For example, as  of September 2014, 32 of the 33 components certified that they had  reviewed their inventory of contracted services and, overall, more  components addressed more of DOD’s required reporting elements than  in fiscal year 2011. DOD also continues to face  challenges in fully implementing the CMRA-based common data system  that is intended to collect the required data for the inventories DOD  components must review, thus jeopardizing its plan to have all  components using this system to collect manpower data reported by  contractors by 2016. As we  reported in May 2014, DOD officials noted that the lack of dedicated  resources has been a key factor hindering implementation of its planned  ECMRA, the common data system based on the Army’s CMRA system. As we concluded in our May 2014 report, DOD did not have a  comprehensive plan with timeframes and milestones to measure its  progress toward developing a common contractor manpower data system  and associated business processes. This review raises a  question about whether DOD will continue to implement a DOD-wide  inventory data collection system modeled after the Army’s CMRA system  or attempt to develop a new system. The Military Departments Have Not Developed Statutorily Required Plans or Identified Specific Responsibilities to Facilitate the Use of the Inventory

The military departments have not developed plans or enforcement  mechanisms to use the inventory of contracted services to inform  strategic workforce planning, workforce mix, and budget decision-making  processes, as statutorily required. Disparate offices are responsible for the various  decision-making processes at the military departments, and the  secretaries of the military departments have not assigned specific  responsibility for coordinating among these offices to develop plans to  use the inventory to inform such decisions. In part, the absence of  accountable officials to integrate the use of the inventory leaves the  department at continued risk of not complying with the applicable  legislative requirements to use the inventory to support management  decisions. The Air Force  failed to submit an inventory review certification letter while the Army  submitted incomplete review data for several major commands. DOD’s fiscal year 2013 guidance does not fully address some  of the shortcomings our review identified, including how to identify  contracts to review or the methodologies or approaches to use to ensure  the components’ inventory reviews adequately assess contractor  activities. As a result, components may not fully identify instances of  contractors providing services that are closely associated with inherently  governmental functions. Without a thorough review of contractor  activities, DOD risks becoming overly reliant on contractors to support  core missions. We had previously recommended  that DOD develop a plan of action with timeframes and milestones to  measure DOD’s progress in implementing a common data system, but  DOD has yet to do so. Internal control standards state that  management should establish an organizational structure, delegate  authority for key roles, and assign responsibility to enable an organization  to achieve management objectives and to comply with laws. In response to our recommendation to revise its inventory review  guidance to provide more clarity on which contracted functions should be  reviewed and to provide approaches the components may use to ensure  that the nature of how the contract is being performed is considered, the  department noted it is currently enhancing its guidance for the fiscal year  2014 inventory of contracted services and intends to have components  review and certify 100 percent of the services reported in their respective  inventory. To assess the extent to which DOD components—to include the three  military departments and the defense agencies— implemented the  required review of contracts and activities in the inventory of contracted  services pursuant to subsection(e), for the fiscal year 2012 inventory, we  examined the guidance related to the fiscal year 2012 inventory review  process which the Office of the Under Secretary of Defense for  Acquisition, Technology, and Logistics (AT&L) and the Acting Under  Secretary of Defense for Personnel and Readiness (P&R) issued on  February 4, 2013. We discussed identification of a cognizant official for  the plans and processes with acquisition, manpower, programming, and  budgeting officials. Appendix II: Comparison of Components’ Identification of Contractors Providing Services Closely Associated With Inherently Governmental Functions in their Fiscal Year 2011 and 2012 Certification Letters

Appendix II: Comparison of Components’  Identification of Contractors Providing  Services Closely Associated With Inherently  Governmental Functions in their Fiscal Year  2011 and 2012 Certification Letters The Navy did not identify the number of FTEs,  but noted they have 25 contracts that contained  these functions.
Why GAO Did This Study

DOD is the government's largest purchaser of contractor-provided services. In 2008, Congress required DOD to compile and review an annual inventory of its contracted services to include the number of contractors providing services to DOD and the functions these contractors performed, and in 2011, amended this statute to require DOD to plan to use that inventory to inform certain department-wide decision making processes. The National Defense Authorization Act for Fiscal Year 2014 mandated GAO to report on the required reviews and plans to use these inventories.
For this report, GAO assessed the extent to which DOD components (1) reviewed contracts and activities in the fiscal year 2012 inventory of contracted services and (2) developed plans to use the inventory for decision-making. GAO reviewed relevant laws and guidance, reviewed component certification letters from 32 components, and interviewed DOD acquisition, manpower, programming, and budgeting officials.

What GAO Found

The Department of Defense (DOD) continues to face challenges in assuring that it conducts and reports on the results of its required inventory reviews. As of September 2014, 32 of the 33 components that were required to conduct an inventory review certified that they had done so and generally addressed more of the required reporting elements than in fiscal year 2011. However, GAO found limitations with the inventory review results. For example, the Air Force did not submit a fiscal year 2012 inventory certification letter and the Army's review was incomplete at the time its Secretary signed the certification. Further, components may not have fully identified all instances in which contractors were providing services that are closely associated with inherently governmental functions, a key review objective to help ensure that the DOD is not overly reliant on contractors to support core missions. DOD's March 2014 guidance, which is applicable to the fiscal year 2013 inventory, does not fully address some of the shortcomings GAO identified, including how to identify contracts for review or approaches to ensure that components adequately assess contractor activities. As a result, components may not fully identify instances of contractors providing services that are closely associated with inherently governmental functions.
A key factor hindering the components' inventory reviews is the lack of accurate and reliable data. DOD has not resolved issues with implementing its planned common data system based on the Army's existing system. Further, in September 2014, DOD initiated a new review, due by December 2014, to identify and develop options to collect these data. This review raises a question of whether DOD will continue to implement a common data system modeled after the Army's system or attempt to develop a new system. DOD continues to lack a plan with timeframes and milestones to measure its progress toward implementing a common data system. These factors jeopardize DOD's goal to have all components, by 2016, collect statutory-required contractor manpower data. Further delays in resolving these issues will undermine the inventory's usefulness.
The military departments generally have not developed plans to use the inventory of contracted services to facilitate DOD's strategic workforce planning, workforce mix, and budget decision-making processes, as statutorily required. Numerous offices are responsible for the various decision-making processes at the military departments, and the Secretaries of the military departments have not assigned specific responsibility for coordinating among these offices to do so. The absence of officials who are accountable for integrating the use of the inventory leaves the department at continued risk of not complying with the applicable legislative requirements to use the inventory to support management decisions. Internal control standards state that management should assign responsibility to enable an organization to achieve management objectives and to comply with laws.

What GAO Recommends

GAO recommends DOD revise inventory guidance to improve the review of contract functions, approve a plan of action with milestones and timeframes to establish a common data system to collect contractor manpower data, and designate a senior management official at the military departments to develop plans to use inventory data to inform management decisions. DOD concurred with GAO's recommendations.