Rebuilding Iraq: Fiscal Year 2003 Contract Award Procedures and  
Management Challenges (01-JUN-04, GAO-04-605).			 
                                                                 
Congress has appropriated more than $20 billion since April 2003 
to support rebuilding efforts in Iraq. This complex undertaking, 
which is occurring in an unstable security environment and under 
significant time constraints, is being carried out largely	 
through contracts with private-sector companies. As of September 
2003, agencies had obligated nearly $3.7 billion on 100 contracts
or task orders under existing contracts. Given widespread	 
congressional interest in ensuring that reconstruction contracts 
are awarded properly and administered effectively, GAO reviewed  
25 contract actions that represented about 97 percent of the	 
obligated funds. GAO determined whether agencies had complied	 
with competition requirements in awarding new contracts and	 
issuing task orders and evaluated agencies' initial efforts in	 
carrying out contract administration tasks.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-605 					        
    ACCNO:   A10269						        
  TITLE:     Rebuilding Iraq: Fiscal Year 2003 Contract Award	      
Procedures and Management Challenges				 
     DATE:   06/01/2004 
  SUBJECT:   Appropriated funds 				 
	     Contract performance				 
	     Contract terms					 
	     Contract administration				 
	     Competition					 
	     Foreign governments				 
	     Federal aid to foreign countries			 
	     Limited procurement				 
	     Sole source procurement				 
	     Iraq						 

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GAO-04-605

United States General Accounting Office

                     GAO Report to Congressional Committees

June 2004

REBUILDING IRAQ

      Fiscal Year 2003 Contract Award Procedures and Management Challenges

                                       a

GAO-04-605

Highlights of GAO-04-605, a report to congressional committees.

Congress has appropriated more than $20 billion since April 2003 to
support rebuilding efforts in Iraq. This complex undertaking, which is
occurring in an unstable security environment and under significant time
constraints, is being carried out largely through contracts with
private-sector companies. As of September 2003, agencies had obligated
nearly $3.7 billion on 100 contracts or task orders under existing
contracts.

Given widespread congressional interest in ensuring that reconstruction
contracts are awarded properly and administered effectively, GAO reviewed
25 contract actions that represented about 97 percent of the obligated
funds. GAO determined whether agencies had complied with competition
requirements in awarding new contracts and issuing task orders and
evaluated agencies' initial efforts in carrying out contract
administration tasks.

GAO is making several recommendations to the Secretary of the Army to
ensure compliance with requirements when issuing task orders to rebuild
Iraq and to reduce cost risk for the government. GAO also is recommending
that the Secretary of Defense develop a strategy to improve the delivery
of acquisition support in any future operations. DOD generally concurred
with the recommendations and said it is resolving the contracting issues.

www.gao.gov/cgi-bin/getrpt?GAO-04-605.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact John Doe at (202) 512-5555
or [email protected].

June 2004

REBUILDING IRAQ

Fiscal Year 2003 Contract Award Procedures and Management Challenges

Agencies used sole-source or limited competition approaches to issue new
reconstruction contracts, and when doing so, generally complied with
applicable laws and regulations. Agencies did not, however, always comply
with requirements when issuing task orders under existing contracts. For
new contracts, the law generally requires the use of full and open
competition, where all responsible prospective contractors are allowed to
compete, but permits sole-source or limited competition awards in
specified circumstances, such as when only one source is available or to
meet urgent requirements. All of the 14 new contracts GAO examined were
awarded without full and open competition, but each involved circumstances
that the law recognizes as permitting such awards. For example, the Army
Corps of Engineers properly awarded a sole-source contract for rebuilding
Iraq's oil infrastructure to the only contractor that was determined to be
in a position to provide the services within the required time frame. The
Corps documented the rationale in a written justification, which was
approved by the appropriate official. The U.S. Agency for International
Development properly awarded seven contracts using limited competition.
The Department of State, however, justified the use of limited competition
by citing an authority that may not be a recognized exception to
competition requirements, although a recognized exception could have been
used.

There was a lesser degree of compliance when agencies issued 11 task
orders under existing contracts. Task orders are deemed by law to satisfy
competition requirements if they are within the scope, period of
performance, and maximum value of a properly awarded underlying contract.
GAO found several instances where contracting officers issued task orders
for work that was not within the scope of the underlying contracts. For
example, to obtain media development services and various subject matter
experts, the Defense Contracting Command-Washington placed two orders
using a management improvement contract awarded under the General Services
Administration's schedule program. But neither of the two orders involved
management improvement activities. Work under these and other orders
should have been awarded using competitive procedures or, due to the
exigent circumstances, supported by a justification for other than full
and open competition.

The agencies encountered various contract administration challenges during
the early stages of the reconstruction effort, stemming in part from
inadequate staffing, lack of clearly defined roles and responsibilities,
changing requirements, and security constraints. While some of these
issues have been addressed, staffing and security remain major concerns.
Additionally, the Army and its contractors have yet to agree on key terms
and conditions, including the projected cost, on nearly $1.8 billion worth
of reconstruction work that either has been completed or is well under
way. Until contract terms are defined, cost risks for the government
remain and contract cost control incentives are likely to be less
effective.

Contents

LetterEUR

Scope and Methodology
Results in Brief
Background
New Contract Awards Generally Complied with Competition

Requirements, but Task Orders Were Less Compliant
Effective Contract Administration Remains a Key Challenge as

Contracting Activity Increases
Conclusions
Recommendations for Executive Action
Agency Comments and Our Evaluation

1

1 4 6

11

21 28 29 30

Appendix I List of Organizations Contacted

Appendix II~Iraq Reconstruction Contracts/Task Orders and Obligations as
of September 30, 2003

Appendix III~Comments from the Department of Defense 41
GAO Comments 46

Appendix IV Comments from the Department of State

Appendix V~Comments from the U.S. Agency for International Development

Appendix VI Comments from the General Services Administration 52

Appendix VII GAO Contacts and Acknowledgments 55

Tables

Table 1: Organizations and Principal Areas of Responsibility for
Rebuilding Iraq 7 Table 2: Contract Activity by Organization, as of
September 30, 2003 8 Table 3: Projected Uses of Fiscal Year 2004
Appropriations for Iraq

Reconstruction Efforts 9 Table 4: Principal Procurement Approaches Used to
Rebuild Iraq 11 Table 5: Agency Compliance with Requirements for Awarding
New

Contracts Using Other Than Full and Open Competition 13 Table 6: Agency
Compliance with Requirements for Issuing Task Orders on Existing Contracts
16 Table 7: Undefinitized Contract Actions as of March 2004 23

Abbreviations EUR

CICA Competition in Contracting Act
CPA Coalition Provisional Authority
DCAA Defense Contract Audit Agency
DCC-W Defense Contracting Command-Washington
DCMA Defense Contract Management Agency
DOD Department of Defense
FAR Federal Acquisition Regulation
GAO General Accounting Office
GSA General Services Administration
LOGCAP Logistics Civil Augmentation Program
OMB Office of Management and Budget
SAIC Science Applications International Corporation
USAID U.S. Agency for International Development

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separately.

United States General Accounting Office Washington, DC 20548

  Scope and Methodology

June 1, 2004

Congressional Committees

The United States, along with its coalition partners and various
international organizations and donors, has embarked on a significant
effort to rebuild Iraq in the aftermath of the war that replaced that
country's regime. Since April 2003, Congress has appropriated more than
$20 billion to support rebuilding efforts such as restoring Iraq's oil and
electric infrastructures; reconstituting Iraq's national army and local
police forces; assisting in developing a market-based economy; and
improving the country's health, education, and medical services. The
Coalition Provisional Authority (CPA), an entity established to manage
Iraqi affairs on a temporary basis, is overseeing the rebuilding effort.
This complex undertaking, which is occurring in an unstable security
environment and under significant time constraints, is being carried out
largely through contracts with private-sector companies.

Given the widespread congressional interest in ensuring that
reconstruction contracts are awarded properly and administered
effectively, we initiated a review of the contracts awarded to rebuild
Iraq. Our review focused on reconstruction-related contract actions by the
Department of Defense (DOD) (primarily the U.S. Army, including the Army
Corps of Engineers), the U.S. Agency for International Development
(USAID), and the Department of State through September 30, 2003. Many of
these contract actions were awarded on behalf of the CPA, especially by
the Army, which acted as the CPA's executive agent. Our objectives were to
(1) determine whether agencies had complied with applicable laws and
regulations governing competition in awarding new contracts and issuing
task orders under existing contracts, and (2) evaluate agencies' initial
efforts in carrying out contract administration tasks.

We reviewed reconstruction contracts that had been funded, in whole or in
part, with U.S. appropriated funds. We focused our review on new
contracts, modifications, task orders under existing contracts, and
contract actions using the General Services Administration's (GSA) federal
supply schedule program as of September 30, 2003. We did not review
contracts that were funded entirely with international or Iraqi national
funds, such as funds seized after the 1991 Gulf War or funds that were
discovered during Operation Iraqi Freedom in 2003. We also did not

review contracts or task orders that were used only for support of
military operations or grants and cooperative agreements awarded to
international or nongovernmental organizations. We continue to evaluate
various issues related to military operations and the progress in
rebuilding Iraq under separate reviews.1

To determine the number of reconstruction contract actions, the types of
contract actions, the procedures used to make the awards, and the funding
sources, we requested information from each of the principal organizations
responsible for rebuilding activities in Iraq: the CPA, the Office of the
Secretary of Defense, the Department of the Army, the Army Corps of
Engineers, USAID, and the Departments of State and Justice. To verify the
information provided, we requested copies of each contract action issued
as of September 30, 2003, and corrected the information provided as
appropriate. Agency officials could not provide the contract files for a
limited number of small-dollar contracts awarded during the early stages
of the reconstruction effort. To determine the amount obligated for
reconstruction, we primarily used the obligation data recorded in the
contracts. We also reviewed the data maintained by the agencies' budget
offices and information reflected in the Office of Management and Budget's
(OMB) quarterly status reports. To obtain information on contract
activities since September 2003, we interviewed CPA and agency officials,
attended industry day conferences, and reviewed solicitations and other
relevant agency documents.

To determine whether agencies had complied with applicable laws and
regulations governing competition when awarding contracts and issuing task
orders, we reviewed the requirements of the Competition in Contracting Act
(CICA) of 1984 and other relevant laws and regulations. We judgmentally
selected 25 contract actions, consisting of 14 new contracts awarded using
other than full and open competition and 11 task orders issued under
existing contracts. These 25 contract actions represented about 97 percent
of the total dollars obligated for reconstruction through September 30,
2003. New contracts accounted for nearly 80 percent of this spending.

1 For example, we testified on efforts to identify and recover assets of
the former regime and return them to the Iraqi people. See Recovering
Iraq's Assets: Preliminary Observations on U.S. Efforts and Challenges,
GAO-04-579T (Washington, D.C.: Mar. 18, 2004).

We selected the 25 contracts or task orders based on various factors. We
focused on high-dollar value contracts and task orders, and on contracts
awarded using other than full and open competitive procedures. We also
considered whether audits by the DOD or USAID Inspectors General were
under way. Overall, the 25 contracts or task orders consisted of the
following:

o  	the largest contract awarded and the 4 largest task orders, by dollar
value, issued to support CPA operations;

o  	9 contracts awarded and 1 task order issued by USAID, as well as 1
task order issued under an Air Force contract to provide logistical
support for USAID-managed efforts;

o  	2 contracts awarded and 4 task orders issued by the Army Corps of
Engineers and the Army Field Support Command to help restore Iraq's oil or
electrical infrastructure;

o  	1 contract awarded and 1 task order issued by the Army to train or
equip the New Iraqi Army; and

o  	1 contract awarded by the Department of State to support Iraqi law
enforcement efforts.

For new contract awards, we determined whether agency officials followed
appropriate procedures in using other than full and open competition and
assessed the agency's justification for its contracting approach. For task
orders issued under existing contracts, we determined whether the task
orders were within the scope of the existing contracts, and if not,
whether the agencies had followed proper procedures to add the work. To do
so, we obtained the contracts or task orders and associated modifications,
justification and approval documentation, negotiation memoranda, audit
reports, and other relevant documents. We discussed the award and issuance
process with agency procurement personnel, including contracting officers,
program managers, and, in some cases, agency counsel. We also reviewed
audit reports on various procurement issues prepared by the DOD and USAID
Inspectors General and the Defense Contract Audit Agency (DCAA).

To assess agencies' initial contract administration efforts, we
interviewed procurement officials to determine how contract administration
for their contracts was initially staffed, including the use of support
contracts to assist in administering the contracts. We obtained
information on plans for reaching agreement on key contract terms and
conditions. We also reviewed the 25 contracts or task orders to determine
whether they included provisions related to contract administration, such
as quality assurance plans, requirements for monthly status reports, and

subcontractor management plans. As part of our monitoring of
reconstruction activities, we conducted field visits in October 2003 in
Baghdad and in other areas in Iraq, including Al Hillal and Al Basrah.
During these visits, we held discussions with officials and visited
project sites, including power plants, oil wells, oil processing
facilities, water and sewage systems, schools, and many other
reconstruction activities. During these visits, we observed the challenges
faced in carrying out reconstruction efforts, including the hostile
security environment, poor communications, and unsettled working
conditions.

Appendix I lists the agencies visited during our review. We conducted our
work between May 2003 and April 2004 in accordance with generally accepted
government auditing standards.

                                Results in Brief

Agencies generally complied with applicable laws and regulations governing
competition when using sole-source or limited competition approaches to
award new contracts for reconstruction. They did not always comply with
competition requirements, however, in issuing task orders under existing
contracts. For new contracts, the law generally requires the use of full
and open competition, where all responsible prospective contractors are
allowed to compete, but permits sole-source or limited competition awards
in specified circumstances, such as when only one source is available or
to meet urgent requirements. All of the 14 new contracts we examined were
awarded without full and open competition. Each of these contracts,
however, involved circumstances that the law recognizes as permitting
other than full and open competition, and agencies generally justified the
use of sole-source or limited competition awards in accordance with legal
requirements. For example, the Army Corps of Engineers properly awarded a
sole-source contract for rebuilding Iraq's oil infrastructure to the only
contractor DOD had determined was in a position to provide the services
within the required time frame given classified prewar planning
requirements. The Army Corps of Engineers documented the rationale in a
written justification and had the justification approved by the
appropriate official. Similarly, USAID properly awarded seven contracts
using limited competition procedures. In one instance, however, the
Department of State justified and approved the use of limited competition
by citing a unique authority that may not be a recognized exception to the
competition requirements, even though a recognized exception to
competition requirements was available.

Of the 11 task orders agencies issued under existing contracts, 2 were
within the scope of the underlying contracts and 7, in whole or part, were

not within scope; we have reservations about whether 2 others were within
scope. Task orders are deemed by law to satisfy competition requirements
if they are within the scope, period of performance, and maximum value of
a properly awarded underlying contract. Although the maximum value and
period of performance for a contract are almost always objectively
ascertainable, decisions concerning the scope of a contract involve
subjective analysis and judgment. Contracting officers must decide whether
the work described in a task order fits within the work generally
described in the contract. In several instances, contracting officers
issued task orders for work that was not within the scope of the
underlying contracts. For example, to obtain media development services
and various subject matter experts, the Defense Contracting
Command-Washington (DCC-W) placed two orders using a management
improvement contract awarded under GSA's federal supply schedule program.
But the two orders, both placed with the same company, did not involve
management improvement activities. The out-of-scope work under these and
other orders should have been awarded using competitive procedures or,
because of the exigent circumstances involved, supported by a
justification for other than full and open competition in accordance with
legal requirements. To ensure that task orders issued to rebuild Iraq
comply with applicable requirements, we are making several recommendations
to the Secretary of the Army to review out-of-scope task orders to address
outstanding issues and take appropriate actions, as necessary.

The agencies encountered various contract administration challenges during
the early stages of the reconstruction effort, stemming in part from
inadequate staffing, lack of clearly defined roles and responsibilities,
changing requirements, and security constraints. While some of these
issues have been addressed, staffing, security, and defining key terms and
conditions of the contracts remain major concerns. For example, USAID
officials have found it necessary to augment mission staff with personnel
on temporary assignment from other USAID missions, while the State
Department is exploring options for reorganizing the bureau overseeing its
contract to use resources more efficiently. In addition, the Army has
nearly $1.8 billion worth of reconstruction work that either has been
completed or is well under way, but the agency and the contractors have
yet to agree on key terms and conditions, including a projected cost.
Until contract terms are defined, contract cost control incentives are
likely to be less effective and risks to the government remain. To promote
effective cost control, we are recommending that the Secretary of Army
definitize outstanding contract actions as soon as possible. To improve
the delivery of acquisition support in future operations, we are also
recommending that

the Secretary of Defense, in consultation with the Administrator, USAID,
evaluate the lessons learned in Iraq and develop a strategy for assuring
that adequate staff and other resources can be made available in a timely
manner.

For future reconstruction efforts in Iraq, the CPA has established a
program management office to provide better coordination and management
over activities to be conducted during the next year. To implement this
approach, in March 2004, DOD, on behalf of the CPA, awarded 17 contracts
for overall program support and construction management services in such
areas as electricity and water. Other agencies, such as USAID, will
continue to award and manage contracts within their areas of
responsibilities.

We received written comments on a draft of this report from DOD, the
Department of State, USAID, and GSA. DOD generally concurred with our
recommendations and outlined a number of corrective actions it is taking.
The Department of State disagreed with our assessment that the authority
it cited to limit competition may not be a recognized exception to
competition requirements. State did not provide us, however, with a
persuasive basis to conclude that the authority is a recognized exception.
USAID concurred with the draft as written. GSA noted it was working with
DOD and other federal agencies to ensure that their contracting officers
are fully trained on the proper use of the federal supply schedule
program. The agencies' comments appear in appendixes III, IV, V, and VI.

During the latter part of 2002, as diplomatic efforts to convince the
former Iraqi regime to comply with United Nations Security Council
resolutions continued, discussions took place within the administration
about the need to rebuild Iraq should combat operations become necessary.
In October 2002, OMB established a senior interagency team to establish a
baseline assessment of conditions in Iraq and to develop relief and
reconstruction plans. According to an OMB official, the team developed
plans for immediate relief operations and longer-term reconstruction in 10
sectors: health, education, water and sanitation, electricity, shelter,
transportation, governance and the rule of law, agriculture and rural
development, telecommunications, and economic and financial policy.

Though high-level planning continued through the fall of 2002, most of the
agencies involved in the planning were not requested to initiate
procurement actions for the rebuilding efforts until early in 2003. Once
assigned the responsibilities, agency procurement personnel were

  Background

instructed to be ready to award the initial contracts within a relatively
short time period, often within weeks. During 2003, several agencies
played a role in awarding or managing reconstruction contracts, most
notably USAID and the Army Corps of Engineers. Various agencies awarded
contracts on behalf of the CPA and its predecessor organization, the
Office of Reconstruction and Humanitarian Assistance. Table 1 shows the
principal areas of responsibility assigned to the CPA and other agencies.

Table 1: Organizations and Principal Areas of Responsibility for
Rebuilding Iraq

Organization Primary responsibilities

CPA 	Acts as an interim government and oversees, directs, coordinates, and
approves rebuilding efforts. The CPA Administrator reports to the
President through the Secretary of Defense.

Department of the Army	DOD executive agent for the CPA. Provides
administrative, logistics, and contracting support for the CPA and
training for the New Iraqi Army.

Army Corps of Engineers 	Iraqi oil and electrical infrastructures, CPA
administrative support, and technical assistance on USAID capital
construction contracts.

USAID	Nonoil-related capital construction, seaport and airport
administration, local governance, economic development, education, and
public health.

Department of State 	Civilian law enforcement, judicial, and corrections
support.

Department of Justice Civilian law enforcement training and support.

Source: GAO's analysis of agency data.

As of September 30, 2003, the agencies had obligated nearly $3.7 billion
on 100 contracts or task orders for reconstruction efforts (see table 2).
These obligations came from various funding sources, including U.S.
appropriated funds and Iraqi assets.2 The Army Corps of Engineers and
USAID together obligated about $3.2 billion, or nearly 86 percent of this
total. The majority of these funds were used to rebuild Iraq's oil
infrastructure and to fund other capital-improvement projects, such as
repairing schools, hospitals, and bridges. This spending reflects a
relatively small part of the total amount that may be required to rebuild

2 The Emergency Wartime Supplemental Appropriations Act, 2003 (Pub. L. No.
108-11, Apr. 16, 2003) established several funds that could be used to
support rebuilding efforts. Agencies also used other appropriation
accounts to support certain rebuilding efforts.

Iraq, with estimates ranging from $50 billion to $100 billion.3 Appendix
II lists the 100 reconstruction contracts and task orders we identified
and the associated obligations as of September 30, 2003.4

Table 2: Contract Activity by Organization, as of September 30, 2003

Dollars in millions

Contracts awarded or task Amount Percent of Organization orders issued
obligated total obligations

CPAa

            Army Field Support Command                 1    $204.1    
      Defense Contracting Command-Washington          24    127.9     
             Army Corps of Engineers                   3     28.5          <1 
        Defense Information Systems Agency             4     27.4          <1 
        Defense Contract Management Agency             7     16.9          <1 
             Army Contracting Agency                   1     11.0          <1 
         Washington Headquarters Services             34     1.8           <1 

                             Department of the Army

Army Corps of Engineers 8 1,694.6

Army Field Support Command 3 69.4

Army Contracting Agency 1 48.1

USAID

USAID 11 1,335.8

b

Department of the Air Force 1 91.5

                         Department of State 1 19.6 <1

Department of Justice 1 1.7 <1 Total 100 $3,678.3 100

Source: GAO's analysis of data provided by DOD, the CPA, USAID, and the
Departments of State and Justice.

Note: Figures do not total to 100 percent.
aReflects contracts awarded or task orders issued on behalf of the CPA by
the listed agencies.
bReflects an Air Force task order issued for logistical support on behalf
of USAID.

3 Congressional Budget Office, Paying for Iraq's Reconstruction (January
2004).

4 Appendix II may understate the total number of reconstruction contracts
and task orders, as agency officials were unable to provide information on
a limited number of small-dollar contracts awarded during the early stages
of the reconstruction effort.

In November 2003, Congress appropriated an additional $18.4 billion for
rebuilding activities.5 The CPA's projected uses for the funds reflect a
continued emphasis on rebuilding Iraq's infrastructure and on providing
improved security and law enforcement capabilities (see table 3). In
appropriating these funds, Congress required that the CPA Administrator or
the head of a federal agency notify Congress no later than 7 calendar days
before awarding a contract, with these funds, valued at $5 million or more
for reconstruction using other than full and open competition procedures.6

Table 3: Projected Uses of Fiscal Year 2004 Appropriations for Iraq
Reconstruction Efforts

Dollars in billions

                                 Purpose Amount

                             Electric sector $ 5.6

                       Water resources and sanitation 4.3

                        Security and law enforcement 3.2

                             Oil infrastructure 1.7

                 Justice, public safety, and civil society 1.5

                                Health care 0.8

                     Transportation/telecommunications 0.5

                      Roads, bridges, and construction 0.4

                   Education, refugees, and human rights 0.3

                         Private-sector development 0.2

                                  Total $18.4

Source: OMB.

Note: Figures may not total due to rounding.

5 Emergency Supplemental Appropriations Act for Defense and for the
Reconstruction of Iraq and Afghanistan, 2004. (Pub. L. No. 108-106, Nov.
6, 2003.) Congress appropriated $18.649 billion for Iraq relief and
reconstruction; however, of this amount, $210 million was set aside for
assistance to Jordan, Liberia, and Sudan. Additionally, the Consolidated
Appropriations Act, 2004 (Pub. L. No. 108-199, Jan. 23, 2004) allows
another $100 million of that amount to be used for assistance to Turkey
and $30 million for the Middle East Partnership Initiative.

6 Included within the information to be provided is the justification for
using other than full and open competitive procedures, a brief description
of the contract's scope, the amount of the contract, a discussion of how
the contracting agency identified and solicited offers from contractors,
and a list of the contractors solicited.

U.S.-funded reconstruction efforts were undertaken through numerous
contracts awarded by various U.S. agencies. CICA generally requires that
federal contracts be awarded on the basis of full and open competition-
that is, all responsible prospective contractors must be afforded the
opportunity to compete.7 The process is intended to permit the government
to rely on competitive market forces to obtain needed goods and services
at fair and reasonable prices. Within this overall framework, agencies can
use various procurement approaches to obtain goods and services. Each
approach, as listed in table 4, involves different requirements with which
agencies must comply. In some cases, agency officials may determine that a
contractor working under an existing contract may be able to provide the
required goods or services through issuance of a task order, thus
obviating the need to award a new contract. Before awarding a task order
under an existing contract, however, the agency must determine that the
work to be added is within the scope of that contract (i.e., that the work
fits within the statement of work, performance period, and maximum value
of the existing contract). In making this determination, the contracting
officer must decide whether the new work is encompassed by the existing
contract's statement of work and the original competition for that
contract.

7 CICA, as enacted in 10 U.S.C. S: 2304(a)(1) (2000) (applicable to DOD)
and codified at 41 U.S.C. S: 253(a)(1) (2000) (applicable to other
executive agencies discussed in this report); 41 U.S.C. S: 403(6) (2000)
(definition of "full and open competition"). CICA's competition
requirements are implemented in the Federal Acquisition Regulation (FAR),
48 C.F.R. part 6 (2003) and agency supplements.

         Table 4: Principal Procurement Approaches Used to Rebuild Iraq

Procurement approach Key requirements

Award new contract 	Contract awards generally must comply with CICA's
requirement for full and open competition. When not providing for such
competition, the contracting officer must, among other things, justify the
reasons for using the alternative authorized procedure, and, if
applicable, solicit offers from as many potential sources as is
practicable under the circumstances and consider actions to facilitate
competition for any subsequent acquisition of the supplies or services
required. The contracting officer's justification for the use of other
than full and open competitive procedures must be approved at the required
level within the agency, depending on the value of the contract and the
competition exception cited.

Use existing
indefinite-delivery/indefinite-Indefinite-delivery/indefinite-quantity
contracts establish the basic terms of the contracts

quantity contract 	in advance, enabling agency personnel to issue
subsequent task or delivery orders for specific services or goods
expeditiously. Orders must be within the contract's scope, issued within
the period of performance, and be within the contract's maximum value.
Out-of-scope work must either be competed or be justified by the
contracting officer under the same rules that apply to noncompetitive
awards of new contracts. If the basic contract is awarded to multiple
firms, then each generally must be given a "fair opportunity to be
considered" for each order. Special competition requirements apply to
orders for services by or on behalf of DOD.

Use federal supply schedule contract 	GSA's federal supply schedule
program offers a wide variety of commercial goods and services through the
use of various schedule contracts. Because these contracts are deemed to
be competitively awarded, contracting officers generally may place orders
under these contracts without seeking further competition or further
determining whether the listed prices are fair and reasonable. For service
contracts that are valued at more than $2,500 and require a statement of
work, GSA established special ordering procedures that require agency
personnel to solicit quotes from at least three contractors and evaluate
the mix and price of the labor categories being offered, among other
things. Special competition requirements apply to orders for services by
or on behalf of DOD.

                            Source: GAO's analysis.

  New Contract Awards Generally Complied with Competition Requirements, but Task
  Orders Were Less Compliant

Agencies generally complied with applicable laws and regulations governing
competition when using sole-source or limited competition approaches to
award the initial reconstruction contracts we reviewed. The exigent
circumstances that existed immediately prior to, during, and following the
war led agency officials to conclude that the use of full and open
competitive procedures for new contracts would not be feasible. We found
these decisions to be within the authority provided by law. We found
several instances, however, in which agencies had issued task orders for
work that was outside the scope of existing contracts. Such task orders do
not satisfy legal requirements for competition. In these cases, the
out-of-scope work should have been awarded using competitive procedures or
supported with a Justification and Approval for other than full and open
competition in accordance with legal requirements. Given the urgent need
for reconstruction efforts, the authorities under the competition laws for
using noncompetitive procedures provided agencies

ample latitude to justify other than full and open competition to satisfy
their needs.

    Agencies Properly Justified Use of Other Than Full and Open Competition in
    Awarding New Contracts

The agencies responsible for rebuilding Iraq generally complied with
applicable requirements governing competition when awarding new contracts.
While CICA requires that federal contracts be awarded on the basis of full
and open competition, the law and implementing regulations recognize that
there may be circumstances under which full and open competition would be
impracticable, such as when contracts need to be awarded quickly to
respond to unforeseen and urgent needs or when there is only one source
for the required product or service.8 In such cases, agencies are given
authority by law to award contracts under limited competition or on a
sole-source basis, provided that the proposed actions are appropriately
justified and approved.9

We reviewed 14 new contracts that were awarded using other than full and
open competition: a total of 5 sole-source contracts awarded by the Army
Corps of Engineers, the Army Field Support Command, and USAID and 9
limited competition contracts awarded by the Department of State, the Army
Contracting Agency, and USAID (see table 5). Because of the limited time
available to plan and commence reconstruction efforts, agency officials
concluded that the use of full and open competitive procedures in awarding
new contracts would not be feasible. For 13 of these new contracts, agency
officials adequately justified their decisions and complied with the
statutory and regulatory competition requirements. In the remaining case,
the Department of State justified and approved the use of limited
competition under a unique authority that, in our opinion, may not be a
recognized exception to the competition requirements.10 State

8 These exceptions are listed in 10 U.S.C. S: 2304(c) and 41 U.S.C. S:
253(c). Agencies may have other authority available that permits them to
justify using other than full and open competition in appropriate
circumstances. For example, table 5 describes the authority USAID used to
conduct its limited competitions.

9 10 U.S.C. S: 2304(f) and 41 U.S.C. S: 253(f) establish the required
approval levels and the required contents of the justification. Lack of
advance planning is prohibited as a basis for using other than competitive
procedures.

10 State relied on section 481(a) of the Foreign Assistance Act of 1961,
as amended, 22 U.S.C. S: 2291(a)(4) (2000), which reads: "Notwithstanding
any other provision of law, the President is authorized to furnish
assistance to any country or international organization, on such terms and
conditions as he may determine, for the control of narcotic and
psychotropic drugs and other controlled substances, or for other anticrime
purposes."

took steps to obtain competition, however, by inviting offers from four
firms. State could have justified and approved its limited competition
under recognized exceptions to the competition requirements.

Table 5: Agency Compliance with Requirements for Awarding New Contracts
Using Other Than Full and Open Competition

Dollars in millions

Obligations as Contract(s) objectives Agency action Our assessment of
Sept. 2003

$1,390.1

Interim transitional civil Justification and Approval $19.7 administration
headquarters complied with applicable legal standards.

Awarded sole-source contract citing authorized CICA exception for only one
responsible source available. According to DOD, there was only one source
with the capability to perform emergency repairs to the oil infrastructure
given (1) the classified nature of the planning efforts, (2) the
contractor's role in those efforts, and (3) the imminent commencement of
hostilities. DOD recognized as early as November 2002 that the contractor,
given its role in preparing a contingency support plan, would be in the
best position to execute the plan for emergency repair and continuing the
operations of Iraq's oil infrastructure. The contracting officer's written
justification outlined the rationale for the decision and other factors,
and it was approved by the Army's senior procurement executive.

Awarded sole-source contract citing CICA's unusual and compelling urgency
exception.

USAID

Capital construction, transition Awarded seven contracts under limited
support, local governance, competition and two sole-source contracts
citing
economic development, the foreign aid program impairment exception to
education, public health, the competition requirements provided for under
personnel support, and airport the Federal Property and Administrative
Services
and seaport administration Act.b The waiver, signed on January 16, 2003,

Justifications and $1,326.3
Approvals complied with
applicable legal

c

standards.

instructed procurement officials to seek offers from as many sources as
was practicable. Excluding the two sole-source awards, USAID solicited
between 2 and 10 potential offerors for each contract.

Dollars in millions

Obligations as Contract(s) objectives Agency action Our assessment

of Sept. 2003 Army Contracting Agency

Training program  Awarded contract under limited   Justification and $48.1 
    for New Iraqi              competition                Approval      
         Army       citing CICA's unusual and           complied with   
                    compelling urgency                   applicable     
                    exception. In this case, the CPA  legal standards.  
                              identified a                              
                    requirement for a program on May                    
                                31, 2003,                               
                    with the objective of having a                      
                    program in place                                    
                    by July 1. The Army received five                   
                    proposals, and                                      
                    following an evaluation, awarded                    
                    a contract on                                       
                                June 25.                                

                 Army Field Support Command Department of State

Prepositioning         Awarded sole-source letter Justification and  $37.5 
fire-fighting               contract (numbered as      Approval      
     equipment    a task order under the Army's        complied with    
                  existing Logistics                     applicable     
                          Civil Augmentation Program alegal standards.  
                                  (LOGCAP) contract)                    
                  citing CICA's exception for only                      
                  one responsible                                       
                          source available.                             

Law enforcement, judicial,  Agency limited competition by citing a   $19.6 
              and               provision of Authority used by State    
      corrections support      the Foreign Assistance Act of 1961 that  
                                 authorizes may not be a recognized     
                                  the President to furnish foreign      
                               assistance on exception to competition   
                                 such terms and conditions as he may    
                                  determine requirements, although      
                               for international narcotics control or   
                                 for other circumstances would have     
                               anticrime purposes "notwithstanding any  
                                  other supported State's use of a      
                               provision of law." recognized exception  
                                                 to                     
                                                      the requirements. 

Source: GAO's analysis of agency data.

aBecause the Army cited national security considerations in deciding not
to publicize its requirements, it was required under the Army FAR
Supplement to cite national security as the basis for using other than
full and open competition and request offers from as many potential
sources as practicable under the circumstances. However, since the Army
reasonably determined in both cases that there was only one available,
responsible source, there was no substantive effect from the choice of
authorized competition exception.

bThe Federal Property and Administrative Services Act permitted waiver of
competitive contracting procedures that would impair foreign aid programs.
This authority, previously codified at 40 U.S.C. S: 474 (2000), was
recently recodified and enacted into positive law, 40 U.S.C. S: 113(e), by
Pub. L. No. 107-217, S: 1, 116 Stat. 1062, 1066 (2002).

cThe USAID Inspector General also evaluated USAID's procurement processes.
While the Inspector General found that USAID had generally complied with
applicable federal regulations, the Inspector General identified a number
of issues, including inadequate needs assessments, absence of a clear
methodology for and documentation of market research decisions in
identifying prospective contractors, need to obtain general counsel's
advice on certain procurement matters, and lack of notification and timely
debriefings of unsuccessful offerors. USAID agreed to address the issues
raised by the Inspector General.

    Agencies Did Not Always Satisfy Competition Requirements When Issuing Task
    Orders under Existing Contracts

We found a lesser degree of compliance when agencies issued task orders
under existing contracts. When issuing a task order under an existing
contract, the competition law does not require competition beyond that
obtained for the initial contract award,11 provided the task order does
not increase the scope of the work, period of performance, or maximum
value of the contract under which the order is issued.12 The scope,
period, or maximum value may be increased only by modification of the
contract,13 and competitive procedures are required to be used for any
such increase unless an authorized exception applies.14

Determining whether work is within the scope of an existing task order
contract is primarily an issue of contract interpretation and judgment by
the contracting officer (in contrast to the contract's maximum value and
performance period, which are explicitly stated in the contract). Other
than the basic requirement that task orders be within scope, there are no
statutory or regulatory criteria or procedures that guide a contracting
officer in making this determination. Instead, guiding principles for
scope of contract determinations are established in case law, such as bid
protest decisions of the Comptroller General.15 These decisions establish
that the key factor is whether there is a material difference between the
new work and the contract that was originally awarded-in other words,
whether

11 10 U.S.C. S: 2304c(a)(2) and 41 U.S.C. S: 253j(a)(2) (2000). If more
than one contractor was awarded a contract, however, then all the
contractors are required to be provided a fair opportunity to be
considered for the task order. 10 U.S.C. S: 2304c(b) and 41 U.S.C. S:
253j(b).

12 10 U.S.C. S: 2304a(e) and 41 U.S.C. S: 253h(e) (2000).

13 10 U.S.C. S: 2304a(e) and 41 U.S.C. S: 253h(e).

14 This requirement for competition for out-of-scope modifications is
explicitly stated for task order contracts for advisory and assistance
services. 10 U.S.C. S: 2304b(f) and 41 U.S.C. S: 253i(f) (2000). For other
types of task and delivery order contracts, the requirement for
competition for out-of-scope modifications is based on case law such as
bid protest decisions of the Comptroller General of the United States.
See, for example, Makro Janitorial Srvs., Inc., B-282690, Aug. 18, 1999,
99-2 CPD P: 39 at 2; Anteon Corp., B-293523, B-293523.2, Mar. 29, 2004,
2004 CPD P:___at 4-5.

15 Although we used such bid protest decisions in establishing the
criteria for our review of the task orders issued for Iraq's
reconstruction, our review is not related in any way to the statutory bid
protest function of the Comptroller General under CICA.

new work is something potential offerors reasonably could have anticipated
in the competition for the underlying contract.16

Of the 11 task orders we reviewed, 2 were within the scope of the
underlying contract and 7 were, in whole or part, not within scope; we
have reservations concerning whether 2 others were within scope (see table
6).

Table 6: Agency Compliance with Requirements for Issuing Task Orders on
Existing Contracts

Dollars in millions

Obligations as Task order objectives Our assessment of Sept. 2003

Defense Information Systems Agency

Provide internal communications and

No issues identified. Task order is within the scope of the contract.
$22.0

                         management support to the CPA

USAID

Provide monitoring and evaluation

No issues identified. Task order is within the scope of the contract. $5.5

                     services for USAID activities in Iraq

DCC-W

Establish an Iraqi media capability,

Work is outside the scope of the existing contract to provide management

 $82.4 including print, television, and radio consulting services to assist in
improving federal agency operations. Recruit and provide logistical support Work
is outside the scope of the existing contract to provide management $24.8

for subject matter experts to assist the Iraqi Reconstruction and
Development Council

consulting services to assist in improving federal agency operations.

Air Force Contract Augmentation Program

Provide logistical support and Work is, in part, outside the scope of the
contract, which is primarily to

                                     $91.5

equipment to support USAID mission in Baghdad and at other sites in Iraq

provide commanders an ability to augment or relieve base operating support
functions for sustaining deployed operating forces. The Air Force is
issuing new guidance to ensure orders supporting USAID are within the
scope of the contract.

Army Field Support Command

Contingency support planning for

Work was outside the scope of the existing LOGCAP contract, which

                  $1.9 restoring the Iraqi oil infrastructure

provides for planning in support of requirements designated to be met via
LOGCAP support. At the time the order was issued, DOD recognized that
restoration of the oil infrastructure was beyond the scope of the LOGCAP
contract. In our opinion, planning for such efforts was, correspondingly,
also outside the scope. DOD nevertheless determined the planning was
within scope.

16 Floro & Assocs., B-285451.3; B-285451.4, Oct. 25, 2000, 2000 CPD P: 172
at 4; Anteon Corp., supra, at 5.

Dollars in millions

                                 Obligations as

Task order objectives Our assessment

of Sept. 2003

Three task orders issued to repair and Work is outside the scope of the
three existing contracts because it causes $280.0 restore the Iraqi
electrical infrastructure the maximum value ($100 million) of each
underlying contract to be exceeded.

The Army Corps of Engineers used limited competition in awarding the three
underlying contracts. Also, the subsequent task orders were not competed
among the three contractors as required; rather, the work was assigned to
each contractor based on its existing capabilities within geographic
location, among other factors. We found that the contracting officer had
not prepared a justification for these noncompetitive task orders. After
we raised this issue with agency officials, the contracting officer
prepared the required documentation in April 2004.

Although CICA and the FAR permit after-the-fact Justification and Approval
of noncompetitive awards based on unusual and compelling urgency, neither
the justification for limiting competition in the award of the three
underlying contracts, nor the justification for increasing their maximum
value, has been approved by the Army-almost a year after award and more
than 6 months after the justification was submitted by the Army Corps of
Engineers.

Army Field Support Command

CPA logistical support Work may be outside of the scope of the existing
LOGCAP contract, which

                                     $204.1

provides for civilian contractor augmentation of combat service support
and combat support for Army and other entities in wartime and other
specified operations.

New Iraqi Army training logistical Work may be outside of the scope of the
                     existing LOGCAP contract, which $30.0

support provides for civilian contractor augmentation of combat service
support and combat support for Army and other entities in wartime and
other specified operations.

Source: GAO's analysis of agency data.

The seven instances in which agencies issued task orders for work that
was, in whole or in part, outside the scope of an existing contract are
described on the following pages. In each of these cases, the out-of-scope
work should have been awarded using competitive procedures or supported
with a Justification and Approval for other than full and open competition
in accordance with legal requirements. Given the urgent need for
reconstruction efforts, the authorities under the competition laws for
using noncompetitive procedures provided agencies ample latitude to
justify other than full and open competition to satisfy their needs.

o  	DCC-W17 improperly used a GSA schedule contract to issue two task
orders with a combined value of over $107 million for work that was
outside the scope of the schedule contract.

Under GSA's federal supply schedule program, GSA negotiates contracts with
multiple firms for various commercial goods and services and makes those
contracts available for other agencies to use. In March 2003, DCC-W placed
two orders with Science Applications International Corporation (SAIC)
under SAIC's schedule contract. One order involved development of a news
media capability-including radio and television programming and
broadcasting-in Iraq. The other required SAIC to recruit people identified
by DOD as subject matter experts, enter into subcontracts with them, and
provide them with travel and logistical support within the United States
and Iraq. The schedule contract, however, was for management,
organizational, and business improvement services for federal agencies. In
our view, the statements of work for both task orders were outside the
scope of the schedule contract, which typically would encompass work such
as consultation, facilitation, and survey services. The period of
performance for the media services task order has expired, and the task
order for subject matter experts was extended through April 30, 2004.18

o  	Over $91 million was obligated under an Air Force Contract
Augmentation Program contract for delivery of commodities to USAID for
reconstruction activities and logistical support for USAID's mission in
Iraq. The contract is intended primarily to provide base-level logistical
and operational support for Air Force deployments. Under an

17 DCC-W, a division within the office of the Administrative Assistant to
the Secretary of the Army, provides administrative support, including
contracting support, to DOD components located in the National Capital
Region.

18 In March 2004, the DOD Inspector General reported that a review of 24
contract actions awarded by DCC-W on behalf of the CPA (including the two
task orders we reviewed) revealed that DCC-W circumvented contracting
rules-including improperly using schedule contracts and improperly
contracting for personal services. The Inspector General attributed this
condition to the need to quickly award contracts and to DOD's failure to
plan for the acquisition support the CPA needed to perform its mission.
DCC-W officials reported that they have and will continue to provide
additional guidance and training on the use of the schedules program to
its personnel. See Acquisition: Contracts Awarded for the Coalition
Provisional Authority by the Defense Contracting Command-Washington.

(Report. No. D-2004-057, Office of the Inspector General, Department of
Defense. Arlington, Va., Mar. 18, 2004).

interagency agreement,19 the Air Force used the contract to provide USAID
a variety of support tasks related to storage, inventory control and
management, and other logistical and operational support. Some of these
funds, however, had been obligated for services such as building materials
for Iraqi schools and planning for fixing electrical power generation for
Baghdad water treatment plants. Because these types of services-though
related to USAID's foreign assistance mission-are not related to support
for a deployment, they appear to be outside the scope of the contract.
When we brought this issue to the attention of Air Force officials, they
agreed that some of the work was outside the scope of the contract, and
they are issuing guidance to ensure that logistical support for USAID does
not go beyond the scope of the

contract.

o  	The Army Field Support Command issued a $1.9 million task order for
contingency planning for the Iraqi oil infrastructure mission under its
LOGCAP contract with Kellogg Brown & Root. The task order was not within
the scope of that contract.20 This task order, issued in November 2002,
required the contractor to develop a plan to repair and restore Iraq's oil
infrastructure should Iraqi forces damage or destroy it. Because the
contractor was knowledgeable about the U.S. Central Command's planning for
conducting military operations, DOD officials determined the contractor
was uniquely positioned to develop the contingency support plan. DOD
determined that planning for the missions was within the scope of the
LOGCAP contract, but it also determined that the actual execution of the
Iraq oil mission, including prepositioning of fire-fighting equipment and
teams, was beyond its scope.

19 The interagency agreement is based on authorization contained in the
Foreign Assistance Act. Section 491(b) of the Foreign Assistance Act
authorizes the President, "notwithstanding any other provision of this or
any other Act," to furnish foreign assistance "on such terms and
conditions as he may determine, for international disaster relief and
rehabilitation," while section 632(b) of the Act authorizes, for carrying
out foreign assistance functions, the utilization of the services
(including defense services) and facilities of, or procurement of
commodities and defense articles from, any U.S. agency.

20 The LOGCAP contract, which was competitively awarded in 2001, requires
the contractor to provide planning and a broad range of logistics services
to the Army and other entities in wartime and other operations. The Army
has used LOGCAP to support both military operations and reconstruction
efforts in Iraq. We are reviewing DOD's use of the LOGCAP contract to
support military operations under a separate review that will be completed
later this year.

We agree with the DOD conclusion that repairing and continuing the
operations of the Iraqi oil infrastructure are not within the scope of the
contract. But unlike DOD, we conclude that preparation of the contingency
support plan for this mission was beyond the scope of the contract. We
read the LOGCAP statement of work as contemplating planning efforts for
missions designated for possible contractor execution under the contract.
Consequently, the Army Field Support Command should have prepared a
written justification to authorize the work without competition. The
resulting contingency plan was used as justification for subsequently
awarding a sole-source contract to Kellogg Brown & Root for restoring the
oil infrastructure, for which nearly $1.4 billion was obligated during
fiscal year 2003. As noted in table 5, we found that the award of this
contract generally complied with applicable legal standards.

o  	In March 2003, the Army Corps of Engineers conducted a limited
competition resulting in multiple-award contracts with three firms-
Washington International, Inc., Fluor Intercontinental, Inc., and Perini
Corporation-for construction-related activities in the Central Command's
area of responsibility. These contracts had a maximum value of $100
million each. In the latter part of August 2003, as efforts to restore
electricity throughout Iraq lagged and amid concerns that the electrical
shortages presented social unrest and security threats to the CPA and the
military forces, the Central Command tasked the Army Corps of Engineers
with taking steps to rebuild the electrical infrastructure as quickly as
possible. In response, the Army Corps of Engineers issued task orders
under each of these contracts causing them to exceed their maximum
value.21 Consequently, the orders are outside the scope of the underlying
contracts.

The Army Corps of Engineers prepared a justification for award of the
underlying contracts in August 2003 and a subsequent justification in
September 2003 to increase the maximum value of each contract from

21 As of September 30, 2003, two of the three multiple-award contracts had
exceeded their maximum value. In October 2003, the third contract also
exceeded its maximum value.

$100 million to $500 million. Neither justification had been approved as
of March 31, 2004. 22

Finally, we note that section 803 of the National Defense Authorization
Act for Fiscal Year 2002 (Pub. L. No. 107-107) requires that an order for
services in excess of $100,000 issued under a multiple-award contact by or
on behalf of a DOD agency be made on a competitive basis, unless a
contracting officer justifies an exception in writing. The Army Corps of
Engineers did not compete these task orders among the three multipleaward
contractors. Rather, the agency and the contractors collectively decided
to allocate the electrical infrastructure work based on geographical
sectors and the capabilities of the contractors in the theater. We found
that the contracting officer had not prepared a justification for these
noncompetitive task orders. After we raised this issue with agency
officials, the contracting officer prepared the required documentation in
April 2004.

As described in table 6, we also have reservations about whether work
ordered under two other Army task orders was within the scope of an
underlying contract for combat support. These task orders were issued by
the Army Field Support Command for the CPA's logistical support and for a
base camp used in training the New Iraqi Army. In these, as in the other
cases, the competition laws provided agencies ample latitude to justify
using other than full and open competition to satisfy their needs.

The need to award contracts and begin reconstruction efforts quickly-the
factors that led agencies to use other than full and open competition-also
contributed to initial contract administration challenges. Faced with
uncertainty as to the full extent of the rebuilding effort, agencies often
authorized contractors to begin work before key terms and conditions,
including the statement of work to be performed and the projected cost for
that work, were fully defined. Until agreement is reached, contract
incentives to control costs are likely to be less effective. Staffing
constraints and security concerns posed further challenges. Agencies have

22 Under 10 U.S.C. S: 2304(f)(2), a Justification and Approval for unusual
and compelling urgency can be made after award. It has been a year since
these contracts were awarded using limited competition and more than 6
months since the Corps requested approval from the Army's senior
procurement executive for its limited competitive awards. The Army FAR
Supplement requires the submission of such a post-award justification for
approval within 30 working days of award.

  Effective Contract Administration Remains a Key Challenge as Contracting
  Activity Increases

made progress in addressing these issues, but there remains a backlog of
contracts for which final agreement has not yet been reached. The CPA has
created a new office to better manage and coordinate reconstruction
efforts to be conducted over the next year.

    Reaching Agreement on Key Contract Terms and Conditions

To meet urgent operational needs, as is the case in Iraq's reconstruction,
agencies are permitted to authorize contractors to begin work before
contracts or task orders have been definitized-that is, before key terms
and conditions, including price, have been defined and agreed upon. While
this approach allows agencies to initiate needed work quickly, it also can
result in potentially significant additional costs and risks being imposed
on the government. Agencies generally are required to definitize
contractual actions within 180 days.23

For many of the contracts we reviewed, agencies authorized the contractors
to begin work before terms were fully defined, and later reached final
agreement on the scope and price of the work. There remain six DOD
contracts or tasks orders, however, that had yet to be definitized as of
March 2004, two involved work that had been completed more than a year
earlier (see table 7). In total, nearly $1.8 billion had been obligated on
these contracts or task orders as of September 30, 2003. These contracts
or task orders had been awarded or issued by either the Army Corps of
Engineers or the Army Field Support Command, and they include efforts to
restore Iraq's oil and electrical infrastructures and to provide
logistical support to the CPA.

23 DOD may waive this requirement if the head of a DOD agency determines
that the waiver is necessary for a contract to support a contingency
operation or a humanitarian or peacekeeping operation. 10 U.S.C. S:
2326(b)(4) (2000). No such waivers have been issued for the contracts we
reviewed. The DOD requirements for undefinitized contract actions are in
the Defense FAR Supplement at subpart 217.74. General requirements for all
agencies are listed in FAR P:16.603.

Table 7: Undefinitized Contract Actions as of March 2004

Dollars in millions

                                                  Work status as       Amount 
                                                        of       obligated as 
        Agency        Purpose of contract/ task   March 31, 2004 of Sept. 30, 
                                order                                    2003 
    Army Corps of        aRestore Iraq's oil         Ongoing         $1,390.0 
      Engineers            infrastructure                        
      Army Field     Provide support to the CPA      Ongoing            204.1 
Support Command                                               
    Army Corps of     Restore Iraq's electrical      Ongoing            111.0 
      Engineers            infrastructure                        
      Army Field    Prepositioning of                            
Support Command  fire-fighting equipment         Completed    
                            and personnel           March 2003   
      Army Field    Logistical support for                       
Support Command  personnel training                           
                       for the New Iraqi Army                    

Ongoing

    Army Field Support Command Contingency plan for repairing and Completed
              maintaining Iraq's oil infrastructure February 2003

                                 Total $1,774.5

Source: GAO's analysis of agency data.

aThe Army Corps of Engineers awarded a single, sole-source
indefinite-delivery/indefinite-quantity contract in March 2003. Under this
contract, the Army Corps of Engineers had issued a total of 10 task orders
as of March 30, 2004.

Agency officials attribute much of the delay in reaching agreement to
continued growth in reconstruction efforts, which in turn have required
numerous revisions to contract statements of work. The continued growth in
requirements has resulted in an increase in both contractor costs and
administrative workload on both contractor and agency procurement
personnel. For example, the Army Corps of Engineers' contract to restore
Iraq's oil infrastructure had individual task orders placed in March and
May 2003 that were supposed to be definitized within 180 days.24
Similarly, the Army Field Support Command has four task orders that have
to be definitized. For example, the Army Field Support Command's task
order to support the CPA was originally issued in March 2003, at an
estimated cost of $858,503. As of September 30, the Army had obligated
$204.1 million, and the statement of work had been modified a total of
nine times. With each change, the contractor had to revise its cost and
technical proposals, which also increased the workload for agency
procurement personnel.

24 This contract also includes a requirement to import fuel and other
petroleum products into Iraq by the contractor, Kellogg Brown & Root. This
task, which accounts for nearly 40 percent of the amount obligated on the
contract as of September 2003, is the subject of ongoing reviews by the
DOD Inspector General and DCAA. Because of these ongoing investigations,
we did not evaluate the Army Corps of Engineers' oversight of this task
order as part of this review.

The Army Field Support Command's revised schedule now calls for
definitizing the task orders between June and October 2004.

Some of the delays reflect concerns over the adequacy of the contractors'
proposals. For example, on the task order awarded to restore Iraq's
electrical infrastructure, DCAA found a significant amount of proposed
costs for which the contractor had not provided adequate support.
Consequently, DCAA believed that the proposal was inadequate for the
purposes of negotiating a fair and reasonable price. As of March 2004,
negotiations between the contractor and the Army Corps of Engineers were
still ongoing. To reduce risks, the Army Corps of Engineers has proposed
paying the contractor only 85 percent of incurred costs until the
contractor has adequately fulfilled its contract closeout responsibilities
and acceptable business systems were in place.

The lack of timely contract definitization potentially can have a
significant impact on total contract costs and related risks.
Specifically, the major reconstruction efforts have used
cost-reimbursement type contracts under which the government has agreed,
subject to cost ceilings, to reimburse the contractor for all reasonable
and allowable costs incurred in performing the work. In two of the largest
contract actions-the contract to repair and maintain Iraq's oil
infrastructure and the task order to support the CPA operations-the
agencies have included an award fee provision under which the contractor
can earn additional profit for meeting set targets in specified areas,
such as cost control. As long as work continues to be performed under an
undefinitized contract, however, the award fee incentive is likely to be
less effective as a cost control tool since there is less work remaining
to be accomplished and therefore less costs to be controlled by the
contractor.25 Given the high cost involved, particularly for the Iraq oil
mission (over $2.5 billion), any reduction in cost control incentives
potentially involves a significant contract cost risk.

25 Other cost control mechanisms, such as the use of on-site government
oversight personnel and auditors, as well as contractor cost accounting
systems, could mitigate some of the cost risks to the government where
definitization has been delayed. In addition, 10 U.S.C. S: 2326(e)
requires DOD to ensure that the profit allowed on an undefinitized
contract for which the final price is negotiated after a substantial
portion of the work is completed reflects the possible reduced cost risk
to the contractor.

    Providing Adequate Staff to Oversee Contracts

The lack of adequate staffing presented challenges to several agencies
involved in reconstruction efforts and, at times, resulted in inadequate
oversight of the contractors' activities. While agencies have taken
actions, some of these early contract administration issues have yet to be
fully resolved.

When the CPA's predecessor organization-Office of Reconstruction and
Humanitarian Assistance---was established in mid-January 2003, it lacked
an in-house contracting capability. It was not until February 27, 2003,
that the Defense Contract Management Agency (DCMA) was asked to provide
contracting support, including providing acquisition planning assistance
and awarding and administering contracts. DOD officials noted that this
tasking was unusual for DCMA, as it is typically responsible for
administering, rather than awarding, contracts.

According to DOD officials, they found that the Office of Reconstruction
and Humanitarian Assistance did not have an official responsible for
authorizing contract actions and supervising contracting officers and
others performing procurement-related duties. Further, DOD had authorized
positions for only two contracting officers, who had yet to arrive. In
addition, DCMA officials reported that the lack of an organizational
structure led to contractors providing draft statements of work and cost
estimates to the contracting officers so that contracts could be awarded
more quickly. Normally, it is the government's responsibility to provide
statements of work and develop independent cost estimates.

We found that there were not always sufficient in-country personnel to
administer the contracts or task orders when they were initially awarded
or issued. For example, for the federal supply schedule order issued in
March 2003 by DCC-W to establish an Iraqi media capability, contractor
personnel purchased property that was not part of the task order,
including purchases that may not have been necessary or appropriate.
According to DOD officials, contractor personnel purchased about $7
million in equipment and services not authorized under the contract,
including a H-2 Hummer and a pickup truck, and then chartered a flight to
have them delivered to Iraq. According to DCMA officials, these actions
were primarily due to inadequate government property management to control
or monitor the contractor's purchases. DCMA officials decided in May 2003
that it was in the best interests of the government to modify the approved
equipment list, and include the materials purchased by the contractor.

The lack of in-country procurement staff proved problematic in another
task order issued by the DCC-W to help recruit and support subject matter
experts to assist the CPA and Iraqi ministries.26 According to DCC-W and
DCMA officials, there was initially neither contractor staff nor
government officials to monitor the subject matter experts once they
arrived in Iraq. DCMA officials indicated that some experts failed to
report to duty or perform their responsibilities as expected or were no
longer performing work under the task order.

Staffing concerns affected other agencies as well. For example, USAID
recognized early that its resources were insufficient to administer and
oversee the contracts it expected to award. Consequently, USAID arranged
for the Army Corps of Engineers to provide oversight on its $1.0 billion
infrastructure contract, arranged to have DCAA audit contractors, and made
plans to augment its mission in Iraq. As of January 2004, however, a
senior USAID procurement official stated that its Iraq mission remained
understaffed to provide adequate contract oversight in Iraq.27 USAID
stated it has four full-time procurement staff that will be assigned to
work in Iraq for 3 years. According to the senior official, this long-term
commitment is essential to establishing the institutional knowledge needed
to monitor and administer the contracts effectively. However, USAID
indicated that given the workload, providing an appropriate degree of
oversight would require at least seven additional personnel. Consequently,
USAID found it necessary to augment the mission staff with personnel on
temporary assignment from other USAID missions, who will serve between 1
and 3 months.

Similarly, State Department officials noted that the Bureau of
International Narcotics and Law Enforcement Affairs-the bureau responsible
for monitoring State's law enforcement support contract-is understaffed.
For example, the department official responsible for contract oversight
had multiple, time-consuming roles. This official currently serves as both
the

26 The DOD Inspector General's March 2004 report found that, overall,
government personnel did not provide adequate surveillance on 13 of the 24
contracts or task orders awarded or issued on behalf of the CPA by DCC-W.

27 We have previously reported that USAID's lack of personnel support has
affected the agency's abilities to deliver reconstruction assistance. See
Major Management Challenges and Program Risks: U.S. Agency for
International Development. GAO-03-111 (Washington, D.C.: Jan. 1, 2003) and
Foreign Assistance: Disaster Recovery Program Addressed Intended Purposes,
but USAID Needs Greater Flexibility to Improve Its Response Capability,
GAO-02-787 (Washington, D.C.: July 24, 2002).

program manager and the contracting officer's representative for the law
enforcement support contract. As such, the official approves the
contractor's monthly vouchers along with carrying out other detailed
procurement tasks. The same official also had responsibilities for the
department's efforts to recompete a $1.3 billion effort to provide
worldwide law enforcement support and for law enforcement support efforts
in Liberia and Haiti. To address the workload issue, the bureau has
assigned two additional staff to assist in overseeing contract activities
in Iraq and is exploring options for reorganizing the bureau to use
resources more efficiently.

Providing adequate oversight on reconstruction efforts is challenging
given the uncertain security environment and harsh working conditions.
During site visits to Iraq in October 2003, we observed the considerable
degree to which these factors were affecting reconstruction efforts. For
example, travel outside secure compounds occurred only in convoys of
armored vehicles with armed security forces. Flak jackets and helmets were
required to be worn or, at a minimum, carried. Communications were
generally difficult and unreliable. In addition, the living and working
environment afforded individuals little privacy or time to rest. We
observed that personnel generally worked 12 to 15 hour days and often
shared cramped living and working quarters. In Al Hillah, for example,
five USAID personnel shared two small offices with their security team.

    Revised Approach Planned for Fiscal Year 2004 Reconstruction Efforts

To better coordinate and manage the $18.4 billion in reconstruction
funding provided for fiscal year 2004, the CPA established a program
management office that is responsible for infrastructure-related programs.
The office, which includes representatives from USAID and the Army Corps
of Engineers, is responsible for coordinating the efforts of the CPA, the
Iraqi ministries, and other coalition partners.

The office's acquisition strategy reflects a plan to award

o  	1 program management support contract to support the program
management office and to oversee reconstruction efforts of specific
sectors-electricity, oil, public works and water, security and justice,
transportation and communications, and buildings and health;

o  	6 program management contracts to coordinate reconstruction efforts
specific to each sector; and

o  15 to 20 design-build contracts to execute specific tasks.

Conclusions

In March 2004, various DOD components, on behalf of the CPA, awarded 17
contracts-the program management support contract, the 6 sectorspecific
program management and the 10 design-build contracts. These contracts were
awarded pursuant to a DOD decision to limit competition to firms from the
United States, Iraq, coalition partners, and force contributing nations.28

In addition to these contracts, other agencies will continue to award and
manage contracts for areas within their assigned area of responsibility.
For example, in January 2004, USAID competitively awarded a $1.8 billion
contract to enable further reconstruction efforts, while the Army Corps of
Engineers competitively awarded two contracts with a combined value of
$2.0 billion to further repair and rehabilitate Iraq's oil infrastructure.
USAID announced its intent to solicit bids on at least seven new
contracts. One of these contracts is intended to provide USAID with an
enhanced capability to carry out data collection, performance monitoring,
and evaluation of USAID's ongoing work in Iraq.

The United States, along with its coalition partners and various
international organizations and donors, has undertaken an enormously
complex, costly, and challenging effort to rebuild Iraq. At the early
stages of these efforts, agency procurement officials were confronted with
little advance warning on which to plan and execute competitive
procurement actions, an urgent need to begin reconstruction efforts
quickly, and uncertainty as to the magnitude of work required. Their
actions, in large part, reflected proper use of the flexibilities provided
under procurement laws and regulations to award new contracts using other
than full and open competitive procedures.

With respect to several task orders issued under existing contracts,
however, some agency officials overstepped the latitude provided by
competition laws by ordering work outside the scope of the underlying
contracts. This work should have been separately competed, or justified

28 On December 5, 2003, the Deputy Secretary of Defense approved a
determination and findings under the public interest exception to the
competition requirements that eligibility for 26 contracts to be awarded
by DOD on behalf of the CPA would be limited to firms from the United
States, Iraq, coalition partners, and force contributing nations. The
Secretary of Defense is authorized to use this exception only on a
non-delegable basis. 10 U.S.C. 2304(c)(7), (d)(2); FAR 6.302-7(c)(1).
Further, the Secretary's determination and finding to use the exception
cannot be made on a class basis. FAR 6.302-7(c)(4).

and approved at the required official level for performance by the
existing contractor. Given the war in Iraq, the urgent need for
reconstruction efforts, and the latitude allowed by the competition law,
these task orders reasonably could have been supported by justifications
for other than full and open competition. In some cases, such as the task
order for the Iraqi media capability, the work has been completed so there
is no practical remedy available. In several other cases, however, the
opportunity exists to bring task orders into compliance with requirements,
as well as to ensure that future task orders are issued properly.

Providing effective contract administration and oversight remains
challenging, in part due to the continued expansion of reconstruction
efforts, the staffing constraints, and the need to operate in an unsecure
and threatening environment. Indeed, the magnitude of work that remains
undefinitized is symptomatic of changing requirements and the lack of
sufficient agency and contractor resources. Nevertheless, timely
definitization of outstanding contracts and task orders is needed to
promote effective cost control. More broadly, these challenges suggest the
need to assess the lessons learned from the contract award and
administration processes in Iraq to identify ways to improve similar
activities in the future.

It is too early to gauge whether the CPA approach to improving its ability
to monitor and coordinate reconstruction efforts through the use of a new
program management office and the planned award of various types of
construction and management support contracts will be effective. However,
recent congressional action requiring the CPA Administrator and heads of
federal agencies to report on contracts awarded using other than full and
open competition will provide more transparency and accountability in the
award of new Iraq reconstruction contracts.

To ensure that task orders issued to rebuild Iraq comply with applicable
requirements, and to maximize incentives for the contractors to ensure
effective cost control, we recommend that the Secretary of the Army take
the following four actions:

o  	Review the out-of-scope task orders for Iraqi media and subject matter
experts issued by the Defense Contracting Command-Washington and take any
necessary remedial actions.

o  	Ensure that any future task orders under the LOGCAP contract for Iraq
reconstruction activities are within the scope of that contract.

  Recommendations for Executive Action

  Agency Comments
  and Our Evaluation

o  	Address and resolve all outstanding issues in connection with the
pending Justifications and Approvals for the contracts and related task
orders used by the Army Corps of Engineers to restore Iraq's electricity
infrastructure.

o  	Direct the Commanding General, Army Field Support Command, and the
Commanding General and Chief of Engineers, U.S. Army Corps of Engineers,
to definitize outstanding contracts and task orders as soon as possible.

To improve the delivery of acquisition support in future operations, we
recommend that the Secretary of Defense, in consultation with the
Administrator, U.S. Agency for International Development, evaluate the
lessons learned in Iraq and develop a strategy for assuring that adequate
acquisition staff and other resources can be made available in a timely
manner.

DOD and the Department of State provided written comments on a draft of
this report. Their comments are discussed below and are reprinted in
appendixes III and IV. USAID concurred with the draft report as written.
USAID's response is reprinted in appendix V. GSA also provided comments
regarding its efforts to ensure that agencies properly use the federal
supply schedule program. GSA's comments are reprinted in appendix VI.

DOD generally concurred with our recommendations. DOD noted that it is in
the process of taking appropriate remedial actions on the task orders
issued by the Defense Contracting Command-Washington, and is resolving
outstanding issues related to the task orders issued by the Army Corps of
Engineers to restore Iraq's electrical infrastructure. As part of its
efforts to definitize contracts, DOD noted that the Army Field Support
Command has, among other things, established firm dates for the submission
of contractor proposals and to complete negotiations. DOD also noted that
progress on these efforts is being reviewed by senior Command officials on
at least a weekly basis. DOD did not indicate, however, what steps the
Army Corps of Engineers is taking to definitize the actions for which they
are responsible. As we noted in the report, the Army Corps of Engineers
had two undefinitized contracts on which they had obligated more than $1.5
billion as of March 2004. Lastly, DOD reported that efforts are already
underway to conduct a study to evaluate the lessons learned in Iraq and
develop a strategy for assuring that adequate staff and other resources
can be made available.

DOD partially concurred with our recommendation to ensure that future task
orders issued on the LOGCAP contract are within the scope of that
contract. DOD noted that the LOGCAP contracting officer reviews each
proposed scope of work and determines whether the action is within the
scope of the contract, and obtains legal advice as needed. DOD also noted
that the recommendation appeared to be based on only one action, namely
the task order for contingency planning for the Iraq oil infrastructure
mission. We also expressed concern, however, about whether the task orders
to provide logistical support for the CPA and to the New Iraqi Army
training program were within the scope of the underlying LOGCAP contract.
Consequently, the steps taken by the contracting officer-while necessary
and appropriate-may not be sufficient to ensure that work outside the
scope of the LOGCAP contract is either competed or properly justified.

DOD provided two comments on our findings. First, DOD took exception to
our observations on the manner by which the Deputy Secretary limited
competition for contracts awarded in fiscal year 2004 to firms from the
United States, Iraq, coalition partners and force contributing nations.
DOD noted that the Deputy Secretary has broad authority from the Secretary
to act on his behalf, which we do not dispute. We note, however, that the
plain language of the law provides that authority to approve public
interest exceptions may not be delegated.29 While the Deputy Secretary may
have broad authority to act on the Secretary's behalf, he was not
authorized to do so in this case. Second, regarding our conclusion that
the LOGCAP contingency planning order was not within the scope of the
contract, DOD commented that our conclusion should be couched in terms of
opinion. While legal analysis by its nature reflects opinion, we remain
convinced of our conclusion and emphasize the need for more analytical
rigor in the review of LOGCAP task orders.

The Department of State disagreed with our assessment that the authority
it cited to limit competition may not be a recognized exception to
competition requirements. The department believed that the authority it
cited-section 481 of the Foreign Assistance Act of 1961, as amended- was
used appropriately. The specific section of the Act cited by the
department-section 481(a)(4)-speaks to the authority of the President to
furnish assistance to a country or international organization, but does
not provide relief from statutory competition requirements. In its

29 10 U.S. C. 2304(d)(2).

comments and in earlier discussions, State did not provide us with a
persuasive basis to conclude that the authority is a recognized exception
to the competition requirements. However, we did not need to resolve the
issue because State appears to have maximized competition under the
circumstances, and we believe State could have used other recognized
exceptions, such as 40 U.S.C. S:113(e), to meets its requirements. This
authority permits the waiver of competitive contracting procedures when
use of those procedures would impair foreign aid programs.

GSA recognized that it has a responsibility to ensure that agency
personnel are adequately trained in the proper use of the federal supply
schedule program. GSA noted that it has been working with DOD and other
federal agencies to ensure that their contracting officers are fully
trained on the proper use of the program and identified some of its
ongoing and planned efforts toward this objective.

We are sending copies of this report to the Director, Office of Management
and Budget; the Secretaries of Defense and State; the Administrator, U.S.
Agency for International Development; the Commanding General and
Chief of Engineers, U.S. Army Corps of Engineers; the Director, Defense
Contract Management Agency; and the Director, Defense Contract Audit
Agency. We will make copies available to others on request. In addition,
this report will be available at no charge on GAO's Web site at
http://www.gao.gov.

The major contributors to this report are listed in appendix VII. If you
have
any questions about this report, please contact me on (202) 512-4841 or
Timothy DiNapoli on (202) 512-3665.

William T. Woods
Director, Acquisition and Sourcing Management

List of Committees

The Honorable Susan M. Collins
Chairman
The Honorable Joseph I. Lieberman
Ranking Minority Member
Committee on Governmental Affairs
United States Senate

The Honorable Tom Davis
Chairman
The Honorable Henry A. Waxman
Ranking Minority Member
Committee on Government Reform
House of Representatives

The Honorable John W. Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Duncan Hunter
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

The Honorable Ted Stevens
Chairman
The Honorable Robert C. Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate

The Honorable C. W. Bill Young
Chairman
The Honorable David R. Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives

The Honorable Richard G. Lugar
Chairman
The Honorable Joseph R. Biden
Ranking Minority Member
Committee on Foreign Relations
United States Senate

The Honorable Henry J. Hyde
Chairman
The Honorable Tom Lantos
Ranking Minority Member
Committee on International Relations
House of Representatives

                  Appendix I: List of Organizations Contacted

During the course of the review, we contacted the following organizations:

o  Office of Management and Budget, Washington, D.C.;

o  	Office of Reconstruction and Humanitarian Assistance, Washington,
D.C.;

o  Coalition Provisional Authority, Washington, D.C., and Baghdad, Iraq;

o  Department of Defense, the Comptroller, Pentagon, Washington, D.C.

o  Department of the Army, Pentagon, Washington, D.C;

o  Washington Headquarters Services, Pentagon, Washington, D.C.;

o  	Defense Contracting Command-Washington, Pentagon, Washington, D.C.;

o  	Southern Region Contracting Center, Army Contracting Agency, Fort
McPherson, Georgia;

o  	Northern Region Contracting Center, Army Contracting Agency, Fort
Eustis, Virginia;

o  Army Field Support Command, Rock Island, Illinois;

o  	Headquarters, U.S. Army Corps of Engineers, Washington, D.C.; U.S.
Army Engineer Division, Southwestern, Dallas, Texas; U.S. Army Engineer
District, Fort Worth, Fort Worth, Texas; Engineering and Support Center,
Huntsville, Alabama; Transatlantic Program Center, Winchester, Virginia;
U.S. Army Engineer District, Philadelphia, Philadelphia, Pennsylvania; and
Vicksburg Consolidated Contracting Office, Alexandria, Virginia;

o  	Defense Information Systems Agency, Arlington, Virginia, and Scott Air
Force Base, Illinois;

o  Department of Defense, Inspector General, Arlington, Virginia;

o  Defense Contract Management Agency, Alexandria, Virginia;

o  Defense Contract Audit Agency, Fort Belvoir, Virginia;

o  U.S. Agency for International Development, Washington, D.C.;

o  U.S. Department of State, Washington, D.C.; and

o  U.S. Department of Justice, Washington, D.C.

Appendix II: Iraq Reconstruction Contracts/Task Orders and Obligations as of
September 30, 2003

Contracting agency/ Procurement Amount Contractor Purpose method obligated

Department of Defense

Department of the Army

                          U.S. Army Corps of Engineers

Brown & Root Services, a   Restore Iraqi oil        New     $1,390,095,044 
         division of                                contract   
    Kellogg Brown & Root,                                      
             Inc.                                              
Washington International     Restore Iraqi      Task order     110,960,000 
             Inc.                electricity                   
Fluor Intercontinental,      Restore Iraqi      Task order     102,460,000 
             Inc.                electricity                   
      Perini Corporation        Restore Iraqi      Task order      66,589,900 
                                 electricity                   
       Raytheon Systems      Interim Transitional      New                    
         Development         Civil Administration   contract       19,679,939

Company

                                  Headquarters

IAP Worldwide Services Restore Iraqi       Task order           11,875,000 
           electricity-25 diesel                               
                generators                                     
USA Environmental Explosive ordnance       Task order            6,800,000 
             removal services                                  
    Michael Baker Jr., Inc. Coalitional       Task order            4,416,209 
        Provisional Authority (CPA)                            
              program management support                       
Stanley Consultants, Inc. CPA program      Task order            4,414,150 
            management support                                 
     IAP Worldwide Services Emergency    Contract modification      3,500,000 
     generator lease for oil refinery                          
      EOD Technology, Inc. Explosive          Task order            2,308,439 
         ordnance removal services                             
    Total, U.S. Army Corps of Engineers                        $1,723,098,681 

Army Field Support Command

Brown & Root Services, a division of Kellogg Brown & Root, Inc.

 Logistic support for the CPA Task order $204,130,305 Brown & Root Services, a
division of Prepositioning fire-fighting equipment New contract 37,500,000

Kellogg Brown & Root, Inc.

Brown & Root Services, a division of New Iraqi Army logistical training support
                Task order 30,000,000 Kellogg Brown & Root, Inc.

     Brown & Root Services, a division of        Task order         1,883,681 
             Contingency planning                                
          Kellogg Brown & Root, Inc.                             
      Total, Army Field Support Command                          $273,513,986 
           Army Contracting Agency                               
      Vinnell Corporation New Iraqi Army        New Contract      $48,074,442 
                   training                                      
      Blackwater Security Consulting LLC      General Services                
Support services for protective security                        10,994,423
                    detail                  Administration (GSA) 
                                              supply schedule    
        Total, Army Contracting Agency                            $59,068,865 
    Defense Contracting Command-Washington                       
Science Applications International Iraqi                                   
              Free Media Program            GSA supply schedule   $82,350,557
                 Corporation                                     

Appendix II: Iraq Reconstruction Contracts/Task Orders and Obligations as
of September 30, 2003

Contracting agency/ Procurement Amount Contractor Purpose method obligated

Science Applications International Subject matter experts for the Iraqi
GSA supply schedule 24,811,853 Corporation Reconstruction and Development
Council

      S&K Technologies, Inc. Administrative support New contract 8,259,385

 MZM, Inc. Interpreter/linguists support services GSA supply schedule 3,640,896

  Military Professional Resources Inc. Linguists GSA supply schedule 1,901,962

Chugach McKinley Inc. 	Professional skills and competencies support New
contract 1,210,846 requirements program

Dataline, Inc. 	Secure mobile communication and GSA supply schedule
1,028,852 information collaboration capability

    Red River Computer Company Computer equipment and accessories GSA supply
                                schedule 972,593

Military Professional Resources Inc. 	Technical support to the Iraqi Army
GSA supply schedule 706,833 Reconstruction Support Program

Dell Marketing, L.P. Computer hardware and software GSA supply schedule 513,679

Science Applications International Subject matter expert for Energy Group
GSA supply schedule 477,284 Corporation

RONCO Consulting Corporation 	Disarmament, Demobilization and Purchase
order 419,793 Reintegration Program

     Force 3 Computer equipment and accessories GSA supply schedule 274,652

UNISYS Corporation 	Infrastructure study-country plan GSA supply schedule
255,000 development

Science Applications International Subject matter experts for
Democratization GSA supply schedule 235,231 Corporation and Governance

Science Applications International Subject matter expert for military
ministry GSA supply schedule 201,011 Corporation coordinator

Native American Industrial Distributors Protocol officer and materials Purchase
                                 order 195,017

  International Global Systems, Inc. Computer hardware and software GSA supply
                                schedule 157,383

               Page 37 GAO-04-605 Iraq Reconstruction Contracting
Science                                       Giesecke &                      Science                                      Science                                  Intelligent                                                                                                                        Readiness                                            
Applications                                      Devrient                    Applications                                 Applications                                Enterprise                     JSI Inc.                                                      Total,                                   Mgt.                                  
International   GSA            Corporation     America, Inc.  Purchase        International                 Corporation    International                 Corporation    Solutions    GSA              Desktop     Purchase         Total, Defense                 Department                 Department   Support LC Task                          
Subject     supply  87,461 administration      Lease of     order   66,200    Subject                    liaison and       Senior              55,174    Board       Computer    supply  19,835 administration  order   3,376    Contracting      $127,908,901   of the    $2,183,590,433 of the Air      Iraq    order $91,500,000   Total,    
matter expert schedule           advisor          currency                    matter expert   GSA           coordination     executive     GSA                          hardware   schedule             tool                     Command-Washington                  Army                      Force      logistical                   Department  
for the civil                                  authentication                  for United    supply                        assistant to   supply                           and                                                                                                                             support                     of the Air  
                                                  systems                        Nations    schedule 64,028                Oil Advisory  schedule                       software                                                                                                                                                         Force     $91,500,000

Appendix II: Iraq Reconstruction Contracts/Task Orders and Obligations as
of September 30, 2003

Contracting agency/ Procurement Amount Contractor Purpose method obligated Other
                        Defense agencies and components

Defense Contract Management Agency

Global Risk Strategies, Ltd. Personal and     New contract      $7,112,813 
           Facility Security Program                              
Global Risk Strategies, Ltd. Personal and     New contract       3,537,449 
           Facility Security Program                              
Global Risk Strategies, Ltd. Personal and     New contract       2,413,205 
           Facility Security Program                              
     Global Risk Strategies, Ltd. Security       New contract       1,633,032 
           mobilization and start up                              
     Motorola, Inc. Mobile digital radios,                                    
                 equipment and                GSA supply schedule   1,281,701
                  accessories                                     
    Meteoric Tactical Solutions, (PTY) Ltd.      New contract         599,383 
         Security advisors and planners                           
     Blackwater Lodge and Training Private       New contract                 
                security details                                      300,000
                  Center, Inc.                                    
Total, Defense Contract Management Agency                      $16,877,583 

      Defense Information Systems Agency Washington Headquarters Services

       Science Applications International CPA        Task order   $22,081,803 
            integrated communication and                          
     Corporation information technology support                   
                       systems                                    
    SETA Corporation CPA internal communications     Task order     3,165,765 
                         and                                      
                 management support                               
    Artel Telecommunications and LAN support for    New contract    1,254,902 
                Iraqi Forum building                              
          AOS, Inc. Satellite phone channel        Delivery order     866,988 
      Total, Defense Information Systems Agency                   $27,369,458 

               Page 38 GAO-04-605 Iraq Reconstruction Contracting
                                                   20                                    15                                                                                                                                                                                                                                                   17                                    13                                       285                                                                                                                                 
          Airtime     GSA                       satellite    GSA                     satellite    GSA                       80       GSA                        6                                                                                                                                       1 copier   GSA                    satellite    GSA           Outfitter  satellite                              holsters,                            The    90 Global    GSA           Atlas         GSA                                           
Cellhire    for      supply  $960,000 Cellhire telephones   supply  260,480 Cellhire telephones  supply  85,545 Cellhire satellite  supply  71,920          portable                   accessories   Comfort     Hotel     Purchase 47,324 Cellhire 4 satellite                   airtime    Cartridge    and     supply  40,492 Cellhire telephones  supply  35,683 Satellite, telephones Purchase 33,203    Bald           250                  duffel    GPS   Positioning  supply  19,761 Case,  25    supply  17,243                                 
  USA    satellite  schedule            USA        and     schedule           USA       and     schedule          USA     phones   schedule        LandSea  telephone   GSA                            Inn   lodging/meals  order            USA    telephones,    GSA                      Discounters supplies schedule          USA       and     schedule           Inc.       and      order          Industries compasses,   GSA             bags    Store,   Systems   schedule        Inc.  cases schedule            CDW                  GSA    
         telephones                            accessories                            airtime                                                      Systems,  systems   supply                                                                       accessories,  supply                                                                   airtime                               airtime                                   and 6  supply                    Inc                                                           Government, 8 digital   supply  
                                                                                                                                                     Inc       and    schedule 47,750                                                                   and      schedule 46,040                                                                                                                                         rolling schedule 21,884                                                                              Inc     projectors schedule 16,224

Appendix II: Iraq Reconstruction Contracts/Task Orders and Obligations as
of September 30, 2003

               Page 39 GAO-04-605 Iraq Reconstruction Contracting
                                                                                                                                                                       CDW                        CDW                                                                           Cellhire                    Capital                                                                                                   Staples                                            CDW                                                                          WECSYS                    Smith                                              Total,                                                                                                                                                                                                                                                                                                                                                                                              Management                                                 
                                                             Export                      Bald                                               SPARCO                 Government,                Government,                   The                                                    USA                     Shredder                    Capital                    Total                    Hardware                  National                   EHI                  Government,                    The                        MEI                      20                     Office                      Total,                  other                                             U.S. Agency      Bechtel                             Research                                                                    Creative                         Development                      International                        Abt                          Stevedoring                                                                    Systems                                        
Contracting                    Contractor                  Depot 165  Purchase        Industries GSA             Bea Mauer,  GSA              20    GSA              Inc 75    GSA            Inc 188 UPS GSA             Electric  Purchase       Export Depot Purchase        Satellite  GSA            Corporation GSA             Shredder   GSA            Business 8 GSA            Associates  GSA            Advantage GSA            Company GSA              Inc 30    GSA            Complement, Purchase        Research   Purchase       folding GSA             Machines   Purchase        Washington               Defense                  Total,                        for          National     New                    Triangle    New                BearingPoint,   New                         Associates     New               Alternatives,   New                 Resources     New               Associates   New                Services of     New                SkyLink Air     New                      International Task             Development  Task  
  agency/   Procurement Amount  Purpose   method obligated  voltage    order   14,473    200     supply   13,850   Inc. 40   supply   9,920 digital supply   9,215    2-way    supply   7,965    power    supply   7,332 Generator   order   6,974     112       order   6,709  telephone  supply   6,315 3 shredders supply   6,286 Corporation supply   5,517  digital   supply   4,696  14 2-way   supply   4,304 5 copiers supply   4,194 6 flat  supply   3,956  handheld   supply   3,653   Inc. 28    order   3,358 Corporation  order   3,276 tables  supply   3,040 Corporation  order   2,961 Headquarters  $1,831,543  agencies   $46,078,584 Department  $2,321,169,017 International   Inc. Capital contract $1,029,833,259 Institute  contract 104,611,000 Inc. Economic contract            growth   International contract 37,853,000     Inc.      contract 35,523,857     Group     contract 26,621,153    Inc.    contract 20,995,000  America, Inc  contract 14,318,985  and Logistic  contract            Inc.    Monitoring   order 5,500,000 Alternatives, order 
                                                           converters                  mosquito  schedule        footlockers schedule       cameras schedule       radios and  schedule         supply    schedule        Store 3                  transformers                    and     schedule           and     schedule       3 shredders schedule       camcorders schedule       radios and  schedule         with    schedule       screen  schedule          2-way    schedule          steel                    15 cases                  and 30  schedule        3 copiers                   Services                  and                  of Defense                  Development    construction                           Local                           recovery,                                    Inc.                           Transition                         Personnel                         Public                          Seaport                          Support USA)                                  and                          Inc.            
                                                                                       netting                                                                     accessories                   units                   generators                                            accessories                accessories                                                                     accessories                supplies                   TVs                    radios                     trunks                                              chairs                    with                                             components                                                                                              governance                       reform, and                                 Education                        initiative                          support                          health                       administration                        Airport                                 evaluation                     Marshland         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              supplies                                                                                                                                                                                     sustained            39,000,000                                                                                                                                                                                  administration          17,500,000                                       initiative         4,000,000

  Appendix II: Iraq Reconstruction Contracts/Task Orders and Obligations as of
                               September 30, 2003

Contracting agency/ Procurement Amount Contractor Purpose method obligated

 Total, U.S. Agency for International Development $1,335,756,254 Department of
                                     State

DynCorp International, LLC	Law enforcement, judicial, and corrections New
contract $19,640,359 support

          Total, Department of State $19,640,359 Department of Justice

       Science Applications     Police training and Task order     $1,700,000 
          International               support                  
           Corporation                                         
Total, Department of Justice                                    $1,700,000 
           Grand Total                                         $3,678,265,630 

    Source: GAO's analysis of data provided by DOD, the CPA, USAID, and the
                       Departments of State and Justice.

Appendix III: Comments from the Department of Defense

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

Appendix III: Comments from the Department of Defense

                                 See comment 1.

Appendix III: Comments from the Department of Defense

                                 See comment 2.

Appendix III: Comments from the Department of Defense

                                 See comment 3.

                                 See comment 4.

Appendix III: Comments from the Department of Defense

Appendix III: Comments from the Department of Defense

The following are GAO's comments on the Department of Defense's letter
dated May 13, 2004.

                                  GAO Comments

1. The Department of Defense (DOD) incorrectly noted that the
recommendation was based on only one instance. In addition to the example
cited by DOD, we also expressed concern about whether the task orders to
provide logistical support for the Coalition Provisional Authority (CPA)
and to the New Iraqi Army training program were within the scope of the
underlying Logistics Civil Augmentation Program (LOGCAP) contract.

2. The actions being taken by the Army Field Support Command are positive
steps to monitor progress in reaching agreement on the contracts' key
terms and conditions. DOD did not indicate, however, what steps the Army
Corps of Engineers was taking to definitize the actions for which the
Corps is responsible. As noted in table 7, the Army Corps of Engineers had
two undefinitized contracts on which had obligated more than $1.5 billion
as of March 2004.

3. DOD asserts that the determination and finding was not made on a class
basis because it included a common justification for 26 specifically
identified "particular procurements." The Federal Acquisition Regulation
(FAR) provides for determination and findings for individual contract
actions (FAR 1.702) and a class of contract actions (FAR 1.703). Because
the determination and finding encompasses 26 contract actions, we conclude
that it is a class determination and finding. Specifically enumerating
members of the class does not alter the fundamental fact that it is for
more than one action. Class determination and findings are specifically
prohibited by FAR 6.302-7(c)(4). As to the question of authority to
execute the determination and finding, we do not dispute that the Deputy
Secretary has broad authority to act on behalf of the Secretary. We note,
however, that the plain language of the law provides that authority to
approve public interest exceptions may not be delegated1 and conclude that
the Deputy Secretary did not have authority in this instance.

1 With regard to the public interest exception (10 U.S.C. 2304(c)(7)), the
law specifically states that, "the authority of the head of an agency
under subsection (c)(7) may not be delegated." 10 U.S. C. 2304(d)(2).

Appendix III: Comments from the Department of Defense

4. Legal analysis by its nature reflects opinion. In the opinion of GAO,
the Army, and DOD, the actual restoration of Iraqi oil infrastructure was
not within the scope of the LOGCAP contact. We also noted that the LOGCAP
contract anticipates contingency planning for work that can be executed
under the contract. In other words, contingency planning is within the
scope of the contract only if the actual work is also within the scope of
the contract. In this instance, all parties agree that actual restoration
of the oil infrastructure was not within the scope of the contract.
Consequently, we conclude that planning the oil infrastructure restoration
was also not within the scope of the contract.

We would encourage the contracting officer to continue to obtain legal
assistance given the complexity of the LOGCAP contract, but we also
believe that DOD needs to ensure analytical rigor in its review of task
orders.

Appendix IV: Comments from the Department of State

Appendix IV: Comments from the Department of State

Appendix IV: Comments from the Department of State

               Page 51 GAO-04-605 Iraq Reconstruction Contracting

Appendix VI: Comments from the General Services Administration

Appendix VI: Comments from the General Services Administration

Appendix VI: Comments from the General Services Administration

Appendix VII: GAO Contacts and Acknowledgments

GAO Contacts 	William T. Woods, (202) 512-4841 Timothy DiNapoli, (202)
512-3665

Acknowledgments 	Major contributors to this report were Robert Ackley,
Ridge Bowman, Carole Coffey, Muriel Forster, Glenn D. Furbish, Charles D.
Groves, John Heere, Chad Holmes, John Hutton, Ronald Salo, Karen Sloan,
Lillian Slodkowski, Steve Sternlieb, Susan Tindall, Adam Vodraska, and Tim
Wilson.

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