The government is relying on contractors to perform many tasks that  closely support inherently governmental functions, such as contracting  support, intelligence analysis, security services, program management, and  engineering and technical support for program offices. The closer contractor services come to supporting  inherently governmental functions, the greater the risk of contractors  influencing the government’s control over and accountability for decisions  that may be based, in part, on the contractor’s work. Potential Risks Associated with Use of Contractors

When the decision is made to use contractors in roles closely supporting  inherently governmental functions, additional risks are present. Defense  contractor employees are not subject to the same laws and regulations  that are designed to prevent personal conflicts of interests among federal  employees. When contractors work side by side with government employees and  perform the same mission-related duties, the risk associated with such  contracts can be increased. Contingency Situations Reveal Acquisition Workforce Shortfalls

In July 2006, we reported that DOD’s acquisition workforce is subject to  certain conditions that increase DOD’s vulnerabilities to contracting fraud,  waste, and abuse, including    growth in overall contracting workload,    pending retirement of experienced government contracting personnel, and    a greater demand for contract surveillance because of DOD’s increasing  reliance on contractors for services. Government waste is growing and far exceeds the  cost of fraud and abuse. These vulnerabilities are more  dramatically revealed in contingency situations, such as the conflicts in  Iraq and the aftermath of Hurricane Katrina, when large amounts of money  are quickly made available and actions are hurried. We have long noted that  DOD’s acquisition workforce needs to be made a priority. We have  reported that DOD needs to have the right skills in its acquisition  workforce to effectively implement best practices and properly manage  the acquisition of goods and services. Monitoring Contractor Performance

The role of the acquisition function does not end with the award of a  contract. It requires continued involvement throughout contract  implementation and closeout to ensure that contracted services are  delivered according to the schedule, cost, quality, and quantity specified in  the contract. We have reported wide discrepancies in the rigor with which CORs  perform their duties, particularly in unstable environments. It  stated that the inability to monitor contractor performance and enforce  contracts are critical problems in an expeditionary environment and cited  an example: “When the critical need is to get a power station running, and  there are no resources to monitor contractor performance, only the  contractor knows whether the completed work is being sabotaged  nightly.”
In December 2006, we reported that while DOD has taken some steps to  improve its guidance on the use of contractors to support deployed forces,  addressing some of the problems we have raised since the mid-1990s, it  continues to face long-standing problems that hinder its management and  oversight of contractors at deployed locations. Cost of Contractors

A key assumption of many of the federal management reforms of the 1990s  was that the cost-efficiency of government operations would be improved. We recently reported that sufficient data are not available to determine  whether increased service contracting has caused DOD’s costs to be  higher than they would have been had the contracted activities been  performed by uniformed or DOD civilian personnel. We compared the costs of the government employees at the GS-12 and GS- 13 levels to their equivalent contractor counterparts (referred to as  contract specialists II and III) and found that, on average, the Army is  paying up to 26 percent more for the contractors, as depicted in table 2. We will continue to do work in this area. Appendix I: Systemic Acquisition Challenges at the Department of Defense

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Why GAO Did This Study

The Department of Defense's (DOD) spending on goods and services has grown significantly since fiscal year 2000, to well over $314 billion annually. GAO has identified DOD contract management as a high-risk area for more than decade. With awards to contractors large and growing, DOD will continue to be vulnerable to contracting fraud, waste, or misuse of taxpayer dollars, and abuse. Prudence with taxpayer funds, widening deficits, and growing long-range fiscal challenges demand that DOD maximize its return on investment, while providing warfighters with the needed capabilities at the best value for the taxpayer. This statement discusses (1) the implications of DOD's increasing reliance on contractors to fill roles previously held by government employees, (2) the importance of the acquisition workforce in DOD's mission and the need to strengthen its capabilities and accountability, and (3) assumptions about cost savings related to the use of contractors versus federal employees. This statement is based on work GAO has ongoing or has completed over the past several years covering a range of DOD contracting issues.

What GAO Found

DOD has increasingly turned to contractors to fill roles previously held by government employees and to perform many functions that closely support inherently governmental functions, such as contracting support, intelligence analysis, program management, and engineering and technical support for program offices. This trend has raised concerns about what the proper balance is between public and private employees in performing agency missions and the potential risk of contractors influencing the government's control over and accountability for decisions that may be based, in part, on contractor work. Further, when the decision is made to use contractors in roles closely supporting inherently governmental functions, additional risks are present. Contractors are not subject to the same ethics rules as government even when doing the same job, and the government risks entering into an improper personal services contract if an employer/employee relationship exists between the government and the contractor employee. DOD's increasing reliance on contractors exacerbates long-standing problems with its acquisition workforce. GAO has long reported that DOD's acquisition workforce needs to have the right skills to effectively implement best practices and properly manage the acquisition of goods and services. Weaknesses in this area have been revealed in recent contingency situations, but they are present in nonemergency circumstances as well, with the potential to expose DOD to fraud, waste, and abuse. It is important to note that the role of the acquisition function does not end with the award of a contract. Continued involvement of the workforce throughout contract implementation and closeout is needed to ensure that contracted services are delivered according to the schedule, cost, quality, and quantity specified in the contract. GAO has in the past several years reported wide discrepancies in the rigor with which contracting officer's representatives perform these duties, particularly in unstable environments such as the conflict in Iraq and the aftermath of Hurricane Katrina. A key assumption of many of the federal management reforms of the 1990s was that the cost-efficiency of government operations could be improved through the use of contractors. GAO recently reported that sufficient data are not available to determine whether increased service contracting has caused DOD's costs to be higher than they would have been had the contracted activities been performed by uniformed or DOD civilian personnel. GAO recently probed, in-depth, the cost of contractor versus government contract specialists at the Army's Contracting Center for Excellence and found that the Army is paying up to 26 percent more for the contractors as compared to their government counterparts.