Defense Contracting: Army Case Study Delineates Concerns with Use of Contractors as Contract Specialists
Published: 2008-03-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2007, the Department of Defense (DOD) paid contractors $158.3 billion for a range of services, including contract specialists. To better understand the use of contractors in this role, GAO initiated a case study, under the authority of the Comptroller General, at the Army Contracting Agency's (ACA) Contracting Center of Excellence (CCE). GAO determined (1) the extent to which and why CCE relies on contractor contract specialists, (2) how risks of contractor use are mitigated, (3) how the cost of the contractors compares to that for CCE's government employees, and (4) whether the contract vehicles were appropriate. GAO reviewed a random sample of contract files to understand the contractors' duties and responsibilities, compared compensation costs, and reviewed documents from the General Services Administration (GSA), under whose contracts CCE ordered the contract specialists.
section_title: What GAO Found
paragraphs: CCE has relied on contractor contract specialists since it began hiring them in 2003. In August 2007, contractors--who work side by side and perform the same functions as their government counterparts--comprised 42 percent of CCE's contract specialists. CCE officials cited difficulties hiring and retaining government personnel in light of the competition from government and the private sector for this competency. While CCE officials said that they prefer to use government employees, they have not considered the appropriate balance of contractor versus government contract specialists. Furthermore, CCE has not addressed the need for more training of its government employees to strengthen their skills in conducting CCE's increasingly more complex procurements. Methods to mitigate the risks of using contractors have been mixed in effect. First, the line separating contractor from government employee is blurry, and contractors did not always clearly identify themselves as such when dealing with the public. Second, the potential for the work being done under a personal services contract, which the Federal Acquisition Regulation generally prohibits because of the government-contractor relationship it creates, was clearly present. While contractor managers retained control over matters such as approving leave requests, CCE took steps to further strengthen the management distinction between government and contractor employees based on GAO's findings. Finally, risks of organizational and personal conflicts of interest were mitigated to some extent, but in practice the government relies on individual contractor employees to identify potential conflicts. These types of risks must be mitigated to ensure that the government does not lose accountability over policy and program decisions. CCE is paying up to almost 27 percent more for its contractor-provided contract specialists than for similarly graded government employees. This comparison took into account government salary, benefits, and overhead and the loaded hourly labor rates paid to contractors. Our review of available r?sum?s showed that six contractor employees supporting CCE in fiscal year 2007 had on average more contracting experience than CCE's five recent government hires. Despite CCE's legal counsel's concerns, CCE has been inappropriately ordering contract specialists under a GSA contract because the services were out of scope of those contracts. GAO found additional problems, such as a contractor advertising contract specialist services on GSA's Web site that it was not authorized to provide. Due to what it characterizes as the growing demand by federal agencies for contractor contract specialists, GSA recently posted a revised contract category, under which government agencies can procure contract specialists to provide acquisition management services, such as cost estimating and proposal evaluation support. In response to GAO's findings, GSA contacted each of the contractors involved in our review about their out-of-scope services and plans further follow-ups with them.

section_title: Letter
paragraphs: Over the past 10 years, Department of Defense (DOD) spending on  services has increased 76 percent—to $158.3 billion in fiscal year 2007— and now outpaces its spending on supplies and equipment, including  major weapon systems. One effect of the escalation in service spending  has been to place greater demands on a shrinking acquisition workforce,  which is increasingly faced with the need to manage more complex  contracting approaches. Agencies have dealt with these trends by relying  more heavily on contractors, particularly those that provide professional,  administrative, and management support services, an area where DOD’s  spending more than tripled from fiscal years 1998 through 2007. One  example of a function DOD is acquiring through contracts is contract  specialists, who perform a range of acquisition services in support of  government contracting officers.
The decision to turn to contractors can, in some cases, create risks that  the government needs to consider and manage. Of key concern is the risk  of loss of government control over and accountability for mission-related  policy and program decisions when contractors provide services that  closely support inherently governmental functions. Contract specialist  services are an example of such a service, whereas the contracting officer,  who obligates the government’s money, is performing an inherently  governmental function that cannot be obtained through a contract. Other  concerns include an increased potential for conflicts of interest, both  organizational and personal; the potential for improper use of personal  services contracts, which the Federal Acquisition Regulation (FAR)  generally prohibits because of the employer-employee relationship they  create between the government and contractor personnel; and the cost to  the government of hiring contractors rather than government personnel.
To learn more about the use and roles of contractors providing contract  specialist services, we conducted a case study, under the authority of the  Comptroller General to conduct evaluations on his own initiative, of the  Army’s Contracting Center of Excellence’s (CCE) use of contractors in this  role. Organizationally, CCE falls under the Army Contracting Agency  (ACA), a field operating agency reporting to the Assistant Secretary of the  Army for Acquisition, Logistics, and Technology. We determined (1) the  extent to which and the reasons CCE is relying on contractors, (2) what  actions have been taken to mitigate the risks associated with using  contractors in contract specialist roles, (3) how the costs of CCE’s  contract specialists compared to that of its government contract  specialists, and (4) whether the contract vehicles used to acquire the  specialists were appropriate. This report presents our findings at CCE as  an example of the challenges faced by agencies in an environment of  increased reliance on contractors to help meet the contracting mission.
We identified CCE as a government agency using contractors as contract  specialists through a bid protest that involved CCE’s predecessor  organization awarding a contract for contract specialists. In fiscal year  2007, CCE obligated almost $1.8 billion in contract actions. To conduct our  work, we interviewed CCE and ACA officials and contractor  representatives. We obtained information on CCE’s contract specialist  staffing levels in fiscal year 2007, and we reviewed CCE’s orders issued  under blanket purchase agreements (BPA) established in 2006 for  contract specialist services, as well as billing information. To identify the  roles and responsibilities of contractor contract specialists, we  interviewed government and contractor contract specialists and  government contracting officers, and we reviewed 42 randomly selected  CCE contract files for work performed by the contractor contract  specialists in fiscal years 2006 and 2007 to understand the contractors’  day-to-day duties. We also reviewed contractor policies and procedures  regarding organizational and personal conflicts of interest. In addition, we  reviewed FAR provisions pertaining to conflicts of interest, as well as  those relating to personal services contracts. To compare costs, we  calculated an average loaded hourly rate (including benefits, overhead,  and other costs) for CCE’s government contract specialists who perform  the same tasks and have similar qualifications as the contractor-provided  contract specialists, and compared it to the weighted average labor hour  rate that two contractors charged CCE for contract specialists in August  2007. The contractors’ labor hour rates include wages, benefits, overhead,  general and administrative expenses, and profit. We also reviewed  résumés to compare experience levels of contractor and government  contract specialists. Résumés were available for six contractor contract  specialists who had supported the agency for at least 6 months; we also  reviewed the résumés of the five contract specialists CCE had recently  hired. We reviewed CCE’s contracting strategies to determine whether  new contracts were awarded to obtain contract specialists or whether  interagency contracts through other federal agencies, such as the General  Services Administration’s (GSA) schedule program, were used. We  analyzed contract documents, including CCE’s BPAs with four  contractors, related task orders, and underlying GSA schedule contracts.  We spoke with GSA officials responsible for overseeing the Mission  Oriented Business Integrated Services (MOBIS) schedule and with CCE  officials. We also examined the FAR section on the use of GSA schedules.
While CCE has established BPAs with four contractors to provide contract  specialist services, nearly all of the contractor-provided contract  specialists at CCE during our review were employees of CACI  International, Inc. (CACI); thus, our primary focus was on the CACI  contract, related BPA, and orders.
We conducted this performance audit from May 2007 to March 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. See appendix I for additional information  on our scope and methodology.
subsections: section_title: Background
paragraphs: CCE, which falls organizationally under ACA, provides contracting  support to 125 DOD customers in the National Capitol Region, including  the Joint Chiefs of Staff, TRICARE Management Activity, Defense  Information Systems Agency, DOD Inspector General, Pentagon  Renovation Office, and Office of the Judge Advocate General. During fiscal  year 2007, the agency awarded about 5,800 contract actions and obligated  almost $1.8 billion. CCE is one of many government agencies that have  turned to contractors to support their contracting functions.
While use of contractors provides the government certain benefits, such as  increased flexibility in fulfilling immediate needs, we and others have  raised concerns about the federal government’s services contracting, in  particular for professional and management support services. A major  concern is the risk of loss of government control over and accountability  for mission-related policy and program decisions when contractors  provide services that closely support inherently governmental functions.  Inherently governmental functions require discretion in applying  government authority or value judgments in making decisions for the  government, such as approving contractual requirements; as such, they  must be performed by government employees, not private contractors.  The closer contractor services come to supporting inherently  governmental functions, the greater the risk of their influencing the  government’s control over and accountability for decisions that may be  based, in part, on contractor work. Decisions may be made that are not in  the best interest of the government and may increase vulnerability to  waste, fraud, or abuse.
The FAR sets forth examples of services closely supporting inherently  governmental functions. These include acquisition support services, such  as    services in support of acquisition planning,    services that involve or relate to the evaluation of another contractor’s    contractors providing assistance in contract management (such as  where the contractor might influence official evaluations of other  contractors), and    contractors working in any situation that permits or might permit them  to gain access to confidential business information, any other sensitive  information, or both.
It is now commonplace for agencies to use contractors to perform  activities historically performed by federal government contract  specialists. Although these contractors are not authorized to obligate  government money, they provide acquisition support to contracting  officers, the federal decision makers who have the authority to bind the  government contractually. Among other things, contract specialists  perform market research, assist in preparing statements of work, develop  and manage acquisition plans, and prepare the documents the contracting  officer signs, such as contracts, solicitations, and contract modifications.
In its 2007 report to Congress, DOD’s Panel on Contracting Integrity noted  that the practice of using contractors to support the contracting mission  merits further study because it gives rise to questions regarding potential  conflicts of interest and appropriate designation of governmental versus  nongovernmental functions. The panel concluded that potential  vulnerabilities may exist that could result in fraud, waste, and abuse.
A November 2005 DAU study cited four top reasons that federal agencies  are contracting out for procurement services: (1) to meet workload surge  requirements, (2) inability to hire adequate resources to meet workload,  (3) relative speed of contracting versus hiring to meet workload, and   (4) ability to select specific required expertise. The DAU data showed that  contractors performed duties across the spectrum of contracting  functions, from acquisition planning to contract closeout. The study’s  authors noted that as DOD’s personnel levels have dropped, activity rates  for procurement organizations have increased, driving a gap between the  requirements and government capability in many DOD contracting offices.  The report warned that the government must be careful when contracting  for the procurement function to ensure that government leaders retain  thorough control of policy and management functions and that contracting  does not inappropriately restrict agency management in its ability to  develop and consider options.
section_title: CCE Is Using Contractors to Supplement Its Workforce without Considering the Right Balance of Contractors versus Government Employees
paragraphs: CCE has relied on contractors to help meet its increasing workload  requirements since 2003 and plans to continue doing so, although agency  officials would prefer an all-government workforce. The roles and  responsibilities of the contractor contract specialists mirror those of the  government contract specialists. In fact, contractor and government  contract specialists work side by side and perform the same duties. CCE  has not taken into consideration what constitutes a reasonable and  feasible balance of the number of government versus contractor personnel  or developed a training program for its permanent government employees.
subsections: section_title: CCE Has Relied on Contractors to Meet Its Increasing Workload and Plans to Continue Doing So
paragraphs: According to agency officials, CCE began using contractor contract  specialists in 2003 as a stopgap measure to meet an increase in workload,  but the agency has continued to rely heavily on their support. Our analysis  of CCE’s contract actions showed that contractors supported from 24 to  30 percent of all actions from fiscal year 2005 through 2007. In fiscal year  2007, CCE spent over $2.8 million on over 32,600 hours (approximately  15.6 full-time-equivalent employees) of contracting support services from  two contractors—CACI and The Ravens Group. In August 2007, 42 percent  of CCE’s contract specialists were contractors. CCE officials stated that  the agency plans to continue relying on contractors, although they would  prefer an all-government workforce.
CCE officials told us that prior to 2005, the majority of the agency’s  contracting activity consisted of issuing orders against GSA schedule  contracts—a relatively simple contracting method. After a DOD policy  memorandum placed limitations on the use of non-DOD contract vehicles  because of widely reported misuse of interagency contracts, CCE began  relying less on using contract vehicles awarded by other agencies. Our  analysis of Federal Procurement Data System-Next Generation data found  that from fiscal years 2005 to 2007, the number of CCE contract actions  through other agency contract vehicles decreased by 55 percent and  obligations through use of these vehicles decreased by 45 percent.  According to agency officials, CCE began awarding more of its own  contracts through full and open competition, but the contracting staff  generally lacked experience with these more complex types of  procurements. Much of the workload had to be assigned to a limited  number of more experienced staff, creating a situation where officials  believed they had no choice but to turn to contractor support.
section_title: Activities and Responsibilities of Contractor Contract Specialists Mirror Those of Government Personnel
paragraphs: Contractor contract specialists at CCE perform the same tasks as  government contract specialists. Typical tasks include pre-procurement  research and planning, preparing contract documents, monitoring  contracts, assisting with negotiations, and closing out contracts. These  “cradle-to-grave” procurement activities are performed as support for a  government contracting officer, who performs an inherently governmental  function with the ability to bind the government by contract. According to  CCE contracting officers, the work is generally assigned based on  knowledge and experience, not whether the specialist is a government or  contractor employee, with the only exception being cases where there  could be a potential organizational conflict of interest (such as when the  contractor employee’s company could bid on the contract in question).
We reviewed contract files for 42 randomly selected contract actions on  which contractor contract specialists worked during fiscal years 2006 and  2007 and found that the contractors had prepared a range of contracting  documents, such as contract modifications, requests for legal review,  small business coordination records, cover sheets to route contract  actions for approval, award decision memorandums, and memorandums  to the file. Contractors also had requested or received documents from  vendors or other DOD entities, such as proposals, technical evaluations,  and past performance questionnaires, and assisted in preparing statements  of work.
The contracting officers and government and contractor-provided contract  specialists we interviewed at CCE emphasized that while the contractors  can recommend a course of action, the contracting officers make the  decisions, such as deciding on an acquisition strategy and making contract  award determinations. The contracting officers and specialists also told us  that although contractors may assist in negotiations, the contracting  officer takes the lead role in negotiating the terms of the contract.
section_title: CCE Has Faced Difficulties Hiring Government Contract Specialists
paragraphs: CCE officials informed us that the agency has had trouble recruiting and  retaining government contract specialists. For example, an official told us  that as of October 2007 the agency had 10 contract specialist positions that  have been vacant for as long as 5 months, as well as another 12 vacancies,  such as procurement analysts and a cost/price analyst. According to the  official, from August 2006 through August 2007, 24 contract specialists— more than one-quarter of its government contracting workforce during  the period—left the agency. Agency officials stated that some of these  personnel retired, but many had gone to work for private contractors that  support the federal government. In fact, CCE officials said that they  cannot compete with the private sector when it comes to offering some  employment incentives. Additionally, both CCE and ACA officials stated  that the government’s hiring process takes too long and that potential  candidates are often hired by a contractor or another agency before CCE  can make an offer. For example, it took CCE over 5 months, from  solicitation to job offer and placement, for two recent contract specialist  hires. In contrast, a CCE official told us that they can order and have a  contractor employee in place within as little as a couple of weeks.
CCE officials stated that the agency’s recruitment difficulties are in large  part caused by the high demand for contract specialists—by both the  many federal agencies in Washington, D.C., and contractors from which  the government purchases these services—making it difficult to compete  for them. Contractor representatives, too, reiterated that the employment  market for well-qualified contract specialists is extremely competitive.  CACI employees who were supporting CCE as contract specialists  confirmed that there is a high demand for their skill set, and several of  these individuals stated that a well-qualified person can be selective when  searching for a new employer. In addition, these employees said CACI  offers some better benefits than the federal government, including higher  salaries, fewer responsibilities, and shorter work weeks (because of  contract restrictions on extended hours). Senior managers from The  Ravens Group told us that their firm recruits contract specialists who have  worked for and been trained by the government and hires them at a higher  rate of pay.
section_title: CCE Has Not Considered the Appropriate Balance of Contractor to Government Employees and Lacks a Training Plan to Help Build Government Staff’s Skills
paragraphs: CCE plans to continue relying on contractors to help meet its mission, but  has not considered the appropriate and feasible ratio of government  employees to contractors. In a November 2005 study on contracting out  the procurement function, DAU concluded that it is reasonable to contract  out functions or tasks that are not inherently governmental to meet a  sudden or temporary increase in workload or when special expertise is  required. However, the study cautioned that contracted procurement  support needs to be maintained at a “reasonable” level. The study  recommended that each contracting activity be limited in the percentage  of its workforce that may be contractors, acknowledging that the  appropriate limitation is a matter for debate. It noted that using  contractors only in limited situations would    provide contracting agencies with flexibility to quickly react to surge    enable managers to assign the contractors to lower-priority tasks so  that government employees would handle the more sensitive  procurement tasks, and    help address the concern that extensive contracting out of the  contracting function could reduce, in the long term, the opportunity to  develop adequate numbers of government personnel with a full range  of contracting experience.
Defining the right mix of contractor to government contract specialists is  not just a matter of numbers, but also of skill sets. The DAU study  envisions contractors playing a limited role and performing lower-priority  tasks. However, at CCE, complex, high-priority work is often assigned to  the contractors, whose role has been ongoing since 2003. In part,  according to agency officials, this is because many of the government  employees lack experience with complex procurements. However, we  found that while CCE has implemented a 2-year training program for its  contract specialist interns, the agency does not have in place a training  program for its permanent staff. In fact, according to CCE’s former  Commander and the current Director of Contracting, contracting staff  have had to learn these practices on the job, which has resulted in some  performance problems. An agency’s overall training strategy—including  planning, developing, implementing, and continuous improvement of its  programs—is an important factor in ensuring that the staff has the skills,  knowledge, and experience to meet agency missions.
section_title: Risks Associated with Using Contractors for Acquisition Services Are Being Mitigated to a Mixed Degree
paragraphs: Three broad areas of risk of using contractors as contract specialists are  present at CCE, with the risks being mitigated to various degrees. First, we  found that the blurred lines demarcating contractor from government  personnel could result in creating the impression that contractor  employees are government personnel. Contractor employees were not  always identified as such to the public and in some cases were named on  documents as the government’s point of contact. Second, the work being  done reflects the descriptive elements listed in the FAR as guidance for  assessing the existence of personal services contracts, which are  prohibited unless authorized. However, a determination as to whether a  personal services contract exists must be made on a case-by-case basis;  here, CACI’s on-site managers retain control over supervisory and  managerial functions, such as approving time cards and making hiring and  firing decisions, thus negating the existence of a personal services  contract. We found no DOD guidance that elaborated on the factors to be  considered in determining whether an unauthorized personal services  contract exists or how to mitigate that risk. Finally, although policies and  procedures are in place to help mitigate organizational and personal  conflicts of interest, in practice, CCE relies on contractor employees to  self-identify potential conflicts.
subsections: section_title: Contractor Contract Specialists Not Always Identified as Such
paragraphs: To avoid confusion by vendors and customers over whether they are  speaking to a government employee, it is important to clearly distinguish  between contractors and government employees in all interactions.  Contractor personnel attending meetings, answering government  telephones, and working in other situations where their contractor status  is not obvious to third parties should identify themselves as such to avoid  creating the impression that they are government officials. In addition,  the FAR states that agencies must ensure that all documents or reports  contractors produce are suitably marked as contractor products or that  contractor participation is appropriately disclosed. Further, in December  2005, the Assistant Secretary of the Army issued a memorandum,  “Contractors in the Government Workplace,” stating that “while it is  preferred that contractor personnel work in company office space, if  Government and contractor personnel must be co-located in the same  office space, then, to the maximum extent possible, the contractor  personnel should have separate, and separated, space.”
At CCE, we found the line separating government from contractor  personnel to be blurry. There is no physical separation; the two work side  by side in identical office space, and contractor employees are not  identified as such on their cubicles. The only apparent distinction is their  different badge color.
In addition, contractors were not always identified as such on contracting  documents they had prepared. We reviewed 23 contract modifications  prepared by contractor employees and found that their status as  contractors was not indicated on the documents. Further, on 16 of these  modifications, the contractor was identified as administering the contract,  and on four, the contractor was listed as the point of contact without  identification as a contractor—for example, as the “CCE contact” or  “government point of contact.” Instances such as these, where the  contractor is not identified as such or is misidentified, can cause  confusion about the contractor’s status and create an impression that the  contractor is speaking or acting for the government. For example, we  found a situation in which a vendor, in submitting a proposal to the  government, listed the contractor contract specialist as the contracting  officer, who has the contract source selection authority for the  government. Another contract file contained e-mails between a contractor  employee and third-party entities—correspondence with a CCE customer  agency and notification to a vendor that its bid would not be considered— with no contractor identification at all.
CCE officials told us that the agency has no requirement that contractor  employees identify themselves as contractors in the e-mail signature line,  which could help ensure that outside parties know they are dealing with a  contractor. Further, although the FAR and CCE’s orders for contract  specialists under the BPAs specifically cite telephone contacts as  situations in which contractors should identify themselves as such, a CCE  management official did not know whether this was occurring in practice.
When we brought these issues to CCE’s attention, the agency began to  establish policies to mitigate the risk of contractors being mistaken for  government employees and appearing to be speaking for the government.  It has since issued a policy that contractor support personnel are not to  communicate orally or in writing with other contractors, such as vendors.  The contractor contract specialists will still communicate with CCE’s  federal customers. In addition, the CACI on-site senior manager notified  CACI employees at CCE that they are to identify themselves as contractors  in all correspondence, including e-mail and voice mail, and documents.
section_title: Determination of Whether Personal Services Contract Exists Must Be Made on Case-by-Case Basis
paragraphs: At CCE, the work of the contractor contract specialists, performed in  direct support of the government contracting officer and under his or her  day-to-day supervision, results in an arrangement that can have  characteristics of a personal services contract. Personal services contracts  are generally prohibited, unless authorized by statute. The government is  normally required to obtain its employees by direct hire under competitive  appointment or other procedures required by the civil service laws.  Section 37.104 of the FAR lists six descriptive elements to be used as a  guide in assessing the existence of a personal services contract. The  presence of any or all of these elements does not necessarily establish the  existence of a personal services contract. Such a finding can only be  established based on a case-by-case analysis of the totality of the  circumstances of each case. The FAR elements are shown in table 1 along  with the working environment of the contract employees at CCE. We  found that the actual working environment for the contractor contract  specialists at CCE touched on all six elements.
The FAR provides that each contract arrangement be judged in the light of  its own facts and circumstances, with the key question always being  whether the government will exercise relatively continuous supervision  and control over the contractor personnel performing the contract. For  example, GAO bid protest decisions have considered, along with the  existence of other factors, the fact that government “managers interviewed  and selected contractor personnel for assignment to positions, and  routinely requested pay increases and promotions for contractor  personnel” to be contributing factors in the existence of a personal  services contract. Another bid protest decision considered that “the  contractor’s right to hire and fire employees, to grant or deny individual  leave requests, and to reassign employees negate the existence of a  personal services contract as defined in the FAR.” CACI’s performance, in  this case, of supervisory and management functions, such as approving  time cards and leave requests, preparing performance evaluations, and  making hiring and firing decisions, means a personal services contract  does not exist, even if the six FAR elements are present. Although the  distinction between a personal services contract and a non-personal  services contract is somewhat murky and requires a case-by-case analysis  based on the facts of each circumstance, we found no additional DOD  guidance that elaborated on the factors contracting officers or program  officials should consider in determining whether a personal services  contract exists and how to mitigate against this risk when contractors are  working side by side with their government counterparts, perhaps even  receiving their daily task assignments from a government supervisor.  Because of the type of contract and nature of the contract services  provided along with the presence of the FAR’s descriptive elements, the  CACI contract runs the risk of becoming a personal services contract if the  government does not carefully monitor the manner in which services are  provided.
When we brought these issues to the attention of CCE, the agency began  to take actions to strengthen the management distinction between  government and contractor personnel. Before, the contractor personnel  were assigned to a team consisting of government and contractor  employees, and they generally worked for one contracting officer most of  the time. Now, all of the contractor personnel are on a separate team, and  the contractors’ managers on-site are responsible for assigning work to the  contractor employees—unlike the previous situation where the  government contracting officer assigned the work. Under this  arrangement, contractor contract specialists can work for several different  contracting officers, according to a CCE official. In addition, CCE has  plans to situate contractors together in an area separate from government  personnel and to put nameplates on cubicles to clearly distinguish  between contractor and government employees, but these plans have not  yet been implemented.
The Acquisition Advisory Panel recently reported that as the extent of  service contracting has grown, the current ban on personal services  contracts has created two responses—government managers may find  themselves crafting cumbersome and inefficient processes to manage the  work of contractor personnel to avoid the appearance that they are  exercising continuous supervisory control, or they may simply ignore the  ban. The panel recommended replacing the ban with guidance on the  appropriate and effective use of personal services contracts. The panel  stated that in implementing the recommendation, the government should  be allowed to supervise the work performed by the contractor workforce,  but current prohibitions on government involvement in purely supervisory  or management activities—such as hiring, leave approval, and  performance ratings—should be retained.
section_title: Mitigations of Organizational and Personal Conflicts of Interest Must Rely Heavily on Individual Contractor Specialists
paragraphs: Reliance on contractor support to meet agency missions can raise the risk  of organizational and personal conflicts of interest. In fact, the  Acquisition Advisory Panel noted that the government’s increased reliance  on contractors, coupled with increased contractor consolidations, has  escalated the potential for organizational conflicts of interest (OCI). With  respect to protecting contractor confidential or proprietary data, the panel  recognized the increased threat of improper disclosure as more contractor  employees support the government’s acquisition function. The panel also  found that while there are numerous statutory and regulatory provisions  that apply to federal employees to protect against personal conflicts of  interest, most do not apply to contractor personnel.
An OCI may be present when a contractor organization has other interests  that either directly or indirectly (because of business or relationships with  other contractor organizations) relate to the work to be performed under a  contract and (1) may diminish its capacity to give impartial, technically  sound, objective assistance or advice or (2) may result in it having an  unfair competitive advantage. The FAR and GAO bid protest decisions  provide guidance for contracting officers to mitigate three types of OCIs:  unequal access to nonpublic information as part of its performance under  a government contract that might provide the contractor firm unfair  competitive advantage in a future competition; biased ground rules, such  as the firm being in a position to write a statement of work that might  provide it an unfair advantage in a future competition; and impaired  objectivity when the contractor firm’s work under a contract entails  evaluating its own work or that of a competitor either through an  assessment of performance under another contract or through an  evaluation of proposals.
As required under its BPA with CCE, CACI submitted an OCI risk  mitigation plan, which lays out the elements of its plan to mitigate the risk  of an OCI. According to the plan, the contractor has established a  separation, or “firewall,” between the business unit that provides contract  specialists and program support services to CCE and all other divisions  and corporations owned by the company. As a part of the firewall, the  business unit’s employees are physically separated from the company’s  other operating groups, proposal databases are separated, and the  business unit’s employee financial incentives do not depend on the  performance of the company’s other operating organizations. Also, the  business unit providing contract specialists is precluded from submitting  proposals in response to solicitations issued by CCE, except for those  related to the BPA for contract specialists. In addition, the company  provides its employees with OCI training and instructions to immediately  notify the contracting officer of a potential OCI; requires them to sign  conflict of interest and nondisclosure agreements to protect proprietary or  sensitive information belonging to the government or other contractors— for example, cost and pricing data, government spend plan data, and  contractor technical proposal data—and not use this information to  violate procurement integrity rules; and limits where employees can work  within CACI for 2 years after leaving CCE. The nondisclosure agreement  also addresses personal conflicts of interest, as the contractor employee  must agree not to engage in any conduct prohibited by the Procurement  Integrity Act as implemented in FAR 3.104. Finally, a group internal to the  company conducts annual reviews of the effectiveness of and adherence  to the OCI risk mitigation plan.
Although CCE and the contractor have taken steps to mitigate OCI risks,  in practice, identifying and mitigating the risks necessarily relies, to a large  extent, on individual contractor personnel. Contractor officials indicated  that it is the responsibility of the contractor contract specialists to  immediately notify the company supervisor and contracting officer of  potential OCIs. CACI officials and employees told us of cases where  contractor contract specialists had been exposed to potential conflicts of  interest, that is, they were assigned to procurements that the company  planned to bid on. We were told these employees were subsequently  removed from working on the procurements after notifying contractor  management and government officials of a potential conflict. Despite these  instances, CCE officials told us that they are careful about what  procurements they assign to the contractors. For example, the CCE  contracting officer’s representative told us that she screens requirements  packages to determine which ones would present a potential conflict if  assigned to a contractor. However, she does not have visibility to the  subcontract level, where the contractor could be a subcontractor to a  potential bidder.
For purposes of this report, we define a personal conflict of interest as a  situation when an individual, employed by an organization in a position to  materially influence research findings, recommendations, or both, may  lack objectivity or be perceived to potentially lack objectivity because of  his or her personal activities, relationships, or financial interests. For  example, a conflict can occur when a government employee contacts an  offeror during the conduct of an acquisition since this could be construed  as seeking employment. Defense contractor employees are not subject to  the same laws and regulations that are designed to prevent federal  employee conflicts of interests. Moreover, although a new FAR subpart  states that contractors should have a written code of business ethics and  conduct, neither the FAR nor DOD contracting policy requires that  contractor employees be free from conflicts of interest or that they deploy  other safeguards to help ensure that the advice and assistance the  employees provide is not tainted by personal conflicts of interest.  Therefore, mitigating the risks associated with personal conflicts of  interest depends on the integrity of the contractors and their employees.
For example, one of the contractors providing contract specialists to CCE  has an internal policy for standards of employee ethics and business  conduct that addresses personal conflicts of interest. In addition, the  company provides mandatory ethics training that covers personal conflicts  of interest. According to a company official, rather than having a formal  financial disclosure process, its employees are equipped with knowledge  of what constitutes a personal conflict of interest, and it is the employees’  responsibility to self-report if they have a personal conflict of interest. The  company also has a moonlighting policy that requires employees to obtain  company approval prior to forming any relationship with a for-profit  company.
section_title: CCE Is Paying More for Contractor Contract Specialists Than Its Government Employees
paragraphs: CCE is paying more on average for contractor-provided contract  specialists than for its government specialists. We reviewed the hours of  contractor services CCE purchased under orders pursuant to the four  BPAs it established at the end of fiscal year 2006. By the end of fiscal year  2007, CCE had purchased contract support services only from CACI and  The Ravens Group, with the vast majority being from CACI. Agency  officials informed us that CCE has purchased services of two types of  contract specialists: (1) contract specialists II, which are Defense  Acquisition Workforce Improvement Act (DAWIA) II-certified/GS-12  equivalents, and (2) contract specialists III, which are DAWIA III- certified/GS-13 equivalents. Because the orders issued pursuant to the  BPAs are time-and-materials contracts, payments to contractors are based  on the number of labor hours billed at a fixed hourly rate—which includes  wages, benefits, and the company’s overhead; general and administrative  expenses; and profit. Because agency officials stated that CCE has  government contract specialists with the same certifications and GS levels  as the contractor contract specialists, we determined that these specialists  were comparable. Therefore, we compared the costs and experience of  the government and contractor employees within these two categories. We  found that the average hourly cost of a contract employee is higher than a  government specialist performing the same duties, as shown in table 2.
Key elements of our analysis were as follows:    The loaded hourly cost of a government employee includes salary,  costs of the government’s contributions to the employee’s benefits, the  costs to train the employee, the employee’s travel expenses, and the  costs of operations overhead—which are the costs of government  employees who provide support services, such as budget analysts or  human capital staff.
Government employee salaries and benefits were based on actual data  from one pay period. These data were then compared to hourly cost of  contractor employees ordered during that same pay period. The cost of  a contractor employee is the fully loaded hourly rate the government  pays for these services. We reported the weighted average of those  hourly rates because the agency used two contractors at two different  rates during that pay period.
We excluded the costs that the government incurs for both government  and contractor-provided specialists. These include the costs of  supplies, facilities, utilities, information technology, and  communications.
Based on a limited number of résumés we reviewed, the contractors  generally had more contracting experience than their government  counterparts. Résumés were available for six CACI employees supporting  CCE as contract specialists for at least 6 months during fiscal year 2007;  they had from 5 to 32 years, or an average of about 18 years, of  contracting-related experience. In contrast, the five CCE government  contract specialists hired during fiscal year 2007 had from 6 to 17 years, or  an average of about 12 years, of contracting-related experience prior to  joining the agency. All six contract employees previously worked for, and  were trained by, the federal government before being hired by the  contractor.
section_title: Contract Vehicles Inappropriately Issued and Used to Order Contract Specialists
paragraphs: CCE’s issuance of the BPAs with four contractors for contract specialists  under GSA’s MOBIS schedule was inappropriate as some of the services  required in CCE’s performance work statements were outside the scope of  the underlying contracts. The labor category descriptions in the vendors’  GSA schedule contracts were, in most cases, significantly different from  the description on CCE’s performance work statements and, for the two  contractors who have been issued task orders, did not accurately  represent the work performed. A GSA official confirmed that contract  specialist services were not within the scope of the MOBIS schedule but  said it is the responsibility of the ordering agency to ensure that orders are  within scope. In addition, we found that one of the other contractors had  improperly advertised on GSA’s Web site that its contract contained  contract specialist services. GSA has initiated corrective actions with the  four contractors based on our findings. Because of federal agencies’  demand for contract support services, GSA recently implemented a  revised MOBIS category for acquisition management support, which  includes contract specialist services. Finally, CCE did not comply with  Army policy requiring an assertion that work performed by a contractor  under a non-DOD contract is within scope of the contract.
subsections: section_title: Orders for Contract Specialists Were Out of the Scope of the Underlying Contract
paragraphs: The four contractors’ BPAs with CCE (CACI, The Ravens Group, Tai Pedro  & Associates, and Government Contracts Consultants), established under  the GSA schedule contracts, were inappropriately issued as some of the  services required in the performance work statements were outside the  scope of these underlying contracts. Specifically, their labor category  descriptions differed significantly from those required in CCE’s  performance work statements, and they did not accurately represent the  work that the contractor was to perform. Moreover, CCE has issued task  orders for contract specialists against CACI’s and The Ravens Group’s  MOBIS contracts that were outside the scope of those contracts. Where an  agency announces its intention to order from an existing GSA contractor,  all items ordered are required to be within the scope of the vendors’  contracts. Orders issued outside the scope of the underlying GSA  contract do not satisfy legal requirements under the Competition in  Contracting Act for competing the award of government contracts and  limit the government’s ability to know if it is paying a fair and reasonable  price. In such cases, the out-of-scope work should have been awarded  using competitive procedures or supported with a justification and  approval for other than full and open competition.
CCE has issued task orders for contract specialists against CACI’s and The  Ravens Group’s MOBIS contracts. Table 3 provides examples of the  differences between the GSA schedule contract labor category  descriptions and CCE’s statements of work for these contractors for a  contract specialist—level 3 position. Although the performance work  statement does not delineate responsibilities that are specific to the  contract specialist, level 3 position, it contains responsibilities for all  contract specialist positions as described in the table.
Our review of the contract file shows that during acquisition planning,  CCE’s policy and legal offices raised concerns about the use of the GSA  MOBIS schedule to meet CCE’s requirements. Specifically, in a  September 1, 2006, letter to the contracting officer and government  contract specialist, CCE’s Acting Chief Attorney expressed concern that  the schedule “may not provide the right personnel for this requirement,”  and cited an applicable GAO decision in which the protest was sustained  on the basis that vendors’ quoted services were outside the scope of their  GSA contracts. The CCE attorney determined that the request for  quotations (RFQ) was “legally insufficient” because of this and other  issues and indicated that the out-of-scope issue, among others, should be  considered. According to the legal office, despite this determination, CCE  contracting personnel issued the RFQ without returning it to the attorney  for further review. According to the Army’s internal policies and a March  2006 CCE memorandum regarding legal review procedures, where the  contracting officer makes a decision or takes a proposed action that is  contrary to legal advice, the contract file must include written evidence to  that effect, including a statement of the contracting officer’s rationale for  proceeding contrary to such legal advice. No such evidence was included  in the contract file in this case.
Contractor representatives told us that the linkage between labor  categories and the work to be performed is more of an art than a clean-cut  science. They told us that they attempted to match the labor categories as  best they could by using their GSA labor rates and CCE’s requirements.  Although acknowledging that the mapping was strained, CACI officials  pointed out that it was disclosed in their proposal to CCE and that the  company provided CCE with résumés that more closely matched the  agency’s requirements. CACI officials told us that they have had  discussions in the past with GSA about offering contracting support skill  sets and what schedule is appropriate. The Ravens Group officials said  that the key is the evaluation of the qualifications and level of effort  required and relating those factors to the various MOBIS schedule job  descriptions and labor rates.
GSA agreed that CCE’s orders for contract specialists were issued out of  scope of the vendors’ underlying MOBIS contracts, but a senior official  stated that it is the responsibility of the ordering agency to ensure that  orders are within scope of the vendors’ contracts. The official told us that  while GSA has ownership of the MOBIS schedule, it is only able to  perform limited oversight of the orders issued under schedule contracts.  The official acknowledged that GSA is aware of instances where agencies  have improperly used the MOBIS schedule to hire contract specialists,  although it does not know the extent to which this has occurred.
We found that other DOD agencies had used the MOBIS schedule to  procure contract specialists but stopped doing so because of concerns  about out-of-scope work. In 2004, ACA’s Capital District Contracting  Center in Fort Belvoir, Virginia, used the MOBIS schedule to hire contract  specialists in support of what is now the Joint Contracting Command- Iraq/Afghanistan (JCC-I/A). However, in 2005, the contracting center  changed its approach, awarding a similar contract for additional support  using full and open competition instead of continuing to issue orders  under the MOBIS contract. When the period of performance expired, JCC- I/A awarded its own contract in 2006 for contract specialists, again using  full and open competition. According to a former JCC-I/A official involved  in the award, the driving factor in the decision to issue a competitive  solicitation was the determination that contract specialist services were  not in the scope of the MOBIS schedule.
Based on our findings, CCE is planning to solicit a new contract for  contract specialists using full and open competition, under the FAR’s  commercial item acquisition procedures, with a target award date of   June 30, 2008. In the interim, according to a CCE official, no more orders  are being placed under the current BPAs for contract specialists.
Although CCE has not placed orders for contract specialists with two  other firms with which it has established BPAs—Tai Pedro & Associates  and Government Contracts Consultants—we found troublesome issues  related to their schedule contracts as well. Tai Pedro & Associates’ MOBIS  contract actually includes a labor category for “contract specialist”  services under a category for competitive sourcing support, which allows  contractors to perform competitive sourcing surveys or to assist agencies  in developing A-76 procurement strategies. According to GSA officials,  the competitive sourcing support category allows contractor contract  specialists to assist with A-76 projects and outsourcing efforts, but not  with other efforts.
Government Contracts Consultants’ MOBIS contract did not contain  acquisition support categories. However, the contractor advertised that its  contract contained these categories—including contract specialists—on  the GSA Advantage Web site, the agency’s portal for Web-based  procurement. The contractor took this action despite having affirmed in  writing to GSA prior to its contract award its understanding that “contract  support services are not authorized” under the contract. Until we informed  GSA officials of this situation in September 2007, they were unaware that  it had occurred. They told us that they normally check postings on GSA  Advantage against awarded contracts to ensure that inappropriate services  are not advertised, but in this case the situation was overlooked.
section_title: GSA Has Initiated Corrective Actions
paragraphs: Based on our findings, GSA began in the fall of 2007 to notify the four  contractors that contract specialist services are out of scope of their  schedule contracts. For example, GSA notified Government Contracts  Consultants that it had been found to be performing out-of-scope services.  GSA sent its internal reviewers to the company’s facilities to review its  task orders to determine what services the company was offering federal  customers under its GSA contract. GSA also directed Government  Contracts Consultants to remove the incorrect labor categories from its  posting on the GSA Advantage Web site, which the company has since  done. GSA also notified both CACI and The Ravens Group that they had  been found to be performing services outside the scope of their schedule  contracts and informed Tai Pedro & Associates that acquisition support  services are out of the scope of its MOBIS schedule contract, which is  limited to support for competitive sourcing efforts. GSA told CACI, The  Ravens Group, and Tai Pedro & Associates that internal reviewers would  visit their facilities in fiscal year 2008 to ensure that they are performing  within the scope of their contracts and that GSA may periodically ask for  copies of recently awarded task orders to be reviewed for scope  appropriateness. GSA advised all four companies—Government Contracts  Consultants, The Ravens Group, CACI, and Tai Pedro & Associates—that  if any new out-of-scope work is performed, GSA will take appropriate  action, up to and including canceling their contracts or initiating  termination for cause proceedings.
Because of the demand for contract support services, GSA recently  implemented a revised Special Item Number category—Acquisition  Management Support—under the MOBIS schedule. Contract specialist  services can be ordered under this category to perform functions such as  cost estimating; preparing price negotiation memorandums and statements  of work; assisting with acquisition planning, including performing market  research and recommending procurement strategies; providing expert  assistance in supporting proposal evaluations; assisting with reviews of  contractor performance; and investigating reports of contract  discrepancies. GSA has links on its Web site for special ordering  instructions and an ordering guide for the revised category. These  documents primarily discuss mitigating conflicts of interest and ensuring  that contractors do not perform inherently governmental functions.
section_title: CCE Did Not Properly Justify Use of Interagency Contracting Vehicle
paragraphs: In placing the orders for contract specialist services, CCE did not follow  ACA policy and guidance pertaining to interagency contracts. After a  number of reports by inspectors general and others regarding problems  with interagency contracting, DOD established requirements in October  2004 for reviewing and approving the use of non-DOD contract vehicles  when procuring supplies and services for amounts greater than the  simplified acquisition threshold. These requirements included  determining that the tasks to be accomplished or supplies to be provided  were within the scope of the contract to be used. ACA’s implementing  guidance, issued before CCE established the BPAs with the four  contractors, required that specific certifications be made when using non- DOD contracts, including procedures for direct acquisitions (i.e., orders  placed by an Army contracting or ordering officer against a non-DOD  contract), such as CCE’s orders against the vendors’ GSA schedule  contracts. Prior to the contracting officer’s placement of a direct  acquisition order for supplies and services, the head of the requiring  activity must execute, among other things, a written certification that the  supplies, services, or both, are within the scope of the non-DOD contract.  Additionally, for the acquisition of services, (1) the requiring activity must  obtain written concurrence from the non-DOD contracting officer at the  servicing organization (in this case, GSA) that the services to be provided  are within the scope of the non-DOD contract, unless the DOD contracting  office has access to the non-DOD contract, and (2) the contracting officer  must obtain written coordination from supporting legal counsel prior to  placement of the order.
CCE’s certification for use of a non-DOD contract was undated but signed  by the contracting officer. It stated that the services were within the scope  of the non-DOD contract, despite the fact that there was a clear disconnect  between the descriptions in the contractors’ GSA contract labor categories  and the services CCE required. In addition, we could find no evidence that  CCE obtained written concurrence from a GSA contracting officer, as  required, or written coordination from its legal counsel. In fact, the  certification listed the point of contact at the non-DOD agency as “to be  determined.”
section_title: Conclusion
paragraphs: The CCE example delineates two major areas of concern in today’s  environment: hiring contractors for sensitive positions in reaction to a  shortfall in the government workforce rather than as a planned strategy to  help achieve an agency mission, and the need to properly manage those  contractors once they are hired. When contractors are performing duties  closely supporting inherently governmental functions—such as those  performed by contract specialists at CCE—risks are present that can  result in loss of government control and decision making, absent proper  mitigation and government vigilance. CCE and its contractors alike bear  responsibility for helping to mitigate risks, such as ensuring that measures  are in place to prevent conflicts of interest and that contractor personnel  are clearly identified as such. Given the blurred lines separating  government from contractor employees in such situations as that at CCE,  an additional risk is that the work may be done under an improper  personal services contract. DOD guidance on this issue—which could help  contracting and program officials look beyond the FAR elements to  determine the condition and mitigate the risk—is lacking. Because CCE  has not considered the appropriate balance of contractor and government  personnel performing specific functions, or adequately trained its  government workforce, the agency runs the risk of over reliance on  contractors to meet its mission and of paying more in the long run. If CCE  relies too heavily on contractors and cannot adequately develop its own  workforce, it may not be able to support its DOD customers. The cost of  decreased mission capability could be far higher than paying more for  contractors. And GSA, as the agency responsible for the schedule  program, needs to take steps to ensure that contractors appropriately  advertise their available services.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense issue guidance to clarify the  circumstances under which contracts risk becoming improper personal  services contracts and to provide direction on how the risk should be  mitigated.
To help ensure that CCE has sufficient qualified government personnel to  meet its mission, and uses contractors appropriately, we recommend that  the Secretary of the Army direct ACA to work with CCE in taking the  following three actions:  identify the appropriate mix of contractor and government contract  specialists over the long term and develop a plan to help fill positions  to achieve the desired balance;  implement a training program designed to ensure that CCE’s  permanent employees develop and maintain needed skills; and  implement formal oversight procedures to ensure that contractors  identify themselves as such in all interactions external to CCE,  including telephone communications, e-mail signature lines, and  documents, as required by the FAR.
Finally, we recommend that the Administrator of GSA strengthen internal  controls to guard against situations where contractors advertise services  on the GSA Advantage Web site that are not in their underlying GSA  schedule contracts.
section_title: Agency Comments and Our Evaluation
paragraphs: DOD and GSA provided written comments on a draft of this report. Their  comments are reprinted in appendixes II and III, respectively.
DOD’s Director, Defense Procurement, Acquisition Policy, and Strategic  Sourcing, concurred with all four of our recommendations and outlined  actions DOD plans to take or has taken to address them. The Director  stated that contractors performing as contract specialists is viewed as a  matter of grave concern.  While one of our recommendations called for  ACA to work with CCE to identify the appropriate mix of contractor and  government contract specialists over the long term, the Director stated  that he plans to meet with the Army’s Senior Procurement Executive in an  effort to eliminate, within 180 days, contractors acting as contract  specialists at CCE. If this time frame cannot be met, the Director  plans to  urge the Army to transfer the workload within CCE to other DOD  contracting agencies or sister federal agencies so that contract specialist  functions are performed solely by government employees. In response to  our recommendation that formal oversight procedures be implemented to  ensure that contractors are identified as such in all interactions external to  CCE, DOD stated that CCE had recently distributed to its government  personnel and support contractors an information paper reinforcing such  a policy. DOD’s response states that CCE provided GAO with this  information paper in February 2008.  We did not receive such a paper.   After seeing this reference in DOD’s comments, we contacted CCE to  request a copy of this document, but as of our report issuance date, we  had not received it.
GSA agreed with our recommendation that the agency strengthen controls  to guard against situations where contractors advertise services on the  GSA Advantage Web site that are not in their underlying schedule  contracts. GSA noted that while it provides limited oversight of the orders  issued under schedule contracts, it takes actions to educate customers  about how best to use the contracts. GSA also pointed out that because  the revised Special Item Number category “Acquisition Management  Support” has been implemented under the MOBIS schedule, contracting  for contract specialist work is now within the scope of that schedule.
We are sending copies of this report to interested congressional  committees; the Secretary of Defense; the Secretary of the Army; the  Commander, ACA; the Commander, CCE; the Administrator of GSA; and  the Director, Office of Management and Budget. We will provide copies to  others on request. This report will also be available at no charge on GAO’s  Web site at http://www.gao.gov.
If you or your staff have any questions about this report or need additional  information, please contact me at (202) 512-4841 or huttonj@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Staff  acknowledgments are provided in appendix IV.
section_title: Appendix I: Scope and Methodology
paragraphs: To learn more about the use and roles of contractors providing contract  specialist services, we conducted a case study under the authority of the  Comptroller General to conduct evaluations on his own initiative. We  selected the Army’s Contracting Center of Excellence (CCE), in the  Washington, D.C., area, as one Department of Defense (DOD) agency  using contractors in this role based on a bid protest that had been  submitted to our office. The protest, which was denied, challenged the  Defense Contracting Command–Washington’s (now known as CCE)  acceptance of CACI, International’s (CACI) organizational conflict-of- interest mitigation plan and the evaluation of proposals for contract  specialist services. In fiscal year 2007, CCE obligated almost   $1.8 billion in contract actions. Because nearly all of the contractor- provided contract specialists at CCE during the performance of our review  were employees of CACI, our primary focus was on the CACI contract.  CCE had also ordered a few contract specialists from another firm, The  Ravens Group. In all, CCE had established blanket purchase agreements  (BPA) with four contractors in September 2006, under General Services  Administration (GSA) schedule contracts, to provide contract specialist  services.
To determine the extent to which and the reasons CCE is relying on  contractors, we obtained contract specialist staffing levels in fiscal year  2007. We reviewed CCE’s task orders issued under schedule contracts  using the agency’s BPAs for contracting support services and agency  billing information. We also interviewed CCE’s commander and  contracting, training, and human capital officials and spoke with officials  from the Army Contracting Agency (ACA), which is CCE’s parent  organization. We analyzed information from the Federal Procurement Data  System-Next Generation to determine trends in CCE’s use of other  agencies’ contracts from fiscal years 2005 through 2007. To identify the  roles and responsibilities of the contractor contract specialists, we  randomly selected 42 contract actions worked on by contractor contract  specialists during fiscal year 2006 and fiscal year 2007 through June 13 to  determine what work they perform on a daily basis. The intent of this file  review was to understand the contractors’ day-to-day duties; we selected  the files randomly to avoid selection bias. We interviewed management  officials from CACI and The Ravens Group. We also interviewed CACI’s  contract specialists at CCE, but The Ravens Group management would not  allow us to interview their employees. We did not consider this to be a  scope limitation because of the small number (2 to 3) of The Ravens  Group’s contract specialists at CCE during the time of our review. For  comparison, we interviewed government contract specialists at CCE  regarding their roles and responsibilities. We also interviewed government  contracting officers about the roles and responsibilities of the government  and contractor-provided contract specialists. To obtain information on the  general demand for contract specialists in today’s marketplace, we  interviewed contractor management representatives, and we reviewed a  Defense Acquisition University report on contracting out the procurement  function, an Air Force-sponsored study to assess the status of contracting  out procurement functions within DOD and federal agencies. We also  looked at job postings on USA Jobs, the federal government’s Web site for  job vacancies.
To determine what actions have been taken to mitigate the risks  associated with using contractors in contract support roles, we  interviewed CCE managers and contracting officers and CACI contract  specialists at CCE. We reviewed CACI’s organizational conflicts of interest  (OCI) mitigation plan and interviewed employees about their knowledge  of policies and procedures regarding OCIs. We interviewed CACI officials  regarding the company’s policies and procedures to mitigate personal  conflicts of interest, and we examined related documents—such as CACI’s  Standards of Ethics and Business Conduct—and the ethics training  provided by CACI to its employees. We also reviewed other documents,  such as the Acquisition Advisory Panel’s 2007 report. In addition, we  reviewed sections of the Federal Acquisition Regulation (FAR) pertaining  to organizational and personal conflicts of interest, as well as those related  to personal services contracts. We conducted a legal review of CCE’s  performance work statement, BPAs, and orders for contract specialists  and compared the elements of personal services contracts in FAR Subpart  37.104 with the environment in which contractors are working at CCE as  contract specialists.
To compare the cost of contractor contract specialists to their government  counterparts, we reviewed CCE’s fiscal year 2007 task orders with CACI  and The Ravens Group and agency billing information to identify the  hourly labor rate the government is paying for these positions. Because  the orders issued pursuant to the BPAs are time-and-materials contracts,  payments to the contractors are based on the number of labor hours billed  at a fixed hourly rate, which includes wages, benefits, overhead, general  and administrative expenses, and profit. We identified the number of  hours purchased from each contractor during August 2007 and calculated  the weighted average hourly cost for contract specialist II and III  positions. We reported the weighted average hourly cost because the  agency used two contractors at two different rates in August 2007. To  compare these costs to those for a government contract specialist, we  identified two groups of CCE employees that perform the same tasks and  share similar qualifications, those who were GS-12s with Defense  Acquisition Workforce Improvement Act (DAWIA) II certification—which  are equivalent to contractor-provided contract specialist II positions—and  those who were GS-13s with DAWIA III certification—which are  equivalent to contractor-provided contract specialist III positions. We  obtained the actual salaries and the government’s contributions to the  benefits of those contract specialists during the pay period ending on  August 18, 2007. We used data from one pay period to capture the costs of  government contract specialists because CCE has had turnover in these  positions, making it difficult to capture costs throughout the year. From  those data, we determined the average hourly rate and costs of benefits for  these two groups based on 68.3 productive hours during the pay period.  To determine the government’s overhead costs, we used the actual costs  of support services—salaries and government contributions to the benefits  of human capital personnel, manpower personnel, and other support staff  as identified by ACA during the pay period ending on August 18, 2007. CCE  also provided the agency’s expenditures on travel and training during  fiscal year 2007. We then determined the average travel and training costs  per person per hour for only those government employees who were  directly associated with these costs. This average travel and training cost  estimate was applied to all government contract specialists supporting  CCE and may be higher than the agency’s actual cost per person. We  excluded from our analysis the costs for supplies, information technology,  and communication services because the government pays these costs for  contractors as well. We also excluded the costs of facilities and utilities  because the Director of Resource Management told us that ACA could not  specifically identify these costs (which the government also covers for  contractor employees). We compared the average hourly cost—actual  salary, government’s contribution to benefits, and overhead—of the two  groups of CCE contract specialists to the weighted average hourly rate  paid for the respective contractor positions. To determine how CACI and  CCE employee contracting experience differs, we reviewed available  résumés of contractor and government contract specialists. Résumés were  available for six CACI contract specialists who have supported CCE for at  least 6 months and were identified by CCE officials as doing the same  work as government contract specialists. Five résumés were available for  CCE contract specialists hired in fiscal year 2007, who were identified by  agency officials as doing the same work as the contractors. In reviewing  these résumés, we considered previous contracting experience to be the  time spent in jobs related to the field of contracting.
To determine whether the contract vehicles used to acquire the specialists  were appropriate, we reviewed CCE’s contracting strategies to determine  whether new contracts were awarded to obtain contract specialists or  whether interagency contracts through other federal agencies, such as  GSA’s schedule program, were used. We analyzed CCE’s BPAs with four  contractors—CACI, The Ravens Group, Tai Pedro & Associates, and  Government Contracts Consultants—and their underlying GSA Mission  Oriented Business Integrated Services (MOBIS) schedule contracts to  which the BPAs were tied. We also reviewed CCE’s performance work  statements and analyzed the task orders that have been issued for contract  specialists. We reviewed the contract files to obtain documentation, such  as legal reviews and compliance with DOD policies on interagency  contracting. We interviewed CCE officials and GSA officials, including the  Director of GSA’s Management Services Center, Region 10, who is  responsible for the MOBIS schedule. We reviewed reports by GAO and  others concerning the use of interagency contracts. We also reviewed FAR  Subpart 8.4, which sets forth the regulations pertaining to GSA’s schedule  program.
We conducted this performance audit from May 2007 through March 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: Comments from the Department of Defense
section_title: Appendix III: Comments from the General Services Administration
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the individual named above, Michele Mackin, Assistant  Director; Erin Schoening; William Allbritton; Timothy Carr; Daniel Chen;  Justin Jaynes; Kenneth Patton; Charles Perdue; and Sylvia Schatz made  key contributions to this report.