Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD's Total Workforce
Published: 2013-05-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The federal governments growing fiscal challenges underscore the importance of DOD employing a strategic approach to determining the appropriate mix of its military, civilian, and contractor personnel to perform its mission, and determining the functions that are critical for the department to achieve its missions. A committee report accompanying the National Defense Authorization Act for Fiscal Year 2013 directed GAO to assess the measures DOD is taking to balance its workforce against its requirements. GAO examined (1) historical and projected workforce trends, (2) the actions DOD has taken to determine an appropriate workforce mix, (3) the analysis DOD performs to identify core or critical functions, and (4) how DOD used its inventory of contracted services to inform budget submissions. GAO performed trend analysis to determine historical and future workforce levels. GAO also reviewed relevant statutes, DOD and military department guidance, and budgetary submissions, and interviewed officials from DOD and the Office of Management and Budget (OMB).
section_title: What GAO Found
paragraphs: Since fiscal year 2001, the Department of Defense's (DOD) military and civilian workforces peaked in fiscal year 2011 at 3.1 million personnel combined, and is projected to decrease over the next five years to below the fiscal year 2001 level of 2.9 million. Comparable historical data on DOD's contractor workforce are not available. In fiscal year 2011, DOD reported that it contracted for services performed by an estimated 710,000 contractor full time equivalents (FTEs)--a workforce equal to about 90 percent of the size of DOD's civilian workforce of 807,000 FTEs. Using fiscal year 2013 constant dollars, GAO's analysis of DOD spending on contracted services shows obligations peaked in fiscal year 2010 at about $195 billion, more than twice the amount spent in fiscal year 2001. This spending decreased to about $174 billion in fiscal year 2012.
DOD has taken some steps to improve its understanding and management of its total workforce; however, several shortcomings remain. Specifically, DOD has yet to assess the appropriate mix of its military, civilian, and contractor personnel capabilities in its strategic workforce plan as required by law. Further, DOD has not updated its policies and procedures to reflect current statutory requirements to use its civilian strategic workforce plan and the inventory of contracted services to determine the appropriate mix of personnel to perform DOD's mission. Moreover, DOD's strategic human capital plan does not contain certain required elements and information and several factors limit the accuracy of its inventory of contracted services. As a result, the department is hampered in making more informed strategic workforce mix decisions, which is crucial to meeting DOD's congressional mandate to manage its total workforce.
Although DOD is not required to perform analysis to identify a list of core or critical functions across the department as a whole, DOD has identified broad core mission areas of the department. However, its current policies do not fully reflect federal policy concerning the identification of critical functions. Office of Federal Procurement Policy Policy Letter 11-01 requires agencies to identify and ensure that they retain control over critical functions that are core to the agency's mission, but may be contracted out to the private sector. DOD's policies and procedures predate the publication of this requirement, and consequently contain no reference to it. Absent specific policies and procedures on this process, DOD may lack assurance that it retains enough government employees to maintain control over these important functions.
DOD components used various methods and data sources, including their inventories of contracted services, to estimate contractor FTEs for budget submissions, but GAO's analysis found that the contractor FTE estimates have significant limitations and do not accurately reflect the number of contractors providing services to DOD. Components encountered challenges, to include the use of estimating techniques based on inventory data that may not be accurate and the lack of a crosswalk between the inventory and specific budget codes. While the Army has a process that addresses these challenges, it may be several years before the remaining DOD components are able to do the same. DOD is taking steps to help the remaining components address these challenges, but, in the meantime, the budget does not provide an explanation of how the contractor FTE estimates are derived and what limitations apply.
section_title: What GAO Recommends
paragraphs: GAO recommends that DOD revise its policies and procedures to incorporate (1) legislative requirements for workforce planning and (2) federal requirements for the identification of critical functions. GAO also recommends that DOD provide better information regarding contractor FTEs used in budget submissions. DOD noted actions that it has underway or planned to respond to these recommendations.

section_title: Letter
paragraphs: The Department of Defense (DOD) is one of the largest and most  complex organizations in the federal government, and it is consequently  one of the nation’s largest employers. DOD’s total workforce consists of  three main components: military personnel (including the active military  and the reserve and guard forces), civilians, and contractors providing  support to the department. For fiscal year 2012, DOD budgeted for a  military workforce of about 2.3 million active and reserve servicemembers  and a civilian workforce of about 800,000 full time equivalents (FTEs),  including foreign nationals and indirect hires. The active military and  reserve and guard forces are charged with implementing the National  Military Strategy and performing military essential functions in support of  DOD’s various missions. DOD’s civilian workforce performs a wide variety  of responsibilities, including providing care for active duty personnel, their  dependents, and wounded servicemembers; managing financial  accounting systems; and providing mission-essential combat-support  functions that traditionally have been performed by the uniformed military,  such as logistics support, maintenance, and carrying out cyber and  intelligence efforts. In addition, a key component of this workforce also  provides deployable civilian experts to Afghanistan and other theaters of  operation. Augmenting the military and civilian workforces, DOD has  increasingly relied on contractors both overseas and in the United States  to perform many of the same functions as civilian employees, including  management support, communication services, interpreters who  accompany military patrols, base operations support (e.g., food and  housing), weapon systems maintenance, and intelligence. In its inventory  of contracted services, DOD reported that it spent about $145 billion for  contracted services in fiscal year 2011, provided by an estimated 710,000  contractor FTEs. DOD’s workforce management is governed by a  complex statutory and regulatory framework, and each component of  DOD’s total workforce is governed by different rules that direct how the  department manages its total workforce. $17.8 billion in fiscal year 2001 to nearly $23.5 billion in fiscal year 2008.  Further, DOD’s obligations for contracted services more than doubled  from fiscal years 2001 to 2009. The sequestration as a result of the  Budget Control Act of 2011 requires spending cuts in fiscal year 2013  totaling about $40 billion through across-the-board, proportional  reductions in funding provided in the appropriations acts for most defense  accounts, including accounts related to DOD’s civilian workforce and  contracted services. To prepare for the sequestration, the Secretaries of  the Military Departments issued guidance in January 2013 to their  respective departments to direct actions intended to reduce costs.  Further, section 955 of the National Defense Authorization Act for Fiscal   calls for the Secretary of Defense to develop an efficiencies  Year 2013plan to achieve savings in funding for contractor and civilian workforces  commensurate with the savings in military pay due to currently planned  reductions to active duty end strength.
The current and long-term future fiscal pressures facing DOD underscore  the importance of a strategic approach to recruit, develop, and retain the  right number of individuals with the necessary skills and competencies for  DOD to meet its mission and contract for services where appropriate.  While progress has been made since we first placed strategic human  —for example, through  capital management on our high risk list in 2001 the various authorities and flexibilities provided to agencies for managing  the federal workforce—this area remains one of significant concern. As  we noted in February 2013, strategic human capital management in DOD  and across the federal government continues to be a GAO high-risk area  because critical skill and competency gaps could undermine agencies’  abilities to accomplish their missions. Current budget and long-term  future fiscal pressures coupled with a potential wave of employee  retirements could produce gaps in leadership and institutional knowledge  that may threaten the government’s capacity to effectively address  complex challenges. Strategic human capital planning that is integrated  with broader organizational strategic planning is essential for ensuring  that agencies have the talent, skills, and experience they need to cost- effectively execute their current and future mission and program goals.  Specifically, with regard to DOD, our work has emphasized that effective  planning can enable the department to have the right people, with the  right skills, doing the right jobs, in the right places, at the right time by  making flexible use of its military and civilian workforces and appropriate  use of contractors.
The National Defense Authorization Act for Fiscal Year 2010, Pub. L. No. 111-84, §  1108 (2009) (codified as amended at 10 U.S.C. §115b) codified a previous strategic  workforce plan requirement that was originally enacted by section 1122 of the National  Defense Authorization Act for Fiscal Year 2006, Pub. L. No. 109-163 (2006). relevant legislation, requirements, and guidance that directs DOD to take  steps regarding its strategic workforce management. Additionally, we  have made a series of recommendations to DOD to better manage its  total workforce and improve its strategic workforce plan. Appendix I lists  our recent relevant recommendations made to DOD.
A committee report accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2013 directed GAO to assess DOD’s  efforts to appropriately balance its current and future workforce structure  against its requirements. In this report, we examine: (1) the historical  trends of the levels of military, civilian, and contractor personnel and the  future projected trends for DOD’s workforce in light of shifts in  departmental priorities; (2) the extent to which DOD has taken action to  determine the appropriate workforce mix necessary to accomplish its  mission; (3) the extent to which DOD conducts analysis to identify core or  critical functions of the department; and (4) how the military departments  and defense agencies used the inventory of contracted services to inform  their fiscal year 2013 and 2014 budget submissions.
To examine the historical and projected trends of the levels of military,  civilian and contractor personnel in light of shifts in departmental  priorities, we obtained data on active component end strength; the  selected reserve within the reserve component end strength;  and  civilian personnel FTEs, including foreign nationals and indirect hires;and performed trend analysis on this data from fiscal year 2001 to fiscal  year 2017. We relied on data from DOD’s fiscal year 2013 Future Years  Defense Program (FYDP), the Comptroller Information System (CIS) from  the Office of the Under Secretary of Defense, Comptroller, and other  DOD budget documents. We determined that these data, collectively,  were sufficiently reliable for use in discussing historical and future trends  of the military and civilian workforces. We assessed the reliability of the  data by comparing the data against other available data sources,  conducting electronic testing of the data, and discussing any limitations of  the data with appropriate DOD officials. DOD does not have comparable  information on DOD’s contractor workforce, but to determine the size of  the contractor workforce, we obtained estimates of contractor FTEs from  DOD’s inventory of contracted services from fiscal year 2008 to fiscal  year 2011. To report on obligated dollars for contracted services, we  reviewed the obligated dollars for contracted services from fiscal year  2001 to fiscal year 2012 and the projected obligations for contracted  services from fiscal year 2013 to fiscal year 2014. We relied on budget  data on obligations for contracted services. Based on discussions with  appropriate DOD officials and our comparison of the trends in the budget  data against other data sources, we believe the contracted service  obligation data are sufficiently reliable to serve as context of overall  trends for contracted services. In addition, we interviewed officials from  the Office of the Secretary of Defense (OSD) and military services  regarding how shifts in departmental priorities are expected to impact  workforce requirements.
To determine the extent to which DOD has taken action to determine the  appropriate workforce mix to accomplish its mission, we reviewed  relevant legislation that governs DOD total workforce management and  departmental guidance concerning requirements for DOD to carry out   We also interviewed OSD and military service  such an assessment.officials to assess the actions DOD has taken to ensure it is employing  the appropriate workforce mix. Specifically, we discussed the process  DOD uses to determine which sector of the workforce should perform a  given task based on the nature of the work involved, DOD’s process for  identifying mission critical occupations as part of its strategic workforce  planning process, and efforts by the services to improve their total  workforce management in the future. We reviewed selected statutory  requirements concerning the processes by which DOD is to determine its  appropriate workforce mix. We then compared these requirements to the  department’s efforts to date, and noted any differences.
To determine the extent to which DOD conducts analysis to identify core  and critical functions, we reviewed relevant legislation and federal policy  and other guidance that requires the identification of inherently  governmental and critical functions, including the Office of Federal  Procurement Policy Policy Letter 11-01. Further, we reviewed  departmental guidance concerning the need and process for identifying  critical functions. We interviewed OSD and military service officials to  determine the actions DOD has taken to define core or critical functions  and respond to these requirements. Additionally, we met with officials  from the Office of Federal Procurement Policy within the Office of  Management and Budget to discuss their views on DOD’s implementation  of those requirements contained in the 2011 policy letter regarding critical  functions. We compared federal policy concerning the identification of  critical functions to DOD’s efforts to date, and noted any differences.
To determine how the military departments and defense agencies used  the inventory of contracted services to inform their fiscal year 2013 and  2014 budget submissions, we focused our efforts on five DOD  components—the departments of the Army, the Navy, and the Air Force,  the Defense Logistics Agency (DLA), and the Defense Information  Systems Agency (DISA). We selected these components based on the  amount of their obligations for contracted services and the large number  of contractor FTEs they identified in their fiscal year 2011 inventory of  contracted services, the most current inventory available at the time of  our review. We reviewed relevant guidance that directed the DOD  components on how to use the inventory of contracted services to provide  contractor FTE information in their budget submissions for fiscal years  2013 and 2014. We also interviewed DOD officials regarding the  guidance and ongoing initiatives intended to improve the accuracy of the  inventory data to inform future budget submissions. In addition, we  interviewed relevant budget and manpower officials from the five  components we included in our review regarding the use of their  inventories in the development of their fiscal year 2013 and 2014 budget  submissions, and we obtained corroborating documentation from the  three components that could provide it to determine the processes used  to develop contractor FTE information included in these budget  submissions.
We conducted this performance audit from October 2012 to May 2013 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. A more in depth discussion of  our scope and methodology appears in appendix II of this report.
subsections: section_title: Background
paragraphs: DOD’s total workforce is made up of three main components: military  personnel (including the active military and the reserve and guard forces),  , and contractor support. Figure 1 shows the  DOD civilian employeesnumber of the active and reserve components of the military, civilians,  and estimated contractor FTEs that comprised DOD’s total workforce in  fiscal year 2011.
Over the last decade, Congress has enacted or amended several laws  that govern DOD’s management of its total workforce. These  interconnected provisions provide a framework for DOD total workforce  management that requires DOD to adopt and enforce specific policies. In  addition to those policy requirements, DOD is also required to submit  information to Congress about its workforce and workforce planning,  including, among other things, a strategic plan for shaping its civilian  workforce, an annual inventory of contracted services and budget  justification information concerning its contractor workforce. Other  provisions govern the overall composition of DOD’s workforce, and  outline the circumstances under which it is appropriate to convert  performance of functions from one of the three workforce components to  another. This section provides a high level overview of selected relevant  provisions, as well as the major responsibilities regarding workforce  management assigned to departmental leadership and organizations.
10 U.S.C. § 129a governs DOD’s general policy for total force  management and was significantly amended in December of 2011.  Section 129a now requires the Secretary of Defense to establish  policies and procedures for determining the most appropriate and cost  efficient mix of military, civilian, and contractor personnel to perform  the mission of the department. These policies and procedures are  required to clearly provide that attainment of a DOD workforce  sufficiently sized and comprised of the appropriate mix of personnel  necessary to carry out the mission of the department and the core  mission areas of the armed forces takes precedence over cost. The  law also specifies that these procedures shall specifically require DOD  to use, among other things, the civilian strategic workforce plan (see  10 U.S.C. § 115b below) and the inventory of contracted services (see  10 U.S.C. § 2330a below) when making determinations regarding the  appropriate workforce mix.
10 U.S.C. § 115b requires the biennial submission of a strategic  workforce plan to shape and improve DOD’s civilian workforce.  Among other things, the plan is required to address the appropriate  mix of military, civilian, and contractor personnel capabilities, a  requirement that DOD’s plan submissions have not addressed to  date.
10 U.S.C. § 2330a requires the Secretary of Defense to submit an  annual inventory of activities performed pursuant to contracts for  services, which, among other things, is required to include information  concerning the number of contractor employees, expressed as full- time equivalents, subject to certain exceptions. Section 2330a also  requires that the DOD component heads perform a review of the  contracts and activities in the inventory to ensure that the activities on  the list do not include inherently governmental functions or illegal  personal services contracts, and, to the maximum extent practicable,  do not include functions closely associated with inherently  governmental functions. The inventory is also to be used to identify  additional categories of functions for possible conversion to civilian  performance pursuant to 10 U.S.C. § 2463 (below). Additionally,  section 2330a requires DOD component heads to develop a plan,  including an enforcement mechanism and approval process, to use  the inventory to implement 10 U.S.C. § 129a (above), to inform  strategic workforce planning, such as the plan required by 10 U.S.C. §  115b (above), to facilitate the use of the inventory in the submission of  budgetary information in compliance with 10 U.S.C. § 235 (below),  and to perform conversions identified during the review described  above.
10 U.S.C. § 2463 requires the Secretary of Defense make use of the  inventory of contracted services, compiled pursuant to 10 U.S.C. §  2330a (above), for the purpose of identifying certain functions  performed by contractors, to include closely associated with inherently  governmental functions, critical functions and acquisition workforce  functions, that should be given special consideration for conversion to  civilian performance.
10 U.S.C. § 235 requires that the Secretary of Defense include (in the  budget justification materials submitted to Congress) information that  clearly and separately identifies both the amount requested for the  procurement of contract services for each DOD component,  installation, or activity and the number of contractor FTEs projected  and justified for each DOD component, installation, or activity based  on the inventory of contracts for services and the statutorily required  reviews of the inventory data (see 10 U.S.C. § 2330a and 10 U.S.C. §  2463 above).
Following DOD’s fiscal year 2010 announcement of its efficiency  initiatives (including a cap on its civilian workforce FTEs at fiscal year  2010 levels), and in light of the planned drawdown of military personnel,  Congress enacted two additional provisions that shape the composition of  DOD’s total workforce.
Section 808 of the National Defense Authorization Act for Fiscal  Year 2012 (Pub. L. No. 112-81 (2011)) requires, among other things  and subject to certain exceptions, that the total amount obligated by  DOD for contract services in fiscal years 2012 and 2013 may not  exceed the total amount requested for contract services in the fiscal  year 2010 President’s budget. The fiscal year 2010 president’s budget  was the baseline DOD used in developing its civilian workforce cap;  the effect of this provision is to provide a parallel cap on contracted  services working from a similar baseline.
Section 955 of the National Defense Authorization Act for Fiscal  Year 2013 (Pub. L. No. 112-239 (2013)) requires the Secretary of  Defense to, among other things, develop an efficiencies plan for the  civilian and contract workforces. The plan is required to achieve  savings in the total funding of those workforces not less than savings  achieved for basic military personnel pay from reductions in end  strength over the same period of time, subject to certain exceptions.  Among these exceptions are expenses for personnel performing  critical functions identified by the Secretary of Defense as requiring  exemption in the interest of the national defense.
Additionally, there is a body of guidance that relates to determining what  work should be performed by each sector of the total DOD workforce,  including an Office of Federal Procurement Policy Letter, and several  DOD guidance documents. These documents, collectively, require that  migration of work between DOD’s three workforce components be  supported by analysis, and provide when the relevant components should  be considered for performing new requirements.
Office of Federal Procurement Policy Policy Letter 11-01: This  policy letter, among other things, (1) clarifies what functions are  inherently governmental, (2) explains how agencies must manage  work that is “closely associated” with inherently governmental  functions, and (3) requires agencies to identify “critical functions” to  ensure that they have enough internal capability to retain control over  functions that are core to the agency’s mission and operations.
DOD Directive 1100.4: This directive outlines manpower  requirements determination noting that national military objectives  shall be accomplished with a minimum of manpower that is organized  and employed to provide maximum effectiveness and combat power.  It requires that military (active and reserve) and civilian manpower  resources be programmed in accordance with validated manpower  requirements, and within fiscal limits and acceptable levels of risk  identified in defense planning and programming guidance.
DOD Instruction 1100.22: This instruction outlines DOD policy and  procedures for determining the appropriate mix of manpower (military  and civilian) and private sector support (contractors).
DOD Directive Type Memorandum 09-007: Provides business rules  for use in estimating and comparing the full costs of military and DOD  civilian manpower and contract support. It requires components to use  certain business rules when performing an economic analysis in  support of workforce decisions, which include determining the  workforce mix of new or expanding mission requirements that are not  inherently governmental or exempt from private-sector performance.  10 U.S.C. §§ 2461 and 2463 and OMB circular A-76 are also relevant  to the subject of transitions between workforce types, depending on  the type of transition.
Collectively, this body of law and guidance requires DOD to collect a  variety of information for its decision makers to review and use in making  strategic workforce management decisions. These requirements are  especially significant in light of the current and long-term future fiscal  pressures facing DOD, which will require identification of all of those  functions currently being performed by each workforce sector,  prioritization of those functions, and strategic determinations as to  whether the performance of functions is appropriately distributed across  these three sectors.
Several offices have responsibility for implementing these laws and  regulations and managing the department’s total workforce. The Office of  the Under Secretary of Defense, Personnel and Readiness (USD, P&R),  has overall responsibility for issuing guidance on manpower management  to be used by the DOD components, providing guidance on manpower  levels of the components, and developing manpower mix criteria and  other information to be used by the components to determine their  workforce mix. The Under Secretary of Defense (Comptroller) and the  Director, Cost Assessment and Program Evaluation (CAPE) play key  roles in determining the amounts budgeted for military and civilian  personnel, as well as contracted services. The Under Secretary of  Defense (Comptroller) is responsible for ensuring that the budget for DOD  is consistent with the total force management policies and procedures.  The Secretaries of the military departments and heads of the defense  agencies have overall responsibility for the requirements determination,  planning, programming, and budgeting for total force management  policies and procedures, as well as having numerous responsibilities  related to manpower management as detailed in DOD guidance. For  example, they are responsible for designating an individual with full  authority for manpower management including: (1) implementing fiscal  year guidance and manpower management policy within their respective  component, (2) ensuring manpower levels are programmed to optimize  readiness, (3) developing annual manpower requests for Congress,  including the consideration of converting from one form of manpower to  another, (4) conducting continuous review of manpower utilization plans  and programs, and (5) establishing and maintaining manpower data  systems that account for all manpower resources.
section_title: DOD Projects Its Military and Civilian Workforce to Decrease, but Comparable Data on DOD’s Contractor Workforce Are Not Available
paragraphs: DOD’s data shows that since fiscal year 2001, its combined active,  reserve, and civilian workforce peaked in fiscal year 2011 at 3.1 million  personnel, and is projected by DOD to gradually decrease over the next  five years to below its fiscal year 2001 level. Comparable historical data  on the contractor component of DOD’s total workforce are not available,  in part because DOD was not required to compile an annual inventory of  activities performed pursuant to contracts for services until 2008. In its  inventory for fiscal year 2011, DOD reported that about 710,000  contractor FTEs were performing various functions under contracts for  services—which is equal to about 90 percent of the size of DOD’s civilian  workforce of 807,000 FTEs for that same fiscal year. Our analysis of  DOD’s obligations for contracted services using fiscal year 2013 constant  dollars shows DOD’s spending peaked in fiscal year 2010 at about $195  billion, more than twice the amount spent in fiscal year 2001. Such  spending decreased to about $174 billion in fiscal year 2012.
subsections: section_title: DOD’s Military and Civilian Workforce Peaked in Fiscal Year 2011, but Is Projected by DOD to Decrease
paragraphs: Our analysis of DOD’s military and civilian workforce data indicates that  the collective growth in DOD’s military and civilian workforce peaked in  fiscal year 2011 and is projected by DOD to gradually decrease over the  next five years to below its fiscal year 2001 level, which was about 2.9  million servicemembers and DOD civilians combined. In fiscal year 2011,  DOD’s military and civilian workforce totaled about 3.1 million  servicemembers and civilians, or about 139,000 more than fiscal year  2001, with the most growth occurring within the civilian workforce.  Specifically, in fiscal year 2011, DOD’s civilian workforce numbered about  807,000 FTEs, an increase of 17 percent or 120,000 FTEs over fiscal  year 2001 levels. The active component of the military workforce  increased by 3 percent, or about 40,000 personnel, to about 1.425 million,  and the reserve component of the military workforce decreased by 2  percent, or about 21,000 personnel, to about 848,000 during this same  time period. By fiscal year 2017, DOD projects that its active component  end strength will fall below its fiscal year 2001 level to about 1.32 million,  and its reserve component end strength will continue to be below its fiscal  year 2001 level. DOD projects that the civilian workforce will also  decrease by fiscal year 2017 to about 784,000 FTEs—about 14 percent  above its fiscal year 2001 level. Historically, the size of the civilian  workforce has represented about a quarter of DOD’s combined military  and civilian workforce. This ratio has remained relatively constant,  ranging from 23 to 27 percent since the 1960s and reflects substitution  between these workforces. Figure 2 shows the active component and  reserve component end strength and civilian FTEs from fiscal year 2001  through 2017.
Among each of the military services, military and civilian workforce growth  differed over the course of the conflicts in Iraq and Afghanistan; however,  most military services project a decrease in the military and civilian  components of the workforce through fiscal year 2017. For example, from  fiscal year 2001 through fiscal year 2011, the Army and the Marine Corps  significantly increased the number of active component personnel to  execute the warfighting effort, whereas during this same time period, the  Navy and the Air Force decreased the number of active component  personnel by 14 and 6 percent, respectively. During this period of time,  the civilian workforce for all of the military services also increased. In light  of the withdrawal from Iraq and planned withdrawal from Afghanistan, as  well as changing priorities and missions, the Army, the Navy, and the  Marine Corps project decreases among both the active component and  civilian workforce by 2017. The Air Force also projects a decrease in the  number of active component personnel, but projects a civilian workforce  increase of approximately 1 percent by fiscal year 2017. Collectively, the  defense-wide organizations, which include the Office of the Secretary of  Defense, the Joint Staff, and the Defense Agencies and Field Activities,  project an increase of approximately 1 percent for their civilian workforce  by fiscal year 2017. Table 1 shows the changes in the number and  percentage of the military and civilian components of the workforce  between fiscal years 2001 and 2011, with projected changes for fiscal  years 2012 through 2017 by service.
DOD and military service officials identified several factors that  contributed to changes in the size of the military and civilian components  of the workforce since fiscal year 2001. For example, DOD officials noted  that the conflicts in Iraq and Afghanistan, as well as recognition of the  need to rebuild the acquisition workforce, which had been significantly  reduced during the 1990s, and reduce DOD’s reliance on contractors  contributed to the shape and size of the military and civilian sectors of the  workforce over the past decade. Further, DOD cited other factors that led  to growth within the civilian workforce, such as the department’s new  cyber mission and areas specifically designated by Congress. The  following are examples that DOD officials have cited as contributing to the  change in the size and mix of DOD’s workforce.
Military to civilian/contractor conversion: DOD officials stated that  about 50,000 military positions were converted to DOD civilian  positions or contractor performance since fiscal year 2004 to devote  more military positions to support of ongoing military operations.  Conversion to civilian performance may not be one-for-one due to  differences in military and civilian availability and productivity rates.  For example, civilians who are typically hired must be qualified for  their position, whereas military personnel often require on-the-job  training in addition to technical training received prior to assignments.  DOD’s military to civilian conversions were partly due to the high pace  of operations that occurred after September 11, 2001, which created  significant stress on the military’s operating forces. Further, in late  2003, DOD reported that studies had found thousands of military  personnel were being used to accomplish work tasks that were not  military essential. DOD found that civilians or contractors could  perform these tasks in a more efficient and cost-effective manner than  military personnel. The Navy and the Air Force reduced their military  end strength when functions performed by military billets, or positions,  were converted to civilian or contractor performance. Conversely,  when the Army and the Marine Corps converted functions performed  by military billets to DOD civilians, they retained these military billets  to be used in the operating force.
Contractor to civilian conversion (in-sourcing): DOD officials  noted that in-sourcing, or converting previously contracted functions to  performance by civilians, has been an effective tool for the  department to rebalance its workforce, realign inherently  governmental and other critical and core functions to government  performance, and in many cases, generate resource efficiencies for  higher priority goals. In April 2009, the Secretary of Defense  announced his intention to reduce the department’s reliance on  contractors and increase funding for new civilian authorizations. In our  February 2012 report, DOD officials stated that they could not  determine the number of contractor FTEs whose functions were in- sourced because DOD contracts for services, not positions,  and the  number of contractor FTEs used to perform a service is determined by  each private sector provider. Nonetheless, one of the data elements  DOD is required to collect and include in its inventory of contracted  services is the number of contractor FTEs performing each identified  activity pursuant to a contract.
Growth of acquisition workforce: DOD officials noted that  rebuilding the acquisition workforce is another reason for growth. In  our June 2012 report, we reported that according to DOD officials, the  civilian acquisition workforce gained about 17,500 positions from fiscal  year 2009 to December 2011. As noted previously, a portion of this  growth was attributed to in-sourcing. The acquisition workforce had  experienced significant erosion in some areas of expertise due to a  nearly 50 percent cut in its workforce during the 1990s. This reduction  took place as part of DOD’s larger effort to reduce its civilian  workforce by nearly 20 percent overall during that time. When we  evaluated DOD’s approach to this force reduction in 1992, we found  that it was not oriented toward shaping the makeup of the workforce,  resulting in significant imbalances in terms of shape, skills, and  retirement eligibility. At that time, we found that the department’s  efforts were hampered by incomplete data and lacked a clear strategy  for avoiding the adverse effects of downsizing and minimizing skills  imbalances. The downsizing produced serious imbalances in the skills  and experience of the highly talented and specialized civilian  acquisition workforce, putting DOD on the verge of a retirement-driven  talent drain that has had long-lasting implications. To help alleviate  some of these long standing challenges and provide additional funds  for the recruitment, training, and retention of acquisition personnel, in  2008, Congress established the Defense Acquisition Workforce  Development Fund (DAWDF). DOD officials stated that of the  approximately 17,500 positions, about 5,850 were hired using  DAWDF funds.
Growth of cyber security workforce: DOD officials stated that focus  on the new cyber mission increased the size of the cyber workforce.  DOD’s 2010 Quadrennial Defense Review designated cyberspace  operations as a key mission area and discussed steps the department  was taking to strengthen capabilities in the cyber domain, including  developing a department-wide comprehensive approach to DOD  operations in cyberspace that will help build an environment in which  cyber security and the ability to operate effectively in cyberspace are  viewed as priorities for DOD. According to the Quadrennial Defense  Review, to aid its efforts in countering cyberspace threats, DOD  established the U.S. Cyber Command in 2010 to lead, integrate and  better coordinate the day-to-day defense, protection, and operation of  DOD networks. In November 2011, we reported that DOD established  a cybersecurity workforce plan but faced challenges in determining  the size of its cybersecurity workforce because of variations in how  work is defined and the lack of an occupational series specific to  cybersecurity. For these reasons, in February 2013, we included  workforce planning for cybersecurity personnel as a factor in  designating human capital management as a high risk area for the  federal government.
The withdrawal from Iraq and planned withdrawal from military operations  in Afghanistan will impact both the military and, to some extent, the  civilian workforce. DOD currently projects a reduction in its civilian  workforce by 2 percent from fiscal year 2012 through fiscal year 2017.  Several factors have prompted the department to develop plans to  reshape and possibly reduce the numbers of civilians performing certain  functions, while other needs may require additional civilian positions.  DOD and military service officials identified the following factors as key  drivers of projected future change within DOD’s total workforce.
Shift in focus to Pacific region: DOD is refocusing its strategy in the  Asia-Pacific region in the interest of promoting regional security with  its allies in the area. DOD officials stated that this restructuring could  result in a reshaped force and might require changes to installations  and support as forces are restructured.
Budget constraints and uncertainty: DOD, as well as the entire  federal government, is currently operating in a fiscally constrained  environment. The Office of the Secretary of Defense, the military  departments, and other organizations within DOD have issued  guidance to their commands on immediate actions that can be taken  to mitigate some, but not all, of the effects of a constrained budget in  the near-term. Actions include implementing a civilian hiring freeze,  reducing temporary employees, and furloughing the civilian workforce.
Efficiency initiatives: As the federal government confronts growing  fiscal challenges and DOD faces competition for funding, DOD  announced efficiency initiatives in 2010, which the Secretary of  Defense stated were to reduce duplication, overhead, and excess,  and instill a culture of savings and restraint across the department.  Some of the efficiency initiatives focused directly on civilian workforce  levels, including the goals of reducing civilian positions in offices and  commands across DOD, attempting to hold the civilian workforce level  constant at fiscal year 2010 levels, the elimination of some civilian  senior executive positions, and the disestablishment of the Business  Transformation Agency and Joint Forces Command.
Continued growth of cyber workforce: According to officials we  spoke to from each of the services, DOD is continuing to focus its  resources on emerging threats such as cyber attacks. For example,  efforts are underway to further develop and implement the cyber  mission. Each service has its own part in this mission and expects a  continued hiring increase in civilian personnel with skills in  cybersecurity. Further, the Secretary of Defense recently stated that  the cyber mission is critical for the department and will continue to be  an investment priority.
Equipment reset: Military service officials stated that the equipment  that returns from the military operations in Afghanistan will be sent to  depots for repair and maintenance. Reset work, which is performed, in  part, by the civilian workforce, will take two to three years to  complete.
Medical assistance for returning servicemembers: More than a  decade of fighting two wars has resulted in a large number of soldiers,  marines, sailors, and airmen needing medical care, including, among  other things, adjusting to the use of prosthetic limbs and treatment for  post traumatic stress disorder and traumatic brain injuries. DOD  officials stated that it will be important to retain and recruit additional  medical personnel to continue to provide for the medical needs of  servicemembers, who can sometimes require long-term care.
We analyzed the active component of the military and civilian workforce  to provide further perspectives on areas of growth between fiscal years  2001 and 2011. Our analysis of active component end strength and  civilian FTEs by force and infrastructure categories shows that between  fiscal years 2001 and 2011, the civilian workforce generally grew while  the active component workforce generally declined in most force and  infrastructure categories compared to fiscal year 2001. For example, from  fiscal year 2001 through fiscal year 2011, the acquisition infrastructure   and the defense health program civilian workforce grew by 15  workforcepercent and 57 percent respectively, while the active component declined  in those categories by 16 percent and 3 percent respectively. Further,  according to DOD officials, the growth from fiscal year 2001 through fiscal  year 2011 of the civilian workforce in certain categories such as operating  forces and command and intelligence was in large part due to military to  civilian conversions. Table 2 shows the growth and decline of various  force and infrastructure categories.
Historical information on the trends of the contractor component of DOD’s  total workforce since 2001 that would be comparable to information  known about the military and civilian components is not available. This  has occurred in part because DOD contracts for services, not individuals,  and because DOD was not required to track such information until 2008  when Congress required DOD to compile its first annual inventory of  contracted services, starting with the services DOD contracted for in fiscal  year 2007. To date, DOD has submitted annual inventories of contracted  services to Congress for fiscal years 2007, 2008, 2009, 2010, and  2011. However, DOD officials cautioned against comparing the number  of contractor FTEs reported across fiscal years because of differences in  the estimating formula, changes in reporting for the research and  development category, and other factors. In fiscal year 2011, DOD  reported that about 710,000 contractor FTEs were performing various  functions pursuant to contracts for services—about 90 percent of the size  of DOD’s civilian workforce of 807,000 FTEs. Further, in its fiscal year  2011 inventory, DOD reported that these 710,000 contractor FTEs  provided services to DOD under contracts with obligations totaling about  $145 billion.FTEs reported and obligation dollars reported in DOD’s inventory of  contracted services for fiscal years 2008 through 2011.
section_title: DOD Has Taken Some Steps Useful for Determining the Appropriate Mix of Its Workforce, but Shortcomings Remain
paragraphs: DOD has taken some steps to improve its understanding and  management of its workforce, including service-specific efforts to obtain  better data about the workforce; however, several shortcomings remain.  Specifically, DOD has yet to include an assessment of the appropriate  mix of military, civilian, and contractor personnel capabilities in its  strategic workforce plan as required by law. Further, DOD has not  updated its policies and procedures to reflect the most current statutory  requirements to use its civilian strategic workforce plan and the inventory  of contracted services to help determine the appropriate mix of personnel  in its workforce.
subsections: section_title: DOD’s Efforts to Obtain Better Information on Workforce Capacity Continue to Face Challenges
paragraphs: DOD has taken some steps to develop better information and data about  the size, capabilities, and skills possessed and needed by its workforce,  but gaps remain. As part of the statutory requirement to develop a civilian  strategic workforce plan, DOD has been mandated since 2006 to assess  the critical skills and competencies of its current and future civilian   To date, DOD has  workforce and to assess gaps in those areas.developed and updated its strategic workforce plan four times. In its latest  strategic plan issued in March 2012, DOD identified 22 mission critical  occupations, which according to DOD are civilian personnel occupations  that merit special attention based on their importance and the presence of  human capital challenges. In September 2012, we issued a report on  DOD’s March 2012 plan that found that DOD had conducted competency  gap analyses for just 8 of the 22 mission critical occupations identified in  the plan, and it still did not contain an assessment of the appropriate  workforce mix as required by law. Examples of occupations where DOD  did not report conducting gap analyses included budget analysis,  information technology management, and logistics management. Many of  the occupations are associated with areas identified in our high-risk  report.of its mission critical occupations, and DOD partially concurred with this  recommendation and stated that it plans to complete competency gap  analysis for mission critical occupations and other major civilian  occupations by fiscal year 2015.
We recommended that DOD conduct and report on gap analysis  Further, section 115b of title 10 of the United States Code requires DOD  to include in its strategic workforce plan an assessment of the appropriate  mix of military, civilian, and contractor personnel capabilities. However,  as we have previously reported, DOD did not include an assessment of  the appropriate mix of military, civilian, and contractor personnel or an  assessment of the capabilities of each of these workforces. In the most  recent version of the strategic workforce plan issued in March 2012, DOD  included information submitted by 11 functional communities, which are  groups of employees who perform similar functions. We found that 2 of  the 11 functional communities included in the plan—the medical and  human resources functional communities—provided data on the mix of  their workforces, while 9 communities provided partial or no data. For  example, the logistics and information-technology functional communities  provided only the military and civilian workforce data and did not include  contractor workforce data. In September 2012, we recommended that  DOD direct the functional communities to collect information that identifies  not only the number or percentage of personnel in its military, civilian, and  contractor workforces but also the capabilities of the appropriate mix of  those three workforces, and DOD partially concurred with this  recommendation. Further, in January 2013, we recommended that DOD  use competency gap analyses to assist in decision making regarding the  size of its civilian workforce.
Congress has also required several actions to provide more complete and  accurate information about DOD’s contractor workforce similar to the type  of information DOD already has about its civilian and military workforces,  such as the requirement, as noted previously, to compile an inventory of  contracted services, including the number of contractor FTEs performing   Section 2330a  services for DOD and the type of functions they perform. of title 10 of the United States Code requires DOD to submit to Congress  an annual inventory of contracted services. This section further requires  each DOD component head to conduct comprehensive reviews of these  services to determine, for example, whether they are inherently  governmental, critical, or acquisition workforce functions, and whether  performance of such functions by contractors should be converted to  performance by the civilian workforce. Additionally DOD component  heads are required to develop a plan, including an enforcement  mechanism and approval process, to provide for the use of the inventory  to implement the requirements of 10 U.S.C. § 129a, such as using the  inventory in making workforce mix decisions, to inform strategic workforce  planning, such as the strategic workforce plan required by 10 U.S.C. §  115b, and to facilitate the use of the inventory for compliance with 10  U.S.C. § 235, which requires the inclusion of certain contractor  information in budget submissions. We previously reported that while  DOD made a number of changes to improve the inventory, there were still  factors that limited the utility, accuracy, and completeness of the inventory  data. Therefore, we made a series of recommendations to DOD to further  improve its inventory of contracted services.
During the course of this review, we found that some of the military  services are taking additional steps to better manage their civilian or total  workforces. For example, Army officials stated that they developed a list  of nearly 40 mission critical occupations that are specific to the Army,  which are in addition to the department wide mission critical occupations  identified in the most recent version of the civilian strategic workforce  plan, and that they plan to complete competency gap analyses for the  Army-specific mission critical occupations by the end of 2014. Officials  from the Marine Corps reported that they are developing a six step  process for strategic workforce management planning to be implemented  at the command level by late 2013. These officials stated that the process  would include steps such as assessing current and future missions,  performing gap analysis, and developing action plans to address gaps.
section_title: DOD Has Not Updated Its Workforce Policies to Reflect the Most Recent Statutory Requirements for Workforce Mix Determinations
paragraphs: DOD’s primary policies for determining workforce mix—DOD Directive  1100.4 and DOD Instruction 1100.22—largely reflect statutory  requirements for DOD policies concerning workforce mix, though there   The  are several recent amendments that have yet to be incorporated.directive provides general guidance concerning determining  requirements, managing resources, and future planning, while the  instruction provides manpower mix criteria and guidance for determining  how individual positions should be designated based on the work  performed. For example, the latter provides guidance concerning how to  identify whether a task is inherently governmental, and consequently  must be performed by military personnel or civilians, or whether a  commercial activity should be performed by the contractor workforce or  meets DOD criteria to exempt the activity from contract performance.  Officials from the Office of the Undersecretary of Defense, Personnel and  Readiness told us that they review shifts in trends among the various  segments of the workforce, and that they rely upon the oversight of the  military services to determine which segment of the workforce should  perform specific types of work in accordance with DOD guidance.
Various OSD officials further noted that the requirements determination  process is associated with the department’s Planning, Programming,  Budgeting and Execution processes to help ensure fully informed risk and  cost decisions are translated into justified and transparent manpower  requirements. DOD Instruction 1100.22 states that the heads of the DOD  components shall require their designated manpower authority to issue  implementing guidance that requires the use of the instruction when  manpower officials determine the workforce mix for current, new, or  expanded missions, or when revalidating manpower requirements,  among other circumstances. Each military service has issued service- specific workforce management guidance that implements the DOD-wide  instruction as required and officials we spoke with from each service  stated that the DOD-wide guidance was used when making workforce mix  decisions. To make workforce decisions, manpower officials within the  components are to identify the appropriate workforce component to  perform the activity based on the nature of the work and circumstances of  its performance as outlined in the instruction. Criteria are reviewed to  determine if the work associated with the activity is an inherently  governmental function, exempt from commercial performance, or suitable  for performance by contractors, and for work that is inherently  governmental or exempt from commercial performance, whether the work  should be performed by military personnel or civilian personnel. The focus  of the process of determining the workforce mix is primarily at the position  level, as opposed to a holistic view of the overall appropriate mix of  military, civilian, and contractor personnel.
DOD issued its directive and instruction in February 2005 and April 2010,  respectively, prior to significant changes to relevant legislation in  December of 2011. Prior to these 2011 changes, the legislation  governing DOD’s personnel required that the department use the least  costly form of personnel consistent with military requirements and other  departmental needs. Section 129a was revised to clarify that when  determining the most appropriate and cost efficient mix of military, civilian,  and contractor personnel to perform the mission of the department, that  the attainment of a DOD workforce sufficiently sized and comprised of the  appropriate mix of personnel necessary to carry out DOD’s mission and  the core mission areas of the armed forces takes precedence over cost.  The law also specifies that the Secretary of Defense shall establish  policies and procedures that shall specifically require DOD to use, among  other things, the civilian strategic workforce plan and the inventory of  contracted services when making determinations regarding the  appropriate workforce mix. Although DOD Instruction 1100.22 had  already addressed the requirement that risk mitigation take precedence  over cost in making workforce decisions prior to the enactment of section  129a, DOD has not yet implemented the new requirement that  determinations regarding the appropriate workforce mix be made using  the civilian strategic workforce plan and the inventory of contracted  services. As a result, DOD decision makers may lack key elements  necessary to make appropriate, informed decisions concerning DOD’s  mix of personnel because the department has not updated its existing  policies and procedures or issued new guidance for determining  workforce mix that reflects the new statutory requirements. OSD officials  stated that both DOD Directive 1100.4 and DOD Instruction 1100.22 are  currently under revision, and stated that they intend to revise DOD  Directive 1100.4 to require the use of the inventory of contracted services  to inform budget requests and decisions for total force management. The  officials provided a draft of the directive for our review and stated that is  was in the early stages of coordination and review. DOD did not provide a  draft of the instruction or discuss timelines for issuance of a revised  instruction.
Related to the statutory changes to departmentwide workforce  management, similar legislation requires certain defense components to  use the inventory of contracted services as part of their strategic  workforce management. Specifically, 10 U.S.C. § 2330a(e) requires that  DOD component heads perform a review of the contracts and activities in  the inventory to ensure that the activities on the list do not include  inherently governmental functions or illegal personal services contracts,  and, to the maximum extent practicable, do not include functions closely  associated with inherently governmental functions. The review is also  required to identify activities that should be considered for conversion to  civilian performance pursuant to 10 U.S.C. § 2463. In 2012, our review of  DOD’s fiscal year 2010 inventory of contracted services found that the  military departments’ required reviews of their fiscal year 2009 inventories  were incomplete, and that with the exception of the Army, DOD had much  further to go in addressing the requirements for compiling and reviewing  the inventories of contracted services.
Additionally 10 U.S.C. § 2330a(f) requires the secretaries of the military  departments and heads of the defense agencies to develop a plan,  including an approval process and enforcement mechanism, to provide  for the use of the inventory of contracted services to implement the  requirements of 10 U.S.C. § 129a, to ensure the inventory is used to  inform strategic workforce planning, such as the strategic workforce plan  (as required by 10 U.S.C. § 115b), and to determine the appropriate  workforce mix necessary to perform its mission. However, the extent to  which the military departments have developed the required plans and  accompanying approval process and enforcement mechanism varies.  Some military department officials indicated that they are in the final  stages of developing a plan to integrate the required information, and  other military department officials stated that they plan to move forward  once better information on contractors required by the inventory of  contracted services becomes available. For example,
Army manpower officials stated that the Army had conducted  analyses that could support the required plan. Regarding the required  enforcement mechanism and approval process, an Army official  stated that the Army has established its Panel for the Documentation  of Contractors review process, which requires commands to fill in a  pre-award contract approval form in order to justify a request to  procure services. This form asks executives to certify that contracted  services do not include inherently governmental functions, among  other things. In addition, the official stated that the Army’s annual  inventory of contracted services, and its inventory review process, the  Panel for the Documentation of Contractors, are intended to inform  strategic workforce planning, provide information for in-sourcing  decisions, and to the extent possible, inform budget requests.
Air Force manpower officials stated that while the Air Force lacks a  single plan, a number of separate efforts are moving towards the  required elements of the plan. The officials stated that the Air Force  plans to modify its manpower data system to accommodate the  important contractor information captured in and required by the  inventory of contracted services, and then define the utilization,  approval and enforcement process in an Air Force Instruction.
Navy manpower officials stated that the Navy has authorized the  establishment of a Total Force Integration Board, including multiple  stakeholders, to address all required elements. Marine Corps  personnel officials stated that the Marine Corps is awaiting guidance  from the Department of the Navy on a proposed plan and the related  enforcement mechanism.
section_title: DOD Defines the Core Missions of the Department, but Current Policy Does Not Fully Reflect the Need to Identify Critical Functions
paragraphs: DOD clearly identifies the core mission areas of the armed forces, which  cover broad areas of military activity that the department is statutorily  required to identify, but given the wide range of missions and  responsibilities of its various components, DOD has not developed a list  of “core or critical functions” for the department as a whole, nor is it  required to do so. OMB policy requires executive agencies to identify  critical functions in the context of contracting; but DOD’s current  workforce mix policies do not fully reflect the need to identify critical  functions, and as such the department may not have assurance that it  properly identifies and retains the ability to maintain control over critical  functions.
subsections: section_title: DOD Clearly Defines Core Mission Areas
paragraphs: DOD clearly identifies the core mission areas of the armed forces, but it  does not perform analysis to specifically identify a list of “core or critical  functions.” Section 129a of Title 10 of the United States Code requires  that the Secretary of Defense adopt policies that clearly provide that the  attainment of a workforce sufficiently sized and comprised of the  appropriate mix of personnel necessary to carry out the mission of the  department and the core mission areas of the armed forces takes  precedence over cost. The core mission areas of the armed forces are  broad strategic military activities required to achieve strategic objectives  of the National Defense Strategy and National Military Strategy, such as  providing homeland defense and carrying out major combat operations, in  support of DOD’s overall mission to deter war and provide for the security  of the nation.Quadrennial Roles and Missions Review Report which is issued near the  end of implementation of the department’s quadrennial defense review  cycle. DOD manpower officials we spoke with stated that this top-level  direction is communicated throughout the department.
The core mission areas are identified in DOD’s  Determining the core or critical work of the department can be  complicated by the various contexts under which the terms “core” or  “critical,” are used. For example, as discussed previously in this report,  DOD identifies “mission critical occupations” in its strategic workforce  plan. These are occupations that merit special attention based on their  importance and the presence of human capital challenges, and only apply  to the civilian workforce. On the other hand, OMB policy requires that the  executive agencies define “critical functions to ensure that they have  sufficient internal capability to maintain control over certain functions that  are core to the agency’s mission and operations.
section_title: DOD Policy Does Not Fully Reflect Federal Requirements to Identify Critical Functions
paragraphs: DOD’s current workforce mix policy, DOD Instruction 1100.22, does not  fully reflect the need to identify critical functions. Office of Federal  Procurement Policy Policy Letter 11-01 (OFPP 11-01), issued in  September 2011, requires agencies to identify “critical functions” to  ensure that they have sufficient internal capability, in DOD’s case civilian  and military personnel, to maintain control over functions that are core to  the agency’s mission and operations, but are otherwise permissible to  contract out to the private sector.would help ensure that DOD can accomplish its mission even if  contractors are unable to perform or otherwise default on their contractual  responsibilities. While critical functions often represent important  functions that may be necessary in support of the department’s mission,  they do not include functions that are inherently governmental in nature,  or functions that are closely associated with inherently governmental  functions.
The identification of critical functions  DOD officials stated that they do not plan to develop a list of critical  functions for the department as a whole because the missions of  organizations within a department as large as DOD vary considerably,  and that other designations serve the same purpose. Further, they stated  a function that might be critical for one organization may be a lesser  priority, and therefore not critical, for another. DOD officials told us that  the designation of billets or positions as exempt from commercial  performance (commercial-exempt billets) meets the intention of  identifying critical functions. Based on guidance in DOD Instruction  1100.22, DOD components review all billets on an annual basis to  determine which segment of the workforce should perform certain types  of work. The Instruction provides for a variety of reasons for which a billet  may be given a commercial-exempt designation, thereby reserving that  billet for performance by civilian or military personnel. However, under  this Instruction, positions may be designated as commercial exempt for a  variety of reasons aside from their possible consideration as critical,  including reasons such as esprit d’ corps and professional development.  It is therefore unclear how DOD can determine if the exemption of  individual positions from commercial performance ensures that DOD  maintains sufficient internal capability to retain control over critical  functions.
DOD’s current guidance does not fully reflect the need to identify critical  functions as required by federal policy because DOD has not updated its  workforce policies and procedures to reflect the requirements of OFPP  11-01. Officials from OFPP stated that many of the general principles  behind OFPP 11-01 were reflected in DOD’s current guidance, but  acknowledged that current DOD guidance may not specifically  incorporate the concept of critical functions as defined by the policy letter.  Part of the impetus for the guidance was the need to provide a consistent  understanding of the term “critical functions”. Ensuring that DOD  maintains sufficient internal capability to maintain control over its mission  is a key aspect of ensuring that departmental officials have enough  information and expertise to be accountable for the work product and can  continue critical operations with in-house resources should contractor  assistance be withdrawn. Absent specific policies and procedures that  delineate requirements relating to critical functions and explain how  components should identify these functions, DOD may lack assurance  that it properly identifies and retains the ability to maintain control over  critical functions. These efforts may be further hampered by the lack of  sufficient information necessary for DOD to make strategic determinations  of an appropriate workforce mix, as it may be difficult for the department  to determine if it has sufficient internal capability to perform a critical  function should contractors default on their responsibilities.
section_title: DOD Components Used the Inventory of Contracted Services and Other Data in Budget Submissions, but the Projections Have Significant Limitations
paragraphs: DOD components we reviewed used various methods and data sources,  including their inventories of contracted services, to project contractor  FTEs for their fiscal year 2013 and 2014 budget submissions, but our  analysis found that the components’ contractor FTE projections have  significant limitations. DOD’s Comptroller directed DOD components to  report contractor FTEs in their budget submissions that were consistent  with both the inventories, and funding levels of contracted services.  Among the challenges encountered by the DOD components in using the  inventory of contracted services, however, are the use of estimating  techniques based on inventory data that may not be accurate or current,  and the lack of a crosswalk between the inventory of contracted services  and specific budget lines of accounting. While the Army has a process  that addresses these challenges, it may be several years before the  remaining DOD components are able to do the same. DOD is taking  steps to help the remaining components address these challenges, but, in  the meantime, the budget does not provide an explanation of how the  contractor FTE estimates are derived and what limitations apply.  Disclosure of this information would help ensure that decision makers  draw informed conclusions.
subsections: section_title: DOD Components’ Budget Submissions Included Contractor FTE Information for Fiscal Years 2013 and 2014, but the Accuracy of these Projections Is Questionable
paragraphs: In December 2011, the Comptroller issued guidance to defense  components instructing them to report contractor FTEs and funding levels  for contracted services in their fiscal year 2013 budget submissions in  accordance with 10 U.S.C. § 235. Specifically, the guidance directed the  components to: provide contractor FTE data that were consistent with the inventory of  contracted services they submit annually to the Congress, provide contractor FTEs that were consistent with the funding levels  for contracted services, and  report contractor FTE data and funding levels for contracted services  in two separate budget exhibits in the operation and maintenance  budget account.
Though the Comptroller’s guidance does not specifically refer to it, 10  U.S.C. § 235(b)(2) requires that contractor FTE projections for the budget  submissions are to be based on both the inventory data and the reviews  of that data that DOD components are required to conduct to identify  whether contractors are performing services that should be converted to  civilian performance.
DOD’s fiscal year 2013 budget, submitted in February 2012, included the  information on contractor FTEs and related funding levels from the two  operation and maintenance budget exhibits. Overall, DOD requested  about $72 billion for contracted services in the operations and  maintenance account and projected that roughly 285,000 contractor FTEs  would be funded with that amount.
Two of the five components we reviewed—the Air Force and the Navy— used their inventories of contracted services as a starting point to derive  the contractor FTE projections, but the data they relied on has significant  limitations. To derive their projections, Air Force and Navy budget officials  obtained the operation and maintenance budget requests for sub activity  groups prepared by resource managers for fiscal year 2013 and divided  these by an average contractor FTE cost figure derived from their fiscal  year 2010 inventories. This resulted in estimates of contractor FTEs for  the corresponding sub activity groups. For example, the Navy requested  $166 million for contracted services related to mission and other flight  operations activities for fiscal year 2013. Using the fiscal year 2010  inventory and applying inflationary factors, the Navy used an average  contractor FTE cost of $180,119 to derive a contractor FTE figure of 924  for this sub activity group. Navy budget officials told us they used the  same average contractor FTE cost for all of its different types of services.
Both services’ fiscal year 2010 inventories were based primarily on data  from the Federal Procurement Data System-Next Generation (FPDS-NG)  system. DOD has acknowledged that FPDS-NG has a number of  limitations that affect the utility, accuracy, and completeness of the  inventory data. For example, FPDS-NG does not identify more than one  type of service purchased for each contract action, is not able to capture  any services performed under contracts that are predominantly for  supplies, and cannot provide the number of contractor FTEs used to  perform each service, among other things. DOD officials acknowledge  that the use of derived average cost figures can result in inaccurate  reporting of contractor FTEs. For example, Navy budget officials noticed  that the funding for satellite lease services had decreased significantly,  but the contractor FTE estimate related to the services remained stable.  The budget officials believed that since the program had moved from the  development phase of its life cycle to the maintenance phase, the number  of contractor FTEs needed for the program would be less than 10  compared to the approximately 1,000 FTEs calculated for budget  purposes. The budget officials decided not to make adjustments to the  projections because they wanted to use a consistent approach to derive  the contractor FTEs. In January 2011, we reported that Army manpower  and OSD officials raised concerns about the use of average labor rates  and ratios to project contractor FTEs given the tendency of those  averages to obscure variations in the underlying data. Further, our  analysis showed that the use of these averages resulted in significant  variations for some specific categories of services and particular  contracts.
For the fiscal year 2013 budget submissions, budget officials from the  remaining three components we examined used other data sources they  considered to be more reliable for their contractor FTE projections. These  officials explained that the fiscal year 2010 inventories were not aligned to  their budget data, were outdated or were not appropriate for budget  projection purposes. For example, DISA and DLA budget officials noted  that the most current inventory data available at the time the components  were preparing their fiscal year 2013 budgets reflected contracts that  were active in fiscal year 2010. Further, component budget officials noted  that object class codes (used in preparing the budget) and product  service codes (used in tracking contracts in FPDS-NG) often did not have  a direct relationship, making the translation between the two categories  subjective. For example, object class 25.1, which is used to delineate  advisory and assistance services, is broad enough to encompass  numerous product service codes associated with multiple categories of  services. As a result, DISA and DLA relied on program managers to  provide their projections on what level of contractor FTEs would be  funded by the operation and maintenance budget requests.
Army budget officials explained that they did not use the inventory data  compiled from the Army’s Contractor Manpower Reporting Application  (CMRA) system when preparing their fiscal year 2013 budget submission.  The CMRA system is intended to capture data directly reported by  contractors on each service performed at the contract line item level,  including information on the direct labor dollars, direct labor hours, total  invoiced dollars, the functions and mission performed, and the Army unit  on whose behalf contractors are performing the services. It also captures  selected information from FPDS-NG and the Army’s accounting systems  (to include budget codes). While DOD’s AT&L and P&R leadership  considers the Army as currently having a reporting process and  infrastructure in place that fully complies with inventory legislative  requirements, CMRA data was not available in time. Instead, budget  officials relied on the Army’s Structure and Manpower Allocation System  (SAMAS), which according to budget and program officials contains  civilian, military, and contractor personnel information and is used during  the Army’s program and budget development process. However, an Army  manpower official explained that SAMAS does not include object class  data, dollars projected for contracted services, or information on  inherently governmental and closely associated with inherently  governmental functions. Table 4 summarizes the methods used by DOD  components in our review to derive their respective contractor FTE  projections.
The Comptroller issued updated guidance in June 2012 for the fiscal year  2014 through 2018 budget submissions. The updated guidance  incorporated two significant changes from the 2011 guidance. The  components are now required to (1) include contractor FTE estimates for  not only the operation and maintenance account, but also for non- operation and maintenance accounts including the procurement and  research, development, test and evaluation budget accounts and (2)  report contractor FTE and budget data together, rather than separately for  different budget accounts.
According to Navy and Air Force officials, for the fiscal year 2014 budget  submission, they followed the same approach used to project contractor  FTEs that they did for their fiscal year 2013 budget submission; that is,  they derived an average contractor FTE cost from their fiscal year 2011  inventory data. Therefore, the resulting projections will have the same  limitations as their fiscal year 2013 projections. Navy and Air Force  officials indicated that they used an average contractor FTE cost derived  from their inventory to generate estimates for procurement and research,  development, test and evaluation contractor FTEs in the same manner as  they did for operation and maintenance-related activities. DLA and DISA  officials indicated that they followed the same process as they did for their  fiscal year 2013 budget submission whereby they relied on inputs from  their program managers.
According to Army budget officials, the Army used a different process to  project contractor FTEs for their fiscal year 2014 budget submission.  These officials told us that the Army used information contained in its  inventory of contracted services, which was compiled using data from its  CMRA system, as well as the results of its reviews as the basis for its  fiscal year 2014 contractor FTE projections. Army budget and manpower  officials noted that several factors facilitated the use of CMRA data for its  fiscal year 2014 budget contractor FTE projections. First, Army budget  officials noted that they received fiscal year 2011 CMRA data in sufficient  time to use for the fiscal year 2014 budget submission. Further, as part of  the Army’s inventory review process, when the individual commands  reviewed the inventory data associated with their contracted services,  they had assigned budget codes to the CMRA data so that it could be  aligned with the Army’s budget lines of accounting. In this regard, during  the Army’s inventory review process, Army command officials assigned  budget codes to the CMRA contract data through a web based  application. This process allowed budget officials to gain additional insight  into the types of services included in each line of accounting, and align  contractor FTES in the budget submissions in an easier and more  transparent manner.
At the conclusion of our review, DOD released the fiscal year 2014  Operation and Maintenance Overview, which reported that DOD  requested about $52.5 billion for contracted services in the operations  and maintenance account and projected that about 223,000 contractor  FTEs would be funded with that amount. During our review of the  document, we found that the funding amounts and the contractor FTE  summary information for each military department did not match the  figures that the military departments reported as part of their individual  fiscal year 2014 budget submissions. When we inquired as to the  possible reasons for the discrepancies, a Comptroller official, with  knowledge of the Operation and Maintenance Overview document, told  us that a variety of factors could have contributed to the differences,  including that the overview document excluded Health Program and  Research and Development contracts that the military services included  in their budget documents. The Comptroller official, however, did not  know the exact reasons for the discrepancies.
section_title: DOD Is Taking Steps to Improve the Accuracy of Contractor FTE Projections Included in Future Budget Submissions
paragraphs: DOD officials recognize that the contractor FTE information provided in  their fiscal year 2013 and 2014 budget submissions had significant  limitations, but noted that DOD has initiatives underway to improve the  accuracy of components’ inventories of contracted services and the  linkage between the inventories and budget data. However, according to  DOD officials, these initiatives are not expected to be fully implemented  for several years.
DOD officials stated that having a reliable, current inventory of contractor  FTEs is a fundamental building block for developing future contractor FTE  estimates. DOD has initiated efforts to improve inventory data by  collecting manpower data directly from contractors, using the Army’s  CMRA system as the model. To do so, DOD directed its components in  November 2012 to include a reporting requirement in new and current  contracts for services to collect direct labor hours from contractors, which  can subsequently be used to calculate contractor FTEs performing each  service or function. In addition, DOD is developing a department-wide  CMRA system to collect and house this data. DOD officials expect to  have a fully functional system available for all components to begin to use  in fiscal year 2014 and that components will be in compliance with the  reporting requirement by 2016.
One challenge identified by Comptroller and manpower officials is the  need to link contractor manpower information in the inventories of  contracted services to specific budget lines of accounting. There are  approximately 2,200 contract codes, referred to as product and service  codes, in the FPDS-NG inventory and the CMRA inventory that  correspond to specific types of services which, according to acquisition  officials, need to be linked to roughly 21 budget codes. According to an  Army official, the Army CMRA as implemented contains both budget  codes and product service codes; therefore, it is not be dependent on  DOD’s crosswalk effort. For example, the Defense Acquisition University  has mapped 17 product and service codes to one budget code related to  printing and reproduction. According to an acquisition official, the  department recently formed a working group comprised of officials from  the acquisition community and the Comptroller’s office to develop a more  complete crosswalk between the product and service codes and the  budget lines of accounting. This acquisition official also told us that formal  guidance related to the crosswalk is expected to be issued in April 2013  and modifications to financial systems to capture product and service  code information should occur in 2014.
Finally, although DOD officials do not expect these initiatives to be fully  implemented for several years, one could expect to see incremental  improvements in the fidelity of contractor FTE projections as DOD  components compile more accurate and complete inventories and  conduct the required reviews of that inventory data.
section_title: Conclusions
paragraphs: DOD manages a large and diverse workforce that is tasked with  accomplishing a wide variety of missions, from shipyard maintenance to  cybersecurity. Over the past decade and in the context of fighting two  wars, both the military and civilian parts of this workforce have grown in  number, as has spending on contracted services, but the department now  faces a changing environment that includes a strategic shift and a period  of fiscal constraint that will likely last for some time. As DOD decides how  to face these changes, total workforce management and planning will be  important elements of ensuring the department’s continued ability to meet  the unique requirements of its missions. To be successful, the department  must carefully consider what critical skills and competencies are needed  to meet these requirements, and what strategies it can use to monitor and  plan for retaining those skills in its workforce. Ensuring that its guidance is  up to date would aid the department in assessing an appropriate  workforce mix, properly identifying critical functions as required by the  Office of Federal Procurement’s Policy’s September 2011 memorandum,  and mitigating inappropriate risks that may be posed by contractors  performing certain functions.
Congress, recognizing the importance of identifying the extent to which  DOD relies on contractors to help carry out its mission, has enacted new  legislative requirements over the past five years requiring DOD to collect  data on its contractor workforce and make determinations about the  nature of the activities that contractors perform, and amended legislation  to require DOD to include contractor workforce information in DOD’s  strategic planning and total force management efforts and budget  requests. DOD’s approach to including projected contractor FTE  information in its fiscal year 2013 and 2014 budget requests had a  number of limitations and DOD acknowledges that the FTE information  does not accurately reflect the number of contractors performing work in  support of DOD. The department is taking steps to improve the accuracy  of the data contained in its inventory of contracted services and enable  the inventory and required reviews to be used to project contractor FTEs  for budgetary purposes, but it may be several years before DOD is able to  do so.
section_title: Recommendations for Executive Action
paragraphs: To help ensure DOD’s workforce mix guidance reflects the current  statutory requirements for total force management policy set forth in 10  U.S.C. § 129a as well as the regulatory requirements set forth in the  Office of Federal Procurement Policy’s September 2011 policy letter, we  recommend that the Secretary of Defense direct the Under Secretary of  Defense for Personnel and Readiness to revise DOD’s existing workforce  policies and procedures to address the determination of the appropriate workforce mix, and  identification of critical functions.
Until such time that DOD is able to accurately project contractor FTE  estimates it presents in budget submissions using the inventories and  required reviews, we recommend that the Secretary of Defense direct the  Under Secretary of Defense (Comptroller) to include an explanation in  annual budget exhibits of the methodology used to project contractor FTE  estimates and any limitations of that methodology or the underlying  information to which the methodology is applied.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, DOD partially concurred with  both recommendations. DOD’s comments are reprinted in appendix III.  Additionally, DOD provided technical comments on the draft report, which  we incorporate as appropriate. We provided a draft of this report to the  Office of Management and Budget, but we did not receive comments.
DOD made two overarching comments in its agency response to our draft  report. First, DOD commented that it is concerned by the emphasis we  placed on the strategic workforce plan as it relates to the department’s  total force management and resulting workforce size and structure. DOD  stated that the plan is an integral tool in informing policies and procedures  for retention, recruitment, and accession planning and it helps inform the  demographic makeup of its civilian personnel inventory, including the  talent, competencies, education, and skills of that workforce. DOD stated  that it uses a capabilities-based approach to determine the size and  structure of the workforce needed to implement national military and  security strategies. These capabilities are based on the department’s  mission, function, and task hierarchy, and are informed by workload, risk  mitigation, and resource availability. According to DOD, it justifies its  workforce size based on mission workload, rather than competency or  skill gaps. We agree that DOD’s mission workload should determine the  size of its total workforce. However, the type of personnel—military,  civilian, or contractor—that performs the work is dependent on the nature  of the work and circumstances of its performance. DOD is required by law  to establish policies and procedures that require the use of the strategic  workforce plan when making determinations of the appropriate mix of  total workforce personnel necessary to perform its mission, and to include  in the strategic workforce plan an assessment of the appropriate mix of  military, civilian, and contractor personnel capabilities, which it has not  included to date. While the primary focus of this report is not on DOD’s  strategic workforce plan, we have reported in this and a body of prior  work, that without knowledge of the skills and competencies that are  necessary to perform its mission workload and any associated gaps in  those skills and competencies, DOD may be challenged to appropriately  identify its current and future civilian workforce needs. Moreover, without  assurance that its civilian workforce possesses the necessary skills and  competencies, DOD may not be able to readily convert the performance  of a function from contractor to civilian personnel, should DOD determine  that it would be more appropriate to do so. Therefore, a fully developed  strategic workforce plan that addresses the statutory requirements to  include an assessment of the appropriate mix of military, civilian, and  contractor personnel capabilities and report on the results of competency  and skill gap analysis, could serve as an important resource for the  department as it makes workforce mix decisions, especially in light of  current fiscal constraints and budgetary pressures.
DOD commented that it is also concerned by the apparent lack of  reference in our draft report to the Planning, Programming, Budgeting,  and Execution process carried out annually across the department,  especially as these processes relate to the size and shape of the  department’s total force. DOD explained that the process provides  direction on spending levels, mission priorities, and strategic goals, which  then impact decisions regarding force structure and operational  capabilities, and ultimately addresses prioritization and resource  alignment. We agree with DOD that the Planning, Programming,  Budgeting, and Execution process is an important aspect of workforce  planning and decisionmaking; both requirements and resources drive  workforce decisions. We noted in our draft report that various OSD  officials stated that the workforce requirements determination process is  part of the department’s Planning, Programming, Budgeting and  Execution process to help ensure fully informed risk and cost decisions  are translated into justified and transparent manpower requirements.  Further, we noted the roles and responsibilities of the various offices  involved in developing workforce requirements, including as part of the  budget process. However, we also noted that a recently enacted statute  requires that DOD and prioritize the attainment of a workforce sufficiently  sized and comprised of the appropriate mix of military, civilian and  contractor personnel to carry out DOD’s mission over cost. Our report  addresses steps DOD is taking to implement statutory requirements to  develop and utilize certain policies, analyses, and tools to aid in making  such workforce mix determinations. As DOD stated, the budgeting  process involves prioritization of requirements and making trade-offs  among competing needs as part of resource allocation. Therefore, having  the most reliable and accurate information is imperative for making well  informed budgetary and other workforce planning decisions.  Consequently we believe, DOD should continue to take steps to obtain  and develop the information and data that will allow it to make more  informed and strategic workforce mix decisions, such as analyses of the  gaps in skills and competencies within the civilian workforce, identification  of the functions that are critical to the department’s mission, and the  collection of more accurate and complete information regarding  contractors performing work in support of DOD.
DOD partially concurred with our recommendation to revise the  department’s existing workforce policies and procedures to address the  determination of the appropriate workforce mix and identification of critical  functions. As we noted in our report, DOD has not issued new guidance  or revised existing guidance to reflect the current statutory and other  federal requirements for total force management policy. Specifically, we  reported that DOD’s primary policies for determining workforce mix— DOD Directive 1100.4 and DOD Instruction 1100.22—largely reflect  current statutory requirements set forth in 10 U.S.C. § 129a for DOD  policies concerning workforce mix, though there are several recent  amendments that have yet to be incorporated, such as that DOD has not  yet implemented the new requirements that determinations regarding the  appropriate workforce mix be made using the civilian strategic workforce  plan and the inventory of contracted services. Further, we reported that  the guidance similarly does not reflect federal requirements for the  identification of critical functions as required by Office of Federal  Procurement Policy’s Policy Letter 11-01. In response to our draft report,  DOD stated in its agency comments that DOD Directive 1100.4. is  currently undergoing revision and entering the formal issuance process  for signature by the Deputy Secretary of Defense. Further, DOD stated  that the updated directive will authorize and direct the revision of the  instruction. We noted in our report that OSD officials told us that they  were in the process of revising both the directive and instruction, and they  provided us with a draft of the revised directive. DOD should issue this  revised guidance in a timely manner and ensure that revisions to both  guidance documents address statutory requirements related to  determinations of the appropriate mix of the department’s workforce and  federal requirements to identify critical functions in order for  decisionmakers to make better informed decisions regarding the mix of  personnel and ensure that the department retains enough government  employees to maintain control of functions that are critical to its mission.
DOD also partially concurred with our recommendation to include an  explanation in annual budget exhibits of the methodology used to project  contractor FTE estimates and any limitations of that methodology or the  underlying information to which the methodology is applied. DOD stated  in its agency comments that its financial management regulations and  annual budget submission guidance memorandums issued by the Office  of the Under Secretary of Defense (Comptroller) are the means used to  explain budget exhibit preparation methodologies and the guidance  directs how components are to develop and display budgetary estimates.  DOD stated in its comments that this office will strengthen the annual  guidance as improvements are made in the inventory of contracted  services. Further, DOD stated that if a component’s methodology  deviates from the process defined in the annual guidance, a footnote  explaining the deviation will be included in the contracted services section  of the Operation and Maintenance Overview book within the budget. We  recognize DOD has efforts underway to improve its inventory of  contracted services, including its use in providing contractor FTEs within  its annual budget exhibits. While footnoting any component  methodologies that deviate from DOD’s guidance is a step in the right  direction, most components use methodologies that reflect inherent  limitations that undermine the utility and accuracy of the FTE estimate.  DOD acknowledged during the course of this review that the contractor  FTE information provided in their fiscal year 2013 and 2014 budget  submissions had significant limitations. Consequently, to improve  transparency, we continue to believe that DOD should disclose the  methodologies used and any limitations thereof until such time DOD is  able to accurately project contractor FTEs.
We are sending copies of this report to the Secretary of Defense, the  Under Secretary of Defense for Personnel and Readiness, the Under  Secretary of Defense for Acquisition, Technology and Logistics, the  Under Secretary of Defense Comptroller, the Office of Management and  Budget, and appropriate congressional committees. In addition, this  report will also be available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions regarding this report, please  contact us at (202) 512-3604 or farrellb@gao.gov or (202) 512-4841 or  dinapolit@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made major contributions to this report are listed in  appendix V.
section_title: Appendix I: Recent GAO Recommendations for DOD’s Strategic Workforce Management
paragraphs: Appendix I: Recent GAO Recommendations for  DOD’s Strategic Workforce Management Prior Recommendation  Involve functional community managers and to the extent possible, use  information from gap assessments of its critical skills and competencies as they  are completed, to make informed decisions for possible future reductions or justify  the size of the force that it has.
Document its efforts to strategically manage its civilian workforce and maintain  critical skills and competencies for future reductions.
Direct the Under Secretary of Defense for Personnel and Readiness to include in  the guidance that it disseminates for developing future strategic workforce plans  clearly defined terms and processes for conducting these assessments.
Conduct competency gap analyses for DOD’s mission-critical occupations and  report the results. When managers cannot conduct such analyses, we  recommend that DOD report a timeline in the strategic workforce plan for  providing these assessments.
Establish and adhere to timelines that will ensure issuance of future strategic  workforce plans in accordance with statutory timeframes.
Provide guidance for developing future strategic workforce plans that clearly  directs the functional communities to collect information that identifies not only the  number or percentage of personnel in its military, civilian, and contractor  workforces but also the capabilities of the appropriate mix of those three  workforces.
Enhance the department’s results-oriented performance measures by revising  existing measures or developing additional measures that will more clearly align  with DOD’s efforts to monitor progress in meeting the strategic workforce planning  requirements in section 115b of Title 10 of the United States Code.
Conduct assessments of the skills, competencies, and gaps within all five career  civilian senior leader workforces and report them in DOD’s future strategic  workforce plans.
Ensure that the military departments and defense components issue guidance to  their commands that provides clear lines of authority, responsibility, and  accountability for conducting an inventory review and resolving instances where  functions being performed by contractors are identified as inherently  governmental functions.
To ensure that the six instances we reviewed in which the Army identified that  contractors were still performing functions it deemed inherently governmental, as  well as those at Kwajalein Atoll, have been properly resolved, we recommend that  the Secretary of the Army review these functions, determine the status of actions  to resolve the issues, and, as appropriate, take necessary corrective actions.
subsections: section_title: GAO Product
paragraphs: Prior Recommendation  To ensure that the two instances we reviewed where contractors were still  performing functions the Air Force had previously identified as inherently  governmental are properly resolved, we recommend that the Secretary of the Air  Force review these functions, determine the status of actions to resolve the  issues, and, as appropriate, take necessary corrective actions.
To enhance insights into and facilitate oversight of the department’s in-sourcing  efforts, we recommend that the Secretary of Defense direct the Under Secretary  of Defense for Personnel and Readiness to issue guidance to DOD components  requiring that the components establish a process to help ensure the accuracy of  any data collected on future in-sourcing decisions.
To improve DOD’s strategic workforce planning, we recommend that the  Secretary of Defense direct the Under Secretary of Defense for Personnel and  Readiness to better align the data collected on in-sourcing with the department’s  strategic workforce plans and establish metrics with which to measure progress in  meeting any in-sourcing goals.
section_title: Appendix II: Scope and Methodology
paragraphs: To determine the historical trends and future projections of the levels of  military, civilian, and contractor personnel, we obtained relevant data and  performed trend analysis. For our analysis of historical trends, we  included fiscal year 2001 through fiscal year 2011 and, for our analysis of  future projections, we included fiscal year 2012 through fiscal year 2017.  At the time of our review, the fiscal year 2013 president’s budget  contained the most recent data available for projections and it included  actuals through fiscal year 2011 and projections for fiscal years 2012  through fiscal year 2017. For our analysis of military end strength and  civilian personnel FTEs, we relied on data from DOD’s Future Years  Defense Program (FYDP), Office of the Under Secretary of Defense  Comptroller’s Comptroller Information System (CIS) and DOD budget  documents. For our analysis of growth within type of activity performed,  we used force and infrastructure categories from the FYDP to provide  further perspectives on areas of workforce growth from fiscal years 2001  to 2011. We determined that these data were sufficiently reliable for use  in discussing historical and future trends of the military and civilian  workforce. Specifically, we reviewed previous GAO reports using  workforce data, compared military and civilian personnel levels to  published data, performed electronic testing, and discussed the reliability  of the data with knowledgeable DOD and service officials.
Further, we interviewed DOD officials to obtain their views on the major  drivers for workforce changes. For our analysis of historical trends of the  contractor workforce, we reviewed DOD’s inventory of contracted  services for fiscal years 2008, 2009, 2010, and 2011. We did not  independently assess the accuracy or reliability of the underlying data  supporting the fiscal year inventories. However, we reviewed our prior  work, which addressed limitations of the inventory data. Due to the lack of  consistent reporting of contractor FTE data, we reviewed the obligated  dollars for contracted services from fiscal year 2001 through fiscal year  2012 and the projected obligations for contracted services from fiscal year  2013 through fiscal year 2014. We relied on budget data on obligations  for contracted services (object class 25). Based on discussions with  various OSD officials, we excluded object classes 25.3 that represent  dollars obligated for goods and services from federal sources. We  adjusted the current dollars to constant fiscal year 2013 dollars using the  Fiscal Year GDP Price Index to eliminate the effects of inflation. GAO has  designated DOD’s financial management area as high risk due to long- standing deficiencies in DOD’s systems, processes, and internal controls.  Since some of these systems provide the data used in the budgeting  process, there are limitations to the use of DOD budget data. However,  based on discussions with appropriate DOD officials and our comparison  of the trends in the budget data against other data sources, we believe  the contracted service obligation data are sufficiently reliable for showing  overall trends for contracted services.
To determine the extent to which DOD has taken action to determine the  appropriate workforce mix to accomplish its mission, we reviewed  relevant legislation and departmental guidance concerning  requirements for DOD to carry out such analysis. We also interviewed  DOD and military service officials to assess the actions DOD has taken to  ensure it is employing the appropriate workforce mix. Specifically, we  discussed the process of categorizing parts of the workforce based on the  nature of the work they perform, DOD’s process for identifying mission  critical occupations as part of its strategic workforce planning process,  and efforts by the services to improve implementation of its total  workforce management in the future. We compared statutory  requirements concerning the processes by which DOD is to determine its  appropriate workforce mix to its efforts to date, and noted any differences.
To determine the extent to which DOD conducts analysis to identify core  or critical functions, we reviewed relevant legislation, federal policy, and  departmental guidance concerning the process for identifying core or  critical functions. We interviewed DOD and military service officials to  explore the various ways in which “core” or “critical” functions could be   We  defined and reviewed documents that supported those definitions.interviewed DOD and military service officials to determine the actions  DOD has taken to define critical functions and respond to federal  requirements. Additionally, we met with officials from the Office of Federal  Procurement Policy within the Office of Management and Budget to  discuss their views on DOD’s implementation of those requirements. We  compared federal policy concerning the identification of critical functions  to DOD’s efforts to date, and noted any differences.
To determine how the military departments and defense agencies used  the inventory of contracted services to inform their fiscal year 2013 and  2014 budget submissions, we focused our efforts on five DOD  components—the departments of the Army, Navy, and Air Force, and the  Defense Logistics Agency (DLA) and Defense Information Systems  Agency (DISA). We selected these components based on the amount of  their obligations for contracted services and the large number of  contractor full time equivalents they identified in their fiscal year 2011  inventory of contracted services, the most current inventory available at  the time of our review. We reviewed relevant guidance that directed the  DOD components on how to use the inventory of contracted services to  provide contractor FTE information in their budget submissions for fiscal  years 2013 and 2014. We also interviewed officials from the Office of the  Under Secretary of Defense for Acquisition, Technology and Logistics,  Office of Defense Procurement and Acquisition Policy; the Office of the  Under Secretary of Defense for Personnel and Readiness; and the Office  of the Under Secretary of Defense (Comptroller) regarding the guidance  and ongoing initiatives that will impact how the inventory data can be  used to inform future budget submissions. In addition, we interviewed  relevant budget and workforce officials from the five components we  included in our review regarding the use of the inventory in the  development of their fiscal year 2013 and 2014 budget submissions, and  we obtained corroborating documentation from the three components that  could provide it to determine the processes used to develop contractor  FTE information included in these budget submissions.
section_title: Appendix III: Comments from the Department of Defense
section_title: Appendix IV: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts:
section_title: Staff Acknowledgments:
paragraphs: In addition to the contacts named above, Margaret A. Best, Assistant  Director; Cheryl K. Andrew, Jerome Brown, Katheryn S. Hubbell, LeAnna  Parkey, Suzanne M. Perkins, Carol D. Petersen, Guisseli Reyes-Turnell,  Terry L. Richardson, Stephanie J. Santoso, Adam G. Smith, Erik Wilkins- McKee, and Michael Willems made key contributions to this report.