Report of the

Defense Science Board 

Task Force on

Improvements to Services 

Contracting

March 2011

Office of the Under Secretary of Defense

For Acquisition, Technology, and Logistics

Washington, D.C. 20301-3140
This report is a product of the Defense Science Board (DSB).        

The DSB is a Federal Advisory Committee established to provide independent advice to the 

Secretary of Defense. Statements, opinions, conclusions, and recommendations in this report 

do not necessarily represent the official position of the Department of Defense. The Defense 

Science Board Task Force on Improvements to Services Contracting completed its 

information‐gathering in February 2011. The report was cleared for open publication by the 

DoD Office of Security Review on March 8, 2011.

This report is unclassified and cleared for public release.
OFFICE OF THE SECRETARY OF DEFENSE

3140 DEFENSE PENTAGON

WASHINGTON, DC 20301–3140

MEMORANDUM FOR UNDER SECRETARY OF DEFENSE FOR ACQUISITION, 

TECHNOLOGY, AND LOGISTICS

SUBJECT: Report of the Defense Science Board Task Force on Improvements to Services 

Contracting

I am pleased to forward the final report of the Defense Science Board Task Force on 

Improvements to Services Contracting. The report offers important considerations for the 

Department of Defense for acquisition of services.

Purchasing services presents a significant opportunity to the Department of Defense as it 

represents over 50 percent of the Department’s acquisition budget. Moreover, in many cases

services contracting is an operational necessity, such as in contingency operations. The 

challenge is to obtain the advantages such as lower costs, access to needed expertise, and the 

ability to surge or fade manpower while lowering risk and increasing performance over time. 

The task force findings include many issues related to the complexity, span, and scope of 

services contracting – not just in the range of dollars involved, but also in types of activities 

contracted for. A better understanding of these issues is needed and the right data about them 

needs to be tracked to conduct relevant trend and performance analysis. The report also makes 

useful recommendations in specific areas, such as the definition of inherently governmental 

functions and services contracting in support of contingency operations. The report suggests 

many helpful actions to address these issues in the areas of policies and procedures, leadership, 

and training, but no “one-size-fits-all” solutions exist.

I endorse all of the study's recommendations and strongly encourage you to adopt them 

into your operations.

 

Dr. Paul G. Kaminski

Chairman

DEFENSE SCIENCE

BOARD

OFFICE OF THE SECRETARY OF DEFENSE

3140 DEFENSE PENTAGON

WASHINGTON, DC 20301–3140

March 29, 2011

MEMORANDUM TO THE CHAIRMAN, DEFENSE SCIENCE BOARD

SUBJECT: Final Report of the Defense Science Board Task Force on Improvements to Services 

Contracting

The final report of the Defense Science Board Task Force on Improvements to Services 

Contracting is attached. The task force conducted an independent assessment of improvements 

in the procurement and oversight of services by the Department of Defense (DOD).

The task force identified five Key Findings in their assessment.

• Contracts for services support major DOD programs and their associated administrative, 

technological, and logistics services and are a strategic component of all military 

operations. DOD services contracting in 2010 added up to more than $200 billion–over 

50 percent of the total DOD acquisition budget.

• Buying services is fundamentally different than buying weapons systems, yet most 

current acquisition regulations, laws, policies, processes, standards, training, education, 

and management structures are focused on optimizing the characteristics of products.

Only a small fraction of these focus on the way services are acquired.

• The workforce is inadequately prepared to acquire and execute services contracts. 

Specific guidance, training, and experience are needed.

• The DOD urgently needs to establish a meaningful taxonomy for services in order to 

develop useful definitions, performance standards, and outcome measures for each type 

of service. It is important to note that “one size does not fit all” and that different types of 

services will need different policies and guidance than others—buying engineering 

design services is vastly different than buying base maintenance services.

• New and more detailed guidance is needed that clarifies the inherently governmental 

functions that should always be performed by government personnel. This is needed to 

eliminate the confusion over work that is “critical” or “closely associated” with 

inherently governmental activities, much of which can be done better and more 

efficiently through contracting in support of inherently governmental work.

• Services contracting to support contingency operations is a special case needing fast 

response. A number of specific actions are needed to facilitate acquisition in these timecritical situations.

DEFENSE SCIENCE

BOARD
The task force next identified a number of Recommended Actions that would address the 

situation: 

• Create new policies and processes for services contracting. These should address tracking 

and management, guidance on contract structures, and the integration of commercial 

business practices into DOD processes.

• Designate roles and responsibilities for appropriate leadership and organizations for 

services contracting. Almost all senior leaders need training in this area. Further, seniorlevel focal points are needed in each service to ensure the new policies and processes are 

implemented and improved. 

• Strengthen the skills and capabilities of people involved in services contracting. The task 

force urgently recommends shifting acquisition training from products only to a balance 

of products and services. 

• Establish separate policies and processes to improve management and oversight of 

contingency contracting. Recommended actions in this area include creating a single 

playbook for all relevant information needed at the start of a contingency operation and 

including the acquisition and participation of services contractors in realistic exercises 

and training.

Perhaps most importantly, the task force encourages the DOD at all levels to recognize that “one 

size does not fit all,” and that an over-emphasis on compliance at the expense of creativity will 

not result in effective, efficient, or timely services contracting.

The task force feels that action is urgently needed to address all of these recommendations given 

the size and critical nature of services contracting to the achievement of DOD missions.

Jacques S. Gansler

Chairman
TABLE OF CONTENTS I v

Table of Contents

Executive Summary ..........................................................................................................vii

Chapter 1. New Policies and Processes ......................................................................1

Chapter 2. Leadership and Organizational Roles and Responsibilities..... 19

Chapter 3. Personnel Skills and Capabilities......................................................... 23

Chapter 4. Services During Contingency Operations ........................................ 27

Chapter 5. Final Thoughts ............................................................................................. 31

Appendix A. Congressional Oversight of Services Contracting..................... 33

Appendix B. Regulations on Inherently Governmental Functions .............. 35

Appendix C. DOD Portfolio Analysis Strategy....................................................... 39

Appendix D. Acquisition of Information Technology Services...................... 44

Terms of Reference.......................................................................................................... 47

Task Force Membership ................................................................................................ 51

Presentations to the Task Force................................................................................. 53

Glossary................................................................................................................................. 55

EXECUTIVE SUMMARY I vii

Executive Summary

Contracts  for  services  are  essential  to  all  aspects  of  military  operations. 

Contracted services to support Department of Defense  (DOD) missions range  from 

routine  base  operating  support  to  highly  skilled  analysis  to direct  support  to 

battlefield  operations. Contracts for  services  supporting major DOD programs  and 

their associated administrative,  technological, and logistics  services are a  strategic 

component  of  the  expanding  expeditionary  military,  stability,  and  reconstruction 

operations. The reduction in the number of uniformed personnel in the 1990s, and 

today’s  demanding  combat missions  have  resulted  in  the  expansion  of  services 

contracting  to  more  than  $200  billion—over  50  percent of  the  DOD acquisition 

budget.  Today,  almost  every  defense  task  that  is  not an  inherently  governmental 

function is carried out in some part through contracted services.

Buying  services  is  fundamentally different  than  buying  weapons  systems. 

Effective utilization of services relies on people—optimizing individual skills, work 

environments, communication, and many other factors. Yet most current acquisition 

regulations,  laws,  policies,  processes,  standards,  training,  education,  and 

management  structures  are  focused  on  optimizing the  characteristics  of products. 

The task force made a number of recommendations to remedy this imbalance. 

In order to improve the management of services contracts, the Department urgently 

needs to track and understand which services are purchased, how they are utilized, and 

who  performs  them.  This  will  require  the  Department  to  establish  a  meaningful 

taxonomy for services, and  then to develop useful definitions, performance standards, 

and  outcome measures  for each type  of  service. It is important  to  note  that “one  size 

does not fit all” and that some types of services will need different policies and guidance 

than  others.  Services  for  analysis,  construction,  information  technology, and  physical 

security  services have many similarities—and  even  more  differences.  Of  current 

importance,  performance  standards  and  outcome  metrics  change  when these  same 

services are provided during an expeditionary operation. 

Improving  the  taxonomy,  definitions, and  standards  is  needed  for  both 

peacetime and contingency periods. A reliable structure will provide a better basis 

to reward positive and relevant past performance and to select contractors for their 

best  value  to  the  government.  This  is  much  preferred  to  using  criteria  stating 

”technically acceptable, low bid” when evaluating proposals and awarding contracts.
viii I EXECUTIVE SUMMARY

An important part of the task force’s work was to consider what services should 

be  competitively  contracted  out, versus  what  services  should  be  performed 

organically  within  the  Department.  To  facilitate  this,  new  and  more  detailed 

guidance is needed that clarifies the inherently governmental functions that should 

always be performed by government personnel. 

A specific need is to eliminate the confusion over work that is “critical” or “closely 

associated” with inherently governmental activities. Guidance must explicitly categorize 

these functions as either inherently governmental or non‐inherently governmental. For 

non‐inherently  governmental  activities that  are  currently  being  done  by  government 

personnel, each DOD military department or defense agency should use competition to 

determine  whether  government  or  contractor  personnel  should  perform  them.

1 In 

evaluating  costs  for  comparable  work,  all  costs  to  the  federal  government  must  be 

considered, both short‐ and long‐term, and both direct and indirect.

Major Recommendations

The  task  force  proposes  a  new approach  to  services  with  four interrelated, 

critical recommendations for the Secretary of Defense:

RECOMMENDATION 1:  CREATE NEW POLICIES AND PROCESSES FOR SERVICES 

CONTRACTING.

Initially  this  should  include  a  meaningful  taxonomy  that  guides  definitions, 

performance standards, and outcome metrics for services contracts. Clear direction

is also  needed on contract  structures  to  reduce  risk and meaningful incentives  for 

high  performance  at  low  cost.  The  task  force  also  encourages  a  new  look  at 

integrating  proven  commercial  business  practices and  communication  strategies

into defense acquisitions, both before a solicitation and during contract execution.

RECOMMENDATION 2:  DESIGNATE ROLES AND RESPONSIBILITIES FOR APPROPRIATE 

LEADERSHIP AND ORGANIZATIONS FOR SERVICES CONTRACTING.

Senior  leadership  currently  gives  little  attention  to  services,  and almost all  senior 

officers  need  training  in  this  area.  New  roles  and  responsibilities  recommended 

include  a  senior‐level  focal  point  for  services  in  the  Office  of  the  Secretary  of 

Defense, and strategic sourcing of services executives in each military department. 

                                                       

1. Office of Management and Budget.  Performance of Commercial Activities, Circular No. A‐76, 

revised May 29, 2003. (Link accessed March 2011.)
EXECUTIVE SUMMARY I ix

Strategic  sourcing  offices  or  category  councils  should  also  be  formed  to  provide  a 

shared forum for the users and acquirers of services.

RECOMMENDATION 3:  STRENGTHEN THE SKILLS AND CAPABILITIES OF PEOPLE INVOLVED 

IN SERVICES CONTRACTING.

Workforce  issues  hamper  performance  in  all  phases  of  services  contracting. 

Systematic  improvements  in  training  are  needed  for  all  personnel  involved  in 

services  contracting.  To  jump‐start  this,  the  task  force  recommends  actively 

recruiting experts in services acquisition from outside of government contracting to 

the  Department.  To  ensure  these  improvements  continue,  changes  are  needed  to 

ensure that services acquisition experience is career‐enhancing for both civilian and 

military personnel.

RECOMMENDATION 4:  ESTABLISH SEPARATE POLICIES AND PROCESSES TO IMPROVE 

MANAGEMENT AND OVERSIGHT OF CONTINGENCY CONTRACTING.

Today,  over  half  of  the  total  contingent  in  Iraq  and  Afghanistan  are  contractors 

providing  services,  illustrating  the  critical  need  for  services  contracting  to  support 

contingency  operations.  A  number  of  actions  are recommended  to  facilitate 

acquisition in these situations. First, a single playbook should be issued that contains 

all  relevant  acquisition  information  for  use  in  time‐critical  situations.  Delegation  of 

limited contracting authority is also needed during contingency operations to enable 

organizations to move quickly in response to a threat. Realistic services contracts and 

acquisition  must  be  part  of  any  training  or  exercises  to  prepare  for  contingency 

operations. Finally, to make all this possible, it is important that contingency contracts 

are tracked as a separate element in the procurement tracking system.

A Path Forward

Major  change  is  needed  to  enable  DOD  to  acquire  and  use  services far  more

effectively and efficiently. Much of the required actions can be done by the Secretary 

of Defense under current authorities and the commercial nature of many services is 

consistent with Federal Acquisition Regulations, Part 12. However, legislation would 

be  extremely  valuable  to  demonstrate  congressional  support  for  the new  services 

acquisition system.

The  task  force  acknowledges the  National  Defense  Authorization  Act  for  the 

Fiscal  Year  2011.  The  relevant  passages  are  included  in  Appendix  A,  stating  the 

intent to drive a rational process in the DOD to identify, assess, review, and validate 
x I EXECUTIVE SUMMARY

requirements  for  the  acquisition  of  services.2 The  task  force  encourages the 

Department in the implementation of this Act to recognize that “one size does not fit 

all,” and  that an over‐emphasis on compliance at  the expense of creativity will not 

result in effective, efficient, or timely services contracting.

                                                       

2. Ike Skelton National Defense Authorization Act for Fiscal Year 2011, Public Law 111‐383. (Link 

accessed March 2011.)
NEW POLICIES AND PROCESSES I 1

Chapter 1. New Policies and Processes

Contracted  services  in  the  Department  of  Defense  (DOD)  support  a  variety  of 

mission requirements, ranging from routine services for facilities and equipment to 

highly  skilled  analysis  and direct  support  to  battlefield  operations.  Contracts  for 

services  support  major  programs  and  their  associated  administrative,  technology, 

and  logistics  functions;  and are  a  strategic  component  of  the  expanding 

expeditionary  military,  stability, and  reconstruction  operations.  Almost  every 

defense  function  that  is  not  inherently  governmental3 is  carried  out  in  part  by 

contracted services, including support for congressional directives.

4

Contracting  for  services  has  long  been  essential  to  the  military  mission.  As  is 

shown in Figure 1, the acquisition of defense services accounted  for approximately 

57 percent of the 2009 defense acquisition budget.

A number of issues, however, influence the DOD’s ability to provide services in 

an  efficient  and  effective  manner.  These  include  setting  definitions  and  standards 

for services, making decisions to retain organic capacity or contract for services, and 

setting  effective  processes  and  policies  to  guide  services  contracting. To  address 

these issues, the task force recommends that the Secretary of Defense create a new, 

simplified,  and  streamlined  process  to  govern  the  range  of  services  contracted.

Several recommended actions are proposed to implement this change.

Figure 1: Breakdown of Defense Acquisition Budget (FY2009)

                                                       

3. Policy guidance for inherently governmental functions can be found in Appendix B.

4. Including this Defense Science Board Task Force.
2 I CHAPTER 1

Processes to Improve Understanding of Defense 

Services Contracting

Some  services  fit  easily into  simple  categories,  but many  do  not.  There  are many 

instances  where  the  lines  between  goods  and  services  are  blurred.  An  example  is 

information  technology  (IT)  services,  which  may be  providing  and  supporting 

commercial hardware for government information processing and telecommunications, 

but  also  may  entail  operating  the  equipment  and  providing resulting  information.  IT

services  may  also  support  major  information  systems  acquisitions,  for  example,  by 

carrying out systems engineering, establishing initial standards, performing third‐party 

testing, analyzing security vulnerabilities, and so on.

Equipment maintenance is another area with many facets, ranging from upgrading 

equipment  to  supplying  spare  parts  as  needed,  and  can  extend to  public‐private 

partnerships, such as privately financed initiatives. Finally, research and development

(R&D) efforts cover the full spectrum from providing hardware to providing services.

While all contracted services can benefit from best practices, some, such as physical 

security  services  or  facilities  maintenance,  are  easier  to  define  and  standardize. 

Construction  and  product  development are  more  complex;  while  these  are typically 

contracted as a service, the deliverable is usually a product. This means two very similar 

outcomes—a building, a study, or a component—may have been procured and tracked 

through  very  different  paths. A  notional  illustration  of  the  complexities  and  overlaps 

among the categories of defense contracting is shown in Figure 2.

Figure 2: Complexities and Overlaps among Defense Contracts
NEW POLICIES AND PROCESSES I 3

Taxonomy for Services

The  Department  of  Defense  buys  services  ranging  from  highly  classified, 

knowledge‐based tasks to mundane grass cutting, and everything in between. Since 

2007,  these  have  been  tracked  in  the  Federal  Procurement  Data  System  (FPDS). 

FPDS is a large and unwieldy database  that is used across  the  federal government. 

While DOD procurements represent the largest funding sector in the database, FPDS 

was not designed nor is it optimized for DOD’s use. 

A current breakdown of major services codes used in FPDS is shown in Table 1. 

These  are  rolled  up  from  more  than  1,350  subcategories,  ranging  from  AA16‐

Management  Support  of  Agriculture  Insect  and  Disease  Control  R&D  to  Z300‐

Restoration‐Maintenance, Repair, Alterations. The ability to tag each contract with a 

4‐digit  code is useful  for  tracking  simple  contracts,  but may also  be limiting. As in 

many databases,  the  FPDS user manual  states  that “if more  than  one code applies, 

report  the  code  that  represents  the  predominance  of  the  dollars  obligated  or  de‐

obligated  for  the contract/action.”5 This is clearly not useful  for large and complex 

services contracts, such as logistics support for expeditionary operations. While an 

entire  contract  may  be tagged  R706‐Logistics  Support  Services  or R414‐Systems 

Engineering Services, it will  contain many major tasks that are more appropriately 

categorized  by  other  4‐digit  codes.  The  ability  to  apply  the  appropriate,  different 

codes to tasks within large contracts is a needed change to FPDS that would benefit 

not only DOD, but all federal agencies.

To facilitate analysis, the DOD uses a different top‐level taxonomy than the FPDS 

alphabetical  categories  shown  in  Table  1.  The  Office  of  Defense  Procurement  and

Acquisition  Policy  (DPAP)  groups  more  than 1,300  codes into  39  portfolios,  as 

shown in Table 2 and also presented in Appendix C. 

Examination of the data presents a number of concerns. First, any service code 

ending in “9” is an “Other” category. For example, the largest category of all services 

is R499‐Other Professional Services. It is unlikely that the services included here did 

not  fit  into  any  of  the  dozens  of  categories  available  for  classification  under 

professional  services;  rather,  it  is  likely  that  each  contract  included  multiple 

categories  of  services  and  “Other”  was  the  most  appropriate  choice.  Further 

examples  highlight  related  issues;  all  S206‐Guard  Services are accounted  under 

“Housekeeping  &  Social  Services”  (while  many  guard  services  are  not  facilities‐

                                                       

5. Federal Procurement Data System. FPDS‐NG User Manual. (Link accessed February 2011.)
4 I CHAPTER 1

related),  and  D313‐Computer‐Aided  Design  and  Manufacturing  Services are 

accounted under the “Telcom” portfolio. 

Currently, DPAP rolls up these 39 portfolios into eight “portfolio groups.” Figure 

3 shows the total funded spending in FY 2009 for each portfolio group.

Table 1. DOD Services Funding

Major 

Service 

Code

Description in the FPDS

DOD FY2010 

(billions)

R Professional, Administrative and Management Support Services $47.6

A Research and Development 42.3

Y Construction of Structures and Facilities 24.8

J Maintenance, Repair, and Rebuilding of Equipment 16.6

D Automatic Data Processing and Telecommunication Services 13.1

Q Medical Services 12.7

Z Maintenance, Repair or Alteration of Real Property 10.6

S Utilities and Housekeeping Services 7.9

V Transportation, Travel and Relocation Services 6.9

C Architect and Engineering Services - Construction 3.8

F Natural Resources Management 2.7

M Operation of Government-Owned Facility 2.2

U Education and Training Services 2.2

B Special Studies and Analyses - Not R&D 2.1

L Technical Representative Services 1.7

K Modification of Equipment 1.1

W Lease or Rental of Equipment 0.8

N Installation Equipment 0.8

H Quality Control, Testing and Inspection Services 0.7

X Lease or Rental of Facilities 0.3

T Photographic, Mapping, Printing, and Publication Services 0.2

G Social Services 0.1

P Salvage Services 0.1

E Purchase of Structures and Facilities 0.1
NEW POLICIES AND PROCESSES I 5

Table 2. Funded Amounts for Largest Categories of DOD Services

Note: The number of total categories is shown in parentheses under each column heading.

Service 

Code

FPDS Category 

(1,350+)

Defense Procurement & 

Acquisition Policy (DPAP) 

Portfolio (39)

DPAP Portfolio 

Group (8)

DOD 

FY2009 

(B$)

R499 Other Professional Services Program Management 

Services 

Knowledge Based 

Services 

$20.7 

R421 Technical Assistance Engineering Management 

Services 

Knowledge Based 

Services 

20.4 

R425 Engineering and Technical 

Services 

Engineering Management 

Services 

Knowledge Based 

Services 

15.4 

D399 Other ADP and 

Telecommunications Services 

(data storage on tapes, disks) 

Telecommunications Services Electronics and

Communication 

Services 

14.5 

R799 Other Management Support 

Services 

Program Management 

Services 

Knowledge Based 

Services 

14.5 

M152 Operation of Government-Owned 

Facilities (Maintenance Buildings) 

Operation of GovernmentOwned Facilities Facility Related 

Services 

12.7 

Q201 General Health Care Services General Medical Services Medical Services 11.3 

M181 Operation of Government-Owned 

Contractor-Operated R&D 

Facilities 

Operation of GovernmentOwned Facilities Facility Related 

Services 

10.5 

R706 Logistics Support Services Logistics Management 

Services 

Knowledge Based 

Services 

9.3 

R408 Program Management/Support 

Services 

Program Management 

Services 

Knowledge Based 

Services 

8.0 

S206 Guard Services Housekeeping and Social 

Services 

Facility Related 

Services 

7.9 

R414 Systems Engineering Services Engineering Management 

Services 

Knowledge Based 

Services 

6.9 

C219 Other Architect and Engineering 

Services 

Architect/Engineering Services Facility Related 

Services 

5.7 

D302 ADP Systems Development 

Services 

ADP Services Electronics and

Communication 

Services 

4.7 

D313 Computer Aided Design/Computer 

Aided Manufacturing (CAD/CAM) 

Services 

Telecommunications Services Electronics and

Communication 

Services 

4.5 

J058 Maintenance, Repair and 

Rebuilding of Equipment 

(Communication, Detection) 

Equipment Maintenance Electronics and

Communication 

Services 

4.0 

X111 Lease or Rental of Facilities (Office 

Buildings) 

Purchases and Leases Facility Related 

Services 

3.8 

D307 Automated Information System 

Design and Integration Services 

Telecommunications Services Electronics and

Communication 

Services 

3.8 

M294 Operation of Government-Owned 

Facilities (Waste Treatment and 

Storage Facilities) 

Operation of GovernmentOwned Facilities Facility Related 

Services 

3.5 

C118 Architecture/Eng (R&D Facilities) Architect/Engineering Services Facility Related 

Services 

3.5
6 I CHAPTER 1

Figure 3. DOD Spending on Services Contracts (FY 2009)

Given the concerns over data quality, these eight “portfolio groups” used by the 

DOD to track  services are  particularly  troubling. While  these groupings may make 

semantic  sense,  they  are  not  appropriate  to  determine  guidance  and  policy.  The 

“knowledge‐based  services” portfolio  group,  as  an  example,  inappropriately 

combines  routine  education  and  training  contracts  with  expeditionary  logistics 

management  contracts.  This  portfolio  group  is  overly  vague  and  cannot provide 

meaningful  analysis  of  performance  insights. Similarly,  contracts  for  utilities  are 

compared  with  those  for  architectural  and  engineering  services  in  the  “facilities 

related” portfolio group.  It is clear  that  these  very different services should not be 

assigned  the  same  definitions,  performance  standards,  outcome measures,  or  best 

practices;  nor  should  they  be  held  to  similar  standards  for  contract  structures  or 

spending parameters. One size does not fit all.

Neither the current taxonomy used in the FPDS nor the portfolio groups used by 

the Defense Procurement and Acquisition Policy in the Under Secretary of Defense 

for Acquisition, Technology and Logistics (USD (AT&L)) are sufficient to guide policy 

for  the  entire  array  of  DOD  services  contracts. Neither  sufficiently  discriminates

among activities  performed in widely  variable  risk  situations. Rolling  up activities 

likely to be critical in contingency operations with routine activities inside multiple 

portfolio categories decreases rather than improves visibility. 
NEW POLICIES AND PROCESSES I 7

RECOMMENDATION 1:  CREATE NEW, SIMPLIFIED, AND STREAMLINED PROCESSES FOR THE 

RANGE OF SERVICES CONTRACTED.

RECOMMENDED ACTION 1‐1

USD (AT&L) establish a meaningful taxonomy to track services contracting.

This  taxonomy should not  force comparisons of contracts with low versus high risk,

with  easily  defined  versus  complex  outcomes, with  routine  performance  standards 

versus  multifaceted  missions.  The  task  force  believes  that  analysis  according  to 

categories is not sufficient; and rolling these up into larger groups merely compounds 

the  limitations  presented  by  the  FPDS  system  in  prohibiting  multiple  task  labels 

within  a  single  contract. Definitions,  contracting  standards, performance  standards, 

and  outcome  measures  must  be  assigned  with  an  understanding  of  each  contract’s 

purpose and should not be based on flawed database entries.

Definitions and Standards

Across  defense  acquisition,  the  task  force  found  that  buying  services  is 

fundamentally different than buying weapons systems. Buying products tends to be

a sequential process that progresses from setting requirements through milestones

to delivery of a product. Many of the steps required for large product acquisitions—

design  reviews,  developmental  test and evaluation, materials  development, and  so 

on—do not apply to services acquisition. 

Contracting  for  services  is  a  more  continuous  process.  While  the  acquisition 

process  ends  when  a  product  is  delivered,  acquisition  of  services  continues 

throughout the contract period. For many services, continuity is critical and it is not 

possible to “stop work” at contracting transitions.

The  historical  predominance  of  product  acquisition regulations,  however, 

means that current acquisition laws, rules, policies, procedures, practices, and even 

training  and  education, are  overwhelmingly  focused  on  the  sequential  steps  for 

buying products.  Many  of  these  existing  constraints  affect  efficient and  effective 

services contracting. The task force notes that these existing constraints, developed 

and  refined  for  large  hardware  systems,  also  dictate  acquisition  of the  goods and 

services  for  IT,  R&D,  and  urgent  operational  needsall  of  which  are  more 

effectively addressed by approaches outside the traditional processes defined under 

DOD  Instruction 5000.02. For  these  and  other  reasons,  Congress  has  recently 
8 I CHAPTER 1

required a comprehensive assessment of the Department’s policies and guidance for

services contracting.6

Specific Concerns for Knowledge‐based Services Contracting

A number of concerns specifically affect companies providing knowledge‐based 

services  to  the  government. Knowledge‐based  services  include R&D,  analysis,  and 

other professional services. Some of these require very high security clearances and 

specialized knowledge, such as intelligence analysis or translation.

Defense contracting is attractive to many knowledge‐based enterprises; defense 

contracts can  help  a private‐sector firm  to maintain corporate  technical  capability 

and provide support for internal R&D when market size or market timing is unclear. 

However, many  firms  that  are interested in  performing knowledge‐based  services 

for the DOD find the processes overly complicated by acquisition law and guidance. 

Rules  governing  conflicts  of  interest  can  prevent  defense  services  providers 

from  balancing  their  workload  with  similar  non‐government business.  Because 

these rules extend to the avoidance of the appearance of organizational or personal 

conflicts  of interest,  this  can  prevent many  defense  services  providers  from  doing 

any  work  outside  the  defense sector.  Many government  requirements  often  push

service  providers  to  separate commercial  and  government  work, preventing 

beneficial synergies or workload balancing. 

Many firms also have concerns over intellectual property and data rights, export 

controls,  or  limitations  on  international  partnering.  These  barriers  decrease  the 

Department’s  access  to  potentially  transformational  services  and  decrease 

competition among qualified services firms.

Specific Concerns for IT Services Contracting

Current  DOD  acquisition  processes  for  IT  systems  are  incompatible  with 

globally competitive, commercial  IT  development.  Attempts  to  speed  this  process 

through spiral development or technology refreshers have generally been defeated 

                                                       

6. This assessment is called for in FY2011 National Defense Authorization Act, Section 864, which 

calls for a review of DOD acquisition guidance in Department of Defense Instruction 5000.02, and 

also in Section 865, which calls for a review of the Federal Acquisition Regulation and the Defense 

Federal Acquisition Regulation Supplement, to ensure that such regulations include appropriate 

guidance for and references to services acquisition. (Link accessed March 2011.)
NEW POLICIES AND PROCESSES I 9

by the weight of the defense acquisition and budgeting processes. When the pace of 

technology  change  was  slower,  and  when  defense  systems  dominated  the market, 

DOD was  able  to  acquire top IT services.  Today,  DOD  buyers  need  to  understand 

that they are not a priority buyer in any IT services market.

One reason for this is that DOD buys systems rather than modular components; 

yet modular is  how IT components are  sold globally  today,  utilizing  new  concepts 

such  as  apps,  open  architectures,  standard  interfaces,  and  model‐based 

architecturesand many  times,  these are marketed as services  rather  than goods. 

Buying  IT  services  requires  portfolio‐specific  experience  and  understanding  of 

commercial  IT  services  markets  and  processes.  Specific  recommendations  in  this

area are included in Appendix D.

RECOMMENDED ACTION 1‐2

USD (AT&L)  establish and  monitor  definitions,  performance  standards,  and 

outcome measures for each portfolio of services in the taxonomy.

 Carry out adequate analysis up front, including reaching out to service 

providers, to provide a definition for each type of service to allow efficient 

tracking and communication. 

 Develop contracting standards based on an understanding of the purpose 

and constraints on each contract. These may include the type of contract, 

spending plan, level of competition required, and so on.

 Develop quality, productivity, and performance standards for each type of 

service. These may include quality, quantity, timeliness, continuity, and 

other factors measured as the contract is executed.

 Describe outcome measures that can be aligned with specific contract 

actions. Both performance‐based and cost‐based outcome measures are 

needed to achieve desired behavior from both federal employees and 

contractor personnel. These measures should not focus on how the service 

is provided, but rather on the effectiveness of the final product of each task 

in meeting requirements.

Services vary widely and require a wide variety of standards. Similar service  tasks 

can be—and routinely are—labeled differently, combined into contracts differently, 

and managed differently. There is also a wide variation in cost and performance for 

similar  tasks;  costs  differ  within  installations,  across  geographic  regions,  among 

agencies,  and  between  government  and  commercial contracts.  Only  with  better 
10 I CHAPTER 1

descriptions  and  tracking  can  we  begin  to  understand  best  practices  and  gain 

system‐wide improved effectiveness and efficiencies.

With  adequate  standards  established, the  service  provider’s past  performance  can 

be appropriately assessed and weighted. Current evaluation of past performance is 

uneven  and  difficult  to  reward,  making  it  a  less  effective  incentive. Methods  are 

problematic;  on  one  hand,  past  performance  assessments  don’t  typically  take 

continuous  improvement into  account,  and  on  the  other  hand,  these  same 

assessments can disadvantage a new firm with a better approach. 

A major goal  of improving how  services contracts are awarded is  to establish  that 

past,  positive,  and  relevant  performance, along  with  best  value, are  preferred  to 

using only “technically acceptable, low bid” as selection criteria. 

Strategic  sourcing  would  be  helped  tremendously  by  a  single  portal  to  provide 

visibility into all existing DOD services contracts. If implemented as part of the FPDS, 

this portal could access data on services contracts in each portfolio performed for all 

federal agencies. Access to information on contracts for services awarded by state or 

local governments near defense installations would also be very useful. An excellent 

start on such an approach carried out by a single agency is the database of contracts 

maintained by the Army Corps of Engineers. 

Decisions to Contract for Services or Retain 

Organic Capacity

The task force addressed an additional question from Secretary Gates, posed at 

the quarterly meeting  of  the Defense  Science  Board  on  February  25,  2010,  asking 

what services should be contracted‐out versus performed in‐house?

Non‐inherently Governmental Activities

A  key  factor  in  the  decision  to  contract  for  services  is  whether  or  not  the 

activity  is  inherently  governmental.  Therefore,  up‐to‐date  guidance  to  define 

inherently governmental  functions  is  a  particular  need  in  light  of  the  growth  in 

services contracting. 

While  inherently governmental  functions  should  always  be  carried  out  by 

government  personnel,  non‐inherently government  functions  are  best  competed, 

either  among  contractors or  between  government  and  the  private  sector.  If  non‐
NEW POLICIES AND PROCESSES I 11

inherently  governmental  activities  are  directly  sourced  to  government  personnel 

without competition, the Department loses performance and cost benefits.

RECOMMENDED ACTION 1‐3

USD (AT&L) identify all activities performed in support of defense missions as 

either inherently governmental or non‐inherently governmental.

USD (AT&L)  should  work  with  the  Office  of  the  Under  Secretary  of  Defense  for 

Personnel  and  Readiness  to  develop  and  propagate  clear  definitions  to  everyone 

involved in services contracting. Inherently governmental activities should always be 

performed by government personnel. Non‐inherently governmental activities may be 

performed  by  either  government  or  contractor personnel.  Work  that  is “critical” or 

“closely  associated” with  inherently  governmental  activities  must  be  categorized  as 

either  inherently  governmental  or  non‐inherently  governmental. If functions  are 

classified with imprecise labels,  cautious  contracting  officials will  require  them to  be 

performed  by  government  employees.  In  many  cases,  this  will  limit  the  potential 

benefits of competition.

Benefits of Services Contracting to DOD

One of the many advantages the Department of Defense gains through services 

contracting  is  the  ability  to  tailor  efforts  more  easily  to  available  budgets. 

Contracting  allows  fast  surge  or  fade  to  follow  operational  needs or  funding 

availability—for  both  highly‐skilled  experts  and  physical  labor.  Contracting  for 

services is especially valuable when specific expertise is needed for a rapid response 

to an unexpected adversary capability, and the ability to reach new experts quickly 

can be the difference between success and failure.

Contracting also provides access to expertise developed outside of government 

contracting.  By  engaging  the  services  of  companies  that  work  in  both  commercial 

and  government  sectors,  personnel  can  apply  successful  business  practices, 

technologies, and skills to benefit the government. However, this will only happen if 

the current barriers to such integration can be removed.

Perhaps  most  importantly,  performance  improvements  are  well‐documented 

when work is competed, whether it is among services contractors or between public 

and  private  providers. A  number  of  studies  have looked  at  the  cost  of  contracting 
12 I CHAPTER 1

services compared to using federal employees. A specific example is the Devonport 

Royal Dockyard.7 The United Kingdom Royal Navy’s only nuclear capable shipyard 

was converted  from a government‐owned, government‐operated  to a government‐

owned, contractor‐operated facility in 1996. After three years of private ownership, 

the  workforce  was  cut  from  6,300  to  3,500  with  essentially  the  same  throughput 

and workload. Private ownership introduced modern cost accounting systems, and 

savings were also realized by avoiding gold plating, knowing  the  true cost of extra 

work,  and  improved  resource  allocation  decisions.  The  shipyard  also  accepts 

commercial contracts for at least 25 percent of the total workload.

For  expeditionary logistics  support, when  considering  all  costs  over  a  20‐year 

period,  private  sector  competitive  procurement  was  projected  to  be  roughly  90 

percent less costly than using federal workers.

8 In a detailed analysis for a one‐year 

period  in  the  Iraq  theatre  beginning  in  June  2004,  the  costs  of  a  private  sector 

security  contractor  were  comparable  to  the  Army's  costs.9 In  a  separate  one‐year 

analysis,  the  use  of  private  contractors  was  shown  to  be  over  90  percent  less 

expensive than using State Department employees.10 These studies further observed 

that an expeditionary private security contract can be terminated during peacetime 

operations, whereas Army personnel would remain in the force structure and incur 

many long‐tail costs, such as health care and pensions.

RECOMMENDED ACTION 1‐4

USD (AT&L)  require  competition  for  those  non‐inherently  governmental 

activities being  performed  non‐competitively  by  government  personnel  to 

determine  if  government  or  contractor  personnel  should  perform  them. In 

evaluating  the  best  value  to  the  government,  all  costs,  both  short‐ and  long‐term, 

and both direct and indirect, should be considered.

                                                       

7.   Carla A Tighe, Carol S Moore, Alan J Marcus, Julian Silk, and Robert Trost. 1997. A Privatization 

Primer: Issues and Evidence. p. 31. (Link accessed March 2011.)

8. Congressional Budget Office. 2005. Logistics Support for Deployed Military Forces, p. 36. (Link 

accessed March 2011.)

9. Congressional Budget Office. 2008. Contractors’ Support of U.S. Operations in Iraq. p. 17. (Link 

accessed March 2011.)

10. Government Accountability Office. 2010. Warfighter Support: A Cost Comparison of Using State 

Department Employees versus Contractors for Security Services in Iraq. GAO‐10‐266R. (Link 

accessed March 2011.)
NEW POLICIES AND PROCESSES I 13

Processes for Services Contracting

Good intentions  to improve competition and lower costs for services contracts 

have led to a number of unintended, adverse consequences. Services contracts have 

changed  dramatically  in  a  number  of  ways  since  many  laws  and  policies  were 

established.  As  an  example,  the  size  of  contracts  has  grown  considerably: $10 

million contracts for services are routine, and $100 million contracts are not out of 

the ordinary. Approximately 66 percent of services were procured using indefinite 

delivery/indefinite  quantity  (IDIQ) contracts in  2010,  something  that  was  never 

contemplated when IDIQs were first proposed.

Many well‐intentioned policies to fix acquisition processes have had unintended 

consequences.  It is  therefore imperative  that  each  organization  carry  out  periodic 

reviews for any process to measure effectiveness and efficiency to ensure continued 

value of implementation. 

Appropriate Incentives

The  task  force  observed  a  number  of  poorly  designed  incentives  that  drive

contractor performance. While competition is a strong driver for high performance 

at low cost, it is not the only incentive needed.

For  example,  required  frequent  re‐competition  threatens  to prevent  high‐

performing  incumbents  from  implementing  continuous  improvement  programs. 

When  firms  contract  for  services  in  the  commercial sector,  contracts  tend  to  be 

written for longer periods because increased performance with improved efficiency 

is  expected over  time  and is  written into  contracting  agreements. When  contracts 

are competed often, incentives to existing contractors for high performance at lower 

cost don’t exist—and costs remain high. 

Similarly, efforts to compete every contract to the fullest extent have discouraged 

unsolicited  proposals,  because  any innovative idea  submitted  are  frequently put  up 

for competitive bid.

The  ease  of  protesting  an  award can  provide  an  undesired  incentive.  While 

protests by losing bidders have always been part of services contracting, automatic 

rather than substantive protest actions are occurring in many cases and have led to 
14 I CHAPTER 1

a  15‐year  high  for protest  filings at  the Government Accountability Office (GAO).

11

Recent rule changes for task‐order contracts may push them even higher. 

Protests may be lodged as a standard business practice to provide a second chance 

to  win  or  to  delay  an  award—and  can  do  so  for  many  months.  In  the  worst‐case

scenario,  entire  procurements  may  be  cancelled  in  anticipation  of  a  lengthy  protest 

process. Selection officials often strive to avoid protests by choosing the proposal with 

the lowest price, but  this is at  the cost of best  value  to  the government.12 A preferred 

alternative would be to initiate a penalty for unjustified protests.

RECOMMENDED ACTION 1‐5

USD (AT&L)  provide  meaningful  incentives to  services  contractors  for  high 

performance at low cost.

 Reward services contractors that achieve higher performance at lower costs 

with a significant award, incentive fee, or sole‐source follow‐on. However, 

when performance is low or costs rise, the option of competition must be 

available and utilized; and the Department must document such past 

performance information to ensure accountability and repercussions for 

future source selections.

 Focus source selection evaluations on performance outcomes and total price 

rather than profit or fee determination. Two service providers may both 

provide best value to the government with widely varying profit and fee 

percentages.

 Establish clauses that share savings between the government and the 

contractor to provide incentives for continuous improvements in 

performance and cost of services provided.

 Reward contractors for extremely innovative, high‐value unsolicited 

proposals with a sole‐source initial award.

 Work with Congress to impose penalties that will discourage unjustified 

protests.

                                                       

11. Robert Brodsky, Bidders Bite Back, Government Executive, February 1, 2011. (Link accessed 

March 2011.)

12. Government Accountability Office. 2010. Defense Contracting: Enhanced Training Could 

Strengthen DoD’s Best Value Tradeoff Decisions. GAO‐11‐8. (Link accessed March 2011.)
NEW POLICIES AND PROCESSES I 15

Integrating Commercial Business Practices

DOD acquisition laws and regulations strongly encourage commercial sourcing, 

and  most  services that the  Department  buys  are  also  available  in  the  commercial 

market.  Further,  many commercial  services  companies  are  motivated to  work  for 

DOD because of the desire to support our troops and to diversify their markets and 

their customer base.

However, many  practices greatly deter both large  and  small commercial  firms 

from  providing  services  to  DOD.  These  disincentives  begin  with  the  inflexible 

government contracting processes that employ non‐standard cost accounting, profit 

and  overhead  policies,  documentation,  dispute  resolution,  and  so  on.  Further 

disincentives—including poorly  written  requirements,  export  control  restrictions, 

data  rights requirements—extend  to  practices  such  as  delayed  billing  on  change 

orders that can bankrupt small companies. 

Improved  communication  can address many  of  these issues. Service  providers 

have  expressed  a general  frustration  in  dealing  with  government  contracting 

personnel with little industry experience. For example, some contracting personnel 

have no sense of urgency to help the contractor maintain employee continuity. As a 

result  of  these  factors,  less  than  20  percent  of  services  (excluding  R&D  and 

construction) are sourced using commercial practices. 

Because  contractors  will  tend  to  put  their  best  people  on  better‐understood 

commercial  contracts,  poor  provider  relationships  deprive  the  government  of  the 

best  private sector  skills.  Companies  with  the  highest  success  in  the  commercial 

marketplace are less likely to suffer the frustrations of government contracting.

Attempts to improve competition have had the effect of restricting pre‐solicitation 

discussions. This practice is driven partially by policy and partially by a culture of risk‐

avoidance.13 The result has been a decrease in the government’s ability to understand 

how  a  service  will  be  provided  and  an  impaired  determination  of  the  best  way  to 

match the  government’s  need  to  the  contractor’s  capabilities.  In  the  commercial

sector, this kind of market research is a best practice.

The task force concludes that the defense services supplier base could be expanded 

through  improved  communication  between  the  government  and  industry.  Detailed 

                                                       

13. Daniel I. Gordon. 2011. "Myth‐busting": Addressing misconceptions to improve communication 

with industry during the acquisition process. (Link accessed March 2011.)
16 I CHAPTER 1

recommendations on this topic are available in the 2009 Defense Business Board study 

detailing  an  outreach  plan  to  improve  communications  between  the  DOD  and  the 

defense industrial base.14

RECOMMENDED ACTION 1‐6

The DOD General  Counsel explore  ways  to  maximize  appropriate 

communication between government and the services contracting industry.

Communication  is  critical  both  before  the  solicitation,  and  also  during  contract 

execution  in  order  to  help  the  government  conduct  effective market  research  and 

improve  understanding  of  the  services  industry.  Communication  must  be  two‐way 

and  one‐on‐one;  bidders’ conferences  are  not  enough.  The  General  Counsel  should 

find  ways  to  provide  greater  visibility  and  common  avenues  for  dialog  among 

customers as well as among service suppliers. Improved communication between the 

government and contractor firms will reduce barriers that prevent wider competition.

Contract Structures

Contract  structures  are  a  particular  concern.  Procurement  officials  have 

endeavored  to  lower  costs  by  requiring  the  use  of  firm‐fixed‐price  contracts  for 

services.  For  very  well‐understood  and  predictable  services,  firm‐fixed‐price 

contracts may be a wise strategy. However, because this strategy shifts risk from the 

government  to  the contractor, it has resulted in higher overall bids. This approach 

has  been  unsuccessful when  the  requirements are  unknown  or  the  scope  requires 

frequent change, as is the case for most contingency operations or for services with 

high intellectual content.

The task force noted a proliferation in the use of IDIQ contracts in recent years. 

The intent for the IDIQ structure was to create a two‐step process to provide for an 

indefinite  quantity  of  supplies  or  services  during  a  fixed  period  of  time. The  first 

step is to identify a few of the most highly‐qualified firms to address the scope, and 

the second step is to speedily bid tasks among the few pre‐qualified firms.

Today,  many  IDIQs  are  ultra‐large,  have several  hundred  qualified  firms, and 

individual  task  orders  over  $100  million,  defeating  their  initial  purpose.  For 

                                                       

14. Defense Business Board. 2009. Task Group on an Outreach Plan to Improve Communications 

between the Department of Defense and the Defense Industrial Base. Report DBB‐FY09‐7. (Link 

accessed March 2011.)
NEW POLICIES AND PROCESSES I 17

example,  SeaPort‐e,  the  Navy’s  platform  for  acquiring  support  services  in  22 

functional  areas, including  engineering,  financial  management,  and  program 

management, has over 1,800 qualified suppliers. The Army’s R2‐3G contract has 18 

separate  functional  areas  and  is  valued  at  over  $16  billion. In  these  large  IDIQs, 

competition  for individual task  orders  can  be as  costly and  time‐consuming as  for

large, distinct procurements. Moreover, some of these IDIQ contracts require every 

contractor to bid on every task order. These costs disproportionately disadvantage 

small  and  mid‐sized  firms.  Further,  beginning  in  2010,  individual  task  orders  of 

more than $10 million can be protested at GAO—and this practice is on the increase.

No  evidence  was  presented  to  show  that  IDIQs  produce  better  results  for  the 

Department. Because  IDIQ  contracts  have  evolved  so  greatly  from  their  original 

intent, any advantages have almost disappeared. 

The  task  force  concluded  that  the  use  of  the  appropriate  contract  type, 

commensurate  with  risk,  is  needed  to  incentivize  contractor  performance.  It  is 

especially important to recognize that “one size does not fit all.”

RECOMMENDED ACTION 1‐7

USD  (AT&L)  provide  clear  guidance  for  defense  acquisition  personnel  in  the 

use of appropriate contract structures for the type of service.

 Use firm‐fixed‐price contracts when requirements are well‐established, 

stable, and the technical risk is low; however, use cost‐plus‐fixed‐fee or 

cost‐plus‐incentive‐fee contracts in other cases. This will likely apply to any 

knowledge‐based services contract.

 Provide a two‐step process for services with indefinite delivery and indefinite 

quantity; first, no more than five well‐qualified providers are selected for a 

narrowly‐scoped requirement area; then, for each task order, the user of the 

service rapidly competes and selects a qualified provider or providers.

 For well‐defined performance‐based services, use service level agreements

(SLAs) that allow suppliers flexibility to meet desired outcomes at an 

acceptable risk, and update these by evaluating program experience over 

time. SLAs are typically used for Internet services, and have recently been 

applied to satellite imagery as part of the EnhancedView contract for the 

National Geospatial Office and to observational drone time‐on‐station for 

the Special Operations Command.
18 I CHAPTER 1

 Expand use of other transactions authority to attract high quality commercial 

services contractors.15A recent example of this was the Chemical, Biological, 

and Radiological Technology Alliance, which allowed non‐traditional defense 

contractors to apply their knowledge to an urgent technology need. Other 

transactions authority allowed flexibility in intellectual property guidance 

and freedom from government‐unique requirements, such as hourly timecard 

reporting and other defense accounting rules that would normally preclude 

participation of many private sector companies.

 Modernize the Defense Federal Acquisition Regulation Supplement (DFARS) 

Part 12 to reflect the intent of the original statute, 10 U.S. Code §2377. Per the 

simplicity of the early guidance, changes should minimize mandatory clauses, 

permit flexibility in contract structure, and institutionalize market research 

requirements.

                                                       

15.  For DOD, “other transactions” is a term commonly used to refer to the §10 U.S.C. 2371 

authority to enter into transactions other than contracts, grants, or cooperative agreements.
ROLES AND RESPONSIBILITIES I 19

Chapter 2. Leadership and Organizational 

Roles and Responsibilities

While gathering information in  support  of  the charge,  the task  force found little 

strategic  attention is paid  to  managing  either  large  or  small  services  contracts.

A  starting  point  in  understanding  how  the  Department  acquires  services  is  to 

recognize  the  decentralized  nature  of  the  process.  For  the  most  part,  services  are 

acquired  by  the  command  level  that  utilizes  the  service  at  the  local  level.  Senior 

leaders  have  limited  insight  and  seldom  participate  in  vetting  requirements  that 

translate to service contracts. 

Across the Department, there is little visibility into, and guidance for, who, what, 

and  how  the  DOD  buys  services.  As  a  result,  there  is  overwhelming  pressure  to 

simply execute operations and maintenance funds to the maximum amount allotted 

with  little  regard  for  the  efficiencies  that  could  be  realized  through  a  more 

centralized approach.

Another  significant  finding  is  that,  for  the  most  part,  service  contracts  do  not 

enjoy  the benefits of having a dedicated contract manager. As a  result, contracting 

officers  and  contracting officer’s  representatives  often  act  as  the  de  facto  contract 

manager.  While  this  solution  may  work  for  routine  and  well‐defined  services,  for 

more complex  service  agreements,  it  often  requires  contracting  officers  to  fulfill 

conflicting roles and shortchanges the mission.

The  lack  of  leadership  in  this  area  has  a  number  of  consequences. Across  the 

acquisition  workforce,  rote  compliance  is  rewarded  and, therefore,  creativity  is 

stifled. Contracting personnel find it difficult to take risks without an understanding 

of, or value given to, achieving performance standards and outcome measures. 

A salient example is the use of cost‐based contracts for services with fixed‐fee or 

incentive‐fee. In many  cases where  the  requirements  are  unknown  or  changeable, 

these offer lower  cost and lower  risk  to  the government when  compared  to  fixed‐

priced contracts. However, many acquisition personnel and some policies maintain 

the  outdated  view  that  fixed‐price  contracts  make  sense  even  for  services  that 

require a flexible or knowledge‐based approach. 

It  is  critical  for  leaders across  the  DOD  to  understand  the  policies  and 

guidance governing services contracting; and to provide acquisition professionals 
20 I CHAPTER 2

with  the  support  to  make  the  decisions  in  the  best  interest  of  DOD  in  acquiring 

and executing services.

RECOMMENDATION 2: DESIGNATE ROLES AND RESPONSIBILITIES FOR APPROPRIATE 

LEADERSHIP AND ORGANIZATIONS FOR SERVICES CONTRACTING.

RECOMMENDED ACTION 2‐1

Each  military  department train  all  general  officers on  services contracting, 

with  a  focus  on  requirements  specifications  and  management  oversight  of 

contracts for services.

RECOMMENDED ACTION 2‐2

USD (AT&L)  create a  senior‐level  focal  point for  services,  equivalent  to  the 

Assistant  Secretary  of  Defense  (Research  and  Engineering) and  the  Deputy 

Under Secretary of Defense (Logistics).

Responsibilities include coordination of services acquired across the Department to 

include  training,  strategic  sourcing,  category  councils,  and  dotted‐line  relationship 

to the services acquisition executives in each military department or agency.

RECOMMENDED ACTION 2‐3

Each military department strongly  support a general/flag  officer or member 

of the Senior Executive Service as the strategic sourcing of services executive.

This  position  should  report (solid‐line) to  the  Service  Acquisition  Executive,  and 

report  (dotted‐line) to a focal point  for  services appointed under  the USD (AT&L).

These positions are currently held by the following individuals:

 Major General Wendy Masiello has been the Air Force Program Executive 

Officer for Combat and Mission Support since 2007. She leads the 

acquisition of Air Force services and is responsible for more than $184 

billion in existing and planned contracts across the Air Force. She oversees 

acquisition planning, the competitive selection process, and execution of 

performance‐based acquisition, and she ensures proper management 

controls are in place throughout performance of contracted services.
ROLES AND RESPONSIBILITIES I 21

 Mr. James C. Sutton is the Deputy Assistant Secretary of the Army for 

Services. This position was established in November 2010 and is 

responsible for policy, planning, execution, and management of services 

provided to the Army, a $50 billion annual effort.

 Mr. Bruce Sharp is the Navy’s Director for Services Acquisition. In this role, 

established in December 2010, he addresses oversight requirements, 

identifies outcomes and metrics, recommends required authorities, and 

develops documentation. Mr. Sharp is also the Director, Program Analysis 

and Business Transformation, Deputy Assistant Secretary of the Navy 

(Acquisition and Logistics Management).

RECOMMENDED ACTION 2‐4

Each military department establish portfolio‐specific strategic sourcing offices 

(SSOs) and category councils  (CCs) for  services  to  strengthen  the  connection 

between the acquisition community and users of services. Some of the duties of 

the SSOs/CCs are provided here:

 Bring together leaders and individual members with portfolio expertise and 

operational experience with the services being acquired throughout all 

phases of the acquisition and lifecycle of services contracts. Interactions will 

give buyers needed experience, technical expertise, and authority to make 

the best business decision to acquire the required services—with a focus on 

mission outcomes rather than process compliance.

 Contribute to best practices, performance standards, and definitions for 

each portfolio category of services contracts.

 Facilitate a strategic approach by aggregating requirements at the highest 

level, and then consolidating requirements, setting common performance 

standards, engaging the global marketplace, and buying common services

using common contract language where possible.

 Determine and assign the appropriate level of program management for the 

size of the services contract.

 Manage services costs for the enterprise by vetting requirements, curbing 

disconnected spending, and setting and managing cost improvement targets 

with service providers.

An excellent example of this approach is the Services and Infrastructure Enterprise 

Contract  Management  Program  (SIECMP)  at  the  Army’s  Installation  Management 
22 I CHAPTER 2

Command  (IMCOM). Their  quarterly  reviews  are  a successful  example  of  ways  to 

monitor  contract  execution  and  encourage  improved  coordination. Annual 

execution  reviews  for Air  Force  combat and mission  support are also  commended 

for improving execution and coordination, and ensuring effectiveness of policies for 

services contracting.
SKILLS AND CAPABILITIES I 23

Chapter 3. Personnel Skills and Capabilities

The task  force also observed an overall lack of appropriate  training, education, 

and experience  for all  people involved.  Few  strong  program managers exist in  the 

Department with experience in portfolio‐specific services and industries. Workforce 

issues  hamper  performance in  all  phases  of  services  contracting today.  This  is 

evidenced in a number of ways.

Fundamentally, the entire defense workforce lacks knowledge and experience in 

services  contracting,  auditing,  and  oversight.  This  experience  is  lacking  both 

generally,  and  also  in  specific  categories  of  services  contracting.  For  example, 

knowledge  of  contracting  for  research  is  useful  but  not  sufficient  to  understand 

contracting  for  facilities  maintenance. While  personnel  are  being  hired,  there 

remain too  few  experienced  people  who  have  successfully  executed  contracts  for 

services. Further, there is no documented body of knowledge to help them succeed 

while they gain experience.

A  large  contributing  factor  to  this  lack  of  knowledge  and  experience  is  that 

functional  personnel  currently  managing  services  programs  are  not  considered 

members  of  the  DOD acquisition  workforce.  They  are  not  typically  provided 

acquisition  training  under  Defense  Acquisition  Workforce  Improvement  Act 

(DAWIA)  requirements,  and  current  training  and  education  programs  for 

acquisition  do not  address  services  contracting. Some  fledgling  efforts  exist, 

including  the  Services  Center  of  Excellence at  the  Defense  Acquisition  University.

However, only two faculty (out of 390) serve in the center and it does not currently 

document  case  studies or best  practices on  services  contracting. Recalling  that  57 

percent of defense acquisition funding is for services todayand this percentage is 

growingthis effort seems woefully inadequate.

Finally,  the  task  force  found  that  aspects  of  services  contractingwriting 

requirements,  establishing  acceptance  criteria,  managing deliverables,  evaluating

performance,  and  othersare  often  much  more  complex  than  contracting  for 

equipment, and success in these aspects is even more dependent on experience. At 

the same time, services contracting experience is not adequately included in staffing, 

career planning, promotions, and education. Incentives and culture currently drive 

good people to large systems acquisition programs to aid in career advancement. In 

too many cases, aspiring officers avoid acquisition assignments altogether.
24 I CHAPTER 3

The Department should systematically improve training for personnel involved in 

services acquisition and oversight. Because the responsibility for services contracting 

is shared by both acquisition personnel and command personnel, individual training 

for all military and civilian personnel must address how contracting delivers services. 

To be effective, all these programs must be implemented with a large increase in 

personnel  with  non‐government‐related  services  experience  in  the  acquisition  of 

services. For example, training programs should hire successful retirees from outside 

the government contracting sector to develop case studies and teach best practices.

RECOMMENDATION 3: STRENGTHEN THE SKILLS AND CAPABILITIES OF PEOPLE INVOLVED 

IN SERVICES CONTRACTING.

RECOMMENDED ACTION 3‐1

USD (AT&L) establish  more  formal  certification  requirements for  services 

acquisition personnel. 

Tailored  training  should  be  provided  to  all  contracting  officer’s  representatives

(CORs) and contracting officer’s technical representatives (COTRs) who support the 

acquisition  of  services. These  requirements  should  encompass  education,  training, 

and experience.16

All  CORs  and  COTRs involved  in  services  acquisition  should  have  experience 

relevant  to  one  or more  portfolios  of  services. The task  force  realizes  that experts 

are  made  and  not  born,  and  participation  on  Category  Councils,  sharing  of  best 

practices, and  services‐focused  training are all  necessary  tools  for  both  the  novice 

and experienced CORs and COTRs. 

RECOMMENDED ACTION 3‐2

USD (AT&L)  work  to  establish  training  programs for  services  acquisition

throughout the DOD’s professional military education infrastructure.

Training should be a requirement for all combat‐support and combat service‐support 

career fields. It is especially important that commanders receive this training prior to 

                                                       

16. Standards have been proposed in a USD (AT&L) memorandum, DoD Standard for Certification 

of Contracting Officer's Representatives (COR) for Services Acquisitions. March 29, 2010. (Link 

accessed March 2011.)
SKILLS AND CAPABILITIES I 25

joining  the  command  ranks.  Military  departments  should  also  consider  extending 

contracting  certification  selection  to  enlisted  personnel. Training  can  and  should 

occur at the service colleges, the National Defense University, the Federal Acquisition 

Institute, and the Defense Acquisition University. 

The task  force  also  acknowledges  that acquisition  of  services  is  sufficiently  diverse 

that  a  single  training  trackas  now  exists  for  hardware  weapon  systems 

acquisitionsis not appropriate. Separate  tracks are needed in specific portfolios of 

services.  Centers  of Excellence  can lead in  developing  portfolio‐specific  training and 

education  for  category  experts  and  acquisition  professionals.  Where  no  Centers  of 

Excellence exist, each military department’s functional subject matter experts should 

be encouraged to partner with defense acquisition schools to establish them.

RECOMMENDED ACTION 3‐3

USD (AT&L),  military  departments,  and  defense  agencies reallocate  training 

dollars to bring services acquisition training and education into balance with 

systems acquisition training to ensure needed training occurs. 

Effective  training  programs  need  case  studies  specific  to  buying  and  managing 

services.  Today,  of  100  case  studies  at  the  Defense  Acquisition  University,  none 

focus  on  services  contracting.  Shared  documentation  on definitions,  performance 

standards, outcome metrics, and best contracting practices are also needed for each 

portfolio of services.

This  reallocation  should  benefit  both  the  acquisition  personnel  who  buy  services 

and the functional command personnel who use services. 

RECOMMENDED ACTION 3‐4

Each military department and defense agency actively recruit individuals with 

expertise in commercial acquisition of services.

Recruiting  from  industry  can  be  facilitated  using  legislation governing  highly 

qualified experts for tours in government. As with any interaction between industry 

and government, it is important to avoid conflicts of interest.
26 I CHAPTER 3

RECOMMENDED ACTION 3‐5

Each military department and  defense  agency ensure  promotion  potential for 

military and government civilians involved in services contracting. This must be 

done  with  support  from USD (AT&L)  and the  Under  Secretary  of  Defense  for 

Personnel and Readiness.

Serving  in  services  acquisition  should  enhance an  officer’s  career. Formal  career 

planning  will  be  necessary  to  accomplish  this  goal,  including  relevant  rotations  to 

industry. Currently,  only  the  Air  Force  has  a  career  path  for  non‐commissioned 

officers  in  contracting;  all  military  departments should  follow  this  example. 

Experience  leading  organizations that  use  services  contracts  effectively  will  be 

especially useful for career advancement.
CONTINGENCY OPERATIONS I 27

Chapter 4. Services During Contingency 

Operations

The Department of Defense has been involved in several contingency operations 

over the  past  decade.  These  activities  have  taken  place  both  overseas  and  in  the 

continental  United  States,  and  have  involved  armed  conflicts; stability,  security, 

transition,  and  reconstruction  (SSTR) actions; terrorist  attacks; and  natural 

disasters. All of these are dynamic and unpredictable situations where speed, agility, 

and responsiveness have proven more valuable than consistency and conformity.

Actions  during  a  contingency  operation  require  a  72‐hour  response  time,  or 

faster.  Routine  oversight  and  standards  are  not  appropriate  for  such fast‐paced, 

fluid circumstances. The Department of Defense has also learned the necessity for 

experience;  inexperienced  personnel  operate  in  these environments only  with 

great difficulty.

Given  these  conditions,  the  current  standards  and  definitions  for  contingency 

services  are  often  problematic.  The task  force found  that  the  standards,  definitions, 

and rules for contingency operations vary between military departments. For services 

contracting,  the  rules  are  set  according  to  the  jurisdiction  of  the  contracting  office, 

rather than the nature of the contingency services or the location where the services 

are  provided. In  any  case,  rules driven  toward weapons  acquisition  efficiency leave 

little flexibility to rapidly respond to unexpected situations in services contracting.

Initial  steps  have  been  taken  to  address  contingency  contracting  and  oversight. 

Activities of the Special Inspector General for Iraq Reconstruction (SIGIR) are realistic 

and responsive, as are the U.S. Army Expeditionary Contracting Command (ECC) and 

the  Defense  Contingency  Contracting  Handbook. While  these  are  promising  steps, 

overall efforts  to remedy  contingency  contracting  in  the  Federal  Acquisition 

Regulations, Part 18 on Emergency Acquisitions, have not adequately enabled efficient 

and effective services contracting to support ongoing contingency operations.
28 I CHAPTER 4

RECOMMENDATION 4: ESTABLISH SEPARATE POLICIES AND PROCESSES TO IMPROVE 

MANAGEMENT AND OVERSIGHT OF CONTINGENCY CONTRACTING.

RECOMMENDED ACTION 4‐1

USD (AT&L)  establish a  single playbook for  contingency  services  contracting 

that is applicable to all contracts supporting contingency operations.

 Replace current DFARS Part 218 with an “It’s All Right Here” playbook

modeled on the Central Command’s Contracting Center Acquisition 

Instruction (C3AI).

The  C3AI  organizing  principle  is  “include  everything  a  commanding  officer  (CO)

needs, exclude policies and procedures they don't,” so there is no need to look up a 

cross‐reference.  In  this  case,  the  instruction  should  incorporate  current  Available 

Acquisition  Flexibilities (Subpart  218.1)  and  Emergency  Acquisition  Flexibilities 

(Subpart 218.2) within a new Part 218 structure. The instruction may also include 

FAR Part 18 to create a true “It’s All Right Here” document.

 Direct the military departments and defense agencies to establish 

procedures to identify contract actions in support of contingency operations 

and ensure that they are conducted under Part 218.

These  actions  are  intended  to  have  the  effect  of  establishing  the  same  policy 

framework  for  Theater  Support  Contracting,  External  Support  Contracting, and 

Systems Support Contracting.

 Make maximum use of available resources to develop and implement this 

process, including the Joint Contingency Acquisition Support Office in the 

Defense Logistics Agency.

RECOMMENDED ACTION 4‐2

USD (AT&L) instruct the Federal Data Procurement System to include a separate 

tracking element for each expeditionary operation. These may be included along 

with the National Interest Action element that tracks procurement actions supporting 

domestic contingency operations, such as national disasters and large events.

While some information can be drawn  from  the existing data using  the location of 

the contract action, this is an unsatisfactory approach. 

 Each military department, the U.S. Transportation Command, the Defense 

Logistics Agency, and the Defense Information Services Agency should 
CONTINGENCY OPERATIONS I 29

establish portfolio category councils to aid in efficient and effective contract 

execution and strategic sourcing decisions. Category councils should be 

established at a minimum for: 

– contingency capability contracts valued at over $100 million; 

– private security contracts; 

– inter‐ and intra‐theater transportation and intra‐theater supply chain 

management contracts; 

– training of foreign security forces; 

– personnel support contracts with a period of performance over 179 days; 

– theater communications contracts; and 

– professional services in direct support of a joint task force.

 Each military department, the U.S. Transportation Command, the Defense 

Logistics Agency, and the Defense Information Services Agency should assign a 

general/flag officer to conduct appropriate oversight over the expeditionary 

and contingency portfolios (consistent with Recommended Action 2‐4).

RECOMMENDED ACTION 4‐3

USD (AT&L)  grant  limited  acquisition  and  contracting  authority to  the

geographic  combatant  commands (GCCs)  for  contingency  operations  within 

their  areas  of  responsibility. This  is  intended  to  mean,  for  example,  that 

contracting  authority  would  remain  at military department contracting  command, 

but authority to administer task orders performed in theater could transition to the

relevant combatant command or joint task force.

 Establish policies and procedures to delegate acquisition and contracting 

authority for theater support contracting and external support contracting 

performed in the combatant command’s area of responsibility. Note that 

command staff must meet existing standards for acquisition authority (only 

the U.S. Transportation Command and U.S. Special Operations Command do 

now) or delegate that authority to a lead service agent. Delegation authority 

should include such considerations as size and expected duration of the 

contingency, significant triggering events, and availability of resources.

 Direct commands to include transition of authority, contracting organization 

relationships, and related factors, in an Annex W (Operational Contract 

Support) to their operational plan through the appropriate deliberate or 

contingency planning process.

 Assure full visibility and reporting to accompany this delegation of authority.
30 I CHAPTER 4

RECOMMENDED ACTION 4‐4

Each military department and defense agency conduct realistic exercises and 

training that accounts for services contracting during contingency operations.

The Secretary of Defense should:

 Direct the military departments, the U.S. Transportation Command, the 

Defense Logistics Agency, and the Defense Information Services Agency to 

include provisions in external support contracts to permit contractor 

support to training and exercises.

 Direct the geographic combatant commands to plan and resource, to include 

the participation of services contractors in exercises in representative roles 

similar to their expected roles in actual contingencies.

 Direct the Defense Acquisition University to develop and conduct 

appropriate training for non‐contracting members of joint task force staffs 

and contractor personnel to support the inclusion of realistic acquisition 

and supply chain management.

 Direct the USD (AT&L) to monitor the Department’s efforts to provide 

realistic, representative training for contracting and non‐contracting 

personnel (including COTRs).

 Direct each component to include performance reviews of training for 

contracting and non‐contracting personnel (including CORs) in their 

contingency services portfolio category reviews.
FINAL THOUGHTS I 31

Chapter 5. Final Thoughts

In  past  decades, enlisted personnel  cut grass, peeled  potatoes, and  carried  out 

most  defense services.  Today,  with  a  smaller all‐volunteer  force,  many  of  these 

services are now contracted out. This systemic change means the system must also 

change. Services acquisition makes up over 50 percent of all contracting, but has not 

had the attention or improvements needed to ensure effectiveness and efficiency.

The  task  force  recognizes  that,  for  the  most  part, the  major  commands  and 

combatant  commands are  responsible  for  services  contracting,  but  they  need  help 

from  the  USD (AT&L)  with  shared  best  practices, definitions,  performance 

standards, and outcome metrics. Most importantly, these need to be communicated 

via tailored training and a strong network of strategic services sourcing executives 

and category councils.

In  several  ways,  the  Department  has  already  stepped  out to  address  these 

concerns.  The  military  departments  have  appointed  executives  to oversee  this 

critical  function. The  Office  of  Defense  Procurement  and  Acquisition  Policy  has 

begun to implement independent management reviews for services acquisitions and 

has drafted a Roadmap for the Acquisition of Services. These are very positive steps. 

The  use  of  improved  data  to  track  services  spending  is  also  a  positive  step,  but 

needs additional definitions and standards for appropriate portfolios, and the ability 

to  track  expeditionary  spending.  It  is  not  possible  to  manage  funding for  services 

without proper tracking tools.

With  more  than  50  percent  of  all  defense  acquisition  funding  in  services 

contracting, it is critical  to address both  the Secretary’s Affordability  Initiative and 

to  provide  significantly  improved  support  to  the  warfighter. Urgent  actions  and 

transition plans are needed to implement the four major recommendations made by 

the task force:

 Create new policies and processes for services contracting.

 Designate roles and responsibilities for appropriate leadership and 

organizations for services contracting.

 Strengthen the skills and capabilities of people involved in services 

contracting.

 Establish separate policies and processes to improve management and 

oversight of contingency contracting.
32 I CHAPTER 5

Finally,  the  task  force  emphasizes  that  contingency  contracting  in  support  of 

military  operations  occurs  at  a  completely  different  pace,  and that  battlefield 

success depends on it.
CONGRESSIONAL OVERSIGHT I 33

Appendix A. Congressional Oversight of 

Services Contracting

Excerpt from the Ike Skelton National Defense Authorization Act for Fiscal Year 2011.

17

SEC. 863. REQUIREMENTS FOR THE ACQUISITION OF SERVICES. 

(a) ESTABLISHMENT OF REQUIREMENTS PROCESSES FOR THE ACQUISITION OF SERVICES.—The 

Secretary of Defense shall ensure that the military departments and Defense Agencies each 

establish a process for identifying, assessing, reviewing, and validating requirements for the 

acquisition of services. 

(b) OPERATIONAL REQUIREMENTS.—With regard to requirements for the acquisition of services in 

support of combatant commands and military operations, the Secretary shall ensure—

(1) that the Chief of Staff of the Army, the Chief of Naval Operations, the Chief of Staff of the Air 

Force, and the Commandant of the Marine Corps implement and bear chief responsibility for 

carrying out, within the Armed Force concerned, the process established pursuant to subsection 

(a) for such Armed Force; and 

(2) that commanders of unified combatant commands and other officers identified or designated 

as joint qualified officers have an opportunity to participate in the process of each military 

department to provide input on joint requirements for the acquisition of services. 

(c) SUPPORTING REQUIREMENTS.—With regard to requirements for the acquisition of services not 

covered by subsection (b), the Secretary shall ensure that the secretaries of the military

departments and the heads of the Defense Agencies implement and bear chief responsibility for 

carrying out, within the military department or Defense Agency concerned, the process established 

pursuant to subsection (a) for such military department or Defense Agency. 

(d) IMPLEMENTATION PLANS REQUIRED.—The Secretary shall ensure that an implementation plan 

is developed for each process established pursuant to subsection (a) that addresses, at a minimum, 

the following: 

(1) The organization of such process. 

(2) The level of command responsibility required for identifying, assessing, reviewing, and 

validating requirements for the acquisition of services in accordance with the requirements of 

this section and the categories established under section 2330(a)(1)(C) of title 10, United States 

Code. 

(3) The composition of positions necessary to operate such process. 

(4) The training required for personnel engaged in such process. 

(5) The relationship between doctrine and such process. 

(6) Methods of obtaining input on joint requirements for the acquisition of services. 

(7) Procedures for coordinating with the acquisition process. 

(8) Considerations relating to opportunities for strategic sourcing.

(e) MATTERS REQUIRED IN IMPLEMENTATION PLAN.—Each plan required under subsection (d) 

shall provide for initial implementation of a process for identifying, assessing, reviewing, and 

validating requirements for the acquisition of services not later than one year after the date of the 

                                                       

17. Ike Skelton National Defense Authorization Act for Fiscal Year 2011, Public Law 111‐383. (Link accessed 

March 2011.)
34 I APPENDIX A

enactment of this Act and shall provide for full implementation of such process at the earliest date 

practicable. 

(f) CONSISTENCY WITH JOINT GUIDANCE.—Whenever, at any time, guidance is issued by the 

Chairman of the Joint Chiefs of Staff relating to requirements for the acquisition of services in 

support of combatant commands and military operations, each process established pursuant to 

subsection (a) shall be revised in accordance with such joint guidance. 

(g) DEFINITION.—The term ‘‘requirements for the acquisition of services’’ means objectives to be 

achieved through acquisitions primarily involving the procurement of services. 

(h) REVIEW OF SUPPORTING REQUIREMENTS TO IDENTIFY SAVINGS.—The secretaries of the 

military departments and the heads of the Defense Agencies shall review and validate each 

requirement described in subsection (c) with an anticipated cost in excess of $10,000,000 with the 

objective of identifying unneeded or low priority requirements that can be reduced or eliminated, 

with the savings transferred to higher priority objectives. Savings identified and transferred to 

higher priority objectives through review and revalidation under this subsection shall count toward 

the savings objectives established in the June 4, 2010, guidance of the Secretary of Defense on 

improved operational efficiencies and the annual reduction in funding for service support 

contractors required by the August 16, 2010, guidance of the Secretary of Defense on efficiency 

initiatives. As provided by the Secretary, cost avoidance shall not count toward these objectives. 

(i) EXTENSION OF AUTHORITY.—Subsection (e) of section 834 of the National Defense 

Authorization Act for Fiscal Years 1990 and 1991 (15 U.S.C. 637 note) is amended by striking 

‘‘September 30, 2010’’ and inserting ‘‘December 31, 2011’’. 

SEC. 864. REVIEW OF DEFENSE ACQUISITION GUIDANCE. 

(a) REVIEW OF GUIDANCE.—The Secretary of Defense shall review the acquisition guidance of the 

Department of Defense, including, at a minimum, the guidance contained in Department of 

Defense Instruction 5000.02 entitled ‘‘Operation of the Defense Acquisition System’’. 

(b) MATTERS CONSIDERED.—The review performed under subsection (a) shall consider—

(1) the extent to which the acquisition of commercial goods and commodities, commercial and 

military unique services, and information technology should be addressed in Department of 

Defense Instruction 5000.02 and other guidance primarily relating to the acquisition of weapon 

systems, or should be addressed in separate instructions and guidance; 

(2) whether long‐term sustainment and energy efficiency of weapon systems is appropriately 

emphasized;

(3) whether appropriate mechanisms exist to communicate information relating to the mission 

needs of the Department of Defense to the industrial base in a way that allows the industrial 

base to make appropriate investments in infrastructure, capacity, and technology development 

to help meet such needs; 

(4) the extent to which earned value management should be required on acquisitions not 

involving the acquisition of weapon systems and whether measures of quality and technical 

performance should be included in any earned value management system; and 

(5) such other matters as the Secretary considers appropriate. 

(c) REPORT.—Not later than 270 days after the date of the enactment of this Act, the Secretary of 

Defense shall submit to the Committees on Armed Services of the Senate and the House of 

Representatives a report detailing any changes in the acquisition guidance of the Department of 

Defense identified during the review required by subsection (a), and any actions taken, or planned 

to be taken, to implement such changes.
INHERENTLY GOVERNMENTAL FUNCTIONS I 35

Appendix B. Regulations on Inherently 

Governmental Functions

Federal Acquisition Regulations

Subpart 7.5 - Inherently Governmental Functions18

7.503 Policy (Effective January 31, 2011)

(a)Contracts shall not be used for the performance of inherently governmental functions.

(b)Agency decisions which determine whether a function is or is not an inherently 

governmental function may be reviewed and modified by appropriate Office of 

Management and Budget officials.

(c) The following is a list of examples of functions considered to be inherently 

governmental functions or which shall be treated as such. This list is not all inclusive:

(1) The direct conduct of criminal investigations.

(2) The control of prosecutions and performance of adjudicatory functions other than 

those relating to arbitration or other methods of alternative dispute resolution.

(3) The command of military forces, especially the leadership of military personnel who 

are members of the combat, combat support, or combat service support role.

(4) The conduct of foreign relations and the determination of foreign policy.

(5) The determination of agency policy, such as determining the content and application 

of regulations, among other things.

(6) The determination of Federal program priorities for budget requests.

(7) The direction and control of Federal employees.

(8) The direction and control of intelligence and counter-intelligence operations.

(9) The selection or non-selection of individuals for Federal Government employment, 

including the interviewing of individuals for employment.

(10) The approval of position descriptions and performance standards for Federal 

employees.

(11) The determination of what Government property is to be disposed of and on what 

terms (although an agency may give contractors authority to dispose of property at 

prices within specified ranges and subject to other reasonable conditions deemed 

appropriate by the agency).

(12) In Federal procurement activities with respect to prime contracts—

(i) Determining what supplies or services are to be acquired by the Government 

(although an agency may give contractors authority to acquire supplies at prices 

within specified ranges and subject to other reasonable conditions deemed 

appropriate by the agency);

(ii) Participating as a voting member on any source selection boards;

(iii) Approving any contractual documents, to include documents defining 

requirements, incentive plans, and evaluation criteria;

                                                       

18. Federal Acquisition Regulation. Inherently Governmental Functions. Subpart 7.5. (Link accessed March

2011.)
36 I APPENDIX B

(iv) Awarding contracts;

(v) Administering contracts (including ordering changes in contract performance or 

contract quantities, taking action based on evaluations of contractor 

performance, and accepting or rejecting contractor products or services);

(vi) Terminating contracts;

(vii) Determining whether contract costs are reasonable, allocable, and allowable; 

and

(viii) Participating as a voting member on performance evaluation boards.

(13) The approval of agency responses to Freedom of Information Act requests (other 

than routine responses that, because of statute, regulation, or agency policy, do not 

require the exercise of judgment in determining whether documents are to be 

released or withheld), and the approval of agency responses to the administrative 

appeals of denials of Freedom of Information Act requests.

(14) The conduct of administrative hearings to determine the eligibility of any person for a 

security clearance, or involving actions that affect matters of personal reputation or 

eligibility to participate in Government programs.

(15) The approval of Federal licensing actions and inspections.

(16) The determination of budget policy, guidance, and strategy.

(17) The collection, control, and disbursement of fees, royalties, duties, fines, taxes, and 

other public funds, unless authorized by statute, such as 31 U.S.C. 952 (relating to 

private collection contractors) and 31 U.S.C. 3718 (relating to private attorney 

collection services), but not including—

(i) Collection of fees, fines, penalties, costs, or other charges from visitors to or 

patrons of mess halls, post or base exchange concessions, national parks, and 

similar entities or activities, or from other persons, where the amount to be 

collected is easily calculated or predetermined and the funds collected can be 

easily controlled using standard case management techniques; and

(ii) Routine voucher and invoice examination.

(18) The control of the treasury accounts.

(19) The administration of public trusts.

(20) The drafting of Congressional testimony, responses to Congressional 

correspondence, or agency responses to audit reports from the Inspector General, 

the General Accounting Office, or other Federal audit entity.

(d)The following is a list of examples of functions generally not considered to be 

inherently governmental functions. However, certain services and actions that are not 

considered to be inherently governmental functions 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 contractor performance. 

This list is not all inclusive:

(1) Services that involve or relate to budget preparation, including workload modeling, 

fact finding, efficiency studies, and should-cost analyses, etc.

(2) Services that involve or relate to reorganization and planning activities.

(3) Services that involve or relate to analyses, feasibility studies, and strategy options to 

be used by agency personnel in developing policy.

(4) Services that involve or relate to the development of regulations.

(5) Services that involve or relate to the evaluation of another contractor’s performance.

(6) Services in support of acquisition planning.

(7) Contractors providing assistance in contract management (such as where the 

contractor might influence official evaluations of other contractors).

(8) Contractors providing technical evaluation of contract proposals.
INHERENTLY GOVERNMENTAL FUNCTIONS I 37

(9) Contractors providing assistance in the development of statements of work.

(10) Contractors providing support in preparing responses to Freedom of Information Act 

requests.

(11) Contractors working in any situation that permits or might permit them to gain access 

to confidential business information and/or any other sensitive information (other than 

situations covered by the National Industrial Security Program described in 4.402(b)).

(12) Contractors providing information regarding agency policies or regulations, such as 

attending conferences on behalf of an agency, conducting community relations 

campaigns, or conducting agency training courses.

(13) Contractors participating in any situation where it might be assumed that they are 

agency employees or representatives.

(14) Contractors participating as technical advisors to a source selection board or 

participating as voting or nonvoting members of a source evaluation board.

(15) Contractors serving as arbitrators or providing alternative methods of dispute 

resolution.

(16) Contractors constructing buildings or structures intended to be secure from electronic 

eavesdropping or other penetration by foreign governments.

(17) Contractors providing inspection services.

(18) Contractors providing legal advice and interpretations of regulations and statutes to 

Government officials.

(19) Contractors providing special non-law enforcement, security activities that do not 

directly involve criminal investigations, such as prisoner detention or transport and 

non-military national security details.

(e)Agency implementation shall include procedures requiring the agency head or designated 

requirements official to provide the contracting officer, concurrent with transmittal of the 

statement of work (or any modification thereof), a written determination that none of the 

functions to be performed are inherently governmental. This assessment should place 

emphasis on the degree to which conditions and facts restrict the discretionary authority, 

decision-making responsibility, or accountability of Government officials using contractor 

services or work products. Disagreements regarding the determination will be resolved in 

accordance with agency procedures before issuance of a solicitation.

Defense Federal Acquisition Regulation Supplement (DFARS)

Subpart 207.5—Inherently Governmental Functions19

207.503 Policy. (Revised January 10, 2008)

(e) The written determination required by FAR 7.503(e), that none of the functions to be 

performed by contract are inherently governmental—

(i) Shall be prepared using DOD Instruction 1100.22, Guidance for Determining Workforce 

Mix; and

(ii) Shall include a determination that none of the functions to be performed are exempt from 

private sector performance, as addressed in DOD Instruction 1100.22.

                                                       

19. Defense Federal Acquisition Regulation Supplement (DFARS). Inherently Governmental Functions. 

Subpart 207.5. (Link accessed March 2011.)
38 I APPENDIX B

(S-70) Contracts for acquisition functions.

(1) In accordance with 10 U.S.C. 2383, the head of an agency may enter into a contract 

for performance of the acquisition functions closely associated with inherently 

governmental functions that are listed at FAR 7.503(d) only if—

(i) The contracting officer determines that appropriate military or civilian DOD

personnel—

(A) Cannot reasonably be made available to perform the functions;

(B) Will oversee contractor performance of the contract; and

(C) Will perform all inherently governmental functions associated with the functions 

to be performed under the contract; and

(ii) The contracting officer ensures that the agency addresses any potential 

organizational conflict of interest of the contractor in the performance of the 

functions under the contract (see FAR Subpart 9.5).

(2) See related information at PGI 207.5

Procedures, Guidance, and Information (PGI)

Subpart 207.5—Inherently Governmental Functions

Section 804 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-

375) limits contractor performance of acquisition functions closely associated with inherently 

Governmental functions.
PORTFOLIO ANALYSIS I 39

Appendix C. DOD Portfolio Analysis Strategy

Data  for  the  following  figures  are  taken  from  the  Federal  Procurement  Data 

System  and  depict  Department  of  Defense  spending  on contracted  services  in 

FY2009.  They  are  arranged  according  to  the six portfolio  groups  proposed  in  the

November 23, 2010 memorandum, Taxonomy for the Acquisition of Services.

20 They 

are arranged according to six portfolio groups.

The six groups are: 

 Knowledge‐Based Services

 Equipment Related Services

 Electronics and Communications Services

 Facilities Related Services

 Medical Services

 Transportation Services

Two additional portfolio groups are also included in this appendix:

 Research and Development Services 

 Construction Services 

Note that the Prime Contractors and Funded Contracts columns are not additive.

The key for the type of contract under Percent of Actions and Percent of Spend is 

as follows

                                                       

20. Office of Defense Procurement and Acquisition Policy.  Taxonomy for the Acquisition of Services.

Memorandum, November 23, 2010. (Link accessed March 2011.)

Cost and Cost Plus

Fixed Price

Time and Materials

All Other (Combination, Labor, No Description)
40 I APPENDIX C

Knowledge‐Based Services

Equipment Related Services
PORTFOLIO ANALYSIS I 41

Electronics and Communications Services

Facilities Related Services
42 I APPENDIX C

Medical Services

Transportation Services
PORTFOLIO ANALYSIS I 43

Research and Development Services

Construction Services
44 I APPENDIX D

Appendix D. Acquisition of Information 

Technology Services

Some recent guidance for acquisition of information technology.

DOD Policies and Procedures for the Acquisition of 

Information Technology

The following recommendations were issued as part of the Report of the Defense 

Science  Board  Task  Force on  the Department  of Defense Policies and  Procedures for 

the Acquisition of Information Technology in March 2009.

21

The Secretary of Defense should recognize that the current acquisition process 

for information technology is ineffective and Direct the Under Secretary of Defense 

for  Acquisition,  Technology, and  Logistics  (USD  (AT&L))  and  the  Vice  Chairman, 

Joint  Chiefs  of  Staff,  to  develop  new  acquisition  and  requirements  (capabilities) 

development processes for information technology systems. 

The  DOD  Chief  Information  Officer  (CIO) should  actively  exercise  his  or  her 

authority to certify that all IT acquisitions are consistent with the Department’s net‐

centric architecture.

 In the Services and agencies, the CIOs should also have strong authorities 

and responsibilities for system certification, compliance, applications 

development, and innovation. 

 All CIOs should approve IT acquisition program manager training and 

certification and advise the personnel selection process.

 The DOD CIO, supported by CIOs in the Services and agencies, should be 

responsible for certifying that systems and capabilities added to the 

enterprise do not introduce avoidable vulnerabilities that can be exploited 

by adversaries.

All  acquisition  oversight  of  information  technology  should  be  consolidated 

under the USD (AT&L) by moving into that organization those elements of the DOD 

                                                       

21. Defense Science Board. Report of the Defense Science Board Task Force on the Department of 

Defense Policies and Procedures for the Acquisition of Information Technology. March 2009. (Link 

accessed March 2011.)
ACQUISITION OF IT SERVICES I 45

CIO  and  Business  Transformation  Agency  responsible  for  IT  acquisition  oversight.

The USD (AT&L) should:

 Aggressively delegate milestone decision authority commensurate with 

program risk.

 Consider a more effective management and oversight mechanism to ensure 

joint program stability and improved program outcomes.

The  Secretary  of  Defense  shall  require  that  the  Defense  Acquisition  Executive 

(USD (AT&L)) and the component acquisition executives have proven and relevant 

business experience in  the appropriate areas  of acquisition,  product  development, 

and management.

 The USD (AT&L) must work with component and agency acquisition 

executives to improve the capabilities and selection process for program 

executive officers and program managers.

 The USD (AT&L) shall direct the Defense Acquisition University, in 

coordination with the Information Resources Management College, to 

integrate the new acquisition model into their curriculum

Office of Management and Budget

The  following information  technology acquisition and management strategy was 

issued by the Office of Management and Budget (OMB) on November 19, 2010.22

 Aligning the budget and acquisition process with the technology cycle. 

Between increasing budget flexibility and speeding up acquisitions, we’re 

going to eliminate the structural disconnect between the government’s 

process and the technology cycle. To start, OMB will work with Congress to 

identify a dozen pilot projects through which it can develop a framework for 

increased budget flexibility and greater oversight. 

 Strengthening program management. The government will create a formal 

career track for professional program managers. In addition, OMB will 

approve IT projects only if they have an effective program management 

team hardwired into the agency's organizational structure.

 Streamlining governance and increasing accountability. The administration 

will revamp agency investment review boards, modeling them after OMB’s 

                                                       

22. Office of Management and Budget. Information technology acquisition and management 

strategy. November 19, 2010. (Link accessed March 2011.)
46 I APPENDIX D

TechStat reviews. This will bring senior executives to the table armed with 

the right information and expertise to provide meaningful oversight and 

drive interventions and decision making on specific projects.

 Increasing engagement with the IT community. OMB will launch a “myth 

busters” campaign to promote greater engagement with industry and 

remove barriers to communication, that are hurting productivity. OMB will 

develop mechanisms for sharing best practices and solutions between 

agencies and the IT community on a regular basis. 

 Adopting light technology and shared solutions. The administration plans to 

reduce the government’s data centers footprint by 40 percent by 2015. In 

addition, a “cloud‐first” policy will be required in the fiscal year 2012 budget 

process as the default for agency IT.
TERMS OF REFERENCE I 47

Terms of Reference

The Terms of Reference for the task force is included on the following pages.

The  task  force  addressed  an  additional  question  from  Secretary  Gates  at  the 

quarterly meeting  of  the Defense  Science  Board  on  February  25,  2010,  asking what 

services  should  be  contracted‐out  versus  performed  in‐house? Thus,  the  task  force 

considered two additional issues:

 What services to contract out

 How best to contract for services

THE UNDER SECRETARY OF DEFENSE

3010 DEFENSE PENTAGON

WASHINGTON. DC 20301-3010

ACQUISITION.

TECHNOLOGY

AND LOGISTICS

MEMORANDUM FOR CHAIRMAN, DEFENSE SCIENCE BOARD

DEC 042009

SUBJECT: Terms ofReference - Defense Science Board (DSB) Task Force (TF) on

Improvements in Services Contracting

In accordance with section 802 ofthe National Defense Authorization Act for

FY 2010 (H.R. 2647, 211-212), the DSB is directed to create a TF to conduct an

independent assessment ofimprovements in the procurement and oversight ofservices by

the Department ofDefense. The assessment shall include the following areas ofinterest:

(1) An assessment ofthe quality and completeness of guidance relating to

the procurement ofservices, including implementation ofstatutory and regulatory

authorities and requirements.

(2) A determination ofthe extent to which best practices are being

developed for setting requirements and developing statements ofwork.

(3) An assessment ofthe contracting approaches and contract types used

for the procurement ofservices and whether such contracting approaches and contract

types best serve the interests ofthe Department ofDefense.

(4) A determination ofwhether effective standards to measure performance

have been developed.

(5) An assessment ofthe effectiveness of peer reviews within the

Department ofDefense of contracts for services and whether such reviews are being

conducted at the appropriate dollar threshold.

(6) An assessment ofthe management structure for the procurement of

services, including how the Military Departments and Defense Agencies have

implemented oftitle 10, United States Code, section 2330.

(7) A determination ofwhether the performance savings goals required by

section 802 ofthe National Defense Authorization Act for FY 2002 (10 U.S.C. 2330

note) are being achieved.

(8) An assessment ofthe effectiveness ofthe Acquisition Center of

Excellence for Services established pursuant to section 1431(b) ofthe Services

Acquisition Reforni Act of2003 (title XIV of Public Law 108-136; 117 Stat. 1671;

41 U.S.C. 405 note) and the feasibility of creating similar centers of excellence in the

Military Departments.
(9) An assessment ofthe quality and sufficiency ofthe acquisition

workforce for the procurement and oversight ofservices.

A final report on the results ofthe assessment shall be submitted to the

congressional defense committees upon completion.

This TF will be sponsored by me as the Under Secretary ofDefense for

Acquisition, Technology and Logistics. Dr. Jacques Gansler will chair the TF. Mr. John

Tenaglia (DPAP) will serve as Executive Secretary. Major Michael Warner, USAF, will

serve as the DSB Secretariat Representative.

The TF will operate in accordance with the provisions ofP.L. 92-463, the "Federal

Advisory Committee Act," and DoD Directive 5105.4, the "DoD Federal Advisory

Committee Management program." It is not anticipated that this TF will need to go into

any "particular matters" within the meaning oftitle 18, United States Code, section 208,

nor will it cause any member to be placed in the position of action as a procurement

official.

2
TASK FORCE MEMBERSHIP I 51

Task Force Membership

Name Affiliation

Chair

HON Jacques S Gansler University of Maryland

Vice Chairs

GEN Paul Kern, (U.S. Army, retired) Private Consultant

Mr Philip Odeen (Defense Business Board) Private Consultant

Executive Secretary

Mr John Tenaglia Office of Defense Procurement and Acquisition 

Policy

Members

Mr Richard Dunn Private Consultant

Dr Ronald Kerber Private Consultant

Ms Deidre Lee Fluor Corporation

Mr William Lucyshyn University of Maryland

HON Judith A Miller Private Consultant

RADM David Oliver (U.S. Navy, retired) EADS North America

Maj Gen Darryl Scott (U.S. Air Force, retired) Boeing Company

DSB Representatives

Mr Brian Hughes Office of the Under Secretary of Defense for 

Acquisition, Technology and Logistics

Maj Michael Warner Office of the Under Secretary of Defense for 

Acquisition, Technology and Logistics

Staff

Ms Kelly Frere Strategic Analysis, Inc.

Ms Teresa Kidwell Strategic Analysis, Inc.

Dr Toni Marechaux Strategic Analysis, Inc.

PRESENTATIONS TO THE TASK FORCE I 53

Presentations to the Task Force

Name Organization

May 24, 2010

Mr Edward Harrington Deputy Assistant Secretary of the Army 

(Procurement)

Mr Shay D. Assad Office of Defense Procurement and Acquisition 

Policy

Mr Elliott B. Branch Acquisition and Logistics Management, Office of 

the Assistant Secretary of the Navy (Research, 

Development and Acquisition)

June 23–24, 2010

Ms Diann McCoy Acquisition Solutions, Inc

Mr Jeffrey Parsons U.S. Army Contracting Command

Mr David Berteau Center for Strategic and International Studies

Mr Stan Soloway Professional Services Council

Mr Terry Raney and Mr Steven Weill CACI

Ms Joseph Schneider JSA Partners, Inc

July 28–29, 2010

Mr Andrew Hunter House Armed Services Committee

Brig Gen Wendy Masiello Program Executive Office for Combat and Mission 

Support, U.S. Air Force

Mr Edward Elgart U.S. Army Communications Electronics Command

CDR Mark Runstrom, U.S. Navy Operational Contract Support, Joint Staff J-4

Mr Peter Levine Senate Armed Services Committee

Mr James Sheaffer CSC

Mr Brad Smith and Ms Lindsay Samora Strategic Analysis, Inc

Ms Kimberly Rupert SAIC
54 I PRESENTATIONS TO THE TASK FORCE

Name Organization

September 22–23, 2010

Mr Robert Jones Caterpillar Logistics Services, Inc

Ms Debra Scheider National Reconnaissance Office

Ms Mary Margaret Evans Insitu, Inc

Mr George Mitchell Sikorsky Helicopter

COL Nello Tortora U.S. Army Engineering and Support Center, 

Huntsville

Mr Richard Gross Boeing Company

Mr Lyle Eesley Defense Acquisition University

October 29, 2010

Mr David Berteau Center for Strategic and International Studies

Mr William Greenwalt and Mr Louis Kratz Lockheed Martin Corporation

BG Thomas Horlander U.S. Army Installation and Management Command

Mr Stuart Hazlett Office of Defense Procurement and Acquisition 

Policy

November 18–19, 2010

Mr Douglas Horn and Ms Ella Studer KBR
GLOSSARY I 55

Glossary

ADP automatic data processing

CAD/CAM computer-aided design/computer-aided manufacturing

C3AI Central Command’s Contracting Center Acquisition Instruction

CC category council

CIO Chief Information Officer

CO commanding officer

COR contracting officer’s representative

COTR contracting officer’s technical representative

DAWIA Defense Acquisition Worforce Improvement Act

DFARS Defense Federal Acquisition Regulation Supplement

DOD Department of Defense

DPAP Defense Procurement and Acquisition Policy

DSB Defense Science Board

ECC Expeditionary Contracting Command (Army)

FAR Federal Acquisition Regulation

FPDS Federal Procurement Data System

GAO Government Accountability Office

GCC geographic combatant command

IDIQ indefinite delivery/indefinite quantity

IMCOM Installation Management Command (Army)

IT information technology

MAIS major automated information system

MDAPS major defense acquisition programs

MILCON military construction

OCI organizational conflict of interest

OMB Office of Management and Budget

PFI private finance initiative

R&D research and development

SIECMP Services and Infrastructure Enterprise Contract Management Program

SIGIR Special Inspector General for Iraq Reconstruction

SLA service level agreement

SSO strategic sourcing office

SSTR stability, security, transition, and reconstruction

U.S.C. United States Code

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