GAO 

United States Government Accountability Office

Report to Congressional Requesters

DEFENSE 

ACQUISITIONS 

Further Actions 

Needed to Address 

Weaknesses in DOD’s 

Management of 

Professional and 

Management Support 

Contracts 

November 2009 

GAO-10-39 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

November 2009

DEFENSE ACQUISITIONS

Further Actions Needed to Address Weaknesses in 

DOD's Management of Professional and Management 

Highlights of GAO-10-39, a report to Support Contracts

congressional requesters 

In fiscal year 2008, the DOD 

obligated $200 billion on services 

contracts, including $42 billion for 

professional and management 

services. GAO previously identified 

weaknesses in DOD’s management 

and oversight of services contracts, 

contributing to DOD contract 

management being on GAO’s highrisk list. 

For selected professional and 

management support contracts, 

GAO was asked to examine (1) the 

extent to which DOD considered 

the risks of contractors closely 

supporting inherently 

governmental functions at key 

decision points, (2) how DOD 

implemented performance-based 

practices, (3) the extent to which 

DOD designated trained 

surveillance personnel, and (4) 

whether a new review process may 

improve DOD’s management of 

such contracts. 

GAO reviewed federal regulations, 

agency policies and guidance, and 

analyzed seven acquisitions 

approved from 2004 to 2007 and 

64 related task orders for services. 

What GAO Recommends

GAO recommends that DOD 

consider and document how 

contractors closely support 

inherently governmental functions 

during management reviews and to 

mitigate related risks before issuing 

task orders, provide additional 

guidance on enhanced oversight 

techniques, and better monitor the 

designation of trained surveillance 

personnel. DOD concurred with 

each of the recommendations. 

DOD policies do not require assessments of the risks associated with 

contractors closely supporting inherently governmental functions as part of 

its management reviews of acquisition strategies nor when task orders are 

issued for professional and management services. Such risks include the 

potential loss of government control over and accountability for missionrelated policy and program decisions. Though all seven acquisitions and more 

than 75 percent of the task orders GAO reviewed provided for such services, 

GAO found no evidence that these risks were among those considered in the 

documentation reviewed. DOD guidance issued after these acquisitions were 

approved requires that consideration be given to using civilian personnel 

rather than contractors when the activities closely support inherently 

governmental functions. This guidance, however, does not require DOD 

personnel to consider and document risks posed when contractors perform 

these activities. Further, DOD personnel were unaware of the need to provide 

enhanced oversight when contracting for such services. 

DOD faces challenges in defining requirements and outcome-based measures 

when acquiring professional and management services. DOD personnel 

generally expressed task order requirements in terms of a broad range of 

activities that contractors may perform, but used standards and measures that 

were not always well-suited to assess outcomes. DOD made more use of 

objective measures to assess cost and schedule performance, but generally 

relied on subjective measures to assess the quality of the contractors’ work. 

For example, DOD often measured quality based on the number of complaints 

lodged against the contractor, which provided little detail into how desired 

outcomes were achieved. DOD also missed opportunities to include objective 

measures that may have been better suited to assess outcomes. DOD officials 

stated that developing outcome-based, objective measures is challenging, but 

noted that initiatives are under way to better utilize such approaches. 

DOD has made progress in ensuring that trained surveillance personnel are 

assigned to monitor contract performance. Surveillance personnel were 

assigned to all 64 of the task orders GAO reviewed, and all but 3 had received 

required training. GAO identified, however, 3 instances of surveillance 

personnel who were not assigned before the contractor began work on a task 

order and 20 instances of personnel who did not receive training prior to 

beginning surveillance duties. 

In September 2008, DOD implemented a new peer review process that is 

tasked to address, among other issues, contractors closely supporting 

inherently governmental functions, the use of performance-based practices, 

and contractor surveillance. As of October 2009, four pre-award reviews and 

one post-award review of professional and management support contracts 

have been conducted and it is too early to tell whether such reviews will 

encourage DOD personnel to address these issues across the range of DOD’s 

services contracts. 

View GAO-10-39 or key components.

For more information, contact John P. Hutton 

at (202) 512-4841 or huttonj@gao.gov. 
Page i GAO-10-39 

Contents 

Letter 1

Background 5 

DOD Policies Do Not Require an Assessment of Risk of 

Contractors Closely Supporting Inherently Governmental 

Functions at Key Acquisition Decision Points 11 

DOD Faces Challenges In Implementing Performance-Based 

Practices on Professional and Management Support Task Orders 16 

DOD Efforts to Designate Trained Surveillance Personnel Show 

Progress, but Concerns Remain 23 

Recent Initiative May Improve DOD’s Insight into Issues Affecting 

Professional and Management Support Contracts 26 

Conclusions 30 

Recommendations for Executive Action 32 

Agency Comments and Our Evaluation 32 

Appendix I Scope and Methodology 34 

Appendix II Examples of Inherently Governmental and 

Approaching Inherently Governmental Functions 40 

Appendix III Comments from the Department of Defense 42 

Appendix IV GAO Contact and Staff Acknowledgments 45 

Tables 

Table 1: DOD Acquisition Workforce—Military and Civilian 

Personnel for Fiscal Years 2001 and 2008 6 

Table 2: Range of Contracted Services and Related Risk Level 8 

Table 3: Examples of Performance Requirements in DOD’s 

Guidebook for Performance-Based Services Acquisition 

in the Department of Defense 18 

Table 4: Principal Measures Used to Assess Selected Performance 

Objectives 19 

Table 5: Focus Areas of the Peer Review Process 29 

 Defense Acquisitions 
Table 6: Award of Contracts and Issuance of Task Orders from 

Fiscal Years 2004 through 2008 Subsequent to the Military 

Departments’ Approval of Acquisition Strategies 30 

Table 7: Reviewed Services Acquisitions and Total Task Orders 

Issued and Obligations from Fiscal Year 2004 through 2008 36 

Table 8: Examples of Inherently Governmental Functions 40 

Table 9: Examples of Services That May Approach Being Inherently 

Governmental Functions 41 

Figures 

Figure 1: Comparison of DPAP’s Peer Reviews and Management 

Reviews for Services Acquisitions for Acquisitions 

Estimated to be Valued at $1 Billion or More 28 

Abbreviations 

DAU Defense Acquisition University 

DFARS Defense Federal Acquisition Regulation Supplement 

DOD Department of Defense 

DPAP Defense Procurement and Acquisition Policy 

FAR Federal Acquisition Regulation 

OFPP Office of Federal Procurement Policy 

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

 And Logistics 

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Page ii GAO-10-39 Defense Acquisitions
Page 1 GAO-10-39 

 

United States Government Accountability Office

Washington, DC 20548 

 

November 20, 2009 

The Honorable Evan Bayh 

Chairman 

The Honorable Richard Burr 

Ranking Member 

Subcommittee on Readiness and Management Support 

Committee on Armed Services 

United States Senate 

The Honorable Daniel K. Akaka 

United States Senate 

The Honorable John Thune 

United States Senate 

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

purchaser of contractor-provided services, obligating more than $200 

billion on services contracts in fiscal year 2008. DOD obligated $42 billion 

(21 percent) of its 2008 obligations for services on professional, 

administrative, and management support. Examples of such services 

include budget and program management and contracting support. Often 

these services are procured through performance-based acquisition 

approaches, which encourage the private sector to develop innovative 

solutions to meet DOD’s needs. 

DOD’s reliance on contracted services to support its missions makes 

effective management and oversight of these contracts essential. Our work 

over the past several years, however, has identified weaknesses in DOD’s 

management and oversight. For example, in 2005, we found that DOD’s 

surveillance of service contractors needed improvement as staff 

responsible for assessing contractor performance were not always 

appointed or trained.1

 In 2006, we found that DOD’s approach to managing 

services acquisitions did not put the department in a position to determine 

whether its investments in services were achieving the desired outcomes.2

1

 GAO, Contract Management: Opportunities to Improve Surveillance on Department of 

Defense Service Contracts, GAO-05-274 (Washington, D.C.: Mar. 17, 2005). 

2

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

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

 Defense Acquisitions 
 

These shortfalls stemmed, in part, from the limitations of the management 

reviews DOD established to review and approve high-dollar services 

acquisitions.3

 Additionally, our recent work has shown that reliance on 

contractors, including professional and management support contractors, 

to support core missions can place the government at risk of transferring 

government responsibilities to contractors.4

 Collectively, such issues 

continue to place DOD at high risk of fraud, waste, abuse, and 

mismanagement and result in DOD contract management being on our 

high-risk list.5

In response to your interest in whether DOD’s policies and actions to 

improve the management of services contracts addressed issues affecting 

professional and management support contracts, we examined (1) the 

extent to which DOD considered the risks associated with contractors 

closely supporting inherently governmental functions at key acquisition 

decision points; (2) how DOD was implementing performance-based 

acquisition practices, such as identifying requirements in terms of 

expected and measurable outcomes; (3) the extent to which DOD 

designated trained surveillance personnel; and (4) whether recent actions 

to implement a peer review process may improve DOD’s management and 

use of such contracts. 

To assess the extent to which DOD’s management reviews and policies 

addressed the risks associated with contractors closely supporting 

inherently governmental functions at key acquisition points, we reviewed 

DOD’s May 2002 and October 2006 guidance that established its processes 

for reviewing and approving proposed acquisitions to obtain contractor 

support. To assess how these risks were addressed during reviews of 

 

3

 The National Defense Authorization Acts for Fiscal Years 2002 and 2006, respectively, 

required DOD to establish and implement a management structure to review its 

procurement of services. For the purposes of this report, we use the term management 

review to collectively refer to the review and approval procedures established by DOD and 

the military departments pursuant to this legislation. 

4

 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); and DOD’s High Risk Areas: Actions Needed to Reduce 

Vulnerabilities and Improve Business Outcomes, GAO-09-460T (Washington, D.C.: Mar. 

12, 2009). Inherently governmental functions are defined by the Federal Acquisition 

Regulation as those functions that are so intimately related to public interest that they must 

be performed by government employees. 

5

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

Page 2 GAO-10-39 Defense Acquisitions
 

specific services acquisitions, we reviewed a DOD-provided list of 102 

services acquisitions approved by the Air Force, Army, or Navy from fiscal 

years 2004 through 2007. Using contract data from the Federal 

Procurement Data System–Next Generation,6

 we determined that 32 of 

these acquisitions, with almost $15 billion in total combined obligations 

from fiscal years 2004 through 2008, included contracts for the purchase of 

professional, administrative, and management support. From these 32 

acquisitions, we selected 7 for our review based on the percentage of total 

obligations that went towards professional, administrative, and 

management support services; the specific types of services acquired; and 

the military department responsible for the acquisition. We also 

determined that the military departments obligated over $4.3 billion on 

1,874 task orders from these 7 acquisitions from fiscal years 2004 through 

2008. We randomly selected and reviewed 64 task orders that had 

obligations of $500,000 or more and were issued during fiscal years 2004 

through 2007 from these acquisitions to assess how such risks were 

addressed prior to DOD’s decision to award a contract or issue a task 

order for professional and management support contracts. We did not 

review acquisitions approved after fiscal year 2007 since our analysis 

indicated that it was often a year or more from the time that the 

acquisition strategy was approved to the time when task orders were 

actually issued. We reviewed the acquisition strategy, base contract, task 

order, statements of work, and other documentation supporting the need 

to acquire contract support and any risk assessments prepared. We also 

interviewed officials who managed these acquisitions to obtain 

information on why these services were purchased, the risks that were 

considered, and any steps taken for enhanced contractor oversight. 

We assessed the reliability of the Federal Procurement Data System–Next 

Generation to identify acquisitions and to select task orders that were 

within the scope of our review by verifying (1) the contract and task order 

identification numbers, (2) the contract award date, (3) that the task 

orders associated with the acquisitions were for professional and 

management support services, and (4) that the task orders had obligations 

exceeding $500,000. On the basis of this assessment, we determined that 

the data were sufficiently reliable for the purposes of this review. 

 

6

 The Federal Procurement Data System–Next Generation is the federal government’s 

current system for tracking information on contracting actions. 

Page 3 GAO-10-39 Defense Acquisitions
 

To assess how DOD was implementing performance-based acquisitions 

practices on professional and management support contracts, we 

reviewed Federal Acquisition Regulation (FAR) requirements and DOD 

guidance on developing performance work statements and specifically on 

how to identify contract requirements in terms of expected and 

measurable outcomes. We then reviewed performance work statements 

for the 64 task orders to assess whether contract requirements were 

measurable and outcome based. We interviewed contracting and program 

officials who managed these task orders to identify how requirements and 

performance measures were developed and analyzed documentation to 

determine how contractor performance was measured. 

To assess the extent to which DOD designated trained surveillance 

personnel7

 on professional and management support contracts, we 

reviewed the Defense Federal Acquisition Regulation Supplement 

(DFARS) and DOD policies and procedures to identify the department’s 

surveillance and training requirements. We analyzed surveillance 

personnel appointment and training documentation associated with each 

of the 64 task orders to determine whether these requirements were met. 

To identify how recent actions to implement a new peer review process 

may improve DOD’s management and use of professional and 

management support contracts, we reviewed relevant legislation and the 

department’s implementation policy and guidance to identify the scope 

and content of these reviews. We also interviewed officials from the Under 

Secretary of Defense for Acquisition, Technology, and Logistics’ 

(USD(AT&L)) Office of Defense Procurement and Acquisition Policy 

(DPAP) and the military departments and reviewed memoranda 

summarizing the findings and recommendations of reviews performed on 

professional and management support services contracts. Additional 

information on our scope and methodology may be found in appendix I. 

We conducted this performance audit from July 2008 through 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 

 

7

 The military departments, including the contracting offices we visited during this review, 

use different terms to describe personnel involved in contractor surveillance including: 

Quality Assurance Personnel, Contracting Officer’s Representative, Functional Area 

Evaluator, and Task Order Contracting Officer’s Representative. For purposes of this 

report, we refer to all these positions as surveillance personnel. 

Page 4 GAO-10-39 Defense Acquisitions
 

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. 

Background 

DOD Obligations and 

Workforce Trends 

From fiscal years 2001 through 2008, DOD’s reported obligations on 

contracts for services, when measured in real terms, more than doubled—

from roughly $92 billion to slightly over $200 billion. These obligations 

accounted for over half of the department’s total contract obligations in 

fiscal year 2008. Over that same time period, DOD’s obligations on 

professional, administrative, and management support contracts nearly 

tripled from $14.2 billion to $42 billion. These services represented about 

15 percent of DOD’s total obligations on services contracts in 2001 and 

21 percent in 2008. As we have reported in the past, this increased use of 

contractor-provided services has been the result of thousands of individual 

decisions, not the result of strategic, comprehensive planning for the 

whole department in which the volume and composition of contracted 

services have been measured outcomes.8

 We also noted that the absence 

of well-defined requirements, sound contracting arrangements, or effective 

management and oversight has contributed to schedule delays, cost 

overruns, and unmet expectations. 

Despite substantial increases in spending on both goods and services from 

fiscal year 2001 through 2008, DOD’s acquisition workforce has declined 

by 2.6 percent (see table 1). Without an adequate workforce to manage 

DOD’s billion-dollar acquisitions, there is an increased risk of poor 

acquisition outcomes and vulnerability to fraud, waste, and abuse. We 

reported in March 2009 that DOD lacked critical, departmentwide 

information needed to ensure that its acquisition workforce was sufficient 

to meet its national security mission.9

 We found, for example, that DOD 

did not collect or track information on contractor personnel, despite the 

fact that those personnel providing professional and management support 

services make up a key segment of the total acquisition workforce. 

 

8

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

GAO-09-643T (Washington, D.C.: Apr. 23, 2009) and GAO-07-20. 

9

 GAO, Department of Defense: Additional Actions and Data are Needed to Manage and 

Oversee DOD’s Acquisition Workforce, GAO-09-342 (Washington, D.C.: Mar. 25, 2009). 

Page 5 GAO-10-39 Defense Acquisitions
 

Additionally, DOD lacked complete information on the reasons personnel 

are contracted, thus limiting its ability to determine whether decisions to 

augment the in-house acquisition workforce with contractors were 

appropriate. 

Table 1: DOD Acquisition Workforce—Military and Civilian Personnel for Fiscal Years 2001 and 2008 

Acquisition workforce by functional career field 

Fiscal year

2001

Fiscal year 

2008 

Percentage

change fiscal years 

2001 to 2008

Program Management 14,031 12,781 -8.9%

Contracting 25,413 26,680 1.1

Industrial/Contract Property Management 620 451 -27.3

Purchasing 4,121 1,196 -71.0

Facilities Engineering 0 4,920 n/a

Production Quality and Manufacturing 10,547 9,138 -13.4

Business, Cost Estimating, and Financial Management 10,279 7,085 -31.1

Life Cycle Logistics 11,060 13,361 20.8

Information Technology 5,612 3,934 -29.9

System Planning, Research, Development, and Engineering—Systems 

Engineering 34,899 34,537 -1.0

System Planning, Research, Development, and Engineering—Science 

and Technology Manager 0 480 n/a

Test and Evaluation 5,113 7,420 45.1

Auditing 3,457 3,638 5.2

Unknown/Other 4,097 1,258 -69.3

Total 129,249 125,879 -2.6%

Source: DOD data. 

Risks of Contractors 

Closely Supporting 

Inherently Governmental 

Functions 

Federal agencies acquire basic services, such as custodial and 

landscaping, to more complex professional and management support 

services, which may closely support the performance of inherently 

governmental functions. Tasks that require discretion in applying 

government authority or value judgments in making decisions for the 

government are defined by the FAR as inherently governmental functions; 

as such they are required to be performed by government employees, not 

private contractors.10 The FAR provides 20 examples of such work 

functions, including determining agency policy or federal program budget 

 

10 FAR § 7.503(a). 

Page 6 GAO-10-39 Defense Acquisitions
 

request priorities; directing and controlling federal employees; and 

awarding, administering or terminating federal contracts.11

The FAR also provides examples of functions that, while not inherently 

governmental, approach the category due to the nature of the function, the 

manner in which a contractor performs the task, or methods used by the 

government to administer performance under a contract (see app. II).12

Services that closely support inherently governmental functions include 

professional and management support services, such as those that involve 

or relate to supporting budget preparation; program planning; acquisition 

planning; technical evaluation for contract proposals or source selections; 

and development of statements of work. 

The decision to turn to contractors can, in some cases, create risks that 

the government needs to consider and manage. Of key concern is the loss 

of government control over and accountability for mission-related policy 

and program decisions when contractors provide services that closely 

support inherently governmental functions. The closer contractor services 

come to supporting inherently governmental functions, the greater the risk 

of their influencing the government’s control over and accountability for 

decisions that may be based, in part, on contractor work. This may result 

in decisions that are not in the best interest of the government and may 

increase vulnerability to waste, fraud, and abuse. Given this risk, the FAR 

and Office of Federal Procurement Policy (OFPP) guidance state that a 

greater scrutiny and an enhanced degree of management oversight is 

required when contracting for functions that closely support the 

performance of inherently governmental functions.13 Additionally, the 

Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 

required, among other things, that prior to entering into a contract for 

performance of acquisition functions that closely support inherently 

governmental functions, DOD must ensure that its personnel cannot 

reasonably be made available to perform these activities, that appropriate 

DOD personnel supervise contractor performance and perform all 

inherently governmental functions, and that DOD address any potential 

organizational conflict of interest of the contractor when performing these 

 

11 FAR § 7.503(c). 

12 FAR § 7.503(d). 

13 FAR § 37.114 and OFPP Policy Letter 93-1, Management Oversight of Service 

Contracting, May 18, 1994. 

Page 7 GAO-10-39 Defense Acquisitions
 

tasks.14 Table 2 provides examples of contracted services and their relative 

risk of influencing government decision making. 

Table 2: Range of Contracted Services and Related Risk Level 

Basic services 

Professional and management support 

services that do not closely support 

inherently governmental functions 

Professional and management support 

services that closely support inherently 

governmental functions 

• Custodial 

• Food 

• Landscaping 

• Snow removal 

• Storage 

• Trash collection 

• Advertising 

• Banking 

• Parking 

• Records maintenance 

• Acquisition support 

• Contracting support 

• Budget preparation 

• Developing or interpreting regulations 

• Engineering and technical services 

• Intelligence services 

• Policy development 

• Reorganization and planning 

Low ← Risk level → High 

Source: GAO analysis. 

Our previous work has identified that the use of contractors for services 

that closely support inherently governmental functions introduces other 

risks due to a potential loss of government control over program 

decisions.15 Such concerns include an increased potential for conflicts of 

interest, both organizational and personal; the potential for improper use 

of personal services contracts, which the FAR generally prohibits because 

of the employer-employee relationship they create between the 

government and contractor personnel; and the potential additional cost to 

the government of hiring contractors rather than government personnel. 

DOD Management and 

Peer Reviews 

The National Defense Authorization Act for Fiscal Year 2002 required the 

Secretary of Defense to establish a review process for the approval of 

DOD services acquisitions.16 USD(AT&L) issued guidance in May 2002 

 

14 Section 804 of Public Law 108-375 added section 2383 to Title 10, U.S. Code, which 

placed limitations on when defense agencies may enter into contracts for the performance 

of acquisition functions that closely support inherently governmental functions. 

15 GAO, Department of Homeland Security: Improved Assessment and Oversight Needed 

to Manage Risk of Contracting for Selected Services, GAO-07-990 (Washington, D.C.: Sept. 

17, 2007) and Defense Contracting: Army Case Study Delineates Concerns with Use of 

Contractors as Contract Specialists, GAO-08-360 (Washington, D.C.: Mar. 26, 2008). 

16 Pub. L. No. 107-107, § 801 (2001). See 10 U.S.C. § 2330 (2002). 

Page 8 GAO-10-39 Defense Acquisitions
 

establishing its management reviews, intending to ensure that DOD’s 

services acquisitions are based on clear, performance-based requirements 

with measurable outcomes and that acquisitions are planned and 

administered to achieve intended results.17 Under this initial guidance 

USD(AT&L) was to review all proposed services acquisitions with an 

estimated value of $2 billion or more, and military department and other 

defense component officials were to review those below that threshold. 

The military departments each subsequently developed their own 

management review processes for acquisitions that contained several of 

the same elements. Chief among these was the requirement that written 

acquisition strategies must be reviewed and approved by senior officials 

before contracts may be awarded. The content of these strategies 

included, among other things, information on contract requirements, risks, 

and business arrangements.18 Once the acquisition strategies are approved, 

DOD contracting offices may continue the acquisition process, including 

soliciting bids for proposed work and subsequently awarding contracts. 

Based on further requirements in the National Defense Authorization Act 

for Fiscal Year 2006,19 in October 2006, USD(AT&L) issued a memorandum 

updating DOD’s acquisition of services policy.20 Under the updated policy, 

all proposed services acquisitions with a value estimated at more than $1 

billion or designated as “special interest” should be referred to 

USD(AT&L) for review. The dollar threshold for military department 

reviews was also lowered. While the substance of the management 

reviews remained largely unchanged from the 2002 policy, it did 

incorporate a few additional, specific, acquisition strategy requirements 

concerning inclusion of any required waivers and top-level discussion of 

source selection processes. 

 

17 Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, 

Acquisition of Services, May 31, 2002. 

18 According to the FAR, acquisition planning is a process by which the efforts of all 

personnel responsible for an acquisition are coordinated and integrated through a 

comprehensive plan for fulfilling the agency need in a timely manner and at a reasonable 

cost. It includes developing the overall strategy for managing the acquisition. FAR Subpart 

2.1. Acquisition planning is required for all acquisitions, and the FAR includes general 

procedures and content requirements for written acquisition plans or strategies. 

19 Pub. L. No. 109-163, § 812, rewriting 10 U.S.C. § 2330 (2006). 

20 Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, 

Acquisition of Services Policy, October 2, 2006. 

Page 9 GAO-10-39 Defense Acquisitions
 

In 2006, we reported that although DOD had established formal 

management reviews for the approval of services acquisitions, issues with 

services contracts at the strategic and transactional level remained.21 We 

reported that DOD’s approach to managing services acquisitions tended to 

be reactive and that it had not developed a means for gauging whether 

ongoing and planned efforts were achieving intended results. At the 

transactional level, DOD focused primarily on elements associated with 

awarding contracts, with much less attention paid to requirements or the 

assessment of the actual delivery of contracted services. Moreover, the 

results of individual acquisitions were generally not used to inform or 

adjust strategic direction. We recommended that, among other actions, 

DOD take steps to determine areas of specific risk that were inherent in 

acquiring services and that should be managed with greater attention. 

DOD agreed with this recommendation and has identified actions under 

way to address our concerns. 

In response to a requirement in Section 808 of the National Defense 

Authorization Act for Fiscal Year 2008, USD(AT&L) established a 

multiphased, pre- and post-contract award independent management 

review, or peer review, process for services acquisitions.22 In December 

2008, DOD Instruction 5000.02, Operation of the Defense Acquisition 

System, was revised and incorporated these peer reviews as well as the 

management reviews and dollar thresholds established in the October 

2006 acquisition of services policy. 

 

21 The strategic level is where the enterprise—DOD—sets a direction for what it needs, 

captures knowledge to make informed management decisions, ensures that 

departmentwide goals and objectives are achieved, and assesses the resources it has to 

achieve desired outcomes. The strategic level sets the context for the transactional level, 

where the focus is on making sound decisions on individual service acquisitions using valid 

and well-defined requirements, appropriate business arrangements, and adequate 

management of contractor performance. GAO-07-20. 

22 Pub. L. No. 110-181 § 808 (2008). 

Page 10 GAO-10-39 Defense Acquisitions
 

DOD Policies Do Not 

Require an 

Assessment of Risk of 

Contractors Closely 

Supporting Inherently 

Governmental 

Functions at Key 

Acquisition Decision 

Points 

DOD and the military departments are to assess a number of risks when 

developing an acquisition strategy for services, but DOD policy does not 

require an assessment of risks associated with contractors closely 

supporting inherently governmental functions at two key decision 

points—when approving acquisition strategies or issuing task orders. All 7 

of the proposed acquisitions for professional, administrative, and 

management services and more than 75 percent of the 64 related task 

orders we reviewed required the contractor to provide services that 

closely supported inherently governmental functions. A DOD instruction 

issued after the approval of the acquisition strategies we reviewed requires 

that consideration be given to using civilian personnel rather than 

contractors, specifically when the activities to be performed cannot be 

separated or distinguished from inherently governmental functions. 

However, once the decision to rely on contractors is made, DOD personnel 

are not required to identify and document risks posed when contractors 

are given responsibility for closely supporting inherently governmental 

functions or take steps to mitigate those risks. 

Risks Associated with 

Contractors Closely 

Supporting Inherently 

Governmental Functions 

Are Not among Those 

Assessed in Acquisition 

Strategies Submitted for 

Management Reviews 

DPAP representatives we met with noted that the acquisition strategy is a 

“big picture” document that examines whether the proposed methods for 

acquiring services are sound and how the acquisition compares with 

previous acquisitions. The strategy is developed, in part, with the 

assistance of both program office representatives, who identify the 

requirements, and contracting personnel, who will develop the basic 

contracts and subsequently issue task orders. Agency personnel are 

required to document in the acquisition strategy their assessment of 

current and potential technical, cost, schedule, and performance risks; the 

level of those risks; and a mitigation plan. As part of the acquisition 

strategy, this assessment is subsequently reviewed by senior DOD officials 

during management reviews. Documentation for all seven acquisition 

strategies we reviewed included a discussion of these risks as well as 

methods to mitigate their impact, as required in policy. 

DOD policy, however, does not require the military departments to 

consider and document in their acquisition strategies the extent to which 

the proposed services will be used to closely support inherently 

governmental functions. As a result, none of the acquisition strategies or 

related risk assessment documentation reviewed under DOD’s 

management reviews that we analyzed identified such concerns or any 

related mitigation strategies. The acquisition strategies and supporting 

documentation we reviewed included broad descriptions of the services to 

be provided over the course of the acquisition, which included acquisition, 

Page 11 GAO-10-39 Defense Acquisitions
 

contracting, and policy development support services. Each of these 

services are identified in the FAR as examples of those that closely 

support inherently governmental functions.23

DOD and military department officials we spoke with indicated that, to 

some degree, DOD’s management review is not well suited to assess the 

risks of contractors closely supporting inherently governmental functions. 

These officials noted that the acquisition strategies generally described 

requirements in broad terms and that the timing of the review—often 

months before DOD actually solicits bids from the contractors or awards 

contracts and issues task orders for specific services—makes it 

challenging to know what specific risks might be encountered or whether 

a mitigation strategy is warranted. These officials indicated that identifying 

such risks would be more appropriate during the planning for the 

subsequent award of contracts or issuance of task orders, when the 

program offices have more clearly defined their specific needs and 

requirements. 

In most cases, however, the military departments had prior knowledge 

about their expected use of contractors to provide such services. For 

example, all of the acquisition strategies and supporting documentation 

we reviewed justified the need to obtain contractor support to perform 

these functions due to a lack of government resources needed to meet 

daily mission requirements. These documents and contracting officials 

indicated that the offices supported by these acquisitions have long relied, 

in some cases for over a decade, on contractor support to augment the 

government workforce and perform tasks that closely support inherently 

governmental functions. For example, although the Professional 

Acquisition Support Services strategy that supports the Air Force’s 

Electronic Systems Center was approved in 2006, the center has 

contracted for similar acquisition support services continuously since 

1984. Likewise, the acquisition management services provided to the Air 

Force’s Air Combat Command through the Technical Acquisition 

Management Support 3 acquisition have been obtained through previous 

acquisitions dating back to 1989. Although officials stated that 

documentation explaining the need to contract for these services in the 

past was often unavailable, contracting officers and program officials 

indicated that reductions in government personnel have led to the 

 

23 FAR § 7.503(d). 

Page 12 GAO-10-39 Defense Acquisitions
 

increased use of contractors to perform activities government personnel 

would have performed in the past. 

Program and contracting officials stated that they would now prefer to use 

government personnel to perform these activities, but they noted the 

length of time it takes to hire federal employees and the lack of available 

personnel funds or positions necessitates them to use contractor support. 

Program and contract officials also informed us that the decision not to 

pursue additional federal employees instead of contractors was made by 

the supported programs before these officials became involved with the 

acquisition process. Further, they indicated they were not provided with 

the analyses used to support these decisions. We did not find any analysis 

or discussion of how these decisions were made in the acquisition 

strategies or supporting documentation submitted for the management 

review. 

Risks of Contractors 

Closely Supporting 

Inherently Governmental 

Functions Are Not 

Considered and 

Documented by DOD 

Personnel When Awarding 

Contracts or Issuing Task 

Orders 

According to DOD officials, personnel are not required to consider and 

document the risks associated with contractors closely supporting 

inherently governmental functions when awarding contracts or issuing 

task orders. Forty-nine of the 64 task orders we reviewed included 

services that, as described in the FAR, are examples of activities that 

closely support inherently governmental functions, including support for 

developing statements of work or contract documents; or budget 

preparation.24 Program managers and contracting officers we spoke with 

acknowledged that contractors closely supported inherently government 

functions, but none of the contract files identified them as such or 

indicated if any steps were taken to address related risks. 

The associated contract files for each of the task orders we reviewed 

included provisions specifically prohibiting the contractor from 

performing inherently governmental functions. Program managers and 

contracting officers informed us that they were aware of the importance of 

preventing contractors from performing inherently governmental 

functions as required by the FAR.25 These officials acknowledged that 

without contractor support, fulfilling mission requirements or conducting 

certain program activities could not continue and some recognized that 

the close working relationships that develop between government and 

 

24 FAR Subpart 7.5. 

25 FAR Subpart 7.5. 

Page 13 GAO-10-39 Defense Acquisitions
 

contractor support personnel increase the risks of contractors performing 

inherently governmental functions. To prevent contractors from 

performing such tasks, program and contracting officials indicated that 

they reviewed task order requirements to ensure that they are within the 

scope of the acquisition and do not require contractors to perform tasks 

that should be left only to government employees. Officials further stated 

that when developing performance work statements they emphasize that 

the contractors’ role is to provide assistance to the government rather than 

make program decisions. 

Program and contract personnel that we interviewed who were 

responsible for overseeing the work done under the task orders were 

unaware, however, of the FAR requirement to provide greater scrutiny and 

an enhanced degree of management oversight and surveillance when 

contracting for services that closely support inherently governmental 

functions.26 Additionally, federal internal control standards require that 

agencies conduct an assessment of risks, such as risks that result from 

heavy reliance on contractors to perform critical agency operations.27

According to DOD officials, however, no specific guidance has been 

provided by DOD that defines how contracting and program officials 

should conduct such enhanced oversight. DPAP officials noted that 

additional information on how to oversee contractors that closely support 

inherently governmental functions would be useful to the military 

departments, but acknowledged that they have no ongoing efforts do so. 

 

26 FAR Part 37.114 states that the government must provide greater scrutiny and enhanced 

oversight of contractor activities that closely support inherently governmental functions in 

order to ensure that contractors do not actually perform the inherently government 

functions and that government officials properly exercise their authority. OFPP Policy 

Letter 93-1 also requires that agency officials provide an enhanced degree of management 

controls and oversight when contracting for such services. 

27 GAO, Internal Control: Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999) supplemented by GAO, Internal 

Control Standards: Internal Control Management and Evaluation Tool, GAO-01-131G

(Washington, D.C.: February 2001). 

Page 14 GAO-10-39 Defense Acquisitions
 

In May 2009, DOD issued guidance28 in response to legislation requiring 

DOD to devise and implement guidelines and procedures to ensure that 

consideration is given to converting, or in-sourcing, functions currently 

performed by contractors to DOD civilian personnel.29 This in-sourcing 

guidance instructs DOD personnel to prioritize the conversion of any 

currently contracted services to DOD civilian performance if the functions: 

are valid and enduring mission requirements; are inherently governmental 

functions; are exempted functions;30 are unauthorized personal services; 

have problems with contract administration; or are services that require 

“special consideration” for in-sourcing. Under the law and the guidance, 

one of the categories of services that should be given “special 

consideration” for in-sourcing is services that closely support inherently 

governmental functions. 

Recent Guidance Requires 

DOD to Consider Using 

Civilian or Military 

Employees to Perform 

Activities That Closely 

Support Inherently 

Governmental Functions 

The May 2009 guidance also states that when making certain in-sourcing 

decisions, agency personnel should consult workforce management 

officials, as specified in DOD’s Guidance for Determining Workforce 

Mix.

31 This instruction requires DOD personnel to pay particular attention 

when contracting for activities that closely support inherently 

governmental functions. If an activity is so closely associated with an 

inherently governmental function that it cannot be separated or 

distinguished from it, the instruction requires that the function be 

identified as inherently governmental and precluded from private sector 

performance. This safeguard is intended to prevent the transferring of 

governmental authority, responsibility, or accountability to the private 

sector. However, neither the May 2009 in-sourcing guidance nor DOD’s 

Guidance for Determining Workforce Mix require DOD contracting and 

program personnel to identify, document, or mitigate risks posed when 

contractors will be relied on to closely support inherently governmental 

functions. 

 

28 Deputy Secretary of Defense, In-Sourcing Contracted Services—Implementation 

Guidance, May 28, 2009. 

29 Pub. L. No. 110-181, § 324. See 10 U.S.C. § 2463. 

30 Certain commercial functions are exempted from private sector performance by law, 

Executive Order, treaty, or international agreement and should be performed by DOD 

civilian or military personnel. 

31 Department of Defense Instruction 1100.22, Guidance for Determining Workforce Mix, 

April 6, 2007. 

Page 15 GAO-10-39 Defense Acquisitions
 

Further, under the May 2009 in-sourcing guidance, the conversion of 

services that require “special consideration” to government performance is 

to be based solely on cost and not risk; that is, these services may be insourced only if a cost analysis shows that performance by DOD civilian 

employees is more cost-effective. Officials from the Office of the Director 

for Cost Assessment and Program Evaluation32 stated that guidance for 

standardizing how these cost analyses should be performed was expected 

to be issued by December 2009. The May 2009 in-sourcing guidance also 

requires that when cost analyses indicate that the private sector is the 

more cost-effective provider of services, a written confirmation should be 

provided to contracting officers. Further, the guidance states that all 

documents leading to the decision to contract for such services should be 

retained in contract files. DPAP and military department officials stated 

that cost analyses are not required to be submitted in the documentation 

supporting management reviews. 

DOD faces challenges in defining requirements and outcome-based 

measures when using a performance-based approach to acquire 

professional and management support services. DOD personnel generally 

expressed task order requirements in terms of a broad range of services 

that the contractors might be required to perform and used a mix of 

objective and subjective measures to determine whether the contractor 

achieved assigned tasks within expected cost, schedule, and quality 

parameters. For example, 63 percent of the task orders that assessed 

contractor cost performance principally used objective performance 

measures, while two-thirds of the task orders that assessed the quality of 

contractor performance principally used subjective measures. We found 

objective measures generally provided more discrete information to assess 

contractor performance. In contrast, subjective measures, especially those 

to assess the quality of contractor work, tended to rely on customer 

feedback, such as the number of complaints lodged against the contractor. 

In several instances, DOD missed opportunities to include objective 

performance measures that may have been better suited to assess contract 

outcomes, in part because DOD personnel used the performance measures 

established in the base contract rather than attempt to measure the 

specific services being provided under the task order. DOD officials 

acknowledged there are challenges in developing measures that assess the 

DOD Faces 

Challenges In 

Implementing 

Performance-Based 

Practices on 

Professional and 

Management Support 

Task Orders 

 

32 This office was previously known as the Office of the Director for Program Analysis and 

Evaluation. 

Page 16 GAO-10-39 Defense Acquisitions
 

outcomes of professional and management support contracts and noted 

recent actions to improve existing guidance. 

FAR and DOD Guidance 

Established Preference for 

Performance-Based 

Services Acquisition 

In 2000, Congress established performance-based approaches as the 

preferred acquisition method for acquiring most services.33 Under the FAR, 

all performance-based acquisitions should include: 

• a performance work statement that describes outcome-oriented 

requirements in terms of results required rather than the methods of 

performance of the work; 

• measurable performance standards describing how to measure 

contractor performance in terms of quality, timeliness, and quantity; 

and 

• the method of assessing contract performance against performance 

standards, commonly accomplished through the use of a quality 

assurance surveillance plan.34

DOD issued its Guidebook for Performance-Based Services Acquisition 

in the Department of Defense in December 2000 to educate DOD 

personnel on, and promote the use of, performance-based practices. The 

guidebook suggests that personnel develop performance objectives that 

encompass at a top level all the tasks that must be completed to arrive at 

the desired outcome. The guidebook states that performance standards 

should be identified for the performance objectives so personnel will 

know if the desired outcome was satisfactorily achieved. It further states 

that determining an appropriate performance standard is a judgment call 

based on the needs of the mission and available expertise. DOD’s guidance 

also identifies that surveillance personnel may use various measures to 

assess the contractor’s performance, such as random or periodic sampling 

of the contractor’s work as well as customer feedback. The guidebook 

indicates, however, that customer feedback should be used prudently as it 

is subjective and does not always relate to the requirements of the 

contract. Lastly, the guidebook provides examples of performance 

objectives with corresponding standards and measures for various 

 

33 Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001, Pub. L. No. 

106-398, § 821(a) (2000), required that the FAR be revised to establish a preference for the 

use of a performance-based approach in the acquisition of services. The requirement was 

implemented in FAR § 37.102(a). 

34 FAR Subpart 37.6. 

Page 17 GAO-10-39 Defense Acquisitions
 

services and activities, but not specifically for professional and 

management support services (see table 3). 

Table 3: Examples of Performance Requirements in DOD’s Guidebook for Performance-Based Services Acquisition in the 

Department of Defense

Type of service Performance objective Performance standard Assessment methods 

Call center 

operations 

Maintain all equipment and materials. Equipment failures, non-availability, or 

maintenance shall not interfere with 

operations for more than x minutes during 

a month (day, etc.). 

Random inspection; audit or 

review by third party 

Call center 

operations 

Assure customers are satisfied with 

quality of service. 

At least x percent of customers contacted 

must be satisfied with service. 

Review and validate 

customer surveys; conduct 

independent surveys 

Reporting to the 

government 

Deliver required reports. No more than x (or x percent) of the 

reports to appropriate government contact 

may be later than the specified time 

period. 

Review reports and logs 

Satellite control 

center service 

Conduct an effective position 

certification program to ensure 

qualified personnel are provided for 

orbital analysis. 

95 percent of personnel certified within x 

timelines per year. 

Not specified 

Source: DOD’s Guidebook for Performance-Based Services Acquisition in the Department of Defense, 2000. 

Performance Standards 

and Measures Were Not 

Always Well Suited to 

Assess the Outcomes of 

the Broad Range of 

Contracted Services 

While DOD identified as performance-based all but one of the task orders 

we reviewed, we found that almost all of the task orders had broadly 

defined requirements that listed various categories of services and related 

activities the contractor may be required to perform over the course of the 

order rather than expected results. The task orders we reviewed were 

issued from base contracts that identified the categories of support 

services a contractor may be required to perform. The task orders then 

identified a broad range of activities that the contractor may be required to 

perform based on the customer program office’s needs. For example, the 

base contract for one task order identified four different categories of 

support services: acquisition, financial management, contracting, and 

administrative and human resources support. In turn, the task order 

identified several activities the contractor could perform, such as 

preparing acquisition-related documents, updating commanders on 

policies and procedures, tracking and analyzing funds, maintaining 

contract files, and preparing travel orders. 

DOD generally grouped contractor performance into a number of different 

performance objectives, including cost, schedule, and quality, and set 

standards that the contractor had to meet. These performance objectives 

Page 18 GAO-10-39 Defense Acquisitions
 

required the contractor to, among other things, maintain control of costs 

by completing work within an acceptable range of projected costs, adhere 

to the government’s schedule by delivering products on time, and provide 

the government with high-quality work products. DOD personnel used a 

mix of objective and subjective measures to assess the contractors’ 

performance against the cost, schedule, and quality standards in 54 of the 

64 task orders we reviewed; not all task orders established performance 

measures in all three categories (see table 4). The measures used varied 

depending on the area of performance assessed. For example, 63 percent 

of the task orders that assessed the contractor’s cost performance 

principally used objective performance measures, while two-thirds of the 

task orders that assessed the quality of the contractor’s performance 

principally used subjective measures. 

Table 4: Principal Measures Used to Assess Selected Performance Objectives 

Performance objective 

Performance standard 

measured objectively

Performance standard 

measured subjectively

Performance objective not 

included or assesseda

Maintain cost control 34 20 10

Meet schedule requirements 29 25 10

Provide high-quality services 20 40 4

Source: GAO analysis of 64 selected task orders. 

a

In lieu of measuring cost, schedule, or performance, contractors were assessed in such areas as 

maintaining good business relations with the government and how well the contractor retained and 

replaced its personnel. 

We found that the objective performance measures yielded better 

information on how well the contractor met desired cost and schedule 

contract outcomes than subjective measures. For example, the objective 

performance standards in one task order required the contractor to remain 

within projected costs and perform tasks within schedule 97 percent of the 

time. In this instance, the surveillance personnel maintained a database of 

the contractor’s cost and periodically contacted customers to identify if 

the contractor’s work was completed on time. The other task orders that 

included cost and schedule performance standards were assessed 

subjectively, based on the number of complaints lodged against the 

contractor. According to task order documentation and surveillance 

personnel we spoke with, a customer complaint is generated when a 

contractor fails to meet performance requirements. Ten of these task 

orders required the contractor to provide accurate cost forecasts and 

accomplish tasks with minimum delay to program mission objectives. 

None of these task orders, however, identified what would constitute a 

level of performance that would result in a valid customer complaint. 

Page 19 GAO-10-39 Defense Acquisitions
 

Contractor performance documentation we reviewed for these task orders 

indicated that DOD assessed the contractor as having met performance 

requirements, but provided little to no information on what the contractor 

accomplished. 

Both the subjective and objective performance measures used to assess 

the quality of the contractors’ services provided little insight into the 

outcomes of the contractors’ work. DOD personnel relied on subjective 

measures to assess the quality of contractor services provided in 40 of the 

64 task orders we reviewed. For example, 30 of these tasks orders directed 

surveillance personnel to assess quality based on the number of customer 

complaints a contractor received. Surveillance personnel we spoke with 

indicated that they regularly contacted government customers to inquire 

about their overall satisfaction with the contractor’s performance. Some 

surveillance personnel explained that it was difficult to determine if the 

contractor met or exceeded performance standards because guidance on 

making these determinations was not available. Consequently, they 

generally documented the contractor’s performance as acceptable if the 

customer said they were satisfied with the contractor’s performance. We 

found that when the contractor’s performance was rated as meeting 

requirements, surveillance personnel documented little detail about the 

quality of the contractor’s work because such descriptions were often 

required only when the contractor either exceeded or did not meet 

expectations. In another 10 task orders involving the purchase of 

engineering, technical, business, and acquisition support services, such as 

helping to identify the program office’s contracting requirements and 

assisting with developing requests for proposals and statements of work to 

fill those requirements, quality performance standards required the 

contractor to complete task order activities with little rework and with 

few minor and no significant problems at least 80 percent of the time. 

According to the documentation we reviewed, surveillance personnel 

indicated they periodically sampled the contractor’s work to verify the 

percentage that was redone and often rated the quality of the work as 

exceptional because little rework was reported. 

On four task orders for translation services in Afghanistan, Cuba, and 

other areas, DOD personnel did not attempt to measure the quality of the 

contractor’s services. In these cases, the task orders’ requirements 

included that the contractor deploy translators in response to mission 

requirements. The corresponding performance standard required the 

Page 20 GAO-10-39 Defense Acquisitions
 

contractor to meet staffing requirements35 no less than 95 percent of the 

time, which was measured and documented by surveillance personnel. 

The task orders, however, did not include a performance objective for 

obtaining high-quality translation services. Contracting and program 

officials explained that they did not try to measure the quality of the 

translations provided because DOD lacks the personnel with translation 

skills necessary to make such an assessment. These officials stated that 

ensuring qualified personnel are provided in a timely manner is the best 

alternative to determining if the translations provided are of high quality. 

The military departments may have missed opportunities to include and 

use objective performance measures that were better suited to assess 

contract outcomes in several of the task orders we reviewed. In part, this 

occurred because DOD personnel used the general performance measures 

that were established in the base contract rather than develop measures 

that were tailored for the specific work required in the task orders in more 

than 80 percent of the task orders we reviewed. Consequently, in each of 

the following examples, the quality of the contractor’s performance was 

measured based on the number of validated complaints submitted by 

government personnel. 

• Four task orders issued for acquisition, financial management, 

contracting, and administrative support required contractors to 

indicate at the end of each contract year at least two lessons learned, 

best practices, or improvements it made to the government’s processes 

in areas including acquisition and program management. The 

requirements did not, however, identify at the outset of the task order 

the type or extent of the improvements that DOD desired, such as 

reductions in the time required to complete activities or costs savings. 

• In a $1.8 million task order for information and project management 

support, the contractor was required to identify and reduce the 

government’s unliquidated obligations by 25 percent in 6 months and 

by 50 percent in a year when measured against an identified baseline. 

Nevertheless, the task order did not include any performance 

measures that were directly related to whether the contractor met the 

reduction targets. The official responsible for assessing the 

 

35 According to the performance standards in the task orders we reviewed, translators were 

to arrive at a designated place of duty with all required documentation, equipment, training, 

logistical support, and information required to begin work not later than the time and date 

specified on movement and deployment orders. 

Page 21 GAO-10-39 Defense Acquisitions
 

contractor’s performance noted, however, that he considered the 

contractor’s efforts to reduce unliquidated obligations when he 

assessed the contractor’s performance. 

• In four other task orders for acquisition and information management 

support, the contractor was required to review technical proposals and 

validate prices submitted by other contractors and make 

recommendations on the acceptance or rejection of these proposals as 

part of the support it provided to the program office’s pre-award 

activities. The task orders, however, did not include objective 

performance measures to assess the contractor’s performance, such as 

whether the contracting officer returned the contractor’s work to 

correct deficiencies or whether the reviews resulted in reducing the 

government’s costs. 

DOD Officials Identified 

Challenges in Developing 

Objective, OutcomeOriented Measures 

Our previous work at the Department of Homeland Security noted that 

defining outcome-oriented requirements and measurable performance 

standards may be challenging for professional and management support 

services.36 We found similar concerns expressed by the DOD contracting, 

program, and surveillance officials we interviewed. These officials 

acknowledged that they find it difficult to identify and objectively measure 

the outcomes of professional and management support services contracts 

due to the broad range of support provided. They stated that these task 

orders encompassed a range of activities which, while not inherently 

governmental, would typically be performed by federal employees. 

Consequently, officials stated the performance work statements needed to 

be written broadly to provide the flexibility to obtain specific support as 

needed and that contractors were often viewed as simply augmenting the 

government’s workforce. Further, these officials noted that it was often 

not practical to measure the work contractors performed and that 

subjective measures, such as the number of customer complaints received, 

are frequently used as an alternative to assess whether the contractor met 

the government’s requirements. As a result, they generally considered the 

outcome of these task orders to be obtaining qualified people rather than a 

specific result the contractor was required to achieve. 

 

36 GAO, Department of Homeland Security: Better Planning and Assessment Needed to 

Improve Outcomes for Complex Service Acquisitions, GAO-08-263 (Washington, D.C.: Apr. 

22, 2008). 

Page 22 GAO-10-39 Defense Acquisitions
 

To address the challenges of developing performance-based requirements 

and measures for professional and management support, a Defense 

Acquisition University (DAU) official noted that DAU was reviewing 

performance work statements and surveillance plans from professional 

and management support contracts across DOD to identify good examples 

of outcome-based performance objectives, standards, and measures. DAU 

plans to launch a Web site in January 2010 that includes templates derived 

from these examples for contracting and program officials across DOD to 

tailor to their own needs. Additionally, this official noted that since 

January 2009, DAU has offered a 4-day services acquisition workshop 

tailored to individual acquisitions developed by program offices across 

DOD. According to the DAU official, the workshop brings together key 

acquisition personnel, from contracting officers to customers, to support 

the development of new acquisition strategies before they are reviewed by 

the military departments. The official added that by the end of the 

workshop, the requiring activity has a draft performance work statement 

and a quality assurance surveillance plan that meets performance-based 

requirements. 

DOD’s efforts to ensure that trained surveillance personnel are assigned to 

monitor contractor performance on services contracts have shown 

progress, though on a number of task orders personnel were not always 

designated or trained in a timely fashion. Surveillance personnel are 

required to be qualified by training and designated in writing.37 In response 

to our and inspector general reports on continued shortcomings in DOD’s 

contract surveillance practices,38 DOD issued guidance on December 6, 

2006, requiring that surveillance personnel be properly trained and 

designated before contract performance begins, and that properly trained 

surveillance personnel are identified on active contracts for services.39

DOD Efforts to 

Designate Trained 

Surveillance 

Personnel Show 

Progress, but 

Concerns Remain 

 

37 DFARS Subpart 201.6 requires that a contracting officer’s representative (COR) be 

qualified by training and experience commensurate with the responsibilities delegated and 

the COR designation must be in writing. Senior DOD officials stated that when DOD 

regulations use the term “COR”, that such policy applies to all surveillance personnel 

throughout DOD. 

38 For example, in 2005, we found that DOD’s surveillance personnel were not designated 

on 15 of the 90 services contracts reviewed, and that 13 of the 104 surveillance personnel 

did not receive the required training before beginning their assignments. See GAO-05-274. 

39 Office of the Secretary of Defense, Designation of Contracting Officer’s Representatives 

on Contracts for Services in Support of Department of Defense Requirements (Dec. 6, 

2006). 

Page 23 GAO-10-39 Defense Acquisitions
 

At the time of our review, trained surveillance personnel were designated 

to all 64 task orders. DOD personnel responsible for five of the seven 

acquisitions we reviewed, however, did not maintain documentation on all 

surveillance personnel assigned over the task orders’ entire period of 

performance. DOD officials stated that in some cases additional personnel 

may have been designated to the task orders, and that some personnel 

may have received surveillance training on a date earlier than was 

indicated in the contract files, but were unable to provide documentation. 

In most cases, DOD was able to provide documentation of the first person 

designated to conduct surveillance and the person assigned at the time of 

our review. On the basis of this information, we found that surveillance 

personnel were designated after contract performance began on 3 of the 

37 task orders awarded after the issuance of the December 2006 

guidance.40 In 1 of these 3 cases, the person was designated more than 90 

days after performance began on the task order. 

We also found that 61 of the 64 surveillance personnel designated on the 

task orders we reviewed had received training. For 1 of the 3 instances 

where personnel were not trained, a program official explained that the 

person was recently assigned and had been notified of the training 

requirements, but had not completed the training. In the 2 other instances, 

DOD officials were not able to identify a reason for the lack of training. 

For the 61 task orders with trained personnel assigned, 20 personnel had 

not received training prior to beginning their assignments. Furthermore, in 

3 of these cases, surveillance personnel did not receive the required 

training until at least a year after they were assigned to monitor a 

contractor’s performance. 

The training that surveillance personnel received varied across and within 

the military departments, ranging in duration from 2 hours to 1 week, and 

included, among other things, reviewing training slides, completing an online course offered through DAU’s Web site, and completing an in-class 

course tailored by the program office responsible for the acquisition. 

There are no DOD-wide requirements for the content of surveillance 

training and personnel we spoke with provided mixed feedback on how 

well their training prepared them to conduct surveillance. Surveillance 

 

40 We found that 7 of the 27 task orders that were issued prior to the issuance of the 

December 2006 guidance also lacked designated surveillance personnel before work was to 

begin. 

Page 24 GAO-10-39 Defense Acquisitions
 

personnel noted that training provided an adequate basis for conducting 

their duties, but did not always provide enough instruction on how to 

effectively oversee contractors, especially for those who had little to no 

previous experience with assessing contractor performance. Several 

personnel stated that the most useful information that training provided 

was the contact information for personnel in the contracting offices that 

surveillance personnel could speak with if they had questions. DPAP 

officials acknowledged that the type and content of the training 

surveillance personnel receive varied and indicated that DOD is 

considering a certification system for these personnel that may include 

both training and experience requirements. 

Surveillance personnel identified a number of challenges that may affect 

their surveillance duties, such as numerous contractors to oversee in 

multiple locations and surveillance responsibilities being secondary to 

primary duties. For example, on one task order for translation services in 

Afghanistan, surveillance personnel were each responsible for monitoring 

over 1,000 contractors dispersed throughout the country. An official who 

oversaw this task order stated the ratio of surveillance personnel to 

contractors was so large that it affected the government’s ability to assess 

contractor performance.41 For a task order for translation services in 

Cuba, the contracting officer’s letter of designation to the contracting 

officer’s representative stressed the importance of on-site surve

Nevertheless, we found that there was an 8-month period during which 

surveillance personnel were absent from the site of contractor 

performance. Despite the absence of on-site surveillance personnel, 

contracting officials determined that the contractor should receive the full 

award fee based upon performance reports submitted before and after this 

8-month period. Several personnel from other commands we visited told 

us they did not have sufficient time to focus on their surveillance 

responsibilities in addition to their primary duties. Finally, surveillance 

personnel at many of the commands we visited stated that they were 

unaware of requirements to provide enhanced oversight of contractors 

that closely support inherently governmental functions. 

illance. 

 

41 We and the DOD Inspector General have previously reported on the challenges in 

providing contract oversight during contingency operations. See GAO, Military 

Operations: DOD Needs to Address Contract Oversight and Quality Assurance Issues for 

Contracts Used to Support Contingency Operations, GAO-08-1087 (Washington, D.C.: Sept. 

26, 2008) and Office of the Inspector General, Department of Defense, Logistics Support 

Contracting for the United States Special Operations Command, D-2009-083 (May 28, 

2009). 

Page 25 GAO-10-39 Defense Acquisitions
 

DOD is in the process of implementing additional processes to review 

services contracts both prior to and after contract award, which may 

provide additional insight into DOD’s management and oversight of 

professional and management support contracts. These reviews are 

intended to assess a number of issues that are not currently addressed by 

DOD’s management review, including contractors that closely support 

inherently governmental functions, implementation of performance-based 

practices, and proper surveillance of contractors. 

Recent Initiative May 

Improve DOD’s 

Insight into Issues 

Affecting Professional 

and Management 

Support Contracts 

The National Defense Authorization Act for Fiscal Year 2008 required DOD 

to issue guidance to implement an independent management review of 

services contracts.42 In response, the Director of DPAP issued 

memorandums in September 2008 outlining pre- and post-award peer 

reviews and in February 2009 detailing criteria for the peer reviews for 

services acquisitions with estimated values of $1 billion or more, 

consistent with the threshold for reviewing proposed services 

acquisitions.43 To do so, DOD convenes peer review teams that consist of 

senior contracting leaders from across DOD as well as legal counsel to 

work closely with the offices responsible for developing acquisition 

strategies. This policy also required the military departments to establish 

their own procedures to conduct peer reviews for service acquisitions 

valued at less than $1 billion. As of October 2009, DPAP conducted 48 preaward peer reviews on 31 different proposed supplies and services 

acquisitions. DPAP also conducted three post-award reviews on approved 

and ongoing services acquisitions, which included a review of task order 

documents. Of the 51 reviews conducted by DPAP, four pre-award reviews 

and one post-award review were conducted on three different professional 

and management support services acquisitions.44

The peer review process differs from DOD’s management reviews in a 

number of areas that may provide opportunities for the department to 

address key aspects of managing and overseeing professional and 

 

42 Pub. L. No. 110-181, § 808. The Act also requires GAO to report on DOD’s implementation 

guidance, which we will do under a separate engagement. 

43 Office of the Under Secretary of Defense, Peer Reviews of Contracts for Supplies and 

Services (Sept. 29, 2008) and Office of the Under Secretary of Defense, Review Criteria for 

the Acquisition of Services (Feb. 18, 2009). 

44 As of October 2009, the Air Force and Navy have established policies for conducting preand post-award peer reviews. The Army has established policies for conducting pre-award 

peer reviews but has not yet done so for post-award peer reviews. 

Page 26 GAO-10-39 Defense Acquisitions
 

management support contracts. Whereas the premise of the management 

review is to assess and approve proposed acquisition strategies, the peer 

reviews are conducted after strategies have been approved and are 

intended to be advisory in nature. Peer reviews are designed to help: 

• ensure that contracting officers across DOD implement policy and 

regulations in a consistent and appropriate manner; 

• improve the quality of DOD’s contracting processes; and 

• facilitate cross-sharing of best practices and lessons learned. 

Currently, a peer review team summarizes the results of its review in a 

memorandum provided to both the contracting office responsible for the 

acquisition and DPAP. According to DPAP officials, DOD is still 

determining how to share best practices and lessons learned from these 

reviews with the department’s acquisition community. 

While both the peer reviews and the management reviews contain preaward components, the multiple phases of the peer reviews provide DOD 

the opportunity to address additional issues and examine documents not 

available during the management review (see fig. 1). For example, the preaward management review of proposed services acquisitions occurs 

before performance work statements and quality assurance surveillance 

plans are developed. As a result, the management reviews do not include 

an assessment of how performance-based practices are implemented and 

whether proper contractor surveillance is conducted. Further, as 

previously noted, DOD’s management review guidance does not require 

department personnel to identify whether the services to be provided 

closely support inherently governmental functions or how the risks 

associated with contractors providing such services will be addressed. In 

contrast, the pre-award peer reviews occur later in the acquisition cycle 

and include the review of additional documents that may provide 

reviewers an opportunity to recommend improvements to performance 

work statements and surveillance plans. 

Page 27 GAO-10-39 Defense Acquisitions
 

Figure 1: Comparison of DPAP’s Peer Reviews and Management Reviews for Services Acquisitions for Acquisitions 

Estimated to be Valued at $1 Billion or More 

Milestones

for services

acquisition

Peer review:

Acquisition strategy 

review and approval

Documents typically 

reviewed: draft acquisition 

strategy, instructions for 

proposals, and proposal 

evaluation criteria

Phase 1: Prior to 

issuance of the 

solicitation

Documents typically 

reviewed: performance 

work statement, quality 

assurance surveillance 

plan, request for 

proposal, and source 

selection plan

Phase 3: Prior to 

contract award 

Documents typically 

reviewed: proposal 

analysis report

and selection 

decision document

Phase 4: 

Post-award review

Documents

typically reviewed: 

any documentation 

related to the 

program, such as

task orders, award 

fee plan, and 

performance 

assessments

Phase 2: Prior to 

request for final 

proposal revisions

Documents typically 

reviewed: instructions

for proposals and 

proposal evaluation 

criteria, source 

selection evaluation 

guide, source selection 

plan, and evaluations of 

contractor proposals

One year after 

contract award Contract awarded Final request for 

proposals issued Solicitation issued Development of acquisition 

strategy and supporting 

documentation begins

Management 

review:

Source: GAO analysis of DOD policy and guidance.

Milestones

for services

acquisition

Peer review:

Acquisition strategy 

review and approval

Documents typically 

reviewed: draft acquisition 

strategy, instructions for 

proposals, and proposal 

evaluation criteria

Phase 1: Prior to 

issuance of the 

solicitation

Documents typically 

reviewed: performance 

work statement, quality 

assurance surveillance 

plan, request for 

proposal, and source 

selection plan

Phase 3: Prior to 

contract award 

Documents typically 

reviewed: proposal 

analysis report

and selection 

decision document

Phase 4: 

Post-award review

Documents

typically reviewed: 

any documentation 

related to the 

program, such as

task orders, award 

fee plan, and 

performance 

assessments

Phase 2: Prior to 

request for final 

proposal revisions

Documents typically 

reviewed: instructions

for proposals and 

proposal evaluation 

criteria, source 

selection evaluation 

guide, source selection 

plan, and evaluations of 

contractor proposals

One year after 

contract award Contract awarded Final request for 

proposals issued Solicitation issued Development of acquisition 

strategy and supporting 

documentation begins

Management 

review:

Source: GAO analysis of DOD policy and guidance.

Additionally, the peer review process provides for a post-award phase for 

services that expands upon the management review requirements. The 

post-award peer review has eight metrics that provide criteria that 

reviewers use to evaluate ongoing acquisitions in terms of how contractor 

performance is assessed, including the use of objective criteria; whether 

surveillance personnel are appropriately staffed; and the extent of reliance 

on contractors to perform tasks closely associated with inherently 

government functions. Table 5 shows the various areas of focus of the 

peer reviews. 

Page 28 GAO-10-39 Defense Acquisitions
 

Table 5: Focus Areas of the Peer Review Process 

 Before contract award After contract award 

• Clearly defined requirements 

• Contractors performing functions closely associated with 

inherently governmental functions 

• Contractor conflicts of interest 

• Utilization of performance-based characteristics 

• Contract surveillance 

• Contractor cost, schedule, and performance assessments 

• Maintaining competition 

• Contractor’s management of subcontractors 

• Contract surveillance 

• Pass-through chargesa

• Contractors performing certain functions closely associated 

with inherently governmental functions 

• Contractor conflicts of interest 

• Objective criteria for contracts with award or incentive fee 

Source: GAO analysis based on DOD policy. 

a

Pass-through charges are contractor charges for the costs associated with subcontracting work. 

Our review of the summary memoranda for the five peer reviews 

conducted on professional and management support contracts found that 

while the memoranda generally focused on business aspects, some 

memoranda made recommendations related to performance-based 

approaches and surveillance issues specific to the individual acquisition. 

For example, a pre-award peer review team recommended that the 

contracting office work with DAU to develop performance-based 

statements of work. The peer review team for the one post-award review 

recommended that the program office identify objective performance 

measures and present them to the contractor. Another pre-award peer 

review team recommended that the contracting office appoint surveillance 

personnel prior to the award of a contract. None of the memoranda we 

reviewed noted issues with contractors closely supporting inherently 

governmental functions. DOD officials stated that these issues were 

discussed, but that none appeared to warrant inclusion in the memoranda. 

While DPAP has completed peer reviews on 34 individual supplies and 

services acquisitions since September 2008, developing an approach that 

will lead to the achievement of the peer review’s objectives enterprisewide 

may prove challenging given the nature and volume of service contract 

activity. Nearly 1,900 task orders were issued under the seven professional 

and management support services acquisitions we reviewed, all of which 

required a contractor to perform multiple and varying tasks. Furthermore, 

we identified thousands of individual task orders associated with the 

professional and management support services acquisition strategies 

approved by the military departments from fiscal years 2004 through 2007, 

all of which require management and oversight by the department. These 

numbers are even greater when looking at all services acquisition 

Page 29 GAO-10-39 Defense Acquisitions
 

strategies approved by the military departments in that same time period 

(see table 6). 

Table 6: Award of Contracts and Issuance of Task Orders from Fiscal Years 2004 through 2008 Subsequent to the Military 

Departments’ Approval of Acquisition Strategies 

Type of contract 

Acquisitions 

approveda

Base

contracts awarded

Task

orders issued

Total 

obligations

Professional and management support 

servicesb

 

32 192 8,817 $15.0 billion

All services 91c 361 13,650 $27.3 billion

Source: GAO analysis of DOD contract data reported in the Federal Procurement Data System–Next Generation. 

a

These acquisitions were approved by DOD during fiscal years 2004 through 2007. 

b

Other services may have been purchased in these contracts and tasks orders. 

c

An additional 11 acquisitions were approved during fiscal years 2004 through 2007, but had not 

awarded any contracts during the period covered by our review. 

DOD’s reliance upon contractor-provided professional, administrative, and 

management services to support its missions makes effective management 

and oversight of these contracts critical. Certain activities such as budget 

preparation, acquisition planning, and policy development can create risks 

that the government needs to consider and effectively manage. Of key 

concern is the loss of government control over and accountability for 

policy and program decisions. Nevertheless, DOD’s policies do not require 

that DOD personnel include an assessment of these risks when their 

proposals for contractor support are submitted for approval under DOD’s 

management review process. While recent legislation and DOD’s 

implementing guidance require that DOD consider whether to continue the 

use of contractors for critical services, including conducting a cost 

analysis if the situation warrants, these determinations and analyses are 

largely disconnected from the acquisition review process. Consequently, 

senior DOD leadership does not have the benefit of such analyses when 

making strategic decisions on obtaining long-term, high-dollar-value 

professional and management support. 

Conclusions 

Similarly, key decisions at the transactional level— such as to award a 

contract or to issue a task order—are made with the recognition that DOD 

is dependent on contractors to support its missions and operations. 

Despite this dependency, DOD officials generally did not consider whether 

contractors may be unduly or inappropriately influencing government 

decision making. Further, while these services were often acquired 

through performance-based approaches, such efforts were hindered by 

Page 30 GAO-10-39 Defense Acquisitions
 

DOD’s use of broad statements of work and the use of performance 

measures established in the base contract rather than attempting to 

measure the specific services being provided under the task order. Within 

DOD’s acquisition community, there is widespread recognition that 

developing outcome-oriented measures is particularly difficult for 

professional and management support contracts. DOD has efforts under 

way to help develop better outcome-oriented measures for professional 

and management support contracts, but it is too soon to know whether 

this effort will prove successful. Perhaps the most critical tool in assessing 

contractor performance is having properly trained personnel in sufficient 

numbers to effectively monitor contractor performance. While 

improvements were evident, lapses in designating such personnel, in 

particular during the initial stages of the contract, continue to expose DOD 

to an increased risk of poor contractor performance. 

DOD consideration, at both the strategic and transactional levels, of the 

risks of using contractors to closely support inherently governmental 

functions can help improve the context for successful professional and 

management support outcomes. DOD’s peer review process is beginning 

to assess this issue just prior to and then after contract award, but with 

only a handful of reviews performed on such contracts, it is too early to 

gauge whether the process will be successful in encouraging DOD 

personnel to address these issues across the range of DOD’s services 

contracts. Having similar information provided at a level of detail 

appropriate for when senior DOD and military department leadership 

review proposed acquisition strategies would inform decision makers and 

engender more proactive consideration earlier in the acquisition cycle. As 

DOD gets closer to awarding contracts or issuing task orders for specific 

services, risks move from potential to the more tangible. Reducing the 

possibility that DOD would enter into a contractual arrangement that 

exposes it to unintentional and undesired consequences requires that DOD 

personnel consider—based on the facts and circumstances of a particular 

acquisition—whether such risks are present and, if so, how best to 

mitigate them. The fact that DOD program and contracting personnel we 

contacted were generally unaware of the long-standing requirement to 

provide greater scrutiny and enhanced oversight on services closely 

supporting inherently governmental functions underscores the need to 

address these problems at multiple levels and manners. 

Page 31 GAO-10-39 Defense Acquisitions
 

To better inform acquisition decisions, assist DOD personnel in 

performing their management oversight responsibilities, and improve 

DOD’s surveillance of services contracts, we recommend that the 

Secretary of Defense take the following four actions: 

• revise documentation requirements for DOD’s current management 

review to include information on the extent to which services to be 

provided will closely support inherently governmental functions as 

well as the consideration given to using DOD civilian employees to 

perform such functions; 

• require before the award of any contract or issuance of task order for 

services closely supporting inherently governmental functions that 

program and contracting officials consider and document their 

assessment of the unique risks of these services and the steps that 

have been taken to mitigate such risks; 

• develop guidance to identify approaches that DOD should take to 

enhance management oversight when contractors provide services 

that closely support inherently governmental functions; and 

• direct the military departments to review their procedures to ensure 

that properly trained surveillance personnel have been assigned prior 

to and throughout a contract’s period of performance. 

Recommendations for 

Executive Action 

DOD provided written comments on a draft of this report. DOD concurred 

with the four recommendations and also identified a number of actions 

that would be taken to address them. DOD acknowledged the need to 

continually refine its policies and procedures regarding the management 

of support contracts. DOD noted that while it intended to decrease 

funding for contracted support and scale back the use of contractors, DOD 

will continue to rely on service contracts to support its mission, making 

the effective management of professional, administrative, and 

management support contracts critical. DOD also provided technical 

comments, which were incorporated as appropriate. DOD’s comments are 

reprinted in appendix III. 

Agency Comments 

and Our Evaluation 

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

Secretaries of the Air Force, Army, and Navy; the Administrator of the 

Office of Federal Procurement Policy; and interested congressional 

committees. In addition, the report will be made available at no charge on 

GAO’s Web site at http://www.gao.gov. 

Page 32 GAO-10-39 Defense Acquisitions
 

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

contact me at (202) 512-4841. 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 major contributions to this report are 

John P. Hutton 

listed in appendix III. 

Director 

Acquisition and Sourcing Management 

Page 33 GAO-10-39 Defense Acquisitions
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

To determine whether the Department of Defense’s (DOD) policies and 

actions to improve its management of services contracts addressed issues 

affecting professional and management support contracts, we examined 

(1) the extent to which DOD considered the risks associated with 

contractors closely supporting inherently governmental functions at key 

acquisition decision points;(2) how DOD was implementing performancebased acquisitions practices, such as identifying requirements in terms of 

expected and measurable outcomes; (3) the extent to which DOD 

designated trained surveillance personnel; and (4) whether recent actions 

to implement a peer review process may improve DOD’s management and 

use of such contracts. 

To assess the extent to which DOD considered the risks associated with 

contractors closely supporting inherently governmental functions at key 

acquisition decision points, we reviewed relevant provisions of the 

National Defense Authorization Acts for fiscal years 2002 through 2009 

that pertained to DOD’s acquisition of services. We also reviewed guidance 

issued by DOD in May 2002 and October 2006, as well as DOD Instruction 

5000.02, Operation of the Defense Acquisition System, reissued in 

December 2008, which collectively established DOD’s management review 

processes to identify the risks that should be considered during these 

reviews. Further, we reviewed Office of Federal Procurement Policy Letter 

93-1, Management and Oversight of Service Contracting and Federal 

Acquisition Regulation (FAR) requirements for the management and 

oversight of contractors that closely support inherently governmental 

functions. We also reviewed DOD Instruction 1100.22, Guidance for 

Determining Workforce Mix and DOD’s May 2009 in-sourcing guidance, 

In-Sourcing Contracted Services—Implementation Guidance, to 

determine how personnel should consider and document the risks of 

contractors performing activities that closely support inherently 

governmental functions and assess the appropriate mix of DOD civilian, 

military, and contractor personnel. We interviewed representatives from 

the Office of Defense Procurement and Acquisition Policy (DPAP), and 

representatives from each of the military departments that are responsible 

for implementing these policies, guidance, and reviews to identify how 

these risks are accounted for prior to approval of the proposed acquisition 

strategy. 

To assess how these risks were addressed under DOD’s management 

review for specific services acquisitions, we reviewed a DOD-provided list 

of 102 services acquisition strategies that were reviewed and approved by 

the Air Force, Army, or Navy from fiscal years 2004 through 2007. We 

obtained information from the military departments on the contracts that 

Page 34 GAO-10-39 Defense Acquisitions 
Appendix I: Scope and Methodology 

had been awarded after these 102 strategies had been approved. Using this 

information and data derived from the Federal Procurement Data System–

Next Generation,1

 we determined that the military departments had 

awarded 361 contracts and issued 13,650 task orders from these 102 

acquisitions during fiscal years 2004 through 2007. We then identified 

product service codes associated with these contracts and used the 

Federal Procurement Data System–Next Generation to determine the 

number of contract actions and obligations for professional and 

management support services. We found that 32 of these acquisitions, with 

almost $15 billion in total combined obligations from fiscal years 2004 

through 2008, included contracts for professional and management 

support. From these 32 acquisitions, we selected 7 acquisitions based on 

such factors as the percentage of obligations that were made for 

professional and management support services, the specific types of 

services acquired, and the agency awarding the contract.2

 The 7 

acquisitions we selected had over $4.3 billion in total combined obligations 

from fiscal years 2004 through 2008 (see table 7 for more information on 

these acquisitions). 

 

1

 Federal Procurement Data System–Next Generation is the federal government’s current 

system for tracking information on contracting actions. 

2

 We used the following product service codes in the Federal Procurement Data System–

Next Generation to identify acquisitions for professional, administrative, and management 

support services: R408 for Program Management/Support Services; R706 for Management 

Services/Logistics Support; R707 for Management Services/Contract and Procurement 

Support; R425 for Engineering and Technical Services; R799 for Other Management 

Support Services; and AD25 for Services (Operational). 

Page 35 GAO-10-39 Defense Acquisitions
Appendix I: Scope and Methodology 

Table 7: Reviewed Services Acquisitions and Total Task Orders Issued and Obligations from Fiscal Year 2004 through 2008 

Services acquisition 

(year approved) and supported command 

Total

task orders

Total 

obligations

Total 

number of task 

orders revieweda

Total

obligations for task

orders reviewed

Consolidated Acquisition of Professional 

Services (2005) 

Air Force, Aeronautical Systems Center, 

Wright-Patterson Air Force Base, Ohio 

317 $290,059,894 10 $19,129,251

Global Engineering Integration and Technical 

Assistance 5 (2004) 

Air Force, Center for Engineering and the 

Environment, Brooks City Air Force Base, 

Texas 

974 377,343,260 10 12,786,624

Professional Acquisition Support Services 

(2006) 

Air Force, Electronic Systems Center, 

Hanscom Air Force Base, Massachusetts 

48 167,184,450 10 19,147,786

Technical and Acquisition Management 

Support 3 (2004) 

Air Force, Material Command, Eglin Air Force 

Base, Florida 

75b

97,136,450 10b32,889,624

AMCOM Express (2003) 

Army, Aviation and Missile Command, 

Redstone Arsenal Army Base, Alabama 

272 2,468,630,948 10 121,247,457

INSCOM Linguistics [Part 2] (2006) 

Army, Intelligence and Security Command, 

Fort Belvoir, Virginia 

66 826,095,932 4c

247,618,693

Systems Engineering and Technical 

Assistance (2005) 

Navy, Space and Naval Warfare Systems 

Center, New Orleans, Louisiana 

122 83,440,664 10 11,959,827

Total 1,874 $4,309,891,598 64 $464,779,262

Source: GAO. 

a

The task orders we reviewed were issued during fiscal years 2004 through 2007 and had obligations 

over $500,000. 

b

Task orders were not issued from the contracts awarded for services purchased under Technical and 

Acquisition Management Support 3. The program office used contract modifications, which it referred 

to as tasks, to purchase services and provided us a list of these tasks. For the purposes of our 

review, we randomly selected 10 contract modifications or tasks that met our selection criteria and 

are referring to these as task orders. 

c

At the time of our review, the Army Intelligence and Security Command had issued only four task 

orders with total obligations over $500,000 during fiscal years 2004 through 2007. 

The seven acquisition strategies we reviewed were approved under DOD’s 

May 2002 acquisition of services policy, which required the Under 

Secretary of Defense for Acquisition, Technology, and Logistics to review 

Page 36 GAO-10-39 Defense Acquisitions
Appendix I: Scope and Methodology 

acquisitions with an expected value of over $2 billion and for each of the 

DOD components, which includes the military departments, to review 

those acquisitions that were under that threshold. None of the acquisition 

strategies we selected were approved after DOD issued its October 2006 

acquisition of services policy, which lowered the dollar thresholds for 

management reviews. The substance of the management reviews remained 

largely unchanged, incorporating a few additional, specific, acquisition 

strategy requirements, such as the inclusion of any required waivers and 

top-level discussion of source selection processes that were not significant 

to the objectives of our review. 

To assess how such risks were addressed at the contract or task order 

level, we used data from the Federal Procurement Data System–Next 

Generation to determine the number of task orders that had obligations of 

$500,000 or more that were issued from fiscal years 2004 through 2007 

from each of these seven acquisitions. From that list, we randomly select 

10 task orders for each acquisition, with the exception of the INSCOM 

Linguistics Part 2 acquisition for which we selected all four task orders 

that had been issued as of September 2007 that exceeded this threshold. 

Overall, we selected 64 task orders, which ranged from $530,000 to 

$227 million in obligations, for review. We did not review acquisitions 

approved after fiscal year 2007 since our analysis indicated that it was 

often a year or more from the time that the acquisition strategy was 

approved to the time when task orders were actually issued. For each of 

the task orders, we reviewed the acquisition strategy, base contract, task 

orders, statements of work, and other documentation supporting the need 

to acquire contract support and any risk assessments prepared. We also 

interviewed program and contracting officials who managed these 

acquisitions to obtain information concerning why these services were 

contracted for, the risks that were considered, and any additional steps 

that had been taken to enhance oversight of the contractors. 

We assessed the reliability of the Federal Procurement Data System–Next 

Generation to identify acquisitions and to select task orders that were 

within the scope of our review by verifying (1) the contract and task order 

identification numbers; (2) the contract award date; (3) that the task 

orders associated with the acquisitions were for professional and 

management support services; and (4) that the task orders had obligations 

exceeding $500,000. On the basis of this assessment we determined that 

the data were sufficiently reliable for the purposes of this review. 

Page 37 GAO-10-39 Defense Acquisitions
Appendix I: Scope and Methodology 

To assess how DOD implemented performance-based acquisitions 

practices on contracts for professional and management support, we 

reviewed relevant provisions in the FAR and DOD guidance. We 

interviewed DOD and military department officials responsible for 

reviewing and approving services acquisitions to identify how these 

reviews addressed the implementation of performance-based practices. 

We reviewed performance work statements from each of the 64 task 

orders to assess whether contract requirements and performance 

measures were consistent with performance-based guidance, such as 

whether contract requirements were measurable and outcome based. We 

also analyzed documentation to determine how contractor performance 

was measured. We interviewed contracting and program officials 

associated with these acquisitions to identify how contract requirements 

and performance measures were developed. Finally, we interviewed DPAP 

officials and a representative from the Defense Acquisition University to 

obtain information on efforts to develop additional DOD guidance for 

implementing performance-based services acquisitions. 

To assess the extent to which DOD designated trained surveillance 

personnel, we reviewed the Defense Federal Acquisition Regulation 

Supplement and DOD policies and procedures to identify the department’s 

surveillance and training requirements. We then analyzed surveillance 

personnel appointment letters and training documentation associated with 

each of the 64 task orders to determine whether these requirements were 

met. We also interviewed DOD officials who were designated as 

surveillance personnel on one or more of the task orders we reviewed to 

obtain information on their training and responsibilities. 

To identify how actions to implement additional reviews of services 

acquisitions may improve DOD’s management and use of services 

contracts, we reviewed provisions contained in the National Defense 

Authorization Act for Fiscal Year 2008 that required DOD to establish an 

independent management review process. We review memoranda issued 

by DOD in September 2008 and February 2009 that provided guidance on 

the scope of these reviews, which DOD refers to as peer reviews. To 

obtain information on how peer reviews differ from the management 

reviews, we spoke with officials from DPAP and the military departments 

responsible for these reviews. We also obtained copies of the memoranda 

summarizing the findings and recommendations of the five peer reviews 

performed on professional and management support contracts as of 

September 2009. 

Page 38 GAO-10-39 Defense Acquisitions
Appendix I: Scope and Methodology 

We conducted this performance audit from July 2008 through 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. 

Page 39 GAO-10-39 Defense Acquisitions
Appendix II: Examples of Inherently 

Governmental and Approaching Inherently Appendix II: Examples of Inherently Governmental Functions 

Governmental and Approaching Inherently 

Governmental Functions 

Federal Acquisition Regulation section 7.503 provides examples of 

inherently governmental functions as well as services or actions that are 

not inherently governmental, but may approach being inherently 

governmental functions based on the nature of the function, the manner in 

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

government administers contractor performance. These examples are 

listed in tables 8 and 9 below. 

Table 8: Examples of Inherently Governmental Functions 

1. Directly conduct criminal investigations. 

2. Control prosecutions and performance of adjudicatory functions other than those relating to arbitration. 

3. Command military forces. 

4. Conduct foreign relations and determine foreign policy. 

5. Determine agency policy, including regulations. 

6. Determine federal program priorities for budget requests. 

7. Direct and control federal employees. 

8. Direct and control intelligence and counterintelligence operations. 

9. Select or interview individuals for federal government employment. 

10. Approve position descriptions and performance standards for federal employees. 

11. Determine the disposal of government property. 

12. In federal procurement activities with respect to prime contracts: Determine the supplies or services acquired by the 

government; participate as a voting member on any source selection boards; approve contractual documents, including 

documents defining requirements, incentive plans, and evaluation criteria; award contracts; administer contracts; terminate 

contracts; determine whether contract costs are reasonable, allocable, and allowable; and participate as a voting member on 

performance evaluation boards. 

13. Approve agency responses to Freedom of Information Act requests. 

14. Conduct administrative hearings to determine eligibility for security clearances, or that affect personal reputation or eligibility to 

participate in government programs. 

15. Approve federal licensing actions and inspections. 

16. Determine budget policy, guidance, and strategy. 

17. Collect, control, and disburse public funds, unless authorized by statute. Does not include the collection of public charges to 

mess halls, national parks, and similar entities and routine voucher and invoice examination. 

18. Control treasury accounts. 

19. Administer public trusts. 

20. Draft congressional testimony, responses to congressional correspondence, or agency responses to audit reports. 

Source: GAO analysis of Federal Acquisition Regulation section 7.503(c). 

Page 40 GAO-10-39 Defense Acquisitions 
Appendix II: Examples of Inherently 

Governmental and Approaching Inherently 

Governmental Functions 

Table 9: Examples of Services That May Approach Being Inherently Governmental Functions 

1. Involve or relate to budget preparation. 

2. Involve or relate to reorganization and planning activities. 

3. Involve or relate to analyses, feasibility studies, and strategy options to be used in developing policy. 

4. Involve or relate to developing regulations. 

5. Involve or relate to evaluating another contractor’s performance. 

6. Support acquisition planning. 

7. Assist in contract management. 

8. Provide technical evaluation of contract proposals. 

9. Assist in developing statements of work. 

10. Support the preparation of responses to Freedom of Information Act requests. 

11. Work in situations that may permit access to confidential business information. 

12. Provide information regarding agency policies or regulations. 

13. Participate in situations where contractors may be assumed to be agency employees or representatives. 

14. Participate as technical advisors to source selection boards or as members of a source evaluation board. 

15. Serve as arbitrators or provide alternative methods of dispute resolution. 

16. Construct buildings intended to be secure. 

17. Provide inspection services. 

18. Provide legal advice and interpret regulations and statutes for government officials. 

19. Provide non-law enforcement security activities that do not directly involve criminal investigations. 

Source: GAO analysis of Federal Acquisition Regulation section 7.503(d). 

Page 41 GAO-10-39 Defense Acquisitions
Appendix III: Comments from the Department Appendix III: Comments from the of Defense 

Department of Defense 

Page 42 GAO-10-39 Defense Acquisitions 
Appendix III: Comments from the Department 

of Defense 

Page 43 GAO-10-39 Defense Acquisitions
Appendix III: Comments from the Department 

of Defense 

Page 44 GAO-10-39 Defense Acquisitions
Appendix IV: 

A

GAO Contact and Staff 

cknowledgments 

Page 45 GAO-10-39 

Appendix IV: GAO Contact and Staff 

Acknowledgments 

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

In addition to the individual named above, key contributors to this report 

were Timothy DiNapoli, Assistant Director; Gary Guggolz; Justin Jaynes; 

Christopher Mulkins; Thomas Twambly; Richard Winsor; Arthur James, 

Jr.; Julia Kennon; Susan Neil; and Noah Bleicher. 

 Defense Acquisitions 

GAO Contact 

Acknowledgments 

(120745) 
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