Contingency operations can encompass a number of potentially dangerous or uncertain environments, which increase risks to federal agencies and personnel, including contractors that support those agencies. The U.S. Code defines a contingency operation, in relevant part, as a military operation designated by the Secretary of Defense in which armed forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or results in the call to active duty members of the uniformed services, such as in Iraq and Afghanistan.fall within this definition but potentially pose similar challenges. However, there are other environments that do not USAID officials noted that its personnel operate in challenging environments on a daily basis and that the agency uses various terms to describe these environments. For example, USAID’s programming policy defines high-threat environment as a country, city, area, subregion, or region in which USAID is hindered in accomplishing its mission due to security risks such as (1) specific targeting of U.S. interests, (2) a favorable operating environment for terrorist groups, (3) intelligence indicating that a threat is imminent, or (4) other significant risk as identified by various security offices. State operates in similar environments. For example, in its 2010 Quadrennial Diplomacy and Development Review, State noted that more than 25 percent of State and USAID personnel serve in 30 countries classified as high risk for conflict and instability, including Yemen, Democratic Republic of Congo, Sudan, and Kyrgyzstan. For the purposes of this report, we use the term “contingency operations” to encompass the range of potentially dangerous or uncertain environments in which USAID and State operate. Our work over the past 5 years, as well as that of others in the accountability community, has found that State and USAID have experienced systemic challenges that have hindered their ability to manage and oversee contracts in contingency environments. In our reports issued annually between 2008 and 2011, we consistently found that State and USAID lacked reliable data and systems to report on their contracts and contractor personnel in Iraq and Afghanistan. Having reliable data on contracts and contractor personnel is a starting point for informing agency decisions and ensuring proper management. In 2012, we reported that the agencies had made improvements to their contractor personnel data and related systems that could result in more reliable data, but data comparability across years and agencies was limited. We also reported in 2012 that State had not assessed the skills and workforce mix needed to meet future contracting requirements in Iraq and Afghanistan. Further, we found that State had insufficient personnel with the necessary expertise to conduct acquisition planning and oversight functions to support the department’s mission in Iraq, and, as a result, relied on the Department of Defense (DOD) for acquisition support. We also found weaknesses in USAID’s oversight and monitoring of project and program performance in Afghanistan. Specifically, we reported that USAID did not consistently follow its established performance management and evaluation procedures for Afghanistan agriculture and USAID subsequently issued new guidance, approved a water projects.new performance management plan, and took steps to improve its third- party monitoring of projects. Similarly, others in the accountability community have reported on the acquisition challenges faced by State and USAID in contingency environments. For example, Inspectors General at both agencies identified aspects of contracting in contingency environments as a serious management challenge in the agencies’ fiscal year 2012 financial reports. State’s Inspector General found that the department continued to face challenges managing contracts and procurements, and reported that it has identified instances in Iraq and Pakistan in which poor contract monitoring resulted in increased costs and poor performance. Similarly, USAID’s Inspector General identified USAID’s work in high-threat environments such as Afghanistan, Pakistan, Iraq, and South Sudan, as one of the agency’s most serious management challenges, in part due to audits that disclosed weak contract management in these environments. In addition, the Special Inspector General for Iraq Reconstruction and the Special Inspector General for Afghanistan Reconstruction have reported on similar contracting issues. Further, the statutorily established Commission on Wartime Contracting in Iraq and Afghanistan made a number of recommendations directed to State and USAID in its final report, issued in 2011. Recommendations include those related to using risk factors to decide what functions are appropriate to contract for in contingency settings, ensuring the government can provide sufficient acquisition management and contractor oversight, and taking actions to mitigate the threat of additional waste due to a lack of sustainment by host governments. Section 850(a) of the fiscal year 2013 NDAA mandated that State and USAID submit, to the appropriate Congressional committees, assessments of agency policies governing contract support in overseas Section 850(a) required State and USAID to contingency operations.submit their reports to Congress by July 2, 2013. Section 850(b) of the NDAA provided that the reports 1. Describe and assess the roles and responsibilities of officials and offices with contract-related responsibilities in overseas contingency operations; 2. Include procedures and processes associated with eight elements of contracting, including collection, inventory, and reporting of data; acquisition planning; solicitation and award of contracts; requirements development and management; contract tracking and oversight; performance evaluations; risk management; and interagency coordination and transition planning; and 3. Include strategies and improvements necessary to address workforce issues in overseas contingencies, including reliance on contractors. State and USAID submitted their reports to Congress on June 25 and July 1, 2013, respectively. State and USAID identified a number of actions needed to improve contracting in contingency environments. Overall, the actions identified by State and USAID may help position each agency to better support future contingency operations, but many of the identified changes are new or have not been fully implemented and the agencies generally have not established plans to assess the impact of the changes. Federal internal control standards highlight the importance of managers comparing actual performance to expected results. For example, in October 2013, State’s Under Secretary for Management approved a series of actions, which included changing the organizational structure by establishing a new staff unit to oversee elements of contracting in overseas contingency operations, a new contract risk mitigation effort, and the creation of specific contingency contracting policy in its Foreign Affairs Manual. In some instances, such as establishing the new risk mitigation staff, State intends to assess the impact of the initiatives. According to State officials, they are still developing specific plans and time frames to implement several other initiatives. We found that State has not indicated whether or how it intends to assess the impact of these other initiatives. Continued management attention is needed to ensure that these efforts achieve their intended objectives. USAID identified several actions needed to improve areas such as the collection, inventory, and reporting of data; contractor performance evaluations; and risk management. In response to long-standing challenges that the agency faces in implementing and monitoring activities in high-threat environments, USAID established a nonpermissive environment working group in October 2013 to develop lessons learned, toolkits, and training, but it is not expected to complete this effort until the end of September 2014. We found that USAID missions and offices with responsibilities for responding to contingencies have established procedures and practices, but USAID did not consider whether these procedures should be institutionalized agency-wide. USAID officials explained that they took a narrow view of the mandate and focused their assessment on agency-wide policies. As a result, USAID may have missed opportunities to leverage its institutional knowledge to better support future contingencies. State’s Section 850 report to Congress concluded that its organizational structure was generally adequate to support overseas contingency operations and identified several actions needed to improve areas such as acquisition planning, contract oversight, and interagency coordination (see table 1). In addition, our review identified other contingency contracting related actions taken by State, including those identified after State submitted its report to Congress. To identify needed changes, State established working groups comprised of key officials from offices across the department to assess State’s organizational structure and contracting procedures in overseas contingency operations. In October 2013, State’s Under Secretary for Management approved a series of recommendations proposed by the working groups, which included establishing a new staff unit to oversee elements of contracting in overseas contingency operations and other critical environments, as well as the creation of a specific contingency contracting chapter in the Foreign Affairs Manual, which contains the organizational responsibilities and authorities of each of the major components of the department. According to State officials, they are still developing specific plans and time frames to implement many of the changes approved in October, but generally have not developed plans to assess the impact of these initiatives. State officials subsequently reported that the Critical Environment Contract Analytics Staff, which was formally established in December 2013, will be responsible for using metrics to assess the effectiveness and performance of State’s planned initiatives. State determined that its centralized organizational structure was generally effective and efficient for contract support in overseas contingency operations. To improve management and oversight of contract performance of major contracts in Iraq, State established a new regional Contract Management Office in August 2013. State plans to review the effectiveness of the Contract Management Office after it has been operational for 1 year to determine gaps and applicability as a department-wide model for contracting in future contingency environments. State officials noted that the office, currently located in Iraq, will move to Kuwait in mid-2014 to allow for administrative support for other contracts in the region as resources are available. Appendix II describes the roles and responsibilities of State’s contracting organization used to support contingency operations. With regard to tracking of contractors and contractor personnel, State has previously taken steps to improve the collection, inventory, and reporting of contractor and contractor personnel data within DOD’s Synchronized Predeployment and Operational Tracker (SPOT) database for overseas contingency operations. In 2008, Congress required DOD, State, and USAID to begin tracking use of contractors in Iraq and Afghanistan. To do so, the agencies agreed to use DOD’s SPOT database.