Audit

Report 

Policies and Procedures Used for Iraq Relief and 

Reconstruction Fund Project Management - 

Construction Quality Assurance 

Report No. SIGIR 05-012 July 22, 2005

Office of the Special Inspector General for Iraq Reconstruction
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

400 Army Navy Drive • Arlington, Virginia 22202

July 22, 2005 

MEMORANDUM FOR DIRECTOR, PROJECT AND CONTRACTING OFFICE 

COMMANDER, GULF REGION DIVISION, U.S. ARMY 

CORPS OF ENGINEERS 

SUBJECT: Policies and Procedures Used for Iraq Relief and Reconstruction Fund 

Project Management - Construction Quality Assurance 

(Report No. SIGIR 05-012) 

We are providing this audit report for your information and use. We performed the audit 

in accordance with our statutory duties contained in Public Law 108-106, as amended, 

which mandates the independent and objective conduct of audits relating to the programs 

and operations funded with amounts appropriated or otherwise made available to the Iraq 

Relief and Reconstruction Fund. Public Law 108-106, as amended, requires that we 

provide for the independent and objective leadership and coordination of and 

recommendations on policies designed to promote economy, efficiency, and effectiveness 

in the administration of such programs and operations and to prevent and detect waste, 

fraud, and abuse. 

This report does not contain recommendations, therefore, no written response to this 

report is required. We appreciate the courtesies extended to our staff. For additional 

information on this report, please contact Mr. James P. Mitchell at jim.mitchell@sigir.mil

or at (703) 428-1100. For the report distribution, see Appendix D. 

Stuart W. Bowen, Jr. 

Inspector General 
i

Special Inspector General for Iraq Reconstruction 

Report Number SIGIR 05-012 July 22, 2005 

(Project No. D2005-DCPAAP-0005) 

Policies and Procedures Used for Iraq Relief and Reconstruction Fund 

Project Management – Construction Quality Assurance 

Executive Summary 

Introduction. In May 2005, we initiated an audit to determine whether the policies, 

procedures, and internal controls used by U.S. government organizations resulted in the 

effective management of Iraq reconstruction projects. This audit report is the first of a 

series of reports addressing policies and procedures used by U.S. government 

organizations within Iraq to manage reconstruction projects funded by the Iraq Relief and 

Reconstruction Fund. This report discusses policies and procedures used for construction 

quality management. 

Objective. The objective of this audit was to identify the policies, procedures, and 

internal controls established by U.S. government organizations for monitoring and 

reviewing Iraq reconstruction projects. 

This information was obtained as part of a broader review of the effectiveness of the 

U.S. government’s policies, procedures, and internal controls, and whether those policies, 

procedures, and internal controls are adequately coordinated by and among 

U.S. government organizations and sufficiently consistent for the effective management 

and timely completion of Iraq reconstruction projects. We plan additional reviews to 

determine the effectiveness of these policies, procedures, and internal controls and the 

adequacy of their coordination. 

Results. The Project and Contracting Office and the U.S. Army Corps of Engineers, the 

two major organizations involved in Iraq Relief and Reconstruction Fund projects, have 

issued written policies and procedures for establishing and managing construction quality 

management programs for reconstruction projects funded by the Iraq Relief and 

Reconstruction Fund. 
Table of Contents 

Executive Summary i 

Introduction 

 Background 1 

 Objective 1 

Finding 

 Policies and Procedures 3 

Appendixes 

A. Scope and Methodology 4 

B. Project and Contracting Office Standard Operating Procedures 5 

C. Acronyms 7 

D. Report Distribution 8 

E. Audit Team Members 10 
1 

Background 

Introduction 

In May 2005, we initiated an audit to determine whether the policies, procedures, and 

internal controls used by U.S. government organizations resulted in the effective 

management of Iraq reconstruction projects. This audit report is the first of a series of 

reports addressing policies and procedures used by U.S. government organizations within 

Iraq to manage reconstruction projects funded by the Iraq Relief and Reconstruction Fund 

(IRRF). This report discusses policies and procedures used for construction quality 

management. 

Construction Quality. Obtaining quality construction is a combined responsibility of 

the construction contractor and the government. The contract documents should specify, 

establish, and clearly define the quality of materials and workmanship required for a 

construction project. Construction contractors must comply with the contract’s terms and 

produce the required product. Certain civil works structures specify a construction 

procedure in lieu of an end-product. In such instances, contractors are responsible for the 

specified procedure and the government must verify design assumptions, project control, 

and assure the end-product quality. 

Contractors are responsible for all activities necessary to manage, control, and document 

work so as to ensure compliance with the contract terms, plans, and specifications. 

Accordingly, the contractor develops and implements a contractor quality control system 

to manage, control, and document all construction activities and other functions related to 

delivering quality construction. 

Government Quality Assurance. Government quality assurance is the process by 

which the government assures end product, project, or specified procedural quality. The 

government quality assurance process starts well before construction and continues 

through acceptance of completed construction. While government quality assurance is 

required on all construction contracts, the extent of government quality assurance activity 

should be commensurate with the value and complexity of the contracts involved. In any 

case, effective monitoring and review of construction activity by the government is 

paramount to ensure that completed construction projects are compliant with contract 

specifications. 

Management of Iraq Reconstruction Projects. The Project and Contracting Office 

(PCO) and the U.S. Army Corps of Engineers (USACE) are the two major organizations 

involved in the management of IRRF related projects. The PCO is responsible for all 

activities associated with asset, financial, program, and project management and for 

managing both construction and non-construction activities. 

Objective 

The objective of this audit was to identify the policies, procedures, and internal controls 

established by U.S. government organizations for monitoring and reviewing Iraq 

reconstruction projects. 
2 

This information was obtained as part of a broader review of the effectiveness of the 

U.S. government’s policies, procedures, and internal controls, and whether those policies, 

procedures, and internal controls are adequately coordinated by and among 

U.S. government organizations and sufficiently consistent for the effective management 

and timely completion of Iraq reconstruction projects. We plan additional reviews to 

determine the effectiveness of these policies, procedures, and internal controls and the 

adequacy of their coordination. 

For a discussion of the audit scope, methodologies, and prior coverage, see Appendix A. 

For definitions of the acronyms used in this report, see Appendix C. For a list of the audit 

team members, see Appendix E. 
3 

Policies and Procedures 

The PCO and the USACE, the two major organizations involved in IRRF projects, have 

issued written policies and procedures for establishing and managing construction quality 

management programs for reconstruction projects funded by the IRRF. 

Project and Contracting Office 

The PCO manages approximately $13 billion of the IRRF program, of which 

approximately $8.7 billion has been apportioned for construction projects, and is 

responsible for all activities associated with construction. Its policies and guidance for 

establishing construction quality management procedures are detailed in its standard 

operating procedures. Between June and December 2004, the PCO issued more than 

100 standard operating procedures, and we identified 42 that were related to construction 

and contracting quality management. The procedures range from conducting 

construction quality control and assurance inspections to final inspection, acceptance, and 

transfer of construction. According to a senior PCO official, these procedures 

supplement the USACE regulation, which also applies to PCO managed projects. A list 

of the PCO Standard Operating Procedures that apply to construction quality 

management is provided in Appendix B. 

U.S. Army Corps of Engineers 

USACE Regulation 1180-1-6, “Construction Quality Management,” September 30, 1995, 

provides the general policy and guidance for establishing quality management procedures 

in the execution of USACE construction projects. The regulation is based on 

requirements in the Federal Acquisition Regulation and applies to all USACE elements, 

major subordinate commands, districts, and field operating activities responsible for 

awarding and supervising construction contracts. Essentially, the regulation recognizes 

that obtaining quality construction is a combined responsibility of the construction 

contractor and the government. On the government side, the process starts before 

construction and includes reviews of plans and specifications for biddability, 

constructability, operability, and environmental responsibility; plan-in-hand site reviews; 

coordination with using agencies or local interests; establishment of performance periods 

and quality control requirements; field office planning; preparation of quality assurance 

plans; and reviews of quality control plans. During construction, the government is 

responsible for enforcement of contract clauses, maintenance of quality assurance and 

quality control inspection and work records, and acceptance of completed construction. 

On the contractor side, contractors are responsible for all activities necessary to manage, 

control, and document work so as to ensure compliance with the contract terms and 

specifications. The contractor’s responsibilities include ensuring adequate quality control 

services are provided for work accomplished on- and off- site by the contractor, 

suppliers, subcontractors, technical laboratories, and consultants. The work activities 

include safety, submittal management, and all other functions relating to the requirement 

for quality construction. 
4 

Appendix A. Scope and Methodology

To obtain information on construction quality management policies and procedures, we 

reviewed portions of the Federal Acquisition Regulation and the U.S. Army Corps of 

Engineers Regulation 1180-1-6, “Construction Quality Management,” September 30, 

1995, applicable to construction quality management and discussed these regulations 

with professional engineers experienced in Iraq reconstruction1. 

We also reviewed the Project and Contracting Office’s Standard Operating Procedures 

Index to identify those procedures applicable to construction quality management and 

obtained and reviewed all applicable procedures for completeness. We also discussed 

these procedures with senior Project and Contracting Office officials. 

We conducted this performance audit from May through July 2005, in accordance with 

generally accepted government auditing standards. 

Scope Limitation. We did not test the adequacy of the Federal Acquisition Regulations, 

the U.S. Army Corps of Engineers regulation, or the Project and Contracting Office 

Standard Operating Procedures. We plan to test the adequacy of regulations, policies, 

procedures, and internal controls and the implementation of that guidance in a series of 

on-site reviews and will report our results in a future audit reports. 

Prior Coverage. There were no audits performed in the past five years with the same or 

similar objectives as this audit. 

 

1

 The professional engineers were the Project and Contracting Office’s Deputy for Operations; the Project 

and Contracting Office Government Water Sector Project Manager; and the Special Inspector General for 

Iraq Reconstruction’s Senior Project Technical Manager. 
5 

Appendix B. Project and Contracting Office 

Standard Operating Procedures 

Updated: 3/31/05 

 PROCEDURE 

NUMBER 

EFFECTIVE 

DATE 

Contracting 

Contracting primer CM-100 11/05/04 

Contractor invoicing CM-101 06/30/04 

Evaluate contractor performance and administer fee boards CM-102 11/05/04 

Conduct negotiations of scope and price for db task orders CM-103 06/30/04 

Management of contractor-acquired government property CM-104 07/05/04 

Identification and appointment of contracting officer’s representatives CM-105 11/05/04 

Adjust award fee plan evaluation criteria CM-106 11/05/04 

 

Construction 

Conduct construction contractor quality control and assurance inspection CN-100 06/20/04 

Prepare project construction management plan CN-101 06/17/04 

Contractor quality control and assurance construction deficiency tracking CN-102 06/29/04 

Contractor construction quality control plan CN-103 06/20/04 

Construction contractor quality control assurance mutual understanding meeting CN-104 06/29/04 

Construction submittal review process CN-105 06/20/04 

Biddability, constructability, operability, and environmental reviews CN-106 06/20/04 

Process construction interim payments (cost plus) CN-107 12/19/04 

Accident prevention plan CN-108 06/20/04 

Schedule update and progress payment for firm fixed-price construction CN-109 12/19/04 

Develop construction submittal register CN-110 06/30/04 

Preconstruction conference CN-111 06/30/04 

Processing construction contractor performance evaluations CN-112 06/30/04 

Request for information-construction CN-113 06/30/04 

Preparation of as-built drawings CN-114 07/05/04 

Construction project photographs CN-115 06/30/04 

Develop project security plan CN-116 06/30/04 

Operation and maintenance training CN-117 06/30/04 

Final inspection, acceptance, and transfer of construction CN-118 Rev 1 12/25/04 

Develop operation and maintenance manuals CN-119 06/30/04 

System startup and commissioning CN-120 07/05/04 

Process modification for changes (directed and constructive) CN-121 07/15/04 

Process modification for differing site condition CN-122 06/30/04 

Process modification for excusable delay CN-123 07/05/04 

Process modification for user requested change CN-124 06/30/04 

Designation of procuring, administrative, and termination contracting officers CN-125 07/05/04 
6 

Process suspension of work (ordered and constructive) for construction CN-126 07/05/04 

Resolving contract disputes and claims CN-127 12/19/04 

Terminations for the convenience of the government and for default CN-128 12/19/04 

Beneficial occupancy CN-129 07/05/04 

Task order final payment and closeout (cost plus) CN-130 12/19/04 

Contractor quality control factory testing CN-131 12/19/04 

Warranty repair procedures CN-132 07/05/04 

Accident investigation and reporting CN-133 06/29/04 

Preservation of historical, archeological, and cultural resources CN-134 07/05/04 
7 

Appendix C. Acronyms 

IRRF Iraq Relief and Reconstruction Fund 

PCO Project and Contracting Office 

USACE U.S. Army Corps of Engineers 
8 

Appendix D. Report Distribution 

Department of State 

Secretary of State 

Senior Advisor/Coordinator for Iraq 

U.S. Ambassador to Iraq 

Director, Iraq Reconstruction Management Office 

Inspector General, Department of State 

Department of Defense 

Deputy Secretary of Defense 

Director, Defense Reconstruction Support Office-Iraq 

Under Secretary of Defense (Comptroller)/Chief Financial Officer 

Deputy Chief Financial Officer 

Deputy Comptroller (Program/Budget) 

Inspector General, Department of Defense 

Department of the Army 

Assistant Secretary of the Army for Acquisition, Logistics, and Technology 

Principal Deputy to the Assistant Secretary of the Army for Acquisition, Logistics, 

and Technology 

Deputy Assistant Secretary of the Army (Policy and Procurement) 

Director, Project and Contracting Office 

Assistant Secretary of the Army for Financial Management and Comptroller 

Commander, U.S. Army Corps of Engineers 

Commander, Gulf Region Division 

Auditor General of the Army 

Other Defense Organizations

Director, Defense Contract Audit Agency 

Other Federal Government Organizations 

Director, Office of Management and Budget 

Comptroller General of the United States 

Inspector General, Department of the Treasury 

Inspector General, Department of Commerce 

Inspector General, Department of Health and Human Services 

Inspector General, U.S. Agency for International Development 
9 

Congressional Committees and Subcommittees, Chairman and 

Ranking Minority Member 

U.S. Senate 

Senate Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on Foreign Operations 

Senate Committee on Armed Services 

Senate Committee on Foreign Relations 

Subcommittee on Near Eastern and South Asian Affairs 

Subcommittee on International Operations and Terrorism 

Senate Committee on Homeland Security and Governmental Affairs 

Subcommittee on Government Efficiency and Financial Management 

Subcommittee on Financial Management, the Budget, and International Security 

U.S. House of Representatives 

House Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on Foreign Operations, Export Financing and Related Programs 

House Committee on Armed Services 

House Committee on International Relations 

Subcommittee on Middle East and Central Asia 

House Committee on Government Reform 

Subcommittee on Government Efficiency and Financial Management 

Subcommittee on National Security, Emerging Threats and International Relations 
10 

Appendix E. Audit Team Members 

The Office of the Assistant Inspector General for Auditing, Office of the Special 

Inspector General for Iraq Reconstruction, prepared this audit report. The Office of the 

Special Inspector General for Iraq Reconstruction staff members who contributed to the 

report include: 

Michael A. Stanka, PE 

William J. Whitehead 

Lloyd E. Wilson