Military Operations
DOD Needs to Address Contract Oversight and Quality Assurance Issues for Contracts Used to Support Contingency Operations Gao ID: GAO-08-1087 September 26, 2008The Department of Defense (DOD) uses contractors to meet many of its logistical and operational support needs. With the global war on terrorism, there has been a significant increase in deployment of contractor personnel to areas such as Iraq and Afghanistan. In its fiscal year 2007 report, 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. GAO determined (1) the extent to which costs for selected contracts increased and the factors causing the increases, (2) the extent to which DOD provided oversight for selected contracts, and (3) the reasons for DOD's use of contractors to support contingency operations. To address these objectives, GAO reviewed a nonprobability sample of seven DOD contracts for services that provide vital support to contingency operations in Iraq and Afghanistan. GAO reviewed contract requirements, funding documents and DOD guidance for these contracts and interviewed DOD and contractor personnel.
Costs for six of the seven contracts GAO reviewed increased from an initial estimate of $783 million to about $3.8 billion, and one consistent and primary factor driving the growth was increased requirements associated with continued military operations in Iraq and Afghanistan. For example, the Army awarded a $218.2 million task order for equipment maintenance and supply services in Kuwait in October 2004. Since then, approximately $154 million of additional work was added to this task order for vehicle refurbishment, tire assembly and repair, and resetting of prepositioned equipment. Other factors that increased individual contract costs include the use of short-term contract extensions and the government's inability to provide contractually required equipment and services. For example, in three of the contracts GAO reviewed, short-term contract extensions (3 to 6 months) increased costs because the contractor felt it was too risky to obtain long-term leases for vehicles and housing. The actual cost of one contract we reviewed did not exceed the estimated cost for reasons such as lower than projected labor rates. GAO has frequently reported that inadequate staffing contributed to contract management challenges. For some contracts GAO reviewed, DOD's oversight was inadequate because it had a shortage of qualified personnel and it did not maintain some contract files in accordance with applicable guidance. For five contracts, DOD had inadequate management and oversight personnel. In one case, the office responsible for overseeing two contracts was short 6 of 18 key positions, all of which needed specialized training and certifications. In addition, for two other contracts, proper accounting of government owned equipment was not performed because the property administrator position was vacant. Second, DOD did not always follow guidance for maintaining contract files or its quality assurance principles. For four contracts, complete contract files documenting administration and oversight actions taken were not kept and incoming personnel were unable to determine how contract management and oversight had been performed and if the contractor had performed satisfactorily prior to their arrival. In addition, oversight was not always performed by qualified personnel. For example, quality assurance officials for the linguist contract were unable to speak the language so they could not judge the quality of the contractor's work. Without adequate levels of qualified oversight personnel, proper maintenance of contract files, and consistent implementation of quality assurance principles, DOD may not be able to determine whether contractors are meeting their contract requirements, which raises the potential for waste. DOD used contractors to support contingency operations for several reasons, including the need to compensate for a decrease in force size and a lack of capability within the military services. For example, an Army contract for linguist services had a requirement for more than 11,000 linguists because DOD did not have the needed linguists. According to Army officials, the Army phased out many interpreter positions years ago and did not anticipate a large need for Arabic speakers.
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Director: Team: Phone:GAO-08-1087, Military Operations: DOD Needs to Address Contract Oversight and Quality Assurance Issues for Contracts Used to Support Contingency Operations
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
September 2008:
Military Operations:
DOD Needs to Address Contract Oversight and Quality Assurance Issues
for Contracts Used to Support Contingency Operations:
Military Operations:
GAO-08-1087:
GAO Highlights:
Highlights of GAO-08-1087, a report to congressional committees
September.
Why GAO Did This Study:
The Department of Defense (DOD) uses contractors to meet many of its
logistical and operational support needs. With the global war on
terrorism, there has been a significant increase in deployment of
contractor personnel to areas such as Iraq and Afghanistan. In its
fiscal year 2007 report, 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.
GAO determined (1) the extent to which costs for selected contracts
increased and the factors causing the increases, (2) the extent to
which DOD provided oversight for selected contracts, and (3) the
reasons for DOD‘s use of contractors to support contingency operations.
To address these objectives, GAO reviewed a nonprobability sample of
seven DOD contracts for services that provide vital support to
contingency operations in Iraq and Afghanistan. GAO reviewed contract
requirements, funding documents and DOD guidance for these contracts
and interviewed DOD and contractor personnel.
What GAO Found:
Costs for six of the seven contracts GAO reviewed increased from an
initial estimate of $783 million to about $3.8 billion, and one
consistent and primary factor driving the growth was increased
requirements associated with continued military operations in Iraq and
Afghanistan. For example, the Army awarded a $218.2 million task order
for equipment maintenance and supply services in Kuwait in October
2004. Since then, approximately $154 million of additional work was
added to this task order for vehicle refurbishment, tire assembly and
repair, and resetting of prepositioned equipment. Other factors that
increased individual contract costs include the use of short-term
contract extensions and the government‘s inability to provide
contractually required equipment and services. For example, in three of
the contracts GAO reviewed, short-term contract extensions (3 to 6
months) increased costs because the contractor felt it was too risky to
obtain long-term leases for vehicles and housing. The actual cost of
one contract we reviewed did not exceed the estimated cost for reasons
such as lower than projected labor rates.
GAO has frequently reported that inadequate staffing contributed to
contract management challenges. For some contracts GAO reviewed, DOD‘s
oversight was inadequate because it had a shortage of qualified
personnel and it did not maintain some contract files in accordance
with applicable guidance. For five contracts, DOD had inadequate
management and oversight personnel. In one case, the office responsible
for overseeing two contracts was short 6 of 18 key positions, all of
which needed specialized training and certifications. In addition, for
two other contracts, proper accounting of government owned equipment
was not performed because the property administrator position was
vacant. Second, DOD did not always follow guidance for maintaining
contract files or its quality assurance principles. For four contracts,
complete contract files documenting administration and oversight
actions taken were not kept and incoming personnel were unable to
determine how contract management and oversight had been performed and
if the contractor had performed satisfactorily prior to their arrival.
In addition, oversight was not always performed by qualified personnel.
For example, quality assurance officials for the linguist contract were
unable to speak the language so they could not judge the quality of the
contractor‘s work. Without adequate levels of qualified oversight
personnel, proper maintenance of contract files, and consistent
implementation of quality assurance principles, DOD may not be able to
determine whether contractors are meeting their contract requirements,
which raises the potential for waste.
DOD used contractors to support contingency operations for several
reasons, including the need to compensate for a decrease in force size
and a lack of capability within the military services. For example, an
Army contract for linguist services had a requirement for more than
11,000 linguists because DOD did not have the needed linguists.
According to Army officials, the Army phased out many interpreter
positions years ago and did not anticipate a large need for Arabic
speakers.
What GAO Recommends:
To ensure effective oversight, GAO recommends that DOD adequately staff
oversight positions with qualified personnel, and address
inconsistencies in maintaining contract files and implementing quality
assurance principles. DOD concurred with each of GAO‘s recommendations
and stated the Army was aware of and addressing the identified
problems.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1087]. For more
information, contact William M. Solis at (202) 512-8365 or
solisw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Contract Costs Increased, Primarily Due to Added Requirements to
Support Ongoing Operations in Iraq and Afghanistan:
DOD's Oversight of Some Contracts Has Been Inadequate:
DOD Used Contractors Because Military Personnel and DOD Civilians Were
Not Available:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Information Concerning Contracts We Reviewed:
Table 2: Comparison of Originally Estimated and Total Actual Contract
Costs:
Abbreviations:
APS: Army Prepositioned Stock:
DFARS: Defense Federal Acquisition Regulation Supplement:
DOD: Department of Defense:
FAR: Federal Acquisition Regulation:
FPRA: Forward Pricing Rate Agreement:
GAO: Government Accountability Office:
HMMWV: High Mobility Multi-Wheeled Vehicle:
LOGCAP: Logistics Civil Augmentation Program:
O&M: Operations and Maintenance:
United States Government Accountability Office:
Washington, DC 20548:
September 26, 2008:
Congressional Committees:
The Department of Defense (DOD) uses contractors to meet many of its
logistical and operational support needs during combat operations and
peacekeeping and humanitarian assistance missions. According to DOD,
the scale and duration of global war on terrorism operations have
required a significant increase in contractor support and in deployment
of contractor personnel to areas such as Iraq and Afghanistan.
Moreover, this reliance on contractors continues to grow, and DOD has
reported that future deployments of DOD military forces are anticipated
to require similar levels of support.[Footnote 1] In Iraq, Afghanistan,
and throughout Southwest Asia, contractors provide deployed U.S. forces
with communication services, interpreters who accompany military
patrols, base operations support (e.g., food and housing), weapon
systems maintenance, intelligence analysis, security services, and a
variety of other support. As of April 2008, DOD estimated that it had
more than 164,000 contractors in Iraq, costing billions of dollars each
year. DOD reported that contingency contract obligations for fiscal
years 2003 through 2006 totaled nearly $44 billion. In August 2008, the
Congressional Budget Office reported that DOD's fiscal years 2003
through 2007 contingency contract obligations for the Iraq theater were
$76 billion.
In its fiscal year 2007 report accompanying the DOD Appropriations
Bill, the House Appropriations Committee directed GAO to examine the
link between the growth in DOD's operation and maintenance costs and,
among other things, DOD's increased reliance on service
contracts.[Footnote 2] This is the third report we have issued in
response to this direction. In May 2007, we issued a report that
examined the trends in operation and maintenance costs for fiscal years
1995 through 2005.[Footnote 3] In January 2008, we issued a report
addressing oversight weaknesses related to a maintenance and supply
services contract in Kuwait.[Footnote 4] This report examines issues
related to cost, oversight, and use of contractors to support
contingency operations. Our reporting objectives are to determine (1)
the extent to which costs for selected contracts supporting contingency
operations increased and the factors causing the increases, (2) the
extent to which DOD provided oversight for selected contracts that
support contingency operations, and (3) the reasons for the
department's use of contractors to support contingency operations for
the contracts we reviewed, as well as other contracts.
To accomplish our objectives, we conducted a case study review of a
nonprobability sample of six DOD contracts and one task order for
services that support contingency operations.[Footnote 5] To obtain our
sample, we relied on DOD and our own work. Specifically, due to the
unavailability of a complete list of contracts supporting contingency
operations, DOD provided us a list of 34 contracts, based on criteria
we developed. These criteria included: the contract supported deployed
forces; Operations and Maintenance (O&M) funds were used to pay for the
contract services; the principal place of performance was within
Central Command's Area of Operation; the contract was to maintain a
weapons system(s) and/or provide support; the contract was still in
effect; and the contractor was U.S. based. In addition to these
contracts, based on our own research and experience from past audit
work, we generated a list of eight contracts that also met the criteria
to supplement those provided by DOD. From the combined list, we
selected for case study review our nonprobability sample of seven
contracts providing various services such as base operations support,
security, equipment maintenance, and linguist services. Factors that
influenced the case study selection included previous GAO reviews on
contracts supporting contingency operations, type of contract service
provided, location where the contractor's work was performed, and
contract dollar amount. Our selection of contracts did not allow us to
project our findings across the universe of DOD contracts for services
that support contingency operations. For each contract selected, our
review covered from the beginning of the contract until it ended or
June 2008, whichever occurred first.
To determine the extent to which selected contracts supporting
contingency operations experienced cost increases, we reviewed contract
requirements and funding documents for our case study contracts and
interviewed contracting office officials regarding changing
requirements and cost increases. We also interviewed contractor
personnel to obtain their views related to changing requirements and
increasing contract costs. To determine the extent to which DOD
provided oversight of contracts that support contingency operations, we
compared authorized oversight positions to actual on-hand oversight
personnel involved in contract oversight. We also interviewed Army and
contractor personnel to determine the number of oversight personnel
involved in providing oversight and the types of oversight provided. To
determine the reasons the department uses contractors to support
contingency operations, we interviewed contracting office officials and
reviewed and compared available guidance and documentation related to
DOD's decision to use contractors instead of military personnel for the
contracts.
We conducted our review from November 2006 through August 2008 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. A more detailed description
of our scope and methodology is included in appendix I.
Results in Brief:
Beginning in September 2000 and covering a period of about eight years,
the total cost for six of the seven contracts we reviewed increased
from an initial estimate of $783 million to about $3.8
billion.[Footnote 6] While other factors contributed to individual
contract cost growth, one consistent and primary factor driving the
growth was increased requirements associated with continued military
operations in Iraq and Afghanistan. For example, in October 2004 the
Army awarded a $218.2 million task order for equipment maintenance and
supply services in Kuwait. Since that time, approximately $154 million
of additional work was added to this task order for High Mobility Multi-
Wheeled Vehicle (HMMWV) refurbishment, tire assembly and repair, and
resetting of prepositioned equipment ($33 million, $16.6 million, and
$104.3 million, respectively). Other factors that increased costs for
the contracts we reviewed included the use of short-term contract
extensions and the government's inability to provide contractually
required equipment and services. For example, in three of the contracts
we reviewed, short-term contract extensions (3 to 6 months) increased
costs because the contractor felt it was too risky to obtain long-term
leases for vehicles and housing. We also found that one contract's
costs increased because the Army was unable to provide the contractor
with personal protective equipment even though the contract stated the
government would do so. According to contracting office officials,
there was a limited supply of authorized equipment which was issued to
deployed military units. As a result, the contractor purchased the
equipment at a cost of approximately $600,000 and the government
reimbursed the contractor, including the cost of overhead expenses
associated with the purchase. The actual total cost of one contract we
reviewed did not exceed the estimated cost for reasons such as lower
than projected labor rates.
DOD's oversight of some of the contracts we reviewed was inadequate due
to (1) a shortage of qualified oversight and contract administration
personnel and (2) because it did not maintain some contract files in
accordance with applicable policy and guidance. GAO and others have
frequently reported that inadequate staffing contributed to contract
management challenges in Iraq and elsewhere. In both 2004 and 2006 we
reported that oversight personnel told us that DOD does not have
adequate personnel at deployed locations to effectively oversee and
manage contractors and we found a similar situation for five of the
seven contracts we reviewed. For example, in the contracting office
that managed both the base operations and security services contracts
we reviewed, 6 of 18 oversight positions were vacant. As of April 2008,
4 of the 6 positions had been vacant for 7 months or more and the other
2 had been vacant for 4 and 6 months. The six vacant positions all need
specialized training and certifications and were judged by the Army to
be key oversight and management positions. One of these vacant
positions was the performance evaluation specialist who, according to
the Army position description, among other tasks, is responsible for
managing the Army's quality assurance program for two multi-million
dollar contracts and training other quality assurance personnel. Other
vacant positions included three contract specialists, who are
responsible for, among other tasks, reviewing monthly contractor
invoices. As a result, the contracting officer's representative was
reviewing contractor invoices, a responsibility for which he said he
was not trained. According to the contracting officer's representative,
the invoices required closer scrutiny than he was able to provide and
he often did not know if the invoices included valid expenses. In
addition, the contracting officer's representative had oversight
responsibilities for five additional contracts and his primary
assignment as the base's Provost Marshal did not always allow him time
to complete his contract oversight responsibilities. According to the
contracting officer, it was difficult to find qualified candidates and
numerous applicants were rejected because they did not have the right
skills. Second, we found that, for some contracts, DOD did not always
follow policy and guidance for maintaining contract files and it did
not follow established quality assurance principles. According to the
Federal Acquisition Regulation (FAR), the contract administration
office shall, unless otherwise specified, maintain as part of the
performance records of the contract, suitable records reflecting the
nature of quality assurance actions.[Footnote 7] The regulation states
that contract files must be organized to a level sufficient to ensure
that they are readily accessible to principal users and, if needed, a
locator system should be established to ensure the ability to locate
promptly any contract files.[Footnote 8] However, for three of the
contracts we reviewed--including two award fee contracts--the
contracting offices did not maintain complete contract files
documenting contract administration and oversight actions taken. As a
result, incoming contract administration personnel were unable to
determine how contract management and oversight had been performed and
the extent to which the contractor had performed satisfactorily prior
to their arrival. Some contracting office personnel whom we spoke with
stated that previous contracting office personnel had not properly
documented and maintained all contract actions; however, they could not
explain why, given that this occurred prior to their assignments.
Finally, according to an Army regulation, management of a comprehensive
quality program requires subject matter practitioners with quality
expertise.[Footnote 9] However, we found that assigned contract
oversight personnel for the linguist contract were unable to judge the
contractor's performance because they were generally unable to speak
the languages of the contractor employees they were responsible for
overseeing. Without adequate levels of qualified oversight personnel,
proper maintenance of contract files, and consistent implementation of
quality assurance principles, DOD's ability to perform the various
tasks needed to monitor contractor performance may be impaired. In
addition, until DOD is able to obtain reasonable assurance that
contractors are meeting their contract requirements efficiently and
effectively, it may not be able to make fully informed decisions
related to award fees as well as additional contract awards. Although
our selection of contracts did not allow us to project our findings
across all DOD contracts for services that support contingency
operations, we believe the potential for these weaknesses exists in
other DOD contracts supporting contingency operations that are managed
by the same contract oversight and administration offices and
processes. Unless DOD can determine that inadequate oversight and
insufficient staff are not problems across the department, the
potential for waste exists in other DOD contracts supporting
contingency operations.
For the contracts we reviewed, DOD used contractors to support
contingency operations for several reasons, including the need to
compensate for a decrease in force size and a lack of capability within
the military services. For example, in fiscal year 2002, Congress
provided the Air Force with $1.5 billion to acquire 60 additional
unmanned Predator aircraft; however, according to Air Force documents,
the Air Force did not have the additional 1,409 personnel needed to
maintain these new assets. As a result, the Air Force used contractors
to support the additional aircraft. In another example, in February
2007 an Army contract that provided linguist services had a requirement
for more than 11,000 linguists because DOD did not have the number of
linguists needed. According to Army officials, years ago the Army
phased out many interpreter military occupational specialties and did
not anticipate a large requirement for Arabic speakers, thereby
creating the shortfall. A third contract we reviewed provided, among
other things, for the repair of severely damaged Army Stryker vehicles.
According to contracting office officials, the repair and maintenance
of Army Stryker vehicles was contracted out because DOD did not have
personnel with the specific skills needed to repair the Stryker.
Furthermore, according to various GAO, DOD, and RAND reports, other
reasons the department used contractors included a governmentwide
policy encouraging contracting for commercial activities, the need to
obtain contractor support in order to deploy weapon systems before they
are fully developed, and the increasingly complex nature of DOD weapon
systems.
We are making several recommendations to ensure that DOD is able to
exercise effective oversight over the contracts we reviewed, including
that DOD develop a plan to adequately staff oversight positions with
qualified personnel, take steps to determine why guidance for
maintaining contract files is not consistently being followed and
implement a corrective action plan, and ensure that quality assurance
principles are consistently implemented. In addition, we recommend that
the DOD conduct a review of contract administration functions for
contingency operations contracts to determine the prevalence of
inadequate contract oversight and administration staffing levels and
the extent to which guidance for maintaining contract files and quality
assurance principles are not being consistently followed, and to take
corrective actions as necessary.
In commenting on a draft of this report, DOD concurred with our
recommendations and discussed actions planned and already taken to
address the identified weaknesses. While DOD's actions should be viewed
as positive steps, in the near term they will not address the issues we
highlighted in this report. DOD provided technical comments which we
incorporated as appropriate. DOD's comments are reprinted in appendix
II.
Background:
The individual military services and a wide array of DOD and non-DOD
agencies award contracts to support contingency operations.[Footnote
10] Within a service or agency, numerous contracting officers, with
varying degrees of knowledge about how contractors and the military
operate in deployed locations, can award contracts that support
contingency operations. According to DOD estimates, in 2005 several
hundred contractor firms provided U.S. forces with a range of services
at deployed locations. The customer (e.g., a military unit) for these
contractor-provided services is responsible for identifying and
validating requirements to be addressed by the contractor as well as
evaluating the contractor's performance and ensuring that contractor-
provided services are used in an economical and efficient manner. In
addition, DOD has established specific policies on how contracts,
including those that support contingency operations, should be
administered and managed. Oversight of contracts--which can refer to
contract administration functions, quality assurance surveillance,
corrective action, property administration, and past performance
evaluation--ultimately rests with the contracting officer, who has the
responsibility for ensuring that contractors meet the requirements as
set forth in the contract. However, as some contracting officers are
not located at the deployed location, the contracting officers appoint
contract oversight personnel who represent the contracting officer at
the deployed location and are responsible for monitoring contractor
performance. The way contracts and contractors are monitored at a
deployed location is largely a function of the size and scope of the
contract. Some contracting officers have opted to have personnel from
the Defense Contract Management Agency monitor a contractor's
performance and management systems to ensure that the cost, product
performance, and delivery schedules comply with the terms and
conditions of the contract. Defense Contract Management Agency
officials delegate daily oversight responsibilities to individuals
drawn from units receiving support from these contractors to act as
contracting officer's representatives for specific services being
provided. For other contracts, contracting officers usually directly
appoint contracting officer's representatives or contracting officer's
technical representatives to monitor contractor performance at the
deployed locations. These individuals are typically drawn from units
receiving contractor-provided services, are not normally contracting
specialists, and for whom contract monitoring is an additional duty.
They cannot direct the contractor by making commitments or changes that
affect price, quantity, quality, delivery, or other terms and
conditions of the contract. Instead, they act as the eyes and ears of
the contracting officer and serve as the liaison between the contractor
and the contracting officer.
The FAR requires contract administration offices to perform all actions
necessary to verify whether contracted services conform to contract
quality requirements and to maintain records of these actions.[Footnote
11] The Defense Federal Acquisition Regulation Supplement (DFARS) adds
an additional requirement for DOD agencies to conduct quality audits to
ensure the quality of services meets contractual requirements.[Footnote
12] Oversight begins with trained personnel being nominated for and
assigned oversight responsibilities, and then conducting oversight
actions throughout the contract performance period to ensure the
government receives the services required by the contract. In addition
to the FAR and DFARS, a DOD best practices guide stresses proper
documentation. The Guidebook for Performance-Based Services Acquisition
in the Department of Defense states that an assessment of contractor
performance should be documented, whether acceptable or unacceptable,
as it is conducted and this official record may be considered past
performance information.
A wide selection of contract types is available to the government and
contractors to provide needed flexibility in acquiring supplies and
services. The contract types are grouped into two broad categories: (1)
fixed price and (2) cost reimbursement. The specific contract types
range from firm-fixed-priced, in which the contractor has full
responsibility for the performance cost and any resulting profit or
loss, to cost-plus-fixed-fee, in which the contractor has minimal
responsibility for the performance costs and the negotiated fee
(profit) is fixed. In between are the various incentive contracts, in
which the contractor's responsibility for the profit or fee incentives
offered is tailored to the uncertainties involved in contract
performance. One such contract type that provides incentives on the
basis of performance is cost-plus-award-fee. A cost-plus-award-fee
contract is a cost reimbursement contract that provides a fee (base
amount plus an award amount) sufficient to motivate the contractor to
excel in areas such as quality and timeliness. The amount of the award
fee is based on the government's evaluation of the contractor's
performance in terms of the contract criteria. Another contract type is
indefinite-delivery/indefinite-quantity which provides for an
indefinite quantity of supplies or services, within stated limits,
during the contract period and the government places orders for
individual requirements. As shown in table 1, most of the contracts we
reviewed were cost-plus-fixed-fee type contracts. Two of the contracts
were cost-plus-award-fee contracts.
Table 1: Information Concerning Contracts We Reviewed:
Contract information: Linguist Interpretation Services;
Type of contract: Cost-plus-fixed-fee;
Contract time period: 1 year--6 months and two 90 day option
periods[A]; 09/2004-09/2005;
Unit requiring the contract: Army Intelligence and Security Command.
Contract information: Maintenance and Supply Services for Army
Prepositioned Stock--Qatar;
Type of contract: Hybrid--firm-fixed-price and cost plus incentive fee;
Contract time period: 10.25 years--3-month transition and 10 option
years; 09/01/2000-11/30/2010;
Unit requiring the contract: Army Field Support Battalion - Qatar.
Contract information: Global Maintenance and Supply Services in Kuwait-
-Task Order 0001;
Type of contract: Cost-plus-fixed-fee and firm-fixed- price;
Contract time period: 5 years--1 base year and 4 option years;
12/01/2004-09/29/2009;
Unit requiring the contract: Army Field Support Battalion - Kuwait.
Contract information: Base Operations Support Services--Qatar;
Type of contract: Cost-plus-award-fee;
Contract time period: 5 years--1 base year and 4 option years[B];
01/01/2003-09/30/2007;
Unit requiring the contract: Army Support Group - Qatar.
Contract information: Base Security Support Services--Qatar;
Type of contract: Cost-plus-award-fee;
Contract time period: 5 years--1 base year and 4 option years[B];
01/01/2003-09/30/2007;
Unit requiring the contract: Army Support Group - Qatar.
Contract information: Stryker Battle Damage Repair;
Type of contract: Cost-plus-fixed-fee;
Contract time period: 2.33 years--09/22/2005-01/ 31/2008[C];
Unit requiring the contract: Army Tank Automotive and Armaments
Command.
Contract information: Predator Operations and Maintenance;
Type of contract: Cost-plus-fixed-fee;
Contract time period: 3 years--1 base year and 2 option years;
02/10/2005-03/15/2008;
Unit requiring the contract: Air Combat Command, Program Management
Squadron.
Source: GAO.
[A] This contract was extended several times through June 2008.
[B] These contracts were extended through March 2008.
[C] The Stryker Battle Damage Repair effort was part of the Stryker
Interim Contractor Logistics Support contract, which was awarded in May
2002.
[End of table]
We looked at specific contracts that provide a variety of services.
While some of these contracts have ended, DOD continues to acquire
these services through other contracts. For example, the linguist
contract ended in June 2008, but another contract valued at $4.6
billion was awarded to provide linguist services in Iraq for 5 years.
The base operations support and security services contracts ended in
March 2008 but two new bridge contracts for these services were
awarded. The bridge contracts were for 1 year each and provided for
continued operations and security services while bid protests were
being decided.
Contract Costs Increased, Primarily Due to Added Requirements to
Support Ongoing Operations in Iraq and Afghanistan:
For six of the seven contracts we reviewed, actual costs exceeded the
initially estimated contract costs, primarily because of added
requirements to support ongoing operations in Iraq and Afghanistan. The
actual costs for the other contract we reviewed did not exceed the
estimated contract costs. The cost increases occurred primarily because
as operations in Iraq and Afghanistan expanded, there were increased
demands for services already established under the contracts and, in
some cases, new requirements were added to the contracts. Other factors
that contributed to individual contract cost growth among the contracts
we reviewed included short-term contract extensions, the government's
inability to provide promised equipment, changes in host country labor
laws, and paying for work to be performed multiple times.
Contract Costs Increased for Six Contracts:
For six of the contracts we reviewed, the cost of each contract
exceeded the originally estimated contract cost, primarily because of
increases in contract requirements from ongoing operations in Iraq and
Afghanistan. Costs for these six contracts--three of which were
extended--increased from an initial estimate of $783 million to an
approximate actual total cost of $3.8 billion.[Footnote 13] In four of
these cases, the individual contract's actual cost exceeded the
estimated cost by at least 300 percent. For example, the total cost of
the base operations support contract exceeded the estimated contract
cost by $122.4 million, or 481 percent. In another example, the
estimated cost for the equipment maintenance contract in Qatar was
$52.7 million for a 3-month base period and 10 option years. However,
the total cost of the contract as of March 2008--which was during
option year 8--was $471 million or 794 percent more than originally
estimated for the entire contract. For the seventh contract, we found
that the actual contract costs did not exceed the originally estimated
costs. Table 2 below shows how total actual contract costs, including
the cost of any extensions, compared to the original cost estimate.
Table 2: Comparison of Originally Estimated and Total Actual Contract
Costs:
Dollars in millions.
Linguist Interpretation Services;
Initial estimate for the base and all option years: $400.0;
Actual cost for the base and exercised option years: $409.6;
Difference between estimated and actual cost: $9.6;
Additional costs incurred during contract extensions: $1,784.7;
Total contract cost including extensions: $2,194.3.
Maintenance and Supply Services for Army Prepositioned Stock--Qatar;
Initial estimate for the base and all option years: 52.7;
Actual cost for the base and exercised option years: 471.0;
Difference between estimated and actual cost: 418.2;
Additional costs incurred during contract extensions: N/A;
Total contract cost including extensions: 471.0.
Global Maintenance and Supply Services in Kuwait--Task Order 0001;
Initial estimate for the base and all option years: 218.2;
Actual cost for the base and exercised option years: 778.6;
Difference between estimated and actual cost: 560.4;
Additional costs incurred during contract extensions: N/A;
Total contract cost including extensions: 778.6.
Base Operations Support Services--Qatar;
Initial estimate for the base and all option years: 25.4;
Actual cost for the base and exercised option years: 131.0;
Difference between estimated and actual cost: 105.6;
Additional costs incurred during contract extensions: 16.8;
Total contract cost including extensions: 147.8.
Base Security Support Services--Qatar;
Initial estimate for the base and all option years: 80.3;
Actual cost for the base and exercised option years: 92.7;
Difference between estimated and actual cost: 12.0;
Additional costs incurred during contract extensions: 13.1;
Total contract cost including extensions: 105.8.
Stryker Battle Damage Repair;
Initial estimate for the base and all option years: 6.4;
Actual cost for the base and exercised option years: 95.1;
Difference between estimated and actual cost: 88.7;
Additional costs incurred during contract extensions: N/A;
Total contract cost including extensions: 95.1.
Total;
Initial estimate for the base and all option years: $783.0;
Actual cost for the base and exercised option years: $1,978.0;
Difference between estimated and actual cost: $1,194.6;
Additional costs incurred during contract extensions: 1,814.6;
Total contract cost including extensions: $3,792.6.
Predator Operations and Maintenance;
Initial estimate for the base and all option years: 49.7;
Actual cost for the base and exercised option years: 45.7;
Difference between estimated and actual cost: - 4.0;
Additional costs incurred during contract extensions: 3.6;
Total contract cost including extensions: 49.3.
Source: GAO analysis of Army, Air Force, and contractor data.
[End of table]
Increased Contract Costs Were Primarily a Result of Added Requirements
from Ongoing Operations:
Although several factors increased the contract costs, the primary
factor was additional requirements associated with ongoing operations
in Iraq and Afghanistan. Expanding operations in Iraq and Afghanistan
placed an increased demand for services already established under each
of the seven contracts we reviewed. In addition, new requirements were
added to some of the contracts. The following examples illustrate
additional contract requirements due to ongoing operations in Iraq and
Afghanistan and their impact on contract costs.
Linguist Services:
In April 1999, the Army awarded a contract for linguist translation and
interpretation services. According to the Army, the initial requirement
was for about 180 linguists worldwide at an estimated cost of $19
million for 1 base year and 4 option years. Since the award of this
contract, the linguist requirement grew and the Army awarded other
contracts to provide linguist services. For example, we reviewed an
indefinite-delivery/indefinite-quantity contract awarded in September
2004--an interim 6-month contract with two 3-month options to continue
providing linguist services worldwide[Footnote 14]--with an estimated
maximum cost of $400 million. The total actual cost for the first year
of services for this contract was about $409.6 million. Linguist
requirements under the interim contract were increased multiple times,
which increased contract costs. For example, in February 2007 the
linguist requirement supporting operations in Iraq and Afghanistan grew
from 8,899 to 10,714 in response to the surge in the number of military
forces deployed to these areas of operation. At this same time, the
worldwide linguist requirement grew from 9,313 to 11,154. To
accommodate the increasing requirements and the need to continue
providing the services, the interim contract was modified to increase
the maximum costs allowable and to extend the performance period. As of
April 2008, the interim contract had been extended five times and the
total cost of the contract was $2.2 billion. At that time, the
requirements to support exercises in the United States and operations
in Afghanistan and Guantanamo Bay were being provided under new
contracts while the requirements to support operations in Iraq were
still being provided under the interim contract. A new indefinite-
delivery/indefinite-quantity contract for linguist services in Iraq
took effect in June 2008 with a maximum cost for all orders under the
contract of $4.6 billion for 5 years.
Army Prepositioned Stock--5 Maintenance and Supply Services:
In August 2000, the Army awarded this contract for maintenance and
supply services of the Army Prepositioned Stocks (APS)--5 in
Qatar.[Footnote 15] In addition to performing routine maintenance on
the prepositioned stocks, the contractor was required to support
contingency operations by receiving, repairing, maintaining, and
temporarily storing equipment from other sources until it was needed.
The contract award represented the base year requirements of certain
contract line items to be performed for 3 months in 2000 at a total
contract amount of $568,166. The contract had 10 single-year options
available for full contract performance and the contractor's total
estimated cost for the base plus 10 option years was $52.7 million. At
the end of the seventh option year, which was in November 2007, the
total cost of the contract was $428.9 million, or $376.2 million more
than originally estimated for the entire contract. According to the
contracting officer, requirements within the scope of the contract
increased in support of the global war on terror to include supporting
operations in Iraq and Afghanistan, performing operations in Kuwait,
repairing equipment, and supporting additional reimbursable customers,
such as the 550th Signal Company, Area Support Group-Qatar, and Army
Tank Automotive and Armaments Command's tire assembly repair program.
For example, in 2002 contractor resources were deployed to Kuwait to
meet the requirement for immediate download and urgent maintenance of
equipment flowing into Southwest Asia in support of operations in
Iraq.[Footnote 16] Approximately $195.6 million was funded on the APS-
5 contract for operations in Kuwait between 2002 and 2005. In another
example, in January 2006 a requirement to produce tire wheel assemblies
was added to the contract. The scope of this requirement was to provide
a package of ready-to-use, preconfigured tires to reduce the workload
at forward maintenance locations. As of March 2008, the total funded
for the tire operation was $6.4 million. Moreover, at various times
throughout the life of the contract, requirements were added for the
resetting of Army Prepositioned Stocks. For example, in the third,
fifth, sixth, and seventh option years, funding placed on the contract
for the reset of equipment totaled $35 million, $9 million, $39
million, and $23 million, respectively.
Global Maintenance and Supply Services in Kuwait--Task Order 0001:
In October 2004, the Army issued this task order for equipment
maintenance and supply services in Kuwait under an umbrella indefinite-
delivery/indefinite-quantity contract for Global Maintenance and Supply
Services. The contractor was required to provide maintenance, inspect
and test equipment, operate a wash rack for agriculture cleaning, and
perform various other maintenance functions depending on developing
missions. The contractor estimated a total cost for a 10- month base
period and four option years of $218.2 million. At the end of the
second option year in September 2007, the total cost of the task order
after modifications was about $581.5 million, $363.2 million more than
the original estimate for the entire task order. According to the
contracting officer, the magnitude of the requirements under the task
order increased significantly after the task order was issued. This
increase included growth in the quantity of equipment repaired and the
number of customers served, new requirements for resetting and issuing
Army prepositioned stock and operating tire assembly and repair and
HMMWV refurbishment programs. For example, in May 2006, a major HMMWV
refurbishment effort valued at approximately $33 million was added to
the task order. According to contracting officials, the task order
could be used to expeditiously provide the required HMMWV refurbishment
capability. Likewise, in September 2005 a requirement was added to the
task order for tire assembly and repair. As of March 2008, the total
funding for the tire assembly and repair operation was approximately
$16.6 million. In addition, according to the contracting officer,
requirements for the resetting of Army prepositioned stocks were added
within the scope of the task order. For example, in option years one
and two, funding for the reset of equipment totaled approximately $54.2
million and $50.1 million, respectively.
Base Operations Support:
In February 2003 the Army awarded this contract to provide a full range
of base support activities including public works; logistics; medical;
food; and morale, welfare, and recreation services in support of an
installation in Qatar. The contractor estimated a total cost of $25.4
million for the 9-month base period plus 4 option years. The total cost
of the contract was approximately $147.8 million, $122.4 million more
than the original cost estimate. According to contracting officials,
this growth in requirements was due to changes in the planned use for
the installation and an increase in major tenants such as the United
States Central Command Forward Headquarters and Special Operations
Command Central. For example, the installation increased its logistics
support of a nearby Air Force base and supported the rest and
relaxation program for military personnel deployed to Iraq and
Afghanistan, providing morale, welfare, and recreation services and
quality-of-life support to more than 300 soldiers per week. To meet the
increased demands, additional contractor personnel were needed. For
example, five Medical Supply Clerks were added to the medical services
requirement and four employees were added to meet the change in
requirements of the Public Works department. The contractor's estimated
total costs for these additional personnel were $95,706 and $887,120,
respectively. In addition, the services provided under the contract
grew as new requirements were added. For example, in September 2004 a
new requirement for an installation fire department was added.
According to the contractor's cost estimate, the total cost for option
years one through four (the requirement was added during option year
one) to meet the requirement for fire department services was $10.7
million.
Base Security Services:
In February 2003 the Army awarded this contract for base security
services at Camp As Sayliyah, Qatar. The contractor was to intercept,
deter, and prevent unauthorized personnel and instruments of damage and
destruction from entering the installation. The contractor should also
conduct surveillance and counter-surveillance of the installation's
perimeter and vicinity from designated observation towers and posts.
The contractor estimated a total cost of $80.3 million for the 9-month
base period plus 4 option years. The total cost of the contract was
about $105.8 million, or $25.6 million more than originally
estimated.[Footnote 17] According to the contracting officer, as was
the case for the base operations support contract, changes in the
planned use for the installation and an increase in major tenants such
as the United States Central Command Forward Headquarters and Special
Operations Command Central resulted in increased contract requirements.
In some instances, additional personnel were needed to meet the
requirements of the contract. For example, four guards and four
screeners were added at a cost of $255,267 for option year one. In
another example, in option year two, the required coverage at one guard
tower was increased to 24 hours a day. Funding in the amount of
$145,327 was provided to meet this requirement for the remainder of the
option year. The contractor's estimated cost for meeting this
requirement in the remaining 2 option years was $690,880. In another
example, in option year one a requirement was added for personnel to
operate a mobile vehicle and cargo inspection system. This system
consisted of a truck-mounted, nonintrusive gamma ray imaging system
that x-rays the contents of trucks, containers, cargo, and passenger
vehicles entering the base to determine the possible presence of
various types of contraband. A total of $359,685 was provided to meet
this requirement for the remainder of the option year.
Stryker Battle Damage Repair Facility--Qatar:
In May 2002 the Army awarded a contract that provided total logistics
support for the Stryker vehicles fielded to two combat brigade
teams.[Footnote 18] In September 2005 the Army modified the contract to
add a requirement for the repair of battle-damaged Stryker vehicles in
Qatar.[Footnote 19] Our review focused on the battle damage repair
requirements performed in Qatar and the associated modifications. The
initial requirement was for the repair of 11 battle-damaged vehicles at
a cost of approximately $6.4 million. As of April 2008, the total cost
of the battle damage repair facility in Qatar was approximately $95.1
million. According to officials at the Army Tank Automotive and
Armaments Command, when the logistics support contract was modified to
add the Qatar battle damage repair facility requirements, the Army and
the contractor jointly developed and negotiated the requirements and
cost estimates. As more Stryker vehicles sustained battle damage,
additional modifications were added. For example, only a few days after
this initial requirement was added to the contract, a modification was
issued that increased the requirement by 15 vehicles, bringing the
total number of battle-damaged vehicles to be repaired to 26. With this
increased requirement, approximately $4.6 million in funding was added
to the contract. According to Army officials, over time the number of
vehicles that required repair increased as attacks on United States
forces intensified and more Stryker brigades rotated in and out of Iraq
and Afghanistan. The battle damage repair requirements are currently
stated in terms of the number of vehicles that can be repaired per
month. For example, in February 2006 the repair requirement increased
from 2 vehicles every 45 days to 4 vehicles per month, and in July 2007
the requirement increased again to 6 vehicles per month.
Predator Maintenance:
In February 2005 the Air Force awarded this contract for maintenance
support of the Predator unmanned aircraft to support scheduled flying
hours for a base period of 1 year with 2 option years. According to
program officials, the contractor was required to provide
organizational maintenance services such as base support of systems,
weapons loading, launching, routine day-to-day flight maintenance,
routine inspections, scheduled and unscheduled maintenance, and
maintenance of supply and support packages. The estimated base and
option year one contract cost was $49.7 million. At the end of option
year one, which included an unanticipated 7-week extension, the total
cost of the contract was approximately $49.3 million.[Footnote 20]
While the total cost of the contract, including the cost of the
extension, did not exceed the total estimated cost for the base and
option year one, contract requirements changed in support of operations
in Iraq and Afghanistan and the effect these changes had on the cost of
the contract varied. For example, according to program officials, the
contractor established support operations in Afghanistan in March 2005
and in Iraq three months later. In July 2005, contractor support in
Iraq was increased to provide additional Predator surveillance at a
cost of $2.5 million. Also, in June 2006 the contractor support in
Afghanistan was moved to Iraq, resulting in a $2.3 million decrease in
contract cost. Other factors also decreased contract costs and as a
result, the total cost of the contract was less than initially
estimated. For example, contract labor rates--which were negotiated and
accepted after the contract was awarded--were lower than the rates used
to calculate the estimated contract costs, resulting in a lower
contract cost of approximately $1.8 million.[Footnote 21] Additionally,
in August 2005 the cost of the contract was decreased by approximately
$567,000 due to a 6-week delay in the start of the contract.
Other Factors That Caused Cost Growth:
Other factors that contributed to individual contract cost growth among
the contracts we reviewed included (1) short-term contract extensions,
(2) the government's inability to provide promised equipment, (3)
changes in host country labor laws, and (4) having to pay for work to
be performed multiple times because it did not meet required standards.
First, we found that in three of the contracts, short-term contract
extensions increased costs because the contractor signed short-term
leases which were more expensive than longer-term leases. The
contractors felt it was too risky to obtain long-term leases for such
things as vehicles and housing because there was no guarantee that the
contract would be extended again. Each of these three contracts was
extended for less than 1 year. In each instance, the extensions were to
allow for the continuation of contractor services during protests of
newly awarded contracts. For example, in April 2007 the linguist
contract requirements were being performed under a 3-month extension
due to protests of newly awarded linguist contracts. According to the
linguist contractor, the short-term extensions diminished its ability
to leverage leasing because a short-term lease commitment is more
expensive than a longer, 1-year lease commitment. For example, the
monthly cost for one contractor to lease trucks under a 6-month lease
was $2,437, whereas the monthly cost under a 1-year lease was $1,700--
a 30 percent savings. According to the contractor, short-term lease
commitments also limit the contractor's ability to shop around for
better prices because most vendors want a longer commitment.
Additionally, short-term extensions drain contractor resources and
increase overhead costs because the contractor has to prepare cost
proposals, review funding, and perform other administrative tasks every
90 or 120 days. While the contractors could enter into leases for a
period longer than the specified contract period of performance, they
would assume the risk for the cost of the excess months. In addition,
in October 2007 the base operations and security services contract
requirements were being performed under 6-month contract extensions.
According to both the base operations contractor and the security
services contractor, it was difficult to find housing that was
available for a 6-month lease in Qatar due to the booming economy, and
any lease term for fewer than 12-months was costly. For example,
according to the security services contractor, the same 12-month
housing lease that cost about $1,650 in 2007 cost about $4,100 in 2008.
The officials added that, when available, a 6-month lease for the same
housing averaged around $4,700 to $5,000.
Second, for the linguist contract, additional costs were incurred when
the government was unable to provide the equipment or services, which
were to be government-furnished pursuant to the contract. The contract
stated that contractor personnel providing support to the military in
contingency operations may be required to wear protective equipment as
determined by the supported commander. When required by the commander,
the government will provide to the contractor all military-unique
individual equipment. According to contracting officials, due to the
large deployments of soldiers requiring protective equipment, there was
an insufficient supply of equipment remaining for contractors.
Contracting officials told us that when the government does not supply
the equipment as provided for under the contract, the contractor is
authorized to procure and be reimbursed for the cost of the equipment
and the associated general and administrative expenses. When the
contractor is paid for the equipment it becomes government property.
According to the contracting officer's representative, the contractor
was able to purchase the equipment at military surplus stores at a cost
to the government of approximately $600,000. In addition, contracting
officials for this same contract told us that the government was to
provide transportation for the contract manager; however, the
government did not provide this transportation. As a result, the
contractor leased a vehicle to provide this transportation and the
government reimbursed the contractor and paid for the associated
overhead expenses.[Footnote 22]
Third, changes in the host country labor law resulted in additional
security services contract costs. According to the contractor, a change
in Qatar's labor law directed that (1) employees could not work more
than 10 hours in 1 day, including overtime, and (2) employees be given
at least a 1-hour break after working for 5 hours. As a result,
additional employees were required to provide 24-hour security
coverage. The cost of providing this additional manpower in option year
two was approximately $752,000. The contractor's estimated cost for
meeting this requirement in the remaining years (option years three and
four) was approximately $2.5 million. The contractor also told us that
a second change in Qatar's labor law required workers to be paid for 1
day off a week. To comply with this change, employees were
retroactively paid for the weekly day off from the effective date of
the law change until their contract ended. The Army added $1.3 million
in funding to the contract to assist with the retroactive pay for the
paid day off.
Fourth, according to contracting officials, under the two cost-
reimbursable equipment maintenance contracts we reviewed, the
government must continue to pay for additional work performed on
equipment rejected for failure to meet the required maintenance
standard. When equipment was presented to the government and did not
pass quality assurance inspection, it was returned to the contractor
for additional maintenance until it met the required standard.
Contracting officials explained that under the cost-plus-fixed-fee
maintenance provisions of the contracts, the contractor was reimbursed
for all maintenance labor hours incurred, including labor hours
associated with maintenance performed after the equipment was rejected
because it did not meet specified maintenance standards. This resulted
in additional costs to the government. As we reported in January 2008,
our analysis of Army data for a task order under one of these contracts
in Kuwait found that since May 2005, the contractor worked a total of
about 188,000 hours to repair equipment after the first failed
government inspection, at an approximate cost to the government of $4.2
million.[Footnote 23] We were unable to calculate the total cost of the
rework performed under the second equipment maintenance contract
because, according to officials, information entered into the
maintenance database that tracks equipment status and inspection
results does not distinguish between the contractor's internal quality
control inspections and government inspections prior to acceptance.
DOD's Oversight of Some Contracts Has Been Inadequate:
DOD's oversight of some of the contracts we reviewed has been
inadequate because of a shortage of qualified oversight and contract
administration personnel and because it did not maintain some contract
files in accordance with applicable policy and guidance. We have
previously reported that inadequate numbers of trained contract
management and oversight staff have led to contracting challenges. We
found that for five of the seven contracts we reviewed, DOD did not
have adequate numbers of qualified personnel at deployed locations to
effectively manage and oversee the contracts. Additionally, we found
that for four of the contracts we reviewed, the contracting offices
either did not maintain complete contract files documenting contract
administration and oversight actions taken or did not follow quality
assurance guidance. For the other two contracts we reviewed, authorized
oversight positions were filled with personnel to properly oversee the
contracts.
Some Contract Management and Oversight Teams Were Inadequately Staffed:
Having the right people with the right skills to oversee contractor
performance is critical to ensuring that DOD receives the best value
for the billions of dollars spent each year on contractor-provided
services supporting forces deployed in southwest Asia and elsewhere.
However, inadequate numbers of personnel to oversee and manage
contracts is a long-standing problem that continues to hinder DOD's
management and oversight of contractors in deployed locations. In 2004,
we reported that DOD did not always have sufficient contract oversight
personnel in place to manage and oversee its logistics support
contracts such as LOGCAP[Footnote 24] and recommended that DOD develop
teams of subject matter experts to make periodic visits to deployed
locations to judge, among other things, if its logistics support
contracts were being used efficiently.[Footnote 25] DOD concurred with-
-but did not implement--this recommendation. In addition, in 2005 we
reported in our High-Risk Series that inadequate staffing contributed
to contract management challenges in Iraq.[Footnote 26] In 2006, we
reported that oversight personnel told us that DOD does not have
adequate personnel at deployed locations to effectively oversee and
manage contractors.[Footnote 27] DOD concurred with our assessment and
noted that they were congressionally directed to undertake a review of
the health of the acquisition work forces, including oversight
personnel, and assess the department's ability to meet the oversight
mission. Currently, DOD has completed a competency analysis of its work
force but has not determined what number of oversight personnel will be
needed to provide adequate oversight for contingency contracting. Our
review of the staff authorized to provide contract oversight and
management revealed similar vacancies in some critical oversight and
administration positions for five of the seven contracts, as
illustrated by the following examples.
* The APS-5 contract did not have an administrative contracting officer
for almost a year. Oversight of contracts ultimately rests with the
contracting officer, who has the responsibility for ensuring that
contractors meet the requirements set forth in the contract. However,
most contracting officers are not located at the deployed location. As
a result, contracting officers often appoint administrative contracting
officers to provide day-to-day oversight and management of the
contractor at the deployed location. The administrative contracting
officer is a certified contracting officer with specialized training
and experience. Administrative contracting officers may be responsible
for many duties including ensuring contractor compliance with contract
quality assurance requirements, approving the contractor's use of
subcontractors, reviewing the contractor's management systems,
reviewing and monitoring the contractor's purchasing system, and
ensuring that government personnel involved with contract management
have the proper training and experience. According to the contracting
officer, while the administrative contracting officer's position was
vacant, she acted as the administrative contracting officer; however,
she was located in the United States and the place of performance for
this contract was in Qatar.
* The APS-5 contract also lacked a property administrator for more than
a year. According to a DOD manual, the responsibilities of the property
administrator 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 to ensure that
it does not create an unacceptable risk of loss, damage, or destruction
of property.[Footnote 28] While some property administrator duties are
often delegated to the administrative contracting officer, this
contracting office was also without an administrative contracting
office for several months. As such, important property administration
duties were not being performed including the proper accounting for
government-owned contractor-acquired equipment.
* As of April 2008, the contract administration office responsible for
administering the base operations and support and the base security
contracts in Qatar only had 12 of its 18 authorized positions. The 6
vacant positions included a performance evaluation specialist, 3
contracting specialists, 1 cost analyst, and 1 procurement analyst.
Four of the positions had been vacant for 7 months or more, while 2 had
been vacant for 4 and 6 months, despite the fact that the Army
designated both as key positions. According to position descriptions
provided by the Army, the performance evaluation specialist is a
technical quality expert who advises the commander on quality issues.
Moreover, the performance evaluation specialist is responsible for the
Army's quality assurance program for the two contracts in Qatar. This
includes developing a quality assurance plan, monitoring contractor
performance, training junior quality assurance personnel, analyzing
quality data for trends, and providing input on the contractor's
performance for the award fee board. This position requires a certified
quality assurance professional. While some of these duties were
performed by the administrative contracting officer, other duties need
specialized skills that administrative contracting officers generally
do not have. Contract specialists perform a wide variety of pre-and
post-award tasks encompassing complex acquisition planning, contract
type selection, contract formation and execution, cost of price
analysis, contract negotiation, and contract administration including
reviewing monthly contractor invoices. According to the contracting
officer's representative, he was responsible for providing the
technical assessment of the contractor's performance and reviewing
contractor invoices, a responsibility for which he said that he was not
trained. He also said that the invoices required closer scrutiny than
he was able to give them and he often did not know if the invoices
included valid expenses or not. In addition, the contracting officer's
representative had oversight responsibilities for five additional
contracts and his primary assignment as the base's Provost Marshal did
not always allow him time to complete his contract oversight
responsibilities. The procurement analyst, among other things, is
responsible for developing cost/pricing data, proposals, and counter-
proposals for use in negotiations; analyzing contractor proposals to
determine reasonableness; determining appropriateness and
reasonableness of proposed labor and overhead rates; and developing
data for use in pricing trend analyses. What made these vacancies even
more critical is that during this time the contracting office awarded
two, 1-year contracts to continue providing the base security and base
operations services. According to the contracting officer, it was
difficult to find qualified candidates to fill some of the vacancies,
and in the fall of 2007 the Army rejected a number of applicants
because they did not have the right skills.
* The contracting officer for the Global Maintenance and Supply
Services in Kuwait--Task Order and the APS-5 contract said that her
office was understaffed, which made it difficult to keep up with some
contract administrative requirements. For example, she said that more
staff would allow her office to properly handle the deobligation of
funds against contracts.
In January 2008, we reported that (1) the contract management oversight
team was inadequately staffed to effectively oversee the Global
Maintenance and Supply Services in Kuwait--Task Order 0001, (2) the
401st Army Field Support battalion was concerned about its ability to
administer cost-plus-award-fee provisions, and (3) the battalion was
not meeting Army Quality Program requirements due in part to lack of
oversight and contract management staff.[Footnote 29] Specifically, we
reported that there were not enough trained oversight personnel to
effectively oversee and manage the task order. We also reported that as
of April 2007 four oversight personnel positions were vacant, including
two military quality assurance inspectors and two civilian positions--
a quality assurance specialist and a property administrator. Due to the
vacant property administrator position, some proper accounting of
government-owned equipment was not performed. The Army agreed with our
recommendation that it take steps to fill the vacant oversight
positions and Army Sustainment Command officials told us that steps
were being taken to fill the vacant oversight positions with qualified
personnel. According to the officials, 16 military personnel were
assigned to the battalion to help provide contract oversight in
maintenance, supply, transportation, and operations--8 of which would
be assigned to maintenance. In addition, the officials stated that the
quality assurance specialist and property administrator positions had
both been announced numerous times and several offers had been
declined. The property administrator position was filled in March 2008;
however, as of June 2008 the quality assurance specialist position was
still vacant.
For the linguist contract, officials responsible for the contract said
(1) there were not enough contracting officer's technical
representatives to effectively oversee the contract and (2) the
representatives spent more time ensuring the contractor met its
responsibilities concerning employees' pay, uniforms, and other things
than they did performing the full range of contract oversight actions.
According to contracting officials, in February 2007 there were 7
contracting officer's technical representatives providing oversight for
about 8,300 linguists in 120 locations across Iraq and Afghanistan. In
one case, a single oversight person was responsible for linguists
stationed at more than 40 different locations spread throughout the
theater of operations. The officials also said that one theater
commander restricted travel within the area of operations during some
time of the contract. This travel restriction limited the ability of
oversight personnel to perform adequate contract oversight. In
addition, oversight officials stated that when they did have the
opportunity to visit a forward operating location, they often spent
their time focusing on contractor personnel issues such as ensuring
that the contractor paid the foreign national linguists on time and as
agreed to in their contracts. Oversight officials also cited the
following difficulties in performing contract oversight: (1)
determining what support the government is supposed to provide to the
contractor, (2) getting deployed units to provide support such as
subsistence and transportation to the assigned linguists and (3)
inexperience of unit commanders in working with contractors. In March
2008, after awarding four new contracts for linguist services, the Army
increased the number of alternate contracting officer's representatives
in Iraq and Afghanistan from 7 to 14 in an effort to improve oversight.
For the other two contracts we reviewed, authorized oversight positions
were filled. For the Stryker contract, the Program Manager-Stryker
Brigade Combat Team provided overall contract management and the
Defense Contract Management Agency provided contract administration and
oversight services for the battle damage repair effort in Qatar. The
Defense Contract Management Agency had a designated administrative
contracting officer in Kuwait, who also served as the quality assurance
evaluator. The quality assurance evaluator traveled to Qatar and
performed final inspection of repaired vehicles prior to accepting them
for the government. He also performed periodic in-process inspections
during his visits to Qatar, as his schedule allowed.
Oversight for the Predator contract was performed by the quality
assurance group within the Air Combat Command Program Management
Squadron. According to Air Force officials, the Predator quality
assurance team consisted of a superintendent quality assurance
evaluator and 16 additional quality assurance evaluators. One full-time
evaluator was located in Iraq while the others were located at Creech
Air Force Base, Nevada. The quality assurance evaluators worked full
time to ensure that the contractor's maintenance of the Predator met
contract specifications. According to Air Force officials, based on a
risk analysis, one evaluator was sufficient to provide oversight in
Iraq. The quality assurance evaluators planned their oversight
inspections using a monthly contract surveillance audit plan provided
by the quality assurance department. At the end of each month, the
evaluators in Iraq and at Creech prepared a report that described the
results of site audits, technical inspections, any deficiencies
identified, the status of corrective action requests, other action
items, and an overall summary of the business relationship with the
contractor.
Guidance for Contract File Maintenance and Quality Assurance Not Always
Followed:
We found that contracting offices and oversight activities did not
always follow policy and guidance for maintaining contract files or
established quality assurance principles. According to the FAR, unless
otherwise specified, the contract administration office shall maintain
suitable records reflecting the nature of quality assurance actions as
part of the performance records of the contract. The regulation states
that organization of the contract files must be sufficient to ensure
the files are readily accessible to principal users and, if needed, a
locator system should be established to ensure the ability to locate
promptly any contract files. In addition, a DFARS policy, guidance and
instruction states that the basis for all award fee determinations
should be documented in the contract file. However, for three of the
contracts we reviewed--including two award fee contracts--the
contracting officers could not provide documents supporting contract
administration and oversight actions taken. Specifically, for the base
operations support, security services, and APS-5 contracts, we asked
the contracting offices to provide documentation from the contract
files related to past oversight actions, including any records of
corrective actions. Contracting officials said that they could not
identify records of oversight actions taken because corrective action
requests and other such documentation of contractor performance either
were not maintained in the contract files or were maintained in such a
manner that the current contracting officer could not locate them and
was unaware of their existence. As a result, incoming contracting
officers and contract administration personnel said they were unable to
identify whether there were recurring contractor performance issues.
Some of the contracting office personnel with whom we spoke stated that
previous contracting office personnel had not properly documented and
maintained all contract actions; however, they could not explain why,
given that this occurred prior to their assignments. For the base
operations support and security services contracts, we also asked for
documents related to the Army's decision concerning award fees to the
contractors; however, the contracting office personnel were unsure
whether or how quality assurance evaluations were previously analyzed
and used to assess the contractor's performance for purposes of
determining the award fee it received.
According to DOD's guidebook for performance-based service
acquisitions, an assessment of contractor performance should be
documented, whether acceptable or unacceptable, as it is conducted and
this official record may be considered past performance information. As
we reported in January 2008, the Army did not always document
unacceptable performance for the Global Maintenance and Supply Services
in Kuwait--Task Order 0001. We reported that the Army did not always
document deficiencies identified during quality assurance inspections
despite the requirement to do so in the battalion's quality and
contract management procedures. Instead, quality assurance inspectors
allowed 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. We found a similar situation with the APS-
5 contract for equipment maintenance in Qatar.
We also found that the regulation governing the Army quality program
stated that management of a comprehensive quality program requires
subject matter practitioners with quality expertise. However, according
to oversight officials, assigned contract oversight personnel for the
linguist contract were unable to judge the performance of the
contractor employees because they were generally unable to speak the
languages of the contractor employees they were responsible for
overseeing. The officials stated that this prevented the government
from assessing linguist quality and identifying ways to improve
contractor performance. We asked how the Army could ensure the
linguists were properly translating and interpreting information if the
quality assurance personnel could not speak the language in question.
Agency officials responded that they thoroughly reviewed and validated
the contractor's methodology for determining if the linguists spoke the
language and met the proficiency standards. They further stated that if
they had people available who could speak the different languages
needed, they would not need contract linguists.
Similar to our findings, the Army Inspector General reported in October
2007 that shortages of contracting officers, quality assurance
personnel, and technically proficient contracting officer's
representatives were noticeable at all levels. Without adequate levels
of qualified oversight personnel, complete and organized contract
files, and consistent implementation of quality assurance principles,
DOD's ability to perform the various tasks needed to monitor contractor
performance may be impaired. Additionally, until DOD is able to obtain
reasonable assurance that contractors are meeting their contract
requirements efficiently and effectively, it will be unable to make
fully informed decisions related to award fees as well as additional
contract awards. Our selection of contracts did not allow us to project
our findings across the universe of DOD contracts for services that
support contingency operations. However, given that we identified
inadequate oversight and administration staff levels for five of the
seven contracts, and in four of the contracts we identified a failure
to follow guidance for contract file maintenance or quality assurance
principles, we believe the potential for these weaknesses exists in
other DOD contracts. As we previously stated, some of the contracts we
reviewed have ended; however, DOD continues to acquire those services
through new contracts that are managed by the same contract oversight
and administration offices and processes. As such, it is likely the
weaknesses we identified continue to exist in the new contracts. While
we could not determine the cost effect of inadequate oversight, as we
have previously reported inadequate oversight may have some negative
cost implications. Unless DOD can determine that inadequate oversight
and insufficient staff are not a problem on other contracts for
services to support contingency operations, the potential for waste
exists DOD-wide.
DOD Used Contractors Because Military Personnel and DOD Civilians Were
Not Available:
DOD uses contractors to support contingency operations for several
reasons, including the need to compensate for a decrease in the size of
the force and a lack of expertise within the military services. For the
seven contracts we reviewed, DOD decided to use a contractor rather
than DOD personnel because sufficient numbers of military personnel and
DOD civilians were not available or the available personnel did not
have the required skills. For five of the seven contracts, DOD lacked
sufficient personnel to meet increased requirements for services to
support operations in Iraq and Afghanistan. For example, one contract
we reviewed was for organizational-level maintenance of the Predator
unmanned aerial system. In fiscal year 2002, Congress provided the Air
Force $1.6 billion to acquire 60 additional unmanned Predator aircraft;
however, according to Air Force documents, it did not have the
additional 1,409 personnel needed to maintain these new assets. As a
result, the Air Force decided to use contractors to support the
additional aircraft. In another example, the contracting officer for a
contract that provides maintenance of prepositioned Army equipment and
supply services in Qatar told us that these services are contracted out
because there were insufficient military personnel to maintain the
equipment. According to the official, while maintenance personnel
maintain their unit's equipment, they are not available to maintain all
prepositioned equipment in a location such as Qatar. We also reviewed a
similar equipment maintenance and supply services contract in Kuwait.
According to the contracting officer, who is the same for both the
Qatar and Kuwait contracts, contractors are used to provide the
services in Kuwait because no military personnel were available to meet
the requirements during the required time frame and the maintenance
effort had previously only been performed by contractors. Additionally,
contracting office officials for the security services and base
operations support contracts in Qatar told us that contractors provide
these services because there are not enough military personnel
available to perform the work.
For the two other contracts we reviewed, DOD did not have the personnel
with specific skill sets to meet the missions. For example, regarding
the contract that provides linguist interpretation and translation
services for deployed units, Army officials told us that, the Army does
not have enough military personnel who can speak the various required
languages. In February 2007, the contract requirement was for over
11,000 linguists in over 40 different languages and dialects. According
to Army officials, years ago the military did not anticipate such a
large requirement for Arabic speakers. As a result, it phased out many
interpreter military occupational specialties, thereby creating the
shortfall. The officials said the requirements for language skills
change over time and it is very difficult to forecast what language
skills and what number of personnel with those skills will be needed in
the future. Similarly, our review of a contract that provided total
logistics support for the Stryker program found that these services
were contracted out because DOD did not have people with the specific
skills to perform this type of repair. According to Army officials, the
development, production, and fielding of the Stryker vehicles were done
concurrently and as a result, total logistics support had to be
contracted out because at that time no organic capability had been
established within the military to maintain the vehicles. After the
contract was in place, the Army identified a need for the rapid repair
of battle-damaged Stryker vehicles in order to restore combat
capability. This requirement was added to the existing logistics
support contract. According to Army officials, the decision was made to
contract for the repair of battle-damaged Army Stryker vehicles because
DOD did not have people with the specific skills to perform this type
of repair. Moreover, the officials also stated that the military will
never have an organic military capability to repair battle-damaged
vehicles as any extensive structural damage typically requires specific
welding experience.
In May 2007 we reported that DOD and service officials attributed the
increased use of contractors for support services to several factors,
including (1) increased operations and maintenance requirements from
the global war on terror and other contingencies, which DOD has met
without an increase in active duty and civilian personnel; (2) federal
government policy, which is to rely on the private sector for needed
commercial services that are not inherently governmental in nature; and
(3) DOD initiatives, such as its competitive sourcing[Footnote 30] and
utility privatization programs. We also reported that officials stated
the increased use of contractor support to help meet expanded mission
support work has certain benefits.[Footnote 31] For example, they said:
* the use of contractors allows uniformed personnel to be available for
combat missions,
* obtaining contractor support in some instances can be faster than
hiring government workers,
* it is generally easier to terminate or not renew a contract than to
lay off government employees when operations return to normal, and:
* contractors can provide support capabilities that are in short supply
in the active and reserve components, thus reducing the frequency and
duration of deployments for certain uniformed personnel.
Furthermore, according to other GAO, DOD, and RAND reports, the
department also uses contractors because of its need to deploy weapon
systems before they are fully developed, and the increasingly complex
nature of DOD weapon systems. For example, in a 2005 report that
examined the Army's use of contractors on the battlefield, RAND
reported that DOD's decision to field equipment still in development
delays the date at which maintenance work can be performed in-house and
extends the time the Army needs contractor personnel because it has not
had the time to develop any internal capability. Additionally, in
October 2007 DOD reported that the increasing technical complexity of
DOD weapons systems and equipment requires a level of specialized
technical expertise of limited scope, which DOD does not believe can be
cost-effectively serviced and supported by a military force capability,
resulting in the use of contractors.
Conclusions:
While contractors provide valuable support to contingency operations,
we have frequently reported that long-standing DOD contract management
and oversight problems, including DOD's failure to follow contract
management and oversight policy and guidance, 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. Lack of effective oversight over the large number of
contracts and contractors raises the potential for mismanagement of
millions of dollars of these obligations. As we previously stated, some
of the contracts we reviewed have ended, however, DOD continues to
acquire these services through new contracts that are managed by the
same contract oversight and administration offices and processes. As
such, it is likely the weaknesses we identified continue to exist in
the new contracts. Our selection of contracts did not allow us to
project our findings across the universe of DOD contracts for services
that support contingency operations. However, given that we identified
inadequate oversight and administration staff levels for five of the
seven contracts, and in four of the contracts we identified a failure
to follow guidance for contract file maintenance or quality assurance
principles, we believe the potential for these weaknesses exists in
other DOD contracts supporting contingency operations.
Recommendations for Executive Action:
To ensure that DOD is able to exercise effective oversight over the
contracts we reviewed, we recommend that the Secretary of Defense
direct the Secretary of the Army to take the following three actions:
* develop a plan to adequately staff oversight positions with qualified
personnel,
* take steps to determine why guidance for maintaining contract files
is not consistently being followed and implement a corrective action
plan, and:
* ensure that quality assurance principles are consistently
implemented.
We also recommend that the Secretary of Defense direct each of the
service secretaries to conduct a review of the contract administration
functions that support contingency operations contracts to determine
the prevalence of inadequate contract oversight and administration
staffing levels and the extent to which guidance for maintaining
contract files and quality assurance principles are not being
consistently followed and take corrective actions as necessary.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, DOD concurred with each of our
recommendations and stated that the Army was well aware of the problems
we identified. In response to our recommendation that the Army develop
a plan to adequately staff oversight positions for the contracts we
reviewed with qualified personnel, DOD stated that the Army established
the Gansler Commission to review lessons learned in recent operations
and provide recommendations to improve effectiveness, efficiency, and
transparency for future military operations. The Gansler Commission
recommended that the Army contracting workforce be increased by 1,400
personnel. DOD stated that the Army established three new contracting
commands that should enhance the focus on contractor oversight and that
concept plans to support an increase in contract personnel were being
staffed. While the Army's actions should be viewed as positive steps,
increasing the workforce and establishing three new contracting
commands will not address, in the near term, the Army's inadequate
oversight personnel on the specific contracts we reviewed. We continue
to believe that the Army should ensure that currently authorized
oversight positions are filled with qualified personnel. If the concept
plans include provisions for filling currently vacant authorized
oversight positions with qualified personnel, then the Army's actions
should address our recommendation. In response to our recommendation
that the Army take steps to determine why guidance for maintaining
contract files is not consistently being followed and implement a
corrective action plan, DOD stated that contract files are reviewed for
compliance and completeness during all Army Procurement Management
Reviews of Army contracting activities and that the Army found that a
checklist should be developed. We believe that developing a checklist
may be beneficial for identifying information that should be in
contract files. However, this may not address the issue of why existing
guidance for contract file maintenance, which already identifies what
should be included in the files, is not being followed. In response to
our recommendation that the Army ensure that quality assurance
principles are consistently implemented, DOD stated that it has
stressed the requirement to prepare quality assurance surveillance
plans for all service contracts greater than $2,500 to ensure
systematic quality assurance methods are used. While having a quality
assurance surveillance plan can be beneficial to consistent
implementation of quality assurance principles, most of the contracts
we reviewed had a quality assurance surveillance plan, yet quality
assurance principles were not consistently implemented. For example,
the Global Maintenance and Supply Services Contract in Kuwait had a
quality assurance surveillance plan that required documentation of
contractor performance. However, as we reported, the Army did not
always document unacceptable contractor performance. Because of our
concern that the problems we identified may exist in other contingency
contracts, we recommended that the service secretaries conduct a review
of contract administration functions that support contingency
operations contracts to determine the prevalence of inadequate
oversight and administration staffing levels and the extent to which
guidance for maintaining contract files and quality assurance
principles is not being consistently followed and take corrective
actions as necessary. In response, DOD stated that it has taken several
initiatives to position itself for future operations, including
increasing staffing dedicated specifically to contracting in
expeditionary operations. While these actions may enhance future
contracting for expeditionary operations, they will not address
potential problems with active contracts. Additionally, authorized
oversight positions in deployed locations need to be filled with
qualified personnel to provide contractor oversight. We believe
existing active contracts still need to be reviewed to address the
problems we identified. DOD's comments are reprinted in appendix II.
We are sending copies of this report to the appropriate congressional
committees and the Secretary of Defense. We will also make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov]. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report.
If you or your staff has any questions regarding this report, please
contact me at (202) 512-8365 or solisw@gao.gov. Key contributors to the
report are listed in appendix III.
Signed by:
William M. Solis, Director:
Defense Capabilities and Management:
List of Committees:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable John P. Murtha:
Chairman:
The Honorable C. W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
[End of section]
Appendix I: Scope and Methodology:
To conduct our work, we selected and conducted a case study review of a
nonprobability sample of 7 Department of Defense (DOD) contracts for
services that support deployed forces. Since a complete list of
contracts was not available, we developed a list from which to select
our case studies in two steps. First, we developed criteria for such a
list of contracts (including task orders) awarded by DOD and its
components that included the following: the contract supports deployed
forces; Operations and Maintenance (O&M) funds are used to pay for the
contract services; the principal place of performance is within the
United States Central Command's Area of Operation (i.e., 50 percent or
greater); the contract is to maintain a weapons system(s) and/or
provide support, including base support, but not for reconstruction and
commodities; the award date of the contract is after October 2002; the
contract was still in effect as of December 12, 2006; and the
contractor is U.S. based. We provided this list of criteria to DOD
which provided us with a list of 34 contracts, some of which did not
meet the criteria. Second, we generated a short list of 8 contracts to
supplement those provided by DOD based on our research and experience
from prior work. We selected our nonprobability sample of 7 contracts
from these two lists combined. The selected contracts provided various
services such as base operations support, security, vehicle
maintenance, and linguist services for case study review. Factors that
influenced the case study selection included the extent of work we may
have done on a contract during previous GAO reviews, type of contract
service provided, location where the contractor's work was performed,
and contract dollar amount. Our selection of contracts does not allow
us to project our findings across the universe of DOD contracts for
services that support deployed forces.
To determine why selected contracts supporting deployed forces
experienced cost growth, we reviewed available contract requirements
and funding documents and interviewed contracting office officials.
When available, we compared the initially estimated annual contract
costs with the actual annual contract costs to determine if the annual
contract costs were different than initially anticipated. If there was
a difference between annual contract costs and the initially estimated
contract costs, we reviewed contract modification documents, contractor
proposals, and other contract documents, and spoke with contracting
office and contractor representatives to determine what led to the
change in cost. We also spoke with representatives of the contractor to
obtain their views related to changing contract requirements and the
impact the changes had on contract costs.
To determine the extent to which DOD provided oversight of contracts
that support contingency operations, we reviewed a variety of quality
assurance and contract management regulations and guidance, including
the Federal Acquisition Regulation, the Defense Federal Acquisition
Regulation Supplement, the Army Quality Program regulation, and DOD's
Guidebook for Performance-Based Services Acquisition in the Department
of Defense. We met with contracting and quality assurance officials,
and reviewed oversight and surveillance plans and inspection records.
In addition, we spoke with representatives of the contractor and
reviewed data provided by the contractor. We also observed physical
inspections of the services provided for two contracts and toured
operation areas for two other contracts. We spoke with oversight and
contracting office officials to discuss the extent to which the
contract management and oversight teams were adequately staffed to
perform administration and oversight activities. While guidance was not
available on the appropriate number of personnel needed to monitor
contractors in a deployed location, we relied on the judgments and
views of contracting office and contract oversight personnel as to the
adequacy of staffing.
To determine why the department uses contractors to support contingency
operations, we interviewed contracting office officials and reviewed
available documentation related to the decision to use contractors
instead of military or DOD civilian personnel for the contracts. We
also reviewed prior GAO work and DOD studies to determine if the basis
of the decisions for the seven contracts we reviewed were consistent
those used to make past decisions to contract for services across DOD.
We did not, however, compare the cost of contractors versus military
personnel or make policy judgments as to whether the use of contractors
is desirable.
We conducted this performance audit from November 2006 through August
2008 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]
Appendix II: Comments from the Department of Defense:
Deputy Under Secretary Of Defense For Logistics And Materiel Readiness:
3500 Defense Pentagon:
Washington, DC 20301-3500:
September 23, 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) technical response to the GAO
draft report, "Military Operations: DoD Needs to Address Contract
Oversight and Quality Assurance Issues for Contracts Used to Support
Contingency Operations," dated August 25, 2008 (GAO Code 350951).
The Department concurs with these recommendations. Detailed comments on
the report are enclosed. Technical comments were submitted under
separate cover.
Signed by:
Jack Bell:
Enclosure:
As stated:
GAO Draft Report – Dated August 25, 2008 GAO Code 350951/GAO-08-1087:
"Military Operations: DoD Needs to Address Contract Oversight and
Quality Assurance Issues for Contracts Used to Support Contingency
Operations"
Department Of Defense Comments To The Recommendations:
Recommendation 1: The GAO recommends that the Secretary of Defense
direct the Secretary of the Army to develop a plan to adequately staff
oversight positions with qualified personnel.
DOD Response: Concur.
The Army recognizes the importance of oversight of contractor
performance and is aggressively moving forward to resolve these issues
in a timely manner.
The Secretary of the Army established an independent Commission on Army
Acquisition and Program Management in Expeditionary Operations (Gansler
Commission), to review the lessons learned in recent operations and
provide forward-looking recommendations to ensure that future military
operations achieve greater effectiveness, efficiency, and transparency.
The Commission assessed processes (including internal controls),
personnel, organization, training, policy and regulation, as well as
explored legislative solutions. In response to the Gansler Commission
findings and recommendations, dated October 31, 2007, the Army
established the U.S. Army Contracting Command (ACC), the U.S. Army
Expeditionary Contracting Command (ECC), and the U.S. Army Installation
Contracting Command (ICC), under the command and control of the U.S.
Army Materiel Command (AMC). This is expected to enhance the focus on
contractor oversight.
One of the recommendations of the Gansler Commission is to increase the
number of military (by 400) and civilian (by 1000) in the Army
contracting workforce, which involves about a 25 percent increase. The
Commission made this recommendation after considering both the Air
Force and Marine Corps model for determining the number of military.
Ultimately, the Commission recommended that a ratio of 70/30 percent
(civilian to military personnel) is appropriate for the total Army
Acquisition Force, and a ratio of 80/20 for the Contracting Corps.
Concept plans to support the increase in additional personnel are being
staffed.
Recommendation 2: The GAO recommends that the Secretary of Defense
direct the Secretary of the Army to take steps to determine why
guidance for maintaining contract files is not consistently being
followed and implement a corrective action plan.
DOD Response: Concur.
The Army is well aware of the problems associated with maintaining
contract files and Contracting Officer Representative (COR) files in an
appropriate manner. The Army is aggressively moving ahead to resolve
these issues in a timely manner.
Contract files are reviewed for compliance and completeness during all
Army Procurement Management Reviews (PMRs) of Army contracting
activities. The Army Associate Deputy Assistant Secretary
(ADAS)(Procurement) Directorate manages the PMR program and based on
systemic trend, found that a checklist should be developed.
Recommendation 3: The GAO recommends that the Secretary of Defense
direct the Secretary of the Army to ensure that quality assurance
principles are consistently implemented.
DOD Response: Concur.
The Army is well aware of the problems associated with ensuring that
quality assurance principles are consistently implemented and
documented in the contract files. The Army is moving ahead aggressively
to resolve these issues in a timely manner.
Deputy Assistant Secretary of the Army (Procurement and Policy)
memorandum, dated February 9, 2007, "Contract Administration and
Surveillance for Service Contracts," stressed the requirement to
prepare Quality Assurance Surveillance Plans (QASPs) for all service
contract actions greater than $2,500 to ensure systematic quality
assurance methods are used during contract administration. Further, the
Army requires that the level of surveillance described in the plan be
commensurate with the dollar value, risk, complexity and criticality of
the acquisition.
Recommendation 4: The GAO recommends that the Secretary of Defense
direct each of the Service Secretaries to conduct a review of the
contract administration functions that support contingency operations
contracts to determine the prevalence of inadequate contract oversight
and administration staffing levels and the extent to which guidance for
maintaining contract files and quality assurance principles are not
being consistently followed and take corrective actions as necessary.
DOD Response: Concur.
The DoD is cognizant of the problems associated with expeditionary
contracting, contract administration and the requirement to adequately
staff oversight positions with qualified personnel and is aggressively
moving ahead to resolve these issues in a timely manner.
To improve contingency contracting, the Department undertook several
initiatives to position itself for future operations. In May 2007, the
Department increased the staffing within the Defense Procurement,
Acquisition Policy and Strategic Sourcing Directorate (DPAP) that is
dedicated specifically to contracting in expeditionary operations. The
DoD is developing joint policies for requirements definition,
contingency program management, and contingency contracting during
combat operations and post conflict operations in coordination with
other government agencies in-theater.
Additionally, the Army established the U.S. Army Contracting Command
(ACC), the U.S. Army Expeditionary Contracting Command (ECC), and the
U.S. Army Installation Contracting Command (ICC), under the command and
control of the U.S. Army Materiel Command (AMC). This is expected to
enhance the focus on contractor oversight.
[End of section]
Appendix 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, Larry Junek, Ronald La Due Lake,
Katherine Lenane, Susan Mason, Connie W. Sawyer, Jr., and Karen
Thornton made key contributions to this report.
[End of section]
Footnotes:
[1] Department of Defense, Report on DOD Program for Planning,
Managing, and Accounting for Contractor Services and Contractor
Personnel during Contingency Operations (October 2007).
[2] H.R. Rep. No. 109-504, at 46-47 (June 2006).
[3] GAO, Defense Budget: Trends in Operations and Maintenance Costs and
Support Services Contracting, GAO-07-631 (Washington, D.C.: May 18,
2007).
[4] GAO, Defense Logistics: The Army Needs to Implement an Effective
Management and Oversight Plan for the Equipment Maintenance Contract in
Kuwait, GAO-08-316R (Washington, D.C.: January 22, 2008).
[5] Throughout this report, we refer to the six contracts and the one
task order as the seven contracts.
[6] The seven contracts we reviewed were awarded at different times.
See table 1 for information on when each of the contracts began.
[7] FAR § 46.104(c).
[8] FAR § 4.802 (c) & (d).
[9] Army Regulation 702-11, "Army Quality Program," prescribes the
policies and responsibilities of an Army quality program applicable to
all Army activities that acquire services. The March 2007 version of
the regulation supersedes AR 702-11, dated April 15, 1979, and includes
a major revision defining the core competencies fundamental to an
effective quality program.
[10] For example, in 2003 DOD relied on a Department of the Interior
contracting office that specializes in awarding and administering
contracts for other agencies to obtain contractor-provided intelligence-
related services quickly to support U.S. forces in Iraq. See GAO,
Interagency Contracting: Problems with DOD's and Interior's Orders to
Support Military Operations, GAO-05-201 (Washington, D.C.: April 29,
2005).
[11] FAR §§ 46.104 and 4.802.
[12] Defense Federal Acquisition Regulation Supplement § 246.102.
[13] While the initially estimated cost for each of the contracts
included a base year and all option years, the actual contract costs
included only those option years that have been exercised. Two of the
contracts were ongoing and not all of the option years had been
exercised at the time of this report.
[14] When the April 1999 contract expired in 2004, the Army sought
offers for a new contract to provide linguist services worldwide. A bid
protest was filed alleging that multiple requirements were being
bundled in a way that made it impossible for small businesses to
compete. Award of the contract was stayed and the bridge contract we
reviewed was issued sole source to the existing contractor. According
to Army officials, when the requirement was solicited in 2005 it was
broken into four contracts to encourage small business competition.
Each of the four contracts was awarded; however, performance was stayed
due to protests, which resulted in the bridge contract being extended
repeatedly to allow for continued service.
[15] The Army prepositions stocks at land sites in Europe, Northeast
Asia, Southwest Asia, and aboard ships afloat near Guam and Diego
Garcia. APS equipment sets are referred to according to numerical
designations of 1 through 5, corresponding to their locations. APS-5 is
the equipment prepositioned in Southwest Asia.
[16] According to the contracting officer, this modification was issued
as an undefinitized contract action and supported by an emergency
justification and approval document citing unusual and compelling
circumstances.
[17] The contract was extended by 6 months in light of an ongoing bid
protest against the follow on contract.
[18] Support provided includes: maintenance, supply support, technical
assistance, logistics planning and management, field exercises,
deployment support preparation, program plans and controls, business
administration, logistics planning, and technical manual feedback.
[19] According to Army officials, battle-damaged vehicles are those
that have sustained structural damage and can not be used in the fight
due to the vehicles' vulnerability.
[20] Only 1 option year was exercised because the Air Force sought
competition and awarded a new contract in an effort to reduce Predator
maintenance costs. The 7-week extension was to allow for transition to
the new contract.
[21] According to program officials, the contract labor rates for the
Predator maintenance contract were determined by a Forward Pricing Rate
Agreement (FPRA) that was negotiated between the government and the
contractor. A FPRA, as defined in the FAR, is a written agreement
negotiated between a contractor and the government to make certain
rates available during a specified period for use in pricing contracts
or contract modifications. Such rates represent reasonable projections
of specific costs that are not easily estimated for, identified with,
or generated by a specific contract, contract end item, or task.
[22] In commenting on a draft of this report, DOD stated that it was
less costly for the contractor to provide the protective equipment than
for the government. According to DOD, the actual equipment cost was
$785,399.91 (excluding shipping), whereas Army-issued equipment would
have cost $1,296,116.64. Related to the transportation, DOD said that
actual transportation cost was approximately $1.84 million whereas it
would have cost between $1.43 million and $1.76 million for HMMWVs to
provide to the contractor. We believe better communication between the
contracting officer and the customer using the service would have
identified the best means to provide the equipment and transportation.
[23] GAO-08-316R.
[24] Established in 1985, the Army's LOGCAP program preplans for the
use of global corporate resources to support worldwide contingency
operations. In the event that U.S. forces deploy, contractor support is
then available to a military commander as an option.
[25] GAO, Military Operations: DOD's Extensive Use of Logistics Support
Contracts Requires Strengthened Oversight, GAO-04-854 (Washington,
D.C.: July 19, 2004).
[26] GAO, High Risk Series: An Update, GAO-05-207 (Washington, D.C.:
January 2005).
[27] GAO, Military Operations: High-Level DOD Action Needed to Address
Long-standing Problems with Management and Oversight of Contractors
Supporting Deployed Forces, GAO-07-145 (Washington, D.C.: December 18,
2006).
[28] DOD Manual for the Performance of Contract Property
Administration, DOD 4161.2-M, December 1991.
[29] GAO-08-316R.
[30] Competitive sourcing, otherwise known as the A-76 process, is when
the military services and other defense components conduct public/
private competition for a commercial activity currently performed by
government personnel to determine whether it would be cost effective to
contract with the private sector to perform that activity.
[31] GAO-07-631.
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