	Background

		Legislative Contract Services Limitation Requirements

Section 808 of the NDAA for fiscal year 2012, as amended by section 802  of the NDAA for fiscal year 2014, limited DOD’s total obligations for  contract services in fiscal years 2012 through 2014 to the amount  requested for these services in the fiscal year 2010 President’s Budget  Request. These functions may  include personal services or other positions that may put the government  at risk of contractors inappropriately influencing government decisions. Prior GAO Work

In December 2014, we reported on DOD’s implementation of the section  808 limitations in fiscal years 2012 and 2013. As a result, we  recommended that DOD identify additional data sources beyond the  inventory of contracted services to help ensure that funding reductions  called for in the law are implemented. DOD concurred with our  recommendation. DOD Adhered to the 2014 Contract Services Spending Limit Due in Part to Increased Oversight from the Comptroller and Military Departments

DOD obligated $54.6 billion, or $280 million less than the limit on contract  services in fiscal year 2014. In addition, the Comptroller’s office improved  planning and oversight of contract services for fiscal year 2014 by  seeking input when setting spending targets and implementing a waiver  request process to allow for adjustments during the year. However, Army and Navy budget officials identified additional  steps they plan to take to better manage the contract services spending  limit in the future. Military Departments Took Steps to Improve Fiscal Controls, but Varied in Adherence to Obligation Targets

For fiscal year 2014, the military departments continued to improve their  management of contract services obligations, but experienced varied  success in adhering to their targets. Military Departments Achieved Required Funding Reduction for Key Functions Based on Revised Approach to Measure Compliance

Our analysis of DOD obligation data indicate that all of the military  departments achieved funding reductions greater than 20 percent for  closely associated with inherently governmental and staff augmentation  functions by fiscal year 2014. Section 813 of the NDAA for fiscal year  2015 facilitated DOD’s implementation of our December 2014  recommendation by encouraging DOD to use different data sources, such  as advisory and assistance services, to measure compliance with closely  associated with inherently governmental and staff augmentation funding  reductions. Advisory and assistance service is a budget category that  includes many of the types of contractor services that are considered  closely associated with inherently governmental and staff augmentation  functions. This new measure was adopted  after a lack of data hindered DOD’s previous attempts to demonstrate  compliance. In May 2015, the Comptroller issued guidance instructing components to  submit a separate budget exhibit for the fiscal year 2017 budget  submission with advisory and assistance service obligations for fiscal  years 2010 through 2015 to demonstrate the required funding reductions  in closely associated with inherently governmental and staff augmentation  contracts. As  shown in table 2, the Air Force and Navy achieved reductions in advisory  and assistance service obligations greater than 30 percent from fiscal  years 2010 through 2013. The Army achieved a 9 percent reduction by  fiscal year 2013, but achieved a 32 percent reduction in fiscal year 2014. Agency Comments

Because DOD has efforts underway to address our December 2014  recommendations, we are not making new recommendations in this  report. Specifically, we assessed DOD’s implementation of the 1) contract  services spending limit for fiscal year 2014 and 2) funding reductions for  contracts with closely associated with inherently governmental and staff  augmentation functions from fiscal years 2010 through 2014. To determine the extent to which DOD implemented the contract services  spending limit in fiscal years 2014, we reviewed relevant laws and DOD  guidance, analyzed budget and obligation data from the Office of the  Under Secretary of Defense Comptroller for fiscal years 2010 and 2014  from the program resource collection process (PRCP) system, and  interviewed DOD and military department budget officials.
Why GAO Did This Study

Paying contractors for services, such as program management support, accounted for more than half of DOD's $285 billion in total acquisition obligations for fiscal year 2014. Congress limited DOD's contract services obligations for fiscal years 2012 through 2014 and required funding reductions of 10 percent per year in 2012 and 2013 for contracts with closely associated with inherently governmental and staff augmentation functions. Subsequently, Congress extended the time period for DOD to achieve required funding reductions in select contract services through 2014. In December 2014, GAO reported on DOD's implementation for fiscal years 2012 and 2013 and made several recommendations to improve DOD's management of contract services.
The House Armed Services Committee Report 113-446 included a provision for GAO to review DOD's implementation of the contract services limits. This report addresses the extent to which, DOD implemented (1) the contract services spending limit for fiscal year 2014 and (2) funding reductions for closely associated with inherently governmental and staff augmentation functions from fiscal years 2010 through 2014. GAO reviewed relevant guidance; analyzed DOD financial, inventory, and other contract services data; and interviewed relevant officials.

What GAO Found

The Department of Defense (DOD) obligated $54.6 billion, or $280 million less than the limit on contract services for fiscal year 2014 due, in part, to increased oversight by the DOD Comptroller's office and military departments. The Comptroller's office sought input from components—military departments and defense agencies—when setting obligation targets and implemented a waiver request process to allow for adjustments, which it had not done in 2012 or 2013. The military departments also implemented a variety of controls over contract services obligations, but experienced varying degrees of success in adhering to their targets.
Moreover, Army and Navy budget officials identified additional actions their departments' plan to take to improve adherence to the spending limit. For example, Army budget officials are soliciting contract services budget estimates from commands and the Navy has increased monitoring of contract services obligations from twice a year to monthly.
GAO analysis of DOD obligation data from fiscal years 2010 through 2014 indicate that all of the military departments achieved required funding reductions for contractors performing closely associated with inherently governmental and staff augmentation functions—positions that run the risk of contractors inappropriately influencing government decisions. DOD initiated a different approach in fiscal year 2015 to measure compliance after GAO found in December 2014 that DOD lacked the data necessary to demonstrate reductions and recommended that DOD identify additional data sources to ensure funding reductions were achieved. Congress facilitated DOD's implementation of this recommendation in the National Defense Authorization Act (NDAA) for fiscal year 2015, encouraging DOD to use advisory and assistance services—a budget category that includes many of the types of contract services that are considered closely associated with inherently governmental and staff augmentation—to measure compliance with funding reductions. DOD issued guidance in May 2015 adopting the alternative measure and instructed components to submit these data as part of the fiscal year 2017 budget request. Based on currently available obligation data through fiscal year 2014, GAO found that the Air Force and Navy achieved reductions greater than 20 percent as required by Congress from 2010 through 2013. The Army achieved a 9 percent reduction by 2013, but achieved a 32 percent reduction in 2014. The DOD Comptroller plans to assess compliance for all DOD components, including the military departments, after the submission of the fiscal year 2017 budget request, which is expected in February 2016.

What GAO Recommends

DOD has efforts underway to address GAO's December 2014 recommendations; therefore, GAO is not making any new recommendations in this report. DOD concurred with the findings of this report.