PBGC was created as a self-financing, nonprofit, wholly owned government corporation under ERISA to protect the retirement income of workers with private-sector defined benefit plans—that is, plans that promise a set benefit amount upon retirement to vested employees typically based on a formula. PBGC administers two separate insurance programs for these pension plans: a single-employer program and a multiemployer program. The single-employer program is the larger of the two, and as of fiscal year 2010 covered about 34 million participants in just over 26,000 plans. The multiemployer program covered over 10 million participants in about 1,500 collectively bargained plans that are maintained by two or more unrelated employers. If the sponsor of a single- employer plan meets the statutory requirements for financial distress and the plan does not have sufficient assets to pay all promised (vested accrued) benefits that have become due, the plan will be terminated and PBGC will likely become the plan’s trustee, assuming responsibility for paying benefits to participants, up to certain limits specified under statute in ERISA and related regulations. If the sponsors of a multiemployer pension plan are unable to pay all promised benefits that have become due, PBGC will provide financial assistance to the plan, usually a loan, so that retirees can receive the guaranteed portion of their benefits, but PBGC does not assume trusteeship of the plan. PBGC’s Director, who is appointed by the President and subject to Senate confirmation, is responsible for managing the agency’s daily operations. A three-member Board of Directors, consisting of the Secretaries of the Departments of Commerce, Labor, and the Treasury, is charged with providing policy direction and oversight of PBGC’s finances and operations. PBGC is self financed through insurance premiums set by Congress and paid by companies that sponsor defined benefit plans, the assets of underfunded single-employer plans terminated and trusteed by PBGC, recoveries from companies formerly responsible for those plans, and the returns earned on the investment of these funds. Thus, PBGC’s primary responsibilities are to collect premiums from the sponsors of defined benefit plans, monitor the financial status of the plans it insures, assume administration of underfunded single-employer plans that terminate, calculate benefit amounts and make payments to participants in those plans when due, and manage the investment of plan assets under its control. In our 2001 high-risk update, we included PBGC in a list of examples of agencies that were facing human capital challenges, stating: “Because the agency did not adequately link its contracting decisions to long-term strategic planning, it may not have the cost-effective mix of contractor and federal employees needed to meet future workload challenges. Further, PBGC employees who monitor contractors lack adequate guidance and policies essential to monitoring contractor performance.” Subsequently, we designated PBGC’s single-employer program as a “high-risk” program in 2003 due to PBGC’s net deficit, as well as the continuing likelihood of future terminations of large, underfunded pension plans, and the program has remained on the list with each subsequent update. In 2009, we also designated the multiemployer program as high risk. Between fiscal years 2008 and 2010, the single-employer program’s deficit grew from $10.7 billion to nearly $22 billion, and the multiemployer program’s deficit grew from $473 million to just over $1.4 billion. We noted in our February 2011 high-risk report that PBGC’s current strategic planning does not adequately incorporate goals in several key management areas, including goals to determine the optimal mix of contract and federal workers. We reported that PBGC could take steps—such as including procurement decision making in its corporate-level strategic planning—to strengthen strategic management of its contractor workforce to better manage the challenges of its unstable financial condition and increasing workload. We have also issued a number of reports on ways to improve contracting practices by federal agencies governmentwide, and by PBGC in particular. For example, in 2005, we published Framework for Assessing the Acquisition Function at Federal Agencies in response to federal agencies’ increasing reliance on contractors to perform their missions and the systemic weaknesses identified in key areas of contracting by us, IGs, and other accountability organizations (see app. I). With respect to PBGC in particular, in September 2000, we reported on a variety of challenges facing its contracting activities, including that the agency did not adequately link decisions to contract for services to longer-term strategic planning considerations. We recommended that PBGC develop a strategic approach to contracting by conducting a review of its future human capital needs and to link contracting decisions to PBGC’s long- term strategic plan. More recently, in 2008, we reported that while PBGC had taken steps to improve its acquisition infrastructure, most of the agency’s contracts still lacked performance incentives and methods to hold contractors accountable. We recommended that PBGC revise its strategic plan to reflect the importance of contracting. PBGC is organized into different program and administrative departments that are responsible for different aspects of its pension plan insurance programs, including the termination of defined benefit plans and administration of plan benefits, and other internal functions such as legal services, financial operations, and procurement. Four program departments account for most contract expenditures at PBGC—the Benefits Administration and Payment Department (BAPD), the Corporate Investment Department (CID), the Department of Insurance Supervision and Compliance (DISC), and the Office of Information Technology (OIT) (see fig. 1). Other departments provide support services for the program departments. For example, PBGC’s Procurement Department manages all contract award activities for the agency. Only contracting officers in the Procurement Department may sign and award contracts on behalf of PBGC. The program departments develop requests for the purchase of goods and services needed to accomplish their objectives, which they submit to the Procurement Department to initiate the contracting process. In addition, PBGC’s Budget and Organization Performance Department (Budget Department) manages the formulation and execution of the PBGC budget and establishes and implements policies, regulations, and guidelines related to organizational performance. According to the Budget Director, when PBGC departments submit their annual budget requests, the Budget Department identifies any changes in contract service requirements and workforce requests to inform its budget recommendation to PBGC executive management. PBGC’s workload has increased in the last 20 years as the cumulative number of plans terminated and trusteed, number of participants eligible for or receiving benefits in those plans, and amount and complexity of plan assets taken over by PBGC have grown. As of fiscal year 2010, PBGC had terminated and trusteed a total of 4,150 underfunded pension plans (see fig. 2). Following the economic downturn, during the combined 2009 and 2010 fiscal years, a total of 301 underfunded single-employer plans were trusteed by PBGC. By comparison, during the combined 2007 and 2008 fiscal years, only 189 underfunded single-employer plans were trusteed. In addition, during fiscal years 2009 and 2010, PBGC provided assistance to 93 multiemployer pension plans, up from 78 plans during the prior 2 years. As a result of the increase in terminated plans, the number of participants in plans terminated and trusteed by PBGC has also grown over the last decade (see fig. 3). By fiscal year 2010, PBGC paid or owed benefits to nearly 1.5 million total participants in 4,150 trusteed plans. During fiscal years 2009 and 2010 alone, PBGC became responsible for the retirement benefits of an additional 300,000 pension plan participants when their underfunded plans were terminated and trusteed. The increase in terminated plans has also contributed to the amount of assets PBGC manages. Total assets managed by PBGC have grown from less than $22 billion in fiscal year 2000 to nearly $80 billion in fiscal year 2010 (see fig. 4). In recent years, PBGC’s investment portfolio has become more challenging as it now includes complex financial instruments and the oversight of additional managers. PBGC has come to rely heavily on contracting to conduct much of the core work of the agency, yet PBGC does not make decisions to use contractors in accordance with an agency-wide strategic plan or focus. Rather, individual departments develop their own rationales for contracting, largely based on historical practice rather than on an assessment that using contractors would be more advantageous than using federal employees to conduct its work. PBGC’s long-term, extensive reliance on contractors raises concern that the agency may be eroding its in house expertise and management control over core functional areas. In 2005, we issued a framework for assessing federal agencies’ contracting activities that identified four cornerstones to promote an efficient, effective, and accountable acquisition function. One of these cornerstones was “organizational alignment and leadership,” with “organizational alignment” defined as appropriately placing the acquisition function within the agency, having clearly defined roles and responsibilities for stakeholders, aligning contracting with the agency’s mission and needs, and organizing the contracting function. Our 2008 report on PBGC’s contracting activities found that PBGC was falling short in this area. The agency had not involved its Procurement Department in helping the agency make strategic decisions about contracting early in the process or in developing long-term strategic approaches, thus leaving the agency less able to effectively identify, analyze, prioritize, and coordinate agency-wide acquisition needs. We recommended that PBGC take several steps to better incorporate contracting into its strategic planning. In our work for this report, we found that while PBGC has taken certain steps to improve its acquisition infrastructure, such as adding staff to the Procurement Department to help manage and monitor contract awards and developing staff training, the agency has not fully integrated its contracting function at the corporate level. Instead, PBGC has continued to leave contracting decisions to the agency’s individual program departments.