United States Government Accountability Office

Washington, DC 20548 

January 29, 2010 

Congressional Committees 

Subject: Defense Acquisitions: Observations on the Department of Defense Service 

Contract Inventories for Fiscal Year 2008

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

contractor-provided services and relies on contractors to support its varied missions. 

DOD’s contractors provide a range of services, such as consulting and administrative 

support, information technology services, and weapon system and base operations 

support. However, DOD contract management has been on our high-risk list since 

1992,1

 and our recent work continues to identify weaknesses in DOD’s management 

and oversight of services contracts. In particular, we have reported on the need for 

reliable data on how service acquisition dollars are spent to make informed contract 

management decisions and achieve positive acquisition outcomes.2

 Congress has 

enacted legislation in recent years to increase the availability of information on 

services acquisitions to improve DOD’s ability to manage these purchases. As part of 

those efforts, the National Defense Authorization Act for Fiscal Year 2008 amended 

10 U.S.C. § 2330a to require DOD to submit an annual inventory of the activities 

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

preceding fiscal year.3 These inventories are to contain a number of different 

elements for the service contracts listed, including information on the functions and 

missions performed by the contractor, the funding source for the contract, and the 

number of contractor full-time equivalents (FTE) working under the contract. Once 

compiled, the inventories are to be reviewed by senior DOD officials and used to 

inform a variety of acquisition and workforce decisions. 

House Armed Services Committee Report 111-116, which accompanied the National 

Defense Authorization Act for Fiscal Year 2010, directed us to assess the 

methodology used by the Departments of the Army, Navy,4

 and Air Force to compile 

the service contract inventories for fiscal year 2008. In December 2009, we provided 

your staff with a briefing on the results of our assessment of the methodologies used. 

This letter summarizes that briefing, which is contained in enclosure I. 

To assess the methodologies used by each of the military departments in compiling 

their fiscal year 2008 inventories, we obtained and reviewed each of the inventories 

 

1

 GAO, High-Risk Series: An Update, GAO-09-271 (Washington, D.C.: January 2009). 2

 GAO, Defense Acquisitions: Tailored Approach Needed to Improve Service Acquisition Outcomes, 

GAO-07-20 (Washington, D.C.: Nov. 9, 2006). 3

 10 U.S.C. § 2330a (c). 

4

 Throughout this letter and the enclosed briefing, we use the term Navy to refer to the Department of 

the Navy, which includes both the Navy and the United States Marine Corps. 
2 GAO-10-350R Service Contract Inventories 

and descriptions of the methodologies used. In addition, we interviewed officials 

from the Office of Acquisition, Technology and Logistics, Defense Procurement and 

Acquisition Policy, and the Army, Navy, and Air Force to identify the data sources 

used and discuss the compilation methodologies. We also analyzed data from the 

Federal Procurement Data System-Next Generation (FPDS-NG)5 on service contracts 

active in fiscal year 2008 for each military department to assess the methodologies 

used and the completeness of the data contained in the inventories. We have 

previously reported on issues with the reliability of data contained in FPDS-NG; 

however, for the purposes of this review, we used FPDS-NG data to identify potential 

inconsistencies in the military departments’ methodologies and their implementation, 

rather than to assess the completeness or accuracy of FPDS-NG data. Additional 

information regarding our scope and methodology appears in appendix I of the 

briefing. 

We conducted this performance audit from October 2009 to November 2009 in 

accordance with generally accepted government auditing standards. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate evidence 

to provide a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives. 

Summary 

In July 2009, DOD transmitted a report to Congress containing the inventories for 

fiscal year 2008, in which the Departments of the Army, Navy, and Air Force 

identified $96 billion spent to acquire contractor services and 596,219 contractor 

FTEs providing services.6 In compiling their respective inventories, the military 

departments used different methodologies, relying on a mixture of existing data 

systems, contractor-entered data, manual compilation of some data elements, or 

estimates. Key differences between the departments’ methodologies include how 

they identified service contracts, the categories of services included in each 

inventory, and how they determined the number of contractor FTEs. Furthermore, 

the data reported in each of the inventories were not complete. DOD has 

acknowledged limitations associated with the methodologies used and currently has 

an effort under way to develop a new, more consistent approach for compiling future 

inventories. 

 

5

 FPDS-NG is the primary governmentwide contracting database, providing information on government 

contracting actions, procurement trends, and achievement of socioeconomic goals, such as small 

business participation. 

6

 According to FPDS-NG, DOD obligated approximately $200 billion on service contracts in fiscal year 

2008. DOD has since indicated that the fiscal year 2008 total was overstated by $13.9 billion and has 

corrected this administrative error in its fiscal year 2009 data. The difference between the obligations 

identified in FPDS-NG and the amount identified in the military departments’ inventories is 

attributable, in part, to service contracting activities by defense agencies other than the military 

departments, which were not included in our review, and the fact that the Army inventory dollar total 

was based on invoiced contract costs rather than obligations. 
3 GAO-10-350R Service Contract Inventories 

Methodologies Used by the Army, Navy, and Air Force Differed in Key Ways 

One key difference in the methodologies relates to how the Army, Navy, and Air 

Force identified contracts for services. Specifically, the Army’s methodology included 

services purchased under contracts for both goods and services, while the Navy and 

Air Force methodologies did not. This occurred because the Army inventory was 

based in part on information entered by contractors into its Contractor Manpower 

Reporting Application (CMRA) system, which was set up to obtain better visibility of 

the contractor service workforce. According to Army policy, Army contracts must 

contain a clause requiring contractors to enter data, including the invoiced amount 

and the direct labor hours for services purchased, regardless of whether the contract 

is primarily for services or goods. In contrast, the Navy and Air Force identified 

service contracts based on whether the contracts were coded for services in FPDSNG. However, since services can also be purchased under contracts coded for goods 

in FPDS-NG, services purchased under such contracts were not included in the Navy 

and Air Force inventories.7

 

Another key difference among the methodologies is that each military department 

defined what constituted a service differently and excluded different categories of 

services and contract actions from each inventory based on their interpretations of 

the requirements. In some instances, the effect of these exclusions was significant. 

Most notably, the Air Force excluded contracts categorized as providing research and 

development services whereas the Navy and Army inventories contain such 

contracts. The effect of this exclusion reduced the obligations reported in the Air 

Force’s inventory by about $13 billion. Additionally, the Navy excluded contract 

actions below $100,000, which totaled $1.8 billion, and contract actions with 

de-obligations, which totaled $1.2 billion. 

The military departments also differed in how they determined the number of 

contractor FTEs performing services. The Army used data entered into CMRA by 

contractors regarding the number of direct labor hours worked for contract services 

during fiscal year 2008, which were then converted to FTEs.8

 Army officials explained 

that contractor data should but may not always be validated by government 

personnel overseeing the contractors. However, Army officials indicated that because 

the reported data are consistent with other data obtained through internal reviews, 

they are confident in the reported data’s accuracy. Army officials also stated that on a 

limited basis, when the alternative would have been receiving no labor hour data, 

contractors have been given permission to enter estimates in lieu of actual labor 

hours. In contrast, the Navy and Air Force both used the amount obligated for a 

particular type of service divided by the estimated cost of a contractor employee to 

perform that type of service to estimate the number of contractor FTEs. However, the 

Navy and Air Force differed in how they identified the cost of a contractor 

performing each type of service. The Navy reviewed a sample of 510 Navy contracts 

and based on this sample calculated the average hourly labor rate for each type of 

 

7

 Guidance for entering data into FPDS-NG indicates that only one product service code is to be used 

for each contract action, and this code should reflect the predominant good or service purchased, even 

if other types of goods or services are also being purchased under the same contract. 

8

 One FTE equals 2087 labor hours performed in a year. 
4 GAO-10-350R Service Contract Inventories 

service. The Air Force, for the majority of its contracts, adjusted the average annual 

cost of a contractor FTE identified in DOD’s Performance of Commercial Activities 

Report9 and used this adjusted number as its estimated contractor cost. For example, 

using its methodology, the Navy determined the cost of a contractor providing 

professional services to be $179,252 per year, whereas the Air Force determined the 

cost for the same type of service to be $160,000 per year. When using an estimate to 

calculate FTEs, the results can be highly sensitive to the numbers that are used for 

the cost of a contractor FTE. For instance, when the Air Force adjusted the factor 

contained in the DOD commercial activities report, its FTE calculation was reduced 

by almost half. 

Inventory Data Were Not Complete 

The data reported in each of the military departments’ inventories are not complete. 

For example, the military departments noted challenges in their ability to obtain and 

report data on services purchased through interagency contracting. Using FPDS-NG, 

we identified $1.4 billion in obligations where the military departments provided 

funding to non-DOD agencies to contract for services on DOD’s behalf, which 

indicates a large scope of service contracting activities not fully reflected in the 

inventories. In addition, for those contracts that were included in the inventories, the 

Army, Navy, and Air Force were missing some data they were required to report. For 

example, the Navy inadvertently omitted $4 billion in service contracting activity 

because of an error made in manually compiling its inventory. Additionally, all three 

military departments did not identify the funding source for a significant portion of 

the contracts in their inventories—in the case of the Air Force, the funding source 

was provided for less than 1 percent of the contracts. In the case of the Army, our 

analysis showed that for 88 percent of the contracts in the Army’s inventory, data 

were not provided on the number of contractor FTEs or the function performed by 

the contractor. Army officials told us that this occurred because contractors did not 

enter data into the CMRA system for all contracts that the Army listed in its 

inventory. We found that the Army had more complete data for a small subset of 

contracts for which contractors entered labor hour data into CMRA. For this subset, 

the number of contractor FTEs and the function performed by the contractor were 

provided for close to 100 percent of these contracts.10 The Navy and Air Force were 

able to provide more complete data on the number of contractor FTEs and the 

function performed for almost all contracts listed in their inventories because each 

populated the contractor FTE field with estimates using a formula and took the 

function performed by the contractor from existing data systems. 

Plans for Fiscal Year 2009 Inventories and Future GAO Reviews 

DOD has acknowledged the presence of inconsistencies across the military 

departments’ fiscal year 2008 inventories. The Office of Acquisition, Technology, and 

Logistics, Defense Procurement and Acquisition Policy is developing a new, more 

 

9

 DOD submits this report to Congress pursuant to requirements contained in 10 U.S.C. § 2462(b). 

10 According to the Army, this small subset of contracts provides the sole basis for the 

213,133 contractor FTEs and the $34 billion spent to acquire services that the Army identified in the 

July 2009 report to Congress. 
5 GAO-10-350R Service Contract Inventories 

consistent methodology for compiling the fiscal year 2009 inventories to address 

these inconsistencies, which includes consideration of options for standardizing the 

calculation of contractor FTEs. In addition, section 803 of the National Defense 

Authorization Act for Fiscal Year 2010 directs GAO to continue to report on DOD’s 

inventories in 2010, 2011, and 2012.11 

Concluding Observations 

The service contract inventories are to be used to inform a variety of acquisition and 

workforce decisions within DOD. The limitations that both we and DOD have 

identified in the methodologies used to compile the inventories for fiscal year 2008 

indicate a need to exercise caution when using them as a basis for such decisions. 

First, the differences inherent in each of the methodologies, in particular the 

differences in the categories of services excluded and in the way in which the number 

of contractor FTEs was identified, make comparisons across the military 

departments difficult. Furthermore, all three methodologies had limitations in the 

extent to which each captured the universe of service contracting activity, and for 

those contracts that were included, the extent to which complete data were reported. 

DOD efforts to develop a new, more consistent approach for compiling the 

inventories may address such limitations and better meet the varying information 

needs of those responsible for making acquisition and workforce decisions. 

Agency Comments 

We provided a draft of this report to DOD for its review and comment. DOD provided 

oral comments in which Mr. Shay Assad, Director, Defense Procurement and 

Acquisition Policy, stated that DOD concurs with the GAO’s concluding observations 

and will continue working with the military departments and other defense agencies 

to establish a unified methodology for completion of all data required by 

10 U.S.C. § 2330a. 

 

11 Pub. L. No. 111-84 § 803, 123 Stat. 2190 (2009). 
6 GAO-10-350R Service Contract Inventories 

We are sending a copy of this report to the Secretary of Defense. In addition, this 

document will be available at no charge on GAO’s Web site at http://www.gao.gov. 

If you or your staff have any questions, please contact us at (202) 512-4841 or 

huttonj@gao.gov or (202) 512-8365 or solisw@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last page of this 

report. GAO staff who made contributions to this correspondence are listed in 

enclosure II. 

John P. Hutton 

Director, Acquisition and Sourcing Management 

William Solis 

Director, Defense Capabilities and Management 

Enclosures - 2 
7 GAO-10-350R Service Contract Inventories 

List of Committees 

The Honorable Carl Levin 

Chairman 

The Honorable John McCain 

Ranking Member 

Committee on Armed Services 

United States Senate 

The Honorable Daniel Inouye 

Chairman 

The Honorable Thad Cochran 

Ranking Member 

Subcommittee on Defense 

Committee on Appropriations 

United States Senate 

The Honorable Ike Skelton 

Chairman 

The Honorable Howard P. McKeon 

Ranking Member 

Committee on Armed Services 

House of Representatives 

The Honorable John Murtha 

Chairman 

The Honorable C.W. Bill Young 

Ranking Member 

Subcommittee on Defense 

Committee on Appropriations 

House of Representatives 
Enclosure I: Briefing Slides 

8 GAO-10-350R Service Contract Inventories

Observations on the Department 

of Defense Service Contract 

Inventories for Fiscal Year 2008

Briefing for Congressional Staff

December 10, 2009
Enclosure I: Briefing Slides 

9 GAO-10-350R Service Contract Inventories

2

Contents

• Introduction

• Objective, Scope, and Methodology

• Results in Brief

• Background

• Methodologies Used by Military Departments Differed

• Inventory Data Are Not Complete

• Concluding Observations

• Plans for Fiscal Year 2009 Inventories and Future GAO Reviews

• Agency Views

• Appendix I: Scope and Methodology

• Points of Contact
Enclosure I: Briefing Slides 

10 GAO-10-350R Service Contract Inventories

3

Introduction: DOD’s Use of Service Contracts 

and Requirement for Inventories

• The Department of Defense (DOD) reported obligating roughly $200 billion 

on service contracts in fiscal year 2008. 

• Contractors provided a range of services for DOD, such as:

• food services;

• management support;

• analytical support for budget formulation; 

• weapon system repair; and 

• security guard services. 

• 10 USC § 2330a requires DOD to collect data on the purchase of services, 

compile an inventory of those services, and submit the inventory to 

Congress annually. The inventory is to be made available to the public. 

Further, within 90 days of submission of the annual inventory to Congress, 

DOD must review the inventory to ensure that it complies with the 

requirements of 10 USC 2330a (e).
Enclosure I: Briefing Slides 

11 GAO-10-350R Service Contract Inventories

4

Objective, Scope, and Methodology

• The House Armed Services Committee Report 111-166 accompanying 

H.R. 2647, the National Defense Authorization Act for Fiscal Year 2010, 

directed GAO to assess the methodology used by the Departments of the 

Air Force, Navy,1 and Army to compile the inventories for fiscal year 2008. 

• To conduct our work we: 

• obtained and reviewed the military departments’ inventories for fiscal 

year 2008 and descriptions of the methodologies used to compile 

them;

• interviewed officials to identify the data sources used to compile the 

inventories and discuss the compilation methodologies; and

• compared inventory data to data extracted from the Federal 

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

2008 to assess the completeness of the data contained in the 

inventories.

• See Appendix I for our complete scope and methodology. 

1 For the remainder of this briefing, we use the term Navy to refer to the Department of the Navy, which includes both the Navy and the United States 

Marine Corps. 
Enclosure I: Briefing Slides 

12 GAO-10-350R Service Contract Inventories

5

Results in Brief

The military departments each used different approaches and data

sources to compile their service contract inventories for fiscal year 

2008, excluded different categories of data, and calculated the 

number of contractor full time equivalents differently. Further, the data 

reported in each of the inventories are not complete. 

The military departments have acknowledged some of the limitations 

associated with their methodologies. Furthermore, there is a DODwide effort underway to develop a new, more consistent approach for 

compiling future inventories. 
Enclosure I: Briefing Slides 

13 GAO-10-350R Service Contract Inventories

6

Background: Statutory Requirements

• 10 USC § 2330a (a) requires the Secretary of Defense to establish a data 

collection system to provide management information about the purchase 

of services. This system is to capture data on the following elements:

• the service purchased;

• total dollar amount of the purchase;

• form of contracting;

• whether the purchase was made through a performance-based or nonperformance based contracting arrangement;

• if the purchase was made by a non-DOD agency, the name of that 

agency; 

• the extent of competition provided in making the purchase, and 

whether there was more than one offer;

• whether the purchase was made from a small business, small 

disadvantaged businesses, or women-owned small businesses. 
Enclosure I: Briefing Slides 

14 GAO-10-350R Service Contract Inventories

7

Background: Statutory Requirements (cont.)

• 10 USC 2330a (c) also requires the Secretary of Defense to submit to 

Congress, not later than the third quarter of each fiscal year, an annual 

inventory of the activities performed during the preceding fiscal year 

pursuant to contracts for services for or on behalf of DOD. The inventory 

shall include the following data elements for each activity:

• functions and missions performed by the contractor;

• contracting organization, administering component, and requiring

organization;

• funding source for the contract by appropriation and operating agency;

• fiscal year the activity was first reported on an inventory;

• number of full-time contractor employees (or equivalent); 

• a determination of whether the contract is for personal services; and

• a summary of the data already required in 10 USC 2330a (b).
Enclosure I: Briefing Slides 

15 GAO-10-350R Service Contract Inventories

8

Background: Statutory Requirements (cont.)

• 10 USC § 2330a (e) also requires that the secretary of the military 

department or head of the defense agency shall review contracts on the 

list for which they are responsible to:

• ensure that personal services contracts are being entered into and 

performed according to applicable statutory and regulatory 

requirements;

• ensure that the activities on the list do not include any inherently 

governmental functions;

• ensure that to the maximum extent practicable that activities on the 

list do not include any functions closely associated with inherently 

governmental functions; and

• identify activities that should be considered for conversion to 

• performance by DOD civilian employees pursuant to 10 USC 

2463, or

• to an acquisition approach more advantageous to DOD.
Enclosure I: Briefing Slides 

16 GAO-10-350R Service Contract Inventories

9

Background: Schedule for Submitting Fiscal 

Year 2008 Inventories

• In May 2008, DOD’s Office of Acquisition, Technology & Logistics

(AT&L) issued a memorandum that established a phased 

approach for implementing the inventory requirement. 

• In May 2009, AT&L issued a revised implementation schedule. 

Fiscal Year 2008 Fiscal Year 2009 Fiscal Year 2010 Fiscal Year 2011

• Army will deliver fully 

compliant inventory list.

• Army will deliver fully 

compliant inventory list, and 

the Air Force and Navy will 

deliver prototype lists.

• Army, Air Force, and Navy will 

deliver fully compliant inventory. 

Defense agencies will deliver 

prototype inventories.

• All DOD components will 

deliver annual inventories in full 

compliance with 10 USC § 

2330a.

June 30, 2009 August 28, 2009 June 30, 2010 

• Military departments 

submit inventories for 

fiscal year 2008.

• Defense agencies submit 

inventories.

• All DOD components submit 

inventories for DOD-wide 

compliance with 10 USC § 

2330a.
Enclosure I: Briefing Slides 

17 GAO-10-350R Service Contract Inventories

10

Background Background: Inventories for Fiscal Year 2008 

Service Contracts

The fiscal year 2008 military departments’ inventories identified $96 billion in 

service contracting activity and 596,219 contractor full-time equivalents 

(FTEs).2

Table 1: Dollars contracted for services in 

fiscal year 2008 inventories

Figure 1: Total FTEs in fiscal year 2008 inventories 

2 One FTE equals 2087 labor hours performed in a year. 
Enclosure I: Briefing Slides 

18 GAO-10-350R Service Contract Inventories

11

Methodologies Used by the Military 

Departments Differed

• Key differences exist in how the military departments compiled 

their service contract inventories for fiscal year 2008.

• The military departments’ methodologies relied on a mixture of 

existing data systems, manual compilation of some data 

elements, and estimates. 

• Each military department excluded different categories of 

contract services and actions. 

• Each military department chose a different technique for 

calculating the number of contractor FTEs. 
Enclosure I: Briefing Slides 

19 GAO-10-350R Service Contract Inventories

12

Methodologies Used: Overview of Army

To compile its inventory, the 

Army used the Army Contract 

Business Intelligence System 

(ACBIS) to identify service 

contracts and populate the 

Contractor Manpower 

Reporting Application (CMRA).

Contractors then entered 

additional data, including data 

on labor hours, into CMRA. 

The Army then used ACBIS to 

populate any remaining data 

elements.

ACBIS

Contractors enter 

data

CMRA

ACBIS

Inventory Data Set
Enclosure I: Briefing Slides 

20 GAO-10-350R Service Contract Inventories

13

To compile its inventory, 

the Navy had individual 

contracting offices query 

FPDS-NG and contracting 

writing systems using the 

product service code (PSC) 

to identify services 

contracts. 

Methodologies Used: Overview of Navy

Inventory Data Set

FPDS-NG

Contractor FTEs were 

calculated using average 

hourly labor rates derived from 

a sample of Navy contracts 

representing 17 PSC 

categories. 

Contract Writing Systems
Enclosure I: Briefing Slides 

21 GAO-10-350R Service Contract Inventories

14

Actions associated with 

contracts for advisory and 

assistance services

To compile its inventory, 

the Air Force queried 

FPDS-NG using the PSC 

to identify service 

contracts. The Air Force 

then used multiple 

methodologies depending 

on the nature of the 

contract action to identify 

the number of contractor 

FTEs.

Methodologies Used: Overview of Air Force

FPDS-NG

Inventory Data Set

Contractor FTEs were 

determined by the office that 

managed the contract.

Actions associated with 

all other contracts

Contractor FTEs were determined 

by the office that managed the 

contract; 

OR

were calculated using a formula 

based on an average revenue per 

employee factor for each PSC.
Enclosure I: Briefing Slides 

22 GAO-10-350R Service Contract Inventories

15

Methodologies Used: Some Services and 

Contract Actions Excluded

• Because the Air Force and Navy identified contracts included in their 

inventories based on whether they were coded as a service in FPDS-NG, 

their inventories do not include contracts that may have been coded 

under a PSC for goods but that also have services being performed. 

• This occurs because those entering data into FPDS-NG are to report 

only one PSC for each action and are to use the PSC that describes 

the predominant product or service procured. 

• According to Army guidance on reporting in CMRA, contractors are

required to report data on services purchased under a contract used to 

purchase both goods and services, even if the product service code 

associated with the contract is for goods. We identified contracts included 

in the Army’s inventory that are coded under a PSC for goods in FPDSNG.
Enclosure I: Briefing Slides 

23 GAO-10-350R Service Contract Inventories

16

Methodologies Used: Some Services and 

Contract Actions Excluded

Each military department excluded some categories of services and/or 

contract actions from their inventories. 

Table 2: Activities excluded from fiscal year 2008 inventories
Enclosure I: Briefing Slides 

24 GAO-10-350R Service Contract Inventories

17

Methodologies Used: Example of the Effect of 

Navy Exclusions

• Based on its interpretation of 10 U.S.C. 2330a, a Navy official stated 

that the Navy did not include actions below $100,000. Using FPDSNG, we identified the total dollar value of these actions as about $1.8 

billion. 

• The Navy also did not include contract actions with de-obligations in 

its inventory. Using FPDS-NG, we identified the total dollar value of 

de-obligations as about $1.2 billion.3

3 For our analysis of the Navy’s exclusions, we removed contract actions from the FPDS-NG data we compiled that were associated with the PSCs for 

lease or rental of equipment and construction to maintain consistency with the Navy’s original PSC inclusions. 
Enclosure I: Briefing Slides 

25 GAO-10-350R Service Contract Inventories

18

Methodologies Used: Example of the Effect of 

Air Force Exclusions

While the Army and Navy inventories included product service codes for research and development 

(PSC A) and maintenance, repair or alteration of real property (PSC Z), the Air Force inventory did 

not. If PSC A and PSC Z were included in the Air Force inventory, both total obligations and the FTE 

estimate would increase significantly. 

Figure 2: Potential change in Air Force inventory 

obligations for fiscal year 2008

Figure 3: Potential change in Air Force inventory 

FTE estimate for fiscal year 2008
Enclosure I: Briefing Slides 

26 GAO-10-350R Service Contract Inventories

19

Methodologies Used: Army’s Calculation of 

Contractor FTEs

• Contractors with a reporting requirement in their performance work 

statement are to enter data in CMRA for direct labor hours, which is the 

total number of hours performed by the contractor on the contract in the 

prior fiscal year.

• According to Army officials, contractors can enter labor hour 

estimates on a limited exception basis because in some cases, the 

alternative would have been receiving no labor hour data. They 

stated these estimates are regarded as reasonable since CMRA has

automated checks of whether the labor hours are consistent with 

other data being reported. 

• Army officials said that while contracting officer’s representatives are 

to validate the labor hours entered by contractors in CMRA, this

validation may not always occur. However, officials expressed 

confidence in the reported FTEs’ accuracy because the numbers are 

consistent with data obtained through internal reviews.
Enclosure I: Briefing Slides 

27 GAO-10-350R Service Contract Inventories

20

To calculate the number of contractor FTEs, the Army used the 

following formula based on the data from CMRA:

Number of 

FTEs =

Direct labor hours 

2087 annual labor hours

Taken from CMRA

Methodologies Used: Army’s Calculation of 

Contractor FTEs (cont.)
Enclosure I: Briefing Slides 

28 GAO-10-350R Service Contract Inventories

21

Methodologies Used: Navy’s Calculation of 

Contractor FTEs

• To calculate contractor FTE’s, the Navy used the following 

process:

• Grouped PSCs into 17 categories based on similarities in 

descriptions and functions.

• Selected a sample of Navy contracts for each category of 

services. 

• Reviewed 510 contracts to identify the average hourly labor 

rate on each contract, then calculated the average hourly 

labor rate for each of the 17 categories. For example, using 

this method the Navy calculated that a contractor working 

under a contract coded as program management services 

earned an average labor rate of $85.75 per hour. 
Enclosure I: Briefing Slides 

29 GAO-10-350R Service Contract Inventories

22

Methodologies Used: Navy’s Calculation of 

Contractor FTEs (cont.)

Once the Navy identified the average hourly labor rate for each 

service category, the Navy used the following formula to calculate 

FTEs:

Number of 

FTEs =

Dollars obligated for 

each contract line item 

Average hourly 

labor rate

Taken from 

contract writing 

systems

The average hourly labor rate was calculated based on sample of Navy 

contracts and then multiplied by 2087 annual labor hours to convert to an 

annual dollar amount. 

x 2087
Enclosure I: Briefing Slides 

30 GAO-10-350R Service Contract Inventories

23

Methodologies Used: Air Force’s Calculation 

of Contractor FTEs

• For the 1,154 contract actions in the Air Force inventory that the 

Air Force identified as being associated with contracts for advisory 

and assistance services, the Air Force used FTE numbers that 

were generated through their annual budget documentation 

process. To do so, the offices that manage each contract are to 

provide their best estimate of the number of contractor FTEs 

based on the techniques identified in Air Force Instruction 38-201, 

Determining Manpower Requirements. 

• These estimating methods were used for actions associated 

with advisory and assistance services contracts regardless of 

the amount obligated. 
Enclosure I: Briefing Slides 

31 GAO-10-350R Service Contract Inventories

24

Methodologies Used: Air Force’s Calculation 

of Contractor FTEs (cont.)

• For the non-advisory and assistance service contract actions in the Air 

Force inventory that were $10 million and above, the responsible

contracting offices were asked to provide their best estimate of the 

number of FTEs and could do so based on any logical approach they 

chose, including counting the number of contractor badges or common 

access cards issued under the contract, asking the contractor how many 

people were working under the contract, or asking the quality assurance 

personnel to provide an estimate. Using these approaches, the 

responsible contracting offices provided either a head count or an FTE 

estimate for 86 of these actions.

• For the remaining 196 actions that were $10 million and above, the 

responsible contracting office did not provide an FTE estimate. As a 

result, the Air Force applied its formula for calculating FTEs to these 

as well as the 44,917 actions below $10 million.
Enclosure I: Briefing Slides 

32 GAO-10-350R Service Contract Inventories

25

Methodologies Used: Air Force’s Calculation 

of Contractor FTEs (cont.)

To estimate contractor FTEs in its inventory, the Air Force used the 

following formula:

Number of 

FTEs =

Dollars obligated 

for the action

Average annual cost of FTE for the 

PSC associated with the action

Taken from 

FPDS-NG

Based on an Air Force adjustment to the average FTE costs in the

DOD Performance of Commercial Activities Report.

4

4DOD submits this report to Congress pursuant to requirements contained in 10 U.S.C. § 2462(b).
Enclosure I: Briefing Slides 

33 GAO-10-350R Service Contract Inventories

26

Methodologies Used: Air Force’s Calculation 

of Contractor FTEs (cont.)

• The Air Force did not agree with the methodology used to 

calculate the average annual cost of an FTE in the DOD 

Performance of Commercial Activities Report, citing concerns 

that the costs identified were too low. 

• Based on a survey of its professional services contracts, the Air 

Force proportionally increased the average annual cost of an 

FTE for all service contract categories. 

• Using the adjusted average FTE cost, the Air Force estimated it 

had 122,764 contractor FTEs for those actions where it used its 

formula. Using the averages from DOD’s commercial activities 

report, the estimate would have been 238,107 FTEs for these 

same actions. 
Enclosure I: Briefing Slides 

34 GAO-10-350R Service Contract Inventories

27

Methodologies Used: Comparison of FTE 

Calculations

• Using two Army task orders as examples, we identified the dollars 

obligated under each task order in FPDS-NG for fiscal year 2008 

and then applied both the Navy and Air Force FTE formulas and 

their respective labor rates to the same task order to compare the 

resulting number of FTEs. Because the Army methodology for 

determining FTEs relies on contractor reported data, we could not 

apply that methodology to Navy or Air Force contracts or orders.

• As illustrated on the following slide, applying the different 

methodologies, specifically the labor rates, to the same task order 

results in a different number of contractor FTEs. 
Enclosure I: Briefing Slides 

35 GAO-10-350R Service Contract Inventories

28

Methodologies Used: Comparison of FTE Calculations 

(cont.)

Figure 4: Comparison of FTE results for the Army, Navy, and Air Force
Enclosure I: Briefing Slides 

36 GAO-10-350R Service Contract Inventories

29

Inventory Data Are Not Complete

• The military departments’ inventories are not complete.

• Each military department reported that interagency contracts for

which DOD provided funds to other agencies to purchase services on 

its behalf were not fully reflected in their inventories.

• The Army inventory was missing data for some required data 

elements because contractors did not enter data for a significant 

number of contracts. 

• The Navy inventory inadvertently omitted almost $4 billion in service 

contracting activity.

• The Air Force inventory did not identify the funding source for a large 

number of contracts and attributed this to resource constraints. The 

Air Force also excluded a small number of contractor FTEs from the 

total.
Enclosure I: Briefing Slides 

37 GAO-10-350R Service Contract Inventories

30

Completeness: Incomplete Reporting of 

Interagency Contracting Activities

• In submitting their inventories, the Army and Air Force noted 

challenges in their ability to obtain and report data on interagency 

service contracts. As a result, the Army stated that its inventory 

contained limited data on services purchased through another 

agency, while the Air Force stated that its inventory did not include 

contracts where it was the funding agency but not the contracting 

agency. Similarly, Navy officials informed us that their inventory 

did not include instances in which another agency procured 

services on the Navy’s behalf.

• All three military departments indicated that they are looking at 

options on how to improve their collection of data on services 

obtained through interagency contracts.
Enclosure I: Briefing Slides 

38 GAO-10-350R Service Contract Inventories

31

Completeness: Incomplete Reporting of 

Interagency Contracting Activities (cont.)

Using FPDS-NG, we identified 

obligations totaling almost $1.4 billion 

in service contracting activities done 

on behalf of the Army, Navy, and Air 

Force by non-DOD agencies. While 

the interagency contracting data in 

FPDS-NG may not be complete, 

these activities represent a large 

scope of service contracting activity 

not fully reflected in the inventories.5

Figure 5: Fiscal year 2008 obligations on non-DOD 

interagency service contracts

5 For example, see GAO, Interagency Contracting: Need for Improved Information and Policy Implementation at the Department of State, GAO-08-578

(Washington D.C.: May 8, 2008).
Enclosure I: Briefing Slides 

39 GAO-10-350R Service Contract Inventories

32

Completeness: Army Missing Data

• When we analyzed the Army’s inventory, we identified a significant number of contracts 

for which data were missing, as shown in table 3. For example, for 87.9 percent of the 

contracts in the inventory, no data were provided on the function performed by the 

contractor. 

• Army officials told us that the missing data in its inventory are attributable to contractors 

not entering data in CMRA for all contracts. However, they noted that when contractors 

entered labor hour data into CMRA, the remaining data elements for those contracts 

were more likely to be populated. For the subset of contracts with labor hour data, we 

found considerably fewer instances where the data were missing. 

Table 3: Percentage of contracts with missing data for selected data elements 
Enclosure I: Briefing Slides 

40 GAO-10-350R Service Contract Inventories

33

• When we replicated the Navy’s methodology for identifying service 

contracts in FPDS-NG, we identified 1,837 contracts with obligations of 

almost $4 billion that were not included in the Navy’s inventory. A Navy 

official noted that these contracts were not included due to an inadvertent 

error in manually compiling the full data set and that the Navy will take 

steps to ensure this does not occur in future inventories.

• Additionally, in submitting its inventory, the Navy noted that there were 

missing data for the contracts included in the inventory due to information 

not being available from the data sources used. 

Completeness: Navy Missing Data

Table 4: Percentage of Navy contracts missing data for selected data elements 
Enclosure I: Briefing Slides 

41 GAO-10-350R Service Contract Inventories

34

Completeness: Air Force Missing Data

• In submitting its inventory, the Air Force acknowledged that some data were 

missing, particularly the funding source for actions below $10 million. The Air Force 

attributed this to limited resources available to find the information and manually 

enter it. 

Table 5: Percentage of Air Force contracts missing data for selected data elements 

• In analyzing the Air Force’s inventory data, we identified 2,459 FTEs not included 

in their FTE total. This difference occurred because of the Air Force’s decision to 

record FTE values between -1 and 1 as 0 for 26,117 actions where the Air Force 

used its formula for estimating FTEs.6

6 As noted by the Air Force, because its inventory included individual contract actions with de-obligations, the FTE calculation can result in a negative 

number. 
Enclosure I: Briefing Slides 

42 GAO-10-350R Service Contract Inventories

35

Concluding Observations

• Because the inventories of service contracts for fiscal year 2008 were 

compiled in different ways, comparisons across the military departments 

may be difficult. This is particularly the case for the contractor FTEs given 

the substantial differences in how each military department compiled 

those numbers. As our analysis demonstrated, the numbers of FTEs vary 

based on the factors used to estimate the cost of contractors performing 

particular categories of services. 

• Further, the inventories do not reflect the full universe of service contracts 

and for contracts that were included, did not always provide all of the 

required information. 

• As a result, the inventories do not provide comparable or comprehensive 

information on DOD’s service contracts that could be used to inform 

acquisition and workforce decisions.
Enclosure I: Briefing Slides 

43 GAO-10-350R Service Contract Inventories

36

Plans for Fiscal Year 2009 Inventories and 

Future GAO Reviews

• In its submission of the fiscal year 2008 inventories, DOD 

acknowledged the inconsistencies in the inventories. AT&L has an

effort underway to develop a new, more consistent approach for 

compiling the fiscal year 2009 inventories and is currently 

considering options for calculating the number of contractor FTEs. 

According to DOD officials, guidance regarding this approach is 

forthcoming.

• Section 803 of the National Defense Authorization Act for Fiscal 

Year 20107 directs GAO to report on DOD’s inventory in 2010, 

2011, and 2012. 

7 Pub. L. No. 111-84 § 803, 123 Stat. 2190 (2009)
Enclosure I: Briefing Slides 

44 GAO-10-350R Service Contract Inventories

37

Agency Views

In providing oral comments on a draft of this briefing, a senior AT&L 

official stated that the briefing provides a fair assessment of the 

methodologies used by the military departments in compiling their 

fiscal year 2008 service contract inventories. This official further 

commented that the military departments made a good faith effort to 

comply with the inventory requirements. He noted that developing and 

implementing the methodologies required considerable time and 

effort, given the current lack of a DOD-wide source for all of the 

information required for the inventories. 
Enclosure I: Briefing Slides 

45 GAO-10-350R Service Contract Inventories

38

Appendix I: Scope and Methodology

• Our objective was to assess the methodology used by the departments of the Air 

Force, Navy, and Army to compile the fiscal year 2008 service contract inventories 

required by 10 USC § 2330a. To conduct our work, we:

• obtained and reviewed the military departments’ inventories for fiscal year 2008 

and documents describing the methodologies used to compile them;

• interviewed officials from the following DOD offices to identify the data sources 

used to compile the inventories and discuss the compilation methodologies:

• Office of Acquisition, Technology, and Logistics, Defense Procurement and 

Acquisition Policy

• Department of the Air Force, Office of Air Force Contracting and Office of 

Acquisition Integration

• Department of the Army, Office of the Assistant Secretary for Manpower 

and Reserve Affairs

• Department of the Navy, Office of the Deputy Assistant Secretary of the 

Navy for Acquisition and Logistics Management
Enclosure I: Briefing Slides 

46 GAO-10-350R Service Contract Inventories

39

Appendix I: Scope and Methodology (cont.)

• To assess the methodologies used and the completeness of the data contained in the 

inventories, we extracted data from FPDS-NG on service contracts active in fiscal year 2008. 

Using the FPDS-NG data, we conducted the following analyses.

• For the Air Force, Navy, and Army, we determined obligations under contracts for 

services in which the military departments were identified as the funding agency and a 

non-DOD agency was identified as the contracting agency. 

• For the Navy, we determined:

• total obligations associated with service contract actions below $100,000 and 

actions with de-obligations and

• total obligations under and number of contracts for services that were not included 

in the Navy’s inventory.

• For the Army: 

• We determined total obligations for selected task orders contained in the Army’s 

inventory which we then used to compare FTE calculations using the Air Force and 

Navy methodologies.

• We identified service contracts included in the Army’s inventory that were coded 

under PSCs for goods.
Enclosure I: Briefing Slides 

47 GAO-10-350R Service Contract Inventories

40

Appendix I: Scope and Methodology (cont.)

• FPDS-NG is the primary federal government system for tracking 

information on contracts. Our past work has found that FPDS-NG 

contains inaccurate data and is not always complete.8 In addressing 

the inventory requirement, the military departments relied to different 

extents upon information contained in FPDS-NG. In assessing the 

military departments' methodologies, we used data from FPDS-NG 

and the inventories to help quantify the effects of decisions made by 

the military departments to exclude certain categories of services and 

contract actions and to replicate the methodologies used to identify 

service contracts. We did not attempt to assess the accuracy or

completeness of FPDS-NG data, but rather have used the data to 

identify potential inconsistencies in the military departments' 

methodologies and their implementation. 

8 GAO ,Federal Contracting: Observations on the Government’s Contracting Data Systems, GAO-09-1032T (Washington D.C.: Sept. 29, 2009).
Enclosure I: Briefing Slides 

48 GAO-10-350R Service Contract Inventories

41

Appendix I: Scope and Methodology (cont.)

• In conducting our assessment of the methodologies and the resulting 

inventories, we did not attempt to determine the accuracy of the data 

contained in each inventory. We also did not evaluate whether any 

one of the methodologies resulted in more accurate or reliable 

inventories than the others.

• We conducted this performance audit from October to November 

2009 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based on our audit 

objectives.
Enclosure I: Briefing Slides 

49 GAO-10-350R Service Contract Inventories

42

Points of Contact

For more information, contact John Hutton at 202-512-4841 or 

huttonj@gao.gov or William Solis at 202-512-8365 or 

solisw@gao.gov. 

(120865)
Enclosure II: GAO Contacts and Staff Acknowledgments 

50 GAO-10-350R Service Contract Inventories 

GAO Contacts 

John P. Hutton (202) 512-4841 or huttonj@gao.gov 

William Solis (202) 512-8365 or solisw@gao.gov

Acknowledgments

In addition to the contacts named above, Johana R. Ayers, Assistant Director; Brent 

Corby; Morgan Delaney Ramaker; Kathryn Edelman; Julia Kennon; and John Krump 

made key contributions to this correspondence. 

(120889) 
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