Federal Contracting: Congressional Action Needed to Address Long-standing Problems with Reporting of Advisory and Assistance Services
Published: 2008-03-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since 1994, the Office of Management and Budget (OMB) has been required by law to collect and report obligations for advisory and assistance services (A&AS) in the President's budget. The initial intent for this requirement is not clear, however. The statutory definition of A&AS covers three broad categories of management and professional support services. For many years, GAO and others have reported on inaccuracies in agencies' reporting of A&AS obligations. This report follows up on GAO's past work, pursuant to the fiscal year 2007 Defense Authorization Act. GAO assessed (1) whether reported A&AS obligations are accurate or used for management purposes and (2) the extent to which A&AS contracts are used for recurring services and for longer than 5 years and the contract types and vehicles used. GAO analyzed legislative history and reviewed 334 randomly selected contract files across 10 agencies, the results of which are generalizable to locations visited.
section_title: What GAO Found
paragraphs: Agencies' reported A&AS obligations are inaccurate to the point of being meaningless and are not used for management purposes. GAO found a range of factors that contribute to significant inaccuracies in these data. Almost 20 percent of the 334 contract actions GAO reviewed were erroneously identified as A&AS, including services such as fitness center maintenance and telecommunications cabling installation. Agency officials frequently cited the broad nature of the A&AS definition as a problem. Agencies GAO reviewed generally encountered challenges in tying reported A&AS obligations to their corresponding contracts because of the lack of integration of procurement and budget data systems. Agency and OMB officials unanimously told GAO they do not use reported A&AS obligations for management or other purposes. Acquisition officials said they oversee their A&AS contracts, as they do their other professional services contracts, with established contract management procedures. Reflecting the lack of a clear distinction between A&AS and general professional services contracts, DOD retracted its A&AS directive and replaced it with general service contracting guidance in 2004. Even as far back as 1996, a code to specifically designate A&AS contracts was removed from the Federal Procurement Data System, the government's procurement information system. Agencies frequently awarded contracts for A&AS on a recurring basis and to the same contractor. Overall 63 percent of the A&AS contract actions were issued on other than a sole-source basis. Most task order contracts reviewed met the A&AS statutory period of performance limit of 5 years; but 2 exceeded and 10 had the potential (if options were exercised) to exceed this limit. Agencies used various contract types and vehicles to procure A&AS. Almost half of the actions GAO reviewed were time-and-materials, and over 40 percent were under interagency vehicles, primarily orders under the General Services Administration's schedule contracts.

section_title: Letter
paragraphs: Each year, the federal government spends billions of dollars to procure  goods and services from private contractors, with a growing proportion  related to services. Advisory and assistance services (A&AS), previously  referred to as consultant services are contracted services intended to be  used by federal agencies to acquire three broad areas of services:  management and professional support; studies, analyses, and evaluations;  and engineering and technical services. Since 1994, the Office of  Management and Budget (OMB) has been required by law to collect and  report obligations for A&AS in the President’s budget. However,  Congress’s initial intent behind this requirement is not clear.
Our past work and that of other organizations have highlighted long- standing challenges agencies face in identifying and reporting their A&AS  spending. For example, a 1988 OMB report on the government’s use of  consulting services concluded that the definitions were overly broad and  complex and subject to varying interpretations. In 1990, we reported that  agencies had no common understanding of how to interpret the definition  of what is now called A&AS. In 1996, the President’s Council on Integrity  and Efficiency reported that, governmentwide, agency inspectors general  found inaccuracies in reporting on their A&AS contracts because of  unclear guidance on what constituted such services and how they should  be reported. Similarly, in 2001, we reported that the Department of  Defense’s (DOD) persistent deficiencies in accurately reporting its  obligations under these contracts were due in part to unclear definitions,  lack of consistency in identifying and reporting, and inadequate  accounting systems used to track such expenditures.
The ordering period for A&AS task order contracts has been limited to 5  years, but in the John Warner National Defense Authorization Act for  Fiscal Year 2007, Congress authorized agencies to extend this period up to  10 years if certain determinations were made. Before agencies could take  advantage of the 10-year ordering period authority, DOD and the Office of  Federal Procurement Policy (OFPP) had to submit a report to certain  congressional committees by April 1, 2007.  On March 21, 2008, the Deputy  Under Secretary of Defense, Acquisition and Technology, submitted letters  to Congress stating that the department was unable to comply with the  required submission date for the report because the federal procurement  data system does not identify A&AS, requiring a slow and cumbersome  manual data call across DOD.  The letters note that the lack of the waiver  authority has had no impact on DOD’s acquisition of services. The  Director, Defense Procurement, Acquisition Policy, and Strategic Sourcing  has also notified DOD components that, because the required submission  date for the report to Congress was not met, no waivers may be issued to  extend task order contracts for A&AS.  Similarly, on March 26, 2008, the  Administrator of OFPP submitted letters to Congress stating that it was  unable to comply with the required submission date for the report because  it could not identify the requested information on A&AS contracts from  the federal procurement data system and the federal budget data system.   OFPP added that it was unable to collect the requested information from  surveying civilian agencies.  OFPP notified agencies that because the  information was not available to report to Congress, they cannot issue  waivers to extend task order contracts for A&AS.  The Act also directed us  to report on the federal government’s use of contracts for A&AS. We  provided briefings to congressional committees on our work to meet that  mandate in the fall of 2007 and agreed to issue a follow-on report on  agencies’ reporting and use of A&AS. For DOD and selected civilian  agencies, we (1) assessed whether reported obligations for A&AS were  accurate or used for management purposes and (2) identified the extent to  which they are used for recurring services and periods greater than 5 years  as well as the contract types and vehicles used.
To perform our work, we reviewed the legislative history of contracted  consulting services and A&AS, analyzed relevant public laws, pertinent  sections of the Federal Acquisition Regulation (FAR), and federal A&AS  budget reporting requirements in OMB’s Circular A-11, Preparation,  Submission, and Execution of the Budget. We also examined our related  prior work, inspectors general audit reports, and reports from other  organizations. Because contracts for A&AS are not identified as such in  the Federal Procurement Data System-Next Generation (FPDS-NG), the  federal government’s procurement information system, we queried OMB’s  MAX A-11 budget data system to determine the scope of agencies for our  review. We identified the seven federal departments with the largest  average reported A&AS obligations for fiscal years 2002 to 2006 (the  departments of Defense, Energy, Health and Human Services, Homeland  Security, Housing and Urban Development (HUD), Treasury, and Veterans  Affairs (VA)). Based on our analysis of the reported obligations and  discussions with agency officials, we narrowed our scope to the  departments that could provide us with a list of the A&AS contracts that  comprised their reported obligations in fiscal year 2006. HUD and VA were  unable to do so, so we excluded them from our detailed contract file  review. Next, we narrowed our scope to the major agencies or  components (within the 5 departments) that had the largest reported  overall obligations on service contracts, based on FPDS-NG data, and that  could provide us with a list of A&AS contracts for fiscal year 2006. This  step led to the Department of the Army’s dropping out of our file review  sample, as it could not identify A&AS contracts. In all, we conducted in- depth reviews of 334 randomly selected contract actions out of the 6,373  contracts that the 10 major agencies within our review identified as  A&AS. The results of our agency-specific contract file reviews are  generalizable to the particular agency location where we reviewed  contract files. Table 1 shows the agencies included in our review.
We also interviewed agency officials on their management policies for and  use of A&AS and obtained agency-specific service contracting guidance  from agency procurement, program, and budget officials. We conducted  this performance audit from January 2007 to February 2008 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. More information on our scope and methodology is  contained in appendix I.
subsections: section_title: Background
paragraphs: Agencies report their obligations for goods and services annually to OMB  using a format called a budget object class structure, specified in the OMB  Circular A-11. The Circular provides five major budget object class  categories used to classify obligations by the items or services purchased;  each of the five is divided into smaller detailed classes. As shown in figure  1, A&AS are a subset of the “contractual services and supplies” category,  one of the five major categories.
We have reported that, generally, the budget object classification system,  which agencies use to report annual spending to OMB, is not a reliable  mechanism for assessing the performance and cost of government  operations. Our concerns included agency discretion regarding how  spending is coded, which may not promote an accurate, complete, or  consistent portrayal of A&AS activities. We also noted agencies’ long- standing problem with classifying activities into the correct budget object  class given that many activities could conceivably fit into more than one  category.
subsections: section_title: Key Events Regarding A&AS
paragraphs: Over the past several decades, Congress and agencies have taken certain  actions regarding the use of A&AS. Key events included the Federal  Acquisition Streamlining Act of 1994, which added new sections to the  U.S. Code–one for DOD and an identical one applicable to civilian  agencies and departments–authorizing the use of task order contracts to  procure A&AS. These provisions limit the ordering period of A&AS task  order contracts to periods of no more than 5 years, but authorize the use  of a 6-month sole-source extension in certain circumstances. Both  provisions also indicate a preference for multiple awards. Also, in 1995,  the FAR was amended to include the broad statutory definition of A&AS  and to include certain examples of A&AS for which agencies may contract  when essential to their mission. These include obtaining outside points of  view to avoid too limited judgment on critical issues and obtaining the  opinions, special knowledge, or skills of noted experts. The FAR also  includes services for which A&AS are not to be used, such as to    perform work of a policy, decision-making, or managerial nature that is  the direct responsibility of agency officials;    bypass or undermine personnel ceilings, pay limitations, or competitive  employment procedures;    contract on a preferential basis to former government employees; or    obtain professional or technical advice that is readily available within  the agency or another federal agency.
An additional limitation pertaining to A&AS is that agencies are not to hire  contractors to conduct evaluations or analyses of any aspect of a proposal  submitted for an initial contract award unless the agency makes a written  determination that government personnel (from the requesting agency or  from any other agency) with adequate training and capabilities to perform  the required proposal evaluation are not readily available.
Table 2 portrays a time line of key events related to A&AS.
section_title: Other Relevant Service Contracting Policies and Regulations
paragraphs: The federal government is increasingly relying on private entities to  provide a wide range of services; federal spending on services represented  over 60 percent of total contract spending governmentwide in 2006. To  help agencies manage their service contracts, various federal regulations  and policies provide guidance in key areas, such as organizational and  consultant conflicts of interest, inherently governmental functions, and  improper personal services contracts. For example:    OMB Policy Letter 93-1, Management Oversight of Service  Contracting, establishes government-wide policy, assigns  responsibilities, and provides guiding principles for executive  departments and agencies in managing the acquisition and use of  services.
FAR Subpart 7.5 on inherently governmental functions establishes  Executive Branch policy related to service contracting and inherently  governmental functions to assist agency officials and employees in  avoiding an unacceptable transfer of official responsibility to  government contractors.
FAR Subpart 9.5 on organizational and consultant conflicts of interest  prescribes responsibilities, general rules, and procedures for  identifying, evaluating, and resolving organizational conflicts of  interest. An organizational conflict of interest occurs under a service  contract when the objectivity of a government contractor is impaired  or the contractor has an unfair advantage over others. The FAR notes  that organizational conflicts of interest are more likely to occur in  contracts involving certain services, such as management support  services and consultant or other professional services.
FAR Section 37.104 on personal services contracts establishes that  obtaining personal services by contract is prohibited by law unless  Congress has specifically authorized acquisition of the services by  contract. A personal service occurs under a service contract when  contractor personnel are subject to the relatively continuous  supervision and control of a federal employee.
section_title: Agencies’ Reported A&AS Obligations Are Not Accurate or Used for Management Purposes
paragraphs: Agencies’ reported A&AS obligations to OMB for inclusion in the  President’s budget are inaccurate to the point of being meaningless.  Although the five departments where we conducted our file reviews  reported about $14 billion to OMB for their fiscal year 2006 A&AS  obligations, a variety of factors cause inaccuracies in agencies’ reporting.  (See app. II for a list of their reported A&AS obligations.) First, the  different interpretations of the broad A&AS definition contribute to errors  in identifying contracts. Second, we found little consistency in agencies’  approaches for reporting these obligations. Third, the lack of integration  of agency procurement and budget systems thwarts accurate accounting  of A&AS contracts. Figure 2 depicts these factors.
subsections: section_title: Different Interpretations of Broad Definition and Numerous Exclusions Contribute to Errors in Identifying Contracts as A&AS
paragraphs: Different interpretations of the broad A&AS definition (as set forth in  budget object class 25.1 in OMB’s Circular A-11) by agency officials  contribute to errors in identifying contracts as A&AS. Agency procurement  and budget officials told us they must use a significant amount of  judgment and interpretation when deciding whether to code contracts as  A&AS for budget reporting. Officials added that given the extensive scope  of the definition, making distinctions between what constitutes having a  contractor provide an advisory or consultative-type service versus directly  performing established services to assist an agency is often difficult. For  example, the definitions cover functions ranging from contracts for  consultants to provide very specific “expert opinions” to more generic  contracts for “assistance” in areas such as management and professional  support and engineering and technical services.
We found misidentified contracts in seven of the 10 agencies where we  performed contract file reviews. Overall, agencies erroneously identified  about 18 percent (59) of the 334 contract actions we reviewed as A&AS  and inappropriately included them in their fiscal year 2006 reported  obligations. As shown in table 3, examples of misidentified contract  actions included services for fitness center operation and maintenance,  food and maintenance services at a federal detention center, and the  installation of telecommunications cabling.
In addition to the contract actions that were clearly not A&AS, we also  found examples where the determination of whether the contracted  service constituted A&AS was highly subjective because of its broad  definition. Examples of such contracts included arbitration services and  speakers at training events. As such, we could not definitively determine  whether the agency misidentified the contract actions.
Over the years, certain activities have been excluded from civilian and  defense reporting of A&AS, exclusions that further complicates agency  efforts to identify such contracts for budget reporting. These exclusions  are set forth in the FAR, OMB Circular A-11, and in DOD’s Financial  Management Regulation. However, the Circular A-11 exclusions are more  extensive than those in the FAR, and DOD has 14 exclusions, such as  initial training supporting weapons system procurement.  See appendix III  for a full list of civilian and defense exclusions to A&AS reporting. Further,  DOD canceled its A&AS directive in 2004, which listed these 14 exclusions,  but did not make conforming changes to its financial management  regulation—which still lists them. According to DOD procurement policy  officials, this discrepancy has likely contributed to confusion in properly  coding contracts as A&AS.
section_title: Agencies’ Approaches for Reporting Obligations Have Little Consistency and Sometimes Lack Sound Basis
paragraphs: We found that agencies used a range of approaches and practices for  reporting their A&AS obligations to OMB. These included misreporting  (such as using prior year data) and partially reporting the obligations.  Also, several agencies could not tell us the source for their obligations  reported to OMB. OMB officials were unaware of these discrepancies and  inconsistencies until we informed them.
For example, HUD budget and procurement officials told us that their  budget staff report all of the department’s contract obligations under  budget object class 25.1—without trying to distinguish those for A&AS— since they were not aware of the internal contracting database that  contained A&AS information. As such, HUD officials were unable to  understand the basis for HUD’s reported obligations of $400 million for  A&AS in fiscal year 2006. According to HUD budget officials, even after  working with OMB on how to properly classify their department’s  contracts for A&AS and other service contracts for budget reporting, they  are still unable to make this differentiation. For fiscal year 2007, the  agency could not identify any A&AS contracts in its internal contracting  database, but it still reported $205 million in A&AS obligations to OMB.
VA officials told us the agency did not report departmentwide obligations  for A&AS to OMB in fiscal years 2005 and 2006, even though amounts for  A&AS appeared in the budget for those years ($1 million in fiscal year 2005  and $8 million in fiscal year 2006). When we questioned VA officials about  these numbers, they could not explain where these amounts came from  and acknowledged that they did not accurately represent their A&AS  obligations. In addition, the VA could not substantiate its reported fiscal  year 2007 estimate of $9 million.  According to the department, in October  2007 it added a code to its financial management system to help provide  the ability to capture A&AS obligations.
The Air Force misreported its A&AS obligations using prior year data. It  reported its fiscal year 2006 obligations for A&AS based on what it  reported for fiscal year 2005 because officials did not want to conduct the  manually intensive data call to obtain needed information. Air Force  officials said they reduced their reported fiscal year 2005 data based on  broader budget reductions made by the Office of the Secretary of Defense.  They noted that in 2005 and years prior the Air Force had relied upon the  intensive data calls to collect and report A&AS obligations and said they  would use this process again for fiscal year 2007. Even these data calls  have demonstrated shortcomings; in 2006 the Air Force Audit Agency  reported that Air Force officials had provided inaccurate and incomplete  obligations in fiscal year 2004 as a result of their data calls for A&AS  obligations.
Agencies also used inconsistent methodologies for reporting A&AS  obligations. For example, according to officials from Energy and  Treasury’s Internal Revenue Service, if “a majority” of a single contract is  for A&AS, then they report the contract’s total obligations as A&AS. On the  other hand, Aeronautical Systems Center and Naval Sea Systems  Command procurement and budget officials told us their agencies’  procedure is to report only the labor costs under their A&AS contracts and  to exclude other costs, including travel, materials, and other direct costs.  According to Aeronautical Systems Center officials, the labor portion of  their A&AS contracts averages about 80 percent of these contract costs.
section_title: Lack of Integration of Agency Procurement and Budget Systems Thwarts Accurate Accounting of A&AS Contracts
paragraphs: Most agencies we reviewed lack the capability to identify, via their budget  systems, the contracts for A&AS that comprised their reported obligations.  According to procurement and budget staff, the lack of integration in such  management systems poses another challenge to accurately accounting for  their contracts for A&AS because, while budget and program staff are  responsible for reporting the obligations to OMB, they cannot readily—if  at all—identify the specific contracts that are funded with A&AS dollars.  For example, Air Force and National Institutes of Health officials cited  their need to conduct intensive manual data calls to extract and report on  contracts for A&AS from their procurement and budget systems. Although  Army budget staff perform detailed manual reviews of obligation data in  financial databases to generate an estimate of A&AS costs, they could not  provide us with a list of contracts specifically associated with that data  (contract numbers are not part of the accounting database).
In 1996, as part of its efforts to streamline data collection on federal  contracts, OMB modified FPDS, the federal government’s contracting  database, to stop tracking A&AS contracts. Prior to this action, FPDS  contained a field where agency procurement staff could mark contracts as  A&AS as part of their routine data entry of contract information. Since the  field was removed, procurement officials have been disassociated from the  process of identifying contracts as A&AS. According to OFPP officials, the  2007 Defense Authorization Act requirement that OFPP report on  contracts for A&AS has caused them to reevaluate whether or not A&AS  should be tracked again in FPDS-NG. However, OFPP’s effort is still in the  planning stages.
section_title: Agencies Do Not Use Reported A&AS Obligations for Management Purposes
paragraphs: Agency officials told us they see little or no internal value in tracking  A&AS obligations as a separate category of services since they do not use  the information for management purposes. For their part, OMB officials  also said they question the benefit of reporting A&AS as a separate  category of services. OMB budget officials told us that they do not monitor  agencies’ reporting of A&AS as a separate category of services because  reported obligations for A&AS represent a very small percentage of total  service contract obligations. They added that OMB would normally defer  to agencies’ judgment on the amount and type of A&AS they procure.
Further, at the agencies we reviewed, officials told us they manage their  A&AS contracts, as they do their other professional support service  contracts, through established acquisition management procedures.  Agency procurement officials said they utilize broader federal service  contracting policies and regulations to manage these contracts, such as  FAR provisions and OFPP policy letters related to management and  oversight of service contracting, inherently governmental functions,  organizational conflicts of interest, and personal services contracts. They  refer to FAR Subpart 37.2, Advisory and Assistance Services, for  governmentwide policy on A&AS and do not have separate policies or  directives exclusive to their contracts for A&AS.
Reflecting the lack of a clear distinction between A&AS and other  professional management support services, OMB rescinded its Circular  No. A-120, Guidelines for the Use of Advisory and Assistance Services, in  1993 and issued Policy Letter 93-1, Management Oversight of Services  Contracting in its place.  In 2004, DOD followed suit, canceling its 1992  directive that contained guidance on acquiring and managing A&AS, citing  redundancy with its other service contracting rules.
section_title: Agencies Generally Procured A&AS on a Recurring Basis, Met Period of Performance Limits, and Used Many Contract Vehicles
paragraphs: Agencies we reviewed frequently entered into contract actions for A&AS  on a recurring basis and commonly retained the same contractor to  perform these services, with about half of these actions for recurring  requirements awarded or issued competitively. Relatively few of the A&AS  contract actions exceeded or had the potential to exceed 5 years. Agencies  used many contracting vehicles to acquire A&AS. Time-and-materials  contract actions were the most prevalent contract type, and there was  considerable use of the GSA schedule program. Overall, 63 percent of the  A&AS contract actions were issued or awarded on other than a sole  source basis.
subsections: section_title: All Agencies Reviewed Contracted for A&AS on a Recurring Basis and Frequently Used the Same Contractor
paragraphs: We found recurring contract actions—that is, actions for which there was  evidence that a contract action for the same or similar services existed  immediately prior to the present contract action—in all the agencies we  reviewed. Overall, nearly 70 percent of the 275 A&AS contract actions in  our sample were recurring to meet continuing needs. The recurring  requirements included such services as logistics, engineering, acquisition,  program management, and legal support. Table 4 provides the frequency  of recurring contract actions for each agency and examples of the types of  recurring services procured in the A&AS contract files we reviewed.
Furthermore, we found that agencies entered into contract actions with  the same contractor as under the prior contract action over 70 percent of  the time, with about half of these awarded or issued competitively. Figure  3 shows by agency the extent of recurring A&AS contract actions we  identified through our contract file review, as well as the frequency with  which these contract actions were with the same contractor. For example,  almost 37 percent of contract actions we reviewed at the Department of  Homeland Security’s Immigration and Customs Enforcement were  recurring, and of those recurring actions, nearly 64 percent were awarded  to the same contractor for the follow-on requirement.
section_title: Agencies’ A&AS Contract Actions Generally Met Statutory Period of Performance Limits
paragraphs: Most contract actions we reviewed had periods of performance (including  all contract options and award terms) that were less than 5 years—the  statutory limit for A&AS task order contracts, but 2 exceeded and 10 had  the potential to exceed the limit.
The period of performance of two task order contracts (at Energy’s  National Nuclear Security Administration and Homeland Security’s  Immigration and Customs Enforcement) exceeded or had the potential  to exceed 5 years. The Energy contract has since expired; Immigration  and Customs Enforcement officials told us they planned to recompete  the requirement before the 5-year period was exceeded.
The Naval Sea Systems Command, which accounted for 10 of the 12  contracts, failed to accurately identify certain SeaPort and SeaPort-e  contracts as A&AS at award, and consequently included option periods  that could have potentially exceeded 5 years, with the longest period of  performance being 15 years. Based on recommendations from the  Naval Audit Service, however, the Command subsequently reviewed  these contracts before the 5-year period had expired to ensure they  were accurately classified as A&AS and refrained from exercising  options to prevent the ordering periods from exceeding 5 years. The  agency has since increased oversight to prevent A&AS task orders from  exceeding 5 years.
An additional 15 contract actions exceeded or had the potential to exceed  5 years, but did not breach the A&AS statutory period of performance  limit for various reasons.
Six of the 102 orders under GSA schedule contracts we reviewed  exceeded 5 years, with the longest being for 10 years. GSA administers  its schedule program under the authority of 40 U.S.C. § 501 and 41  U.S.C. § 259(b)(3).
Six contract actions had a period of performance of more than 5 years  but less than 5.5 years. A statutory provision allows for a one-time sole- source award of up to 6 months for continuation of A&AS services  based on extenuating circumstances, such as delay in award of a new  contract.
Three additional contract actions exceeded 5 years but were not  subject to the A&AS statutory period of performance limitation on task  order contracts. These actions included a stand-alone contract (i.e., not  a task order contract), a purchase order, and an agreement between  two federal agencies.
section_title: Agencies Use a Broad Range of Contract Types and Vehicles for A&AS
paragraphs: Agencies can use a broad range of contract types and vehicles to meet  their needs. For example, time-and-materials contracts can be used in  conjunction with stand-alone or indefinite-quantity contracts. We recently  reported that time-and-materials contracts are considered high risk to the  government because they provide no positive profit incentive to the  contractor for cost control or labor efficiency.  The choice of contract  type is the principal means agencies have for allocating cost risk between  the government and the contractor. Agencies can also award contracts or  issue task orders themselves, or, through interagency contracting, rely on  another agency’s contract, such as a GSA schedule contract. Figure 4  shows some of the contract vehicles and types.
For the files we reviewed, time-and-materials contract actions were  prevalent, representing almost half of all A&AS actions, although the  frequency varied greatly across agencies. For example, 93 percent of  contract actions at the Aeronautical Systems Center were time-and- materials, whereas we found none at the Naval Sea Systems Command.  Figure 5 illustrates the distribution of A&AS contract types at agencies we  reviewed.
In addition, agencies may use interagency contracting vehicles to acquire  services from other government agencies, such as GSA’s schedule  program. Interagency contracting vehicles were used for over 40 percent,  or 113 of the 275 A&AS contract actions we reviewed, with about 90  percent of these under GSA schedule contracts. We found the highest  percentage of interagency contracts used at the Air Force’s Aeronautical  Systems Center; 90 percent of the contract actions we reviewed at that  location were issued under GSA schedule contracts. However, the Center  has recently shifted its A&AS contracting away from schedule contracts to  its own Consolidated Acquisition of Professional Services contract, an  indefinite-delivery/indefinite-quantity multiple award contract initiated in  2006.
Figure 6 shows the distribution of interagency contract actions identified  in our contract file review.
Agencies can also procure goods or services using competition or on a  sole-source basis (that is, where agencies solicit and negotiate with only  one source). Generally, the FAR requires agencies to pursue full and open  competition for soliciting offers and awarding contracts for services  unless otherwise authorized. To determine whether or not the actions we  reviewed were issued or awarded using competition, we assessed whether  the agency contracting officials had prepared a justification and approval  for a sole-source action or whether documentation supporting a  competitive process was in the contract file. While about 37 percent of the  actions we reviewed, according to file documentation, were sole-source  procurements; the majority (63 percent) were not. As with contract type,  we found substantial variation in the regularity of competitive contract  awards among the agencies we reviewed.  The Naval Sea Systems  Command used competition to award all contract actions we reviewed,  whereas over 60 percent of contract actions at Air Force Headquarters, the  Aeronautical Systems Center, and the National Institutes of Health were  not competed. Moreover, the Air Force and National Institutes of Health  sole-source awards were commonly follow-on contract actions for similar  A&AS.
section_title: Conclusions
paragraphs: As the government increasingly turns to contractors to provide a wide  range of professional management support services such as A&AS, these  contracts need to be effectively managed and the contractors properly  overseen. However, the long-standing requirement that agencies report  A&AS budget obligations is not contributing to this management and  oversight. That the reporting has not provided Congress with accurate or  meaningful information has been identified as a problem for over 20 years.  From an agency perspective, the broad definition of A&AS serves little  utility for management or accountability purposes, as such contracts are  not clearly distinguishable from other professional support service  contracts either in policy or practice. The broad definition of A&AS,  coupled with the fact that reported obligations are not being used for  management or oversight purposes, calls into question the need to  continue the requirement as it currently stands. Further, while OMB’s  consideration of re-implementing a field in FPDS-NG for A&AS contracts  may help provide agency procurement officials and others with additional  insight on their obligations, this action will be only marginally beneficial  without an overarching clarification of the current broad definition of  A&AS.
section_title: Matter for Congressional Consideration
paragraphs: To address the long-standing problems agencies face in reporting A&AS  obligations, Congress should consider re-evaluating the need for agencies  to report A&AS funding separately to OMB, recognizing that contracts for  A&AS are not managed any differently than other contracts for  professional management support. If insights into A&AS contracts are  desired, Congress should consider clarifying the statutory definition of  A&AS to more explicitly address congressional concerns related to these  types of contracts and require the Administrator of  OFPP to reinstate data  collection on contracts for A&AS in FPDS-NG using the revised definition.
section_title: Agency Comments and Our Evaluation
paragraphs: We received written comments on a draft of this report from the  Department of the Treasury, which agreed with our findings. Treasury’s  letter is reprinted in appendix IV. In emails, the departments of Homeland  Security and VA stated that they also agreed. We received technical  comments from the Departments of Health and Human Services, VA, and  OFPP, which we incorporated as appropriate. The Departments of  Defense, Energy, and HUD had no comment.
We are sending copies of this report to interested congressional  committees, the Secretaries of Defense, Energy, Health and Human  Services, Homeland Security, HUD, Treasury, and VA; the Director of  OMB; the Administrator of GSA; and Administrator of OFPP. We will also  provide copies to others on request. In addition, the report will be  available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-4841 or HuttonJ@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report were Michele Mackin,  Assistant Director; Jaime Allentuck; Noah Bleicher; Lily Chin; Claudia  Dickey; Carol Henn; Arthur James, Jr.; Julia Kennon; Sean Merrill; Angie  Nichols-Friedman; Kenneth Patton; Brian Smith; and Anthony Wysocki.
section_title: Appendix I: Scope and Methodology
paragraphs: For the Department of Defense and selected civilian agencies, our  objectives were to (1) assess whether reported obligations for advisory  and assistance services (A&AS) are accurate or used for management  purposes and (2) identify the extent to which A&AS contracts are used for  recurring services and periods greater than 5 years, as well as the contract  types and vehicles used.
To address our overall audit objectives, we conducted a contract file  review at 10 agencies. To establish the agencies to include in the contract  file review, we first obtained lists of the 24 Chief Financial Officers Act  department level obligations reported to the Office of Management and  Budget (OMB)—as reflected in OMB’s MAX A-11 data entry system—from  fiscal years 2002 through 2006. We identified the 7 departments that had  the highest average reported A&AS obligations during this 5-year period:    Department of Defense    Department of Energy    Department of Health and Human Services    Department of Homeland Security    Department of Housing and Urban Development    Department of the Treasury    Department of Veterans Affairs  From that point, through analysis of department data and discussions with  agency officials, we identified those departments that were able to provide  us with a list of the fiscal year 2006 contracts that comprised their  reported 2006 A&AS obligations to OMB. Two departments—Housing and  Urban Development and Veterans Affairs–could not provide us with such a  list and therefore were not part of our contract file review. Next, through  analysis of agency data on overall service contracts, as captured in the  Federal Procurement Data System-Next Generation (FPDS-NG) and  further discussions with agency officials, we identified the major agencies  or components within the 5 remaining departments that could provide us  with a list of contracts comprising these reported obligations. The  Department of the Army dropped out of our file review sample at this  point, as it could not provide us with a list of A&AS contracts. Table 5  shows the locations where we did our work, including those where we  could not perform a file review.
For our onsite file review, we generated a statistical random sample of 334  contract actions out of the 6,373 contracts that the 10 major agencies  within our review identified as A&AS.  We performed the file reviews  using an electronic data collection instrument and onsite source  verification. For instances where the contract file review results warranted  follow-up with the agency, we requested and received additional  information from agency officials, which we analyzed and incorporated  into our final results where appropriate. The results of our agency-specific  contract file reviews are generalizable to the particular agency location  where we reviewed contract files. Table 6 depicts the number of contract  actions we reviewed at each agency.
To assess whether reported A&AS obligations are accurate or used for  management purposes, we analyzed pertinent sections of the Federal  Acquisition Regulation and OMB Circular No. A-11, Preparation,  Submission, and Execution of the Budget, requirements for contracted  A&AS. We reviewed prior GAO, inspectors general, and other audit agency  reports. We also collected and reviewed existing agency-specific service  contracting guidance, reviewed obligation data from the OMB MAX A-11  data entry system, and performed our contract file reviews at selected  agencies. We conducted a detailed review of congressional and other  actions regarding consulting services and A&AS over time. We also  interviewed agency procurement and budget officials to discern their  processes and procedures for reporting A&AS obligations to OMB and  discussed the accuracy and usefulness of reported A&AS obligations with  officials from OMB and the Office of Federal Procurement Policy. Because  the focus of this report was the government’s budget reporting of A&AS  obligations, we did not address compliance with various A&AS-related  provisions, such as the requirement for multiple awards for A&AS task  order contracts (10 U.S.C. § 2304b(e) and 41 U.S.C. § 253i(e) and those in 7  U.S.C. § 2207a, 10 U.S.C. § 2399(e), or 41 U.S.C. § 419. We also did not  assess compliance with a requirement under federal appropriations law  that agencies must confirm that their reported obligations were certified  by officials designated by the agency head.
We relied on OMB’s MAX database system to analyze A&AS obligations  because FPDS-NG, which is used to collect, develop, and disseminate  procurement data from executive agencies, does not distinguish A&AS  contract actions and their associated obligations. Because there was no  direct denotation for A&AS contract actions within FPDS-NG, we  attempted to identify federal product and service codes that relate to  A&AS using the database system, but found, through outreach with agency  officials, a wide range of product and service codes—from six to over  400—that were identified as having the potential to include A&AS contract  actions (that is, while these product and service codes may involve A&AS,  they also may not). Because of the wide range of product and service  codes that could potentially include A&AS, we were unable to determine,  through an analysis of contract actions reported in FPDS-NG, the extent to  which A&AS contract actions may have been underreported.
To assess the extent to which agencies use A&AS to meet recurring  requirements and the regularity with which the recurring contract actions  are awarded to the same contractor for the follow-on work, we analyzed  data obtained from our contract file reviews and held discussions with  agency officials. For our review, we considered a “recurring contract  action” to be an action for which there was evidence that a contract action  for similar services existed immediately prior to the contract action we  reviewed. Likewise, we considered “same contractor” as a contractor that  had been issued or awarded a contract action for the same or similar  A&AS immediately prior to the action we reviewed. Where we could not  determine through our file review the status of prior contract actions or  could not identify the prior contractor, we asked agency officials for  additional information, which we incorporated into our final results where  appropriate.
Similar to our activities related to recurring contract actions, we reviewed  information from agency interviews and contract file review data to assess  the frequency with which task order contracts for A&AS exceeded or had  the potential to exceed a 5-year period of performance. In particular, our  contract file review enabled us to document the length of contracts and to  evaluate the extent to which the statutory period of performance  limitations for A&AS were met. “Period of performance” is the total  potential length of a task order contract with all options or award terms  exercised by the agency. Title 10 U.S.C. § 2304b and 41 U.S.C. § 253i limit  the total period of performance for A&AS task order contracts to 5 years,  with the possibility of an extension of no longer than 6 months for  continuation of services when extenuating circumstances exist. For any  contract actions identified as exceeding or having the potential to exceed  the 5-year period of performance limitation, we requested and received  agencies’ explanations for exceeding 5 years and incorporated their  responses into our final results.
To evaluate what contract types and vehicles are used by agencies to  acquire A&AS, we analyzed our contract file review data and information  from our interviews with agency officials. In particular, our contract file  review findings enabled us to analyze the contract types used by agencies  to procure A&AS, the degree of interagency contracting for A&AS, and the  level of competition for A&AS contract actions. To determine whether or  not the action was issued or awarded using competition, we assessed  whether the agency contracting officials had prepared a justification and  approval for a sole-source action or whether documentation supporting a  competitive process was in the contract file. Our interviews with agency  officials provided additional information concerning agency-specific A&AS  contracting practices that affect the contract type, interagency use, and  extent of competition.
We conducted this performance audit from January 2007 to February 2008  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.
section_title: Appendix II: Department-Level Reported A&AS Obligations for Agencies in Our Review
paragraphs: Fiscal year obligations (dollars in millions)
section_title: Appendix III: Exclusions to the Definition of A&AS
paragraphs: The Federal Acquisition Regulation (FAR), Office of Management and  Budget (OMB) Circular No. A-11, and the Department of Defense’s (DOD)  Financial Management Regulation provide exclusions to the definition of  advisory and assistance services (A&AS), shown below.
section_title: Appendix IV: Comments from the Department of the Treasury