Governmentwide, spending on services contracts has grown substantially over the past several years. At DHS, in fiscal year 2005 services accounted for $7.9 billion, or 67 percent, of total procurement obligations, with $1.2 billion obligated for four types of professional and management support services: program management and support, engineering and technical, other professional, and other management support (see fig. 1). More than two-thirds of DHS’s obligations for these services ($805 million) were to support the Coast Guard, OPO, and TSA. The services federal agencies buy are organized under more than 300 codes in FPDS-NG and range from basic services, such as custodial and landscaping, to more complex professional and management support services, which may closely support the performance of inherently governmental functions. Inherently governmental functions require discretion in applying government authority or value judgments in making decisions for the government; as such, they should be performed by government employees, not private contractors. The Federal Acquisition Regulation (FAR) provides 20 examples of functions considered to be, or to be treated as, inherently governmental, including determining agency policy and priorities for budget requests, directing and controlling intelligence operations, approving contractual requirements, and selecting individuals for government employment. The closer contractor services come to supporting inherently governmental functions, the greater the risk of their influencing the government’s control over and accountability for decisions that may be based, in part, on contractor work. This may result in decisions that are not in the best interest of the government, and may increase vulnerability to waste, fraud, or abuse. The FAR provides 19 examples of services and actions that may approach the category of inherently governmental because of the nature of the function, the manner in which the contractor performs the contracted services, or the manner in which the government administers contractor performance. Table 1 provides examples of these services and their relative risk of influencing government decision making. FAR and OFPP guidance address contracting for services that closely support the performance of inherently governmental functions, including professional and management support services, due to their potential for influencing the authority, accountability, and responsibilities of government officials. In particular, the guidance states that services that tend to affect government decision making, support or influence policy development, or affect program management are susceptible to abuse and require a greater level of scrutiny. Such services include advisory and assistance, which includes expert advice, opinions, and other types of consulting services. The guidance requires agencies to provide greater scrutiny of these services and an enhanced degree of management oversight. This would include assigning a sufficient number of qualified government employees to provide oversight and to ensure that agency officials retain control over and remain accountable for policy decisions that may be based in part on a contractor’s performance and work products. The potential for the loss of government management control associated with contracting for services that closely support the performance of inherently governmental functions or that should be performed by government employees is a long-standing governmentwide concern. For example, in 1981, GAO found that contractors’ level of involvement in management functions at the Departments of Energy (DOE) and Defense (DOD) was so extensive that the agencies’ ability to develop options other than those proposed by the contractors was limited. A decade later, in 1991, GAO reported that DOE had contracted extensively for support in planning, managing, and carrying out its work because it lacked sufficient resources to perform the work itself. We noted that while support service contracts are appropriate for fulfilling specialized needs or needs of a short-term or intermittent nature, the contracts we reviewed at DOE were not justified on these bases. In that same year, GAO reported that three agencies—DOE, the Environmental Protection Agency, and the National Aeronautics and Space Administration—may have relinquished government control and relied on contractors to administer some functions that may have been governmental in nature. More recently, government, industry, and academic participants in GAO’s 2006 forum on federal acquisition challenges and opportunities and the congressionally mandated Acquisition Advisory Panel noted how an increasing reliance on contractors to perform services for core government activities challenges the capacity of federal officials to supervise and evaluate the performance of these activities. The panel also noted that contracts for professional services are often performed with close contact between the federal government and contractor employees, which approaches the line between personal and nonpersonal services. Personal services are prohibited by the FAR, unless specifically authorized, and are indicated when the government exercises relatively continuous supervision and control over the contractor. Both the panel and GAO acquisition forum participants noted the large growth in contracting for complex and sophisticated services has increased attention to the appropriate use of contractors. A broad range of activities related to specific programs and administrative operations was performed under the professional and management support services contracts we reviewed. In most cases, the services provided—such as policy development, reorganization and planning activities, and acquisition support—closely supported the performance of inherently governmental functions. Contractor involvement in the nine cases we reviewed in detail ranged from providing two to three supplemental personnel to staffing an entire office. Of the $805 million obligated by the Coast Guard, OPO, and TSA in fiscal year 2005 to procure four types of professional and management support services, more than one-half of the obligations was for engineering and technical services—most of which was contracted by the Coast Guard and OPO. Figure 2 provides a breakdown of contracting dollars for the four selected professional and management support services by the three DHS components. Some of the 117 statements of work we reviewed were for services that did not closely support inherently governmental functions. These included a TSA contract for employee parking services at airports and a Coast Guard contract to maintain historic human resource records and perform data entry. However, most of the selected statements of work we reviewed did request reorganization and planning activities, acquisition support, and policy development—services that closely supported inherently governmental functions. Of the 117 statements of work that we reviewed, 71 included a total of 122 services that fell into these three categories— with reorganization and planning activities requested most often. For example, the Coast Guard obligated $500,000 for a contractor to provide services for the Nationwide Automatic Identification System to identify and monitor vessels approaching or navigating in U.S. waters. The services included advising and providing recommendations on strategies for project planning, risk management, and measuring the performance and progress of the system. Additionally, the tasks included assisting with the development of earned value management reviews, life-cycle cost estimates, and cost-benefit analyses. In another example, TSA obligated $1.2 million to acquire contractor support for its Acquisition and Program Management Support Division, which included assisting with the development of acquisition plans and hands-on assistance to program offices to prepare acquisition documents. Because contract statements of work can be broad, or contain requirements that the contractor may not ultimately perform, we conducted a more detailed review of nine cases to verify the work performed. In these nine cases, we found that contractors provided a broad array of services to sustain a range of programs and administrative operations, with the categories of reorganization and planning, policy development, and acquisition support requested most often. For example, $2.1 million in orders supporting the Coast Guard’s fleet modernization effort—the Integrated Deepwater System—included modeling and simulation services to analyze the operational performance and effectiveness of various fleet scenarios for program planning. A $42.4 million OPO order for professional, technical, and administrative services for multiple offices in DHS’s Information Analysis and Infrastructure Protection Directorate included tasks to assist in developing policies, budget formulation, and defining information technology requirements. Specifically, contractor personnel provided general acquisition advice and support to the Information Analysis and Infrastructure Protection business office, which included the management, execution, process improvement, and status reporting of procurement requests. For another office, the contractor provided an analysis of intelligence threats. A $7.9 million OPO human capital services order provided a full range of personnel and staffing services to support DHS’s headquarters offices, including writing position descriptions, signing official offer letters, and meeting new employees at DHS headquarters for their first day of work. The extent of contractor involvement in the nine case studies varied from providing two to three supplemental personnel to staffing an entire office, and in most cases contractor staff performed services on-site at DHS facilities. Figure 3 shows the type and range of services provided in the nine case studies and the location of contractor performance. A lack of staff and expertise to get programs and operations up and running drove decisions to contract for professional and management support services. While program officials generally acknowledged that these contracts closely supported the performance of inherently governmental functions, they did not assess the risk that government decisions may be influenced by, rather than independent from, contractor judgments. In the nine cases we reviewed, we found contractors providing services integral to an agency’s mission and comparable to those provided by government employees, and contracts with broadly defined requirements. These conditions need to be carefully monitored to ensure the government does not lose control over and accountability for mission related decisions. DHS has not explored ways to manage the risk of contracting for these services such as determining the right mix of government-performed and contractor-performed services or assessing total workforce deployment across the department. DHS’s human capital strategic plan notes the department has identified core mission critical occupations and plans to reduce skill gaps in core and key competencies. However, it is unclear how this will be achieved and whether it will inform the department’s use of contractors for services that closely support inherently governmental functions. The reasons most often cited by program officials for contracting for services was the need for employees—to start up a new program or administrative operation, provide specific expertise, or meet immediate mission needs. When DHS was established in 2003, it was charged with developing strategies, programs, and projects to meet a new mission while facing skill gaps in core and key competencies. For example, at TSA—a component built from the ground up—according to program officials, the lack of federal staff to provide acquisition support led to hiring contractors for its Secure Flight program.