DOCUMENT RESUME

00573 - A05S0812J

Improvement and New Legislation Needed in AID's Contracting forConsultants and Advisors. ID-76-82; B-132961. December 27, 1976.Released January 14, 1977. 23 pp. + 2 appendices.

Report to Sen. Daniel K. Inouye, Chairman, Senate Committee onAppropriations: Foreian Operatioas Subcommittee; by Elmer B.Staats, Comptroller General.

Issue Area: International Economic and Military Programs (600);Personnel Management and CopensatA.on (300);7,ederalProcurement of Goods and Services (1900).

Contact: International Div.Budget Functior: International Affairs: Foreign Economic and

Financial Assistance (151).Organization Concerned: Department of State; Agency for

International Development.Congressional Relevance: Senate Committee on Appropriations:

Foreign Operations Subcommittee.Authority: Foreign Assistance kct of 1961, ec. 601. Foreign

Assistance Act of 1962, sec. 301.

The Agency for International Develcpment (AID) obtainsconsultant and advisory services to carry out foreign assistanceprograms. Findings/Conclusions: AID-s management informationsystem did not readily identify the total dollar value ofpersopal services ctracts awarded during fiscal year 1975, Lutavailible data indicate that the value of such contracts wasabout $1.5 million. Consultants and experts emplcyed on anintermittent basis accounted for another $1.1 million. AID hasspecial authority to use personal services contracts whentechnical day-to-day supervision is carried out by the hostgovernment's officials or when the host government does not wishto contract directly with a foreign technician. In severalinstances, the Agency has not observed Civil Service rules withregard to the employment of itermittent consultants andexperts. Retired civilian employees serving as experts orconsultants are exempted from laws governing the simultaneousreceipts of compelsaticn and retirement benefits.Recommendations: The Administrator of AID should: developprocedures so that the limited authority of AID to awardpersonal services contracts is not exceeded; require that, inselecting personal services contractors, more than one potentialcontractor is interviewed; and in negotiating compensation ratesfor personal services contracts, the rate is set on the basis ofthe job requirements rather than on the consultant's earningshistory. (RBS}

too_ ^.<t en\ t1;n 2s" 'm191oil~ ~2~! RELEASEDREPORT TO TIlE SUBCOMMITTEE / YON FOREIGN OPERATIONSCOMMITTEE ON APPROPRIA1 TIONS

... BY THE COMPTROLLER GEN ERALOF' THE UNITED STATES

nmprovements And New LegislationNeeded In AID's Contracting ForConsultants Arid AdvisorsAgency for International Development

The Agency for International Developmentspends about $2.7 million a year for personalservice contracts and the intermittent employ-ment of consultants and advisors.

GAO's study disclosed several opportunitiesfor improving the administration of the pro-gram, including the need to amend theauthorizing legislation to eliminate the simul-taneous receipt of compensation and retiredpay or annuities.

ID-76-82 l-_ I " 1 9 7

COMPTROLLER I[ NI;RAL OP THE UNITED STANES

WAIOTON, D.C. U

B-132961

The Honorable Daniel . InouyeChairman, Subcommittee on Foreign OperationsCommittee on AppropriationsUnited States Senate

Dear Mr. Chairman:

In response to your Apvil 17, 1975, request that we re-

view how the Agency for International Development uses pri-

vate and voluntary organizations, colleges and universities,and outside consultants and advisors to carry out foreign

assistance programs, this report describes the various ar-

rangements the Agency uses to obtain consultant and advisory

services. Two reports were issued on May 5, 1976, concerning

the other two parts of your request.

In accordance with your wishes, we have not obtainedwritten comments from the Agency. We did, however, discuss

our findings with Agency officials and considered their com-

ments in preparing the report.

During our review we discussed with your Subcommittee

the Agency's unnecessary exemption which permits Federal re-

tirees intermittently employed as experts or consultants to

simultaneously receive both their fees and retirement 4nnuity

without the reduction which would be required if they were

intermittently employed by another Federal agency. Our re-

port recommends that to permanently establish comparabilitybetween intermittent employees of the Agency and other Federal

agencies the Congress should amend section 626(b) of the For-

eign Assistance Act of 1961 in order to remove the exemption

from the laws governing the simultaneous receipt of compen-

sation and Government retired pay or annuities which is con-

tained therein.

This report contains several recommendations to the

Agency Administrator concerning improvements needed in var-

ious areas of management. As your office requested, this

report will be available for general distribution after it

has been received by your Subcommittee. As you know, sec-

tion 236 of the Legislative Reorganization Act of 1970 re-

quires the head of a Federal agency to submit a written

statement on actions taken on our recommendations to the

B-132961

House and Senate Committees on Government Operations within

60 days and to the House and Senate Committees on Appropria-tions with the Agency's first request for appropriations mademore than 60 days after the date of the report. Release of

t'.e report will activate section 236.

Sincerly yours

Comptroller Generalof the United States

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Contents?age

DIGEST i

CHAPTER

1 INTRODUCTION 1Why AID uses outside consultants and

advisors 1Management information system 3Scope of review 3

2 CONTRACTING WITH INDIVIDUALS FOR PERSONALSERVICES 5

Background of AID's personal servicescontracting authority 5

Contractor compensation rates 8Contractor selection procedures 9'3pportunities for wider distribution

of contractors' reports 10Conclusions 11Recommendations 12

3 INTERMITTENT EMPLOYMENT OF EXPERTS ANDCONSULTANTS 13

Whlat is an intermittent expert or con-sultant? 14

AID policy on intermittent experts andconsultants 15

Use of intermittent experts and consul-tants 16Selection of experts and consultants 16Use of experts and consultants 18

Use of retired Federal employees 19Pay rates for experts and consultants 20Management controls on the use of inter-

mittent employees 21Conclusions 22Recommendation to the Congress 23

APPENDIX

I Excerpt from Senate hearings, before a sub-committee of the Committee on Appropria-tions, on foreign assistance and relatedprograms' appropriations, fiscal year 1976,April 17, 1975 24

APPENDIX Page

II Suggested revision to section 626(b)of the Foreig.l Assistance Act of 1961 26

ABBREVIATIONS

AID Agency fo- International Development

GAO General Accounting Office

ICA International Cooperation Administration

COMPTROLLER GENERAL'S IMPROVEMENTS AND NEW LEGISLATIONREPORT TO THE SUBCOMMITTEE NEEDED IN AID'S CONTRACTING FOPON FOREIGN OPERATIONS CONSULTANTS AND ADVISORSCOMMITTEE ON APPROPRIATIONS Agency for International

Development

D I G E S T

The Foreign Assistance Act states that theAgency for International Development shoulduse the professional and technical servicesof private nterprises to the extent practic-able in carrying out its purposes. For manyyears the gency has done so. Especially af-ter 1972, its management philosophy has beento use consultants and advisors even more ex-tensively. (See pp. 1 to 3.)

The Agency's management information systemwas not designed to provide data on thetotal number or dollar volume of contractsawarded for consultant or advisory services;however, a new system s being installedwhich should provide such data for futurefiscal years. The best data currently avail-able for fiscal year 1975 indicates the fol-lowing kinds of expenditures (see p. 5):

(millions)

-- Personal services contracts $1.6--Consultants and experts em-ployed on an intermittentbasis 1.1

The Agency has special authority to usepersonal services contracts, but the au-thority is limited to obtaining assistancefor host governments when (1) technical day-to-day supervision is carried out by thehost government's officials and (2) the hostgovernment does not wish to contract directlywith a foreign technician and/or the technicianfeels more secure with a U.S. Government con-tract. (See pp. 5 to 7.)

The rules governing the employment of inter-mittent consultants and experts are clearlystated by the Civil Service Commission, but

TJAbej. Upon removal, the reportcover date should be noteJ hereon. i ID-76-82

the Agency has not observed these rules inseveral cases. (See pp. 13 to 18.)

Retired civilian employees serving as ex-perts or consultants with the Agency are ex-empted--a policy instituted under the Mar-shall Plan--from the laws governing the si-multaneous receipt of compensation and e-tirement benefits, which is commonly referredto as "double dipping." As a result, theyreceive an advantage they would not enjoyunder the same circumstances at another Gov-ernment agency.

GAO believes that because of changes in theForeign Assistance Program such exemption isno longer necessary and that the Congressshould amend section 626(b) of the ForeignAssistance Act to remove the provision whichexempts the Agency from laws governing thesimultaneous receipt of compensation andGovernment retired pay or annuities. (Seepp. 19 and 20.) Suggested legislativelanguage is in appendix Ii.

RECOMMENDATIONS TO THEAGENCY ADMINISTRATOR

GAO previously recommended in its report"Stengthening and Using Universities as aResource for Developing Countries" (ID-76-57), May 5, 1976, that all potential sourcesbe considered fully before awarding single-source contracts. Projects should be suffi-ciently planned in advance so that contract-ing officers would have an opportunity tosolicit proposals from other organizationswhich may be capable of fulfilling the re-quirement. The Agency Administrator shouldalso:

--Develop procedures so that the limited au-thority of AID t award personal servicescontracts is not exceeded.

-- Require that, to the extent possible inselecting personal services contractors,more than one potential contractor be

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interviewed and that such information bemade a part of the contract record.

-- Require that in negotiating compensationrates for personal services contractsevery effort be made to set the rate onthe basis of the job requirements ratherthan on the consultant's earnings history.

-- Insure that reports resulting from personalservices contracts which may have broad ap-plication be adequately disseminated, in-cluding providing a copy to the Agency'sReference Center.

GAO informally discussed the findings withAID officials and co. ridered their commentsin preparing this re rt. They agreed withthe substance of the report.

Tear Shet

CHAPTER 1

INTRODUCTION

On April 17, 1975, the Chairman, Subcommittee on ForeignOperations, Committee o Appropriations, United States Senate,asked that we review and report on the Agency for Interna-tional Development's (AID's) use of private consultants andadvisors. During subsequent meetings with the Subcommittee,particular interest was shown regarding the dollar volume ofcontracts with consultants and advisors over a period of yearsand various other aspects of contracting.

WHY AID USES OUTSIDECONSULTANTS AND ADVISORS

The Foreign Assistance Act of 1961, as amended, and theimplementing administrative regulation state that AID shoulduse contract professional and technical services from privateenterprise to the fullest extent practicable. Section 601of the 1961 act stated, in part:

"ENCOURAGEMENT OF FREE ENTERPRISE AND PRIVATEPARTICIPATION. - (a) The Congress of the UnitedStates recognizes the vital role of free enter-prise in achieving rising levels of productionand standards of living essential to economicprogress and development. Accordingly, it isdeclared to be the poLicy of the United States* * * to encourage the contribution of UnitedStates enterprise toward economic strength ofless developed friendly countries, through* * * private participation in programs carriedout under this Act (including the use of privatetrade channels to the maximum extent practicablein carrying out such pgrams), and exchange ofideas and technical information on the matterscovered by this subsection."

In 1962 the Congress provided more explicit guidance withrespect to using private organizations to carry out the for-eign assistance programs. Section 301(a)(3) of the ForeignAssistance Act of 1962 amended the 1961 Act, directing thatto encourage and facilitate participation by private enter-prise to the maximum extent practicable in achieving the pur-poses of the act, the President shall:

-'1 1

"Utilize wherever practicable the services ofUnited States private enterprise (including,but not limited to, the services of expertsand consultants in technical fields such asengineering)."

In 1963 the Congress further strengthened the policy regard-ing the use of private enterprise by adding section 302(a)of the Foreign Assistance Act of 1963 to section 621 of theact of 1961. This additional direction states that:

"* * * In providing technical assistance underthis Act, the head of any such agency or suchofficer shall utilize, to the fullest extentpracticable, goods and professional and otherservices from prirate enterprise on a contractbasis. In such fields as education, health,housing, or agriculture, the facilities andresources of other Federal agencies shall beutilized when such facilities are particularlyor uniquely suitable for technical assistance,are not competitive with private enterprise,and can be made ailable without interferingunduly with dome.'ic programs."

Although AID used the services of private consultantsand advisors prior to 1967, the general mnagement philosophywas to use direct-hire personnel to carry out the purposesof the act and to contract for outside technical expertiseon a more limited basis. In 1967, AID established a specificpolicy, which is still in effect, with regard to the use ofnon-AID resources in the total foreign assistance effort.The policy states that:

"Where other factors are equal, means of obtain-ing skilled personnel will be used in the follow-ing order of preference.

a. by contract with non-governmental organizations.

b. by participating agency agreement (or contract)with other federal, state or local governmentagencies.

c. by direct hire."

The AID Reform Plan initiated in 1972 reemphasized thephilosophy that contractors would be given a greater role inproviding the expertise needed to carry out the foreign aid

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programs. AID's management plan stated that by 1976 onlya few direct-hire technical specialists would remain inits overseas missions, and project implementation and tech-nical assistance would be performed by contract personnel.According to the management plan, direct-hire personnelwould perform program planning, contract monitoring, andother such management functions normally performed by Gov-ernment employees.

MANAGEMENT INFORMATION SYSTEM

AID did not have a management information system toreadily identify the total number or dollar volume of thevarious types of contracts awarded for consultant or avis-ory services during any given fiscal year. The AID Officeof Contract Management prepared various internal statusand summary reports which are generally used to manage thecontract and grant workload. These reports, however, didnot show the number or dollar volume of consultant or ad-visory contracts awarded during the period. Because AID didnot maintain summary statistics data on the types and purposesof contracts awarded during the year, we were unable to as-certain the dollar volume of contracts with consultants andadvisors over a period of years.

At the time of our review AID was -- the process ofinstalling an automatic data processing vstem which, wewere informed, will result in more timely and accurate in-formation. AID officials stated that the automated dataprocessing system will provide information on the total valueof contracts, grants, and amendments entered into during thefiscal year and will provide data on specific types of con-tracts, such as those with consulting firms, individuals,universities, cooperatives, and private and voluntary organ-izations. The new system became operational in January 1976.

SCOPE OF REVIEW

Our review was directed toward evaluating how AID usedoutside commercial consultants and advisors in carrying outthe foreign assistance programs. Although AID obtained ex-tensive consultant and advisory assistance from U.S. univer-sities, and to a lesser extent from private and voluntaryorganizations, particularly cooperative associations, thisreport does not include these institutions. AID's involve-ment with these institutions is discussed in GAO reports"Strengthening and Using Universities as a Resource for De-veloping Countries" (ID-76-57) and "Channeling Foreign Aid

3

Through Private and Voluntary Organizations" (ID-76-58),both dated May 5, 1976.

We reviewed (1) the legislative history concerning thevarious authorities which allow AID to engage outside ex-pertise aind (2) AID's policies, procedures, and practicesrelated to the award of contracts to obtain consultant andadvisory services. Our review was performed at AID in Wash-ington, D.C., and did not include an examination of contractresults in recipient countries.

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CHAPTER 2

CnNTRACTING WITH INDIVIDUALS

FOR PERSONAL SERVICES

A personal services contract is defined as one whichcreates what is equivalent to an employer-employee relation-ship between th? Government and the contractor or its m-ployees. The relationship exists when the contractor's em-ployee--or the contractor if an individual--is subject tothe supervision of a Federal officer or employee wile per-forming his duties.

The Civil Service Commission and the Comptroller Generalhave concluded that personal services contracts t performservices for the Government are prohibited unless an agen .ypossesses specific exemption from the personnel lws to i.o-cure personal services by contract. AID has been given thisspecial authority, provided that the services are rendereddirectly to host country governments. Our review of AID'suse of this authority showed that-

-- AID's management informat on system did not readilyidentify the total number or dollar volume of thevarious types of contracts awarded during a fiscalyear, but available records indicated that duringfiscal year 1973 the Office of Contract Managementawarded 126 contracts and 6 amendments valued at$1.6 million which it categorized as personal serv-ices contracts. Additional personal services con-tracts were awarded by the overseas missions, butthe figure for fiscal year 1975 was not availablein Washington. According to AID records, the over-seas mission awarded 185 personal services contractsand 173 amendments valued at $2.9 million duringfiscal year 1974.

BACKGROUND OF AID'S PERSONALSERVICES CONTRACTING AUTHORITY

In 1958 the Civil Service Commission reviewed the person-nel operations of AID's predecessor agency, the InternationalCooperation Administration (ICA), and corcluded that numerouscontracts with individuals were improper. This conclusionwas based on GAO rulings and the Commission's position thatpersonal services for the Government should be obtained bydirect-hire employment. The Commission rejected ICA's view

5

that contracts with individual. to furnish assistance to aforeign government were not subject to the prohibition againstpersonal services contracts. The Commission stated that be-cause CA was established specifically to provide assistanceto foreign governments, its activities, including providingtechnical assistance to host country governments, were infact services to the U.S. Government.

ICA argued that (1) it had general contracting authorityto contract with individuals to furnish technical assistance,(2) in some situations it was necessary for it to sign thecontract because of host-government laws or regulations orbecause the individual refused to sign a contract with aforeign government, and (3) some of the contracts were in-tended to create an independent contractor relationship andwere not for personal services. With regard to the thirdargument, GAO and the Commission believed that contractterminology requiring supervisory control by the AID missionscreated an overall employer-employee relationship rather thanan independent contractor re]dtionship.

The dispute was resolved when GAO agreed that it wouldmake no f mal objection to such contracts if ICA obtainedclarifying legislation. In 1960 the Mutual Security Actwas amended to give ICA authority for contracting with in-dividuals for personal services abroad, provided that suchindividuals would not be regarded as employees of the UnitedStates Government for the purpose of any law administered bythe Civil Service Commission. This authority is containedin section 636(a)(3) of the Foreign Assistance Act of 1961,as amended.

The limitations upon this authority to contract withindividuals for personal services was clarified in the Houseof Representatives' Committee on Foreign Affairs report (No.14C4, Apr. 7, 1960). The report indicated the authority ap-plied to hiring both Americans and foreign nationals, sub-ject to administrative and policy supervision by the over-seas missions, but it placed certain restrictions on the useof this authority when hiri-g Americans. The Committee Re-port stated, in part:

"The determination whether a contract establishesan employer-employee or independent contractorrelationship depends upon the terms of each con-tract. The contract specifies the degree of ICAsupervision of the contractor, whether housing oroffice space is provided, and whether an end pro-duct, such as a report or design, is sought as

6

opposed to continuing services. No problem ariseswhere he individual and the host government enterinto a contract financed by ICA.

"The question arises in those cases where ICA ratherthan the host government enters into a contract withan individual technician and where the contract pro-vides for ICA direction and supervision of the tech-nician's ctivities in order to achieve the programobjectives. ICA may become a arty to the contractwhere the host ove-rnn-t oesnot wsh to enterinto a contract wltEha-f-r F ein technicl-an ecauseit -s unT-amlTar with contracting proceures or

were- the techncFian himseif may feel more securewith a UnitEie§tates Government contract. * * (Under scoing-a3de.)

The history of AID's legislative authority clearly in-dicates that AID should use its authority only in those in-stances in which (1) the host government does not wish tocontract with a foreign technician or (2) the technicianhimself may feel more secure with a United States Govern-ment contract.

AID may create an employer-employee relationship be-tween an individual and a host country government by exe-cuting a personal services contract between the individualand AID. The key question for determining whether such anemployer-employee relationship exists is whether an officerof the host country government rather than of the U.S. Gov-ernment provides technical supervision to the individualin the performance of his duties. Technical supervisionexcludes administrative or policy supervision, and refers tothe technician's day-to-day supervision in his professionalcapacity.

Based on a sampling of personal services contractsawarded by AID, we found instances in which AID managementappeared to be a primary recipient of the personal servicesrendered, and/or in which technical supervision was givenby AID officials. We did not determine the legaliLy of thecontracts because such a determination would require a case-by-case evaluation, including discussions in some instanceswith the overseas personnel involved. This was beyond thescope of our review.

On the basis of our review of contract language, itappears in some cases that an employer--employee relationship

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was created between AID and the individual contractor ratherthan between the host country government and the contractor.The relationships described are not allowed, according tocriteria established by the Civil Service Commission.

CONTRACTOR COMPENSATION RATES

The primary cost in a personal services contract isthe individual contractor's salary and related allowances.For example, a 1-year, $70,000 contract was budgeted as fol-lows:

Salary $36,000Allowances 30,000International travel 1,700Other allowable costs 2,300

Total $70,000

It is the responsibility of the contracting officer tonegotiate the lowest possible cost to the Government, consis-tent with the requirements of the project. AID has limitedthe amount of compensation that may be paid to a contractorto the equivalent daily rate of the Foreign Service Class I--currently $145 per day--unless the responsible Assistant Ad-ministrator or Mission Directo. agrees that a higher levelof compensation is needed.

Agency guidelines state that the project and contractpersonnel should attempt to negotiate lower salaries orpropose the use of other individuals where this can be done.The guidelines state that it is not sufficient to merelystate that the individual received the requested salary inpast cases. Projects have different requirements for e-pertise, and a salary received on one project should notserve as justification for the same salary level on otherAID contracts.

A review of contract files for 24 personal services con-tracts and discussions with contract negotiators indicatedthat the compensation levels are generally based on (1) the?amount requested by the contractor and (2) the contractor'sprior earnings record. We noted that generally the contrac-tor's asking price was reduced only when it exceeded thenaximum daily rate of $145. The reduction was usually madeoecause much paperwork was required for obtaining approvalto pay the higher rate, rather than because the job to beperformed would not justify it.

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In discussing this matter with various AID contractingofficials, we were told that a problem which inhibits ne-gotiating a lower salary level is that in many cases thetechnical office selects only one prospective contractorwith whom the contracting officer is to negotiate. Further-more, the salary level has often already been discussedbetween the technical officer and the prospective contrac-tor before the contracting officer becomes involved innegotiating a compensation level. In our opinion, priordiscussions with a prospective contractor concerning com-pensation levels adversely affects contract negotiationsand may unnecessarily add to program costs.

Personal services contracts establish an employer-employee relationship, and individual contractors performduties which could be performed by direct-hire personnelif such personnel were available. Office of Personnel andManpower specialists establish position descriptions andappropriate General Schedule and Foreign Service classifi-cations for positions occupied by a direct-hire employee.We found that in setting compensation rates for personalservices contractors, more emphasis has been given to theindividual's prior earnings history than to determining theappropriate pay rate for the position to be filled. Webelieved that to avoid contracting for more expensive talentthan is needed to fulfill a requirement, the contractingofficer should seek the advice and assistance of personnelspecialists in the Office of Personnel and Manpower.

CONTRACTOR SELECTION PROCEDURES

Personal services contracts are negotiated procure-ments; however, AID's regulations do not require solicitationof proposals from more than one source, except that consider-ation should be given to as many sources as practicable.AID's current selection procedures for obtaining personalservices contractors are very informal. Program or projectneeds are determined and potential candidates are selectedprimarily by the project or program officers. AID projectofficers told us that they are generally aware of individualswho have the necessary skills for the project. Sources gen-erally used to identify individual contractors include:

-- Prior AID contractors.

-- Other AID contacts, when the individual has performedwork in a related area.

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-- Established relationships with universities and pro-fessional organizations.

--Recommerdations from other specialists.

-- General knowledge.

We found that in most cases AID interviewed only onepotentially qualified contractor. Contract documents anddiscussion with project officials indicated that:

-- Specific individuals were requested by missl,.,s.

-- The individual was selected because of .or workperformed for AID.

-- The individual had performed similar work while withAID as a direct-hire employee.

Based on our limited sample, we did not observe anysituations where AID's informal selection procedures resultedin the employment of an unqualified individual. However, wefound that AID's contract and project personnel were notfully using other sources of information which were availablefor selecting personal services contractors. These othersources include lists maintained by AID's Office of ContractManagement of consultants and advisors, urban and regionalplanners, and others who ossess special qualifications.

Prior to June 1975, AID did not have a system to screenin-house for available personnel to perform functions whichwere carried out by personal services contract. As a resultof the terminating Indochina programs, an in-house screeningprocedure was established so that available direct-hirepersonnel would be used before a personal services contractwas awarded. The screening procedure had been implemented,but its effect on the number of personal services contractsawarded was negligible.

OPPORTUNITIES FOR WIDER DISTRIBUTIONOF CONTRACTOR REPORTS

Under a personal services cntract AID is procuring theservices of an individual rather than an end product suchas a report. Nevertheless, we noted that in addition topurchasing an individual's services for a period of time, thescope of contract work often included report requirementsother than daily activity reports.

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AID's procedures for non-personal-services contracts--contracts for an end product--require that the resultingreports be distributed to interested individuals and bemade a part of AID'S permanent record in the Reference Cen-ter. We noted that in some cases the personal servicescontracts required that any resulting reports be providedto the program office ir 'shingl-n; however, in other in-stances this was nt a contract req>tiement. We noted in-stances in whic.h eports prepared by internationally knownspecialists working under personal services contracts hadbeen provided to the program office, but were not availablein AID's Reference Center. In our opinion, such reportsmay have much broader application than the immediate situa-tion for which the contract was awarded. We believe thatAID should take advantage of information developed by apersonal services contractor and establish a procedure that,when appropriate, makes the reports fully available to allinterested parties in AID and in other development organiza-tions.

CONCLUSIONS

AID's management information system did not readilyidentify the total dollar value of personal services con-tracts awarded during fiscal year 1975, but available dataindicates that the value of such contracts awarded by AID'sOffice of Contract Management in Washington, D.C., was about$1.5 million. Additional personal services contracts wereawarded by the overseas missions, but the amount for fiscalyear 1975 was not available. AID's new management informa-tion system noted in chapter 1 of this report should remedythis lack of readily available data; therefore, we are notmaking a recommendation at this time concerning this matter.

AID's authority to use personal services contracts islimited to obtaining advisory assistance for host countrygovernments whose officials perform technical supervisionof the contractor. However, in some instances the contractlanguage indicated that the contractor was to help AID carryout its management functions and/or that the contractor wouldreceive day-to-day technical supervision from an AID official.

The procedures followed by AID for selecting individualsto be awarded personal services contracts were very informal,and generally only one candidate--the one selected by theproject office--was interviewed. The project officer oftendiscussed compensation rates with the prospective contractor

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prior to negotiations between the contractor and the con-tracting officer, and the compensation rates were oftenbased on the contractur's record of prior earnings ratherthan on a determination of specific job requirements.

In some cases personal services contracts resulted inreports which had broader application than the specific situa-tion for which the contract was awarded, but providing a copyto AID's Reference Center was not a contract requirement.

RECOMMENDATIONS

We recommend that the Administrator of AID:

-- Develop procedures so that the limited authorityof AID to award personal services contracts is notexceeded.

--Require that, to the extent possible in selectingpersonal services contractors, more than one potentialcontractor be interviewed and that such informationbe made a part of the contract record.

-- Require that in negotiating compensation rates forpersonal services contracts every effort be made toset the rate on tha basis of the job requirementsrather than on the consultant's earnings history.

-- Insure that reports resulting from personal servicescontracts which may have broad application be ade-quately disseminated, including providing a copy toAID's Reference Center.

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CHAPTER 3

INTERMTTTENT EMPLOYMENT

OF EXPERTS AND CONSULTANTS

Section 626(a) of the FoiLign Assistance Act of 1961, asamended, states that AID may contract with experts and con-sultants, or organizations thereof, as authorized by sec-tion 3109 of title 5 of the United States Code, to performfunctions under the act. Section 3109 rovides that agenciesmay, when authorized by an appropriation or other statute,employ experts or consultants, or organizations thereof,temporarily--not in excess of 1 year--or intermittently with-out regard to civil service classification laws.

The Civil Service Commission has oversight responsibilityfor agencies' proper use of their authorities to temporarilyor intermittently employ experts or consultants. This in-cliues responsibility for determining (1) what dutie and re-sponsibilities constitute an expert or a consultant 1ositionand (2) that persons employed in those positions have theoutstanding knowledges and abilities required of experts and.consultants.

Our review of AID's use of intermittent or temporaryexperts and consultants engaged on a "when-actually-employed"basis showed that:

-- During fiscal year 1975 AID had 200 individual con-sultants and experts on its rolls who worked an equi-valent of 9,226 days at a cost of about $1.1 million.

--Although the rules governing the use of experts andconsultants are clearly stated by the Commission, AIDdid not fully observe the Commission's regulationswith respect to several individuals employed as ex-,erts or consultants.

--AID had not complied with certain provisions of theFederal Personnel Manual, which requires periodic re-views and management reminders concerning the use ofexperts and consultants, but action has been taken tocorrect these problems.

-- Contraiy to the normal practice in other Governmentagencies, retired civilian employees serving as ex-perts or consultants with AID are exempted from the

13

laws governing the simultaneous receipt of compensa-tion and retirement benefits. This exemption may-nolonger be necessary.

--AID had paid experts and consultants amounts up to thehighest rate for a grade GS. 15--currently $145 perday--although section 626(a) of the Foreign AssistanceAct of 1961, as amended, specified a maximum rate of$100 per day. On December 31, 1975, pursuant to aComptroller General's decision, AID directed that fu-ture appointments of experts and consultants limit themaximum pay rate to $100 per day.

WHAT IS AN INTERMITTENT EXPERT OR CONSULTANT?

The Civil Service Commission had defined a consultantand an expert as follows:

"Consultant means a person who serves as an adviserto an officer or instrumentality of the Government,as distinguished from an officer or employee whocarries out the agency's duties and responsibili-ties. He gives his views or opinions on problemsor questions presented him by the agency. but heneither performs nor supervises performance of op-erating functions. Ordinarily, he is expert in thefield in which he advises, but he need not be aspecialist. His expertness may consist of a highorder of broad administrative, professional, ortechnical experience indicating that his abilityand knowledge make his advice distinctively valuable to the agency.

* * * *

"Expert means a person with excellent qualifica-tions and a high degree of attainment in a pro-fessional, scientific, technical, or other field.His knowledge and mastery of the principles, prac-tices, problems, methods, and techniques of hisfield of activity, or of a specialized area inthe field, are clearly superior to those usuallypossessed by ordinarily competent persons in thatactivity. His attainment'is such that he usuallyis regarded as an authority or as a practitionerof unusual competence and skill by other personsin the profession, occupation, or activity."

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The Commission has further stated that an expert posi-tion requires the services of an expert in a particularfield; the duties cannot be performed satisfactorily bysomeone who is not an expert in that field.

AID POLICY ON INTERMITTENTEXPERTS AD CSULTANTSX

A Federal agency may employ an expert or consultant onlywith prior Commission approval, unless the agency's statuteexempts it from Commission authority o the Commission andthe agency have an agreement permitting employment withoutprior Commission approval. AID has operated under an agree-ment with the Comission to employ experts and consultantswithout prior approval since 1970, and the current agreement,entered into on April 24, 1975, will be in effect untilSeptember 1, 1977. The agreement states that AID may useintermittent experts and consultants for the following pur-poses.

-- To secure specialized expert opinion, unavailablewithin AID or other Federal agencies, on highlytechnical subjects.

-- To obtain outside points of view on critical issues.

-- To obtain specialized advice regarding new develop-ments within certain sject areas.

-- To secure consultation with noted experts whose na-tional or international prestige has a significantbearing on the success of the undertaking.

AID's policy statement concerning the purposes for hir-ing outside experts and consultants generally incorporatesthe guidelines specified in the agreement with the CivilService Commission. It is AID's stated policy that:

-- Because experts and consultants are used on an inter-mittent or temporary basis, their appointments arenot normally for more than 130 days during a serviceyear.

-- When the expert or consultant services of a retiredAID employee are needed, he or she may not beginwork for a period of 60 days following retirement,unless approved by the Assistant Administrator forProgram and Management Services.

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-- A retired AID employ ,e will not be employed as an ex-pert or consultant it a large part of the proposedduties involves evaluating functions on which he orshe worked before retirement.

USE OF INTERMITTENTEXPERTS AND CNSULTANTS

During fiscal year 1975, AID used 200 individual con-sultants and experts for a total of 9,226 staff-days at a costof about $1.1 million. The following information provided byAID shows the extent to which consultants and experts wereused by the various bureaus and offices.

Number Staff-days Percentemployed worked Cost of cost

(000 omitted)

Bureau for TechnicalAssistance 83 2,858 $ 346 32

Office of Personneland Manpower 30 2,225 256 24

Office of Engineer-ing 14 661 80 7

Bureau of Populationand HumanitarianAssistance 12 659 77 7

Office of FinancialManagement 8 383 45 4

Office of the Admin-istrator 4 279 38 3

Bureau for Near Eastand South Asia 4 318 31 3

Office of PublicSafety 4 241 31 3

All other bureausand offices 41 1,601 187 17

Total 200 9,226 1,091 100

Selection of experts and consultants

AID's Office of Personnel and Manpower has overall re-sponsibility for recruiting and appointing individuals tosatisfy personnel requirements identified by the various AIDbureaus and offices, including the selection and appointment)f intermittent consultants and experts. In practice, how-over, the process is a joint effort. Identification and

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selection is usually performed by the requesting bureau oroffice, and appointments are made through the Office of Per-sonnel and Manpower.

Prior to June 1975, AID did not have a formal procedureto screen its own personnel for available individuals tosatisfy personnel requirements which were being filled byconsultants and experts, participating agency service agree-ment, or contracts with individuals for personal or non-personal services. In June 1975, as a result of the largenumber of direct-hire individuals returning from the ter-minated Indochina programs, the Deputy Administrator di-rected that AID personnel be considered before authoriza-tion would be given to obtain personnel from outside theAgency under the following types of arrangements:

--Intermittent demands for consultants and experts.

--Participating agency service agreements and re-sources support service agreements with other Govern-ment agencies.

--Contracts with individuals for personal and non-personal services under direct AID contracts or AID-financed country contracts.

A procedure was established whereby all requests toobtain individuals under the above arran ements would bechanneled through the Office of Personnel and Manpower tobe screened against available drect-hire staff. Requeststo contract with universities, cooperative associations, orprivate firms for consultant or evaluative services werenot included in the procedure to screen for available direct-hire personnel.

During the period June 5, 1975, through February 13,1976, the Office of Personnel and Manpower received 381 re-quests from the bureaus, offices, and overseas missions forindividuals to be obtained under the above arrangements.The Office identified 37 in-house candidates to fill theserequests, and as of February 13, 1976, 16 requests werepending approval or internal clearances. Of the 37 individ-uals identified as potential candidates, we found that 7 wereultimately selected. In February 1976 we found that thescreening system did not include a. procedure to follow upwith the requesting office to determine whether the prospec-tive candidate was used to fill the requirement; however, wewere subsequently informed that a follow-up procedure had

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been instituted. The in-house candidates not used to fillthe requirements were generally rejected by the bureaus, of-fices, or missions because, in their opinion, the individuallacked the specific qualifications or experience desired.

AID officials stated their belief that although thisscreening system will remain in effect for the present time,it has essentially outlived its usefulness. The Agency,they said, is no longer in the excess personnel position itwas in at the time the screening procedure was instituted.

Use of experts and consultants

In reviewing whether AID has properly used the servicesof experts and consultants, we selected 20 individual posi-tions--14 expert and 6 consultant positions. In most caseswe found that the outside consultants and experts wereproperly used, but in certain instances AID's use of theseindividuals did not fully conform with Commission criteriaand guidelines or could have been avoided through betterprior planning. Each of these instances involved the inter-mittent hiring of a retired AID employee.

We noted that those in 10 of the 20 positions we re-viewed--8 experts and 2 consultants--were hired primarilyon the basis of their previous employment with AID. Cer-tain of these individuals had other work experience, butdocuments justifying their hiring did not indicate thatthey had the credentials which the Commission normally con-siders necessary for an expert or consultant, such as af-filiations with universities, urganizationF or professionalsocieties. AID's justifying documents showed that only 1 ofthe 10 individuals had served as an expert in his field orwas "* * * regarded as an authority or as a practitioner ofunusual competence and skill by other persons in the profes-sion, occupation, or activity."

An AID internal review of the same 20 consultant and ex-pert positions which we selected showed that 5 individuals--all experts--were being paid from 1 to 3 equivalent GeneralSchedule (GS) grade levels above the level for services beingprovided. These pay levels were justified by AID on the basisthat (1) the individuals possessed unique qualifications and(2) the individuals were needed to help AID accomplish its re-duction in force. We were informed by AID that the purposeof AID's internal review was to find and correct such situa-tions.

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USE OF RETIRED FEDERAL EMPLOYEES

During fiscal year 1975 AID used 200 intermittent con-sultants and experts, 133 of which were retired Federalemployees--94 retired AID employees and 30 retired fromother Federal agencies.

Retired civilian employees of the Federal Governmentserving in the capacity of an expert of consultant toFederal agencies are generally subject to having theirfees reduced by an amount equal to the annuity allocableto the period of actual employment. Retired Foreign ServiceOfficers are subject to having their annuity rather thantheir fees reduced. However, retired civilian employees ofthe Government serving in the capacity of an expert or con-sultant to AID have oeen exempted from these provisions.As a result, civilian retirees employed by AID as consultantsor experts received an advantage they would not enjoy underthe same circumstances Pa another Government agency.

For example, an AI- mployee who prior to retirementon December 31, 1974, earned the daily equivalent of $138was engaged by AID on Januaary 2, 1975, as an expert at adaily rate of $135. In addition to the $135 fee the in-dividual also re eived the daily equivalent of $69 in re-tirement annuity payments, for a total of $204 per day. Ifthis individual had been engaged in an identical capacityat another Federal agency, he would have received the dailyequivalent of his annuity payment--$69--plus the differencebetween his expert fee and the daily equivalent of his an-nuity payment--$66 for a total of $135 per day.

The exemption granted to AID from having the expert'sor consultant's fees or annuities reduced is contained insection 626(b) of the Foreign Assistance Act of 1961, asamended, which states:

"Service of an individual as an expert or consul-tant under subsection (a) of this section shallnot be considered as employment or holding officeor position bringing such individual within theprovisions of sections 3323(a) and 8344 of title5 of the United States Code, section 872 of theForeign Service Act of 1946, as amended, or anyother law limiting the reemployment of retiredofficers or employees or governing the simultan-eous receipt of compensation and retired pay orannuities, subject to section 5532 of title 5of the United States Code."

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The legislative history of section 626(b) indicates thatthe origin of the exemption from the dual compensation lawsis somewhat obscure. A report on Job Evaluation and Rankingin the Federal Government by the House Committee on Post Of-fice and Civil Service (H.R. 91-28, February 27, 1969) statedthat the exemption from dual compensation laws was part ofthe original legislative ackage cited as essential to t-success of the Marshall Plan. It was designed to permitquick access to experts in the private sector, to retiredcivilian specialists, and to retired military personnel.

According to a report of the Committee on Foreign Af-fairs on the Mutual Security Act of 1961--enacted as theForeign Assistance Act of 1961--(H.R. 851, August 4, 1961)subsection "b" was drawn from the Mutual Security Act of1954 and continues to exempt experts and consultants fromcertain conflicts-of-interest laws governing reemployment ofretired officers or employees of the Government and thesimultaneous receipt of compensation and retired pay or an-nuities.

There have been dramatic changes in the United Statesforeign assistance program since the Marshall Plan. Inaddition to the obvious change from assisting in the re-construction of already developed countries to rovidingeconomic assistance to developing countries, the level ofexpertise available, both within the Government and fromoutside sources, has also changed considerably. WhileAID may still require quick access to experts in variousfields of foreign assistance, the personnel resources avail-able have expanded considerably. We believe that the needno longer exists for AID to be exempted from the laws con-cerning the simultaneous receipt of compensation and retire-ment benefits.

PAY RATES FOR EXPERTSAND CONSULTANTS

Section 626(a) of the Foreign Assistance Act of 1961, asamended, which authorizes AID to intermittently employ ex-perts and consultants, states that individuals so employedmay be compensated at rates not in excess of $100 per day.Despite this language, AID had interpreted section 3109 oftitle 5 of the United States Code as authority to pay expertsand consultants up to the mximum of $145 per day.

% Comptroller General's Decision (B-90867) dated Decem-ber 12, 1975, ruled that the $100-per-day limitation stated

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in section 626(a) of the Act was still applicable. Accord-ingly, on December 31. 1975, AID issued a general notice toall employees that until clarification could be obtainedregarding the effective date of the decision, pay for con-sultants and experts would not exceed $100 per day forservices performed after December 12, 1975.

AID has held that the provisions of section 626(a)were intended to permit payments at a higher rate thanthat permitted by the general, Government-wide authorityof title 5 of the U}nited States Code (which was linked tothe highest rate payable under the General Schedule). AIDhad, therefore, requested that GAO reconsider its December 12,1975, ruling.

AID said that the GAO ruling ad placed it at a competi-tive disadvantage with respect to both private entities andother Federal agencies. AID requested, therefore, that sec-tion 626(a) of the Foreign Assistance Act of 1961 be amendedso that in the future AID could pay experts and consultantsthe highest rate that may be paid an employee under theGeneral Schedule established by section 5332 of title 5 ofthe United States Code. On June 30, 1976, PL. No. 94-329,90 Stat. 729, was enacted. Section 603 of this act amendedsection 626(a) of the Foreign Assistance Act to eliminatethe $100-per-day limitation and substitute insteap the dailyequivalent of the highest rate under the General Scheduleprescribed by 5 U.S.C. 5332 (1970).

The legislative history indicates that AID cited ourdecision as necessitating such action. (See S.R. No. 94-876,94th Congress, 2nd Sess. 62-64 (1976)). In view of this andthe congressional action amending the law to permit AID topay its experts and consultants in excess of the former $100limit, we held by decision B-90867, September 16, 1976, thatit was not necessary to reconsider our prior decision citedabove.

MANAGEMENT CONTROLS ON THESE OF INTERMITTlENT EMPLOYEES

The Civil Service Commission Federal Personnel Manualestablishes various regulations on the use of agencies' au-thority to intermittently employ onsultants and experts.For example, the regulation requires that agencies perform aquarterly review of each consultant and expert working morethan 10 days during the quarter to determine whether theduties being performed are proper, documentation is current,

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and that time limits are observed. The regulations alsorequire that t ency annually remind managers of the ap-plicable regulator, provisions.

We found that quarterly reviews had not been conductedprior to February 1975. We were told this was because otherwork of the Office of Personnel and Manpower had a higherpriority. In February 1975, 1 month after the Commission hadsuspended the State Department's authority to hire consultantsand experts for improperly using its authority, AID initiateda review of 143 consultant and expert positions.

We noted that AID had been slow in annually remindingits managers about the applicable regulatory provisions. Wewere informed, however, that such a reminder was recentlyissued.

CONCLUSIONS

AID has numerous individuals listed on its rolls as in-termittently employed consultants and experts. Civil ServiceCommission rules are clearly stated concerning how such con-sultants and experts are to be used, and in most cases, AID'suse of them complied with the Commission regulations.

Maay of the intermitSt- ' onsultants and experts onAID's rolls were Federr is. Generally, Federal re-tirees serving as expelst cL -ultants to Federal agenciesare subject to having their feve or annuity reduced so thatthe amount received in fees plus annuity does not exceedthe daily equivalent of the stated consultant or expert rate.FedeLal retirees serving in such a capacity with AID, however,are exempted from this reduction. This exemption from thedual compensation laws was initially included in the foreignaid legislation as an element essential to the success ofthe Marshall Plan. In our opinion, however, the need nolonger exists for this exemption, and it results in an ad-vantage to Federal retirees employed by AID which is notavailable to Federal retirees employed in the same capacityby other Federal agencies.

Prior to a December 12, 1975, Comptroller General's De-cision, AID had paid intermittent consultants and experts upto $145 per day despite the $100 per day limit established inthe Foreign Assistance Act. Subsequently however, the ForeignAssistance Act has been amended to permit AID to pay the samerates as are generally authorized to be paid by other Federalagencies.

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APPENDIX I APPENDIX I

EXCERPT FROM SENATE HEARINGS, BEFORE A SUBCOMMITTEE

OF THE COMMITTEE ON APPROPRIATIONS, ON

FOREIGN ASSISTANCE AND RELATED PROGRAMS'

APPROPRIATIONS, FISCAL YEAR 1976

APRIL 17, 1975

Senator Inouye. As ycu know, Mr. Fasick, this subcommit-tee has oversight respon a full rTanie ofattivi-ties involved in fore n assistance and some of these actiT1-ties are being carrle out y so-call e vo untaryo rprivateorganizations and nongovernmental [sic].

Frankly, we don't have the detailed information aboutthe operations which I feel is necessary if this committee isto carry out in proper fashion this oversight responsibility.

So I would like to take this opportunity to officallyask you t-o make timely reviews on three separate topics7. Oneis AID financed university contracts. There are many throug~-out theland.

Second, AID's use of private consultants and advisers.

And, third, AID's relationshipto and practices of pri-vateand voluntary organizations. I realize this a broadone.

I have given the staff, our committee staff, instruc-tions as to the nature of these reviews and I will ask themto meet with appropriate officials on your staff to work outthe specific areas to be covered and the timing of the re-port.

Mr. Fasick. We can do that, and I think all three areasare significant and warrantstudies.

Senator Inouye. I think it is very important becausehere again it doesn't help when one recieves a nameless letteror rumors suggesting that certain universities have a contractbecause of pressure and that university wasn't really quali-fied or had an inadequate staff to carry out the project. Wewould like to know what the truth is.

Mr. Fasick. All right, thank you.

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AID had been slow in performing certain management re-quirements of the Civil Service Commission such as makingtimely reviews of consultant and expert positions and remind-ing management officials about the applicable regulatory pro-visions. AID has acted to correct these problems.

AID has acted to (1) periodically review the posi-tion of each consultant and expert working more than 10days during the quarter for compliance with Commission reg-ulations and (2) regularly remind managers about the regu-lations concerning the use of consultants and experts. Inview of this, we are not recommending any specific actionsat this time.

RECOMMENDATION TO THE CONGRESS

In order to establish comparability between intermit-tent employees of AID and all other Federal agencies, werecommend that the Congress amend section 626(b) of the For-eign Assistance Act of 1961 to remove AID's exemption fromthe laws governing the simultaneous receipt of compensationand Government retired pay or annuities.

This is consistant with the recommendation made in HouseConference Report No. 94-1642 to accompany H.R. 14260.

Suggested language for amending the act to implement therecommendation is In appendix II.

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APPENDIX I APPENDIX I

Senator Inouye. There is a personal side to that re-quest. As chairman of a subcommittee, I suppose there aresome who may feel that I may use that position to enhancethe position of Hawaiian enterprises and the University ofHawaii I know has a couple of contracts with AID. I wouldlike you to look specifically into those to determinewhether these contracts are good and whether the Universityof Hawaii is carrying out its part and giving the taxpayerstheir money's worth.

Mr. Fasick. Very good, sir. (Underscoring added.)

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APPENDIX II APPENDIX II

SUGGESTED REVISION TO SECTION 626(b) OF THE

FOREIGN ASSISTANCE ACT OF 1961

Section 626(b) of the Foreign Assistance Act of 1961, asamended, Public Law 87-195, 75 Stat. 424 (22 U.S.C. 2386(b))should be amended by deleting the phrase

"sections 3323(a) and 8344 of title 5 of theUnited States Code, section 872 of the ForeignService Act of 1946, as amended, or any etherlaw limiting the reemployment of retired of-ficers or employees or governing the simultane-ous receipt of compensation and retired pay orannuities, subject to section 5532 of title 5of the United States Code."

and inserting in lieu thereof:

"section 3323(a) of title 5 of the United StatesCode."

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