Rebuilding Iraq: Fiscal Year 2003 Contract Award Procedures and Management Challenges

GAO-04-605 Published: Jun 01, 2004. Publicly Released: Jun 01, 2004.
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Congress has appropriated more than $20 billion since April 2003 to support rebuilding efforts in Iraq. This complex undertaking, which is occurring in an unstable security environment and under significant time constraints, is being carried out largely through contracts with private-sector companies. As of September 2003, agencies had obligated nearly $3.7 billion on 100 contracts or task orders under existing contracts. Given widespread congressional interest in ensuring that reconstruction contracts are awarded properly and administered effectively, GAO reviewed 25 contract actions that represented about 97 percent of the obligated funds. GAO determined whether agencies had complied with competition requirements in awarding new contracts and issuing task orders and evaluated agencies' initial efforts in carrying out contract administration tasks.

Agencies used sole-source or limited competition approaches to issue new reconstruction contracts, and when doing so, generally complied with applicable laws and regulations. Agencies did not, however, always comply with requirements when issuing task orders under existing contracts. For new contracts, the law generally requires the use of full and open competition, where all responsible prospective contractors are allowed to compete, but permits sole-source or limited competition awards in specified circumstances, such as when only one source is available or to meet urgent requirements. All of the 14 new contracts GAO examined were awarded without full and open competition, but each involved circumstances that the law recognizes as permitting such awards. For example, the Army Corps of Engineers properly awarded a sole-source contract for rebuilding Iraq's oil infrastructure to the only contractor that was determined to be in a position to provide the services within the required time frame. The Corps documented the rationale in a written justification, which was approved by the appropriate official. The U.S. Agency for International Development properly awarded seven contracts using limited competition. The Department of State, however, justified the use of limited competition by citing an authority that may not be a recognized exception to competition requirements, although a recognized exception could have been used. There was a lesser degree of compliance when agencies issued 11 task orders under existing contracts. Task orders are deemed by law to satisfy competition requirements if they are within the scope, period of performance, and maximum value of a properly awarded underlying contract. GAO found several instances where contracting officers issued task orders for work that was not within the scope of the underlying contracts. For example, to obtain media development services and various subject matter experts, the Defense Contracting Command-Washington placed two orders using a management improvement contract awarded under the General Services Administration's schedule program. But neither of the two orders involved management improvement activities. Work under these and other orders should have been awarded using competitive procedures or, due to the exigent circumstances, supported by a justification for other than full and open competition. The agencies encountered various contract administration challenges during the early stages of the reconstruction effort, stemming in part from inadequate staffing, lack of clearly defined roles and responsibilities, changing requirements, and security constraints. While some of these issues have been addressed, staffing and security remain major concerns. Additionally, the Army and its contractors have yet to agree on key terms and conditions, including the projected cost, on nearly $1.8 billion worth of reconstruction work that either has been completed or is well under way. Until contract terms are defined, cost risks for the government remain and contract cost control incentives are likely to be less effective.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Army To ensure that task orders issued to rebuild Iraq comply with applicable requirements, and to maximize incentives for the contractors to ensure effective cost control, the Secretary of the Army should review the out-of-scope task orders for Iraqi media and subject matter experts issued by the Defense Contracting Command-Washington and take any necessary remedial actions.
Closed – Implemented
The Defense Contracting Command-Washington (DCC-W) agreed with the GAO findings concerning out-of-scope work for the orders awarded to SAIC for the Iraqi Media Network and the subject matter experts. Contracting officers ordering the out-of-scope work have been made aware that their actions were improper. DCC-W has instituted agency wide training in a number of topics, including the need to carefully review the scope of work of a contract to determine what may be legitimately ordered from that contract. This training will be periodically repeated. In addition, its post award reviews will include an assessment of whether requiringn work is within the scope of the basic contract.
Department of the Army To ensure that task orders issued to rebuild Iraq comply with applicable requirements, and to maximize incentives for the contractors to ensure effective cost control, the Secretary of the Army should ensure that any future task orders under the LOGCAP contract for Iraq reconstruction activities are within the scope of that contract.
Closed – Not Implemented
According to DOD, the Procuring Contracting Officer for the Logistics Civil Augmentation Program (LOGCAP) contract reviews each proposed scope of work, which will result in a task order, and makes a determination whether the action is within the scope of the contract and obtains appropriate legal advice as necessary. DOD did not believe that any additional action was necessary.
Department of the Army To ensure that task orders issued to rebuild Iraq comply with applicable requirements, and to maximize incentives for the contractors to ensure effective cost control, the Secretary of the Army should address and resolve all outstanding issues in connection with the pending Justifications and Approvals for the contracts and related task orders used by the Army Corps of Engineers to restore Iraq's electricity infrastructure.
Closed – Implemented
In June 2004, GAO reported that the U.S. Army Corps of Engineers did not fully comply with applicable laws and regulations governing competition when it awarded contracts and task orders to support rebuilding of Iraq's electrical infrastructure. In this regard, the Corps of Engineers used limited competition to award 3 contracts and then issued task orders that exceeded the maximum value of these contracts. Under the Federal Acquisition Regulation, such actions required the Corps of Engineers to submit a justification and approval document to a senior agency official for review and approval. The Army subsequently reported, however, that no provision existed for an "after-the-fact" review and approval of such documents. To address the deficiencies, in February 2007, the Assistant Secretary of the Army (Acquisition, Logistics and Technology) issued a memorandum that noted he had reviewed the documents and concluded that the timely submission of the documents would have resulted in their approval. The Army further noted that processes have been instituted at the Corps of Engineers to ensure that future justification and approval documents requiring approval by senior officials are submitted and approved prior to contract award.
Department of the Army To ensure that task orders issued to rebuild Iraq comply with applicable requirements, and to maximize incentives for the contractors to ensure effective cost control, the Secretary of the Army should direct the Commanding General, Army Field Support Command, and the Commanding General and Chief of Engineers, U.S. Army Corps of Engineers, to definitize outstanding contracts and task orders as soon as possible.
Closed – Implemented
DOD has defined, or reached agreement on key terms and conditions, all of the six contract actions identified in our June 2004 report. We noted in our March 2005 report entitled, "High-Level DOD Coordination is Needed to Further Improve the Management of the Army's LOGCAP Contract," that one component--the Army Field Support Command--had made improvements in defined task orders issued under the Logistics Civil Augmentation Program (LOGCAP) contract. In that regard, the Army Field Support Command had defined the four task orders we identified in our June 2004 report for which they were responsible. Similarly, the U.S. Army Corps of Engineers reported that they had defined the task orders to restore Iraq's electrical infrastructure. As of June 2006, the U.S. Army Corps of Engineers has defined all the task orders under the contract to restore Iraq's oil infrastructure.
Department of Defense To improve the delivery of acquisition support in future operations, the Secretary of Defense, in consultation with the Administrator, U.S. Agency for International Development, should evaluate the lessons learned in Iraq and develop a strategy for assuring that adequate acquisition staff and other resources can be made available in a timely manner.
Closed – Not Implemented
The Department of Defense (DOD) has agreed that it needs to assure that sufficient acquisition staff and other resources are available to support contingency, reconstruction, and stability operations, but DOD's actions to date provide little assurance that it will be be able to do so. According to DOD officials, DOD has taken, or is the process of taking, a number of actions to improve acquisition planning and support for future contingency operations, including established a Joint Rapid Acquisition Cell, that, among other things, is reviewing the capability to effectively and efficiently award and administer contracts for theater requirements. Further, in November 2005, DOD issued directive 3000.05, Military Support for Stability, Security, Transition, and Reconstruction Operations, which, in part, required that DOD ensure proper oversight of contracts in stability operations and ensure U.S. commanders deployed in foreign countries are able to secure contract support rapidly. DOD also issued in January 2008 a Joint Contingency Contracting Guide and added guidance on emergency acquisitions in the Defense Federal Acquisition Regulation Supplement in January 2007 and September 2008. Despite these efforts, however, significant challenges remain. For example, in October 2007, the report by the Commission on Army Acquisition and Program Management in Expeditionary Operations found that the Army's acquisition workforce was neither adequately staff, trained, structured or empowered to meet the needs of deployed forces. In part, the Commission called for the Army to increase its acquisition workforce by 1,400 military and civilian employees to meet current needs. Further, in July 2008, GAO reported that while DOD had made some progress in augmenting the personnel assigned to provide oversight of private security contractors, it was unclear whether the increase could be sustained due to staffing and resource constraints. The shortfalls that continue to be experienced in Iraq, with the increase workload anticipated as the United States increases its investment in reconstruction and stabilization efforts in Afghanistan, raises significant questions as to whether DOD has learned from its lessons in Iraq and developed an effective strategy for assuring adequate staff and resources are available.

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