DOD’s September 2011 In-sourcing Report Addressed Two of the Three Mandated Requirements

DOD’s September 2011 in-sourcing report addressed the legislative  requirements to report the service or agency involved with each of its  fiscal year 2010 in-sourcing actions and the rationale for each action, but  did not report the number of contractor employees whose functions were  in-sourced, as specified in the act. DOD stated that it could not report the  number of contractor employees because it contracts for services, rather  than hiring contractor employees directly. An OUSD (P&R) official noted  that one of the data elements Congress has required DOD to include in  its annual inventories of contracted services is the number of contractor  employees, expressed as full-time equivalents, that performed each  activity, and DOD is in the process of implementing a revised approach  to collect these data directly from contractors. In its September 2011 in-sourcing  report to Congress, DOD noted that ongoing efforts to collect the  information required by section 2330a may in the future help inform the  number of contractor full-time equivalents in-sourced. DOD and Military Department Approaches to Verifying Reported Data Varied

To produce the report on fiscal year 2010 in-sourcing actions, OUSD  (P&R) requested that DOD components provide certain information about  their fiscal year 2010 in-sourcing actions, and DOD and the military  departments took varying, and in some instances limited, approaches to  ensuring the reliability of the reported data. Our work identified either an inaccuracy in the information reported to  OUSD (P&R) for the in-sourcing report or concerns about the accuracy of  the data included in the report to Congress at four of the nine major  commands we met with, as the following examples illustrate:
The Navy’s Fleet Forces Command acknowledged that while they  reported establishing 348 authorizations (out of a total of 354 fiscal  year 2010 in-sourcing authorizations) to perform information  technology functions that were inherently governmental, these  authorizations should have been categorized as exempt from private  sector performance for continuity of infrastructure operations. Without access to accurate data, decision makers in DOD and  Congress may not have reliable information to help manage and oversee  DOD’s in-sourcing actions. Alignment between In-sourcing Actions and Strategic Workforce Plans Is Unclear

While section 323 of the FY11 NDAA did not require the in-sourcing  report to address whether DOD’s fiscal year 2010 in-sourcing actions  aligned with the department’s strategic workforce plans, DOD officials told  us that the department had taken some initial steps to align these efforts. DOD’s in-sourcing implementation guidance  required components to identify contracted services for possible in- sourcing as part of a total force approach to strategic human capital  planning, and we and the Office of Personnel Management have  identified aligning an organization’s human capital program with its  current and emerging mission and programmatic goals as a critical need  of strategic workforce planning.data used in the in-sourcing report and workforce plans hinder an  accurate assessment of the degree to which DOD’s use of in-sourcing  achieved the department’s strategic workforce objectives. However, differences in the types of  With respect to the steps DOD took to align in-sourcing with its strategic  workforce plans, the department identified a goal for the in-sourcing  initiative in its March 2010 civilian strategic workforce plan. The plan  stated that the goal was to optimize the department’s workforce mix to  maintain readiness and operational capability, ensure inherently  governmental positions were performed by government employees, and  construct the workforce in an effective, cost efficient manner. However, without  greater alignment between the in-sourcing data and strategic workforce  plans, decision makers in DOD and Congress have limited information  about the extent to which in-sourcing actions furthered the department’s  strategic workforce goals. To improve DOD’s strategic workforce planning, we recommend that the  Secretary of Defense direct the Under Secretary of Defense for Personnel  and Readiness to better align the data collected on in-sourcing with the  department’s strategic workforce plans and establish metrics with which  to measure progress in meeting any in-sourcing goals. We  agree, and have noted in our report that the need for reliable data is not  unique to in-sourcing decisions. In that regard, as we state in our report, DOD  officials acknowledged that they had not established metrics to measure  progress against the in-sourcing goal in the department’s most recent  strategic workforce plan and that it would be difficult to use the available  data to assess such progress. Specifically, we ascertained  the extent to which DOD reported on: (1) the agency or service of the  department involved in the decision, (2) the basis and rationale for the  decision, and (3) the number of contractor employees whose functions  were converted to performance by DOD civilians. We also reviewed DOD guidance on the in-sourcing  decision process.
Why GAO Did This Study

The Department of Defense (DOD) relies on contractors for varied functions, and obligated about $200 billion in fiscal year 2010 for contracted services. In-sourcingmoving contracted work to performance by DOD employeeshas been one tool through which DOD managed its workforce. The National Defense Authorization Act for Fiscal Year 2011 required DOD to report on its fiscal year 2010 in-sourcing decisions and required GAO to assess DODs report. The act required DOD to report, for each decision, the agency or service involved, the basis and rationale for the decision, and the number of contractor employees in-sourced. GAO assessed the report against these requirements and examined how DOD prepared the report and assured itself of the datas reliability, and the extent the in-sourcing actions were aligned with DODs strategic workforce plans. GAO reviewed the in-sourcing report, examined in-sourcing guidance, reviewed DODs recent strategic workforce plans, and interviewed appropriate department officials.

What GAO Found

DOD reported on two of three issues required by law: the component involved with each of its fiscal year 2010 in-sourcing actions and the rationale for each action. However, DOD did not report the number of contractor employees whose functions were in-sourced, because, DOD officials said, the department does not have these data. Specifically, the department noted, in its report to Congress, that it contracts for services and does not hire individual contractor employees. Instead, DOD reported the number of new civilian authorizations created due to in-sourcing. Congress has separately required DOD to report the number of contractor employees performing services for DOD, expressed as full-time equivalents, as part of its inventory of activities performed under contracts for services. In its in-sourcing report, DOD said that efforts to comply with this additional requirement may in the future help inform the number of contractor full-time equivalents in-sourced.
The Office of the Under Secretary of Defense for Personnel and Readiness (OUSD (P&R)) requested information from DOD components on fiscal year 2010 in-sourcing actions to produce its report, and the military departments and OUSD (P&R) took varying, and in some instances limited, approaches to ensuring the datas reliability. Additionally, some of the commands GAO contacted made errors in reporting in-sourcing data. For example, 348 of 354 new in-sourcing authorizations by the Navys Fleet Forces Command were categorized as inherently governmental when they should have been categorized as exempt from private sector performance for continuity of infrastructure operations. Federal internal control standards state that data verification helps provide management with reasonable assurance of achieving agency objectives, including compliance with laws. Without accurate data, decision-makers in DOD and Congress may not have reliable information to help manage and oversee DOD in-sourcing.
While the mandate did not require the in-sourcing report to align with DODs strategic workforce plans, it was unclear to what extent the in-sourcing actions aligned with DODs plan due to differences in the types of data used in the in-sourcing report and the most recent workforce plan, and the absence of metrics to measure the in-sourcing goal established in the plan. DOD took some steps toward aligning these efforts, such as establishing a goal for in-sourcing in its most recent strategic workforce plan, which was issued in March 2010. Additionally, OUSD (P&R) officials said that the in-sourcing actions furthered DODs strategic workforce objectives, but acknowledged they had not established metrics to measure against the in-sourcing goalwhich was to, among other things, optimize the departments workforce mix to maintain readiness and operational capability and ensure inherently governmental positions were performed by government employees. Additionally, the strategic workforce plans coded jobs by occupational series, such as budget analyst, while the in-sourcing report used function codes indicating broad areas of work, such as logistics. DOD officials told GAO there is no crosswalk between the two. GAO has previously reported that strategic workforce planning includes aligning human capital programs with programmatic goals. Without metrics and due to the differences in the data used, DOD and Congress may have limited insight on the extent to which in-sourcing actions met strategic workforce goals.

What GAO Recommends

GAO recommends that, for future in-sourcing actions, DOD (1) issue guidance to components on verifying in-sourcing data, and (2) better align in-sourcing data with strategic workforce plans and establish metrics to measure progress against in-sourcing goals. DOD partially concurred with the recommendations, but noted that the challenges identified in GAOs report are not unique to in-sourcing. GAO agrees, but believes actions are necessary to improve oversight of DODs in-sourcing.