How Many Contractors Does It Take to Run the Government?

By: John Ford, Senior Consultant, Government Contractor Services Group

For many years, there has been a debate as to how many contractors are performing work for the government. This issue has two components:

(1) the number of entities holding contracts; and

(2) the number of individuals who are actually performing those contracts.

While the former is fairly easy to determine, the latter is more problematic. This article will discuss two of the tools available to the government to make this determination. These tools also help the government to know how much these employees are costing the government.

The first tool, required by 10 U.S.C. §2330a, requires the Department of Defense (“DoD”) to “establish a data collection system to provide management information with regard to each purchase of services . . . in excess of the simplified acquisition threshold.” Among the data to be collected are:

• A description of the services purchased;
• The total dollar amount of the purchase;
• The calculation of contractor full-time equivalents for direct labor, using direct labor hours in a manner that is comparable to the calculation of DoD civilian full-time equivalents (“FTEs”); and
• The number of contractor employees, expressed as FTEs for direct labor, using direct labor hours and associated cost data collected from contractors.

The information collected is to be reported to Congress on a fiscal year basis, and made publicly available by DoD after it is reported to Congress.

DoD does not use a DFARS clause to implement this requirement. Instead, the current requirement is stated in a November 28, 2012, memorandum. That memorandum requires the use of language prescribed in the memorandum to be included in “both new statements of work/performance work statements and modifications to existing contracts.” It goes on to state that each DoD component “shall ensure that all contracted services procured, regardless of the source of the funding or acquisition agent, are executed in accordance with these requirements. Data will be reported using an Enterprise-wide Contractor Manpower Reporting Application (eCMRA).” In this regard, there are four platforms used for entering data into the eCMRA – one for each military department and one for all other DoD components. There is a user guide for each platform with definitions of reportable data. Contractors should become familiar with the user guide published by each component with which they do business.

The eCMRA data is entered on a contract by contract basis or, for indefinite delivery contracts, on an order by order basis. Obviously, this can be a labor intensive effort and quite extensive for some contractors. Because this data entry is required by the terms of individual contracts, the cost of compliance can be treated as a direct cost of each reportable contract.

For contracts awarded by non-DoD agencies, the reporting requirement is more formalized. There are two Federal Acquisition Regulation (“FAR”) clauses that require such reporting: FAR 52.204-15 is used in indefinite delivery contracts for services and requires reporting at the order level, while FAR 52.204-14 is used in other contract types for services and requires reporting at the contract level. Neither clause is to be used in contracts fully funded by DoD, contracts awarded with a generic entity identifier, or in classified solicitations, contracts, or orders. Each clause is required to be included in relevant, first-tier subcontracts that meet the following thresholds:

(i) All cost-reimbursement, T&M/LH service contracts and orders with an estimated total value above the simplified acquisition threshold.

(ii) All fixed-price service contracts awarded and orders issued according to the following thresholds:

(A) Awarded or issued in fiscal year 2014, with an estimated total value of $2.5 million or greater.

(B) Awarded or issued in fiscal year 2015, with an estimated total value of $1 million or greater.

(C) Awarded or issued in fiscal year 2016, and subsequent years, with an estimated total value of $500,000 or greater.

While FAR 4.1703 requires contracting officers to impose reporting requirements on contractors holding contracts meeting those thresholds, neither clause applies these thresholds at the prime contract level. Thus, if either clause is included in a contract below the applicable threshold, the contractor may still be required to report data.

Both clauses require reporting of the total dollar amount invoiced for services performed during the previous government fiscal year under the contract or order and the number of contractor direct labor hours expended on the services performed during the same period and similar data reported by first-tier subcontractors. Thus, subcontractors do not separately report this data to the government, but must report it to the prime contractor. In this regard, the language required to be inserted in DoD contracts requires the prime contractor to report data provided by subcontractors, but does not limit it to first-tier subcontractors. Further, the guidance does not state the mechanism by which the prime is to obtain such data.

The data required by the FAR is to be reported in System for Award Management (“SAM”) by October 31 of each year. If the contractor fails to submit the report timely, the contracting officer is to “exercise appropriate contractual remedies.” In addition, the contracting officer will make the contractor’s failure to comply a part of the contractor’s Contractor Performance Assessment Reports System (“CPARS”) evaluation. Thus, failure to make a timely report can affect a contractor’s ability to receive future contracts. While the DoD guidance does not address this point, there is no reason why a contracting officer could not take note of such a failure in the contractor’s CPARS.

It should be noted that while the reporting requirements for DoD and civilian agencies deal with services, this is not limited to contracts covered by the Service Contract Act (“SCA”). Also, there is no geographical limitation on the contracts under which data is to be reported. Therefore, the reporting requirements apply to overseas contracts. Contractors should not be lulled into believing that they do not have to report data, if they have a contract with a significant amount of services that is not subject to the SCA.