Senate testimony: Intelligence community needs to keep better tabs on its contractors

The 17 agencies in the intelligence community must get a better handle on the extent of their reliance on contractors, witnesses told a Senate panel on Wednesday. Overuse of outsourcing presents risks to both national security and managerial efficiency, senators and an auditor warned.

“Contractors can provide flexibility and unique expertise, but there are risks” if internal controls, formal planning and documentation are inadequate, Timothy DiNapoli, director of acquisition and sourcing management at the Government Accountability Office (GAO), told the Senate Homeland Security and Governmental Affairs Committee. “Changes to the definition of core contract personnel limit the comparability of the information over time,” he said, noting that the civilian intelligence community agencies used various methods to calculate the number of contract personnel and did not maintain documentation to validate the number of personnel reported for 37 percent of records reviewed. GAO also found that the civilian intelligence community agencies either under- or over-reported contract obligations by more than 10 percent for one-fifth of the records.

Panel Chairman Sen. Tom Carper, D-Del., said, “The people we entrust with leadership roles at these agencies need to be able to show the American people, and Congress, that they know who is working for them and why.” Overreliance on contractors behind the intelligence agencies’ secrecy walls presents three hazards, Carper said: hollowing out the in-house workforce and making it weaker, requiring extra layers of management and paying more for work that could have been performed by federal employees.

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Rule would expand scope of personal conflict of interest regulation

Individual federal contractors will likely face increased conflict of interest scrutiny under a proposed regulation.

The rule, proposed April 2, would expand strictures against personal conflicts of interest beyond just contractors with non-governmental acquisition duties. That would make the scope of personal conflict of interest regulations match those controlling organizational conflict of interest.

Currently the Federal Acquisition Regulation limits the definition of personal conflict of interest to those performing jobs closely associated with inherently governmental acquisition work.

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State Dept. IG issues alert over $6 billion in contracting money unaccounted for

The State Department’s inspector general has warned the department that $6 billion in contracting money over the past six years cannot be properly accounted for and cited “significant financial risk and . . . a lack of internal control.”

The warning was the second “management alert” in State Department history, both issued by new Inspector General Steve Linick. Linick took over the job in late September, after it had been vacant for nearly six years.

oth the alert, dated March 20, and the department’s response a week later, were made public Thursday, April 3, 2014.

The department said it concurred in all recommendations and outlined steps it will take to address what it agreed is a “vulnerability.”

Linick initiated the alert format to report on problems that remain unaddressed despite repeatedly being identified in IG audits and investigations. The first alert, released in January in partly classified form, cited “significant and recurring weaknesses in the Department of State Information System Security Program.”

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The federal outsourcing boom and why it’s failing Americans

Two of the biggest news events of the past year have been the leaks about top-secret snooping by the NSA and the disastrous rollout of Obamacare. But in an important way, they are both manifestations of a story that has been unfolding for decades — that of a federal government that has outsourced too much of what it does to private contractors while allowing the quality of its own workforce to atrophy.

Lots of Americans were disturbed to learn from Edward Snowden that the government is keeping track of their every phone call and text message. But they might have also wondered why a 30-year-old government contractor in Honolulu, with security clearance that was approved by another private contractor, had routine access to some of the government’s most sensitive secrets. Even worse, two years after Pfc. Bradley Manning did the same thing, Snowden managed to download millions of pages of documents from a computer system designed and managed by private contractors without setting off a single alarm. The whole affair was an embarrassment to Washington’s government contracting sector.

So, too, the fiasco with, which despite the bleating of Republicans has almost nothing to do with the wisdom of the new health-care law and everything to do with the way the government and its outside contractors set about implementing it. While several of the contractors failed to perform as promised, in hindsight it appears the government also made a crucial mistake in deciding to rely on the IT staff at the Centers for Medicare and Medicaid Services to manage the contractors and oversee the final integration of the new system. Free-market ideologues will reflexively see in this failure further evidence of the inherent inferiority of public-sector workers. In truth, it is evidence of how outdated civil service rules and ill-conceived caps on the size and pay of the federal workforce have eroded the government’s ability to perform even essential government tasks.

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GAO: DoD fails to fully account for contractors performing inherently governmental functions

The Government Accountability Office says a haphazard Defense Department review of nearly $200  billion of annual contracted services makes it impossible to determine whether  corrective actions were taken in cases where contractors were doing work  government employees should be performing.

To correct the problem, the GAO recommended in its report (.pdf) that the defense secretary direct the  leaders of all military components to include all the required elements in their  letters and certify the methodology and results of their contracted services  inventory review. GAO said those letters also should include how the components  resolved instances in which contractors were performing work that should have  been done by DoD employees.

The Defense Department concurred with the findings but disagreed the  defense secretary needed to be involved. The Pentagon also disagreed that  components should still report how they resolved cases in which contractors  performed governmental or unauthorized personal services, saying they would  rather focus on current and future reviews.

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Outsourcing at the local level: Examining the role of the Chief Procurement Officer in the decision-making process

Outsourcing in the public sector means “contracting out” functions that  historically have been provided by public employees. The belief that there are  functions best performed by the private sector is not new, and moving these  functions from the public to the private sector requires a fair and open process  in the public’s best interest.

The Institute for Public Procurement recognizes that the outsourcing of  particular governmental functions can be a fiscally sound tool of responsible  public administration. However, identifying and assessing the elements of public  performance most appropriate for outsourcing — and ensuring a successfully  executed outsourcing decision – is a substantial challenge for everyone.

Public procurement offers a uniquely qualified and professional resource for  government decision-makers considering outsourcing alternatives. The Chief  Procurement Officer (CPO), Procurement Director or Purchasing Manager serves a  strategic role in a public entity’s decision to outsource. The CPO is central to  a fair, transparent and effective outsourcing process. While the decision is  ultimately reserved for an elected body or senior executive, the CPO is prepared  to provide informed insight on market structure, cost, risk, competitive methods  and contract form as these factors impact the quality and cost of services. The  CPO is uniquely positioned to help design and manage a process to achieve a  successful public outsourcing effort. It is therefore important to engage the  CPO early as a strategic partner to assess and to administer any ensuing  selection and contract formation process.

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Acquisition workforce unprepared for challenges of sequestration

Most federal acquisition professionals are not prepared to quickly renegotiate contracts or handle other responsibilities if automatic budget cuts take effect next month, according to a survey released Monday, Dec. 17, 2012.  

Sequestration — the automatic spending cuts required if Congress and the White House fail to agree on a deficit reduction plan by Jan. 2 — would require acquisition employees to quickly renegotiate, cancel or change the scope of contracts. Of the 40 federal officials surveyed, including senior acquisition executives, contracting professionals, congressional staff and representatives from the oversight community, 60 percent said those skills were weak or nonexistent in the acquisition workforce.

Sequestration “will present a host of issues, such as contract terminations. There is the potential for millions in broken contracts, so this is a critical area,” one survey respondent said.

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Agencies should file better reports on their service contracts, GAO says

The Obama administration’s effort to better calibrate which functions are inherently governmental and which are better contracted out will require improvements in agency inventories of service contracts, according to a new Government Accountability Office report.

Forty eight of the 49 agencies that GAO reviewed had filed the required lists of their contracts for such services as professional management support, information technology support and medical support, which together totaled $126 billion in fiscal 2011. But due to differing methodologies among agencies, the Office of Management and Budget and Congress could not “meaningfully use these service contract inventories to compare service contract obligations among agencies or develop spending trends,” the report said, adding, “agencies did not have a complete universe of service contracts to consider for review.”

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Senators to DOD: Use more of your own employees

Defense Secretary Leon Panetta received a letter from 26 senators April 25 who urged him to use more civilian employees instead of contractors.

The senators, led by Sherrod Brown (D-Ohio) and Kirsten Gillibrand (D-N.Y.), wrote that they understand the need to cut back on civilian employees because of tightened budgets. However, they raised concerns that the private sector wasn’t given similar constraints.

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GAO reports Defense Department barely moving toward a comprehensive service contracts database

Earlier in April, the Government Accountability Office (GAO) released the second in a series of new, congressionally mandated reports assessing the Department of Defense’s (DOD) efforts to compile an inventory of service contracts. Congress intends for the Pentagon to include these reviews in its yearly budget work and expects “inherently governmental work” currently performed by private contractors to be brought back “in-house.” This review process will help the Pentagon find ways to reduce costs and limit the over-reliance on contractors.

Seventy cents of every contracting dollar spent by the federal government in 2010 was spent by the Pentagon; $371 billion of the $530 billion in federal contract spending was awarded through DOD contracts. Moreover, DOD contracting is continually plagued by stories of $435 hammers, 19 cent washers that cost almost $1 million to ship, and other impossible-to-justify charges.

As a result, Congress has enacted legislation demanding that the Pentagon take steps to improve its acquisition and service contract management systems. In 2008, Congress inserted language into that year’s National Defense Authorization Act requiring the Pentagon to compile and review an annual inventory of service contracts, including the collection of key data, such as:

  • The “function and missions” performed by the contractor
  • The name of the contracting organization
  • The funding source and operating agency paying the contract
  • The number of full-time contractor employees that the contract is paying for

Additionally, Congress required the Pentagon to integrate the information on contractors into its annual strategic workforce plans and budget justification materials.

Congress directed the GAO to assess the progress DOD and its departments were making in cataloging this data over the following three years. The first report in the series, released in January 2011, paints a picture of disorganization and inefficiency.

The Pentagon has no database that officials can use to create a common inventory. In fact, due to the challenges in addressing “the different requirements of the military departments and components,” the Pentagon estimates that it will not be able to field the common database system until 2016, which may be too optimistic since GAO found that “DOD has not established milestones or time frames for the development and implementation of the data system” within its work plan.

Pentagon departments have to rely on the Federal Procurement Data System – Next Generation (FPDS-NG) to compile their inventory reports, but the FPDS-NG dataset does not contain much of the specific data DOD is looking for, including multiple services provided through a single contracting action, services provided through a contract predominantly for supplies, or contractor employment numbers.

Moreover, GAO found that some Navy commands contacted were not even aware that they were supposed to conduct a review, and Navy headquarters did not follow up to ensure that they had conducted the inventories. In fact, the Pentagon was not able to tell Congress that all DOD departments were either collecting or had plans to start collecting the appropriate contractor data, including employment figures, until November 2011. All other federal agencies began collecting this information earlier.

Although not comprehensive, the 2009 inventory was able to identify more than 2,000 instances of contractors performing inherently governmental functions, as determined by Army and Air Force reviews. When GAO performed a random check to see if these jobs had been converted back to civil service jobs, they found private contractors still in eight out of 12 positions. While GAO found that DOD made some improvements between its 2009 and 2010 service contract inventory reports, providing greater detail and higher levels of accuracy, the Pentagon plan for establishing a department-wide service contract database has yet to incorporate appropriate milestones and timeframes or to hold managers responsible for in-sourcing contracts.

— published Apr. 17, 2012 by OMB Watch at