Pension Benefit Guaranty Corporation: Some Steps Have Been Taken
to Improve Contracting, but a More Strategic Approach is Needed
(18-AUG-08, GAO-08-871).
The Pension Benefit Guaranty Corporation (PBGC) insures the
pensions of more than 44 million workers in over 30,000
employer-sponsored defined benefit pension plans. In response to
growing workloads, PBGC has come to rely heavily on contractors
to conduct its work. GAO was asked to report on (1) the role that
contracting plays in PBGC's efforts to accomplish its mission,
(2) the steps PBGC has taken to improve its acquisition
infrastructure and develop a strategic approach to guide its
contracting activities, and (3) the steps PBGC has taken to
improve its contract oversight processes to ensure
accountability. To address these issues, we interviewed PBGC
officials and selected contractors, reviewed data on PBGC's
contracting activities; identified changes PBGC is making to
contracting procedures; and identified strategies PBGC uses to
monitor contracts.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-871
ACCNO: A83604
TITLE: Pension Benefit Guaranty Corporation: Some Steps Have
Been Taken to Improve Contracting, but a More Strategic Approach
is Needed
DATE: 08/18/2008
SUBJECT: Agency missions
Contract administration
Contract oversight
Contract performance
Contract termination
Contractors
Contracts
Data collection
Data integrity
Employees
Human capital management
Human capital planning
Internal controls
Pensions
Performance measures
Policy evaluation
Procurement planning
Procurement regulations
Strategic planning
Performance-based contracting
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GAO-08-871
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
August 2008:
Pension Benefit Guaranty Corporation:
Some Steps Have Been Taken to Improve Contracting, but a More Strategic
Approach Is Needed:
GAO-08-871:
GAO Highlights:
Highlights of GAO-08-871, a report to congressional requesters.
Why GAO Did This Study:
The Pension Benefit Guaranty Corporation (PBGC) insures the pensions of
more than 44 million workers in over 30,000 employer-sponsored defined
benefit pension plans. In response to growing workloads, PBGC has come
to rely heavily on contractors to conduct its work. GAO was asked to
report on (1) the role that contracting plays in PBGC�s efforts to
accomplish its mission, (2) the steps PBGC has taken to improve its
acquisition infrastructure and develop a strategic approach to guide
its contracting activities, and (3) the steps PBGC has taken to improve
its contract oversight processes to ensure accountability.
To address these issues, we interviewed PBGC officials and selected
contractors, reviewed data on PBGC�s contracting activities; identified
changes PBGC is making to contracting procedures; and identified
strategies PBGC uses to monitor contracts.
What GAO Found:
Contracting plays a central role in helping PBGC achieve its mission
and address unpredictable workloads. Since the mid-1980s, PBGC has had
contracts covering a wide range of services, including the
administration of terminated plans, payment of benefits, customer
communication, legal assistance, document management, and information
technology. PBGC�s workforce currently consists of about 800 federal
employees and utilizes the services of about 1,500 contract employees.
From fiscal year 2000 through 2007, PBGC�s contract spending increased
steadily along with its overall budget and workload, and its use of
contract employees has outpaced its hiring of federal employees. As its
workloads have grown due to a significant number of large pension plan
terminations, PBGC has relied on contractors to supplement its
workforce, acknowledging that it has difficulty anticipating its
workloads due to unpredictable economic conditions.
PBGC is taking steps to improve its acquisition infrastructure, but the
Procurement Department is not yet part of PBGC�s strategic decision-
making process. In 2007, PBGC began to take steps to realign its
Procurement Department, update contracting policies and processes,
upgrade the skills of Procurement Department staff, and better track
contracting data. PBGC�s efforts begin to provide an improved
foundation for the contracting function; however, these efforts are
early steps and more remains to be done. PBGC has not fully integrated
its contracting function at the corporate level; the Procurement
Department is not included in corporate-level strategic planning and
does not have a presence on PBGC�s relevant strategic teams.
PBGC has made improvements to contractor oversight and has begun to
implement performance-based contracting that offers the potential for
better contract outcomes, but also creates new challenges for contract
oversight and monitoring efforts. PBGC has implemented new contract
monitoring activities, improved oversight activities for some of its
major contracts, and developed comprehensive procedures to direct
contracting activities. For its field benefit administration office
contracts, PBGC developed performance measures and scorecards,
providing feedback about contractor performance in terms of timeliness
and accuracy of benefit payments. Despite these improvements, most of
PBGC�s current contracts still lack performance incentives and methods
to hold contractors accountable. PBGC recently began awarding more
performance-based contracts, as a means to achieve better outcomes.
Although performance-based contracting is recognized as a viable way
toward getting better results from contractors, GAO and others have
identified common challenges agencies face when implementing this
approach�from deciding which contracts are appropriate for a
performance-based approach to deciding which outcomes to measure and
emphasize. PBGC procurement officials recognize the benefits and
challenges of performance-based contracting, and that they must provide
additional oversight of contracts and a different approach to contract
monitoring that focuses on outcomes rather than processes.
What GAO Recommends:
GAO recommends that PBGC revise its strategic plan to reflect the
importance of contracting and to project its vision of future
contractor use; and include the Procurement Department in agency-wide
strategic planning. In response, PBGC agreed with most of our
recommendations, but disagreed with incorporating more detail in its
strategic planning documents, as it believes its recently issued
strategic plan is sufficiently comprehensive. However, PBGC�s plan
mentions contracting only briefly and does not reflect the important
role contracting plays in achieving its mission.
To view the full product, including the scope and methodology, click on
GAO-08-871. For more information, contact Barbara Bovbjerg at 202-512-
7215 or [email protected].
[End of section]
Contents:
Letter:
Results in Brief:
Background:
PBGC Relies on Contractors to Address Unpredictable Workloads:
PBGC Is Taking Steps to Improve Its Acquisition Infrastructure but Has
Not Yet Developed a Strategic Approach to Contracting:
PBGC Has Made Improvements to Contractor Oversight, but Implementation
of Performance-Based Contracting May Present Challenges:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Pension Benefit Guaranty Corporation:
Appendix III: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Figures:
Figure 1: Overview of Plan Processing at PBGC:
Figure 2: Cumulative Number of Pension Plans Administered by PBGC,
Fiscal Years 2000-2007:
Figure 3: Cumulative Number of Participants in Pension Plans
Administered by PBGC, Fiscal Years 2000-2007:
Figure 4: Total PBGC Contract Spending and Budget, Fiscal Years 2000-
2007:
Figure 5: Number of Federal Employees and Contractor Employees at PBGC,
Fiscal Years 2000-2007:
Figure 6: PBGC Organization Chart with the Number of Contract Employees
and PBGC Federal Employees:
Figure 7: Number of PBGC Pending Benefit Determinations, Fiscal Years
2000-2007:
Abbreviations:
BAPD: Benefits Administration and Payment Department:
COTR: contracting officers' technical representative:
ERISA: Employee Retirement Income Security Act of 1974:
FTE: full-time equivalent:
MCU: Management Coordination Unit:
NAPA: National Academy of Public Administration:
OIG: Office of the Inspector General:
OFPP: Office of Federal Procurement Policy:
OMB: Office of Management and Budget:
PBGC: Pension Benefit Guaranty Corporation:
PPA: Pension Protection Act of 2006:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
August 18, 2008:
The Honorable Max Baucus:
Chairman:
The Honorable Charles E. Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
The Honorable Edward M. Kennedy:
Chairman:
The Honorable Michael B. Enzi:
Ranking Member:
Committee on Health, Education, Labor and Pensions:
United States Senate:
The Pension Benefit Guaranty Corporation (PBGC) insures pensions for
more than 44 million workers in over 30,000 employer-sponsored defined
benefit plans--private sector pension plans where an employer
guarantees a benefit. PBGC's primary responsibility is to collect
premiums from the sponsors of the pension plans and provide timely and
uninterrupted benefit payments when terminations or bankruptcies occur.
In the event of a distressed plan termination, PBGC assumes control of
plan assets, calculates benefit amounts, and pays recipients a
guaranteed benefit. In fiscal year 2007, roughly 611,000 beneficiaries
received over $4.1 billion in benefit payments. In response to growing
workloads, PBGC has come to rely heavily on contractors to conduct its
work. PBGC's current workforce is made up of roughly two-thirds
contractor employees and one-third federal employees.
In July 2003, GAO designated PBGC's single-employer pension insurance
program--its largest insurance program--as "high risk," including it on
GAO's list of major programs that need urgent attention and
transformation; the program remains on the list today.[Footnote 1] To
strengthen pension plan funding, Congress passed the Pension Protection
Act of 2006 (PPA). However, PBGC still showed an accumulated deficit of
$14 billion for its single-employer program as of September 2007.
Because of PBGC's reliance on contracts to carry out its mission, its
acquisition infrastructure--the framework an agency must have in place
to manage its contracting activities--will in part determine whether
the agency succeeds in its mission. Previous GAO work identified
challenges facing PBGC's contracting activities, which included PBGC's
limited efforts to link contracting and staffing decisions to longer-
term strategic planning, placing PBGC at risk for being unprepared for
future workload changes.[Footnote 2] GAO also identified weaknesses in
PBGC's contract oversight activities and in its contracting processes,
resulting in limited competition and an over-reliance on contracts that
carry more cost and quality assurance risks. These findings have been
echoed in recent studies by PBGC's Inspector General. To ensure that
PBGC is well positioned to manage its workload, we were asked to review
PBGC's contracting function to follow-up on our earlier contracting
work. Specifically, this report assesses (1) the role that contracting
plays in PBGC's efforts to accomplish its mission, (2) the steps PBGC
has taken to improve its acquisition infrastructure and develop a
strategic approach to guide its contracting activities, and (3) the
steps PBGC has taken to improve its contract oversight processes to
ensure accountability.
To assess the role contracting plays in PBGC's efforts to accomplish
its mission, we collected and analyzed data on PBGC contracting
activities, as well as on participants, plans, employees, and budget
trends. To assess the steps PBGC has taken to improve its acquisition
infrastructure and develop a strategic approach to guide its
contracting activities, we evaluated PBGC's acquisition infrastructure
in four key areas--organizational alignment and leadership, policies
and procedures, human capital, and information management. We
identified changes PBGC is making to its contracting procedures and to
specific contracts, and reviewed progress made on these initiatives. To
assess the steps PBGC has taken to improve its contract oversight
processes, we identified the strategies PBGC uses to monitor its
contracts. We reviewed documentation and spoke to officials responsible
for monitoring customer satisfaction and the accuracy of benefit
payments, and actions taken in response to the results of these
monitoring efforts. We also reviewed a small, random sample of contract
oversight files. In addition, we interviewed PBGC senior executives,
managers, and programming and contracting staff at headquarters, as
well as selected contractors. We also interviewed officials from PBGC's
Office of Inspector General and reviewed relevant Inspector General
reports.
We conducted our work between May 2007 and August 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 the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives. Appendix I discusses our scope and
methodology in further detail.
Results in Brief:
Contracting plays a central role in helping PBGC achieve its mission
and address unpredictable workloads. Since the mid-1980s, PBGC has had
contracts covering a wide range of services, including the
administration of terminated plans, payment of benefits, customer
communication, legal assistance, document management, and information
technology. PBGC's workforce currently consists of about 800 federal
employees and utilizes the services of about 1,500 contract employees.
From fiscal year 2000 through 2007, PBGC's contract spending increased
steadily along with its overall budget and workload, and its use of
contract employees has outpaced its hiring of federal employees. As its
workloads have grown due to a significant number of large pension plan
terminations, PBGC has relied on contractors to supplement its
workforce, acknowledging that it has difficulty anticipating workloads
due to unpredictable economic conditions.
PBGC is taking steps to improve its acquisition infrastructure, but its
Procurement Department is not yet part of PBGC's strategic decision-
making process. In 2007, PBGC began to take steps to realign its
Procurement Department, update contracting policies and processes,
upgrade the skills of Procurement Department staff, and better track
contracting data. In 2000, we recommended that PBGC develop a strategic
approach to contracting by conducting a comprehensive review of PBGC's
future human capital needs and using this review to better link
contracting decisions to PBGC's long-term strategic planning process.
PBGC took some initial steps to implement our recommendation, and has
recently renewed its efforts and drafted a strategic human capital plan
which calls for hiring a human resource specialist to coordinate and
complete the planning process initiated in 2001. PBGC's efforts begin
to provide an improved foundation for the contracting function;
however, these efforts are early steps and more remains to be done.
PBGC has not fully integrated its contracting function at the corporate
level. For example, the Procurement Department is not included in
corporate-level strategic planning and does not have a presence on
PBGC's relevant strategic teams--the Operations Integration Board, the
Budget and Planning Integration Team, and the Capital Planning for
Information Technology Team.
PBGC has made improvements to contractor oversight since our last
report and has begun to implement performance-based contracting, which
offers the potential for better contract outcomes but also creates new
challenges for contract oversight and monitoring efforts. In response
to concerns about contract oversight raised by us and PBGC's Inspector
General, PBGC has implemented new contract monitoring activities,
improved oversight activities for some of its major contracts, and
developed comprehensive procedures to direct contracting activities.
For its field benefit administration office contracts, PBGC developed
performance measures and scorecards, providing feedback about
contractor performance in terms of timeliness and accuracy of benefit
payments. The Procurement Department also implemented refresher
training requirements for contracting officers' technical
representatives (COTR),[Footnote 3] who are responsible for much of the
direct contract oversight. Despite these improvements, most of PBGC's
current contracts still lack performance incentives and methods to hold
contractors accountable. PBGC recently began awarding more performance-
based contracts, which can achieve better contract outcomes. Although
performance-based contracting is recognized as a viable way to get
better results from contractors, GAO and others have identified common
challenges agencies face when implementing this approach--from deciding
which contracts are appropriate for a performance-based approach to
deciding which outcomes to measure and emphasize. PBGC procurement
officials recognize the benefits and challenges of performance-based
contracting and that they must provide additional oversight of
contracts and a different approach to contract monitoring that focuses
on outcomes rather than processes.
To improve performance in an environment of heavy contract use, we are
making several recommendations to PBGC. These include revising its
strategic planning documents to reflect the importance of contracting
and PBGC's use of contractors, projecting its vision of future
contractor use, better linking staffing and contracting decisions at
the corporate level, and including the Procurement Department in agency-
wide strategic planning. We also are making several recommendations to
PBGC that are intended to improve its contract management as it
implements a performance-based approach to contracting.
In response to our draft report, PBGC's Director stated PBGC's
commitment to managing its contracting activities to obtain the best
value for the 44 million beneficiaries of its insurance program. PBGC
agreed with most of our recommendations and mentioned various ways it
planned to address them. For example, PBGC stated that it understood
that other government agencies have faced challenges in implementing
performance-based contracting and plans to take steps to avoid common
pitfalls. While PBGC agreed that contracting should be part of its
strategic planning process, it disagreed with our recommendation to
reflect the importance of contracting and incorporate its vision for
future contractor use in its strategic planning documents, as it
believes its recently issued strategic plan is sufficiently
comprehensive. However, PBGC's strategic plan only briefly mentions
performance-based contracting, flexible staffing and metrics for
specific contracts, and therefore we believe that it does not reflect
the important role contracting is playing in achieving PBGC's mission.
In addition, PBGC disagreed with our recommendation that its Director
of Procurement should sit on certain specific corporate committees.
Because PBGC relies to such a great extent on contracting, we believe
that it is essential that an individual well-versed in procurement
operations be more integrated into PBGC's planning for the future.
PBGC's comments are reproduced in appendix II.
Background:
Overview of PBGC:
The Employee Retirement Income Security Act of 1974 (ERISA) created
PBGC as a self-financing, nonprofit, wholly owned government
corporation.[Footnote 4] PBGC protects participants in private pension
plans from losing guaranteed benefits due to the termination of
underfunded plans. PBGC's primary responsibilities are to collect
premiums from the sponsors of defined benefit plans to insure against
default and to assume administration of underfunded plans that
terminate. In the event of a plan default, PBGC assumes control of plan
assets (including amounts due and payable from the plan sponsor);
calculates benefit amounts due to plan participants, commonly
communicated in "benefit determination letters;" and pays recipients as
benefits are due.
Generally, pension plans under PBGC's administration, in which final
benefit determination letters have not yet been issued, are considered
estimated plans. PBGC pays benefits in estimated amounts until final
determinations are made, routinely taking several years to complete all
benefit determinations for plans that terminate. When all letters are
issued and participant appeal periods have expired, plans are then
closed and moved to ongoing administration where they generally require
limited maintenance to reflect participants' marital changes, address
changes, deaths, and other events.[Footnote 5] Figure 1 provides an
overview of the steps involved in processing a terminated pension plan.
Figure 1: Overview of Plan Processing at PBGC:
[See PDF for image]
This figure is an illustration of an overview of Plan Processing at
PBGC, as follows:
Pretermination:
* Monitor underfunded plans;
* Work with plans that face distress terminations.
Initial Trusteeship (Termination):
* Develop and obtain agreement on plan trusteeship[A];
* Notify retirees and request information;
* Ensure that retirees receive benefit payments.
Audit:
* Determine and gather needed plan documents;
* Identify best available source for participant data;
* Define plan population; build and audit participant database;
* Audit plan assets;
* Determine employer liability.
Benefit Valuation:
* Calculate individual benefits;
* Determine PBGC�s overall benefit liability.
Notification:
* Determine if benefit being paid is correct;
* Notify participants of the benefit amount;
* Process participants� appeals.
Postvaluation Administration (Ongoing):
* Process address changes;
* Process death notices;
* Calculate benefit at participant�s actual retirement;
* Place participants in pay status at retirement;
* Respond to participants� requests regarding their benefits.
Source: PBGC.
[A] Trusteeship is the process by which PBGC assumes continuing
responsibility for a pension plan that terminates.
[End of figure]
Over the years, PBGC's workloads have grown significantly. In fiscal
year 1975, the first year after the passage of ERISA, PBGC administered
three pension plans with a total of 400 participants. By fiscal year
2007, PBGC administered almost 3,800 pension plans with over 1.3
million participants. Figures 2 and 3 show the number of pension plans
and participants administered by PBGC since fiscal year 2000--the last
time GAO issued a report on this subject. Between fiscal years 2002 and
2005, PBGC experienced a large number of claims that contributed to its
workload growth.
Figure 2: Cumulative Number of Pension Plans Administered by PBGC,
Fiscal Years 2000-2007:
[See PDF for image]
This figure is a vertical bar graph depicting the following data:
Fiscal year: 2000;
Number of plans: 2,874.
Fiscal year: 2001
Number of plans: 2,976.
Fiscal year: 2002;
Number of plans: 3,132.
Fiscal year: 2003;
Number of plans: 3,287.
Fiscal year: 2004;
Number of plans: 3,479.
Fiscal year: 2005;
Number of plans: 3,585.
Fiscal year: 2006;
Number of plans: 3,683.
Fiscal year: 2007;
Number of plans: 3,793.
Source: PBGC.
[End of figure]
Figure 3: Cumulative Number of Participants in Pension Plans
Administered by PBGC, Fiscal Years 2000-2007:
[See PDF for image]
This figure is a vertical bar graph depicting the following data:
Fiscal year: 2000;
Number of participants: 541,000.
Fiscal year: 2001
Number of participants: 624,000.
Fiscal year: 2002;
Number of participants: 783,000.
Fiscal year: 2003;
Number of participants: 934,000.
Fiscal year: 2004;
Number of participants: 1,061,000.
Fiscal year: 2005;
Number of participants: 1,296,000.
Fiscal year: 2006;
Number of participants: 1,271,000.
Fiscal year: 2007;
Number of participants: 1,305,000.
Source: PBGC.
[End of figure]
Previous Assessments of PBGC Contracting:
In September 2000, we identified a variety of challenges facing PBGC's
contracting activities.[Footnote 6] Faced with a significant influx of
large pension plan failures beginning in the mid-1980s, PBGC chose to
contract for services rather than seek additional federal employees
during a period of government downsizing. Over time, PBGC continued
contracting for services to address backlogs, but was focused on
obtaining necessary services quickly. As a result, we found that PBGC
did not adequately link decisions to contract for services to longer-
term strategic planning considerations. We recommended that PBGC
develop a strategic approach to contracting by conducting a
comprehensive review of PBGC's future human capital needs and using
this review to better link contracting decisions to PBGC's long-term
strategic planning process. In response to our recommendation, PBGC
commissioned a study by the National Academy of Public Administration
(NAPA). NAPA provided a six-step model for PBGC to follow for its
strategic human capital planning. Upon completion of this study, PBGC
convened a workforce planning team that initiated some of the steps
NAPA suggested.
Our work also identified weaknesses in PBGC's contract planning and
execution processes, which may have led to overuse of labor-hour
contracts rather than fixed-price contracts and also to limited
competition. PBGC's contractor oversight activities also exhibited
weaknesses, including a lack of data essential for monitoring
performance, quality assurance review processes and policies, and
procedural guidance. Finally, we identified a potential lack of
independence on the part of the office that was responsible for
auditing and reviewing PBGC contracting activities. Many of these
findings have been echoed more recently by PBGC's Inspector General.
PBGC's Inspector General issued a report on contracting trends in July
2007.[Footnote 7] The Inspector General noted that the three major
areas cited most often as needing improvements were questioned costs
(unsupported and or unauthorized costs that contractors billed to
PBGC); lack of documented contracting policies, procedures, and
directives; and inadequate contractor oversight. The leading causes for
questioned costs were that contractors: (1) did not maintain adequate
documentation to justify the costs they billed PBGC and (2)
subcontracted with employees who did not have the qualifications
required under the contract. Inspector General reports also noted that
PBGC has no comprehensive contracting directives or policy guidance
available to aid contracting officials and contractors to carry out
their respective duties. The reports also identified significant
contracting problems and control vulnerabilities, often stemming from a
lack of adequate monitoring of contractor performance. Appendix II
includes a list of related GAO and PBGC Inspector General Reports.
Acquisition Framework:
In response to federal agencies' increasing reliance on contractors to
perform their missions and the systemic weaknesses identified in key
areas of contracting by GAO, inspectors general, and other
accountability organizations, in 2005, we published a Framework for
Assessing the Acquisition Function at Federal Agencies.[Footnote 8] The
framework enables high-level, qualitative assessments of the strengths
and weaknesses of the contracting function.
The framework consists of four interrelated cornerstones that our work
has shown are essential to an efficient, effective, and accountable
contracting process.
* Organizational alignment and leadership. Organizational alignment
assures the appropriate placement of the contracting function in the
agency, with stakeholders having clearly defined roles and
responsibilities. Key elements and critical success factors include
aligning contracting with the agency's mission and needs and organizing
the contracting function to operate strategically. Committed leadership
enables officials to make strategic decisions that achieve agency-wide
contracting outcomes more effectively and efficiently. In fact, the
Services Acquisition Reform Act of 2003 requires that certain civilian
executive agencies designate a Chief Acquisition Officer that has
management of acquisition as their primary duty.[Footnote 9] An
executive in this position would address acquisition workforce needs
and strategies as part of strategic planning and performance results
processes.
* Policies and processes. Implementing strategic decisions to achieve
desired agency-wide outcomes requires clear and transparent policies
and processes that are implemented consistently. Policies establish
expectations about the management of the contracting function.
Processes are the means by which management functions will be performed
and implemented. Effective policies and processes govern the planning,
award, administration, and oversight of contracting efforts.
* Human capital. Successfully acquiring goods and services, and
executing and monitoring contracts requires valuing and investing in
the contracting workforce. Agencies must think strategically about
attracting, developing, and retaining talent, and creating a results-
oriented culture within the contracting workforce.
* Knowledge and information management. Effective knowledge and
information management provides credible, reliable, and timely data to
make contracting decisions. Stakeholders in the contracting process-
-Procurement Department and program staff who decide which goods or
services to buy; project managers who receive the goods and services;
managers who maintain supplier relationships; contract administrators
who oversee compliance with the contract; and the finance department
that pays for the goods and services--need meaningful data to perform
their respective roles and responsibilities.
PBGC Relies on Contractors to Address Unpredictable Workloads:
Contracting plays a central role in helping PBGC achieve its mission
and address unpredictable workloads. PBGC's contracts cover a wide
range of services, including the administration of terminated plans,
payment of benefits, customer communication, legal assistance, document
management, and information technology. Its contract spending has
increased steadily along with overall budget and workload, and use of
contracted staff has outpaced its hiring of federal employees. PBGC has
relied on contractors to supplement its workforce since the mid-1980s
as its workloads have grown due to a significant number of pension plan
terminations. PBGC acknowledges that it has difficulty anticipating its
workloads due to unpredictable economic conditions and relies on
contractors to expand or reduce its workforce as necessary.
PBGC's Contract Spending Has Increased along with Overall Budget, and
Growth in Contract Employees Has Outpaced PBGC Employees:
To address the increase in the overall number of pension plans and
participants, PBGC's budget increased steadily over the last 8 years,
from $165 million in fiscal year 2000 to $398 million in fiscal year
2007. Similarly, PBGC's contract spending increased from $122 million
in fiscal year 2000 to $297 million in fiscal year 2007, as shown in
figure 4. Contracting represented 71 percent of PBGC's appropriated
budget during this period. Across the federal government, contract
spending has more than doubled since fiscal year 2000, going from about
$208.8 billion to $430 billion. The Departments of Defense and Homeland
Security account for the majority of the increase, while other agencies
vary in their budget changes. In previous work on contract spending at
various agencies, we found that overall, about a quarter of agencies'
discretionary spending was through contracts.[Footnote 10] Therefore,
PBGC's contract spending as a percentage of its discretionary budget is
relatively high, although most federal agencies have increased their
contract spending in recent years.
Figure 4: Total PBGC Contract Spending and Budget, Fiscal Years 2000-
2007:
[See PDF for image]
This figure is a multiple vertical bar graph depicting the following
data:
Fiscal year: 2000;
Contract spending: $122 million;
Total PBGC appropriation: $165 million.
Fiscal year: 2001;
Contract spending: $134 million;
Total PBGC appropriation: $191 million.
Fiscal year: 2002;
Contract spending: $153 million;
Total PBGC appropriation: $227 million.
Fiscal year: 2003;
Contract spending: $194 million;
Total PBGC appropriation: $271 million.
Fiscal year: 2004;
Contract spending: $202 million;
Total PBGC appropriation: $294 million.
Fiscal year: 2005;
Contract spending: $249 million;
Total PBGC appropriation: $351 million.
Fiscal year: 2006;
Contract spending: $276 million;
Total PBGC appropriation: $386 million.
Fiscal year: 2007;
Contract spending: $297 million;
Total PBGC appropriation: $398 million.
Source: PBGC.
[End of figure]
The number of PBGC's contract employees has grown significantly more
than PBGC employees. As figure 5 shows, PBGC had 791 contract employees
in fiscal year 2000. By fiscal year 2007, there were over 1,500
contract employees. Conversely, PBGC's federal employees increased
modestly from 763 in fiscal year 2000 to 811 in fiscal year 2007. The
largest increases in contractor employees correspond to the failure of
several large plans, resulting in workload increases that occurred from
fiscal year 2002 through fiscal year 2005. The number of contract
employees peaked in fiscal year 2006 at 1,768, and has since fallen to
1,502 in fiscal year 2007, as PBGC is completing the work associated
with terminating these large plans.
Figure 5: Number of Federal Employees and Contractor Employees at PBGC,
Fiscal Years 2000-2007:
[See PDF for image]
This figure is a multiple vertical bar graph depicting the following
data:
Fiscal year: 2000;
Federal employees: 763;
Contractor employees: 791.
Fiscal year: 2001;
Federal employees: 775;
Contractor employees: 919.
Fiscal year: 2002;
Federal employees: 773;
Contractor employees: 1,248
Fiscal year: 2003;
Federal employees: 754;
Contractor employees: 1,342.
Fiscal year: 2004;
Federal employees: 776;
Contractor employees: 1,331.
Fiscal year: 2005;
Federal employees: 784;
Contractor employees: 1,639.
Fiscal year: 2006;
Federal employees: 822;
Contractor employees: 1,768.
Fiscal year: 2007;
Federal employees: 811;
Contractor employees: 1,502.
Source: PBGC.
Note: PBGC data show the number of federal employees as of September 30
of each fiscal year. Historical PBGC data on contractor employees show
the number reported on different dates in each fiscal year.
[End of figure]
PBGC Contracts for a Wide Range of Services:
PBGC contracts for a wide range of services including:
* operating its 10 field benefit administration offices throughout the
country--field benefit administration office contract employees perform
the majority of benefits estimation and plan administration processing;
* managing PBGC's $68 billion of assets;
* paying benefits to participants;
* developing, overseeing, and managing new systems and information
technology projects in support of program operations; and:
* handling of customer inquiries through its customer call center.
PBGC also has certain functions, such as audit and actuarial functions,
where contract employees work side by side with federal employees and
supplement their efforts. PBGC also contracts for specialized services
that may not be needed on a routine basis. For example, while PBGC has
in-house attorneys who handle the majority of PBGC's litigation and
negotiations, occasionally there are cases where it is necessary for
PBGC to retain outside counsel. According to PBGC officials, hiring
lawyers with special expertise on a full-time basis, rather than as
needed, would be cost prohibitive. When PBGC needs outside legal
services, it solicits proposals from these firms for the needed
services. According to PBGC officials, this arrangement makes it
possible for PBGC to secure necessary legal services quickly and
efficiently.
PBGC Relies on Contractors to Address Unpredictable Workloads:
To carry out its operations, PBGC has relied on contractors to address
its unpredictable workload, which is driven largely by pension plan
terminations. In 2001, PBGC convened a workforce planning team to
analyze its future service demands. The team recognized that
fluctuations in the economy, or business cycle, could result in
significant fluctuations in PBGC workloads. For example, PBGC typically
sees an increase in terminations 1 to 2 years after a decline in the
economy. The team noted that PBGC must remain flexible to rapidly
expand or reduce its processing capacity to meet changing workloads,
but cautioned that it was important to keep the highest level of
expertise in-house. Figure 6 shows the number of contract employees and
federal employees at PBGC, by office.
Figure 6: PBGC Organization Chart with the Number of Contract Employees
and PBGC Federal Employees:
[See PDF for image]
This figure is an illustration of the PBGC Organization Chart, as
follows:
Board of Directors;
Office of the Inspector General (24 contractors, 21 FTEs);
Director (0 contractors, 2 FTEs):
* Advisory Committee;
* Office of Equal Opportunity (0 contractors, 3 FTEs);
Deputy Director, Office of Policy and External Affairs (14 contractors,
38 FTEs):
- Communications and Public Affairs Department;
- Legislative and Regulatory Department;
- Policy, Research and Analysis Department;
Under the Director:
* Chief Operating Officer (933 contractors, 273 FTEs);
- Benefits Administration and Payment Department;
- Actuarial Services Division;
- Operations and Actuarial Systems Division;
- Retirement Services Division;
- Trusteeship Processing Division;
- Problem Resolution Office.
* Chief Insurance Officer (18 contractors, 151 FTEs);
- Department of Insurance Supervision and Compliance;
- Office of Chief Counsel;
-Multi-employer Program Division;
- Standard Termination and Compliance Division.
* Chief Financial Officer (65 contractors, 108 FTEs);
- Contracts and Control Review Department;
- Financial Operations Department.
* Chief Management Officer (34 contractors, 71 FTEs);
- Budget Department;
- Facilities and Services Department;
- Human Resources Department;
- Procurement Department;
- Strategic Planning and Evaluation Department.
* General Counsel (24 contractors, 55 FTEs);
- Appeals Division;
- Disclosure Division;
- Legal Division.
* Chief Information Officer (390 contractors, 84 FTEs);
- Office of Information Technology.
Total contractor employees: 1,502.
Total full-time equivalent (FTE) federal employees: 806.
Source: PBGC.
Note: PBGC data on the number of full-time equivalent (FTE) PBGC
federal employees and contract employees are broken out by component as
of June 2007. These numbers vary somewhat throughout the year and
differ slightly from the number at the end of the fiscal year because
of timeframes reported.
[End of figure]
Although PBGC is currently experiencing a decline in new terminated
plan workloads, the case processing cycle takes an average of 3 years
or more. In determining the need for contract employees, PBGC considers
both the incoming workload and the workload currently in process. A
PBGC official noted that in order to balance the current benefit
determination workload and the anticipated decline in the incoming
workload, PBGC is allowing field benefit administration office staff
increases only when there is a clear demonstration of need. See figure
7 for recent trends in pending benefit determinations.
Figure 7: Number of PBGC Pending Benefit Determinations, Fiscal Years
2000-2007:
[See PDF for image]
This figure is a vertical bar graph depicting the following data:
Fiscal year: 2000;
Number of pending benefit determinations: 168,886.
Fiscal year: 2001;
Number of pending benefit determinations: 183,292.
Fiscal year: 2002;
Number of pending benefit determinations: 280,963.
Fiscal year: 2003;
Number of pending benefit determinations: 386,695.
Fiscal year: 2004;
Number of pending benefit determinations: 391,413.
Fiscal year: 2005;
Number of pending benefit determinations: 481,243.
Fiscal year: 2006;
Number of pending benefit determinations: 374,065.
Fiscal year: 2007;
Number of pending benefit determinations: 356,022.
Source: PBGC.
Note: Pending benefit determinations are shown as of the end of the
fiscal year.
[End of figure]
According to a PBGC official, PBGC doesn't foresee large plan
terminations and bankruptcies coming in 2008 or 2009, but there are a
few plans it is monitoring that could have significant impact on PBGC.
Thus, PBGC is in the delicate position of beginning to decrease
contract resources while still remaining prepared for possible workload
increases in a time of uncertain financial conditions.
PBGC Is Taking Steps to Improve Its Acquisition Infrastructure but Has
Not Yet Developed a Strategic Approach to Contracting:
In 2007, PBGC began to realign its Procurement Department, update
contracting policies and processes, upgrade the skills of Procurement
Department staff, and better track contracting data. While these
efforts provide an improved foundation for the contracting function,
they are early steps and a strategic approach to contracting has not
yet been developed.
PBGC Is Taking Steps to Improve Its Acquisition Infrastructure:
PBGC's heavy reliance on contract support requires an adequate
acquisition infrastructure to ensure an efficient, effective, and
accountable contracting function. An agency's acquisition function
stands on four interrelated cornerstones--organizational alignment and
leadership, policies and processes, human capital, and knowledge and
information management.[Footnote 11] In 2007, PBGC hired a new
procurement director who has taken steps to improve the acquisition
infrastructure in the four cornerstone areas; however, the acquisition
function's infrastructure is still inadequate in some areas.
Organizational Alignment and Leadership:
The appropriate placement of the acquisition function within an agency
can facilitate efficient and effective management of acquisition
activities. In our work on best practices, we learned that leading
companies elevated or expanded the role of the company's acquisition
organization--typically assigning it greater responsibility and
authority for strategic planning, management, and oversight of the
company's services spending. These changes transformed the role of the
purchasing unit from one focused on mission support to one that was
strategically important to the company's bottomline.[Footnote 12]
Further, recent legislation recognized the importance of placing the
acquisition function at an appropriate level and mandates that most
executive departments appoint a chief acquisition officer.[Footnote 13]
PBGC's Procurement Department does not play a strategic role within the
corporation and does not have an active role in the strategic decision-
making process, becoming involved only once a requisition is submitted
to the department. For example, the procurement director is not part of
the following three teams that focus on initiatives that support the
corporation's strategic plan.
* The Operations Integration Board, whose members include the entire
Executive Management Committee, provides a forum for the senior
leadership to commission and review corporate-wide programs, projects,
and internal policies. Significant projects that cross organizational
lines and require multiorganizational resources are presented to the
board for approval.
* The Budget and Planning Integration Team is responsible for approving
corporate-wide resource allocations and aligning resources to PBGC's
strategic objectives. This team also makes recommendations on large
funding requests that are subject to approval by the Operations
Integration Board.
* The Capital Planning for Information Technology Team reviews
information technology investments to assure the alignment of
information technology capital investments with the corporate strategic
plan and to monitor and control the execution of those investments. The
team provides recommendations to the Operations Integration Board and
the Budget and Planning Integration Team as the recommendations affect
operations or budget.
As a result, the Procurement Department has no input into the decision
to acquire goods or services through contracting; it is responsible for
implementing the policy decisions made by the executive management team
but has no voice in making these decisions. The Procurement
Department's involvement on such boards could improve strategic
planning by enabling PBGC to identify and manage relationships among
the parties involved in the acquisition process; analyze aggregate
agency needs and devise strategic acquisition plans; and take into
consideration the effects of external factors, such as the
appropriations process, on the timing and execution of major contracts.
Further, while PBGC has recently published its strategic plan and begun
developing a strategic human capital plan, the agency has not actively
involved the Procurement Department in the process. The Procurement
Department's lack of involvement in strategic decision making is an
indicator that it may be unable to identify, analyze, prioritize, and
coordinate agency-wide acquisition needs.
Policies and Processes:
Policies and processes govern the way an agency performs the
acquisition function. The acquisition function does not end with the
award of contracts, but continues through contract implementation and
closeout. Acquisition policies and processes should clearly define the
roles and responsibilities of all involved in the acquisition process
and need to be communicated clearly to all involved. In addition,
implementing strategic acquisition decisions to achieve agency-wide
outcomes requires clear, transparent, and consistent policies and
processes that govern the planning, award, administration, and
oversight of acquisitions.
PBGC updated its contracting policies and procedures in 2008. In the
past year, with the support of executive management, the Procurement
Department updated and issued two procurement directives that spell out
roles and responsibilities of all individuals involved in the
acquisition process and outline procurement and obligation procedures.
The Procurement Department issued policies requiring high-level
approval for certain types of transactions, such as issuing labor-hour-
type contracts and making modifications to contracts. The Procurement
Department has recently completed a comprehensive procurement manual
that outlines standard operating procedures and provides examples to
illustrate guidance. The General Counsel's Office has provided guidance
on when the legal review of acquisitions is required, and works closely
with the Procurement Department in performing legal reviews and
providing legal advice. However, it is still too early to tell what the
effect of the new policies will be. The success of any set of policies
will depend on adequate communication across the agency; internal
controls to ensure they are implemented; and clear, strong, guidance
from leadership on the importance of adhering to the new policies.
Human Capital:
A strategic human capital management approach enables an agency to
recruit, develop, and retain the right number of personnel with the
right skills to accomplish its mission effectively. Senior managers
should devote adequate resources to recruiting, hiring, developing,
rewarding, and retaining talented personnel. This is true for all
functions within an agency and is crucial for specialized functions,
such as acquisition. Succession planning also is needed to ensure that
the workforce is composed of the right number of personnel with the
necessary skills and qualifications to perform the acquisition function
into the future.
PBGC has begun to focus on developing the knowledge and skills of its
Procurement Department staff. Having the right people with the right
skills is key to making a successful transformation toward an effective
acquisition environment. Over the last decade, the emergence of several
procurement trends, including a government-wide rise in services
contracting, has created a need for an acquisition workforce with a
much greater knowledge of market conditions, industry trends, and the
technical details of the commodities and services they procure. The
Procurement Department has developed new training and certification
requirements and invested in upgrading the skills of the acquisition
workforce, by providing training to help contract specialists obtain
certification. According to PBGC, while only 2 of 12 staff in the
contract specialist series were certified in contracting as of February
2007, by January 2008, 9 of the 12 staff had been certified. The
Procurement Department also is working to enhance training and
certification requirements for COTRs working throughout PBGC.
While PBGC's contract spending has more than doubled since 2001, the
number of staff in the Procurement Department has risen only by two FTE
employees from 2001 to 2007. PBGC Procurement Department officials are
concerned that their staff of nine certified contract specialists is
not adequate to support the mission. In May 2007, the Procurement
Department studied four comparable agencies to determine appropriate
staffing levels for PBGC's Procurement Department. This study compared
PBGC's contracting staff size, number of annual transactions, and value
of annual transactions to those of the other four agencies. Although
PBGC had 88 percent more transactions on average and 40 percent more
contract dollars on average than the other four agencies, it had less
than half the average number of contracting office staff. This study
only focused on the Procurement Department and did not attempt to
determine appropriate staffing levels for other acquisition
professionals not assigned to the Procurement Department, such as
program managers, financial managers, and individuals involved in
contract monitoring. We did not conduct an independent assessment of
this study to validate the study's results.
Information and Knowledge Management:
To make strategic, mission-focused acquisition decisions, organizations
need knowledge and information management processes and systems that
produce credible, reliable, and timely data about the goods and
services acquired and the methods used to acquire them. Such data can
be used to identify opportunities to reduce costs, improve service
levels, measure compliance and performance, and manage service
providers.
PBGC's Procurement Department uses a variety of reports to oversee
contract spending. Some reports come from the contract writing system
while others are maintained manually. According to a PBGC official, the
reports track how goods and services are acquired but do not provide
detailed data on goods and services, as well as suppliers, and spending
patterns. As a result, PBGC may not have the strategic information
needed to support effective acquisition management decisions. In
addition, PBGC's procurement software is not integrated into its
financial system, which would allow contracting professionals to obtain
real-time information on availability of funds, status of obligations
and expenditures, and payments for the receipts of goods and services.
PBGC's Procurement Department recently invested in new procurement
software to better track acquisition data. In addition to generating
reports on workload and procurement lead times, the new software links
to the Federal Procurement Data System to report on PBGC's contract
actions as required by the Office of Management and Budget (OMB). This
system is able to produce some aggregate data, like dollars expended,
but lacks detailed information on goods and services purchased.
PBGC Has Not Yet Taken Steps to Develop Strategic Approach to
Acquisition:
PBGC has not yet taken all the steps needed to develop a strategic
approach to acquisition. In 2000, we recommended that PBGC do so by
conducting a comprehensive review of PBGC's future human capital needs
and using this review to better link contracting decisions to PBGC's
long-term strategic planning process. However, PBGC's strategic plans
do not provide sufficient detail to determine what role acquisition
plays in achieving its goals. In our work on best practices,[Footnote
14] we learned that a strategic plan should incorporate an
understanding of how acquisition will be used to help an agency achieve
its mission and goals. This would enable PBGC to better coordinate
current acquisition initiatives or serve as a road map for identifying
or prioritizing future efforts. PBGC recently issued its strategic
plan, but it is not comprehensive. Although the plan states that one of
PBGC's strategic priorities is to align resources to meet changing
workload demands and mentions flexible staffing as an indicator of
efficient operations, it does not specify how this will be accomplished
or what role contract staff will play. PBGC recently has hired a human
resources specialist to coordinate and complete the planning process
initiated in 2002 and update its human capital succession plan. PBGC
also has drafted a strategic human capital plan that acknowledges the
need for contract support, but does not provide detailed plans for how
the contract support will be obtained.
As stated earlier, NAPA provided a six-step model for PBGC to follow
for its strategic human capital planning. In response, PBGC convened a
workforce planning team that implemented some of NAPA's suggested
steps. Although the workforce planning team acknowledged the importance
of contract staff for meeting PBGC's unpredictable workloads, the
team's analysis of PBGC's future workforce focused almost entirely on
PBGC's federal employees and not its contractor workforce. The team
recognized PBGC's need for improvement in the area of contracting, such
as better defining where to use contractors versus federal employees,
structuring the work to ensure that federal staff retain core
competencies, and developing stronger COTR and contract monitoring
competencies. While the team's 2002 report included an analysis of the
current competencies of PBGC's federal workforce and PBGC's future
needs, it did not similarly analyze the contractor workforce, which, at
the time, made up almost half of PBGC's total workforce and now makes
up almost two-thirds. The report did not address how the contractor
workforce should change to meet future needs or how contractors should
be utilized. Although the report included a discussion of recruitment
and hiring strategies, it did not include an analysis of strategies for
adding to or subtracting from the contractor workforce in case of
increased or decreased workloads.
Further, PBGC does not use its strategic annual performance plans to
document how the acquisition function supports the agency's missions
and goals. It is not clear how acquisition serves PBGC's mission,
because metrics are not linked to PBGC's overall performance plan.
While the procurement director has developed some metrics to measure
the Procurement Department's workload, PBGC's strategic plan only has
one broad metric related to measuring call center customer or
participant satisfaction, but there is no specific metric that
enumerates the level of customer service to be reached. Additionally,
the strategic plan only has one broad metric related to performance-
based contracting, but there are no specific metrics that relate to
acquisition efficiency, effectiveness, and results, such as measures to
track the number of contracts awarded that include incentives for
performance. Performance measurements can be used to gain insight into
the Procurement Department's current performance level and performance
over time and set realistic goals for improvements to the acquisition
process.
Finally, PBGC has taken some limited steps toward making more strategic
contracting decisions in certain specific areas. These steps generally
were taken in reaction to concerns raised about existing contracts in
an internal report and reports by us and the Office of the Inspector
General. For example, the Inspector General and PBGC each studied the
contracts for the field benefit administration offices and concluded
that there were opportunities to increase efficiency and decrease
costs. As a result, PBGC is recompeting the contracts in an effort to
consolidate the number of field benefit administration offices.
PBGC Has Made Improvements to Contractor Oversight, but Implementation
of Performance-Based Contracting May Present Challenges:
PBGC has made improvements to contractor oversight by implementing new
contract monitoring activities, improving oversight activities for some
of its major contracts, and developing comprehensive procedures to
direct contracting activities. However, most of PBGC's current
contracts lack performance incentives and methods to hold contractors
accountable. PBGC recently began awarding more performance-based
contracts, as a means to achieve better contract outcomes, but there
are common challenges that arise--from deciding which contracts are
appropriate for a performance-based approach to deciding which outcomes
to measure and emphasize. PBGC procurement officials acknowledge the
benefits and challenges of performance-based contracting, and must
provide additional oversight of contracts and a different approach to
contract monitoring that focuses on outcomes rather than processes.
PBGC Has Made Some Improvements to Contractor Oversight:
PBGC has improved upon existing contract monitoring activities and
implemented new activities to strengthen contract oversight. In our
2000 report,[Footnote 15] we recommended that PBGC develop the capacity
to centrally monitor field benefit administration office contractor
performance including product quality and timeliness. In response, PBGC
shifted the responsibility for contract oversight of Benefits
Administration and Payment Department (BAPD) contracts to its
Management Coordination Unit (MCU),[Footnote 16] to consolidate its
monitoring of field benefit administration office performance. The MCU
uses several different methods to monitor contracts.
* The MCU reviews the 10 field benefit administration office
contractors annually to assess the accuracy of benefit determination
letters and the security procedures in place and trains analysts in
contract oversight to conduct field benefit administration office
reviews. Following each review, the office receives a report that
highlights findings and requires a corrective action plan to address
deficiencies.
* The MCU conducts quarterly COTR visits to the field benefit
administration offices. During these visits, COTRs conduct interviews
with key office staff and review the office's workplans and records.
The MCU developed the COTR site visit program and a corresponding
standard protocol to be used in conducting site visits. PBGC officials
told us that, due to COTR work activities, not all site visits are
being conducted as anticipated; only one to two are being conducted per
office each year.
* The MCU conducts monthly compliance and data integrity reviews of
field benefit administration case processing activities. Results of
these reviews are compiled into a scorecard that is reported quarterly
to the office and the COTR. The scorecard measures BAPD processing
goals for timeliness and quality. Noncompliant items are communicated
to the offices monthly for resolution. Field benefit administration
office contractors receive feedback on the timeliness and accuracy of
benefit payments based on the MCU's monitoring efforts.
To improve contract oversight, the Procurement Department also has
implemented refresher training requirements for COTRs. PBGC provides
guidance and training to COTRs regarding their duties and to ensure
their compliance with Procurement Department policy, federal law,
regulations and guidance, including the Federal Acquisition Regulation.
PBGC is planning to comply with a November 2007, OMB Office of Federal
Procurement Policy (OFPP) memorandum for training directed mainly at
COTRs. The memorandum establishes a structured training program for
COTRs and calls for standardization of competencies and training across
civilian agencies. The mandate requires a minimum of 40 hours of
training to be certified as a COTR. According to the requirements, new
COTRs must be certified within 6 months of appointment and existing
COTRs within a year. The Procurement Department will ensure that all
COTRs have evidence of their certification, as required by the
memorandum.
PBGC recently improved its procedural guidance. In 2000, we found that
PBGC lacked such guidance on contract oversight and a central location
for guidance and procurement policies on contract oversight. Our report
noted that due to the absence of specific procedures, staff spent
significant time seeking guidance on issues, may have received
conflicting directions, and contributed to inconsistent administration
practices. Procurement Department officials recently completed a
comprehensive procedural guidance manual for staff responsible for
awarding contracts and monitoring contractor performance. According to
Procurement Department officials, the new manual should eliminate the
ad-hoc directives, e-mail, and stand-alone memorandums previously used
to address concerns. The Procurement Department's new procedures manual
provides uniform procedures for the internal operation of acquiring
supplies and services within PBGC. The document represents a central
repository for guidance and policies. The manual has been prepared in
an electronic format, and includes relevant Internet links wherever
external references are made, such as to OMB Circulars.
PBGC's Move toward Performance-Based Contracting Can Add Accountability
but May Present Challenges During Implementation:
Performance-based contracting offers the government the potential for
achieving better contract outcomes by requiring that all aspects of an
acquisition be structured around the purpose of the work as opposed to
the manner in which the work is to be performed. Contracts should
include descriptions of the outcomes the agency is looking for rather
than descriptions of how services should be performed, measurable
performance standards, quality assurance plans that describe how the
contractor's performance will be evaluated, and positive and negative
incentives, when appropriate. However, our work has shown that the
transition to and use of performance-based contracts has proven a
challenge for government agencies deeply rooted in traditional methods
of contracting.
PBGC agreed with our 2000 recommendation that it utilize contracts and
payment arrangements consistent with best practices in performance-
based contracting. In 2001, OFPP directed government agencies to award
contracts using performance-based techniques for at least 20 percent of
service contracting dollars greater than $25,000 by fiscal year 2002.
In 2003, OFPP recommended that executive agencies apply performance-
based techniques to at least 40 percent of service contracting dollars
greater than $25,000 by 2005. PBGC began altering its acquisition
strategy to be in line with the government-wide move toward performance-
based contracting in 2003. However, PBGC to date has awarded less than
$150 million in service contract dollars in fiscal year 2008 and
remains short of OFPP's performance-based contracting goals.[Footnote
17] According to PBGC officials, only six of its contracts currently
are performance based, representing a yearly cost of approximately $30
million for communication, administrative, and critical function
services. PBGC is in the process of awarding an additional $20 million
in performance-based contracts for the administration of the field
benefit administration offices. Prior to the solicitation, these
offices were contracted using individual labor-hour contracts.
[Footnote 18]
According to PBGC officials, most of PBGC's current contracts lack the
methods to hold contractors accountable for their performance. One PBGC
official said existing contracts neither include the incentives needed
to encourage contractors to achieve desired results, nor do they
include performance measures and targets. Instead, PBGC staff work
directly with the contractor to communicate necessary targets. In the
event that deliverables do not match contract descriptions or there is
a problem with contractor performance, PBGC will work with the
contractor to correct that problem. By not incorporating performance
targets and other measures, PBGC depends on contractors who have
limited incentive to provide optimal service. PBGC has the option not
to renew a contract with a poorly performing contractor, but officials
acknowledge the disadvantage it faces by not providing performance
incentives to help hold contractors accountable. PBGC also has
attempted to motivate contractors by considering assessments of the
contractor's customer service as a part of future contract renewal and
is planning to incorporate customer service measures into its contracts
through the use of the American Customer Service Index.[Footnote 19]
However, the index is not completely effective as an incentive
mechanism because it does not report results for individual contractors
and instead reports on contracts collectively.
While it is important that PBGC incorporate strong performance
incentives into its contracts, the transition to and use of performance-
based contracts has proven a challenge for agencies deeply-rooted in
traditional methods of contracting. In a 2002 report, we highlighted
challenges faced by agencies during their transition to performance-
based contracting.[Footnote 20] These challenges included the lack of
understanding of performance-based contracting, lack of specific agency
guidance, and inadequate oversight of contracts with performance-based
methods. In addition, while PBGC has increased the amount of training
provided to COTRs and others, the transition to performance-based
contracting will require additional training, specific to the new
contracting method. In 1998 guidance,[Footnote 21] OFPP called
attention to the problems agencies face in converting from a
traditional contract's statement of work to a performance-based work
statement. Agencies reported to OFPP that performance work statements
required an increased initial investment of time and resources.
However, according to the OFPP guidance, the savings expected by
performance-based contracting will offset such costs and correct
problems commonly associated with service contracts--cost overruns,
schedule delays, and technical challenges.
Our prior work, and the work of others, also explains that both
agencies and contractors typically find it difficult to move away from
traditional contracting methods to a method of linking payments to
performance, based on specific requirements that describe results and
measurable standards of performance. Our prior work concluded that
additional government guidance on performance-based contracting was
needed to ensure its proper and effective use.[Footnote 22] PBGC
officials recognize that PBGC may face challenges similar to those
faced by other government agencies during implementation of performance-
based contracting.
Conclusions:
With three-quarters of its operational budget currently being spent on
contracting, it is clear that acquisition plays a central role in
achieving PBGC's strategic goals. While PBGC has made efforts to
improve its acquisition infrastructure, it has not developed a
strategic approach to its contracting process as envisioned in our 2000
report. In its role as a support function, rather than a business
partner, PBGC's Procurement Department is not involved in helping PBGC
make strategic decisions about contracting early in the process or in
developing long-term strategic approaches. PBGC developed its most
recent strategic plan and strategic human capital plan, the latter
still in draft, without a thorough examination of the role contracting
plays at PBGC. By assessing the existing organizational alignment of
the Procurement Department against a framework of best practices, PBGC
may find that its Procurement Department is unable to effectively
identify, analyze, prioritize, and coordinate agency-wide acquisition
needs. Further, PBGC's workload depends on future economic conditions
that are difficult to predict. Without a strategic acquisition
approach, PBGC risks being unprepared for future workload changes and
cannot be assured that it has the optimal mix of contractor staff and
federal employees.
Since our last report, PBGC also has made meaningful improvements to
its contract oversight. To continue contracting improvements, PBGC's
focus on performance-based contracting is growing--providing additional
tools to hold contractors accountable for performance and to encourage
the achievement of desired outcomes. However, this contracting method
requires a new approach to contract oversight and has demonstrated the
need for comprehensive training and organizational culture changes.
PBGC will likely face challenges similar to those we have seen faced by
other agencies that have moved toward performance-based contracting.
PBGC needs to be aware of the common pitfalls other agencies have faced
and take steps now to avoid the same challenges.
Recommendations for Executive Action:
To improve PBGC's performance in an environment of heavy contractor
use, we recommend that the Director of PBGC revise its strategic plan
and, in drafting the corporation's human capital strategic plan,
reflect the importance of contracting and PBGC's use of contractors,
project its vision of future contractor use, and better link staffing
and contracting decisions at the corporate level. In drafting the plan,
the Director of PBGC should do the following:
* Include the Procurement Department in agency-wide strategic planning.
* Ensure that the Procurement Director sits on PBGC's three strategic
teams--the Operations Integration Board, the Budget and Planning
Integration Team, and the Capital Planning for Information Technology
Team.
* Broaden the Procurement Department's May 2007 staffing study to
include as part of PBGC's agency-wide acquisition workforce those
positions outside of the Procurement Department that have a significant
impact on procurement outcomes (i.e., requirements staff, program
managers, financial managers, and individuals involved in contract
monitoring). The study should determine appropriate staffing levels for
these positions as the May 2007 study did for Procurement Department
staff.
* Include in PBGC's human capital plan detailed plans for how contract
support will be obtained.
* Assess PBGC's contract information to determine if additional
information is needed to support strategic acquisition management
decisions. This could include more complete information on goods and
services purchased, as well as suppliers and spending patterns. In
addition, contract spending information should be integrated into
PBGC's financial system, to allow acquisition staff to obtain real-time
information on the availability of funds, status of obligations and
expenditures, and payments for the receipt of goods and services.
* Develop metrics for PBGC's annual performance plan that document how
the acquisition function supports PBGC's missions and goals. These
could include metrics related to acquisition efficiency and customer
satisfaction.
To improve PBGC's contract management as it implements a performance-
based approach to contracting, we recommend that the Director of PBGC:
* provide comprehensive training on performance-based contracting for
PBGC's Procurement Department staff, managers, and acquisition-related
workforce;
* develop practices to help ensure accountability for the Procurement
Department staff carrying out contract monitoring responsibilities;
and:
* ensure that future contracts measure performance in terms of
outcomes, provide incentives for the accomplishment of desired
outcomes, and ensure payment of award fees only for excellent
performance.
Agency Comments and Our Evaluation:
We obtained written comments on a draft of this report from PBGC, which
are reproduced in appendix II. In addition, we provided a copy of the
draft report to the Department of Labor for its comments, but Labor did
not provide comments.
In response to our draft report, PBGC's Director stated PBGC's
commitment to managing its contracting activities to obtain the best
value for the 44 million beneficiaries of its insurance program. PBGC
agreed with most of our recommendations and mentioned various ways it
planned to address them. For example, PBGC stated it understood that
other government agencies have faced challenges in implementing
performance-based contracting and plans to take steps to avoid common
pitfalls. PBGC also stated that it will be conducting a comprehensive
review of necessary staffing levels across the agency related to
procurement functions and future contracting needs, consistent with our
recommendation.
While PBGC agreed that contracting should be part of its strategic
planning process, it disagreed with our recommendation to reflect the
importance of contracting and incorporate its vision for future
contractor use into its strategic planning documents. In its comments,
PBGC maintained that its recently issued strategic plan reflects the
importance of contracting and its vision for future use.
However, we continue to believe that PBGC's recently issued strategic
plan is not sufficiently comprehensive. PBGC's strategic plan only
briefly mentions performance-based contracting, flexible staffing and
metrics for specific contracts, and therefore does not fully reflect
the importance of contracting in achieving its mission. For example,
among eight "strategic priorities," contracting is not mentioned. While
the plan does state that PBGC will implement performance-based
contracting for vendors in an effort to provide good customer service
to stakeholders, it does not provide measurable goals for converting
certain contracts or any time frames for implementation. Where the plan
mentions using the American Customer Service Index as an indicator, it
does not provide any detail on how it will use the index, what its
performance goals are, and how it will measure success. In addition,
the plan lacks certain key attributes of successful performance
measures, such as measurable targets with numerical goals, and it does
not include the activities that its acquisition function is expected to
perform to support the intent of PBGC's acquisition program.
PBGC also disagreed with our recommendation that its Director of
Procurement should sit on certain specific corporate committees. We
believe that PBGC's Procurement Director should be included on each of
the corporation's three strategic teams. In its comments, PBGC stated
that its Chief Management Officer represents contracting on these
teams, and that there are greater gains to be realized by emphasizing
executive-level awareness of procurement issues in decision making than
by requiring the Procurement Director to sit on the three committees.
While we appreciate PBGC's position that executives should be aware of
procurement issues in their strategic decision making, because PBGC
relies to such a great extent on contracting, it is critical that its
Procurement Director be more involved in the corporation's strategic
planning efforts. In addition to the Procurement Department, the Chief
Management Officer currently oversees several additional functions,
such as the Budget Department and the Human Resources Department, each
vitally important to PBGC, and each with its own challenges. It is
essential that an individual well-versed in procurement operations be
more integrated into PBGC's planning for the future.
As agreed with your staff, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its issue date. At that time, we will send copies of this report
to the Secretary of Labor and to the Director of PBGC and other
interested parties. We will also make copies available to others upon
request. In addition, the report will be available at no charge on the
GAO Web site at [hyperlink, http://www.gao.gov]. If you or your staff
have any questions concerning this report, please contact me at (202)
512-7215 or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made key contributions to this
report are listed in appendix III.
Signed by:
Barbara D. Bovbjerg:
Director, Education, Workforce, and Income Security Issues:
[End of section]
Appendix I: Scope and Methodology:
To assess the role contracting plays in the Pension Benefit Guaranty
Corporation's (PBGC) efforts to accomplish its mission, we collected
and analyzed data on PBGC contracting activities, as well as on
participants, plans, employees, and budget trends. We also collected
data to identify trends regarding how PBGC has relied on contractors to
conduct its work. To do this, we reviewed contracting data from fiscal
years 2000 through 2007. We determined that PBGC's data were
sufficiently reliable for the purposes of this report.
To assess the steps PBGC has taken to improve its acquisition
infrastructure and develop a strategic approach, we compared PBGC's
acquisition infrastructure to standards outlined in GAO's acquisition
framework.[Footnote 23] Use of the framework enabled us to conduct a
high-level, qualitative assessments of the strengths and weaknesses of
PBGC's contracting function. Specifically, we evaluated PBGC's
acquisition infrastructure in four key areas--organizational alignment
and leadership, policies and procedures, human capital, and information
management. We also reviewed prior GAO work on best practices in
strategic approaches to the contracting and compared PBGC's current
operations to best practices.
To identify the strategies that PBGC uses to monitor contracts, we
reviewed applicable laws, regulations, policies and guidance regarding
contract management at PBGC. Specifically, we reviewed OFPP guidance
related to performance-based contracting to understand PBGC's adherence
with federal policy on the subject. We also conducted a contract file
review of six contract files to assess file fitness and completeness
along with monitoring and oversight improvements. To assess the steps
PBGC has taken to improve its contract oversight processes to ensure
accountability, we reviewed our findings from our 2000 report and
followed up on improvements PBGC has made since then to its contract
monitoring procedures. For each objective, we interviewed PBGC senior
executives, managers, and programming and contracting staff at
headquarters, as well as selected contractors. We also interviewed
officials from PBGC's Office of Inspector General and reviewed relevant
Inspector General reports.
We conducted this performance audit from May 2007 to August 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 Pension Benefit Guaranty Corporation:
PBGC:
Pension Benefit Guaranty Corporation:
Protecting America's Pensions:
Office of the Director:
1200 K Street, N.W.
Washington, D.C. 20005-4026:
July 24, 2008:
Ms. Barbara Bovbjerg, Director:
Education, Workforce, and Income Security Issues:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Ms. Bovbjerg:
Thank you for the opportunity to comment on the Government
Accountability Office (GAO) draft report, "Some Steps Have Been Taken
to Improve Contracting, but a More Strategic Approach is Needed."
Contracting plays an important role in enabling PBGC to carry out its
mission and address unpredictable workloads due to changing economic
conditions. PBGC is committed to managing its contracting activities to
obtain the best value for the 44 million beneficiaries of its insurance
program. We appreciate GAO's recognition that, since its last report,
PBGC has made meaningful improvements to its contract oversight. As the
draft report notes, PBGC has implemented new contract monitoring
activities, improved oversight for some of its major contracts,
developed comprehensive procedures to direct contracting activities,
and has begun to implement performance-based contracting.
PBGC appreciates that the focus of the report is not only on the role
of contracting in accomplishing our mission, but also on the
improvements here at PBGC in our acquisition infrastructure, our
strategic approach, and our oversight processes to ensure
accountability. The report nicely catalogs the progress made on several
fronts in PBGC contracting in recent years. In improving our
infrastructure, it notes our steps to realign the Procurement
Department (PD), our updating of policies and processes, our upgrading
of PD staff skills, and our better tracking of contracting data. The
report also underscores advances in our contractor oversight, pointing
to the centralized monitoring of field offices, PD's new procedures
manual, and our new training for the certification of Contracting
Officer's Technical Representatives (COTRs).
We agree with GAO that the role of contracting should be part of PBGC's
strategic planning process, and we are comfortable that it is
meaningfully integrated into the process. We disagree with GAO's
statement that our strategic plan is not sufficiently comprehensive.
PBGC's recently-issued Strategic Plan for 2008-2013 includes goals and
objectives for performance-based contracting, flexible staffing and a
strategic human capital plan, as well as metrics for major contracting
activities such as the customer call center. Our strategic plan thus
reflects the importance of contracting and PBGC's vision for its use in
the future; further detail on specific implementing activities is
properly reflected in our executives' performance plans, all of which
link to the strategic plan. Each member of PBGC's senior leadership,
including the Director of the Procurement Department, is closely
involved in the strategic planning process. This includes participation
in the annual senior-level strategic planning meeting, opportunities to
provide input to agency goals and objectives, and reviewing draft
versions of the strategic plan.
Contracting is an important element in the planning activities of all
major offices of PBGC, supported by the office of the Chief Management
Officer (CMO), where the Corporation's contracting authority resides.
Representatives of all executive offices, including the CMO, sit on the
major budget and planning committees of the Corporation -- the Capital
Planning for Investment Technology committee (CPIT), the Budget
Planning and Integration Team (BPIT) and the Operations Integration
Board (OIB). For example, the CMO chairs the OIB; the Director of the
Budget Department chairs the BPIT, and the Director of Strategic
Planning is a member of the CPIT. Contracting issues arising from these
groups are coordinated as part of regular CMO staff meetings. Further,
the Director of the Procurement Department joins these groups on an as-
needed basis, providing valuable input into corporate decisions which
will impact PBGC's short-term and long-term contracting plans. We
believe there are greater gains to be realized by continuing to
emphasize executive-level awareness of procurement issues in decision-
making than by requiring the Director of Procurement Department to sit
on specific corporate committees as the draft report recommends.
As part of the human capital strategic planning process currently under
way at PBGC, we will be conducting a comprehensive review of necessary
staffing levels across the agency relating to procurement functions and
future contracting needs, consistent with the recommendation contained
in GAO's recent report on PBGC's human capital management. With regard
to Procurement Department staffing, we note that, in June 2008, the
Procurement Department was authorized three additional staff beginning
in FY 2009.
We will assess existing contract information to determine whether
additional information is needed to support strategic acquisition
management decisions. However, we note that our existing financial
systems provide extensive information on contract spending, including
availability of funds, status of obligations and expenditures, and
payments for the receipts of goods and services. Reports by contract
are regularly made available to COTRs, and we will ensure that
Procurement Department staff has ready access to this information as
well.
With regard to the recommendation to develop additional procurement
metrics, PBGC currently has metrics relating to contracting performance
in individual performance plans of senior executives with major
contracting projects, as well as in those of the Procurement Department
employees. The Procurement Department also has an automated customer
service questionnaire, which reflects a current customer satisfaction
rate of 88 percent. PBGC will review whether these measures can be
incorporated into the annual performance budget (which replaced the
annual performance report pursuant to OMB Circular A-11) to document
how the acquisition function supports PBGC's missions and goals,
consistent with GAO's recommendation.
We agree with GAO's recommendations to enhance our implementation of
performance-based contracting, specifically with respect to
comprehensive training for PBGC staff, accountability for Procurement
Department oversight, and incorporating performance-based measures into
our future contracts. In fact, such efforts are already underway. For
example, during this past year, 46 employees completed training on
developing performance-based statements of work at PBGC's Training
Institute. Procurement Department staff work closely with departmental
representatives to ensure that statements of work and resulting
contracts are properly structured to achieve the desired outcomes.
Further, the Procurement Department is currently performing reviews of
COTR files to ensure that proper contract monitoring is occurring.
Lastly, the use of labor-hour contracts has been restricted and
requires formal approval by the Director of the Procurement Department.
We understand that other government agencies have faced challenges in
the implementation of performance-based contracting, and agree with GAO
that PBGC needs to be aware of these common pitfalls and take steps now
to avoid them. In that vein, it is important to note that until
training and oversight are fully implemented, measuring success solely
by the number of dollars or contracts denominated "performance-based"
can be misleading. As we have learned from the experience of other
government agencies, the structure first must be in place to support
the implementation of performance-based measures. We believe success
will be shown when we have training and oversight in place that enables
us to achieve the results set forth in our major performance-based
contracts. This must be done in addition to measuring the percentage of
contract dollars devoted to contracts containing performance measures.
PBGC is committed to continuing to improve the performance of its
contracting function to deliver the excellent results its beneficiaries
deserve. We appreciate your attention to this important topic and look
forward to sharing the results of our progress with you in the future.
Sincerely,
Signed by:
Charles E. F. Millard:
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Barbara Bovbjerg (202) 512-7215 or [email protected]:
Staff Acknowledgments:
The following team members made key contributions to this report: Blake
Ainsworth, Assistant Director; Lara Laufer and Monika Gomez, Analysts-
in-Charge; Jeffrey Bernstein; Susannah Compton; Jena Sinkfield; Najeema
Washington; and Craig Winslow.
[End of section]
Related GAO Products:
Pension Benefit Guaranty Corporation: Governance Structure Needs
Improvements to Ensure Policy Direction and Oversight. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-808]. Washington, D.C.: July
6, 2007.
High-Risk Series: An Update. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-310]. Washington, D.C.: January 2007.
Framework for Assessing the Acquisition Function at Federal Agencies.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-218G]. Washington,
D.C.: September 2005.
Private Pensions: The Pension Benefit Guaranty Corporation and Long-
Term Budgetary Challenge. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-772T]. Washington, D.C.: June 9, 2005.
Contract Management: Opportunities to Improve Surveillance on
Department of Defense Service Contracts. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-05-274]. Washington, D.C.: March
17, 2005.
Federal Procurement: Spending and Workforce Trends. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-03-443]. Washington, D.C.: April
30, 2003.
Contract Management: Guidance Needed for Using Performance-Based
Service Contracting. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
02-1049]. Washington, D.C.: September 23, 2002.
Best Practices: Taking a Strategic Approach Could Improve DOD's
Acquisition of Services. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-230]. Washington, D.C.: January 18, 2002.
Pension Benefit Guaranty Corporation: Appearance of Improper Influence
in Certain Contract Awards. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?T-OSI-00-17]. Washington, D.C.: September 21, 2000.
Pension Benefit Guaranty Corporation: Contract Management Needs
Improvement. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?T-HEHS-00-
199]. Washington, D.C.: September 21, 2000.
Pension Benefit Guaranty Corporation: Contracting Management Needs
Improvement. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-
130]. Washington, D.C.: September 18, 2000.
High-Risk Series: An Overview. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/HR-95-1]. Washington, D.C.: February 1, 1995.
High-Risk Series: Pension Benefit Guaranty Corporation. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO/HR-93-5]. Washington, D.C.:
December 1, 1992.
Related PBGC Inspector General Reports:
Trend Analysis Report: PBGC Procurement Issues From 2000-2007, 2007-6/
CA-0036. Washington, D.C., July 26, 2007.
Evaluation of the Field Benefits Administration Concept, 2004-9/23178.
Washington, D.C., April 30, 2004.
[End of section]
Footnotes:
[1] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-310] (Washington, D.C.:
January 2007). In 1992, we placed PBGC on our list of federal programs
at high risk because a large and growing imbalance between its assets
and liabilities threatened its long-term financial viability. GAO, High-
Risk Series: Pension Benefit Guaranty Corporation, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO/HR-93-5] (Washington, D.C.:
December 1992). To address PBGC's financial problems, Congress passed
the Retirement Protection Act in 1994, which strengthened minimum
funding requirements for plans and increased premiums paid to PBGC by
underfunded plans (Pub. L. No. 103-465, 108 Stat. 4809). In addition,
PBGC improved administration of its insurance programs. Consequently,
we removed PBGC from our high-risk list in 1995. GAO, High-Risk Series:
An Overview, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HR-95-1]
(Washington, D.C.: February 1995). GAO again added PBGC's single
employer insurance program to its high-risk series in July 2003. GAO,
Private Pensions: The Pension Benefit Guaranty Corporation and Long-
Term Budgetary Challenges, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-772T] (Washington, D.C.: June 9, 2005).
[2] GAO, Pension Benefit Guaranty Corporation: Contracting Management
Needs Improvement, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/HEHS-00-130] (Washington, D.C.: Sept. 18, 2000).
[3] A COTR is an individual assigned to a contract to evaluate
contractor performance based on their technical background and
experience. The COTR uses meetings, physical observations, and reports
to ensure that work is performed in compliance with contract
requirements. The COTR makes many decisions or recommendations about
the daily administration of the contract, and the contracting officer
relies on the COTR's judgment in the areas of inspection, payment
approval, and providing recommendations on problems that arise.
[4] Pub. L. No. 93-406, 88 Stat. 829.
[5] Both PBGC employees and contractor employees are involved in
performing aspects of ongoing administration for closed plans.
[6] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-130].
[7] PBGC-Office of the Inspector General (OIG), Trend Analysis Report:
PBGC Procurement Issues From 2000-2007, 2007-6/CA-0036 (Washington,
D.C., July 26, 2007).
[8] GAO, Framework for Assessing the Acquisition Function at Federal
Agencies, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-218G]
(Washington, D.C.: Sept. 2005).
[9] 41 U.S.C. � 414.
[10] GAO, Federal Procurement: Spending and Workforce Trends,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-443] (Washington,
D.C.: Apr. 30, 2003).
[11] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-218G].
[12] GAO, Best Practices: Taking a Strategic Approach Could Improve
DOD's Acquisition of Services, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-230] (Washington, D.C.: Jan. 18, 2002).
[13] Services Acquisition Reform Act of 2003, tit. XIV, Pub.L. No. 108-
136, � 1421, 117 Stat. 1663, 1666-67 (2003). PBGC is not required to
appoint a chief acquisition officer.
[14] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-230].
[15] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-130].
[16] BAPD is the office within PBGC with the highest number of
contracts and contract spending. This division manages the termination
process for defined benefit plans, provides participant services for
terminated plans, and provides actuarial support for PBGC, whose
contracts represent approximately 37 percent of contracting activities
at PBGC.
[17] An OFPP official told us that PBGC may follow these guidelines,
but it is not required to do so. A PBGC official responded that the
corporation is required to adhere to guidance when it applies to small
agencies. According to the PBGC official, in response to this guidance
and OFPP goals, only about 13 percent of PBGC's eligible contracts are
performance based, although it anticipates additional performance-
based awards during the remainder of the fiscal year.
[18] Labor-hour contracts provide for payment of contractors at hourly
rates for the number of hours worked. In general, labor-hour contracts
require detailed reviews of the hours charged by contract staff and
close monitoring by the contracting entity to ensure that quality and
timeliness requirements are met.
[19] [9] The American Customer Service Index is used to measure
customer satisfaction in the public and private sector. PBGC's first
year of participation was 2001, which is considered the benchmark year.
In that first year, the index measured the satisfaction of plan
participants. Since that time, PBGC has used the index to measure
customer service performance of contractors that provide services to
Web users and retirees on behalf of PBGC.
[20] GAO, Contract Management: Guidance Needed for Using Performance-
Based Service Contracting, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-1049] (Washington, D.C.: Sept. 23, 2002). The
agencies we reviewed included the Departments of Defense, Treasury,
Energy, the National Aeronautics and Space Administration, and the
General Services Administration.
[21] A Guide to Best Practices for Performance Based Contracting,
Office of Federal Procurement Policy, Office of Management and Budget,
Final Edition 1998.
[22] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-1049].
[23] GAO, Framework for Assessing the Acquisition Function at Federal
Agencies, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-218G]
(Washington, D.C.: Sept. 2005). PBGC-OIG, Trend Analysis Report: PBGC
Procurement Issues From 2000-2007, 2007-6/CA-0036 (Washington, D.C.,
July 26, 2007).
[End of section]
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