From fiscal year 2005 through  fiscal year 2010, civilian agency obligations for professional and  management support service contracts increased $9.9 billion dollars, or  44 percent, to $32 billion (adjusted for inflation to 2010 dollars). 2.) Use of these services can result in the loss of  government accountability and control if proper oversight is not provided. Of the 230 professional and management support service contract  statements of work (SOW) we reviewed from the five agencies, at least  120 contracts—or more than half—requested services that the FAR  identifies as closely supporting inherently governmental functions,  including services related to budget preparation, reorganization and  planning activities, evaluation of another contractor’s performance, and  acquisition support. 3.) Agency Officials Generally Did Not Consider and Mitigate Risks Associated with Contracts for Professional and Management Support Services

Agency officials generally did not consider the risks of acquiring  professional and management support services before awarding the 12  contracts we reviewed. In some cases, however, officials later became  concerned and took steps to mitigate potential risks that contractors might  perform inherently governmental functions, or that government  employees might lack sufficient expertise to oversee the contractors’  work. Few Officials Considered Risks When Awarding Contracts That Closely Support Inherently Governmental Functions

For the contracts we reviewed, few of the contracting or program officials  said they considered whether the services they were contracting for  closely supported inherently governmental functions or took steps to  address the related risks before award. The FAR requires agencies to provide  enhanced management oversight for contracts that closely support  inherently governmental functions, and federal internal control standards  require assessments of risks. performance. The policy letter requires  agencies to develop and maintain internal procedures to address the  requirements of the guidance, but does not state when the procedures  should be implemented. Agencies Have Responded to Multisector Workforce Initiatives to Varying Degrees

The five agencies we reviewed have participated in many of OMB’s  efforts related to the multisector workforce, but only DHS has taken steps  to incorporate guidance to examine its use of contractors and balance its  workforce. OMB May Have Missed Opportunities to Address Cost Savings and Risk in Two Recent Initiatives

Two recent OMB efforts have highlighted a group of service codes for  increased attention as agencies address their use of service contracts,  but do not contain two codes—Other Professional Services and Other  Management Support Services—that accounted for a significant amount  of dollars obligated by civilian agencies on professional and management  support service contracts in fiscal year 2010 and may contain risks to the  government’s control of mission and operations. To ensure that the risks of professional and management support service  contracts are more fully considered and addressed, we recommend that  the Director of OMB, through the Office of Federal Procurement Policy  include contracts coded in the Federal Procurement Data System –  Next Generation (FPDS-NG) as Other Professional Services and  Other Management Support Services in the cost savings initiative for  management support services and planned service contract inventory  guidance to agencies for conducting analysis of special interest  functions. We also reviewed agency and  governmentwide guidance and spoke with agency and Office of  Management and Budget (OMB) officials. To determine the extent to which civilian agencies contract for  professional and management services, we compiled information from  FPDS-NG on procurement spending at civilian agencies for fiscal years  2005 through 2010. To gain greater insight into the types of activities included  in contracts under these codes, we judgmentally selected five civilian  agencies, the Departments of Homeland Security (DHS), Transportation  (DOT), and Housing and Urban Development (HUD), the U.S. Agency for  International Development (USAID), and the National Science Foundation  (NSF), based in part on their obligations for professional and  management support services in fiscal year 2009 as a proportion of  overall service obligations, as well as to represent varying agency  missions and amounts of service contract obligations. We also included service  codes that were frequently used by the five agencies and that might relate  to specific agency missions.
Why GAO Did This Study

In fiscal year 2010, civilian agencies obligated $136 billion on service contracts, including obligations for professional and management support services such as program evaluation and acquisition support. Many of these services increase the risk that contractors may inappropriately influence the government's authority, control, and accountability for inherently governmental decisions. GAO was asked to (1) determine the extent to which civilian agencies use professional and management support service contracts and the types of activities acquired, (2) determine if agencies consider and mitigate risks associated with contractors providing these services, and (3) assess agencies' response to recent Office of Management and Budget (OMB) efforts related to acquiring these services. GAO analyzed Federal Procurement Data System - Next Generation (FPDS-NG) data and selected a nongeneralizable sample of 230 statements of work and 12 case studies from five agencies with one-third of obligations for these services in fiscal year 2010. GAO also reviewed agency and governmentwide guidance and met with agency and OMB officials.

What GAO Found

From fiscal years 2005 through 2010, civilian agency obligations on contracts for professional and management support services increased 44 percent, from $22 billion to $32 billion (in 2010 dollars), more than twice the rate of increase for other services. For the five agencies GAO reviewedthe Departments of Homeland Security, Transportation, and Housing and Urban Development, the United States Agency for International Development, and the National Science Foundationmore than half of the 230 statements of work for professional and management support service contracts requested services that closely support the performance of inherently governmental functions. Using these services can inappropriately influence government decisionmaking if proper oversight is not provided. The five agencies generally did not consider and mitigate risks of acquiring professional and management support services prior to awarding the 12 contracts GAO reviewed. The Federal Acquisition Regulation requires agencies to provide enhanced management oversight for contracts that closely support inherently governmental functions. For the 12 contracts, few of the officials said they considered whether contracted services included such functions. In some cases, officials said they later became concerned that contractors might perform inherently governmental functions or that government employees lacked expertise to oversee contracted work, and took steps to mitigate risks. Guidance from four of the five agencies did not include processes to identify risks or ensure enhanced management oversight when contractors perform such services.
Recent congressional and OMB guidance has emphasized the need for agencies to examine their use of service contracts and the related risks. The five agencies have participated in these efforts, including service contract inventories and multisector workforce pilots, to varying degrees, but only DHS has taken steps to incorporate related OMB efforts into processes that examine their use of professional and management support services. A September 2011 OMB policy letter requires agencies to develop procedures to improve their management of risks when contracting for these services, but does not include an implementation deadline. Further, two OMB efforts have focused on selected professional and management support service codes from FPDS-NG that require increased agency attention, but the efforts exclude two related codes that accounted for significant obligations and that may similarly contain risks.

What GAO Recommends

GAO recommends that OMB establish a deadline for its recent requirement that agencies develop procedures for services, including those that closely support inherently governmental functions, and include two FPDS-NG codes in guidance for agencies' use of service contracts and in the cost savings initiative for management support services. OMB generally agreed with the recommendations.