Embassy Construction: Process for Determining Staffing Requirements Needs Improvement
Published: 2003-04-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The 1998 terrorist attacks on two U.S. embassies in Africa highlighted security deficiencies in diplomatic facilities, leading the Department of State to embark on an estimated $16 billion embassy construction program. The program's key objective is to provide safe, secure, and cost-effective buildings for employees overseas. Given that the size and cost of new facilities are directly related to agencies' anticipated staffing needs, it is imperative that future requirements be projected as accurately as possible. GAO was asked to (1) assess whether State and other federal agencies have adopted a disciplined process for determining future staffing requirements and (2) review cost-sharing proposals for agencies with overseas staff.
section_title: What GAO Found
paragraphs: U.S. agencies' staffing projections for new embassy compounds are developed without a systematic approach or comprehensive rightsizing analyses. State's headquarters gave embassies little guidance on factors to consider in developing projections, and thus U.S. agencies did not take a consistent or systematic approach to determining long-term staffing needs. Officials from each of the 14 posts GAO contacted reported that their headquarters bureaus had not provided specific, formal guidance on important factors to consider when developing staffing projections. The process was further complicated by the frequent turnover of embassy personnel who did not maintain documentation on projection exercises. Finally, staffing projections were not consistently vetted with all other agencies' headquarters. Because of these deficiencies, the government could construct wrong-sized buildings. In fact, officials at two embassies GAO visited said that due to poor projections, their sites may be inadequate almost immediately after staff move onto the new compound. State has proposed a cost-sharing plan that would require federal agencies to help fund new embassy construction. The Office of Management and Budget (OMB) is leading an interagency committee to develop a cost-sharing mechanism that would provide more discipline when determining overseas staffing needs and encourage agencies to think more carefully before posting personnel overseas. Numerous issues will need to be resolved for such a program to be successful, including how to structure the program and how payments will be made.

section_title: Letter
paragraphs: As a result of the 1998 terrorist attacks on two U.S. embassies in Africa,  which highlighted the security deficiencies in U.S. diplomatic facilities, the  Department of State has embarked on an estimated $16 billion embassy  construction program, the largest program of its kind in the department’s  history. The program’s key objective is to provide safe, secure, and cost- effective buildings for employees working overseas. Given that the size  and cost of new facilities are directly related to anticipated staffing  requirements for these posts, it is imperative that future staffing needs be  projected as accurately as possible.
In August 2001, the President identified rightsizing of embassies and  consulates as one of his management priorities. One of the goals of this  initiative is to develop accurate staffing projections for new overseas  construction. In July 2002, we developed a framework for assessing  embassy staff levels to help support rightsizing initiatives for existing  facilities. However, developing staffing requirements for a new embassy is  much more difficult than for an existing facility because it requires  managers to project staffing needs 5 to 7 years in the future.
In response to your concerns, we assessed whether State and other federal  agencies have adopted a disciplined process for determining staffing  requirements for new embassies and consulates. We also reviewed cost- sharing proposals for agencies with overseas staff. To meet these  objectives, we collected documentation from and conducted interviews  with executive branch agencies in Washington, D.C., including the  Departments of State, Defense, Justice, and others, regarding future  staffing requirements, the projection process, and the extent to which cost  considerations were factored into the decision-making process. To assess  agencies’ actions in developing staffing requirements, we visited seven  U.S. posts and contacted seven additional embassies in a range of  geographic regions, all of which are slated for new compounds. These  posts represent about 16 percent of the new embassy compound projects  in State’s construction plan for fiscal years 2002 through 2007, and 23  percent of these projects are expected to be funded by fiscal year 2005.
subsections: section_title: Background
paragraphs: The 1998 terrorist bombings of the U.S. embassies in Kenya and Tanzania  highlighted the compelling need for safe and secure overseas facilities.  Following the bombings, two high-level independent groups cited  problems at U.S. overseas facilities. In January 1999, the chairman of the  Accountability Review Boards, formed to investigate the bombings,  reported that unless security vulnerabilities associated with U.S. overseas  facilities were addressed, “U.S. Government employees and the public in  many of our facilities abroad” would be at continued risk from further  terrorist bombings. Later that year, the Overseas Presence Advisory Panel  (OPAP) concluded that many U.S. overseas facilities are unsafe,  overcrowded, deteriorating, and “shockingly shabby” and recommended  major capital improvements and more accountability for security. In  addition, the panel recommended that the United States consider  rightsizing its overseas presence to reduce security vulnerabilities. In  January 2001, we recommended that State develop a long-term capital  construction plan to guide the multibillion dollar program to build new  secure facilities. We also reported in July 2002 on a rightsizing framework  we developed to facilitate the use of a common set of criteria for making  staff assessments and adjustments at overseas posts, which included  consideration of security, mission priorities and requirements, and costs.  We recommended that OMB use the framework as a basis for assessing  staffing levels at existing overseas posts.
Figure 1 illustrates the locations worldwide for which State has received  funding for new embassy compound construction in fiscal years 1999  through 2003 and for which it has requested funding for projects in fiscal  year 2004.
In July 2001, State published its first Long-Range Overseas Building Plan, a  planning document that outlines the U.S. government’s overseas facilities  requirements and guides implementation of State’s expansive and  unprecedented overseas construction program. This program aims to  provide safe, secure, and cost-effective buildings for the thousands of U.S.  employees working overseas. State identified the projects with the most  compelling case for replacement and ranked them in the plan, which OBO  plans to update annually as compounds are completed and new projects  are added to the priority list. The current long-range plan describes  building new embassy compounds at more than 70 locations during fiscal  years 2002 through 2007. State estimates this will cost more than $6.2  billion. Additional funding will be needed after this time to continue the  program.
State’s construction program of the late 1980s encountered lengthy delays  and cost overruns in part because of a lack of coordinated planning of post  requirements prior to approval and budgeting for construction projects. As  we reported in 1991, meaningful planning began only after project budgets  had been authorized and funded. As real needs were determined, changes  in scope and increases in costs followed. OBO now requires that all  staffing projections for new embassy compounds be finalized prior to  submitting funding requests, which are sent to the Congress as part of  State’s annual budget request each February. To accomplish this task,  OBO requires that final staffing projections be submitted the previous  spring. Figure 2 outlines the major milestones and highlights key dates in  the planning and construction process for a new embassy compound  scheduled for 2007 funding. As Figure 2 depicts, OBO will receive final  staffing projections for fiscal year 2007 projects in spring 2005. Between  spring 2005 and February 2006, OBO will develop more firm cost estimates  for the project, vet the resulting funding requirements through OMB, and  submit the funding request to the Congress. Appropriations for these fiscal  year 2007 projects will not be secured until at least October 2006—18  months after final projections are submitted—and construction may not  begin for another 6 months. In total, OBO estimates that, in some cases, it  could take 2 to 3 years from the time projections are finalized to actually  begin construction of a new compound, which could take another 2 to 3  years to complete.
To ensure that projects in the long-range plan proceed on schedule and at  cost, OBO will not request additional funding to accommodate changes  made after funding requests are submitted to the Congress. Once OBO  receives appropriations for construction projects, it moves immediately to  complete the design of a new compound and secure a contracting firm for  the project. Changes to staffing projections after this point may result in  redesign and could lead to lengthy delays and additional costs, according  to an OBO official. For example, large changes generally require that  materials already purchased for the project be replaced with new  materials. According to OBO, there is little room for flexibility after the  budget is submitted given budgetary and construction time frames.  However, OBO does include a margin of error in the designs for all new  embassy compounds, which typically allows for a 5-10 percent increase in  building size to accommodate some additional growth.
A key component of the planning process outlined in figure 2 is the  development of staffing projections for new embassy compounds. Staffing  projections present the number of staff likely to work in the facility and  the type of work they will perform. These are the two primary drivers of  the size and cost of new facilities. Individual embassies and consulates, in  consultation with headquarters bureaus and offices, are responsible for  developing the staffing projections, which OBO then uses to design the  new compounds and prepare funding requests. As the government’s  overseas real property manager, OBO must rely on the other bureaus in  the State Department and other U.S. agencies for policy and staffing  decisions. OBO is not in a position to independently validate the  projections once the geographic bureaus have given their approval.
To help ensure that new compounds are designed as accurately as  possible, OBO designed a system for collecting future staffing  requirements, as shown in figure 3, that encourages the active  participation of embassy personnel, officials in State’s geographic bureaus,  and officials from all other relevant federal agencies. This process also  calls upon embassy management and geographic bureaus to review and  validate all projections before submitting them to OBO. OBO generally  gives embassies and geographic bureaus the opportunity to submit staffing  projections several times before they are finalized.
Finally, it should be noted that while OBO takes the lead in designing and  constructing all buildings on new embassy compounds, OBO is not always  responsible for securing funding for all compound buildings. Pursuant to  an informal agreement between OBO and USAID, USAID will secure  funding for a separate annex in a compound when it requires desk space  for 50 or more employees. However, if USAID projects it will need fewer  than 50 desks, its offices will be in the chancery building in the compound,  which State would fund, as it would for all U.S. government agencies in  the chancery. According to OBO and USAID headquarters officials, there is  some flexibility in the maximum number of USAID desk spaces allowed in  a chancery, and this issue is handled on a case-by-case basis.
section_title: Systematic Effort to Project Staffing Needs for New Embassies Is Lacking
paragraphs: Although OBO has designed a reasonable approach to developing staffing  projections, we found that it was not adopted uniformly across all of the  embassies and geographic bureaus that we studied. While some of the  embassies we examined have conducted relatively thorough analyses of  their future needs, in other cases the process has been managed poorly,  both in the field and at headquarters offices, thus raising concerns about  the validity of the projected requirements. For example, with few  exceptions, officials at the posts we visited did not appreciate the  seriousness of the staffing projection process as it relates to the size and  cost of new diplomatic facilities. Moreover, none of the embassies we  contacted received formal, detailed guidance on how to develop  projections. In addition, they had no systematic approach, such as the one  presented in our framework, to conducting rightsizing analyses that would  ensure that projected needs are the minimum necessary to support U.S.  national security interests. In general, for the embassies we contacted,  rightsizing exercises were largely limited to predictions of future  workload, priorities, and funding levels, and did not include analyses of  other factors, such as operational costs. Moreover, none of the embassies  we contacted conducted a rightsizing analysis of existing staffing levels  prior to projecting future requirements. We also found that posts did not  maintain documentation of the assessments they conducted when  completing staffing projections, and that State’s geographic bureaus did  not consistently vet posts’ projections prior to submitting them to OBO.   Finally, the process was further complicated by other factors, such as  frequent personnel turnover and breakdowns in communication among  multiple agencies.
subsections: section_title: Efforts to Develop Staffing Projections Vary Significantly across Embassies and Geographic Bureaus
paragraphs: We found that staffing projection exercises were not consistent across all  of the embassies we contacted, and, indeed, State officials acknowledged  that efforts to develop and validate projections were informal and  undisciplined. Some embassy management teams were more engaged in  the projection process than others. For instance, at several of the U.S.  embassies we contacted, chiefs of mission or deputy chiefs of mission led  interagency, or country team, meetings to discuss the embassy’s long-term  priorities and the staffing implications. In addition, management followed  up with agency representatives in one-on-one meetings to discuss each  agency’s projected requirements. However, management teams at other  embassies we contacted, such as the U.S. embassies in Belgrade, Serbia  and Montenegro, and Tbilisi, Georgia, were less engaged and had relied  mainly on administrative officers to collect information from each agency  informally. In Belgrade, officials acknowledged that the projection  exercise was not taken seriously and that projections were not developed  using a disciplined approach. In Tbilisi, a failure to document recent  growth in current staffing levels led to final projections that were too low.  OBO has had to meet immediate additional requirements by using all of  the growth space it built into the original compound design and reducing  the amount of common space, such as conference rooms, to accommodate  additional offices. Therefore, the new facility may be overcrowded upon  opening, embassy officials said. If embassy or headquarters officials  communicated earlier to OBO the likelihood of large staffing increases by  the time construction was completed, OBO might have been able to better  accommodate these needs in its plans.
In addition to inconsistencies in the field, we found that officials in the  geographic bureaus in Washington, D.C., whose staff are responsible for  working most closely with embassies and consulates, also have varied  levels of involvement in the projection process. Officials with whom we  spoke in State’s geographic bureaus acknowledged that there is no  mechanism to ensure the full participation of all relevant parties. When  these officials were more involved, we have more confidence in the  accuracy of the projections submitted to OBO. For example, officials from  the U.S. Embassy in Beijing, China, said that representatives from their  geographic bureau in Washington, D.C., have been very involved in  developing their projections. They reported that the geographic bureau  contacted all federal agencies that might be tenants at the new embassy— even agencies that currently have no staff in the country—to determine  their projected staffing needs. Conversely, officials at Embassy Belgrade  said State’s geographic bureau did not request any justifications for or  provide any input into the final projections submitted to OBO. Officials in  the geographic bureau acknowledged that the bureau does not require  formal justification for embassies’ projected staffing requirements for new  compounds. Given the weaknesses in how staffing projections were  developed in Embassy Belgrade, State has little assurance that the planned  compound will be the right size.
section_title: Embassies Do Not Receive Consistent, Formal Guidance on Staffing Projection Process and Importance of Rightsizing
paragraphs: Our analysis indicates that the State Department is not providing  embassies with sufficient formal guidance on important time lines in the  projection process or factors to consider when developing staffing  projections for new embassy compounds. Officials from each of the 14  posts we contacted reported that their headquarters bureaus had not  provided specific, formal guidance on important factors to consider when  developing staffing projections. One geographic bureau provided its  embassies with a brief primer on the process by which State determines  priorities for new embassy compounds that broadly described the  projection process and OBO’s long-range plan. However, we found that  State generally did not advise embassies to consider factors such as (1)  anticipated changes in funding levels, (2) the likelihood that policy  changes could result in additional or fewer work requirements, (3)  linkages between agencies’ annual operating costs and the achievement of  embassy goals, (4) costs associated with their presence in a new facility,  or (5) alternative ways to consolidate certain positions among neighboring  embassies, among others. Absent such guidance from Washington, D.C.,  we found that factors that embassy officials considered when developing  projections varied on a case-by-case basis. Officials at Embassy Sarajevo,  for example, conducted a relatively thorough analysis of their future  needs, including consulting World Bank indicators for Bosnia-Herzegovina  to determine the likelihood of increased U.S. investment in the region and  link future staffing needs accordingly. In addition, a consular affairs  officer analyzed the likelihood that new security requirements for consular  sections, which may allow only American consular officers to screen visa  applicants, would boost that section’s staffing requirements.
Other embassies we contacted conducted less thorough analyses of future  needs. For example, officials from several of the other embassies we  contacted reported that they largely relied on information from annual  Mission Performance Plans to justify future staffing needs in a new  compound. Although the performance plan links staffing to budgets and  performance, and may include goals related to improving diplomatic  facilities, it is a near-term tool. For example, performance plans for fiscal  year 2004 identify goals and strategies only for that fiscal year. For a  project scheduled for 2004 funding, an embassy may go through two or  three additional performance planning cycles before embassy staff move  onto a new compound. The performance plan, while a reasonable starting  point, is not directly linked to long-term staffing requirements and by itself  is not sufficient to justify staffing decisions for new compounds.
Indeed, an official from one geographic bureau said that while the bureau  works with the embassies in developing staffing projections, it generally  does not send out additional or separate formal guidance to all relevant  embassies. Although OBO informed the geographic bureaus that final  projections for fiscal year 2004 funding would be due in spring 2002,  officials at some of the embassies we examined were unaware of this  deadline. For example, officials at the U.S. Embassy in Harare, Zimbabwe,  said they lacked information on the major time frames in the funding  process for their new compound. Officials at the Embassy Belgrade said  they were unaware that the projections they submitted to OBO in spring  2002 would be their final chance to project future staffing needs, and that  the results would be used as the basis for the new compound’s design. In  other words, they did not know that additional requirements they might  submit would not result in a larger-sized building.
subsections: section_title: Use of Rightsizing Exercises
paragraphs: According to OBO, individual embassies should have conducted  rightsizing exercises before submitting the staffing projections used to  develop the July 2001 version of the long-range plan. In addition, in  January 2002, OBO advised all geographic bureaus that staffing projections  should incorporate formalized rightsizing initiatives early in the process so  that building designs would accurately reflect the embassies’ needs.  However, OBO is not in a position to know what processes the geographic  bureaus use when developing staffing projections. Indeed, OBO officials  stated that they cannot hold the geographic bureaus accountable for  policy-related decisions and can only assume that rightsizing exercises  have been incorporated into the projection process.
The degree to which each geographic bureau stressed the importance of  rightsizing staffing projections differed across the embassies we studied.  We found that agencies at the posts we examined were not consistently  considering the three critical elements of diplomatic operations outlined in  our rightsizing frameworkphysical security of facilities, mission  priorities and responsibilities, and operational costs—when determining  future staffing requirements. In general, for these posts, rightsizing  exercises were largely limited to predictions of future funding levels and  likely workloads. For example, officials at each of the seven posts we  visited reported that staffing projections were, in large part, linked to  anticipated funding levels. In Skopje, for example, USAID officials  estimated that funding levels for some programs, such as the democracy  and governance program, could decline significantly over the next 5 years  and could result in a reduction in staff assigned to these areas.
Although these embassies had considered mission requirements as part of  the projection process, they did not consistently consider other factors  that are mentioned above, such as options for relocating certain positions  to regional centers or consolidating other positions among neighboring  embassies. Moreover, decision makers at these embassies used current  staffing levels as the basis for projecting future requirements. None of the  posts we contacted conducted a rightsizing analysis of existing staffing  levels prior to projecting future requirements. In addition, we found that  most agencies with staff overseas are not consistently considering  operational costs when developing their staffing projections. The  President’s rightsizing initiative has emphasized cost as a critical factor in  determining overseas staffing levels. However, during our fieldwork, only  USAID officials consistently reported that they considered the  implications of anticipated program funding on staffing levels and the  resulting operational costs. Furthermore, we found only one instance  where an agency, the U.S. Commercial Service, reported that as part of its  overseas staffing process, it compares operating costs of field offices with  the performance of those offices.
section_title: Little Documentation of Comprehensive Assessments of Long-term Staffing Needs
paragraphs: At each of the seven posts we visited, we found little or no documentation  to show that staff had completed a comprehensive assessment of the  number and types of people they would need in the year that their new  embassy would be completed. As part of our prior work on rightsizing, we  developed examples of key questions that may be useful for embassy  managers in making staffing decisions. These include, but are not limited  to the following questions:  Is there adequate justification for the number of employees from each  agency compared to the agency’s mission?
What are the operating costs for each agency at the embassy?    To what extent could agency program and/or routine administrative  functions (procurement, logistics, and financial management functions) be  handled from a regional center or other locations?
However, we did not find evidence of these types of analyses at the posts  we visited. Officials from several embassies told us they had considered  these factors; yet, they did not consistently document their analyses or the  rationales for their decisions. Although officials at the embassies we  visited said that these types of considerations are included as part of their  annual Mission Performance Plan process, there was little evidence of  analyses of long-term needs. Moreover, we found little or no  documentation explaining how previous projections were developed or  the justifications for these decisions. For example, by the time the new  embassy compound is completed in Yerevan, Armenia, the embassy will be  four administrative officers removed from the person who developed the  original staffing requirements, and current embassy officials had no  documentation on previous projection exercises or the decision-making  processes. Thus, there was generally no institutional memory of and  accountability for previous iterations of staffing projections. As a result,  future management teams will not have accurate information on how or  why previous decisions were made when they embark on efforts to update  and finalize staffing projections.
section_title: Staffing Projections Are Not Vetted Consistently by Geographic Bureaus
paragraphs: According to OBO, the relevant geographic bureaus are expected to  review and verify the staffing projections developed by individual  embassies and confirm these numbers with other agencies’ headquarters  before they are submitted to OBO. However, we found that the degree to  which the staffing projections were reviewed varied. For example, officials  at Embassy Belgrade reported that their geographic bureau was not an  active participant in projection exercises. But officials at Embassy  Sarajevo reported that officials from the same geographic bureau were  involved in the projection process and often requested justifications for  some decisions. In addition, we found little evidence to show that staffing  projections were consistently vetted with all other agencies’ headquarters  to ensure that the projections were as accurate as possible. Indeed, State  officials acknowledged that (1) State and other agencies’ headquarters  offices are not held accountable for conducting formal vetting exercises  once projections are received from the embassies; (2) there is no formal  vetting process; and, (3) the geographic bureaus expect that officials in the  field consult with all relevant agencies; therefore, the bureaus rarely  contact agency headquarters officials.
section_title: Additional Factors Complicate Staffing Projection Process
paragraphs: We found additional factors that further complicate the staffing projection  process. First, frequent turnover of embassy personnel responsible for  developing staffing projections results in a lack of continuity in the  projection process. This turnover and the lack of formal documentation  may prevent subsequent embassy personnel from building upon the work  of their predecessors. Second, we found that coordinating the projected  needs of all agencies could be problematic. For example, some agencies  may decide not to be located in the new compound, while others, such as  USAID, may have different requirements in the new compound. However,  we found that these issues were not always communicated to embassy  management in a timely fashion, early in the projection process.
subsections: section_title: Lack of Continuity in Projection Process
paragraphs: Frequent turnover in embassy personnel can contribute to problems  obtaining accurate staffing projections. Embassy staff may be assigned to  a location for only 2 years, and at some locations, the assignment may be  shorter. For instance, the U.S. Office in Pristina, Kosovo, and the U.S.  Embassy in Beirut, Lebanon, have only a 1-year assignment requirement.  Given that personnel responsible for developing the projections could  change from year to year, and that posts may go through several updates  before the numbers are finalized, the continuity of the projection process  is disrupted each year as knowledgeable staff are transferred to new  assignments. Officials in Kosovo reported that the frequent turnover of  administrative personnel has forced incoming staff to rebuild institutional  knowledge of the projection process each year.
section_title: Breakdowns in Communication among Multiple Agencies
paragraphs: Part of the complexity of the projection process is the difficulty in  coordinating staffing requirements for multiple agencies in a given  location. Agencies’ space needs in the main office building may differfor  instance, some may require classified space, which is more expensive to  construct and thus has different implications for the design and cost of a  new building than unclassified space. However, agencies requesting office  space may not currently be situated in the country in question and, thus,  communication between them and embassy managers is difficult. For  example, embassy management in Yerevan, Armenia, stated that one  agency without personnel currently in Armenia did not notify the  ambassador that it planned to request controlled access space in the new  embassy. Embassy officials stated they learned of this only when floor  plans for the new chancery were first delivered. These kinds of issues  should be communicated to embassy managers in the early stages of the  projection process so that the final projections are based on the most  accurate information available. Embassy officials in Rangoon, Burma, for  example, reported that close interaction among agencies at post and OBO  during the staff projection process, under the leadership of the deputy  chief of mission and the administrative officer, kept OBO apprised of  changes to requirements early enough in the process that it was before the  budget proposal was submitted to the Congress and the projections were  locked.
section_title: Failure to Provide Timely Requests for Co-location Waivers
paragraphs: Following the 1998 embassy bombings, a law was passed requiring that all  U.S. agencies working at posts slated for new construction be located on  the new embassy compounds unless they are granted a special co-location  waiver. However, agencies are not required to submit these waiver  requests prior to submitting their final staffing projections to OBO. To  ensure that OBO has the most accurate projections, it is imperative that  waiver requests be incorporated early in the staffing projection process so  that OBO is not designing and funding buildings that are too large or too  small. In Yerevan, for example, the Department of Agriculture office  projected the need for 26 desks in the new chancery, yet officials in  Yerevan plan to use only 13 of these desks and to house the remaining  personnel in their current office space. However, Agriculture has not yet  requested a waiver. If Agriculture receives a waiver and proceeds  according to current plans, OBO will have designed space and requested  funding for 13 extra desks for Agriculture staff. We found other instances  where agencies had not requested a waiver before submitting final  projections. In Sarajevo, for example, the Departments of the Defense,  Treasury, and Justice have staff in host country ministries they advise.  However, officials at Embassy Sarajevo, including the regional security  officer, were uncertain about which agencies would be requesting a waiver  for the new compound. Embassy officials acknowledged that these  decisions must be made before the staffing projections are finalized.
section_title: Separate Funding for USAID Annexes Could Complicate the Projection Process
paragraphs: In compounds where USAID is likely to require desk space for more than  50 employees, it is required to secure funding in its own appropriations for  an annex building on the compound. However, officials from at least two  of the embassies we examined had trouble determining where USAID  would be located, and this kind of problem could delay planning and  disrupt OBO’s overall plan for concurrent construction of the USAID  annex with the rest of the compound. For example, at Embassy Yerevan,  confusion among USAID officials in Washington and the field over  whether USAID would fund a separate annex has caused construction and  funding on the annex to fall behind schedule. Therefore, USAID staff will  not move to the new site concurrent with the rest of the embassy’s staff.  Rather, USAID may be forced to remain at the current, insecure  facilityat an additional costuntil completion of its annex, unless  alternative arrangements can be made.
We also found a related problem in Sarajevo, Bosnia-Herzegovina, where  USAID officials were concerned about having to build a separate annex.  Current staffing levels and projections exceed the 50-desk level, which will  require USAID to fund the construction of an annex on the compound.  However, the assistance program may be declining significantly soon after  the completion of the new compound and, as a result, the office may need  far fewer staff. Thus, USAID may be constructing an annex that is  oversized or unnecessary by the time construction is completed or soon  after. USAID officials in Sarajevo acknowledged they would need to  coordinate with embassy management and their headquarters offices  regarding the decision to build a separate annex so that OBO has the most  accurate projections possible.
The issue of USAID annex construction is further complicated by difficulty  coordinating funding schedules. One of the key assumptions of the long- range plan is that where USAID requires a separate annex, construction  will coincide with the State-funded construction projects. However,  annual funding levels for USAID construction have been insufficient to  keep chancery and USAID annex construction on the same track in some  countries. In Tbilisi, Georgia, for example, funding for the USAID annex  has fallen behind State Department funding by 2 to 3 fiscal years.  According to USAID officials in Washington, D.C., two-track construction  could lead to security concerns, work inefficiencies, and additional costs.  Because USAID is required to secure funding for its annexes separate from  State’s funding for new compounds, it is imperative that decisions  regarding the future location of USAID personnel be made early in the  staffing projection process to avoid additional security or financial risks.
section_title: Government Aims to Distribute Costs of Overseas Facilities among Users
paragraphs: The State Department, which historically has been responsible for funding  the construction and maintenance of U.S. embassies and consulates,  recently proposed a capital security cost-sharing plan that would require  federal agencies to help fund its embassy construction program.  Traditionally, U.S. government agencies other than State have not been  required to help fund capital improvements of U.S. embassies and  consulates. OMB is examining State’s and other cost-sharing proposals  designed to create more discipline in the process for determining overseas  staffing requirements. The administration believes that if agencies were  required to pay a greater portion of the total costs associated with  operating overseas facilities, they would think more carefully before  posting personnel overseas. In spring 2003, OMB will lead an interagency  committee to develop a cost-sharing mechanism that would be  implemented in fiscal year 2005. This new mechanism could require  agencies to help fund the construction of new embassies and consulates.  While it may be reasonable to expect that agencies should pay full costs  associated with their overseas presence, many factors and questions must  be addressed prior to implementing an effective and equitable cost-sharing  mechanism.
subsections: section_title: State’s Proposed Capital Security Cost-sharing Plan
paragraphs: The State Department has presented a capital security cost-sharing plan to  OMB that would require agencies to help fund State’s capital construction  program. State’s proposal calls for each agency to pay a proportion of the  total construction program costs based on its total overseas staffing  levels. Agencies would be charged different costs based on whether their  staff are located in classified or nonclassified access areas. Agencies  would be assessed a fee each year, which would be updated annually, until  the building program is completed. An added benefit of such a program,  State believes, is it would provide incentive for agencies to place greater  consideration of the total costs associated with their presence abroad,  which in turn, would lead to greater efforts to rightsize overseas presence.  Table 1 shows an estimated distribution of costs for each agency once the  program is fully implemented, based on State’s May 2001 survey data.
section_title: Efforts by OMB to Develop a Cost-sharing Mechanism
paragraphs: As part of the President’s Management Agenda, OMB is leading an effort  to develop a cost-sharing mechanism that would require users of U.S.  overseas facilities to share the costs associated with those facilities to a  greater extent than currently required. OMB and the administration  believe that such a requirement would provide agencies with an incentive  to scrutinize long-term staffing more thoroughly when assessing their  overseas presence. OMB officials also believe greater cost sharing could  provide a clear linkage between the costs of new facilities that result  directly from agencies’ presence.
In its November 1999 report, the Overseas Presence Advisory Panel  (OPAP) noted a lack of cost sharing among agencies that use overseas  facilities, particularly as it related to capital improvements and  maintenance of sites. As a result, OPAP recommended that agencies be  required to pay rent in government-owned buildings in foreign countries to  cover current operating and maintenance costs. In effect, agencies would  pay for space in overseas facilities just as they would for domestic office  space operated by the General Services Administration. In response to the  OPAP recommendation, a working group consisting of staff from the  Departments of Commerce, Defense, Justice, State, and Transportation;  the Central Intelligence Agency; OMB; and USAID was created to develop  a mechanism by which agencies would be charged for the use of overseas  facilities.  In summer 2000, the working group recommended to the  Interagency Subcommittee on Overseas Facilities that agencies be  assessed a surcharge based on the space they actually use in overseas  facilities. Like State’s more recent proposal, the working group’s plan  was designed to help fund construction of new embassy compounds, but  the plan was not implemented.
In January 2003, OMB notified each federal agency with overseas staff how  State’s capital cost-sharing proposal would affect the agencies’ respective  budgets in fiscal year 2004. Because the State proposal and OMB  assessment were completed after the budget submission deadline, OMB  told agencies that they would not be charged in 2004; however, OMB did  say that a capital construction surcharge would be phased in over 5 years  beginning in 2005. In addition, agencies were invited to participate in an  interagency working group charged with developing an equitable cost- sharing program this year. Also during 2003, OMB is requiring that  agencies complete a census of all current overseas positions and an  assessment of agencies’ future staffing plans as part of their budget  requests for 2005. The results of this census will become the baseline for  how future cost-sharing charges are determined.
section_title: Factors to Consider When Developing a Capital Cost- sharing Mechanism
paragraphs: The impact of agencies’ staffing levels on the costs associated with  maintaining and improving the physical infrastructure of overseas facilities  is an important factor agencies should consider when placing staff  overseas.  However, agency personnel in Washington and in the field, and  embassy management teams with whom we spoke, expressed concerns  over many factors involved in implementing a new cost-sharing  arrangement.  Therefore, as OMB and the interagency committee work to  develop a new cost-sharing mechanism, they also need to develop  consensus on many issues, including    how the cost-sharing mechanism would be structured—for example, as  capital reimbursement for new embassy compounds, or as a rent  surcharge applied to all embassy occupants worldwide or just those at  new embassy compounds;  the basis for fees—such as full reimbursement of capital costs in a year or  amortized over time, or rent based on local market rates, an average of  market rates within a region, or one flat rate applied worldwide;    how charges would be assessed—based on the amount of space an agency  uses or on its per capita presence—and whether charges would be applied  on a worldwide level, at the post level, or just for posts receiving new  facilities;    whether different rates would be applied to staff requiring controlled  access rather than noncontrolled access space;    whether agencies would be charged for staff not located within facilities  operated by the State Department—for example, USAID staff working in  USAID-owned facilities outside an embassy compound or staff who work  in office space at host country ministries and departments;  if and how costs associated with staff providing shared services would be  offset, and whether costs associated with Marine and other security  services would be covered;    how fees would be paid and who would collect the payments—whether  through an interagency transfer of funds or through an existing structure  such as ICASS; and    whether potential legal barriers exist and, if so, what legislation would be  necessary to eliminate them.
In addition, the interagency committee must develop consensus on the  underlying purpose of capital cost sharing, demonstrate how such a  mechanism would benefit users of overseas facilities, and determine how  the mechanism can be implemented with the greatest fairness and equity.  Finally, the committee must figure out how to minimize the management  burden of whatever mechanism it develops.
section_title: Conclusions
paragraphs: The State Department has embarked on an expansive capital construction  program designed to provide safe, secure, and cost-effective buildings for  employees working overseas. This program will require a substantial  investment of resources. Given that the size and cost of new facilities are  directly related to anticipated staffing requirements for these posts, it is  imperative that future staffing needs be projected as accurately as  possible. Developing staffing projections is a difficult exercise that  requires a serious effort by all U.S. agencies to determine their  requirements 5 to 7 years in the future. However, we found that efforts to  develop these projections at the embassies we studied were undisciplined  and did not follow a systematic approach. Therefore, the U.S. government  risks building new facilities that are designed for the wrong number of  staff. We believe that additional, formal guidance and the consistent  involvement of the geographic bureaus would help mitigate the cost and  security risks associated with wrong-sized embassies. Although any  staffing requirements could be affected by changing world events and  circumstances, we believe a systematic process would help ensure that the  construction of new embassies is based on the best projections possible  and most accurate information.
Costs associated with the physical infrastructure of facilities are important  factors that agencies need to consider when deciding whether to assign  staff to overseas locations. Recent proposals to implement a new cost- sharing mechanism may help add greater discipline to the staffing  projection and rightsizing processes. However, in deciding how costs will  be shared, decision makers will need to address issues such as fairness  and equity, while designing a system that is relatively easy to administer.
section_title: Recommendations for Executive Action
paragraphs: To ensure that U.S. agencies are conducting systematic staffing projection  exercises, we recommend that the Secretary of State provide embassies  with formal, standard, and comprehensive guidance on developing staffing  projections for new embassy compounds. This guidance should address  factors to consider when developing projections, encourage embassywide  discussions, present potential options for rightsizing, and identify  important deadlines in the projection process, including planning, funding,  and construction time lines. To ensure continuity in the process, we also  recommend that the Secretary of State require that chiefs of mission  maintain documentation on the decision-making process including  justifications for these staffing projections. Finally, we recommend that  the Secretary require all chiefs of mission and geographic bureaus to  certify that the projections have been reviewed and vetted before they are  submitted to OBO.
section_title: Agency Comments and Our Evaluation
paragraphs: State and USAID provided written comments on a draft of this report (see  apps. II and III). OMB provided oral comments. State agreed with our  conclusion that it is essential that staffing projections for new embassy  compounds be as accurate as possible. State also said it plans to  implement our recommendations fully by creating a standard and  comprehensive guide for developing staffing projections, which it  anticipates completing by late April 2003. State said this guide would  provide posts and geographic bureaus with a complete set of required  steps, the timelines involved, and the factors to consider when developing  staffing projections. Moreover, State agreed with our recommendations  that posts should retain documentation on the processes they used to  develop staffing projections, and that chiefs of mission and geographic  bureaus should certify staffing projections. State provided technical  comments related to our cost-sharing discussion, which were incorporated  into the text, where appropriate.
USAID also agreed that U.S. agencies do not take a consistent approach to  determining long-term staffing needs for new embassy compounds.  Specifically, USAID supported the recommendation calling for standard  and comprehensive guidance to assist posts when developing staffing  projections. USAID also expressed deep concerns about the security and  cost implications that result from delayed funding for their facilities on  new embassy compounds. Indeed, USAID acknowledged that its  employees will continue to work in facilities at two overseas locations that  do not meet minimal physical security standards even though other  agencies have been moved to new embassy compounds. USAID said that  the lack of funding has prevented USAID and State from coordinating the  construction of new facilities.
In oral comments, OMB said it agrees with our conclusions regarding both  the staffing projection process and cost sharing, and with our three  recommendations to the Secretary of State.  In addition, OMB suggested it  would be useful to have an independent body review the vetted staffing  projections prior to their submission to OBO, to augment the guidance  developed by State, and ensure that agencies and embassy management  examine rightsizing options.  OMB intends to address this issue with the  interagency cost-sharing committee.  OMB also stated it is concerned  about the security and cost implications that can result from funding  delays for USAID annexes, and it is studying ways to overcome this  problem.  OMB also provided technical comments, which we addressed in  the text, as appropriate.
section_title: Scope and Methodology
paragraphs: To determine how U.S. agencies are developing staffing projections for  new embassy compounds, we analyzed the State Department’s Long- Range Overseas Buildings Plan and interviewed State Department officials  from OBO, the Office of Management Policy, and the six geographic  bureaus. We also interviewed headquarters officials from agencies with  overseas personnel, including officials from the Departments of  Agriculture, Commerce, Defense, Justice, and the Treasury, and officials  from USAID and the Peace Corps. In addition, we reviewed reports on  embassy security and overseas staffing issues, including those of the  Accountability Review Boards and OPAP, and we met with officials from  OMB to discuss how they are implementing the overseas presence  initiatives in the President’s Management Agenda.
To further assess agencies’ efforts to develop long-term staffing  projections and the extent to which agencies were conducting rightsizing  exercises as part of the projection process, we visited seven posts in  State’s Bureau of European and Eurasian Affairs—Yerevan, Armenia;  Baku, Azerbaijan; Sarajevo, Bosnia-Herzegovina; Tbilisi, Georgia; Pristina,  Kosovo; Skopje, Macedonia; and Belgrade, Serbia and Montenegro—where  State is planning to construct new compounds from fiscal years 2002  through 2007. We selected these two groups of neighboring posts—the  Balkans and Caucasus posts—because State is planning to complete a  significant number of construction projects in these subregions. By  focusing on these subregions within Europe and Eurasia, we were able to  assess the extent to which these posts considered combining services or  positions when developing staffing projections for their new compounds.  At each post, we interviewed management teams (ambassadors/chiefs of  mission, deputy chiefs of mission, and administrative officers),  representatives of U.S. agencies, and other personnel who participated in  the staffing projection process. To examine the staffing projection process  at embassies in other geographic bureaus, we also conducted structured  telephone interviews with administrative officers or deputy chiefs of  mission from seven other embassies slated for new compounds— Rangoon, Burma; Beijing, China; Quito, Ecuador; Accra, Ghana; Beirut,  Lebanon; Panama City, Panama; and Harare, Zimbabwe. These embassies  would have just recently completed or were about to complete their  staffing projection process. In all, the posts we contacted represent about  16 percent of the new embassy compound construction projects in OBO’s  Long-Range Overseas Buildings Plan for 2002 through 2007, and 23 percent  of those construction projects in the plan expected to be funded by fiscal  year 2005. We also reviewed planning documents, staffing patterns,  staffing projections for the new building, and other documentation  provided by the posts.
To examine the issue of capital cost sharing for construction of new  diplomatic facilities, we solicited the views of agency headquarters staff  and the management teams of our case study posts to determine the  extent to which cost considerations were factored into the decision- making process. We also solicited the views of agency headquarters staff  and the management teams of our case study posts to determine the  potential advantages and disadvantages of different capital cost-sharing  programs. In particular, we interviewed OBO officials and reviewed  documentation supporting its capital security cost-sharing proposal. We  also held discussions with OMB officials on their plans for developing and  implementing an equitable cost-sharing program and on potential issues  for the planned interagency working group. Finally, we attended meetings  of OBO’s Industry Advisory Panel where cost sharing was discussed by  private sector and industry professionals. We also interviewed staff from  the International Facility Management Association on how cost sharing is  implemented within the private sector.
We conducted our work between May 2002 and February 2003 in  accordance with generally accepted government auditing standards.
We are sending copies of this report to other interested Members of  Congress. We are also providing copies of this report to the Secretary of  State and the Director of the Office of Management and Budget. We will  also make copies available to others upon request. In addition, this report  will be available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  on (202) 512-4128. Another GAO contact and staff acknowledgments are  listed in appendix IV.
section_title: Appendix I: Standard Embassy Compound Design
paragraphs: Figure 4 depicts the elements of a new embassy compound. State’s Bureau  of Overseas Buildings Operations is purchasing parcels of land large  enough to accommodate these elements and the department’s security  standards, which include the placement of all buildings at least 30 meters  from a perimeter wall.
section_title: Appendix II: Comments from the Department of State
section_title: Appendix III: Comments from the U.S. Agency for International Development
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, David G. Bernet, Janey Cohen,  Martin de Alteriis, David Dornisch, Kathryn Hartsburg, Edward Kennedy,  and James Strus made key contributions to this report.