The inventory is to include a number of specific data elements for each  identified activity, including  the function and missions performed by the contractor;  the contracting organization, the component of DOD administering the  contract, and the organization whose requirements are being met  through contractor performance of the function;  the funding source for the contract by appropriation and operating  agency;  the fiscal year the activity first appeared on an inventory;  the number of contractor employees (expressed as FTEs) for direct  labor, using direct labor hours and associated cost data collected from  contractors; a determination of whether the contract pursuant to which the activity  is performed is a personal services contract; and a summary of the information required by subsection 2330a(a) of title  10 of the U.S. Code. Prior GAO Work

Over the past five years, we have issued several reports on DOD’s efforts  to compile and review its inventory of contracted services and made  recommendations on a variety of issues related to the inventories. DOD concurred with our  recommendation, but has not yet implemented it. For  example, the level of detail and input provided on the use of the inventory  to inform annual program reviews and budget processes varied. In  addition, we continued to find significant differences and potential  underreporting in the extent to which components identified instances of  contractors providing services that are closely associated with inherently  governmental functions in their inventories. As of  July 2016, 40 DOD components reporting for fiscal year 2014 certified  that they had reviewed their inventories. DOD’s guidance for fiscal year 2014, among other things, requires  components to include six elements in their certification letters. Overall, in fiscal year 2014 components addressed more of DOD’s  required elements in comparison to prior years, as 21 of the 40  components—or over half—addressed all required elements in their  certification letters (see figure 3). In this regard, our analysis indicates that DOD obligated  about $28 billion for contracts in the 17 product service codes that OFPP  and GAO identified as more likely to include closely associated with  inherently governmental functions. In comparison, of the 40 components  reporting for fiscal year 2014, 25 components identified a total of  $10.8 billion in obligations or dollars invoiced for contracts that included  work identified as closely associated with inherently governmental  functions—either within the 17 product service codes or for any other  category of service. Continued Delays on Key Management Decisions Hinder Efforts to Develop Statutorily Required Plans to Use the Inventory to Inform Workforce and Budget Decisions

The military departments generally have not developed plans to use the  inventory of contracted services to inform workforce mix, strategic  workforce planning, and budget decision-making processes, as required  by the National Defense Authorization Act for Fiscal Year 2012. DOD  has recently made progress in identifying accountable officials to develop  plans and establish processes for using the inventories in decision  making, a step we recommended in November 2014 to help ensure the  inventory is integrated into key management decisions. Despite this effort,  DOD faces continued delays to key steps in the implementation of the  inventory process, including choosing the path forward for its underlying  inventory data collection system, staffing its inventory management  support office, and formalizing the roles and responsibilities of that office  and its relationship to the military departments and other stakeholders. Collectively, these persistent delays hinder the department’s ability to use  the inventory of contracted services as intended. The  instruction notes that DOD components will submit an annual inventory of  contracted services, and that the inventory and associated review are to  be used to inform acquisition planning and workforce shaping decisions,  but does not provide any specific guidance as to how the inventories are  to contribute to such decisions, including guidance for identifying closely  associated with inherently governmental activities. Further, more than two years since the support office was funded, DOD  has yet to define the roles and responsibilities of the office. Agency Comments

We are not making new recommendations in this report.
Why GAO Did This Study

DOD is the government's largest purchaser of contractor-provided services. In 2008, Congress required DOD to compile and review an annual inventory of its contracted services to identify the number of contractors performing services and the functions contractors performed. In 2011, Congress required DOD to use that inventory to inform certain decision-making processes, including workforce planning and budgeting. GAO has previously reported on the challenges DOD faces in compiling, reviewing, and using the inventory. Since 2011, GAO made 13 recommendations intended to improve DOD's use of the inventory. Of these, DOD has yet to fully address 8 open recommendations.
Congress included a provision in statute for GAO to report on DOD's required reviews and plans to use the inventory. This report assesses the extent to which DOD components (1) reviewed contracts and activities in the fiscal year 2014 inventory of contracted services, and (2) developed plans to use the inventory for decision making. GAO reviewed relevant laws and guidance and 40 components' inventory review certification letters, and interviewed DOD acquisition, manpower, and programming officials.

What GAO Found

In fiscal year 2014, 40 Department of Defense (DOD) components in total certified that they had conducted an inventory review. Components are required by DOD guidance to address six elements in their certification letters, including, for example, identifying any inherently governmental functions and unauthorized personal services contracts. More components—21 out of 40—addressed all of the required review elements compared to prior years. However, DOD components may continue to underreport the extent to which contractors were providing services that are closely associated with inherently governmental functions, a key review objective to help ensure that DOD has proper oversight in place. For example, GAO's analysis indicates that DOD obligated about $28 billion for contracts in 17 categories—such as professional and management support services—that the Office of Federal Procurement Policy and GAO identified as more likely to include closely associated with inherently governmental functions. In comparison, components identified a total of $10.8 billion in obligations or dollars invoiced for contracts that included work identified as closely associated with inherently governmental functions—either within the 17 categories or for any other category of service. Most of these functions were identified by the Army using its long-standing review process.
The military departments have not yet developed plans to use the inventory to inform workforce mix, strategic workforce planning, and budget decision-making processes, as statutorily required. DOD has made some recent progress on requiring components to identify an accountable official to lead efforts to develop plans and establish processes for using their inventories in decision making, a step GAO recommended in November 2014. However, DOD faces continued delays in deciding on the path forward for its underlying inventory data collection system, staffing its inventory management support office, and formalizing the roles and responsibilities of that office and stakeholders (see figure).
GAO previously recommended that DOD address these issues to improve the usefulness of the inventory. DOD concurred with these recommendations but has not yet addressed them. These continued delays hinder DOD's ability to use the inventory of contracted services as intended, including using the inventory data to inform workforce and budget decision-making processes.

What GAO Recommends

GAO is not making new recommendations in this report. In its comments, DOD noted that it intends to address GAO's eight open recommendations, including those related to determining its approach for compiling the inventory and defining the roles and responsibilities of a key support office and stakeholders.