Defense Contracting: Army Case Study Delineates Concerns with Use
of Contractors as Contract Specialists (26-MAR-08, GAO-08-360).  
                                                                 
In 2007, the Department of Defense (DOD) paid contractors $158.3 
billion for a range of services, including contract specialists. 
To better understand the use of contractors in this role, GAO	 
initiated a case study, under the authority of the Comptroller	 
General, at the Army Contracting Agency's (ACA) Contracting	 
Center of Excellence (CCE). GAO determined (1) the extent to	 
which and why CCE relies on contractor contract specialists, (2) 
how risks of contractor use are mitigated, (3) how the cost of	 
the contractors compares to that for CCE's government employees, 
and (4) whether the contract vehicles were appropriate. GAO	 
reviewed a random sample of contract files to understand the	 
contractors' duties and responsibilities, compared compensation  
costs, and reviewed documents from the General Services 	 
Administration (GSA), under whose contracts CCE ordered the	 
contract specialists.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-360 					        
    ACCNO:   A81421						        
  TITLE:     Defense Contracting: Army Case Study Delineates Concerns 
with Use of Contractors as Contract Specialists 		 
     DATE:   03/26/2008 
  SUBJECT:   Comparative analysis				 
	     Contract administration				 
	     Contract costs					 
	     Contractor payments				 
	     Contractor personnel				 
	     Defense cost control				 
	     Defense procurement				 
	     Department of Defense contractors			 
	     Employee training					 
	     Federal employees					 
	     Government contracts				 
	     Government employees				 
	     Human capital management				 
	     Human capital planning				 
	     Private sector					 
	     Risk assessment					 
	     Risk management					 
	     Internal controls					 
	     Contract principles				 

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GAO-08-360

   

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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

March 2008: 

Defense Contracting: 

Army Case Study Delineates Concerns with Use of Contractors as Contract 
Specialists: 

GAO-08-360: 

GAO Highlights: 

Highlights of GAO-08-360, a report to congressional committees. 

Why GAO Did This Study: 

In 2007, the Department of Defense (DOD) paid contractors $158.3 
billion for a range of services, including contract specialists. To 
better understand the use of contractors in this role, GAO initiated a 
case study, under the authority of the Comptroller General, at the Army 
Contracting Agencyï¿½s (ACA) Contracting Center of Excellence (CCE). GAO 
determined (1) the extent to which and why CCE relies on contractor 
contract specialists, (2) how risks of contractor use are mitigated, 
(3) how the cost of the contractors compares to that for CCEï¿½s 
government employees, and (4) whether the contract vehicles were 
appropriate. GAO reviewed a random sample of contract files to 
understand the contractorsï¿½ duties and responsibilities, compared 
compensation costs, and reviewed documents from the General Services 
Administration (GSA), under whose contracts CCE ordered the contract 
specialists. 

What GAO Found: 

CCE has relied on contractor contract specialists since it began hiring 
them in 2003. In August 2007, contractorsï¿½who work side by side and 
perform the same functions as their government counterpartsï¿½comprised 
42 percent of CCEï¿½s contract specialists. CCE officials cited 
difficulties hiring and retaining government personnel in light of the 
competition from government and the private sector for this competency. 
While CCE officials said that they prefer to use government employees, 
they have not considered the appropriate balance of contractor versus 
government contract specialists. Furthermore, CCE has not addressed the 
need for more training of its government employees to strengthen their 
skills in conducting CCEï¿½s increasingly more complex procurements. 

Methods to mitigate the risks of using contractors have been mixed in 
effect. First, the line separating contractor from government employee 
is blurry, and contractors did not always clearly identify themselves 
as such when dealing with the public. Second, the potential for the 
work being done under a personal services contract, which the Federal 
Acquisition Regulation generally prohibits because of the government-
contractor relationship it creates, was clearly present. While 
contractor managers retained control over matters such as approving 
leave requests, CCE took steps to further strengthen the management 
distinction between government and contractor employees based on GAOï¿½s 
findings. Finally, risks of organizational and personal conflicts of 
interest were mitigated to some extent, but in practice the government 
relies on individual contractor employees to identify potential 
conflicts. These types of risks must be mitigated to ensure that the 
government does not lose accountability over policy and program 
decisions. 

CCE is paying up to almost 27 percent more for its contractor-provided 
contract specialists than for similarly graded government employees. 
This comparison took into account government salary, benefits, and 
overhead and the loaded hourly labor rates paid to contractors. Our 
review of available rï¿½sumï¿½s showed that six contractor employees 
supporting CCE in fiscal year 2007 had on average more contracting 
experience than CCEï¿½s five recent government hires. 

Despite CCEï¿½s legal counselï¿½s concerns, CCE has been inappropriately 
ordering contract specialists under a GSA contract because the services 
were out of scope of those contracts. GAO found additional problems, 
such as a contractor advertising contract specialist services on GSAï¿½s 
Web site that it was not authorized to provide. Due to what it 
characterizes as the growing demand by federal agencies for contractor 
contract specialists, GSA recently posted a revised contract category, 
under which government agencies can procure contract specialists to 
provide acquisition management services, such as cost estimating and 
proposal evaluation support. In response to GAOï¿½s findings, GSA 
contacted each of the contractors involved in our review about their 
out-of-scope services and plans further follow-ups with them. 

What GAO Recommends: 

GAO recommends that the Secretary of Defense issue guidance regarding 
personal services contracts and that the Secretary of the Army direct 
ACA to work with CCE to develop a plan that addresses the appropriate 
mix of government and contractors, implement a training program, and 
ensure that contractors identify themselves as such. GAO also 
recommends that GSA implement controls to prevent contractors from 
improperly advertising their services. In written comments on a draft 
of this report, DOD and GSA agreed with the recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-360]. For more information, contact John 
Hutton at (202) 512-4841 or [email protected]. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

CCE Is Using Contractors to Supplement Its Workforce without 
Considering the Right Balance of Contractors versus Government 
Employees: 

Risks Associated with Using Contractors for Acquisition Services Are 
Being Mitigated to a Mixed Degree: 

CCE Is Paying More for Contractor Contract Specialists Than Its 
Government Employees: 

Contract Vehicles Inappropriately Issued and Used to Order Contract 
Specialists: 

Conclusion: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Defense: 

Appendix III: Comments from the General Services Administration: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: The Six FAR Personal Services Contract Elements Compared with 
CCE's Working Environment: 

Table 2: Comparison of the Average Cost of CCE's Government and 
Contractor Contract Specialists: 

Table 3: Comparison of Labor Categories in Two Contractors' GSA MOBIS 
Contracts with Requirement in CCE's Performance Work Statement: 

Abbreviations: 

ACA: Army Contracting Agency: 

BPA: blanket purchase agreement: 

CCE: Contracting Center of Excellence: 

DAU: Defense Acquisition University: 

DAWIA: Defense Acquisition Workforce Improvement Act: 

DOD: Department of Defense: 

FAR: Federal Acquisition Regulation: 

GAO: Government Accountability Office: 

GSA: General Services Administration: 

JCC-I/A: Joint Contracting Command-Iraq/Afghanistan: 

MOBIS: Mission Oriented Business Integrated Services: 

OCI: organizational conflict of interest: 

RFQ: request for quotations: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

March 26, 2008: 

Congressional Committees: 

Over the past 10 years, Department of Defense (DOD) spending on 
services has increased 76 percent--to $158.3 billion in fiscal year 
2007--and now outpaces its spending on supplies and equipment, 
including major weapon systems.[Footnote 1] One effect of the 
escalation in service spending has been to place greater demands on a 
shrinking acquisition workforce, which is increasingly faced with the 
need to manage more complex contracting approaches. Agencies have dealt 
with these trends by relying more heavily on contractors, particularly 
those that provide professional, administrative, and management support 
services, an area where DOD's spending more than tripled from fiscal 
years 1998 through 2007. One example of a function DOD is acquiring 
through contracts is contract specialists, who perform a range of 
acquisition services in support of government contracting officers. 

The decision to turn to contractors can, in some cases, create risks 
that the government needs to consider and manage. Of key concern is the 
risk of loss of government control over and accountability for mission- 
related policy and program decisions when contractors provide services 
that closely support inherently governmental functions. Contract 
specialist services are an example of such a service, whereas the 
contracting officer, who obligates the government's money, is 
performing an inherently governmental function that cannot be obtained 
through a contract. Other concerns include an increased potential for 
conflicts of interest, both organizational and personal; the potential 
for improper use of personal services contracts, which the Federal 
Acquisition Regulation (FAR) generally prohibits because of the 
employer-employee relationship they create between the government and 
contractor personnel; and the cost to the government of hiring 
contractors rather than government personnel. 

To learn more about the use and roles of contractors providing contract 
specialist services, we conducted a case study, under the authority of 
the Comptroller General to conduct evaluations on his own initiative, 
of the Army's Contracting Center of Excellence's (CCE) use of 
contractors in this role. Organizationally, CCE falls under the Army 
Contracting Agency (ACA), a field operating agency reporting to the 
Assistant Secretary of the Army for Acquisition, Logistics, and 
Technology. We determined (1) the extent to which and the reasons CCE 
is relying on contractors, (2) what actions have been taken to mitigate 
the risks associated with using contractors in contract specialist 
roles, (3) how the costs of CCE's contract specialists compared to that 
of its government contract specialists, and (4) whether the contract 
vehicles used to acquire the specialists were appropriate. This report 
presents our findings at CCE as an example of the challenges faced by 
agencies in an environment of increased reliance on contractors to help 
meet the contracting mission. 

We identified CCE as a government agency using contractors as contract 
specialists through a bid protest that involved CCE's predecessor 
organization awarding a contract for contract specialists.[Footnote 2] 
In fiscal year 2007, CCE obligated almost $1.8 billion in contract 
actions. To conduct our work, we interviewed CCE and ACA officials and 
contractor representatives. We obtained information on CCE's contract 
specialist staffing levels in fiscal year 2007, and we reviewed CCE's 
orders issued under blanket purchase agreements (BPA)[Footnote 3] 
established in 2006 for contract specialist services, as well as 
billing information. To identify the roles and responsibilities of 
contractor contract specialists, we interviewed government and 
contractor contract specialists and government contracting officers, 
and we reviewed 42 randomly selected CCE contract files for work 
performed by the contractor contract specialists in fiscal years 2006 
and 2007 to understand the contractors' day-to-day duties. We also 
reviewed contractor policies and procedures regarding organizational 
and personal conflicts of interest. In addition, we reviewed FAR 
provisions pertaining to conflicts of interest, as well as those 
relating to personal services contracts. To compare costs, we 
calculated an average loaded hourly rate (including benefits, overhead, 
and other costs) for CCE's government contract specialists who perform 
the same tasks and have similar qualifications as the contractor- 
provided contract specialists, and compared it to the weighted average 
labor hour rate that two contractors charged CCE for contract 
specialists in August 2007. The contractors' labor hour rates include 
wages, benefits, overhead, general and administrative expenses, and 
profit. We also reviewed rï¿½sumï¿½s to compare experience levels of 
contractor and government contract specialists. Rï¿½sumï¿½s were available 
for six contractor contract specialists who had supported the agency 
for at least 6 months; we also reviewed the rï¿½sumï¿½s of the five 
contract specialists CCE had recently hired. We reviewed CCE's 
contracting strategies to determine whether new contracts were awarded 
to obtain contract specialists or whether interagency contracts through 
other federal agencies, such as the General Services Administration's 
(GSA) schedule program, were used. We analyzed contract documents, 
including CCE's BPAs with four contractors, related task orders, and 
underlying GSA schedule contracts. We spoke with GSA officials 
responsible for overseeing the Mission Oriented Business Integrated 
Services (MOBIS) schedule and with CCE officials. We also examined the 
FAR section on the use of GSA schedules. 

While CCE has established BPAs with four contractors to provide 
contract specialist services, nearly all of the contractor-provided 
contract specialists at CCE during our review were employees of CACI 
International, Inc. (CACI); thus, our primary focus was on the CACI 
contract, related BPA, and orders. 

We conducted this performance audit from May 2007 to March 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. See appendix I for 
additional information on our scope and methodology. 

Results in Brief: 

CCE has relied on contractor contract specialists since it began hiring 
them in 2003 to help meet its increasing workload and plans to continue 
doing so, although officials told us that they would prefer an all- 
government workforce. CCE's contractor employees supported from 24 to 
30 percent of its contract actions from fiscal years 2005 through 2007 
and, in August 2007, represented 42 percent of the agency's contract 
specialists. The contractors work side by side with government contract 
specialists and perform the same activities. CCE and ACA officials 
noted that they face chronic difficulties in recruiting and retaining 
contract specialists, given the high demand for this skill set in the 
Washington, D.C., area. They said that it is a struggle to compete with 
other agencies as well as with the contractors supplying the 
specialists to the government. Further, while the agency has a 2-year 
training program for interns, it lacks a formal training program for 
its other contract specialists, despite officials' acknowledgment that 
skills need to be improved. Finally, CCE has not considered what would 
be an appropriate and feasible balance of the number of contractor and 
government employees. A recent Defense Acquisition University (DAU) 
study recommended that agencies assess the proper balance of contractor 
to government contract specialists to avoid overreliance on 
contractors. 

We found mixed results in terms of policies, procedures, and actions in 
place to mitigate the risks of using contractors in the contract 
specialist role at CCE: 

* The line separating contractor from government employee is blurry, 
and we found situations in which contractor employees were not clearly 
identified as such to the general public and cases where they were 
listed as the government's point of contact on contract documents. In 
situations such as these, contractor employees may appear to be 
speaking for the government, a situation that could create the 
impression in the general public that they are government employees. As 
a result of our findings, CCE has taken initial steps to more clearly 
delineate the contractor employees. 

* The work being done by CCE's contractor contract specialists reflects 
each of the descriptive elements listed in the FAR as a guide in 
assessing the existence of personal services contracts--which are 
generally prohibited unless authorized--including work performed under 
the direct, day-to-day supervision of the government. However, 
determinations as to whether a personal services contract is present 
must be made based on the facts and circumstances of each situation. In 
this case, the contractor maintains control over a number of 
supervisory and management functions, such as the approval of time 
cards and leave requests. As a result of our review, CCE has taken 
several actions, such as reorganizing the contractor employees so that 
their work is now assigned by a supervisor employed by the contractor. 
We found no DOD guidance that elaborated on the factors to be 
considered in determining whether a personal services contract exists 
or how to mitigate that risk when contractors work side by side with 
their government counterparts. 

* To mitigate the risk of organizational and personal conflicts of 
interest, CCE requires contractors to submit mitigation plans when 
appropriate, and contractor employees sign agreements not to disclose 
proprietary or sensitive information belonging to the government or 
other contractors, such as cost and pricing data, government spend plan 
data, and contractor technical proposal data, and not to engage in any 
conduct prohibited by provisions of the Procurement Integrity Act as 
implemented by the FAR.[Footnote 4] In practice, the government must 
rely heavily on individual contractor employees to identify potential 
organizational conflicts of interest, such as where they are assigned 
to a procurement on which their company is bidding. The same holds true 
for personal conflicts of interest, because, although a new FAR subpart 
states that contractors should have a written code of business ethics 
and conduct, neither the FAR nor DOD contracting policy requires that 
contractor employees be free from conflicts of interest or that they 
deploy other safeguards to help ensure that the advice and assistance 
the employees provide is not tainted by personal conflicts of interest. 

CCE is paying more on average for contractor-provided contract 
specialists than for its government contract specialists who are doing 
equivalent work. We found that on average and taking into account 
benefits and overhead rates, the cost of a GS-12 CCE contract 
specialist is $59.21 per hour, as compared to the contractors' average 
loaded hourly labor rate of $74.99, or about 17 percent more. The 
average cost of CCE's GS-13 specialists is $72.15 per hour, while it is 
paying the contractor specialists $84.38 per hour, or about 27 percent 
more. We also reviewed available rï¿½sumï¿½s of six contract employees 
supporting CCE for at least 6 months and found that they had from 5 to 
32 years, or an average of 18 years, of contracting-related experience. 
In comparison, the five CCE government contract specialists hired in 
fiscal year 2007 had from 6 to 17 years, or an average of about 12 
years, of contracting-related experience. All six contract employees 
had previously worked for, and were trained by, the federal government 
before being hired by the contractor. 

The contract vehicles CCE has used since 2003 to acquire its contract 
specialists--orders issued under GSA's MOBIS schedule contracts--were 
inappropriate because the services were out of scope of those 
contracts. The labor category descriptions in the vendors' GSA schedule 
contracts are, in most cases, substantially different from the 
descriptions in CCE's performance work statements and did not 
accurately represent the work that the contractors were performing. For 
example, one contractor's negotiated GSA contract was for "senior 
business analysts," but it is providing CCE with contract specialist 
support--a completely different description. Acquiring services outside 
the scope of the underlying contract circumvents the government's 
competition requirements and limits the government's ability to know if 
it is paying a fair and reasonable price. CCE's legal counsel and a 
senior procurement analyst raised concerns about the scope of services, 
but the agency issued the BPAs without resolving their concerns. When 
we brought the issue of the out-of-scope services to GSA's attention, 
as well as other issues we found, such as a contractor that had 
advertised services on GSA's Web site that it was not under contract to 
provide, GSA began contacting the contractors to rectify the 
situations. Because of the high demand for contract specialists, GSA 
has revised the MOBIS schedule to add acquisition management support 
services, including assistance in supporting proposal evaluations and 
reviews of contractor performance. Finally, CCE failed to follow Army 
policy for certifying that work ordered under a non-DOD contract--in 
this case, a GSA contract--is within scope of the contract. 

We are recommending that the Secretary of the Army direct ACA to work 
with CCE to take several actions, including identifying the appropriate 
mix of contractor and government personnel and developing a plan to 
achieve the desired balance, implementing a training program for its 
employees, and putting in place procedures to ensure that contractors 
identify themselves as such in all interactions external to CCE. We are 
also recommending that DOD issue guidance to clarify the circumstances 
under which contracts risk becoming improper personal services 
contracts and to provide direction on how the risk should be mitigated. 
Finally, we are recommending that GSA, as the entity responsible for 
the MOBIS schedules, strengthen controls to guard against situations 
where contractors improperly advertise services on GSA's Web site that 
they are not under contract to provide. In written comments on a draft 
of this report, DOD and GSA concurred with the recommendations and 
outlined actions they plan to take or have taken to address them. DOD's 
and GSA's comments are reprinted in their entirety in appendixes II and 
III, respectively. 

Background: 

CCE, which falls organizationally under ACA, provides contracting 
support to 125 DOD customers in the National Capitol Region, including 
the Joint Chiefs of Staff, TRICARE Management Activity, Defense 
Information Systems Agency, DOD Inspector General, Pentagon Renovation 
Office, and Office of the Judge Advocate General. During fiscal year 
2007, the agency awarded about 5,800 contract actions and obligated 
almost $1.8 billion. CCE is one of many government agencies that have 
turned to contractors to support their contracting functions. 

While use of contractors provides the government certain benefits, such 
as increased flexibility in fulfilling immediate needs, we and others 
have raised concerns about the federal government's services 
contracting, in particular for professional and management support 
services.[Footnote 5] A major concern is the risk of loss of government 
control over and accountability for mission-related policy and program 
decisions when contractors provide services that closely support 
inherently governmental functions. Inherently governmental functions 
require discretion in applying government authority or value judgments 
in making decisions for the government, such as approving contractual 
requirements; as such, they must be performed by government employees, 
not private contractors. The closer contractor services come to 
supporting inherently governmental functions, the greater the risk of 
their influencing the government's control over and accountability for 
decisions that may be based, in part, on contractor work. Decisions may 
be made that are not in the best interest of the government and may 
increase vulnerability to waste, fraud, or abuse. 

The FAR[Footnote 6] sets forth examples of services closely supporting 
inherently governmental functions. These include acquisition support 
services, such as: 

* services in support of acquisition planning, 

* services that involve or relate to the evaluation of another 
contractor's performance, 

* contractors providing assistance in contract management (such as 
where the contractor might influence official evaluations of other 
contractors), and: 

* contractors working in any situation that permits or might permit 
them to gain access to confidential business information, any other 
sensitive information, or both. 

It is now commonplace for agencies to use contractors to perform 
activities historically performed by federal government contract 
specialists. Although these contractors are not authorized to obligate 
government money, they provide acquisition support to contracting 
officers, the federal decision makers who have the authority to bind 
the government contractually. Among other things, contract specialists 
perform market research, assist in preparing statements of work, 
develop and manage acquisition plans, and prepare the documents the 
contracting officer signs, such as contracts, solicitations, and 
contract modifications. 

In its 2007 report to Congress, DOD's Panel on Contracting 
Integrity[Footnote 7] noted that the practice of using contractors to 
support the contracting mission merits further study because it gives 
rise to questions regarding potential conflicts of interest and 
appropriate designation of governmental versus nongovernmental 
functions. The panel concluded that potential vulnerabilities may exist 
that could result in fraud, waste, and abuse. 

A November 2005 DAU study[Footnote 8] cited four top reasons that 
federal agencies are contracting out for procurement services: (1) to 
meet workload surge requirements, (2) inability to hire adequate 
resources to meet workload, (3) relative speed of contracting versus 
hiring to meet workload, and (4) ability to select specific required 
expertise. The DAU data showed that contractors performed duties across 
the spectrum of contracting functions, from acquisition planning to 
contract closeout. The study's authors noted that as DOD's personnel 
levels have dropped, activity rates for procurement organizations have 
increased, driving a gap between the requirements and government 
capability in many DOD contracting offices. The report warned that the 
government must be careful when contracting for the procurement 
function to ensure that government leaders retain thorough control of 
policy and management functions and that contracting does not 
inappropriately restrict agency management in its ability to develop 
and consider options.[Footnote 9] 

CCE Is Using Contractors to Supplement Its Workforce without 
Considering the Right Balance of Contractors versus Government 
Employees: 

CCE has relied on contractors to help meet its increasing workload 
requirements since 2003 and plans to continue doing so, although agency 
officials would prefer an all-government workforce. The roles and 
responsibilities of the contractor contract specialists mirror those of 
the government contract specialists. In fact, contractor and government 
contract specialists work side by side and perform the same duties. CCE 
has not taken into consideration what constitutes a reasonable and 
feasible balance of the number of government versus contractor 
personnel or developed a training program for its permanent government 
employees. 

CCE Has Relied on Contractors to Meet Its Increasing Workload and Plans 
to Continue Doing So: 

According to agency officials, CCE began using contractor contract 
specialists in 2003 as a stopgap measure to meet an increase in 
workload, but the agency has continued to rely heavily on their 
support. Our analysis of CCE's contract actions showed that contractors 
supported from 24 to 30 percent of all actions from fiscal year 2005 
through 2007. In fiscal year 2007, CCE spent over $2.8 million on over 
32,600 hours (approximately 15.6 full-time-equivalent 
employees)[Footnote 10] of contracting support services from two 
contractors--CACI and The Ravens Group. In August 2007, 42 percent of 
CCE's contract specialists were contractors.[Footnote 11] CCE officials 
stated that the agency plans to continue relying on contractors, 
although they would prefer an all-government workforce. 

CCE officials told us that prior to 2005, the majority of the agency's 
contracting activity consisted of issuing orders against GSA schedule 
contracts--a relatively simple contracting method. After a DOD policy 
memorandum placed limitations on the use of non-DOD contract vehicles 
because of widely reported misuse of interagency contracts, CCE began 
relying less on using contract vehicles awarded by other agencies. Our 
analysis of Federal Procurement Data System-Next Generation data found 
that from fiscal years 2005 to 2007, the number of CCE contract actions 
through other agency contract vehicles decreased by 55 percent and 
obligations through use of these vehicles decreased by 45 percent. 
According to agency officials, CCE began awarding more of its own 
contracts through full and open competition, but the contracting staff 
generally lacked experience with these more complex types of 
procurements. Much of the workload had to be assigned to a limited 
number of more experienced staff, creating a situation where officials 
believed they had no choice but to turn to contractor support. 

Activities and Responsibilities of Contractor Contract Specialists 
Mirror Those of Government Personnel: 

Contractor contract specialists at CCE perform the same tasks as 
government contract specialists. Typical tasks include pre-procurement 
research and planning, preparing contract documents, monitoring 
contracts, assisting with negotiations, and closing out contracts. 
These "cradle-to-grave" procurement activities are performed as support 
for a government contracting officer, who performs an inherently 
governmental function with the ability to bind the government by 
contract. According to CCE contracting officers, the work is generally 
assigned based on knowledge and experience, not whether the specialist 
is a government or contractor employee, with the only exception being 
cases where there could be a potential organizational conflict of 
interest (such as when the contractor employee's company could bid on 
the contract in question). 

We reviewed contract files for 42 randomly selected contract actions on 
which contractor contract specialists worked during fiscal years 2006 
and 2007 and found that the contractors had prepared a range of 
contracting documents, such as contract modifications, requests for 
legal review, small business coordination records, cover sheets to 
route contract actions for approval, award decision memorandums, and 
memorandums to the file. Contractors also had requested or received 
documents from vendors or other DOD entities, such as proposals, 
technical evaluations, and past performance questionnaires, and 
assisted in preparing statements of work. 

The contracting officers and government and contractor-provided 
contract specialists we interviewed at CCE emphasized that while the 
contractors can recommend a course of action, the contracting officers 
make the decisions, such as deciding on an acquisition strategy and 
making contract award determinations. The contracting officers and 
specialists also told us that although contractors may assist in 
negotiations, the contracting officer takes the lead role in 
negotiating the terms of the contract. 

CCE Has Faced Difficulties Hiring Government Contract Specialists: 

CCE officials informed us that the agency has had trouble recruiting 
and retaining government contract specialists. For example, an official 
told us that as of October 2007 the agency had 10 contract specialist 
positions that have been vacant for as long as 5 months, as well as 
another 12 vacancies, such as procurement analysts and a cost/price 
analyst. According to the official, from August 2006 through August 
2007, 24 contract specialists--more than one-quarter of its government 
contracting workforce[Footnote 12] during the period--left the agency. 
Agency officials stated that some of these personnel retired, but many 
had gone to work for private contractors that support the federal 
government. In fact, CCE officials said that they cannot compete with 
the private sector when it comes to offering some employment 
incentives. Additionally, both CCE and ACA officials stated that the 
government's hiring process takes too long and that potential 
candidates are often hired by a contractor or another agency before CCE 
can make an offer. For example, it took CCE over 5 months, from 
solicitation to job offer and placement, for two recent contract 
specialist hires. In contrast, a CCE official told us that they can 
order and have a contractor employee in place within as little as a 
couple of weeks. 

CCE officials stated that the agency's recruitment difficulties are in 
large part caused by the high demand for contract specialists--by both 
the many federal agencies in Washington, D.C., and contractors from 
which the government purchases these services--making it difficult to 
compete for them. Contractor representatives, too, reiterated that the 
employment market for well-qualified contract specialists is extremely 
competitive. CACI employees who were supporting CCE as contract 
specialists confirmed that there is a high demand for their skill set, 
and several of these individuals stated that a well-qualified person 
can be selective when searching for a new employer. In addition, these 
employees said CACI offers some better benefits than the federal 
government, including higher salaries, fewer responsibilities, and 
shorter work weeks (because of contract restrictions on extended 
hours). Senior managers from The Ravens Group told us that their firm 
recruits contract specialists who have worked for and been trained by 
the government and hires them at a higher rate of pay. 

CCE Has Not Considered the Appropriate Balance of Contractor to 
Government Employees and Lacks a Training Plan to Help Build Government 
Staff's Skills: 

CCE plans to continue relying on contractors to help meet its mission, 
but has not considered the appropriate and feasible ratio of government 
employees to contractors. In a November 2005 study on contracting out 
the procurement function, DAU concluded that it is reasonable to 
contract out functions or tasks that are not inherently governmental to 
meet a sudden or temporary increase in workload or when special 
expertise is required. However, the study cautioned that contracted 
procurement support needs to be maintained at a "reasonable" level. The 
study recommended that each contracting activity be limited in the 
percentage of its workforce that may be contractors, acknowledging that 
the appropriate limitation is a matter for debate.[Footnote 13] It 
noted that using contractors only in limited situations would: 

* provide contracting agencies with flexibility to quickly react to 
surge workload situations, 

* enable managers to assign the contractors to lower-priority tasks so 
that government employees would handle the more sensitive procurement 
tasks, and: 

* help address the concern that extensive contracting out of the 
contracting function could reduce, in the long term, the opportunity to 
develop adequate numbers of government personnel with a full range of 
contracting experience. 

Defining the right mix of contractor to government contract specialists 
is not just a matter of numbers, but also of skill sets. The DAU study 
envisions contractors playing a limited role and performing lower- 
priority tasks. However, at CCE, complex, high-priority work is often 
assigned to the contractors, whose role has been ongoing since 2003. In 
part, according to agency officials, this is because many of the 
government employees lack experience with complex procurements. 
However, we found that while CCE has implemented a 2-year training 
program for its contract specialist interns, the agency does not have 
in place a training program for its permanent staff. In fact, according 
to CCE's former Commander and the current Director of Contracting, 
contracting staff have had to learn these practices on the job, which 
has resulted in some performance problems. An agency's overall training 
strategy--including planning, developing, implementing, and continuous 
improvement of its programs--is an important factor in ensuring that 
the staff has the skills, knowledge, and experience to meet agency 
missions. 

Risks Associated with Using Contractors for Acquisition Services Are 
Being Mitigated to a Mixed Degree: 

Three broad areas of risk of using contractors as contract specialists 
are present at CCE, with the risks being mitigated to various degrees. 
First, we found that the blurred lines demarcating contractor from 
government personnel could result in creating the impression that 
contractor employees are government personnel. Contractor employees 
were not always identified as such to the public and in some cases were 
named on documents as the government's point of contact. Second, the 
work being done reflects the descriptive elements listed in the FAR as 
guidance for assessing the existence of personal services contracts, 
which are prohibited unless authorized. However, a determination as to 
whether a personal services contract exists must be made on a case-by- 
case basis; here, CACI's on-site managers retain control over 
supervisory and managerial functions, such as approving time cards and 
making hiring and firing decisions, thus negating the existence of a 
personal services contract. We found no DOD guidance that elaborated on 
the factors to be considered in determining whether an unauthorized 
personal services contract exists or how to mitigate that risk. 
Finally, although policies and procedures are in place to help mitigate 
organizational and personal conflicts of interest, in practice, CCE 
relies on contractor employees to self-identify potential conflicts. 

Contractor Contract Specialists Not Always Identified as Such: 

To avoid confusion by vendors and customers over whether they are 
speaking to a government employee, it is important to clearly 
distinguish between contractors and government employees in all 
interactions. Contractor personnel attending meetings, answering 
government telephones, and working in other situations where their 
contractor status is not obvious to third parties should identify 
themselves as such to avoid creating the impression that they are 
government officials.[Footnote 14] In addition, the FAR states that 
agencies must ensure that all documents or reports contractors produce 
are suitably marked as contractor products or that contractor 
participation is appropriately disclosed. Further, in December 2005, 
the Assistant Secretary of the Army issued a memorandum, "Contractors 
in the Government Workplace," stating that "while it is preferred that 
contractor personnel work in company office space, if Government and 
contractor personnel must be co-located in the same office space, then, 
to the maximum extent possible, the contractor personnel should have 
separate, and separated, space." 

At CCE, we found the line separating government from contractor 
personnel to be blurry. There is no physical separation; the two work 
side by side in identical office space, and contractor employees are 
not identified as such on their cubicles. The only apparent distinction 
is their different badge color. 

In addition, contractors were not always identified as such on 
contracting documents they had prepared. We reviewed 23 contract 
modifications[Footnote 15] prepared by contractor employees and found 
that their status as contractors was not indicated on the documents. 
Further, on 16 of these modifications, the contractor was identified as 
administering the contract, and on four, the contractor was listed as 
the point of contact without identification as a contractor--for 
example, as the "CCE contact" or "government point of contact." 
Instances such as these, where the contractor is not identified as such 
or is misidentified, can cause confusion about the contractor's status 
and create an impression that the contractor is speaking or acting for 
the government. For example, we found a situation in which a vendor, in 
submitting a proposal to the government, listed the contractor contract 
specialist as the contracting officer, who has the contract source 
selection authority for the government. Another contract file contained 
e-mails between a contractor employee and third-party entities-- 
correspondence with a CCE customer agency and notification to a vendor 
that its bid would not be considered--with no contractor identification 
at all. 

CCE officials told us that the agency has no requirement that 
contractor employees identify themselves as contractors in the e-mail 
signature line, which could help ensure that outside parties know they 
are dealing with a contractor. Further, although the FAR and CCE's 
orders for contract specialists under the BPAs specifically cite 
telephone contacts as situations in which contractors should identify 
themselves as such, a CCE management official did not know whether this 
was occurring in practice. 

When we brought these issues to CCE's attention, the agency began to 
establish policies to mitigate the risk of contractors being mistaken 
for government employees and appearing to be speaking for the 
government. It has since issued a policy that contractor support 
personnel are not to communicate orally or in writing with other 
contractors, such as vendors. The contractor contract specialists will 
still communicate with CCE's federal customers. In addition, the CACI 
on-site senior manager notified CACI employees at CCE that they are to 
identify themselves as contractors in all correspondence, including e- 
mail and voice mail, and documents. 

Determination of Whether Personal Services Contract Exists Must Be Made 
on Case-by-Case Basis: 

At CCE, the work of the contractor contract specialists, performed in 
direct support of the government contracting officer and under his or 
her day-to-day supervision, results in an arrangement that can have 
characteristics of a personal services contract. Personal services 
contracts are generally prohibited, unless authorized by statute. The 
government is normally required to obtain its employees by direct hire 
under competitive appointment or other procedures required by the civil 
service laws. Section 37.104 of the FAR lists six descriptive elements 
to be used as a guide in assessing the existence of a personal services 
contract.[Footnote 16] The presence of any or all of these elements 
does not necessarily establish the existence of a personal services 
contract. Such a finding can only be established based on a case-by- 
case analysis of the totality of the circumstances of each case. The 
FAR elements are shown in table 1 along with the working environment of 
the contract employees at CCE. We found that the actual working 
environment for the contractor contract specialists at CCE touched on 
all six elements. 

Table 1: The Six Far Personal Services Contract Elements Compared With 
CCE'S Working Environment: 

FAR elements suggesting personal services contracts exist: 
1. Performance on-site; 
CCE contracting environment: Contractors are on-site at CCE and sit 
among government personnel performing the same tasks. 

FAR elements suggesting personal services contracts exist: 
2. Principal tools and equipment furnished by the government; 
CCE contracting environment: Contractors use government equipment and 
facilities. 

FAR elements suggesting personal services contracts exist: 
3. Services are applied directly to the integral effort of the agency 
or an organizational subpart in the furtherance of its assigned 
function or mission; 
CCE contracting environment: CCE's core mission is providing contract 
support directly to DOD entities. Contractors fulfill capability and 
workforce gaps at CCE. 

FAR elements suggesting personal services contracts exist: 
4. Comparable services, meeting comparable needs, are performed in the 
same or similar agencies using civil service personnel; 
CCE contracting environment: Other than reassigning work when a 
potential organizational conflict of interest exists, there is no 
difference between the work of a government employee and a contractor 
employee. 

FAR elements suggesting personal services contracts exist: 
5. The need for the type of service provided can reasonably be expected 
to last beyond 1 year; 
CCE contracting environment: CCE has contracted for contract specialist 
support on an ongoing basis since 2003. 

FAR elements suggesting personal services contracts exist: 
6. The inherent nature of the service, or the manner in which it is 
provided, reasonably requires, directly or indirectly, government 
direction or supervision of contractor employees in order to (1) 
adequately protect the government's interest, (2) retain control of the 
function involved, or (3) retain full personal responsibility for the 
function supported in a duly authorized federal officer or employee; 
CCE contracting environment: CCE uses time-and-materials contracts for 
these services. Because there is no profit incentive for cost control 
or labor efficiencies when these contracts are used, they require the 
government to ensure appropriate surveillance over the contractor's 
performance. Contractor tasks are issued by the government directly to 
the contractor employee performing the work. The contractors' work is 
directly reviewed by the government contracting officer. The 
contractors are performing tasks that are defined by the FAR as closely 
supporting inherently governmental functions. CCE contracting officers 
retain the responsibility for making contract awards. 

Sources: FAR subpart 37.104(d), CCE data, and GAO analysis. 

[End of table] 

The FAR provides that each contract arrangement be judged in the light 
of its own facts and circumstances, with the key question always being 
whether the government will exercise relatively continuous supervision 
and control over the contractor personnel performing the contract. 
[Footnote 17] For example, GAO bid protest decisions have considered, 
along with the existence of other factors, the fact that government 
"managers interviewed and selected contractor personnel for assignment 
to positions, and routinely requested pay increases and promotions for 
contractor personnel" to be contributing factors in the existence of a 
personal services contract.[Footnote 18] Another bid protest decision 
considered that "the contractor's right to hire and fire employees, to 
grant or deny individual leave requests, and to reassign employees 
negate the existence of a personal services contract as defined in the 
FAR."[Footnote 19] CACI's performance, in this case, of supervisory and 
management functions, such as approving time cards and leave requests, 
preparing performance evaluations, and making hiring and firing 
decisions, means a personal services contract does not exist, even if 
the six FAR elements are present. Although the distinction between a 
personal services contract and a non-personal services contract is 
somewhat murky and requires a case-by-case analysis based on the facts 
of each circumstance, we found no additional DOD guidance that 
elaborated on the factors contracting officers or program officials 
should consider in determining whether a personal services contract 
exists and how to mitigate against this risk when contractors are 
working side by side with their government counterparts, perhaps even 
receiving their daily task assignments from a government supervisor. 
Because of the type of contract and nature of the contract services 
provided along with the presence of the FAR's descriptive elements, the 
CACI contract runs the risk of becoming a personal services contract if 
the government does not carefully monitor the manner in which services 
are provided.[Footnote 20] 

When we brought these issues to the attention of CCE, the agency began 
to take actions to strengthen the management distinction between 
government and contractor personnel. Before, the contractor personnel 
were assigned to a team consisting of government and contractor 
employees, and they generally worked for one contracting officer most 
of the time. Now, all of the contractor personnel are on a separate 
team, and the contractors' managers on-site are responsible for 
assigning work to the contractor employees--unlike the previous 
situation where the government contracting officer assigned the work. 
Under this arrangement, contractor contract specialists can work for 
several different contracting officers, according to a CCE official. In 
addition, CCE has plans to situate contractors together in an area 
separate from government personnel and to put nameplates on cubicles to 
clearly distinguish between contractor and government employees, but 
these plans have not yet been implemented. 

The Acquisition Advisory Panel[Footnote 21] recently reported that as 
the extent of service contracting has grown, the current ban on 
personal services contracts has created two responses--government 
managers may find themselves crafting cumbersome and inefficient 
processes to manage the work of contractor personnel to avoid the 
appearance that they are exercising continuous supervisory control, or 
they may simply ignore the ban. The panel recommended replacing the ban 
with guidance on the appropriate and effective use of personal services 
contracts. The panel stated that in implementing the recommendation, 
the government should be allowed to supervise the work performed by the 
contractor workforce, but current prohibitions on government 
involvement in purely supervisory or management activities--such as 
hiring, leave approval, and performance ratings--should be retained. 

Mitigations of Organizational and Personal Conflicts of Interest Must 
Rely Heavily on Individual Contractor Specialists: 

Reliance on contractor support to meet agency missions can raise the 
risk of organizational and personal conflicts of interest.[Footnote 22] 
In fact, the Acquisition Advisory Panel noted that the government's 
increased reliance on contractors, coupled with increased contractor 
consolidations, has escalated the potential for organizational 
conflicts of interest (OCI). With respect to protecting contractor 
confidential or proprietary data, the panel recognized the increased 
threat of improper disclosure as more contractor employees support the 
government's acquisition function. The panel also found that while 
there are numerous statutory and regulatory provisions that apply to 
federal employees to protect against personal conflicts of interest, 
most do not apply to contractor personnel. 

An OCI may be present when a contractor organization has other 
interests that either directly or indirectly (because of business or 
relationships with other contractor organizations) relate to the work 
to be performed under a contract and (1) may diminish its capacity to 
give impartial, technically sound, objective assistance or advice or 
(2) may result in it having an unfair competitive advantage. The FAR 
and GAO bid protest decisions provide guidance for contracting officers 
to mitigate three types of OCIs: unequal access to nonpublic 
information as part of its performance under a government contract that 
might provide the contractor firm unfair competitive advantage in a 
future competition; biased ground rules, such as the firm being in a 
position to write a statement of work that might provide it an unfair 
advantage in a future competition; and impaired objectivity when the 
contractor firm's work under a contract entails evaluating its own work 
or that of a competitor either through an assessment of performance 
under another contract or through an evaluation of proposals.[Footnote 
23] 

As required under its BPA with CCE, CACI submitted an OCI risk 
mitigation plan, which lays out the elements of its plan to mitigate 
the risk of an OCI. According to the plan, the contractor has 
established a separation, or "firewall," between the business unit that 
provides contract specialists and program support services to CCE and 
all other divisions and corporations owned by the company. As a part of 
the firewall, the business unit's employees are physically separated 
from the company's other operating groups, proposal databases are 
separated, and the business unit's employee financial incentives do not 
depend on the performance of the company's other operating 
organizations. Also, the business unit providing contract specialists 
is precluded from submitting proposals in response to solicitations 
issued by CCE, except for those related to the BPA for contract 
specialists. In addition, the company provides its employees with OCI 
training and instructions to immediately notify the contracting officer 
of a potential OCI; requires them to sign conflict of interest and 
nondisclosure agreements to protect proprietary or sensitive 
information belonging to the government or other contractors--for 
example, cost and pricing data, government spend plan data, and 
contractor technical proposal data--and not use this information to 
violate procurement integrity rules; and limits where employees can 
work within CACI for 2 years after leaving CCE. The nondisclosure 
agreement also addresses personal conflicts of interest, as the 
contractor employee must agree not to engage in any conduct prohibited 
by the Procurement Integrity Act as implemented in FAR 3.104. Finally, 
a group internal to the company conducts annual reviews of the 
effectiveness of and adherence to the OCI risk mitigation plan. 

Although CCE and the contractor have taken steps to mitigate OCI risks, 
in practice, identifying and mitigating the risks necessarily relies, 
to a large extent, on individual contractor personnel. Contractor 
officials indicated that it is the responsibility of the contractor 
contract specialists to immediately notify the company supervisor and 
contracting officer of potential OCIs. CACI officials and employees 
told us of cases where contractor contract specialists had been exposed 
to potential conflicts of interest, that is, they were assigned to 
procurements that the company planned to bid on. We were told these 
employees were subsequently removed from working on the procurements 
after notifying contractor management and government officials of a 
potential conflict. Despite these instances, CCE officials told us that 
they are careful about what procurements they assign to the 
contractors. For example, the CCE contracting officer's 
representative[Footnote 24] told us that she screens requirements 
packages to determine which ones would present a potential conflict if 
assigned to a contractor. However, she does not have visibility to the 
subcontract level, where the contractor could be a subcontractor to a 
potential bidder. 

For purposes of this report, we define a personal conflict of interest 
as a situation when an individual, employed by an organization in a 
position to materially influence research findings, recommendations, or 
both, may lack objectivity or be perceived to potentially lack 
objectivity because of his or her personal activities, relationships, 
or financial interests. For example, a conflict can occur when a 
government employee contacts an offeror during the conduct of an 
acquisition since this could be construed as seeking employment. 
Defense contractor employees are not subject to the same laws and 
regulations that are designed to prevent federal employee conflicts of 
interests. Moreover, although a new FAR subpart states that contractors 
should have a written code of business ethics and conduct, neither the 
FAR nor DOD contracting policy requires that contractor employees be 
free from conflicts of interest or that they deploy other safeguards to 
help ensure that the advice and assistance the employees provide is not 
tainted by personal conflicts of interest.[Footnote 25] Therefore, 
mitigating the risks associated with personal conflicts of interest 
depends on the integrity of the contractors and their employees. For 
example, one of the contractors providing contract specialists to CCE 
has an internal policy for standards of employee ethics and business 
conduct that addresses personal conflicts of interest. In addition, the 
company provides mandatory ethics training that covers personal 
conflicts of interest. According to a company official, rather than 
having a formal financial disclosure process, its employees are 
equipped with knowledge of what constitutes a personal conflict of 
interest, and it is the employees' responsibility to self-report if 
they have a personal conflict of interest. The company also has a 
moonlighting policy that requires employees to obtain company approval 
prior to forming any relationship with a for-profit company. 

CCE Is Paying More for Contractor Contract Specialists Than Its 
Government Employees: 

CCE is paying more on average for contractor-provided contract 
specialists than for its government specialists. We reviewed the hours 
of contractor services CCE purchased under orders pursuant to the four 
BPAs it established at the end of fiscal year 2006. By the end of 
fiscal year 2007, CCE had purchased contract support services only from 
CACI and The Ravens Group, with the vast majority being from CACI. 
Agency officials informed us that CCE has purchased services of two 
types of contract specialists: (1) contract specialists II, which are 
Defense Acquisition Workforce Improvement Act (DAWIA)[Footnote 26] II- 
certified/GS-12 equivalents, and (2) contract specialists III, which 
are DAWIA III-certified/GS-13 equivalents. Because the orders issued 
pursuant to the BPAs are time-and-materials contracts, payments to 
contractors are based on the number of labor hours billed at a fixed 
hourly rate--which includes wages, benefits, and the company's 
overhead; general and administrative expenses; and profit.[Footnote 27] 
Because agency officials stated that CCE has government contract 
specialists with the same certifications and GS levels as the 
contractor contract specialists, we determined that these specialists 
were comparable. Therefore, we compared the costs and experience of the 
government and contractor employees within these two categories. We 
found that the average hourly cost of a contract employee is higher 
than a government specialist performing the same duties, as shown in 
table 2. 

Table 2: Comparison Of The Average Cost Of CCE's Government And 
Contractor Contract Specialists: 

DAWIA certification/GS level or equivalent: II/GS-12; 
Average hourly cost of a government employee[A]: $59.21; 
Average hourly cost of a contract employee[B]: $74.99; 
Percentage difference: 26.65. 

DAWIA certification/GS level or equivalent: III/GS-13; 
Average hourly cost of a government employee[A]: $72.15; 
Average hourly cost of a contract employee[B]: $84.38; 
Percentage difference: 16.95. 

Source: GAO analysis based on government information. 

[A] This rate is based on actual salaries and benefits paid during the 
pay period ending on August 18, 2007, and 68.3 productive hours per pay 
period. The rate does not include the government's costs of managing 
the payroll of government employees. 

[B] This rate is based on the weighted average rate CCE paid during 
August 2007 and does not include CCE's cost of managing the contracts 
for these services. 

[End of table] 

Key elements of our analysis were as follows: 

* The loaded hourly cost of a government employee includes salary, 
costs of the government's contributions to the employee's benefits, the 
costs to train the employee, the employee's travel expenses, and the 
costs of operations overhead--which are the costs of government 
employees who provide support services, such as budget analysts or 
human capital staff. 

* Government employee salaries and benefits were based on actual data 
from one pay period. These data were then compared to hourly cost of 
contractor employees ordered during that same pay period. The cost of a 
contractor employee is the fully loaded hourly rate the government pays 
for these services. We reported the weighted average of those hourly 
rates because the agency used two contractors at two different rates 
during that pay period. 

* We excluded the costs that the government incurs for both government 
and contractor-provided specialists. These include the costs of 
supplies, facilities, utilities, information technology, and 
communications. 

Based on a limited number of rï¿½sumï¿½s we reviewed, the contractors 
generally had more contracting experience than their government 
counterparts. Rï¿½sumï¿½s were available for six CACI employees supporting 
CCE as contract specialists for at least 6 months during fiscal year 
2007; they had from 5 to 32 years, or an average of about 18 years, of 
contracting-related experience. In contrast, the five CCE government 
contract specialists hired during fiscal year 2007 had from 6 to 17 
years, or an average of about 12 years, of contracting-related 
experience prior to joining the agency. All six contract employees 
previously worked for, and were trained by, the federal government 
before being hired by the contractor. 

Contract Vehicles Inappropriately Issued and Used to Order Contract 
Specialists: 

CCE's issuance of the BPAs with four contractors for contract 
specialists under GSA's MOBIS schedule was inappropriate as some of the 
services required in CCE's performance work statements were outside the 
scope of the underlying contracts. The labor category descriptions in 
the vendors' GSA schedule contracts were, in most cases, significantly 
different from the description on CCE's performance work statements 
and, for the two contractors who have been issued task orders, did not 
accurately represent the work performed.[Footnote 28] A GSA official 
confirmed that contract specialist services were not within the scope 
of the MOBIS schedule but said it is the responsibility of the ordering 
agency to ensure that orders are within scope. In addition, we found 
that one of the other contractors had improperly advertised on GSA's 
Web site that its contract contained contract specialist services. GSA 
has initiated corrective actions with the four contractors based on our 
findings. Because of federal agencies' demand for contract support 
services, GSA recently implemented a revised MOBIS category for 
acquisition management support, which includes contract specialist 
services. Finally, CCE did not comply with Army policy requiring an 
assertion that work performed by a contractor under a non-DOD contract 
is within scope of the contract. 

Orders for Contract Specialists Were Out of the Scope of the Underlying 
Contract: 

The four contractors' BPAs with CCE (CACI, The Ravens Group, Tai Pedro 
& Associates, and Government Contracts Consultants), established under 
the GSA schedule contracts, were inappropriately issued as some of the 
services required in the performance work statements were outside the 
scope of these underlying contracts. Specifically, their labor category 
descriptions differed significantly from those required in CCE's 
performance work statements, and they did not accurately represent the 
work that the contractor was to perform. Moreover, CCE has issued task 
orders for contract specialists against CACI's and The Ravens Group's 
MOBIS contracts that were outside the scope of those contracts. Where 
an agency announces its intention to order from an existing GSA 
contractor, all items ordered are required to be within the scope of 
the vendors' contracts.[Footnote 29] Orders issued outside the scope of 
the underlying GSA contract do not satisfy legal requirements under the 
Competition in Contracting Act for competing the award of government 
contracts and limit the government's ability to know if it is paying a 
fair and reasonable price. In such cases, the out-of-scope work should 
have been awarded using competitive procedures or supported with a 
justification and approval for other than full and open competition. 
[Footnote 30] 

CCE has issued task orders for contract specialists against CACI's and 
The Ravens Group's MOBIS contracts. Table 3 provides examples of the 
differences between the GSA schedule contract labor category 
descriptions and CCE's statements of work for these contractors for a 
contract specialist--level 3 position. Although the performance work 
statement does not delineate responsibilities that are specific to the 
contract specialist, level 3 position, it contains responsibilities for 
all contract specialist positions as described in the table. 

Table 3: Comparison Of Labor Categories In Two Contractors' GSA MOBIS 
Contracts With Requirement In CCE'S Performance Work Statement: 

MOBIS labor category description: 
CACI: senior program control analyst; 
Responsibilities: Maintains current project documentation and record of 
changes, including status reports. Assists in establishing budgets and 
monitoring performance. Directs all or most activities related to 
financial and administrative functions, such as budgeting, manpower and 
resource planning, and financial reporting. May research, report on, 
and recommend solutions to contractual issues. Provides expert 
functional advice and direction to functional/user area management and 
project teams working on complex systems; 
Experience/education: Experience in the preparation and analysis of 
financial statements, working with acquisition systems, or complex 
vertical business, purchasing applications, or both. General experience 
required includes progressively more responsible experience in general 
accounting, acquisition, or management activities; 
The Ravens Group: senior budget/business analyst; 
Responsibilities: Reviews expenditures and prepares operating budgets 
for various departments to ensure conformance to budgetary limits. 
Performs a variety of tasks; 
Experience/education: Requires a bachelor's degree in business, 
finance, accounting or economics with 8 years of experience in federal 
government budgeting; the DOD Planning, Programming and Budgeting 
System; or equivalent budgeting experience. Knowledge of automated 
systems used in budget formulations and execution is required. Relies 
on extensive experience and judgment to plan and accomplish goals. 

CCE requirements: Contract specialist - level 3; 
Responsibilities: Provides support and assistance in essentially all 
areas of FAR-based federal procurement in which advanced or complex 
knowledge and expertise is required, such as preparing or reviewing pre-
procurement packages; actively participating in integrated process 
teams; developing and managing acquisition plans; preparing/researching 
support documentation; making recommendations to the contracting 
officer; handling complex problems through resolution; validating data; 
and otherwise completing actions needed to successfully advertise, 
solicit, construct, award, administer, and close out government 
contract vehicles; 
Experience/education: Master's degree. An advanced degree or 
acquisition certification is preferred. Eight years of progressive 
experience supporting and developing large, major, or complex 
government procurements. In-depth knowledge of the FAR, agency-specific 
regulations, and current and demonstrated experience with acquisition 
streamlining initiatives and reforms. Practical knowledge of various 
acquisition approaches. Ability to formulate appropriate documentation 
for the various approaches. Experience leading and managing other 
acquisition professionals. 

Source: GAO analysis based on GSA contracts and CCE BPAs. 

[End of table] 

Our review of the contract file shows that during acquisition planning, 
CCE's policy and legal offices raised concerns about the use of the GSA 
MOBIS schedule to meet CCE's requirements.[Footnote 31] Specifically, 
in a September 1, 2006, letter to the contracting officer and 
government contract specialist, CCE's Acting Chief Attorney expressed 
concern that the schedule "may not provide the right personnel for this 
requirement," and cited an applicable GAO decision in which the protest 
was sustained on the basis that vendors' quoted services were outside 
the scope of their GSA contracts.[Footnote 32] The CCE attorney 
determined that the request for quotations (RFQ) was "legally 
insufficient" because of this and other issues and indicated that the 
out-of-scope issue, among others, should be considered. According to 
the legal office, despite this determination, CCE contracting personnel 
issued the RFQ without returning it to the attorney for further review. 
According to the Army's internal policies and a March 2006 CCE 
memorandum regarding legal review procedures, where the contracting 
officer makes a decision or takes a proposed action that is contrary to 
legal advice, the contract file must include written evidence to that 
effect, including a statement of the contracting officer's rationale 
for proceeding contrary to such legal advice. No such evidence was 
included in the contract file in this case. 

Contractor representatives told us that the linkage between labor 
categories and the work to be performed is more of an art than a clean- 
cut science. They told us that they attempted to match the labor 
categories as best they could by using their GSA labor rates and CCE's 
requirements. Although acknowledging that the mapping was strained, 
CACI officials pointed out that it was disclosed in their proposal to 
CCE and that the company provided CCE with rï¿½sumï¿½s that more closely 
matched the agency's requirements. CACI officials told us that they 
have had discussions in the past with GSA about offering contracting 
support skill sets and what schedule is appropriate. The Ravens Group 
officials said that the key is the evaluation of the qualifications and 
level of effort required and relating those factors to the various 
MOBIS schedule job descriptions and labor rates. 

GSA agreed that CCE's orders for contract specialists were issued out 
of scope of the vendors' underlying MOBIS contracts, but a senior 
official stated that it is the responsibility of the ordering agency to 
ensure that orders are within scope of the vendors' contracts. The 
official told us that while GSA has ownership of the MOBIS schedule, it 
is only able to perform limited oversight of the orders issued under 
schedule contracts. The official acknowledged that GSA is aware of 
instances where agencies have improperly used the MOBIS schedule to 
hire contract specialists, although it does not know the extent to 
which this has occurred. 

We found that other DOD agencies had used the MOBIS schedule to procure 
contract specialists but stopped doing so because of concerns about out-
of-scope work. In 2004, ACA's Capital District Contracting Center in 
Fort Belvoir, Virginia, used the MOBIS schedule to hire contract 
specialists in support of what is now the Joint Contracting Command- 
Iraq/Afghanistan (JCC-I/A). However, in 2005, the contracting center 
changed its approach, awarding a similar contract for additional 
support using full and open competition instead of continuing to issue 
orders under the MOBIS contract. When the period of performance 
expired, JCC-I/A awarded its own contract in 2006 for contract 
specialists, again using full and open competition. According to a 
former JCC-I/A official involved in the award, the driving factor in 
the decision to issue a competitive solicitation was the determination 
that contract specialist services were not in the scope of the MOBIS 
schedule.[Footnote 33] 

Based on our findings, CCE is planning to solicit a new contract for 
contract specialists using full and open competition, under the FAR's 
commercial item acquisition procedures, with a target award date of 
June 30, 2008. In the interim, according to a CCE official, no more 
orders are being placed under the current BPAs for contract 
specialists. 

Although CCE has not placed orders for contract specialists with two 
other firms with which it has established BPAs--Tai Pedro & Associates 
and Government Contracts Consultants--we found troublesome issues 
related to their schedule contracts as well. Tai Pedro & Associates' 
MOBIS contract actually includes a labor category for "contract 
specialist" services under a category for competitive sourcing support, 
which allows contractors to perform competitive sourcing surveys or to 
assist agencies in developing A-76 procurement strategies.[Footnote 34] 
According to GSA officials, the competitive sourcing support category 
allows contractor contract specialists to assist with A-76 projects and 
outsourcing efforts, but not with other efforts. 

Government Contracts Consultants' MOBIS contract did not contain 
acquisition support categories. However, the contractor advertised that 
its contract contained these categories--including contract 
specialists--on the GSA Advantage Web site, the agency's portal for Web-
based procurement. The contractor took this action despite having 
affirmed in writing to GSA prior to its contract award its 
understanding that "contract support services are not authorized" under 
the contract. Until we informed GSA officials of this situation in 
September 2007, they were unaware that it had occurred. They told us 
that they normally check postings on GSA Advantage against awarded 
contracts to ensure that inappropriate services are not advertised, but 
in this case the situation was overlooked. 

GSA Has Initiated Corrective Actions: 

Based on our findings, GSA began in the fall of 2007 to notify the four 
contractors that contract specialist services are out of scope of their 
schedule contracts. For example, GSA notified Government Contracts 
Consultants that it had been found to be performing out-of-scope 
services. GSA sent its internal reviewers to the company's facilities 
to review its task orders to determine what services the company was 
offering federal customers under its GSA contract. GSA also directed 
Government Contracts Consultants to remove the incorrect labor 
categories from its posting on the GSA Advantage Web site, which the 
company has since done. GSA also notified both CACI and The Ravens 
Group that they had been found to be performing services outside the 
scope of their schedule contracts and informed Tai Pedro & Associates 
that acquisition support services are out of the scope of its MOBIS 
schedule contract, which is limited to support for competitive sourcing 
efforts. GSA told CACI, The Ravens Group, and Tai Pedro & Associates 
that internal reviewers would visit their facilities in fiscal year 
2008 to ensure that they are performing within the scope of their 
contracts and that GSA may periodically ask for copies of recently 
awarded task orders to be reviewed for scope appropriateness. GSA 
advised all four companies--Government Contracts Consultants, The 
Ravens Group, CACI, and Tai Pedro & Associates--that if any new out-of- 
scope work is performed, GSA will take appropriate action, up to and 
including canceling their contracts or initiating termination for cause 
proceedings. 

Because of the demand for contract support services, GSA recently 
implemented a revised Special Item Number category--Acquisition 
Management Support--under the MOBIS schedule. Contract specialist 
services can be ordered under this category to perform functions such 
as cost estimating; preparing price negotiation memorandums and 
statements of work; assisting with acquisition planning, including 
performing market research and recommending procurement strategies; 
providing expert assistance in supporting proposal evaluations; 
assisting with reviews of contractor performance; and investigating 
reports of contract discrepancies. GSA has links on its Web site for 
special ordering instructions and an ordering guide for the revised 
category. These documents primarily discuss mitigating conflicts of 
interest and ensuring that contractors do not perform inherently 
governmental functions. 

CCE Did Not Properly Justify Use of Interagency Contracting Vehicle: 

In placing the orders for contract specialist services, CCE did not 
follow ACA policy and guidance pertaining to interagency contracts. 
After a number of reports by inspectors general and others regarding 
problems with interagency contracting, DOD established requirements in 
October 2004[Footnote 35] for reviewing and approving the use of non- 
DOD contract vehicles when procuring supplies and services for amounts 
greater than the simplified acquisition threshold.[Footnote 36] These 
requirements included determining that the tasks to be accomplished or 
supplies to be provided were within the scope of the contract to be 
used. ACA's implementing guidance, issued before CCE established the 
BPAs with the four contractors, required that specific certifications 
be made when using non-DOD contracts, including procedures for direct 
acquisitions (i.e., orders placed by an Army contracting or ordering 
officer against a non-DOD contract), such as CCE's orders against the 
vendors' GSA schedule contracts. Prior to the contracting officer's 
placement of a direct acquisition order for supplies and services, the 
head of the requiring activity must execute, among other things, a 
written certification that the supplies, services, or both, are within 
the scope of the non-DOD contract. Additionally, for the acquisition of 
services, (1) the requiring activity must obtain written concurrence 
from the non-DOD contracting officer at the servicing organization (in 
this case, GSA) that the services to be provided are within the scope 
of the non-DOD contract, unless the DOD contracting office has access 
to the non-DOD contract, and (2) the contracting officer must obtain 
written coordination from supporting legal counsel prior to placement 
of the order. 

CCE's certification for use of a non-DOD contract was undated but 
signed by the contracting officer. It stated that the services were 
within the scope of the non-DOD contract, despite the fact that there 
was a clear disconnect between the descriptions in the contractors' GSA 
contract labor categories and the services CCE required. In addition, 
we could find no evidence that CCE obtained written concurrence from a 
GSA contracting officer, as required, or written coordination from its 
legal counsel. In fact, the certification listed the point of contact 
at the non-DOD agency as "to be determined." 

Conclusion: 

The CCE example delineates two major areas of concern in today's 
environment: hiring contractors for sensitive positions in reaction to 
a shortfall in the government workforce rather than as a planned 
strategy to help achieve an agency mission, and the need to properly 
manage those contractors once they are hired. When contractors are 
performing duties closely supporting inherently governmental functions--
such as those performed by contract specialists at CCE-- risks are 
present that can result in loss of government control and decision 
making, absent proper mitigation and government vigilance. CCE and its 
contractors alike bear responsibility for helping to mitigate risks, 
such as ensuring that measures are in place to prevent conflicts of 
interest and that contractor personnel are clearly identified as such. 
Given the blurred lines separating government from contractor employees 
in such situations as that at CCE, an additional risk is that the work 
may be done under an improper personal services contract. DOD guidance 
on this issue--which could help contracting and program officials look 
beyond the FAR elements to determine the condition and mitigate the 
risk--is lacking. Because CCE has not considered the appropriate 
balance of contractor and government personnel performing specific 
functions, or adequately trained its government workforce, the agency 
runs the risk of over reliance on contractors to meet its mission and 
of paying more in the long run. If CCE relies too heavily on 
contractors and cannot adequately develop its own workforce, it may not 
be able to support its DOD customers. The cost of decreased mission 
capability could be far higher than paying more for contractors. And 
GSA, as the agency responsible for the schedule program, needs to take 
steps to ensure that contractors appropriately advertise their 
available services. 

Recommendations for Executive Action: 

We recommend that the Secretary of Defense issue guidance to clarify 
the circumstances under which contracts risk becoming improper personal 
services contracts and to provide direction on how the risk should be 
mitigated. 

To help ensure that CCE has sufficient qualified government personnel 
to meet its mission, and uses contractors appropriately, we recommend 
that the Secretary of the Army direct ACA to work with CCE in taking 
the following three actions: 

* identify the appropriate mix of contractor and government contract 
specialists over the long term and develop a plan to help fill 
positions to achieve the desired balance; 

* implement a training program designed to ensure that CCE's permanent 
employees develop and maintain needed skills; and: 

* implement formal oversight procedures to ensure that contractors 
identify themselves as such in all interactions external to CCE, 
including telephone communications, e-mail signature lines, and 
documents, as required by the FAR. 

Finally, we recommend that the Administrator of GSA strengthen internal 
controls to guard against situations where contractors advertise 
services on the GSA Advantage Web site that are not in their underlying 
GSA schedule contracts. 

Agency Comments and Our Evaluation: 

DOD and GSA provided written comments on a draft of this report. Their 
comments are reprinted in appendixes II and III, respectively. 

DOD's Director, Defense Procurement, Acquisition Policy, and Strategic 
Sourcing, concurred with all four of our recommendations and outlined 
actions DOD plans to take or has taken to address them. The Director 
stated that contractors performing as contract specialists is viewed as 
a matter of grave concern. While one of our recommendations called for 
ACA to work with CCE to identify the appropriate mix of contractor and 
government contract specialists over the long term, the Director stated 
that he plans to meet with the Army's Senior Procurement Executive in 
an effort to eliminate, within 180 days, contractors acting as contract 
specialists at CCE. If this time frame cannot be met, the Director 
plans to urge the Army to transfer the workload within CCE to other DOD 
contracting agencies or sister federal agencies so that contract 
specialist functions are performed solely by government employees. In 
response to our recommendation that formal oversight procedures be 
implemented to ensure that contractors are identified as such in all 
interactions external to CCE, DOD stated that CCE had recently 
distributed to its government personnel and support contractors an 
information paper reinforcing such a policy. DOD's response states that 
CCE provided GAO with this information paper in February 2008. We did 
not receive such a paper. After seeing this reference in DOD's 
comments, we contacted CCE to request a copy of this document, but as 
of our report issuance date, we had not received it. 

GSA agreed with our recommendation that the agency strengthen controls 
to guard against situations where contractors advertise services on the 
GSA Advantage Web site that are not in their underlying schedule 
contracts. GSA noted that while it provides limited oversight of the 
orders issued under schedule contracts, it takes actions to educate 
customers about how best to use the contracts. GSA also pointed out 
that because the revised Special Item Number category "Acquisition 
Management Support" has been implemented under the MOBIS schedule, 
contracting for contract specialist work is now within the scope of 
that schedule. 

We are sending copies of this report to interested congressional 
committees; the Secretary of Defense; the Secretary of the Army; the 
Commander, ACA; the Commander, CCE; the Administrator of GSA; and the 
Director, Office of Management and Budget. We will provide copies to 
others on request. This report will also be available at no charge on 
GAO's Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report or need 
additional information, please contact me at (202) 512-4841 or 
[email protected]. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. Staff acknowledgments are provided in appendix IV. 

Signed by: 

John Hutton: 
Director: 
Acquisition and Sourcing Management: 

List of Congressional Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Joseph I. Lieberman: 
Chairman: 
The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Ted Stevens: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

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

The Honorable Henry A. Waxman: 
Chairman: 
The Honorable Tom Davis: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable John P. Murtha: 
Chairman: 
The Honorable C.W. Bill Young: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Bernard Sanders: 
United States Senate: 

[End of section] 

Appendix I: Scope and Methodology: 

To learn more about the use and roles of contractors providing contract 
specialist services, we conducted a case study under the authority of 
the Comptroller General to conduct evaluations on his own initiative. 
We selected the Army's Contracting Center of Excellence (CCE), in the 
Washington, D.C., area, as one Department of Defense (DOD) agency using 
contractors in this role based on a bid protest that had been submitted 
to our office. The protest, which was denied, challenged the Defense 
Contracting Command-Washington's (now known as CCE) acceptance of CACI, 
International's (CACI) organizational conflict-of-interest mitigation 
plan and the evaluation of proposals for contract specialist 
services.[Footnote 37] In fiscal year 2007, CCE obligated almost $1.8 
billion in contract actions. Because nearly all of the contractor- 
provided contract specialists at CCE during the performance of our 
review were employees of CACI, our primary focus was on the CACI 
contract. CCE had also ordered a few contract specialists from another 
firm, The Ravens Group. In all, CCE had established blanket purchase 
agreements (BPA) with four contractors in September 2006, under General 
Services Administration (GSA) schedule contracts, to provide contract 
specialist services. 

To determine the extent to which and the reasons CCE is relying on 
contractors, we obtained contract specialist staffing levels in fiscal 
year 2007. We reviewed CCE's task orders issued under schedule 
contracts using the agency's BPAs for contracting support services and 
agency billing information. We also interviewed CCE's commander and 
contracting, training, and human capital officials and spoke with 
officials from the Army Contracting Agency (ACA), which is CCE's parent 
organization. We analyzed information from the Federal Procurement Data 
System-Next Generation to determine trends in CCE's use of other 
agencies' contracts from fiscal years 2005 through 2007. To identify 
the roles and responsibilities of the contractor contract specialists, 
we randomly selected 42 contract actions worked on by contractor 
contract specialists during fiscal year 2006 and fiscal year 2007 
through June 13 to determine what work they perform on a daily basis. 
The intent of this file review was to understand the contractors' day- 
to-day duties; we selected the files randomly to avoid selection bias. 
We interviewed management officials from CACI and The Ravens Group. We 
also interviewed CACI's contract specialists at CCE, but The Ravens 
Group management would not allow us to interview their employees. We 
did not consider this to be a scope limitation because of the small 
number (2 to 3) of The Ravens Group's contract specialists at CCE 
during the time of our review. For comparison, we interviewed 
government contract specialists at CCE regarding their roles and 
responsibilities. We also interviewed government contracting officers 
about the roles and responsibilities of the government and contractor- 
provided contract specialists. To obtain information on the general 
demand for contract specialists in today's marketplace, we interviewed 
contractor management representatives, and we reviewed a Defense 
Acquisition University report on contracting out the procurement 
function,[Footnote 38] an Air Force-sponsored study to assess the 
status of contracting out procurement functions within DOD and federal 
agencies. We also looked at job postings on USA Jobs, the federal 
government's Web site for job vacancies. 

To determine what actions have been taken to mitigate the risks 
associated with using contractors in contract support roles, we 
interviewed CCE managers and contracting officers and CACI contract 
specialists at CCE. We reviewed CACI's organizational conflicts of 
interest (OCI) mitigation plan and interviewed employees about their 
knowledge of policies and procedures regarding OCIs. We interviewed 
CACI officials regarding the company's policies and procedures to 
mitigate personal conflicts of interest, and we examined related 
documents--such as CACI's Standards of Ethics and Business Conduct--and 
the ethics training provided by CACI to its employees. We also reviewed 
other documents, such as the Acquisition Advisory Panel's 2007 
report.[Footnote 39] In addition, we reviewed sections of the Federal 
Acquisition Regulation (FAR) pertaining to organizational and personal 
conflicts of interest, as well as those related to personal services 
contracts. We conducted a legal review of CCE's performance work 
statement, BPAs, and orders for contract specialists and compared the 
elements of personal services contracts in FAR Subpart 37.104 with the 
environment in which contractors are working at CCE as contract 
specialists. 

To compare the cost of contractor contract specialists to their 
government counterparts, we reviewed CCE's fiscal year 2007 task orders 
with CACI and The Ravens Group and agency billing information to 
identify the hourly labor rate the government is paying for these 
positions. Because the orders issued pursuant to the BPAs are time-and- 
materials contracts, payments to the contractors are based on the 
number of labor hours billed at a fixed hourly rate, which includes 
wages, benefits, overhead, general and administrative expenses, and 
profit. We identified the number of hours purchased from each 
contractor during August 2007 and calculated the weighted average 
hourly cost for contract specialist II and III positions. We reported 
the weighted average hourly cost because the agency used two 
contractors at two different rates in August 2007. To compare these 
costs to those for a government contract specialist, we identified two 
groups of CCE employees that perform the same tasks and share similar 
qualifications, those who were GS-12s with Defense Acquisition 
Workforce Improvement Act (DAWIA) II certification--which are 
equivalent to contractor-provided contract specialist II positions-- 
and those who were GS-13s with DAWIA III certification--which are 
equivalent to contractor-provided contract specialist III positions. We 
obtained the actual salaries and the government's contributions to the 
benefits of those contract specialists during the pay period ending on 
August 18, 2007.[Footnote 40] We used data from one pay period to 
capture the costs of government contract specialists because CCE has 
had turnover in these positions, making it difficult to capture costs 
throughout the year. From those data, we determined the average hourly 
rate and costs of benefits for these two groups based on 68.3 
productive hours[Footnote 41] during the pay period. To determine the 
government's overhead costs, we used the actual costs of support 
services--salaries and government contributions to the benefits of 
human capital personnel, manpower personnel, and other support staff as 
identified by ACA during the pay period ending on August 18, 2007. CCE 
also provided the agency's expenditures on travel and training during 
fiscal year 2007. We then determined the average travel and training 
costs per person per hour for only those government employees who were 
directly associated with these costs. This average travel and training 
cost estimate was applied to all government contract specialists 
supporting CCE and may be higher than the agency's actual cost per 
person. We excluded from our analysis the costs for supplies, 
information technology, and communication services because the 
government pays these costs for contractors as well. We also excluded 
the costs of facilities and utilities because the Director of Resource 
Management told us that ACA could not specifically identify these costs 
(which the government also covers for contractor employees). We 
compared the average hourly cost--actual salary, government's 
contribution to benefits, and overhead--of the two groups of CCE 
contract specialists to the weighted average hourly rate paid for the 
respective contractor positions. To determine how CACI and CCE employee 
contracting experience differs, we reviewed available rï¿½sumï¿½s of 
contractor and government contract specialists. Rï¿½sumï¿½s were available 
for six CACI contract specialists who have supported CCE for at least 6 
months and were identified by CCE officials as doing the same work as 
government contract specialists. Five rï¿½sumï¿½s were available for CCE 
contract specialists hired in fiscal year 2007, who were identified by 
agency officials as doing the same work as the contractors. In 
reviewing these rï¿½sumï¿½s, we considered previous contracting experience 
to be the time spent in jobs related to the field of contracting. 

To determine whether the contract vehicles used to acquire the 
specialists were appropriate, we reviewed CCE's contracting strategies 
to determine whether new contracts were awarded to obtain contract 
specialists or whether interagency contracts through other federal 
agencies, such as GSA's schedule program, were used. We analyzed CCE's 
BPAs with four contractors--CACI, The Ravens Group, Tai Pedro & 
Associates, and Government Contracts Consultants--and their underlying 
GSA Mission Oriented Business Integrated Services (MOBIS) schedule 
contracts to which the BPAs were tied. We also reviewed CCE's 
performance work statements and analyzed the task orders that have been 
issued for contract specialists. We reviewed the contract files to 
obtain documentation, such as legal reviews and compliance with DOD 
policies on interagency contracting. We interviewed CCE officials and 
GSA officials, including the Director of GSA's Management Services 
Center, Region 10, who is responsible for the MOBIS schedule. We 
reviewed reports by GAO and others concerning the use of interagency 
contracts. We also reviewed FAR Subpart 8.4, which sets forth the 
regulations pertaining to GSA's schedule program. 

We conducted this performance audit from May 2007 through March 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
Acquisition, Technology And Logistics: 
3000 Defense Pentagon: 
Washington, DC 20301-3000: 

March 24, 2008: 

Mr. John Hutton: 
Director, Acquisition and Sourcing Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Hutton: 

This is the Department of Defense (DoD) response to the GAO Draft 
Report, GAO-08-360, "Defense Contracting: Army Case Study Delineates 
Concerns with Use of Contractors as Contract Specialists," dated 
February 20, 2008 (GAO Code 120654). 

We fully concur with the recommendations provided in the report. 
Recently, I testified at House Armed Service Committee Subcommittee on 
Readiness on the matter of inherently governmental responsibilities. I 
expressed my concern that we had a small number of contracting 
organizations that had contractors performing as contract specialists. 

I view this to be a matter of grave concern. I plan to meet with the 
Army's Senior Procurement Executive in an effort to accelerate the 
transition of contractors out of the contract specialist role. If we 
can not eliminate the role of contractors acting as contract 
specialists within 180 days, I plan to urge the Army to transfer the 
workload within that office to other DoD contracting agencies or sister 
federal agencies so that contract specialists function arc performed 
solely by Government employees. 

Detailed comments on the report recommendations are attached. The 
Department of the Army Contracting Agency, Contracting Center of 
Excellence (CCE), provided a response for each recommendation directed 
to the Secretary of the Army. 

We appreciate the opportunity to provide comments on the draft report. 
My point of contact for this issue is Janice E. Sullivan who is 
available at (703) 614-4840 and [email protected]. 

Signed by: 

Shay D. Assad: 
Director: 
Defense Procurement, Acquisition Policy, and Strategic Sourcing: 

Attachment: As stated 

GAO Draft Report ï¿½ Dated February 20, 2008: 
GAO-08-360 (GAO CODE 120654): 

"Defense Contracting: Army Case Study Delineates Concerns with Use of 
Contractors as Contract Specialists" 

Department Of Defense Comments To The GAO Recommendations: 

Recommendation 1: The GAO recommended that the Secretary of Defense 
issue guidance to clarify the circumstances under which contracts risk 
becoming improper personal services contracts and to provide direction 
on how the risk should be mitigated. 

DOD Response: Concur. DoD concurs with the need to provide guidance 
regarding the appropriate use of personal service contracts and how to 
mitigate the risks of unauthorized personal service contracts. We are 
in the process of developing such guidance. 

Recommendation 2: The GAO recommended that the Secretary of the Army 
direct the Army Contracting Agency to work with their Contracting 
Center of Excellence to identify the appropriate mix of contractor and 
government contract specialists over the long term and develop a plan 
to help fill positions to achieve the desired balance. 

DOD Response: Concur. The Army advises that the Contracting Center of 
Excellence (CCE) long term goal is to staff the organization solely 
with government contract specialists. We have put forth an aggressive 
recruitment effort to fill all vacant government positions with highly 
qualified contract specialists. Towards this goal, CCE. decreased the 
number of contractor personnel from thirty-one in 2007 to seventeen 
currently (as of February 26, 2008). Today, however, CCE still needs 
contractor personnel who, on average, possess greater experience and/or 
expertise than available in the government workforce. We anticipate the 
continued reduction of contractors in the CCE workplace over the next 
two years as the Gansler Commission recommendations are implemented; 
improving the Army's acquisition workforce and developing Government 
acquisition personnel who are better trained and more capable of 
handling the complex requirements of our customers. 

Recommendation 3: The GAO recommended that the Secretary of the Army 
direct the Army Contracting Agency to work with their Contracting 
Center of Excellence to implement a training program designed to ensure 
its permanent employees develop and maintain needed skills. 

DOD Response: Concur. The Army advises that CCE has implemented the 
recommendation that will ensure Government employees receive training 
and needed skills as outlined: 

a. In-House Training: All managers are required to meet with their 
employees to discuss career goals and objectives and to ensure that all 
Individual Development Plans are updated and reflect the desired and 
required training to remain current. An assessment of major trends and 
weaknesses in the organization is made and a determination on how to 
best utilize limited funds available to improve or update the skill 
levels of all of CCE contracting personnel. Training is conducted 
through various methods to include lunch time sessions, train-the-
trainer, on-the-job training and mentoring. Some of the in-house 
training provided in FY 2007 included Team Building; Continuous 
Learning Course (CLC) 033, Contract Format and Structure; CLC 007, 
Contract Source Selection; Cost and Pricing; lunch time training on 
various subjects provided by acquisition professional, and monthly 
luncheons with speakers from National Contract Management Agency 
(NCMA); and Small Business Training. 

b. Defense Acquisition Workforce Improvement Act: Certification 
requirements are reviewed annually to ensure all personnel are 
certified at their required level. Over 97% of CCE's personnel meet or 
exceed their required level. 

c. Formal Training: Formal training is conducted at least once a 
quarter. Four formal training sessions are scheduled for FY 2008. 
Additional training include web-based courses and paying for personnel 
to attend outside training. For example, CCE hosts a monthly NCMA 
professional development opportunity. CCE also established an on the 
job training and mentoring program within the CCE Directorate of 
Contracting. On the job training and mentoring provide unique 
opportunities to our specialists who already possess some job-related 
skills and the knowledge to learn from their peers. Training schedule 
for FY 2008 includes Best Values and Source Selection, Performance 
Based Contract, Performance Work Statement, Commercial Contracting, and 
Review of Contractor Cost and Pricing Data. When available, CCE funds 
college tuition for courses related to acquisition or contracting. 

Recommendation 4: The GAO recommended that the Secretary of the Army 
direct the Army Contracting Agency to work with their Contracting 
Center of Excellence to implement formal oversight procedures to ensure 
that contractors identify themselves as such in all interactions 
external to CCE, including telephone communications, emails signature 
lines, and documents, as required by the Federal Acquisition Regulation 
(FAR). 

DOD Response: Concur. The Army advises that CCE recently provided all 
CCE Government personnel and the CCE support contractors with an 
information paper which, among other topics, explicitly re-enforced the 
long-standing policy that contractor employees identify themselves as 
required by the FAR. A copy was provided to GAO in February 2008. 
Consistent with Army policy, CCE has always required contractor 
employee email addresses contain the contractor's company name. Most 
correspondence (electronic or hard copy) leaving CCE is signed by 
warranted contracting officers. Those documents and emails signed by 
contractor employees will be reviewed to ensure that the contractor's 
identity is evident. Ensuring contractor identity was added to CCE's 
contract file checklist. In addition, telephonic spot checks will be 
conducted monthly. Finally, CCE took additional steps to ensure that 
contractor employee identity is known, including having the contractor 
program manager assign all work to his/her contractor personnel and 
physically assigning all contractor personnel to the same work area. 
CCE's legal office also prepared policy documents on the duties and 
responsibilities of the contractor specialist to include contractor 
personnel. 

[End of section] 

Appendix III: Comments from the General Services Administration: 

GSA Administrator: 
U.S. General Services Administration: 
900 F Street NW: 
Washington, DC 20405-0002: 
Telephone: (202) 501-0600
Fax (202) 219-1243
[hyperlink, http://www.gsa.gov]. 

March 19, 2008: 

The Honorable Gene L. Dodaro: 
Acting Comptroller General of the United States: 
Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Dodaro: 

The General Services Administration (GSA) appreciates the opportunity 
to review and comment on the draft report, "Defense Contracting: Army 
Case Study Delineates Concerns with Use of Contractors as Contract 
Specialists" (GAO-08-360) We also appreciate the Government 
Accountability Office's (GAO's) acknowledgement of the actions GSA has 
already taken as a result of the report findings. 

The GAO draft report includes one recommendation to GSA, namely that 
GSA strengthen internal controls to guard against situations where 
contractors advertise services on the GSA Advantage! website that are 
not in their underlying GSA schedule contracts. We agree with the 
recommendation and will take appropriate action. 

Technical comments that update and clarify statements in the draft 
report are enclosed and incorporated herein by reference. If you have 
any questions, please contact me. Staff inquiries may be directed to 
Mr. Kevin Messner, Associate Administrator, Office of Congressional and 
Intergovernmental Affairs, at (202) 501-0563. 

Cordially, 

Signed by: 

Lurita Doan: 
Administrator: 

Enclosure: 

cc: John Hutton, Director, Acquisition and Sourcing Management 

Government Accountability Office Draft Report, 'Defense Contracting: 
Army Case Study Delineates Concerns with Use of Contractors as Contract 
Specialists" (GAO-08-360): 

GSA Comments: 

Page 22, paragraph 3: Beginning at 'GSA agreed that CCE's orders for 
contract specialist were issued out of scope ... but a senior official 
stated ... it is only able to perform limited oversight of the orders 
issued under the schedule contracts." 

GSA Comment: 

The report correctly notes that GSA performs limited oversight. 
However, GSA does take extensive action to educating customers in how 
to best use Schedule contracts. In managing the schedules, GSA: 

* Develops and manages Special Item Numbers (SIN) descriptions to 
ensure that they clearly convey what services are covered and what 
services are not covered; 

* Operates GSA Advantage!; 

* Provides guidance on best use of schedules via many channels; 

* Leads regulation in Federal Acquisition Regulation (FAR) 8.4. This 
provides ordering procedures for agencies to use schedules 
appropriately; 

*Evaluates contractor performance and compliance with scope through the
Customer Assessment Initiative (CACI) Report Card; 

* Delivers regular customer training courses, in person and via 
webinar; 

* Publishes Multiple Award Schedule (MAS) Owners Manual (updated 
edition coming soon); 

* Consults to advise customer agencies on best way to use schedules; 

* Conducts annual compliance surveys to identify on-going opportunities 
to improve schedule usage; 

* Issues Frequently Asked Questions (FAQ's) for all of our schedules; 

* Conducts scope review, consultations and assists with acquisition 
planning to customers when requested. 

Nonetheless, it is the responsibility of the ordering activity to 
follow ordering procedures and stay within scope. It is also the 
responsibility of the contractor to follow Terms & Conditions of its 
contract. 

Page 24, paragraph 2: Because of the demand for contract support 
services, GSA recently implemented a revised Special Item Number 
categoryï¿½"Acquisition Management Support"ï¿½under the MOBIS schedule. 

GSA Comment: 

We appreciate GAO's acknowledgement of recent actions undertaken, but 
we note that the information GSA posts on its website also provides 
guidance that is directed to ordering activities, as well as 
contractors, to ensure that both parties are aware of their 
responsibilities and limitations under the regulations. As a result of 
the change to MOBIS last month, contracting for contract specialist 
work is now within the scope of the schedule. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John Hutton, (202) 512-4841 or [email protected]: 

Acknowledgments: 

In addition to the individual named above, Michele Mackin, Assistant 
Director; Erin Schoening; William Allbritton; Timothy Carr; Daniel 
Chen; Justin Jaynes; Kenneth Patton; Charles Perdue; and Sylvia Schatz 
made key contributions to this report. 

[End of section] 

Footnotes: 

[1] We have reported that to a large extent, DOD has not proactively 
managed this growth, meaning that it cannot know whether its 
investments in service contracts are achieving the desired outcomes. 
GAO, Defense Acquisitions: Tailored Approach Needed to Improve Service 
Acquisition Outcomes, GAO-07-20 (Washington, D.C.: Nov. 9, 2006). 

[2] LEADS Corporation, B-292465, September 26, 2003, 2003 CPD 197 at 1. 
The protest was denied. 

[3] BPAs are a simplified method of filling anticipated repetitive 
needs for supplies and services. For example, agencies can establish 
"charge accounts" with qualified vendors. FAR 13.303-1(a). BPAs 
established under a Federal Supply Schedule apply the BPA procedures 
under subpart 8.4 of the FAR. 

[4] 41 U.S.C. ï¿½ 423, FAR 3.104. 

[5] GAO, Department of Homeland Security: Improved Assessment and 
Oversight Needed to Manage Risk of Contracting for Selected Services, 
GAO-07-990 (Washington, D.C.: Sept. 17, 2007). 

[6] The FAR is the primary regulation for use by all federal executive 
agencies in their acquisition of supplies and services with 
appropriated funds. 

[7] Department of Defense, Office of the Under Secretary of Defense for 
Acquisition, Technology, and Logistics, Panel on Contracting Integrity, 
2007 Report to Congress. Also, see the John Warner National Defense 
Authorization Act for Fiscal Year 2007, ï¿½ 813. 

[8] Defense Acquisition University, Contracting Out Procurement 
Functions: An Analysis, DAU Research Report 06-001 (Fort Belvoir, Va.: 
Defense Acquisition University Press, November 2005). 

[9] In Urgent Reform Required: Army Expeditionary Contracting (November 
2007), the Commission on Army Acquisition and Program Management in 
Expeditionary Operations reported similar findings specifically for the 
Army. It noted that there were significant reductions in the Army's 
contracting workforce from 1990 to 2006, while workload increased over 
654 percent from 1992 to 2006. The commission recommended increasing 
the stature, quantity, and career development of military and civilian 
contracting personnel. In response to the commission's report, the Army 
approved the creation of an Army Contracting Command, which will fall 
under the Army Materiel Command and be led by a two-star officer. The 
Army also plans to increase its contracting workforce by approximately 
400 military personnel and 1,000 civilian personnel. 

[10] Based on 2087 hours for a full-time-equivalent employee. 

[11] This percentage does not include three contractor employees for 
whom CCE was billed 16 hours or less in August 2007. 

[12] CCE's government contracting workforce includes contract 
specialists, procurement analysts, and cost/price analysts. 

[13] The authors suggested that contractor employees should not exceed 
25 percent of an activity's total procurement workforce in other than 
exceptional situations. The authors did not specifically set forth 
their rationale for recommending this percentage. 

[14] FAR 37.114(c). 

[15] Contract modifications are documents that amend or modify existing 
contract conditions and are signed by the government contracting 
officer. Bilateral contract modifications are also signed by the vendor 
providing the goods or services. 

[16] FAR Subpart 37.104(d). 

[17] FAR 37.104(c)(2). 

[18] Encore Management, Inc., B-278903.2, February 12, 1999, 99-1 CPD ï¿½ 
33 at 3. 

[19] W.B. Joley, B-234146, March 31, 1989, 89-1 CPD ï¿½ 339 at 2. 

[20] We note the inherent tension between the government's 
responsibility to refrain from exercising relatively continuous 
supervision and control over contractor employees under FAR 37.104, the 
government's obligation to ensure sufficient surveillance of contractor 
performance for time-and-materials contracts under FAR 16.601(c)(1), 
and the government's responsibility to ensure enhanced oversight when 
contracting for functions that closely support inherently governmental 
functions. See FAR 7.503(d) and FAR 37.114(b). 

[21] Acquisition Advisory Panel, Report of the Acquisition Advisory 
Panel to the Office of Federal Procurement Policy and the United States 
Congress (January 2007). Also, see National Defense Authorization Act 
for Fiscal Year 2004, Pub. L. No. 108-136, ï¿½ 1423 (2003). 

[22] Whether the contractor providing contract specialist support had 
an adequate organizational conflict of interest mitigation plan in 
place has been the subject of GAO bid protests, for example, The LEADS 
Corporation v. CACI, B-292465, September 26, 2003. 

[23] FAR Subpart 9.5. 

[24] If contract performance will be ongoing, a contracting officer's 
representative--generally an official at the requiring agency with 
relevant technical expertise--is normally designated by the contracting 
officer to monitor the contractor's performance and serve as the 
liaison between the contracting officer and the contractor. 

[25] See GAO, Defense Contracting: Additional Personal Conflict of 
Interest Safeguards Needed for Certain DOD Contractor Employees, GAO-08-
169 (Washington, D.C.: Mar. 7, 2008). 

[26] In 1990, Congress enacted DAWIA to enhance the quality and 
professionalism of the defense acquisition workforce (Pub. L. No. 101- 
510). Most of DAWIA was codified in Title 10 of the United States Code, 
and it has been amended a few times since enactment. DAWIA requires the 
Secretary of Defense to establish the minimum qualification standards 
of those personnel performing functions integral to the acquisition 
process, formalizes career paths for personnel who wish to pursue 
careers in acquisition, and defines critical or senior management 
acquisition positions. See GAO, Defense Space Activities: Management 
Actions Are Needed to Better Identify, Track and Train Air Force Space 
Personnel, GAO-06-908 (Washington, D.C.: Sept. 21, 2006). The 
certification levels are based on an individual's education, 
experience, and training. National Defense Authorization Act for Fiscal 
Year 1991, Pub. L. No. 101-510 (1990). See also DOD Manual 5000.52M. 

[27] We recently reported on DOD's use of time-and-materials and labor- 
hour contracts. GAO, Defense Contracting: Improved Insight and Controls 
Needed over DOD's Time-and-Materials Contracts, GAO-07-273 (Washington, 
D.C.: June 29, 2007). 

[28] Contract specialists are available under GSA's Temporary 
Administrative and Professional Staffing Support Services Schedule, but 
these services are limited to a maximum of 240 work days. 

[29] Tarheel Specialties, Inc., B-298197, 298197.2, July 17, 2006, 2006 
CPD ï¿½ 140. 

[30] See, generally, FAR Subpart 6.3. 

[31] Although CCE has been procuring contract specialists from the GSA 
MOBIS schedule since 2003, it established the BPAs with four 
contractors in September 2006; the contract files contained no evidence 
of legal objections prior to 2006. 

[32] In American Systems Consulting, Inc., B-294644, December 13, 2004, 
2004 CPD ï¿½ 247, GAO determined that an award of a BPA based on a 
competition of GSA schedule contract vendors, using schedule program 
procedures, was improper because the awardee's quotation contained 
services not identified in its contract. We found the services offered 
to be outside of the contract's scope because the labor categories 
identified in the awardee's schedule contract as "most nearly equating" 
to the labor categories in the performance work statement did not match 
the positions as described in the performance work statement. 

[33] We and others have raised concerns about the use of interagency 
contracts, such as GSA schedule contracts, for the acquisition of 
services. For example, in April 2005, we reported on breakdowns in the 
issuance and administration of task orders, issued by the Department of 
the Interior under a GSA schedule information technology contract, for 
interrogation and other services in Iraq on behalf of DOD. These 
breakdowns included issuing task orders that were beyond the scope of 
underlying contracts, in violation of competition rules, and not 
properly justifying the decision to use interagency contracting. GAO, 
Interagency Contracting: Problems with DOD's and Interior's Orders to 
Support Military Operations, GAO-05-201 (Washington, D.C.: Apr. 29, 
2005). Also see GAO, Interagency Contracting: Improved Guidance, 
Planning, and Oversight Would Enable the Department of Homeland 
Security to Address Risks, GAO-06-996 (Washington, D.C.: Sept. 27, 
2006). We placed interagency contracting on our high-risk list in 
January 2005. 

[34] Office of Management and Budget Circular A-76 prescribes policies 
and procedures for use by agencies as they select service providers 
through competitions among public and private sector sources. 

[35] Memorandum from the Office of the Secretary of Defense, "Proper 
Use of Non-DOD Contracts," October 29, 2004. 

[36] The simplified acquisition threshold is $100,000, except for 
acquisitions of supplies or services that as determined by the head of 
the agency, are to be used to support a contingency operation or to 
facilitate defense against or recovery from nuclear, biological, 
chemical, or radiological attack. FAR 2.101. 

[37] LEADS Corporation, B-292465, September 26, 2003, 2003 CPD 197 at 
1. LEADS Corporation challenged the Defense Contracting Command- 
Washington's (now known as CCE) acceptance of CACI's organizational 
conflict-of-interest mitigation plan and the evaluation of proposals. 
GAO denied the protest. 

[38] Defense Acquisition University, Contracting Out Procurement 
Functions: An Analysis. DAU Research Report 06-001 (Fort Belvoir, Va.: 
Defense Acquisition University Press, November 2005). 

[39] Acquisition Advisory Panel, Report of the Acquisition Advisory 
Panel to the Office of Federal Procurement Policy and the United States 
Congress. 

[40] We included CCE's contributions to employee benefits. These are 
Thrift Savings Plan, Thrift Savings Plan Basic, Civil Service 
Retirement System, Federal Employees Retirement System, Social 
Security, Medicare, Federal Employee Health Benefits, and Federal 
Employee Group Life Insurance. 

[41] Office of Management and Budget Circular A-76, which establishes 
federal policy for the competition of commercial activities, states 
that staffing of federal civilian employee positions shall be expressed 
in terms of annual productive work hours (1,776) rather than annual 
available hours that include nonproductive hours (2,080 hours). For the 
purposes of this analysis, which analyzes the costs during one pay 
period rather than a full year, we are using an equivalent 68.3 
productive hours per pay period to determine the hourly rate. 

[End of section] 

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