Contingency Contracting: State and USAID Made Progress Assessing and Implementing Changes, but Further Actions Needed
Released: 2014-02-14T00:00:00

Letter

Background

Contingency operations can encompass a number of potentially dangerous or uncertain environments, which increase risks to federal agencies and personnel, including contractors that support those agencies. The U.S. Code defines a contingency operation, in relevant part, as a military operation designated by the Secretary of Defense in which armed forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or results in the call to active duty members of the uniformed services, such as in Iraq and Afghanistan.fall within this definition but potentially pose similar challenges.

However, there are other environments that do not USAID officials noted that its personnel operate in challenging environments on a daily basis and that the agency uses various terms to describe these environments. For example, USAID’s programming policy defines high-threat environment as a country, city, area, subregion, or region in which USAID is hindered in accomplishing its mission due to security risks such as (1) specific targeting of U.S. interests, (2) a favorable operating environment for terrorist groups, (3) intelligence indicating that a threat is imminent, or (4) other significant risk as identified by various security offices.

State operates in similar environments. For example, in its 2010 Quadrennial Diplomacy and Development Review, State noted that more than 25 percent of State and USAID personnel serve in 30 countries classified as high risk for conflict and instability, including Yemen, Democratic Republic of Congo, Sudan, and Kyrgyzstan. For the purposes of this report, we use the term “contingency operations” to encompass the range of potentially dangerous or uncertain environments in which USAID and State operate.

Our work over the past 5 years, as well as that of others in the accountability community, has found that State and USAID have experienced systemic challenges that have hindered their ability to manage and oversee contracts in contingency environments. In our reports issued annually between 2008 and 2011, we consistently found that State and USAID lacked reliable data and systems to report on their contracts and contractor personnel in Iraq and Afghanistan. Having reliable data on contracts and contractor personnel is a starting point for informing agency decisions and ensuring proper management. In 2012, we reported that the agencies had made improvements to their contractor personnel data and related systems that could result in more reliable data, but data comparability across years and agencies was limited. We also reported in 2012 that State had not assessed the skills and workforce mix needed to meet future contracting requirements in Iraq and Afghanistan. Further, we found that State had insufficient personnel with the necessary expertise to conduct acquisition planning and oversight functions to support the department’s mission in Iraq, and, as a result, relied on the Department of Defense (DOD) for acquisition support. We also found weaknesses in USAID’s oversight and monitoring of project and program performance in Afghanistan. Specifically, we reported that USAID did not consistently follow its established performance management and evaluation procedures for Afghanistan agriculture and USAID subsequently issued new guidance, approved a water projects.new performance management plan, and took steps to improve its third- party monitoring of projects.

Similarly, others in the accountability community have reported on the acquisition challenges faced by State and USAID in contingency environments. For example, Inspectors General at both agencies identified aspects of contracting in contingency environments as a serious management challenge in the agencies’ fiscal year 2012 financial reports. State’s Inspector General found that the department continued to face challenges managing contracts and procurements, and reported that it has identified instances in Iraq and Pakistan in which poor contract monitoring resulted in increased costs and poor performance. Similarly, USAID’s Inspector General identified USAID’s work in high-threat environments such as Afghanistan, Pakistan, Iraq, and South Sudan, as one of the agency’s most serious management challenges, in part due to audits that disclosed weak contract management in these environments. In addition, the Special Inspector General for Iraq Reconstruction and the Special Inspector General for Afghanistan Reconstruction have reported on similar contracting issues. Further, the statutorily established Commission on Wartime Contracting in Iraq and Afghanistan made a number of recommendations directed to State and USAID in its final report, issued in 2011. Recommendations include those related to using risk factors to decide what functions are appropriate to contract for in contingency settings, ensuring the government can provide sufficient acquisition management and contractor oversight, and taking actions to mitigate the threat of additional waste due to a lack of sustainment by host governments.

Section 850(a) of the fiscal year 2013 NDAA mandated that State and USAID submit, to the appropriate Congressional committees, assessments of agency policies governing contract support in overseas Section 850(a) required State and USAID to contingency operations.submit their reports to Congress by July 2, 2013. Section 850(b) of the NDAA provided that the reports 1. Describe and assess the roles and responsibilities of officials and offices with contract-related responsibilities in overseas contingency operations; 2. Include procedures and processes associated with eight elements of contracting, including collection, inventory, and reporting of data; acquisition planning; solicitation and award of contracts; requirements development and management; contract tracking and oversight; performance evaluations; risk management; and interagency coordination and transition planning; and 3. Include strategies and improvements necessary to address workforce issues in overseas contingencies, including reliance on contractors.

State and USAID submitted their reports to Congress on June 25 and July 1, 2013, respectively.

State and USAID Have Efforts Under Way to Address Challenges, but Neither Agency Has Fully Implemented Changes for Contracting in Overseas Contingency Operations

State and USAID identified a number of actions needed to improve contracting in contingency environments. Overall, the actions identified by State and USAID may help position each agency to better support future contingency operations, but many of the identified changes are new or have not been fully implemented and the agencies generally have not established plans to assess the impact of the changes. Federal internal control standards highlight the importance of managers comparing actual performance to expected results. For example, in October 2013, State’s Under Secretary for Management approved a series of actions, which included changing the organizational structure by establishing a new staff unit to oversee elements of contracting in overseas contingency operations, a new contract risk mitigation effort, and the creation of specific contingency contracting policy in its Foreign Affairs Manual. In some instances, such as establishing the new risk mitigation staff, State intends to assess the impact of the initiatives. According to State officials, they are still developing specific plans and time frames to implement several other initiatives. We found that State has not indicated whether or how it intends to assess the impact of these other initiatives. Continued management attention is needed to ensure that these efforts achieve their intended objectives.

USAID identified several actions needed to improve areas such as the collection, inventory, and reporting of data; contractor performance evaluations; and risk management. In response to long-standing challenges that the agency faces in implementing and monitoring activities in high-threat environments, USAID established a nonpermissive environment working group in October 2013 to develop lessons learned, toolkits, and training, but it is not expected to complete this effort until the end of September 2014. We found that USAID missions and offices with responsibilities for responding to contingencies have established procedures and practices, but USAID did not consider whether these procedures should be institutionalized agency-wide. USAID officials explained that they took a narrow view of the mandate and focused their assessment on agency-wide policies. As a result, USAID may have missed opportunities to leverage its institutional knowledge to better support future contingencies.

State Is in the Early Stages of Implementing Changes Needed

State’s Section 850 report to Congress concluded that its organizational structure was generally adequate to support overseas contingency operations and identified several actions needed to improve areas such as acquisition planning, contract oversight, and interagency coordination (see table 1). In addition, our review identified other contingency contracting related actions taken by State, including those identified after State submitted its report to Congress.

To identify needed changes, State established working groups comprised of key officials from offices across the department to assess State’s organizational structure and contracting procedures in overseas contingency operations. In October 2013, State’s Under Secretary for Management approved a series of recommendations proposed by the working groups, which included establishing a new staff unit to oversee elements of contracting in overseas contingency operations and other critical environments, as well as the creation of a specific contingency contracting chapter in the Foreign Affairs Manual, which contains the organizational responsibilities and authorities of each of the major components of the department. According to State officials, they are still developing specific plans and time frames to implement many of the changes approved in October, but generally have not developed plans to assess the impact of these initiatives. State officials subsequently reported that the Critical Environment Contract Analytics Staff, which was formally established in December 2013, will be responsible for using metrics to assess the effectiveness and performance of State’s planned initiatives.

Organizational Structure

State determined that its centralized organizational structure was generally effective and efficient for contract support in overseas contingency operations. To improve management and oversight of contract performance of major contracts in Iraq, State established a new regional Contract Management Office in August 2013. State plans to review the effectiveness of the Contract Management Office after it has been operational for 1 year to determine gaps and applicability as a department-wide model for contracting in future contingency environments. State officials noted that the office, currently located in Iraq, will move to Kuwait in mid-2014 to allow for administrative support for other contracts in the region as resources are available. Appendix II describes the roles and responsibilities of State’s contracting organization used to support contingency operations.

Data Collection, Inventory, and Reporting

With regard to tracking of contractors and contractor personnel, State has previously taken steps to improve the collection, inventory, and reporting of contractor and contractor personnel data within DOD’s Synchronized Predeployment and Operational Tracker (SPOT) database for overseas contingency operations. In 2008, Congress required DOD, State, and USAID to begin tracking use of contractors in Iraq and Afghanistan. To do so, the agencies agreed to use DOD’s SPOT database. To implement this requirement, State issued a procurement information bulletin in March 2008, which directed State contracting officers (CO) to designate the use of SPOT for all applicable contracts in Iraq and Afghanistan and include a clause requiring contractors to provide certain data within SPOT. However, we consistently found in reports issued annually since 2008 that State lacked reliable sources and methods to report on its contracts and contractor personnel in Iraq and Afghanistan. According to State officials, to improve State’s reporting, the Office of Acquisitions Management developed additional guidance in fall 2012 which outlined the process of inputting contracts, how contractors should enter contractor personnel, how to request letters of authorization and approvals, and how to enter data through contract close-out. The new regional Contract Management Office will be responsible for overseeing contractors’ input of Iraq contractors’ data into SPOT.

Solicitation and Award of Contracts

State’s Section 850 report noted that the use of a centralized acquisition office in Washington D.C., and two regional procurement support offices help solicit and award contingency contracts. State officials noted that approximately 90 percent of its acquisition dollars and all major programs are managed by either its Office of Acquisitions Management or its two regional procurement support offices in Florida and Germany. Further, it noted that contracts for contingency operations in Iraq and Afghanistan are managed by its Office of Acquisitions Management. At individual missions and posts, State’s general services officers have contracting authority limited to noncomplex transactions below $250,000. State noted that this approach provided sufficient support in terms of soliciting and awarding contracts.

Requirements Development and Acquisition Planning

State’s Section 850 report noted that contract requirements were generally developed either at State’s in-country posts or its functional bureaus, and stated that its requirements development process was adequate. To improve acquisition planning, State developed a draft update to the Foreign Affairs Manual that explains that acquisition planning for contingency operations requires special attention and has designated staff to facilitate planning in contingency environments. In addition, State issued standard operating procedures in May 2013 for support cells that will be coordinated on an as-needed basis at the start of a contingency. The support cell will assist in the opening or reopening of posts based on lessons learned and will be located within the regional bureau. The support cell process was incorporated into the Foreign Affairs Manual and includes a typical support cell organization chart, a work process map documenting the steps that determine a situational plan of action, and a checklist document that can be used when creating an operational plan to open or reopen a post. According to State officials, the new procedures were used in 2013 to establish a support cell for a potential contingency in Syria.

Contract Oversight

To carry out contract oversight, State generally relies on contracting officer’s representatives (COR) appointed from programs within the department’s regional and functional bureaus to help ensure that the contractor accomplishes the required work. State’s Section 850 report noted, however, that State lacks CORs with certain technical subject matter expertise for contingency operations, such as medical and aviation. Additionally, State officials noted the need to improve training for CORs and cited several actions the department has taken to do so. For example, according to State officials, the department has revised COR training to be more scenario-based and initiated an effort to better manage the COR function across the department due to the growth in the number of CORs in areas such as Afghanistan and Pakistan. In March 2013, State reinstituted a COR council to collect agency COR data and to develop plans and actions that improve the effectiveness of the COR function. State officials told us that they intend to use the Federal Acquisition Institute Training Application System to track COR certifications and allow COs and bureaus to identify qualified CORs when needed. In October 2013, State proposed a revision to the Foreign Affairs Manual that would assign responsibility to the individual bureaus to define specialized training or experience requirements for CORs to ensure effective contract oversight. State reported that staffing the newly established regional Contract Management Office in Iraq with specific technical skills and identifying individuals with previous COR experience represents a continuing challenge that they will try to address through training and mentoring, among other things.

In prior reports, we found that State had taken actions to address the challenges it encountered in overseeing private security contractors in In July 2013, the Under Secretary for Management testified that Iraq.private security contractors are critical to State’s readiness and capability to carry out U.S. foreign policy under dangerous and uncertain security conditions. The Under Secretary emphasized that maintaining this capability is particularly important when the department is taking on expanding missions in contingency operations or areas that are transitioning from periods of intense conflict, such as in Iraq and Afghanistan. State officials noted that the department continues to improve its program for private security contractors in contingency operations. For example, the department revised its training requirements and issued contractor standards of conduct to ensure the professionalism of private security contractors. In addition, State’s draft update to the Foreign Affairs Manual outlines the roles and responsibilities and training standards of private security contractors. Officials expect revisions to the Foreign Affairs Manual will be approved in 2014.

Performance Evaluations

State’s Section 850 report noted that reporting contractor performance evaluations in the government-wide Contractor Performance Assessment Reporting System (CPARS) needed improvement. The Federal Acquisition Regulation (FAR) requires agencies to prepare an evaluation of contractor performance for each contract that exceeds the simplified acquisition threshold at the time the work is completed and gives agencies discretion to include interim evaluations for contracts with a performance period exceeding 1 year. To do so, State has started several initiatives, including more dedicated staff time to manage reporting, monthly meetings held by the Office of Acquisitions Management and the Office of the Procurement Executive to track reporting progress, and increased training on past performance reporting and evaluations. Further, the Office of the Procurement Executive is working with the human resources division to incorporate work elements into CORs’ performance appraisals. State officials indicated that they have established a goal that contractor past performance reporting will be at a 45-percent completion rate by December 31, 2013.intends to incorporate a requirement within its Foreign Affairs Manual for State personnel to conduct contractor program reviews of contracts over $25 million for contingency operations at least semi-annually, and document them in the government-wide database.

Risk Management

In December 2013, State established the Critical Environment Contract Analytics Staff to centrally coordinate and perform, among other things, contract risk assessments and mitigation plans. As outlined in the October 2013 action memorandum, this group will be responsible for coordinating with other U.S. government agencies and monitoring contracting readiness in critical environments. The group also will be expected to expand the contract risk assessments in Afghanistan and other high-threat, high-risk posts, such as locations with major multibureau contracts. According to State officials, the Critical Environment Contract Analytics Staff will be comprised of three individuals and as of January 2014, staffing and recruitment efforts were underway.

In 2011, we found that State had not developed a process to vet contractor firms in Afghanistan and recommended that State assess the need to vet non-U.S. vendors to ensure that resources are not diverted to insurgent or criminal groups.program in October 2012 to vet contractors and grantees for links to terrorists or their supporters. The pilot was designed to assess risk and test the utility of vetting across the range of department operations and risk profiles. The department works in tandem with regional posts and USAID on the current pilot program, which includes Lebanon, Guatemala, Kenya, Ukraine, and the Philippines. In addition to these countries, Afghanistan and Syria have been included to reflect vetting in high-risk countries. The pilot was scheduled to be completed in October 2013, but State officials stated that it will be extended and that the completion date has not been determined. State noted that as of August 2013, preliminary results suggest that the effectiveness of vetting is related to the prevalence of conflict, but that few data are available from the five pilot countries due to the limited number of contracts and grants in those countries.

Interagency Coordination and Transition Planning

State’s Section 850 report noted that interagency coordination was an area that needed improvement. In September 2010, DOD and State established an Executive Steering Group, co-chaired by the DOD’s Deputy Assistant Secretary for Program Support and State’s Deputy Assistant Secretary for Logistics Management, to help State identify critical requirements in Iraq for which it had previously relied on DOD and address other issues associated with the transition. State reported that ad hoc working groups, such as the Executive Steering Group, provide timely coordination on specific implementation issues in contingency environments. In addition, officials told us in September 2013 that the Iraq contract transition working group continued to host biweekly meetings between State and DOD to address requirements and post-transition activity in Iraq.

An Executive Steering Group modeled after the group in Iraq was also established for Afghanistan in May 2011. In addition, State established the Management Transition Office in Kabul in June 2011 to help with the transition planning in Afghanistan for a post-2014 presence. State officials have noted that they are less dependent on DOD for services in Afghanistan, but they are taking lessons learned from Iraq and implementing them as appropriate. According to State officials, no agreements have been finalized on requirements for the post-2014 presence as they are waiting for drawdown and security plans to be finalized. In addition to the groups already established in Iraq and Afghanistan, State reported that it will coordinate with other agencies at the outset of future contingencies to define which working groups should be initiated. In addition, the newly approved contract risk assessment and mitigation staff described above will act as the coordinator for interagency acquisition agreements during contingency operations.

The FAR requires, among other things, that agencies carefully consider whether an interagency acquisition is based on a sound business decision and formally document the terms and conditions in an interagency agreement. In August 2012, we found that State and DOD did not comply with requirements for use and management of assisted interagency acquisitions. To respond to recommendations we made in this 2012 report, State officials indicated that the department is working with DOD to enhance a database used to store information on joint interagency agreements. For any existing interagency agreements, the department continues to work with DOD to identify where any required justifications are not already existent and rectify them in accordance with FAR requirements. Additionally, in response to previous recommendations, State issued a procurement information bulletin in January 2013 defining the process and requiring the use of interagency agreements. We also previously found that interagency coordination in Iraq began late, which caused State to have limited insights into its use of interagency acquisitions and hindered contract oversight. State officials told us that they want to focus on longer-term continuity by institutionalizing interagency agreements before determining how they would handle interagency coordination and transition planning for future contingencies.

State intends to assess the impact of some initiatives, such as establishing the regional Contract Management Office and the contractor vetting pilot program. According to State officials, they are still developing specific plans and time frames to implement many of the changes discussed above. We found that State has not indicated whether or how it intends to assess the impact of some initiatives. For example, as outlined in the October 2013 action memorandum, State plans to establish a new staff to centrally coordinate and assist in managing contract risk assessments and mitigation plans but has not yet determined how to assess the impact of the office. Federal Internal Control Standards highlight the importance of reviews by management at the functional level to compare actual performance to planned or expected results and Accordingly, without management analyze significant differences.reviews to assess planned and actual performance, State may not be able to determine whether these initiatives better enable it to support future contingency operations. State officials subsequently reported that the Critical Environment Contract Analytics Staff will be responsible for assessing the effectiveness and performance of the planned initiatives.

USAID Has Identified and Implemented Changes, but May Have Missed Opportunities to Leverage Its Institutional Knowledge

USAID concluded that its organizational structure was adequate to support contingency contracting efforts, but identified several actions needed to improve areas such as collection, inventory, and reporting of data; contractor performance evaluations; and risk management (see table 2). Our review also identified other contingency contracting-related actions taken by USAID that were not included in its report to Congress or were identified after USAID submitted its report to Congress.

To develop its Section 850 report, USAID officials told us that USAID’s Office of Acquisition and Assistance in the Bureau for Management (M/OAA)—the office responsible for developing, issuing, and maintaining the agency’s acquisition regulations, procedures, and standards—was tasked with assessing agency-wide acquisition policies, such as its Automated Directives System and the FAR, to determine if new policies or changes to existing policies or procedures were needed to improve contracting in overseas contingency operations. Section 850 required USAID to assess its policies and procedures related to contract support of contingency operations. USAID officials said that they took a narrow view of the mandate and did not include operational procedures from missions that have played key roles in contingency operations in their assessment because they interpreted the legislative requirement to include only agency policy rather than operational procedures developed by individual missions. Further, according to agency officials, the Office of Foreign Disaster Assistance and the Office of Transition Initiatives within USAID’s Bureau for Democracy Conflict and Humanitarian Assistance did not participate in developing USAID’s Section 850 report as these offices do not create contracting policy. However, officials from these two organizations noted that they are often the first to respond to disasters or contingencies and play a key role in successfully transitioning from short- term, quick-impact interventions to longer-term traditional development programming. For example, working in-country the Office of Transition Initiatives designs acquisition instruments and develops relationships with implementing partners—information that could benefit the mission if leveraged. As a result, USAID may have missed opportunities to leverage its institutional knowledge to better support future contingencies.

In response to long-standing challenges that the agency faces in implementing and monitoring activities in high-threat environments, however, USAID established a nonpermissive environment working group in October 2013. By September 2014, the working group plans to develop a compendium of best practices and lessons learned for implementing and monitoring projects in nonpermissive environments; an operations security toolkit that will include tools for enhanced monitoring, and possibly a field information technology support package; and a targeted set of training and learning tools that focus on how USAID prepares staff for managing risks inherent in working in overseas contingency environments. This working group affords USAID another opportunity to leverage its institutional knowledge, such as that residing at its missions and other offices with contingency contracting related responsibilities.

Organizational Structure

USAID described the offices that support contingency contracting in its Section 850 report and identified that its decentralized organizational structure for contracting activities is an effective and efficient model for overseas contingency operations. USAID delegates authority to heads of USAID contracting activities to carry out the programs and activities for which they are responsible—including execution of contracts and the establishment of procurement policies, procedures, and standards appropriate for their programs and activities, subject to government-wide and USAID regulations and policy. USAID reported that the agency works on a daily basis in countries characterized by many of the same conditions found in contingency operations; therefore, USAID concluded that its existing organizational structure for contracting activities can be easily applied, when necessary, in contingency operations. Further, USAID reported that its decentralized model gives staff flexibility in addressing issues that arise in contingency operations. Appendix III describes the roles and responsibilities of USAID’s contracting organization used to support contingency operations.

Data Collection, Inventory, and Reporting

USAID is in the early stages of developing a proposal to use SPOT solely as a tool to track contractor personnel in contingency environments rather than the number and value of contracts. USAID officials stated that other data systems, such as the Federal Procurement Data System–Next Generation and its Global Acquisition and Assistance System, provide more reliable information on the number and value of contracts. USAID plans to present this proposal to DOD and State for their consideration.

Solicitation and Award of Contracts

With regard to solicitation and award of contracts, USAID reported that its contracting writing system, the Global Acquisition and Assistance System, has been deployed worldwide and will allow personnel to write, manage, oversee, and report on USAID awards from any location. According to USAID, 80 percent of USAID-obligated funds are now managed through the Global Acquisition and Assistance System.

Requirements Development and Acquisition Planning

USAID did not identify any additional changes needed to its requirements development or acquisition planning processes for contingency operations in its Section 850 report. USAID’s missions and bureaus are responsible for establishing requirements prior to contract award and preparing a written acquisition plan that defines these requirements, if necessary. We previously identified that written acquisition plans, requirements development, cost estimating, incorporating lessons learned, and allowing sufficient time to conduct acquisition planning are several important elements of successful acquisition planning. In 2011, GAO found that USAID did not require written acquisition plans for individual contracts. We recommended that USAID establish requirements for written acquisition plans and enhance guidance for lessons learned in acquisition planning, among other things. In response to our recommendation, in April 2013 USAID finalized its acquisition planning chapter in the Automated Directives System, which provides the agency’s policy directives, required procedures, and internal guidance for the planning of USAID direct acquisition and assistance activities, including requirements for preparing written acquisition plans for individual contracts. However, we found that the policy does not require a discussion of lessons learned, including insights on the performance of the contract and any issues the program may have encountered.

Contract Oversight

While USAID did not identify contract oversight as an area needing improvement in its Section 850 report, USAID reported that it has completed or is taking steps at the mission level to improve contract oversight in overseas contingency operations. For example: In Iraq, USAID reported that it made a number of management changes to meet mission needs, including modifying contracts to include more stringent reporting requirements. USAID also increased the number of CORs in-country and provided them with additional guidance on ensuring compliance related to reporting.

As the U.S. military presence draws down in Afghanistan, USAID officials acknowledged that they may be challenged to adequately monitor project progress. To address this concern, USAID created on- site monitors at project sites to devolve project monitoring responsibilities to USAID personnel in the five regional commands in September 2010. In addition, USAID/Afghanistan provided training for on-site monitors on the acquisition process. According to M/OAA officials in Kabul, the USAID mission in Afghanistan recently established support units for contracting activities. For example, mission officials told us that they established a compliance division approximately 1 year ago to ensure that implementing partners and M/OAA are in compliance with USAID acquisition policy. Further, USAID officials told us that the mission in Afghanistan staffed a contract management team in 2012 to support COs by tracking audit recommendations and ensuring implementation and performing contract closeout.

In addition, USAID is planning to implement a remote monitoring program in Afghanistan that will verify project performance through individuals hired by the contractor to verify activities that implementing partners have completed at project sites. This initiative will be composed of a set of monitoring methods that will be used to verify project performance, including third-party monitors, Global Positioning System tracking, photography, and data collections with mobile devices, among other methods. To implement this initiative, USAID issued a draft request for proposals in May 2013 publicizing its intent to negotiate up to as many as three contracts. According to USAID officials, as of October 2013, the agency is in the process of finalizing the request for proposals.

The USAID mission in Pakistan reported that it has developed several monitoring and evaluation mechanisms that are especially useful in geographically remote areas where USAID staff have limited access due to security restrictions. For example, USAID contracts with several independent local contractors to monitor implementation in insecure areas. In May 2013, the Inspector General recommended that the USAID mission in Pakistan implement a mission‐wide monitoring and evaluation plan to cover all aspects of mission programs. USAID/Pakistan concurred with this recommendation.

Performance Evaluations

USAID reported that it has identified increasing the submission of contractor performance evaluations in CPARS as one of the agency’s highest acquisition priorities. To do so, M/OAA has established quarterly targets for reporting in the contractor past performance database to measure its progress in meeting the agency’s 65-percent reporting goal for fiscal year 2013 and embarked on a communications and training effort for COs and CORs.

Risk Management

USAID has taken actions to address contracting risks in contingency environments, including reliance on contractors and the risk of terrorist financing. For example, USAID’s Bureau for Policy, Planning and Learning revised the agency’s planning policy to incorporate a risk assessment requirement for using contractor support in overseas contingency operations as required by the 2013 NDAA. According to agency officials, they expect the draft revised policy will be finalized in January 2014. Further, in 2011, we found that USAID’s vendor vetting process in Afghanistan faced limitations and recommended that USAID consider formalizing a risk-based approach that would enable them to identify and vet the highest-risk vendors and partners. USAID concurred with the recommendation and in April 2013 USAID completed deployment of its Partner Vetting System—a centralized database used to support the vetting of individuals—to decrease the risk of terrorist financing, and is preparing templates and implementation guidance for COs.

In addition, individual USAID missions develop and implement operational procedures as necessary to address environment-specific risks. For example, USAID reported that, in Afghanistan, USAID launched the Accountable Assistance for Afghanistan initiative to further protect taxpayer dollars from being diverted from their development purpose in the fall of 2010. The initiative consists of several components, including limiting the number of layers of subcontracts and financial controls such as auditing all locally incurred costs and ensuring close review of contractor claims prior to payment.

Interagency Coordination and Transition Planning

USAID’s Office of Afghanistan and Pakistan Affairs represents USAID in interagency discussions related to the contingency operation in Afghanistan. Further, the Office of Afghanistan and Pakistan Affairs provides support to the USAID mission in Afghanistan so that it may provide input to key interagency stakeholders. While USAID did not identify interagency coordination as an area needing improvement in its Section 850 report, according to USAID officials the Office of Afghanistan and Pakistan Affairs details staff on an ongoing basis to State and DOD offices to strengthen interagency coordination. Further, according to USAID officials, the Office of Afghanistan and Pakistan Affairs and the USAID mission in Afghanistan have conducted extensive planning regarding management and oversight of procurements in light of the upcoming transition from a DOD to a State-led presence in Afghanistan. Principal procurement management responsibilities are expected to remain with USAID staff based in Kabul, in consultation with Washington, D.C.-based staff.

State and USAID Increased Their Acquisition Workforces and Continue to Assess Contingency Acquisition Workforce Needs

Since 2011, State and USAID have increased their overall acquisition workforces and are in various stages of assessing their workforce needs for overseas contingency operations. Per Office of Management and Budget (OMB) guidance, both agencies identified competency and skill gaps for their acquisition workforces in their 2013 acquisition human capital plans. State’s 2013 plan noted that, in response to growth in contracting activity in areas such as Iraq and Afghanistan, additional acquisition personnel were needed. In October 2013, State’s Under Secretary for Management approved the formation of a multibureau working group that plans to further explore workforce needs for current and future contingency operations. USAID launched a program in 2008 that has worked to rebuild a cadre of contracting officers and USAID’s 2013 plan cited providing training for a young acquisition workforce as the agency’s greatest challenge. State noted in its Section 850 report that it will increase its focus on conducting risk assessments on the reliance, use, and oversight of contractors through the establishment of risk management staff. USAID’s Section 850 report did not address reliance on contractors, but in October 2013, USAID drafted a revision to its planning policy to require a risk assessment and mitigation plan associated with contractor performance of critical functions in overseas contingency operations.

State and USAID Have Increased Their Overall Levels of Acquisition Personnel Since 2011

Since 2011, both State and USAID have increased the size of their acquisition workforces. State reported that its workforce has grown by 53 percent, while USAID’s workforce grew by about 15 percent (see table 3).

State’s 2013 acquisition human capital plan noted that, in response to growth in contracting activity in areas such as Iraq and Afghanistan, additional acquisition personnel were needed. To increase their acquisition workforce, State officials told us that they realigned and designated existing staff as acquisition personnel and undertook limited hiring. Further, State officials noted that the department’s acquisition workforce growth was in part aided by the use of its working capital fund, which is generated through a 1-percent fee on all procurements. In 2012, we found that State had not assessed the extent to which the working capital fund has helped State surge its workforce to meet requirements for Iraq and Afghanistan.

While USAID also reported increasing its overall acquisition workforce from fiscal year 2011 to 2013, USAID officials told us that they experienced a decrease in 2013 due to a number of factors, including a temporary loss in their direct hiring authority for hard-to-fill positions and a slowdown in hiring due to budget cuts as a result of sequestration. USAID officials stated that they anticipate that the number of acquisition personnel will increase in future years as personnel are hired to fill vacant positions. USAID officials do not anticipate an increase in the total number of authorized positions at this time.

Responsible for ensuring the technical and administrative functions of the contract, CORs are an integral part of the acquisition workforce. USAID officials reported that their Global Acquisition and Assistance System identified 3,629 personnel in fiscal year 2013 who have been designated to serve as a COR since 2008. However, USAID officials cautioned that they are continuing to improve the reliability of the data and that relying on the number of employees who have been certified as a COR may overstate the COR workforce at USAID. Further, USAID officials explained that the number of CORs reported by Global Acquisition and Assistance System who have been designated to serve as a COR on a specific award—which totaled about 1,116 as of November 2013—may be a more accurate representation of USAID’s COR workforce. State officials told us that 2,367 CORs were certified in fiscal year 2013.

State and USAID Are in Various Stages of Assessing Their Workforce Needs for Overseas Contingency Operations

State and USAID are in various stages of assessing their workforce needs for overseas contingency operations and have identified skills and competency gaps in their acquisition workforces. OMB’s 2009 memorandum, Acquisition Workforce Development Strategic Plan for Civilian Agencies—FY 2010-2014, requires agencies to develop annual acquisition workforce human capital plans that identify strategies and goals for increasing the capacity and capability of the acquisition workforce. For example, the plan is to include recruitment and retention strategies for obtaining the acquisition workforce resources and skills required to meet future agency mission needs. We also identified leading practices agencies should follow when developing workforce plans, including determining the occupations, skills, and competencies that are critical to achieving their missions and goals, as well as identifying any gaps between their current workforce and the workforce they will need in the future.

State’s March 2013 acquisition human capital plan provided information on identified skill and competency gaps in its acquisition workforce, as well as agency plans to address them. For example, State’s report identified that its contracting professionals had strong technical skills in contract award and administration, but noted weakness in acquisition planning, among other areas. State reported that it is focusing on pairing interns and recently hired staff with senior staff and mentoring them in the competencies that need additional attention. State is also continuing to use internal expertise and resources to provide in-house training sessions to supplement external training.

In October 2013, State’s Under Secretary for Management approved the formation of a multibureau working group that plans to explore workforce needs for current and future contingency operations. Specifically, the working group will assess the existing COR structure, further analyze skill gaps to meet the department’s demands for surge personnel, and develop expanded legislative authority for hiring personal services contractors in contingencies. For example, the group plans to review the feasibility of special pay incentives for critically needed COR skills and study whether a new career track for CORs with specialized training is needed. State did not identify when the working group is expected to complete its efforts.

OMB’s July 2009 multisector workforce guidance directed agencies to determine the best mix of skills of contractors and federal employees and the appropriate workforce size for the agency. To do so, agencies were directed to conduct a pilot human capital analysis of at least one program where the agency has concerns about the extent of reliance on contractors and to adopt a framework for planning and managing a multisector workforce that is built on strong strategic human capital planning. According to State officials, in response to OMB’s guidance, they created a multisector workforce methodology, conducted two pilot programs, and realized efficiencies and cost savings. In August 2012, we found that State had not fully assessed whether its effort to increase its workforce was sufficient to meet requirements; whether it had the proper skills; whether it had the appropriate mix of government/contractor personnel; or whether it had sufficient numbers of qualified oversight personnel to support its future acquisition efforts in Iraq and Afghanistan. We recommended that State assess the extent to which the current acquisition workforce, both government and contracting personnel, meets its needs for acquiring goods and services in complex environments such as Iraq and Afghanistan. State concurred with this recommendation and, in September 2013, State officials noted that they are still considering options to address this recommendation, such as relying on the resources of an Afghanistan interagency coordination group to determine skill sets needed. Further, State noted in its Section 850 report that it will increase its focus on conducting risk assessments on the reliance, use, and oversight of contractors through the establishment of risk management staff. In addition, State issued an updated workforce policy on October 1, 2013, that directed bureaus on a regular basis to consider using federal employees to perform new or expanded functions performed by contractors.

Similar to State, USAID’s 2013 acquisition human capital plan provided information on identified skill and competency gaps in its acquisition workforce. For example, USAID’s report identified that its contracting professionals had strong technical skills in contract administration and proposal evaluation, but noted weaknesses with acquisition planning, among other things. Similarly, USAID reported that its CORs had strong skills in project management and contract administration and weaknesses in market research and acquisition planning. In response, USAID developed training to improve COR technical skills through scenario- based learning. In addition, USAID launched an e-based resource in March 2013 that provides tools to guide personnel through the procurement process; the resource includes references for CORs at each stage of the contract award process.

USAID’s 2013 acquisition human capital plan cited providing training for a young acquisition workforce as the agency’s greatest challenge and USAID launched a program in 2008 that has worked to rebuild a cadre of contracting officers. According to USAID’s 2013 acquisition human capital plan, the average procurement professional within M/OAA has five years or less of experience in federal procurement policy and procedures. USAID established a Professional Development and Training Division in the fourth quarter of fiscal year 2013 to implement acquisition and assistance training. This division is intended to develop a formal process for learning across the acquisition workforce, but it is not focused specifically on training needs in contingency environments.

USAID’s Section 850 report did not address reliance on contractors in connection with contingency operations, but in October 2013, USAID drafted a revision of its planning policy to require a risk assessment and mitigation plan associated with contractor performance of critical functions in overseas contingency operations. The draft revision will undergo an agency clearance process before becoming policy in 2014. According to the draft policy, the risk assessments will consider the core capabilities of government personnel and the risk of overreliance on contractors to monitor other contractors, among other things. The draft policy notes that the mitigation plan will include specific actions to mitigate or reduce the risks and impacts noted in the risk assessment, including the development of alternative capabilities to reduce reliance on contractors for critical functions.

Conclusions

State and USAID have faced numerous contract management and oversight challenges while operating in contingency environments such as Iraq and Afghanistan. These challenges highlight the importance of effectively leveraging knowledge and developing ways to identify, mitigate, or avoid contracting pitfalls before new contingencies arise. Each agency has to varying degrees assessed, identified, and started implementing changes to improve its ability to overcome inherent risks of contracting in uncertain environments. State has outlined a series of initiatives to address weaknesses in areas such as the collection of contractor data, acquisition planning, contract oversight, risk management, and interagency coordination, and plans to institutionalize many of these changes in the department’s Foreign Affairs Manual within the next year. Except for a limited number of cases, State generally has not developed plans to assess the impact of these initiatives. Federal internal control standards highlight the importance of reviews by management to compare actual performance to planned or expected results and analyze significant differences. As a result, continued management attention is needed to ensure that these efforts achieve their intended objectives. While USAID has identified some needed improvements, such as completing contractor performance evaluations, it did not assess whether the procedures and practices created by the missions or offices that operate in contingency environments should be reflected in agency-wide policy or guidance. As a result, USAID may have missed opportunities to leverage its institutional knowledge. USAID recently established a nonpermissive working group responsible for developing lessons learned, toolkits, and training, which affords USAID another opportunity to take better advantage of its institutional knowledge. State and USAID have increased the size of their acquisition workforces in the past 3 years, and both have efforts in place to better ensure acquisition personnel are equipped with the skills needed to support future contingency operations. Both agencies have taken some initial steps to address reliance on contractors and to assess the appropriate mix of government and contractor personnel, but these efforts are in their infancy.

Recommendations for Executive Action

To ensure that State is in a better position to support future contingencies, we recommend that the Secretary of State develop plans to assess whether planned initiatives are achieving their intended objectives.

To ensure that USAID has the necessary policies and procedures to better position itself to address future contingency challenges, we recommend that the Administrator of USAID ensure that its nonpermissive working group consider procedures and practices developed by missions and offices with contingency-related responsibilities during the course of its efforts.

Agency Comments and Our Evaluation

We provided a draft of this report to State and USAID. In their written comments, the two agencies concurred with our recommendations and provided information on actions taken or planned to address them. Specifically, State created the Critical Environment Contract Analytics Staff on December 19, 2013 to develop and prepare department-wide contracting risk assessments and risk mitigation plans, coordinate efforts with other agencies, and monitor procurement readiness for contracting operations in critical environments. Additionally, the staff will be responsible for using metrics to assess the effectiveness and performance of planned initiatives. USAID plans to create a supplementary working group to the nonpermissive environment working group that will reach out to missions, offices, and contracting personnel with contingency operations experience to collect and disseminate a set of best practices for contracting in support of contingency operations and other potentially dangerous or uncertain environments. State’s letter is reprinted in appendix IV and USAID’s letter is in Appendix V. Both agencies provided technical comments which we incorporated into the report as appropriate.

We are sending copies of this report to interested congressional committees, the Secretary of State, and the Administrator of USAID. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov.

If you or your staff have 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 major contributions to this report are listed in appendix VI.

Appendix I: Objectives, Scope, and Methodology

Section 850(c) of the National Defense Authorization Act (NDAA) for Fiscal Year 2013 mandated that we report on the progress that the Department of State (State) and the U.S. Agency for International Development (USAID) have made in identifying and implementing improvements in a range of areas related to contract support for overseas contingency operations. The objectives for this review were to examine the extent to which State and USAID have identified and implemented changes to the agencies’ (1) organizational structures and policies; and (2) workforces, including their use of contractors. For the purposes of our review, we used the definition of overseas contingency operations set forth in Title 10 of the U.S. Code, as well as other contingency environments with characteristics such as unique security and logistical challenges; the need to contract quickly; difficulty in conducting oversight; difficulty traveling to dangerous or remote locations; events occurring unexpectedly; and frequent rotations among personnel.

For all objectives, we reviewed State and USAID’s Section 850 reports submitted to Congress in June and July, 2013, respectively; interviewed officials at State and USAID in the United States and Afghanistan with related program, acquisition, or workforce planning responsibilities to discuss their role in identifying and implementing changes, as appropriate; and reviewed and analyzed GAO and other oversight reports, including those from State and USAID’s Offices of the Inspector General, the Commission on Wartime Contracting, and the Special Inspectors General for Iraq and Afghanistan to identify key challenges reported by the accountability community.

To determine the extent to which State and USAID have identified and implemented changes related to their organizational structures, we reviewed State and USAID’s organizational charts and agency policy outlining roles and responsibilities in overseas contingency operations. To complement this information, we conducted interviews with key offices identified in the agencies’ Section 850 reports to obtain additional information regarding their roles and responsibilities in overseas contingency operations. In the case of State, these offices included the Office of Management Policy, Rightsizing, and Innovation; Office of Acquisitions Management; Deputy Assistant Secretary for Logistics Management; Kabul General Services Office; and the Afghanistan Transition Office. In the case of USAID, these offices included the Bureau for Management/Office of Acquisition and Assistance, the Office of Afghanistan and Pakistan Affairs, and the Office of Foreign Disaster Assistance and the Office of Transition Initiatives within USAID’s Bureau for Democracy Conflict and Humanitarian Assistance. We did not independently assess the adequacy of either State or USAID’s organizational structure.

To determine the extent to which State and USAID have identified and implemented changes to the agencies’ contract award and management policies, we collected and analyzed agency documentation, such as descriptions of related working groups, acquisition and quality assurance plans, and draft working group charters. We also reviewed agency-wide and individual mission contracting policies and guidance, such as USAID’s Automated Directives System and Acquisition and Assistance Policy Directive, and State’s Foreign Affairs Manual and Procurement Information Bulletins, as well as relevant sections of the Federal Acquisition Regulation. We compared changes identified by the agencies in their Section 850 reports to challenges and potential changes identified in prior GAO and other oversight reports, to determine the extent to which the agencies are addressing these challenges.

To determine the extent to which State and USAID have identified and implemented changes related to their workforces for contract support in overseas contingency operations, we collected and analyzed detailed data on the composition of State and USAID’s acquisition workforces. Specifically, we reviewed and compiled acquisition workforce data for fiscal years 2011 to 2013 from each agency’s March 2013 acquisition human capital plan. We included data from the following categories: contracting officers, contracting specialists, contracting officer representatives, and program or project managers. We collected updated data on State and USAID’s acquisition workforces as of November 2013. We used this information to describe characteristics of each agency’s acquisition workforce and, as such, did not assess the reliability of the data. We reviewed a March 2013 USAID report on worldwide staffing patterns and other USAID data on its acquisition workforce for its five critical priority countries. We also reviewed various workforce related reports, such State and USAID’s 5-year succession plans and the Federal Acquisition Institute annual federal acquisition workforce reports. We also reviewed acquisition workforce guidance and memorandums from the 2009 Office of Management and Budget multisector workforce guidance and its acquisition workforce development strategic plan.

We conducted this performance audit from March 2013 to February 2014 in accordance with generally accepted government auditing standards. These 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.

Appendix II: Description of Department of State’s (State) Contracting Organization for Contingency Operations

Appendix II: Description of Department of State’s (State) Contracting Organization for Contingency Operations Roles and responsibilities The Under Secretary for Management leads several bureaus, such as Administration and Diplomatic Security. As the leader of these bureaus, the Under Secretary is responsible for major contingency contracting policy decisions.

The Assistant Secretary for Administration serves as State’s Chief Acquisition Officer and advises the Under Secretary for Management on the applicability of relevant policy on contracts for overseas operations, including contingency operations, and ensuring compliance of the contracts and contracting activities with such policies.

The Office of the Procurement Executive supports the Chief Acquisition Officer and is responsible for promulgating acquisition policy, providing oversight, and defining and presenting acquisition training.

The Office of Acquisitions Management is responsible for providing a full range of contracting services to support activities across State, including acquisition planning, contract negotiations, cost and price analysis, and contract administration. The office reports to the Deputy Assistant Secretary for Logistics Management.

The Deputy Assistant Secretary for Logistics Management oversees the integration of logistics and acquisition and ensures complete supply chain accountability.

Functional bureaus such as the International Narcotics and Law Enforcement Affairs, Overseas Buildings Operations, Human Resources, and Diplomatic Security are responsible for identifying and defining contracting requirements, providing technical contract administration, providing program and project management support, and training within their mission.

Appendix III: Description of U.S. Agency for International Development’s (USAID) Contracting Organization for Contingency Operations

Appendix III: Description of U.S. Agency for International Development’s (USAID) Contracting Organization for Contingency Operations Roles and responsibilities The Office of Acquisition and Assistance within the Bureau for Management is responsible for (1) developing, issuing, and maintaining the agency’s acquisition regulations, procedures, and standards in accordance with established agency delegations and requirements; and (2) evaluating the agency’s procurement system, providing recommendations for selecting and appointing contracting officers and terminating their appointments, and providing technical support to overseas contracting officers. Additionally, in accordance with Section 849 of the 2013 NDAA, the Director of the Office of Acquisition and Assistance advises the agency on the applicability of relevant policies on contracts for overseas contingency operations as defined in 10 U.S.C. § 101(a)(13) and ensures the compliance of contracting activities with this policy.

The Assistant Administrator for the Bureau for Democracy, Conflict, and Humanitarian Assistance has authority to negotiate, execute, and amend contracts for the purpose of immediately responding to disasters overseas. This authority is limited to grants and cooperative agreements up to $3 million, and contracts up to $500,000. The Office of Foreign Disaster Assistance and Office of Transition Initiatives are typically USAID’s first responders to a contingency situation. The Office of Civilian Response provides reconstruction and stabilization support, and provides staff surge support for contracting, including those seconded to the Office of Acquisition and Assistance for assignment.

USAID acquisition and assistance staff at overseas missions provide advice and support to mission staff that design and manage assistance activities; they also have overall responsibility for the administration of acquisition instruments at overseas missions. Acquisition offices are typically headed by a contracting officer, who reports to the mission director, the principal USAID officer at post, or deputy mission director. At most bilateral missions, contracting officers are co-located with acquisition specialists and contracting officer’s representatives (COR). However, under USAID’s regional mission structure, contracting officers provide acquisition support to more than one mission and are not necessarily co-located with either the CORs or the acquisition specialists who assist them. Some missions with no on-site contracting officers may instead have on-site acquisition specialists who provide support to CORs.

Appendix IV: Comments from the Department of State

Appendix V: Comments from the U.S. Agency for International Development

Appendix VI: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, W. William Russell, Assistant Director; Peter Anderson; Lynn Cothern; Leigh Ann Haydon; Amber Keyser; John Krump; Anne McDonough-Hughes; Eddie Uyekawa; and Andrea Yohe made key contributions to this report.