We  previously reported on differences between the act and OMB guidance. As a  result, agencies did not report three data elements required by the statute  in their fiscal year 2010 inventories—(1) the role the services played in  achieving agency objectives, (2) the total dollar amount invoiced for  services under the contract, and (3) the number and work location of  contractor and subcontractor personnel. As a  result, OMB and Congress cannot meaningfully use these service  contract inventories to compare service contract obligations among  agencies or develop spending trends, and agencies did not have a  complete universe of service contracts to consider for review. Progress, however, is being made towards collecting this information. For  example, OMB directed agencies to start collecting information on the  role services play in achieving agency objectives for new contracts  awarded on or after March 1, 2012. Five agencies,  however, did not. One agency—DOT—reported information on fiscal  year 2010 obligations for its fiscal year 2011 inventory. The other 9 agencies  did not submit an inventory report to OMB or make their reports publicly  available. Specifically, the 5 agencies identified a total of 3 contracts where  contractors could be performing inherently governmental functions and  104 instances of contractors performing closely associated with inherently  governmental functions. We collected the required reports for 40 of the 49 agencies, either from  their websites or OMB. Under the proposed FAR  rule, if finalized, agencies would start collecting unavailable, but required  data elements directly from contractors. Although most agencies followed OMB guidance for reporting on their  inventory reviews, it is unclear based on the information provided in their  reports whether the results of the reviews were a real indication of the  agencies’ effective and appropriate use of contractors or due to the  different approaches used to conduct the inventory reviews. To help ensure that the service contract inventories contain consistent  and reliable information and that the service contract inventory analysis  reports have sufficient information to provide greater context and value,  we recommend that the Administrator of OMB’s Office of Federal  Procurement Policy clarify guidance to:
Require agencies to fully describe in their inventory review reports the  scope of the inventory reviews, including information such as the  number of contracts and the percentage of contracts reviewed for  each product and service code selected and the total universe of  contracts;
Require agencies to consistently report on the number of contractor  personnel and functions that were involved with the workforce issues  identified during their inventory reviews; and
Require agencies to include, as part of their inventory review reports,  the status of agency efforts to resolve findings identified in previous  reviews until they are resolved. OMB provided comments via e- mail, stating that it generally concurs with our recommendations. Appendix I: Scope and Methodology

Section 743 of the 2010 Consolidated Appropriations Act directed GAO to  report on the second annual service contract inventory that civilian  agencies were required to submit to the Office of Management and  Budget (OMB) by December 31, 2011. To satisfy the mandate, we  assessed civilian agencies’ efforts to (1) compile their fiscal year 2011  inventories and (2) review and report on their fiscal year 2010 inventories. To assess civilian agencies’ efforts to compile their fiscal year 2011  inventories, we reviewed the act and OMB guidance to determine what  data elements were required to be included in the service contract  inventories. These agencies were selected because they represent  approximately 42 percent of total fiscal year 2011 service contract  obligations for civilian agencies. We also met with agency  officials to determine the extent to which agencies have used their  reviews for decision making, including workforce planning and strategic  sourcing efforts, and to determine how agencies identified instances in  which contractors were performing inherently governmental functions or  functions closely associated with inherently governmental functions.
Why GAO Did This Study

In fiscal year 2011, civilian agencies reported $161 billion in contract obligations, $126 billion (almost 80 percent) of which were for services such as professional management and information technology support. Concerned about agencies' reliance on contractors, Congress included a requirement in the Consolidated Appropriations Act of 2010 for civilian agencies to compile and review an annual inventory of service contracts to examine certain issues, such as contractors performing inherently governmental functions or functions closely associated with inherently governmental functions, which would require enhanced management oversight. It also required OMB to develop guidance to assist agencies in meeting the act's requirements and for GAO to report on agency efforts.
GAO assessed agency efforts to (1) compile their fiscal year 2011 inventories and (2) review and report on their fiscal year 2010 inventories. To meet these objectives, GAO analyzed agencies' fiscal year 2011 service contract inventories and fiscal year 2010 service contract inventory review reports and compared them to legislative requirements, OMB guidance, and federal procurement data.

What GAO Found

Civilian agencies did not fully comply with statutory requirements for compiling fiscal year 2011 service contract inventories. For example, because the information is not currently readily available, the Office of Management and Budget (OMB) directed the 49 agencies that were required to submit inventories to defer the collection of three statutorily required data elements for each contract--the role the services played in achieving agency objectives, the total dollar amount invoiced for services under the contracts, and the number and work locations of contractor and subcontractor personnel. Progress, however, is being made to collect this information for future inventories. OMB directed agencies to start collecting information on the role services play in achieving agency objectives for new contracts awarded on or after March 1, 2012. A proposed Federal Acquisition Regulation rule was published in April 2011 to start collecting the remaining two data elements directly from contractors. We also found several instances where agencies significantly underreported obligations in their inventories, either because they misinterpreted or did not follow OMB guidance. For example, the General Services Administration underreported obligations by approximately $6.4 billion. Without complete and accurate service contract inventories, OMB and Congress cannot meaningfully compare service contract obligations among agencies, or develop spending trends for agencies, thus limiting the overall utility of the inventories.
Nine of the 49 civilian agencies did not submit a report on their fiscal year 2010 inventory review to OMB, as required. Of the 40 agencies that submitted reports on their inventory reviews, 5 agencies identified 3 contracts where contractors could be performing inherently governmental functions and 104 instances where contractors were performing closely associated with inherently governmental functions. It is unclear, however, based on the 40 agency reports, whether these results were a real indication of the agencies' effective and appropriate use of contractors or due to the different approaches agencies used to conduct the reviews. Agencies did not include important context in their reports, such as the number of contracts or the percentage of their inventories reviewed. Of the 25 agencies that reported the number of contracts they reviewed, most reviewed 50 or fewer contracts. OMB intends to have agencies share lessons learned, including the use of cross-functional teams, to help future review efforts.

What GAO Recommends

GAO recommends that OMB (1) work with agencies to improve how compliance with the act and with OMB guidance is monitored and (2) clarify guidance to agencies for compiling and reporting on their inventories. OMB generally concurred with our recommendations.