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,
[email protected].

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

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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 [email protected]. 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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