Civilian Intelligence Community: Additional Actions Needed to Improve Reporting on and Planning for the Use of Contract Personnel
Published: 2014-02-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The IC uses core contract personnel to augment its workforce. These contractors typically work alongside government personnel and perform staff-like work. Some core contract personnel require enhanced oversight because they perform services that could significantly influence the government's decision making.
In September 2013, GAO issued a classified report that addressed (1) the extent to which the eight civilian IC elements use core contract personnel, (2) the functions performed by these personnel and the reasons for their use, and (3) whether the elements developed policies and strategically planned for their use. GAO reviewed and assessed the reliability of the elements' core contract personnel inventory data for fiscal years 2010 and 2011, including reviewing a nongeneralizable sample of 287 contract records. GAO also reviewed agency acquisition policies and workforce plans and interviewed agency officials. In January 2014, GAO issued an unclassified version of the September 2013 report, GAO-14-204 . This statement is based on the information in the unclassified GAO report.
section_title: What GAO Found
paragraphs: Limitations in the intelligence community's (IC) inventory of contract personnel hinder the ability to determine the extent to which the eight civilian IC elements—the Central Intelligence Agency (CIA), Office of the Director of National Intelligence (ODNI), and six components within the Departments of Energy, Homeland Security, Justice, State, and the Treasury—use these personnel. The IC Chief Human Capital Officer (CHCO) conducts an annual inventory of core contract personnel that includes information on the number and costs of these personnel. However, GAO identified a number of limitations in the inventory that collectively limit the comparability, accuracy, and consistency of the information reported by the civilian IC elements as a whole. For example, changes to the definition of core contract personnel limit the comparability of the information over time. In addition, the civilian IC elements used various methods to calculate the number of contract personnel and did not maintain documentation to validate the number of personnel reported for 37 percent of the records GAO reviewed. GAO also found that the civilian IC elements either under- or over-reported the amount of contract obligations by more than 10 percent for approximately one-fifth of the records GAO reviewed. Further, IC CHCO did not fully disclose the effects of such limitations when reporting contract personnel and cost information to Congress, which limits its transparency and usefulness.
The civilian IC elements used core contract personnel to perform a range of functions, such as information technology and program management, and reported in the core contract personnel inventory on the reasons for using these personnel. However, limitations in the information on the number and cost of core contract personnel preclude the information on contractor functions from being used to determine the number of personnel and their costs associated with each function. Further, civilian IC elements reported in the inventory a number of reasons for using core contract personnel, such as the need for unique expertise, but GAO found that 40 percent of the contract records reviewed did not contain evidence to support the reasons reported.
Collectively, CIA, ODNI, and the departments responsible for developing policies to address risks related to contractors for the other six civilian IC elements have made limited progress in developing those policies, and the civilian IC elements have generally not developed strategic workforce plans that address contractor use. Only the Departments of Homeland Security and State have issued policies that generally address all of the Office of Federal Procurement Policy's requirements related to contracting for services that could affect the government's decision-making authority. In addition, IC CHCO requires the elements to conduct strategic workforce planning but does not require the elements to determine the appropriate mix of government and contract personnel. Further, the inventory does not provide insight into the functions performed by contractors, in particular those that could inappropriately influence the government's control over its decisions. Without complete and accurate information in the inventory on the extent to which contractors are performing specific functions, the elements may be missing an opportunity to leverage the inventory as a tool for conducting strategic workforce planning and for prioritizing contracts that may require increased management attention and oversight.
section_title: What GAO Recommends
paragraphs: In the September 2013 and January 2014 reports, GAO recommended that IC CHCO take several actions to improve the inventory data's reliability, revise strategic workforce planning guidance, and develop ways to identify contracts for services that could affect the government's decision-making authority. IC CHCO generally agreed with GAO's recommendations.

section_title: Letter
paragraphs: I am pleased to be here today as you examine the use of contractors by  the civilian intelligence community (IC). Like other federal agencies, the  eight agencies or departmental offices that make up the civilian IC have  long relied on contractors to support their missions. For the purposes of  this statement, I will refer to these agencies or departmental offices as the  civilian IC elements. While the use of contractors can provide flexibility to  meet immediate needs and obtain unique expertise, their use can also  introduce risks for the government to consider and manage. In that  regard, the IC has focused considerable attention on identifying and  managing their use of “core contract personnel,” who provide a range of  direct technical, managerial, and administrative support functions to the  IC. As part of its efforts, since fiscal year 2007, the IC Chief Human  Capital Officer (IC CHCO) annually conducts an inventory of these  personnel, including information on the number and costs of contractor  personnel and the services they provide. These contractors typically work  alongside government personnel, augment the workforce, and perform  staff-like work. Core contract personnel perform the types of services that  may also affect an element’s decision-making authority. Without proper  management and oversight, such services risk inappropriately influencing  the government’s control over and accountability for decisions that may  be supported by contractors’ work.
At the request of this committee, in September 2013, we issued a  classified report that addressed (1) the extent to which the eight civilian IC  elements rely on core contract personnel, (2) the functions performed by  core contract personnel and the factors that contribute to their use, and  (3) whether the civilian IC elements have developed policies and  guidance and strategically planned for their use of contract personnel to  mitigate related risks. Last month, we issued an unclassified version of  that report that omits sensitive or classified information, such as the  number and associated costs of core contract personnel.today is based on the information contained in the unclassified report.
To address these three issues, we reviewed and assessed the reliability  of the eight civilian IC elements’ core contract personnel inventory data  for fiscal years 2010 and 2011, including reviewing a nongeneralizable  sample of 287 contract records.  We originally planned to review fiscal  years 2007 through 2011 inventory data. However, we could not conduct  a reliability assessment of the data for fiscal years 2007 through 2009 due  to a variety of factors. These factors include civilian IC element officials’  stating that they could not locate records of certain years’ submissions or  that obtaining the relevant documentation would require an unreasonable  amount of time. As a result, we generally focused our review on data from  fiscal years 2010 and 2011. We also reviewed relevant IC CHCO  guidance and documents and interviewed agency officials responsible for  compiling and processing the data. We also reviewed agency acquisition  policies and guidance, workforce planning documents, and strategic  planning tools. We also interviewed human capital, procurement, or  program officials at each civilian IC element. We compared the plans,  guidance, and tools to Office of Management and Budget (OMB)  guidance that address risks related to contracting for work closely  supporting inherently governmental and critical functions, including Office  of Federal Procurement Policy’s (OFPP) September 2011 Policy Letter  11-01, Performance of Inherently Governmental and Critical Functions;  OMB’s July 2009 Memorandum, Managing the Multisector Workforce;  and OMB’s November 2010 and December 2011 memoranda on service  contract inventories. Further, we compared the civilian IC elements’  efforts to strategic human capital best practices identified in our prior  work. The work this statement is based on was performed in accordance  with generally accepted government auditing standards. Our unclassified  report provides further details on our scope and methodology.
subsections: section_title: Limitations in the Inventory Undermine Ability to Determine Extent of Civilian IC Elements’ Reliance on Contractors
paragraphs: Limitations in the core contract personnel inventory hinder the ability to  determine the extent to which the eight civilian IC elements used these  personnel in 2010 and 2011 and to identify how this usage has changed  over time. IC CHCO uses the inventory information in its statutorily- mandated annual personnel assessment to compare the current and  projected number and costs of core contract personnel to the number and   IC CHCO reported that the number of core  costs during the prior 5 years.contract personnel full-time equivalents (FTEs) and their associated costs  declined by nearly one-third from fiscal year 2009 to fiscal year 2011.  However, we found a number of limitations with the inventory, including  changes to the definition of core contract personnel, the elements’ use of  inconsistent methodologies and a lack of documentation for calculating  FTEs, and errors in reporting contract costs. On an individual basis, some  of the limitations we identified may not raise significant concerns. When  taken together, however, they undermine the utility of the information for  determining and reporting on the extent to which the civilian IC elements  use core contract personnel. Additionally, IC CHCO did not clearly explain  the effect of the limitations when reporting the information to Congress.
We identified several issues that limit the comparability, accuracy, and  consistency of the information reported by the civilian IC elements as a  whole including:
Changes to the definition of core contract personnel. To address  concerns that IC elements were interpreting the definition of core  contract personnel differently and to improve the consistency of the  information in the inventory, IC CHCO worked with the elements to  develop a standard definition that was formalized with the issuance of  Intelligence Community Directive (ICD) 612 in October 2009. Further,  IC CHCO formed the IC Core Contract Personnel Inventory Control  Board, which has representatives from all of the IC elements, to  provide a forum to resolve differences in the interpretation of IC  CHCO’s guidance for the inventory. As a result of the board’s efforts,  IC CHCO provided supplemental guidance in fiscal year 2010 to  either include or exclude certain contract personnel, such as those  performing administrative support, training support, and information  technology services. While these changes were made to—and could  improve—the inventory data, it is unclear the extent to which the  definitional changes contributed to the reported decrease in the  number of core contract personnel and their associated costs from  year to year. For example, for fiscal year 2010, officials from one  civilian IC element told us they stopped reporting information  technology help desk contractors, which had been previously  reported, to be consistent with IC CHCO’s revised definition. One of  these officials stated consequently that the element’s reported  reduction in core contract personnel between fiscal years 2009 and  2010 did not reflect an actual change in their use of core contract  personnel, but rather a change in how core contract personnel were  defined for the purposes of reporting to IC CHCO. However, IC CHCO  included this civilian IC element’s data when calculating the IC’s  overall reduction in number of core contract personnel between fiscal  years 2009 and 2011 in its briefing to Congress and the personnel  level assessment. IC CHCO explained in both documents that this  civilian IC element’s rebaselining had an effect on the element’s  reported number of contractor personnel for fiscal year 2010 but did  not explain how this would limit the comparability of the number and  costs of core contract personnel for both this civilian IC element and  the IC as a whole.
Inconsistent methodologies for determining FTEs. The eight  civilian IC elements used significantly different methodologies when  determining the number of FTEs. For example, some civilian IC  elements estimated contract personnel FTEs using target labor hours  while other civilian IC elements calculated the number of FTEs using  the labor hours invoiced by the contractor. As a result, the reported  numbers were not comparable across these elements. The IC CHCO  core contract personnel inventory guidance for both fiscal years 2010  and 2011 did not specify appropriate methodologies for calculating  FTEs, require IC elements to describe their methodologies, or require  IC elements to disclose any associated limitations with their  methodologies. Depending on the methodology used, an element  could calculate a different number of FTEs for the same contract. For  example, for one contract we reviewed at a civilian IC element that  reports FTEs based on actual labor hours invoiced by the contractor,  the element reported 16 FTEs for the contract. For the same contract,  however, a civilian IC element that uses estimated labor hours at the  time of award would have calculated 27 FTEs. IC CHCO officials  stated they had discussed standardizing the methodology for  calculating the number of FTEs with the IC elements but identified  challenges, such as identifying a standard labor-hour conversion  factor for one FTE. IC CHCO guidance for fiscal year 2012 instructed  elements to provide the total number of direct labor hours worked by  the contract personnel to calculate the number of FTEs for each  contract, as opposed to allowing for estimates, which could improve  the consistency of the FTE information reported across the IC.
Lack of documentation for calculating FTEs. Most of the civilian IC  elements did not maintain readily available documentation of the  information used to calculate the number of FTEs reported for a  significant number of the records we reviewed. As a result, these  elements could not easily replicate the process for calculating or  validate the reliability of the information reported for these records.  Federal internal control standards call for appropriate documentation   For 37  to help ensure the reliability of the information reported.percent of the 287 records we reviewed, however, we could not  determine the reliability of the information reported.
Inaccurately determined contract costs. We could not reliably  determine the costs associated with core contract personnel, in part  because our analysis identified numerous discrepancies between the  amount of obligations reported by the civilian IC elements in the  inventory and these elements’ supporting documentation for the  records we reviewed. For example, we found that the civilian IC  elements either under- or over-reported the amount of contract  obligations by more than 10 percent for approximately one-fifth of the  287 records we reviewed. Further, the IC elements could not provide  complete documentation to validate the amount of reported  obligations for another 17 percent of the records we reviewed. Civilian  IC elements cited a number of factors that may account for the  discrepancies, including the need to manually enter obligations for  certain contracts or manually delete duplicate contracts. Officials from  one civilian IC element noted that a new contract management  system was used for reporting obligations in the fiscal year 2011  inventory, which offered greater detail and improved functionality for  identifying obligations on their contracts; however, we still identified  discrepancies in 18 percent of this element’s reported obligations in  fiscal year 2011 for the records in our sample.
In our September 2013 report, we recommended that IC CHCO clearly  specify limitations, significant methodological changes, and their  associated effects when reporting on the IC’s use of core contract  personnel. We also recommended that IC CHCO develop a plan to  enhance internal controls for compiling the core contract personnel  inventory. IC CHCO agreed with these recommendations and described  steps it was taking to address them. Specifically, IC CHCO stated it will  highlight all adjustments to the data over time and the implications of  those adjustments in future briefings to Congress and OMB. In addition,  IC CHCO stated it has added requirements for the IC elements to include  the methodologies used to identify and determine the number of core  contract personnel and their steps for ensuring the accuracy and  completeness of the data.
section_title: Inventory Provides Limited Insight into Functions Performed by Contractors and Reasons for Their Use
paragraphs: The civilian IC elements have used core contract personnel to perform a  range of functions, including human capital, information technology,  program management, administration, collection and operations, and  security services, among others. However, the aforementioned limitations  we identified in the obligation and FTE data precluded us from using the  information on contractor functions to determine the number of personnel  and their costs associated with each function category. Further, the  civilian IC elements could not provide documentation for 40 percent of the  contracts we reviewed to support the reasons they cited for using core  contract personnel.
As part of the core contract personnel inventory, IC CHCO collects  information from the elements on contractor-performed functions using  the primary contractor occupation and competency expertise data field.  An IC CHCO official explained that this data field should reflect the tasks  performed by the contract personnel. IC CHCO’s guidance for this data  field instructs the IC elements to select one option from a list of over 20  broad categories of functions for each contract entry in the inventory.  Based on our review of relevant contract documents, such as statements  of work, we were able to verify the categories of functions performed for  almost all of the contracts we reviewed, but we could not determine the  extent to which civilian IC elements contracted for these functions. For  example, we were able to verify for one civilian IC element’s contract that  contract personnel performed functions within the systems engineering  category, but we could not determine the number of personnel dedicated  to that function because of unreliable obligation and FTE data.
Further, the IC elements often lacked documentation to support why they  used core contract personnel. In preparing their inventory submissions, IC  elements can select one of eight options for why they needed to use  contract personnel, including the need to provide surge support for a  particular IC mission area, insufficient staffing resources, or to provide  unique technical, professional, managerial, or intellectual expertise to the  IC element that is not otherwise available from U.S. governmental civilian  or military personnel. However, for 81 of the 102 records in our sample  coded as unique expertise, we did not find evidence in the statements of  work or other contract documents that the functions performed by the  contractors required expertise not otherwise available from U.S.  government civilian or military personnel. For example, contracts from  one civilian IC element coded as unique expertise included services for  conducting workshops and analysis, producing financial statements, and  providing program management. Overall, the civilian IC elements could  not provide documentation for 40 percent of the 287 records we reviewed.
section_title: Limited Progress Has Been Made in Developing Policies and Strategies on Contractor Use to Mitigate Risks
paragraphs: CIA, ODNI, and the executive departments that are responsible for  developing policies to address risks related to contractors for the six  civilian IC elements within those departments have generally made  limited progress in developing such policies. Further, the eight civilian IC  elements have generally not developed strategic workforce plans that  address contractor use and may be missing opportunities to leverage the  inventory as a tool for conducting strategic workforce planning and for  prioritizing contracts that may require increased management attention  and oversight.
By way of background, federal acquisition regulations state that certain  functions government agencies perform, such as setting agency policy  and issuing regulations, are inherently governmental and must be  performed by federal employees. In some cases, contractors perform  functions closely associated with the performance of inherently  governmental functions. For example, contractors performing certain  intelligence analysis activities may closely support inherently  governmental functions. For more than 20 years, OMB procurement  policy has indicated that agencies should provide a greater degree of  scrutiny when contracting for services that closely support inherently  governmental functions. The policy directs agencies to ensure that they  maintain sufficient government expertise to manage the contracted work.  The Federal Acquisition Regulation also addresses the importance of  management oversight associated with contractors providing services  that have the potential to influence the authority, accountability, and  responsibilities of government employees.
Our prior work has examined reliance on contractors and the mitigation of  related risks at the Department of Defense, Department of Homeland  Security, and several other civilian agencies and found that they generally  did not fully consider and mitigate risks of acquiring services that may  inform government decisions.
Within the IC, core contract personnel perform the types of functions that  may affect an IC element’s decision-making authority or control of its  mission and operations. While core contract personnel may perform  functions that closely support inherently governmental work, these  personnel are generally prohibited from performing inherently  governmental functions. Figure 1 illustrates how the risk of contractors  influencing government decision making is increased as core contract  personnel perform functions that closely support inherently governmental  functions.
More recently, OFPP’s September 2011 Policy Letter 11-01 builds on  past federal policies by including a detailed checklist of responsibilities  that must be carried out when agencies rely on contractors to perform  services that closely support inherently governmental functions. The  policy letter requires executive branch departments and agencies to  develop and maintain internal procedures to address the requirements of  the guidance. OFPP, however, did not establish a deadline for when  agencies need to complete these procedures. In 2011, when we reviewed  civilian agencies’ efforts in managing service contracts, we concluded that  a deadline may help better focus agency efforts to address risks and  therefore recommended that OFPP establish a near-term deadline for  agencies to develop internal procedures, including for services that  closely support inherently governmental functions. OFPP generally  concurred with our recommendation and commented that it would likely  establish time frames for agencies to develop the required internal  procedures, but it has not yet done so.
In our September 2013 report, we found that CIA, ODNI, and the  departments of the other civilian IC elements had not fully developed  policies that address risks associated with contractors closely supporting  inherently governmental functions. DHS and State had issued policies  and guidance that addressed generally all of OFPP Policy Letter 11-01’s  requirements related to contracting for services that closely support  inherently governmental functions. However, the Departments of Justice,  Energy, and Treasury; CIA; and ODNI were in various stages of  developing required internal policies to address the policy letter. Civilian  IC element and department officials cited various reasons for not yet  developing policies to address all of the OFPP policy letter’s  requirements. For example, Treasury officials stated that the OFPP policy  letter called for dramatic changes in agency procedures and thus elected  to conduct a number of pilots before making policy changes.
We also found that decisions to use contractors were not guided by  strategies on the appropriate mix of government and contract personnel.  OMB’s July 2009 memorandum on managing the multisector workforce  and our prior work on best practices in strategic human capital  management have indicated that agencies’ strategic workforce plans  should address the extent to which it is appropriate to use contractors.Specifically, agencies should identify the appropriate mix of government  and contract personnel on a function-by-function basis, especially for  critical functions, which are functions that are necessary to the agency to  effectively perform and maintain control of its mission and operations. The  OMB guidance requires an agency to have sufficient internal capability to  control its mission and operations when contracting for these critical  functions. While IC CHCO requires IC elements to conduct strategic  workforce planning, it does not require the elements to determine the  appropriate mix of personnel either generally or on a function-by-function  basis. ICD 612 directs IC elements to determine, review, and evaluate the  number and uses of core contract personnel when conducting strategic  workforce planning but does not reference the requirements related to  determining the appropriate workforce mix specified in OMB’s July 2009  memorandum or require elements to document the extent to which  contractors should be used. As we reported in September 2013, the  civilian IC elements’ strategic workforce plans generally did not address  the extent to which it is appropriate to use contractors, either in general or  more specifically to perform critical functions. For example, ODNI’s 2012- 2017 strategic human capital plan outlines the current mix of government  and contract personnel by five broad function types: core mission,  enablers, leadership, oversight, and other. The plan, however, does not  elaborate on what the appropriate mix of government and contract  personnel should be on a function-by-function basis. In August 2013,  ODNI officials informed us they are continuing to develop documentation  to address a workforce plan.
Lastly, the civilian IC elements’ ability to use the inventory for strategic  planning is hindered by limited information on contractor functions.  OFPP’s November 2010 memorandum on service contract inventories  indicates that a service contract inventory is a tool that can assist an  agency in conducting strategic workforce planning. Specifically, an  agency can gain insight into the extent to which contractors are being  used to perform specific services by analyzing how contracted resources,  such as contract obligations and FTEs, are distributed by function across  an agency. The memorandum further indicates that this insight is  especially important for contracts whose performance may involve critical  functions or functions closely associated with inherently governmental  functions. When we met with OFPP officials during the course of our  work, they stated that the IC’s core contract personnel inventory serves  this purpose for the IC and, to some extent, follows the intent of the  service contract inventories guidance to help mitigate risks. OFPP  officials stated that IC elements are not required to submit separate  service contract inventories that are required of the civilian agencies and  DOD, in part because of the classified nature of some of the contracts.  The core contract personnel inventory, however, does not provide the  civilian IC elements with detailed insight into the functions their  contractors are performing or the extent to which contractors are used to  perform functions that are either critical to support their missions or  closely support inherently governmental work. In our September 2013  report, we concluded that without complete and accurate information in  the core contract personnel inventory on the extent to which contractors  are performing specific functions, the civilian IC elements may be missing  an opportunity to leverage the inventory as a tool for conducting strategic  workforce planning and for prioritizing contracts that may require  increased management attention and oversight.
In our September 2013 report, we recommended that the Departments of  Justice, Energy, and Treasury; CIA; and ODNI set time frames for  developing guidance that would fully address OFPP Policy Letter 11-01’s  requirements related to closely supporting inherently governmental  functions. These agencies did not comment on our recommendation, and  we will continue to follow up with them to identify what actions, if any, they  are taking to address our recommendation. To improve the ability of the  civilian IC elements to strategically plan for their contractors and mitigate  associated risks, we also recommended that IC CHCO revise ICD 612 to  require IC elements to identify their assessment of the appropriate  workforce mix on a function-by-function basis, assess how the core  contract personnel inventory could be modified to provide better insights  into the functions performed by contractors, and require the IC elements  to identify contracts within the inventory that include services that are  critical or closely support inherently governmental functions. IC CHCO  generally agreed with these recommendations and indicated it would  explore ways to address the recommendations.
In conclusion, IC CHCO and the civilian IC elements recognize that they  rely on contractors to perform functions essential to meeting their  missions. To effectively leverage the skills and capabilities that  contractors provide while managing the government’s risk, however,  requires agencies to have the policies, tools, and data in place to make  informed decisions. OMB and OFPP guidance issued over the past  several years provide a framework to help assure that agencies  appropriately identify, manage and oversee contractors supporting  inherently governmental functions, but we found that CIA, ODNI, and  several of the departments in our review still need to develop guidance to  fully implement them. Similarly, the core contract personnel inventory can  be one of those tools that help inform strategic workforce decisions, but at  this point the inventory has a number of data limitations that undermines  its utility. IC CHCO has recognized these limitations and, in conjunction  with the IC elements, has already taken some actions to improve the  inventory’s reliability and has committed to doing more. Collectively,  incorporating needed changes into agency guidance and improving the  inventory’s data and utility, as we recommended, should better position  the IC CHCO and the civilian IC elements to make more informed  decisions.
Chairman Carper, Ranking Member Coburn, and Members of the  Committee, this concludes my prepared remarks. I would be happy to  answer any questions that you may have.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For questions about this statement, please contact Timothy DiNapoli at  (202) 512-4841, or at dinapolit@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this testimony  include Molly W. Traci, Assistant Director; Claire Li; and Kenneth E.  Patton.
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