In part to improve the information available and management of DOD’s acquisition of services, in 2001 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. Congress amended section 2330a in 2008 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 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 subsection 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) is to submit 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 2015, the most recent submitted on September 20, 2016 (see table 1). Since DOD began reporting on the department-wide inventory of contracted services in fiscal year 2008, 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 contract action, 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. Subsection 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 of the inventory being 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 in 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 in 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. In addition, subsection 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 potential 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. Over the past five years, we have issued several reports on DOD’s efforts to compile and review its inventory of contracted services and made recommendations on a variety of issues related to the inventories. For example, in January 2011, we found that the military departments had differing approaches to reviewing the activities performed by contractors, and the department stated it had a goal of collecting manpower data from contractors for future inventories. We recommended that the department develop a plan of action to facilitate the department’s intent of collecting manpower data and address other limitations to its current approach to meeting inventory requirements. The department concurred with our recommendation but had not addressed it as of August 2016. In November 2015, we found that 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 functions, and recommended that DOD require acquisition officials to document, prior to contract award, whether the proposed contract action includes activities that are closely associated with inherently governmental functions. DOD concurred with our recommendation, but has not yet implemented it. A full list of our prior reports on DOD’s inventory of contracted services, the recommendations from those reports, and the current status of those recommendations— including eight that remain open—is included in appendix I. Our prior work has also consistently found that the absence of a complete and accurate inventory of contracted services hinders DOD’s ability to improve its management of these services. For example, in a June 2016 report on DOD headquarters personnel reduction efforts, we found that DOD does not have reliable data for assessing headquarters functions and associated costs, including those performed by contractor personnel. We concluded that without reliable information, DOD may not be able to accurately assess specific functional areas or identify potential streamlining and cost savings opportunities. In a December 2015 report on civilian and contractor personnel reductions, we found that limitations in the methodology for contractor FTE estimates in the inventory may hinder efforts to implement statutorily mandated reporting on reductions in contractor personnel. Further, in a February 2016 report on DOD efforts to forecast service contract requirements, we found that existing data on DOD’s future spending for contracted service requirements was not fully captured by DOD’s programming and budget processes, an effort the inventory of contracted services is intended to support. We noted that critical to being more strategic is knowing what DOD is spending today and what DOD intends to spend in the future. More DOD components conducted and certified the completion of an inventory review as required by subsection 2330a(e) of title 10 of the U.S. Code and DOD’s guidance, respectively, in fiscal year 2014 as compared to previous years. Overall, we found that the 40 components’ certification letters addressed more of DOD’s required elements in comparison to prior years, with over half of the components including all six of the required elements. In some areas, however, we continued to find limitations with the information provided in the certification letters. For example, the level of detail and input provided on the use of the inventory to inform annual program reviews and budget processes varied. In addition, we continued to find significant differences and potential underreporting in the extent to which components identified instances of contractors providing services that are closely associated with inherently governmental functions in their inventories. For example, through its review process, the Army identified $8.1 billion in invoiced dollars for contracts that include closely associated with inherently governmental functions, nearly three times the amount identified by the Navy, Air Force, and other defense agencies collectively for similar types of contracts. USD(AT&L) and USD(P&R)’s December 29, 2014, guidance governing the fiscal year 2014 inventory of contracted services required the military departments and defense agencies to certify—through submission of a certification letter to the USD(P&R)—that their review was conducted in accordance with subsection 2330a(e) of title 10 of the U.S. Code. As of July 2016, 40 DOD components reporting for fiscal year 2014 certified that they had reviewed their inventories. Notably, the Air Force, which represented close to 18 percent of DOD’s contract obligations for services in fiscal year 2014, submitted a review certification letter for the first time since the fiscal year 2011 inventory. The Army submitted an interim certification letter in April 2016 based on a review of the contracted functions performed by 73 percent of its contractor FTEs from its fiscal year 2014 inventory. DOD’s guidance for fiscal year 2014, among other things, requires components to include six elements in their certification letters. DOD components’ certification letters have generally improved each year since 2011 in terms of the number of elements addressed. See figure 2 for the list of required elements and the percentage of components that addressed each element in their certification letters for fiscal years 2011 to 2014.