    Interagency Contracting: Problems with DOD's and Interior's
    Orders to Support Military Operations (29-APR-05, GAO-05-201).

    In recent years, federal agencies have increasingly turned to
    interagency contracts--where one agency, for example, places an
    order under an existing contract for another agency--as a way to
    streamline the procurement process. Interagency contracting can
    offer benefits of improved efficiency, but this approach needs to
    be effectively managed. To learn more about some of the
    challenges of interagency contracting, we reviewed the process
    that the Department of Defense (DOD) used to acquire
    interrogation and certain other services through the Department
    of the Interior to support military operations in Iraq. On behalf
    of DOD, Interior issued 11 task orders, valued at over $66
    million, on an existing contract. This report identifies
    breakdowns in the procurement process, contributing factors that
    led to the breakdowns, and the extent to which recent actions by
    Interior and DOD address these contributing factors.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-05-201
        ACCNO:   A22957
      TITLE:     Interagency Contracting: Problems with DOD's and
    Interior's Orders to Support Military Operations
         DATE:   04/29/2005
      SUBJECT:   Contract administration
    	     Contract performance
    	     Contractor violations
    	     Defense procurement
    	     Department of Defense contractors
    	     Federal procurement
    	     Interagency relations
    	     Military operations
    	     Performance measures
    	     Procurement practices
    	     Internal controls
    	     Military intelligence
    	     Service contracts
    	     Policies and procedures

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO Product.                                                 **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ******************************************************************
    GAO-05-201

    United States Government Accountability Office

    GAO

                           Report to Congressional Committees

    April 2005

                                      INTERAGENCY
                                      CONTRACTING

        Problems with DOD's and Interior's Orders to Support Military Operations

    GAO-05-201

    [IMG]

    April 2005

    INTERAGENCY CONTRACTING

    Problems with DOD's and Interior's Orders to Support Military Operations

      What GAO Found

    DOD, faced with an urgent need for interrogation and other services in
    support of military operations in Iraq, turned to the Department of the
    Interior for contracting assistance. Numerous breakdowns occurred in the
    issuance and administration of the orders for these services. The
    breakdowns included

    o  	issuing orders that were beyond the scope of the underlying contract,
    in violation of competition rules;

    o  	not complying with additional DOD competition requirements when
    issuing task orders for services on existing contracts;

    o  not properly justifying the decision to use interagency contracting;

    o  	not complying with ordering procedures meant to ensure best value for
    the government; and

    o  inadequate monitoring of contractor performance.

    Because the officials at Interior and the Army responsible for the orders
    did not fully carry out their roles and responsibilities, the contractor
    was allowed to play a role in the procurement process normally performed
    by the government.

    A lack of effective management controls-in particular insufficient
    management oversight and a lack of adequate training-led to the
    breakdowns. When these management controls are not in place, particularly
    in an interagency fee-for-service contracting environment, more emphasis
    can be placed on customer satisfaction and revenue generation than on
    compliance with sound contracting policy and required procedures.
    Significant problems in the way Interior's contracting office carried out
    its responsibilities in issuing the orders for interrogation and other
    services on behalf of DOD were not detected or addressed by management.
    Further, the Army officials responsible for overseeing the contractor, for
    the most part, lacked knowledge of contracting issues and were not aware
    of their basic duties and responsibilities.

    In response to the above concerns, Interior and DOD have taken actions to
    strengthen management controls. For example, Interior has re-issued or
    clarified several policies for its contracting personnel and has required
    them to take training on the proper use of General Service Administration
    contracts. DOD has issued a new policy requiring that military departments
    and defense agencies establish procedures for reviewing and approving the
    use of other agencies' contracts. These actions are a positive step toward
    addressing some of the contributing causes to the breakdowns GAO found,
    but it is too soon to tell how effective they will be.

                     United States Government Accountability Office

    Contents

      Letter

    Results in Brief
    Background
    Breakdowns Occurred When Interior Procured Interrogation and

    Other Services for DOD Need for Strong Management Controls Too Early to
    Tell If Actions to Increase Oversight and Improve

    Training Will Be Effective Recommendations Agency Comments and Our
    Evaluation 1

    3 4

    7 14

    19 21 21

    Appendix I Scope and Methodology

    Appendix II Comments from the Department of Defense

    Appendix III Comments from the Department of the Interior

    Appendix IV Comments from CACI International Inc.

    Appendix V	Summary of Task Orders Issued to CACI for Work in Iraq

      Table

    Table 1: Comparison of Labor Categories from DOD's Statements of Work to
    the Information Technology Contract 8

                       Page i GAO-05-201 Interagency Contracting

    Abbreviations

    BPA blanket purchase agreement
    CACI CACI International, Inc.
    CJTF-7 Coalition Joint Task Force Seven
    COR contracting officer's representative
    DOD Department of Defense
    FAR Federal Acquisition Regulation
    GSA General Services Administration
    IG Inspector General

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

                       Page ii GAO-05-201 Interagency Contracting

    United States Government Accountability Office Washington, DC 20548

    April 29, 2005

    The Honorable John Warner
    Chairman
    The Honorable Carl Levin
    Ranking Minority Member
    Committee on Armed Services
    United States Senate

    The Honorable Duncan Hunter
    Chairman
    The Honorable Ike Skelton
    Ranking Minority Member
    Committee on Armed Services
    House of Representatives

    In recent years, federal agencies have made a major shift in the way they
    buy goods and services, turning increasingly to interagency contracts as a
    way to streamline the procurement process. Interagency contracting
    occurs when an agency needing supplies or services obtains them from
    another agency, often for a fee. For example, an agency can use an
    existing contract that has already been awarded by another agency, or
    turn to another agency to issue and administer task orders on its behalf.1
    Interagency contracting can offer the benefits of improved efficiency and
    timeliness, but this approach needs to be effectively managed. Use of
    these contracts demands a high degree of business acumen and flexibility
    on the part of the federal acquisition workforce. Due to the challenges
    associated with interagency contracts, we recently designated interagency
    contracting as a governmentwide high-risk area.2

    The process that the Department of the Interior used to acquire
    interrogation and certain other services for the Department of Defense

    1Task orders are placed against established contracts that provide for the
    issuance of orders for the performance of tasks during the period of the
    contract. In a prior report, we examined the fees charged for some types
    of interagency contracting vehicles. See GAO, Contract Management:
    Interagency Contract Program Fees Need More Oversight, GAO-02-734
    (Washington, D.C.: July 25, 2002).

    2GAO, High Risk Series: An Update, GAO-05-207 (Washington, D.C.: January
    2005).

                       Page 1 GAO-05-201 Interagency Contracting

    (DOD) during military operations in Iraq provides insight into aspects of
    interagency contracting that need careful attention. By August 2003, DOD
    was faced with a critical and largely unforeseen need for interrogators
    and screeners, some of whom were needed at Abu Ghraib prison. DOD had in
    place only a contingency contracting office in Iraq at the time, whose
    efforts were focused on obtaining basic necessities such as portable
    sanitation facilities and water trucks. To obtain interrogation and other
    services quickly, DOD relied on an Interior contracting office that
    specializes in awarding and administering contracts for other agencies
    through fee-for-service arrangements. Over an 8-month period, the Interior
    contracting office issued 11 task orders, valued at over $66 million, to
    CACI International, Inc. (CACI) on behalf of DOD. Of the 11 orders, 6 were
    for interrogation, screening, and other intelligence-related services, and
    5 were for logistics support services. Interior placed the task orders on
    an information technology contract that CACI had in place with the General
    Services Administration (GSA) under GSA's Schedule program.3 The Interior
    Inspector General (IG) and GSA subsequently determined that 10 of the 11
    orders were out of scope of the information technology contract. Following
    the disclosure of the prisoner abuse at Abu Ghraib and the implication of
    contractor employees in the abuse, questions arose about how DOD used
    Interior to acquire interrogators and screeners on an information
    technology contract and, more generally, about the integrity of the
    federal procurement process.

    To learn more about some of the challenges associated with interagency
    contracting, we assessed (1) breakdowns that occurred in the procurement
    process when Interior placed orders with CACI for interrogation and other
    services in Iraq, (2) factors that led to the breakdowns, and (3) the
    extent to which recent or planned actions by Interior and DOD address
    these factors. To help ensure that the corrective actions underway will
    fully address the problems, we are recommending steps Interior and DOD can
    take to further refine those efforts.

    We conducted our work at Interior, DOD, and GSA. In addition, we spoke
    with Army program officials who were responsible for overseeing the
    contractor's performance in Iraq and with contractor employees and
    representatives. Appendix I contains more detail on our scope and
    methodology. Appendix V contains a summary of the 11 orders for

    3Schedule contracts allow agencies to quickly procure commonly available
    commercial goods and services at prices associated with volume buying.

                       Page 2 GAO-05-201 Interagency Contracting

    interrogation and other services in Iraq. We conducted our review from
    July 2004 to January 2005 in accordance with generally accepted government
    auditing standards.

                                    Results in Brief

    Numerous breakdowns occurred in the issuance and administration of
    Interior's task orders for interrogation and other services on behalf of
    DOD for military operations in Iraq. These breakdowns included

    o  orders for services beyond the scope of the underlying contract, in

    violation of competition rules;  o  not complying with additional DOD
    competition requirements when issuing task orders for services on existing
    contracts;

    o  not properly justifying the decision to use interagency contracting;

    o  	not complying with ordering procedures meant to ensure best value for
    the government; and

    o  inadequate monitoring of contractor performance.

    Because DOD and Interior officials effectively abdicated certain
    contracting responsibilities, the contractor was allowed to play a large
    role in aspects of the procurement process normally performed by
    government personnel.

    The situation in Iraq at the time the orders for interrogation and other
    services were placed was extraordinary-a wartime environment and an
    atmosphere of turmoil and urgency. Nevertheless, a lack of management
    controls-in particular insufficient management oversight and a lack of
    adequate training-led to the breakdowns. When these controls are not in
    place, particularly in an interagency fee-for-service contracting
    environment, more emphasis can be placed on customer satisfaction and
    revenue generation than on compliance with sound contracting policy and
    required procedures. Significant problems in the way Interior's
    contracting office carried out its responsibilities in issuing the orders
    for interrogation and other services on behalf of DOD were not detected or
    addressed by management. Further, the Army officials responsible for
    overseeing the contractor, for the most part, lacked knowledge of
    contracting issues and were not aware of their basic duties and
    responsibilities in administering the orders.

    The high-profile nature of the interrogation orders has served to focus
    attention on ways to improve the use of interagency contracts. Interior
    and DOD have taken actions to strengthen management controls. For example,
    Interior has re-issued or clarified several policies for its contracting

                       Page 3 GAO-05-201 Interagency Contracting

    personnel and has required them to take training on the proper use of GSA
    contracts. DOD has issued a new policy designed to improve oversight of
    its use of other agencies' contracts, but it has left implementation to
    the individual departments and agencies and does not have a mechanism in
    place to provide for departmentwide monitoring of the policy's
    implementation. While these actions are a positive step toward addressing
    some of the causes to the breakdowns with the orders, it is too soon to
    tell how effective they will be.

    Because a number of corrective actions are already underway, we make
    recommendations in this report on steps that Interior and DOD should take
    to further refine their efforts to improve management oversight and
    training. In written comments on a draft of this report, both agencies
    agreed with the recommendations and discussed actions they are taking to
    implement them. We also received written comments from CACI. While
    acknowledging that our report identifies a number of areas where the
    government can improve its contracting processes, CACI raised several
    issues that it believes we did not adequately address. The comments from
    DOD, Interior, and CACI are discussed beginning on page 21 and are
    reproduced in their entirety in appendices II, III, and IV, respectively.

    In recent years, agencies have increasingly placed orders against existing
    contracts that have been awarded by another agency to save time and
    administrative effort. Rather than going through the often lengthy process
    involved in awarding a new contract for services-soliciting offers,
    evaluating proposals, and awarding the contract-agencies can place task
    orders against established indefinite quantity contracts that meet their
    needs. When placing orders against multiple-award task order contracts,
    agencies are generally required to ensure that contractors have a fair
    opportunity to be considered for each order with certain exceptions (such
    as urgency or logical follow-on). For GSA Schedule contracts, agencies are
    required to follow ordering procedures such as reviewing prices from at
    least three contractors, evaluating prices for services requiring a
    statement of work, and seeking price reductions for large orders.

    Interagency contracting is often handled by entrepreneurial,
    fee-forservice organizations, where agency contracting units operate like
    a business and provide contracting assistance to other agencies for a fee.
    The Interior contracting office that placed the orders for interrogation
    and other services-the Southwest Branch of Interior's National Business
    Center, located in Fort Huachuca, Arizona-is one such organization. This
    office's contracting activity, primarily on behalf of other agencies, has

    Background

    Page 4 GAO-05-201 Interagency Contracting

    increased substantially over the past 3 years, with reported obligations
    increasing from $609 million in fiscal year 2002 to $1.02 billion in
    fiscal year 2004.

    The fee-for-service procurement process generally involves three parties:
    the agency requiring a good or service; the agency placing the order or
    awarding the contract; and contractors providing the goods and services
    the government needs. The requiring agency officials determine the goods
    or services needed and, if applicable, prepare a statement of work,
    sometimes with the assistance of the ordering organization. The
    contracting officer at the ordering office ensures that the contract or
    order is properly awarded or issued (including any required competition),
    and administered under applicable regulations and agency requirements. If
    contract performance will be ongoing, a contracting officer's
    representative-generally an official at the requiring agency with relevant
    technical expertise-is normally designated by the contracting officer to
    monitor the contractor's performance and serve as the liaison between the
    contracting officer and the contractor.

    At the same time as use of interagency contracting has increased, DOD has
    also increased its use of contractors in military operations. Particularly
    since the 1991 Gulf War, contractors have taken over support positions
    that were traditionally filled by government personnel. For example, a
    company that CACI later acquired began providing intelligence support to
    the Army in Germany in 1999.4 When the Army in Europe deployed
    intelligence personnel to the Iraq theater in 2003, CACI employees went
    with them. Following the announcement of the end of major combat in May
    2003, the Army, as part of the Coalition Joint Task Force Seven (CJTF-7),
    was expecting a non-hostile situation and did not plan for an insurgency.5
    It was unprepared for the volume of Iraqi detainees and the

    4In 1999, the Army acquired intelligence analysis support from Premier
    Technology Group. CACI acquired the assets of Premier Technology Group in
    May 2003, including the GSA contract.

    5The CJTF was designed to conduct offensive operations to defeat remaining
    noncompliant forces and neutralize destabilizing influences in the Iraq
    theater to create a secure environment in direct support of the Coalition
    Provisional Authority. Previous reports demonstrate that DOD did not
    adequately plan for the acquisition support required to perform its
    mission in Iraq. In fact, in June 2004, we recommended that the Secretary
    of Defense develop a strategy for assuring that adequate acquisition staff
    and other resources can be made available in a timely manner to improve
    the delivery of acquisition support in future operations. GAO, Rebuilding
    Iraq: Fiscal Year 2003 Contract Award Procedures and Management
    Challenges, GAO-04-605 (Washington, D.C.: June 1, 2004).

                       Page 5 GAO-05-201 Interagency Contracting

    need for interrogation and other intelligence and logistics services. An
    Army investigative report from August 2004 noted that the CJTF-7
    headquarters in Iraq lacked adequate personnel and equipment and that the
    military intelligence units at Abu Ghraib were severely underresourced.

    The out-of-scope orders for interrogation and other services issued by
    Interior have been terminated. However, the Army has continued contracting
    for intelligence functions and logistics services through bridge contracts
    awarded on a sole source basis to CACI. The original term of the contracts
    was 4 months, and the Army subsequently exercised options for an
    additional 2 months, through early 2005. According to an Army official,
    the contract terms were recently extended further to allow the Army
    adequate time to competitively award contracts for these services.6

    Recently, in the Ronald W. Reagan National Defense Authorization Act for
    Fiscal Year 2005, 7 Congress took steps to ensure the proper use of
    interagency contracts by DOD, the largest customer for these types of
    contract arrangements. The act prohibits DOD from procuring goods and
    services above the simplified acquisition threshold (generally $100,000)
    through a contract entered into by an agency outside DOD, unless the
    procurement is done in accordance with procedures prescribed by DOD for
    reviewing and approving the use of such contracts.8 The conference report
    accompanying the legislation established expectations that

    o  	DOD's procedures will ensure that any fees paid by DOD to the
    contracting agency are reasonable in relation to work actually performed;

    o  	the supplies or services are consistent with the appropriated funds
    being used;

    o  	the goods and services procured are within the scope of the non-DOD
    contract vehicle; and

    o  	such orders are in compliance with all applicable DOD-unique statutes,
    regulations, directives, and other requirements prior to approval.

    6The intelligence contract was extended until July 2005 and the logistics
    contract was extended until April 2005.

    7P.L. 108-375.

    8Section 854.

                       Page 6 GAO-05-201 Interagency Contracting

      Breakdowns Occurred When Interior Procured Interrogation and Other Services
      for DOD

    Further, the act required reviews of certain non-DOD contracting offices
    to determine if they are compliant with Defense procurement requirements.
    9 If an office is deemed non-compliant, DOD could be prohibited from
    ordering, purchasing or otherwise procuring property or services in excess
    of $100,000 through that contracting office. In addition, a recent change
    to the Federal Acquisition Regulation (FAR), effective July 2004, added
    language to make it clear that a contracting officer placing an order
    against a GSA Schedule on another agency's behalf is responsible for
    applying that agency's regulatory and statutory requirements.10

    The process of procuring interrogation and other services for DOD broke
    down at numerous points. In general, breakdowns in the procurement
    process, such as not following competition requirements and not properly
    justifying the decision to use interagency contracting, occurred when the
    orders were issued. The process also broke down during the administration
    of the contract, as the contractor's performance was not adequately
    monitored. Because the officials at Interior and the Army responsible for
    the orders did not fully carry out their roles and responsibilities, the
    contractor was allowed to play a role in the procurement process normally
    performed by the government. This situation increased the risk that the
    government would not get the services it needed at reasonable prices and
    in compliance with competition and other contracting requirements.

        Task Orders Were Out of Scope of Underlying Contract

    Orders issued outside the scope of the underlying contract do not satisfy
    legal requirements under the Competition in Contracting Act for competing
    the award of government contracts.11 In such cases, the out-ofscope work
    should have been awarded using competitive procedures or supported with a
    justification and approval for other than full and open competition. The
    Interior IG and GSA have determined that 10 of the 11 task orders issued
    by Interior to CACI for interrogation and other services in Iraq were
    outside the scope of the underlying GSA information

    9Section 802.

    10Federal Acquisition Circular 2001-24, Item V-Federal Supply Schedule
    Services and Blanket Purchase Agreements (BPA) (FAR Case 1999-603).

    11We recently described these competition requirements in the context of
    out-of-scope orders (GAO-04-605).

                       Page 7 GAO-05-201 Interagency Contracting

    technology contract.12 The Army has also determined that interrogation
    services were outside the scope of the contract.

    The labor category descriptions in the GSA contract were, in most cases,
    significantly different from the descriptions on DOD's statements of work
    and do not accurately represent the work that the contractor performed.
    Table 1 demonstrates some of the disparities between the labor categories
    in DOD's statements of work and the information technology contract.

    Table 1: Comparison of Labor Categories from DOD's Statements of Work to
    the Information Technology Contract

                   Statements of work Information technology contract

    Screening / Interrogation Operations Coordinator Senior System Engineer

    Senior Counterintelligence Agent Senior Analyst

    Counterintelligence Agent Senior Functional Analyst

    Screener Training Specialist

    Interrogator Senior Functional Analyst

    Tactical/Strategic Interrogator Senior System Planner

    Source: GAO analysis of Interior's task order files.

    CACI representatives stated that they determined the salary and benefits
    the company would pay interrogators and screeners and then selected the
    GSA information technology contract labor categories that would
    sufficiently cover the company's employee salary and benefits expenses,
    overhead, and profit. In other words, CACI selected the labor categories
    in the contract for cost and pricing purposes, rather than as a reflection
    of the work to be performed. Army representatives in Iraq told us that the
    services on the orders for interrogators, screeners, and logistics support
    were not information technology services. The Interior contracting officer
    also had concerns about whether the orders were within scope, asking the
    contractor for a verbal and, later, written explanation as to how the
    labor categories in the contract were related to the services the company
    was to provide in Iraq.

    The contracting officer neglected to follow a requirement for legal review
    that could have raised questions about whether the orders were within

    12GSA determined that the orders for interrogation services could not be
    purchased through any of the GSA Schedules, but the orders for logistics
    services could have been procured through GSA's Logistics Worldwide
    Schedule.

    Page 8 GAO-05-201 Interagency Contracting

    scope. A July 2001 Interior policy requires legal review for all proposed
    solicitations in excess of $500,000 for non-commercial items and $2
    million for commercial items. Interior contracting officials stated that
    they did not believe this requirement extended to orders placed on GSA
    contracts. Representatives from Interior's offices of general counsel and
    acquisition policy, however, told us that orders placed on GSA contracts
    are subject to legal review and that the orders for interrogation and
    other services should have been reviewed.

    Further, the Interior contracting officer did not perform the required
    evaluation of the contractor's proposed approach for addressing DOD's
    requirements. Normally, when ordering services from GSA Schedules that
    require a statement of work, the ordering office is responsible for
    evaluating the contractor's level of effort and mix of labor proposed to
    perform the specific tasks being ordered and for making a determination
    that the price is reasonable. In this situation, however, the Interior
    contracting officer did not evaluate the mix of labor categories or
    establish that the level of effort was reasonable. Although documents in
    Interior's contract files provided that "technical review does not take
    exception to the proposal," no documentation exists to support the
    statement that an evaluation was performed and, in fact, Interior
    contracting officials told us that no such review was done.

        DOD Task Order Competition Requirements Were Not Followed

    In addition to violating competition rules by placing orders that were not
    in the scope of the underlying contract, Interior contracting officials
    also did not comply with requirements contained in section 803 of the
    National Defense Authorization Act for Fiscal Year 2002 relating to DOD's
    purchase of services from GSA Schedule contracts.13 Specifically, for DOD
    orders for services over $100,000 placed on GSA contracts, notice must be
    provided to all GSA Schedule contractors offering the required services or
    to as many contractors as practicable to ensure that offers will be
    received from at least three contractors. If three offers are not
    received, a written determination must be made that no additional
    contractors could be identified despite reasonable attempts to do so. The
    requirements that DOD orders be placed on a competitive basis can be
    waived in writing for certain circumstances such as urgency. Section 803
    requirements applied to the Iraq orders, even though Interior was the
    contracting agency, because DOD regulations require application of section
    803 provisions to

    13P.L. 107-107.

    Page 9 GAO-05-201 Interagency Contracting

    orders placed by non-DOD agencies on behalf of DOD.14 The Interior
    contracting office, however, placed the orders directly with CACI without
    notifying other prospective contractors. Interior did not make any written
    determination that no additional contractors could be identified or that
    the competition requirement should be waived in this case.

        Decision to Use Interagency Contracting Was Not Properly Justified

    In contracting through Interior, the Army did not follow requirements to
    justify use of interagency contracts. According to procurement
    regulations, an Economy Act determination and findings should have been
    approved by an Army contracting officer or another designated official to
    justify the use of Interior to acquire the services for the Army.15 The
    Economy Act authorizes agencies to enter into mutual agreements to obtain
    supplies or services by interagency acquisition.16 The FAR mandates that
    the requiring activity document that an Economy Act order is in the
    agency's best interest and that it cannot obtain the goods and services as
    conveniently or economically by contracting directly with a private
    source. However, Army personnel did not prepare the determination and
    findings, as required.17

    Ordering Procedures Interior placed the orders with CACI by using a
    blanket purchase Meant to Ensure Best agreement (BPA) established under
    the GSA Information Technology Value Were Not Followed Schedule contract
    in 1998.18 BPAs, a simplified method of filling

    anticipated repetitive needs for supplies and services, allow agencies to
    establish "charge accounts" with qualified vendors. The BPA in this case

    14DFARS S: 208.404-70 (effective Oct. 25, 2002).

    15FAR Subpart 17.5.

    1631 U.S.C. S: 1535; FAR S: 17.502(a).

    17An Economy Act determination and findings is not required when the
    agency needing the services uses certain required or optional sources of
    supply (such as GSA Schedule contracts) or for acquisitions using
    government wide acquisition contracts (FAR S: 17.500). These conditions
    were not met in this instance because the Army-the agency needing the
    services-was not ordering directly from the GSA Schedules and because a
    government wide acquisition contract was not used.

    18The BPA in question was originally established in 1998 between Premier
    Technology Group Inc. (the assets of which were acquired by CACI in May
    2003) and the Army Directorate of Contracting at Fort Huachuca, Arizona.
    In 2001, Interior's National Business Center assumed responsibility for
    the contracting staff at Fort Huachuca, and the BPA was transferred to
    Interior. Interior subsequently extended the BPA in 2003 to match the time
    frame of the underlying GSA contract.

                       Page 10 GAO-05-201 Interagency Contracting

    was improperly established and improperly used. Interior's contracting
    office did not comply with required BPA procedures meant to ensure the
    government receives the best value for its dollars and that competition is
    encouraged. Under procedures referred to in the Schedule contract,
    ordering offices that establish a single BPA are required to select a
    contractor that represents the best value and results in lowest overall
    cost, and to inform other contractors of the basis for the selection. We
    found no evidence, either in the BPA files or in our discussions with
    Interior contracting staff, that these requirements were followed, even
    though documents in the contract files state that the BPA is "best value."
    In essence, the BPA was used to direct business to the company on a sole
    source basis.

    Contracting officials also failed to seek discounts from CACI's
    established GSA contract prices, as required. Applicable procedures in the
    contract stipulate, for example, that discounts are to be sought when
    orders exceed $500,000.19 We found that no discounts were sought, even
    though the value of the orders for work in Iraq ranged from $953,000 to
    $21.8 million. In addition, the procedures in the GSA contract require
    that BPAs are reviewed annually to ensure the government continues to
    receive best value. These annual reviews were never conducted. Further,
    the BPA was improper because it did not contain defined requirements, as
    stipulated in the GSA contract. Rather, the BPA states that "the
    categories of service provided by this BPA may include but are not limited
    to" various classes of information technology services. Finally, in 2001,
    Interior added several items and services to the BPA. This action
    improperly expanded the scope of services contained in the underlying GSA
    contract. According to GSA guidance, such scope expansions are a potential
    violation of the Competition in Contracting Act. When we asked Interior's
    contracting officials-including the contracting officer who signed the
    BPA-about these additions, they were unable to explain how or why the
    additions had been made.

    Contractor's Performance One of the contracting officer's key
    responsibilities is ensuring that the Was Not Adequately government
    monitors the contractor's performance. The contracting Monitored officer
    may assign this responsibility to a contracting officer's

    19The maximum order threshold cited in the contract is $500,000. The
    maximum order threshold is the point at which ordering agencies are to
    seek additional price reductions beyond those offered under the vendor's
    GSA contract.

    Page 11 GAO-05-201 Interagency Contracting

    representative (COR). At Interior, the contracting officer is required to
    verify that the COR has the appropriate training and to issue a
    designation letter to the COR outlining the duties to be performed. These
    duties can include

    o  	verifying that the contractor performs the technical requirements of
    the contract in accordance with the contract terms, conditions, and
    specifications;

    o  	monitoring the contractor's performance, notifying the contractor of
    deficiencies observed during surveillance, and directing appropriate
    action to effect correction; and

    o  	reporting to the contracting officer in a monthly report the
    performance of services rendered under the contract.

    We found that Interior's contracting officials never verified that the
    Army personnel serving as CORs had the appropriate training and, with one
    exception, sent the COR designation letter either months after the fact or
    not at all. Interior officials, including the contracting officer who
    placed the orders for DOD, had no explanation for why contractor
    surveillance policies were not followed. Moreover, the contracting officer
    had little to no communication with the CORs in Iraq and did not follow up
    to obtain monthly reports from them on the contractor's performance.

    Proper surveillance of the contractor's performance under the orders was
    especially critical because the work was done on a time and materials
    basis, where services are billed on the basis of direct labor hours at
    specified fixed hourly rates (which includes wages, overhead, general and
    administrative expenses, and profit). According to the FAR, time and
    materials contracts require appropriate government oversight because there
    is no incentive for the contractor to control costs or be efficient.20
    This requirement was recently reiterated in a September 2004 memo from
    DOD's Director, Defense Procurement and Acquisition Policy, which states
    that, because labor hour and time and materials contracts usually require
    significant surveillance to ensure the government receives good value,
    CORs should be appointed to verify the appropriateness of labor categories
    and the reasonableness of the number of hours worked.

    In Iraq, the Army CORs responsible for the orders for interrogation and
    other services performed limited surveillance of the contractor's

    20FAR S: 16.601(b)(1).

    Page 12 GAO-05-201 Interagency Contracting

    performance. Contractor employees were stationed in various locations
    around Iraq, with no COR or assigned representative on site to monitor
    their work. One contractor interrogator who had been located at the Abu
    Ghraib prison told us that, although he interacted with military personnel
    at the prison, he had no interaction with the COR. Further, although the
    COR in Baghdad stated that he relied on other military personnel on site
    to report back to him, a recent Army investigative report showed that the
    military personnel on site were not given guidance on how to oversee the
    contractors. In fact, one of the military interrogators at Abu Ghraib
    prison indicated that the primary point of contact for the contractors was
    the contractor's on-site manager, with no mention of the COR. The Army
    investigative report pointed to this lack of contractor surveillance at
    the Abu Ghraib prison as a contributing factor to the environment in which
    the prisoner abuse occurred. The report noted that it is very difficult,
    if not impossible, to effectively administer a contract when the COR is
    not on site and that the Army needs to improve its oversight of
    contractors' performance to ensure that the Army's interests are
    protected.

        Contractor Played a Role in the Procurement Process Normally Performed by
        Government Personnel

    In procuring the interrogation and other services in Iraq, Interior and
    Army officials abdicated their contracting responsibilities to a large
    degree. In this void, the contractor played a significant role in
    developing, issuing, and administering the orders, including

    o  developing requirements;

    o  	identifying the contractor's BPA with Interior as the contract vehicle
    to provide the services;

    o  drafting statements of work;

    o  	suggesting that Army officials use the company's rough order of
    magnitude price as the government cost estimate;

    o  	acting as a conduit for information from the Army in Iraq to the
    Interior contracting office;

    o  	providing the Interior contracting office with a draft justification
    and approval to award additional work to the company on a sole source
    basis;

    o  sending invoices directly for payment; and

    o  	requesting that construction work be performed under the BPA, which
    would have also been out of scope from the GSA Schedule contract, although
    subsequent discussions between CACI and Interior contracting officials
    resulted in the work being awarded separately on a sole source basis due
    to urgency.

                       Page 13 GAO-05-201 Interagency Contracting

    By acting in this manner, the contractor effectively replaced government
    decision-makers in several aspects of the procurement process. For
    example, a contractor employee proposed the initial requirements package
    for human intelligence, which included interrogators, and provided
    information to the Army personnel regarding skill sets needed for
    positions. Contractor employees also identified the company's BPA with
    Interior as the contract vehicle to provide the services. Contractor
    officials acknowledge they helped to draft statements of work, with
    contractor employees in Iraq sending the statements of work to company
    headquarters in the United States for suggestions. In fact, one of the
    statements of work we found in official contract files was on the
    contractor's letterhead. We also found that contractor employees wrote a
    draft justification and approval for Interior to award additional work
    noncompetitively to the company. Such a level of participation by the
    contractor creates a conflict of interest and undermines the integrity of
    the competitive contracting process.

    Contractor officials explained that they marketed their services directly
    to Army intelligence and logistics officials in Iraq because of
    relationships they had developed over time. According to contractor
    officials, Army officials told them to work directly with the Interior
    contracting office because the DOD contingency contracting office in Iraq
    was focused on obtaining other necessary services. They also told us that,
    because military communication channels were not adequate, they
    communicated directly with the Interior contracting office. Interior
    contracting officials went along with this arrangement, citing problems in
    reaching Army officials in Iraq. The contract files contain emails between
    the contractor and Interior contracting officials on matters such as
    funding requests, statements of work, and COR assignments. Further, a COR
    responsible for the logistics orders told us that contractor officials
    informed him that Interior had merged two task orders; he was unaware that
    this had occurred. According to contractor officials, because Army and
    Interior officials allowed contractor personnel to act as the go-between,
    the contractor sent its invoices directly to Interior for payment after
    the COR signed them, as opposed to the normal practice of having
    government personnel perform this task.

    Need for Strong 	Although use of streamlined contracting vehicles can be
    beneficial, they must be effectively managed to ensure compliance with the
    FAR and to

    Management Controls 	protect the government's interests. When a requiring
    agency's contracting needs are being handled by an outside agency,
    effective management controls become even more critical due to the more
    complex environment

    Page 14 GAO-05-201 Interagency Contracting

    involved. Management controls, synonymous with internal controls, are an
    integral component of an organization's management that provide reasonable
    assurance that operations are effective and efficient and that employees
    comply with applicable laws and regulations. Two controls include
    management oversight and training. When these controls are not in place,
    particularly in a fee-for-service environment, more emphasis can be placed
    on customer satisfaction and revenue generation than on compliance with
    sound contracting policy and required procedures. We found an absence of
    these management controls for the 11 orders that were issued and
    administered for interrogation and other services.

        Lack of Management Oversight

    Significant problems in the way Interior's contracting office carried out
    its responsibilities in issuing these orders were not detected or
    addressed by management. Further, managers at this office told us that
    they intentionally created an office culture of providing inexperienced
    staff with the opportunity to learn contracting by taking on significant
    responsibilities. More experienced contracting officers were responsible
    for overseeing and reviewing less experienced and trained purchasing
    agents and contract specialists. However, some staff told us that the
    contracting officers' reviews were not always thorough and appeared to be
    a "rubber stamp." Further, some staff indicated discomfort at the level of
    responsibility given to less experienced personnel and believed oversight
    of the activities of these employees was inadequate.

    Moreover, Interior's headquarters did not exercise thorough oversight of
    the contracting activity that placed the orders. An April 2003 Interior
    Acquisition Management Review concluded that the contracting office was
    highly effective, despite the fact that the review identified a number of
    problems where contracting personnel did not comply with sound contracting
    practices. Nonetheless, an Interior headquarters official told us that the
    contracting office did not require extensive oversight, based in part on
    the determination that the office was highly effective. The review cited
    the following:

    o  	A conscious decision was made not to comply with Interior's
    requirements for legal review because the office believed the reviews took
    too long.21

    21At the time, the contracting office did not have an attorney on site and
    had to turn to Interior headquarters for legal advice. An attorney was
    assigned to the office in September 2003.

    Page 15 GAO-05-201 Interagency Contracting

    o  A general weakness in cost support was noted. For instance, "best

    value" analysis was cited in sole source awards.22 Also, the contracting
    office accepted contractors' proposed prices without analyzing the cost
    and pricing data in depth to ensure that the prices were fair and
    reasonable. Further, the contractor's proposed cost and the government's
    cost estimate were identical without any explanation.

    o  	Labor rates included in contracts and orders were not adequately
    justified.

    o  	Competition requirements were not followed when placing orders using
    BPAs.

    The review's conclusion that the office was highly effective was based in
    part on the office's peer review process, where contracting actions were
    reviewed by a second person as a management control. However, the review
    found no consistent methodology or format for the peer reviews and little
    or no information on results. Rather, the process for conducting and
    reporting the results of the reviews varied from individual to individual.
    Based on our interviews with Interior employees, we found that the peer
    reviews were often conducted by personnel with little contracting
    experience and training.

    Adequate management oversight is particularly critical to ensuring that
    interagency fee-for-service contracting organizations, such as the
    Interior contracting office, comply with procurement regulations. The
    fee-forservice arrangement creates an incentive to increase sales volume
    in order to support other programs of the agency that awards and
    administers an interagency contract. This may lead to an inordinate focus
    on meeting customer demands at the expense of complying with required
    ordering procedures. The managers at Interior's contracting office promote
    a business-like entrepreneurial philosophy modeled after the private
    sector and empower employees to market services, interact with
    contractors, and make decisions in support of acquisitions. We found
    examples where the Interior contracting office marketed its BPA with CACI
    to federal agencies as a way to obtain services quickly without
    competition. Further, the performance measures for individual employees at
    Interior's contracting

    22A best value determination is not typically involved in a sole source
    award since there is no evaluation of competing proposals to determine
    which prospective contractor's approach would represent the best value to
    the government, price and technical factors considered. In contrast, the
    price of a sole source award is determined to be fair and reasonable using
    other techniques such as comparison to prices known to be reasonable, cost
    realism analysis, or a detailed review of the contractor's cost and
    pricing data, as described in FAR Subpart 15.4.

                       Page 16 GAO-05-201 Interagency Contracting

    office, which measure quality, teamwork, and customer service,
    specifically state that customer satisfaction is a high priority in
    achieving good customer service. In fact, Interior's Acquisition
    Management Review of the contracting office focused heavily on customer
    satisfaction as a performance metric. Several of the office's customers
    were interviewed, and their compliments were summarized in detail as a key
    section of the review.

    The Army also lacked management oversight of the contracting activity for
    interrogation and other services. This lack of oversight is evidenced by
    some questions that were raised by the Army's Chief of Contracts in Iraq
    in February 2004, about 6 months after the initial orders were placed. The
    Chief of Contracts asked the Interior contracting office

    o  	whether the orders were against a GSA contract and what the contract
    number was,

    o  what labor rates were included in the contract,

    o  	whether there was a performance description for contractor personnel
    providing services,

    o  	whether all contractor employees in Iraq were in accordance with the
    statements of work,

    o  	who had been keeping track of the labor hours the contractor billed to
    the government,

    o  	whether Interior had received monthly status reports on the
    contractor's performance, and

    o  	whether an Economy Act determination and findings had been prepared.

    Further, DOD is required to have a management structure in place for the
    procurement of services that provides for a designated official in each
    military department and defense agency to exercise responsibility for the
    management of the procurement of services by that department or agency.23
    This management structure is to include a means by which employees of the
    departments and defense agencies are accountable to the designated
    officials for carrying out certain requirements. These requirements
    include ensuring that services are procured by means of contracts or task
    orders that are in the best interest of DOD and are entered into or issued
    and managed in compliance with applicable statutes, regulations,
    directives, and other requirements, regardless of

    2310 U.S.C. S: 2330, as added by section 801 of the National Defense
    Authorization Act for Fiscal Year 2002 (P.L. 107-107).

                       Page 17 GAO-05-201 Interagency Contracting

    whether the services are procured by DOD directly or through a non-DOD
    contract or task order. These requirements also include approving, in
    advance, any procurement of services above certain thresholds that is to
    be made through the use of a contract entered into, or a task order
    issued, by a government official outside DOD. Notwithstanding the
    requirement for this management structure, it is clear that DOD's
    implementation did not ensure that these requirements were met in
    procuring the interrogation and other services through Interior.

                               Lack of Adequate Training

    Interior's contracting office personnel and Army personnel in Iraq that
    were responsible for the orders for interrogation and other services
    lacked adequate training on their contracting responsibilities. While a
    warranted contracting officer at Interior signed the orders, certain
    requirements were not understood or followed, such as the need for legal
    review and competition. Further, an inexperienced purchasing agent
    administered the BPA on a day-to-day basis, including preparing various
    contracting documents. The employee had taken only one basic contracting
    course, even though the contracting office's training requirements require
    purchasing agents to take three contracting courses. Moreover, one staff
    member who had not taken the required training for a purchasing agent
    position was promoted to a contract specialist position. Several
    contracting employees we spoke with were concerned about the frequency and
    consistency of training they had received. We found that employees took
    training on their own initiative and that the training was not monitored
    or enforced by managers.

    Army personnel in Iraq responsible for overseeing CACI employees'
    performance in Iraq were not adequately trained to properly exercise their
    responsibilities. An Army investigative report concluded that the lack of
    training for the CORs assigned to monitor contractor performance at Abu
    Ghraib prison, as well as an inadequate number of assigned CORs, put the
    Army at risk of being unable to control poor performance or become aware
    of possible misconduct by contractor personnel. We found that the
    personnel acting as CORs did not, for the most part, have the requisite
    training and were unaware of the scope of their duties and
    responsibilities. For example, they did not know that they were required
    to monitor and verify the hours worked by the contractor and instead just
    signed off on the invoices provided by the contractor. During the course
    of our work, we found confusion about whether the CORs were required to
    meet Interior's or DOD's training requirements. DOD and Interior officials
    told us that no policy or guidance exists on this matter when interagency
    contracting is used.

                       Page 18 GAO-05-201 Interagency Contracting

      Too Early to Tell If Actions to Increase Oversight and Improve Training Will
      Be Effective

    One COR for the logistics orders in Iraq, who had prior contracting
    experience, observed problems with two orders as soon as he was designated
    COR in February 2004. The concerns included: (1) a "clear mismatch"
    between the underlying contract and the statement of work, (2) the fact
    that no invoices had been submitted for work that began several months
    earlier, (3) Army personnel not overseeing and verifying time cards, (4)
    significant delays and issues in communicating with Interior's contracting
    office, and (5) significant problems with the administration of the orders
    by both the government and the contractor.

    The discovery of the problems with the Iraq orders encouraged Interior and
    DOD to take corrective actions aimed at improving management oversight and
    training, particularly as they pertain to interagency contracting.
    However, due to the recent nature of these efforts, it is too soon to tell
    how effective they will be.

    In June 2004, Interior issued a policy memorandum prohibiting its
    contracting officers from acquiring interrogation or human intelligence
    services "regardless of the dollar value" for internal or external
    customers. Further, to focus attention on proper use of GSA contracts,
    Interior plans to evaluate its use of GSA contracts in its fiscal year
    2006 agencywide targeted performance review, an annual self-reported
    review by each of its contracting activities focusing on issues that are
    deemed important by top executives.

    Also in June 2004, Interior's National Business Center, which has direct
    oversight responsibility for the contracting office that placed the orders
    for DOD in Iraq, clarified for its contracting activities the requirements
    for competition when ordering on behalf of DOD. At the same time, it
    updated its policy outlining COR requirements, emphasizing the need for
    written designation letters; issued new guidance for using BPAs and GSA
    contracts; and clarified its legal review policy. Moreover, the National
    Business Center intends to hire an additional manager whose
    responsibilities will include overseeing the contracting activities under
    the Center's purview. Officials at Interior agree that management controls
    are critical in fee-for-service contracting offices with a focus on
    customer service, and, in comments on this report, Interior stated that
    the National Business Center has established a new performance rating
    system that provides incentives to contracting officials to exercise due
    diligence.

    Officials at the Interior contracting office that ordered the services for
    the Army told us that they are no longer placing orders against the CACI
    BPA.

    Page 19 GAO-05-201 Interagency Contracting

    Once all orders expire, the BPA will be terminated. In addition, in
    December 2004, the contracting office released a revised independent
    quality review process to include specific checks for GSA contract
    actions, including whether the maximum order threshold is exceeded,
    section 803 competition compliance, and scope determination with a labor
    category verification. Officials also plan to review the amount of
    activity on all existing BPAs to determine if these BPAs are still needed
    and to assess whether prices are competitive. Interior, in commenting on
    this report, stated that the contracting office has also established a
    policy to ensure that BPAs are reviewed annually.

    In addition, Interior has taken steps to improve training for its
    contracting officers. For fiscal year 2005, Interior has required each of
    its contracting activities to certify that all warranted contracting
    officers have taken two training courses on GSA contract use. Further, the
    contracting office that placed the orders for the Army has re-instituted
    regular, formal training seminars for newer contracting staff. It has also
    implemented a new mentoring program to augment training standards and
    assist new employees in learning on the job. However, a mechanism is not
    yet in place to track or monitor the training.

    DOD, for its part, issued a policy in October 2004, signed by high-level
    officials from the Office of the Comptroller and the Office of
    Acquisition, Technology, and Logistics, requiring that military
    departments and defense agencies establish procedures for reviewing and
    approving the use of other agencies' contracts. The procedures are to
    ensure that the use of another agency's contract is in the best interest
    of DOD; tasks are within the scope of the contract being used; funding is
    being used in accordance with appropriation limitations; unique terms and
    conditions are provided to the ordering activity; and data are collected
    on the use of outside ordering activities. The procedures took effect in
    January 2005. Most military services have outlined procedures where the
    requiring activity is responsible for coordinating with the contracting
    office, and in some cases the legal and financial offices, when planning
    to use interagency contracting and for documenting compliance with the
    policy's guidelines. While the policy does not include a mechanism for
    monitoring the departments' implementation plans, ensuring ongoing
    compliance with the policy, or sharing information across DOD, agency
    officials stated that these functions are being performed informally.

                       Page 20 GAO-05-201 Interagency Contracting

      Recommendations for Executive Action

    Agency Comments and Our Evaluation

    While the actions Interior and DOD have recently put in place or plan to
    initiate are positive steps, additional actions are needed to further
    refine these efforts. Accordingly, we recommend that:

    The Secretary of the Interior take the following four actions:

    o  	Ensure that management reviews of Interior contracting offices
    emphasize and assess whether contracting officials are trained adequately
    and BPAs are used appropriately.

    o  	Ensure that performance measures for contracting officials provide
    incentives to exercise due diligence and comply with applicable
    contracting rules and regulations.

    o  	Ensure that CORs are properly designated when contracts are awarded or
    orders are issued for other agencies and that they have met appropriate
    training requirements.

    o  	Direct the National Business Center at Fort Huachuca to take the
    following three actions:

    o  	Establish a consistent methodology for conducting peer reviews of
    contracting actions and ensure that experienced and trained contracting
    officials perform the reviews.

    o  	Ensure that reviews of BPAs are done annually, as required by the FAR,
    to determine whether they still represent best value.

    o  	Ensure that the contracting staff are properly trained and effective
    mechanisms are in place to track the training.

    The Secretary of Defense take the following action:

    o  	Develop a mechanism to track implementation of the new policy that
    establishes procedures for reviewing and approving the use of non-DOD
    contracts and to ensure that the military services and defense agencies
    have the opportunity to share information on how they are implementing it.

    We provided a draft of this report to DOD, Interior, and CACI for review
    and comment. Their written comments are included as appendices II, III,
    and IV, respectively.

    DOD agreed with our recommendation to develop a mechanism to track
    implementation of the new policy that establishes procedures for reviewing
    and approving the use of non-DOD contracts. DOD plans to post
    implementation policies on its web site and is considering establishing a

    Page 21 GAO-05-201 Interagency Contracting

    community of practice on this issue. Our draft report contained a second
    recommendation to ensure that CORs are properly assigned, as appropriate,
    for all orders that DOD places on interagency contracts and that they are
    provided requisite training. Because DOD recently concurred with a similar
    recommendation in another GAO report,24 we have deleted this
    recommendation.

    Interior agreed with all of our recommendations and outlined actions and

    plans to address the issues that we identified in our report.25 In
    general, Interior is taking actions to improve oversight and training for
    its contracting staff, in particular for the National Business Center
    offices. In some cases, officials initiated corrective actions during the
    course of our review, as we brought issues to their attention.

    While acknowledging that our report identified a number of areas where the
    government can improve its contracting processes, CACI took issue with
    several aspects of the report:

    o  	CACI suggested that our report does not adequately take into account
    the impact of the wartime environment in Iraq. We believe that our report
    adequately references the wartime situation. As CACI pointed out, the
    wartime circumstances may have justified the government's use of
    non-competitive contracting procedures. However, such authorized
    flexibilities were not employed by the agencies involved. Instead, as
    described in the report, Interior improperly used CACI's GSA contract in
    servicing its DOD customer.

    o  	CACI offered a number of detailed comments to support its position
    that the orders fell within the scope of the GSA contract. We did not find
    these arguments convincing. Every government agency involved determined
    that most of the work performed on the orders was out of scope. Contrary
    to CACI's assertion, our finding was not based merely on a comparison of
    the labor categories in CACI's GSA contract and those in the orders'

    24GAO, Contract Management: Opportunities to Improve Surveillance on
    Department of Defense Service Contracts, GAO-05-274 (Washington, D.C.:
    Mar. 17, 2005).

    25Interior's response includes a reference to enclosure 1, which consisted
    of technical comments on our report and, as agreed with Interior, is not
    reproduced in this report. We incorporated changes to the draft based on
    the comments as appropriate. Further, the response refers to one concern
    that was not included in enclosure 1. This word choice was explained by
    Interior as an oversight that should have been deleted from the response.

                       Page 22 GAO-05-201 Interagency Contracting

    statements of work, but on the material differences between the services
    authorized by the GSA contract and the services actually ordered by
    Interior and provided by CACI. While some of the services involved
    information technology, that, by itself, does not mean that those services
    (such as interrogation of detainees) can be ordered from CACI's GSA
    contract. The GSA contract is for the performance of certain
    commercial-type information technology services, not for any service that
    happens to involve the use of information technology. As noted in our
    report, the Army officials we spoke with stated that the services were not
    information technology services. In addition, while CACI's earlier orders
    from GSA's Federal Technology Service may help explain how the services in
    Iraq came to be ordered by Interior, it is not determinative of the proper
    use of that contract in this situation.

    o  	On the issue of the contractor playing an unusually large role in
    actions normally performed by government officials, CACI defends its
    actions as being appropriate in the wartime environment. The intent of
    that section of our report is not to suggest that the contractor acted
    with malfeasance; rather, we highlight the fact that, because the
    government officials did not exercise due diligence in carrying out their
    duties, the contractor was either allowed or encouraged to step in to fill
    the void. Further, CACI refers to our description of out-of-scope
    construction work and the drafting of the sole source justification as
    "incomplete and out of context." Based on our audit work with Interior and
    CACI officials, we found that CACI intended to include the construction
    work on the order for intelligence services under the BPA. However,
    because subsequent decisions by CACI contracting personnel and Interior's
    contracting office led to a separate, sole source award, we revised the
    wording in our report to reflect this outcome. The contractor did-as
    CACI's response confirms-draft a sole source justification for additional
    construction work. As stated above, we included this in our report to
    demonstrate how the contractor was encouraged to perform duties normally
    fulfilled by government personnel.

    o  	CACI questioned whether our findings on the lack of adequate
    contractor surveillance were well-founded. Our findings are not based
    solely on our discussion with the contractor interrogator who had been
    located at Abu Ghraib prison; rather, they are based on our file reviews
    and a number of discussions with DOD officials.

                       Page 23 GAO-05-201 Interagency Contracting

    We are sending copies of this report to the Director, Office of Management
    and Budget, the Secretaries of Defense and the Interior, and CACI. We will
    make copies available to others on request. In addition, this report will
    be
    available at no charge on GAO's Web site at http://www.gao.gov.

    If you have any questions about this report, please contact me on (202)
    512-4841 or Michele Mackin on (202) 512-4309. Other major contributors to
    this report were Alexandra Dew, James Kim, Adam Vodraska, and Tatiana
    Winger.

    David E. Cooper, Director
    Acquisition and Sourcing Management

                       Page 24 GAO-05-201 Interagency Contracting

                           Appendix I: Scope and Methodology

    We conducted our work at the Department of the Interior, including its
    National Business Center headquarters and office at Fort Huachuca,
    Arizona; and the Department of Defense (DOD), including the Defense
    Procurement and Acquisition Policy office and the Department of the Army.
    We also met with representatives of CACI, International, Inc. (CACI) and
    the General Services Administration (GSA).

    To determine what breakdowns occurred in the process of procuring
    interrogation and other services and the contributing factors to the
    breakdowns, we reviewed contract files on the 11 orders issued to CACI to
    understand the facts about how the orders were issued. We also reviewed
    internal controls and guidance to assess what safeguards were in place to
    ensure compliance with regulations, including training requirements and
    performance evaluation factors at the National Business Center's office in
    Fort Huachuca. We reviewed the two orders for interrogators, placed in
    August and December 2003, to corroborate GSA's and Interior's
    determination that the orders were out of the scope of the GSA contract.
    We also identified and analyzed pertinent policies and regulatory
    requirements governing the contracting process to assess whether Interior,
    Army, and contractor officials operated in compliance with those
    requirements. We interviewed Army representatives who were responsible for
    overseeing the contractor's performance in Iraq. We spoke with officials
    at the Interior's Offices of Acquisition and Property Management, National
    Business Center, and employees of the Fort Huachuca office who were
    involved with the orders for interrogation and other services.
    Additionally, we interviewed several CACI employees, including a
    contractor interrogator, and attorneys representing CACI. We used GAO's
    Standards for Internal Control in the Federal Government
    (GAO/AIMD-00-21.3.1, November 1999) as criteria to demonstrate the
    importance of management controls such as oversight and training.

    To evaluate the extent to which actions taken by Interior and DOD address
    contributing factors to breakdowns in the procurement process, we
    identified and reviewed steps taken by these agencies, such as newly
    released policies and guidance. In particular, we reviewed recently issued
    policies from Interior's headquarters, National Business Center, and the
    contracting office at Fort Huachuca, as well as DOD.

    We conducted our review from July 2004 to January 2005 in accordance with
    generally accepted government auditing standards.

                       Page 25 GAO-05-201 Interagency Contracting

    Appendix II: Comments from the Department of Defense

    Appendix II: Comments from the Department of Defense

    Appendix II: Comments from the Department of Defense

    Appendix III: Comments from the Department of the Interior

    Appendix III: Comments from the Department of the Interior

    Appendix III: Comments from the Department of the Interior

    Appendix III: Comments from the Department of the Interior

    Appendix III: Comments from the Department of the Interior

    Appendix III: Comments from the Department of the Interior

    Appendix III: Comments from the Department of the Interior

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix IV: Comments from CACI International Inc.

    Appendix V: Summary of Task Orders Issued to CACI for Work in Iraq

    Order

                                     Department of

    number and date

    Maximum order value Description of order Selected labor categories from
    the CACI contract Defense customer

                             Provide interrogation    Senior System
                $19,915,407         support.            Engineer,     Intelligence
                                                         Training
                                                       Specialist,
      (8/2003)                                        Senior System
                                                         Planner
                 3,222,503   Provide screening cell  Senior Security
                                 management and          Computer     Intelligence
                                                       Specialist,
      (8/2003)                                           Training
                                    support.           Specialist,
                                                     Database Manager
                            Provide support to man,   Senior Systems
                 1,254,367       organize, and       Engineer, Senior Intelligence
                             execute as members of       Computer
      (8/2003)                  the Open Source          Security
                                                       Specialist,
                               Intelligence Team.    Database Manager
                  998,117   Provide special security Senior Security
                            and security support         Computer     Intelligence
                              to the intelligence    Specialist,
      (8/2003)                     function.         Communications
                                                     Analyst
                  952,695   Provide and maintain an  Project Manager,
                            operational property          Senior       Logistics
      (9/2003)                     book team.         Editor/Writer
                                                     Principal
                            Provide technical and    Engineer/Project
                 6,191,315  functional knowledge     Manager,          Logistics
                             of the total property   Senior Computer
      (10/2003)                   book system.       Security
                                                     Specialist
                             Provide technical and   Program/Project
                 1,189,100      training support         Manager,      Logistics
      (11/2003)             services for a military  Database Manager
                            information technology
                                    system.
                 21,799,921 Assist in performance of  Senior System
                            human intelligence       Engineer, Senior Intelligence
                            and counterintelligence  Analyst, Senior
      (12/2003)                    missions.            Functional
                                                         Analyst
                                                          Senior
                 4,895,478   Assist in intelligence     Functional
                               support staff and     Analyst, Senior  Intelligence
      (12/2003)              analytical functions.   Analyst, Senior
                                                     Systems Engineer
                            Establish and staff a    Program/Project
                 1,822,240  Command Automation       Manager, Subject  Logistics
                                   Logistics
      (12/2003)             Assistance/Instructional Matter Expert II
                                     Team.
                            Provide technical and    Program/Project
                 3,980,000  functional knowledge     Manager, Subject  Logistics
      (3/2004)               of the total property   Matter Expert I
                                  book system.
        Total   $66,221,143

    Source: GAO analysis of documents obtained from the Department of the
    Interior.

    Notes: The Department of the Interior Inspector General and the General
    Services Administration determined that Order 70 was not out of scope.

    Maximum order values include order modifications made subsequent to the
    order date.

                  (120371) Page 55 GAO-05-201 Interagency Contracting

      GAO's Mission

    Obtaining Copies of GAO Reports and Testimony

    The Government Accountability Office, the audit, evaluation and
    investigative arm of Congress, exists to support Congress in meeting its
    constitutional responsibilities and to help improve the performance and
    accountability of the federal government for the American people. GAO
    examines the use of public funds; evaluates federal programs and policies;
    and provides analyses, recommendations, and other assistance to help
    Congress make informed oversight, policy, and funding decisions. GAO's
    commitment to good government is reflected in its core values of
    accountability, integrity, and reliability.

    The fastest and easiest way to obtain copies of GAO documents at no cost
    is through GAO's Web site (www.gao.gov). Each weekday, GAO posts newly
    released reports, testimony, and correspondence on its Web site. To have
    GAO e-mail you a list of newly posted products every afternoon, go to
    www.gao.gov and select "Subscribe to Updates."

    Order by Mail or Phone 	The first copy of each printed report is free.
    Additional copies are $2 each. A check or money order should be made out
    to the Superintendent of Documents. GAO also accepts VISA and Mastercard.
    Orders for 100 or more copies mailed to a single address are discounted 25
    percent. Orders should be sent to:

    U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
    D.C. 20548

    To order by Phone: 	Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
    512-6061

      To Report Fraud, Contact:

    Waste, and Abuse in Web site: www.gao.gov/fraudnet/fraudnet.htm

    E-mail: fraudnet@gao.govFederal Programs Automated answering system: (800)
    424-5454 or (202) 512-7470

    Gloria Jarmon, Managing Director, JarmonG@gao.gov (202)
    512-4400Congressional U.S. Government Accountability Office, 441 G Street
    NW, Room 7125 Relations Washington, D.C. 20548

    Public Affairs 	Paul Anderson, Managing Director, AndersonP1@gao.gov (202)
    512-4800 U.S. Government Accountability Office, 441 G Street NW, Room 7149
    Washington, D.C. 20548

                               PRINTED ON RECYCLED PAPER
    *** End of document. ***