In recent years, agencies have increasingly placed orders against existing contracts that have been awarded by another agency to save time and administrative effort. Rather than going through the often lengthy process involved in awarding a new contract for services—soliciting offers, evaluating proposals, and awarding the contract—agencies can place task orders against established indefinite quantity contracts that meet their needs. When placing orders against multiple-award task order contracts, agencies are generally required to ensure that contractors have a fair opportunity to be considered for each order with certain exceptions (such as urgency or logical follow-on). For GSA Schedule contracts, agencies are required to follow ordering procedures such as reviewing prices from at least three contractors, evaluating prices for services requiring a statement of work, and seeking price reductions for large orders. Interagency contracting is often handled by entrepreneurial, fee-for- service organizations, where agency contracting units operate like a business and provide contracting assistance to other agencies for a fee. The Interior contracting office that placed the orders for interrogation and other services—the Southwest Branch of Interior’s National Business Center, located in Fort Huachuca, Arizona—is one such organization. This office’s contracting activity, primarily on behalf of other agencies, has increased substantially over the past 3 years, with reported obligations increasing from $609 million in fiscal year 2002 to $1.02 billion in fiscal year 2004. The fee-for-service procurement process generally involves three parties: the agency requiring a good or service; the agency placing the order or awarding the contract; and contractors providing the goods and services the government needs. The requiring agency officials determine the goods or services needed and, if applicable, prepare a statement of work, sometimes with the assistance of the ordering organization. The contracting officer at the ordering office ensures that the contract or order is properly awarded or issued (including any required competition), and administered under applicable regulations and agency requirements. If contract performance will be ongoing, a contracting officer’s representative—generally an official at the requiring agency with relevant technical expertise—is normally designated by the contracting officer to monitor the contractor’s performance and serve as the liaison between the contracting officer and the contractor. At the same time as use of interagency contracting has increased, DOD has also increased its use of contractors in military operations. Particularly since the 1991 Gulf War, contractors have taken over support positions that were traditionally filled by government personnel. For example, a company that CACI later acquired began providing intelligence support to the Army in Germany in 1999. When the Army in Europe deployed intelligence personnel to the Iraq theater in 2003, CACI employees went with them. Following the announcement of the end of major combat in May 2003, the Army, as part of the Coalition Joint Task Force Seven (CJTF-7), was expecting a non-hostile situation and did not plan for an insurgency. It was unprepared for the volume of Iraqi detainees and the need for interrogation and other intelligence and logistics services. An Army investigative report from August 2004 noted that the CJTF-7 headquarters in Iraq lacked adequate personnel and equipment and that the military intelligence units at Abu Ghraib were severely under- resourced. The out-of-scope orders for interrogation and other services issued by Interior have been terminated. However, the Army has continued contracting for intelligence functions and logistics services through bridge contracts awarded on a sole source basis to CACI. The original term of the contracts was 4 months, and the Army subsequently exercised options for an additional 2 months, through early 2005. According to an Army official, the contract terms were recently extended further to allow the Army adequate time to competitively award contracts for these services. Recently, in the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Congress took steps to ensure the proper use of interagency contracts by DOD, the largest customer for these types of contract arrangements. The act prohibits DOD from procuring goods and services above the simplified acquisition threshold (generally $100,000) through a contract entered into by an agency outside DOD, unless the procurement is done in accordance with procedures prescribed by DOD for reviewing and approving the use of such contracts. The conference report accompanying the legislation established expectations that DOD’s procedures will ensure that any fees paid by DOD to the contracting agency are reasonable in relation to work actually performed; the supplies or services are consistent with the appropriated funds being used; the goods and services procured are within the scope of the non-DOD contract vehicle; and such orders are in compliance with all applicable DOD-unique statutes, regulations, directives, and other requirements prior to approval. Further, the act required reviews of certain non-DOD contracting offices to determine if they are compliant with Defense procurement requirements. If an office is deemed non-compliant, DOD could be prohibited from ordering, purchasing or otherwise procuring property or services in excess of $100,000 through that contracting office. In addition, a recent change to the Federal Acquisition Regulation (FAR), effective July 2004, added language to make it clear that a contracting officer placing an order against a GSA Schedule on another agency’s behalf is responsible for applying that agency’s regulatory and statutory requirements. The process of procuring interrogation and other services for DOD broke down at numerous points. In general, breakdowns in the procurement process, such as not following competition requirements and not properly justifying the decision to use interagency contracting, occurred when the orders were issued. The process also broke down during the administration of the contract, as the contractor’s performance was not adequately monitored. Because the officials at Interior and the Army responsible for the orders did not fully carry out their roles and responsibilities, the contractor was allowed to play a role in the procurement process normally performed by the government. This situation increased the risk that the government would not get the services it needed at reasonable prices and in compliance with competition and other contracting requirements. Orders issued outside the scope of the underlying contract do not satisfy legal requirements under the Competition in Contracting Act for competing the award of government contracts. In such cases, the out-of- scope work should have been awarded using competitive procedures or supported with a justification and approval for other than full and open competition. The Interior IG and GSA have determined that 10 of the 11 task orders issued by Interior to CACI for interrogation and other services in Iraq were outside the scope of the underlying GSA information technology contract. The Army has also determined that interrogation services were outside the scope of the contract. The labor category descriptions in the GSA contract were, in most cases, significantly different from the descriptions on DOD’s statements of work and do not accurately represent the work that the contractor performed. Table 1 demonstrates some of the disparities between the labor categories in DOD’s statements of work and the information technology contract. CACI representatives stated that they determined the salary and benefits the company would pay interrogators and screeners and then selected the GSA information technology contract labor categories that would sufficiently cover the company’s employee salary and benefits expenses, overhead, and profit. In other words, CACI selected the labor categories in the contract for cost and pricing purposes, rather than as a reflection of the work to be performed. Army representatives in Iraq told us that the services on the orders for interrogators, screeners, and logistics support were not information technology services. The Interior contracting officer also had concerns about whether the orders were within scope, asking the contractor for a verbal and, later, written explanation as to how the labor categories in the contract were related to the services the company was to provide in Iraq. The contracting officer neglected to follow a requirement for legal review that could have raised questions about whether the orders were within scope. A July 2001 Interior policy requires legal review for all proposed solicitations in excess of $500,000 for non-commercial items and $2 million for commercial items. Interior contracting officials stated that they did not believe this requirement extended to orders placed on GSA contracts. Representatives from Interior’s offices of general counsel and acquisition policy, however, told us that orders placed on GSA contracts are subject to legal review and that the orders for interrogation and other services should have been reviewed. Further, the Interior contracting officer did not perform the required evaluation of the contractor’s proposed approach for addressing DOD’s requirements. Normally, when ordering services from GSA Schedules that require a statement of work, the ordering office is responsible for evaluating the contractor’s level of effort and mix of labor proposed to perform the specific tasks being ordered and for making a determination that the price is reasonable. In this situation, however, the Interior contracting officer did not evaluate the mix of labor categories or establish that the level of effort was reasonable. Although documents in Interior’s contract files provided that “technical review does not take exception to the proposal,” no documentation exists to support the statement that an evaluation was performed and, in fact, Interior contracting officials told us that no such review was done. In addition to violating competition rules by placing orders that were not in the scope of the underlying contract, Interior contracting officials also did not comply with requirements contained in section 803 of the National Defense Authorization Act for Fiscal Year 2002 relating to DOD’s purchase of services from GSA Schedule contracts. Specifically, for DOD orders for services over $100,000 placed on GSA contracts, notice must be provided to all GSA Schedule contractors offering the required services or to as many contractors as practicable to ensure that offers will be received from at least three contractors. If three offers are not received, a written determination must be made that no additional contractors could be identified despite reasonable attempts to do so. The requirements that DOD orders be placed on a competitive basis can be waived in writing for certain circumstances such as urgency. Section 803 requirements applied to the Iraq orders, even though Interior was the contracting agency, because DOD regulations require application of section 803 provisions to orders placed by non-DOD agencies on behalf of DOD.