The individual military services and a wide array of DOD and non-DOD agencies award contracts to support contingency operations. Within a service or agency, numerous contracting officers, with varying degrees of knowledge about how contractors and the military operate in deployed locations, can award contracts that support contingency operations. According to DOD estimates, in 2005 several hundred contractor firms provided U.S. forces with a range of services at deployed locations. The customer (e.g., a military unit) for these contractor-provided services is responsible for identifying and validating requirements to be addressed by the contractor as well as evaluating the contractor’s performance and ensuring that contractor-provided services are used in an economical and efficient manner. In addition, DOD has established specific policies on how contracts, including those that support contingency operations, should be administered and managed. Oversight of contracts—which can refer to contract administration functions, quality assurance surveillance, corrective action, property administration, and past performance evaluation—ultimately rests with the contracting officer, who has the responsibility for ensuring that contractors meet the requirements as set forth in the contract. However, as some contracting officers are not located at the deployed location, the contracting officers appoint contract oversight personnel who represent the contracting officer at the deployed location and are responsible for monitoring contractor performance. The way contracts and contractors are monitored at a deployed location is largely a function of the size and scope of the contract. Some contracting officers have opted to have personnel from the Defense Contract Management Agency monitor a contractor’s performance and management systems to ensure that the cost, product performance, and delivery schedules comply with the terms and conditions of the contract. Defense Contract Management Agency officials delegate daily oversight responsibilities to individuals drawn from units receiving support from these contractors to act as contracting officer’s representatives for specific services being provided. For other contracts, contracting officers usually directly appoint contracting officer’s representatives or contracting officer’s technical representatives to monitor contractor performance at the deployed locations. These individuals are typically drawn from units receiving contractor-provided services, are not normally contracting specialists, and for whom contract monitoring is an additional duty. They cannot direct the contractor by making commitments or changes that affect price, quantity, quality, delivery, or other terms and conditions of the contract. Instead, they act as the eyes and ears of the contracting officer and serve as the liaison between the contractor and the contracting officer. The FAR requires contract administration offices to perform all actions necessary to verify whether contracted services conform to contract quality requirements and to maintain records of these actions. The Defense Federal Acquisition Regulation Supplement (DFARS) adds an additional requirement for DOD agencies to conduct quality audits to ensure the quality of services meets contractual requirements. Oversight begins with trained personnel being nominated for and assigned oversight responsibilities, and then conducting oversight actions throughout the contract performance period to ensure the government receives the services required by the contract. In addition to the FAR and DFARS, a DOD best practices guide stresses proper documentation. The Guidebook for Performance-Based Services Acquisition in the Department of Defense states that an assessment of contractor performance should be documented, whether acceptable or unacceptable, as it is conducted and this official record may be considered past performance information. A wide selection of contract types is available to the government and contractors to provide needed flexibility in acquiring supplies and services. The contract types are grouped into two broad categories: (1) fixed price and (2) cost reimbursement. The specific contract types range from firm-fixed-priced, in which the contractor has full responsibility for the performance cost and any resulting profit or loss, to cost-plus-fixed- fee, in which the contractor has minimal responsibility for the performance costs and the negotiated fee (profit) is fixed. In between are the various incentive contracts, in which the contractor’s responsibility for the profit or fee incentives offered is tailored to the uncertainties involved in contract performance. One such contract type that provides incentives on the basis of performance is cost-plus-award-fee. A cost-plus-award-fee contract is a cost reimbursement contract that provides a fee (base amount plus an award amount) sufficient to motivate the contractor to excel in areas such as quality and timeliness. The amount of the award fee is based on the government’s evaluation of the contractor’s performance in terms of the contract criteria. Another contract type is indefinite- delivery/indefinite-quantity which provides for an indefinite quantity of supplies or services, within stated limits, during the contract period and the government places orders for individual requirements. As shown in table 1, most of the contracts we reviewed were cost-plus-fixed-fee type contracts. Two of the contracts were cost-plus-award-fee contracts. We looked at specific contracts that provide a variety of services. While some of these contracts have ended, DOD continues to acquire these services through other contracts. For example, the linguist contract ended in June 2008, but another contract valued at $4.6 billion was awarded to provide linguist services in Iraq for 5 years. The base operations support and security services contracts ended in March 2008 but two new bridge contracts for these services were awarded. The bridge contracts were for 1 year each and provided for continued operations and security services while bid protests were being decided. For six of the seven contracts we reviewed, actual costs exceeded the initially estimated contract costs, primarily because of added requirements to support ongoing operations in Iraq and Afghanistan. The actual costs for the other contract we reviewed did not exceed the estimated contract costs. The cost increases occurred primarily because as operations in Iraq and Afghanistan expanded, there were increased demands for services already established under the contracts and, in some cases, new requirements were added to the contracts. Other factors that contributed to individual contract cost growth among the contracts we reviewed included short-term contract extensions, the government’s inability to provide promised equipment, changes in host country labor laws, and paying for work to be performed multiple times. For six of the contracts we reviewed, the cost of each contract exceeded the originally estimated contract cost, primarily because of increases in contract requirements from ongoing operations in Iraq and Afghanistan. Costs for these six contracts—three of which were extended—increased from an initial estimate of $783 million to an approximate actual total cost of $3.8 billion. In four of these cases, the individual contract’s actual cost exceeded the estimated cost by at least 300 percent. For example, the total cost of the base operations support contract exceeded the estimated contract cost by $122.4 million, or 481 percent. In another example, the estimated cost for the equipment maintenance contract in Qatar was $52.7 million for a 3-month base period and 10 option years. However, the total cost of the contract as of March 2008—which was during option year 8— was $471 million or 794 percent more than originally estimated for the entire contract. For the seventh contract, we found that the actual contract costs did not exceed the originally estimated costs. Table 2 below shows how total actual contract costs, including the cost of any extensions, compared to the original cost estimate. Although several factors increased the contract costs, the primary factor was additional requirements associated with ongoing operations in Iraq and Afghanistan. Expanding operations in Iraq and Afghanistan placed an increased demand for services already established under each of the seven contracts we reviewed. In addition, new requirements were added to some of the contracts. The following examples illustrate additional contract requirements due to ongoing operations in Iraq and Afghanistan and their impact on contract costs. In April 1999, the Army awarded a contract for linguist translation and interpretation services. According to the Army, the initial requirement was for about 180 linguists worldwide at an estimated cost of $19 million for 1 base year and 4 option years. Since the award of this contract, the linguist requirement grew and the Army awarded other contracts to provide linguist services. For example, we reviewed an indefinite- delivery/indefinite-quantity contract awarded in September 2004—an interim 6-month contract with two 3-month options to continue providing linguist services worldwide—with an estimated maximum cost of $400 million. The total actual cost for the first year of services for this contract was about $409.6 million. Linguist requirements under the interim contract were increased multiple times, which increased contract costs. For example, in February 2007 the linguist requirement supporting operations in Iraq and Afghanistan grew from 8,899 to 10,714 in response to the surge in the number of military forces deployed to these areas of operation. At this same time, the worldwide linguist requirement grew from 9,313 to 11,154. To accommodate the increasing requirements and the need to continue providing the services, the interim contract was modified to increase the maximum costs allowable and to extend the performance period. As of April 2008, the interim contract had been extended five times and the total cost of the contract was $2.2 billion. At that time, the requirements to support exercises in the United States and operations in Afghanistan and Guantanamo Bay were being provided under new contracts while the requirements to support operations in Iraq were still being provided under the interim contract. A new indefinite- delivery/indefinite-quantity contract for linguist services in Iraq took effect in June 2008 with a maximum cost for all orders under the contract of $4.6 billion for 5 years. In August 2000, the Army awarded this contract for maintenance and supply services of the Army Prepositioned Stocks (APS)—5 in Qatar. In addition to performing routine maintenance on the prepositioned stocks, the contractor was required to support contingency operations by receiving, repairing, maintaining, and temporarily storing equipment from other sources until it was needed. The contract award represented the base year requirements of certain contract line items to be performed for 3 months in 2000 at a total contract amount of $568,166. The contract had 10 single-year options available for full contract performance and the contractor’s total estimated cost for the base plus 10 option years was $52.7 million.