Of key concern is the loss  of government control over and accountability for mission-related policy  and program decisions when contractors provide services that closely  support inherently governmental functions. All 7  of the proposed acquisitions for professional, administrative, and  management services and more than 75 percent of the 64 related task  orders we reviewed required the contractor to provide services that  closely supported inherently governmental functions. DOD Faces Challenges In Implementing Performance-Based Practices on Professional and Management Support Task Orders

DOD faces challenges in defining requirements and outcome-based  measures when using a performance-based approach to acquire  professional and management support services. Performance Standards and Measures Were Not Always Well Suited to Assess the Outcomes of the Broad Range of Contracted Services

While DOD identified as performance-based all but one of the task orders  we reviewed, we found that almost all of the task orders had broadly  defined requirements that listed various categories of services and related  activities the contractor may be required to perform over the course of the  order rather than expected results. The other task orders that  included cost and schedule performance standards were assessed  subjectively, based on the number of complaints lodged against the  contractor. DOD personnel relied on subjective  measures to assess the quality of contractor services provided in 40 of the  64 task orders we reviewed. The military departments may have missed opportunities to include and  use objective performance measures that were better suited to assess  contract outcomes in several of the task orders we reviewed. Furthermore, in  3 of these cases, surveillance personnel did not receive the required  training until at least a year after they were assigned to monitor a  contractor’s performance. Nevertheless, DOD’s policies do not require  that DOD personnel include an assessment of these risks when their  proposals for contractor support are submitted for approval under DOD’s  management review process. DOD’s peer review process is beginning  to assess this issue just prior to and then after contract award, but with  only a handful of reviews performed on such contracts, it is too early to  gauge whether the process will be successful in encouraging DOD  personnel to address these issues across the range of DOD’s services  contracts. Recommendations for Executive Action

To better inform acquisition decisions, assist DOD personnel in  performing their management oversight responsibilities, and improve  DOD’s surveillance of services contracts, we recommend that the  Secretary of Defense take the following four actions:  revise documentation requirements for DOD’s current management  review to include information on the extent to which services to be  provided will closely support inherently governmental functions as  well as the consideration given to using DOD civilian employees to  perform such functions;  require before the award of any contract or issuance of task order for  services closely supporting inherently governmental functions that  program and contracting officials consider and document their  assessment of the unique risks of these services and the steps that  have been taken to mitigate such risks;    develop guidance to identify approaches that DOD should take to  enhance management oversight when contractors provide services  that closely support inherently governmental functions; and    direct the military departments to review their procedures to ensure  that properly trained surveillance personnel have been assigned prior  to and throughout a contract’s period of performance. Appendix I: Scope and Methodology

To determine whether the Department of Defense’s (DOD) policies and  actions to improve its management of services contracts addressed issues  affecting professional and management support contracts, we examined  (1) the extent to which DOD considered the risks associated with  contractors closely supporting inherently governmental functions at key  acquisition decision points;(2) how DOD was implementing performance- based acquisitions practices, such as identifying requirements in terms of  expected and measurable outcomes; (3) the extent to which DOD  designated trained surveillance personnel; and (4) whether recent actions  to implement a peer review process may improve DOD’s management and  use of such contracts.
Why GAO Did This Study

In fiscal year 2008, the Department of Defense (DOD) obligated $200 billion on services contracts, including $42 billion for professional and management services. The Government Accountability Office (GAO) previously identified weaknesses in DOD's management and oversight of services contracts, contributing to DOD contract management being on GAO's high-risk list. For selected professional and management support contracts, GAO was asked to examine (1) the extent to which DOD considered the risks of contractors closely supporting inherently governmental functions at key decision points, (2) how DOD implemented performance-based practices, (3) the extent to which DOD designated trained surveillance personnel, and (4) whether a new review process may improve DOD's management of such contracts. GAO reviewed federal regulations, agency policies and guidance, and analyzed seven acquisitions approved from 2004 to 2007 and 64 related task orders for services.

What GAO Found

DOD policies do not require assessments of the risks associated with contractors closely supporting inherently governmental functions as part of its management reviews of acquisition strategies nor when task orders are issued for professional and management services. Such risks include the potential loss of government control over and accountability for mission-related policy and program decisions. Though all seven acquisitions and more than 75 percent of the task orders GAO reviewed provided for such services, GAO found no evidence that these risks were among those considered in the documentation reviewed. DOD guidance issued after these acquisitions were approved requires that consideration be given to using civilian personnel rather than contractors when the activities closely support inherently governmental functions. This guidance, however, does not require DOD personnel to consider and document risks posed when contractors perform these activities. Further, DOD personnel were unaware of the need to provide enhanced oversight when contracting for such services. DOD faces challenges in defining requirements and outcome-based measures when acquiring professional and management services. DOD personnel generally expressed task order requirements in terms of a broad range of activities that contractors may perform, but used standards and measures that were not always well-suited to assess outcomes. DOD made more use of objective measures to assess cost and schedule performance, but generally relied on subjective measures to assess the quality of the contractors' work. For example, DOD often measured quality based on the number of complaints lodged against the contractor, which provided little detail into how desired outcomes were achieved. DOD also missed opportunities to include objective measures that may have been better suited to assess outcomes. DOD officials stated that developing outcome-based, objective measures is challenging, but noted that initiatives are under way to better utilize such approaches. DOD has made progress in ensuring that trained surveillance personnel are assigned to monitor contract performance. Surveillance personnel were assigned to all 64 of the task orders GAO reviewed, and all but 3 had received required training. GAO identified, however, 3 instances of surveillance personnel who were not assigned before the contractor began work on a task order and 20 instances of personnel who did not receive training prior to beginning surveillance duties. In September 2008, DOD implemented a new peer review process that is tasked to address, among other issues, contractors closely supporting inherently governmental functions, the use of performance-based practices, and contractor surveillance. As of October 2009, four pre-award reviews and one post-award review of professional and management support contracts have been conducted and it is too early to tell whether such reviews will encourage DOD personnel to address these issues across the range of DOD's services contracts.