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Army Should Do More to Control Contract Cost in the Balkans

NSIAD-00-225: Published: Sep 29, 2000. Publicly Released: Oct 6, 2000.

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Carol R. Schuster
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Pursuant to a congressional request, GAO reviewed Army's efforts to control the costs of its Balkans Support Contract, focusing on whether: (1) the Army is taking effective actions to contain costs; and (2) improvements are needed in how the Army and other Department of Defense (DOD) agencies involved in Balkan operations manage activities under the primary Balkan contract.

GAO noted that: (1) both the Army and its contractor, Brown and Root Services, have taken various actions to control the cost of services provided under the Balkans Support Contract; (2) these actions include a contract provision requiring the contractor to regularly identify cost savings, recycling materials from elsewhere in the Balkans and Europe, and using soldiers to perform tasks such as building construction whenever possible; (3) nevertheless, the Army should have done more to control costs; (4) one step it should have taken was to give more consideration to costs in making decisions on the extent of services to be provided by the contractor; (5) another step the Army should have taken was to place greater emphasis on the level and efficiency with which recurring services were being provided; (6) in July 2000, the Army directed that a quarterly review be conducted to assess whether all the services it receives under the contract are still needed; (7) however, it has not called for the review to include an examination of the level of these services and the efficiency with which they are being provided; (8) the Army has also directed that standards be developed for each service provided at its camps, but as of July 2000 had not set a date for the standards' completion; (9) each standard is to describe the service to be performed, the necessary facilities and personnel, when and how the services are to be performed, and the level at which they are to be performed; (10) the Army plans to achieve efficiencies in the level of services and the way in which they are provided by mandating that officials in Kosovo and Macedonia identify $40 million in cost savings for fiscal year 2001; (11) the Army expects costs to be reduced by this amount by reducing the number of contractor personnel providing services, scaling back service levels, and reducing on-hand inventories; (12) the Army should improve its management of the Balkans Support Contract; (13) officials at facilities in the Balkans have not been as specific as they should have been about what they expect from the contractor; (14) they frequently have simply accepted the level of services the contractor provided without questioning whether they could be provided more efficiently or less frequently and at lower cost; (15 ) GAO found a widespread view among Army and other DOD agencies' officials in the Balkans that they had little control over the contractor's actions once it was authorized to perform tasks; and (16) contract administrators are deployed for a limited time which hinders effective contract oversight.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Defense Contract Management Agency (DCMA) is conducting monthly reviews of contractor provided services. Defense Contract Auditing Agency (DCAA) auditors are accompanying administrative teams that deploy to the Balkans. DCMA and DCAA are working in concert to enhance in-theater cost monitoring. The Army has established base operations standards.

    Recommendation: To better control costs and improve administration of the Balkans Support Contract, the Secretary of Defense should direct the Secretary of the Army to direct the Commanding General, U.S. Army Europe, to: (1) examine the level and frequency of services being provided and assess the economy and efficiency with which they are being provided as part of the newly-directed quarterly review of recurring services under the Balkans Support Contract; (2) seek the participation of the Defense Contract Management Agency and the Defense Contract Audit Agency in these reviews; and (3) set a target date for completing base operation standards for contractor-provided services and use these standards in the quarterly reviews.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD has undertaken the necessary remedial action, including pre-deployment training on the government's authority and responsibility when administering a performance-based contract and practical exercises based on real world scenarios.

    Recommendation: To better control costs and improve administration of the Balkans Support Contracts, the Secretary of Defense should direct the Secretary of the Army to direct a more extensive predeployment training program for all contract oversight personnel to include: (1) the fundamentals of cost reimbursement performance-based contracting; and (2) the government's authority and responsibilities under the contract.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The Defense Contract Management Agency is working to ensure that its personnel rotations have greater continuity with units deployed in the Balkans.

    Recommendation: The Secretary of Defense should direct both the Secretary of the Army and the Director, Defense Contract Management Agency, to provide greater continuity in managing the Balkans Support Contract by scheduling rotations so that key contracting personnel, such as administrative contracting officers, rotate at different times and by considering the feasibility of a more permanent core of civilian contract administrators.

    Agency Affected: Department of Defense


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