Military Construction: Kaiserslautern Military Community Center Project Continues to Experience Problems
Published: 2008-06-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Kaiserslautern Military Community Center (KMCC) is one of many projects initiated at Ramstein Air Base to upgrade capabilities of the base as a result of the consolidation of military bases in Europe. The KMCC is intended to provide lodging, dining, shopping, and entertainment for thousands of U.S. military and civilian personnel and their families in the area. Construction on the project, which began in late 2003, was originally scheduled to be completed in early 2006. On June 28, 2007, GAO testified that construction deficiencies and mismanagement had drawn into question when the project would be completed and at what cost. This testimony discusses updated findings related to the KMCC project. The testimony describes (1) the current status of the KMCC construction project, (2) whether oversight and internal control improvements have been made by the Air Force since GAO's last testimony, and (3) if other projects recently completed in the KMCC area have experienced problems similar to those affecting the KMCC. To address the objectives, GAO interviewed officials from the U.S. Air Force, Army and Air Force Exchange Service (AAFES), Air Force Services Agency, U.S. Army Corps of Engineers, Department of State, and German government. GAO also conducted site visits and reviewed project plans, cost estimates, completion analyses, and other relevant KMCC documents.
section_title: What GAO Found
paragraphs: Approximately 1year after GAO'sJune 2007 testimony and over 2years after the KMCC's originally scheduled construction completion date, the project continues to experience significant cost and schedule uncertainty along with construction quality problems and ongoing criminal investigations. Limited progress has been made on KMCC construction, and there are still no accurate estimates of how much the total project will cost or when it will be completed. Major construction deficiencies GAO reported in 2007 are just now beginning to be corrected. In addition, the Air Force does not track the total cost of the KMCC. Specifically, tens of millions of dollars related to design, foreign currency fluctuation, rework, personnel, and furniture and equipment costs are not included in the Air Force's cost estimates. Contingencies to fund items such as repairs to cracking concrete are also not included in the Air Force's estimates. After including all estimated costs, the total cost of the project will likely exceed $200 million. Project delays have also resulted in additional costs to the U.S. government and lost profit for project funding partners. For example, AAFES estimates that it is losing $500,000 of profit for each month that the exchange facility is not open. Although these problems exist, the Air Force has made significant improvements in its oversight and control over the project. For example, the Air Force established standardized policies and procedures for reviewing change orders and invoices. Improvements in controls over payments and change orders have minimized future risks of paying for unapproved work or fraudulent billings for work not performed. Cost, schedule, and construction deficiencies affected other projects built by German government construction agents in the KMCC area. For example, underground electrical ducts at Ramstein Air Base flood with water causing runway lights to malfunction. A freight terminal on the air base was also built with structural deficiencies that resulted in its temporary evacuation.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss our findings on the current status  of the Kaiserslautern Military Community Center (KMCC) construction  project. This testimony is a 1-year update to our testimony before this  committee in June 2007, which detailed the problems facing the project.  In June 2007, we testified that the KMCC was experiencing cost, schedule,  and construction quality problems that raised questions about when the  project would be completed and at what cost. At the time of our  testimony, there were few workers on-site, the building’s roof was leaking,  and German police and Air Force Office of Special Investigations (AFOSI)  agents were seizing documents as part of ongoing criminal investigations.  In addition, the projected total cost of the project had increased  substantially because of delays, rework, and the appreciation of the euro  versus the U.S. dollar. Our 2007 testimony also detailed construction  management failures by the Landesbetrieb Liegenschafts-und  Baubetreuung’s office in Kaiserslautern (LBB-Kaiserslautern), the German  construction agent charged with managing the project for the U.S. forces.  In addition, our testimony detailed control weaknesses within the Air  Force that contributed to the problems for the project. This testimony  provides an update on the status of the KMCC project and its problems,  and makes an assessment of whether other construction projects in the  area have experienced similar problems.
As we previously reported, the KMCC, an 844,000 square foot facility, is  one of many projects that were initiated at Ramstein Air Base to upgrade  capabilities of the base as a result of the consolidation of military bases in  Europe. It is intended to provide lodging, dining, shopping, and  entertainment for over 50,000 U.S. military and civilian personnel and their  families in the Kaiserslautern, Germany, area. Project highlights include a  350-room visiting quarters, sports bar, name-brand restaurant, food court,  and numerous retail businesses. Funding for the KMCC was provided from  a variety of sources including nonappropriated funds from the Army and  Air Force Exchange Service (AAFES) and the Air Force Services Agency  (AFSVA),  military construction appropriations, and the Rhein Main  Transition Program (RMTP) funds. Construction on the KMCC began in  November 2003 and was planned to be completed in early 2006.
In addition, we previously reported that the activities of U.S. forces  personnel in Germany are to be carried out in accordance with the  provisions of the North Atlantic Treaty Organization’s Status of Forces  Agreement and various implementing agreements. The KMCC, like other  military construction projects in Germany, is governed by one such  agreement, the Auftragsbaugrundsaetze 1975 (ABG-75) Administrative  Agreement. ABG-75 provides that U.S. forces are to coordinate  construction planning with the German government to ensure the  optimum use of German design and construction capacities. For the  KMCC, the responsibility for construction resided with LBB- Kaiserslautern, a German government construction agency.
As requested, this testimony updates our findings on the status of the  project and problems affecting the KMCC. Specifically, the testimony will  describe (1) the current status of the KMCC construction project,  including projected costs, projected construction completion dates, and  status of ongoing investigations; (2) whether oversight and internal control  improvements have been made by the Air Force since our last testimony;  and (3) whether other projects recently completed in the KMCC area have  experienced problems similar to those affecting the KMCC.
To address our objectives, we conducted interviews with Air Force  personnel responsible for the KMCC project. In addition, we interviewed  officials from LBB-Kaiserslautern, AAFES, AFSVA, and the U.S. Army  Corps of Engineers. We also interviewed officials from the Department of  State and officials from the Federal Republic of Germany’s construction  division. We obtained and reviewed project plans, cost completion  analyses, and other relevant documents related to the design and  construction of the KMCC. We also compiled Air Force and LBB- Kaiserslautern cost estimates for the various cost elements associated  with the KMCC. We physically inspected the KMCC and other recently  completed facilities on Ramstein Air Base. See appendix I for more details  on our scope and methodology.
Because of ongoing investigations, we were not able to fully explore and  discuss the details of fraud investigations with AFOSI and the German  police, which limited the scope of our audit work.
We conducted this performance audit from November 2007 through June  2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Progress on the KMCC Has Been Slow, Quality Problems Persist, and Project Costs Are Unknown
paragraphs: Approximately 1 year after our initial testimony and over 2 years after the  KMCC’s originally scheduled construction completion date, the project  continues to experience significant cost and schedule uncertainty along  with construction quality problems and ongoing criminal investigations.  Since our testimony in June of 2007, limited progress has been made on  KMCC construction, and estimates of how much the total project will cost  or when it will be completed are uncertain. Total project costs are  uncertain because the Air Force does not track all costs associated with  the project. Specifically, tens of millions of dollars related to design,  foreign currency fluctuation, rework, personnel, and furniture and  equipment costs are not included in the Air Force’s cost to date or  estimate for construction completion of the project. Contingencies to fund  items such as potential hindrance claims are also not included in the  estimated costs for construction completion. When including all estimated  costs, the total cost of the project will likely exceed $200 million.
subsections: section_title: Limited Progress Has Been Made
paragraphs: Over the past year, limited progress has been made on constructing the  KMCC, and the project’s construction completion date is uncertain.  Figures 1 and 2 show comparisons of the project when we visited in 2007  and during our last visit in May 2008. The comparison of the KMCC food  court area shows that other than some wall finishes and floor tiles being  installed, the area remains essentially the same and still requires finishing  work and the installation of the food court restaurants. Overall, relatively  few contractor employees were on-site from the time of our initial site visit  in May 2007 through early 2008, as LBB-Kaiserslautern experienced  repeated delays in reaching agreements with major contractors to return  to work. While LBB-Kaiserslautern reached completion agreements with  its major contractors in March 2008, and the number of workers on-site  has increased since that time, it is not clear if the number and type of  workers are sufficient to sustain production and meet LBB- Kaiserslautern’s new estimated construction completion date of January  2009. This projected date represents construction completion; however,  the facility will not be open to the public for about 4 months following  construction completion. Moreover, because LBB-Kaiserslautern has not  met earlier construction schedules and the estimated construction  completion date has continued to slip, we are concerned about LBB- Kaiserslautern’s ability to manage actions needed to achieve the January  2009 estimated construction completion date.
The comparison of the KMCC name-brand restaurant shows that the  restaurant still requires painting, wiring, and other finishing work similar  to that needed in 2007.
In addition, major construction deficiency problems, such as the leaking  roof and improperly installed kitchen exhaust ducts, which we discussed  in our 2007 testimony, are just now being repaired. For example, contracts  were recently awarded for the first two of four phases of repair work on  the leaking roof, and most of the deficient ductwork has been removed.  However, additional problems, such as several long cracks in the concrete  floor of the AAFES store, have been identified by the Air Force since our  last testimony. LBB-Kaiserslautern has retained an expert consultant to  investigate the floor cracks, and the consultant’s report recommends that  joints be cut into the floor to control further cracking. The actual scope of  the floor repair work and associated cost and schedule impacts are not  known at this time. Figure 3 shows an example of these cracks. The pen in  the photograph is provided for scale.
section_title: Final Costs of the KMCC Project Are Still Unknown
paragraphs: Because the Air Force does not track the total cost of the KMCC project,  there are no accurate estimates of how much the total KMCC project will  cost. Cost estimates provided by the Air Force primarily include core  construction-related costs and do not account for millions of dollars in  other costs related to the KMCC project. When all project-related costs are  taken into account, the total cost for the project will likely exceed $200  million. This figure was derived by consolidating numerous Air Force cost  estimates captured in different accounts, such as military construction  funds (MILCON), non-appropriated funds, and operations and  maintenance funds. According to Air Force officials, approximately $121  million has been spent on core construction-related costs for the KMCC as  of March 31, 2008. In addition, Air Force officials estimate that an  additional $41 million in construction-related costs are required to  complete the project. However, this estimate only relates to those costs  that the Air Force tracks for reporting purposes. Not included in the Air  Force’s estimate are design costs, costs of rework to repair known  construction deficiencies, foreign currency fluctuation costs, costs for  furniture and equipment, some costs for secondary services, and costs for  the numerous Air Force personnel reassigned from other projects in order  to help manage the KMCC construction project. For example, the Air  Force cost estimate does not fully reflect the effect of the weakening  dollar compared to the euro because payments from MILCON funded  project components to cover losses due to foreign currency fluctuation are  drawn from a separate account that the Air Force does not track as part of  this project. Table 1 shows the Air Force cost estimate for core  construction-related expenses along with additional costs associated with  the project. As the table shows, an accurate estimate on the total cost of  the project is not possible because of a number of unknown expenses,  such as the Air Force’s liability for contractor hindrance claims.
Additional clarification on selected project costs not included in the Air  Force’s construction cost estimate is provided below.
Construction deficiency repairs. Deficient construction has been  identified on major building components, including the roof and kitchen  exhaust ducts. LBB-Kaiserslautern is taking steps to contract for repairs to  correct these deficiencies.
Roof damage. Significant sections of the roof require repair or  replacement. The current plan is to complete repairs to the roof in four  phases. The first phase of repairs is expected to cost $2.7 million and is  included in the Air Force’s construction cost estimate, which according  to the Air Force is being paid for primarily with funds withheld from  the original roof contractor. Costs for repair phases two through four  are estimated by the Air Force to cost about $10.8 million and are not  included in its construction cost estimate. U.S. government funds  remaining from the original roof contract are being used to fund the  majority of phase one repairs; therefore, the phase one repair cost is  reflected in the Air Force’s construction cost estimate. Funds for repair  phases two through four are initially being funded by the German  government, and the Air Force excludes these costs in its construction  costs to complete the project.
Kitchen exhaust ducts. The kitchen exhaust ducts installed in the  KMCC do not comply with U.S. National Fire Protection Association  standards specified by the Air Force. LBB-Kaiserslautern has  completed the design for repairs to the exhaust ducts and is negotiating  with its contractor a final price for their installation. The estimated  installation cost is approximately $1.8 million. In early 2007, the Air  Force agreed to pay for $600,000 of the rework and has included that  amount in its construction cost estimate, but has not included the rest  of the repair cost as part its construction cost estimate.
Secondary services. As the project has progressed, the Air Force has  retained several contractor personnel to provide construction inspection,  engineering, consulting, and other secondary services. For example, since  January 2005 the Air Force has contracted for construction inspectors  who are responsible for, among other things, ensuring that installed work  meets the terms of the contract and checking that invoices correctly  reflect the work performed. The cost for most of these secondary services  is not included in the Air Force’s construction cost estimate. Air Force  officials indicated that some of the Air Force’s technical consultants were  also supporting other projects, but that the majority of their work involved  support on the KMCC. Since the majority of work performed under these  secondary services contracts relates to the KMCC project, we have  included the cost of these contracts in the Air Force’s estimate.
Foreign currency fluctuation. Since the start of the project in 2003, the  euro has appreciated 35 percent relative to the U.S. dollar. Because KMCC  contractors are paid in euros but KMCC project funds are budgeted in  dollars, the Air Force is susceptible to paying more when the dollar loses  value. In addition, this risk has been magnified by the 2-year delay in  completion of the project. Since the June 2007 testimony alone, the euro  has appreciated by 15 percent, from $1.35 to $1.55. As a result of the  devaluation of the dollar, nonappropriated fund payers (AAFES and  AFSVA) have paid about $31.9 million in foreign currency fluctuation  expenses, and appropriated MILCON funds have paid $8.6 million since  the project’s inception. The Air Force includes nonappropriated fund  foreign currency fluctuation costs in its construction cost estimates.  However, because MILCON foreign currency fluctuation costs are paid  from a separate account, the effect of foreign currency fluctuation is not  reflected in the Air Force’s construction cost estimate. Therefore we have  included in the estimate based on the Air Force’s reported numbers the  actual foreign currency fluctuation costs paid to date associated with  MILCON funds. In addition, the Air Force also did not include an  allowance for future foreign currency fluctuation costs associated with  MILCON funding. Based on the trend of the strengthening euro, these  foreign currency fluctuation costs will only increase as MILCON expenses  increase. Figure 4 shows the trend in the strengthening of the euro against  the U.S. dollar over the past several years.
In addition to the estimated expenses listed above, there are still a number  of significant costs associated with project completion that have not been  estimated. These items include potential hindrance claims, repair of  cracking concrete, and Air Force personnel costs for staff needed to  manage the KMCC’s construction. Depending on the resolution of these  unknown costs, the total cost of the KMCC project could increase  substantially before completion.
Hindrance claims. As a result of delays to the project, the Air Force  expects that contractors will submit claims for additional costs  incurred from being hindered in their performance. As of June 1, 2008,  LBB-Kaiserslautern had forwarded change order requests for  contractor hindrances totaling $8.2 million (5.4 million euros) to the Air  Force. However, the Air Force has denied the requests because it  contends that they are not substantiated. In anticipation of contractors  making formal hindrance claims—that must meet a prescribed legal  standard and would be adjudicated through the German courts—the  Air Force has retained a consultant to evaluate the history of the  project and prepare the Air Force’s claims defense strategy. At this  time, the Air Force’s potential exposure to claims is unknown.
Concrete cracking. Long cracks have been identified by the Air Force  at various locations on concrete floors of the KMCC subsequent to our  2007 site visit. A German court appointed an expert consultant to  determine the severity of the cracks and identify their causes. The  consultant’s report, issued in March 2008, indicates that joints will need  to be cut into the floor to keep additional cracks from occurring. LBB- Kaiserslautern subsequently initiated design work to detail the scope of  the repairs. The Air Force expects that LBB-Kaiserslautern will award a  contract for the repairs in July 2008. At this time, the cost of repairs is  unknown. (See fig. 3 for an example of these cracks).
Air Force personnel costs for staff managing the KMCC.
According to the Air Force, a team of 29 military, civilian, and  contractor personnel manage the KMCC construction project. They are  responsible for financial management, claims management, design and  construction management, and stakeholder operations. This team  comprises 6 military officers and enlisted personnel, 10 civil service  employees, and 13 contracted employees. The cost of the salaies and  benefits for military and civil service employees who have been  reassigned from other projects to assist in managing the KMCC project  since its inception in 2003 is a real cost of the project but is not  included in the Air Force’s overall cost estimate. This cost is difficult to  quantify because the military and civilian personnel occasionally work  on other projects, and it is not clear how their time is apportioned  among projects.
Federal Republic of Germany funds. The extent to which project cost  increases will be borne by the Air Force and its funding partners is  unknown because of uncertainties regarding the $37.9 million (25 million  euros) committed by the German government for the project. The German  government allocated $15.2 million (10 million euros) to pay contractors’  invoices against change orders that had not yet been approved by the Air  Force. According to the Air Force, only $8.6 million (5.7 million euros)  were actually expended by LBB-Kaiserslautern prior to the funds expiring  at the end of calendar year 2007. According to the German officials, this  initial $8.6 million amounts to a loan, and the Air Force stated that it will  reimburse this amount when it approves the change orders and makes  payment against the associated invoices. The additional $22.7 million (15  million euros) are planned to be used by LBB-Kaiserslautern to fund  contracts for rework items, such as roof repairs and kitchen exhaust duct  replacement, and may also be used to settle contractor hindrance claims.  In discussions with us, German officials characterized the $22.7 million (15  million euros) as a loan as well and said that they expected full repayment  of funds. However, Air Force officials contended that they will only pay  for valid work under the original KMCC contract and will not pay for  rework. In light of these opposing views, for transparency purposes, all  expenses paid from the German funds are incorporated into the total  project cost regardless of which party is ultimately responsible for  financing them.
section_title: Delayed Completion Has Caused Opportunity Costs to Grow
paragraphs: As a result of the delayed KMCC project completion, AFSVA and AAFES,  two major funding sources for the project, have experienced negative  financial effects. Both AFSVA and AAFES invested in the project with the  expectation of returns being generated in early 2006, the project’s original  construction completion date. However, the delayed completion has  resulted in lost profits and in turn reduced the amount of funds AAFES  and AFSVA can provide to military communities for morale, welfare, and  recreation. For example, AAFES estimates that every month the KMCC’s  opening is delayed, AAFES loses approximately $500,000 in net profits  from stores such as the base exchange and food court restaurants. In total,  AAFES estimates it will have lost more than $14 million in net profits by  the time construction is estimated to be completed in January 2009. Also,  the unavailability of the 350 hotel rooms to be completed in the KMCC  Visitors Quarters results in the U.S. government paying more for lodging  on the local economy. According to an Air Force estimate, on average  each month that the opening of the hotel is delayed results in the U.S.  government paying an additional $90,000 for off-base lodging of displaced  personnel traveling at the government’s expense. Estimated increases in  off-base housing costs will total $2.9 million dollars if construction is  completed in January 2009.
section_title: Criminal and Civil Investigations Continue to Surround the KMCC and Other Projects
paragraphs: In our June 2007 testimony, we reported that several Air Force and LBB- Kaiserslautern personnel involved in management of the KMCC and other  RMTP projects were under investigation by AFOSI and German police for  a variety of issues, both criminal and civil. AFOSI officials stated that the  cases have matured significantly since that time; however, formal  indictments have not yet been made. Because the investigations are still  active, AFOSI is limited as to the information it can disclose. However  officials did state that investigations involve U.S. military and civilian  employees, employees of LBB-Kaiserslautern, and KMCC trade  contractors. These individuals are being investigated for offenses such as  dereliction of duty and bribery.
section_title: The Air Force Has Improved Controls over the KMCC Project
paragraphs: The Air Force has made significant improvements in its oversight and  internal controls over the KMCC project. As stated in the June 2007  testimony, the Air Force had failed to institute effective management  oversight and internal controls in order to mitigate the high risk of the  project. Specifically, the Air Force lacked standardized policies, did not  have sufficient staffing to oversee the project, was not thoroughly  reviewing invoices, and was approving change orders and payments on the  project without proper documentation. In the last year, the Air Force  created the RDO, which centralized management oversight of the KMCC  project and brought together appropriate personnel specializing in  financial management, claims management, design and construction  management, and stakeholder operations. The Air Force has also  standardized its invoice and change order review processes to minimize  future risks of paying for unapproved work. The Air Force trained and  appointed certifying officers and accountable officials for the KMCC  project to ensure that personnel authorizing payments are aware of their  fiduciary responsibilities. Finally, during 2007, senior officials within the  Air Force engaged officials from the Department of State and the Federal  Republic of Germany in an effort to encourage progress on the project.
subsections: section_title: Establishment of the RDO and Improvements in Invoice and Change Order Reviews
paragraphs: In August 2007, the Air Force established the RDO to centralize control  over all aspects of the KMCC project. According to the Air Force, the RDO  has 29 personnel, which is a significant increase from the 8 oversight  personnel initially assigned to the KMCC project. These 29 personnel are 6  military officers and enlisted personnel, 10 civil service employees, and  13 contracted employees. The RDO is divided into four branches: financial  controls, ABG-75 administration, engineering, and operations/quality  assurance. The Air Force also standardized policies and procedures for the  four RDO branches, which are documented in an official operating  instruction manual for the KMCC project. The documented policies were a  measurable improvement from the one-page flowchart used during our  last visit in 2007. As part of the establishment of the RDO, the Air Force  also appointed and trained 9 certifying officers and accountable officials.  Certifying officers are responsible for certifying vouchers for payment.  Accountable officials provide source information to a certifying officer to  support a decision to certify a voucher for payment or to disburse funds.  Appointment and training of these types of officials are key to ensuring  that appropriate controls are in place over payments made by the Air  Force. The RDO also includes 6 quality assurance engineers and  technicians responsible for performing technical reviews of designs and  conducting daily surveillance of the work site.
Since creating the RDO, the Air Force has also improved its review  process for invoices. During our initial visit last year, we reported how Air  Force management instructed its staff to certify for payment invoices with  items included in unapproved change orders and items that exceeded  quantity limitations specified in contracts. The Air Force has since revised  its policy and now rejects invoices for quantities in excess of contracted  amounts and also rejects invoices with items included in unapproved  change orders. For example, if the Air Force receives an invoice that  contains charges for items contained in unapproved project change  orders, the Air Force will reject the invoice and refuse payment until LBB- Kaiserslautern submits an invoice that only lists items that have been  approved by the Air Force. In addition, the Air Force has gone back on  prior invoices and recouped amounts previously paid in excess of  contracted quantities.
section_title: Involvement of Senior Air Force Officials
paragraphs: Beyond improvements over internal controls and the establishment of the  RDO, senior Air Force, Department of State, and German government  officials have also increased oversight of the project. Beginning in August  2007, the U.S. Air Forces in Europe Vice Commander, the U.S. Ambassador  to Germany, and the heads of the German Ministry of Construction and the  German Ministry of Finance started meeting regularly to discuss problems  facing the KMCC. These repeated meetings between U.S. and German  officials prompted the German government to provide $37.9 million (25  million euros) to the project for backlogged change orders and repair  work. According to the Air Force, German support is essential for a  successful completion of the KMCC project. The Air Force’s expectation is  that by maintaining strong relationships among senior officials, it will  ensure that those running the KMCC project are able to better organize,  prioritize, and execute the project. Unfortunately, this joint effort has not  yet expedited KMCC construction to an acceptable pace according to Air  Force officials.
section_title: Other Recent U.S. Projects on Ramstein Air Base Have Experienced Similar Problems
paragraphs: Other projects recently completed in the KMCC area managed by LBB- Kaiserslautern have experienced problems similar to those affecting the  KMCC. Air Force officials report that several recent projects on Ramstein  Air Base experienced cost and schedule growth, including projects that  were delivered by LBB-Kaiserslautern months after the planned delivery  dates. In addition, several projects were delivered with construction flaws  that have caused flights to be diverted and have affected the processing of  freight shipments. According to the Air Force, it has experienced fewer  problems with less sophisticated projects, such as the construction of  more than 1,000 new military family housing units in the KMCC area and  the construction of an indoor pool on Ramstein Air Base, that were  managed by LBB-Kaiserslautern. However, construction of these projects  is not comparable to the scope and complexity of constructing the KMCC  building, runways, and other operational facilities.
subsections: section_title: Cost and Schedule Growth of Other Projects
paragraphs: Numerous recent projects associated with the RMTP built on Ramstein Air  Base by LBB-Kaiserslautern have experienced significant cost growth,  according to the Air Force. Several of these projects have also not  received final bills from LBB-Kaiserslautern despite being turned over to  the United States more than a year ago. Therefore, the final costs of the  projects are still unknown. In addition, many of the same group of projects  managed by LBB-Kaiserslautern also experienced significant schedule  growth according to the Air Force, including projects that were delivered  months after their scheduled completion dates.
section_title: Construction Deficiencies of Other Recently Completed Projects
paragraphs: Construction deficiencies experienced on several of the RMTP projects  built by LBB-Kaiserslautern add to the concerns associated with cost and  schedule growth. Specifically, there have been several projects where  faulty construction has resulted in safety concerns, building evacuations,  and potentially reduced useful lives of facilities. Below are examples of  such problems.
South runway. This runway was recently built on Ramstein Air Base in  order to upgrade the base’s capabilities in support of overseas missions,  including those in Iraq and Afghanistan. However, the runway lights are  adversely affected by a construction defect that allows groundwater to  collect in the underground ducts and manholes that contain electrical  components used to control the lights. The intrusion of water has  damaged electrical components resulting in power outages to the lights.  These lights are crucial for operations because they allow aircraft to land  during times of extremely limited visibility. According to the Air Force,  because of the lighting failures, aircraft could not land during periods of  limited visibility from November through December 2007 and flights were  diverted to other bases in Europe. Portable lights have been used to  temporarily resolve the problem. Additionally, water is pumped from the  manholes as an ongoing maintenance activity that according to Air Force  officials, has cost about $65,000 to date. Finally, during rainy periods,  several large ponds developed between the south runway and adjacent  runways and taxiways because of poor water drainage. These ponds,  which were several acres in total area during our visit in March 2008, have  attracted large waterfowl, which pose a safety hazard to aircraft using the  runway. Figure 5 shows one of these large ponds. Studies and court  actions are currently under way to resolve these issues.
Freight terminal. This large 100,000 square foot material handling facility  was constructed to assist in processing freight shipments to and from  overseas locations. However, deficiencies with the structural steel that  frames the freight terminal required evacuation of the building until  additional support columns could be installed. According to the Air Force,  because of material fabrication issues, insufficient welds, and undersized  connections, the steel structure that supports the freight terminal building  was determined to be at risk of collapsing. As an interim safety measure,  41 additional support columns were installed to bolster the structural  integrity of the facility. According to the Air Force, these additional  supports effectively reduce the open area in the center of the facility and  affect freight processing operations. For example, forklifts are restricted  in maneuvering and cannot access certain areas. Figure 6 shows an  example of the additional support columns installed within the freight  terminal building. A permanent resolution will be determined by legal  proceedings that are currently ongoing in the German courts. In addition,  officials were concerned that a building attached to the freight terminal  was also structurally deficient as a result of potentially insufficient welds  on the structural steel. Because of these concerns, the building was  evacuated from July through September 2007 while additional support  columns were installed. An inspection completed in March 2008 confirmed  that the structural steel was, in fact, installed correctly and that the  building is not at risk of collapsing. The attached building is currently  being used as intended.
Hot cargo pad. A large concrete area intended to be used for loading live  munitions onto aircraft destined for overseas locations such as Iraq and  Afghanistan was recently built near the Ramstein Air Base runway.  However, when building the concrete pad, contractors did not install  dowels between adjacent concrete slabs as is typically done in this type of  construction. Because the dowels were not installed, Air Force officials  stated that differential settling of the concrete slabs could result in damage  to the cargo pad and reduce its useful life. The Air Force is currently  negotiating with LBB-Kaiserslautern to determine what, if any, actions will  be taken to address this issue. While this does not represent a safety risk,  the reduced life span of the cargo pad could result in the Air Force  spending money for repair or replacement earlier than would normally be  expected.
section_title: Concluding Comments
paragraphs: Although the Air Force has made measurable improvements in its  oversight and control of the KMCC since our last testimony, the project  remains at risk because of schedule and cost uncertainties. With few  visible changes, no reliable construction completion date, rising repair  costs, and continuing construction quality problems, the KMCC will  continue to be a high-risk project. Even after the KMCC is completed and  open, it will likely take years before all issues related to this project,  including litigation and potential construction quality problems, are  resolved.
Mr. Chairman and Members of the Committee, this concludes our  statement. We would be pleased to answer any questions that you or other  members of the committee may have at this time.
section_title: GAO Contacts
paragraphs: For further information about this testimony, please contact Gregory Kutz  at (202) 512-6722 or kutzg@gao.gov or Terrell Dorn at (202) 512-6293 or  dornt@gao.gov. Contact points for our Offices of Congressional Relations  and Public Affairs may be found on the last page of this testimony.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the current status of the Kaiserslautern Military Community  Center (KMCC) construction project, including projected costs, cost  completion analyses, projected construction completion dates, and status  of ongoing investigations, we interviewed officials from the Air Force at  Ramstein Air Base in Germany, the Army and Air Force Exchange Service  (AAFES), the Air Force Services Agency (AFSVA), the U.S. Army Corps of  Engineers (USACE), the Air Force Audit Agency, the Air Force Office of  Special Investigations (AFOSI), and the Department of State. In addition,  we interviewed officials from Landesbetrieb Liegenschafts-und  Baubetreuung office in Kaiserslautern (LBB-Kaiserslautern), the German  government construction agency; the Federal Republic of Germany’s  construction division; and the German police. We physically inspected the  KMCC facility with an Air Force project manager and observed  construction deficiencies. We also reviewed financial records and  statements in the form of contracts, change orders, and invoices to the  extent that they were available. We also compiled Air Force and LBB- Kaiserslautern cost estimates for the various cost elements associated  with the KMCC project.
To determine whether oversight and internal control improvements have  been made by the Air Force since our last testimony, we interviewed Air  Force officials from the KMCC Resident Director’s Office. We also  interviewed officials from LBB-Kaiserslautern, AAFES, AFSVA, AFOSI and  the Air Force Audit Agency. We obtained and reviewed project  management plans, standardized policies and procedures, cost estimates,  training materials for certifying officers and accountable officials, and  other relevant documents related to project management.
To determine if other projects recently completed in the KMCC area have  experienced problems similar to those affecting the KMCC, we  interviewed Air Force officials regarding their construction projects in  Germany. We also conducted interviews with other organizations,  including USACE, AFOSI, LBB-Kaiserslautern, and the Air Force Center  for Engineering and the Environment to understand the cost, schedule,  and construction flaws experienced by other military construction  projects in the KMCC area and how they may affect the viability of future  construction projects. We also reviewed available technical expert reports  documenting construction deficiencies associated with these projects.
Because of ongoing investigations, we were not able to fully explore and  discuss the details of fraud investigations with AFOSI and the German  police, which limited the scope of our audit.
We conducted this performance audit from November 2007 through June  2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.