Embassy Construction
Proposed Cost-Sharing Program Could Speed Construction and Reduce Staff Levels, but Some Agencies Have Concerns Gao ID: GAO-05-32 November 15, 2004The Department of State is in the early stages of a proposed multibillion dollar program to build secure new embassies and consulates around the world. Under the proposed Capital Security Cost-Sharing Program, all agencies with staff assigned to overseas diplomatic missions would share in construction costs. This report describes (1) the rationale for and development of the program, (2) agency concerns about the program, and (3) the influence of the program on agencies' overseas staff levels.
The administration's proposed Capital Security Cost-Sharing Program has been developed to accelerate the building of 150 new secure embassies and consulates around the world and to ensure that all agencies with overseas staff assign only the number of staff needed to accomplish their overseas missions. The Department of State's Bureau of Overseas Buildings Operations (OBO), which would manage the program, examined several formulas before deciding that all agencies with an overseas presence would share costs, based on a per capita or "head-count" formula. If enacted, nearly 30 U.S. agencies would be assessed a total of $17.5 billion for constructing 150 new embassies by 2018, or 12 years sooner than the projected completion date of 2030. After a gradual phase-in period beginning in fiscal year 2005, the program would generate $1.4 billion annually from fiscal years 2009 through 2018, with State paying $920 million and non-State agencies paying $480 million. Many non-State Department agencies have concerns about the proposed program. They would prefer a formula other than one based on head counts to assess fees, and they are concerned that cost-sharing fees could affect their ability to accomplish their overseas missions. In addition, they stated that it would be useful to establish new interagency mechanisms to discuss and resolve potential implementation issues. We did not assess the mechanisms to be used to implement the program and have taken no position on whether they would be needed. State is concerned that, without accelerated funding, U.S. government employees will remain at risk beyond the 2018 completion date. State is also concerned that, without cost sharing, OBO could overbuild office space due to agencies' imprecise staffing projections. In our prior work, we have noted the importance of achieving interagency consensus and striving to achieve equity while minimizing management burden. Decision-makers need to continually focus on these factors to give the program every opportunity to succeed. If enacted, it is important that Congress and State monitor its implementation and make changes as needed.
GAO-05-32, Embassy Construction: Proposed Cost-Sharing Program Could Speed Construction and Reduce Staff Levels, but Some Agencies Have Concerns
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Report to the Chairman, Subcommittee on National Security, Emerging
Threats, and International Relations, Committee on Government Reform,
House of Representatives:
November 2004:
EMBASSY CONSTRUCTION:
Proposed Cost-Sharing Program Could Speed Construction and Reduce Staff
Levels, but Some Agencies Have Concerns:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-32]:
GAO Highlights:
Highlights of GAO-05-32, a report to the Chairman, Subcommittee on
National Security, Emerging Threats, and International Relations;
House Committee on Government Reform:
Why GAO Did This Study:
The Department of State is in the early stages of a proposed
multibillion dollar program to build secure new embassies and
consulates around the world. Under the proposed Capital Security Cost-
Sharing Program, all agencies with staff assigned to overseas
diplomatic missions would share in construction costs. This report
describes (1) the rationale for and development of the program, (2)
agency concerns about the program, and (3) the influence of the program
on agencies‘ overseas staff levels.
What GAO Found:
The administration‘s proposed Capital Security Cost-Sharing Program has
been developed to accelerate the building of 150 new secure embassies
and consulates around the world and to ensure that all agencies with
overseas staff assign only the number of staff needed to accomplish
their overseas missions. The Department of State‘s Bureau of Overseas
Buildings Operations (OBO), which would manage the program, examined
several formulas before deciding that all agencies with an overseas
presence would share costs, based on a per capita or ’head-count“
formula. If enacted, nearly 30 U.S. agencies would be assessed a total
of $17.5 billion for constructing 150 new embassies by 2018, or 12
years sooner than the projected completion date of 2030. After a
gradual phase-in period beginning in fiscal year 2005, the program
would generate $1.4 billion annually from fiscal years 2009 through
2018, with State paying $920 million and non-State agencies paying
$480 million.
Accelerated Funding for Embassy Construction:
[See PDF for image]
[End of figure]
Many non-State Department agencies have concerns about the proposed
program. They would prefer a formula other than one based on head
counts to assess fees, and they are concerned that cost-sharing fees
could affect their ability to accomplish their overseas missions. In
addition, they stated that it would be useful to establish new
interagency mechanisms to discuss and resolve potential implementation
issues. We did not assess the mechanisms to be used to implement the
program and have taken no position on whether they would be needed.
State is concerned that, without accelerated funding, U.S. government
employees will remain at risk beyond the 2018 completion date. State is
also concerned that, without cost sharing, OBO could overbuild office
space due to agencies‘ imprecise staffing projections. In our prior
work, we have noted the importance of achieving interagency consensus
and striving to achieve equity while minimizing management burden.
Decision-makers need to continually focus on these factors to give the
program every opportunity to succeed. If enacted, it is important that
Congress and State monitor its implementation and make changes as
needed.
The proposed program has already influenced some agencies‘ decisions to
reduce overseas staff numbers and move some employees into less costly
office space. Because agencies‘ budgets would have to cover the gradual
increase in cost-sharing fees, they may feel increased pressure to
further reduce staff by fiscal year 2009 and beyond.
What GAO Recommends:
GAO is not making recommendations in this report. The proposed cost-
sharing formula could result in funds to accelerate embassy
construction, encourage agency rightsizing of overseas staff levels,
and provide a disciplined approach to staffing projections for new
embassies.
We received comments on a draft of this report from nine government
organizations. The Department of State agreed with the report. The
other eight departments and agencies expressed concerns about some
aspects of the program, including potential implementation issues.
www.gao.gov/cgi-bin/getrpt?GAO-05-32.
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:
Rationale for and Development of the Capital Security Cost-Sharing
Program:
Several Agencies Have Concerns about the Program:
Program Has Influenced Some Agencies' Decisions to Reduce the Number of
Overseas Staff:
Conclusion:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Department of Agriculture:
GAO Comments:
Appendix III: Comments from the Department of Commerce:
GAO Comments:
Appendix IV: Comments from the Department of Health and Human Services:
GAO Comment:
Appendix V: Comments from the Department of Homeland Security:
GAO Comments:
Appendix VI: Comments from the Department of Justice:
GAO Comments:
Appendix VII: Comments from the Library of Congress:
GAO Comments:
Appendix VIII: Comments from the Department of State:
GAO Comments:
Appendix IX: Comments from the Department of the Treasury:
Appendix X: Comments from the U.S. Agency for International
Development:
GAO Comments:
Tables Tables:
Table 1: Non-State Agencies' Cost-Sharing Assessments, Fiscal Years
2005-2018 (Excluding 2008):
Table 2: Four Formulas for Allocating Costs among Agencies with an
Overseas Presence:
Table 3: Selected Agencies' Annual Cost-Sharing Fees Using Different
Cost-Sharing Formulas:
Table 4: Selected Agencies' Staff Positions and Estimated Savings in
Annual Cost-Sharing Fees for Fiscal Years 2005 and 2006, as of July 1,
2004:
Table 5: Estimated Percentage Increase Needed in International Program
Budgets for Cost-Sharing Fees for Selected Agencies, Fiscal Years 2005,
2007, and 2009:
Figures:
Figure 1: U.S. Agencies' Overseas Staff Positions Used to Determine
Annual Cost-Sharing Fees under Proposed Program, as of March 2004:
Figure 2: Accelerated Funding for Embassy Construction with Cost
Sharing, Fiscal Years 1999-2030:
Abbreviations:
GSA: General Services Administration:
IAP: Industry Advisory Panel:
ICASS: International Cooperative Administrative Support Services:
OBO: Bureau of Overseas Buildings Operations:
OMB: Office of Management and Budget:
OPAP: Overseas Presence Advisory Panel:
USAID: U.S. Agency for International Development:
Letter November 15, 2004:
The Honorable Christopher Shays:
Chairman:
Subcommittee on National Security, Emerging Threats, and International
Relations:
Committee on Government Reform:
House of Representatives:
Dear Mr. Chairman:
The Department of State is in the early stages of a proposed
multibillion-dollar program to accelerate the building of secure
embassies and consulates around the world. To help finance
construction, the administration has proposed the Capital Security
Cost-Sharing Program, under which agencies with staff assigned to
overseas diplomatic missions would pay a portion of the construction
costs. A provision authorizing the program is included in legislation
currently under consideration by the Congress.[Footnote 1] If enacted,
the program is scheduled to go into effect in fiscal year 2005 and
would represent a major shift in how the U.S. government allocates
funding for embassy construction, as State historically has paid for
nearly the entire program.[Footnote 2] The cost-sharing concept, under
development since 1999, gained momentum in 2001 when the President, as
part of his management agenda, directed that all agencies reduce
overseas staff to the minimum levels necessary to meet U.S. foreign
policy objectives.[Footnote 3] Since then, the administration has
stated that cost sharing would be an important part of the overall
embassy "rightsizing" initiative as it would force each agency to
consider the full costs of its overseas presence, including the costs
of building safe facilities, in determining overseas staffing levels.
This report describes (1) the administration's rationale for and
development of the Capital Security Cost-Sharing Program, (2) agency
concerns about the program, and (3) the influence of the proposed
program on agencies' decisions on overseas staff levels. To complete
our work, we obtained documents and discussed the program in
Washington, D.C., with State's Bureau of Overseas Buildings Operations
(OBO), which is responsible for the embassy construction program; the
Office of Management and Budget (OMB); eight other executive branch
departments and agencies; and the Library of Congress. We selected the
executive branch departments and agencies because they have staff
overseas and, under the current proposal, would have the largest annual
cost-sharing charges. We selected the Library of Congress because it is
the only nonexecutive branch agency that would pay cost-sharing fees.
We conducted our work in accordance with generally accepted government
auditing standards. Appendix I provides more information on our
objectives, scope, and methodology.
Results in Brief:
The administration has proposed the Capital Security Cost-Sharing
Program to fund the accelerated construction of 150 secure new
embassies and consulates worldwide 12 years sooner than currently
planned and to ensure that agencies "rightsize," or assign only the
number of staff needed to accomplish their overseas missions.[Footnote
4] Under the proposed program, agencies would begin paying partial
cost-sharing fees in fiscal year 2005. These fees would gradually
increase until fiscal year 2009, when agencies would feel the full
impact of the program on their budgets. In 2000, OBO began developing
the cost-sharing program in consultation with a working group of
interagency officials. In 2002, OBO announced that it proposed to
charge each agency a portion of the overall construction costs based on
a worldwide per-capita, or "head-count," formula. OBO officials stated
that they preferred the head-count formula, largely because it would
best meet the primary goals of accelerating embassy construction and
promoting rightsizing of U.S. agencies' overseas staff, would be simple
to implement, and would avoid agencies' relocating overseas personnel
to avoid or reduce cost-sharing charges.
Several agencies have concerns about the proposed program. Some non-
State agencies are particularly concerned about the cost-sharing
formula selected. These agencies believe that other formulas would more
closely link the fees they pay to benefits they receive, such as the
amount of office space occupied. Our analysis shows that, depending on
the formula used, cost-sharing amounts would vary considerably, with
some agencies benefiting at the expense of others. Some non-State
officials are also concerned about how potential disputes would be
resolved, such as deciding which agencies' staff would be required to
find office space outside the embassy compound if increased staff
levels resulted in a shortage of office space within the compound.
Several agencies also expressed concern that the cost-sharing fees
could affect their ability to accomplish their overseas missions. In
addition, State is concerned that, if the program is not implemented,
OBO would be unable to accelerate construction and, if some agencies
are exempted, overall support for the program would be seriously
eroded.
The cost-sharing program has already influenced some agencies'
decisions to reduce their numbers of overseas staff. Some agencies, in
consultation with OMB and their appropriations subcommittees, have been
considering new ways of meeting their missions with fewer overseas
staff. Several agency officials stated that they have closely
scrutinized their staff levels to reduce their fees. We found that at
least five agencies have reduced overseas positions or placed staff in
less costly areas within the embassy compound, thereby reducing the
amounts of their cost-sharing fees. Officials from two of these five
agencies stated that the staff reductions were made specifically to
reduce cost-sharing fees. The amount of pressure could increase on
agencies to either further reduce their overseas staff or curtail other
budgetary activities to cover the gradual increase in their cost-
sharing fees.
We received written comments on a draft of this report from eight
executive branch departments and agencies (Departments of Agriculture,
Commerce, Health and Human Services, Homeland Security, Justice, State,
the Treasury, and the U.S. Agency for International Development) and
the Library of Congress. State said the report is a fair and accurate
representation of the issues. Non-State agencies emphasized their
concerns regarding several aspects of the program, including the
program's accountability and equity, as well as its impact on their
ability to accomplish their overseas missions. Further, many non-State
agencies said that adequate mechanisms are not in place to ensure
smooth implementation. Several agencies recommended that new
interagency mechanisms be established to resolve disputes, ensure
accountability and equity, and consider improvements to the program.
Our work focused on the rationale for and development of the cost-
sharing program, agencies' concerns about the program, and the
program's influence on agencies' overseas staffing levels. We did not
assess the mechanisms to be used to implement the program if Congress
enacts it. Therefore, we have taken no position on whether alternative
interagency mechanisms would be needed. In our previous work, we have
pointed out the importance of striving for accountability and equity
and achieving an interagency consensus on capital cost
sharing.[Footnote 5] In addition, we have noted the importance of
minimizing management burden while carrying out such a program. We
believe there is time to address these and other potential
implementation issues during the initial phase-in period of the program
and that decision-makers would need to continually focus on various
implementation issues to give the program every opportunity to succeed.
Further, if the proposed program is enacted, it is important that
Congress and State monitor the program's implementation and make
changes as needed.
Background:
Following the terrorist bombings of U.S. embassies in Kenya and
Tanzania in 1998, the Secretary of State, with the support of the
President and Congress, created an Overseas Presence Advisory Panel
(OPAP) to examine the condition, organization, management, and other
aspects of U.S. diplomatic representation overseas. In 1999, the panel
declared that the U.S. overseas presence was near a state of crisis and
that the condition of U.S. posts and missions abroad was
unacceptable.[Footnote 6] Specifically, the Panel recommended that
major capital improvements be undertaken at U.S. facilities to
strengthen security. The Panel reported that funds for new overseas
facilities should be provided from a variety of sources, including
payments by all the agencies that share space in the
facilities.[Footnote 7] In addition, the Panel concluded that, at U.S.
facilities, linking the number of staff with mission priorities could
achieve significant budget savings by reducing the size of overstaffed
locations. Further, Congress passed legislation in 1999 requiring all
U.S. government staff working at posts slated for new construction to
be located on the new embassy compounds unless they are granted a
special colocation waiver.[Footnote 8]
In 2002, the President's Management Agenda emphasized the importance of
configuring U.S. overseas staff to the minimum necessary to meet
foreign policy goals. As part of the Agenda, OMB led an effort to
develop a cost-sharing mechanism. OMB also emphasized the need to build
embassies more quickly and recognized that, to do so, all agencies with
overseas staff should be required to contribute their share to the
costs. The administration also emphasized that, by requiring agencies
to pay for overseas staff, agencies would be more likely to closely
assess the need for each position before deciding to place a person
overseas, thereby rightsizing overseas staffing levels at U.S.
facilities.
In 2003, we reported on the poor conditions of facilities at embassies
and consulates. For example, we found that the primary office building
at 232 posts lacked sufficient security, potentially putting thousands
of U.S. government employees at risk.[Footnote 9] We also reported,
however, that OBO had begun to institute a number of organizational and
management reforms, beginning in 2001, designed to cut costs,
standardize designs and review processes, and reduce the construction
period for new embassies and consulates. These reforms, along with
other actions such as increasing staff training and expanding outreach
to contractors, provided OBO with the capability to manage its overseas
building program more effectively.[Footnote 10]
The United States currently has a network of embassies and consulates
at 251 locations around the world.[Footnote 11] Nearly 30 agencies have
more than 61,000 staff at these locations. Under the proposed program,
cost-sharing fees would be charged for every overseas position. Annual
charges for approximately 25,000 State support staff that provide
security, transportation, and other services to all overseas agencies
would be shared proportionately among over 36,000 program staff from
all agencies, including State.[Footnote 12] Figure 1 shows the numbers
of U.S. agencies' overseas staff positions that would pay annual cost-
sharing fees under the proposed program.
Figure 1: U.S. Agencies' Overseas Staff Positions Used to Determine
Annual Cost-Sharing Fees under Proposed Program, as of March 2004:
[See PDF for image]
[End of figure]
Historically, State has borne the costs for constructing nearly all
diplomatic facilities abroad. During the 6-year period from fiscal year
1999 through 2004, OBO received appropriations totaling $3.1 billion
for constructing these facilities. Annual funding amounts generally
increased during the period from about $300 million in fiscal year 1999
to about $750 million in fiscal year 2004, an amount that is about half
of the annual $1.4 billion that the proposed $17.5 billion program
would provide for new embassy construction when fully implemented.
Rationale for and Development of the Capital Security Cost-Sharing
Program:
The Capital Security Cost-Sharing Program was developed so that State
could obtain funds to accelerate the construction of new embassies and
consulates around the world and so that agencies would pay the full
costs associated with their overseas presence. The agencies' share of
embassy construction costs would be phased in over 5 years. When the
proposed program is fully implemented, from fiscal years 2009 through
2018, it could result in funding of $1.4 billion annually from nearly
30 agencies, including State. OBO worked with OMB to develop the
program based on a per-capita allocation of worldwide embassy
construction costs for 150 facilities. OBO devised a fee-assessment
plan that would spread the total embassy construction costs among all
agencies with an overseas presence. After considering and rejecting
several ways to charge agencies, OBO approved a cost-sharing formula
based on a per-capita or "head-count" fee because, according to OBO, it
was simple to implement, promoted agency rightsizing, and minimized
agencies' incentives to move staff to different locations to avoid
cost-sharing charges.
Proposed Cost-Sharing Program Could Accelerate Embassy Construction:
Funding through the proposed Capital Security Cost-Sharing Program
could allow significant acceleration of the construction of U.S.
diplomatic missions.[Footnote 13] Under the proposed program, the total
funding amount would be $1.4 billion annually, a substantial increase
over OBO's historical funding levels. For example, during the 6-year
period from fiscal years 1999 through 2004, OBO's actual appropriations
for embassy construction totaled $3.1 billion, an average of roughly
$522 million annually. Annual funding amounts generally increased from
about $300 million in fiscal year 1999 to about $750 million in fiscal
year 2004.
According to OBO, funds from cost sharing would enable the construction
of 150 new embassy and consulate compounds to be completed by 2018, 12
years sooner than OBO's initial plan, which included a planned
completion date of 2030. After fees are phased in during fiscal years
2005 through 2008, non-State agencies would pay $480 million annually
for a 10-year period through fiscal year 2018, while State's annual
payment would be $920 million. Figure 2 shows OBO's existing embassy
construction projections through fiscal year 2030 and how funding
generated by the proposed cost-sharing program could accelerate embassy
construction through fiscal year 2018.
Figure 2: Accelerated Funding for Embassy Construction with Cost
Sharing, Fiscal Years 1999-2030:
[See PDF for image]
[End of figure]
Proposed Cost Sharing Is Based on a Worldwide Head-Count Formula:
In developing the proposed cost-sharing program, OBO, with OMB's
approval, selected a per-capita or head-count formula based on the
number of agency staff at all overseas locations and the type of office
space. To determine each agency's cost share, agency officials were
encouraged to scrutinize their overseas staff numbers and determine
whether each position required office space with controlled access,
space with noncontrolled access, or nonoffice space for staff such as
custodians, gardeners, drivers, and others who do not require a
specific desk or workstation. According to OBO officials, it can easily
calculate and periodically revise agencies' fees by performing a few
simple calculations, without the need for a large number of staff to
administer the program.
Amounts for Cost-Sharing Positions Would Be Adjusted Every 3 Years:
OBO adopted a methodology in which agencies' cost-sharing fees for the
first 3 years of the program, fiscal years 2005 to 2007, would be based
on the total number of overseas positions that OBO identified in a 2002
worldwide survey. The positions were categorized by the four types of
space. To determine agencies' fees for the four types of positions, OBO
estimated the construction costs for building each type of space at a
typical new embassy. For example, the annual charge for a position
located in a controlled access area would be $59,318.[Footnote 14]
According to OBO, it plans to adjust these amounts every 3 years,
beginning in fiscal year 2008, based on changes in the total number of
overseas positions. In addition to the basic head-count fees, agencies'
annual charges would include amounts for their proportionate share of
construction costs for support services' personnel under the
International Cooperative Administrative Support Services (ICASS)
program. However, agencies' fees would be reduced, or "offset," by the
amounts they are currently paying for office space outside embassy
compounds.
Based on input from all participating agencies, OBO plans to update the
head-count numbers for staff annually and adjust cost-sharing fees to
reflect updated headcounts. If the proposed program begins in fiscal
year 2005, agencies would be charged for 61,413 positions, including
251 positions in the chief-of-mission areas; 8,432 in controlled access
areas; 30,850 in noncontrolled access areas; and 21,880 in nonoffice
space. These positions include direct-hire Americans, locally employed
staff, contractors, continuing part-time staff, and temporary duty
positions. Non-State agency participants and phased-in annual fees are
shown in table 1.
Table 1: Non-State Agencies' Cost-Sharing Assessments, Fiscal Years
2005-2018 (Excluding 2008):
Dollars in millions.
Non-State agencies:
USAID;
Number of staff positions: 6,429;
FY 2005 (20%): $20.3;
FY 2006 (40%): $55.8;
FY 2007 (60%): $91.3;
Annually FY 2009-2018: (100%): $179.7.
Defense;
Number of staff positions: 2,521;
FY 2005 (20%): $30.6;
FY 2006 (40%): $61.9;
FY 2007 (60%): $93.1;
Annually FY 2009-2018: (100%): $125.6.
Justice;
Number of staff positions: 1,083;
FY 2005 (20%): $13.5;
FY 2006 (40%): $27.0;
FY 2007 (60%): $40.5;
Annually FY 2009-2018: (100%): $61.4.
Commerce;
Number of staff positions: 1,276;
FY 2005 (20%): $4.5;
FY 2006 (40%): $13.6;
FY 2007 (60%): $22.8;
Annually FY 2009-2018: (100%): $40.2.
Homeland Security;
Number of staff positions: 750;
FY 2005 (20%): $7.6;
FY 2006 (40%): $15.3;
FY 2007 (60%): $22.9;
Annually FY 2009-2018: (100%): $28.5.
Agriculture;
Number of staff positions: 525;
FY 2005 (20%): $0.6;
FY 2006 (40%): $4.5;
FY 2007 (60%): $8.4;
Annually FY 2009-2018: (100%): $16.3.
Library of Congress;
Number of staff positions: 202;
FY 2005 (20%): $1.2;
FY 2006 (40%): $2.4;
FY 2007 (60%): $3.6;
Annually FY 2009-2018: (100%): $6.4.
Health and Human Services;
Number of staff positions: 219;
FY 2005 (20%): $1.0;
FY 2006 (40%): $2.6;
FY 2007 (60%): $4.3;
Annually FY 2009- 2018: (100%): $5.1.
Other departments and agencies (17);
Number of staff positions: 514;
FY 2005 (20%): $4.4;
FY 2006 (40%): $9.3;
FY 2007 (60%): $14.4;
Annually FY 2009-2018: (100%): $16.9.
Total non-state agencies;
Number of staff positions: 13,519;
FY 2005 (20%): $83.7;
FY 2006 (40%): $192.4;
FY 2007 (60%): $301.3;
Annually FY 2009-2018: (100%): $480.0.
Source: GAO analysis based on OBO data, as of March 2004.
Note: Assessment data were not available for fiscal year 2008. Annual
funding for fiscal year 2009-2018 includes proportionate amounts for
support services. Figures may not add to total due to rounding.
[End of table]
OBO Considered and Rejected Alternative Cost-Sharing Formulas:
OBO considered two other formulas before deciding on the head-count
method of determining agencies' shares of embassy construction costs.
One formula considered by OBO and an interagency working group would
have assessed agencies' charges based on the amount of space (square
feet or meters) occupied in overseas facilities. There was agreement
that the "space occupied" formula would more directly link costs paid
to benefits received. However, OBO rejected the proposed formula
because, according to OBO officials, administering and managing the fee
assessments would require frequent collection and updates of data,
which could be burdensome and labor intensive.
OBO proposed a second formula based on comparable rental costs
apportioned on a per-capita basis. The formula included factors such as
commercial cost of rent by location, the net amount of space occupied,
and other variables. According to OBO officials, this option was
eventually rejected because it would not result in sufficient up-front
funding needed for the construction and would also be labor intensive
to compile and manage the data. The space occupied and rent formulas
also lacked the support of OBO's Industry Advisory Panel (IAP),
[Footnote 15] whose members stated that agency officials could dispute
the amount of office space for which they were charged, complain about
the quality of their space, assert that other agencies' staff were
using a disproportionate share of space, and raise other issues that
could be difficult to manage.[Footnote 16]
OBO and OMB worked to develop fee assessments based on a per-capita or
head-count fee for the full costs of construction in early 2002. OBO
officials stated that the formula would be the simplest to manage
because fees are based on a flat rate for four different types of
office space, regardless of where the position is located worldwide.
Charges assessed to each agency would be generated on the basis of a
consistent, standardized formula. Each agency can easily compute the
cost of adding or removing an employee from overseas duty. In addition,
OBO officials stated that a per-capita or head-count formula would not
require intensive labor to administer and could readily provide a
steady flow of up-front funding to expedite embassy construction. OBO
also claimed that, because all agencies' staff positions are included
in the worldwide cost-sharing methodology, each agency would pay its
share for occupied workspace. OBO's initial proposal included charging
for office space in controlled and noncontrolled access areas only. In
response to other agencies' requests, OBO established per-capita fee
assessments for all four types of positions in its current proposed
program.
Several Agencies Have Concerns about the Program:
Officials from several agencies have concerns about the development and
implementation of the proposed program. Some non-State agencies would
prefer a formula other than the head-count formula to more closely link
the fees paid to the services received. Non-State officials are also
concerned about potential implementation issues, including concerns
about the resolution of interagency differences and uncertainty about
consistent congressional support for increasing budget requests that
include cost shares, which could impact their international missions.
State officials are concerned that, if the program is not funded, OBO
will be unable to accelerate construction and that if some agencies are
exempted, overall support for the program would be seriously eroded.
Some Non-State Agencies Prefer Formulas Other Than the Head-Count
Formula:
Officials from some non-State agencies are concerned that the program's
head-count formula may result in disproportionate costs to some
agencies. They indicated that they would prefer a formula based on one
of three options: (1) the amount of office space occupied worldwide,
(2) the amount of office space occupied at a specific location, (3) a
head count of staff at locations where new embassies would be
built. They added that these formulas would more closely link the fees
paid to the benefits received. We examined these alternative formulas
and describe them, along with OBO's current proposed head-count
formula, in table 2.
Table 2: Four Formulas for Allocating Costs among Agencies with an
Overseas Presence:
Basis of charge;
(1) Worldwide office space occupied: Space occupied as a percentage of
construction cost;
(2) Site-specific rent comparable to local commercial space:
Comparable cost of renting office space locally;
(3) Site-specific head count at locations where new embassies are
built: Cost per position for constructing one embassy;
OBO's current proposed worldwide head-count formula: Cost per position
for constructing 150 embassies.
Management and administrative requirements;
(1) Worldwide office space occupied: According to OBO, a full-time
staff is needed to manage this formula.[A] Staff would need to
periodically update data on the amount of space occupied by agency
staff;
(2) Site-specific rent comparable to local commercial space: According
to OBO, a full-time staff is needed to manage this formula. Staff would
need to periodically update data on the costs of local commercial space
overseas and security upgrades;
(3) Site-specific head count at locations where new embassies are
built: According to OBO, few staff are needed to manage this formula.
Staff would need data on construction costs and number and types of
positions where embassies would be built;
OBO's current proposed worldwide head-count formula: According to OBO,
few staff are needed to manage this formula. Staff would need data on
the number of staff positions overseas and the types of space they
occupy.
Cost allocation methodology;
(1) Worldwide office space occupied: Similar to standard U.S.
government approach for capital construction;
(2) Site-specific rent comparable to local commercial space: Similar to
standard U.S. government approach for rent;
(3) Site-specific head count at locations where new embassies are
built: Link between building costs at a specific site and staff who
benefit;
OBO's current proposed worldwide head-count formula: OBO and agencies
differ on the link between costs and benefits.[B].
Who pays more/less?
(1) Worldwide office space occupied: Agencies occupying a larger
percentage of space worldwide pay more; agencies occupying a smaller
percentage of space pay less;
(2) Site-specific rent comparable to local commercial space: Agencies
with large numbers of staff in high-cost locations pay more; small
numbers of staff in high-cost locations pay less;
(3) Site-specific head count at locations where new embassies are
built: Staff in new embassies pay relatively large fees; staff not
located in new embassies pay no fees;
OBO's current proposed worldwide head-count formula: Agencies with
larger numbers of staff worldwide pay more; agencies with smaller
numbers of staff worldwide pay less.
Source: GAO.
[A] Agriculture disagreed with OBO's assertion that full-time staff
would be required to administer this formula.
[B] OBO's head-count formula assesses agencies for positions at all 251
overseas embassies and consulates, including positions at 101 locations
where no major construction is planned through fiscal year 2018. OBO's
rationale is that staff at the 101 locations are already in secure
facilities and thus benefit from prior construction. Some non-State
agencies disagree with OBO, stating that they should not be required to
pay for secure facilities already built by OBO.
[End of table]
Formulas Based on Space Occupied and Rent at Overseas Facilities:
We found that the cost-sharing fees of seven selected agencies would
vary under different scenarios. Specifically, we examined two formulas
that OBO had developed during its initial planning phase of the
program: one based on the amount of office space occupied worldwide and
the other based on comparable cost for renting office space locally. We
compared these two formulas with OBO's current head-count formula.
Using OBO data that we determined to be reliable, we computed the
amount of space occupied by agencies worldwide and at each overseas
location. We found that, because agencies use different amounts of
office space, the Departments of Agriculture, Defense, Health and Human
Services, and State would pay higher cost-sharing fees under the space-
occupied formula; the Department of Commerce and USAID would pay less;
and the Library of Congress' fee would be similar to its fee under the
head-count formula.
Several agency officials stated that they would be in favor of a
formula similar to the standard U.S. government approach for rent as
used domestically by the General Services Administration (GSA), which
manages many government buildings by renting space to other U.S.
government agencies. GSA's fees are based on numerous factors,
including comparable costs for commercial space, number of square feet,
and the location and condition of the building. We found that, under
the formula based on comparable local rental costs, State, USAID, and
Health and Human Services would pay less than under OBO's current head-
count charge because they have staff based in numerous locations where
rental costs are inexpensive. In contrast, many Defense, Commerce, and
Department of Agriculture staffs are based in cities with higher rents
for commercial space. Thus, their rental fee would be higher than a fee
based on head counts. Finally, fees for the Library of Congress using
both the amount of office space occupied and comparable rental costs
would be relatively similar to fees under the head-count formula, as
shown in table 3.
Table 3: Selected Agencies' Annual Cost-Sharing Fees Using Different
Cost-Sharing Formulas:
Dollars in millions.
Department or agency: Agriculture;
Worldwide space occupied: $23.2;
Site-specific rent comparable with commercial space: $21.6;
OBO's proposed current worldwide head count: $16.3.
Department or agency: Commerce;
Worldwide space occupied: $31.8;
Site-specific rent comparable with commercial space: $49.1;
OBO's proposed current worldwide head count: $40.2.
Department or agency: Defense;
Worldwide space occupied: $135.3;
Site-specific rent comparable with commercial space: $205.3;
OBO's proposed current worldwide head count: $125.6.
Department or agency: Health and Human Services[A];
Worldwide space occupied: $11.1;
Site-specific rent comparable with commercial space: $3.9;
OBO's proposed current worldwide head count: $5.1.
Department or agency: Library of Congress;
Worldwide space occupied: $5.2;
Site-specific rent comparable with commercial space: $5.5;
OBO's proposed current worldwide head count: $6.4.
Department or agency: State;
Worldwide space occupied: $1,002.7;
Site-specific rent comparable with commercial space: $790.6;
OBO's proposed current worldwide head count: $920.0.
Department or agency: USAID;
Worldwide space occupied: $79.0;
Site-specific rent comparable with commercial space: $100.3;
OBO's proposed current worldwide head count: $179.7.
Source: GAO analysis based on OBO data.
[A] Includes the Centers for Disease Control and Prevention (CDC).
[End of table]
Formula Based on Head Count of Staff Benefiting from New Embassy
Construction:
Several agency officials noted that the proposed head-count formula
assesses blanket fees worldwide, not specifically where agencies' staff
are located or where new embassies would be built. As a result, some
agencies would be assessed fees, although some of their staff may not
benefit directly from new construction. For example, the Library of
Congress (the Library) is one of several agencies opposed to the head-
count formula. According to Library and OBO data, only 45 (22 percent)
Library staff--located in three cities--are likely to benefit from new
embassy construction scheduled from fiscal years 2004 through 2009. In
addition, many of the Library's positions are currently located in
rented space outside embassy compounds, where the Library's annual
office-space costs are substantially less than it would pay under the
cost-sharing program. For example, Library officials stated that they
currently pay roughly $1,200 each for several positions in Islamabad,
an amount that is considerably less than the $28,144 per position that
would be assessed under the cost-sharing program. According to OBO
officials, the Library has numerous staff in several cities, including
Islamabad and five other locations, where construction is planned
during fiscal years 2010 through 2018. The officials added that the
Library would receive rent credit offsets for the costs of renting
office space outside embassy compounds and noted that current law
requires the Secretary of State, in selecting sites for new U.S.
diplomatic facilities abroad, to ensure that all U.S. personnel under
chief of mission authority be located on-site.
We examined what agencies' head-count fees could be under the formula
requiring only agencies with a presence at the new location to pay. We
selected a typical location where a new embassy, with 247 staff
representing four agencies, is projected to be built in fiscal year
2006 at a cost of $92.2 million. Agencies with no positions at this
location would not be required to pay any cost-sharing fees. Our
analysis, based on comparing the costs for types of space occupied at
this typical embassy, shows that one-time fees for all four agencies
would be higher at this one location than the current proposed head-
count fees for all positions under this formula. For example, the one-
time fee for a position in the noncontrolled access area would be about
$357,000 for each person, substantially higher than the $28,144 annual
fee used to calculate the current head-count formula. However, the same
agency's overall fees would be higher due to its paying $28,144
annually, over a 14-year period. According to OBO officials, allowing
agencies to pay cost-sharing fees only where their staffs are based
would not support the goal of rightsizing because it would encourage
agencies to avoid cost-sharing fees. Specifically, agencies could "game
the system" by moving staff, even to potentially less secure locations,
where no construction was planned. OBO acknowledged, however, that some
non-State agencies' would be unlikely to move staff due to country-
specific missions and the costs involved with moving.
Agencies Have Other Concerns about the Program:
Some non-State agencies have other concerns about the proposed program,
including how potential disputes would be resolved and how cost-sharing
fees would affect their ability to accomplish their overseas missions.
In addition, State is concerned that, if the program were not
implemented, OBO would be unable to accelerate construction; and, if
some agencies are exempted, overall support for the program could be
seriously eroded.
Non-State agency officials indicated that the existing interagency
working group may not be an effective mechanism for resolving disputes.
Some non-State agencies are concerned that, when the program is
implemented, the Interagency Facilities Committee, an interagency
advisory group established by OBO to facilitate communication among
agency officials, would not provide a credible forum for discussing
program issues and resolving disputes. For example, some non-State
agency officials said that they have no assurance that OBO would
provide them with space in the embassy compound if conditions become
crowded. According to one agency, all agencies should have participated
in the formative stage discussions of the proposed program, such as the
participatory and transparent discussions that were held during the
development of the ICASS Program. In contrast, according to OBO
officials, the Interagency Facilities Committee is a credible forum for
discussing office space issues. OBO officials added that, in planning
embassy size, a certain amount of contingency, or "spill-over" space,
in anticipation of staff increases is incorporated into the plan.
Some non-State officials said that OBO has shown little flexibility in
adopting agencies' suggestions in Interagency Facilities Committee
meetings. For example, OBO currently requires that the employing agency
pay cost-sharing fees for staff temporarily assigned to another agency.
In contrast, some agency officials would prefer that cost-sharing fees
be paid by the agency to which the staff member is detailed, not by the
permanent employer. According to one non-State official, OBO should not
be concerned about which agency pays the fees and should allow the
agencies to resolve this issue. OBO officials stated, however, that it
would be complicated and burdensome to keep track of detailees to
maintain an accurate account of overseas staff positions. OBO officials
added that agencies could coordinate with other agencies to reimburse
funding for detailees.
OBO officials stated that they have made adjustments to the program
based on agency suggestions, including charging more for the chief-of-
mission position based on larger office space, and providing rent
offsets to agencies for staff working outside embassy compounds. OBO
also created certain procedures that agencies can use to challenge
decisions. According to OBO officials, these procedures establish OMB
as the final arbiter for resolving interagency disputes. OBO officials
stated that these procedures and standard OMB processes had already
been used to resolve some disputes. One non-State agency stated,
however, that when disputes arise, OMB is likely to favor OBO's
position because OBO has overall responsibility for implementing the
proposed program.
If the proposed program is implemented, some agencies are also
concerned that annual cost-sharing fees could affect their ability to
accomplish their international missions. USAID officials expressed
concern that, without adequate funding, they may have to downsize and
with fewer staff would not be able to accomplish some of their overseas
missions. Commerce and Agriculture had similar concerns. Officials from
both agencies stated that, without additional funding, their agencies
would have to cut their overseas staff and some ongoing activities at
numerous locations. For example, Commerce has projected that it may
have to close offices at as many as 51 posts by fiscal year 2009,
reducing staff levels by 498 persons, to reduce annual costs by roughly
$27.4 million. A Commerce official stated that post closings and
reductions in staff could affect overseas sales for some U.S. firms
because Commerce would have fewer staff to represent U.S. businesses in
foreign markets. Finally, the Library of Congress' $6.4 million annual
cost-sharing fee, set to take effect in fiscal year 2009, would
represent over 70 percent of its total fiscal year 2004 international
budget. Library officials indicated that, if the Library were required
to pay such a large amount without receiving additional funding, the
mission of their international program would be seriously affected. :
State is concerned that, if the program is not fully funded, OBO would
be unable to accelerate construction and, if some agencies are
exempted, overall support for the program could be seriously eroded.
Congress is currently considering the proposed program but, until it is
enacted, State will not be able to implement the accelerated building
schedule. In addition, State is concerned about the potential impact of
granting agencies exemptions from the program. Specifically, State
noted that if one or more agencies were exempted, other agencies'
funding levels would have to be increased to generate the $1.4 billion
needed annually for the construction program.
Program Has Influenced Some Agencies' Decisions to Reduce the Number of
Overseas Staff:
Although it is too early to tell how the cost-sharing program, if
implemented, could influence all agencies' overseas staff levels, some
agencies have already begun to rightsize staff in an effort to reduce
their potential cost-share bill. Faced with expenditures they have not
paid in the past, agencies have had additional incentives to closely
review staffing levels and, in consultation with OMB and their
appropriations committees, consider new ways of meeting their missions
with fewer overseas staff. We found that, as of July 2004, at least
five agencies had reduced their employee rosters by as many as 473
overseas positions. Two of these five agencies stated that the staff
reductions were made specifically to reduce cost-sharing fees. OBO
plans to use agencies' adjusted staffing numbers to revise its embassy
construction plans. However, the full effect of the cost-sharing
program would not be felt until 2009, after the 5-year phase-in period
ends, which would likely bring increased pressure for agencies to
further reduce their overseas staff.
Cost Sharing Has Promoted Greater Consideration of Costs in Staffing
Decisions:
In the 2001 President's Management Agenda, the administration took the
position that, if agencies are required to pay a greater share of the
costs associated with their overseas presence, they would weigh cost
considerations more carefully before posting personnel overseas. The
administration's position is that by minimizing the growth of overseas
staff, the U.S. government will benefit by reducing the numbers of
people exposed to security risks, terrorist attacks, kidnapping, and
other risks that are inherent in the overseas presence, and by reducing
the costs of constructing embassy compounds. With the added incentive
to scrutinize staff numbers, agencies would be required to consider
whether they could afford each staff member. This rightsizing effort is
important to ensure that, governmentwide, the correct numbers of people
are working at each embassy. OBO officials stated that growth in
overseas positions has been generated by both State and non-State
agencies and that, for the first time, the Capital Security Cost-
Sharing Program would provide a mechanism for controlling growth. By
reexamining staffing numbers and types of office space, some agencies
have already reduced their future cost-sharing fees.
In preparing for the program, many agencies have already scrutinized
the numbers of staff positions overseas and the types of office space
they require. As a result, one agency eliminated numerous unfilled
overseas positions, some of which had been unfilled for several
years.[Footnote 17] One agency official stated that, prior to the cost-
sharing program, many overseas positions had not been formally removed
because retaining the positions allowed the agency the ability to
quickly reassign staff as their missions and priorities
changed.[Footnote 18] For example, beginning in fiscal year 2005,
State, Commerce, the Treasury, and Homeland Security had already
reduced overseas positions. State cut 263 positions and Commerce
reduced its overseas staff by 191 positions, eliminating 168 unfilled
positions and cutting 23 other positions. Finally, Treasury removed 17
positions, and Homeland Security removed 2 positions.
Some agencies have reassessed the types of office space required for
their employees stationed overseas. These agencies decided that some
positions located in controlled access areas could be relocated to
noncontrolled access areas, thereby reducing their cost-sharing
fees. For example, the Foreign Broadcast Information Service
reclassified six positions previously located in noncontrolled access
areas to less costly nonoffice areas.
By scrutinizing their numbers of overseas positions and determining the
types of space they require, State, Commerce, the Treasury, and
Homeland Security, and the Foreign Broadcast Information Service
significantly reduced their cost-sharing assessments for fiscal year
2006 and, at the same time, reduced the number of staff that would be
exposed to terrorist attacks and other overseas security risks. For
example, State reduced its projected fees by more than $15 million, and
Commerce reduced its fees by nearly $6 million. Other agencies' staff
numbers have either increased, did not change, or were being finalized
as of September 2004. Table 4 shows selected agencies' estimated
savings in annual cost-sharing fees (fiscal year 2005 to 2006) after
reducing their overseas positions and/or reassessing the types of space
needed.
Table 4: Selected Agencies' Staff Positions and Estimated Savings in
Annual Cost-Sharing Fees for Fiscal Years 2005 and 2006, as of July 1,
2004:
Dollars in millions.
Agency or department: Department of Commerce;
FY 2005: Staff positions: 1,276;
FY 2005: Cost-sharing fee: $34.7;
FY 2006: Staff positions: 1,085;
FY 2006: Cost-sharing fee: $28.9[B];
Estimated savings[A]: $5.8.
Agency or department: Foreign Broadcast Information Service;
FY 2005: Staff positions: 109;
FY 2005: Cost-sharing fee: $3.1;
FY 2006: Staff positions: 109;
FY 2006: Cost-sharing fee: $2.9;
Estimated savings[A]: $0.2.
Agency or department: Department of Homeland Security;
FY 2005: Staff positions: 750;
FY 2005: Cost-sharing fee: $24.6;
FY 2006: Staff positions: 748;
FY 2006: Cost-sharing fee: $24.4;
Estimated savings[A]: $0.2.
Agency or department: Department of State;
FY 2005: Staff positions: 23,131;
FY 2005: Cost- sharing: fee: 663.1;
FY 2006: Staff positions: 22,868;
FY 2006: Cost-sharing fee: $647.7;
Estimated savings[A]: $15.4.
Agency or department: Department of the Treasury;
FY 2005: Staff positions: 89;
FY 2005: Cost-sharing fee: $3.2;
FY 2006: Staff positions: 72;
FY 2006: Cost-sharing fee: $2.5;
Estimated savings[A]: $0.7.
Total;
FY 2005: Staff positions: 25,355;
FY 2005: Cost-sharing fee: $728.7;
FY 2006: Staff positions: 24,882;
FY 2006: Cost- sharing: fee: $706.4;
Estimated savings[A]: $22.3.
Source: GAO analysis of OBO data.
Note: Amounts shown for fiscal year 2005 and 2006 cost-sharing fees and
estimated savings are full cost shares that do not reflect the phase-in
period of the program. They do not include construction charges for
ICASS positions and rent offsets, if applicable.
[A] If agencies would "save" funds by reducing cost-sharing fees, OBO
would receive less than $1.4 billion annually. As a result, OBO would
have to either construct fewer or less costly buildings annually or
extend the proposed completion date beyond 2018.
[B] According to Commerce, the fiscal year 2006 fee was still under
negotiation with OBO, as of October 12, 2004.
[End of table]
OBO officials stated that the fundamental building block for planning a
new embassy compound is the projected numbers and types of positions
that must be accommodated in the new facilities. Without these details,
the U.S. government risks building new facilities that are designed for
the wrong number of staff. To prepare for the initial implementation of
the cost-sharing program, OBO asked agencies to submit updated
information on overseas staff numbers. OBO has since revised the
agencies' data so that it can begin the program with the most current
staffing levels. Because the size and cost of new embassy facilities
are directly related to anticipated staffing requirements, OBO stated
that it would continue to obtain periodically revised staff numbers
and, when appropriate, change its embassy construction plans or adjust
cost-sharing fees that agencies would be required to pay.
Gradual Phase-in of Program Would Likely Bring Increasing Pressure to
Reduce Overseas Staff:
For selected agencies, international program budgets would have to
increase substantially to cover the gradual phase-in of annual cost-
sharing fees. Therefore, agencies are likely to face increased pressure
to scrutinize their overseas staff levels and ensure that only
essential personnel are staffed at overseas posts. As agencies are
required to pay more each year until the proposed program is fully
implemented in fiscal year 2009, agency officials may decide to further
reduce their overseas staff numbers to reduce their fees.
We selected four agencies and estimated how much their international
program budgets would need to increase to meet cost-sharing fees. We
found, for example, that Commerce's Foreign and Commercial Service
budget would have to increase by 11 percent from fiscal year 2005 to
fiscal year 2007 and by as much as 18 percent from fiscal year 2005 to
fiscal year 2009 to cover cost-sharing fees. The estimated amount and
percentage of budget increases needed to pay cost-sharing fees for
fiscal years 2007 and 2009 for sampled agencies--Agriculture, Commerce,
USAID, and the Library of Congress--are shown in table 5.
Table 5: Estimated Percentage Increase Needed in International Program
Budgets for Cost-Sharing Fees for Selected Agencies, Fiscal Years 2005,
2007, and 2009:
Dollars in millions.
Department or agency: Agriculture
Component/program: Foreign Agriculture Service;
FY 2005: International budget (requested): $147.6;
FY 2007: International budget (estimated): $156.0;
FY 2007: Percent increase from FY 2005: 6%;
FY 2009: International budget (estimated): $163.9;
FY 2009: Percent increase from FY 2005: 11%.
Department or agency: Commerce
Component/program: U.S. Foreign and Commercial Service;
FY 2005: International budget (requested): $211.9;
FY 2007: International budget (estimated): $234.7;
FY 2007: Percent increase from FY 2005: 11%;
FY 2009: International budget (estimated): $252.1;
FY 2009: Percent increase from FY 2005: 19%.
Department or agency: Library of Congress
Component/program: International;
FY 2005: International budget (requested): $8.9;
FY 2007: International budget (estimated): $12.5;
FY 2007: Percent increase from FY 2005: 40%;
FY 2009: International budget (estimated): $15.3;
FY 2009: Percent increase from FY 2005: 72%.
Department or agency: USAID
Component/program: Operating Expenses;
FY 2005: International budget (requested): $623.4;
FY 2007: International budget (estimated): $714.7;
FY 2007: Percent increase from FY 2005: 15%;
FY 2009: International budget (estimated): $803.1;
FY 2009: Percent increase from FY 2005: 29%.
Source: President's Budget submission and GAO estimation.
Note: Estimates for fiscal years 2007 and 2009 assume no other budget
increases and are GAO estimations based on fiscal year 2005 data.
[End of table]
Conclusion:
The principle of cost sharing is consistent with the Overseas Presence
Advisory Panel's findings and recommendations that agencies share in
the cost of constructing new secure embassies and that agencies'
staffing levels be linked with their overseas missions. If the proposed
cost-sharing program is enacted and funded, it could result in
expedited construction of new embassies and, at the same time,
increased incentives for agencies to ensure that only essential staff
are based overseas. Providing secure facilities for U.S. employees
overseas is a high priority for the U.S. government, and the proposed
Capital Security Cost-Sharing Program is one way to accelerate the
construction of these facilities. Requiring agencies to pay a share of
embassy construction costs would also encourage them to consider the
full cost of their overseas presence and to determine the number of
people they need to meet critical overseas missions.
Several non-State agencies have raised concerns about the proposed
cost-sharing formula and implementation issues that could adversely
affect their overseas missions. According to our analysis, agencies'
cost-sharing fees under other formulas would vary widely, with some
agencies benefiting at the expense of others. While we take no position
on which formula should be used, some type of cost-sharing mechanism
could provide a disciplined approach to the staffing projection and
rightsizing processes and accelerate the capital construction program.
Several agencies suggested that it would be useful to establish new
interagency mechanisms to discuss and resolve potential disputes. We
did not assess the mechanisms to be used to implement the program, if
Congress enacts it. Therefore, we have taken no position on whether new
interagency mechanisms would be needed. Nevertheless, in our prior
work, we have noted the importance of achieving interagency consensus
and striving to achieve equity, while minimizing management burden.
Decision-makers need to continually focus on these factors in order to
give the program every opportunity to succeed. There is time to address
these and other potential implementation issues during the 5-year
phase-in period of the program. If the proposed program is enacted, it
is important that Congress and State monitor the program's
implementation and make changes as needed.
Agency Comments and Our Evaluation:
We received written comments on a draft of this report from eight
executive departments and agencies (Departments of Agriculture,
Commerce, Health and Human Services, Homeland Security, Justice, State,
the Treasury, and the U.S. Agency for International Development) and
the Library of Congress. The Department of State said that the report
is a fair and accurate representation of the issue. The other
departments and agencies raised a number of concerns regarding
accountability and equity issues if the program is implemented. Their
comments, along with our responses to specific points, are reprinted in
appendixes II-X. Several agencies also provided technical comments,
which we have incorporated into the report where appropriate.
Several agencies stated that using a cost-sharing formula based on the
number of personnel overseas was not equitable. We have taken no
position on the formula to be used. Our report points out the
advantages and disadvantages of potential formulas and that some
agencies may benefit at the expense of others, depending on the formula
used.
We are sending copies of this report to interested congressional
committees. We are also providing copies of this report to the
Secretaries of Agriculture, Commerce, Defense, Health and Human
Services, Homeland Security, Justice, State, and the Treasury; the
Administrator, U.S. Agency for International Development; the Director,
Office of Management and Budget; and the Librarian of Congress. We will
also make copies available to others upon request. In addition, this
report will be available at no charge on the GAO Web site at
[Hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me on (202) 512-4128. John Brummet, Lynn Cothern, Martin De
Alteriis, Mary Moutsos, Julia A. Roberts, and George Taylor made key
contributions to this report.
Sincerely yours,
Signed by:
Jess T. Ford:
Director, International Affairs and Trade:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Our objectives were to examine (1) the Department of State's rationale
for and development of the proposed Capital Security Cost-Sharing
Program, (2) agency concerns about the program, and (3) the influence
of the proposed program on agencies' decisions on overseas staff
levels. To complete our work, we analyzed data, reviewed documents, and
discussed the program in Washington, D.C., with officials of State's
Bureau of Overseas Buildings Operations (OBO), which is responsible for
the embassy construction program; the Office of Management and Budget
(OMB); and eight other executive branch departments and agencies,
including the Departments of Agriculture, Commerce, Defense, Health and
Human Services, Homeland Security, Justice, and the Treasury, and the
U.S. Agency for International Development (USAID). We also reviewed
documents and held discussions in Washington, D.C., with officials of
the Library of Congress, a legislative branch agency. We selected the
executive branch departments and agencies because they have staff
overseas and, under the current proposal, would have the largest annual
cost-sharing charges. We selected the Library of Congress because it is
the only nonexecutive branch agency that would pay cost-sharing fees.
To describe the overall rationale for and development of the proposed
program, we examined numerous reports and other documents, including
those issued by OBO, the Overseas Presence Advisory Panel, and other
working groups and committees. We reviewed historical information
dating back to 1999, including the alternative formulas OBO considered
before selecting the head-count formula to assess agencies' fees for
embassy construction. We reviewed documents and held discussions in
Washington, D.C., with officials of nine executive branch agencies or
departments with the largest cost-sharing fee assessments and with the
Library of Congress. In addition, we met with OMB officials to discuss
agencies' concerns about some aspects of the proposed program and
General Services Administration to discuss its management of U.S.
government facilities domestically.
We conducted data analyses using data from the International
Cooperative Administrative Support Services (ICASS) system Global
Database, which was developed and maintained by the ICASS Service
Center and contains information for each overseas post. We assessed the
reliability of the ICASS data during a recent review of State's Embassy
Administrative Support System.[Footnote 19] The assessment included (1)
performing electronic testing for errors in accuracy and completeness,
(2) discussing data reliability issues with agency officials
knowledgeable about the data, and (3) reviewing relevant reports from
State's Office of the Inspector General and GAO and financial audits of
the ICASS system. We found that the data were also sufficiently
reliable for the purpose of determining agencies' space occupied
worldwide that was compared with alternative formulas. Data showing
estimates for future costs under the Capital Security Cost-Sharing
Program were provided in a briefing by staff from OBO. We interviewed
knowledgeable officials about the estimating methodology and reviewed
some supporting documents, but we did not conduct a full review of the
procedures OBO used for these estimations.
To examine and compare alternative cost-sharing formulas, we selected
seven agencies, four that have a larger number of staff worldwide
(State, Defense, Commerce, and USAID) and three agencies with a smaller
number of staff working overseas (Agriculture, Health and Human
Services, and the Library of Congress). To determine alternative cost-
sharing percentages for agencies with overseas staff, we allocated
costs for ICASS personnel proportionately. We used OBO staffing data
that excluded Peace Corps staff, Marine Security Guards, and various
other positions permanently stationed in host government facilities or
specialized research or technical facilities. We determined that the
data were sufficiently reliable for determining cost-sharing
percentages.
To determine the amount each agency would have to pay under two rent
formulas, we used OBO data that we had determined to be sufficiently
reliable for the purpose of this report and computed the percentage of
space each agency occupies. OBO's data were included in a database that
listed the total worldwide space at each post and the total space
occupied per agency at each post. To find out how much each agency
would pay annually to raise $1.4 billion under this formula, we
multiplied each agency's percentage of space occupied worldwide by $1.4
billion. To determine how OBO would generate $1.4 billion annually
using a rental formula, we used OBO's 2002 data for fees that would
have generated $575 million annually, which took into consideration the
cost of commercial space per location, security and classified space
for each post, and multiplied the fees by 2.4 to compare them with
formulas that raise $1.4 billion annually. To determine the
proportionate percentages and cost-sharing fees for each type of office
space at one embassy, we selected a post scheduled for construction in
2006 and used the data that OBO provided, listing the number of
agencies, staff and types of space occupied for each staff member.
OBO's estimated cost to build the facility would be $92.2 million as
listed in OBO's long-range overseas building plan. We used OBO's
estimate of the total square footage for the post and determined the
amount and percentage of space needed for the chief of mission,
controlled access, noncontrolled access, and nonoffice areas. We then
divided the amounts for each area by the total area to determine the
total costs to build the embassy for each type of space. We determined
the data were sufficiently reliable to illustrate the effects of the
number of staff on agencies' costs.
To describe the actions agencies have taken to reassess their overseas
staffing levels, we collected documentation on each agency's staffing
numbers and types of space for chief of mission, controlled access
area, noncontrolled access area, and nonoffice space that were used to
calculate cost-sharing fees for fiscal year 2005 budget requests. To
assess the reliability of these data, we verified the amount each
agency requested by reviewing budget submission documents provided by
several agencies and through discussions with knowledgeable agency
officials. We determined that the data were sufficiently reliable for
the purpose of this report. We then compared the fees to each agency's
revised staffing numbers and the space requirements used to calculate
cost-sharing fees for fiscal year 2006 budget requests. Revisions to
the numbers of staff or the types of space resulted in savings for five
agencies. We also discussed with OBO officials how agencies' revised
staff numbers and space requirements would affect future embassy
construction plans. To determine the amount in international program
budgets that selected agencies would need to cover cost-sharing fees in
fiscal years 2005, 2007, and 2009, we obtained the figures on budget
requests for fiscal year 2005. We then used OBO data showing projected
cost-sharing fees for each agency in fiscal years 2007 and 2009. To
determine the amount and percentage that the international budget for
each agency would have to grow to cover their cost-sharing fees, we
added the amount they would need in fiscal years 2007 and 2009 to their
international budget request for fiscal year 2005 and determined the
difference. We determined that these data were sufficiently reliable
for the purpose of providing a broad indication of the amounts the
agencies would need to increase their budgets for the chosen years. We
assumed that each agency's program budget would not increase for any
other reason than Capital Security Cost-Sharing Program fees.
[End of section]
Appendix II: Comments from the Department of Agriculture:
USDA:
United States Department of Agriculture:
Farm and Foreign Agricultural Services:
Foreign Agricultural Service:
1400 Independence Ave, SW:
Room 4965-S:
Stop 1060:
Washington, DC 20250-1060:
Mr. Jess T. Ford:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
OCT 12 2004:
Dear Mr. Ford:
Thank you for providing the U.S. Department of Agriculture (USDA) with
the Government Accountability Office's (GAO) draft report entitled
"Embassy Construction: Proposed Cost-Sharing Program Could Speed
Construction and Reduce Staff Levels but Some Agencies Have Concerns."
We would like to offer the following comments for your consideration.
Your report agrees with the Department of State's (State) position that
the proposed program will support rightsizing. However, the report does
not comment on the propriety of using the size of buildings to drive
the size of the U.S. overseas missions, as opposed to using mission
goals to determine resource levels. There is no discussion of how using
the size of buildings as the primary tool to accomplish rightsizing
will impact the existing authority of the chiefs of mission to set
mission size. In light of the existing rightsizing authority, State's
recently undertaken measures to improve the coordination of that
authority, and GAO and the Office of Management and Budget's (OMB)
ongoing rightsizing reviews, USDA believes that a program such as the
one proposed by State's Bureau of Overseas Building Operations (OBO) is
not needed for the purpose of implementing rightsizing. In fact,
because this program forces agencies to pay for positions in new
embassy compounds even after positions have been eliminated, USDA
believes that this program does not further the intent of rightsizing.
The draft report does not mention the fact that OBO designed its
proposed program without substantive input from other agencies. USDA
believes that, for a program of this magnitude and involving this
degree of change, all stakeholders should have participated in the
formative stage discussions, as they did for the development of the
International Cooperative Administrative Support Services (ICASS)
System. In contrast to the formulation of the Capital Security Cost
Sharing Program (CSCSP), ICASS development was transparent and
participatory, detailed policies and procedures were completed prior to
implementation, and all stakeholders had an opportunity to provide
input to the design of the program. We are concerned that the low
involvement of stakeholders in the proposal and planning stages of
CSCSP will lead to significant difficulties in implementing the
program, if approved.
Your report refers to the fact that several agencies have concerns
about OBO's proposed program. There is no indication, however, of the
relative degree of concern. If, for example, the State Department
supports this program and all other affected agencies have serious or
grave concerns about it or simply oppose it, we believe this is an
important fact that should be weighed in determining whether to approve
implementation of the program.
Many agencies expressed serious concerns to GAO about the lack of
accountability mechanisms included in the proposed program. The program
contains no credible means for agencies to either maintain oversight or
hold OBO accountable for the substantial financial contributions
requested. GAO's report mentions but does not elaborate on this
significant shortcoming. Similarly, the report does not discuss
performance measures for the program. OBO has not provided any detailed
information regarding annual targets and goals for construction that
would allow measurement of its annual performance against overall
program goals. Lack of accountability mechanisms and performance
measures are additional significant factors that should be included in
an analysis of the business case for this program.
Your report also does not address the fact that the proposed program,
which is planned for implementation this fiscal year, still lacks
detailed implementation policies and procedures. USDA has requested
repeatedly that OBO draft detailed implementation guidance to be
included in the Foreign Affairs Manual for this program. Such guidance
would help address the many details and questions surrounding
implementation and how various contingencies will be handled. USDA
believes that the chances for success for this program, if implemented,
are greatly reduced without detailed guidance in place prior to
implementation. Other State-led programs involving comparable levels of
cost and interagency coordination have had such guidance in place prior
to implementation. Unfortunately, no program of the proposed size and
scope of this proposal would be as simple to administer as State has
claimed.
USDA agrees with GAO's characterization of the results of this proposed
program as possible as opposed to certain. For a program of this size
and scope, we would have liked to see your report more fully address
the risks posed by such a large and radically different program to
agencies' overseas mission goals. Given the profound nature of the
changes proposed by State, USDA regrets that the draft report does not
offer recommendations to assist Congress in weighing the risks of this
major change in embassy construction against the benefits.
We have a number of additional comments of a more technical nature.
They are enclosed for your consideration.
In closing, I again want to thank you for allowing us to comment on
this draft report. Please let us know if you would like to discuss our
comments further.
Sincerely,
Signed by:
A. Ellen Terpstra:
Administrator:
The following are GAO's comments on the Department of Agriculture's
letter dated October 12, 2004.
GAO Comments:
1. We agree that mission goals are a critical factor in determining
resource levels. However, we believe that security and cost factors
also need to be fully considered along with mission goals in
determining overseas staffing levels. In our prior reports, we
presented a rightsizing framework to help decision-makers focus on
security, mission, and cost trade-offs associated with staffing levels
and rightsizing options.[Footnote 20] We believe that the proposed
Capital Security Cost-Sharing Program will encourage agencies to more
closely scrutinize overseas staffing levels by requiring agencies to
pay a share of the embassy construction costs associated with their
overseas presence.
2. OBO officials stated that it solicited and received substantive
input from other agencies during the design of the proposed program. We
acknowledge that Agriculture and some other agencies have concerns
about issues concerning accountability, transparency, and other
implementation mechanisms.
3. We agree that the proposed program would be large and could have a
major impact on agencies, but we believe the program is consistent with
the criteria for rightsizing we previously reported. These criteria
include (1) security of facilities and employees, (2) mission
priorities and requirements, and (3) cost of operations, all of which
should be systematically evaluated. Agencies must provide a strong
rationale to Congress for overseas programs, including all associated
costs.
4. We acknowledge that agencies have concerns about potential risks
they may encounter if the program is enacted. However, we concluded
that some type of cost-sharing program would achieve important goals,
such as accelerating the construction of new secure facilities. In
addition, requiring agencies to pay a share of embassy construction
costs would also encourage them to consider the full cost of their
overseas presence and to determine the number of people they need to
meet critical overseas missions.
[End of section]
Appendix III: Comments from the Department of Commerce:
UNITED STATES DEPARTMENT OF COMMERCE:
Chief Financial Officer and Assistant Secretary for Administration:
Washington, D.C. 20230:
OCT 14 2004:
Mr. Jess T. Ford:
Director:
International Affairs and Trade:
Government Accountability Office:
Dear Mr. Ford:
Enclosed are the Department of Commerce's comments to the report
entitled EMBASSY CONSTRUCTION. Proposed Cost-Sharing Program Could
Speed Construction and Reduce Staff Levels but Some Agencies Have
Concerns (GAO-05-32).
Please contact me at (202) 482-4951 if you have any questions.
Sincerely yours,
Signed by:
Otto J. Wolff:
Chief Financial Officer and Assistant Secretary for Administration:
Enclosures:
Commerce Department Comments on GAO Draft Report Number GAO-05-32,
"Embassy Construction: Proposed Cost-Sharing Program Could Speed
Construction and Reduce Staff Levels but Some Agencies Have Concerns"
(October 2004):
This responds to the Government Accountability Office (GAO) request for
the Commerce Department to provide comments on the GAO draft report
(GAO-05-32) entitled "Embassy Construction: Proposed Cost-Sharing
Program Could Speed Construction and Reduce Staff Levels but Some
Agencies Have Concerns," dated October 2004. The Department wants to
express its appreciation to GAO for assessing the Capital Security
Cost-Sharing Program (CSCSP) and affording us the opportunity to
comment on the report.
We recognize that the program has passed the design phase and will
enter the implementation phase later this year when FY 2005 funds are
appropriated for participating agencies and Departments. If the
additional funds required for CSCSP are not provided in subsequent
years, however, CSCSP risks disrupting valuable mission-critical
program activities.
We believe it will be a missed opportunity if GAO chooses not to make
recommendations in this report. Objective reviewers can and should
assess the CSCSP's needed improvements before it seriously affects
participating agencies and their programs.
Our comments are grounded in our experience with the CSCSP program
planning process to date and are organized to address the critical
implementation issues we will face going forward with the program. A
number of issues stood out that concern the Department about the future
of CSCSP.
Implementation Issues:
* The Department suggests that the report should provide
recommendations for the implementation phase of the CSCSP. These
recommendations should establish sound business processes and
management controls to address transparency, ensure effective
management oversight, accurately present implementation costs and
address perceived discrepancies, and ensure the establishment of a
Board to address and resolve CSCSP implementation problems. We suggest
that GAO recommend:
- the formation of an oversight team comprised of members of customer,
stakeholder, and oversight authority agencies;
- the creation of a dispute resolution mechanism that defers to a
specific agency or body to resolve disagreements between the Bureau of
Overseas Building Operations (OBO) and customer agencies;
- the establishment of a mechanism that incorporates customer agency
feedback into strategic planning for CSCSP and embassy construction
projects; and:
- a methodology to determine per capita costs on an annual rather than
three-year basis.
* Regarding the GAO rationale for the OBO overseas staff counting
system (pages 7-9): OBO claims that alternative formulas are
complicated and require "fulltime staff" to administer and that its
chosen approach is simpler. In fact, OBO created an entire new office
to account for charges under its system and it has taken more than a
year to sort these numbers out. The OBO approach is not simple and it
takes a new bureaucracy to administer. Moreover, OBO in the past has
ignored the comments or concerns of the agencies for which they are
building space.
The agencies are required to contribute significant sums for a building
program in which they have minimal input regarding:
- which embassies/consulates will be built;
- in which order they will be built;
- what space they will occupy; and:
- if they will be able to occupy space in the building since the new
facilities will likely be too small because CSCSP charges encourage
agencies to "lowball" their estimates of future staff size.
The GAO report should recommend the establishment of a Board to address
and resolve CSCSP implementation problems and a clear Board charter to
explain how agencies would participate in this decision-making process.
These steps would help address the Department's key concerns, as stated
earlier, regarding transparency, effective oversight, and accurate
portrayal and determination of CSCSP implementation costs.
Cost and Accountability Issues:
* The administration has requested appropriations to cover the expected
CSCSP assessments. The report, however, should explain that if
inadequate appropriations are available to ITA and other agencies to
fund the new CSCSP requirements, then agencies such as ITA will be
forced to use operating funds to make up the difference. For ITA,
drawing on operating funds would immediately require dramatic overseas
staff reductions that will have a deleterious impact on ITA's overseas
mission and performance. Unpredictable and dramatic variation in
resource levels overseas is complex in many ways. For example, ITA's
U.S. and Foreign Commercial Service (US&FCS) has made extensive use of
foreign nationals to do its work overseas (including Foreign Service
Nationals (FSNs), Personal Service Contractors (PSCs) and Personal
Service Assistants, etc.) and these nationals make up 83 percent of
US&FCS's overseas presence. Terminating a foreign national can have a
substantial price tag because it may require significant severance
payments (possibly on the order of $200,000 for retirement alone,
depending on the laws of the country in question). Forced reductions in
overseas staffing may force the US&FCS to make cuts beyond those simply
necessary to achieve target staff level related reductions.
* The GAO report presents an inaccurate portrayal of the ability of
agencies to "game the system" and move to less costly embassies in
order to avoid CSCSP charges (page 11 of the report). In truth,
agencies cannot move positions into an embassy or consulate without the
Chief of Mission's (COM) approval and COMB are usually unwilling to
approve positions that are not entirely dedicated to their mission.
Agencies such as ITA's US&FCS need staff in certain locations to meet
demand and deliver their international services. US&FCS would not move
staff to another country just to save money. The only time the US&FCS
relocates staff is to meet client demand. For this reason, OBO should
incorporate a planning mechanism to address both program and cost
considerations that includes input from customers, stakeholders and
oversight authorities.
* The report refers to the interagency advisory group established by
OBO to resolve disputes and facilitate communication. GAO should
evaluate the level of accountability and the separation of duties for
this group. Because this advisory group does not include representation
of customer agencies, this group is not the proper forum for discussing
program issues and resolving disputes. As stated earlier, the
Department believes that OBO should work with non-State agencies to
ensure the establishment of a Board to address and resolve CSCSP
implementation problems and that a committee of that Board, comprised
of representatives of customer, stakeholder, and oversight authority
agencies, should serve as an oversight team to ensure effective and
transparent resolution of program issues and disputes. This Board could
address, for example, issues associated with both in-country and inter-
country program-related staff relocations and consider costs associated
with those shifts as well.
Technical and Miscellaneous Comments and Corrections:
The report contains a number of inconsistent and inaccurate figures in
relation to the Department of Commerce's costs associated with CSCSP.
These discrepancies need to be reconciled. Here are our data concerns:
Page 7 - The report indicates that, "In addition to the basic headcount
fees, agencies" annual charges would include amounts for their
proportionate share of ICASS support services." GAO should determine
from OBO the accuracy of this statement. The Department should be
provided an estimate of the amount of ICASS support services covered by
an agency's annual CSCSP charges.
Page 7 - The chart does not include the FY 2008 charge column.
Page 10 - The chart entitled "OBO Proposed Current Worldwide Headcount"
depicts the Commerce Department amount as $34.7 M. The latest (Spring
2003) full-cost projection from OBO lists the FY 2009 projected cost at
$40.2M, not including offsets.
Page 12 - If agencies pull out of CSCSP, remaining costs for the
Commerce Department will continue to increase. This is not an accepted
business practice but is the likely outcome because the basis of
billing is a position-based ratio approach.
Page 14 - It is important to note that of the 191 Commerce positions
eliminated as reported by GAO, only 23 were from "rightsizing." These
23 positions were not eliminated as a result of CSCSP, but rather
because of adjustments of scarce resources to meet overall needs. All
of the other eliminated positions were vacant and simply taken off the
books. Also, 14 misclassified Controlled Access Area (CAA) positions
were reclassified as Non-CAA positions; no one was physically moved. We
did not reassign staff to positions in the U.S. other than the routine
HQ rotation.
Page. 14 - The statement, "Department of Commerce reduced its fees by
more than $5 million" is incorrect. The "fees" to which GAO are
referring are actually the CSCSP bills (FY 2005 and FY 2006 combined).
The FY 2005 bill was $4.5M and was reduced to $11M - a savings of
$1.4M. The FY 2006 bill was increased from $13.6M to $14.1 M. The
Department believes that the FY 2006 bill should actually be
approximately $10.9M, based on previously agreed-upon rent offsets. We
are presently working out the difference with OBO.
Page 14 - There are concerns regarding the impact of decreased
headcount on total cost for ITA. Will per capita cost go up as
headcount goes down? We recommend that GAO address this issue in the
report.
The following are GAO's comments on the Department of Commerce's letter
dated October 14, 2004.
GAO Comments:
1. We did not assess the need for improvements in business processes
and management controls. If the program were to be enacted, there would
be time during the phase-in period to monitor these issues and address
other concerns that may arise.
2. We believe that agencies should request the appropriate funding in
their budget submissions and be prepared to make adjustments if funds
are not forthcoming. If funding is not provided, agencies may have to
reconsider the size of their overseas presence and/or adjust their
missions.
3. Our report discusses several cost-sharing formulas and some of their
advantages and disadvantages. We discuss agency views on the formulas,
and OBO stated that under some formulas agencies could "game the
system" to reduce their cost share.
4. We did not assess the mechanisms, including the interagency advisory
group, that could be used to implement the program, if Congress enacts
it. Therefore, we have taken no position on whether alternative
interagency mechanisms would be needed.
5. We did not include agencies' annual charges for embassy construction
attributable to ICASS support services in the table. However, under the
program, agencies will be expected to pay a share of the embassy
construction costs attributable to administrative support service
received under ICASS.
6. As noted, fiscal year 2008 data were not available.
7. The OBO data included offsets.
8. We agree that, if some agencies pull out of the proposed program,
the remaining agencies' cost-sharing charges may increase. However,
depending on the extent to which agencies consider the size of their
overseas presence, OBO's costs for constructing fewer and/or smaller
facilities may decrease and result in decreased costs to agencies.
9. We modified the text on page 15 and footnoted table 4 to reflect
these comments and attributed the information to the Department of
Commerce.
[End of section]
Appendix IV: Comments from the Department of Health and Human Services:
DEPARTMENT OF HEALTH & HUMAN SERVICES
Office of Inspector General:
OCT 12 2004:
Mr. Jess T. Ford:
Director, International Affairs and Trade:
United States Government Accountability Office:
Washington, D.C. 20548:
Dear Mr. Ford:
Enclosed are the Department's comments on your draft report entitled,
"Embassy Construction-Proposed Cost-Sharing Program Could Speed
Construction and Reduce Staff Levels but Some Agencies Have Concerns
(GAO-05-32). The comments represent the tentative position of the
Department and are subject to reevaluation when the final version of
this report is received.
The Department appreciates the opportunity to comment on this draft
report before its publication.
Sincerely,
Signed by:
Daniel R. Levinson:
Acting Inspector General:
Enclosure:
The Office of Inspector General (OIG) is transmitting the Department's
response to this draft report in our capacity as the Department's
designated focal point and coordinator for Government Accountability
Office reports. OIG has not conducted an independent assessment of
these comments and therefore expresses no opinion on them.
COMMENTS OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES ON THE U. S.
GOVERNMENT ACCOUNTABILITY OFFICE'S DRAFT REPORT, "EMBASSY
CONSTRUCTION-PROPOSED COST-SHARING PROGRAM COULD SPEED CONSTRUCTION
AND REDUCE STAFF LEVELS BUT SOME AGENCIES HAVE CONCERNS" (GAO-05-32):
The Department of Health and Human Services (HHS) appreciates the
opportunity to comment on the U.S. Government Accountability Office's
draft report. HHS understands and fully supports the requirement to
provide secure embassy and consulate space for U.S. Government
employees overseas. In addition, HHS fully understands and supports the
need to fund an equitable share of the cost of functional space
occupied by HHS employees. Nonetheless, HHS has numerous concerns
regarding the cost sharing-methodology proposed by the Department of
State.
HHS remains very concerned that, while the Department of State proposal
would require very substantial capital outlay by the funding agencies,
the agencies themselves would have little or no voice in the direction
of the Department of State's Bureau of Overseas Buildings Operations
(OBO) program. Under the current proposal, OBO would be able to adjust
charges, reallocate funds, and change the rules under which the program
operates without review or coordination with the funding agencies.
Charges could be assessed and ground rules implemented without notice
and without appropriate public or Congressional scrutiny. Additionally,
if allocation of room within buildings funded by the Capital Security
Cost-Sharing Program remains fully in the hands of the Department of
State, agencies cannot be assured equitable distribution of OBO-owned
space. For these reasons, HHS believes that a governing board
"comprising representatives from both the public and private sectors"
to oversee the daily operations would be in the interest of the funding
agencies and in keeping with findings of the Overseas Presence Advisory
Panel.
While the Department of State proposes the per capita charge for
"positions" overseas as a simple cost distribution method, it is far
from simple. The definition of a counted employee is nebulous, subject
to change and interpretation, and fails to take into consideration
widely varying space requirements of various types of positions.
Additionally, the head tax methodology fails to encourage Department of
State and other agencies to efficiently and economically use allocated
space in OBO facilities.
While disputes are inevitable, the OBO proposal provides no interagency
working level mechanism to resolve differences, such as the Washington-
based International Cooperative Administrative Support Services
(ICASS) Working Group that functions to resolve most ICASS policy
issues. HHS believes that such staff level coordination and consensus
building should be an integral part of the OBO program regardless of
the funding mechanism eventually enacted. Such a panel would also be in
line with the Overseas Presence Advisory Panel's proposals.
Finally, HHS remains unclear as to exactly what services Department of
State will provide to the funding agencies as a result of paying the
proposed charge.
With a more user-focused and user-involved approach, HHS believes
agencies can work together to support and manage cost sharing in a way
that reflects the intent of the President, the interest of
participating agencies, and, of course, the interests of the American
people.
The following is GAO's comment on the Department of Health and Human
Services' letter dated October 12, 2004.
GAO Comment:
1. We did not assess the mechanisms to be used to implement the
program, if Congress enacts it. Therefore, we have taken no position on
whether alternative interagency mechanisms would be needed.
[End of section]
Appendix V: Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20528:
October 13, 2004:
Jess T. Ford:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
RE: GAO 05-32: Embassy Construction-Proposed Cost Sharing Program Could
Speed Construction and Reduce Staff Levels but Some Agencies Have
Concerns (GAO Job Code 320257):
Dear Mr. Ford:
The Department of Homeland Security (DHS) appreciates the opportunity
to submit agency comments on the above-referenced draft report. The
Government Accountability Office (GAO) did not make any recommendations
with respect to various cost-sharing options discussed in the report
including the per-capita or "headcount" formula proposed by the
Department of State's (DOS) Bureau of Overseas Building Operations.
Nonetheless, as an agency, we would like to present some of our views
on the proposed Capital Security Cost-Sharing Program.
The concept of "rightsizing" does not necessarily mean downsizing. The
size of the agency's workforce should be based on its diplomatic
mission as mentioned on Page 2 of the draft report. There are no
industry metrics available with which to benchmark and compare the cost
of the program if the cost charging system proposed is adopted in order
to "rightsize" mission staff. Any DOS system that employs charges
devoid of common industry standard benchmarking procedures and
practices is not equitable for DHS or any other agency. Furthermore,
the seat count method also lends itself to double charges or billings
that would be difficult to detect for the member or occupying agencies
and Departments. DHS agrees that these charges may need to be revisited
to obtain a more equitable method for computing fees. Equally
important, the projected rates appear to exceed the industry standards
or GSA/Office of Management and Budget approved "return-on-investment"
pricing. This is particularly important for DHS because we have 750
staff positions that occupy an average of 225 usable square feet
deployed in foreign locations.
The study provided information but did not adequately address how the
proposed program would affect DHS as we interface with DOS. This is
compounded by the cost related questions. Consequently, the proposed
program is difficult to support. DHS acknowledges that DOS has a
critical need to secure $1.4 billion in upfront construction funding in
order to meet building facilities requirements at foreign locations. As
a result, even though the Capital Security Cost-Sharing Program has not
yet become law, DOS continues to move forward with its planning and
projected assessments. However, concerns raised herein should be
considered before further action is taken.
DHS also questions the equity of the proposed assessment when we are
paying additional costs for the design and construction of off-post,
overseas structures that we are using while at the same time we are
still being assessed for cost-sharing. Also, the draft report only
addresses embassy structures and does not discuss the critical need for
increased security associated with foreign housing and schools.
DHS agrees with the report in that further review and negotiations are
warranted in order to ensure equitable funding assessments, as well as
provide DOS with sufficient funding to proceed with critical
construction in the very near future.
We are available to discuss our response if you have any questions.
Sincerely,
Signed by Michael M. Poland for:
Anna Dixon:
Director, Departmental GAO/OIG Liaison Office:
The following are GAO's comments on the Department of Homeland
Security's letter dated October 13, 2004.
GAO Comments:
1. We agree that the proposed program could impact agencies' missions
if funding decisions result in reductions of overseas staff positions.
However, as we discuss in the report, the concept of cost sharing
encourages all agencies to seriously consider their overall program
mission and the costs of having staff overseas. We believe that
agencies should request the appropriate funding in their budget
submissions and be prepared to make adjustments if funds are not
forthcoming. If funding is not provided, agencies may have to
reconsider the size of their overseas presence and/or adjust their
missions.
2. Security issues associated with foreign housing and schools were not
in the scope of our work.
[End of section]
Appendix VI: Comments from the Department of Justice:
U.S. Department of Justice:
Washington, D.C. 20530:
October 12, 2004:
Laurie E. Ekstrand:
Director, Homeland Security and Justice:
Government Accountability Office:
Washington, D.C. 20548:
RE: GAO Draft Audit Report No. GAO-05-32 (Review No. 320257):
Dear Ms. Ekstrand:
The Department of Justice (Department) completed its review of the
final draft of the above referenced Government Accountability Office's
(GAO) draft report entitled EMBASSY CONSTRUCTION: Proposed Cost-Sharing
Program Could Speed Construction and Reduce Staff Levels but Some
Agencies Have Concerns. This letter transmits the Department's formal
comments to be published in the final GAO report.
GAO reports that the proposed cost sharing formula could result in
funds to accelerate embassy construction and encourage agency right-
sizing of overseas staff levels. The Department has concerns related to
both agency funds necessary to support cost sharing and potential
rightsizing of its personnel without regard to mission requirements.
Additionally, the proposed Capital Security Cost Sharing (CSCS )
Program lacks transparency and accountability of costs and spending
controls. These concerns are aggravated by the absence of an
interagency governing board to resolve issues. As proposed, arbitration
for interagency disputes is reserved for the Office of Management and
Budget with no mechanism of de-confliction at lower levels.
The GAO report accurately captures many of the concerns for non-
Department of State (DOS) agencies, particularly those related to the
CSCS methodology; however, some concerns noted in the report do not
fully explain the impact on the operations of the Department or other
affected agencies. For example, the Department is requesting funds to
cover CSCS Program costs in fiscal year 2006, but the provision of
these funds is uncertain. There is no mechanism to ensure that agencies
are funded at the proper level to account for unexpected cost increases
of the CSCS Program. The Department and other agencies are unable to
adequately plan for and manage future CSCS Program costs, and there are
no procedures in place to coordinate increased CSCS Program
reimbursable costs through the Department's budget process. Most
importantly, the report does not address the possibility that agencies
will not receive funding increases required to meet CSCS Program costs
and the impact of this lack of funding on the entire CSCS Program
concept.
The report mentions in its conclusion that "if enacted and funded" the
CSCS Program could accelerate embassy construction, but the report
fails to consider challenges such as cost increases to construction
contracts. These additional costs will be passed on to non-DOS agencies
involved in the CSCS Program, even though these agencies have no
opportunity for oversight to minimize the additional costs.
The report concludes that the CSCS Program has led to agency decisions
to reduce staff overseas; however, it does not discuss how this trend
will impact those agencies that are already "right-sized" and must
continue to operate overseas, or law enforcement agencies that are
being expanded overseas due to mission requirements. Staffing cutbacks
overseas may be contrary to the United States' Mission and the mission
of affected agencies. Without continued supplemental funding to support
CSCS Program costs, the cost may be too prohibitive to support some
international mission stations with a permanent overseas presence, even
though mission needs the presence.
The Department appreciates the opportunity to provide comments for
inclusion in the GAO's final audit report. Your staff may contact
either Richard Theis, Acting Director, or Vicky Caponiti, Audit Liaison
Office, on 202-514-0469.
Sincerely,
Signed by:
Paul R. Corts:
Assistant Attorney General for Administration:
cc:
DEA - Sheldon Shoemaker:
FBI - Cheryl Johnston:
JMD - Andrea Nicholson:
The following are GAO's comments on the Department of Justice's letter
dated October 12, 2004.
GAO Comments:
1. We did not assess the need for improvements in business processes
and management controls, such as transparency and accountability of
costs and spending controls. If the program were to be enacted, there
would be time during the phase-in period to monitor these issues and
address other concerns that may arise.
2. We agree that the proposed program could impact agencies' missions
if funding decisions result in reductions of overseas staff positions.
However, as we discuss in the report, the concept of cost sharing
encourages all agencies to seriously consider their overall program
mission and the costs of having staff overseas. We believe that
agencies should request the appropriate funding in their budget
submissions and be prepared to make adjustments if funds are not
forthcoming. If funding is not provided, agencies may have to
reconsider the size of their overseas presence and/or adjust their
missions.
[End of section]
Appendix VII: Comments from the Library of Congress:
THE LIBRARY OF CONGRESS:
101 INDEPENDENCE AVENUE, S.E.:
WASHINGTON, D.C. 20540-9100:
OFFICE OF THE CHIEF FINANCIAL OFFICER:
October 12, 2004:
Dear Mr. Brummet:
Enclosed are the Library's comments on the draft report entitled:
Embassy Construction: Proposed Cost-Sharing Program Could Speed
Construction and Reduce Staff levels but Some Agencies Have Concerns
(GAO-05-32).
If you have any follow-up questions, please call Kathy Murphy on (202)
707-0634. We appreciate the opportunity to review and comment on this
very important issue.
Sincerely,
Signed by:
John Webster:
Chief Financial Officer:
Enclosure:
Mr. John Brummet:
Assistant Director:
Government Accountability Office:
Washington, DC 20548:
October 12, 2004:
Library of Congress Comments on GAO's Draft Report On Embassy
Construction (GAO-05-32):
The Library of Congress has reviewed the Government Accountability
Office's draft report on Embassy Construction and has the following
comments:
The Library recommends that GAO discuss and provide an opinion as to
whether the fee calculation methodology used by the Department of State
(DOS) meets the cost accounting standards of the federal government.
The Library does not believe that the State Department fee calculation
methodology charges the Library for services received. Instead, the
methodology produces a "head tax" that is levied on all overseas
personnel without regard to services provided.
Further, the DOS methodology is structured to raise capital to build
buildings, not to allocate costs. The Library recommends that GAO
evaluate this approach. Are there other examples where the construction
program of one department is funded by other departments? An analogy of
this program is asking someone who wants to rent an apartment, to help
pay for the construction of the apartment building and possibly other
apartment buildings in other cities - in advance of moving into the
apartment - not knowing if they will still want the apartment when the
construction is completed.
The reason given for using the "head tax" approach in allocating costs
is that DOS would have to exert too much staff time and effort to
capture and monitor data needed to allocate costs on actual services
provided. Many departments do not have adequate staff to perform
mission-related work, yet accomplish the work anyway. Because the
building of embassies is a mission critical goal of the State
Department and because accelerating construction is now a top priority,
the Library believes that DOS should provide the additional staff
needed to implement this program and in a fair and equitable fashion.
GAO's stamp of approval on this process could lead to other such
schemes by agencies. For example would GSA be allowed to allocate space
by "head tax" so that they can reduce their staff, who keep track of
actual space and services provided? Would other departments be allowed
to escape accountability requirements just because it is too much
effort to do the accounting in accordance with the standards?
Second question is what is the purpose of this program - to build safe
embassies for Americans or to reduce the number of Americans overseas?
If the Office of Management and Budget (OMB) and the Administration
want to reduce overseas staff, a directive or management initiative to
cut staff over a period of time is more appropriate and should precede
the building of facilities not follow. Any reduction in staff would
change the amount of funds collected to support building facilities.
In addition, the Department of Defense (DOD) has a provision (Sec.
8067) in its FY 2005 appropriations bill (P.L. 108-287) that greatly
reduces or eliminates the amount of funds that DOD will pay for this
program. The Library recommends that GAO analyze the impact of fewer
overseas employees and reduced DOD payments on the DOS methodology.
Should the DOS methodology be changed in light of the DOD provision and
potential reduction in overseas staff?
A recent exercise conducted by OMB had each agency provide data on its
overseas budgets to calculate the cost per American FTE. While all
personnel costs were limited to number of American hires, the support
costs (per OMB's guidance) included the total cost to run an overseas
office. For the Library of Congress, total costs support 222
individuals, of which only 7 are Americans. Therefore, by dividing the
total support costs by 7 (vs. the 222), the average direct hire FTE
cost is grossly overstated. We assume this would be true for all other
offices/departments too.
Even the term "rightsizing" implies that agencies have assigned wrong
or unnecessarily large numbers of employees overseas. With regard to
LOC, the number of staff overseas and at each of its offices has
remained stable for decades. The LOC did its "rightsizing" in the
seventies, when it closed a number of offices, deemed no longer
necessary or cost-effective. The LOC only has 7 Americans in six
offices covering 75 countries on three continent that are supported by
195 LES direct hires. The number of Library staff (Americans or LES)
overseas cannot be reduced without damaging the mission of our offices,
and the services we provide to the Congress and 85 American
Universities.
The following are GAO's comments on the Library of Congress letter
dated October 12, 2004.
GAO Comments:
1. We were not asked to express an opinion on whether the cost
accounting standards of the federal government apply to the capital
cost-sharing program. However, we did note that State and non-State
agencies disagree on whether there is a link between the amounts to be
paid and the benefits received.
2. The administration proposed the Capital Security Cost-Sharing
Program to fund the accelerated construction of secure new embassies
and consulates worldwide and to ensure that agencies rightsize the
number of staff needed to accomplish their overseas missions. Our
analysis shows that, depending on the formula used, cost-sharing
amounts would vary considerably, with some agencies benefiting at the
expense of others. While we take no position on which formula should be
used, some type of cost-sharing mechanism could provide a disciplined
approach to the staffing projection and rightsizing processes and
accelerate the capital construction program:
3. We have taken no position on which cost-sharing formula, including
the "head-tax" approach (which we refer to as the head-count approach),
should be used. We also did not assess the need for improvements in
business processes and management controls, such as determining the
number of staff required. We acknowledge that some agencies have
concerns about potential risks if the program is enacted. However, we
concluded that some type of cost-sharing program would achieve
important goals, such as accelerating the construction of new secure
facilities. In addition, requiring agencies to pay a share of embassy
construction costs would also encourage them to consider the full cost
of their overseas presence and to determine the number of people they
need to meet critical overseas missions.
4. The administration proposed the Capital Security Cost-Sharing
Program to fund the accelerated construction of secure new embassies
and consulates worldwide and to ensure that agencies rightsize the
number of staff needed to accomplish their overseas missions.
5. We agree that, if some agencies pull out of the proposed program,
the remaining agencies' cost-sharing charges may increase. However,
depending on the extent to which agencies consider the size of their
overseas presence, OBO's costs for constructing fewer and/or smaller
facilities may decrease and result in decreased costs to agencies.
Congress will decide whether or not the Department of Defense will
participate in the cost-sharing program.
6. The proposed program is intended to capture the full costs, not only
support costs, to agencies for staff in overseas locations, including
construction of new embassy compounds. While we recognize that the
Library currently has staff located outside embassy compounds, with the
1999 enactment of the Secure Embassy and Counterterrorism Act, all
staff are required to be colocated onsite at locations where new
embassies are built.
7. We recognize that the Library has only seven Americans in six
offices. Our report does not suggest that the Library is not
rightsized. However, the Library and other agencies should request the
appropriate funding in their budget submissions and be prepared to make
adjustments if funds are not forthcoming.
[End of section]
Appendix VIII: Comments from the Department of State:
United States Department of State:
Assistant Secretary and Chief Financial Officer:
Washington, D. C. 20520:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548-0001:
OCT 7 2004:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, "EMBASSY
CONSTRUCTION: Proposed Cost-Sharing Program Could Speed Construction
and Reduce Staff Levels but Some Agencies have Concerns," GAO Job Code
320257.
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, Bureau of Overseas Building Operations, at
(703) 875-5748.
Sincerely,
Signed by:
Christopher B. Burnham:
cc: GAO - John Brummet:
OBO - Charles Williams:
State/OIG - Mark Duda:
Department of State Comments on GAO Draft Report EMBASSY CONSTRUCTION:
Proposed Cost-Sharing Program Could Speed Construction and Reduce Staff
Levels but Some Agencies Have Concerns (GAO 05-32, Job Code 320257):
Introduction:
The Department of State appreciates the opportunity to review and
comment on the GAO Draft Report, "EMBASSY CONSTRUCTION: Proposed Cost-
Sharing Program Could Speed Construction and Reduce Staff Levels but
Some Agencies Have Concerns." We believe the report overall is a fair
and accurate representation of the issue. However, the Department
offers the following observations.
Cost Sharing is an Administration Initiative:
GAO should make it clearer that the Capital Security Cost-Sharing
(CSCS) Program is an Administration initiative and that OMB played a
leading role in developing it. Two suggestions to accomplish this:
* Insert the word "Administration's" in the first sentence of the one
page Highlights (i.e., "What GAO Found"), so it reads: "The
Administration's proposed Capital Security Cost-Sharing Program has
been developed to accelerate...." (GAO already does this in the "Why
GAO Did This Study" box on the left.)
* In the cover letter to Rep. Shays, 2nd paragraph, I" sentence,
replace "State Department's" with "Administration's" so it starts:
"This report describes (1) the Administration's rationale for and
development of...."
Emphasize that CSCS is Working as a Rightsizing Tool:
GAO should emphasize that, as a rightsizing tool, CSCS is already
working. Suggestion to accomplish this:
* Reorder the three points of the report so that rightsizing is second
rather than third:
- The Administration's rationale for/development of CSCS.
- CSCS's influence on agencies' staffing decisions.
- Other agencies' concerns about the program.
(This also makes more sense in terms of listing the items in a priority
order, grouping aspects of the overall program rationale.):
Shifting the Risk of Overbuilding:
GAO should point out that without per capita cost sharing, only the
State Department bears the burden of overbuilding as a result of
agencies' imprecise or fluctuating staffing projections. Suggestion to
accomplish this: * Add a sentence to the Highlights, "What GAO Found,"
end of second full paragraph; also p. 2, end of the first full
paragraph.
"Without per capita cost sharing, the risk of overbuilding space based
on other agencies' imprecise or fluctuating staffing projections
remains a burden solely borne by State, instead of the tenant in
question."
CSCS Program_ has a 5-Year Phase-in Period:
The report refers to the phase-in period for cost sharing as a 4-year
period (Highlights page, p. 5, and p. 13). The Department and OMB have
typically described the phase-in as a 5-year period, with 100 percent
of the contribution being assessed in the fifth year. The Department
would prefer to use the term "5-year phase-in period" to be consistent
with materials that have been widely distributed to other agencies, in
order to prevent confusion. If the term "4-year" phase-in is used,
agencies might think that the program has been changed, when it has
not.
Agencies are Mandated by Law to Collocate:
Paragraph regarding the Library of Congress (LOC) at bottom of p. 10,
top of p. 11: While LOC's rent costs for leased space outside the
embassy compound may be less expensive than their cost-sharing amount
for space within an embassy compound, collocation of overseas agencies
within the embassy compound is mandated by law (Secure Embassy
Construction and Counterterrorism Act of 1999). Although GAO mentions
this earlier in the report, GAO may wish to also note this legislative
requirement in the report discussion of LOC.
Other Comments:
1. We are pleased to see that GAO again includes its rightsizing
definition (footnote #4 on p. 2) - and now also says "The Department of
State" agrees with the definition.
2. On pages 4 and 9 GAO states we have embassies and consulates in 251
locations worldwide. The Department has 263 embassies, consulates,
missions, American presence posts, and branch offices worldwide.
3. p. 8 - footnote no. 12: GAO may wish to explain the nature and
function of the Industry Advisory Panel in this footnote, since it is
mentioned in the same report sentence. The description from OBO's
public website is as follows: The Industry Advisory Panel (IAP) is a
panel of experts who provide strategic industry insights to OBO, on a
variety of issues. The IAP, a chartered Federal advisory committee,
provides input on the latest innovations in the commercial world
combining best practices, streamlined processes, and proven cost
effective methods.
The following are GAO's comments on the Department of State's letter
dated October 7, 2004.
GAO Comments:
1. We modified the text in the Highlights and cover letter to reflect
these comments.
2. We organized the report as we did because the influence of the
proposed program on agencies' overseas staffing-level decisions is
uncertain.
3. We modified the text in the Highlights to reflect this comment and
attributed the additional comment to OBO.
4. We modified the text in the Highlights and on pages 5 and 13 to
reflect State's phase-in period.
5. We modified the text on pages 10 and 11 to reflect these comments.
6. We added a footnote on page 4 to clarify the number of overseas
locations.
7. We added a footnote on page 8 to explain the role of the OPAP.
[End of section]
Appendix IX: Comments from the Department of the Treasury:
DEPARTMENT OF THE TREASURY:
WASHINGTON, D.C. 20220:
October 12, 2004:
Jess T. Ford:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Ford:
I am pleased to provide the following comments to the Government
Accountability Office's (GAO) draft report entitled "EMBASSY
CONSTRUCTION: Proposed Cost Sharing Program Could Speed Construction
and Reduce Staff Levels but Some Agencies Have Concerns (GAO-05-32)" of
October 2004:
The GAO report adequately states the need for a feasible cost sharing
approach to fund the construction of secure new embassies and
consulates worldwide. However, to ensure the most efficient and
equitable distribution of costs, it is important to employ the most
appropriate cost-sharing formula (currently, per capita) that is
beneficial to the majority of agencies having an overseas presence.
Also, it is important that agencies receive the sufficient level of
funding (e.g., appropriations) to achieve accelerated embassy
construction.
Lastly, other concerns (such as, mission requirements, economic
situations and associated factors) warrant consideration in addition to
costs in promoting and implementing an overseas program that will be
effective in meeting the President's Management Agenda.
Please feel free to call me at (202) 622-0500 if you have questions.
Signed by:
Carolyn Austin-Diggs:
Director, Office of Asset Management:
[End of section]
Appendix X: Comments from the U.S. Agency for International
Development:
U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT:
OCT 8 2004:
Jess T. Ford:
Director:
International Affairs and Trade:
U.S. General Accounting Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Ford:
I am pleased to provide the U.S. Agency for International Development's
(USAID) response on the draft GAO report entitled Embassy Construction:
Proposed Program Could Speed Construction and Reduce Staff Levels but
Some Agencies Have Concerns (GAO-OS-32).
USAID is generally satisfied with the design of the Capital Security
Cost-Sharing Program and the proposed implementation schedule. However,
we do have some issues that we would like to comment on. We will
reference page number, paragraph heading and paragraph number for each
item that we address.
Page two, "Results in Brief', paragraph two states: "Non-State
officials are also concerned about how potential disputes would be
resolved, such as deciding which agencies' staff would be required to
find office space outside the embassy compound if increased staff
levels result in a shortage of office space within the compound."
USAID's Comment - The Secure Embassy and Counterterrorism Act of 1999
requires that all foreign affairs agencies be located on new embassy
compounds. Rising global construction costs are a major consideration
and require accurate planning in order to maximize limited resources.
However, we are concerned that building designs with limited
flexibility for expansion are shortsighted. This concern relates to a
statement on page eleven, titled "Agencies Have Other Concerns about
the Program", in which paragraph two states: "OBO officials added that,
in planning embassy size, a certain amount of contingency, or spillover
space in anticipation of staff increases can be incorporated into the
plan." OBO incorporates an insufficient growth rate, in most cases a
mere five percent, into New Embassy Construction Projects (NEC). This
is not sufficient for an Agency such as USAID in which program staff
levels increase relative to an immediate programmatic need. A number of
NEC projects are filled to capacity before they are completed. In one
case, USAID program staff levels in Zagreb rose from 27 to 34, or 13%.
USAID was limited to the space already allocated, forcing USAID to
reduce staff cubicle size. Although USAID is considering regional
platforms and other methods to minimize staff levels, current space
planning in NECs offers little flexibility in terms of growth. If this
inflexibility continues, few options exist other than managing from
afar or leasing an off-compound facility that would afford staff with
the same protection as the NEC. This would defeat the goal of the NEC
concept. An increased growth factor would certainly give the USG more
flexibility while affording the same level of protection to all mission
staff.
Page six and seven, "Proposed Cost Sharing Is Based on a World wide
Headcount Formula", 2NDparagraph states: "In addition to the basic
headcount fees, agencies' annual charges would include amounts for
their proportionate share of ICASS support services." USAID's Comment -
This issue requires further discussion. ICASS costs will rise
considerably at each NEC location unless proper accountability and cost
containment controls are introduced.
Lastly, a formal process should be developed for non-State agencies in
which specific security and programmatic concerns are considered
regarding the prioritization for the construction of NEC locations.
USAID has a number of locations with sizable staff that are in insecure
facilities with no immediate solution for improvement available. For
example, the USAID office in Addis Ababa remains a major security
vulnerability. Our efforts to advance specific locations in the NEC
process have been unsuccessful to date.
Thank you for the opportunity to respond to the GAO draft report and
for the courtesies extended by your staff in the conduct of this
review.
Sincerely,
Signed by:
John Marshall:
Assistant Administrator Bureau for Management:
The following are GAO's comments on the U.S. Agency for International
Development's letter dated October 8, 2004.
GAO Comments:
1. Issues involving State's planning for the size of new embassies were
not in the scope of our review. Our recent reports on this issue
include Embassy Construction: Process for Determining Staffing
Requirements Needs Improvement,
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-411] (Washington,
D.C.: Apr. 7, 2003) and Embassy Construction: State Department Has
Implemented Management Reforms, but Challenges Remain,
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-100] (Washington,
D.C.: Nov. 4, 2003).
2. We did not include agencies' annual charges for embassy construction
attributable to ICASS support services in the table. However, under the
program, agencies would be expected to pay a share of the embassy
construction costs attributable to administrative support service
received under ICASS.
3. State's prioritization for building new embassy compounds was not
included in the scope of our review. See Embassy Construction: State
Department Has Implemented Management Reforms, but Challenges Remain,
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-100] (Washington,
D.C.: Nov. 4, 2003), for a discussion of these issues.
(320257):
FOOTNOTES
[1] See H.R. 4754, Sec. 625, Departments of Commerce, Justice, and
State, the Judiciary and Related Agencies Appropriations Act, 2005.
[2] The U.S. Agency for International Development (USAID) has also
funded the construction of some overseas facilities. For additional
information, see GAO, Embassy Construction: Achieving Concurrent
Construction Would Help Reduce Costs and Meet Security Goals, GAO-04-
952 (Washington, D.C.: Sept. 28, 2004).
[3] Office of Management and Budget, The President's Management Agenda,
Fiscal Year 2002 (Washington, D.C.: Aug. 2001).
[4] For our purposes, we define rightsizing as aligning the number and
location of staff assigned overseas with foreign policy priorities,
security, and other constraints. State agrees with this definition.
Rightsizing may result in the addition or reduction of staff, a change
in the mix of staff at a given embassy or consulate, or a change in
embassy construction plans. The goal of rightsizing is consistent with
our framework for determining overseas staffing levels, which
encourages each agency to consider security, mission, and cost trade-
offs in adjusting overseas staffing levels. For further information on
overseas staffing issues, see GAO, Overseas Presence: Framework for
Assessing Embassy Staff Levels Can Support Rightsizing Initiatives,
GAO-02-780 (Washington, D.C.: July 26, 2002); Overseas Presence:
Rightsizing Framework Can Be Applied at U.S. Diplomatic Posts in
Developing Countries, GAO-03-396 (Washington, D.C.: Apr. 7, 2003); and
Embassy Construction: Process for Determining Staffing Requirements
Needs Improvement, GAO-03-411 (Washington, D.C.: Apr. 7, 2003).
[5] GAO, Overseas Presence: Framework For Assessing Embassy Staff
Levels Can Support Rightsizing Initiatives, GAO-02-780 (Washington,
D.C.: July 26, 2002).
[6] U.S. Department of State, America's Overseas Presence in the 21ST
Century, The Report of the Overseas Presence Advisory Panel
(Washington, D.C.: Nov. 1999).
[7] Recognizing the absence of cost sharing among agencies at overseas
facilities, the OPAP recommended establishing a government corporation
that would be authorized to collect rental revenue from agencies for
current operating and maintenance costs. The recommendation was never
implemented.
[8] 22 U.S.C. § 4865 requires the Secretary of State, in selecting
sites for new U.S. diplomatic facilities abroad, to ensure that all
U.S. personnel under chief of mission authority be located onsite.
However, the Secretary of State may waive this requirement if the
Secretary, together with the heads of those agencies with personnel who
would be located off-site, determines that security considerations
permit an off-site location and that it is in the U.S. national
interest.
[9] GAO, Overseas Presence: Conditions of Overseas Diplomatic
Facilities, GAO-03-557T (Washington, D.C.: Mar. 20, 2003).
[10] GAO, Embassy Construction: State Department Has Implemented
Management Reforms, but Challenges Remain, GAO-04-100 (Washington,
D.C.: Nov. 4, 2003).
[11] According to State, there are an additional 12 missions, American
presence posts, and branch offices worldwide where there is no chief of
mission.
[12] State support staff provide services under the International
Cooperative Administrative Support Services (ICASS) program.
[13] Acceleration of construction depends on agencies' either receiving
increased appropriations or reallocating funds from other activities.
[14] Under the proposed program, the cost-sharing fee for each type of
position is as follows: (1) chief-of-mission area at $209,034 per
position, (2) controlled access area at $59,318 per position, (3)
noncontrolled access area at $28,144 per position, and (4) nonoffice
area at $4,940 per position.
[15] According to OBO, the IAP is a chartered federal advisory
committee consisting of a panel of experts who provide strategic
industry insights to OBO on a variety of issues, including the latest
innovations in the commercial world combining best practices,
streamlined processes, and proven cost-effective methods.
[16] According to OBO officials, neither method resulted in the full
$1.4 billion needed to achieve annual program goals through fiscal year
2018.
[17] In addition to reducing staff positions, one agency has also
announced plans to completely withdraw all staff at some overseas
locations.
[18] We previously reported that unfilled positions should be
eliminated to improve the process of planning and constructing new
embassies. See GAO, Embassy Construction: Process for Determining
Staffing Requirements Needs Improvement, GAO-03-411 (Washington, D.C.:
Apr. 7, 2003).
[19] GAO, Embassy Management: Actions Are Needed to Increase Efficiency
and Improve Delivery of Administrative Support Services, GAO-04-511
(Washington, D.C.: Sept. 7, 2004).
[20] GAO, Overseas Presence: Framework for Assessing Embassy Staff
Levels Can Support Rightsizing Initiatives, GAO-02-780 (Washington,
D.C.: July 26, 2002) and Overseas Presence: Rightsizing Framework Can
Be Applied at U.S. Diplomatic Posts in Developing Countries, GAO-03-396
(Washington, D.C.: Apr. 7, 2003).
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