In part to improve the information available and management of DOD’s acquisition of services, in fiscal year 2002 Congress enacted section 2330a of title 10 of the U.S. Code, 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. The information DOD is to collect includes, among other things, the services purchased, the total dollar amount of the purchase, the form of contracting action used to make the purchase, and the extent of competition provided in making the purchase. In 2008, Congress amended section 2330a 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 component of DOD 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 full FTEs) for direct labor, using 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 information required by section 2330a(a) of title 10 of the U.S. Code. Within DOD, USD(AT&L), USD(P&R), and the Office of the Under Secretary of Defense (Comptroller) have shared responsibility for issuing guidance for compiling and reviewing the inventory. USD(P&R) compiles the inventories prepared by the components, and USD(AT&L) submits a consolidated DOD inventory to Congress no later than June 30 of each fiscal year. DOD has submitted annual, department-wide inventories for fiscal years 2008 through 2014, the most recent submitted on August 31, 2015 (see table 1). Since DOD implemented the department-wide inventory of contracted services, the primary source used by most DOD components to compile their inventories, with the exception of the Army, has been FPDS-NG. The Army developed its CMRA system in 2005 to collect information on labor-hour expenditures by function, funding source, and mission supported on contracted efforts, and has used its CMRA as the basis for its inventory. The Army’s CMRA is intended to capture data directly reported by contractors on services performed at the contract line item level, including information on the direct labor dollars, direct labor hours, total invoiced dollars, the functions performed, and the organizational unit for which the services are being performed. In instances where contractors are providing different services under the same order, or are providing services at multiple locations, contractors can enter additional records in CMRA to capture information associated with each type of service or location. It also allows for the identification of services provided under contracts for goods. Section 2330a(e) of title 10 of the U.S. Code requires the secretaries of the military departments or heads of the defense agencies to complete a review of the contracts and activities in the inventory for which they are responsible within 90 days after an inventory is submitted to Congress. USD(P&R), as supported by the Comptroller, is responsible for, among other things, developing guidance for the conduct and completion of this review. As part of this review, the military departments and defense agencies are to ensure that any personal services contracts on the inventory were properly entered into and performed appropriately; the activities on the list do not include any inherently governmental functions; and to the maximum extent practicable, the activities on the inventory do not include any functions closely associated with inherently governmental functions. This review also requires the secretaries of the military departments and heads of defense agencies to identify activities that should be considered for conversion to government performance, or insourced, pursuant to section 2463 of title 10 of the U.S. Code, or to a more advantageous acquisition approach. Section 2463 specifically requires the Secretary of Defense to make use of the inventory to identify critical functions, acquisition workforce functions, and closely associated with inherently governmental functions performed by contractors—and to give special consideration to converting those functions to DOD civilian performance. Further, section 808 of the National Defense Authorization Act for Fiscal Year 2012 required DOD to issue guidance requiring the components to eliminate contractor positons identified as being responsible for performing inherently governmental functions and reduce by 10 percent the funding for contracts for the performance of functions closely associated with inherently governmental in fiscal years 2012 and 2013. DOD issued guidance in June 2012 instructing components to rely on the annual inventory review to demonstrate compliance with these requirements, using the fiscal year 2011 inventory review as the baseline for reductions. However, we found in December 2014 that the annual inventory review did not include the obligation data necessary to establish a baseline for reductions and recommended that DOD identify additional data sources to corroborate data reported in the annual inventory review. DOD concurred with our recommendation. In September 2015, we found the Comptroller intended to measure these reductions based on the advisory and assistance service obligations in the fiscal year 2017 budget submission. Our analysis found that using these revised measures, the military departments achieved the required funding reductions. In addition, section 2330a(f) of title 10 of the U.S. Code requires the secretaries of the military departments or heads of the defense agencies responsible for contracted services in the inventory to develop a plan, including an enforcement mechanism and approval process for using the inventory to inform management decisions (see figure 1). Collectively, these statutory requirements mandate the use of the inventory and the associated review process to enhance the ability of DOD to identify and track services provided by contractors, achieve accountability for the contractor sector of DOD’s total workforce, help identify contracted services for possible conversion from contractor performance to DOD civilian performance, support DOD’s determination of the appropriate workforce mix, and project and justify the number of contractor FTEs included in DOD’s annual budget justification materials. We have issued several reports on DOD’s efforts to compile and review its inventory of contracted services, including initiatives to standardize contractor manpower data collection across the department. For example, in April 2012 we found that DOD issued a plan in November 2011 to develop a common technology solution that would allow the department to collectively meet the inventory requirements and planned to have the system available to help inform the 2013 inventory of contracted services with full reporting by the fiscal year 2016 inventory. To achieve a uniform approach to collecting contractor manpower data, USD(P&R) and USD(AT&L) issued a joint memorandum in November 2012 that reiterated its goal for all components to report contractor manpower data using a common system, which it termed the Enterprise-wide Contractor Manpower Reporting Application (ECMRA). In May 2013, we reported that the Navy and Air Force had each taken steps to develop their own interim system to collect and store contractor manpower data based on the Army’s existing CMRA system. In May 2014, we reported that DOD fielded the last of the four CMRA systems for the defense agencies in September 2013. Most recently, in November 2014, we found DOD continued to lack a plan with timeframes and milestones to implement a common contractor manpower reporting system and faced continued delays in doing so. Additionally, we reported that USD(P&R) initiated a strategic review to assess all data collection options, raising the question of whether DOD would continue to establish a common data system, ECMRA, as it indicated it intended to do in a November 2012 memorandum. Noting that continued delays in developing an implementation plan for a common data system increased the risk that DOD would be unable to collect the statutorily required data needed to serve as the basis for DOD’s inventory process, we recommended that USD(P&R) approve a plan of action, with timeframes and milestones, for rolling out and supporting a department- wide data collection system as soon as practicable following the strategic review. Further, should a decision be made to use or develop a system other than ECMRA, we recommended that USD(P&R) provide a documented rationale for doing so and assure that the new approach will provide statutorily required data. DOD concurred with these recommendations. Additionally, we found that the military departments had not developed plans with enforcement and approval mechanisms to facilitate the use of the inventory in management decisions, including workforce planning and budgeting and that the responsibility for developing such plans was not clearly assigned. Consequently, to help ensure the inventory is integrated into key management decisions, as statutorily required, we recommended that the military departments appoint an accountable official within their departments with responsibility for leading and coordinating efforts across manpower, budgeting, and acquisition functional communities and, as appropriate, revise guidance, develop plans and enforcement mechanisms, and establish processes. DOD concurred, but had not done so at the time we began our current work. We discuss the status of DOD’s efforts in this report. A listing of GAO’s prior work on DOD’s inventory of contracted services may be found in appendix IV. We found that DOD components’ 2013 inventory review certifications better addressed required reporting elements than in prior years; however, for the second consecutive year, the Air Force, which accounts for about 20 percent of DOD’s obligations for contracted services, did not submit a certification letter. Further, DOD may be understating the number of contractors performing closely associated with inherently governmental functions. For example, the Army identified nearly 80 percent of its contracts for certain types of services as including such functions. The Navy and other defense components identified 13 percent of their contracts as doing so for similar categories of services. Further, our review of 28 selected contract actions found that commands’ pre- contract award reviews of the proposed contract did not consistently identify or document whether contractors would potentially perform closely associated with inherently governmental functions, which may contribute to inaccurate reporting of the functions contractors performed during the inventory review process. Overall, our analysis found that at least 12 of the 28 contract actions we reviewed appeared to include closely associated with inherently governmental functions, but—of those 12—DOD identified only one prior to contract award and only two during the inventory review process as including such functions. USD(AT&L) and USD(P&R)’s March 18, 2014 guidance governing the fiscal year 2013 inventory of contracted services instructed components to address seven elements in their certification letters, the same seven elements contained in DOD’s guidance for the fiscal year 2012 inventory. The elements include discussions of the inventory review methodology, the identification of inherently governmental and closely associated with inherently governmental functions, and the role of the inventory review in budget formulation (see table 2). DOD components continued to make progress in addressing more of the required elements in their fiscal year 2013 certification letters compared to prior years. For example, 15 of the 35 components reporting for 2013 addressed all required elements compared to none of the 31 components reporting for fiscal year 2011. Further, 32 of the 35 components submitting fiscal year 2013 certification letters addressed at least four of the required reporting elements and 28 components addressed at least five of the required reporting elements. The Air Force, which represented about 20 percent of DOD’s obligations for contracted services in fiscal year 2013, did not submit a certification letter for the second consecutive year (see table 3). While more components are addressing more of the elements in their certification letters, DOD’s guidance on how to conduct the reviews is not clear. In November 2014, we recommended, in part, that DOD’s guidance for the inventory compilation and review clearly identify the basis for selecting contracts to review and provide approaches the components may use to conduct the reviews. DOD concurred with this recommendation and stated that it intended to have components review 100 percent of the services reported in their respective inventories. We found that 12 of the 35 components we reviewed specifically stated the percentage of the contract actions reviewed. Of those 12 components, 11, including the Navy, stated they reviewed 100 percent of contract actions, while the Army stated it reviewed 85 percent of its contracts. The other 23 components, including the Air Force, did not identify the percentage of contracts they reviewed and whether any of these components used a risk based approach. More recently, a USD(P&R) official stated that, while the intention was to have all components review 100 percent of the contracts in their inventory, the nature and level of the review may vary. For example, this official noted a larger component may, based on its knowledge of its contracting activities, prioritize its review on selected areas or types of contracting activities, and then based on its review of those areas, certify it has reviewed its inventory of contracted services. DOD’s March 2014 guidance for the fiscal year 2013 inventory, however, did not provide clarification on the appropriate criteria for such an approach. DOD’s December 29, 2014 guidance for the fiscal year 2014 inventory—the first issued after our November 2014 recommendation— also did not provide a specific percentage of contracts to be reviewed or the basis for selecting the contracts to review or any additional clarity on approaches. Without such clarification, components may miss opportunities to properly identify contractors performing closely associated with inherently governmental functions. We found that DOD obligated about $25.5 billion for contracts in the 17 product service codes that OFPP and GAO identified as often including services that are closely associated with inherently governmental functions. After excluding the contracts awarded by the Air Force, DOD obligated $20.4 billion for contracts in these product service codes. Overall, 17 components reported about $8.9 billion—or 44 percent—of these obligations as being on contracts actually including work identified as closely associated with inherently governmental functions. Appendix II provides detailed data reported by the components. There was significant disparity, however, among the components. For example, the Army identified nearly 80 percent of its $9.7 billion in contract actions in these 17 product service codes, by obligation value, as including work that is closely associated with inherently governmental functions. In contrast, the Navy and other defense agencies identified less than $1.4 billion of the $10.7 billion—or about 13 percent—of their contracts in these same 17 codes, by obligation value, as having such work (see figure 2). Our analysis of the obligations in fiscal year 2013 by the three major commands we reviewed found similar results. For example, the Army Materiel Command identified $1.6 billion, or nearly 70 percent of its contracts in the 17 product service codes, by obligation value, as including work that is closely associated with inherently governmental functions. In contrast, the Naval Sea Systems Command identified about two percent of their contracts in these codes, by obligation value, as having such work. While the Air Force did not submit a certification letter, the Air Force Materiel Command reported that none of the $2.7 billion obligated for contracts categorized under these product service codes included work that was closely associated with inherently governmental functions in two reviews of its fiscal year 2013 contract actions. According to Air Force officials, neither the Air Force’s Annual Execution Review of contracts for programs over $100 million or the Air Force Materiel Command’s Health of Services assessment of all contracts over $150,000 identified contracts with contractors performing such functions in fiscal year 2013. Each military department and major command we reviewed took different approaches to reviewing contracts prior to award and during the inventory review process (see table 4). We identified several factors that may contribute to incorrectly identifying contracts that may include closely associated with inherently governmental functions during the pre-contract award process. Overall, we identified at least 12 of the 28 contract actions we reviewed that appeared to include such functions, but—of those 12—commands only identified one prior to contract award. For example: Office of the Secretary of Defense and military department officials indicated that a lack of understanding of the definition of closely associated with inherently governmental functions remains and may have led components to incorrectly identify the potential for contractors to perform these types of functions. The lack of a requirement for acquisition officials to document, during the pre-award process, whether a proposed contract may include closely associated with inherently governmental functions hinders DOD’s ability to consistently identify contractors that perform such functions. There is no requirement in statute, the FAR, DOD Federal Acquisition Regulation Supplement (DFARS), or OFPP Policy Letter 11-01 to document a pre-award determination regarding closely associated with inherently governmental functions; however, there are requirements for agencies, and DOD specifically, to take certain steps to mitigate the risk of using contractors for such functions. For example, section 2383 of title 10, U.S. Code, provides that DOD may only enter into such a contract if the contracting officer ensures that DOD personnel cannot reasonably be made available to perform the function; that appropriate DOD personnel supervise contractor performance and perform all inherently governmental functions under the contract; and that the agency addresses any potential organizational conflict of interest of the contractor in performance of these functions. We found the Army’s pre-award process, specifically the Service Contract Approval checklist, documents the determination of closely associated with inherently governmental functions and other determinations of planned contractor functions. By contrast, the Air Force and Navy do not have department-wide requirements to document this determination in its contract files. Acquisition officials documented their pre-award determinations in eight of the 28 contract actions. In one case involving a Navy contract, the command clearly identified that the proposed contract included closely associated with inherently governmental functions. In another case involving an Army contract, the pre-award documentation identified closely associated with inherently governmental functions, but our review did not identify such functions in the statement of work. The remaining 20 contract actions in our review did not include documentation of a pre-award determination. Our analysis of the statements of work and other pre- award documentation found 11 of these 20 contract actions potentially included these functions. All three military departments are required to follow DOD guidance that required, effective March 1, 2013, contracting officers to identify whether or not contractors were performing such functions in an FPDS-NG narrative data field. None of the 17 contracts we reviewed awarded after this date included the required information. In several cases, command officials used one determination to cover more than one contract action. For example, the Army identified one contract action in our review as including closely associated with inherently governmental functions based on a blanket Service Contract Approval form for contracts within the Software Engineering Center. We found, however, that the activities described in the form were not consistent with the activities outlined in the statement of work, which did not appear to include closely associated with inherently governmental functions. We also found that the Navy and Air Force commands used a blanket or class determination and finding document to cover multiple contract actions under which contractors would perform evaluations and analyses of proposals or advisory and assistance services, as permitted by the FAR. For example, for six of the Air Force contract actions, the contract files included blanket approvals to use non-government personnel in source selection and sole source evaluations. However, these services are clearly identified in FAR § 7.503(d)(8) and OFPP Policy Letter 11-01, appendix B, paragraph (1)(e)(ii) as closely associated with inherently governmental functions, but there was not documentation in the contract files identifying these activities as being closely associated with inherently governmental functions. Having contractors perform closely associated with inherently governmental functions is often necessary to support an agencies’ mission. However, using contractors for these functions poses several risks to an agency, including the inappropriate transfer of inherently governmental functions to the contractor. To mitigate these risks, the FAR and OFPP Policy Letter 11-01 requires agencies to ensure appropriate oversight of contractors performing closely associated with inherently governmental functions. Further, section 2383 of title 10 of the U.S. Code and the DFARS require that DOD take certain steps before entering into a contract for such functions, such as ensuring that appropriate DOD military or civilian personnel will oversee contractor performance and will perform all inherently governmental functions associated with the contract. To carry out these steps, it is critical for DOD to identify contracts that may include closely associated with inherently governmental functions during the pre-contract award process. Both the OFPP guidance and the FAR offer descriptions of tasks that are closely associated with inherently governmental functions (see figure 3). As the inventory review process at the Army and Navy relies, in part, on pre-award determinations and documentation, inaccurate identification of contractors performing closely associated with inherently governmental functions prior to contract award may hinder the review process at these departments. Our review of inventory review processes at the three commands we reviewed found that the commands may not have accurately identified contract activities that included closely associated with inherently governmental functions during the review process. In our review of the 28 contract actions, we did not assess whether the contractor actually performed closely associated with inherently governmental functions, which could potentially account for some differences between our pre-award assessment and assessments commands made for the inventory review. In some cases, however, it is unclear whether the major commands adequately considered planned activities in their inventory reviews. The following examples illustrate these issues. Our analysis found all nine Air Force Materiel Command contract actions included closely associated with inherently governmental functions in the statements of work. These functions included assisting, preparing, developing, and delivering compliant documents in support of planning, programming, budgeting, and execution; and developing documents such as the acquisition strategy, performance work statements, requests for proposal, technical evaluations, and evaluation notices. The Air Force Materiel Command, however, did not identify these contracts as having closely associated with inherently governmental functions in its reviews for the fiscal year 2013 inventory. In response to our review, Air Force officials re- examined the contract actions and agreed with our determination that all nine included closely associated with inherently governmental functions. The Naval Sea Systems Command (NAVSEA) identified four of the nine selected contract actions as including closely associated with inherently governmental functions in its inventory review letter. In two of these cases, our review of the statements of work matched NAVSEA’s determination, but in the third case we found the statement of work did not include closely associated with inherently governmental functions. In the fourth case, it was unclear whether the contract activities would include these functions. Of the selected Navy contract actions, we also identified one where the statement of work included requirements for contractors to perform closely associated with inherently governmental functions that was not identified by NAVSEA. At the Army, it is unclear whether eight of the 10 contract activities were included in the Army’s inventory review results. Army’s PDC tool, used to inform the inventory review, tracks by location and functional requirement—such as administrative or logistics support. Officials who input data into this system noted that there is no data field specifically for contract number but stated they can include this information in the description field if they choose to do so. For the two contracts we could confirm were included in the inventory review results we agreed with the Army determination that the contractor activities did not include closely associated with inherently governmental functions based on our review of the statements of work. The Joint Explanatory Statement accompanying the National Defense Authorization Act for Fiscal Year 2015 directed the senior acquisition executives from the Navy and Air Force, along with the USD(AT&L) for the defense agencies, to issue policies implementing a standard checklist to be completed before awarding a contract for services, similar to the Army’s current process that identifies whether contractors are performing closely associated with inherently governmental functions, among other things. Neither USD(AT&L) nor the two military departments met the March 30, 2015 deadline. USD(AT&L) delegated the requirement to the Office of Defense Procurement and Acquisition Policy (DPAP)—the office within USD(AT&L) responsible for contracting and acquisition policy. In lieu of developing a standard checklist, representatives from DPAP and the two military departments indicated they intended to address the issue in a different manner. Specifically, DPAP officials stated that the forthcoming DOD Instruction on service acquisitions will include direction to consider the planned activities under a contract during the service requirement review boards. DPAP officials plan to issue supplemental guidance on the service requirement review boards, including direction for components to identify and document plans to have contractors perform closely associated with inherently governmental functions. DPAP officials stated that this supplemental guidance would apply to all military departments and defense components. According to Navy officials, an upcoming revision to the Navy’s instruction governing services acquisitions will include a service contract approval form requirement. Navy officials stated that the service contract approval form will address the mission needs, requirements, and consideration of inherently governmental and closely associated with inherently governmental functions. Requirements owners completing the form will need to certify that closely associated with inherently governmental functions were considered, but not necessarily document a determination that contractors will or will not be performing such functions. According to an Air Force official, the Air Force is developing a Service Management Tool that will require documentation that closely associated with inherently governmental functions were considered prior to contract award. It is not certain whether contracting officers would be required to document this determination in the contract files. Until DPAP, Air Force, and Navy take action to develop and implement these pre-award processes, we cannot determine the extent to which they will address challenges we found with identifying contract activities that may include closely associated with inherently governmental functions. In turn, without accurate identification of the number of contractors performing these functions, DOD cannot be assured that proper oversight is in place or provide data to ensure that it is meeting statutory requirements to reduce, to the maximum extent practicable, the number of contractors performing closely associated with inherently governmental functions. Federal internal control standards state that documentation is a necessary part of an effective control system. In particular, management should have the information necessary to identify the risks related to its objectives and design appropriate control activities. The military departments generally have not developed statutorily- required plans or enforcement mechanisms to use the inventory to inform workforce mix, strategic workforce planning, or budget decision-making processes. At the same time, DOD components and contractors are increasing their use of CMRA for reporting purposes, and the 28 contract actions we reviewed generally included requirements for contractors to report manpower data, such as direct labor hours, into the system. DOD is in the process of defining the roles and responsibilities of a support office that is intended to help manage the inventory of contracted services reporting processes and continues to explore options for an enhanced reporting system that may better meet user needs. Until DOD identifies these roles and responsibilities for collecting and validating the data, it is unclear how the information may be used for decision making. The military departments generally have not developed plans or enforcement mechanisms as required by title 10 U.S.C. § 2330a(f), to use the inventory of contracted services to inform workforce mix, strategic workforce planning, and budget decision-making processes. In November 2014, we found that the military departments lacked plans and processes to incorporate the inventory in decision making, with the exception of workforce mix and insourcing decisions at the Army. We did not identify any updates to guidance, policy, or processes that incorporated the use or consideration of the inventory of contracted services since our November 2014 report. Appendix III provides details on policies and processes identified in that report. Further, we previously found that the responsibility for developing such plans was not clearly assigned and was divided across multiple offices. We recommended that the secretaries of the military departments identify an accountable official to lead and coordinate efforts across the functional communities to develop plans and establish processes for using the inventory for decision making. DOD concurred with this recommendation, but the military departments have not appointed an accountable official responsible for coordinating these efforts as of September 2015. Our review found that, in addition to the Army, some DOD components used data captured in their CMRA systems to support the fiscal year 2013 inventory. DOD’s March 18, 2014 guidance for the fiscal year 2013 inventory required components to include the percentage of their total contracts that were reported by contractors in their CMRA in fiscal year 2013 and the extent to which reported data were used to support their inventory submission. A USD(P&R) official noted that this was the best metric given the difficulty of determining the number of contracts that include the reporting requirement. Contractors are required to report labor hour data for labor executed during the period of performance during each government fiscal year, no later than October 31. We found that nine out of the 37 components reported using CMRA data for the fiscal year 2013 inventory submissions, comprising about 40 percent of total FTEs reported in the DOD inventory, while other components continued to rely on FPDS-NG. Specifically, The Army reported relying 100 percent on its CMRA data to compile its inventory in fiscal years 2013 and 2014. Army officials noted that CMRA is prepopulated with data from its Army Contracting Business Information System and FPDS-NG. The Army estimated its CMRA data accounted for the labor and associated costs of at least 78 percent of the fiscal year 2013 contract service obligations recorded in various accounting systems, including the General Fund Business Enterprise System. In its inventory submission letter, the Army attributes the differences to an over reporting of obligations for contract services and under reporting of invoices for overseas contingency operation services where limited network access prevents complete reporting in CMRA by vendors. Our analysis also found that contractors input data on direct labor hours and invoices for 26 of the 30 largest services contract actions based on FPDS-NG obligations in fiscal year 2013. In the four remaining cases, one contract action was for foreign military sales, which the Army does not include in its CMRA data, one contract action included contractor reported invoice information, and contractors did not enter invoice or direct labor hours for the two remaining contract actions. The Air Force reported that 31 percent of the contractor FTEs in its fiscal year 2013 submission and 28 percent in its fiscal year 2014 submission were based on direct labor hours reported by contractors in the Air Force CMRA. Our analysis found that contractors provided data for nine of the 30 largest services contract actions based on FPDS-NG obligations in fiscal year 2013 to the Air Force CMRA. Four of the remaining 21 contract actions were for foreign military sales. Similar to the Army, the Air Force also excludes these from its CMRA. The Navy did not use CMRA data to compile its inventory submission for fiscal year 2013 and reported that less than one percent of its calculated FTEs were reported directly by contractors into the Navy CMRA. As such, Navy officials stated that they relied on FPDS-NG rather than its CMRA to compile its inventory for fiscal year 2013. The Navy reported that about 15 percent of the reported contractor FTEs in its fiscal year 2014 inventory submission were based on data reported in its CMRA. Our analysis found that contractors provided data for 15 of the 30 largest services contract actions based on FPDS-NG obligations in fiscal year 2013. DOD’s November 2012 memorandum directed all DOD components to include the reporting requirement in new contracts and modifications to existing contracts, except contracted services for construction and utilities. At the contract level, we found that 24 of the 28 contract actions we reviewed included the reporting requirement in the statement of work. Four Navy contract actions did not include the reporting requirement, including two that were awarded after the November 2012 memorandum. DOD is in the process of finalizing a DFARS rule that will require the use of a new contract clause requiring contractors to report data into ECMRA for all new contracts. DOD officials estimated that the rule will be finalized in October 2015. DOD provided funding to establish an office to implement and support a common enterprise-wide contractor manpower data system in March 2014, but this effort has encountered a number of challenges and continues to lack a formal agreement, including clearly defined roles and responsibilities for the office. DOD officials noted that it planned to finalize a memorandum of agreement identifying the roles and responsibilities for the support office, which they termed the Total Force Management Support Office, to be agreed upon by the offices with primary responsibility—the Assistant Secretary of Defense for Manpower and Reserve Affairs and the Director of the Defense Human Resource Activity—by September 2015. The two offices have not yet finalized this agreement but expect to do so in the near term. The responsibilities that DOD officials indicated would need clarification include: Establishing common business rules for compiling the inventory data, developing related policies and procedures, performing quality control audits of the data, and potentially assessing the data for management review. Identifying the need for guidance and training. In this regard, our current work found that in several cases, contractors had not received any training or guidance on how to access and accurately input data into the CMRA systems. Additionally, several contracting officer’s representatives we interviewed said they were unclear as to how to ensure that contractors enter the appropriate data and verify the accuracy of contractor entered data. Exploring options for a longer-term solution to potentially replace the current CMRA systems. In September 2014, DOD initiated a strategic review to consider all options–in the short and long-term–for developing an enterprise data collection solution to collect the necessary contractor manpower data for the review of contracted services and for use in management decisions. The review concluded in December 2014 and found that the current CMRA systems did not address data needs across the planning, programming, and budgeting communities. For example, the budgeting and financial management communities use the object class codes, while the acquisition community uses the product service codes to distinguish between types of services. Further, the strategic workforce planning community expressed more interest in data on contractor FTEs than the other user communities because FTE data are useful in comparing military, civilian, and contractor workforces. DOD officials stated that the memorandum of agreement between the Assistant Secretary of Defense for Manpower and Reserve Affairs and the Director of the Defense Human Resource Activity will be issued shortly and will address the near-term responsibilities of the support office. Currently, DOD is in the process of hiring of six federal employees with the goal for the office to be fully operational by March 2016. As part of DOD’s current efforts, DMDC awarded a contract in September 2015 that tasked the contractor with migrating the four CMRA systems to a single DMDC server and with conducting an analysis to recommend options for the next generation of ECMRA or an alternative solution. DOD officials stressed that no decision has been made to implement an alternative to ECMRA. As we noted in November 2014, should a decision be made to use or develop a system other than the ECMRA system currently being fielded, the USD(P&R) should document the rationale for doing so and ensure that the new approach will provide data that satisfies the statutory requirements for the inventory. DOD officials indicated that the memorandum of agreement will not address the roles to be played by the support office, military departments, and other stakeholders in exploring the longer-term solution to collect contractor manpower data and integrating inventory data within the military departments’ decision-making processes. DOD hopes to formalize these relationships between the support office, DMDC, and other stakeholders within the military departments and other defense agencies after finalizing the memorandum of agreement. Federal internal control standards call for management and employees to establish and maintain an environment that supports a positive control environment. A good internal control environment requires, in part, that an agency’s organizational structure to clearly define key areas of authority and responsibility and establish appropriate lines of reporting. Clearly identifying the relationships between the support office and other stakeholders would help ensure that efforts to implement an enterprise- wide data collection system and integrate the data into decision-making processes will meet user needs and expectations. In the seven years since DOD first submitted its initial department-wide inventory of contracted services and conducted the associated reviews, it has continued to lack the means to reliably identify functions performed by contractors. Currently, there is no DOD-wide requirement for acquisition officials to document their determination as to whether the expected activities may include contractors performing closely associated with inherently governmental functions prior to contract award. Having contractors perform closely associated with inherently governmental functions is necessary to support an agencies’ mission, but statutory law, the FAR, DFARS, and OFPP guidance require that DOD provide sufficient oversight to mitigate the risks when contractors perform such work. DOD intends to require its services requirement review boards to identify contractor functions prior to awarding a contract and is expected to issue supplemental guidance to implement this requirement. Additional actions are planned by the Air Force and Navy. Until such time that the new instruction and supplemental guidance is issued, however, the military departments and defense agencies may be missing opportunities to improve their capability to identify and mitigate the risks of contractors performing closely associated with inherently governmental functions. Overall, while components are addressing more of the required elements in DOD’s inventory review guidance, the results of DOD’s fiscal year 2013 inventory review raises questions about the accuracy and completeness of the reviews. In this case, the Army identified nearly 80 percent of its contracts in the 17 product service codes OFPP and GAO identified as often including closely associated with inherently governmental functions, as including such work. In contrast, the Navy and other defense agencies identified about 13 percent of their contracts as doing so in these same codes. Additionally, the Air Force did not submit a letter certifying they had completed the review for the second consecutive year, without explanation. The lack of documentation on whether a proposed contract includes closely associated with inherently governmental functions may result in inventory review processes incorrectly reporting these contracts. At least 12 of the 28 contract actions we reviewed appeared to include these activities, but—of those 12—the DOD components identified one prior to contract award and two during the inventory review process as including such activities. More recently, DOD officials noted that it may be unrealistic for components to review all contracts in their inventory and added that a risk-based approach to select which contracts to review may be appropriate. Neither DOD’s March 2014 guidance nor its December 2014 guidance for fiscal years 2013 and 2014 inventories, respectively, provided a specific percentage of contracts to be reviewed or the basis for selecting the contracts to review. At a minimum, DOD components should review the contracts that are more likely to include closely associated with inherently governmental functions. Without clear guidance outlining an appropriate risk-based approach, DOD components may continue to misreport contactors performing closely associated with inherently governmental functions. The military departments have not updated or revised the guidance for budgeting, manpower, and workforce planning to incorporate the use of the inventory of contracted services data, nor have they appointed an accountable official to help determine how best to use inventory data when it becomes available. We continue to believe that implementing the recommendations we previously made to do so would facilitate the use of the inventory for decision-making purposes. Critical to making sure that the data are useable and consistent is clearly defining the roles and responsibilities of the management support office and formalizing relationships between this office and DOD stakeholders. This office is expected to provide a wide range of support activities for the inventory of contracted services, including exploring options for an alternative to the current ECMRA system. DOD officials noted that an agreement on the short-term roles and responsibilities of the office is imminent. We encourage the department to work expeditiously to do so. However, until such time as DOD clearly outlines the longer term relationships between the support office, military departments, and other stakeholders, the department faces increased risk that efforts to implement an enterprise- wide data collection system and integrate the data into decision-making processes will not meet user needs and expectations. To ensure proposed contract activities, as reflected in the statement of work and other contract documents, are assessed against the criteria provided by the FAR and OFPP policy, we recommend that the Under Secretary for Defense for Acquisition, Technology, and Logistics ensure that the Director of the Office of Defense Procurement and Acquisition Policy provide clear instructions, in a timely manner, on how the service requirement review boards are to identify whether contract activities include closely associated with inherently governmental functions; and require acquisition officials to document, prior to contract award, whether the proposed contract action includes activities that are closely associated with inherently governmental functions. To assist components in appropriately identifying contracts that include closely associated with inherently governmental functions in the inventory review more generally, we recommend that the Under Secretary of Defense for Acquisition, Technology, and Logistics and the Under Secretary of Defense for Personnel and Readiness work jointly to ensure that military departments and defense agencies review, at a minimum, those contracts within the product service codes identified as requiring heightened management attention and as more likely to include closely associated with inherently governmental functions. To help facilitate the collection and use of inventory data in decision- making processes, we recommend that the Under Secretary of Defense for Personnel and Readiness clearly identify the longer term relationships between the support office, military departments, and other stakeholders. We provided a draft of this report to DOD for comment. In its written comments, which are reprinted in appendix V, DOD concurred with our recommendations and described the actions it plans to take. DOD, however, generally did not provide timeframes for completing such actions. Given the magnitude, significance, and risk associated with contracted services, we encourage the department to move out expeditiously and set appropriate timeframes for completing these actions. DOD also provided technical comments, which we incorporated in the report as appropriate. In response to our recommendation that DPAP provide clear instructions, in a timely manner, on how the service requirement review boards are to identify whether contract activities include closely associated with inherently governmental functions, the department noted that the pending DOD instruction for service acquisitions will provide such guidance. The department also noted it will provide supplemental direction to acquisition officials in response to our recommendation that the Director, Defense Procurement and Acquisition Policy, require acquisition officials to document, prior to contract award, whether the proposed contract action includes activities that are closely associated with inherently governmental functions. In response to our recommendation that Under Secretary of Defense for Acquisition, Technology, and Logistics and the Under Secretary of Defense for Personnel and Readiness work jointly to ensure that military departments and defense agencies, at a minimum, review contracts within the product service codes identified as requiring heightened management attention and as more likely to include closely associated with inherently governmental functions, the department stated it will update its inventory of contracted services guidance. In response to our recommendation that the Under Secretary of Defense for Personnel and Readiness clearly identify the longer term relationships between the support office, military departments, and other stakeholders, the department noted that it will implement, as appropriate, a memorandum of agreement or service level agreements to clearly identify relationships and roles of the various stakeholders. We are sending copies of this report to the appropriate congressional committees, the Secretary of Defense; the Under Secretary of Defense for Acquisition, Technology, and Logistics; the Under Secretary of Defense for Personnel and Readiness; the Secretaries of the Army, Navy, and Air Force; and other interested parties. 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 VI. Section 951(a) of the National Defense Authorization Act for Fiscal Year 2014 directs GAO to report, for fiscal years 2014, 2015, and 2016, on DOD’s implementation of title 10 U.S. Code section 2330a subsections (e) and (f). To satisfy the mandate for 2015, we assessed DOD’s efforts to (1) implement subsection (e) to review contracts and functions in the inventory of contracted services for the fiscal year 2013 inventory and (2) implement subsection (f) to develop plans and processes to use the inventory for strategic workforce planning, workforce mix, and budget decisions. We used data from the fiscal year 2013 inventory as it was the most recent inventory at the time of our review. Further, the Joint Explanatory Statement accompanying the National Defense Authorization Act for Fiscal Year 2015 mandated GAO to report on the defense agencies’ and military services’ implementation of a standard pre- solicitation checklist. To assess the extent to which DOD components—which include the three military departments and the defense agencies—complied with the requirements to review applicable contracts and activities in the inventory of contracted services pursuant to subsection (e), we focused on DOD’s fiscal year 2013 inventory and associated review, which was the latest inventory and review available when we initiated our work. We reviewed DOD’s fiscal year 2013 inventory submission and review guidance, issued by Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) and the Acting Under Secretary of Defense for Personnel and Readiness (USD(P&R)) issued on March 18, 2014. The March 2014 guidance requires military departments and defense agencies to certify—through submission of a certification letter to USD(P&R)—that their review was conducted in accordance with subsection (e). The guidance required components to report on seven elements including the contract selection criteria and methodologies used to conduct the reviews; the extent to which contactors were found to be performing certain functions, to include inherently governmental and closely associated with inherently governmental; and to the extent necessary, a plan to realign performance of such functions to government performance. We analyzed all unclassified fiscal year 2013 certification letters submitted by 35 of 37 components to USD(P&R) as of September 2015 to determine if components reported on all seven required elements. The Air Force and the Test Resource Management Center did not submit a certification letter in fiscal year 2013. We did not analyze any classified certification letters submitted, such as that by the Defense Intelligence Agency. We also reviewed the Office of Federal Procurement Policy’s (OFPP) November 5, 2010 guidance for civilian agencies’ service contract inventories. This guidance directs agencies to give priority consideration to reviewing certain categories on contracted services that the guidance and GAO’s prior work have indicated often include closely associated with inherently governmental functions. The guidance and GAO’s work identifies 17 product service codes describing these categories of contracted services. We identified total obligations for contracts categorized under the product service codes identified in the OFPP guidance and two additional product services codes identified in GAO’s prior work and compared these obligations to total obligations certified by DOD components as being for contractors performing closely associated with inherently governmental functions in the fiscal year 2013 certification letters. We did not independently assess the accuracy or reliability of the underlying data supporting the components’ inventories of contracted services and associated reviews. In performing our work to assess the extent to which DOD implemented subsection (e) to review contracts and activities in the inventory of contracted services for the fiscal year 2013 inventory, we selected a major command from each of the military departments—Army Materiel Command, Air Force Materiel Command, and Naval Sea Systems Command. The commands were selected because they had the highest obligations in knowledge based services for fiscal year 2013, based on data from the Federal Procurement Data System-Next Generation (FPDS-NG). At each command, we reviewed a selection of 28 non- generalizable contract actions. These contract actions were selected, in part, because of their high dollar value and categorization under the product service codes OFPP and we have identified as often including closely associated with inherently governmental functions. We compared the inventory submission data to the Federal Procurement Data System- Next Generation (FPDS-NG) data for fiscal year 2013 and determined the data were sufficiently reliable for these purposes. We reviewed each contract action and supporting documentation in the contract file to identify any planned contractor activities that appeared to be closely associated with inherently governmental functions. For the purposes of this report, we considered a contract action to include such functions if any activity described in the statement of work appeared to be closely associated with inherently governmental functions as defined under section 7.503(d) of the Federal Acquisition Regulation (FAR) and appendix B of OFPP Policy Letter 11-01. We then compared our assessment with the determination made by contracting and program officials at the time the contract was awarded and when the contract was reviewed as part of the fiscal year 2013 inventory of contracted services review and certification process. Our results are not intended to be generalizable and as such, results from non-generalizable samples cannot be used to make inferences about all service contracts. Naval Sea Systems Command Naval Surface Warfare Center–Carderock Division Finally, to better understand how, if at all, DOD guidance has improved over time and the challenges, if any, components have with the inventory review process, we selected seven defense agencies based on completeness of the certification letters over the last three years and the percent of total obligations identified for contracts including closely associated with inherently governmental functions. The defense agencies were Defense Advanced Research Projects Agency; Defense Contract Audit Agency; Defense Finance and Accounting Services; Defense Human Resource Activity; DOD Educational Activity; US Northern Command; and US Southern Command. In addition, we interviewed officials from USD(P&R) and USD(AT&L). To assess the extent to which the Defense agencies’ and military services have implemented a standard pre-solicitation checklist pursuant to the Joint Explanatory Statement accompanying of the National Defense Authorization Act for Fiscal Year 2015, we met with officials from USD(AT&L) Office for Defense Procurement and Acquisition Policy (DPAP) and the Departments of the Air Force and Navy. To assess the extent to which DOD components have developed plans and processes to use the inventory to inform management decisions pursuant to subsection (f), we used the data we collected for our November 2014 report on this issue to establish the extent to which each military department’s strategic workforce planning, manpower mix, and budgeting guidance and documentation required or cited the use of the inventory of contracted services. We then interviewed officials from each military department to determine what updates, if any, had been made to those policies and procedures. We also interviewed acquisition and manpower officials at the three military departments to assess the status of the military departments’ plans to appoint an accountable official to facilitate efforts to develop a plan and enforcement mechanisms pursuant to subsection (f). We also assessed DOD’s efforts to develop a common contractor manpower reporting application by interviewing officials from USD(P&R) and the Defense Manpower Data Center (DMDC), reviewing briefing slides resulting from the December 2014 strategic review of options, and reviewing meeting minutes from a work group charged with developing such a system. To assess the completeness of the data from the Contractor Manpower Reporting Application (CMRA) systems, we reviewed policy and guidance for the system. In addition, we identified officials responsible for verifying CMRA data based on our selected contract actions. We also selected six contractors associated with the contracts in our sample—three large businesses and three small businesses—to discuss the data entry and data verification processes. In addition, we compared data from FPDS- NG for the 30 service contracts with the highest obligations from October 2012 through July 2013 at the Army, Navy, and Air Force to determine the extent to which contractors reported direct labor hours and invoice amounts for these contracts into CMRA. We did not independently assess the data provided by contractors. We conducted this performance audit from December 2014 to November 2015 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 audit objectives. We believe that the evidence obtained provides a reasonable basis for our finding and conclusions based on audit objectives. The Navy did not identify the number of FTEs, but noted they had 25 contracts that contained these functions. The agency did not identify the number of FTEs, but noted they had contracts that contained these functions. The agency did not identify the number of FTEs, but noted that they had contractors performing these functions. The agency did not identify the number of FTEs in current contracts, but noted they had one contract that contained these functions. The agency did not identify the number of FTEs, but noted that 4.5 percent of their sample of more than 50 percent of contract actions contained these functions. The agency did not identify the number of FTEs in current contracts, but noted they have one contract that contained these functions. The agency did not identify the number of FTEs in current contracts, but noted they had one contract that contained these functions. Did not report Did not report 84 2011 The agency did not identify the number of FTEs, but noted that several contracts contained these functions. The agency did not identify whether they had any contract actions that contained these functions. The components did not identify the number of FTEs, but reported that 24 out of 950 contracts consolidated from the three components had contractors performing these functions. The activity did not identify the number of FTEs, but stated that some contracts contained these functions The commands did not identify the number of FTEs, but noted that “some requirements” contained these functions. Did not report Did not report As of September 2015, the Test Resource Management Center has yet to provide a certification letter for the fiscal year 2013 inventory. The Under Secretary of Defense for Personnel and Readiness (USD(P&R)) has overall responsibility for developing and implementing DOD’s strategic workforce plan to shape and improve DOD’s civilian workforce, including an assessment of the appropriate total force mix. USD(P&R) issued guidance that designated responsibility for the development of the strategic workforce plan to the Deputy Assistant Secretary of Defense for Civilian Personnel Policy, but did not require use of the inventory. This guidance pre-dates the statutory requirement to use the inventory to inform strategic workforce planning. For example, the Fiscal Years 2013-2018 Strategic Workforce Plan, the most recent plan available at the time of our November 2014 review, stated that DOD’s plans for identifying and assessing workforce mix will leverage the inventory of contracted services, but it did not provide any additional details on using the inventory. None of the three military departments had developed a statutorily required plan or enforcement mechanism to use the inventory of contracted services and generally they had not developed guidance or processes for these purposes (see table 5). DOD had two department-wide policies for determining workforce mix— DOD directive 1100.4 and DOD instruction 1100.22—but neither required the use of the inventory to inform workforce mix planning. DOD Directive 1100.4, dated February 2005, provided general guidance concerning determination of manpower requirements, managing resources, and manpower affordability. According to USD(P&R) officials, revisions to this directive, which were under review during our November 2014 review, would explicitly require use of the inventory to inform budgeting and total force management decisions. DOD Instruction 1100.22, dated April 2010, provides manpower mix criteria and guidance for determining how individual positions should be designated based on the work performed. This instruction did not direct the military departments to develop a plan to use the inventory to inform management decisions, as DOD issued it before the enactment of the requirement for developing such plans. DOD’s primary insourcing guidance was reflected in April 4, 2008 and May 28, 2009 memoranda. These memoranda reiterated statutory requirements by calling for DOD components and the military departments to use the inventory of contracted services to identify functions for possible insourcing and to develop a plan for converting these functions within a reasonable amount of time. Among the military departments, however, only the Army had guidance and a process that requires use of the inventory of contracted services for insourcing. However, the military departments had not issued guidance for managing workforce mix that requires the use of the inventory of contracted services (see table 6). DOD’s Financial Management Regulation provided, among other things, guidance to the military departments on budget formulation and presentation; however, these regulations did not require the military departments to use the inventory in formulating and presenting their budgets. At the military department level, the Air Force had issued additional instructions in terms of budget formulation and presentation. However, the Air Force’s guidance did not require the use of the inventory. The Comptroller issued supplemental guidance requiring, among other things, that the military departments and defense components provide information on the number of FTEs as required under 10 U.S.C. § 235, but this guidance did not require reporting the amount of funding requested for contracted services. The Comptroller guidance for budget submissions from all components had remained similar for the past three fiscal years, instructing DOD components to ensure that contractor FTEs reported in the budget exhibit were consistent with those in the DOD’s inventory of contracted services. Both Navy and Air Force officials reported that they used the inventory of contracted services to estimate the number of contractor FTEs for inclusion in their budget request. The Army budget office did not have a process to use the inventory to inform budgeting and could not identify how the Army estimated FTEs in the Army’s budget submission (see table 7). DOD’s Inventory of Contracted Services GAO, Defense Contractors: Additional Actions Needed to Facilitate the Use of DOD’s Inventory of Contracted Services, GAO-15-88 (Washington, D.C.: November 19, 2014). GAO, Defense Acquisitions: Update on DOD’s Efforts to Implement a Common Contractor Manpower Data System, GAO-14-491R (Washington, D.C.: May 19, 2014). GAO, Defense Acquisitions: Continued Management Attention Needed to Enhance Use and Review of DOD’s Inventory of Contracted Services, GAO-13-491 (Washington, D.C.: May 23, 2013). GAO, Defense Acquisitions: Further Actions Needed to Improve Accountability for DOD’s Inventory of Contracted Services, GAO-12-357 (Washington, D.C.: April 6, 2012). GAO, Defense Acquisitions: Further Action Needed to Better Implement Requirements for Conducting Inventory of Service Contract Activities, GAO-11-192 (Washington, D.C.: January 14, 2011). GAO, Defense Acquisitions: Observations on the Department of Defense Service Contract Inventories for Fiscal Year 2008, GAO-10-350R (Washington, D.C.: January 29, 2010). DOD Service Contracting and Workforce GAO, DOD Contract Services: Improvements Made to Planning and Implementation of Fiscal Controls, GAO-15-780 (Washington, D.C.: September 30, 2015). GAO, DOD Contract Services: Improved Planning and Implementation of Fiscal Controls Needed, GAO-15-115 (Washington, D.C.: December 11, 2014). GAO, Human Capital: DOD Should Fully Develop Its Civilian Strategic workforce Plan to Aid Decision Makers, GAO-14-565 (Washington, D.C.: July 9, 2014). GAO, Human Capital: Opportunities Exist to Further Improve DOD’s Methodology for Estimating the Costs of its Workforces, GAO-13-792 (Washington, D.C.: September 25, 2013). GAO, Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD’s Total Workforce, GAO-13-470 (Washington, D.C.: May 29, 2013). GAO, Managing Service Contracts: Recent Efforts to Address Associated Risks Can Be Further Enhanced, GAO-12-87 (Washington, D.C.: December 7, 2011). GAO, Defense Acquisitions: Further Actions Needed to Address Weaknesses in DOD’s Management of Professional and Management Support Contracts, GAO-10-39 (Washington, D.C.: November 20, 2009). GAO, Department of Defense: Additional Actions and Data Are Needed to Effectively Manage and Oversee DOD’s Acquisition Workforce, GAO-09-342 (Washington, D.C.: March 25, 2009). In addition to the contact named above, Penny Berrier, Assistant Director; Saquib Ahsan, Andrea C. Evans, Laura Greifner, Kristine Hassinger, Julia Kennon, Caryn E. Kuebler, Jean McSween, Brian Smith, and Oziel Trevino.

Summary: DOD is the government's largest purchaser of contractor-provided services. In 2008, Congress required DOD to compile and review an annual inventory of its contracted services to identify the number of contractors and the functions contractors performed. In 2011, Congress required DOD to use that inventory to inform certain decision-making processes. GAO has previously reported on the challenges DOD faces in compiling, reviewing, and using the inventory. Congress included a provision in statute for GAO to report on the required DOD reviews and plans to use these inventories. For this report, GAO assessed the extent to which DOD components (1) reviewed contracts and activities in the fiscal year 2013 inventory of contracted services and (2) developed plans to use the inventory for decision-making. GAO reviewed relevant laws and guidance; 35 component inventory certification letters and 28 contract actions for services categorized as often supporting inherently governmental functions; and interviewed DOD acquisition, manpower, and programming officials. The Department of Defense (DOD) continues to face challenges in ensuring that it fully reviews its inventory of contracted services. As of September 2015, 35 of 37 components certified they had done so and generally addressed more of the review elements required by DOD guidance than in prior years. For the second consecutive year, however, the Air Force did not submit a certification letter. Further, components may be inaccurately reporting on the extent to which contractors were providing services that are closely associated with inherently governmental functions, a key review objective to help ensure that DOD has proper oversight in place. The Office of Federal Procurement Policy indicates that certain contracted services—such as professional and management support—are more likely to include such functions. In fiscal year 2013, the Army reported that nearly 80 percent of the $9.7 billion it obligated for these types of services included closely associated with inherently governmental functions. In contrast, the Navy and other DOD agencies reported about 13 percent of the $10.7 billion obligated for similar contracted services included such functions. GAO's review found that the lack of documentation on whether a proposed contract included such functions may result in inventory review processes incorrectly reporting these contracts. At least 12 of the 28 contract actions GAO reviewed appear to include these functions, but—of those 12—DOD components identified only one prior to contract award and only two during the review process as such. Without accurate identification of the functions contractors are performing, DOD cannot be assured that proper oversight is in place or provide data on the activities and functions contractors are performing. Military departments have not developed plans to facilitate the use of the inventory for workforce planning or budgetary decisions nor have they appointed an accountable official to help do so, as DOD previously stated they intended to do. Further, DOD has not outlined the relationships between a management support office, military departments, and other stakeholders to facilitate the collection and use of inventory data in decision-making processes. Internal control standards state that management should define key areas of authority and responsibility to achieve management objectives and to comply with laws. GAO recommends that DOD focus increased attention on contracts more likely to include services closely associated with inherently governmental functions during the review process, document whether proposed contracts include such functions, and clarify the relationships between the support office and key stakeholders. DOD concurred with GAO's recommendations.