Accounting of Personal Services Contracts Not Reliable, Says GAO


Following are key parts of a GAO report on the use of personal services contracts by federal agencies, always a controversial topic in the federal workforce because those working on such contracts typically perform work that could be done instead by a federal employee.

A personal services contract is one that makes contractor personnel appear to be government employees. These contracts must be authorized by federal law. According to FPDS-NG, the government reported obligating about $1.5 billion on personal services contracts in fiscal years 2011 through 2015.

GAO was asked to examine the federal government’s use of personal services contracts. This report discusses (1) the extent to which selected federal agencies award personal services contracts, and (2) how those agencies use them.

GAO identified the four agencies spending the most on personal services contracts—the Air Force, Army, Navy, and USAID—as reported in FPDS-NG. These agencies account for about 60 percent of total spending on these contracts. GAO also reviewed the service contract inventories these agencies prepared for fiscal year 2014, the latest year available at the time of this review.

The United States Agency for International Development (USAID) spent more than $123 million on personal services contracts in fiscal year 2015, according to the Federal Procurement Data System-Next Generation (FPDS-NG). But GAO cannot confirm the extent that personal services contacts are awarded by the Department of Defense (DOD) because GAO identified significant reporting errors at two DOD agencies—the Air Force and the Army. Specifically, 4 of the 15 Air Force contracts and 13 of the 15 Army contracts GAO reviewed were incorrectly recorded in FPDS-NG as personal services contracts. Defense officials agreed with this assessment. Further, the fiscal year 2014 inventories of contracted services at Air Force, Army, and Navy contained personal services contracts not captured in FPDS-NG. Apart from the inaccuracies of the reported data, GAO observed and agency officials agreed that additional undercounting could exist since some contracts for nonpersonal services could become personal services contracts, depending on whether the contract involves direct supervision by government employees. In the absence of accurate data, proper management of personal services and other contracts becomes more difficult.

Military departments and USAID use personal services contracts differently. DOD personal services contracts GAO reviewed were mostly for health care services. As permitted under its regulations, USAID uses personal services contracts for a broader range of functions such as program management, security analysis, and logistics, some of which are considered tasks that only government employees should perform—inherently governmental activities. Federal regulations that prohibit contractors from performing such activities do not apply to authorized personal services contracts. DOD’s practice is not to use personal services contracts for inherently governmental tasks. DOD and USAID have multiple authorities for awarding personal services contracts, but none of the files GAO reviewed at USAID cited the correct authority for personal services contracts performed in the United States. USAID has taken steps to address this issue but has not yet determined whether these steps will be effective.

Agencies need accurate information about their personal services contracts in order to ensure that government supervision of the work is appropriate. Without such information agencies do not have information useful for managing their programs. The Air Force and Army had significant errors in reporting the use of personal contracts and USAID consistently cited the incorrect authority for awarding the personal services contracts we reviewed. Therefore, there is room for improving procedures to help ensure accurate information is recorded. USAID has taken initial steps to revise its documentation but has not yet developed a process to determine whether the steps taken will result in increased accuracy. Personal services contracts are important to understand and track because the contractors are directly supervised by government personnel much as government employees would be. Because of their organic relationship to the work of government, it is incumbent on government agencies to have credible, accurate information about the number of these contracts and the authorities under which they are awarded. The absence of such reliable and credible information hinders the ability of government managers to determine if there are sufficient government personnel to carry out inherently governmental work and to properly oversee the work of contractors to ensure that the government remains responsible for the execution of approved government functions and for managing the agency’s work.