Embassy Construction
State Department Has Implemented Management Reforms, but Challenges Remain Gao ID: GAO-04-100 November 4, 2003Since the 1998 bombings of two U.S. embassies in Africa, the State Department has done much to improve physical security at overseas posts. However, most overseas diplomatic office facilities still do not meet the security standards State developed to protect these sites from terrorist attacks and other dangers. To correct this problem, State in 1999 embarked on an estimated $21 billion embassy construction program. The program's key objective is to provide secure, safe, and functional compounds for employees overseas--in most cases by building replacement facilities. In 2001, State's Bureau of Overseas Buildings Operations (OBO)--which manages the program--began instituting reforms in its structure and operations to meet the challenges of the embassy construction program. This report discusses (1) OBO's mechanisms for more effectively managing the embassy construction program and (2) the status of and challenges facing the program. We received comments from State, which said that the report is a fair and accurate representation overall of the Department's overseas construction process.
OBO in 2001 began instituting organizational and management reforms designed to cut costs, put in place standard designs and review processes, and reduce the construction period for new embassies and consulates. OBO now has mechanisms to more effectively manage the embassy construction program, including (1) an annual Long-Range Overseas Buildings Plan to guide the planning and execution of the program over a 6-year period; (2) monthly project reviews at headquarters; (3) an Industry Advisory Panel for input on current best practices in the construction industry; (4) expanded outreach to contractors in an effort to increase the number of bidders; (5) ongoing work to standardize and streamline the planning, design, and construction processes, including initiation of design-build contract delivery and a standard embassy design for most projects; (6) additional training for OBO headquarters and field staff; and (7) advance identification and acquisition of sites. State's program to replace about 185 vulnerable embassies and consulates is in its early stages, but the pace of initiating and completing new construction projects has increased significantly over the past two fiscal years. As of September 30, 2003, State had started construction of 22 projects to replace facilities at risk of terrorist or other attacks. Overall, 16 projects have encountered challenges that have led or, if not overcome, could ultimately lead to extensions in the completion date or cost increases in the construction contract. According to OBO, project delays have occurred because of such factors as changes in project design and security requirements; difficulties hiring appropriate American and local labor with the necessary clearances and skills; differing site conditions; and unforeseen events such as civil unrest. In addition, the U.S. government has had problems coordinating funding for projects that include buildings for the U.S. Agency for International Development. None of the projects started since OBO instituted its reforms has been completed; thus GAO believes it is too early to assess the effectiveness of the reforms in ensuring that new embassy and consulate compounds are built within the approved project budget and on time.
GAO-04-100, Embassy Construction: State Department Has Implemented Management Reforms, but Challenges Remain
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Report to the Chairman, Committee on Foreign Relations, U.S. Senate:
November 2003:
EMBASSY CONSTRUCTION:
State Department Has Implemented Management Reforms, but Challenges
Remain:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-100] GAO-04-100:
GAO Highlights:
Highlights of GAO-04-100, a report to the Chairman, Committee on
Foreign Relations, U.S. Senate
Why GAO Did This Study:
Since the 1998 bombings of two U.S. embassies in Africa, the State
Department has done much to improve physical security at overseas
posts. However, most overseas diplomatic office facilities still do
not meet the security standards State developed to protect these sites
from terrorist attacks and other dangers. To correct this problem,
State in 1999 embarked on an estimated $21 billion embassy
construction program. The program‘s key objective is to provide
secure, safe, and functional compounds for employees overseas”in most
cases by building replacement facilities. In 2001, State‘s Bureau of
Overseas Buildings Operations (OBO)”which manages the program”began
instituting reforms in its structure and operations to meet the
challenges of the embassy construction program. This report discusses
(1) OBO‘s mechanisms for more effectively managing the embassy
construction program and (2) the status of and challenges facing the
program.
We received comments from State, which said that the report is a fair
and accurate representation overall of the Department‘s overseas
construction process.
What GAO Found:
OBO in 2001 began instituting organizational and management reforms
designed to cut costs, put in place standard designs and review
processes, and reduce the construction period for new embassies and
consulates. OBO now has mechanisms to more effectively manage the
embassy construction program, including
* an annual Long-Range Overseas Buildings Plan to guide the planning
and execution of the program over a 6-year period;
* monthly project reviews at headquarters;
* an Industry Advisory Panel for input on current best practices in
the construction industry;
* expanded outreach to contractors in an effort to increase the number
of bidders;
* ongoing work to standardize and streamline the planning, design, and
construction processes, including initiation of design-build contract
delivery and a standard embassy design for most projects;
* additional training for OBO headquarters and field staff; and
* advance identification and acquisition of sites.
State‘s program to replace about 185 vulnerable embassies and
consulates is in its early stages, but the pace of initiating and
completing new construction projects has increased significantly over
the past two fiscal years. As of September 30, 2003, State had started
construction of 22 projects to replace facilities at risk of terrorist
or other attacks. Overall, 16 projects have encountered challenges
that have led or, if not overcome, could ultimately lead to extensions
in the completion date or cost increases in the construction contract.
According to OBO, project delays have occurred because of such factors
as changes in project design and security requirements; difficulties
hiring appropriate American and local labor with the necessary
clearances and skills; differing site conditions; and unforeseen
events such as civil unrest. In addition, the U.S. government has had
problems coordinating funding for projects that include buildings for
the U.S. Agency for International Development. None of the projects
started since OBO instituted its reforms has been completed; thus GAO
believes it is too early to assess the effectiveness of the reforms in
ensuring that new embassy and consulate compounds are built within the
approved project budget and on time.
www.gao.gov/cgi-bin/getrpt?GAO-04-100.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Jess Ford at (202)
512-4128 or fordj@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
OBO Mechanisms to More Effectively Manage the Embassy Construction
Program:
Status of and Challenges Facing the Construction Program:
Conclusion:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Information on Embassy Construction Projects' Contractors
and Building Size:
Appendix III: Comments from the Department of State:
GAO Comments:
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Staff Acknowledgments:
Tables:
Table 1: Cost and Schedule Performance of Projects Awarded before OBO's
Management Reforms (as of late July 2003):
Table 2: Cost and Schedule Performance of Projects Awarded since OBO's
Management Reforms (as of late July 2003):
Table 3: List of the 22 Post Replacement Projects Included in This
Review:
Table 4: List of Post Replacement Projects Awarded in Late Fiscal Year
2003:
Table 5: List of Contractors for Ongoing Embassy and Consulate
Replacement Projects:
Table 6: Size of Embassy Construction Projects Using Standard Embassy
Design:
Figures:
Figure 1: Appropriations for Upgrading and Replacing Diplomatic Posts,
Fiscal Years 1998-2004:
Figure 2: Standard Embassy Design:
Figure 3: Initiated and Completed Projects, Fiscal Years 1999-2003:
Figure 4: Status of State's Program to Replace Embassies and Consulates,
Fiscal Years 1999-2003:
Figure 5: Site of Proposed, but Unfunded, USAID Building at the U.S.
Embassy in Yerevan:
Abbreviations:
OBO: Bureau of Overseas Buildings Operations:
USAID: U.S. Agency for International Development:
Letter November 4, 2003:
The Honorable Richard Lugar:
Chairman, Committee on Foreign Relations
United States Senate:
Dear Mr. Chairman:
Since the 1998 bombings of two U.S. embassies in Africa,[Footnote 1]
the State Department has done much to improve physical security at
overseas posts, such as constructing perimeter walls and anti-ram
barriers at many facilities. Despite these security upgrades, however,
most overseas diplomatic office facilities do not meet security
standards that State developed to protect them from terrorist attacks
and other dangers. As a result, thousands of American and Foreign
Service National U.S. government employees may be vulnerable to
terrorist attacks. In March 2003,[Footnote 2] we testified on these
security deficiencies at overseas diplomatic facilities, reporting that
many facilities are in poor condition, do not meet fire and safety
standards, and are in need of major maintenance. To correct the
security shortcomings at existing embassies and consulates, the State
Department in 1999 embarked on an estimated $21 billion embassy
construction program, the largest program of its kind in the
department's history. The program's key objective is to provide secure,
safe, and functional compounds for employees assigned to work at U.S.
embassies and consulates around the world, in most cases by building
replacement facilities. State's Bureau of Overseas Buildings Operations
(OBO) is responsible for planning and managing the program. Recognizing
the challenges of managing State's expanded overseas construction
program, OBO in 2001 began to institute organizational and management
reforms in its structure and operations.
At your request, this report discusses (1) OBO's mechanisms for more
effectively managing State's construction program to replace vulnerable
embassies and consulates and (2) the status of and challenges facing
the overall construction program.
To address these objectives, we reviewed the report of the Overseas
Presence Advisory Panel,[Footnote 3] earlier GAO reports that outlined
problems in State's embassy construction program, State's Long-Range
Overseas Buildings Plans for the past 3 years, monthly project
performance documents, contract modifications, and other OBO documents.
We also interviewed key State Department officials and contractors
currently working on new embassy construction projects to determine the
steps OBO has taken to more effectively manage the construction
program. Further, we visited two field locations--in Sofia, Bulgaria,
and Yerevan, Armenia--where we observed the level of management and
supervision at the new embassy construction sites and the contractor's
performance on the projects. Appendix I provides more information on
our scope and methodology.
Results in Brief:
OBO in fiscal year 2001 began to institute a number of organizational
and management reforms in its structure and operations designed to cut
costs, put in place standard designs and review processes, and reduce
the construction period for new embassies and consulates. Thus, OBO now
has a number of mechanisms in place to more effectively manage the
expanded construction program. These mechanisms include the annual
Long-Range Overseas Buildings Plan, the first of which was developed in
July 2001, which guides the planning and execution of its overseas
construction program over a 6-year period, among other things. OBO in
2001 also instituted monthly project reviews at headquarters and in
2002 established a panel of industry advisors for input on current best
practices in the construction industry. In addition, OBO expanded its
outreach to contractors in an attempt to increase the number of
contractors that bid on construction projects, has put in place
standard designs, and has streamlined its project design delivery
processes. Furthermore, OBO has increased its efforts to train staff in
a variety of positions and to acquire sites well in advance of planned
construction.
State's program to replace about 185 vulnerable embassies and
consulates is in its early stages, but the pace of initiating and
completing new construction projects has increased significantly over
the past three fiscal years. From fiscal years 1999 through 2003, State
received approximately $2.7 billion for the construction program. As of
September 30, 2003, State had started construction of 22 projects to
replace embassies and consulates at risk of terrorist or other
attacks.[Footnote 4] Eight of the 22 projects were started before OBO
began to institute its recent management reforms--that is, before
fiscal year 2001--and the remaining 14 were started since then.
Overall, 16 projects--7 that were started before OBO's reforms and 9
that were started after--have encountered challenges that have led or,
if not overcome, ultimately could lead to extensions to the project
completion date or cost increases in the construction contract, which
represents the largest line item in project budgets. According to OBO
reports, construction projects have been delayed due to such factors as
changes in project design and security requirements, difficulties
hiring appropriate American and local labor with the necessary
clearances and skills, differing site conditions, and unforeseen events
such as civil unrest. Moreover, the U.S. government has had difficulty
in coordinating funding for projects that include buildings for the
U.S. Agency for International Development (USAID), which can result in
increased project costs and security risks to U.S. government
personnel. None of the projects started since OBO's management reforms
has been completed; thus, we believe it is too early to assess the
effectiveness of these reforms in addressing these challenges and in
ensuring that new embassy and consulate compounds are built within the
approved project budget and on time.
We received written comments from the Department of State, which we
have reprinted in appendix III. State said that the report is a fair
and accurate representation overall of the department's overseas
construction process and properly cites all of OBO's management
reforms.
Background:
OBO was instituted on May 15, 2001, replacing State's Office of Foreign
Buildings Operations. OBO manages the construction of new facilities
that can satisfy the State Department's stringent security standards
and provide U.S. diplomatic personnel secure, safe, and functional
office and residential environments. Along with the input and support
of other State Department bureaus, foreign affairs agencies, and
Congress, OBO sets worldwide priorities for the design, construction,
acquisition, maintenance, use, and sale of real properties and the use
of sales proceeds. OBO is composed of five main offices: Planning and
Development, Real Estate and Property Management, Project Execution,
Operations and Maintenance, and Resource Management. The construction
program is located primarily in the Project Execution Office,
specifically in the Construction and Commissioning Division within that
office.
In response to terrorist threats, the State Department in 1986 began an
embassy construction program, known as the Inman program, to protect
U.S. personnel and facilities. In 1991, we reported that State was
unable to complete as many projects as originally planned due to
systemic weaknesses in program management, as well as subsequent
funding limitations.[Footnote 5] This construction program suffered
from delays and cost increases due to, among other things, poor program
planning, difficulties acquiring sites, changes in security
requirements, and inadequate contractor performance. Following the
demise of the Inman program in the early 1990s, the State Department
initiated very few new construction projects until the 1998 embassy
bombings in Africa, which prompted additional funding for security
upgrades and the construction of secure embassies and consulates.
Through State's security upgrade program, the department has done much
since the 1998 bombings to upgrade physical security at existing
overseas posts without building new embassy or consulate compounds.
These security upgrades have included constructing perimeter walls,
anti-ram barriers, and access control facilities at many posts.
However, even with these improvements, most office facilities do not
meet security standards that State developed to protect overseas
diplomatic office facilities from terrorist attacks and other dangers.
As of December 2002, the primary office building at 232 posts[Footnote
6] lacked desired security because it did not meet one or more of
State's five key security standards[Footnote 7] of (1) 100-foot setback
between office buildings and uncontrolled areas, (2) perimeter walls
and/or fencing, (3) anti-ram barriers, (4) blast-resistant construction
techniques and materials, and (5) controlled access at the perimeter of
the compound. Only 12 posts had a primary building that met all five
standards. As a result, thousands of U.S. and foreign national
employees may be vulnerable to terrorist attacks.[Footnote 8]
After the 1998 attacks, State identified facilities at about 185 posts
that would need to be replaced to meet security standards. OBO plans to
construct the replacement facilities on embassy and consulate compounds
that will contain the main office building, all support buildings and,
where necessary, a building for USAID. While State continues to fund
some security upgrades at embassies and consulates, it has shifted its
resources toward those capital projects that would replace existing
facilities with new, secure diplomatic compounds or substantially
retrofit existing, newly acquired, or leased buildings. As shown in
figure 1, funding for State's capital projects has significantly
increased since fiscal year 1998. State received about $2.7 billion for
its new construction program from fiscal year 1999 through fiscal year
2003 and requested $890 million for fiscal year 2004. OBO in June 2003
estimated that beginning in fiscal year 2005 it would cost about $17.5
billion to replace the remaining vulnerable posts.
Figure 1: Appropriations for Upgrading and Replacing Diplomatic Posts,
Fiscal Years 1998-2004:
[See PDF for image]
Note: Fiscal year 2002 includes $200.5 million in emergency spending
provided by the 2002 Supplemental Appropriations Act for Further
Recovery From and Response to Terrorist Attacks on the United States
(Pub. L. No. 107-206).
[End of figure]
As of September 30, 2003, State had started construction of 22 projects
to replace embassies and consulates that are at risk of terrorist or
other attacks. Toward the end of fiscal year 2003, State awarded
contracts for an additional 7 projects. The timeline for funding and
completing the remaining projects depends on the amount of funding
State receives annually for the construction program. At the proposed
fiscal year 2004 rate of funding, it will take more than 20 years to
fully fund and build replacement facilities.[Footnote 9]
OBO Mechanisms to More Effectively Manage the Embassy Construction
Program:
Recognizing past problems managing State's overseas construction
program, OBO in 2001 began to institute organizational and management
reforms in its structure and operations. OBO intended that these
reforms--which are designed to cut costs, put in place standard designs
and review processes, and reduce the construction period for new
embassies and consulates--would bring rational and efficient management
to OBO by using a results-based approach to program management.
OBO has instituted the following seven key mechanisms over the past 3
years to better manage its expanded embassy construction program:
* the Long-Range Overseas Buildings Plan,[Footnote 10] which
prioritizes and summarizes capital projects over 6 years;
* monthly project reviews at headquarters, where senior management
officials review ongoing projects to identify and resolve current or
potential issues at all stages of the project;
* an Industry Advisory Panel, which advises OBO on industry best
practices in the construction sector;
* efforts to broaden the contractor pool through events such as
Industry Day, where interested contractors are invited to learn about
OBO's construction program;
* ongoing work to standardize and streamline the planning, design, and
construction processes, including the initiation of design-build
contract delivery and a standard embassy design for most projects;
* additional training for OBO headquarters and field staff; and:
* advance identification and acquisition of sites.
Development of the Long-Range Overseas Buildings Plan:
To help manage State's expanding large-scale construction program, OBO
developed the Long-Range Overseas Buildings Plan, first published in
July 2001 and most recently updated in March 2003. The latest version
of the plan prioritizes proposed capital projects over 6 years, from
fiscal years 2003 through 2008, based on input from State's Bureau of
Diplomatic Security, regional bureaus, and agencies with overseas
presence. It describes and provides a justification for the foreign
affairs community's global and regional capital project requirements.
According to OBO, it also provides the basis for proceeding in a
logical and focused fashion to improve the security, safety, and
functionality of facilities overseas. Each year the plan is updated to
capture changes resulting from budget actions and requirements of posts
overseas. According to the latest version of the plan, State plans to
start replacing facilities at 75 vulnerable posts from fiscal year 2003
to fiscal year 2008 at an estimated cost of $7.4 billion.
As described in the March 2003 plan and by OBO officials, State
followed a multistep process in developing its phased site acquisition,
design, and construction schedule for its security capital projects:
* The Bureau of Diplomatic Security completed its annual security
evaluation of all the U.S. overseas posts, taking into account many
factors affecting a post's overall security level. The evaluation
listed vulnerable posts and ranked them in terms of security issues.
Because the terrorist threat is global and because the buildings have
fundamental security problems, Diplomatic Security and OBO officials
believe that there are a great many posts that are very vulnerable and
in need of replacement, and that the differences in vulnerability do
not make posts at the lower end of the list substantially safer than
those at the top of the list. By congressional mandate,[Footnote 11]
these posts are listed and ranked in bands of 20, through a process
discussed in the following paragraphs.[Footnote 12] Congress directed
that State spend its security capital funds, which are funded within
the Embassy Security, Construction and Maintenance account, on the top
80 posts only.
* Working with the security-prioritized list, each regional bureau
annually ranked all posts within its region that were in the top 80
replacement list based on such factors as threat, survivability,
staffing trends, regional interests, and functionality. OBO officials
told us this effort resulted in a prioritized list for State's security
capital projects for each of the six regional bureaus, which responds
to the global nature of the transnational terrorism threat. Each year,
as new posts are added, these posts usually go to the end of a bureau's
priority list.
* Finally, OBO combined the prioritized lists from the different
regions into one master list, which, as mentioned above, OBO updates
annually. The first six posts on the list were the top ranked post from
each region. Posts 7 through 12 on the list were the second-ranked
posts from each region, and so on. With the help of its Planning and
Real Estate Offices, OBO then determined if a site already existed to
build a new facility and, if not, when new sites could actually be
acquired. When necessary, OBO rescheduled the list based on the likely
available capital security funding in each year covered in the Long-
Range Overseas Buildings Plan, opportunities or problems in acquiring a
site, and constraints on the ability of construction companies to work
in a particular country at the planned time. This prioritized and
scheduled listing of projects then becomes the security capital portion
of the Long-Range Overseas Buildings Plan.
State also requests funds for regular capital projects to replace posts
not in the top 80 that have compelling operational or other
requirements that must be addressed. The Long-Range Overseas Buildings
Plan includes descriptions of these regular capital projects.
OBO's development of the plan was a major advancement in ensuring the
embassy construction program would be better managed.[Footnote 13]
According to the OBO director, while the current plan is not a budget
document, it is an important tool that provides information for the
budget decision-making process. It presents OBO's best understanding of
the U.S. government's most urgent diplomatic and consular facility
requirements through 2008 and provides all stakeholders, especially
other U.S. government agencies that rely on State for their overseas
facilities, a road map of where the department is headed.
Monthly Project Reviews at Headquarters:
As part of OBO's ongoing efforts to improve accountability and
performance, OBO in June 2001 began holding monthly project performance
reviews at headquarters for senior OBO officials and project
executives. At these meetings, senior managers convene to discuss
developments in their areas of responsibility and their plan of action
to address current or potential issues. According to OBO documents and
our observations of five monthly meetings, the monthly project
performance reviews covered the following topics:
* real estate and property management, including acquisitions and
disposals and evaluations;
* project planning and development, including project evaluation and
analysis;
* project execution, including the status of both construction projects
by region and security upgrade projects; interiors and furnishings;
design and engineering issues, such as design management, standard
embassy designs, value engineering, and energy and seismic concerns;
and security management of ongoing projects;
* information management, including issues related to information
technology; and:
* other management concerns, including management support, human
resources and financial management, and operations and maintenance.
At these monthly meetings, senior OBO staff present information on
internal and external operations. For instance, in reviewing internal
operations, the Project Execution Office presents information about
personnel vacancies, number of training events attended per month,
performance indicators, and travel budget. The Project Execution
Office's Construction and Commissioning Division reports on
construction-related issues, including the number of outstanding
claims, contract modifications, and the status of each construction
project. For each construction project, the division notes the
completion of major milestones, such as congressional notification,
site acquisition, contract award, and notice to proceed. It also
assigns a color-coded rating--green, yellow, or red--to each project.
This rating reflects the project executives' assessment of current or
future issues that could affect either the project's cost or scheduled
completion date, with green indicating the project is generally on
track and red indicating a major issue.
Establishment of the Industry Advisory Panel:
In February 2002, OBO held the first quarterly meeting of the Industry
Advisory Panel, whose function is to keep OBO apprised of the private
sector's best practices in the construction and maintenance of
facilities. The panel consists of volunteer industry representatives
who meet quarterly to discuss issues related to OBO's construction
program and advise OBO management on the industry's views on the most
efficient processes, optimal solutions, and best new technologies. OBO
prepares new topics of discussion for each meeting, and the experts
respond based on their experience dealing with similar issues.
At the meeting held on May 20, 2003, we observed that the panel and
senior OBO officials discussed the following:
* how to more effectively apply Value Engineering--a method that looks
for the best value to the government at each phase of the design
process,
* to what extent private U.S. companies build to U.S. standards
overseas and how much they rely on local materials and equipment,
* the best approach for estimating project costs and budgets, and:
* criteria used to determine if direct-hire staff should fill an
organization's gap in required skills or specialized contractors.
OBO takes minutes of each Industry Advisory Panel meeting and posts
them on its Web site where they are available to the public. According
to OBO officials, the panel has been very active in providing
invaluable strategic industry insights into a variety of issues. They
touch upon the latest innovations in the commercial world combining
best practices, streamlined processes, and proven cost-effective
methods. According to a recent General Services Administration survey
of about 470 federal advisory groups, OBO's Industry Advisory Panel
demonstrated superior results on the "people," "process," and "outcome"
indices of the survey.
Efforts to Broaden Contractor Pool:
OBO has expanded its efforts to increase competition for bids on its
new embassy and consulate compound projects through outreach to
potential contractors. For example, OBO has held two annual Industry
Days where interested parties can attend presentations and information
sessions about doing business with OBO. According to OBO, Industry Day
2002 attracted more than 350 representatives, with slightly more than
half from small firms. Industry Day 2003 had about 450 participants. As
a result of these efforts, OBO has increased the number of contractors
prequalified to bid on OBO contracts from 5 to 14.[Footnote 14] OBO
believes that increasing the number of prequalified contractors will
likely increase the number of bids on a project--thus allowing OBO to
select the best value for its money--and will be important to the
expanding construction program.
Standardizing and Streamlining the Design Process:
OBO has initiated two major efforts to standardize and streamline the
design process for new embassy and consulate compounds. First, it
developed a standard embassy design for three different sizes of
compounds, with a standard design for a small, medium, or large main
office building (see fig. 2). For each project, the contractor adapts
the standard design to meet site-and post-specific requirements. OBO
believes that standard designs will give it the ability to contract for
shortened design and construction periods, control costs through
standardization, and assist with State's initiative to rightsize its
overseas posts.
Figure 2: Standard Embassy Design:
[See PDF for image]
[End of figure]
Second, OBO uses design-build as a contract delivery method, instead of
design-bid-build, for most of its new projects. According to the latest
Long-Range Overseas Buildings Plan, OBO plans to award design-build
contracts for 56 compound projects between fiscal years 2003 and 2008.
State's design-build process saves time by (1) avoiding the time needed
to award separate design and construction contracts and (2) allowing
construction to proceed before design is completed. Under this process,
a compound could be one-third of the way through construction before
the final design is completed. In Sofia, Bulgaria, for instance, the
project was 30 percent complete before the contractor delivered the
final design package. To minimize any cost and schedule risks
associated with design-build contracts, building requirements must be
fully and precisely identified early in the process.
Training:
According to OBO officials, OBO has instituted additional training
requirements for all OBO staff involved in the contracting process and
for all field staff. To enhance their knowledge of contracting,
headquarters and field staff take courses in areas such as acquisition
procedures, principles of contract pricing, and government contract
law. Staff can take classes offered by the Defense Acquisition
University and other private institutions to meet their training
requirements. Staff in the Construction and Commissioning Division
enroll in additional courses that enhance their skills in such areas as
computerized project planning, leadership and management, cost control,
language training, and security and safety. These courses are designed
to increase their effectiveness as project supervisors.
During our visits to two new embassy construction sites in Sofia,
Bulgaria, and Yerevan, Armenia, we observed that the OBO project
directors and the contract project managers closely managed and
supervised the projects. Project directors maintained oversight with
the help of experienced and knowledgeable American and Foreign Service
National staff. Project directors made daily visits to the construction
site to observe worker performance and held weekly progress meetings
with OBO and contractor staff. During the weekly meetings, OBO staff
asked about the activity schedule, identified potential problems, and
came to a consensus on solutions.
We observed the OBO project management team in Sofia, which consists of
seven engineers and assistants, interacting closely with the contractor
staff to identify possible delays and oversee construction. For
instance, the project director questioned the pace at which the
contractor was laying concrete slab on one of the floors. The project
director was able to convince the contractor to pour concrete slab on
one of the floors a day or two ahead of schedule.
Site Acquisition:
To address potential issues in site acquisition, OBO has used its Long-
Range Overseas Buildings Plan to guide its contingency planning and
give it the flexibility to continue the overall program if an
individual site is not available in the planned year. Rather than hold
up the appropriated funds for a given project, State will, with
congressional support, shift funding to another project where a site is
available. For example, OBO deferred the planned compound in Asmara,
Eritrea, from fiscal year 2004 to fiscal year 2005 due to difficulties
obtaining a site. The new embassy compound in Lome, Togo, which had
been planned for fiscal year 2004, took the place of Asmara. For
projects planned for construction from fiscal years 2005 through 2007,
State has a supply of seven U.S. government-owned sites and five sites
under contract in its regular and security capital programs. These 12
sites will offer some flexibility to State as it moves forward with its
Long-Range Overseas Buildings Plan. OBO officials told us that they
plan to continue acquiring sites ahead of time to provide the program
with this type of scheduling flexibility over the foreseeable future.
These management initiatives show promise for improving the cost and
schedule performance of embassy and consulate construction projects.
However, as discussed in the following section, it is still too early
in the new program's implementation to assess their effectiveness in
achieving these goals.
Status of and Challenges Facing the Construction Program:
As of September 30, 2003, State had started construction of 22 projects
to replace embassies and consulates at risk of terrorist or other
attacks. Eight of the 22 projects were started before OBO began to
institute its recent management reforms, and the remaining 14 were
started since then. None of the projects started after the reforms were
implemented has yet been completed; only one is more than 50 percent
complete. Over half of the 22 projects have faced challenges that have
led or, if not overcome, could lead to extensions to or cost increases
in the construction contract. OBO reports attribute project delays to
such factors as changes in project design and security requirements,
difficulties hiring appropriate labor, differing site conditions, and
civil unrest. The U.S. government also has had difficulty coordinating
funding for projects that include buildings for USAID, which could lead
to increased costs and security risks.
From fiscal years 1999 through 2003, State received approximately $2.7
billion for its new embassy construction program. As of September 30,
2003, State was still in the initial phase of the overall program,
having awarded the contracts for 11 of its 22 projects in fiscal year
2002. In addition, the contracts for another 7 projects were awarded in
late fiscal year 2003 (see figs. 3 and 4). Of the seven completed
projects, six were new embassy compounds and one was a newly acquired
building that was retrofitted to meet the required security standards.
Figure 3: Initiated and Completed Projects, Fiscal Years 1999-2003:
[See PDF for image]
Note: The contracts for seven new projects were awarded in the last
quarter of fiscal year 2003.
[End of figure]
Figure 4: Status of State's Program to Replace Embassies and
Consulates, Fiscal Years 1999-2003:
[See PDF for image]
Note: For each fiscal year, ongoing projects equals ongoing projects
from the prior fiscal year plus new starts minus completed projects.
[End of figure]
Status of Projects Awarded before OBO Instituted Management Reforms:
As shown in table 1, seven of the eight projects that started before
OBO's management reforms were implemented have been completed. All
eight projects experienced cost increases in the construction contract,
which typically accounts for 60 to 70 percent of the total project
budget; however, none of the seven completed projects exceeded its
approved budget, and the budget for one was lower than originally
planned.
In addition, six projects were extended 30 days or more beyond the
project completion date. The primary reasons for the delays included
contract modifications and security-related disruptions.
Table 1: Cost and Schedule Performance of Projects Awarded before OBO's
Management Reforms (as of late July 2003):
Region/location: Africa:
Region/location: Dar Es Salaam, Tanzania[A]; Number of days over
original end date: 2; Primary reason for delay: Delay not
significant; Percentage over original contract value: 9;
Change from original project budget: 8% under budget.
Region/location: Kampala, Uganda[A]; Number of days over original end
date: 90; Primary reason for delay: Contractor dispute;
Percentage over original contract value: 29; Change from
original project budget: On budget.
Region/location: Nairobi, Kenya[A]; Number of days over original end
date: 80; Primary reason for delay: Contract modifications;
Percentage over original contract value: 12; Change from
original project budget: On budget.
Region/location: Europe:
Region/location: Istanbul, Turkey[A]; Number of days over original end
date: 74; Primary reason for delay: Mitigation of security
problem; Percentage over original contract value: 28; Change
from original project budget: On budget.
Region/location: Zagreb, Croatia[A]; Number of days over original end
date: 1; Primary reason for delay: Delay not significant;
Percentage over original contract value: 18; Change from
original project budget: On budget.
Region/location: Near East:
Region/location: Abu Dhabi, United Arab Emirates[B]; Number of days
over original end date: 154[C]; Primary reason for delay:
Material delivery did not arrive as scheduled; contractor reported
differing soil conditions; Percentage over original contract value: 11;
[Empty]; Change from original project budget: 10% under budget.
Region/location: Doha, Qatar[A]; Number of days over original end date:
30; Primary reason for delay: Security threat; Percentage over
original contract value: 41; Change from original project
budget: On budget.
Region/location: Tunis, Tunisia[A]; Number of days over original end
date: 127; Primary reason for delay: Change in project scope;
Percentage over original contract value: 20; Change from
original project budget: On budget.
Source: GAO analysis of OBO data as of September 2003.
Note: This table includes projects whose contracts were awarded from
fiscal years 1999 through 2001.
[A] Completed project.
[B] Ongoing project.
[C] This number represents contract modification days as this project
had not yet been completed.
[End of table]
OBO has attempted to manage project resources and keep its projects
within their approved budgets by using funds from the projects'
contingency line items or, in some cases, a management reserve line
item. The use of contingency and management reserve line items is an
industry practice. In Istanbul, for instance, the cost of the
construction contract increased by about $8.5 million. OBO covered this
cost increase by using funds from the project's contingency line item,
which OBO includes in project budgets for this purpose. In some cases
where OBO has awarded contracts at a much lower value than the original
independent government estimate, it has established a management
reserve to hold these extra funds to insure against potential cost
increases later in the construction. The OBO director must approve the
use of funds for that project from the management reserve. We did not
review how OBO established its project budgets, how it determined the
contingency and management reserve line item amounts, or how it used
the funds from those line items.
Further, OBO has also reevaluated its budget plans for ongoing and
planned projects and has identified significant savings to be applied
either to a project whose contract bid had come in above the approved
budget or to new projects. For example, in the March 2003 project
performance review, OBO identified anticipated savings of about $63.6
million for six projects. OBO used these funds to sign a contract for a
new construction project in Freetown, Sierra Leone, during fiscal year
2003. In the fiscal year 2002 appropriations conference report,
Congress commended State for identifying such budget savings and urged
the department to use them to significantly exceed the level of
activity described in the budget request. OBO officials told us that
the amount of such savings would decrease over time as the bureau
improves its cost estimates.
Status of and Challenges Encountered by Projects Awarded since OBO
Instituted Management Reforms:
From fiscal year 2001, when OBO began to institute its management
reforms, through the end of fiscal year 2003, State had started
construction of 14 projects to replace vulnerable embassies and
consulates.[Footnote 15] As shown in table 2, as of July 2003, OBO
expected 13 of these 14 projects to come in at or under their approved
budgets and 1 project--Conakry, Guinea---to come in 6 percent over the
approved budget. Six of these projects have had increases in their
construction contract costs ranging from 2 percent to 11 percent above
their original contract value. In addition, the project in Sao Paulo,
Brazil, added 48 contract modification days to its original project
completion date. This project, a major renovation initiated at the end
of August 2002, missed its scheduled completion date of August 28,
2003, and was completed on October 15, 2003. Table 2 provides more
information on challenges that have affected or may affect the cost and
schedule of the projects that were initiated after OBO made reforms to
its management practices.
:
Table 2: Cost and Schedule Performance of Projects Awarded since OBO's
Management Reforms (as of late July 2003):
Location: Sao Paulo, Brazil; Percentage complete: 60; Percentage over
contract value: (2); Change from original project budget: On
budget; Number of contract modification days: 48; Project
challenges identified by OBO: Contractor delays in procuring materials
and labor.
Location: Abidjan, Cote D'Ivoire; Percentage complete: 33; Percentage
over contract value: 0; Change from original project budget:
2% under budget; Number of contract modification days: 0;
Project challenges identified by OBO: Ordered departure of personnel
caused by the political situation will have an impact on cost and
schedule.
Location: Sofia, Bulgaria; Percentage complete: 31; Percentage over
contract value: 3; Change from original project budget: 19%
under budget; Number of contract modification days: 0; Project
challenges identified by OBO: None reported.
Location: Yerevan, Armenia; Percentage complete: 31; Percentage over
contract value: 2; Change from original project budget: 4%
under budget; Number of contract modification days: 0; Project
challenges identified by OBO: USAID building unfunded.
Location: Luanda, Angola; Percentage complete: 27; Percentage over
contract value: 5; Change from original project budget: On
budget; Number of contract modification days: 14; Project
challenges identified by OBO: Design revisions for mitigation of
security concerns include a cost increase and time extension.
Location: Abuja, Nigeria; Percentage complete: 23; Percentage over
contract value: 0; Change from original project budget: On
budget; Number of contract modification days: 0; Project
challenges identified by OBO: Contractor has claimed that rock
excavation due to differing site conditions will have an impact on
schedule. OBO is evaluating; USAID building unfunded.
Location: Cape Town, South Africa; Percentage complete: 15; Percentage
over contract value: 0; Change from original project budget:
28% under budget; Number of contract modification days: 0;
Project challenges identified by OBO: None reported.
Location: Conakry, Guinea; Percentage complete: 15; Percentage over
contract value: 2; Change from original project budget: 6%
over budget; Number of contract modification days: 0; Project
challenges identified by OBO: Contract will need additional time and
will cost more due to the design and construction of a new type of
foundation because of site conditions that differ from those originally
anticipated; USAID building unfunded.
Location: Dushanbe, Tajikistan; Percentage complete: 14; Percentage
over contract value: 2; Change from original project budget:
3% under budget; Number of contract modification days: 0;
Project challenges identified by OBO: None reported.
Location: Yaounde, Cameroon; Percentage complete: 14; Percentage over
contract value: 0; Change from original project budget: 9%
under budget; Number of contract modification days: 0; Project
challenges identified by OBO: Contractor claims differing soil
conditions will affect the soil's capacity for a foundation.
Location: Tbilisi, Georgia; Percentage complete: 13; Percentage over
contract value: 0; Change from original project budget: 12%
under budget; Number of contract modification days: 0; Project
challenges identified by OBO: USAID building unfunded.
Location: Kabul, Afghanistan; Percentage complete: 11; Percentage over
contract value: 0; Change from original project budget: On
budget; Number of contract modification days: 0; Project
challenges identified by OBO: None reported.
Location: Phnom Penh, Cambodia; Percentage complete: 11; Percentage
over contract value: 0; Change from original project budget:
12% under budget; Number of contract modification days: 0;
Project challenges identified by OBO: Diplomatic Security certification
is holding up construction; USAID building unfunded.
Location: Tashkent, Uzbekistan; Percentage complete: 11; Percentage
over contract value: 0; Change from original project budget:
18% under budget; Number of contract modification days: 0;
Project challenges identified by OBO: None reported.
Sources: GAO analysis of July 2003 Project Performance Review data, OBO
officials.
Note: This table includes projects whose contracts were awarded in
fiscal year 2001 or 2002. All 14 projects are using a design-build
contract delivery method. Six projects that began in fiscal year 2002
employ a standard embassy design.
[End of table]
Integrating All Requirements Early in the Design Process:
Once a contract has been awarded, any subsequent changes to the design
of the building are likely to have cost and schedule implications. In
State's design-build process, design and construction sometimes occur
simultaneously. Any changes to the design can require changes in the
construction schedule.
A key component of the planning process for new embassy construction
projects is the development of staffing projections. Staffing
projections present the number of staff likely to work in the facility
and the type of work they will perform. These are the two primary
drivers of the size and cost of new facilities. Changes to staffing
projections after Congress has appropriated money for a construction
project may result in redesign and could lead to lengthy delays and
additional costs, according to an OBO official. There is little room
for flexibility after the budget is submitted given budgetary and
construction time frames.
Officials from Diplomatic Security, the State Department bureau that
initiates changes for security reasons, make every effort to have
security requirements finalized before a contract is awarded, but
changes in technologies or new analyses sometimes make design
modifications necessary. Although the bureau does not insist that
previously awarded contracts be modified to reflect these kinds of
changes, OBO makes a decision about what is most prudent for security
reasons in determining whether to modify the contract.
At both embassy construction projects that we visited, State added
security or other requirements that increased costs and led to an
extension in the contract completion date. At the U.S. embassy in
Sofia, State added security requirements late in the design phase that
increased the cost of the $50 million project by about $2 million and
led to a 2-month extension to the original contract completion date. As
in Sofia, Yerevan has had to adapt recent security modifications to
include, among others, the addition of a generator and changes to the
mail screening room.
Finding Appropriate U.S. and Local Labor:
Contractors on at least two projects have had difficulty finding
appropriate workers at the right time. For example, one project--a
major retrofit of existing buildings in Sao Paulo, Brazil--was
completed in about 14 months rather than 12 months due in part to a
lack of skilled labor. In March 2003, OBO reported delays in executing
this project because the contractor had not yet hired critical
craftsmen, particularly U.S. and Brazilian certified welders. At the
project we visited in Yerevan, which OBO considers to be on track, the
contractor had not hired enough local laborers because of a shortage of
qualified construction workers in Armenia. OBO officials said that the
contractor hired skilled workers from neighboring countries and made up
the lost time on the project.
In addition, each project requires U.S. supervisors and laborers with
security clearances to work in certain areas. However, contractor
representatives told us that as State's overall construction program
accelerates and the demand for U.S. workers with security clearances
escalates, this form of labor could command a premium. Some contractor
officials stated that there could be a shortage of these workers in the
near term, which could result in delays that could potentially affect
the duration and cost of the overall program. Others said the workers
will be available but will demand a higher price for their labor, which
would increase contract costs.
Differing Site Conditions:
In four ongoing projects[Footnote 16] where OBO had raised concerns
about the projects' progress, contractors had reported site conditions
that differed from what they had originally anticipated. According to
OBO documents, this difference could affect the projects' cost or
schedule because it could require the contractor to construct a
different type of foundation for the buildings. At the construction
site we visited in Yerevan, a project OBO considered on track as of
July 2003, the contractor determined that it had not thoroughly
analyzed the soil conditions at the site and would need to blast away
about 9 feet of rock from the site to make room for the foundation.
This blasting process caused about a 6-week delay, time that the
contractor made up as the project progressed.
Political and Civil Unrest or Other Unforeseen Events:
Many ongoing and planned projects are located in developing countries
with the potential for political and civil unrest and thus pose
unpredictable challenges to State in its embassy construction work. For
example, civil unrest delayed the start of the project in Abidjan, Cote
D'Ivoire, in 2002, leading to delays in the project schedule and
potential cost increases. Further, political upheaval in Zimbabwe
forced OBO to postpone construction of the new embassy in Harare from
fiscal year 2002 until at least fiscal year 2005, according to OBO's
most recent Long-Range Overseas Buildings Plan. On the other hand,
State decided to replace the embassy in Kabul, Afghanistan, and brought
the construction project to the front of the 2002 schedule following
the U.S. and allied military action there that responded to the
September 11 terrorist attacks.[Footnote 17]
Site Acquisition:
Although OBO has developed a flexible approach to deal with problems in
acquiring sites for new embassy compounds, the issue of site
acquisition could become more important as OBO increases the number of
projects it undertakes each year. In the short term, the shifting of
projects across fiscal years, as discussed earlier, keeps the overall
program on track; however, in the long term, the number of difficult
site acquisitions per year may increase. If the less complicated site
acquisitions continue to be pulled to the front of the line, and more
complicated ones pushed back, State may have increasing difficulty
obtaining sites for its annual program.
Coordinating Funding for Construction of Compounds with USAID
Buildings:
As mentioned earlier in this report, OBO attempts to build embassy and
consulate compounds that contain the main office building, all support
buildings, and, where necessary, a building for USAID. In several
cases, however, OBO has started to build compounds without the proposed
USAID building because funding for the USAID building was not
available.
In compounds where USAID is likely to require desk space for more than
50 employees, USAID and OBO informally agreed that USAID would secure
funding in its appropriations for a separate building on the
compound.[Footnote 18] If USAID does not secure funding for its
building at the same time as the new embassy compound, the compound is
constructed as scheduled, but the USAID building may be built either
after the rest of the compound, later in the construction process, or
not at all. If a USAID building is constructed after the rest of the
compound, the overall costs to the government would likely be higher
because the contractor must remobilize the construction staff. The
delay could also pose a security risk and inconvenience to post
operations, as construction personnel and equipment would be coming
into and out of the site on a regular basis. OBO officials told us that
five projects were awaiting funding for the construction of the
proposed USAID building on the compounds.
At the U.S. embassy in Yerevan, funding for the compound's USAID
building was not available when the compound construction contract was
awarded. Therefore, USAID staff will not move to the new site
concurrent with the rest of the embassy's staff. Rather, USAID may be
forced to remain at the current, insecure facility at an additional
cost until completion of its annex unless alternative arrangements can
be made. The Ambassador told us that USAID was one of the most
important missions at the embassy and that not having it colocated on
the compound would create a major inconvenience to the embassy's
operations and decrease mission effectiveness. Figure 5 shows the
central location of the proposed USAID building within the new U.S.
embassy compound in Yerevan.
Figure 5: Site of Proposed, but Unfunded, USAID Building at the U.S.
Embassy in Yerevan:
[See PDF for image]
[End of figure]
As of September 2003, one completed project and five ongoing
construction projects--including Yerevan--had to delay or postpone
building the USAID annex due to a lack of USAID funding at the start of
construction for the rest of the compound. Other locations included the
recently completed project at Nairobi, Kenya; as well as the ongoing
projects in Tbilisi, Georgia; Conakry, Guinea; Abuja, Nigeria; and
Phnom Penh, Cambodia. In addition, according to an OBO official, two
projects that will receive security capital funding this year--Bamako,
Mali, and Kingston, Jamaica--may not have funding for the planned USAID
buildings at the time of construction, although funding may become
available sometime during construction.
The U.S. government has had mixed success in dealing with this problem
of coordinating funding. For example, for the new compound in Nairobi-
-the location of one of the 1998 embassy bombings--State awarded a
construction contract for the USAID building in September 2003, 7
months after the rest of the compound had been completed. In another
case, Dar Es Salaam, funding became available in time for OBO to modify
the construction contract and complete the USAID building at the same
time as the rest of the compound.
We plan to do additional work in the near future on the issue of
coordinating USAID funding with funding for new embassy and consulate
compounds.
Conclusion:
Providing secure and safe office facilities at U.S. embassies and
consulates is a critical task that will require sustained funding and
management attention over many years. To sustain support for this
program, the State Department must demonstrate that it is exerting
effective management, resulting in projects that are on time and within
approved budgets. We believe that State has put in place a number of
mechanisms that together represent a positive management approach with
the potential to achieve favorable program results. However, it is too
early to assess whether these new mechanisms will ensure that State can
consistently achieve cost and schedule targets on individual
construction projects over the course of the program.
Agency Comments and Our Evaluation:
The Department of State provided written comments on a draft of this
report (see app. III). In the comments, State said that the report is a
fair and accurate representation overall of the department's overseas
construction process and provided additional information on (1) how
State prioritizes and plans for its construction projects, (2) the
problems in funding USAID building projects, and (3) other capital
construction projects being implemented by OBO. We revised the text of
the report to include information on how Diplomatic Security and OBO
view the relative vulnerability of facilities at overseas posts. State
also provided technical comments, which we incorporated in the report
where appropriate.
:
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 10 days
from the report date. At that time, we will send copies of this report
to other interested members of Congress. We will also provide copies of
this report to the Secretary of State and the Director of the Office of
Management and Budget. We also will 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] http://www. gao.gov.
If you or your staff has any questions about this report, please call
me at (202) 512-4128. Another contact and staff acknowledgments are
listed in appendix IV.
Sincerely yours,
Jess T. Ford,
Director International Affairs and Trade:
Signed by Jess T. Ford:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
To determine whether the Bureau of Overseas Buildings Operations (OBO)
has mechanisms in place to more effectively manage State's construction
program to replace vulnerable embassies and consulates, we (1) reviewed
the report of the Overseas Presence Advisory Panel and earlier GAO
reports that outlined problems in embassy security and State's embassy
construction program and (2) interviewed OBO and contractor officials
about specific steps OBO has taken to improve program management,
including the usefulness of and rationale behind both the standard
embassy design for new embassy and consulate compounds and the design-
build contract delivery method. We also attended quarterly meetings of
the Industry Advisory Panel where industry representatives provided
advice and information on industry best practices to senior OBO
management officials, as well as monthly project performance reviews
where senior OBO officials addressed issues related to embassy
construction projects. Further, we visited two field locations--in
Sofia, Bulgaria, and Yerevan, Armenia--where we observed the level of
management and supervision at the new embassy construction sites and
the contractor's performance on the projects.
To determine the status of the overall construction program, as well as
its current and potential challenges, we reviewed capital projects--
whether a completely new embassy or consulate compound, a new building,
or a major retrofit of an existing building--that would bring the post
up to current security standards. Table 3 provides the list of projects
included in this review: 7 completed projects and 15 ongoing projects
whose contracts were awarded from fiscal years 1999 through 2002. We
excluded the Dili, East Timor, project from the scope of our review
because it was an interim office building.
Table 3: List of the 22 Post Replacement Projects Included in This
Review:
Project status[A]: Completed; Project location: Dar Es Salaam,
Tanzania.
Project status[A]: Completed; Project location: Kampala, Uganda.
Project status[A]: Completed; Project location: Nairobi, Kenya.
Project status[A]: Completed; Project location: Istanbul, Turkey.
Project status[A]: Completed; Project location: Zagreb, Croatia.
Project status[A]: Completed; Project location: Doha, Qatar.
Project status[A]: Completed; Project location: Tunis, Tunisia.
Project status[A]: Not completed; Project location: Abidjan, Cote
D'Ivoire.
Project status[A]: Not completed; Project location: Abuja, Nigeria.
Project status[A]: Not completed; Project location: Yaounde, Cameroon.
Project status[A]: Not completed; Project location: Cape Town, South
Africa.
Project status[A]: Not completed; Project location: Conakry, Guinea.
Project status[A]: Not completed; Project location: Luanda, Angola.
Project status[A]: Not completed; Project location: Dushanbe,
Tajikistan.
Project status[A]: Not completed; Project location: Kabul, Afghanistan.
Project status[A]: Not completed; Project location: Sofia, Bulgaria.
Project status[A]: Not completed; Project location: Tashkent,
Uzbekistan.
Project status[A]: Not completed; Project location: Tbilisi, Georgia.
Project status[A]: Not completed; Project location: Yerevan, Armenia.
Project status[A]: Not completed; Project location: Phnom Penh,
Cambodia.
Project status[A]: Not completed; Project location: Abu Dhabi, United
Arab Emirates.
Project status[A]: Not completed; Project location: Sao Paulo, Brazil.
Source: OBO.
[A] As of September 30, 2003.
[End of table]
Table 4 shows the seven projects whose contracts were awarded in late
fiscal year 2003 that are outside the scope of our review. This table
does not include the recently started projects in Athens, Moscow, or
Beijing because OBO is utilizing the design-bid-build process for these
three projects and has yet to award their construction contracts.
Table 4: List of Post Replacement Projects Awarded in Late Fiscal Year
2003:
Project location:
Freetown, Sierra Leone.
Bamako, Mali.
Astana, Kazakhstan.
Frankfurt, Germany.
Bridgetown, Barbados.
Kingston, Jamaica.
Tirana, Albania.
Source: OBO.
[End of table]
We also reviewed the State Department's Long-Range Overseas Buildings
Plan, monthly project performance documents, contract modifications,
and other OBO documents. We interviewed key State Department officials
from OBO and Diplomatic Security and contractor officials currently
working on new embassy construction projects. We visited the ongoing
projects in Sofia and Yerevan to determine the types of problems that
could affect cost and schedule and what OBO and the contractor are
doing to overcome these problems. Contracts for the design and
construction of these projects were awarded in September and August
2001, respectively. The contractor broke ground around September 2002.
When we visited the sites in July 2003, the contractor was pouring
concrete slabs for the floors. We did not verify data provided by OBO.
We conducted our work between October 2002 and September 2003 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Information on Embassy Construction Projects' Contractors
and Building Size:
This appendix provides information on the contractors responsible for
each of the 22 ongoing embassy or consulate construction projects. It
also indicates which projects are using standard embassy design and the
respective sizes of these projects. Table 5 is a list of contractors
currently working on a new embassy or consulate construction project or
compound renovation. Company locations are provided to show the
geographic dispersion of the companies to which State awards its
contracts.
Table 5: List of Contractors for Ongoing Embassy and Consulate
Replacement Projects:
Contractor name and location: ABB SUSA; North Brunswick, New Jersey;
Projects: Luanda, Angola.
Contractor name and location: Alutiiq-Fluor Joint Venture; Rosslyn,
Virginia; Projects: Sao Paulo, Brazil.
Contractor name and location: B.L. Harbert International Birmingham,
Alabama; Projects: Abuja, Nigeria.
Contractor name and location: Brown & Root Services; Rosslyn, Virginia;
Projects: Kabul, Afghanistan.
Contractor name and location: Caddell Construction Montgomery, Alabama;
Projects: Yaounde, Cameroon; Conakry, Guinea; Freetown, Sierra Leone;
Bamako, Mali.
Contractor name and location: Caribbean Consultants, Ltd.; Bridgetown,
Barbados; Projects: Bridgetown, Barbados.
Contractor name and location: Hensel Phelps Construction; Aurora,
Colorado; Projects: Cape Town, South Africa.
Contractor name and location: HITT Fairfax, Virginia; Projects: Tirana,
Albania.
Contractor name and location: J.A. Jones Construction Charlotte, North
Carolina; Projects: Abidjan, Cote D'Ivoire; Sofia, Bulgaria; Yerevan,
Armenia; Tashkent, Uzbekistan; Tbilisi, Georgia; Abu Dhabi, United Arab
Emirates Frankfurt, Germany.
Contractor name and location: Kullman Industries, Inc.; Lebanon, New
Jersey; Projects: Dushanbe, Tajikistan.
Contractor name and location: Fluor International, Inc.; Greenville,
South Carolina; Projects: Astana, Kazakhstan; Kingston, Jamaica.
Contractor name and location: H.B. Zachry Construction; San Antonio,
Texas; Projects: Phnom Penh, Cambodia.
Source: OBO.
[End of table]
Table 6 is a list of the projects employing a standard embassy design
and their size. Standard embassy designs were not used until fiscal
year 2002. OBO plans to use the standard design for most future
projects, unless the embassy involves a large degree of complexity or
has special significance to the United States, such as Beijing.
Table 6: Size of Embassy Construction Projects Using Standard Embassy
Design:
Location: Freetown, Sierra Leone; Size of embassy: Small.
Location: Yaounde, Cameroon; Size of embassy: Medium.
Location: Conakry, Guinea; Size of embassy: Medium.
Location: Cape Town, South Africa; Size of embassy: Medium.
Location: Bamako, Mali; Size of embassy: Medium.
Location: Kingston, Jamaica; Size of embassy: Large.
Location: Astana, Kazakhstan; Size of embassy: Large.
Location: Phnom Penh, Cambodia; Size of embassy: Large.
Location: Tbilisi, Georgia; Size of embassy: Large.
Location: Tashkent, Uzbekistan; Size of embassy: Large.
Source: OBO.
[End of table]
[End of section]
Appendix III: Comments from the Department of State:
[United States Department of State:
Washington, D. C.: 20520:
OCT 27 2003:
Dear Ms. Westin:
We appreciate the opportunity to review your draft report, "EMBASSY
CONSTRUCTION: State Department Has Implemented Management Reforms But
Challenges Remain," GAO-04-100, GAO Job Code 320163.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact Cy
Alba, Branch Chief, Office of Overseas Building Operations, at (703)
875-5748.
Sincerely:
Signed by:
Joseph W. Bowab, Acting Assistant Secretary for Resource Management and
Chief Financial Officer:
Enclosure:
As stated.
cc: GAO/IAT - John Brummet State/OIG - Luther Atkins State/OBO - Cy
Alba:
State/M/P - Jay Anania State/H - Paul Kelly:
Ms. Susan S. Westin, Managing Director, International Affairs and
Trade, U.S. General Accounting Office.
Department of State Comments on GAO Draft Report EMBASSY CONSTRUCTION:
State Department Has Implemented Management Reforms But Challenges
Remain (GAO-04-100, GAO Code 320163):
Introduction:
The Department of State appreciates the opportunity to review and
comment on the GAO Draft Report, "EMBASSY CONSTRUCTION: State
Department Has Implemented Management Reforms But Challenges Remain."
We believe the report is overall a fair and accurate representation of
the Department's overseas construction process. It is a positive
report, one that recognizes the many management reforms that have been
instituted by the Bureau of Overseas Buildings Operations (OBO) in its
structure and operations since 2001.
Progress:
The enhanced status of OBO as a bureau within the Department, the
active participation of the OBO Director and Chief Operating Officer in
the construction process, the establishment of a Long-Range Overseas
Buildings Plan, the monthly project reviews at headquarters, the
creation of an Industry Advisory Panel, outreach efforts aimed at
enlarging the contractor pool, ongoing work to standardize and
streamline the planning, design, and construction processes, from the
LROBP to the initiation of design-build contract delivery and standard
embassy design for most projects are all factors in the Department's
improved performance. The GAO report properly cites all of these
management reforms.
A Cooperative Effort:
Throughout the course of the GAO review, OBO has been forthcoming in
providing information, access to all of its records, making its staff
available to answer questions, and providing briefings, as well as
inviting the GAO staff members to participate in internal review
meetings. The GAO staff has been professional in its endeavors and has
been receptive to our opinions and explanations. The cooperative effort
between the legislative and executive branches throughout this review
on behalf of the American taxpayer continues to serve as a model for
future work. The openness and cooperative spirit of both branches has
resulted in a report that we believe will benefit all parties
concerned.
Other Comments:
We also appreciate the opportunity to provide further comments,
clarifications, and updates on specific passages in the draft report.
We have three major areas of concern: (1) discussion of the Long-Range
Overseas Buildings Plan (LROBP); (2) discussion of the funding for
USAID projects; and (3) the omission of other capital construction
projects.
(1) Long-Range Overseas Buildings Plan (LROBP):
The discussion in the report of the process for identifying the NEC
projects that go into the Long-Range Overseas Buildings Plan (LROBP) is
still a concern as it appears confusing and in some instances
incorrect. Below is the text of a document that OBO previously provided
to GAO, which presents a clearer and more complete picture of the
process - including how posts are identified to go into the top 80 and
how the top 80 posts are prioritized. The report uses only a portion of
the material OBO provided (pages 11 and 12) and thus does not make
clear the process and the distinction between the Bureau f Diplomatic
Security's (DS) evaluation of a post's vulnerability and the list of
posts to be replaced that goes to Congress, and how that is turned into
the list of posts in the security capital portion of the LROBP.
Also on page 11, in the discussion of the DS evaluation list, the
report states "Diplomatic Security and OBO officials believe that there
is very little difference in vulnerability between the top-ranked posts
and the lowest ranked posts on the list." As far as the DS list goes,
this is not correct. The proof that this is not correct is that DS
evaluates all posts, including those replaced during the Inman program
and the new posts that we are replacing under the current program.
Originally only 187 or so of the 260 plus posts on the DS list were
identified for inclusion in the first report to Congress, which listed
all posts to be replaced (and resulted in the first top 80 subset). The
GAO report confuses the DS list and the one sent to Congress. It would
be more accurate to state that Diplomatic Security and OBO officials
believe that there are a great many posts that are very vulnerable and
in need of replacement, and that the differences in vulnerability do
not make posts at the lower end of the 187 substantially safer than
those at the top of the list. This lack of clarity is, in part, because
the report does not incorporate our full one-page discussion.
Here is a more complete description of the process:
* The Bureau of Diplomatic Security completes an annual physical
security vulnerability evaluation of all U.S. overseas posts, taking
into account many factors affecting a post's overall physical security
level. This security evaluation listing is the basic information used
to develop the Priority List of Diplomatic Facilities for Replacement
(Replacement List), which is required under PL-106-113. By
congressional mandate, the posts in the Replacement List are
prioritized and listed in bands of 20. Congress has further authorized
spending one type of State capital funds, its security capital funds,
only on the top 80 (or first four bands) of posts.
* The Replacement List is updated annually. Posts that have received
full funding for their NEC and for which construction has begun on the
new facilities are removed from the top 80 list and are moved to a
"funded/under construction/completed" column for record purposes.
Senior Department management, including the regional bureaus, using
DS's security evaluation and considering other factors, such as the
number of USG employees at post, nominates new posts to move into the
top 80 Replacement List. These nominations are forwarded to the Under
Secretary for Management and the:
Secretary for their approval and inclusion in the Replacement List. This
list is then provided to Congress.
Again, working with the DS security evaluation list, each regional
bureau annually ranks all posts within its region than are in the Top
80 Replacement List. They use such additional factors as threat,
survivability, staffing trends, regional interests, and functionality.
This effort results in a prioritized list for State's capital security
projects for each of the six regional bureaus. Each year, as new posts
are added to the top 80 replacement list from those remaining on the
list of posts slated for eventual replacement. These posts usually go
to the end of the bureau's priority list.
OBO combines the prioritized lists from the different regional bureaus
into one master list, and revises the list annually. The first six
posts on the list are the top ranked posts from each region. Post 7
through 12 on the list are the second-ranked posts from each region and
so on. As new posts are added each year, they usually go to the end (in
effect, the out years) of this list as well. With the help of its
Planning and Real Estate offices, OBO then determines if a site already
exists to build on or when a new site could actually be acquired. When
necessary, OBO reschedules the list based on the likely available
capital security funding in each year covered by the LROBP,
opportunities or problems in acquiring a site, and constraints on the
ability of construction companies to work in a particular country at
the planned time.
This prioritized and scheduled listing of posts/projects then becomes
the Capital Security portion of the LROBP.
State may use its other type of capital funds, regular capital (now
called non-security) funds, to replace any posts not in the top 80
Replacement list that have compelling operational or other requirements
that must be addressed. These posts are included in the Regular Capital
portion of the LROBP.
The Department developed a new "Guide to Developing Staffing
Projections for New Embassy and Consulate Compound Construction." These
formal procedures were developed in response to an earlier GAO report
("Embassy Construction - Process for Determining Staffing Requirements
Needs Improvement," GAO-03-411) and now govern the process for
developing authoritative interagency-approved projections vital to the
proper planning of new projects. OBO emphasized the importance of this
new process when it met in September with State regional bureaus and
tenant agencies to kick off the next round of the LROBP.
(2) Funding for USAID Projects:
Beginning with the second to last sentence on page 6, the report
addresses the difficult issue of coordinating funding for USAID
building projects with funding for NEC projects. The issue is addressed
in more depth beginning with the second paragraph on page 28. The
Department agrees this is a very significant issue. The difficulty in
coordinating funding is not due to any lack of effort by the Department
or USAID but rather is due to the availability and timing of funding
for these projects. The Department:
fully plans for all known USAID projects and includes them in the
LROBP. The Department is doing everything within its control to ensure
USAID buildings are complete when we cut the ribbons on new NECs in
countries where USAID offices are present and continues to seek
Congressional support to provide concurrent funding for NEC projects
and (where needed) USAID buildings.
(3) Other Capital Construction Projects:
It is important to note that in addition to the construction projects
mentioned in the report OBO also has the following major capital
projects:
Completed:
Istanbul Marine Security Guard Quarters (MSGQ):
Lima USAID Annex:
Bogota USAID Annex:
Under Construction:
Doha MSGQ:
Zagreb MSGQ:
Dar Es Salaam MSGQ:
Kampala MSGQ:
Nairobi MSGQ:
Nairobi USAID Annex:
MSGQ are now constructed as part of the New Embassy Compounds. However,
as noted in (2) above, USAID funding instill not always available in
time for inclusion as part of the initial project.
The following are GAO's comments on the Department of State letter
dated October 27, 2003.
GAO Comments:
1. We relied primarily on information from the March 2003 Long-Range
Overseas Buildings Plan and discussions with OBO officials in drafting
this section of the report. We revised the text to include information
on how Diplomatic Security and OBO officials view the relative
vulnerability of facilities at overseas posts.
2. We plan to do additional work in the near future on the issue of the
U.S. government's efforts to coordinate USAID funding with funding for
new embassy and consulate compounds.
3. Our work focused on the replacement of vulnerable embassies and
consulates through construction projects that would bring the post up
to current security standards. As a result, our report does not discuss
these projects.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
John Brummet (202) 512-5260:
Staff Acknowledgments:
In addition to the individual named above, Janey Cohen, Jessica
Lundberg, Judy McCloskey, Nanette Ryen, and Michael Simon made key
contributions to this report.
:
(320163):
:
:
FOOTNOTES
[1] The 1998 terrorist bombings of the U.S. embassies in Nairobi,
Kenya, and Dar Es Salaam, Tanzania, killed more than 220 people and
injured 4,000.
[2] U.S. General Accounting Office, Overseas Presence: Conditions of
Overseas Diplomatic Facilities, GAO-03-557T (Washington, D.C.: Mar. 20,
2003).
[3] Secretary of State Albright established the Overseas Presence
Advisory Panel following the 1998 embassy bombings in Africa.
Department of State, America's Overseas Presence in the 21ST Century,
The Report of the Overseas Presence Advisory Panel (Washington, D.C.:
November 1999).
[4] OBO awarded contracts for seven additional projects toward the end
of fiscal year 2003. These new projects were outside the scope of our
review.
[5] U.S. General Accounting Office, State Department: Management
Weaknesses in the Security Construction Program, GAO/NSIAD/92-2
(Washington, D.C.: November 1991).
[6] The United States maintains more than 250 diplomatic posts--
embassies, consulates, and other diplomatic missions--around the world.
More than 60,000 U.S. and Foreign Service National personnel work at
these locations. About 50 government agencies and subagencies operate
overseas, including the Departments of State, Defense, and Justice; and
USAID.
[7] These standards apply to the construction of new buildings.
Existing buildings are required to meet the setback standard to the
"maximum extent feasible."
[8] GAO-03-557T.
[9] GAO-03-557T.
[10] See Bureau of Overseas Buildings Operations, U.S. Department of
State, Long-Range Overseas Buildings Plan: FY 2003-FY 2008 (Washington,
D.C.: March 2003) for the latest version of the plan.
[11] Pub. L. No. 106-113, div. B, Sec. 1000(a)(7) (div. A, title VI,
Sec. 605) codified as a note to 22 U.S.C. 4865.
[12] This replacement list is updated annually. According to OBO
officials, posts that have received full funding and have begun
construction on their new facilities are removed from the list each
year and moved to a "funded/under construction/completed" column for
record purposes. Senior State Department management, considering the
Diplomatic Security vulnerability list and such factors as the number
of U.S. government employees at a post, nominates new posts to move
into the top 80 replacement list. These nominations are forwarded to
the Under Secretary for Management and the Secretary for their approval
and inclusion in the replacement list. This list is then provided to
Congress.
[13] In January 2001, we recommended that OBO develop such a plan
because it was an industry best practice that has helped leading
organizations establish project priorities, plan for resource use,
control costs, and provide decision makers a rationale for allocating
funding. Several months later, OBO's new management accepted this
recommendation and agreed that it is an important tool for the budget
process.
[14] On September 25, 2003, the contractor for 7 of the 22 ongoing
embassy and consulate construction projects declared bankruptcy. OBO
and contractor officials told us that the bankruptcy has had and will
have no effect on the contractor's ability to complete the projects.
[15] Toward the end of fiscal year 2003, State awarded contracts for an
additional 7 projects.
[16] Abuja, Nigeria; Conakry, Guinea; Yaounde, Cameroon; and Abu Dhabi,
United Arab Emirates.
[17] The U.S. embassy in Kabul, which had been closed in January 1989
for security reasons, officially reopened as an embassy on January 17,
2002.
[18] U.S. General Accounting Office, Embassy Construction: Process for
Determining Staffing Requirements Needs Improvement, GAO-03-411
(Washington, D.C.: April 2003).
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