PBGC Relies on Contractors to Address Unpredictable Workloads

Contracting plays a central role in helping PBGC achieve its mission and  address unpredictable workloads. PBGC’s contracts cover a wide range of  services, including the administration of terminated plans, payment of  benefits, customer communication, legal assistance, document  management, and information technology. Its contract spending has  increased steadily along with overall budget and workload, and use of  contracted staff has outpaced its hiring of federal employees. PBGC has  relied on contractors to supplement its workforce since the mid-1980s as  its workloads have grown due to a significant number of pension plan  terminations. PBGC acknowledges that it has difficulty anticipating its  workloads due to unpredictable economic conditions and relies on  contractors to expand or reduce its workforce as necessary. The number of PBGC’s contract employees has grown significantly more  than PBGC employees. PBGC Is Taking Steps to Improve Its Acquisition Infrastructure but Has Not Yet Developed a Strategic Approach to Contracting

In 2007, PBGC began to realign its Procurement Department, update  contracting policies and processes, upgrade the skills of Procurement  Department staff, and better track contracting data. While these efforts  provide an improved foundation for the contracting function, they are  early steps and a strategic approach to contracting has not yet been  developed. PBGC recently issued its  strategic plan, but it is not comprehensive. PBGC Has Made Improvements to Contractor Oversight, but Implementation of Performance-Based Contracting May Present Challenges

PBGC has made improvements to contractor oversight by implementing  new contract monitoring activities, improving oversight activities for some  of its major contracts, and developing comprehensive procedures to direct  contracting activities. However, most of PBGC’s current contracts lack  performance incentives and methods to hold contractors accountable. PBGC recently began awarding more performance-based contracts, as a  means to achieve better contract outcomes, but there are common  challenges that arise—from deciding which contracts are appropriate for a  performance-based approach to deciding which outcomes to measure and  emphasize. PBGC procurement officials acknowledge the benefits and  challenges of performance-based contracting, and must provide additional  oversight of contracts and a different approach to contract monitoring that  focuses on outcomes rather than processes. Field benefit administration office contractors receive  feedback on the timeliness and accuracy of benefit payments based on the  MCU’s monitoring efforts. To improve PBGC’s contract management as it implements a performance- based approach to contracting, we recommend that the Director of PBGC    provide comprehensive training on performance-based contracting for  PBGC’s Procurement Department staff, managers, and acquisition-related  workforce;    develop practices to help ensure accountability for the Procurement  Department staff carrying out contract monitoring responsibilities; and    ensure that future contracts measure performance in terms of outcomes,  provide incentives for the accomplishment of desired outcomes, and  ensure payment of award fees only for excellent performance. Appendix I: Scope and Methodology

To assess the role contracting plays in the Pension Benefit Guaranty  Corporation’s (PBGC) efforts to accomplish its mission, we collected and  analyzed data on PBGC contracting activities, as well as on participants,  plans, employees, and budget trends. To do this, we reviewed contracting data from fiscal years 2000 through  2007. To assess the steps PBGC has taken to improve its acquisition  infrastructure and develop a strategic approach, we compared PBGC’s  acquisition infrastructure to standards outlined in GAO’s acquisition  framework. To  assess the steps PBGC has taken to improve its contract oversight  processes to ensure accountability, we reviewed our findings from our  2000 report and followed up on improvements PBGC has made since then  to its contract monitoring procedures.
Why GAO Did This Study

The Pension Benefit Guaranty Corporation (PBGC) insures the pensions of more than 44 million workers in over 30,000 employer-sponsored defined benefit pension plans. In response to growing workloads, PBGC has come to rely heavily on contractors to conduct its work. GAO was asked to report on (1) the role that contracting plays in PBGC's efforts to accomplish its mission, (2) the steps PBGC has taken to improve its acquisition infrastructure and develop a strategic approach to guide its contracting activities, and (3) the steps PBGC has taken to improve its contract oversight processes to ensure accountability. To address these issues, we interviewed PBGC officials and selected contractors, reviewed data on PBGC's contracting activities; identified changes PBGC is making to contracting procedures; and identified strategies PBGC uses to monitor contracts.

What GAO Found

Contracting plays a central role in helping PBGC achieve its mission and address unpredictable workloads. Since the mid-1980s, PBGC has had contracts covering a wide range of services, including the administration of terminated plans, payment of benefits, customer communication, legal assistance, document management, and information technology. PBGC's workforce currently consists of about 800 federal employees and utilizes the services of about 1,500 contract employees. From fiscal year 2000 through 2007, PBGC's contract spending increased steadily along with its overall budget and workload, and its use of contract employees has outpaced its hiring of federal employees. As its workloads have grown due to a significant number of large pension plan terminations, PBGC has relied on contractors to supplement its workforce, acknowledging that it has difficulty anticipating its workloads due to unpredictable economic conditions. PBGC is taking steps to improve its acquisition infrastructure, but the Procurement Department is not yet part of PBGC's strategic decision-making process. In 2007, PBGC began to take steps to realign its Procurement Department, update contracting policies and processes, upgrade the skills of Procurement Department staff, and better track contracting data. PBGC's efforts begin to provide an improved foundation for the contracting function; however, these efforts are early steps and more remains to be done. PBGC has not fully integrated its contracting function at the corporate level; the Procurement Department is not included in corporate-level strategic planning and does not have a presence on PBGC's relevant strategic teams. PBGC has made improvements to contractor oversight and has begun to implement performance-based contracting that offers the potential for better contract outcomes, but also creates new challenges for contract oversight and monitoring efforts. PBGC has implemented new contract monitoring activities, improved oversight activities for some of its major contracts, and developed comprehensive procedures to direct contracting activities. For its field benefit administration office contracts, PBGC developed performance measures and scorecards, providing feedback about contractor performance in terms of timeliness and accuracy of benefit payments. Despite these improvements, most of PBGC's current contracts still lack performance incentives and methods to hold contractors accountable. PBGC recently began awarding more performance-based contracts, as a means to achieve better outcomes. Although performance-based contracting is recognized as a viable way toward getting better results from contractors, GAO and others have identified common challenges agencies face when implementing this approach--from deciding which contracts are appropriate for a performance-based approach to deciding which outcomes to measure and emphasize. PBGC procurement officials recognize the benefits and challenges of performance-based contracting, and that they must provide additional oversight of contracts and a different approach to contract monitoring that focuses on outcomes rather than processes.