    Embassy Construction: State Department Has Implemented Management
    Reforms, but Challenges Remain (04-NOV-03, GAO-04-100).

    Since the 1998 bombings of two U.S. embassies in Africa, the
    State Department has done much to improve physical security at
    overseas posts. However, most overseas diplomatic office
    facilities still do not meet the security standards State
    developed to protect these sites from terrorist attacks and other
    dangers. To correct this problem, State in 1999 embarked on an
    estimated $21 billion embassy construction program. The program's
    key objective is to provide secure, safe, and functional
    compounds for employees overseas--in most cases by building
    replacement facilities. In 2001, State's Bureau of Overseas
    Buildings Operations (OBO)--which manages the program--began
    instituting reforms in its structure and operations to meet the
    challenges of the embassy construction program. This report
    discusses (1) OBO's mechanisms for more effectively managing the
    embassy construction program and (2) the status of and challenges
    facing the program. We received comments from State, which said
    that the report is a fair and accurate representation overall of
    the Department's overseas construction process.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-04-100
        ACCNO:   A08821
      TITLE:     Embassy Construction: State Department Has Implemented
    Management Reforms, but Challenges Remain
         DATE:   11/04/2003
      SUBJECT:   Embassies
    	     Facility security
    	     Government facility construction
    	     Program management
    	     Schedule slippages
    	     Terrorism
    	     Physical security
    	     Americans employed abroad
    	     Safety
    	     Dept. of State Long-Range Overseas
    	     Buildings Plan

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    GAO-04-100

    United States General Accounting Office

    GAO

    Report to the Chairman, Committee on

                             Foreign Relations, U.S. Senate

    November 2003

    EMBASSY CONSTRUCTION

    State Department Has Implemented Management Reforms, but Challenges Remain

                                           a

    GAO-04-100

    Highlights of GAO-04-100, a report to the Chairman, Committee on Foreign
    Relations, U.S. Senate

    Since the 1998 bombings of two U.S. embassies in Africa, the State
    Department has done much to improve physical security at overseas posts.
    However, most overseas diplomatic office facilities still do not meet the
    security standards State developed to protect these sites from terrorist
    attacks and other dangers. To correct this problem, State in 1999 embarked
    on an estimated $21 billion embassy construction program. The program's
    key objective is to provide secure, safe, and functional compounds for
    employees overseas-in most cases by building replacement facilities. In
    2001, State's Bureau of Overseas Buildings Operations (OBO)-which manages
    the program-began instituting reforms in its structure and operations to
    meet the challenges of the embassy construction program. This report
    discusses (1) OBO's mechanisms for more effectively managing the embassy
    construction program and (2) the status of and challenges facing the
    program.

    We received comments from State, which said that the report is a fair and
    accurate representation overall of the Department's overseas construction
    process.

    www.gao.gov/cgi-bin/getrpt?GAO-04-100.

    To view the full product, including the scope and methodology, click on
    the link above. For more information, contact Jess Ford at (202) 512-4128
    or fordj@gao.gov.

    November 2003

    EMBASSY CONSTRUCTION

    State Department Has Implemented Management Reforms, but Challenges Remain

    OBO in 2001 began instituting organizational and management reforms
    designed to cut costs, put in place standard designs and review processes,
    and reduce the construction period for new embassies and consulates. OBO
    now has mechanisms to more effectively manage the embassy construction
    program, including

    o  	an annual Long-Range Overseas Buildings Plan to guide the planning and
    execution of the program over a 6-year period;

    o  monthly project reviews at headquarters;

    o  	an Industry Advisory Panel for input on current best practices in the
    construction industry;  o  expanded outreach to contractors in an effort
    to increase the

    number of bidders;  o  ongoing work to standardize and streamline the
    planning, design, and construction processes, including initiation of
    design-build contract delivery and a standard embassy design for most
    projects;

    o  additional training for OBO headquarters and field staff; and

    o  advance identification and acquisition of sites.

    State's program to replace about 185 vulnerable embassies and consulates
    is in its early stages, but the pace of initiating and completing new
    construction projects has increased significantly over the past two fiscal
    years. As of September 30, 2003, State had started construction of 22
    projects to replace facilities at risk of terrorist or other attacks.
    Overall, 16 projects have encountered challenges that have led or, if not
    overcome, could ultimately lead to extensions in the completion date or
    cost increases in the construction contract. According to OBO, project
    delays have occurred because of such factors as changes in project design
    and security requirements; difficulties hiring appropriate American and
    local labor with the necessary clearances and skills; differing site
    conditions; and unforeseen events such as civil unrest. In addition, the
    U.S. government has had problems coordinating funding for projects that
    include buildings for the U.S. Agency for International Development. None
    of the projects started since OBO instituted its reforms has been
    completed; thus GAO believes it is too early to assess the effectiveness
    of the reforms in ensuring that new embassy and consulate compounds are
    built within the approved project budget and on time.

    Contents

        Letter                                                                  1
                                      Results in Brief                          2
                                         Background                             3
                       OBO Mechanisms to More Effectively Manage the Embassy
                                    Construction Program                        7
                  Status of and Challenges Facing the Construction Program     15
                                         Conclusion                            26
                             Agency Comments and Our Evaluation                26

    Appendixes

    Appendix I:

    Appendix II:

    Appendix III:

    Appendix IV:

    Scope and Methodology

    Information on Embassy Construction Projects' Contractors and Building
    Size

    Comments from the Department of State

    GAO Comments

    GAO Contact and Staff Acknowledgments

    GAO Contact
    Staff Acknowledgments

                                           28

                                           31

                                         33 38

    39 39 39

    Tables Table 1:

    Table 2: Table 3: Table 4: Table 5: Table 6:

    Cost and Schedule Performance of Projects Awarded
    before OBO's Management Reforms (as of late
    July 2003)
    Cost and Schedule Performance of Projects Awarded since
    OBO's Management Reforms (as of late July 2003)
    List of the 22 Post Replacement Projects Included in This
    Review
    List of Post Replacement Projects Awarded in Late Fiscal
    Year 2003
    List of Contractors for Ongoing Embassy and Consulate
    Replacement Projects
    Size of Embassy Construction Projects Using Standard
    Embassy Design

    18 20 29 30 31 32 Figures Figure 1: Appropriations for Upgrading and
    Replacing Diplomatic

    Posts, Fiscal Years 1998-2004 6

    Figure 2: Standard Embassy Design 13

    Figure 3: Initiated and Completed Projects, Fiscal Years

    1999-2003 16

    Contents

    Figure 4: Status of State's Program to Replace Embassies and

    Consulates, Fiscal Years 1999-2003 17 Figure 5: Site of Proposed, but
    Unfunded, USAID Building at the

    U.S. Embassy in Yerevan 25

    Abbreviations

    OBO Bureau of Overseas Buildings Operations USAID U.S. Agency for
    International Development

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

    A

    United States General Accounting Office Washington, D.C. 20548

    November 4, 2003

    The Honorable Richard Lugar
    Chairman, Committee on Foreign Relations
    United States Senate

    Dear Mr. Chairman:

    Since the 1998 bombings of two U.S. embassies in Africa,1 the State
    Department has done much to improve physical security at overseas posts,
    such as constructing perimeter walls and anti-ram barriers at many
    facilities. Despite these security upgrades, however, most overseas
    diplomatic office facilities do not meet security standards that State
    developed to protect them from terrorist attacks and other dangers. As a
    result, thousands of American and Foreign Service National U.S.
    government employees may be vulnerable to terrorist attacks. In March
    2003,2 we testified on these security deficiencies at overseas diplomatic
    facilities, reporting that many facilities are in poor condition, do not
    meet
    fire and safety standards, and are in need of major maintenance. To
    correct
    the security shortcomings at existing embassies and consulates, the State
    Department in 1999 embarked on an estimated $21 billion embassy
    construction program, the largest program of its kind in the department's
    history. The program's key objective is to provide secure, safe, and
    functional compounds for employees assigned to work at U.S. embassies
    and consulates around the world, in most cases by building replacement
    facilities. State's Bureau of Overseas Buildings Operations (OBO) is
    responsible for planning and managing the program. Recognizing the
    challenges of managing State's expanded overseas construction program,
    OBO in 2001 began to institute organizational and management reforms in
    its structure and operations.

    At your request, this report discusses (1) OBO's mechanisms for more
    effectively managing State's construction program to replace vulnerable
    embassies and consulates and (2) the status of and challenges facing the
    overall construction program.

    1The 1998 terrorist bombings of the U.S. embassies in Nairobi, Kenya, and
    Dar Es Salaam, Tanzania, killed more than 220 people and injured 4,000.

    2U.S. General Accounting Office, Overseas Presence: Conditions of Overseas
    Diplomatic Facilities, GAO-03-557T (Washington, D.C.: Mar. 20, 2003).

    To address these objectives, we reviewed the report of the Overseas
    Presence Advisory Panel,3 earlier GAO reports that outlined problems in
    State's embassy construction program, State's Long-Range Overseas
    Buildings Plans for the past 3 years, monthly project performance
    documents, contract modifications, and other OBO documents. We also
    interviewed key State Department officials and contractors currently
    working on new embassy construction projects to determine the steps OBO
    has taken to more effectively manage the construction program. Further, we
    visited two field locations-in Sofia, Bulgaria, and Yerevan, Armenia-where
    we observed the level of management and supervision at the new embassy
    construction sites and the contractor's performance on the projects.
    Appendix I provides more information on our scope and methodology.

    Results in Brief	OBO in fiscal year 2001 began to institute a number of
    organizational and management reforms in its structure and operations
    designed to cut costs, put in place standard designs and review processes,
    and reduce the construction period for new embassies and consulates. Thus,
    OBO now has a number of mechanisms in place to more effectively manage the
    expanded construction program. These mechanisms include the annual
    Long-Range Overseas Buildings Plan, the first of which was developed in
    July 2001, which guides the planning and execution of its overseas
    construction program over a 6-year period, among other things. OBO in 2001
    also instituted monthly project reviews at headquarters and in 2002
    established a panel of industry advisors for input on current best
    practices in the construction industry. In addition, OBO expanded its
    outreach to contractors in an attempt to increase the number of
    contractors that bid on construction projects, has put in place standard
    designs, and has streamlined its project design delivery processes.
    Furthermore, OBO has increased its efforts to train staff in a variety of
    positions and to acquire sites well in advance of planned construction.

    3Secretary of State Albright established the Overseas Presence Advisory
    Panel following the 1998 embassy bombings in Africa. Department of State,
    America's Overseas Presence in the 21st Century, The Report of the
    Overseas Presence Advisory Panel (Washington, D.C.: November 1999).

    State's program to replace about 185 vulnerable embassies and consulates
    is in its early stages, but the pace of initiating and completing new
    construction projects has increased significantly over the past three
    fiscal years. From fiscal years 1999 through 2003, State received
    approximately $2.7 billion for the construction program. As of September
    30, 2003, State had started construction of 22 projects to replace
    embassies and consulates at risk of terrorist or other attacks.4 Eight of
    the 22 projects were started before OBO began to institute its recent
    management reforms-that is, before fiscal year 2001-and the remaining 14
    were started since then. Overall, 16 projects-7 that were started before
    OBO's reforms and 9 that were started after-have encountered challenges
    that have led or, if not overcome, ultimately could lead to extensions to
    the project completion date or cost increases in the construction
    contract, which represents the largest line item in project budgets.
    According to OBO reports, construction projects have been delayed due to
    such factors as changes in project design and security requirements,
    difficulties hiring appropriate American and local labor with the
    necessary clearances and skills, differing site conditions, and unforeseen
    events such as civil unrest. Moreover, the U.S. government has had
    difficulty in coordinating funding for projects that include buildings for
    the U.S. Agency for International Development (USAID), which can result in
    increased project costs and security risks to U.S. government personnel.
    None of the projects started since OBO's management reforms has been
    completed; thus, we believe it is too early to assess the effectiveness of
    these reforms in addressing these challenges and in ensuring that new
    embassy and consulate compounds are built within the approved project
    budget and on time.

    We received written comments from the Department of State, which we have
    reprinted in appendix III. State said that the report is a fair and
    accurate representation overall of the department's overseas construction
    process and properly cites all of OBO's management reforms.

    Background	OBO was instituted on May 15, 2001, replacing State's Office of
    Foreign Buildings Operations. OBO manages the construction of new
    facilities that can satisfy the State Department's stringent security
    standards and provide U.S. diplomatic personnel secure, safe, and
    functional office and residential environments. Along with the input and
    support of other State Department

    4OBO awarded contracts for seven additional projects toward the end of
    fiscal year 2003. These new projects were outside the scope of our review.

    bureaus, foreign affairs agencies, and Congress, OBO sets worldwide
    priorities for the design, construction, acquisition, maintenance, use,
    and sale of real properties and the use of sales proceeds. OBO is composed
    of five main offices: Planning and Development, Real Estate and Property
    Management, Project Execution, Operations and Maintenance, and Resource
    Management. The construction program is located primarily in the Project
    Execution Office, specifically in the Construction and Commissioning
    Division within that office.

    In response to terrorist threats, the State Department in 1986 began an
    embassy construction program, known as the Inman program, to protect U.S.
    personnel and facilities. In 1991, we reported that State was unable to
    complete as many projects as originally planned due to systemic weaknesses
    in program management, as well as subsequent funding limitations.5 This
    construction program suffered from delays and cost increases due to, among
    other things, poor program planning, difficulties acquiring sites, changes
    in security requirements, and inadequate contractor performance. Following
    the demise of the Inman program in the early 1990s, the State Department
    initiated very few new construction projects until the 1998 embassy
    bombings in Africa, which prompted additional funding for security
    upgrades and the construction of secure embassies and consulates.

    5U.S. General Accounting Office, State Department: Management Weaknesses
    in the Security Construction Program, GAO/NSIAD/92-2 (Washington, D.C.:
    November 1991).

    Through State's security upgrade program, the department has done much
    since the 1998 bombings to upgrade physical security at existing overseas
    posts without building new embassy or consulate compounds. These security
    upgrades have included constructing perimeter walls, anti-ram barriers,
    and access control facilities at many posts. However, even with these
    improvements, most office facilities do not meet security standards that
    State developed to protect overseas diplomatic office facilities from
    terrorist attacks and other dangers. As of December 2002, the primary
    office building at 232 posts6 lacked desired security because it did not
    meet one or more of State's five key security standards7 of (1) 100-foot
    setback between office buildings and uncontrolled areas, (2) perimeter
    walls and/or fencing, (3) anti-ram barriers, (4) blast-resistant
    construction techniques and materials, and (5) controlled access at the
    perimeter of the compound. Only 12 posts had a primary building that met
    all five standards. As a result, thousands of U.S. and foreign national
    employees may be vulnerable to terrorist attacks.8

    After the 1998 attacks, State identified facilities at about 185 posts
    that would need to be replaced to meet security standards. OBO plans to
    construct the replacement facilities on embassy and consulate compounds
    that will contain the main office building, all support buildings and,
    where necessary, a building for USAID. While State continues to fund some
    security upgrades at embassies and consulates, it has shifted its
    resources toward those capital projects that would replace existing
    facilities with new, secure diplomatic compounds or substantially retrofit
    existing, newly acquired, or leased buildings. As shown in figure 1,
    funding for State's capital projects has significantly increased since
    fiscal year 1998. State received about $2.7 billion for its new
    construction program from fiscal year 1999 through fiscal year 2003 and
    requested $890 million for fiscal year 2004. OBO in June 2003 estimated
    that beginning in fiscal year 2005 it would cost about $17.5 billion to
    replace the remaining vulnerable posts.

    6The United States maintains more than 250 diplomatic posts-embassies,
    consulates, and other diplomatic missions-around the world. More than
    60,000 U.S. and Foreign Service National personnel work at these
    locations. About 50 government agencies and subagencies operate overseas,
    including the Departments of State, Defense, and Justice; and USAID.

    7These standards apply to the construction of new buildings. Existing
    buildings are required to meet the setback standard to the "maximum extent
    feasible."

    8GAO-03-557T.

    Figure 1: Appropriations for Upgrading and Replacing Diplomatic Posts,
    Fiscal Years 1998-2004

    Note: Fiscal year 2002 includes $200.5 million in emergency spending
    provided by the 2002 Supplemental Appropriations Act for Further Recovery
    From and Response to Terrorist Attacks on the United States (Pub. L. No.
    107-206).

    As of September 30, 2003, State had started construction of 22 projects to
    replace embassies and consulates that are at risk of terrorist or other
    attacks. Toward the end of fiscal year 2003, State awarded contracts for
    an additional 7 projects. The timeline for funding and completing the
    remaining projects depends on the amount of funding State receives
    annually for the construction program. At the proposed fiscal year 2004
    rate of funding, it will take more than 20 years to fully fund and build
    replacement facilities.9

    9GAO-03-557T.

    OBO Mechanisms to More Effectively Manage the Embassy Construction Program

    Recognizing past problems managing State's overseas construction program,
    OBO in 2001 began to institute organizational and management reforms in
    its structure and operations. OBO intended that these reforms- which are
    designed to cut costs, put in place standard designs and review processes,
    and reduce the construction period for new embassies and consulates-would
    bring rational and efficient management to OBO by using a results-based
    approach to program management.

    OBO has instituted the following seven key mechanisms over the past 3
    years to better manage its expanded embassy construction program:

    o 	the Long-Range Overseas Buildings Plan,10 which prioritizes and
    summarizes capital projects over 6 years;

    o 	monthly project reviews at headquarters, where senior management
    officials review ongoing projects to identify and resolve current or
    potential issues at all stages of the project;

    o 	an Industry Advisory Panel, which advises OBO on industry best
    practices in the construction sector;

    o 	efforts to broaden the contractor pool through events such as Industry
    Day, where interested contractors are invited to learn about OBO's
    construction program;

    o 	ongoing work to standardize and streamline the planning, design, and
    construction processes, including the initiation of design-build contract
    delivery and a standard embassy design for most projects;

    o  additional training for OBO headquarters and field staff; and

    o  advance identification and acquisition of sites.

    10See Bureau of Overseas Buildings Operations, U.S. Department of State,
    Long-Range Overseas Buildings Plan: FY 2003-FY 2008 (Washington, D.C.:
    March 2003) for the latest version of the plan.

    Development of the Long-Range Overseas Buildings Plan

    To help manage State's expanding large-scale construction program, OBO
    developed the Long-Range Overseas Buildings Plan, first published in July
    2001 and most recently updated in March 2003. The latest version of the
    plan prioritizes proposed capital projects over 6 years, from fiscal years
    2003 through 2008, based on input from State's Bureau of Diplomatic
    Security, regional bureaus, and agencies with overseas presence. It
    describes and provides a justification for the foreign affairs community's
    global and regional capital project requirements. According to OBO, it
    also provides the basis for proceeding in a logical and focused fashion to
    improve the security, safety, and functionality of facilities overseas.
    Each year the plan is updated to capture changes resulting from budget
    actions and requirements of posts overseas. According to the latest
    version of the plan, State plans to start replacing facilities at 75
    vulnerable posts from fiscal year 2003 to fiscal year 2008 at an estimated
    cost of $7.4 billion.

    As described in the March 2003 plan and by OBO officials, State followed a
    multistep process in developing its phased site acquisition, design, and
    construction schedule for its security capital projects:

    o 	The Bureau of Diplomatic Security completed its annual security
    evaluation of all the U.S. overseas posts, taking into account many
    factors affecting a post's overall security level. The evaluation listed
    vulnerable posts and ranked them in terms of security issues. Because the
    terrorist threat is global and because the buildings have fundamental
    security problems, Diplomatic Security and OBO officials believe that
    there are a great many posts that are very vulnerable and in need of
    replacement, and that the differences in vulnerability do not make posts
    at the lower end of the list substantially safer than those at the top of
    the list. By congressional mandate,11 these posts are listed and ranked in
    bands of 20, through a process discussed in the following paragraphs.12

    11Pub. L. No. 106-113, div. B, Sec. 1000(a)(7) (div. A, title VI, Sec.
    605) codified as a note to 22 U.S.C. 4865.

    12This replacement list is updated annually. According to OBO officials,
    posts that have received full funding and have begun construction on their
    new facilities are removed from the list each year and moved to a
    "funded/under construction/completed" column for record purposes. Senior
    State Department management, considering the Diplomatic Security
    vulnerability list and such factors as the number of U.S. government
    employees at a post, nominates new posts to move into the top 80
    replacement list. These nominations are forwarded to the Under Secretary
    for Management and the Secretary for their approval and inclusion in the
    replacement list. This list is then provided to Congress.

    Congress directed that State spend its security capital funds, which are
    funded within the Embassy Security, Construction and Maintenance account,
    on the top 80 posts only.

    o 	Working with the security-prioritized list, each regional bureau
    annually ranked all posts within its region that were in the top 80
    replacement list based on such factors as threat, survivability, staffing
    trends, regional interests, and functionality. OBO officials told us this
    effort resulted in a prioritized list for State's security capital
    projects for each of the six regional bureaus, which responds to the
    global nature of the transnational terrorism threat. Each year, as new
    posts are added, these posts usually go to the end of a bureau's priority
    list.

    o 	Finally, OBO combined the prioritized lists from the different regions
    into one master list, which, as mentioned above, OBO updates annually. The
    first six posts on the list were the top ranked post from each region.
    Posts 7 through 12 on the list were the second-ranked posts from each
    region, and so on. With the help of its Planning and Real Estate Offices,
    OBO then determined if a site already existed to build a new facility and,
    if not, when new sites could actually be acquired. When necessary, OBO
    rescheduled the list based on the likely available capital security
    funding in each year covered in the Long-Range Overseas Buildings Plan,
    opportunities or problems in acquiring a site, and constraints on the
    ability of construction companies to work in a particular country at the
    planned time. This prioritized and scheduled listing of projects then
    becomes the security capital portion of the Long-Range Overseas Buildings
    Plan.

    State also requests funds for regular capital projects to replace posts
    not in the top 80 that have compelling operational or other requirements
    that must be addressed. The Long-Range Overseas Buildings Plan includes
    descriptions of these regular capital projects.

    OBO's development of the plan was a major advancement in ensuring the
    embassy construction program would be better managed.13 According to the
    OBO director, while the current plan is not a budget document, it is an

    13In January 2001, we recommended that OBO develop such a plan because it
    was an industry best practice that has helped leading organizations
    establish project priorities, plan for resource use, control costs, and
    provide decision makers a rationale for allocating funding. Several months
    later, OBO's new management accepted this recommendation and agreed that
    it is an important tool for the budget process.

    important tool that provides information for the budget decision-making
    process. It presents OBO's best understanding of the U.S. government's
    most urgent diplomatic and consular facility requirements through 2008 and
    provides all stakeholders, especially other U.S. government agencies that
    rely on State for their overseas facilities, a road map of where the
    department is headed.

    Monthly Project Reviews at Headquarters

    As part of OBO's ongoing efforts to improve accountability and
    performance, OBO in June 2001 began holding monthly project performance
    reviews at headquarters for senior OBO officials and project executives.
    At these meetings, senior managers convene to discuss developments in
    their areas of responsibility and their plan of action to address current
    or potential issues. According to OBO documents and our observations of
    five monthly meetings, the monthly project performance reviews covered the
    following topics:

    o 	real estate and property management, including acquisitions and
    disposals and evaluations;

    o 	project planning and development, including project evaluation and
    analysis;

    o 	project execution, including the status of both construction projects
    by region and security upgrade projects; interiors and furnishings; design
    and engineering issues, such as design management, standard embassy
    designs, value engineering, and energy and seismic concerns; and security
    management of ongoing projects;

    o 	information management, including issues related to information
    technology; and

    o 	other management concerns, including management support, human
    resources and financial management, and operations and maintenance.

    At these monthly meetings, senior OBO staff present information on
    internal and external operations. For instance, in reviewing internal
    operations, the Project Execution Office presents information about
    personnel vacancies, number of training events attended per month,
    performance indicators, and travel budget. The Project Execution Office's
    Construction and Commissioning Division reports on construction-related
    issues, including the number of outstanding claims, contract
    modifications,

    and the status of each construction project. For each construction
    project, the division notes the completion of major milestones, such as
    congressional notification, site acquisition, contract award, and notice
    to proceed. It also assigns a color-coded rating-green, yellow, or red-to
    each project. This rating reflects the project executives' assessment of
    current or future issues that could affect either the project's cost or
    scheduled completion date, with green indicating the project is generally
    on track and red indicating a major issue.

    Establishment of the Industry Advisory Panel

    In February 2002, OBO held the first quarterly meeting of the Industry
    Advisory Panel, whose function is to keep OBO apprised of the private
    sector's best practices in the construction and maintenance of facilities.
    The panel consists of volunteer industry representatives who meet
    quarterly to discuss issues related to OBO's construction program and
    advise OBO management on the industry's views on the most efficient
    processes, optimal solutions, and best new technologies. OBO prepares new
    topics of discussion for each meeting, and the experts respond based on
    their experience dealing with similar issues.

    At the meeting held on May 20, 2003, we observed that the panel and senior
    OBO officials discussed the following:

    o 	how to more effectively apply Value Engineering-a method that looks for
    the best value to the government at each phase of the design process,

    o 	to what extent private U.S. companies build to U.S. standards overseas
    and how much they rely on local materials and equipment,

    o  the best approach for estimating project costs and budgets, and

    o 	criteria used to determine if direct-hire staff should fill an
    organization's gap in required skills or specialized contractors.

    OBO takes minutes of each Industry Advisory Panel meeting and posts them
    on its Web site where they are available to the public. According to OBO
    officials, the panel has been very active in providing invaluable
    strategic industry insights into a variety of issues. They touch upon the
    latest innovations in the commercial world combining best practices,
    streamlined processes, and proven cost-effective methods. According to a
    recent General Services Administration survey of about 470 federal

    advisory groups, OBO's Industry Advisory Panel demonstrated superior results on
             the "people," "process," and "outcome" indices of the survey.

    Efforts to Broaden Contractor Pool

    OBO has expanded its efforts to increase competition for bids on its new
    embassy and consulate compound projects through outreach to potential
    contractors. For example, OBO has held two annual Industry Days where
    interested parties can attend presentations and information sessions about
    doing business with OBO. According to OBO, Industry Day 2002 attracted
    more than 350 representatives, with slightly more than half from small
    firms. Industry Day 2003 had about 450 participants. As a result of these
    efforts, OBO has increased the number of contractors prequalified to bid
    on OBO contracts from 5 to 14.14 OBO believes that increasing the number
    of prequalified contractors will likely increase the number of bids on a
    project-thus allowing OBO to select the best value for its money-and will
    be important to the expanding construction program.

    Standardizing and Streamlining the Design Process

    OBO has initiated two major efforts to standardize and streamline the
    design process for new embassy and consulate compounds. First, it
    developed a standard embassy design for three different sizes of
    compounds, with a standard design for a small, medium, or large main
    office building (see fig. 2). For each project, the contractor adapts the
    standard design to meet site- and post-specific requirements. OBO believes
    that standard designs will give it the ability to contract for shortened
    design and construction periods, control costs through standardization,
    and assist with State's initiative to rightsize its overseas posts.

    14On September 25, 2003, the contractor for 7 of the 22 ongoing embassy
    and consulate construction projects declared bankruptcy. OBO and
    contractor officials told us that the bankruptcy has had and will have no
    effect on the contractor's ability to complete the projects.

    Figure 2: Standard Embassy Design

    Second, OBO uses design-build as a contract delivery method, instead of
    design-bid-build, for most of its new projects. According to the latest
    Long-Range Overseas Buildings Plan, OBO plans to award design-build
    contracts for 56 compound projects between fiscal years 2003 and 2008.
    State's design-build process saves time by (1) avoiding the time needed to
    award separate design and construction contracts and (2) allowing
    construction to proceed before design is completed. Under this process, a
    compound

    could be one-third of the way through construction before the final design
    is completed. In Sofia, Bulgaria, for instance, the project was 30 percent
    complete before the contractor delivered the final design package. To
    minimize any cost and schedule risks associated with design-build
    contracts, building requirements must be fully and precisely identified
    early in the process.

    Training	According to OBO officials, OBO has instituted additional
    training requirements for all OBO staff involved in the contracting
    process and for all field staff. To enhance their knowledge of
    contracting, headquarters and field staff take courses in areas such as
    acquisition procedures, principles of contract pricing, and government
    contract law. Staff can take classes offered by the Defense Acquisition
    University and other private institutions to meet their training
    requirements. Staff in the Construction and Commissioning Division enroll
    in additional courses that enhance their skills in such areas as
    computerized project planning, leadership and management, cost control,
    language training, and security and safety. These courses are designed to
    increase their effectiveness as project supervisors.

    During our visits to two new embassy construction sites in Sofia,
    Bulgaria, and Yerevan, Armenia, we observed that the OBO project directors
    and the contract project managers closely managed and supervised the
    projects. Project directors maintained oversight with the help of
    experienced and knowledgeable American and Foreign Service National staff.
    Project directors made daily visits to the construction site to observe
    worker performance and held weekly progress meetings with OBO and
    contractor staff. During the weekly meetings, OBO staff asked about the
    activity schedule, identified potential problems, and came to a consensus
    on solutions.

    We observed the OBO project management team in Sofia, which consists of
    seven engineers and assistants, interacting closely with the contractor
    staff to identify possible delays and oversee construction. For instance,
    the project director questioned the pace at which the contractor was
    laying concrete slab on one of the floors. The project director was able
    to convince the contractor to pour concrete slab on one of the floors a
    day or two ahead of schedule.

    Site Acquisition	To address potential issues in site acquisition, OBO has
    used its Long-Range Overseas Buildings Plan to guide its contingency
    planning and give it the flexibility to continue the overall program if an
    individual site is not available in the planned year. Rather than hold up
    the appropriated funds for a given project, State will, with congressional
    support, shift funding to another project where a site is available. For
    example, OBO deferred the planned compound in Asmara, Eritrea, from fiscal
    year 2004 to fiscal year 2005 due to difficulties obtaining a site. The
    new embassy compound in Lome, Togo, which had been planned for fiscal year
    2004, took the place of Asmara. For projects planned for construction from
    fiscal years 2005 through 2007, State has a supply of seven U.S.
    government-owned sites and five sites under contract in its regular and
    security capital programs. These 12 sites will offer some flexibility to
    State as it moves forward with its Long-Range Overseas Buildings Plan. OBO
    officials told us that they plan to continue acquiring sites ahead of time
    to provide the program with this type of scheduling flexibility over the
    foreseeable future.

    These management initiatives show promise for improving the cost and
    schedule performance of embassy and consulate construction projects.
    However, as discussed in the following section, it is still too early in
    the new program's implementation to assess their effectiveness in
    achieving these goals.

    Status of and Challenges Facing the Construction Program

    As of September 30, 2003, State had started construction of 22 projects to
    replace embassies and consulates at risk of terrorist or other attacks.
    Eight of the 22 projects were started before OBO began to institute its
    recent management reforms, and the remaining 14 were started since then.
    None of the projects started after the reforms were implemented has yet
    been completed; only one is more than 50 percent complete. Over half of
    the 22 projects have faced challenges that have led or, if not overcome,
    could lead to extensions to or cost increases in the construction
    contract. OBO reports attribute project delays to such factors as changes
    in project design and security requirements, difficulties hiring
    appropriate labor, differing site conditions, and civil unrest. The U.S.
    government also has had difficulty coordinating funding for projects that
    include buildings for USAID, which could lead to increased costs and
    security risks.

    From fiscal years 1999 through 2003, State received approximately $2.7
    billion for its new embassy construction program. As of September 30,
    2003, State was still in the initial phase of the overall program, having

    awarded the contracts for 11 of its 22 projects in fiscal year 2002. In
    addition, the contracts for another 7 projects were awarded in late fiscal
    year 2003 (see figs. 3 and 4). Of the seven completed projects, six were
    new embassy compounds and one was a newly acquired building that was
    retrofitted to meet the required security standards.

           Figure 3: Initiated and Completed Projects, Fiscal Years 1999-2003

    Note: The contracts for seven new projects were awarded in the last
    quarter of fiscal year 2003.

    Figure 4: Status of State's Program to Replace Embassies and Consulates,
    Fiscal Years 1999-2003

    Note: For each fiscal year, ongoing projects equals ongoing projects from
    the prior fiscal year plus new starts minus completed projects.

    Status of Projects Awarded As shown in table 1, seven of the eight
    projects that started before OBO's before OBO Instituted management
    reforms were implemented have been completed. All eight Management Reforms
    projects experienced cost increases in the construction contract, which

    typically accounts for 60 to 70 percent of the total project budget;
    however, none of the seven completed projects exceeded its approved
    budget, and the budget for one was lower than originally planned.

    In addition, six projects were extended 30 days or more beyond the project
    completion date. The primary reasons for the delays included contract
    modifications and security-related disruptions.

        Table 1: Cost and Schedule Performance of Projects Awarded before OBO's
               Management Reforms (as of late July 2003) Region/location

    Number of days over original end date Primary reason for delay

                                          Percentage over original contract value

    Change from original project budget

    Africa

           Dar Es Salaam, Tanzaniaa 2 Delay not significant 9 8% under budget

    Kampala, Ugandaa 90 Contractor dispute 29 On budget

    Nairobi, Kenyaa 80 Contract modifications 12 On budget

    Europe

            Istanbul, Turkeya 74 Mitigation of security problem 28 On budget

                 Zagreb, Croatiaa 1 Delay not significant 18 On budget

    Near East

    Abu Dhabi, United Arab 154c Material delivery did not  11 10% under budget
                                             arrive
             Emiratesb              as scheduled; contractor
                                    reported differing soil
                                           conditions
            Doha, Qatara        30      Security threat       41    On budget
          Tunis, Tunisiaa      127  Change in project scope   20    On budget

    Source: GAO analysis of OBO data as of September 2003.

    Note: This table includes projects whose contracts were awarded from
    fiscal years 1999 through 2001.

    aCompleted project.

    bOngoing project.

    cThis number represents contract modification days as this project had not
    yet been completed.

    OBO has attempted to manage project resources and keep its projects within
    their approved budgets by using funds from the projects' contingency line
    items or, in some cases, a management reserve line item. The use of
    contingency and management reserve line items is an industry practice. In
    Istanbul, for instance, the cost of the construction contract increased by
    about $8.5 million. OBO covered this cost increase by using funds from the
    project's contingency line item, which OBO includes in project budgets for
    this purpose. In some cases where OBO has awarded contracts at a much
    lower value than the original independent government estimate, it has
    established a management reserve to hold these extra funds to insure
    against potential cost increases later in the construction. The

    OBO director must approve the use of funds for that project from the
    management reserve. We did not review how OBO established its project
    budgets, how it determined the contingency and management reserve line
    item amounts, or how it used the funds from those line items.

    Further, OBO has also reevaluated its budget plans for ongoing and planned
    projects and has identified significant savings to be applied either to a
    project whose contract bid had come in above the approved budget or to new
    projects. For example, in the March 2003 project performance review, OBO
    identified anticipated savings of about $63.6 million for six projects.
    OBO used these funds to sign a contract for a new construction project in
    Freetown, Sierra Leone, during fiscal year 2003. In the fiscal year 2002
    appropriations conference report, Congress commended State for identifying
    such budget savings and urged the department to use them to significantly
    exceed the level of activity described in the budget request. OBO
    officials told us that the amount of such savings would decrease over time
    as the bureau improves its cost estimates.

    Status of and Challenges Encountered by Projects Awarded since OBO
    Instituted Management Reforms

    From fiscal year 2001, when OBO began to institute its management reforms,
    through the end of fiscal year 2003, State had started construction of 14
    projects to replace vulnerable embassies and consulates.15 As shown in
    table 2, as of July 2003, OBO expected 13 of these 14 projects to come in
    at or under their approved budgets and 1 project-Conakry, Guinea---to come
    in 6 percent over the approved budget. Six of these projects have had
    increases in their construction contract costs ranging from 2 percent to
    11 percent above their original contract value. In addition, the project
    in Sao Paulo, Brazil, added 48 contract modification days to its original
    project completion date. This project, a major renovation initiated at the
    end of August 2002, missed its scheduled completion date of August 28,
    2003, and was completed on October 15, 2003. Table 2 provides more
    information on challenges that have affected or may affect the cost and
    schedule of the projects that were initiated after OBO made reforms to its
    management practices.

    15Toward the end of fiscal year 2003, State awarded contracts for an
    additional 7 projects.

    Table 2: Cost and Schedule Performance of Projects Awarded since OBO's
    Management Reforms (as of late July 2003)

                                          Change      Number of
                                           from
                  Percentage Percentage  original      contract      Project
                             over        project                   challenges
        Location    complete   contract   budget   modification identified by OBO
                                  value                    days
    Sao Paulo,         60                                 48 Contractor delays
         Brazil                     (2) On budget                      in
                                                                        procuring
                                                                    materials and
                                                                      labor

    Abidjan, Cote D'Ivoire 33 0 2% under budget 0	Ordered departure of
    personnel caused by the political situation will have an impact on cost
    and schedule

    Sofia, Bulgaria 31 3 19% under budget 0 None reported

            Yerevan, Armenia 31 2 4% under budget 0 USAID building unfunded

    Luanda, Angola 27 5 On budget 14	Design revisions for mitigation of
    security concerns include a cost increase and time extension

    Abuja, Nigeria 23 0 On budget 0	Contractor has claimed that rock
    excavation due to differing site conditions will have an impact on
    schedule. OBO is evaluating

    USAID building unfunded

    Cape Town, South 15 0 28% under budget 0 None reported Africa

    Conakry, Guinea 15 2 6% over budget 0

    Contract will need additional time and will cost more due to the design
    and construction of a new type of foundation because of site conditions
    that differ from those originally anticipated

    USAID building unfunded

    Dushanbe, Tajikistan 14 2 3% under budget 0 None reported

    Yaounde, Cameroon 14 0 9% under budget 0	Contractor claims differing soil
    conditions will affect the soil's capacity for a foundation

            Tbilisi, Georgia 13 0 12% under budget 0 USAID building unfunded

    Kabul, Afghanistan 11 0 On budget 0 None reported

    (Continued From Previous Page)

                                           Change      Number of
                                            from
                    Percentage Percentage original      contract     Project
                               over        project                  challenges
         Location     complete   contract  budget   modification  identified by
                                    value           days               OBO
                            11          0 12% under            0    Diplomatic
    Phnom Penh,                         budget                    Security
         Cambodia                                                certification is
                                                                       holding up
                                                                   construction
                                                                   USAID building
                                                                         unfunded
        Tashkent,           11          0 18% under            0
        Uzbekistan                         budget                 None reported

    Sources: GAO analysis of July 2003 Project Performance Review data, OBO
    officials.

    Note: This table includes projects whose contracts were awarded in fiscal
    year 2001 or 2002. All 14 projects are using a design-build contract
    delivery method. Six projects that began in fiscal year 2002 employ a
    standard embassy design.

    Integrating All Requirements Once a contract has been awarded, any
    subsequent changes to the design

    Early in the Design Process	of the building are likely to have cost and
    schedule implications. In State's design-build process, design and
    construction sometimes occur simultaneously. Any changes to the design can
    require changes in the construction schedule.

    A key component of the planning process for new embassy construction
    projects is the development of staffing projections. Staffing projections
    present the number of staff likely to work in the facility and the type of
    work they will perform. These are the two primary drivers of the size and
    cost of new facilities. Changes to staffing projections after Congress has
    appropriated money for a construction project may result in redesign and
    could lead to lengthy delays and additional costs, according to an OBO
    official. There is little room for flexibility after the budget is
    submitted given budgetary and construction time frames.

    Officials from Diplomatic Security, the State Department bureau that
    initiates changes for security reasons, make every effort to have security
    requirements finalized before a contract is awarded, but changes in
    technologies or new analyses sometimes make design modifications
    necessary. Although the bureau does not insist that previously awarded
    contracts be modified to reflect these kinds of changes, OBO makes a
    decision about what is most prudent for security reasons in determining
    whether to modify the contract.

    At both embassy construction projects that we visited, State added
    security or other requirements that increased costs and led to an
    extension in the contract completion date. At the U.S. embassy in Sofia,
    State added security requirements late in the design phase that increased
    the cost of the

    $50 million project by about $2 million and led to a 2-month extension to
    the original contract completion date. As in Sofia, Yerevan has had to
    adapt recent security modifications to include, among others, the addition
    of a generator and changes to the mail screening room.

    Finding Appropriate U.S. and Contractors on at least two projects have had
    difficulty finding appropriate

    Local Labor	workers at the right time. For example, one project-a major
    retrofit of existing buildings in Sao Paulo, Brazil-was completed in about
    14 months rather than 12 months due in part to a lack of skilled labor. In
    March 2003, OBO reported delays in executing this project because the
    contractor had not yet hired critical craftsmen, particularly U.S. and
    Brazilian certified welders. At the project we visited in Yerevan, which
    OBO considers to be on track, the contractor had not hired enough local
    laborers because of a shortage of qualified construction workers in
    Armenia. OBO officials said that the contractor hired skilled workers from
    neighboring countries and made up the lost time on the project.

    In addition, each project requires U.S. supervisors and laborers with
    security clearances to work in certain areas. However, contractor
    representatives told us that as State's overall construction program
    accelerates and the demand for U.S. workers with security clearances
    escalates, this form of labor could command a premium. Some contractor
    officials stated that there could be a shortage of these workers in the
    near term, which could result in delays that could potentially affect the
    duration and cost of the overall program. Others said the workers will be
    available but will demand a higher price for their labor, which would
    increase contract costs.

    Differing Site Conditions	In four ongoing projects16 where OBO had raised
    concerns about the projects' progress, contractors had reported site
    conditions that differed from what they had originally anticipated.
    According to OBO documents, this difference could affect the projects'
    cost or schedule because it could require the contractor to construct a
    different type of foundation for the buildings. At the construction site
    we visited in Yerevan, a project OBO considered on track as of July 2003,
    the contractor determined that it had not thoroughly analyzed the soil
    conditions at the site and would need to blast away about 9 feet of rock
    from the site to make room for the

    16Abuja, Nigeria; Conakry, Guinea; Yaounde, Cameroon; and Abu Dhabi,
    United Arab Emirates.

    Political and Civil Unrest or Other Unforeseen Events

    Site Acquisition

    Coordinating Funding for

    foundation. This blasting process caused about a 6-week delay, time that
    the contractor made up as the project progressed.

    Many ongoing and planned projects are located in developing countries with
    the potential for political and civil unrest and thus pose unpredictable
    challenges to State in its embassy construction work. For example, civil
    unrest delayed the start of the project in Abidjan, Cote D'Ivoire, in
    2002, leading to delays in the project schedule and potential cost
    increases. Further, political upheaval in Zimbabwe forced OBO to postpone
    construction of the new embassy in Harare from fiscal year 2002 until at
    least fiscal year 2005, according to OBO's most recent Long-Range Overseas
    Buildings Plan. On the other hand, State decided to replace the embassy in
    Kabul, Afghanistan, and brought the construction project to the front of
    the 2002 schedule following the U.S. and allied military action there that
    responded to the September 11 terrorist attacks.17

    Although OBO has developed a flexible approach to deal with problems in
    acquiring sites for new embassy compounds, the issue of site acquisition
    could become more important as OBO increases the number of projects it
    undertakes each year. In the short term, the shifting of projects across
    fiscal years, as discussed earlier, keeps the overall program on track;
    however, in the long term, the number of difficult site acquisitions per
    year may increase. If the less complicated site acquisitions continue to
    be pulled to the front of the line, and more complicated ones pushed back,
    State may have increasing difficulty obtaining sites for its annual
    program.

    As mentioned earlier in this report, OBO attempts to build embassy and
    Construction of Compounds consulate compounds that contain the main office
    building, all support

    with USAID Buildings	buildings, and, where necessary, a building for
    USAID. In several cases, however, OBO has started to build compounds
    without the proposed USAID building because funding for the USAID building
    was not available.

    17The U.S. embassy in Kabul, which had been closed in January 1989 for
    security reasons, officially reopened as an embassy on January 17, 2002.

    In compounds where USAID is likely to require desk space for more than 50
    employees, USAID and OBO informally agreed that USAID would secure funding
    in its appropriations for a separate building on the compound.18 If USAID
    does not secure funding for its building at the same time as the new
    embassy compound, the compound is constructed as scheduled, but the USAID
    building may be built either after the rest of the compound, later in the
    construction process, or not at all. If a USAID building is constructed
    after the rest of the compound, the overall costs to the government would
    likely be higher because the contractor must remobilize the construction
    staff. The delay could also pose a security risk and inconvenience to post
    operations, as construction personnel and equipment would be coming into
    and out of the site on a regular basis. OBO officials told us that five
    projects were awaiting funding for the construction of the proposed USAID
    building on the compounds.

    At the U.S. embassy in Yerevan, funding for the compound's USAID building
    was not available when the compound construction contract was awarded.
    Therefore, USAID staff will not move to the new site concurrent with the
    rest of the embassy's staff. Rather, USAID may be forced to remain at the
    current, insecure facility at an additional cost until completion of its
    annex unless alternative arrangements can be made. The Ambassador told us
    that USAID was one of the most important missions at the embassy and that
    not having it colocated on the compound would create a major inconvenience
    to the embassy's operations and decrease mission effectiveness. Figure 5
    shows the central location of the proposed USAID building within the new
    U.S. embassy compound in Yerevan.

    18U.S. General Accounting Office, Embassy Construction: Process for
    Determining Staffing Requirements Needs Improvement, GAO-03-411
    (Washington, D.C.: April 2003).

    Figure 5: Site of Proposed, but Unfunded, USAID Building at the U.S.
    Embassy in Yerevan

    As of September 2003, one completed project and five ongoing construction
    projects-including Yerevan-had to delay or postpone building the USAID
    annex due to a lack of USAID funding at the start of construction for the
    rest of the compound. Other locations included the recently completed
    project at Nairobi, Kenya; as well as the ongoing projects in Tbilisi,
    Georgia; Conakry, Guinea; Abuja, Nigeria; and Phnom Penh, Cambodia. In
    addition, according to an OBO official, two projects that will receive
    security capital funding this year-Bamako, Mali, and Kingston, Jamaica-may
    not have funding for the planned USAID buildings at the time of
    construction, although funding may become available sometime during
    construction.

    The U.S. government has had mixed success in dealing with this problem of
    coordinating funding. For example, for the new compound in Nairobi-the

    location of one of the 1998 embassy bombings-State awarded a construction
    contract for the USAID building in September 2003, 7 months after the rest
    of the compound had been completed. In another case, Dar Es Salaam,
    funding became available in time for OBO to modify the construction
    contract and complete the USAID building at the same time as the rest of
    the compound.

    We plan to do additional work in the near future on the issue of
    coordinating USAID funding with funding for new embassy and consulate
    compounds.

    Conclusion	Providing secure and safe office facilities at U.S. embassies
    and consulates is a critical task that will require sustained funding and
    management attention over many years. To sustain support for this program,
    the State Department must demonstrate that it is exerting effective
    management, resulting in projects that are on time and within approved
    budgets. We believe that State has put in place a number of mechanisms
    that together represent a positive management approach with the potential
    to achieve favorable program results. However, it is too early to assess
    whether these new mechanisms will ensure that State can consistently
    achieve cost and schedule targets on individual construction projects over
    the course of the program.

    Agency Comments and Our Evaluation

    The Department of State provided written comments on a draft of this
    report (see app. III). In the comments, State said that the report is a
    fair and accurate representation overall of the department's overseas
    construction process and provided additional information on (1) how State
    prioritizes and plans for its construction projects, (2) the problems in
    funding USAID building projects, and (3) other capital construction
    projects being implemented by OBO. We revised the text of the report to
    include information on how Diplomatic Security and OBO view the relative
    vulnerability of facilities at overseas posts. State also provided
    technical comments, which we incorporated in the report where appropriate.

    As agreed with your office, unless you publicly announce the contents of
    this report earlier, we plan no further distribution until 10 days from
    the report date. At that time, we will send copies of this report to other
    interested members of Congress. We will also provide copies of this report

    to the Secretary of State and the Director of the Office of Management and
    Budget. We also will make copies available to others upon request. In
    addition, the report will be available at no charge on the GAO Web site at
    http://www. gao.gov.

    If you or your staff has any questions about this report, please call me
    at (202) 512-4128. Another contact and staff acknowledgments are listed in
    appendix IV.

    Sincerely yours,

    Jess T. Ford, Director International Affairs and Trade

    Appendix I

    Scope and Methodology

    To determine whether the Bureau of Overseas Buildings Operations (OBO) has
    mechanisms in place to more effectively manage State's construction
    program to replace vulnerable embassies and consulates, we (1) reviewed
    the report of the Overseas Presence Advisory Panel and earlier GAO reports
    that outlined problems in embassy security and State's embassy
    construction program and (2) interviewed OBO and contractor officials
    about specific steps OBO has taken to improve program management,
    including the usefulness of and rationale behind both the standard embassy
    design for new embassy and consulate compounds and the design-build
    contract delivery method. We also attended quarterly meetings of the
    Industry Advisory Panel where industry representatives provided advice and
    information on industry best practices to senior OBO management officials,
    as well as monthly project performance reviews where senior OBO officials
    addressed issues related to embassy construction projects. Further, we
    visited two field locations-in Sofia, Bulgaria, and Yerevan, Armenia-where
    we observed the level of management and supervision at the new embassy
    construction sites and the contractor's performance on the projects.

    To determine the status of the overall construction program, as well as
    its current and potential challenges, we reviewed capital projects-whether
    a completely new embassy or consulate compound, a new building, or a major
    retrofit of an existing building-that would bring the post up to current
    security standards. Table 3 provides the list of projects included in this
    review: 7 completed projects and 15 ongoing projects whose contracts were
    awarded from fiscal years 1999 through 2002. We excluded the Dili, East
    Timor, project from the scope of our review because it was an interim
    office building.

    Appendix I
    Scope and Methodology

    Table 3: List of the 22 Post Replacement Projects Included in This Review

    Project statusa Project location

    Completed	Dar Es Salaam, Tanzania Kampala, Uganda Nairobi, Kenya Istanbul,
    Turkey Zagreb, Croatia Doha, Qatar Tunis, Tunisia

    Not completed

    Abidjan, Cote D'Ivoire
    Abuja, Nigeria
    Yaounde, Cameroon
    Cape Town, South Africa
    Conakry, Guinea
    Luanda, Angola
    Dushanbe, Tajikistan
    Kabul, Afghanistan
    Sofia, Bulgaria
    Tashkent, Uzbekistan
    Tbilisi, Georgia
    Yerevan, Armenia
    Phnom Penh, Cambodia
    Abu Dhabi, United Arab Emirates
    Sao Paulo, Brazil

    Source: OBO.

    aAs of September 30, 2003.

    Table 4 shows the seven projects whose contracts were awarded in late
    fiscal year 2003 that are outside the scope of our review. This table does
    not include the recently started projects in Athens, Moscow, or Beijing
    because OBO is utilizing the design-bid-build process for these three
    projects and has yet to award their construction contracts.

    Appendix I
    Scope and Methodology

      Table 4: List of Post Replacement Projects Awarded in Late Fiscal Year 2003

    Project location

                                 Freetown, Sierra Leone

    Bamako, Mali

    Astana, Kazakhstan

    Frankfurt, Germany

                                  Bridgetown, Barbados

    Kingston, Jamaica

    Tirana, Albania

    Source: OBO.

    We also reviewed the State Department's Long-Range Overseas Buildings
    Plan, monthly project performance documents, contract modifications, and
    other OBO documents. We interviewed key State Department officials from
    OBO and Diplomatic Security and contractor officials currently working on
    new embassy construction projects. We visited the ongoing projects in
    Sofia and Yerevan to determine the types of problems that could affect
    cost and schedule and what OBO and the contractor are doing to overcome
    these problems. Contracts for the design and construction of these
    projects were awarded in September and August 2001, respectively. The
    contractor broke ground around September 2002. When we visited the sites
    in July 2003, the contractor was pouring concrete slabs for the floors. We
    did not verify data provided by OBO.

    We conducted our work between October 2002 and September 2003 in
    accordance with generally accepted government auditing standards.

    Appendix II

                          Information on Embassy Construction
                        Projects' Contractors and Building Size

    This appendix provides information on the contractors responsible for each
    of the 22 ongoing embassy or consulate construction projects. It also
    indicates which projects are using standard embassy design and the
    respective sizes of these projects. Table 5 is a list of contractors
    currently working on a new embassy or consulate construction project or
    compound renovation. Company locations are provided to show the geographic
    dispersion of the companies to which State awards its contracts.

    Table 5: List of Contractors for Ongoing Embassy and Consulate Replacement
    Projects

    Contractor name and location Projects

    ABB SUSA Luanda, Angola North Brunswick, New Jersey

    Alutiiq-Fluor Joint Venture Sao Paulo, Brazil Rosslyn, Virginia

    B.L. Harbert International Abuja, Nigeria Birmingham, Alabama

    Brown & Root Services Kabul, Afghanistan Rosslyn, Virginia

    Caddell Construction Yaounde, Cameroon

    Montgomery, Alabama	Conakry, Guinea Freetown, Sierra Leone Bamako, Mali

    Caribbean Consultants, Ltd. Bridgetown, Barbados Bridgetown, Barbados

    Hensel Phelps Construction Cape Town, South Africa Aurora, Colorado

    HITT Tirana, Albania Fairfax, Virginia

    J.A. Jones Construction Abidjan, Cote D'Ivoire

    Charlotte, North Carolina	Sofia, Bulgaria Yerevan, Armenia Tashkent,
    Uzbekistan Tbilisi, Georgia Abu Dhabi, United Arab Emirates Frankfurt,
    Germany

    Kullman Industries, Inc. Dushanbe, Tajikistan Lebanon, New Jersey

    Fluor International, Inc. Astana, Kazakhstan Greenville, South Carolina
    Kingston, Jamaica

    H.B. Zachry Construction Phnom Penh, Cambodia San Antonio, Texas

    Source: OBO.

    Appendix II
    Information on Embassy Construction
    Projects' Contractors and Building Size

    Table 6 is a list of the projects employing a standard embassy design and
    their size. Standard embassy designs were not used until fiscal year 2002.
    OBO plans to use the standard design for most future projects, unless the
    embassy involves a large degree of complexity or has special significance
    to the United States, such as Beijing.

      Table 6: Size of Embassy Construction Projects Using Standard Embassy Design

    Location Size of embassy

    Freetown, Sierra Leone Small

    Yaounde, Cameroon Medium

    Conakry, Guinea Medium

    Cape Town, South Africa Medium

    Bamako, Mali Medium

    Kingston, Jamaica Large

    Astana, Kazakhstan Large

    Phnom Penh, Cambodia Large

    Tbilisi, Georgia Large

    Tashkent, Uzbekistan Large

    Source: OBO.

                                      Appendix III

                         Comments from the Department of State

    Note: GAO comments supplementing those in the report text appear at the
    end of this appendix.

    Appendix III
    Comments from the Department of State

    Appendix III
    Comments from the Department of State

                                  Now on pp. 8 and 9.

    See comment 1.

    Appendix III
    Comments from the Department of State

    See comment 2. Now on pp. 3 and 23.

    Appendix III
    Comments from the Department of State

                                     See comment 3.

                                      Appendix III
                         Comments from the Department of State

    The following are GAO's comments on the Department of State letter dated
    October 27, 2003.

    GAO Comments 1.

    2.

    3.

    We relied primarily on information from the March 2003 Long-Range Overseas
    Buildings Plan and discussions with OBO officials in drafting this section
    of the report. We revised the text to include information on how
    Diplomatic Security and OBO officials view the relative vulnerability of
    facilities at overseas posts.

    We plan to do additional work in the near future on the issue of the U.S.
    government's efforts to coordinate USAID funding with funding for new
    embassy and consulate compounds.

    Our work focused on the replacement of vulnerable embassies and consulates
    through construction projects that would bring the post up to current
    security standards. As a result, our report does not discuss these
    projects.

    Appendix IV

                         GAO Contact and Staff Acknowledgments

                        GAO Contact John Brummet (202) 512-5260

    Staff 	In addition to the individual named above, Janey Cohen, Jessica
    Lundberg, Judy McCloskey, Nanette Ryen, and Michael Simon made key
    contributions

    Acknowledgments to this report.

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