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Wednesday, February 1, 2023

GAO Warns DHS on Contractor Oversight Failings

A May 7 report from the Government Accountability Office (GAO) said the government could be at risk of losing control of its decisions and operations because contractors are performing critical functions without oversight.

The Department of Homeland Security (DHS) relies on contracts to support many missions. The department’s spending on services, such as guard services and technology support, represents over 75 percent of its annual contract obligations. 

To conduct its review, 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. The components were 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).  From these components, GAO selected a sample of 100 fiscal year 2018 contracts.

The watchdog found that DHS did not 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.

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

GAO’s review 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. 

The watchdog’s review of waived procurement actions also found that the Office of the Chief Procurement Officer at DHS waived several Federal Emergency Management Agency (FEMA) 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. Previous GAO reviews have found challenges in requirements development and acquisition planning for these types of contracts. 

For example, in April 2019, GAO 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. And earlier this year, GAO 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.

GAO said that 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”. GAO added that as 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. 

To address the concerns, GAO has made six recommendations to DHS:

  1. Develop, in coordination with the Office of Program Accountability and Risk Management, 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.
  2. 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. 
  3. Update the Inherently Governmental and Critical Functions Analysis* to require the identification of special interest functions. 
  4. 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. 
  5. 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.
  6. 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.

Generally speaking, DHS tends to concur with GAO recommendations. However, in this case, it agreed with recommendations 3 and 5 only, both of which it expects to meet by September 30 2020.

With regards to the first recommendation, DHS cited Instruction 102-01-001 as codifying how DHS and its components acquire and sustain services for major acquisitions. However, as noted in an earlier GAO report from November 2019, none of DHS’s services programs rose to the level of being classified as a major service acquisition. DHS also noted the use of existing processes that enable it to identify needs and develop contract requirements for services, but GAO found they were not consistently used throughout the contracts under review, and said “none can serve as a replacement for the kind of risk-based headquarters-level oversight that we believe is necessary”. 

When responding to the second recommendation, DHS said its decision to waive a Procurement Strategy Roadmap review does not mean that the Chief Procurement Officer did not consider acquisition risks.

DHS also disagreed with recommendation 4, regarding updating the Inherently Governmental and Critical Functions Analysis job aid. The department 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 closely associated with inherently governmental or critical function. DHS added 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. GAO argued that 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 response, DHS conceded somewhat as it recognized the need to provide guidance for updating the job aid, if there is a change in the contract requirement.

DHS did not agree with GAO’s final recommendation, to work with Congress to identify information to include in congressional budget justifications. DHS said 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. 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, GAO argued that 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. 

It is worth noting that in 2018, DHS began piloting a Service Requirements Review to validate, optimize, prioritize, and approve service requirements early in the development process. However, DHS discontinued these efforts in April 2019, before the pilot was finalized, because it was found to be too resource intensive. DHS officials told GAO that 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.

Service contracts play a critical role in supporting DHS’s wide range of missions and recent efforts by the department to perform a headquarters-level review of certain service and product procurement actions can be seen as a positive step in improving visibility into how DHS acquires certain services and products.

However, as GAO pointed out – 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. 

In addition, the lack of agency-wide guidance for planning, documenting, and updating federal oversight personnel and activities identified in GAO’s report put the department at risk of not effectively addressing whether contractors are performing inherently governmental functions. 

Read the full report at GAO

*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. Source: GAO-20-417

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