United States Government Accountability Office

GAO Report to the Chairman, Committee on 

Foreign Relations, U.S. Senate 

EMBASSY 

CONSTRUCTION 

State Has Made 

Progress Constructing 

New Embassies, but 

Better Planning Is 

Needed for Operations 

and Maintenance 

Requirements 

June 2006 

 

GAO-06-641 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 2006

EMBASSY CONSTRUCTION 

State Has Made Progress Constructing 

New Embassies, but Better Planning Is 

Needed for Operations and Maintenance 

Requirements 

Highlights of GAO-06-641, a report to the 

Chairman, Committee on Foreign 

Relations, U.S. Senate 

In response to 2 bombings of U.S. 

embassies in Africa in 1998, the 

Department of State embarked on a 

$21 billion program to replace 201 

insecure and dilapidated 

diplomatic facilities. In November

2004, GAO reported that State’s 

Bureau of Overseas Buildings 

Operations (OBO), which manages

the construction program, had

implemented reforms to its 

planning, design, construction, and 

funding processes designed to 

expedite the construction process

and prevent cost overruns that 

were common to previous State 

diplomatic construction programs.

This report updates GAO’s earlier 

report, by discussing OBO’s 

completion rates and costs for 

embassy construction projects and 

the impact the reforms and other 

factors have on completion rates. 

It also discusses the changes in the 

costs for operating and maintaining 

these new facilities. 

What GAO Recommends

GAO recommends that the 

Secretary of State develop an

integrated and comprehensive 

facilities plan that clearly specifies 

the immediate and long-term 

resource needs for operating and 

maintaining new embassy

compounds. 

We received comments from the

Department of State, which 

generally agreed with our findings

and reported that it plans to 

implement our recommendation. 

State’s comments are reprinted in

appendix III.

State has made significant progress constructing new embassy compounds 

(NEC). The average time to design and construct the 18 embassies and 

consulates completed from1999 to 2005 is nearly 3 years faster than for 

embassies built during the 1980s and 1990s, despite these new facilities

being significantly larger and more complex. Although only half of the 18 

projects were completed according to planned schedules, 15 of the 18 NECs 

were opened ahead of, on, or within 1 month after their scheduled move-in 

dates, and approximately 8,700 U.S. government employees were relocated 

to these secure and modern facilities. Construction costs for 14 of the 18 

completed projects were significantly lower than budget estimates OBO 

provided to Congress. Strategic and procedural reforms implemented by 

State, including elevating the former Foreign Buildings Office to bureau 

status, switching to the design-build contract delivery method, and 

developing a standard embassy design have had a cumulative positive effect 

on project cycle times; however, it is still difficult to quantify the effects of 

any single reform. GAO found that factors specific to individual projects 

affected OBO’s ability to complete work on time and on budget, including 

the experience levels of OBO and contractors’ projects teams, unforeseen 

conditions at construction sites, and weather conditions, among others. 

Due to increased size and complexity, annual operations and maintenance 

costs for NECs are significantly greater than the costs for previous locations;

once all 201 NECs are completed, annual operations and maintenance costs 

could increase by at least $111 million, and possibly several times more. 

These costs include increases in utility usage; the need to hire highly 

qualified technical staff; new maintenance needs; and costly equipment, 

supplies, and spare parts. State does not clearly identify the projected 

operations and maintenance costs for NECs it builds. Thus, there is 

currently no mechanism that allows decision makers to determine whether 

NEC operations and maintenance needs are being adequately planned for 

and funded. A lack of a comprehensive long-term plan that clearly identifies 

the significant increases in resources that are likely to be needed as more

NECs come online could increase the risk of earlier-than-expected 

deterioration of NECs. 

Previous and New U.S. Embassy in Zagreb, Croatia

Previous embassy New embassy

Source: U.S. Department of State.

www.gao.gov/cgi-bin/getrpt?GAO-06-641.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Jess T. Ford at 

(202) 512-4128 or fordj@gao.gov or Terrell G. 

Dorn at (202) 512-6923 or dornt@gao.gov. 
Contents 

Letter 1

Results in Brief 2 

Background 4

State Has Made Significant Progress in Completing New Embassy 

and Consulate Compounds 9 

Planning for Operations and Maintenance Costs for New Embassy 

Compounds Is Neither Comprehensive Nor Transparent 27 

Conclusions 41

Recommendation for Executive Action 42 

Agency Comments 42 

Appendix I Scope and Methodology 44 

Appendix II Operations and Maintenance Funding Sources 51 

Appendix III Comments from the Department of State 53 

GAO comments 60 

Appendix IV GAO Contacts and Staff Acknowledgments 62

Tables 

Table 1: Estimated and Actual Total Project Costs for Completed 

NEC Projects 15 

Table 2: Estimated Annual Operating Costs for Completed NECs 41 

Table 3: Major Costs and Funding Sources for Operations and

Maintenance of Overseas Government-owned and Longterm Lease Office Facilities 51 

Figures 

Figure 1: Features of a Notional NEC (without USAID annex) 7 

Figure 2: Construction of the Standard-design New Embassy 

Compound in Tbilisi, Georgia 9 

Page i GAO-06-641 Embassy Construction Performance
Figure 3: Comparison of Planned and Actual Contract Completion, 

and Planned and Actual Occupation Dates of New 

Embassy Compounds 12 

Figure 4: Previous and New U.S. Embassy in Tunis, Tunisia 29 

Figure 5: Previous and New U.S. Consulate General in Istanbul, 

Turkey 33

Abbreviations 

FBO Office of Foreign Buildings Operations 

FEBR Forced Entry and Ballistic Resistant 

ICASS International Cooperative Administrative Support Services 

NEC New Embassy (or Consulate) Compound 

OBO Bureau of Overseas Buildings Operations 

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 

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Page ii GAO-06-641 Embassy Construction Performance
United States Government Accountability Office

Washington, DC 20548 

June 30, 2006 

The Honorable Richard G. Lugar 

Chairman 

Committee on Foreign Relations 

United States Senate 

Dear Mr. Chairman: 

In 1999, the Department of State (State) began the Capital Security 

Construction Program, an unprecedented $21 billion, multiyear program to 

construct 201 new embassies and consulates. This program was developed

in response to the 1998 embassy bombings in Kenya and Tanzania that 

killed 220 people and injured thousands more. The program’s primary goal 

is to provide secure, safe, and functional workplace facilities for all 

employees assigned to U.S. overseas posts. This goal is designed to 

implement the Secure Embassy Construction and Counterterrorism Act of 

1999, which requires that new diplomatic facilities abroad be sufficiently 

sized to ensure that all U.S. government personnel at the post are located 

on-site unless security conditions permit otherwise and it is within U.S. 

national interests to locate personnel outside the new facility.1

 State’s 

Bureau of Overseas Buildings Operations (OBO), which operates the 

program, also intends that these new embassy and consulate compounds 

(NEC) are efficient, state-of-the-art office buildings. 

In the past, we have reported on the significant construction delays and

cost overruns associated with previous embassy construction efforts. This 

report addresses (1) the progress OBO has made in completing embassy 

and consulate construction projects according to planned schedules and 

budgets and (2) whether posts are prepared to operate and maintain the

new facilities. 

To complete our work, we reviewed the report of the Overseas Presence 

Advisory Panel,2

 previous GAO reports on State’s embassy construction 

 1

See 22 U.S.C. § 4865, “Security Requirements for United States Diplomatic Facilities.” 

2

Former Secretary of State, Madeleine Albright, established the Overseas Presence 

Advisory Panel following the 1998 embassy bombings in Africa. Department of State, 

America’s Overseas Presence in the 21st Century, the Report of the Overseas Presence

Advisory Panel (Washington, D.C.: November 1999). 

Page 1 GAO-06-641 Embassy Construction Performance
programs, OBO’s past five annual Long-Range Overseas Buildings Plans, 

the files of 18 completed projects, and the monthly program performance 

updates and documents of more than 20 ongoing projects. To track OBO’s 

performance in completing construction projects on time and on budget,

we developed and analyzed a database containing planned and actual 

project schedule and cost data, which were obtained from individual 

construction project files. We interviewed key State officials in

Washington on the planning for and adequacy of NECs, and we met with

contractors currently involved in construction projects to discuss OBO’s 

reforms to the planning and construction processes. We also visited nine 

posts with either ongoing or completed construction projects to observe 

the construction process, solicit views of State and the contractors’ field 

staff, and review posts’ plans for operating and maintaining the new 

facilities.3

 We performed our work from January 2005 to June 2006 in 

accordance with generally accepted government auditing standards. 

Appendix I provides more information on our scope and methodology. 

State has made significant progress in completing new embassy and 

consulate compounds in a timely manner and according to planned costs.

From 1999 to the end of calendar year 2005, State completed construction 

of 18 embassies and consulates at a cost of approximately $1.3 billion. 

Despite the increased size and complexity of the modern facilities it 

constructs, State has significantly reduced the time it takes to complete 

construction of NECs over past programs. In addition, although only onehalf of State’s construction projects were completed according to the 

contractual schedules, all but three were sufficiently completed to allow 

posts to occupy their respective facilities on, ahead of, or within 1 month 

after the scheduled move-in date. As a result, approximately 8,700 U.S. 

government employees now work in safe, secure, and modern office 

buildings. Moreover, actual construction costs for most completed 

projects were significantly lower than the funding levels OBO reported as 

needed for those projects. Although it is too early to fully assess schedule 

performance and costs of yet-to-be-completed projects, we noted that six 

of the nine ongoing NEC projects scheduled for completion in 2006 are 

currently behind schedule and three of the nine projects are currently 

estimated to cost more than originally intended. However, OBO reported 

Results in Brief 

 3

The posts visited included U.S. embassies in Abuja, Nigeria; Bamako, Mali; Conakry,

Guinea; Kingston, Jamaica; Luanda, Angola; Phnom Penh, Cambodia; Tbilisi, Georgia; and 

Tunis, Tunisia; and the U.S. consulate in Cape Town, South Africa. We also met with the 

OBO project director for the Tashkent, Uzbekistan NEC project. 

Page 2 GAO-06-641 Embassy Construction Performance
that it has taken actions to mitigate the impact of these delays, and, in the

case of the three projects estimated to exceed original cost estimates, that 

it has notified Congress of the need to reprogram funds as a result of 

higher-than-expected contractor costs for two projects and the need to 

pay workforce remobilization costs to complete the third project. OBO 

and contractors’ staff reported that strategic and procedural reforms 

implemented by State—including transforming the former Office of 

Foreign Buildings Operations (FBO) to the Bureau of Overseas Buildings 

Operations, switching to the design-build contract delivery method,4

 and 

developing a standard embassy design—have had a cumulative positive 

effect on project cycle times; however, it is difficult to quantify the effects 

of any single reform. We found that other factors specific to individual 

projects also affected OBO’s ability to complete work on time and on 

budget, such as the timeliness of procurement and delivery of materials; 

conditions at the project site; political and social conditions in the host 

nation; staffing and labor issues; and climatic and environmental 

conditions. 

Operations and maintenance costs for newly constructed embassies and 

consulates are significantly higher than the operations and maintenance 

costs for facilities they replaced. We estimate that once all 201 NECs are 

completed, these total annual operations and maintenance costs, adjusted 

to 2006 constant dollars, could increase by $111 million over those posts’ 

previous facilities, and possibly by several times more. According to 

analyses of data from the International Cooperative Administrative 

Support Services (ICASS) system, OBO staff, and post officials, these costs 

increases are driven in part by technical security requirements that 

resulted in greater utility consumption, the need for highly qualified 

technical staff, and new maintenance requirements that posts did not have 

at their previous locations. State initially did not recognize the magnitude

of new costs for the day-to-day functional requirements of NECs, but State 

subsequently developed guidance for posts to help determine the notional 

staffing and financial resources for individual NECs. However, State has 

not developed a clear budgetary line item to project operations and 

maintenance costs. Currently, these costs are intermingled with domestic 

and other nonfacilities-related administrative costs among several 

accounts, and no mechanism exists for determining how global costs for 

 4

The design-build contract delivery method reduces project cycle time by combining design 

and construction in a single contract award and allows contractors to begin construction

before the building design is complete. 

Page 3 GAO-06-641 Embassy Construction Performance
operations and maintenance will increase in the long-term. Thus, decision 

makers cannot determine whether NEC operations and maintenance 

needs are being adequately planned for and funded. In the past, GAO and 

others noted that inadequate funding for operations and maintenance of 

overseas posts led to unsafe, insecure, and dilapidated embassies. A lack 

of a comprehensive long-term plan that clearly identifies the significant 

increases in resources that are likely to be needed as more NECs come 

online could increase the risk of earlier-than-expected deterioration of 

NECs. 

To protect the $21 billion investment in these new facilities, this report 

contains a recommendation that the Secretary of State develop an 

integrated and comprehensive facilities plan that clearly specifies the 

financial and human resources needed for meeting the immediate and

long-term operations and maintenance requirements for new embassy 

compounds. 

We received written comments from the State, which are reprinted in 

appendix III. The department generally agreed with our findings and 

conclusions. Moreover, State reported that it supports and would take the 

necessary steps to address our recommendation. State also provided 

technical comments, which were incorporated throughout the report, as 

appropriate.

In the wake of three bombings at U.S. facilities in Beirut, Lebanon—the 

U.S. Embassy in April 1983, the Marine barracks in October 1983, and the

U.S. Embassy Annex in September 1984—then Secretary of State George 

P. Schultz convened the Advisory Panel on Overseas Security to review 

security issues at U.S. overseas facilities. Among the panel’s many 

suggestions for improving security for U.S. overseas missions and 

employees, it recommended that the chanceries, consulates, and other 

office buildings at 126 of the 262 overseas posts be replaced due to 

security conditions and their locations. In 1987, State estimated that under

the resulting Diplomatic Security Construction Program—also known as 

“the Inman Program” after the head of the Advisory Panel, Rear Admiral 

Bobby Inman (Ret.)—it could complete construction of 57 new office 

buildings and other capital projects for approximately $2.1 billion. In 

November 1991, however, we reported that the program was characterized

by funding shortfalls, construction delays, and cost increases, and State 

Background 

Page 4 GAO-06-641 Embassy Construction Performance
ultimately completed only 24 of the 57 planned new office buildings under 

the program.5

 From 1994 to1998, Congress appropriated $134 million for 

security-related capital projects,6

 although not all of this money was 

targeted to the construction of new embassies or consulates. 

Capital Security 

Construction Program 

On August 7, 1998, terrorist bombings at the U.S. Embassies in Nairobi, 

Kenya, and Dar es Salaam, Tanzania, killed more than 220 people and 

injured 4,000 others. Among the dead were 12 American U.S. government 

employees and family members, in addition to 32 Kenyan and 8 Tanzanian

nationals working at those embassies. In January 1999, the Accountability 

Review Boards, formed to investigate the bombings, reported that unless 

security vulnerabilities at U.S. embassies and consulates were addressed, 

“U.S. government employees and the public in many of our facilities 

abroad” would remain at risk from terrorist bombings.7

 The board also 

noted more than 200 attacks at U.S. diplomatic facilities from 1987 to 1997. 

Also in 1999, the Overseas Presence Advisory Panel reported on the 

unsafe, overcrowded, deteriorating, and “shockingly shabby” conditions of 

U.S. embassies and consulates. Both the board and the panel 

recommended that State embark on a multiyear, multibillion dollar 

program to replace insecure and aging diplomatic facilities worldwide. 

This new effort was named the Capital Security Construction Program. 

In October 1998, Congress appropriated $627 million for reestablishing 

embassies in Kenya and Tanzania, relocating other high-risk embassies 

Annual Costs and Production 

 5

GAO, State Department: Management Weaknesses in the Security Construction 

Program, GAO/NSIAD-92-2 (Washington, D.C.: Nov. 29, 1991) and GAO, State Department, 

Status of the Diplomatic Security Construction Program, GAO/NSIAD-91-143BR 

(Washington, D.C.: Feb. 20, 1991). 

6

Congressional Research Service, Embassy Security: Background, Funding, and the 

Budget, RL 30662 (Washington, D.C.: Oct. 4, 2001). 

7

This board was appointed by former Secretary of State Madeleine Albright to investigate 

the facts and circumstances surrounding the 1998 embassy bombings. See Department of 

State, Report of the Accountability Review Boards on the Embassy Bombings in Nairobi, 

Kenya and Dar es Salaam, Tanzania on August 7, 1998 (Washington, D.C.: Jan. 1999), 

and Admiral William J. Crowe, Press Briefing on the Report of the Accountability Review 

Boards on the Embassy Bombings in Nairobi and Dar es Salaam (Washington, D.C.: 

Jan. 8, 1999). 

Page 5 GAO-06-641 Embassy Construction Performance
and consulates, and improving security at embassies and consulates 

worldwide.8

 From fiscal year 1999 to the end of calendar year 2005, State 

• obligated a total of $3.1 billion for the construction of 40 NECs;9 and 

• completed 18 NEC projects through the end of calendar year 2005, at a

cost of approximately $1.3 billion.10

As of year-end 2005, State had 22 ongoing NEC projects, 9 of which are 

scheduled for completion by year-end 2006. From 2009 to 2018, State 

expects an average annual funding level of approximately $1.4 billion for 

NEC projects. In total, State plans to build 201 NECs under the Capital 

Security Construction Program. 

NECs generally consist of a chancery or consulate building, compound 

access control buildings, utility buildings housing the mechanical and

electrical systems that operate the compound, Marine Security Guard 

quarters (if a post has a Marine contingent), and an antiram/anticlimb 

perimeter fence (see fig. 1). Depending on the site, the project budget, and 

the needs of the post, a new compound could also include a General 

Services support annex, a warehouse, maintenance shops, recreation 

facilities, and employee and public parking areas. Some compounds also 

include an annex building for USAID or other program or agency functions 

that do not require access to secure areas. On rare occasions, the new 

compounds may also include housing units for post employees, although 

these units are generally only located in high security-risk locations, such 

as Kabul, Afghanistan. 

Compound Features and 

Requirements 

 8

Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999, Pub. L. 

No. 105-277, 112 Stat. 2681 (1998). 

9

Only NEC projects funded under the capital security construction fund were included in

this total. The cited obligation does not include funds budgeted for Embassies Baghdad and 

Beijing, which combined are estimated at more than $1 billion. Since 1999, State has also 

constructed nine annexes on existing diplomatic compounds, four interim office buildings, 

four fit-outs of newly acquired buildings, several major rehabilitation projects, and $100 

million in compound security projects. 

10Total costs for these NEC projects include the costs for site acquisition, design, 

construction, security equipment, furniture and furnishings, and project supervision. 

Reimbursements from other agencies are not included in the total costs.

Page 6 GAO-06-641 Embassy Construction Performance
Figure 1: Features of a Notional NEC (without USAID annex) 

EXIT

Public

CAC

General

Services

Annex

Utility

Utility

MSG

Chancery/

M Consulate ain CAC

Warehouse

Source: GAO synthesis of OBO documents.

Perimeter fence

Perimeter fence

Perimeter fence

Service CAC

CAC Compound access control

MSG Marine Security Guard Quarters

NECs must comply with the physical security and collocation 

requirements of the Secure Embassy Construction and Counterterrorism 

Act of 1999.11 The act requires that, in site selection, the Secretary of State

shall ensure that all U.S. government personnel under the authority of a 

chief of mission, including foreign national employees, be colocated onto a 

single compound. In addition, all buildings on NECs must meet stringent 

security standards for setback and blast resistance. However, according to 

State officials and the Foreign Affairs Handbook, only those buildings 

where U.S. government personnel will be stationed are required to be on 

compound. Buildings that do not contain desk space for employees or in

 11Consolidated Appropriations Act of 2000, Pub. L. No. 106-113, Div. B, sec. 1000(a)(7), 113

Stat. 1536 (1999). State elaborates on these requirements in the U.S. Department of State 

Foreign Affairs Handbook, 12 FAH-5. 

Page 7 GAO-06-641 Embassy Construction Performance
which employees are not permanently located, such as warehouses, need 

not be on the new compound. 

In 1991, we reported that State was unable to complete as many projects

as originally planned under the Inman Program due to systemic 

weaknesses in program management and funding limitations.12 We also 

reported that this program suffered from delays and cost increases due to

poor program planning, difficulties acquiring sites, changes in security 

requirements, and inadequate contractor performance. 

Reforms to the Construction 

Process 

In November 2003, we reported on a number of organizational and 

managerial reforms to State’s current capital construction process.13 These 

reforms, which were designed to reduce the construction cycle times and 

costs, include the following: 

• the transformation of the Office of Foreign Buildings Operations to the 

Bureau of Overseas Buildings Operations with responsibility for all capital 

construction and maintenance operations at U.S. diplomatic facilities at 

home and abroad; 

• the development of the Long-Range Overseas Buildings Plan, which 

prioritizes and summarizes capital construction projects over a 6-year 

cycle;

• efforts to standardize the planning, design, and construction processes, 

including eliminating the use of design-bid-build contract delivery in favor 

of design-build contract delivery—and the development of a standardized 

design for most new embassy and consulate compound projects 

(see fig. 2);

• monthly project status reviews in Washington, where senior OBO 

managers meet to discuss ongoing projects and resolve issues that could 

adversely impact construction schedules and costs; 

• quarterly meetings of an Industry Advisory Panel, which advises OBO on 

industry best practices in the construction sector; 

 12GAO/NSIAD-92-2. 

13GAO, Embassy Construction: State Department Has Implemented Management 

Reforms, but Challenges Remain GAO-04-100, (Washington, D.C.: Nov. 4, 2003). 

Page 8 GAO-06-641 Embassy Construction Performance
• advance identification and acquisition of sites; and 

• additional training for OBO headquarters and field staff. 

Figure 2: Construction of the Standard-design New Embassy Compond in Tbilisi, 

Georgia

State has reduced the average project cycle time by approximately 2 years 

and 9 months, compared with that for embassies built during the 1980s 

and early 1990s. Though only 9 of the 18 recently constructed compounds 

were completed according to contractual schedule requirements, 15 of the 

18 projects were sufficiently completed to allow posts to occupy their 

respective facilities on, ahead of, or within 1 month after the scheduled 

move-in date, and State reported that, as of March 31, 2006, approximately 

8,700 U.S. government employees had been relocated to new, safe, and 

secure facilities. Actual NEC construction costs were most often 

significantly less than the estimates reported to Congress; however, in 

some cases, projects were completed outside the official NEC project and,

therefore, the total cost was not captured. Although it is too early to fully 

assess schedule performance and costs of yet-to-be-completed projects, 

we noted that six of the nine NEC projects scheduled for completion in 

2006 are currently behind schedule and that three of the nine projects are

currently estimated to cost more than originally intended. However, OBO 

Source: U.S. Department of State.

State Has Made 

Significant Progress 

in Completing New 

Embassy and 

Consulate 

Compounds 

Page 9 GAO-06-641 Embassy Construction Performance
reported that it has taken actions to mitigate the impact of these delays, 

and that it has notified Congress of the need to reprogram funds as a result 

of higher-than-expected contractor bids for two projects and the need to 

remobilize a workforce to complete a third project. Strategic and 

procedural reforms implemented by State—including the creation of OBO, 

the implementation of performance management and strategic planning

principles, and the use of the design-build contract delivery method and a 

standard embassy design—resulted in reduced project cycle times and 

costs. However, due to the small numbers of projects, it is difficult to 

quantify the specific effects of any one reform. Many factors influence 

OBO’s ability to complete construction on time and on budget, such as the 

timeliness of procurement and delivery of materials; conditions at the 

project site; political and social conditions in the host nation; staffing and 

labor issues; and climatic and environmental conditions. 

Depending on the benchmark used, OBO’s performance varied in 

completing NEC projects on schedule. We examined three performance 

indicators for timeliness: (1) total project cycle time, which we defined as 

the number of months from the start of the design phase to construction 

completion; (2) whether construction was completed according to 

contractual requirements; and (3) whether posts occupied the new 

compounds by the planned occupancy date. 

We compared the cycle times for the 18 projects completed under the 

current program with projects completed during the late 1980s and early 

1990s. In November 1991, we reported that 11 of the projects then ongoing

had completion dates extended by 14 to 54 months. Moreover, OBO 

reported, according to FBO records, that the average cycle time for 13 

embassy construction projects completed from 1986 to 1991 was 69.4 

months. In contrast, the average cycle time for the 18 completed projects 

under the current program was 36.7 months, approximately 2 years and 9 

months less than the average cycle time State reported for the earlier 

projects. State officials stated that these reductions are even more 

impressive, given that the scopes of work under the current effort, 

consisting of multistructure compounds, are significantly larger and more 

complex than facilities constructed during the Inman program, which 

consisted of single buildings. Moreover, State intends to reduce cycle 

times even further. In November 2003, we reported that State established 

new performance targets for project cycle times based on the size of the 

NEC. Although individual contract requirements may result in slightly 

Overall Project Cycle Time 

Was Greatly Reduced 

Compared with Past 

Programs, but 

Performance Measured 

against Project Schedule 

Requirements Is Mixed 

Average Construction Cycle 

Time Was Significantly 

Reduced 

Page 10 GAO-06-641 Embassy Construction Performance
different authorized project durations, since fiscal year 2003 State now 

targets design and construction cycle times to average 15 months for small 

NECs, 24 months for medium-sized NECs, and 28 months for large NECs.14

Construction industry representatives and contractors with whom we met 

stated they have concerns over whether these shorter cycle times can be

met. They indicated that the new time frames increase performance risks 

for them, which could expose them to financial losses and result in higher 

future bids. However, no NECs built to the new time frames have yet been

completed. Thus, it is too early to determine the effect of the reduced 

timeframes on contractor performance, or to assess the impact the new 

timeframes may have on contract costs. 

Based on the requirements set forth in the construction contracts, 

however, State’s record in completing construction projects according to

planned schedules was mixed, with some projects completed significantly 

ahead of schedule and others delivered substantially behind.15 Figure 3 

shows that construction for 9 of the 18 completed NEC construction 

projects was finished on or before the planned construction completion 

date.16 Of the remaining nine projects, two were completed within 1 month 

after the planned completion date, three within 1 to 3 months after the 

planned date, and four within 3 to 6 months after the planned completion 

dates. State officials said that when contractors are late the department 

assesses liquated damages.17 As of April 2006, OBO had collected or 

assessed approximately $2.4 million in liquidated damages. 

Performance Measured against 

Contractual Schedule 

Requirements Is Mixed 

 14The 18 completed NEC projects cited above began between 1999 to 2002, and thus were 

not held to the new average cycle time requirements. 

15The terms of each construction award specify the time frame that contractors have to 

complete the requirements of the contract. 

16For the contract completion date, we used the “substantial completion” date, which is the 

date that OBO certifies a contractor has met all requirements of the contract, although 

minor items may still need completion. For planned completion dates, we used the original

dates set forth in the contract unless a contract modification resulted in a time extension. 

17Liquidated damages provisions essentially provide for a contractor to pay a specified 

amount (typically on a per-diem basis) for failing to perform some element of the contract. 

Such provisions are typically tied to maintaining contract schedule, with the contractor

bearing a stipulated daily cost for failing to meet the schedule by reason of its inadequate 

performance. 

Page 11 GAO-06-641 Embassy Construction Performance
Figure 3: Comparison of Planned and Actual Contract Completion, and Planned and Actual Occupation Dates of New

Embassy Compounds

1999 2000 2001 2002 2003 2004 2005 2006

Source: U.S. Department of State, Bureau of Overseas Buildings Operations NEC Project Files.

Original duration

Time extension

Actual duration

Certificate of occupancy (planned)

Certificate of occupancy (actual)

Page 12 GAO-06-641 Embassy Construction Performance
We also reviewed schedule performance for the nine ongoing projects that 

OBO plans to complete during calendar year 2006, as presented in OBO’s 

April 2006 Program Performance Review meeting.18 At the time of the 

meeting, six of the nine projects were already behind schedule or 

exhibited signs of missing their scheduled completion dates. Reasons for 

some of the delays were provided in the projects’ monthly summaries. For 

example, terminating the contractor for cause shut down the Dushanbe, 

Tajikistan, NEC project for many months. As a result, the project is 

currently expected to be more than 23 months late. OBO recently awarded 

a construction contract to a new contractor and expects to complete 

construction for post occupancy by July 2006. OBO reported that, as of 

March 31, 2006, construction of the Astana, Kazakhstan, NEC was 25 days 

past its scheduled completion date and that the project would likely be

more than 9 months late when completed. OBO also reported that 

construction of the Kingston, Jamaica, NEC would likely be delayed by

more than 5 months and that the Bamako, Mali, and Freetown, Sierra 

Leone, NEC projects would likely miss their scheduled completion dates 

by approximately 1 month. Finally, OBO reported that construction of the 

Conakry, Guinea, NEC was certified as substantially complete on March 

16, 2006, 31 days past its scheduled completion date. OBO said it has taken 

actions to address delays with these projects, including revising contract 

schedules; providing time extensions, where warranted; withholding 

payments until projects are back on schedule; assessing liquidated 

damages; accelerating work plans; and adding personnel to the site. In 

addition, contractors for some of the NEC projects requested contract 

modifications for time extensions. At the time of the April 2006 meeting, 

no delays were considered likely or foreseen for the NEC projects in 

Belmopan, Belize; Lome, Togo; and Managua, Nicaragua.

While it is important to consider performance against contractual 

requirements, the purpose of the program is to move staff into safe, 

secure, and functional facilities as quickly as possible; therefore, we also 

compared the planned and actual building occupancy dates. State officials 

reported that, between completion of construction and occupancy, a 60-

day facilities accreditation process must take place, involving certification

of the mechanical, electrical, and security systems, and other requirements 

for the compound. Once all systems within the compound are deemed 

functional, and the security, safety, and construction requirements are 

Posts Occupied NECs on, 

ahead of, or within a Month of 

Schedule 

 18This Program Performance Review Meeting was held from April 25 to 26, 2006, and 

reviewed project data, as of March 31, 2006. 

Page 13 GAO-06-641 Embassy Construction Performance
met, posts may occupy the new compound. Nine of the 18 completed 

NECs were certified for occupancy ahead of schedule, and another 6 posts

occupied their new compounds within approximately 1 month past their 

expected occupation date. Only three posts were occupied significantly 

later than planned. OBO reported that, as of March 31, 2006, 

approximately 8,700 U.S. government employees had been relocated to 

new, safe, secure, and functional facilities, and it plans to relocate another

3,400 by the end of this calendar year. 

Most Projects Were 

Completed within Planned 

Funding Levels; However, 

Work beyond Original 

Project Scopes Required 

Additional Funds 

Actual costs for all but 4 of 18 completed NEC projects were significantly

less than State’s cost estimates. However, construction outside the original 

NEC project scope adds to the total cost of construction at the 18 NEC 

sites. In addition, as of April 2006, six of the nine ongoing NEC projects 

were within OBO’s budget parameter, while three ongoing projects 

showed signs of cost growth. 

We compared the actual total project costs for State’s 18 completed NEC 

projects with the estimated total project funds that State told Congress it 

would need to complete those projects,19 and we found that actual costs 

for 14 of the 18 projects were significantly less than State’s cost estimates 

(see table 1). Actual obligations for these 14 projects ranged from about 5 

to 33 percent less than what State had reported to Congress concerning 

the amount that would be needed to complete construction. Reasons given 

for these lower-than-expected costs varied, including the following: 

Most Project Costs Lower than 

State’s Estimates 

• Contractors bundled proposals for multiple projects. OBO reported that 

on five occasions it awarded contracts based on combined proposals, 

including for Dar es Salaam and Nairobi; Yerevan, Armenia, and Sofia, 

Bulgaria; Tunis, Tunisia, and Kampala, Uganda; Tbilisi, Georgia, and 

Tashkent, Uzbekistan; and the ongoing projects in Lome, Togo, and Accra, 

Ghana. These bundled proposals allowed the contractor to create an 

economy of scale, thereby allowing State to award the combined projects

at a lower cost than the estimated sum of the individual projects. 

 19Data for estimated total project costs derive from notifications to Congress of State’s 

intent to obligate funds for embassy and consulate construction. These notifications were 

addressed to the Chairmen of the Subcommittee on Commerce, Justice, State, the

Judiciary, and Related Agencies, Committee on Appropriations, House of Representatives. 

Page 14 GAO-06-641 Embassy Construction Performance
• Competition among contractors sometimes resulted in aggressive 

proposals at less cost than the government estimated. 

• OBO’s policy to limit changes to project scopes resulted in fewer cost 

increases. 

• Removal of certain facilities or features from the project scopes reduced 

overall costs; however, sometimes these costs reappeared in the form of 

secondary construction projects outside the scope of the NEC project. 

In some cases, construction and fit-out of certain facilities outside the 

scope of the NEC contract resulted in additional costs for completing all 

facilities on the new compound. The need for additional construction 

derived from multiple sources, including security requirements established 

after construction of the NEC began, nonconcurrent appropriations that 

funded USAID facility construction,20 and certain items that were either 

removed from the original scope of work or deferred for later 

construction. 

Table 1: Estimated and Actual Total Project Costs for Completed NEC Projects 

Dollars in millions 

Project 

Project 

execution

year (FY) 

Congressional 

notification 

estimate 

Actual 

costsa

Variance 

Percent from

estimated

level

Dar es Salaam 1999 $51.2 $51.9 $0.7 1.3%

Kampala 1999 $32.5 $36.2 $3.7 11.3%

Nairobi 1999 $67.8 $60.4 -$7.5 -11.0%

Tunis 1999 $86.0 $59.5 -$26.5 -30.8%

Zagreb 1999 $66.9 $63.3 -$3.6 -5.4%

Abu Dhabi 2000 $93.0 $64.0 -$29.0 -31.2%

Istanbul 2000 $83.2 $76.3 -$6.9 -8.3%

Luanda 2000 $39.2 $51.7 $12.5 31.8%

Abidjan 2001 $108.6 $74.5 -$34.1 -31.4%

Abuja 2001 $69.5 $63.6 -$5.9 -8.5%

Sofia 2001 $100.6 $72.0 -$28.6 -28.5%

 20At posts where USAID required more than 50 desks in the NEC, a USAID-funded annex 

was included in project scope. See GAO, Embassy Construction: Achieving Concurrent

Construction Would Help Reduce Costs and Meet Security Goals, GAO-04-952 

(Washington, D.C.: Sept. 28, 2004). 

Page 15 GAO-06-641 Embassy Construction Performance
Dollars in millions 

Project 

Project 

execution

year (FY) 

Congressional 

notification 

estimate 

Actual 

costsa

Variance

Percent from

estimated

level

Yerevan 2001 $79.6 $68.1 -$11.5 -14.5%

Cape Town 2002 $71.9 $48.1 -$23.8 -33.1%

Kabul 2002 $120.5 $177.2 $56.7 47.1%

Phnom Penh 2002 $87.9 $71.5 -$16.4 -18.6%

Tashkent 2002 $92.5 $73.7 -$18.8 -20.3%

Tbilisi 2002 $87.2 $75.6 -$11.6 -13.3%

Yaounde 2002 $79.8 $65.0 -$14.8 -18.6%

Total $1,418 $1,252 -$165.5 -11.67%

Source: Department of State. 

Note: As of year-end 2005, Cape Town, Kabul, Luanda, Phnom Penh, Tashkent, Tbilisi, and Yaounde 

had pending claims for contract modifications that could change the value of actual obligations in the 

table. 

a

The congressional notification estimates and the actual costs do not include costs funded by other 

agencies. Reimbursements from other agencies totaled approximately $22.7 million, which is

primarily for furniture and equipment. 

Actual costs for four projects were greater than the expected costs 

originally reported to Congress, with actual costs for three of them (Kabul, 

Kampala, and Luanda) being significantly greater than their expected 

costs. In the case of Kabul, OBO awarded a cost-plus-fixed-fee contract to

construct a new embassy compound in September 2002. By February 2004, 

project costs had increased, and the schedule had slipped in part because, 

as State’s Inspector General reported, the cost-plus-fixed-fee contract 

provided little incentive for the contractor to contain costs or complete 

construction according to schedule.21 As a result, in September 2004, OBO 

reprogrammed $43.9 million previously allocated to construct a NEC in 

Surabaya, Indonesia, to the Kabul NEC project to cover the costs for 

converting the existing cost-plus-fixed-fee contract to a fixed-priced 

contract, as well as for completing construction requirements. Costs for 

the Luanda, Angola, project rose by approximately 32 percent due to a 

higher-than-anticipated contract award and to security-driven design 

changes. In Kampala, costs increased by more than 11 percent to resolve 

defective designs for the building’s windows and the heating and 

 21U.S. Department of State and the Broadcasting Board of Governors, Office of Inspector 

General, Report of Audit: Evaluation and Analysis of Cost/Schedule Data, Kabul 

Embassy Compound Project, Report Number AUD/CG-04-34 (Washington, D.C.: July 2004).

Page 16 GAO-06-641 Embassy Construction Performance
ventilation system, as well as to compensate the contractor for 

construction delays resulting from the redesign efforts. 

Overall, OBO obligated a net $165.5 million less for these 18 projects than 

the amount it had reported to Congress it would need. OBO 

reprogrammed this net difference for alternative uses, including the 

following: 

• Acquiring sites and conducting planning for NEC projects in future years.

• Providing additional funds for other projects. For example, in December 

2005, State notified Congress of its intent to reprogram more than $48 

million in unused funds from nine completed NEC projects to enable the 

awarding of several fiscal year 2005 projects—NECs in Khartoum, Sudan; 

Mumbai, India; Quito, Ecuador; and the new annex building in Moscow, 

Russia—where winning proposals exceeded the government estimates. In 

addition, OBO notified Congress that it would reprogram $13 million to 

restart construction at another post—Dushanbe, Tajikistan—where the 

previous contractor was terminated for cause. 

• Accelerating funding of future year projects. For example, State reported

that the new embassy compound in Freetown, Sierra Leone, was funded 

with approximately $60 million in funds previously obligated, but not 

needed, for other NEC projects. 

OBO also obligated, or plans to obligate, additional funds for 9 of the 18 

completed posts to construct facilities that were either not originally 

intended as part of the NEC or were deferred to future years. Some of 

these additional projects are USAID annexes for which USAID did not 

receive funding in time for concurrent construction with the rest of the 

NEC, and, as a result, deferred the projects to a later date.22 Construction 

for one USAID annex—Dar es Salaam—was conducted concurrent with, 

but under a different contract from, the NEC project. In addition, prior to 

2002, quarters for Marine Security Guards were not required to be 

colocated on NECs, and the change in security requirements of embassy 

compounds was applied retroactively to newly constructed NECs. As a 

result, State was required to construct housing for posts’ Marine Security

Construction Outside the NEC 

Project Adds to Total 

Construction Costs 

 22OBO reports that, in the future, USAID annexes will be funded through the Capital 

Security Cost Sharing Program.

Page 17 GAO-06-641 Embassy Construction Performance
Guards at five of the completed NECs, thus raising their costs.23 Finally, 

the additional construction accounts for other facilities identified as 

needed, but that were outside the original scope of the NEC project, such

as a cafeteria, recreation center, warehouse, and health unit for the Kabul

NEC; and an annex and the completion of the previously unfinished third 

floor at the Abuja, Nigeria, NEC. Construction costs for these additional 

projects is approximately $168 million to date, including projects planned 

for fiscal year 2006, a 31 percent increase over the NEC project costs at 

these posts. Once all construction is complete, these additional projects 

increase the total cost of construction at the 18 NEC sites from 

approximately $1.25 billion to approximately $1.42 billion. 

We also compared the current budget for the nine ongoing NEC projects 

with the budgets OBO had reported to Congress as being needed for these 

projects.24 Three of the nine ongoing projects have thus far experienced 

cost increases ranging from approximately 6.5 to 16 percent over what 

OBO initially estimated it needed, while three projects were on budget and 

the remaining three projects were under budget by 4 to 8.5 percent. In 

total, costs for these nine projects have thus far increased by a net of 

approximately $9.2 million.25 The Dushanbe project has experienced a 

$13 million increase attributable to remobilizing a workforce to complete 

the portions of the NEC that were unfinished when the original contractor 

was terminated in June 2005. In addition, OBO reported that costs 

increases to the Belmopan and Conakry NEC projects were due to higherthan-expected contractor bids, while decreased costs for Astana, Lome, 

and Managua are due to lower-than-expected contractor bids. 

Three Ongoing Projects Show 

Signs of Cost Growth While Six 

Are Within Budget Parameters 

 23The five posts were Dar es Salaam, Tanzania; Istanbul, Turkey; Kampala, Uganda; Nairobi,

Kenya; and Zagreb, Croatia. The $13.2 million costs for these Marine houses include 

funding for Marine quarters at the U.S. Embassy in Doha, Qatar, which we could not

disaggregate from the five NECs in our analysis. 

24Current budget, as reported at the April 2006 Program Performance Review Meeting. 

25OBO notified Congress of the need to reprogram funds for each of the three projects with 

higher-than-expected costs. 

Page 18 GAO-06-641 Embassy Construction Performance
Strategic reforms cited as having the greatest impact include the elevation 

in status of the former Office of Foreign Buildings Operations to the 

Bureau of Overseas Buildings Operations, the implementation of 

performance-based management principles at the strategic and project 

level, and the development of the Long-Range Overseas Buildings Plan. 

Significant procedural reforms include the switch to the design-build 

contract delivery method and the establishment of a standard embassy 

design. In addition, State continues to examine its procedures for 

additional reforms to improve schedule performance and reduce costs of

NEC projects. Other factors affecting project schedules and costs make it 

difficult to determine the effects of any one reform. 

The elevation of the former Office of Foreign Buildings Operations to the

Bureau of Overseas Buildings Operations was one of the most important 

reforms made by State related to reducing project cycle times and limiting 

cost increases. Elevation to bureau status allowed OBO to become the 

equal of the regional bureaus, and resulted in OBO and the regional 

bureaus and overseas posts having more of a traditional client-service 

provider type relationship. Prior to this reform FBO often subordinated its 

own responsibilities to the needs and desires of regional bureaus and 

posts. For example, many of the delays and cost overruns during the 

Inman program occurred because FBO did not reject change requests from 

regional bureaus and overseas posts. As a coequal, however, OBO can and 

does enforce a more disciplined process that discourages change orders 

that result in delays and cost increases. In fact, OBO considers project 

budgets to be locked once project funds are requested from Congress, and

OBO will not request additional funds from Congress for those projects. 

The second strategic reform that contributed significantly to improved 

performance was OBO’s implementation of performance-based 

management principles at both the strategic and project level. OBO 

established specific and quantifiable strategic goals for the program that 

the Office of Management and Budget reported “clearly represent 

meaningful measurements of progress.”26 Moreover, OBO now integrates 

all affected parties into the strategic management of the program, as well 

as throughout all facets of individual projects. OBO also conducts monthly 

reviews of all ongoing capital projects, including those outside the Capital

State and Contractor 

Officials Attribute 

Reductions in 

Construction Cycle Time 

and Costs to Reforms, but 

Limited Data and 

Indeterminate Factors 

Make It Difficult to 

Quantify the Effects of 

Specific Reforms 

Strategic Reforms 

 26Office of Management and Budget, Program Assessment: Capital Security Construction 

Program, http://www.whitehouse.gov/omb/expectmore/detail.10000378.2005.html, 

(Washington, D.C.: 2004). 

Page 19 GAO-06-641 Embassy Construction Performance
Security Construction Program, which allows management to monitor 

performance and provide early warnings of potential problems. 

A third strategic reform viewed as positively impacting the program was 

the development of the Long-Range Overseas Buildings Plan, which was 

first implemented in 2002 in response to our recommendations.27 The plan,

which is updated annually to ensure that future construction plans align 

with changing priorities and budget actions, outlines, justifies, and 

provides likely cost estimates for all capital projects over a 6-year time 

frame.28 Contractors stated that the plan helps them develop long-term 

strategies for targeting projects for bidding, determining staffing needs, 

finding reliable suppliers that can meet OBO’s standards, and developing 

relationships with foreign and domestic subcontractors. The plan also 

better allows regional bureaus to determine where to apply scarce 

resources for capital maintenance and provides a baseline from which 

posts can begin specific processes for prioritizing work and planning their 

staffing in advance of the NEC process. 

Contractors and OBO headquarters and project staff stated that the switch 

to design-build contract delivery and the development of the standard 

embassy design have had the greatest influence over cycle times and 

project costs of all the procedural reforms implemented under the current 

program. The design-build contract delivery method is designed to reduce 

project cycle time in two ways. First, it reduces the number of bidding and 

award cycles from two (one for design and one for construction) to one 

for both design and construction. Second, it allows the contractor to begin

construction before the design is complete. Sixteen of the 18 projects 

utilized this contract delivery method. Contractors and OBO project 

directors believed the design-build project delivery method likely reduced 

total cycle times for their projects. However, contractors’ field staff at 

some of the posts we visited stated they were sometimes unable to start 

construction as soon as they wanted. They said that construction, which 

was scheduled to begin when the total design was approximately one-third

finished, was delayed until the Bureau of Diplomatic Security approved 

Procedural Reforms 

 27GAO, Embassy Construction: Better Long-term Planning Will Enhance Program

Decision-making, GAO-01-11 (Washington, D.C.: Jan. 22, 2001). 

28In addition to projects for the Capital Security Construction Program, the Long-Range 

Overseas Buildings Plan contains information on other types of capital construction

projects, including major rehabilitations of existing facilities and strategic capital projects, 

such as the construction of a new facility in Taipei, Taiwan. 

Page 20 GAO-06-641 Embassy Construction Performance
the full design for the buildings. In addition, the project director from the 

Phnom Penh project stated he could have reduced the project’s cycle time 

by as much as 4 months if he had issued a notice to proceed with 

construction at the 35 percent design phase, the point at which designs for 

foundations are generally completed, rather than at the 60 percent design

phase. 

The standard embassy design is a tool that OBO reports better enables it

to plan, award, design, and construct NECs; simplifies its construction 

process; and provides economically feasible facilities. The standard 

embassy design consists of a series of documents describing requirements 

for site selection, building plans and specifications, design criteria, site 

adaptation, and contract requirements. It also provides plans and 

requirements for all features of NECs, including office buildings, 

compound access control and utility buildings, housing for Marine security

guards at posts with a Marine contingent, and perimeter fences. OBO 

believes that standard embassy designs help speed the planning, design,

and construction of NECs by reducing the amount of time it takes to issue 

requests for proposals, prepare contract documents and issue awards, and 

complete design reviews. 

State continues to examine its operations to discover ways to improve 

cycle times and reduce costs. In particular, OBO recently developed new 

ways to think toward achieving these goals, including proposed additional 

changes to the construction process. Some of these proposed additional 

process changes include the following: 

Additional Reforms 

• clarifying language in the Request for Proposal documents; 

• ensuring, to the extent possible, that contractor and OBO project directors

have the technical and management skills required to complete the 

projects on time and on budget; 

• adapting the standard embassy design for NEC projects constructed from 

2006 and beyond to make NECs more energy efficient and sustainable by 

applying a more rigorous value engineering process and adopting industry 

best practices; and 

• providing guidance to posts on developing operations and maintenance 

plans. 

In November 2003, we reported that since no projects had been completed

under the reformed processes, it was too early to determine the impact of

Effects of Reforms Cannot Be 

Quantified

Page 21 GAO-06-641 Embassy Construction Performance
the reforms.29 Taken as a whole, the reforms have greatly reduced the 

overall cycle time for constructing NECs. However, we are still unable to

quantify with certainty the effects of specific reforms due to the relatively

small number of projects completed under each reform. Although OBO 

has now completed eight standard-designed embassies and eight 

nonstandard-designed embassies delivered under the design-build 

contracting method, these totals are insufficient to complete meaningful 

quantitative analysis because they each are sensitive to statistical outliers.

Moreover, accounting for factors outside the control of the reformed OBO 

processes, including the size and location of a new embassy, among 

others, requires that projects be categorized into even smaller subgroups. 

As a result, comparison of these differing categories becomes even more 

susceptible to the effects of statistical outliers. 

Many issues specific to individual NEC projects can affect project costs 

and schedules. Some factors are controllable by OBO and the contractors, 

while others may not be. Factors that we found affecting our case study 

projects included the following: 

Various Factors Affect 

Project Schedules and 

Costs 

• the timeliness of procurement and delivery of materials, 

• site conditions, 

• political and social conditions in the host nation,

• staffing and labor issues, and 

• climatic and environmental conditions. 

OBO and contractors both noted the difficulties with procuring and 

ensuring timely delivery of materials to NEC work sites. OBO and 

contractor project staff also stated that the contractors sometimes did not 

appreciate the logistical difficulties associated with delivering materials to 

remote locations. For example, the contractor for the Bamako NEC said it 

originally estimated 1 month as the time it would take to send materials 

from the supplier to the project site. In reality, the first stage—shipping the

material to Dakar, Senegal—took approximately 1 month, but it took 

another month for the material to travel approximately 650 miles overland 

Procurement and Material 

Delivery Can Affect Progress 

 29GAO-04-100. 

Page 22 GAO-06-641 Embassy Construction Performance
by rail or roads to the project site. Our site visits to Luanda and Cape 

Town also revealed that materials frequently arrived late or in insufficient 

quantities, forcing certain activities to be postponed. 

One set of materials that contractors frequently had problems obtaining 

were Forced Entry and Ballistic Resistant (FEBR) doors and windows. 

Because of the long manufacturing and delivery lead times for these doors 

and windows, contractors must order these materials well in advance of 

when they would actually be installed. These lead times are the result of a 

limited supplier base for FEBR doors and windows. However, as the 

construction program matured, demand increases for FEBR materials 

made it increasingly difficult for contractors to obtain FEBR doors and 

windows in a timely manner. As a result, beginning in 2005, OBO began 

providing them as government furnished materials on its NEC contracts. 

As such, OBO is now responsible for ensuring the procurement and 

delivery of the FEBR doors and windows to meet the contractors’ 

production schedules. 

NEC construction is also affected by the contractor’s ability to clear 

materials through customs in a timely manner. Since the volume of 

shipments and materials can overwhelm post capabilities, OBO sometimes 

provides a shipping clerk responsible for working with the host nations’ 

customs officials to clear materials for use at the site. A host nation’s lack

of responsiveness, however, can lead to delays. For example, project staff 

for the Conakry and Luanda NECs cited frequent month-long delays in 

clearing items through customs. In Conakry, the contractor considered 

hiring local legal assistance to expedite the release of materials. In Luanda,

embassy personnel reported numerous instances of the Government of 

Angola delaying the customs clearance process. Delays in each of these 

countries often required official involvement by high-level U.S. diplomats, 

including the respective ambassadors, to release the construction 

materials. 

In developing the requirements for an NEC, OBO provides geotechnical 

information, such as the type of soil and the depth to bedrock, derived 

from a limited number of soil borings on the NEC site. In some past 

instances, this information did not always provide an accurate picture of 

the true soil conditions on the site, which resulted in subsequent change 

orders that increased costs and extended project schedules. For example, 

in Conakry, Guinea, deep formations of soft soil and large voids were 

discovered only after construction began, which necessitated a change 

from deep pilings to a mat foundation. As a result, the original project 

schedule was delayed by 141 days and costs increased by $750,000. More 

Understanding Site Conditions 

Page 23 GAO-06-641 Embassy Construction Performance
recently, OBO was forced to adjust the scope of the Skopje, Macedonia, 

NEC project because the steepness of the grade required more funding to 

prepare the site than OBO had allocated. Other NEC projects cited by 

contractors as having different site conditions than expected include Abu 

Dhabi, United Arab Emirates; Astana; Freetown; and Abuja. OBO has 

recognized the difficulties contractors have faced in developing proposals 

based on limited information, and has indicated that it will conduct more 

extensive site investigations and provide more detailed information when 

issuing future requests for proposals. 

OBO and contractor officials stated that contract requirements call for 

contractors to use either American materials or those that meet American 

standards. However, to reduce the costs associated with procurement and 

shipping of American-made materials, it is sometimes in the contractors’ 

interests to use foreign-manufactured materials. Contractor officials stated 

that to use comparable-quality foreign-manufactured materials, OBO 

requires them to show that the substitute materials meet U.S. standards, 

and are substantially equivalent to the materials to be replaced. In certain

instances, OBO has allowed contractors to use materials from foreign 

suppliers if the contractor could demonstrate that the material met 

American standards. For example, in Cape Town, South Africa, the 

contractor successfully demonstrated that a local steel company could 

provide rebar that met U.S. standards. In doing so, the contractor reduced 

the time and costs associated with shipping rebar from the United States 

to South Africa. However, contractors noted that on other projects OBO 

project directors did not consistently approve the use of materials even 

after their compliance with U.S. standards was demonstrated. For 

example, most embassy designs require the use of Indiana limestone for 

the building facades, and shipping this material overseas is expensive. One 

contractor for multiple projects in Africa reported that it had

demonstrated that stone from Portugal met the American standards for 

stonework, and the contractor received approval to use it in 1 location.

The OBO project director for another project, however, would not approve 

the use of this stone. To address this issue, OBO is developing a list of 

foreign made materials that have already been demonstrated as meeting 

American standards and that have been approved for use on some 

construction projects. This list will enable expedited and more consistent 

decisions regarding the use of foreign materials. 

Changing political and social conditions and relations between the United 

States and the host nation can impact NEC schedules and costs. In 

addition, they can affect the capacity and usage of the NEC. For example, 

a civil war in Cote d’Ivoire disrupted construction of the Abidjan NEC, 

Use of Foreign-Manufactured 

Materials 

Political Conditions in the Host 

Nation 

Page 24 GAO-06-641 Embassy Construction Performance
delaying its completion by 3 months and increasing costs by 

approximately $1 million, as a result of the delay. Moreover, during the 

civil war, many agencies moved operations from Abidjan to other nearby

U.S. embassies but did not return once the country stabilized. As a result, 

the new compound currently operates at about one-half its capacity. OBO 

staff in Washington reported that canceling the project as a result of the 

war would have resulted in tens of millions of dollars in contract 

termination costs; therefore, the decision was made to continue as 

planned. 

U.S. relations with host nations can also affect construction time frames 

and costs. In Tashkent, the Uzbek government required that the U.S. 

government vacate an Uzbek airbase, which was being used, among other 

things, as a logistical center for the Tashkent NEC construction project. As 

a result, construction materials were airlifted to Almaty, Kazakhstan, and 

then hauled more than 400 miles to Tashkent. In addition, the NEC project 

in Algiers was temporarily delayed due to a diplomatic dispute between 

the United States and the host government. Building permits for the NEC 

project were delayed by a dispute over back rent that the Government of 

Algeria said the United States owed for use of an access road and a 

parking lot near the current embassy. 

The extent to which the local workforce can be used to work on NEC 

projects varies across posts. Contractors said that in much of the 

developing world, they generally do not have problems finding a sufficient 

number of people willing to work, because, in most places, the NEC 

project provides some of the highest salaries in the country. However, 

contractor and OBO project staff stated that in many locations, 

particularly in developing countries, the number of skilled construction 

workers is low. As a result, contractors say they must train most of the 

workers in the basics of construction, which takes time and may result in 

rework. Contractor and OBO staff noted that if local labor is nonexistent

or not sufficiently skilled, the contractor may need to hire third-country 

nationals, who are more expensive to hire, to complete the work. 

We observed that an insufficient or inconsistent number of laborers at 

Bamako, Cape Town, and Luanda contributed to construction delays. For 

example, OBO project staff said that approximately 480 staff were actually 

needed for the Bamako NEC project. However, at the time of our visit, the

project employed 356 construction workers, most of whom were Malian, 

but some of whom were direct hires of the Turkish subcontractor in 

charge of construction. In Cape Town, the contractor and OBO staff stated 

that the booming South African construction industry made employment 

Staffing and Labor Issues Can 

Delay Projects 

Page 25 GAO-06-641 Embassy Construction Performance
at the NEC less attractive because salaries and benefits were less than 

what workers could receive on other construction jobs. As a result, the 

project did not attract the number of workers it needed and, ultimately, 

the contractor had to hire and transport to the site about 25 noncleared 

American workers to complete work normally done by local hires. In 

Luanda, the general contractor fired the subcontractor responsible for the 

actual construction of the NEC, assumed control over actual construction, 

and directly hired about 170 experienced construction personnel from the 

Philippines to complete the work because locally hired employees would 

have required time-consuming training. The contractor said the 

Government of Angola delayed issuance of many work visas for the 

Philippine workers because it preferred that Angolans be hired. 

Contractors and OBO staff reported that another problematic issue was 

ensuring that enough American workers and guards with security 

clearances are present on construction sites. State requires that 

construction of classified areas be completed or supervised by American 

employees with security clearances, and OBO and contractor staff 

reported difficulties retaining American personnel with clearances due to 

the high demand for their services. Nonetheless, at only one of the nine 

construction projects we reviewed was a shortage of cleared American 

staff cited as a reason for schedule delays. OBO and contractor staff noted 

that security conditions specific to Angola prevented locally hired 

employees from entering classified areas of the NEC; thus, more cleared

American workers were required than would normally be needed for other 

projects. However, the contractor was never able to achieve the full 

complement it needed to complete construction on schedule.

To the extent that historical weather patterns are known, contractors 

should plan construction activities around expected weather conditions. 

For example, OBO officials reported that in regions with very cold winters, 

such as in Astana, Kazakhstan, it tries to complete construction of the 

chancery building’s shell before the onset of winter so that construction 

work within the building could continue through the winter months. In 

addition, one contractor for multiple projects in West Africa indicated that 

efforts to get materials to the construction site on time could be impeded

during the rainy season. However, uncontrollable weather events may also 

affect projects. For example, Hurricane Ivan flooded the Kingston NEC 

site, shutting down construction for 3 weeks in the summer of 2004. 

Climatic and Environmental 

Conditions Can Halt Work 

Page 26 GAO-06-641 Embassy Construction Performance
Operations and maintenance costs for newly constructed embassies and 

consulates are significantly higher than the operations and maintenance 

costs for facilities they replaced. We estimate that once all 201 new 

embassy and consulate compounds are completed, these total annual

operations and maintenance costs, adjusted to 2006 constant dollars, 

could increase by $111 million over those posts’ previous facilities, and 

possibly by several times more. According to analyses of data from the 

International Cooperative Administrative Support Services (ICASS) 

system,30 OBO staff, and post officials, these costs increases are driven in 

part by technical security requirements that resulted in greater utility 

consumption, the need for highly qualified technical staff, and new 

maintenance requirements that posts did not have at their previous 

locations. State initially did not recognize the magnitude of new costs for 

the day-to-day functional requirements of NECs. As a result, some 

embassies’ ability to prepare for operating and maintaining their new 

facilities was impaired. OBO, Embassy Tunis, and State’s Office of Global 

Support Services and Innovation ultimately developed guidance for posts 

to help determine the notional staffing and financial resources for 

individual NECs. However, State has not developed a clear budgetary lineitem to project operations and maintenance costs. Currently, these costs 

are intermingled with domestic and other nonfacilities-related

administrative costs among several accounts, and no mechanism exists for 

determining how global costs for operations and maintenance will 

increase in the long-term. Thus, decision makers cannot determine 

whether NEC operations and maintenance needs are being adequately 

planned for and funded. In the past, GAO and others noted that inadequate 

funding for operations and maintenance of overseas posts led to unsafe, 

insecure, and dilapidated embassies. A lack of a comprehensive long-term 

plan that clearly identifies the significant increases in resources that are 

likely to be needed as more and more NECs come on line could increase 

the risk of earlier-than-expected deterioration of NECs. 

Planning for 

Operations and 

Maintenance Costs 

for New Embassy 

Compounds Is 

Neither 

Comprehensive Nor 

Transparent 

 30The ICASS system shares the costs of common administrative support items, such as 

mail, telephones, and building operations, among the agencies that use overseas diplomatic 

facilities. See GAO, Embassy Management: Actions Are Needed to Increase Efficiency

and Improve Delivery of Administrative Support Services, GAO-04-511 (Washington,

D.C.: Sept. 7, 2004). 

Page 27 GAO-06-641 Embassy Construction Performance
As NECs began to open, posts quickly learned that the cost to operate and 

maintain their new facilities would be far greater than the cost to run 

previous ones. Based on interviews with post and regional bureau staff, 

reviews of analyses conducted by one post and the ICASS Service Center, 

and budget projections by regional bureaus, we estimate that once all 201 

new embassy and consulate compounds are completed, the total annual

budget requirements for day-to-day operations and maintenance of 

overseas posts, adjusted to 2006 constant dollars, would likely increase by

at least $111 million over those posts’ previous facilities, and this figure 

could be several times more. 

We discussed posts’ experiences in planning for and operating NECs with 

post managers from 9 of the 10 NEC projects we reviewed, as well as with 

each of State’s six regional bureaus.31 Post and bureau officials reported 

that the costs needed to operate and maintain the new compound on a 

day-to-day basis were significantly greater than for the previous facilities 

posts occupied. Embassy Tunis, which opened one of the first NECs in 

November 2002 (see fig. 4), prepared a comprehensive analysis of the 

recurring and nonrecurring cost increases associated with running and 

maintaining its NEC. This analysis revealed that annual recurring costs 

increased by $591,000. Other posts we visited also expected the new 

compound to be significantly more costly to run and maintain once 

operations commenced, but at the times of our visits, they were unable to

provide solid estimates. Officials from State’s Bureau of European and

Eurasian Affairs reported that operations and maintenance costs for posts 

in that bureau would increase annually, on average, by $500,000 per post. 

Costs of Basic Operations 

and Maintenance 

Significantly Increased for 

NECs 

 31Only four of the NECs—Abuja, Luanda, Phnom Penh, and Tunis—were opened prior to

our review of their operations. Embassies Tbilisi and Conakry and Consulate General Cape 

Town opened after our site inspections, and NEC projects are still ongoing for embassies 

Bamako,, and Kingston. We did not discuss operations and maintenance costs with 

Embassy Tashkent. 

Page 28 GAO-06-641 Embassy Construction Performance
Figure 4: Previous and New U.S. Embassy in Tunis, Tunisia 

Previous embassy New embassy

Source: U.S. Department of State.

We reviewed actual operations and maintenance costs for seven posts, 

using data originating from those posts’ ICASS Building Operations 

expenses.32 In our analysis, we compared these costs for the year prior to 

moving into the NEC with the costs for fiscal year 2006. We found cost 

increases for each post, ranging from approximately $94,000 to $2.7 

million, and averaging approximately $894,000 per post per year. We also 

reviewed projected operations and maintenance costs for eight additional 

posts provided by State’s Bureaus of East Asian and Pacific Affairs and 

Western Hemisphere Affairs and found increases for each ranging from 

approximately $400,000 to $5.7 million, and averaging approximately $1.9 

million per post per year.33 Based on these analyses, we estimate that once 

all 201 NECs are opened, annual post-funded operations and maintenance 

 32These posts include the U.S. embassies in Abu Dhabi, UAE; Doha, Qatar; Luanda, Angola;

Sofia, Bulgaria; Tunis, Tunisia; Yerevan, Armenia; and Zagreb, Croatia. Costs were 

converted to 2006 constant dollars. 

33For East Asia and the Pacific, we analyzed cost estimates for Embassy Phnom Penh for 

fiscal year 2006, and projected operations and maintenance increases for the U.S.

embassies in Beijing, China; Rangoon, Burma; and the Consulate General in Surabaya, 

Indonesia, for fiscal year 2008, and for the U.S. embassy in Suva, Fiji, for fiscal year 2009.

For Western Hemisphere posts, we analyzed fiscal year 2006 to 2007 operations and 

maintenance budgets for U.S. embassies in Belmopan, Belize; Kingston, Jamaica; and

Panama City, Panama. All costs were converted to 2006 constant dollars. 

Page 29 GAO-06-641 Embassy Construction Performance
costs would likely increase by a minimum of $71 million over their 

previous values, and they could increase by several times more.34

In addition, OBO intends to staff each NEC with a full-time facility 

manager. These positions are funded solely by OBO and their costs are in 

addition to those within the ICASS structure. To achieve the goal of 

placing a facility manager in each new embassy compound, OBO reported 

it would need a minimum of 100 additional positions. Based on per capita 

costs for maintaining American personnel at overseas posts developed by

State’s Office of Rightsizing the U.S. Overseas Presence, the annual cost 

for locating an additional 100 facility managers in overseas Foreign 

Service positions is approximately $40 million.35 Adding this figure to the 

estimates provided above results in a minimum total annual funding 

increase of $111 million.

Posts also require significant nonrecurring costs associated with the 

startup of NECs. For example, post managers at Embassy Phnom Penh 

reported spending about $1 million for one-time start-up supplies and 

equipment, including $50,000 on a mechanical lift that it uses to change

light bulbs on the ceiling of the three-story atrium. Early NEC posts, 

including Tunis, had to get additional, unbudgeted funding from their 

regional bureaus to cover these immediate shortfalls, requiring the 

bureaus to request additional funding from the department or to reallocate 

money from other posts’ funds. Posts also receive funds from OBO to help 

defray the cost of equipment needed to operate the NECs. 

Utility Costs Increased 

Significantly Due to New 

Systems and Expanded 

Space 

One of the primary factors driving the cost increases for operations and 

maintenance was increased utility consumption, primarily due to the 

higher electricity and water needs for heating and cooling, and irrigating 

the large landscaped areas that many posts did not previously have. Posts 

experienced particularly large increases for utility costs, primarily because 

NECs need much more electricity than did the older, less modern 

facilities’, and electricity is sometimes more expensive to obtain in the 

 34For a description of how operations and maintenance costs increases were determined, 

see appendix I.

35The Office of Rightsizing the U.S. Government Overseas Presence estimates that the

average total cost for maintaining American direct hire staff at overseas locations to be 

approximately $400,000 per year. Total costs include salaries, salary differentials for 

hardship and danger pay, personal benefits, and support costs, such as for housing. 

Page 30 GAO-06-641 Embassy Construction Performance
more rural locations where some new compounds are located. NECs need 

more electricity to run, for example, new heating, ventilation, and air 

conditioning systems—which also require routine replacement of 

expensive air filters—to heat and cool much larger areas than did old 

embassies that generally had window air conditioning units, if any at all. 

Some NECs may also have considerably higher water bills due to 

landscaping requirements of the new compounds.36 The Tunis analysis 

listed increases in annual utility costs as the second biggest increase after 

the cost to hire and train new maintenance staff.

NECs were designed to be modern, energy-efficient buildings. 

Nonetheless, numerous posts reported significant cost increases for 

electricity, some by well more than 100 percent. Management officials in 

Phnom Penh stated the post’s electricity costs rose from about $17,000 per 

month to about $95,000 per month for the first 3 months of 2006. Based on

this rate, annual electricity costs would increase nearly sixfold, from 

approximately $200,000 for the old embassy to at least $1.14 million per 

year for the NEC. In addition, Embassy Tunis’ cost analysis stated that 

electricity was 127 percent higher for the NEC than the combined costs of 

the three office buildings the post previously occupied. In our review of 

ICASS data, we found that electricity costs for Embassy Yerevan more 

than doubled from $107,000 in fiscal year 2004 to $254,000 in 2005, while 

Embassy Luanda increased its budget for electricity from $41,000 in 2005 

to $80,000 in 2006. Posts and bureau staff stated the cost increases were 

due primarily to the increased energy requirements for heating and cooling 

significantly larger facilities than those the posts previously occupied.37

High electricity costs at some posts derive from multiple factors. Some 

posts do not have adequate access to the local power grid, and therefore

must generate their own power. For example, the NEC in Conakry, 

Guinea, is located in a suburb that is a considerable distance from the city 

center. In this location, the power grid does not operate during the 

daytime. As a result, the new compound will rely on two diesel generators, 

operating 24 hours a day, to supply the post with electricity. Post 

 36A key legal requirement of the Capital Security Construction Program is that new 

embassy and consulate buildings have a 100-foot setback from the exterior wall of the

building to the perimeter wall or fence, primarily to provide blast protection. To achieve

this setback, OBO seeks to locate NECs on sites of approximately 10 acres. 

37These year-to-year increases in electrical costs were not adjusted for year-to-year weather 

variations. 

Page 31 GAO-06-641 Embassy Construction Performance
managers expect costs for fueling these generators to be approximately 

$1 million per year, while operating these generators 24 hours a day will 

require extensive maintenance and, at some point, replacement, creating

additional costs. However, management officers in Phnom Penh reported 

that their high electricity costs derive from the high rates charged for using 

the local grid. As a result, post staff there are studying the feasibility of 

either supplementing or switching entirely to post-generated electricity. 

Still other posts reported that, despite electricity from the grid being 

affordable, the power supply was unreliable and their posts required diesel 

generators as backup sources. 

Water costs have also increased primarily due to landscaping needs. NECs 

are generally located on 10 or more acre sites, which are heavily 

landscaped with grass, gardens, shrubbery, and trees (see fig 5. as example 

of new landscaping areas). Maintaining these landscaped areas requires 

significant amounts of water. This often represents a new or substantially 

increased cost, as many of the NECs replace facilities that were located in

city centers and thus had little or no landscaping requirements. For 

example, Embassy Tunis reported that water consumption costs increased 

more than 3 times, from $5,200 in fiscal year 2002 to $17,700 in 2004. The

new Tunis compound has more than 700 trees and significant acreage of 

grass. Moreover, the post operates its own water treatment plant. ICASS 

data for Embassy Yerevan showed that costs for water consumption was 

estimated at $250 per year for the previous location and increased to an 

estimated $12,500 per year at the NEC.38

 38The ICASS Service Center reported that water bills were not tracked independently and 

that billing by the local water company is sporadic and possibly inaccurate. At that same 

post, the old facility had no natural gas usage but costs for natural gas at the new

compound are estimated at $18,350 for fiscal year 2006, the first full year after move-in. 

Page 32 GAO-06-641 Embassy Construction Performance
Figure 5: Previous and New U.S. Consulate General in Istanbul, Turkey 

Previous consulate New consulate

Source: U.S. Department of State.

Need for More and Better 

Trained Staff to Run and 

Maintain New Facilities 

Increased the Cost of 

Operating the New 

Compounds 

Another primary factor driving the cost increases for operations and 

maintenance was the need to hire additional staff, some with advanced 

degrees or certificates, to maintain the new, state-of-the-art office 

buildings. Some of these staff must come from other countries because 

local labor markets cannot always supply the skills required by the posts.

In preparing to take over the new compounds, posts often found they did

not have staff capable of operating and maintaining the new facilities, 

which include sophisticated equipment—for electrical generation, climate 

control, fire suppression, and water and air purification. Therefore, many 

posts were required to hire new, highly qualified staff with advanced 

technical training, contributing to the increased costs beyond what OBO 

first envisioned. Management officers at three of the posts we contacted 

stated that they have already or would need to hire 2 to 10 staff to fill gaps

in the posts’ technical expertise. For example, Embassy Tunis concluded 

that none of its existing locally hired maintenance employees were 

qualified to service the new equipment. These employees were therefore 

reassigned to residential maintenance duties, and post management 

created 10 new positions to perform NEC maintenance, including three 

engineers and seven maintenance mechanics, adding $147,000 in salaries 

to the post’s payroll.39 Consulate Cape Town reported it would hire an 

 39In September 2004, we reported on numerous disincentives for posts to consider efforts 

to streamline administrative functions. See GAO-04-511. 

Page 33 GAO-06-641 Embassy Construction Performance
electrician and an air conditioning technician for a combined annual cost 

increase of $32,610, while Embassy Phnom Penh hired two engineers and 

two technical specialists for its maintenance operations. All other posts 

we contacted reported the need to hire additional technical staff, but most 

had not yet classified the positions nor calculated the costs as of our site 

visits. 

Regional bureaus and some posts reported having difficulties finding 

people who have been or can be trained in the technical skills required to

operate the new compounds. Moreover, existing post maintenance 

employees often were not considered capable for filling these new 

operational needs, even with specific technical training. For example, 

Africa bureau officials said that in many West African countries—citing 

posts in Abuja and Conakry, in particular—there are few people who can 

operate this equipment or be trained to do it. U.S. officials in Conakry 

added that the post’s current work force is not capable of working on the 

new systems, and they were doubtful whether they could hire or contract 

with Guineans with the appropriate expertise. At the time of our visit, the 

post was studying hiring third-country national employees, noting that 

doing so would be more costly and would also entail a more lengthy 

process for classifying, advertising, and hiring for the positions. In Luanda, 

officials said they assigned three people from their existing maintenance 

staff to work with the construction contractor on installation and start-up

of NEC equipment to help them gain experience running and maintaining 

this equipment, while also hiring third country nationals to fill the skill gap 

the Angolan market could not fill. OBO officials have said that hiring thirdcountry nationals should be done as a last resort because it is the most 

expensive alternative. However, OBO acknowledged that it may be the 

only way to obtain capable staff in some countries. 

By not having advanced knowledge of the technical qualifications needed 

to operate the systems, posts were often unable to initiate the recruiting 

process, which can take 6 months or more, in time to have all required 

trained staff available at the time of move in. For example, a former Tunis 

official who helped prepare that post’s analysis of start-up and recurring 

operations and maintenance costs stated that the post could not get 

information regarding needed technical qualifications for maintenance 

staff in advance of the move. He said he spent the 6 months prior to the 

move trying to obtain this information from OBO with little success. As a 

result, the post was not able to determine its maintenance staffing needs 

or begin hiring new maintenance staff until after construction was 

completed. He added that it took the post 12 to 18 months to fully resolve 

this situation. 

Page 34 GAO-06-641 Embassy Construction Performance
In addition, posts also found that many new maintenance needs arose 

once the NEC opened, and were thus required to either hire additional 

staff or contract for maintenance services. For example, many posts were 

previously in locations with few or no landscaping needs. Upon moving to 

new compounds, however, posts had to either hire gardeners or contract 

with local landscaping firms. Embassy Tunis reported that gardening 

expenses increased by $35,000 annually,40 while another post awarded a 

$45,000 contract for landscaping services when it moved into its new 

facility. In addition, the size of the new compounds often required posts to 

expand their janitorial staff. For example, Tunis reported that it doubled 

the size of its cleaning crew, at an additional $60,000 per year, to maintain

the interior of their new facilities. Cape Town reported the need to hire a 

cleared American escort for approximately $29,000 per year to supervise 

the cleanup of the controlled access areas. 

Posts Did Not Always 

Receive Initial Spare Parts 

Prior to the completion of construction, NEC contractors are required to

provide a list of all spare parts, as well as a short-term supply of critical 

spare parts. However, posts and regional bureau officials reported that the

posts did not always receive the lists or actual parts in a timely manner. 

Officials in Phnom Penh noted that they did not receive all the spare parts 

and supplies the contractor was supposed to provide, including some 

critical items that are needed to keep the embassy operating should the 

current parts fail. Among the spare parts the post still needed were some

with a 3-month or more delivery lead time. Moreover, posts reported not 

receiving the list of spare parts and supplies until after moving into the 

NEC, although officials noted that the contractor was obligated to provide 

the list prior to completion of construction. As a result, these posts did not 

have enough lead time to order these critical parts to ensure they arrived

before the NEC began operations. Officials in Phnom Penh, as well as 

officials at other posts and the regional bureaus, stated that receiving the

list of spare parts and supplies 6 months to 1 year before the NEC opened 

would have allowed them to understand which parts would be supplied 

and which were to be provided by the posts, as well as ensure that critical

supplies and parts were on site when the new compounds opened. 

Knowing the NEC’s maintenance needs in advance also would help posts 

and regional bureaus plan for recurring costs sooner. The Bureau of 

 40This cost is in addition to the increased water costs associated with landscaping needs 

previously discussed. 

Page 35 GAO-06-641 Embassy Construction Performance
European and Eurasian Affairs reported that Embassy Yerevan 

discovered, a few weeks before it moved to the NEC, that it needed about 

$50,000 worth of salt each year to make its water purification system work 

properly, an expense it had not planned for. Similarly, Embassy Tunis 

reported replacing over 600 light bulbs in the first 30 months of operation 

and estimated the annual cost of bulbs alone to be $14,000. The post also 

stated that the NEC requires several dozen types of light bulbs and 

fluorescent tubes, virtually all of which must be purchased in the United

States. Moreover, posts and regional bureaus alike cited the high costs of 

specialized air filters for the heating, ventilation, and air conditioning 

systems. Officials in the Bureau of European and Eurasian Affairs stated 

that Embassy Yerevan used $80,000 worth of filters in its first year, and 

that a complete set of replacement filters can cost as much as $300,000, 

although some of the individual filters are changed less frequently than are 

others. During our fieldwork in Luanda, one official noted that this 

already-opened NEC had not yet received the list of system requirements 

and spare parts from the contractor, and he was concerned that the lack of 

parts, particularly the filters for the air conditioning units, would delay 

maintenance and affect the warranties. 

OBO and Others Have 

Developed Guidance for 

Individual Posts 

According to regional bureau and post officials, in the early stages of the

program, OBO told them that operations and maintenance costs of the 

new facilities would not cost much more than those of the replaced 

facilities. Some regional bureau officials said they were skeptical of this 

claim from the beginning. When developing the first NECs, OBO believed 

that, due to their more efficient mechanical and electrical systems, 

compared with what posts previously had, operational costs would 

increase little, if at all. However, posts and regional bureaus reported 

having great difficulty obtaining projections and estimates from OBO on 

what operations and maintenance requirements the NECs would entail, as 

well as how costs would change with the new compound. This lack of 

information prevented posts and regional bureaus from adequately 

preparing for the staffing and funding resources needed to transition post 

operations from the previous facilities to the NECs. 

Regional bureau officials said that although it took several years, they 

eventually convinced OBO to include consideration of operations and 

maintenance costs earlier in the NEC design and construction process. In 

2004, OBO began providing posts with estimates of likely operations and 

maintenance costs about 2 years prior to the onset of construction. 

However, these are only notional estimates based on generic small, 

medium, and large NECs, and they may not reflect the actual costs a post 

Page 36 GAO-06-641 Embassy Construction Performance
may expect. Nonetheless, these estimates provide posts with a template 

they can apply to their local circumstances. In addition, approximately 6 

months before handing NECs over to posts, OBO provides each post with 

a Workload Analysis and Staffing Recommendations study that compares 

an NEC’s operations and maintenance needs with the post’s current filled 

and unfilled maintenance positions; assesses whether existing staff meet 

or can be trained to meet the NEC’s operations and maintenance 

requirements; outlines additional staffing and/or service contractors the 

post would need to provide newly-required services such as gardening;

and details availability of manpower or services from the local labor pool. 

These studies do not provide cost estimates for new positions or service 

contracts. 

Officials at some posts with more recently completed NECs said the large

increase in operations and maintenance costs was not as much of a shock 

to the post as it could have been, because these increases had become well 

documented by posts by the time their NECs opened and were even 

becoming known when these posts started budgeting 2 years earlier. 

Moreover, information regarding cost and staffing needs for NECs has 

become increasingly shared as more NECs come online. Tunis was one of 

the first posts to raise the issue concerning greatly increased operations 

and maintenance costs, and its work became the basis for many posts’ 

NEC planning. Tunis placed guidance for other posts on its Intranet site 

that highlights actions posts should take beginning 2 years prior to the 

NEC opening. The site also provides hints for executing the move itself 

and operating and maintaining the NEC for the first year after it opens. 

Officials from numerous posts, including Conakry, Cape Town, and 

Phnom Penh, among others, have consulted with Tunis officials or visited 

the post to discuss issues such as operations and maintenance, staffing, 

training, and funding requirements to operate the NEC. 

Assistance Provided Outside of 

OBO 

In addition, State’s Office of Global Support Services and Innovation 

maintains an Intranet site that contains information and guidance on

planning and executing moves from old facilities to new embassy 

compounds, likely operations and maintenance needs, and ways for posts 

with upcoming NECs to communicate with posts with already opened 

NECs. The site also contains documents addressing NEC procurement 

advance planning, the commissioning and decommissioning processes for 

new and old facilities, NEC lessons learned from posts that already have 

moved into their new facilities, and other related topics. Nearly all the 

material on this site derives from overseas staff experienced in planning 

posts’ moves to new facilities and preparing posts for the new operations 

and maintenance requirements. One post manager with whom we talked 

Page 37 GAO-06-641 Embassy Construction Performance
said that this information was very useful and has been disseminated 

widely. 

Facilities Operations and 

Maintenance Planning Not 

Comprehensive or 

Transparent 

In November 1999, the Overseas Presence Advisory Panel noted the 

“shockingly shabby and antiquated building conditions” at U.S. embassies 

and consulates throughout the world. The panel stated that these 

conditions were due to overseas property being managed for decades 

“without a workable plan or funding adequate to provide upkeep and the 

long-term capital needs of overseas facilities.” In March 2003, we reported 

that many posts had maintenance concerns common to old and 

deteriorating buildings, including sinking foundations, crumbling walls, 

bursting pipes, and electrical overloads.41 We also reported that at 133 

overseas posts, the primary office building had fire and safety deficiencies.

These problems, we concluded, were due to essential maintenance and 

repair requirements that had long been unfunded. We noted that in May 

2002, State reported a backlog in capital maintenance of approximately 

$736 million and that this figure was likely to increase because of the age 

of the existing facilities. 

In its Long-Range Overseas Buildings Plan, which was first issued in 2002 

in response to our recommendations,42 OBO establishes requirements and 

estimates costs of long-term capital repair and equipment replacement 

programs, such as roof repairs, elevator replacement, and generator 

refurbishment. Not included in OBO’s plan are the basic, day-to-day 

operations and maintenance requirements funded by State’s regional 

bureaus and the tenant agencies at overseas posts, such as utility costs, 

maintenance staff salaries, janitorial services, and spare parts and 

supplies, among others (see app. II). Rather, these functions are funded 

through the ICASS system or are directly paid for by State or tenant 

agencies. 

Funding requirements for basic operations and maintenance needs are 

assessed only on an annual and incremental basis and, according to State’s 

Bureau of Resource Management, there is no specific line-item 

appropriation for these activities. Annual funding requests originate at the 

post level, are aggregated by State’s regional bureaus, and then are further 

aggregated and submitted to the Office of Management and Budget and

 41See GAO, Overseas Presence: Conditions of Overseas Diplomatic

Facilities, GAO-03-557T (Washington, D.C: Mar. 20, 2003).

42See GAO-01-11. 

Page 38 GAO-06-641 Embassy Construction Performance
Congress by the Bureau of Resource Management. The resulting budget

request intermingles funding needs for posts’ basic operations and 

maintenance with numerous other costs, such as for domestic 

administrative needs, nonfacilities-related embassy support functions, and 

personnel compensation, among others. In addition, agencies with staff in 

overseas diplomatic facilities help fund operations and maintenance 

costs—either through the ICASS system or directly for costs they 

specifically generate—and must request the necessary funds through 

budget development and appropriations processes independent of State’s. 

There is no source that clearly and solely identifies the specific resource 

needs for basic operations and maintenance activities at U.S. overseas 

diplomatic facilities, either on an annual and worldwide basis or on a longterm basis, like that produced by OBO for capital maintenance projects. 

Thus, there is currently no mechanism that allows decision makers to 

determine whether NEC operations and maintenance needs are being 

adequately planned for and funded. A lack of a comprehensive long-term 

plan that clearly identifies the significant increases in resources that are 

likely to be needed as more NECs come online could increase the risk of 

earlier-than-expected deterioration of NECs. 

Methodologies for 

Estimating Operations and 

Maintenance Needs 

Budget officers from two of State’s regional bureaus and the Bureau of 

Resource Management indicated that they cannot accurately predict longterm costs increases because they do not know the types of systems to be 

installed, the new staffing and service contract needs, maintenance

schedules, and likely utility consumption rates, most of which they do not

learn until about 1 to 2 years prior to an NEC opening. They said that due 

to the unpredictability of operating in overseas environments and actual 

construction schedules, they cannot plan with accuracy their resource 

needs beyond 2 years into the future. However, as we previously 

demonstrated, enough NECs have opened to project at least notional 

levels of changes to operations and maintenance costs for posts with 

NECs. In addition, methodologies exist for developing operations and 

maintenance budgets. 

We examined two methodologies for estimating long-term costs for 

operating and maintaining facilities developed by the National Research 

Council of the National Academies. First, the council developed a method

for estimating the total life-cycle costs of buildings.

43 The council 

 43National Research Council of the National Academies, “Investments in Federal Facilities: 

Asset Management Strategies for the 21st Century” (Washington, D.C.: 2004). 

Page 39 GAO-06-641 Embassy Construction Performance
determined that operations and maintenance costs constitute 60 to 85 

percent of a facility’s life-cycle costs, with construction costs comprising 5 

to 10 percent of the total life-cycle costs, and the remainder deriving from 

land acquisition, programming, conceptual planning, major capital renewal 

projects, and disposal. The council also stated that when public sector 

organizations face choices on where to invest limited resources, facilities 

investments, particularly investments in maintenance and repairs, are 

often the first to be deferred or cut altogether. It estimated that each dollar 

in deferred maintenance results in a long-term capital liability of $4 to $5, 

concluding that “an accumulation of deferred investments over the long 

term may be significantly greater than the short-term savings that publicsector decision makers were initially seeking.”44

The council also developed a methodology for estimating recurring 

maintenance requirements on the basis of an index of the ratio of annual

maintenance costs to the current replacement value of a facility.45

According to the Building Research Board of the National Research 

Council, an index value of 2 to 4 percent—meaning annual maintenance 

expenditures between 2 and 4 percent of a facility’s replacement value—is 

recommended. Applying that recommendation to the current replacement 

value of the 18 NECs, which is approximately $1.26 billion, suggests that 

between $25 and $50 million should be expended on annual maintenance 

(see table 2). Total annual maintenance requirements once all projects are 

completed would range from $420 to $840 million, or approximately $2.1 

to $4.2 million per NEC.46 It should also be noted that these costs only 

apply to routine maintenance needs. Other operational expenses, such as 

those for utilities, and major capital renewal projects managed by OBO, 

such as replacing elevators, are not included. 

 44Ibid. 

45Cited in International Facility Management Association, “Operations and Maintenance 

Benchmarks,” Research Report #26, 2005. Current replacement value is the total 

expenditure in current dollars required to replace any facility inclusive of construction 

costs, design costs, project management costs, and project administrative costs. The value 

of property/land is excluded. 

46These costs are in addition to the maintenance needs for the approximately 60 posts 

worldwide that are not expected to have new facilities constructed under State’s current 

capital replacement program.

Page 40 GAO-06-641 Embassy Construction Performance
Table 2: Estimated Annual Operating Costs for Completed NECs 

Dollars in millions 

Estimated annual maintenance cost 

Projecta

Current 

replacement

value

Current 

 replacement value

index (2%) 

Current 

replacement value 

index (4%)

Abidjan $74.5 $1.5 $3.0

Abu Dhabi $64.0 $1.3 $2.6 

Abuja $63.6 $1.3 $2.5

Cape Town $48.1 $1.0 $1.9 

Dar es Salaam $51.9 $1.0 $2.1 

Istanbul $76.3 $1.5 $3.0 

Kabul $177.2 $3.5 $7.1

Kampala $36.2 $0.7 $1.4

Luanda $51.7 $1.0 $2.1

Nairobi $60.4 $1.2 $2.4 

Phnom Penh $71.5 $1.4 $2.9 

Sofia $72.0 $1.4 $2.9 

Tashkent $73.7 $1.5 $3.0

Tbilisi $75.6 $1.5 $3.0

Tunis $59.5 $1.2 $2.4

Yaounde $65.0 $1.3 $2.6

Yerevan $68.1 $1.4 $2.7 

Zagreb $63.3 $1.3 $2.5 

Total $1,252.6 $25.0 $50.1

Sources: Department of State and International Facilities Management Association.

a

Excludes facilities constructed outside of the official NEC project. 

In the past, the Overseas Presence Advisory Panel, State, and GAO 

reported that inadequate capital maintenance funding for embassies and 

consulates resulted in decrepit, unsafe, and dysfunctional facilities. In 

addition, the panel concluded that these decrepit facilities and a “lack of

fiscal tools” could contribute to a crippling of American foreign policy. 

These findings ultimately led to the unprecedented effort to move 201 

overseas posts into new, safe, secure, and functional facilities, and State 

has made significant progress in constructing NECs in a timely manner. 

However, due to increased utilities consumption, the need to hire highly 

qualified technical staff, new maintenance requirements, and expensive 

spare parts and supplies, annual operations and maintenance costs of 

Conclusions 

Page 41 GAO-06-641 Embassy Construction Performance
NECs are significantly greater than the costs associated with the facilities 

they replaced. State was slow to recognize the increased funding needed 

to operate and maintain these new facilities. Moreover, State has not 

developed a comprehensive plan that details long-term resource 

requirements necessary for ensuring that the investments made achieve 

their expected life cycles. Failure to provide posts with adequate financial

and staffing resources and a sufficient and timely supply of spare parts (1) 

could affect posts’ operational effectiveness and (2) lead to more costly 

replacement of capital equipment or the buildings themselves long before 

the end of their projected life cycles. A long-range plan that clearly 

identifies the resource needs for basic, day-to-day operations and 

maintenance at overseas posts, similar to OBO’s plan for capital 

construction and maintenance, would reduce the risk that operations and

maintenance needs for NECs are not met and help these new buildings 

achieve their expected life cycles. 

To protect the $21 billion capital investment in 201 new embassy and 

consulate compounds, we recommend that the Secretary of State develop 

an integrated and comprehensive facilities plan that clearly specifies the 

financial and human resources for meeting the immediate and long-term 

operations and maintenance requirements for new embassy compounds. 

We received written and oral comments on a draft of this report from the 

Department of State. State said that it agreed with our principle findings 

and conclusions. In addition, State wrote that it supported our 

recommendation to develop an integrated and comprehensive facilities 

plan that clearly specifies the financial and human resources needed for 

meeting the immediate and long-term operations and maintenance needs

for new embassy compounds, and that it will initiate actions that 

implement this recommendation. State provided additional clarifying and

technical comments on a number of points, which we have incorporated 

throughout the report, as appropriate. State’s comments, along with our 

responses to specific points, are reprinted in app. II. 

We are sending copies of this report to interested congressional 

committees. We are also sending copies of this report to the Secretary of 

State. Copies will be made 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. 

Recommendation for 

Executive Action 

Agency Comments 

Page 42 GAO-06-641 Embassy Construction Performance
If you or your staff have any questions about this report, please contact 

Jess T. Ford on (202) 512-4128, e-mail fordj@gao.gov, or Terrell G. Dorn on 

(202) 512-6923, e-mail dornt@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Other GAO contact and staff acknowledgments are listed in

appendix III. 

Sincerely yours, 

Jess T. Ford

Director, International Affairs and Trade 

Terrell G. Dorn, PE 

Director, Physical Infrastructure 

Page 43 GAO-06-641 Embassy Construction Performance
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

To complete our work, we reviewed the report of the Overseas Presence 

Advisory Panel, previous GAO reports on the Department of State’s (State) 

embassy construction programs, Bureau of Overseas Buildings Operations’ 

(OBO) past 5 annual Long-Range Overseas Buildings Plans, the files of 18 

new embassy (and consulate) compound (NEC) projects, and the monthly 

Program Performance Review updates and documents of 9 ongoing 

projects scheduled for completion by December 31, 2006, and 22 ongoing

projects scheduled for completion in 2007 to 2008. We did not assess the 

quality of construction. 

Projects within our review were limited to construction under the Capital

Security Construction Program, and did not include construction of new 

embassies funded under the Strategic Capital Program, or major 

rehabilitations or security upgrades of existing embassies and consulates. 

In addition, our review focused on construction projects designated by

OBO as NECs, which in the early years of the program were called New 

Office Buildings. In general, we did not consider other types of OBO 

construction projects, such as renovation of newly acquired buildings, as 

in Bridgetown, Barbados; individual annexes either for general use, as in 

Bogota, Colombia, or those dedicated to USAID operations, as in Lima, 

Peru; or other types of individual projects. However, we did examine costs 

involving construction of certain facilities at NEC sites that were 

completed or will be completed outside the scope of the NEC project, 

such as in cases where USAID annexes were delayed due to funding 

issues, Marine Security Guard quarters were added after completion of the 

NEC project, and construction of facilities in the original NEC scope of 

work was deferred to future years, as well as when concurrent

construction projects occurred outside the scope of the NEC project, such 

as in Kabul, Afghanistan.

To track OBO’s performance in completing construction projects on time 

and on budget, we developed and analyzed a database containing planned 

and actual project schedule and cost data, which were obtained from the 

files of 18 embassy and consulate construction projects. Each of the 

projects was started after the August 1998 bombings in Dar es Salaam, 

Tanzania, and Nairobi, Kenya, and was declared substantially completed 

on or before December 31, 2005. Projects started prior to August 1998, 

such as the new embassy building in Doha, Qatar, were excluded from the 

analysis. 

Data for project schedules included the dates for contract award and 

notice to proceed with construction, the original construction completion 

date, the number of additional days approved in contract modifications; 

Page 44 GAO-06-641 Embassy Construction Performance
Appendix I: Scope and Methodology 

the actual completion date certified by OBO (also known as substantial 

completion), and the actual occupancy date certified by OBO. In addition,

planned dates for project milestones were computed by adding the 

number of allowable days for specific actions to a baseline date. For 

example, the planned occupation date was determined by adding 60 

days—the amount of time to complete commissioning and accreditation 

activities at the new facility—to the planned substantial completion date.

Data for project costs included the budget estimates for each project 

provided to Congress and the actual costs of the projects. We also 

collected information characterizing the site conditions, including building 

and compound sizes; all contract proposals submitted to OBO; whether 

the building was a standard design embassy or consulate; the contract 

delivery method used (design-bid-build or design-build), and the type of

contract awarded (firm-fixed-price or cost-reimbursable); and the amount 

of desk space and the number of personnel to occupy the NEC. 

Data used to analyze project schedules was derived primarily from project 

design packages and requests for proposals; contract awards and 

modification logs; and memorandums and letters certifying substantial 

completion of construction, stating that security requirements have been 

met and that a new facility is ready for occupation. Data for project costs 

derived from two sources. Budget estimates provided to Congress derive 

from letters sent by the Department of State to congressional 

appropriators notifying the Congress of State’s intent to fund construction 

of certain projects. These notifications provided the amount of funding 

OBO intended to allocate in a given year, and they sometimes included the 

total funding OBO estimated for the entire project, including site 

acquisitions. However, since these are notifications for State’s obligations, 

they do not include costs associated with contributions from other 

agencies. Actual costs for each project were provided by OBO’s Financial

Management Division. Project descriptions derive from multiple sources. 

Building and compound sizes and the amount of desk and nondesk space 

derive from Project Authorization Documents, which are used to track 

changes in project scopes and budgetary requirements throughout the 

course of NEC projects. Contract documents identified the contractor, the 

contract type, the award amount, the contract delivery method, and the 

contract performance period, while a summary of cost and schedule data 

for nonwinning proposals was provided by OBO. 

We also reviewed schedule and cost performance data for the nine NEC 

projects scheduled for completion by December 31, 2006, including 

Astana, Kazakhstan; Bamako, Mali; Belmopan, Belize; Conakry, Guinea; 

Dushanbe, Tajikistan; Freetown, Sierra Leone; Kingston, Jamaica; Lome, 

Page 45 GAO-06-641 Embassy Construction Performance
Appendix I: Scope and Methodology 

Togo; and Managua, Nicaragua. Data for our analysis derived from the 

April 2006 Program Performance Review, a meeting OBO holds on a 

monthly basis to review the progress of all construction projects, in 

addition to general management issues within OBO. Data we analyzed 

derived from project information that is reported to OBO Washington from 

project directors in the field and is then placed into a standard format for 

presentation at the meeting. Information we gathered from these 

presentations include the contract award and notice to proceed dates, the 

original and modified planned substantial completion dates, the current 

budget for the project, and planned and actual amount of work completed. 

In addition, the presentations provide narrative information specific to the 

project, which may include project scope and reports of critical 

information, such as potential delays. Progress for 13 additional ongoing

NEC projects scheduled for completion beyond year-end 2006 was not 

sufficient for us to analyze the pace of construction or changes to cost 

estimates. 

We examined the processes by which data are incorporated into the 

Project Authorization Documents and the presentations for the monthly 

Program Performance Review meetings. Assessment of these processes 

included the purpose of the systems, the primary users and their access to 

the data, how and where the data are collected, what the data describe, 

the procedures for ensuring the proper data are collected, the currency of 

the data, and how frequently data are entered. We found the schedule, 

cost, and project characteristics data to be sufficiently reliable for our 

purposes. However, we did not conduct a financial audit of the cost data

and are not expressing an opinion on them. 

To determine the effects of State’s strategic and procedural reforms and 

the factors that affect construction schedules and costs, we interviewed 

key officials from State’s regional bureaus and OBO on the planning for 

and construction of NECs, and we met with corporate staff for three 

contractors currently involved in construction. We also visited six posts 

with either ongoing or completed construction projects to observe the 

construction process, solicit the views of State and the contractors’ field 

staff, and collect and review project documents.1

 Additionally, we visited 

Abuja, Nigeria, to review issues surrounding the impact of incomplete and

 1

The posts visited included U.S. embassies in Bamako, Mali; Conakry, Guinea; Kingston, 

Jamaica; Luanda, Angola; Tbilisi, Georgia; and the U.S. consulate in Cape Town, South 

Africa. 

Page 46 GAO-06-641 Embassy Construction Performance
Appendix I: Scope and Methodology 

deferred construction on staff location and security. Finally, we 

interviewed the project directors for the Phnom Penh, Cambodia, and 

Tashkent, Uzbekistan, NEC projects—while each was briefly in 

Washington—and conducted telephone interviews with post managers in 

Phnom Penh. We also discussed reforms with staff from each of State’s 

regional bureaus. 

To determine how total annual operations and maintenance costs would 

increase once all NECs were completed, we analyzed cost data from four 

sources, which include the following: 

• actual building operations expense budgets for 13 posts with NECs 

worldwide, as reported through the ICASS system; 

• budgeted cost increases for 5 posts, as reported by the Bureau of East 

Asias and Pacific Affairs; 

• budget costs for 3 posts, as reported by the Bureau of Western 

Hemisphere Affairs; and 

• discussions on cost increases for operations and maintenance activities 

with managers at overseas posts and at State’s four other regional bureaus. 

To analyze the ICASS data, we first compared the operations budget for 

the year prior to the post taking possession of the NEC with the budget for 

fiscal year 2006. We also compared the operations costs for the years 

before and after the move. In doing these comparisons, we removed 

several of the posts from the analysis for different reasons. U.S. 

Consulates Istanbul, Turkey, and Sao Paulo, Brazil, were removed because 

as constituent posts, their costs are combined with the respective 

embassies that oversee their operations (Embassies Ankara, Turkey, and

Brasilia, Brazil), and we could not disaggregate these costs from the 

parent posts. Thus changes in their operations costs may actually be 

unrelated to the opening of NEC. We also removed Embassies Dar es 

Salaam, Tanzania; Nairobi, Kenya; and Kampala, Uganda, from the analysis 

because some agencies at these posts, notably USAID, continued to 

occupy locations outside the NEC for multiple years after the NEC 

opened. In addition, when USAID or other agencies own an overseas 

facility, the support costs for activities in that facility are outside the 

ICASS system. Thus, for our analyses, we could not determine whether the 

ICASS costs represented all operations costs for these posts or whether 

costs were generated outside the ICASS system. Finally, we removed 

Embassy Abidjan, Cote d’Ivoire, from the analyses because the post went 

Page 47 GAO-06-641 Embassy Construction Performance
Appendix I: Scope and Methodology 

through a significant downsizing of program and support personnel after 

the start of construction. As a result, the new facility operates at only half 

capacity. The seven posts included in the ICASS analysis were the U.S. 

Embassies in Abu Dhabi, United Arab Emirates; Doha, Qatar; Luanda, 

Angola; Sofia, Bulgaria; Tunis, Tunisia; Yerevan, Armenia; and Zagreb, 

Croatia.2

The data provided by the Bureaus of East Asian and Pacific Affairs and 

Western Hemisphere Affairs included its estimates for the total operations 

and maintenance cost increases for eight NECs, as well as cost increases 

associated with those posts’ utilities, personnel, and maintenance. The five 

East Asian posts included estimates for Embassy Phnom Penh, Cambodia, 

in fiscal year 2006; Embassies Beijing, China, and Rangoon, Burma, and 

Consulate General Surabaya, Indonesia, for fiscal year 2008; and for 

Embassy Suva, Fiji, in fiscal year 2009. The three western posts included 

operations and maintenance budgets for fiscal years 2006 and 2007 for 

Embassies Belmopan, Belize; Kingston, Jamaica; and Panama City, 

Panama. 

To provide an indication of the possible total minimum annual cost 

increases for operations and maintenance, we examined all the available

data on cost increases including actual costs from eight posts and 

estimated costs for seven posts. In addition, we considered State’s 

estimate of average costs rising by $500,000 for posts in Europe and the 

various factors that are driving the observed and estimated cost estimates. 

We removed one outlier from the 15 posts (Embassy Sofia), and used the 

actual costs from the next lowest post, Luanda, of $351,000, which we 

applied to all 201 NECs, resulting in an estimated cost increase of $71 

million per year. Our analysis of Luanda suggested that it can serve as a 

reasonable proxy for the low end of the range because it is small, has only 

one building, and all staff are colocated on the new compound. While this

exercise represents our best attempt to quantify the minimum potential 

costs, it can only provide a rough indication of what the minimum might 

be. It assumes that the actual costs for future posts will generally fall 

within the range we have observed. It also assumes that the costs for 

medium and larger posts will be considerably greater than $351,000. Based 

on the data we have for the remaining 10 posts, some of which have costs 

that are many times greater than those for Luanda, we suspect that actual 

 2

Although we did not test the reliability of these specific data, in the past, we have 

conducted general assessments of ICASS data and found the data reliable. See GAO-04-511. 

Page 48 GAO-06-641 Embassy Construction Performance
Appendix I: Scope and Methodology 

annual cost estimates could be several times greater than that which we 

provided. 

To this minimum cost, we added the costs of adding 100 new OBO-funded 

facilities managers. State’s Office of Rightsizing the U.S. Overseas 

Presence estimates the total per capita cost of placing American 

government employees in overseas positions at approximately $400,000 

per year. Based on this figure, the cost of placing Americans in new facility 

manager positions at 100 NECs would cost approximately $40 million. 

Thus, overall operations and maintenance costs will likely increase by a 

minimum of $111 million. 

All costs for these analyses were converted to 2006 constant dollars using 

the U.S. Gross Domestic Product Deflator. 

We also visited the U.S. embassy in Tunis, Tunisia, and met with former 

Tunis management staff to discuss how its operations and maintenance 

needs and costs changed after moving into its new embassy compound; 

reviewed the worldwide cable it developed to document its cost increases

and additional staffing needs; and discussed the assistance the post 

provides other U.S. embassies and consulates, as they prepare to occupy

their own NECs. In addition, we interviewed management and facilities 

maintenance personnel at eight posts with either ongoing or recently 

completed construction projects to discuss preparations each made or are

making for hiring additional and training current staff, awarding service 

contracts, developing maintenance plans, ensuring the posts have 

adequate supplies and spare parts for the initial year of operations, and 

working with regional bureaus and agency clients to ensure operations 

and maintenance are properly funded.

3

We also interviewed key officials from State’s regional bureaus, OBO, and 

the Bureau of Resource Management on (1) the planning for the 

operational requirements of NECs and (2) the staffing and funding 

resources required to ensure they function properly. We also reviewed 

processes developed by OBO’s Facilities Management Office to provide 

early-on assistance to posts on the types of systems that are to be installed 

at the NECs, the maintenance needs of the mechanical systems, and the 

skill requirements and numbers of staff needed to operate and maintain 

the various systems in the new compounds. Finally, we reviewed 

 3

The eight posts include those cited above with the exception of Tashkent, Uzbekistan. 

Page 49 GAO-06-641 Embassy Construction Performance
Appendix I: Scope and Methodology 

assistance provided to posts by State’s Office of Global Support Services 

and Innovation. 

We performed our work from January 2005 to June 2006 in accordance

with generally accepted government auditing standards. 

Page 50 GAO-06-641 Embassy Construction Performance
Appendix II: Operations and Maintenance 

Funding Sources 

Operations and maintenance costs are funded through five primary 

sources, including OBO, ICASS, State’s regional bureaus and Bureau of 

Diplomatic Security, and other agencies, as needed (see table 3). 

According to the Foreign Affairs Manual, basic building and compound 

operations, such as custodial services, fuel, utilities, supplies, trash 

collection, and grounds care, among others, are planned for by individual 

posts and are funded through the ICASS system, from the Diplomatic and 

Consular Programs fund overseen by State’s regional bureaus, and from 

other agencies’ operating budgets. OBO is responsible for funding general 

maintenance and repair projects at overseas posts, including routine 

services and materials for items of a recurring nature, such as painting, 

weather stripping, termite control, and small repairs, among others. OBO 

is also responsible for special maintenance and improvement projects that 

cost more and are more technical in nature. For example, OBO manages 

projects for repairs such as those for air conditioning systems, elevators, 

and fire suppression systems, and also manages emergency repairs caused 

by unforeseen events. OBO also funds major and minor upgrades for the 

physical security of embassies and consulates, while costs for technical

security equipment are funded by the Bureau of Diplomatic Security. 

Table 3: Major Costs and Funding Sources for Operations and Maintenance of

Overseas Government-owned and Long-term Lease Office Facilities 

Cost center Funding source

Lease costs OBO

Building operating expenses ICASS 

Diplomatic and Consular Programsa

Other agenciesb

Physical security upgrade OBO

Technical security equipment Bureau of Diplomatic Security

Maintenance and repair 

improvements

OBO (government-owned buildings) 

Leaseholder and OBO (long-term lease buildings) 

Program alteration Other agencies

Grounds care ICASS 

Diplomatic and Consular Programs 

Other agencies

Fire equipment OBO

Appendix II: Operations and Maintenance 

Funding Sources 

Page 51 GAO-06-641 Embassy Construction Performance
Appendix II: Operations and Maintenance 

Funding Sources 

Cost center Funding source

Furniture • Initial 

OBO 

Other agencies

• Replacement 

ICASS 

Diplomatic and Consular programs 

Other agencies

Air conditioning units OBOc

ICASS 

Diplomatic and Consular programs 

Other agencies

Emergency generators (including 

overhauls) 

OBO 

Generator service contract Diplomatic and Consular programs 

Other agencies

Source: U.S. Department of State, Foreign Affairs Manual (15 FAM-120, 160, and 630). 

a

Post-held funds allotted by State’s regional bureaus. 

b

The ICASS system permits service providers to directly charge any agency, including State, for using

a service that can be easily identified as benefiting that specific agency. 

c

On air conditioning units greater than 36,000 BTUs. 

Page 52 GAO-06-641 Embassy Construction Performance
Appendix III: Comments from the Department Appendix III: Comments from the of State 

Department of State 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

Page 53 GAO-06-641 Embassy Construction Performance
Appendix III: Comments from the Department 

of State 

Page 54 GAO-06-641 Embassy Construction Performance
Appendix III: Comments from the Department 

of State 

See comment 1. 

See comment 2. 

Page 55 GAO-06-641 Embassy Construction Performance
Appendix III: Comments from the Department 

of State 

See comment 3. 

See comment 4. 

Page 56 GAO-06-641 Embassy Construction Performance
Appendix III: Comments from the Department 

of State 

Page 57 GAO-06-641 Embassy Construction Performance
Appendix III: Comments from the Department 

of State 

See comment 5. 

Page 58 GAO-06-641 Embassy Construction Performance
Appendix III: Comments from the Department 

of State 

See comment 6. 

Page 59 GAO-06-641 Embassy Construction Performance
Appendix III: Comments from the Department 

of State 

The following are GAO’s comments on the State Department’s letter dated 

June 19, 2006. 

1. We modified the text of the report to address this concern. GAO Comments 

2. We did not complete a full analysis of OBO’s value engineering 

process. We note that value engineering was integral to OBO’s 

reformatted standard embassy design that will be used beginning with 

fiscal year 2006 projects. However, until these NECs come on line, it is 

unclear how the changes will impact operations and maintenance 

costs for those posts. 

3. The first of the two objectives of our review was to assess State’s 

performance in completing NEC projects on time and within cost 

parameters, and to examine the factors that affect construction 

projects. As such, the scope of our work, in part, required that we 

compare State’s performance under the current construction program 

with its past efforts. However, an assessment of OBO’s program 

performance relative to the efforts of other agencies or the private 

sector was not within the scope of our work. 

4. We deleted the statements from our final report. 

5. Our review and findings were to demonstrate that (1) the costs for 

operating and maintaining new embassy compounds are significantly 

higher than those costs associated with the facilities they replaced and 

(2) that no mechanism exists that clearly explains the resources 

needed for operating and maintaining NECs on a day-to-day basis. We 

neither state nor imply an “apples-to-apples comparison” between the 

resource requirements for operating NECs and those for the older 

facilities. To the contrary, we state that NECs are significantly larger, 

are more complex, and have significantly more demands than the 

facilities they replace. We attribute these factors, in part, to increased 

security needs, though we purposefully avoided discussion of specific 

equipment and functions that could be deemed sensitive. We also 

acknowledge that increased staffing needs could impact the size of 

NECs, which in turn, could affect operations and maintenance costs. 

Finally, in our report we acknowledged that operations and 

maintenance at U.S. diplomatic facilities had long been underfunded, 

and we stated how we and others concluded that this led to 

dilapidated conditions at many overseas posts. The relevant points for 

decision makers are that costs to operate and maintain the new 

facilities are significantly greater than the costs of the facilities they 

Page 60 GAO-06-641 Embassy Construction Performance
Appendix III: Comments from the Department 

of State 

replace, and that failure to provide adequate funding could repeat the 

cycle of deterioration previously seen at overseas diplomatic facilities. 

We believe that the first step toward ensuring that operations and 

maintenance activities are properly funded and staffed is to provide a 

clear and accurate representation of the necessary resources to those 

who make funding and human capital decisions.

6. During the course of our work, State officials said there was no way 

for them to predict how costs for operating and maintaining overseas 

posts changed when new embassies came online. We disagree with 

this contention. NECs under the current construction program are 

larger, tend to have more buildings, and are more complex than 

embassies and consulates constructed under the Inman program. 

However, Inman program embassies and others built during the 1990s, 

such as in Bogota, Colombia, and Lima, Peru, were required to meet 

many of the same security requirements and were significantly larger 

than the facilities they replaced. A comparison of actual operations 

and maintenance expenditures for these facilities may have highlighted 

the increased costs in a more timely manner. 

Page 61 GAO-06-641 Embassy Construction Performance
Appendix IV: 

A

GAO Contact and Staff 

cknowledgments 

Page 62 GAO-06-641

Appendix IV: GAO Contacts and Staff 

Acknowledgments 

Jess T. Ford, Director, International Affairs and Trade, (202) 512-4128, email fordj@gao.gov, and Terrell G. Dorn, Director, Physical Infrastructure, 

(202) 512-6923, e-mail dornt@gao.gov. 

In addition to the individuals named above, Michael Courts, Assistant 

Director; Michael Armes; Sam Bernet; Joseph Carney; Erika Carter; and 

Edward Kennedy made key contributions to this report. 

Embassy Construction Performance

GAO Contacts 

Staff 

Acknowledgments 

(320332) 
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