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1 1 (January 17, 2023)

handle is hein.crs/govekhf0001 and id is 1 raw text is: Congres iona& Research Service Informing the legislitive debate since 1914 Updated January 17, 2023 Defense Primer: Department of Defense Contractors Throughout its history, the Department of Defense (DOD) has relied on contractors to support a wide range of military operations. Within the defense policy community, the term contractor is commonly used in two different contexts. The word can describe the private companies, academic institutions, and other entities with which DOD contracts to provide supplies, construction services, or other types of services. It can also describe individuals hired by DOD- usually through private companies, which are also considered contractors in the previous context-to perform specific tasks. The term contractor does not refer to military servicemembers, civilian DOD career employees, or civilian political appointees. Contractors as Entities In Fiscal Year (FY) 2021, DOD obligated more money on federal contracts ($397 billion in current dollars) than the contract spending of all other government agencies combined. While DOD contracts with many entities, five companies (Lockheed Martin, Boeing, Raytheon, General Dynamics, and Northrop Grumman) typically received a majority of departmental contract obligations each fiscal year (see Table 1). These five companies are often referred to as the primes, signifying their frequent role as prime contractors who in turn subcontract to other companies. For FY2021, top recipients of DOD contract funding also included Pfizer Inc., with which DOD has contracts to obtain antiviral oral therapeutics and mRNA vaccines used to treat and prevent Coronavirus Disease 2019 (COVID- 19). Some of these contracts were executed in partnership with the Department of Health and Human Services (HHS) as part of the national emergency response to COVID-19. Table I. Six Largest DOD Contractors by Obligations, FY2021 in billions of current dollars Company Obligations Lockheed Martin Corporation $40.3 The Boeing Company $22.1 Raytheon Technologies Corporation $20.6 General Dynamics Corporation $17.3 Pfizer Inc. $13.3 Northrop Grumman Corporation $12.7 Source: SAM.gov Top 100 Contractors Report, FY2021. Note: Fifty percent of the Bell-Boeing Joint Project Office is attributed to The Boeing Company. In FY2021, 49% of total DOD contract obligations were for goods, 42% were for services (inclusive of IT services), and 9% were for research and development (R&D). Contractors as Individmals Individual DOD contractors fulfill a wide variety of organizational roles and functions from logistics and transportation to intelligence analysis and private security. Why Does DOD Use Individual Contractors? Following the conclusion of the Cold War, the U.S. military-in line with a government-wide trend-embraced outsourcing, increasing reliance on contractors instead of using military servicemembers or government civilians to perform certain tasks. Some analysts have highlighted numerous benefits of using contractors. These benefits include freeing up uniformed personnel to focus on military specific activities; providing supplemental expertise in specialized fields, such as linguistics or weapon systems maintenance; and providing a surge capability to quickly deliver critical support functions tailored to specific military needs. Some have accordingly argued that meeting immediate personnel needs through surges in contractor use by the federal government is more cost-effective on a long- term basis. Just as the effective use of contractors can augment military capabilities, ineffective management and oversight of contractors can lead to wasteful spending of taxpayer dollars and impeded operational outcomes. Contractors can also compromise the credibility and effectiveness of the U.S. military and undermine operations, as some analysts believe occurred during operations in Iraq and Afghanistan. How Many Contractors Does DOD Employ? DOD's Inventory of Contracted Services (ICS, see 10 U.S.C. §4505(c)) is a required annual report to Congress that provides information on certain categories of contractor hiring by individual DOD components (e.g., the military departments and defense agencies). Under 10 U.S.C. §4505, DOD is required to collect and report data to Congress for each purchase of services in excess of $3 million within four service acquisition portfolio groups: logistics management services, equipment related services, knowledge-based services, and electronics and communications services. Contracts valued at or below the simplified acquisition threshold (generally $250,000) or for commercially available off-the-shelf items are exempt from this requirement. These reports combine contract data routinely entered into the Federal Procurement Data System (FPDS) by DOD contracting officials with contractor-reported information reported to SAM.gov on an annual basis. Contractor- supplied information includes the total number of direct labor hours expended on services performed under contract, as well as the number of employees associated with these services. The report historically has not included a total number of individual contractors-instead, it has provided an estimate of contractor full-time equivalents (FTEs) for

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