Background

Interior’s Indian education programs derive from the federal government’s  trust responsibility to Indian tribes, a responsibility established in federal  statues, treaties, court decisions, and executive actions. In accordance  with this trust responsibility, Interior is responsible for providing safe and  healthy environments for students who attend BIE schools. These  schools are located primarily in rural areas and small towns on or near  Indian reservations in 23 states (see fig. 1).

		Indian Affairs’ Bureaus and Offices with Responsibilities for BIE School Construction and Repair

Indian Affairs oversees multiple bureaus and offices at the national and  regional level that play a key role in school replacement construction and  repair (see fig. 2).
The Office of the Deputy Assistant Secretary—Management oversees  construction and repair of BIE school facilities. The Division of Facilities  Management and Construction, housed within this office, reports to the  Director of the Office of Facilities, Property and Safety Management. The  Division of Facilities Management and Construction provides facilities  budget, planning, design, and construction services for Indian Affairs for  both school replacement and renovation projects.
BIA regional facilities managers in nine of its 12 regional offices oversee  the day-to-day management of some school facility projects.
BIE oversees educational functions, including funding and operating BIE  schools. Multiple BIE regional offices—referred to as Education Resource  Centers—work directly with schools to provide technical assistance.
Interior has proposed that BIE assume key responsibilities from other  Indian Affairs’ offices for school facilities as part of BIE’s ongoing  restructuring initiative. Currently, it is not clear specifically when and how  such a transfer of responsibilities would take place.

		Indian Affairs’ Management of School Construction Projects

Once funding for BIE school construction and repair is available, tribes  may choose to have the project managed by Indian Affairs (federally  managed) or they can manage it themselves (tribally managed). When a  project is federally managed, Indian Affairs contracts directly with  commercial vendors to plan, design, and build or repair the school. These  types of contracts are subject to the Federal Acquisition Regulation (FAR)  and, unless otherwise noted, when we use the term “contract” in this  report, it refers to these types of contracts. An Indian Affairs engineer,  architect, or subject matter expert serves as a project manager for  federally managed construction projects. The project manager oversees  the technical aspects of the project and serves as the technical  representative to the contracting officer, who has the authority to enter  into a contract on behalf of the government.
When a tribal organization manages a project, Indian Affairs awards the  organization a grant or a self-determination contract to replace or repair  the school. The tribal organization, in turn, contracts with commercial  vendors to plan, design, and build or repair the school. Indian Affairs  oversees the grant or self-determination contract it has with the tribal  organization, and the organization, in turn, oversees the contracts it has  with vendors. When a tribal organization chooses to manage a project  and receive the funds as a grant, the BIE grant officer, who is also  responsible for disbursing and overseeing education funds, disburses the  funding. If a tribal organization chooses to manage the project under a  self-determination contract, an awarding official within Indian Affairs  disburses the funding. In both cases, an Indian Affairs architect, engineer,  or subject matter expert oversees the technical aspects of the grant  agreement or self-determination contract and serves as the technical  representative to the grant or awarding official. The technical  representative and BIE grant officer or awarding official must work  together to ensure that the tribal organization has made sufficient  progress before funds are disbursed and to provide technical assistance  when it is requested.

		Indian Affairs’ School Facilities Data

Indian Affairs uses a database—the Indian Affairs Facilities Management  System—to collect and track data related to the condition of BIE school  facilities, including unaddressed facility repair needs, which are referred  to as facilities’ deferred maintenance work orders. Indian Affairs’ staff,  contractors, and school personnel share the responsibility for entering  data into the system. Indian Affairs is responsible for reviewing the  deferred maintenance work orders that are entered. According to Indian  Affairs officials, work orders are approved by several levels within Indian  Affairs, including BIA regional offices, the Indian Affairs’ facility condition  assessment contractor, and the Division of Facilities Management and  Construction. Indian Affairs bases its facilities funding decisions on this  information. However, as we and Interior’s Inspector General have  previously reported, these data are often inaccurate, inconsistent, and  incomplete. For example, as our prior work has shown, school officials  often lack the capacity to properly input facility issues into Indian Affairs’  data system, and the agency lacks the necessary tools to check the  accuracy of the data. In September 2016, Interior’s Inspector General  made recommendations to improve the way Indian Affairs assists school  staff in entering data, such as by providing consistent training to school  employees, ensuring passwords for the facilities management system are  established and used, and creating a tracking and reminder system for  active users. Interior’s Inspector General also recommended revisiting  Indian Affairs’ condition assessment contract to ensure that these  inspections are consistent, thorough, and entered into the facilities  management system every three years. In February 2017, Indian Affairs  indicated it would implement these recommendations.

		Indian Affairs’ Funding for Building Replacement and Repair

Indian Affairs distributes funding for the repair and replacement of school  facilities through a variety of programs ranging from those focused on  daily operations and maintenance to the replacement of entire school  buildings and campuses. Each program allocates funding using a distinct  formula or set of priorities (see fig. 3).

		Plans for Future BIE School Replacement Projects

Indian Affairs is currently in the process of replacing the final 3 of 14  schools that it selected for replacement in 2004. These schools were  chosen based on Indian Affairs’ assessment of its data on school  conditions and on-site assessments by a contractor.
According to the Native American Education Improvement Act of 2001, a  part of the No Child Left Behind Act of 2001, the Secretary of the Interior  was required to establish a negotiated rulemaking committee. Among the  committee’s responsibilities was a requirement to submit a report to  Interior on school replacement and new construction needs and a formula  for the equitable distribution of funds to address those needs. The  committee issued its report in December 2011. To be eligible to apply for  replacement, schools had to either be in “poor” condition, based on their  current replacement value and total deferred maintenance, or be at least  50 years old and/or educating 75 percent or more of their students in  portable classrooms. Based on these criteria, Indian Affairs determined  that 78 schools were eligible to apply for replacement. Of those 78, 54  submitted applications in 2015. A National Review Committee then  reviewed the schools’ applications using the identified criteria and  selected the top 10 school replacement projects. Indian Affairs will  determine the order of school replacement by a school’s condition and  the date by which a school completes the planning phase of the project. It  is not yet clear when construction will begin on the first of the 10 schools.
In addition to these 10 schools, Indian Affairs also announced in April  2016 that it would replace a high school building at another BIE school—a  K-12 school in Minnesota. Indian Affairs will use $15.3 million from its  facility replacement program for the high school building.

	Indian Affairs Does Not Have a Capital Asset Plan to Guide the Efficient Allocation of Construction Funds and Has Not Provided Detailed Information to Policymakers

		Indian Affairs Does Not Have a Comprehensive Capital Asset Plan to Allocate Funds to Maintain, Repair, and Replace Schools

Indian Affairs does not have a comprehensive capital asset plan to  maintain, repair, or replace all the BIE schools in its portfolio. While Indian  Affairs has determined which 10 schools it plans to replace next, it does  not have a long-term capital asset plan for the remaining 175 schools.  About one-third of these schools are in poor condition, according to Indian  Affairs data, resulting in thousands of students being educated or housed  in unsafe facilities. According to OMB guidance, agencies should  engage in capital asset planning and management to help ensure that  their assets are acquired, operated, and maintained at the right size, cost,  and condition to support agency missions and objectives. OMB encourages agencies to develop capital asset plans as a part of their  strategic planning efforts because such plans help provide agencies with  information and analysis needed to make more informed long-term  decisions. Additionally, Interior requires its bureaus to have a 5-year  capital improvement plan that prioritizes individual capital investment  projects, and to develop such a plan 2 years before the fiscal year the  plan will cover.
When we asked Indian Affairs officials for evidence that they had  developed a strategic or long-term capital asset plan for BIE school  facilities, they provided a general outline of how they plan to spend funds  over the next 5 years in several broad categories, including construction,  program management, advance planning and design, and school boiler  inspections. This outline lacked key details, including a description of  agency goals and plans, a prioritized list of future school repair and  renovation projects, updates on the status of previous projects, and  projected student enrollment numbers. In addition, in May 2017 Indian  Affairs stated that the Division of Facilities Management and Construction  had submitted a prioritized list of projects to be funded in 2017 to Indian  Affairs’ Construction Investment Review Board. Officials said that given  constrained funding, they generally based their plans on the previous  year’s budget, rather than on need. However, a strategic approach to  capital asset planning is more important when funds are limited because  decision-makers must take trade-offs into account. In November 2016  and February 2017, Indian Affairs officials told us they were developing a  long-term capital management program, but they did not provide any  documentation of these efforts.
Indian Affairs’ lack of capital asset planning has been noted by  congressional appropriations committees. In a committee report  accompanying Interior’s 2017 appropriations bill, the House  Appropriations Committee expressed concern over the agency’s  approach to school replacement, which, it stated, focuses on only a  subset of schools. The Committee called for a more comprehensive long- term planning approach for every facility in Indian Affairs’ portfolio. In  the same year, a Senate Appropriations Committee report directed Indian  Affairs to report on the progress it has made toward implementing a long- term facilities plan.
Indian Affairs’ could not readily provide us basic information that it would  need to monitor the condition of school facilities and to select and  prioritize repair and renovation projects, which are key components of a  capital asset plan. For example, when we requested information about  schools’ deferred maintenance costs, current replacement values, dates  of school health and safety inspections, and the prior year’s repair funding  allocation for each school, an Indian Affairs official told us the information  we requested had to be retrieved from five separate data sources,  consolidated, verified, and validated, which took over 200 staff hours to  complete. OMB advises agencies to compare all assets against one  another to create a prioritized portfolio, and our prior work has shown that  leading organizations use defined processes for ranking and selecting  projects and share the criteria with stakeholders.
Currently, Indian Affairs has separate processes for disbursing each of  the different facilities program funds based, in part, on input from regional  facilities managers, according to Indian Affairs officials. These separate  processes have allowed critical facility issues to go unaddressed. For  example, at one BIE school we visited, officials reported that  unaddressed water leaks resulted in permanent damage to all of their  computer servers, and that replacement costs were over $200,000.  According to the National Research Council of the National Academies,  each $1 in deferred maintenance results in a long-term capital liability of  $4 to $5.
When Indian Affairs makes project prioritization decisions without  considering its entire facilities portfolio, the agency risks using its limited  resources inefficiently and may fund lower priority projects before those  that should have a higher priority. If Indian Affairs continues operating  without a comprehensive capital asset plan, it has no assurance that it is  addressing the most critical issues first.

		Indian Affairs Has Not Provided Detailed Information to Policymakers on Proposed School Construction Spending

Indian Affairs has not provided specific information about how the agency  plans to use school construction funds in the future and how it has used  them in the past in its annual budget justifications, which support the  President’s budget. Congressional budget justifications help Congress  gain a more complete understanding of agency needs. Congress uses  budget justifications to inform appropriations decisions, conduct oversight,  and provide control over funds. In a review of Indian Affairs’ budget  justifications for fiscal years 2002 to 2017, we found that the agency  included fewer and fewer details in its presentation of its school facilities  construction budget over time. In 2011, Indian Affairs stopped describing  the deficiencies at specific schools unless they were proposed for facility  or campus replacement. In 2016, information on ongoing and recently  completed projects—including original planned completion dates, actual  completion dates, original cost estimates, and final construction costs— was removed entirely.
When we asked Indian Affairs officials about the changes to its annual  budget submissions, they told us they removed construction updates to  streamline the submissions because there were fewer projects in  progress than in previous years and the majority of the projects were  complete. The House and Senate Appropriations Committees, however,  have repeatedly requested that Indian Affairs provide more specific information in its annual submissions to the President’s budget. In 2006,  the Senate Appropriations Committee stated that it expected more robust  appropriations requests for Indian Affairs school construction in the  future. In 2016, the House Appropriations Committee specifically  directed Indian Affairs to publish a report on the status of its education  construction programs. These requests demonstrate that having such  information is useful to Congress to provide oversight of Indian Affairs’  progress in improving and maintaining BIE schools. Federal accounting  standards recommend that agencies provide reliable and timely  information on the full costs of their federal programs so that  congressional and executive policymakers can better allocate federal  resources and make more informed decisions. In addition, Standards for  Internal Control in the Federal Government emphasize using quality and  complete information to make decisions and communicate such  information externally.
Until Indian Affairs provides policymakers with details on specific needs at  schools—including proposed capital expenditures and updates on  previous construction—it limits the transparency needed for  congressional oversight of the agency’s annual budget requests and  spending plans for school construction.

	Indian Affairs Has Not Consistently Ensured Accountability for Either Federally or Tribally Managed School Construction Projects

		For Federally Managed Projects, Indian Affairs Has Not Used All Available Accountability Measures to Ensure Projects Are on Time, Within Budget, and Meet Schools’ Needs

Indian Affairs has not consistently used accountability measures included  in its contracts for federally managed BIE school construction projects.  Correspondingly, the 19 federally managed BIE school construction  projects completed from fiscal year 2003 through 2016 often took longer  than expected, and were sometimes over budget or had to be scaled  back, such as by decreasing square footage, to remain within budget.  Further, according to school officials, these projects did not always meet  schools’ needs.
Eight of the 19 federally managed BIE school construction projects since  fiscal year 2003 were completed three or more years after the estimated  completion date. One school we visited in Arizona took 14 years to  complete, which was almost 10 years over schedule. Indian Affairs’  design manual states that it will strive to complete all school construction  projects within 4 years, from planning through completion. However,  Indian Affairs was unable to provide us information on when school  replacement projects began, and it does not track the length of these  projects. Indian Affairs officials told us they estimate that the projects  generally take about 6 years, but they could provide no data on which  they based these estimates.
In addition to delays, seven of the 19 federally managed projects were 20  percent or more over budget. One was more than 86 percent over  budget; four others were over budget by 40 percent or more. According to  school officials, Indian Affairs had to scale back some school projects by  eliminating buildings or other major features to stay within budget. Since  Indian Affairs does not track information on the reduction in size or scope  of projects, it is not known how many of the 19 projects Indian Affairs had  to reduce in size or scope. Figure 4 shows how the 19 federally managed  BIE school replacement projects completed since 2003 performed with  regard to schedule and cost.
According to senior Indian Affairs facilities officials, the agency is  considering addressing cost overruns and schedule delays by using  modular construction. Portions of permanent modular buildings would be  manufactured off-site, transported, and then assembled at the site. This  construction technique can reduce the construction period because much  of the work can be done simultaneously, rather than sequentially.  Officials said another way they will address schedule delays is by using a  design-build approach in which the same contractor is responsible for  designing and building a facility rather than having one contractor design  the project and other contractors bid to build it.
Officials at the three BIE schools we visited that had recent federally  managed construction projects pointed to aspects of the projects that did  not meet their needs. For example, an official at a school in Oklahoma  told us that when Indian Affairs managed a project to replace a high  school building and dormitories, Indian Affairs planned a dormitory to  house 400 students and a school that could only accommodate 368  students. Because all of the students in the dormitories would have to be  educated on-site, there was not enough capacity in the school to match  the capacity in the dormitory.
Accountability measures can provide incentives for contractors to meet  schedule, cost, and performance goals. OMB advises agencies to include  and enforce measures in contracts that reduce the risk of cost overruns,  schedule shortfalls, and work that fails to meet contract requirements.  However, we found Indian Affairs did not consistently use available  accountability measures in contracts for federally managed BIE school  construction projects to ensure these goals were met. In particular, in  interviews with Indian Affairs and school officials and our review of  contract files for recent school construction projects, we found Indian  Affairs officials responsible for working with the contracting officer did not  always understand how to use accountability measures. Because Indian  Affairs does not have guidance on incorporating accountability measures  into its school construction contracts with commercial vendors, and on  properly implementing them during contract performance, facilities  management officials we interviewed did not always understand which  tools were available to ensure accountability in construction or how to use  those tools. Specifically, they misunderstood the use of retainage and  liquated damages clauses, performance bonds, and warranties. Indian  Affairs also did not always conduct robust lifecycle cost analysis of  different building options to help ensure sustainability over time. Each of  these issues is discussed in greater detail below.

			Retainage

Retainage is one tool that agencies may use in federal construction to  ensure contractors meet contract requirements. The Federal Acquisition  Regulation allows agencies to retain, or withhold, a portion of the agreed  upon contract price until the work is complete to ensure the contractor or  subcontractor will meet its obligations and complete a construction project  satisfactorily.
We found that although all three contracts for federally managed school  construction projects that we reviewed contained retainage clauses,  officials at each of these schools identified unresolved issues that the  contractor had not yet addressed. Contracting officers, construction  project managers, and a senior facilities management official with whom  we discussed the use of retainage said they generally did not use this  measure to ensure accountability in contracts, and they appeared to  misunderstand how it could be used. Retained funds can provide an  immediate source of funding for correcting problems that a contractor  cannot or will not correct. When asked why they typically did not use  retainage in contracts, the officials we interviewed provided various  reasons. For example, one contracting officer said he often knew the  contractors and they generally did not have performance problems. Two  project managers and the senior facilities official incorrectly believed the  agency was not allowed to use retainage. A senior Indian Affairs official  acknowledged there might be misunderstandings about the use of  retainage across the agency.

			Liquidated Damages

Liquidated damages clauses in contracts are a tool that agencies can use  if they expect to incur damages as the result of delayed delivery or  performance. These clauses require the contractor to pay the government  a daily fixed amount agreed to by both parties to compensate the  government for damages incurred due to delays in project completion.  Liquidated damages are not punitive, and should be reasonable, just  compensation for probable damages associated with delayed  completion.
We found all three of the contracts for federally managed school  construction projects that we examined included liquidated damages  clauses, but two of the three project managers with whom we discussed  liquidated damages said they generally did not use this accountability  measure in their school construction projects. When we asked the project  managers why they typically did not use liquidated damages, despite  such clauses customarily being included in their contracts, their  responses reflected a misunderstanding of the role, use, and  implementation of this measure. For example, one regional facilities  manager told us that using liquidated damages could harm Indian Affairs’  relationship with the contractor. She saw the tool as punitive and said it  reflects an assumption that the contractor is trying to take advantage of  the government. However, as noted above, the Federal Acquisition  Regulation specifically states that liquidated damages are not punitive  and are not negative performance incentives. Further, the liquidated  damages rate must be a reasonable forecast of just compensation for  costs that would be incurred.

			Performance Bonds

Performance bonds, which are required for construction contracts issued  by the federal government, assure payment by a second party to the  government in the event that the contractor does not fulfill its obligations  under the contract. An insurance company or bank typically provides this  assurance.
We found that Indian Affairs does not have any written guidance for  contracting officers and project managers on how to use performance  bonds. As a result, senior Indian Affairs facilities officials did not always  fully understand how they could use performance bonds to hold  contractors accountable. Two senior Indian Affairs facilities officials we  interviewed did not realize that the time period for which they could use  performance bonds to ensure that contractors complete work  satisfactorily was for the entire warranty period. Specifically, they told us  that Indian Affairs generally releases performance bonds at the end of  construction rather than at the end of the warranty period.

			Warranties

Warranties are a promise given by a contractor regarding the nature or  condition of the work performed under the contract. Warranties aim to  ensure quality, for example, by guaranteeing the owner that the builder  will repair or replace defective parts or workmanship within a specified  time period.
Although warranty clauses were included in the construction contracts we  reviewed, senior facilities officials told us that Indian Affairs does not  require project managers to perform warranty inspections before the  warranty period expires. Such inspections are the primary tool to identify  issues that may be covered under the contract’s warranty and are a  common practice in federal government construction. These officials said  project managers do not always perform warranty inspections. As a  result, according to school officials, federally managed school  construction projects did not always meet contract requirements and  quality standards, and Indian Affairs did not ensure that contractors  corrected all deficiencies before the end of the warranty period.
Because contracting officials did not fully apply the accountability  measures available to them under the Federal Acquisition Regulation,  problems with school construction sometimes had to be corrected at  Indian Affairs’ expense after school construction was completed. For  example, officials at four schools we visited told us they had roofs that  leaked soon after installation. As a result, there was damage to the  interior of the buildings which had to be repaired at additional cost to the  government. At two schools, the roofs leaked from the day they were  installed, officials said. Indian Affairs accepted the roofs as meeting  contract requirements, even though the leaks were not satisfactorily  repaired prior to acceptance. At one of the schools, officials said the new  roof had to be replaced two more times.
Another school we visited in Arizona almost two years after it was built  reported a long list of nonfunctioning and malfunctioning building  components—including technological, electrical, and plumbing problems  and issues with safety and handicap accessibility—that were not  addressed when Indian Affairs accepted the building or during the  warranty period. We also observed classrooms where agency officials  pointed out windows that did not allow enough room for students to  escape in case of emergency, and other emergency exit windows with  rails that had sharp protrusions that could cause injury, among other  construction and safety issues. School officials told us they found Indian  Affairs to be unresponsive to their efforts to resolve warranty issues.

			Lifecycle Cost Analysis

Lifecycle cost analysis is a tool to determine the most cost-effective  option among competing alternatives to purchase, own, operate,  maintain, and dispose of a building. However, we found that some  recently replaced BIE schools were planned, designed, and built without  first conducting a lifecycle cost analysis. Such analysis would have  required the design to take into account the overall cost and the ability of  school staff to operate and maintain the facility over its useful life.
According to senior Indian Affairs officials, a lifecycle cost analysis is not  routinely conducted for new school construction projects. As a result,  schools have been designed and equipped with features, such as  complex heating and cooling systems, that some school facility staff do  not have the technical skills, training, and certification to properly operate  and maintain. Officials at three schools we visited told us they sometimes  had to override the systems in an attempt to address operational  problems. Improper use and maintenance of these systems may  ultimately result in increased costs, reduced performance, and shorter  lifespans, and may potentially void the warranty. Additionally, in our  review of contract files, we found a letter from a contractor recommending  that one school contract with certified maintenance staff to maintain its  complex heating and cooling system after school staff were unsuccessful  in maintaining it themselves. Some BIE schools do not have sufficient  resources to hire contractors or certified maintenance staff, or they may  be in such remote locations that it is difficult to find qualified staff.
When we asked Indian Affairs officials why they did not routinely analyze  the lifecycle costs of building systems and required that schools be  designed with complex heating and cooling systems, they told us they  believed such systems were a requirement under federal green building  standards. However, such complex systems are not an absolute  requirement under the green building certification system adopted by  Indian Affairs, which allows flexibility to substitute simpler systems as long  as the building’s overall rating is within the acceptable range. Instead, it is Indian Affairs’ own School Facilities Design Handbook—which federal  contractors and tribal organizations use when designing schools—that  requires systems, such as those for heating and cooling, that have  complex features. However, the handbook also requires that a school’s  design take into account an analysis of the lifecycle costs of purchasing,  installing, and operating such systems over time. In addition, the  handbook requires that when selecting a heating and cooling system,  factors including a system’s simplicity of operation and its maintainability  also be taken into account.
The design handbook’s requirement to take lifecycle cost-effectiveness  and other factors into consideration, and the requirement to install heating  and cooling systems with complex features, could be in conflict in some  situations, such as when school facility staff lack the requisite skills and  training to operate and maintain such systems. Federal standards for  internal control require management to define objectives so that they are  consistent with external requirements and internal expectations. If Indian  Affairs had ensured that a comprehensive lifecycle cost analysis was  conducted, as required by its own handbook, it may have found that in  some cases such systems were not cost effective or practical when  compared to other alternatives. However, even if a thorough lifecycle cost  analysis demonstrates that the requirement for sophisticated heating and  cooling operating systems is not practicable, it is not clear from the  handbook when and how school designs can deviate from this  requirement. Until Indian Affairs clarifies its design handbook’s  requirements, the agency risks spending money on costly equipment that  school officials may be unable to properly operate and maintain.
Without specific guidance for ensuring accountability in contracts,  contracting officers and project managers may continue to misunderstand  how and when to use accountability measures that are available to them  under federal regulations. Therefore, Indian Affairs will have little  assurance that contracts are consistently managed to ensure projects are  completed satisfactorily, on time, and within budget. As a result, Indian  Affairs could risk spending millions of dollars on new schools that do not  meet the needs of students and staff in terms of their size, quality of  construction, or sustainability over time.

		For Tribally Managed Projects, Indian Affairs Has Not Provided Sufficient Oversight and Technical Assistance to Ensure Projects Are on Time, Within Budget, and Meet Schools’ Needs

For school construction projects managed by tribal organizations under  grants or self-determination contracts, Indian Affairs also has not provided  sufficient oversight and technical assistance to the tribal organizations.  Indian Affairs’ facilities management manual states that facilities  management and regional facilities staff are responsible for providing  technical assistance throughout the construction process. In addition, the  manual notes that the Indian Affairs staff are also responsible for fiscal  and programmatic oversight of facilities programs, including those  operated under tribal grants and self-determination contracts. In  addition, according to the Guide to Opportunities for Improving Grant  Accountability by the Domestic Working Group Grant Accountability  Project, agencies need to oversee grants to ensure that grant funds are  used for intended purposes and will lead to planned results. When  grantees further distribute funds, such as to contractors, it is important for  them to be able to ensure that the contractors perform in accordance with  their contracts. One way agencies help ensure compliance with grant  requirements is to provide technical assistance on how to manage grant  funds.
Because tribal organizations may not always have the capacity to ensure  accountability for large school construction projects, Indian Affairs policy  requires an organizational capacity review before awarding school  construction grants. The organizational capacity review is an  assessment of the tribal organization’s capacity to perform construction  activities, including assessing its financial management, procurement,  personnel, and property management systems. Indian Affairs contracts  with a certified public accountant to conduct the review. The findings of  the review help the agency determine if the tribal organization represents  a high risk of not being able to complete the project satisfactorily. Indian  Affairs uses the risk rating to determine its level of oversight, which is  reflected in the performance, reporting, and funding schedules included  as grant conditions. If it determines the organization is at high risk,  Indian Affairs may decide not to award the grant and manage the project  itself, although Indian Affairs officials told us this rarely occurs. Instead,  Indian Affairs usually adds conditions to the grant or self-determination  contract with the tribal organization that are intended to increase Indian  Affairs’ oversight. Examples of such grant conditions we found in our  grant file reviews and in interviews included Indian Affairs: making progress payments only after the tribal organization is able to  demonstrate that it has met project requirements, rather than  providing grant funds to the organization in one lump sum;  requiring tribal organizations to provide more detailed financial reports  and undergo additional project monitoring; or disbursing the grant on a reimbursement basis, meaning the tribal  organization has to spend its own money and be reimbursed after  project requirements are met.
Some tribal organizations do have the experience and capacity to  manage large construction projects. For example, at two schools, we met  with officials who had previously managed construction and maintenance  projects for multiple tribally managed schools, and, therefore, had the  capacity to manage large projects. In one case, the school used a tribal  grants office to manage grant funds. The school was also part of a  consortium of tribal schools that obtained facilities management and  architectural services through a tribally administered non-profit  organization. The organization employed two experienced architects who  served as project managers. The other school was also part of a  consortium, this one with three schools for which the consortium  manages educational as well as construction funds for the schools.
However, not all tribal organizations have such high capacity. Even  though Indian Affairs evaluates the capacity of these organizations before  awarding a grant or self-determination contract for school construction, it  does not always provide those that lack capacity with sufficient technical  assistance to improve their ability to manage construction projects.  Instead, to address these capacity issues, Indian Affairs directs these  organizations to hire professional project managers, construction  administrators, and on-site inspectors to help them manage the  construction projects. However, some tribal organizations were not able  to perform basic aspects of project management, such as finding  professional services providers. During our contract and grant file review,  we found correspondence from a tribal organization that was struggling to  hire a skilled project manager for its school and dormitory replacement  project. Without sufficient technical assistance, the tribal organization  selected a relatively inexperienced project manager over a more  experienced one. The school subsequently had problems with the project  manager and had to hire another one, resulting in delays of several  months. Further, school officials said they did not know how to remedy  issues that arose during or after construction was completed or which  office to contact for assistance. They noted that when they reached out to  Indian Affairs, Indian Affairs did not provide adequate technical  assistance.
In addition, unless a tribal organization specifically asks for assistance,  Indian Affairs generally does not provide technical assistance to tribal  organizations on how to negotiate and administer contracts and hold  contractors accountable for completing projects on time and within  budget. According to Indian Affairs’ guidance on overseeing tribally  managed construction projects, tribal organizations must request  technical assistance in writing. Tribal organizations managing school  construction projects may need more oversight and technical assistance  to develop contract requirements and ensure they are met. For example,  an environmental audit cited one newly replaced BIE school in Arizona for  having biosolids and lagoon sludge in a fenced-in area adjacent to the  school. The contractor had removed the sludge during the school  construction process and renovation of a lagoon on school property.  According to Indian Affairs, the school did not properly contract for  renovating the lagoon, did not set aside funds for sludge disposal, and  allowed the contractor to dump the sludge near the school rather than  dispose of it properly. The school subsequently had to hire a new  contractor to dispose of the sludge at an additional cost to Indian Affairs  of $1.8 million.
We found other instances in which tribal organizations managing BIE  school construction projects would have benefited from more technical  assistance from Indian Affairs to structure their construction contracts to  ensure they held contractors accountable. For example, a BIE school in  South Dakota that was replaced in 2009 requested technical assistance  from Indian Affairs when it wanted to make a claim against a contractor  for not properly testing the soil under the school, which school officials  said caused structural damage to the new buildings. The officials said the  school lacked the resources to hire an attorney and wanted to obtain  assistance from an Interior attorney or obtain Indian Affairs funds to pay  for a private attorney. However, Indian Affairs did not provide any  technical assistance. Officials said the school had been built under a  grant and as a result the tribal organization was responsible for settling  any problems with its construction contracts. This is consistent with  examples we found in our prior work. As we reported in 2015, one tribally  managed project at a South Dakota school to construct a $1.5 million  building for bus maintenance and storage resulted in a building that was  too small to accommodate a large school bus on a hydraulic lift when the  exterior door was closed. Leaving the door open was not practical in cold  South Dakota winters. The tribal organization had not used financial  incentives to ensure the contract performance was satisfactory.  Specifically, it paid the firm nearly the full amount for the project before  final completion, according to school officials, leaving it little financial  leverage over the contractor. Unless Indian Affairs provides assistance to  tribal organizations in structuring contracts to protect their interests, tribal  organizations with low capacity may have little recourse to address poor  contractor performance, possibly resulting in a waste of federal funds.
Furthermore, we found that Indian Affairs did not always provide  adequate oversight for ongoing tribally managed projects. For example,  an official at one school we reviewed in South Dakota told us that the  Indian Affairs technical representative only visited the school once in two  years when it was completing its project. Indian Affairs’ policy states that  the technical representative will inspect projects of this size quarterly.  Officials at another school we reviewed in South Dakota told us that  Indian Affairs was so slow to perform its oversight tasks that school and  tribal officials had to travel to Albuquerque, where the Division of Facilities  Management and Construction is located, to inquire about the delays in  reviewing and approving the design of the new school. Moreover, Indian  Affairs was not always able to perform oversight before payments were  made to tribal organizations. Indian Affairs facilities officials told us that  grant officers, the BIE officials that administer school construction grants,  occasionally approve payments without proper review by Indian Affairs.  For example, Indian Affairs facilities managers were sometimes informed  that BIE had fully allocated funds for school construction projects before  the facilities managers had a chance to review the final project.
As a result of this lack of technical assistance and oversight, some new  school facility projects managed by tribal organizations took longer than  expected and were over budget or had to be scaled back by eliminating  buildings or major features. Eight of the 30 tribally managed school  replacement projects completed since 2003 were completed three or  more years after the estimated completion date. Three of the 30 projects  were 20 percent or more over budget, and one was more than 60 percent  over budget (see fig. 5). Some planned school designs had to be scaled  back to stay within budget. For example, one replacement plan for a  school in Arizona initially included both an elementary and a high school,  but the tribal organization was not able to build the high school for  budgetary reasons. Officials at the South Dakota school that  experienced delays in obtaining Indian Affairs’ approval for its design told  us that due to the delays, the costs of supplies and labor increased,  resulting in its planned gymnasium and kitchen no longer being within  budget.
Delays and issues with budget may also be expected on the last three  schools on BIE’s 2004 school replacement list, two of which are tribally  managed replacement projects. During our visits to the three schools, we  noted that Indian Affairs has not addressed tribal organizations’ requests  for assistance or reviewed desired changes in a timely manner. All three  schools received funds for planning and design in 2013 and 2014 and are  currently at various stages of design. As of February 2017, construction  had not yet begun on any of the projects. One school was concerned  about rising costs, mainly because BIE was slow to review the school’s  requests for changes in the type of space and square footage allowed by  BIE. The tribal organization waited over 2 years to obtain a waiver from  BIE to build a slightly larger facility based on the reservation’s current  census data, which indicated larger incoming kindergarten classes than  BIE had projected. Although BIE eventually granted the school more  space, it did not initially grant additional funding. Until March 2017, the  school and Indian Affairs were at an impasse because the cost for the  new design exceeded the budget allotted by Indian Affairs. School  officials were concerned that as time passed, the cost of construction  continued to rise. In March 2017, Indian Affairs approved funding to  supplement the project and notified school officials that the design could  proceed. For another school on the 2004 replacement list, the tribal  organization asked BIE to approve additional space for its gymnasium.  School officials said that after months of hearing nothing from BIE  officials, the tribal organization decided to move ahead with the project  with a smaller gym.
Until Indian Affairs improves its oversight of tribally managed construction  projects and provides technical assistance to those tribal organizations  that lack the capacity to manage major projects, tribal organizations may  not be able to ensure their new schools are completed on schedule,  within budget, and in accordance with schools’ needs.

		Indian Affairs Did Not Adequately Maintain Contract and Grant Files, Making it Difficult to Ensure Accountability

Indian Affairs has not maintained copies of complete contract or grant  files for recently completed BIE school and dormitory construction  projects. The agency was unable to provide us complete sets of key  contract or grant documents for any of the 10 recently constructed  schools we selected for review. Numerous key documents were missing  from all of the files we requested. In one case, BIE was unable to locate  any of its own grant files for a tribally managed school and dormitory  construction project completed in 2014. The school faced many serious  construction issues, such as non-working fire alarms and large cracks in  the foundation, but because school and agency officials were unable to  provide the grant documents, there was no documentation to identify how  the tribal organization attempted to address these problems or how the  contractor responded. Interior’s Departmental Manual on Information  Resources Management requires the bureaus to develop efficient and  effective filing systems to organize and retrieve their records. In  addition, for contracts for federally managed construction projects, the  Federal Acquisition Regulation requires assignment of responsibility for  their maintenance, and establishment of a system to locate any contract  files promptly when files are not maintained in a central location. In our  review, we found that different phases of major Indian Affairs construction  projects were sometimes handled by different contracting offices, which  each maintained the files in their respective locations. Indian Affairs  officials said that it is Indian Affairs’ policy that the contracting or grant  officers maintain a complete set of files. They said this does not always  occur. Further, they told us that contracting officers have large workloads  that sometimes take precedence over maintaining contract files.
According to Indian Affairs officials, the agency has begun to maintain  electronic files for contracts awarded after 2012, which could make it  easier to locate certain files. However, it is unclear whether contract  administration files will be included as part of this system. Further, agency  officials told us the new system will not include grant files and self- determination contract files for tribally managed construction projects.
Turnover among senior Indian Affairs’ managers responsible for  overseeing school construction and a resulting loss of institutional  knowledge makes a set of complete contract files important in order to  better manage current and future projects. Without a complete set of  construction contract or grant files for recently built BIE schools, it is also  difficult to use contract provisions to hold contractors accountable for  problems resulting from construction. Further, without a complete set of  contract files for all projects, Indian Affairs will be less likely to learn from  past experience to ensure future school and dormitory construction  projects are better managed. This is particularly important now as Indian  Affairs is in the process of building three BIE schools from its 2004  replacement list and will soon begin replacing 10 additional schools  selected for replacement in April 2016.

	Conclusions

Managing BIE school facilities is a complex task. The cost of repairing,  renovating, and replacing BIE’s school and dormitory facilities represents  a substantial liability, particularly in a resource-constrained environment.  Unless Indian Affairs actively monitors its school facilities portfolio and  develops a comprehensive long-term capital asset plan, it may not be  able to effectively evaluate the full range of its funding priorities and  identify which school construction projects should take precedence.  Moreover, by including more detailed information on proposed capital  expenditures for future projects and updates on ongoing and recent  construction in its annual congressional budget justifications, Indian  Affairs could provide Congress with more complete information on the  costs of its programs. Such information could help inform decision-making  about the agency’s annual budget for school construction and, more  generally, provide greater transparency of federal resource allocation and  facilitate oversight.
It is critical that Indian Affairs develop and implement clear, specific  guidance for project managers and contracting officers on the effective  use of accountability measures to ensure that federally managed projects  are on time, within budget, and meet schools’ needs. Without such  guidance, Indian Affairs may be unable to ensure that new construction  meets the needs of students and staff in terms of its size, quality, or  sustainability over time. In addition, unclear guidance in Indian Affairs’  design handbook makes it difficult to ensure that design requirements— such as for heating and cooling systems—are cost effective and practical.  Without clarification on when and how school designs can deviate from  such requirements based on lifecycle cost analysis, the agency risks  planning, designing, and building school facilities that do not offer the  most cost effective solutions over their lifespan or include features that  school facility staff can easily operate and maintain. As a result, school  facilities staff may continue to override the systems in an attempt to  address operational problems causing systems to fail, operate  inefficiently, or void warranties, which could lead to increased costs,  reduced performance, and shorter system lifespan.
For tribally managed projects, unless Indian Affairs provides adequate  technical assistance and oversight, it may not be able to ensure that tribal  organizations are well positioned to effectively manage their construction  projects. Finally, without proper maintenance of complete contract and  grant files for all BIE school construction projects, Indian Affairs may have  difficulty administering contracts and grants, including using accountability  measures to ensure contractors meet contract requirements and grantees  meet grant requirements.
Without taking steps to improve planning and oversight for school  construction projects, Interior may be unable to ensure that limited  funding for BIE school repair, renovation, and replacement will be used  efficiently and effectively. As a result, thousands of Indian students may  continue their education in unsafe and inadequate school facilities.

	Recommendations

To ensure accountability for BIE school facility funds, we recommend that  the Secretary of the Interior direct the Assistant Secretary—Indian Affairs  to take the following six actions:  1.  Develop a comprehensive long-term capital asset plan to inform its  allocation of school facility funds. Such a plan should include a  prioritized list of school repair and maintenance projects with the  greatest need for funding.  2.  Provide more details in Indian Affairs’ annual congressional budget  justifications on specific needs at BIE schools, including information  on proposed capital expenditures, and updates on previous school  construction projects.  3.  Develop and implement guidance for its project managers and  contracting officers regarding effective use of accountability  measures.  4.  Clarify Indian Affairs’ design handbook requirements to explain when  and how school designs can deviate from specific requirements— such as heating and cooling systems with complex features—when  the life cycle cost analysis demonstrates the requirements are not  cost-effective or practical given such factors as the technical capacity  of school facility staff.  5.  Improve oversight and technical assistance to tribal organizations to  enhance tribal capacity to manage major construction projects.  6.  Develop and implement guidance for maintaining complete contract  and grant files for all BIE school construction projects.

	Agency Comments and Our Evaluation

We provided a draft copy of this report to Interior for review and comment.  In its written comments, reproduced in appendix I, Interior agreed with  five of our recommendations and disagreed with one recommendation.  Interior also provided technical comments, which we incorporated as  appropriate.
Interior concurred with our recommendation to develop a comprehensive  long-term capital asset plan to inform its allocation of school facility funds.  Interior stated that Indian Affairs is engaged with the Office of  Management and Budget to develop a more robust and prioritized capital  asset management plan for school infrastructure needs, which they  expect to complete before the end of the fiscal year.
Interior concurred with our recommendation to provide more details in  Indian Affairs’ annual congressional budget justifications on specific  needs at BIE schools. Interior stated that Indian Affairs is currently  engaged in an effort to comprehensively review the budget justification  process with the objective of improving the quality, format, and  presentation of the President’s annual budget submission to Congress  and that it will work to provide more detailed information on proposed  capital expenditures and updates on previous construction projects. In  addition, Interior stated that Indian Affairs will ensure improvements to the  budgeting process are made permanent through formal policy and  procedure in order to ensure that the needs of BIE schools are accurately  and regularly reported in its congressional budget justification.
Interior also concurred with our recommendation to develop and  implement guidance for its project managers and contracting officers  regarding the effective use of accountability measures. Interior indicated  that the Acquisition office and the Division of Facilities Management and  Construction are working together to create and implement guidance and  were preparing and planning improvements for future construction  contracts. In addition, Interior stated that Indian Affairs will develop a  financial accountability workgroup with members from the Office of the  Chief Financial Officer, BIA, BIE, and the Office of the Assistant  Secretary—Indian Affairs to develop guidance and standards to ensure  the effective use of accountability measures.
Interior did not concur with our recommendation to clarify Indian Affairs’  design handbook to explain when and how school designs can deviate  from specific requirements—such as heating and cooling systems with  complex features—when the lifecycle cost analysis demonstrates that the  requirements are not cost-effective or practical. Interior stated that it had  revised its design handbook in 2017 and that the revised handbook  includes a process to consider deviations that do not violate requisite  codes, standards, or laws. Interior further stated that the handbook is not  intended to describe every scenario where a deviation may be requested  and that it is more efficient to allow designers, schools and other users to  request deviations and exceptions as and when needs arise. However,  based on our discussions with officials and review of excerpts of the  revised handbook, the revised handbook is still in draft and is being  reviewed internally and has neither been finalized nor distributed. We  believe that an updated design handbook that includes a process for  deviations is critical, and we agree with Interior’s statement that the  handbook does not need to describe every scenario where a deviation  may be requested. The draft 2017 handbook indicates that when conflicts  or questions arise the designer is to formally notify the Interior project  manager in writing to request a waiver. However, it does not provide an  explanation of the process or how life cycle cost analysis might inform  that process. We continue to believe that, in addition to a process,  providing guidelines and an explanation about how life-cycle cost analysis  should inform such decisions in the handbook before it is finalized would  be useful and help to ensure that the choices designers make with regard  to design are both cost-effective and practical.
Interior concurred with our recommendation to improve oversight and  technical assistance to tribal organizations to enhance tribal capacity to  manage major construction projects. Interior stated that the Division of  Facilities Management and Construction will develop a “high-risk” project  tracking and monitoring process. The Division will work with BIA and BIE  facilities managers to develop an engagement plan to better inform tribes  of the extensive requirements involving the management of capital  projects replacing schools or facilities. For tribes that manage projects  themselves, Indian Affairs will offer to provide them with technical  assistance, particularly during key program phases.
Finally, Interior concurred with our recommendation to develop and  implement guidance for maintaining complete contract and grant files for  all BIE construction projects. Interior stated that Indian Affairs will  develop, as part of its Financial Accountability Workgroup, guidance for  maintaining all types of construction contract and grant files.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Interior, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II.

Appendix I: Comments from the Department of the Interior

Appendix II: GAO Contact and Staff Acknowledgments

	GAO Contact

	Staff Acknowledgments

In addition to the contact named above, Elizabeth Sirois (Assistant  Director), Lara Laufer (Analyst-in-Charge), Ellie Klein, Liam O’Laughlin,  and Jon Melhus made key contributions to this report. In addition, support  was provided by Michael Armes, James Bennett, Deborah Bland, David  Chrisinger, Monika Gomez, Kelsey Kennedy, Jeff Malcolm, Sheila  McCoy, Kimberly McGatlin, Jean McSween, James Rebbe, Jeanette  Soares, Alyssa Weir, and Tatiana Winger.

Summary:
Why GAO Did This Study

Indian Affairs is responsible for operating and maintaining 1,785 buildings at 185 K-12 BIE schools, including dormitory buildings for students, on or near reservations. These buildings had an estimated value of $4.5 billion in 2016. Many of these schools are in poor condition and have safety hazards. GAO was asked to review Indian Affairs' processes to fund and oversee the repair and replacement of schools.
GAO examined the extent to which Indian Affairs (1) has a comprehensive plan to maintain, repair, or replace schools and ensure the efficient use of funds, and (2) ensures accountability throughout the school construction process. GAO assessed agency data on the cost and timeliness of 49 school replacement projects completed from fiscal year 2003 through 2016, and reviewed contract and grant files for 10 school construction projects selected from schools that had recent or ongoing projects. GAO also assessed Indian Affairs' practices against its policies, design standards, and federal laws and regulations and interviewed agency and school officials.

What GAO Found

The Department of the Interior's (Interior) Office of the Assistant Secretary-Indian Affairs (Indian Affairs) does not have a comprehensive capital asset plan to guide the allocation of funding for school construction projects across its 185 Bureau of Indian Education (BIE) schools. Indian Affairs is in the process of replacing 3 schools and plans to replace 10 additional schools from a list of 54 schools that applied in 2015. However, Indian Affairs has not developed a comprehensive, long-term capital asset plan for the repair or replacement of the remaining schools in its portfolio, as required by Interior policy. Until Indian Affairs develops a capital asset plan, it risks using federal funds inefficiently and not prioritizing funds to schools with the most pressing needs.
Indian Affairs has not consistently used accountability measures or conducted sufficient oversight to ensure that BIE school construction projects are completed on time, within budget, and meet schools' needs. For instance, Indian Affairs does not always use accountability measures, such as warranties, to have builders replace defective parts or repair poor workmanship. Project managers, who are responsible for helping to ensure accountability, do not always understand how to use accountability measures because Indian Affairs has not provided guidance on when and how to use them to ensure successful completion of construction projects. In addition, Indian Affairs has not adequately overseen school projects managed by tribal organizations. Officials interviewed by GAO at three schools said Indian Affairs was not timely in reviewing new school designs, which resulted in project delays. For 49 construction projects completed from 2003 through 2016, the inconsistent use of accountability measures and inadequate oversight led to projects that took longer than expected, were sometimes over budget, or had to be scaled back to remain within their allotted budgets. For example, of the 49 projects:
16 were 3 or more years behind schedule (see fig. 1).
1 was almost 10 years behind schedule.
10 were 20 percent or more over budget.
Further, the new projects did not always meet schools' needs, according to school officials. In one instance, Indian Affairs planned a dormitory to house 400 students while the school it planned could only accommodate 368 students. Until Indian Affairs develops and implements guidance for ensuring accountability throughout the school construction process and improves its oversight of these projects, it will have little assurance they are completed satisfactorily and meet the needs of students and staff.
Figure 1: Timeliness of Indian Affairs' School Replacement Projects Completed, Fiscal Years 2003-2016

What GAO Recommends

GAO is making six recommendations, including that Indian Affairs develop a capital asset plan for school facility construction and repair, develop and implement guidance on how to use accountability measures, and improve oversight of projects. Interior agreed with five of the recommendations and disagreed with one. GAO continues to believe its recommendation is valid, as discussed further in this report.