Audit 

 Report 

Award of Sector Design-Build Construction Contracts 

Report Number 04-005 July 23, 2004 

Office of the Inspector General 

Coalition Provisional Authority 
Acronyms 

CPA Coalition Provisional Authority 

DASA(P&P) Deputy Assistant Secretary of the Army (Policy and Procurement) 

DCAA Defense Contract Audit Agency 

FAR Federal Acquisition Regulation 

JV Joint Venture 

KBR Kellogg, Brown and Root, Incorporated 

RFP Request for Proposal 

PCO Projects and Contracting Office 

SSEB Source Selection Evaluation Board 
COALITION PROVISIONAL AUTHORITY 

OFFICE OF THE INSPECTOR GENERAL

400 Army Navy Drive • Arlington, Virginia 22202 

July 23, 2004 

MEMORANDUM FOR AMBASSADOR TO IRAQ 

ASSISTANT SECRETARY OF THE ARMY (ACQUISITION, 

LOGISTICS AND TECHNOLOGY) 

DIRECTOR, DEFENSE PROCUREMENT AND ACQUISITION 

POLICY 

IRAQ RECONSTRUCTION MANAGEMENT OFFICE 

COMMANDER, U.S. ARMY CORPS OF ENGINEERS 

COMMANDER, NAVAL FACILITIES ENGINEERING COMMAND 

SUBJECT: Report on Award of Sector Design-Build Construction Contracts 

 (Report No.04-005) 

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

accordance with our statutory duties contained in Public Law 108-106 which mandates the 

conduct of audits relating to the treatment, handling, and expenditure of funds by the CPA or its 

successor entities on Iraq reconstruction, and of the programs operations, and contracts, carried 

out in utilizing such funds. We considered management comments in preparing the final report. 

We appreciate the courtesies extended to the staff. Questions should be directed to 

Mr. John Betar, (703) 428-1094 or Mr. Donney J. Bibb at (703) 428-0467. If management 

requests, we will provide a formal briefing on the results. See Appendix C for the report 

distribution. 

 Stuart W. Bowen, Jr. 

 Inspector General 

 Coalition Provisional Authority 
i 

Office of the Inspector General 

Coalition Provisional Authority 

Report No. 04-005 July 23, 2004

Award of Sector Design-Build Construction Contracts 

Executive Summary

Background. Public Law 108-106 Congress appropriated over $18.6 billion1 for the Iraq Relief 

and Reconstruction Fund, November 6, 2003, including $18.4 billion designated for Iraq. Those 

funds can be used through September 2006. The Project and Contracting Office,2 Coalition 

Provisional Authority supervises reconstruction efforts in Iraq and manages execution of the 

$18.4 billion. The Project and Contracting Office has six Sector Project and Contracting Offices 

that oversee reconstruction. The sectors are Public Works and Water; Security and Justice; 

Buildings, Education, and Health; Electric; Communications and Transportation; and Oil. 

To help rebuild the Iraqi infrastructure, DoD Components awarded 12 design-build construction 

contracts, valued as much as $7 billion. Two contracts were awarded in January 2004 to rebuild 

the oil sector and 10 contracts were awarded in March 2004 for the other sectors. Each contract 

was an indefinite-delivery indefinite quantity contract that provides for the issuance of task 

orders on either a cost reimbursement or fixed price basis. This contracting vehicle was used in 

order to minimize the costs of mobilizing and de-mobilizing contractors and administering the 

contracts, and to facilitate training and transition of responsibility to the Iraqi people. Each 

contractor will perform a portion of the work within a sector. As such, the contractors will not 

compete for work performed within the scope of their contracts. 

Results. For the six contracts we reviewed, DoD Components used competitive procedures to 

award the design-build construction contracts for rebuilding the Iraqi infrastructure. However, 

except for the two contracts for the oil sector, the contract awards were limited to sources from 

designated countries, the United States, Iraq, Coalition partners, and force contributing nations. 

On awarding these contracts, Army components properly advertised the requirements, developed 

source selection plans, and had sufficient controls to ensure the plans were followed. As a result, 

the U.S. Government will potentially obtain the benefits derived from competitive contracting. 

Nonetheless, the Project and Contracting Office faces challenges in ensuring that tasks 

performed under these contracts fully meet the U.S. Government’s requirements and are 

economically and efficiently executed. 

Management Comments. Although not required to comment, the Director, Iraq Project and 

Contracting Office, provided comments to the draft report. See the finding section of the report 

and the Management Comments section of the report for the complete text of the comments. 

 

1

 Of the $18.6 billion, $100 million is designated for assistance to Jordan, $100 million is designated for assistance 

to Liberia, and $10 million is designated for assistance to Sudan. 

2

 As of June 28, 2004, the Program Management Office was re-designated as the Project and Contracting Office. 
Table of Contents 

Executive Summary i

Background 1

Objectives 3

Finding 

Procedures Used to Award the Sector Design-Build Contracts 4 

Appendixes 

A. Scope and Methodology 12 

B. Evaluation Factors for the Design-Build Construction Contracts 14 

C. Report Distribution 18 

Management Comments 

Director, Project and Contracts Office 20 
1 

Background 

In order to provide security, relief, rehabilitation, and reconstruction in Iraq under the Foreign 

Assistance Act of 1961, in Public Law 108-106, Congress appropriated over $18.6 billion3 for 

the Iraq Relief and Reconstruction Fund (the Fund), November 6, 2003. These funds can be 

used by the Coalition Provisional Authority (CPA), the Department of Defense, the Department 

of Health and Human Services, the Department of State, the Department of Treasury, and the 

U.S. Agency for International Development through September 2006. 

Actions Prompting Congressional Concerns. Concern has been expressed over the award of 

non-competitive contracts for the rebuilding of Iraq. Much of that concern has centered on the 

sole-source contracts awarded to Kellogg, Brown and Root (KBR), a unit of the Halliburton 

Corporation. According to the Acquisition Strategy for Repair and Continuity of Operations of 

the Iraqi Oil Infrastructure, June 5, 2003, the Assistant Secretary of the Army (Acquisition, 

Logistics, and Technology) approved a Justification and Approval for the Southwestern 

Division, U.S. Army Corps of Engineers (Southwestern Division) on February 28, 2003, to 

negotiate a sole-source contract for KBR to execute a Contingency Support Plan. KBR had 

developed and delivered that plan to the Government on February 4, 2003, through the contract 

for the Logistics Civil Augmentation Program. Then, according to the acquisition strategy, the 

Southwestern Division identified an immediate need for additional capabilities and on March 8, 

2003, the Under Secretary of Defense for Policy approved a request by the Southwestern 

Division to award the contract to KBR for executing the contingency support plan. Although the 

sole-source contract was not to exceed $7 billion, the acquisition strategy states that the contract 

was intended as a temporary execution mechanism until competitively awarded contracts could 

replace it. 

Program Management. The CPA and its Project and Contracting Office4

 (PCO) are 

responsible for rebuilding Iraq. Award of the sector design-build contracts involved several 

organizations, including the PCO and Department of the Army (Army), which was designated as 

the executive agent for the contracting efforts. Source selection authorities evaluated the 

contract proposals and made award decisions. The source selection authorities received 

advisory, evaluation, contracting, and legal assistance. 

Projects and Contracting Office. The PCO is responsible for all activities associated 

with program, project, asset, construction, and financial management of the 

reconstruction efforts undertaken by the United States. As such, the PCO supervises 

reconstruction efforts in Iraq and is responsible for managing execution of the 

$18.4 billion appropriated on behalf of the CPA. The PCO consists of an overall 

management staff, six Sector PCOs, and a Directorate for Construction Management with 

regional construction offices. Sector PCOs oversee reconstruction and include Public 

Works and Water; Security and Justice; Buildings, Education, and Health; Electric; 

Communications and Transportation; and Oil. There are two PCO offices. The central 

PCO office, located in Baghdad, controls the infrastructure program. The rear PCO 

office, located in the Pentagon, provides contracting and financial support. 

 

3

 Of the $18.6 billion, $100 million is designated for assistance to Jordan, $100 million is designated for assistance 

to Liberia, and $10 million is designated for assistance to Sudan. 

4

 As of June 28, 2004, the Program Management Office was re-designated as the Iraq Project and Contracting 

Office. 
2 

Army. On May 21, 2003, the Deputy Secretary of Defense designated the Secretary of 

the Army as the DoD executive agent for administrative, financial, logistics, acquisition, 

and contracting support to the CPA. Following that designation, the Assistant Secretary 

of the Army (Acquisition, Logistics and Technology) designated the Deputy Assistant 

Secretary of the Army (Policy and Procurement) (DASA[P&P]), as the agent responsible 

to the acting Secretary of the Army for acquisition support for the CPA mission. In this 

capacity, the DASA(P&P) has authority for provide personnel and other support 

necessary to support the Iraqi infrastructure reconstruction effort both in the National 

Capital Region and in Iraq.

Source Selection Authority. Source selection authorities ensured proper conduct of the 

source selection process and made award decisions. The source selection authorities 

were selected from the U.S. Army Corps of Engineers, the Naval Facilities Engineering 

Command, and the U.S. Army Communication-Electronics Command, a component of 

the Army Materiel Command. Advisory councils, consisting of senior leaders, provided 

counsel and advice to the source selection authorities and participated in briefings and 

reviews.5

 The source selection evaluation board (SSEB) coordination and orchestration 

committee included the chair and deputy chair of the SSEB and the legal advisor. That 

committee oversaw and provided advice to the SSEB. The SSEB consisted of teams that 

evaluated designated aspects of the contract proposals. The procuring contracting office 

and legal advisors provided support to the entire evaluation organization. 

Design-Build Construction Contracts. DoD Components awarded 12 design-build 

contracts including 2 contracts in January 2004 and 10 contracts in March 2004 to rebuild 

the Iraqi infrastructure. The DASA(P&P) determined that the most appropriate type of 

contract to use was an indefinite-delivery indefinite quantity contract that provides for 

the issuance of task orders on either a cost reimbursement or fixed price basis. Technical 

and schedule risks were considered to be moderate, while cost risk was considered to be 

high. It was anticipated that task orders would initially be awarded on a cost-plus award 

fee basis, and if the risks later decreased, orders would be negotiated and awarded on a 

fixed price basis. The DASA(P&P) also determined that the contracts should be singleaward with each contractor responsible for performing a portion of the work within a 

sector. The use of a single-award would minimize the costs of mobilizing and demobilizing contractors and administering the contracts, and facilitate training and 

transition of responsibility to the Iraqi people. The contracts, valued as much as 

$7 billion, are identified in Table 1. 

 

5

For the oil sector, the DASA (P&P) also established an Executive Review Committee that reviewed the SSEB 

evaluation and briefed the source selection authority on that evaluation in November 2003. 
3 

 

 Table 1. Sector Design-Build Construction Contracts 

 Contract

 Award Ceiling 

 Sector Contractor Contract No. Date (millions)

 

 

Buildings/Education 

and Health Parsons Delaware, Inc W914NS-04-D-0006 25-Mar-04 500 

 

 

Communications/ 

Transportation Lucent Technologies, Inc W914NS-04-D-0005 23-Mar-04 75 

 

Contrack/AICI/OCI/ 

Archirodon JV W914NS-04-D-0004 3-Mar-04 325 

 

Electrical Fluor-AMEC, Joint Venture

 (JV) W914NS-04-D-0003 11-Mar-04 $500 

 Washington Group, Inc W914NS-04-D-0010 12-Mar-04 500 

 Perini Corporation W914NS-04-D-0011 12-Mar-04 500 

 

 Oil Parsons/Iraq JV W9126G-04-D-0002 16-Jan-04 800 

 Kellogg, Brown and 

 Root, Inc W9126G-04-D-0001 16-Jan-04 1,200

 

 

Public Works/ 

Water Fluor-AMEC, JV W914NS-04-D-0008 23-Mar-04 600 

 Fluor-AMEC, JV W914NS-04-D-0022 23-Mar-04 500 

 

Black and Veatch/ 

Washington Group, JV W914NS-04-D-0007 11-Mar-04 600 

 

 Security and Justice Parsons Delaware, Inc W914NS-04-D-0009 26-Mar-04 900 

 Total $7,000

 

 

Objectives 

Our overall audit objective was to evaluate the procedures used by the CPA, the CPA PCO, and 

supporting contracting activities when awarding sector contracts. Specifically, we evaluated 

whether competitive procedures were used to award contracts to rebuild the Iraqi infrastructure. 

See Appendix A for a discussion of the scope, scope limitations, and methodology. 
4 

Procedures Used to Award the Sector Design-Build 

Construction Contracts 

Except that competition was generally limited to sources from designated countries, 

DoD Components used competitive procedures required by the Federal Acquisition Regulation 

(FAR) to award the design-build contracts for each sector of the Iraqi infrastructure. In awarding 

the contracts, the Army properly advertised the requirements, developed source selection plans, 

and had sufficient controls to ensure the plans were followed. As a result, the Government will 

potentially obtain the benefits derived from competitive contracting. Nonetheless, the PCO faces 

challenges in ensuring that tasks performed under these contracts fully meet the 

U.S. Government’s requirements and are economically and efficiently executed. 

Competition Requirements 

To award contracts with Fund appropriations, P.L. 108-106 requires that the CPA and Federal 

executive agencies use full and open competition, except when the Federal Property and 

Administrative Services Act allows the use of other procedures. The Federal Property and 

Administrative Services Act include six exceptions to the use of full and open competition. To 

compete Government requirements, agencies must follow steps specified in the FAR. The steps 

involved with awarding a competitive, negotiated contract start with publicizing the 

U.S. Government’s requirements and ends with source selection. 

Publicizing Government Requirements. FAR Part 5 prescribes policies and procedures for 

publicizing contract opportunities and award information. Generally, FAR Subpart 5.203 

requires Federal agencies to synopsize information on proposed contract actions expected to be 

over $25,000 in the Government Point of Entry, accessed at www.fedbizopps.gov, at least 

15 days before issuing a solicitation. Also, except for the acquisition of commercial items, FAR 

Subpart 5.203 requires Federal agencies to provide a response time of at least 30 days to receive 

proposals from solicitation issuance, if the proposed contract action is expected to exceed the 

simplified acquisition threshold ($500,000 for contracts to be performed outside the United 

States). 

Evaluation of Proposals. FAR Part 15 prescribes policies and procedures for negotiated 

acquisitions. FAR Subpart 15.304 states that although the evaluation factors and their relative 

importance that apply to an acquisition are within the broad discretion of agency acquisition 

officials, the evaluation factors must represent the key areas of importance and emphasis that the 

Federal agency should consider in the source selection decision. That subpart also requires that 

the evaluation factors support a meaningful comparison and discrimination between and among 

competing proposals and price or cost and quality be evaluated in every source selection. The 

subpart explains that the evaluation of quality includes factors such as past performance, 

compliance with solicitation requirements, technical excellence, management capability, 

personnel qualifications, and prior experience. FAR Subpart 15.305 states that proposals will be 

evaluated based on the factors and sub-factors in the solicitation. That subpart also states that 

Federal agencies can evaluate proposals using any rating method or combination of methods. 

Evaluation of Price or Cost. FAR Subpart 15.304(c)(1) states that price or cost to the 

Government shall be evaluated in every source selection. Also, FAR 15.305(1) states 

that Federal agencies are required to perform a cost realism analysis to determine what 

the Government should realistically expect to pay for the proposed effort, the offeror’s 

understanding of the work, and the offeror’s ability to perform the contract. 
5 

Evaluation of Technical Proposal. FAR Subpart 15.304(c)(2) requires Federal agencies 

to address the quality of the product or service in every source selection through 

consideration of one or more non-cost evaluation factors. Those factors include past 

performance, compliance with solicitation requirements, technical excellence, 

management capability, personnel qualifications, and prior experience. FAR Subpart 

15.305(a)(2) describes past performance information is an indicator of an offeror’s ability 

to successfully perform the contract and states that Federal agencies should consider the 

currency and relevance of information provided by offerors, source and context of the 

information, and general performance trends. That subpart also states that the evaluation 

should take into account past performance information regarding key personnel who have 

relevant experience, or subcontractors that will perform major or critical aspects of the 

requirement when such information is relevant to the acquisition. The evaluation of past 

performance should also include offerors’ compliance with subcontracting plan goals for 

small disadvantaged business concerns, monetary targets for small and disadvantaged 

business participation, and notifications. 

Contract Competition 

Except that competition was limited to sources from designated countries for all prime contracts 

but the oil sector contracts, DoD Components used competitive procedures required by the FAR 

to award the design-build contracts for each sector of the Iraqi infrastructure. Specifically, a 

number of proposals were received for each request for proposal (RFP), staff evaluated contract 

proposals according to the established evaluation factors, and the source selection authority 

decided on the best value to the Government. The evaluation factors included compliance with 

solicitation requirements, past performance, technical excellence, management capability, 

personnel qualifications, prior experience, and cost. In planning the oil sector acquisition and 

selecting the contractor, the Southwestern Division and the source selection authority faced 

several challenges. 

Limited Competition. Except for the award of contracts in the oil sector, competition for award 

of the sector design-build construction contracts was limited. The limited competition was based 

on a Determination and Findings,6 December 5, 2003, approved by the Deputy Secretary of 

Defense, citing the public interest exception to the competition requirements in the Federal 

Property and Administrative Services Act. Specifically, the Determination and Findings stated 

that it was in the public interest to limit competition to sources from the United States, Iraq, 

Coalition partners, and force contributing nations. Although the Federal Property and 

Administrative Services Act does not provide the Deputy Secretary of Defense with authority to 

cite that exception, according to officials from the Office of General Counsel, DoD, evidence 

supports that the Secretary of Defense7

 was aware of and agreed with that determination. Also, 

according to the Single Acquisition Management Plan, January 6, 2004, the Deputy Secretary’s 

determination supported a policy decision made by the Deputies Committee, National Security 

Council. 

Offers Received. The Government received a sufficient number of offers for the six contracts 

that we selected for detailed review. For the oil sectors, proposals were due at the Ft. Worth 

 

6

 A Determination and Findings is a written approval by an authorized official that is required by statute or 

regulation as a prerequisite to taking certain contract actions. 

7

 According to the Federal Property and Administrative Procedures Act, the Secretary of Defense has authority to 

make a determination that it is in the public interest to use procedures other than full and open competition in the 

award of contracts. 
6 

District Office, Southwestern Division by 2 PM local time on August 14, 2003. For the other 

sectors, proposals were due at the locations responsible for performing the evaluations by 1 P.M. 

local time, on February 5, 2004. Of the 57 proposals received, 53 proposals were received ontime and 51 were assessed as responsive to the requirements in the solicitation, as shown in the 

following Table 2. 

 

 Table 2. Number of Companies That Submitted Proposals 

 

 Total On-time Late 

 Sector Contract Number Offers Offers Offers

 

 Oil - North W9126G -04-D-0002 7* 7* 0 

 

 Oil - South W9126G-04-D-0001 7* 7* 0 

 

 

Public Works - 

North W914NS-04-D-0008 11 11 0 

 

 

Public Works - 

South W914NS-04-D-0022 13 12 1 

 

 Transportation W914NS-04-D-0004 10 8 2 

 

 

Water 

Resources W914NS-04-D-0007 9 8 1 

 

 Total 57 53 4 

 

*Initially 7 proposals were received for each oil sector. However the Southwestern Division rejected one 

proposal for each sector as being unresponsive. The offeror did not take exception to the rejection; therefore, 

the Southwest Division evaluated 6 proposals for each oil sector.

In accordance with the FAR Subpart 15.208(b)(1), the four late offers were not considered for 

award. 

Evaluation of Contract Proposals. After the proposal receipt deadline, teams evaluated 

the proposals to assess which ones provided the best value to the Government. Initially, 

the evaluation teams assessed whether the proposals complied with the general 

requirements in the solicitations. Then, the proposals were assessed for the factors in the 

solicitations, which included all the factors required by the FAR: technical, management, 

past performance, and cost. For the oil sector contracts, evaluators assessed two sample 

projects, including a project related to firefighting capabilities and a project related to 

assessing oil systems. For the contracts in the other sectors, the evaluators assessed the 
7 

offerors’ approach to a mobilization task8

 and a sample task, which were unique to each 

solicitation. 

Evaluations. Evaluators assessed proposals according to the factors in the 

solicitation and the source selection plan. First, the evaluators individually 

assessed the proposals. The individual assessments were then consolidated into a 

consensus report that was summarized into a briefing for the source selection 

authority. The comments and conclusions in the consensus report were supported 

by the individual evaluations and those evaluations were, in turn, supported by 

information in the offerors’ proposals. Further, while generally agreeing with the 

conclusions reached by the evaluation teams, the source selection authorities 

made their own assessments of the proposals. In the two instances where the 

source selection authority disagreed with sub-factor ratings provided made by 

evaluation teams, the source selection authority provided reasonable rationale. 

Evaluation Factors. The RFP for the oil sector presented evaluation factors 

different from the RFPs for the other sectors, and provided different relative 

values. However, all the RFPs included evaluation factors required by the FAR. 

For the oil sector, the factors included past performance, technical, management 

capability, contract administration, and cost. For the other sectors, the factors 

included technical, management, past performance, and cost. For all evaluations, 

the non-cost factors, when combined, were considered to be significantly more 

important than cost. Details on the evaluation factors are in Appendix B. 

Challenges to Award of the Oil Sector Contracts. The Southwestern Division faced several 

challenges in the award of the two oil sector contracts. First, there was an incumbent contractor 

for restoring Iraq’s oil industry and, prior to the March 2003 war in Iraq, that contractor had 

developed the Government’s contingency support plan for restoring the oil industry. Then, the 

Southwestern Division needed to compare costs between proposals that used different technical 

approaches and made different assumptions. In addition, the Southwestern Division needed to 

evaluate whether a bankruptcy filed by an affiliate affected an apparent winner’s ability to 

perform the contract. Also, the evaluations of the top three offerors were practically identical. 

Lastly, three days prior to contract award, the Defense Contract Audit Agency (DCAA) issued a 

report on the estimating system used by one of the offerors. The Southwestern Division and the 

source selection authority addressed each of the concerns. 

Incumbent Contractor. One challenge faced by the Southwestern Division was 

that there was an incumbent contractor for restoring Iraq’s oil industry. 

According to the acquisition strategy, the incumbent had certain advantages 

including the knowledge accumulated in developing the contingency support 

plan, and the knowledge of actual cost incurred performing work under the 

existing contract. In addition, the Government had already reimbursed the 

incumbent for its mobilization costs and the incumbent already had staff in-place. 

The Southwestern Division addressed the incumbency issue in its acquisition 

strategy. To mitigate the incumbent’s advantage, the Southwestern Division 

proposed that it determine the work to be performed and incorporate that work 

into the statements of work for each task order. Also, each offeror would develop 

a project management plan geared to the statement of work in the RFPs and 

mobilization costs would be removed from proposal costs. 

 

8

 Mobilization was not a factor for the oil sector contracts as the Government had already reimbursed the incumbent 

contractor for its costs of mobilizing under Contract No. DACA63-03-D-0005. 
8 

Potential Conflict of Interest. Another challenge faced by the Southwestern 

Division was determining whether there was a conflict of interest in allowing the 

incumbent contractor to compete for the contracts since the incumbent had 

developed the Government’s contingency support plan for restoring the oil 

industry. FAR Subpart 9.505-2(a) states that if a contractor prepares and 

furnishes complete specifications covering non-developmental items used in a 

competitive acquisition, that contractor shall not be allowed to furnish these 

items. In its acquisition plan, the Southwestern Division concluded that the 

contingency support plan was not a specification and would not be used to 

prepare either proposals or statements of work. In addition, Southwestern 

Division officials stated that their personnel, not the incumbent contractor, 

prepared the statements of work and that the conditions in Iraq were considerably 

different in June 2003, when the statement of work was being developed, than 

anticipated when the contingency support plan was prepared from midNovember 2002 through early February 2003. According to the acquisition 

strategy, the contingency support plan assumed that much more damage would 

occur from sabotage and the war efforts than the amount that actually occurred. 

In addition, the acquisition strategy states that the contingency support plan did 

not foresee the amount of damage that would result from looting and civil 

disorder. Finally, the acquisition strategy states that the contingency support plan 

did not anticipate the early re-emergence of Iraqi oil companies. Our review of 

the contingency support plan identified no clear relationship between the plan and 

the RFP.9

Evaluation of Costs. The cost proposals were not comparable because the 

offerors made different assumptions regarding the sample project in the RFP and 

proposed different technical solutions to the sample projects. The evaluators 

found that the RFP requirements were subject to interpretation and that the 

offerors’ assumptions could realistically be read into the task objectives for the 

sample projects. For example, the sample project for fighting oil well fires did 

not define the size of the fire or the amount of damage to the wells. As a result, 

offerors proposed a wide variety of total hours to complete the project, and 

reached different conclusions as to the equipment and services that would be 

furnished by the Government. The SSEB concluded that price differences were 

not significantly attributable to differences in technical approaches, each of which 

were reasonable based on the RFP requirements and assumptions. As a result, all 

offerors were evaluated and rated based on the reasonableness and cost realism of 

their sub-assumptions. 

Bankruptcy. The Southwestern Division needed to evaluate whether a 

bankruptcy filing under 11 U.S.C. Chapter 1110 in December 2003 by an affiliate 

of an offeror affected the company’s ability to perform the contract. The 

contracting officer determined that the bankruptcy would not affect the 

company’s responsibility. The source selection authority considered the 

contracting officer’s advice in selecting the oil sector contractors. 

Distinguishing Between Proposals. The results of the proposal evaluations for 

the top three offerors were practically identical. Therefore, the source selection 

authority needed to differentiate between the three best proposals. Using source 

 

9

 We did not use technical assistance to review the contingency support plan, which was still classified as SECRET 

when we reviewed it. 

10 Under 11 U.S.C. Chapter 11, the entity reorganizes. 
9 

selection criteria, the source selection authority was able to differentiate between 

the proposals and made a source selection decision. The Office of the General 

Counsel, USACE reviewed that decision and found it adequately supported by the 

record in compliance with legal requirements, and that there was a sound business 

case and legal basis for the decision. 

Report on Estimating System. Three days prior to contract award, DCAA 

issued a report on the estimating system used by an offeror. One day before the 

award, Southwestern Division officials contacted a local DCAA office about the 

report. The DCAA contact said that she would either obtain and review the report 

and explain the issues, or provide a point of contact at the responsible DCAA 

office. However, there was no further communication between the Southwestern 

Division and DCAA concerning that report. The contracting officer advised the 

source selection authority that the report did not impact source selection. 

Acquisition Planning, Publicizing Requirements, and Controls Over 

the Evaluation Process 

In awarding the sector design-build construction contracts, the Army adequately planned the 

acquisitions and publicized the Government’s requirements, and had sufficient controls in place 

to ensure that DoD Components followed the source selection plans. The controls included 

established procedures to evaluate proposals, training of evaluators, and oversight of the process 

by independent teams. Although evaluators for the oil sector contracts did not initially follow 

the source selection plan, oversight identified those deviations and they were corrected. 

Acquisition Planning. The Southwestern Division and the PCO developed acquisition plans 

and source selection plans before the RFPs were issued.11 Those plans detailed the factors to be 

considered in evaluating contract proposals and included standard sheets for evaluators to 

complete in preparing their evaluations. The evaluation sheets, which were properly completed 

by the evaluators, identified the offeror, evaluator, sector, factor and sub-factor being evaluated, 

proposal summary, evaluation summary, and strengths, weaknesses, and deficiencies of the 

proposal.12 

Publicizing the Proposed Contracts. The Army properly publicized the proposed contracts and 

provided potential offerors adequate time to prepare proposals. For the oil sector, the 

Southwestern Division synopsized the proposed contract in the Government Point of Entry on 

June 23, 2003, which was 16 days before the RFP was issued on July 9, 2003, for full and open 

competition on an unrestricted basis. In addition, the Southwestern Division held a pre-proposal 

conference in Dallas, Texas, on July 14, 2003, to provide information to potential offerors and to 

answer their questions. For the other sectors, the Army synopsized information on proposed 

contract actions in the Government Point of Entry on November 24, 2003, which was 42 days 

before the RFPs were issued on January 6, 2004. In addition, the Army held two industry day 

conferences on the proposed contracts. After the conference in Washington, D.C., the Army 

made the presentation materials, an audio of the speakers’ presentations, and frequently asked 

 

11 Adjustments were made to the plan after the RFP was issued, but those adjustments were made prior to the date 

and time that proposals were due from offerors. 

12 After initial evaluations, the procuring contracting officer decided that the Government needed to have 

discussions with companies that had prepared acceptable offers for awards in the Transportation sector and Water 

and Public Works sector. After discussions, the companies determined to be in the competitive range clarified 

their offers and the evaluation teams re-evaluated the proposals. 
10 

questions available on the CPA website and the National Defense Industries Association 

website. 

Controls Over the Evaluation Process. The Army established sufficient controls over the 

proposal evaluation process to ensure the source selection plans were followed. The controls 

included requiring statements of non-disclosure and independence, evaluator training, and 

oversight of the process followed by the independent teams. Although evaluators for the oil 

sector contracts did not initially follow the source selection plan for the evaluation of costs, 

oversight identified those deviations and those deviations were corrected. 

Statements of Non-Disclosure and Independence. The integrity of the evaluation 

process included staff involved in the evaluation and source selection process being 

required to sign non-disclosure statements and statements of non-interest. Through the 

statement of non-interest, staff stated that they and members of their family did not have 

either a direct or indirect interest in any firm submitting a proposal being considered by 

the SSEB. For the contract competitions reviewed, one evaluator stated that a family 

member was associated with one proposal. To ensure independence, the SSEB received 

legal advice that the evaluator should not review that proposal. 

Training. For all the sectors except oil, training was provided to evaluation team 

members. That training occurred in January 2004 and covered the provisions of the 

RFPs, integrity requirements, source selection process, evaluations, exchanges with 

offerors, documenting decisions, and protests. For the oil sector, although the source 

selection plan stated evaluators would be trained, officials from the Southwestern 

Division stated that since the evaluators were very experienced, training was informal. 

Oversight of the Source Selection Process. After the evaluation process, the SSEB 

briefed the source selection authority and source selection advisory council to discuss the 

evaluation results and recommend the proposal that represented the best overall value and 

most advantageous to the Government. The source selection authority and SSEB also 

briefed the DASA(P&P). For the oil sector, the DASA(P&P) appointed an Executive 

Review Committee to review the efforts of the SSEB. The committee identified 

evaluation deficiencies and recommended corrective action, including a re-evaluation of 

proposal costs. After a new chairperson was assigned to the cost team, the team reevaluated proposal costs. Finally, another team, consisting of staff from the Air Force 

Materiel Command and Defense Contract Management Agency, reviewed the cost 

evaluation and concluded that the cost evaluation team had developed a complete and 

careful analysis of a difficult procurement. 

Competition Benefits and Challenges Ahead 

Because DoD Components used competitive procedures to award the design-build construction 

contracts, the U.S. Government will potentially obtain the benefits derived from competitive 

contracting. Those benefits include timely delivery of quality products and services at 

reasonable cost. In addition, because competitive procedures were used, companies that 

submitted proposals have assurances that they were treated fairly. However, because offerors 

were not competing to provide or repair specific facilities and the contractors will not compete 

against each other for specific tasks, there are risks that the full benefits of competition will not 

be achieved. Therefore, the PCO needs to manage the risks by providing oversight ensuring 

contractors design facilities that fully meet the Government’s requirements and are economically 

and efficiently executed. That includes using efficient and effective design and building 
11 

methods, the most appropriate materials, and competitive procedures to subcontract and obtain 

materials. That also includes contractors effectively managing their staff and subcontractors. In 

addition, since the contracts provide incentives for the contractors through award fees, the PCO 

needs to effectively manage those fees. 

Management Comments. In responding to the draft report, the Director, PCO acknowledged 

the management challenges and presented its plan to meet the challenges. The strategy consisted 

of: 

• Using award fee contracts to motivate contractor performance. 

• Monitoring and controlling costs and schedule performance by using earned value 

management systems. 

• Using contractors to assist with the monitoring of the design-build construction 

contractors. 

The Director, PCO also commented that the award of the sector design-build construction 

contracts was not the end of the competitive process. He stated that the PCO intends to continue 

using contracts awarded by the Air Force Center for Environmental Excellence; the Gulf Region 

Division, U.S. Army Corps of Engineers; and U.S. Agency for International Development in the 

efforts to rebuild Iraq. In addition, the Director stated that the PCO would monitor performance 

on existing contracts to determine where the contractors are excelling and will use past 

performance information, along with pricing and scheduling information, as factors in evaluating 

the suitability of contractors to perform. The Director stated that this process would create 

competition and ensure that taxpayers receive the best value possible. 
12 

Appendix A. Scope and Methodology 

We reviewed the procedures used by Army and other DoD Components that assisted the Army 

to award the design-build construction contracts to restore the Iraqi infrastructure. The review 

was limited to evaluating whether DoD Components complied with the competition 

requirements in the FAR. Specifically, we evaluated whether Government requirements were 

adequately publicized, controls over the receipt and safeguarding of proposals, the evaluation of 

proposals, and notices provided to unsuccessful offerors. We performed this audit from 

April 2004 through July 2004 in accordance with generally accepted government auditing 

standards. The RFPs that we reviewed are in the following table, along with the associated 

infrastructure sector and the organization of the source selection authority. 

 

 Table of RFPs Reviewed 

 

 

Source Selection 

Authority 

 Sector RFP Number. Organization 

 

 Transportation W914NS-04-R-0004 

Northwestern Division, U.S. 

Army Corps of Engineers 

 

 

Oil, North and 

South DACA63-03-R-0021 

Southwestern Division, U.S. 

Army Corps of Engineers 

 

 

Public Works - 

Water Resources W914NS-04-R-0007 

Headquarters, Naval 

Facilities Engineering 

Command 

 

 

Public Works - 

Water, North and 

South W914NS-04-R-0008 

Headquarters, Naval 

Facilities Engineering 

Command 

 

Documents reviewed included acquisition plans, source selection plans, RFPs, proposals, 

proposal receipts, statements of non-interest and non-disclosure, proposal evaluations made by 

individuals involved with the source selection, source selection briefings, notices to unsuccessful 

offerors, source selection decisions, and contracts. We conducted interviews with officials from 

the Iraq Infrastructure Reconstruction Contract Team; Headquarters, Naval Facilities 

Engineering Command; South West Division, U.S. Army Corps of Engineers; and DCAA. 

Scope Limitation. This review contained scope limitations that could materially impact the 

results. 

• Although a common source selection plan was developed for all the contracts 

except the two oil sector contracts, the choice of contracts to review was not 
13 

always at our discretion. Specifically, the DASA (P&P) and the Iraq 

Infrastructure Reconstruction Contract Team provided contract W914NS-04-D0004 (Transportation) as the only contract file immediately available. That was 

the first contract file reviewed. 

• The source selection process was reviewed after the fact. Therefore, we could not 

obtain complete assurance that contract proposals were properly secured after 

receipt and throughout the evaluation process. In addition, the files for 

W914NS-04-D-0004 were not reviewed at the Omaha Division, USACE; 

therefore, security over the proposals for that contract was not reviewed. The 

files for W914NS-04-D-0004 were reviewed at Ft. Belvoir, VA. 

• We did not review the management control program for any DoD Component 

involved with the award of the sector design-build construction contracts. 

• The review of the sample tasks was limited to a general review of the 

reasonableness of the contract proposals. We did not enlist the assistance of 

technical specialists. 

• Although we found no discernible relationship between the statement of work and 

the contingency support plan prepared for the Government by the incumbent 

contractor for the oil sector, technical experts did not assist in that review. 

Use of Computer-Processed Data. We did not use computer-processed data to perform this 

audit. 

Prior Coverage 

During the last 5 years, the Government Accountability Office (GAO), the Inspector General of 

the Department of Defense (IG DoD), and the Inspector General of the Coalition Provisional 

Authority have issued 3 reports discussing the award of contracts to rebuild Iraq. Unrestricted 

GAO reports can be accessed over the Internet at http://www.gao.gov. Unrestricted IG DoD 

reports can be accessed at http://www.dodig.osd.mil/audit/reports. 

GAO 

GAO-04-605, “Fiscal Year 2003 Contract Award Procedures and Management Challenges,” 

June 1, 2004 

GAO-04-869T, “Contracting for Iraq Reconstruction and Global Logistics Support,” June 15, 

2004 

IG DoD 

IG DoD Report No. D-2004-057, “Contracts Awarded for the Coalitional Provisional Authority 

by the Defense Contracting Command-Washington,” March 18, 2004 
14 

Appendix B. Evaluation Factors for the Design-Build 

Construction Contracts 

The proposals that we reviewed were evaluated for the factors included in the RFPs, which 

included all the factors in the FAR. In all source selections of negotiated contracts, the FAR 

requires an evaluation of price or cost to the Government and quality of products of services. 

The FAR states that quality is addressed by evaluating one or more non-cost factor, such as past 

performance, technical excellence, management capability, personnel qualifications, and prior 

experience. For negotiated contracts expected to exceed $1 million, the FAR requires that past 

performance be an evaluation factor. 

Oil Sector Contracts. For the oil sector contracts, the RFP broke the evaluation of quality into 

the following categories, in the order of importance: past performance and experience; business 

management and technical approach, and contract administration. Cost was significantly less 

important than the combination of the other criteria. 

Past Performance and Experience. The evaluation of past performance and 

experience, which was considered to be the most important evaluation factor, assessed 

the likelihood that offerors would be able to successfully perform the requirements in the 

contract. Offerors that demonstrated good performance and experience on recent, 

relevant contracts were assessed a lower level of risk. Primary sub-factors were past 

performance, personnel experience and company experience. The level of risk assessed 

the likelihood of success in performing the requirements stated in the RFP. 

Past Performance. For the past performance sub-factor, evaluators assessed the 

quality of services and or products provided by the offeror, responsiveness and 

flexibility to changes in project requirements, resourcefulness or ability to provide 

needed resources, problem solving, and the ability to develop innovative 

approaches to resolve problems. In addition, the offeror’s record of timely 

performance, cost control, business practices, customer satisfaction, key 

personnel, and support of the small and small disadvantaged business utilization 

program were also evaluated. That evaluation was based on information in the 

proposals as well as information from references and other sources. 

Personnel Experience. For the personnel experience sub-factor, evaluators 

evaluated the offerors personnel relative to the requirements of the contract. The 

proposed job titles, education, and special qualifications listed on the resumes of 

the key personnel were evaluated. Offerors with personnel possessing experience 

with cost reimbursable contracts, and personnel with experiences linked to 

projects identified in the company experiences section were rated higher. 

Company Experience. The evaluation of past experience assessed the ability of 

the company to successfully perform work relevant to the contract, including 

experience working in the Middle East. Offerors were to present up to ten 

examples of projects representing work experience relevant to the requirements of 

the contract. These requirements included experiences by the Prime or subcontractor on large diverse projects in this region of the world. In addition, the 

offerors were asked to describe technical problems encountered and how these 

problems were addressed. Offerors with experience working in Iraq with Iraqi 

contractors received high ratings. In addition, those who identified technical 
15 

challenges and solutions on past projects and related those experiences to what 

they expected to find in Iraq were evaluated higher 

Business Management and Technical Approach. The evaluation of business 

management and technical approach, which was considered to be slightly less important 

than past performance and experience, assessed the ability of offerors to perform the 

business management and technical requirements. The primary sub-factors included 

business management approach and oil field capabilities. 

Business Management Approach. For the business management approach subfactor, evaluators assessed the size and depth of the organization staffing plans, 

workload, training, and use of resources. Also, the proposed approach to 

mobilization was evaluated. Although other mobilization factors were 

considered, offerors showing ability to quickly respond and mobilize received 

higher ratings. The evaluations included a review of the relationship between the 

prime and subcontractors and the joint venture team members. Those groups with 

experience in working a project together received higher ratings. 

Oil Field Capability. For the oil field capability sub-factor, evaluators assessed 

the ability to meet contract requirements and the methods proposed for 

accomplishing the requirements, including quality control and safety. Offerors 

that demonstrated an outstanding understanding of safety and quality control 

received higher ratings. Offerors were also evaluated on their ability to provide a 

full range of oil service capabilities. Evaluators assessed the offeror’s ability to 

provide cost effective services, work with undefinitized contracts, and perform 

daily cost accounting. In addition, offeror’s plans for responding to 

environmental and disaster situations with environmental implications were 

considered. That evaluation included the ability to provide environmental 

services, including environmental sampling, laboratory analyses, and other 

environmental services. In addition, the offeror’s philosophy toward the use of 

innovative technologies was evaluated. 

Contract Administration. The evaluation of contract administration, which was 

considered to be less important than business management and technical approach, 

assessed the ability of offerors to perform the range of contract administration 

requirements as stated in the RFP. The primary contract administration sub-factors were 

management information system, small business and small disadvantaged business 

utilization, and acquisition management. Offerors that demonstrated in its proposal an 

excellent understanding of Contract Administration requirements received higher ratings. 

Management Information System. For the management information system 

sub-factor, evaluators assessed how offerors integrated subcontractors and or 

team members into the system. Offerors that proposed a viable plan for 

controlling cost were given high ratings. 

Small Business. For the small business and small disadvantaged business 

utilization sub-factor, evaluators assessed the proposed use of small, small 

disadvantaged, women owned and small businesses in historically underutilized 

business zones (HUBZones). 

Acquisition Management. For the acquisition management sub-factor, 

evaluators assessed the offerors’ purchasing system and procedures for managing 

the acquisition and control of resources and subcontractors. Proposals providing 

details of how the purchasing system would be used and verifying that the 
16 

purchasing system was Government approved received higher ratings. Proposals 

showing that the acquisition system was used to manage subcontracts also 

received higher ratings. 

Cost. Proposed costs were subjectively evaluated for cost realism and most probable 

cost, and to determine the reasonableness, affordability over the life of the contract, the 

adequacy and value of the cost data. Offerors provided a copy of their latest audited 

financial statements, a determination of adequacy from the cognizant administrative 

contracting officer and verification of an approved accounting system that is adequate for 

cost-reimbursement contracts. In addition, offerors submitted for evaluation cost 

proposals for two sample projects, firefighting capabilities and oil system assessment 

capabilities. 

Other Sectors. For contracts in the other sectors, the RFP broke the evaluation of quality into 

the following categories, in the order of importance: technical, management, and past 

performance. Cost was significantly less important that the combination of the other criteria. 

Technical. The evaluation of the technical factor, which was considered to be the most 

important factor, assessed the likelihood of the offeror successfully performing the 

requirements in the statement of work. This factor had two subfactors, technical 

approach and tasks. 

Technical Approach. For the evaluation of the technical approach sub-factor, 

evaluators assessed the offerors’ experience and expertise, capabilities, ability to 

quickly obtain additional expertise and resources. In addition, evaluators 

assessed the offerors’ proposed sources of proposed material and heavy 

equipment. According to the source selection plan, that assessment was made to 

evaluate the offerors’ understanding of the contract requirements, and challenges 

of performing work in Iraq. 

Tasks. Evaluators assessed the offerors’ approach to a mobilization task and a 

sample task. Each sample task was unique to each RFP. In addition to evaluating 

costs, the evaluators assessed whether the planned approach demonstrated 

whether each offeror understood the requirements of the tasks, the needed 

resources and logistics requirements, the event sequences and timing. The 

evaluation also assessed the offerors’ ability to identify and mitigate risks, 

minimize mobilization time, and address logistics issues related to facilities, 

security, and moving personnel and equipment. 

Management. The evaluation of the management factor, which was considered to be 

slightly less important than the technical factor, assessed the approach to managing 

design-build construction efforts. The primary management sub-factors were 

management approach and subcontracting plan. 

Management Approach. Management approach was further sub-divided into 

three other elements: the management plan, life support and security, and 

approach to integrating the Iraqi workforce. As part of the management plan, the 

evaluators assessed systems for managing and controlling multiple construction 

efforts, ability to identify and mitigate or manage risks, solve problems, and 

maintaining quality and fiscal control. The evaluation of management plan also 

assessed the control processes, management information systems, purchasing 

systems, communication plans, subcontractor management, ability to manage cost 

reimbursable projects, and to respond to changing requirements. The evaluation 

of life support and security assessed the offerors’ capabilities and approaches to 
17 

providing life support services and security for personnel, materials, and 

equipment. The evaluation of approaches to integrating the Iraqi workforce 

assessed the utilization and training of the Iraqi workforce. It also evaluated 

approaches to increasing Iraqi women’s access to or ownership of productive 

assets. 

Subcontracting Plan. The evaluation of subcontracting plans assessed how the 

offerors were going to use U.S. small businesses and companies from coalition 

partners and force-contributing nations. The evaluation of U.S. small business 

usage assessed the proposed utilization of U.S. small businesses, including small 

businesses owned by veterans, service-disabled veterans, disadvantaged persons, 

and women, and HUBZones. Plans submitted by offerors needed to assure that at 

least 10 percent of the total dollar value of the acquisition was performed by small 

businesses as either prime contractors or first-tier subcontractors. As part of that 

assessment, evaluators reviewed the history of offerors’ ability to meet small 

business goals and actions that the offerors proposed to identify opportunities for 

U.S. small businesses. The evaluation of the subcontracting plan also assessed 

the proposed actions for identifying opportunities for companies from coalition 

partners and force-contributing nations to be prime contractors or subcontractors 

at any tier. 

Past Performance. The evaluation of past performance, which was considered to be 

slightly less important than the management factor, assessed the likelihood that offerors 

would be able to successfully perform the requirements in the RFP. Specifically, the 

evaluators assessed the quality, relevancy, and recency of past performance of the 

offerors and their proposed subcontractors. The elements of past performance assessed 

were cost, schedule, and performance. Based on information in the proposals as well as 

information from references and other sources, the evaluators assessed whether offerors 

executed programs within costs, adhered to contract schedules or accelerated schedules 

when necessary, resolved problems quickly, effectively managed subcontractors, and 

used sound engineering processes and practices. The evaluation of past performance also 

included an assessment of whether contractor teams, including joint venture members 

and offerors and their subcontractors, had experience working together on relevant 

projects. 

Cost. Proposed costs were evaluated for realism and reasonableness based on 

hypothetical projects the Government expected contractors to perform under each 

contract. The hypothetical projects included estimates for labor, materials, and 

equipment needed. Offerors adjusted the Government estimates to reflect their cost and 

level of effort projections of the effort needed to support the hypothetical projects and to 

include their direct and indirect cost rates. 
18 

Appendix C. Report Distribution 

Office of the Secretary of Defense 

Under Secretary of Defense for Acquisition, Technology, and Logistics 

Director, Defense Procurement and Acquisition Policy 

Department of the Army 

Assistant Secretary of the Army (Acquisition, Logistics, and Technology) 

Deputy Assistant Secretary of the Army (Policy and Procurement) 

Commander, U.S. Army Corps of Engineers 

Auditor General, Department of the Army 

Department of the Navy 

Assistant Secretary of the Navy (Research, Development and Acquisition) 

Commander, Naval Facilities Engineering Command 

Naval Inspector General 

Combatant Command 

Commander, U.S. Central Command 

Other Defense Organizations 

Director, Iraq Project and Contracting Office 

Department of Defense Inspector General 

Director, Defense Contract Audit Agency 

Non-Defense Federal Organization 

Office of Management and Budget 

U.S. Government Accountability Office 

Department of State 

U.S. Agency for International Development 
19 

Congressional Committees and Subcommittees, Chairman and 

Ranking Minority Member 

Senate Committee on Appropriations 

Senate Subcommittee on Defense, Committee on Appropriations 

Senate Committee on Armed Services 

Senate Committee on Governmental Affairs 

Senate Committee on Foreign Relations 

House Committee on Appropriations 

House Subcommittee on Defense, Committee on Appropriations 

House Committee on Armed Services 

House Committee on Government Reform 

House Subcommittee on Government Efficiency and Financial Management, Committee on 

Government Reform 

House Subcommittee on National Security, Emerging Threats, and International Relations, 

Committee on Government Reform 

House Subcommittee on Technology, Information Policy, Intergovernmental Relations, and the 

Census, Committee on Government Reform 
20 

Iraq Project and Contracting Office Comments 
21 
22 

Audit Team Members 

The Office of the Deputy Inspector General for Auditing of the Coalition Provisional 

Authority prepared this report. Office of the Inspector General staff who contributed to 

the report are listed below. 

John Betar 

Donney J. Bibb 

Leslie M. Barnes 

MacKensie Ryan