Interagency Contracting: Improved Guidance, Planning, and Oversight Would Enable the Department of Homeland Security to Address Risks
Published: 2006-09-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Homeland Security (DHS) has some of the most extensive acquisition needs within the federal government. In fiscal year 2005, DHS spent $17.5 billion on contracted purchases, $6.5 billion, or 37 percent, of which was through the use of other agencies' contracts and contracting services, a process known as interagency contracting. While these types of contracts offer the benefits of efficiency and convenience, in January 2005, GAO noted shortcomings and designated the management of interagency contracting as a governmentwide high-risk area. Given the department's critical national security mission and the results of our earlier work, GAO reviewed the extent to which DHS manages the risks of interagency contracting and assessed DHS' guidance, planning, and oversight of interagency contracting.
section_title: What GAO Found
paragraphs: DHS has developed guidance on how to manage the risks of some but not all types of interagency contracts. The department has guidance for interagency agreements--the largest category of interagency contracting at the department--but does not have specific guidance for using other types of contracts such as the General Services Administration (GSA) schedules and governmentwide acquisition contracts (GWAC), which amounted to almost $1.5 billion in fiscal year 2005. Moreover, in some cases we found users may have lacked expertise that could be addressed through guidance and training on the use of these types of contracts. DHS did not always consider alternatives to ensure good value when selecting among interagency contracts. While this contracting method is often chosen because it requires less planning than establishing a new contract, evaluating the selection of an interagency contract is important because not all interagency contracts provide good value when considering timeliness and cost. As of July 2005 DHS has required planning and analysis of alternatives for all acquisitions. In this review, we found that in all four cases for which an analysis of alternatives was required, it was not conducted. DHS officials said benefits of speed and convenience--not total value including cost--have often driven decisions to choose these types of contracts. DHS does not systematically monitor its total spending on interagency contacts and does not assess the outcomes of its use of this contracting method. According to officials, DHS' acquisition oversight program has been hindered by limited resources and authority. As of August 2006, the Office of the Chief Procurement Officer had five staff assigned to departmentwide oversight responsibilities for $17.5 billion in acquisitions. In March 2005, GAO recommended that the Chief Procurement Officer be provided sufficient authority to provide effective oversight of DHS' acquisition policies and procedures. Without this authority, DHS cannot be certain that acquisition improvements are made.

section_title: Letter
paragraphs: The Department of Homeland Security (DHS) performs a comprehensive  homeland security mission encompassing protecting the nation’s borders,  airports and critical infrastructure, and response and recovery in the event  of national emergencies. DHS meets these goals with some of the most  extensive acquisitions within the federal government. Now one of the  largest procuring agencies, DHS spent about $17.5 billion on contracted  purchases in fiscal year 2005. Over $6.5 billion, or approximately   37 percent of the department’s total fiscal year 2005 contract dollars, was  for purchases made through the use of other agencies’ contracts and  contracting services, a process known as interagency contracting. While  these types of contracts offer the benefits of efficiency and convenience,  in January 2005, GAO noted shortcomings and designated the management  of interagency contracting as a governmentwide high-risk area. Our work  and the work of others has identified the need for improved guidance and  expertise, planning, and oversight to manage and mitigate the risks of  these types of contracts. In March 2005, we reported that DHS was not  effectively managing acquisition, in particular interagency purchases, of  the multitude of goods and services it needed to meet its mission.
Given the department’s critical national security mission and the results of  our earlier work, you asked us to review the extent to which DHS manages  interagency contracting. To address this question, we assessed (1) DHS  guidance for the use of interagency contracts; (2) DHS planning and  evaluation of contracting alternatives when using interagency contracts;  and (3) DHS practices for overseeing the performance of interagency  contracts.
To conduct our work, we selected 17 cases totaling $245 million. Each  case represented $5 million or more in orders placed through several types  of interagency contracting arrangements in fiscal year 2005. These cases  represented orders placed by DHS’ Office of Procurement Operations  (OPO), Customs and Border Protection (CBP), and Coast Guard, which  were the largest users of interagency contracts in fiscal year 2005. We  interviewed senior procurement officials at the three components and at  the Office of the Chief Procurement Officer (OCPO), interviewed  contracting officers and program managers at the three components, and  reviewed the guidance and oversight at the departmental level and at the  components to address the management and planning of interagency  contracting. We obtained data on procurement actions from DHS and  compared it with data from the Federal Procurement Data System-Next  Generation (FPDS-NG) and determined that the data were sufficiently  reliable for our purposes. For more information on our scope and  methodology, see appendix I. We conducted our work from February  through August 2006 in accordance with generally accepted government  auditing standards.
subsections: section_title: Background
paragraphs: In recent years, federal agencies have been making greater use of  interagency contracting—a process by which agencies can use another  agency’s contracting services or existing contracts already awarded by  other agencies to procure many goods and services. An agency can enter  into an interagency agreement with a servicing agency and transfer funds  to the servicing agency to conduct the acquisition on its behalf, or an  agency can order directly from a servicing agency’s contract, such as the  GSA schedules or GWACs. When funds are transferred to another agency,  the contracting service can be provided through entrepreneurial, fee-for- service organizations, which are government-run but operate like  businesses. Interagency contracts are designed to leverage the  government’s aggregate buying power and simplify procurement of  commonly used goods and services. In this way, the contracts offer the  benefits of improved efficiency and timeliness in the procurement process.
Determining the value of a particular contracting method includes  considering benefits such as timeliness and efficiency as well as cost-- including price and fees. Although interagency contracts can provide the  advantages of timeliness and efficiency, use of these types of vehicles can  also pose risks if they are not properly managed. GAO designated  management of interagency contracting a governmentwide high-risk area  in 2005. A number of factors make these types of contracts high risk,  including their rapid growth in popularity along with their administration  and use by some agencies that have limited expertise with this contracting  method, and their contribution to a much more complex procurement  environment in which accountability has not always been clearly  established. In an interagency contracting arrangement, both the agency  that holds, and the agency that makes purchases against, the contract  share responsibility for properly managing the use of the contract.  However, these shared responsibilities often have not been well-defined.  As a result, our work and that of some inspectors general has found cases  in which interagency contracting has not been well-managed to ensure  that the government was getting good value. For example, in our review of  the Department of Defense’s (DOD) use of two franchise funds, we found  that the organizations providing these services did not always obtain the  full benefits of competitive procedures, did not otherwise ensure fair and  reasonable prices, and may have missed opportunities to achieve savings  on millions of dollars in purchases. In another review, we found task  orders placed by DOD on a GSA schedule contract did not satisfy legal  requirements for competition because the work was not within the scope  of the underlying contract. Recent inspector general reviews have found  similar cases. For example, the Inspector General for the Department of  the Interior found that task orders for interrogators and other intelligence  services in Iraq were improperly awarded under a GSA schedule contract  for information technology services.
The Federal Acquisition Regulation (FAR) is the primary regulation  governing how most agencies acquire supplies and services with  appropriated funds. The regulation provides general guidance for  interagency agreements that fall under the authority of the Economy Act  and for the GSA schedules and GWACs. The FAR precludes agency  acquisition regulations that unnecessarily repeat, paraphrase, or otherwise  restate the FAR, limits agency acquisition regulations to those necessary  to implement FAR policies and procedures within an agency, and provides  for coordination, simplicity, and uniformity in the federal acquisition  process. There are several types of interagency contracting. For more  information on those included in our review, see appendix II.
DHS spends significant and increasing amounts through interagency  contracting—a total of $6.5 billion in fiscal year 2005, including $5 billion  through interagency agreements and about $1.5 billion by placing orders  off other agencies’ contracts (see fig. 1). DHS’ total spending on  interagency contracting increased by about 73 percent in just 1 year.
DHS was established as of March 1, 2003, by merging the functions of   23 agencies and organizations that specialize in one or more aspects of  homeland security. OCPO is responsible for creating departmentwide  policies and processes to achieve integration and to manage and oversee  the acquisition function but does not have enforcement authority to  ensure that initiatives are carried out.
There are seven acquisition offices within DHS that pre-date the formation  of DHS and continue to operate at the components. OPO was formed with  the new department to serve the newly established entities and those  components that did not have a separate procurement operation. Of those  that pre-date DHS, the Coast Guard and CBP provide different examples of  the types of components that formed DHS. The Coast Guard, previously  under the Department of Transportation, already had an extensive  procurement operation, whereas CBP was created by combining the  United States Customs Service, formerly part of the Department of the  Treasury, Border Patrol and the inspectional parts of the Immigration and  Naturalization Service, and portions of the Department of Agriculture’s  Animal Plant and Health Inspection Service. Thus, CBP has been faced  with the added challenge of creating a procurement organization to meet  its new mission. Our prior work has found that an effective acquisition  organization has in place knowledgeable personnel who work together to  meet cost, quality, and timeliness goals while adhering to guidelines and  standards for federal acquisition.
section_title: Enhanced Guidance and Expertise Could Help DHS Address Interagency Contracting Risks
paragraphs: While DHS has developed guidance on the use of interagency  agreements—the largest category of interagency contracting at DHS,  which amounted to $5 billion in fiscal year 2005—it does not have specific  guidance for other types of interagency contracting, including GSA  schedules and GWACs, which accounted for almost $1.5 billion in fiscal  year 2005. Moreover, we found that some DHS users may have lacked  expertise in the proper use of interagency contracts. Although some DHS  acquisition officials believe the FAR provides adequate guidance on the  use of interagency contracts, such as the GSA schedules, our prior work  and inspector general reviews have found numerous cases in which these  contracting methods have not been properly used. For example, users  have requested work that was not within the scope of the contract and  administrators have not ensured fair and reasonable prices. Recognizing  this concern, other large agencies, such as DOD and the Department of  Energy, have identified the need to carefully manage the use of these  contracts and have issued supplemental guidance and emphasized training  programs to mitigate these risks.
subsections: section_title: DHS Guidance Could be Expanded to All Types of Interagency Contracting
paragraphs: DHS departmentwide acquisition guidance covers interagency agreements  but not other types of interagency contracting. In December 2003, DHS  issued the Homeland Security Acquisition Regulation and the Homeland  Security Acquisition Manual to provide departmentwide acquisition  guidance. In addition, DHS issued a departmentwide directive on how to  use interagency agreements by which funds are transferred to other  agencies to award and administer contracts or to provide contracting  services on behalf of DHS. However, as we reported in March 2005, the  directive was not being followed for purchases made through these  agreements. For example, there was little indication that required analyses  of alternatives were performed or that required oversight was in place.  Although DHS began revising the directive in fiscal year 2004, the revisions  have yet to be issued. According to OCPO officials, its limited policy and  oversight resources provide assistance to the components as needed,  taking time away from acquisition policy efforts, such as developing  guidance. For example, OCPO officials provided contracting assistance to  the Federal Emergency Management Agency in the response to Hurricanes  Katrina and Rita.
To supplement departmentwide DHS guidance on interagency agreements,  each of the components we reviewed has issued some implementing  guidance. OPO issued guidance addressing the appropriate use of  interagency agreements that requires program officials and contracting  officers to research other available contract vehicles. In contrast, CBP  guidance addresses the goals of an analysis of alternatives, but emphasizes  the process and the documentation necessary to execute the interagency  agreement. The Coast Guard’s supplemental guidance focuses mainly on  the ordering and billing procedures for interagency agreements. However,  none of the components we reviewed had implementing guidance for  other types of interagency contracts. While DHS acquisition officials  acknowledge the need to manage the risks of interagency agreements,  some do not see other types of interagency contracting, such as the GSA  schedules and GWACs, as needing the same type of attention and believe  sufficient guidance is available in the FAR. In fiscal year 2005, the three  components we reviewed spent a total of $832 million through GSA  schedules, GWACs, and other interagency contracts (see table 1). This is a  53 percent increase over the prior year.
section_title: Additional Training Could Help Reduce Management Risks
paragraphs: We have previously reported that use of interagency contracts demands a  higher degree of business acumen and flexibility on the part of users and  administrators than in the past, and acquisition officials need sufficient  training and expertise to ensure the proper use of these types of contracts  in an increasingly complex procurement environment. During our review,  we identified several examples that showed that DHS may not have  obtained a good value for millions of dollars in spending and indicated a  need for improved training and expertise (see table 2).
Several contracting officials stated that additional training is needed in the  use of interagency contracts but that there was not much training  available. In addition, other contracting officials told us that they were not  aware of the range of available alternatives for interagency contracting.
section_title: Other Large Agencies Have Developed Guidance and Emphasized Training for all Types of Interagency Contracting
paragraphs: To ensure the proper use of all types of interagency contracts, other large  procuring agencies, including DOD and the Department of Energy, have  issued guidance to supplement the FAR and have emphasized specialized  training. DOD is the largest user of other agencies’ contracts and the  Department of Energy reported that it spent about $1.7 billion on other  agencies’ contracts in fiscal year 2005—a substantial amount, but less than  DHS. For example, DOD issued special guidance to ensure that proper  procedures and management practices are used when using other  agencies’ contracts including GSA schedules. The guidance requires DOD  acquisition personnel to evaluate, using specific criteria, whether using a  non-DOD contract for a particular purchase is in the best interest of the  department. The criteria include the contract’s ability to satisfy the  requirements in a timely manner and provide good value. DOD’s guidance  also emphasizes using market research to help identify the best acquisition  approach to meet the requirement and states that the contracting officer  should document this research. The Department of Energy also has  issued guidance addressing the proper use of GSA schedules and GWACs.  This guidance emphasizes that these contracts are not to be used to  circumvent agency regulations and that the contracting officer should  ensure that the original order and all future orders are within the scope of  the contract. In the case of the GSA schedules, the contracting officer  should seek and document advice from GSA’s contracting officer on the  proper use of the schedules whenever an issue is in doubt.
In 2004, GSA took a step toward improving the management of GSA  contracts and services by implementing the “Get It Right” program in part  to secure the best value for federal agencies, improve education and  training of the federal acquisition workforce on the proper use of GSA  contracts and services, and ensure compliance with federal acquisition  policies, regulations, and procedures. As part of the program, DOD and  GSA have partnered to offer updated training on the proper use of GSA  schedules. In addition, the Department of Energy has instituted training to  emphasize the proper use and the need for planning when using the GSA  schedules and GWACs.
section_title: DHS Did Not Always Assess Total Value When Choosing Interagency Contracts
paragraphs: Interagency contracts are intended to offer a simplified procurement  process whereby users commonly rely on planning that has already been  conducted by the agency that established the contract to ensure that the  prices are competitive. However, our recent work, as well as the work of  others, has found that not all interagency contracts provide good value  when considering both timeliness and cost. This suggests the need for  evaluating the selection of an interagency contract. According to DHS  contracting officials the benefits of speed and convenience—not total  value including cost—have often driven decisions to choose interagency  contracting vehicles. As of July 2005, DHS has required an analysis of  alternatives for all purchases. Of the 17 cases in our review, this analysis  was only required for the four interagency agreements. None of these  interagency agreements indicated that the required analysis was  conducted. Without an evaluation of interagency contracting alternatives,  DHS users cannot be sure they are obtaining a good value.
subsections: section_title: Speed and Convenience, Rather Than Planning and Analysis, Often Determined Contract Selection
paragraphs: A sense of urgency has prevailed in DHS’ acquisition decision-making  process, according to officials from the Office of Inspector General. For  example, one official said that expediting program schedules and contract  awards limits time available for adequate procurement planning, which  can lead to higher costs, schedule delays, and systems that do not meet  mission objectives. Eight of the 16 contracting officers we interviewed at  OPO, CBP, and Coast Guard told us that using interagency contracts was a  quick and convenient way to acquire needed products and services. A few  DHS contracting officers felt that interagency contracts—in particular,  GSA schedules—were the only viable alternatives given time constraints.  In some cases, officials told us that it could take 4 to 6 months to establish  and obtain goods and services through an in-house contract. In other  cases, officials stated that purchase requests were received too close to  the end of the fiscal year to use anything other than an interagency  contract. None of the contracting officials said they chose to use  interagency contracts because they also provided good value to DHS in  terms of total cost.
Interagency contracts are designed to be convenient to use and require  less planning than entering into a full and open competition for a new  contract, and users commonly rely on planning that has already been  conducted by the agency that established the contract. However, we found  that GSA schedule prices may not always be the most competitive, and  agencies do not always obtain the required competition when using the  schedules, thus, there is no assurance that these contracts are providing  good value. In another review, we found that fees charged by the agency  that provides the contracting service may not make these contracts cost- effective in some cases. Purchasing agencies also sometimes pay fee on  top of fee for the use of another agency’s contract because servicing  agencies may be using other agencies’ contracts—including GSA  schedules—to make purchases. Fees charged for the use of GWACs also  range between 0.65 and 5 percent. Given these concerns, evaluating the  selection of an interagency contract is a sound management practice used  by other large agencies.
Pursuant to DHS acquisition policy, purchases made through interagency  agreements require an analysis of alternatives to determine that the  approach is in the government’s best interest; however, in the four cases  we reviewed that fell under this requirement, there was no indication that  this analysis was performed. In one case, CBP used FedSim, one of GSA’s  contracting service providers, to place an order for $9 million for  information technology support for systems security. In another case, CBP  transferred $5 million to a franchise fund for the purchase of license plate  readers. In the two remaining cases, OPO used FedSim to place orders  totaling about $45 million against one contract to provide information  technology support for the Homeland Secure Data Network. In these  examples, there was little evidence that DHS users determined whether  this was the best method for acquiring the needed services. These findings  are consistent with our March 2005 review, in which we did not find an  analysis of alternatives in 94 percent of the cases where it was required.  Recent internal reviews at OPO and CBP cited similar findings in which  evidence that a determination of findings or an analysis of alternatives was  conducted was missing.
In our review of 17 cases, we also found several examples where  contracting officers placed orders to fulfill what were perceived to be  critical needs, for convenience without comparing alternatives, or to  spend funds at the end of the fiscal year without obtaining competing  proposals. While an analysis of alternatives was not required in most of  these cases, performing such an analysis could have helped DHS users to  address some of the known concerns about these types of contracts to  ensure that they obtained good value for the department (see table 3).
section_title: Recent Planning Requirement Does Not Include Evaluation Criteria
paragraphs: As of July 2005 DHS has required an analysis of alternatives for all  acquisitions, including all types of interagency contracts. DHS policy now  states that all acquisition plans must include an analysis of alternatives  including a discussion of why the acquisition process was chosen and the  processes considered. The guidance states that the plan must contain  information about the type of contract selected. However, the guidance  does not include factors to consider or specific criteria for making a good  choice among alternative contracting options. We have found that some  agencies have established factors to consider in making this decision. For  example, DOD and the Department of Energy have established factors that  incorporate considerations of value, policy and regulatory requirements,  customer needs, and administrative responsibilities. Following are some of  the factors these agencies use:  Value: cost (including applicable fees or service charges); whether  using an interagency contract is in the best interest of the department.
Policy and regulatory requirements: departmental funding  restrictions; departmental policies on small business, performance- based contracting, and competition.
Customer needs: schedule; scope of work; unique terms, conditions  and requirements.
Contract administration: including oversight, monitoring, and  reporting requirements.
section_title: DHS Oversight Program Does Not Assess Outcomes of Interagency Contracting
paragraphs: Although DHS’ spending through interagency contracting totals billions of  dollars annually and increased by 73 percent in the past year, the  department does not systematically monitor its use of these contracts to  assess whether this method for acquiring goods and services is being  properly managed and provides good outcomes for the department. While  OCPO has established a framework for an acquisition oversight program,  the program is not designed to assess the outcomes of different  contracting methods including interagency contracting. According to  officials, DHS’ acquisition oversight program has been hindered by limited  resources and authority.
subsections: section_title: DHS Does Not Monitor or Assess Use of Interagency Contracting
paragraphs: DHS does not systematically monitor spending on its interagency  contracts, which totaled $6.5 billion in fiscal year 2005—37 percent of  DHS’ procurement spending for that year. This type of monitoring could  provide DHS with useful information to assess its use of this contracting  method. For example, as part of its strategic sourcing initiative, DHS  officials said they reviewed the component’s use of information  technology and telecommunications contracts and determined that the  department could achieve savings of $22.5 to $45 million in fees and  reduced prices by establishing its own departmentwide contracts.  However, DHS does not have available information to make comparable  assessments for interagency contracts. For example, DHS officials were  not able to readily provide data on the amounts spent through different  types of interagency contracts. To respond to our request for information,  OCPO prepared a special report on the use of GSA schedules and GWACs.  For information on interagency agreements, OCPO had to request data  from components. Ultimately, however, we had to compile a summary and  clarify information obtained from components.
DHS also does not collect data on the amount of service fees paid to other  agencies for the use of contracting services or vehicles regarding  interagency contracting, such as the amount of service fees paid to other  agencies, and the components, which pay the fees, also do not collect this  data. In prior work in this area, we have found that these fees can range  from less than 1 percent to 8 percent. In March 2005, we found that OPO,  the largest user of interagency contracts among the components, alone  paid $12.9 million in service fees in fiscal year 2004. Given that the  volume of DHS’ interagency contracting has increased by $2.7 billion, or  about 73 percent, since fiscal year 2004, it is likely that the fees paid also  have increased substantially. This lack of data is not unique to DHS.  Although the need to collect and track data on interagency contracting  transactions has become increasingly important governmentwide, there is  no governmentwide system to collect this data. In fact, the Office of  Management and Budget has an effort underway to collect basic  information on interagency contracting from all federal agencies.
While each of the components we visited has established its own internal  reviews to evaluate contracting practices, including the use of interagency  contracts, these reviews are compliance-based and are not designed to  evaluate the outcomes of interagency contracting. For example, OPO,  which has taken a comprehensive approach, established procedures for  reviewing and approving procurement actions. The review includes an  assessment of the documentation for compliance with acquisition  regulations or policies; soundness of the acquisition strategy; use of  business judgment; and completeness, consistency, and clarity. OPO also  had a study completed to determine whether its contracts, task orders,  interagency agreements, and other transactions were awarded and  administered in compliance with procurement laws, regulations, and  internal DHS and OPO operating policies and procedures. While the  review found that much improvement was needed to comply with policies  and procedures, it was not designed to address areas such as timeliness,  total cost including price and fees paid, and customer service to determine  whether a particular contract method resulted in the best outcome.
section_title: DHS Has Begun to Develop an Oversight Program, but Is Facing Challenges
paragraphs: In December 2005, OCPO issued a policy that provides a framework for a  departmentwide acquisition oversight program. However, the framework  does not evaluate the outcomes of different contracting methods,  including interagency contracting, to determine whether the department  obtained good value. Additionally, the Chief Procurement Officer lacks the  authority needed to ensure the department’s components comply with its  procurement policies and procedures that would help to establish an  integrated acquisition function.
The framework includes four key reviews (see table 4). According to DHS  officials, the acquisition planning review was operational as of August  2006, and an on-site review was ongoing at the Federal Emergency  Management Agency. DHS plans to implement the full program in fiscal  year 2007.
According to OCPO officials, while DHS expects to track interagency  contracting through this framework, it will not gather data to determine  whether these contracts were used effectively. For example, through the  operational status reviews, DHS plans to track the number and dollar  value of orders placed using interagency agreements and GSA schedules  and GWACs. However, these reviews will not collect data on cost  including the price of goods and services and fees paid, timeliness, or  customer service, that would help them to evaluate whether specific  interagency contracts were a good value.
In addition, the Chief Procurement Officer, who is held accountable for  departmentwide management and oversight of the acquisition function,  lacks the authority and has limited resources to ensure compliance with  acquisition policies and processes. As of August 2006, according to OCPO  officials, only five staff were assigned to departmentwide oversight  responsibilities for $17.5 billion in acquisitions. According to OCPO  officials, their small staff faces the competing demands of providing  acquisition support for urgent needs at the component level. As a result,  they have focused their efforts on procurement execution rather than  oversight. Officials also noted that limited resources have delayed the  oversight program’s implementation.
DHS’ acquisition function was structured to rely on cooperation and  collaboration among DHS components to accomplish the department’s  goals. While this structure was intended to make efficient use of resources  departmentwide, it has limited the Chief Procurement Officer’s ability to  effectively oversee the department’s acquisitions, manage risks, and has  ultimately wasted time and other resources. In our prior work, we have  found that in a highly functioning acquisition organization, the chief  procurement officer is in a position to oversee compliance with  acquisition policies and processes by implementing strong oversight  mechanisms. In March 2005, we recommended that OCPO be provided  sufficient enforcement authority and resources to provide effective  oversight of DHS’ acquisition policies and procedures. In a 2005 review of  the department’s organization, the Secretary focused on mission initiatives  and, as of August 2006, has not changed the structure of the operational  functions to provide additional authority to the Chief Procurement Officer.
section_title: Conclusions
paragraphs: One of the largest procuring agencies in the federal government, DHS  relies on contracts for products and services worth several billions of  dollars to meet its complex homeland security mission. Effective  acquisition management must include sound policies and practices for  managing the risks of large and rapidly increasing use of other agencies’  contracts. While the use of these types of contracts provides speed and  convenience in the procurement process, the agencies that manage the  contracts and DHS users have not always adhered to sound contracting  practices. Guidance and training that could help DHS to address risks is  not in place; planning was not always conducted; and adequate monitoring  and oversight were not performed. While DHS has developed a framework  for an oversight program, until such oversight is in place, DHS cannot be  sure that taxpayer’s dollars are being spent wisely and purchases are made  in the best interest of the department. While the challenges to effective  management of an acquisition function in any organization with a   far-reaching mission are substantial, these challenges are further  complicated at DHS by an organizational structure in which the Chief  Procurement Officer lacks direct authority over the components. Without  such authority, the department cannot be sure that necessary steps to  implement improvements to its acquisition function will be taken.
section_title: Recommendations for Executive Action
paragraphs: To improve the department’s ability to manage the risks of interagency  contracting, we recommend that the Secretary of Homeland Security  consider the adequacy of the Office of the Chief Procurement Officer’s  resources and implement the following three actions:    develop consistent, comprehensive guidance, and related training to  reinforce the proper use of all types of interagency contracts to be  followed by all components;    establish, as part of the department’s planning requirement for an  analysis of alternatives, criteria to consider in making the decision to  use an interagency contract; and  implement oversight procedures to evaluate the outcomes of using  interagency contracts.
section_title: Matter for Congressional Consideration
paragraphs: Because the Secretary has not taken action to ensure departmentwide  acquisition oversight, Congress should require the Secretary to report on  efforts to provide the Chief Procurement Officer with sufficient authority  over procurement activities at all components.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DHS for review and comment. In  written comments, DHS concurred with all of our recommendations and  provided information on what action would be taken to address them. The  department’s comments are reprinted in appendix III.
Regarding the recommendation for guidance and training to reinforce the  proper use of all interagency contracts, DHS stated that it will issue a  revised management directive in the near future. This directive will require  the reporting of data on interagency agreements. DHS also will issue  additional direction to the components on reporting the use of other types  of interagency contracts. With regard to training, the OCPO will introduce  specific training with respect to all types of interagency contracting for all  contracting personnel during fiscal year 2007. With regard to establishing  criteria to consider in making the decision to use an interagency contract,  DHS will revise the acquisition planning guide to address this  recommendation. With regard to implementing oversight procedures to  evaluate the outcomes of using interagency contracts, DHS plans to  incorporate oversight procedures assessing the proper use of interagency  contracts and agreements into its acquisition oversight program.
Concerning the overall use of interagency contracts, the department’s  comments stated that it is the goal of the OCPO to reduce the number and  value of contracts awarded through the use of interagency contracts or  agreements. This will be accomplished in part through the use of new  departmentwide contracts for information technology equipment and  services.  We believe this is a positive step toward improving DHS’  contract management.
In responding to the Matter for Congressional Consideration that the  Secretary report on efforts to provide the Chief Procurement Officer with  sufficient authority over procurement activities, DHS noted some steps  that the Secretary has taken to improve acquisition oversight.   revised the investment review process, placing the Chief Procurement  Officer in a key position to review and provide oversight of the  Department’s most critical programs;    supported an increase of 25 OCPO positions to improve acquisition and    directed the Chief Procurement Officer to work with all component  heads to report on departmentwide progress in key acquisition areas.
While these actions should help, they do not provide the Chief  Procurement Officer with sufficient authority to ensure effective oversight  of DHS’ acquisition policies and procedures, and we continue to believe  that the Congress should require the Secretary to report on efforts to  address this lack of authority.
We are sending copies of this report to the Secretary of the Department of  Homeland Security, and to other interested agencies and congressional  committees. We will also make copies available to others upon request. In  addition, this report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you have any questions about this report or need additional information,  please contact me at (202) 512-4841 (huttonj@gao.gov). Contact points for  our Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Other staff making key contributions to this  report were Amelia Shachoy, Assistant Director; Greg Campbell;  Christopher Langford; Eric Mader; Bill McPhail; Russ Reiter; Karen Sloan;  and Karen Thornton.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the level of interagency contracting at the Department of  Homeland Security (DHS), we requested data from each component on  fiscal year 2005 purchases made through all types of interagency  contracts. We compiled a summary of purchases made through  interagency agreements, the General Service Administration’s schedules  and governmentwide acquisition contracts (GWAC) from the individual  reports we received from each component. We found that the Office of  Procurement Operations (OPO), Customs and Border Protection (CBP),  and Coast Guard were the largest users of interagency contracts in fiscal  year 2005. Based on a review of this data, we selected 17 cases, totaling  $245 million. Interagency contracting actions for these components  represented a sample of GSA schedule, GWAC, and interagency  transactions made through fee-for-service contracting providers. See table  5. The 17 cases were selected to represent procurement actions of   $5 million or more at three DHS components. Because our findings  included similar problems across these activities, we believe they  represent common problems in DHS’ procurement process. To assess the  reliability of this data, we compared the data obtained from DHS to the  data maintained in the Federal Procurement Data System-Next Generation  (FPDS-NG). Based upon the comparison, we determined that the data  were sufficiently reliable for our purposes.
To assess the extent to which DHS manages the risks of interagency  contracting, we reviewed guidance and oversight at the departmental level  and at the three components in our sample—OPO, CBP and Coast Guard,  and we interviewed officials in the Office of the Chief Procurement Officer  (OCPO) and senior officials of the components under review. To  determine how other large agencies address the management risks of  interagency contracting, we reviewed relevant guidance and training at the  Departments of Defense and Energy. We also reviewed relevant GAO and  Inspector General reports.
To assess DHS planning for the use of interagency contracts, we  conducted fieldwork at CBP’s National Acquisition Center in Indianapolis,  Indiana; National Data Center in Springfield, Virginia; and at the Coast  Guard’s procurement office in Norfolk, Virginia, and reviewed contract  files and completed a data collection instrument for each of the 17 cases  we selected. We also interviewed the contracting officer, program  manager and Contracting Officer’s Technical Representative to discuss  each case. In conducting our review, we identified the reasons for using  interagency contracts and the reasons for choosing a particular  interagency contract.
We performed our review between February and August 2006 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Department of Homeland Security Interagency Contracting
section_title: Appendix III: Comments from the Department of Homeland Security