Embassy Construction: Achieving Concurrent Construction Would Help Reduce Costs and Meet Security Goals
Published: 2004-09-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: After the 1998 bombings of two U.S. embassies in Africa, the State Department embarked on a multibillion-dollar, multiyear program to build new, secure facilities on compounds at posts around the world. The Secure Embassy Construction and Counterterrorism Act of 1999 generally requires that all U.S. agencies, including the U.S. Agency for International Development (USAID), colocate offices within the newly constructed compounds. This report discusses how State is incorporating office space for USAID into the construction of new embassy compounds and the cost and security implications of its approach.
section_title: What GAO Found
paragraphs: State has built new embassy compounds in separate stages--scheduling construction of the USAID annex after work has begun (or in many cases after work has been completed) on the rest of the compound. State and USAID attributed this practice to a lack of full simultaneous funding for construction at nine locations through fiscal year 2004. Concurrent construction of USAID annexes could help decrease overall costs to the government and help achieve security goals. Concurrent construction would eliminate the second expensive mobilization of contractor staff and equipment and added supervision, security, and procurement support expenses that result from nonconcurrent construction. State has estimated that if nine future USAID annexes scheduled for nonconcurrent construction are built concurrently, it could save taxpayers $35 million. Extrapolating from data provided by State, GAO estimated a total cost savings of around $68 million to $78 million if all 18 future USAID projects are built concurrently. GAO also found that designing additional space for USAID within the main office building, or chancery, may cost less than erecting a separate annex, depending on a number of factors, including the size and configuration of the planned buildings. In addition to cost considerations, concurrent construction could help State and USAID comply with the colocation requirement and decrease the security risks associated with staff remaining outside of the embassy compound. For example, USAID staff who remain in a temporary USAID facility after other U.S. government personnel move into a new embassy compound may be more vulnerable to terrorist attack because the temporary facility does not meet security standards for new buildings and may be perceived to be a "softer" target relative to the new, more secure embassy compound. State's current plans call for continued nonconcurrent construction through fiscal year 2009. State acknowledged that there are substantial advantages to concurrent construction and has indicated that it may revise its building schedule to allow for more concurrent construction if a new cost-sharing proposal to fund new embassies by allocating construction costs among all agencies having an overseas presence is implemented in fiscal year 2005. However, even if cost sharing is not implemented, there are still opportunities for building some USAID facilities concurrently with the overall construction of the embassy compound if State, with congressional consent, revised its plan and rescheduled some projects.

section_title: Letter
paragraphs: After the 1998 bombings of two U.S. embassies in Africa, the State  Department embarked on a multibillion-dollar, multiyear program to build  new, secure facilities on compounds at posts around the world. The Secure  Embassy Construction and Counterterrorism Act of 1999 requires that all  U.S. agencies, including the U.S. Agency for International Development   (USAID), colocate offices within the newly constructed compounds.  USAID had historically provided its own office space for larger missions,  and according to the State Department’s Bureau of Overseas Buildings  Operations (OBO) and USAID, the agencies had unofficially agreed to  largely continue this practice. Under this agreement, according to State and  USAID officials, OBO would provide office space within State-funded  facilities for USAID missions with fewer than 50 staff, but USAID would  fund its own annex buildings within embassy compounds for larger  missions.
At your request, this report examines (1) how State is incorporating office  space for USAID into the construction of new embassy compounds, and  (2) the cost and security implications of State’s efforts to build USAID  office space into compounds.
To accomplish these objectives, we reviewed planning and construction  documents at OBO; interviewed State Department and USAID officials  regarding construction program plans, implementation, and funding; and  analyzed OBO estimates of the cost differentials between concurrent and  nonconcurrent construction of USAID annexes. We also interviewed  officials from four firms hired to build new embassy projects. Further, we  visited two field locations—in Nairobi, Kenya, and Kampala, Uganda— where we discussed the implications of construction sequencing for the  embassies and USAID. We conducted our review from December 2003 to  July 2004 in accordance with generally accepted government auditing  standards. Appendix I provides more information on our scope and  methodology.
subsections: section_title: Background
paragraphs: In the wake of the 1998 bombings at the U.S. embassies in Nairobi, Kenya,  and Dar es Salaam, Tanzania, State has received increased funding for the  construction of new, secure facilities overseas. Funding from fiscal year  1999 to 2004 totaled about $3.4 billion. In addition, Congress passed the  Secure Embassy Construction and Counterterrorism Act of 1999. The act  established a number of security requirements for diplomatic facilities  overseas, one of which was that all U.S. government personnel (except  those under the command of an area military commander) at any new U.S.  diplomatic facility abroad must be located at the same site. State identified  facilities at about 185 posts that would need to be replaced to meet the  security standards.
To help manage this large-scale construction program, OBO developed the  Long-Range Overseas Buildings Plan, first published in July 2001 and  recently updated in March 2004. The plan is updated annually, adding new  projects as scheduled projects’ construction contracts are awarded. The  plan prioritizes posts based on security and operational considerations,  including input from State’s regional bureaus and the Bureau of Diplomatic  Security. The most recent version of the plan prioritizes 77 proposed  security capital and regular capital projects from fiscal years 2004 through  2009, including 18 separate USAID annex buildings.
Until the late 1990s, the majority of USAID missions were not colocated  with embassies but existed in separate commercial or freestanding  buildings. Most of these facilities were rented; several were built with host  country trust funds, and a small number were constructed with funds  appropriated by the Foreign Operations Appropriations Acts.
Since the 1999 colocation requirement, State and USAID have not been  fully successful in obtaining funding for construction of separate USAID  annex buildings at locations where State was building a new embassy  compound. In its fiscal year 2001 report on Commerce, Justice, and State  funding, the House Committee on Appropriations wrote that it did not  approve the use of the funds for the USAID annexes because  appropriations requirements of USAID fall under the jurisdiction of the  Foreign Operations, Export Financing, and Related Programs  Subcommittee. In an effort to overcome funding problems, USAID  requested that the Foreign Operations subcommittee fund a new account  for fiscal year 2003, the Capital Investment Fund, to fund information  technology enhancements and construction of colocated USAID facilities.  Although the fund has been established, USAID has not obtained full  funding to construct all of its buildings. In its report on the fiscal year 2003  Foreign Operations appropriation, the House Committee on  Appropriations noted that buildings and space for all other government  agencies overseas were appropriated through State’s account for overseas  construction, and stated that therefore the committee had not funded all  requests for USAID buildings on new embassy compounds. State’s fiscal  year 2005 budget request, which has been approved by the House and is  pending approval in the Senate, includes the construction of four USAID buildings anticipated to be funded from contributions through the Capital  Security Cost-Sharing Program.
section_title: State Has Built Compounds in Stages
paragraphs: State has built new embassy compound facilities in separate stages to  accommodate the lack of USAID funding, according to State and USAID  officials. Only one of three new embassy compounds completed to date  includes the planned annex for USAID. In addition, contracts have been  awarded or construction is under way on several more compounds that do  not include, but will eventually have, a separate annex for USAID. Under  OBO’s current 6-year building plan, nonconcurrent construction will  continue through at least fiscal year 2009.
subsections: section_title: State and USAID Attribute Nonconcurrent Construction to Lack of Funds
paragraphs: State initiated the Security Capital Construction Program to replace its  most vulnerable posts. Under this program, OBO is constructing  replacement facilities on embassy and consulate compounds that will  contain the main office building, or chancery, all support buildings, and a  separate annex building for USAID, where necessary. According to OBO, it  has always preferred to construct all components of a new embassy  compound concurrently, and its 2002 long-range plan included projects in  which the USAID building would be built concurrently with rest of the  compound. It was only after USAID did not receive funding for its annexes  in fiscal year 2001 that OBO began to move to a nonconcurrent approach to  construction, according to OBO officials.
Since 1999, OBO has completed construction of new embassy compounds  in Dar es Salaam, Nairobi, and Kampala, Uganda, which were planned to  include a separate facility for USAID. So far, OBO has completed the annex  for USAID only at the compound in Dar es Salaam. Initially, OBO awarded a  construction contract that did not include the USAID annex, but USAID  received $15 million in additional operating expense funds through the  regular appropriation process to pay for new construction. In addition, $2.5  million from program funds were used with $25 million obtained from the  Security Supplemental Account for security upgrades. The funding became  available in time for OBO to modify the original construction contract and  complete the USAID annex at the same time as the rest of the compound.
For Nairobi, OBO awarded a construction contract for a new embassy  compound in September 1999 that did not include the USAID facility  because there were no funds for this USAID annex. Subsequently, OBO and  the contractor negotiated to include the USAID annex as a modification to  the original contract, but sufficient funding did not become available in  time. Construction of the chancery building was completed in 2003. USAID  received funding for its annex in fiscal year 2003; construction began in  June 2004 and is scheduled to end in June 2006, 3 years after the compound  was completed and became operational (see fig. 1). In the meantime,  USAID is leasing space at a cost of about $300,000 per year on the campus  of a nongovernmental research facility.
A construction contract for the new embassy compound in Kampala was  awarded in 1999 and construction was completed in fiscal year 2002, but  USAID did not receive funding for its annex until fiscal year 2004. OBO  expects to award a construction contract for the USAID annex sometime in  2004, according to an OBO official. USAID plans to remain in its interim  location outside the new compound—an office converted from a residence  in Kampala and leased for $144,000 per year—until its new facility is built  in about 2006.
In addition, contracts have been awarded or construction is under way on  the following seven compounds that do not include a separate building for  USAID because the agency lacked funding for the construction: Yerevan,  Armenia; Phnom Penh, Cambodia; Tbilisi, Georgia; Conakry, Guinea;  Bamako, Mali; Kingston, Jamaica; and Abuja, Nigeria. At most of these  posts, construction of the USAID facility will start between 2 to 4 years  after OBO awarded the contract for the compound. For example, OBO  awarded construction contracts for the new embassy compounds in  Phnom Penh and Conakry in fiscal year 2002 and plans to solicit bids to  construct the USAID annexes on these compounds during fiscal year 2004.  In Yerevan, the U.S. Ambassador and OBO devised an alternative to waiting  for funds to build a separate facility for USAID:  OBO is adding a floor to a  warehouse building under construction on the compound to house USAID.  OBO can add a floor to the building for less money than it would cost to  build a separate annex, although USAID will have less space, according to  State and USAID officials. Table 1 shows the contract award dates for  selected new embassy compounds and the award dates for the  corresponding USAID annex. The Secretary of State has had to issue  waivers of the colocation requirement for some of these locations to permit  USAID to remain outside the compound pending construction of a facility  on the compound.
section_title: Nonconcurrent Construction Will Continue for Years under Current Plan
paragraphs: In addition to the projects previously discussed, OBO’s current 6-year  building plan includes 18 new embassy compounds that will include a  separate facility for USAID, 9 of which are slated to be built  nonconcurrently. For the remainder of fiscal year 2004, OBO will award  construction contracts for 3 new embassy compounds without including  the USAID annex: in Managua, Nicaragua; Kathmandu, Nepal; and Accra,  Ghana. The current schedule also calls for awarding embassy construction  contracts in 5 locations in fiscal year 2006 but not awarding the contracts  for USAID annexes until fiscal year 2007; and awarding 1 embassy project  in fiscal year 2008 but not awarding the USAID contract until at least fiscal  year 2009. Table 2 lists new embassy compound construction projects  through fiscal year 2009.
section_title: Concurrent Construction Could Decrease Costs, Improve Security
paragraphs: Nonconcurrent construction increases the overall cost to the government  and raises concerns about security. We also found that, in some cases,  constructing a separate annex building could cost more than building a  larger chancery to accommodate USAID. OBO’s own analysis of 9 projects  shows that the current schedule of nonconcurrent construction will add  more than $35 million in costs. In addition, extrapolating from OBO’s  data, we have projected an overall cost increase of as much as $78 million if  all 18 future USAID annexes follow the historical pattern of nonconcurrent  construction. This estimate does not include security enhancements and  other costs that USAID will incur while its staff are in interim facilities  pending completion of the USAID annex. This estimate also does not  include potential cost savings from merging USAID space into chancery  buildings in the future. Finally, nonconcurrent construction has security  implications for USAID employees left behind in interim facilities and for  the other U.S. government employees moved to more secure compounds.
subsections: section_title: State and USAID Officials and Contractors Agree That Nonconcurrent Construction Is the More Costly Approach
paragraphs: All government officials and private construction contractors with whom  we spoke agreed that the practice of nonconcurrent construction  significantly adds to the overall expense of building USAID office space.  Building nonconcurrently can result in a second expensive mobilization of  contractor staff and equipment, additional work to procure building  materials, and added construction management oversight. According to  contractors experienced in building embassy compounds overseas, such  remobilization and duplication of support activities can add 20 percent to  25 percent to what a concurrent construction contract would have cost,  depending on the location. They said that when the U.S. government does  not receive funds for the USAID annex until after the contractor has  finished building the embassy, there is no chance of maximizing economies  of scale that result from contractor staff and equipment already on site. In  Nairobi, for example, according to one of the contractors we met with,  OBO could have built the USAID annex for $19 million using the same  contractor building the embassy chancery, but OBO awarded a contract for  almost $30 million to a different builder since funding was not available  until 4 years later. OBO officials have also said that in addition to  contractor mobilization costs, nonconcurrent expenses must include  OBO’s added supervision and site security costs for a second project. For  instance, in Nairobi, OBO’s project supervision and construction security  cost estimates for the USAID annex rose from $683,000 for concurrent  building to $2.9 million for nonconcurrent building.
Nonconcurrent construction also increases security enhancement  expenses. Until secure office space is built, USAID must either remain in or  move to interim facilities. The interim site may require significant security  upgrades to obtain some minimum level of protection for staff, including  the leasing of surrounding property to create setbacks from roads, as well  as the addition of perimeter fencing and installation of anti-ram barriers.  Security, supervision, and maintenance personnel costs would continue to  accrue until the new USAID facility were completed. For instance, in  Kampala, Uganda, USAID will likely spend $3.2 million for operational and  security expenses from the time the new chancery opened in 2002 until the  annex in the new embassy compound is finished in 2006.
section_title: Concurrent Construction of Future USAID Annexes Could Save Millions of Dollars
paragraphs: OBO estimates that future USAID annex projects now scheduled for  nonconcurrent construction will increase costs to taxpayers by $35 million.  Extrapolating from these data, we project that annex construction costs  could rise between $68 million to $78 million if all 18 future annexes were  delayed. These expenses do not include the $27 million to $30 million cost  increase that, based on OBO’s data, we inferred was generated by  nonconcurrent construction of annexes for embassy compounds awarded  before 2004. There are no opportunities to significantly reduce this expense  because these compounds are already built or under construction without  USAID annexes. Estimates from OBO calculate the cost increase for  building the 9 USAID annexes now scheduled for nonconcurrent  construction over the next 5 budget years at $43 million (or $35 million at  present value) above the cost for building at the same time. We further  extrapolated from these and other OBO cost estimates, an average cost  differential increase for a USAID annex of about 24 percent to 31 percent  for nonconcurrent construction. Using OBO’s cost data, we calculated the  range of the potential cost increase of nonconcurrent construction for all  future annex projects to be between $88 million to $101 million over the  next five budget years (or $68 million to $78 million at present value).   Figure 2 compares concurrent and nonconcurrent construction costs for 18  projects to be built after fiscal year 2004.
Further, our estimates do not include the costs of additional operations and  lease expenses or increased security and personnel costs, for which we did  not have comprehensive data but which could be substantial. For example,  OBO has estimated that in one European location, USAID will have to pay  an additional $690,000 for rent because of a 1-year delay in awarding the  construction contract. In two African locations, USAID officials estimate  they will have to pay an additional $5.5 million for 3 or more years of rent  and continuing security expenses until their new facilities are built.
subsections: section_title: Including USAID Space within a Larger Chancery Rather Than Constructing a Separate USAID Annex May Decrease Costs
paragraphs: Depending on a number of factors, building a separate annex for USAID  increases costs over designing additional space for USAID within the  chancery. Two of the contractors we met with stated that constructing one  building could be more cost effective than constructing two. OBO has  estimated that in two African locations where new embassy construction is  scheduled for 2006, building a separate USAID annex would cost at least  $6.5 million per site more than housing USAID in the chancery, assuming  nonconcurrent construction. OBO officials have said that, except for very  large USAID missions, there may be little reason to build a separate USAID  annex other than the ease of allocating construction costs to USAID.  Further, OBO has recently re-evaluated the office space parameters for  new overseas missions, significantly reducing the sizes of proposed USAID  annexes. Assuming these revised space allocations are adequate, an  additional five to eight proposed USAID annexes would be similar in size  (2,500 gross square meters or less) to those at the two African locations  OBO analyzed. The cost differentials between a separate annex versus  locating USAID within the chancery in those locations could be similar if  other key factors, such as building configuration and site conditions, were  also comparable.
However, there are factors other than costs that should be considered  when determining whether to build a separate annex or include space for  USAID in the chancery, according to USAID. Such factors include  geographic location, the type of work USAID is engaged in, and the security  profiles of the country. Moreover, a separate unclassified USAID annex  may allow greater access for local staff and visitors.
section_title: Nonconcurrent Construction Poses Security Risks
paragraphs: In addition to cost considerations, nonconcurrent construction of the  USAID annexes raises a number of security concerns, according to State  Diplomatic Security and embassy officials as well as USAID security  officials. For example, some officials expressed concern about the safety of  USAID employees who remain in interim facilities after other U.S.  government personnel have moved to the new embassy compounds. State  is building the compounds to provide safe, secure facilities because U.S.  facilities and personnel have faced continued threats from terrorist and  other attacks since the Kenya and Tanzania embassy bombings. For  example, from 1998 through 2002, there were 30 terrorist attacks against  overseas posts, personnel, and diplomatic residences. During that same  period, overseas posts were forced to evacuate personnel or suspend  operations 83 times in response to direct threats or unstable security  situations in the host country.
Terrorists continue to look for targets, according to the security officials,  and an interim USAID facility might be perceived to be a “softer” target  than a new, more secure embassy, thus making USAID employees more  vulnerable to attack. For example, figure 3 shows a new embassy  compound main gate with an anti-vehicle delta barrier, anti-ram perimeter  wall, and blast-resistant guardhouse containing bomb detection equipment,  compared with an interim USAID facility entrance with temporary barriers  that are removed after work hours.
State, USAID, and embassy officials described a number of actions taken to  mitigate the risks for USAID employees who are not colocated in new  embassy compounds. For example, a post may construct special jersey  barriers and fences, dig trenches, close streets adjacent to a USAID facility  to create a setback around the building during the day, and lease properties  adjacent to its facilities to create a buffer. A post may also use contract  guard services, deploy surveillance detection teams and mobile response  teams, and use the services of local police.
Despite actions to mitigate the security risks of nonconcurrent  construction, State and USAID officials remain concerned because interim  facilities do not meet the security standards established by the Overseas  Security Policy Board. In addition to the Secure Embassy Construction and  Counterrorism Act of 1999, which requires a 100-foot setback and  colocation of all U.S. government employees at a new site, the security  standards for new office buildings include anti-ram perimeter walls and  barriers, construction to meet blast protection, forced entry/ballistic  resistant protection for doors and windows, and controlled access points.  A USAID security official stated that, despite measures to reduce security  risks, facilities are vulnerable when they are not controlled by the U.S.  government. For example, the official said that posts using temporary  jersey barriers eliminate the setback each evening when the barriers are  removed and the streets are reopened to normal traffic. Further, a State  security official stated that the Bureau of Diplomatic Security was an early  advocate of colocating all U.S. personnel when the new embassy  compound is built. He said that the bureau is concerned from a threat  perspective and that the threat to U.S. personnel remains high. He said that  when USAID cannot be colocated, the bureau tries to find ways to mitigate  the risk but there is no perfect solution. However, he said the bureau does  not recommend delaying the construction of a compound until funding for  the USAID annex is available because that would leave a greater number of  staff vulnerable.
Nonconcurrent construction also has security implications for the  employees who move into the newly constructed compound. Subsequent  construction of the USAID annex on the compound results in more  workers, vehicles, and equipment on site, which may increase the  vulnerability of the overall embassy compound and its personnel by giving  terrorists the opportunity to conduct surveillance or attack the embassy,  according to State and USAID officials. To address this issue, OBO and  regional security officers in Nairobi, Kenya, and Kampala, Uganda,  described a number actions required to control the access of construction  personnel and equipment to the compound. For example, the regional  security officers told us that they need to hire additional security guards to  inspect trucks bringing building materials to the compound. The regional  security officer in Nairobi said he would need about 14 additional guards to  perform these inspections. For some sites, destruction of part of the  perimeter wall to add an entrance for the construction vehicles and  equipment has been discussed as a way of allowing contractor access to  the compound. Construction workers need to undergo background checks  and receive identification cards, according to regional security officers;  these requirements could place a significant burden on their time and  workload unless State hires a site security manager.
section_title: Opportunities Exist for More Concurrent Construction
paragraphs: OBO acknowledged that it would be advantageous to the U.S. government  to build embassy compounds concurrently.  OBO said it may revise its  schedule to allow for more concurrent construction and consider on a  case-by-case basis whether USAID should have a separate annex if the  Capital Security Cost-Sharing Program is funded. However, even without  cost sharing, there are opportunities for more concurrent and efficient  construction. By delaying one project slated for fiscal year 2006 and  estimated to cost more than $100 million, State would have sufficient funds  to eliminate the backlog of USAID projects. Moreover, it is not  unprecedented for projects in successive annual plans to be moved from  one year to another. For example, over the last three planning cycles,  several planned projects have had to be moved from one year to another  due to factors such as a failure to acquire land in a timely manner or a  change in executive branch priorities. Therefore, if OBO could reschedule  planned projects it could make headway in minimizing nonconcurrent  construction. OBO emphasized that it would need congressional support to  do this.
section_title: Conclusion
paragraphs: OBO’s multibillion-dollar program to build new, secure embassies and  consulates around the world was designed to colocate all U.S. employees  stationed overseas within a secure compound, as required by law. However,  by building the compounds in stages, some employees must temporarily  remain in less secure space outside the compound. Concurrent  construction will help State and USAID comply with the colocation  requirement. Our analysis also shows that concurrent construction likely  results in cost savings for the taxpayer and that incorporating all office  space into the main chancery building rather than building a separate  annex may be, in some cases, a more efficient approach. According to  State, lack of funding and restrictions on the use of funds has required OBO  to phase construction of new embassy compounds that have a USAID  annex component. However, State said it will consider revising its  construction schedule to achieve more concurrent construction if the  Capital Security Cost-Sharing Program is implemented in fiscal year 2005.
However, even if the plan is not implemented, opportunities exist to  schedule the construction of more projects concurrently.
section_title: Matter for Congressional Consideration
paragraphs: In order to minimize costs and further improve security associated with  building new embassy compounds, if the Capital Security Cost-Sharing  Program is not implemented in fiscal year 2005, Congress may wish to  consider alternative funding approaches to support concurrent  construction of new embassy compounds.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Director of State’s Bureau of Overseas Buildings  Operations (1) update the Long-Range Overseas Buildings Pan to achieve  the concurrent construction of USAID facilities to the maximum extent  possible; and (2) in coordination with USAID, consider incorporating  USAID space into single office buildings in future compounds, where  appropriate.
section_title: Agency Comments and Our Evaluation
paragraphs: The State Department and the U.S. Agency for International Development  provided written comments on a draft of this report (see app. II and app.  III). State also provided technical comments, which we have incorporated  into the report as appropriate.
In its comments, State said that the report is a fair and accurate  representation of the issue and welcomed our recommendations. State said  it would update the Long-Range Overseas Buildings Plan to achieve  concurrent construction to the maximum extent and coordinate with  USAID to consider incorporating USAID space into single office buildings  in future compounds where appropriate if the Capital Security Cost- Sharing Program is implemented. However, our recommendations and  matter for consideration are designed to bring about concurrent  construction to the maximum extent regardless of the implementation of  the Capital Security Cost-Sharing Program.
In its comments, USAID said the report successfully attempts to address  the rationale as well as many of the difficulties in achieving the goal of  concurrent construction of new embassy compounds and facilities to be  occupied by USAID employees on those compounds. USAID said it agreed  with both our recommendations and provided information to support the  recommendations and explain its requirements.
We are sending copies of this report to interested congressional  committees, the Secretary of State, and the Administrator of USAID. We  will also make copies available to others upon request. In addition, the  report will be available at no charge on GAO’s Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-4128. Another GAO contact and staff acknowledgments are  listed in appendix IV.
section_title: Scope and Methodology
paragraphs: To examine State’s efforts to incorporate office space for the U.S. Agency  for International Development (USAID) into the construction of new  embassy compounds and to assess the cost and security implications of its  approach, we  reviewed the State Department’s Bureau of Overseas Buildings  Operations (OBO) construction documents and the Long-Range  Overseas Buildings Plans for fiscal years 2002 to 2007, years 2003 to  2008, and 2004 to 2009;   interviewed State Department and USAID officials regarding completed,  ongoing, and planned new embassy compound projects that include a  separate annex for USAID, including operational, cost, and security  issues arising from nonconcurrent construction and the issues involved  in housing USAID in separate buildings;   interviewed officials from several U.S. construction firms experienced  in building new embassy projects regarding the costs of OBO  construction scheduling practices; and   analyzed OBO estimates of the cost differentials between concurrent  and nonconcurrent construction.
Further, we visited two field locations—in Nairobi, Kenya, and Kampala,  Uganda—where we discussed with State and USAID officers at each post  the implications of construction sequencing to the embassies and USAID.
To analyze the cost impacts of different USAID annex construction  scheduling, we developed a cost model enabling us to extrapolate from  State data the aggregate and annual costs for both concurrent or  nonconcurrent construction projects for USAID annexes. Our model is  based on cost estimate data provided by OBO for 26 projects. (Estimates  for Yerevan, Armenia, were not used because OBO no longer plans to build  a separate annex for USAID.)  For some projects, we had estimates of fiscal  year contract award and midpoint construction costs in nominal dollars for  concurrent and nonconcurrent construction. Using such data from 13  projects, we estimated the average percentage cost differential per project  to build a nonconcurrent annex as a range of 30.75 percent and 23.83  percent. The higher end of the range results from excluding data for 3 of  the 13 locations (Kampala, Uganda; Harare, Zimbabwe; and Kingston,  Jamaica) where OBO indicated that site-specific factors accounted for  major deviations from the mean. Both average percentage differentials are  used to project base-year costs for concurrent construction for Abuja,  Nigeria, and for nonconcurrent construction on 11 projects for which we  had incomplete data. We also had data on an additional project (Tbilisi,  Georgia) but used it only to represent the costs of that project, not to  estimate the average cost differential because the data for the project  reflected building sizes for concurrent and nonconcurrent construction  costs that were substantially different. Assumptions included  the length of construction period (24 months for concurrent and 15  months for nonconcurrent),   the 1-year lag between proposed award year for concurrent  construction and nonconcurrent construction,  cost distribution over the construction period, and   average dollar cost escalation of 3 percent per year.
These assumptions for each of the 26 projects enabled us to estimate  total budget dollar costs, and   present value costs in fiscal year 2004 dollars.
We did not verify the accuracy of OBO’s cost estimates or its methodology  for estimating costs. However, we did meet with OBO officials responsible  for the cost estimates to discuss their methodology and underlying  assumptions. The cost differentials between concurrent and  nonconcurrent construction that OBO estimated were consistent with  those estimated by two of the contractors we met with.
We conducted our work from December 2003 to July 2004 in accordance  with generally accepted government auditing standards.
section_title: Comments from the Department of State
paragraphs: The following are GAO’s comments on the State Department letter dated  September 14, 2004.
subsections: section_title: GAO Comments
paragraphs: 1. Our recommendations and matter for consideration are designed to  bring about concurrent construction to the maximum extent regardless  of the implementation of the Capital Security Cost-Sharing Program. 2. We have revised our statement accordingly.
section_title: Comments from the U.S. Agency for International Development
paragraphs: The following is GAO’s comment on the U.S. Agency for International  Development letter dated September 10, 2004.
subsections: section_title: GAO Comment
paragraphs: We agree with the U.S. Agency for International Development that many  factors should be considered to determine whether housing USAID in a  separate building or within the chancery building is beneficial to the U.S.  government. We have added a brief description of some of these factors.
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Omar Beyah, Janey Cohen,  David Hudson, Bruce Kutnick, and La Verne Tharpes made key  contributions to this report.
section_title: GAO’s Mission
paragraphs: The Government Accountability Office, the audit, evaluation and  investigative arm of Congress, exists to support Congress in meeting its  constitutional responsibilities and to help improve the performance and  accountability of the federal government for the American people. GAO  examines the use of public funds; evaluates federal programs and policies;  and provides analyses, recommendations, and other assistance to help  Congress make informed oversight, policy, and funding decisions. GAO’s  commitment to good government is reflected in its core values of  accountability, integrity, and reliability.
section_title: Obtaining Copies of GAO Reports and Testimony
paragraphs: The fastest and easiest way to obtain copies of GAO documents at no cost  is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts  newly released reports, testimony, and correspondence on its Web site. To  have GAO e-mail you a list of newly posted products every afternoon, go to  www.gao.gov and select “Subscribe to Updates.”
subsections: section_title: Order by Mail or Phone
section_title: To Report Fraud, Waste, and Abuse in Federal Programs
section_title: Congressional Relations
section_title: Public Affairs