DOD  spending on services has been increasing significantly over the last several  years—about 66 percent since fiscal year 1999—to a level of $118 billion in  fiscal year 2003 (see fig. Our review also found  that 64 contracts had sufficient, documented surveillance and in some of  these instances, surveillance was extensive. Surveillance Personnel Not Always Assigned and Surveillance Documentation Insufficient

For the 90 DOD service contracts we reviewed, 26 of the contracts  (29 percent) had insufficient surveillance in that they lacked assigned  surveillance personnel or complete documentation of surveillance. On the contracts we reviewed,  13 surveillance personnel had not received the required training. Some tasks the government expected  to be performed were not in the contract, and the contractor was  providing poor service on other tasks. The  Army, unlike the Air Force and Navy organizations we visited, does not  require surveillance personnel to be assigned to contracts prior to the  contract award date. Surveillance Personnel Not Rated on Surveillance Responsibilities

A further indication that surveillance is not always given a high priority is  that almost all personnel involved in our review are not rated on  performance of their surveillance responsibilities. Five NAVSEA  surveillance personnel out of 17 we talked to told us they felt they did not  have enough time, in a normal workday, to fully perform their surveillance  duties. DOD also recently established additional guidance on contract  surveillance for cost-reimbursable and time and materials service  contracts that states that surveillance personnel should be appointed to  these types of service contracts during the early contract planning phase  to help improve oversight. DOD Efforts to Improve Service Contract Management and Oversight

DOD has taken some steps to implement provisions in section 801 of the  National Defense Authorization Act for Fiscal Year 2002, which was  intended to improve DOD management and oversight of services  procurement and reinforce compliance with all applicable statutes,  regulations, directives, and other requirements, regardless of whether the  services are procured through a DOD contract or other agencies’  contracts. Recommendations for Executive Action

To help improve service contract surveillance and further mitigate risk, we  recommend that the Secretary of Defense  ensure that the proper surveillance training of personnel and their  assignment to service contracts occurs no later than the date of contract  award;    develop practices to help ensure accountability for personnel carrying out  surveillance responsibilities;  ensure that DOD’s service contract review process and associated data  collection requirements provide information that will provide more  management visibility over contract surveillance; and  revise the October 2004 policy on proper use of other agencies’ contracts  to include guidance on conducting surveillance of services procured from  other agencies’ contracts. We also  discussed DOD’s efforts with senior OSD acquisition officials.
Why GAO Did This Study

The Department of Defense (DOD) is the federal government's largest purchaser of contractor services, spending $118 billion in fiscal year 2003 alone--an increase of 66 percent since fiscal year 1999. DOD is expected to rely increasingly on contractors to carry out its mission. In recent reports, DOD has identified inadequate surveillance on service contracts. This report examines how DOD manages service contract surveillance. It looks at the extent of DOD's surveillance on a selection of service contracts, reasons why insufficient surveillance occurred, and efforts to improve surveillance.

What GAO Found

Surveillance varied on the 90 contracts we reviewed. Surveillance was insufficient on 26 of the contracts we reviewed but was sufficient on 64 contracts. Fifteen had no surveillance because no personnel were assigned such responsibilities; the other 11 had assigned personnel but could not provide evidence of surveillance due to incomplete documentation. Also, some surveillance personnel did not receive required training before beginning their assignments. According to DOD officials, insufficient surveillance occurred because surveillance is not as important to contracting officials as awarding contracts and therefore, does not receive the priority needed to ensure that surveillance occurs. The Army, unlike the Air Force and Navy organizations we visited, does not require surveillance personnel to be assigned responsibility prior to contract award. We also found that surveillance personnel involved in our review were not evaluated on how well they perform their surveillance duties. Further, surveillance was usually a part-time responsibility and some personnel felt that they did not have enough time in a normal workday to perform their surveillance duties. DOD has taken steps to implement provisions in the National Defense Authorization Act for Fiscal Year 2002 intended to improve the general management and oversight of service contract procurement and, in October 2004, DOD issued a policy that emphasized the proper use of other agencies' contracts. However, these efforts did little to improve service contract surveillance. On a more specific item, DOD did issue guidance that now requires appointment of surveillance personnel during the early planning phases of cost-reimbursable and time and materials service contracts. At the military service level, in April 2004, the Army revised its acquisition instructions and began requiring surveillance on some professional support service contracts; but, the revision did not apply to those contracts awarded before the enactment date that were still in effect.