Army Corps of Engineers:

Recent Changes Have Reduced the Use of Continuing Contracts, but Management Processes Need to Be Improved

GAO-09-552: Published: Jun 22, 2009. Publicly Released: Jun 22, 2009.

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The U.S. Army Corps of Engineers (Corps) has had the authority to award multiyear contracts--continuing contracts--without having received appropriations to cover the full contract amount. In 2006, Congress limited the Corps' use of such contracts by prohibiting obligations made in advance of appropriations. In response, the Corps developed a new clause that stopped work once funding for a fiscal year was expended. GAO was mandated to examine (1) the accuracy of the Corps' fiscal years 2007 and 2008 quarterly reports to Congress about continuing contracts that included the new clause, (2) the extent to which the Corps' use of continuing contacts with the new clause may have affected its execution of the Civil Works program during this time, and (3) the extent to which the Corps followed legal procedures in implementing the new clause. To conduct this work, GAO reviewed Corps documents, such as its quarterly reports and bid protests, federal procurement laws, and interviewed officials.

The Corps' quarterly reports to Congress for fiscal years 2007 and 2008 about continuing contracts with the new clause were inaccurate. According to the reports, the Corps awarded 21 new continuing contracts during fiscal years 2007 to 2008: 9 for construction and 12 for operations and maintenance, ranging in value from $2.1 million to $341.5 million, for a total value of about $811 million. However, GAO found that some continuing contracts were double-counted, while others were missing from the reports. GAO also found other types of errors, such as a fully funded contract that was incorrectly included in the quarterly report as a continuing contract. These errors raise questions about the accuracy of the reports. GAO identified similar inaccuracies in the Corps' quarterly reports during its 2006 review and at that time recommended that the Corps develop a tracking system to monitor its use of these contracts. While the Corps believes its system of asking divisions to provide information on a quarterly basis is sufficient for tracking continuing contracts, GAO disagrees. Without a tracking system supported by sufficient internal controls to ensure accuracy, errors can persist in the information provided to Congress. The Corps' use of the new clause has generally not affected the agency's ability to execute its Civil Works program. The Corps decreased its use of continuing contracts beginning around the time that the new clause was initiated. However, while acknowledging that the transition to the new clause created some initial difficulties that have since been overcome, Corp officials did not provide any examples of work being stopped on a project because funds were not available. The Corps did not comply with a legal requirement in implementing the new clause, resulting in some districts' reluctance to use it. Section 22 of the Office of Federal Procurement Policy Act (OFPP Act) generally provides that no procurement regulation that has a significant effect beyond the internal operating procedures of the agency or a significant cost on contractors or offerors may take effect until 60 days after the procurement regulation is published for comment in the Federal Register. This requirement may be waived in urgent and compelling circumstances; however, the regulation must still be published in the Federal Register stating that it is temporary and providing for a public comment period of 30 days. Although the Corps has requested approval since 2006 from the Department of the Army and the Department of Defense, as it is required to, the clause has never been published and the Corps has continued to use it. GAO believes that the Corps' argument that its pursuit of publication satisfies the statute is unpersuasive. Moreover, GAO spoke with Corps officials from districts and divisions who expressed concern about using the clause prior to its publication. Specifically, they are concerned that using the clause could subject the Corps to legal challenges, such as bid protests, and that such potential challenges could delay projects and increase their costs.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To ensure that the Corps provides accurate and reliable reports to Congress on its use of continuing contracts and complies with federal procurement law, the Secretary of Defense should direct the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers to establish adequate internal controls to ensure accurate and complete information is collected and reported to Congress on the use of continuing contracts.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: The U.S. Army Corps of Engineers Civil Works Directorate annually publishes Engineering Circular 11-2-205, Execution of the Annual Civil Works Program. This document provides for review and approval of all new continuing contracts. As outlined in the circular, the Corps requires the development of a business case for the use of all continuing contracts which addresses the (1) availability of full funding, (2) description of contract acquisition strategy, (3) contract earnings and expected funding stream, and (4) evaluation of contract alternatives. The business case format also contains a section devoted to the discussion of management controls which requires the Corps to provide a description of the management controls in place to ensure that the contractor has adequate notice of exhaustion of funds and is positioned to conclude work before funds are exhausted.

    Recommendation: To ensure that the Corps provides accurate and reliable reports to Congress on its use of continuing contracts and complies with federal procurement law, the Secretary of Defense should direct the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers to suspend the Corps' use of the new continuing contracts clause until it has been published in the Federal Register, in accordance with 41 U.S.C. 418b.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: The Department of Defense published the new continuing Contracts clause (Continuing Contract for Civil Works Project Managed by the United States Army Corps of Engineers Clauses) in the Federal Register on January 15, 2010 as a proposed rule. The Corps is currently evaluating comments received.

    Recommendation: To ensure that the Corps provides accurate and reliable reports to Congress on its use of continuing contracts and complies with federal procurement law, the Secretary of Defense should direct the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers to provide regular updates to Congress on the progress of these actions.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: After the close of each fiscal year, the Corps, following its standard operating procedures, develops a table of its continuing contracts with obligations in that fiscal year or expected in future fiscal years. The Assistant Secretary of the Army for Civil Works transmits the table to the Chairs of the Subcommittees on Energy and Water Development, Committees on Appropriations of the House of Representatives and Senate.

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