GAO-10-357, Contingency Contracting: Improvements Needed in Management of Contractors Supporting Contract and Grant Administration in Iraq and Afghanistan


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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

April 2010: 

Contingency Contracting: 

Improvements Needed in Management of Contractors Supporting Contract 
and Grant Administration in Iraq and Afghanistan: 

GAO-10-357: 

GAO Highlights: 

Highlights of GAO-10-357, a report to congressional committees. 

Why GAO Did This Study: 

The Departments of Defense (DOD) and State and the U.S. Agency for 
International Development (USAID) have relied extensively on 
contractors in Iraq and Afghanistan, including using contractors to 
help administer other contracts or grants. Relying on contractors to 
perform such functions can provide benefits but also introduces 
potential risks, such as conflicts of interest, that should be 
considered and managed. 

Pursuant to the National Defense Authorization Act for Fiscal Year 
2008, GAO reviewed (1) the extent to which DOD, State, and USAID rely 
on contractors to perform contract and grant administration in Iraq 
and Afghanistan; (2) the reasons behind decisions to use such 
contractors and whether the decisions are guided by strategic 
workforce planning; and (3) whether agencies considered and mitigated 
related risks. GAO analyzed relevant federal and agency policies and 
agency contract data, and conducted file reviews and interviews for 32 
contracts selected for case studies. 

What GAO Found: 

DOD, State, and USAID’s use of contractors to help administer 
contracts and grants was substantial, although the agencies did not 
know the full extent of their use of such contractors. GAO found that 
the agencies had obligated nearly $1 billion through March 2009 on 223 
contracts and task orders active during fiscal year 2008 or the first 
half of fiscal year 2009 that included the performance of 
administration functions for contracts and grants in Iraq and 
Afghanistan. The specific amount spent to help administer contracts or 
grants in Iraq and Afghanistan is uncertain because some contracts or 
task orders included multiple functions or performance in various 
locations and contract obligation data were not detailed enough to 
allow GAO to isolate the amount obligated for other functions or 
locations. Overall, the agencies relied on contractors to provide a 
wide range of services, including on-site monitoring of other 
contractors’ activities, supporting contracting or program offices on 
contract-related matters, and awarding or administering grants. For 
example, Air Force Center for Engineering and the Environment 
officials noted that contractors performed quality assurance for all 
of the center’s construction projects in Iraq and Afghanistan. In 
another example, USAID contractors awarded and administered grants on 
USAID’s behalf to support development efforts in Iraq and Afghanistan. 

Decisions to use contractors to help administer contracts or grants 
are largely made by individual contracting or program offices on a 
case-by-case basis. In doing so, the offices generally cited the lack 
of sufficient government staff, the lack of in-house expertise, or 
frequent rotations of government personnel as key factors contributing 
to the need to use contractors. Offices also noted that using 
contractors in contingency environments can be beneficial, for 
example, to meet changing needs or address safety concerns regarding 
the use of U.S. personnel in high-threat areas. GAO has found that to 
mitigate risks associated with using contractors, agencies have to 
understand when, where, and how contractors should be used, but offices’
 decisions were generally not guided by agencywide workforce planning 
efforts. 

DOD, State, and USAID took actions to mitigate conflict of interest 
and oversight risks associated with contractors helping to administer 
other contracts or grants, but did not always fully address these 
risks. For example, agencies generally complied with requirements 
related to organizational conflicts of interest, but USAID did not 
include a contract clause required by agency policy to address 
potential conflicts of interest in three cases. Also, some State 
officials were uncertain as to whether federal ethics laws regarding 
personal conflicts of interest applied to certain types of 
contractors. In almost all cases, the agencies had designated 
personnel to provide contract oversight. DOD, State, and USAID 
contracting officials generally did not, however, ensure enhanced 
oversight as required for situations in which contractors provided 
services closely supporting inherently governmental functions despite 
the potential for loss of government control and accountability for 
mission-related policy and program decisions. 

What GAO Recommends: 

GAO is making recommendations to improve State’s and USAID’s ability 
to plan for the use and mitigate risks of contractors performing 
contract and grant administration functions. State and USAID generally 
concurred with the recommendations. GAO made similar recommendations 
to DOD in 2009, with which it concurred. DOD had no additional 
comments. 

View [hyperlink, http://www.gao.gov/products/GAO-10-357] or key 
components. For more information, contact John P. Hutton at (202) 512-
4841 or huttonj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Agencies' Reliance on Contractors to Support the Administration of 
Contracts and Grants in Iraq and Afghanistan Is Substantial: 

Offices Used Contractors to Address Contingency-Related Challenges, 
but Decisions Are Not Guided by Agencywide Strategies: 

Agencies Did Not Always Mitigate Risks Related to Contractors 
Supporting Contract or Grant Administration Functions: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Summary of Agency Contracts and Task Orders: 

Appendix III: Comments from the Department of State: 

Appendix IV: Comments from the U.S. Agency for International 
Development: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Examples of On-site Monitoring of Contractor Activities: 

Table 2: Examples of Contracting Office Support: 

Table 3: Examples of Program Office Support on Contract-Related 
Matters: 

Table 4: Examples of Awarding or Administering Grants: 

Table 5: Reasons Agencies Cited in Case Studies for Using Contractors 
to Support Contract and Grant Administration in Iraq and Afghanistan: 

Table 6: Examples of Reasons Agencies Cited for Using Contractors in 
Iraq and Afghanistan: 

Table 7: DOD Contracts and Task Orders Active in Fiscal Year 2008 or 
the First Half of Fiscal Year 2009 That Include Administration 
Functions for Other Contracts or Grants in Iraq and Afghanistan: 

Table 8: State Contracts and Task Orders Active in Fiscal Year 2008 or 
the First Half of Fiscal Year 2009 That Include Administration 
Functions for Other Contracts or Grants in Iraq and Afghanistan: 

Table 9: USAID Contracts and Task Orders Active in Fiscal Year 2008 or 
the First Half of Fiscal Year 2009 That Include Administration 
Functions for Other Contracts or Grants in Iraq and Afghanistan: 

Abbreviations: 

COR: contracting officer's representative: 

DOD: Department of Defense: 

FAR: Federal Acquisition Regulation: 

FPDS-NG: Federal Procurement Data System - Next Generation: 

JCC-I/A: Joint Contracting Command - Iraq/Afghanistan: 

LOGCAP: Logistics Civil Augmentation Program: 

USAID: U.S. Agency for International Development: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

April 12, 2010: 

Congressional Committees: 

The Department of Defense (DOD), the Department of State (State), and 
the U.S. Agency for International Development (USAID) have relied 
extensively on contractors in Iraq and Afghanistan to undertake 
reconstruction projects, provide security for U.S. government 
officials and facilities, and support U.S. forces. During fiscal year 
2008 and the first half of fiscal year 2009, DOD, State, and USAID 
reported obligating $38.6 billion on contracts in Iraq and 
Afghanistan. Additionally, State and USAID have relied on grantees to 
support critical efforts such as infrastructure and economic 
development in Iraq and Afghanistan. We have previously reported on 
problems with the administration of these contracts and grants, 
including a shortage of government personnel to monitor performance. 
[Footnote 1] Without adequate contract oversight, agencies risk being 
unable to identify and correct poor contractor performance in a timely 
manner and ultimately may risk paying contractors more than the value 
of the services they performed. Additionally, oversight of grantees is 
critical to creating and sustaining performance accountability. 

In some cases, the government has turned to contractors to help 
support its performance of contract and grant administration 
functions. Contract and grant administration functions represent the 
government's primary mechanism for assessing whether it is getting the 
expected products or services from contractors or whether grantees are 
performing in accordance with grant programs. Examples of such 
functions include on-site monitoring of contractor activities, 
supporting contracting and program offices on contract-related 
matters, and awarding grants and monitoring grantee performance. Using 
contractors to support these functions can provide benefits, such as 
flexibility to meet immediate needs, but it can also introduce risks 
the government needs to consider and manage. For example, contractors 
performing certain contract or grant administration functions may 
closely support the performance of inherently governmental functions, 
which increases the risk that government decisions will be 
inappropriately influenced by, rather than independent from, 
contractor actions. In addition, reliance on contractor support to 
meet agency missions can increase the risk of conflicts of interest 
among companies and individuals, particularly for cases in which 
contractors closely support inherently governmental functions. 

In the National Defense Authorization Act for Fiscal Year 2008, 
Congress directed us to report annually on DOD, State, and USAID 
contracts in Iraq and Afghanistan, including information on any 
specific contract or class of contracts that the Comptroller General 
determines raises issues of significant concern.[Footnote 2] Pursuant 
to that mandate, this report addresses DOD, State, and USAID's use of 
contractors, including personal services contractors, to perform 
administration functions for other contracts or grants with 
performance in Iraq and Afghanistan during fiscal year 2008 and the 
first half of fiscal year 2009.[Footnote 3] Specifically, we analyzed 
(1) the extent to which DOD, State, and USAID rely on contractors to 
perform administration functions for other contracts and grants in 
Iraq and Afghanistan; (2) the reasons behind decisions to use 
contractors to perform these functions and whether the decisions are 
guided by strategic workforce planning; and (3) whether the agencies 
have considered and mitigated conflict of interest and oversight risks 
related to contractors performing contract or grant administration 
functions.[Footnote 4] 

To determine the extent to which DOD, State, and USAID relied on 
contractors to perform functions within our scope, we requested data 
from the agencies on contracts and task orders with at least 1 day of 
performance in fiscal year 2008 or the first half of fiscal year 2009 
for which duties included administration functions for other contracts 
or grants with performance in Iraq or Afghanistan.[Footnote 5] To 
assess whether the data provided by the agencies were accurate and 
appropriately categorized as within the scope of this engagement, we 
reviewed contract documents for 128 of the 186 contracts and task 
orders reported by the agencies.[Footnote 6] We also identified 
additional contracts and task orders in our scope by reviewing data 
from the Federal Procurement Data System - Next Generation (FPDS-NG) 
and data provided to GAO by DOD, State, and USAID for a related 
engagement. Although we found that the agencies' data were incomplete 
based on additional contracts and task orders we identified, we 
determined that taken collectively data provided by the agencies and 
data on the contracts and task orders we identified and included in 
our scope were sufficiently reliable to establish the minimum number 
of contracts and task orders active during fiscal year 2008 or the 
first half of fiscal year 2009 that were awarded by DOD, State, and 
USAID to perform the functions within our scope. 

To learn about the reasons behind decisions to use contractors to 
perform these functions and the extent to which agencies considered 
and mitigated risks related to the use of contractors to perform these 
functions, we purposefully selected 32 contracts at DOD, State, and 
USAID for case studies to provide a cross section of types of 
contracts, locations, and functions performed. We reviewed contract 
files and interviewed officials such as contracting officers, program 
managers, contracting officers' representatives (COR), and 
contractors. For these case studies, we conducted fieldwork in Iraq, 
Afghanistan, and the United States. We also reviewed agency workforce 
planning documents and guidance and interviewed officials 
knowledgeable about workforce planning. Further, we reviewed federal 
regulations and agency policy related to conflicts of interest and 
oversight and interviewed officials responsible for contracting policy 
at each of the agencies. Our review did not assess the effectiveness 
of contractors performing contract or grant administration functions 
for other contracts or grants. 

A detailed description of our scope and methodology is included in 
appendix I. We conducted this performance audit from February 2009 
through April 2010 in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

Background: 

Contract and Grant Administration: 

Contracts and grants are two instruments the government may use to 
achieve its missions, with their selection principally governed by the 
nature of the activity. Contracts are procurement instruments and, as 
such, are governed by the Federal Acquisition Regulation (FAR) and 
agency procurement regulations. Contracts are to be used when the 
principal purpose of the project is the acquisition of goods and 
services for the direct benefit of the federal government. Grants, on 
the other hand, are to be used when the principal purpose of a project 
is to accomplish a public purpose of support or stimulation authorized 
by federal statute. Contract administration, as defined by the Office 
of Federal Procurement Policy, consists of those activities performed 
after a contract has been awarded to determine how well the government 
and the contractor performed to meet the requirements of the contract. 
Contract and grant administration include a number of similar 
functions, including monitoring contractor or grantee performance and 
reviewing contractor or grantee financial information. 

Contract administration functions are carried out under the direction 
of contracting officers, who are responsible for ensuring performance 
of all necessary actions for effective contracting, ensuring 
compliance with the terms of the contract, and safeguarding the 
government's interests. Contracting officers have authority to enter 
into, administer, or terminate contracts. A contracting officer may 
designate another individual to provide oversight on his or her 
behalf. For the purposes of this report, we use "COR" to refer to such 
individuals, although in some cases agencies or offices use other 
terms. The COR functions as the "eyes and ears" of the contracting 
officer, monitoring technical performance and reporting any potential 
or actual problems to the contracting officer. Functions of the COR 
typically include informing the contracting officer of any technical 
or contractual difficulties encountered during performance, informing 
the contractor of failures to comply with technical requirements of 
the contract, performing inspection and acceptance of all final work 
required under the contract, and maintaining contract files. 
Similarly, grant administration functions are carried out under the 
direction of grant or agreement officers, who may be assisted by 
grants officers' representatives or agreement officers' technical 
representatives. 

Risks Related to Reliance on Contractors: 

Our prior work has identified risks related to agencies' decisions to 
use contractors to support certain types of agency missions, including 
potential conflicts of interest.[Footnote 7] An organizational 
conflict of interest can occur when a contractor has present or 
currently planned interests (including business or relationships with 
other contractors) that either directly or indirectly relate to the 
work to be performed under a contract and (1) may diminish its 
capacity to give impartial, technically sound, objective assistance or 
advice or (2) may result in it having an unfair competitive advantage. 
For this report, a personal conflict of interest is one that can occur 
in a situation in which an individual is employed by a contractor or 
is contracted for directly by the government as a personal services 
contractor and is in a position to materially influence an agency's 
recommendations or decisions and, because of his or her personal 
activities, relationships, or financial interests, may lack or appear 
to lack objectivity or appear to be unduly influenced by personal 
financial interest. 

In addition, other risks to the agencies may occur when using 
contractors for services that closely support inherently governmental 
functions. Inherently governmental functions are so intimately related 
to the public interest as to require performance by government 
employees, and include functions that require discretion in applying 
government authority or value judgments in making decisions for the 
government.[Footnote 8] FAR section 7.503(c) provides 20 examples of 
functions considered to be inherently governmental, including 
determining agency policy or federal program budget request 
priorities; directing and controlling federal employees; and awarding, 
administering, or terminating federal contracts. Similarly, FAR 
section 7.503(d) provides examples of functions that while not 
inherently governmental, may approach the category because of the 
nature of the function, the manner in which a contractor performs the 
contract, or the manner in which the government administers 
performance under a contract. These functions closely support the 
performance of inherently governmental functions and generally include 
professional and management support activities, such as those that 
involve or relate to supporting budget preparation, evaluation of 
another contractor's performance, acquisition planning, or technical 
evaluation of contract proposals. When contractors perform these 
functions, there is a risk of inappropriately influencing the 
government's control over and accountability for decisions that may be 
based, in part, on contractor work. 

Nonpersonal and Personal Services Contracts: 

DOD, State, and USAID use both nonpersonal and personal services 
contractors to perform contract or grant administration functions. 
Nonpersonal services contracts are distinguished from personal 
services contracts in part by the nature of the government's 
relationship with the contractor. Under a nonpersonal services 
contract, the personnel rendering the services are not subject either 
by the contract's terms or by the manner of its administration to the 
relatively continuous supervision and control of government personnel. 
On the other hand, personal services contracts are characterized by an 
employer-employee relationship created between the government and the 
contractor. Personal services contracts involve close and continual 
supervision and control of contractor personnel by government 
employees rather than general oversight of contractor operations. In 
general, personal services contractors perform services that are 
comparable in scope and nature to those of civil service employees and 
often appear, in effect, to be government employees. Additionally, the 
risks of contracting for personal services are not always the same as 
the risks of contracting for nonpersonal services. For example, 
personal services contractors are not explicitly prohibited in the FAR 
from performing inherently governmental functions.[Footnote 9] Also, 
the level and type of oversight and management may differ between 
personal and nonpersonal services contracts. 

The government is normally required to obtain its employees by direct 
hire under competitive appointment or other procedures required by the 
civil service laws, and contracting for personal services is 
prohibited unless authorized by statute. DOD, State, and USAID are 
each authorized to hire personal services contractors under certain 
circumstances.[Footnote 10] For example, USAID and selected bureaus at 
State are permitted to hire personal services contractors to perform 
services outside of the United States. Similarly, DOD has specific 
authority to enter into personal services contracts to support 
operations outside of the United States in certain circumstances. 
Personal services contractors may be U.S. citizens, local nationals, 
or third-country nationals. State and USAID regulations state that 
personal services contractors generally cannot supervise government 
employees, serve as contracting officers, or otherwise obligate 
government funds. DOD regulations do not specifically address whether 
personal services contractors can supervise government employees or 
otherwise obligate government funds. 

Agencies' Reliance on Contractors to Support the Administration of 
Contracts and Grants in Iraq and Afghanistan Is Substantial: 

DOD, State, and USAID relied on contractors to perform a wide range of 
administration functions for contracts and grants with performance in 
Iraq and Afghanistan, but did not know the full extent of their use of 
contractors to perform such functions. Our review found 223 contracts 
and task orders active during fiscal year 2008 or the first half of 
fiscal year 2009 that included the performance of administration 
functions for other contracts or grants in Iraq and Afghanistan. DOD, 
State, and USAID officials told us that there were no agencywide data 
sources that provided detailed information about the functions 
performed by contractors and that individual contracting offices would 
have to manually review their contracts to identify contracts within 
our scope. Of the 186 contracts or task orders reported to us by 
individual contracting offices, we determined that 161 were within our 
scope. Through our review of FPDS-NG data and agency data compiled for 
another purpose, we found an additional 62 contracts or task orders 
within our scope. Given limitations we have previously reported with 
FPDS-NG and agency contracting data, the 223 contracts and task orders 
we identified, including 119 contracts and task orders for personal 
services, represent the minimum number of contracts and task orders 
within our scope (see appendix II for more information on the 
contracts and task orders we identified). 

According to FPDS-NG and agency data, the agencies had obligated 
approximately $990 million as of March 31, 2009, on the 223 contracts 
and task orders we identified, although we were unable to determine 
how much of this amount was specifically obligated for the performance 
of administration functions for contracts or grants with performance 
in Iraq or Afghanistan. For example, some of the contracts or task 
orders included the performance of functions besides contract or grant 
administration or the performance of administration functions for 
contracts or grants with performance outside of Iraq and Afghanistan. 
FPDS-NG and agency obligation data were not detailed enough to allow 
us to isolate the amount obligated for other functions or locations. 
The approximately $990 million obligated by the agencies on the 
contracts and task orders we identified also includes more than $116 
million reported by USAID for grants that were awarded by USAID 
contractors in Iraq on behalf of USAID, as authorized in the terms of 
their contracts.[Footnote 11] USAID contractors also awarded grants on 
behalf of USAID in Afghanistan, but USAID officials told us that the 
Afghanistan mission does not track grants awarded by contractors. 

As illustrated in tables 1 through 4, contractors in our case studies 
performed a wide variety of services in support of DOD, State, and 
USAID's administration and oversight of other contracts and grants 
collectively worth billions of dollars. Contract and grant 
administration functions performed by contractors included on-site 
monitoring of contractor activities, contracting office support, 
program office support on contract-related matters, and awarding or 
administering grants. For instance, Air Force Center for Engineering 
and the Environment officials told us that they used contractors to 
perform quality assurance functions for all of the center's 
construction projects in Iraq and Afghanistan. Obligations for 
construction on these projects totaled over $790 million for 
approximately 200 task orders during fiscal year 2008 and the first 
half of fiscal year 2009. In another example, State had obligated just 
over $700,000 as of March 2009 for a Bureau of International Narcotics 
and Law Enforcement personal services contractor to provide oversight, 
such as performing inspections and accepting contractor work on behalf 
of the U.S. government, for two task orders that included support for 
an Iraq criminal justice development program and had combined 
obligations of $343 million as of March 2009. 

Table 1: Examples of On-site Monitoring of Contractor Activities: 

Activities include: On-site quality assurance work to ensure that 
construction standards outlined in a contract are being adhered to, 
ensuring that safety procedures are being followed, and monitoring of 
contractors' technical performance. 

Personal services contracts: The U.S. Army Corps of Engineers had 
obligated more than $44 million as of March 2009 toward 10 task orders 
under two personal services contracts with firms in Iraq and 
Afghanistan to provide services such as providing oversight of quality 
and safety of construction contractor work products. 

Nonpersonal services contracts: State had obligated $3.2 million as of 
March 2009 on a contract to provide quality assurance services, 
including identifying and reporting contractor performance problems 
and assessing contractor compliance with standard operating 
procedures, for an aviation support task order in Iraq on which the 
department had obligated $144 million as of March 2009. 

Nonpersonal services contracts: USAID had obligated approximately $35 
million as of March 2009 on a contract to provide continued 
performance monitoring and evaluation of the program managed by USAID 
in Iraq, including activities carried out by other USAID contractors 
and grantees. 

Source: GAO analysis of agency contract information and interviews 
with agency officials. 

[End of table] 

Table 2: Examples of Contracting Office Support: 

Activities include: Maintaining contract administration files, 
reviewing invoices for contractor payment, and administering contract 
modifications. 

Personal services contracts: As of March 2010, USAID's Office of 
Acquisition and Assistance in Iraq comprised 2 U.S. government 
employees and 10 personal services contractors. Personal services 
contractors supporting the office were responsible for a range of 
postaward administration activities, such as preparation of 
modifications to acquisition actions, postaward approvals and actions, 
terminations, audits, and closeout. According to USAID, 8 of the 10 
personal services contractors were third-country nationals. USAID 
officials noted that third-country nationals are recruited by USAID 
missions in other countries to provide temporary support, training, 
and mentoring to local staff and are critical to helping the agency 
achieve its development mission. They also noted that third-country 
nationals are not considered temporary employees, as many often return 
to their countries and continue as local permanent staff with USAID. 

Nonpersonal services contracts: The Joint Contracting Command--
Iraq/Afghanistan obligated over $16 million through March 2009 on a 
contract in Iraq for the performance of a wide range of contract 
administration functions, including inspection and surveillance of 
various contractors' care and control over government property valued 
at over $500 million. 

Nonpersonal services contracts: State's Office of Acquisition 
Management had obligated just over $900,000 as of March 2009 toward a 
task order for contract specialist support, including support for two 
of the State contracts within our scope with combined obligations of 
nearly $24 million through March 2009. The task order states that 
contractor personnel employed under it perform the full range of pre-
and postaward duties. According to a State contracting official, 
specific duties included serving as a liaison between the contracting 
and program offices and maintaining contract files. 

Source: GAO analysis of agency contract information and interviews 
with agency officials. 

[End of table] 

Table 3: Examples of Program Office Support on Contract-Related 
Matters: 

Activities include: Evaluation of cost and schedule performance, 
support to program offices regarding program performance and actual or 
anticipated program problems, and evaluation of contractor proposals. 

Personal services contracts: State had obligated just over $200,000 as 
of March 2009 for a personal services contractor to serve as a deputy 
program manager at the Bureau of Diplomatic Security to provide 
management oversight and evaluate the performance of an aviation 
support contractor in Iraq performing under a task order with 
obligations of approximately $144 million as of March 2009. The 
statement of work for the personal services contract stated that the 
deputy program manager exercised wide latitude for independent action, 
initiating projects and executing approved new programs under general 
supervision of the division chief. 

Nonpersonal services contracts: The Army had obligated approximately 
$62 million as of March 2009 toward seven task orders that included 
contract administration support, among other functions, for its 
Logistics Civil Augmentation Program (LOGCAP) contracts. The LOGCAP 
contracts provide logistical and life support services in contingency 
locations worldwide, and had obligations of approximately $7.6 billion 
during fiscal year 2008 and the first half of fiscal year 2009 for 
task orders with performance in Iraq and Afghanistan. The support 
contract includes a wide range of functions, such as evaluating task 
order proposals and providing financial and technical analysis of 
contractor costs and performance. 

Nonpersonal services contracts: State had obligated just over $20 
million as of March 2009 toward a contract to provide program and 
acquisition support to the Bureau of Diplomatic Security's Office of 
Overseas Protective Operations, including for State's Worldwide 
Personal Protective Services II contracts. As of March 2009, the 
department had obligated approximately $1.2 billion toward task orders 
under these contracts with performance in Iraq or Afghanistan. 
Contract administration activities performed by the support contractor 
included reviewing invoices and evaluating contractor price proposals. 

Source: GAO analysis of agency contract information and interviews 
with agency officials. 

[End of table] 

Table 4: Examples of Awarding or Administering Grants: 

Activities include: Awarding grants on behalf of a federal agency, 
monitoring and evaluating grantee performance, and reviewing grantee 
reports. 

Personal services contracts: Some USAID personal services contractors 
in Iraq and Afghanistan working in contracting offices were also 
responsible for assisting with the award and administration of grants, 
including preparing award and closeout documents. 

Nonpersonal services contracts: USAID had obligated approximately $165 
million as of March 2009 toward a contract, including approximately 
$76 million in grant funds, for the contractor to award and administer 
grants in Iraq to support community-based conflict mitigation and 
reconciliation projects. 

Nonpersonal services contracts: State had obligated $350,000 as of 
March 2009 toward a task order that included the monitoring and 
evaluation of grantee performance in Iraq. Functions performed by the 
contractor included verifying the performance of work that is reported 
by grantees and assisting in other oversight activities. 

Source: GAO analysis of agency contract information and interviews 
with agency officials. 

[End of table] 

We found that the way DOD acquired personal services contractors and 
the functions performed by these contractors differed when compared to 
those of State and USAID. At DOD, we identified two contracts for 
personal services awarded by the U.S. Army Corps of Engineers to firms 
that would in turn hire individuals, including local nationals, to 
provide construction quality assurance. In these cases, contract 
personnel (up to an estimated 174 individuals, in one case) work under 
the direct supervision and control of agency officials while 
administrative aspects of their employment are managed by the 
contracted firm. In contrast, State and USAID awarded personal 
services contracts directly to individuals for a range of functions, 
including on-site monitoring of contractor activities, supporting 
contracting and program offices on contract-related matters, and 
awarding grants and monitoring grantee performance. 

Offices Used Contractors to Address Contingency-Related Challenges, 
but Decisions Are Not Guided by Agencywide Strategies: 

The decisions to use contractors to support contract or grant 
administration functions are largely made by individual contracting or 
program offices within the agencies on a case-by-case basis. The 
offices cited the lack of a sufficient number of government staff, the 
lack of in-house expertise, or frequent rotations among government 
personnel as key factors contributing to the decision to use 
contractors to support their efforts. These individual decisions, 
however, are generally not informed by more strategic, agencywide 
workforce plans or guidance on the extent to which contractors should 
be used to support these functions. 

Offices Largely Used Contractors to Alleviate Workforce Challenges and 
Cited Additional Benefits to Using Contractors in a Contingency 
Environment: 

Individual contracting or program offices generally decided to use 
contractors to perform administration functions for other contracts or 
grants to address workforce challenges, including a shortage of 
government personnel and a lack of expertise among government 
personnel to perform specific functions, as well a lack of continuity 
because of frequent rotations. While workforce-related challenges were 
cited most frequently as a reason for needing to acquire contractor 
support, contracting and program officials also noted that using 
contractors in contingency environments can be beneficial to meet 
unforeseen or changing needs, address safety concerns regarding the 
use of U.S. personnel in high-threat areas, and provide a means to 
overcome language barriers or help develop the local economy (see 
table 5). 

Table 5: Reasons Agencies Cited in Case Studies for Using Contractors 
to Support Contract and Grant Administration in Iraq and Afghanistan: 

Reason: Government personnel shortages; 
Personal services (of 13 case studies): 10; 
Nonpersonal services (of 19 case studies): 17; 
Total (of 32 case studies): 27. 

Reason: Special skills/lack of expertise among government personnel; 
Personal services (of 13 case studies): 13; 
Nonpersonal services (of 19 case studies): 14; 
Total (of 32 case studies): 27. 

Reason: Flexibility/surge capacity; 
Personal services (of 13 case studies): 7; 
Nonpersonal services (of 19 case studies): 12; 
Total (of 32 case studies): 19. 

Reason: Continuity/frequent rotations of government personnel; 
Personal services (of 13 case studies): 4; 
Nonpersonal services (of 19 case studies): 11; 
Total (of 32 case studies): 15. 

Reason: Security and logistical concerns; 
Personal services (of 13 case studies): 2; 
Nonpersonal services (of 19 case studies): 9; 
Total (of 32 case studies): 11. 

Reason: Cultural familiarity; 
Personal services (of 13 case studies): 3; 
Nonpersonal services (of 19 case studies): 5; 
Total (of 32 case studies): 8. 

Reason: Local economy development; 
Personal services (of 13 case studies): 2; 
Nonpersonal services (of 19 case studies): 5; 
Total (of 32 case studies): 7. 

Reason: Cost; 
Personal services (of 13 case studies): 2; 
Nonpersonal services (of 19 case studies): 2; 
Total (of 32 case studies): 4. 

Source: GAO analysis of agency contract documents and interviews with 
agency officials for 32 case studies. 

Note: Agencies could cite more than one reason for using contractors. 

[End of table] 

The examples in table 6 provide illustrations from our case studies of 
the reasons cited by the agencies for their reliance on contractors to 
perform contract or grant administration functions for other contracts 
or grants in Iraq or Afghanistan. 

Table 6: Examples of Reasons Agencies Cited for Using Contractors in 
Iraq and Afghanistan: 

Reason: Government personnel shortages; 
Example: The U.S. Army Corps of Engineers cited a shortage of 
personnel, among other reasons, as justification for using personal 
services contractors in Iraq and Afghanistan. For example, the 
determination and findings that supported the use of such contractors 
in Iraq stated that it had proven impossible to assemble sufficient 
numbers of U.S. quality assurance personnel to adequately monitor 
construction progress at thousands of expected work sites. USAID 
officials noted that a long-standing staffing shortage has led to the 
need for personal services contractors in missions worldwide, and 
indicated that these shortages are particularly acute in Iraq and 
Afghanistan. 

Reason: Special skills/lack of expertise among government personnel; 
Example: State program officials noted that the department's 
nonpersonal services aviation quality assurance contract required 
personnel with specific technical skills and years of experience that 
are difficult to find among government employees. 

Reason: Flexibility/surge capacity; 
Example: State Bureau of International Narcotics and Law Enforcement 
Affairs officials told us that personal services contractors are a 
good fit for COR positions in contingency environments because State 
needs surge capacity to support the increase of State agents and 
programs in the conflict region, and the contracts can be terminated 
later. 

Reason: Continuity/frequent rotations of government personnel; 
Example: Under a nonpersonal services contract to support the Joint 
Contracting Command-Iraq/Afghanistan (JCC-I/A), contractor personnel 
made up about 15 percent of JCC-I/A's contracting workforce in Iraq as 
of December 2008. DOD officials noted that contractors were needed to 
maintain continuity within the office given that the relatively short 
deployments of DOD personnel could otherwise result in loss of 
institutional knowledge. 

Reason: Security and logistical concerns; 
Example: USAID contracting officials for a nonpersonal services 
contract in Iraq that included the performance of on-site monitoring 
of contractor and grantee activities at remote locations noted that 
local national contractor personnel could generally travel more easily 
to project sites because of familiarity with local languages and 
customs and fewer travel restrictions. The determination and findings 
that supported the U.S. Army Corps of Engineers' use of personal 
services contractors to perform construction quality assurance in 
Afghanistan stated that local nationals are able to travel to remote 
job locations and complete work that security concerns prevent U.S. 
personnel from performing. 

Reason: Cultural familiarity; 
Example: JCC-I/A's Regional Contracting Center in Kabul justified 
using a nonpersonal services contract to provide contracting 
administration support because of the contractor's experience with 
local businesses and ability to speak and interpret the language, for 
which no reasonable alternative existed. 

Reason: Local economy development; 
Example: Regarding a construction oversight contract in Afghanistan, 
DOD officials indicated that hiring local nationals to perform quality 
assurance functions for construction projects helped build local 
knowledge about construction standards so local communities could 
maintain and continue existing projects once U.S. efforts were 
complete. Regarding the issuance of grants under contract in Iraq and 
Afghanistan, USAID contracting offices noted that grants under 
contract are good for development projects in quickly changing 
environments because they are a way to bridge the gap between formal 
institutions while engaging local nationals, and contractors are used 
to increase the capacity of local grantees. 

Reason: Cost; 
Example: The determination and findings justifying the use of a DOD 
personal services contract to provide construction quality assurance 
functions in Afghanistan noted that the average cost of hiring a local 
national personal services contractor was approximately 4 percent of 
the cost of hiring a U.S. employee for an equivalent position. 

Source: GAO analysis of agency contract documents and interviews with 
agency officials for 32 case studies. 

[End of table] 

Agencies Generally Lack Strategies to Determine How Extensively 
Contractors Should Perform Contract or Grant Administration Functions: 

Individual offices' decisions to use contractors are generally not 
informed by more strategic, agencywide workforce plans or guidance on 
the extent to which contractors should be used to support contract or 
grant administration functions. Agencies' current strategic human 
capital plans and guidance generally do not address the extent to 
which it is appropriate to use contractors, either in general or more 
specifically to perform contract or grant administration functions. 
Some DOD, State, and USAID officials noted that they would prefer to 
use government employees to perform some of the functions currently 
being performed by contractors. Our work indicated, however, that 
agencies intend to continue to rely on contractors to perform these 
functions in Iraq or Afghanistan on a longer-term basis. For example, 
in 15 of the 32 case studies we conducted, contracts or task orders 
were awarded in 2007 or earlier, and we found cases in which the 
contract or task order had recently been or was in the process of 
being recompeted. 

Our prior work has noted that to mitigate risks associated with using 
contractors, agencies have to understand when, where, and how 
contractors should be used given the risk of diminished institutional 
capacity, potentially greater costs, and mission risks.[Footnote 12] 
We have also reported that decisions regarding the use of contractors 
should be based on strategic planning regarding what types of work are 
best done by the agency or by contractors.[Footnote 13] DOD and the 
Office of Management and Budget have recently issued guidance that 
further emphasized the importance of this type of planning. 
Specifically, after recognizing in its 2006 update to the Quadrennial 
Defense Review that contractors are part of the total force, DOD 
issued guidance in May 2009 that encouraged DOD components to consider 
when to use contractors as part of a total force approach to workforce 
management and strategic human capital planning.[Footnote 14] 
Similarly, the Office of Management and Budget's July 2009 Managing 
the Multi-Sector Workforce guidance required civilian agencies to take 
immediate steps to adopt a framework for planning for and managing the 
multisector workforce of federal employees and contractors, including 
principles for considering the appropriate mix of contractors and 
government employees. 

We reported in 2009 that while DOD had made good progress in 
developing a civilian workforce plan and had recognized contractors as 
a part of its total workforce, the department had yet to develop a 
strategy for determining the appropriate mix of contractor and 
government personnel.[Footnote 15] DOD Instruction 1100.22, which 
provides guidance for determining the appropriate military, civilian, 
and contractor mix needed to accomplish the department's mission, 
focuses on individual decisions of whether to use contractors to 
provide specific capabilities and not the overarching question of what 
the appropriate role of contractors should be. For example, the 
guidance distinguishes between contract administration functions that 
contractors can and cannot perform based on which functions are 
considered to be inherently governmental and states that contractors 
may be used in certain circumstances to perform contract quality 
control and performance evaluation or inspection functions, but does 
not address the extent to which contractors should be used to perform 
these functions. We recommended in March 2009 that DOD revise its 
criteria and guidance to clarify under what circumstances and the 
extent to which it is appropriate to use contractors to perform 
acquisition-related functions.[Footnote 16] DOD concurred with our 
recommendation and, according to DOD officials, is in the process of 
finalizing revisions to its guidance as of March 2010. 

State's departmentwide workforce plan also generally does not address 
the extent to which contractors should be used to perform specific 
functions. As part of State's fiscal year 2011 budget process, State 
has asked its bureaus to focus on transitioning some activities 
performed by contractors to performance by government employees. State 
officials told us, however, that departmentwide workforce planning 
efforts generally have not addressed the extent to which the 
department should use contractors because those decisions are left up 
to individual bureaus. Officials at State's Bureaus of Acquisition 
Management, Diplomatic Security, and International Narcotics and Law 
Enforcement Affairs told us that they do not have workforce plans that 
include consideration of the extent to or the circumstances under 
which contractors should be used to perform contract or grant 
administration functions. These officials indicated that decisions 
about the use of contractors are generally made on a case-by-case 
basis and often reflect the necessity of using contractors because of 
a shortage of direct hire employees. 

USAID has taken steps to determine the extent to which personal 
services contractors should be used, but has not addressed the extent 
to which nonpersonal services contractors outside the United States 
should be used, either in general or to perform specific functions. 
USAID officials told us that personal services contractors are used 
across the agency's overseas missions and that they consider these 
contractors to be part of their workforce. As such, personal services 
contractors have been included in the agency's workforce planning 
model. For example, the model for USAID headquarters includes an 
estimate of the extent to which various functions should be performed 
by personal services contractors. Officials told us that future 
iterations of the model will address the extent to which personal 
services contractors should be used to staff contracting offices in 
Iraq and Afghanistan. USAID's current workforce planning efforts, 
including its human capital and workforce plans, however, do not 
address the extent to which nonpersonal services contractors working 
outside of the United States should be used as officials do not 
consider those contractors to be part of USAID's workforce. 

DOD, State, and USAID will be challenged to fully address the 
appropriate role for contractors performing specific functions during 
workforce planning efforts because of the lack of complete and 
reliable data on the functions performed by contractors. We recently 
reported that all three agencies continue to struggle in implementing 
improvements to track data on contracts and contractor personnel in 
Iraq and Afghanistan.[Footnote 17] Our past work has shown that such 
data are important to enable agencies to conduct adequate workforce 
planning.[Footnote 18] 

DOD, State, and USAID took a number of actions to mitigate conflict of: 

Agencies Did Not Always Mitigate Risks Related to Contractors 
Supporting Contract or Grant Administration Functions: 

interest and oversight risks associated with contractors supporting 
contract and grant administration functions, but did not always fully 
address these risks. For example, the agencies generally complied with 
requirements related to organizational conflicts of interest. USAID, 
however, did not always include a contract clause generally required 
by USAID policy intended to protect the government's interest 
regarding potential organizational conflicts of interest. 
Additionally, some State officials were uncertain as to whether or how 
federal ethics laws regarding personal conflicts of interest applied 
to personal services contractors. In almost all cases, the agencies 
had designated personnel to provide contract oversight, though they 
did not ensure enhanced oversight for contractors that closely 
supported inherently governmental functions in accordance with federal 
requirements. 

Agencies Generally Complied with Requirements Related to 
Organizational Conflicts of Interest, Although USAID Did Not Always 
Follow Agency Policy: 

FAR subpart 9.5 requires contracting officers to identify and evaluate 
potential organizational conflicts of interest prior to contract award 
and take steps to address potential conflicts that they determine to 
be significant. If the contract may involve a significant potential 
conflict, before issuing a solicitation, the contracting officer must 
submit for approval to the head of the contracting activity a written 
analysis with courses of action for avoiding, mitigating, or 
neutralizing the conflict. Though not mandatory, the contracting 
officer may use solicitation provisions or a contract clause to 
restrict the contractor's eligibility for other contract awards or 
require agreements about the use of other contractors' proprietary 
information obtained during the course of contract performance. 
[Footnote 19] 

In six of the contracts we reviewed, agencies addressed potential 
organizational conflicts of interest by incorporating a clause into 
the contract that precluded the contractor from bidding on other 
related work that may result in a conflict of interest. For example, 
Air Force Center for Engineering and the Environment officials 
identified the potential for an organizational conflict of interest in 
a contract used in part to support the center's CORs in Iraq and 
therefore restricted the contractor from participating in any of the 
center's other contracts for the life of the contract plus 1 year. 
Similarly, a State contract to support the department's management and 
oversight of security operations overseas, including in Iraq and 
Afghanistan, had a clause that precluded the contractor and its 
subcontractors from participating in directly related department 
contracts for 3 years after the completion of the contract. These six 
case studies also included a contract clause addressing the protection 
or nondisclosure of other contractors' proprietary data. 

Agencies have broad discretion in how to address potential 
organizational conflicts of interest. Solicitation and contract 
clauses are one of many options contracting officers have, though they 
are not always used. For example, agency documents in two cases 
suggested that there had been consideration of the possible need to 
restrict contractors' activities because of potential conflicts of 
interest. Clauses related to potential conflicts of interest, however, 
were not included in the contracts at the time of award. In one case, 
the Commander of the Joint Contracting Command - Iraq/Afghanistan's 
(JCC-I/A) letter of justification for contract and property specialist 
support stated that the award of the contract may preclude the 
contractor from being eligible for or working on other contracts. The 
contract itself, though, did not contain any related organizational 
conflict of interest clauses. Additionally, the contract file of a 
Defense Energy Support Center contract to support the oversight of 
fuel delivery in Afghanistan included e-mails indicating that the 
oversight support contractor could not provide services to the 
companies providing fuel delivery services for the center. Contracting 
officials told us that the related discussions had been informal and 
therefore had not been documented. 

In addition to the FAR, USAID also has specific agency policy that 
addresses organizational conflicts of interest for certain 
contractors, including contractors that evaluate USAID program 
activities or other contractors.[Footnote 20] The policy requires that 
an organizational conflict of interest clause be included in the 
evaluation contract that precludes the contractor from providing 
certain related services within 18 months of USAID receiving an 
evaluation report from the contractor unless a waiver is authorized; 
restricts the use of information obtained from other parties during 
the course of the contract; and requires nondisclosure agreements with 
other contractors to protect proprietary data. This clause was not, 
however, incorporated in any of the three USAID contracts we reviewed 
that included the evaluation of program activities or contractors. In 
one of these contracts, the statement of work notes that the 
contractor may be precluded from performing work under the current 
task order or from award of other contracts if USAID determines the 
contractor has a conflict of interest, and that the contractor shall 
protect proprietary information. This statement is not, however, 
specific as to when those circumstances occur, nor does it 
specifically restrict the contractor's use of information obtained 
from other parties during the course of the contract in future 
proposals. USAID officials told us that when this contract is 
recompeted in 2010, the clause required by USAID policy will be 
included. In another of these three cases, USAID's response to a 
prospective bidder's questions indicated that prior to the award of 
the contract, a determination was made that the contractor would be 
restricted from bidding for the award of other related contracts, but 
the restrictions were not addressed in the solicitation or contract 
despite the requirement to do so in FAR section 9.507-2. 

One case study illustrated the challenges of identifying potential 
organizational conflicts of interest prior to award and the potential 
effect if one is identified after award. In this case, JCC-I/A awarded 
a $1 million contract to support the Armed Contractor Oversight 
Directorate in Afghanistan. The contractor, which itself was a private 
security contractor, was assigned a number of responsibilities related 
to oversight of private security contractors, including monitoring 
private security contractor activity, documenting and analyzing 
security incidents, and assisting the government in conducting 
incident inspections. The contract files we reviewed did not include 
documentation that the contracting officer assessed the potential for 
a conflict of interest, though as previously noted, a written analysis 
would not be necessary unless the contracting officer decided that 
there was a significant potential conflict of interest. In addition, 
no clauses were included in the solicitation or contract that 
precluded the contractor from bidding on other contracts. After the 
support contract had been awarded and performance had begun, the 
support contractor competed for and won a separate contract to provide 
armed guard services in Afghanistan. Subsequent to the award of the 
second contract, however, a JCC-I/A attorney became aware of the two 
contracts and, according to JCC-I/A officials, alerted a JCC-I/A 
contracting official. JCC-I/A counsel concluded that the contractor's 
objectivity in supporting the Armed Contractor Oversight Directorate 
could potentially be impaired by its performance of armed guard 
services. Ultimately, JCC-I/A counsel determined that no mitigation 
plan would adequately mitigate this conflict. Therefore, JCC-I/A 
terminated the ongoing Armed Contractor Oversight Directorate support 
contract for the convenience of the government and awarded another 
support contract to a different contractor. 

Agencies are not required to have a formal process for monitoring 
potential organizational conflicts of interest after award, but in 
some cases, officials told us that they did so informally. For 
example, for a State task order to provide contract administration 
support, officials noted that it was possible to mitigate potential 
conflicts of interest because the small size of the office facilitates 
direct government oversight of contractor activities, and contractors 
that perform contract administration functions for State do not often 
perform other services that could be in conflict with their current 
responsibilities. In several other case studies we conducted, agency 
officials told us that contractors have responsibility to bring 
organizational conflicts of interest to the attention of contracting 
officials if they occur. 

Under USAID acquisition regulations, contracts that include 
restrictions on a contractor's eligibility for future work should also 
include a standard clause stating that the contractor should disclose 
any postaward conflicts of interest it discovers. In the three 
contracts that we previously indicated should have had a clause to 
restrict the contractor's eligibility for future work based on USAID 
policy because they included evaluation services, one contract had the 
clause to disclose postaward conflicts of interest discovered while 
the other two did not. USAID officials in these cases, however, told 
us that they take steps to mitigate potential organizational conflicts 
of interest during the life of the contract. For example, for a USAID 
contract for monitoring and evaluation services in Iraq, the personal 
services contractor responsible for contract oversight told us that he 
addressed potential conflicts of interest by limiting contact between 
the contractors responsible for executing mission programs and the 
contractor evaluating their services. Although DOD and State 
regulations do not require contract clauses related to the disclosure 
of conflicts of interest by contractors, changes to governmentwide 
requirements on organizational conflicts of interest, including the 
establishment of standard contract clauses, are being considered. 
[Footnote 21] 

Mitigation Efforts for Personal Conflicts of Interest Vary by Agency 
and Contract Type: 

Most requirements governing personal conflicts of interest that apply 
to federal employees are generally not applicable to nonpersonal 
services contractors and their employees. Since December 2007, the FAR 
has required certain contractors to have a written code of business 
ethics and conduct, although this requirement did not apply in most of 
the nonpersonal services case studies we conducted.[Footnote 22] We 
have previously reported that this requirement will not ensure that 
the advice and assistance received from contractor employees is not 
tainted by personal conflicts of interest.[Footnote 23] We recommended 
in March 2008 that DOD develop and implement policy that requires 
personal conflict of interest safeguards for certain defense 
contractor employees that are similar to those required of DOD's 
federal employees. In November 2009, DOD issued a memorandum providing 
additional information on risks related to personal conflicts of 
interest and how those risks should be addressed under current federal 
regulations, but DOD's response to our recommendation is pending 
resolution of a proposed amendment to the FAR to address personal 
conflicts of interest by contractor employees performing acquisition 
functions.[Footnote 24] 

Several contracting officials told us that contractors have 
responsibility to bring personal conflicts of interest to the agency's 
attention. In our case studies, we found that contractors managed 
personal conflicts of interest in a variety of ways. For example, in 
two USAID case studies that included the award of grants, the 
contractor included in its grant management plan criteria for 
identifying contractor personnel with conflicts of interest and the 
process for mitigating those conflicts. Representatives from a DOD 
contractor providing construction quality assurance services in Iraq 
and Afghanistan told us that they screen and interview all employees 
they hire to identify personal conflicts of interest and require 
employees to sign a form stating that they have no such conflicts. In 
this and three other DOD case studies we conducted, agency contracting 
and program officials stated that they attempt to identify and 
mitigate potential personal conflicts of interest by reviewing the 
résumés of proposed contractor employees. 

The agencies vary in how they address personal conflicts of interest 
among personal services contractors. DOD officials told us that the 
department does not have specific policies related to conflicts of 
interest among personal services contractors. USAID policy states that 
personal services contractors are covered by all federal ethics laws 
that apply to direct hire personnel, including requirements to file 
financial disclosure forms.[Footnote 25] USAID policy requires the 
contracting officer or executive officer who awards a personal 
services contract to make a determination at the time of contract 
award about the specific financial disclosure filing requirements that 
will apply to the personal services contractor and to include that 
determination as part of the contract. USAID officials complied with 
this requirement in each of the six USAID personal services case 
studies we conducted.[Footnote 26] 

Unlike USAID, neither State nor its bureaus that hired personal 
services contractors within our scope have guidance that specifically 
addresses the applicability of federal ethics laws to personal 
services contractors. According to the senior ethics counsel at State, 
understanding which financial disclosure requirements apply to 
personal services contractors is complicated and depends on the 
personal services contractor's contract and the bureau's statutory 
basis for hiring that personal services contractor. Our work at State 
identified some confusion among contracting personnel and supervisors 
of personal services contractors as to whether federal ethics laws, 
including those related to financial disclosure requirements, were 
applicable to personal services contractors. In the five personal 
services case studies we conducted at State's Bureaus of Diplomatic 
Security and International Narcotics and Law Enforcement Affairs, 
contracting personnel and supervisors of personal services contractors 
either were uncertain of how requirements to file financial disclosure 
forms applied to personal services contractors, told us that the 
requirements did not apply, or told us that the requirements had only 
recently been applied at all or consistently to personal services 
contractors. The five personal services contractors in these case 
studies told us, however, that they were generally required to 
complete financial disclosure forms or that they had completed 
financial disclosure forms in the past year. 

Agencies Appointed Oversight Personnel for Contracts but Did Not 
Consider Enhanced Oversight for Contractors Closely Supporting 
Inherently Governmental Functions: 

In most case studies we conducted, the agencies had designated 
oversight personnel to monitor contractors performing administration 
functions for other contracts or grants in Iraq or Afghanistan. A 
primary characteristic of a personal services contract is the 
relatively continuous supervision and control of the personal services 
contractor by a government employee, and in the case studies we 
conducted, we generally found personal services contractors had 
designated government supervisors who worked within the same program. 
In 18 of 19 nonpersonal services case studies we conducted, agencies 
had identified individuals to provide contract oversight, though the 
extent of that oversight varied in part based on the functions 
performed by the contractor and whether the contractor performed at 
remote locations. For example, State officials told us that for a 
contract to provide program and acquisition support for the 
department's oversight of overseas security operations, including 
those in Iraq and Afghanistan, government officials supported by the 
contractor are collocated with contractor employees, and government 
branch chiefs routinely meet with the contractor's program manager to 
discuss contractor employee performance on assigned work. In contrast, 
CORs in some quality assurance case studies conducted oversight 
primarily of remote locations. For example, U.S. Army Corps of 
Engineers officials told us that CORs for a construction quality 
assurance contract conduct oversight primarily by reviewing contractor 
reports and photos of work sites and conducting meetings with quality 
assurance and construction contractor personnel. In several cases, 
agency officials indicated that they did not maintain or could not 
locate documentation of oversight activities. 

Agencies faced challenges providing sufficient oversight of 
contractors performing administration functions for other contracts in 
Iraq or Afghanistan in several case studies we conducted. For example, 
agency officials stated that when they cannot visit contractor work 
sites for security reasons--as with some sites for the Defense Energy 
Support Center's fuel delivery inspection contract in Afghanistan and 
USAID's Monitoring and Evaluation Performance Program contract in 
Iraq--their oversight is entirely remote. USAID officials told us that 
other U.S. government officials, such as representatives from 
provincial reconstruction teams, may be able to provide some insight 
into contractor activities during times when those officials are at 
contractor work sites. Defense Energy Support Center officials told us 
that the inability of government personnel to visit contractor work 
sites can make it difficult for them to verify the quality of work of 
the contractor that is supporting the oversight of work performed by 
other contractors. In addition, the COR for a U.S. Army Corps of 
Engineers quality assurance contract told us that some contractor 
personnel did not provide high-quality reports and that construction 
oversight personnel who reviewed the reports on a daily basis 
sometimes lacked the quality assurance expertise to direct the 
contractor's quality assurance personnel. The COR told us that 
training efforts were under way to address this issue. Further, 
according to State officials, they had difficulty filling the 
government deputy program manager position for State's aviation 
quality assurance contract, which affected the department's plans to 
provide continuous oversight of the contractor's technical operations 
in Iraq since the deputy program manager was intended to provide in-
country oversight when the program manager was not in Iraq. In another 
State case, contracting officials told us that oversight was conducted 
entirely by the COR and program office staff but were unaware that 
there was not a COR currently designated for the contract. The 
officials later told us that staff turnover in Iraq had resulted in 
the lack of a COR, and they were taking steps to try to get a new COR 
appointed. 

In the 19 nonpersonal services case studies we conducted, we found 
that the contract or task order statements of work provided for the 
contractor to perform functions that closely support inherently 
governmental functions. For contractors administering other contracts, 
this includes evaluating another contractor's performance, providing 
inspection services, and performing tasks that might allow access to 
confidential business or other sensitive information, among other 
functions; for contractors administering grants, awarding or 
recommending the award of grants closely supports the performance of 
inherently governmental functions.[Footnote 27] We have previously 
reported that when contractors provide services that closely support 
inherently governmental functions, there is the potential for loss of 
government control and accountability for mission-related policy and 
program decisions, and that risk increases the closer the services 
come to supporting inherently governmental functions. This loss of 
government control may result in decisions that are not in the best 
interest of the government and may increase vulnerability to waste, 
fraud, and abuse. To address this risk, the FAR and Office of Federal 
Procurement Policy guidance require that agencies provide greater 
scrutiny and an enhanced degree of management oversight of contractors 
performing services that tend to affect government decision making, 
support or influence policy development, or affect program management. 
[Footnote 28] This enhanced oversight would include assigning a 
sufficient number of qualified government employees to provide 
oversight and to ensure that agency officials retain control over and 
remain accountable for policy decisions that may be based in part on a 
contractor's performance and work products. These requirements for 
enhanced oversight are not applicable to personal services 
contractors, including the 13 personal services case studies we 
conducted, because Office of Federal Procurement Policy guidance and 
FAR restrictions on contractors performing inherently governmental 
functions do not apply to these contractors.[Footnote 29] 

Although we found that statements of work for all of the 19 
nonpersonal services case studies we conducted provided for the 
contractor to perform activities that closely supported inherently 
governmental functions, we did not find evidence that the agencies 
considered related requirements to provide greater scrutiny and an 
enhanced degree of management oversight in these 19 cases. In our 
prior work at DOD and the Department of Homeland Security, we found 
that program and contracting personnel were unaware of requirements 
related to providing enhanced oversight of services that closely 
support inherently governmental functions.[Footnote 30] In the case 
studies we conducted, we found that many contracting and program 
officials were unfamiliar with the concept of contractors closely 
supporting inherently governmental functions. Further, DOD, State, and 
USAID regulations generally do not require contracting or program 
officials to document an assessment of whether contractors closely 
support inherently governmental functions or any consideration given 
to enhanced oversight.[Footnote 31] According to DOD, State, and USAID 
officials, no specific guidance has been developed that defines how 
contracting and program officials should conduct enhanced oversight. 
In November 2009, we recommended that DOD require program and 
contracting officials to document risks and risk mitigation steps when 
awarding any contract or issuing any task order for services closely 
supporting inherently governmental functions and develop guidance to 
identify approaches to enhance management oversight for these 
contracts or task orders. DOD concurred with these recommendations and 
identified a number of actions that would be taken to address them. 
[Footnote 32] 

Conclusions: 

Contracting in contingency environments such as Iraq and Afghanistan 
presents unique security and logistical challenges, including 
difficulty traveling to dangerous or remote locations and frequent 
rotations among government personnel. Despite such challenges, 
effective oversight of contractors and grantees remains critical to 
help ensure that contractors are meeting contract requirements and 
grant funds are being used for their intended purposes. Using 
contractors to support the administration and oversight of other 
contracts and grants can facilitate the government's ability to carry 
out this critical function. Our prior work and the Office of 
Management and Budget's July 2009 guidance, however, have underscored 
the importance of strategic planning to guide decisions related to how 
contractors should be used to support agency missions. Until DOD, 
State, and USAID fully consider in their workforce planning efforts 
the extent to which contractors should perform contract and grant 
administration functions, the agencies will not be positioned to 
consider the potential implications of relying on contractors to 
perform these functions, such as a loss of institutional capacity to 
perform mission-critical functions or greater costs. 

The agencies did not fully address risks related to potential 
conflicts of interest and oversight for contractors performing 
contract or grant administration functions. For example, USAID did not 
always address potential organizational conflicts of interest in its 
contracts in accordance with agency policy, though ongoing efforts to 
revise federal organizational conflict of interest regulations could 
potentially improve USAID's and other agencies' ability to mitigate 
this risk in the future. Additionally, without management 
understanding of whether federal ethics laws related to personal 
conflicts of interest apply to the department's personal services 
contractors, State runs the risk of inconsistent application of these 
laws, potentially limiting the department's ability to ensure that 
contract and grant administration decisions are made in the best 
interest of the government. Further, DOD, State, and USAID's lack of 
consideration of the need to provide greater scrutiny and an enhanced 
degree of management oversight when nonpersonal services contractors 
closely support inherently governmental functions may impair the 
agencies' ability to ensure the appropriate level of oversight. The 
agencies will continue to face this challenge without an effective 
process to identify contracts that closely support inherently 
governmental functions and guidance to assist program and contracting 
officials. 

In 2009, we made recommendations to DOD with regard to improving the 
department's ability to plan for the use of contractors supporting 
acquisition functions and mitigate the risks of contractors closely 
supporting the performance of inherently governmental functions. Since 
the department concurred with these recommendations and has identified 
steps it plans to take to address them, we are not making any 
additional recommendations to DOD. 

Recommendations for Executive Action: 

To improve State and USAID's ability to plan effectively for the use 
of contractors to perform contract or grant administration functions 
and to improve oversight of contracts that closely support inherently 
governmental functions in Iraq, Afghanistan, and future contingency 
environments where the agencies rely heavily on contractors, we 
recommend that the Secretary of State and Administrator of USAID take 
the following three actions: 

* Determine the extent to which contractors should perform 
administration functions for other contracts and grants in accordance 
with strategic human capital planning principles outlined in the 
Office of Management and Budget's July 2009 multisector workforce 
guidance. 

* Develop guidance to identify approaches that contracting and program 
officials should take to enhance management oversight when nonpersonal 
services contractors provide services that closely support inherently 
governmental functions. 

* Before the award of any nonpersonal services contract or task order 
for services closely supporting inherently governmental functions, 
require that program and contracting officials document their 
consideration of related risks and the steps that have been taken to 
mitigate such risks. 

To improve State's ability to mitigate risks related to potential 
personal conflicts of interest among personal services contractors, we 
recommend that the Secretary of State clarify the department's 
policies regarding the application of federal ethics laws to personal 
services contractors. 

Agency Comments and Our Evaluation: 

We provided DOD, State, and USAID with a draft of this report for 
their review and comment. DOD provided technical comments, which we 
incorporated as appropriate. State agreed with our recommendations and 
identified steps that the department plans to take to address each 
recommendation. State's comments, along with our response, are 
reprinted in appendix III. USAID generally agreed with our 
recommendations and identified steps the agency is taking or plans to 
take to address them. With regard to our recommendation related to 
determining the extent to which contractors should perform contract or 
grant administration functions, USAID noted that it is already in the 
process of determining the extent to which nonpersonal services 
contractors, which USAID refers to as institutional support 
contractors, should perform such functions. As we noted in the report, 
however, USAID's current efforts do not address the extent to which 
nonpersonal services contractors performing such functions outside of 
the United States, such as in Iraq or Afghanistan, should be used. We 
believe it is important for the agency to make such a determination to 
position itself to effectively mitigate the potential risks associated 
with reliance on contractors. USAID also provided some points of 
clarity related to the recommendations, and we incorporated the 
comments in the report as appropriate. USAID's comments, along with 
our responses, are reprinted in appendix IV. 

We are sending copies of this report to the Secretary of Defense, the 
Secretary of State, the Administrator of the U.S. Agency for 
International Development, and interested congressional committees. 
The report also is available at no charge on GAO's Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-4841 or huttonj@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix V. 

Signed by: 

John P. Hutton: 
Director: 
Acquisition and Sourcing Management: 

List of Committees: 

The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate: 

The Honorable John F. Kerry:
Chairman:
The Honorable Richard G. Lugar:
Ranking Member:
Committee on Foreign Relations:
United States Senate: 

The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate: 

The Honorable Dianne Feinstein:
Chairman:
The Honorable Christopher S. Bond:
Vice Chairman:
Select Committee on Intelligence:
United States Senate: 

The Honorable Ike Skelton:
Chairman:
The Honorable Howard P. McKeon:
Ranking Member:
Committee on Armed Services:
House of Representatives: 

The Honorable Howard L. Berman:
Chairman:
The Honorable Ileana Ros-Lehtinen:
Ranking Member:
Committee on Foreign Affairs:
House of Representatives: 

The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives: 

The Honorable Silvestre Reyes:
Chairman:
The Honorable Peter Hoekstra:
Ranking Member:
Permanent Select Committee on Intelligence:
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

The National Defense Authorization Act for Fiscal Year 2008 directed 
us to report annually on Department of Defense (DOD), Department of 
State (State), and U.S. Agency for International Development (USAID) 
contracts in Iraq and Afghanistan, including information on any 
specific contract or class of contracts the Comptroller General 
determines raises issues of significant concern. Pursuant to that 
mandate, we reviewed DOD, State, and USAID's use of contractors, 
including personal services contractors, to perform administration 
functions for contracts or grants with performance in Iraq and 
Afghanistan for fiscal year 2008 and the first half of fiscal year 
2009.[Footnote 33] Specifically, we analyzed (1) the extent to which 
DOD, State, and USAID rely on contractors to perform administration 
functions for other contracts and grants in Iraq and Afghanistan; (2) 
the reasons behind decisions to use contractors to perform these 
functions and whether the decisions are guided by strategic workforce 
planning; and (3) whether the agencies have considered and mitigated 
conflict of interest and oversight risks related to contractors 
performing contract or grant administration functions. 

To determine the extent to which DOD, State, and USAID rely on 
contractors to perform administration functions for other contracts 
and grants in Iraq and Afghanistan,[Footnote 34] we obtained data from 
the agencies on contracts and task orders with at least 1 day of 
performance in fiscal year 2008 or the first half of fiscal year 2009 
for which duties included administration functions for other contracts 
or grants with performance in Iraq, Afghanistan, or both.[Footnote 35] 
The data we obtained from the agencies were intended to include all 
contracts with administration functions for other contracts and grants 
with performance in Iraq and Afghanistan, regardless of the place of 
performance of the contractor performing administration functions. For 
example, some contracts or task orders in our scope included 
performance in the United States in support of the administration of 
contracts or grants with performance in Iraq or Afghanistan. 

To assess whether the data obtained from the agencies were accurate 
and appropriately categorized as within the scope of this engagement, 
we reviewed contract documents for a selection of reported contracts. 
We reviewed contract documents for all 49 contracts or task orders 
reported for DOD and 37 of the 39 contracts or task orders reported by 
State. The 2 contracts we did not review at State were contracts for 
which officials could not identify the task orders that were within 
our scope. For USAID, we reviewed contract documents for all 17 
nonpersonal services contracts or task orders reported by the agency 
and selected 25 of 81 personal services contract files for review 
during our fieldwork in Iraq and Afghanistan.[Footnote 36] For the 
most part, we determined that the contracts or task orders we reviewed 
had been appropriately reported by the agencies as being within our 
scope. When we noted discrepancies, we gathered additional information 
about contracts or task orders reported by the agencies, and if we 
determined that a contract or task order was not within our scope, we 
removed it from our analysis. 

We attempted to identify additional contracts or task orders within 
our scope by reviewing data from the Federal Procurement Data System - 
Next Generation (FPDS-NG) and data provided to GAO by these agencies 
for a related engagement. Specifically, for both sources of data, we 
used a list of keywords related to contract and grant administration 
to search for contracts or task orders not reported by the agencies 
that might be within our scope.[Footnote 37] When we identified such 
contracts or task orders, we followed up with the agencies to obtain 
contract documents and additional information from knowledgeable 
officials as necessary to determine whether the contracts or task 
orders were within our scope. If we determined that the contracts or 
task orders were within our scope, we added them to our analysis. In 
total, we added 62 contracts or task orders as a result of our data 
reliability reviews. Although we found that the agencies' data were 
incomplete based on these additional contracts and task orders we 
identified, we determined that taken collectively, data provided by 
the agencies and data on the contracts and task orders we identified 
and included in our scope were sufficiently reliable to establish the 
minimum number of contracts and task orders active in fiscal year 2008 
or the first half of fiscal year 2009 awarded by DOD, State, and USAID 
to perform the functions within our scope. 

For the contracts and task orders within our scope, we also obtained 
data from FPDS-NG or the agencies on the total obligations for the 
contracts or task orders through March 31, 2009. To assess the 
reliability of the obligation data from FPDS-NG, we compared them with 
related data from our contract file reviews for the nonpersonal 
services contracts we selected as case studies. In two cases at USAID, 
we identified discrepancies. In these cases, we followed up with the 
agency to determine the reasons for the discrepancies and made 
corrections as necessary. We determined that the data were 
sufficiently reliable for the purposes of our review, although 
obligations for some USAID contracts in Afghanistan may be 
underreported in FPDS-NG because of discrepancies between USAID 
information systems and FPDS-NG. State and USAID obligations for 
personal services contracts were generally not included in FPDS-NG, so 
we obtained obligation data from the agencies for these contracts. We 
assessed the reliability of the data provided by the agencies by 
comparing them to related data we collected during our file reviews 
for the personal services contracts we selected as case studies. Based 
on this assessment, we determined that the data were sufficiently 
reliable for the purposes of our review. We were unable to determine 
how much of the amount obligated by the agencies on the contracts or 
task orders within our scope was specifically obligated for the 
performance of contract or grant administration functions in Iraq or 
Afghanistan. Some of the contracts or task orders included the 
performance of functions besides contract or grant administration or 
the performance of administration functions for contracts or grants 
with performance outside of Iraq and Afghanistan, but FPDS-NG and 
agency obligation data were not detailed enough to allow us to isolate 
the amount obligated for other functions or locations. 

To gather information about the reasons behind decisions to use 
contractors to perform functions within our scope, we purposefully 
selected 13 personal services contracts and 19 nonpersonal services 
contracts at DOD, State, and USAID for case studies to provide a cross 
section of types of contracts, locations, and functions performed. For 
these case studies, we conducted fieldwork in Iraq, Afghanistan, and 
the United States. We reviewed available documentation of agencies' 
justifications for using contractors, such as acquisition strategies 
and relevant determinations and findings for the contracts we 
selected. We also interviewed agency officials, such as contracting 
officers, program managers, and contracting officers' representatives 
(COR), about the reasons for using contractors to perform contract or 
grant administration functions. To determine the extent to which 
agencies had developed strategies to inform decisions about the use of 
contractors to perform these functions, we reviewed agency workforce 
planning documents, such as strategic human capital plans. We also 
analyzed relevant guidance, including DOD Instruction 1100.22, 
Guidance for Determining Workforce Mix, and Office of Management and 
Budget and DOD guidance related to insourcing, and reviewed our prior 
work on the inclusion of contractors in workforce planning. Further, 
we interviewed knowledgeable agency officials about steps taken to 
include contractors in agency workforce planning efforts. 

To assess the agencies' consideration and mitigation of conflict of 
interest and oversight risks related to contractors performing 
contract or grant administration functions, we reviewed relevant 
federal regulations and agency policy and analyzed data collected 
through the case studies we conducted. Specifically, to determine the 
steps taken by the agencies to address risks related to potential 
organizational and personal conflicts of interest, we analyzed 
contract clauses and other contract documentation relevant to 
conflicts of interest. To determine the steps taken by the agencies to 
address risks related to oversight, we analyzed relevant contract 
documentation, such as COR appointment letters, surveillance or 
contract administration plans, and documentation of the consideration 
of whether contractors closely supported inherently governmental 
functions when available. To gain additional insight into how 
potential conflict of interest and oversight risks were addressed by 
the agencies, we interviewed agency officials responsible for 
contracting policy as well as officials such as contracting officers, 
CORs, and program officials responsible for the contracts we selected 
as case studies. Our review did not assess the effectiveness of 
contractors performing contract or grant administration functions for 
other contracts or grants. 

We conducted this performance audit from February 2009 through April 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Summary of Agency Contracts and Task Orders: 

DOD, State, and USAID relied on contractors to perform a wide range of 
administration functions for contracts and grants with performance in 
Iraq and Afghanistan. Our review found 223 contracts and task orders 
active during fiscal year 2008 or the first half of fiscal year 2009 
that included the performance of administration functions for other 
contracts or grants in Iraq and Afghanistan. Tables 7, 8, and 9 
provide more details about these contracts and task orders. 

Table 7: DOD Contracts and Task Orders Active in Fiscal Year 2008 or 
the First Half of Fiscal Year 2009 That Include Administration 
Functions for Other Contracts or Grants in Iraq and Afghanistan: 

Nonpersonal services contracts/task orders: 
Supporting Iraq: $23 million; 
Supporting Afghanistan: $37 million; 
Supporting Iraq and Afghanistan: $8 million; 
Total: $68 million. 

Personal services contracts/task orders: 
Supporting Iraq: $1 million; 
Supporting Afghanistan: $9 million; 
Supporting Iraq and Afghanistan: 0; 
Total: $10 million. 

Total: 
Supporting Iraq: $24 million; 
Supporting Afghanistan: $46 million; 
Supporting Iraq and Afghanistan: $8 million; 
Total: $78 million. 

Obligations as of March 31, 2009[A]: 
Supporting Iraq: $170.9 million; 
Supporting Afghanistan: $52.5 million; 
Supporting Iraq and Afghanistan: $70.4 million; 
Total: $293.8 million. 

Source: GAO analysis of DOD and FPDS-NG data. 

[A] We were unable to determine how much of this amount was 
specifically obligated for the performance of contract or grant 
administration functions in Iraq or Afghanistan because, while some of 
the contracts or task orders within the scope of this engagement 
include administration functions for contracts or grants with 
performance outside of Iraq and Afghanistan or the performance of 
functions besides contract or grant administration, FPDS-NG and agency 
obligation data were not detailed enough to allow us to isolate the 
amount obligated for other functions or locations. 

[End of table] 

Table 8: State Contracts and Task Orders Active in Fiscal Year 2008 or 
the First Half of Fiscal Year 2009 That Include Administration 
Functions for Other Contracts or Grants in Iraq and Afghanistan: 

Nonpersonal services contracts/task orders: 
Supporting Iraq: $5 million; 
Supporting Afghanistan: $1 million; 
Supporting Iraq and Afghanistan: $14 million; 
Total: $20 million. 

Personal services contracts/task orders: 
Supporting Iraq: $7 million; 
Supporting Afghanistan: $5 million; 
Supporting Iraq and Afghanistan: $14 million; 
Total: $26 million. 

Total: 
Supporting Iraq: $12 million; 
Supporting Afghanistan: $6 million; 
Supporting Iraq and Afghanistan: $28 million; 
Total: $46 million. 

Obligations as of March 31, 2009[A]: 
Supporting Iraq: $12.1 million; 
Supporting Afghanistan: $2.9 million; 
Supporting Iraq and Afghanistan: $26.0 million; 
Total: $40.9 million. 

Source: GAO analysis of State and FPDS-NG data. 

Note: Numbers may not add to totals because of rounding: 

[A] We were unable to determine how much of this amount was 
specifically obligated for the performance of contract or grant 
administration functions in Iraq or Afghanistan because, while some of 
the contracts or task orders within the scope of this engagement 
include administration functions for contracts or grants with 
performance outside of Iraq and Afghanistan or the performance of 
functions besides contract or grant administration, FPDS-NG and agency 
obligation data were not detailed enough to allow us to isolate the 
amount obligated for other functions or locations. 

[End of table] 

Table 9: USAID Contracts and Task Orders Active in Fiscal Year 2008 or 
the First Half of Fiscal Year 2009 That Include Administration 
Functions for Other Contracts or Grants in Iraq and Afghanistan: 

Nonpersonal services contracts/task orders: 
Supporting Iraq: $5 million; 
Supporting Afghanistan: $11 million; 
Supporting Iraq and Afghanistan: 0; 
Total: $16 million. 

Personal services contracts/task orders: 
Supporting Iraq: $30 million; 
Supporting Afghanistan: $53 million; 
Supporting Iraq and Afghanistan: 0; 
Total: $83 million. 

Total: 
Supporting Iraq: $35 million; 
Supporting Afghanistan: $64 million; 
Supporting Iraq and Afghanistan: 0; 
Total: $99 million. 

Obligations as of March 31, 2009[A]: 
Supporting Iraq: $365.4 million[B]; 
Supporting Afghanistan: $286.1 million[B,C]; 
Supporting Iraq and Afghanistan: $0; 
Total: $651.6 million[B,C]. 

Source: GAO analysis of USAID and FPDS-NG data. 

Note: Numbers may not add to totals because of rounding: 

[A] We were unable to determine how much of this amount was 
specifically obligated for the performance of contract or grant 
administration functions in Iraq or Afghanistan because, while some of 
the contracts or task orders within the scope of this engagement 
include administration functions for contracts or grants with 
performance outside of Iraq and Afghanistan or the performance of 
functions besides contract or grant administration, FPDS-NG and agency 
obligation data were not detailed enough to allow us to isolate the 
amount obligated for other functions or locations. 

[B] These obligations include more than $116 million reported by USAID 
for grants that were awarded by contractors in Iraq on behalf of 
USAID, as authorized in the terms of their contracts. USAID 
contractors also awarded grants on behalf of USAID in Afghanistan, but 
USAID officials told us that the Afghanistan mission does not track 
grants awarded by contractors. 

[C] Obligations for some USAID contracts in Afghanistan may be 
underreported in FPDS-NG because of discrepancies between USAID 
information systems and FPDS-NG. 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of State: 

Note: GAO's comments supplementing those in the report text appear at 
the end of this appendix. 

United States Department of State: 
Chief Financial Officer: 
Washington, D.C. 20520: 

April 2, 2010: 

Ms. Jacquelyn Williams-Bridgers: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

Dear Ms. Williams-Bridgers: 

We appreciate the opportunity to review your draft report, 
"Contingency Contracting: Improvements Needed in Management of 
Contractors Supporting Contract and Grant Administration in Iraq and 
Afghanistan," GAO Job Code 120812. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact 
Jason Passaro, Director, Office of Commercial Services Management, 
Bureau of Administration at (703) 875-5114. 

Sincerely, 

Signed by: 

James L. Millette: 

cc: GAO — Anthony Moran: 
A — Steven Rodriguez: 
State/OIG — Mark Duda: 

[End of letter] 

Department of State Comments on GAO Draft Report: 

Contingency Contracting: Improvements Needed in Management of 
Contractors Supporting Contract and Grant Administration in Iraq and 
Afghanistan (GA0-10-357, GAO Code 120812): 

The Department of State appreciates the opportunity to comment on 
GAO's draft report entitled "Contingency Contracting: Improvements 
Needed in Management of Contractors Supporting Contract and Grant 
Administration in Iraq and Afghanistan." 

The GAO report recommends the following to the Secretary of State: 

Recommendation 1: Determine the extent to which contractors should 
perform administration functions for other contracts and grants in 
accordance with strategic human capital planning principles outlined 
in the Office of Management and Budget's July 2009 multi-sector 
workforce guidance. 

Response: The Department concurs with the GAO's recommendation that 
the determination of the extent to which contractors can and should 
perform services in the administration of other contracts and grants 
should be in accordance with strategic human capital planning 
principles and Office of Management and Budget (OMB) guidance. 

In accordance with OMB's Multi-Sector Workforce Management (MSWM) 
guidance, the Department is conducting a pilot study, which is being 
used to examine an organization's workforce mix and determine the 
appropriate balance of contractor and government positions. The 
process includes a determination as to whether or not the contracted 
functions are inherently governmental (or closely associated) or 
mission critical. The Department also assesses costs in its 
determinations as appropriate and has developed a costing methodology 
to perform these comparisons. The Department notes that our MSWM 
program has included strategic human capital planning principles at 
each step of development, pilot testing, and implementation. 

The Acquisitions Management Office (A/LM/AQM), the Office of the 
Procurement Executive (A/OPE), the Commercial Services Management 
Office (A/CSM), the Human Resources Resource Management Analysis Office
(HR/RMA) and the Office of the Legal Advisor (L/BA) will work together 
to identify the general extent to which contractors should perform 
administrative functions for contracts and grants. In accordance with 
the Acquisition Workforce Human Capital Plan, AQM will significantly 
reduce reliance on nonpersonal service contractors to perform 
acquisition work. 

Recommendation 2: Develop guidance to identify approaches that 
contracting and program officials should take to enhance management 
oversight when nonpersonal services contractors provide services that 
closely support inherently governmental functions. 

Response: The Department agrees with the GAO's recommendation that 
guidance be developed to aid contracting and program officials in 
making vital decisions about the appropriateness of using nonpersonal 
service contractors in functions that closely support inherently 
governmental operations. Through its Quadrennial Diplomacy and 
Development Review (QDDR), the Department is focusing efforts on its 
workforce balance and rebuilding core capabilities within the 
Department. The MSWM pilots being concluded are resulting in the 
development of a rigorous process to examine contracted functions to 
determine if it would be more appropriate to perform the work with 
government employees. The Department notes that this will result in 
balanced workforce guidance and criteria that will be disseminated 
Department-wide. The criteria will include the process for examining 
contractor duties to determine if it is an inherently governmental 
process, or closely associated with inherently governmental. Functions 
which are closely associated must be examined using an extensive list 
of questions to highlight operational, conflict of interest, or other 
issues which present an unacceptable level of risk. 

Recommendation 3: Require before the award of any nonpersonal services 
contract or task order for services closely supporting inherently 
governmental functions that program and contracting officials document 
their consideration of related risks and the steps that have been 
taken to mitigate such risks. 

Response: The Department agrees and the Acquisitions Management Office 
(A/LM/AQM), the Office of the Procurement Executive (A/OPE), the 
Commercial Services Management Office (A/CSM), and the Office of the 
Legal Advisor (L/BA) will work together to identify the types of 
services closely supporting inherently governmental functions that 
occur on our contracts. Acquisition planning documentation will 
address the decision to use nonpersonal services contractors instead 
of federal personnel. Additional considerations will include avoiding 
conflicts of interest, correct identification of affiliation, and 
appropriate reservation of decision-making authority to federal 
personnel. 

Recommendation 4: To improve State's ability to mitigate risks related 
to potential personal conflicts of interest among personal services 
contractors, we recommend that the Secretary of State clarify the 
Department's policies regarding the application of federal ethics laws 
to personal services contractors. 

Response: The Department of State agrees that federal ethics rules 
applicable to personal services contractors should be clarified. The 
Office of Ethics (L/Ethics) is working with the Office of the 
Procurement Executive (A/OPE) and the Commercial Services Management 
Office (A/CSM) to standardize and clarify the application of federal 
ethics laws to personal service contractors. A/OPE will issue guidance 
to require the use of a standard clause in all Personal Services 
Contracts regardless of bureau that will advise personal services 
contractors of their ethics responsibilities. We would note, however, 
that a number of federal agencies and departments also have authority 
to employ personal service contractors. The Office of Government 
Ethics (OGE) is responsible for providing standards of conduct 
guidance to employees of the Executive Branch. GAO should consider 
requesting OGE to provide regulatory guidance on the scope of ethics 
obligations to all personal services contractors so that there is 
consistency in the Executive Branch. While the Department of State 
intends on developing a standard clause applicable to all State 
personal services contractors, the more systemic approach is one 
standard applicable to all Executive Branch personal services 
contractors. [See comment 1] 

The following are GAO's supplemental comments on the Department of 
State's letter dated April 2, 2010. 

GAO Comments: 

1. State's comments raised an issue about whether there was a need for 
additional regulatory guidance to help determine the scope of ethics 
obligations applicable to all executive branch personal services 
contractors. As we focused on DOD, State, and USAID, whether there is 
a need for consistent guidance across the executive branch was beyond 
the scope of this work. 

[End of section] 

Appendix IV: Comments from the U.S. Agency for International 
Development: 

Note: GAO's comments supplementing those in the report text appear at 
the end of this appendix. 

USAID: 
From The American People: 

April 8, 2010: 

John P. Hutton: 
Director, Acquisition and Sourcing Management: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Hutton, 

I am pleased to provide the U.S. Agency for International 
Development's (USAID) formal response to the GAO draft report 
entitled: "Contingency Contracting: Improvements Needed in Management 
of Contractors Supporting Contract and Grant Administration in Iraq 
and Afghanistan" (GA0-10-357). 

We appreciate the time and attention the GAO team paid to this issue 
and the intricacies involved in understanding the various contracting 
mechanisms and the appropriate risk mitigation. After review of the 
draft comments within the report, we appreciate GAO's overall 
findings. We do offer some points of clarity. however, in relation to 
the recommendations posed in the draft report. 

The enclosed USAID comments are provided for incorporation with this 
letter as an appendix to the final report. 

Thank you for the opportunity to respond to the GAO draft report and 
for the courtesies extended by your staff in the conduct of this audit 
review. 

Sincerely, 

Signed by: 

Drew W. Luten: 
Acting Assistant Administrator: 
Bureau for Management: 

Enclosure: a/s: 

[End of letter] 

USAID Comments On GAO Draft Report No. GAO-10-357: 

GAO Recommendation 1: "Determine the extent to which contractors 
should perform administration functions for other contracts and grants 
in accordance with strategic human capital planning principles 
outlined in the Office of Management and Budget's July 2009 multi-
sector workforce guidance." 

USAID Response: USAID is already in the process of determining to what 
extent institutional and other contractors should perform 
administration functions. The USAID Multi-Sector Work Force Pilot, 
which will be complete by April 30, 2010. will function to inform the 
integration of institutional support contractors into USAID's 
Consolidated Workforce Planning Model (CWWPM). 

As part of the Agency plan to rebuild, USAID will be doubling the size 
of its Foreign Service personnel. The Foreign Service personnel system 
is a rank-in-person model (similar to that of the military). Most new 
employees will enter at the junior officer rank. As these new 
employees progress up the ranks, they will move into jobs currently 
occupied by non-U.S. Direct Hires, excluding our Foreign Service 
Nationals (FSNs). 

The USAID FSN staff represent our permanent local staff and are 
critical to helping the Agency achieve its development mission in each 
host country where we work. While their roles and responsibilities 
differ from those of U.S. Personal Service Contractors, who are U.S. 
citizens hired as temporary employees. FSNs' work is closely monitored 
in a similar fashion as any U.S. government employee. 

Third Country Nationals (TCNs) are recruited by USAID missions in other
countries to provide temporary support, training and mentoring to 
local FSNs. In recent years, most of USAID/Iraq's local FSNs and their 
families have been targeted and intimidated by violent groups for 
their association with the USG. As a result, the vast majority of 
USAID/Iraq FSNs have qualified for asylum in the US, making it 
difficult to recruit and retain them. TCNs have proven to be a
valuable temporary resource to make up for the current difficulties in 
recruiting local FSNs. For this reason, please note on page 12 [now on 
p. 10] of the draft report that 8 oldie 10 "personal services 
contractors" who were responsible for contracting office support are 
TCNs. TCNs are not considered temporary employees, like U.S. PSCs, as 
many often return to their country and continue as local permanent 
staff with USAID. These staff from third countries are on temporary 
duty (TDY) and are critical to helping the Agency achieve its 
development mission during a shortage of local permanent FSN staff. 
[See comment 1] 

In regards to institutional support contractors. it is important to 
note that those institutional contractors who implement USAID 
projects. including grants under contracts, are considered under 
USAIDs program policy and planning guidance, not under the Agency 
workforce planning. 

GAO Recommendation 2: "Develop guidance to identify approaches that 
contracting and program officials should take to enhance management 
oversight when non-personal services contractors provide services that 
closely support inherently government functions. 

USAID Response: USAID ensures within institutional support contracts 
that the appropriate oversight functions are involved throughout the 
life of an award. Many of our institutional contractors are closely 
monitored on a daily basis by the cognizant Contracting Officer's 
Technical Representative. We do agree with the GAO, however, that up-
to-date guidance for enhancing management oversight of institutional 
support contractors and their employees would be beneficial to the 
Agency as a whole. 

GAO Recommendation 3: "Require before the award of any non-personal 
services contract or task order for services closely supporting 
inherently governmental functions that program and contracting 
officials document their consideration of related risks and the steps 
that have been taken to mitigate such risks." 

USAID Response: USAID will consider how to best address this 
recommendation through its current pre-award procedures and based upon 
guidance, per recommendation 2. 

We do wish to address one point raised by the GAO draft in Table 6 on 
page 16.[now on p. 13] "Local Economy Development." USAID does issue 
contracts in Iraq and Afghanistan that do authorize specific 
institutional contractors to issue grants under contracts. The primary 
purpose of such grants is to build local capacity; these grants are an 
integral part of the project itself rather than a reflection of an 
implementing partner performing an inherently governmental function. 
We mitigate the risks associated with these mechanisms through our 
Agency policy, which requires that for each of the contracts where 
grants may be let, the Head of the Contracting Activity---only after 
legal officer clearance--make the final affirmative determination as 
to whether specific criteria are satisfied. If a contractor is 
authorized to issue grants. the Agency requires substantial 
involvement with the development of the selection criteria and the 
selection of the grantee. Contractor-executed grants must follow the 
same requirements as Agency-issued grants, but as a final risk 
management tool, USAID may terminate the grants made under the 
contract at any time. [See comment 2] 

USAID recognizes the increased risks in using a contractor to perform 
grant-making and administration functions but believes that we 
mitigate these risks through: I) the approvals required by the Agency 
before authorization; 2) the Agency's authority over the grant pre-
award and during administration; and 3) the requirements imposed on 
the contractor to comply with Agency policy. USA ID also believes 
building local capacity, through the use of small grants, is an 
important development best practice that needs to be carefully 
maintained. 

The following are GAO's supplemental comments on the U.S. Agency for 
International Development's letter dated April 8, 2010. 

GAO Comments: 

1. We have revised table 2 to reflect USAID's comments. 

2. As noted in the report, we consider contractors responsible for 
assisting in the award of grants as closely supporting an inherently 
governmental function. USAID's Automated Directives System provides 
guidance on the use of contractors to award grants on behalf of USAID. 
We have reflected this guidance in the final report. 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John P. Hutton, (202) 512-4841 or huttonj@gao.gov. 

Acknowledgments: 

In addition to the contact named above, Timothy DiNapoli, Assistant 
Director; Johana R. Ayers; Shea Bader; Noah Bleicher; John C. 
Bumgarner; Morgan Delaney Ramaker; Kathryn M. Edelman; Walker 
Fullerton; Katherine Hamer; Art James, Jr.; Justin M. Jaynes; Julia 
Kennon; Anne McDonough-Hughes; Christopher J. Mulkins; Jason Pogacnik; 
Thomas P. Twambly; and Gwyneth B. Woolwine made key contributions to 
this report. 

[End of section] 

Footnotes: 

[1] See, for example, GAO, Rebuilding Iraq: DOD and State Department 
Have Improved Oversight and Coordination of Private Security 
Contractors in Iraq, but Further Actions Are Needed to Sustain 
Improvements, [hyperlink, http://www.gao.gov/products/GAO-08-966] 
(Washington, D.C.: July 31, 2008), and Afghanistan Reconstruction: 
Despite Some Progress, Deteriorating Security and Other Obstacles 
Continue to Threaten Achievement of U.S. Goals, [hyperlink, 
http://www.gao.gov/products/GAO-05-742] (Washington, D.C.: July 28, 
2005). 

[2] Pub. L. No. 110-181, § 863. For earlier reports issued pursuant to 
this mandate, see GAO, Contingency Contracting: DOD, State, and USAID 
Contracts and Contractor Personnel in Iraq and Afghanistan, 
[hyperlink, http://www.gao.gov/products/GAO-09-19] (Washington, D.C.: 
Oct. 1, 2008), and Contingency Contracting: DOD, State, and USAID 
Continue to Face Challenges in Tracking Contractor Personnel and 
Contracts in Iraq and Afghanistan, [hyperlink, 
http://www.gao.gov/products/GAO-10-1] (Washington, D.C.: Oct. 1, 2009). 

[3] The Federal Acquisition Regulation (FAR) defines "personal 
services contracts" as contracts that, by their express terms or as 
administered, make the contractor personnel appear to be, in effect, 
government employees. FAR § 2.101. 

[4] For the purposes of this report, we use "contractor" to include 
both personal and nonpersonal services contractors. When it is 
necessary to distinguish between the two types of contractors, we use 
"personal services contractor" and "nonpersonal services contractor." 

[5] The FAR defines a task order as an order for services placed 
against an established contract or with government sources. FAR § 
2.101. The data we collected from the agencies were intended to 
include information on all contracts with administration functions for 
other contracts and grants with performance in Iraq and Afghanistan, 
regardless of the place of performance of the contractor performing 
administration functions. For example, the data we received included 
information on contracts with performance in the United States in 
support of contracts or grants with performance in Iraq or Afghanistan. 

[6] We reviewed contract documents for all but two nonpersonal 
services contracts or task orders reported by the agencies. The two 
contracts we did not review were State contracts for which officials 
could not identify the task orders that were within our scope. We also 
reviewed contract documents for all personal services contracts 
reported by DOD and State, and selected 25 of 81 personal services 
contracts reported by USAID for review during our fieldwork in Iraq 
and Afghanistan. 

[7] See, for example, GAO, Defense Contracting: Army Case Study 
Delineates Concerns with Use of Contractors as Contract Specialists, 
[hyperlink, http://www.gao.gov/products/GAO-08-360] (Washington, D.C.: 
Mar. 26, 2008), and Defense Contracting: Additional Personal Conflict 
of Interest Safeguards Needed for Certain DOD Contractor Employees, 
[hyperlink, http://www.gao.gov/products/GAO-08-169] (Washington, D.C.: 
Mar. 7, 2008). 

[8] On March 31, 2010, the Office of Federal Procurement Policy issued 
a proposed policy letter that would, among other things, clarify what 
functions are inherently governmental and strengthen guidance related 
to functions closely associated with the performance of inherently 
governmental functions. Public comments on the proposed policy letter 
are due by June 1, 2010. 

[9] FAR § 7.502. 

[10] State is authorized under section 2 of the State Department Basic 
Authorities Act of 1956, as amended, to contract for personal 
services. 22 U.S.C. § 2669(c) and (n). USAID is authorized under 
section 636 of the Foreign Assistance Act of 1961, as amended, to 
contract for personal services. 22 U.S.C. § 2396(a)(3). DOD has 
authority under 10 U.S.C. § 129b to contract for personal services. 

[11] USAID's Automated Directives System, Section 302.3.4.8, defines 
"grants under contract" as a contract that provides for a USAID 
contractor to execute grants with both nonprofit and for-profit 
nongovernmental organizations. 

[12] GAO, DOD's High-Risk Areas: Actions Needed to Reduce 
Vulnerabilities and Improve Business Outcomes, [hyperlink, 
http://www.gao.gov/products/GAO-09-460T] (Washington, D.C.: Mar. 12, 
2009). 

[13] GAO, A Model of Strategic Human Capital Management, [hyperlink, 
http://www.gao.gov/products/GAO-02-373SP] (Washington, D.C.: Mar. 15, 
2002). 

[14] Deputy Secretary of Defense, Insourcing Contracted Services - 
Implementation Guidance (May 28, 2009). The Quadrennial Defense Review 
defines "total force" as comprising active and reserve military, 
civilian, and contractor personnel. 

[15] GAO, Human Capital: Opportunities Exist to Build on Recent 
Progress to Strengthen DOD's Civilian Human Capital Strategic Plan, 
[hyperlink, http://www.gao.gov/products/GAO-09-235] (Washington, D.C.: 
Feb. 10, 2009), and Department of Defense: Additional Actions and Data 
Are Needed to Effectively Manage and Oversee DOD's Acquisition 
Workforce, GAO-09-342 (Washington, D.C.: Mar. 25, 2009). 

[16] [hyperlink, http://www.gao.gov/products/GAO-09-342]. 

[17] GAO, Contingency Contracting: Further Improvements Needed in 
Agency Tracking of Contractor Personnel and Contracts in Iraq and 
Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-10-187] 
(Washington, D.C.: Nov. 2, 2009). 

[18] See, for example, [hyperlink, 
http://www.gao.gov/products/GAO-02-373SP], [hyperlink, 
http://www.gao.gov/products/GAO-10-187], and GAO, Department of 
Homeland Security: A Strategic Approach Is Needed to Better Ensure the 
Acquisition Workforce Can Meet Mission Needs, [hyperlink, 
http://www.gao.gov/products/GAO-09-30] (Washington, D.C.: Nov. 19, 
2008). 

[19] If, as a condition of award, the contractor's eligibility for 
future prime contract or subcontract awards will be restricted or the 
contractor must agree to some other restraint, the solicitation must 
contain a proposed clause that specifies both the nature and duration 
of the proposed restraint. FAR § 9.507-2. 

[20] USAID Contract Information Bulletin 99-17, Organizational 
Conflict of Interest. 

[21] The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council are currently considering revising FAR 
policies for addressing organizational conflict of interest issues. 
(FAR Case 2007-018) 

[22] FAR § 3.1002. Although this requirement now applies more broadly, 
it did not apply to most of our nonpersonal services case studies 
because the contract was either awarded prior to December 2007, valued 
at less than $5 million, or issued before December 2008 and was 
considered to be for commercial items or performed entirely outside of 
the United States. 

[23] [hyperlink, http://www.gao.gov/products/GAO-08-169]. 

[24] Under Secretary of Defense (Acquisition, Technology and 
Logistics), Personal Conflicts of Interest (PCIs) of Contractors' 
Employees (Nov. 24, 2009). A proposed amendment to the FAR addresses 
personal conflicts of interest by employees of government contractors, 
as required by section 841 of the Duncan Hunter National Defense 
Authorization Act for Fiscal Year 2009, Pub. L. No. 110-417 (2008). 
The proposed rule was published on November 13, 2009. (FAR Case 2008-
025) 

[25] USAID Contract Information Bulletin 93-17, Financial Disclosure 
Requirements Under a Personal Services Contract. 

[26] For the case studies we conducted at USAID, it was determined 
that none of the personal services contractors were required to 
complete a financial disclosure form. However, two of these 
contractors had completed forms that were on file with the USAID 
Office of the General Counsel. 

[27] FAR § 7.503(d) lists examples of functions that are closely 
associated with or closely support the performance of inherently 
governmental functions. Although not specifically identified as such 
in the FAR, for purposes of this report, we considered contractors 
responsible for assisting in the awarding of grants as closely 
supporting an inherently governmental function. USAID's Automated 
Directives System, Section 302.3.4.8, provides guidance that governs 
the use of contractors to award grants on USAID's behalf. 

[28] FAR § 37.114, and Office of Federal Procurement Policy, 
Management Oversight of Service Contracting, Policy Letter 93-1 (May 
18, 1994). 

[29] FAR § 7.502. 

[30] GAO, Department of Homeland Security: Improved Assessment and 
Oversight Needed to Manage Risk of Contracting for Selected Services, 
[hyperlink, http://www.gao.gov/products/GAO-07-990] (Washington, D.C.: 
Sept. 17, 2007), and Defense Acquisitions: Further Actions Needed to 
Address Weaknesses in DOD's Management of Professional and Management 
Support Contracts, [hyperlink, http://www.gao.gov/products/GAO-10-39] 
(Washington, D.C.: Nov. 20, 2009). 

[31] Section 207.503 of the Defense FAR Supplement requires that 
before a contract for the performance of acquisition functions closely 
associated with inherently governmental functions (those listed at FAR 
§ 7.503(d)) is entered into, the contracting officer has to make 
certain determinations related to the availability of DOD personnel to 
perform the functions and the oversight of the contract after award. 
However, the Defense FAR Supplement does not require documentation of 
this assessment, and DOD officials confirmed that the requirement 
could be considered fulfilled without documentation of the 
determination. In July 2009, the Army began requiring that an official 
for the requiring activity complete a form that included a 
determination of whether contractors will be closely supporting 
inherently governmental functions. 

[32] [hyperlink, http://www.gao.gov/products/GAO-10-39]. 

[33] The Federal Acquisition Regulation (FAR) defines "personal 
services contracts" as contracts under which, by their express terms 
or as administered, contractor personnel are subject to relatively 
continuous supervision and control of a government officer or 
employee. FAR § 37.104. State is authorized under section 2 of the 
State Department Basic Authorities Act of 1956, as amended, to 
contract for personal services. 22 U.S.C. § 2669(c) and (n). USAID is 
authorized under section 636 of the Foreign Assistance Act of 1961, as 
amended, to contract for personal services. 22 U.S.C. § 2396(a)(3). 
DOD has authority under 10 U.S.C. § 129b to contract for personal 
services. 

[34] For the purposes of our data request to the agencies, we defined 
administration functions for other contracts as including, but not 
limited to (1) surveillance, monitoring, evaluation of contractor 
performance, or a combination of these; (2) support of program, 
product, and project offices regarding program reviews, program 
status, program performance, and actual or anticipated program 
problems; (3) performing property administration; (4) reviewing 
contractor financial information or vouchers/invoices; (5) maintaining 
contract administration files; and (6) performing administrative 
closeout procedures. We defined administration functions for grants as 
including, but not limited to (1) surveillance, monitoring, evaluation 
of grant recipients' performance, or a combination of these; (2) 
receipt, analysis, or both of technical, financial, or performance 
reports from grantees; (3) making site visits to grantee performance 
locations; and (4) awarding grants on behalf of a federal agency. 

[35] For DOD, we requested data from the Joint Contracting Command - 
Iraq/Afghanistan; the U.S. Army Corps of Engineers; all Air Force 
major commands, Navy systems acquisition commands, and Marine 
contracting activities; the Army Contracting Command; the Defense 
Logistics Agency; and the Defense Contract Management Agency. 
Together, these contracting activities accounted for more than 95 
percent of DOD contract obligations in Iraq and Afghanistan in fiscal 
year 2008 and the first half of fiscal year 2009 according to Federal 
Procurement Data System - Next Generation data. For State and USAID, 
we requested agencywide data. 

[36] In Afghanistan, we randomly selected personal services contract 
files for review. In Iraq, we purposefully selected personal services 
contract files to provide a cross section of functions performed and 
contract types. 

[37] From FPDS-NG, we obtained data on all DOD, State, and USAID 
contract actions during fiscal year 2008 or the first half of fiscal 
year 2009 with performance in Iraq or Afghanistan. The data we used 
from the other GAO engagement included all contracts and task orders 
reported by the agencies as having performance in Iraq or Afghanistan 
during fiscal year 2008 or the first half of fiscal year 2009. 

[End of section] 

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