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 [email protected].

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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