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FY2011 Service Contract Inventory Analysis Report

1. Background

The Department of Health and Human Services (HHS) takes its responsibility to be thoughtful stewards of the public’s funds seriously, and sees the opportunities presented under the Administration’s priorities for efficient spending and delivering an efficient, effective, and accountable Government as a way to reinforce this responsibility.

As required by Division C, Section 743 of the Fiscal Year (FY) 2010 Consolidated Appropriations Act (P.L. 111-117) and further guidance from the Office of Management and Budget (OMB) – Office of Federal Procurement Policy (OFPP) Memorandum to Chief Acquisition Officers (CAO) and Senior Procurement Executives (SPE), entitled “Service Contract Inventories” - dated November 5, 2010, HHS’ FY 2011 service contract inventory was submitted to the OMB in December 2011 and posted on HHS’ website in January 2012 (  HHS Senior Officials and Service Acquisition Initiative (SAI) Teams assessed the Department’s service contract inventory, coordinated their internal analysis and collaborated on various department-wide SAI efforts.  The results are summarized in this report.

2. Purpose

Perhaps now more than ever, HHS is responsible for executing highly important and politically visible programs. In addition, the Department’s management processes are more complex.  In compliance with the FY 2010 Consolidated Appropriations Act, HHS completed a thorough analysis of its FY 2011 inventory to:

  1. gauge whether contracts for services are being used appropriately to support the HHS mission;
  2. determine the effectiveness of HHS’ use of support contractors; and
  3. identify future improvements to our service-related acquisition practices.

HHS is submitting this report, in accordance with OMB’s guidance and GAO Report #GAO-12-1007, to present its analysis and the SAI’s methodologies, significant findings, accomplishments and future actions required for continued improvements.

3. Analysis of FY 2011 Service Contract Inventories

The Department continues to strengthen its financial stewardship throughout the acquisition life-cycle.  The HHS SAI Teams completed the analysis of the 2011 service contract inventory assuring service contracts supported valid program requirements along with considering the mix of federal employees and service contractors is balanced.  The results of the agency-level analysis were then brought forward to the Department to conduct an enterprise-wide assessment and promote the sharing of best-practices along with lessons-learned.

The Department recognizes that the ongoing critical success of the services that HHS acquires to support its missions require definitive processes to execute services acquisitions and ensure governance and oversight.  In 2011 HHS’ implemented mandatory reviews of service contracts which were designed to invigorate new acquisition processes to support the mission without  causing (1) significant impact on the mission, (2) a waste of resources, or (3) increased risks.  These challenges have implications across budget, programmatic, financial, human resources, information technology, and contracting portfolios.  The ongoing review processes create opportunities to engage customers early along with the ability to develop effective, results-oriented strategies that meet the need with solutions and incentives for efficient innovation throughout the acquisition process.

The following sections address the specific aspects of the SAI as requested by OMB.  The SAI Teams analyzed 25,550 (FY2011) service contract actions estimated value of $5B.   

  • Special Interest Functions
  • Based upon a mix of random and judgmental sampling, the SAI Teams reviewed approximately 432 contract files and focused on special interest functions in three categories:   

    1. OMB Special Interest Functions – based upon Product Service Codes (PSCs) designated by OMB/OFPP as being of high-risk federal-wide;
    2. HHS Special Interest Functions – HHS identified specific PSCs with overall high dollar-value of service contract awards as reported in its FY2011 inventory;  which may be a particular management interest, such as studies and legal services; or individual contracts of a high-value; and
    3. “Other Services” Acquisitions – based upon HHS’ FY 2011 acquisition of services using the generic PSCs designations (i.e., codes ending in 99); several of which were among the top ten overall dollar-values.

    See Attachment 1, “Special Interest Functions,” for a summary of HHS’ FY 2011 dollars obligated by the PSCs referenced above.  The rationale for focusing on these special interest functions include the requirement from OFPP for certain mandated PSCs, along with HHS’ decision to focus on high dollar value awards, use of “other” services codes, and other mission related specialty areas such as those noted above.

  • Methodology Used to Support Analysis

    The methodology was not changed from last year we built upon the success of the SAI Teams (Department-wide oversight and agency specific multi-disciplinary teams – comprised of experts in budget, program management, information technology, acquisition, finance and human resources).  This assured support and buy-in from senior officials throughout the Department.  The SAI Teams completed a retrospective analysis of the FY 2011 service contract inventory and provided coordination and collaboration across the Department.  The process occurred as follows:

    1. The Assistant Secretary for Financial Resources, serving as HHS’ Chief Acquisition officer (CAO) and the Senior Procurement Executive (SPE) continued to improve on prior year successes;
    2. May 2012 – Department-wide SAI Team meeting was held; reviewing timelines, report templates, inventory review protocols for all team members;
    3. June 2012 – the Department Oversight team met separately with each agency-level SAI Team to assess progress and provide further guidance;
    4. August 2012 – results of preliminary analysis by the SAI Teams were submitted to the Department; feedback was provided and changes were incorporated; and
    5. October 2012 – all agencies submitted their final preliminary analyses to the SPE. 

    The inventory review protocol and methods included:

    1. interviewed program managers, budget managers, contracting officer representatives, and contracting officers;
    2. data mining;
    3. random sampling of service contracts in the special interest areas identified above;
    4. validated inherently governmental – performance by contractor or government;
    5. assessed need driven by mission;
    6. looked for opportunities to reduce duplication; and
    7. identified challenges and opportunities.

    As evidenced by the results achieved after FY2010, the Department completed the OMB required preliminary analysis of the FY 2011 inventory and HHS has realized significant improvements which include visibility and insight into the Department’s service acquisition portfolio, greater efficiencies, and improved transparency and accountability among all SAI Team members who have demonstrated commitment to this ongoing effort.

  • HHS’ Findings

    Building on success started in FY2011, HHS continues to analyze a representative sample of contracts identified in the special interest function areas.  The analyses were completed using the protocol and methods outlined above.  Brief discussions of the SAI Team findings, which met the desired outcomes described in 743(e) (2), are outlined below:

    • The vast majority of service contracts were deemed necessary and in direct support of the HHS mission.
    • In FY2011, the SAI Team proactively reviewed the service contracts which were appropriate relative to the performance of (a) inherently governmental functions; (b) closely associated with inherently governmental (CAIG) functions; and (c) personal services:
      • During FY2011four contracts expired which were identified during the FY2010 service contract analyses. This resulted in a balance between contactor and federal employees performing the required services.
      • In FY2011, the SAI Teams identified a few functions provided in service contracts that were determined to be CAIG functions. These were in the areas of scientific/technical assistance and information technology (IT) project management support. In each case, the contract delineated clear roles and responsibilities between government and contractor personnel. Management and oversight were enhanced to ensure greater scrutiny and safeguards for monitoring the services contracts.
      • In FY2011, the SAI Teams did not identify any improper personal service contracts.
    • The vast majority of HHS’ contracts met performance expectations and contractual requirements. The SAI Teams reviewed the effectiveness of contractor performance and found no service contracts identified as having cost, schedule, or performance deviations exceeding 10%. All HHS agencies reported that the services obtained met their needs and worked through any contract-specific challenges.
    • Continuing best practices established in FY2010, the FY2011 review found adequate oversight capacity to monitor its service contracts. The SAI Teams reviewed programs and contracts to identify potential instances where the mix of FTEs versus contractor was unreasonable, or where there might otherwise exist an undue reliance upon contractor personnel – assuring the mission is not compromised. Under HHS’ Acquisition Workforce Human Capital Plan, the Department increased the acquisition workforce by 199, this is an improvement but additional FTEs are required to maximize HHS’ ability to oversee and administer all service contracts.
    • There were opportunities to eliminate redundant requirements.
      • The SAI Teams identified 17 contracts for similar work/services and federal staff positions and consolidated them into 5 separate contracts leveraging the government’s buying power and eliminating redundancy saving the Department $14M.
      • In FY2011, 39 contractor positions were converted to federal positions saving the Department $762K.
      • In FY2011, HHS continued to utilize Strategic Sourcing for the following services: Events Management, Information Technology, and Temporary Administrative/Professional Staffing.
      • In FY2011, a period of performance for a service contract was reduced to 13 months, saving the government $2M.
  • Planned Actions for Continued Improvement 

    Following the guidance from OFPP, the Department analyzed its FY2011 services contract inventory obtaining valuable information about the services procured and why the services were acquired. This information assists in future acquisition decisions and opportunities for collaboration across-HHS in FY2012 and beyond. The results from the FY2011 SAI efforts were:

    • A reduction in services that were duplicated across the Department.
    • An increase in the number, variety, and utilization of strategic sourcing vehicles.
    • Implemented opportunities for in-sourcing or where contractors are properly positioned to meet agency needs and enable HHS to re-purpose its FTEs.
    • Improved the transparency into department-wide service portfolios.
    • Continued reinforcing the need of quality data (i.e. assigning the correct PSCs and providing clear, concise service descriptions).
    • On-going service acquisition review protocols and processes.
    • Review and assess performance metrics to improve the SAI performance.
    • Set up quarterly reviews to share effective practices and lessons learned.
    • Actively monitor HHS’ ability to achieve and exceed the required 15% reduction in Management Support Services spending in FY2012.

    The SAI Team improved the service acquisition processes, analysis protocol, and methodology of the service inventory through:

    • A continuous effort to implement Automated Acquisition Plans (AAPs) to enhance visibility into budgetary/program areas, providing the ability to:
      • identify PSCs and flag those related to specific service contracts;
      • consolidate and analyze requirements data; resolving issues early in the acquisition lifecycle;
      • increase the use of performance-based acquisition methodologies; and
      • facilitate strategic sourcing efforts of similar requirements department-wide.
    • Regularly update checklists that address key considerations for service acquisitions (e.g., inherently governmental functions, CAIG functions, and personal services) to enhance acquisition strategies and implement the guidance associated with OFPP Policy Letter 11-01 addressing the performance of inherently governmental and other critical functions.
    • An on-going effort to improve tools that monitor contractor performance.

4. Way-Ahead

HHS Senior Officials and Service Acquisition Initiative (SAI) Teams are committed to the Department Service Acquisition Initiative and meeting the requirements and intent of Division C, Section 743 of the Fiscal Year (FY) 2010 Consolidated Appropriations Act (P.L. 111-117).  The Department continues to focus its efforts on achieving HHS mission and the priorities of the Administration, as we prepare to analyze the FY2012 inventory of service contracts and apply the best practices realized from the FY2011 results.

Dr. Angela Billups, Associate Deputy Assistant Secretary for Acquisition is accountable for the development of agency policies, procedures, and training associated with OFPP Policy Letter 11-01 addressing the performance of inherently governmental and critical functions.  Dr. Billups is also responsible for ensuring appropriate internal management attention is given to the development and analysis of service contract inventories.  Ms. Lori Sakalos, Director, Office of Acquisition Policy, will serve on the working group to share best practices and lessons learned in the use of inventories as a management tool.

HHS FY 2011 Special Interest Functions

HHS Special Interest Areas - FY2012 Inventory Analysis

A review of the HHS Service Contract Inventory shows an analysis of obligations by special interest areas.

Office of Management and Budget Identified Product and Service Codes

Product &
Service Code
DescriptionFY2012 Obligations
(in Dollars)*
% of contracts reviewed for each product and service code selected and the total universe of contracts
B505 Cost benefit analysis$476,9010.009%
D302ADP systems development services$242,496,3964.549%
D307Automated information systems services$227,132,0304.260%
D310ADP Backup and Security Services$2,473,8160.046%
D314ADP system acquisition support services$12,683,0080.238%
R406Policy review/development services$7,142,6220.134%
R407Program evaluation services$43,276,7230.812%
R408Program management/support services$524,104,5699.831%
R409Program review/ development services$37,591,4500.705%
R413Specifications development services$504,3680.009%
R414Systems engineering services$7,635,8270.143%
R423Intelligence services$12,624,1470.237%
R425Engineering and technical services$18,103,6610.340%
R497Personal service contracts$17,617,2390.330%
R707Management services/contract & procurement support$159,307,3042.988%


HHS Special Interest Functions

Product &
Service Code
DescriptionFY2012 Obligations
(in Dollars)*
% of contracts reviewed for each product and service code selected and the total universe of contracts
B506Data analysis (other than scientific)$36,461,5580.684%
B513Feasibility studies (non-construction)$303,6920.006%
B547Accounting/financial management studies$350,1800.007%
B553Communications studies$142,2580.003%
B599Other special studies and analyses$19,708,5390.370%
R418Legal services$20,657,2310.387%
R421Technical Assistance$254,757,8024.779%
R701Advertising services$91,262,8801.712%
R702Data collection services$100,327,4231.882%
R708Public relations services, including event planning and management, media relations, and radio and television analysis$16,312,1750.306%


HHS Use of “Other” Services

Product &
Service Code
DescriptionFY2012 Obligations
(in Dollars)*
% of contracts reviewed for each product and service code selected and the total universe of contracts
B599Other special studies and analyses$19,708,5390.370%
D399Other ADP and Teleconferencing$1,149,434,51121.560%
R499Other Professional Services$1,508,670,23228.298%
R699Other Administrative$522,207,3169.795%
R799Other Management Support Services$277,802,3695.211%

Grand Totals: $5,331,276,784

Total Number of Contract Actions: 25,550

(Prepared 12/30/2011)

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