HHS FY 2013 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 2013 service contract inventory was submitted to the OMB in December 2013 (in accordance with statutory requirements) and posted on HHS’ website (http://www.hhs.gov/grants/contracts/get-ready/servicecontracts/index.html) after the additional detailed information requested was included in the FY2012 Inventory Analysis Report.  HHS Senior Officials and the Service Acquisition Initiative (SAI) Team 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.

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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 FY2013 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 the GAO Report #GAO-12-1007, to present its analysis and the SAI’s methodologies, significant findings, accomplishments, and future actions required for continued improvements. 

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3. Analysis of FY 2013 Service Contract Inventories

The Department continues to strengthen its financial stewardship throughout the acquisition life-cycle.  The HHS SAI Team completed the analysis of their 2013 service contract inventory assuring service contracts supported valid program requirements along with considering the balance between federal employees and service contractors.  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 2013, HHS conducted 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 on in the acquisition planning process which enables them 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.  HHS FY2013 Special Interest Functions (See Attachment 1) resulted in the award of 22,942 actions with an estimated value of $5B.    

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Special Interest Functions

Based upon a mix of random and judgmental sampling, the SAI Team reviewed approximately 330 contract files 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 FY2013 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 2013 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 2013 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.  The 330 contracts reviewed were valued at $1B and represent 25% of the FY2013 special interest functions. 

Between FY2012 and FY2013, spending reductions occurred and total dollars and percentages went down in various PSC codes.  The SAI Team identified the top 10 reductions below:   

OMB Identified PSCs

PSC Description FY2012 Amount FY2013 Amount Difference Amount
D302 ADP Systems Development Services




R407 Program Evaluation Services




R409 Program Review/Development Services




R423 Intelligence Services




R497 Personal Services Contracts




R707 Mgt Svcs/Contract & Procurement Sup




HHS Special Interest Functions

PSC Description FY2012 Amount FY2013 Amount Difference Amount
B513 Study/Feasibility - Non-Contruct




B547 Study/Accounting/Financial Mgt




B553 Communications Studies




R421 Technical Assistance




HHS Use of Other Services

PSC Description FY2012 Amount FY2013 Amount Difference Amount
R799 Other Management Support Services





PSC Description FY2012 Amount FY2013 Amount Difference Amount
  Grand Totals (all functions)




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Methodology Used to Support Analysis

The methodology continues from FY2011 and builds upon the success of the SAI Team (Department-wide oversight and agency specific multi-disciplinary teams – comprised of experts in budget, program management, information technology, acquisition, finance and human resources).   This secures support and buy-in from senior officials throughout the Department.  The SAI Team completed a retrospective analysis of the FY 2013 service contract inventory and provided coordination and collaboration across the Department.  The process occurred as follows:

  1. The Associate Deputy Assistant Secretary for Acquisition, serving as HHS’ Senior Procurement Executive (SPE), continues to improve on prior year successes;
  2. Initial Meeting April 2014  – The first Department-wide SAI Team meeting was held; reviewing timelines, reporting templates, SAI survey results, and inventory review protocols for all team members;
  3. One-on-one meetings with SAI POCs were held via web conferences to train in the efforts to use the new SAI SharePoint Web Portal which was created to standardize and streamline the Department’s reporting process, and to act as a repository for SAI data;
  4. August 2014 – The second Department-wide SAI Team meeting was held.  Discussions included assessing the following:  Closely Associated Inherently Governmental (CAIG) functions; personal service contracts; deviations of cost, schedule or performance deviation exceeding 10%; if a representative sampling of contracts were reviewed; any redundant requirements (if so, how they were eliminated); planned actions for continued improvement;   
  5. November 2014 –The results of the preliminary analysis conducted by the SAI Team were submitted to the Department for review; feedback and guidance was provided and changes were incorporated; 
  6. October-December 2014 - Fact finding and validation interviews were conducted with senior officials across the Department and multi-disciplinary team members at each Operating and Staff  Division to ensure that the findings captured in their reports were accurate and complete.
  7. December 2014 –Final analyses were submitted to the SPE; and

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 during FY2010, FY2011, and FY2012, the Department completed the OMB required preliminary analysis of the FY2013 inventory and HHS continues to make 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.

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HHS’ Findings

Process improvement and prior year success stories enable HHS to analyze and validate a meaningful representative sample of contracts.  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:

  • Of the contracts HHS reviewed, all were deemed necessary and in direct support of the HHS mission. 

In FY2012, HHS issued an Acquisition Policy Memorandum (APM)  2012-01 entitled:  Guidance on Inherently Governmental and Critical functions and Information Collection – FY 2012 Service Contract Inventory in support of OMB’s guidelines, information collection, and reporting requirements for inherently governmental and critical factors.   This APM established a method to collect the data using existing acquisition systems as outlined in the OFPP Policy Letter 11-01. These activities enabled HHS to increase management oversight and to ensure proper controls are in place. 

  • The SAI Team proactively reviewed service contracts which were relative to the performance of (a) inherently governmental functions; (b) closely associated with inherently governmental (CAIG) functions; and (c) personal services:
  • During FY2013, the SAI Team did not identify any contracts with inherently governmental functions.  
  • In FY2013, the SAI Team identified 13 service contracts that included CAIG functions.  These were in the areas of inspection services, policy and regulatory analysis services, management support services, scientific and technical support, acquisition planning support, and grants management support services.  In each case, the contract delineated clear roles and responsibilities between government and contractor personnel.  Contract management and oversight were enhanced to ensure greater scrutiny and safeguards for monitoring the services contracts.  Measures to keep the services from crossing over to inherently governmental functions are in place, to include COR oversight and an adequate mix of government personnel and contractor employees.  In one contract, the contractor works closely with the government and other contractors as part of an Integrated Project Team. 
  • In FY2013, the SAI Team did not identify any improper personal service contracts.
  • The vast majority of HHS’ contracts met performance expectations and contractual requirements.  The SAI Team reviewed the effectiveness of contractor performance and found no service contracts identified as having cost, schedule, or performance deviations exceeding 10%.  HHS reported that all services obtained met the “bona fide needs rule” and any contract specific challenges identified were resolved.
  • Continuing upon best practices previously established, the FY2013 review found adequate oversight capacity to monitor its service contracts.  The SAI Team 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. 
  • Opportunities were taken to eliminate redundant requirements. 
  • The SAI Team identified 2 contracts and consolidated them into 1 separate contract (valued at $1M) leveraging the government’s buying power, eliminating redundancy, and achieving cost savings.
Program Action Result
Office of the Inspector General Combined maintenance and support of firewall network equipment as well as; Network Access Control System Solution which provided planning, design, implementation, configuration and training.


  • Leveraging the Government’s buying power continues to be one of the most important and effective tools HHS uses to achieve savings and administrative efficiencies, by closely tracking progress in the use of HHS Strategic Sourcing vehicles and the Federal Strategic Sourcing Initiative (FSSI).  Examples include:
Program Action Result
Assistant Secretary for Financial Resources (ASFR) ASFR utilized a Federal Strategic Sourcing Initiative (FSSI) Wireless Blanket Purchase Agreement (BPA) for the purchase of 22 Blackberries with a cost savings of $58,462.16.  


Center For Disease Control (CDC) Center for Disease Control (CDC) awarded an Information Technology managed contract (iSYS) to centralize mobility services and device purchases (e.g., vice Federal Strategic Sourcing Initiative – Wireless Devices and Plans) which has provided costs savings for CDC program offices. CDC continues to receive cost savings from the consolidated management contract for wireless devices and plans.  Savings realized at the end of FY2013 were $1.4M.


CDC CDC used its BPAs to streamline the equipment purchases for network printers which:  1).Made the consumable compatible throughout CDC; 2). Limited the type and number of personal printers, and 3). CDC uses FSSI to purchases copiers. The BPA for purchasing network printers is still a viable procurement vehicle.  The use of the BPA continues to streamline procurements across CDC which results in compatibility across CDC and reduced spending on inks and toners for personal printers.  CDC is transitioning away from desktop printers to network printers to reduce the cost of printers and printer supplies. CDC has installed cost saving settings on all network printers. Significantly reduced the amount spent on stocking assortments of inks and toners which reduces the carbon footprint of environmental issues associated with printing.
CDC CDC leveraged the agency buying power by using the Microsoft Premier/Consulting Services BPA to conduct assessments of various technology areas including the SQL Server, Microsoft Project Server and SharePoint.  This BPA provides standard rates for Microsoft Premier Services and Consulting and is available CDC Enterprise-wide.  Technology “health checks” provide assessments of various technology areas including the SQL Server, Microsoft Project Server and SharePoint.  The standard rates on the BPA remain constant for the life of the BPA which assists with effective resource management with the contract vehicle.
CDC CDC consolidated requirements by issuing a Broad Agency Announcement (BAA) for Mine Safety research and made 12 contract awards totaling over $4 Million.  The total number of contract awards resulted from a single solicitation and handled by one contract specialist working with the review and selection board.  Typically, this effort would have been duplicated 14 times over.  This procedure allowed the mining community to specifically propose research projects within a stated number of general research areas resulting in research projects more reflective of current needs as identified by the mining industry itself.  This methodology and use of BAAs will be further utilized for mining research projects in FY2014. While no specific dollar savings can be quantified by utilization of the BAA procurement approach, the manpower savings were significant. 
  Total Result


  • In FY-2013, the SAI Team identified a net savings of $4M by:  reducing the high cost of contractor personnel and overhead; enhanced market research (new vendors in the marketplace, price breaks based upon volume, different procurement vehicles available), increased competition, and stronger negotiations; reducing VTC support services; reducing training costs; minimizing travel expenses by holding meetings by utilizing web based tools as opposed to in-person travel to conferences and meetings; and changing business processes to storing publications electronically versus in a physical warehouse.  Examples of those savings include:
Program Action Result
Assistant Secretary for Administration (ASA) Cost savings of approximately $392,000 was due to lower contractor rates generating an estimated savings over the five-year life of the contract.  The contract is for processing background investigations and providing office support for personnel badging.


Food & Drug Administration (FDA) Cost savings in the amount of $177,878 for an Information Technology (IT) and Telecom Data Entry contract based upon the negotiated contract award. 


Health Resources Services Administration (HRSA) A contract modification was executed to delete training logistics and substituted it with in-house webinars resulted in a cost savings of $977,600.  Webinars are now handled internally by HRSA personnel.


Health Resources Services Administration An IT and Telecom-Telecommunications and Transmission contract for Warehousing & Distribution of HRSA Publications to the Public converted 800 pallets of publications stored in a warehouse to electronic documents now electronically stored  on the HRSA website.   The savings were a result of the business process moving from paper to electronic.  Additionally, HRSA personnel will now manage the on-line data and saved $991,595.


Office of Medical Hearings and Appeals (OMHA) Reduced a Video Tele-Conferencing support contract mid-year that resulted in a cost savings of $40,000.


Office of the National Coordinator for Health Information Technology (ONC) ONC awarded a new contract for executive and administrative support for the Senior Leadership Team by using an HHS Strategic Sourcing vehicle for temporary staffing that resulted in a cost savings of $624,093.




A renegotiation of contractor support rates for executive and administrative support realized a cost savings of $500,000.


  Total Result



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Planned Actions for Continued Improvement

Following the guidance from OFPP, the Department analyzed its FY2013 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 FY2013 and beyond.  The results from the FY2013 SAI efforts were:

  • A reduction in services that were duplicated across the Department.
  • An increase in the number, variety, and utilization of buying smarter and buying less which includes taking advantage of FSSI and HHS 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 and promote efficient spending.

The Department 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
  • increase Acquisition Workforce efficiencies by maintaining the capacity and increasing the capability of our acquisition workforce through training and development which continues to be a top priority in HHS.
  • 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. 
  • Standardized tools were developed for the purpose of improving processes used by the acquisition workforce; examples include guides and templates for Acquisition Forecast, Strategic Sourcing, Acquisition Strategies/Plans, Independent Government Cost Estimate (IGCE), Source Selection Evaluation, Contract Close-Out, Business Case (Enterprise or Government Wide Contracts), Justification and Approval (J&A).

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4. Way-Ahead

HHS Senior Officials and the Service Acquisition Initiative (SAI) Team 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 FY2014 inventory of service contracts and apply the best practices realized from the FY2013 results.

Dr. Angela Billups, Associate Deputy Assistant Secretary for Acquisition - SPE 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, serves on the working group to share best practices and lessons learned in the use of inventories as a management tool.

HHS FY 2013 Special Interest Functions

OMB Identified PSC Code Product Service Name Description FY 2013 Obligations (in Dollars)*
B505 Cost Benefit Analyses


D302 ADP Systems Development Services


D307 Automated Information System Svcs


D310 ADP Backup And Security Services


D314 ADP Acquisition Sup Svcs


R406 Policy Review/Development Services


R407 Program Evaluation Services


R408 Program Management/Support Services


R409 Program Review/Development Services


R413 Specifications Development Services


R414 Systems Engineering Services


R423 Intelligence Services


R425 Engineering And Technical Services


R497 Personal Services Contracts


R707 Mgt Svcs/Contract & Procurement Sup


HHS Special Interest Functions

OMB Identified PSC Code Product Service Name Description FY 2013 Obligations (in Dollars)*
B506 Study/Data - Other Than Scientific


B513 Study/Feasibility - Non-Contruct


B547 Study/Accounting/Financial Mgt


B553 Communications Studies


R418 Legal Services


R421 Technical Assistance


R701 Advertising Services


R702 Data Collection Services


R708 Public Relations Services


HHS Use of “Other” Services

OMB Identified PSC Code Product Service Name Description FY 2013 Obligations (in Dollars)*
B599 Other Special Studies And Analyses


D399 Other ADP & Telecommunications Svcs


R499 Other Professional Services


R699 Other Administrative Support Svcs


R799 Other Management Support Services


Grand Totals                                                      $5,724,978,022.46

Total Number of Actions:                             22,942

*Note:  The information in this document is based on FPDS Data pulled on November 26, 2013.

Attachment 1 – Page 1

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