Section 955 of the National Defense Authorization Act for Fiscal  Year 2013 (Pub. DOD Projects Its Military and Civilian Workforce to Decrease, but Comparable Data on DOD’s Contractor Workforce Are Not Available

DOD’s data shows that since fiscal year 2001, its combined active,  reserve, and civilian workforce peaked in fiscal year 2011 at 3.1 million  personnel, and is projected by DOD to gradually decrease over the next  five years to below its fiscal year 2001 level. In its  inventory for fiscal year 2011, DOD reported that about 710,000  contractor FTEs were performing various functions under contracts for  services—which is equal to about 90 percent of the size of DOD’s civilian  workforce of 807,000 FTEs for that same fiscal year. Our analysis of  DOD’s obligations for contracted services using fiscal year 2013 constant  dollars shows DOD’s spending peaked in fiscal year 2010 at about $195  billion, more than twice the amount spent in fiscal year 2001. Such  spending decreased to about $174 billion in fiscal year 2012. DOD Has Taken Some Steps Useful for Determining the Appropriate Mix of Its Workforce, but Shortcomings Remain

DOD has taken some steps to improve its understanding and  management of its workforce, including service-specific efforts to obtain  better data about the workforce; however, several shortcomings remain. Further, DOD has not  updated its policies and procedures to reflect the most current statutory  requirements to use its civilian strategic workforce plan and the inventory  of contracted services to help determine the appropriate mix of personnel  in its workforce. § 115b), and to determine the appropriate  workforce mix necessary to perform its mission. DOD Defines the Core Missions of the Department, but Current Policy Does Not Fully Reflect the Need to Identify Critical Functions

DOD clearly identifies the core mission areas of the armed forces, which  cover broad areas of military activity that the department is statutorily  required to identify, but given the wide range of missions and  responsibilities of its various components, DOD has not developed a list  of “core or critical functions” for the department as a whole, nor is it  required to do so. Office of Federal  Procurement Policy Policy Letter 11-01 (OFPP 11-01), issued in  September 2011, requires agencies to identify “critical functions” to  ensure that they have sufficient internal capability, in DOD’s case civilian  and military personnel, to maintain control over functions that are core to  the agency’s mission and operations, but are otherwise permissible to  contract out to the private sector.would help ensure that DOD can accomplish its mission even if  contractors are unable to perform or otherwise default on their contractual  responsibilities. Absent specific policies and procedures that  delineate requirements relating to critical functions and explain how  components should identify these functions, DOD may lack assurance  that it properly identifies and retains the ability to maintain control over  critical functions. DOD Components Used the Inventory of Contracted Services and Other Data in Budget Submissions, but the Projections Have Significant Limitations

DOD components we reviewed used various methods and data sources,  including their inventories of contracted services, to project contractor  FTEs for their fiscal year 2013 and 2014 budget submissions, but our  analysis found that the components’ contractor FTE projections have  significant limitations. Among the challenges encountered by the DOD components in using the  inventory of contracted services, however, are the use of estimating  techniques based on inventory data that may not be accurate or current,  and the lack of a crosswalk between the inventory of contracted services  and specific budget lines of accounting. While the Army has a process  that addresses these challenges, it may be several years before the  remaining DOD components are able to do the same. DOD is taking  steps to help the remaining components address these challenges, but, in  the meantime, the budget does not provide an explanation of how the  contractor FTE estimates are derived and what limitations apply. DOD is required by law  to establish policies and procedures that require the use of the strategic  workforce plan when making determinations of the appropriate mix of  total workforce personnel necessary to perform its mission, and to include  in the strategic workforce plan an assessment of the appropriate mix of  military, civilian, and contractor personnel capabilities, which it has not  included to date. Further, we reported that  the guidance similarly does not reflect federal requirements for the  identification of critical functions as required by Office of Federal  Procurement Policy’s Policy Letter 11-01. Appendix II: Scope and Methodology

To determine the historical trends and future projections of the levels of  military, civilian, and contractor personnel, we obtained relevant data and  performed trend analysis. We also interviewed  DOD and military service officials to assess the actions DOD has taken to  ensure it is employing the appropriate workforce mix. We  compared federal policy concerning the identification of critical functions  to DOD’s efforts to date, and noted any differences.
Why GAO Did This Study

The federal governments growing fiscal challenges underscore the importance of DOD employing a strategic approach to determining the appropriate mix of its military, civilian, and contractor personnel to perform its mission, and determining the functions that are critical for the department to achieve its missions. A committee report accompanying the National Defense Authorization Act for Fiscal Year 2013 directed GAO to assess the measures DOD is taking to balance its workforce against its requirements. GAO examined (1) historical and projected workforce trends, (2) the actions DOD has taken to determine an appropriate workforce mix, (3) the analysis DOD performs to identify core or critical functions, and (4) how DOD used its inventory of contracted services to inform budget submissions. GAO performed trend analysis to determine historical and future workforce levels. GAO also reviewed relevant statutes, DOD and military department guidance, and budgetary submissions, and interviewed officials from DOD and the Office of Management and Budget (OMB).

What GAO Found

Since fiscal year 2001, the Department of Defense's (DOD) military and civilian workforces peaked in fiscal year 2011 at 3.1 million personnel combined, and is projected to decrease over the next five years to below the fiscal year 2001 level of 2.9 million. Comparable historical data on DOD's contractor workforce are not available. In fiscal year 2011, DOD reported that it contracted for services performed by an estimated 710,000 contractor full time equivalents (FTEs)--a workforce equal to about 90 percent of the size of DOD's civilian workforce of 807,000 FTEs. Using fiscal year 2013 constant dollars, GAO's analysis of DOD spending on contracted services shows obligations peaked in fiscal year 2010 at about $195 billion, more than twice the amount spent in fiscal year 2001. This spending decreased to about $174 billion in fiscal year 2012.
DOD has taken some steps to improve its understanding and management of its total workforce; however, several shortcomings remain. Specifically, DOD has yet to assess the appropriate mix of its military, civilian, and contractor personnel capabilities in its strategic workforce plan as required by law. Further, DOD has not updated its policies and procedures to reflect current statutory requirements to use its civilian strategic workforce plan and the inventory of contracted services to determine the appropriate mix of personnel to perform DOD's mission. Moreover, DOD's strategic human capital plan does not contain certain required elements and information and several factors limit the accuracy of its inventory of contracted services. As a result, the department is hampered in making more informed strategic workforce mix decisions, which is crucial to meeting DOD's congressional mandate to manage its total workforce.
Although DOD is not required to perform analysis to identify a list of core or critical functions across the department as a whole, DOD has identified broad core mission areas of the department. However, its current policies do not fully reflect federal policy concerning the identification of critical functions. Office of Federal Procurement Policy Policy Letter 11-01 requires agencies to identify and ensure that they retain control over critical functions that are core to the agency's mission, but may be contracted out to the private sector. DOD's policies and procedures predate the publication of this requirement, and consequently contain no reference to it. Absent specific policies and procedures on this process, DOD may lack assurance that it retains enough government employees to maintain control over these important functions.
DOD components used various methods and data sources, including their inventories of contracted services, to estimate contractor FTEs for budget submissions, but GAO's analysis found that the contractor FTE estimates have significant limitations and do not accurately reflect the number of contractors providing services to DOD. Components encountered challenges, to include the use of estimating techniques based on inventory data that may not be accurate and the lack of a crosswalk between the inventory and specific budget codes. While the Army has a process that addresses these challenges, it may be several years before the remaining DOD components are able to do the same. DOD is taking steps to help the remaining components address these challenges, but, in the meantime, the budget does not provide an explanation of how the contractor FTE estimates are derived and what limitations apply.

What GAO Recommends

GAO recommends that DOD revise its policies and procedures to incorporate (1) legislative requirements for workforce planning and (2) federal requirements for the identification of critical functions. GAO also recommends that DOD provide better information regarding contractor FTEs used in budget submissions. DOD noted actions that it has underway or planned to respond to these recommendations.