Interagency contracting is designed to leverage the government’s aggregate buying power and simplify procurement of commonly used goods and services. This contracting method has allowed agencies to meet the demands for goods and services at a time when they face growing workloads, declines in the acquisition workforce, and the need for new skill sets. Interagency contracts are awarded under various authorities and can take many forms. They typically are used to provide agencies with common goods and services, such as office supplies or information technology services. In other cases, they may be used to fill specialized requirements, particularly if the other agency providing the contract support services has unique expertise in a particular type of procurement. Agencies that award and administer interagency contracts usually charge a fee to support their operations. There are two main methods of interagency contracting: direct and assisted. For direct acquisitions, rather than going through the process to award a new contract—soliciting offers, evaluating proposals, and awarding the contract—contracting officers at agencies can place orders directly on contracts already established by other agencies. With assisted acquisitions, customer agencies can obtain contracting services from other agencies, whose contracting officers place and administer orders on the customer agencies’ behalf. Assisted acquisitions can use interagency acquisition agreements (IAA) to document and establish general terms and conditions governing relationships between the customer agencies, which need the goods or services, and the servicing agencies, which provide the contracting services. Responsibility for acquisition policy and management at State is shared by two offices within the Bureau of Administration—the Office of the Procurement Executive (OPE) and the Office of Acquisitions Management (AQM), as shown in figure 1. OPE is responsible for establishing acquisition policy at State. This responsibility includes prescribing and implementing acquisition policies, regulations, and procedures; managing State’s procurement reporting system; appointing contracting officers; and establishing a system for measuring the performance of State contracting offices. AQM is responsible for providing a full range of contracting services to support activities across State, including acquisition planning, contract negotiations, cost and price analysis, and contract administration. Acquisition officials in OPE and AQM stated that they work closely on many acquisition activities, but there is no direct reporting relationship between the two. While AQM is by far the largest contracting office within State, other domestic bureaus and offices have varying degrees of contracting authority. Additionally, 277 of State’s overseas posts have limited authority to conduct contracting activities in support of the bureaus and program office activities carried out at each location. Finally, two additional contracting offices, known as Regional Procurement Support Offices, report to AQM and provide contracting services to the overseas posts. These offices operate as working capital funds, charging a fee to the overseas posts and other organizations in exchange for providing contracting services. In addition to AQM and its regional support offices, only those bureaus and posts with contracting authority can conduct direct interagency contracting. However, all bureaus and posts can use assisted interagency contracting, relying on contracting officers at other agencies to conduct procurements. In response to an increase in the amount of acquisition dollars going to contract servicing agencies, the Under Secretary of State for Management issued a memorandum in May 2002 describing the State First policy. The policy was incorporated into the Department of State Acquisition Regulations (DOSAR) and clarified later by implementing guidance. This policy directs domestic bureaus and offices to first use the services of AQM or another appropriate State contracting activity before transferring funds to another agency to conduct an acquisition. The policy states further that domestic bureaus or offices may only transfer funds to another agency for contracting services after obtaining a waiver from AQM. Application of this policy is limited to assisted interagency contracting actions. Instances in which a State contracting officer directly places an order on another agency’s contract are not subject to the policy. Additionally, the State First policy does not apply to assisted interagency contracting activities conducted by overseas posts. The State First policy instructs requesting bureaus to provide information about the proposed interagency contract action, including a description of the requirement and contracting services to be provided by the other agency, the estimated dollar value, the number of option years, the reason for using the other agency, and the amount of any surcharge or fee to be charged by the other agency for its contracting services. AQM, in consultation with OPE, is to review a bureau’s request and either issue a waiver allowing it to proceed with the proposed interagency contracting activity or decline the request and direct the bureau to the appropriate State contracting office for assistance, as described in figure 2. The State First policy also provides AQM with the authority to grant blanket waivers for future acquisitions involving the same item so that bureaus do not need to request an individual waiver each time they need to procure that item. For instance, the policy cites the acquisition of ammunition through DOD as an example of this type of recurring need that could be covered by a blanket waiver. The Department of State has limited insight into the extent to which it uses interagency contracting. A key governmentwide data system does not fully capture information on interagency contracting, and State’s internal systems do not comprehensively track its use of these contracts. While State reported to us over $800 million in direct and assisted interagency contract actions in fiscal year 2006, these data were incomplete, and reported data were missing basic information in many cases. We have previously reported that the lack of reliable information on interagency contracts inhibits agencies from making sound contracting decisions and engaging in good management practices. The Federal Procurement Data System-Next Generation (FPDS-NG), the federal government’s primary database for procurement actions, is not a reliable source of information on interagency contracts. We have reported in the past on difficulties in obtaining data and generating reports on interagency contracting using FPDS-NG. Similarly, the State Procurement Executive explained to us that it is difficult to extract interagency contracting data from FPDS-NG and that there is no single report that comprehensively identifies uses of interagency contracting. For assisted interagency actions, the servicing agency is responsible for entering data into FPDS-NG, but such entries do not always indicate that actions involve interagency contracts. If a contracting officer at another agency placed an order for State, that agency—not State—would be responsible for recording the order in FPDS-NG, and the fact that the order was done for State would not necessarily be recorded. While the servicing agency can enter a funding agency in FPDS-NG, it may identify itself as the funding agency instead. For example, we identified records in FPDS-NG for certain contract actions entered into by DOD for State that listed DOD as the funding agency. A DOD official told us that once funds are transferred to DOD, they lose their association with the funding agency. For direct contract actions, in which State contracting officers placed the orders and recorded the transactions in FPDS-NG, there is no data field that reliably indicates that these actions involved an interagency contract. In addition, State cannot rely on the data systems used by its central procurement and financial offices to provide complete information on its use of interagency contracting. AQM maintains a procurement data system; however, bureau officials told us that not all bureaus with contracting authority use this system and that assisted acquisitions where the contracting officer is at another agency are not recorded in this system. For example, a State official noted that a bureau that reported to us significant use of assisted interagency contracting does not use this system. The State Procurement Executive acknowledged the limitations of this system, noting it would be difficult to use it to identify interagency contracts. Further, State’s accounting system cannot be used to identify many interagency contracting actions. State officials explained that for direct actions, the accounting system does not record whether an interagency contract was used. Similarly, the officials said that for assisted actions, a “miscellaneous” data field that captures a variety of information may, but does not always, indicate that the transfer of funds to another agency is for a contract. While State officials told us that the most reliable way to identify interagency contract actions would be to request a list of these actions from each bureau and overseas post, several bureaus and posts had difficulty responding to our request for such information. For example, one bureau, which has used assisted interagency contracts, noted that the bureau had no reasonable means of obtaining information on its assisted interagency contract actions. In some cases, bureaus did not have a central point of contact responsible for tracking interagency contracts and many bureaus reported reviewing paper files to assemble the requested information on their assisted actions. Additionally, a procurement official expressed concern about another bureau’s lack of information on interagency contracts, noting that when she needed basic information, such as the amounts obligated by the bureau on these contracts, she was directed to the servicing agencies. Similar challenges were experienced in 2005 when State’s Office of Inspector General conducted a related review and sought to identify bureaus’ use of interagency contracts. The official who led that review told us he found that it was generally difficult for bureaus to compile data on interagency contracts and that a number of bureaus continually identified new contract actions throughout the course of the review. In the absence of a data system that reliably identifies State’s interagency contracts, we requested information on all interagency contract actions of at least $25,000 conducted in fiscal year 2006 from 53 State bureaus and overseas posts. Fifty-two of these bureaus and posts reported a total of over $800 million in interagency actions—$577.2 million for direct actions and $234.3 million for assisted actions (see app. II for more details on the data reported to us by State). However, we found that at least 13 of these bureaus provided incomplete data.