Earlier in April, the Government Accountability Office (GAO) released the second in a series of new, congressionally mandated reports assessing the Department of Defense’s (DOD) efforts to compile an inventory of service contracts. Congress intends for the Pentagon to include these reviews in its yearly budget work and expects “inherently governmental work” currently performed by private contractors to be brought back “in-house.” This review process will help the Pentagon find ways to reduce costs and limit the over-reliance on contractors.

Seventy cents of every contracting dollar spent by the federal government in 2010 was spent by the Pentagon; $371 billion of the $530 billion in federal contract spending was awarded through DOD contracts. Moreover, DOD contracting is continually plagued by stories of $435 hammers, 19 cent washers that cost almost $1 million to ship, and other impossible-to-justify charges.

As a result, Congress has enacted legislation demanding that the Pentagon take steps to improve its acquisition and service contract management systems. In 2008, Congress inserted language into that year's National Defense Authorization Act requiring the Pentagon to compile and review an annual inventory of service contracts, including the collection of key data, such as:

• The “function and missions” performed by the contractor
• The name of the contracting organization
• The funding source and operating agency paying the contract
• The number of full-time contractor employees that the contract is paying for

Additionally, Congress required the Pentagon to integrate the information on contractors into its annual strategic workforce plans and budget justification materials.

Congress directed the GAO to assess the progress DOD and its departments were making in cataloging this data over the following three years. The first report in the series, released in January 2011, paints a picture of disorganization and inefficiency.

The Pentagon has no database that officials can use to create a common inventory. In fact, due to the challenges in addressing “the different requirements of the military departments and components,” the Pentagon estimates that it will not be able to field the common database system until 2016, which may be too optimistic since GAO found that “DOD has not established milestones or time frames for the development and implementation of the data system” within its work plan.

Pentagon departments have to rely on the Federal Procurement Data System – Next Generation (FPDS-NG) to compile their inventory reports, but the FPDS-NG dataset does not contain much of the specific data DOD is looking for, including multiple services provided through a single contracting action, services provided through a contract predominantly for supplies, or contractor employment numbers.

Moreover, GAO found that some Navy commands contacted were not even aware that they were supposed to conduct a review, and Navy headquarters did not follow up to ensure that they had conducted the inventories. In fact, the Pentagon was not able to tell Congress that all DOD departments were either collecting or had plans to start collecting the appropriate contractor data, including employment figures, until November 2011. All other federal agencies began collecting this information earlier.

Although not comprehensive, the 2009 inventory was able to identify more than 2,000 instances of contractors performing inherently governmental functions, as determined by Army and Air Force reviews. When GAO performed a random check to see if these jobs had been converted back to civil service jobs, they found private contractors still in eight out of 12 positions. While GAO found that DOD made some improvements between its 2009 and 2010 service contract inventory reports, providing greater detail and higher levels of accuracy, the Pentagon plan for establishing a department-wide service contract database has yet to incorporate appropriate milestones and timeframes or to hold managers responsible for in-sourcing contracts.