Military Departments 

Have Not Developed 

Statutorily Required 

Plans and Continue 

to Make Limited Use 

of the Inventory to 

Inform Management 

Decisions

Military Departments 

Generally Have Not 

Developed Plans to Use 

the Inventory for DecisionMaking
Page 15 GAO-18-330 DOD Contracted Services

of military departments’ guidance in these areas.28 Further, we found the 

degree to which these guidance documents require the use of the 

inventory in these areas is still minimal—3 of the 14 documents include 

requirements related to the inventory (see table 3).

Table 3: Role of the Inventory of Contracted Services in Current Military Department Guidance for Workforce and Budget 

Decisions

Military department Guidance

Issuance or 

updated date

Type of 

guidance

Requirements related 

to inventory

Army Army Regulation 570-4, “Manpower 

Management”

February 2006 Workforce mix None

Memorandum, Army Policy for Civilian 

Workforce Management and Service 

Contracts

July 2009 Workforce mix Use inventory for 

insourcing plans

Memorandum, Concept Plan 

Guidance

March 2010 Workforce mix Use inventory for 

insourcing plans

Memorandum, Guidance for Justifying 

Transfers of Workload

November 2014 Workforce mix None

Memorandum, Delegation of 

Insourcing Approval Authority

September 2016 Workforce mix None

Memorandum, Fiscal Year (FY)19 

Command Plan Guidance

February 2017 Budgeting and 

workforce mix

None

Navy Department of the Navy Budget 

Guidance Manual

April 2016 Budgeting None

Budget Guidance Memorandum BG 

18-1, Guidance for the Preparation 

and Submission of the FY2020 

Program/Budget Estimates for the 

Department of the Navy Program/ 

Budget Review

March 2018 Budgeting None

Air Force Air Force Instruction 65-601, Volume 

3, “The Air Force Budget Corporate 

Process”

August 2011 Budgeting None

Air Force Instruction 65-601, Volume 

1, “Budget Guidance and Procedures”

August 2012, 

incorp. ch. 1, July 

2015

Budgeting None

Air Force Instruction 38-201, 

“Management of Manpower 

Requirements and Authorizations”

January 2014 Workforce mix Directs manpower 

division to support 

review of the inventory

 28The Navy does not have department-wide guidance for strategic workforce planning or 

workforce mix, but the Navy and Marine Corps each have their own guidance in these 

areas, which do not mention the inventory.
Page 16 GAO-18-330 DOD Contracted Services

Military department Guidance

Issuance or 

updated date

Type of 

guidance

Requirements related 

to inventory

Air Force Broad framework for long-range 

planning

July 2014 Strategic workforce 

planning

None

Air Force Instruction 65-601, Volume 

2, “Budget Management for 

Operations”

July 2017 Budgeting None

Air Force Policy Directive 38-2, 

“Manpower”

August 2017 Workforce mix None

Source: GAO analysis of military department documents. | GAO-18-330

Two documents, the Army’s July 2009 memorandum on civilian workforce 

management and the Army’s March 2010 concept plan guidance, require 

the use of the inventory for insourcing plans to convert contracted 

activities to performance by government personnel. Air Force Instruction 

38-201 on management of manpower requirements directs the Air Force 

manpower division to support the review of the inventory, but does not 

require its use for workforce mix decisions.

As noted previously, in November 2014 we found that no single office or 

individual at the military departments was responsible for leading or 

coordinating efforts between the various functional areas to develop a 

plan to use the inventory to inform management decisions.29 As a result 

we recommended that the secretaries of the military departments identify 

accountable officials to do so. As of January 2018, the Army and Navy 

still had not named accountable officials responsible for developing plans 

and enforcement mechanisms to use the inventory for workforce and 

budget decisions, according to officials at those departments. Navy 

officials said they have not reached agreement on the appropriate 

managerial level of an accountable official. According to an Air Force 

official, the Air Force has named an official from the Program Executive 

Office for Combat and Mission Support to serve on an interim basis. We 

continue to believe this recommendation is valid and should be fully 

implemented.

 29GAO-15-88. 
Page 17 GAO-18-330 DOD Contracted Services

Army manpower officials we interviewed stated that the inventory 

provided information that was not readily available elsewhere and the 

information collected in the inventory process may be useful for making 

workforce mix decisions. For example, Army manpower officials said the 

inventory provides a single source for information like the number of 

contractor FTEs, contractor labor hours and costs, the location of work 

performance, and the functions performed. Army officials said they can 

use this information to analyze cost factors and contract expenditures and 

compare them to in-house costs. In addition, Army officials noted the 

inventory provides information to address questions from Congress, 

DOD, and Army leadership about the number and cost of contractors, and 

that it is the only source of detailed data that supports analysis of the 

contractor workforce mix that is statutorily required. Comptroller, Navy, 

and Air Force officials added that they use information from the inventory 

to estimate the average number of contractor FTEs that are reported in 

DOD’s annual budget request.

However, representatives from the workforce and budgeting offices within 

the military departments we interviewed also noted that the inventory has 

limitations that hinder its use. These officials noted that the data reflected 

in the inventory are often too outdated to help inform strategic decisions 

that are usually made at the local level—such as a specific military 

installation—based on real-time data. For example, Air Force officials said 

that under the program objective memorandum (POM) process, the Air 

Force identifies future budget requests and workforce needs 2 years 

before the beginning of a fiscal year, whereas the most recent inventory 

data available may already be 2 years old when that process starts.30 To 

illustrate the issue, the officials noted that they were already planning for 

the 2020 POM in early fiscal year 2018, although the fiscal year 2016 

inventory was not yet available. As a result, if the Air Force were to use 

inventory data to plan for the 2020 POM, they would have to rely on fiscal 

year 2015 inventory data.

Air Force officials also said certain types of information that are useful for 

strategic planning, such as planned contracts for services and the scope 

and duration of the existing contracts, are not captured in the inventory 

process. Army officials had a similar perspective and said they do not use 

 30The program objective memorandum is established by each DOD component for their 

programs and is a 5-year funding plan for the specific capabilities needed to meet 

planning guidance objectives. 

Military Departments Make 

Limited Use of the 

Inventory for DecisionMaking
Page 18 GAO-18-330 DOD Contracted Services

the inventory to plan for the POM because collecting data on past 

contracted services is not as relevant to estimating future requirements 

and funding needs.

As part of Congress’s efforts to inform DOD’s management of its 

acquisition of contracted services, it enacted the inventory legislation. We 

concluded in January 2011 that the real benefit of the inventory process 

would ultimately be measured by its ability to inform management’s

decision-making.31 As noted above, we have made recommendations to 

help improve this decision-making, which we continue to believe should 

be fully implemented. DOD officials have also identified ways in which the 

inventory can be useful.

Recent legislation and our prior work in other related areas have identified 

additional means through which DOD can manage its acquisitions of 

contracted services.

• In December 2017, the National Defense Authorization Act for Fiscal 

Year 2018 was enacted. Section 851 requires DOD to regularly 

analyze past spending patterns and anticipated future requirements 

for its procurement of services and use these analyses to inform 

decisions on the award of and funding for such service contracts.32

• In August 2017, we found DOD had not fully implemented three key 

leadership positions that were intended to enable DOD to more 

strategically manage service acquisitions.33 We recommended the 

USD(AT&L) reassess the roles, responsibilities, authorities, and 

organizational placement of key leadership positions to help foster 

strategic decision-making and improvements in the acquisition of 

services. DOD concurred with our recommendation. In December 

2017, the Deputy Secretary of Defense appointed a reform leader for 

service contracts and category management—an approach intended 

to manage entire categories of spending across government for 

commonly purchased goods and services—and established related 

 31GAO, 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). 

32Pub. L. No. 115-91. 

33GAO, Defense Contracted Services: DOD Needs to Reassess Key Leadership Roles 

and Clarify Policies for Requirements Review Boards, GAO-17-482 (Washington, D.C.: 

Aug. 31, 2017).
Page 19 GAO-18-330 DOD Contracted Services

reform teams to help ensure department-wide efficiency in contract 

spending.

• In February 2016, we found that DOD’s and Congress’s insight into 

future spending on contracted services was limited because DOD did 

not identify service contract spending needs beyond the current 

budget year.34 Although program offices generally kept track of their 

future service contract needs and estimated costs for 5 years out, 

they were not required to identify planned service contract spending 

beyond the budget year. We recommended that the military 

departments revise their programming guidance to collect information 

on how contracted services will be used to meet requirements beyond 

the budget year. DOD partially concurred with our recommendation, 

but noted that the volatility of requirements and each budget cycle 

constrain the department’s ability to accurately quantify service 

contract requirements beyond the budget year. We agreed that 

requirements and budgets change over time, but our work showed 

that the needed data already exists and is not captured in such a way 

to inform senior leadership on future service contract spending. We 

continue to believe that implementing this recommendation will assist 

the department in gaining better insight into contracted service 

requirements and enable more strategic decisions about the volume 

and type of services it plans to acquire.

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

draft of this report to DOD for comment. In its written comments, which 

are reprinted in appendix I, DOD stated that it remains committed to 

improving its processes for collecting, analyzing, and reporting contracted 

services data. DOD also provided technical comments, which we 

incorporated as appropriate.

 34GAO, 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). 

Agency Comments
Page 20 GAO-18-330 DOD Contracted Services

We are sending copies of this report to the appropriate congressional 

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

and Air Force; the Under Secretary of Defense for Personnel and 

Readiness; the Under Secretary of Defense for Acquisition and 

Sustainment; and the Under Secretary of Defense (Comptroller). 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 II.

Timothy J. DiNapoli

Director, Contracting and National Security Acquisitions
Page 21 GAO-18-330 DOD Contracted Services

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 Dick 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 Kay Granger

Chairwoman

The Honorable Pete Visclosky

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Appendix I: Comments from the Department of 

Defense

Page 22 GAO-18-330 DOD Contracted Services

Appendix I: Comments from the Department 

of Defense
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 23 GAO-18-330 DOD Contracted Services

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

In addition to the contact named above, Katherine Trimble (Assistant 

Director); Brenna Derritt (Analyst-in-Charge); Pete Anderson; Dennis 

Antonio; Vincent Balloon; Lorraine Ettaro; Gina Flacco; Kristine 

Hassinger; and Julia Kennon made significant contributions to this review.

Appendix II: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(102122)
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