Military Operations: DOD's Extensive Use of Logistics Support Contracts Requires Strengthened Oversight
Published: 2004-07-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In its contingency operations since the early 1990s, the Department of Defense (DOD) has relied extensively on logistics support contractors to provide many of the supplies and services needed by deployed U.S. forces. As requested, GAO assessed DOD's planning in its use of logistics support contracts in contingency operations; determined whether DOD has had contract oversight processes that are adequate to ensure that quality services were provided in an economical and efficient manner; and assessed the extent to which DOD provided trained personnel qualified to oversee its contractors. GAO focused its efforts on four logistics support contracts chosen because of their size and chosen to represent more than one military service--the Army's Logistics Civil Augmentation Program (LOGCAP) and Balkans Support Contract, the Navy's Construction Capabilities Augmentation Program, and the Air Force's Contract Augmentation Program.
section_title: What GAO Found
paragraphs: The effectiveness of DOD's planning to use the logistics support contracts during contingency operations varies widely between the commands that use them and the contracts themselves. In many cases, planning was done effectively, in close coordination with the respective contractors. For LOGCAP, however, the Army Central Command did not develop plans to use the contract to support its military forces in Iraq until May 2003, even though Army's LOGCAP guidance calls for early planning and early involvement of the contractor. Those plans, moreover, have undergone numerous changes since that initial planning. In Kuwait, as well, the Army has made frequent changes in its use of LOGCAP. DOD's contract oversight processes were generally good, although there is room for improvement. DOD customers have not always ensured that contractors provide services in an economic and efficient manner, although they have a responsibility to do so. We have found that when the customer reviews the contractor's work for economy and efficiency, savings are realized. Under the LOGCAP contract, months-long delays in definitizing contract task orders have frequently undermined the contractor's cost-control incentives, and the absence of an Army award fee board to comprehensively evaluate the contractor's performance has further limited DOD's oversight. DOD did not have sufficient numbers of trained personnel in place to provide effective oversight of its logistics support contractors. The Army has deployed units responsible for supporting the LOGCAP contract, but some of the personnel have little knowledge of the contract. The Air Force did not consistently train evaluators to monitor its logistics support contractor's performance. Military units across the services receiving contractor support have lacked a comprehensive understanding of their roles and responsibilities, which include establishing the work to be done by contractors and monitoring contractors' performance.

section_title: Letter
paragraphs: The U.S. military has long used contractors to provide supplies and  services to deployed U.S. forces. Since the early 1990s, much of this  support has come from logistics support contracts—contracts that are  awarded prior to the beginning of contingencies and are available to  support the troops as needed. These contracts are currently being used by  the services in more than half a dozen countries, including Iraq, to provide  a wide array of support, such as food service and housing. The contract  support in Iraq is the largest effort in the history of such contracts. While  these contracts provide vital services, they are expensive. The estimated  value of the work under the current contracts we examined is $12 billion,  including $5.6 billion for work in Iraq as of May 2004. Some of the factors  that affect costs are (1) the requirements that must be met from food  service to housing, to name just a few; (2) the conditions under which the  services must be provided, such as the security situation in Iraq; and   (3) the adequacy of government oversight.
You asked us to (1) assess the effectiveness of the Department of  Defense’s (DOD) planning for the use of logistics support contracts in  contingency operations; (2) assess the adequacy of DOD’s contract  oversight processes; (3) determine if the contracts are being used in an  economical, efficient, and cost-conscience manner; and (4) assess the  extent to which DOD had qualified personnel in place with the training  and skills necessary to provide effective contract oversight. As discussed  with your offices, we focused our efforts on four contracts: (1) the Army  Logistics Civil Augmentation Program (LOGCAP) Contract; (2) the Air  Force Contract Augmentation Program (AFCAP) Contract; (3) the U.S.  Army, Europe, Balkans Support Contract (BSC); and (4) the Navy  Construction Capabilities (CONCAP) Contract. The Army’s LOGCAP  contract is by far the largest of these contracts. The contractors for these  contracts and the military services have, for the most part, worked  together to meet the customers’ needs in sometimes hazardous or difficult  circumstances.
In conducting our work, we examined a wide range of contract documents  and contracting guidance and met with contracting officers; contract  customers; and the contractors to gain a comprehensive understanding of  the contracts, the contract management process, and issues related to  using the contracts. We visited U.S. military sites using the LOGCAP,  CONCAP, and AFCAP contracts, including sites in Kuwait and Qatar, but  did not visit sites in Iraq. However, to obtain information about the use of  LOGCAP in Iraq, we interviewed personnel who were responsible for  contract management in Iraq, reviewed Defense Contract Management  Agency (DCMA) situation reports written by contracting officers in Iraq,  and met with representatives of the 101st Airborne Division shortly after  their return from Iraq to discuss their experiences with the LOGCAP  contract. In addition, because we visited the Balkans during our previous  reviews of the Balkans Support Contract, we did not visit the Balkans  during this review but did meet with Army personnel in Germany  administering the contract. We determined that the information and data  discussed in this report were reliable for the purpose of the report. We  conducted our review from August 2003 through June 2004 in accordance  with generally accepted government auditing standards. We discuss our  scope and methodology in more detail in appendix I.
subsections: section_title: Background
paragraphs: The U.S. military has relied on contractors to provide supplies and  services in support of contingency operations since the Revolutionary  War. Since the early 1990s, DOD has used logistics support contracts to  meet many of its logistical support needs during combat operations,  peacekeeping missions, and humanitarian assistance missions, ranging  from Somalia and Haiti to Afghanistan and Iraq. Today these contracts  support contingency operations such as Operation Enduring Freedom and  Operation Iraqi Freedom as a major part of America’s Global War on  Terrorism. Figure 1 shows locations where contractors are being used to  support deployed forces.
Contracts such as AFCAP, LOGCAP, and BSC provide similar logistics and  engineering services, such as food preparation, laundry, housing, and  construction in support of contingency operations. The Navy’s CONCAP  contract is a contingency construction contract designed to meet  emergency requirements involving natural disaster recovery, humanitarian  assistance, or conflicts.
All of the contracts included in our review are cost-plus award fee  contracts. Cost-plus contracts allow the contractor to be reimbursed for  reasonable, allowable, and allocable costs incurred to the extent  prescribed in the contract. A cost-plus award fee contract provides  financial incentives on the basis of performance. These contracts allow the  government to evaluate a contractor’s performance according to specified  criteria and to grant an award amount within designated parameters.  Award fees can serve as a valuable tool to help control program risk and  encourage excellence in contract performance. To reap the advantages  that cost-plus award fee contracts offer, the government must implement  an effective award fee process.
Table 1 provides additional contract information on the logistics support  contracts we reviewed. As can be seen in table 1, LOGCAP is by far the  largest of these contracts both in terms of funds obligated and of the  estimated value of work under the contract.
The use of LOGCAP to support U.S. troops in Iraq is the largest effort in  the history of the LOGCAP program both in number of troops supported  and in land mass. As of May 21, 2004, the estimated value of contract  services in Iraq was $5.6 billion. Figure 2 illustrates the size of Iraq. As  shown, when superimposed over a U.S. map, Iraq covers an area east to  west that is comparable to that from Washington, D.C., to central Indiana,  and from north to south comparable to Lansing, Michigan, to Raleigh,  North Carolina.
WASHINGTON, D.C.
The contractors and the services have, for the most part, worked together  to meet the customers’ needs in sometimes hazardous or difficult  circumstances. For example, the AFCAP contractor is providing air traffic  management at air bases throughout central Asia, reducing the operations  tempo of selected and scarce Air Force assets. In addition, AFCAP is  providing housing and base support in Iraq. Through CONCAP the Navy  has constructed detainee facilities (including a maximum security prison)  at Guantanamo Bay on time and within budget. CONCAP’s projects at  Guantanamo have increased the safety of both the detainees and the U.S.  forces guarding them and will result in real savings in reduced personnel  tempo. For example, CONCAP has increased detainee safety with the  construction of more secure cells and guard safety by providing greater  separation between guards and detainees. LOGCAP is providing life and  logistics support for more than 166,500 soldiers and civilians under  difficult circumstances in Iraq, Afghanistan, Kuwait, and Djibouti, and  customers are generally pleased with the service the contractor is  providing. Finally, BSC continues to provide troops in Kosovo and Bosnia  with a myriad of high-quality services, and the customer works with the  contractor to identify costs savings.
Many factors can influence the overall cost of the logistics support  contracts. As shown in figure 3, costs can be affected by the size and scope  of requirements identified by customers and by the amount of time the  customer gives the contractor to plan and execute the mission.  Additionally, cost is influenced by the manner in which a unit chooses to  fulfill a requirement. Other resources that are more cost-effective may be  available to the units, such as military troop labor or host nation support.  Cost may also be affected by the quality of documentation prepared by  contract customers and program managers. Concise statements of work  and comprehensive government cost estimates may reduce the likelihood  of incurring additional costs. In addition, the appointment of government  contract management personnel to monitor contractors’ performance  ensures that contractor-provided services meet contract requirements.  Lastly, operational concerns, such as the security situation in Iraq, can  make providing services more costly.
The military services, as well as DCMA and the Defense Contract Audit  Agency, perform contract management functions to ensure that the  government is receiving quality services from the logistics support  contractors at the best possible prices. The customer is responsible for  identifying and validating requirements to be addressed by the logistics  support contracts as well as evaluating the contractor’s performance and  ensuring that the contract is used in an economical and efficient manner.  The contracting officer is responsible for oversight and management of the  contract. However, the contracting officer may delegate some of the  oversight and management functions to DCMA. When management  functions are delegated by the procuring contracting officer, DCMA may  assign administrative contracting officers to provide on-site contract  administration at deployed contingency locations. The Defense Contract  Audit Agency ensures that costs claimed by the contractor are reasonable,  allowable, and allocable. Table 2 provides additional information on the  roles and responsibilities of contract management personnel.
Work is done under each of the contracts through task orders. The task  order process begins when the customer, or the unit that is requesting  support from the contractor, identifies a requirement. The requirement is  generally documented in the form of a task order statement of work,  which establishes the specific tasks to be accomplished by the contractor  and the time frames of performance. If the decision is made to use the  logistics support contract to satisfy the requirement, the unit contacts the  contract program management office. The program management office, in  coordination with the contracting officer, determines whether the task is  within the scope of the contract. The program management office obtains  an approximate cost estimate from the contractor and provides the  customer with the information. From this information, the customer  decides if it will use the contractor to fulfill the requirement. If the  government decides to use a logistical support contract, funding is  obtained, the statement of work is finalized, and the contracting officer  issues the contractor a notice to begin work. Significantly, if the customer  identifies a change in the requirement, the process is initiated again.  Figure 4 provides an illustration of the key steps in the task order process.
We have issued reports on the use of contractors to support deployed  forces in 1997, 2000, and 2003. In 1997 we reported that there were  opportunities to make the use of LOGCAP in Bosnia more efficient and  effective, including developing doctrine and guidance, providing  commanders with training, and providing commands with assistance when  they are using LOGCAP. In 2000 we reported that the Army should  improve its management of BSC, the successor contract to LOGCAP in the  Balkans, including examining the level and frequency of services and  providing a more extensive predeployment training program for all  contract oversight personnel. In 2003 we reported that commanders had  limited visibility and understanding of the extent and type of services  being provided by contractors and those commanders and other personnel  lacked training on their roles and responsibilities in dealing with  contractors.  DOD generally agreed with the recommendations that we  made in each of these reports, including the provision of more training.
section_title: Planning for the Use of Contractor Support Varied Widely
paragraphs: Planning for the Navy’s CONCAP contract, the Army’s BSC, and to a lesser  degree, the Air Force’s AFCAP contract, included the contractor in task  order planning, resulting in more-effective planning. However, while the  Army has developed guidance to facilitate the use of LOGCAP that clearly  recommends working with the contractor to develop comprehensive  support plans and statements of work in the early stages of contingency  planning, that guidance was not always followed. For example, the Army  Central Command did not follow that guidance when planning for  Operation Iraqi Freedom. Even as it became clear that U.S. forces would  remain in Iraq longer than originally anticipated, LOGCAP planning  continued to be mixed, partly because the Army often did not include the  contractor in its planning and planning did not always take advantage of  lead-time when it was available. However, U.S. Army, Europe, in planning  for the anticipated movement of troops through Turkey into Iraq in  support of Operation Iraqi Freedom, and the Marine Corps, in planning for  the deployment of forces to Haiti, followed LOGCAP guidance, which  proved beneficial. As noted earlier, the LOGCAP contract is the most  expensive of the logistics support contracts we examined.
subsections: section_title: U.S. Army, Europe; the Navy; and the Air Force Involve the Contractor in Planning
paragraphs: Planning for BSC, the CONCAP contract, and the AFCAP contract all  follow similar processes, which rely on a collaboration between the  customer and the contractor to develop comprehensive and clear  statements of work in the early stages of planning. For example, we  observed during our work that the following guidance and procedures  were being followed:    Guidance issued by BSC’s contracting office, the Army Corps of  Engineers—Transatlantic Program Center, establishes the policy for  developing statements of work for BSC. According to the guidance, after  the customer identifies a requirement, the customer and the contractor  work together to develop the statement of work. After the statement of  work is agreed to, the contractor prepares an execution plan that  describes how the contractor intends to meet the requirement. The  government reviews the execution plan to ensure that the customer’s  needs are met in the most economical and efficient manner possible. This  process continues until U.S. Army, Europe, is satisfied that the statement  of work accurately reflects the command’s requirements and the  contracting officer issues a notice to proceed.
CONCAP planning is a cooperative effort between the Navy Facilities  Command, the customer, and the contractor. Customers work closely with  the command and the contractor to clearly define the requirements and  develop a statement of work, which may vary from a brief description or  sketch to a complete design. Depending on the project, the contractor may  be given the responsibility to provide the initial statement of work, which  the government team reviews and determines if it is acceptable before  providing final approval. After the government and the contractor come to  agreement on the work to be performed and the cost, the task order is  incorporated into the contract.
The AFCAP planning process is detailed in AFCAP’s Concept of  Operations document. According to this guidance, customers    obtain approval to use AFCAP from a Major Command, and    develop a statement of work.
After the statement of work is developed, the contractor provides a cost  estimate, and the government and the contractor work together to ensure  that all parties understand the requirements, available options, and  associated costs. Using information developed through this collaborative  effort, the customer finalizes the statement of work and sends it to the  procuring contracting officer, who issues a notice to proceed.
section_title: Army Guidance Highlights the Early Identification of Requirements as a Key to Maximizing the Effectiveness of Contractor Support
paragraphs: Early planning that identifies requirements and decides which ones will be  satisfied by contracting, and the involvement of the contractor in planning,  are recurring themes in the Army’s doctrine and guidance for using  contractor support, in general, and the LOGCAP contract, specifically.  According to Army Field Manual 3-100.21—”Contractors on the  Battlefield” — integrated planning is a governing principle of contractor  support, and for contractor support to be effective and responsive, its use  must be considered and integrated into the planning process. Proper  planning identifies the full extent of contractor involvement, how and  where contractor support is provided, and any responsibilities the Army  may have in supporting the contractor. This same emphasis on planning  and the early identification of requirements is also discussed in Army  Regulation 700-137—”Logistics Civil Augmentation Program”—which  establishes the policies, responsibilities, and procedures for implementing  LOGCAP. That regulation states that contractor responsiveness similar to  that offered by military units can be achieved only through the careful  drafting of contract requirements (statements of work), and that to  increase proper planning and execution, the contractor should have a  clear understanding of the statement of work. The regulation also urges  commanders not to classify plans at a level where the contractor cannot  have access and, if classification is necessary, commanders should write  unclassified contract statements of work and put time frames, geographic  areas, and other classified material in appendixes. An Army regulation on  contractors accompanying the force similarly states that the most  important factor in ensuring that support services are provided at the  desired levels of quality and timeliness is the establishment of clear and  concise contract requirements in a statement of work,  and Army Materiel  Command Pamphlet 700-30—Logistics Civil Augmentation Program — designed to help users obtain support through the LOGCAP process  reiterates the point that a major consideration for maximizing LOGCAP  potential is for the customer to be aware of its LOGCAP support  requirements and convey those requirements in a timely manner to the  appropriate personnel. This pamphlet also recommends the early  involvement of the contractor in planning because it allows the contractor  to develop more accurate cost estimates, gives the contractor time to bring  on board reliable subcontractors, and can minimize costs. The guidance  also recommends that the customer and the contractor develop a  comprehensive statement of work in the early stages of contingency  planning.
Early decisions on how the contract is to be used facilitate a number of  other actions that lead to enhanced contract management and oversight.  Once government and contractor planners are notified of a customer’s  requirements, they can begin developing statements of work. According to  the Army’s LOGCAP guidance, statements of work specify the products  and services required and are the most important documents provided to  the contractor. The contractor uses statements of work to (1) plan how to  satisfy the customer’s requirements in the most efficient and economical  manner and (2) develop cost estimates. These estimates are provided to  the customer and serve as an important decision tool for assessing  contractors’ proposals and deciding between alternative support  strategies. At the same time, representatives from the LOGCAP program  management office use the statements of work to develop independent  government cost estimates. An independent government cost estimate is  the government’s estimate of the costs the contractor is expected to incur  in performing the work. The more time the contractor and the government  have to refine their estimates, the more useful they are to commanders.
section_title: Planners Followed Army Guidance with Positive Results in Turkey and Haiti
paragraphs: Following LOGCAP guidance proved beneficial for Army operations in  Turkey and Marine Corps operations in Haiti (LOGCAP is available to all  the military services). Specifically, involvement of the contractor as  recommended in the LOGCAP guidance led to more informed decision  making as follows:  In planning for Operation Iraqi Freedom, U.S. Army, Europe, was tasked  with supporting the anticipated movement of troops through Turkey into  Iraq, and our review of that planning showed that the command followed  Army guidance to good effect. In October 2002 the command brought  contractor personnel to its headquarters in Europe to help plan and  develop the statement of work. According to U.S. Army, Europe,  contractor planners brought considerable knowledge of contractors’  capabilities, limitations, and operations, and their involvement early in the  planning efforts increased their understanding of requirements and  capabilities, facilitated communication regarding the statement of work,  and enhanced the mission’s completion.
Recent planning for the deployment of U.S. forces to Haiti resulted in a  similar outcome. U.S. Marine Forces Atlantic, U.S. Southern Command,  Army Materiel Command, and contractor personnel visited Haiti to  develop support plans. According to an Army Materiel Command official,  the planning process was a success because it led to an informed decision  by the Marines to use their own assets to support the forces in lieu of  LOGCAP.
section_title: Planning for Operation Iraqi Freedom Was Not Comprehensive
paragraphs: The Army Central Command—the Army command responsible for  LOGCAP planning in Kuwait and Iraq—did not follow the planning process  described in Army regulations and guidance as it prepared for operations  in southwest Asia. According to a former Army Materiel Command  logistics planner, the Army Central Command used the standing LOGCAP  plans to prepare for the mission but, after Army forces deployed, the plan  changed significantly and Army Materiel Command’s involvement was  diminished because of security concerns. The planner stated that Army  Central Command raised the security classification for the plan above the  clearance level of the planners and it took some time to resolve this issue.  Thus, during a critical planning period, the planning personnel with the  most experience in using the contract were not part of the planning  process. The planner also said that the contractor was not involved in the  planning because of security concerns. As a result, two key principles  needed to maximize LOGCAP support and minimize cost—a  comprehensive statement of work and early contractor involvement— were not followed. Specifics follow:    The Army developed a plan to support the troops in Iraq (task order 59 of  the LOGCAP contract) in May 2003, but the plan was not comprehensive  because it did not include all of the dining facilities, troop housing, and  other services that the Army has since added to the task order. According  to an official from the 101st Airborne Division, there was a lack of detailed  planning for the use of LOGCAP at the theater and division levels for the  sustainment phase of the operation. He went on to add that Army planners  should develop a closer working relationship with the divisions and the  contractor.
Task orders were frequently revised. These revisions generated a  significant amount of rework for the contractor and the contracting  officers. Additionally, time spent reviewing revisions to the task orders is  time that is not available for other oversight activities. While operational  considerations might have driven some of these changes, we believe  others were more likely the result of ineffective planning. For example,  task order 59 was changed seven times in less than 1 year. Specifics  follow:    Basic Statement of Work—May 30, 2003—provided limited services  such as food services (except site A); pest control; laundry services;  and morale, welfare, and recreation services at six base camp clusters  known as sites A, B, C, D, E, and F.
Change 1 on June 7, 2003, added support for the coalition forces   (site G).
Change 2 on June 20, 2003, added food service; pest control; laundry  services; and morale, welfare, and recreation services for Site H (the  101st Airborne Division).
Change 3 on June 24, 2003, added troop housing, transportation, and  supply service activities at site A.
Change 4 on July 22, 2003, removed the coalition forces (Site G) from  the task order and added food service for site A. A separate task order  was developed for support for coalition forces.
Change 5 on August 27, 2003, added housing for sites B, C, D, F, and  H.
Change 6 on November 3, 2003, made changes to the services being  provided and added additional combat support activities.
Change 7 on November 14, 2003, added additional combat support  services.
Frequent revisions have not been limited to task order 59. Task order 27,  which provides support for a significant number of U.S. troops in Kuwait  (valued at $426 million as of May 2004), was changed 18 times from  September 2002 through December 2003, including five changes in 1  month, some on consecutive days. As of May 11, 2004, the contracting  office, DCMA, and the contractor processed more than 176 modifications  to LOGCAP task orders. As discussed above, frequent revisions to task  orders generate a significant amount of rework for the contractor and the  contracting officer.
section_title: LOGCAP Planning Has Not Always Been Timely
paragraphs: While we recognize the uncertainty inherent in wartime operations,  planning for some LOGCAP tasks did not take advantage of lead-time  when it was available. According to the LOGCAP program manager, early  planning is a key to obtaining the best services at the best prices. The  following are two examples of where the Army did not use the planning  time available:    The Kuwaiti government gave the Army several months’ notice that it  needed some Army facilities at the Kuwait International Airport moved  because of planned construction. The Army did not inform the contractor,  however, until 5 days before the scheduled deadline. Army officials stated  that accomplishing the move in only 5 days increased the cost to the Army.
The Army in Kuwait did not always give acquisition review boards  sufficient time or resources to consider alternatives to LOGCAP.  Commanders create acquisition review boards to make recommendations  about the validity of requirements and the best way to meet them. The  boards generally consist of personnel from operations, logistics, legal  services, resource management, and contracting that review requirements  for contracting support against the priorities established by the  commander. The boards screen requirements and determine whether or  not they should be satisfied through contingency contract support,  through host nation support, LOGCAP, or other sources. However, in  December of 2003 in Kuwait, we observed that one board was not given  sufficient time to consider alternatives to LOGCAP and that the resources  to pursue contingency contracts other than LOGCAP were not available,  largely defeating the purpose of the board. For example, several large,  preexisting task orders that were to expire within a few weeks were  presented with the admonition that it was imperative that the task orders  continue. With only a few weeks to renew the task order, the board had no  time to explore options to using the LOGCAP contract. Furthermore, the  principal assistant responsible for contracting in Kuwait said that her  office lacked the resources to explore contracting options to LOGCAP and  the legal office lacked the resources to review new contracts.
section_title: Contract Oversight Processes Were Generally Good but Not Always Properly Implemented
paragraphs: While oversight of a contract is the contracting officer’s responsibility, the  contracting officer may delegate some oversight responsibilities to DCMA.  The contracting officers for LOGCAP, AFCAP, and BSC have all delegated  significant portions of contract oversight to DCMA, while the Navy retains  all contract administration and oversight responsibilities for the CONCAP  contract. While DCMA’s contract oversight generally resulted in cost  savings, opportunities exist to improve oversight. For example, DCMA did  not perform some of its delegated contract administration tasks under  AFCAP, such as ensuring that the contractor maintained appropriate  controls of government property, and the Air Force did not always appoint  contracting officers’ representatives (subject matter experts) to assist with  oversight. Complicating oversight were recurring contractor problems  such as poor cost reporting; difficulties with producing and meeting  schedules; and inadequate controls over purchasing, which made the  LOGCAP contract more difficult to administer. In addition, better  government oversight might have avoided a billing disagreement between  the government and the LOGCAP contractor involving millions of dollars  in food service bills. Moreover, while the AFCAP and BSC task orders  have been definitized within the time allowed by the Defense Federal  Acquisition Regulation Supplement, most of the LOGCAP task orders have  not. Because task orders have not been definitized, LOGCAP contracting  personnel have not conducted an award fee board. We believe it will be  difficult to comprehensively assess the contractor’s performance in an  award fee board because customer evaluations of the contractor’s  performance have not been uniformly documented. Finally, lessons  learned are often not shared or are shared only informally, and there is no  process in place to systematically collect knowledge and insights about  the programs and to disseminate it to those who currently need it to  provide oversight and management of the contracts.
subsections: section_title: DCMA’s Oversight of Logistics Support Contracts Has Produced Good Results
paragraphs: The oversight of contracts ultimately rests with the contracting officer,  who is responsible for ensuring that contractors meet the requirements set  forth in the contract. However, most contracting officers are not located at  deployed locations. As a result, contracting officers appoint monitors, who  represent the contracting officer and are responsible for monitoring  contractors’ performance. Contracting officers for AFCAP, LOGCAP, and  BSC have chosen to have personnel from DCMA oversee contractors’  performance. DCMA is an independent combat support agency within  DOD that serves as the department’s contract manager, responsible for  ensuring that federal acquisition programs, supplies, and services are  delivered on time, delivered within cost, and meet performance  requirements.
We met with DCMA officials in Kuwait and Qatar and discussed contract  oversight activities for the LOGCAP and AFCAP contracts; reviewed Army  Audit Agency audits of contract oversight activities in Afghanistan,  Uzbekistan, and Turkey; and found that, overall, DCMA is doing a good job  of administering the contract. From December 2002 through February  2004, the Army Audit Agency reviewed the Army’s use of LOGCAP in  Turkey, Uzbekistan, and Afghanistan and found that the contract was  being effectively managed. While these audits did not specifically assess  DCMA’s oversight of the contract, the audits’ included the oversight  responsibilities delegated to DCMA. In Turkey, the Army Audit Agency  reported that appropriate actions to control costs and ensure effective  stewardship of resources were in place; in Uzbekistan, it reported that key  management controls had been identified, were in place, and were  working; and in Afghanistan, the audit agency reported that adequate  procedures were in place to control costs but that the government could  improve the management of government-furnished equipment provided to  the contractor.
The Army Audit Agency’s conclusions are similar to our observations of  DCMA’s activities in Kuwait, where DCMA’s oversight is resulting in  contract improvements and cost savings. For example, at one location we  visited in Kuwait that included the use of LOGCAP for helicopter airfield  operations, the DCMA administrative contracting officer had an aviation  background and observed that the contract called for more aviation  refueling points than necessary and that the number of sweepers available  for cleaning the runways and parking ramps was excessive. He was able to  reduce the number of refueling points by half, saving the Army money, and  the number of sweepers from five to three. In addition, after conducting a  lease/buy analysis, the administrative contracting officer directed the  contractor to buy the sweepers instead of leasing them because buying  saved the government money. Situation reports filed periodically by  DCMA administrative contracting officers also detail a concerted effort to  reduce contract costs by conducting lease or buy analyses for nontactical  vehicles and generators, critiquing the contractor’s proposed cost  estimates, and monitoring the disposition of government property. These  reports also document DCMA’s quality assurance personnel enforcing  health and safety standards to ensure, for example, that food served to  U.S. military personnel had met all health requirements. Additionally,  DCMA officials, along with contractor and service officials in Qatar, the  Balkans, and Kuwait were instrumental in transferring excess material and  equipment from AFCAP and BSC to LOGCAP. DCMA estimated savings to  the LOGCAP contract from the equipment transfer at $17 million to   $22 million.
section_title: DCMA Failed to Perform Its Property Administration Function on Some Task Orders
paragraphs: While, as discussed above, we believe overall that DCMA provided good  oversight, it failed to perform some of its delegated contract  administration tasks for the AFCAP task orders in southwest Asia. DCMA  failed to ensure that the contractor maintained appropriate controls of  government property. The Federal Acquisition Regulation states that a  government contractor is required to establish and maintain a property  system to control, protect, preserve, and maintain all government  property. The Federal Acquisition Regulation goes on to say that the  government’s contracting officer or the designated representative assigned  the property administration responsibility should review the contractor’s  property control systems to ensure compliance with the property clauses  of the contract.
On task orders executed in southwest Asia, the AFCAP procuring  contracting officer delegated the property administration responsibility to  DCMA’s administrative contracting officers. However, contract  administrators in southwest Asia did not ensure that the contractor had  established and maintained a property control system to track items  acquired under the contract. In addition, DCMA’s contracting officers in  southwest Asia did not have a system in place to document what the  contractor was procuring in support of AFCAP task orders and what was  being turned over to the Air Force. As a result, as of April 2004, neither  DCMA nor the Air Force could account for approximately $2 million worth  of tools and construction equipment purchased through the AFCAP  contract.
In July 2004 DCMA told us that the AFCAP contracting officer provided  DCMA with additional direction regarding the administration of property  acquired under the contract. According to DCMA, its Middle East office  identified a joint accountability problem for the Air Force engineering  squadrons. The AFCAP contracting officer has since clarified that the tools  and construction equipment purchased for the Air Force engineering  squadrons were to go directly to the Air Force. As a result, DCMA believes  that neither it nor the contractor are responsible for the accountability of  the property. However, at the time of our visit to the theater in December  2003, and in subsequent conversations with DCMA contracting officers, we  observed and were told that at that time DCMA was responsible for  property administration but did not have a system in place to document  the property that was purchased under these task orders and that DCMA  contracting officers should have been performing this responsibility.  Notwithstanding the additional guidance that has since been provided by  the AFCAP contracting officer, DCMA was delegated the property  administration responsibility and either should have documented all  property purchased for the Air Force engineering squadrons or sought  clarifying guidance earlier from the AFCAP contracting officer. However,  at the time of our review, neither the Air Force nor DCMA could account  for approximately $2 million worth of tools and equipment purchased  under the contract.
section_title: DCMA Did Not Always Appoint and Use Contracting Officers’ Technical Representatives to Monitor the Contract in Iraq
paragraphs: As mentioned, the LOGCAP contract is being used to meet a wide range of  military requirements, such as running supply operations for food, water,  fuel, construction materials, and repair parts and providing services such  as laundry, clothing repair, food service, sanitation, recreation,  maintenance, transportation, medical waste disposal, and construction.  Effective oversight of this diverse body of work requires personnel with  knowledge and expertise in these particular areas. DCMA administrative  contracting officers are contracting professionals but may have limited  knowledge of field operations. In these situations, DCMA normally uses  contracting officers’ technical representatives. Contracting officers’  technical representatives are individuals who have been designated by  their unit and appointed and trained by the administrative contracting  officer. They provide technical oversight of the contractor’s performance,  but they cannot direct the contractor by making commitments or changes  that affect any terms of the contract.
In March 2000, the U.S. Army, Europe, audit cell located in Kosovo  recommended that the command use the Army’s subject matter experts to  provide oversight of routine day-to-day services provided by the Balkans  Support Contract. The audit cell recommended that the task force  designate these experts as contracting officers’ representatives, which,  according to the audit cell, would improve contract oversight and  management and ensure that the command received quality service from  the contractor. In October 2002, during a visit to Kosovo, we confirmed  that the command had designated subject matter experts from the Area  Support Group’s Department of Logistics as contracting officers’  representatives for BSC.
According to a DCMA official in Iraq, it was the agency’s goal to have a  contracting officer’s technical representative for each functional area (e.g.,  food service and maintenance) at each division and camp. While  representatives were appointed at some locations, they were not at others.  For example, 101st Airborne Division officials told us that they had not  been asked to provide representatives and had played no role in  overseeing the contract. We believe that having contracting officers’  technical representatives for each functional area at each division and  camp would improve government oversight.
section_title: LOGCAP Contract Management Is Made More Difficult by Recurring Contractor Problems
paragraphs: DCMA prepares periodic situation reports that report the status of  contractor activities, successes, and problems. Our review of the reports  prepared by DCMA from September 2003 through May 2004, which we did  not validate but did discuss with the LOGCAP contractor, highlights a  pattern of contractor management problems. Some of the problems  mentioned in these reports follow:    Adequate cost reporting and cost management are important because they  affect the government’s ability to monitor contract spending. Several  administrative contracting officers believe that the contractor’s cost  reports are inadequate and make it difficult to know how much the  contractor has actually spent on the individual task orders. For example,  in the November 13, 2003, report for Iraq, the administrative contracting  officer reported that the contractor was refusing to perform work because  of its contention that no funding remained available, while the cost report  for the previous reporting period showed that the contractor had  expended only 45 percent of the available funds. Furthermore, some  administrative contracting officers have noted that the contractor’s  managers at individual sites have no knowledge of the costs associated  with their task orders.
Difficulties with producing and meeting schedules affect the government’s  ability to know when contracted support will be provided. The situation  reports frequently mention that the contractor has not been able to  produce task order schedules as required by the contract. In addition, the  reports often note that the contractor is behind schedule on both big and  small projects. Additionally, officials from the 101st Airborne Division  noted that the contractor did not meet the required schedule for providing  housing. They also noted that the contractor did not provide some of the  services required by task order 59, specifically pest control and water  production.  Inadequate controls over purchasing and subcontractors hinder  government oversight. Several administrative contracting officers have  noted that the contractor had inadequate controls over its purchasing  system. For example, administrative contracting officers have observed  that requisitions    are not always provided to the administrative contracting officers as  required by the contract,  frequently lack sufficient documentation to justify the lease or  purchase, and    do not provide an accurate estimate of the cost of the item.
Also, administrative contracting officers have noted that they are unable to  gain accurate status about materiel being purchased through the  contractor, which increases customers’ frustration. In addition, the  contractor does not have good control over its subcontractors. One DCMA  official reported that the contractor let a subcontract expire without a  transition plan, thus disrupting services.
The LOGCAP contractor has acknowledged some of these problems and  has been working with DCMA to establish systems and procedures that  will be more responsive to the government’s needs. For example, in late  2003 the contractor sent a large team of auditors to Kuwait to review its  operations in Kuwait and Iraq and develop processes and procedures to  help resolve some of the purchasing problems. The situation reports also  document that the contractor is working with DCMA to resolve other  problems mentioned above, such as issues related to scheduling. However,  situation reports from Iraq and Kuwait indicated that scheduling and cost  reporting continue to be a problem at some locations while improvements  have been noted at others.
section_title: Better Oversight of Food Service Might Have Avoided a Contract Disagreement
paragraphs: A disagreement between the LOGCAP contractor and the Defense  Contract Audit Agency involving at least $88 million in food services  charges to feed soldiers in Iraq might have been avoided had there been  more careful government oversight. The statement of work prepared by  the Army required that the LOGCAP contractor provide food service and  food service facilities at bases throughout Iraq. It directed that the  contractor build, equip, and operate the dining facilities at the base camps  and provide four meals a day for the base camp populations. The  populations were specified in the statement of work. The contractor  subcontracted with six food service companies, which were responsible  for building and operating the dining facilities as well as providing food  service workers and food. The contractor instructed the subcontractors to  do a head count at each meal. A military representative, a contractor  representative, and a subcontractor representative signed daily head-count  sheets. The statement of work did not specify whether the government  should be billed on the camp populations specified in the statement of  work or on the actual head count. Generally, the subcontractors billed the  contractor for the base camp population although there were some  differences in the subcontractors’ billing procedures.
During our review of subcontractors’ files, we noted that on many  occasions the number of personnel eating in the dining facilities  throughout Iraq was less than the base camp population indicated in the  statement of work. In response to a Defense Contract Audit Agency audit  of dining facility billings, the contractor analyzed selected invoices from a  number of dining facilities throughout Iraq for a 4-month period and found  that by billing the government for the base camp population instead of the  actual personnel served, it had billed the government for food service for  more than 15.9 million soldiers when only 12.5 million—more than 3.4  million fewer—had passed through the dining facilities. The contractor  estimated the cost of serving the additional personnel who did not use the  dining facilities at approximately $88 million.
The contractor and the Defense Contract Audit Agency disagree over the  appropriate billing procedures for this service. The Defense Contract  Audit Agency’s interpretation requires billings based on actual head counts  while the contractor’s interpretation authorizes billings based on the  number of soldiers at each base camp as established in the task order  statement of work. The parties are currently discussing the issue. We  believe that this disagreement could have been avoided through better  contract oversight. As discussed above, daily head counts sheets were  being prepared at each facility. However, neither the government nor the  contractor apparently acted on the disparity between the camp population  and the head counts. According to representatives of the 101st Airborne  Division, they were not aware of the cost implications of the disparity.  They also said that CJTF-7, the next higher headquarters for the 101st, was  not interested in the numbers of people that were using the dining facility  unless the number exceeded the number contracted for in the statement of  work.
section_title: The Navy Provides Oversight for the CONCAP Contract
paragraphs: Unlike the other contracts we reviewed, the Navy has retained all of the  contract administration and oversight responsibilities for the CONCAP  contract. The Naval Facilities Engineering Command uses frequent  communication and technically qualified staff for overseeing CONCAP  projects. For example, at Guantanamo Bay, the site of CONCAP’s largest  project, the contractor’s on-site project managers provide the Naval  Facilities Engineering Command, Atlantic Division Headquarters in  Norfolk, Virginia, with daily situation reports. In addition, Facilities  Command engineers and engineering technicians located at Guantanamo  Bay provide on-site quality control for the CONCAP projects and  document their findings in quality control reports. Partnering sessions  with customers, contractors, and subcontractors are held monthly, and  project management officials from the command frequently visit the sites  to inspect the projects. A command official stated that in contracting one  must have people with the technical expertise to provide oversight of the  job. According to officials, a minimum of at least one technically qualified  person should be on site at each task order location.
section_title: The Army Has Not Definitized the Majority of LOGCAP Task Orders nor Has It Held an Award Fee Board
paragraphs: The Defense Federal Acquisition Regulation Supplement requires that  undefinitized contracting actions, such as the task orders used in the  LOGCAP program, be definitized within 180 days of beginning work or  before 50 percent of the work is completed. While AFCAP and BSC  complete the definitization process well within the 180-day time limit,  many of the LOGCAP task orders have not been definitized despite the fact  that work has been completed on some of the task orders. In addition, the  Army has yet to hold an award fee board despite the contract requirement  to hold a board every 6 months. The award fee board is a mechanism for  the government to evaluate the contractor’s overall performance and  recommend an amount of award fee. Furthermore, it is unclear if the  award fee board, when it is held, will be able to conduct a comprehensive  evaluation of the contractor’s performance because many LOGCAP  customers have not been evaluating and documenting the contractor’s  performance.
subsections: section_title: Most LOGCAP Task Orders Have Not Been Definitized
paragraphs: The LOGCAP, AFCAP, and Balkans Support Contracts comprise a series  of task orders that commit the contractor to provide services and the  government to pay for them. The task orders are considered undefinitized  contracting actions because the terms, specifications, and price of the task  orders are not agreed upon before performance begins. Undefinitized  contract actions are used when government interests demand that the  contractor be given a binding commitment so that work can begin  immediately and negotiating a definitive contract is not possible in  sufficient time to meet the requirement.
The Defense Federal Acquisition Regulation Supplement requires that  undefinitized contract actions include a not-to-exceed cost and a  definitization schedule. It also requires that the contract be definitized  within 180 days or before 50 percent of the work to be performed is  completed, whichever occurs first. The head of an agency may waive the  limitations.
While the AFCAP and BSC task orders have generally been definitized  within the time allowed by the Defense Federal Acquisition Regulation  Supplement, and CONCAP task orders do not require definitization, most  of the LOGCAP task orders have not been definitized in the required time  even though work began on some of the task orders in 2002. For example,  Air Force contract administrators definitized contract terms, on average,  in 23 days after issuing a notice to proceed. However, as of June 4, 2004,  the Army had issued 78 task orders for the LOGCAP contract, of which 54  require definitization. (The 24 task orders that do not require definitization  are cost reimbursable or firm fixed-price task orders.) The Army and the  contractor have definitized 13 of the 54 task orders, and 30 task orders are  in the process of being definitized. In addition, the Army and the  contractor have also agreed to a schedule for submitting qualified  proposals for the remaining 11 task orders. Table 3 shows the task order  award date; the contractually required definitization date; the currently  scheduled definitization date; and the value of the task order for the 10  oldest undefinitized task orders, which total $1.402 billion.
The table does not include task order 59, which is the LOGCAP contract’s  largest task order, with an estimated value of $3.894 billion, as it is not  among the 10 oldest undefinitized task orders. Work began on this task  order in June 2003 and according to the contract, it was to be definitized  by December 2003. According to the Army Field Support Command, the  definitization process for task order 59 began on May 6, 2004.
According to the Commanding General of the Army Materiel Command,  the Army and the contractor have agreed to a schedule for definitizing the  remaining task orders, and as of May 2004 the contractor has been meeting  that schedule. Furthermore, if the contractor does not adhere to the  schedule, the general said that the Army intends to unilaterally definitize  the contract. Agency officials attribute much of the delay in definitizing the  task orders to the growing number of task orders, the frequent revisions to  the task orders, contractor staffing problems, and the contractor’s  antiquated accounting system.
Timely definitization of LOGCAP task orders has been a long-standing  problem. In 1997 we reported that the LOGCAP contracting officer (then  the Army Corps of Engineers) and the contractor had not definitized the  LOGCAP task orders in a timely fashion.  We noted that because the task  orders had not been definitized, contract provisions that give the  contractor major incentives to control costs were not effective. Seven  years later, we continue to have those same concerns. In June 2004, we  again reported that delays in defining contract terms increase the risk to  the government by making cost control incentives in award fee contracts  less effective.  We have also noted that DOD is required to ensure that the  profit allowed on an undefinitized contract for which the final price is  negotiated after a substantial portion of the work is completed reflects the  possible reduced risk to the contractor.
section_title: The Army Has Not Held an Award Fee Board for the LOGCAP Contract
paragraphs: The LOGCAP contract requires an award fee board every 6 months, but  the Army has yet to hold one even though work under the contract began  in 2002. The award fee board is a mechanism for the government to  evaluate the contractor’s overall performance and recommend an amount  of award fee. Award fees can serve as a valuable tool to control program  risk and encourage contractors’ performance. According to LOGCAP  officials, several issues have delayed the award fee boards. First, the  LOGCAP award fee plan has not been finalized; second, no one has been  appointed to the award fee board; and third, as we noted above, many  LOGCAP task orders have not been definitized. Definitization is an  essential step in the award fee process because it establishes the amount  of money available for the award fee.
We believe that the Army will find it difficult to hold a board that  comprehensively evaluates the contractor’s performance to date because  some customers have not been documenting their LOGCAP experience as  required. According to the Army’s LOGCAP guidance, DCMA and LOGCAP  customers, as part of “Team LOGCAP,” should evaluate and document  contractors’ performance and participate in the award fee boards. DCMA  documents contractor performance in the periodic situation reports it  provides the contracting officer and through site-specific performance  evaluation boards discussed below. On the other hand, customers have  not been asked by the contracting officer to document their experiences  or their evaluations of the contractor’s performance, and as a result, some  have not done so. The contracting officer told us that it is important to  have customers’ input. However, many customers with direct knowledge  of the LOGCAP contractor’s performance have left their unit, and  capturing this information may be difficult. For example, at the 101st  Airborne Division, the four key officials involved with LOGCAP—the  Assistant Division Commander for Support, the division’s logistics officer,  the LOGCAP focal point, and the housing officer—are all in the process of  moving to their next posts.
DCMA has documented customer-performance evaluations in site-specific  performance evaluation boards at some locations. In Djibouti, the Marine  Corps and DCMA hold performance evaluation boards every 2 months to  evaluate the contractor’s performance and provide the contractor with  feedback. During these meetings, key command officials and DCMA meet  to evaluate the contractor’s performance using the evaluation criteria  established in the LOGCAP contract. While no fee is awarded, scores are  tabulated and provided to the contracting officer. Performance evaluation  boards have also been held for some of the Afghanistan and Iraq task  orders.
section_title: Lessons Learned Have Not Been Systematically Collected, Shared, or Implemented
paragraphs: Despite over 10 years of experience in using logistics support contracts,  the Army continues to experience the same types of problems it  experienced during earlier deployments that used LOGCAP for support.  For example, in our previously cited 1997 report on the Army’s use of  LOGCAP in Bosnia, we cited inadequate training as a cause of many of the  Army’s problems in controlling contract costs. In that report we  recommended that the Army provide commanders with training on the  fundamentals of using the LOGCAP contract. In our 2000 report on U.S.  Army, Europe’s, use of BSC we again cited the need for better training.   In 2004 Army officials told us again that LOGCAP training needs to be  improved. In addition to training concerns, we also reported in 1997 that  U.S. Army, Europe, officials felt the contractor’s cost-reporting system  used in Bosnia was not sufficient to track the cost of the operation or  report on how LOGCAP funds were spent. As we noted above, from  September 2003 through May 2004, DCMA expressed similar concerns  about the LOGCAP contractor’s current cost reports.
The Army requires that lessons learned be captured. Army Regulation 700- 137, which establishes the LOGCAP program, makes customers that  receive services under the LOGCAP contract responsible for collecting  lessons learned.  However, there are no procedures in place to ensure  that lessons learned are collected and shared and, as we noted above,  LOGCAP customers are generally not documenting their experiences. In  the Army, a primary organization responsible for collecting lessons  learned is the Army Center for Lessons Learned. The center collects and  analyzes data from a variety of current and historical sources, including  Army operations and training events, and produces lessons for military  commanders, staff, and students. The Center for Army Lessons Learned  database contains numerous articles on using logistics support contracts,  but our review found little information on the challenges and problems  commanders have faced in using these contracts or what commanders  should plan for and anticipate when using them. For example, we found  nothing on the challenges that commanders’ face in controlling costs.  While U.S. Army, Europe, which has had the most experience in using  logistics support contracts, has periodically advised us of the steps it has  taken to improve its management of BSC, it has not consolidated these  lessons learned and made them available for others. U.S. Army, Europe,  does maintain a lessons learned database that captures the experiences of  soldiers in Bosnia and Kosovo, including the use of LOGCAP and BSC;  however, it might be difficult to access the database as it is not mentioned  on the U.S. Army, Europe, Web site. In a meeting with the commanding  general of the Army Materiel Command, he agreed that there was a need  for a lessons-learned system, which would “push” lessons and best  practices down to the organizations using the contract.
The LOGCAP and the Balkans Support contracts both require that the  contractor collect lessons learned and provide the government with them.  Generally, these lessons learned are collected at the small task level (e.g.,  how to prevent slipping in the shower) rather than at the macro-level.  While useful, these types of lessons-learned do not address systemic  contract management problems or help improve contract management. In  addition, the contractor does not have an internal lessons learned  program. Instead, contractor personnel take lessons they have learned as  they move from deployment to deployment, and contract to contract.
section_title: The Military Services’ Efforts to Ensure That Contractors Perform in an Economical, Efficient, and Cost Conscious Manner Vary Widely
paragraphs: OMB circular A-123 requires all managers of federal funds to ensure that  cost-effective controls be implemented for the expenditure of  appropriated funds, and the Army’s senior leadership has recognized the  Army’s responsibility to be good stewards of the taxpayers’ dollars. While  contract oversight is the responsibility of the contracting officer, as  indicated in the OMB circular, all managers have a responsibility to ensure  that agency programs operate in an economical and efficient manner and  that costs are controlled. Efforts to control costs vary widely both across  and within logistics support contracts. The Army and the Army Central  Command did not make the need to control LOGCAP spending for  activities in Iraq and Kuwait a high priority until late 2003. However, CJTF- 180 made controlling LOGCAP costs in Uzbekistan an important goal  during the early days of Operation Enduring Freedom. Managers for BSC,  CONCAP, and AFCAP recognized the need to be good stewards of the  taxpayers’ dollars and have taken steps to control costs. We have noted  that when the customer reviews the contractor’s work for economy and  efficiency, savings are realized. However, steps to conduct these reviews  have not been taken by LOGCAP customers at all task order locations. In  addition, both the Army and the Air Force believed that at times they had  no other option but to use their logistics support contracts to obtain goods  and services even when they knew that other methods might have resulted  in lower costs. For example, the Army had the contractor provide housing  for an Army division although it was more costly than allowing the unit to  build the housing itself because at the time the Army decided to use  LOGCAP, it was the only means available to get the 101st Airborne  Division into housing by a November 15, 2003, deadline. Similarly, the Air  Force used the AFCAP contract to supply commodities for its heavy- construction squadrons because it did not deploy with enough contracting  and finance personnel to buy materials quickly or in large quantities  although the use of the contract to procure and deliver commodity  supplies required that the Air Force pay the contractor’s costs plus an  additional award fee.
subsections: section_title: Efforts to Control Costs Vary across Logistics Support Contracts
paragraphs: We recognize that cost control should not be the primary consideration for  commanders when U.S. forces are involved in major combat operations or  when the operational environment or security situation requires the  presence of more troops or the relocation of forces. However, cost  constraint did not become a factor in using LOGCAP in Iraq and Kuwait  until almost a year into the operations in Iraq. The Army Central  Command, the Army command responsible for paying for LOGCAP, had  no spending limits for LOGCAP until spring 2004, when a $6.5 billion limit  was placed on the amount that could be spent in fiscal year 2004 on the  basis of the estimated cost of required work. The spending limit followed a  December 2003 message from the Army Vice Chief of Staff that asked units  to control costs and look for alternatives to the LOGCAP contract and the  realization that LOGCAP costs were growing rapidly. According to a study  commissioned by the Army Budget Office, from September 2003 through  January 2004, projected LOGCAP costs for services in Kuwait, Iraq, and  Afghanistan grew from $5.8 billion to $8.6 billion. In late 2003, the Army  Central Command requested that “Team LOGCAP” review the cost  estimates for the task orders being used in Kuwait, Iraq, and Afghanistan  to determine if the cost estimates could be reduced. According to the  Army Budget Office, this review reduced the estimated cost of using  LOGCAP in the Army Central Command’s area of responsibility from   $8.6 billion to $6.5 billion, although most of the reduction came from the  use of more accurate cost data rather than a reduction in requirements or  more economical approaches. According to the Army Central Command,  commanders in the area of operations have established additional review  procedures. For example, all requests for services greater than $50,000  must be approved by a general officer before the requests can be  considered for approval by the local acquisition review board.  Additionally, all requests that would add services to the LOGCAP contract  valued at more than $10 million must be reviewed by a LOGCAP and  service contract review board. Members of the review board include the  deputy commanding general for support and other high-ranking members  of the command staff.
As we noted earlier, the Army Audit Agency examined the use of LOGCAP  in Turkey, Afghanistan, and Uzbekistan. They reported that  commanders in each location had adequate procedures in place to control  costs. In particular, the Army Audit Agency reported that program  managers in Uzbekistan and Turkey had made cost control a priority and  in Afghanistan had taken appropriate action to control costs and ensure  effective stewardship.
Cost control has long been a matter of importance for contract  administration officials for CONCAP, AFCAP, and BSC. Navy and Air  Force officials believe that using the CONCAP and AFCAP contracts to  fulfill a requirement is often the most expensive option available;  consequently, they have taken steps to control costs. For example, to  control costs, CONCAP establishes a budget for each project and works  closely with the contractor and customer to agree on requirements and  costs before the project gets under way.
The AFCAP contracting officer and program managers have retained cost- control responsibilities and review and substantiate the contractor’s cost  estimate at the beginning of each task order. At the initiation of each task  order, AFCAP contract administrators negotiated costs proposed by the  contractor in order to receive advantageous pricing for the government.  Additionally, the government’s review of proposed costs allows it to better  define its requirements for the contractor. We reviewed several examples  of the memoranda detailing these negotiations and found that the  government developed cost estimates that were significantly less than the  contractor’s original proposal. For example, the government achieved  reductions that ranged from 6 percent to 97 percent on the basis of the  review and substantiation of the contractor’s cost proposals. Regarding  the largest proportionate reduction, the AFCAP contractor estimated that  it would cost $23.1 million to provide and maintain equipment for Air  Force construction units However, in reviewing this proposal, the AFCAP  contract administrator determined that the government had overstated its  requirements, resulting in a 97 percent, or $22.3 million reduction.
U.S. Army, Europe’s, focus on cost control has increased since BSC was  first awarded. Beginning in the fall of 2001, U.S. Army, Europe, has taken a  number of steps to control the costs of BSC, as shown below:  In fiscal year 2003, resource managers established a cost reduction goal  for the contract.
Command leadership issued guidance on the need to be cost conscious.    Cost control became the most important criterion for determining the  contractor’s award fee.
The command sets cost-control goals for the contractor at every award fee  board.
section_title: Steps to Ensure That the Contractors Provide Service in an Economical and Efficient Manner Have Not Been Taken at All Task Order Locations
paragraphs: Customers who use the logistics support contracts have a role in ensuring  that the contracts are used in an economical and efficient manner, and our  previous work has shown that when government officials (including  customers) review the contractor’s work for economy and efficiency,  savings are generated. For example, in part as a result of our previously  cited 2000 report on managing BSC, U.S. Army, Europe, has developed a  proactive approach to managing BSC and ensuring that the contractor  provides services in an economic and efficient manner. U.S. Army, Europe,  reported savings of approximately $200 million by reducing services and  labor costs, and by closing or downsizing camps that were no longer  needed. The $200 million in savings is about 10 percent of the current  contract ceiling price of $2.098 billion. In addition to these savings, U.S.  Army, Europe, routinely sends in teams of auditors from its internal  review group to review practices and to make recommendations to  improve economy and efficiency. Examples of the audit results are as  follows:  In March 2001, U.S. Army, Europe, auditors reported that shuttle bus  services within Task Force Falcon (Kosovo) were not well utilized and  that the services should be reduced. The auditors estimated that reducing  bus service would result in a savings of more than $700,000 during the  remaining 3 years of BSC.  In September 2001Army auditors recommended that the Army provide the  contractor with gravel and sand as government-furnished equipment partly  because the contractor was maintaining excessive inventories of these  materials. Auditors estimated that by providing sand and gravel as  government-furnished materiel, the Army could save approximately  $365,000 over the remaining 3 years of the contract.
The Marines have also taken actions to ensure that the contractor is  working in a cost-efficient and economical manner. When Marine Corps  forces replaced Army forces in Djibouti in December 2002 (to provide  humanitarian assistance and fight the Global War on Terrorism), they also  took over responsibility for funding LOGCAP services. Marine  commanders immediately undertook a complete review of the statement  of work and were able to reduce the $48 million task order by an  estimated $8.6 million, or 18 percent. The savings came by eliminating or  reducing services in the following areas:    building and construction projects—$2.8 million,    equipment—$2.9 million,   labor hours—$2.0 million, and    materials and miscellaneous items—$0.892 million.
Marine Forces Central Command deploys teams of subject matter experts  to Djibouti semiannually to identify services that could be eliminated,  reduced, or changed. Since its initial review, the Marines have identified  potential additional savings totaling more than $2 million, including  $75,000 a year as a result of having the contractor switch from a popular  commercial laundry detergent to a detergent available through the Marine  Corps’ supply system.
In the Balkans and in Afghanistan, command policy requires a periodic  review of all services being provided by contractors to determine if the  appropriate services as well as the appropriate level of services are being  provided. During our visit to Bosnia in October 2002, commanders  reported that these reviews resulted in a yearly cost savings of  approximately $120,000. Among the services reduced were cleaning and  janitorial services and operating hours for wash racks and fuel service  facilities. U.S. Army, Europe, requires that these reviews be conducted  three times a year prior to the award fee boards. In Afghanistan CJTF-180  guidance requires that the reviews be held monthly; however, the Army  Audit Agency noted that these reviews were not taking place. In response  to the Army Audit Agency report, the command revised its guidance to  include procedures for the reviews.
On the basis of our visit to Kuwait in December 2003 and a review of  CJTF–7 policies, it appears that neither the Army Central Command in  Kuwait nor CJTF–7 in Iraq have established similar policies mandating  regularly scheduled reviews of services. However, some reviews of  services have been undertaken since January 2004, as shown below:    On the basis of the Army Central Command estimate that $2.6 million  could have been saved in March 2004 if it removed food service from the  LOGCAP contract and contracted directly for food service at six locations  in Kuwait, we calculated that this could save almost $31 million a year.  The transition has been directed to take place in June 2004, and a schedule  has been established setting out the dates on which each location is to  transition. By eliminating the use of LOGCAP and making the LOGCAP  subcontractor the prime contractor, the command reduced meal costs by  43 percent without a loss of service or quality.
During a review of task order 59, change 7, CJTF-7 was able to reduce the  estimated cost of the task order by over $108 million by eliminating  services and an extra dining and laundry facility.
section_title: Circumstances Did Not Always Allow the Army and Air Force to Select a More Economical and Efficient Method to Obtain Services
paragraphs: Circumstances did not always allow the Army and the Air Force to use a  more economical and efficient means to obtain services. Both the Army  and the Air Force believed they had no other options but to use their  logistics support contracts to obtain goods and services even when they  knew that other methods would have resulted in lower costs. For example,  as discussed below, CJTF-7 concluded that it had no choice but to use the  LOGCAP contract to provide housing for the 101st Airborne Division  despite the fact that CJTF-7’s own cost estimate showed that having the  contractor provide the housing would cost the Army tens of millions of  dollars more than having the 101st Airborne Division build its own  housing. Air Force engineering squadrons used the AFCAP contract to  provide supplies for construction projects because they were not able to  deploy with sufficient assets to obtain the needed supplies. However, by  using the contractor, the Air Force paid an award fee on task orders with  limited risk.
subsections: section_title: The Need for Housing Made Using LOGCAP the Only Viable Choice for the Army
paragraphs: In July 2003, a decision was made to extend the deployment of the 101st  Airborne Division through February 2004. As a result, getting the division’s  soldiers out of tents before the onset of winter in northern Iraq became a  priority for division leadership. To achieve the division’s goal of getting its  soldiers out of tents by November 15, 2003, the division, in conjunction  with CJTF-7, considered three courses of action as follows:    Allow the division to build its own housing, purchasing the necessary  material and using the division’s engineer brigades to do the construction.  This was the division’s preferred option, as division leadership felt it  would get the troops “out of tents” by November 15, 2003, and also provide  a valuable training opportunity for its engineers. However, CJTF-7  concluded that this was not a viable option, since it would require the use  of military construction funds, which CJTF-7 believed were no longer  available. According to an official with CJTF-7, the task force did not  believe that military construction funds would be available until November  2003 at the earliest, so work would not start until December 2003 and  possibly as late as February 2004.
Divide the division’s entire housing requirement into 33 individual projects  so that the individual projects could be built with operation and  maintenance funds, allowing the division to build its own housing. CJTF- 7 concluded that this was not a legally sound option, as it would involve  dividing one project into several projects.
Obtain the housing under the LOGCAP contract. The Army determined  that CJTF-7 could use operation and maintenance funds to buy movable  buildings, since the buildings could be moved as necessary for mission  requirements unlike nonmovable buildings, which would require military  construction funds. This was the course of action ultimately accepted, and  in early October 2003, the administrative contracting officer directed the  LOGCAP contractor to provide the housing for the 101st Airborne  Division. The statement of work required that the housing be provided by  November 15, 2003. However, according to officials from both CJTF-7 and  the 101st Airborne Division, the contractor did not meet the scheduled  delivery date.
The decision to use the LOGCAP contract carried a substantial cost  premium. The division estimated that it would cost about $25 million to  build its own housing. The $25 million included building material for the  housing, as well as showers, power generation and heating and air  conditioning. Latrines were not included in the cost estimate and were to  be provided by a contractor. The government’s cost estimate to use  LOGCAP to provide housing, showers and power generation, was about  $65 million plus over $8 million in administrative costs and potential  award fee. The $65 million included the purchase of (1) reusable  containers for housing and showers, (2) maintaining the containers,   (3) installing the units at locations around northern Iraq, and (4) procuring  and installing power. In discussions with CJTF-7 on how housing was  obtained, we were told that using the LOGCAP contract was more costly  then having the 101st Airborne Division build the housing units  themselves; however, at the time they made the decision to use LOGCAP,  they concluded that it was the only legal means available to get the 101st  into housing by the November 15 deadline.
Although buying the trailers was more expensive than allowing the  division to build its own housing, the cost of the two options is not directly  comparable because the trailers are reusable and moveable whereas the  housing built by the division is not.  Should the trailers ultimately be  reused elsewhere, thus reducing future housing costs, the disparity  between the options could be reduced in the long term. At this time, how  well the trailers will hold up in the Iraqi climate and the extent to which  the trailers will be reused once they are no longer needed in northern Iraq  is unknown, so a full cost comparison cannot be done.
section_title: The Air Force and Others Have Used AFCAP to Purchase Supplies Despite the Fact That It May Not Be a Cost-Effective Use of the Contract
paragraphs: The Air Force has used the AFCAP contract to supply commodities such  as building materials, tools, and equipment for its heavy construction  squadrons. According to Air Force officials, engineering squadrons use the  AFCAP contract for commodities because they do not deploy with enough  contracting and finance personnel to buy materials quickly or in large  quantities. Additionally, the U.S. Agency for International Development  has used the contract to provide disaster relief and humanitarian  assistance supplies. In many instances, the contractor provided a service  for the customer, such as equipment maintenance, in addition to the  procurement of the supplies. In other cases, however, the contractor  simply bought the supplies and delivered them to the customer. The  contractor received more than $2 million in award fees since February  2002 for these commodity supply task orders. While contractually  permitted, the use of a cost-plus award fee contract as a supply contract  may not be cost-effective. In these instances, the government reimburses  the contractor’s costs and pays additional award fees for task orders with  little risk.
The Air Force and other federal agencies that use the contract to procure  and deliver commodity supplies are required to pay the contractor’s costs  plus an additional award fee—a 1 percent base fee and up to 6 percent  award fee—on each task order performed. Air Force program managers  have recognized that the use of a cost-plus award fee contract to buy  commodities may not be cost-effective. According to these officials, the  next version of the contract may allow for either firm-fixed prices or cost- plus fixed fee procurements on these types of task orders. Firm-fixed price  or cost-plus fixed fee contracts will reduce the potential amount of fees  paid to the contractor, thereby providing the government with a more  cost-effective alternative.
section_title: DOD Did Not Always Have Enough Personnel to Manage Its Logistics Support Contracts, and Available Personnel Often Lack the Training to Effectively Use and Monitor the Contract
paragraphs: Given the scope and complexity of logistics support contracts, there were  not always enough personnel responsible for contract oversight and  monitoring the performance of the contractor, and oversight personnel  have not always been adequately trained. DOD deploys civilian and  military personnel to provide contract administration and oversight of its  logistics support contractors. For example, DCMA has deployed  administrative contracting officers to several countries throughout  southwest and central Asia and the Balkans to provide on-site contract  administration. The Defense Contract Audit Agency has provided audit  assistance in contingency locations to ensure that the costs claimed by the  logistical support contractors are appropriate. The military services have  also deployed personnel to assist unit commanders that are receiving  contract services and to monitor the performance of the contractor.
We could find no guidelines on the appropriate number of DCMA oversight  personnel and hence relied on the judgments expressed in DCMA’s  situation reports and the views of oversight personnel with whom we  spoke as to the adequacy of staffing. A DCMA official told us there are no  specific criteria for determining the size of a deployed contract  administration team. Each request for assistance is reviewed, and the team  size is based on the risk associated with the contract. DCMA has  recognized its human capital challenges, including its staffing challenges,  and has developed a strategic plan to address them.
DCMA officials believe that additional resources are needed to effectively  support the LOGCAP and AFCAP contracts. Administrative contracting  officers in Iraq, for example, have been overwhelmed with their duties as a  result of the expanding scope of some of the task orders. Additionally,  some Army and Air Force personnel with oversight responsibilities did not  receive the training necessary to effectively accomplish their jobs. On the  other hand, the Navy has provided contract monitors that are qualified and  trained for their responsibilities under the contract. In addition, military  units receiving services from the contracts generally lacked a  comprehensive understanding of their roles and responsibilities. For  example, officers do not understand their role in establishing LOGCAP  requirements.
subsections: section_title: Limited Number of Personnel Support the Oversight of the Logistics Support Contracts
paragraphs: Several defense agencies and the military services deploy civilian and  military personnel to assist with contract administration and oversight.  For example, as of April 14, 2004, DCMA had approximately 65 personnel  deployed to locations in southwest and central Asia to provide on-site  contract administration. The agency has contracting officers in Iraq,  Kuwait, Qatar, Afghanistan, Uzbekistan, and Djibouti in support of the  LOGCAP and AFCAP contracts, as well as other contracts. In addition,  three DCMA personnel in Bosnia and three in Kosovo  have been deployed  to support the Balkans Support Contract and other contracts.
The Defense Contract Audit Agency provides contract oversight and audit  assistance for the military at deployed locations. The agency planned to  have 31 auditors in its Iraq branch office by May 31, 2004, to oversee the  LOGCAP contract as well as other contracts. Defense Audit Agency offices  located at contractor facilities in the United States also provide contract  oversight. The agency oversees the Balkans Support contractor on request  from the Corps of Engineers–Transatlantic Programs Center.
The Army has also deployed military personnel to assist unit commanders  in implementing services provided by its logistics support contractor. As  of April 14, 2004, 19 members of the 66-person support units were  deployed in the Persian Gulf and central Asia. Members of the units are  not contracting officers and cannot direct the contractor nor make  changes to the contract. Members advise commanders on LOGCAP and  help customers develop statements of work. Members also develop  independent government cost estimates. Frequently, the unit members are  responsible for several task orders concurrently.
While the defense agencies have effectively supported the military in these  locations, DCMA administrative contracting officers in Iraq believe that  they need an increase in the number of qualified staff to fully meet their  oversight mission. DCMA not only provides contract administration for the  LOGCAP and AFCAP contracts, it also supports other large contracts in  Iraq. The Army requires that DCMA review and approve purchase  requisitions valued at more than $2,500 for LOGCAP task orders. A DCMA  official who served in Iraq estimated that the six administrative  contracting officers in his command reviewed from 200 to 500 requisitions  a week. Another DCMA official indicated a need to hire contracting and  procurement technicians to improve the operations of DCMA in Iraq.  Moreover, Marine Forces, Central Command officials we spoke to believe  that the number of DCMA personnel providing contract oversight in  Djibouti is insufficient. As we noted above, DCMA has approximately   65 contracting officials deployed to support the LOGCAP and AFCAP  contracts in the Central Command’s area of responsibility having an  estimated value of more than $6.5 billion. In contrast, DCMA deployed a   30-member team to administer the LOGCAP contract in Bosnia in 1996. At  that time, the value of the work in Bosnia was approximately   $461.5 million. Essentially, in the Central Command’s area of  responsibility, including Iraq, DCMA had slightly more than twice the  number of people it had in the Balkans and an estimated value of work  that is almost 15 times more than in the Balkans.
DCMA officials in southwest Asia told us that they need an additional  administrative contracting officer and property administrator to account  for $2 million worth of construction tools and equipment that are currently  unaccounted for in the AFCAP contract. Under AFCAP task orders in  southwest and central Asia, the procuring contracting officer delegated  certain administrative responsibilities to the contracting officers, to  include property administration. However, DCMA did not assign a  property administrator for the AFCAP contract. According to officials,  DCMA deployed one property administrator who was responsible for all  property in the theater. An additional administrative contracting officer  and a property administrator would assist the Air Force to close out the  approximately 80 completed task orders in southwest Asia. The Air Force  cannot close out completed task orders until the property is accounted  for.
According to DCMA, it has limited resources to support the military at  deployed locations because staffing has been reduced by 55 percent over  the last 11 years. DCMA uses its in-plant personnel, who oversee the  acquisition of major weapon systems, such as aircraft, to support its  contingency contract administration services. Increasing the number of  deployed DCMA personnel means reducing the number of DCMA  personnel at defense plants. One possible approach to overcome staffing  shortages is being tried in the Balkans. DCMA has reduced its presence  there and has replaced some U.S. citizens with contracted host country  nationals that assist the administrative contracting officers and quality  assurance personnel. This has allowed DCMA to adjust its limited pool of  personnel.
section_title: Military Members with Key Oversight and Management Roles Either Had No Training or Insufficient Training to Do Their Jobs
paragraphs: The personnel deployed by the military services to monitor the  performance of the logistical support contractors have not always  received the training necessary to accomplish their missions. Army  guidance on the use of the LOGCAP contract describes the logistics  support unit as a significant player in LOGCAP event execution.   Logistics support unit members may be called upon to write statements of  work, prepare independent government cost estimates, review the  contractor’s cost estimates and technical plans, and act as an interface  between the customer and the contractor. According to LOGCAP officials,  the original members of this unit were deployed in the early stages of  Operation Iraqi Freedom. When the original members returned home, the  unit was staffed with individuals with no prior LOGCAP or contracting  experience. For example, most of the replacement support unit members  we met during our December 2003 trip to Kuwait had received only a 2- week training session before deploying and had little experience or  training in developing independent government cost estimates. These cost  estimates are used to judge the reasonableness of the contractor’s cost  proposal and to determine if sufficient resources are available to fund the  statement of work. In a 2004 report on the use of LOGCAP in Afghanistan,  the Army Audit Agency also noted that members of the logistics support  unit needed better training, particularly when it came to developing  independent government cost estimates.
The Air Force has not consistently provided training for its personnel  overseeing the performance of the AFCAP contractor. The Air Force  appoints quality assurance evaluators (who are subject matter experts) to  ensure that the contractor is performing in accordance with the task order  statement of work. Air Force guidance requires quality assurance  personnel to be appointed and trained prior to assuming quality assurance  responsibilities. However, the Air Force quality assurance evaluators  assigned in southwest and central Asia were not consistently appointed,  trained, or performing their responsibilities. Specifically, AFCAP contract  administrators have not consistently provided Air Force quality assurance  evaluators with appointments and training. For example, while a quality  assurance evaluator had been appointed for a major construction project  in Qatar, the evaluator told us that he had received no training on the  AFCAP contract or on his duties and responsibilities as an evaluator.  Quality assurance evaluators have also not been effectively documenting  the performance of the contractor. Without comprehensive performance  evaluations conducted regularly by quality assurance evaluators, the  government has had difficulty in determining the amount of fee to award  the contractor.
Conversely, the CONCAP contract administrator has technically qualified  staff providing day-to-day oversight at specific job sites. During our visit to  Guantanamo Bay, Cuba, we observed that the Navy Facilities Engineering  Command has the basic construction contract administration functions  performed by personnel in one of the three following general categories:    Engineers, including degreed engineers or architects, with many licensed  by one or more states. In addition to formal education and licensure,  engineers receive Navy-specific training in safety, quality management,  and other construction-related areas. Typically, engineers serve in  contracting officers’ technical representative positions and Navy technical  representative positions.
Engineer technicians that are generally trade-specific individuals with  extensive construction-related background. Their positions are often titled  as “quality assurance representative.” As with engineers, they receive  Navy-specific training as part of their position. In certain instances,  technicians may serve as Navy technical representatives, usually when the  work is of limited scope. In those cases where an engineer serves as the  Navy technical representative or contracting officer’s technical  representative, it is common practice to have one or more technicians  working under the technical supervision of the engineer in the  management and oversight of contract work.
Contract specialists and contracting officers that have extensive education  and training requirements. All Navy Facilities Engineering Command  personnel in this category are appropriately trained, certified, and  warranted at the appropriate level.
section_title: DOD Personnel Often Lacked the Training to Effectively Use the Contract
paragraphs: Customers using the logistics support contracts also have a role in  ensuring that the contracts are used in an economical and efficient  manner, yet many are unaware that they have any role in the contract  management or oversight process. We found that officers and  noncommissioned officers using the LOGCAP and AFCAP contracts had  little understanding of these contracts and did not fully understand their  contract management responsibilities because they had had little or no  training on using contractors, including the LOGCAP contractor, on the  battlefield. In interviews, Army customers told us that they knew nothing  about LOGCAP before they deployed and had received no training  regarding their roles and responsibilities as a LOGCAP customer. For  example, a senior logistics officer in the 101st Airborne Division told us  that the Army does not educate its battalion and brigade commanders on  LOGCAP or on the Army regulation governing the contract. Furthermore,  he noted that information about the LOGCAP contract was not included in  any of his precommand training courses.
In our 2003 report on DOD’s use of contractors to support deployed  forces,  we noted a lack of training or education for commanders or  senior personnel on the use of contractors, and we recommended that  DOD develop training courses for commanding officers and other senior  leaders who are deploying to locations with contractor support. DOD  agreed with our recommendation. We also noted in our 2003 report that  U.S. Army, Europe, had responded to our earlier concerns regarding the  lack of training for commanders and now includes contract familiarization  during mission rehearsal exercises for the Balkans deployments. “The first is the lack of preparation our officers have for dealing with LOGCAP: we don’t  train this as a capability that our officers consider during deliberate planning. This  unfamiliarity with LOGCAP in general contributes to considerable delay up front, as we  rely on the requesting unit to generate the statements of work that are the catalyst for the  entire process . . . .”
In our previously cited 2000 report on BSC, we highlighted the problem of  poorly written statements of work. For example, we noted that the Army  did not provide the contractor with guidance regarding the level of power  generation redundancy (i.e., backup power) needed in Kosovo. As a result,  the contractor bought and leased generators to provide 100 percent power  redundancy. Army officials later told us that much less redundancy was  needed and by reducing the redundancy and shifting from leased to  purchased generators, the Army was able to save approximately $85  million over 5 years. The problem of poorly written statements of work  continues with the current LOGCAP contract. For example, task order 59  requires the contractor to provide water for units within 100 kilometers of  designated points. However, the statement of work does not indicate how  much water needs to be delivered to each unit or how many units will  need water. The statement of work also requires that the contractor  maintain the capability to recover vehicles. According to the contractor’s  deputy project manager, problems with this requirement include the  following: (1) there is no indication if the contractor will provide the  primary vehicle recovery support or be the backup to the Army, (2) the  time frame for recovery is not specified, and (3) whether the contractor is  supposed to recover vehicles both on and off road is not specified.  Without this information, the contractor cannot determine how to meet  the needs of the Army and may take excessive steps to ensure customers’  satisfaction. According to LOGCAP guidance, statements of work must be  specific in detail and to the point.
AFCAP program managers expressed frustration that Air Force customers  lacked institutional knowledge of the contract. AFCAP program managers  stated that they have attempted to institutionalize training for the Air  Force’s major commands but have been unsuccessful to date in  convincing the commands to send representatives for training. According  to the program managers, the Air Force’s major commands are not  interested in the AFCAP contract until its services are needed; whereupon  the program managers are required to train the command personnel.
section_title: Conclusions
paragraphs: Over the past few years, DOD and the Army have developed doctrine and  guidance for using logistics contracts to support operations, which include  the early identification of requirements, and involving the contractor in  developing comprehensive statements of work as recurring themes. These  principles support a concept that when the contractor has adequate time  to plan and prepare to accomplish its mission, service quality improves  and costs are lowered. However, planning for the use of the LOGCAP  contract to support the troops in Iraq did not begin until after the fall of  Baghdad, was not comprehensive, and did not include the contractor.  Instead, a piecemeal approach to planning occurred and resulted in  constant changes to the statement of work and forced the contractor to  scramble to meet contract requirements, resulting in unmet expectations,  lower-quality services, and unnecessary costs. Even considering the  inherent uncertainty of wartime planning, a more deliberate approach  involving the contractor, as discussed in the doctrine and guidance, would,  in our opinion, have resulted in a better product at a lower cost.
Our previous and current work has repeatedly shown that when  customers of logistics support contracts review the types and level of  services provided by contractors for both economy and efficiency, savings  can be realized. While some customers have developed procedures for  periodic reviews of recurring services using subject matter experts, others  have not. Until all customers develop review programs, DOD will have  limited assurance that it is paying only for services it truly needs.
DOD, particularly the Army, has had more than 10 years of experience  using logistics support contracts such as LOGCAP and the Balkans  Support Contract, yet it often makes the same mistakes in new  deployments. Unless it establishes a lessons learned program, DOD is  likely to repeat the same costly mistakes it has made since first using  logistics support contracts to support deployed forces.
The lack of contract training for operational commanders, customers, and  others with responsibilities to use, manage, and oversee logistics support  contracts has adversely affected the use of such contracts to support  deployed forces in contingency operations. Commanders and other senior  leaders must understand that they have a key role in identifying  requirements, ensuring that the contractor works in a cost-effective  manner, and evaluating contractors’ performance. Without such an  understanding, the government’s ability to control contract costs and  ensure quality service at the best possible price is severely limited.
section_title: Recommendations for Executive Action
paragraphs: To promote better planning, improve oversight, and improve efficiency  when using logistics support contracts to support military operations, we  recommend that the Secretary of Defense ensure that the four following  actions be taken:    Emphasize to the heads of DOD components the need to comply with  guidance to identify operational requirements that are to be provided by  contractors early in the planning process and involve the contractor in the  planning, where practicable. If security concerns prevent the involvement  of the contractor, direct that unclassified statements of work be developed  and provided to the contractor.
Direct the service secretaries to establish teams of subject matter experts  who will periodically travel to locations where contractor services are  being provided by logistics support contracts to evaluate and make  recommendations on (1) the appropriateness of the services being  provided, (2) the level of services being provided, and (3) the economy  and efficiency with which the services are being provided.  Implement a department-wide lessons learned program that will capture  the experiences of others who have used logistics support contracts. This  system should include lessons learned from operations as well as lessons  learned and best practices documented by DOD’s audit agencies.
Develop and implement training courses for commanding officers and  other senior leaders who are deploying to locations with contractor  support. Such training should provide information on the role of  commanders and others in the contracting process. Specifically, the  training should provide instruction on (1) developing and documenting  requirements, (2) ensuring that contractors perform in a cost-effective  manner, and (3) assessing contractors’ performance. The training should  also include information on the limits of commanders’ authority vis-à-vis  contractors and include information on the roles and responsibilities of  DCMA and other oversight agencies.
section_title: Agency Comments and our Evaluation
paragraphs: In written comments on a draft of this report the Acting Deputy Secretary  of Defense for Logistics and Materiel Readiness stated that the department  concurred with the report and all its recommendations. The department’s  comments are reprinted in appendix II.
In its comments, DOD described the steps it plans to take to implement  our recommendations. Regarding our recommendations on emphasizing  the need to comply with guidance on planning for the use of contractors  and the establishment of teams of subject matter experts to evaluate and  make recommendations where appropriate on the appropriateness and  level of services being provided and the economy and efficiency with  which they are being provided, DOD noted the discussion in the draft  report on the existing guidance and efforts to review services. The  department stated that it will reiterate this guidance and the need for  subject matter experts to make periodic visits in policy memoranda and in  such issuances as a draft DOD instruction on procedures for the  management of contractor personnel during contingency operations.  Regarding our recommendation to implement a department-wide lessons  learned program that will capture the experiences of others who have  used logistics support contracts, DOD stated that it will investigate how  best to capture lessons learned. DOD said it initially will explore the  possibility of establishing such a database as part of the Logistics  Community of Practice at the Defense Acquisition University. Regarding  our recommendation for training for commanding officers and other  senior leaders who are deploying to locations with contractor support,  DOD stated that it will begin discussions with the Defense Acquisition  University, the services, and the Defense Contract Management Agency on   how best to unify current disparate training and create a training  capability that will be applicable and available to all. DOD said that an  initial proposal would be to establish a continuous learning-type training  module that could be utilized by each of the mid- and senior- level service  schools, including staff and war colleges. DOD will aim to get such a  module into the Defense Acquisition University’s plans for fiscal year 2005  development.
We also provided an opportunity for the contractors on the logistics  support contracts we reviewed— Kellogg Brown and Root for LOGCAP,  BSC, and CONCAP and Readiness Management Support L.C. for AFCAP—  to comment on a draft of this report and Readiness Management Support  provided written comments. In its comments Readiness Management  Support stated that it concurred with many statements in the report and  provided several comments to clarify its position regarding the costs  associated with logistics support contracts and the role of the contractor  in property administration under the AFCAP contract. The company’s  comments and our response are contained in appendix III.
We plan no further distribution of this report until 10 days after its  issuance unless you publicly disclose its contents earlier.  At that time we  will send copies to the Chairman, House Committee on Government  Reform; the Chairman, House Committee on Energy and Commerce; the  Chairman and Ranking Minority Member, Senate Committee on  Governmental Affairs; the Chairmen and Ranking Minority Members,  House and Senate Committees on Armed Services, and other interested  congressional committees. We are also sending a copy to the Secretary of  Defense and the Director, Office of Management and Budget, and will  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.
If you or your staff have any questions, please contact me on   (757) 552-8100 or by e-mail at curtinn@gao.gov. Major contributors to this  report are included in appendix IV.
section_title: Appendix I: Scope and Methodology
paragraphs: We focused our efforts on four contracts: (1) the Army’s Logistics Civil  Augmentation Program (LOGCAP) Contract; (2) the Air Force’s Contract  Augmentation Program (AFCAP) Contract; (3) the U.S. Army, Europe’s  Balkans Support Contract (BSC); and (4) the Navy’s Construction  Capabilities (CONCAP) Contract. We selected these contracts (1) on the  basis of their size and scope and (2) to include more than one of the  military services.
We took a number of actions to assess the effectiveness of the Department  of Defense’s (DOD) planning for the use of these logistics support  contracts. We reviewed the guidance prepared by the Chairman, Joint  Chiefs of Staff; the Army’s regulations and guidance related to planning for  contractor support to deployed forces; and an array of additional guidance  specific to each of the logistics support contracts as follows:  the Army Materiel Command’s LOGCAP battle book,    U.S. Army, Europe, Users’ Guide to the Balkans Support Contract and  operating procedures written by the Balkans Support Contract  procurement contracting office on task order development,  the Air Force’s guide for using the Air Force’s AFCAP contract—the  AFCAP Concept of Operations, and  the Navy’s CONCAP Users’ Guide.
We met with representatives of the Army Materiel Command’s LOGCAP  program management office to discuss LOGCAP planning and met with  the Army Materiel Command’s LOGCAP planners for Europe and  southwest Asia to determine their roles in planning to use LOGCAP to  support Operation Iraqi Freedom. Additionally, we met with  representatives of U.S. Army, Europe, to discuss planning for both BSC  and the command’s use of the LOGCAP contract and with representatives  of the Army Central Command to discuss their role in planning for  Operation Iraqi Freedom. We also met with the contracting officers for  both the Balkans Support Contract and the LOGCAP contract to obtain  their perspective on planning. To gain a comprehensive understanding of  AFCAP and CONCAP planning, we met with the program managers for  both the AFCAP and CONCAP contracts as well as the procuring  contracting officers for both contracts. We also talked to customers of the  four contracts to gain a better understanding of the customer’s role in  planning and the customer’s views of the planning process. Finally, we  spoke with representatives of Kellogg, Brown, and Root—the CONCAP,  LOGCAP, and BSC contractor—and Readiness Management Support, the  AFCAP contractor, to obtain their views on the planning process.
To determine the adequacy of the contract oversight process, we  undertook a number of actions. We reviewed a wide array of documents,  including  the Department of Defense’s and the Army’s policies, regulations, and  instructions that relate to the use of contractors to support deployed  forces;    documents specific to the AFCAP, CONCAP, LOGCAP, and Balkans    audit reports prepared by DOD agencies on these contracts, including the  Defense Contract Audit Agency, the Air Force Audit Agency, the Army  Audit Agency, and the Army Materiel Command Inspector General, and we  met with representatives of these organizations as well to discuss their  findings; and  the Defense Contract Management Agency’s (DCMA) situation reports for  September 2003 through May 2004 for Iraq, Kuwait, Afghanistan, and  Djibouti to get a better understanding of the types of oversight actions that  administrative contracting officers and quality assurance representatives  were taking.
During our visits to Kuwait and Qatar, we met with DCMA representatives  to discuss oversight issues and observe some of their oversight practices  and procedures. In Germany we met with the DCMA administrative  contracting officers assigned to monitor BSC. To gain further insight into  LOGCAP oversight in Iraq, we interviewed one of the senior DCMA  administrative contracting officers responsible for overseeing the  LOGCAP contract in Iraq after he redeployed. We also met the DCMA  representatives located at the headquarters of the Halliburton Company  (the parent company of Kellogg, Brown and Root) to gain a better  understanding of the role of the corporate administrative contracting  officer. We met with officials at all levels of command to gain an  understanding of what they believed their roles were in the oversight  process, and we met with contractor representatives to discuss contract  oversight and contract management from their perspective. We also did  the following:    To understand the definitization process, we reviewed relevant portions of  the Defense Federal Acquisition Regulation Supplement, interviewed  those government-contracting officials responsible for the definitization  process, and reviewed negotiation memoranda documenting the results of  definitization negotiations. We also discussed the definitization process  with representatives of the contractors. To understand the award fee  process and the requirements for an effective award fee board, we  reviewed the Army Audit Agency’s Report on Award Fee best practices  and reviewed the award fee plans for the CONCAP, AFCAP, and Balkans  Support Contract and a draft of the award fee plan for the LOGCAP  contract. We reviewed documentation prepared for award fee boards to  understand the types of contractor performance evaluations that  customers and oversight officials provided. We also attended award fee  boards for CONCAP, AFCAP, and BSC. At the time we completed our  review, the LOGCAP contracting office had not yet held an award fee  board.
To determine if lessons learned were being collected, we reviewed the  Center for Army Lessons Learned database and the U.S. Army, Europe,  Lessons Learned database to determine if they contained any lessons  learned related to the use of BSC or the LOGCAP contract. In addition, we  reviewed the Coalition Forces Land Component Command’s lessons  learned database for any relevant LOGCAP lessons learned. We met with  contract customers to determine how they documented lessons they might  have learned and to ascertain if lessons learned were shared between  contract users. We also met with officials from DCMA and the contractors  to discuss their lessons learned programs.
To determine if the logistics support contracts were being used in an  economic, efficient, and cost-conscious manner, we reviewed previous  audits by DOD organizations and command-level audit agencies, such as  the U.S. Army, Europe’s, Office of Internal Review and Audit Compliance.  We met with representatives of the Army Central Command to determine  if they had issued any guidance to the LOGCAP customers on the need to  be cost conscious, and we obtained and reviewed guidance issued by  CJTF-7 and CJTF-180 to determine if they had (1) established the need to  be cost conscious as a priority and (2) established procedures for  reviewing and approving requirements and reevaluating recurring services.  We also met with representatives of Marine Forces Central Command and  U.S. Army, Europe, to get a better understanding of their review processes  for LOGCAP and BSC, respectively. In addition, we met with Navy officials  to determine how they control costs and ensure that the contractor  provides service in an economical and efficient manner and with CONCAP  customers at Guantanamo Bay to determine their involvement with cost  control. Similarly, we met with Program Management and Contracting  Office officials for the AFCAP contract to determine what steps they take  to ensure that the contract is used in an economic and efficient manner  and met with AFCAP customers at Al Udeid Air Base, Qatar, and discussed  cost control. We also reviewed DCMA situation reports to determine if  DCMA officials at deployed locations had any insight into improving cost  control and economy and efficiency.
To assess the extent to which DOD had a sufficient number of qualified  personnel with the training and skills necessary to provide effective  contract oversight and management in place, we determined the numbers  of DCMA, Defense Contract Audit Agency, and Army Materiel Command  personnel that were deployed in support of AFCAP, LOGCAP, and BSC.  Since we could find no guidelines on the appropriate number of oversight  personnel, we spoke with DCMA officials who oversaw the LOGCAP and  AFCAP contracts to determine if they believed that the number of DCMA  personnel deployed was adequate. We also reviewed DCMA situation  reports to determine if DCMA staffing affected contract oversight. We  interviewed Navy and Air Force officials responsible for overseeing the  CONCAP and AFCAP contracts to determine if sufficient oversight  personnel were available. To determine if the personnel with contract  responsibilities, including customers, had sufficient training to  satisfactorily fulfill their responsibilities, we met with personnel at all  levels to discuss the training they had received regarding the use of  logistics support contracts and their understanding of their specific roles  and responsibilities. We also asked them to assess the adequacy of the  training they received. We met with members of the program management  offices to determine if they believed that personnel such as quality  assurance representatives, contracting officers’ representatives, and  contracting officers’ technical representatives had been adequately  trained.
We visited the following locations during our review:  Office of the Secretary of Defense:  Inspector General Office, Arlington, Va.
Defense Contract Management Agency, Alexandria, Va.    Defense Contract Management Agency Middle East, Kuwait.    Defense Contract Management Agency Middle East, Qatar.    Defense Contract Audit Agency, Houston, Tex.    Defense Contract Audit Agency, Atlanta, Ga.    Defense Contract Audit Agency, Iraq Branch Office.    Defense Contract Audit Agency, European Branch Office.
Department of the Army:    Office of the Deputy Chief of Staff-Logistics, The Pentagon.    United States Army, Europe, Heidelberg, Germany.    United States Army Forces Command, Fort McPherson, Ga.    United States Army Central Command (Rear), Fort McPherson, Ga.    United States Army Central Command (Forward), Kuwait.
Camp Udairi, Kuwait.    Camp Arifjan, Kuwait.    Camp Doha, Kuwait.    Other LOGCAP sites in Kuwait.
U.S. Army Corps of Engineers—Trans Atlantic Program Center,  Winchester, Va.
U.S. Army Materiel Command, Ft. Belvoir, Va.
Army Field Support Command, LOGCAP Program Manager,  Alexandria, Va.
Army Field Support Command, LOGCAP Procurement Contracting  Office, Rock Island, Ill.
Army Materiel Command, Europe.    Army Materiel Command, Kuwait.
U.S. Army Audit Agency, Alexandria, Va.
Army Audit Agency, Mainz Kastel, Germany.
United States Army Criminal Investigation Command, Fort Belvoir,  Department of the Air Force:    U.S. Air Force Civil Engineer Support Agency, Tyndall Air Force Base, Fla.    U.S. Air Force 325th Contracting Squadron, Tyndall Air Force Base, Fla.    U.S. Central Command Air Forces, Shaw Air Force Base, S.C.
Al Udeid Air Base, Qatar.
U.S. Pacific Air Forces, Hickam Air Force Base, Hawaii.
Department of the Navy:    Marine Forces, Central Command, Camp Smith, Hawaii    Naval Facilities Engineering Command, Atlantic Division, Norfolk, Va.    Naval Facilities Engineering Command, Pacific Division, Pearl Harbor,  Hawaii.
U.S. Southern Command, Miami, Fla.
Joint Task Force, Guantanamo Bay, Cuba.
Kellogg Brown and Root Services, Houston, Tex.    Kellogg Brown and Root Services, Arlington, Va.    Readiness Management Support, LC, Panama City, Fla.
We also obtained written responses from the U.S. Central Command in  response to written questions we provided them on their role in managing  logistics support contracts.
Since we had done extensive work in the Balkans over the past several  years, we drew upon past work where appropriate and visited Germany to  talk to Army personnel administering the contract. In addition, although  we did not travel to Iraq, we spoke with a senior DCMA Administrative  Contracting Officer who was recently based in Iraq and obtained situation  reports, which document observations regarding contractor performance.  We also met with representatives of the 101st Airborne Division, who had  been customers of LOGCAP services in Iraq, upon their return to the  United States, and talked to contractor officials working in Iraq. We relied  on data provided us by DOD and the contractor, which we verified where  possible. For example, in assessing billing for dining facilities, we verified  the contractor’s summary data by tracing the summary numbers to the raw  data. The data were sufficiently reliable for the purpose of this report. We  performed our work from August 2003 through June 2004 in accordance  with generally accepted government auditing standards.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: Comments from Readiness Management Support L.C.
paragraphs: Appendix III: Comments from Readiness  Management Support L.C.
The following are GAO’s comments on the Readiness Management  Support’s letter dated July 4, 2004.
subsections: section_title: GAO Comments
paragraphs: 1.  Readiness Management Support expressed concern that the draft  report characterized the use of logistics support contracts as the most  expensive solution for the government. The company stated that, in  the case of its power production contracts, the Air Combat Command  determined it to be less expensive than using military in the  command’s current method while acknowledging that there are  occasions when the contractor does cost more than military execution,  but that, in many of those cases, the contractor is the only solution. We  state in the report that both Air Force and Navy officials believe that  using the AFCAP and CONCAP contracts to fulfill a requirement is  often the most expensive option available and consequently they have  taken steps to control costs. We recognize that this may not always be  the case. However, we are not aware of any comprehensive analysis  comparing the cost of using logistics support contracts to provide  logistics support with the cost of using military personnel to provide  that support. Regarding AFCAP, we were told by Air Force contract  customers that the use of the AFCAP contract was a “level of  magnitude” more expensive than other alternatives because of the  premiums associated with the manpower the contractor can access  and the speed in which the contractor can provide services.  2.  Readiness Management Support stated that it did not control certain  property acquired under the AFCAP contract but noted that in each  instance the property was properly purchased, documented, and  turned over to the Air Force. In reviewing the government’s role in  property administration under the contract, we stated that DCMA did  not ensure that the contractor maintained appropriate controls of  government property. For task orders performed in southwest and  central Asia, the AFCAP contract administrator delegated the property  administration responsibility to DCMA. From our observations and  conversations with DCMA contract administrators in southwest Asia in  late 2003, we found that DCMA did not have a system in place to  document what was purchased under the contract and what was  turned over to the Air Force, although it was delegated this  responsibility. As a result, at the time of our audit work, neither DCMA  nor the Air Force could account for approximately $2 million worth of  tools and equipment purchased under the AFCAP contract.  3.  Readiness Management Support described our report as stating that  using civil augmentation contracts are not an effective method to  procure equipment and materials and stated that it believed our  research to be incomplete. Our report discusses how circumstances  did not always allow the Army and the Air Force to select a more  economical and efficient method to obtain services. In the case of  AFCAP, we discussed how Air Force engineering squadrons used the  AFCAP contract to buy commodities because they did not deploy with  enough contracting and finance personnel to buy materials quickly or  in large quantities and that the U.S. Agency for International  Development also used the contract to provide disaster relief and  humanitarian assistance supplies. We reported that the AFCAP  contractor received more than $2 million in award fees since February  2002 for these commodity supply task orders. To calculate this  amount, we reviewed data on the amount of award fees that the  contractor received for commodity supply task orders from February  2002 through February 2004. To ensure that we captured only those  task orders in which the contractor purchased commodities, we  provided the AFCAP contract administrator with our analysis of the  task orders to , and he concurred with our analysis. We stated in the  report that Air Force program managers recognized that the use of a  cost plus award fee contract to buy commodities may not be cost- effective and are considering alternative types of contract options for  these task orders for the next AFCAP contract.  4.  We revised the report to reflect this comment.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the person named above, Carole Coffey, Laura Czohara,  George Duncan, Glenn Furbish, Oscar Mardis, Kenneth Patton, Matthew  Ullengren, Gary Delaney, and Cheryl Weissman made key contributions to  this report.
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