cia oig audit independent contractors

8/17/2019 CIA OIG Audit Independent Contractors

1/39

;

\

b) 1)

b) 3) CIAAct

b) 3) NatSecAct

Approved for Release: 2016/03131 C06491273

SECRET NOFORN

CENTRAL INTELLIGENCE AGENCY

Office

of

l·nspector General

(U) REPORT OF UDIT

(l)) The Use of Independent Contractors

Report

No

. 201 0-0028-AS

EGAETUNOFOftN

Approved for Release : 2016/03/31 C06491273

22

June 2 12

Issue Date


2/39

649 7

3

Approved for Release: 2016/

03131

C06491273

SECR f1/NOFOAN

Table

of Contents

(U) EXECUTIVE SUMMARY ......................................................................................... 1

U) BACKGROUND ........................ ............................. ............ ....... ......... ................. 4

(U) Independent Contractors ............................................... ................................. 4 .

(U) Independent

Contractors Are

Used Extensively

Throughout

the CIA ........ 4

(U} AUDIT RESULTS AND RECOMMENDATIONS .................... .............. ............... 7

U//POUO) Contracting Practices WithinI (b)(3) CIAAct I

i o l a t e CIA

Regulation ...........................

.

..................................... 7

(U) Some Independent Contractors Are Performing Inherently .

Governmental

Functions

....... ............................................. ............................. 10

U/lfOl:JG} Indepe

ndent

Contractors Within l (b)(3) CIAAct

re Interviewing Applicants .. ........................................... 10

(U//FOl:JQ) Some Independent

Contractors

Utilized by

the

CounterTerrorism Center Are Performing a Supervisory Role ................. 12

(U) Price Analysis Is

Not

Adequately Documented ........................... ............. 1J

(GHNF}

Independent

Contractors in

_ _ (b)(3) CIAAct

Do

Not Provide

Services on

a Fee-f

or

a

sl<

Basas .............................................14

{U) Independent

Contractors

Begin

Work Without

a

Contract

........

.............. 16

(U) Objectives, Scope,

and

Methodology ......................................................Exhibit A

(U) Sample

of Independent Contractor

Proposal Review ............................

Exhibit

B

{U) Employee Bulletin 0012-07 ...................................

.................................

Exhibit

C

(U)

List of

Sample

Contracts

With Unauthorized

Commitments

....... ........Exhibit D

(U) Recommendations ....................................................................... ...........

Exhibit

E

(U) Audit

Team

Exhibit F

SECRETIINOFORN

Approved for Relea

se:

2016/03/31 C06491273


3/39

Approved for Release: 2016/03/3 C06491273

SECRETt/NOFORN

U) Report of Audit

U) The Use o Independent Contractors

U) EXECUTIVE SUMMARY

• Independent contractors are used

in

compliance with

applicable guidance.

• Independent contractor prices are fair

and

reasonable.

• Appropriate contract types are used

for

independent

contractor work. b) 3) CIAAct b) 3)

CIM

8 ~ W ) Independent contractors ICs) are self-employed individuals with

whom

the

CIA contracts

to

a[ ui rj specific services. ICs are not employees of the CIA. ln FY 2010,

the CIA

executed new

IC

contracts

and

task orders

valued

at

to

obtain

a

wide variety of services

i ~ c l u d i n g

worldwide operational assistance

NatSe

e_

ct ]translators, protective security services, CI Universl y-. l -tru .-c

o

r_s_ an1

research services. ICs are used hv all Directorates.

As

of31 July 201 1, the CTA utilized

the

services

~ ~ C s

b) 3) CIAAct

Chq.W) The CIA reli

es

heavily

on

ICs

to

accomplish important facets of its mission

and

should strive to protect the overall integrity of the IC program, while at the

same

time

procuring t

he

appropriate services at a fair

and rea

sonable price. During the audit, we

identified instances of noncompliance with federal laws

and CIA

regulation:

1) there

is

the appearance of an

m p _ l Q ~ _ p l o v e e

relationshill..between the

C I ~ and

National

Clandestine Service


4/39


SECRETHNOFORN

~ f N f ) CIA components should carefully scrutinize expenditures and ensure the

CIA is paying the best possible price for

IC

services. We found that contracting officers

and procurement oflicers

1

are not adequately documenting the price analysis and

negotiations used

to

substantiate the prices paid for IC services. Without evidentiary

documentation that demonstrates cost reasonableness, it is not known whether_the CIA

is

a

ing

more for

IC

services then

it

needs

to

a .

b) 1)

(b)(3) CIAAct

(b)(3)

NatSecAct

b) 5)

(CIItif ) Most of

the

IC contracts we reviewed contained an appropriate contract

type. However,

ICs

_

_ Jare-paid und•(b)(1 ).bor-

hour contract, the least preferred met oa

or

contracting with res resulting ir(b)(3)

NatSecAct

increased workload

on an

already overburdened contract stafl'and no ositive incentive

for the ICs

to

control costs and work efficiently. (b)(1 l

(b)(3) ClAAct/

(b)(3)

NatSecAct

b) 5) I

(U//FOUO) Many ICs, most of whom

work

for

the

NCS begin performance of

services without a valid contract

or

task order.

These

actions, referred

to

as unauthorized

commitments, are non-binding agreements made by representatives without the authority

to

enter

into contracts on behalfof the US Government. The CIA is under

no

obligation

to

fulfill the terms

of

an unauthorized commitment

and

has discretion whether

or

not to

ratify

the

unauthorized commitment with

the

contractor.L (b)(S) ]

[ that last-minute requirements· chal1enges with

implementing the

new

acquis ition system,C (b)(3) CIAAct: :J and a contract

staff

that

struggles to

keep

u with the volume

of

IC task orders contribute to res work n without

a valid contract.

(b)(3) CIAAct

(b){S)

1

U I / ~ ) A procurement officer

is

an officer with the authority to enter into and administer

pro

curement

actions for commercial type products, services, and JCs Generally, a procurement officer will handle commercial

purchases, IC contracts, and other finn-fixed-price type contracts, but can bandle other types of contracts if so

authorized. The main difference between a procurement officer and a contracting officer

is

the level ofeducation

and t r a i n i n g ~

~ : . .

l


5/39


SEGRETHNOFORN

b) 3) IMct

b) 5)

~ b ) 3 )

L b) 6) · · _ j

Acting Assistant Inspector General for Audit -

SE RETUNOFORN


3


6/39


S ~ C E T i i N O F O R N

U) BACKGROUND

U) Independent Contractors

(U//FOUe)

Independent contractors are

e l f ~ e m p l o y e

individuals with whom the

CIA

contracts

to

acquire specific services. ICs are not employees

of

the

CIA.

ICs

are

not incorporated, and contracts must be issued in the name

of

the

i

diYidital

wh.o_wi

provide the service. (b)(3) CIAAct

. ___________

he CIA may contract with ICs when (a) the services to

be performed are for

a

specific task over a fixed period for

a

specific fee or other legal

consideration; (b) the work to be done requires

a

unique skill or knowledge for its proper

performance;

and

c) the work does not have to be done pursuant to a regimented daily

time schedule. An IC arrangement should not be considered until use

of

existing CIA

staf f resources and industrial contracts--competitively awarded or so

le

sourced-prove

to be unavailable or inappropriate. CIA personnel

may

not supervise ICs or prescribe

how the agreed-upon services are to be performed. CIA personnel should, however,

review ICs'

work

products to ensure the ICs are satisfying the requirements

of

their

contracts.

(U//FeH-9) The Procurement Executive oversees the policies and regulations

g o v ~ r n i n g

ICs to ensure consistency among components, while giving due regard to

the components' differing needs. CIA policy, authorities, and responsibilities for the

administration ofiCs are

set

forth in Agency Regulation (AR) 40-8, independent

Contractors. Additionally, the Procurement Executive has established[ (b)(3) C I c t

(b)(3) CIAAcr l procedures and clauses for contracting for the services

of

ICs where such

procedures

and

clauses differ from what is normally required

of

he contracting officer

or procurement officer to contract for other non-personal services.

For

any issues not

addressed

C{b) 3

) C I c t CIA should apply normal contracting procedures.

U) Independent Contractors Are Used

Extensively Throughout the CtA (b)(3) CIAAct

Sj)

In FY 2010, the CIA executed[ lnew

JC

contracts and task orders'

valued

at

I

to

obtain a wide variety

of

services, as depicted

in

Figure

1.

4

(b)(3) CIAAct (b)(3) CJAAct

(b)(3) CIAAct

3

U / / ~

s

of

18

November

2010,

the l (b)(3) CIAAct h o w e d thatc tc contracts

and task

or

ders were awarded during FY

20

I

0.

To determine

our

population, we excluded0 zero-dollar contracts,

102

Office of the Director of National Intelligence contracts, and seven National Geospatial-lntelligence Agency contracts,

resulting

~

IC contracts and task orders with an effective date between 1 October 2009 and 30 September20

0.

(b)(3

CIAA

"Other" category shown in Figure 1 includes the following orocucement entities bv directOiate:

Nafional

Clandestine

SerVice:

0 lobal Deployment Center,l

---.:;

: : - -> - - :- - - , ; :

:-;;;;--:;o=o-;- . , . . . .- ;-----: := - -;;-;;

Information Operations Center; Dire it

orate

of cience and e e ~ Office..oLGlobalAc£ess ~ f T e c h n i c a l

Collection, Corporate Services Staff,[

Directorate

ofSuooon.-_Q al Communications Services, I (b)(3) CIAAct

'

Director s Area: Director's Executive- Support Staff, Information Management Services.

4

b)

1

(b)(3) NatSecAct

.SECRET//NOFORN

b) 1)

(b)(3) NatSecAct



7/39

1273


·

SE RETUNOFORN

'tet Figure 1

U)

N•w

IC

Contracts

aifd Task'

orden:

by

Procurement

En -

FY

2010

b) 1)

b) 3) CIAAct

b) 3) NatSecAct

{U//fetf )

Source: Auditor-developed from da

b) 3) CIAAct

18

November 2010. b) 3) CIAAct

b) 3) CIAAct .

ESi,q.ff) As of31 July 2011,f ] reported

_ j

1

cs

under contract

with the CIA.

5

The majority

ofiCs

can be grouped

by

the

si

milarity

of

ta

sks they

p e r f o n n

r ~ ~ ~

d

~ ~

~

•

•

•

b} 1)

b} 3) CIAAct

b) 3) NatSecAct

s

U//.Petfe)

Reliable historical information on

th

e number

of

ICs is not available due to limitations in the

eportin functionality and the way IC contracts and task orders were recorded and modified in the

ystem. eplacedL

in October 20 I

0

b) 3) CIAAct b) 3} CIAAct

5

SE RETHNOFORN



8/39

(b)(3) CIAAct

(b)(3) CI ct

.·


S E R E T U N O F O ~ b ~ CI ct

• The Open Source Center has approximately ICs that provide

translation services

of

print and audio and other translation-related

services, such as research and acquiring materials for translation.

• The Human Resources/Recruitment Centetf

]has

approximately

0 ICs that conduct phone and in-person interviews of applicants for

employment within the NCS s Professional Trainee and Clandestine

Service Trainee Program.

• The DS/Office

of

Security/Global Response Staffbas approximately

_

ICs that provide protecti

ve

services at designated locations

overseas. These ICs supplement - (b)(1)

c b 3 } N a

(b)(3

CIAA

• The DI has

approximatety0ICs

that conduct research and analysis

on

a s s i g n ~ d

topics and prepare research papers and presentations.

(b)(3) CIAA

• CIA University has approximately

~ c s

that provide instruction and

lectures, facilitate course segments, and create and provide support

materials.

i&J Figure 2

(b)(1)

(b)(3) CIAAct

(b}(3) NatSecAct

.

(U)

P e t c

~ n t

of o t a i : D o l l ~ r

V a l u e New

c o n l r a c t s a s k

o·rders

b

D i r e c t o r

~

. . . . . : . . . . : : . : : . : : : . . .

~

: . . .

~

- - - - - - - - - - -

(b)(1)

(b)(3) CIAAct

(b)(3) NatSecAct

U) Source: Auditor-developed based on information b)_3_)_CI_ c_

.___.

(b)(3) CIAActm 18 November 2010.

6

SECRETnNOF OftN


(b )(3

CI


9/39

1273


SECRETffNOFORN

(U) UDIT RESULTS AND RECOMMENDATIONS

lUJ •ouo Contractin Practices Within b) 3) CIMct

[_ Violate CIA Regulation

( C / J N 1 ~

b)

3

) CI c P1as a significant number of individuals

under contract as ICs that are being utili

ze

d or .are providing services in a manner that makes

them appear to be employees, which is in violation of CIA regulation and procedures.

AR 40-8, Independent ntractors 1 (b) 3) CIAAct state that the use

of

an IC contract

is not appropriate when the terms of the IC contract would create the appearance of an

employer-employee relationship between the

CIA

and the IC. There are significant risks to

the CIA associated with treating ICs as employees, including the potential liability for taxes

and employee benefits that would have b

ee

n withheld or paid had the individuals been

treated as employees and potential criticism that the

CIA

is circumventing its

Congressionally mandated personnel ceiling by utilizing ICs as

if

they were employees.

b) 1)

b) 3) CIAAct

b) 3) NatSecAct

CIMct

S / ~ W ) In assessing whether a contract with an IC creates the appearance

of

an

emplo er

e

mploy

ee

relationship, which is prohibited by AR 40-8, we reviewed the tenns

o f

ndependent Contractor Ordering Agreements (ICOAs) and task orders.

7

We considered the de

sc

ription

of

work to performed in the ICOA and task order, the

information recorded on the Requirement Form, the contract type used,

the IC Proposal Review Check Sheet,' the Business Review,

9

and interviews with the

b) 3) CIAAct

;=L== = = ==

=

= b) 3) CIAAct

(U) An I

COA

allows for

the issuance of fixed-priced services

task

orders during

a

tixed per

od

not exceedmg

three

yea

rs The bilateral

base

agreement will include all terms and condit ions for the specified services. All -

services

to be

furnished under the lCOA will be issued as task orders. All task orders are subject

to

the tenns and

c onditii>DS

oftbtiCOA._

b) 1)

b) 3) CIAAct

b) 3) NatSecAct

b) S)

(U//POUO) A Business Review

is

a contract document that contains the sp

ec

ifics

of

a procurement inc

ludin

g a

checklist

of

minimally required documentation/certifications per the

Fed era

l

Ac

quisition

Regul

ation

and

the

CIA

Contracting Manual; points

of contact;

a description

of

the procurement, market research, source justification, and

justifications for contract type

and

contract price; and any other special issues.

SECRETHNOFORN

Approved

for Release: 2016/03/31 C06491273

7


10/39

649 1

273

Approved for Release: 2016/03/

3

C06491273

SECRETHNOFORN

b) 1)

b) 3)

CIAAct

b) 3)

NatSecAct

contracting

or

procurement officer

and

the COTR. NCS performed a search

I

on individual IC names and we reviewed a sample ofcables that provided us with

examples .ofthe work activities carri

ed

out by the ICs.

b) 3) CIAAct

€/IUF) We found that, in most instances,f · -

c o n t r c t s are not established

for a soecific purpose

and

fee as required by AR 40-8. For example, task orders with

3

) CIAAct

Jcs

do not contain specific tasks to be performed by the IC. Instead, almost all

of

the task orders we reviewed merely stated tfbo)t(3( ')ci t il ired to provide operational

support'' to a specific station

or

base.

11

Th

c Requirement Fonn that NCS

area divisions, components, and centers send to to request the services of an b)

3

) CIA

IC provides only slightly more information than the task order regarding how the NCS

intends to use the IC. Based on discu si with the Chief, '

b) 3) CIAAc

I__ l

and

the

COTR

for _ NCS ofticers provide specific direction to ·

b

3

CIAA

the ICs when

they

arrive at the station

or

base . The failure to explicitly articulate in the ( ) )

contract the tasks to be performed by the ICs used by[ contributes to the

appearance of an employer-employee relationship. b) 3) CIAAct

b

3

C

c t ~

d d i t i o n a ~

b) 3) CIAAct ]the

p e

of

contract. used fo r

) _ Cs, labor-hour,

1s

the least preferred method of contractmg for·IC servtces and

provides no positive incentive to the TC for labor efficiency. Labor-hour contracts

provide for acquiring services on the basis of labor-hours at a specified hourly rate.

I b) 3)

CIAAct

Jrecommends firm-fixed-price completion contracts because they

bel

mat tam_an

ann'

-lenrrth

reJatio.n

sb

io betwe.en..t.heJ:IA_and t h e ~ C . .

b) 3)

CIAAct

b) 5)

The

iC

Proposal Review also indicates the appearance of an m p

employee relationship: (Exhibit B con

ta

ins the

TC

Proposal Review used for all

_j

b) 3) CIAA

ICs.) The IC Proposal Review contains 20 factors for the contracting officer or

procurement officer to consider when assessing whether the arrangement reflects an

employer-employee relationship. As stated in the IC Proposal Review Check Sheet,

a yes answer means that particular factor indicates the proposed IC contract or its

a ~ m i n i s t r a t i o n could lead towards the c ~ e a t i o n of an emfoi:er-emJ loyee relationship.

wtth the IC. The

one IC Proposal Revtew prepared for contracts shows nme

of the 20 factors marked yes, including that the IC will perform a

key

aspect of the

Agency's mission (#9), the IC will be precluded from having some control over hiring

arid paying

ofassi s

tants , ~ n d the contract would be

tor an on

going need (#8).

b) 3) CIAAct

jthere is not a total number of factors that, when

exceeded, automatically puts a proposed

TC

contract into the realm

of

forming an

b) 1)

b) 3)

CIAAct

b) 3) NatSecAct

SECRET JNOFOftN


8

b) 3)

CIAA


11/39

064912 73


SECRET NOFORN

employer-employee relationship,

we

believe that the nine factors, together with the

absence of specific tasks to be performed in the

1

e.ontr t

the

inability to use a firm-

fixed-price contract, and the fact that almost all1

Cs

are retired case officers

b) 3}

CIAA

performing functions similar to the duties they performed prior to retirement, create the

appearance that these ICs are employees.

emW)

Furthermore, since the formation

of

l

(b)(

3

) CIAAct

l

two

reports were

issued that expressed concerns that

the

use

of

Cs ~ J o augment the staff

workforce at stations and bases could be problematic and result in noncompliance with

CT regulations. A previous Office

of

Inspector General audit report

2

pointed

out

the

vulnerabilities for

the

CIA in using ICs contrary

to

CIA

regulations. A 2 1 special ·

review

13

performed by

a

CIA officer

at

the request

of

the then Executive Director resulted

in

a report which provided that, ··rhe Agency needs to face up to the fact that its practices

regarding the use

of

independent contractors are sometimes incompatible with its

policies. There are clusters of ICs that fail

to

meet the fundamental ·definition n

h=e - - - - ,

relev_ant Agency reJilllalLon.

AR 40-d

b) 3) CIAAct

(b)(5)

However,

as

currently utilized, mos{ Cs are providing services to NCS stations

and bases that appear

to

establish an employer-employee relationship that is in violation

of AR 40-8. b) 3) CIAAct ·

------------------------------------.

b) 3)

CIAAct

b) 3)

NatSecAct

(b)(5)

12

U) Reporto Audit: Contracting With Independent Contractors 1999-0039-AS, dated 27 July 200 I.

JJ

U)

Review

o

ndependent Contractors A Report or the Executive Director;

December200 l.

SE RETHNOFORN

.


9

b) 3)

CIMc


12/39

649 12

73


SECftETffNOFORN

U) Some Independent Contractors Are

Performing n ~ e r e n t l y Governmental Functions

(U//FOUO) Some ICs are engaged in inherently governmental functions. By

using ICs for these functions, the components have improperly transferred government

authorities in violation

of

federal laws and CIA regulations. The Federal Activities

Inventory Refonn Act

of

1

9

(FAIR Act)'

4

defines

an

activity as inherently governmental

when it is so intimately related to the public interest as to mandate performance by federal

employees. FAR, Subpart 7.5, Inherently Governmental Functions implements the

FATR

Act and provides soecific exam les ofprohibited functions.

15

AR 40-8, Independent

Contractors

- b) 3) CIAAct

tate that ICs cannot perform inherently governmental

functions; such functions should be reserved for government employees. These functions

include activities that require the exercise

of

discretion in applying governmental authority

or the use ofvalue judgments in making decisions for the government, such as collecting

or disbursing public funds, committing the government to binding contracts or

agreements,

or

decisions on n t i t l f : m e : n t ~ or hP:nefits. Des ite these policies, we found

two components- theC

b) 3} CIAAct

j and

b) 3) CIAAct

.__________

that are using ICs to perform inherently governmental functions.

~ { ~

~ R _ e n d e

n o t ~

J

b)

3

) CIAAct

b) 3} CIAAct

re Interviewing Applicants

b) 3} CIAAct

€ / ~ ~ F ) The Human Resources/Recruitment Cente

L

~ a s contracted with

D

es

as of April 2011 to, in part, conduct interviews

of

applicants for employment

within the NCS s

Professional Trainee PT) and Clandestine Service Trainee (CST)

Program,

6

which is not in compliance with applicable federal laws and

AR 40-8.

FAR,

Subpart 7.503, explicitly prohibits the use of o n t r ~ c t o r s for the selection or non·

selection

of

individuals for federal government employment, includin the interview in of

individuals for em loyment.j

b) 3) CIAAct

L

-

-

- b) S)

- - - -

14

(U)

Public L. 105-2

?0

(Oct. 19, 1998), 112 Stat. 2382,31 U.S.C.

§501

note.

15

(U) In September 20 II, after the completion

ofour

fieldwork, the Office

of

Management and Budget, Office

of Federal Procurement Policy published Office of Federal Procurement Policy (OFPP) Policy Letter 11-01,

P e ~ o r m a n o nherently Governmental nd Critical Functions. This Policy Letter, effective October

12

20 II,

provides Executive Departments and agencies guidance on managing the perfonnance

of

inherently governmental

and critical functions. The policy letter is intended to implement direction in the Presidential emorandum on

Government Contracting dated 4 March 2009, that requires OMB

to

clarify when governmental outsourcing for

services

is

and

is

not appropriate.

16

(Uifti6t16') The purpose of his program is to hire and train entry level Operations Officers, Collection

Management Officers, StaffOperations Officers, Special Operations

and

Program Officers, Collection Support

Officers,

and Program

Support Officers in support

of the CIA's mission

.

17

~ CIA Employee Bulletin 0012-07, Work That May N

ot

Be Peiformed

By

Contractors

a t ~ d

2 October 2007. Exhibit C contains the full text

ofthe

bulletin. In discussions with

OGC

officials during the

audit, they indicated that the guidance remains valid.

SECRET INOFORN

Approved for

Release:

2016/03/31 C06491273

10


13/39

Approved

or

Release:

2 1

_6/03/31 C06491273

SE RETHNOFORN

b) 1)

b) 3) CIAAct

b) 3) NatSecAct

b) S)

SE RETUNOFORN

Approved or Release: 2016/03131 C06491273

. 11


14/39

273


SECRET 7NOFORN

b) 1)

b) 3) CIAAct

b) 3) NatSecAct

b) 5)

b) 3) CIAAct

b) 3) NatSecAct

U/IFEU::fO)

Some lndependent Contractors

Utilized y the CounterTerrorism Center re

Performing a Supervisory Role

b)

3

)

CIAAct-

( S h t ~ F )

SomeO tcs

are performing supervisory responsibilities. FAR Subpart 7 5,

s p e c i ~ c a l f Y

identifies direction

and

control of federal employees as inherent ovemmental

funct10ns J_ b) 1 )

- - - - - - - - . . J

b) 3) CIAAct

b} 3) NatSecAct

22

~

The HBT (Headquarters Based Trainee) program prepares trainees to serve in the StaffOperations

Officer (SOO), Collection Management Officer - Specialized (CMO-S), and the Specialized Skills

Officer

b}{3) CIAAct

[

' ~ ( . ) s o . .

npositions.

b ) 3) NatSecAct

b 5 --

-

SECRETHNOFORN


2


15/39

1273


SECRETHNOFORN

b 1)

b) 3) CIAAct

b) 3) NatSecAct

b) S}

U) Price Analysis Is Not Adequately Documented

U/IfOUO)

Contracting officers and procurement officers are not adequately

documenting the price analysis and negotiations used to substantiate the fairness and

r e s o n b l e n e ~ s

of

he prices paid for IC services. Without such documentation, there is

no

eviqence that analysis is being performed and that the resulting prices are, in fact, fair

and

reasonable.

If

the analysis is not being performed, the CIA could be paying more for

IC services than it should.

I b) 3)

CIAAc

( U / / P - P O ~ u ~ o ~ )

L be process for negotiating IC contracts is

the same as that used to negotiate industrial contracts, and that contracting officers and

procurement officers shou

ld

conduct price analysis

in

determining fair and reasonable

prices and document the determination in the Business Review. The documentation

should

sho

w how a fair price for services was determined. focusin on the value

of

the

work to be performed under the contract.

b) 3) CIAAct

AR, .

Subpart 15.404-l b) state that

d o c u m e n t t i o n ~ m c

u e how contracting otlicers

CQnsidered rates established with other ICs for t

he

same

or

similar services. This section

of

the FAR also states that historical prices paid

by

the government

may be

used for price

determination purposes; however, historical prices must be a valid basis for comparison

. 13

SECRETt/NOFORN



16/39

64912

73

Approved or Release: 2016/03/31 C06491273

b} 3) CIAAct

SE RETifNOFORN

Sffl


17/39

Approved for Release: 2016/03/31 C06491273....

\

. /

CIAAct ·

){3)

NatSecAct

SECRETHNOFORN

b) 1)

Cf/Nn

lnd.Mendent _ o _ j ) ~ t < ? r s in the b) 1)

[ JDo Not b) 3) CIAAct

Provide

Services on a Fee-for-Task Basis b) 3) NatSecAct

E C / I N F ~

Independent Contractors supporting

o

rk

under a labor-hour contract rather than a flriii="fixed-pnce

c o m p : : ~ ~

~

__

__c_o-ntrac--(also known as fee-for-task contract). {b) 3)

CIA

fee-for-task contract when there is a simzle requireme_nt with a known end date and few or

no a n t i c i p ~ t e d

. c ~ a n g e s .

C b) 3) CIAAct ]a labor-hour contract should only

be used when t ts not poss Ole, at t e time o p acmg the contract, to estimate accurately

the extent or duration of the work or to anticipate total price with any reasonable degree

of

confidence. Because a labor-hour contract is based on the number oflabor hours incurred

at a specified hourly rate, which provides no positive incentive to the IC for cost control

Or labor efficiency,

25

it iS the )eaSt preferred method Of

COntracting

for rc ServiCeS.

(C/I+W

j

b){1)

b) 3)

CIAAct

b) 3) NatSecAct

b) 3)

CIAAct

b) 3)

CIAAct

b)

3

)

_ _ _

A

_ _ _____ JI

According to the Chief,[

~ b o r

h o u r contracts were selected for the

in 2008 because NCS contracting officials could not accurately

~ ~ ~ ~ ~ ~

estimate a fee-for-task price.

E C t ~ I ¥

b) 1)

b) 3) CIAAct

b){3) NatSecAct

The Chieq ]acknowledged that there is currently enough

~

_

b) 3) CJAAct ·

======

====

b) 1 )

__

b) 3) CIAAct

b) 3)

NatSecAct

25

(U) Under FAR, Subparts

16.60

I and I6.602, a labor-hour contract is a variation of the time-and-materials

contract, differing only in that materials are not supplied

by

the

co

ntractor. A time-and-materials

co

ntract pro

vi

des

no positive

profit

incentive to the contractor for cost control or labor efficiency. Therefore, appropriate government

surVeillance of contractor performance is required to give reaso·nable assurance that efficient

meth

ods and effective

cost

con

trols are being

used.

15

SI CRETl·lNOFORN



18/39

6491 273

b) 3) NatSecAct

b) 3) CI ct

Approved for Release: 2016/ /

3

C06491273

SECR T11NOFORN

historical data to accurately estimate the extent, duration, and anticipated costs

of IC{ =:]with a reasonable degree ofconfidence. ·Once

standardized fees are determined, each IC contract should be converted to a fee-for-task

contract. o n v e r t contracts to fee-for-task will reduce variability in the cost of

I nd will also reduce the administrative burden that currently

exists for budget officers, acquisition officers, and COTRs who have to estimate, track,

CIAActand verifY the n u ~ e r of hours worked by each IC across several rate categories.

NatSecAct

(U) Office o Management and Budget Memorandum, Improving

Government Acquisition M-09-25, July 29, 2009

U) The Office

of

Management and Budget OMB) recognized labor-hour

contracts as high-risk contracting vehicles that pose special risks of overspending

because they provide no direct incentive to the contractor for cost control. OMB

further cautioned that reports from the Government Accountability Office, agency

~ n s p e c t o r s

general, and agency management indicated that labor-hour contracts

are often used without an appropriate basis or sufficient management and

oversight to limit taxpayer risk. OMB advised agencies to begin taking actions to

reduce the use of high-risk contracts, including labor-hour contracts.

b) 1)

b) 3)

CI ct

b) 3) NatSecAct

(U) Independent Contractors Begin

Work Without a Contract

U//FOOO) ICs are initiating the perfonnance

of

services without a valid contract

or task order. These actions, referred to as unauthorized commitments, are non-binding

agreements made by representatives without the authority to enter into contracts on

behalfof the US Government. The CIA is under no obligation to fulfill the terms of an

unauthorized commitment and has discretion whether or not to ·ratify the unauthorized

commitment with the contractor.

S ~ C ~ E T i N O f O R N


16


19/39


SECRETHNOFORN

(U//FOUO) AR 40-4 (d),

Contracting Officer Authorities

nd

Responsibilities

(b)(3) CIAAct

I

Accordingly, component officers are not

authorized to direct

C

~ b ) 3 ) c f A . A

~ { o r m a n c e

without a properly awarded contract or task

order. Further, c ·coTRs are not authorized to issue changes or

make commitments (either formal or informal) that may involve a change in consideration,

scope (quantity, quality, delivery schedule), or legal aspects of a contract. Such actions are

the responsibility of and must be reterred

to

the contracting officer.

(b)(3)

CIAAct

SAC.Nf) We found that in

I

percent) contracts or task orders we

reviewed, contracting officers

and procurement officers had not awarded a contract or task

order before the ICs began providing services to the

C I A

(b)(3) CIAAct

(b)( 1)

(b)(3) CIAAct

(b)(3) NatSecAct

C I ~ W ]

ICs began working without a valid contract or task order because the

components requesting the ICs failed to approve the contract requests and funding, or the

contracting officers

or

procurement officers failed

to

award the contracts or task orders

before the ICs started work. In

c __=j

NCS contracts or task orders, the component

requesting IC services failed to a rove the contract requirement and certify the

. .

avai labili of funds via b

3 CIAAct re

uest form befo

re

the IC be an work.

28

(b)(3)

CIAAct

(b)(5)

(b)(3) CIAAct

fS/H'Wj

IL

= __]N

cs

contracts or task orders, the contracting officers and

procurement officers failed to award a contract or task order before the IC began

perfonning services. Contracting officers and procurement officers were delayed in

awarding contracts because the components did not give them sufficient time to award the

contracts

or task orders or because the contracting officers and procurement officers were

working through a backlog

of

existing contract actions.

29

L b)(3) CIAAct

(b)(3)

CJMct

(b)(5)

'

6

(U) FAR SubPart 16.5, Indefinite Delivery Contracts defines

a

\ask order contract as a contract for services that

does not procure or specify a

finn

quantity

of

services (other than a minimum or maximum quantity)

and

that

rrov ides for the issuance of rders

for

the

perfonnancc of asks during

the

period

of

he

con

tract.

7

(U//ffit:f )L o n t r a c t s were

for components

outside of he NCS.

Details

pontracts

are

contained

in ExhibiLD (b)(3) CIAAct-------:

[ (b)(3) CIAAct (b)(3) CIAAct

9

(U/I

I Otte)

t

l [ tracts, the contracting officer had less than five days to p r o p ~ award the

contract.

·Auditor

s

noted that milestones have not been established for the minimum time NCS

L (b )(3) CIMct

needs to

process

requests for

contracts;

we applied

five

days

in

the absence of speci

fie

guidance.

17

SEGRET NOFOR:N

pproved

for Release: 2016/03/31 C06491273


20/39


SECRETHNOFORN

~ ________ b) 3) CIAAct

(b)(S)

(b )(3) C IAAct

The CIA

s l

I how

s

the number ofNCS

contract actions increased by

55

percent from fiscal years 2008 to 20 I 0,

1

(b )(3) CIAAct

r--- _

b}(S}

_We acknowledge the increased workload;

however, ICs

should not

start

work

without

a

contract

and

a

task

order. ·

b) 1)

_ _

_ : _: : :: ______________ ___

b) 3) CIAAct

b) 3) NatSecAct

(b)(S)

(U

//FOUO) The practice of creating unauthorized commitments must cease.

AR 40-4 (b)(3) ClAAct

Individuals

who

create unauthorized commitments are liable

for

c ....p[

n-a-

ry ac

t. ..on_,and

could

incur personal liability. For the0 ontracts or task

orders

we identified as

having

unauthorized commitments,

the CIA does

not have

a

legal (b)(3) CIAAct

obligation to pay

the

TCs The contracting

officer s

subsequent authorization of the

contract does not resolve the unauthorized commitment.

n

accordance with the CCM

subpart

101.602-3(b),

b ) 3 )

CIAAct

~

h i e f

may

ratify unauthorized

commitments

subject

to

the

limitations

prescribed lnthe AR.

32

The Procurement Executive

should

ensure that

the

ratification process is

completed

for

the

O mauthorized

commitments

identified. In addition, NCS components must

ensure

that all requests for contractual

b) 1)

(b)(3) CIAAct

(b)(3) NatSecAct

b) 3)

CIAAct

l ~

The

Acquisition Statistical Summary For the Period I October 2008

to

30 September 2009

and the

Acquisition SummaiY..EPLLite.J .e.riod I October 2 9 to 3 September 2010

These

reports compare

acquisition activities recorded. ] for previous

and

current-year acquisition activity both in tenns of

dollars and contract actions.

32

(U) FAR, Subpart 1.602-3, states that ratification authority is vested in the head of he contracting activity, unless

a higher )evel official is designated by the agency. The F ~ pennits the delegation of ratification authority in

accordance with agency procedures, but in no case shall the ratification authority

be

delegated below the level ·of

chief of the contracting office. b )

3

) C

IAAct

18

SECRETHNOFOR



21/39

64912 73


S CRET11NOFORN

services are properly approved, certifications

of

funds are obtained, and contracts and

task orders are approved before ICs perform services.

.

(b)(3)

CIAAct

(b)(3) NatSecAct

(b)(5)

(b)(3) CIAAct

(b)(3)

NatSecAct

(b)( 5)

U / I F O U ~ CI ct ~ e r b a l authorizations are permitted

when urgent circumstances require

an

IC to begin work before a written contract can be

signed. Even under such

i r c u m s t a n c e v . . e r h a l a u t h o r i z a t i o n s . . a l o n e

do noL9ermit

components to direct lCs to start workl (b)(3) CIAAct

_j

the

contracting officer or procurement officer shall ensure that all appropriate_doc_umentatLon

and/or approvals have been received, and a verbal authorization from (b)(3)

CIA.f-ct

Chiefhas been granted. Also, the component must ( ~ 3 n ) v C P I ; { A act requirement and

certify the availability of funds as well as obtain th b)( ct

Chief

approval before

the IC can begin work (b)(3) CIAAct erbal authorizations need to

be reduced

to

a writtent c contract wtt m t ee wor

ay

s

of

the issuance

of

the

·verbal authorization to the

IC. I

- - - - - - - - - - -

(b)(3) CIAAct

(b)(5)

SECRETifNOFORN

19

I

Approved for Release: 2016/03/31 CD6491273

- - · - - -

- - - - - -


22/39

. .


SECRET NOFORN

b) 3) CIAAct

b) 5)

b} 3) CIMct

b) 5)

-

(U/ fOUO) Agency procedures, as contained n the CCM, subpart I01.602-3

Ratification

o

Unauthorized Commitments

state that only the contracting officers acting

within the scope of heir authority may enter into contracts on behalfof he Agency. b) 3) CIAAct

During the audit, we confirmed that for each

of

ther JIC contracts or task orders, the IC

started work before the contract or task order was signed by the cognizant contracting

officer or procurement officer, n effect creating an unauthorized commitment by those

managers who tasked the IC contractor to start work without a contract. However we

reco

gn

ize that

tb

F hiefs need to make their own independent judgment

regarding the appropriateness of these contracts or task orders and.have changed the

recommendation to acknowledge this authority.

b) 3) CIAAct

2

SECRETHt4 FORN



23/39

91 273


SECRETHNOFORN

Exhibit A

U) Objectives, Scope, and Methodology

(U)

The

objectives of this audit were to determine whether:

• Independent contractors are used in compliance with applicable

guidance.

• Independent contractor prices are fair and reasonable.

• Appropriate contract types are used for independent contractor

work.

(U//FOUO) The audit topic and objectives were selected during the Office of

Inspector General s annual planning process. The audit is responsive to the Intelligence

Community-wide focus on the use of contractors as well as to the government-wide

focus on the use ofhigh-risk contracts, such as labor-hour contracts.

(U//ffOUC)

The

scope

of

the audit included contracts for services

of

inde endent

contractors ICs initiated durin

FY

20 I0 as ca tured in the CIA

b) 3) CIAAct

excluding

no-fee contracts and contracts in support

of

other government agencies.

g i ~ W ) To accomplish our audit objectives, we:

b) 3)

CIAAct

• Selected a random statistical sample ofC::JIC contracts and task

orders initiated during FY 2010. As of 18 November 2010 there

wP. I

P I l IC contracts and task orders awarded during FY 20 I0 in

b) 3)

CIAAct

J To determine the population

b) 3

IM

from which to sample,

we

excluded

l

zero-dollar contracts, 102

Office ofthc Director ofNationallntelligence contractsL { Q @

j

L

b) 3)

l

The population b) 3) CIAAct

represents

[=

IC contracts and task orders with an effective date

CIAAct

between I October

2 9

and 30 September 2010. The sample size

was determined based on criteria established in the Government

Accountability Office/President s Council on Integrity and Efficiency

(GAO/PCIE) Financial Audit Manual. In selecting our sample,

we

used a confidence level of 90 percent; a tolerable error rate of

5 percent, and an expected deviation rate of 2 percent.

• Reviewed

and

summarized federal laws and regulations

and

CIA

regulations, policies, and procedures related to ICs. We incorporated

these laws, regulations, policies; and procedures into a checklist used

to review IC contract documentation

nd

interview contracting

officers, procurement officers, and contracting officer s technical

representatives (COTRs)

1

SECRETIINOFORN



24/39

649 2 73


3

C06491273

SECRETHNOFORN

·

• Conducted research, reviewed, and summarized previously issued CIA

Office of Inspector Genera] audit, invesfigatiop., and inspection reports';

b) 1)

OIG

reports

of

other federal agencies; and CIA internal reports related

b) 3)

CIAAct

b) 3) NatSecAct

to ICs.

• Searched for and reviewed selected cables from

b) 3) CIAAct

b) 3)

CIAAct

related to individuallCs to determine actual wor activtttes carrie

by

the ICs.

• Interviewed officers from the NC

b) 3) CIAAct I

[ DS/Office

of

Corporate Businesses/Support

Contractor Management Program Office, and Chief/Human

Resources/Recruitment Center

b) 3)

CI

AAct]

to

discuss audit results.

• ReviewedU ontracts and task orders to determine whether:

•

The

terms

of

he contract created the appearance of

an

emp

loyer-employee relationship. ·

• The IC performed an inherently governmental function.

•

The

prices paid for IC services were substantiated.

•

The

Associate Deputy Director/CIA approved contracts

over r those that would result in an IC being

paid over

I

i

n aggregate value per calendar year.

•

The

appropriate contract type was used.

• The contracts and task orders, and associated funding,

were properly authorized.

U)

We conducted this performance audit from December 2010 to June 2011 in

accordance with generally accepted government auditing standards. Those standards

require that we plan

and

perform the audit to obtain sufficient, appropriate evidence to

provide a reasonable basis for our findings and conclusions based on

our

audit objectives.

We believe that the evidence obtained provides a reasonable basis for our findings and

conclusions based

on

our audit objectives.

U) Comments

on

a draft

of

his report were provided by the Director

of

the National

Clandestine Service and the Procurement Executive and were considered in preparing the

final report.

2

SECRETh NOFORN


.


25/39

6

4

91273


S E C ~ f T # N O f O ~ N

Exhibit B

U) Sample of Independent Contractor Proposal Review

CLASSIFY ,\S"AP.PROPRlATE

lnifcpendc

nt

Coillr3ctor

r o p o ~ o l

Rc\"icw

I

(10/08)

N3n\c or}'fcc,oscd JC: Date;

Reque$ling:OITu:cr; Component:

Coritmct Numbtr m r e c ~

"'"

'c.nn."rn

'

OJii..,,;

Rcoucst Number:

IHs t\gcncy Jloliey not

to

o:nler into an TC cqntrnct.lhnt would crc:n

tc

a11 C ( J i p l o y e r - c m p l o y ~ rtbtioll,hip. "11ois form

p r o v l l l c ~

lho Conornctina OfficcJ's Tcchni,ca e s ~ l l l l i • - e (CqTR>. lhc ·Rcquating Officer, and the comP.oncnt t\pproving Ollicer

(Lc.thc p p r o v e r o f t h e f1mds) a me.vis

to

holpsumri1.iize :uid document a propOsed IC contrxt in lhe c o n o c . ~ 1 of

he

~ c t o r s

11ia1

indiQIO

ohc f11rmation of an cmployer..:mploycc rciationship. Tht purpoicof his form is

to

.preclude

the

1\gc:m:y from

entcnng into an

IC eon11"3ctlhot,lhrough

lhe contDclterms, ercalc:& I

he

oppc3tancc

of an c m p l o y c r - c m p l o ~ · c c

n:lationship.

If

he

ln1ern.11 Revenue Service or a coun were

to

determine that

on

t \ g c ac tll411)' an :\g,-ncy etnplo)·cc, Ih

Oc

Agency

c9uld·

f.1cc

liability lor l l . ~ c s a n p i O Y . c ~

b;cnclit

C0515.that would have been withheld

or

paid had

the

individua.l b« n.

eom:ctly cl:liJilied"Lt'indicatc

an

c m p l l J ) · c r ~ m p l o y c c relationship. ·No single faClor

is

delcnnin>livc In

an

·nsse.umenl nfwhetl>tr

n

worker

nn

-IC

or on

erns1loyec

..

Not>11 fnctolllarc weighed cqll411y.

·nocn:

~ r c :

noIn

IOJ;IIttumhcr o f " ' y • ~ " , w c r s t h a t , wh

en exceeded,"

4UlOmalically

·puiS

th

e

r o j » . ~ c d

IC contnct·into the

rcotm of an

cmpl

oycr:O..mployo:c

rctationahip.

Uetcnnil nlion

or.wo.rkcr'i .

sll"ltus

.

must take

into aecouilllhe overall

rc:latioi\Shlp of he

indhidual and lhc Agcney.

\ " y e s ~ answer means.that"p:>niwbrf•ctor indicates h ~ p r o p o s c d IC contractor ts"aclminl$tration could lead towards

the

en:ation.of an cmploycr-c:mploycc rclatioMhip with the IC.

T11c

more itans that arc

• n . ~ w c r c d "yes

; the more likely

It

would

be th,.lthc individual

would

be pcrecivcd 10 be on

empiO)

'cc, m

th

tr donn an IC. In rotno.cnses, 8Uch JS when lhe IO.nncrin

whi

.ch il iJ 10 he provided, could 11.-.ppropn>lely

modllled.

to

.clintlnatc e s • ~ n s w c r s The

co

mponent's CO will serve o s

on

a d v i s ~ in t

his

p r o c e ~

·me·Rcctuc:sting 0fficcr,·

th

c·

eomponcn

l

t\pp\"o'"ing

Ofliccr; ~ n d

the

CO"

f .

shall sign

th

e final version of his

form

>nd

prc,Ciu"llO the CO. The CO requires :alirull

hord-c

'

opy

ycrsion ofthis fonn piior

10

ll"lking any action

on

the IC procurcmont

request. (In

oclclition,

• soO-copy

must"

be l t ~ c l t c d

10

lhcc n:qucsl ifthc CO delctmincs

lhc

n:quin:mcn.t can

be

PfOIICJ" )'·Iillcd through·usc ofan IC.)

Tlu:

CO will mlkc >dctcrmin:uion ofwhcthcrthc

r o p o s ~ .

iflillcd through.an

IC

cont

rac

t, •-:ould lead 10 tloc creation ofan employer-employee n:lotion.ship with Ihe

n d i v i d ~ U I .

If

he

COdclcnninu th>l the

requirement oan be mel r ropcf y through on IC contract , lhe s gncd hard-copy

l ~ s

runn will be n:talnc f in

Ihe

con trac t

rile. If

the

CO d c t ~ r m i I < S thotlhc r u P , O s ~ d IC conlt:tel would crc:alc o.n crnj loyctdvicc

of.t

hc

llumon·Rcsourcc Recruitment Center

10

cngagc

the

individuol1111d

er tr:nns

other han as

on

IC

{e

.g conlr>Ct employee, re·hin:d annuil3nl,

etc

.). The co·s \ c q u i ~ i t i o n Center Chief will

be

ll>e orbiter

of

any disagreement rc:gardins·lhc CO s dctcnnin:ilion.

Regardless of.lhc terms-

of

aniC eontroCI, impru110r eontracl

odmi

ni"rntion lc>d to

the crc:otio ' of

>n employer-

employ

n:lalionshipwith an IC. COTR.s ·.re cncour.>gcd to"·rc,;cw

a

copy flhis.fonn periodically

duoif18

administration

of

lho.elmlrJCIIO hell)

.ensure

tHat

employer-employeerel3tioMhip is not cre3tcd.lnadvcncnlly. CO"R.s who h ~ v c ~ n y

questioN regarding proper odminislf3lion of heir IC


26/39

6 49127 3

Approved for Release: 2016/0

3/31

C06491273

ECRETHNOfiiORN

CMSSlFY AS AP.PROPRJA:rE. _ _

F.1ctor

Amwer

' Yes,

No,

N/A

I.

Will the.,.\gcncy

l ;lve th

·c

right [Q.detennine ltow the

worl;

e s u l t ~

~ r c to be,

: ~ c h i e v c d ?

2. Will the IC receive training·

or instruction to peifotm

s c r l i c ~ s

a-pariicular

m31UlCf.

(orbor than m:tnda Ol)'_soculjt}•

nd counterintelligence

r a i i \ i n ~

c:dled·for in

tht

contracl)'l

'

3,

WiU

tho Agoncy directly

pay the b u ~ i n ~ ~ s and/or

l r ~ v e l

e ~ > ; p e F U e 9 ' ?

4. Will the IC be able to

provide the 5CIVicc without a

8ignificont financial inve11tmtn t

in lllo f.,cilitics.ils"d to

pcrtonn

the

servi


27/39

6 49

273

Approved

for

Release: 2016/03/31 C06491273

SECftET1tNOFOFtN

CLASSIP.Y AS

APPROPRIATE

F ~ ~ ; t o r ·Arunver F . . ~ p l 3 n a l o r y

GommcmtS

Y.cs,

N.o,

N/A

6. Wilt the Aaency provide.lhe

• Providing an IC

r ~ l s , m a t e r i ~ l . ~ n d ~ q u i p m c n 1 n e c t ~ S O J r y

to

perfof111

tool$, m ; ~ t o r i . ~ l . or cquipiTienl

.tl)cir

t a ~ k s · i s one

ofthc:•rnctors.th?l indicalc·:m

c m p l o y c r ~ p l u y

(includi11g

n

vehicle) needed

io

rclationiihip.

perfoJlll ihe serviet?

• To the

e.'(tcnt

con&islenr wilh Agcn;y security n:qUiremeni:J,.ICs should

be ~ p o m i l c for providing

tho:

loolt, material, and cquipmenl c c c s s ~ r y to

perform their ser:vices.

•

To

the extent these iicms (including·vehiele.-.) are provided, the

~ J r a n g e i n e n U e a n s - t o w ~ r d c r e a l i n g e m p l o y c r ~ m p l o y e e relalionsltip. To

t h . . ,

t e n U h e s c

i l t : m R a n ~ not provided, the.amngemenlle:ms Iowan the

individu:tl being ao JC ioslcnd of nn employee.

1 •

Willthe.IC be paid

on

an • Pilying an lC·on an hourly,

wc:i:IUy

or.d:tily r::JIC

is

one of t:ac·rors.that

hourly, ~ i l y , or-weekly rate? indicarc an crnpiC?ycc'cmployer rclotionsllip.

• rc sc:rvicrs shoUld

be:

obtained under a fum-ftxed price·delivery colllracl,

-under wbich o n l r . l e l ( ' ~ y

c n t

is dctcrmirn:d so

lely

by ~ p l e t i o n or non·

completion ofllie task.

8.

I. llhisa c o ~ l r o ~ t te JeWai?' · ·Having an ongoing need for IC

ro

·r an ind.cfinilc'amount

lime

is una

of

.lhc foc1001

lltDI

indicate 3R 'mplop:r-cmP.Ioycc c l a t i a n ~ h i p .

•.

An

IC rcqciircmcnr should

be

f o r ~

f i . : ~ > d

~ n o d

of

ime,

.

1111hcr

th411

an

'indcfinitc·time

os

coulil be

i n d i o ; ~

ted by renew,ls .

• Rcncw3l$ of IC c:onrrocts ~ h o u l d be avoided.

9 Will the TC pcrform a key • lfnving.nn.JC pcrforming n key a'JlCCI of Ihe Agency's

i ~ s i o n iA

one of he

~ ~ p e e l of-the Ag.:T\Gy's r ~ c l o r s ihat.

indic31e

.an emplnycr-employec.relationship.

mission?

• Inherently govcmmcnlal functions (:alisltcl

~ Y .

FAR Sobpar17.S) cannot

be provid.:il by

JCs

.

LO WilllheJC.have to·follow

- ? ~ t t i n g houl l of worl one of·rhc factors that indicate an • ' 1 p l o y .. -

htiurs

of

work sc1by

l ~ c

employe' tcl"3lionship,

Agency?

•

An

1 ~ ,

ns

:o b l i s j n c ~ 5 p e n o n , r c r ~ p o n s i b l c

t9r

dctcm1ining his or her own

1

) 9un>

of

work.

(b )(3) C AAct

I I

Will

lhc IC receive work •

111

r: manner in wfuch :m

.tC

reeavcs work

: ~ S s c g n m c n r s 1S

one

of

1hc f.1c1or.;

~ ~ ~ i g n m c n t s or

direction nn·a rhnl inllic.alc an employer-employee c b l i o n ~ h i p

day-to-d3y

baRis?

• 11ic·contract srnlomont ofwori; should

be

the source

of

he IC' s work

a s s i g n m e n t ~ .

• The statemi:ut of work•should lie:

Wriuen

in such a : ~ 10 clearly

oullinc t h c . , r c : ~ . ~ d to f l ; c l i l d ~ the nepd for,giVi.ng work l s ~ i 8 J 1 m c n t s

on a dav-to-d:Jv basi•:

12. Will the ICprovide Re·quiril1g thai a ~ ~ c c must t;e· r o v i d ~ ' « ~ > n o l l y • o n c

of

he faclors t h ~ t

~ c r v i c c ~

111'11·n>u•l be rcndcn:d

ind.ic3to.an c:niploycr-cmpioycc:-relarion5hip: ·

pc:r.;on31Jv'?

l3.

\Viii tbc JC be precluded

P.c-ecluding.an·IC from

ha"'ing

some control over hiring

n d - p a y i n g . o f

from having o m ~ conrro .over

O I S S i s b ~ l s is one

of

Ihe factors thai indicate an

e m p l o y e r - e m p l o y ~ e

hinhg and paying of ~ s i s t a n t s ?

rclationRhij>. . .

l4 . W i l l l h e ~ I C : w o r J C ; f u U · • t i m e

·li.wing·.an IC

work:

fuil'lirne

i5 o n ~ of

he faclors

lhnt i n d i c ~ l e

employer·

for the

g ~ Y

U11dr:r this

cmpl oyee.rel t i o n s h i ' p .

contrnet? • Lc:Vcl of elT

on

C()nlraclli

t h ~ t


28/39

Approved or Release: 2016/03/

3

C06491273

S£ RETNNOFORN

CLASSIFY

A:S AP.PROPRJA'f.E

_

F:aclor Answer

fu;

pi

anotr11y Comments

Y c ~

No,

N/A

15: Will the -IC be 11rovided •

.

roviCJin& an IC eriiployc:e·typc: benefits is one of tht faclors I M i n d i c . : ~ l e an

e m p l o y c e · t ~ p c ; benefit&,

w e ~

: 1 ~

cmployar-cmployce:n:lillionship.

insurance, a p c n ~ i o n plan,

•ll1e;provi.Sion of.employce·lype' bc:ncfits wcigh r vecy heavily towards

vacation

~ · ; onick

P.ay?'

creating'3 m p l o y e r - ~ : m p l o y e e .mationship.

• I n . ~ u r ~ n c ~ (lifc

.o

r.mcdicaf) should

be:

c o r u ~ i d c r c d I C ~ only_when the IC

ilo.cunicnLfthat & he.

has

o'poiicy th:ill'{au,ld not

proviC from making"

a loss from providing

~ r v i c c s is

one of he factors t h ~ t indicate an 1:1nployc:r-

profi 1or st.i.ffcring a. oss fir;lm

e m p l o y ~ rel3tionship,

,providing. (oiher than

• Pn:clu.ding·an t ~ · f r o m halfing d i ~ c n : t i q n OV =f CO$t m a n a g c : m ~ u c h a•

the ha ie i ~ i - v i c c fcc)?

by .providing cquipmci'll and fiicilities·

anCI

reimbursing travel or

u s i n ~ s

c:'\pcmcs, also pn:cl udc.• an Cl fm111 mllking a profi t or suO


29/39

6

491273

Approved for

Re

lease: 2016/03/31 C06491273

SECRETHNOFORN

Exhibit C

(U) Employee B u l l ~ t i n 0012-07

EMPLOYEE ~ ) B U L L E T I N ~

0PR:

OGe:EB N.UMBER:·0012-07

2

O ~ t o b e r : 2 o o 7 ·

··W:O:RK

T.Hk

T

MA

¥

.-

N.

OT BE

·

PERFOR-MED

'BY :CON.I RAGTOR·s .

1. { : U / 'Becal:lse 0Go of.ten

receives

quest' 'ions

·a

bout; whether a

c o n t c a c t o r ~ e g a l ' l y . ma)r ·p.

e r

:

for:iJI _a· pact:

'ict.ifiu:' .activ. i ty '.on . ·behal:f o,f

the CIA,

OGC

i s r>el:ssu

i'ng

·.-the: foilow'i119 ·

su

..-

l e t in

to .expla:

in th i s

i·ss\le, t 'o. ~ e:

p:l ·

·emplo.y,ees: arfc:.l n ~ · r a c t o

J ; . s

. .fl.'l thoug:n ·the wo,t:'k

tha t

a cont·cac.tr may perfocm :l's

·al\"C YS

.restt: .fcted qy the - ter:ms of his

or. her € o n t r a c ~ , tQere. are c ~ ; i _ ~ t ~ a i r ; ~ ~ ) . i h c t ; i o n s kmowrl' as· h e r e n t l y

governmental ftmct:

ions"

.tha t: •fede·r-al '

•l

·aw· _gener-al-ly. prohibits

the

CIA. from out sou_rc): ;.9. .

2'. -Who

i s

a

Cont·nactor

.? r ~ . p u r : p o s e s . of;

t h i s

Bullet in .t he: ·te.rm "to.11tr,a-ctor" refers tO:· an independent

or

i nd1.4.

s t r i a l

eontr.actor . An . .indeP.enGlent. c o n t

r ~ c t c ; > r

·

:f

.s a

se i

r.:-empfoyeci'.•·inp:ivJ'dua- ··.with w h ~ i r i t h { CIA

'entt rs,

·into a

contz;ac

.t .

to p r o ~ i d e

s P . , e c i f

i ~ ~ ~ O J i c e s

f:a

d ie

. C·IA· .

Ap ,

industr . ial cori tcactor

;

is

a

cbrporat ii:>ri

·

or.

oth

'e-r.

reiated

eiit:i.ty

wftn which th e. CJ::A ·ent ec-s. :fm:o .a· simflar• -eont·r.Bct; and t:he'i:-r

emplroyees. · ·

3 .

'( / · ; ~ ·ttJhb.·•'i s· ·not a: Contl

fec

. lor'?'· Th':i:s .

Bu

;r·l;etdn .tloe·s ...no.t

apply

to

CIA

c a i i t r a c ~ ' E i m ~ . l o y e e s .. For purposes of

.the

fede

-r.

a l

Ja \oJ discussed n 't h i s Sul'J.:e't in ·8 C61it·

r 'act

.emp.loy;ee :i ·s an

einpioYee o f t' he < : > ~ w l i o i apeo'i:nted ..fu·r :a :1- irrt'it:ed te ·zi..m·,.

during he IBY• Pe ·t:fQ:t:'Rl : ~ h ~ ~ ~ m e

fl:.lneti'0ns

-··aJ?.- ·a ;s:t.a·ff

·employee·

. Thi:s

Bi h-l'et·

in,

wses:·t·J:l:e; t e r m · ' · ~ e l l ) p i ~ y e ~ e . .to

·refer

.to

ciA

s ta·.ff and

cont ::

=kt:t'

·;em

plq.yees;.

4•

U / I ~ What i-s.

P.t:'ohibtte

.d?.' T-

h.e

.Fel fera':i:. .P;cguis i

R:eg1:1lation" · ' ~ f ' A R ' ~ ~ 'wh:ic h. i: t '

the

p l e x · o ~ : r\:ife3: t h a t

o : v e . r . n ~ · gover'i'iment : c 6 n t ; r

a c t i n g

·p·r.

·9hi'bfts.' ·a,

qencie:

s, f·rom

eori

tracJ;

ir:t.9 out · ~ ' i n h e r e n t - l y .

_ g o v ~ t r . u n e n t · a l .

'

func:tions .

~ ~ ~

48

·c .

F. R.

Exhibit C is UNCLASSIFIED//AIW -

1

SECRETHNOFORN



30/39


3

C06491273

SEGRETHNOFORN

7.

50 3. The purpos;e .l?eh ii:ld

t h i s

.t:' lle i s to ·preven t t he U.s.

Government from

· improper ly t ra

-

nsfer r ing

i t s

au thor i ty to

c


31/39


SEGAETNNOFORN

b) 3) CIAAct

SECRET NOFORN



32/39

64

1273


SECRETHNOFORN

b) 3) CIAAct

'

4

S CRETHNOFORN


3

C06491273

(


33/39


SECRETfi'NOFORN

(U) List of Sample Contracts With

Unauthorized Commitments

CS NFt

National Clandestine Service fNCS) Contracts

b) 1)

(b)(3) CIAAct

(b)(3) NatSecAct

(U) Source: uditor-developed from data in (b)(3) CIAAct

_

1

SECRFiTUNOFORN

Approved for Release:

2 0 ~ 6 0 3 3 1

C06491273

Exh'ibit D


34/39

.

b) 1)

b) 3) CIAAct

b) 3) NatSecAct


7

5EGRET fNOFORIQ

SECRETUNOfORN



35/39

2

73

/

Approved for Release: 2016/03/31 C06491 273

SECRET11NOFORN

(b (1)

(b)(3) CIAAct

(b)(3) NatSecAct

fSn NF) Non-NCS Contracts

/

Independent

Contract Number

Procurement Unit

Price Contractor

S t a r t W o

(b)( 1)

(b)(3) CIAAct

b 3) NatSecAct

Total

o n

~

N

S

~

·1

Contracts: b) 3)

Grand Tot

f' -

Contracts:

(b)(1)

(b)(3) NatSecAct

(b)(3)

CIAAct

b) 3) NatSecAct----

3

SECRETHNOFORN

Approved for Release: 2016/03 31 C06491273

Date of

Days

Contract

Award

Late


36/39

.

27

3


73

SEGRETr¥NOFORN

Exhibit E

U) Recommendations

b) 3)

CIAAct ..

b) 3) NatSecAct

b) S)

b) 3) CIAAct

b) 3) NatSecAct

b) 3) CIAAct

b) 3) NatSecAct

b) 1)

b) 3)

ClAAct

b) 3) NatSecAct

b) 1)

b) 3) CIAAct

b) 3) NatSecAct

Exhibit E is C Q N F I B E N T b l c U I N P O ~ N

SEGRETJINOFORN


1 C06491 273


37/39

-

6

4912

73


31

C06491273

SE RETHNOFORN

b) 3) CIAAcl

b) 3) NatSecAct

5)

U) The status

of

significant recommendations will e included in

the

Inspector

General s semiannuaJ

reports

to the Director,

Central

Intelligence Agency.

2

SE RETtfNOPfORN

Approved for Release: 2016/03/31 C06491 273


38/39

-


Sf CRETHNOFORN

·

Exhibit F

(U) Audit Team

This

audit

report

was

prepared

by

theI

(b)(3)

CIAAct

Audit

Staff,

Office

of

In

spector General.

-----

b) 1)

(

(3)

CIAAct

(b)(3) NatSecAct

Exhibit F Is CONFI9ENTIAU/N8Fe,._N

8ECRET//NOFORN

Approved or Release: 2016/03/31 C06491273


39/39

73


SECRETffNOFORN

cia oig audit independent contractors

Documents