Agencies should file better reports on their service contracts, GAO says

The Obama administration’s effort to better calibrate which functions are inherently governmental and which are better contracted out will require improvements in agency inventories of service contracts, according to a new Government Accountability Office report.

Forty eight of the 49 agencies that GAO reviewed had filed the required lists of their contracts for such services as professional management support, information technology support and medical support, which together totaled $126 billion in fiscal 2011. But due to differing methodologies among agencies, the Office of Management and Budget and Congress could not “meaningfully use these service contract inventories to compare service contract obligations among agencies or develop spending trends,” the report said, adding, “agencies did not have a complete universe of service contracts to consider for review.”

Auditors also found instances of agencies underreporting obligations -- the General Services Administration underreported about $6.4 billion -- because “they misinterpreted or did not follow OMB guidance.”

Of the 40 agencies that submitted reports on their inventory reviews, five identified three contracts where contractors could be performing inherently governmental functions and 104 instances where contractors were performing functions “closely associated” with inherently governmental ones. But the auditors could not be certain, the report said, “whether these results were a real indication of the agencies’ effective and appropriate use of contractors or due to the different approaches agencies used to conduct the reviews.”

Three agencies studied in detail -- the Homeland Security Department, NASA and the Health and Human Services Department -- took steps to improve workforce understanding of the inventory problems. OMB officials told GAO that its Office of Federal Procurement Policy intends to work with agencies to better enforce the reporting requirements.

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