DOD Contracted Services: Long-Standing Issues Remain about Using Inventory for Management Decisions
Released: 2018-03-29T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: DOD obligated about $150 billion on contracted services—such as information technology support and maintenance of defense facilities—in fiscal year 2016. DOD has faced long-standing challenges in effectively managing its service acquisitions.

The National Defense Authorization Act for Fiscal Year 2017 amended existing requirements for DOD to annually collect data on contracted services and to compile and review an inventory of the functions performed by contractor personnel. The Act also contained a provision for GAO to report on the status of this data collection and to assess DOD's use of the inventory. This report addresses how DOD (1) collected data to create an inventory of fiscal year 2016 contracted services and (2) used the inventory to inform workforce planning, workforce mix, and budget decisions. GAO has reported on DOD's inventory of contracted services since 2010.

GAO reviewed OSD and the military departments' guidance, as well as the military departments' inventory submissions to OSD. GAO also analyzed contracted services data and interviewed OSD and military department officials.

section_title: What GAO Found
paragraphs: GAO found that the Department of Defense (DOD) used the same sources as it did in prior years to collect data and create an inventory of fiscal year 2016 contracted services, which is intended, in part, to help DOD make more strategic workforce decisions and better align resources. Office of the Secretary of Defense (OSD) guidance, issued in September 2017 to implement congressional direction, required the military departments to include in their submissions, at a minimum, purchases of services with a total contract value of $3 million or more, and in four services acquisition portfolio groups—logistics management, equipment-related, knowledge-based, and electronics and communications.

As permitted under OSD's inventory guidance, the military departments varied somewhat in how they reported their contracted services data to OSD. For example, the Army and Air Force included purchases both over and under $3 million and the Air Force also identified purchases by the four portfolio groups. The Navy submitted summary data of contracted services but did not provide a list of purchases in time to be included in an inventory summary for Congress. An OSD official said, however, that the information provided was sufficient to prepare the inventory summary, which OSD submitted to Congress in February 2018. The Navy subsequently provided a list of its fiscal year 2016 service purchases to OSD in March 2018.

Military departments generally have not developed plans to use the inventory for workforce and budget decisions, as statutorily required. This is consistent with what GAO found in November 2014 and October 2016. GAO's analysis found that the military departments' guidance generally does not require using the inventory in workforce and budget decisions (see table).

Army manpower officials told GAO that inventory information such as the number of contractor full-time equivalents and the functions performed can be used to inform workforce mix decisions. However, workforce and budget officials at the Army, Navy, and Air Force stated they make limited use of the inventory to inform decision-making, in part because by the time the inventory is available, the data reflected are often too outdated to inform strategic decisions. GAO has previously recommended ways to improve use of the inventory. In November 2014, for example, GAO found that a lack of officials at the military departments who are accountable for integrating the use of the inventory leaves the department at continued risk of not complying with the legislative requirement to use the inventory to support management decisions. This issue persists, as the military departments have not made final designations for accountable officials responsible for developing plans and enforcement mechanisms to use the inventory.

section_title: What GAO Recommends
paragraphs: GAO is not making new recommendations in this report. Seven of 18 prior GAO recommendations related to the inventory remain open, including a recommendation for DOD to identify officials at the military departments responsible for developing plans and enforcement mechanisms to use the inventory. In its comments, DOD stated it is committed to improving its inventory processes.

section_title: Letter
paragraphs: The Department of Defense (DOD) is the federal government’s largest  purchaser of contractor-provided services, which obligated about $150  billion on contracted services in fiscal year 2016. DOD relies on  contractors to provide a wide array of services, including support for  management, information technology, and weapon systems. There are  benefits to using contractors to perform services for the government, but  the government can become overly reliant on contractors and risk  contractors performing inherently governmental functions. This risk is  increased for certain types of services, including program evaluation,  systems engineering, and information technology support services, as the  Office of Federal Procurement Policy and our prior work has found.

Beginning in 2001, Congress enacted legislation to improve DOD’s ability  to manage its acquisitions of contracted services, to make more strategic  decisions about the appropriate workforce mix, and to better align  resource needs through the budget process to achieve that mix. As part  of these efforts, section 2330a of title 10 of the U.S. Code requires DOD  to conduct certain activities, including: establishing a data collection system to provide management  information with regard to service purchases by the military  departments and defense agencies; and annually compiling an inventory of services contracted for or on behalf  of DOD during the preceding fiscal year. This inventory is intended, in  part, to help provide better insight into the number of contractor full- time equivalents (FTE) providing services to the department and the  functions they are performing.

Further, this section requires the military departments and defense  agencies to undertake certain actions using the inventory, including:  reviewing the contracts and activities in the inventory for which the  secretary or agency head is responsible to ensure that personal  services contracts in the inventory are performed under applicable  statutes and regulations and to identify contracted functions that DOD  should consider for conversion to government performance, also  known as insourcing; and developing a plan, including an enforcement mechanism and approval  process, to use the inventory for strategic workforce planning,  workforce mix determinations, and budget decisions.

Section 812 of the National Defense Authorization Act (NDAA) for Fiscal  Year 2017 amended these requirements by changing the scope of the  data to be collected and the type of activities to be reported to Congress.  Specifically, section 812 increased the minimum value of service  purchases for which information is to be collected from those in excess of  $150,000 to those in excess of $3 million, reduced the types of services  included, and changed DOD’s reporting requirements. Section 812 also  contained a provision for us to report on the status of data collection and  assess DOD’s efforts to develop a plan and enforcement mechanism to  use the inventory. This report addresses how DOD (1) collected data on  its service purchases to create an inventory of fiscal year 2016 contracted  services and (2) used the inventory to inform workforce planning,  workforce mix, and budget decisions.

To determine how DOD collected data to create an inventory of fiscal  year 2016 contracted services (fiscal year 2016 inventory), we reviewed  relevant legislation and the Office of the Secretary of Defense’s (OSD)  Fiscal Year 2016 Guidance Related to the Inventory and Tracking of  Contracted Services (OSD’s inventory guidance), issued in September  2017. We focused on the fiscal year 2016 inventory because it was the  most recent inventory at the time of our review and is the inventory to  which the September 2017 guidance pertains. We interviewed officials at  the Under Secretary of Defense offices for Personnel and Readiness  (USD(P&R)); Acquisition, Technology, and Logistics (USD(AT&L)); and  the Under Secretary of Defense (Comptroller) about their roles in  establishing OSD’s inventory guidance for fiscal year 2016 and other  aspects of the inventory process. We focused our review of the process  for compiling data for the inventory on the military departments because  they represented about 79 percent of overall service contract obligations  in fiscal year 2016, though other DOD components, such as combatant  commands and defense agencies, are also responsible for creating  inventories under OSD’s inventory guidance. We interviewed officials at  the military departments—Army, Navy, and Air Force—to understand  their approach to collecting contracted services data, including their use  of data systems, and compiling their inventories.

To understand the potential impact on data collection of the recent  statutory changes, as implemented in OSD’s inventory guidance, we  reviewed and analyzed information from USD(AT&L)’s Defense  Procurement and Acquisition Policy (DPAP) office. Specifically, we  analyzed the contracted services data from the Federal Procurement  Data System-Next Generation (FPDS-NG) that DPAP posted on its  website in sets showing fiscal year 2016 service purchases before and  after scope changes were applied. To ascertain the reliability of the  data, we replicated USD(AT&L)’s process for extracting data from FPDS- NG based on officials’ descriptions of that process and compared the  results with the data on USD(AT&L)’s website. We found minimal  differences (0.4 percent or less) in the number of and amounts of fiscal  year 2016 obligations for service purchases between the two data sets  and determined the data were reliable for estimating the potential  changes in the amount of data reported. We also reviewed the military  departments’ inventory submissions to OSD to determine how they  incorporated key aspects of OSD’s inventory guidance, such as the dollar  value and types of contracts included.

To determine how DOD used the inventory for workforce planning,  workforce mix, and budget decisions, we updated the information we  collected for our October 2016 report on this issue to establish the extent  to which each military department’s strategic workforce planning,  workforce mix, and budgeting guidance and processes required or cited  the use of the inventory of contracted services, as of February 2018. To  do so, we interviewed and obtained information from manpower and  budget officials at the military departments about the status of their efforts  to develop plans and to use the inventory, confirmed whether the  guidance identified in our October 2016 report remained current as of  February 2018, and, as appropriate, obtained and reviewed any new or  revised guidance issued after our October 2016 report. In responding to  our draft report, the Navy provided additional information about its  guidance in March 2018. In addition, we interviewed USD(P&R),  USD(AT&L), and Comptroller officials regarding their department-wide  perspectives on the utility of the inventory to inform management  decisions.

We conducted this performance audit from June 2017 to March 2018 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.
subsections: section_title: Background
subsections: section_title: Contracted Services Data Collection and Inventory Requirements and Process
paragraphs: In part to improve the information available and management of DOD’s  acquisition of services, Congress enacted section 2330a of title 10 of the  U.S. Code in 2001, which required the Secretary of Defense to establish  a data collection system to provide management information on each  purchase of services by a military department or defense agency.  Congress amended section 2330a in 2008 to add a requirement for the  Secretary of Defense to submit an annual inventory of the activities  performed pursuant to contracts for services on behalf of DOD during the  preceding fiscal year.

The inventory is to include a number of specific data elements for each  identified activity, including:  the function and missions performed by the contractor;  the contracting organization, the military department or defense  agency administering the contract, and the organization whose  requirements are being met through contractor performance of the  function;  the funding source for the contract by appropriation and operating  agency;  the fiscal year the activity first appeared on an inventory;  the number of contractor employees (expressed as FTEs) for direct  labor hours and associated cost data collected from contractors; a determination of whether the contract pursuant to which the activity  is performed is a personal services contract; and a summary of the contracted services data required to be collected in  subsection 2330a(a) of title 10 of the U.S. Code.

The secretaries of the military departments and heads of the defense  agencies are required to review the contracts and activities in the  inventory for which they are responsible to ensure that personal services  contracts were performed appropriately and that the activities listed do  not include inherently governmental functions, among other factors. In  addition, in 2011 Congress amended section 2330a to add a requirement  that the secretaries of the military departments and heads of the defense  agencies develop a plan, including an enforcement mechanism and  approval process, to provide for the use of the inventory by the military department or  defense agency to implement requirements of section 129a of title 10,  U.S. Code (section 129a requires policies and procedures for  determining the appropriate mix of military, civilian, and contractor  personnel to perform DOD’s mission);  facilitate the use of the inventory for compliance with section 235 of  title 10, U.S. Code (section 235 requires budget justification materials  to include the amount requested for procurement of contract services  and the number of full-time contractor employees projected); provide for appropriate consideration of the conversion of activities  identified under section 2463 of title 10, U.S. Code (section 2463  requires procedures to ensure civilian employees are considered for  performing critical functions); and ensure that the inventory is used to inform strategic workforce  planning.

In section 812 of the National Defense Authorization Act for Fiscal Year  2017, enacted in December 2016, Congress further amended section  2330a by reducing the scope of the required data collection, specifying  the type of contracted services to be included in an inventory summary  submitted to Congress, and calling for particular attention to the military  departments’ review of certain high-risk contracts (see table 1).

To address the requirements of section 2330a of title 10, U.S. Code, DOD  is to conduct several key steps for each fiscal year (see table 2).

DOD has submitted to Congress annual, department-wide inventories for  fiscal years 2008 through 2015. As shown in table 2, each inventory is  required to be submitted to Congress by June 30, and is to reflect  activities performed during the preceding fiscal year. DOD has not always  submitted the inventory to Congress on time. For example, DOD was  required to submit the fiscal year 2015 inventory to Congress on June 30,  2016, but did not do so until September 20, 2016. For the inventory of  fiscal year 2016 contracted services, the department submitted its  summary of the inventory to Congress in February 2018.

section_title: Prior GAO Work
paragraphs: Over the past 8 years, we have issued several reports on DOD’s efforts to  compile and review its inventory of contracted services. We have made  18 recommendations, 7 of which are still open, on a variety of issues  related to the inventory. Key findings and recommendations in our prior  work that pertain to this review are included below.

In November 2014, we found the military departments generally had  not developed plans to use the inventory to facilitate DOD’s workforce  planning, workforce mix, and budget decision-making processes, and  that numerous offices were responsible for the various decision- making processes at the military departments. This, in turn, left the  department at risk of not complying with legislative requirements. We  recommended that secretaries of the military departments identify an  accountable official within their departments with responsibility for  leading and coordinating efforts across their manpower, budgeting,  and acquisition functional communities, and, as appropriate, revise  guidance, develop plans and enforcement mechanisms, and establish  processes. DOD concurred with the recommendation, but as of  January 2018, the Army and Navy still had not identified accountable  officials. The Air Force has identified an interim accountable official in  its Program Executive Office for Combat and Mission Support,  according to an Air Force official.

In November 2015, we found that DOD’s effort to establish an office to  implement and support a common, enterprise-wide contractor  manpower data system had encountered a number of challenges and  lacked clearly defined roles and responsibilities for the office. DOD  had not outlined the relationships between the support office, military  departments, and other stakeholders in exploring the longer-term  solution to collect contractor manpower data and integrate inventory  data within the military departments’ decision-making processes. We  recommended DOD clearly identify the longer-term relationships  between the support office, military departments, and other  stakeholders. DOD concurred and has since stood up the support  office (now called the Total Force Management Support Division) and  implemented the Enterprise-wide Contractor Manpower Reporting  Application (ECMRA) department-wide. However, DOD has not yet  fully identified longer-term relationships. By doing so, DOD would help  ensure that efforts to integrate contracted services data into decision- making processes will meet user needs and expectations.

Most recently, in October 2016, we found that DOD components  (which include the military departments) continued to improve their  reviews of the inventory compared to prior years, but that they may  continue to underreport contractors providing services that are closely  associated with inherently governmental functions. Specifically, our  analysis found that in fiscal year 2014 DOD obligated about $28 billion  for contracts in the product service codes that the Office of Federal  Procurement Policy and GAO identified as more likely to include  closely associated with inherently governmental functions. In  comparison, the components identified a total of $10.8 billion in  obligations or dollars invoiced for contracts that included such work.  We also found that the military departments had not yet developed  plans to use the inventory to inform workforce mix, strategic workforce  planning, and budget decision-making. We did not make new  recommendations in that report.

section_title: DOD Collected Data for the Inventory of Fiscal Year 2016 Contracted Services Using the Same Sources as in Prior Years
paragraphs: To facilitate DOD’s submission of an inventory summary to Congress,  OSD’s inventory guidance required each military department to submit to  the offices of the USD(AT&L) and USD(P&R) a list of all services  provided under contract consistent with the guidance and within the  scope of section 2330a of title 10, U.S. Code, as amended by section 812  of the fiscal year 2017 NDAA. The military departments collected data for  the fiscal year 2016 inventory using the same data sources—FPDS-NG  and ECMRA—as they had in prior years, though each department used  slightly different processes from one another.

OSD’s inventory guidance provided for flexibility in how the military  departments compiled and submitted data. For example, the guidance  required that the inventory submissions include, at a minimum, all  purchases of services with a total contract value of $3 million or more and  in the following service acquisition portfolio groups: logistics management  services; equipment-related services; knowledge-based services; and  electronics and communications services. It did not, however, preclude  the military departments from submitting additional information beyond  the minimum threshold. In addition, under the guidance, military  departments were encouraged to augment FPDS-NG data with data from  ECMRA, as has been the process in the past. We analyzed the effect of  the recent statutory changes, as implemented in OSD’s inventory  guidance, on fiscal year 2016 contracted services data reported in FPDS- NG and compiled by USD(AT&L). We found that the number of service  purchases reported under the inventories across the department would  be reduced to about 2 percent of the total service purchases if the  components reported only the minimum information required under  OSD’s guidance. This approach would capture about 30 percent of the  total service contract dollars.

Officials responsible for overseeing the data collection effort within each  of the three military departments stated that for fiscal year 2016 they  collected data captured in FPDS-NG and ECMRA, as they have done for  previous inventories. The military departments varied somewhat in how  they collected and reported their data, which is permitted under OSD’s  guidance. The following is a description of the military departments’  processes for collecting data and key aspects of their inventories:

Army officials stated that they extracted their inventory data for fiscal  year 2016 primarily from ECMRA and used FPDS-NG data to fill gaps  in data not collected in ECMRA, such as data on aspects of contract  competition (e.g., number of offers and small business  considerations). Army officials estimated that the total invoices in  ECMRA represented approximately 80 percent of contracted services  obligations for fiscal year 2016. In its inventory, submitted to OSD in  January 2018, the Army reported services purchased under contract  actions with fiscal year 2016 invoiced amounts both above and below  $3 million. The Army reported that its fiscal year 2016 inventory  accounts for $31 billion in invoiced amounts and 157,000 contractor  FTEs.

Navy officials stated that they captured nearly all of their inventory  data for fiscal year 2016 from FPDS-NG and combined it with ECMRA  data. Navy officials estimated that approximately 75 percent of the  Navy services contracts that it believed should have been reported in  ECMRA were reported during fiscal year 2016. The Navy submitted  summary data, including fiscal year 2016 obligations and contractor  FTEs by command and in total, to OSD in December 2017. The Navy  did not provide a list of its fiscal year 2016 service purchases in time  to be included in the inventory summary for Congress, but a  USD(AT&L) official said the information provided was sufficient to  allow OSD to prepare the summary. The Navy subsequently  submitted its full inventory of fiscal year 2016 contracted services to  OSD in March 2018 and reported over $6.5 billion in obligations and  over 45,000 contractor FTEs.

Air Force officials stated that they drew approximately 75 percent of  the data elements required for the inventory for fiscal year 2016 from  FPDS-NG. Air Force officials stated that they also extracted data from  the Air Force financial management system, such as total contracted  dollar amounts, and manpower data from ECMRA. Air Force officials  did not have an estimate of the percentage of service contracts that  were reported in ECMRA in fiscal year 2016. The Air Force submitted  its inventory to OSD in December 2017 and included services  purchased under contract actions with fiscal year 2016 invoiced  amounts or obligations both above and below $3 million. In addition,  the Air Force specifically identified purchases within each of the four  service acquisition portfolio groups specified in OSD’s inventory  guidance. The Air Force reported approximately $14.6 billion in  obligations with an estimated 73,400 contractor FTEs in its fiscal year  2016 inventory.

A USD(AT&L) official stated that he used the information provided by the  military departments and defense components to help create the  inventory summary required by section 812 of the fiscal year 2017 NDAA.  OSD submitted this inventory summary to Congress in February 2018.  This official added that OSD will discuss whether changes in its guidance  for the next inventory are needed to clarify what information the military  departments and defense components should submit.

section_title: Military Departments Have Not Developed Statutorily Required Plans and Continue to Make Limited Use of the Inventory to Inform Management Decisions
paragraphs: The military departments generally have not developed plans to use the  inventory to inform management decisions as required by subsection  2330a(e) of title 10 of the U.S. Code and OSD’s inventory guidance.  Further, manpower and budget officials said they make limited use of the  inventory to inform strategic workforce planning, workforce mix, and  budget decisions. This situation is similar to what we have found in our  past work. Manpower and budget officials we spoke with stated the  inventory is often too outdated to inform their decision-making, though the  inventory provides a single source of certain types of information that are  not readily available elsewhere. This limited use may also reflect, in part,  the lack of accountable officials responsible for developing plans and  enforcement mechanisms to use the inventory, as we recommended in  November 2014.
subsections: section_title: Military Departments Generally Have Not Developed Plans to Use the Inventory for Decision- Making
paragraphs: Subsection 2330a(e) of title 10 of the U.S. Code, DOD Instruction  5000.74, and OSD’s inventory guidance direct the military departments  and defense agencies to use the inventory to inform workforce and  budget decisions. When we last reported on this issue in October 2016,  we identified 12 guidance documents from the military departments  related to strategic workforce planning, workforce mix, and budget  decisions. Our current work found that 14 documents, some of which are  the same as what we reported in October 2016, make up the current set  of military departments’ guidance in these areas. Further, we found the  degree to which these guidance documents require the use of the  inventory in these areas is still minimal—3 of the 14 documents include  requirements related to the inventory (see table 3).

Two documents, the Army’s July 2009 memorandum on civilian workforce  management and the Army’s March 2010 concept plan guidance, require  the use of the inventory for insourcing plans to convert contracted  activities to performance by government personnel. Air Force Instruction  38-201 on management of manpower requirements directs the Air Force  manpower division to support the review of the inventory, but does not  require its use for workforce mix decisions.

As noted previously, in November 2014 we found that no single office or  individual at the military departments was responsible for leading or  coordinating efforts between the various functional areas to develop a  plan to use the inventory to inform management decisions. As a result  we recommended that the secretaries of the military departments identify  accountable officials to do so. As of January 2018, the Army and Navy  still had not named accountable officials responsible for developing plans  and enforcement mechanisms to use the inventory for workforce and  budget decisions, according to officials at those departments. Navy  officials said they have not reached agreement on the appropriate  managerial level of an accountable official. According to an Air Force  official, the Air Force has named an official from the Program Executive  Office for Combat and Mission Support to serve on an interim basis. We  continue to believe this recommendation is valid and should be fully  implemented.

section_title: Military Departments Make Limited Use of the Inventory for Decision- Making
paragraphs: Army manpower officials we interviewed stated that the inventory  provided information that was not readily available elsewhere and the  information collected in the inventory process may be useful for making  workforce mix decisions. For example, Army manpower officials said the  inventory provides a single source for information like the number of  contractor FTEs, contractor labor hours and costs, the location of work  performance, and the functions performed. Army officials said they can  use this information to analyze cost factors and contract expenditures and  compare them to in-house costs. In addition, Army officials noted the  inventory provides information to address questions from Congress,  DOD, and Army leadership about the number and cost of contractors, and  that it is the only source of detailed data that supports analysis of the  contractor workforce mix that is statutorily required. Comptroller, Navy,  and Air Force officials added that they use information from the inventory  to estimate the average number of contractor FTEs that are reported in  DOD’s annual budget request.

However, representatives from the workforce and budgeting offices within  the military departments we interviewed also noted that the inventory has  limitations that hinder its use. These officials noted that the data reflected  in the inventory are often too outdated to help inform strategic decisions  that are usually made at the local level—such as a specific military  installation—based on real-time data. For example, Air Force officials said  that under the program objective memorandum (POM) process, the Air  Force identifies future budget requests and workforce needs 2 years  before the beginning of a fiscal year, whereas the most recent inventory  data available may already be 2 years old when that process starts. To  illustrate the issue, the officials noted that they were already planning for  the 2020 POM in early fiscal year 2018, although the fiscal year 2016  inventory was not yet available. As a result, if the Air Force were to use  inventory data to plan for the 2020 POM, they would have to rely on fiscal  year 2015 inventory data.

Air Force officials also said certain types of information that are useful for  strategic planning, such as planned contracts for services and the scope  and duration of the existing contracts, are not captured in the inventory  process. Army officials had a similar perspective and said they do not use  the inventory to plan for the POM because collecting data on past  contracted services is not as relevant to estimating future requirements  and funding needs.

As part of Congress’s efforts to inform DOD’s management of its  acquisition of contracted services, it enacted the inventory legislation. We  concluded in January 2011 that the real benefit of the inventory process  would ultimately be measured by its ability to inform management’s  decision-making. As noted above, we have made recommendations to  help improve this decision-making, which we continue to believe should  be fully implemented. DOD officials have also identified ways in which the  inventory can be useful.

Recent legislation and our prior work in other related areas have identified  additional means through which DOD can manage its acquisitions of  contracted services.

In December 2017, the National Defense Authorization Act for Fiscal  Year 2018 was enacted. Section 851 requires DOD to regularly  analyze past spending patterns and anticipated future requirements  for its procurement of services and use these analyses to inform  decisions on the award of and funding for such service contracts.

In August 2017, we found DOD had not fully implemented three key  leadership positions that were intended to enable DOD to more  strategically manage service acquisitions. We recommended the  USD(AT&L) reassess the roles, responsibilities, authorities, and  organizational placement of key leadership positions to help foster  strategic decision-making and improvements in the acquisition of  services. DOD concurred with our recommendation. In December  2017, the Deputy Secretary of Defense appointed a reform leader for  service contracts and category management—an approach intended  to manage entire categories of spending across government for  commonly purchased goods and services—and established related  reform teams to help ensure department-wide efficiency in contract  spending.

In February 2016, we found that DOD’s and Congress’s insight into  future spending on contracted services was limited because DOD did  not identify service contract spending needs beyond the current  budget year. Although program offices generally kept track of their  future service contract needs and estimated costs for 5 years out,  they were not required to identify planned service contract spending  beyond the budget year. We recommended that the military  departments revise their programming guidance to collect information  on how contracted services will be used to meet requirements beyond  the budget year. DOD partially concurred with our recommendation,  but noted that the volatility of requirements and each budget cycle  constrain the department’s ability to accurately quantify service  contract requirements beyond the budget year. We agreed that  requirements and budgets change over time, but our work showed  that the needed data already exists and is not captured in such a way  to inform senior leadership on future service contract spending. We  continue to believe that implementing this recommendation will assist  the department in gaining better insight into contracted service  requirements and enable more strategic decisions about the volume  and type of services it plans to acquire.

section_title: Agency Comments
paragraphs: We are not making new recommendations in this report. We provided a  draft of this report to DOD for comment. In its written comments, which  are reprinted in appendix I, DOD stated that it remains committed to  improving its processes for collecting, analyzing, and reporting contracted  services data. DOD also provided technical comments, which we  incorporated as appropriate.

We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Secretaries of the Army, Navy,  and Air Force; the Under Secretary of Defense for Personnel and  Readiness; the Under Secretary of Defense for Acquisition and  Sustainment; and the Under Secretary of Defense (Comptroller). In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@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 key contributions to this  report are listed in appendix II.

section_title: Appendix I: Comments from the Department of Defense

section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Katherine Trimble (Assistant  Director); Brenna Derritt (Analyst-in-Charge); Pete Anderson; Dennis  Antonio; Vincent Balloon; Lorraine Ettaro; Gina Flacco; Kristine  Hassinger; and Julia Kennon made significant contributions to this review.

Fast facts: DOD spends billions of dollars on contracted services for tasks such as IT support, but it has struggled for years to effectively manage the range of services DOD buys. To build a full picture of purchases and make strategic decisions about them, it's required to compile an ongoing inventory of these purchases.

We found that DOD continues to make limited use of the inventory. We have made 18 recommendations in the past on how to improve or better use the inventory, most of which have been implemented. However, military departments generally have not developed plans to use the inventory for workforce and budget decisions.

Question-summary annotations: questions: question: How did military departments report their contracted services data to OSD?
answer: As permitted under OSD's inventory guidance, the military departments varied somewhat in how they reported their contracted services data to OSD.

question: How did the military departments' reports of contracted services vary?
answer: For example, the Army and Air Force included purchases both over and under $3 million and the Air Force also identified purchases by the four portfolio groups.

question: What information did the Navy submit regarding its contracted services?
answer: The Navy submitted summary data of contracted services but did not provide a list of purchases in time to be included in an inventory summary for Congress. An OSD official said, however, that the information provided was sufficient to prepare the inventory summary, which OSD submitted to Congress in February 2018.
child_questions: question: What other information did the Navy supply?
answer: The Navy subsequently provided a list of its fiscal year 2016 service purchases to OSD in March 2018.

questions: question: What is the use of inventory information to military organizations?
answer: Army manpower officials told GAO that inventory information such as the number of contractor full-time equivalents and the functions performed can be used to inform workforce mix decisions.
child_questions: question: Why don't military organizations often make use of this information?
answer: However, workforce and budget officials at the Army, Navy, and Air Force stated they make limited use of the inventory to inform decision-making, in part because by the time the inventory is available, the data reflected are often too outdated to inform strategic decisions.
child_questions: question: What has GAO previously recommended?
answer: In November 2014, for example, GAO found that a lack of officials at the military departments who are accountable for integrating the use of the inventory leaves the department at continued risk of not complying with the legislative requirement to use the inventory to support management decisions. This issue persists, as the military departments have not made final designations for accountable officials responsible for developing plans and enforcement mechanisms to use the inventory.

questions: question: What was the purpose of the National Defense Authorization Act for Fiscal Year 2017?
answer: The National Defense Authorization Act for Fiscal Year 2017 amended existing requirements for DOD to annually collect data on contracted services and to compile and review an inventory of the functions performed by contractor personnel. The Act also contained a provision for GAO to report on the status of this data collection and to assess DOD's use of the inventory.

question: What is GAO's report about?
answer: This report addresses how DOD (1) collected data to create an inventory of fiscal year 2016 contracted services and (2) used the inventory to inform workforce planning, workforce mix, and budget decisions.

question: What is GAO's past relationship with DOD?
answer: GAO has reported on DOD's inventory of contracted services since 2010.