Data limitations mean that an apparent increase in the dollar value of Defense Department service contracts in fiscal 2009 compared to the year before could just be due to better reporting, says the Government Accountability Office.

In a report dated Jan. 14, the GAO reviews military departments' fiscal 2009 service contracting inventory reporting. While on the surface it appears that the departments spent 10 percent more on services that year when compared to fiscal 2008--for a total of $140.4 billion--that's not necessarily the case, GAO auditors say.

For one thing, the departments were under military-wide guidance from the under secretary of acquisition, technology and logistics on what services to include in their reporting, whereas in fiscal 2008, the services decided for themselves. The Air Force, for example, had excluded from its fiscal 2008 inventory any research and development services while the Navy included them.

As a result of following fiscal 2009 AT&L guidance to exclude from its inventory early stage research and development contracts, as well as construction and the lease and rental of facilities and equipment contracts, Navy spending on services appears to have decreased in fiscal 2009 by 3 percent, to $39.9 billion. But, spending on services included in both years' inventories actually increased by $3.8 billion, the report says.

Army officials told GAO auditors that their reported increase of 26 percent in invoiced services during fiscal 2009 to $43 billion (other departments based their dollar amounts on obligated amounts) likely is a result of more accurate reporting in its Contractor Manpower Reporting Application. Other military departments draw on data in the Federal Procurement Data System-Next Generation as the basis of their reporting; DoD currently lacks a single data source that contains all the data elements required for reporting service contract inventories.

The Army's CMRA system also allows that department to track services provided under contracts that were primarily for goods, whereas FPDS-NG data classifies contracts either as a good or a service, with no visibility given into services provided under product contracts. (A contact for, say, copiers could easily include services for installation or repair.) Fiscal 2009 Army data includes $5.5 billion worth of services that in FPDS would have shown up as an exclusively product contract, the report says.

Pentagon officials have said they want to reverse the growth in DoD service contracts, which have roughly doubled in value from fiscal 2001 to 2009. In August 2010, Defense Secretary Robert Gates announced plans to reduce funding for service support contractors by 10 percent per year from fiscal years 2011 to 2013 as part of a larger efficiency drive.

For more:
- download the report, GAO-11-192 (.pdf)

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