Contractors are doing core acquisition jobs, Defense official says

Defense contractors are performing fundamental government functions that should be confined exclusively to federal employees, the Pentagon's top procurement policy official testified on Tuesday.

Roughly 5 percent of the Defense Department's acquisition workforce consists of contractors, a number of whom provide administrative support, Shay Assad, director of Defense procurement and acquisition policy told the House Armed Service Subcommittee on Readiness.

On occasion, he said, these contractors appear to be performing "inherently governmental" tasks such as helping to determine an acquisition approach and business strategy, selecting who will perform the work, and negotiating the cost and terms of a contract.

"I can assure you that I am working to change those instances where I believe contractors are performing functions that should be inherently governmental," Assad said. "It is essential that we in the government fully recognize that contracting personnel are entrusted with important responsibilities and must be accountable to the taxpayer. We should not outsource that responsibility."

Inherently governmental functions are those tasks so intimately related to the public interest that federal employees must perform them. The Federal Acquisition Regulation, as well as the 1998 Federal Activities Inventory Reform Act, spells out a number of jobs that are prohibited from outsourcing, including administering contracts and determining which services or supplies the government should buy.

Jack Bell, deputy undersecretary of Defense for logistics and materiel readiness, said the agency follows these regulations, noting that its use of contractors "is entirely consistent with existing U.S. governmental policy on inherently governmental functions."

Nonetheless, some contracting officials might be interpreting inherently governmental policies in different ways.

Assad said he has found several instances in which Defense contractors might have performed tasks during the pre-award contract decision-making process that should have been kept in-house. "While not pervasive within the department, there are occasions when contractor personnel are performing contracting roles," he said.

Several panelists testified that the problems originated in the 1980s as the Pentagon attempted to cash in on the post-Cold War "peace dividend" by reducing the size of its military and civilian forces. The drawdown of the agency's contracting staff subsequently led to a less experienced workforce that was forced to manage increasingly complex contracts, particularly in recent years during the global war on terrorism. Lacking these core capabilities, the agency turned to the private sector.

But, such a reliance on contractors for core government functions can put taxpayers at risk, according to David M. Walker, the outgoing comptroller general. Walker was making his final congressional appearance before starting Thursday as president and chief executive officer of the Peter G. Peterson Foundation, a new organization focused on solving the nation's economic challenges.

"The closer contractor services come to supporting inherently governmental functions, the greater the risk of their influencing the government's control over and accountability for decisions that may be based, in part, on contractor work," Walker said in a report that accompanied his testimony. "This may result in decisions that are not in the best interest of the government, and may increase vulnerability to waste, fraud and abuse."

Subcommittee Chairman Rep. Solomon Ortiz, D-Texas, said these problems could be exacerbated when agencies rely on lead systems integrators to manage complex multibillion-dollar programs such as the Defense's Future Combat Systems.

"Just because work is called 'commercial,' does that mean only the private sector can or should do it?" Ortiz asked. "The flip side to that concern is this: If the needs of the warfighter are being taken care of, should we really care who is performing the work?"

Walker suggested, as he has in the past, that the Office of Management and Budget revise the definition of inherently governmental functions to clarify any ambiguity agencies could face when determining which tasks to outsource. Assad agreed that the process is worth a "hard look," but OMB has thus far resisted such an appeal.

As a general rule, Walker said, recurring governmental needs should be filled by federal employees while specialized short-term capabilities are best served by the private sector.