Contingency Contracting: Improvements Needed in Management of Contractors Supporting Contract and Grant Administration in Iraq and Afghanistan
Published: 2010-04-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Departments of Defense (DOD) and State and the U.S. Agency for International Development (USAID) have relied extensively on contractors in Iraq and Afghanistan, including using contractors to help administer other contracts or grants. Relying on contractors to perform such functions can provide benefits but also introduces potential risks, such as conflicts of interest, that should be considered and managed. Pursuant to the National Defense Authorization Act for Fiscal Year 2008, GAO reviewed (1) the extent to which DOD, State, and USAID rely on contractors to perform contract and grant administration in Iraq and Afghanistan; (2) the reasons behind decisions to use such contractors and whether the decisions are guided by strategic workforce planning; and (3) whether agencies considered and mitigated related risks. GAO analyzed relevant federal and agency policies and agency contract data, and conducted file reviews and interviews for 32 contracts selected for case studies.
section_title: What GAO Found
paragraphs: DOD, State, and USAID'suse of contractors to help administer contracts and grants was substantial, although the agencies did not know the full extent of their use of such contractors. GAO found that the agencies had obligated nearly $1 billion through March 2009 on 223 contracts and task orders active during fiscal year 2008 or the first half of fiscal year 2009 that included the performance of administration functions for contracts and grants in Iraq and Afghanistan. The specific amount spent to help administer contracts or grants in Iraq and Afghanistan is uncertain because some contracts or task orders included multiple functions or performance in various locations and contract obligation data were not detailed enough to allow GAO to isolate the amount obligated for other functions or locations. Overall, the agencies relied on contractors to provide a wide range of services, including on-site monitoring of other contractors' activities, supporting contracting or program offices on contract-related matters, and awarding or administering grants. For example, Air Force Center for Engineering and the Environment officials noted that contractors performed quality assurance for all of the center's construction projects in Iraq and Afghanistan. In another example, USAID contractors awarded and administered grants on USAID's behalf to support development efforts in Iraq and Afghanistan. Decisions to use contractors to help administer contracts or grants are largely made by individual contracting or program offices on a case-by-case basis. In doing so, the offices generally cited the lack of sufficient government staff, the lack of in-house expertise, or frequent rotations of government personnel as key factors contributing to the need to use contractors. Offices also noted that using contractors in contingency environments can be beneficial, for example, to meet changing needs or address safety concerns regarding the use of U.S. personnel in high-threat areas. GAO has found that to mitigate risks associated with using contractors, agencies have to understand when, where, and how contractors should be used, but offices' decisions were generally not guided by agencywide workforce planning efforts. DOD, State, and USAID took actions to mitigate conflict of interest and oversight risks associated with contractors helping to administer other contracts or grants, but did not always fully address these risks. For example, agencies generally complied with requirements related to organizational conflicts of interest, but USAID did not include a contract clause required by agency policy to address potential conflicts of interest in three cases. Also, some State officials were uncertain as to whether federal ethics laws regarding personal conflicts of interest applied to certain types of contractors. In almost all cases, the agencies had designated personnel to provide contract oversight. DOD, State, and USAID contracting officials generally did not, however, ensure enhanced oversight as required for situations in which contractors provided services closely supporting inherently governmental functions despite the potential for loss of government control and accountability for mission-related policy and program decisions.

section_title: Letter
paragraphs: The Department of Defense (DOD), the Department of State (State), and  the U.S. Agency for International Development (USAID) have relied  extensively on contractors in Iraq and Afghanistan to undertake  reconstruction projects, provide security for U.S. government officials and  facilities, and support U.S. forces. During fiscal year 2008 and the first half  of fiscal year 2009, DOD, State, and USAID reported obligating  $38.6 billion on contracts in Iraq and Afghanistan. Additionally, State and  USAID have relied on grantees to support critical efforts such as  infrastructure and economic development in Iraq and Afghanistan. We  have previously reported on problems with the administration of these  contracts and grants, including a shortage of government personnel to  monitor performance. Without adequate contract oversight, agencies risk  being unable to identify and correct poor contractor performance in a  timely manner and ultimately may risk paying contractors more than the  value of the services they performed. Additionally, oversight of grantees is  critical to creating and sustaining performance accountability.
In some cases, the government has turned to contractors to help support  its performance of contract and grant administration functions. Contract  and grant administration functions represent the government’s primary  mechanism for assessing whether it is getting the expected products or  services from contractors or whether grantees are performing in  accordance with grant programs. Examples of such functions include on- site monitoring of contractor activities, supporting contracting and  program offices on contract-related matters, and awarding grants and  monitoring grantee performance. Using contractors to support these  functions can provide benefits, such as flexibility to meet immediate  needs, but it can also introduce risks the government needs to consider  and manage. For example, contractors performing certain contract or  grant administration functions may closely support the performance of  inherently governmental functions, which increases the risk that  government decisions will be inappropriately influenced by, rather than  independent from, contractor actions. In addition, reliance on contractor  support to meet agency missions can increase the risk of conflicts of  interest among companies and individuals, particularly for cases in which  contractors closely support inherently governmental functions.
In the National Defense Authorization Act for Fiscal Year 2008, Congress  directed us to report annually on DOD, State, and USAID contracts in Iraq  and Afghanistan, including information on any specific contract or class of  contracts that the Comptroller General determines raises issues of  significant concern. Pursuant to that mandate, this report addresses DOD,  State, and USAID’s use of contractors, including personal services  contractors, to perform administration functions for other contracts or  grants with performance in Iraq and Afghanistan during fiscal year 2008  and the first half of fiscal year 2009. Specifically, we analyzed (1) the  extent to which DOD, State, and USAID rely on contractors to perform  administration functions for other contracts and grants in Iraq and  Afghanistan; (2) the reasons behind decisions to use contractors to  perform these functions and whether the decisions are guided by strategic  workforce planning; and (3) whether the agencies have considered and  mitigated conflict of interest and oversight risks related to contractors  performing contract or grant administration functions.
To determine the extent to which DOD, State, and USAID relied on  contractors to perform functions within our scope, we requested data  from the agencies on contracts and task orders with at least 1 day of  performance in fiscal year 2008 or the first half of fiscal year 2009 for  which duties included administration functions for other contracts or  grants with performance in Iraq or Afghanistan. To assess whether the  data provided by the agencies were accurate and appropriately  categorized as within the scope of this engagement, we reviewed contract  documents for 128 of the 186 contracts and task orders reported by the  agencies. We also identified additional contracts and task orders in our  scope by reviewing data from the Federal Procurement Data System –  Next Generation (FPDS-NG) and data provided to GAO by DOD, State, and  USAID for a related engagement. Although we found that the agencies’  data were incomplete based on additional contracts and task orders we  identified, we determined that taken collectively data provided by the  agencies and data on the contracts and task orders we identified and  included in our scope were sufficiently reliable to establish the minimum  number of contracts and task orders active during fiscal year 2008 or the  first half of fiscal year 2009 that were awarded by DOD, State, and USAID  to perform the functions within our scope.
To learn about the reasons behind decisions to use contractors to perform  these functions and the extent to which agencies considered and mitigated  risks related to the use of contractors to perform these functions, we  purposefully selected 32 contracts at DOD, State, and USAID for case  studies to provide a cross section of types of contracts, locations, and  functions performed. We reviewed contract files and interviewed officials  such as contracting officers, program managers, contracting officers’  representatives (COR), and contractors. For these case studies, we  conducted fieldwork in Iraq, Afghanistan, and the United States. We also  reviewed agency workforce planning documents and guidance and  interviewed officials knowledgeable about workforce planning. Further,  we reviewed federal regulations and agency policy related to conflicts of  interest and oversight and interviewed officials responsible for contracting  policy at each of the agencies. Our review did not assess the effectiveness  of contractors performing contract or grant administration functions for  other contracts or grants.
A detailed description of our scope and methodology is included in  appendix I. We conducted this performance audit from February 2009  through April 2010 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 the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Contract and Grant Administration
paragraphs: Contracts and grants are two instruments the government may use to  achieve its missions, with their selection principally governed by the  nature of the activity. Contracts are procurement instruments and, as  such, are governed by the Federal Acquisition Regulation (FAR) and  agency procurement regulations. Contracts are to be used when the  principal purpose of the project is the acquisition of goods and services for  the direct benefit of the federal government. Grants, on the other hand, are  to be used when the principal purpose of a project is to accomplish a  public purpose of support or stimulation authorized by federal statute.  Contract administration, as defined by the Office of Federal Procurement  Policy, consists of those activities performed after a contract has been  awarded to determine how well the government and the contractor  performed to meet the requirements of the contract. Contract and grant  administration include a number of similar functions, including monitoring  contractor or grantee performance and reviewing contractor or grantee  financial information.
Contract administration functions are carried out under the direction of  contracting officers, who are responsible for ensuring performance of all  necessary actions for effective contracting, ensuring compliance with the  terms of the contract, and safeguarding the government’s interests.  Contracting officers have authority to enter into, administer, or terminate  contracts. A contracting officer may designate another individual to  provide oversight on his or her behalf. For the purposes of this report, we  use “COR” to refer to such individuals, although in some cases agencies or  offices use other terms. The COR functions as the “eyes and ears” of the  contracting officer, monitoring technical performance and reporting any  potential or actual problems to the contracting officer. Functions of the  COR typically include informing the contracting officer of any technical or  contractual difficulties encountered during performance, informing the  contractor of failures to comply with technical requirements of the  contract, performing inspection and acceptance of all final work required  under the contract, and maintaining contract files. Similarly, grant  administration functions are carried out under the direction of grant or  agreement officers, who may be assisted by grants officers’  representatives or agreement officers’ technical representatives.
section_title: Risks Related to Reliance on Contractors
paragraphs: Our prior work has identified risks related to agencies’ decisions to use  contractors to support certain types of agency missions, including  potential conflicts of interest. An organizational conflict of interest can  occur when a contractor has present or currently planned interests  (including business or relationships with other contractors) that either  directly or indirectly 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. For this report, a personal conflict of interest is  one that can occur in a situation in which an individual is employed by a  contractor or is contracted for directly by the government as a personal  services contractor and is in a position to materially influence an agency’s  recommendations or decisions and, because of his or her personal  activities, relationships, or financial interests, may lack or appear to lack  objectivity or appear to be unduly influenced by personal financial  interest.
In addition, other risks to the agencies may occur when using contractors  for services that closely support inherently governmental functions.  Inherently governmental functions are so intimately related to the public  interest as to require performance by government employees, and include  functions that require discretion in applying government authority or value  judgments in making decisions for the government. FAR section 7.503(c)  provides 20 examples of functions considered to be inherently  governmental, including determining agency policy or federal program  budget request priorities; directing and controlling federal employees; and  awarding, administering, or terminating federal contracts. Similarly, FAR  section 7.503(d) provides examples of functions that while not inherently  governmental, may approach the category because of the nature of the  function, the manner in which a contractor performs the contract, or the  manner in which the government administers performance under a  contract. These functions closely support the performance of inherently  governmental functions and generally include professional and  management support activities, such as those that involve or relate to  supporting budget preparation, evaluation of another contractor’s  performance, acquisition planning, or technical evaluation of contract  proposals. When contractors perform these functions, there is a risk of  inappropriately influencing the government’s control over and  accountability for decisions that may be based, in part, on contractor  work.
section_title: Nonpersonal and Personal Services Contracts
paragraphs: DOD, State, and USAID use both nonpersonal and personal services  contractors to perform contract or grant administration functions.  Nonpersonal services contracts are distinguished from personal services  contracts in part by the nature of the government’s relationship with the  contractor. Under a nonpersonal services contract, the personnel  rendering the services are not subject either by the contract’s terms or by  the manner of its administration to the relatively continuous supervision  and control of government personnel. On the other hand, personal  services contracts are characterized by an employer-employee relationship  created between the government and the contractor. Personal services  contracts involve close and continual supervision and control of  contractor personnel by government employees rather than general  oversight of contractor operations. In general, personal services  contractors perform services that are comparable in scope and nature to  those of civil service employees and often appear, in effect, to be  government employees. Additionally, the risks of contracting for personal  services are not always the same as the risks of contracting for  nonpersonal services. For example, personal services contractors are not  explicitly prohibited in the FAR from performing inherently governmental  functions. Also, the level and type of oversight and management may  differ between personal and nonpersonal services contracts.
The government is normally required to obtain its employees by direct hire  under competitive appointment or other procedures required by the civil  service laws, and contracting for personal services is prohibited unless  authorized by statute. DOD, State, and USAID are each authorized to hire  personal services contractors under certain circumstances. For example,  USAID and selected bureaus at State are permitted to hire personal  services contractors to perform services outside of the United States.  Similarly, DOD has specific authority to enter into personal services  contracts to support operations outside of the United States in certain  circumstances. Personal services contractors may be U.S. citizens, local  nationals, or third-country nationals. State and USAID regulations state  that personal services contractors generally cannot supervise government  employees, serve as contracting officers, or otherwise obligate  government funds. DOD regulations do not specifically address whether  personal services contractors can supervise government employees or  otherwise obligate government funds.
section_title: Agencies’ Reliance on Contractors to Support the Administration of Contracts and Grants in Iraq and Afghanistan Is Substantial
paragraphs: DOD, State, and USAID relied on contractors to perform a wide range of  administration functions for contracts and grants with performance in Iraq  and Afghanistan, but did not know the full extent of their use of  contractors to perform such functions. Our review found 223 contracts  and task orders active during fiscal year 2008 or the first half of fiscal year  2009 that included the performance of administration functions for other  contracts or grants in Iraq and Afghanistan. DOD, State, and USAID  officials told us that there were no agencywide data sources that provided  detailed information about the functions performed by contractors and  that individual contracting offices would have to manually review their  contracts to identify contracts within our scope. Of the 186 contracts or  task orders reported to us by individual contracting offices, we determined  that 161 were within our scope. Through our review of FPDS-NG data and  agency data compiled for another purpose, we found an additional 62  contracts or task orders within our scope. Given limitations we have  previously reported with FPDS-NG and agency contracting data, the 223  contracts and task orders we identified, including 119 contracts and task  orders for personal services, represent the minimum number of contracts  and task orders within our scope (see app. II for more information on the  contracts and task orders we identified).
According to FPDS-NG and agency data, the agencies had obligated  approximately $990 million as of March 31, 2009, on the 223 contracts and  task orders we identified, although we were unable to determine how  much of this amount was specifically obligated for the performance of  administration functions for contracts or grants with performance in Iraq  or Afghanistan. For example, some of the contracts or task orders  included the performance of functions besides contract or grant  administration or the performance of administration functions for  contracts or grants with performance outside of Iraq and Afghanistan.  FPDS-NG and agency obligation data were not detailed enough to allow us  to isolate the amount obligated for other functions or locations. The  approximately $990 million obligated by the agencies on the contracts and  task orders we identified also includes more than $116 million reported by  USAID for grants that were awarded by USAID contractors in Iraq on  behalf of USAID, as authorized in the terms of their contracts. USAID  contractors also awarded grants on behalf of USAID in Afghanistan, but  USAID officials told us that the Afghanistan mission does not track grants  awarded by contractors.
As illustrated in tables 1 through 4, contractors in our case studies  performed a wide variety of services in support of DOD, State, and  USAID’s administration and oversight of other contracts and grants  collectively worth billions of dollars. Contract and grant administration  functions performed by contractors included on-site monitoring of  contractor activities, contracting office support, program office support on  contract-related matters, and awarding or administering grants. For  instance, Air Force Center for Engineering and the Environment officials  told us that they used contractors to perform quality assurance functions  for all of the center’s construction projects in Iraq and Afghanistan.  Obligations for construction on these projects totaled over $790 million for  approximately 200 task orders during fiscal year 2008 and the first half of  fiscal year 2009. In another example, State had obligated just over $700,000  as of March 2009 for a Bureau of International Narcotics and Law  Enforcement personal services contractor to provide oversight, such as  performing inspections and accepting contractor work on behalf of the  U.S. government, for two task orders that included support for an Iraq  criminal justice development program and had combined obligations of  $343 million as of March 2009.
We found that the way DOD acquired personal services contractors and  the functions performed by these contractors differed when compared to  those of State and USAID. At DOD, we identified two contracts for  personal services awarded by the U.S. Army Corps of Engineers to firms  that would in turn hire individuals, including local nationals, to provide  construction quality assurance. In these cases, contract personnel (up to  an estimated 174 individuals, in one case) work under the direct  supervision and control of agency officials while administrative aspects of  their employment are managed by the contracted firm. In contrast, State  and USAID awarded personal services contracts directly to individuals for  a range of functions, including on-site monitoring of contractor activities,  supporting contracting and program offices on contract-related matters,  and awarding grants and monitoring grantee performance.
section_title: Offices Used Contractors to Address Contingency- Related Challenges, but Decisions Are Not Guided by Agencywide Strategies
paragraphs: The decisions to use contractors to support contract or grant  administration functions are largely made by individual contracting or  program offices within the agencies on a case-by-case basis. The offices  cited the lack of a sufficient number of government staff, the lack of in- house expertise, or frequent rotations among government personnel as  key factors contributing to the decision to use contractors to support their  efforts. These individual decisions, however, are generally not informed by  more strategic, agencywide workforce plans or guidance on the extent to  which contractors should be used to support these functions.
subsections: section_title: Offices Largely Used Contractors to Alleviate Workforce Challenges and Cited Additional Benefits to Using Contractors in a Contingency Environment
paragraphs: Individual contracting or program offices generally decided to use  contractors to perform administration functions for other contracts or  grants to address workforce challenges, including a shortage of  government personnel and a lack of expertise among government  personnel to perform specific functions, as well a lack of continuity  because of frequent rotations. While workforce-related challenges were  cited most frequently as a reason for needing to acquire contractor  support, contracting and program officials also noted that using  contractors in contingency environments can be beneficial to meet  unforeseen or changing needs, address safety concerns regarding the use  of U.S. personnel in high-threat areas, and provide a means to overcome  language barriers or help develop the local economy (see table 5).
The examples in table 6 provide illustrations from our case studies of the  reasons cited by the agencies for their reliance on contractors to perform  contract or grant administration functions for other contracts or grants in  Iraq or Afghanistan.
section_title: Agencies Generally Lack Strategies to Determine How Extensively Contractors Should Perform Contract or Grant Administration Functions
paragraphs: Individual offices’ decisions to use contractors are generally not informed  by more strategic, agencywide workforce plans or guidance on the extent  to which contractors should be used to support contract or grant  administration functions. Agencies’ current strategic human capital plans  and guidance generally do not address the extent to which it is appropriate  to use contractors, either in general or more specifically to perform  contract or grant administration functions. Some DOD, State, and USAID  officials noted that they would prefer to use government employees to  perform some of the functions currently being performed by contractors.  Our work indicated, however, that agencies intend to continue to rely on  contractors to perform these functions in Iraq or Afghanistan on a longer- term basis. For example, in 15 of the 32 case studies we conducted,  contracts or task orders were awarded in 2007 or earlier, and we found  cases in which the contract or task order had recently been or was in the  process of being recompeted.
Our prior work has noted that to mitigate risks associated with using  contractors, agencies have to understand when, where, and how  contractors should be used given the risk of diminished institutional  capacity, potentially greater costs, and mission risks. We have also  reported that decisions regarding the use of contractors should be based  on strategic planning regarding what types of work are best done by the  agency or by contractors. DOD and the Office of Management and  Budget have recently issued guidance that further emphasized the  importance of this type of planning. Specifically, after recognizing in its  2006 update to the Quadrennial Defense Review that contractors are part  of the total force, DOD issued guidance in May 2009 that encouraged DOD  components to consider when to use contractors as part of a total force  approach to workforce management and strategic human capital  planning. Similarly, the Office of Management and Budget’s July 2009  Managing the Multi-Sector Workforce guidance required civilian agencies  to take immediate steps to adopt a framework for planning for and  managing the multisector workforce of federal employees and contractors,  including principles for considering the appropriate mix of contractors  and government employees.
We reported in 2009 that while DOD had made good progress in  developing a civilian workforce plan and had recognized contractors as a  part of its total workforce, the department had yet to develop a strategy  for determining the appropriate mix of contractor and government  personnel. DOD Instruction 1100.22, which provides guidance for  determining the appropriate military, civilian, and contractor mix needed  to accomplish the department’s mission, focuses on individual decisions of  whether to use contractors to provide specific capabilities and not the  overarching question of what the appropriate role of contractors should  be. For example, the guidance distinguishes between contract  administration functions that contractors can and cannot perform based  on which functions are considered to be inherently governmental and  states that contractors may be used in certain circumstances to perform  contract quality control and performance evaluation or inspection  functions, but does not address the extent to which contractors should be  used to perform these functions. We recommended in March 2009 that  DOD revise its criteria and guidance to clarify under what circumstances  and the extent to which it is appropriate to use contractors to perform  acquisition-related functions. DOD concurred with our recommendation  and, according to DOD officials, is in the process of finalizing revisions to  its guidance as of March 2010.
State’s departmentwide workforce plan also generally does not address  the extent to which contractors should be used to perform specific  functions. As part of State’s fiscal year 2011 budget process, State has  asked its bureaus to focus on transitioning some activities performed by  contractors to performance by government employees. State officials told  us, however, that departmentwide workforce planning efforts generally  have not addressed the extent to which the department should use  contractors because those decisions are left up to individual bureaus.  Officials at State’s Bureaus of Acquisition Management, Diplomatic  Security, and International Narcotics and Law Enforcement Affairs told us  that they do not have workforce plans that include consideration of the  extent to or the circumstances under which contractors should be used to  perform contract or grant administration functions. These officials  indicated that decisions about the use of contractors are generally made  on a case-by-case basis and often reflect the necessity of using contractors  because of a shortage of direct hire employees.
USAID has taken steps to determine the extent to which personal services  contractors should be used, but has not addressed the extent to which  nonpersonal services contractors outside the United States should be  used, either in general or to perform specific functions. USAID officials  told us that personal services contractors are used across the agency’s  overseas missions and that they consider these contractors to be part of  their workforce. As such, personal services contractors have been  included in the agency’s workforce planning model. For example, the  model for USAID headquarters includes an estimate of the extent to which  various functions should be performed by personal services contractors.  Officials told us that future iterations of the model will address the extent  to which personal services contractors should be used to staff contracting  offices in Iraq and Afghanistan. USAID’s current workforce planning  efforts, including its human capital and workforce plans, however, do not  address the extent to which nonpersonal services contractors working  outside of the United States should be used as officials do not consider  those contractors to be part of USAID’s workforce.
DOD, State, and USAID will be challenged to fully address the appropriate  role for contractors performing specific functions during workforce  planning efforts because of the lack of complete and reliable data on the  functions performed by contractors. We recently reported that all three  agencies continue to struggle in implementing improvements to track data  on contracts and contractor personnel in Iraq and Afghanistan. Our past  work has shown that such data are important to enable agencies to  conduct adequate workforce planning.
section_title: Agencies Did Not Always Mitigate Risks Related to Contractors Supporting Contract or Grant Administration Functions
paragraphs: DOD, State, and USAID took a number of actions to mitigate conflict of  interest and oversight risks associated with contractors supporting  contract and grant administration functions, but did not always fully  address these risks. For example, the agencies generally complied with  requirements related to organizational conflicts of interest. USAID,  however, did not always include a contract clause generally required by  USAID policy intended to protect the government’s interest regarding  potential organizational conflicts of interest. Additionally, some State  officials were uncertain as to whether or how federal ethics laws regarding  personal conflicts of interest applied to personal services contractors. In  almost all cases, the agencies had designated personnel to provide  contract oversight, though they did not ensure enhanced oversight for  contractors that closely supported inherently governmental functions in  accordance with federal requirements.
subsections: section_title: Agencies Generally Complied with Requirements Related to Organizational Conflicts of Interest, Although USAID Did Not Always Follow Agency Policy
paragraphs: FAR subpart 9.5 requires contracting officers to identify and evaluate  potential organizational conflicts of interest prior to contract award and  take steps to address potential conflicts that they determine to be  significant. If the contract may involve a significant potential conflict,  before issuing a solicitation, the contracting officer must submit for  approval to the head of the contracting activity a written analysis with  courses of action for avoiding, mitigating, or neutralizing the conflict.  Though not mandatory, the contracting officer may use solicitation  provisions or a contract clause to restrict the contractor’s eligibility for  other contract awards or require agreements about the use of other  contractors’ proprietary information obtained during the course of  contract performance.
In six of the contracts we reviewed, agencies addressed potential  organizational conflicts of interest by incorporating a clause into the  contract that precluded the contractor from bidding on other related work  that may result in a conflict of interest. For example, Air Force Center for  Engineering and the Environment officials identified the potential for an  organizational conflict of interest in a contract used in part to support the  center’s CORs in Iraq and therefore restricted the contractor from  participating in any of the center’s other contracts for the life of the  contract plus 1 year. Similarly, a State contract to support the  department’s management and oversight of security operations overseas,  including in Iraq and Afghanistan, had a clause that precluded the  contractor and its subcontractors from participating in directly related  department contracts for 3 years after the completion of the contract.  These six case studies also included a contract clause addressing the  protection or nondisclosure of other contractors’ proprietary data.
Agencies have broad discretion in how to address potential organizational  conflicts of interest. Solicitation and contract clauses are one of many  options contracting officers have, though they are not always used. For  example, agency documents in two cases suggested that there had been  consideration of the possible need to restrict contractors’ activities  because of potential conflicts of interest. Clauses related to potential  conflicts of interest, however, were not included in the contracts at the  time of award. In one case, the Commander of the Joint Contracting  Command – Iraq/Afghanistan’s (JCC-I/A) letter of justification for contract  and property specialist support stated that the award of the contract may  preclude the contractor from being eligible for or working on other  contracts. The contract itself, though, did not contain any related  organizational conflict of interest clauses. Additionally, the contract file of  a Defense Energy Support Center contract to support the oversight of fuel  delivery in Afghanistan included e-mails indicating that the oversight  support contractor could not provide services to the companies providing  fuel delivery services for the center. Contracting officials told us that the  related discussions had been informal and therefore had not been  documented.
In addition to the FAR, USAID also has specific agency policy that  addresses organizational conflicts of interest for certain contractors,  including contractors that evaluate USAID program activities or other  contractors. The policy requires that an organizational conflict of interest  clause be included in the evaluation contract that precludes the contractor  from providing certain related services within 18 months of USAID  receiving an evaluation report from the contractor unless a waiver is  authorized; restricts the use of information obtained from other parties  during the course of the contract; and requires nondisclosure agreements  with other contractors to protect proprietary data. This clause was not,  however, incorporated in any of the three USAID contracts we reviewed  that included the evaluation of program activities or contractors. In one of  these contracts, the statement of work notes that the contractor may be  precluded from performing work under the current task order or from  award of other contracts if USAID determines the contractor has a conflict  of interest, and that the contractor shall protect proprietary information.  This statement is not, however, specific as to when those circumstances  occur, nor does it specifically restrict the contractor’s use of information  obtained from other parties during the course of the contract in future  proposals. USAID officials told us that when this contract is recompeted in  2010, the clause required by USAID policy will be included. In another of  these three cases, USAID’s response to a prospective bidder’s questions  indicated that prior to the award of the contract, a determination was  made that the contractor would be restricted from bidding for the award  of other related contracts, but the restrictions were not addressed in the  solicitation or contract despite the requirement to do so in FAR section  9.507-2.
One case study illustrated the challenges of identifying potential  organizational conflicts of interest prior to award and the potential effect  if one is identified after award. In this case, JCC-I/A awarded a $1 million  contract to support the Armed Contractor Oversight Directorate in  Afghanistan. The contractor, which itself was a private security contractor,  was assigned a number of responsibilities related to oversight of private  security contractors, including monitoring private security contractor  activity, documenting and analyzing security incidents, and assisting the  government in conducting incident inspections. The contract files we  reviewed did not include documentation that the contracting officer  assessed the potential for a conflict of interest, though as previously  noted, a written analysis would not be necessary unless the contracting  officer decided that there was a significant potential conflict of interest. In  addition, no clauses were included in the solicitation or contract that  precluded the contractor from bidding on other contracts. After the  support contract had been awarded and performance had begun, the  support contractor competed for and won a separate contract to provide  armed guard services in Afghanistan. Subsequent to the award of the  second contract, however, a JCC-I/A attorney became aware of the two  contracts and, according to JCC-I/A officials, alerted a JCC-I/A contracting  official. JCC-I/A counsel concluded that the contractor’s objectivity in  supporting the Armed Contractor Oversight Directorate could potentially  be impaired by its performance of armed guard services. Ultimately, JCC- I/A counsel determined that no mitigation plan would adequately mitigate  this conflict. Therefore, JCC-I/A terminated the ongoing Armed Contractor  Oversight Directorate support contract for the convenience of the  government and awarded another support contract to a different  contractor.
Agencies are not required to have a formal process for monitoring  potential organizational conflicts of interest after award, but in some  cases, officials told us that they did so informally. For example, for a State  task order to provide contract administration support, officials noted that  it was possible to mitigate potential conflicts of interest because the small  size of the office facilitates direct government oversight of contractor  activities, and contractors that perform contract administration functions  for State do not often perform other services that could be in conflict with  their current responsibilities. In several other case studies we conducted,  agency officials told us that contractors have responsibility to bring  organizational conflicts of interest to the attention of contracting officials  if they occur.
Under USAID acquisition regulations, contracts that include restrictions  on a contractor’s eligibility for future work should also include a standard  clause stating that the contractor should disclose any postaward conflicts  of interest it discovers. In the three contracts that we previously indicated  should have had a clause to restrict the contractor’s eligibility for future  work based on USAID policy because they included evaluation services,  one contract had the clause to disclose postaward conflicts of interest  discovered while the other two did not. USAID officials in these cases,  however, told us that they take steps to mitigate potential organizational  conflicts of interest during the life of the contract. For example, for a  USAID contract for monitoring and evaluation services in Iraq, the  personal services contractor responsible for contract oversight told us that  he addressed potential conflicts of interest by limiting contact between the  contractors responsible for executing mission programs and the  contractor evaluating their services. Although DOD and State regulations  do not require contract clauses related to the disclosure of conflicts of  interest by contractors, changes to governmentwide requirements on  organizational conflicts of interest, including the establishment of  standard contract clauses, are being considered.
section_title: Mitigation Efforts for Personal Conflicts of Interest Vary by Agency and Contract Type
paragraphs: Most requirements governing personal conflicts of interest that apply to  federal employees are generally not applicable to nonpersonal services  contractors and their employees. Since December 2007, the FAR has  required certain contractors to have a written code of business ethics and  conduct, although this requirement did not apply in most of the  nonpersonal services case studies we conducted. We have previously  reported that this requirement will not ensure that the advice and  assistance received from contractor employees is not tainted by personal  conflicts of interest. We recommended in March 2008 that DOD develop  and implement policy that requires personal conflict of interest safeguards  for certain defense contractor employees that are similar to those required  of DOD’s federal employees. In November 2009, DOD issued a  memorandum providing additional information on risks related to  personal conflicts of interest and how those risks should be addressed  under current federal regulations, but DOD’s response to our  recommendation is pending resolution of a proposed amendment to the  FAR to address personal conflicts of interest by contractor employees  performing acquisition functions.
Several contracting officials told us that contractors have responsibility to  bring personal conflicts of interest to the agency’s attention. In our case  studies, we found that contractors managed personal conflicts of interest  in a variety of ways. For example, in two USAID case studies that included  the award of grants, the contractor included in its grant management plan  criteria for identifying contractor personnel with conflicts of interest and  the process for mitigating those conflicts. Representatives from a DOD  contractor providing construction quality assurance services in Iraq and  Afghanistan told us that they screen and interview all employees they hire  to identify personal conflicts of interest and require employees to sign a  form stating that they have no such conflicts. In this and three other DOD  case studies we conducted, agency contracting and program officials  stated that they attempt to identify and mitigate potential personal  conflicts of interest by reviewing the résumés of proposed contractor  employees.
The agencies vary in how they address personal conflicts of interest  among personal services contractors. DOD officials told us that the  department does not have specific policies related to conflicts of interest  among personal services contractors. USAID policy states that personal  services contractors are covered by all federal ethics laws that apply to  direct hire personnel, including requirements to file financial disclosure  forms. USAID policy requires the contracting officer or executive officer  who awards a personal services contract to make a determination at the  time of contract award about the specific financial disclosure filing  requirements that will apply to the personal services contractor and to  include that determination as part of the contract. USAID officials  complied with this requirement in each of the six USAID personal services  case studies we conducted.
Unlike USAID, neither State nor its bureaus that hired personal services  contractors within our scope have guidance that specifically addresses the  applicability of federal ethics laws to personal services contractors.  According to the senior ethics counsel at State, understanding which  financial disclosure requirements apply to personal services contractors is  complicated and depends on the personal services contractor’s contract  and the bureau’s statutory basis for hiring that personal services  contractor. Our work at State identified some confusion among  contracting personnel and supervisors of personal services contractors as  to whether federal ethics laws, including those related to financial  disclosure requirements, were applicable to personal services contractors.  In the five personal services case studies we conducted at State’s Bureaus  of Diplomatic Security and International Narcotics and Law Enforcement  Affairs, contracting personnel and supervisors of personal services  contractors either were uncertain of how requirements to file financial  disclosure forms applied to personal services contractors, told us that the  requirements did not apply, or told us that the requirements had only  recently been applied at all or consistently to personal services  contractors. The five personal services contractors in these case studies  told us, however, that they were generally required to complete financial  disclosure forms or that they had completed financial disclosure forms in  the past year.
section_title: Agencies Appointed Oversight Personnel for Contracts but Did Not Consider Enhanced Oversight for Contractors Closely Supporting Inherently Governmental Functions
paragraphs: In most case studies we conducted, the agencies had designated oversight  personnel to monitor contractors performing administration functions for  other contracts or grants in Iraq or Afghanistan. A primary characteristic  of a personal services contract is the relatively continuous supervision and  control of the personal services contractor by a government employee,  and in the case studies we conducted, we generally found personal  services contractors had designated government supervisors who worked  within the same program. In 18 of 19 nonpersonal services case studies we  conducted, agencies had identified individuals to provide contract  oversight, though the extent of that oversight varied in part based on the  functions performed by the contractor and whether the contractor  performed at remote locations. For example, State officials told us that for  a contract to provide program and acquisition support for the  department’s oversight of overseas security operations, including those in  Iraq and Afghanistan, government officials supported by the contractor are  collocated with contractor employees, and government branch chiefs  routinely meet with the contractor’s program manager to discuss  contractor employee performance on assigned work. In contrast, CORs in  some quality assurance case studies conducted oversight primarily of  remote locations. For example, U.S. Army Corps of Engineers officials told  us that CORs for a construction quality assurance contract conduct  oversight primarily by reviewing contractor reports and photos of work  sites and conducting meetings with quality assurance and construction  contractor personnel. In several cases, agency officials indicated that they  did not maintain or could not locate documentation of oversight activities.
Agencies faced challenges providing sufficient oversight of contractors  performing administration functions for other contracts in Iraq or  Afghanistan in several case studies we conducted. For example, agency  officials stated that when they cannot visit contractor work sites for  security reasons—as with some sites for the Defense Energy Support  Center’s fuel delivery inspection contract in Afghanistan and USAID’s  Monitoring and Evaluation Performance Program contract in Iraq—their  oversight is entirely remote. USAID officials told us that other U.S.  government officials, such as representatives from provincial  reconstruction teams, may be able to provide some insight into contractor  activities during times when those officials are at contractor work sites.  Defense Energy Support Center officials told us that the inability of  government personnel to visit contractor work sites can make it difficult  for them to verify the quality of work of the contractor that is supporting  the oversight of work performed by other contractors. In addition, the  COR for a U.S. Army Corps of Engineers quality assurance contract told us  that some contractor personnel did not provide high-quality reports and  that construction oversight personnel who reviewed the reports on a daily  basis sometimes lacked the quality assurance expertise to direct the  contractor’s quality assurance personnel. The COR told us that training  efforts were under way to address this issue. Further, according to State  officials, they had difficulty filling the government deputy program  manager position for State’s aviation quality assurance contract, which  affected the department’s plans to provide continuous oversight of the  contractor’s technical operations in Iraq since the deputy program  manager was intended to provide in-country oversight when the program  manager was not in Iraq. In another State case, contracting officials told us  that oversight was conducted entirely by the COR and program office staff  but were unaware that there was not a COR currently designated for the  contract. The officials later told us that staff turnover in Iraq had resulted  in the lack of a COR, and they were taking steps to try to get a new COR  appointed.
In the 19 nonpersonal services case studies we conducted, we found that  the contract or task order statements of work provided for the contractor  to perform functions that closely support inherently governmental  functions. For contractors administering other contracts, this includes  evaluating another contractor’s performance, providing inspection  services, and performing tasks that might allow access to confidential  business or other sensitive information, among other functions; for  contractors administering grants, awarding or recommending the award of  grants closely supports the performance of inherently governmental  functions. We have previously reported that when contractors provide  services that closely support inherently governmental functions, there is  the potential for loss of government control and accountability for  mission-related policy and program decisions, and that risk increases the  closer the services come to supporting inherently governmental functions.  This loss of government control may result in decisions that are not in the  best interest of the government and may increase vulnerability to waste,  fraud, and abuse. To address this risk, the FAR and Office of Federal  Procurement Policy guidance require that agencies provide greater  scrutiny and an enhanced degree of management oversight of contractors  performing services that tend to affect government decision making,  support or influence policy development, or affect program management.  This enhanced oversight would include assigning a sufficient number of  qualified government employees to provide oversight and to ensure that  agency officials retain control over and remain accountable for policy  decisions that may be based in part on a contractor’s performance and  work products. These requirements for enhanced oversight are not  applicable to personal services contractors, including the 13 personal  services case studies we conducted, because Office of Federal  Procurement Policy guidance and FAR restrictions on contractors  performing inherently governmental functions do not apply to these  contractors.
Although we found that statements of work for all of the 19 nonpersonal  services case studies we conducted provided for the contractor to perform  activities that closely supported inherently governmental functions, we did  not find evidence that the agencies considered related requirements to  provide greater scrutiny and an enhanced degree of management oversight  in these 19 cases. In our prior work at DOD and the Department of  Homeland Security, we found that program and contracting personnel  were unaware of requirements related to providing enhanced oversight of  services that closely support inherently governmental functions. In the  case studies we conducted, we found that many contracting and program  officials were unfamiliar with the concept of contractors closely  supporting inherently governmental functions. Further, DOD, State, and  USAID regulations generally do not require contracting or program  officials to document an assessment of whether contractors closely  support inherently governmental functions or any consideration given to  enhanced oversight. According to DOD, State, and USAID officials, no  specific guidance has been developed that defines how contracting and  program officials should conduct enhanced oversight. In November 2009,  we recommended that DOD require program and contracting officials to  document risks and risk mitigation steps when awarding any contract or  issuing any task order for services closely supporting inherently  governmental functions and develop guidance to identify approaches to  enhance management oversight for these contracts or task orders. DOD  concurred with these recommendations and identified a number of actions  that would be taken to address them.
section_title: Conclusions
paragraphs: Contracting in contingency environments such as Iraq and Afghanistan  presents unique security and logistical challenges, including difficulty  traveling to dangerous or remote locations and frequent rotations among  government personnel. Despite such challenges, effective oversight of  contractors and grantees remains critical to help ensure that contractors  are meeting contract requirements and grant funds are being used for their  intended purposes. Using contractors to support the administration and  oversight of other contracts and grants can facilitate the government’s  ability to carry out this critical function. Our prior work and the Office of  Management and Budget’s July 2009 guidance, however, have underscored  the importance of strategic planning to guide decisions related to how  contractors should be used to support agency missions. Until DOD, State,  and USAID fully consider in their workforce planning efforts the extent to  which contractors should perform contract and grant administration  functions, the agencies will not be positioned to consider the potential  implications of relying on contractors to perform these functions, such as  a loss of institutional capacity to perform mission-critical functions or  greater costs.
The agencies did not fully address risks related to potential conflicts of  interest and oversight for contractors performing contract or grant  administration functions. For example, USAID did not always address  potential organizational conflicts of interest in its contracts in accordance  with agency policy, though ongoing efforts to revise federal organizational  conflict of interest regulations could potentially improve USAID’s and  other agencies’ ability to mitigate this risk in the future. Additionally,  without management understanding of whether federal ethics laws related  to personal conflicts of interest apply to the department’s personal  services contractors, State runs the risk of inconsistent application of  these laws, potentially limiting the department’s ability to ensure that  contract and grant administration decisions are made in the best interest  of the government. Further, DOD, State, and USAID’s lack of consideration  of the need to provide greater scrutiny and an enhanced degree of  management oversight when nonpersonal services contractors closely  support inherently governmental functions may impair the agencies’  ability to ensure the appropriate level of oversight. The agencies will  continue to face this challenge without an effective process to identify  contracts that closely support inherently governmental functions and  guidance to assist program and contracting officials.
In 2009, we made recommendations to DOD with regard to improving the  department’s ability to plan for the use of contractors supporting  acquisition functions and mitigate the risks of contractors closely  supporting the performance of inherently governmental functions. Since  the department concurred with these recommendations and has identified  steps it plans to take to address them, we are not making any additional  recommendations to DOD.
section_title: Recommendations for Executive Action
paragraphs: To improve State and USAID’s ability to plan effectively for the use of  contractors to perform contract or grant administration functions and to  improve oversight of contracts that closely support inherently  governmental functions in Iraq, Afghanistan, and future contingency  environments where the agencies rely heavily on contractors, we  recommend that the Secretary of State and Administrator of USAID take  the following three actions:    Determine the extent to which contractors should perform  administration functions for other contracts and grants in accordance  with strategic human capital planning principles outlined in the Office  of Management and Budget’s July 2009 multisector workforce  guidance.
Develop guidance to identify approaches that contracting and program  officials should take to enhance management oversight when  nonpersonal services contractors provide services that closely support  inherently governmental functions.
Before the award of any nonpersonal services contract or task order  for services closely supporting inherently governmental functions,  require that program and contracting officials document their  consideration of related risks and the steps that have been taken to  mitigate such risks.
To improve State’s ability to mitigate risks related to potential personal  conflicts of interest among personal services contractors, we recommend  that the Secretary of State clarify the department’s policies regarding the  application of federal ethics laws to personal services contractors.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided DOD, State, and USAID with a draft of this report for their  review and comment. DOD provided technical comments, which we  incorporated as appropriate. State agreed with our recommendations and  identified steps that the department plans to take to address each  recommendation. State’s comments, along with our response, are  reprinted in appendix III. USAID generally agreed with our  recommendations and identified steps the agency is taking or plans to take  to address them. With regard to our recommendation related to  determining the extent to which contractors should perform contract or  grant administration functions, USAID noted that it is already in the  process of determining the extent to which nonpersonal services  contractors, which USAID refers to as institutional support contractors,  should perform such functions. As we noted in the report, however,  USAID’s current efforts do not address the extent to which nonpersonal  services contractors performing such functions outside of the United  States, such as in Iraq or Afghanistan, should be used. We believe it is  important for the agency to make such a determination to position itself to  effectively mitigate the potential risks associated with reliance on  contractors. USAID also provided some points of clarity related to the  recommendations, and we incorporated the comments in the report as  appropriate. USAID’s comments, along with our responses, are reprinted  in appendix IV.
We are sending copies of this report to the Secretary of Defense, the  Secretary of State, the Administrator of the U.S. Agency for International  Development, and interested congressional committees. The report also is  available at no charge on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or huttonj@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix V.
section_title: Appendix I: Scope and Methodology
paragraphs: The National Defense Authorization Act for Fiscal Year 2008 directed us to  report annually on Department of Defense (DOD), Department of State  (State), and U.S. Agency for International Development (USAID) contracts  in Iraq and Afghanistan, including information on any specific contract or  class of contracts the Comptroller General determines raises issues of  significant concern. Pursuant to that mandate, we reviewed DOD, State,  and USAID’s use of contractors, including personal services contractors,  to perform administration functions for contracts or grants with  performance in Iraq and Afghanistan for fiscal year 2008 and the first half  of fiscal year 2009. Specifically, we analyzed (1) the extent to which DOD,  State, and USAID rely on contractors to perform administration functions  for other contracts and grants in Iraq and Afghanistan; (2) the reasons  behind decisions to use contractors to perform these functions and  whether the decisions are guided by strategic workforce planning; and (3)  whether the agencies have considered and mitigated conflict of interest  and oversight risks related to contractors performing contract or grant  administration functions.
To determine the extent to which DOD, State, and USAID rely on  contractors to perform administration functions for other contracts and  grants in Iraq and Afghanistan, we obtained data from the agencies on  contracts and task orders with at least 1 day of performance in fiscal year  2008 or the first half of fiscal year 2009 for which duties included  administration functions for other contracts or grants with performance in  Iraq, Afghanistan, or both. The data we obtained from the agencies were  intended to include all contracts with administration functions for other  contracts and grants with performance in Iraq and Afghanistan, regardless  of the place of performance of the contractor performing administration  functions. For example, some contracts or task orders in our scope  included performance in the United States in support of the administration  of contracts or grants with performance in Iraq or Afghanistan.
To assess whether the data obtained from the agencies were accurate and  appropriately categorized as within the scope of this engagement, we  reviewed contract documents for a selection of reported contracts. We  reviewed contract documents for all 49 contracts or task orders reported  for DOD and 37 of the 39 contracts or task orders reported by State. The 2  contracts we did not review at State were contracts for which officials  could not identify the task orders that were within our scope. For USAID,  we reviewed contract documents for all 17 nonpersonal services contracts  or task orders reported by the agency and selected 25 of 81 personal  services contract files for review during our fieldwork in Iraq and  Afghanistan. For the most part, we determined that the contracts or task  orders we reviewed had been appropriately reported by the agencies as  being within our scope. When we noted discrepancies, we gathered  additional information about contracts or task orders reported by the  agencies, and if we determined that a contract or task order was not  within our scope, we removed it from our analysis.
We attempted to identify additional contracts or task orders within our  scope by reviewing data from the Federal Procurement Data System –  Next Generation (FPDS-NG) and data provided to GAO by these agencies  for a related engagement. Specifically, for both sources of data, we used a  list of keywords related to contract and grant administration to search for  contracts or task orders not reported by the agencies that might be within  our scope. When we identified such contracts or task orders, we followed  up with the agencies to obtain contract documents and additional  information from knowledgeable officials as necessary to determine  whether the contracts or task orders were within our scope. If we  determined that the contracts or task orders were within our scope, we  added them to our analysis. In total, we added 62 contracts or task orders  as a result of our data reliability reviews. Although we found that the  agencies’ data were incomplete based on these additional contracts and  task orders we identified, we determined that taken collectively, data  provided by the agencies and data on the contracts and task orders we  identified and included in our scope were sufficiently reliable to establish  the minimum number of contracts and task orders active in fiscal year  2008 or the first half of fiscal year 2009 awarded by DOD, State, and USAID  to perform the functions within our scope.
For the contracts and task orders within our scope, we also obtained data  from FPDS-NG or the agencies on the total obligations for the contracts or  task orders through March 31, 2009. To assess the reliability of the  obligation data from FPDS-NG, we compared them with related data from  our contract file reviews for the nonpersonal services contracts we  selected as case studies. In two cases at USAID, we identified  discrepancies. In these cases, we followed up with the agency to  determine the reasons for the discrepancies and made corrections as  necessary. We determined that the data were sufficiently reliable for the  purposes of our review, although obligations for some USAID contracts in  Afghanistan may be underreported in FPDS-NG because of discrepancies  between USAID information systems and FPDS-NG. State and USAID  obligations for personal services contracts were generally not included in  FPDS-NG, so we obtained obligation data from the agencies for these  contracts. We assessed the reliability of the data provided by the agencies  by comparing them to related data we collected during our file reviews for  the personal services contracts we selected as case studies. Based on this  assessment, we determined that the data were sufficiently reliable for the  purposes of our review. We were unable to determine how much of the  amount obligated by the agencies on the contracts or task orders within  our scope was specifically obligated for the performance of contract or  grant administration functions in Iraq or Afghanistan. Some of the  contracts or task orders included the performance of functions besides  contract or grant administration or the performance of administration  functions for contracts or grants with performance outside of Iraq and  Afghanistan, but FPDS-NG and agency obligation data were not detailed  enough to allow us to isolate the amount obligated for other functions or  locations.
To gather information about the reasons behind decisions to use  contractors to perform functions within our scope, we purposefully  selected 13 personal services contracts and 19 nonpersonal services  contracts at DOD, State, and USAID for case studies to provide a cross  section of types of contracts, locations, and functions performed. For  these case studies, we conducted fieldwork in Iraq, Afghanistan, and the  United States. We reviewed available documentation of agencies’  justifications for using contractors, such as acquisition strategies and  relevant determinations and findings for the contracts we selected. We  also interviewed agency officials, such as contracting officers, program  managers, and contracting officers’ representatives (COR), about the  reasons for using contractors to perform contract or grant administration  functions. To determine the extent to which agencies had developed  strategies to inform decisions about the use of contractors to perform  these functions, we reviewed agency workforce planning documents, such  as strategic human capital plans. We also analyzed relevant guidance,  including DOD Instruction 1100.22, Guidance for Determining Workforce  Mix, and Office of Management and Budget and DOD guidance related to  insourcing, and reviewed our prior work on the inclusion of contractors in  workforce planning. Further, we interviewed knowledgeable agency  officials about steps taken to include contractors in agency workforce  planning efforts.
To assess the agencies’ consideration and mitigation of conflict of interest  and oversight risks related to contractors performing contract or grant  administration functions, we reviewed relevant federal regulations and  agency policy and analyzed data collected through the case studies we  conducted. Specifically, to determine the steps taken by the agencies to  address risks related to potential organizational and personal conflicts of  interest, we analyzed contract clauses and other contract documentation  relevant to conflicts of interest. To determine the steps taken by the  agencies to address risks related to oversight, we analyzed relevant  contract documentation, such as COR appointment letters, surveillance or  contract administration plans, and documentation of the consideration of  whether contractors closely supported inherently governmental functions  when available. To gain additional insight into how potential conflict of  interest and oversight risks were addressed by the agencies, we  interviewed agency officials responsible for contracting policy as well as  officials such as contracting officers, CORs, and program officials  responsible for the contracts we selected as case studies. Our review did  not assess the effectiveness of contractors performing contract or grant  administration functions for other contracts or grants.
We conducted this performance audit from February 2009 through April  2010 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: Summary of Agency Contracts and Task Orders
paragraphs: DOD, State, and USAID relied on contractors to perform a wide range of  administration functions for contracts and grants with performance in Iraq  and Afghanistan. Our review found 223 contracts and task orders active  during fiscal year 2008 or the first half of fiscal year 2009 that included the  performance of administration functions for other contracts or grants in  Iraq and Afghanistan. Tables 7, 8, and 9 provide more details about these  contracts and task orders.
section_title: Appendix III: Comments from the Department of State
paragraphs: The following are GAO’s supplemental comments on the Department of  State’s letter dated April 2, 2010.
subsections: section_title: GAO Comments
paragraphs: 1. State’s comments raised an issue about whether there was a need for  additional regulatory guidance to help determine the scope of ethics  obligations applicable to all executive branch personal services  contractors. As we focused on DOD, State, and USAID, whether there is a  need for consistent guidance across the executive branch was beyond the  scope of this work.   .
section_title: Appendix IV: Comments from the U.S. Agency for International Development
paragraphs: The following are GAO’s supplemental comments on the U.S. Agency for  International Development’s letter dated April 8, 2010.
subsections: section_title: GAO Comments
paragraphs: 1. We have revised table 2 to reflect USAID’s comments.  2. As noted in the report, we consider contractors responsible for assisting  in the award of grants as closely supporting an inherently governmental  function. USAID’s Automated Directives System provides guidance on the  use of contractors to award grants on behalf of USAID. We have reflected  this guidance in the final report.
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: John P. Hutton, (202) 512-4841 or huttonj@gao.gov.
section_title: Acknowledgments
paragraphs: In addition to the contact named above, Timothy DiNapoli, Assistant  Director; Johana R. Ayers; Shea Bader; Noah Bleicher; John C. Bumgarner;  Morgan Delaney Ramaker; Kathryn M. Edelman; Walker Fullerton;  Katherine Hamer; Art James, Jr.; Justin M. Jaynes; Julia Kennon; Anne  McDonough-Hughes; Christopher J. Mulkins; Jason Pogacnik; Thomas P.  Twambly; and Gwyneth B. Woolwine made key contributions to this  report.