AOC and its major construction contractors have made progress since the Subcommittee’s May 17 hearing. As of May 31, the construction management contractor reported that the CVC project’s construction was about 65 percent complete. The sequence 1 contractor, Centex Construction Company, which was responsible for the project’s excavation and structural work, has continued to address punch-list items, such as stopping water leaks that continue to appear in perimeter walls. According to the construction management contractor, as of May 31, the sequence 1 contractor had completed almost all of the items on the punch list. AOC expects the sequence 1 contractor to be completely done with this list and off site by June 30, although the contractor may have to return later to address some issues. Furthermore, the sequence 2 contractor, which is responsible for the mechanical, electrical, plumbing, and finishing work, continued to make progress in these areas, including erecting masonry block, placing concrete, and installing finish stone, sheetrock and plaster, and granite pavers. The sequence 2 contractor also continued work on the utility tunnel. As the Subcommittee requested, we worked with AOC on the selection of several sequence 2 milestones that the Subcommittee can use to help track the project’s progress from the Subcommittee’s May 17 hearing to July 31. These milestones are shown in appendix 1 and include activities on the project’s critical path, as well as other activities that we and AOC believe are important for the project’s timely completion. AOC’s sequence 2 contractor completed 3 of the 11 activities listed in appendix 1 as scheduled for completion by today. The 11 activities include certain stone work in the Great Hall, a portion of the masonry wall in the auditorium, and certain utility tunnel work. According to AOC, the delays in 8 of these activities were caused by a number of factors, such as unforeseen site conditions, a design problem, and delays in completing certain masonry work that had to be completed before other work could be done. AOC does not expect these delays to postpone the project’s scheduled September 2006 completion date because it believes that the sequence 2 contractor can recover the lost time. Since the May 17 hearing, AOC learned that the utility tunnel, which was expected to be operational in October 2005, is not now likely to be operational until March 2006. According to AOC, this date slipped because of unforeseen site conditions and the need to do certain work earlier than originally anticipated. The sequence 2 contractor has indicated that the impact of this delay on the project’s scheduled September 2006 completion date will be mitigated by the use of temporary dehumidification equipment. However, this mitigation approach will result in additional costs, as explained later in this statement. Also since the May 17 hearing, AOC’s contractors have updated the project’s master schedule, and the new schedule shows seven paths that are critical or are within 15 days of being critical. For example, the updated schedule shows millwork and finishing the auditorium to be within 10 days and 15 days, respectively, of being critical. Having so many critical or near-critical paths complicates schedule management and increases the risk of problems that could lead AOC to miss its scheduled completion date. In our May 17 statement, we provided several observations on AOC’s management of the project’s schedules, including our view that problems in this area contributed to slippage in the project’s scheduled completion date and additional project costs associated with delays. We also discussed recommendations we had already made to AOC to enhance its schedule management. AOC had agreed with these recommendations and had generally begun to implement them, but, it still needed, in our view, to give priority attention to them to keep the project on track and as close to budget as possible. A brief discussion follows of the issues that need AOC’s priority attention and the current status of AOC’s actions to address these issues. Having realistic time frames for completing work and obtaining fully acceptable schedules from contractors. Over the course of the project, AOC’s schedules have shown dates for completing tasks that project personnel themselves considered unlikely to be met. In addition, the master project schedule ( prepared by AOC’s construction management contractor) that AOC was using in May 2005 did not tie all interrelated activities together and did not identify the resources to be applied for all the activities, as AOC’s contract requires. On June 10, the construction management contractor told us that it had reassessed the reasonableness of the activity durations and found that they reasonably reflected the time required to perform the activities. Last week, AOC provided us with a revised master schedule that the construction management contractor said (1) reflected significant improvement in the linkage of interrelated tasks and (2) provided sufficient information to manage the project’s resources. AOC said that it planned to approve and accept this schedule subject to several conditions. Although our initial review of this revised schedule indicates that a number of improvements have been made, we have not yet had time to fully evaluate it. We will have a more complete assessment for the Subcommittee by its next CVC oversight hearing. Furthermore, as we said during the May 17 hearing, we continue to believe that AOC’s scheduled September 2006 completion date is optimistic and that the project is more likely to be done in the December 2006 to March 2007 time frame, largely because of past problems, the risks to the schedule identified during our assessment of it in early 2004, and future risks and uncertainties facing the project. We plan to update our risk assessment for AOC’s revised schedule and have our update completed in September 2005. Our update will include a review of activity durations. Aggressive monitoring and managing contractors’ adherence to the schedule, including documenting and addressing the causes of delays, and reporting accurately to Congress on the status of the project’s schedule. We noted in our May 17 testimony that neither AOC nor its construction management contractor had previously (1) adhered to contract provisions calling for monthly progress review meetings and schedule updates and revisions, (2) systematically tracked and documented delays and their causes as they occurred or apportioned their time and costs to the appropriate parties on an ongoing basis, and (3) always accurately reported on the status of the project’s schedule. AOC and the construction management contractor have been working with the schedule consultant to develop a new, systematic process for tracking, analyzing, and documenting schedule progress and delays, addressing schedule issues, approving proposed schedule changes, and reporting on the schedule’s status. On June 7, AOC, the construction management contractor, the sequence 2 contractor, and the schedule consultant conducted the first monthly schedule status review session using the newly developed approach. If effectively implemented and sustained, we believe that this new approach should generally resolve the schedule management concerns we previously raised, although it is not yet clear how delays will be handled on an ongoing basis. We believe that the successful implementation of this new approach, including the effective handling of delays, depends heavily on the CVC project team’s continuous commitment of sufficient skilled resources to schedule management. On June 9, the construction management contractor told us that a project control engineer who had been assigned temporarily to help manage the project’s schedule would be working full time on the project starting June 13. We plan to closely monitor the implementation of this new approach, including the resources devoted to it, the handling of delays, and the accuracy of the information provided to Congress. Developing and implementing risk mitigation plans. In the course of monitoring the CVC project, we have identified a number of risks and uncertainties that could have significant adverse effects on the project’s schedule and costs. Some of these risks, such as underground obstructions and unforeseen conditions, have already materialized and have had the anticipated adverse effects. We believe the project continues to face risks and uncertainties, such as unforeseen conditions associated with the project’s remaining tunnels and other work, scope gaps or other problems associated with the segmentation of the project between two major contractors, and shortages in the supply of stone and skilled stone workers. Although we have recommended that AOC develop and implement risk mitigation plans for these types of risks and uncertainties, AOC has not yet done so. AOC has agreed, however, to begin to do this shortly, and, according to AOC’s CVC project executive, is exploring possible approaches. Preparing a master schedule that integrates the major steps needed to complete CVC construction and the steps necessary to prepare for operations. A number of activities, such as hiring and training staff, procuring supplies and services, and developing policies and procedures, need to be planned and carried out on a timely basis for CVC to open to the public when construction is complete. Although AOC has started to plan and prepare for CVC operations, as we indicated in our May 17 testimony, it has not yet developed a schedule that integrates the construction activities with those activities necessary to prepare for operations. The Subcommittee requested such a schedule during its April 13, 2005, hearing on AOC’s fiscal year 2006 budget request. Because of a lack of funds, AOC had not been able to extend the work of a contractor that had been helping it plan and prepare for operations. Last week, AOC received the funding needed to re-engage this contractor, and AOC said that it would be working with the contractor to continue planning and preparing for CVC operations. As we said during the Subcommittee’s May 17 hearing, we estimate that the cost to complete the construction of the CVC project, including proposed revisions to its scope, will range from about $522 million without provision for risks and uncertainties to about $559 million with provision for risks and uncertainties. As of June 10, 2005, about $483.7 million had been provided for CVC construction. In its fiscal year 2006 budget request, AOC asked Congress for an additional $36.9 million for CVC construction.