United States Government Accountability Office

GAO Report to the Chairman, Subcommittee 

on National Security, Emerging Threats 

and International Relations, Committee 

on Government Reform, House of 

Representatives 

OVERSEAS 

PRESENCE 

State and USAID 

Should Adopt a 

Comprehensive Plan 

to Improve the 

Consolidation of 

Overseas Support 

Services 

September 2006 

 

GAO-06-829 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2006

OVERSEAS PRESENCE 

State and USAID Should Adopt a 

Comprehensive Plan to Improve the 

Consolidation of Overseas Support 

Services 

Highlights of GAO-06-829, a report to the 

Chairman, Subcommittee on National 

Security, Emerging Threats and 

International Relations, Committee on 

Government Reform, House of 

Representatives 

The Department of State (State)

has embassies in about 180 

countries, and the U.S. Agency for 

International Development

(USAID) maintains missions in 

about 90 of those countries. At 

many posts, State and USAID are 

located on separate compounds 

and maintain multiple support 

service operations, such as

warehouses. However, the United

States is in the process of building

new embassy compounds that will 

collocate all agencies, creating

opportunities for greater sharing of

services. In September 2004, we

recommended that State pursue the

elimination of duplicative support 

structures at overseas facilities. We

reviewed (1) the status of State and 

USAID’s joint initiative to 

consolidate overseas services, and 

plans for advancing the initiative; 

and (2) the challenges State and

USAID face in these efforts. 

What GAO Recommends

We are recommending that the

Secretary of State, in conjunction 

with the USAID Administrator, 

designate overseas service 

consolidation a priority; and 

develop a plan that details the 

desired end state, and defines 

timelines, performance and

accountability measures, and 

criteria for success. We are also 

recommending that State and 

USAID set timelines for 

accomplishing the standardization 

of State and USAID policies, 

procedures, and systems. State and 

USAID agreed with the report and 

the recommendations. 

State and USAID have demonstrated the feasibility of consolidating overseas 

support services and are seeking to expand their efforts. In June 2004, State 

and USAID initiated pilot projects at four posts to demonstrate the feasibility 

of consolidating support services. The four posts that participated in the 

pilot successfully consolidated 12 of the 16 support services, such as 

residential property maintenance, and reported operational efficiencies and 

costs avoided. For example, Dar es Salaam eliminated several positions and 

Phnom Penh improved motor pool and housing procedures. State and 

USAID learned valuable lessons from the pilot projects. They have directed 

posts to begin the process of identifying duplicative services and initiating 

consolidation efforts. As of July 2006, nine posts had responded, but only 

one had advanced beyond the planning stage. 

The two agencies face several challenges in consolidating services at posts. 

The challenges include the need for State and USAID in Washington and at 

posts to address concerns that USAID’s costs may increase if services are

consolidated, develop better cost and performance data, reduce the number 

of locally employed staff and reduce or replace U.S. direct hires with locally 

employed staff, communicate better, and resolve technical differences.

During our work, State and USAID took steps to address some of these 

challenges. For instance, in June 2006, the two agencies produced a draft 

strategy that defines broad goals and sets forth a common vision–to combine 

at collocating posts all State and USAID services into a single administrative 

structure and reduce the number of U.S. direct hire personnel. This is a 

positive step. However, our analysis of the draft strategy shows that it does 

not include a plan that details milestones, specific goals, timelines, and 

performance measures or accountability mechanisms to demonstrate 

results. 

State and USAID Collocated Posts, Fiscal Years 2006-2011 

Source: Department of State.

Countries in which

State and USAID will

be collocated over the

next six fiscal years

Countries in which

State and USAID

are collocated

www.gao.gov/cgi-bin/getrpt?GAO-06-829.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Jess Ford at 

(202) 512-4268 or fordj@gao.gov.
Contents 

Letter 1

Results in Brief 3

Background 4

State and USAID Have Consolidated Some Services and Plan

Additional Consolidations 8 

State and USAID Face Challenges in Expanding Consolidation of 

Support Services 19 

Conclusion 27

Recommendations for Executive Action 27 

Agency Comments and Our Evaluation 27 

Appendix I Posts Where State and USAID Are Currently 

Collocated 29 

Appendix II Posts Currently Planned for Construction During 

Fiscal Years 2006-2011 Where State and USAID 

Will be Collocated 31 

Appendix III Results of Workshop on Consolidating Support 

Services 32 

Appendix IV Scope and Methodology 35 

Appendix V Comments from the Department of State 37 

Appendix VI Comments from USAID 42 

Appendix VII GAO Contact and Acknowledgments 47 

Page i GAO-06-829 Overseas Consolidation
Table 

Table 1: Results of Pilot Services Consolidation Project, June 2004-

October 2005 10 

Figures 

Figure 1: Posts Where State and USAID are Collocated or Will be 

Collocated Based on Current Construction and USAID 

Deployment Plans, Fiscal Years 2006-2011 6 

Figure 2: The Location of State and USAID on the New Embassy 

Compound in Dar es Salaam 7 

Abbreviations 

ICASS International Cooperative Administrative Support Services 

OMB Office of Management and Budget 

USAID U.S. Agency for International Development 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 

Page ii GAO-06-829 Overseas Consolidation
United States Government Accountability Office

Washington, DC 20548 

September 8, 2006 

The Honorable Christopher Shays 

Chairman 

Subcommittee on National Security, Emerging Threats 

 and International Relations 

Committee on Government Reform 

House of Representatives 

Dear Mr. Chairman: 

The Department of State (State) has embassies in about 180 countries, and 

the U.S. Agency for International Development (USAID) maintains 

missions in about 90 of these countries. At many overseas posts, State and 

USAID are located on separate compounds and maintain multiple 

warehouses, motor pools, and other support service operations. However, 

the United States is in the process of building new embassy compounds 

that will collocate all agencies, including State and USAID, under the 

authority of a chief of mission, creating opportunities for greater sharing 

of services.1

 In September 2004, we recommended that State aggressively 

pursue the elimination of duplicative support structures at overseas 

facilities with the goal of limiting each service to the one provider best 

able to provide a quality service at the lowest possible price.2

 Further, the 

President has emphasized the importance of safety, efficiency, and 

accountability in U.S. government staffing overseas by designating the 

achievement of a “rightsized” overseas presence as part of the President’s 

Management Agenda.

3

 One of the elements of rightsizing is to eliminate 

and consolidate duplicative services. State and USAID have initiated an

 1

The Secure Embassy Construction and Counterterrorism Act of 1999, Pub. L. 106-113, 

Appendix G, Div. A, Title VI, sec. 606(a)(2) generally requires all agencies under the 

authority of a chief of mission to be collocated on new embassy compounds. 

2

GAO, Embassy Management: Actions Are Needed to Increase Efficiency and Improve 

Delivery of Administrative Support Services, GAO-04-511 (Washington, D.C.: 

September 7, 2004). 

3

Office of Management and Budget, President’s Management Agenda, Fiscal Year 2002 

(Washington, D.C.: August 2001). The President’s Management Agenda is a set of 

management initiatives designed to make government more effective and efficient. 

Rightsizing is a concept that refers to having the right number of staff at overseas posts 

with the necessary resources and expertise to accomplish U.S. policy objectives. 

Page 1 GAO-06-829 Overseas Consolidation
effort to eliminate and consolidate duplicative services at posts with both 

a State and USAID presence, starting with pilot projects at four posts. 

This report examines (1) the status of State and USAID’s joint initiative to 

consolidate overseas services, and plans for advancing the initiative; and 

(2) the challenges that State and USAID face in consolidating services at

posts. This report is one of three recent reports that address your interest 

in rightsizing the U.S. presence abroad. The other two reports discussed 

State’s initiative to provide support services remotely4

 and the U.S. 

government’s overall effort to rightsize its presence overseas.5

To address our objectives, we reviewed plans and studies describing 

State’s and USAID’s efforts to consolidate services. We also met with 

officials of several State and USAID regional and functional bureaus, as 

well as private and public sector organizations with knowledge of or 

firsthand experience consolidating and providing shared services. In 

January and February 2006, we conducted fieldwork at three posts that 

participated in the pilot projects—Cairo, Egypt; Dar es Salaam, Tanzania; 

and Phnom Penh, Cambodia—and held a teleconference with the fourth—

Jakarta, Indonesia. We also conducted fieldwork in Nairobi, Kenya, a post 

that is planning to consolidate State and USAID services. We obtained and 

analyzed studies documenting the results of the pilot projects and lessons 

learned, as well as the challenges encountered by State and USAID. We 

also reviewed numerous studies documenting consolidation and shared 

services lessons learned and benefits, and we convened a workshop in 

May 2006 consisting of State and USAID officials, as well as two experts 

on governance and shared services, to further discuss and analyze these 

lessons in the context of State’s and USAID’s initiative. This workshop not 

only provided participants with an opportunity to discuss and learn from 

similar private and public sector efforts to consolidate support services, 

but also provided us with the context for framing our recommendations. 

Appendix III contains the results of our workshop. We performed our 

work from November 2005 through July 2006 in accordance with generally 

accepted government auditing standards. (See app. IV for a more complete 

discussion of our scope and methodology). 

 4

GAO, Overseas Presence: Cost Analyses and Performance Measures are Needed to 

Demonstrate Full Potential of Providing Embassy Support Remotely, GAO-06-479 

(Washington, D.C.: May 2, 2006). 

5

GAO, Overseas Staffing: Rightsizing Approaches Slowly Taking Hold but More Needs to 

Be Done, GAO-06-737 (Washington, D.C.: June 28, 2006).

Page 2 GAO-06-829 Overseas Consolidation
State and USAID have demonstrated the feasibility of consolidating 

overseas support services and are seeking to expand their efforts. In June 

2004, State and USAID initiated pilot projects at four posts to demonstrate 

the feasibility of consolidating support services. The four posts that 

participated in the pilot—Cairo, Egypt; Dar es Salaam, Tanzania; Phnom 

Penh, Cambodia; and Jakarta, Indonesia—successfully consolidated 12 of 

the 16 support services targeted, such as residential property maintenance, 

and reported operational efficiencies and costs avoided. For example, 

Phnom Penh used the consolidation as an opportunity to improve 

standard operating procedures for motor vehicle and housing services. 

Dar es Salaam eliminated several positions and replaced a U.S. direct hire

position with an eligible family member position.6

 State and USAID 

learned valuable lessons from the pilot projects and are expanding their 

efforts to consolidate services at other posts. In December 2005, State and 

USAID directed posts to begin the process of identifying duplicative 

services and initiating consolidation efforts. As of July 2006, nine posts 

had responded, but only one had advanced beyond the planning stage. 

Results in Brief 

State and USAID face several challenges in consolidating services at all 

posts. The challenges include the need for State and USAID in Washington

and at posts to address concerns that USAID’s costs may increase if 

services are consolidated, in part because of embassies’ reliance on 

higher-cost U.S. direct hire staff,7

 even though overall U.S. government 

costs will decrease; develop better cost and performance data; reduce the 

number of locally employed staff and reduce or replace U.S. direct hire 

staff with locally employed staff who are less expensive to employ; 

communicate better; and resolve technical differences. During the course 

of our work, State and USAID have taken steps to address some of these 

challenges. For instance, in April 2006, State took steps to encourage the

regional bureaus to replace U.S. direct hires with locally employed staff. In

addition, in June 2006, the two agencies produced a draft strategy that 

defines broad goals and sets forth a common vision—to combine at 

collocating posts all common State and USAID services into a single 

administrative structure and reduce the number of U.S. direct hire 

 6

An eligible family member lives with a U.S. direct hire staff person at post. State uses 

eligible family members to fill a variety of positions. According to State officials, hiring an 

eligible family member often can result in savings because State does not have to pay for

many of the costs associated with supporting the U.S. direct hire staff person, such as the

cost of schooling for dependent children. 

7

See GAO-04-511 for a fuller explanation of how costs for overseas posts’ administrative 

services have increased. 

Page 3 GAO-06-829 Overseas Consolidation
personnel. These are positive steps. However, our analysis of the draft 

strategy shows that it does not include a plan that details milestones, 

specific goals, timelines, and performance measures or accountability 

mechanisms to demonstrate results. 

We are recommending that the Secretary of State, in conjunction with the 

USAID Administrator, designate overseas services consolidation a priority 

and develop a comprehensive plan that provides a detailed picture of the 

desired end state and defines timelines, performance and accountability 

measures, and results-oriented criteria for success. We are also

recommending that State and USAID set timelines for accomplishing the 

standardization of State’s and USAID’s policies, procedures, and systems.

State and USAID agreed with the report and our recommendations and 

said that they are actively working to consolidate overseas support 

services. 

The operation of U.S. embassies requires basic support services for 

overseas personnel, such as motor pool, residential property leasing, 

warehousing, and others. Many non-State government agencies, including 

USAID, operate overseas under the authority of a chief of mission and 

require such services. Under a State Department-administered system 

known as the International Cooperative Administrative Support Services 

(ICASS) system, the costs of support services are divided among agencies 

that have personnel at post and representatives of participating agencies

are part of a council that tracks and evaluates service provider 

performance. While many agencies participate in ICASS, it is for the most 

part a voluntary system; agencies can opt out of all but two services.8

Reasons for doing so can include a desire to retain control over service 

providers, an agency’s belief that costs can be minimized by providing the 

services itself, or because the agency is not located on the main embassy 

complex. For these and other reasons, at many overseas locations, 

agencies maintain multiple warehouses, motor pools, procurement 

operations, and other services. USAID, for example, provides its own 

services in many of the approximately 90 countries where it has a 

Background 

 8

These include services that can only be obtained by the embassy, such as securing 

diplomatic credentials from the host country and services provided by the post’s

Community Liaison Office, such as providing welcoming and orientation materials, and 

helping to enroll dependent children in education programs.

Page 4 GAO-06-829 Overseas Consolidation
presence. At some posts, USAID is the largest agency that maintains its 

own separate, sometimes duplicative, support services. 

State plans to construct 65 new embassies and consulates over the next 6 

fiscal years and State and USAID will be collocated at 37 of these 

locations, providing considerable opportunities for consolidating the 

agencies’ services.9

 For instance, the new embassy office compound in 

Addis Ababa, Ethiopia, slated for construction in fiscal year 2007, will 

provide space for both State and USAID. Figure 1 shows the posts where 

State and USAID are collocated and will be collocated over the next 6 

years, based on current embassy construction plans and USAID 

deployment plans. Figure 2 shows the new embassy compound in Dar es 

Salaam, where State and USAID are now collocated. Appendix I provides a 

listing of the 44 posts where State and USAID are currently collocated, and 

Appendix II provides a listing of the 37 posts planned for construction 

during fiscal years 2006-2011 where State and USAID will be collocated, 

based on current construction and USAID deployment plans. 

 9

Total cost over the life of the program is estimated to be about $21 billion. Under the 

program, State intends to replace approximately 200 embassies and consulates. According 

to State officials, the program envisions spending approximately $1.4 billion per fiscal year

for construction over the next 6 fiscal years. 

Page 5 GAO-06-829 Overseas Consolidation
Figure 1: Posts Where State and USAID are Collocated or Will be Collocated Based on Current Construction and USAID 

Deployment Plans, Fiscal Years 2006-2011

Source: Department of State.

Countries in which State and USAID will be collocated over the next six fiscal years

Countries in which State and USAID are collocated

Page 6 GAO-06-829 Overseas Consolidation
Figure 2: The Location of State and USAID on the New Embassy Compound in Dar

es Salaam

Source: GAO.

Embassy USAID

In accordance with the President’s National Security Strategy10 and the 

President’s Management Agenda, State and USAID have begun to 

integrate their operations and management structures, producing for the 

first time a joint strategic plan in August 2003.

11 While mindful that the 

agencies remain two separate organizations with distinct legislative 

mandates and budgets, the goal of the plan is to reduce redundancies and

costs where possible. As such, the plan states that, among other things, 

State and USAID will work with the Office of Management and Budget 

(OMB) and other U.S. government agencies to align the number and 

location of staff assigned overseas with foreign policy priorities, security, 

and other constraints. It also calls for State and USAID to jointly review 

 10The National Security Strategy of the United States of America (Washington, D.C.: 

March 16, 2006). The strategy’s goal of enhancing and transforming key institutions has 

three priorities, one of which is to promote State’s reorientation toward transformational 

diplomacy by more fully aligning the foreign assistance provided by State and USAID. 

11Strategic Plan, Fiscal Years 2004-2009: U.S. Department of State and U.S. Agency for 

International Development (Washington, D.C.: August 2003). State and USAID are

currently revising this strategic plan. 

Page 7 GAO-06-829 Overseas Consolidation
their operations at overseas locations and implement pilot projects in 

which selected support operations would be combined to reduce costs, 

enhance the quality of services provided, or both. As part of a separate but

related effort, State and USAID have begun to consolidate administrative 

services at headquarters, including information technology and financial

systems services. In conjunction with rightsizing efforts, posts receiving a 

new embassy compound are required to prepare an analysis of duplicative 

services and identify opportunities for consolidation. 

To develop priorities and implement strategies for the two agencies, and

monitor progress toward the goals articulated in the strategic plan, State 

and USAID established a Joint Management Council, cochaired by State’s

Undersecretary for Management and USAID’s Deputy Administrator. The 

council created eight joint State-USAID working groups, one of which was 

formed to identify parallel services performed by both State and USAID 

and examine the feasibility of consolidating services at selected posts, 

among other things. Within State, the congressionally mandated Office of 

Rightsizing12 and the Office of Global Support Services and Innovation 

within the Bureau of Administration lead State’s efforts to encourage posts 

to consolidate services by providing technical services and direction, 

including documenting and posting lessons learned on State’s intranet 

Web site; at USAID, the Office of Overseas Management Support within 

the Bureau for Management plays the same role. 

In June 2004 State and USAID launched pilot projects at four posts to 

demonstrate the feasibility of consolidating services. Consolidation results 

varied from post to post but overall 12 of 16 targeted services achieved 

some level of consolidation. For example, Phnom Penh and Dar es Salaam 

merged four services—warehousing, motor pool, residential maintenance, 

and leasing. Cairo was the least successful, consolidating one service, 

warehouse operations. Jakarta consolidated motor pool, residential 

maintenance, and leasing operations, but did not initially consolidate 

warehousing. Posts reported some operational efficiencies and costs 

avoided, but because of differences in how each post calculated its 

State and USAID Have 

Consolidated Some 

Services and Plan 

Additional 

Consolidations

 12In fiscal year 2004, Congress mandated the establishment of an Office of Rightsizing the 

United States Government Overseas Presence to be established within the Department of

State. The office was directed to lead the State Department’s effort to develop internal and 

interagency mechanisms to better coordinate, rationalize, and manage the deployment of 

U.S. government personnel overseas, under Chief of Mission authority (Public Law 108-199,

Div. B, Title IV ). 

Page 8 GAO-06-829 Overseas Consolidation
benefits, the overall level of cost avoidance and savings was not fully 

developed. 

State and USAID learned important lessons from the pilot projects, 

including the need for posts to determine the scope and pace of 

consolidation efforts. State and USAID are expanding their efforts to 

consolidate services at other posts. As of July 2006, nine posts had begun 

consolidation projects. However, only one had advanced beyond the 

planning stage. 

Pilot Projects Demonstrate 

Feasibility of 

Consolidating Overseas 

Support Services 

With assistance from a private contractor, a joint State and USAID 

working group from Washington completed a study in May 2004 examining 

the feasibility of consolidating duplicative motor pool, warehouse, 

residential maintenance, and leasing services at four posts—Cairo, Egypt; 

Dar es Salaam, Tanzania; Phnom Penh, Cambodia; and Jakarta, 

Indonesia.13 The goal was to combine the best employees, equipment, and 

processes from existing operations to ensure that both agencies and all 

ICASS customers benefited from improved services at lower cost to the 

taxpayer. The study identified significant advantages to consolidating 

services, finding in every case that service levels could be improved and 

cost could be reduced. The study also recommended a set of pilot projects 

for each location and suggested which of the two service providers—

State/ICASS or USAID—should be the lead service provider but left the 

final decision up to the individual posts. According to agency and post 

officials, the pilot projects began in June 2004. 

As a result of the pilot projects, State and USAID reported that the four 

posts had successfully consolidated in full or in part 12 of the 16 services

targeted, resulting in operational efficiencies and costs avoided. The final

evaluation of the results of the pilot projects, completed in October 2005, 

was based on surveys submitted by the four pilot posts in June 2005 to the

Joint Management Council. However, post-consolidation customer 

satisfaction surveys were conducted on only 5 of the services, providing 

insufficient data to draw reasonable conclusions about changes in the 

quality of services provided. Examples of operational efficiencies 

identified include 

 13In Cairo, State and USAID are located on separate compounds; in Dar es Salaam, Jakarta, 

and Phnom Penh, State and USAID are collocated or will soon be collocated on the same 

compound. 

Page 9 GAO-06-829 Overseas Consolidation
• Re-engineered business processes and updated standard operating 

procedures. For example, Phnom Penh updated its housing handbook. 

• Better use of workspace. For example, combining the warehouses in 

Phnom Penh resulted in a 40 percent decrease in the amount of space 

used. 

• Improvements in the competitive position of the U.S. government. For 

example, posts reported that having just one U.S. government provider 

responsible for residential leasing eliminated the competition for 

residences in the local market. 

• Reduced unit costs of service. For example, the unit cost of providing 

residential maintenance in Jakarta—a measure of the cost of maintaining a 

residence or building—decreased from $1.54 a square foot before the pilot 

project to $1.33 per square foot after consolidation occurred.

The pilot posts reported costs avoided of approximately $386,000 

stemming from staff reductions, contract terminations, or other actions. 

Table 3 summarizes what the pilot posts reported. Dar es Salaam later 

reported that as a result of consolidating services, it has decided to replace

a U.S. direct hire position with a position for an eligible family member. By 

doing this, post officials in Dar es Salaam estimated that they saved an 

additional $300,000. 

Table 1: Results of Pilot Services Consolidation Project, June 2004-October 2005 

Motor pool Warehouse Leasing

Residential 

maintenance

Annual cost

avoidance

Cairo Not consolidatedaConsolidated Not consolidatedaNot consolidateda$180,000

Phnom Penh Consolidated Consolidated Consolidated Consolidated $ 49,000

Dar es Salaam Consolidated Consolidated Consolidated Consolidated $ 42,000

Jakarta Consolidated Not consolidated Consolidated Consolidated $114,885

Total annual cost 

avoidance $385,885

Source: October 2005 State and USAID evaluation. 

a

According to post officials, Cairo decided not to consolidate leasing and residential maintenance 

services, in part because of a post analysis that indicated consolidating these services would not 

reduce costs. The motor pools were not merged because the post did not believe this could result in 

significant savings. 

Page 10 GAO-06-829 Overseas Consolidation
Posts’ efforts to consolidate services varied. Phnom Penh and Dar es 

Salaam were the most successful, consolidating all four services, and 

Jakarta consolidated three services. By contrast, Cairo, the largest of the 

four pilot posts and one of the largest posts in the world, was only able to

consolidate one service.

Phnom Penh successfully merged all four target services and realized 

efficiency gains. State and USAID officials described Phnom Penh as the 

model project. The post reported that it had reviewed and consolidated all 

administrative instructions and standard operating procedures for motor 

vehicle services and housing services. In particular, the post updated its 

housing handbook, held customer service briefings, and updated its 

country clearance cable to ensure that all customers understood the 

changes in procedures. The post also reported that it had instituted 

USAID’s best practice of providing vehicles to the maintenance staff, 

allowing its four maintenance teams to operate independently without 

additional workload for the motor pool or the need for additional drivers. 

Moreover, before consolidation, USAID and State motor pool drivers 

occupied two separate offices, but these were consolidated, making better 

use of existing space and decreasing utility costs. Additionally, the post 

reported that leasing services were improved by establishing a single point

of contact for local landlords with multiple properties under lease to the 

U.S. government. Still further, the consolidation of maintenance services 

allowed USAID in Phnom Penh to terminate its maintenance shop lease, 

which led to savings in utilities and rent expenses. Finally, by 

consolidating warehouse operations, the post reported that it had realized 

gains in delivery times and a 40 percent decrease in the amount of space 

used. 

Dar es Salaam reported several operational efficiencies and costs avoided 

from the pilot project. In leasing, the post reported benefits from the 

establishment of a single leasing office and by eliminating in the process 

the competition between State and USAID. The post also reported that 

while State had lacked an adequate assistant maintenance supervisor 

before the consolidation of the residential maintenance function, the 

acquisition of a highly qualified supervisor from USAID made the 

combined section stronger. 

Results Varied by Post 

Phnom Penh 

Dar es Salaam 

Dar es Salaam initially reported that it had avoided $42,000 in costs by 

reducing the number of locally employed staff. However, in our 

discussions with post officials we found that it has also replaced a U.S. 

direct hire position with an eligible family member position. State’s Bureau 

of Resource Management has computed the average cost of each overseas

Page 11 GAO-06-829 Overseas Consolidation
position at $400,000 for fiscal year 2007, including salary, benefits, and 

support costs, plus a number of costs that apply only to officials overseas.

It also includes costs for providing a secure building for officers to work in 

overseas. By replacing a U.S. direct hire position with an eligible family 

member position, post officials estimated that they saved approximately 

$300,000, chiefly by not having to pay additional support costs associated 

with a U.S. direct hire. For this reason, costs avoided amounted to 

approximately $342,000, the most of any pilot post.14

Jakarta reported that it was able to consolidate three services, including

leasing, and avoid costs of $114,000. However, post staff we spoke with in 

February 2006 indicated that in fact leasing had been only partially 

consolidated and that while residential leasing was taken over by USAID, 

nonresidential leasing had not been consolidated. Nonetheless, Jakarta 

reported gaining some efficiencies. For example, driver utilization—a 

measure of the amount of time a driver is in use—increased from below 50 

percent before motor pool consolidation to 78 percent after consolidation. 

In addition, post staff indicated that dropping a $50,000 residential 

maintenance contract contributed to cost avoidance. 

Jakarta 

Cairo reported that it avoided $180,000 in costs mainly by terminating the 

USAID warehouse contract. State/ICASS took over the management of 

both warehouses, increasing its inventory by 50 percent but leaving the 

number of staff the same. Because the USAID and State warehouse 

buildings are adjacent to one another, placing them under a single 

management structure was a priority. However, although State/ICASS now 

oversees warehouse activities for both agencies, operations are not fully 

integrated. USAID still has a separate building and post officials 

maintained that the separate building is necessary for keeping track of its 

inventory, some of which legally must be used only to support 

development activities in Egypt and therefore cannot be merged with 

State’s inventory. State officials contend that effective monitoring would 

address the issue and that further efficiencies could be gained by 

combining warehouse space. 

Cairo 

Cairo did not consolidate the other targeted services for two main reasons. 

First, the two agencies are in separate, very distant compounds. While the 

embassy is located in central Cairo, USAID’s building is in a suburb of the 

 14OMB’s estimate of the average cost across all agencies of having one U.S. direct hire

overseas for 2007 is $491,000, including direct and indirect personnel costs.

Page 12 GAO-06-829 Overseas Consolidation
city. Second, the post reported that merging leasing, residential 

maintenance, and motor pool services would not result in benefits. Cairo’s 

ICASS Council, which includes management officers and support services 

personnel from both agencies, analyzed these services as candidates for 

consolidation. It found no evidence that cost avoidance, improvement in 

service, or change in staffing levels could be achieved, and therefore 

recommended they remain separate. However, post officials also 

cautioned that their data was imprecise and was derived from proxies or 

rough extrapolations. In addition, State officials questioned the post’s 

conclusion that consolidating services would not reduce costs or result in 

operational efficiencies, suggesting that the post had not explored the full

potential. Moreover, State officials suggested that other services might be

candidates for consolidation, including travel services and human 

resource services for locally employed staff. 

State and USAID Learned 

Lessons from the Pilot 

Projects 

State and USAID have learned some important lessons from the pilot 

projects. These lessons were partially detailed in the October 2005 Joint 

Management Council evaluation, which included a number of 

recommendations to improve the initiative, some of which have been 

implemented. They included the following: 

• Posts, not Washington, should decide whether to consolidate services 

sequentially or simultaneously. During the pilot program, Washington 

made many of the key decisions, according to post officials in Jakarta, 

Cairo, and Dar es Salaam. In addition, posts reported that it was much 

easier to consolidate services sequentially. More recently, many of the key 

decisions about consolidating services, including whether or not to 

consolidate services sequentially or simultaneously, have been left to post 

officials. Nairobi, for example, has chosen to consolidate services 

sequentially.

• To realize operational efficiencies and eliminate the potential for 

increased duplication and operational confusion, certain services, such as 

residential leasing and maintenance, should be paired and operated by a 

single service provider. During the original pilot projects, these services 

were not paired. According to officials in Jakarta, this resulted in some 

operational inefficiencies and missed costs avoided. For example, 

according to one official in Jakarta, Washington chose to consolidate only 

residential leasing, though consolidating all leasing services would have 

been more logical. In addition, while State and USAID decided to 

consolidate property management, they did not include supply 

management, which is closely related. More recently, Nairobi and San 

Page 13 GAO-06-829 Overseas Consolidation
Salvador decided to pair residential leasing and maintenance, among other 

services. 

• Posts that have consolidated support services should be encouraged to 

expand the number of services consolidated. Phnom Penh, for example, 

consolidated vehicle maintenance along with motor pool operations and 

currently is exploring other possibilities. 

In addition, in our discussions with agency and post officials, they also 

identified other lessons, including the following:

• The need for chiefs of mission to take a strong and active role in 

consolidating services. State and USAID officials attributed Phnom Penh’s 

positive results in part to the chief of mission’s strong commitment. 

• The need for the agencies, particularly State, to make better use of locally

employed staff consistent with security and accountability requirements in 

order to reduce the cost of support services overseas. 

In July 2006, the State Department Inspector General issued a report that 

addressed, in part, the consolidation of duplicative administrative services. 

It found that State had done a good job of consolidating services at posts 

receiving new embassy compounds, but had not been as successful in 

combining services at posts not scheduled to receive a new embassy 

compound. The report also found that despite the Joint Management 

Council’s guidance to eliminate duplicative State and USAID support 

services, State and USAID had duplicative services in 22 of the 27 posts 

that it inspected in fiscal years 2005 and 2006. 

State and USAID are expanding their efforts to consolidate services, 

relying on posts to identify and eliminate duplicative services and 

designate a lead service provider. The approach was defined in a 

December 2005 message from State and USAID that provided a status 

report on the consolidation initiative, including lessons learned from the 

pilot project; recommended collocating posts adopt a model merging State 

and USAID services into a streamlined, unified operation; and defined the 

services that could be provided by State’s Office of Global Support 

Services and Innovation. The message also directed chiefs of mission and 

USAID mission directors involved in the process of developing a mission 

performance plan to lead the effort to consolidate services at their posts, 

including the development of short and long-term consolidation plans. 

However, according to State and USAID officials, the message did not go

far enough. For example, it did not define in detail the services that posts 

State and USAID Are 

Expanding Their Efforts to 

Consolidate Services 

Page 14 GAO-06-829 Overseas Consolidation
could and could not consolidate. In addition, no detailed guidance was 

available for posts, particularly USAID missions, to quickly identify the 

functions and their associated costs that should be included in the 

operational baseline analysis needed to determine the lead service 

provider—a process that USAID mission officials in Jakarta told us was 

time and labor intensive because of differences in State’s and USAID’s 

accounting and financial systems and the inclusion of certain

administrative costs within USAID’s program functions.15

Recognizing that additional guidance was needed, in March 2006, State 

and USAID developed a template to enable posts to quickly identify and

document the items that should be included as part of the operational 

baseline analysis of costs and services. In addition, in April 2006, State and 

USAID sent a second message to posts that updated and clarified the 

December 2005 guidance. This message defined in detail the services that

posts could and could not consider for consolidation. Services identified 

for consolidation included administrative support functions, such as 

warehouse management, expendable supplies, and motor pool services; 

financial management functions, such as cashiering and locally employed 

staff payroll processing; human resource functions, such as recruitment, 

and language training at post for Americans; and joint information 

technology systems. Services identified as not subject to consolidation 

included USAID technical and program management functions and 

nonadministrative staff and management activities that support these 

functions, and USAID legal advisory functions. The April 2006 message 

assumes that collocating posts will consolidate all administrative functions 

provided by State/ICASS, leaving to posts the decision about which agency 

will serve as the lead service provider. 

Certain posts have begun to plan new consolidation projects. Officials in 

Phnom Penh told us that they intend to consolidate additional services, 

and eight other posts—- Jakarta, Indonesia; Nairobi, Kenya; San Salvador, 

El Salvador; Managua, Nicaragua; Kiev, Ukraine; Tegucigalpa, Honduras; 

Pristina, Kosovo; and Cotonou, Benin—have also begun to plan 

consolidation projects. However, only one of these posts has advanced 

beyond the planning stages, and Nairobi, which started first and had a 

timetable calling for State and USAID to consolidate services before 

Some Additional Posts 

Have Begun to Plan New 

Consolidation Projects 

 15Examples of administrative costs included in USAID’s programming include, for instance,

the costs associated with budget analysis. 

Page 15 GAO-06-829 Overseas Consolidation
USAID’s scheduled September 2006 move into the new embassy 

compound, now does not plan to begin consolidating services until after 

the move occurs. 

Post officials in Phnom Penh told us in February 2006 that they plan to 

eventually consolidate all State and USAID services, but they have not 

announced any specific plans, deferring any actions to consolidate 

additional services until after USAID’s move into the new embassy 

compound, scheduled for September 2006. Post officials underlined three 

main reasons for consolidating all State and USAID services: their desire 

to become a model post, an interest in greater efficiencies, and cost 

savings. 

In May 2006, the post announced that it had consolidated one additional 

service, was in the process of consolidating a second, and planned to 

consolidate two other services by November 2006. As of May 2006, USAID 

had taken over nonresidential leasing and had begun the process of taking 

over warehousing functions. USAID plans to complete its takeover of 

warehouse functions by October 2006. However, post officials reported 

that one issue, if not resolved, could erase any cost savings resulting from 

this effort—the need to reconcile State’s personal property regulations, 

which require posts to track and account for all items valued at more than 

$500 with USAID’s much more rigorous regulations, requiring missions to 

track and account for all items valued at more than $100.16 The post has 

asked State and USAID to waive USAID’s regulations on personal property 

management. 

In addition, the post plans to consolidate procurement and human 

resource services for locally employed staff under the leadership of 

State/ICASS by November 2006. State/ICASS plans to take over USAID’s 

administrative procurement function. However, this will not affect 

USAID’s program-related procurements. In addition, State/ICASS plans to 

take over all of USAID human resource functions involving locally 

employed staff, such as payroll services. 

In preparation for USAID’s move to the new embassy complex, expected

in September 2006, Nairobi plans to consolidate seven services. The post’s 

original timetable called for State and USAID to consolidate services 

Phnom Penh 

Jakarta 

Nairobi 

 16Personal property includes such items as vehicles, furniture, equipment, supplies, and 

machinery. 

Page 16 GAO-06-829 Overseas Consolidation
before USAID’s scheduled move into the new embassy compound. As of 

June 2006, the post had not begun to consolidate any services. 

Nairobi began the process of consolidating support services in April 2005. 

In August and September 2005, a combined State and USAID team from 

Washington, with assistance from a private consultant, conducted an 

assessment of services. The team’s report, submitted in September, 2005, 

recommended consolidating six services—motor pool, vehicle 

maintenance, non-expendable property, warehousing, expendable 

property and administrative supply, residential maintenance, leasing, 

shipping, and customs. It also recommended combining all administrative 

services and staff into a single organization under the leadership of 

State/ICASS, but with a strong role for USAID. As an alternative, the 

team’s report recommended consolidating the six services under the 

leadership of either State/ICASS or USAID. 

Post officials decided to consolidate the six services, but not to combine 

the services into a single organization in the short term. Five reasons were 

given for not adopting this model: differences between the two agencies 

on where the savings should be achieved, with USAID arguing that 

consolidation should not result in any additional costs for the agency; the 

need for Washington to harmonize systems before certain services could 

be consolidated at post; ambiguity in lines of authority; uncertainty over 

personnel assignments; and skepticism that meaningful cost savings could

be achieved with this combined structure. Instead, the post decided to

adopt the same model used by the pilot projects involving the provision of 

services by one of the two service providers. However, three factors—

budget constraints, conflicting interests of the two agencies, and a lack of

effective communication between Washington and posts—continued to

slow the progress of this effort. 

More recently, in June 2006, the post reported that it had decided to 

consolidate a seventh service—reproduction services. As of June 2006, it 

had not begun to consolidate any service. 

In April 2006, a team from State and USAID in Washington traveled to San 

Salvador to assist the post’s efforts to consolidate State and USAID 

support services, including determining the lead service provider. A total 

of nine services were identified for consolidation, including administrative

supplies, motor pool, vehicle maintenance, nonexpendable property 

management and warehousing, leasing, residential maintenance, reception 

and switchboard, copy services, and mail and messenger services. The 

State and USAID team suggested that San Salvador take several steps to 

San Salvador

Page 17 GAO-06-829 Overseas Consolidation
move the initiative forward, including developing a timeline and an overall 

plan for implementation. The post has indicated that it plans to

consolidate reception and switchboard, copy, and mail and messenger 

services by October 1, 2006. The post plans to consolidate the other 

services beginning on April 1, 2007. 

In May 2006, a Washington team visited Managua to facilitate the post’s 

consolidation efforts. The team examined motor pool, administrative 

supplies, warehouse, residential maintenance, leasing, shipping, travel, 

reproduction, reception services, and human resource services for locally

employed staff. Their report recommended that the post develop an

overarching communication plan and form a working group to manage 

implementation activities, including conducting a cost analysis, reviewing 

service quality, standardizing processes, outlining a plan, and creating a 

timeline. The report also stated that if cost savings cannot be reached 

within 3 to 6 months, the post should identify a plan to achieve cost 

savings over the next 1 to 2 years. 

USAID is reducing the size of its mission in Ukraine and is looking to State 

to take over some of its administrative services. In addition, the post is in 

the process of planning for a new embassy compound. For these reasons, 

the post has announced plans to consolidate a number of State and USAID 

support services. The services that will be consolidated are travel services, 

shipping and customs, warehousing, and human resource services for 

locally employed staff. In addition, the post plans to consolidate motor 

pool, and residential maintenance and leasing services. For this purpose, 

the post has developed and sent a communications strategy to post 

personnel and is currently at work on an implementation strategy and 

timeline. 

Tegucigalpa plans to consolidate State’s and USAID’s warehouses in the 

summer of 2006. It recently created a task force to examine the provision

of other support services and recommend consolidation where practicable

and plans to consolidate additional support services next year. However, 

as of June 2006, the post had not identified the other support services that 

it plans to consolidate. In addition, Pristina has stated that it plans to 

implement a consolidation project in the next 2 years, starting with motor 

pool services. Finally, Cotonou, Benin, has announced plans to consolidate 

warehouse, motor pool, and maintenance services beginning in October 

2006. 

Managua 

Kiev 

Tegucigalpa, Pristina, and 

Cotonou 

Page 18 GAO-06-829 Overseas Consolidation
State and USAID face challenges in expanding the consolidation of 

support services. The challenges include the need for State and USAID in 

Washington and at posts to address concerns that USAID’s costs may 

increase if services are consolidated due in part to State/ICASS’s reliance 

on higher-cost U.S. direct hire staff even though overall U.S. government 

costs will decrease; develop better cost and performance data, reduce or 

replace U.S. direct hire and locally employed staff, communicate better, 

and resolve technical differences. During the course of our work, State 

and USAID have taken steps to address some of these challenges. For 

instance, in April 2006, State took steps to encourage the regional bureaus 

to identify and replace U.S. direct hires with locally employed staff. In 

addition, in June 2006, the two agencies produced a draft strategy that 

defines broad goals and sets forth a common vision—to combine at 

collocating posts all State and USAID services into a single administrative 

structure and reduce the number of U.S. direct hire personnel. The steps 

taken by State and USAID are a positive development. However, their full

impact has yet to be determined. In addition, the draft strategy is not 

sufficiently comprehensive, since it does not include a plan that contains

key elements including specific timelines, accountability mechanisms, 

specific goals, and performance measures to show results. 

USAID officials have expressed concerns that because State/ICASS relies 

more heavily on higher-cost U.S. direct hire staff, its costs could increase if 

services are consolidated. However, State officials have argued that by 

consolidating services, USAID will save a significant amount of the cost 

imposed by the Capital Security Cost Sharing Program, which requires 

agencies with staff assigned to overseas missions to pay a portion of the 

construction costs of new embassy compounds based on the number of 

agency staff at all overseas locations and the type of office space. 17 USAID 

acknowledges that in some cases, it will save money by consolidating 

services under State/ICASS. However, USAID officials also cautioned that 

they have not determined the full budget impact of support service 

consolidation, taking into consideration the Capital Security Cost Sharing 

Program. 

An October 2005 memo issued by the post in Nairobi, repeated again in a 

message to Washington in June 2006, stated that while the proposed 

unified administrative structure had great potential for overall cost savings

State and USAID Face 

Challenges in 

Expanding 

Consolidation of 

Support Services 

USAID’s Concerns about 

Potential Cost Increases 

 17P. L. 108-447, Div. B, Title IV, sec. 629. Congress authorized the Capital Security Cost 

Sharing Program in fiscal year 2005. 

Page 19 GAO-06-829 Overseas Consolidation
to the U.S. government, it would likely result in increased costs for USAID. 

It also stated that the probable increased cost to USAID of ICASS services

was a key obstacle that had to be surmounted before the project could

move forward—an assessment that post officials in Nairobi during our 

visit in January 2006 agreed was slowing the progress of the project 

considerably. In particular, USAID officials have expressed concern about 

the effects that increased costs as a result of service consolidation could

have on its operating expense budget. USAID officials in Washington 

stated that while USAID’s program budget worldwide has increased since 

fiscal year 2001, its operating expense budget, adjusted for inflation, has 

remained essentially flat. In addition, USAID has opened missions in 

Afghanistan and Iraq, which have placed additional strains on its operating

expense budget. Our analysis of the data shows that USAID’s operating 

budget from fiscal year 2001 to fiscal year 2006 increased annually on 

average by 2.5 percent. 

In addition, while USAID officials recognize that consolidating support 

services overseas could result in reduced costs for the U.S. government as

a whole, they have expressed skepticism about State/ICASS’s ability to 

control or reduce the cost of services. Specifically, these officials stated 

that State/ICASS relies more heavily than USAID on more expensive U.S. 

direct hire personnel and has in the past experienced difficulties 

controlling costs. In September 2004, we found that State/ICASS costs rose 

almost 30 percent from 2001 to 2003 because of State’s increased hiring of

U.S. direct hire personnel, rising security costs, and other factors.18 We 

also reported that 21 out of 23 customer agencies had chosen to reduce 

their participation in ICASS during the same period. More recently, OMB 

rated ICASS’s performance only as “adequate” in part because of the 

program’s inability to control costs, which according to OMB, have 

increased an average of 7.5 percent since fiscal year 2001.19

However, State officials have argued that by consolidating services under 

State/ICASS, USAID could save a significant amount of the cost imposed 

by the Capital Security Cost Sharing program as they would likely have 

fewer staff assigned to embassies. Under the Capital Security Cost Sharing 

 18See GAO-04-511. 

19Office of Management and Budget, Program Assessment Rating Tool. OMB developed the 

Program Assessment Rating Tool to assess and improve program performance. Using the

tool, OMB places each program into one of five categories: “Effective,” “Moderately 

Effective,” “Adequate,” “Ineffective,” and “Results Not Demonstrated.” 

Page 20 GAO-06-829 Overseas Consolidation
Program, agencies with staff assigned to overseas missions pay a portion 

of new embassy compound construction costs based on the number of 

agency staff at all overseas locations and the type of office space. The 

agencies’ share of embassy construction costs is phased in over a 5-year 

period, beginning in fiscal year 2005.

USAID officials acknowledge that the costs imposed by the Capital 

Security Cost Sharing Program could mean that for certain missions it may 

make sense to consolidate services under State/ICASS. For example, 

according to USAID, a June 2006 examination of support services provided 

by USAID in Gaborone, Botswana, determined that by consolidating 

services under State/ICASS, the post could save approximately $78,000 per 

year, chiefly by reducing the number of locally employed staff and 

terminating the lease on a warehouse. However, USAID officials also 

cautioned that the Capital Security Cost Sharing Program is relatively new 

and its full effect is uncertain. 

In its October 2005 evaluation of the pilot project, State and USAID 

reported that consolidating services at the pilot posts resulted in costs 

avoided estimated at approximately $386,000. However, agency officials 

indicated that this estimate is imprecise and based on figures provided by

posts, which themselves stem in part from extrapolations or proxies. Post 

officials stated that because certain performance and cost data was 

lacking, data often was not available to make valid before-and-after 

comparisons, forcing them to use rough approximations. 

Several factors complicated posts’ efforts to estimate cost avoidance.

First, State and USAID use different budgeting and accounting methods, 

and did not follow the same methodology for developing cost information. 

For example, State and USAID’s motor pool logs do not capture the same 

information and therefore cannot be used to make direct comparisons. In 

addition, some USAID staff manage multiple services but do not closely 

monitor time spent on each, making it difficult to disaggregate the cost of

a service. Further, during the pilot project, posts did not have good 

guidance for reconciling different accounting rules for transferring assets, 

such as building space and vehicles. This caused uncertainty in valuations 

and raised questions about how to calculate one time costs. 

To achieve cost benefits from consolidation, State and USAID need to 

reduce or replace U.S. direct hire staff where appropriate or better utilize 

locally employed staff. According to the October 2005 Joint Management 

Council evaluation, significant savings from consolidation of services can

only occur if there is a reduction in the number of U.S. direct hire staff 

Posts Lack Reliable Cost Data 

Reluctance to Reduce Staff 

Page 21 GAO-06-829 Overseas Consolidation
overseas. Although officials from both agencies in Washington and in the 

field recognize this fact, only one of the pilot posts—Dar es Salaam—was 

able to achieve such an outcome.20 Dar es Salaam decided to replace a U.S. 

direct hire position—a State Department assistant general services 

officer—with an eligible family member.21

Post officials we spoke with in Phnom Penh and Dar es Salaam said that 

they were reluctant to implement reductions in force, in part because of a 

lack of consistent guidance from State and USAID, choosing to combine 

the two workforces and transfer the cost of personnel from one agency to

another, or rely on slow attrition to achieve this reduction. According to 

agency and post officials, the failure to implement reductions in force of 

locally employed staff has reduced the overall impact of consolidating 

services. The October 2005 evaluation stated that Washington needed to 

provide detailed guidance to posts on both U.S. and locally employed 

position reductions resulting from service consolidation. Post officials also

attributed their reluctance to reducing the number of locally employed 

staff to other factors. For example, post officials in Nairobi and Dar es 

Salaam told us that their reluctance to reduce the number of locally 

employed staff also stemmed from loyalty to their staff, many of whom 

have worked for the United States for many years and were present during 

the 1998 embassy bombings. In addition, post officials cited concerns 

about diminishing morale. 

State has demonstrated potential cost avoidance from reducing staff 

positions overseas. For example, State reported that a rightsizing initiative

in Addis Ababa, Ethiopia, avoided approximately $14.2 million in 

construction costs for the new embassy compound. According to State, 

the initiative avoided construction costs by reducing the number of 

projected staff positions by 79—including 36 U.S. direct hire staff. 

However, we have not validated State’s reported cost avoidance. 

USAID has argued that one way State can reduce the cost of providing 

support services is by replacing U.S. direct hire personnel, particularly 

State Department general service officers, with locally employed staff. 

State has estimated the average cost of employing a locally employed staff 

 20Nairobi has also taken steps to eliminate two U.S. direct hire positions. However, as of 

June 2006, Nairobi had not begun to consolidate support services. 

21General services officers provide leasing, housing and contracting services for State and 

other agencies. 

Page 22 GAO-06-829 Overseas Consolidation
member, including salaries and benefits, at approximately $24,000.22

USAID tends to use locally employed staff extensively, and these staff 

often play a key role in the mission’s operations and programming. 

However, State tends to use locally employed staff to a lesser degree 

because of requirements involving entry into secure parts of the chancery 

and other factors. In June 2006, the post in Nairobi asked State and USAID 

in Washington to clarify the extent to which locally employed staff can 

substitute for State Department direct hire general service officers. 

In April 2006, State’s Undersecretary for Management took steps to reduce 

the number of U.S. direct hire staff overseas, requiring State regional 

executive directors to submit by June 1, 2006, a list of U.S. direct hire 

positions for conversion to locally employed staff. Moreover, in June 2006, 

State and USAID developed a draft strategy that states, among other 

things, that posts rightsizing and consolidating services need to conduct 

reductions in force of locally employed staff in a transparent fashion and,

where appropriate, to establish plans for this purpose. However, as of July 

2006, the April 2006 message had resulted in the identification of only 21

U.S. direct hire positions for conversion. State officials told us in July 2006

that they expect that the bureaus will identify additional positions. In 

addition, a recent survey of posts by the Bureau of Human Resources 

disclosed that as of June 2006, 61 embassies had not prepared reduction in

force plans for locally employed staff, and another 30 have plans that are 

over 10 years old. 

State, USAID, and post officials told us that consistent and effective 

communication between Washington and the posts has not always been 

forthcoming, hampering posts’ efforts to develop and implement 

consolidation projects. For example, in February 2005 USAID instructed 

posts to demonstrate that consolidating services would not result in 

increased costs to the agency. The directive showed that there was a basic 

philosophical difference between State and USAID about where savings 

should be achieved. State/ICASS has argued that saving money for the U.S.

government is the overall goal, and USAID has argued that any 

consolidation be cost-neutral for USAID. According to post officials in 

Nairobi, the effect of the USAID directive was to cause confusion about 

Communication between 

Headquarters and Posts 

 22According to State, this estimate was derived by adding the salaries of all locally 

employed staff worldwide, including locally employed staff employed by other agencies, 

and dividing this by the number of staff employed. While we have not validated State’s

methodology for producing this estimate, our analysis indicates that the salary costs of

locally employed staff overseas are considerably lower than those for U.S. direct hires. 

Page 23 GAO-06-829 Overseas Consolidation
the purpose of consolidating services, slowing the process, and causing it 

to be more contentious, since a time-consuming cost analysis is needed to 

demonstrate that consolidating services would not result in increased 

costs to USAID. According to USAID officials, as of April 2006, this 

conflicting guidance remained in effect. However, State and USAID 

officials said in June 2006 that they are trying to address the difference by

collaborating on the creation of a new shared strategic vision for 

consolidating services. 

State’s and USAID’s efforts to consolidate support services face challenges 

stemming from having different technical systems, such as different 

accounting, financial, and information technology systems and software. 

In addition, State and USAID have different regulatory requirements with 

respect to accounting for and tracking property. While State and USAID 

have recommended that collocating posts adopt a model merging State 

and USAID services into a streamlined, unified operation, Nairobi’s 

experience suggests that State and USAID will not achieve this goal until 

these technical challenges are resolved. 

State and USAID have incompatible budgeting, accounting, and 

information technology systems. As a result, posts have found it difficult 

and contentious to determine the most cost-effective service provider. In 

addition, the different systems have complicated efforts to merge 

operations, such as warehousing. State and USAID have tried to address 

these issues by creating a cost analysis template and a specialized version 

of their standard costing software application. However, while posts 

acknowledge that these tools have helped, they also stated that the tools 

have not entirely resolved the problems caused by incompatible systems. 

To identify the most cost-effective service provider, posts must identify 

the appropriate functions that must be included in the analysis and their 

associated costs. In addition, they must conduct a side-by-side comparison 

of the two service providers’ cost and quality of services, and produce a

“what if” analysis using a different mix of inputs, such as vehicles and 

drivers. This is done to determine the per unit cost of enlarging the scope 

of a service, for example, the cost of transferring vehicles and drivers from 

one agency’s motor pool to another. To facilitate valid cost comparison, 

State and USAID have agreed to use the State/ICASS system to examine 

costs and created a special software tool for alternate service providers, 

such as USAID, to use. However, posts still face three key problems. 

Technical Differences Will 

Hamper Efforts to Consolidate 

Services 

Page 24 GAO-06-829 Overseas Consolidation
First, the process of putting a value on certain inputs can to a certain 

degree be subjective and is based on past performance, not future 

requirements. For example, calculating a hypothetical cost for USAID to 

provide motor pool services involves placing a value on staff time spent 

supervising or operating the vehicle fleet. According to State and USAID 

officials, this value can vary substantially among posts and between 

agencies because of a lack of standardized rules and procedures. 

Oversight of most support services also varies. In addition, forecasting 

new requirements on the basis of past performance can lead to misjudging 

costs substantially. 

Second, most USAID missions do not have experience using the alternate 

service provider software. According to State and USAID officials, the 

recent development of a template in March 2006 to gather and translate 

data related to specific cost centers has reduced the amount of time and 

effort required to gather the needed data and create the baseline analyses 

needed to compare the two service providers’ cost and quality. In addition, 

according to State officials, State/ICASS is developing a new version of the

alternate service provider software. According to State and USAID 

officials, this software will make it easier for posts, particularly USAID 

missions, to identify the appropriate costs that must be included and 

produce “what if” analyses. However, State, USAID and post officials also

cautioned that the template will not eliminate the subjective quality of the 

cost comparison, and as a result, quantifying costs will remain a problem. 

In addition, as of April 2006, State and USAID officials did not know when 

the new version of the alternate service provider software would be 

released. 

Third, State and USAID use different information technology systems to 

track and account for property items in their warehouses, manage and 

monitor payroll and human resource activities, and communicate 

internally and externally, among other things. For instance, State uses a 

property tracking system that is different from that of USAID. To fully 

integrate their warehousing services, State and USAID will need to adopt 

one system. In May 2006, the post in Jakarta asked State and USAID to 

allow it to use State’s system for tracking property to track all items in the 

warehouse, including those of USAID. However, as of June 2006, post 

officials indicated that State and USAID had not responded to Jakarta’s 

request. Post officials also told us that as an interim measure, they have 

determined that whichever agency is serving as the service provider will 

be utilizing its own guidelines in providing the services, as is consistent 

with State/ICASS guidelines for alternate service providers. 

Page 25 GAO-06-829 Overseas Consolidation
In July 2006, State officials told us that the Joint Management Council was 

in the process of developing plans for harmonizing the two agencies’ 

systems and procedures. However, these plans were not completed in time 

for us to analyze them. 

In June 2006, State and USAID developed a draft strategy that defines 

broad goals and sets forth a common vision. Among other things, the draft 

strategy sets as an immediate goal one of consolidating all State and 

USAID services into a combined or single mission administrative 

operation for those posts moving into new embassy compounds. It also 

sets as a goal the reduction of U.S. direct hire personnel and their 

replacement, where appropriate, with locally employed staff. The draft 

strategy is a step forward, but our experience shows that the strategy must 

be coupled with a more comprehensive, detailed implementation plan that

includes milestones, specific timelines, accountability mechanisms, more 

detailed goals, and performance measures to show results. State officials 

told us in early July 2006 that the Joint Management Council is in the 

process of developing a plan. However, it was not completed in time for us 

to analyze the results. 

The Government Performance and Results Act of 1993 requires federal 

agencies to develop plans and measures to assess progress in achieving 

their goals. In particular, it requires agencies to set multiyear strategic 

goals in their strategic plans and corresponding annual goals in their 

performance plans, measure performance toward the achievement of 

those goals, and report on their progress. 

The draft strategy outlined by State and USAID in June 2006, while a step

in the right direction, does not provide a detailed map of actions to take, 

and for this reason, State and USAID need to define a more comprehensive 

plan. For example, the strategy does not identify the actions that need to 

be taken to establish a single, joint administrative structure. Such a 

structure was recommended for Nairobi in September 2005, but the post 

decided not to adopt this structure in the short term, in part because of 

skepticism that meaningful cost savings could be achieved with this 

structure and the need for harmonization of State and USAID systems and 

procedures. In addition, the strategy does not address the fundamental 

problem that in some cases adequate performance measures to fully 

demonstrate the extent of cost and operational efficiencies do not exist. 

The set of challenges faced by State and USAID as they consolidate 

overseas support services are similar to those faced by other

State and USAID Need a 

Comprehensive Plan 

Page 26 GAO-06-829 Overseas Consolidation
organizations. In May 2006, we convened a workshop with State and 

USAID officials as well as outside experts to discuss the most important 

issues. The experience of other organizations generally supports our 

analysis of the key challenges and highlights the need for strong 

leadership, a clear direction, consistent communication, and agreement on

a standard set of procedures and systems. For more detailed information 

on outcomes from the workshop, see appendix III. 

State and USAID have taken important steps toward the consolidation of 

support services. During the course of our work, relations between State 

and USAID improved. State and USAID have begun to integrate certain 

operations and management structures and are currently revising their 

joint strategic plan. This provides an opportunity to move the 

consolidation process forward by addressing the challenges that have

limited the progress of the consolidation effort. If State and USAID can 

overcome these challenges, they may have the potential to realize 

significant savings and efficiencies. To do so, State and USAID need to 

develop a more comprehensive plan that establishes clear goals, 

performance targets, and accountability mechanisms. 

We recommend that the Secretary of State, in conjunction with the USAID 

Administrator, 

• designate overseas services consolidation a priority joint State/USAID 

objective; 

• define a comprehensive plan that provides a detailed picture of the desired 

end state; addresses cost and incentive differences between agencies; 

enables clear and consistent communications from headquarters to post; 

demonstrates the overall cost benefits of consolidation; defines timelines, 

metrics, and results-oriented criteria for success; and outlines, where 

appropriate, options for leveraging more locally employed staff; and 

• set timelines for accomplishing the standardization of State and USAID 

policies, procedures, and systems. 

We provided a draft of this report to the Department of State and USAID 

for comment. State’s and USAID’s comments can be found in appendixes V 

and VI. We also received technical comments from both State and USAID, 

which have been incorporated into the report as appropriate.

Conclusion 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 

Page 27 GAO-06-829 Overseas Consolidation
State fully agreed with our recommendations. State said that it is actively 

working with USAID to address the policy, procedural, and technical 

issues identified in our report. State believes that elimination of 

duplicative administrative support platforms will result in overall savings

to both State and USAID. 

USAID also agreed with the basic findings of our report. USAID said that it

is clear that by consolidating duplicative administrative operations and 

eliminating staff, the U.S. government will save considerable sums of 

money. USAID said that it and the State Department are in the process of 

developing a comprehensive plan to improve the manner in which support 

services are managed. 

As agreed with your office, unless you publicly announce the contents of

this report earlier, we plan no further distribution until 30 days from the 

date of this letter. At that time, we will send copies of this report to other 

interested members of Congress, the Library of Congress, and the 

Secretary of State. We will also make copies available to others upon 

request. In addition, this report will be available at no charge on the GAO 

Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-4128. Other GAO contacts and staff acknowledgments are 

listed in appendix VII. 

Sincerely yours, 

Jess T. Ford

Director, International Affairs and Trade 

Page 28 GAO-06-829 Overseas Consolidation
Appendix I: Posts Where State and USAID Are Appendix I: Posts Where State and USAID Currently Collocated 

Are Currently Collocated 

Alexandria, Egypt 

Amman, Jordan 

Baku, Azerbaijan 

Basrah, Iraq 

Beirut, Lebanon 

Belgrade, Serbia 

Bishkek, Kyrgyzstan 

Bogotá, Colombia 

Brasilia, Brazil 

Bridgetown, Barbados 

Brussels, Belguim 

Bujumbura, Burundi 

Colombo, Sri Lanka 

Dar es Salaam, Tanzania 

Dhaka, Bangladesh 

Djibouti, Djibouti 

Dushanbe, Tajikistan 

Freetown, Sierra Leone 

Geneva, Switzerland 

Georgetown, Guyana 

Hillah, Iraq 

Islamabad, Pakistan 

Jakarta, Indonesia 

Jerusalem, Israel 

Kabul, Afghanistan 

Lima, Peru 

Luanda, Angola 

Mexico City, Mexico 

Minsk, Belarus 

Monrovia, Liberia 

Moscow, Russia 

New Delhi, India 

Nicosia, Cyprus 

Phnom Penh, Cambodia 

Podgorica, Montenegro 

San Salvador, El Salvador

Istanbul, Turkey 

Sanaa, Yemen 

Sofia, Bulgaria 

Tashkent, Uzbekistan 

Tirana, Albania 

Page 29 GAO-06-829 Overseas Consolidation
Appendix I: Posts Where State and USAID Are 

Currently Collocated 

Ulaanbaatar, Mongolia 

Yerevan, Armenia 

Zagreb, Croatia 

Page 30 GAO-06-829 Overseas Consolidation
Appendix II: Posts Currently Planned for 

Construction During Fiscal Years 2006-2011 Appendix II: Posts Currently Planned for Where State and USAID Will be Collocated 

Construction During Fiscal Years 2006-2011 

Where State and USAID Will be Collocated 

Abuja, Nigeria 

Accra, Ghana 

Addis Ababa, Ethiopia 

Almaty, Kazakhstan 

Antananarivo, Madagascar 

Astana, Kazakhstan 

Asuncion, Paraguay 

Baghdad, Iraq 

Bamako, Mali 

Conakry, Guinea 

Cotonou, Benin 

Dili, East Timor 

Harare, Zimbabwe 

Istanbul, Turkey 

Juba, Sudan

Kampala, Uganda 

Kathmandu, Nepal 

Khartoum, Sudan 

Kiev, Ukraine 

Kigali, Rwanda 

Kingston, Jamaica 

Kinshasa, Congo 

Lusaka, Zambia 

Managua, Nicaragua 

Manila, Philippines 

Mbabane, Swaziland 

Nairobi, Kenya 

Ouagadougou, Burkina Faso 

Panama City, Panama 

Peshawar, Pakistan 

Port-au-Prince, Haiti 

Pristina, Kosovo 

Quito, Ecuador 

Santo Domingo, Dominican Republic

Sarajevo, Bosnia 

Skopje, Macedonia 

Tbilisi, Georgia 

Page 31 GAO-06-829 Overseas Consolidation
Appendix III: Results of Workshop on Appendix III: Results of W Consolidating Support Services orkshop on 

Consolidating Support Services 

In May 2006, we convened a workshop with State and U.S. Agency for 

International Development officials as well as two outside experts to 

discuss the most important issues related to State and USAID efforts to 

consolidate overseas support services. 

The experience of other organizations suggests that creating shared 

service centers and consolidating support services can achieve significant 

cost avoidance and efficiencies. Moreover, experts suggest four elements 

are critical for achieving success in such efforts: defining an overarching 

vision, communicating clearly and consistently, demonstrating the cost 

benefits, and developing metrics. 

External studies and the results of our May 2006 workshop show that 

private and public sector organizations that consolidate support services 

and create shared service centers can achieve major cost avoidance and 

efficiencies. For example, in the private sector, British Petroleum, one of 

the world’s largest energy companies, has achieved savings of 20 percent 

to 50 percent since adopting a consolidated services model in 1995. In the

public sector, the U.S. Postal Service reported that consolidating and

creating shared accounting service centers enabled it to achieve 

economies of scale by closing 80 district accounting offices. According to 

one study, the average organization may realize net cost decreases of 

approximately 25 to 55 percent through efforts to consolidate services and

create shared service centers, depending on the function. For instance, 

consolidating and creating shared service centers for purchasing typically

results in a 25 percent cost reduction for that function; while consolidating 

and creating shared service centers for general accounting functions can 

result in a 55 percent cost reduction.

A number of private sector corporations in the United States and 

throughout the world have adopted a consolidated or shared service 

model. For example, British Petroleum’s program involves the 

consolidation of finance and accounting functions, including internal and 

external financial reporting, and budgeting and forecasting functions, as 

well as the creation of shared service centers. According to one private 

sector consulting company, as a result of these actions, British 

Petroleum’s finance and accounting transactional unit costs have steadily 

declined, and working capital improvements measured in the tens of 

millions of dollars have already been achieved, with more on the way. 

In addition, public sector organizations in the United States and 

throughout the world have also adopted shared services models. These 

include the U.S. Postal Service, which as part of an initiative in 2003 to 

Page 32 GAO-06-829 Overseas Consolidation
Appendix III: Results of Workshop on 

Consolidating Support Services

consolidate its finance function reported that consolidating and creating

shared accounting service centers enabled it to achieve economies of scale 

by closing 80 district accounting offices. The Postal Service’s Strategic 

Transformation Plan: 2006-2010 also outlines a human resources shared 

services initiative that will centralize certain transactional human resource 

functions and other noncore support functions as well, such as 

information technology and purchasing functions.1

While examples of public and private sector successes in consolidating 

services are numerous, it is important to note that cost savings and 

operational efficiencies can vary. State and USAID may not be able to 

achieve similar levels of success because of differences in the nature and

scope of their efforts. Nonetheless, the fact that large companies and 

organizations have achieved positive results clearly demonstrates that the

potential for savings exists and suggests that their lessons learned may be 

applicable to State and USAID’s efforts. 

The challenges faced by State and USAID as they consolidate overseas 

support services are similar to those faced by other organizations. The 

experiences of these organizations highlight the need for strong 

leadership, a clear direction, consistent communication, and agreement on

a standard set of procedures and systems. For example: 

• Defining an overarching vision: Experts suggest that a strategic framework 

is critical to the success of a consolidation effort. Such a framework 

should provide a detailed picture of the desired end state, define resultsoriented criteria for success, and outline key milestones. In addition, it 

should address concerns about staff reductions and career implications. 

Most importantly, the plan should state that leadership commitment, from

the executives of both agencies, is strong and unified. 

• Communicating clearly and consistently: Experts suggest that 

communication should be consistent and clear, with detailed direction on 

how to implement the consolidation effort at post. Agency officials 

indicated that posts have received mixed messages from headquarters in 

the past. 

• Demonstrating the cost benefits: Experts suggest demonstrating a 

compelling rationale for undertaking the consolidation effort is critical. 

 1

United States Postal Service, Strategic Transformation Plan: 2006-2010, (Washington,

D.C.: September 2005). 

Page 33 GAO-06-829 Overseas Consolidation
Appendix III: Results of Workshop on 

Consolidating Support Services

However, State and USAID do not have the data or a method for 

accurately determining and comparing the cost and quality of services 

provided by each agency, making it difficult to accurately demonstrate the 

benefits of consolidating services and achieve consensus on which is the 

most efficient service provider. 

• Developing metrics: Experts suggest that the adoption of performance 

measures is critical to evaluating operational efficiencies. Although State 

and USAID have developed some metrics, key performance metrics are 

lacking. For example, the May 2005 study that recommended consolidating 

services at the four pilot posts noted that for both State/ICASS and USAID, 

motor pool trip logs are not used for an analysis of driver/vehicle 

utilization, peak volume/time determination, or capacity requirements. 

Moreover, warehouse capacity use and inventory turnover are not tracked 

to determine the need for warehouse space or to highlight opportunities 

for disposal of unused items. The lack of performance measures has also 

complicated posts’ efforts to quantify and document cost avoidance. 

Page 34 GAO-06-829 Overseas Consolidation
Appendix IV: Scope and Methodology Appendix IV: Scope and Methodology 

To address what State and USAID have accomplished and learned from 

their initiative to consolidate overseas support services, we obtained and 

reviewed a number of State and USAID documents, including the State 

and USAID joint strategic plan for fiscal years 2004 through 2009, the May

2004 study that led to the original pilot project, and the October 2005 

evaluation of lessons learned as a result of the pilot project. We also met 

with State and USAID officials in the functional and regional bureaus, as 

well as private sector consultants knowledgeable about the initiative. We

conducted fieldwork at three of the four original pilot posts—Cairo, Egypt; 

Dar es Salaam, Tanzania; and Phnom Penh, Cambodia and conducted a 

teleconference with officials of the fourth—Jakarta, Indonesia. We also 

conducted fieldwork at a post that is planning to consolidate support 

services—Nairobi, Kenya. At each post, we met with the principal officers, 

including the chief of mission and the deputy chief of mission, as well as 

the State management officer and the USAID executive officer. At many 

posts, the State management officer and the USAID executive officer are 

responsible for managing the day-to-day operations of their respective 

agencies, and in most cases, these officials were given the responsibility of

working out the details of consolidating support services. To assess the 

reliability of the cost and operational efficiency data that posts provided, 

we (1) reviewed pertinent documents provided by State, USAID, and the 

posts, such as the May 2004 study that detailed problems with obtaining 

reliable cost and performance data, and (2) discussed data reliability with

agency and post officials knowledgeable about the data. We noted 

limitations in the data that result from State and USAID collecting data

through different systems and managers sometimes failing to record 

accurately the times allocated to different tasks. However, we determined

the data to be sufficiently reliable for the purposes of this report. 

To address the challenges that State and USAID have encountered in 

implementing this program, we obtained and analyzed a number of 

documents, among them the May 2004 study that led to the original pilot 

project, the February 2005 directive from USAID directing missions to 

demonstrate that consolidating services would not result in any additional 

costs to the agency before agreeing to consolidate a support service, the 

October 2005 evaluation of lessons learned, and the December 2005 and 

April 2006 directives from State and USAID to the missions that, among 

other things, established the services that can and cannot be consolidated.

We also reviewed a copy of State and USAID’s June 2006 draft strategy. In

addition, we met with knowledgeable agency and post officials, including 

State/ICASS officials and USAID contractors knowledgeable about the 

ICASS alternate service provider software and its use. Moreover, we 

reviewed certain State/ICASS and USAID policies and procedures that 

Page 35 GAO-06-829 Overseas Consolidation
Appendix IV: Scope and Methodology 

outline the requirements for managing property at post. These are spelled 

out in USAID’s Automated Directives System, and in State’s Foreign 

Affairs Manual. 

To learn what private and public sector lessons learned can be applied to 

this initiative, which we used to help frame our recommendations, we 

reviewed a number of studies that examined how private and public sector

organizations have implemented efforts to consolidate and share support 

services. Many of these studies detail shared service best practices and 

lessons learned. We also met with private and public sector officials 

knowledgeable about or responsible for implementing shared services. 

Finally, in May 2006 we convened an informal roundtable discussion 

featuring two respected experts on governance and shared services. The 

two experts were Jonathan Breul, of the IBM Center for the Business of 

Government, a research center dedicated to improving government 

services; and Brad Gladstone, of Accenture, a global management 

consulting and technology services company. Breul, a Senior Fellow with 

the IBM Center, previously served as a Senior Advisor to the Deputy 

Director for Management in the Office of Management and Budget, and 

has provided his insights to a number of government agencies and 

initiatives, including the State Department, and the President’s 

Management Agenda. Gladstone, a Senior Executive in Accenture’s 

Federal Client Group, leads their finance and performance management 

practice. He has provided his expertise on consolidation and shared 

services to a wide range of customers in both the public and private 

sectors, including the Departments of Interior and Agriculture. State, 

USAID, and other agency officials participated in this informal roundtable.

We prepared a summary of lessons learned based on the roundtable 

discussion and shared this with State and USAID officials. 

We performed our work from November 2005 through July 2006 in 

accordance with generally accepted government auditing standards. 

Page 36 GAO-06-829 Overseas Consolidation
Appendix V: Comments from the Department Appendix V of State : Comments from the Department 

of State 

Page 37 GAO-06-829 Overseas Consolidation
Appendix V: Comments from the Department 

of State 

Page 38 GAO-06-829 Overseas Consolidation
Appendix V: Comments from the Department 

of State 

Page 39 GAO-06-829 Overseas Consolidation
Appendix V: Comments from the Department 

of State 

Page 40 GAO-06-829 Overseas Consolidation
Appendix V: Comments from the Department 

of State 

Page 41 GAO-06-829 Overseas Consolidation
Appendix VI: Comments from USAID Appendix VI: Comments from USAID 

Page 42 GAO-06-829 Overseas Consolidation
Appendix VI: Comments from USAID 

Page 43 GAO-06-829 Overseas Consolidation
Appendix VI: Comments from USAID 

Page 44 GAO-06-829 Overseas Consolidation
Appendix VI: Comments from USAID 

Page 45 GAO-06-829 Overseas Consolidation
Appendix VI: Comments from USAID 

Page 46 GAO-06-829 Overseas Consolidation
Appendix VII: GAO Contact and 

Acknowledgments 

GAO Contact Jess Ford, (202) 512-4128

In addition to the person named above, John Brummett, Assistant 

Director; Kevin Bailey; Joseph Brown; Joseph Carney; Virginia Chanley; 

Marc Castellano; Martin De Alteriis; Edward Kennedy; José M. Peña, III; 

and Wrenn Yennie made key contributions to this report. 

Page 47 GAO-06-829 Overseas Consolidation

Staff 

Acknowledgments 

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