DEFENSE 

ACQUISITIONS

Continued 

Management Attention 

Needed to Enhance 

Use and Review of 

DOD’s Inventory of 

Contracted Services

Report to Congressional Committees

May 2013

GAO-13-491

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-491, a report to 

congressional committees 

May 2013

DEFENSE ACQUISITIONS

Continued Management Attention Needed to 

Enhance Use and Review of DOD’s Inventory of 

Contracted Services

Why GAO Did This Study

DOD is the government’s largest 

purchaser of contractor-provided

services. In fiscal year 2011, DOD 

reported $199 billion in obligations for 

service contracts, which include 

services as varied as medical services

and intelligence support. In 2008,

Congress required DOD to compile 

and review an annual inventory of its

contracted services to include the 

number of contractors providing 

services to DOD and the functions 

these contractors were performing. 

The 2010 National Defense

Authorization Act directed GAO to 

report for 3 years on these inventories. 

For this third report, GAO assessed 

(1) the progress DOD has made in

compiling the fiscal year 2011 

inventory of contracted services and 

efforts to collect contractor manpower 

data, and (2) the extent to which 

defense components complied with 

DOD’s guidance for reporting on their 

inventory reviews. GAO reviewed 

relevant laws and guidance, analyzed 

inventory submissions from 31 

components, reviewed component 

certification letters, and interviewed 

DOD acquisition and manpower 

officials. 

What GAO Recommends

GAO recommends that the Secretary 

of Defense direct component heads to 

discuss in their certification letters all 

required inventory review elements, as 

well as how instances where 

contractors are performing inherently 

governmental functions were resolved. 

DOD generally concurred with our 

recommendations, but indicated that 

the Secretary’s involvement was not 

necessary. GAO believes it is, as 

discussed in the report. 

What GAO Found

Over the past year and a half, the Department of Defense (DOD) has taken steps 

to implement its plan to collect contractor manpower data directly from 

contractors and to develop and implement a department-wide system, based on 

the Army’s existing system, to collect and store these and other inventory data. 

DOD officials estimate that the data system will be available in fiscal year 2014, 

with DOD components reporting on most of their service contracts by fiscal year 

2016. DOD, however, is still working on key decisions related to security, 

funding, and other technological issues and has not developed a plan of action

with anticipated time frames and necessary resources to help ensure DOD 

remains on track to meet its goals. Making timely decisions and developing a 

plan of action with anticipated timeframes and necessary resources, as GAO has

previously recommended, would facilitate DOD’s stated intent of implementing a 

DOD-wide system to collect required inventory information. For the fiscal year 

2011 inventory, DOD components generally used the same compilation 

processes used in the previous year. As such, with the exception of the Army, 

which already has an inventory data collection system, the remaining 

components relied primarily on the Federal Procurement Data System-Next

Generation (FPDS-NG). GAO previously reported that FPDS-NG has several 

limitations, including the inability to identify more than one type of service in a 

contract or the number of contractor full-time equivalents (FTE), which limit its 

utility for purposes of compiling a complete and accurate inventory. 

Consistent with DOD’s December 2011 guidance, 29 of the 31 components 

submitted letters certifying that they had conducted an inventory review as of 

April 2013. DOD officials stated that the requirement to submit certification letters 

represented a significant improvement over prior years' reviews, when DOD 

could not determine whether the required reviews were conducted. These 

officials also stated that the letters provided useful insights into the components’ 

efforts. GAO’s analysis, however, indicates that none of the components’ 

certification letters discussed all six elements required by DOD’s guidance. For 

example, GAO’s analysis found that the letters generally provided only limited 

information on their review methodologies or the results of their review efforts. In 

addition, it is unclear based on the information provided in the certification letters 

the extent to which the differences in the methodologies components used to

conduct the reviews contributed to the variation in the identification of contractors 

performing inherently governmental functions, unauthorized personal services, or 

closely associated with inherently governmental functions. For example, the 

Army, using its review process, identified over 44,000 contractor FTEs 

performing closely associated with inherently governmental functions, while the 

Air Force identified about 1,400 contractor FTEs and 13 components reported 

they had no contractors performing these functions. Further, the Army and the Air 

Force did not provide complete information on actions taken to resolve instances 

where they had identified contractors performing inherently governmental 

functions as part of their reviews, such as by transferring performance of these 

functions to DOD personnel or modifying the contract’s statement of work. The 

ability to identify contractors performing these functions is valuable as it allows 

actions to be taken, but that value is significantly reduced if decision-makers 

have no assurance as to whether corrective actions were taken. 

View GAO-13-491. For more information, 

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

or dinapolit@gao.gov. 
Page i GAO-13-491 DOD Inventory of Contracted Services

Letter 1 

Background 5

DOD Has Ongoing Efforts to Collect Contractor Manpower Data, 

but Data System Issues Have Not Been Resolved 10

Most Components Certified That They Conducted an Inventory 

Review, but Provided Limited Information to Gauge Review 

Efforts 17

Conclusions 25

Recommendations for Executive Action 27

Agency Comments and Our Evaluation 27

Appendix I Objectives, Scope and Methodology 30

Appendix II Comments from the Department of Defense 32

Appendix III GAO Contact and Staff Acknowledgments 34

Tables

Table 1: Summary of Contractor FTEs and Total Obligations As

Reported in the Fiscal Year 2011 Inventory of Contracted 

Services 15

Table 2: Number of Contractors Identified as Performing 

Inherently Governmental Functions and Unauthorized 

Personal Services in the Fiscal Year 2011 Review of the 

Inventory of Contracted Services 21

Table 3: Components Identifying Instances of Contractors 

Performing Closely Associated with Inherently 

Government Functions 23

Figure

Figure 1: Relationship among the Inventory of Contracted Services, 

Insourcing, and Budget Documentation Requirements 10

Contents 
Page ii GAO-13-491 DOD Inventory of Contracted Services

Abbreviations 

AT&L Office of the Under Secretary of Defense for Acquisition,

 Technology and Logistics 

CMRA Contractor Manpower Reporting Application

DLA Defense Logistics Agency

DISA Defense Information Systems Agency 

DOD Department of Defense

eCMRA Enterprise-wide Contractor Manpower Reporting

 Application

FPDS-NG Federal Procurement Data System-Next Generation 

FTE full-time equivalent 

P&R Office of the Under Secretary of Defense for Personnel

 and Readiness

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

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Page 1 GAO-13-491 DOD Inventory of Contracted Services

441 G St. N.W.

Washington, DC 20548

May 23, 2013

The Honorable Carl Levin

Chairman

The Honorable James M. Inhofe

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Howard P. “Buck” McKeon

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

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

purchaser of contractor-provided services, reporting about $199 billion in 

obligations for contracted services in fiscal year 2011. DOD relies on 

contractors to perform various functions, such as professional and 

management support, medical services, information technology support, 

and weapon system and intelligence support. While there are benefits to 

using contractors to perform services for the government, our prior work 

has shown that reliance on contractors to support core missions can 

place the government at risk of becoming overly reliant on contractors to 

perform closely associated with inherently governmental functions or 

creating circumstances in which contractors perform functions deemed 

 
 

Page 2 GAO-13-491 DOD Inventory of Contracted Services

inherently governmental.1 Over the past decade, our work has also 

identified the need for DOD to obtain better data on its contracted 

services to enable it to make more strategic decisions.2

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

ability to manage its acquisition of services; to make more strategic 

decisions about the right workforce mix of military, civilian, and contractor 

personnel; and to better align resource needs through the budget process 

to achieve that mix. For example, Section 2330a of title 10 of the U.S. 

Code requires DOD to annually compile and review an inventory of 

activities performed by contractors pursuant to contracts for services to, 

among other things, help provide better insight into the number of 

contractor full-time equivalents (FTE) providing services to the 

department and the functions they are performing and determine whether 

any of these functions warrant conversion to DOD civilian performance.

While DOD has 

begun a number of efforts to gain better insight into its acquisition of 

services, these efforts have had mixed success to date.

3

 

1

GAO, Defense Management: DOD Needs to Reexamine Its Extensive Reliance on 

Contractors and Continue to Improve Management and Oversight, GAO-08-572T 

(Washington, D.C.: Mar. 11, 2008). Inherently governmental functions are defined by law 

as functions that are so intimately related to the public interest as to require performance 

by federal government employees. Federal Activities Inventory Reform (FAIR) Act of 

1998, Pub. L. No 105-270, § 5; 31 U.S.C. § 501, note. There is currently an open Federal 

Acquisition Regulation (FAR) case (2012-001) under consideration to implement a 

September 2011 Office of Federal Procurement Policy Letter that, among other things, 

clarified the definition of “inherently governmental function” (consistent with the FAIR Act 

definition). Office of Federal Procurement Policy, Policy Letter 11-01, Performance of 

Inherently Governmental and Critical Functions (Sept. 12, 2011). In addition, closely 

associated with inherently governmental functions are those that while not inherently 

governmental, may approach the category because of the nature of the function, the 

manner in which the contractor performs the contract, or the manner in which the 

government administers performance under a contract. FAR § 7.503(d) provides 

examples of such functions.

2

See, for example, GAO, Strategic Sourcing: Improved and Expanded Use Could Save 

Billions in Annual Procurement Costs, GAO-12-919 (Washington, D.C.: Sept. 20, 2012); 

Defense Acquisitions: Actions Needed to Ensure Value for Service Contracts, 

GAO-09-643T (Washington, D.C.: Apr. 23, 2009); and Defense Acquisitions: Tailored 

Approach Needed to Improve Service Acquisition Outcomes, GAO-07-20 (Washington, 

D.C.: Nov. 9, 2006). 

3

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

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

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

reported by a contractor for each service by 2,088, the number of labor hours in a federal 

employee work year.
 

Page 3 GAO-13-491 DOD Inventory of Contracted Services

DOD has submitted annual inventories for fiscal years 2007 through 

2011, the most recent submitted on August 27, 2012.

Section 803(c) of the National Defense Authorization Act for fiscal year 

2010 directed GAO to report for 3 years on the inventory of activities 

performed pursuant to contracts for services that are to be submitted by 

the Secretary of Defense for fiscal years 2009, 2010, and 2011 

respectively.4 To respond to this mandate, we first issued a report in 

January 2011 that assessed the approaches used to compile the fiscal 

year 2009 inventories.5

We issued a second report in April 2012 that assessed the progress DOD 

had made in addressing limitations in compiling the fiscal year 2010 

inventory, and the extent to which the military departments addressed 

issues with contractors performing inherently governmental functions 

identified during their reviews of the fiscal year 2009 inventories.

In that report, we recommended that DOD 

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

collecting contractor manpower data directly from contractors and to 

address other limitations in its approach to meeting the statutory inventory 

requirements, including those specific to the Federal Procurement Data 

System-Next Generation (FPDS-NG). This system has a number of 

limitations, including that it does not identify more than one type of service 

purchased for each contract action.

6

 

4

Pub. L. No. 111-84 (2009).

We 

found that DOD, with the exception of the Army, had much further to go in 

addressing the requirements for compiling and reviewing the inventories 

of contracted services. For example, we reported that the Navy had no 

assurance that their commands conducted the required reviews and 

found no evidence that the required reviews were conducted at the Navy 

commands we contacted. In addition, we found that in certain cases, 

contractors continued to perform functions the military departments 

identified as inherently governmental. We recommended that the 

Secretary of Defense ensure that the military departments and defense 

components issue guidance to their commands to provide for clear lines 

5

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

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

Jan. 14, 2011).

6

GAO, Defense Acquisitions: Further Actions Needed to Improve Accountability for DOD’s 

Inventory of Contracted Services, GAO-12-357 (Washington, D.C.: Apr. 6, 2012).
 

Page 4 GAO-13-491 DOD Inventory of Contracted Services

of authority, responsibility, and accountability for conducting an inventory 

review and resolving instances where functions being performed by 

contractors are identified as inherently governmental functions. DOD 

agreed it was imperative for the components to do so, but noted that its 

December 2011 guidance regarding the submission and review of the 

fiscal year 2011 inventories, while not prescribing individual component 

management practices, requires component heads to certify completion 

of and results from the reviews.

This report is our third and final review in response to the mandate and 

focuses on DOD’s fiscal year 2011 inventory. We assessed (1) the 

progress DOD has made in compiling the inventory of contracted services 

and the status of efforts to collect contractor manpower data and (2) the 

extent to which the defense components complied with DOD’s December 

2011 guidance for reporting on their reviews of the fiscal year 2011 

inventories.

To conduct our work, we reviewed relevant guidance related to the 

inventory compilation and review processes and interviewed officials from 

the Office of the Under Secretary of Defense for Acquisition, Technology

and Logistics (AT&L); Office of Defense Procurement and Acquisition 

Policy; the Office of the Under Secretary of Defense for Personnel and 

Readiness (P&R); the Office of the Under Secretary of Defense 

(Comptroller); the departments of the Army, Navy, Air Force; and two 

selected DOD components—the Defense Logistics Agency (DLA) and 

Defense Information Systems Agency (DISA)—based on the number of 

contractor FTEs they identified.

To assess the progress DOD has made in compiling the inventory of 

contracted services and the status of efforts to collect contractor 

manpower data, we analyzed 31 components’ inventory submissions and 

all memorandums accompanying their inventory submissions to 

determine the methodologies used to compile their fiscal year 2011 

inventory and to calculate or estimate the number of contractor FTEs and 

obtained information on the department’s efforts to collect contractor 

manpower data. We include DOD’s estimate of overall obligations and 

contractor FTEs for fiscal year 2011 in this report. We did not 

independently assess the accuracy or reliability of the underlying data 

supporting the components’ inventories of contracted services. However, 

our previous work identified data limitations with DOD components using 

data from FPDS-NG as the basis for their inventories. We discuss these 

limitations in the report, as appropriate.
 

Page 5 GAO-13-491 DOD Inventory of Contracted Services

To assess the extent to which components complied with DOD’s 

December 2011 guidance on the inventory review process, we reviewed 

all 29 fiscal year 2011 inventory review certification letters submitted by 

DOD components as of April 2013. We assessed the letters to determine 

if components reported on the six elements in DOD’s guidance for the 

inventory review, including the selection criteria and methodologies used 

to conduct the reviews, the extent to which contractors were found to be 

performing certain functions, to include inherently governmental and 

closely associated with inherently governmental, and to the extent 

necessary, a plan to realign performance of such functions to government 

performance. A detailed description of our scope and methodology is 

included in appendix I.

We conducted this performance audit from October 2012 to May 2013 in 

accordance with generally accepted 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 

audit objectives.

In part to improve the availability of information on and management of 

DOD’s acquisition of services, in fiscal year 2002 Congress enacted 

section 2330a of title 10 of the U.S. Code, which required the Secretary of 

Defense to establish a data collection system to provide management 

information on each purchase of services by a military department or 

defense agency.7

In 2008, Congress amended section 2330a to add a requirement for the 

Secretary of Defense to submit an annual inventory of the activities 

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

The information to be collected includes, among other 

things, the services purchased, the total dollar amount of the purchase, 

the form of contracting action used to make the purchase, and the extent 

of competition provided in making the purchase.

 

7

The National Defense Authorization Act for Fiscal Year 2002, Pub. L. No. 107-107, § 

801(c) (2001). 

Background
 

Page 6 GAO-13-491 DOD Inventory of Contracted Services

during the preceding fiscal year.8

• the function and missions performed by the contractor;

The inventory is to include a number of 

specific data elements for each identified activity, including

• the contracting organization, the component of DOD administering the 

contract, and the organization whose requirements are being met 

through contractor performance of the function;

• the funding source for the contract by appropriation and operating 

agency;

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

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

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

contractors;

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

is performed is a personal services contract,9

• a summary of the information required by section 2330a(a) of title 10 

of the U.S. Code.

and

As implemented by DOD, components are to compile annual inventories 

of activities performed on their behalf by contractors and submit them to 

AT&L, which is to formally submit a consolidated DOD inventory to 

Congress no later than June 30. Since this provision was implemented 

DOD-wide, the primary source used by DOD components, with the 

exception of the Army, to compile their inventories has been FPDS-NG. 

The Army developed its Contractor Manpower Reporting Application 

(CMRA) in 2005 to collect information on labor-hour expenditures by 

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

and has used CMRA as the basis for its inventory. CMRA captures data 

directly reported by contractors on services performed at the contract line 

item level, including information on the direct labor dollars, direct labor 

hours, total invoiced dollars, the functions and mission performed, and the 

organizational unit on whose behalf the services are being performed. In 

instances where contractors are providing different services under the 

 

8

The National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110-181, § 

807. 

9

A personal services contract is characterized by the employer-employee relationship it 

creates between the government and the contractor’s personnel. The government is 

normally required to obtain its employees by direct hire under competitive appointment or

other procedures required by the civil service laws. Agencies are not permitted to award 

personal services contracts unless specifically authorized by statute to do so. FAR § 

37.104.
 

Page 7 GAO-13-491 DOD Inventory of Contracted Services

same order, or are providing services at multiple locations, contractors 

can enter additional records in CMRA to capture information associated 

with each type of service or location. It also allows for the identification of 

services provided under contracts for goods.

Within 30 days after it is submitted to Congress, the inventory is to be 

made public. Within 90 days of the date on which the inventory is 

submitted to Congress, the Secretaries of the military department and 

heads of the defense agencies responsible for activities in the inventory 

are to complete a review of the contracts and activities for which they are 

responsible and ensure that any personal services contracts in the 

inventory were properly entered into and performed appropriately; that the 

activities in the inventory do not include inherently governmental 

functions; that to the maximum extent practicable, the activities on the list 

do not include any functions closely associated with inherently 

governmental functions; and that activities that should be considered for 

conversion to DOD civilian performance have been identified.10

In January 2011, Congress amended section 2330a(c) of title 10 of the 

U.S. Code to specify that P&R, AT&L, and Comptroller are responsible for 

issuing guidance for compiling the inventory.11

Congress provided further direction on the collection of FTE information 

for contractor employees in the Department of Defense and Full-Year 

Continuing Appropriations Act, 2011 by providing not less than $2 million 

to both the Navy and Air Force to leverage the Army’s CMRA to 

document the number of full-time contractor employees, or their 

equivalent in the inventory. The services and the directors of the defense 

agencies in coordination with P&R were to report to the Congressional 

defense committees within 60 days of enactment of that act on their plans 

Section 2330a(c) was also 

amended to state that DOD is to use direct labor hours and associated 

cost data collected from contractors as the basis for the number of 

contactor FTEs identified in the inventory, though it provided that DOD 

may use estimates where such data are not available and cannot 

reasonably be made available in a timely manner.

 

1010 U.S.C. § 2330a(e). 

11The Ike Skelton National Defense Authorization Act for Fiscal Year 2011, Pub. L. No. 

111-383, § 321. 
 

Page 8 GAO-13-491 DOD Inventory of Contracted Services

for documenting the number of full-time contractor employees or their 

equivalent.12

In December 2011, section 936 of the National Defense Authorization Act 

for Fiscal Year 2012 amended section 2330a of title 10 of the U.S. Code 

to clarify the types of contracted services to be inventoried, including 

contracts for goods to the extent services are a significant component of 

performance, as identified in a separate line item of a contract. This 

section also directed the secretary of the military department or head of 

the defense agency responsible for activities in the inventory to develop a 

plan, including an enforcement mechanism and approval process, to

• provide for the use of the inventory to make determinations regarding 

the most appropriate mix of military, civilian, and contractor personnel 

to perform its mission;

• ensure that the inventory is used to inform strategic workforce 

planning;

• facilitate the use of the inventory for budgetary purposes; and

• provide for appropriate consideration of the conversion of certain 

activities, to include those closely associated with inherently 

governmental functions, critical functions, and acquisition workforce 

functions, to performance by government employees.13

Section 2463 of title 10 of the U.S. Code requires the Secretary of 

Defense to make use of the inventory of contracted services to identify 

certain functions performed by contractors, to include closely associated 

with inherently governmental functions, critical functions and acquisition 

workforce functions, and ensure that special consideration is given to 

converting those functions to civilian performance.

Further, the National Defense Authorization Act for Fiscal Year 2010 

provided for a new section 115b in title 10 of the U.S. Code that requires 

DOD to annually submit to the defense committees a strategic workforce 

plan to shape and improve the civilian workforce. Among other 

requirements, the plan is to include an assessment of the appropriate mix 

of military, civilian, and contractor personnel capabilities. P&R is 

responsible for developing and implementing the strategic plan in 

consultation with AT&L. The act also added section 235 to title 10 of the 

 

12Pub. L. No. 112-10, § 8108. 

13 Pub.L.No.112-81.
 

Page 9 GAO-13-491 DOD Inventory of Contracted Services

U.S. Code, which requires that the Secretary of Defense include (in the 

budget justification materials submitted to Congress) information that 

clearly and separately identifies both the amount requested for the 

procurement of contract services for each DOD component, installation, 

or activity and the number of contractor employee full-time equivalents 

projected and justified for each DOD component, installation, or activity 

based on the inventory of contracts for services and associated reviews.14

Collectively, these statutory requirements mandate the use of the 

inventory and the associated review process to enhance the ability of 

DOD to identify and track the services provided by contractors, achieve 

accountability for the contractor sector of its total workforce, help identify 

functions for possible conversion from contractor performance to DOD 

civilian performance, support the development of DOD’s annual strategic 

workforce plan, and project and justify the number of contractor FTEs 

included in its annual budget justification materials. Figure 1 illustrates the 

relationship among the related statutory requirements.

 

14Pub. L. No. 111-84 § 1108(a)(1) and 803 (a)(1) (2009). 
 

Page 10 GAO-13-491 DOD Inventory of Contracted Services

Figure 1: Relationship among the Inventory of Contracted Services, Insourcing, and Budget Documentation Requirements

Over the past year and a half, DOD has taken its first steps to implement 

a November 2011 plan to collect contractor manpower data from 

contractors. These steps included directing components to start collecting 

direct labor hours and associated costs from contractors and initiating 

efforts to develop and implement a department-wide data collection 

system based on the Army’s CMRA to collect and store inventory data, 

including contractor manpower data. AT&L and P&R officials estimate 

that the new system will be available in fiscal year 2014, with DOD 

components reporting on most of their contracted services by fiscal year 

2016. DOD, however, is still working on key decisions related to security, 

funding, and other technological issues and has not developed an 

implementation plan with specific time frames or milestones to help 

ensure DOD remains on track to develop its planned data collection 

system. For the fiscal year 2011 inventory, DOD components generally 

used the same compilation processes used in the previous year. As such, 

with the exception of the Army, which already collects contractor 

DOD Has Ongoing 

Efforts to Collect 

Contractor Manpower 

Data, but Data System 

Issues Have Not Been 

Resolved
 

Page 11 GAO-13-491 DOD Inventory of Contracted Services

manpower data and other key information using its CMRA data collection 

system, the remaining components obtained most of their inventory 

information from FPDS-NG, a system that does not collect contractor FTE 

information and has other limitations, which limit its utility for purposes of 

compiling a complete and accurate inventory.

DOD has taken steps to meet legislative requirements to develop a data 

collection system that provides management insight on contracted 

services and collects the required data points for each contracted service, 

including information on the number of contractor FTEs. In April 2011, 

Congress passed the Department of Defense and Full-Year Continuing 

Appropriations Act, 2011, which among other things, required the 

secretaries of the military departments and the directors of the defense 

agencies, in coordination with P&R, to submit plans for documenting the 

number of contractor FTEs.15

Over the past year and a half, DOD took a number of actions to 

implement its November 2011 plan.

In response, in November 2011 DOD 

issued a plan to collect contractor manpower data and document 

contractor FTEs, and provided for short-term and long-term actions 

intended to meet the requirements of 10 U.S.C. § 2330a. DOD stated that 

it was committed to assisting components as they implement their plans, 

especially those currently without reporting processes or infrastructure in 

place, by leveraging the Army’s CMRA system, processes, best practices, 

and tools to the maximum extent possible. Part of the long-term plan is to 

develop a comprehensive instruction for components to use on the 

development, review, and use of the inventories and for the Office of the 

Deputy Chief Management Officer, P&R, and other stakeholders to form a 

working group to develop and implement a common data system to 

collect and house the information required for the inventory, including 

contractor manpower data. DOD noted in its plan that it expects the data 

system to be operational and DOD components to be reporting on most 

of their service contracts by fiscal year 2016.

 

15Pub. L. No. 112-10, § 8108(c).

DOD Has Taken Initial 

Steps to Implement a 

Department-wide Data 

Collection System
 

Page 12 GAO-13-491 DOD Inventory of Contracted Services

• DOD published a Federal Register notice as required by the 

Paperwork Reduction Act,16 in February 2012, seeking public 

comment on its proposal to allow DOD components to collect certain 

key information directly from contractors, including the number of 

direct labor hours associated with the provision of each service. The 

Office of Management and Budget approved DOD’s request in May 

2012.17

• In November 2012, the Under Secretaries for P&R and AT&L issued a 

joint memorandum that instructed components to ensure all actions to 

procure contracted services, including contracts for goods with 

defined requirements for services, include a requirement for the 

contractor to report all contractor labor hours required for performance 

of the services provided. The joint memorandum further instructed 

that data will be reported using an Enterprise-wide Contractor 

Manpower Reporting Application (eCMRA) and provided that the 

eCMRA website would be available to receive data to support the 

fiscal year 2013 inventory. Additionally, standard language, which was 

developed in a collaborative effort between AT&L, P&R, and the DOD 

components, is to be included in new statements of work and 

modifications to existing contracts.

According to AT&L and P&R officials, DOD expects more than 

270,000 contracts or orders to be modified across the department, 

with most contracts containing the language by fiscal year 2016. The 

Navy and Air Force began implementing the requirement to collect 

direct labor hours from contractors by modifying or including the 

reporting requirement in all their current and future service contracts 

in October and November 2012, respectively. The Army has 

previously included this requirement in its contracts.

• AT&L officials have also been working to develop a new provision to 

implement the reporting requirements in the Defense Federal 

Acquisition Regulation Supplement. As part of their efforts, they have 

 

1644 U.S.C. §§ 3501-3521. The Paperwork Reduction Act requires that agencies obtain 

Office of Management and Budget approval before requesting most types of information 

from the public.

17The Army, which previously received approval from the Office of Management and 

Budget to collect certain contract data from contractors using its CMRA system, received 

a 3-year extension of this approval on December 15, 2011.
 

Page 13 GAO-13-491 DOD Inventory of Contracted Services

initiated a case to the Defense Acquisition Regulation Council, but as 

of April 2013, the case is still pending.

Further, the Navy and Air Force have each taken steps to develop their 

own interim system to collect and store contractor manpower data based 

on the Army’s CMRA system. According to P&R and AT&L officials, the 

remaining DOD components will all share an interim CMRA-based 

system to collect and store their contracted services data. The Army and 

the Air Force will provide support for this component shared system; 

however, individual components will retain responsibility for ensuring the 

accuracy of the contracted services information reported into the CMRA 

system, which will later be used to compile the inventories.

In January 2013, P&R, in collaboration with DOD’s Deputy Chief 

Management Officer, initiated efforts to develop and implement the 

department-wide eCMRA system that will replace the interim CMRA 

systems to collect and store information about all contracted services, 

including contractor reported labor hours and associated costs. The 

working group, comprised of officials from the Deputy Chief Management 

Office—whose role is to act as facilitator for the implementation of the 

system—and representatives from the military departments, has met 

several times as of April 2013 to discuss features of the new system.

P&R and AT&L officials stated that the department remains on track to 

meet the time frames outlined in DOD’s November 2011 plan and 

indicated that they anticipate having the data collection system 

operational by fiscal year 2014. According to working group officials, 

however, the working group is still working on key decisions related to 

security, funding, and other technological issues and has not developed 

an implementation plan with specific time frames or milestones to help 

ensure DOD remains on track to meet its goals. Based on our 

discussions with several working group members, there is an unresolved 

issue about whether DOD components should use one department-wide 

system as planned or continue using the individual interim CMRA 

systems that have been developed. Some working group officials stated 

that using the multiple CMRA systems currently available was sufficient 

and would allow DOD to report accurate inventory data sooner. 

Conversely, other working group officials stated that a department-wide 

system would be less expensive to operate and upgrade and would be 

less of a burden on contractors because they would only have to interface 

with one DOD system. Working group officials did not provide any time 

frames for which a resolution to the issue would be made. Doing so in a 

timely fashion, as well as developing a plan of action with anticipated time 
 

Page 14 GAO-13-491 DOD Inventory of Contracted Services

frames and necessary resources, as we have previously recommended, 

would help facilitate the department’s stated intent of collecting contractor 

manpower data.

In December 2011, AT&L and P&R issued guidance for the submission of 

the fiscal year 2011 inventory of contracted services. The guidance 

instructed the military departments and DOD components to use all 

reporting tools at their disposal to compile their inventories. In addition, it 

noted that the Director, Defense Procurement and Acquisition Policy 

would provide each component that has acquisition authority with a data 

set from the FPDS-NG that should be used to cross check the information 

that the components had compiled. The December 2011 guidance noted 

that most components were not currently collecting direct labor hours 

from contractors; therefore it identified five methodologies components 

could use singularly or in combination to estimate or calculate the number 

of contractor FTEs in their inventories. For example, components could 

collect direct labor hour information from contractors, or calculate the 

number of contractor FTEs by using a formula provided by P&R, which 

was based in part from information extrapolated from the manpower data 

collected by the Army from its contractors.18

Thirty-one DOD components submitted inventories for fiscal year 2011,19

collectively reporting an estimated 710,000 contractor FTEs providing 

services to DOD with obligations totaling about $145 billion (see table 

1).20

 

18DOD’s December 2011 guidance also indicated that components could collect direct 

labor hours as reported by the contracting officer’s representative for the service during 

fiscal year 2011; reference the independent government estimate or contractor technical 

proposals to extrapolate hours for the services provided in fiscal year 2011; or report 

information collected from contract invoices.

19A component’s inventory submission may encompass contracts awarded on behalf of 

another component. For example, contracts for the Defense Acquisition University are 

reported by the Office of the Director, Administration and Management.

20According to AT&L and P&R officials, the difference in service contract obligations 

reported in the fiscal year 2011 inventory of contracted services, $145 billion, to the 

service contract obligations reported in FPDS-NG for fiscal year 2011, $199 billion, may 

be, in part, because the FPDS-NG obligation amount for services captures categories of 

services that are not reported in the inventory, to include lease or rental of equipment and 

facilities and military construction. In addition costs associated with utilities in the Utilities 

and Housekeeping product and service code, and freight and shipping in the 

Transportation, Travel and Relocation product and service code are also excluded.

DOD’s Inventory of 

Contracted Services 

Continues to Be Based 

Primarily on FPDS-NG
 

Page 15 GAO-13-491 DOD Inventory of Contracted Services

Table 1: Summary of Contractor FTEs and Total Obligations As Reported in the 

Fiscal Year 2011 Inventory of Contracted Services

Component Contractor FTEs Total obligations

Army 246,916 $40,345,114,626

Air Force 166,496 $33,553,494,773

Navy 175,929 $32,728,959,199

Other components 120,538 $37,878,905,195

Total 709,879 $144,506,473,793

Source: GAO analysis of DOD data.

In comparison, for fiscal year 2010, DOD reported that 23 components 

submitted inventories, and estimated that about 623,000 contractor FTEs 

provided services with obligations totaling about $121 billion. DOD 

officials cautioned against comparing the number of contractor FTEs for 

fiscal year 2010 and fiscal year 2011 because components used different

methodologies to estimate contractor FTEs, there were changes in the 

types of services that were to be included in the inventories, and other 

factors. For example, for the fiscal year 2010 inventory, DOD estimated 

contractor FTEs using one methodology for all components, other than 

the Army, while for the fiscal year 2011 inventory, those components 

used a variety of methodologies to estimate contractor FTEs.

Of the 31 components that submitted a fiscal year 2011 inventory of 

contracted services, only 2 components reported that they collected direct 

labor hour information from contractors—the Army, which uses CMRA, 

and the Defense Test Resource Management Center. Of the remaining 

components, 18—including the Air Force and Navy, which together 

represent almost half of the contractor FTEs in the inventory—reported 

that they used information extrapolated from Army manpower data and 

FPDS-NG to calculate an estimate of the number of contractor FTEs; 6 

components reported that they used a variety of methodologies, including 

information from independent government estimates and contractor 

technical proposals; and 5 components did not identify the methodology 

used to estimate the number of contractor FTEs.

As we have previously reported, the FPDS-NG system has several 

limitations that limit its utility for purposes of compiling a complete and 

accurate inventory, including

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

purchased for each contracting action entered into the system,
 

Page 16 GAO-13-491 DOD Inventory of Contracted Services

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

are predominantly for supplies,

• not being able to identify the requiring activity specifically,21

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

perform each service. 

and

22

Over the years, DOD has made a number of changes to address some of 

the limitations posed by using FPDS-NG, but not all of the limitations 

have been totally addressed. According to AT&L and P&R officials, the 

Army’s CMRA system, as well as the CMRA-based systems now being 

used by the Air Force and Navy, will help the military departments 

overcome a number of the FPDS-NG limitations.

In addition to the limitations posed by using FPDS-NG as a source for 

compiling the fiscal year 2011 inventories, DOD experienced challenges 

with correctly identifying all services that were to be reported in the 

inventory. According to P&R and AT&L officials, the Air Force identified 

omissions of about $8 billion during its final review, for which the Air 

Force conducted a cross-check of its inventory data by comparing the 

FPDS-NG data set provided by Director, Defense Procurement and 

Acquisition Policy to its financial management system. AT&L and P&R 

officials noted that the omissions were primarily for services provided to 

the Air Force pursuant to a contract action conducted by other DOD 

components, and services provided to other DOD components pursuant 

to contract actions conducted by the Air Force. AT&L and P&R officials 

explained that they decided to report the omissions as “other DOD inputs” 

to avoid any further delays in submitting DOD’s fiscal year 2011 inventory 

to Congress. According to Navy officials, the Navy did not identify errors, 

but noted that they did not use other systems to cross-check their 

inventory data. Army officials told us that the Army reported contracted 

services for which the Army was the requiring organization, but stated 

that other components may not have reported contracted services 

performed on their behalf pursuant to contract actions for which the Army 

was the procuring agency.

 

21The requiring activity is the organization charged with fulfilling a mission for or on behalf 

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

effort is contracted to the private sector. 

22GAO-12-357. 
 

Page 17 GAO-13-491 DOD Inventory of Contracted Services

Consistent with DOD’s December 2011 guidance on the inventory review, 

most components certified that they conducted the inventory review, but 

provided only limited information of their review methodologies, results of 

their review, or use of the inventory to inform annual program reviews and 

budget processes. As of April 2013, 29 of the 31 components certified 

that they had completed a review of their inventory. AT&L and P&R 

officials stated that the requirement to submit certification letters 

represented a significant improvement over prior years’ reviews when 

DOD could not determine whether or not the required reviews were 

conducted and believed that the letters provided useful insights into the 

components’ processes and methodologies for conducting the reviews. 

Our analysis indicates, however, that none of the components reported 

on all six elements required in the guidance. For example, about half of 

the component letters provided limited or no information on the 

methodology used to perform the reviews. In addition, components 

provided limited information on their efforts to ensure appropriate 

government control when contractors were performing closely associated 

with inherently governmental functions. Further, while the Army and Air 

Force identified instances where contractors were performing inherently 

governmental functions and unauthorized personal services, they did not 

report whether they fully resolved these issues.

In December 2011, AT&L and P&R issued guidance to components 

directing them to review at least 50 percent of their inventories and to the 

maximum extent possible, give priority to contracts not previously 

reviewed or those that may present a higher risk of inappropriate 

performance. In addition, heads of components were required to provide 

a letter to P&R by November 25, 2012, certifying completion of the 

inventory review and at a minimum include a discussion on the following 

six elements:

• an explanation of the methodology used to conduct the reviews and 

criteria for selection of contracts to review;

• delineation of the results in accordance with all applicable title 10 

provisions and the December 2011 guidance;

• the identification of any inherently governmental functions or 

unauthorized personal services contracts, with a plan of action to 

either divest or realign such functions to government performance;

• the identification of contracts under which closely associated with 

inherently governmental functions are being performed and an 

explanation of steps taken to ensure appropriate government control 

Most Components 

Certified That They 

Conducted an 

Inventory Review, but 

Provided Limited 

Information to Gauge 

Review Efforts

DOD’s Fiscal Year 2011 

Guidance Improved 

Accountability for the 

Inventory Reviews
 

Page 18 GAO-13-491 DOD Inventory of Contracted Services

and oversight of such functions, or if necessary, a plan to either divest 

or realign such functions to government performance;

• the identification of contracted services that are exempt from private 

sector performance in accordance with DOD Instruction 1100.22, 

which establishes policies and procedures for determining the 

appropriate manpower mix; require special consideration under 10 

U.S.C. § 2463; or are being considered for cost reasons, to be 

realigned to government performance;23

• the actions being taken or considered with regards to annual program 

reviews and budget processes to ensure appropriate reallocation of 

resources based on the reviews conducted.

and

According to AT&L and P&R officials, the letters were intended to ensure 

that the components conducted the required review of their inventories, 

and documented the extent to which contractors were found to be 

performing certain functions to include inherently governmental and 

closely associated with inherently governmental and, to the extent 

necessary, provided for a plan to realign performance of such functions to 

government performance. DOD could also modify the statement of work 

or the manner of its performance to ensure that the work performed is not 

inherently government or divest or discontinue the work. In cases where 

contractors are performing activities that are closely associated with 

inherently governmental functions, DOD is required to ensure appropriate 

government control and oversight of such functions.

As of April 2013, 29 of the 31 components required to review their 

inventories had submitted a certification letter, while the Air Force 

submitted an interim letter based on a review of 30 percent of the 

contracts that it had completed at that time.24

 

23DOD components may designate certain positions as commercial exempt for a variety of 

reasons, including esprit d’ corps and professional development.

The Air Force provided us 

with updated figures based on their review of about 80 percent of their 

contract actions, which we incorporated in this report. However, the Air 

Force has yet to submit a formal letter to P&R certifying the results of its 

review. AT&L and P&R officials stated that the requirement to submit

certification letters represented a significant improvement over prior 

24The Defense Microelectronics Activity and US Forces Korea, which represent less than 

1 percent of contract obligations in the fiscal year 2011 inventory, did not submit a 

certification letter. In addition to the 31 components, the Defense Intelligence Agency 

provided a certification letter in support of its classified inventory. 
 

Page 19 GAO-13-491 DOD Inventory of Contracted Services

years’ reviews when DOD could not determine whether or not the 

required reviews were conducted and believed the letters provided useful 

insights into the components’ processes and methodologies for 

conducting the reviews.

Our analysis of the 29 component certification letters found that none 

discussed all six elements required in guidance. Further, certification 

letters varied significantly in terms of the information and insights 

provided for the methodologies components used to review their 

inventories, the results of the reviews, and use of the inventory to inform 

annual program reviews and budget processes, as illustrated in the 

following examples.

• Methodology and Selection Criteria: Sixteen of the 29 components 

provided information on both the criteria and methodology used to 

conduct their reviews. These components represent about 38 percent 

of the total contractor FTEs submitted in the inventory. However, the 

level of detail provided in the certification letters varied. For example, 

the Army, which noted in its certification letter that it reviewed more 

than 50 percent of its contracted functions, provided a detailed 

explanation of its selection criteria and review methodology. 

In its inventory submission, the Army explained that it has a twopronged approach to reviewing the activities in the inventory. First, it 

uses a pre-award process that includes detailed checklists to help 

assess whether the proposed contract includes services that are 

inherently governmental functions or inappropriate personal services, 

and to identify services that are closely associated with inherently 

governmental functions. For example, to identify work that is closely 

associated with inherently governmental functions, the checklists ask 

whether the contractor will be providing services related to budget 

preparation, feasibility studies, and acquisition planning, among 

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

Documentation of Contractors, to review information provided by 

commands to make certain determinations such as whether a 

contractor’s performance of closely associated with inherently 

governmental functions has evolved into the performance of 

inherently governmental functions. The panel also evaluates whether 

sufficient capacity exists to oversee the contracted workforce. This 

process allowed the Army to identify over 900 contractor FTEs 

performing inherently governmental functions and over 44,000 

Components Provided 

Limited Information in 

Certification Letters
 

Page 20 GAO-13-491 DOD Inventory of Contracted Services

contractor FTEs performing closely associated with inherently 

governmental functions. 

In contrast, the Department of Defense Education Activity indicated its 

review was conducted by comparing data from the inventory with 

information gathered through their contract writing system database. 

The component provided no additional information on its 

methodology.

Based on the reported methodologies, we could not determine 

whether several components took into consideration the way an

activity is performed or administered as part of their inventory reviews, 

which was required by the December 2011 guidance. For example, 

U.S. Special Forces Command indicated in its certification letter that 

all the contracts in its inventory were reviewed before award by the 

Special Operations Command Requirements Evaluation Board. The 

command did not indicate whether reviews were conducted after 

contracts were awarded. While the Office of Federal Procurement 

Policy directs agencies to confirm before award that the services to be 

procured do not include inherently governmental work, it also directs 

agencies to review on an ongoing basis the functions performed by 

contractors to ensure that the work being performed is appropriate.25

• Inventory Review Results: All 29 components included a discussion of 

inherently governmental functions and unauthorized personal services 

in their letters. However, 4 of the 29 components did not discuss 

whether contractors were performing functions closely associated with 

inherently governmental functions, and 20 of the 29 components did 

not discuss contracted services that are exempt from private sector 

performance. Therefore, we could not determine if these components 

considered these types of activities when conducting their inventory 

reviews or whether no instances were found. 

It was unclear based on our analysis of the certification letters, 

however, whether U.S. Special Forces Command, as well as several 

other components, took into consideration the way a contract is 

performed or administered as part of their inventory reviews.

Two components—the Army and Air Force—identified contractors 

performing inherently government functions or unauthorized personal 

 

25Office of Federal Procurement Policy Letter 11-01, Performance of Inherently 

Governmental and Critical Functions (Sept. 12, 2011).
 

Page 21 GAO-13-491 DOD Inventory of Contracted Services

services. The other 27 components indicated that they did not have 

contractors performing any of these activities. Table 2 summarizes the 

number of contractor FTEs the Army and Air Force identified.

Table 2: Number of Contractors Identified as Performing Inherently Governmental 

Functions and Unauthorized Personal Services in the Fiscal Year 2011 Review of 

the Inventory of Contracted Services

Component

Inherently governmental 

contractor FTEs 

Unauthorized personal 

services contractor FTEs

Army 936 718 

Air Force 473 85 

Source: GAO analysis of DOD data.

The Army, in its certification letter, noted that it planned to use term or 

temporary employees and/or military special duty personnel while 

awaiting insourcing approval of functions at risk of inherently 

governmental performance or otherwise lacking statutory authority. In 

January 2013, however, the Secretary of the Army froze civilian hiring, 

terminated temporary employees and prohibited extensions of term 

appointment without a specific exception to mission critical activities. 

In subsequent discussions with Army officials, we found that the 

Army, as of April 2013, had not developed a plan to address all 

instances in which contractors were performing inherently 

governmental functions or providing unauthorized personal services. 

Similarly, in follow-up discussions with Air Force officials, they told us 

that they are still discussing resolution of the instances identified with 
 

Page 22 GAO-13-491 DOD Inventory of Contracted Services

their manpower and personnel communities, as well as the affected 

major commands.26

Twelve of the 29 components identified contractors performing closely 

associated with inherently government functions (see table 3), 13 

components noted that they did not have contractors performing these 

functions, and 4 did not discuss this element in their certification letter. 

Since DOD’s guidance did not specify how components were to report 

the number of instances identified, components discussed the 

instances they found in a variety of ways. For example, the Army and 

the Air Force were able to provide us with the number of contractor 

FTEs performing closely associated with inherently governmental 

functions, while the Navy identified the number of contracts and the 

Defense Logistics Agency identified the percent of contracts that 

included this type of activity. As a result, it is difficult to determine how 

many contractors are performing closely associated with inherently 

governmental functions. Further, our prior work has found that DOD 

contracts for significant amounts of professional, administrative and 

management support services, a significant portion of which were 

services that closely supported inherently governmental functions.27

 

26In April 2012, we reported that the Army and the Air Force had identified contractors 

performing inherently governmental functions through their reviews of the fiscal year 2009 

inventories. See 

Based on our prior work, it is not clear that DOD components 

accurately identified the extent to which their contractors are 

performing such functions during their inventory reviews.

GAO-12-357. We recommended that the Secretaries of the Army and the 

Air Force take the necessary corrective actions to resolve the issues. DOD concurred with 

these recommendations. As of May 2013, the Army had resolved one case regarding the 

use of security contractors in Kwajalein Atoll by transferring responsibilities to government 

personnel. Further, Army officials noted that for the four instances of contractors 

performing system coordinator duties, the Deputy Director for Intelligence Systems 

instructed the contractors supporting his office that they were not authorized to represent 

the Army, were not to attend any meetings also attended by a member of congress or 

congressional staff, nor were they to identify themselves as Department of the Army 

Systems Coordinators in any correspondence or communication. The Army, however, has 

not provided information on the remaining two instances we recommended that it resolve. 

Air Force officials told us that the two instances identified in our report had been resolved, 

but did not provide information on the steps taken to resolve them. 

27GAO, Defense Acquisitions: Further Actions Needed to Address Weaknesses in DOD’s 

Management of Professional and Management Support Contracts, GAO-10-39 

(Washington, D.C.: Nov. 20, 2009).
 

Page 23 GAO-13-491 DOD Inventory of Contracted Services

Table 3: Components Identifying Instances of Contractors Performing Closely 

Associated with Inherently Government Functions

Component

Closely associated with inherently 

governmental functions a

Army 44,541contractor FTEs

Air Force 1,398 contractor FTEs

Navy The Navy did not identify the number of 

contractor FTEs, but noted they have 25 

contracts that contained these functions.

Defense Advanced Research 

Projects Agency 

The agency did not identify the number of 

contractor FTEs in current contracts, but noted 

they have contracts that contained these 

functions. 

Defense Logistics Agency The agency did not identify the number of 

contractor FTEs, but noted that 4.5 percent of 

their sample of more than 50 percent of contract 

actions contained these functions.

Defense Commissary Agency The agency did not identify the number of 

contractor FTEs, but noted that they had 

contractors performing these functions.

Office of the Secretary of Defense

Washington Headquarters Service

Pentagon Force Protection Agency b

The components did not identify the number of 

contractor FTEs, but reported that 24 out of 950 

contracts consolidated from the three 

components had contractors performing these 

functions.

Defense Threat Reduction Agency The agency did not identify the number of 

contractor FTEs, but noted that several contracts 

contained these functions. 

United States Northern Command/ 

North American Aerospace Defense 

Command c

The commands did not identify the number of 

contractor FTEs, but noted that “some 

requirements” contained these functions. 

TRICARE Management Activity The activity did not identify the number of 

contractor FTEs, but stated that some contracts 

contained these functions

Source: GAO analysis of DOD data.

a

With the exception of the Army and the Air Force, components did not identify the number of 

contractor FTEs performing closely associated with inherently governmental functions. 

b

The Office of the Secretary of Defense, Director of Administration and Management submitted a 

consolidated review on behalf of the Office of Secretary of Defense, Washington Headquarters 

Service and the Pentagon Force Protection Agency, but did not specifically identify which component 

reported it had contractors performing closely associated with inherently governmental functions. 

c

United States Northern Command/North American Aerospace Command submitted one inventory of 

contracted services and one review certification letter. 

The 12 components’ certification letters varied in the level of detail 

provided regarding the form of government control and oversight of 

contractors performing closely associated with inherently 
 

Page 24 GAO-13-491 DOD Inventory of Contracted Services

governmental functions. For example, the Defense Logistics Agency 

noted that it limits contractors’ exercise of discretion, assigns sufficient 

government employees to oversee the work, and identifies contractors 

and their products to ensure they are not being confused with those of 

government employees. In contrast, the Defense Advanced Research 

Projects Agency, stated that it awards and administers contracts in 

compliance with all applicable procedures, but did not provide further 

detail.

Finally, 9 of the 29 components discussed contracted services that 

are exempt from private sector performance. None of these 

components reported having services exempt from private sector 

performance.

• Annual program reviews and budget processes: Fifteen of the 29 

components that submitted review certification letters reported that 

they had used the information from their inventory reviews for annual 

program reviews or budget processes. For example, the Defense 

Contract Management Agency noted that it uses a review board to 

analyze service contracts on a monthly basis to look at requirements, 

follow-on contracts, and exercise of contract options proposed in the 

near future. In addition, it is currently assigning priorities and targeting 

reduction and conversions from contractors to government positions. 

These changes in priorities or workforce realignment would entail a 

change where funds are requested in budget justification materials. In 

another example, the U.S. Special Operations Command noted that it 

uses a requirements approval system to evaluate requirements, 

eliminate redundancies, and identify activities to be insourced. In 

addition, the Army has indicated that their inventory and inventory 

review were used to inform total workforce management reviews, 

including planned efforts to implement spending reductions for 

services that are closely associated with inherently governmental 

functions, and its fiscal year 2014 budget submission. None of the 

components, however, provided details on specific budgetary actions 

they took.

DOD issued revised guidance applicable to the components’ fiscal year 

2012 inventories in February 2013. DOD components are expected to 

review 80 percent of their inventories and respond to the same six 

elements as they were required to do in fiscal year 2011, but the

components will also be required to provide additional information on the 

funds and the number of contractor FTEs associated with the following 

functions:

The Fiscal Year 2012 

Inventory Review 

Guidance Requires 

Components to Provide 

Additional Information
 

Page 25 GAO-13-491 DOD Inventory of Contracted Services

• inherently governmental functions,

• closely associated with inherently governmental functions,

• critical functions,

• unauthorized personal services lacking statutory authority,

• authorized personal services, and

• commercial functions.

In addition, components are to provide an explanation of the degree to 

which the functions are part of overseas contingency operations, or 

reimbursable functions not currently in the component’s budget estimate 

for contracted services. Further, components are to report on the actions 

taken with respect to the functions described above, including whether 

the contract where these functions reside is continuing or modified, or 

whether the function was insourced or divested.28

Since fiscal year 2002, Congress has directed DOD to increase visibility 

into the purchase of services by the department, in part through the 

establishment of a data collection system that would allow it to identify 

each activity being performed by contractors and make informed 

workforce mix and budgetary decisions. With the exception of the Army, 

DOD’s overall progress to date can be characterized as a series of 

incremental, ad hoc steps, often taken in response to congressional 

direction. Over the past 18 months, DOD has been able to reach internal 

agreement on a way forward to collect contractor manpower data directly 

from contractors and has taken certain tangible steps toward this goal, 

such as by requiring components to begin modifying more than 270,000 

contracts and task orders and to require new contracts to include 

provisions to require contractors to report direct labor hours, the types of 

functions being performed, and other information into interim CMRA 

systems. Nevertheless, it will be at least another year before DOD may 

have a department-wide eCMRA system in place to collect inventory 

data, such as manpower data directly from contractors and 2 more years, 

at the earliest, until it may have all components in compliance with 

inventory reporting requirements. Further, there are a number of 

challenges and unresolved issues that require continued management 

attention. For example, while DOD indicates that it remains on track to 

 

28DOD defines insourcing as the conversion of any currently contracted service or function 

to DOD civilian or military performance, or a combination thereof. (Deputy Secretary of 

Defense, Insourcing Contracted Services—Implementation Guidance, May 28, 2009). To 

divest a service or function means to eliminate the service or function.

Conclusions
 

Page 26 GAO-13-491 DOD Inventory of Contracted Services

have a departmentwide data collection system in place in fiscal year 

2014, the working group DOD established in January 2013 is still working 

on key decisions related to security, funding, and other technological 

issues and has not developed an implementation plan with anticipated 

time frames and necessary resources to help ensure DOD remains on 

track to meet its goals, as we recommended in 2011.

Similarly, DOD’s December 2011 guidance has helped ensure that most 

components are reviewing their inventories. DOD also believes that the 

certifications by components have provided it better insights into the 

processes used and results of the reviews. Our review, however, 

indicates that the certifications often did not address or provided only 

limited information on the six elements that were called for by DOD’s 

December 2011 guidance. Most significantly, the letters were inconsistent 

in describing the methodology used to identify and review the inventories, 

the actions taken or planned to be taken by the military services to 

address instances in which contractors were found to be performing 

inherently governmental functions or unauthorized personal services, or 

how these and other components were providing adequate government 

oversight of contractors who were performing work closely associated 

with inherently governmental functions. For example, the Army and Air 

Force identified instances where contractors were performing inherently 

governmental functions and unauthorized personal services, but did not 

report whether they fully resolved these issues. Further, based on our 

review of the certification letters, it is unclear the extent to which the 

differences in the approaches used to conduct the reviews contributed to 

the wide variation of instances identified with regard to contractors 

performing work that is closely associated with inherently governmental 

functions. For example, the Army identified over 44,000 contractor FTEs 

performing work closely associated with inherently government functions, 

while 13 components did not identify any instances where contractors 

were performing these functions.

Having the ability to identify and report instances of contractors 

performing inherently governmental functions, unauthorized personal 

services, or those closely associated with inherently governmental 

functions is one of the key benefits that the inventory is to provide to 

DOD, as it allows DOD to ensure contractors are performing appropriate 

work and to decide on the appropriate course of action should the reviews 

find that not to be the case. However, that value is significantly reduced if 

decision-makers have no assurance on whether corrective action was 

taken. DOD’s February 2013 guidance that governs the fiscal year 2012 

inventory review attempts to improve accountability of the funds allocated 
 

Page 27 GAO-13-491 DOD Inventory of Contracted Services

to certain high risk functions and obtain better insight into the resolution of 

instances where contractors are performing inherently governmental 

functions or unauthorized personal services. The results, however, hinge 

on the extent to which the components comply with the guidance. Based 

on this year’s results, whether the components do so is not a foregone 

conclusion.

To ensure that the inventory of contracted services reviews provide 

greater context and value to DOD leadership, we recommend that the 

Secretary of Defense direct component heads to take the following two 

actions:

• Comply with DOD’s February 2013 guidance, by ensuring that all 

required inventory review data elements, including a comprehensive 

description of their inventory review methodology, are addressed in 

their certification letters; and

• Provide updated information in certification letters on how they 

resolved the instances of contractors performing inherently 

governmental functions or unauthorized personal services in prior 

inventory reviews.

DOD provided us with written comments on a draft of this report. DOD 

agreed with one recommendation and partially concurred with one 

recommendation. DOD’s written response is reprinted in appendix II. 

DOD also provided technical comments, which were incorporated as 

appropriate.

DOD concurred with our recommendation that to provide greater context 

and value to DOD leadership, DOD should direct component heads to 

comply with its February 2013 guidance and ensure that all required 

inventory review data elements, including a comprehensive description of 

their inventory review methodology, are addressed in their certification 

letters. DOD did not believe that it was necessary for the Secretary of 

Defense to provide additional guidance, but rather indicated that AT&L 

and P&R, which have lead responsibility for the inventory, will 

disseminate our report to the components with a reminder that each 

component must specifically address each item listed in the fiscal year 

2012 inventory of contracted services guidance. While we appreciate 

DOD’s actions to address the recommendation, the fact that none of the 

components fully addressed each element contained in AT&L and P&R’s 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 28 GAO-13-491 DOD Inventory of Contracted Services

previous guidance underscores, in our view, the need for more direct 

involvement by the Secretary to ensure compliance. 

DOD partially concurred with our recommendation that component heads 

provide updated information in certification letters on how they resolved 

the instances of contractors performing inherently governmental functions 

or unauthorized personal services in prior inventory reviews. DOD stated 

that while it agreed with the intent to ensure complete information is 

provided in certification letters regarding how component heads resolved 

instances of contractors performing inherently governmental or 

unauthorized personal services, DOD believes that the focus should be 

on the current and future reviews of the inventory of contracted services, 

rather than a correction of prior inventory reviews. To do so, DOD stated 

that AT&L and P&R will ask each component to include in the fiscal year 

2012 certification letters any updated information on how they resolved 

the instances of contractors performing inherently governmental functions 

or unauthorized personal services in prior inventory reviews. DOD added 

that the fiscal year 2013 inventory of contracted services guidance will be 

updated to include this requirement when it is published in February 

2014. Subsequently, DOD stated that any instances of contractors 

performing inherently governmental functions or unauthorized personal 

services recorded in prior inventory reviews that persist will be included 

and documented in the fiscal year 2012 and future review processes.

DOD said it will verify that the certification letters contain a complete and 

accurate description of all required data elements, including actions taken 

to resolve outstanding issues related to contractors performing inherently 

governmental functions and unauthorized personal services prior to 

closing the respective review process. We agree that such an approach, if 

successfully implemented, would meet the intent of our recommendation. 

We are sending copies of this report to the Secretary of Defense and 

interested congressional committees. In addition, the report is available at 

no charge on the GAO website at http://www.gao.gov. 

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

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

Offices of Congressional Relations and Public Affairs may be found on 
 

Page 29 GAO-13-491 DOD Inventory of Contracted Services

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

report are listed in appendix III.

Timothy J. DiNapoli

Director, Acquisition and Sourcing Management
Appendix I: Objectives, Scope and 

Methodology

Page 30 GAO-13-491 DOD Inventory of Contracted Services

Section 803(c) of the National Defense Authorization Act for Fiscal Year 

2010 directs GAO to report for 3 years on the inventory of activities 

performed pursuant to contracts for services that are to be submitted by 

the Secretary of Defense for fiscal years 2009, 2010, and 2011, 

respectively. To satisfy the mandate for 2012, we assessed (1) the 

progress DOD has made in compiling the inventory of contracted services 

and the status of efforts to collect contractor manpower data, and (2) the 

extent to which the defense components complied with DOD’s December 

2011 guidance for reporting on the review of the fiscal year 2011 

inventories.

In performing our work we obtained pertinent documents and interviewed 

cognizant officials from the Office of the Under Secretary of Defense for 

Acquisition, Technology and Logistics (AT&L); Office of the Under 

Secretary of Defense for Personnel and Readiness (P&R); the Office of 

the Under Secretary of Defense (Comptroller); Office of Defense 

Procurement and Acquisition Policy; Deputy Chief Management Officer; 

the departments of the Army, Navy, and Air Force; and two DOD 

components–the Defense Logistics Agency (DLA) and Defense 

Information Systems Agency (DISA).

To assess the progress DOD has made in compiling the inventory of 

contracted services and the status of efforts to collect contractor 

manpower data, we reviewed the December 2011 guidance issued by 

AT&L and P&R related to the inventory compilation processes. We 

analyzed 31 DOD components’ fiscal year 2011 inventory submissions 

and all memorandums accompanying the inventory submissions, to 

determine the methodologies and processes used when compiling the 

fiscal year 2011 inventories and calculating or estimating the number of 

contractor full time equivalents (FTE). We focused on the Army, Navy, Air 

Force, DLA, and DISA because they had among the largest service 

contract obligations and contractor FTEs in the fiscal year 2011 inventory. 

We include DOD’s estimate of overall obligations and contractor FTEs for 

fiscal year 2011 in this report. We did not independently assess the 

accuracy or reliability of the underlying data supporting the components’ 

inventories of contracted services. However, our previous work identified 

data limitations with DOD components using data from the Federal 

Procurement Data System-Next Generation (FPDS-NG) as the basis for 

their inventories. We discuss these limitations in the report, as 

appropriate.

In addition, we assessed DOD’s progress in developing a common data 

system to collect and house contractor manpower data for the entire 

Appendix I: Objectives, Scope and 

Methodology 
Appendix I: Objectives, Scope and 

Methodology

Page 31 GAO-13-491 DOD Inventory of Contracted Services

department. We reviewed guidance issued by AT&L and P&R on 

modifying new and existing contracts to require reporting of contractor 

manpower data, and discussed the implementation by the Air Force, 

Navy, and DOD components of an interim data system. We also 

interviewed officials from AT&L, P&R, and the Office of the Deputy Chief 

Management Officer, and the military services to obtain the status of 

efforts in developing and implementing a department-wide data system to 

collect and house contractor manpower information.

To assess the extent to which DOD components followed DOD’s 

guidance on the review of their fiscal year 2011 inventory, we analyzed 

29 inventory certification letters submitted to P&R as of April 2013. We 

assessed the letters to determine if components reported on the six 

elements in DOD’s guidance for the inventory review, including the 

selection criteria and methodologies used to conduct the inventory 

reviews, a listing of the results of their compliance with applicable Title 10 

provisions, workforce issues identified, whether the workforce issues had 

been resolved, identification of contracted services that are exempt from 

private sector performance, and actions being taken or considered with 

regards to annual program reviews and budget processes. We also 

followed-up with appropriate Army and Air Force officials to determine 

how they resolved workforce issues identified in their fiscal year 2009 

inventory reviews. We did not assess whether the reported data or

guidance met legislative requirements for the inventory review. In 

addition, we also did not independently assess the reliability and accuracy 

of the review certification information.

We conducted this performance audit from October 2012 to May 2013 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.
Appendix II: Comments from the Department 

of Defense

Page 32 GAO-13-491 DOD Inventory of Contracted Services

Appendix II: Comments from the Department 

of Defense
Appendix II: Comments from the Department 

of Defense

Page 33 GAO-13-491 DOD Inventory of Contracted Services
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 34 GAO-13-491 DOD Inventory of Contracted Services

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

In addition to the contact named above, Cheryl Andrew, Margaret A. Best, 

Laura Greifner, Katheryn S. Hubbell, Julia Kennon, John Krump, LeAnna 

Parkey, Guisseli Reyes-Turnell, and Wendy P. Smythe made key 

contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO contact

Staff 

Acknowledgements

(121102)
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