Department of Homeland Security: Risk Assessment and Enhanced Oversight Needed to Manage Reliance on Contractors
Released: 2007-10-17T00:00:00

Letter

Background

Inherently governmental functions require discretion in applying government authority or value judgments in making decisions for the government; as such, they should be performed by government employees—not private contractors. The Federal Acquisition Regulation (FAR) provides 20 examples of functions considered to be, or to be treated as inherently governmental (see Appendix I), including determining agency policy and priorities for budget requests, directing and controlling intelligence operations, approving contractual requirements, and selecting individuals for government employment.

The closer contractor services come to supporting inherently governmental functions, the greater the risk of their influencing the government’s control over and accountability for decisions that may be based, in part, on contractor work. Table 1 provides examples of the range of services contractors provide to the federal government—from basic activities, such as custodial and landscaping, to more complex professional and management support services—and their relative risk of influencing government decision making.

The potential for the loss of government management control and accountability for decisions is a long-standing governmentwide concern. For example, in 1981, we found that the level of contractor involvement in management functions at the Departments of Energy and Defense was so extensive that the agencies’ ability to develop options other than those proposed by the contractors was limited. More recently, in 2006, government, industry, and academic participants in GAO’s forum on federal acquisition challenges and opportunities and the congressionally mandated Acquisition Advisory Panel noted how an increasing reliance on contractors to perform services for core government activities challenges the capacity of federal officials to supervise and evaluate the performance of these activities.

FAR and Office of Federal Procurement Policy (OFPP) guidance state that services that tend to affect government decision-making, support or influence policy development, or affect program management are susceptible to abuse and require a greater level of scrutiny and an enhanced degree of management oversight. This 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.

DHS Contracting Decisions For A Broad Range Of Activities Were Largely Driven By A Lack Of Staff And Expertise And Immediacy Of Need

A broad range of program-related and administrative activities was performed under the professional and management support services contracts we reviewed. DHS decisions to contract for these services were largely driven by the need for staff and expertise to get programs and operations up and running. While DHS has identified core mission-critical occupations and plans to reduce skill gaps in core and key competencies, it has not directly addressed the department’s use of contractors for services that closely support the performance of inherently governmental functions.

DHS Contracts for Selected Services Covered a Broad Range of Activities Closely Supporting Inherently Governmental Functions

A broad range of activities related to specific programs and administrative operations was performed under the professional and management support services contracts we reviewed. The categories of policy development, reorganization and planning, and acquisition support were among the most often requested in the 117 statements of work, as well as in the nine case studies.

For example, TSA obligated $1.2 million to acquire contractor support for its Acquisition and Program Management Support Division, which included assisting with the development of acquisition plans and hands-on assistance to program offices to prepare acquisition documents.

A $7.9 million OPO human capital services order provided a full range of personnel and staffing services to support DHS’s headquarters offices, including writing position descriptions, signing official offer letters, and meeting new employees at DHS headquarters for their first day of work.

Contractor involvement in the nine case studies ranged from providing two to three supplemental personnel to staffing an entire office. Figure 1 shows the type and range of services provided in the nine cases and the location of contractor performance.

DHS Contracting Decisions Were Largely Driven by a Lack of Staff and Expertise and Immediacy of Need

Many of the program officials we spoke with said that contracting for services was necessary because they were under pressure to get program and administrative offices up and running quickly, and they did not have enough time to hire staff with the right expertise through the federal hiring process. For example: According to officials at TSA, federal staff limitations was a reason for procuring employee relations support services. Specifically, the agency needed to immediately establish an employee relations office capable of serving 60,000 newly hired airport screeners—an undertaking TSA Office of Human Resources officials said would have taken several years to accomplish if they hired qualified federal employees.

DHS human capital officials said there were only two staff to manage human resources for approximately 800 employees, and it would have taken 3 to 5 years to hire and train federal employees to provide the necessary services.

In prior work, GAO has noted that agencies facing workforce challenges, such as a lack of critical expertise, have used strategic human capital planning to develop long-term strategies for acquiring, developing, motivating, and retaining staff to achieve programmatic goals. While DHS’s human capital strategic plan notes that the department has identified core mission-critical occupations and seeks to reduce skill gaps in core and key competencies, DHS has not determined the right mix of government performed and contractor performed services or assessed total workforce deployment across the Department to guide decisions on contracting for selected services. We have noted the importance of focusing greater attention on which types of functions and activities should be contracted out and which ones should not, while considering other reasons for using contractors, such as a limited number of federal employees. DHS’s human capital plan is unclear as to how this could be achieved and whether it will inform the Department’s use of contractors for services that closely support the performance of inherently governmental functions.

DHS Did Not Consider Risk Or Provide Enhanced Oversight When Contracting For Selected Services

While program officials generally acknowledged that their professional and management support services contracts closely supported the performance of inherently governmental functions, they did not assess the risk that government decisions may be influenced by, rather than independent from, contractor judgments—as required by federal procurement policy. In addition, none of the program officials and contracting officers we spoke with was aware of these requirements, and few believed that their professional and management support service contracts required enhanced oversight. Federal guidance also states that agency officials must retain control over and remain accountable for policy and program decisions. For the nine cases we reviewed, the level of oversight DHS provided did not always help ensure accountability for decisions or the ability to judge whether contractors were performing as required; however, DHS’s Chief Procurement Officer is implementing an acquisition oversight program with potential to address this issue.

Selected Cases May Have Been at Risk of Contractors Influencing Decisions

To help ensure the government does not lose control over and accountability for mission-related decisions, long-standing federal procurement policy requires attention to the risk that government decisions may be influenced by, rather than independent from, contractor judgments when contracting for services that closely support inherently governmental functions. The nine cases we reviewed in detail provided examples of conditions that we have found need to be carefully monitored to help ensure the government does not lose control over and accountability for mission-related decisions.

Contractors providing services integral to an agency’s mission and comparable to those provided by government employees: In seven of the nine cases, contractors provided such services. For example, one contractor directly supported DHS efforts to hire federal employees, including signing offer letters. In another case, a contractor provided acquisition advice and support while working alongside federal employees and performing the same tasks.

Contractors providing ongoing support: In each of the nine case studies, the contractor provided services for more than 1 year. In some of these cases, the original justification for contracting had changed, but the components extended or recompeted services without examining whether it would be more appropriate for federal employees to perform the service. For example, OPO established a temporary “bridge” arrangement without competition that was later modified 20 times, and extended for almost 18 months, to avoid disruption of critical support including budget, policy, and intelligence services. Subsequently, these services were competed and awarded to the original contractor under six separate contracts.

Broadly defined requirements: In four of the case studies, the statements of work lacked specific details about activities that closely support inherently governmental functions. In addition, several program officials noted that the statements of work did not accurately reflect the program’s needs or the work the contractors actually performed. For example, a Coast Guard statement of work for a $1.3 million order initially included services for policy development, cost- benefit analyses, and regulatory assessments, though program officials told us the contractors provided only technical regulatory writing and editing support. The statement of work was revised in a later contract to better define requirements.

Officials Did Not Assess Risk or Provide Enhanced Oversight of Contracts for Selected Services as Required

Federal acquisition guidance highlights the risk inherent in services contracting—particularly those for professional and management support services—and federal internal control standards require assessment of risks. OFPP staff we met with also emphasized the importance of assessing the risk associated with contracting for services that closely support the performance of inherently governmental functions. While contracting officers and program officials for the nine case studies generally acknowledged that their professional and management support services contracts closely supported the performance of inherently governmental functions, none assessed whether these contracts could result in the loss of control over and accountability for mission-related decisions. Furthermore, none were aware of federal requirements for enhanced oversight of such contracts. Contracting officers and program officials, as well as DHS acquisition planning guidance, did not cite services that closely support the performance of inherently governmental functions as a contracting risk and most did not believe enhanced oversight of their contracts was warranted.

Current DHS initiatives may have the potential to address oversight when contracting for services that closely support inherently governmental functions. DHS’s Chief Procurement Officer is in the process of implementing an acquisition oversight program that is intended to assess contract administration, business judgment, and compliance with federal acquisition guidance. This program was designed to allow flexibility to address specific procurement issues and is based on a series of reviews at the component level that could address selected services.

Control and Accountability Were Limited

Both the FAR and OFPP policy state that when contracting for services— particularly for professional and management support services that closely support the performance of inherently governmental functions—a sufficient number of qualified government employees assigned to plan and oversee contractor activities is needed to maintain control and accountability. While most contracting officers and program officials that we spoke with held the opinion that the services they contracted for did not require enhanced oversight, we found cases in which the components lacked the capacity to oversee contractor performance due to limited expertise and workload demands. For example: One Contracting Officer’s Technical Representative (COTR) was assigned to oversee 58 tasks, ranging from acquisition support to intelligence analysis to budget formulation and planning, across multiple offices and locations. Program and contracting officials noted the resulting oversight was likely insufficient. To provide better oversight for one of the follow-on contracts, the program official assigned a new COTR to oversee just the intelligence work and established monthly meetings between the COTR and the program office. According to program officials, this change was made to ensure that the contract deliverables and payments were in order, not to address the inherent risk of the services performed.

Similarly, a DHS Human Capital Services COTR assigned to oversee an extensive range of personnel and staffing services provided by the contractor lacked technical expertise, which the program manager believed affected the quality of oversight provided. To improve oversight for the follow-on contract, the program manager assigned a COTR with more human resources experience along with an employee with human resources expertise to assist the COTR.

DHS components were also limited in their ability to assess contractor performance, which is necessary to ensure control and accountability, in a way that addressed the risk of contracting for professional and management support services that closely support the performance of inherently governmental functions. Assessing contractor performance requires a plan that outlines how services will be delivered and establishes measurable outcomes. However, none of the related oversight plans and contract documents we reviewed contained specific measures for assessing contractors’ performance of the selected services.

Conclusion and Recommendations

Until the department provides greater scrutiny and enhanced management oversight of contracts for selected services—as required by federal guidance—it will continue to risk transferring government responsibility to contractors. To improve the department’s ability to manage the risk associated with contracting for services that closely support the performance of inherently governmental functions and help ensure government control and accountability, the report we are releasing today recommends that the Secretary of Homeland Security take several actions. These actions include establishing strategic-level guidance for determining the appropriate mix of government and contractor employees, assessing the risk of using contractors for selected services, more clearly defining contract requirements, assessing the ability of the government workforce to provide sufficient oversight when using selected services, and reviewing contracts for selected services as part of the acquisition oversight program.

DHS generally concurred with our recommendations and provided information on what actions would be taken to address them. However, DHS partially concurred with our recommendation to assess the risk of selected services as part of the acquisition planning process and modify existing guidance and training, noting that its acquisition planning guidance already provides for the assessment of risk. Our review found that this guidance does not address the specific risk of services that closely support the performance of inherently governmental functions. DHS also partially concurred with our recommendation to review selected services contracts as part of the acquisition oversight program. DHS stated that rather than reviewing selected services as part of the routine acquisition oversight program, the Chief Procurement Officer will direct a special investigation on selected issues as needed. We did not intend for the formal oversight plan to be modified, rather we recognize that the program was designed with flexibility to address specific procurement issues as necessary. We leave it to the discretion of the Chief Procurement Officer to determine how to implement the recommendation.

Mr. Chairman, this concludes my prepared statement. I would be happy to respond to any questions you or other members of the committee may have at this time.

Contacts And Acknowledgments

For further information regarding this testimony, 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 product. Staff making key contributions to this statement were Amelia Shachoy, Assistant Director; Katherine Trimble; Jennifer Dougherty; Karen Sloan; Julia Kennon; and Noah Bleicher.

Appendix I: Examples of Inherently Governmental and Approaching Inherently Governmental Functions

Federal Acquisition Regulation (FAR) section 7.503 provides examples of inherently governmental functions and services or actions that are not inherently governmental, but may approach being inherently governmental functions based on the nature of the function, the manner in which the contractor performs the contract, or the manner in which the government administers contractor performance. These examples are listed in tables 1 and 2.