Contract Security Guards: Army's Guard Program Requires Greater  
Oversight and Reassessment of Acquisition Approach (03-APR-06,	 
GAO-06-284).							 
                                                                 
Following the terrorist attacks of September 11, 2001, increased 
security requirements and a significant number of active duty and
reserve personnel sent overseas to support the war on terror left
the Department of Defense (DOD) with fewer military personnel to 
rely on to protect domestic installations. To correct this	 
shortage, Congress is temporarily allowing DOD to use contract	 
security guards to fulfill roles previously performed by military
employees. The U.S. Army has awarded contracts worth nearly $733 
million to acquire contract guards at 57 Army installations, an  
investment far greater than those made by other DOD services so  
far. The requesters asked GAO to assess how the Army has been	 
managing and overseeing its acquisition of security guard	 
services, particularly with regard to the Army's (1) acquisition 
strategy, (2) employment screening, (3) training of contract	 
guards, and (4) award fee process. This report also discusses	 
DOD's mandated November 2005 report to Congress on the contract  
guard program.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-284 					        
    ACCNO:   A50617						        
  TITLE:     Contract Security Guards: Army's Guard Program Requires  
Greater Oversight and Reassessment of Acquisition Approach	 
     DATE:   04/03/2006 
  SUBJECT:   Army procurement					 
	     Contract administration				 
	     Contract oversight 				 
	     Contract performance				 
	     Contractor payments				 
	     Department of Defense contractors			 
	     Employee training					 
	     Performance measures				 
	     Risk assessment					 
	     Security services contracts			 
	     Sole source procurement				 
	     Standards						 
	     Award fees 					 
	     Background checks					 
	     SBA 8(a) Program					 

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GAO-06-284

     

     * Results in Brief
     * Background
     * Army's Approach for Acquiring Contract Security Guards Relie
          * Army Used Three-Phased Acquisition Approach
          * Army's Sole-Source Approach Centered on Contracting with 8(a
          * ANC Firms Subcontracted with Large Security Guard Companies
     * Army Procedures Do Not Provide Assurance That Contract Secur
          * Two-Part Screening Process Has Significant Weaknesses
          * Initial Screening Process Relies on Individuals to Self-Repo
          * DOD Planning Actions to Improve Screening Process for Contra
     * Lax Oversight and Training Irregularities Raise Doubts About
          * Weaknesses in Army's Training Program Include Inadequate Ove
               * Government Oversight Lacking
               * Training Records Incomplete
               * Training Techniques and Tasks Not Standardized
          * Potential Improvements for Contract Security Guard Training
     * Continued Need for Award Fees Is Questionable
          * Award-Fee Plan Rewards Basic Compliance
          * Army Has Awarded Almost All Available Award-Fees
          * Army Performance Monitors Not Consistently Complying with Aw
          * IMA Award-Fee Board Has Recommended Consistently High Rating
          * Award-Fee Board's Processes Lack Rigor
          * Continued Need for Award Fee Questionable
     * DOD Report to Congress Does Not Address Some Key Issues Pert
     * Conclusion
     * Recommendations
     * Agency Comments
     * GAO's Mission
     * Obtaining Copies of GAO Reports and Testimony
          * Order by Mail or Phone
     * To Report Fraud, Waste, and Abuse in Federal Programs
     * Congressional Relations
     * Public Affairs

Report to Congressional Requesters

United States Government Accountability Office

GAO

April 2006

CONTRACT SECURITY GUARDS

Army's Guard Program Requires Greater Oversight and Reassessment of
Acquisition Approach

GAO-06-284

Contents

Letter 1

Results in Brief 2
Background 6
Army's Approach for Acquiring Contract Security Guards Relies Mostly on
8(a) Sole-Source Contracts 9
Army Procedures Do Not Provide Assurance That Contract Security Guards Are
Adequately Screened 16
Lax Oversight and Training Irregularities Raise Doubts About the Adequacy
of the Guards' Training 20
Continued Need for Award Fees Is Questionable 24
DOD Report to Congress Does Not Address Some Key Issues Pertaining to the
Army's Guard Program 31
Conclusion 32
Recommendations 33
Agency Comments 33
Appendix I Scope and Methodology 35
Appendix II List of Army Installations Using Contract Security Guards 38
Appendix III Agency Comments 40

Tables

Table 1: Overview of the Army's Three-Phased Approach for Hiring Contract
Security Guards 10
Table 2: Army's Three-Phased Acquisition Approach 12
Table 3: Highlights of Activities Required under Army's Two-Part Screening
Process 16
Table 4: Contractors' Training Requirements 21
Table 5: Criteria Used to Evaluate Contractors' Performance 25
Table 6: Evaluations and Percentage of Fees Authorized as of February 1,
2006 28

Figures

Figure 1: Number of Installations with Guards Obtained under Each Phase 11
Figure 2: Comparison of Contract Security Guard Award Fees Authorized and
Not Earned as of February 1, 2006 (dollars in millions) 25

Abbreviations

ACA Army Contracting Agency

ANC Alaska Native corporation

DOD Department of Defense

GSA General Services Administration

IMA Installation Management Agency

NCIC National Crime Information Center

SBA Small Business Administration

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separately.

United States Government Accountability Office

Washington, DC 20548

April 3, 2006

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

The Honorable Lane Evans House of Representatives

In the aftermath of the September 11, 2001, attacks, the Department of
Defense (DOD) sent numerous active-duty, U.S.-based personnel to
Afghanistan, Iraq, and other destinations to support the global war on
terror. These deployments depleted the pool of military security guards at
a time when DOD was faced with increased security functions at its U.S.
installations. To ease this imbalance, Congress temporarily authorized DOD
to waive a prohibition against the use of contract security guards at
domestic military installations. Subsequently, DOD has turned to
contractors to help fulfill the security guard function at a growing
number of installations. We recently reported that the government's
increasing reliance on contractors for missions previously performed by
government employees highlights the need for sound planning and contract
execution.1

The congressional authority allowing DOD to hire contract guards initially
was to expire in December 2005, but Congress extended the waiver authority
through September 2006, on the condition that DOD submit a report to
Congress addressing various aspects of the security guard program. DOD
submitted the report in November 2005. The National Defense Authorization
Act for Fiscal Year 2006 has further extended the waiver authority through
September 2007. The Army, the first service to use the authority, has
awarded contracts worth nearly $733 million to acquire contract guards at
57 installations. We were asked to assess how the Army has been managing
and overseeing its acquisition of security guard services. Specifically,
we determined (1) what acquisition approach the Army used, (2) whether the
Army ensures that the guards are effectively screened for employment, (3)
whether the Army ensures the guards are adequately trained, and (4) the
Army's rationale for providing the contractors with award fees and how the
award fee process is being implemented. This report also discusses DOD's
November 2005 report to Congress.

1GAO, Hurricanes Katrina and Rita: Preliminary Observations on Contracting
for Response and Recovery Efforts, GAO-06-246T (Washington, D.C.: Nov. 08,
2005).

To address these objectives, we obtained and analyzed key documents,
including Army and contractor policies, procedures, and records, as well
as policies and procedures followed by the U.S. Air Force and the
Department of Homeland Security's Federal Protective Service for their
contract security guards. We selected 11 Army installations to visit by
(1) ensuring that each of the Army's security guard contractors were
included and (2) choosing installations that represented a range of
contractor performance evaluation outcomes, from perfect scores to lower
average scores (according to March/April 2005 Army assessments).2 These
installations are cited in appendix II. In addition, we met with officials
at the Army's Installation Management Agency, the Army's Office of the
Provost Marshal General, and the Army Contracting Agency. We also met with
the contractors and subcontractors that provide security guards to the
Army. We examined the November 2005 "Department of Defense Installation
Security Guard Requirement Assessment and Plan" and met with the head of
the working group that prepared the report. Further details on the scope
and methodology of our review can be found in appendix I. We conducted our
review from May 2005 to February 2006 in accordance with generally
accepted government auditing standards.

                                Results in Brief

To acquire its security guards, the Army is relying heavily on sole-source
contracts under the Small Business Administration's 8(a) Business
Development Program, despite the fact that contracting specialists had
identified existing competed contracts under which they believed the
guards could have been acquired just as quickly. The 8(a) sole-source
contracts, currently valued at over $494 million, went to two Alaska
Native corporation (ANC) firms, which have been accorded special
contracting advantages under the 8(a) program by Congress.3 Prior to
contract award, the Defense Contract Management Agency assessed these
firms' capabilities at the request of the contracting officer and rated
one as "high risk" for performance because it was a manufacturing firm
with no experience providing security guard services. Despite this firm's
lack of experience, the Small Business Administration's Alaska district
office had recommended it to the Army as a good candidate for fulfilling
the security guard requirement and the Army worked with this firm to
refine the contract's performance work statement. Both of the ANC firms
have subcontracted with other companies in order to meet the Army's
requirements, with agreements in place allowing the subcontractors to
perform 49 percent of the work-just under the 50 percent subcontracting
limit under the 8(a) program. After the initial group of installations
received their guards under the 8(a) sole-source contracts, the Army
obtained guards for a second group under full and open competition. But
the Army turned again to the 8(a) sole-source contracts for a third group
of installations-significantly increasing the contracts' value-in spite of
an Army analysis that revealed the competitive contracts had turned out to
be about 25 percent less costly. In all, 46 of the 57 installations have
guards obtained under the 8(a) sole-source contracts.

2Officials from the 11 installations are responsible for a total of 14
installations.

3Alaska Native corporations are authorized to own 8(a) firms that can be
awarded sole-source contracts for any amount under the Small Business
Administration's 8(a) Business Development Program, as long as they meet
relevant size standards and other eligibility requirements.

Weaknesses in the Army's employment screening process have resulted in the
hiring of unscreened security guards, some with criminal histories, at
U.S. installations. The weaknesses include policy-related problems,
background checks that lag far behind the rate at which contract guards
are put to work, and procedures that depend on job applicants to be honest
on their employment forms. We found that some guards had taken firearms
training and started work at installations before any initial screening
was completed. At one installation we visited, the required, detailed
national agency checks had never been initiated. At two other sites, the
Army Criminal Investigation Command found guards were put to work even
though they had records relating to criminal offenses; at one site, 61
such guards were identified and about two dozen of them had charges that
would cause concern and possible ineligibility for employment in the
security force. Army policy permits interim employment pending completion
of initial screening, but interim employment can last more than 2 years
because that is how long it can take to obtain the results of the national
agency checks. The Army has delegated to the contractors responsibility
for validating employees' self-reported information during the initial
screening process and finding out whether critical information was left
out of the application form, such as criminal histories or aliases. We
have previously raised concerns about the screening process for
contractors, including security guards, and DOD has agreed to revise its
antiterrorism standards to put into place a better mechanism for verifying
trustworthiness.4

There is a general lack of government oversight of the guards' training,
as well as poor record keeping on the part of the contractors and
inconsistent training techniques. We found at 4 installations that
government monitoring of the training is not consistently done, if at all.
We also found missing or incomplete training documents at each of the 11
installations we visited. At three installations, guards were certified by
the contractor before their training had been completed, and one guard was
certified before he had completed weapons-qualification training. In early
2005, it was determined that contractor personnel had falsified training
records at one installation, and the government paid over $7,000 to the
contractor to repeat weapons-qualification training for the guards.
Moreover, the Army does not provide standardized instructions on how
contractors should conduct training for required skills. As a result,
contractors are applying different standards and techniques. We found that
one contractor allowed employees unlimited attempts to pass weapons
training, while another allowed only three tries. We have previously
reported on marked improvements in training through increased government
oversight and standard training.5 Army officials told us they are drafting
new contract requirements aimed at standardizing training for contract
guards.

The Army's process for evaluating and rewarding contractor performance
through award fees has resulted in a payout of more than $18 million in
monetary incentives as of February 2006. The award fee evaluation factors,
however, require only that contractors comply with basic contractual
requirements, not that they provide above-and-beyond performance. We also
found that Army personnel responsible for monitoring contractors'
performance were not complying with requirements for assessing and rating
performance. For example, several Army monitors told us that limited
resources prevent them from making the required weekly inspections to
ensure that contract guards are in fact present and doing their jobs, and
a requirement to test guards by attempting to pass through installation
gates with fake identification is not being conducted on a consistent
basis. Several Army personnel told us that they are in need of more
specific guidance about how to measure contractor performance. Despite the
recognition that performance monitors are not consistently applying the
award-fee criteria, the Army has often given high ratings for contractor
performance, and those ratings frequently translate into high payouts of
available award fees. We found that 66 percent of all evaluations as of
February 1, 2006, have resulted in scores of 99 or 100 percent. The
initial rationale for the award fees was in part to motivate the first
contractors to post security guards at the gates within 90 days; this
rationale is no longer applicable.

4GAO, Combating Terrorism: Improvements Needed in European Command's
Antiterrorism Approach for In-Transit Forces at Seaports, GAO-03-731NI
(Washington, D.C.: September 2003), and Combating Terrorism: Improvements
Needed in Pacific Command's Antiterrorism Approach for In-Transit Forces
at Seaports, GAO-04-851NI (Washington, D.C.: August 2004).

5GAO, Human Capital: A Guide for Assessing Strategic Training and
Development Efforts in the Federal Government, GAO-04-546G (Washington,
D.C.: March 2004).

DOD's November 2005 report to Congress on the contract security guard
program makes several statements that we believe could be misconstrued.
While the report addresses DOD's contract guard program as a whole, most
of DOD's experience with contract guards has been with the Army, which has
invested far more in the program than the other military services.6 On the
basis of our review of the Army's program, we believe that the report
overstates some issues, including the cost-effectiveness of using contract
guards versus Army civilian employee guards; the contract guards'
performance vis-`a-vis that of military guards; their screening and
training, and the extent and effectiveness of government surveillance and
oversight of the contract guard program. Finally, the report refers to the
ANC firms' contracts as set-aside 8(a), which implies competition among
8(a) firms. A more accurate depiction would characterize these contracts
as sole-source under the 8(a) program.

In this report, we are making seven recommendations to the Secretary of
Defense to improve management and oversight of the contract security guard
program. Specifically, we recommended changes in the acquisition strategy,
improvement in the screening of the guards, and improved oversight of the
guards' training. In written comments on a draft of this report, DOD
concurred and stated that the Department of Army is implementing the
recommendations. DOD's comments are included in their entirety in appendix
III.

6From fiscal year 2003 through fiscal year 2005, the time frame covered in
the report, the Army had contracted for 89 percent of DOD's overall guard
program.

                                   Background

Since late 1982, Congress has, for the most part, prohibited DOD from
contracting for security guards at U.S. domestic installations. According
to the legislative history, the prohibition was originally enacted because
of concerns about the uncertain quality and reliability of private
security guard services, base commanders' potential lack of control over
contractor personnel, and the right of contractor personnel to strike.
Following the terrorist attacks of September 11, however, DOD directed
installation commanders to ensure that all vehicles, identification cards,
badges, and other forms of identification were inspected for authorized
access to military installations. These increased security requirements
created an increased demand for personnel to perform security-related
tasks. Initially, security requirements were filled at military
installations with active duty and reserve component personnel. However,
as reserve personnel reached their mandatory release dates from active
duty and as competing demands for both reserve and active component
personnel grew, resources became constrained. DOD reported that
contracting for security guard services was deemed necessary and practical
to allow it to simultaneously support increased demands for military
forces and to meet heightened security requirements for continental U.S.
installations and facilities. Accordingly, in the Bob Stump National
Defense Authorization Act for Fiscal Year 2003, Congress temporarily
authorized DOD to waive the prohibition against contracting for security
guard functions, thereby minimizing the department's need to use military
personnel to perform these functions.

The congressional waiver authority was predicated on an expectation that
without the contract guards, military personnel would be used to perform
the increased security function. In addition, it was expected that
contract guards would perform their jobs as well as the military personnel
who had previously served in that capacity. The 2003 authorization act
required that in order to use the authority, the following stipulations
must be met:

           o  Recruiting and training standards for contract security guards
           must be comparable to standards for DOD personnel who perform
           security guard functions.
           o  Contract security guards must be effectively supervised,
           reviewed, and evaluated.
           o  Employment of contract security guards must not cause a
           reduction in the security of the military installation.

The waiver authority was initially set to expire in December 2005, but the
Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005
extended the authority through September 2006, provided that DOD submit a
report to Congress on the contract guard program. The report, entitled
"Department of Defense Installation Security Guard Requirement Assessment
and Plan," was submitted to Congress on November 22, 2005. The National
Defense Authorization Act for Fiscal Year 2006 again extended the waiver
authority an additional year, through September 2007.

The Army, Air Force, and Navy each have employed contract security guards
under the waiver authority.7 The Army was the first to begin acquiring
guards and has used the waiver authority most extensively; as of December
2005, it had contracted for security guards at 57 installations, whereas
contract guards are being used at 18 Air Force and 5 Navy installations.
Several key players are involved in the Army's contract security guard
program.

           o  Army Office of the Provost Marshal General: This office directs
           policy for all matters relating to Army law enforcement, police
           intelligence, physical security, criminal investigations, provost
           marshal activities, and military police and provides oversight of
           these resources. The Office of the Provost Marshal General was the
           requiring agency that determined and prioritized security guard
           requirements at each installation and identified the number of
           guards needed.

           o  Installation Management Agency (IMA): Formed in 2002, IMA is
           responsible for centralized oversight of U.S. Army bases and for
           administering all aspects of the contract guard program according
           to the requirements set by the Provost Marshal General. IMA is
           responsible for developing the guard contracts' performance work
           specifications, which specify what the Army expects the
           contractors to do, such as detailing the requirements for
           screening and training.

           o  Army Contracting Agency (ACA) (northern region): This was the
           contracting agency for the guard program. It awarded six
           fixed-price, award-fee contracts and has issued task orders under
           these contracts for guards at 57 installations. The contracting
           officer has designated an IMA official as the government's primary
           oversight representative for the guard program.

           o  Army installations: These are the recipients of contract
           guards. Installation officials are responsible for ensuring that
           the contractor's performance is evaluated daily and that the
           guards are screened and trained by reviewing contractor-supplied
           records. Installation personnel provide input to IMA as part of
           the award-fee process.

           o  U.S. Small Business Administration (SBA): SBA oversees the 8(a)
           Business Development Program and is responsible for issuing
           regulation and policy concerning the program. Although SBA has
           delegated contracting authority to DOD for 8(a) procurements, SBA
           district offices-in this case, the Alaska district office-must
           approve any proposed contract going to an 8(a) firm and are to be
           notified if 8(a) contracts are modified.

           o  Contractors: Two of the four contractors providing security
           guards are 8(a) Alaska Native corporation firms, both of which
           have subcontracted a portion of the work to security guard firms
           that are large businesses. ANCs were created by Congress to help
           settle Alaska Native land claims and to foster economic
           development for Alaska Natives, have been accorded special
           advantages under SBA's 8(a) Business Development Program. 8(a) ANC
           firms are considered small disadvantaged businesses, and as long
           as they meet relevant size standards for the procurement and other
           eligibility requirements, they can be awarded contracts
           noncompetitively for any dollar amount.8 Generally, acquisitions
           offered to other 8(a) businesses where the contract value is more
           than $3 million or $5 million (for manufacturing) must be
           competitively awarded. The other two contractors are not ANC
           firms.

7The Marine Corps intended to start using the program if Congress further
extended the waiver authority in the National Defense Authorization Act
for Fiscal Year 2006 or made it permanent.

When acquiring services, a federal agency's first course of action is
typically to develop an acquisition strategy. Ideally, this would involve
examining and weighing several alternatives. Once the Army decided to use
contract security guards, it began analyzing its contracting options. ACA
could have chosen from among numerous contract vehicles available to
acquire the guard services. It had the option of awarding a new contract
or using existing interagency contracts through other federal agencies.
For example, the General Services Administration (GSA) awards

governmentwide contracts, including contracts for security guard services,
under its Federal Supply Schedule (Schedule) program to help federal
agencies make purchases in less turnaround time on a competitive basis for
commonly used items or services.

813 CFR 124.506(b).

To motivate contractors to perform well, the Army chose to use monetary
incentives called award fees. Award fees allow agencies to adjust the
amount of fee paid to the contractor based on performance. We recently
questioned how effectively these fees are being used at DOD because its
programs have paid contractors large amounts of fees on acquisitions that
are experiencing problems. We reported that DOD has little evidence to
support its belief that these fees improve contractor performance and
acquisition outcomes.9

Separately, we have reported on concerns involving the trustworthiness of
contractors and subcontractors who have access to U.S. military
installations. DOD officials have told us that they have not evaluated the
trustworthiness of some contractors because the department's existing
antiterrorism standards do not specifically require them to do so. In
response to our recommendations, DOD officials are in the process of
revising the standards to verify trustworthiness of contractors and
subcontractors and better control access to installations, facilities, and
sensitive areas.10

  Army's Approach for Acquiring Contract Security Guards Relies Mostly on 8(a)
                             Sole-Source Contracts

The Army has awarded two sole-source contracts, totaling almost $495
million, to 8(a) ANC firms to acquire the bulk of its contract guards,
even though contracting officials pointed out that using competed GSA
Schedule contracts would have been just as fast and less costly. We found
that the Army hired an inexperienced contractor to help refine the
performance work statement, failed to monitor certain subcontracting
limitations under 8(a) contracts, and turned again to the 8(a) sole-source
contracts in a third acquisition phase despite knowing that its competed
contracts for the same services, awarded in the second acquisition phase,
had cost 25 percent less than the initial 8(a) sole-source contracts.

9GAO, Defense Acquisitions: DOD Has Paid Billions in Award and Incentive
Fees Regardless of Acquisition Outcomes, GAO-06-66 (Washington, D.C.: Dec.
19, 2005).

10 GAO-04-851NI and GAO-03-731NI .

Army Used Three-Phased Acquisition Approach

An understanding of the Army's approach for acquiring contract security
guards requires getting a broad overview of the three phases of the
acquisition, knowing how much the Army has spent so far to acquire guards
and who the key players are, and following the chronology of contracting
events. Table 1 presents the three-phased approach and shows in which
phase the Army used 8(a) sole-source contracts or competitive contracts.

Table 1: Overview of the Army's Three-Phased Approach for Hiring Contract
Security Guards

                     Contracting                  
Acquisition phase approach         Contractors hired
Phase one         8(a) sole-source 2 contractors that are 8(a) Alaska
                                      Native corporation firms; 2 security
                                      guard firms as subcontractors
Phase two         Full and open    2 other contractors hired through the
                     competition      use of new competitive contracts
Phase three       8(a) sole-source Same contractors used in phase one
Total committed value of 8(a) sole-source                   $494.8 million 
contracts from phases one and three:                                       
                                                               $238.0 million 
Total committed value of competitive contracts 
from phase two:                                

Source: Army (data); GAO (presentation and analysis).

Since the Army's contract security guard program began in 2003, the Army
has devoted almost twice as many contract dollars to sole-sourcing under
the 8(a) program as it has to full and open competition. Figure 1 shows
that 46 out of 57 Army installations received their contract guards
through 8(a) sole-source contracts in phases one and three and that the
guards for the remaining 11 installations were acquired through competed
contracts.

Figure 1: Number of Installations with Guards Obtained under Each Phase

Table 2 shows how the acquisition approach began taking shape before the
Army settled on its three-phased approach and who the key players were.

Table 2: Army's Three-Phased Acquisition Approach

Key player              Activity                                           
Army headquarters       Requirement: Issued instructions for implementing  
                           contract security guard program                    
Army Installation       Description of approach: Issued an implementation  
Management Agency (IMA) approach for identifying the installations in need 
                           of contract security guards                        
Army's Office of the    List of installations needing contract security    
Provost Marshal General guards: Prioritized a list of 89 installations on  
                           the basis of critical need, type, and size of      
                           installation, allowing the maximum number of       
                           reserve personnel to be deployed for military      
                           operations                                         
Army Contracting Agency Contracting options: Northern and southern         
(ACA)                   regional offices developed preliminary approaches  
                           for acquiring guards                               
                                                                              
                           Contracting specialists in both offices identified 
                           the option of using GSA Schedule contracts;        
                           combined, the following benefits of using these    
                           contracts were noted:                              
                                                                              
                              o  They offer quickest solution for placing     
                              "boots on the ground"                           
                              o  They allow for competitive procurement       
                              o  Individual installations could place orders  
                              for contract guards against GSA Schedule        
                              contracts and choose from 66 companies that had 
                              experience with contract security guards        
                              o  Small businesses would have sufficient       
                              opportunity to win security guard contract      
                              opportunities under GSA Schedule contracts      
                              because 45 vendors on the list were small       
                              businesses                                      
                              o  Installations could negotiate with vendors   
                              and conceivably obtain prices an average of 10  
                              to 15 percent lower than the stated GSA         
                              Schedule prices                                 
                              o  It is easier to place orders against GSA     
                              Schedule contracts than to initiate new         
                              competed contracts; contracting specialists at  
                              one of the regional offices said neither the    
                              regional office nor the installations have      
                              sufficient staffing resources to award and      
                              properly administer new contracts               
                                                                              
                           Contracting specialists in the northern region     
                           also proposed another option: awarding sole-source 
                           contracts to 8(a) ANC firms. The office identified 
                           the following benefits to using this approach:     
                                                                              
                              o  Potentially a huge amount of new dollars     
                              going to business participating in the 8(a)     
                              Business Development Program,                   
                              o  A large consolidation at the national level  
                              that both ACA and IMA could point to as a       
                              success story.                                  
ACA headquarters and    Northern region, selected as contract office,      
northern region         developed Army's acquisition strategy              
                                                                              
                           Made decision not to use GSA Schedule contracts    
                           because ACA officials believed this method would   
                           require a significant amount of time               
                                                                              
                           Cited another disadvantage with using GSA Schedule 
                           contracts-assumed that responsibility for          
                           acquiring contract guards would have to be         
                           devolved to individual installations, a course     
                           that would have stretched out the time available   
                           for getting guards to installations and            
                           "suboptimized" the performance work statement and  
                           resulting contracts                                

Source: Army (data); GAO (presentation and analysis).

Army's Sole-Source Approach Centered on Contracting with 8(a) ANC Firms

Even though the use of the GSA Schedule was identified as a possible
acquisition approach, the Army decided that the best course of action for
the first acquisition phase was to award contracts to 8(a) ANC firms,
believing that use of the GSA Schedule would have taken longer, would not
have allowed a consolidated approach at the national level, and would have
diluted the Army's purchasing power. The Army was not able to provide us
with any analysis showing how it made these determinations. We found that
other federal agencies, such as the U.S. Air Force and the Department of
Homeland Security's Federal Protective Service, have used GSA Schedule
contracts to obtain their security guards.11 According to the Air Force
contracting officer, using GSA Schedule contracts was considered the more
efficient, faster method to obtain the guards. The Air Force has used
these contracts to obtain contract security guards at 18 bases at an
annual estimated cost of $29 million. The Federal Protective Service
manages and oversees 10,000 armed contract security guards that were
mostly obtained under GSA's Schedule program.

SBA's Alaska district office, in a May 2003 letter to ACA, stated that it
was "marketing" a particular 8(a) ANC firm to meet the Army's security
guard requirements. According to ACA officials, this firm was already
being considered by the Army. A second 8(a) ANC firm that had approached
the Army was also considered. Before awarding the contracts to these
companies, the contracting office asked the Defense Contract Management
Agency to evaluate the firms' capabilities.12 The agency rated one of the
firms-the one SBA had marketed to the Army-as "high risk" for performance
because it had experience manufacturing goods but no experience providing
services. The risk was mitigated somewhat because of anticipated support
and assistance from the company's parent corporation, the Defense Contract
Management Agency said, and because the firm had chosen to team up with a
subcontractor experienced in providing security guard services.
Subsequently, in a process known as "alpha contracting," Army officials
worked together with this ANC firm to finalize the contract guard
performance work statement by refining specific tasks for feasibility and
affordability. The resulting performance work statement was then used on
all of the security guard contracts.

11The Federal Protective Service's mission is to provide law enforcement
and security services to more than 1 million tenants and daily visitors to
all federally owned and leased facilities nationwide.

12DOD's Defense Contract Management Agency provides numerous services to
DOD agencies, including insight into contractor operations to assess and
forecast contractor cost, schedule, and performance information.

During a second acquisition phase in September 2003, the Army awarded four
competed contracts. In evaluating the contractors' cost proposals for the
second acquisition phase, the Army recognized that the same contractors
involved in the first phase submitted cost proposals considerably higher
than the winning proposals. But the Army turned again to these same
contractors in phase three, adding 37 more installations to the 8(a)
sole-source contracts. The Army took this action despite knowing that the
government was paying considerably less for the phase-two competed
contracts. An ACA analysis computing the cost per contract employee showed
that the competitive contracts cost about 25 percent less than the 8(a)
sole-source contracts. ACA officials told us that the Army returned to the
ANC firms in part because doing so was an easy method of obtaining
additional security guards and because they were pleased with the ANC
firms' performance. In addition, IMA officials asserted that because the
phase three requirements were not finalized until within 90 days of when
the contract guards were required, a competitive solicitation was not
possible.

In phase three, the ANC firms' contracts were modified to expand the
ceiling prices to a total value of $480 million each.13 When modifying the
contracts, ACA did not comply with a requirement to notify SBA. In
delegating procurement authority under the 8(a) program to DOD, SBA
requires that DOD provide a copy of contracts, including modifications, to
the SBA district office within 15 working days of the date of award or of
contract modification. The Army contracting officer was unaware of this
requirement and said she does not send 8(a) modifications to SBA. However,
after being made aware of this requirement, the contracting officer said
that contract modifications will be forwarded to the appropriate SBA
office.

13Initially, the caps were increased to a total of $2.1 billion. When we
asked for clarification, the contracting officer said it was never the
Army's intention to award to that ceiling amount, and subsequent contract
modifications were executed to decrease the total contracts' value to $480
million each.

ANC Firms Subcontracted with Large Security Guard Companies

Under the 8(a) program, businesses can subcontract up to 50 percent of the
personnel costs incurred under each service contract.14 The two ANC firms
have established agreements with their subcontractors, large security
guard companies, intended to ensure that the subcontractors perform 49
percent of the work, while ANC firms retain 51 percent. As of December
2005, more than $200 million has been subcontracted under the Army's guard
contracts.

The ANC firms have taken different approaches to dividing the workload
with their subcontractors. One divides the workload on an installation
basis, while the second firm decided to share workload by staffing the
gates at each installation partially with its own employees and partially
with the subcontractor's employees. In the latter case, the guards'
uniform patches reflect the names of both companies.

The Army's contracting officer is responsible for determining whether the
ANC firms are complying with the 50-percent limit on subcontracting, but
this is not being done. The contracting officer told us that the
contractors' proposed approach for complying with the limitation on
subcontracting is reviewed each time additional work is awarded to the ANC
firms, but actual performance is not monitored to ensure compliance. We
found confusion as to who is responsible for the monitoring. The
contracting officer pointed to SBA; the contracting officer representative
in IMA pointed to ACA. In practice, the Army is relying on the prime
contractors themselves to ensure that their subcontractors stay below the
50-percent limit. The two firms told us they monitor their compliance with
the required 50/50 split.

14"Limitations on subcontracting," FAR 52.219.14. Such nonlabor costs
items as weapons and uniforms for security guards are provided by the
subcontractor and do not apply toward the 50-percent limit.

Army Procedures Do Not Provide Assurance That Contract Security Guards Are
                              Adequately Screened

The Army's screening process is unreliable because of lack of adherence to
Army policy, a time lapse of as much as 2 years from the start of interim
employment until detailed nationwide background checks are completed; and
a reliance on job applicants to self-report accurate information on their
employment application forms. The combined effect of these weaknesses has
put the Army at risk of staffing its gates with contract security guards
who are not qualified for the job and in fact has resulted in applicants
with criminal histories, including felons, being employed as guards. We
have previously reported on, and made recommendations concerning, the
inadequacy of screening measures used for contract employees with access
to military installations and other sensitive areas.15

Two-Part Screening Process Has Significant Weaknesses

Army policy requires all prospective contract guards to undergo a two-part
screening process-an initial screening conducted by the contractor
followed by a thorough, more detailed screening conducted by the federal
government. Table 3 highlights the activities required for each part of
the process and who is responsible for conducting the various screening
activities.

Table 3: Highlights of Activities Required under Army's Two-Part Screening
Process

Part one: initial screening      Part two: detailed screening              
Who's responsible: the           Who's responsible: Army officials at each 
contractor                       installation                              
Required activities:             Required activities:                      
                                                                              
Local agency check: Ensure that  National agency check: the Army official  
a local check be conducted in    submits a request, along with the         
the jurisdiction where the       applicant's fingerprints, to the Office   
applicant has resided during the of Personnel Management, which conducts a 
most recent 5-year period; the   search to see if the fingerprints match   
contractor does not conduct the  any of the ones contained in national     
local agency check on its own,   databases, which include the following:   
but hires a company to conduct                                             
it, which includes the              o  Security/Suitability Investigations 
following:                          Index                                  
                                       o  Defense Clearance and Investigation 
      o  arrest records                Index                                  
      o  criminal and civil court      o  Federal Bureau of Investigation     
      records                          Name Check                             
                                       o  Federal Bureau of Investigation     
References: Contact applicant's     National Criminal History Fingerprint  
former employers and                Check                                  
supervisors, former educators,   
and other personal references    
                                    
Education: Check applicant's     
educational records              
                                    
Finances: Check credit history   
Time frame for conducting these  Time frame for conducting these           
activities: We found it took 1   activities: We found time frames ranging  
day to 2 weeks                   from 1 week to over 2 years               

Sources: U.S. Army (data); GAO (analysis and presentation).

15 GAO-03-731NI and GAO-04-851NI .

IMA requires contractors to conduct local agency checks before offering
interim employment to prospective employees. Training, such as firearms
training and weapons qualifications, cannot begin until the local agency
checks have been completed and the results are favorable. If the results
are unfavorable, employment is not offered.

Weaknesses in the screening process have led to risky situations, as the
following examples illustrate:

           o  A contractor had permitted guards to take firearms training and
           start working even before their local agency checks were
           completed.

           o  In April 2005, the Army found that 61 guards had been put to
           work at one installation even though they had records relating to
           criminal offenses, about two dozen of which involved felonies or
           domestic violence and abuse cases. One of the guards had an active
           warrant and was arrested while performing his duties. The Army
           found similar circumstances at another installation in August 2005
           with a different contractor. Twenty-eight guards were identified
           in the Army's Crime Records Center database as having records
           relating to criminal offenses, including assault, larceny,
           possession and use of controlled substances, and forgery.

           o  At another location, we found that paperwork to initiate
           national agency checks had not been submitted for any of the 128
           guards hired during a 2-year period. The contractor had been
           responsible for initiating and submitting these checks between
           December 2003 and March 2004, but did not follow through and was
           out of compliance with the terms of its contract. In March 2004,
           it became the responsibility of installation officials, rather
           than the contractors, to submit the national agency checks.
           However, the officials told us they had not received the new
           direction from IMA and thus did not comply with it. The officials
           said that they have now submitted the required paperwork to
           initiate the national screening process. An IMA official told us
           that national agency checks had never been conducted for guards at
           another installation either.

           o  An Army official at another location informed us that national
           agency checks were pending for the 8 guard files we sampled.
           However, the installation's security office found no record of a
           national agency check ever being initiated for 3 of these guards.

           o  At the same installation, when we asked for documentation of
           compliance with the Army's regulation for certifying the
           reliability and suitability of prospective and current contract
           security guards, we were provided with documents that were missing
           key screening information. For example, the section addressing the
           screening of personnel records was not completed and the name of
           the physician conducting the medical examination was not included.
           Also missing was information demonstrating that guards had been
           briefed on the Army's reliability standards and objectives. These
           documents were all signed and dated by the Army's certifying
           official on the day they were sent to us. Moreover, the certifying
           official did not fill out the section on the form indicating
           whether the individual was or was not suitable for employment.

Initial Screening Process Relies on Individuals to Self-Report Information

The Army's reliance on job applicants to be forthcoming and accurate on
their application forms affects the quality of the local agency checks.
The contractor asks for typical employment information, such as full name,
other names or aliases, Social Security number, addresses during the most
recent five-year period, and employment history. The local agency check is
dependent on full and accurate disclosure on these forms. The contractor
itself does not conduct the check, but hires an outside firm to perform
this task, and each firm uses the job applicant's information as a basis
for conducting the check. If the applicant falsifies information or
neglects to include former addresses outside the county and state of
current residence, the local agency check may not search existing records
in those jurisdictions, and the contractor may never know that the
applicant is unsuitable for hire. Furthermore, how the checks are
conducted varies among the different firms. For example, one firm
conducted a statewide investigation, while another company checked records
in all 50 states and 57 counties.

Because Army policy allows interim employment after a local agency check
uncovers no problems, a contract guard who successfully hid a criminal
history during the job application process could be working at an
installation gate, using a firearm, until a national agency check
discovers the truth. When we brought these concerns to IMA officials, they
stated that permitting interim employment is the fastest, most effective
means of putting contract guards at the gates. IMA officials also asserted
that the issues we found only highlight that the contract security program
is working as intended because individuals with criminal histories
ultimately were caught. The officials were unwilling to explore other
options to mitigate the potential risk of having extended periods of time
during which unsuitable individuals were guarding Army installations.

DOD Planning Actions to Improve Screening Process for Contractors

In 2003 and 2004, we reported on the inadequacy of screening measures used
for contract employees with access to military installations, facilities,
and sensitive areas, and the risks posed to military forces.16 As a result
of our work, the Assistant Secretary of Defense, Special Operations and
Low Intensity Conflict, is revising the department's antiterrorism
standards to require a more thorough screening of contract personnel,
including security guards, at military installations. The standards,
however, have not been completed or approved-and no specific time frame is
set for their approval.

In addition, in response to a Homeland Security Presidential Directive
regarding the need to establish a common identification standard for
federal employees and contractors, DOD is strengthening its screening
process to include new, secure, and reliable credentials that will be used
by DOD employees as well as contract personnel. These credentials will not
be issued unless employees and contract personnel pass the national agency
check. According to DOD's implementation plan, the revised screening
improvements are to be implemented by October 2006. The Federal
Acquisition Regulation has also been amended to require contractors to
comply with the agency's personnel identity verification process.17

Between now and when the new screening improvements are implemented, the
Army could mitigate the risk of hiring personnel with criminal records by
supplementing the local agency check with background information accessed
through the Army's Crime Records Center database, which maintains
information from Army law enforcement records. The Army's Criminal
Investigation Command has recommended that these checks be done on
prospective security guard employees.

Another supplemental source of information is the Federal Bureau of
Investigation's National Crime Information Center (NCIC) database. The
NCIC database is a national index of theft reports, warrants,
missing-persons reports, and other criminal justice information submitted
by law enforcement agencies across the United States in a secure,
electronic format in real time. While not a perfect solution, since it
also relies in part on self-reported information, use of this database
would give the Army access to detailed background information on
prospective contract guards with far less turnaround time than it
currently takes the Office of Personnel Management to conduct national
agency checks. In fact, the Army's Criminal Investigation Command
recommends use of the NCIC database. Some Army installations, concerned
about the time lapse between the local and the national agency checks,
have used it to mitigate what they perceive as risks associated with
hiring guards based only on the local agency check. IMA officials,
however, have repeatedly instructed installations not to use the NCIC
database, citing an Army policy from 1993 that, they assert, does not
permit its use. An IMA official told us that the purpose of requiring the
contractor to perform the screening function is to reduce the Army's costs
and to streamline the background check process with, IMA asserts, adequate
results.

16 GAO-03-731NI and GAO-04-851NI .

17The revision became effective January 3, 2006, and applies to
solicitations and contracts issued or awarded on or after October 27,
2005. Contracts awarded before that date requiring contractors to have
access to a federally-controlled facility or a federal information system
must be modified by October 27, 2007, pursuant to Federal Acquisition
Regulation 4.13.

During our review, officials from the Office of the Provost Marshal
General told us that they recognized the need for interim improvements in
the screening process and said they would contact the Federal Bureau of
Investigation to explore the feasibility of the Army using the NCIC
database.

Lax Oversight and Training Irregularities Raise Doubts About the Adequacy of the
                                Guards' Training

The Army may not have in place adequately trained contract security guards
protecting its installations because contractors are given responsibility
to conduct nearly all of the training; and neither IMA nor Army
installation personnel provide sufficient oversight to know whether
training is actually conducted in accordance with contractual provisions,
training records are accurate and complete, and contractors are adhering
to standards. We found instances where the contractors were not complying
with requirements to track and maintain records of employee training and
where contractors' training techniques were inconsistent.

Weaknesses in Army's Training Program Include Inadequate Oversight, Poor Record
keeping, and Lack of Compliance with Standards

The Army requires contractors to train their guards in 19 competencies
listed in table 4.

Table 4: Contractors' Training Requirements

      1. Use of force                                                         
      2. Antiterrorism, threats, definition, and identification               
      3. Security operations, basic functions, patrolling techniques and      
      responsibilities                                                        
      4. Response to hostage situations; initial actions prior to military    
      police response                                                         
      5. Personnel identification procedures, package and vehicle search      
      procedures, and contraband identification/seizure procedures            
      6. Firearm (pistol and/or shotgun) qualification and safety             
      7. Unarmed self-defense                                                 
      8. Oleoresin capsicum (OC) spray techniques, use, and application       
      9. Nightstick and police baton use and techniques                       
      10. Clearing, securing, and protecting crime scene                      
      11. Use of interpersonal skills, verbal skills, de-escalation,          
      nonverbal actions                                                       
      12. Techniques for searches, Fourth Amendment rights, consent and       
      seizure                                                                 
      13. Application of handcuffs                                            
      14. Hand and arm signals, basic traffic control techniques              
      15. Recording of police information and sworn statements                
      16. Contract security guard authority and jurisdiction                  
      17. Prevention of sexual harassment                                     
      18. Customer service                                                    
      19. Military customs and courtesies                                     

Source: Army (data); GAO (presentation).

The Army requires that the contractors conduct training in these 19 areas
before the guards are put to work and annually thereafter.

  Government Oversight Lacking

While contractors are required to make training records and certifications
available for Army installations to review, Army personnel are not
required to certify the training. Even though some installations officials
said they have taken the initiative to have their performance monitors
observe the guard training on a periodic basis, we found at 4
installations that monitoring of the training is not consistently done, if
at all. According to IMA officials, government monitors should be
supervising the contractors on a daily basis and should be observing guard
training in accordance with the Quality Assurance Surveillance Plan.18 We
found, however, that training is not referenced in the plan. In fact, the
plan states that the government is responsible for ensuring its stated
needs are met while allowing the contractor sufficient latitude to allow
accomplishment of the desired task with a "minimum of oversight."

18The purpose of the Quality Assurance Surveillance Plan is to ensure that
the security guard contractor meets the objectives of the performance work
statement. The plan is intended to provide installation monitors an
effective and systematic surveillance method for the services listed in
the performance work statement.

Lack of government oversight may have contributed to a situation where a
contractor's training records were falsified. In 2005, an investigation
discovered that contractor personnel at one installation had falsified
training records relating to firearms qualification. The contractor
subsequently determined that its employees had not followed the company's
procedures and had validated training for individuals who had in fact not
properly qualified. The installation required the guards to be requalified
in firearms, which cost the Army over $7,000. At least three guards could
not qualify. The supervisor of the guards and training officer involved in
the incidents were terminated by the contractor. According to Army
officials at that installation, they have since stepped up their on-site
observations of the weapons training.

  Training Records Incomplete

We found that poor documentation in the training files also contributed to
some installations not knowing whether guard training is meeting contract
requirements. Our analysis of individual training records found several
instances of missing documentation and irregularities. Each of the
installations we visited documented and maintained the training records
differently. The lack of detail, in some cases, would make it impossible
for a government performance monitor to know whether the guards had been
trained as required. We also found that at three installations, the
contractor had certified security guards as trained before records
indicated that the training had been completed, including one case where a
guard was certified before the weapons qualification training had even
started. At another installation, officials determined the guards did not
need to train in one or more of the specific training topics found in the
performance work statement. However, according to installation officials,
IMA was not informed of this decision, nor was this deviation noted in
individual training records.

  Training Techniques and Tasks Not Standardized

While the Army requires contractors to train their employees in the 19
competency areas, it is left to the contractors to determine how to
structure the training. The Army provides little guidance in terms of
training content or techniques. As a result, we found a lack of
standardization across installations. For example:

           o  weapons training conducted in a simulation room with moving
           targets versus only classroom lectures;
           o  prospective guards given unlimited tries to pass weapons
           training versus being allowed only three tries;

           o  firearm training conducted within the first 3 days of
           training-because this is an area prospective guards are likely to
           fail-versus during the third week of training; and

           o  a subcontractor using its own, detailed weapons
           re-qualification policy that the prime contractor has not endorsed
           and does not follow.

Because the contractors have a large amount of leeway in how they conduct
the training, this variation is not surprising.

Potential Improvements for Contract Security Guard Training

While the Army does not require its performance monitors to oversee
contract security guard training, other federal agencies do require such
government oversight. For example, the Air Force and the Federal
Protective Service, both of which use contract guards, require government
officials to observe and certify that the guards have successfully
completed weapons-firing qualification.

Also, we have previously reported on the benefits of centralized
development of training content, including standardization.19 Centralizing
design can enhance consistency of training content and offer potential
cost savings. Additionally, centralization can help agencies realize cost
savings through standardization of record keeping and simplified and more
accurate reporting on courses, certifications, educational attainment,
costs, or standards. The Transportation Security Administration, for
example, has taken several steps to strengthen its review of air carriers'
crew member security training curriculum. These steps include developing a
standard review form for inspectors and trainers to use to enhance
consistency in the review process.20

Based on our review of a draft IMA document, the Army is considering a
requirement that the contractors submit periodic status reports specific
to each installation, using a standard form that includes an update on
training. This training update would include the number of new hires
trained, annual refreshers and continuing education classes, and weapons
qualifications. In December 2005, IMA officials conducted a briefing to
the installation monitors that discussed the need to inspect training and
training records.

19 GAO-04-546G .

20GAO, Aviation Security: Flight and Cabin Crew Member Security Training
Strengthened, but Better Planning and Internal Controls Needed, GAO-05-781
(Washington, D.C.: Sept. 6, 2005).

                 Continued Need for Award Fees Is Questionable

The Army's strategy of using award fees to motivate contractors has
resulted in over $18 million in fee payouts for complying with the basic
contractual requirements-not for exceeding what the contract requires. We
identified a number of concerns with the award-fee process and question
the continued need for award fees under the security guard program.

Award-Fee Plan Rewards Basic Compliance

Each of the Army's security guard contracts uses the same award-fee plan,
which spells out criteria for evaluating contractor performance, and the
final ratings dictate how much money is to be paid in award fees. In our
comparison of the award-fee plan with the contract's statement of work, we
found that the award fee is not designed to elicit "above-and-beyond"
performance. Rather, the award-fee plan merely requires contractors to
meet contractual requirements.

The evaluations are conducted on a semiannual basis. Each of four
award-fee factors is worth a certain percentage of the total score. In
addition, under each factor, a score between 0 and 100 can be given. A
score from 91 to 100 is considered excellent performance, 81 to 90 is very
good, 70 to 80 good. A score of 69 or below is considered satisfactory or
below performance, resulting in no award fee. See table 5 for an overview
of the award-fee factors used in conducting the semiannual evaluations.

Table 5: Criteria Used to Evaluate Contractors' Performance

Factor                                 Selected subfactors                 
Achieving/maintaining full operational    o  Extent to which contractor    
capability (20%)                          achieves and maintains required  
                                             level of guard coverage          
                                             o  Responsiveness, alertness,    
                                             physical fitness, courtesy of    
                                             guards                           
Proper control of access to the           o  Denying access when proper in 
installation/controlled facilities        both actual circumstances and    
(30%)                                     government surveillance or blind 
                                             tests                            
Effective contribution to a positive      o  Proper appearance, to include 
Army image in the installation and        appropriate uniform              
surrounding community and effective       o  Interaction with the public   
management of guard improprieties         and DOD personnel                
(30%)                                     o  Appropriate conduct in the    
                                             community while off-duty         
                                             o  Extent to which contractor    
                                             effectively responds to          
                                             incidents of employee misconduct 
                                             or allegations of impropriety    
Cooperation with IMA and Army             o  Effectively works with the    
commands; sound management of             Army organization to jointly and 
government property (20%)                 effectively resolve security     
                                             services-related questions,      
                                             problems, and issues that arise  
                                             during contract performance      
                                             o  Extent to which contractor    
                                             personnel demonstrate the        
                                             ability to respond to duty       
                                             changes and contingencies that   
                                             may arise                        
                                             o  Assist with the effective     
                                             management and maintenance of    
                                             government resources             

Source: Army (data); GAO (analysis and presentation).

Army Has Awarded Almost All Available Award-Fees

As of February 1, 2006, a total of $18.76 million in award fees was
available in the contract guard program. Only $0.42 million or almost 2
percent was not earned by the contractors. As figure 2 shows, IMA has
authorized almost all of its available award fees.

Figure 2: Comparison of Contract Security Guard Award Fees Authorized and
Not Earned as of February 1, 2006 (dollars in millions)

The Army's practice of routinely paying its contractors nearly the entire
available award fee creates an environment where contractors expect to
receive most of the available fee, regardless of acquisition outcomes. We
recently reported that DOD frequently pays most of the available award fee
to contractors regardless of their performance outcomes.21

The award fees being paid to the security guard contractors are in
addition to the profit they have already built into their prices. We found
that under the terms of their contracts, not all of the contractors are
eligible to receive the same percentage of award fee-even though they are
all performing under the same performance work specification. Three of the
four contractors negotiated a fee equal to 5 percent of their annual
contract value, but the other negotiated only 3 percent. One contractor
told us that it offered to reduce its fee but ACA officials refused,
stating that they believed the 5 percent fee was necessary to motivate
performance.

Army Performance Monitors Not Consistently Complying with Award-Fee Plan

Among the criteria used to rate the contractors' performance are the
results of on-site inspections of the guards. Army performance monitors
are required to conduct inspections, evaluate performance, take into
account any comments from persons who have had dealings with the guards,
assign ratings commensurate with performance, and report their ratings to
IMA's award-fee review board. The board comprises members familiar with
the contract requirements, and the board makes the final recommendation to
IMA's award-fee determining official about how much the contractors should
receive in award fees.

We found that at over half of the 11 Army installations we visited, the
government monitors rated performance without having conducted all of the
required inspections. Several monitors stated that limited resources
prevented them from conducting the inspections. Three monitors told us
they have not been conducting weekly checks of the contractors'
performance. Another monitor said it was a "waste of time" to go around
counting guards to ensure the contractor has provided enough employees to
meet contract requirements. Several monitors told us that they are not
conducting the required blind checks, where they attempt to get on base
using false identification. In one case, the monitor said this check is
impractical because the contract guards know him by sight. One monitor
told us that in deriving the ratings, he starts at 100 and lowers the
rating if there are inadequacies in performance.

21 GAO-06-66 .

Lack of guidance from IMA was a complaint among the monitors we
interviewed. For example, several monitors told us that they have no
quantifiable way of determining whether a contractor who performs in an
excellent manner in a certain evaluation factor should receive a score of
91 or 100. For lack of any other method, they ultimately use subjective
reasoning to make their decisions. Several monitors have taken it upon
themselves to establish their own methods for determining where the
ratings should fall. One created a checklist that he fills in each week,
and at the end of each evaluation period the weekly ratings are used to
derive an overall rating. Another convenes a "mini" award-fee board at the
installation to obtain formal input from other government officials
familiar with the contractor's performance. Actions such as these
demonstrate that some monitors are attempting to inject more rigor into
the award-fee process, but the result is a lack of uniformity in criteria
for determining award-fee payouts. Although monitors said they have
brought this issue to IMA's attention, the agency has not issued any
clarifying guidance. IMA and ACA officials indicated they believe the
award-fee plan provides sufficient guidance for the performance monitors
to follow.

IMA Award-Fee Board Has Recommended Consistently High Ratings

March/April 2005 marked the end of an award fee evaluation period. Our
analysis found that, of the 50 recommendations given by the award fee
board to the fee determining official, all were in the "excellent" range,
with 29 receiving scores of 100 percent and 10 others receiving 99
percent. None fell below 91 percent. Table 6 shows that this result is
typical of the pattern over the life of the contract guard program, with
66 percent of contractor evaluations receiving a score of 99 or 100
percent.

Table 6: Evaluations and Percentage of Fees Authorized as of February 1,
2006

Percentage of                 Cumulative                                   
available fees   Number of percentage of   Total award fees authorized (in 
authorized     evaluations   evaluations              millions of dollars)
100                     89            53                             $8.57 
99                      23            66                             $3.19 
97 - 98                 28            83                             $2.83 
94 - 96                 16            92                             $2.52 
90 - 93                  8            97                             $0.58 
Less than 90             5           100                             $0.65 
Total                  169                                          $18.34 

Source: Army (data); GAO (analysis and presentation).

Award-Fee Board's Processes Lack Rigor

We found that IMA's award-fee board did not always carefully review
performance monitors' input in making award fee determinations. An IMA
official said that "rubber stamping" by the board may have led to an error
that we found in the course of our audit work. During the March/April 2005
evaluation period, the board mistakenly reviewed an evaluation report
covering the wrong period and recommended 99 percent of the available
award fee be paid to the contractor at the time this contractor was under
investigation for falsifying training records. To rectify the error, the
board later recommended lowering the score from 99 to 90 percent of the
available award fee amount. The government monitor at this installation
was unaware that the board had reviewed the wrong report or that it had
initially awarded the contractor 99 percent of the award fee.

IMA's appeals process also raises questions about the integrity of the
award-fee process. During the March/April 2005 evaluation period, the
award-fee board raised over 25 percent of performance monitors' ratings.
Sometimes the board raised the scores unilaterally because members
believed the monitors were being too critical of the contractor's
performance. Sometimes the scores were raised because the performance
monitors did not, in the board's view, provide sufficient narrative to
support their scores. In these cases, the board normally raised the scores
without contacting the monitors for additional support. In reviewing
performance evaluations, we found that some performance monitors, on the
basis of poor contractor performance, gave the contractors relatively low
ratings-in the "good" range with a score between 70 and 80-but the IMA
board often raised the scores. For example, for the "sound management of
government property" factor, a performance monitor provided a score of 80
because the contractor had three vehicular accidents. IMA raised the score
for this factor to 95 because the contractor remedied the problem and paid
for damages. This action resulted in the contractor receiving an overall
performance score of 99 and almost $55,000 in award fees for that period.

Contractors, upon receiving award-fee evaluations, are allowed to rebut
the scores, either in person or by letter. The board has raised ratings
after hearing rebuttals during the appeals process, but it is not IMA's
policy to inform performance monitors when their submitted scores are
changed. In the March/April 2005 evaluation period, IMA adjusted 14 of the
50 performance monitor assessments. IMA raised the scores for 13 of
them-increases ranging from 2 to 15 percent-and lowered the score for one
by 6 percent. In one case, a performance monitor reported that the
contract guards were not able to detect a fake installation vehicle pass,
which was presented to gain access at nine different control points. The
performance monitor also reported that five guards, in violation of
standard operating procedures and Army regulation, fired on a vehicle
leaving the installation. After the contractor appealed the score, IMA
raised the rating of 90 (very good) to 96 (excellent), awarding the
contractor almost $246,000.

In another case, a performance monitor had deducted 10 points under the
factor "effective contribution to a positive Army image," in part because
a contractor employee had been arrested off-post with 100 prestamped
passes to the base in his possession. The contractor protested its rating,
arguing that the incident occurred off-post and involved no negative
publicity. IMA added back 2 points, awarding the contractor almost
$97,000.

We also found that in one case, IMA reduced the installation monitor
performance rating from 99.1 to 93.1 points, both scores considered
excellent, because the contractor had refused to provide pepper spray to
its guards, as required. Even though the contractor was not in compliance
with the contract, over $100,000 in award fee was authorized.

Continued Need for Award Fee Questionable

During the acquisition planning for the guard contracts, ACA's contract
attorney questioned the appropriateness of using an award fee. In his
memorandum to the contracting officer, he stated that the government has
already dictated the standards to the contractor in the statement of work,
and if those standards are insufficient, the government should raise the
standards. The attorney concluded that he was unconvinced that adding an
award fee made good business sense and was in the best interest of the
government. Nevertheless, ACA prepared a written justification for use of
award fees which asserts, among other reasons, that award fees were needed
to motivate the contractors because of the "extremely subjective" nature
of the performance evaluation. The Federal Acquisition Regulation states
that fixed-price contracts, where the contractor's profit is already built
into the base price, may include award fees to motivate a contractor when
other incentives cannot be used because the contractor's performance
cannot be measured objectively. However, IMA's award-fee plan sets forth a
number of objective factors, such as providing the required coverage at
the gates and wearing proper uniforms, on which monitors are to base their
ratings.

ACA's justification also states that the award fee is needed to motivate a
"better than satisfactory" performance. As discussed above, the
contractors are merely required to comply with the basic terms of the
contract, not to perform above and beyond, to earn the fee. The initial
stated intent of having the award fee was that the fee would motivate the
contractors to provide security guards as quickly as possible-within 90
days or fewer of contract award. The award-fee plan was subsequently
modified to remove the 90-day requirement now that guards are in place,
and it now reflects the evaluation criteria outlined in table 5. The
Army's continued need to use award fees well after the contractors have
achieved full operational capability is unclear. IMA officials said they
like the award fee because it gives them leverage to deal with the
contractors and results in the contractors being more responsive.

In addition, the ACA contracting officer, who is handling all of the
Army's guard contracts and task orders, told us she finds the award-fee
administration time-consuming and cumbersome, because she must modify each
task order every 6 months to reflect the award-fee decisions. We found
errors in the administration of the program. For example, in one incident
the contractor was overpaid $47,548, but this administrative error was not
recognized for over a year. In two other examples, award fees were based
on an incorrect amount and the contractor was underpaid by about $130,000.

DOD Report to Congress Does Not Address Some Key Issues Pertaining to the Army's
                                 Guard Program

The Ronald W. Reagan National Defense Authorization Act for Fiscal Year
2005 extended the waiver authority for hiring contract guards through
September 2006, but the extension hinged in part on a required report by
DOD on its contract guard program. The report, "Department of Defense
Installation Security Guard Requirement Assessment and Plan," was
delivered to Congress on November 22, 2005. The report addresses Army,
Navy, and Air Force experience with contract guards. On the basis of our
work with the Army, which has acquired the vast majority of contract
guards, we believe additional observations should be provided on some of
the report's statements.

           o  The report describes the use of contract security guards as
           "cost-effective," but at the same time states that the Air Force
           has determined that cost-effectiveness must be determined base by
           base because of differing locations and economic circumstances. We
           found during our review that the issue of cost-effectiveness is
           not clear-cut. In fact, there are differing opinions on this
           subject even within the Army. The Deputy Assistant Secretary of
           the Army's Director for Programs and Strategy prepared an
           independent cost evaluation in April 2005 entitled "Contracting
           Versus Using Department of the Army Civilians to Provide
           Installation Security." The study found that using Department of
           the Army civilian guards is significantly less costly than using
           contract guards. IMA officials disagree, emphasizing that the cost
           evaluation does not calculate the challenges imposed by the Army's
           current personnel system in hiring civilians or the benefit of
           contracting this function in the flexibility it offers IMA.

           o  The report states that "assessments to date determined that
           they [contract guards] perform on par with military security
           guards." When we asked the report's working group chairman for the
           basis for this statement, we were told that input from
           installation officials had been obtained. IMA officials, who
           assisted in writing the report, told us that the assessments refer
           to the award-fee performance evaluations. Those evaluations,
           however, are used to determine how the contractors, not individual
           contract guards, are performing; they do not compare contract
           guards with military security guards.

           o  The report states that "contracts for security services are
           specific concerning the training, performance and supervision of
           security guards. Effective oversight ensures that installation and
           facility security is not diminished." We found that the oversight
           function performed by the Army, specifically training, needs
           improvement.

           o  The report cites quality assurance surveillance plans that are
           supposed to be prepared by government representatives and used by
           installation performance monitors. We found that the Army's
           quality assurance surveillance plan, which applies to each of the
           57 installations using contract security guards, mirrors the
           award-fee plan, which performance monitors have found to be
           unclear.

           o  The report states that "on-site visits of installations by the
           headquarters of the respective services are conducted to ensure
           proper enforcement of the performance work statements." However,
           IMA officials did not visit all 57 installations. In fact, they
           told us that in 2005, they conducted 17 on-site visits to enforce
           the performance work statement. At the 11 installations we
           visited, we found that improvements were needed in training and
           screening oversight. At one installation, it took over 2 years
           before IMA found that the contractor and the installation were not
           in compliance with the performance work statement.

           o  The report states that "local security checks and National
           Agency Checks are performed on all prospective employees." As we
           found during our review of the Army's guard program, weaknesses in
           the screening process have led to unscreened personnel guarding
           the gates, and the checks had not been performed on all contract
           guards.

           o  The report characterizes the contracts to the ANC firms as
           set-aside 8(a). Set-aside 8(a) generally refers to cases when
           there will be competition among 8(a) firms. In fact, these were
           sole-source contracts under the 8(a) program. According to ACA
           officials, future reports will make this clarification.

                                   Conclusion

To make the best use of taxpayer dollars and achieve its desired outcomes
in relying on contractors to guard military installations, the Army
requires sound acquisition planning, leading to prudent contract awards,
and rigorous monitoring of contractor performance. A lack of diligence in
these areas, coupled with the practice of awarding fees for compliance
with basic contractual requirements, indicates that the Army needs to do
more to achieve its goals. The Army needs to take a stronger role in
overseeing contractor performance, and we believe a reassessment of the
acquisition approach is called for.

                                Recommendations

We are making the following seven recommendations to the Secretary of
Defense to improve management and oversight of the contract security guard
program. We recommend that the Secretary of the Army be directed to take
the following seven actions:

           o  Direct the ACA to take the following two actions:

                        o  reassess its acquisition strategy for contract
                        security guards, using competitive procedures for
                        future contracts and/or task orders,
                        o  remove award-fee provisions from future contracts
                        and task orders under existing contracts.

           o  Direct IMA to take the following four actions:

                        o  monitor the status of DOD's revised antiterrorism
                        standards and implement them into Army policy for
                        screening of contract security guards as deemed
                        suitable,
                        o  direct installations to use the Army's Crime
                        Records Center and the National Crime Information
                        Center databases to supplement initial screening
                        (local agency check) of contract security guards
                        until the new standards are in effect,
                        o  issue a standardized recordkeeping format for
                        contractors to show that the guards have met all
                        training requirements, and
                        o  require installation performance monitors to
                        review training files to ensure that initial training
                        certification is achieved as well as subsequent
                        annual recertification.

           o  Direct the Office of the Provost Marshal General to require an
           Army official to monitor and certify contractor training of
           guards, especially weapons-qualification training.

                                Agency Comments

We provided a draft of this report to DOD for review and comment. In
written comments, DOD agreed with the findings and stated that the
Department of the Army is implementing the seven recommendations. DOD
stated that these recommendations will strengthen the contracting process
and help ensure that the department receives the best security guard
support available.

The department's comments are reprinted in appendix III.

We are sending copies of this report to the Secretary of Defense, the
Secretary of the Army, the Director of the Office of Management and
Budget, and interested congressional committees. We will make copies
available to others upon request. This report will also be available at no
charge on the GAO Web site at http://www.gao.gov

If you have any questions about this report or need additional
information, please contact me at (202) 512-4841or [email protected].
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. Key contributors to
this report were David E. Cooper, Director; Michele Mackin, Assistant
Director; Noah Bleicher; Lily Chin; Todd Dice; Paul Gvoth; Arthur James
Jr.; Robert Rapasky; Holly Reil; and Russ Reiter.

Katherine V. Schinasi, Managing Director Acquisition and Sourcing
Management

Appendix I: Scope and Methodology Appendix I: Scope and Methodology

The Army, Air Force, and Navy each have employed contract security guards
under the congressional waiver authority. At the time of our review, the
Marine Corps had not yet used the authority. We focused our review on the
Army's use of contract security guards because it (1) was the first
activity to use the waiver authority and (2) had used the authority
substantially more than the Air Force or Navy. The first Army contract
security guard contract was awarded in July 2003, whereas the Air Force
and Navy contracts did not start until May and June 2004, respectively. In
addition, the Army has contracted for security guards at 57 installations,
whereas contract security guards are being used at 18 Air Force and 5 Navy
installations.

During our audit, we conducted interviews with Army officials from the
Installation Management Agency (IMA), the Army Contracting Agency, and the
Office of the Provost Marshal General. We visited 11 Army installations
that are currently using contract security guards and met with government
and contractor officials at each location. Officials from these 11
installations are responsible for a total of 14 different installations.
These installations represent approximately 25 percent of the 57
installations that have the contract security guard program in place. We
used two factors to determine which installations to visit: the contractor
and the March/April 2005 performance monitor assessments. Our analysis of
these evaluations ensured we visited at least 1 installation per
contractor that had a perfect score, where the average of the four
award-fee rating categories was 100 percent--typically, these were
locations IMA had recommended we visit. To provide a balanced view, we
then chose 2 other locations for each contractor with lower averages and a
wide variation in the range of scores for the categories. We visited 3
installations per contractor, except in the case of Coastal International
Security, which provides guards at only 2 locations.

At the 11 installations, we collected an arbitrary sample of the personnel
files, including screening and training records. We met with officials
responsible for and collected documentation related to the contract
security guard program at (1) Adelphi Laboratory Center, (2) Fort Belvoir,
(3) Fort Campbell, (4) Fort Detrick, (5) Fort Drum, (6) Fort Eustis/Fort
Story, (7) Fort Meade, (8) Fort Myer/Fort McNair, (9) Redstone Arsenal,
(10) Fort Riley, and (11) Fort Stewart/Hunter Army Airfield. We also met
with officials from the four contractors and two subcontractors that
provide guard services to the Army: Akal Security, Alutiiq Security and
Technology (with Wackenhut Services as a subcontractor), Chenega
Integrated Systems (with Vance Federal Security Services as a
subcontractor), and Coastal International Security. We also consulted with
officials from the Army Audit Agency, Air Force Audit Agency, and the Army
Criminal Investigation Command.

To address the Army's acquisition strategy, we reviewed the various
proposals for and the ultimate acquisition plan used by the Army
Contracting Agency. We reviewed Defense Contract Management Agency
analysis on the Alaska Native corporation (ANC) firms. We also reviewed
federal regulations pertaining to ANCs under the Small Business
Administration's 8(a) Business Development Program. We reviewed each
contract and its subsequent modifications. We analyzed the task orders to
determine the cost of the different contract vehicles the Army used to
obtain its contract security guards. We compared the Army's acquisition
strategy with that of other agencies using contract security guards,
specifically the U.S. Air Force and the Department of Homeland Security's
Federal Protective Service. We also held discussions with officials from
these two agencies.

To assess whether the Army ensures that the contract security guards are
effectively screened, we reviewed screening requirements in the
performance work statement and analyzed the selected personnel screening
files at the 11 installations we visited. We reviewed screening
requirements the Air Force and Federal Protective Service have for their
contract security guards. We interviewed officials at the installations,
including contractors, and IMA. We shared the specific results of our file
review of screening records with installation and contractor officials. We
reviewed our prior reports on combating terrorism1 and consulted with
representatives from the Department of Defense's Office of Special
Operations and Low Intensity Conflict and the Federal Bureau of
Investigation.

To determine whether the Army ensures the contract security guards are
adequately trained, we reviewed the training requirements outlined in the
performance work statement and Army regulation 190-56, The Army Civilian
Police and Security Guard Program (June 1995), in addition to analyzing
the sample of personnel training files at the 11 installations we visited.
We interviewed installation officials, including contractors, and IMA. We
shared the specific results of our file review of training records with
installation and contractor officials. We reviewed the report on the
falsification of training records prepared by a contractor and consulted
with an official from the Defense Criminal Investigative Service. We also
reviewed the training requirements for contract security guards at the Air
Force and the Federal Protective Service.

1 GAO-04-851NI and GAO-03-731NI .

To assess the Army's rationale for providing the contractors with award
fees and how the award fee process is being implemented, we reviewed the
Federal Acquisition Regulation to determine what circumstances are
appropriate for using an award fee with a firm fixed-price contract.2 We
reviewed the Army Contracting Agency's "Contract Incentives Guide"
(November 2004), and our recent report Defense Acquisitions: DOD Has Paid
Billions in Award and Incentive Fees Regardless of Acquisition Outcomes
(December 2005).3 We compared the government monitors' evaluation reports
with the criteria in the award-fee plan as well as with the final scores
approved by the IMA fee determining official. We analyzed the requirements
in the performance work statement and compared them with the award
fee-plan. Because the Army does not maintain information on how much it is
paying in award fees, we reviewed each task order to identify the award
fees authorized and whether contract modifications were executed. At each
of the installations visited, we discussed the award-fee process with the
performance monitors and obtained their observations and concerns.

We conducted our review from May 2005 to February 2006 in accordance with
generally accepted government auditing standards.

2Federal Acquisition Regulation 16.404.

3 GAO-06-66

Appendix II: List of Army Installations Using Contract Security Guards

Installation                     Contractor            Phasea  Competition 
Adelphi Laboratory Center        Chenega Integrated         3  ANC- 8(a)   
                                    Systemsb                      sole-source 
Anniston Army Depot              Akal Security, Inc.        2  Full & open 
Barnes Building                  Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Belvoir                     Coastal International      2  Full & Open 
                                    Security, Inc.                
Fort Benning                     Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Bliss                       Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Blue Grass Army Depot            Akal Security, Inc.        2  Full & open 
Fort Bragg                       Alutiiq Security &         1  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Campbell                    Akal Security, Inc.        2  Full & open 
Carlisle Barracks                Alutiiq Security &         1  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Carson                      Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Detrick                     Chenega Integrated         1  ANC- 8(a)   
                                    Systems                       sole-source 
Detroit Arsenal/Selfridge and    Alutiiq Security &         3  ANC- 8(a)   
Sebille Manor                    Technology                    sole-source 
Fort Drum                        Coastal International      2  Full & open 
                                    Security, Inc.                
Dugway Proving Grounds           Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Eustis/Fort Story           Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Gordon                      Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Greely                      Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Hood                        Akal Security, Inc.        2  Full & open 
Fort Huachuca                    Chenega Integrated         1  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Irwin                       Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Jackson                     Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Knox                        Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Leavenworth                 Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Lee                         Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Leonard Wood                Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Letterkenny Army Depot           Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Lewis                       Akal Security, Inc.        2  Full & open 
Fort McPherson/Fort Gillem       Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Meade                       Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Military Ocean Terminal, Sunny   Akal Security, Inc.        2  Full & open 
Point                                                          
Fort Monmouth                    Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Monroe                      Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Myer/Fort McNair            Chenega Integrated         1  ANC- 8(a)   
                                    Systems                       sole-source 
Natick Soldier Systems Center    Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Picatinny Arsenal                Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Polk                        Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Presidio of Monterey             Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Red River Army Depot             Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Redstone Arsenal                 Alutiiq Security &         3  ANC- 8(a)   
                                    Technology                    sole-source 
Fort Richardson                  Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Riley                       Akal Security, Inc.        2  Full & open 
Fort Sam Houston                 Chenega Integrated         1  ANC- 8(a)   
                                    Systems                       sole-source 
Sierra Army Depot                Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Sill                        Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       Sole-Source 
Fort Stewart/Hunter Army         Akal Security, Inc.        2  Full & open 
Airfield                                                       
Tooele Army Depot                Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Fort Wainwright                  Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Walter Reed Army Medical Center  Chenega Integrated         1  ANC- 8(a)   
                                    Systems                       sole-source 
U.S. Military Academy at West    Alutiiq Security &         3  ANC- 8(a)   
Point                            Technology                    sole-source 
White Sands Missile Range        Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 
Yuma Proving Grounds             Chenega Integrated         3  ANC- 8(a)   
                                    Systems                       sole-source 

Source: Army (data); GAO (analysis and presentation).

a Phase 1: Installations obtaining contract security guards starting in
fiscal year 2003 from the ANCs' sole-source contracts under the 8(a)
program.

Phase 2: Installations obtaining contract security guards under the full
and open competition contracts.

Phase 3: Installations obtaining contract security guards starting in
fiscal year 2004 and later from the ANCs' sole-source contracts under the
8(a) program.

b Chenega Technical Products received the original contract award; it
subsequently changed its name to Chenega Integrated Systems effective
December 7, 2004.

Appendix III: Agency Comments

(120452)

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www.gao.gov/cgi-bin/getrpt? GAO-06-284 .

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and methodology, click on the link above.

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Highlights of GAO-06-284 , a report to congressional requesters

April 2006

CONTRACT SECURITY GUARDS

Army's Guard Program Requires Greater Oversight and Reassessment of
Acquisition Approach

Following the terrorist attacks of September 11, 2001, increased security
requirements and a significant number of active duty and reserve personnel
sent overseas to support the war on terror left the Department of Defense
(DOD) with fewer military personnel to rely on to protect domestic
installations. To correct this shortage, Congress is temporarily allowing
DOD to use contract security guards to fulfill roles previously performed
by military employees. The U.S. Army has awarded contracts worth nearly
$733 million to acquire contract guards at 57 Army installations, an
investment far greater than those made by other DOD services so far.

The requesters asked GAO to assess how the Army has been managing and
overseeing its acquisition of security guard services, particularly with
regard to the Army's (1) acquisition strategy, (2) employment screening,
(3) training of contract guards, and (4) award fee process. This report
also discusses DOD's mandated November 2005 report to Congress on the
contract guard program.

What GAO Recommends

GAO made recommendations to the Secretary of Defense to improve management
and oversight of the contract security guard program. In written comments
on a draft of this report, DOD agreed with the recommendations and stated
that the Department of Army is implementing them.

The Army's three-phased approach for acquiring contract security guards
has relied heavily on sole-source contracts, despite the Army's
recognition early on that it was paying considerably more for its
sole-source contracts than for those awarded competitively. The Army has
devoted twice as many contract dollars-nearly $495 million-to its
sole-source contracts as to its competed contracts and has placed contract
security guards at 46 out of 57 installations through sole-sourcing. These
sole-source contracts were awarded to two Alaska Native corporation firms
under the Small Business Administration's 8(a) Business Development
Program. Congress has provided these firms with special advantages in the
8(a) program. During initial planning, the Army worked with a contractor
who had not performed guard services before to refine the contract
performance work statement.

The Army's procedure for screening prospective contract guards is
inadequate and puts the Army at risk of having ineligible guards
protecting installation gates. The Army found that, at two separate
installations, a total of 89 guards were put to work even though they had
records relating to criminal offenses, including cases that involved
assault and other felonies. Thorough background checks lag far behind the
rate at which contract guards are put to work, and the initial screening
process relies on prospective guards to be honest when filling out job
application forms. In response to an earlier GAO report, DOD agreed to
revise its antiterrorism standards to put into place a better mechanism
for verifying the trustworthiness of contractors.

The Army has given its contractors the responsibility to conduct most of
the training of contract guards, and the Army cannot say with certainty
whether training is actually taking place and whether it is being
conducted according to approved criteria. GAO found that there is no
requirement for the Army to certify that a contract guard has completed
required training and that Army performance monitors do not conduct
oversight of training as a matter of course. GAO also found missing or
incomplete training records at several installations. At three
installations, guards were certified by the contractor before training had
been completed. An investigation discovered that at one installation,
contractor personnel had falsified training records; the Army subsequently
paid the contractor over $7,000 to re-qualify the guards.

The Army has paid out more than $18 million in award fees, but the fees
are based only on compliance with basic contractual requirements, not for
above-and-beyond performance. Over the life of the contract guard program,
the Army has paid out almost 98 percent of the available award fees. The
practice of routinely paying contractors nearly the entire available award
fee has created an environment in which the contractors expect to receive
most of the available fee, regardless of acquisition outcomes. GAO found
that many Army performance monitors were not conducting all of the
required inspections of contractor activity in order to rate performance.
*** End of document. ***