From 1987-1997, U.S. diplomatic facilities overseas were attacked on more than 200 occasions. On August 7, 1998, terrorist bombings of the U.S. embassies in Dar es Salaam, Tanzania, and Nairobi, Kenya, killed 220 people and injured thousands more. Subsequent investigations into these attacks and on the conditions of U.S. overseas facilities determined that U.S. embassies and consulates worldwide were insecure, unsafe, overcrowded, deteriorating, and “shockingly shabby.” Unless security vulnerabilities were addressed, employees and the public using these facilities would remain at risk of terrorist attacks. In the wake of these reports, State embarked on an unprecedented effort to construct diplomatic facilities at 214 overseas posts. The goal of this effort is to replace insecure, dilapidated, and dysfunctional embassies, consulates, and other overseas diplomatic office buildings with safe, secure, functional, and modern facilities as quickly as possible. As of December 2008, OBO had completed construction for 64 new embassies, consulates, and annexes and had relocated more than 19,500 U.S. employees into these new facilities. State has 31 additional ongoing construction contracts for new facilities and plans to build approximately 90 more facilities from 2009 to 2023. Beyond this effort, State officials said that after 2023, OBO would need to replace facilities at approximately 50 posts. The total award value for all construction contracts for new office facilities awarded since 1999 is approximately $5.8 billion. In 1986, in response to terrorist threats, State began an embassy construction program, known as the Inman program, to better protect U.S. personnel and facilities overseas. However, due to systemic weaknesses in program management, as well as subsequent funding limitations, State completed only 24 of the 57 construction projects planned under the Inman program. Following the demise of the Inman program in the early 1990s, State initiated very few new construction projects, until the 1998 embassy bombings in Africa prompted additional funding for security upgrades and the construction of secure embassies and consulates. In response to the performance problems experienced under the Inman program, State implemented numerous reforms to its management structure and contracting, planning, and construction processes. These reforms were designed to speed completion of projects, reduce costs, and standardize processes, and they had the cumulative effect of reducing the average construction cycle time by 2 years and 9 months. Among the most prominent reforms were elevating the former Office of Foreign Buildings Operations to OBO; relying on the design-build delivery method, which reduces the number of solicitation, proposal, and award processes from two to one and allows contractors to begin basic construction before the design process is completed; convening the Industry Advisory Panel on a quarterly basis to advise OBO on industry best practices in the construction sector; and holding an annual industry day event to solicit a broader pool of contractors. Starting in 2002, OBO also implemented the Standard Embassy Design (SED) to expedite the planning, awarding, design, and construction of NECs. The SED is a series of documents that outline site and building plans, specifications, and design criteria, and explain how to adapt these specifications to a particular project and contract requirements. The SED is not an actual building design but rather a template that standardizes the basic plans for the structural, spatial, safety, and security requirements for each NEC, including the following: main office buildings and annexes; security features, such as the Compound Access Control (CAC) buildings utility buildings, warehouses, and General Services annex; living quarters for Marine Security Guards (MSGQ); and employee and visitor parking. The SED also identifies ways to allow for future building expansion on the site; establishes minimum permissible baseline standards for materials and interior finishes; and factors in environmental concerns such as temperature, humidity, dust, rain, and air quality when designing and selecting mechanical equipment. Figure 1 shows the general features for a standard design NEC. Since 2002, there have been three primary classes of standard design embassy and consulate compounds—small, medium, and large—based on the size and cost of the facility, each of which have predefined construction schedules and total project durations associated with them. In 2004, State introduced a fourth class of SED, called Extra Large or Special SEDs, which generally exceed the size and cost of large SEDs. Finally, in 2007, State introduced the Standard Secure Mini Compound, which is generally smaller and less costly than a small SED. In addition, OBO has developed standard designs for MSGQs, and stand-alone unclassified annexes. Table 1 shows the allowable size and construction time frames for each of the five classes of NECs constructed using the standard embassy design. The Omnibus Diplomatic Security and Antiterrorism Act of 1986 states that, where adequate competition exists, only U.S. persons and qualified U.S. joint-venture persons may (1) bid on diplomatic construction or design projects with estimated total project values exceeding $10 million and (2) bid on diplomatic construction or design projects involving technical security, unless the project involves low-level technology, as determined by the Secretary of State. The act defines adequate competition as the presence of two or more qualified bidders submitting responsive bids for a specific project. In this context, a U.S. person is defined, in part, as a company that is incorporated or legally organized under the laws of the United States; has its principal place of business in the United States; has performed within the United States or at a U.S. diplomatic or consular establishment abroad administrative and technical, professional, or construction services similar in complexity, type, and value to the project being bid; has total business volume equal to or greater than the value of the project being bid in 3 years of the 5-year period before the specified date; employs U.S. citizens (1) in at least 80 percent of its principal management positions in the United States and (2) in more than half of its permanent, full-time positions in the United States; will employ U.S. citizens in at least 80 percent of the supervisory positions on the project site; and has the existing technical and financial resources in the United States to perform the contract. Contracts for construction projects that do not involve technical security requirements may be awarded to foreign firms. However, the Percy Amendment to the Foreign Buildings Act of 1926 enables American firms to be more competitive with foreign firms by reducing the evaluated price of offers from American firms by 10 percent for such projects expected to exceed $5 million. In 2007, State proposed an amendment to the Omnibus Diplomatic Security and Antiterrorism Act of 1986 that would allow the Secretary of State to waive financial, U.S. citizenship, and other requirements for NEC awards, when necessary and appropriate. According to State, the proposed amendment was necessary because “the current pool of American contractors qualified and able to carry out diplomatic construction projects overseas has nearly reached its capacity” and the subsequent reduced competition for contracts would result in increased contract costs. When proposing the amendment, State argued that amending the law would increase competition for NEC awards by opening the contractor pool to smaller U.S. construction companies and to foreign companies that previously could not qualify for NEC projects. Congress did not act on the proposed amendment. In December 2008, State officials told us the department plans to revise the 2007 proposal by opening competition for NECs only to U.S. companies that meet the specified security requirements. State uses a two-phase solicitation process for awarding contracts for NECs. In the first phase, the prequalification of offerors, contractors submit documentation attesting how they meet the legal, technical, and financial qualifications for each project on which they wish to bid. State then reviews this documentation to certify whether contractors do, in fact, meet the criteria. Once State completes these reviews, it issues a list of contractors eligible to bid for each contract award. Only companies that State certifies as prequalified under the first phase receive, and may respond to, subsequent requests for proposals (RFP) for major construction awards. In the second phase, RFPs, State solicits and evaluates contractors’ bids for construction awards, including technical and price proposals. Contractors bid a firm, fixed price for a project; therefore, the winning contractor will deliver the defined scope of the project for the price of the contract. After State awards a design-build contract, the contractor must develop a project design and work plan that incorporates all construction and security features outlined in the RFP and contract documents. During this design phase, the contractor must also begin preparing for construction by obtaining local building permits, buying or ordering materials, and mobilizing workers. In addition, under the design-build delivery method, contractors can begin construction of some buildings and systems that do not require security clearances—such as perimeter walls, warehouses, and mechanical support buildings—before the full design is approved. However, construction of the main office building—the chancery or consulate—generally does not proceed until the design is approved and State certifies to Congress that it meets all security requirements. During the construction phase, OBO monitors contractors’ schedules, inspects and reviews contractors’ work, and certifies that construction is substantially complete once contractors meet all requirements of the contract. Once construction is certified as being substantially complete, State conducts final commissioning to ensure that building systems—such as fire protection, electrical, and mechanical—were installed properly and operate according to design criteria and manufacturer specifications. Once all systems pass the commissioning process, the building is certified to be occupied and post staff may move in. In September 2008, State reported that construction costs had increased dramatically since 2001 and that the trend was likely to continue.