We recommended that PBGC develop a  strategic approach to contracting by conducting a review of its future  human capital needs and to link contracting decisions to PBGC’s long- term strategic plan. 1). PBGC’s Workload

PBGC’s workload has increased in the last 20 years as the cumulative  number of plans terminated and trusteed, number of participants eligible  for or receiving benefits in those plans, and amount and complexity of  plan assets taken over by PBGC have grown. 2). 3). Decisions to Contract Based More on Past Practice than Strategic Assessment

PBGC has come to rely heavily on contracting to conduct much of the core  work of the agency, yet PBGC does not make decisions to use contractors  in accordance with an agency-wide strategic plan or focus. Our 2008  report on PBGC’s contracting activities found that PBGC was falling short  in this area. According to agency officials, even though PBGC requires its departments  to evaluate the costs and benefits of continuing to perform the work  through contractors each time a contract expires, some types of work  have been performed by contractors for 10 years or more with no  assessment as to whether the use of contractors is the most economical  and effective way of getting the work done. In addition, between fiscal years  2008 and 2010, BAPD requested a conversion of contractor dollars for 20  FTEs. In light of PBGC’s extensive reliance on contractors, the agency may be at  risk for the same types of problems mentioned earlier, particularly a lack  of adequate management control and contract oversight—problems which  could impede PBGC’s ability to manage increasing workloads, contractor  costs, and program outcomes. Additionally, PBGC’s extensive reliance on its contractor workforce may  be placing the agency at risk of not building institutional knowledge  among its federal workforce in those areas in which the agency has come  to rely on contractors. In addition, PBGC  has increased its use of competitively awarded contracts and fixed price  contracts. PBGC also has established more rigorous certification and training  requirements for its COTRs. These decisions are the principal means that PBGC has for allocating cost  and performance risk between the agency and its contractors. Since  2008, PBGC has made progress in increasing its use of this method of  contracting, and has implemented new guidance and training to help  expand its use further. In addition, PBGC has increased its incorporation  of performance metrics across various types of contracts. Such linkage is  important to ensuring contract work is well integrated into PBGC’s  strategic plan, just as PBGC does with work performed in house. Additional Training on Performance-Based Contracting Under Way

To help address the barriers to using the performance-based contracting  method that stem from fear of change, lack of understanding of  performance-based contracting methods, or fear of loss of control over the  contracting process, our 2008 report recommended that PBGC provide  comprehensive training on performance-based contracting for PBGC’s  Procurement Department staff, managers, and acquisition-related  workforce. Conclusions

With nearly three-fourths of its budget allocated to contracts, PBGC relies  heavily on contracting to achieve its corporate mission. To this end, we reiterate our prior recommendations in this area, which  have yet to be implemented. In addition, to encourage expanded use of performance-based contracting  with performance metrics linked to the agency’s mission and goals, we  recommend that the Director of PBGC  ensure that the rationale for not using a performance-based service  acquisition approach is documented, consistent with the FAR; and ensure that the performance metrics for major service contracts are  linked to specific corporate strategic goals to the maximum extent  practicable. Appendix II: Summary of PBGC Actions Taken to Improve Contracting in Response to Previous Recommendations

PBGC has taken a number of steps to strengthen its contracting process in  response to contract-related recommendations from previous GAO  reports, as well as reports from PBGC’s Office of Inspector General (IG). I), and past GAO work. Pension Benefit Guaranty Corporation: Improvements Needed to  Address Financial and Management Challenges. Pension Benefit Guaranty Corporation: Governance Structure Needs  Improvements to Ensure Policy Direction and Oversight. Federal Contracting: Observations on the Government’s Contracting  Data Systems.
Why GAO Did This Study

The Pension Benefit Guaranty Corporation (PBGC) insures the pension benefits of more than 44 million U.S. workers and retirees in more than 27,500 private defined benefit plans. In response to growing workloads over the last 20 years, PBGC has come to rely heavily on contractors to perform its work. With the influx of plan terminations during the recent economic downturn, GAO was asked to examine: (1) how PBGC decides between contracting for services and performing services in house; (2) the steps PBGC has taken to strengthen its internal controls over the contracting process; and (3) PBGC's implementation of a performance-based approach in its recent contracts. To conduct this study, GAO reviewed federal and PBGC contracting policies; interviewed PBGC officials and selected contractors; examined a small judgmental sample of eight recent contracts selected based on type, amount, and location; and assessed PBGC's actions in response to past GAO and PBGC Inspector General (IG) recommendations.

What GAO Found

PBGC's contracting decisions are based primarily on historical practice within each of its departments rather than strategic assessment. Nearly three-fourths of PBGC's budget is allocated to contractors, yet PBGC does not have a strategic agency-level plan for contracting. PBGC often justifies extensive use of contractors based on the need to manage fluctuating workloads; however, historical data appear to indicate that PBGC has more contractor workers than needed to respond to workload fluctuations. Some of its contractor use is justified based on needed expertise or lower cost. However, because PBGC does not routinely conduct cost-benefit or risk analyses as part of its contract decision-making process, the efficiency and effectiveness of its contracting is unknown, and PBGC's long-term extensive reliance on contractors may be placing the agency at risk of eroding management control in core functions. At the same time, PBGC has adopted new policies and procedures to improve contractor oversight and ensure that federal contracting requirements are met, addressing past GAO and PBGC IG recommendations in this area. For example, PBGC has issued new standard operating procedures and is conducting training for staff involved in the agency's contracting activities. In addition, PBGC has increased the use of competitive and fixed price contracts, which provide more integrity to the contracting process by limiting government cost and performance risk. In addition, PBGC has implemented new guidance and training to improve staff knowledge and understanding of performance-based contracting and has expanded its use. Between fiscal years 2008 and 2010, PBGC increased the use of performance-based contracts from 2 to 12 percent. PBGC also increased its incorporation of performance metrics across various types of contracts to ensure performance is measured in terms of outcomes. Thus, past GAO and IG recommendations in this area have been partially addressed. However, unlike work performed in house, PBGC does not require performance metrics for its contract work to be linked to agency mission and goals, which is important to ensuring such work is well integrated into its strategic plan.

What GAO Recommends

GAO recommends that PBGC improve its strategic approach to contracting by developing an inventory of contract resources, assessing risk in areas heavily reliant on contractors, documenting its consideration of performance-based contracting, and linking contractor performance to agency goals. PBGC agrees with our recommendations.