Military Operations: DOD Needs to Address Contract Oversight and Quality Assurance Issues for Contracts Used to Support Contingency Operations
Published: 2008-09-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Defense (DOD) uses contractors to meet many of its logistical and operational support needs. With the global war on terrorism, there has been a significant increase in deployment of contractor personnel to areas such as Iraq and Afghanistan. In its fiscal year 2007 report, the House Appropriations Committee directed GAO to examine the link between the growth in DOD's operation and maintenance costs and DOD's increased reliance on service contracts. GAO determined (1) the extent to which costs for selected contracts increased and the factors causing the increases, (2) the extent to which DOD provided oversight for selected contracts, and (3) the reasons for DOD's use of contractors to support contingency operations. To address these objectives, GAO reviewed a nonprobability sample of seven DOD contracts for services that provide vital support to contingency operations in Iraq and Afghanistan. GAO reviewed contract requirements, funding documents and DOD guidance for these contracts and interviewed DOD and contractor personnel.
section_title: What GAO Found
paragraphs: Costs for six of the seven contracts GAO reviewed increased from an initial estimate of $783 million to about $3.8 billion, and one consistent and primary factor driving the growth was increased requirements associated with continued military operations in Iraq and Afghanistan. For example, the Army awarded a $218.2 million task order for equipment maintenance and supply services in Kuwait in October 2004. Since then, approximately $154 million of additional work was added to this task order for vehicle refurbishment, tire assembly and repair, and resetting of prepositioned equipment. Other factors that increased individual contract costs include the use of short-term contract extensions and the government's inability to provide contractually required equipment and services. For example, in three of the contracts GAO reviewed, short-term contract extensions (3 to 6 months) increased costs because the contractor felt it was too risky to obtain long-term leases for vehicles and housing. The actual cost of one contract we reviewed did not exceed the estimated cost for reasons such as lower than projected labor rates. GAO has frequently reported that inadequate staffing contributed to contract management challenges. For some contracts GAO reviewed, DOD's oversight was inadequate because it had a shortage of qualified personnel and it did not maintain some contract files in accordance with applicable guidance. For five contracts, DOD had inadequate management and oversight personnel. In one case, the office responsible for overseeing two contracts was short 6 of 18 key positions, all of which needed specialized training and certifications. In addition, for two other contracts, proper accounting of government owned equipment was not performed because the property administrator position was vacant. Second, DOD did not always follow guidance for maintaining contract files or its quality assurance principles. For four contracts, complete contract files documenting administration and oversight actions taken were not kept and incoming personnel were unable to determine how contract management and oversight had been performed and if the contractor had performed satisfactorily prior to their arrival. In addition, oversight was not always performed by qualified personnel. For example, quality assurance officials for the linguist contract were unable to speak the language so they could not judge the quality of the contractor's work. Without adequate levels of qualified oversight personnel, proper maintenance of contract files, and consistent implementation of quality assurance principles, DOD may not be able to determine whether contractors are meeting their contract requirements, which raises the potential for waste. DOD used contractors to support contingency operations for several reasons, including the need to compensate for a decrease in force size and a lack of capability within the military services. For example, an Army contract for linguist services had a requirement for more than 11,000 linguists because DOD did not have the needed linguists. According to Army officials, the Army phased out many interpreter positions years ago and did not anticipate a large need for Arabic speakers.

section_title: Letter
paragraphs: The Department of Defense (DOD) uses contractors to meet many of its  logistical and operational support needs during combat operations and  peacekeeping and humanitarian assistance missions. According to DOD,  the scale and duration of global war on terrorism operations have required  a significant increase in contractor support and in deployment of  contractor personnel to areas such as Iraq and Afghanistan. Moreover, this  reliance on contractors continues to grow, and DOD has reported that  future deployments of DOD military forces are anticipated to require  similar levels of support. In Iraq, Afghanistan, and throughout Southwest  Asia, contractors provide deployed U.S. forces with communication  services, interpreters who accompany military patrols, base operations  support (e.g., food and housing), weapon systems maintenance,  intelligence analysis, security services, and a variety of other support. As  of April 2008, DOD estimated that it had more than 164,000 contractors in  Iraq, costing billions of dollars each year. DOD reported that contingency  contract obligations for fiscal years 2003 through 2006 totaled nearly $44  billion. In August 2008, the Congressional Budget Office reported that  DOD’s fiscal years 2003 through 2007 contingency contract obligations for  the Iraq theater were $76 billion.
In its fiscal year 2007 report accompanying the DOD Appropriations Bill,  the House Appropriations Committee directed GAO to examine the link  between the growth in DOD’s operation and maintenance costs and,  among other things, DOD’s increased reliance on service contracts. This is  the third report we have issued in response to this direction. In May 2007,  we issued a report that examined the trends in operation and maintenance  costs for fiscal years 1995 through 2005. In January 2008, we issued a  report addressing oversight weaknesses related to a maintenance and  supply services contract in Kuwait. This report examines issues related to  cost, oversight, and use of contractors to support contingency operations.  Our reporting objectives are to determine (1) the extent to which costs for  selected contracts supporting contingency operations increased and the  factors causing the increases, (2) the extent to which DOD provided  oversight for selected contracts that support contingency operations, and  (3) the reasons for the department’s use of contractors to support  contingency operations for the contracts we reviewed, as well as other  contracts.
To accomplish our objectives, we conducted a case study review of a  nonprobability sample of six DOD contracts and one task order for  services that support contingency operations. To obtain our sample, we  relied on DOD and our own work. Specifically, due to the unavailability of  a complete list of contracts supporting contingency operations, DOD  provided us a list of 34 contracts, based on criteria we developed. These  criteria included: the contract supported deployed forces; Operations and  Maintenance (O&M) funds were used to pay for the contract services; the  principal place of performance was within Central Command’s Area of  Operation; the contract was to maintain a weapons system(s) and/or  provide support; the contract was still in effect; and the contractor was  U.S. based. In addition to these contracts, based on our own research and  experience from past audit work, we generated a list of eight contracts  that also met the criteria to supplement those provided by DOD. From the  combined list, we selected for case study review our nonprobability  sample of seven contracts providing various services such as base  operations support, security, equipment maintenance, and linguist  services. Factors that influenced the case study selection included  previous GAO reviews on contracts supporting contingency operations,  type of contract service provided, location where the contractor’s work  was performed, and contract dollar amount. Our selection of contracts did  not allow us to project our findings across the universe of DOD contracts  for services that support contingency operations. For each contract  selected, our review covered from the beginning of the contract until it  ended or June 2008, whichever occurred first.
To determine the extent to which selected contracts supporting  contingency operations experienced cost increases, we reviewed contract  requirements and funding documents for our case study contracts and  interviewed contracting office officials regarding changing requirements  and cost increases. We also interviewed contractor personnel to obtain  their views related to changing requirements and increasing contract  costs. To determine the extent to which DOD provided oversight of  contracts that support contingency operations, we compared authorized  oversight positions to actual on-hand oversight personnel involved in  contract oversight. We also interviewed Army and contractor personnel to  determine the number of oversight personnel involved in providing  oversight and the types of oversight provided. To determine the reasons  the department uses contractors to support contingency operations, we  interviewed contracting office officials and reviewed and compared  available guidance and documentation related to DOD’s decision to use  contractors instead of military personnel for the contracts.
We conducted our review from November 2006 through August 2008 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives. A more detailed description of our scope  and methodology is included in appendix I.
subsections: section_title: Background
paragraphs: The individual military services and a wide array of DOD and non-DOD  agencies award contracts to support contingency operations. Within a  service or agency, numerous contracting officers, with varying degrees of  knowledge about how contractors and the military operate in deployed  locations, can award contracts that support contingency operations.  According to DOD estimates, in 2005 several hundred contractor firms  provided U.S. forces with a range of services at deployed locations. The  customer (e.g., a military unit) for these contractor-provided services is  responsible for identifying and validating requirements to be addressed by  the contractor as well as evaluating the contractor’s performance and  ensuring that contractor-provided services are used in an economical and  efficient manner. In addition, DOD has established specific policies on  how contracts, including those that support contingency operations,  should be administered and managed. Oversight of contracts—which can  refer to contract administration functions, quality assurance surveillance,  corrective action, property administration, and past performance  evaluation—ultimately rests with the contracting officer, who has the  responsibility for ensuring that contractors meet the requirements as set  forth in the contract. However, as some contracting officers are not  located at the deployed location, the contracting officers appoint contract  oversight personnel who represent the contracting officer at the deployed  location and are responsible for monitoring contractor performance. The  way contracts and contractors are monitored at a deployed location is  largely a function of the size and scope of the contract. Some contracting  officers have opted to have personnel from the Defense Contract  Management Agency monitor a contractor’s performance and management  systems to ensure that the cost, product performance, and delivery  schedules comply with the terms and conditions of the contract. Defense  Contract Management Agency officials delegate daily oversight  responsibilities to individuals drawn from units receiving support from  these contractors to act as contracting officer’s representatives for  specific services being provided. For other contracts, contracting officers  usually directly appoint contracting officer’s representatives or  contracting officer’s technical representatives to monitor contractor  performance at the deployed locations. These individuals are typically  drawn from units receiving contractor-provided services, are not normally  contracting specialists, and for whom contract monitoring is an additional  duty. They cannot direct the contractor by making commitments or  changes that affect price, quantity, quality, delivery, or other terms and  conditions of the contract. Instead, they act as the eyes and ears of the  contracting officer and serve as the liaison between the contractor and the  contracting officer.
The FAR requires contract administration offices to perform all actions  necessary to verify whether contracted services conform to contract  quality requirements and to maintain records of these actions. The  Defense Federal Acquisition Regulation Supplement (DFARS) adds an  additional requirement for DOD agencies to conduct quality audits to  ensure the quality of services meets contractual requirements. Oversight  begins with trained personnel being nominated for and assigned oversight  responsibilities, and then conducting oversight actions throughout the  contract performance period to ensure the government receives the  services required by the contract. In addition to the FAR and DFARS, a  DOD best practices guide stresses proper documentation. The Guidebook  for Performance-Based Services Acquisition in the Department of Defense  states that an assessment of contractor performance should be  documented, whether acceptable or unacceptable, as it is conducted and  this official record may be considered past performance information.
A wide selection of contract types is available to the government and  contractors to provide needed flexibility in acquiring supplies and  services. The contract types are grouped into two broad categories: (1)  fixed price and (2) cost reimbursement. The specific contract types range  from firm-fixed-priced, in which the contractor has full responsibility for  the performance cost and any resulting profit or loss, to cost-plus-fixed- fee, in which the contractor has minimal responsibility for the  performance costs and the negotiated fee (profit) is fixed. In between are  the various incentive contracts, in which the contractor’s responsibility for  the profit or fee incentives offered is tailored to the uncertainties involved  in contract performance. One such contract type that provides incentives  on the basis of performance is cost-plus-award-fee. A cost-plus-award-fee  contract is a cost reimbursement contract that provides a fee (base  amount plus an award amount) sufficient to motivate the contractor to  excel in areas such as quality and timeliness. The amount of the award fee  is based on the government’s evaluation of the contractor’s performance in  terms of the contract criteria. Another contract type is indefinite- delivery/indefinite-quantity which provides for an indefinite quantity of  supplies or services, within stated limits, during the contract period and  the government places orders for individual requirements. As shown in  table 1, most of the contracts we reviewed were cost-plus-fixed-fee type  contracts. Two of the contracts were cost-plus-award-fee contracts.
We looked at specific contracts that provide a variety of services. While  some of these contracts have ended, DOD continues to acquire these  services through other contracts. For example, the linguist contract ended  in June 2008, but another contract valued at $4.6 billion was awarded to  provide linguist services in Iraq for 5 years. The base operations support  and security services contracts ended in March 2008 but two new bridge  contracts for these services were awarded. The bridge contracts were for 1  year each and provided for continued operations and security services  while bid protests were being decided.
section_title: Contract Costs Increased, Primarily Due to Added Requirements to Support Ongoing Operations in Iraq and Afghanistan
paragraphs: For six of the seven contracts we reviewed, actual costs exceeded the  initially estimated contract costs, primarily because of added requirements  to support ongoing operations in Iraq and Afghanistan. The actual costs  for the other contract we reviewed did not exceed the estimated contract  costs. The cost increases occurred primarily because as operations in Iraq  and Afghanistan expanded, there were increased demands for services  already established under the contracts and, in some cases, new  requirements were added to the contracts. Other factors that contributed  to individual contract cost growth among the contracts we reviewed  included short-term contract extensions, the government’s inability to  provide promised equipment, changes in host country labor laws, and  paying for work to be performed multiple times.
subsections: section_title: Contract Costs Increased for Six Contracts
paragraphs: For six of the contracts we reviewed, the cost of each contract exceeded  the originally estimated contract cost, primarily because of increases in  contract requirements from ongoing operations in Iraq and Afghanistan.  Costs for these six contracts—three of which were extended—increased  from an initial estimate of $783 million to an approximate actual total cost  of $3.8 billion. In four of these cases, the individual contract’s actual cost  exceeded the estimated cost by at least 300 percent. For example, the total  cost of the base operations support contract exceeded the estimated  contract cost by $122.4 million, or 481 percent. In another example, the  estimated cost for the equipment maintenance contract in Qatar was $52.7  million for a 3-month base period and 10 option years. However, the total  cost of the contract as of March 2008—which was during option year 8— was $471 million or 794 percent more than originally estimated for the  entire contract. For the seventh contract, we found that the actual  contract costs did not exceed the originally estimated costs. Table 2 below  shows how total actual contract costs, including the cost of any  extensions, compared to the original cost estimate.
section_title: Increased Contract Costs Were Primarily a Result of Added Requirements from Ongoing Operations
paragraphs: Although several factors increased the contract costs, the primary factor  was additional requirements associated with ongoing operations in Iraq  and Afghanistan. Expanding operations in Iraq and Afghanistan placed an  increased demand for services already established under each of the seven  contracts we reviewed. In addition, new requirements were added to some  of the contracts. The following examples illustrate additional contract  requirements due to ongoing operations in Iraq and Afghanistan and their  impact on contract costs.
subsections: section_title: Linguist Services
paragraphs: In April 1999, the Army awarded a contract for linguist translation and  interpretation services. According to the Army, the initial requirement was  for about 180 linguists worldwide at an estimated cost of $19 million for 1  base year and 4 option years. Since the award of this contract, the linguist  requirement grew and the Army awarded other contracts to provide  linguist services. For example, we reviewed an indefinite- delivery/indefinite-quantity contract awarded in September 2004—an  interim 6-month contract with two 3-month options to continue providing  linguist services worldwide—with an estimated maximum cost of $400  million. The total actual cost for the first year of services for this contract  was about $409.6 million. Linguist requirements under the interim contract  were increased multiple times, which increased contract costs. For  example, in February 2007 the linguist requirement supporting operations  in Iraq and Afghanistan grew from 8,899 to 10,714 in response to the surge  in the number of military forces deployed to these areas of operation. At  this same time, the worldwide linguist requirement grew from 9,313 to  11,154. To accommodate the increasing requirements and the need to  continue providing the services, the interim contract was modified to  increase the maximum costs allowable and to extend the performance  period. As of April 2008, the interim contract had been extended five times  and the total cost of the contract was $2.2 billion. At that time, the  requirements to support exercises in the United States and operations in  Afghanistan and Guantanamo Bay were being provided under new  contracts while the requirements to support operations in Iraq were still  being provided under the interim contract. A new indefinite- delivery/indefinite-quantity contract for linguist services in Iraq took effect  in June 2008 with a maximum cost for all orders under the contract of $4.6  billion for 5 years.
section_title: Army Prepositioned Stock—5 Maintenance and Supply Services
paragraphs: In August 2000, the Army awarded this contract for maintenance and  supply services of the Army Prepositioned Stocks (APS)—5 in Qatar. In  addition to performing routine maintenance on the prepositioned stocks,  the contractor was required to support contingency operations by  receiving, repairing, maintaining, and temporarily storing equipment from  other sources until it was needed. The contract award represented the  base year requirements of certain contract line items to be performed for 3  months in 2000 at a total contract amount of $568,166. The contract had 10  single-year options available for full contract performance and the  contractor’s total estimated cost for the base plus 10 option years was  $52.7 million. At the end of the seventh option year, which was in  November 2007, the total cost of the contract was $428.9 million, or $376.2  million more than originally estimated for the entire contract. According to  the contracting officer, requirements within the scope of the contract  increased in support of the global war on terror to include supporting  operations in Iraq and Afghanistan, performing operations in Kuwait,  repairing equipment, and supporting additional reimbursable customers,  such as the 550th Signal Company, Area Support Group-Qatar, and Army  Tank Automotive and Armaments Command’s tire assembly repair  program. For example, in 2002 contractor resources were deployed to  Kuwait to meet the requirement for immediate download and urgent  maintenance of equipment flowing into Southwest Asia in support of  operations in Iraq. Approximately $195.6 million was funded on the APS-5  contract for operations in Kuwait between 2002 and 2005. In another  example, in January 2006 a requirement to produce tire wheel assemblies  was added to the contract. The scope of this requirement was to provide a  package of ready-to-use, preconfigured tires to reduce the workload at  forward maintenance locations. As of March 2008, the total funded for the  tire operation was $6.4 million. Moreover, at various times throughout the  life of the contract, requirements were added for the resetting of Army  Prepositioned Stocks. For example, in the third, fifth, sixth, and seventh  option years, funding placed on the contract for the reset of equipment  totaled $35 million, $9 million, $39 million, and $23 million, respectively.
section_title: Global Maintenance and Supply Services in Kuwait—Task Order 0001
paragraphs: In October 2004, the Army issued this task order for equipment  maintenance and supply services in Kuwait under an umbrella indefinite- delivery/indefinite-quantity contract for Global Maintenance and Supply  Services. The contractor was required to provide maintenance, inspect and  test equipment, operate a wash rack for agriculture cleaning, and perform  various other maintenance functions depending on developing missions.  The contractor estimated a total cost for a 10-month base period and four  option years of $218.2 million. At the end of the second option year in  September 2007, the total cost of the task order after modifications was  about $581.5 million, $363.2 million more than the original estimate for the  entire task order. According to the contracting officer, the magnitude of  the requirements under the task order increased significantly after the task  order was issued. This increase included growth in the quantity of  equipment repaired and the number of customers served, new  requirements for resetting and issuing Army prepositioned stock and  operating tire assembly and repair and HMMWV refurbishment programs.  For example, in May 2006, a major HMMWV refurbishment effort valued at  approximately $33 million was added to the task order. According to  contracting officials, the task order could be used to expeditiously provide  the required HMMWV refurbishment capability. Likewise, in September  2005 a requirement was added to the task order for tire assembly and  repair. As of March 2008, the total funding for the tire assembly and repair  operation was approximately $16.6 million. In addition, according to the  contracting officer, requirements for the resetting of Army prepositioned  stocks were added within the scope of the task order. For example, in  option years one and two, funding for the reset of equipment totaled  approximately $54.2 million and $50.1 million, respectively.
section_title: Base Operations Support
paragraphs: In February 2003 the Army awarded this contract to provide a full range of  base support activities including public works; logistics; medical; food;  and morale, welfare, and recreation services in support of an installation  in Qatar. The contractor estimated a total cost of $25.4 million for the 9- month base period plus 4 option years. The total cost of the contract was  approximately $147.8 million, $122.4 million more than the original cost  estimate. According to contracting officials, this growth in requirements  was due to changes in the planned use for the installation and an increase  in major tenants such as the United States Central Command Forward  Headquarters and Special Operations Command Central. For example, the  installation increased its logistics support of a nearby Air Force base and  supported the rest and relaxation program for military personnel deployed  to Iraq and Afghanistan, providing morale, welfare, and recreation services  and quality-of-life support to more than 300 soldiers per week. To meet the  increased demands, additional contractor personnel were needed. For  example, five Medical Supply Clerks were added to the medical services  requirement and four employees were added to meet the change in  requirements of the Public Works department. The contractor’s estimated  total costs for these additional personnel were $95,706 and $887,120,  respectively. In addition, the services provided under the contract grew as  new requirements were added. For example, in September 2004 a new  requirement for an installation fire department was added. According to  the contractor’s cost estimate, the total cost for option years one through  four (the requirement was added during option year one) to meet the  requirement for fire department services was $10.7 million.
section_title: Base Security Services
paragraphs: In February 2003 the Army awarded this contract for base security  services at Camp As Sayliyah, Qatar. The contractor was to intercept,  deter, and prevent unauthorized personnel and instruments of damage and  destruction from entering the installation. The contractor should also  conduct surveillance and counter-surveillance of the installation’s  perimeter and vicinity from designated observation towers and posts. The  contractor estimated a total cost of $80.3 million for the 9-month base  period plus 4 option years. The total cost of the contract was about $105.8  million, or $25.6 million more than originally estimated. According to the  contracting officer, as was the case for the base operations support  contract, changes in the planned use for the installation and an increase in  major tenants such as the United States Central Command Forward  Headquarters and Special Operations Command Central resulted in  increased contract requirements. In some instances, additional personnel  were needed to meet the requirements of the contract. For example, four  guards and four screeners were added at a cost of $255,267 for option year  one. In another example, in option year two, the required coverage at one  guard tower was increased to 24 hours a day. Funding in the amount of  $145,327 was provided to meet this requirement for the remainder of the  option year. The contractor’s estimated cost for meeting this requirement  in the remaining 2 option years was $690,880. In another example, in  option year one a requirement was added for personnel to operate a  mobile vehicle and cargo inspection system. This system consisted of a  truck-mounted, nonintrusive gamma ray imaging system that x-rays the  contents of trucks, containers, cargo, and passenger vehicles entering the  base to determine the possible presence of various types of contraband. A  total of $359,685 was provided to meet this requirement for the remainder  of the option year.
section_title: Stryker Battle Damage Repair Facility—Qatar
paragraphs: In May 2002 the Army awarded a contract that provided total logistics  support for the Stryker vehicles fielded to two combat brigade teams. In  September 2005 the Army modified the contract to add a requirement for  the repair of battle-damaged Stryker vehicles in Qatar. Our review  focused on the battle damage repair requirements performed in Qatar and  the associated modifications. The initial requirement was for the repair of  11 battle-damaged vehicles at a cost of approximately $6.4 million. As of  April 2008, the total cost of the battle damage repair facility in Qatar was  approximately $95.1 million. According to officials at the Army Tank  Automotive and Armaments Command, when the logistics support  contract was modified to add the Qatar battle damage repair facility  requirements, the Army and the contractor jointly developed and  negotiated the requirements and cost estimates. As more Stryker vehicles  sustained battle damage, additional modifications were added. For  example, only a few days after this initial requirement was added to the  contract, a modification was issued that increased the requirement by 15  vehicles, bringing the total number of battle-damaged vehicles to be  repaired to 26. With this increased requirement, approximately $4.6 million  in funding was added to the contract. According to Army officials, over  time the number of vehicles that required repair increased as attacks on  United States forces intensified and more Stryker brigades rotated in and  out of Iraq and Afghanistan. The battle damage repair requirements are  currently stated in terms of the number of vehicles that can be repaired  per month. For example, in February 2006 the repair requirement  increased from 2 vehicles every 45 days to 4 vehicles per month, and in  July 2007 the requirement increased again to 6 vehicles per month.
section_title: Predator Maintenance
paragraphs: In February 2005 the Air Force awarded this contract for maintenance  support of the Predator unmanned aircraft to support scheduled flying  hours for a base period of 1 year with 2 option years. According to  program officials, the contractor was required to provide organizational  maintenance services such as base support of systems, weapons loading,  launching, routine day-to-day flight maintenance, routine inspections,  scheduled and unscheduled maintenance, and maintenance of supply and  support packages. The estimated base and option year one contract cost  was $49.7 million. At the end of option year one, which included an  unanticipated 7-week extension, the total cost of the contract was  approximately $49.3 million. While the total cost of the contract,  including the cost of the extension, did not exceed the total estimated cost  for the base and option year one, contract requirements changed in  support of operations in Iraq and Afghanistan and the effect these changes  had on the cost of the contract varied. For example, according to program  officials, the contractor established support operations in Afghanistan in  March 2005 and in Iraq three months later. In July 2005, contractor support  in Iraq was increased to provide additional Predator surveillance at a cost  of $2.5 million. Also, in June 2006 the contractor support in Afghanistan  was moved to Iraq, resulting in a $2.3 million decrease in contract cost.  Other factors also decreased contract costs and as a result, the total cost  of the contract was less than initially estimated. For example, contract  labor rates—which were negotiated and accepted after the contract was  awarded—were lower than the rates used to calculate the estimated  contract costs, resulting in a lower contract cost of approximately $1.8  million. Additionally, in August 2005 the cost of the contract was  decreased by approximately $567,000 due to a 6-week delay in the start of  the contract.
section_title: Other Factors That Caused Cost Growth
paragraphs: Other factors that contributed to individual contract cost growth among  the contracts we reviewed included (1) short-term contract extensions, (2)  the government’s inability to provide promised equipment, (3) changes in  host country labor laws, and (4) having to pay for work to be performed  multiple times because it did not meet required standards. First, we found  that in three of the contracts, short-term contract extensions increased  costs because the contractor signed short-term leases which were more  expensive than longer-term leases. The contractors felt it was too risky to  obtain long-term leases for such things as vehicles and housing because  there was no guarantee that the contract would be extended again. Each  of these three contracts was extended for less than 1 year. In each  instance, the extensions were to allow for the continuation of contractor  services during protests of newly awarded contracts. For example, in April  2007 the linguist contract requirements were being performed under a 3- month extension due to protests of newly awarded linguist contracts.  According to the linguist contractor, the short-term extensions diminished  its ability to leverage leasing because a short-term lease commitment is  more expensive than a longer, 1-year lease commitment. For example, the  monthly cost for one contractor to lease trucks under a 6-month lease was  $2,437, whereas the monthly cost under a 1-year lease was $1,700—a 30  percent savings. According to the contractor, short-term lease  commitments also limit the contractor’s ability to shop around for better  prices because most vendors want a longer commitment. Additionally,  short-term extensions drain contractor resources and increase overhead  costs because the contractor has to prepare cost proposals, review  funding, and perform other administrative tasks every 90 or 120 days.  While the contractors could enter into leases for a period longer than the  specified contract period of performance, they would assume the risk for  the cost of the excess months. In addition, in October 2007 the base  operations and security services contract requirements were being  performed under 6-month contract extensions. According to both the base  operations contractor and the security services contractor, it was difficult  to find housing that was available for a 6-month lease in Qatar due to the  booming economy, and any lease term for fewer than 12-months was  costly. For example, according to the security services contractor, the  same 12-month housing lease that cost about $1,650 in 2007 cost about  $4,100 in 2008. The officials added that, when available, a 6-month lease  for the same housing averaged around $4,700 to $5,000.
Second, for the linguist contract, additional costs were incurred when the  government was unable to provide the equipment or services, which were  to be government- furnished pursuant to the contract. The contract stated  that contractor personnel providing support to the military in contingency  operations may be required to wear protective equipment as determined  by the supported commander. When required by the commander, the  government will provide to the contractor all military-unique individual  equipment. According to contracting officials, due to the large  deployments of soldiers requiring protective equipment, there was an  insufficient supply of equipment remaining for contractors. Contracting  officials told us that when the government does not supply the equipment  as provided for under the contract, the contractor is authorized to procure  and be reimbursed for the cost of the equipment and the associated  general and administrative expenses. When the contractor is paid for the  equipment it becomes government property. According to the contracting  officer’s representative, the contractor was able to purchase the  equipment at military surplus stores at a cost to the government of  approximately $600,000. In addition, contracting officials for this same  contract told us that the government was to provide transportation for the  contract manager; however, the government did not provide this  transportation. As a result, the contractor leased a vehicle to provide this  transportation and the government reimbursed the contractor and paid for  the associated overhead expenses.
Third, changes in the host country labor law resulted in additional security  services contract costs. According to the contractor, a change in Qatar’s  labor law directed that (1) employees could not work more than 10 hours  in 1 day, including overtime, and (2) employees be given at least a 1-hour  break after working for 5 hours. As a result, additional employees were  required to provide 24-hour security coverage. The cost of providing this  additional manpower in option year two was approximately $752,000. The  contractor’s estimated cost for meeting this requirement in the remaining  years (option years three and four) was approximately $2.5 million. The  contractor also told us that a second change in Qatar’s labor law required  workers to be paid for 1 day off a week. To comply with this change,  employees were retroactively paid for the weekly day off from the  effective date of the law change until their contract ended. The Army  added $1.3 million in funding to the contract to assist with the retroactive  pay for the paid day off.
Fourth, according to contracting officials, under the two cost- reimbursable equipment maintenance contracts we reviewed, the  government must continue to pay for additional work performed on  equipment rejected for failure to meet the required maintenance standard.  When equipment was presented to the government and did not pass  quality assurance inspection, it was returned to the contractor for  additional maintenance until it met the required standard. Contracting  officials explained that under the cost-plus-fixed-fee maintenance  provisions of the contracts, the contractor was reimbursed for all  maintenance labor hours incurred, including labor hours associated with  maintenance performed after the equipment was rejected because it did  not meet specified maintenance standards. This resulted in additional  costs to the government. As we reported in January 2008, our analysis of  Army data for a task order under one of these contracts in Kuwait found  that since May 2005, the contractor worked a total of about 188,000 hours  to repair equipment after the first failed government inspection, at an  approximate cost to the government of $4.2 million. We were unable to  calculate the total cost of the rework performed under the second  equipment maintenance contract because, according to officials,  information entered into the maintenance database that tracks equipment  status and inspection results does not distinguish between the contractor’s  internal quality control inspections and government inspections prior to  acceptance.
section_title: DOD’s Oversight of Some Contracts Has Been Inadequate
paragraphs: DOD’s oversight of some of the contracts we reviewed has been  inadequate because of a shortage of qualified oversight and contract  administration personnel and because it did not maintain some contract  files in accordance with applicable policy and guidance. We have  previously reported that inadequate numbers of trained contract  management and oversight staff have led to contracting challenges. We  found that for five of the seven contracts we reviewed, DOD did not have  adequate numbers of qualified personnel at deployed locations to  effectively manage and oversee the contracts. Additionally, we found that  for four of the contracts we reviewed, the contracting offices either did  not maintain complete contract files documenting contract administration  and oversight actions taken or did not follow quality assurance guidance.  For the other two contracts we reviewed, authorized oversight positions  were filled with personnel to properly oversee the contracts.
subsections: section_title: Some Contract Management and Oversight Teams Were Inadequately Staffed
paragraphs: Having the right people with the right skills to oversee contractor  performance is critical to ensuring that DOD receives the best value for  the billions of dollars spent each year on contractor-provided services  supporting forces deployed in southwest Asia and elsewhere. However,  inadequate numbers of personnel to oversee and manage contracts is a  long-standing problem that continues to hinder DOD’s management and  oversight of contractors in deployed locations. In 2004, we reported that  DOD did not always have sufficient contract oversight personnel in place  to manage and oversee its logistics support contracts such as LOGCAP  and recommended that DOD develop teams of subject matter experts to  make periodic visits to deployed locations to judge, among other things, if  its logistics support contracts were being used efficiently. DOD  concurred with—but did not implement—this recommendation. In  addition, in 2005 we reported in our High-Risk Series that inadequate  staffing contributed to contract management challenges in Iraq. In 2006,  we reported that oversight personnel told us that DOD does not have  adequate personnel at deployed locations to effectively oversee and  manage contractors. DOD concurred with our assessment and noted that  they were congressionally directed to undertake a review of the health of  the acquisition work forces, including oversight personnel, and assess the  department’s ability to meet the oversight mission. Currently, DOD has  completed a competency analysis of its work force but has not determined  what number of oversight personnel will be needed to provide adequate  oversight for contingency contracting. Our review of the staff authorized  to provide contract oversight and management revealed similar vacancies  in some critical oversight and administration positions for five of the seven  contracts, as illustrated by the following examples.
The APS-5 contract did not have an administrative contracting officer for  almost a year. Oversight of contracts ultimately rests with the contracting  officer, who has the responsibility for ensuring that contractors meet the  requirements set forth in the contract. However, most contracting officers  are not located at the deployed location. As a result, contracting officers  often appoint administrative contracting officers to provide day-to-day  oversight and management of the contractor at the deployed location. The  administrative contracting officer is a certified contracting officer with  specialized training and experience. Administrative contracting officers  may be responsible for many duties including ensuring contractor  compliance with contract quality assurance requirements, approving the  contractor’s use of subcontractors, reviewing the contractor’s  management systems, reviewing and monitoring the contractor’s  purchasing system, and ensuring that government personnel involved with  contract management have the proper training and experience. According  to the contracting officer, while the administrative contracting officer’s  position was vacant, she acted as the administrative contracting officer;  however, she was located in the United States and the place of  performance for this contract was in Qatar.
The APS-5 contract also lacked a property administrator for more than a  year. According to a DOD manual, the responsibilities of the property  administrator include administering the contract clauses related to  government property in the possession of the contractor, developing and  applying a property systems analysis program to assess the effectiveness  of contractor government property management systems, and evaluating  the contractor’s property management system to ensure that it does not  create an unacceptable risk of loss, damage, or destruction of property.  While some property administrator duties are often delegated to the  administrative contracting officer, this contracting office was also without  an administrative contracting office for several months. As such,  important property administration duties were not being performed  including the proper accounting for government-owned contractor- acquired equipment.
As of April 2008, the contract administration office responsible for  administering the base operations and support and the base security  contracts in Qatar only had 12 of its 18 authorized positions. The 6 vacant  positions included a performance evaluation specialist, 3 contracting  specialists, 1 cost analyst, and 1 procurement analyst. Four of the  positions had been vacant for 7 months or more, while 2 had been vacant  for 4 and 6 months, despite the fact that the Army designated both as key  positions. According to position descriptions provided by the Army, the  performance evaluation specialist is a technical quality expert who advises  the commander on quality issues. Moreover, the performance evaluation  specialist is responsible for the Army’s quality assurance program for the  two contracts in Qatar. This includes developing a quality assurance plan,  monitoring contractor performance, training junior quality assurance  personnel, analyzing quality data for trends, and providing input on the  contractor’s performance for the award fee board. This position requires a  certified quality assurance professional. While some of these duties were  performed by the administrative contracting officer, other duties need  specialized skills that administrative contracting officers generally do not  have. Contract specialists perform a wide variety of pre- and post-award  tasks encompassing complex acquisition planning, contract type selection,  contract formation and execution, cost of price analysis, contract  negotiation, and contract administration including reviewing monthly  contractor invoices. According to the contracting officer’s representative,  he was responsible for providing the technical assessment of the  contractor’s performance and reviewing contractor invoices, a  responsibility for which he said that he was not trained. He also said that  the invoices required closer scrutiny than he was able to give them and he  often did not know if the invoices included valid expenses or not. In  addition, the contracting officer’s representative had oversight  responsibilities for five additional contracts and his primary assignment as  the base’s Provost Marshal did not always allow him time to complete his  contract oversight responsibilities. The procurement analyst, among other  things, is responsible for developing cost/pricing data, proposals, and  counter-proposals for use in negotiations; analyzing contractor proposals  to determine reasonableness; determining appropriateness and  reasonableness of proposed labor and overhead rates; and developing data  for use in pricing trend analyses. What made these vacancies even more  critical is that during this time the contracting office awarded two, 1-year  contracts to continue providing the base security and base operations  services. According to the contracting officer, it was difficult to find  qualified candidates to fill some of the vacancies, and in the fall of 2007 the  Army rejected a number of applicants because they did not have the right  skills.
The contracting officer for the Global Maintenance and Supply Services in  Kuwait—Task Order and the APS-5 contract said that her office was  understaffed, which made it difficult to keep up with some contract  administrative requirements. For example, she said that more staff would  allow her office to properly handle the deobligation of funds against  contracts.
In January 2008, we reported that (1) the contract management oversight  team was inadequately staffed to effectively oversee the Global  Maintenance and Supply Services in Kuwait—Task Order 0001, (2) the  401st Army Field Support battalion was concerned about its ability to  administer cost-plus-award-fee provisions, and (3) the battalion was not  meeting Army Quality Program requirements due in part to lack of  oversight and contract management staff. Specifically, we reported that  there were not enough trained oversight personnel to effectively oversee  and manage the task order. We also reported that as of April 2007 four  oversight personnel positions were vacant, including two military quality  assurance inspectors and two civilian positions—a quality assurance  specialist and a property administrator. Due to the vacant property  administrator position, some proper accounting of government-owned  equipment was not performed. The Army agreed with our  recommendation that it take steps to fill the vacant oversight positions and  Army Sustainment Command officials told us that steps were being taken  to fill the vacant oversight positions with qualified personnel. According to  the officials, 16 military personnel were assigned to the battalion to help  provide contract oversight in maintenance, supply, transportation, and  operations—8 of which would be assigned to maintenance. In addition, the  officials stated that the quality assurance specialist and property  administrator positions had both been announced numerous times and  several offers had been declined. The property administrator position was  filled in March 2008; however, as of June 2008 the quality assurance  specialist position was still vacant.
For the linguist contract, officials responsible for the contract said (1)  there were not enough contracting officer’s technical representatives to  effectively oversee the contract and (2) the representatives spent more  time ensuring the contractor met its responsibilities concerning  employees’ pay, uniforms, and other things than they did performing the  full range of contract oversight actions. According to contracting officials,  in February 2007 there were 7 contracting officer’s technical  representatives providing oversight for about 8,300 linguists in 120  locations across Iraq and Afghanistan. In one case, a single oversight  person was responsible for linguists stationed at more than 40 different  locations spread throughout the theater of operations. The officials also  said that one theater commander restricted travel within the area of  operations during some time of the contract. This travel restriction limited  the ability of oversight personnel to perform adequate contract oversight.  In addition, oversight officials stated that when they did have the  opportunity to visit a forward operating location, they often spent their  time focusing on contractor personnel issues such as ensuring that the  contractor paid the foreign national linguists on time and as agreed to in  their contracts. Oversight officials also cited the following difficulties in  performing contract oversight: (1) determining what support the  government is supposed to provide to the contractor, (2) getting deployed  units to provide support such as subsistence and transportation to the  assigned linguists and (3) inexperience of unit commanders in working  with contractors. In March 2008, after awarding four new contracts for  linguist services, the Army increased the number of alternate contracting  officer’s representatives in Iraq and Afghanistan from 7 to 14 in an effort to  improve oversight.
For the other two contracts we reviewed, authorized oversight positions  were filled. For the Stryker contract, the Program Manager-Stryker  Brigade Combat Team provided overall contract management and the  Defense Contract Management Agency provided contract administration  and oversight services for the battle damage repair effort in Qatar. The  Defense Contract Management Agency had a designated administrative  contracting officer in Kuwait, who also served as the quality assurance  evaluator. The quality assurance evaluator traveled to Qatar and  performed final inspection of repaired vehicles prior to accepting them for  the government. He also performed periodic in-process inspections during  his visits to Qatar, as his schedule allowed.
Oversight for the Predator contract was performed by the quality  assurance group within the Air Combat Command Program Management  Squadron. According to Air Force officials, the Predator quality assurance  team consisted of a superintendent quality assurance evaluator and 16  additional quality assurance evaluators. One full-time evaluator was  located in Iraq while the others were located at Creech Air Force Base,  Nevada. The quality assurance evaluators worked full time to ensure that  the contractor’s maintenance of the Predator met contract specifications.  According to Air Force officials, based on a risk analysis, one evaluator  was sufficient to provide oversight in Iraq. The quality assurance  evaluators planned their oversight inspections using a monthly contract  surveillance audit plan provided by the quality assurance department. At  the end of each month, the evaluators in Iraq and at Creech prepared a  report that described the results of site audits, technical inspections, any  deficiencies identified, the status of corrective action requests, other  action items, and an overall summary of the business relationship with the  contractor.
section_title: Guidance for Contract File Maintenance and Quality Assurance Not Always Followed
paragraphs: We found that contracting offices and oversight activities did not always  follow policy and guidance for maintaining contract files or established  quality assurance principles. According to the FAR, unless otherwise  specified, the contract administration office shall maintain suitable  records reflecting the nature of quality assurance actions as part of the  performance records of the contract. The regulation states that  organization of the contract files must be sufficient to ensure the files are  readily accessible to principal users and, if needed, a locator system  should be established to ensure the ability to locate promptly any contract  files. In addition, a DFARS policy, guidance and instruction states that the  basis for all award fee determinations should be documented in the  contract file. However, for three of the contracts we reviewed—including  two award fee contracts—the contracting officers could not provide  documents supporting contract administration and oversight actions  taken. Specifically, for the base operations support, security services, and  APS-5 contracts, we asked the contracting offices to provide  documentation from the contract files related to past oversight actions,  including any records of corrective actions. Contracting officials said that  they could not identify records of oversight actions taken because  corrective action requests and other such documentation of contractor  performance either were not maintained in the contract files or were  maintained in such a manner that the current contracting officer could not  locate them and was unaware of their existence. As a result, incoming  contracting officers and contract administration personnel said they were  unable to identify whether there were recurring contractor performance  issues. Some of the contracting office personnel with whom we spoke  stated that previous contracting office personnel had not properly  documented and maintained all contract actions; however, they could not  explain why, given that this occurred prior to their assignments. For the  base operations support and security services contracts, we also asked for  documents related to the Army’s decision concerning award fees to the  contractors; however, the contracting office personnel were unsure  whether or how quality assurance evaluations were previously analyzed  and used to assess the contractor’s performance for purposes of  determining the award fee it received.
According to DOD’s guidebook for performance-based service  acquisitions, an assessment of contractor performance should be  documented, whether acceptable or unacceptable, as it is conducted and  this official record may be considered past performance information. As  we reported in January 2008, the Army did not always document  unacceptable performance for the Global Maintenance and Supply  Services in Kuwait—Task Order 0001. We reported that the Army did not  always document deficiencies identified during quality assurance  inspections despite the requirement to do so in the battalion’s quality and  contract management procedures. Instead, quality assurance inspectors  allowed the contractor to fix some deficiencies without documenting them  in an attempt to prevent a delay in getting the equipment up to standard to  pass inspection. We found a similar situation with the APS-5 contract for  equipment maintenance in Qatar.
We also found that the regulation governing the Army quality program  stated that management of a comprehensive quality program requires  subject matter practitioners with quality expertise. However, according to  oversight officials, assigned contract oversight personnel for the linguist  contract were unable to judge the performance of the contractor  employees because they were generally unable to speak the languages of  the contractor employees they were responsible for overseeing. The  officials stated that this prevented the government from assessing linguist  quality and identifying ways to improve contractor performance. We asked  how the Army could ensure the linguists were properly translating and  interpreting information if the quality assurance personnel could not speak  the language in question. Agency officials responded that they thoroughly  reviewed and validated the contractor’s methodology for determining if  the linguists spoke the language and met the proficiency standards. They  further stated that if they had people available who could speak the  different languages needed, they would not need contract linguists.
Similar to our findings, the Army Inspector General reported in October  2007 that shortages of contracting officers, quality assurance personnel,  and technically proficient contracting officer’s representatives were  noticeable at all levels. Without adequate levels of qualified oversight  personnel, complete and organized contract files, and consistent  implementation of quality assurance principles, DOD’s ability to perform  the various tasks needed to monitor contractor performance may be  impaired. Additionally, until DOD is able to obtain reasonable assurance  that contractors are meeting their contract requirements efficiently and  effectively, it will be unable to make fully informed decisions related to  award fees as well as additional contract awards. Our selection of  contracts did not allow us to project our findings across the universe of  DOD contracts for services that support contingency operations. However,  given that we identified inadequate oversight and administration staff  levels for five of the seven contracts, and in four of the contracts we  identified a failure to follow guidance for contract file maintenance or  quality assurance principles, we believe the potential for these weaknesses  exists in other DOD contracts. As we previously stated, some of the  contracts we reviewed have ended; however, DOD continues to acquire  those services through new contracts that are managed by the same  contract oversight and administration offices and processes. As such, it is  likely the weaknesses we identified continue to exist in the new contracts.  While we could not determine the cost effect of inadequate oversight, as  we have previously reported inadequate oversight may have some negative  cost implications. Unless DOD can determine that inadequate oversight  and insufficient staff are not a problem on other contracts for services to  support contingency operations, the potential for waste exists DOD-wide.
section_title: DOD Used Contractors Because Military Personnel and DOD Civilians Were Not Available
paragraphs: DOD uses contractors to support contingency operations for several  reasons, including the need to compensate for a decrease in the size of the  force and a lack of expertise within the military services. For the seven  contracts we reviewed, DOD decided to use a contractor rather than DOD  personnel because sufficient numbers of military personnel and DOD  civilians were not available or the available personnel did not have the  required skills. For five of the seven contracts, DOD lacked sufficient  personnel to meet increased requirements for services to support  operations in Iraq and Afghanistan. For example, one contract we  reviewed was for organizational-level maintenance of the Predator  unmanned aerial system. In fiscal year 2002, Congress provided the Air  Force $1.6 billion to acquire 60 additional unmanned Predator aircraft;  however, according to Air Force documents, it did not have the additional  1,409 personnel needed to maintain these new assets. As a result, the Air  Force decided to use contractors to support the additional aircraft. In  another example, the contracting officer for a contract that provides  maintenance of prepositioned Army equipment and supply services in  Qatar told us that these services are contracted out because there were  insufficient military personnel to maintain the equipment. According to the  official, while maintenance personnel maintain their unit’s equipment, they  are not available to maintain all prepositioned equipment in a location  such as Qatar. We also reviewed a similar equipment maintenance and  supply services contract in Kuwait. According to the contracting officer,  who is the same for both the Qatar and Kuwait contracts, contractors are  used to provide the services in Kuwait because no military personnel were  available to meet the requirements during the required time frame and the  maintenance effort had previously only been performed by contractors.  Additionally, contracting office officials for the security services and base  operations support contracts in Qatar told us that contractors provide  these services because there are not enough military personnel available  to perform the work.
For the two other contracts we reviewed, DOD did not have the personnel  with specific skill sets to meet the missions. For example, regarding the  contract that provides linguist interpretation and translation services for  deployed units, Army officials told us that, the Army does not have enough  military personnel who can speak the various required languages. In  February 2007, the contract requirement was for over 11,000 linguists in  over 40 different languages and dialects. According to Army officials, years  ago the military did not anticipate such a large requirement for Arabic  speakers. As a result, it phased out many interpreter military occupational  specialties, thereby creating the shortfall. The officials said the  requirements for language skills change over time and it is very difficult to  forecast what language skills and what number of personnel with those  skills will be needed in the future. Similarly, our review of a contract that  provided total logistics support for the Stryker program found that these  services were contracted out because DOD did not have people with the  specific skills to perform this type of repair. According to Army officials,  the development, production, and fielding of the Stryker vehicles were  done concurrently and as a result, total logistics support had to be  contracted out because at that time no organic capability had been  established within the military to maintain the vehicles. After the contract  was in place, the Army identified a need for the rapid repair of battle- damaged Stryker vehicles in order to restore combat capability. This  requirement was added to the existing logistics support contract.  According to Army officials, the decision was made to contract for the  repair of battle-damaged Army Stryker vehicles because DOD did not have  people with the specific skills to perform this type of repair. Moreover, the  officials also stated that the military will never have an organic military  capability to repair battle-damaged vehicles as any extensive structural  damage typically requires specific welding experience.
In May 2007 we reported that DOD and service officials attributed the  increased use of contractors for support services to several factors,  including (1) increased operations and maintenance requirements from  the global war on terror and other contingencies, which DOD has met  without an increase in active duty and civilian personnel; (2) federal  government policy, which is to rely on the private sector for needed  commercial services that are not inherently governmental in nature; and  (3) DOD initiatives, such as its competitive sourcing and utility  privatization programs. We also reported that officials stated the increased  use of contractor support to help meet expanded mission support work  has certain benefits. For example, they said  the use of contractors allows uniformed personnel to be available for  combat missions,    obtaining contractor support in some instances can be faster than hiring  government workers,  it is generally easier to terminate or not renew a contract than to lay off  government employees when operations return to normal, and    contractors can provide support capabilities that are in short supply in the  active and reserve components, thus reducing the frequency and duration  of deployments for certain uniformed personnel.
Furthermore, according to other GAO, DOD, and RAND reports, the  department also uses contractors because of its need to deploy weapon  systems before they are fully developed, and the increasingly complex  nature of DOD weapon systems. For example, in a 2005 report that  examined the Army’s use of contractors on the battlefield, RAND reported  that DOD’s decision to field equipment still in development delays the date  at which maintenance work can be performed in-house and extends the  time the Army needs contractor personnel because it has not had the time  to develop any internal capability. Additionally, in October 2007 DOD  reported that the increasing technical complexity of DOD weapons  systems and equipment requires a level of specialized technical expertise  of limited scope, which DOD does not believe can be cost-effectively  serviced and supported by a military force capability, resulting in the use  of contractors.
section_title: Conclusions
paragraphs: While contractors provide valuable support to contingency operations, we  have frequently reported that long-standing DOD contract management  and oversight problems, including DOD’s failure to follow contract  management and oversight policy and guidance, increase the opportunity  for waste and make it more difficult for DOD to ensure that contractors  are meeting contract requirements efficiently, effectively, and at a  reasonable price. Lack of effective oversight over the large number of  contracts and contractors raises the potential for mismanagement of  millions of dollars of these obligations. As we previously stated, some of  the contracts we reviewed have ended, however, DOD continues to  acquire these services through new contracts that are managed by the  same contract oversight and administration offices and processes. As  such, it is likely the weaknesses we identified continue to exist in the new  contracts. Our selection of contracts did not allow us to project our  findings across the universe of DOD contracts for services that support  contingency operations. However, given that we identified inadequate  oversight and administration staff levels for five of the seven contracts,  and in four of the contracts we identified a failure to follow guidance for  contract file maintenance or quality assurance principles, we believe the  potential for these weaknesses exists in other DOD contracts supporting  contingency operations.
section_title: Recommendations for Executive Action
paragraphs: To ensure that DOD is able to exercise effective oversight over the  contracts we reviewed, we recommend that the Secretary of Defense  direct the Secretary of the Army to take the following three actions:    develop a plan to adequately staff oversight positions with qualified  personnel,  take steps to determine why guidance for maintaining contract files is not  consistently being followed and implement a corrective action plan, and    ensure that quality assurance principles are consistently implemented.
We also recommend that the Secretary of Defense direct each of the  service secretaries to conduct a review of the contract administration  functions that support contingency operations contracts to determine the  prevalence of inadequate contract oversight and administration staffing  levels and the extent to which guidance for maintaining contract files and  quality assurance principles are not being consistently followed and take  corrective actions as necessary.
section_title: Agency Comments and Our Evaluation
paragraphs: In commenting on a draft of this report, DOD concurred with each of our  recommendations and stated that the Army was well aware of the  problems we identified. In response to our recommendation that the Army  develop a plan to adequately staff oversight positions for the contracts we  reviewed with qualified personnel, DOD stated that the Army established  the Gansler Commission to review lessons learned in recent operations  and provide recommendations to improve effectiveness, efficiency, and  transparency for future military operations. The Gansler Commission  recommended that the Army contracting workforce be increased by 1,400  personnel. DOD stated that the Army established three new contracting  commands that should enhance the focus on contractor oversight and that  concept plans to support an increase in contract personnel were being  staffed. While the Army’s actions should be viewed as positive steps,  increasing the workforce and establishing three new contracting  commands will not address, in the near term, the Army’s inadequate  oversight personnel on the specific contracts we reviewed. We continue to  believe that the Army should ensure that currently authorized oversight  positions are filled with qualified personnel. If the concept plans include  provisions for filling currently vacant authorized oversight positions with  qualified personnel, then the Army’s actions should address our  recommendation. In response to our recommendation that the Army take  steps to determine why guidance for maintaining contract files is not  consistently being followed and implement a corrective action plan, DOD  stated that contract files are reviewed for compliance and completeness  during all Army Procurement Management Reviews of Army contracting  activities and that the Army found that a checklist should be developed.  We believe that developing a checklist may be beneficial for identifying  information that should be in contract files. However, this may not address  the issue of why existing guidance for contract file maintenance, which  already identifies what should be included in the files, is not being  followed. In response to our recommendation that the Army ensure that  quality assurance principles are consistently implemented, DOD stated  that it has stressed the requirement to prepare quality assurance  surveillance plans for all service contracts greater than $2,500 to ensure  systematic quality assurance methods are used. While having a quality  assurance surveillance plan can be beneficial to consistent  implementation of quality assurance principles, most of the contracts we  reviewed had a quality assurance surveillance plan, yet quality assurance  principles were not consistently implemented. For example, the Global  Maintenance and Supply Services Contract in Kuwait had a quality  assurance surveillance plan that required documentation of contractor  performance. However, as we reported, the Army did not always  document unacceptable contractor performance. Because of our concern  that the problems we identified may exist in other contingency contracts,  we recommended that the service secretaries conduct a review of contract  administration functions that support contingency operations contracts to  determine the prevalence of inadequate oversight and administration  staffing levels and the extent to which guidance for maintaining contract  files and quality assurance principles is not being consistently followed  and take corrective actions as necessary. In response, DOD stated that it  has taken several initiatives to position itself for future operations,  including increasing staffing dedicated specifically to contracting in  expeditionary operations. While these actions may enhance future  contracting for expeditionary operations, they will not address potential  problems with active contracts. Additionally, authorized oversight  positions in deployed locations need to be filled with qualified personnel  to provide contractor oversight. We believe existing active contracts still  need to be reviewed to address the problems we identified. DOD’s  comments are reprinted in appendix II.
We are sending copies of this report to the appropriate congressional  committees and the Secretary of Defense. We will also make copies  available to others upon request. In addition, the report will be available at  no charge on the GAO Web site at http://www.gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found on  the last page of this report.
If you or your staff has any questions regarding this report, please contact  me at (202) 512-8365 or solisw@gao.gov. Key contributors to the report are  listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: To conduct our work, we selected and conducted a case study review of a  nonprobability sample of 7 Department of Defense (DOD) contracts for  services that support deployed forces. Since a complete list of contracts  was not available, we developed a list from which to select our case  studies in two steps. First, we developed criteria for such a list of  contracts (including task orders) awarded by DOD and its components  that included the following: the contract supports deployed forces;  Operations and Maintenance (O&M) funds are used to pay for the contract  services; the principal place of performance is within the United States  Central Command’s Area of Operation (i.e., 50 percent or greater); the  contract is to maintain a weapons system(s) and/or provide support,  including base support, but not for reconstruction and commodities; the  award date of the contract is after October 2002; the contract was still in  effect as of December 12, 2006; and the contractor is U.S. based. We  provided this list of criteria to DOD which provided us with a list of 34  contracts, some of which did not meet the criteria. Second, we generated a  short list of 8 contracts to supplement those provided by DOD based on  our research and experience from prior work. We selected our  nonprobability sample of 7 contracts from these two lists combined. The  selected contracts provided various services such as base operations  support, security, vehicle maintenance, and linguist services for case study  review. Factors that influenced the case study selection included the  extent of work we may have done on a contract during previous GAO  reviews, type of contract service provided, location where the contractor’s  work was performed, and contract dollar amount. Our selection of  contracts does not allow us to project our findings across the universe of  DOD contracts for services that support deployed forces.
To determine why selected contracts supporting deployed forces  experienced cost growth, we reviewed available contract requirements  and funding documents and interviewed contracting office officials. When  available, we compared the initially estimated annual contract costs with  the actual annual contract costs to determine if the annual contract costs  were different than initially anticipated. If there was a difference between  annual contract costs and the initially estimated contract costs, we  reviewed contract modification documents, contractor proposals, and  other contract documents, and spoke with contracting office and  contractor representatives to determine what led to the change in cost. We  also spoke with representatives of the contractor to obtain their views  related to changing contract requirements and the impact the changes had  on contract costs.
To determine the extent to which DOD provided oversight of contracts  that support contingency operations, we reviewed a variety of quality  assurance and contract management regulations and guidance, including  the Federal Acquisition Regulation, the Defense Federal Acquisition  Regulation Supplement, the Army Quality Program regulation, and DOD’s  Guidebook for Performance-Based Services Acquisition in the Department  of Defense. We met with contracting and quality assurance officials, and  reviewed oversight and surveillance plans and inspection records. In  addition, we spoke with representatives of the contractor and reviewed  data provided by the contractor. We also observed physical inspections of  the services provided for two contracts and toured operation areas for two  other contracts. We spoke with oversight and contracting office officials to  discuss the extent to which the contract management and oversight teams  were adequately staffed to perform administration and oversight activities.  While guidance was not available on the appropriate number of personnel  needed to monitor contractors in a deployed location, we relied on the  judgments and views of contracting office and contract oversight  personnel as to the adequacy of staffing.
To determine why the department uses contractors to support  contingency operations, we interviewed contracting office officials and  reviewed available documentation related to the decision to use  contractors instead of military or DOD civilian personnel for the contracts.  We also reviewed prior GAO work and DOD studies to determine if the  basis of the decisions for the seven contracts we reviewed were consistent  those used to make past decisions to contract for services across DOD. We  did not, however, compare the cost of contractors versus military  personnel or make policy judgments as to whether the use of contractors  is desirable.
We conducted this performance audit from November 2006 through  August 2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact named above, Carole Coffey, Assistant Director;  Sarah Baker, Renee Brown, Larry Junek, Ronald La Due Lake, Katherine  Lenane, Susan Mason, Connie W. Sawyer, Jr., and Karen Thornton made  key contributions to this report.