MANAGING SERVICE 

CONTRACTS

Recent Efforts to 

Address Associated 

Risks Can Be Further 

Enhanced

Report to the Committee on Homeland 

Security and Governmental Affairs, 

U.S. Senate

December 2011

GAO-12-87

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-87, a report to the 

Committee on Homeland Security and 

Governmental Affairs, U.S. Senate 

December 2011 

MANAGING SERVICE CONTRACTS 

Recent Efforts to Address Associated Risks Can Be 

Further Enhanced

Why GAO Did This Study

In fiscal year 2010, civilian agencies 

obligated $136 billion on service 

contracts, including obligations for 

professional and management support 

services such as program evaluation 

and acquisition support. Many of these 

services increase the risk that 

contractors may inappropriately 

influence the government’s authority, 

control, and accountability for 

inherently governmental decisions. 

GAO was asked to (1) determine the 

extent to which civilian agencies use 

professional and management support 

service contracts and the types of 

activities acquired, (2) determine if 

agencies consider and mitigate risks 

associated with contractors providing 

these services, and (3) assess 

agencies’ response to recent Office of 

Management and Budget (OMB) 

efforts related to acquiring these 

services. GAO analyzed Federal 

Procurement Data System – Next 

Generation (FPDS-NG) data and 

selected a nongeneralizable sample of 

230 statements of work and 12 case 

studies from five agencies with onethird of obligations for these services in 

fiscal year 2010. GAO also reviewed 

agency and governmentwide guidance 

and met with agency and OMB

officials. 

What GAO Recommends

GAO recommends that OMB establish 

a deadline for its recent requirement 

that agencies develop procedures for 

services, including those that closely 

support inherently governmental 

functions, and include two FPDS-NG 

codes in guidance for agencies’ use of 

service contracts and in the cost 

savings initiative for management 

support services. OMB generally 

agreed with the recommendations.

What GAO Found

From fiscal years 2005 through 2010, civilian agency obligations on contracts for 

professional and management support services increased 44 percent, from $22

billion to $32 billion (in 2010 dollars), more than twice the rate of increase for 

other services. For the five agencies GAO reviewed—the Departments of 

Homeland Security, Transportation, and Housing and Urban Development, the 

United States Agency for International Development, and the National Science 

Foundation—more than half of the 230 statements of work for professional and 

management support service contracts requested services that closely support 

the performance of inherently governmental functions. Using these services can 

inappropriately influence government decisionmaking if proper oversight is not 

provided. 

Professional and Management Support Service Contracting Obligations at Civilian Agencies

The five agencies generally did not consider and mitigate risks of acquiring 

professional and management support services prior to awarding the 12 

contracts GAO reviewed. The Federal Acquisition Regulation requires agencies 

to provide enhanced management oversight for contracts that closely support 

inherently governmental functions. For the 12 contracts, few of the officials said 

they considered whether contracted services included such functions. In some 

cases, officials said they later became concerned that contractors might perform 

inherently governmental functions or that government employees lacked 

expertise to oversee contracted work, and took steps to mitigate risks. Guidance

from four of the five agencies did not include processes to identify risks or ensure 

enhanced management oversight when contractors perform such services. 

Recent congressional and OMB guidance has emphasized the need for agencies 

to examine their use of service contracts and the related risks. The five agencies 

have participated in these efforts, including service contract inventories and 

multisector workforce pilots, to varying degrees, but only DHS has taken steps to 

incorporate related OMB efforts into processes that examine their use of 

professional and management support services. A September 2011 OMB policy 

letter requires agencies to develop procedures to improve their management of 

risks when contracting for these services, but does not include an implementation

deadline. Further, two OMB efforts have focused on selected professional and 

management support service codes from FPDS-NG that require increased 

agency attention, but the efforts exclude two related codes that accounted for 

significant obligations and that may similarly contain risks. 

View GAO-12-87. For more information, 

contact John Hutton at (202) 512-4841 or 

huttonj@gao.gov. 
Page i GAO-12-87 Managing Service Contracts

Letter 1 

Background 4

Civilian Agencies Have Increasingly Acquired a Wide Range of 

Professional and Management Support Services, Which May 

Include Risks 7

Agency Officials Generally Did Not Consider and Mitigate Risks 

Associated with Contracts for Professional and Management 

Support Services 14

OMB Multisector Workforce Efforts Seek to Improve Agency 

Management of Professional and Management Support Service 

Contracts 19

Conclusions 26

Recommendations for Executive Action 27

Agency Comments and Our Evaluation 27

Appendix I Scope and Methodology 30

Appendix II Examples of Inherently Governmental and Closely Supporting 

Inherently Governmental Functions and Associated Special 

Acquisition Requirements 35

Appendix III Service Codes for Professional and Management Support Services 38

Appendix IV List of Services Requiring Special Consideration in OMB Inventory 

Guidance and Services Identified in OMB Cost Savings Initiative 42

Appendix V Comments from Department of Homeland Security 44

Appendix VI GAO Contact and Staff Acknowledgments 46

Contents
Page ii GAO-12-87 Managing Service Contracts

Tables

Table 1: Examples of Service Categories and Codes 4

Table 2: Professional and Management Support Service Contracts 

at Selected Agencies, Fiscal Year 2010 8

Table 3: Professional and Management Support Service Contracts 

and Task Orders Reviewed 12

Table 4: Selected OMB Guidance Related to Professional and 

Management Support Service Contracts 20

Table 5: Services Requested in Contracts Coded as Other 

Professional Services or Other Management Support 

Services 25

Table 6: Professional and Management Support Service Codes 

Included in Selection Sample 31

Table 7: FAR-Identified Services That May Closely Support 

Inherently Governmental Functions Included in Our 

Review 32

Table 8: Examples of Inherently Governmental Functions 35

Table 9: Examples of Services That May Closely Support Inherently 

Governmental Functions 36

Table 10: Special Acquisition Requirements for Services That Have 

the Potential for Influencing the Authority, Accountability, 

and Responsibilities of Government Officials 37

Table 11: Service Codes for Professional and Management Support 

Services 38

Table 12: Service Codes Identified in Recent OMB Initiatives 42

Figures

Figure 1: Risk Associated with Professional and Management 

Support Services 6

Figure 2: Professional and Management Support Service 

Contracting Obligations at Civilian Agencies, Fiscal Years 

2005 through 2010 7

Figure 3: Civilian Agencies’ Professional and Management Support 

Service Contract Obligations, Fiscal Year 2010 10
Page iii GAO-12-87 Managing Service Contracts

Abbreviations

AMS Acquisition Management System

COTR contracting officer’s technical representative

DHS Department of Homeland Security

DOD Department of Defense

DOT Department of Transportation

FAIR Act Federal Activities Inventory Reform Act

FAR Federal Acquisition Regulation

FPDS-NG Federal Procurement Data System – Next Generation

HUD Department of Housing and Urban Development

NSF National Science Foundation

OFPP Office of Federal Procurement Policy

OMB Office of Management and Budget

SOW statement of work

USAID United States Agency for International Development

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

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

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necessary if you wish to reproduce this material separately.
Page 1 GAO-12-87 Managing Service Contracts

United States Government Accountability Office 

Washington, DC 20548

December 7, 2011

The Honorable Joseph I. Lieberman

Chairman

The Honorable Susan M. Collins

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The government relies on contractor services to meet a variety of mission 

needs, and these contracts account for the majority of agencies’ contract 

dollars. In fiscal year 2010, almost 80 percent, or $136 billion, of civilian 

agency contract obligations were used to purchase contractor services. 

This includes contracts for professional and management support 

services, a category of services in which contractors perform functions 

ranging from program evaluation and acquisition support to systems 

engineering services.1

While there are benefits to using contractors, such as addressing surge 

capacity needs, the use of many of the services categorized as 

professional and management support increases the risk that contractors 

may inappropriately influence the government’s authority, control, and 

accountability for decisions. Our prior work has examined these issues at 

the Departments of Defense (DOD) and Homeland Security (DHS).2

 

1

For the purpose of this report, professional and management support service contracts 

refers to contracts categorized as “Professional, Administrative and Management Support 

Services” in the Federal Procurement Data System Product and Service Code Manual. 

See app. III for a list of these product service codes.

More 

recently, Congress has enacted a law to ensure that special consideration 

be given to using federal employees to perform certain functions, and the 

executive branch has raised specific concerns about the governmentwide 

use of professional and management support services and whether 

agencies rely too heavily on contractors to provide these services. In 

2009, Congress directed agencies to give special consideration to using 

2

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

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

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

 
 

Page 2 GAO-12-87 Managing Service Contracts

federal employees rather than contractors for functions closely associated 

with the performance of inherently governmental work, which may be 

found in contracts for professional and management support services.3

To conduct this work, we analyzed contract data from the Federal 

Procurement Data System – Next Generation (FPDS-NG) and selected 

and reviewed 230 contract statements of work (SOW) for professional 

and management support services, from which we selected 12 contracts 

and task orders for more in-depth case-study reviews. We also reviewed 

agency and governmentwide guidance related to professional and 

management support services and their related risks and spoke with 

agency and OMB officials.

Inherently governmental functions require discretion in applying 

government authority or value judgments in making decisions for the 

government; as such they must be performed by government employees 

and not contractors. The Office of Management and Budget (OMB) has 

initiated several efforts to improve how agencies manage their multisector 

workforce of federal employees and contractor personnel and which 

address the inherent risk involved in contracting for functions closely 

associated with the performance of inherently governmental functions. In 

this context, you asked us to review how civilian agencies manage their 

use of contracts for professional and management support services. 

Specifically, you asked us to (1) determine to what extent civilian 

agencies use professional and management support service contracts 

and what types of activities are being acquired, (2) determine if agencies 

considered and mitigated risks associated with contractors providing such 

services, and (3) assess agencies’ responses to recent governmentwide 

efforts related to contracting for professional and management support 

services.

To determine the extent to which civilian agencies contract for 

professional and management support services, we reviewed FPDS-NG 

data for fiscal years 2005 through 2010 for contracts categorized as 

“Professional, Administrative, and Management Support Services.” We 

selected five civilian agencies to provide a closer review: the Departments 

of Homeland Security (DHS), Transportation (DOT), and Housing and 

Urban Development (HUD), the U.S. Agency for International 

Development (USAID), and the National Science Foundation (NSF). They 

 

3

Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, Division D, § 736.
 

Page 3 GAO-12-87 Managing Service Contracts

were chosen in part to represent a variety of agency missions and based 

on the proportion of their obligations for professional and management 

support services in relation to their overall service obligations. Together, 

these agencies accounted for one-third of civilian agency obligations for 

professional and management support services in fiscal year 2010.

Because FPDS-NG does not provide definitions for service codes, to 

better understand the services provided we judgmentally selected a 

nongeneralizable sample of 235 SOWs from the five agencies, selecting 

50 each from DHS, DOT, HUD, and USAID and 35 from NSF (which had 

fewer contracts and task orders to select from compared to the other four 

agencies). To obtain a range of services and contract sizes, the selection 

factors included varying contract obligation amounts and types of 

services, and, when available, descriptions of the services that indicated 

the requested services closely supported inherently governmental 

functions or functions that might be close to their agencies’ missions. Five 

of the 235 SOWs were either not available from the agencies during the 

course of our audit work or not sufficiently detailed for our review 

purposes, so we ultimately reviewed 230 SOWs.

To determine if agencies consider and mitigate risks associated with 

professional and management support services, we judgmentally 

selected 12 contracts and task orders for further review as case studies 

based on a range of factors, including comparing the contract description 

to guidance in the Federal Acquisition Regulation (FAR) to help ensure 

we selected services that might closely support inherently governmental 

functions. For each case study, we met with contracting officers, 

contracting officer’s technical representatives (COTR), and other program 

officials and reviewed selected contract documents for evidence of risk 

consideration and mitigation. We also reviewed agency guidance and 

interviewed senior agency officials in procurement, management, and 

human capital offices and reviewed agency documents to learn about 

guidance that assists in mitigating risks associated with professional and 

management support services contracting. We compared these policies 

and practices to OMB and FAR guidance.

To assess agencies’ response to OMB efforts, we met with Office of 

Federal Procurement Policy (OFPP) officials and reviewed statutes and 

OMB documents, memos, and policy letters that address service 

contracting. We interviewed agency officials and reviewed available 

documentation about steps taken to respond to these efforts. See 

appendix I for a more in-depth description of our scope and methodology.
 

Page 4 GAO-12-87 Managing Service Contracts

We conducted this performance audit from December 2010 to December 

2011 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.

The Federal Procurement Data System – Next Generation (FPDS-NG) 

uses more than 300 codes, organized in 23 categories, to describe the 

services purchased by federal agencies. Among these categories—which 

capture services ranging from utilities and housekeeping services to 

medical services—are professional and management support services. 

Examples of service categories and codes are listed in table 1.

Table 1: Examples of Service Categories and Codes

Examples of FPDS-NG categories of 

services Examples of service codes in each category 

Housekeeping Services • Food Services (S203)

• Interior Plantscaping (S217)

• Other Housekeeping Services (S299)

Medical Services • Nursing Services (Q401)

• Anesthesiology Services (Q501)

• Pediatric Services (Q516)

Professional, Administrative, and 

Management Support Services

• Program Management/Support Services 

(R408)

• Legal Services (R418)

• Other Management Services (R799)

Source: FPDS-NG and U.S. General Services Administration data.

Note: Data are from FPDS-NG and the U.S. General Services Administration’s Federal Procurement 

Data System Product and Service Codes Manual. 

For almost 20 years, OMB procurement policy has indicated that 

agencies should provide a greater degree of scrutiny when contracting for 

professional and management support services, which include acquisition 

support, program evaluation, and other services that can affect the 

Background
 

Page 5 GAO-12-87 Managing Service Contracts

government’s decision-making authority.4 Without proper management 

and oversight, such services risk inappropriately influencing the 

government’s control over and accountability for decisions that may be 

supported by contractors’ work. Thus, the policy directs agencies to 

ensure that they maintain sufficient government expertise to manage the 

contracted work. The FAR also addresses the greater need for 

management oversight associated with contractors providing services 

that have the potential to influence the authority, accountability, and 

responsibilities of government employees. Contractors are prohibited 

from performing inherently governmental functions, such as determining 

agency policy, directing federal employees, and approving contractual 

documents, which require such discretion in applying government 

authority or value judgments in making decisions that they can only be 

performed by government employees.5

 

4

Office of Federal Procurement Policy, Inherently Governmental Functions, OFPP Policy 

Letter 92-1 (Sept. 23, 1992 [Rescinded]); Office of Federal Procurement Policy, 

Management Oversight of Service Contracting, OFPP Policy Letter 93-1 (May 18, 1994). 

The FAR also identifies services 

that can approach being inherently governmental, based on the nature of 

the function or the manner in which the work is performed or 

administered. Contractors can provide services that closely support 

inherently governmental functions, but agencies must provide greater 

scrutiny and enhanced management oversight to ensure that the 

contractors’ work does not limit the authority, accountability, and 

responsibilities of government employees. The FAR includes an 

illustrative list of 19 services that closely support inherently governmental 

functions, many of which—such as supporting policy development and 

providing legal advice—are captured in FPDS-NG codes in the 

professional and management support services category. See appendix II 

for examples of inherently governmental and closely supporting inherently 

governmental functions outlined in the FAR. Figure 1 illustrates how the 

risk of contractors influencing government decision making is increased 

as professional and management support services move closer toward 

supporting inherently governmental functions.

5

FAR 7.503(c) includes a list of functions that are considered to be inherently 

governmental. See app. II for the complete list.
 

Page 6 GAO-12-87 Managing Service Contracts

Figure 1: Risk Associated with Professional and Management Support Services 

Long-standing FAR and OMB guidance addresses the need for enhanced 

oversight, but in prior work we found that DOD and DHS officials were 

often unaware of this policy.6 The guidance states that having a sufficient 

number of trained and experienced government employees is necessary 

when contracting for professional and management support services, but 

does not describe how agencies should provide enhanced management 

oversight for such contracts.

 

6

GAO-10-39 and GAO-07-990. 
 

Page 7 GAO-12-87 Managing Service Contracts

Federal civilian agencies have increasingly relied on contractors to 

provide professional and management support services—such as 

program management and evaluation, engineering and technical 

services, and acquisition support—with a growth rate of obligations in this 

category that is more than twice the growth rate of all other service 

contract obligations over a 5-year period. From fiscal year 2005 through 

fiscal year 2010, civilian agency obligations for professional and 

management support service contracts increased $9.9 billion dollars, or 

44 percent, to $32 billion (adjusted for inflation to 2010 dollars). (See fig. 

2.) This was more than double the 19 percent increase experienced by all 

other service contracts, which increased from $87.8 billion to $104 billion 

in inflation-adjusted dollars during the same time period.

Figure 2: Professional and Management Support Service Contracting Obligations at 

Civilian Agencies, Fiscal Years 2005 through 2010

The five agencies selected for review—DHS, USAID, DOT, HUD, and 

NSF—obligated a larger percentage of their fiscal year 2010 service 

contract dollars on professional and management support services 

compared to all civilian agencies, including the five reviewed. (See table 

2.) 

Civilian Agencies 

Have Increasingly 

Acquired a Wide 

Range of Professional 

and Management 

Support Services, 

Which May Include 

Risks
 

Page 8 GAO-12-87 Managing Service Contracts

Table 2: Professional and Management Support Service Contracts at Selected Agencies, Fiscal Year 2010

Dollars in billions

Professional and management support service contracts

Obligations for all 

service contracts Obligations

Obligations as a 

percentage of all 

service contracts Primary services requested

HUD $1.6 $1.3 80% More than 85 percent of professional 

and management support service 

obligations were for services coded as 

Other Professional Services, Personal 

Property Management Services, and 

Financial Services.

USAID 6.3 4.7 75 Technical Assistance contracts 

accounted for three-quarters of 

professional and management support 

service contract obligations.

NSF 0.4 0.2 36 Two contract codes—Other 

Professional Services and Logistics 

Support Services—accounted for more 

than two-thirds of professional and 

management support service contract 

obligations.

DHS 10.4 3.1 30 Nearly two-thirds of professional and 

management support service contract 

obligations were for services in three 

codes: Program Management/Support 

Services, Engineering and Technical 

Services, and Other Professional 

Services. 

DOT 4.7 1.4 30 Engineering and Technical Services 

contracts accounted for slightly more 

than half of professional and 

management support service contract 

obligations.

Total for selected 

agencies

$23.4 $10.7 46%

Total for all civilian 

agencies

$136.4 $32.1 24%

Source: GAO analysis of FPDS-NG data.
 

Page 9 GAO-12-87 Managing Service Contracts

For the five agencies we reviewed, the activities contractors provided 

through agencies’ professional and management support service 

contracts often appeared to closely support the performance of inherently 

governmental functions. Use of these services can result in the loss of 

government accountability and control if proper oversight is not provided. 

Of the 230 professional and management support service contract 

statements of work (SOW) we reviewed from the five agencies, at least 

120 contracts—or more than half—requested services that the FAR 

identifies as closely supporting inherently governmental functions, 

including services related to budget preparation, reorganization and 

planning activities, evaluation of another contractor’s performance, and 

acquisition support.7 For example, a DOT contract requested support for 

acquisition functions, including the creation of independent government 

cost estimates and analysis and recommendations related to new 

acquisitions. In another contract, HUD requested that contractors assist 

management and staff in developing a new strategic plan for the agency. 

The SOW called for contractors to work with stakeholders inside and 

outside the agency by conducting interviews, documentation reviews and 

surveys to understand the agency’s current operational environment and 

associated challenges, risks, and opportunities. Tasks also included 

assisting in the identification of agency priorities and transformation 

initiatives. The remaining SOWs we reviewed included services that did 

not closely support inherently governmental functions, such as a contract 

for records management and processing at DHS.

A significant portion of the growth in civilian agency contracts for 

professional and management support services was driven by an 

increase in obligations for contracts coded in FPDS-NG as Other 

Professional Services. This category accounted for $3.4 billion of the $9.9 

billion increase in contract obligations for professional and management 

support services from fiscal year 2005 to fiscal year 2010. Overall, 5 of 

the 56 codes for professional and management support services 

accounted for 70 percent of civilian agency obligations for these services 

in fiscal year 2010, representing over $22 billion in overall obligations. 

(See fig. 3.)

 

7

For the purposes of our review of contract statements of work (SOW), acquisition support 

includes assisting with acquisition planning, contract management, technical evaluation of 

contract proposals, and developing contract requirements such as SOWs. 

Professional and 

Management Support 

Service Contracts 

Frequently Included 

Services That Closely 

Support Inherently 

Governmental Functions

Five Professional and 

Management Support 

Services Codes Accounted 

for the Majority of 

Obligations
 

Page 10 GAO-12-87 Managing Service Contracts

Figure 3: Civilian Agencies’ Professional and Management Support Service 

Contract Obligations, Fiscal Year 2010

Of the 230 contract SOWs we reviewed, 171 contracts were in the top 

five codes and covered a wide range of services. For example:

• Other Professional Services. SOWs requested support including risk 

management and analysis, records management, assistance to a 

foreign government, physical and administrative security, budget and 

program management support, financial and information technology 

audits, strategic planning, program administration, acquisition support, 

project management, technical assistance and training, workforce 

analysis, and website development and content management.

• Engineering and Technical Services. SOWs requested services 

including architectural planning and construction, testing and 

evaluation of radar and weather systems, ship inspection services, 

and information technology systems support.

• Technical Assistance. SOWs requested services including support to 

foreign governments, such as support for security and governance in 

Nepal and local government capacity building in unstable areas of 
 

Page 11 GAO-12-87 Managing Service Contracts

Afghanistan, as well as contracts to update information technology 

systems and manuals and provide technical and administrative 

support to meet information technology security requirements.8

• Program Management/Support Services. SOWs requested services 

including support to evaluate internal controls, manage audit 

compliance and the tracking of audit recommendations, and provide 

project management oversight to ensure grantee compliance in 

administering federally funded programs.

• Other Management Support Services. SOWs requested services 

including technical and program expertise related to technologies’ 

compliance with federal laws and guidelines; support to develop a 

program management plan for project monitoring and oversight; 

information systems, hardware, and software support; technical 

expertise to improve data collection and program evaluation; and loan 

servicing activities including payment collection, risk management, 

and customer service.

We conducted a more in-depth review of 12 contracts or task orders for 

professional and management support services. On the basis of our 

review, at least 9 of the 12 contracts or task orders involved services that 

closely support inherently governmental functions, including acquisition 

support, reorganization and planning support, and support for policy 

development. The selected contracts or task orders originated from 2005 

through 2009 and included a mix of both long-standing and new contract 

requirements. For example, the DOT project management oversight 

contracts at the Federal Transit Administration include services that have 

been performed by contractors for more than 20 years.

Contracting and program officials identified several reasons why their 

agencies chose to award contracts for these professional and 

management support services. Six of the 12 contracts or task orders were 

issued or expanded in response to new requirements or workload 

increases, such as the watch officer positions created to provide surge 

capacity at DHS’ Transportation Security Administration, an expanded 

 

8

In fiscal year 2010, USAID accounted for 83 percent of civilian agency obligations for 

contracts coded as Technical Assistance. The majority of SOWs we reviewed in this code 

(21 out of 27) were USAID contracts. The Technical Assistance code was merged into the 

code for Engineering and Technical Services effective October 1, 2011. See app. III for a 

list of professional and management support service codes and a crosswalk showing 

changes that took effect October 1, 2011.

Officials Identified Various 

Reasons for Contracting 

for Services
 

Page 12 GAO-12-87 Managing Service Contracts

Sudan mission support contract at USAID, and short-term need for 

procurement office support at HUD. The 12 case-study contracts and task 

orders are described in table 3.

Table 3: Professional and Management Support Service Contracts and Task Orders Reviewed 

Agency / 

contracting 

organization 

Obligations 

in fiscal year 

2009 (dollars

in millions) Service code 

Fiscal 

year of 

award

Program office 

supported

Summary of services 

provided

DHS

Citizenship and 

Immigration 

Services 

$20.6 Other Professional Services 2007 Office of 

Administration

Acquisition and program 

support services 

Office of the 

Secretary

10.9 Program Management/ 

Support Services

2009 Office of Intelligence 

and Analysis

Intelligence and analytic 

support 

Transportation 

Security 

Administration

2.6 Intelligence Services 2007 Transportation 

Security Operations 

Center

Watch Officer support

HUD

27.5 Financial Services 2006 Government National 

Mortgage Association 

(Ginnie Mae)

Administration of mortgagebacked securities programs

0.3 Other Professional Services 2009 Office of the Chief 

Procurement Officer

Acquisition support services

DOT

Federal 

Aviation 

Administration

1.2 Engineering and Technical 

Services 

2009 Western Logistics 

Service Area Field 

Offices

Logistics support services, 

including acquisition support 

and management 

Federal Transit 

Administration

6.0 Program Management/ 

Support Services

2009 Region 2 Project management 

oversight for grants to state 

and local governments

Office of the 

Secretary 

2.5 Other Professional Services 2009 Office of Airline 

Information, Research 

and Innovative 

Technology 

Administration

Analytic and technical 

services, including database 

administration

NSF

0.7 Other Professional Services 2009 National 

Nanotechnology 

Coordination Office

Analytical, operational, 

technical, and administrative 

support a

4.7 Other Administrative 

Support Services

2005 National Coordination 

Office for Information 

Technology Research 

and Development

Technical assistance, 

meeting facilitation, 

communications, information 

technology, and 

administrative support

a
 

Page 13 GAO-12-87 Managing Service Contracts

Agency / 

contracting 

organization 

Obligations 

in fiscal year 

2009 (dollars

in millions) Service code 

Fiscal 

year of 

award

Program office 

supported

Summary of services 

provided

USAID

9.3 Technical Assistance 2008 Program Office, 

USAID Sudan Mission

Performance evaluation, 

technical, logistical support

0.6 Program Management/ 

Support Services

2009 Chief Operating 

Officer, Bureau for 

Policy, Planning and 

Learning

Administrative and analytic 

support

Source: GAO analysis of FPDS-NG data and other federal agency data.

Notes: For task orders, data shown are related to the individual task order and not the overall 

contract. 

a

The National Coordination Office for Information Technology Research and Development and the 

National Nanotechnology Coordination Office are interagency coordinating offices that receive 

payments from participating agencies. While these offices are not technically a part of NSF, they use 

NSF’s procurement office to obtain contracted services, and as such are subject to the acquisition 

guidance and rules of NSF. 

Agency officials noted that the temporary nature of some work or the 

need for surge capacities made contracting preferable to using federal 

employees because of the flexibility it offers, such as the ability to 

increase or decrease scope in response to program needs. Often, agency 

officials pointed to constraints on the use of federal employees such as 

limitations for hiring federal staff or budget restrictions as a factor that led 

to contracting for services. For example, NSF provides support to two 

interagency offices established by memorandums of understanding, 

which program officials told us have the effect of limiting the number of 

government personnel who can work in the offices, so the majority of the 

work is performed by contractors. Similarly, a senior Federal Transit 

Administration official said that while Congress has authorized a portion 

of annual program funds to be used for oversight services, the 

administration is constrained from using these funds to hire federal 

employees for this purpose.9

 

9

Under 49 U.S.C. § 5327(c), Congress authorizes the Federal Transit Administration to 

use a percentage of annual program funds to contract for oversight services. According to 

a senior agency official, approximately $77,000,000 was available to contract for oversight 

services in fiscal year 2011. The official said that employees are paid through a separate 

Administrative Expense Account.

In another case, officials from HUD’s 

Government National Mortgage Association said that the agency 

increasingly used contractors for data analysis related to mortgagebacked securities, in part because their hiring authority had not increased 
 

Page 14 GAO-12-87 Managing Service Contracts

in several years, so they did not have enough government staff to meet 

their increased workload. 

Agency officials generally did not consider the risks of acquiring 

professional and management support services before awarding the 12 

contracts we reviewed. In some cases, however, officials later became 

concerned and took steps to mitigate potential risks that contractors might 

perform inherently governmental functions, or that government 

employees might lack sufficient expertise to oversee the contractors’ 

work. Four of the five agencies did not have guidance to help identify 

risks prior to award and ensure enhanced oversight is provided when 

services closely support inherently governmental functions.

For the contracts we reviewed, few of the contracting or program officials 

said they considered whether the services they were contracting for 

closely supported inherently governmental functions or took steps to 

address the related risks before award. In almost all of the cases, officials 

explained that they conducted reviews, as required by the FAR, to 

determine if the services requested included inherently governmental 

functions, but none stated that these review processes specifically 

determined whether services might closely support inherently 

governmental functions and thus require enhanced management 

oversight.10

 

10GAO, Standards for Internal Control in the Federal Government, 

The FAR guidance requiring enhanced management 

oversight when contracting for services that closely support inherently 

governmental functions is located in a different part of the FAR than that 

on inherently governmental functions, and agencies did not seem to link 

the two FAR sections, as none of the officials identified services that 

GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). The federal internal control standards provide a 

framework to identify and address areas at greatest risk of mismanagement, waste, fraud, 

and abuse, and require assessments of risks. 

Agency Officials 

Generally Did Not 

Consider and Mitigate 

Risks Associated with 

Contracts for 

Professional and 

Management Support 

Services

Few Officials Considered 

Risks When Awarding 

Contracts That Closely 

Support Inherently 

Governmental Functions
 

Page 15 GAO-12-87 Managing Service Contracts

closely support inherently governmental functions as triggering a need for 

increased oversight.11

During the performance period of the contract, contracting and program 

officials said they relied on routine oversight procedures, such as 

assigning COTRs, reviewing contractors’ work products, and reviewing 

contractor invoices and status reports. In cases where officials did have 

additional oversight measures in place, they did not link their actions to 

concerns associated with risks from acquiring professional and 

management support services. For example, the Federal Transit 

Administration program office at DOT had developed standard oversight 

procedures to address the contractors’ roles and responsibilities for 

overseeing grant recipients, including their responsibilities for conducting 

assessments of the grantees and providing recommendations to the 

agency. While the procedures acknowledge the government’s decisionmaking role, they are an application of long-standing guidance that 

officials said was created to ensure that each project meets its goals, 

rather than additional oversight to address the risk of contractors 

supporting inherently governmental functions. For other contracts, 

contracting or program officials became concerned during the course of 

contract performance that contractors were at risk of performing 

inherently governmental functions, or that government personnel might 

lack the expertise needed to oversee contractors’ work, and took various 

steps to help mitigate those risks. In these cases, we found that concerns 

were generally raised by officials who were new to a program office or 

contracting officials who had assumed responsibilities for an existing 

contract. For example:

• A senior official in DOT’s Office of Airline Information became 

concerned about the lack of government employee expertise to 

oversee information technology functions that had been developed 

and exclusively operated by contractors for several years. The office 

is planning to convert some of the contractor duties to federal 

employee positions, but efforts to hire new employees have not been 

 

11A senior OFPP official told us that it anticipates potential FAR changes as a result of the 

OFPP Policy Letter 11-01. These changes may include cross-references to better link the 

FAR section that describes services that closely support the performance of inherently 

governmental functions (FAR 7.503(d)) and the section describing the need for enhanced 

management oversight (FAR 37.114(b)). 

Some Officials Raised 

Concerns during Contract 

Performance
 

Page 16 GAO-12-87 Managing Service Contracts

completed because of budget constraints and competing priorities 

within the Research and Innovative Technology Administration.

• The contracting officer and COTR in USAID’s Sudan Mission had 

concerns about interaction among federal employees and contractor 

staff in a newly established mission office, fearing that security and 

logistic challenges had left the government overly reliant on 

contractors’ expertise. To prevent the performance of inherently 

governmental work by contractors and to ensure appropriate oversight 

and capacity among the federal employee workforce, they developed 

a mission order nearly 3 years after the contract was awarded that 

outlined the government’s responsibilities and provided training for all 

personnel in the mission office.

• In the two NSF contracts we reviewed, contracting and program 

officials developed policy and procedure manuals after the contracts 

were awarded to outline the responsibilities and workflow among 

contractor and federal staff. Officials said that because each of these 

offices is staffed primarily by contractors, with only one or two federal 

employees, these technical documents primarily serve a business 

continuity function. However, officials also said they help to ensure 

that contractors will not accidentally perform or be tasked with 

inherently governmental work.

• In two of the DHS contracts we reviewed, officials identified risks 

associated with some of the activities performed by contractors and 

are now requiring the work to be performed by government 

employees. According to a senior procurement official with Citizenship 

and Immigration Services, the component has reduced the number of 

contractors supporting the contract from 90 to approximately 22, 

primarily by insourcing work—moving it from contractor to government 

performance—such as acquisition and budget support. The contract 

positions that remain are largely administrative specialist positions 

that officials determined do not support inherently governmental 

functions. Likewise, the Transportation Security Administration 

insourced 12 contracted watch officer support positions, which involve 

collecting information and monitoring domestic events that affect air 

passenger security, and program officials said they plan to insource 

the remaining call center positions in the near future.

According to agency officials, at least 6 of the 12 contracts we reviewed 

have been recently recompeted or will be in the coming year. Officials 

identified various changes to the contracts going forward, but only a few 

indicated that the changes were due to concerns with contractors 

providing professional and management support services. For example, 

USAID’s policy office is changing some of the types of work performed by 
 

Page 17 GAO-12-87 Managing Service Contracts

contractors in that office, but officials indicated that these changes are 

determined by how contract support can most effectively help the office 

function, not by consideration of risk or reliance on contractors. Similarly, 

HUD’s Office of the Chief Procurement Officer ended its use of 

contractors when it received additional funding for federal employees, 

though program officials did not express any concerns about the type of 

work done by those contractors. DOT’s Office of Airline Information is 

rolling its current contract into a larger, administrationwide contract 

vehicle for the sake of potential cost savings, not to address its concerns 

about the type of work being performed. Although the DHS Office of 

Intelligence and Analysis contract we reviewed expired, officials said that 

the succeeding contract, which is classified, contains similar types of 

services.

Agencies use a variety of tools to guide procurement practices prior to 

contract award and during contract performance, including agencyspecific FAR supplements, acquisition manuals, and COTR handbooks, 

and some of the materials we reviewed mention professional and 

management support services. The FAR requires agencies to provide 

enhanced management oversight for contracts that closely support 

inherently governmental functions, and federal internal control standards 

require assessments of risks. However, four of the five agencies reviewed 

did not have processes, through guidance or other means, to help identify 

risks or ensure greater scrutiny and enhanced management oversight 

when contractors provide expertise or perform services that closely 

support inherently governmental work.

In 2007, we recommended that DHS assess the risk of selected 

contractor services as part of the acquisition planning process and modify 

existing acquisition guidance to address when to use and how to oversee 

those services in accordance with federal acquisition policy.12 DHS did 

not have guidance when two of the three contracts we reviewed were 

awarded,13

 

12

but it subsequently established a review process for all 

professional and management support service contracts over $1 million to 

identify related risks, including services that closely support inherently 

GAO-07-990. 

13The third DHS task order we reviewed was awarded in 2009, shortly after the issuance 

of DHS guidance.

Four Agencies’ Guidance 

Did Not Address Risks 

Related to Professional 

and Management Support 

Services
 

Page 18 GAO-12-87 Managing Service Contracts

governmental functions.14

Beyond DHS, one other agency—USAID—had established contract

review processes, but it did not address risks related to professional and 

management support services. USAID’s process requires a review of 

some service contracts for institutional support before the initial contract 

award and before exercising option years, but these reviews were 

intended to ensure all contracts were essential and efficient rather than to 

address risks related to contractors performing services that closely 

support inherently governmental functions.

The review is required before contracts are 

awarded or option years are exercised. According to an official from one 

of the three DHS components we reviewed, this process helped 

contracting officials pay closer attention to oversight capacities of 

government staff, such as whether there were a sufficient number of 

employees available.

15

 

14DHS requires all contract awards, options, and task or delivery orders with an annual 

value greater than $1 million but less than $50 million to be reviewed by the applicable 

Head of Contracting Activity. Awards, options, and orders with an annual value greater 

than $50 million must be reviewed by the Component Acquisitions Executive, with 

concurrence from the Chief Procurement Officer.

In the few cases where 

agencies’ acquisition guidance specifically touches on issues related to 

professional and management support services, the guidance did not 

appear to affect risk assessment related to closely supporting inherently 

governmental functions. For example, HUD’s contract monitoring manual 

for government technical representatives specifically mentions 

professional and management support services, but contracting and 

program officials did not acknowledge the guidance or cite it as 

influencing any oversight they provided. Similarly, one DOT component 

we reviewed had established acquisition guidance that specifically 

identifies support services, including professional and management 

support, and states that they require expertise to monitor contractor 

15USAID’s institutional support contracts can include program support functions similar to 

professional and management support services. USAID defines institutional support 

contractor as a non-personal-services contractor, funded by USAID to support agency 

operations or to augment the agency’s direct hire and personal services staff, or both. 

Personnel employed by an Institutional Support Contractor may be seated within USAID 

space, space rented by or on behalf of the agency, or in the Institutional Support 

Contractor’s space. Institutional Support Contractors may be funded by either program or 

operating expense. While the majority of these individuals provide administrative and 

information technology support to the agency, some personnel employed by nonpersonal-services contractors in headquarters provide program-related support. 
 

Page 19 GAO-12-87 Managing Service Contracts

performance.16 However, the guidance does not have a process for 

providing enhanced management oversight for services that closely 

support inherently governmental functions.

Through several efforts that address agencies’ multisector workforce of 

federal employees and contractor personnel, OMB addresses 

professional and management support service risks, including recent 

guidance that establishes agency management responsibilities for 

services that closely support inherently governmental functions. The five 

agencies we reviewed have responded to these efforts to varying 

degrees, but only DHS has taken steps to incorporate all of these efforts. 

In recent initiatives, OMB may have missed opportunities to address risks 

associated with two specific codes for professional and management 

support services.

OMB has initiated a number of interrelated efforts that address agencies’ 

use of service contractors, including contractors for professional and 

management support services, in the context of maintaining a balanced 

workforce with the appropriate mix of federal employees and contractors. 

Primarily in response to congressional requirements, since 2009 OMB 

has developed guidance and facilitated efforts to improve how agencies 

manage their multisector workforce, which includes addressing the risks 

that overreliance on contractors can pose to government control and 

accountability. Through these efforts, Congress and OMB have 

emphasized the need to examine contracted functions where agencies 

risk becoming overreliant on contractors, such as professional and 

management support service contracts. By focusing on the role that both 

government and contractor employees have in performing work that 

supports agency missions, these efforts emphasize the need to consider 

how contracted functions fit into agency goals and priorities as part of 

strategic planning processes. The resulting multisector workforce efforts 

seek to broaden decisions about the use of contractors from primarily a 

procurement office function, or a series of individual, program-office-level 

 

16The Federal Aviation Administration is exempt from the FAR and follows the guidance of 

the Acquisition Management System (AMS). AMS incorporates FAR language regarding 

prohibition on contractors performing inherently governmental functions but does not 

specifically call for greater scrutiny or enhanced oversight when contracting for services 

that closely support inherently governmental functions.

OMB Multisector 

Workforce Efforts 

Seek to Improve 

Agency Management 

of Professional and 

Management Support 

Service Contracts

Recent OMB Efforts 

Establish Guidance That 

Addresses Risks 

Associated with Service 

Contracts
 

Page 20 GAO-12-87 Managing Service Contracts

decisions, to a shared agency responsibility that requires the involvement 

of human capital, budget, and program, as well as procurement offices. 

Recent efforts that address professional and management support 

services are described in table 4.

Table 4: Selected OMB Guidance Related to Professional and Management Support Service Contracts

OMB guidance Source of guidance Summary

Agencies’ implementation status 

(as of August 2011)

Insourcing guidance:

OMB Memo, Managing 

the Multisector 

Workforce (M-09-26)

July 29, 2009

Congress

Omnibus 

Appropriations Act, 

2009

Pub. L. No. 111-8, 

Div. D, § 736

OMB issued criteria to help civilian agencies 

respond to the statute, which requires that they 

develop procedures to ensure that they 

regularly give special consideration to using 

federal employees for certain functions, 

including those that closely support inherently 

governmental functions. This guidance 

identifies professional and technical service 

contracts as areas agencies should routinely 

monitor for risks.

• DHS issued guidance in 2009.

• USAID developed an 

insourcing plan and guidelines 

in 2010 and piloted the 

planning process in two offices 

in 2011.

• DOT, HUD, and NSF have not 

issued guidance

Multisector workforce 

pilot:

OMB Memo, Managing 

the Multisector 

Workforce (M-09-26)

July 29, 2009

OMB This OMB-initiated effort directs agencies to 

study an office or program that may be reliant 

on contractors to gain experience with 

multisector workforce analysis and planning. 

Approximately one-third of the 24 pilots 

examined functions that are generally 

considered to be professional and management 

support services.

• All five agencies completed 

the pilot and submitted reports 

to OMB in 2010.

Service contract 

inventories and 

analysis:

OFPP Memo, Service 

Contract Inventories

November 5, 2010

Congress

Consolidated 

Appropriations Act, 

2010

Pub. L. No. 111-117, 

Div. C, § 743

In response to statutory requirement for civilian 

agencies subject to the Federal Activities 

Inventory Reform Act (FAIR Act) to submit to 

OMB an annual inventory of their service 

contracts, OMB guidance requires agencies to 

collect and analyze data on their service 

contracts to promote better decisions about 

their use and to help agencies give special 

management attention where contractors 

perform services that closely support inherently 

governmental functions. It also identifies 

specific professional and management support 

service codes that pose an increased risk to 

loss of government control.

• All five agencies completed 

the fiscal year 2010 inventory 

data collection efforts.

• Agencies’ analyses are due to 

OMB by December 2011.

OFPP Policy Letter 11-

01:

Performance of 

Inherently 

Governmental and 

Critical Functions

76 Fed. Reg. 56227, 

September 12, 2011

Congress

Duncan Hunter 

National Defense 

Authorization Act for 

Fiscal Year 2009

Pub. L. No.110-417, § 

321

In response to statutory requirement, OMB 

revised the definition for inherently 

governmental functions and established criteria 

for identifying critical functions. The policy also 

establishes agency management 

responsibilities for contracts that are closely 

associated with inherently governmental 

functions or are critical functions. 

• The effective date of OFPP 

Policy 11-01 is October 12, 

2011.

Source: GAO analysis of OMB data. 
 

Page 21 GAO-12-87 Managing Service Contracts

OMB established criteria to help agencies respond to the statutory 

requirement to develop a process for reviewing service contractor 

activities to consider if contractor performance is appropriate, referred to 

as insourcing guidance. OMB’s guidance identifies professional services 

as an area of risk, thus requiring increased agency monitoring. In 2009, 

OMB also required agencies to conduct multisector workforce planning 

pilots in one office or unit to gain experience with determining optimal 

workforce balance and submit summary reports on their workforce 

analysis.17

According to a senior OMB official, these pieces of guidance, working 

together, are intended to build the different capacities agencies need to 

examine their use of contractors and balance their workforce. For 

example, the insourcing guidance helps agencies develop the procedures 

needed to determine the appropriate use of public and private labor 

resources. The workforce analysis pilots were intended, in part, to help 

agencies build relationships among key stakeholders, furthering the 

collaboration needed to implement strategic approaches. Similarly, the 

contract inventories and analysis are ongoing efforts to collect and share 

the information stakeholders need to understand their areas of greatest 

More recently, in 2010, OMB issued guidance to help agencies 

conduct inventories of their fiscal year 2010 service contracts and an 

analysis of the inventory, which provides a more detailed list of 

professional and management support service codes, including program 

management support and intelligence services that require increased 

attention from agencies. OMB stated that it will issue additional guidance 

to agencies for the preparation of the fiscal year 2011 inventories, taking 

into consideration experiences with the development and use of the initial 

fiscal year 2010 inventories effort. The recent OMB OFPP Policy Letter 

11-01 seeks to broaden agencies’ focus to include critical functions, 

which can pose a risk if not carefully monitored. Similar to the risks 

associated with contractors performing work that closely supports 

inherently governmental functions, OMB states that relying on contractors 

for critical functions can affect the government’s control of mission and 

operations, unless the government maintains sufficient in-house capability 

to manage and oversee the contractors’ work. The policy letter requires 

agencies to develop and maintain internal procedures to address the 

requirements of the guidance, but does not state when the procedures 

should be implemented.

 

17This requirement applied to the 24 agencies subject to the Chief Financial Officers Act.
 

Page 22 GAO-12-87 Managing Service Contracts

risk. The official also said that the policy letter ties all of these efforts 

together and provides agencies with instructions regarding their 

responsibilities to address risks associated with contractors performing 

services that closely support inherently governmental functions or are 

considered critical functions.

The five agencies we reviewed have participated in many of OMB’s 

efforts related to the multisector workforce, but only DHS has taken steps 

to incorporate guidance to examine its use of contractors and balance its 

workforce. The four remaining agencies we reviewed—DOT, HUD, NSF, 

and USAID—are increasingly responding to the various segments of 

OMB’s guidance by participating in the multisector workforce pilots and 

developing an inventory of service contracts, but have not fully 

implemented insourcing guidance that could provide greater scrutiny of 

professional and management support service contracts. Through the 

multisector workforce pilots, all five agencies we reviewed conducted a 

limited workforce analysis to gain an understanding of the steps needed 

to achieve a balanced workforce and submitted reports on the pilots to 

OMB in April 2010. While OMB initially stated that a summary of agency 

best practices would result from the pilot efforts, agencies have not yet 

received feedback from OMB on their reports and results have not been 

made public. The agencies we reviewed also completed their initial 

service contract inventory, which is an annual requirement of all of the 

civilian agencies subject to the FAIR Act of 1998 to understand how 

contractors are being used and to help identify contracted functions that 

may require workforce rebalancing due to overreliance on contractors. An 

additional analysis of this inventory is due at the end of 2011.18

As of August 2011, three agencies—DOT, HUD, and NSF—had not yet 

developed the insourcing guidance that was due in 2009 for considering 

whether government or contractor employees are best suited for certain 

functions, particularly professional support services and services that 

closely support inherently governmental functions or are similar to work 

OMB is 

planning to provide updated guidance to the agencies for the fiscal year 

2011 inventory analysis, but it had not been issued as of November 2011.

 

18GAO, OMB Service Contracts Inventory Guidance and Implementation, GAO-11-538R

(Washington, D.C.: May 27, 2011).

Agencies Have Responded 

to Multisector Workforce 

Initiatives to Varying 

Degrees
 

Page 23 GAO-12-87 Managing Service Contracts

already performed by federal employees.19 USAID has developed 

insourcing guidance, but is implementing it incrementally through its 

operating units with the assistance of a workforce planning contractor. 

According to USAID officials, the process has been piloted in two offices 

to date. In its most recent guidance, OMB’s OFPP Policy Letter 11-01 

reiterates a statutory requirement that agencies must give special 

consideration to using federal employees to perform work that closely 

supports inherently governmental functions.20

DHS developed insourcing guidance in 2009, and later expanded its 

efforts by introducing a strategy that provides a more comprehensive 

review process to help program offices balance their use of contracted 

and government personnel. The Balanced Workforce Strategy includes a 

decision-making tool intended to help program offices and the department 

assess various risks associated with service contracts, including whether 

the service supports a critical agency function. Using the tool, DHS 

program offices are systematically reviewing all of their existing service 

contracts to determine, among other factors, whether the services 

requested closely support inherently governmental functions, their degree 

of criticality, and the appropriate number of government personnel 

needed to maintain workforce balance. According to DHS officials, the 

review is being conducted in segments and contracts considered to be at 

higher-risk—including professional and management support service 

contracts—were prioritized for the initial reviews.

The Balanced Workforce Strategy leverages the efforts of DHS reviews, 

including the Quadrennial Homeland Security Review and Bottom-Up 

Review completed in 2010. According to DHS officials, it is also in 

response to congressional concerns about their use of contracted 

services and our 2007 report on their use of professional and 

management support services.21

 

19In 2009, we reported that nine civilian agencies we reviewed (including DHS and DOT) 

had not met the statutory date for developing and implementing their insourcing guidelines 

and procedures. GAO, Civilian Agencies’ Development and Implementation of Insourcing 

Guidelines, 

However, DHS is also developing the 

strategy to meet the various statutory and OMB requirements associated 

with the multisector workforce, such as developing insourcing guidelines 

GAO-10-58R (Washington, D.C.: Oct. 6, 2009).

20Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, Division D, § 736.

21GAO-07-990. 
 

Page 24 GAO-12-87 Managing Service Contracts

as required in statute and identifying critical functions, as was outlined in 

OMB’s OFPP Policy Letter 11-01. At the time of our review, DHS officials 

said the strategy was moving forward, but they considered the guidance 

to be a draft because it had been based on OMB’s notice of proposed 

policy letter, and they were anticipating the final policy letter might require 

changes to the DHS strategy.22

Two recent OMB efforts have highlighted a group of service codes for 

increased attention as agencies address their use of service contracts, 

but do not contain two codes—Other Professional Services and Other 

Management Support Services—that accounted for a significant amount 

of dollars obligated by civilian agencies on professional and management 

support service contracts in fiscal year 2010 and may contain risks to the 

government’s control of mission and operations. At a White House forum

in July 2011, OMB announced an effort to achieve cost savings by 

reducing agencies’ spending on management support service contracts 

by 15 percent by the end of fiscal year 2012.23 OMB later identified 12 

service codes to define management support service functions, but did 

not include these two codes, which together comprised 30 percent of 

dollars obligated on professional and management support service 

contracts in fiscal year 2010.24 The two codes were also not included in a 

similar list of service codes provided in OMB’s November 2010 guidance 

for conducting service contract inventories and analysis.25 In the 

guidance, OMB states that agencies should give priority consideration to 

reviewing contracts for professional and management support services 

and provides the list to illustrate codes that should be considered in 

agencies’ analysis.26

 

22OMB Notice of Proposed Policy Letter, Work Reserved for Performance by Federal 

Government Employees, 75 Fed. Reg. 16188 (Mar. 31, 2010).

According to OMB, these codes were identified for 

heightened management attention due to concerns of their increased risk 

23White House Forum on Accountability in Federal Contracting, July 7, 2011.

24OMB Memorandum, Reduced Contract Spending for Management Support Services 

(Nov. 7, 2011). 

25OFPP Memorandum, Service Contract Inventories (Nov. 5, 2010). 

26Two-thirds of the codes identified by OMB are professional and management support 

services, including program management support, acquisitions support, and policy 

development services.

OMB May Have Missed 

Opportunities to Address 

Cost Savings and Risk in 

Two Recent Initiatives
 

Page 25 GAO-12-87 Managing Service Contracts

to the government’s control of mission and operations. See appendix IV 

for a complete list of the service codes identified in both initiatives.

While OMB took steps to provide agencies with guidance on codes for 

certain services that may have increased risks, our analysis of 230 

contract SOWs, which included 83 contracts categorized as Other 

Professional Services or Other Management Support Services, showed 

that contracts in these codes include some of the same functions 

identified in the inventory guidance as requiring heightened management 

attention. (See table 5.) For example, requests for acquisition support 

were included in contracts in the two codes at all five of the agencies we 

reviewed. Additionally, because contracts in these codes can include a 

wide range of functions, they may include multiple activities that 

potentially support inherently governmental functions. For example, a 

DHS contract coded Other Professional Services requested services 

ranging from supporting program development and implementation, 

policy, workforce analysis, statistical and financial analysis, and economic 

analysis, to technical writing, web maintenance, mail and file operations, 

training, and information technology support for various programs.

Table 5: Services Requested in Contracts Coded as Other Professional Services or Other Management Support Services 

DHS DOT USAID HUD NSF Total

Total contracts reviewed 22 11 16 18 16 83

Services that closely support inherently governmental functions requested in one or more contract statements of work

Acquisition support  a     

Support for policy development  a   

Budget preparation      

Reorganization and planning activities     

Evaluating another contractor’s performance  

Responding to FOIA requests  

Inspection services   

Contracts requesting these services 18 3 7 8 5 41

Dollars obligated in fiscal year 2009 on contracts 

requesting these services (in millions)

$336.6 $2.5 $200.0 $15.2 $78.1 $632.3

Source: GAO analysis of FPDS-NG data and agency data.

a

Indicates a service aligned with codes identified by OMB for special management attention. 

According to a senior OMB official, OMB kept its list of inventory service 

codes concise to help agencies focus their attentions on a manageable 

number of services. However, by omitting these codes from receiving 
 

Page 26 GAO-12-87 Managing Service Contracts

priority attention in agencies’ inventory analysis, particularly considering 

that many of the services requested under these codes may closely 

support inherently governmental functions, agencies may not conduct a 

full analysis of risks related to loss of control and operations. While the 

services specified in the inventory analysis list are intended to be 

illustrative, the significant amount of obligations spent in the two excluded 

codes also warrants attention, particularly for efforts aimed at reducing 

spending for such services.

Long-standing OMB and FAR guidance has established the need for 

federal agencies to consider risks associated with contractors providing 

professional and management support services, particularly with services 

that closely support inherently governmental functions. However, the five 

agencies we reviewed generally did not consider these risks prior to 

contract award. Additionally, only one of the five agencies had developed 

guidance or practices over time to improve management of these risks. 

Recent OMB efforts associated with the multisector workforce look to 

increase agency focus on services acquired, not necessarily to reduce 

the number of contractors, but to ensure agencies have sufficient 

knowledge of the activities performed by contractors. The efforts 

particularly focus on whether the government may be overly reliant on 

contractors for certain functions and whether such reliance presents risks 

to government control and accountability for decision making. OMB’s 

most recent policy guidance, OFPP Policy Letter 11-01, requires 

agencies to develop procedures to address these issues. Such 

procedures are an important step toward improved agency consideration 

of risks. However, OMB has not established a deadline for when agencies 

need to complete these procedures, which, if established, may help better 

focus agency efforts to address risks.

In the context of better managing the multisector workforce, there are 

further opportunities to enhance the results of OMB’s efforts. Agencies 

are required to conduct inventory analyses to help them understand the 

extent to which contractors support their work. Under current OMB 

inventory guidance, agencies have been asked to focus on a detailed list 

of professional and management support service codes, but not two 

codes that account for one-third of fiscal year 2010 obligations under this 

services category. According to our analysis, these codes contain the 

same risks to mission and operation that OMB is intending to address. 

The same two codes are also not cited in OMB’s more recent effort to 

reduce agency spending for management support service contracts.

Conclusions
 

Page 27 GAO-12-87 Managing Service Contracts

To address these issues, we are making two recommendations to the 

Director of OMB. To better focus agencies’ efforts to manage the risks 

related to professional and management support service contracts we 

recommend that the Director of OMB, through the Office of Federal 

Procurement Policy

• establish a near-term deadline for agencies to develop internal 

procedures required by OFPP Policy Letter 11-01, including for 

services that closely support inherently governmental functions. 

To ensure that the risks of professional and management support service 

contracts are more fully considered and addressed, we recommend that 

the Director of OMB, through the Office of Federal Procurement Policy

• include contracts coded in the Federal Procurement Data System – 

Next Generation (FPDS-NG) as Other Professional Services and 

Other Management Support Services in the cost savings initiative for 

management support services and planned service contract inventory 

guidance to agencies for conducting analysis of special interest 

functions.

We provided a draft of this report to OMB, DHS, DOT, HUD, USAID, and 

NSF for review and comment. DHS provided a written response stating 

that it is committed to ensuring risks related to professional and 

management support service contracts are mitigated (see app. V) and 

technical comments that were incorporated into the report as appropriate. 

DOT, HUD, and NSF also provided technical comments that were 

incorporated into the report as appropriate. USAID responded that it did 

not have comments.

OMB’s Office of Federal Procurement Policy (OFPP) provided comments 

by e-mail on this report. OFPP generally agreed with our findings and 

recommendations, but provided technical comments on our 

recommendations. For our first recommendation, OFPP commented that 

the OFPP Policy Letter 11-01 addresses multiple management 

responsibilities related to professional and management support service 

contracts and it would likely establish agency time frames for agencies to 

develop the required internal procedures more broadly, not just for 

services that closely support inherently governmental functions. In 

recognition of the interrelatedness of the critical functions that may be 

performed by contractors, including those that closely support inherently 

governmental functions, we modified the recommendation to reflect the 

broader scope of OMB’s policy letter.

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 28 GAO-12-87 Managing Service Contracts

For our second recommendation, OFPP commented that it would 

consider addressing contracts coded in FPDS-NG as Other Professional 

Services and Other Management Support Services in the planned service 

contract inventory guidance to agencies, but expressed concerns with 

including these contracts under its current cost savings initiative for 

management support services contracts. OFPP noted that the initiative is 

focused on this fiscal year’s spending and that changing the baseline 

several months into the fiscal year would create confusion at the 

agencies. OFPP stated that it viewed having clear and consistent 

baselines as consistent with our recommendations on OMB’s fiscal year 

2010 contracts savings initiative and that it could consider expanding the 

list of codes for a future service contract cost savings initiative.

27 As our 

analysis has shown, Other Professional Services and Other Management 

Support Services accounted for a significant amount of dollars obligated 

by civilian agencies on professional and management support services 

contracts in fiscal year 2010 and may contain risks to the government’s 

control of mission operations. Including them in the planned service 

contract inventory guidance to civilian agencies will be a good step in 

expanding the agencies’ focus on the use of contractors. In recognition 

that agencies may have already started to respond to the cost savings 

initiative for this fiscal year, we modified the recommendation to provide 

OMB some flexibility for including these codes under the cost savings 

initiative in the subsequent years.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the appropriate 

congressional committees and the Director of OMB, the Secretaries of 

DHS, DOT, and HUD, and the Administrators of USAID and NSF. In 

addition, the report will be available at no charge on the GAO website at 

http://www.gao.gov. 

If you or your staff have questions about this report or need additional 

information, please contact me at (202) 512-4841 or huttonj@gao.gov. 

Contact points for our Offices of Congressional Relations and Public 

 

27GAO, Federal Contracting: OMB’s Acquisition Savings Initiative Had Results, but 

Improvements Needed, GAO-12-57 (Washington, D.C.: Nov. 15, 2011). 
 

Page 29 GAO-12-87 Managing Service Contracts

Affairs may be found on the last page of this report. Other staff making 

key contributions to this report are listed in appendix VI. 

John P. Hutton

Director

Acquisition and Sourcing Management
Appendix I: Scope and Methodology

Page 30 GAO-12-87 Managing Service Contracts

To conduct this work, we analyzed contract data from the Federal 

Procurement Data System – Next Generation (FPDS-NG) and selected 

and reviewed 230 contract statements of work (SOW) for professional 

and management support services, from which we selected 12 contracts 

and task orders for more in-depth case-study reviews. To assess the 

reliability of FPDS-NG data fields used in our analysis, we confirmed 

through the SOWs that selected contracts and task orders were correctly 

categorized as professional and management support services. We 

determined that the data were sufficiently reliable for overall trend 

analysis of these services. We also reviewed agency and 

governmentwide guidance and spoke with agency and Office of 

Management and Budget (OMB) officials.

To determine the extent to which civilian agencies contract for 

professional and management services, we compiled information from 

FPDS-NG on procurement spending at civilian agencies for fiscal years 

2005 through 2010. For the purposes of this report, contracts described 

as professional and management support services are contracts 

categorized as “Professional, Administrative and Management Support 

Services” in the Federal Procurement Data System Product and Service 

Codes Manual. To gain greater insight into the types of activities included 

in contracts under these codes, we judgmentally selected five civilian 

agencies, the Departments of Homeland Security (DHS), Transportation 

(DOT), and Housing and Urban Development (HUD), the U.S. Agency for 

International Development (USAID), and the National Science Foundation 

(NSF), based in part on their obligations for professional and 

management support services in fiscal year 2009 as a proportion of 

overall service obligations, as well as to represent varying agency 

missions and amounts of service contract obligations. Using the same 

criteria, we selected three components each at DHS and DOT, as these 

two agencies had FPDS-NG data available at these levels. The DHS 

components are the Office of the Secretary, the Transportation Security 

Administration, and U.S. Citizenship and Immigration Services. At DOT, 

we selected the Office of the Secretary of Transportation, the Federal 

Aviation Administration, and the Federal Transit Administration.

From these agencies, we reviewed FPDS-NG data on obligations in fiscal 

year 2009, which at the time was the most recent full year data available, 

to select professional and management support service contracts and 

task orders for further review. To focus our analysis, we obtained FPDSNG data on contract obligations from 20 specific service codes for 

professional and management services, which included codes identified 

in prior GAO work and services listed in OMB’s inventories guidance as 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 31 GAO-12-87 Managing Service Contracts

requiring heightened management attention. We also included service 

codes that were frequently used by the five agencies and that might relate 

to specific agency missions. See table 6 for a list of service codes 

considered.

Table 6: Professional and Management Support Service Codes Included in Selection Sample 

Professional and management support services Service code Description

Identified in OMB contract inventories guidance as 

requiring special management attention

R406 Policy Review/Development Services

R407 Program Evaluation Services

R408 Program Management/Support Services

R409 Program Review/Development Services

R413 Specifications Development Services

R414 Systems Engineering Services

R423 Intelligence Services

R425 Engineering and Technical Services

R497 Personal Services Contracts

R707 Contract, Procurement, and Acquisition Support Services

“Other” professional, administrative, and management 

services 

R499 Other Professional Services

R699 Other Administrative Support Services

R799 Other Management Support Services

Services that may relate to individual agency’s mission R402 Real Estate Brokerage Services

R411 Real Property Appraisals 

R421 Technical Assistance

R426 Communication Services

R498 Patent and Trademark Services

R706 Logistics Support Services

R710 Financial Services

Source: GAO analysis of OMB, FPDS-NG, and U.S. General Services Administration data.

Note: Data are from OMB guidance, FPDS-NG product service codes data, and the U.S. General 

Services Administration’s Federal Procurement Data System Product and Service Codes Manual. 

From the contract obligations included under the selected codes, we 

judgmentally selected a nongeneralizable sample of 235 contracts and 

task orders to cover a range of services and obligation amounts. We also 

included contracts and task orders with descriptions, when available, that 

indicated the requested services closely supported inherently 

governmental functions or could be considered functions close to

agencies’ missions. We requested 50 contract and task order SOWs each 
Appendix I: Scope and Methodology

Page 32 GAO-12-87 Managing Service Contracts

from DHS, DOT, USAID, and HUD. We requested 35 SOWs from NSF, 

which had a smaller number of contracts and task orders from which to 

select in these codes. Of the 235 contracts and task orders requested 

across the five agencies, five SOWs were either not available from the 

agencies during the course of our audit work or not sufficiently detailed for 

our review purposes.1

We reviewed the SOWs from the 230 contracts and task orders provided

and compared the services requested to the descriptions of services that 

closely support the performance of inherently governmental functions that 

are available in federal acquisition guidance. After conducting an initial 

SOW review for all of the categories describing services that closely 

support inherently governmental functions, we judgmentally identified 10 

of the categories for more detailed review, including 4 categories that we 

addressed collectively as acquisition support. (See table 7.) These 

categories were primarily selected because their descriptions available in 

federal acquisition regulations allowed for a more definitive determination 

of services supporting inherently governmental functions, based on the 

descriptions available in the SOWs.

Table 7: FAR-Identified Services That May Closely Support Inherently Governmental 

Functions Included in Our Review 

Number Description

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

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

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

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

options to be used by agency personnel in developing policy.

5 Services that involve or relate to the evaluation of another contractor’s 

performance.

6a Services in support of acquisition planning.

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

contractor might influence official evaluations of other contractors).

 

 

1

Two of the five SOWs that were not reviewed were placed under simplified acquisition 

procedures and did not provide enough detail for our review. For the three remaining 

SOWs, in one case agency officials told us an SOW was awarded by an agency 

component that we did not select for our review. For another SOW, an agency official said 

that it did not use a SOW for an order for a licensing agreement; we did not look into the 

circumstances under which that order was placed. Finally, one SOW was not provided by 

the agency in a timely manner.
Appendix I: Scope and Methodology

Page 33 GAO-12-87 Managing Service Contracts

Number Description

8a Contractors providing technical evaluation of contract proposals.

9 Contractors providing assistance in the development of statements of work

(SOW). 

a 

10 Contractors providing support in preparing responses to Freedom of 

Information Act requests.

17 Contractors providing inspection services.

Source: GAO.

Notes: The numbers associated with each service correspond to their placement in the list of services 

identified in FAR section 7.503(d). See app. II for the complete list of services. 

a

For the purposes of our review, we refer to these services collectively as acquisition support 

services.

To determine if agency officials consider and mitigate risks associated 

with using contracts for selected professional and management support 

services, we reviewed available agency guidance and conducted a 

detailed review of 12 contracts or task orders as case studies. From the 

230 SOWs reviewed, we judgmentally selected the 12 contracts or task 

orders to provide a range of obligation amounts and service codes, and to 

include cases in which the services requested might closely support 

inherently governmental functions, or represent contracting activity that 

might be typical or indicative of types of work contracted by that agency. 

We selected three contracts or task orders each from DHS and DOT, one 

from each of the selected components, and two contracts or task orders 

from each of the three remaining agencies. For each case study, we 

reviewed contract documentation, including available acquisition plans, 

oversight plans, and records, and interviewed contracting and program 

officials about the decision to use contractors and contractor oversight, 

including any processes and guidance used and the extent to which they 

considered potential risks. To review agency guidance and practices, we 

interviewed agency officials, including procurement, management, and 

human capital offices, to help identify available guidance. We requested 

and reviewed agency-level guidance documents, including FAR 

supplements and acquisition manuals, to identify guidance that addresses 

risks associated with professional and management support services 

contracting. We also requested and reviewed available guidance from the 

component organizations we reviewed in DHS and DOT.

To assess agency responses to OMB efforts to address professional and 

management support services, we met with officials from the Office of 

Federal Procurement Policy and reviewed statutes and OMB documents, 

memos and policy letters that address the multisector workforce, as well 

as contracting for professional and management support services. We 
Appendix I: Scope and Methodology

Page 34 GAO-12-87 Managing Service Contracts

interviewed agency procurement and human capital officials about 

actions taken to respond to OMB’s efforts and reviewed available 

documentation.
Appendix II: Examples of Inherently 

Governmental and Closely Supporting 

Inherently Governmental Functions and 

Associated Special Acquisition Requirements

Page 35 GAO-12-87 Managing Service Contracts

The Federal Acquisition Regulation (FAR) section 7.503 provides 

examples of inherently governmental functions and 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, respectively.

Additionally, FAR section 37.114 requires agencies to provide special 

management attention to contracts for services that require the contractor 

to provide advice, opinions, recommendations, ideas, reports, analyses, 

or other work products, as they have the potential for influencing the 

authority, accountability, and responsibilities of government officials. It 

directs agencies to take steps to ensure these contracts do not result in 

performance of inherently governmental functions by the contractor and 

that government officials properly exercise their authority. Table 10 lists 

the steps agencies must take.

Table 8: Examples of Inherently Governmental Functions

Number Description

1 The direct conduct of criminal investigations.

2 The control of prosecutions and performance of adjudicatory functions other than those relating to arbitration or other 

methods of alternative dispute resolution. 

3 The command of military forces, especially the leadership of military personnel who are members of the combat, 

combat support, or combat service support role.

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

5 The determination of agency policy, such as determining the content and application of regulations, among other 

things.

6 The determination of Federal program priorities for budget requests. 

7 The direction and control of Federal employees.

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

9 The selection or non-selection of individuals for Federal Government employment, including the interviewing of 

individuals for employment.

10 The approval of position descriptions and performance standards for Federal employees.

11 The determination of what Government property is to be disposed of and on what terms (although an agency may give 

contractors authority to dispose of property at prices within specified ranges and subject to other reasonable 

conditions deemed appropriate by the agency).

Appendix II: Examples of Inherently 

Governmental and Closely Supporting 

Inherently Governmental Functions and 

Associated Special Acquisition Requirements
Appendix II: Examples of Inherently 

Governmental and Closely Supporting 

Inherently Governmental Functions and 

Associated Special Acquisition Requirements

Page 36 GAO-12-87 Managing Service Contracts

Number Description

12 In Federal procurement activities with respect to prime contracts: (i) Determining what supplies or services are to be 

acquired by the Government (although an agency may give contractors authority to acquire supplies at prices within 

specified ranges and subject to other reasonable conditions deemed appropriate by the agency); (ii) Participating as a 

voting member on any source selection boards; (iii) Approving any contractual documents, to include documents 

defining requirements, incentive plans, and evaluation criteria; (iv) Awarding contracts; (v) Administering contracts 

(including ordering changes in contract performance or contract quantities, taking action based on evaluations of 

contractor performance, and accepting or rejecting contractor products or services); (vi) Terminating contracts; (vii) 

Determining whether contract costs are reasonable, allocable, and allowable; and (viii) Participating as a voting 

member on performance evaluation boards.

13 The approval of agency responses to Freedom of Information Act requests (other than routine responses that, 

because of statute, regulation, or agency policy, do not require the exercise of judgment in determining whether 

documents are to be released or withheld), and the approval of agency responses to the administrative appeals of 

denials of Freedom of Information Act requests.

14 The conduct of administrative hearings to determine the eligibility of any person for a security clearance, or involving 

actions that affect matters of personal reputation or eligibility to participate in Government programs.

15 The approval of Federal licensing actions and inspections.

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

17 The collection, control, and disbursement of fees, royalties, duties, fines, taxes, and other public funds, unless 

authorized by statute, such as 31 U.S.C. 952 (relating to private collection contractors) and 31 U.S.C. 3718 (relating to 

private attorney collection services), but not including: (i) Collection of fees, fines, penalties, costs, or other charges 

from visitors to or patrons of mess halls, post or base exchange concessions, national parks, and similar entities or 

activities, or from other persons, where the amount to be collected is easily calculated or predetermined and the funds 

collected can be easily controlled using standard case management techniques; and (ii) Routine voucher and invoice 

examination.

18 The control of the treasury accounts.

19 The administration of public trusts.

20 The drafting of Congressional testimony, responses to Congressional correspondence, or agency responses to audit 

reports from the Inspector General, the Government Accountability Office, or other Federal audit entity.

Source: FAR section 7.503(c).

Table 9: Examples of Services That May Closely Support Inherently Governmental Functions

Number Description

1 Services that involve or relate to budget preparation, including workload modeling, fact finding, efficiency studies, and 

should-cost analyses, etc.

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

3 Services that involve or relate to analyses, feasibility studies, and strategy options to be used by agency personnel in 

developing policy.

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

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

6 Services in support of acquisition planning.

7 Contractors providing assistance in contract management (such as where the contractor might influence official 

evaluations of other contractors).
Appendix II: Examples of Inherently 

Governmental and Closely Supporting 

Inherently Governmental Functions and 

Associated Special Acquisition Requirements

Page 37 GAO-12-87 Managing Service Contracts

Number Description

8 Contractors providing technical evaluation of contract proposals.

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

10 Contractors providing support in preparing responses to Freedom of Information Act requests.

11 Contractors working in any situation that permits or might permit them to gain access to confidential business 

information and/or any other sensitive information (other than situations covered by the National Industrial Security 

Program described in 4.402(b)).

12 Contractors providing information regarding agency policies or regulations, such as attending conferences on behalf of 

an agency, conducting community relations campaigns, or conducting agency training courses.

13 Contractors participating in any situation where it might be assumed that they are agency employees or 

representatives. 

14 Contractors participating as technical advisors to a source selection board or participating as voting or nonvoting 

members of a source evaluation board. 

15 Contractors serving as arbitrators or providing alternative methods of dispute resolution.

16 Contractors constructing buildings or structures intended to be secure from electronic eavesdropping or other 

penetration by foreign governments. 

17 Contractors providing inspection services.

18 Contractors providing legal advice and interpretations of regulations and statutes to Government officials. 

19 Contractors providing special non-law enforcement, security activities that do not directly involve criminal 

investigations, such as prisoner detention or transport and non-military national security details.

Source: FAR section 7.503(d).

Table 10: Special Acquisition Requirements for Services That Have the Potential for Influencing the Authority, Accountability, 

and Responsibilities of Government Officials 

Agencies must ensure that:

(a) A sufficient number of qualified government employees are assigned to oversee contractor activities, especially those that involve 

support of government policy or decision making. During performance of service contracts, the functions being performed shall not be 

changed or expanded to become inherently governmental.

(b) A greater scrutiny and an appropriate enhanced degree of management oversight is exercised when contracting for functions that 

are not inherently governmental but closely support the performance of inherently governmental functions (see 7.503(c)).

(c) All contractor personnel attending meetings, answering government telephones, and working in other situations where their 

contractor status is not obvious to third parties are required to identify themselves as such to avoid creating an impression in the 

minds of members of the public or Congress that they are government officials, unless, in the judgment of the agency, no harm can 

come from failing to identify themselves. They must also ensure that all documents or reports produced by contractors are suitably 

marked as contractor products or that contractor participation is appropriately disclosed.

Source: GAO analysis of FAR section 37.114.
Appendix III: Service Codes for Professional 

and Management Support Services

Page 38 GAO-12-87 Managing Service Contracts

Executive departments and agencies are responsible for collecting and 

reporting data to the Federal Procurement Data System – Next 

Generation (FPDS-NG). Contracting officers must submit data to FPDSNG, including selecting a product or service code from the product 

service code field to describe the items or services requested by the 

contract. If more than one code is applicable, officials must report the 

code that describes the predominance of dollars obligated for the 

contract. Table 11 lists the codes for Professional and Management 

Support Services as defined in the Federal Procurement Data System 

Product and Service Codes Manual, both the August 1998 edition that 

was in effect at the time of our review and the August 2011 edition that 

became effective October 1, 2011.

Table 11: Service Codes for Professional and Management Support Services

August 1998 manual August 2011 manual

Product 

Service 

Code Description

Product 

Service 

Code Description

R401 Personal Care Services (includes such 

services as barber and beauty shop, shoe 

repairs, tailoring, etc.)

R401 Support- Professional: Personal Care (Non-Medical)

Includes: Barber and Beauty Shop, Shoe Repairs, 

Tailoring

Excludes: Medical Services (PSC Q) 

R402 Real Estate Brokerage Services R402 Support- Professional: Real Estate Brokerage 

R404 Land Surveys, Cadastral Services (nonconstruction)R404 Support- Professional: Land Surveys-Cadastral (NonConstruction) 

R405 Operations Research and Quantitative 

Analysis Services

R405 Support- Professional: Operations 

Research/Quantitative Analysis 

R406 Policy Review/Development Services R406 Support- Professional: Policy Review/Development 

R407 Program Evaluation Services Merged with R409 into new code R410

R408 Program Management/Support Services R408 Support- Professional: Program Management/Support

Includes: Situations Where The Contractor Is Solely 

Responsible for Program Management As Well As 

Situations Where The Contractor Provides Program 

Management Support to A Government Program 

Manager

Excludes: Program Evaluation/Review/Development 

(PSC R410), Contract/Procurement/Acquisition 

Support (PSC R707) 

R409 Program Review/Development Services Merged with R407 into new code R410

R410 Support- Professional: Program 

Evaluation/Review/Development

Excludes: Program Management/Support (PSC R408), 

Contract/Procurement/Acquisition Support (PSC R707) 

Appendix III: Service Codes for Professional 

and Management Support Services
Appendix III: Service Codes for Professional 

and Management Support Services

Page 39 GAO-12-87 Managing Service Contracts

August 1998 manual August 2011 manual

Product 

Service 

Code Description

Product 

Service 

Code Description

R411 Real Property Appraisals Services (SIC 6531) R411 Support- Professional: Real Property Appraisals 

R412 Simulation R412 Support- Professional: Simulation 

R413 Specifications Development Services R413 Support- Professional: Specifications Development 

R414 Systems Engineering Services Merged with R421 into R425 based on FAR definition

R415 Technology Sharing/Utilization Services R415 Support- Professional: Technology Sharing/Utilization 

R416 Veterinary/Animal Care Services R416 Support- Professional: Veterinary/Animal Care 

R418 Legal Services R418 Support- Professional: Legal

Includes: Attorney Services, Such As Testimony 

Preparation; Adjudication; Arbitration; Mediation

Excludes: Environmental Legal Support (PSC F115), 

Expert Witness (PSC R424), Court Reporting (PSC 

R606) 

R419 Educational Services Duplicate of PSC U009

R420 Certifications and Accreditations for products 

and institutions other than educational 

institutions

R420 Support- Professional: Certifications and 

Accreditations (Other Than Educational Institutions or 

Info Tech C&A)

Excludes: Educational Institutions and Information 

Technology Certifications and Accreditations 

R421 Technical Assistance Merged with R414 into R425 based on FAR definition

R422 Market Research and Public Opinion Services 

(includes telephone and field interviews, focus 

testing, and surveys)

R422 Support- Professional: Market Research/Public 

Opinion

Includes: Telephone and Field Interviews, Focus 

Testing, and Surveys 

R423 Intelligence Services R423 Support- Professional: Intelligence 

R424 Expert Witness R424 Support- Professional: Expert Witness 

R425 Engineering and Technical Services R425 Support- Professional: Engineering/Technical

Includes: Systems Engineering, Technical Assistance, 

and Other Services Used to Support The Program 

Office During The Acquisition Cycle 

R426 Communications Services R426 Support- Professional: Communications

Excludes: Language Translation and Sign Language 

Interpretation (PSC R608) 

R427 Weather Reporting/Observation Services R427 Support- Professional: Weather Reporting/Observation 

R428 Industrial Hygienics R428 Support- Professional: Industrial Hygienics 

R429 Support- Professional: Emergency Response, Disaster 

Planning, and Preparedness Support 

R430 Support- Professional: Physical Security and Badging 

R431 Support- Professional: Human Resources 

R497 Personal Services Contracts R497 Support- Professional: Personal Services Contracts 
Appendix III: Service Codes for Professional 

and Management Support Services

Page 40 GAO-12-87 Managing Service Contracts

August 1998 manual August 2011 manual

Product 

Service 

Code Description

Product 

Service 

Code Description

R498 Patent and Trademark Services R498 Support- Professional: Patent and Trademark 

R499 Other Professional Services R499 Support- Professional: Other 

R602 Courier and Messenger Services R602 Support- Administrative: Courier/Messenger 

R603 Transcription Services R603 Support- Administrative: Transcription

Excludes: Court Reporting (PSC R606), Stenographic 

(PSC R609) 

R604 Mailing and Distribution Services R604 Support- Administrative: Mailing/Distribution

Excludes: Courier/Messenger (PSC R602) 

R605 Library Services R605 Support- Administrative: Library 

R606 Court Reporting Services R606 Support- Administrative: Court Reporting

Excludes: Transcription (PSC R603), Stenographic 

(PSC R609) 

R607 Word Processing/Typing Services R607 Support- Administrative: Word Processing/Typing 

R608 Translation and Interpreting Services 

(Including Sign Language)

R608 Support- Administrative: Translation and Interpreting

Includes: Language Translation; Sign Language 

Interpretation 

R609 Stenographic Services R609 Support- Administrative: Stenographic

Excludes: Court Reporting (PSC R606), Transcription 

(PSC R603) 

R610 Personal Property Management Services R610 Support- Administrative:- Personal Property 

Management 

R611 Credit Reporting Services R611 Support- Administrative: Credit Reporting 

R612 Information Retrieval R612 Support- Administrative: Information Retrieval

Includes: Services Related to Search and Storage of 

Text, Images, Video, and Other Such Data 

R613 Post Office Services R613 Support- Administrative: Post Office 

R614 Paper Shredding Services R614 Support- Administrative: Paper Shredding 

R615 Support- Administrative: Background Investigation 

R699 Other Administrative Support Services R699 Support- Administrative: Other 

R701 Advertising Services R701 Support- Management: Advertising 

R702 Data Collection Services R702 Support- Management: Data Collection

Excludes: Market Research/Public Opinion, to Include 

Telephone and Field Interviews, Focus Testing, and 

Surveys (PSC R422) 

R703 Accounting Services (NOTE: New code 

created for Financial Services See R710 

below)

R703 Support- Management: Accounting 

R704 Auditing Services R704 Support- Management: Auditing 
Appendix III: Service Codes for Professional 

and Management Support Services

Page 41 GAO-12-87 Managing Service Contracts

August 1998 manual August 2011 manual

Product 

Service 

Code Description

Product 

Service 

Code Description

R705 Debt Collection Services R705 Support- Management: Debt Collection 

R706 Logistics Support Services R706 Support- Management: Logistics Support 

R707 Contract, Procurement, and Acquisition 

Support Services

R707 Support- Management: 

Contract/Procurement/Acquisition Support 

R708 Public Relations Services (includes writing 

services, event planning and management, 

media relations, radio and television analysis, 

and press services)

R708 Support- Management: Public Relations

Includes: Writing Services, Event Planning and 

Management, Media Relations, Radio and Television 

Analysis, Press Services 

R709 Ongoing Audit Operations Support Duplicate of R704

R710 Financial Services (includes credit card 

services and any other financial services. See 

revision to description for code R703 above)

R710 Support- Management: Financial

Includes: Credit Card Services 

R711 Banking Services (includes accepting and 

cashing government checks and other 

payment instruments, accepting direct 

deposits, accepting payments to the 

government from the public such as excise 

taxes and duties, maintaining bank accounts)

R711 Support- Management: Banking

Includes: Accepting and Cashing Government Checks 

and Other Payment Instruments, Accepting Direct 

Deposits, Accepting Payments to The Government 

From The Public 

R712 Coin Minting R712 Support- Management: Coin Minting 

R713 Banknote Printing R713 Support- Management: Banknote Printing 

R799 Other Management Support Services R799 Support- Management: Other 

Source: U.S. General Services Administration.

Note: Information obtained from the U.S. General Services Administration’s Federal Procurement 

Data System Product and Service Codes Manual, August 1998 edition and August 2011 edition. 
Appendix IV: List of Services Requiring 

Special Consideration in OMB Inventory 

Guidance and Services Identified in OMB Cost 

Savings Initiative

Page 42 GAO-12-87 Managing Service Contracts

In November 2010, the Office of Management and Budget (OMB) issued 

an Office of Federal Procurement Policy (OFPP) memo with guidance to 

help agencies conduct a required service contract inventory for fiscal year 

2010.1

In July 2011, OMB announced a cost savings initiative focused on agency 

contracts for management support services.

According to the guidance, the insight obtained from conducting 

the inventories is especially important for contracts whose performance 

may involve critical functions or functions closely associated with 

inherently governmental functions, as may be the case, for example, with 

contracts for various professional, administrative and management 

services falling within “Code R” of the Federal Procurement Data System 

Product and Services Codes Manual. The guidance further states that 

agencies should conduct an analysis of their inventories, giving priority 

consideration to functions that require increased management attention 

due to heightened risk of workforce imbalance. It provided an illustrative 

list of functions and their service code identified by OMB for heightened 

management consideration, based on concerns of increased risk of losing 

control of mission and operations as identified through a review of reports 

issued in recent years.

2 Agencies were directed to 

reduce their spending on such services by 15 percent by the end of fiscal 

year 2012. In November 2011, OMB issued guidance identifying 12

service codes that describe management support services.3

Table 12: Service Codes Identified in Recent OMB Initiatives

Table 12 

shows the list of service codes from both initiatives.

Service 

Code Description 

Codes in 

inventory 

guidance

Codes in 

cost savings 

initiative

B505 Cost Benefit Analyses 

D302 ADP Systems Development Services  

D307 Automated Information Systems Services  

D310 ADP Backup and Security Services  

 

1

OFPP Memorandum, Service Contract Inventories (Nov. 5, 2010).

2

White House Forum on Accountability in Federal Contracting, July 7, 2011. 

3

OMB Memorandum, Reduced Contract Spending for Management Support Services 

(Nov. 7, 2011).

Appendix IV: List of Services Requiring 

Special Consideration in OMB Inventory 

Guidance and Services Identified in OMB 

Cost Savings Initiative
Appendix IV: List of Services Requiring 

Special Consideration in OMB Inventory 

Guidance and Services Identified in OMB Cost 

Savings Initiative

Page 43 GAO-12-87 Managing Service Contracts

Service 

Code Description 

Codes in 

inventory 

guidance

Codes in 

cost savings 

initiative

D314 ADP System Acquisition Support Services  

R406 Policy Review/Development Services 

R407 Program Evaluation Services 

R408 Program Management/Support Services  

R409 Program Review/Development Services 

R413 Specifications Development Services  

R414 Systems Engineering Services  

R421 Technical Assistance 

R423 Intelligence Services  

R425 Engineering and Technical Services  

R497 Personal Services Contracts  

R707 Contract, Procurement, and Acquisition 

Support Services

 

Source: GAO analysis of Federal Procurement Data System – Next Generation (FPDS-NG) and OMB data.
Appendix V: Comments from Department of 

Homeland Security 

Page 44 GAO-12-87 Managing Service Contracts

Appendix V: Comments from Department of 

Homeland Security
Appendix V: Comments from Department of 

Homeland Security 

Page 45 GAO-12-87 Managing Service Contracts
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 46 GAO-12-87 Managing Service Contracts

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

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

Director; Jennifer Dougherty; Jacques Arsenault; Robert Campbell; Kristin 

Van Wychen; Sarah Viranda; Laura Greifner; Julia Kennon; Sylvia 

Schatz; and Kenneth Patton made key contributions to this report.

Appendix VI: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(120944)
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