DOD faces a number of longstanding and systemic challenges that have hindered its ability to achieve more successful acquisition outcomes— obtaining the right goods and services, at the right time, at the right cost. These challenges include addressing the issues posed by DOD’s reliance on contractors, ensuring that DOD personnel use sound contracting approaches, and maintaining a workforce with the skills and capabilities needed to properly manage the acquisitions and oversee contractors. The issues encountered in Iraq and Afghanistan are emblematic of these systemic challenges, though their significance and effect are heightened in a contingency environment. Our concerns about DOD’s acquisition of services, including the department’s reliance on contractors and the support they provide to deployed forces, predate the operations in Iraq and Afghanistan. We identified DOD contract management as a high-risk area in 1992 and since then we continued to identify a need for DOD to better manage services acquisitions at both the strategic and individual contract levels. Similarly, in 1997 we raised concerns about DOD’s management and use of contractors to support deployed forces in Bosnia. We issued a number of reports on operational contract support since that time, and our recent high-risk update specifically highlighted the need for increased management attention to address operational contract support. Contractors can provide many benefits, such as unique skills, expertise, and flexibility to meet unforeseen needs, but relying on contractors to support core missions can place the government at risk of transferring government responsibilities to contractors. In 2008, we concluded that the increased reliance on contractors required DOD to engage in a fundamental reexamination of when and under what circumstances it should use contractors versus civil servants or military personnel. Earlier this year, we reported that the department lacked good information on the roles and functions fulfilled by contractors. Our work has concluded that DOD’s reliance on contractors is still not fully guided by either an assessment of the risks using contractors may pose or a systematic determination of which functions and activities should be contracted out and which should be performed by civilian employees or military personnel. The absence of systematic assessments of the roles and functions that contractors should perform is also evident in contingency environments. For example, in June 2010 we reported that DOD had not fully planned for the use of contractors in support of operations in Iraq and Afghanistan and needed to improve planning for operational contract support in future operations. In addition, we reported that while U.S. Forces-Iraq had taken steps to identify all the Army’s Logistics Civil Augmentation Program (LOGCAP) contract support needed for the drawdown in Iraq, it had not identified the other contractor support it may need. We found that the May 2009 drawdown plan had delegated responsibility for determining contract support requirements to contracting agencies rather than to operational personnel. However, DOD contracting officials told us that they could not determine the levels of contractor services required or plan for reductions based on those needs because they lacked sufficient, relevant information on requirements for contractor services during the drawdown. Similarly for Afghanistan, we found that despite the additional contractors that would be needed to support the troop increase, U.S. Forces-Afghanistan was engaged in very little planning for contractors with the exception of planning for the increased use of LOGCAP. Further, we have reported on limitations in DOD’s ability to track contractor personnel deployed with U.S. forces. In January 2007, DOD designated the Synchronized Predeployment and Operational Tracker (SPOT) as its primary system for tracking data on contractor personnel deployed with U.S. forces. SPOT was designed to account for all U.S., local, and third-country national contractor personnel by name and to contain a summary of services being provided and information on government-provided support. Our reviews of SPOT, however, have highlighted shortcomings in the system’s implementation in Iraq and Afghanistan. For example, we found that varying interpretations by DOD officials as to which contractor personnel should be entered into the system resulted in SPOT not presenting an accurate picture of the total number of contractor personnel in Iraq or Afghanistan. In addition, we reported in 2009 that DOD’s lack of a departmentwide policy for screening local or third-country nationals—who constitute the majority of DOD contractor personnel in Iraq and Afghanistan—poses potential security risks. We are currently assessing DOD’s process for vetting firms that are supporting U.S. efforts in Afghanistan. Regarding planning for the use of contractors in future operations, since February 2006 DOD guidance has called for the integration of an operational contract support annex—Annex W—into certain combatant command operation plans, if applicable to the plan. However, 4 years later we reported that of the potential 89 plans that may require an Annex W, only 4 operation plans with Annex Ws had been approved by the department. As a result, DOD risks not fully understanding the extent to which it will be relying on contractors to support combat operations and being unprepared to provide the necessary management and oversight of deployed contractor personnel. Moreover, the combatant commanders are missing an opportunity to fully evaluate and react to the potential risks of reliance on contractors. While the strategic level defines the direction and manner in which an organization pursues improvements in services acquisition, it is through the development, execution, and oversight of individual contracts that the strategy is implemented. Keys to doing so are having clearly defined and valid requirements, a sound contract, and effective contractor management and oversight. In short, DOD, like all organizations, needs to assure itself that it is buying the right thing in the right way and that doing so results in the desired outcome. Our work over the past decade identified weaknesses in each of these key areas, whether for services provided in the United States or abroad, as illustrated by the following examples: In June 2007, we reported that DOD understated the extent to which it used time-and-materials contracts, which can be awarded quickly and adjusted when requirements or funding are uncertain. We found few attempts to convert follow-on work to less risky contract types and found wide discrepancies in DOD’s oversight. That same month we also reported that DOD personnel failed to definitize—or reach final agreement on—contract terms within required time frames in 60 percent of the 77 contracts we reviewed. Until contracts are definitized, DOD bears increased risk because contractors have little incentive to control costs. We then reported in July 2007 that DOD had not completed negotiations on certain task orders in Iraq until more than 6 months after the work began and after most of the costs had been incurred, contributing to its decision to pay the contractor nearly all of the $221 million questioned by auditors. We subsequently reported in 2010 that DOD had taken several actions to enhance departmental insight into and oversight of undefinitized contract actions; however, data limitations hindered DOD’s full understanding of the extent to which they are used. As early as 2004, we raised concerns about DOD’s ability to effectively administer and oversee contracts in Iraq. We noted that effective contract administration and oversight remained challenging in part because of the continued expansion of reconstruction efforts, staffing constraints, and need to operate in an unsecure and threatening environment. In 2008, we reported that the lack of qualified personnel hindered oversight of contracts to maintain military equipment in Kuwait and provide linguistic services in Iraq and questioned whether DOD could sustain increased oversight of its private security contractors. During our 2010 visits with deployed and recently returned units, we found that units continue to deploy to Afghanistan without designating contracting officer’s representatives beforehand and that those representatives often lacked the technical knowledge and training needed to effectively oversee certain contracts. Several units that had returned from Afghanistan told us that contracting officer’s representatives with no engineering background were often asked to oversee construction projects and were unable to ensure that the buildings and projects they oversaw met the technical specifications required in the drawing plans. We are currently assessing the training on the use of contract support that is provided to military commanders, contracting officer’s representatives, and other nonacquisition personnel before they deploy. Underlying the ability to properly manage the acquisition of goods and services is having a workforce with the right skills and capabilities. DOD recognizes that the defense acquisition workforce, which was downsized considerably through the 1990s, faces increases in the volume and complexity of work because of increases in services contracting, ongoing contingency operations, and other critical missions. For example, while contract spending dramatically increased from fiscal years 2001 through 2008, DOD reported that its acquisition workforce decreased by 2.6 percent over the same period. In April 2010, DOD issued an acquisition workforce plan that identified planned workforce growth, specified recruitment and retention goals, and forecasted workforce-wide attrition and retirement trends. As part of that plan, DOD announced that it would increase the size of two oversight organizations—the Defense Contract Audit Agency and the Defense Contract Management Agency—over the next several years to help reduce the risk of fraud, waste, and abuse in DOD contracts. However, we reported in September 2010 that DOD had not completed its assessment of the critical skills and competencies of its overall acquisition workforce and that it had not identified the funding needed for its initiatives until the conclusion of our review. The current budget situation raises questions as to whether DOD will be able to sustain its projected workforce growth and related initiatives. We are currently reviewing the Defense Contract Management Agency’s capacity for oversight and surveillance of contracting activity domestically in light of its role in contingency operations. DOD has recognized the need to take action to address the challenges it faces regarding contract management and its reliance on contractors, including those related to operational contract support. Over the past several years, the department has announced new policies, guidance and training initiatives, but not all of these actions have been implemented and their expected benefits have not yet been fully realized.