From fiscal years 2004 through 2008, S&T entered into at least 55 other  transaction agreements to support 17 different projects. Most Agreements Involved Nontraditional Contractors to Provide Key Technologies and Services

DHS has used its other transaction authority to leverage the capabilities of  nontraditional contractors in prototyping and research and development  efforts. We identified a total of 50 nontraditional contractors who participated in  44 (83 percent) of the agreements we examined, with multiple  nontraditional contractors involved on 8 agreements. Nearly half of the nontraditional  contractors were classified as small businesses. The proportion of dollars obligated on each agreement for nontraditional  contractors—which ranged from less than 1 percent to 100 percent—did  not necessarily indicate the importance of the contractors’ contributions. For example, only 1 percent of one agreement’s obligations was allocated  for work by a nontraditional subcontractor to develop chemical tests for a  hazardous substance detection system. Policies and Practices Are in Place to Manage Agreements, but Assessment and Staffing Needs Have Not Been Fully Addressed

Since we reported in 2004, DHS has continued to develop policies and  practices for managing other transactions, issuing an operating procedure  and a guidebook in May 2008, but has not fully addressed the need to  assess its use of these agreements and maintain a contracting workforce. DHS has developed guidance and practices to minimize financial and  program risks. However, the  capacity of the database is limited as it is not designed to capture data to  assess DHS’s use of other transactions—particularly on the extent of  nontraditional contractors’ contributions. In addition, the database does not  contain information on the nature of the work performed by  nontraditional contractors—either prime or subcontractors—or the  funding allocated to nontraditional contractors. DHS’s recently issued guidance also requires program  staff to take training on other transactions. Conclusion

While other transaction agreements can carry the benefit of tapping into  innovative homeland security technologies through nontraditional  contractors, as they are exempt from federal procurement regulations,  they also carry the risk of reduced accountability and transparency if not  properly managed. Recommendations for Executive Action

To promote the efficient and effective use by DHS of its other transactions  authority to meet its mission needs, we recommend that the Secretary of  Homeland Security direct the Under Secretary for Management and the  Under Secretary for Science and Technology to take the following two  actions:    Collect relevant data on other transaction agreements, including the  roles of and funding to nontraditional contractors and intellectual  property rights, and systematically assess and report to Congress on  the use of these agreements to ensure that the intended benefits of the  authority are achieved. While DHS stated that its report to Congress includes  overarching assessment information, DHS does not systematically  evaluate whether it is obtaining the full benefits of other transaction  authority. We continue to believe that this would help DHS  managers ensure a sufficient contracting workforce to execute S&T’s  other transaction authority. Appendix I: Scope and Methodology

To determine the extent to which nontraditional contractors have been  involved in other transactions with the Department of Homeland Security  (DHS) to fulfill technology and mission needs, we obtained an initial list of  agreements from DHS’s Office of Procurement Operations, the contracting  office responsible for entering into these agreements; conducted a file  review; and interviewed DHS’s Science and Technology (S&T)  directorate’s program managers.
Why GAO Did This Study

When the Department of Homeland Security (DHS) was created in 2002, it was granted "other transaction" authority--a special authority used to meet mission needs. While the authority provides greater flexibility to attract and work with nontraditional contractors to research, develop, and test innovative technologies, other transactions carry the risk of reduced accountability and transparency--in part because they are exempt from certain federal acquisition regulations and cost accounting standards. In 2004, GAO reported on DHS's early use of this authority. This follow-up report determines the extent to which nontraditional contractors have been involved in DHS's other transactions, and assesses DHS's management of the acquisition process when using this authority to identify additional safeguards. To conduct its work, GAO reviewed relevant statutes, guidance, and prior GAO reports on other transactions, and interviewed contracting and program management officials, as well as contractors. GAO also reviewed 53 files for agreements entered into from fiscal years 2004 through 2008 and identified those involving nontraditional contractors.

What GAO Found

DHS's other transactions documentation indicates that nontraditional contractors played a significant role in over 80 percent of the Science and Technology directorate's other transaction agreements. GAO identified 50 nontraditional contractors who participated in 44 agreements--one-third of them were prime contractors and about half of them were small businesses. These contractors provided a variety of technologies and services that DHS described as critical--including technology designed to detect chemical warfare agents after a suspected or known chemical attack. The proportion of dollars obligated for nontraditional contractors on an agreement did not necessarily indicate the importance of their contributions. For example, only 1 percent of total agreement obligations were allocated to a nontraditional subcontractor that, according to the prime contractor, was specially qualified for developing tests for a hazardous substance detection system. While DHS has continued to develop policies and procedures for other transactions, including some to mitigate financial and program risks for prototype projects, the department faces challenges in systematically assessing its use of other transactions and maintaining a skilled contracting workforce. DHS issued guidance in 2008 and continued to provide training to contracting staff on the use of other transactions. However, DHS does not track information on the amount of funds paid to nontraditional contractors or the nature of the work they performed, which could help the department assess whether it is obtaining the full benefits of other transaction authority. DHS recently updated its procurement database to capture information on other transaction agreements, but the database does not include all of the data DHS would need to assess nontraditional contractor involvement. Further, DHS's ability to maintain a stable and capable contracting workforce remains uncertain due to high staff turnover and the lack of a staff planning method.