Defense Logistics
The Army Needs to Implement an Effective Management and Oversight Plan for the Equipment Maintenance Contract in Kuwait Gao ID: GAO-08-316R January 22, 2008The Department of Defense (DOD) relies on contractors to perform many of the functions needed to support troops in deployed locations. For example, at Camp Arifjan, Kuwait the Army uses contractors to provide logistics support for operations in Iraq and Afghanistan. Contractors at Camp Arifjan refurbish and repair a variety of military vehicles such as the Bradley Fighting Vehicle, armored personnel carriers, and the High-Mobility, Multi-Purpose Wheeled Vehicle (HMMWV). However, while contractors provide valuable support to deployed forces, we have frequently reported that long-standing DOD contract management and oversight problems increase the opportunity for waste and make it more difficult for DOD to ensure that contractors are meeting contract requirements efficiently, effectively, and at a reasonable price. This report discusses information about Task Order 1 that we developed during our review. Our objectives were to (1) evaluate the contractor's performance of maintenance and supply services under Task Order 1, (2) determine the extent to which the Army's quality assurance and contract management activities implement key principles of quality assurance and contract management regulations and guidance, and (3) determine the extent to which the Army is adequately staffed to perform oversight activities.
Our analysis indicates that the Army is inadequately staffed to conduct oversight of Task Order 1. Authorized oversight personnel positions vacant at the time of our visit in April 2007 included those of a quality assurance specialist, a property administrator, and two quality assurance inspectors. The contracting officer told us that the two civilian positions (the quality assurance specialist and the property administrator) had been advertised but the command had not been able to fill the positions with qualified candidates. The battalion was unsure why the two military positions (the quality assurance inspectors) had not been filled. The lack of an adequate contract oversight staff is not unique to this location. We have previously reported on the inadequate number of contract oversight personnel throughout DOD, including at deployed locations. Army officials also told us that in addition to the two quality assurance inspectors needed to fill the vacant positions, additional quality assurance inspectors were needed to fully meet the oversight mission. According to battalion officials, vacant and reduced inspector and analyst positions mean that surveillance is not being performed sufficiently in some areas and the Army is less able to perform data analyses, identify trends in contractor performance, and improve quality processes. Also, the Army is considering moving major elements of option year 3 (including maintenance and supply services) to a cost plus award-fee structure beginning January 1, 2008. Administration for cost plus award-fee contracts involves substantially more effort over the life of a contract than for fixed-fee contracts. Without adequate staff to monitor and accurately document contractor performance, analyze data gathered, and provide input to the award-fee board, it will be difficult for the Army to effectively administer a cost plus award-fee contract beginning in January 2008.
RecommendationsOur 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: Team: Phone:GAO-08-316R, Defense Logistics: The Army Needs to Implement an Effective Management and Oversight Plan for the Equipment Maintenance Contract in Kuwait
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January 23, 2008:
Congressional Committees:
Subject: Defense Logistics: The Army Needs to Implement an Effective
Management and Oversight Plan for the Equipment Maintenance Contract in
Kuwait:
The Department of Defense (DOD) relies on contractors to perform many
of the functions needed to support troops in deployed locations. For
example, at Camp Arifjan, Kuwait the Army uses contractors to provide
logistics support for operations in Iraq and Afghanistan. Contractors
at Camp Arifjan refurbish and repair a variety of military vehicles
such as the Bradley Fighting Vehicle, armored personnel carriers, and
the High-Mobility, Multi-Purpose Wheeled Vehicle (HMMWV). However,
while contractors provide valuable support to deployed forces, we have
frequently reported that long-standing DOD contract management and
oversight problems increase the opportunity for waste and make it more
difficult for DOD to ensure that contractors are meeting contract
requirements efficiently, effectively, and at a reasonable price.
In its fiscal year 2007 report,[Footnote 1] the House Appropriations
Committee directed GAO to examine the link between the growth in DOD's
operation and maintenance costs and DOD's increased reliance on service
contracts. In May 2007 we issued a report that examined the trends in
operation and maintenance costs at installations within the United
States.[Footnote 2] A second report examining the cost impact of using
contracts to support deployed forces is expected to be issued in 2008.
In the interim, we are issuing this report to you on the Army's Global
Maintenance and Supply Services (GMASS) contract's multimillion-dollar
Kuwait task order--Task Order 1--because of the findings we uncovered
during this engagement and the implications for waste of taxpayer
dollars and the potential negative impact on the warfighter as well as
on our redeployment from Iraq once a decision is made to do so.
This report discusses information about Task Order 1 that we developed
during our review. Our objectives were to (1) evaluate the contractor's
performance of maintenance and supply services under Task Order 1, (2)
determine the extent to which the Army's quality assurance and contract
management activities implement key principles of quality assurance and
contract management regulations and guidance, and (3) determine the
extent to which the Army is adequately staffed to perform oversight
activities.
To evaluate the contractor's performance under Task Order 1, we
interviewed contractor officials at Camp Arifjan, Kuwait as well as
Army officials at the Army Sustainment Command in Rock Island, Illinois
and at the 401ST Army Field Support Battalion in Camp Arifjan, Kuwait.
We also reviewed various Army and contractor documents related to
contractor execution, analyzed Army provided data to compute pass/fail
percentages, and observed the contractor's maintenance processes. To
determine the extent to which the Army's quality assurance and contract
management activities implement key principles of quality assurance and
contract management regulations, we met with contracting and quality
assurance officials at Camp Arifjan, Kuwait, and Rock Island, Illinois,
and reviewed various oversight and surveillance documents. We also
observed physical inspections of equipment presented to the Army and
analyzed Army-provided data on oversight and surveillance. To determine
if the battalion was adequately staffed to perform oversight
activities, we reviewed battalion staffing documents, spoke with
battalion oversight and command officials, and reviewed DOD and Army
guidance and regulations regarding contract oversight and management.
Although data used to compute pass/fail percentages did not include all
failures, we determined that the data were sufficiently reliable for
the purposes of our review. We conducted this performance audit from
March 2007 through December 2007 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.
Enclosure I is a detailed discussion of our scope and methodology.
Results in Brief:
Since the inception of Task Order 1, the contractor has had
difficulties meeting maintenance standards, maintaining an accurate
database, and meeting production requirements. According to Task Order
1, the contractor shall ensure that equipment is repaired to specified
Army standards. However, in many cases, the equipment presented to the
Army as ready for acceptance failed government inspection. Army
corrective action reports attributed these performance shortcomings to
problems with the contractor's quality control processes and other
factors. First, our analysis of Army data found that for five types of
vehicles inspected by quality assurance personnel from July 2006
through May 2007, 18 to 31 percent of the equipment presented to the
Army as ready for acceptance failed government inspection. In addition,
some equipment presented to the Army as ready for acceptance failed
government inspection multiple times, sometimes for the same
deficiencies. Army officials believed the contractor's quality control
system used to ensure that equipment met specified Army standards was
poor and the contractor depended on the Army to identify equipment
deficiencies. When the Army inspected equipment that did not meet
standards, it was returned to the contractor for continued repair. Our
analysis of Army data found that since May 2005 an additional 188,000
hours were worked on equipment after the first failed government
inspection, which translates into an additional cost of approximately
$4.2 million. Furthermore, the contractor was required to operate wash
racks to clean equipment in preparation for its transport back to the
United States. However, according to DOD inspectors, equipment that was
presented for inspection frequently did not meet cleaning standards
referenced in Task Order 1. Second, although the contractor is required
to ensure the correct equipment condition code and location are entered
into a maintenance management database, on numerous occasions Army
officials found that incorrect status was assigned to equipment within
the database. For example, on one occasion, the contractor coded a
HMMWV as "ready for issue"; however, when the Army went to issue the
vehicle it was in a maintenance shop being repaired by the contractor.
Among the reasons the contractor gave for problems with the database
included human error and a fault in the way the database handles
certain data. According to the contracting office, erroneous equipment
status reporting affects the battalion's ability to make timely and
accurate decisions regarding the availability of equipment to support
the warfighter. Third, according to the Army, the contractor has not
met some production requirements and deadlines for some tasks were
extended. For example, according to the Army, the contractor failed to
meet the monthly production requirement for a HMMWV refurbishment
effort. According to a contracting official, a lack of contractor
standard operating procedures and a lack of in-process quality checks
led to a high number of equipment defects, thereby delaying Army
acceptance of the HMMWVs. In addition, the contractor was unable to
independently meet certain production deadlines set by the Army. For
example, the contractor was unable to meet a deadline for repairing
equipment for the Iraq security forces without government assistance.
Poor contractor performance may result in the warfighter not receiving
equipment in a timely manner.
The quality assurance and contract management actions taken by the
401ST Field Support Battalion make it difficult for the battalion to
meet several key principles detailed in the Army Quality Program
regulation and other DOD quality assurance principles. These principles
include, (1) using demonstrated past performance in risk-based
planning, (2) identifying recurring contractor performance issues, and
(3) using past performance information as an evaluation factor for
future contract awards. For example, we found that the battalion does
not always document deficiencies identified during its quality
assurance inspections. Instead, quality assurance inspectors were
allowing the contractor to fix some deficiencies without documenting
them in an attempt to prevent a delay in getting the equipment up to
standard to pass inspection. In addition, although the battalion's July
2006 draft maintenance management plan requires that contractor
performance data be analyzed to help identify the cause of recurring
quality problems and evaluate the contractor's performance, the Army
did not begin to review the contractor's performance data until July
2007. We found that although data on contractor performance were
readily available, the battalion was not routinely tracking or
monitoring the percentage of equipment submitted for government
acceptance that failed quality assurance inspection. Furthermore, we
found that in May 2006, the Army awarded the contractor a major HMMWV
refurbishment effort, valued at approximately $33 million, even though
numerous incidents of poor contractor performance had been documented.
According to the contracting officer, the Army believed the contractor
was fully engaged in correcting poor performance issues. Until the
401ST Army Field Support Battalion implements the quality and
management procedures in its quality and management plans, it will be
unable to determine the extent to which the contractor is meeting the
contract requirements and will be unable to identify problem areas in
the contractor's processes and initiate corrective action to ensure
that deployed forces are receiving equipment in a timely manner.
Our analysis indicates that the Army is inadequately staffed to conduct
oversight of Task Order 1. Authorized oversight personnel positions
vacant at the time of our visit in April 2007 included those of a
quality assurance specialist, a property administrator, and two quality
assurance inspectors. The contracting officer told us that the two
civilian positions (the quality assurance specialist and the property
administrator) had been advertised but the command had not been able to
fill the positions with qualified candidates. The battalion was unsure
why the two military positions (the quality assurance inspectors) had
not been filled. The lack of an adequate contract oversight staff is
not unique to this location. We have previously reported on the
inadequate number of contract oversight personnel throughout DOD,
including at deployed locations. Army officials also told us that in
addition to the two quality assurance inspectors needed to fill the
vacant positions, additional quality assurance inspectors were needed
to fully meet the oversight mission. According to battalion officials,
vacant and reduced inspector and analyst positions mean that
surveillance is not being performed sufficiently in some areas and the
Army is less able to perform data analyses, identify trends in
contractor performance, and improve quality processes. Also, the Army
is considering moving major elements of option year 3 (including
maintenance and supply services) to a cost plus award-fee structure
beginning January 1, 2008. Administration for cost plus award-fee
contracts involves substantially more effort over the life of a
contract than for fixed-fee contracts. Without adequate staff to
monitor and accurately document contractor performance, analyze data
gathered, and provide input to the award-fee board, it will be
difficult for the Army to effectively administer a cost plus award-fee
contract beginning in January 2008.
Accordingly, we are making recommendations to the Secretary of Defense
to direct the Army to review and evaluate its procedures for managing
and overseeing the GMASS task order for services in Kuwait and take the
necessary actions to improve contract management and address the issues
raised in this report. The Army should take the steps necessary to
effectively implement its management and oversight plan to ensure
quality maintenance work by the contractor and proper administration of
the cost plus award-fee contract.
In commenting on a draft of this report, DOD concurred with our
recommendations and discussed proposed implementation actions to be
taken by the Army. DOD's comments are reprinted in enclosure II.
Background:
In March 2004, Army Field Support Command (now the Army Sustainment
Command) issued a solicitation to provide maintenance and supply
services in support of Army Materiel Command, Army Field Support
Command, coalition forces, and other authorized government agencies. In
October 2004, the Army awarded three indefinite quantity/indefinite
delivery-contracts[Footnote 3] for GMASS. The Army simultaneously
issued Task Order 1[Footnote 4] for maintenance services at Camp
Arifjan. Task Order 1 contains several different types of contract line
items, including cost plus fixed fee and firm-fixed-price
provisions.[Footnote 5] For those provisions that are cost plus fixed
fee, payment of a negotiated fee that is fixed at the inception of the
task order is made to the contractor.[Footnote 6] The fixed fee does
not vary with the actual costs but may be adjusted as a result of
changes in the work to be performed. This permits contracting for
efforts that might otherwise present too great a risk to contractors,
but provides the contractor only a minimum incentive to control costs
and, in turn, provides the greatest risk to the government. In
addition, the Army cannot adjust the amount of fee paid to contractors
based on the contractors' performance for the cost plus fixed fee
provisions. For those provisions in the task order that are firm fixed
price, the contractor has full responsibility for the performance costs
and resulting profit or loss.
Task Order 1 was for one year and was originally valued at $20,354,256.
However, by the end of the base year Task Order 1 costs increased to
approximately $102 million. The Army has exercised three options under
the contract and Task Order 1. Costs for option years 1 and 2 were
$209.6 million and $269.4 million, respectively. Cumulative obligations
for the base year plus option years 1 and 2 were approximately $581.5
million.[Footnote 7] There have been at least 86 modifications to the
contract and Task Order 1, including some that added requirements, such
as Army prepositioned stock reset, a tire assembly and repair program,
and HMMWV refurbishment. Many of the modifications were administrative,
such as providing additional funding, extending performance work
periods, updating contract line item numbers, and fixing typographical
errors.
Administration and oversight of this contract is the responsibility of
the contracting officer located at the Army Sustainment Command in Rock
Island, Illinois. According to the Federal Acquisition Regulation,
contracting officers are responsible for ensuring performance of all
necessary actions for effective contracting, ensuring compliance with
the terms of the contract, and safeguarding the interests of the United
States in its contractual relationships. For Task Order 1, the
contracting officer has delegated some administrative control of the
contract and task order to administrative contracting officers located
in Kuwait. The primary administrative contracting officer has contract
administrative responsibilities for most of the tasks included in Task
Order 1 and serves as the lead person for the battalion's contract
oversight team, which includes a government property administrator,
quality assurance specialist, and contract management officer. The
contract oversight team also includes five contracting officer
representatives designated for specific areas of oversight including
transportation, maintenance, supply, and operations. Within the
specific areas, quality assurance inspectors perform inspections of the
contractor's work. Quality assurance personnel at Camp Arifjan perform
oversight of the contractor's work using a quality assurance
surveillance plan. This plan, based on requirements contained in Task
Order 1, is developed by the Army and is used to ensure that systematic
quality assurance methods are used to monitor and evaluate the
performance and services of the contractor. It describes the
surveillance schedule, methods, and performance measures.
As stated in the contract quality assurance surveillance plan, the
level of government quality assurance oversight is determined by
contractor performance. Specifically, the number of quality assurance
inspections may be increased, if deemed appropriate, because of
repeated failures discovered during quality assurance inspections.
Likewise, the government may decrease the number of quality assurance
inspections if performance dictates. While the contractor, and not the
government, is responsible for the management and quality control
actions to meet the terms of the contract, the government quality
assurance surveillance plan was put in place to provide government
surveillance oversight of the contractor's quality control efforts to
ensure that they are timely and effective and are delivering the
results specified in the contract. As a part of the battalion's
surveillance process, 100 percent of equipment repaired by the
contractor is inspected by quality assurance inspectors prior to being
accepted. When the contractor informs the Army that equipment is ready
to be inspected, the inspectors review the equipment for compliance
with applicable maintenance standards. According to battalion standard
operating procedures, all deficiencies identified through Army quality
assurance inspections that prohibit the equipment from meeting the
established maintenance standards shall be documented. Documented
deficiencies describe the items that must be fixed by the contractor in
order for the equipment to meet the maintenance standards and indicate
that the equipment failed the Army quality assurance inspection.
The Army has developed a problem escalation and resolution process that
provides guidance for dealing with problems with a contractor.
According to the process, an identified problem that is not considered
severe should be documented by the administrative contracting officer
in a corrective action report to the contractor with a deadline for
addressing the problem. The process defines severe as a problem related
to safety, security, environmental, or mission impact or the third
occurrence of the same minor problem. If the problem is determined to
be severe, the administrative contracting officer in coordination with
the contracting officer should take immediate action to address any
unsafe practice and issue a contract deficiency report to the
contractor. When identified problems are not corrected after issuance
of a contract deficiency report, the situation is to be elevated to the
contracting officer. If informal communication with the contractor from
the contracting officer cannot resolve the problem, the contracting
officer is to issue a formal notice to the contractor, allowing 10 days
for a response. Records of all corrective action reports and contract
deficiency reports should be provided to the contracting officer.
The Contractor Has Had Difficulties Meeting Maintenance Standards,
Maintaining an Accurate Database, and Meeting Production Requirements:
Our work highlights the difficulties the contractor has had under Task
Order 1 in meeting maintenance standards, maintaining an accurate
database, and meeting production requirements. First, in analyzing Army
data, we found that from July 2006 through May 2007, 18 to 31 percent
of five types of vehicles presented by the contractor to the Army as
ready for acceptance had not been repaired and maintained to the
standards specified in Task Order 1 and consequently failed government
inspection.[Footnote 8] In addition, agricultural inspectors stated
that contractor-cleaned equipment that was to be transported back to
the United States frequently did not meet certain agricultural
standards. Second, the database into which the contractor was required
to enter the equipment's condition codes and location contained
inaccurate information about equipment status. On numerous occasions,
equipment was coded as ready to issue when it had not passed quality
assurance inspection. According to a corrective action report issued to
the contractor, a HMMWV was coded as ready to issue; however, when a
unit went to draw the vehicle, it was in a repair facility. Third,
according to the Army, the contractor had missed production
requirements and originally established deadlines for some tasks. For
example, Army officials stated that during the 12 months of a major
HMMWV refurbishment operation, the contractor never met the monthly
production requirement.
Equipment Presented to the Army for Acceptance Frequently Did Not Meet
Maintenance Standards Referenced in Task Order 1:
The contractor frequently presented equipment to the Army for
acceptance that did not meet the Army standards referenced in Task
Order 1. According to Task Order 1, the contractor shall ensure that
equipment is repaired to specified Army standards determined by the
government. Further, the contractor was to ensure that quality control
inspections and maintenance repair of materiel deficiencies were
completed. However, the contractor frequently presented equipment to
the Army that did not meet Army standards. When the contractor
completes maintenance on a piece of equipment, it is submitted to the
Army as ready for acceptance and Army quality assurance personnel
inspect the equipment to ensure that it meets specified maintenance
standards. Army quality assurance officials told us that in many cases
the contractor presented equipment to the Army as ready for acceptance
that failed Army inspection because the equipment did not meet the
established maintenance standards.
In February 2007 we issued a report on the condition of the Army's pre-
positioned equipment located at various sites around the world. As part
of that engagement, we visited Camp Arifjan in June 2006 to determine
the condition of the equipment maintained by the Task Order 1
contractor. In our February report, we noted that 28 percent of the
equipment at Camp Arifjan submitted for government acceptance had
failed quality assurance testing from June 2005 through June
2006.[Footnote 9] In the spring of 2007 we returned to Camp Arifjan and
found similar failure rates. As shown in table 1, our analysis of Army
data found that for five types of vehicles inspected by quality
assurance personnel from July 2006 through May 2007, the percentage of
equipment presented to the Army as ready for acceptance but that failed
government inspection ranged from 18 to 31 percent[Footnote 10].:
Table 1: Failure Rate Percentages for Selected Equipment Types
Inspected from July 2006 through May 2007:
Equipment type: M113 Armored Personnel Carrier;
Number of inspections performed: 109;
Number of failures: 20;
Percentage failed: 18.
Equipment type: M2A2 Bradley;
Number of inspections performed: 404;
Number of failures: 110;
Percentage failed: 27.
Equipment type: M1025 and M1026 HMMWV;
Number of inspections performed: 934;
Number of failures: 255;
Percentage failed: 27.
Equipment type: M1070 Heavy Equipment Transporter;
Number of inspections performed: 248;
Number of failures: 76;
Percentage failed: 31.
Equipment type: Heavy Expanded Mobility Tactical Truck;
Number of inspections performed: 460;
Number of failures: 122;
Percentage failed: 27.
Source: GAO analysis of Army data.
[End of table]
Similarly, in July 2007 the 401ST Army Field Support Battalion began
calculating (by commodity group) the percentage of equipment that
failed government inspection each week basis.[Footnote 11] The
battalion's analysis found the percentage of vehicles failing quality
assurance inspection generally ranged from 23 and 32 percent in August
and September 2007 with a high of just over 55 percent in one week.
Analyzing the Army's maintenance data, we also found that 702 pieces of
equipment failed Army quality assurance inspection three or more times
since May 2005. One example is an ambulance HMMWV that failed Army
quality assurance inspection five times in December 2006. This vehicle
repeatedly failed inspection for a leaking heater hose and a leaking
valve cover. In another example, a Bradley Fighting Vehicle failed
quality assurance inspection three times. During the first inspection,
12 deficiencies, including five that made the vehicle inoperable, were
identified and documented. One of the inoperable deficiencies
discovered was a main electrical system ground that was installed
improperly, creating a safety hazard. In the second and third
inspections, multiple deficiencies that made the vehicle inoperable
continued to be found, some of which were the same deficiencies that
had been previously identified.
Moreover, for the HMMWV refurbishment task, the contractor frequently
presented vehicles to the Army with multiple deficiencies. For the 5
month period from November 2006 through March 2007, multiple
deficiencies were identified through government inspection of
refurbished HMMWVs when presented to the Army for acceptance. During
those months, the average number of deficiencies identified per vehicle
through quality assurance inspection ranged from 2.5 to 7.4 per month.
The following inspections, which we observed during our visit to Camp
Arifjan in spring 2007, illustrate the difficulties the contractor has
had meeting Army maintenance standards. While at Camp Arifjan we
observed four government equipment inspections, two of which failed.
One failed inspection was of a Bradley Fighting Vehicle. The Bradley
was presented to the Army as ready for acceptance; however, during the
quality assurance inspection the inspector found that a cotter pin was
missing. This pin holds an adjusting rod that controls the brakes on
one side of the Bradley. According to the inspector, using the brakes
just two or three times would have caused the rod to come loose,
leaving the Bradley without brakes. A second failed inspection we
observed was of a forklift. Because of a burned fuse, the forklift did
not meet the maintenance standard and therefore failed the inspection.
The burned fuse was clearly visible to us and should have been easily
seen by contractor personnel.[Footnote 12]
In a March 2006 letter to the contractor, the Army expressed concerns
about the contractor's quality control department. Specifically, the
Army stated that there was a lack of attention to detail and inadequate
maintenance inspection processes and that quality control personnel
were not ensuring that maintenance repairs were in compliance with the
appropriate maintenance manuals. Additionally, in some corrective
action reports issued after the March 2006 letter the Army continued to
express concern about the contractor's quality control processes.
Specifically, the battalion noted that the contractor's quality control
inspections were not being performed in accordance with Army
maintenance standards and that the contractor's quality control checks
were not adequate. Army quality assurance officials believed that the
contractor depended on the Army to identify equipment deficiencies. As
a result of these issues, government quality assurance inspectors were
consistently rejecting equipment presented as ready for acceptance.
When equipment is presented to the government and does not pass quality
assurance inspection, it is returned to the contractor for continued
maintenance until it meets the established standard. Under the cost
plus fixed fee maintenance provisions in Task Order 1, the contractor
is reimbursed for all maintenance labor hours incurred, including labor
hours associated with maintenance performed after the Army rejects
equipment that fails to meet Army maintenance standards. This results
in additional cost to the government. For example, in a December 2006
quality assurance inspection of a HMMWV, 16 deficiencies that made the
vehicle inoperable were found. According to Army data, a total of 213
hours were spent working on this vehicle after it was initially
submitted to the government as ready for acceptance. A second example
is a Heavy Equipment Transporter (HET) that was submitted to the Army
as ready for acceptance in January 2007 and failed Army inspection.
After this first failed inspection, an additional 636 hours were
charged for repairing this vehicle before it passed government quality
assurance inspection three months later. Although the equipment was not
initially presented to the Army at the required standard, the Army
reimbursed the contractor for the labor costs associated with the 213
and 636 hours of rework. Our analysis of Army data found that since May
2005, the contractor worked a total of about 188,000 hours to repair
equipment after the first failed government inspection. This translates
into an approximate cost to the government of $4.2 million.[Footnote
13]
As part of the maintenance requirements of Task Order 1, the contractor
was required to conduct wash rack operations in preparing equipment for
shipment to the United States. According to Task Order 1, the
contractor was required to clean equipment to meet the appropriate
agricultural standards[Footnote 14] as directed by the government.
Further, Task Order 1 noted that the Department of Agriculture's Animal
Plant Health and Inspection Service (APHIS) regulations call for the
equipment to be clean of soil, organic matter, and other
contaminants.[Footnote 15] According to Navy customs
inspectors,[Footnote 16] equipment presented for inspection frequently
did not meet APHIS standards. The inspectors were unable to provide
historical data on agricultural inspection results because they had
just begun to track and monitor this performance metric. However, the
officials told us that they reject most equipment at least once due to
the presence of mud and dirt. We observed an inspection in which a
contractor employee was trying to remove water from the interior of a
piece of equipment with his hands and the vehicle tracks were clearly
filled with mud.
Contractor-Maintained Database Contains Inaccurate Information about
Equipment Status:
The contractor-maintained database contains inaccurate information
about equipment status. The database is used for tasks that include,
but are not limited to, equipment maintenance status, scheduling
equipment for maintenance, deficiency reporting, parts management,
labor reporting, and materiel expenses. Among other things, Task Order
1 requires the contractor to ensure that correct equipment condition
codes and correct locations of equipment be entered into the database
in accordance with Army policy. However, on numerous occasions, Army
officials found that incorrect condition codes were assigned to various
pieces of equipment within the database. In some instances, equipment
was coded as ready for issuance when it had not passed quality
assurance inspection. For example, according to a corrective action
report issued to the contractor, in the maintenance database the
contractor reported that a HMMWV was ready for issuance, but when the
Army went to issue this vehicle to a unit, it was in a maintenance shop
being repaired by the contractor. In another instance, the contractor
had coded equipment that had not passed Army quality assurance
inspection as ready for issuance and placed the equipment in a staging
area for Heavy Brigade Combat Team equipment that was ready for issue.
According to the battalion, this inaccurate reporting portrayed an
incorrect readiness posture for the combat team and could have resulted
in a crippling slowdown of the equipment issue process due to the
probability of units rejecting the equipment. The battalion issued
corrective action reports to the contractor stating that (1) the
database was not being updated with proper condition codes and (2)
erroneous data may have been reported to the Department of the Army in
the battalion's operational readiness reports. Additionally, in an
assessment of the contractor's performance in option year 1, the
contracting office stated that erroneous equipment status reporting
potentially affects the battalion's ability to make timely and accurate
decisions regarding the availability of equipment to support the
warfighter. Among the reasons the contractor gave for the incorrect
condition codes in the database were human error and a probable fault
in the manner in which the database handles certain data.
According to the Army, the Contractor Has Missed Production
Requirements and Deadlines:
According to the Army, the contractor has missed some production
requirements and some task deadlines were extended when the contractor
was unable to meet original completion dates.[Footnote 17] In May 2006
a task was added to the contract for the refurbishment of HMMWVs. The
statement of work associated with the HMMWV refurbishment effort stated
that the contractor was required to be able to process the HMMWVs
through the maintenance facilities at a minimum rate of 150 HMMWVs per
month. According to documents provided by the contracting officer, upon
award of this work, the contractor was provided 45 days to become fully
operational, and for months one and two of operations the production
requirement was 25 and 100 vehicles, respectively. According to Army
documents, after the first two months of operation, the contractor was
expected to be fully operational and the monthly production requirement
was increased to 150 vehicles per month. However, 18 and 90 HMMWVs were
completed in the first and second months of operations, respectively.
Further, according to the Army, the contractor failed to meet its
contractual requirement of a minimum of 150 vehicles per month, and the
contracting officer sent written notices to the contractor documenting
this failure. In some months fewer than 75 HMMWVs were ultimately
accepted by the Army, as shown in table 2 below. For example, 38
vehicles were accepted by the Army in February 2007. According to an e-
mail from one of the administrative contracting officers, the
contractor's monthly production output was influenced by issues such as
deficient production processes and supply management, quality control,
and parts availability problems. The official cited a lack of
contractor standard operating procedures and in-process quality checks
as reasons for a high number of equipment defects, thereby delaying
Army acceptance of the HMMWVS. Further, the official cited contractor
supply management challenges, such as determining when to order
additional parts and ordering the right amount of parts in a timely
manner, as affecting the contractor's ability to meet monthly
production requirements. The official acknowledged that the parts
availability problem was driven by a shortage of armor and frame rails
in the Army supply system. Army officials stated that as a result of
the contractor's failure to meet the production requirements of the
HMMWV refurbishment effort, the Army did not renew this task with the
contractor at the end of the performance period. Because this was a
fixed fee provision, the Army was not able to reduce the contractor's
fee for this task.
Table 2: HMMWV Refurbishment Center Monthly Production:
Production month: June 2006;
Number of vehicles accepted by the Army: 18.
Production month: July 2006;
Number of vehicles accepted by the Army: 90.
Production month: August 2006;
Number of vehicles accepted by the Army: 80.
Production month: September 2006;
Number of vehicles accepted by the Army: 60.
Production month: October 2006;
Number of vehicles accepted by the Army: 111.
Production month: November 2006;
Number of vehicles accepted by the Army: 105.
Production month: December 2006;
Number of vehicles accepted by the Army: 54.
Production month: January 2007;
Number of vehicles accepted by the Army: 70.
Production month: February 2007;
Number of vehicles accepted by the Army: 38.
Production month: March 2007;
Number of vehicles accepted by the Army: 40.
Production month: April 2007;
Number of vehicles accepted by the Army: 60.
Source: GAO analysis of Army data:
[End of table]
We also found that the contractor was unable to independently meet the
original deadlines set by the Army for two other tasks. In July 2006
the contractor began a task to repair 150 HETs. The original completion
date for this task was September 29, 2006; however, as of that date
only 96 HETs had been accepted by the Army. While the original
completion date was pushed back at the mutual agreement of the
contractor and the government, Army contracting officials explained
that the original completion date for this task was extended because of
the contractor's inability to provide the required 150 HETs by the date
originally specified in Task Order 1. The contractor also had a task to
repair HMMWVs for foreign military sale to the Iraqi security forces.
This task required the contractor provide a specific number of HMMWVs
during four different periods. According to the contracting officer's
assessment of the contractor's performance, the contractor was unable
to meet the requirements independently and government assistance was
necessary. The contractor stated that this condition was caused by a
lack of government-provided critical parts and inbound vehicles.
According to a battalion official, the battalion allowed the contractor
to use HMMWVs that the battalion planned to use to meet other missions.
At the time the contractor was preparing HMMWVs for the Iraqi security
forces, among the battalion's other missions were repairing and
replacing equipment damaged as a result of combat and preparing
equipment for a light brigade combat team. The battalion officials
stated that while using assets designated for other missions allowed
the contractor to meet the requirements of the Iraqi security forces
task, the contractor had to subsequently back fill those sources.
Problems meeting production and quality goals may have resulted in some
deployed units not receiving the equipment they needed in a timely
manner.
The Army Has Not Always Followed Established Quality Assurance
Principles:
The Army has not always followed key quality assurance and contract
management principles when managing Task Order 1 because it did not
implement the processes contained in its quality assurance and contract
management plans. These processes require that contractor performance
data be documented and used to assess contractor performance, identify
recurring problems, and inform contract management decisions. However,
the Army has not always documented deficiencies identified during the
battalion's quality assurance inspections, instead allowing the
contractor to fix some deficiencies without documenting them in an
attempt to prevent a delay in getting the equipment to pass inspection.
In addition, the Army did not analyze available data to evaluate the
contractor's performance, failing to routinely track or monitor the
percentage of equipment submitted for government acceptance that failed
quality assurance inspection until July 2007. Furthermore, the Army
awarded the contractor a major HMMWV refurbishment effort, valued at
approximately $33 million, even though numerous incidents of poor
contractor performance had been documented.
Army and DOD Quality Assurance and Contract Management Principles
Should Guide Battalion Activities:
The Army and DOD have developed a variety of quality assurance and
contract management principles that should guide the battalion quality
and contract management activities. The Army Quality Program is a
results-based program that allows Army activities to develop their own
quality programs. However, the program regulation states that quality
programs will address the following key principles:
* Measurement and verification of conformity to requirements:
* Fact-based decision making:
* Use of performance information to foster continuous improvement:
* Effective root-cause analysis and corrective action:
* Performance of tasks by people who can evaluate quality issues and
recommend solutions:
In addition, according to the Army Quality Program regulation, an
activity's (such as the battalion's) quality assurance program should
utilize risk-based planning. In determining the types and frequency of
quality assurance actions, the activity should consider the impact of
nonconforming equipment or services as well as the contractor's
demonstrated past performance.
DOD guidance also establishes principles for quality assurance and
contract administration. For example, according to the guidebook for
performance-based service acquisitions in DOD, each performance
assessment activity should be documented as it is conducted, whether a
contractor's performance was acceptable or unacceptable in accordance
with the performance assessment plan. In addition, the Federal
Acquisition Regulation requires that contractor performance be
documented and that past performance be considered when selecting
contractors for future contract awards.
The Army Does Not Always Document Poor Performance:
The Army has not always documented unacceptable contractor performance
under Task Order 1. The collection of performance data is the
foundation for many of the quality and contract management requirements
established by Army and DOD regulations and guidance. For example, the
Army regulation establishing the Army Quality Program requires that
actions be taken to identify, correct, and prevent the recurrence of
quality issues. Furthermore, the Defense Federal Acquisition Regulation
Supplement states that the contract administration office shall
establish a system for the collection, evaluation, and use of certain
quality data, including quality data developed by the government
through contract quality assurance actions. Moreover, the battalion's
quality assurance guidance requires that deficiencies identified
through the battalion's inspections be documented. However, some
deficiencies identified during Army inspection of equipment were not
being documented and entered into the Army maintenance database.
According to battalion quality assurance officials, while deficiencies
that made the equipment inoperable were always documented, deficiencies
that did not make the equipment inoperable but kept it from meeting the
maintenance standards were commonly not documented. Rather than
documenting all the deficiencies identified, quality assurance
inspectors were allowing the contractor to fix some deficiencies
without documenting them, in an attempt to prevent a delay in getting
the equipment up to standard and passing inspection. According to
quality assurance officials, it may take an additional half a day to
one day for equipment to be accepted by the Army when deficiencies that
do not make the equipment inoperable are documented, because of the
paperwork and process associated with correcting documented
deficiencies.
Although the Army took steps to correct the lack of documentation for
all equipment deficiencies, it reverted back to its original process of
not documenting all deficiencies. Based on our review, the Army took
steps in May 2007 to ensure the documentation of all equipment
deficiencies identified during Army quality assurance inspections. The
lead quality assurance official directed that all equipment
deficiencies be documented so that the Army would have an accurate
picture of the contractor's maintenance quality. We were later told by
quality assurance officials that inspectors followed this direction and
documented all equipment deficiencies that were identified during
inspections for approximately two weeks. However, the officials stated
that after about two weeks the inspectors went back to the practice of
allowing the contractor to correct those deficiencies that did not make
the equipment inoperable without documenting them. They cited the need
to get the equipment to the units quickly as the reason for doing this.
When contractor performance is poor, the need for rigorous government
quality assurance oversight becomes even more important. We believe
that the deficiencies can be documented without a delay in getting the
equipment to the units. For example, the inspector can document the
deficiencies identified during the inspection on the appropriate
worksheet, and at the end of the inspection it can be noted that the
deficiencies were corrected. This worksheet would be included in the
equipment packet provided to the personnel responsible for updating the
equipment status codes in the maintenance database. When the equipment
status code is updated in the maintenance database, it should be noted
that deficiencies were identified and were corrected, and that the
equipment subsequently passed quality assurance inspection and is ready
for issuance.
The Army Did Not Analyze Available Data to Evaluate Contractor
Performance until July 2007:
The Army did not analyze available data to evaluate the contractor's
performance in meeting the specified maintenance standard requirements
until July 2007. The Army quality program specifies the use of
performance information to perform root-cause analysis and foster
continuous improvement, and the battalion's July 2006 draft maintenance
management plan requires that contractor performance data be analyzed
to help identify the cause of new and/or recurring quality problems and
evaluate the contractor's performance. As previously mentioned, Army
quality assurance personnel inspect equipment submitted for Army
acceptance to ensure that it meets the specified maintenance standards.
The results of these inspections, including data documenting whether
the equipment has been accepted or rejected by the Army, are maintained
by quality assurance officials as well as in the Army maintenance
database. However, in February 2007, we reported that the maintenance
battalion had not routinely tracked or monitored the percentage of
equipment submitted for government acceptance that failed quality
assurance inspection.[Footnote 18] While we found that the inspection
results data were readily available to the maintenance battalion, it
was still not tracking or monitoring this key performance metric.
Because the battalion does not track and monitor the percentage of
equipment submitted for Army acceptance that failed quality assurance
inspection, the Army does not know the extent to which the contractor
is meeting the specified maintenance standard requirements nor can it
identify problem areas in the contractor's processes and initiate
corrective action. According to Army quality assurance officials, this
metric was not tracked and monitored because they did not have
sufficient quality assurance staff to perform such analysis.
Recognizing the usefulness of this performance metric, the lead quality
assurance inspector informed us that in July 2007, he began calculating
the percentage of equipment that is failing quality assurance
inspection each week, and this information is presented to the
battalion commander at command and staff updates. He said that this
information is used to identify maintenance shops that are not
improving their performance and to develop historical data on the
contractor's performance. In the past, the command has initiated
improved oversight practices but has later discontinued them.
Maintaining the practice of tracking and monitoring performance metrics
would provide key data for assessing the contractor's performance.
The Army Awarded Additional Work to the Contractor despite Performance
Concerns:
In May 2006, the Army added a major HMMWV refurbishment effort valued
at approximately $33 million to Task Order 1 despite concerns of poor
contractor performance. According to contracting officials, Task Order
1 provided an existing contract that could be used to expeditiously
provide the required HMMWV refurbishment capability. However, prior to
the work being added to Task Order 1, numerous incidents of poor
contractor performance were documented. We found that from October 2005
through April 2006, eight notices describing poor performance were
issued to the contractor. Some of the poor performance concerns
mentioned in the notices follow:
* Equipment status is not being updated in the reporting system. As a
result, the maintenance battalion operational readiness reports are
inaccurate and erroneous data are being reported to the Department of
the Army.
* Equipment is not being inspected in accordance with Army standards
specified in Task Order 1 and initial technical inspections are not
being conducted within the timeframe specified in the task order.
* Contractor quality control inspections performed before equipment is
presented to the government are inadequate and are not identifying
critical maintenance faults.
* Sensitive items are improperly accounted for.
Additionally, in a letter dated March 15, 2006, the Army contracting
officer notified the contractor of numerous areas of concern. The
letter stated that asset management was ineffective to the point that
the battalion's ability to report readiness and determine when assets
would be ready was impaired, maintenance could take significantly less
time if thorough equipment assessments were performed, and equipment
was consistently rejected because of inadequate quality control. The
letter also stated that the Army felt that the contractor's personnel
staffing was insufficient to achieve all missions, as only 89 percent
of the personnel that the contractor proposed to execute the contract
requirements were on-hand for option year 1. More specifically, the
letter stated that only 36 percent of the required personnel were on
hand to perform the priority mission of preparing the Heavy Brigade
Combat Team although funding had been placed on the contract for the
mission. In addition, the Tire Assembly and Repair Program and Add-on
Armor missions had only 41 percent and 45 percent of the required
personnel on hand, respectively, despite being funded.
We asked the Army contracting officer with overall responsibility for
the contract why such a major mission was added to the contract, given
the battalion's concerns with the contractor's performance. The Army
official responded that the battalion did not raise concerns regarding
the contractor's capability to meet the requirements and there was
confidence that the work was being placed with a contractor that had a
good history of performance in theater. The official stated that while
a letter citing concerns with the contractor's ability to ramp up to
full personnel strength and its quality control processes was issued,
the Army believed the contractor was fully engaged in correcting the
issues.
Battalion quality assurance officials told us that all information
regarding contractor performance is not always provided to the
contracting officer. According to the Army's problem resolution
process, all corrective action requests should be sent to the
contracting officer, but this was not being done according to battalion
quality assurance officials. In some situations, the quality assurance
officials wait until they have issued two or three requests related to
the same area before they send the information to the contracting
officer. Following this procedure could result in some corrective
action requests not reaching the contracting officer. Additionally,
some battalion officials said that they do not write as many corrective
action requests as are needed because they would spend most of their
time writing them because of the repeated poor performance.
Battalion's Contract Management Oversight Team Is Inadequately Staffed:
According to Army officials, the battalion's contract management
oversight team is inadequately staffed to effectively oversee Task
Order 1 in Kuwait and the battalion is concerned about its ability to
administer cost plus award-fee provisions. We have previously reported
on the need to have an adequate number of oversight personnel to ensure
the effective and efficient use of contractors and the continued
shortage of contract oversight personnel in deployed locations.
Oversight personnel are responsible for performing the various tasks
needed to monitor contractor performance, document results of
inspections, analyze available inspection data, assess overall
contractor performance, and evaluate the contractor's performance when
considering awarding additional work to the contractor. The battalion
uses both military and civilian personnel to provide contract
oversight. Battalion officials told us that there were not enough
trained oversight personnel to effectively oversee and manage the
maintenance contract in Kuwait. At the time we visited the battalion in
April 2007, four oversight personnel positions were vacant and were
still vacant as of September 2007. The vacancies included those for two
military quality assurance inspectors and two civilian positions-a
quality assurance specialist and a property administrator. Command
officials were unsure why the military quality assurance positions had
not been filled and told us that the vacant civilian positions were
advertised but the command had not been able to fill the positions with
qualified candidates. An administrative contracting officer told us
that the quality assurance specialist position was filled for a short
time in December 2006; however, the person was deemed unqualified and
was assigned to another position. The quality assurance specialist is
responsible for such activities as performing analysis of quality
processes and procedures, tracking and coordinating training for
quality assurance personnel, updating quality assurance surveillance
plans, and ensuring productive interaction between Army and contractor
quality personnel.
Additionally, the battalion has been without a property administrator
since the end of 2006, even though both the battalion and the Army
Sustainment Command have identified issues with the contractor's
accountability for government furnished equipment. According to DOD's
Manual for the Performance of Contract Property Administration,
property administrator responsibilities include administering the
contract clauses related to government property in the possession of
the contractor, developing and applying a property systems analysis
program to assess the effectiveness of contractor government property
management systems, and evaluating the contractor's property management
system and recommending disapproval where the system creates an
unacceptable risk of loss, damage, or destruction of property. We found
that some property administrator duties, such as approving contractor
acquisition of items, were being performed by an administrative
contracting officer; however, other important duties were not being
performed. In March 2007, a team from the Army Sustainment Command's
Office of Internal Review and Audit Compliance conducted a review of
government-furnished property accountability in Kuwait and identified
areas for improvement in property accountability. For example, the team
found that while required property accountability reports were prepared
by the contractor, they were not being provided to the Army nor did the
Army request the reports. After reviewing one such report, the
evaluation team questioned its accuracy. It found that the contractor
was reporting a total of $2.4 million in government-furnished property;
however, the value of two of the eight property listings reviewed
totaled more than $2 million. Without adequate oversight of government
property, the Army cannot be certain that duplicate supplies have not
been ordered, government property is not misplaced or misused, and
property in the possession of the contractor is being efficiently,
economically, and uniformly managed.
In addition to the two vacant quality assurance inspector positions
mentioned above, Army officials also told us that additional quality
assurance inspectors were also needed. The officials explained that
three quality assurance inspector positions were removed from the
Army's authorized battalion organizational structure; however, the
officials were not sure why the positions were removed because they
believe the need still exists for the inspectors. According to
battalion officials, vacant and reduced inspector and analyst positions
mean that surveillance is not being performed sufficiently in some
areas and the Army is less able to perform data analyses, identify
trends in contractor performance, and improve quality processes.
In some instances when contract administration and management positions
cannot be filled permanently, the Army fills these positions
temporarily. For example, the Army filled a vacant administrative
contracting officer's position in Qatar with an Army reservist called
to active duty to fill the position for a specific period-two months.
In Kuwait, the battalion tried to fill the vacant positions temporarily
but was unsuccessful. According to the battalion, it solicited for
volunteers to fill the critical positions in Kuwait with deployments up
to 179 days and requested volunteers from the Army Reserve and Guard.
In addition, a relocation incentive was requested and approved for the
critical property manager and quality assurance specialist positions.
Also, the battalion said that it offered off-post housing to some Army
civilian applicants and augmented military requirements with the
mobilization of the U.S. Army Reserve Multi-Functional Support Command.
As an alternative to providing its own contract administrative and
oversight staff, the Army could have delegated the administrative
responsibilities for Task Order 1 to the Defense Contract Management
Agency (DCMA). DCMA is a combat support agency tasked with providing
contract administration support for contingency contracts like the
GMASS contract and task orders at the request of the contracting
officer. Depending on the delegation from the contracting officer, DCMA
contract administrative personnel can provide a number of contract
administrative services. For example, DCMA can assume responsibility
for performing property administration, provide quality assurance
specialists and supervise contracting officers' representatives,
monitor and evaluate technical performance, and review and approve
purchase requests. In addition, DCMA administrative contracting
officers may be given authority to negotiate certain price adjustments.
Battalion officials also expressed concern that the battalion's current
staffing levels will make the potential transition from a cost plus
fixed-fee to a cost plus award-fee structure for maintenance and supply
services difficult. According to the GMASS indefinite delivery/
indefinite-quantity contract, the Army envisioned transitioning to a
cost plus award-fee structure in option year 2 for maintenance and
supply services, although the government reserved the right to change
the contract line item structure. According to the contracting officer,
the Army initially chose not to move to an award-fee because the
battalion did not believe it had the staff to properly administer the
contract. We have previously reported that the development and
administration of cost plus award-fee contracts involve substantially
more effort over the life of a contract than do cost plus fixed-fee
contracts.[Footnote 19] For award-fee contracts, DOD personnel (usually
members of an award-fee evaluation board[Footnote 20]) conduct
periodic--typically semiannual--evaluations of the contractor's
performance against specified criteria in an award-fee plan and
recommend the amount of fee to be paid. The Army contracting office is
considering transitioning the major elements of option year 3
(including maintenance and supply services) from a cost plus fixed-fee
structure to a cost plus award-fee structure, beginning January 1,
2008. However, according to battalion officials, they will not be
adequately organized and staffed to properly administer award-fee
structured provisions until about April 2008. Battalion officials
stated that a new battalion commander took command on August 1, 2007,
and as a part of his new role, he is reviewing the battalion's
organization and suggesting changes to better align the battalion to
provide adequate contractor oversight and properly administer an award-
fee contract. They stated that it would take some time before these
changes would be in place and personnel are properly trained to take
the actions needed to monitor contractor performance and assist in
making award-fee decisions. Without adequate staff to monitor and
accurately document contractor performance, analyze data gathered, and
provide meaningful input to the award-fee board, it will be difficult
for the Army to effectively administer an award-fee contract beginning
in January 2008.
Conclusions:
The Army has not taken sufficient actions to ensure quality contractor
maintenance and efficient contract oversight. Given the poor
performance by the contractor, adequate and well-documented
surveillance, along with necessary corrective actions, are essential to
improving the quality of work by the contractor. Poor performance by
the contractor and inadequate Army oversight have resulted in
expenditure of additional funds with less-than-expected results,
additional cost to repair items already presented to the Army as
meeting established standards, and may have resulted in delays in
providing assets to deployed units. Without sufficient oversight of
contractor performance, the Army cannot ensure that operation and
maintenance funds for vehicle maintenance are being used cost
effectively. Moving to a cost plus award-fee structure for certain
elements of option year 3 will provide more risk to the contractor,
potentially resulting in improved performance. However, without
adequate Army oversight personnel and contractor performance data to
make award-fee decisions, the Army cannot accurately determine whether
the contractor should receive an award, and if so, how much. Without
aggressive action on the part of the Army, the problems highlighted in
this report will continue.
Recommendations for Executive Action:
We are making five recommendations in this report. We recommend that
the Secretary of Defense direct the Secretary of the Army to review and
evaluate the Army's procedures for managing and overseeing the GMASS
task order in Kuwait and take the necessary actions to improve contract
management. We also recommend that the Army develop a strategy to
implement its current quality assurance and maintenance management
oversight plans to ensure that:
* all deficiencies are documented in the Army's quality assurance
database without affecting the mission:
* contractor data are analyzed to improve contractor performance, and:
* all information on contractor performance is provided to the
contracting officer.
In addition, we recommend that the Army:
* take steps to fill vacant oversight positions with personnel who have
the appropriate knowledge and skills, and:
* develop a plan to allow the proper administration of the cost plus
award-fee structure for maintenance and supply services.
Furthermore, we recommend that the Army consider delegating some
additional oversight responsibilities to DCMA to meet some of the
current contract management and oversight personnel shortfalls.
Agency Comments and our Evaluation:
In commenting on a draft of this report, DOD concurred with our
recommendations and discussed proposed implementation actions to be
taken by the Army. In responding to our recommendations for the Army to
improve contract management and develop a plan to allow for the proper
administration of a cost plus award-fee contract, DOD stated that the
Army is reviewing the contract to determine the best contract type to
improve contract management. Assuming the Army is adequately organized
and staffed to administer the contract type selected, we believe that
this action could allow the Army to identify and determine the best
procedures for managing and overseeing this contract. In response to
our recommendation that the Army develop a strategy to implement its
current quality assurance and maintenance management oversight plans,
DOD said the Army Field Support Battalion-Kuwait has developed a multi-
pronged strategy to implement and/or improve quality assurance and
maintenance management oversight. We believe effective implementation
of the strategy should address our recommendation. In response to our
recommendation that steps be taken to fill vacant oversight positions,
DOD said that the Army continues to exercise several recruiting
authorities to entice qualified candidates to fill critical vacancies.
However, the Army stated that filling the critical quality assurance
specialist position continues to be difficult. According to the Army,
in December 2007, both the first and second choice to fill the position
declined the offer. The position is being announced again and the Army
is working to streamline the recruit and fill process and will continue
to pursue filling this critical position. Given the difficulties of
filling deployed positions, we believe these actions are reasonable and
should help to identify someone to fill this position. In response to
our recommendation for the Army to consider delegating some additional
oversight responsibilities to DCMA, DOD stated that delegating
additional oversight responsibilities to DCMA is predicated on the
ability of the DCMA to support the contract. We understand that DCMA
would play a major role in the decision to delegate additional
oversight responsibility to them. DOD's comments are reprinted in
enclosure II.
We are sending copies of this report to the appropriate congressional
committees, the Secretary of Defense and the Secretary of the Army. We
will also make copies available to others upon request. In addition,
this report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staff has questions, please contact me at (202) 512-8365
or solisw@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report. Key contributors to this report are listed in enclosure III.
William M. Solis:
Director, Defense Capabilities and Management:
Enclosures - 3:
List of Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Ted Stevens:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable John P. Murtha:
Chairman:
The Honorable C. W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
Enclosure I: Scope and Methodology:
To evaluate the contractor's performance of maintenance and supply
services under the Army's Global Maintenance and Supply Services task
order, Task Order 1, we interviewed Army contracting officials at the
Army Sustainment Command in Rock Island, Illinois; interviewed Army
officials of the 401ST Army Field Support Battalion at Camp Arifjan,
Kuwait as well as contractor representatives responsible for the
management of Task Order 1; reviewed various Army and contractor
documents related to contractor execution; and observed the
contractor's maintenance processes. We reviewed all records of quality
assurance inspections conducted from November 2005 through May 2007 for
equipment maintained by the contractor. Subsequently, we analyzed the
inspection result data for selected equipment types inspected from July
2006 through May 2007 to determine the percentage of items failing
inspection. We subjectively selected equipment types that were commonly
repaired by the contractor, were perceived to be critical to the fight
in Iraq and Afghanistan, and were among the battalion's highest repair
priorities. Although the Army has not documented all deficiencies that
would indicate failed inspections and be recorded in the database, we
determined that the data were sufficiently reliable for the purpose of
our review. We took several actions to assess the reliability of the
data. Specifically, we reviewed battalion guidance and procedures for
how inspections should be conducted and documented, interviewed several
quality assurance inspectors to determine how they conducted and
documented inspections, observed the conduct of some quality assurance
inspections, and observed the documentation of inspection results. We
also met with representatives of the contractor, reviewed quality data
provided by the contractor, and discussed our report's findings,
conclusions, and recommendations with contractor representatives.
To determine the extent to which the Army's quality assurance and
contract management activities implement key principles of quality
assurance and contract management regulations, we met with contracting
and quality assurance officials at Camp Arifjan, Kuwait, and Rock
Island, Illinois, and reviewed oversight and surveillance plans and
inspection records. We reviewed a variety of quality assurance and
contract management regulations and guidance, including the Army
Quality Program regulation and the Defense Federal Acquisition
Regulation Supplement. In addition, we spoke with representatives of
the contractor and reviewed data provided by the contractor. We also
observed physical inspections of four pieces of equipment presented to
the Army while we were at Camp Arifjan and analyzed Army-provided data
on oversight and surveillance.
To determine if the battalion was adequately staffed to perform
oversight activities, we reviewed battalion staffing documents and
spoke with battalion oversight and command officials as well as
officials from the Army Sustainment Command. In addition, we reviewed
Department of Defense and Army guidance and regulations regarding
contract oversight and management. We conducted this performance audit
from March 2007 through December 2007 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.
[End of section]
Enclosure II: Comments from the Department of Defense:
Deputy Under Secretary Of Defense For Logistics And Materiel Readiness:
3500 Defense Pentagon:
Washington, DC 20301-3500:
January 10, 2008:
Mr. William M. Solis:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N.W.:
Washington, DC 20548:
Dear Mr. Solis:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO- 08-316R, "Defense Logistics: The Army Needs to Implement
an Effective Management and Oversight Plan for the Equipment
Maintenance Contract in Kuwait," dated December 10, 2007 (GAO Code
351106).
The report recommends that the Secretary of the Army take certain
actions for improving the management and oversight of the Global
Maintenance and Supply Services Contract in Kuwait. The Department of
the Army accepts those recommendations, and the DoD concurs with the
proposed actions. Detailed comments on the report are enclosed.
Sincerely,
Signed by:
Jack Bell:
Enclosure:
As stated:
GAO Draft Report – Dated December 10, 2007 GAO Code 351106/GAO-08-
316R:
"Defense Logistics: The Army Needs to Implement an Effective Management
and Oversight Plan for the Equipment Maintenance Contract in Kuwait"
Department Of Defense Comments To The Recommendations:
Recommendation 1: The GAO recommends that the Secretary of Defense
direct the Secretary of the Army to review and evaluate the Army's
procedures for managing and overseeing the Global Maintenance and
Supply Services under Task Order 1 in Kuwait and take the necessary
actions to improve contract management.
Dod Response: Concur. The Army Sustainment Command is reviewing
contract W52P1J-05-D-0003/Task Order 0001 (Maintenance and Supply
Operations in Kuwait) to determine the best contract type to improve
contract management. The objective will be a contract that enhances
contract management and oversight, incentivizes contractor performance,
and ties compensation to performance and performance improvement.
Target date for this review and decision is March 1, 2008.
Recommendation 2: The GAO recommends that the Army develop a strategy
to implement its current quality assurance and maintenance management
oversight plans to ensure that:
• All deficiencies are documented in the Army's quality assurance
database without impacting the mission;
• Contractor data is analyzed to improve contractor performance; and •
All information on contractor performance is provided to the
contracting officer.
DOD Response: Concur. The Army Field Support Battalion – Kuwait (AFSBn-
KU) has developed a multi-pronged strategy to implement and/or improve
quality assurance and maintenance management oversight to ensure that
deficiencies are documented, contractor performance data is analyzed,
and all information on contractor performance is provided to the
contracting officer.
* Training: Initiated integrated Directorate of Logistics / Quality
Assurance training. Result: 40 personnel trained, training plan
institutionalized.
* Award Fee Plan Metrics: Developed, defined, and instituted key
contractor performance evaluation criteria and metrics as a basis for
the Global Maintenance and Supply Services Task Order 0001 Award Fee
Plan. Result: Completed October 2007; Battalion gathering and
documenting key contractor performance data.
* Assistance Visits/Lessons Learned:
- The Army Sustainment Command Lean Six Sigma (LSS) Deployment Office ”
Assisting and advising the Battalion; i.e.:
* Developed a Value Stream Map of the entire equipment maintenance
process flow from reception to ready-for-issue.
* Developed LSS multi-generational project plan to address primary
contract concerns.
* Advising on metrics for better accountability of contractor
performance.
* Assessing training initiatives to ensure that issues identified are
eliminated.
* Assisted in defining and improving the first pass yield (FPY) process
and reporting metric between government and contractor, resulting in
steady improvement of FPY in December 2007 to 93% of prime self-
propelled vehicles inspected.
* AFSBn-KU and ITT Corporation jointly conducted a quality functional
deployment resulting in improved operational maintenance metrics.
Result: LSS found that GAO findings are being addressed and that
improvements are well under way; LSS is planning to conduct an
assistance visit in January and March 2008.
- Army Prepositioned Stocks (APS) ” 4 (Northeast Asia) ” Shared lessons
learned and advised Battalion on tactics, techniques, and procedures
successfully used to monitor contractor performance for APS-4. Result:
Battalion is implementing recommendations for improvement in equipment
redistribution process, Class IX stock management, maintenance shop
operations, and quality assurance.
Recommendation 3: The GAO recommends that the Army take steps to fill
vacant oversight positions with personnel who have the appropriate
knowledge and skills.
DOD Response: Concur. Army Sustainment Command has exercised and
continues to exercise several recruiting authorities to entice
qualified candidates to fill critical vacancies; i.e., relocation
bonus, expansion of the area of consideration to Federal-wide,
Veteran's Employment Opportunities Act, reinstatement eligibles, and
30% disability. As of December 9, 2007, a qualified Property Management
Specialist was selected with a job offer accepted pending pre-
employment requirements. Assuming all pre-employment requirements are
met, the candidate could be on the job in Kuwait by mid/end January
2008. Despite attempts to attract qualified applicants, filling the
critical Quality Assurance Specialist position continues to be
difficult. In early December 2007, both a first and second choice
selectee declined the position. The position is being announced again
with the best case scenario putting a qualified candidate in Kuwait in
the early February 2008 timeframe. Army Sustainment Command G1 is
working with the local Civilian Personnel Advisory Center to streamline
the recruit and fill process and will continue to pursue the fill of
this critical position with qualified candidates using incentives to
the maximum extent possible.
Recommendation 4: The GAO recommends that the Army develop a plan to
allow the proper administration of the cost plus award-fee structure
for maintenance and supply services.
DOD Response: Concur. The appropriate contract type for the Global
Maintenance and Supply Services Contract is under review with Army
Sustainment Command contracting and operational personnel working
closely with Army Field Support Battalion – Kuwait staff. The result
could be a hybrid contract combining incentives where quantitative
measures are possible with an award fee where only subjective measures
are available to measure contractor performance. The final decision on
the appropriate contract type will be approved by the Army Sustainment
Command Principal Assistant Responsible for Contracting, and the target
for this review and decision is March 1, 2008.
Recommendation 5: The GAO recommends that the Army consider delegating
some additional oversight responsibilities to the Defense Contract
Management Agency to meet some of the current contract management and
oversight personnel shortfalls.
DOD Response: Partially concur. Implementation of this recommendation
is predicated on the ability of the Defense Contract Management Agency
ability to support the Global Maintenance and Supply Services Task
Order 0001 in Kuwait.
[End of section]
Enclosure III: GAO Contact and Staff Acknowledgments:
GAO Contact:
William M. Solis, (202) 512-8365 or solisw@gao.gov:
Acknowledgments:
In addition to the contact named above, Carole Coffey, Assistant
Director; Sarah Baker; Renee Brown; Janine Cantin; Ronald La Due Lake;
Katherine Lenane; and Connie W. Sawyer, Jr. made key contributions to
this report.
[End of section]
Footnotes:
[1] H.R. Rep. No. 109-504, at 46-47 (2006).
[2] GAO, Defense Budget: Trends in Operations and Maintenance Costs and
Support Services Contracting, GAO-07-631 (Washington, D.C.: May 18,
2007).
[3] There are three types of indefinite-delivery contracts: definite-
quantity contracts, requirements contracts, and indefinite-quantity
contracts. The appropriate type of indefinite-delivery contract may be
used to acquire supplies, services, or both when the exact times, exact
quantities, or both of future deliveries are not known at the time of
contract award. An indefinite-quantity contract provides for an
indefinite quantity, within stated limits, of supplies or services
during a fixed period. FAR §§ 16.501-2, 16.504
[4] Under the solicitation, the minimum guaranteed award to the primary
awardee included, among other things, maintenance and supply services
performed at Camp Arifjan, Kuwait. Task Order 1 was issued to the
primary awardee under the solicitation.
[5] Some contract line item numbers are cost plus fixed fee and others
are firm fixed price. The contract line item numbers for the
maintenance work were cost plus fixed fee.
[6] According to the Federal Acquisition Regulation, cost reimbursement
contracts provide for payment of allowable incurred cost, to the extent
prescribed in the contract. These contracts establish an estimate of
total cost for the purpose of obligating funds and establishing a
ceiling that the contractor may not exceed (except at its own risk)
without the approval of the contracting officer. FAR § 16.301-1.
[7] These costs do not include the cost of repair parts as they are
provided by the government.
[8] While Task Order 1's Statement of Work did not contain a first pass
yield rate requirement, it did require that the contractor repair all
equipment to certain Army standards. Therefore, we view pass/fail rates
as an indicator of the quality of the contractor's performance in
repairing equipment to Army standards.
[9] GAO, Defense Logistics, Improved Oversight and Increased
Coordination Needed to Ensure Viability of the Army's Prepositioned
Strategy, GAO-07-144 (Washington, D.C.: Feb. 15, 2007).
[10] As discussed later in this report, not all deficiencies are
documented to illustrate that equipment failed Army quality assurance
inspection. As a result, these numbers may be understated.
[11] The commodities include vehicles, small arms, ground support
equipment, atmospheric test, high dollar part verification, and paint
inspection.
[12] In commenting on our draft report, the contractor argued that the
quality assurance surveillance plan gave government quality assurance
inspectors no guidance on how to determine whether a particular piece
of equipment passed or failed maintenance standards. Government quality
assurance inspectors use the technical manual for the specific piece of
equipment to determine whether the equipment passes or fails
inspection. These manuals are also what the contractor's chief quality
representatives said they use to repair and inspect the equipment.
Also, for the maintenance area, government quality assurance inspectors
are trained mechanics with technical expertise related to the equipment
being inspected.
[13] As discussed later in this report, not all deficiencies are
documented to illustrate that the equipment failed Army quality
assurance inspection. As a result, these numbers may be understated.
[14] Task Order 1 specifies that these cleaning standards are in
accordance with DODD 4500.9, DOD 5030.49-R, and ARCENT Directive 30-3.
[15] 7 C.F.R. Part 330.
[16] Navy customs officials serve as U.S. Customs border clearance
agents. They inspect material and personnel returning to U. S. Customs
territory.
[17] The broad scope of Task Order 1 allows the Army to add maintenance
tasks when necessary. Some tasks like the repair of battle-damaged
equipment or the preparation of equipment for return to the United
States are on-going tasks for the contract period of performance; other
tasks have specific deadlines established by contract modification. For
example, preparing equipment to issue to units supporting the surge and
repairing equipment to be used in Iraq, as well as the two mentioned in
this correspondence are tasks with specific deadlines.
[18] GAO 07-144.
[19] GAO NASA Procurement: Use of Award Fees for Achieving Program
Outcomes Should Be Improved. GAO-07-58 (Washington, D.C.: Jan. 17,
2007).
[20] Award-fee evaluation board members may include personnel from key
organizations knowledgeable about the award-fee evaluation areas, such
as engineering, logistics, program management, contracting, quality
assurance, legal, and financial management; personnel from user
organizations; and personnel from cognizant contract administration
offices.
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