    Military Operations: DOD's Extensive Use of Logistics Support
    Contracts Requires Strengthened Oversight (19-JUL-04,
    GAO-04-854).

    In its contingency operations since the early 1990s, the
    Department of Defense (DOD) has relied extensively on logistics
    support contractors to provide many of the supplies and services
    needed by deployed U.S. forces. As requested, GAO assessed DOD's
    planning in its use of logistics support contracts in contingency
    operations; determined whether DOD has had contract oversight
    processes that are adequate to ensure that quality services were
    provided in an economical and efficient manner; and assessed the
    extent to which DOD provided trained personnel qualified to
    oversee its contractors. GAO focused its efforts on four
    logistics support contracts chosen because of their size and
    chosen to represent more than one military service--the Army's
    Logistics Civil Augmentation Program (LOGCAP) and Balkans Support
    Contract, the Navy's Construction Capabilities Augmentation
    Program, and the Air Force's Contract Augmentation Program.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-04-854
        ACCNO:   A10974
      TITLE:     Military Operations: DOD's Extensive Use of Logistics
    Support Contracts Requires Strengthened Oversight
         DATE:   07/19/2004
      SUBJECT:   Armed forces abroad
    	     Contract administration
    	     Contract costs
    	     Contract oversight
    	     Contract performance
    	     Defense contingency planning
    	     Department of Defense contractors
    	     Human resources training
    	     Human resources utilization
    	     Internal controls
    	     Logistics
    	     Military cost control
    	     Military operations
    	     Military procurement
    	     Service contracts
    	     Air Force Contract Augmentation Program
    	     Army Logistics Civil Augmentation
    	     Program

    	     Balkans Support Contract
    	     Navy Construction Capabilities
    	     Augmentation Program

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    GAO-04-854

    United States Government Accountability Office

    GAO

                           Report to Congressional Requesters

    July 2004

    MILITARY OPERATIONS

        DOD's Extensive Use of Logistics Support Contracts Requires Strengthened
                                       Oversight

    GAO-04-854

    July 2004

    MILITARY OPERATIONS

    DOD's Extensive Use of Logistics Support Contracts Requires Strengthened
    Oversight

    The effectiveness of DOD's planning to use the logistics support contracts
    during contingency operations varies widely between the commands that use
    them and the contracts themselves. In many cases, planning was done
    effectively, in close coordination with the respective contractors. For
    LOGCAP, however, the Army Central Command did not develop plans to use the
    contract to support its military forces in Iraq until May 2003, even
    though Army's LOGCAP guidance calls for early planning and early
    involvement of the contractor. Those plans, moreover, have undergone
    numerous changes since that initial planning. In Kuwait, as well, the Army
    has made frequent changes in its use of LOGCAP.

    DOD's contract oversight processes were generally good, although there is
    room for improvement. DOD customers have not always ensured that
    contractors provide services in an economic and efficient manner, although
    they have a responsibility to do so. We have found that when the customer
    reviews the contractor's work for economy and efficiency, savings are
    realized, as illustrated in the table below. Under the LOGCAP contract,
    months-long delays in definitizing contract task orders have frequently
    undermined the contractor's cost-control incentives, and the absence of an
    Army award fee board to comprehensively evaluate the contractor's
    performance has further limited DOD's oversight.

    Savings Reported through DOD's Review of Contract Activities

    Percent Contract savings Comments

    Balkans Support Contract 10 Savings of $200 million based on current
    contract ceiling price of $2.098 billion LOGCAP (Djibouti) 18 Savings of
    $8.6 million from estimated $48 million in work

    Highlights of GAO-04-854, a report to the Ranking Minority Member, House
    Committee on Government Reform, and the Ranking Minority Member, House
    Committee on Energy and Commerce

    In its contingency operations since the early 1990s, the Department of
    Defense (DOD) has relied extensively on logistics support contractors to
    provide many of the supplies and services needed by deployed U.S. forces.
    As requested, GAO assessed DOD's planning in its use of logistics support
    contracts in contingency operations; determined whether DOD has had
    contract oversight processes that are adequate to ensure that quality
    services were provided in an economical and efficient manner; and assessed
    the extent to which DOD provided trained personnel qualified to oversee
    its contractors. GAO focused its efforts on four logistics support
    contracts chosen because of their size and chosen to represent more than
    one military service-the Army's Logistics Civil Augmentation Program
    (LOGCAP) and Balkans Support Contract, the Navy's Construction
    Capabilities Augmentation Program, and the Air Force's Contract
    Augmentation Program.

    GAO is making a number of recommendations to the Secretary of Defense to
    improve planning, establish procedures to assure that the contractors are
    performing as economically and efficiently as possible, and develop
    training programs for personnel responsible for using and managing
    logistics support contracts. DOD agreed with the report and all its
    recommendations.

    LOGCAP (Kuwait) 43	Savings of $31 million annually based on change in food
    service contractor

    Sources: DOD (data); GAO (analysis).

    DOD did not have sufficient numbers of trained personnel in place to
    provide effective oversight of its logistics support contractors. The Army
    has deployed units responsible for supporting the LOGCAP contract, but
    some of the personnel have little knowledge of the contract. The Air Force
    did not consistently train evaluators to monitor its logistics support
    contractor's performance. Military units across the services receiving
    contractor support have lacked a comprehensive understanding of their
    roles and responsibilities, which include establishing the work to be done
    by contractors and monitoring contractors' performance.

    www.gao.gov/cgi-bin/getrpt?GAO 04-854.

    To view the full product, including the scope and methodology, click on
    the link above. For more information, contact Neal Curtin, 757-552-8100,
    curtinn@gao.gov.

    Contents

      Letter

    Results in Brief
    Background
    Planning for the Use of Contractor Support Varied Widely
    Contract Oversight Processes Were Generally Good but Not

    Always Properly Implemented

    The Military Services' Efforts to Ensure That Contractors Perform in an
    Economical, Efficient, and Cost Conscious Manner Vary Widely

    DOD Did Not Always Have Enough Personnel to Manage Its Logistics Support
    Contracts, and Available Personnel Often Lack the Training to Effectively
    Use and Monitor the Contract

    Conclusions
    Recommendations for Executive Action
    Agency Comments and our Evaluation

    1

                                                                           2 6 14

    20

    34

    42 48 49 50

    Appendix I Scope and Methodology

    Appendix II Comments from the Department of Defense

    Appendix III	Comments from Readiness Management Support L.C.

    Appendix IV GAO Contact and Staff Acknowledgments

      Tables

    Table 1: Contract Information on Logistics Support Contracts 8 Table 2:
    Key Contract Management Roles and Responsibilities 12 Table 3: Information
    on the 10 Oldest Undefinitized LOGCAP Task

    Orders 30

      Figures

    Figure 1: Selected Countries and Possessions Where AFCAP, CONCAP, LOGCAP,
    and BSC Are Being Used As of May 2004 6

    Figure 2: Iraq In Relationship to the United States 9 Figure 3: Some
    Factors That Can Influence Costs of Logistics Support Contracts 11 Figure
    4: Overview of the Task Order Process 13

    Abbreviations

    AFCAP Air Force Contract Augmentation Program
    BSC (U.S. Army, Europe) Balkans Support Contract
    CJTF Combined Joint Task Force
    CONCAP (Navy) Construction Capabilities Contract
    DCMA Defense Contract Management Agency
    DOD Department of Defense
    GAO Government Accountability Office
    LOGCAP (Army) Logistics Civil Augmentation Program

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

    United States Government Accountability Office Washington, DC 20548

    July 19, 2004

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

    The Honorable John D. Dingell Ranking Minority Member Committee on Energy
    and Commerce House of Representatives

    The U.S. military has long used contractors to provide supplies and
    services to deployed U.S. forces. Since the early 1990s, much of this
    support has come from logistics support contracts-contracts that are
    awarded prior to the beginning of contingencies and are available to
    support the troops as needed. These contracts are currently being used by
    the services in more than half a dozen countries, including Iraq, to
    provide a wide array of support, such as food service and housing. The
    contract support in Iraq is the largest effort in the history of such
    contracts. While these contracts provide vital services, they are
    expensive. The estimated value of the work under the current contracts we
    examined is $12 billion, including $5.6 billion for work in Iraq as of May
    2004. Some of the factors that affect costs are (1) the requirements that
    must be met from food service to housing, to name just a few; (2) the
    conditions under which the services must be provided, such as the security
    situation in Iraq; and (3) the adequacy of government oversight.

    You asked us to (1) assess the effectiveness of the Department of
    Defense's (DOD) planning for the use of logistics support contracts in
    contingency operations; (2) assess the adequacy of DOD's contract
    oversight processes; (3) determine if the contracts are being used in an
    economical, efficient, and cost-conscience manner; and (4) assess the
    extent to which DOD had qualified personnel in place with the training and
    skills necessary to provide effective contract oversight. As discussed
    with your offices, we focused our efforts on four contracts: (1) the Army
    Logistics Civil Augmentation Program (LOGCAP) Contract; (2) the Air Force
    Contract Augmentation Program (AFCAP) Contract; (3) the U.S. Army, Europe,
    Balkans Support Contract (BSC); and (4) the Navy Construction Capabilities
    (CONCAP) Contract. The Army's LOGCAP contract is by far the largest of
    these contracts. The contractors for these

    contracts and the military services have, for the most part, worked
    together to meet the customers' needs in sometimes hazardous or difficult
    circumstances.

    In conducting our work, we examined a wide range of contract documents and
    contracting guidance and met with contracting officers; contract
    customers; and the contractors to gain a comprehensive understanding of
    the contracts, the contract management process, and issues related to
    using the contracts. We visited U.S. military sites using the LOGCAP,
    CONCAP, and AFCAP contracts, including sites in Kuwait and Qatar, but did
    not visit sites in Iraq. However, to obtain information about the use of
    LOGCAP in Iraq, we interviewed personnel who were responsible for contract
    management in Iraq, reviewed Defense Contract Management Agency (DCMA)
    situation reports written by contracting officers in Iraq, and met with
    representatives of the 101st Airborne Division shortly after their return
    from Iraq to discuss their experiences with the LOGCAP contract. In
    addition, because we visited the Balkans during our previous reviews of
    the Balkans Support Contract, we did not visit the Balkans during this
    review but did meet with Army personnel in Germany administering the
    contract. We determined that the information and data discussed in this
    report were reliable for the purpose of the report. We conducted our
    review from August 2003 through June 2004 in accordance with generally
    accepted government auditing standards. We discuss our scope and
    methodology in more detail in appendix I.

    The effectiveness of DOD's planning for the use of logistics support
    contracts in contingency operations varied widely between the commands
    that use the contracts. U.S. Army, Europe, followed LOGCAP guidance when
    it used the contractor to help develop its plans to support the
    anticipated movement of troops through Turkey into Iraq. Planning for the
    use of the Army's BSC, the Navy's CONCAP contract, and the Air Force's
    AFCAP contract was generally successful and involved the contractor in the
    early phases of planning. On the other hand, the Army Central Command did
    not follow guidance when planning for Operation Iraqi Freedom. The plan to
    support its military forces in Iraq was developed in May 2003 even though
    Army guidance recommends that a comprehensive statement of work be
    developed during the early phases of contingency planning. Additionally,
    even as it became clear that U.S. forces would remain in Iraq longer than
    originally anticipated, LOGCAP planning was still often ineffective,
    partly because the Army often did not include the contractor in its
    planning, notwithstanding guidance to the contrary.

      Results in Brief

    Frequent revisions to the LOGCAP plans generated a significant amount of
    rework for both DOD and the contractor.

    DOD's contract oversight processes were generally good, albeit, with room
    for improvement. DCMA's (the agency that oversees contractor performance)
    oversight of these contracts has produced good results-for example,
    contracting officers eliminated unnecessary airfield services and have
    identified equipment and materials that can be reused to reduce contract
    costs. Nevertheless, we identified several areas where improvements could
    be made. For example, DCMA did not always appoint contracting officers'
    technical representatives who could have assisted DCMA in its quality
    assurance responsibilities. Recurring contractor problems such as poor
    cost reporting, difficulties with producing and meeting schedules, and
    weaknesses in purchasing system controls also made the LOGCAP contract
    more difficult to administer. Furthermore, an important part of the
    contract oversight process is the definitizing of task orders; that is,
    reaching agreement with the contractor on the determination of contract
    terms, specifications, and cost. Delays in definitizing task orders make
    cost-control incentives under these award fee contracts less effective.
    While AFCAP and BSC task orders were definitized quickly, and CONCAP's
    task orders do not require definitization, most of the LOGCAP task orders
    have remained undefinitized for months, and sometimes more than a year,
    after they were due to be completed and after billions of dollars of work
    has been completed. Furthermore, the Army has not held an award fee board,
    even though the contract requires that one be held every 6 months, and
    award fees are important as a contractor incentive. Specifically, award
    fees can serve as a valuable tool to help control program risk and
    encourage excellence in contract performance. It will be difficult for the
    Army to hold a board that comprehensively evaluates the contractor's
    performance because the LOGCAP customers have not been evaluating and
    documenting the contractor's performance. Finally, neither the services
    nor DOD has established programs to collect and share lessons learned from
    the use of logistics support contracts.

    Customers have not always ensured that contractors provide services in an
    economical and efficient manner and that contract costs are controlled,
    although they have a responsibility to do so. We recognize that cost
    control should not be the primary consideration for commanders when U.S.
    forces are involved in major combat operations or when the operational
    environment or security situation requires the presence of more troops or
    the relocation of forces. However, cost control did not become a priority
    in using LOGCAP in Iraq and Kuwait until late 2003,

    when the Army Central Command received guidance from Army headquarters to
    look for economies. We found that when the customer reviews the
    contractor's work for economy and efficiency, savings are usually
    realized, but these reviews have not been routinely conducted by LOGCAP
    customers at all task order locations. Both the Marine Corps in Djibouti
    and Combined Joint Task Force (CJTF)-180 in Afghanistan periodically
    review the level and the type of services provided by the LOGCAP contract,
    but similar reviews are not being conducted in Kuwait or in Iraq. At times
    both the Army and the Air Force believed that they had no other option but
    to use their logistics support contracts to obtain goods and services even
    when they knew that other methods might have resulted in lower costs. For
    example, the Army had the contractor provide temporary housing for an Army
    division in Iraq although it was more costly than allowing the unit to
    build the housing itself because at the time the Army made the decision to
    use LOGCAP, it was the only means available to get the 101st Airborne
    Division into housing by November 15, 2003. Similarly, the Air Force used
    the AFCAP contract to supply commodities for its heavy construction
    squadrons because it did not deploy with enough contracting and finance
    personnel to buy materials quickly or in large quantities. While using the
    contract to procure and deliver commodities is permitted under the
    contract, it is generally not a cost-effective use of this type of
    contract because the customer pays award fees to the contractor in
    addition to the procurement cost.

    Given the size and complexity of these contracts, DCMA often did not have
    sufficient numbers of personnel in place to provide effective oversight
    and so used a risk-based approach to sizing its oversight teams. We also
    found many indications that some of the personnel responsible for
    overseeing or monitoring the contractors had not been adequately trained.
    DCMA, the Defense Contract Audit Agency, and the military services have
    all deployed civilian and military personnel to assist with contract
    administration and oversee the performance of the logistics support
    contractors. However, DCMA has not always had enough personnel in theater
    to effectively administer the logistics support contracts. In addition,
    many service personnel with oversight responsibilities for the contracts
    have not received the necessary training to accomplish their missions. As
    a result, their ability to perform all their duties, such as preparing the
    independent government cost estimates used to judge the reasonableness of
    the contractor's cost proposals, was limited. The Navy's contract monitors
    were all technically qualified engineers or have had significant
    experience in the construction industry. However, the Army deployed units
    responsible for supporting its LOGCAP customers with personnel who had
    little knowledge of the contract, and the Air Force did

    not consistently train evaluators to monitor the performance of the AFCAP
    contractor. Overall, military units across the services receiving
    contractor support did not have a comprehensive understanding of their
    roles and responsibilities.

    We are making a number of recommendations to improve planning, economy and
    efficiency, and training at all levels of command. These recommendations
    include emphasizing the need to comply with applicable planning guidance,
    establishing teams of subject matter experts to periodically review
    contractor services to ensure that services are appropriate and being
    provided in an economic and efficient manner, and implementing a
    department-wide lessons learned program to draw upon past experience.

    In written comments on a draft of this report, DOD stated that it
    concurred with the report and all its recommendations. We also provided an
    opportunity for the contractors on the logistics support contracts we
    reviewed-Kellogg, Brown and Root for LOGCAP; BSC; and CONCAP and Readiness
    Management Support L.C. for AFCAP-to comment on a draft of this report.
    Readiness Management Support provided clarifying comments in a written
    response. A detailed discussion of DOD's and Readiness Management
    Support's comments is contained in the body of this report.

    contract is a contingency construction contract designed to meet emergency
    requirements involving natural disaster recovery, humanitarian assistance,
    or conflicts.

    All of the contracts included in our review are cost-plus award fee
    contracts. Cost-plus contracts allow the contractor to be reimbursed for
    reasonable, allowable, and allocable costs incurred to the extent
    prescribed in the contract. A cost-plus award fee contract provides
    financial incentives on the basis of performance. These contracts allow
    the government to evaluate a contractor's performance according to
    specified criteria and to grant an award amount within designated
    parameters. Award fees can serve as a valuable tool to help control
    program risk and encourage excellence in contract performance. To reap the
    advantages that cost-plus award fee contracts offer, the government must
    implement an effective award fee process.

    Table 1 provides additional contract information on the logistics support
    contracts we reviewed. As can be seen in table 1, LOGCAP is by far the
    largest of these contracts both in terms of funds obligated and of the
    estimated value of work under the contract.

    Table 1: Contract Information on Logistics Support Contracts

          Category         LOGCAP          AFCAP         CONCAP          BSC
         Contractor    Kellogg, Brown    Readiness    Kellogg,           Kellogg,
                                  and                 Brown and         Brown and
                            Root      Management          Root          Root
                                      Support
         Award date      Dec. 2001       Jan. 2002      June 2000     May 1999
           Type of          Cost-plus Cost-plus award Cost-plus         Cost-plus
          contract          award fee fee             award fee         award fee

    Fee base/award    1 percent/2 1 percent/6     0 percent/2      1 percent/8
                             percent percent           percent            percent
                                                        CONUS
                                                   0 percent/5.75
                                                   percent
                                                        OCONUS

    Length of contract 1 year plus 1 year plus 7 1 year plus 4   1 year plus 4
                  9 option               option     option                 option
                   years                  years         years          years
          Obligations $4.9 billion    $708 million  $242 million   $1.73 billion
           (as of Apr. 30, 2004)                                   (as of Mar. 31
                                                                            2004)
         Contract ceiling price No    $900 million  $300 million  $2.098 billion
               dollar value;
              operational requirement
            used to establish ceiling
    Estimated value of work under  $653 million  $242 million  $2.021 billion
                $9.1 billion
                  contract
              (as of May 2004)

    Sources: DOD (data); GAO (analysis).

    The use of LOGCAP to support U.S. troops in Iraq is the largest effort in
    the history of the LOGCAP program both in number of troops supported and
    in land mass. As of May 21, 2004, the estimated value of contract services
    in Iraq was $5.6 billion. Figure 2 illustrates the size of Iraq. As shown,
    when superimposed over a U.S. map, Iraq covers an area east to west that
    is comparable to that from Washington, D.C., to central Indiana, and from
    north to south comparable to Lansing, Michigan, to Raleigh, North
    Carolina.

                  Figure 2: Iraq In Relationship to the United States

    Source: "Central Intelligence Atlas of the Middle East, 1993."

    The contractors and the services have, for the most part, worked together
    to meet the customers' needs in sometimes hazardous or difficult
    circumstances. For example, the AFCAP contractor is providing air traffic
    management at air bases throughout central Asia, reducing the operations
    tempo of selected and scarce Air Force assets. In addition, AFCAP is
    providing housing and base support in Iraq. Through CONCAP the Navy has
    constructed detainee facilities (including a maximum security prison) at
    Guantanamo Bay on time and within budget. CONCAP's projects at Guantanamo
    have increased the safety of both the detainees and the U.S. forces
    guarding them and will result in real savings in reduced personnel tempo.
    For example, CONCAP has increased detainee safety with the construction of
    more secure cells and guard safety by providing greater separation between
    guards and detainees. LOGCAP is providing life and logistics support for
    more than 166,500 soldiers and civilians under

    difficult circumstances in Iraq, Afghanistan, Kuwait, and Djibouti, and
    customers are generally pleased with the service the contractor is
    providing. Finally, BSC continues to provide troops in Kosovo and Bosnia
    with a myriad of high-quality services, and the customer works with the
    contractor to identify costs savings.

    Many factors can influence the overall cost of the logistics support
    contracts. As shown in figure 3, costs can be affected by the size and
    scope of requirements identified by customers and by the amount of time
    the customer gives the contractor to plan and execute the mission.
    Additionally, cost is influenced by the manner in which a unit chooses to
    fulfill a requirement. Other resources that are more cost-effective may be
    available to the units, such as military troop labor or host nation
    support. Cost may also be affected by the quality of documentation
    prepared by contract customers and program managers. Concise statements of
    work and comprehensive government cost estimates may reduce the likelihood
    of incurring additional costs. In addition, the appointment of government
    contract management personnel to monitor contractors' performance ensures
    that contractor-provided services meet contract requirements. Lastly,
    operational concerns, such as the security situation in Iraq, can make
    providing services more costly.

    Figure 3: Some Factors That Can Influence Costs of Logistics Support
    Contracts

    Sources: DOD (data); GAO (analysis).

    The military services, as well as DCMA and the Defense Contract Audit
    Agency, perform contract management functions to ensure that the
    government is receiving quality services from the logistics support
    contractors at the best possible prices. The customer is responsible for
    identifying and validating requirements to be addressed by the logistics
    support contracts as well as evaluating the contractor's performance and
    ensuring that the contract is used in an economical and efficient manner.
    The contracting officer is responsible for oversight and management of the

    contract. However, the contracting officer may delegate some of the
    oversight and management functions to DCMA. When management functions are
    delegated by the procuring contracting officer, DCMA may assign
    administrative contracting officers to provide on-site contract
    administration at deployed contingency locations. The Defense Contract
    Audit Agency ensures that costs claimed by the contractor are reasonable,
    allowable, and allocable. Table 2 provides additional information on the
    roles and responsibilities of contract management personnel.

    Table 2: Key Contract Management Roles and Responsibilities

    Customers:

    o  Develop requirements.

    o  Write statements of work.

    o  Obtain funding.

    o  Monitor contract performance.

    o  Evaluate technical performance.

    o  Provide the award fee board with input.

    Contracting officer:

    o  Interpret the contract.

    o  	Obligate the government for work under the contract.

    o  	Delegate contract administration. procedures to administrative
    contracting officers.

    o  	Ensure that the contractor corrects cited deficiencies.

    o  Provide the award fee board with input.

    Defense Contract Management Agency:

    o  Provide daily contract oversight.

    o  	Review and approve purchase requisitions (LOGCAP and BSC).

    o  Evaluate quality assurance.

    o  Monitor government property.

    o  Monitor contract performance.

    o  Evaluate technical performance.

    o  Provide the award fee board with input.

    Defense Contract Audit Agency:

    o  	Review contractors' financial management systems.

    o  Review cost proposals.

    o  	Approve payment vouchers (LOGCAP, BSC, and CONCAP).

    o  Audit incurred costs.

    o  	By invitation, provide the award fee board with input.

    Sources: DOD (data); GAO (analysis).

    Work is done under each of the contracts through task orders. The task
    order process begins when the customer, or the unit that is requesting
    support from the contractor, identifies a requirement. The requirement is
    generally documented in the form of a task order statement of work, which
    establishes the specific tasks to be accomplished by the contractor and
    the time frames of performance. If the decision is made to use the
    logistics support contract to satisfy the requirement, the unit contacts
    the contract program management office. The program management office, in
    coordination with the contracting officer, determines whether the task is
    within the scope of the contract. The program management office obtains an
    approximate cost estimate from the contractor and provides the customer
    with the information. From this information, the customer

    decides if it will use the contractor to fulfill the requirement. If the
    government decides to use a logistical support contract, funding is
    obtained, the statement of work is finalized, and the contracting officer
    issues the contractor a notice to begin work. Significantly, if the
    customer identifies a change in the requirement, the process is initiated
    again. Figure 4 provides an illustration of the key steps in the task
    order process.

    Figure 4: Overview of the Task Order Process

    Sources: DOD (data); GAO (presentation).

    We have issued reports on the use of contractors to support deployed
    forces in 1997, 2000, and 2003. In 1997 we reported that there were
    opportunities to make the use of LOGCAP in Bosnia more efficient and
    effective, including developing doctrine and guidance, providing

      Planning for the Use of Contractor Support Varied Widely

    commanders with training, and providing commands with assistance when they
    are using LOGCAP.1 In 2000 we reported that the Army should improve its
    management of BSC, the successor contract to LOGCAP in the Balkans,
    including examining the level and frequency of services and providing a
    more extensive predeployment training program for all contract oversight
    personnel.2 In 2003 we reported that commanders had limited visibility and
    understanding of the extent and type of services being provided by
    contractors and those commanders and other personnel lacked training on
    their roles and responsibilities in dealing with contractors.3 DOD
    generally agreed with the recommendations that we made in each of these
    reports, including the provision of more training.

    Planning for the Navy's CONCAP contract, the Army's BSC, and to a lesser
    degree, the Air Force's AFCAP contract, included the contractor in task
    order planning, resulting in more-effective planning. However, while the
    Army has developed guidance to facilitate the use of LOGCAP that clearly
    recommends working with the contractor to develop comprehensive support
    plans and statements of work in the early stages of contingency planning,
    that guidance was not always followed. For example, the Army Central
    Command did not follow that guidance when planning for Operation Iraqi
    Freedom. Even as it became clear that U.S. forces would remain in Iraq
    longer than originally anticipated, LOGCAP planning continued to be mixed,
    partly because the Army often did not include the contractor in its
    planning and planning did not always take advantage of lead-time when it
    was available. However, U.S. Army, Europe, in planning for the anticipated
    movement of troops through Turkey into Iraq in support of Operation Iraqi
    Freedom, and the Marine Corps, in planning for the deployment of forces to
    Haiti, followed LOGCAP guidance, which proved beneficial. As noted
    earlier, the LOGCAP contract is the most expensive of the logistics
    support contracts we examined.

    1 U.S. General Accounting Office, Contingency Operations: Opportunities to
    Improve the Logistics Civil Augmentation Program, GAO/NSIAD-97-63
    (Washington, D.C.: Feb. 11, 1997).

    2 U.S. General Accounting Office Contingency Operations: Army Should Do
    More to Control Contract Cost in the Balkans, GAO/NSIAD-00-225
    (Washington, D.C.: Sept. 29, 2000).

    3 U.S. General Accounting Office, Military Operations: Contractors Provide
    Vital Services to Deployed Forces but Are Not Adequately Addressed in DOD
    Plans, GAO-03-695 (Washington, D.C.: June 24, 2003).

        U.S. Army, Europe; the Navy; and the Air Force Involve the Contractor in
        Planning

    Planning for BSC, the CONCAP contract, and the AFCAP contract all follow
    similar processes, which rely on a collaboration between the customer and
    the contractor to develop comprehensive and clear statements of work in
    the early stages of planning. For example, we observed during our work
    that the following guidance and procedures were being followed:

    o  Guidance issued by BSC's contracting office, the Army Corps of

    Engineers-Transatlantic Program Center,4 establishes the policy for
    developing statements of work for BSC. According to the guidance, after
    the customer identifies a requirement, the customer and the contractor
    work together to develop the statement of work. After the statement of
    work is agreed to, the contractor prepares an execution plan that
    describes how the contractor intends to meet the requirement. The
    government reviews the execution plan to ensure that the customer's needs
    are met in the most economical and efficient manner possible. This process
    continues until U.S. Army, Europe, is satisfied that the statement of work
    accurately reflects the command's requirements and the contracting officer
    issues a notice to proceed.

    o  	CONCAP planning is a cooperative effort between the Navy Facilities
    Command, the customer, and the contractor. Customers work closely with the
    command and the contractor to clearly define the requirements and develop
    a statement of work, which may vary from a brief description or sketch to
    a complete design. Depending on the project, the contractor may be given
    the responsibility to provide the initial statement of work, which the
    government team reviews and determines if it is acceptable before
    providing final approval. After the government and the contractor come to
    agreement on the work to be performed and the cost, the task order is
    incorporated into the contract.

    o  	The AFCAP planning process is detailed in AFCAP's Concept of
    Operations document.5 According to this guidance, customers

    o  identify requirements,
    o  obtain approval to use AFCAP from a Major Command, and

    o  develop a statement of work.

    After the statement of work is developed, the contractor provides a cost
    estimate, and the government and the contractor work together to ensure

    4 U.S. Army, Army Corps of Engineers Transatlantic Program Center Standard
    Operating Procedures for Task Orders on the Balkans Support Contract"
    (Nov. 23, 1999).

    5 U.S. Air Force Contract Augmentation Program, Concept of Operations (no
    date provided).

    that all parties understand the requirements, available options, and
    associated costs. Using information developed through this collaborative
    effort, the customer finalizes the statement of work and sends it to the
    procuring contracting officer, who issues a notice to proceed.

        Army Guidance Highlights the Early Identification of Requirements as a Key
        to Maximizing the Effectiveness of Contractor Support

    Early planning that identifies requirements and decides which ones will be
    satisfied by contracting, and the involvement of the contractor in
    planning, are recurring themes in the Army's doctrine and guidance for
    using contractor support, in general, and the LOGCAP contract,
    specifically. According to Army Field Manual 3-100.21-"Contractors on the
    Battlefield" 6- integrated planning is a governing principle of contractor
    support, and for contractor support to be effective and responsive, its
    use must be considered and integrated into the planning process. Proper
    planning identifies the full extent of contractor involvement, how and
    where contractor support is provided, and any responsibilities the Army
    may have in supporting the contractor. This same emphasis on planning and
    the early identification of requirements is also discussed in Army
    Regulation 700-137-"Logistics Civil Augmentation Program"7-which
    establishes the policies, responsibilities, and procedures for
    implementing LOGCAP. That regulation states that contractor responsiveness
    similar to that offered by military units can be achieved only through the
    careful drafting of contract requirements (statements of work), and that
    to increase proper planning and execution, the contractor should have a
    clear understanding of the statement of work. The regulation also urges
    commanders not to classify plans at a level where the contractor cannot
    have access and, if classification is necessary, commanders should write
    unclassified contract statements of work and put time frames, geographic
    areas, and other classified material in appendixes. An Army regulation on
    contractors accompanying the force similarly states that the most
    important factor in ensuring that support services are provided at the
    desired levels of quality and timeliness is the establishment of clear and
    concise contract requirements in a statement of work, 8 and Army Materiel

    6 U.S. Army, "Contractors on the Battlefield," Department of the Army
    Field Manual 3-100.21 (Jan. 3, 2003).

    7 U.S. Army, "Logistics Civil Augmentation Program," Department of the
    Army Regulation 700-137 (Dec. 16, 1985).

    8 U.S. Army, "Contractors Accompanying the Force," Department of the Army
    Regulation 715-9 (Oct. 29, 1999).

    Command Pamphlet 700-30-Logistics Civil Augmentation Program 9- designed
    to help users obtain support through the LOGCAP process reiterates the
    point that a major consideration for maximizing LOGCAP potential is for
    the customer to be aware of its LOGCAP support requirements and convey
    those requirements in a timely manner to the appropriate personnel. This
    pamphlet also recommends the early involvement of the contractor in
    planning because it allows the contractor to develop more accurate cost
    estimates, gives the contractor time to bring on board reliable
    subcontractors, and can minimize costs. The guidance also recommends that
    the customer and the contractor develop a comprehensive statement of work
    in the early stages of contingency planning.

    Early decisions on how the contract is to be used facilitate a number of
    other actions that lead to enhanced contract management and oversight.
    Once government and contractor planners are notified of a customer's
    requirements, they can begin developing statements of work. According to
    the Army's LOGCAP guidance, statements of work specify the products and
    services required and are the most important documents provided to the
    contractor. The contractor uses statements of work to (1) plan how to
    satisfy the customer's requirements in the most efficient and economical
    manner and (2) develop cost estimates. These estimates are provided to the
    customer and serve as an important decision tool for assessing
    contractors' proposals and deciding between alternative support
    strategies. At the same time, representatives from the LOGCAP program
    management office use the statements of work to develop independent
    government cost estimates. An independent government cost estimate is the
    government's estimate of the costs the contractor is expected to incur in
    performing the work. The more time the contractor and the government have
    to refine their estimates, the more useful they are to commanders.

        Planners Followed Army Guidance with Positive Results in Turkey and Haiti

    Following LOGCAP guidance proved beneficial for Army operations in Turkey
    and Marine Corps operations in Haiti (LOGCAP is available to all the
    military services). Specifically, involvement of the contractor as
    recommended in the LOGCAP guidance led to more informed decision making as
    follows:

    9 U.S. Army, "Logistics Civil Augmentation Program," Army Materiel Command
    Pamphlet 700-30 January 2002).

    o  	In planning for Operation Iraqi Freedom, U.S. Army, Europe, was tasked
    with supporting the anticipated movement of troops through Turkey into
    Iraq, and our review of that planning showed that the command followed
    Army guidance to good effect. In October 2002 the command brought
    contractor personnel to its headquarters in Europe to help plan and
    develop the statement of work. According to U.S. Army, Europe, contractor
    planners brought considerable knowledge of contractors' capabilities,
    limitations, and operations, and their involvement early in the planning
    efforts increased their understanding of requirements and capabilities,
    facilitated communication regarding the statement of work, and enhanced
    the mission's completion.

    o  	Recent planning for the deployment of U.S. forces to Haiti resulted in
    a similar outcome. U.S. Marine Forces Atlantic, U.S. Southern Command,
    Army Materiel Command, and contractor personnel visited Haiti to develop
    support plans. According to an Army Materiel Command official, the
    planning process was a success because it led to an informed decision by
    the Marines to use their own assets to support the forces in lieu of
    LOGCAP.

        Planning for Operation Iraqi Freedom Was Not Comprehensive

    The Army Central Command-the Army command responsible for LOGCAP planning
    in Kuwait and Iraq-did not follow the planning process described in Army
    regulations and guidance as it prepared for operations in southwest Asia.
    According to a former Army Materiel Command logistics planner, the Army
    Central Command used the standing LOGCAP plans to prepare for the mission
    but, after Army forces deployed, the plan changed significantly and Army
    Materiel Command's involvement was diminished because of security
    concerns. The planner stated that Army Central Command raised the security
    classification for the plan above the clearance level of the planners and
    it took some time to resolve this issue. Thus, during a critical planning
    period, the planning personnel with the most experience in using the
    contract were not part of the planning process. The planner also said that
    the contractor was not involved in the planning because of security
    concerns. As a result, two key principles needed to maximize LOGCAP
    support and minimize cost-a comprehensive statement of work and early
    contractor involvement- were not followed. Specifics follow:

    o  	The Army developed a plan to support the troops in Iraq (task order 59
    of the LOGCAP contract) in May 2003, but the plan was not comprehensive
    because it did not include all of the dining facilities, troop housing,
    and other services that the Army has since added to the task order.
    According to an official from the 101st Airborne Division, there was a
    lack of detailed planning for the use of LOGCAP at the theater and
    division levels for the

    sustainment phase of the operation. He went on to add that Army planners
    should develop a closer working relationship with the divisions and the
    contractor.

    o  	Task orders were frequently revised. These revisions generated a
    significant amount of rework for the contractor and the contracting
    officers. Additionally, time spent reviewing revisions to the task orders
    is time that is not available for other oversight activities. While
    operational considerations might have driven some of these changes, we
    believe others were more likely the result of ineffective planning. For
    example, task order 59 was changed seven times in less than 1 year.
    Specifics follow:

    o  	Basic Statement of Work-May 30, 2003-provided limited services such as
    food services (except site A); pest control; laundry services; and morale,
    welfare, and recreation services at six base camp clusters known as sites
    A, B, C, D, E, and F.

    o  	Change 1 on June 7, 2003, added support for the coalition forces (site
    G).

    o  	Change 2 on June 20, 2003, added food service; pest control; laundry
    services; and morale, welfare, and recreation services for Site H (the
    101st Airborne Division).

    o  	Change 3 on June 24, 2003, added troop housing, transportation, and
    supply service activities at site A.

    o  	Change 4 on July 22, 2003, removed the coalition forces (Site G) from
    the task order and added food service for site A. A separate task order
    was developed for support for coalition forces.

    o  	Change 5 on August 27, 2003, added housing for sites B, C, D, F, and
    H.

    o  	Change 6 on November 3, 2003, made changes to the services being
    provided and added additional combat support activities.

    o  	Change 7 on November 14, 2003, added additional combat support
    services.

    Frequent revisions have not been limited to task order 59. Task order 27,
    which provides support for a significant number of U.S. troops in Kuwait
    (valued at $426 million as of May 2004), was changed 18 times from
    September 2002 through December 2003, including five changes in 1 month,
    some on consecutive days. As of May 11, 2004, the contracting office,
    DCMA, and the contractor processed more than 176 modifications to LOGCAP
    task orders. As discussed above, frequent revisions to task orders
    generate a significant amount of rework for the contractor and the
    contracting officer.

    LOGCAP Planning Has Not While we recognize the uncertainty inherent in
    wartime operations,

    Always Been Timely	planning for some LOGCAP tasks did not take advantage
    of lead-time when it was available. According to the LOGCAP program
    manager, early planning is a key to obtaining the best services at the
    best prices. The following are two examples of where the Army did not use
    the planning time available:

    o  	The Kuwaiti government gave the Army several months' notice that it
    needed some Army facilities at the Kuwait International Airport moved
    because of planned construction. The Army did not inform the contractor,
    however, until 5 days before the scheduled deadline. Army officials stated
    that accomplishing the move in only 5 days increased the cost to the Army.

    o  The Army in Kuwait did not always give acquisition review boards

    sufficient time or resources to consider alternatives to LOGCAP.
    Commanders create acquisition review boards to make recommendations about
    the validity of requirements and the best way to meet them. The boards
    generally consist of personnel from operations, logistics, legal services,
    resource management, and contracting that review requirements for
    contracting support against the priorities established by the commander.
    The boards screen requirements and determine whether or not they should be
    satisfied through contingency contract support, through host nation
    support, LOGCAP, or other sources. However, in December of 2003 in Kuwait,
    we observed that one board was not given sufficient time to consider
    alternatives to LOGCAP and that the resources to pursue contingency
    contracts other than LOGCAP were not available, largely defeating the
    purpose of the board. For example, several large, preexisting task orders
    that were to expire within a few weeks were presented with the admonition
    that it was imperative that the task orders continue. With only a few
    weeks to renew the task order, the board had no time to explore options to
    using the LOGCAP contract. Furthermore, the principal assistant
    responsible for contracting in Kuwait said that her office lacked the
    resources to explore contracting options to LOGCAP and the legal office
    lacked the resources to review new contracts.

    While oversight of a contract is the contracting officer's responsibility,
    the contracting officer may delegate some oversight responsibilities to
    DCMA. The contracting officers for LOGCAP, AFCAP, and BSC have all
    delegated significant portions of contract oversight to DCMA, while the
    Navy retains all contract administration and oversight responsibilities
    for the CONCAP contract. While DCMA's contract oversight generally
    resulted in cost savings, opportunities exist to improve oversight. For
    example, DCMA did not perform some of its delegated contract
    administration tasks under AFCAP, such as ensuring that the contractor
    maintained appropriate

      Contract Oversight Processes Were Generally Good but Not Always Properly
      Implemented

    controls of government property, and the Air Force did not always appoint
    contracting officers' representatives (subject matter experts) to assist
    with oversight. Complicating oversight were recurring contractor problems
    such as poor cost reporting; difficulties with producing and meeting
    schedules; and inadequate controls over purchasing, which made the LOGCAP
    contract more difficult to administer. In addition, better government
    oversight might have avoided a billing disagreement between the government
    and the LOGCAP contractor involving millions of dollars in food service
    bills. Moreover, while the AFCAP and BSC task orders have been definitized
    within the time allowed by the Defense Federal Acquisition Regulation
    Supplement, most of the LOGCAP task orders have not. Because task orders
    have not been definitized, LOGCAP contracting personnel have not conducted
    an award fee board. We believe it will be difficult to comprehensively
    assess the contractor's performance in an award fee board because customer
    evaluations of the contractor's performance have not been uniformly
    documented. Finally, lessons learned are often not shared or are shared
    only informally, and there is no process in place to systematically
    collect knowledge and insights about the programs and to disseminate it to
    those who currently need it to provide oversight and management of the
    contracts.

        DCMA's Oversight of Logistics Support Contracts Has Produced Good Results

    The oversight of contracts ultimately rests with the contracting officer,
    who is responsible for ensuring that contractors meet the requirements set
    forth in the contract. However, most contracting officers are not located
    at deployed locations. As a result, contracting officers appoint monitors,
    who represent the contracting officer and are responsible for monitoring
    contractors' performance. Contracting officers for AFCAP, LOGCAP, and BSC
    have chosen to have personnel from DCMA oversee contractors' performance.
    DCMA is an independent combat support agency within DOD that serves as the
    department's contract manager, responsible for ensuring that federal
    acquisition programs, supplies, and services are delivered on time,
    delivered within cost, and meet performance requirements.

    We met with DCMA officials in Kuwait and Qatar and discussed contract
    oversight activities for the LOGCAP and AFCAP contracts; reviewed Army
    Audit Agency audits of contract oversight activities in Afghanistan,
    Uzbekistan, and Turkey; and found that, overall, DCMA is doing a good job
    of administering the contract. From December 2002 through February 2004,
    the Army Audit Agency reviewed the Army's use of LOGCAP in Turkey,
    Uzbekistan, and Afghanistan and found that the contract was being
    effectively managed. While these audits did not specifically assess

    DCMA's oversight of the contract, the audits' included the oversight
    responsibilities delegated to DCMA. In Turkey, the Army Audit Agency
    reported that appropriate actions to control costs and ensure effective
    stewardship of resources were in place; in Uzbekistan, it reported that
    key management controls had been identified, were in place, and were
    working; and in Afghanistan, the audit agency reported that adequate
    procedures were in place to control costs but that the government could
    improve the management of government-furnished equipment provided to the
    contractor.

    The Army Audit Agency's conclusions are similar to our observations of
    DCMA's activities in Kuwait, where DCMA's oversight is resulting in
    contract improvements and cost savings. For example, at one location we
    visited in Kuwait that included the use of LOGCAP for helicopter airfield
    operations, the DCMA administrative contracting officer had an aviation
    background and observed that the contract called for more aviation
    refueling points than necessary and that the number of sweepers available
    for cleaning the runways and parking ramps was excessive. He was able to
    reduce the number of refueling points by half, saving the Army money, and
    the number of sweepers from five to three. In addition, after conducting a
    lease/buy analysis, the administrative contracting officer directed the
    contractor to buy the sweepers instead of leasing them because buying
    saved the government money. Situation reports filed periodically by DCMA
    administrative contracting officers also detail a concerted effort to
    reduce contract costs by conducting lease or buy analyses for nontactical
    vehicles10 and generators, critiquing the contractor's proposed cost
    estimates, and monitoring the disposition of government property. These
    reports also document DCMA's quality assurance personnel enforcing health
    and safety standards to ensure, for example, that food served to U.S.
    military personnel had met all health requirements. Additionally, DCMA
    officials, along with contractor and service officials in Qatar, the
    Balkans, and Kuwait were instrumental in transferring excess material and
    equipment from AFCAP and BSC to LOGCAP. DCMA estimated savings to the
    LOGCAP contract from the equipment transfer at $17 million to $22 million.

    10 Nontactical vehicles are motor vehicles used to support general
    transportation services and facility maintenance functions not directly
    connected with combat or tactical operations.

        DCMA Failed to Perform Its Property Administration Function on Some Task
        Orders

    While, as discussed above, we believe overall that DCMA provided good
    oversight, it failed to perform some of its delegated contract
    administration tasks for the AFCAP task orders in southwest Asia. DCMA
    failed to ensure that the contractor maintained appropriate controls of
    government property. The Federal Acquisition Regulation11 states that a
    government contractor is required to establish and maintain a property
    system to control, protect, preserve, and maintain all government
    property. The Federal Acquisition Regulation goes on to say that the
    government's contracting officer or the designated representative assigned
    the property administration responsibility should review the contractor's
    property control systems to ensure compliance with the property clauses of
    the contract.

    On task orders executed in southwest Asia, the AFCAP procuring contracting
    officer delegated the property administration responsibility to DCMA's
    administrative contracting officers. However, contract administrators in
    southwest Asia did not ensure that the contractor had established and
    maintained a property control system to track items acquired under the
    contract. In addition, DCMA's contracting officers in southwest Asia did
    not have a system in place to document what the contractor was procuring
    in support of AFCAP task orders and what was being turned over to the Air
    Force. As a result, as of April 2004, neither DCMA nor the Air Force could
    account for approximately $2 million worth of tools and construction
    equipment purchased through the AFCAP contract.

    In July 2004 DCMA told us that the AFCAP contracting officer provided DCMA
    with additional direction regarding the administration of property
    acquired under the contract. According to DCMA, its Middle East office
    identified a joint accountability problem for the Air Force engineering
    squadrons. The AFCAP contracting officer has since clarified that the
    tools and construction equipment purchased for the Air Force engineering
    squadrons were to go directly to the Air Force. As a result, DCMA believes
    that neither it nor the contractor are responsible for the accountability
    of the property. However, at the time of our visit to the theater in
    December 2003, and in subsequent conversations with DCMA contracting
    officers, we observed and were told that at that time DCMA was responsible
    for property administration but did not have a system in place to document
    the property that was purchased under these task orders and that DCMA

    11 Federal Acquisition Regulation, Part 45, "Government Property."

    contracting officers should have been performing this responsibility.
    Notwithstanding the additional guidance that has since been provided by
    the AFCAP contracting officer, DCMA was delegated the property
    administration responsibility and either should have documented all
    property purchased for the Air Force engineering squadrons or sought
    clarifying guidance earlier from the AFCAP contracting officer. However,
    at the time of our review, neither the Air Force nor DCMA could account
    for approximately $2 million worth of tools and equipment purchased under
    the contract.

        DCMA Did Not Always Appoint and Use Contracting Officers' Technical
        Representatives to Monitor the Contract in Iraq

    As mentioned, the LOGCAP contract is being used to meet a wide range of
    military requirements, such as running supply operations for food, water,
    fuel, construction materials, and repair parts and providing services such
    as laundry, clothing repair, food service, sanitation, recreation,
    maintenance, transportation, medical waste disposal, and construction.
    Effective oversight of this diverse body of work requires personnel with
    knowledge and expertise in these particular areas. DCMA administrative
    contracting officers are contracting professionals but may have limited
    knowledge of field operations. In these situations, DCMA normally uses
    contracting officers' technical representatives. Contracting officers'
    technical representatives are individuals who have been designated by
    their unit and appointed and trained by the administrative contracting
    officer. They provide technical oversight of the contractor's performance,
    but they cannot direct the contractor by making commitments or changes
    that affect any terms of the contract.

    In March 2000, the U.S. Army, Europe, audit cell located in Kosovo
    recommended that the command use the Army's subject matter experts to
    provide oversight of routine day-to-day services provided by the Balkans
    Support Contract.12 The audit cell recommended that the task force
    designate these experts as contracting officers' representatives, which,
    according to the audit cell, would improve contract oversight and
    management and ensure that the command received quality service from the
    contractor. In October 2002, during a visit to Kosovo, we confirmed that
    the command had designated subject matter experts from the Area Support
    Group's Department of Logistics as contracting officers' representatives
    for BSC.

    12 Draft Memorandum for the Commanding General, Task Force Falcon
    (Forward), (Mar. 31, 2000) Task Force Falcon Audit Cell.

    According to a DCMA official in Iraq, it was the agency's goal to have a
    contracting officer's technical representative for each functional area
    (e.g., food service and maintenance) at each division and camp. While
    representatives were appointed at some locations, they were not at others.
    For example, 101st Airborne Division officials told us that they had not
    been asked to provide representatives and had played no role in overseeing
    the contract. We believe that having contracting officers' technical
    representatives for each functional area at each division and camp would
    improve government oversight.

    LOGCAP Contract DCMA prepares periodic situation reports that report the
    status of Management Is Made More contractor activities, successes, and
    problems. Our review of the reports Difficult by Recurring prepared by
    DCMA from September 2003 through May 2004, which we did Contractor
    Problems not validate but did discuss with the LOGCAP contractor,
    highlights a

    pattern of contractor management problems. Some of the problems

    mentioned in these reports follow:

    o  	Adequate cost reporting and cost management are important because they
    affect the government's ability to monitor contract spending. Several
    administrative contracting officers believe that the contractor's cost
    reports are inadequate and make it difficult to know how much the
    contractor has actually spent on the individual task orders. For example,
    in the November 13, 2003, report for Iraq, the administrative contracting
    officer reported that the contractor was refusing to perform work because
    of its contention that no funding remained available, while the cost
    report for the previous reporting period showed that the contractor had
    expended only 45 percent of the available funds. Furthermore, some
    administrative contracting officers have noted that the contractor's
    managers at individual sites have no knowledge of the costs associated
    with their task orders.

    o  	Difficulties with producing and meeting schedules affect the
    government's ability to know when contracted support will be provided. The
    situation reports frequently mention that the contractor has not been able
    to produce task order schedules as required by the contract. In addition,
    the reports often note that the contractor is behind schedule on both big
    and small projects. Additionally, officials from the 101st Airborne
    Division noted that the contractor did not meet the required schedule for
    providing housing. They also noted that the contractor did not provide
    some of the services required by task order 59, specifically pest control
    and water production.

    o  	Inadequate controls over purchasing and subcontractors hinder
    government oversight. Several administrative contracting officers have
    noted that the contractor had inadequate controls over its purchasing

    system. For example, administrative contracting officers have observed
    that requisitions

    o  	are not always provided to the administrative contracting officers as
    required by the contract,

    o  	frequently lack sufficient documentation to justify the lease or
    purchase, and

    o  do not provide an accurate estimate of the cost of the item.

    Also, administrative contracting officers have noted that they are unable
    to gain accurate status about materiel being purchased through the
    contractor, which increases customers' frustration. In addition, the
    contractor does not have good control over its subcontractors. One DCMA
    official reported that the contractor let a subcontract expire without a
    transition plan, thus disrupting services.

    The LOGCAP contractor has acknowledged some of these problems and has been
    working with DCMA to establish systems and procedures that will be more
    responsive to the government's needs. For example, in late 2003 the
    contractor sent a large team of auditors to Kuwait to review its
    operations in Kuwait and Iraq and develop processes and procedures to help
    resolve some of the purchasing problems. The situation reports also
    document that the contractor is working with DCMA to resolve other
    problems mentioned above, such as issues related to scheduling. However,
    situation reports from Iraq and Kuwait indicated that scheduling and cost
    reporting continue to be a problem at some locations while improvements
    have been noted at others.

        Better Oversight of Food Service Might Have Avoided a Contract Disagreement

    A disagreement between the LOGCAP contractor and the Defense Contract
    Audit Agency involving at least $88 million in food services charges to
    feed soldiers in Iraq might have been avoided had there been more careful
    government oversight. The statement of work prepared by the Army required
    that the LOGCAP contractor provide food service and food service
    facilities at bases throughout Iraq. It directed that the contractor
    build, equip, and operate the dining facilities at the base camps and
    provide four meals a day for the base camp populations. The populations
    were specified in the statement of work. The contractor subcontracted with
    six food service companies, which were responsible for building and
    operating the dining facilities as well as providing food service workers
    and food. The contractor instructed the subcontractors to do a head count
    at each meal. A military representative, a contractor representative, and
    a subcontractor representative signed daily head-count sheets. The
    statement of work did not specify whether the government

    should be billed on the camp populations specified in the statement of
    work or on the actual head count. Generally, the subcontractors billed the
    contractor for the base camp population although there were some
    differences in the subcontractors' billing procedures.

    During our review of subcontractors' files, we noted that on many
    occasions the number of personnel eating in the dining facilities
    throughout Iraq was less than the base camp population indicated in the
    statement of work. In response to a Defense Contract Audit Agency audit of
    dining facility billings, the contractor analyzed selected invoices from a
    number of dining facilities throughout Iraq for a 4-month period and found
    that by billing the government for the base camp population instead of the
    actual personnel served, it had billed the government for food service for
    more than 15.9 million soldiers13 when only 12.5 million-more than 3.4
    million fewer-had passed through the dining facilities. The contractor
    estimated the cost of serving the additional personnel who did not use the
    dining facilities at approximately $88 million.

    The contractor and the Defense Contract Audit Agency disagree over the
    appropriate billing procedures for this service. The Defense Contract
    Audit Agency's interpretation requires billings based on actual head
    counts while the contractor's interpretation authorizes billings based on
    the number of soldiers at each base camp as established in the task order
    statement of work. The parties are currently discussing the issue. We
    believe that this disagreement could have been avoided through better
    contract oversight. As discussed above, daily head counts sheets were
    being prepared at each facility. However, neither the government nor the
    contractor apparently acted on the disparity between the camp population
    and the head counts. According to representatives of the 101st Airborne
    Division, they were not aware of the cost implications of the disparity.
    They also said that CJTF-7, the next higher headquarters for the 101st,
    was not interested in the numbers of people that were using the dining
    facility unless the number exceeded the number contracted for in the
    statement of work.

    13 This figure is the number of soldiers in Iraq multiplied by the number
    of days in a month multiplied by the number of months included in the
    invoice analysis.

        The Navy Provides Oversight for the CONCAP Contract

    Unlike the other contracts we reviewed, the Navy has retained all of the
    contract administration and oversight responsibilities for the CONCAP
    contract. The Naval Facilities Engineering Command uses frequent
    communication and technically qualified staff for overseeing CONCAP
    projects. For example, at Guantanamo Bay, the site of CONCAP's largest
    project, the contractor's on-site project managers provide the Naval
    Facilities Engineering Command, Atlantic Division Headquarters in Norfolk,
    Virginia, with daily situation reports. In addition, Facilities Command
    engineers and engineering technicians located at Guantanamo Bay provide
    on-site quality control for the CONCAP projects and document their
    findings in quality control reports. Partnering sessions with customers,
    contractors, and subcontractors are held monthly, and project management
    officials from the command frequently visit the sites to inspect the
    projects. A command official stated that in contracting one must have
    people with the technical expertise to provide oversight of the job.
    According to officials, a minimum of at least one technically qualified
    person should be on site at each task order location.

        The Army Has Not Definitized the Majority of LOGCAP Task Orders nor Has It
        Held an Award Fee Board

    Most LOGCAP Task Orders Have Not Been Definitized

    The Defense Federal Acquisition Regulation Supplement requires that
    undefinitized contracting actions, such as the task orders used in the
    LOGCAP program, be definitized within 180 days of beginning work or before
    50 percent of the work is completed. While AFCAP and BSC complete the
    definitization process well within the 180-day time limit, many of the
    LOGCAP task orders have not been definitized despite the fact that work
    has been completed on some of the task orders. In addition, the Army has
    yet to hold an award fee board despite the contract requirement to hold a
    board every 6 months. The award fee board is a mechanism for the
    government to evaluate the contractor's overall performance and recommend
    an amount of award fee. Furthermore, it is unclear if the award fee board,
    when it is held, will be able to conduct a comprehensive evaluation of the
    contractor's performance because many LOGCAP customers have not been
    evaluating and documenting the contractor's performance.

    The LOGCAP, AFCAP, and Balkans Support Contracts comprise a series of task
    orders that commit the contractor to provide services and the government
    to pay for them. The task orders are considered undefinitized contracting
    actions because the terms, specifications, and price of the task orders
    are not agreed upon before performance begins. Undefinitized contract
    actions are used when government interests demand that the contractor be
    given a binding commitment so that work can begin

    immediately and negotiating a definitive contract is not possible in
    sufficient time to meet the requirement.

    The Defense Federal Acquisition Regulation Supplement requires that
    undefinitized contract actions include a not-to-exceed cost and a
    definitization schedule. It also requires that the contract be definitized
    within 180 days or before 50 percent of the work to be performed is
    completed, whichever occurs first. The head of an agency may waive the
    limitations.

    While the AFCAP and BSC task orders have generally been definitized within
    the time allowed by the Defense Federal Acquisition Regulation Supplement,
    and CONCAP task orders do not require definitization,14 most of the LOGCAP
    task orders have not been definitized in the required time even though
    work began on some of the task orders in 2002. For example, Air Force
    contract administrators definitized contract terms, on average, in 23 days
    after issuing a notice to proceed. However, as of June 4, 2004, the Army
    had issued 78 task orders for the LOGCAP contract, of which 54 require
    definitization. (The 24 task orders that do not require definitization are
    cost reimbursable or firm fixed-price task orders.) The Army and the
    contractor have definitized 13 of the 54 task orders, and 30 task orders
    are in the process of being definitized. In addition, the Army and the
    contractor have also agreed to a schedule for submitting qualified
    proposals for the remaining 11 task orders. Table 3 shows the task order
    award date; the contractually required definitization date; the currently
    scheduled definitization date; and the value of the task order for the 10
    oldest undefinitized task orders, which total $1.402 billion.

    14CONCAP task orders do not require definitization since the terms,
    specifications, and price are agreed to before work begins.

    Table 3: Information on the 10 Oldest Undefinitized LOGCAP Task Orders
    Task order Required

                                       Scheduled

    Estimated value of the task ordernumber Description Award date
    definitization date

                                  definitization date

               Base camp support   Aug. 19,    Feb. 15,  July 12,    $216,263,785
                              in     2002        2003      2004
                 Afghanistan
               Base camp support  Sept. 29,    Mar. 26,  July 12,
                              in     2002        2003      2004       144,864,959
                 Afghanistan
               Base camp support   Aug. 23,    Feb. 19,   Sep. 3,     107,399,369
                              in     2002        2003      2004
                  Djibouti
               Base camp support   Oct. 10,    Apr. 6,   July 28,
                              in     2002        2003      2004       425,986,448
                   Kuwait
                   Georgia         Oct. 18,    Apr. 16,  June 28,      14,088,123
                                     2002        2003      2004
                    Secretary of                May 7,    June 7,
                         Defense Nov. 8, 2002    2003      2004         1,883,681
                    Plan
               Base camp support   Dec. 29,    June 27,   July 4,
                              in     2002        2003      2004        68,511,111
                 Afghanistan
                                   Dec. 30,    June 28,   July 5,
              Seaport logistics      2002        2003      2004       136,548,891
              support in Kuwait
               Base camp support Jan. 8, 2003  July 7,   June 21,      51,912,923
                              in                 2003      2004
                   Kuwait
                                               July 3,   July 19,
              Airport logistics  Jan. 4, 2003    2003      2004       234,100,634
              support in Kuwait
    Total                                                       $1,401,559,925

    Sources: U.S. Army (data); GAO (analysis).

    The table does not include task order 59, which is the LOGCAP contract's
    largest task order, with an estimated value of $3.894 billion, as it is
    not among the 10 oldest undefinitized task orders. Work began on this task
    order in June 2003 and according to the contract, it was to be definitized
    by December 2003. According to the Army Field Support Command, the
    definitization process for task order 59 began on May 6, 2004.

    According to the Commanding General of the Army Materiel Command, the Army
    and the contractor have agreed to a schedule for definitizing the
    remaining task orders, and as of May 2004 the contractor has been meeting
    that schedule. Furthermore, if the contractor does not adhere to the
    schedule, the general said that the Army intends to unilaterally
    definitize the contract. Agency officials attribute much of the delay in
    definitizing the task orders to the growing number of task orders, the
    frequent revisions to the task orders, contractor staffing problems, and
    the contractor's antiquated accounting system.

    The Army Has Not Held an Award Fee Board for the LOGCAP Contract

    Timely definitization of LOGCAP task orders has been a long-standing
    problem. In 1997 we reported that the LOGCAP contracting officer (then the
    Army Corps of Engineers) and the contractor had not definitized the LOGCAP
    task orders in a timely fashion. 15 We noted that because the task orders
    had not been definitized, contract provisions that give the contractor
    major incentives to control costs were not effective. Seven years later,
    we continue to have those same concerns. In June 2004, we again reported
    that delays in defining contract terms increase the risk to the government
    by making cost control incentives in award fee contracts less effective.
    16 We have also noted that DOD is required 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 risk to the contractor.17

    The LOGCAP contract requires an award fee board every 6 months, but the
    Army has yet to hold one even though work under the contract began in
    2002. The award fee board is a mechanism for the government to evaluate
    the contractor's overall performance and recommend an amount of award fee.
    Award fees can serve as a valuable tool to control program risk and
    encourage contractors' performance. According to LOGCAP officials, several
    issues have delayed the award fee boards. First, the LOGCAP award fee plan
    has not been finalized; second, no one has been appointed to the award fee
    board; and third, as we noted above, many LOGCAP task orders have not been
    definitized. Definitization is an essential step in the award fee process
    because it establishes the amount of money available for the award fee.

    We believe that the Army will find it difficult to hold a board that
    comprehensively evaluates the contractor's performance to date because
    some customers have not been documenting their LOGCAP experience as
    required. According to the Army's LOGCAP guidance, DCMA and LOGCAP
    customers, as part of "Team LOGCAP," should evaluate and document
    contractors' performance and participate in the award fee boards.18 DCMA

    15GAO/NSIAD-97-63. At that time, LOGCAP was being used to provide
    logistics support in the Balkans.

    16 U.S. General Accounting Office, Rebuilding Iraq: Fiscal Year 2003
    Contract Award Procedures and Management Challenges, GAO-04-605
    (Washington, D.C.: June 1, 2004).

    17 10 U.S.C. S: 2326(e).

    18 Army Materiel Command Pamphlet 700-30.

    documents contractor performance in the periodic situation reports it
    provides the contracting officer and through site-specific performance
    evaluation boards discussed below. On the other hand, customers have not
    been asked by the contracting officer to document their experiences or
    their evaluations of the contractor's performance, and as a result, some
    have not done so. The contracting officer told us that it is important to
    have customers' input. However, many customers with direct knowledge of
    the LOGCAP contractor's performance have left their unit, and capturing
    this information may be difficult. For example, at the 101st Airborne
    Division, the four key officials involved with LOGCAP-the Assistant
    Division Commander for Support, the division's logistics officer, the
    LOGCAP focal point, and the housing officer-are all in the process of
    moving to their next posts.

    DCMA has documented customer-performance evaluations in site-specific
    performance evaluation boards at some locations. In Djibouti, the Marine
    Corps and DCMA hold performance evaluation boards every 2 months to
    evaluate the contractor's performance and provide the contractor with
    feedback. During these meetings, key command officials and DCMA meet to
    evaluate the contractor's performance using the evaluation criteria
    established in the LOGCAP contract. While no fee is awarded, scores are
    tabulated and provided to the contracting officer. Performance evaluation
    boards have also been held for some of the Afghanistan and Iraq task
    orders.

        Lessons Learned Have Not Been Systematically Collected, Shared, or
        Implemented

    Despite over 10 years of experience in using logistics support contracts,
    the Army continues to experience the same types of problems it experienced
    during earlier deployments that used LOGCAP for support. For example, in
    our previously cited 1997 report on the Army's use of LOGCAP in Bosnia, we
    cited inadequate training as a cause of many of the Army's problems in
    controlling contract costs.19 In that report we recommended that the Army
    provide commanders with training on the fundamentals of using the LOGCAP
    contract. In our 2000 report on U.S. Army, Europe's, use of BSC we again
    cited the need for better training. 20 In 2004 Army officials told us
    again that LOGCAP training needs to be improved. In addition to training
    concerns, we also reported in 1997 that U.S. Army, Europe, officials felt
    the contractor's cost-reporting system

    19 GAO/NSIAD-97-63. 20 GAO/NSIAD-00-225.

    used in Bosnia was not sufficient to track the cost of the operation or
    report on how LOGCAP funds were spent. As we noted above, from September
    2003 through May 2004, DCMA expressed similar concerns about the LOGCAP
    contractor's current cost reports.

    The Army requires that lessons learned be captured. Army Regulation
    700137, which establishes the LOGCAP program, makes customers that receive
    services under the LOGCAP contract responsible for collecting lessons
    learned. 21 However, there are no procedures in place to ensure that
    lessons learned are collected and shared and, as we noted above, LOGCAP
    customers are generally not documenting their experiences. In the Army, a
    primary organization responsible for collecting lessons learned is the
    Army Center for Lessons Learned. The center collects and analyzes data
    from a variety of current and historical sources, including Army
    operations and training events, and produces lessons for military
    commanders, staff, and students. The Center for Army Lessons Learned
    database contains numerous articles on using logistics support contracts,
    but our review found little information on the challenges and problems
    commanders have faced in using these contracts or what commanders should
    plan for and anticipate when using them. For example, we found nothing on
    the challenges that commanders' face in controlling costs. While U.S.
    Army, Europe, which has had the most experience in using logistics support
    contracts, has periodically advised us of the steps it has taken to
    improve its management of BSC, it has not consolidated these lessons
    learned and made them available for others. U.S. Army, Europe, does
    maintain a lessons learned database that captures the experiences of
    soldiers in Bosnia and Kosovo, including the use of LOGCAP and BSC;
    however, it might be difficult to access the database as it is not
    mentioned on the U.S. Army, Europe, Web site. In a meeting with the
    commanding general of the Army Materiel Command, he agreed that there was
    a need for a lessons-learned system, which would "push" lessons and best
    practices down to the organizations using the contract.

    The LOGCAP and the Balkans Support contracts both require that the
    contractor collect lessons learned and provide the government with them.
    Generally, these lessons learned are collected at the small task level
    (e.g., how to prevent slipping in the shower) rather than at the
    macro-level. While useful, these types of lessons-learned do not address
    systemic contract management problems or help improve contract management.
    In

    21 Army Regulation 700-137.

      The Military Services' Efforts to Ensure That Contractors Perform in an
      Economical, Efficient, and Cost Conscious Manner Vary Widely

    addition, the contractor does not have an internal lessons learned
    program. Instead, contractor personnel take lessons they have learned as
    they move from deployment to deployment, and contract to contract.

    OMB circular A-123 requires all managers of federal funds to ensure that
    cost-effective controls be implemented for the expenditure of appropriated
    funds, and the Army's senior leadership has recognized the Army's
    responsibility to be good stewards of the taxpayers' dollars. While
    contract oversight is the responsibility of the contracting officer, as
    indicated in the OMB circular, all managers have a responsibility to
    ensure that agency programs operate in an economical and efficient manner
    and that costs are controlled. Efforts to control costs vary widely both
    across and within logistics support contracts. The Army and the Army
    Central Command did not make the need to control LOGCAP spending for
    activities in Iraq and Kuwait a high priority until late 2003. However,
    CJTF180 made controlling LOGCAP costs in Uzbekistan an important goal
    during the early days of Operation Enduring Freedom. Managers for BSC,
    CONCAP, and AFCAP recognized the need to be good stewards of the
    taxpayers' dollars and have taken steps to control costs. We have noted
    that when the customer reviews the contractor's work for economy and
    efficiency, savings are realized. However, steps to conduct these reviews
    have not been taken by LOGCAP customers at all task order locations. In
    addition, both the Army and the Air Force believed that at times they had
    no other option but to use their logistics support contracts to obtain
    goods and services even when they knew that other methods might have
    resulted in lower costs. For example, the Army had the contractor provide
    housing for an Army division although it was more costly than allowing the
    unit to build the housing itself because at the time the Army decided to
    use LOGCAP, it was the only means available to get the 101st Airborne
    Division into housing by a November 15, 2003, deadline. Similarly, the Air
    Force used the AFCAP contract to supply commodities for its
    heavyconstruction squadrons because it did not deploy with enough
    contracting and finance personnel to buy materials quickly or in large
    quantities although the use of the contract to procure and deliver
    commodity supplies required that the Air Force pay the contractor's costs
    plus an additional award fee.

    Efforts to Control Costs We recognize that cost control should not be the
    primary consideration for Vary across Logistics commanders when U.S.
    forces are involved in major combat operations or Support Contracts when
    the operational environment or security situation requires the

    presence of more troops or the relocation of forces. However, cost

    constraint did not become a factor in using LOGCAP in Iraq and Kuwait
    until almost a year into the operations in Iraq. The Army Central Command,
    the Army command responsible for paying for LOGCAP, had no spending limits
    for LOGCAP until spring 2004, when a $6.5 billion limit was placed on the
    amount that could be spent in fiscal year 2004 on the basis of the
    estimated cost of required work. The spending limit followed a December
    2003 message from the Army Vice Chief of Staff that asked units to control
    costs and look for alternatives to the LOGCAP contract and the realization
    that LOGCAP costs were growing rapidly. According to a study commissioned
    by the Army Budget Office, from September 2003 through January 2004,
    projected LOGCAP costs for services in Kuwait, Iraq, and Afghanistan grew
    from $5.8 billion to $8.6 billion. In late 2003, the Army Central Command
    requested that "Team LOGCAP" review the cost estimates for the task orders
    being used in Kuwait, Iraq, and Afghanistan to determine if the cost
    estimates could be reduced. According to the Army Budget Office, this
    review reduced the estimated cost of using LOGCAP in the Army Central
    Command's area of responsibility from $8.6 billion to $6.5 billion,
    although most of the reduction came from the use of more accurate cost
    data rather than a reduction in requirements or more economical
    approaches. According to the Army Central Command, commanders in the area
    of operations have established additional review procedures. For example,
    all requests for services greater than $50,000 must be approved by a
    general officer before the requests can be considered for approval by the
    local acquisition review board. Additionally, all requests that would add
    services to the LOGCAP contract valued at more than $10 million must be
    reviewed by a LOGCAP and service contract review board. Members of the
    review board include the deputy commanding general for support and other
    high-ranking members of the command staff.

    As we noted earlier, the Army Audit Agency examined the use of LOGCAP in
    Turkey,22 Afghanistan,23 and Uzbekistan.24 They reported that commanders
    in each location had adequate procedures in place to control costs. In
    particular, the Army Audit Agency reported that program

    22 U.S. Army Audit Agency, Management of Resources-Army Forces Turkey,
    Army Audit Agency, A-2004-0033-IMU (Oct. 23, 2003).

    23 U.S. Army Audit Agency, Logistics Civil Augmentation Program-Camp
    Stronghold Freedom, Uzbekistan, Army Audit Agency, A-2003-0110-IMU (Dec.
    21, 2002).

    24 U.S. Army Audit Agency, Operation Enduring Freedom-Logistics Civil
    Augmentation Program, Army Audit Agency, A-2004-0156-IMU (Feb. 27, 2004).

    managers in Uzbekistan and Turkey had made cost control a priority and in
    Afghanistan had taken appropriate action to control costs and ensure
    effective stewardship.

    Cost control has long been a matter of importance for contract
    administration officials for CONCAP, AFCAP, and BSC. Navy and Air Force
    officials believe that using the CONCAP and AFCAP contracts to fulfill a
    requirement is often the most expensive option available; consequently,
    they have taken steps to control costs. For example, to control costs,
    CONCAP establishes a budget for each project and works closely with the
    contractor and customer to agree on requirements and costs before the
    project gets under way.

    The AFCAP contracting officer and program managers have retained
    costcontrol responsibilities and review and substantiate the contractor's
    cost estimate at the beginning of each task order. At the initiation of
    each task order, AFCAP contract administrators negotiated costs proposed
    by the contractor in order to receive advantageous pricing for the
    government. Additionally, the government's review of proposed costs allows
    it to better define its requirements for the contractor. We reviewed
    several examples of the memoranda detailing these negotiations and found
    that the government developed cost estimates that were significantly less
    than the contractor's original proposal. For example, the government
    achieved reductions that ranged from 6 percent to 97 percent on the basis
    of the review and substantiation of the contractor's cost proposals.
    Regarding the largest proportionate reduction, the AFCAP contractor
    estimated that it would cost $23.1 million to provide and maintain
    equipment for Air Force construction units However, in reviewing this
    proposal, the AFCAP contract administrator determined that the government
    had overstated its requirements, resulting in a 97 percent, or $22.3
    million reduction.

    U.S. Army, Europe's, focus on cost control has increased since BSC was
    first awarded. Beginning in the fall of 2001, U.S. Army, Europe, has taken
    a number of steps to control the costs of BSC, as shown below:

    o  	In fiscal year 2003, resource managers established a cost reduction
    goal for the contract.

    o  Command leadership issued guidance on the need to be cost conscious.

    o  	Cost control became the most important criterion for determining the
    contractor's award fee.

    o  	The command sets cost-control goals for the contractor at every award
    fee board.

        Steps to Ensure That the Contractors Provide Service in an Economical and
        Efficient Manner Have Not Been Taken at All Task Order Locations

    Customers who use the logistics support contracts have a role in ensuring
    that the contracts are used in an economical and efficient manner, and our
    previous work has shown that when government officials (including
    customers) review the contractor's work for economy and efficiency,
    savings are generated. For example, in part as a result of our previously
    cited 2000 report on managing BSC, U.S. Army, Europe, has developed a
    proactive approach to managing BSC and ensuring that the contractor
    provides services in an economic and efficient manner. U.S. Army, Europe,
    reported savings of approximately $200 million by reducing services and
    labor costs, and by closing or downsizing camps that were no longer
    needed. The $200 million in savings is about 10 percent of the current
    contract ceiling price of $2.098 billion. In addition to these savings,
    U.S. Army, Europe, routinely sends in teams of auditors from its internal
    review group to review practices and to make recommendations to improve
    economy and efficiency. Examples of the audit results are as follows:

    o  	In March 2001, U.S. Army, Europe, auditors reported that shuttle bus
    services within Task Force Falcon (Kosovo) were not well utilized and that
    the services should be reduced.25 The auditors estimated that reducing

    bus service would result in a savings of more than $700,000 during the
    remaining 3 years of BSC.

    o  	In September 2001Army auditors recommended that the Army provide the
    contractor with gravel and sand as government-furnished equipment partly
    because the contractor was maintaining excessive inventories of these
    materials.26 Auditors estimated that by providing sand and gravel as
    government-furnished materiel, the Army could save approximately $365,000
    over the remaining 3 years of the contract.

    The Marines have also taken actions to ensure that the contractor is
    working in a cost-efficient and economical manner. When Marine Corps
    forces replaced Army forces in Djibouti in December 2002 (to provide
    humanitarian assistance and fight the Global War on Terrorism), they also
    took over responsibility for funding LOGCAP services. Marine commanders
    immediately undertook a complete review of the statement of work and were
    able to reduce the $48 million task order by an

    25 U.S. Army, Memorandum for the Chief of Staff, Task Force Falcon, Review
    of Shuttle Bus Service in Task Force Falcon, Audit Report TFF-056 (Mar.
    22, 2001)(unpublished).

    26 U.S. Army, Memorandum for the Chief of Staff, Task Force Falcon, Cost
    of New and Recurring Gravel and/or Sand Requirement, Audit Report TFF-068
    (Sep.17, 2001)(unpublished).

    estimated $8.6 million, or 18 percent.27 The savings came by eliminating
    or reducing services in the following areas:

    o  building and construction projects-$2.8 million,

    o  equipment-$2.9 million,

    o  labor hours-$2.0 million, and

    o  materials and miscellaneous items-$0.892 million.

    Marine Forces Central Command deploys teams of subject matter experts to
    Djibouti semiannually to identify services that could be eliminated,
    reduced, or changed. Since its initial review, the Marines have identified
    potential additional savings totaling more than $2 million, including
    $75,000 a year as a result of having the contractor switch from a popular
    commercial laundry detergent to a detergent available through the Marine
    Corps' supply system.

    In the Balkans and in Afghanistan, command policy requires a periodic
    review of all services being provided by contractors to determine if the
    appropriate services as well as the appropriate level of services are
    being provided. During our visit to Bosnia in October 2002, commanders
    reported that these reviews resulted in a yearly cost savings of
    approximately $120,000.28 Among the services reduced were cleaning and
    janitorial services and operating hours for wash racks and fuel service
    facilities. U.S. Army, Europe, requires that these reviews be conducted
    three times a year prior to the award fee boards. In Afghanistan CJTF-180
    guidance requires that the reviews be held monthly; however, the Army
    Audit Agency noted that these reviews were not taking place. In response
    to the Army Audit Agency report, the command revised its guidance to
    include procedures for the reviews.

    On the basis of our visit to Kuwait in December 2003 and a review of
    CJTF-7 policies, it appears that neither the Army Central Command in
    Kuwait nor CJTF-7 in Iraq have established similar policies mandating
    regularly scheduled reviews of services. However, some reviews of services
    have been undertaken since January 2004, as shown below:

    27 Since the Marines assumed this mission, they have added requirements to
    the task order. As a result the May 2004 estimated value of the task order
    is $107 million. This amount would have been higher if not for the Marine
    Corps' efforts to control costs.

    28 The $120,000 is in addition to the U.S. Army, Europe, estimated cost
    savings of $200 million mentioned above.

    o  	On the basis of the Army Central Command estimate that $2.6 million
    could have been saved in March 2004 if it removed food service from the
    LOGCAP contract and contracted directly for food service at six locations
    in Kuwait, we calculated that this could save almost $31 million a year.
    The transition has been directed to take place in June 2004, and a
    schedule has been established setting out the dates on which each location
    is to transition. By eliminating the use of LOGCAP and making the LOGCAP
    subcontractor the prime contractor, the command reduced meal costs by 43
    percent without a loss of service or quality.

    o  	During a review of task order 59, change 7, CJTF-7 was able to reduce
    the estimated cost of the task order by over $108 million by eliminating
    services and an extra dining and laundry facility.

        Circumstances Did Not Always Allow the Army and Air Force to Select a More
        Economical and Efficient Method to Obtain Services

    The Need for Housing Made Using LOGCAP the Only Viable Choice for the Army

    Circumstances did not always allow the Army and the Air Force to use a
    more economical and efficient means to obtain services. Both the Army and
    the Air Force believed they had no other options but to use their
    logistics support contracts to obtain goods and services even when they
    knew that other methods would have resulted in lower costs. For example,
    as discussed below, CJTF-7 concluded that it had no choice but to use the
    LOGCAP contract to provide housing for the 101st Airborne Division despite
    the fact that CJTF-7's own cost estimate showed that having the contractor
    provide the housing would cost the Army tens of millions of dollars more
    than having the 101st Airborne Division build its own housing. Air Force
    engineering squadrons used the AFCAP contract to provide supplies for
    construction projects because they were not able to deploy with sufficient
    assets to obtain the needed supplies. However, by using the contractor,
    the Air Force paid an award fee on task orders with limited risk.

    In July 2003, a decision was made to extend the deployment of the 101st
    Airborne Division through February 2004. As a result, getting the
    division's soldiers out of tents before the onset of winter in northern
    Iraq became a priority for division leadership. To achieve the division's
    goal of getting its soldiers out of tents by November 15, 2003, the
    division, in conjunction with CJTF-7, considered three courses of action
    as follows:

    o  	Allow the division to build its own housing, purchasing the necessary
    material and using the division's engineer brigades to do the
    construction. This was the division's preferred option, as division
    leadership felt it would get the troops "out of tents" by November 15,
    2003, and also provide a valuable training opportunity for its engineers.
    However, CJTF-7 concluded that this was not a viable option, since it
    would require the use

    of military construction funds, which CJTF-7 believed were no longer
    available. According to an official with CJTF-7, the task force did not
    believe that military construction funds would be available until November
    2003 at the earliest, so work would not start until December 2003 and
    possibly as late as February 2004.29

    o  	Divide the division's entire housing requirement into 33 individual
    projects so that the individual projects could be built with operation and
    maintenance funds, allowing the division to build its own housing.30 CJTF7
    concluded that this was not a legally sound option, as it would involve
    dividing one project into several projects.

    o  	Obtain the housing under the LOGCAP contract. The Army determined that
    CJTF-7 could use operation and maintenance funds to buy movable buildings,
    since the buildings could be moved as necessary for mission requirements
    unlike nonmovable buildings, which would require military construction
    funds. This was the course of action ultimately accepted, and in early
    October 2003, the administrative contracting officer directed the LOGCAP
    contractor to provide the housing for the 101st Airborne Division. The
    statement of work required that the housing be provided by November 15,
    2003. However, according to officials from both CJTF-7 and the 101st
    Airborne Division, the contractor did not meet the scheduled delivery
    date.

    The decision to use the LOGCAP contract carried a substantial cost
    premium. The division estimated that it would cost about $25 million to
    build its own housing. The $25 million included building material for the
    housing, as well as showers, power generation and heating and air
    conditioning. Latrines were not included in the cost estimate and were to
    be provided by a contractor. The government's cost estimate to use LOGCAP
    to provide housing, showers and power generation, was about $65 million
    plus over $8 million in administrative costs and potential award fee. The
    $65 million included the purchase of (1) reusable containers for housing
    and showers, (2) maintaining the containers, (3) installing the units at
    locations around northern Iraq, and (4) procuring and installing power. In
    discussions with CJTF-7 on how housing was obtained, we were told that
    using the LOGCAP contract was more costly

    29 This timeline is based on the CJTF-7 official's assumption that the
    fiscal year 2004 Supplemental Appropriation for the global war on
    terrorism would be passed by November 2003.

    30 Congress allows the services to use funds from its operations and
    maintenance appropriation to build construction projects with an estimated
    cost of less than $750,000. Projects costing over $750,000 generally need
    congressional notice.

    The Air Force and Others Have Used AFCAP to Purchase Supplies Despite the
    Fact That It May Not Be a Cost-Effective Use of the Contract

    then having the 101st Airborne Division build the housing units
    themselves; however, at the time they made the decision to use LOGCAP,
    they concluded that it was the only legal means available to get the 101st
    into housing by the November 15 deadline.

    Although buying the trailers was more expensive than allowing the division
    to build its own housing, the cost of the two options is not directly
    comparable because the trailers are reusable and moveable whereas the
    housing built by the division is not. 31 Should the trailers ultimately be
    reused elsewhere, thus reducing future housing costs, the disparity
    between the options could be reduced in the long term. At this time, how
    well the trailers will hold up in the Iraqi climate and the extent to
    which the trailers will be reused once they are no longer needed in
    northern Iraq is unknown, so a full cost comparison cannot be done.

    The Air Force has used the AFCAP contract to supply commodities such as
    building materials, tools, and equipment for its heavy construction
    squadrons. According to Air Force officials, engineering squadrons use the
    AFCAP contract for commodities because they do not deploy with enough
    contracting and finance personnel to buy materials quickly or in large
    quantities. Additionally, the U.S. Agency for International Development
    has used the contract to provide disaster relief and humanitarian
    assistance supplies. In many instances, the contractor provided a service
    for the customer, such as equipment maintenance, in addition to the
    procurement of the supplies. In other cases, however, the contractor
    simply bought the supplies and delivered them to the customer. The
    contractor received more than $2 million in award fees since February 2002
    for these commodity supply task orders. While contractually permitted, the
    use of a cost-plus award fee contract as a supply contract may not be
    cost-effective. In these instances, the government reimburses the
    contractor's costs and pays additional award fees for task orders with
    little risk.

    The Air Force and other federal agencies that use the contract to procure
    and deliver commodity supplies are required to pay the contractor's costs
    plus an additional award fee-a 1 percent base fee and up to 6 percent
    award fee-on each task order performed. Air Force program managers have
    recognized that the use of a cost-plus award fee contract to buy
    commodities may not be cost-effective. According to these officials, the

    31 The building material might have been reused, however, as it was in the
    Balkans.

      DOD Did Not Always Have Enough Personnel to Manage Its Logistics Support
      Contracts, and Available Personnel Often Lack the Training to Effectively Use
      and Monitor the Contract

    next version of the contract may allow for either firm-fixed prices or
    costplus fixed fee procurements on these types of task orders. Firm-fixed
    price or cost-plus fixed fee contracts will reduce the potential amount of
    fees paid to the contractor, thereby providing the government with a more
    cost-effective alternative.

    Given the scope and complexity of logistics support contracts, there were
    not always enough personnel responsible for contract oversight and
    monitoring the performance of the contractor, and oversight personnel have
    not always been adequately trained. DOD deploys civilian and military
    personnel to provide contract administration and oversight of its
    logistics support contractors. For example, DCMA has deployed
    administrative contracting officers to several countries throughout
    southwest and central Asia and the Balkans to provide on-site contract
    administration. The Defense Contract Audit Agency has provided audit
    assistance in contingency locations to ensure that the costs claimed by
    the logistical support contractors are appropriate. The military services
    have also deployed personnel to assist unit commanders that are receiving
    contract services and to monitor the performance of the contractor.

    We could find no guidelines on the appropriate number of DCMA oversight
    personnel and hence relied on the judgments expressed in DCMA's situation
    reports and the views of oversight personnel with whom we spoke as to the
    adequacy of staffing. A DCMA official told us there are no specific
    criteria for determining the size of a deployed contract administration
    team. Each request for assistance is reviewed, and the team size is based
    on the risk associated with the contract. DCMA has recognized its human
    capital challenges, including its staffing challenges, and has developed a
    strategic plan to address them.

    DCMA officials believe that additional resources are needed to effectively
    support the LOGCAP and AFCAP contracts. Administrative contracting
    officers in Iraq, for example, have been overwhelmed with their duties as
    a result of the expanding scope of some of the task orders. Additionally,
    some Army and Air Force personnel with oversight responsibilities did not
    receive the training necessary to effectively accomplish their jobs. On
    the other hand, the Navy has provided contract monitors that are qualified
    and trained for their responsibilities under the contract. In addition,
    military units receiving services from the contracts generally lacked a
    comprehensive understanding of their roles and responsibilities. For
    example, officers do not understand their role in establishing LOGCAP
    requirements.

        Limited Number of Personnel Support the Oversight of the Logistics Support
        Contracts

    Several defense agencies and the military services deploy civilian and
    military personnel to assist with contract administration and oversight.
    For example, as of April 14, 2004, DCMA had approximately 65 personnel
    deployed to locations in southwest and central Asia to provide on-site
    contract administration. The agency has contracting officers in Iraq,
    Kuwait, Qatar, Afghanistan, Uzbekistan, and Djibouti in support of the
    LOGCAP and AFCAP contracts, as well as other contracts. In addition, three
    DCMA personnel in Bosnia and three in Kosovo have been deployed to support
    the Balkans Support Contract and other contracts.

    The Defense Contract Audit Agency provides contract oversight and audit
    assistance for the military at deployed locations. The agency planned to
    have 31 auditors in its Iraq branch office by May 31, 2004, to oversee the
    LOGCAP contract as well as other contracts. Defense Audit Agency offices
    located at contractor facilities in the United States also provide
    contract oversight. The agency oversees the Balkans Support contractor on
    request from the Corps of Engineers-Transatlantic Programs Center.

    The Army has also deployed military personnel to assist unit commanders in
    implementing services provided by its logistics support contractor. As of
    April 14, 2004, 19 members of the 66-person support units were deployed in
    the Persian Gulf and central Asia. Members of the units are not
    contracting officers and cannot direct the contractor nor make changes to
    the contract. Members advise commanders on LOGCAP and help customers
    develop statements of work. Members also develop independent government
    cost estimates. Frequently, the unit members are responsible for several
    task orders concurrently.

    While the defense agencies have effectively supported the military in
    these locations, DCMA administrative contracting officers in Iraq believe
    that they need an increase in the number of qualified staff to fully meet
    their oversight mission. DCMA not only provides contract administration
    for the LOGCAP and AFCAP contracts, it also supports other large contracts
    in Iraq. The Army requires that DCMA review and approve purchase
    requisitions valued at more than $2,500 for LOGCAP task orders. A DCMA
    official who served in Iraq estimated that the six administrative
    contracting officers in his command reviewed from 200 to 500 requisitions
    a week. Another DCMA official indicated a need to hire contracting and
    procurement technicians to improve the operations of DCMA in Iraq.
    Moreover, Marine Forces, Central Command officials we spoke to believe
    that the number of DCMA personnel providing contract oversight in Djibouti
    is insufficient. As we noted above, DCMA has approximately 65 contracting
    officials deployed to support the LOGCAP and AFCAP

    contracts in the Central Command's area of responsibility having an
    estimated value of more than $6.5 billion. In contrast, DCMA deployed a
    30-member team to administer the LOGCAP contract in Bosnia in 1996. At
    that time, the value of the work in Bosnia was approximately $461.5
    million. Essentially, in the Central Command's area of responsibility,
    including Iraq, DCMA had slightly more than twice the number of people it
    had in the Balkans and an estimated value of work that is almost 15 times
    more than in the Balkans.

    DCMA officials in southwest Asia told us that they need an additional
    administrative contracting officer and property administrator to account
    for $2 million worth of construction tools and equipment that are
    currently unaccounted for in the AFCAP contract. Under AFCAP task orders
    in southwest and central Asia, the procuring contracting officer delegated
    certain administrative responsibilities to the contracting officers, to
    include property administration. However, DCMA did not assign a property
    administrator for the AFCAP contract. According to officials, DCMA
    deployed one property administrator who was responsible for all property
    in the theater. An additional administrative contracting officer and a
    property administrator would assist the Air Force to close out the
    approximately 80 completed task orders in southwest Asia. The Air Force
    cannot close out completed task orders until the property is accounted
    for.

    According to DCMA, it has limited resources to support the military at
    deployed locations because staffing has been reduced by 55 percent over
    the last 11 years. DCMA uses its in-plant personnel, who oversee the
    acquisition of major weapon systems, such as aircraft, to support its
    contingency contract administration services. Increasing the number of
    deployed DCMA personnel means reducing the number of DCMA personnel at
    defense plants. One possible approach to overcome staffing shortages is
    being tried in the Balkans. DCMA has reduced its presence there and has
    replaced some U.S. citizens with contracted host country nationals that
    assist the administrative contracting officers and quality assurance
    personnel. This has allowed DCMA to adjust its limited pool of personnel.

        Military Members with Key Oversight and Management Roles Either Had No
        Training or Insufficient Training to Do Their Jobs

    The personnel deployed by the military services to monitor the performance
    of the logistical support contractors have not always received the
    training necessary to accomplish their missions. Army guidance on the use
    of the LOGCAP contract describes the logistics support unit as a
    significant player in LOGCAP event execution. 32 Logistics support unit
    members may be called upon to write statements of work, prepare
    independent government cost estimates, review the contractor's cost
    estimates and technical plans, and act as an interface between the
    customer and the contractor. According to LOGCAP officials, the original
    members of this unit were deployed in the early stages of Operation Iraqi
    Freedom. When the original members returned home, the unit was staffed
    with individuals with no prior LOGCAP or contracting experience. For
    example, most of the replacement support unit members we met during our
    December 2003 trip to Kuwait had received only a 2week training session
    before deploying and had little experience or training in developing
    independent government cost estimates. These cost estimates are used to
    judge the reasonableness of the contractor's cost proposal and to
    determine if sufficient resources are available to fund the statement of
    work. In a 2004 report on the use of LOGCAP in Afghanistan, the Army Audit
    Agency also noted that members of the logistics support unit needed better
    training, particularly when it came to developing independent government
    cost estimates.33

    The Air Force has not consistently provided training for its personnel
    overseeing the performance of the AFCAP contractor. The Air Force appoints
    quality assurance evaluators (who are subject matter experts) to ensure
    that the contractor is performing in accordance with the task order
    statement of work. Air Force guidance requires quality assurance personnel
    to be appointed and trained prior to assuming quality assurance
    responsibilities.34 However, the Air Force quality assurance evaluators
    assigned in southwest and central Asia were not consistently appointed,
    trained, or performing their responsibilities. Specifically, AFCAP
    contract administrators have not consistently provided Air Force quality
    assurance evaluators with appointments and training. For example, while a
    quality assurance evaluator had been appointed for a major construction
    project

    32 Army Materiel Command Pamphlet 700-30.

    33 Army Audit Agency A-2004-0156-IMU (Feb. 27, 2004).

    34 U.S. Air Force, Performance Based Service Contracts, Air Force
    Instruction 63-124 (Apr. 1, 1999).

    in Qatar, the evaluator told us that he had received no training on the
    AFCAP contract or on his duties and responsibilities as an evaluator.
    Quality assurance evaluators have also not been effectively documenting
    the performance of the contractor. Without comprehensive performance
    evaluations conducted regularly by quality assurance evaluators, the
    government has had difficulty in determining the amount of fee to award
    the contractor.

    Conversely, the CONCAP contract administrator has technically qualified
    staff providing day-to-day oversight at specific job sites. During our
    visit to Guantanamo Bay, Cuba, we observed that the Navy Facilities
    Engineering Command has the basic construction contract administration
    functions performed by personnel in one of the three following general
    categories:

    o  	Engineers, including degreed engineers or architects, with many
    licensed by one or more states. In addition to formal education and
    licensure, engineers receive Navy-specific training in safety, quality
    management, and other construction-related areas. Typically, engineers
    serve in contracting officers' technical representative positions and Navy
    technical representative positions.

    o  	Engineer technicians that are generally trade-specific individuals
    with extensive construction-related background. Their positions are often
    titled as "quality assurance representative." As with engineers, they
    receive Navy-specific training as part of their position. In certain
    instances, technicians may serve as Navy technical representatives,
    usually when the work is of limited scope. In those cases where an
    engineer serves as the Navy technical representative or contracting
    officer's technical representative, it is common practice to have one or
    more technicians working under the technical supervision of the engineer
    in the management and oversight of contract work.

    o  	Contract specialists and contracting officers that have extensive
    education and training requirements. All Navy Facilities Engineering
    Command personnel in this category are appropriately trained, certified,
    and warranted at the appropriate level.

    DOD Personnel Often Customers using the logistics support contracts also
    have a role in Lacked the Training to ensuring that the contracts are used
    in an economical and efficient Effectively Use the manner, yet many are
    unaware that they have any role in the contract Contract management or
    oversight process. We found that officers and

    noncommissioned officers using the LOGCAP and AFCAP contracts had

    little understanding of these contracts and did not fully understand their

    contract management responsibilities because they had had little or no

    training on using contractors, including the LOGCAP contractor, on the
    battlefield. In interviews, Army customers told us that they knew nothing
    about LOGCAP before they deployed and had received no training regarding
    their roles and responsibilities as a LOGCAP customer. For example, a
    senior logistics officer in the 101st Airborne Division told us that the
    Army does not educate its battalion and brigade commanders on LOGCAP or on
    the Army regulation governing the contract. Furthermore, he noted that
    information about the LOGCAP contract was not included in any of his
    precommand training courses.

    In our 2003 report on DOD's use of contractors to support deployed forces,
    35 we noted a lack of training or education for commanders or senior
    personnel on the use of contractors, and we recommended that DOD develop
    training courses for commanding officers and other senior leaders who are
    deploying to locations with contractor support. DOD agreed with our
    recommendation. We also noted in our 2003 report that U.S. Army, Europe,
    had responded to our earlier concerns regarding the lack of training for
    commanders and now includes contract familiarization during mission
    rehearsal exercises for the Balkans deployments.

    The Commanding General of the Army Materiel Command has also expressed his
    concerns about the lack of training regarding LOGCAP for soldiers. In an
    e-mail message to the Army Deputy Chief of Staff for Logistics discussing
    reasons why the LOGCAP contractor is slow to respond to the Army's needs,
    the general said:

    "The first is the lack of preparation our officers have for dealing with
    LOGCAP: we don't train this as a capability that our officers consider
    during deliberate planning. This unfamiliarity with LOGCAP in general
    contributes to considerable delay up front, as we rely on the requesting
    unit to generate the statements of work that are the catalyst for the
    entire process . . . ."

    In our previously cited 2000 report on BSC, we highlighted the problem of
    poorly written statements of work. For example, we noted that the Army did
    not provide the contractor with guidance regarding the level of power
    generation redundancy (i.e., backup power) needed in Kosovo. As a result,
    the contractor bought and leased generators to provide 100 percent power
    redundancy. Army officials later told us that much less redundancy was
    needed and by reducing the redundancy and shifting from leased to

    35 GAO-03-695.

    purchased generators, the Army was able to save approximately $85 million
    over 5 years. The problem of poorly written statements of work continues
    with the current LOGCAP contract. For example, task order 59 requires the
    contractor to provide water for units within 100 kilometers of designated
    points. However, the statement of work does not indicate how much water
    needs to be delivered to each unit or how many units will need water. The
    statement of work also requires that the contractor maintain the
    capability to recover vehicles. According to the contractor's deputy
    project manager, problems with this requirement include the following: (1)
    there is no indication if the contractor will provide the primary vehicle
    recovery support or be the backup to the Army, (2) the time frame for
    recovery is not specified, and (3) whether the contractor is supposed to
    recover vehicles both on and off road is not specified. Without this
    information, the contractor cannot determine how to meet the needs of the
    Army and may take excessive steps to ensure customers' satisfaction.
    According to LOGCAP guidance, statements of work must be specific in
    detail and to the point.

    AFCAP program managers expressed frustration that Air Force customers
    lacked institutional knowledge of the contract. AFCAP program managers
    stated that they have attempted to institutionalize training for the Air
    Force's major commands but have been unsuccessful to date in convincing
    the commands to send representatives for training. According to the
    program managers, the Air Force's major commands are not interested in the
    AFCAP contract until its services are needed; whereupon the program
    managers are required to train the command personnel.

    Conclusions 	Over the past few years, DOD and the Army have developed
    doctrine and guidance for using logistics contracts to support operations,
    which include the early identification of requirements, and involving the
    contractor in developing comprehensive statements of work as recurring
    themes. These principles support a concept that when the contractor has
    adequate time to plan and prepare to accomplish its mission, service
    quality improves and costs are lowered. However, planning for the use of
    the LOGCAP contract to support the troops in Iraq did not begin until
    after the fall of Baghdad, was not comprehensive, and did not include the
    contractor. Instead, a piecemeal approach to planning occurred and
    resulted in constant changes to the statement of work and forced the
    contractor to scramble to meet contract requirements, resulting in unmet
    expectations, lower-quality services, and unnecessary costs. Even
    considering the inherent uncertainty of wartime planning, a more
    deliberate approach

    involving the contractor, as discussed in the doctrine and guidance,
    would, in our opinion, have resulted in a better product at a lower cost.

    Our previous and current work has repeatedly shown that when customers of
    logistics support contracts review the types and level of services
    provided by contractors for both economy and efficiency, savings can be
    realized. While some customers have developed procedures for periodic
    reviews of recurring services using subject matter experts, others have
    not. Until all customers develop review programs, DOD will have limited
    assurance that it is paying only for services it truly needs.

    DOD, particularly the Army, has had more than 10 years of experience using
    logistics support contracts such as LOGCAP and the Balkans Support
    Contract, yet it often makes the same mistakes in new deployments. Unless
    it establishes a lessons learned program, DOD is likely to repeat the same
    costly mistakes it has made since first using logistics support contracts
    to support deployed forces.

    The lack of contract training for operational commanders, customers, and
    others with responsibilities to use, manage, and oversee logistics support
    contracts has adversely affected the use of such contracts to support
    deployed forces in contingency operations. Commanders and other senior
    leaders must understand that they have a key role in identifying
    requirements, ensuring that the contractor works in a cost-effective
    manner, and evaluating contractors' performance. Without such an
    understanding, the government's ability to control contract costs and
    ensure quality service at the best possible price is severely limited.

    Recommendations for 	To promote better planning, improve oversight, and
    improve efficiency when using logistics support contracts to support
    military operations, we

                                    Executive Action

    recommend that the Secretary of Defense ensure that the four following
    actions be taken:

    o  	Emphasize to the heads of DOD components the need to comply with
    guidance to identify operational requirements that are to be provided by
    contractors early in the planning process and involve the contractor in
    the planning, where practicable. If security concerns prevent the
    involvement of the contractor, direct that unclassified statements of work
    be developed and provided to the contractor.

    o  	Direct the service secretaries to establish teams of subject matter
    experts who will periodically travel to locations where contractor
    services are being provided by logistics support contracts to evaluate and
    make

    recommendations on (1) the appropriateness of the services being provided,
    (2) the level of services being provided, and (3) the economy and
    efficiency with which the services are being provided.

    o  	Implement a department-wide lessons learned program that will capture
    the experiences of others who have used logistics support contracts. This
    system should include lessons learned from operations as well as lessons
    learned and best practices documented by DOD's audit agencies.

    o  Develop and implement training courses for commanding officers and

      Agency Comments
      and our Evaluation

    other senior leaders who are deploying to locations with contractor
    support. Such training should provide information on the role of
    commanders and others in the contracting process. Specifically, the
    training should provide instruction on (1) developing and documenting
    requirements, (2) ensuring that contractors perform in a cost-effective
    manner, and (3) assessing contractors' performance. The training should
    also include information on the limits of commanders' authority vis-`a-vis
    contractors and include information on the roles and responsibilities of
    DCMA and other oversight agencies.

    In written comments on a draft of this report the Acting Deputy Secretary
    of Defense for Logistics and Materiel Readiness stated that the department
    concurred with the report and all its recommendations. The department's
    comments are reprinted in appendix II.

    In its comments, DOD described the steps it plans to take to implement our
    recommendations. Regarding our recommendations on emphasizing the need to
    comply with guidance on planning for the use of contractors and the
    establishment of teams of subject matter experts to evaluate and make
    recommendations where appropriate on the appropriateness and level of
    services being provided and the economy and efficiency with which they are
    being provided, DOD noted the discussion in the draft report on the
    existing guidance and efforts to review services. The department stated
    that it will reiterate this guidance and the need for subject matter
    experts to make periodic visits in policy memoranda and in such issuances
    as a draft DOD instruction on procedures for the management of contractor
    personnel during contingency operations. Regarding our recommendation to
    implement a department-wide lessons learned program that will capture the
    experiences of others who have used logistics support contracts, DOD
    stated that it will investigate how best to capture lessons learned. DOD
    said it initially will explore the possibility of establishing such a
    database as part of the Logistics Community of Practice at the Defense
    Acquisition University. Regarding our recommendation for training for
    commanding officers and other

    senior leaders who are deploying to locations with contractor support, DOD
    stated that it will begin discussions with the Defense Acquisition
    University, the services, and the Defense Contract Management Agency on
    how best to unify current disparate training and create a training
    capability that will be applicable and available to all. DOD said that an
    initial proposal would be to establish a continuous learning-type training
    module that could be utilized by each of the mid-and senior-level service
    schools, including staff and war colleges. DOD will aim to get such a
    module into the Defense Acquisition University's plans for fiscal year
    2005 development.

    We also provided an opportunity for the contractors on the logistics
    support contracts we reviewed- Kellogg Brown and Root for LOGCAP, BSC, and
    CONCAP and Readiness Management Support L.C. for AFCAP- to comment on a
    draft of this report and Readiness Management Support provided written
    comments. In its comments Readiness Management Support stated that it
    concurred with many statements in the report and provided several comments
    to clarify its position regarding the costs associated with logistics
    support contracts and the role of the contractor in property
    administration under the AFCAP contract. The company's comments and our
    response are contained in appendix III.

    We plan no further distribution of this report until 10 days after its
    issuance unless you publicly disclose its contents earlier. At that time
    we will send copies to the Chairman, House Committee on Government Reform;
    the Chairman, House Committee on Energy and Commerce; the Chairman and
    Ranking Minority Member, Senate Committee on Governmental Affairs; the
    Chairmen and Ranking Minority Members, House and Senate Committees on
    Armed Services, and other interested congressional committees. We are also
    sending a copy to the Secretary of Defense and the Director, Office of
    Management and Budget, and will make copies available to others upon
    request. In addition, the report will be available at no charge on the GAO
    Web site at http://www.gao.gov.

    If you or your staff have any questions, please contact me on
    (757) 552-8100 or by e-mail at curtinn@gao.gov. Major contributors to this
    report are included in appendix IV.

    Neal P. Curtin
    Director, Defense Capabilities and Management

                           Appendix I: Scope and Methodology

    We focused our efforts on four contracts: (1) the Army's Logistics Civil
    Augmentation Program (LOGCAP) Contract; (2) the Air Force's Contract
    Augmentation Program (AFCAP) Contract; (3) the U.S. Army, Europe's Balkans
    Support Contract (BSC); and (4) the Navy's Construction Capabilities
    (CONCAP) Contract. We selected these contracts (1) on the basis of their
    size and scope and (2) to include more than one of the military services.

    We took a number of actions to assess the effectiveness of the Department
    of Defense's (DOD) planning for the use of these logistics support
    contracts. We reviewed the guidance prepared by the Chairman, Joint Chiefs
    of Staff; the Army's regulations and guidance related to planning for
    contractor support to deployed forces; and an array of additional guidance
    specific to each of the logistics support contracts as follows:

    o  the Army Materiel Command's LOGCAP battle book,

    o  	U.S. Army, Europe, Users' Guide to the Balkans Support Contract and
    operating procedures written by the Balkans Support Contract procurement
    contracting office on task order development,

    o  	the Air Force's guide for using the Air Force's AFCAP contract-the
    AFCAP Concept of Operations, and

    o  the Navy's CONCAP Users' Guide.

    We met with representatives of the Army Materiel Command's LOGCAP program
    management office to discuss LOGCAP planning and met with the Army
    Materiel Command's LOGCAP planners for Europe and southwest Asia to
    determine their roles in planning to use LOGCAP to support Operation Iraqi
    Freedom. Additionally, we met with representatives of U.S. Army, Europe,
    to discuss planning for both BSC and the command's use of the LOGCAP
    contract and with representatives of the Army Central Command to discuss
    their role in planning for Operation Iraqi Freedom. We also met with the
    contracting officers for both the Balkans Support Contract and the LOGCAP
    contract to obtain their perspective on planning. To gain a comprehensive
    understanding of AFCAP and CONCAP planning, we met with the program
    managers for both the AFCAP and CONCAP contracts as well as the procuring
    contracting officers for both contracts. We also talked to customers of
    the four contracts to gain a better understanding of the customer's role
    in planning and the customer's views of the planning process. Finally, we
    spoke with representatives of Kellogg, Brown, and Root-the CONCAP, LOGCAP,
    and BSC contractor-and Readiness Management Support, the AFCAP contractor,
    to obtain their views on the planning process.

    Appendix I: Scope and Methodology

    To determine the adequacy of the contract oversight process, we undertook
    a number of actions. We reviewed a wide array of documents, including

    o  	the Department of Defense's and the Army's policies, regulations, and
    instructions that relate to the use of contractors to support deployed
    forces;

    o  	documents specific to the AFCAP, CONCAP, LOGCAP, and Balkans Support
    Contracts;

    o  	audit reports prepared by DOD agencies on these contracts, including
    the Defense Contract Audit Agency, the Air Force Audit Agency, the Army
    Audit Agency, and the Army Materiel Command Inspector General, and we met
    with representatives of these organizations as well to discuss their
    findings; and

    o  	the Defense Contract Management Agency's (DCMA) situation reports for
    September 2003 through May 2004 for Iraq, Kuwait, Afghanistan, and
    Djibouti to get a better understanding of the types of oversight actions
    that administrative contracting officers and quality assurance
    representatives were taking.

    During our visits to Kuwait and Qatar, we met with DCMA representatives to
    discuss oversight issues and observe some of their oversight practices and
    procedures. In Germany we met with the DCMA administrative contracting
    officers assigned to monitor BSC. To gain further insight into LOGCAP
    oversight in Iraq, we interviewed one of the senior DCMA administrative
    contracting officers responsible for overseeing the LOGCAP contract in
    Iraq after he redeployed. We also met the DCMA representatives located at
    the headquarters of the Halliburton Company (the parent company of
    Kellogg, Brown and Root) to gain a better understanding of the role of the
    corporate administrative contracting officer. We met with officials at all
    levels of command to gain an understanding of what they believed their
    roles were in the oversight process, and we met with contractor
    representatives to discuss contract oversight and contract management from
    their perspective. We also did the following:

    o  	To understand the definitization process, we reviewed relevant
    portions of the Defense Federal Acquisition Regulation Supplement,
    interviewed those government-contracting officials responsible for the
    definitization process, and reviewed negotiation memoranda documenting the
    results of definitization negotiations. We also discussed the
    definitization process with representatives of the contractors. To
    understand the award fee process and the requirements for an effective
    award fee board, we reviewed the Army Audit Agency's Report on Award Fee
    best practices

    Appendix I: Scope and Methodology

    and reviewed the award fee plans for the CONCAP, AFCAP, and Balkans
    Support Contract and a draft of the award fee plan for the LOGCAP
    contract. We reviewed documentation prepared for award fee boards to
    understand the types of contractor performance evaluations that customers
    and oversight officials provided. We also attended award fee boards for
    CONCAP, AFCAP, and BSC. At the time we completed our review, the LOGCAP
    contracting office had not yet held an award fee board.

    o  	To determine if lessons learned were being collected, we reviewed the
    Center for Army Lessons Learned database and the U.S. Army, Europe,
    Lessons Learned database to determine if they contained any lessons
    learned related to the use of BSC or the LOGCAP contract. In addition, we
    reviewed the Coalition Forces Land Component Command's lessons learned
    database for any relevant LOGCAP lessons learned. We met with contract
    customers to determine how they documented lessons they might have learned
    and to ascertain if lessons learned were shared between contract users. We
    also met with officials from DCMA and the contractors to discuss their
    lessons learned programs.

    To determine if the logistics support contracts were being used in an
    economic, efficient, and cost-conscious manner, we reviewed previous
    audits by DOD organizations and command-level audit agencies, such as the
    U.S. Army, Europe's, Office of Internal Review and Audit Compliance. We
    met with representatives of the Army Central Command to determine if they
    had issued any guidance to the LOGCAP customers on the need to be cost
    conscious, and we obtained and reviewed guidance issued by CJTF-7 and
    CJTF-180 to determine if they had (1) established the need to be cost
    conscious as a priority and (2) established procedures for reviewing and
    approving requirements and reevaluating recurring services. We also met
    with representatives of Marine Forces Central Command and U.S. Army,
    Europe, to get a better understanding of their review processes for LOGCAP
    and BSC, respectively. In addition, we met with Navy officials to
    determine how they control costs and ensure that the contractor provides
    service in an economical and efficient manner and with CONCAP customers at
    Guantanamo Bay to determine their involvement with cost control.
    Similarly, we met with Program Management and Contracting Office officials
    for the AFCAP contract to determine what steps they take to ensure that
    the contract is used in an economic and efficient manner and met with
    AFCAP customers at Al Udeid Air Base, Qatar, and discussed cost control.
    We also reviewed DCMA situation reports to determine if DCMA officials at
    deployed locations had any insight into improving cost control and economy
    and efficiency.

    Appendix I: Scope and Methodology

    To assess the extent to which DOD had a sufficient number of qualified
    personnel with the training and skills necessary to provide effective
    contract oversight and management in place, we determined the numbers of
    DCMA, Defense Contract Audit Agency, and Army Materiel Command personnel
    that were deployed in support of AFCAP, LOGCAP, and BSC. Since we could
    find no guidelines on the appropriate number of oversight personnel, we
    spoke with DCMA officials who oversaw the LOGCAP and AFCAP contracts to
    determine if they believed that the number of DCMA personnel deployed was
    adequate. We also reviewed DCMA situation reports to determine if DCMA
    staffing affected contract oversight. We interviewed Navy and Air Force
    officials responsible for overseeing the CONCAP and AFCAP contracts to
    determine if sufficient oversight personnel were available. To determine
    if the personnel with contract responsibilities, including customers, had
    sufficient training to satisfactorily fulfill their responsibilities, we
    met with personnel at all levels to discuss the training they had received
    regarding the use of logistics support contracts and their understanding
    of their specific roles and responsibilities. We also asked them to assess
    the adequacy of the training they received. We met with members of the
    program management offices to determine if they believed that personnel
    such as quality assurance representatives, contracting officers'
    representatives, and contracting officers' technical representatives had
    been adequately trained.

    We visited the following locations during our review:

    Office of the Secretary of Defense:

    o  Inspector General Office, Arlington, Va.

    Defense agencies

    o  Defense Contract Management Agency, Alexandria, Va.

    o  Defense Contract Management Agency Middle East, Kuwait.

    o  Defense Contract Management Agency Middle East, Qatar.

    o  Defense Contract Audit Agency, Houston, Tex.

    o  Defense Contract Audit Agency, Atlanta, Ga.

    o  Defense Contract Audit Agency, Iraq Branch Office.

    o  Defense Contract Audit Agency, European Branch Office.

                           Appendix I: Scope and Methodology

    Department of the Army:

    o  Office of the Deputy Chief of Staff-Logistics, The Pentagon.

    o  United States Army, Europe, Heidelberg, Germany.

    o  United States Army Forces Command, Fort McPherson, Ga.

    o  United States Army Central Command (Rear), Fort McPherson, Ga.

    o  United States Army Central Command (Forward), Kuwait.

    o  Camp Udairi, Kuwait.

    o  Camp Arifjan, Kuwait.

    o  Camp Doha, Kuwait.

    o  Other LOGCAP sites in Kuwait.

    o  	U.S. Army Corps of Engineers-Trans Atlantic Program Center,
    Winchester, Va.

    o  U.S. Army Materiel Command, Ft. Belvoir, Va.

    o  	Army Field Support Command, LOGCAP Program Manager, Alexandria, Va.

    o  	Army Field Support Command, LOGCAP Procurement Contracting Office,
    Rock Island, Ill.

    o  Army Materiel Command, Europe.

    o  Army Materiel Command, Kuwait.

    o  U.S. Army Audit Agency, Alexandria, Va.

    o  Army Audit Agency, Mainz Kastel, Germany.

    o  	United States Army Criminal Investigation Command, Fort Belvoir,
    Virginia

    Department of the Air Force:

    o  U.S. Air Force Civil Engineer Support Agency, Tyndall Air Force Base,
    Fla.

    o  U.S. Air Force 325th Contracting Squadron, Tyndall Air Force Base, Fla.

    o  U.S. Central Command Air Forces, Shaw Air Force Base, S.C.

    o  Al Udeid Air Base, Qatar.

    o  U.S. Pacific Air Forces, Hickam Air Force Base, Hawaii.

    Department of the Navy:

    o  Marine Forces, Central Command, Camp Smith, Hawaii

    o  Naval Facilities Engineering Command, Atlantic Division, Norfolk, Va.

    o  	Naval Facilities Engineering Command, Pacific Division, Pearl Harbor,
    Hawaii.

    Regional Combatant Commanders:

    o  U.S. Southern Command, Miami, Fla.

    o  Joint Task Force, Guantanamo Bay, Cuba.

    Appendix I: Scope and Methodology

    Logistics Support Contractors:

    o  Kellogg Brown and Root Services, Houston, Tex.

    o  Kellogg Brown and Root Services, Arlington, Va.

    o  Readiness Management Support, LC, Panama City, Fla.

    We also obtained written responses from the U.S. Central Command in
    response to written questions we provided them on their role in managing
    logistics support contracts.

    Since we had done extensive work in the Balkans over the past several
    years, we drew upon past work where appropriate and visited Germany to
    talk to Army personnel administering the contract. In addition, although
    we did not travel to Iraq, we spoke with a senior DCMA Administrative
    Contracting Officer who was recently based in Iraq and obtained situation
    reports, which document observations regarding contractor performance. We
    also met with representatives of the 101st Airborne Division, who had been
    customers of LOGCAP services in Iraq, upon their return to the United
    States, and talked to contractor officials working in Iraq. We relied on
    data provided us by DOD and the contractor, which we verified where
    possible. For example, in assessing billing for dining facilities, we
    verified the contractor's summary data by tracing the summary numbers to
    the raw data. The data were sufficiently reliable for the purpose of this
    report. We performed our work from August 2003 through June 2004 in
    accordance with generally accepted government auditing standards.

    Appendix II: Comments from the Department of Defense

    Appendix II: Comments from the Department of Defense

    Note: Page numbers in the draft report may differ from those in this
    report.

    Appendix II: Comments from the Department of Defense

    Appendix II: Comments from the Department of Defense

    Appendix III: Comments from Readiness Management Support L.C.

    Note: GAO's comments appear at the end of this appendix.

    Appendix III: Comments from Readiness Management Support L.C.

                                     See comment 1.

                                     See comment 2.

                                     See comment 3.

    Appendix III: Comments from Readiness Management Support L.C.

    Note: Page numbers in the draft report may differ from those in this
    report.

    See comment 4.

    Appendix III: Comments from Readiness Management Support L.C.

      GAO Comments

    The following are GAO's comments on the Readiness Management Support's
    letter dated July 4, 2004.

    1. 	Readiness Management Support expressed concern that the draft report
    characterized the use of logistics support contracts as the most expensive
    solution for the government. The company stated that, in the case of its
    power production contracts, the Air Combat Command determined it to be
    less expensive than using military in the command's current method while
    acknowledging that there are occasions when the contractor does cost more
    than military execution, but that, in many of those cases, the contractor
    is the only solution. We state in the report that both Air Force and Navy
    officials believe that using the AFCAP and CONCAP contracts to fulfill a
    requirement is often the most expensive option available and consequently
    they have taken steps to control costs. We recognize that this may not
    always be the case. However, we are not aware of any comprehensive
    analysis comparing the cost of using logistics support contracts to
    provide logistics support with the cost of using military personnel to
    provide that support. Regarding AFCAP, we were told by Air Force contract
    customers that the use of the AFCAP contract was a "level of magnitude"
    more expensive than other alternatives because of the premiums associated
    with the manpower the contractor can access and the speed in which the
    contractor can provide services.

    2. 	Readiness Management Support stated that it did not control certain
    property acquired under the AFCAP contract but noted that in each instance
    the property was properly purchased, documented, and turned over to the
    Air Force. In reviewing the government's role in property administration
    under the contract, we stated that DCMA did not ensure that the contractor
    maintained appropriate controls of government property. For task orders
    performed in southwest and central Asia, the AFCAP contract administrator
    delegated the property administration responsibility to DCMA. From our
    observations and conversations with DCMA contract administrators in
    southwest Asia in late 2003, we found that DCMA did not have a system in
    place to document what was purchased under the contract and what was
    turned over to the Air Force, although it was delegated this
    responsibility. As a result, at the time of our audit work, neither DCMA
    nor the Air Force could account for approximately $2 million worth of
    tools and equipment purchased under the AFCAP contract.

    3. 	Readiness Management Support described our report as stating that
    using civil augmentation contracts are not an effective method to

    Appendix III: Comments from Readiness Management Support L.C.

    procure equipment and materials and stated that it believed our research
    to be incomplete. Our report discusses how circumstances did not always
    allow the Army and the Air Force to select a more economical and efficient
    method to obtain services. In the case of AFCAP, we discussed how Air
    Force engineering squadrons used the AFCAP contract to buy commodities
    because they did not deploy with enough contracting and finance personnel
    to buy materials quickly or in large quantities and that the U.S. Agency
    for International Development also used the contract to provide disaster
    relief and humanitarian assistance supplies. We reported that the AFCAP
    contractor received more than $2 million in award fees since February 2002
    for these commodity supply task orders. To calculate this amount, we
    reviewed data on the amount of award fees that the contractor received for
    commodity supply task orders from February 2002 through February 2004. To
    ensure that we captured only those task orders in which the contractor
    purchased commodities, we provided the AFCAP contract administrator with
    our analysis of the task orders to , and he concurred with our analysis.
    We stated in the report that Air Force program managers recognized that
    the use of a cost plus award fee contract to buy commodities may not be
    costeffective and are considering alternative types of contract options
    for these task orders for the next AFCAP contract.

    4. We revised the report to reflect this comment.

    Appendix IV: GAO Contact and Staff Acknowledgments

      GAO Contact Acknowledgments

    (350427)

    Steve Sternlieb (202) 512-4534

    In addition to the person named above, Carole Coffey, Laura Czohara,
    George Duncan, Glenn Furbish, Oscar Mardis, Kenneth Patton, Matthew
    Ullengren, Gary Delaney, and Cheryl Weissman made key contributions to
    this report.

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