DHS Service Contracts: Increased Oversight Needed to Reduce the Risk Associated with Contractors Performing Certain Functions

DHS's spending on services—such as guard services and technology support—represents over 75 percent of its annual contract obligations. The Office of Management and Budget has recognized that some service contracts require extra management attention because they pose a risk that the government could lose control of its decisions or operations.

GAO was asked to review DHS's use of and planning for service contracts. This report addresses, among other objectives, the extent to which DHS and selected components and offices use, oversee, and budget for service contracts.

GAO analyzed Federal Procurement Data System-Next Generation data from fiscal years 2013 through 2018; selected non-generalizable samples of four components with high service contract obligations and eight service contracts requiring heightened management attention; and interviewed DHS officials.

From fiscal years 2013 through 2018, the Department of Homeland Security (DHS) increased its reliance on contracts for services, particularly those in categories that may need heightened management attention, such as drafting policy documents (see figure). These services include functions that are closely associated with inherently governmental, critical, or special interest, which could put the government at risk of losing control of its mission if performed by contractors without proper oversight by government officials.

GAO found that DHS and selected components do not consistently plan for the level of federal oversight needed for these contracts because there is no guidance on how to document and update the number of federal personnel needed to conduct oversight. GAO also found that program and contracting officials from six of the eight contracts GAO reviewed did not identify specific oversight activities they conducted to mitigate the risk of contractors performing functions in a way that could become inherently governmental. DHS lacks guidance on what these oversight tasks could entail. Without guidance for documenting and updating the planned federal oversight personnel needed, and identifying oversight tasks, DHS cannot mitigate the risks associated with service contracts in need of heightened management attention.

Selected DHS components have information on service requirements, but budget documentation—submitted to DHS headquarters as well as to Congress—does not communicate details about most estimated or actual service contract requirements costs. Given that services account for over three-quarters of DHS's annual funding for contracts, additional insights would shed light into how much of DHS's mission is being accomplished through services, including those requiring heightened management attention. Without more visibility into this information, DHS headquarters and Congress are at risk of not having complete information for sound resource planning and decision-making, particularly as it relates to determining what proposed service contract requirements DHS should prioritize when budgeting.

GAO is making six recommendations, including that DHS provide guidance for documenting and updating the federal workforce needed to oversee certain service contracts and identifying oversight tasks, and report service requirement information in budget documents to Congress. DHS agreed with two of the recommendations and did not agree with four of them. GAO continues to believe the recommendations are valid, as discussed in the report.

The Department of Homeland Security (DHS) and its operational and  support components obligate billions of dollars annually on service  contracts to support DHS missions. These service contracts provide a  wide range of important functions—such as guard services, information  technology, telecommunications support, and professional support  functions—and represent over 75 percent of DHS’s total contract  obligations. However, the use of service contracts to perform certain  functions—such as those deemed closely associated with inherently  governmental, critical, or special interest—may require heightened  management attention because of the possibility that contractors may  inappropriately influence the government’s authority, control, and  accountability for decisions, among other risks. Our prior work on the use  of service contracts across the federal government has identified  challenges overseeing and managing risks, and estimating needs for  services as part of agency budget requests.

You asked us to review DHS’s use of and planning for service contracts.  This report addresses the extent to which DHS and selected components  and offices (1) used service contracts from fiscal years 2013 through  2018; (2) identified, developed, and reviewed service contract  requirements; (3) ensured oversight of service contracts requiring  heightened management attention; and (4) considered service contract  requirements in budgeting processes.

To identify the extent to which DHS used service contracts, we reviewed  the Federal Procurement Data System-Next Generation (FPDS-NG) data  on contract obligations from fiscal years 2013 through 2018—the most  current years available. To identify obligations for services, we used the  codes associated with services in the General Services Administration’s  Federal Procurement Data System Product and Service Codes Manual.  We reviewed Office of Management and Budget (OMB) guidance that  identifies services requiring heightened management attention as closely  associated with inherently governmental, critical, and special interest  functions. To determine the proportion of service obligations in need of  heightened management attention, we identified obligations coded as  being functions that were closely associated with inherently  governmental, critical, or both in FPDS-NG, or coded with a product and  service code identified as a special interest function. We assessed the  reliability of FPDS-NG data by reviewing existing information about the  FPDS-NG system and data—specifically the data dictionary and data  validation rules—and performing electronic testing. We determined the  FPDS-NG data were sufficiently reliable for the purposes of identifying  DHS’s use of service contracts.

We selected a non-generalizable sample of four DHS contracting  activities that had high obligations for service contracts and high  obligations for special interest functions compared to other DHS  contracting activities. We selected U.S. Customs and Border Protection  (CBP), U.S. Immigration and Customs Enforcement (ICE), U.S.  Citizenship and Immigration Services (USCIS), and the Office of  Procurement Operations (OPO). For the purposes of this report, we will  refer to these contracting activities, which include three components and  one office, as components. From these components, we selected a non- generalizable sample of 100 fiscal year 2018 contracts that were above  the simplified acquisition threshold and were not exempt from performing  a Balanced Workforce Assessment Tool (BWAT). The BWAT was a risk  analysis tool used by DHS components at that time to identify the  appropriate mix of federal and contractor employees until DHS  decommissioned its use in March 2019. A proposed service requirement  was exempt from the BWAT analysis if the expected total cost was below  the simplified acquisition threshold—currently $250,000—or if the product  or service code was one that DHS previously determined was not likely to  include critical or closely associated with inherently governmental  functions. From that sample of 100 contracts, we selected eight—two  from each component—identified as requiring heightened management  attention, among other selection criteria. We conducted semi-structured  interviews with program, contracting, and budgeting officials from the  eight contracts to identify how service contract requirements were  developed, overseen, and considered when budgeting. For additional  details on the contracts we selected, see appendix I. Information collected  from the four components and eight contracts cannot be generalized to all  components and contracts.

To determine how DHS and selected components identified, developed,  and reviewed service contract requirements prior to soliciting for a  contract, we reviewed relevant documentation, including the Federal  Acquisition Regulation (FAR), and DHS, CBP, ICE, USCIS, and OPO  contracting policies. To determine what processes selected components  have for identifying and developing service requirements, we reviewed  documentation and interviewed program and contracting officials  associated with our four selected components and eight selected  contracts. To determine how DHS is reviewing service contract  requirements, we reviewed guidance and documents from DHS’s Office  of the Chief Procurement Officer (OCPO) and Office of Program  Accountability and Risk Management, and federal internal control  standards on risk assessment. We also interviewed officials within  OCPO and the Office of Program Accountability and Risk Management to  identify and assess DHS headquarters’ recent efforts to establish  processes to review certain high-dollar contracts.

To determine the extent to which DHS and the components in our review  ensured federal oversight of service contracts requiring heightened  management attention, we reviewed relevant documentation and  regulations including Office of Federal Procurement Policy (OFPP)  memorandums, the FAR, DHS contracting policies and guidance, and  federal internal control standards on information and communication and  risk assessment. To understand how DHS and selected components  plan, document, and update oversight needs, we reviewed 58 available  BWATs we identified as special interest functions from a non- generalizable sample of 100 fiscal year 2018 contracts. Additionally, we  reviewed 27 completed Inherently Governmental and Critical Functions  Analysis job aids—the tool that replaced the BWAT in March 2019—for  contract requirements identified as special interest functions and needing  heightened management attention from our selected components to  understand how the oversight planning process has changed. We  interviewed OCPO and component program and contracting officials  about their use of both the BWAT and the Inherently Governmental and  Critical Functions Analysis job aid. Additionally, to determine the extent to  which DHS and selected components conducted federal oversight of  service contracts requiring heightened management attention throughout  the life of a service contract, we analyzed documentation—such as  contracting officer’s representative appointment letters depicting oversight  responsibilities and training for contracting and program officials—and  interviewed officials responsible for performing oversight functions.

To determine the extent to which DHS and selected components consider  service contracts when budgeting, we reviewed OMB, DHS headquarters,  and selected components’ budgeting guidance and federal internal  control standards on information and communication, and interviewed  DHS headquarters and component budget officials. To determine how  service contract requirements are communicated during resource  planning and budget formulation, we reviewed DHS and component  budget justification documents. Appendix I provides detailed information  about our scope and methodology.

We conducted this performance audit from February 2019 to May 2020 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.

DHS has 15 components involved in achieving its broad strategic goals of  countering terrorism and homeland security threats, securing U.S.  borders and sovereignty, securing cyberspace and critical infrastructure,  preserving U.S. prosperity and economic security, and strengthening  preparedness and resilience. DHS relies on contracts to support these  missions and has 10 contracting activities with authority to procure  products and services within and across DHS’s components. For  example, OPO within DHS’s Management Directorate is responsible for  contracting for a number of DHS’s components and offices, including the  Science and Technology Directorate, the Cybersecurity and Infrastructure  Security Agency, and the Countering Weapons of Mass Destruction  Office. See appendix II for DHS’s organizational chart, identifying  operational and support components and contracting activities.

The FAR requires that agencies take certain steps when identifying and  developing requirements that need to be addressed through the  execution of a contract. For example, the FAR requires that agencies  conduct market research, as appropriate, and defines market research as  the process used to collect and analyze information about capabilities in  the market that could satisfy an agency’s needs. While the extent of  market research will vary depending on characteristics of the  requirement, the FAR provides general policies and procedures for  conducting market research with the goal of arriving at the most suitable  approach to acquiring, distributing, and supporting supplies and  services. The FAR also requires agencies to perform acquisition  planning activities for all acquisitions to ensure that the government  meets its needs in the most effective, economical, and timely manner  possible.

In addition to the FAR, DHS relies on the Homeland Security Acquisition  Regulation and Homeland Security Acquisition Manual—issued by DHS’s  Chief Procurement Officer to implement and supplement the FAR—to  establish policies and procedures for all acquisition activities within the  department. For example, together the Homeland Security Acquisition  Regulation and Homeland Security Acquisition Manual provide more  specific department-wide policies and procedures for implementing  acquisition requirements laid out by the FAR, such as competition,  acquisition planning, and market research. Contracting activities may also  implement their own procedures that support and implement the FAR,  Homeland Security Acquisition Regulation, and Homeland Security  Acquisition Manual.

DHS also has its own policies and guidance for managing its service  acquisition programs. For example, DHS generally defines major  acquisition programs as those with life-cycle cost estimates of $300  million or more. However, DHS’s Acquisition Management Instruction  102-01-001 identifies additional thresholds for approval of stand-alone  service acquisition programs—service contracts that are not part of a  larger acquisition program. Specifically, service acquisition programs  with annual cost estimates of $1 billion or more, or between $100 million  and $1 billion are identified as Major Level 1 or 2 acquisition programs,  respectively, and generally require approval from DHS’s Chief Acquisition  Officer. Service acquisition programs with annual cost estimates under  $100 million can be approved at the component level in accordance with  component policies and processes. As of November 2019, DHS did not  have any service programs identified as Major Level 1 or 2.

Service Functions Requiring Heightened Management Attention

In response to the 2009 Presidential Memorandum on Government  Contracting, OFPP, within OMB, issued a policy letter in September 2011  to all executive agencies—including DHS—to clarify, in part, when  governmental outsourcing of services is and is not appropriate.  Specifically, the letter defines inherently governmental functions,  according to the definition in the Federal Activities Inventory Reform Act,  as those that are so intimately related to the public interest as to require  performance by federal employees, such as determining agency policy or  budget requests. Additionally, it identifies categories of service functions  that agencies are allowed to contract for, but that require heightened  management attention, as they pose a risk to the government losing  control of either its responsibility to perform inherently governmental  functions or its mission and operations. Figure 1 illustrates the increasing  risk related to contracting for these types of functions.

The letter also provides guidance on managing the performance of  closely associated with inherently governmental and critical service  functions, among others. In 2010, OFPP had also identified categories of  services requiring heightened management attention. The three  categories of service functions requiring special or heightened  management attention follow:  1.  Closely associated with inherently governmental functions. The  2011 OFPP policy letter adopts a single definition of an inherently  governmental function, clarifies the types of services that constitute  those closely associated with inherently governmental functions, and  highlights the steps that agencies must take to ensure that the  contractor does not ultimately perform functions that are reserved  exclusively for federal employees. The response to public comments  in the 2011 OFPP policy letter—in accordance with the FAR— provides the example that aspects of acquisition planning, such as  determining requirements and approving a contract strategy, are  inherently governmental functions. However, contractors may be used  to support acquisition planning efforts through functions such as  performing market research or drafting statements of work. These  supporting functions are deemed closely associated with inherently  governmental functions and can be contracted for. However, the  OFPP policy letter states that agencies are required to take certain  steps—such as assigning a sufficient number of qualified government  employees to perform contract management—to ensure, among other  things, that the contractor does not perform, interfere with, or  undermine the integrity of the agency’s decision-making  responsibilities.  2.  Critical functions. The 2011 OFPP policy letter describes critical  functions that, when contracted for, pose a risk that the agency could  lose control of its mission and operations. Among other things, the  policy established the criteria for identifying critical functions that are  internally unique to each agency based upon their mission and  operations. As an example, the 2011 OFPP policy letter notes that  analyzing areas of tax law that impose significant compliance burdens  on taxpayers may constitute a critical function for the Internal  Revenue Service’s Office of the Taxpayer Advocate. OFPP notes that  when contracting for a critical function, agencies must retain sufficient  internal capability either through: dedicating an adequate number of  federal personnel to perform the function in-house or alongside the  contractors in the event the contractor fails to perform; or ensuring  federal personnel are available to oversee and manage the contractor  workforce.  3.  Special interest functions. Special interest functions, according to  OFPP, are functions that required increased management attention  due to heightened risk of workforce imbalance. Some special interest  functions may also be either closely associated with inherently  governmental or critical functions. According to OFPP, contracting for  these functions also poses a risk that the agency can lose control of  its mission and operations. In a November 2010 memo, OMB  instructed agencies to identify and analyze a list of product and  service codes to be deemed special interest functions. DHS, with  OMB approval, has chosen 17 product and service codes to  categorize as special interest functions, including policy review and  development and acquisition support services. To mitigate the risk  associated with contracting for special interest functions, agencies are  required to analyze their contracts for special interest functions  annually to ensure the mix of federal employees to contractors is  appropriately balanced.

For examples of functions deemed closely associated with inherently  governmental, critical, and special interest, see appendix III.

Evolution of DHS’s Identification of Inherently Governmental, Closely Associated with Inherently Governmental, Critical, and Special Interest Functions

Since March 2019, DHS has required program officials to complete its  Inherently Governmental and Critical Functions Analysis job aid for all  proposed service contract requirements above the simplified acquisition  threshold—currently $250,000—with a product and service code that is  not included on DHS’s exemption list. The department established the  Inherently Governmental and Critical Functions Analysis job aid to enable  it to systematically ensure that proposed service requirements do not  include inherently governmental functions and to identify those that  contain functions considered closely associated with inherently  governmental or critical. The job aid collects general information about  the proposed service contract, such as a brief description, followed by  three discrete sections to check for these three functions.

Section 1. This section includes a checklist for functions that the FAR  has identified as being inherently governmental, such as developing  federal agency policy and determining price reasonableness of vendor  bids. In order to proceed with contracting for the service, the program  official has to certify that none of these functions exist within the  proposed requirement.

Section 2. This section includes a checklist for functions that the FAR  and OMB have identified as being closely associated with inherently  governmental functions, such as conducting market research or  drafting statements of work. If program officials identify any functions  that are closely associated with inherently governmental in the  proposed requirement, the job aid includes a narrative section where  the program official is expected to input information on the nature of  the work to be performed by the contractor and how heightened  management attention will be given.

Section 3. This section requires program officials to consider whether  the proposed requirement is necessary for the agency to effectively  perform and maintain control of its mission, which would designate the  requirement as critical. Agencies are allowed to contract for critical  functions so long as the program official certifies that the agency has  sufficient internal capacity to undertake the work if, for any reason, the  contractor is unable to provide the service. Special interest functions  are not required to be identified in the job aid.

The job aid concludes with the program official’s signature and is  eventually forwarded to the contracting officer as part of the overall  procurement package prior to soliciting for the proposed requirement.

The job aid was put in place following the March 2019 decommissioning  of DHS’s prior tool—the BWAT. The BWAT was used to implement  DHS’s Balanced Workforce Strategy, which focuses on achieving the  appropriate mix of federal and contractor personnel. This strategy was  established in October 2009 to meet the statutory requirements in the  2009 Omnibus Appropriations Act. The 2009 Omnibus Appropriations Act  directed most federal agencies—including DHS—to devise and  implement guidelines and procedures to ensure that, on a regular basis,  consideration is given to using federal employees to perform new  functions, and functions that are performed by contractors but can be  performed by federal employees.

The Balanced Workforce Strategy established processes to enable DHS  to achieve the appropriate mix of federal employees and contractors to  accomplish the department’s mission, while minimizing risk to DHS’s  missions from an overreliance on contractors. DHS implemented this  strategy through the BWAT—an online questionnaire completed by  individual program offices for certain service contracts. The function of  the BWAT was to ensure the proposed service functions are not  inherently governmental, and to identify whether the functions are closely  associated with inherently governmental, critical, or special interest,  among others. In addition, the BWAT recommended the ratio of federal  employees to contractors needed to oversee those services. This  analysis was then approved by the program and reviewed by the  contracting officer as part of the procurement package.

According to officials from an internal DHS working group, the Balanced  Workforce Strategy—and BWAT by extension—were deemed no longer  necessary based on the maturation of the department’s program and  contracting officials’ ability to identify inherently governmental, closely  associated with inherently governmental, critical, and special interest  functions without a detailed questionnaire. In addition, the software used  to conduct the BWAT was not supportable and faced obsolescence  issues. For additional information on the differences between the BWAT  and the job aid, see appendix IV.

DHS’s Planning, Programming, Budgeting, and Execution Process

DHS relies on its planning, programming, budgeting, and execution  process to plan for and allocate resources—including those for service  contracts—across the department. DHS uses this process to develop its  Future Years Homeland Security Program—a database that contains 5- year program funding plans and is used to prepare a report to  Congress—and the department’s annual budget request.

According to DHS guidance, at the outset of the annual planning,  programming, budgeting, and execution process, the Office of Policy and  Office of Program Analysis and Evaluation under the Chief Financial  Officer provides resource planning guidance to the components outlining  departmental priorities. Following the identification of departmental  priorities, DHS guidance states that components should consider their  objectives and commitments within fiscal guidance constraints, to  estimate needs in their resource plans. The components then prepare  their annual resource plans, based on their needs and in line with DHS  priorities, which are reviewed by DHS leadership and culminate in a  document reflecting the department’s resource decisions. See figure 2 for  a depiction of the planning, programming, budgeting, and execution  process.

Beginning with the fiscal year 2017 budget request, DHS has used the  common appropriation structure to organize the information in its budget  requests. This common appropriation structure is comprised of four  appropriation accounts: procurements, construction, and improvements; operations and support; and  federal assistance.

Each of these accounts has mission oriented program/project activities  that correspond to the components’ different operations. For example,  ICE’s fiscal year 2020 budget request includes program/project activities  for the three operational directorates that accomplish its mission— Homeland Security Investigations, Enforcement and Removal Operations,  and the Office of the Principal Legal Advisor. Within the component’s  program/project activity accounts, service contract requirements are  reflected in budget documents through object classes prescribed by  OMB. OMB guidance establishes object classes as a measure for  communicating resource needs in budget justifications and identifies eight  object class codes for other contracted services, as shown in table 1.

We have conducted prior work on the use of service contracts across the  federal government, including how agencies have mitigated challenges  overseeing and managing risks associated with service contracts that  require heightened management attention, and how agencies have  identified estimated service contract needs as part of agency budget  requests. Specifically:  In December 2011, we reported on how the Departments of  Homeland Security, Transportation, and Housing and Urban  Development, the United States Agency for International  Development, and the National Science Foundation considered and  mitigated risks associated with professional and management support  service contracts—including contracts that are considered to be a  special interest function and can increase the risk that contractors  inappropriately influence the government’s authority, control, and  accountability for decisions. We found that these agencies generally  did not consider and mitigate the risks associated with selected  professional and management support service contracts prior to their  award. We recommended that OMB establish a deadline for agencies  to develop procedures to improve their management of risks related to  professional and management support service contracts. OMB agreed  with our recommendation but did not establish such a deadline.

In February 2016, we reported on what insights the Department of  Defense had into the military department’s use of service contracts to  fulfill current and future requirements, and how the department  reported on service contract requirements in its annual budget  requests to Congress. We found that while program offices within  the military departments generally had information on current and  future service contract requirements beyond the budget year, that  future service requirements through the Future Years Defense  Program were not identified to Department of Defense leadership in  annual budget requests because there was no requirement to do so.  We also found that the Department of Defense’s budget requests to  Congress did not include all planned service contract needs and that  its contracted services budget exhibit intended to meet certain  statutory reporting requirements significantly underreported its  estimated budget request for contracted services. We suggested that  Congress should consider revising statutory reporting requirements to  include estimated requirements beyond the budget year. In August  2018, Congress included a provision in the National Defense  Authorization Act for Fiscal Year 2019 requiring the Department of  Defense to include information on planned service contract  requirements in the Future Years Defense Program. We also  recommended that the military departments revise budgeting  guidance to collect service contract information beyond the budget  year, and that the Department of Defense modify its approach for  reporting on service contracts in budget exhibits to ensure that certain  service contract requirements are included. The department generally  agreed with these recommendations, and has taken some steps to  update military department budget guidance and modified its  approach for reporting service contract requirements in its budget  requests.

In September 2019, we reported on the extent to which the National  Nuclear Security Administration reports information on service  contract requirements in its congressional budget justification  documents and manages potential risks of service contracts that are  at risk of performing inherently governmental functions. We found  that the National Nuclear Security Administration did not consistently  include information on all of its service contracts in budget justification  materials. We also found that the agency may not be effectively  managing the risks of contractors performing inherently governmental  activities because contracting officers are not required to document  how they will oversee contracts for services closely associated with  inherently governmental functions, and the agency does not verify that  planned oversight is performed. We recommended that the National  Nuclear Security Administration report on all professional support  services contracts with obligations as part of its budget justification  materials, ensure contracting officers document plans to oversee  service contracts at risk of performing inherently governmental  functions, and develop a process to ensure that contracting officers  are carrying out planned oversight. The National Nuclear Security  Administration generally agreed with these recommendations.

DHS’s Reliance on Service Contracts to Support Its Mission, Including Those in Need of Heightened Management Attention, Has Increased

DHS’s Service Obligations Are over Three-Quarters of Total Contract Obligations, and Annual Service Contract Obligations Have Increased

DHS obligated about $70.7 billion, or 76 percent, of its $93.7 billion in  total contract obligations on services from fiscal years 2013 through fiscal  year 2018. See figure 3 for details on DHS’s obligations on services and  products from fiscal years 2013 through 2018.

DHS annual service contract obligations increased by 40 percent from  fiscal years 2013 to 2018, from about $10.5 billion to $14.7 billion. This  increase in service contract obligations was largely driven by increases in  Federal Emergency Management Agency and CBP service contract  obligations, which grew by $2.2 billion and $927 million respectively. In  fiscal year 2018, the Federal Emergency Management Agency had the  highest service contract obligations, at $3.3 billion, followed by DHS  headquarters organizations, and CBP. Of the Federal Emergency  Management Agency’s fiscal year 2018 service contract obligations, $2.5  billion, nearly 75 percent, were identified as disaster-related. See figure 4  for additional detail on fiscal year 2018 service contract obligations by  DHS component.

DHS relies on a variety of services to accomplish its missions. For  example, about $2.1 billion, or 14 percent of DHS’s total fiscal year 2018  service contract obligations, were for guard services to protect federal  buildings or other security needs. DHS obligated about $2 billion, or 13  percent of its total fiscal year 2018 service contract obligations, towards  various information technology and telecommunications services—such  as satellite services and hardware and software maintenance. DHS’s five  service categories with the highest amount of contract obligations in fiscal  year 2018 accounted for about 40 percent of its total service contract  obligations that year. See figure 5 for additional details on DHS’s top  service obligations.

DHS Continues to Use Service Contracts in Need of Heightened Management Attention

In fiscal year 2018, 65 percent of DHS’s total service contract obligations  were for services in need of heightened management attention or  oversight due to being a closely associated with inherently governmental,  critical, or special interest function. DHS’s obligations on contracts for  these types of services increased by about 58 percent, from about $6  billion in fiscal year 2013 to $9.5 billion in fiscal year 2018. See figure 6  for additional details on the proportion of contract obligations for services  in need of heightened management attention over time.

Within our selected components, obligations for service contracts in need  of heightened management attention increased the most from fiscal years  2013 to 2018 for contracts awarded by ICE—increasing by $732.1 million.  CBP’s obligations for service contracts in need of heightened  management attention increased over this time frame by $598 million.  Service contracts in need of heightened management attention accounted  for more than three quarters of all service contract obligations in fiscal  year 2018 for DHS headquarters organizations and ICE. See figure 7 for  additional detail on fiscal year 2018 contract obligations for services in  need of heightened management attention by DHS component.

Processes Are in Place to Identify and Develop Service Contract Requirements, but DHS Does Not Have an Approach to Consistently Address Certain Service Procurements

DHS and Components in Our Review Have Guidance and Processes for Identifying and Developing Service Contract Requirements

DHS has policies and guidance to identify its service and product needs  and develop contract requirements. In addition to the FAR, Homeland  Security Acquisition Regulation, and Homeland Security Acquisition  Manual, which combined establish DHS’s acquisition regulations and  contracting policies, DHS has developed additional guidance specific to  identifying needs and developing contract requirements. For example,  DHS’s Developing and Managing Contract Requirements Desk Guide for  the Acquisition Workforce is available to program personnel as a resource  for how to define requirements, including processes and required  documents and templates. DHS has also developed guidance for  program and contracting officials for specific activities related to the  requirements development process—such as market research,  acquisition planning, and source selection guides—as well as guidebooks  for specific participants involved in identifying needs and developing  contract requirements, such as the contracting officer’s representative.

Based on DHS policies and guidance, we identified key processes DHS  undertakes to identify needs and develop contract requirements for  services and products. Of these key processes, assessing for inherently  governmental functions is specific to DHS’s development of service  requirements. In response to the 2011 OFPP policy letter’s requirements  to screen service contracts for the performance of inherently  governmental functions and consider how contractor employees are used  to perform agency functions, DHS implemented the BWAT in 2013. As  previously noted, this tool has now been replaced by the Inherently  Governmental and Critical Functions Analysis job aid. These tools have  been required for service contracts specifically to ensure that contractors  are not performing tasks that should be reserved for federal employees.  Once completed, the output from these tools are reviewed by the  contracting officer and included in the procurement package. Figure 8  summarizes key processes we identified that DHS uses to identify and  develop service requirements.

In addition to the policies and guidance DHS has for identifying and  developing service requirements, DHS components in our review have  implemented additional guidance and tools. For example, USCIS has  developed specific guidance to support the program office’s development  of requirements, including information on how to define requirements,  conduct market research, and develop a cost estimate and acquisition  strategy. Further, all of the components in our review reported using tools,  such as templates and checklists, to help guide program and contracting  officials through the requirements development process. For example, all  of the components in our review use templates for market research,  acquisition plans, and requirements documents that identify what  information officials should include in these documents. The components  in our review also provided program and contracting officials with  checklists for what documents are required in the procurement package,  depending on the type of contract being solicited. Some of the  components in our review maintain this information on acquisition  websites that serve as repositories for DHS and component guidance,  templates, and other requirements. For example, ICE’s Office of  Acquisition Management’s portal provides guidance, documents, and  templates by phase of the acquisition process, from acquisition planning  and solicitation preparation through contract administration and close-out.

DHS components in our review also relied on subject matter experts to  assist in their requirements development efforts, with the level of  involvement varying depending on the requirement. Specifically, officials  associated with two of the eight contracts in our review stated they used  integrated product teams to assist with developing their service  requirements. For example, officials involved in requirements  development for services at USCIS’s 135 Application Support Center  locations told us they established an integrated product team with  program officials, the contracting officer, cost estimators, Field Office  Directorate personnel, and Office of Security and Integrity personnel.  Officials from the other six contracts relied on more informal subject  matter expert involvement. Component officials from three of our  contracts that relied on more informal coordination methods said that  when the requirement is recurring and has previously been contracted for,  formal coordination through an integrated product team may not be  necessary.

DHS Has Not Fully Developed an Approach to Ensure Certain Service Procurements Are Clearly Defined and Consistently Reviewed

DHS has established a process for reviewing the procurement strategy  for certain service and product procurement actions prior to award, but  has not developed an approach to ensure proposed service contract  requirements are clearly defined or that it is consistently reviewing what  DHS considers to be high-risk service procurement actions. In 2018,  OCPO and the Office of Program Accountability and Risk Management  began piloting a DHS-wide Service Requirements Review to validate,  optimize, prioritize, and approve service requirements early in the  development process. However, DHS discontinued these efforts before  the pilot was finalized. According to DHS officials, they initiated this pilot  because there had been no consistency or rigor for reviewing service  contract requirements even though these contracts account for over 70  percent of DHS’s contract obligations.

According to DHS documents and officials, the main objectives of the pilot  were to: ensure service requirements are clearly defined and reviewed before  planning how the services are obtained; assess whether the services should be provided in whole or in part by  foster collaboration and opportunities to leverage efficiencies for  similar service requirements to avoid duplication in services across  the department; and assess whether the requirement should be managed as a service  acquisition program.

To accomplish these objectives, DHS identified stakeholders from within  DHS’s Management Directorate to be headquarters-level reviewers for  service requirements based on the type of service being contracted for.  However, according to OCPO and Office of Program Accountability and  Risk Management officials, the pilot was discontinued in April 2019 before  any service requirements were reviewed because it was determined to be  too resource intensive.

According to DHS officials, the discontinuation of the Service  Requirements Review pilot coincided with the implementation of the  Procurement Strategy Roadmap, a separate OCPO-led initiative to review  and approve the procurement strategy for all service and product  acquisitions with a total estimated value over $50 million. The  Procurement Strategy Roadmap requires contracting activities, along with  their procurement teams, to present and discuss the procurement  strategy with the DHS Chief Procurement Officer, members of OCPO,  and other stakeholders as needed, prior to drafting an acquisition plan or  other decision documents. According to OCPO officials, it was intended to  require procurement staff to meet with OCPO officials early in the  acquisition planning process, prior to the service contract requirement  being finalized, to discuss how services and products would be  purchased. Specifically, the Procurement Strategy Roadmap is intended  to address what OCPO considered as key elements of the procurement  process, such as the requirement, competition, the availability of strategic  sourcing or small business options, and contract type.

Following the discontinuation of the Service Requirements Review pilot in  April 2019, OCPO and Office of Program Accountability and Risk  Management officials discussed expanding the Procurement Strategy  Roadmap to incorporate some elements of the Service Requirements  Review pilot, including reviewing proposed requirements to determine if  they are clearly defined and valid, when appropriate. For example, OCPO  officials said they have included the Office of Program Accountability and  Risk Management and the Office of the Chief Information Officer to  facilitate additional DHS stakeholder involvement in some reviews, and to  broaden the discussion beyond how services and products will be  purchased and include what the requirement is and whether it needs to  be purchased at all.

However, as of February 2020, OCPO officials told us that reviewing  requirements to ensure they are clearly defined and collaborating with  additional DHS stakeholders to identify opportunities to leverage existing  service requirements was not the intent of the Procurement Strategy  Roadmap. For example, OCPO officials stated that proposed  requirements may only be reviewed by additional DHS stakeholders during the Procurement Strategy Roadmap if the requirement is new,  “unique,” or “high risk,” and that this decision is based on their review of  the information in the Procurement Strategy Roadmap and professional  judgment. When asked what constitutes a unique or high risk  requirement, officials told us a proposed requirement could be high risk if  it had historical procurement issues, but noted that ultimately the decision  to review the requirement and whether to involve additional DHS  stakeholders in that review is subjective and based on whether OCPO  leadership believes other stakeholders may add value in developing and  reviewing the proposed requirement. According to OCPO officials, some  Procurement Strategy Roadmap requirements supporting major  acquisition programs undergo separate review by DHS headquarters  stakeholders in the Acquisition Review Board. However, high-dollar  service acquisitions that are not associated with a major acquisition  program or not above $100 million do not currently receive headquarters- level scrutiny to determine whether requirements are clearly defined or to  leverage efficiencies and buying power for similar service requirements  across the department.

In addition, OCPO has not established a process to ensure it is  consistently reviewing proposed procurement actions through the  Procurement Strategy Roadmap. Our review of the fiscal year 2019  Procurement Strategy Roadmap eligible procurement actions found that  OCPO subjectively waived the review for 18 of the 49 eligible actions— over 36 percent of the actions that should have been subject to a  Procurement Strategy Roadmap. The waived procurement actions  included three out of six Federal Emergency Management Agency  actions, eight out of 16 OPO actions, four out of 12 CBP actions, and two  out of six Transportation Security Administration actions. According to  OCPO officials, the decision to waive a procurement action is a subjective  one, made by OCPO leadership based on the initial information provided.  For example, officials said the review may be waived if the procurement  action is recurring or will be fulfilled using an already established DHS  contract vehicle.

We found, however, that the subjective decision to waive the reviews  does not take into account other acquisition risks. For example, our  review of the description of waived procurement actions found that 11 of  the 18 actions were for services, including some for administrative and  professional support and information technology services that DHS  considers to be in need of heightened management attention. Two of the  waived actions were for requirements that resulted in orders placed off  General Services Administration Schedule contracts, despite an OCPO  official telling us that these orders are expected to receive increased  scrutiny to ensure that any existing DHS contract vehicles have been fully  considered.

Our review of waived procurement actions also found that OCPO waived  several Federal Emergency Management Agency actions for disaster  response activities and CBP actions for services at temporary soft-sided  facilities used for holding detainees on the U.S.-Mexico border. Our prior  work has noted challenges in requirements development and acquisition  planning for these types of contracts. For example, in April 2019, we  reported that contracting officers at FEMA were receiving requirements  packages for disaster contracts that lacked technical specificity or had  inaccurate estimates of the products and services needed. In March  2020, we also reported on acquisition planning, requirements  development, and information sharing challenges with one of the waived  procurement actions—a CBP delivery order for a soft-sided facility and  services to hold and care for detainees—finding that these challenges led  to CBP spending millions of dollars on services that were not ultimately  needed.

Federal internal control standards state that management should identify  and respond to risk to achieve its objectives. OCPO officials  acknowledged that the intent of the Procurement Strategy Roadmap was  not to replace the Service Requirements Review that preceded it, and  that expanding the scope of the Procurement Strategy Roadmap to  review requirements would require additional resources. However, the  department’s previous efforts to devote management attention to its  growing proportion of service procurements are indicative of its concerns  about its use of service contracts. While the Procurement Strategy  Roadmap is not specific to services, it can provide a mechanism to  address these concerns. Moreover, without documenting factors OCPO  considers when waiving certain Procurement Strategy Roadmap eligible  procurement actions, DHS is at risk of not consistently reviewing service  procurement actions that could benefit from headquarters-level review.  Given DHS’s reliance on service contracts, which accounted for 78  percent of DHS’s contract obligations in fiscal year 2018, developing a  risk-based approach for reviewing proposed service requirements through  the Procurement Strategy Roadmap or other means could help to  improve DHS’s use of service contracts by identifying opportunities to  leverage efficiencies and ensuring service requirements are clearly  defined across the department.

DHS and the Components in Our Review Inconsistently Planned for and Conducted Oversight of Selected Service Contracts in Need of Heightened Management Attention

DHS Does Not Have a Formal Process for Planning and Updating Personnel Resources Needed for Service Contracts Requiring Heightened Management Attention

DHS does not have a formal process for identifying all service  requirements in need of heightened management attention or for  planning, documenting, and updating the amount of federal personnel  necessary to perform or oversee these requirements. In order to maintain  control of their mission and performance of inherently governmental  functions, part of contracting for services in need of heightened  management attention—including functions that are closely associated  with inherently governmental, critical, and special interest—is ensuring  that agencies dedicate an adequate number of federal employees to  oversee these functions. Specifically, OFPP notes that prior to contract  award, for services that require heightened management attention  agencies should complete an analysis that among other things and  depending on the service, establishes that they can:  retain sufficient capacity and capability to give heightened  management attention to contractor performance or retain control of  its operations;  limit or guide the contractor’s exercise of discretion; ensure reasonable identification of contractors and contractor work avoid or mitigate conflicts of interest.

Functions Requiring Heightened  Management Attention  The Office of Management and Budget’s  (OMB) Office of Federal Procurement Policy  (OFPP) guidance identifies three categories of  service contracts requiring heightened  management attention—those closely  associated with inherently governmental  functions, critical functions, and special  interest functions. Depending on the function,  these categories of service contracts may  involve contractor work products that support  policy development and program evaluation,  and other tasks that are essential to the  agencies’ ability to perform its mission.  According to OMB, these contracts require  management attention to ensure that they do  not result in the performance of inherently  governmental functions by the contractor and  that agencies retain control of their mission  and operations.

DHS officials stated that, as of March 2019, they use the Inherently  Governmental and Critical Functions Analysis, or job aid, to screen  proposed service requirements to ensure that there are no inherently  governmental functions and to identify functions that may be contracted  for that are closely associated with inherently governmental or critical. If a  function is identified as closely associated with inherently governmental or  critical, program officials must certify that there is sufficient internal  capacity to oversee contractor activities and maintain control of its  missions and operations. Further, if a function is closely associated with  inherently governmental, the job aid includes a narrative section where  the program office should document mitigation strategies to ensure  heightened management attention and enhanced oversight occur  throughout the life of the contract. We found that the job aid does not  provide a place to identify special interest functions that require  heightened management attention.

In addition, the job aid does not require program officials to analyze or  document the expected federal personnel necessary to perform or  oversee service requirements in need of heightened management  attention following contract award; therefore information available for  planning purposes is limited. We analyzed all nine of the 27 completed  job aids that included closely associated with inherently governmental  functions, and found that none included any calculation of federal  oversight personnel necessary or mentioned the federal personnel who  will be expected to perform oversight activities. The narrative section of  the job aid instructs components to document mitigation strategies for  functions identified as closely associated with inherently governmental  functions. We found that two of the nine job aids identified mitigation  strategies, such as noting that federal employees will ensure the  contractor’s presence is announced at all meetings. However, neither  provided any detail about who—such as the program manager or  contracting officer representative—would be responsible for performing  and overseeing the contractor employees performing the contracted  functions or tasks.

Program and contracting officials from ICE, CBP, and USCIS stated that  analyzing and documenting the expected federal oversight personnel  necessary prior to contract award with the BWAT provided visibility—both  within the program and across the component—into resource needs.  However, only ICE continues to analyze and document federal oversight  necessary outside of the job aid. Following the BWAT’s decommissioning,  ICE established a Service Contract Review Template for all service  contracts above $1 million. ICE program officials are expected to  complete this template with information such as a description of the  requirement, the anticipated product and service code, identification of  special interest functions, expected number of contractors needed, the  number of federal employees available to oversee the work, and a  justification for outsourcing the requirement. From this information, the  template produces a recommended percentage of federal personnel  necessary to perform management oversight. ICE created this new  process because it wanted to ensure that it has a repeatable,  documented decision-making process that helps plan oversight, such as  the proper balance of federal and contractor employees and determining  the reasonableness of the contract.

DHS’s job aid also does not provide a process to update oversight needs  if the contracted tasks or functions change throughout the life of the  service contract. Officials from three of the four components in our review  reported not having a formal process for updating federal oversight needs  when elements of the contract change—such as an increase in the  number of contractor personnel performing tasks or a change in scope.  For example, component program and contracting officials told us that,  although one of the service contracts in our review experienced an  increase in the number of contractor personnel, they did not update  planning for federal oversight personnel needs. In contrast, officials from  ICE reported having a process to reevaluate federal oversight needed  that is triggered by specific contract funding actions. Funding actions that  trigger the process include: establishing a new contract, exercising an  option on an existing contract, or adding funding to a service contract.  ICE officials explained that through this process they review the service  contract for changes to the number of contractors and whether the current  oversight levels are sufficient. If they find that current oversight levels are  no longer sufficient, ICE officials stated that they would require the  program office to develop a risk mitigation strategy, such as assigning  additional oversight personnel or increasing the contractor’s reporting  requirements.

DHS headquarters officials told us they no longer have a formal process  for analyzing and documenting federal oversight requirements because  the department has matured since implementing the BWAT, and program  and contracting staff are aware of how to plan for federal oversight  requirements for service contracts in need of heightened management  attention. Specifically, during our review, DHS and component officials  from OPO and USCIS stated that they rely on their program and  contracting officials’ historical knowledge and professional judgment to  determine and communicate oversight needs informally at the component  level. However, we found a lack of understanding and inconsistencies in  how oversight was analyzed and documented prior to the BWAT’s  decommissioning. Specifically, 25 of the 75 required BWATs for special  interest functions we reviewed either could not be provided or did not  contain the information used to calculate and, therefore, plan for sufficient  federal employees to conduct oversight.

In addition, according to DHS documents and officials, the department  plans for federal oversight personnel needs more broadly through its  annual workforce planning efforts; and therefore, it is not necessary to  analyze federal oversight personnel needs at the contract level. Yet we  found that DHS’s fiscal year 2018 annual workforce plan focused on DHS  and government-wide mission critical occupations, like Border Patrol  Agents and Transportation Security Administration Officers. The plan  does not address oversight needs based on services in need of  heightened management attention (i.e., contracted functions that are  closely associated with inherently governmental, critical, or special  interest). While DHS’s workforce plan accounts for government-wide  mission critical occupations, such as contracting officers and specialists,  there is not the same level of consideration given to program managers,  employees who serve as contracting officer’s representatives, or other  program staff that are responsible for performing oversight at the contract  level.

According to OCPO officials, program officials completing the job aid  should document in the narrative section the federal personnel  responsible for ensuring the task does not become inherently  governmental. However, we found that the job aid instructions do not  address how program officials should analyze or document the federal  personnel who will be tasked with conducting oversight. The job aid also  does not include similar instructions, or provide space, to depict this  information for functions identified as critical. Moreover, although there is  guidance on when an initial job aid needs to be completed, there is no  guidance indicating when, and under what circumstances, program and  contracting officials may need to update federal oversight needs based on  changes to the functions or task being performed by the contractor.  Officials associated with only three of the eight contracts in our review  reported receiving some training on the new job aid, but OCPO officials  explained that they have not provided additional training beyond the  instructions in the acquisition alert that implemented the job aid.

Federal internal control standards state that agency’s management  should use and internally communicate quality information to achieve the  entity’s objectives. OCPO officials told us that components—such as  ICE—have the discretion to establish additional processes for identifying  and calculating federal oversight beyond what is required by the job aid.  However, without consistently identifying all service requirements in need  of heightened management attention and establishing a repeatable  process across the department for analyzing, documenting, and updating  the federal personnel needed to perform or oversee the requirement  when changes occur, program and contracting officials lack reasonable  assurance that they are dedicating an adequate number of federal  employees to oversee these functions. This places DHS components at  risk of inconsistently planning federal oversight necessary to ensure the  department retains control of its missions and the performance of  inherently governmental functions.

DHS Components Are at Risk of Not Conducting Needed Oversight Tasks

DHS components included in our review are at risk of not conducting the  oversight tasks and safeguards necessary to ensure that, once the  contract has been awarded, the contractor’s functions are performed in a  way so as to not become inherently governmental, and that DHS retains  sufficient internal capability to retain control of its mission for functions  that are closely associated with inherently governmental, critical, or  special interest. The 2010 Consolidated Appropriations Act states that  agencies should have specific safeguards and monitoring systems in  place to ensure the work that contractors are performing has not changed  or expanded during performance to become an inherently governmental  function. Additionally in 2010, OMB issued a memo that states agencies  shall conduct meaningful analysis—through the annual service  inventory—focused on special interest functions that require heightened  management attention to ensure proper workforce balance.

Based on our review of contract documentation and interviews with  program and contracting officials associated with the eight contracts in  our review, oversight of these service contracts in need of heightened  management attention focused largely on assessing the quality of specific  contractor tasks. Oversight of these contracts did not include a focus on  ensuring the work of the contractors is not performed in a way so as to  become inherently governmental, or that DHS retains sufficient internal  capability to perform its missions. While assessing quality is important in  monitoring contractor performance, it does not allow DHS to identify when  tasks beyond what is detailed in the contract—including tasks that are  potentially inherently governmental and require that final agency action  reflects the independent conclusions of agency officials—are being  performed. According to DHS’s most recent service contract inventory  analysis and OCPO officials, DHS relies on well-trained contracting  officer’s representatives to monitor contractor performance for inherently  governmental functions. Yet one of the eight contracts in our review has  not had a certified contracting officer’s representative assigned to the  contract since its award in September 2018. For the remaining seven  contracts, we found that their contracting officer’s representative  appointment letters—which document oversight responsibilities— mentioned performing surveillance and inspections against the contract’s  performance requirements. But only two of the seven letters—both from  CBP—reference performing oversight tasks focused on how the  contractor is completing the work. Specifically, both appointment letters  stated that ongoing reviews should be completed focusing on the way  work is performed and how the government is managing service  acquisitions for closely associated with inherently governmental and  critical functions. However, none of the letters we reviewed identified  specific safeguards—such as vetting all contractor recommendations  through a panel of federal employees—that federal personnel should  perform to mitigate identified concerns with contractors performing closely  associated with inherently governmental or losing sufficient internal  capability for performing critical functions.

Similarly, program and contracting officials associated with six of the eight  service contracts in our review did not identify additional oversight tasks  undertaken as a result of the contract requiring heightened management  attention. Rather, these officials said they assess the contractor’s  performance in terms of the quality of deliverables when asked about the  types of oversight tasks performed. For example, DHS headquarters  officials responsible for overseeing a service contract for technical  support related to the development of nuclear detection technologies  stated that their oversight largely focuses on tracking the completion of  tasks included in the statement of work as well as available funding.  These officials did not identify any additional actions taken to address the  risk of contractors working in situations that permit or might permit access  to confidential business or other sensitive information—a function closely  associated with inherently governmental functions in need of heightened  management attention. Additionally, acquisition officials from one of the  DHS components in our review stated that they have previously relied on  the contractor to report if they were performing work that was not  specified in the contract. While performance monitoring is crucial to  ensure that the contractor is meeting the terms of the contract, it alone  does not provide DHS visibility into whether work is being performed that  is outside the scope of the contract or inappropriate for contractors.

Program and contracting officials associated with two of the eight service  contracts in our review identified safeguards they have established to  prevent contractors from performing inherently governmental work. For  example, program and contracting officials associated with a USCIS  contract awarded to assist in the preparation of Freedom of Information  Act requests stated that they have safeguards in place to ensure the  contractor does not approve agency responses to Freedom of Information  Act requests—an inherently governmental function, according to the 2011  OFPP policy letter. Specifically, officials associated with this contract  explained that they use a software program that does not allow a user  without federal employee credentials to approve a request within the  system. This is an example of a safeguard that can be instituted for  similar service contracts when the risk of the contractor performing the  inherently governmental function of approving requests is present.  Additionally, officials associated with CBP’s service contract for  maintaining its unmanned aircraft systems stated that they ensure that  their onsite personnel do not direct contractors to perform unauthorized  tasks by requiring these personnel to report directly to the program office.

Contracting and program officials’ lack of focus on safeguards to mitigate  risks associated with contract functions in need of heightened  management attention is due, in part, to DHS not identifying—either in  guidance or training that we reviewed—a list of oversight tasks that  program and contracting officials can perform. DHS’s OCPO officials  explained that there are unique aspects of each contract that should drive  oversight needs so they have not established any required safeguards  component program and contracting officials must employ. Despite the  uniqueness of each contract, officials from OPO stated that it would be  helpful to have a list of identified potential oversight tasks or safeguards  for service contracts in need of heightened management attention to  ensure they are managing the risk of the contractor performing work  outside of scope. We found that at least one federal agency has such a  list available. Specifically, the Department of State’s Contracting Officer’s  Representative Handbook provides a list of mitigation strategies  contracting officer’s representative can employ for contracts requiring risk  mitigation—such as reserving final approval authority of any contractor  proposed action for federal employees only. Additional strategies listed  include requiring contractor affiliation be clearly displayed on all  presentation material, and conducting conflict of interest reviews when  contractors are performing services that involve or relate to evaluating  another contractor’s performance. Without identifying what oversight  tasks or safeguards component personnel can institute to prevent  contractors from performing inherently governmental functions or from  affecting the ability of the agency to maintain control of its mission and  operations, DHS is at risk of its personnel not knowing which steps they  should take to prevent that from occurring.

DHS Components Consider Service Contract Requirements When Budgeting but DHS Budget Documents Do Not Provide Visibility into Details

DHS components in our review consider service contract requirements  when identifying their resource needs and formulating their budget  justifications, but DHS headquarters and Congress have limited visibility  into requested and actual service contract requirement costs. DHS uses  the planning, programming, budgeting, and execution process to allocate  resources—including those for service contracts—across the department.  DHS’s guidance for this process that we reviewed does not provide  specific instructions for how the components should consider service  contract requirements when budgeting, but program officials we spoke  with said that they generally provide information on specific service  contract costs, among other resource needs, to their budget offices during  the programming phase. Components then include these resource needs  in their budget justifications, which are submitted to DHS headquarters for  review before being submitted to OMB and then Congress.

Based on our review of component budget justifications, components  communicate service contract requirements in three primary ways, but  none provide complete visibility into service contract requirements.

Object Classes: Object classes are broad spending categories  identified in OMB guidance. As shown earlier in table 1, there are  eight object classes for other contracted services. According to  component officials, once the resource needs for service contracts are  identified, they are grouped into the object classes that best represent  the requirement by either program or budget officials before  submitting budget justifications to DHS headquarters. However, object  class codes do not provide visibility into just service contract  requirements. For example, budget officials at ICE and USCIS told us  that aligning service requirements across object classes is not always  perfect or precise. According to ICE officials, object class codes may  include other expenses, such as interagency agreements. Further,  USCIS officials noted that some contract requirements can apply to  multiple object classes, so how requirements are communicated by  object class is subjective based on program officials’ judgment.

Cost Drivers: According to DHS budget officials, cost drivers  identified in budget documentation represent the requirements that  make up the largest costs at the program/project activity level. Service  requirements may be included as a cost driver, but only if the  estimated value of the contract represents a large portion of the  program/project activity’s costs. For example, ICE’s budget guidance  instructs the program offices to identify major requirements that add  up to at least 50 percent of the program/project activity resource  needs as non-pay cost drivers. Based on that guidance, in fiscal year  2020 budget documentation, one of ICE’s service contracts included  in our review—for Office of the Principal Legal Advisor document  management services—is identified as a cost driver. Only one other  contract included in our review—from USCIS—was identified as a  cost driver.

Capital Investment Exhibit: According to DHS budget officials, the  five contracts with the highest dollar value supporting each  component’s capital investment are identified in the component’s  budget documentation. Service contracts may be included in the  capital investment exhibit if they meet this criteria, but the details  included are vague. For example, for each contract listed, the exhibit  typically includes information such as the contract number and total  value, but does not categorize whether the contract is for a product or  service nor consistently provide a description of the contract itself. For  the contracts in our review, one of the eight—a contract for nuclear  detection technology technical support—was included in the capital  investment exhibit in fiscal year 2020 budget documentation.

Since component budget offices submit their proposed budget requests  with service contract requirements aligned into object class codes,  program/project activities, and capital investment exhibits, DHS lacks  visibility into the components’ requested service contract requirement  needs. For example, officials from the Office of the Chief Financial Officer  stated that they do not have visibility into DHS and the components’  specific service contract requirements. Rather, officials said their visibility  is limited to changes in service contract requirements that are justified as  part of requested increases or decreases in components’ funds. While  officials from the Office of the Chief Financial Officer stated that they can  request additional information from the components on service  requirements if needed, officials could not identify any specific  circumstances that have led to them requesting this information for their  own purposes or in response to congressional interest. See figure 9 for  details on how service contract requirements are communicated to DHS  headquarters in budget documentation.

Moreover, although DHS obligates over three-quarters of its contract  spending to services, neither the Office of the Chief Financial Officer or  OCPO have full visibility into or track service contract requirement costs.  For example, similar to how information is portrayed in budget  documents, officials from the Office of the Chief Financial Officer stated  they report obligations to Congress by object class level on a quarterly  basis; therefore, visibility into service contract requirement costs is  limited. Further, OCPO officials stated that they also do not have a  system for tracking service contract obligations reported through FPDS- NG or otherwise.

In a discussion held during the course of our review, congressional  requesters expressed interest in receiving additional information and  visibility into DHS’s estimated service contract requirements. Members of  Congress have also previously expressed interest in having increased  oversight and visibility into other aspects of DHS’s proposed spending as  well as into the Department of Defense’s estimated service contract  requirements. For example, DHS budget officials told us that the decision  to include the top five highest dollar value contracts in its capital  investment exhibits was driven by congressional interest in this type of  information on service contracts. In addition, in 2009, Congress began  requiring the Department of Defense to identify in its budget submission  the amounts requested for its service contracts for each component,  installation, or activity, excluding services related to research and  development and military construction. For example, the Department of  Defense has two budget exhibits that provide details on estimated service  contract requirements—one that details its advisory and assistance  services, and another that tracks contracted services across prior fiscal  years. In February 2016, we found shortfalls in the Department of  Defense’s reporting of service contract requirements in its budget  documents. We recommended that it modify its approach for reporting  service contracts in its budget justifications to include additional service  requirements. The Department of Defense agreed with this  recommendation and, in February 2016, took steps to fully report on  these service categories in its service contract spending exhibit  accompanying the fiscal year 2017 budget request.

We have also reported on challenges with congressional visibility into  DHS’s major acquisition programs in budget documents. In April 2018, we  found that DHS budget practices limit Congress’s visibility into costs and  recommended that DHS work with Congress to include information on  operations and support funding requests for major acquisitions in its  annual budget justifications. DHS agreed with this recommendation and  addressed it by adding an operations and support funding information  display for major acquisition programs to its congressional budget  justification for fiscal year 2021.

Federal internal control standards state that agency’s management  should communicate quality information internally and externally to inform  decisions. Although detailed information on service requirements is  available at the component level, DHS’s budget justifications do not  provide that level of visibility. Visibility into service requirements is  especially critical given that increases in DHS’s service contract  obligations—particularly those in need of heightened management  attention—may pose risks to DHS maintaining control over its mission.  Given these increases, additional visibility into how much of DHS’s  mission is being accomplished through the use of services requiring  heightened management attention could inform DHS’s decision-making  on the tasks it chooses to contract for, and the balance of its federal and  contractor workforce. Without working with Congress to determine the  format and level of detail needed to communicate service contract  requirements in budget information, DHS headquarters and Congress are  at risk of not having the information for sound resource planning and  decision-making related to DHS’s use of service contracts.

Service contracts play a critical role in supporting DHS’s wide range of  missions, but increases in service contract obligations—including  significant increases in obligations for services in need of heightened  management attention—necessitate DHS’s attention as it develops,  reviews, oversees, and budgets for service contract needs. DHS’s recent  effort to perform a headquarters-level review of certain service and  product procurement actions is a positive step in improving the  department’s visibility into how it is acquiring certain services and  products. However, without developing a risk-based approach for  reviewing certain proposed service contract requirements to ensure they  are clearly defined and valid before they are procured and consistently  reviewing eligible procurement actions, DHS cannot ensure it has  established the rigor needed to review its service procurements. Further,  changes in DHS’s processes and a lack of agency-wide guidance for  planning, documenting, and updating federal oversight personnel and  activities for services in need of heightened management attention have  put the department at risk of not effectively addressing whether  contractors are performing inherently governmental functions. These risks  could pose challenges to DHS’s ability to maintain control over its mission  and operations. Ensuring DHS has guidance for planning and updating  the resources needed to oversee these contracts, and identifying the  types of activities that federal personnel should be performing to mitigate  the risks associated with these contracts are critical to DHS’s ability to  address these concerns.

Finally, despite the availability of information on specific service contract  requirements within component program offices, DHS does not  communicate most of this information in budget documentation provided  to DHS headquarters or Congress, nor is DHS currently required to do so.  Given that DHS’s service contract obligations—including those in need of  heightened management attention—account for more than three quarters  of DHS’s total annual contract obligations, DHS is missing opportunities  to make more informed strategic decisions because it does not have  visibility into its current or future service requirement spending for these  services.

We are making six recommendations to the Secretary of Homeland  Security:  The Secretary of Homeland Security should direct the DHS Chief  Procurement Officer to, in coordination with the Office of Program  Accountability and Risk Management, develop a risk-based approach for  reviewing service requirements—through the Procurement Strategy  Roadmap or other means—to ensure proposed service requirements are  clearly defined and reviewed before planning how they are to be  procured. (Recommendation 1)

The Secretary of Homeland Security should direct the DHS Chief  Procurement Officer to document the factors the Office of the Chief  Procurement Officer considers when waiving procurement actions from its  Procurement Strategy Roadmap to ensure it is consistently considering  potential acquisition risks in its planning—including those specific to  services. (Recommendation 2)

The Secretary of Homeland Security should direct the DHS Chief  Procurement Officer to update the Inherently Governmental and Critical  Functions Analysis to require the identification of special interest  functions. (Recommendation 3)

The Secretary of Homeland Security should direct the DHS Chief  Procurement Officer to update the Inherently Governmental and Critical  Functions Analysis to provide guidance for analyzing, documenting, and  updating the federal workforce needed to perform or oversee service  contracts requiring heightened management attention. (Recommendation  4)

The Secretary of Homeland Security should direct the DHS Chief  Procurement Officer to develop guidance identifying oversight tasks or  safeguards personnel can perform, when needed, to mitigate the risk  associated with contracts containing closely associated with inherently  governmental functions, special interest functions, or critical functions.  (Recommendation 5)

The Secretary of Homeland Security should direct the DHS Chief  Financial Officer to work with Congress to identify information to include  in its annual congressional budget justifications to provide greater  transparency into requested and actual service requirement costs,  particularly for those services requiring heightened management  attention. (Recommendation 6)

We provided a draft of this report to DHS for review and comment. In its  comments, summarized below and reproduced in appendix V, DHS  agreed with the third and fifth recommendations and identified steps it  plans to take to address them. DHS disagreed with the first, second,  fourth, and sixth recommendations. DHS also provided technical  comments, which we incorporated as appropriate.

DHS did not agree with the first recommendation, that OCPO, in  coordination with the Office of Program Accountability and Risk  Management, develop a risk-based approach for reviewing service  requirements through the Procurement Strategy Roadmap, or other  means, to ensure that proposed service requirements are clearly defined  and reviewed before planning how they are to be procured. In its  response, DHS cited Instruction 102-01-001 as codifying how DHS and  its components acquire and sustain services for major acquisitions.  However, as noted in our report, as of November 2019 none of DHS’s  services programs rose to the level of being classified as a major service  acquisition. Therefore, DHS is at risk of overlooking those service  contracts that are not a service acquisition program or not associated with  its major acquisitions.

DHS also noted the use of existing key processes that enable it to identify  needs and develop contract requirements for services. While we  acknowledge in our report that DHS and selected components have these  processes in place, we found they were not consistently used throughout  the contracts in our review, and none can serve as a replacement for the  kind of risk-based headquarters-level oversight that we believe is  necessary. For example, among its processes, DHS cited the use of  integrated product teams as a way to facilitate comprehensive reviews of  service requirements. We noted in our report, however, that according to  officials only two of the eight contracts in our review used such an  approach.

Further, DHS stated that other existing efforts meet the primary objectives  of the Service Requirements Review pilot, thus making an additional  headquarters-level review of service requirements unnecessary.  However, all of these efforts were also already in place when the then  Under Secretary of Management directed OCPO and the Office of  Program Accountability and Risk Management to undertake its December  2018 pilot program to provide consistency and rigor to reviewing service  contract requirements. Therefore, we continue to believe that given the  amount DHS obligates in service contracts to support its mission,  establishing a risk-based approach to review service requirements prior to  and in coordination with its consideration of how those requirements are  to be procured will help prevent negative acquisition outcomes and the  potential for wasted resources.

DHS also did not agree with the second recommendation. In its response,  DHS stated that OCPO’s decision to waive a Procurement Strategy  Roadmap review does not mean that the Chief Procurement Officer did  not consider acquisition risks, and that it is unclear what other acquisition  risks we believe are not being considered. The recommendation to  document the factors considered when waiving the Procurement Strategy  Roadmap is intended to ensure that the department is able to consistently  apply a framework and maintain institutional knowledge—particularly  given the risks and challenges that vacancies in top leadership positions  throughout the department could pose to addressing management  issues. Waiving procurements without documentation of what  acquisition risks are being considered puts the department at risk of  inconsistently making those decisions and not being able to leverage  Procurement Strategy Roadmap lessons learned.

DHS noted in its response that the decision to waive a procurement  review is based on several considerations, such as the type of service,  information provided to the Chief Procurement Officer by the Head of  Contracting Activity, and historical and current knowledge of the  procurement, among others. However, the department offered no further  insights as to: what types of services may not warrant a Procurement  Strategy Roadmap; what type of information provided by the Head of  Contracting Activity may indicate a review is unnecessary; or how the  Chief Procurement Officer maintains the historical knowledge of  procurements that may have previously experienced challenges and thus  warrant a Procurement Strategy Roadmap. We continue to believe that  taking the step of documenting the factors considered—such as types of  services that may require additional review, or challenges with prior  procurements, some of which may have been awarded years prior—will  help ensure that decisions to waive Procurement Strategy Roadmaps are  made consistently and transparently.

DHS did not agree with the fourth recommendation, that OCPO should  update the Inherently Governmental and Critical Functions Analysis job  aid to provide guidance for analyzing, documenting, and updating the  federal workforce needed to perform or oversee service contracts  requiring heightened management attention. In its response, DHS stated  that the job aid requires components to certify that they have sufficient  internal capacity to oversee and manage contractor activities and  maintain control of its missions and operations when the requirement is a  closely associated with inherently governmental or critical function.  Further, DHS stated that the job aid requires components to certify that  there are an adequate number of positions filled by federal employees to  manage and monitor contractors if the requirement is a critical function.

As noted in our report, each component is making its own determination,  in the absence of guidance, as to what factors to consider. In its  response, DHS stated that OCPO will assist components with examples  of analysis by reviewing what some components are doing, and sharing  those examples with others. However, in the absence of guidance about  what DHS expects the components to analyze and document based on  those examples, DHS does not know how or whether the components are  considering the federal workforce available to oversee service contracts  in need of heightened management attention, or what steps, if any, the  components are taking to mitigate risks if there are not enough federal  personnel available to oversee the contracts after award.

In its response, DHS recognized the need to provide guidance for  updating the job aid, if there is a change in the contract requirement, to  help ensure it has sufficient internal capacity to oversee and manage  contractor activities, maintains control of its missions and operations, and  has the appropriate workforce in place. We consider this to be a positive  step to address part of the recommendation; however, it is unclear what  considerations the components will use to update their analysis without  the presence of guidance for how to analyze the federal workforce  needed prior to the contract being awarded. We maintain that without  guidance, DHS is at risk of inconsistent consideration of federal oversight  for service contracts across its components—an action at odds with its  goals of improving integration, and centralizing and coordinating its many  functions to ensure that its whole is greater than its parts.

Finally, DHS did not agree with the sixth recommendation, to work with  Congress to identify information to include in congressional budget  justifications to provide greater transparency into requested and actual  service requirement costs, particularly for services requiring heightened  management attention. In its response, DHS stated that it does not  believe including additional information on estimated or actual service  contract requirement costs is appropriate, and stated that contract  information can be found in congressional budget justifications in budget  object class breakouts, cost drivers, and in the Procurement,  Construction, and Improvement Appropriation Capital Investment exhibit.  We acknowledge these same three sources of information in our report,  and note the limitations with each (either over-estimating or under- estimating service contracts) to providing visibility into DHS’s estimated or  actual service contract requirements—both internally to DHS and  externally to Congress. For example, as we note in the report, contracts  identified in the Capital Investment Exhibit are not categorized as being  for a product or service nor does the exhibit consistently provide a  description of what the contract is for. In its response DHS noted  limitations with our analysis comparing contract obligation data from  FPDS-NG with what is reported in DHS’s budget justifications, however,  after discussion with DHS officials during our review, we did not include  that comparison in our report.

DHS also noted in its response that the congressional budget  justifications are intended to focus on the request, not on the previous or  current year’s contracts. However, the recommendation that DHS work  with Congress is impartial as to what type of service contract information  would be useful for providing greater transparency into DHS’s service  contract requirements. Rather, the recommendation is intended to  address the limited visibility both DHS and Congress have into DHS  service requirements—in particular the significant increases in services  requiring heightened management attention—and provide a means to  report on that information to improve internal and external oversight over  these requirements and to allow for more informed decision-making. The  need for this visibility into service contract requirements is aligned with  prior recommendations GAO has made related to the need to increase  visibility in DHS’s congressional budget justifications for major acquisition  programs’ funding requests; recommendations that DHS has agreed with  and implemented. Given that service contracts accounted for over three  quarters of DHS’s contract obligations from fiscal years 2013 through  2018, we continue to believe that our recommendation to work with  Congress on how to convey that information in congressional budget  requests is valid.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the DHS Chief  Procurement Officer, the Commissioner of U.S. Customs and Border  Protection, the Director of Immigration and Customs Enforcement, and  the Director of U.S. Citizenship and Immigration Services. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@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 key contributions to this report  are listed in appendix VI.

Appendix I: Objectives, Scope, and Methodology

You asked us to review the Department of Homeland Security’s (DHS)  use of and planning for service contracts. This report addresses the  extent to which DHS and selected components and offices (1) used  service contracts from fiscal years 2013 through 2018; (2) identified,  developed, and reviewed service contract requirements; (3) ensured  oversight of service contracts requiring heightened management  attention; and (4) considered service requirements in budgeting  processes.

To identify the extent to which DHS used service contracts, we reviewed  the Federal Procurement Data System-Next Generation (FPDS-NG) data  on DHS-funded contract obligations from fiscal years 2013 through 2018  adjusted for inflation using the Gross Domestic Product Price Index. We  identified obligations for services using the codes associated with  services in the General Services Administration’s Federal Procurement  Data System Product and Service Codes Manual. We analyzed the  FPDS-NG data to identify DHS service obligations compared to  obligations for products, service obligations by DHS component, the types  of services procured, and the proportion of service contracts for functions  in need of heightened management attention—those deemed closely  associated with inherently governmental, critical, and special interest  functions. We assessed the reliability of FPDS-NG data by reviewing  existing information about the FPDS-NG system and the data it collects— specifically the data dictionary and data validation rules—and performing  electronic testing. We determined the FPDS-NG data were sufficiently  reliable for the purposes of identifying DHS’s use of service contracts.

We selected a non-generalizable sample of four DHS contracting  activities that had high obligations for service contracts and special  interest functions compared to other DHS contracting activities—U.S.

Customs and Border Protection (CBP), U.S. Immigration and Customs  Enforcement (ICE), U.S Citizenship and Immigration Services (USCIS),  and the Office of Procurement Operations (OPO). For the purposes of  this report, we will refer to these contracting activities, which include three  components and one office, as components. From these components, we  selected a non-generalizable sample of 100 contracts awarded in fiscal  year 2018 that were above the simplified acquisition threshold and were  not exempt from performing a Balanced Workforce Assessment Tool  (BWAT)—a risk analysis tool used by DHS components at that time to  identify the appropriate mix of federal and contractor employees.  Seventy five of the 100 contracts were for special interest functions, with  the remaining 25 randomly selected. From that sample, we selected eight  contracts—two from each component—that were identified as requiring  heightened management attention. We selected a range of contracts  based on whether the contract contained functions requiring heightened  management attention, the percent of recommended federal oversight,  and whether the requirement was new, among other selection criteria. We  conducted semi-structured interviews with program, contracting, and  budgeting officials from the eight selected component contracts to identify  how the selected service contract requirements were developed,  overseen, and considered when budgeting. Information collected from the  four components and eight contracts cannot be generalized to all  components and contracts. For additional details on the contracts we  selected, see table 2.

To determine how DHS and selected components identified, developed,  and reviewed service contract requirements prior to soliciting for a  contract, we reviewed relevant documentation, including the Federal  Acquisition Regulation (FAR), and DHS, CBP, ICE, USCIS, and OPO  contracting policies. To determine what processes selected components  have for identifying and developing service requirements, we reviewed  documentation, and interviewed program and contracting officials  associated with our four selected components and eight selected  contracts. To determine how DHS is reviewing service contract  requirements, we reviewed DHS Office of the Chief Procurement Officer  (OCPO) and Office of Program Accountability and Risk Management  guidance and documentation on recent DHS headquarters initiatives—the  Procurement Strategy Roadmap and Service Requirements Review  pilot—and federal internal control standards on risk assessment. We  also interviewed officials on these efforts to identify similarities and  differences, and the processes established to review certain service  contracts.

To determine the extent to which DHS and the selected components in  our review ensured federal oversight of service contracts requiring  heightened management attention, we reviewed relevant documentation  and regulations including Office of Federal Procurement Policy (OFPP)  memorandums, the FAR, DHS contracting policies and guidance, and  federal internal control standards on information and communication and  risk assessment. To understand how DHS and selected components  planned and documented oversight needs we reviewed available BWATs  from our non-generalizable sample of contracts that we identified as  special interest functions. Using FPDS-NG data, we identified an  additional 27 contracts with completed job aids that were awarded in  fiscal year 2019 for special interest functions across our selected  components following implementation of the Inherently Governmental and  Critical Functions Analysis job aid in March 2019. We reviewed the  completed job aid associated with each of these contracts to understand  how the oversight planning process has changed. We interviewed OCPO  and component program and contracting officials about their use of both  the BWAT and the Inherently Governmental and Critical Functions  Analysis job aid.

To determine the extent to which DHS and selected components  conducted federal oversight of service contracts requiring heightened  management attention throughout the life of a service contract, we  analyzed documentation—such as contracting officer’s representative  appointment letters depicting oversight responsibilities and training for  contracting and program officials—and interviewed officials responsible  for performing oversight functions. Additionally, to understand the types of  tasks oversight officials can perform to mitigate the risk of contractors  performing inherently governmental functions or losing control of the  department’s mission, we reviewed OCPO provided guidance and  trainings and interviewed relevant officials.

To determine the extent to which DHS and selected components consider  service contracts when budgeting, we reviewed Office of Management  and Budget (OMB), DHS headquarters, and component budgeting  guidance, federal internal control standards on information and  communication, and interviewed headquarters and component budget  officials. To determine how service contract requirements are  communicated during resource planning and budget formulation, we  reviewed DHS and component budget justification documents to identify  what ways service requirement information is reflected, including whether  specific information on our selected contracts was visible. We compared  the resources DHS reported needing and receiving in its fiscal year 2018  budget documentation with DHS’s use of service contracts as reported in  FPDS-NG in the same fiscal year as a proxy for visibility of service  contract requirements in DHS budgeting.

We conducted this performance audit from February 2019 to May 2020 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.

Appendix II: Department of Homeland Security Organizational Chart

Appendix II: Department of Homeland Security  Organizational Chart The Office of Procurement Operations is the contracting activity for the following DHS components  and offices shown above: Countering Weapons of Mass Destruction; Cybersecurity and Infrastructure  Security Agency; Civil Rights and Civil Liberties; General Counsel; Office of Intelligence and Analysis;  Legislative Affairs; Office of Operations Coordination; Partnership and Engagement; Office of  Strategy, Policy, and Plans; Public Affairs; Chief Information Officer; Chief Financial Officer;  Secretary/ Deputy Secretary; Management Directorate; Privacy; and the Science and Technology  Directorate.

Appendix III: Examples of Certain Functions Requiring Heightened Management Attention

In September 2011, the Office of Federal Procurement Policy (OFPP) in  the Office of Management and Budget (OMB) issued a policy letter to  help agencies manage the performance of inherently governmental and  critical functions. The guidance states contracts whose performance may  involve closely associated with inherently governmental, critical, or  special interest functions require heightened management attention.  Specifically, guidance states that closely associated with inherently  governmental functions are functions that require heightened  management attention to ensure that contractor’s activities do not expand  into inherently governmental functions. OMB’s response to public  comments on the proposed policy letter provides examples of inherently  governmental and closely associated with inherently governmental  functions, as shown in table 3.

In response to public comments on the proposed policy letter, OMB called  critical functions core to the agency’s mission or operations. In addition,  the policy letter states that critical functions, when contracted for, pose  the risk that the agency can lose control of its mission and operations.  Examples of work previously identified by DHS as critical functions for the  department include:  Intelligence services—proprietary software used to conduct deep and  dark web searches on possible threats against senior officials.

Risk mitigation services—supporting undercover agents’ identities

Program support—immigration data integration

Administrative services—working closely with agency senior  leadership to conduct research, schedule and attend meetings, as  well as develop policies.

The policy letter states that agencies must retain sufficient internal  capability to give critical functions heightened management attention by:  dedicating an adequate number of qualified federal personnel to  understand the agency’s requirements and perform functions alongside  contractors, if necessary, in the event the contractor fails to perform; or  ensure qualified federal personnel are available to oversee and manage  the contractor workforce.

OMB guidance also describes special interest functions as requiring  heightened management attention. In a 2010 memo, OFPP issued  guidance to help agencies conduct a required service contract inventory  for fiscal year 2010. The guidance describes the service contract  inventory as a tool to better understand how contracted services are used  and whether contractors’ skills are utilized in an appropriate manner.  According to the guidance, agencies should give priority consideration to  special interest functions, which for fiscal year 2010 OFPP identified as  the categories of professional management services and information  technology support services. Special interest functions require increased  management attention due to increased risk of workforce imbalance.  DHS, in line with OMB guidance, has identified 17 product and service  codes to categorize as special interest functions, as shown in table 4.

Appendix IV: Key Differences in Tools for Evaluating Functions Requiring Heightened Management Attention

The Department of Homeland Security (DHS) implemented its Balanced  Workforce Strategy (BWS) in October 2009 to establish a set of  processes that, when repeated on a regular basis, enables the  department to achieve the appropriate mix of federal employees and  contractors to accomplish the department’s mission while minimizing  mission risk that may result from an overreliance on contractors. To  accomplish the intended goals of the BWS, DHS instituted an online  questionnaire called the Balanced Workforce Assessment Tool (BWAT).  The BWAT was in place until March 2019 when DHS determined it— along with the strategy—were no longer necessary given the maturation  of their acquisition workforce and their inability to support the software  underlying the BWAT. In its place, DHS commissioned its Inherently  Governmental and Critical Functions Analysis—known as the job aid.

Appendix V: Comments from the Department of Homeland Security

Appendix VI: GAO Contact and Staff Acknowledgments

Marie A. Mak 202-512-4841 or MakM@gao.gov  In addition to the contact named above, Penny Berrier (Assistant  Director), Meghan Perez (Analyst in Charge), Erin Butkowski, Signe  Janoska-Bedi, and Jacqueline Wade were principal contributors. In  addition, the following people made contributions to this report: Pete  Anderson, Lorraine Ettaro, Suellen Foth, Julia Kennon, Roxanna Sun,  and Anne Louise Taylor.

The Department of Homeland Security relies on contracts to support many missions. But if contractors perform certain critical functions (i.e., determining agency policy or managing budgets) without oversight from government officials, this could put the government at risk of losing control of its decisions and operations.

We looked at how DHS used and oversaw contracts in FY 2013-2018 and found that it didn’t always plan for or update the number of federal personnel needed to oversee such contracts. DHS also did not offer guidance on how to prevent contractors from performing prohibited work.

Our 6 recommendations address these issues.