Agencies’ Reliance on Contractors to Support the Administration of Contracts and Grants in Iraq and Afghanistan Is Substantial

DOD, State, and USAID relied on contractors to perform a wide range of  administration functions for contracts and grants with performance in Iraq  and Afghanistan, but did not know the full extent of their use of  contractors to perform such functions. Contract and grant administration  functions performed by contractors included on-site monitoring of  contractor activities, contracting office support, program office support on  contract-related matters, and awarding or administering grants. For  instance, Air Force Center for Engineering and the Environment officials  told us that they used contractors to perform quality assurance functions  for all of the center’s construction projects in Iraq and Afghanistan. Offices Used Contractors to Address Contingency- Related Challenges, but Decisions Are Not Guided by Agencywide Strategies

The decisions to use contractors to support contract or grant  administration functions are largely made by individual contracting or  program offices within the agencies on a case-by-case basis. The offices  cited the lack of a sufficient number of government staff, the lack of in- house expertise, or frequent rotations among government personnel as  key factors contributing to the decision to use contractors to support their  efforts. While workforce-related challenges were  cited most frequently as a reason for needing to acquire contractor  support, contracting and program officials also noted that using  contractors in contingency environments can be beneficial to meet  unforeseen or changing needs, address safety concerns regarding the use  of U.S. personnel in high-threat areas, and provide a means to overcome  language barriers or help develop the local economy (see table 5). Our prior work has noted that to mitigate risks associated with using  contractors, agencies have to understand when, where, and how  contractors should be used given the risk of diminished institutional  capacity, potentially greater costs, and mission risks. Agencies Did Not Always Mitigate Risks Related to Contractors Supporting Contract or Grant Administration Functions

DOD, State, and USAID took a number of actions to mitigate conflict of  interest and oversight risks associated with contractors supporting  contract and grant administration functions, but did not always fully  address these risks. For example, the agencies generally complied with  requirements related to organizational conflicts of interest. Additionally, some State  officials were uncertain as to whether or how federal ethics laws regarding  personal conflicts of interest applied to personal services contractors. In  almost all cases, the agencies had designated personnel to provide  contract oversight, though they did not ensure enhanced oversight for  contractors that closely supported inherently governmental functions in  accordance with federal requirements. In our case  studies, we found that contractors managed personal conflicts of interest  in a variety of ways. Specifically, we analyzed (1) the extent to which DOD,  State, and USAID rely on contractors to perform administration functions  for other contracts and grants in Iraq and Afghanistan; (2) the reasons  behind decisions to use contractors to perform these functions and  whether the decisions are guided by strategic workforce planning; and (3)  whether the agencies have considered and mitigated conflict of interest  and oversight risks related to contractors performing contract or grant  administration functions. To determine the extent to which DOD, State, and USAID rely on  contractors to perform administration functions for other contracts and  grants in Iraq and Afghanistan, we obtained data from the agencies on  contracts and task orders with at least 1 day of performance in fiscal year  2008 or the first half of fiscal year 2009 for which duties included  administration functions for other contracts or grants with performance in  Iraq, Afghanistan, or both. Some of the  contracts or task orders included the performance of functions besides  contract or grant administration or the performance of administration  functions for contracts or grants with performance outside of Iraq and  Afghanistan, but FPDS-NG and agency obligation data were not detailed  enough to allow us to isolate the amount obligated for other functions or  locations.
Why GAO Did This Study

The Departments of Defense (DOD) and State and the U.S. Agency for International Development (USAID) have relied extensively on contractors in Iraq and Afghanistan, including using contractors to help administer other contracts or grants. Relying on contractors to perform such functions can provide benefits but also introduces potential risks, such as conflicts of interest, that should be considered and managed. Pursuant to the National Defense Authorization Act for Fiscal Year 2008, GAO reviewed (1) the extent to which DOD, State, and USAID rely on contractors to perform contract and grant administration in Iraq and Afghanistan; (2) the reasons behind decisions to use such contractors and whether the decisions are guided by strategic workforce planning; and (3) whether agencies considered and mitigated related risks. GAO analyzed relevant federal and agency policies and agency contract data, and conducted file reviews and interviews for 32 contracts selected for case studies.

What GAO Found

DOD, State, and USAID'suse of contractors to help administer contracts and grants was substantial, although the agencies did not know the full extent of their use of such contractors. GAO found that the agencies had obligated nearly $1 billion through March 2009 on 223 contracts and task orders active during fiscal year 2008 or the first half of fiscal year 2009 that included the performance of administration functions for contracts and grants in Iraq and Afghanistan. The specific amount spent to help administer contracts or grants in Iraq and Afghanistan is uncertain because some contracts or task orders included multiple functions or performance in various locations and contract obligation data were not detailed enough to allow GAO to isolate the amount obligated for other functions or locations. Overall, the agencies relied on contractors to provide a wide range of services, including on-site monitoring of other contractors' activities, supporting contracting or program offices on contract-related matters, and awarding or administering grants. For example, Air Force Center for Engineering and the Environment officials noted that contractors performed quality assurance for all of the center's construction projects in Iraq and Afghanistan. In another example, USAID contractors awarded and administered grants on USAID's behalf to support development efforts in Iraq and Afghanistan. Decisions to use contractors to help administer contracts or grants are largely made by individual contracting or program offices on a case-by-case basis. In doing so, the offices generally cited the lack of sufficient government staff, the lack of in-house expertise, or frequent rotations of government personnel as key factors contributing to the need to use contractors. Offices also noted that using contractors in contingency environments can be beneficial, for example, to meet changing needs or address safety concerns regarding the use of U.S. personnel in high-threat areas. GAO has found that to mitigate risks associated with using contractors, agencies have to understand when, where, and how contractors should be used, but offices' decisions were generally not guided by agencywide workforce planning efforts. DOD, State, and USAID took actions to mitigate conflict of interest and oversight risks associated with contractors helping to administer other contracts or grants, but did not always fully address these risks. For example, agencies generally complied with requirements related to organizational conflicts of interest, but USAID did not include a contract clause required by agency policy to address potential conflicts of interest in three cases. Also, some State officials were uncertain as to whether federal ethics laws regarding personal conflicts of interest applied to certain types of contractors. In almost all cases, the agencies had designated personnel to provide contract oversight. DOD, State, and USAID contracting officials generally did not, however, ensure enhanced oversight as required for situations in which contractors provided services closely supporting inherently governmental functions despite the potential for loss of government control and accountability for mission-related policy and program decisions.