Further Improvements Needed in Navy's Oversight of Contracting for Facilities Construction on Diego Garcia

GAO reviewed the Navy's oversight and management of the acquisition of facilities for its base on the island of Diego Garcia in the Indian Ocean. The Navy awarded a cost plus award fee contract for various improvements to the island.

GAO believes that, under a cost plus award fee contract, strong contract administration is vital to protect the Government's interests. GAO found that: (1) the Navy did not ensure that the contractor's resources were effectively employed; and (2) ineffective management by the Navy caused problems and weaknesses that affected the contract. The Navy did not ensure that the contractor established effective management information and control systems before the beginning of construction. More than 18 months after contract award, the contractor did not have operational systems to provide: (1) accurate and timely financial information; (2) effective materials management; or (3) effective resource management. In addition, GAO found that: (1) the financial management reports used by the Navy and the contractor were unreliable; (2) accounting system data were sometimes incomplete; (3) there was no analysis of the differences between estimated and actual costs; (4) cost estimates did not always reflect the most current information; and (5) while the Navy expects cost overruns, the magnitude of the overruns is uncertain. GAO believes that the Navy is not able to judge the reasonableness of the costs incurred or the reliability of estimated costs under the contract.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: James G. Mitchell Team: General Accounting Office: National Security and International Affairs Division Phone: (202) 275-8676