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Report to Congressional Requesters:

United States Government Accountability Office:

GAO:

July 2004:

Military Operations:

DOD's Extensive Use of Logistics Support Contracts Requires 
Strengthened Oversight:

GAO-04-854:

GAO Highlights:

Highlights of GAO-04-854, a report to the Ranking Minority Member, 
House Committee on Government Reform, and the Ranking Minority Member, 
House Committee on Energy and Commerce: 

Why GAO Did This Study:

In its contingency operations since the early 1990s, the Department of 
Defense (DOD) has relied extensively on logistics support contractors 
to provide many of the supplies and services needed by deployed U.S. 
forces. As requested, GAO assessed DODs planning in its use of 
logistics support contracts in contingency operations; determined 
whether DOD has had contract oversight processes that are adequate to 
ensure that quality services were provided in an economical and 
efficient manner; and assessed the extent to which DOD provided trained 
personnel qualified to oversee its contractors. GAO focused its efforts 
on four logistics support contracts chosen because of their size and 
chosen to represent more than one military servicethe Armys Logistics 
Civil Augmentation Program (LOGCAP) and Balkans Support Contract, the 
Navys Construction Capabilities Augmentation Program, and the Air 
Forces Contract Augmentation Program.

What GAO Found:

The effectiveness of DODs planning to use the logistics support 
contracts during contingency operations varies widely between the 
commands that use them and the contracts themselves. In many cases, 
planning was done effectively, in close coordination with the 
respective contractors. For LOGCAP, however, the Army Central Command 
did not develop plans to use the contract to support its military 
forces in Iraq until May 2003, even though Armys LOGCAP guidance calls 
for early planning and early involvement of the contractor. Those 
plans, moreover, have undergone numerous changes since that initial 
planning. In Kuwait, as well, the Army has made frequent changes in 
its use of LOGCAP.

DODs contract oversight processes were generally good, although there 
is room for improvement. DOD customers have not always ensured that 
contractors provide services in an economic and efficient manner, 
although they have a responsibility to do so. We have found that when 
the customer reviews the contractors work for economy and efficiency, 
savings are realized, as illustrated in the table below. Under the 
LOGCAP contract, months-long delays in definitizing contract task 
orders have frequently undermined the contractors cost-control 
incentives, and the absence of an Army award fee board to 
comprehensively evaluate the contractors performance has further 
limited DODs oversight.

Savings Reported through DODs Review of Contract Activities

[See PDF for image]

[End of table]

DOD did not have sufficient numbers of trained personnel in place to 
provide effective oversight of its logistics support contractors. The 
Army has deployed units responsible for supporting the LOGCAP contract, 
but some of the personnel have little knowledge of the contract. The 
Air Force did not consistently train evaluators to monitor its 
logistics support contractors performance. Military units across the 
services receiving contractor support have lacked a comprehensive 
understanding of their roles and responsibilities, which include 
establishing the work to be done by contractors and monitoring 
contractors performance.

What GAO Recommends:

GAO is making a number of recommendations to the Secretary of Defense 
to improve planning, establish procedures to assure that the 
contractors are performing as economically and efficiently as possible, 
and develop training programs for personnel responsible for using and 
managing logistics support contracts. DOD agreed with the report and 
all its recommendations.

www.gao.gov/cgi-bin/getrpt?GAO 04-854.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Neal Curtin, 
757-552-8100, curtinn@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

Planning for the Use of Contractor Support Varied Widely:

Contract Oversight Processes Were Generally Good but Not Always 
Properly Implemented:

The Military Services' Efforts to Ensure That Contractors Perform in an 
Economical, Efficient, and Cost Conscious Manner Vary Widely:

DOD Did Not Always Have Enough Personnel to Manage Its Logistics 
Support Contracts, and Available Personnel Often Lack the Training to 
Effectively Use and Monitor the Contract:

Conclusions:

Recommendations for Executive Action:

Agency Comments and our Evaluation:

Appendix I: Scope and Methodology:

Appendix II: Comments from the Department of Defense:

Appendix III: Comments from Readiness Management Support L.C.

Appendix IV: GAO Contact and Staff Acknowledgments:

Tables:

Table 1: Contract Information on Logistics Support Contracts:

Table 2: Key Contract Management Roles and Responsibilities:

Table 3: Information on the 10 Oldest Undefinitized LOGCAP Task Orders:

Figures:

Figure 1: Selected Countries and Possessions Where AFCAP, CONCAP, 
LOGCAP, and BSC Are Being Used As of May 2004:

Figure 2: Iraq In Relationship to the United States:

Figure 3: Some Factors That Can Influence Costs of Logistics Support 
Contracts:

Figure 4: Overview of the Task Order Process:

Abbreviations:

AFCAP: Air Force Contract Augmentation Program: 
BSC: (U.S. Army, Europe) Balkans Support Contract: 
CJTF: Combined Joint Task Force: 
CONCAP: (Navy) Construction Capabilities Contract: 
DCMA: Defense Contract Management Agency: 
DOD: Department of Defense: 
GAO: Government Accountability Office: 
LOGCAP: (Army) Logistics Civil Augmentation Program:

United States Government Accountability Office:

Washington, DC 20548:

July 19, 2004:

The Honorable Henry A. Waxman: 
Ranking Minority Member: 
Committee on Government Reform: 
House of Representatives:

The Honorable John D. Dingell: 
Ranking Minority Member: 
Committee on Energy and Commerce: 
House of Representatives:

The U.S. military has long used contractors to provide supplies and 
services to deployed U.S. forces. Since the early 1990s, much of this 
support has come from logistics support contracts--contracts that are 
awarded prior to the beginning of contingencies and are available to 
support the troops as needed. These contracts are currently being used 
by the services in more than half a dozen countries, including Iraq, to 
provide a wide array of support, such as food service and housing. The 
contract support in Iraq is the largest effort in the history of such 
contracts. While these contracts provide vital services, they are 
expensive. The estimated value of the work under the current contracts 
we examined is $12 billion, including $5.6 billion for work in Iraq as 
of May 2004. Some of the factors that affect costs are (1) the 
requirements that must be met from food service to housing, to name 
just a few; (2) the conditions under which the services must be 
provided, such as the security situation in Iraq; and (3) the adequacy 
of government oversight.

You asked us to (1) assess the effectiveness of the Department of 
Defense's (DOD) planning for the use of logistics support contracts in 
contingency operations; (2) assess the adequacy of DOD's contract 
oversight processes; (3) determine if the contracts are being used in 
an economical, efficient, and cost-conscience manner; and (4) assess 
the extent to which DOD had qualified personnel in place with the 
training and skills necessary to provide effective contract oversight. 
As discussed with your offices, we focused our efforts on four 
contracts: (1) the Army Logistics Civil Augmentation Program (LOGCAP) 
Contract; (2) the Air Force Contract Augmentation Program (AFCAP) 
Contract; (3) the U.S. Army, Europe, Balkans Support Contract (BSC); 
and (4) the Navy Construction Capabilities (CONCAP) Contract. The 
Army's LOGCAP contract is by far the largest of these contracts. The 
contractors for these contracts and the military services have, for the 
most part, worked together to meet the customers' needs in sometimes 
hazardous or difficult circumstances.

In conducting our work, we examined a wide range of contract documents 
and contracting guidance and met with contracting officers; contract 
customers; and the contractors to gain a comprehensive understanding of 
the contracts, the contract management process, and issues related to 
using the contracts. We visited U.S. military sites using the LOGCAP, 
CONCAP, and AFCAP contracts, including sites in Kuwait and Qatar, but 
did not visit sites in Iraq. However, to obtain information about the 
use of LOGCAP in Iraq, we interviewed personnel who were responsible 
for contract management in Iraq, reviewed Defense Contract Management 
Agency (DCMA) situation reports written by contracting officers in 
Iraq, and met with representatives of the 101st Airborne Division 
shortly after their return from Iraq to discuss their experiences with 
the LOGCAP contract. In addition, because we visited the Balkans during 
our previous reviews of the Balkans Support Contract, we did not visit 
the Balkans during this review but did meet with Army personnel in 
Germany administering the contract. We determined that the information 
and data discussed in this report were reliable for the purpose of the 
report. We conducted our review from August 2003 through June 2004 in 
accordance with generally accepted government auditing standards. We 
discuss our scope and methodology in more detail in appendix I.

Results in Brief:

The effectiveness of DOD's planning for the use of logistics support 
contracts in contingency operations varied widely between the commands 
that use the contracts. U.S. Army, Europe, followed LOGCAP guidance 
when it used the contractor to help develop its plans to support the 
anticipated movement of troops through Turkey into Iraq. Planning for 
the use of the Army's BSC, the Navy's CONCAP contract, and the Air 
Force's AFCAP contract was generally successful and involved the 
contractor in the early phases of planning. On the other hand, the Army 
Central Command did not follow guidance when planning for Operation 
Iraqi Freedom. The plan to support its military forces in Iraq was 
developed in May 2003 even though Army guidance recommends that a 
comprehensive statement of work be developed during the early phases of 
contingency planning. Additionally, even as it became clear that U.S. 
forces would remain in Iraq longer than originally anticipated, LOGCAP 
planning was still often ineffective, partly because the Army often did 
not include the contractor in its planning, notwithstanding guidance to 
the contrary. Frequent revisions to the LOGCAP plans generated a 
significant amount of rework for both DOD and the contractor.

DOD's contract oversight processes were generally good, albeit, with 
room for improvement. DCMA's (the agency that oversees contractor 
performance) oversight of these contracts has produced good results--
for example, contracting officers eliminated unnecessary airfield 
services and have identified equipment and materials that can be reused 
to reduce contract costs. Nevertheless, we identified several areas 
where improvements could be made. For example, DCMA did not always 
appoint contracting officers' technical representatives who could have 
assisted DCMA in its quality assurance responsibilities. Recurring 
contractor problems such as poor cost reporting, difficulties with 
producing and meeting schedules, and weaknesses in purchasing system 
controls also made the LOGCAP contract more difficult to administer. 
Furthermore, an important part of the contract oversight process is the 
definitizing of task orders; that is, reaching agreement with the 
contractor on the determination of contract terms, specifications, and 
cost. Delays in definitizing task orders make cost-control incentives 
under these award fee contracts less effective. While AFCAP and BSC 
task orders were definitized quickly, and CONCAP's task orders do not 
require definitization, most of the LOGCAP task orders have remained 
undefinitized for months, and sometimes more than a year, after they 
were due to be completed and after billions of dollars of work has been 
completed. Furthermore, the Army has not held an award fee board, even 
though the contract requires that one be held every 6 months, and award 
fees are important as a contractor incentive. Specifically, award fees 
can serve as a valuable tool to help control program risk and encourage 
excellence in contract performance. It will be difficult for the Army 
to hold a board that comprehensively evaluates the contractor's 
performance because the LOGCAP customers have not been evaluating and 
documenting the contractor's performance. Finally, neither the services 
nor DOD has established programs to collect and share lessons learned 
from the use of logistics support contracts.

Customers have not always ensured that contractors provide services in 
an economical and efficient manner and that contract costs are 
controlled, although they have a responsibility to do so. We recognize 
that cost control should not be the primary consideration for 
commanders when U.S. forces are involved in major combat operations or 
when the operational environment or security situation requires the 
presence of more troops or the relocation of forces. However, cost 
control did not become a priority in using LOGCAP in Iraq and Kuwait 
until late 2003, when the Army Central Command received guidance from 
Army headquarters to look for economies. We found that when the 
customer reviews the contractor's work for economy and efficiency, 
savings are usually realized, but these reviews have not been routinely 
conducted by LOGCAP customers at all task order locations. Both the 
Marine Corps in Djibouti and Combined Joint Task Force (CJTF)-180 in 
Afghanistan periodically review the level and the type of services 
provided by the LOGCAP contract, but similar reviews are not being 
conducted in Kuwait or in Iraq. At times both the Army and the Air 
Force believed that they had no other option but to use their logistics 
support contracts to obtain goods and services even when they knew that 
other methods might have resulted in lower costs. For example, the Army 
had the contractor provide temporary housing for an Army division in 
Iraq although it was more costly than allowing the unit to build the 
housing itself because at the time the Army made the decision to use 
LOGCAP, it was the only means available to get the 101st Airborne 
Division into housing by November 15, 2003. Similarly, the Air Force 
used the AFCAP contract to supply commodities for its heavy 
construction squadrons because it did not deploy with enough 
contracting and finance personnel to buy materials quickly or in large 
quantities. While using the contract to procure and deliver commodities 
is permitted under the contract, it is generally not a cost-effective 
use of this type of contract because the customer pays award fees to 
the contractor in addition to the procurement cost.

Given the size and complexity of these contracts, DCMA often did not 
have sufficient numbers of personnel in place to provide effective 
oversight and so used a risk-based approach to sizing its oversight 
teams. We also found many indications that some of the personnel 
responsible for overseeing or monitoring the contractors had not been 
adequately trained. DCMA, the Defense Contract Audit Agency, and the 
military services have all deployed civilian and military personnel to 
assist with contract administration and oversee the performance of the 
logistics support contractors. However, DCMA has not always had enough 
personnel in theater to effectively administer the logistics support 
contracts. In addition, many service personnel with oversight 
responsibilities for the contracts have not received the necessary 
training to accomplish their missions. As a result, their ability to 
perform all their duties, such as preparing the independent government 
cost estimates used to judge the reasonableness of the contractor's 
cost proposals, was limited. The Navy's contract monitors were all 
technically qualified engineers or have had significant experience in 
the construction industry. However, the Army deployed units responsible 
for supporting its LOGCAP customers with personnel who had little 
knowledge of the contract, and the Air Force did not consistently train 
evaluators to monitor the performance of the AFCAP contractor. Overall, 
military units across the services receiving contractor support did not 
have a comprehensive understanding of their roles and responsibilities.

We are making a number of recommendations to improve planning, economy 
and efficiency, and training at all levels of command. These 
recommendations include emphasizing the need to comply with applicable 
planning guidance, establishing teams of subject matter experts to 
periodically review contractor services to ensure that services are 
appropriate and being provided in an economic and efficient manner, and 
implementing a department-wide lessons learned program to draw upon 
past experience.

In written comments on a draft of this report, DOD stated that it 
concurred with the report and all its recommendations. We also provided 
an opportunity for the contractors on the logistics support contracts 
we reviewed--Kellogg, Brown and Root for LOGCAP; BSC; and CONCAP and 
Readiness Management Support L.C. for AFCAP--to comment on a draft of 
this report. Readiness Management Support provided clarifying comments 
in a written response. A detailed discussion of DOD's and Readiness 
Management Support's comments is contained in the body of this report.

Background:

The U.S. military has relied on contractors to provide supplies and 
services in support of contingency operations since the Revolutionary 
War. Since the early 1990s, DOD has used logistics support contracts to 
meet many of its logistical support needs during combat operations, 
peacekeeping missions, and humanitarian assistance missions, ranging 
from Somalia and Haiti to Afghanistan and Iraq. Today these contracts 
support contingency operations such as Operation Enduring Freedom and 
Operation Iraqi Freedom as a major part of America's Global War on 
Terrorism. Figure 1 shows locations where contractors are being used to 
support deployed forces.

Figure 1: Selected Countries and Possessions Where AFCAP, CONCAP, 
LOGCAP, and BSC Are Being Used As of May 2004:

[See PDF for image]

[End of figure]

Contracts such as AFCAP, LOGCAP, and BSC provide similar logistics and 
engineering services, such as food preparation, laundry, housing, and 
construction in support of contingency operations. The Navy's CONCAP 
contract is a contingency construction contract designed to meet 
emergency requirements involving natural disaster recovery, 
humanitarian assistance, or conflicts.

All of the contracts included in our review are cost-plus award fee 
contracts. Cost-plus contracts allow the contractor to be reimbursed 
for reasonable, allowable, and allocable costs incurred to the extent 
prescribed in the contract. A cost-plus award fee contract provides 
financial incentives on the basis of performance. These contracts allow 
the government to evaluate a contractor's performance according to 
specified criteria and to grant an award amount within designated 
parameters. Award fees can serve as a valuable tool to help control 
program risk and encourage excellence in contract performance. To reap 
the advantages that cost-plus award fee contracts offer, the government 
must implement an effective award fee process.

Table 1 provides additional contract information on the logistics 
support contracts we reviewed. As can be seen in table 1, LOGCAP is by 
far the largest of these contracts both in terms of funds obligated and 
of the estimated value of work under the contract.

Table 1: Contract Information on Logistics Support Contracts:

Category: Contractor; 
LOGCAP: Kellogg, Brown and Root; 
AFCAP: Readiness Management Support; 
CONCAP: Kellogg, Brown and Root; 
BSC: Kellogg, Brown and Root.

Category: Award date; 
LOGCAP: Dec. 2001; 
AFCAP: Jan. 2002; 
CONCAP: June 2000; 
BSC: May 1999.

Category: Type of contract; 
LOGCAP: Cost-plus award fee; 
AFCAP: Cost- plus award fee; 
CONCAP: Cost-plus award fee; 
BSC: Cost-plus award fee.

Category: Fee base/award; 
LOGCAP: 1 percent/2 percent; 
AFCAP: 1 percent/6 percent; 
CONCAP: 0 percent/2 percent CONUS 0 percent/5.75 percent OCONUS; 
BSC: 1 percent/8 percent.

Category: Length of contract; 
LOGCAP: 1 year plus 9 option years; 
AFCAP: 1 year plus 7 option years; 
CONCAP: 1 year plus 4 option years; 
BSC: 1 year plus 4 option years.

Category: Obligations (as of Apr. 30, 2004); 
LOGCAP: $4.9 billion; 
AFCAP: $708 million; 
CONCAP: $242 million; 
BSC: $1.73 billion (as of Mar. 31 2004).

Category: Contract ceiling price; 
LOGCAP: No dollar value; 
operational requirement used to establish ceiling; 
AFCAP: $900 million; 
CONCAP: $300 million; 
BSC: $2.098 billion.

Category: Estimated value of work under contract (as of May 2004); 
LOGCAP: $9.1 billion; 
AFCAP: $653 million; 
CONCAP: $242 million; 
BSC: $2.021 billion. 

Sources: DOD (data); GAO (analysis).

[End of table]

The use of LOGCAP to support U.S. troops in Iraq is the largest effort 
in the history of the LOGCAP program both in number of troops supported 
and in land mass. As of May 21, 2004, the estimated value of contract 
services in Iraq was $5.6 billion. Figure 2 illustrates the size of 
Iraq. As shown, when superimposed over a U.S. map, Iraq covers an area 
east to west that is comparable to that from Washington, D.C., to 
central Indiana, and from north to south comparable to Lansing, 
Michigan, to Raleigh, North Carolina.

Figure 2: Iraq In Relationship to the United States:

[See PDF for image]

[End of figure]

The contractors and the services have, for the most part, worked 
together to meet the customers' needs in sometimes hazardous or 
difficult circumstances. For example, the AFCAP contractor is providing 
air traffic management at air bases throughout central Asia, reducing 
the operations tempo of selected and scarce Air Force assets. In 
addition, AFCAP is providing housing and base support in Iraq. Through 
CONCAP the Navy has constructed detainee facilities (including a 
maximum security prison) at Guantanamo Bay on time and within budget. 
CONCAP's projects at Guantanamo have increased the safety of both the 
detainees and the U.S. forces guarding them and will result in real 
savings in reduced personnel tempo. For example, CONCAP has increased 
detainee safety with the construction of more secure cells and guard 
safety by providing greater separation between guards and detainees. 
LOGCAP is providing life and logistics support for more than 166,500 
soldiers and civilians under difficult circumstances in Iraq, 
Afghanistan, Kuwait, and Djibouti, and customers are generally pleased 
with the service the contractor is providing. Finally, BSC continues to 
provide troops in Kosovo and Bosnia with a myriad of high-quality 
services, and the customer works with the contractor to identify costs 
savings.

Many factors can influence the overall cost of the logistics support 
contracts. As shown in figure 3, costs can be affected by the size and 
scope of requirements identified by customers and by the amount of time 
the customer gives the contractor to plan and execute the mission. 
Additionally, cost is influenced by the manner in which a unit chooses 
to fulfill a requirement. Other resources that are more cost-effective 
may be available to the units, such as military troop labor or host 
nation support. Cost may also be affected by the quality of 
documentation prepared by contract customers and program managers. 
Concise statements of work and comprehensive government cost estimates 
may reduce the likelihood of incurring additional costs. In addition, 
the appointment of government contract management personnel to monitor 
contractors' performance ensures that contractor-provided services 
meet contract requirements. Lastly, operational concerns, such as the 
security situation in Iraq, can make providing services more costly.

Figure 3: Some Factors That Can Influence Costs of Logistics Support 
Contracts:

[See PDF for image]

[End of figure]

The military services, as well as DCMA and the Defense Contract Audit 
Agency, perform contract management functions to ensure that the 
government is receiving quality services from the logistics support 
contractors at the best possible prices. The customer is responsible 
for identifying and validating requirements to be addressed by the 
logistics support contracts as well as evaluating the contractor's 
performance and ensuring that the contract is used in an economical and 
efficient manner. The contracting officer is responsible for oversight 
and management of the contract. However, the contracting officer may 
delegate some of the oversight and management functions to DCMA. When 
management functions are delegated by the procuring contracting 
officer, DCMA may assign administrative contracting officers to provide 
on-site contract administration at deployed contingency locations. The 
Defense Contract Audit Agency ensures that costs claimed by the 
contractor are reasonable, allowable, and allocable. Table 2 provides 
additional information on the roles and responsibilities of contract 
management personnel.

Table 2: Key Contract Management Roles and Responsibilities:

Customers: 
* Develop requirements; 
* Write statements of work; 
* Obtain funding; 
* Monitor contract performance; 
* Evaluate technical performance; 
* Provide the award fee board with input; 

Contracting officer: 
* Interpret the contract; 
* Obligate the government for work under the contract; 
* Delegate contract administration. procedures to administrative 
contracting officers; 
* Ensure that the contractor corrects cited deficiencies; 
* Provide the award fee board with input.

Defense Contract Management Agency: 
* Provide daily contract oversight; 
* Review and approve purchase requisitions (LOGCAP and BSC); 
* Evaluate quality assurance; 
* Monitor government property; 
* Monitor contract performance; 
* Evaluate technical performance; 
* Provide the award fee board with input; 

Defense Contract Audit Agency: 
* Review contractors' financial management systems; 
* Review cost proposals; 
* Approve payment vouchers (LOGCAP, BSC, and CONCAP); 
* Audit incurred costs; 
* By invitation, provide the award fee board with input. 

Sources: DOD (data); GAO (analysis).

[End of table]

Work is done under each of the contracts through task orders. The task 
order process begins when the customer, or the unit that is requesting 
support from the contractor, identifies a requirement. The requirement 
is generally documented in the form of a task order statement of work, 
which establishes the specific tasks to be accomplished by the 
contractor and the time frames of performance. If the decision is made 
to use the logistics support contract to satisfy the requirement, the 
unit contacts the contract program management office. The program 
management office, in coordination with the contracting officer, 
determines whether the task is within the scope of the contract. The 
program management office obtains an approximate cost estimate from the 
contractor and provides the customer with the information. From this 
information, the customer decides if it will use the contractor to 
fulfill the requirement. If the government decides to use a logistical 
support contract, funding is obtained, the statement of work is 
finalized, and the contracting officer issues the contractor a notice 
to begin work. Significantly, if the customer identifies a change in 
the requirement, the process is initiated again. Figure 4 provides an 
illustration of the key steps in the task order process.

Figure 4: Overview of the Task Order Process:

[See PDF for image]

[End of figure]

We have issued reports on the use of contractors to support deployed 
forces in 1997, 2000, and 2003. In 1997 we reported that there were 
opportunities to make the use of LOGCAP in Bosnia more efficient and 
effective, including developing doctrine and guidance, providing 
commanders with training, and providing commands with assistance when 
they are using LOGCAP.[Footnote 1] In 2000 we reported that the Army 
should improve its management of BSC, the successor contract to LOGCAP 
in the Balkans, including examining the level and frequency of services 
and providing a more extensive predeployment training program for all 
contract oversight personnel.[Footnote 2] In 2003 we reported that 
commanders had limited visibility and understanding of the extent and 
type of services being provided by contractors and those commanders and 
other personnel lacked training on their roles and responsibilities in 
dealing with contractors.[Footnote 3] DOD generally agreed with the 
recommendations that we made in each of these reports, including the 
provision of more training.

Planning for the Use of Contractor Support Varied Widely:

Planning for the Navy's CONCAP contract, the Army's BSC, and to a 
lesser degree, the Air Force's AFCAP contract, included the contractor 
in task order planning, resulting in more-effective planning. However, 
while the Army has developed guidance to facilitate the use of LOGCAP 
that clearly recommends working with the contractor to develop 
comprehensive support plans and statements of work in the early stages 
of contingency planning, that guidance was not always followed. For 
example, the Army Central Command did not follow that guidance when 
planning for Operation Iraqi Freedom. Even as it became clear that U.S. 
forces would remain in Iraq longer than originally anticipated, LOGCAP 
planning continued to be mixed, partly because the Army often did not 
include the contractor in its planning and planning did not always take 
advantage of lead-time when it was available. However, U.S. Army, 
Europe, in planning for the anticipated movement of troops through 
Turkey into Iraq in support of Operation Iraqi Freedom, and the Marine 
Corps, in planning for the deployment of forces to Haiti, followed 
LOGCAP guidance, which proved beneficial. As noted earlier, the LOGCAP 
contract is the most expensive of the logistics support contracts we 
examined.

U.S. Army, Europe; the Navy; and the Air Force Involve the Contractor 
in Planning:

Planning for BSC, the CONCAP contract, and the AFCAP contract all 
follow similar processes, which rely on a collaboration between the 
customer and the contractor to develop comprehensive and clear 
statements of work in the early stages of planning. For example, we 
observed during our work that the following guidance and procedures 
were being followed:

* Guidance issued by BSC's contracting office, the Army Corps of 
Engineers--Transatlantic Program Center,[Footnote 4] establishes the 
policy for developing statements of work for BSC. According to the 
guidance, after the customer identifies a requirement, the customer and 
the contractor work together to develop the statement of work. After 
the statement of work is agreed to, the contractor prepares an 
execution plan that describes how the contractor intends to meet the 
requirement. The government reviews the execution plan to ensure that 
the customer's needs are met in the most economical and efficient 
manner possible. This process continues until U.S. Army, Europe, is 
satisfied that the statement of work accurately reflects the command's 
requirements and the contracting officer issues a notice to proceed.

* CONCAP planning is a cooperative effort between the Navy Facilities 
Command, the customer, and the contractor. Customers work closely with 
the command and the contractor to clearly define the requirements and 
develop a statement of work, which may vary from a brief description or 
sketch to a complete design. Depending on the project, the contractor 
may be given the responsibility to provide the initial statement of 
work, which the government team reviews and determines if it is 
acceptable before providing final approval. After the government and 
the contractor come to agreement on the work to be performed and the 
cost, the task order is incorporated into the contract.

* The AFCAP planning process is detailed in AFCAP's Concept of 
Operations document.[Footnote 5] According to this guidance, customers:

* identify requirements,

* obtain approval to use AFCAP from a Major Command, and:

* develop a statement of work.

After the statement of work is developed, the contractor provides a 
cost estimate, and the government and the contractor work together to 
ensure that all parties understand the requirements, available options, 
and associated costs. Using information developed through this 
collaborative effort, the customer finalizes the statement of work and 
sends it to the procuring contracting officer, who issues a notice to 
proceed.

Army Guidance Highlights the Early Identification of Requirements as a 
Key to Maximizing the Effectiveness of Contractor Support:

Early planning that identifies requirements and decides which ones will 
be satisfied by contracting, and the involvement of the contractor in 
planning, are recurring themes in the Army's doctrine and guidance for 
using contractor support, in general, and the LOGCAP contract, 
specifically. According to Army Field Manual 3-100.21--"Contractors on 
the Battlefield" [Footnote 6]--integrated planning is a governing 
principle of contractor support, and for contractor support to be 
effective and responsive, its use must be considered and integrated 
into the planning process. Proper planning identifies the full extent 
of contractor involvement, how and where contractor support is 
provided, and any responsibilities the Army may have in supporting the 
contractor. This same emphasis on planning and the early identification 
of requirements is also discussed in Army Regulation 700-137--
"Logistics Civil Augmentation Program"[Footnote 7]--which establishes 
the policies, responsibilities, and procedures for implementing LOGCAP. 
That regulation states that contractor responsiveness similar to that 
offered by military units can be achieved only through the careful 
drafting of contract requirements (statements of work), and that to 
increase proper planning and execution, the contractor should have a 
clear understanding of the statement of work. The regulation also urges 
commanders not to classify plans at a level where the contractor cannot 
have access and, if classification is necessary, commanders should 
write unclassified contract statements of work and put time frames, 
geographic areas, and other classified material in appendixes. An Army 
regulation on contractors accompanying the force similarly states that 
the most important factor in ensuring that support services are 
provided at the desired levels of quality and timeliness is the 
establishment of clear and concise contract requirements in a statement 
of work, [Footnote 8] and Army Materiel Command Pamphlet 700-30--
Logistics Civil Augmentation Program [Footnote 9]--designed to help 
users obtain support through the LOGCAP process reiterates the point 
that a major consideration for maximizing LOGCAP potential is for the 
customer to be aware of its LOGCAP support requirements and convey 
those requirements in a timely manner to the appropriate personnel. 
This pamphlet also recommends the early involvement of the contractor 
in planning because it allows the contractor to develop more accurate 
cost estimates, gives the contractor time to bring on board reliable 
subcontractors, and can minimize costs. The guidance also recommends 
that the customer and the contractor develop a comprehensive statement 
of work in the early stages of contingency planning.

Early decisions on how the contract is to be used facilitate a number 
of other actions that lead to enhanced contract management and 
oversight. Once government and contractor planners are notified of a 
customer's requirements, they can begin developing statements of work. 
According to the Army's LOGCAP guidance, statements of work specify the 
products and services required and are the most important documents 
provided to the contractor. The contractor uses statements of work to 
(1) plan how to satisfy the customer's requirements in the most 
efficient and economical manner and (2) develop cost estimates. These 
estimates are provided to the customer and serve as an important 
decision tool for assessing contractors' proposals and deciding between 
alternative support strategies. At the same time, representatives from 
the LOGCAP program management office use the statements of work to 
develop independent government cost estimates. An independent 
government cost estimate is the government's estimate of the costs the 
contractor is expected to incur in performing the work. The more time 
the contractor and the government have to refine their estimates, the 
more useful they are to commanders.

Planners Followed Army Guidance with Positive Results in Turkey and 
Haiti:

Following LOGCAP guidance proved beneficial for Army operations in 
Turkey and Marine Corps operations in Haiti (LOGCAP is available to all 
the military services). Specifically, involvement of the contractor as 
recommended in the LOGCAP guidance led to more informed decision making 
as follows:

* In planning for Operation Iraqi Freedom, U.S. Army, Europe, was 
tasked with supporting the anticipated movement of troops through 
Turkey into Iraq, and our review of that planning showed that the 
command followed Army guidance to good effect. In October 2002 the 
command brought contractor personnel to its headquarters in Europe to 
help plan and develop the statement of work. According to U.S. Army, 
Europe, contractor planners brought considerable knowledge of 
contractors' capabilities, limitations, and operations, and their 
involvement early in the planning efforts increased their understanding 
of requirements and capabilities, facilitated communication regarding 
the statement of work, and enhanced the mission's completion.

* Recent planning for the deployment of U.S. forces to Haiti resulted 
in a similar outcome. U.S. Marine Forces Atlantic, U.S. Southern 
Command, Army Materiel Command, and contractor personnel visited Haiti 
to develop support plans. According to an Army Materiel Command 
official, the planning process was a success because it led to an 
informed decision by the Marines to use their own assets to support the 
forces in lieu of LOGCAP.

Planning for Operation Iraqi Freedom Was Not Comprehensive:

The Army Central Command--the Army command responsible for LOGCAP 
planning in Kuwait and Iraq--did not follow the planning process 
described in Army regulations and guidance as it prepared for 
operations in southwest Asia. According to a former Army Materiel 
Command logistics planner, the Army Central Command used the standing 
LOGCAP plans to prepare for the mission but, after Army forces 
deployed, the plan changed significantly and Army Materiel Command's 
involvement was diminished because of security concerns. The planner 
stated that Army Central Command raised the security classification for 
the plan above the clearance level of the planners and it took some 
time to resolve this issue. Thus, during a critical planning period, 
the planning personnel with the most experience in using the contract 
were not part of the planning process. The planner also said that the 
contractor was not involved in the planning because of security 
concerns. As a result, two key principles needed to maximize LOGCAP 
support and minimize cost--a comprehensive statement of work and early 
contractor involvement--were not followed. Specifics follow:

* The Army developed a plan to support the troops in Iraq (task order 
59 of the LOGCAP contract) in May 2003, but the plan was not 
comprehensive because it did not include all of the dining facilities, 
troop housing, and other services that the Army has since added to the 
task order. According to an official from the 101st Airborne Division, 
there was a lack of detailed planning for the use of LOGCAP at the 
theater and division levels for the sustainment phase of the operation. 
He went on to add that Army planners should develop a closer working 
relationship with the divisions and the contractor.

* Task orders were frequently revised. These revisions generated a 
significant amount of rework for the contractor and the contracting 
officers. Additionally, time spent reviewing revisions to the task 
orders is time that is not available for other oversight activities. 
While operational considerations might have driven some of these 
changes, we believe others were more likely the result of ineffective 
planning. For example, task order 59 was changed seven times in less 
than 1 year. Specifics follow:

* Basic Statement of Work--May 30, 2003--provided limited services such 
as food services (except site A); pest control; laundry services; and 
morale, welfare, and recreation services at six base camp clusters 
known as sites A, B, C, D, E, and F.

* Change 1 on June 7, 2003, added support for the coalition forces 
(site G).

* Change 2 on June 20, 2003, added food service; pest control; laundry 
services; and morale, welfare, and recreation services for Site H (the 
101st Airborne Division).

* Change 3 on June 24, 2003, added troop housing, transportation, and 
supply service activities at site A.

* Change 4 on July 22, 2003, removed the coalition forces (Site G) from 
the task order and added food service for site A. A separate task order 
was developed for support for coalition forces.

* Change 5 on August 27, 2003, added housing for sites B, C, D, F, and 
H.

* Change 6 on November 3, 2003, made changes to the services being 
provided and added additional combat support activities.

* Change 7 on November 14, 2003, added additional combat support 
services.

Frequent revisions have not been limited to task order 59. Task order 
27, which provides support for a significant number of U.S. troops in 
Kuwait (valued at $426 million as of May 2004), was changed 18 times 
from September 2002 through December 2003, including five changes in 1 
month, some on consecutive days. As of May 11, 2004, the contracting 
office, DCMA, and the contractor processed more than 176 modifications 
to LOGCAP task orders. As discussed above, frequent revisions to task 
orders generate a significant amount of rework for the contractor and 
the contracting officer.

LOGCAP Planning Has Not Always Been Timely:

While we recognize the uncertainty inherent in wartime operations, 
planning for some LOGCAP tasks did not take advantage of lead-time when 
it was available. According to the LOGCAP program manager, early 
planning is a key to obtaining the best services at the best prices. 
The following are two examples of where the Army did not use the 
planning time available:

* The Kuwaiti government gave the Army several months' notice that it 
needed some Army facilities at the Kuwait International Airport moved 
because of planned construction. The Army did not inform the 
contractor, however, until 5 days before the scheduled deadline. Army 
officials stated that accomplishing the move in only 5 days increased 
the cost to the Army.

* The Army in Kuwait did not always give acquisition review boards 
sufficient time or resources to consider alternatives to LOGCAP. 
Commanders create acquisition review boards to make recommendations 
about the validity of requirements and the best way to meet them. The 
boards generally consist of personnel from operations, logistics, legal 
services, resource management, and contracting that review requirements 
for contracting support against the priorities established by the 
commander. The boards screen requirements and determine whether or not 
they should be satisfied through contingency contract support, through 
host nation support, LOGCAP, or other sources. However, in December of 
2003 in Kuwait, we observed that one board was not given sufficient 
time to consider alternatives to LOGCAP and that the resources to 
pursue contingency contracts other than LOGCAP were not available, 
largely defeating the purpose of the board. For example, several large, 
preexisting task orders that were to expire within a few weeks were 
presented with the admonition that it was imperative that the task 
orders continue. With only a few weeks to renew the task order, the 
board had no time to explore options to using the LOGCAP contract. 
Furthermore, the principal assistant responsible for contracting in 
Kuwait said that her office lacked the resources to explore contracting 
options to LOGCAP and the legal office lacked the resources to review 
new contracts.

Contract Oversight Processes Were Generally Good but Not Always 
Properly Implemented:

While oversight of a contract is the contracting officer's 
responsibility, the contracting officer may delegate some oversight 
responsibilities to DCMA. The contracting officers for LOGCAP, AFCAP, 
and BSC have all delegated significant portions of contract oversight 
to DCMA, while the Navy retains all contract administration and 
oversight responsibilities for the CONCAP contract. While DCMA's 
contract oversight generally resulted in cost savings, opportunities 
exist to improve oversight. For example, DCMA did not perform some of 
its delegated contract administration tasks under AFCAP, such as 
ensuring that the contractor maintained appropriate controls of 
government property, and the Air Force did not always appoint 
contracting officers' representatives (subject matter experts) to 
assist with oversight. Complicating oversight were recurring contractor 
problems such as poor cost reporting; difficulties with producing and 
meeting schedules; and inadequate controls over purchasing, which made 
the LOGCAP contract more difficult to administer. In addition, better 
government oversight might have avoided a billing disagreement between 
the government and the LOGCAP contractor involving millions of dollars 
in food service bills. Moreover, while the AFCAP and BSC task orders 
have been definitized within the time allowed by the Defense Federal 
Acquisition Regulation Supplement, most of the LOGCAP task orders have 
not. Because task orders have not been definitized, LOGCAP contracting 
personnel have not conducted an award fee board. We believe it will be 
difficult to comprehensively assess the contractor's performance in an 
award fee board because customer evaluations of the contractor's 
performance have not been uniformly documented. Finally, lessons 
learned are often not shared or are shared only informally, and there 
is no process in place to systematically collect knowledge and insights 
about the programs and to disseminate it to those who currently need it 
to provide oversight and management of the contracts.

DCMA's Oversight of Logistics Support Contracts Has Produced Good 
Results:

The oversight of contracts ultimately rests with the contracting 
officer, who is responsible for ensuring that contractors meet the 
requirements set forth in the contract. However, most contracting 
officers are not located at deployed locations. As a result, 
contracting officers appoint monitors, who represent the contracting 
officer and are responsible for monitoring contractors' performance. 
Contracting officers for AFCAP, LOGCAP, and BSC have chosen to have 
personnel from DCMA oversee contractors' performance. DCMA is an 
independent combat support agency within DOD that serves as the 
department's contract manager, responsible for ensuring that federal 
acquisition programs, supplies, and services are delivered on time, 
delivered within cost, and meet performance requirements.

We met with DCMA officials in Kuwait and Qatar and discussed contract 
oversight activities for the LOGCAP and AFCAP contracts; reviewed Army 
Audit Agency audits of contract oversight activities in Afghanistan, 
Uzbekistan, and Turkey; and found that, overall, DCMA is doing a good 
job of administering the contract. From December 2002 through February 
2004, the Army Audit Agency reviewed the Army's use of LOGCAP in 
Turkey, Uzbekistan, and Afghanistan and found that the contract was 
being effectively managed. While these audits did not specifically 
assess DCMA's oversight of the contract, the audits' included the 
oversight responsibilities delegated to DCMA. In Turkey, the Army Audit 
Agency reported that appropriate actions to control costs and ensure 
effective stewardship of resources were in place; in Uzbekistan, it 
reported that key management controls had been identified, were in 
place, and were working; and in Afghanistan, the audit agency reported 
that adequate procedures were in place to control costs but that the 
government could improve the management of government-furnished 
equipment provided to the contractor.

The Army Audit Agency's conclusions are similar to our observations of 
DCMA's activities in Kuwait, where DCMA's oversight is resulting in 
contract improvements and cost savings. For example, at one location we 
visited in Kuwait that included the use of LOGCAP for helicopter 
airfield operations, the DCMA administrative contracting officer had an 
aviation background and observed that the contract called for more 
aviation refueling points than necessary and that the number of 
sweepers available for cleaning the runways and parking ramps was 
excessive. He was able to reduce the number of refueling points by 
half, saving the Army money, and the number of sweepers from five to 
three. In addition, after conducting a lease/buy analysis, the 
administrative contracting officer directed the contractor to buy the 
sweepers instead of leasing them because buying saved the government 
money. Situation reports filed periodically by DCMA administrative 
contracting officers also detail a concerted effort to reduce contract 
costs by conducting lease or buy analyses for nontactical 
vehicles[Footnote 10] and generators, critiquing the contractor's 
proposed cost estimates, and monitoring the disposition of government 
property. These reports also document DCMA's quality assurance 
personnel enforcing health and safety standards to ensure, for example, 
that food served to U.S. military personnel had met all health 
requirements. Additionally, DCMA officials, along with contractor and 
service officials in Qatar, the Balkans, and Kuwait were instrumental 
in transferring excess material and equipment from AFCAP and BSC to 
LOGCAP. DCMA estimated savings to the LOGCAP contract from the 
equipment transfer at $17 million to $22 million.

DCMA Failed to Perform Its Property Administration Function on Some 
Task Orders:

While, as discussed above, we believe overall that DCMA provided good 
oversight, it failed to perform some of its delegated contract 
administration tasks for the AFCAP task orders in southwest Asia. DCMA 
failed to ensure that the contractor maintained appropriate controls of 
government property. The Federal Acquisition Regulation[Footnote 11] 
states that a government contractor is required to establish and 
maintain a property system to control, protect, preserve, and maintain 
all government property. The Federal Acquisition Regulation goes on to 
say that the government's contracting officer or the designated 
representative assigned the property administration responsibility 
should review the contractor's property control systems to ensure 
compliance with the property clauses of the contract.

On task orders executed in southwest Asia, the AFCAP procuring 
contracting officer delegated the property administration 
responsibility to DCMA's administrative contracting officers. However, 
contract administrators in southwest Asia did not ensure that the 
contractor had established and maintained a property control system to 
track items acquired under the contract. In addition, DCMA's 
contracting officers in southwest Asia did not have a system in place 
to document what the contractor was procuring in support of AFCAP task 
orders and what was being turned over to the Air Force. As a result, as 
of April 2004, neither DCMA nor the Air Force could account for 
approximately $2 million worth of tools and construction equipment 
purchased through the AFCAP contract.

In July 2004 DCMA told us that the AFCAP contracting officer provided 
DCMA with additional direction regarding the administration of property 
acquired under the contract. According to DCMA, its Middle East office 
identified a joint accountability problem for the Air Force engineering 
squadrons. The AFCAP contracting officer has since clarified that the 
tools and construction equipment purchased for the Air Force 
engineering squadrons were to go directly to the Air Force. As a 
result, DCMA believes that neither it nor the contractor are 
responsible for the accountability of the property. However, at the 
time of our visit to the theater in December 2003, and in subsequent 
conversations with DCMA contracting officers, we observed and were told 
that at that time DCMA was responsible for property administration but 
did not have a system in place to document the property that was 
purchased under these task orders and that DCMA contracting officers 
should have been performing this responsibility. Notwithstanding the 
additional guidance that has since been provided by the AFCAP 
contracting officer, DCMA was delegated the property administration 
responsibility and either should have documented all property purchased 
for the Air Force engineering squadrons or sought clarifying guidance 
earlier from the AFCAP contracting officer. However, at the time of our 
review, neither the Air Force nor DCMA could account for approximately 
$2 million worth of tools and equipment purchased under the contract.

DCMA Did Not Always Appoint and Use Contracting Officers' Technical 
Representatives to Monitor the Contract in Iraq:

As mentioned, the LOGCAP contract is being used to meet a wide range of 
military requirements, such as running supply operations for food, 
water, fuel, construction materials, and repair parts and providing 
services such as laundry, clothing repair, food service, sanitation, 
recreation, maintenance, transportation, medical waste disposal, and 
construction. Effective oversight of this diverse body of work requires 
personnel with knowledge and expertise in these particular areas. DCMA 
administrative contracting officers are contracting professionals but 
may have limited knowledge of field operations. In these situations, 
DCMA normally uses contracting officers' technical representatives. 
Contracting officers' technical representatives are individuals who 
have been designated by their unit and appointed and trained by the 
administrative contracting officer. They provide technical oversight of 
the contractor's performance, but they cannot direct the contractor by 
making commitments or changes that affect any terms of the contract.

In March 2000, the U.S. Army, Europe, audit cell located in Kosovo 
recommended that the command use the Army's subject matter experts to 
provide oversight of routine day-to-day services provided by the 
Balkans Support Contract.[Footnote 12] The audit cell recommended that 
the task force designate these experts as contracting officers' 
representatives, which, according to the audit cell, would improve 
contract oversight and management and ensure that the command received 
quality service from the contractor. In October 2002, during a visit to 
Kosovo, we confirmed that the command had designated subject matter 
experts from the Area Support Group's Department of Logistics as 
contracting officers' representatives for BSC.

According to a DCMA official in Iraq, it was the agency's goal to have 
a contracting officer's technical representative for each functional 
area (e.g., food service and maintenance) at each division and camp. 
While representatives were appointed at some locations, they were not 
at others. For example, 101st Airborne Division officials told us that 
they had not been asked to provide representatives and had played no 
role in overseeing the contract. We believe that having contracting 
officers' technical representatives for each functional area at each 
division and camp would improve government oversight.

LOGCAP Contract Management Is Made More Difficult by Recurring 
Contractor Problems:

DCMA prepares periodic situation reports that report the status of 
contractor activities, successes, and problems. Our review of the 
reports prepared by DCMA from September 2003 through May 2004, which we 
did not validate but did discuss with the LOGCAP contractor, highlights 
a pattern of contractor management problems. Some of the problems 
mentioned in these reports follow:

* Adequate cost reporting and cost management are important because 
they affect the government's ability to monitor contract spending. 
Several administrative contracting officers believe that the 
contractor's cost reports are inadequate and make it difficult to know 
how much the contractor has actually spent on the individual task 
orders. For example, in the November 13, 2003, report for Iraq, the 
administrative contracting officer reported that the contractor was 
refusing to perform work because of its contention that no funding 
remained available, while the cost report for the previous reporting 
period showed that the contractor had expended only 45 percent of the 
available funds. Furthermore, some administrative contracting officers 
have noted that the contractor's managers at individual sites have no 
knowledge of the costs associated with their task orders.

* Difficulties with producing and meeting schedules affect the 
government's ability to know when contracted support will be provided. 
The situation reports frequently mention that the contractor has not 
been able to produce task order schedules as required by the contract. 
In addition, the reports often note that the contractor is behind 
schedule on both big and small projects. Additionally, officials from 
the 101st Airborne Division noted that the contractor did not meet the 
required schedule for providing housing. They also noted that the 
contractor did not provide some of the services required by task order 
59, specifically pest control and water production.

* Inadequate controls over purchasing and subcontractors hinder 
government oversight. Several administrative contracting officers have 
noted that the contractor had inadequate controls over its purchasing 
system. For example, administrative contracting officers have observed 
that requisitions:

* are not always provided to the administrative contracting officers as 
required by the contract,

* frequently lack sufficient documentation to justify the lease or 
purchase, and:

* do not provide an accurate estimate of the cost of the item.

Also, administrative contracting officers have noted that they are 
unable to gain accurate status about materiel being purchased through 
the contractor, which increases customers' frustration. In addition, 
the contractor does not have good control over its subcontractors. One 
DCMA official reported that the contractor let a subcontract expire 
without a transition plan, thus disrupting services.

The LOGCAP contractor has acknowledged some of these problems and has 
been working with DCMA to establish systems and procedures that will be 
more responsive to the government's needs. For example, in late 2003 
the contractor sent a large team of auditors to Kuwait to review its 
operations in Kuwait and Iraq and develop processes and procedures to 
help resolve some of the purchasing problems. The situation reports 
also document that the contractor is working with DCMA to resolve other 
problems mentioned above, such as issues related to scheduling. 
However, situation reports from Iraq and Kuwait indicated that 
scheduling and cost reporting continue to be a problem at some 
locations while improvements have been noted at others.

Better Oversight of Food Service Might Have Avoided a Contract 
Disagreement:

A disagreement between the LOGCAP contractor and the Defense Contract 
Audit Agency involving at least $88 million in food services charges to 
feed soldiers in Iraq might have been avoided had there been more 
careful government oversight. The statement of work prepared by the 
Army required that the LOGCAP contractor provide food service and food 
service facilities at bases throughout Iraq. It directed that the 
contractor build, equip, and operate the dining facilities at the base 
camps and provide four meals a day for the base camp populations. The 
populations were specified in the statement of work. The contractor 
subcontracted with six food service companies, which were responsible 
for building and operating the dining facilities as well as providing 
food service workers and food. The contractor instructed the 
subcontractors to do a head count at each meal. A military 
representative, a contractor representative, and a subcontractor 
representative signed daily head-count sheets. The statement of work 
did not specify whether the government should be billed on the camp 
populations specified in the statement of work or on the actual head 
count. Generally, the subcontractors billed the contractor for the base 
camp population although there were some differences in the 
subcontractors' billing procedures.

During our review of subcontractors' files, we noted that on many 
occasions the number of personnel eating in the dining facilities 
throughout Iraq was less than the base camp population indicated in the 
statement of work. In response to a Defense Contract Audit Agency audit 
of dining facility billings, the contractor analyzed selected invoices 
from a number of dining facilities throughout Iraq for a 4-month period 
and found that by billing the government for the base camp population 
instead of the actual personnel served, it had billed the government 
for food service for more than 15.9 million soldiers[Footnote 13] when 
only 12.5 million--more than 3.4 million fewer--had passed through the 
dining facilities. The contractor estimated the cost of serving the 
additional personnel who did not use the dining facilities at 
approximately $88 million.

The contractor and the Defense Contract Audit Agency disagree over the 
appropriate billing procedures for this service. The Defense Contract 
Audit Agency's interpretation requires billings based on actual head 
counts while the contractor's interpretation authorizes billings based 
on the number of soldiers at each base camp as established in the task 
order statement of work. The parties are currently discussing the 
issue. We believe that this disagreement could have been avoided 
through better contract oversight. As discussed above, daily head 
counts sheets were being prepared at each facility. However, neither 
the government nor the contractor apparently acted on the disparity 
between the camp population and the head counts. According to 
representatives of the 101st Airborne Division, they were not aware of 
the cost implications of the disparity. They also said that CJTF-7, the 
next higher headquarters for the 101st, was not interested in the 
numbers of people that were using the dining facility unless the number 
exceeded the number contracted for in the statement of work.

The Navy Provides Oversight for the CONCAP Contract:

Unlike the other contracts we reviewed, the Navy has retained all of 
the contract administration and oversight responsibilities for the 
CONCAP contract. The Naval Facilities Engineering Command uses frequent 
communication and technically qualified staff for overseeing CONCAP 
projects. For example, at Guantanamo Bay, the site of CONCAP's largest 
project, the contractor's on-site project managers provide the Naval 
Facilities Engineering Command, Atlantic Division Headquarters in 
Norfolk, Virginia, with daily situation reports. In addition, 
Facilities Command engineers and engineering technicians located at 
Guantanamo Bay provide on-site quality control for the CONCAP projects 
and document their findings in quality control reports. Partnering 
sessions with customers, contractors, and subcontractors are held 
monthly, and project management officials from the command frequently 
visit the sites to inspect the projects. A command official stated that 
in contracting one must have people with the technical expertise to 
provide oversight of the job. According to officials, a minimum of at 
least one technically qualified person should be on site at each task 
order location.

The Army Has Not Definitized the Majority of LOGCAP Task Orders nor Has 
It Held an Award Fee Board:

The Defense Federal Acquisition Regulation Supplement requires that 
undefinitized contracting actions, such as the task orders used in the 
LOGCAP program, be definitized within 180 days of beginning work or 
before 50 percent of the work is completed. While AFCAP and BSC 
complete the definitization process well within the 180-day time limit, 
many of the LOGCAP task orders have not been definitized despite the 
fact that work has been completed on some of the task orders. In 
addition, the Army has yet to hold an award fee board despite the 
contract requirement to hold a board every 6 months. The award fee 
board is a mechanism for the government to evaluate the contractor's 
overall performance and recommend an amount of award fee. Furthermore, 
it is unclear if the award fee board, when it is held, will be able to 
conduct a comprehensive evaluation of the contractor's performance 
because many LOGCAP customers have not been evaluating and documenting 
the contractor's performance.

Most LOGCAP Task Orders Have Not Been Definitized:

The LOGCAP, AFCAP, and Balkans Support Contracts comprise a series of 
task orders that commit the contractor to provide services and the 
government to pay for them. The task orders are considered 
undefinitized contracting actions because the terms, specifications, 
and price of the task orders are not agreed upon before performance 
begins. Undefinitized contract actions are used when government 
interests demand that the contractor be given a binding commitment so 
that work can begin immediately and negotiating a definitive contract 
is not possible in sufficient time to meet the requirement.

The Defense Federal Acquisition Regulation Supplement requires that 
undefinitized contract actions include a not-to-exceed cost and a 
definitization schedule. It also requires that the contract be 
definitized within 180 days or before 50 percent of the work to be 
performed is completed, whichever occurs first. The head of an agency 
may waive the limitations.

While the AFCAP and BSC task orders have generally been definitized 
within the time allowed by the Defense Federal Acquisition Regulation 
Supplement, and CONCAP task orders do not require 
definitization,[Footnote 14] most of the LOGCAP task orders have not 
been definitized in the required time even though work began on some of 
the task orders in 2002. For example, Air Force contract administrators 
definitized contract terms, on average, in 23 days after issuing a 
notice to proceed. However, as of June 4, 2004, the Army had issued 78 
task orders for the LOGCAP contract, of which 54 require 
definitization. (The 24 task orders that do not require definitization 
are cost reimbursable or firm fixed-price task orders.) The Army and 
the contractor have definitized 13 of the 54 task orders, and 30 task 
orders are in the process of being definitized. In addition, the Army 
and the contractor have also agreed to a schedule for submitting 
qualified proposals for the remaining 11 task orders. Table 3 shows the 
task order award date; the contractually required definitization date; 
the currently scheduled definitization date; and the value of the task 
order for the 10 oldest undefinitized task orders, which total $1.402 
billion.

Table 3: Information on the 10 Oldest Undefinitized LOGCAP Task Orders:

Task order number: 13; 
Description: Base camp support in Afghanistan; 
Award date: Aug. 19, 2002; 
Required definitization date: Feb. 15, 2003; 
Scheduled definitization date: July 12, 2004; 
Estimated value of the task order: $216,263,785.

Task order number: 14; 
Description: Base camp support in Afghanistan; 
Award date: Sept. 29, 2002; 
Required definitization date: Mar. 26, 2003; 
Scheduled definitization date: July 12, 2004; 
Estimated value of the task order: 144,864,959.

Task order number: 15; 
Description: Base camp support in Djibouti; 
Award date: Aug. 23, 2002; 
Required definitization date: Feb. 19, 2003; 
Scheduled definitization date: Sep. 3, 2004; 
Estimated value of the task order: 107,399,369.

Task order number: 27; 
Description: Base camp support in Kuwait; 
Award date: Oct. 10, 2002; 
Required definitization date: Apr. 6, 2003; 
Scheduled definitization date: July 28, 2004; 
Estimated value of the task order: 425,986,448.

Task order number: 28; 
Description: Georgia; 
Award date: Oct. 18, 2002; 
Required definitization date: Apr. 16, 2003; 
Scheduled definitization date: June 28, 2004; 
Estimated value of the task order: 14,088,123.

Task order number: 31; 
Description: Secretary of Defense Plan; 
Award date: Nov. 8, 2002; 
Required definitization date: May 7, 2003; 
Scheduled definitization date: June 7, 2004; 
Estimated value of the task order: 1,883,681.

Task order number: 33; 
Description: Base camp support in Afghanistan; 
Award date: Dec. 29, 2002; 
Required definitization date: June 27, 2003; 
Scheduled definitization date: July 4, 2004; 
Estimated value of the task order: 68,511,111.

Task order number: 34; 
Description: Seaport logistics support in Kuwait; 
Award date: Dec. 30, 2002; 
Required definitization date: June 28, 2003; 
Scheduled definitization date: July 5, 2004; 
Estimated value of the task order: 136,548,891.

Task order number: 35; 
Description: Base camp support in Kuwait; 
Award date: Jan. 8, 2003; 
Required definitization date: July 7, 2003; 
Scheduled definitization date: June 21, 2004; 
Estimated value of the task order: 51,912,923.

Task order number: 36; 
Description: Airport logistics support in Kuwait; 
Award date: Jan. 4, 2003; 
Required definitization date: July 3, 2003; 
Scheduled definitization date: July 19, 2004; 
Estimated value of the task order: 234,100,634.

Total; 
Estimated value of the task order: $1,401,559,925. 

Sources: U.S. Army (data); GAO (analysis).

[End of table]

The table does not include task order 59, which is the LOGCAP 
contract's largest task order, with an estimated value of $3.894 
billion, as it is not among the 10 oldest undefinitized task orders. 
Work began on this task order in June 2003 and according to the 
contract, it was to be definitized by December 2003. According to the 
Army Field Support Command, the definitization process for task order 
59 began on May 6, 2004.

According to the Commanding General of the Army Materiel Command, the 
Army and the contractor have agreed to a schedule for definitizing the 
remaining task orders, and as of May 2004 the contractor has been 
meeting that schedule. Furthermore, if the contractor does not adhere 
to the schedule, the general said that the Army intends to unilaterally 
definitize the contract. Agency officials attribute much of the delay 
in definitizing the task orders to the growing number of task orders, 
the frequent revisions to the task orders, contractor staffing 
problems, and the contractor's antiquated accounting system.

Timely definitization of LOGCAP task orders has been a long-standing 
problem. In 1997 we reported that the LOGCAP contracting officer (then 
the Army Corps of Engineers) and the contractor had not definitized the 
LOGCAP task orders in a timely fashion. [Footnote 15] We noted that 
because the task orders had not been definitized, contract provisions 
that give the contractor major incentives to control costs were not 
effective. Seven years later, we continue to have those same concerns. 
In June 2004, we again reported that delays in defining contract terms 
increase the risk to the government by making cost control incentives 
in award fee contracts less effective. [Footnote 16] We have also noted 
that DOD is required to ensure that the profit allowed on an 
undefinitized contract for which the final price is negotiated after a 
substantial portion of the work is completed reflects the possible 
reduced risk to the contractor.[Footnote 17]

The Army Has Not Held an Award Fee Board for the LOGCAP Contract:

The LOGCAP contract requires an award fee board every 6 months, but the 
Army has yet to hold one even though work under the contract began in 
2002. The award fee board is a mechanism for the government to evaluate 
the contractor's overall performance and recommend an amount of award 
fee. Award fees can serve as a valuable tool to control program risk 
and encourage contractors' performance. According to LOGCAP officials, 
several issues have delayed the award fee boards. First, the LOGCAP 
award fee plan has not been finalized; second, no one has been 
appointed to the award fee board; and third, as we noted above, many 
LOGCAP task orders have not been definitized. Definitization is an 
essential step in the award fee process because it establishes the 
amount of money available for the award fee.

We believe that the Army will find it difficult to hold a board that 
comprehensively evaluates the contractor's performance to date because 
some customers have not been documenting their LOGCAP experience as 
required. According to the Army's LOGCAP guidance, DCMA and LOGCAP 
customers, as part of "Team LOGCAP," should evaluate and document 
contractors' performance and participate in the award fee 
boards.[Footnote 18] DCMA documents contractor performance in the 
periodic situation reports it provides the contracting officer and 
through site-specific performance evaluation boards discussed below. On 
the other hand, customers have not been asked by the contracting 
officer to document their experiences or their evaluations of the 
contractor's performance, and as a result, some have not done so. The 
contracting officer told us that it is important to have customers' 
input. However, many customers with direct knowledge of the LOGCAP 
contractor's performance have left their unit, and capturing this 
information may be difficult. For example, at the 101st Airborne 
Division, the four key officials involved with LOGCAP--the Assistant 
Division Commander for Support, the division's logistics officer, the 
LOGCAP focal point, and the housing officer--are all in the process of 
moving to their next posts.

DCMA has documented customer-performance evaluations in site-specific 
performance evaluation boards at some locations. In Djibouti, the 
Marine Corps and DCMA hold performance evaluation boards every 2 months 
to evaluate the contractor's performance and provide the contractor 
with feedback. During these meetings, key command officials and DCMA 
meet to evaluate the contractor's performance using the evaluation 
criteria established in the LOGCAP contract. While no fee is awarded, 
scores are tabulated and provided to the contracting officer. 
Performance evaluation boards have also been held for some of the 
Afghanistan and Iraq task orders.

Lessons Learned Have Not Been Systematically Collected, Shared, or 
Implemented:

Despite over 10 years of experience in using logistics support 
contracts, the Army continues to experience the same types of problems 
it experienced during earlier deployments that used LOGCAP for support. 
For example, in our previously cited 1997 report on the Army's use of 
LOGCAP in Bosnia, we cited inadequate training as a cause of many of 
the Army's problems in controlling contract costs.[Footnote 19] In that 
report we recommended that the Army provide commanders with training on 
the fundamentals of using the LOGCAP contract. In our 2000 report on 
U.S. Army, Europe's, use of BSC we again cited the need for better 
training. [Footnote 20] In 2004 Army officials told us again that 
LOGCAP training needs to be improved. In addition to training concerns, 
we also reported in 1997 that U.S. Army, Europe, officials felt the 
contractor's cost-reporting system used in Bosnia was not sufficient to 
track the cost of the operation or report on how LOGCAP funds were 
spent. As we noted above, from September 2003 through May 2004, DCMA 
expressed similar concerns about the LOGCAP contractor's current cost 
reports.

The Army requires that lessons learned be captured. Army Regulation 
700-137, which establishes the LOGCAP program, makes customers that 
receive services under the LOGCAP contract responsible for collecting 
lessons learned. [Footnote 21] However, there are no procedures in 
place to ensure that lessons learned are collected and shared and, as 
we noted above, LOGCAP customers are generally not documenting their 
experiences. In the Army, a primary organization responsible for 
collecting lessons learned is the Army Center for Lessons Learned. The 
center collects and analyzes data from a variety of current and 
historical sources, including Army operations and training events, and 
produces lessons for military commanders, staff, and students. The 
Center for Army Lessons Learned database contains numerous articles on 
using logistics support contracts, but our review found little 
information on the challenges and problems commanders have faced in 
using these contracts or what commanders should plan for and anticipate 
when using them. For example, we found nothing on the challenges that 
commanders' face in controlling costs. While U.S. Army, Europe, which 
has had the most experience in using logistics support contracts, has 
periodically advised us of the steps it has taken to improve its 
management of BSC, it has not consolidated these lessons learned and 
made them available for others. U.S. Army, Europe, does maintain a 
lessons learned database that captures the experiences of soldiers in 
Bosnia and Kosovo, including the use of LOGCAP and BSC; however, it 
might be difficult to access the database as it is not mentioned on the 
U.S. Army, Europe, Web site. In a meeting with the commanding general 
of the Army Materiel Command, he agreed that there was a need for a 
lessons-learned system, which would "push" lessons and best practices 
down to the organizations using the contract.

The LOGCAP and the Balkans Support contracts both require that the 
contractor collect lessons learned and provide the government with 
them. Generally, these lessons learned are collected at the small task 
level (e.g., how to prevent slipping in the shower) rather than at the 
macro-level. While useful, these types of lessons-learned do not 
address systemic contract management problems or help improve contract 
management. In addition, the contractor does not have an internal 
lessons learned program. Instead, contractor personnel take lessons 
they have learned as they move from deployment to deployment, and 
contract to contract.

The Military Services' Efforts to Ensure That Contractors Perform in an 
Economical, Efficient, and Cost Conscious Manner Vary Widely:

OMB circular A-123 requires all managers of federal funds to ensure 
that cost-effective controls be implemented for the expenditure of 
appropriated funds, and the Army's senior leadership has recognized the 
Army's responsibility to be good stewards of the taxpayers' dollars. 
While contract oversight is the responsibility of the contracting 
officer, as indicated in the OMB circular, all managers have a 
responsibility to ensure that agency programs operate in an economical 
and efficient manner and that costs are controlled. Efforts to control 
costs vary widely both across and within logistics support contracts. 
The Army and the Army Central Command did not make the need to control 
LOGCAP spending for activities in Iraq and Kuwait a high priority until 
late 2003. However, CJTF-180 made controlling LOGCAP costs in 
Uzbekistan an important goal during the early days of Operation 
Enduring Freedom. Managers for BSC, CONCAP, and AFCAP recognized the 
need to be good stewards of the taxpayers' dollars and have taken steps 
to control costs. We have noted that when the customer reviews the 
contractor's work for economy and efficiency, savings are realized. 
However, steps to conduct these reviews have not been taken by LOGCAP 
customers at all task order locations. In addition, both the Army and 
the Air Force believed that at times they had no other option but to 
use their logistics support contracts to obtain goods and services even 
when they knew that other methods might have resulted in lower costs. 
For example, the Army had the contractor provide housing for an Army 
division although it was more costly than allowing the unit to build 
the housing itself because at the time the Army decided to use LOGCAP, 
it was the only means available to get the 101st Airborne Division into 
housing by a November 15, 2003, deadline. Similarly, the Air Force used 
the AFCAP contract to supply commodities for its heavy-construction 
squadrons because it did not deploy with enough contracting and finance 
personnel to buy materials quickly or in large quantities although the 
use of the contract to procure and deliver commodity supplies required 
that the Air Force pay the contractor's costs plus an additional award 
fee.

Efforts to Control Costs Vary across Logistics Support Contracts:

We recognize that cost control should not be the primary consideration 
for commanders when U.S. forces are involved in major combat operations 
or when the operational environment or security situation requires the 
presence of more troops or the relocation of forces. However, cost 
constraint did not become a factor in using LOGCAP in Iraq and Kuwait 
until almost a year into the operations in Iraq. The Army Central 
Command, the Army command responsible for paying for LOGCAP, had no 
spending limits for LOGCAP until spring 2004, when a $6.5 billion limit 
was placed on the amount that could be spent in fiscal year 2004 on the 
basis of the estimated cost of required work. The spending limit 
followed a December 2003 message from the Army Vice Chief of Staff that 
asked units to control costs and look for alternatives to the LOGCAP 
contract and the realization that LOGCAP costs were growing rapidly. 
According to a study commissioned by the Army Budget Office, from 
September 2003 through January 2004, projected LOGCAP costs for 
services in Kuwait, Iraq, and Afghanistan grew from $5.8 billion to 
$8.6 billion. In late 2003, the Army Central Command requested that 
"Team LOGCAP" review the cost estimates for the task orders being used 
in Kuwait, Iraq, and Afghanistan to determine if the cost estimates 
could be reduced. According to the Army Budget Office, this review 
reduced the estimated cost of using LOGCAP in the Army Central 
Command's area of responsibility from $8.6 billion to $6.5 billion, 
although most of the reduction came from the use of more accurate cost 
data rather than a reduction in requirements or more economical 
approaches. According to the Army Central Command, commanders in the 
area of operations have established additional review procedures. For 
example, all requests for services greater than $50,000 must be 
approved by a general officer before the requests can be considered for 
approval by the local acquisition review board. Additionally, all 
requests that would add services to the LOGCAP contract valued at more 
than $10 million must be reviewed by a LOGCAP and service contract 
review board. Members of the review board include the deputy commanding 
general for support and other high-ranking members of the command 
staff.

As we noted earlier, the Army Audit Agency examined the use of LOGCAP 
in Turkey,[Footnote 22] Afghanistan,[Footnote 23] and 
Uzbekistan.[Footnote 24] They reported that commanders in each location 
had adequate procedures in place to control costs. In particular, the 
Army Audit Agency reported that program managers in Uzbekistan and 
Turkey had made cost control a priority and in Afghanistan had taken 
appropriate action to control costs and ensure effective stewardship.

Cost control has long been a matter of importance for contract 
administration officials for CONCAP, AFCAP, and BSC. Navy and Air Force 
officials believe that using the CONCAP and AFCAP contracts to fulfill 
a requirement is often the most expensive option available; 
consequently, they have taken steps to control costs. For example, to 
control costs, CONCAP establishes a budget for each project and works 
closely with the contractor and customer to agree on requirements and 
costs before the project gets under way.

The AFCAP contracting officer and program managers have retained cost-
control responsibilities and review and substantiate the contractor's 
cost estimate at the beginning of each task order. At the initiation of 
each task order, AFCAP contract administrators negotiated costs 
proposed by the contractor in order to receive advantageous pricing for 
the government. Additionally, the government's review of proposed costs 
allows it to better define its requirements for the contractor. We 
reviewed several examples of the memoranda detailing these negotiations 
and found that the government developed cost estimates that were 
significantly less than the contractor's original proposal. For 
example, the government achieved reductions that ranged from 6 percent 
to 97 percent on the basis of the review and substantiation of the 
contractor's cost proposals. Regarding the largest proportionate 
reduction, the AFCAP contractor estimated that it would cost $23.1 
million to provide and maintain equipment for Air Force construction 
units However, in reviewing this proposal, the AFCAP contract 
administrator determined that the government had overstated its 
requirements, resulting in a 97 percent, or $22.3 million reduction.

U.S. Army, Europe's, focus on cost control has increased since BSC was 
first awarded. Beginning in the fall of 2001, U.S. Army, Europe, has 
taken a number of steps to control the costs of BSC, as shown below:

* In fiscal year 2003, resource managers established a cost reduction 
goal for the contract.

* Command leadership issued guidance on the need to be cost conscious.

* Cost control became the most important criterion for determining the 
contractor's award fee.

* The command sets cost-control goals for the contractor at every award 
fee board.

Steps to Ensure That the Contractors Provide Service in an Economical 
and Efficient Manner Have Not Been Taken at All Task Order Locations:

Customers who use the logistics support contracts have a role in 
ensuring that the contracts are used in an economical and efficient 
manner, and our previous work has shown that when government officials 
(including customers) review the contractor's work for economy and 
efficiency, savings are generated. For example, in part as a result of 
our previously cited 2000 report on managing BSC, U.S. Army, Europe, 
has developed a proactive approach to managing BSC and ensuring that 
the contractor provides services in an economic and efficient manner. 
U.S. Army, Europe, reported savings of approximately $200 million by 
reducing services and labor costs, and by closing or downsizing camps 
that were no longer needed. The $200 million in savings is about 10 
percent of the current contract ceiling price of $2.098 billion. In 
addition to these savings, U.S. Army, Europe, routinely sends in teams 
of auditors from its internal review group to review practices and to 
make recommendations to improve economy and efficiency. Examples of the 
audit results are as follows:

* In March 2001, U.S. Army, Europe, auditors reported that shuttle bus 
services within Task Force Falcon (Kosovo) were not well utilized and 
that the services should be reduced.[Footnote 25] The auditors 
estimated that reducing bus service would result in a savings of more 
than $700,000 during the remaining 3 years of BSC.

* In September 2001Army auditors recommended that the Army provide the 
contractor with gravel and sand as government-furnished equipment 
partly because the contractor was maintaining excessive inventories of 
these materials.[Footnote 26] Auditors estimated that by providing sand 
and gravel as government-furnished materiel, the Army could save 
approximately $365,000 over the remaining 3 years of the contract.

The Marines have also taken actions to ensure that the contractor is 
working in a cost-efficient and economical manner. When Marine Corps 
forces replaced Army forces in Djibouti in December 2002 (to provide 
humanitarian assistance and fight the Global War on Terrorism), they 
also took over responsibility for funding LOGCAP services. Marine 
commanders immediately undertook a complete review of the statement of 
work and were able to reduce the $48 million task order by an estimated 
$8.6 million, or 18 percent.[Footnote 27] The savings came by 
eliminating or reducing services in the following areas:

* building and construction projects--$2.8 million,

* equipment--$2.9 million,

* labor hours--$2.0 million, and:

* materials and miscellaneous items--$0.892 million.

Marine Forces Central Command deploys teams of subject matter experts 
to Djibouti semiannually to identify services that could be eliminated, 
reduced, or changed. Since its initial review, the Marines have 
identified potential additional savings totaling more than $2 million, 
including $75,000 a year as a result of having the contractor switch 
from a popular commercial laundry detergent to a detergent available 
through the Marine Corps' supply system.

In the Balkans and in Afghanistan, command policy requires a periodic 
review of all services being provided by contractors to determine if 
the appropriate services as well as the appropriate level of services 
are being provided. During our visit to Bosnia in October 2002, 
commanders reported that these reviews resulted in a yearly cost 
savings of approximately $120,000.[Footnote 28] Among the services 
reduced were cleaning and janitorial services and operating hours for 
wash racks and fuel service facilities. U.S. Army, Europe, requires 
that these reviews be conducted three times a year prior to the award 
fee boards. In Afghanistan CJTF-180 guidance requires that the reviews 
be held monthly; however, the Army Audit Agency noted that these 
reviews were not taking place. In response to the Army Audit Agency 
report, the command revised its guidance to include procedures for the 
reviews.

On the basis of our visit to Kuwait in December 2003 and a review of 
CJTF-7 policies, it appears that neither the Army Central Command in 
Kuwait nor CJTF-7 in Iraq have established similar policies mandating 
regularly scheduled reviews of services. However, some reviews of 
services have been undertaken since January 2004, as shown below:

* On the basis of the Army Central Command estimate that $2.6 million 
could have been saved in March 2004 if it removed food service from the 
LOGCAP contract and contracted directly for food service at six 
locations in Kuwait, we calculated that this could save almost $31 
million a year. The transition has been directed to take place in June 
2004, and a schedule has been established setting out the dates on 
which each location is to transition. By eliminating the use of LOGCAP 
and making the LOGCAP subcontractor the prime contractor, the command 
reduced meal costs by 43 percent without a loss of service or quality.

* During a review of task order 59, change 7, CJTF-7 was able to reduce 
the estimated cost of the task order by over $108 million by 
eliminating services and an extra dining and laundry facility.

Circumstances Did Not Always Allow the Army and Air Force to Select a 
More Economical and Efficient Method to Obtain Services:

Circumstances did not always allow the Army and the Air Force to use a 
more economical and efficient means to obtain services. Both the Army 
and the Air Force believed they had no other options but to use their 
logistics support contracts to obtain goods and services even when they 
knew that other methods would have resulted in lower costs. For 
example, as discussed below, CJTF-7 concluded that it had no choice but 
to use the LOGCAP contract to provide housing for the 101st Airborne 
Division despite the fact that CJTF-7's own cost estimate showed that 
having the contractor provide the housing would cost the Army tens of 
millions of dollars more than having the 101st Airborne Division build 
its own housing. Air Force engineering squadrons used the AFCAP 
contract to provide supplies for construction projects because they 
were not able to deploy with sufficient assets to obtain the needed 
supplies. However, by using the contractor, the Air Force paid an award 
fee on task orders with limited risk.

The Need for Housing Made Using LOGCAP the Only Viable Choice for the 
Army:

In July 2003, a decision was made to extend the deployment of the 101st 
Airborne Division through February 2004. As a result, getting the 
division's soldiers out of tents before the onset of winter in northern 
Iraq became a priority for division leadership. To achieve the 
division's goal of getting its soldiers out of tents by November 15, 
2003, the division, in conjunction with CJTF-7, considered three 
courses of action as follows:

* Allow the division to build its own housing, purchasing the necessary 
material and using the division's engineer brigades to do the 
construction. This was the division's preferred option, as division 
leadership felt it would get the troops "out of tents" by November 15, 
2003, and also provide a valuable training opportunity for its 
engineers. However, CJTF-7 concluded that this was not a viable option, 
since it would require the use of military construction funds, which 
CJTF-7 believed were no longer available. According to an official with 
CJTF-7, the task force did not believe that military construction funds 
would be available until November 2003 at the earliest, so work would 
not start until December 2003 and possibly as late as February 
2004.[Footnote 29]

* Divide the division's entire housing requirement into 33 individual 
projects so that the individual projects could be built with operation 
and maintenance funds, allowing the division to build its own 
housing.[Footnote 30] CJTF-7 concluded that this was not a legally 
sound option, as it would involve dividing one project into several 
projects.

* Obtain the housing under the LOGCAP contract. The Army determined 
that CJTF-7 could use operation and maintenance funds to buy movable 
buildings, since the buildings could be moved as necessary for mission 
requirements unlike nonmovable buildings, which would require military 
construction funds. This was the course of action ultimately accepted, 
and in early October 2003, the administrative contracting officer 
directed the LOGCAP contractor to provide the housing for the 101st 
Airborne Division. The statement of work required that the housing be 
provided by November 15, 2003. However, according to officials from 
both CJTF-7 and the 101st Airborne Division, the contractor did not 
meet the scheduled delivery date.

The decision to use the LOGCAP contract carried a substantial cost 
premium. The division estimated that it would cost about $25 million to 
build its own housing. The $25 million included building material for 
the housing, as well as showers, power generation and heating and air 
conditioning. Latrines were not included in the cost estimate and were 
to be provided by a contractor. The government's cost estimate to use 
LOGCAP to provide housing, showers and power generation, was about $65 
million plus over $8 million in administrative costs and potential 
award fee. The $65 million included the purchase of (1) reusable 
containers for housing and showers, (2) maintaining the containers, (3) 
installing the units at locations around northern Iraq, and (4) 
procuring and installing power. In discussions with CJTF-7 on how 
housing was obtained, we were told that using the LOGCAP contract was 
more costly then having the 101st Airborne Division build the housing 
units themselves; however, at the time they made the decision to use 
LOGCAP, they concluded that it was the only legal means available to 
get the 101st into housing by the November 15 deadline.

Although buying the trailers was more expensive than allowing the 
division to build its own housing, the cost of the two options is not 
directly comparable because the trailers are reusable and moveable 
whereas the housing built by the division is not. [Footnote 31] Should 
the trailers ultimately be reused elsewhere, thus reducing future 
housing costs, the disparity between the options could be reduced in 
the long term. At this time, how well the trailers will hold up in the 
Iraqi climate and the extent to which the trailers will be reused once 
they are no longer needed in northern Iraq is unknown, so a full cost 
comparison cannot be done.

The Air Force and Others Have Used AFCAP to Purchase Supplies Despite 
the Fact That It May Not Be a Cost-Effective Use of the Contract:

The Air Force has used the AFCAP contract to supply commodities such as 
building materials, tools, and equipment for its heavy construction 
squadrons. According to Air Force officials, engineering squadrons use 
the AFCAP contract for commodities because they do not deploy with 
enough contracting and finance personnel to buy materials quickly or in 
large quantities. Additionally, the U.S. Agency for International 
Development has used the contract to provide disaster relief and 
humanitarian assistance supplies. In many instances, the contractor 
provided a service for the customer, such as equipment maintenance, in 
addition to the procurement of the supplies. In other cases, however, 
the contractor simply bought the supplies and delivered them to the 
customer. The contractor received more than $2 million in award fees 
since February 2002 for these commodity supply task orders. While 
contractually permitted, the use of a cost-plus award fee contract as a 
supply contract may not be cost-effective. In these instances, the 
government reimburses the contractor's costs and pays additional award 
fees for task orders with little risk.

The Air Force and other federal agencies that use the contract to 
procure and deliver commodity supplies are required to pay the 
contractor's costs plus an additional award fee--a 1 percent base fee 
and up to 6 percent award fee--on each task order performed. Air Force 
program managers have recognized that the use of a cost-plus award fee 
contract to buy commodities may not be cost-effective. According to 
these officials, the next version of the contract may allow for either 
firm-fixed prices or cost-plus fixed fee procurements on these types of 
task orders. Firm-fixed price or cost-plus fixed fee contracts will 
reduce the potential amount of fees paid to the contractor, thereby 
providing the government with a more cost-effective alternative.

DOD Did Not Always Have Enough Personnel to Manage Its Logistics 
Support Contracts, and Available Personnel Often Lack the Training to 
Effectively Use and Monitor the Contract:

Given the scope and complexity of logistics support contracts, there 
were not always enough personnel responsible for contract oversight and 
monitoring the performance of the contractor, and oversight personnel 
have not always been adequately trained. DOD deploys civilian and 
military personnel to provide contract administration and oversight of 
its logistics support contractors. For example, DCMA has deployed 
administrative contracting officers to several countries throughout 
southwest and central Asia and the Balkans to provide on-site contract 
administration. The Defense Contract Audit Agency has provided audit 
assistance in contingency locations to ensure that the costs claimed by 
the logistical support contractors are appropriate. The military 
services have also deployed personnel to assist unit commanders that 
are receiving contract services and to monitor the performance of the 
contractor.

We could find no guidelines on the appropriate number of DCMA oversight 
personnel and hence relied on the judgments expressed in DCMA's 
situation reports and the views of oversight personnel with whom we 
spoke as to the adequacy of staffing. A DCMA official told us there are 
no specific criteria for determining the size of a deployed contract 
administration team. Each request for assistance is reviewed, and the 
team size is based on the risk associated with the contract. DCMA has 
recognized its human capital challenges, including its staffing 
challenges, and has developed a strategic plan to address them.

DCMA officials believe that additional resources are needed to 
effectively support the LOGCAP and AFCAP contracts. Administrative 
contracting officers in Iraq, for example, have been overwhelmed with 
their duties as a result of the expanding scope of some of the task 
orders. Additionally, some Army and Air Force personnel with oversight 
responsibilities did not receive the training necessary to effectively 
accomplish their jobs. On the other hand, the Navy has provided 
contract monitors that are qualified and trained for their 
responsibilities under the contract. In addition, military units 
receiving services from the contracts generally lacked a comprehensive 
understanding of their roles and responsibilities. For example, 
officers do not understand their role in establishing LOGCAP 
requirements.

Limited Number of Personnel Support the Oversight of the Logistics 
Support Contracts:

Several defense agencies and the military services deploy civilian and 
military personnel to assist with contract administration and 
oversight. For example, as of April 14, 2004, DCMA had approximately 65 
personnel deployed to locations in southwest and central Asia to 
provide on-site contract administration. The agency has contracting 
officers in Iraq, Kuwait, Qatar, Afghanistan, Uzbekistan, and Djibouti 
in support of the LOGCAP and AFCAP contracts, as well as other 
contracts. In addition, three DCMA personnel in Bosnia and three in 
Kosovo have been deployed to support the Balkans Support Contract and 
other contracts.

The Defense Contract Audit Agency provides contract oversight and audit 
assistance for the military at deployed locations. The agency planned 
to have 31 auditors in its Iraq branch office by May 31, 2004, to 
oversee the LOGCAP contract as well as other contracts. Defense Audit 
Agency offices located at contractor facilities in the United States 
also provide contract oversight. The agency oversees the Balkans 
Support contractor on request from the Corps of Engineers-Transatlantic 
Programs Center.

The Army has also deployed military personnel to assist unit commanders 
in implementing services provided by its logistics support contractor. 
As of April 14, 2004, 19 members of the 66-person support units were 
deployed in the Persian Gulf and central Asia. Members of the units are 
not contracting officers and cannot direct the contractor nor make 
changes to the contract. Members advise commanders on LOGCAP and help 
customers develop statements of work. Members also develop independent 
government cost estimates. Frequently, the unit members are responsible 
for several task orders concurrently.

While the defense agencies have effectively supported the military in 
these locations, DCMA administrative contracting officers in Iraq 
believe that they need an increase in the number of qualified staff to 
fully meet their oversight mission. DCMA not only provides contract 
administration for the LOGCAP and AFCAP contracts, it also supports 
other large contracts in Iraq. The Army requires that DCMA review and 
approve purchase requisitions valued at more than $2,500 for LOGCAP 
task orders. A DCMA official who served in Iraq estimated that the six 
administrative contracting officers in his command reviewed from 200 to 
500 requisitions a week. Another DCMA official indicated a need to hire 
contracting and procurement technicians to improve the operations of 
DCMA in Iraq. Moreover, Marine Forces, Central Command officials we 
spoke to believe that the number of DCMA personnel providing contract 
oversight in Djibouti is insufficient. As we noted above, DCMA has 
approximately 65 contracting officials deployed to support the LOGCAP 
and AFCAP contracts in the Central Command's area of responsibility 
having an estimated value of more than $6.5 billion. In contrast, DCMA 
deployed a 30-member team to administer the LOGCAP contract in Bosnia 
in 1996. At that time, the value of the work in Bosnia was 
approximately $461.5 million. Essentially, in the Central Command's 
area of responsibility, including Iraq, DCMA had slightly more than 
twice the number of people it had in the Balkans and an estimated value 
of work that is almost 15 times more than in the Balkans.

DCMA officials in southwest Asia told us that they need an additional 
administrative contracting officer and property administrator to 
account for $2 million worth of construction tools and equipment that 
are currently unaccounted for in the AFCAP contract. Under AFCAP task 
orders in southwest and central Asia, the procuring contracting officer 
delegated certain administrative responsibilities to the contracting 
officers, to include property administration. However, DCMA did not 
assign a property administrator for the AFCAP contract. According to 
officials, DCMA deployed one property administrator who was responsible 
for all property in the theater. An additional administrative 
contracting officer and a property administrator would assist the Air 
Force to close out the approximately 80 completed task orders in 
southwest Asia. The Air Force cannot close out completed task orders 
until the property is accounted for.

According to DCMA, it has limited resources to support the military at 
deployed locations because staffing has been reduced by 55 percent over 
the last 11 years. DCMA uses its in-plant personnel, who oversee the 
acquisition of major weapon systems, such as aircraft, to support its 
contingency contract administration services. Increasing the number of 
deployed DCMA personnel means reducing the number of DCMA personnel at 
defense plants. One possible approach to overcome staffing shortages is 
being tried in the Balkans. DCMA has reduced its presence there and has 
replaced some U.S. citizens with contracted host country nationals that 
assist the administrative contracting officers and quality assurance 
personnel. This has allowed DCMA to adjust its limited pool of 
personnel.

Military Members with Key Oversight and Management Roles Either Had No 
Training or Insufficient Training to Do Their Jobs:

The personnel deployed by the military services to monitor the 
performance of the logistical support contractors have not always 
received the training necessary to accomplish their missions. Army 
guidance on the use of the LOGCAP contract describes the logistics 
support unit as a significant player in LOGCAP event execution. 
[Footnote 32] Logistics support unit members may be called upon to 
write statements of work, prepare independent government cost 
estimates, review the contractor's cost estimates and technical plans, 
and act as an interface between the customer and the contractor. 
According to LOGCAP officials, the original members of this unit were 
deployed in the early stages of Operation Iraqi Freedom. When the 
original members returned home, the unit was staffed with individuals 
with no prior LOGCAP or contracting experience. For example, most of 
the replacement support unit members we met during our December 2003 
trip to Kuwait had received only a 2-week training session before 
deploying and had little experience or training in developing 
independent government cost estimates. These cost estimates are used to 
judge the reasonableness of the contractor's cost proposal and to 
determine if sufficient resources are available to fund the statement 
of work. In a 2004 report on the use of LOGCAP in Afghanistan, the Army 
Audit Agency also noted that members of the logistics support unit 
needed better training, particularly when it came to developing 
independent government cost estimates.[Footnote 33]

The Air Force has not consistently provided training for its personnel 
overseeing the performance of the AFCAP contractor. The Air Force 
appoints quality assurance evaluators (who are subject matter experts) 
to ensure that the contractor is performing in accordance with the task 
order statement of work. Air Force guidance requires quality assurance 
personnel to be appointed and trained prior to assuming quality 
assurance responsibilities.[Footnote 34] However, the Air Force quality 
assurance evaluators assigned in southwest and central Asia were not 
consistently appointed, trained, or performing their responsibilities. 
Specifically, AFCAP contract administrators have not consistently 
provided Air Force quality assurance evaluators with appointments and 
training. For example, while a quality assurance evaluator had been 
appointed for a major construction project in Qatar, the evaluator told 
us that he had received no training on the AFCAP contract or on his 
duties and responsibilities as an evaluator. Quality assurance 
evaluators have also not been effectively documenting the performance 
of the contractor. Without comprehensive performance evaluations 
conducted regularly by quality assurance evaluators, the government has 
had difficulty in determining the amount of fee to award the 
contractor.

Conversely, the CONCAP contract administrator has technically qualified 
staff providing day-to-day oversight at specific job sites. During our 
visit to Guantanamo Bay, Cuba, we observed that the Navy Facilities 
Engineering Command has the basic construction contract administration 
functions performed by personnel in one of the three following general 
categories:

* Engineers, including degreed engineers or architects, with many 
licensed by one or more states. In addition to formal education and 
licensure, engineers receive Navy-specific training in safety, quality 
management, and other construction-related areas. Typically, engineers 
serve in contracting officers' technical representative positions and 
Navy technical representative positions.

* Engineer technicians that are generally trade-specific individuals 
with extensive construction-related background. Their positions are 
often titled as "quality assurance representative." As with engineers, 
they receive Navy-specific training as part of their position. In 
certain instances, technicians may serve as Navy technical 
representatives, usually when the work is of limited scope. In those 
cases where an engineer serves as the Navy technical representative or 
contracting officer's technical representative, it is common practice 
to have one or more technicians working under the technical supervision 
of the engineer in the management and oversight of contract work.

* Contract specialists and contracting officers that have extensive 
education and training requirements. All Navy Facilities Engineering 
Command personnel in this category are appropriately trained, 
certified, and warranted at the appropriate level.

DOD Personnel Often Lacked the Training to Effectively Use the 
Contract:

Customers using the logistics support contracts also have a role in 
ensuring that the contracts are used in an economical and efficient 
manner, yet many are unaware that they have any role in the contract 
management or oversight process. We found that officers and 
noncommissioned officers using the LOGCAP and AFCAP contracts had 
little understanding of these contracts and did not fully understand 
their contract management responsibilities because they had had little 
or no training on using contractors, including the LOGCAP contractor, 
on the battlefield. In interviews, Army customers told us that they 
knew nothing about LOGCAP before they deployed and had received no 
training regarding their roles and responsibilities as a LOGCAP 
customer. For example, a senior logistics officer in the 101st Airborne 
Division told us that the Army does not educate its battalion and 
brigade commanders on LOGCAP or on the Army regulation governing the 
contract. Furthermore, he noted that information about the LOGCAP 
contract was not included in any of his precommand training courses.

In our 2003 report on DOD's use of contractors to support deployed 
forces, [Footnote 35] we noted a lack of training or education for 
commanders or senior personnel on the use of contractors, and we 
recommended that DOD develop training courses for commanding officers 
and other senior leaders who are deploying to locations with contractor 
support. DOD agreed with our recommendation. We also noted in our 2003 
report that U.S. Army, Europe, had responded to our earlier concerns 
regarding the lack of training for commanders and now includes contract 
familiarization during mission rehearsal exercises for the Balkans 
deployments.

The Commanding General of the Army Materiel Command has also expressed 
his concerns about the lack of training regarding LOGCAP for soldiers. 
In an e-mail message to the Army Deputy Chief of Staff for Logistics 
discussing reasons why the LOGCAP contractor is slow to respond to the 
Army's needs, the general said:

"The first is the lack of preparation our officers have for dealing 
with LOGCAP: we don't train this as a capability that our officers 
consider during deliberate planning. This unfamiliarity with LOGCAP in 
general contributes to considerable delay up front, as we rely on the 
requesting unit to generate the statements of work that are the 
catalyst for the entire process . . . .":

In our previously cited 2000 report on BSC, we highlighted the problem 
of poorly written statements of work. For example, we noted that the 
Army did not provide the contractor with guidance regarding the level 
of power generation redundancy (i.e., backup power) needed in Kosovo. 
As a result, the contractor bought and leased generators to provide 100 
percent power redundancy. Army officials later told us that much less 
redundancy was needed and by reducing the redundancy and shifting from 
leased to purchased generators, the Army was able to save approximately 
$85 million over 5 years. The problem of poorly written statements of 
work continues with the current LOGCAP contract. For example, task 
order 59 requires the contractor to provide water for units within 100 
kilometers of designated points. However, the statement of work does 
not indicate how much water needs to be delivered to each unit or how 
many units will need water. The statement of work also requires that 
the contractor maintain the capability to recover vehicles. According 
to the contractor's deputy project manager, problems with this 
requirement include the following: (1) there is no indication if the 
contractor will provide the primary vehicle recovery support or be the 
backup to the Army, (2) the time frame for recovery is not specified, 
and (3) whether the contractor is supposed to recover vehicles both on 
and off road is not specified. Without this information, the contractor 
cannot determine how to meet the needs of the Army and may take 
excessive steps to ensure customers' satisfaction. According to LOGCAP 
guidance, statements of work must be specific in detail and to the 
point.

AFCAP program managers expressed frustration that Air Force customers 
lacked institutional knowledge of the contract. AFCAP program managers 
stated that they have attempted to institutionalize training for the 
Air Force's major commands but have been unsuccessful to date in 
convincing the commands to send representatives for training. According 
to the program managers, the Air Force's major commands are not 
interested in the AFCAP contract until its services are needed; 
whereupon the program managers are required to train the command 
personnel.

Conclusions:

Over the past few years, DOD and the Army have developed doctrine and 
guidance for using logistics contracts to support operations, which 
include the early identification of requirements, and involving the 
contractor in developing comprehensive statements of work as recurring 
themes. These principles support a concept that when the contractor has 
adequate time to plan and prepare to accomplish its mission, service 
quality improves and costs are lowered. However, planning for the use 
of the LOGCAP contract to support the troops in Iraq did not begin 
until after the fall of Baghdad, was not comprehensive, and did not 
include the contractor. Instead, a piecemeal approach to planning 
occurred and resulted in constant changes to the statement of work and 
forced the contractor to scramble to meet contract requirements, 
resulting in unmet expectations, lower-quality services, and 
unnecessary costs. Even considering the inherent uncertainty of wartime 
planning, a more deliberate approach involving the contractor, as 
discussed in the doctrine and guidance, would, in our opinion, have 
resulted in a better product at a lower cost.

Our previous and current work has repeatedly shown that when customers 
of logistics support contracts review the types and level of services 
provided by contractors for both economy and efficiency, savings can be 
realized. While some customers have developed procedures for periodic 
reviews of recurring services using subject matter experts, others have 
not. Until all customers develop review programs, DOD will have limited 
assurance that it is paying only for services it truly needs.

DOD, particularly the Army, has had more than 10 years of experience 
using logistics support contracts such as LOGCAP and the Balkans 
Support Contract, yet it often makes the same mistakes in new 
deployments. Unless it establishes a lessons learned program, DOD is 
likely to repeat the same costly mistakes it has made since first using 
logistics support contracts to support deployed forces.

The lack of contract training for operational commanders, customers, 
and others with responsibilities to use, manage, and oversee logistics 
support contracts has adversely affected the use of such contracts to 
support deployed forces in contingency operations. Commanders and other 
senior leaders must understand that they have a key role in identifying 
requirements, ensuring that the contractor works in a cost-effective 
manner, and evaluating contractors' performance. Without such an 
understanding, the government's ability to control contract costs and 
ensure quality service at the best possible price is severely limited.

Recommendations for Executive Action:

To promote better planning, improve oversight, and improve efficiency 
when using logistics support contracts to support military operations, 
we recommend that the Secretary of Defense ensure that the four 
following actions be taken:

* Emphasize to the heads of DOD components the need to comply with 
guidance to identify operational requirements that are to be provided 
by contractors early in the planning process and involve the contractor 
in the planning, where practicable. If security concerns prevent the 
involvement of the contractor, direct that unclassified statements of 
work be developed and provided to the contractor.

* Direct the service secretaries to establish teams of subject matter 
experts who will periodically travel to locations where contractor 
services are being provided by logistics support contracts to evaluate 
and make recommendations on (1) the appropriateness of the services 
being provided, (2) the level of services being provided, and (3) the 
economy and efficiency with which the services are being provided.

* Implement a department-wide lessons learned program that will capture 
the experiences of others who have used logistics support contracts. 
This system should include lessons learned from operations as well as 
lessons learned and best practices documented by DOD's audit agencies.

* Develop and implement training courses for commanding officers and 
other senior leaders who are deploying to locations with contractor 
support. Such training should provide information on the role of 
commanders and others in the contracting process. Specifically, the 
training should provide instruction on (1) developing and documenting 
requirements, (2) ensuring that contractors perform in a cost-effective 
manner, and (3) assessing contractors' performance. The training should 
also include information on the limits of commanders' authority vis--
vis contractors and include information on the roles and 
responsibilities of DCMA and other oversight agencies.

Agency Comments and our Evaluation:

In written comments on a draft of this report the Acting Deputy 
Secretary of Defense for Logistics and Materiel Readiness stated that 
it concurred with the report and all its recommendations. The 
department's comments are reprinted in appendix II.

In its comments, DOD described the steps it plans to take to implement 
our recommendations. Regarding our recommendations on emphasizing the 
need to comply with guidance on planning for the use of contractors and 
the establishment of teams of subject matter experts to evaluate and 
make recommendations where appropriate on the appropriateness and level 
of services being provided and the economy and efficiency with which 
they are being provided, DOD noted the discussion in the draft report 
on the existing guidance and efforts to review services. The department 
stated that it will reiterate this guidance and the need for subject 
matter experts to make periodic visits in policy memoranda and in such 
issuances as a draft DOD instruction on procedures for the management 
of contractor personnel during contingency operations. Regarding our 
recommendation to implement a department-wide lessons learned program 
that will capture the experiences of others who have used logistics 
support contracts, DOD stated that it will investigate how best to 
capture lessons learned. DOD said it initially will explore the 
possibility of establishing such a database as part of the Logistics 
Community of Practice at the Defense Acquisition University. Regarding 
our recommendation for training for commanding officers and other 
senior leaders who are deploying to locations with contractor support, 
DOD stated that it will begin discussions with the Defense Acquisition 
University, the services, and the Defense Contract Management Agency on 
how best to unify current disparate training and create a training 
capability that will be applicable and available to all. DOD said that 
an initial proposal would be to establish a continuous learning-type 
training module that could be utilized by each of the mid-and senior-
level service schools, including staff and war colleges. DOD will aim 
to get such a module into the Defense Acquisition University's plans 
for fiscal year 2005 development.

We also provided an opportunity for the contractors on the logistics 
support contracts we reviewed--Kellogg Brown and Root for LOGCAP, BSC, 
and CONCAP and Readiness Management Support L.C. for AFCAP--to comment 
on a draft of this report and Readiness Management Support provided 
written comments. In its comments Readiness Management Support stated 
that it concurred with many statements in the report and provided 
several comments to clarify its position regarding the costs associated 
with logistics support contracts and the role of the contractor in 
property administration under the AFCAP contract. The company's 
comments and our response are contained in appendix III.

We plan no further distribution of this report until 10 days after its 
issuance unless you publicly disclose its contents earlier. At that 
time we will send copies to the Chairman, House Committee on Government 
Reform; the Chairman, House Committee on Energy and Commerce; the 
Chairman and Ranking Minority Member, Senate Committee on Governmental 
Affairs; the Chairmen and Ranking Minority Members, House and Senate 
Committees on Armed Services, and other interested congressional 
committees. We are also sending a copy to the Secretary of Defense and 
the Director, Office of Management and Budget, and will make copies 
available to others upon request. In addition, the report will be 
available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions, please contact me on (757) 
552-8100 or by e-mail at curtinn@gao.gov. Major contributors to this 
report are included in appendix IV.

Signed by: 

Neal P. Curtin: 
Director, Defense Capabilities and Management:

[End of section]

Appendix I: Scope and Methodology:

We focused our efforts on four contracts: (1) the Army's Logistics 
Civil Augmentation Program (LOGCAP) Contract; (2) the Air Force's 
Contract Augmentation Program (AFCAP) Contract; (3) the U.S. Army, 
Europe's Balkans Support Contract (BSC); and (4) the Navy's 
Construction Capabilities (CONCAP) Contract. We selected these 
contracts (1) on the basis of their size and scope and (2) to include 
more than one of the military services.

We took a number of actions to assess the effectiveness of the 
Department of Defense's (DOD) planning for the use of these logistics 
support contracts. We reviewed the guidance prepared by the Chairman, 
Joint Chiefs of Staff; the Army's regulations and guidance related to 
planning for contractor support to deployed forces; and an array of 
additional guidance specific to each of the logistics support contracts 
as follows:

* the Army Materiel Command's LOGCAP battle book,

* U.S. Army, Europe, Users' Guide to the Balkans Support Contract and 
operating procedures written by the Balkans Support Contract 
procurement contracting office on task order development,

* the Air Force's guide for using the Air Force's AFCAP contract--the 
AFCAP Concept of Operations, and:

* the Navy's CONCAP Users' Guide.

We met with representatives of the Army Materiel Command's LOGCAP 
program management office to discuss LOGCAP planning and met with the 
Army Materiel Command's LOGCAP planners for Europe and southwest Asia 
to determine their roles in planning to use LOGCAP to support Operation 
Iraqi Freedom. Additionally, we met with representatives of U.S. Army, 
Europe, to discuss planning for both BSC and the command's use of the 
LOGCAP contract and with representatives of the Army Central Command to 
discuss their role in planning for Operation Iraqi Freedom. We also met 
with the contracting officers for both the Balkans Support Contract and 
the LOGCAP contract to obtain their perspective on planning. To gain a 
comprehensive understanding of AFCAP and CONCAP planning, we met with 
the program managers for both the AFCAP and CONCAP contracts as well as 
the procuring contracting officers for both contracts. We also talked 
to customers of the four contracts to gain a better understanding of 
the customer's role in planning and the customer's views of the 
planning process. Finally, we spoke with representatives of Kellogg, 
Brown, and Root--the CONCAP, LOGCAP, and BSC contractor--and Readiness 
Management Support, the AFCAP contractor, to obtain their views on the 
planning process.

To determine the adequacy of the contract oversight process, we 
undertook a number of actions. We reviewed a wide array of documents, 
including:

* the Department of Defense's and the Army's policies, regulations, and 
instructions that relate to the use of contractors to support deployed 
forces;

* documents specific to the AFCAP, CONCAP, LOGCAP, and Balkans Support 
Contracts;

* audit reports prepared by DOD agencies on these contracts, including 
the Defense Contract Audit Agency, the Air Force Audit Agency, the Army 
Audit Agency, and the Army Materiel Command Inspector General, and we 
met with representatives of these organizations as well to discuss 
their findings; and:

* the Defense Contract Management Agency's (DCMA) situation reports for 
September 2003 through May 2004 for Iraq, Kuwait, Afghanistan, and 
Djibouti to get a better understanding of the types of oversight 
actions that administrative contracting officers and quality assurance 
representatives were taking.

During our visits to Kuwait and Qatar, we met with DCMA representatives 
to discuss oversight issues and observe some of their oversight 
practices and procedures. In Germany we met with the DCMA 
administrative contracting officers assigned to monitor BSC. To gain 
further insight into LOGCAP oversight in Iraq, we interviewed one of 
the senior DCMA administrative contracting officers responsible for 
overseeing the LOGCAP contract in Iraq after he redeployed. We also met 
the DCMA representatives located at the headquarters of the Halliburton 
Company (the parent company of Kellogg, Brown and Root) to gain a 
better understanding of the role of the corporate administrative 
contracting officer. We met with officials at all levels of command to 
gain an understanding of what they believed their roles were in the 
oversight process, and we met with contractor representatives to 
discuss contract oversight and contract management from their 
perspective. We also did the following:

* To understand the definitization process, we reviewed relevant 
portions of the Defense Federal Acquisition Regulation Supplement, 
interviewed those government-contracting officials responsible for the 
definitization process, and reviewed negotiation memoranda documenting 
the results of definitization negotiations. We also discussed the 
definitization process with representatives of the contractors. To 
understand the award fee process and the requirements for an effective 
award fee board, we reviewed the Army Audit Agency's Report on Award 
Fee best practices and reviewed the award fee plans for the CONCAP, 
AFCAP, and Balkans Support Contract and a draft of the award fee plan 
for the LOGCAP contract. We reviewed documentation prepared for award 
fee boards to understand the types of contractor performance 
evaluations that customers and oversight officials provided. We also 
attended award fee boards for CONCAP, AFCAP, and BSC. At the time we 
completed our review, the LOGCAP contracting office had not yet held an 
award fee board.

* To determine if lessons learned were being collected, we reviewed the 
Center for Army Lessons Learned database and the U.S. Army, Europe, 
Lessons Learned database to determine if they contained any lessons 
learned related to the use of BSC or the LOGCAP contract. In addition, 
we reviewed the Coalition Forces Land Component Command's lessons 
learned database for any relevant LOGCAP lessons learned. We met with 
contract customers to determine how they documented lessons they might 
have learned and to ascertain if lessons learned were shared between 
contract users. We also met with officials from DCMA and the 
contractors to discuss their lessons learned programs.

To determine if the logistics support contracts were being used in an 
economic, efficient, and cost-conscious manner, we reviewed previous 
audits by DOD organizations and command-level audit agencies, such as 
the U.S. Army, Europe's, Office of Internal Review and Audit 
Compliance. We met with representatives of the Army Central Command to 
determine if they had issued any guidance to the LOGCAP customers on 
the need to be cost conscious, and we obtained and reviewed guidance 
issued by CJTF-7 and CJTF-180 to determine if they had (1) established 
the need to be cost conscious as a priority and (2) established 
procedures for reviewing and approving requirements and reevaluating 
recurring services. We also met with representatives of Marine Forces 
Central Command and U.S. Army, Europe, to get a better understanding of 
their review processes for LOGCAP and BSC, respectively. In addition, 
we met with Navy officials to determine how they control costs and 
ensure that the contractor provides service in an economical and 
efficient manner and with CONCAP customers at Guantanamo Bay to 
determine their involvement with cost control. Similarly, we met with 
Program Management and Contracting Office officials for the AFCAP 
contract to determine what steps they take to ensure that the contract 
is used in an economic and efficient manner and met with AFCAP 
customers at Al Udeid Air Base, Qatar, and discussed cost control. We 
also reviewed DCMA situation reports to determine if DCMA officials at 
deployed locations had any insight into improving cost control and 
economy and efficiency.

To assess the extent to which DOD had a sufficient number of qualified 
personnel with the training and skills necessary to provide effective 
contract oversight and management in place, we determined the numbers 
of DCMA, Defense Contract Audit Agency, and Army Materiel Command 
personnel that were deployed in support of AFCAP, LOGCAP, and BSC. 
Since we could find no guidelines on the appropriate number of 
oversight personnel, we spoke with DCMA officials who oversaw the 
LOGCAP and AFCAP contracts to determine if they believed that the 
number of DCMA personnel deployed was adequate. We also reviewed DCMA 
situation reports to determine if DCMA staffing affected contract 
oversight. We interviewed Navy and Air Force officials responsible for 
overseeing the CONCAP and AFCAP contracts to determine if sufficient 
oversight personnel were available. To determine if the personnel with 
contract responsibilities, including customers, had sufficient 
training to satisfactorily fulfill their responsibilities, we met with 
personnel at all levels to discuss the training they had received 
regarding the use of logistics support contracts and their 
understanding of their specific roles and responsibilities. We also 
asked them to assess the adequacy of the training they received. We met 
with members of the program management offices to determine if they 
believed that personnel such as quality assurance representatives, 
contracting officers' representatives, and contracting officers' 
technical representatives had been adequately trained.

We visited the following locations during our review:

Office of the Secretary of Defense:

* Inspector General Office, Arlington, Va.

Defense agencies:

* Defense Contract Management Agency, Alexandria, Va.

* Defense Contract Management Agency Middle East, Kuwait.

* Defense Contract Management Agency Middle East, Qatar.

* Defense Contract Audit Agency, Houston, Tex.

* Defense Contract Audit Agency, Atlanta, Ga.

* Defense Contract Audit Agency, Iraq Branch Office.

* Defense Contract Audit Agency, European Branch Office.

Department of the Army:

* Office of the Deputy Chief of Staff-Logistics, The Pentagon.

* United States Army, Europe, Heidelberg, Germany.

* United States Army Forces Command, Fort McPherson, Ga.

* United States Army Central Command (Rear), Fort McPherson, Ga.

* United States Army Central Command (Forward), Kuwait.

* Camp Udairi, Kuwait.

* Camp Arifjan, Kuwait.

* Camp Doha, Kuwait.

* Other LOGCAP sites in Kuwait.

* U.S. Army Corps of Engineers--Trans Atlantic Program Center, 
Winchester, Va.

* U.S. Army Materiel Command, Ft. Belvoir, Va.

* Army Field Support Command, LOGCAP Program Manager, Alexandria, Va.

* Army Field Support Command, LOGCAP Procurement Contracting Office, 
Rock Island, Ill.

* Army Materiel Command, Europe.

* Army Materiel Command, Kuwait.

* U.S. Army Audit Agency, Alexandria, Va.

* Army Audit Agency, Mainz Kastel, Germany.

* United States Army Criminal Investigation Command, Fort Belvoir, 
Virginia:

Department of the Air Force:

* U.S. Air Force Civil Engineer Support Agency, Tyndall Air Force Base, 
Fla.

* U.S. Air Force 325th Contracting Squadron, Tyndall Air Force Base, 
Fla.

* U.S. Central Command Air Forces, Shaw Air Force Base, S.C.

* Al Udeid Air Base, Qatar.

* U.S. Pacific Air Forces, Hickam Air Force Base, Hawaii.

Department of the Navy:

* Marine Forces, Central Command, Camp Smith, Hawaii:

* Naval Facilities Engineering Command, Atlantic Division, Norfolk, Va.

* Naval Facilities Engineering Command, Pacific Division, Pearl Harbor, 
Hawaii.

Regional Combatant Commanders:

* U.S. Southern Command, Miami, Fla.

* Joint Task Force, Guantanamo Bay, Cuba.

Logistics Support Contractors:

* Kellogg Brown and Root Services, Houston, Tex.

* Kellogg Brown and Root Services, Arlington, Va.

* Readiness Management Support, LC, Panama City, Fla.

We also obtained written responses from the U.S. Central Command in 
response to written questions we provided them on their role in 
managing logistics support contracts.

Since we had done extensive work in the Balkans over the past several 
years, we drew upon past work where appropriate and visited Germany to 
talk to Army personnel administering the contract. In addition, 
although we did not travel to Iraq, we spoke with a senior DCMA 
Administrative Contracting Officer who was recently based in Iraq and 
obtained situation reports, which document observations regarding 
contractor performance. We also met with representatives of the 101st 
Airborne Division, who had been customers of LOGCAP services in Iraq, 
upon their return to the United States, and talked to contractor 
officials working in Iraq. We relied on data provided us by DOD and the 
contractor, which we verified where possible. For example, in assessing 
billing for dining facilities, we verified the contractor's summary 
data by tracing the summary numbers to the raw data. The data were 
sufficiently reliable for the purpose of this report. We performed our 
work from August 2003 through June 2004 in accordance with generally 
accepted government auditing standards.

[End of section]

Appendix II: Comments from the Department of Defense:

Note: Page numbers in the draft report may differ from those in this 
report.

DEPUTY UNDER SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS:  
3500 DEFENSE PENTAGON: 
WASHINGTON, DC 20301-3500:

JUL 9 2004:

Mr. Neal P. Curtin:
Director, Defense Capabilities and Management: 
U.S. General Accounting Office:
441 G Street, N. W.: 
Washington, DC 20548:

Dear Mr. Curtin,

This is the Department of Defense (DoD) response to the GAO draft 
report, "MILITARY OPERATIONS: DoD's Extensive Use of Logistics Support 
Contracts Requires Strengthened Oversight," dated June 17, 2004 (GAO 
Code 350427/GAO-04-854).

The Department concurs with the report. Although, as the draft report 
states, there is sufficient policy in place to identify early in the 
planning process the operational requirements that are to be provided 
by contractors, the Department will re-emphasize the need to comply 
with existing guidance and to involve the contractor in the planning. 
The Department will also reiterate that teams of experts be created to 
evaluate the appropriateness, level and economy and efficiency of 
services. Further, the Department plans to capture lessons learned for 
DoD-wide sharing, and will work toward development of training, where 
it doesn't currently exist, for commanders who are deploying to 
locations with contractor support. Detailed DoD comments on the draft 
GAO recommendations are provided in the enclosure. The DoD appreciates 
the opportunity to comment on the draft report.

Sincerely,

Signed by: 

Bradley Berkson: 
Acting: 

Attachment As stated:

GAO DRAFT REPORT DATED June 17, 2003 GAO CODE 350427/GAO-04-854:

"MILITARY OPERATIONS: DoD's Extensive Use of Logistics Support 
Contracts Requires Strengthened Oversight":

DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:

RECOMMENDATION 1: The GAO recommended that the Secretary of Defense 
emphasize to the heads of DoD Components the need to comply with 
guidance to identify operational requirements that are to be provided 
by contractors early in the planning process and involve the contractor 
in the planning, where practicable. If security concerns prevent the 
involvement of the contactor, direct that unclassified statements of 
work be developed and provided to the contractor. (Page 54/GAO Draft 
Report):

DoD RESPONSE: DoD concurs. Although, as the draft report states, that 
this is the stated DoD policy, and that in most cases the Services have 
implemented this policy, the DoD will reiterate this in policy 
memoranda and such issuances as a draft DoD Instruction on Procedures 
for the Management of Contractor Personnel During Contingency 
operations. The draft DoD Instruction contains language to facilitate 
better integrated planning between the Combatant Commanders and DoD 
activities that award contracts for contractor logistic support during 
contingency operations. The language requires that DoD Components 
coordinate with Combatant Commanders, in advance, any proposed 
contractor logistics support arrangements that may impact the Combatant 
Commanders' operation plans and operation orders. Similarly, Combatant 
Commanders are responsible to identify operational specific contractor 
requirements in the operation plan, operation order, or separate annex. 
Together, these efforts will help facilitate and emphasize the 
importance of identifying operational requirements and communicating 
those requirements to contractors earlier in the process. The proposed 
policy reiteration will also include direction that unclassified 
statements of work be developed for the contractor should security 
concerns prevent the contractor from active involvement in the early 
planning.

RECOMMENDATION 2: The GAO recommended that the Secretary of Defense 
direct the Service Secretaries to establish teams of subject matter 
experts who will periodically travel to locations where contactor 
services are being provided by logistics support contracts to evaluate 
and make recommendations where appropriate on (1) the appropriateness 
of the services being provided, (2) the level of services being 
provided, and (3) the economy and efficiency with which the services 
are being provided. (Page 54/GAO Draft Report):

DoD RESPONSE:	DoD concurs. As stated in the draft report on page 40, 
policy currently exists in both the Balkans and Afghanistan requiring 
periodic review of all services being provided by contractors to 
determine if the appropriate services and the appropriate level of 
services are being provided. The U. S. Army Europe requires that these 
reviews be conducted three times a year prior to the award fee boards. 
Moreover, the Marine Forces Central Command deploys teams of subject 
matter experts to Djibouti semi-annually to identify services that 
could be eliminated, reduced, or changed. The Department will reiterate 
the need to have teams of subject matter experts make periodic visits 
to evaluate and make recommendations on the logistics support contracts 
as part of the same policy memoranda mentioned in the DoD response to 
Recommendation 1 above.

RECOMMENDATION 3: The GAO recommended that the Secretary of Defense 
implement a department-wide lessons learned program that will capture 
the experiences of others who have used logistics support contracts. 
This system should include lessons learned from operations as well as 
lessons learned and best practices documented by the DoD's audit 
agencies. (Page 54/GAO Draft Report):

DoD RESPONSE: DoD concurs. As the draft report mentions on page 34, the 
Army already requires that lessons learned be captured. Army regulation 
700-137, Logistics Civil Augmentation Program, makes customers who 
receive services under LOGCAP responsible for collecting the lessons 
learned. The draft report also mentions such established centers as the 
Army Center for Lessons Learned and the U.S. Army Europe. Additionally, 
there is a Joint Lessons Learned Program governed by CJCSI 3150.25A, 1 
October 2000, under the J-7, Operational Plans and Joint Force 
Deployment Directorate. The principal provider of these joint lessons 
learned is the Joint Warfighting Center of the U.S. Joint Forces 
Command in Norfolk, VA. The Department also has a lesson learned 
capability established at the Defense Acquisition University at Ft. 
Belvoir, VA. The Department will investigate as to how best to capture 
the user, customer, and auditor lessons learned and determine a central 
data base that would be available to all communities. Initially, the 
Department will explore the possibility of establishing such a data 
base as part of the Logistics Community of Practice at the Defense 
Acquisition University.

RECOMMENDATION 4: The GAO recommended that the Secretary of Defense 
develop and implement training courses for commanding officers and 
other senior leaders who are deploying to locations with contractor 
support. Such training should provide information on the role of 
commanders and others in the contracting process. Specifically, the 
training should provide instruction on (1) developing and documenting 
requirements, (2) ensuring that contractors perform in a cost effective 
manner, and (3) assessing contractor performance. The training should 
also include information on the limits of commanders' authority vis-a-
vis contractors and include information on the roles and 
responsibilities of the Defense Contract Management Agency and other 
oversight agencies. (Page 54/GAO Draft Report):

DoD RESPONSE: DoD concurs. The Department will begin discussions with 
the Defense Acquisition University, the Services, and the Defense 
Contract Management Agency as to how best to unify current disparate 
training for Logistics Support personnel, including unit commanders, 
and create a training capability that would be applicable and available 
to all. An initial proposal would be to establish a continuous 
learning-type training module that could be utilized by each of the Mid 
and Senior-level Service schools, including Staff and War Colleges. The 
Department will aim to get such a module into the DAU plans for FY05 
development.

[End of section]

Appendix III: Comments from Readiness Management Support L.C.

Note: GAO's comments appear at the end of this appendix.

RMS
Readiness Management Support L.C.
239 Southwood Drive: 
Panama City, FL 32405: 
Phone (850) 763-9600: 
Fax (850) 763-9995:

Mr. Steve Sternlieb: 
Assistant Director: 
United States General Accounting Office: 
Washington, DC 20548:

July 4, 2004:

Subject: MILITARY OPERATIONS: DOD's Extensive Use of Logistics Support 
Contracts Require Strengthened Oversight (GAO-04-854), (Your 17 Jun 04 
Memo):

Dear Mr. Sternlieb:

I appreciate the opportunity to comment on the subject report. RMS, 
through the AFCAP contract, provided diverse and cost effective 
responses to the government on numerous occasions many times in hostile 
situations. I cannot speak for other contracts, but I can speak for the 
AFCAP contract, RMS actions and contingency activities based on seven 
years with the AFCAP contract and 27 years as an Air Force engineer. We 
concur with many of the statements in the report, but I would like to 
comment on or clarify a few areas.

* Administration of the contract - The report is accurate in the 
assessment that ACO and QAE training was limited. On many task orders, 
there was either no ACO or the ACO was not trained on our contract. RMS 
was in the position to protect the government interests and control 
costs and quality which we did because of the integrity of the RMS 
team. Customer evaluations were also limited eliminating opportunities 
to correct any issues early.

* Requirement identification and planning - Although there were 
indications that the AFCAP contract was better than others in 
preplanning and identification of requirements, there is room for 
improvement. Planning for the "CAP" contracts does not happen early 
enough in the process. The contractors need to be trusted members of 
the planning staffs to be ready for various options and, more 
importantly, provide options based on the worldwide capabilities and 
experiences of the contract teams. This is a significant benefit 
provided by the contractors. The identification of requirements is 
difficult. There were comments regarding many changes to task orders. 
Given the dynamic nature of the tasks provided to CAP contractors and 
the environments in which they are issued, this is to be expected. The 
reality is that, although these are cost plus contracts, the 
contractors take great risks given the inability of the government to 
define requirements quickly and accurately. This is a result of the 
circumstances not necessarily poor performance.

* Cost of Contract - Comments were made regarding the "common knowledge" 
that CAP contracts are the most expensive solution for the government. 
This basically is not true. As an example, our power production 
contracts, when analyzed by ACC, were determined to be less expensive 
than using military in their current method. In addition, the services 
provided were more consistent and reliable, allowing the military to 
concentrate on other requirements. There are occasions when the 
contractor does cost more than military execution; but, in many of 
those cases, the contractor is the only solution. Cost comparisons 
rarely include all government costs in the comparisons.

* Property control - There are numerous references to property control 
in the AFCAP contract. Although administration was not specifically as 
required by the government, it is important note that in each of the 
cases, the material or equipment was procured properly, documented on 
receipt and then signed over the government recipients. It is true that 
we did not "control" the property after the government took possession 
for use; but, until that point, controls were in place and used. 
Reference to 80 task orders requiring resolution of property issues 
does not appear to be accurate ... many of these have disposition 
instructions already or material lists have been provided to the 
government to request disposition.

* Procurement of Materials - Throughout the report, there are continued 
references that state using the CAP contracts is not an effective 
method to procure equipment and materials. In my opinion, the research 
is incomplete. An analysis performed by 
OFDA under USAID showed that we actually provided items at a lower cost 
than they could provide. Additionally, we improved the quality of the 
materials received as we discovered that the government had accepted 
materials that did not meet specifications and then we directed an 
effort to update specifications based on current industry standards. I 
am not certain about the point being made regarding RMS receiving $2 
million in award fee for these procurements. First, for task orders, 
RMS received 1% base fee and then the award fee ... the small profit 
for our services. The report failed to mention that with the tight and 
difficult requirements of the task orders that we did not receive any 
award fee when we missed schedules. All must remember that these 
efforts were accomplished in contingencies. The comments that the Air 
Force used AFCAP because the government did not bring sufficient 
personnel to perform procurements is only part of the story. 
Contractors have a significant advantage overseas since we have worked 
in these areas and already have contacts and people in place. In 
addition, many vendors would rather contract with large contractors 
versus the government. Our costs are many times lower than what the 
government would pay and lower than GSA prices. Procurement for 
construction projects involves more than just obtaining materials. 
These projects involved management of batch plants and quality control 
of all operations - complex with difficult schedules and many 
requirement changes. To say that the government would get thinks 
cheaper assumes that the government can get items at the same cost as 
contractors and the cost of government procurement personnel is not 
included. In addition, our team helped prevent the government from 
violating contract regulations and public laws through the dedicated 
actions of the professionals on our team. These allegations and 
comments regarding costs are not substantiated.

* Map on Page 6 - Please note that RMS is also operating in Kuwait, 
Kyrgyzstan and UAE:

* On page 38, the government claims a 97% savings through negotiations 
on an AFCAP task order. The reality is that cost proposals are prepared 
based on poorly defined requirements. Many times, we prepared cost 
estimates and provided the assumptions we used to obtain these 
estimates. During negotiations, the requirements are better identified 
and new proposals are provided. The interaction with the PCO to 
negotiate costs is effective but does not directly produce the savings 
indicated ... that is accomplished during the negotiations when the 
requirement is adjusted. As written, the statements are misleading.

We recognize the difficult challenge faced by GAO to provide a complete 
analyses of the CAP contracts ... they are complex and diverse ... and 
useful. The AFCAP contract has been a great benefit to the US 
Government. There have been mistakes and they have been corrected. The 
success has been achieved by teamwork between the government and the 
contractor .... and dedicated contractors willing to take the extra 
step and risk to help support national security objectives. Please 
contact me if you have any questions concerning these comments. We are 
also interested in any actions that would improve the process for these 
critical contracts.

Sincerely,

Signed by: 

Dwight E. Clark, PE:

Chairman and General Manager:

Note: Page numbers in the draft report may differ from those in this 
report.

The following are GAO's comments on the Readiness Management Support's 
letter dated July 4, 2004.

GAO Comments:

1. Readiness Management Support expressed concern that the draft report 
characterized the use of logistics support contracts as the most 
expensive solution for the government. The company stated that, in the 
case of its power production contracts, the Air Combat Command 
determined it to be less expensive than using military in the command's 
current method while acknowledging that there are occasions when the 
contractor does cost more than military execution, but that, in many of 
those cases, the contractor is the only solution. We state in the 
report that both Air Force and Navy officials believe that using the 
AFCAP and CONCAP contracts to fulfill a requirement is often the most 
expensive option available and consequently they have taken steps to 
control costs. We recognize that this may not always be the case. 
However, we are not aware of any comprehensive analysis comparing the 
cost of using logistics support contracts to provide logistics support 
with the cost of using military personnel to provide that support. 
Regarding AFCAP, we were told by Air Force contract customers that the 
use of the AFCAP contract was a "level of magnitude" more expensive 
than other alternatives because of the premiums associated with the 
manpower the contractor can access and the speed in which the 
contractor can provide services.

2. Readiness Management Support stated that it did not control certain 
property acquired under the AFCAP contract but noted that in each 
instance the property was properly purchased, documented, and turned 
over to the Air Force. In reviewing the government's role in property 
administration under the contract, we stated that DCMA did not ensure 
that the contractor maintained appropriate controls of government 
property. For task orders performed in southwest and central Asia, the 
AFCAP contract administrator delegated the property administration 
responsibility to DCMA. From our observations and conversations with 
DCMA contract administrators in southwest Asia in late 2003, we found 
that DCMA did not have a system in place to document what was purchased 
under the contract and what was turned over to the Air Force, although 
it was delegated this responsibility. As a result, at the time of our 
audit work, neither DCMA nor the Air Force could account for 
approximately $2 million worth of tools and equipment purchased under 
the AFCAP contract.

3. Readiness Management Support described our report as stating that 
using civil augmentation contracts are not an effective method to 
procure equipment and materials and stated that it believed our 
research to be incomplete. Our report discusses how circumstances did 
not always allow the Army and the Air Force to select a more economical 
and efficient method to obtain services. In the case of AFCAP, we 
discussed how Air Force engineering squadrons used the AFCAP contract 
to buy commodities because they did not deploy with enough contracting 
and finance personnel to buy materials quickly or in large quantities 
and that the U.S. Agency for International Development also used the 
contract to provide disaster relief and humanitarian assistance 
supplies. We reported that the AFCAP contractor received more than $2 
million in award fees since February 2002 for these commodity supply 
task orders. To calculate this amount, we reviewed data on the amount 
of award fees that the contractor received for commodity supply task 
orders from February 2002 through February 2004. To ensure that we 
captured only those task orders in which the contractor purchased 
commodities, we provided the AFCAP contract administrator with our 
analysis of the task orders to , and he concurred with our analysis. We 
stated in the report that Air Force program managers recognized that 
the use of a cost plus award fee contract to buy commodities may not be 
cost-effective and are considering alternative types of contract 
options for these task orders for the next AFCAP contract.

4. We revised the report to reflect this comment.

[End of section]

Appendix IV: GAO Contact and Staff Acknowledgments:

GAO Contact:

Steve Sternlieb (202) 512-4534:

Acknowledgments:

In addition to the person named above, Carole Coffey, Laura Czohara, 
George Duncan, Glenn Furbish, Oscar Mardis, Kenneth Patton, Matthew 
Ullengren, Gary Delaney, and Cheryl Weissman made key contributions to 
this report.

FOOTNOTES

[1] U.S. General Accounting Office, Contingency Operations: 
Opportunities to Improve the Logistics Civil Augmentation Program, GAO/
NSIAD-97-63 (Washington, D.C.: Feb. 11, 1997).

[2] U.S. General Accounting Office Contingency Operations: Army Should 
Do More to Control Contract Cost in the Balkans, GAO/NSIAD-00-225 
(Washington, D.C.: Sept. 29, 2000).

[3] U.S. General Accounting Office, Military Operations: Contractors 
Provide Vital Services to Deployed Forces but Are Not Adequately 
Addressed in DOD Plans, GAO-03-695 (Washington, D.C.: June 24, 2003).

[4] U.S. Army, Army Corps of Engineers Transatlantic Program Center 
Standard Operating Procedures for Task Orders on the Balkans Support 
Contract" (Nov. 23, 1999). 

[5] U.S. Air Force Contract Augmentation Program, Concept of Operations 
(no date provided). 

[6] U.S. Army, "Contractors on the Battlefield," Department of the Army 
Field Manual 3-100.21 (Jan. 3, 2003).

[7] U.S. Army, "Logistics Civil Augmentation Program," Department of 
the Army Regulation 700-137 (Dec. 16, 1985).

[8] U.S. Army, "Contractors Accompanying the Force," Department of the 
Army Regulation 715-9 (Oct. 29, 1999).

[9] U.S. Army, "Logistics Civil Augmentation Program," Army Materiel 
Command Pamphlet 700-30 January 2002).

[10] Nontactical vehicles are motor vehicles used to support general 
transportation services and facility maintenance functions not directly 
connected with combat or tactical operations. 

[11] Federal Acquisition Regulation, Part 45, "Government Property."

[12] Draft Memorandum for the Commanding General, Task Force Falcon 
(Forward), (Mar. 31, 2000) Task Force Falcon Audit Cell.

[13] This figure is the number of soldiers in Iraq multiplied by the 
number of days in a month multiplied by the number of months included 
in the invoice analysis. 

[14] CONCAP task orders do not require definitization since the terms, 
specifications, and price are agreed to before work begins.

[15] GAO/NSIAD-97-63. At that time, LOGCAP was being used to provide 
logistics support in the Balkans. 

[16] U.S. General Accounting Office, Rebuilding Iraq: Fiscal Year 2003 
Contract Award Procedures and Management Challenges, GAO-04-605 
(Washington, D.C.: June 1, 2004).

[17] 10 U.S.C.  2326(e).

[18] Army Materiel Command Pamphlet 700-30.

[19] GAO/NSIAD-97-63.

[20] GAO/NSIAD-00-225.

[21] Army Regulation 700-137.

[22] U.S. Army Audit Agency, Management of Resources-Army Forces 
Turkey, Army Audit Agency, A-2004-0033-IMU (Oct. 23, 2003).

[23] U.S. Army Audit Agency, Logistics Civil Augmentation Program-Camp 
Stronghold Freedom, Uzbekistan, Army Audit Agency, A-2003-0110-IMU 
(Dec. 21, 2002).

[24] U.S. Army Audit Agency, Operation Enduring Freedom-Logistics Civil 
Augmentation Program, Army Audit Agency, A-2004-0156-IMU (Feb. 27, 
2004).

[25] U.S. Army, Memorandum for the Chief of Staff, Task Force Falcon, 
Review of Shuttle Bus Service in Task Force Falcon, Audit Report TFF-
056 (Mar. 22, 2001)(unpublished).

[26] U.S. Army, Memorandum for the Chief of Staff, Task Force Falcon, 
Cost of New and Recurring Gravel and/or Sand Requirement, Audit Report 
TFF-068 (Sep.17, 2001)(unpublished). 

[27] Since the Marines assumed this mission, they have added 
requirements to the task order. As a result the May 2004 estimated 
value of the task order is $107 million. This amount would have been 
higher if not for the Marine Corps' efforts to control costs.

[28] The $120,000 is in addition to the U.S. Army, Europe, estimated 
cost savings of $200 million mentioned above.

[29] This timeline is based on the CJTF-7 official's assumption that 
the fiscal year 2004 Supplemental Appropriation for the global war on 
terrorism would be passed by November 2003. 

[30] Congress allows the services to use funds from its operations and 
maintenance appropriation to build construction projects with an 
estimated cost of less than $750,000. Projects costing over $750,000 
generally need congressional notice. 

[31] The building material might have been reused, however, as it was 
in the Balkans. 

[32] Army Materiel Command Pamphlet 700-30.

[33] Army Audit Agency A-2004-0156-IMU (Feb. 27, 2004).

[34] U.S. Air Force, Performance Based Service Contracts, Air Force 
Instruction 63-124 (Apr. 1, 1999).

[35] GAO-03-695.

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