Pentagon blurred line between contractors, feds: GAO

The Defense Department relies excessively on a growing band of private contract specialists to assist with its acquisitions, blurring the line between federal employees and contractors and opening the door for serious conflicts of interest, according to a new report by the Government Accountability Office.

Auditors found that 42 percent of the Army Contracting Agency's Contracting Center of Excellence's contract specialists work for private industry but often were not identified as such when dealing with the public.

These contractor employees, who assist in preparing statements of work, managing acquisition plans and drawing up contracting documents, are paid 27 percent more than their similarly graded federal counterparts, even when including benefits. The contractors, however, were found to have more acquisition-related experience than the federal employees. In 2007, CCE handled nearly $1.8 billion in contracts.

CCE's reliance on a blended workforce also appears to have run afoul of the Federal Acquisition Regulation. GAO found that the center inappropriately used a General Services Administration contract to purchase administrative support. The work being performed under the arrangement was similar to that of personal services contracts, which are generally prohibited by the FAR, auditors said.

"Because CCE has not considered the appropriate balance of contractor and government personnel performing specific functions, or adequately trained its government workforce, the agency runs the risk of overreliance on contractors to meet its mission and of paying more in the long run," the report said. "If CCE relies too heavily on contractors and cannot adequately develop its own workforce, it may not be able to support its DoD customers."

Faced with a daunting workload and an inability to attract enough new hires, CCE began hiring industry employees in 2003. Since 2005, the agency's use of contract specialists has roughly doubled, with contractors now working side by side and performing nearly identical functions as government employees.

In 2007, CCE spent more than $2.8 million for the contracting support services of CACI of Arlington, Va., and Ravens Group of Lanham, Md. But, as GAO pointed out, there is a fine line delineating the roles of feds and contractors -- and CCE appears to have crossed that line more than once.

In nearly 70 percent of contract modifications examined by auditors, the industry employee who prepared the document was identified as the federal official administering the contract. And on a handful of occasions, the contractor was listed as the "government point of contact."

"Instances such as these, where the contractor is not identified as such or is misidentified, can cause confusion about the contractor's status and create an impression that the contractor is speaking or acting for the government," the report said.

CCE has since issued a new policy that contractor support staff is not to communicate, orally or in writing, with other vendors.

GAO also found that the work of Army contract specialists often had the characteristics of a personal services contract. Since CACI employees sometimes took on managerial roles, however, approving time cards and leave requests, preparing performance evaluations, and making hiring and firing decisions, a personal services contract did not exist, GAO said.

On a few occasions, CACI contract specialists were assigned to work on procurements that the company planned to bid on. The contractor employees notified their supervisors of the conflict of interest and were removed from those cases, the report said.

In a statement, CACI said, "We support any effort by the government to effectively acquire and use contractor resources to fill the significant workforce and expertise shortages within the government wherever needed. CACI has consistently provided our armed forces with good value."

GAO's findings drew a strong rebuke from Sen. Joseph Lieberman, I-Conn., the chairman of the Senate Homeland Security and Governmental Affairs Committee.

"Every day, contractors work side by side with federal employees, and yet the government might not even know when the self-interests of contractors are pitted against the interests of the American taxpayer," Lieberman said. "Given the government's increased reliance on outside contractors, we need an immediate overhaul of federal ethics policies to ensure that conflicts of interest don't impair the impartiality of contractors or their employees."

On Wednesday, the Civilian Acquisition Council and the Defense Acquisition Regulation Council, which recommend changes to the FAR, announced that they were considering new contractor conflict-of-interest clauses. The notice in the Federal Register said the councils want to determine whether the regulation's current guidance "adequately addresses the current needs of the acquisition community."

GAO even discovered problems with the contract vehicle CCE used to procure outside specialists.

The agency hired its contractors through GSA's MOBIS multiple awards schedule contract. But auditors found that the labor category descriptions in the GSA contract were "substantially different from descriptions in CCE's performance work statements and did not accurately represent the work that the contractors were performing. For example, one contractor's negotiated GSA contract was for 'senior business analysts,' but it is providing CCE with contract specialist support -- a completely different description."

CCE's legal counsel and senior procurement analyst raised concerns about the scope of the MOBIS contract, but the agency nonetheless issued a blanket purchase agreement for the contract specialists without resolving the concerns, GAO said. CCE indicated that it's planning to solicit a new contract for specialists by the end of June, according to GAO.

The investigation also found that MOBIS contractors were advertising services on GSA's Web site that they were not authorized to provide. GSA has since revised its MOBIS contracting categories to add acquisition management support services.

Shay Assad, the Defense Department's director of procurement and acquisition policy, concurred with GAO's findings, calling the issue "a matter of grave concern … If we cannot eliminate the role of contractors acting as contract specialists within 180 days, I plan to urge the Army to transfer the workload within that office to other DoD contracting agencies or sister federal agencies so that contract specialist functions are performed solely by government employees."