Rebuilding Iraq: Status of Competition for Iraq Reconstruction	 
Contracts (06-OCT-06, GAO-07-40).				 
                                                                 
Since 2003, Congress has appropriated more than $20 billion	 
through the Iraq Relief and Reconstruction Fund (IRRF) to support
Iraq rebuilding efforts. The majority of these efforts are being 
carried out through contracts awarded by the Departments of	 
Defense (DOD) and State and the U.S. Agency for International	 
Development (USAID). When awarding IRRF-funded contracts for $5  
million or more noncompetitively, agencies are required by	 
statute to provide notification and justification to Congress. In
June 2004, GAO found that agencies generally complied with laws  
and regulations governing competition to award new contracts, but
did not always comply with competition requirements when issuing 
task orders under existing contracts. As mandated by Congress,	 
this report (1) describes the extent of competition in Iraq	 
reconstruction contracts awarded by DOD, USAID, and State since  
October 1, 2003, based on available data, and (2) assesses	 
whether these agencies followed applicable documentation and	 
congressional notification requirements regarding competition for
51 judgmentally selected Iraq reconstruction contract actions. In
written comments, State and USAID concurred with the report	 
findings. DOD provided a technical comment.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-40						        
    ACCNO:   A61926						        
  TITLE:     Rebuilding Iraq: Status of Competition for Iraq	      
Reconstruction Contracts					 
     DATE:   10/06/2006 
  SUBJECT:   Competition					 
	     Competitive procurement				 
	     Construction contracts				 
	     Contract administration				 
	     Data collection					 
	     Documentation					 
	     Federal procurement				 
	     Federal regulations				 
	     Reporting requirements				 
	     Task orders					 
	     Iraq						 

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GAO-07-40

     

     * Results in Brief
     * Background
     * Vast Majority of Reported Contract Obligations Were for Comp
          * Most DOD Obligations Were for Competitively Awarded Contract
          * Almost All USAID Contract Obligations Were for Competitive A
          * Only Small Percentage of State Contract Obligations Were for
     * Agencies Generally Provided Necessary Documentation but Did
          * Contract Action Files Generally Contained Required Documenta
          * State Did Not Always Provide Required Congressional Notifica
     * Agency Comments
     * GAO Contacts
     * Acknowledgments
     * GAO's Mission
     * Obtaining Copies of GAO Reports and Testimony
          * Order by Mail or Phone
     * To Report Fraud, Waste, and Abuse in Federal Programs
     * Congressional Relations
     * Public Affairs

Report to Congressional Committees

United States Government Accountability Office

GAO

October 2006

REBUILDING IRAQ

Status of Competition for Iraq Reconstruction Contracts

GAO-07-40

Contents

Letter 1

Results in Brief 3
Background 5
Vast Majority of Reported Contract Obligations Were for Competitive Awards
6
Agencies Generally Provided Necessary Documentation but Did Not Always
Comply with Congressional Notification Requirements 10
Agency Comments 13
Appendix I Scope and Methodology 15
Appendix II Iraq Reconstruction Contract Actions and Obligations Reviewed
18
Appendix III Actions Taken in Response to GAO-04-605, Rebuilding Iraq
Fiscal Year 2003 Contract Award Procedures and Management Challenges 21
Appendix IV Comments from the Department of State 23
Appendix V Comments from the U.S. Agency for International Development 25
Appendix VI GAO Contacts and Acknowledgments 26

Figure

Figure 1: Obligations for Competitive and Noncompetitive Contract Actions
by Agency 7

Abbreviations

AIDAR Agency for International Development Acquisition Regulation

CEFMS Corps of Engineers Financial Management System

CICA Competition in Contracting Act

DCC-W Defense Contracting Command-Washington

DFARS Defense Federal Acquisition Regulation Supplement

DOD Department of Defense

DOSAR Department of State Acquisition Regulation

FAR Federal Acquisition Regulation

FPDS-NG Federal Procurement Data Systems-Next Generation

IDIQ Indefinite delivery/indefinite quantity

IRRF Iraq Relief and Reconstruction Fund

JCC-I/A Joint Contracting Command-Iraq/Afghanistan

LOGCAP Logistics Civil Augmentation Program

USAID U.S. Agency for International Development

This is a work of the U.S. government and is not subject to copyright
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separately.

United States Government Accountability Office

Washington, DC 20548

October 6, 2006

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

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

Since 2003, Congress has appropriated more than $20 billion through the
Iraq Relief and Reconstruction Fund (IRRF) to support Iraq rebuilding
efforts, such as repairing oil facilities, increasing electricity
capacity, and restoring water treatment plants. The majority of these
efforts are being carried out by the Departments of Defense (DOD) and
State (State) and the U.S. Agency for International Development (USAID)
through contracts with private sector companies. Widespread congressional
interest in ensuring competition when awarding contracts for Iraq has been
evident since the war in Iraq began. Specifically, in the fiscal year 2004
supplemental appropriation for Iraq, concerns about competition in Iraq
reconstruction contracting led Congress to require that notification and
justification be sent to multiple congressional committees when other than
full and open competition is used to award contracts for $5 million or
more.1

In June 2004, GAO reported on contract award procedures for contracts and
task orders to help rebuild Iraq in fiscal year 2003.2 That report found
agencies generally complied with applicable laws and regulations governing
competition to award new reconstruction contracts. However, the report
also identified several instances in which task orders issued under
existing contracts did not comply with applicable competition
requirements.3 Appendix III describes actions taken in response to
recommendations made in that report.

1 Emergency Supplemental Appropriations Act for Defense and for the
Reconstruction of Iraq and Afghanistan, 2004 S: 2202 (Pub. L. No. 108-106,
Nov. 6, 2003).

2 GAO, Rebuilding Iraq: Fiscal Year 2003 Contract Award Procedures and
Management Challenges, GAO-04-605 (Washington, D.C.: June 1, 2004).

The fiscal year 2006 National Defense Authorization Act conference report
required that GAO update its 2004 report on competition in Iraq
reconstruction contracting.4 In response, this report (1) describes the
extent of competition in Iraq reconstruction contracts awarded by DOD,
USAID, and State since October 1, 2003, based on available data, and (2)
assesses whether these agencies followed applicable documentation and
congressional notification requirements regarding competition for selected
Iraq reconstruction contract actions.

To address these objectives, we focused our review on three agencies, the
Departments of Defense and State and USAID. These three agencies are
responsible for 98 percent of the total obligations made with IRRF.5 For
the first objective, we obtained data from DOD, USAID, and State on
IRRF-funded reconstruction contract actions, including contracts awarded,
task orders issued, and applicable modifications, from October 1, 2003,
through March 31, 2006, with obligations of $1 million or more.6 For the
second objective, we judgmentally selected 51 contract actions-22
indicated as noncompeted and 29 indicated as competed-to determine
compliance with competition documentation and congressional notification
requirements as prescribed in statute, regulations, and other guidance.
Our findings regarding documentation and notification are specific to
these selected contract actions and are not projectable to the agencies'
total contract action universe.

3 A task order means an order for services placed against an established
contract or with Government sources. Task orders are deemed by law to
satisfy competition requirements if they are within the scope of the work,
period of performance, or maximum value of a properly awarded underlying
contract. The scope, period, or maximum value may be increased only by
modification of the contract and competitive procedures are required to be
used for any such increase unless an authorized exception applies. If more
than one contractor was awarded the same underlying task order contract,
this is referred to as a multiple award indefinite delivery/indefinite
quantity (IDIQ) contract. Generally, in issuing a task order under such a
contract, a contracting officer is required to provide each awardee a
"fair opportunity" to be considered for each order exceeding $2,500 unless
a statutory exception applies. Special competition requirements apply to
certain orders for services by or on behalf of DOD under section 803 of
the National Defense Authorization Act of Fiscal Year 2002 (Pub. L.
No.107-107).

4 H.R. Conf. Rep. No. 109-360, at page 765 (2005).

5 This report focuses on reconstruction contract actions awarded using
IRRF funds. Funds from the first IRRF appropriation were available to the
Department of State, the United States Agency for International
Development, the Department of the Treasury, the Department of Defense,
and the Department of Health and Human Services; funds from the second
IRRF appropriation were available to the same five agencies, as well as
the Coalition Provisional Authority. Other sources of U.S. funding for
Iraq military, reconstruction and stabilization efforts, such as the Iraq
Security Forces Fund, were not included in our review.

We also reviewed statutory requirements, the Federal Acquisition
Regulation (FAR) and applicable agency supplements, and agency policies
and procedures related to competition in contracting. We interviewed
contracting officers and other procurement officials and reviewed contract
files in Washington, D.C.; Virginia; and Iraq. We did not evaluate the
acquisition strategy used to award the contract actions, whether
justifications for issuing awards noncompetitively were adequate, or
whether task orders were within the scope of the underlying contract.7
While GAO and other audit agencies have identified problems in contract
implementation and administration, we did not address these issues within
our review. Appendix I contains the details of our scope and methodology.
We conducted our review from April 2006 through August 2006 in accordance
with generally accepted government auditing standards.

                                Results in Brief

While no single, comprehensive system currently tracks governmentwide Iraq
reconstruction contract data, we obtained competition information on $10
billion of the total $11.6 billion in obligations for Iraq reconstruction
contracts collectively awarded by DOD, USAID, and State from October 1,
2003, through March 31, 2006, and found that about $9.1 billion, or 91
percent, of the obligations were for competitive awards. Several DOD
systems track contract or competition data. However, not all DOD
components consistently tracked or reported this information; therefore we
cannot draw any conclusions on the extent of competition for all DOD Iraq
reconstruction contracts. For example, we were not able to obtain complete
competition data on DOD's Joint Contracting Command-Iraq/Afghanistan
(JCC-I/A) and those of its predecessor organizations for the period of our
review. Despite this, we obtained competition data for approximately 82
percent of DOD's contract obligations for Iraq reconstruction, the vast
majority of which indicated that competition generally occurred since
October 1, 2003. Additionally, based on complete data provided for the
period of our review, 99 percent of USAID's Iraq reconstruction contract
obligations were for competitive awards, while only 10 percent of State's
obligations were for competitive awards.

6 For purposes of this report, the terms "contract action" and "award"
refer not only to the award of a new contract, but also to a modification
to an existing contract treated as a non-competitive award (i.e.,
increases the contract's scope, period of performance, or maximum value),
as well as to the issuance of a task order under a multiple-award IDIQ
contract.

7 For purposes of this report, "noncompetitive" procedures shall include
the use of other than full and open competition procedures authorized
under FAR subpart 6.3 (2005), the use of statutory exceptions to the "fair
opportunity" ordering procedures for multiple award IDIQ contracts under
FAR S: 16.505(b)(2), and State and USAID use of other statutory
exceptions, specifically 40 U.S.C. S: 113(e) (Supp. III 2003).

For the contract actions we reviewed, the agencies generally followed the
FAR and the applicable agency supplements regarding documentation
requirements when awarding Iraq reconstruction contract actions but did
not always comply with congressional notification requirements. We
reviewed contract files for 51 contract actions totaling $1.55 billion, 22
of which were awarded noncompetitively and 29 of which were awarded
competitively. For the 22 noncompetitively awarded contract actions,
agencies generally provided proper contract file documentation, including
justification for using other than full and open competition. Only 1
contract file-for a task order issued by the State Department-did not
contain justifications or other documentation as required in the FAR or
agency supplements. For the 29 competitively awarded contract actions,
agencies generally provided contract file documentation. However, in 4
cases DOD was unable to provide documentation that competition occurred,
such as evidence of bidders or price negotiation memos. Additionally, of
the 22 noncompeted contract actions, State should have notified Congress
of 2 actions it awarded using other than full and open competition in
accordance with the notification requirement in section 2202 of Public Law
108-106.8 While State failed to provide the required notifications, it has
taken steps to address the problem for future awards. Within our sample,
we did not find any additional instances where DOD, USAID, and State
should have notified Congress of a noncompeted award but did not.

8 Pub. L. No. 108-106, Nov. 6, 2003.

We requested comments from DOD, USAID, and State on a draft of this
report. In written comments, USAID and State agreed with our findings.
State also provided additional information regarding steps taken to
address the section 2202 reporting requirement. DOD provided a technical
comment, which was incorporated into the report. Comments from State and
USAID appear in appendixes IV and V.

                                   Background

The United States, along with its coalition partners and various
international organizations and donors, has embarked on a significant
effort to rebuild Iraq following multiple wars and years of neglect. In
April 2003, Congress passed the Emergency Wartime Supplemental
Appropriations Act, which created the Iraq Relief and Reconstruction Fund
and appropriated approximately $2.48 billion for reconstruction
activities.9 These funds-referred to as IRRF I-were to be used by USAID,
State, DOD, Treasury, and Health and Human Services for a broad range of
humanitarian and reconstruction efforts. In November 2003, Congress
enacted an additional emergency supplemental appropriations act, which
provided approximately $18.4 billion for reconstruction activities in
Iraq.10 This appropriation-referred to as IRRF II-focused on security and
infrastructure, and the funding was allocated across multiple sectors.11
Additionally, the November 2003 act required that full and open
competition be used to enter into contracts using IRRF funds unless the
use of an authorized statutory exception was properly documented and
approved, and the specified congressional committees notified.12 As of
August 29, 2006, about 94 percent, or approximately $20 billion, of all
IRRF funds had been obligated by all agencies.

9 Pub. L. No. 108-11, Apr. 16, 2003.

10 Pub. L. No. 108-106.

11 These sectors are Security and Law Enforcement; Electricity; Oil
Infrastructure; Justice, Public Safety and Civil Society; Education,
Refugees, Human Rights, Governance; Roads, Bridges, and Construction;
Health Care; Transportation and Communications; Water Resources and
Sanitation; and Private Sector Development.

12 The statutory exception had to be properly documented and approved by
the head of the contracting agency and the Administrator of the Coalition
Provisional Authority.

The Competition in Contracting Act of 1984 (CICA) generally requires that
federal contracts be awarded on the basis of full and open competition.13
This process is intended to permit the government to rely on competitive
market forces to obtain needed goods and services at fair and reasonable
prices. However, the law and implementing regulations recognize that there
may be circumstances under which full and open competition would be
impracticable, such as when contracts need to be awarded quickly to
respond to urgent needs or when there is only one source for the required
product or service. In such cases, agencies are given authority by law to
award contracts without providing for full and open competition (e.g.,
using limited competition or on a sole-source basis), provided that the
proposed approach is appropriately justified, approved, and documented.
Additionally, regarding task orders issued under an existing contract, the
competition law does not require competition beyond that obtained for the
initial contract award, provided the task order does not increase the
scope of the work, period of performance, or maximum value of the contract
under which the order is issued.14

Vast Majority of Reported Contract Obligations Were for Competitive Awards

While no single, comprehensive system currently tracks governmentwide Iraq
reconstruction contract data, we obtained competition information on $10
billion of the total $11.6 billion in obligations for Iraq reconstruction
contracts collectively awarded by DOD, USAID, and State from October 1,
2003, through March 31, 2006, and found that about $9.1 billion, or 91
percent, of the obligations was for competitive awards. We obtained
information on approximately $7 billion of the $8.55 billion DOD obligated
and found that competition occurred for nearly all of the obligations.
Both USAID and State provided information on all of their IRRF obligations
made during the period of our review. However, where USAID information
showed that almost all of its Iraq reconstruction contract obligations
were for competitive awards, State information showed that few of its
contract action obligations were for competitive awards. Figure 1 shows a
breakdown of the three agencies' competed and noncompeted contract actions
based on available data.

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

14 The scope, period of performance, or maximum value may be increased
only by modification of the contract, and competitive procedures are
required to be used for any such increase unless an authorized exception
applies. For multiple award IDIQ contracts, all of the contractors are
required to be provided a fair opportunity to be considered for the task
order. Special competition requirements apply to certain orders for
services by or on behalf of DOD.

Figure 1: Obligations for Competitive and Noncompetitive Contract Actions
by Agency

Most DOD Obligations Were for Competitively Awarded Contract Actions

Based on available data, we found that the majority of DOD's IRRF contract
obligations incurred during the period we reviewed were for competitive
awards. Competition information was available for approximately 82 percent
of DOD's total $8.55 billion in Iraq reconstruction contract obligations.
Of this, we found that DOD competitively awarded about $6.83 billion, and
noncompetitively awarded about $189 million.15 Most of the DOD offices we
spoke with reported that, when possible, contract actions were competed.

JCC-I/A-the office performing the majority of Iraq contracting for the DOD
offices we reviewed-and its predecessor organizations, including the
Project and Contracting Office and Program Management Office, obligated
$3.82 billion, of which $3.81 billion was obligated for competitive
awards. Additionally, the other DOD offices we reviewed, including the
Army Corps of Engineers' Gulf Region Division and Transatlantic Programs
Center; the Army's TACOM Life Cycle Management Command; and the Air Force
Center for Environmental Excellence obligated approximately $2.25 billion,
and of these obligations, approximately $2.08 billion were for competitive
awards and $177 million for noncompetitive awards. Furthermore, the Army
Corps of Engineers' Southwestern Division competitively awarded two
contracts to rebuild Iraqi oil infrastructure with obligations totaling
$941 million.

Complete information on DOD's contract actions and competition type for
the period of our review was not available, in part because not all
offices consistently tracked or reported this information. Currently, DOD
is transitioning its contract-writing systems to interface with the
Federal Procurement Data System-Next Generation (FPDS-NG).16 Until this
transition is completed, the majority of DOD components are expected to
use DD Form 350s to report contract actions. However, we found that while
the DD 350 system tracks competition information by contract, not all
offices report their contracts to the system. For example, the JCC-I/A and
its predecessor organizations did not fully input detailed, individual
contract action information into DOD-wide systems including DD 350, which
would provide information on competition. Furthermore, according to
JCC-I/A officials, JCC-I/A did not track competition information until
after May 2005. Consequently, we relied on multiple sources in order to
obtain competition information for the DOD components within our review.

15 On December 5, 2003, the Deputy Secretary of Defense issued a
Determination and Findings limiting competition for 26 construction and
services contracts to firms from the United States, Iraq, Coalition
partners, and force contributing nations. While competition was limited to
firms from these countries, DOD components used competitive procedures
required by the FAR to award these contracts. These contract award
obligations represent approximately $2.69 billion in competitive actions
of the $7.02 billion in DOD IRRF contract obligations included in our
review.

16 The FPDS was implemented in 1978 to collect information about federal
procurement contracts. Congress, GAO, executive branch agencies, and the
public rely on FPDS data for information on agency contracting actions,
governmentwide procurement trends, and achievement of small business
goals.

Almost All USAID Contract Obligations Were for Competitive Awards

USAID provided competition information for 100 percent of the $2.27
billion in IRRF contract obligations that the agency reported incurring
between October 1, 2003, and March 31, 2006. These data indicated that
USAID competitively awarded contract actions for about $2.25 billion, or
99 percent, of the approximately $2.27 billion it obligated; approximately
$20.4 million, or about 1 percent, of these obligations were
noncompetitively awarded. Agency contracting staff reported that USAID has
pursued competition with very few exceptions when awarding contracts and
issuing task orders for Iraq reconstruction.

During our contract file review, we identified three instances in which
the competition information provided by USAID was inaccurate. In two
cases, USAID reported contracts as being awarded competitively when they
were actually awarded under limited competition.17 In the third case,
USAID reported a contract as "not competed," when it was actually awarded
competitively. In each of these instances, we used corrected competition
information for our analysis.

Only Small Percentage of State Contract Obligations Were for Competitive Awards

State obligated the smallest portion of IRRF funding among the three
agencies, however, it incurred most if its obligations for noncompetitive
awards. State provided competition information for 100 percent of the $762
million in IRRF contract obligations that the agency reported incurring
between October 1, 2003, and March 31, 2006. These data indicated that
State incurred obligations of approximately $73 million in competitive
awards, or approximately 10 percent, of the approximate $762 million it
obligated for IRRF contract actions; approximately $688 million, or about
90 percent, of these obligations were incurred under noncompetitive
awards. In several of these cases, State cited urgency as the reason for
awarding the contract actions noncompetitively. Specifically,
justifications in two of the contract files we reviewed cited FAR S:
6.302-2, unusual and compelling urgency, as the basis for using other than
full and open competitive procedures. Additionally, one task order we
reviewed was an unauthorized commitment that had to be ratified by
State.18 The ratification amounted to the issuance of a noncompetitive
task order to the contractor.

17 USAID is authorized under statute to limit competition when full and
open competition would impair the administration of a foreign aid program.
40 U.S.C. S: 113(e) (Supp. III 2003) (formerly 40 U.S.C. S: 474); 48
C.F.R. S: 706.302-70 (2005).

During our contract file review, we identified three instances in which
the competition information provided by State was inaccurate. In two of
these cases, we found that contracts that were reported as awarded
competitively were actually awarded noncompetitively. In the third case,
State misclassified the competition type reported for a contract that was
awarded competitively. In each of these instances, we used corrected
competition information for our analysis.

 Agencies Generally Provided Necessary Documentation but Did Not Always Comply
                  with Congressional Notification Requirements

We reviewed 51 contract actions totaling $1.55 billion-35 at DOD, 11 at
USAID, and 5 at State. We found that the agencies generally followed the
FAR and the applicable agency supplements regarding documentation
requirements for contract actions but did not always comply with
congressional notification requirements. Of the 51 contract actions that
we reviewed, 22 were awarded noncompetitively, while 29 were awarded
competitively. Only 1 of the 22 noncompetitive contract action files did
not contain justifications or other documentation as required in the FAR
or agency supplements. Of the 29 competed contract actions, DOD was unable
to provide documentation that competition had occurred, such as evidence
of bidders or price negotiation memos, in 4 cases. Additionally, of the 22
noncompeted contract actions, State should have notified Congress of 2
actions it awarded using other than full and open competition in
accordance with the notification requirements. While State failed to
provide the required notifications, State officials told us that they have
taken steps to address the problem for future awards. Within our sample,
we did not find any additional instances where DOD, USAID, and State
should have notified Congress of a noncompeted award but did not.

Contract Action Files Generally Contained Required Documentation

Of the 35 DOD IRRF contract actions we reviewed, 15 were indicated as
noncompeted and 20 indicated as competed. The files for the 15 noncompeted
contract actions contained documentation required by the FAR, Defense
Federal Acquisition Regulation Supplement and the Army Federal Acquisition
Regulation Supplement. Of the 15 noncompeted actions, 4 were sole source
contract awards; 4 were awarded using limited competition; 3 were
noncompeted task orders under a multiple award IDIQ contract; 3 were sole
source awards under the 8(a) program;19 and 1 was an out of scope
modification. Based on our review, all of the contract actions that were
awarded non-competitively had justification and approval documentation
citing the reason for either limiting competition or using a sole source
award when required. For example, JCC-I/A partially terminated an IDIQ
contract used to rebuild hospitals in Iraq.20 In order to complete the
remaining work, JCC-I/A awarded a series of sole source contracts to the
remaining Iraqi subcontractors to complete the work. In another example,
the Project and Contracting Office awarded a series of contracts using
limited competition to pave roads in 13 governorates in Iraq, citing
unusual and compelling urgent circumstances due to security concerns and
limited manpower to evaluate all submissions from Iraqi firms. For the 20
competed DOD contract actions, 16 files included documentation that
competition occurred, such as evidence of bidders or price negotiation
memos when required. However, DOD was unable to provide supporting
evidence for the remaining 4 contract actions that were indicated as
competed.

18 Ratification is the act of approving an unauthorized commitment by an
official who has the authority to do so. The unauthorized commitment is
not binding solely because the Government representative who made it
lacked the authority to enter into the agreement on behalf of the
Government.

Of the 11 USAID contract actions we reviewed, 3 were indicated as
noncompeted and 8 indicated as competed. The files for all 3 noncompeted
actions included the documentation required by the FAR and the Agency for
International Development Acquisition Regulation (AIDAR) regarding
competition. Two of these contracts were awarded under limited
competition-one for catering services and one for armored
vehicles-providing an opportunity for multiple vendors to submit bids. For
both of these contracts, USAID used a blanket waiver authority provided by
the USAID Administrator pursuant to section 706.302-70(b)(3)(ii) of the
AIDAR.21 This waiver was originally signed in January of 2003, later
renewed in June 2004, and again in August 2005, and the agency is
currently working on a 2006 version. The third noncompeted action was a
modification extending the performance period and increasing the total
award amount for a contract for facility security. The files for the 8
competed USAID contract actions included documentation that competition
occurred, such as evidence of bidders or price negotiation memos.

19 The 8(a) Business Development program refers to section 8(a) of the
Small Business Act, which establishes a program authorizing the Small
Business Administration to enter into contracts with other agencies and
let subcontracts for performing those contracts to firms eligible for
program participation (small disadvantaged business concerns). In some
cases, such as for DOD, the Small Business Adminisration has delegated its
8(a) program contract execution function authority to the agency. Per FAR
6.203, separate justification or determination and findings are not
required to set aside a contract for small business concerns. FAR 6.203(b)
(Jan. 2006).

20 The termination clause in Government contracts provides for the
complete or partial termination of contracts for the convenience of the
Government or default of the contractor. The authority to terminate
contracts resides in the contracting officer and shall only be used,
whether for default or convenience, when it is in the Government's
interest. FAR Part 49, Termination of Contracts (Jan. 2006).

Finally, of the 5 State contract actions we reviewed, 4 were indicated as
noncompeted and 1 indicated as competed. Of the 4 noncompeted actions, 2
were single-award contracts for protective services, and 2 were task
orders for police and guard services off of 1 IDIQ contract. The files for
the 2 single-award contracts and one of the task orders included all of
the documentation required by the FAR and the Department of State
Acquisition Regulation (DOSAR) regarding competition. However, the file
for one of the task orders for construction of a police training facility
did not include documentation regarding the basis for using an exception
to the fair opportunity process, as required in FAR S: 16.505.22 The file
for the 1 competed contract action included documentation that competition
occurred, such as evidence of bidders or price negotiation memos.

State Did Not Always Provide Required Congressional Notifications

Of the 22 noncompeted contract actions in our review, State should have
notified Congress of 2 actions it awarded using other than full and open
competition in accordance with the congressional notification requirement
in section 2202 of Public Law 108-106 but did not.

State failed to notify Congress when awarding 2 letter contracts for
personal protective services noncompetitively.23 State indicated that the
department failed to comply with the notification requirement in these two
cases because the Office of Acquisitions Management, which is responsible
for awarding and administering contracts at State, was not notified that
IRRF funds were applied to these contracts by the relevant program office.
State officials told us they have coordinated with program office staff to
ensure that they communicate funding types to contracting staff in the
future. We did not identify any USAID or DOD contract actions within our
sample that required congressional notification. 24

21 The Federal Property and Administrative Services Act permitted waiver
of competitive contracting procedures that would impair foreign aid
programs. This authority, previously codified at 40 U.S.C. S: 474 (2000),
was recently recodified and enacted into positive law, 40 U.S.C. S: 113(e)
(Supp. III 2003), by Pub. L. No. 107-217, S: 1, 116 Stat. 1062, 1066
(2002). This authority is implemented in section 706.302-70 of the AIDAR.

22 FAR 16.505(b)(1) (Jan. 2006).

23 A letter contract is a written preliminary contractual instrument that
authorizes the contractor to begin immediately manufacturing supplies or
performing services. It is used when the Government's interests demand
that the contractor be given a binding commitment so that work can start
immediately and negotiating a definitive contract is not possible in
sufficient time to meet the requirement.

                                Agency Comments

We requested comments from DOD, USAID, and State on a draft of this
report. DOD provided only one technical comment, which was incorporated
into the report. USAID reviewed the report and found it to be factually
correct. State acknowledged our findings and provided additional
information regarding steps taken to address the section 2202 reporting
requirement. Comments from State and USAID appear in appendixes IV and V.

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

24 We found that DOD, USAID, and State each provided one notification to
Congress for IRRF-funded actions not included in our 51 selected contract
actions.

The major contributors to this report are listed in appendix VI. Contact
points for our Offices of Congressional Relations and Public Affairs may
be found on the last page of this report. If you have any questions about
this report, please contact me at (202)-512-4841.

John P. Hutton Acting Director, Acquisition and Sourcing Management

Appendix I: Scope and Methodology

The fiscal year 2006 National Defense Authorization Act conference report
required that GAO update its 2004 report on the extent of competition for
Iraq reconstruction contracts. In response, we focused our review on
reconstruction contract actions funded solely with the Iraq Relief and
Reconstruction Fund (IRRF). IRRF represents the largest amount of U.S.
appropriated funds for reconstruction purposes. Other sources of U.S.
funding for Iraq military, reconstruction, and stabilization efforts that
are not included in our review are the Iraq Security Forces Fund, the
Commander's Emergency Response Program, and the Commander's Humanitarian
Relief and Reconstruction Program. Additionally, the congressional
notification requirement in section 2202 of Public Law 108-106 that was
included in our review applies only to contract awards funded with IRRF.

We included the Departments of Defense (DOD) and State (State) and the
U.S. Agency for International Development (USAID), as these agencies are
responsible for 98 percent of the total obligations made with IRRF through
June 2006. Additionally, within DOD, we used the Corps of Engineers
Financial Management System (CEFMS) data to select individual components
to include in our review that were responsible for the majority of IRRF II
contracting during the time period of our review. The components we
selected included the Joint Contracting Command-Iraq/Afghanistan, Army
Corps of Engineers' Gulf Region Division and Transatlantic Programs
Center, Army's TACOM Life Cycle Management Command, and the Air Force
Center for Environmental Excellence.

To determine the approximate number of reconstruction contract actions,
the types of actions, the funding sources, and the competition type of
such actions, we found that no single source of information contained
suitable amounts of both contracting actions issued using IRRF monies and
competition information. Therefore, to obtain DOD data, CEFMS was selected
as the basis for DOD's IRRF contract universe due to the fact that it is
the payment system for most of the major offices performing DOD
contracting and presented the most complete contract action list. Using
CEFMS, we identified DOD components based on the Department of Defense
Activity Address Code, and selected offices to include in our review based
on total obligations under IRRF II. Since CEFMS does not capture
competition information, however, we attempted to cross-reference
contracts found in CEFMS with DOD's DD Form 350 Individual Contracting
Action Report database. However, at the time of our review, we found that
DD 350 did not include fiscal year 2006 data and not all DOD components
fully reported contract actions to DD 350. As a result, we contacted the
individual DOD components selected for inclusion in our review and
requested competition information for the offices' contracting actions
funded with IRRF monies.

To obtain IRRF-funded contract actions from USAID and State, we relied on
agency-provided data, since the Federal Procurement Data System-Next
Generation (FPDS-NG) did not contain any of USAID's contracting actions at
the time we began our review. Although State's contracting actions were
contained within FPDS-NG, the system did not indicate which actions were
funded using IRRF money and other criteria needed for our review.

We judgmentally selected 51 contract actions for further review to
determine compliance with documentation requirements as prescribed in
statutes, regulations, and other guidance, such as justification and
approval documentation for noncompeted actions, and synopses of proposed
contract actions, price negotiation memos, and evidence of bidder's lists
for competed actions. To determine the applicable documentation
requirements and policies governing competition when awarding contract
actions, we reviewed the requirements of the Competition in Contracting
Act of 1984 and the Federal Acquisition Regulation, and additional agency
regulations including the Defense Federal Acquisition Regulation
Supplement, Army Federal Acquisitions Regulation Supplement, Agency for
International Development Acquisition Regulation, Department of State
Acquisition Regulation, and other guidance. The contract actions were
selected based on the following criteria:

           o  reconstruction contract actions funded with IRRF monies;
           o  actions awarded from October 1, 2003, through March 31, 2006;
           o  current obligations of $1 million or more;
           o  represented both competed and noncompeted actions;
           o  selected more actions from DOD than USAID and State based on
           volume of contract actions obtained;
           o  included a variety of contracts, task orders, and
           modifications; and
           o  included a variety of goods and services provided.

Our findings regarding documentation are specific to these selected
contract actions and are not projectable to the agencies' total contract
action universe. Of the 51 contract actions selected, 22 were indicated as
awarded noncompetitively and 29 were indicated as awarded competitively.
We included competitively awarded actions in our review to verify the
accuracy of reported actions and confirm evidence of competition. In the
few cases noted where actions were incorrectly reported as competed or
noncompeted by USAID and State, we corrected the errors as appropriate for
use in our analysis. Given that our actions to corroborate the data
contained within agency systems or provided by the agencies identified
only a few errors, which we corrected, we believe the data to be
sufficiently reliable for our purposes.

To determine whether agencies complied with the congressional notification
requirement contained in section 2202 of Public Law 108-106, we reviewed
agency contract data within our selected contract actions to identify
instances where the reporting requirement would apply and followed up with
officials where appropriate.

In order to review and understand the contract files selected, we
interviewed DOD, USAID, and State contracting officers and other
procurement officials in Washington, D.C.; Virginia; and Iraq. Where
possible, we obtained electronic documentation from agency officials.
Appendix II lists the Iraq reconstruction contract actions we reviewed.

We conducted our work between April 2006 and August 2006 in accordance
with generally accepted government auditing standards.

Appendix II: Iraq Reconstruction Contract Actions and Obligations Reviewed

Contracting agency/                          Contract                      
contractora                Purpose           action type  Amount obligated
Department of Defense                                     
U.S. Air Force Center for Environmental Excellence
Environmental Chemical     Convert Iraqi     Task order      $6,901,165.00 
Corporation                fort to prison                 
Shaw Environmental, Inc.   Army base         Task order     $45,492,214.00 
                              renovation                     
Tetra Tech FW, Inc         Facility          Task order     $41,361,224.00 
                              construction and               
                              renovation                     
Washington Group           School repairs    Task order     $11,409,173.00 
International, Inc.                                       
Weston Solutions, Inc.     Airport           Task order      $4,700,826.00 
                              construction and               
                              improvements                   
Laguna Construction        Commando          Task order     $20,555,941.00 
Company, Inc.              satellite                      
                              construction                   
U.S. Army TACOM Life Cycle Management Command
Conley & Associates, Inc.  New equipment     Contract        $2,163,582.54 
                              training                       
Conley & Associates, Inc.  New equipment     Contract        $2,417,967.80 
                              training                       
MAC International FZE      Police truck      Contract       $67,210,440.00 
U.S. Army Transatlantic Programs Center
Odebrecht-Austin (JV)      Gas power plant   Task order                    
                              maintenance                      $38,663,252.20
Shaw Centcom Services LLD  Transmission line Task order                    
                              and substation                 
                              rehabilitation                   $15,423,515.00
Washington                 Generator         Task order                    
International/Black &      Rehabilitation                 
Veatch Joint Venture                                        $64,296,158.00
Joint Contracting Command - Iraq/Afghanistan              
ASRC Airfield and Range    Facility          Contract       $59,522,329.00 
Services, Inc.             construction and               
                              training                       
Eurest Support Services,   Base camp support Contract                      
Inc.                       services                         $48,844,954.00
SBIG Technical Services,   Base support      Contract                      
Ltd.                       services                         $22,915,216.50
FluorAMEC LLC              Electric          Task order                    
                              generation power               
                              plant                          
                              construction                      $4,500,000.00
PAE Government Systems,    Firefighter       Contract                      
Inc.                       training program                 $15,514,713.00
Iraqi Company A            Road construction Contract        $1,353,700.00 
Iraqi Company B            Road construction Contract        $1,185,547.90 
Iraqi Company B            Road construction Contract        $1,119,476.00 
Iraqi Company C            Road construction Contract        $1,409,515.00 
Raytheon Systems           Purchase and      Contract                      
Development Company        install                        
                              communication                  
                              systems                           $1,900,000.00
BLP                        Civil             Contract                      
                              intervention                   
                              force class                       $9,340,912.38
U.S. Investigative Service Training, force   Contract                      
                              protection and                 
                              life support                   
                              services                         $42,197,992.13
Iraqi Company D            Renovate, repair, Contract                      
                              and upgrade                    
                              hospital                          $2,919,752.90
iComPort                   Install and test  Modification                  
                              underground                    
                              feeders                           $1,113,690.00
Iraqi Company E            Rehabilitate      Contract        $1,288,000.00 
                              children's                     
                              hospital                       
Comet Company LTD          Rehabilitate      Contract        $4,222,549.00 
                              water pumping                  
                              station                        

Contracting agency/                       Contract action                  
contractora          Purpose              type            Amount obligated
U.S. Army Corps of Engineers - Gulf Region Division
Iraqi Company F      Water facility       Contract                         
                        construction                            $3,500,000.00
IAP World Wide       Sewer and water      Task order                       
Services             networks                               $26,982,350.00
First Kuwaiti        Emergency response   Task order                       
Contracting          unit bureau                          
                        dignitary protection                 
                        training site                        
                        construction                           $14,078,995.00
KEC-OZDIL JV         Design and           Contract                         
                        reconstruct                          
                        transmission line                      $23,865,426.00
Iraqi Company G      MNSTC-I logistical   Contract                         
                        warehouse complex                       $2,099,556.00
Iraqi Company H      Iraqi National Guard Task order                       
                        battalion garrison                      $7,891,300.00
Iraqi Company I      Electrical complex   Contract                         
                        construction                            $2,837,290.00
Total, Department of                                                       
Defense                                                    $621,198,723.35
U.S. Agency for International Development
Al Gosaibi Services  Catering services    Contract              $1,360,094 
America's            Civil society        Contract                         
Development                                               
Foundation                                                     $42,880,157
Daimler Chrysler AG  Armored vehicles     Contract              $4,261,182 
Development          Grant support        Task order                       
Alternatives, Inc.                                            $348,039,843
Development          Agriculture          Contract                         
Alternatives, Inc.                                            $101,352,912
Gulf Catering        Catering services    Purchase order                   
Company                                                         $1,139,320
International        Monitoring and       Contract                         
Business & Technical evaluation                           
Consultants, Inc.                                               $7,938,544
Kroll Government     Facility security    Modification                     
Services                                                  
International, Inc.                                             $3,368,311
The Louis Berger     Private sector       Contract                         
Group                growth and                           
                        employment                           
                        generation                                $95,000,000
The Partnership for  Child health         Task order                       
Child Health Care,                                        
Inc.                                                            $2,000,000
Research Triangle    Local Governance     Contract                         
Institute                                                      $85,000,000
Total, U.S. Agency for International                                       
Development                                                   $692,340,363
Department of State                                       
Dyncorp              Construction and     Task order                       
International LLC    training at police                   
                        training facility                      $44,817,427.36
Dyncorp              Construction of      Task order                       
International LLC    police training                      
                        facility                               $71,543,529.00
Triple Canopy, Inc.  Local guard services Contract          $73,344,007.29 
Triple Canopy, Inc.  Personal protective  Contract                         
                        services                               $20,800,000.00

                                                Contract                      
Contracting Agency/ Contractor    Purpose    Action Type  Amount Obligated
Blackwater Security Consultants,  Personal   Contract                      
Inc.                              protective             
                                     services                  $24,360,000.00
Total, Department of State                                $234,864,963.65b 
Grand Total                                              $1,548,404,050.00 

Source: GAO.

aNames of Iraqi firms not listed.

bThe two State contracts for personal protective services were only
partially funded with IRRF. Obligations totals listed for these contracts
represent only those obligations made with IRRF funds.

Appendix III: Actions Taken in Response to HTGAO-04-605TH, Rebuilding
Iraq: Fiscal Year 2003 Contract Award Procedures and Management Challenges

GAO recommendations from GAO-04-605  Actions taken according to DOD        
Iraq reconstruction contracting      officials                             
To ensure that task orders issued to DCC-W agreed with the GAO findings    
rebuild Iraq comply with applicable  concerning out-of-scope work for the  
requirements, and to maximize        orders awarded to SAIC for the Iraqi  
incentives for the contractors to    Media Network and the subject matter  
ensure effective cost control, the   experts. Contracting officers         
Secretary of the Army should review  ordering the out-of-scope work have   
the out-of-scope task orders for     been made aware that their actions    
Iraqi media and subject matter       were improper. DCC-W has instituted   
experts issued by the Defense        agencywide training in a number of    
Contracting Command-Washington       topics, including the need to         
(DCC-W) and take any necessary       carefully review the scope of work of 
remedial actions.                    a contract to determine what may be   
                                        legitimately ordered from that        
                                        contract. This training will be       
                                        periodically repeated. In addition,   
                                        its postaward reviews will include an 
                                        assessment of whether requiring work  
                                        is within the scope of the basic      
                                        contract.                             
                                                                              
                                        GAO and DOD consider this             
                                        recommendation closed.                
To ensure that task orders issued to According to DOD, the Procuring       
rebuild Iraq comply with applicable  Contracting Officer for the LOGCAP    
requirements, and to maximize        contract reviews each proposed scope  
incentives for the contractors to    of work that will result in a task    
ensure effective cost control, the   order and makes a determination       
Secretary of the Army should ensure  whether the action is within the      
that any future task orders under    scope of the contract and obtains     
the Logistics Civil Augmentation     appropriate legal advice as           
Program (LOGCAP) contract for Iraq   necessary.                            
reconstruction activities are within                                       
the scope of that contract.          GAO and DOD consider this             
                                        recommendation closed.                
To ensure that task orders issued to As of June 2006, the justifications   
rebuild Iraq comply with applicable  and approvals were being processed    
requirements, and to maximize        for Assistant Secretary of the Army   
incentives for the contractors to    for Acquisition, Logistics and        
ensure effective cost control, the   Technology, approval.                 
Secretary of the Army should address                                       
and resolve all outstanding issues   GAO considers this recommendation     
in connection with the pending       open, though Defense Procurement and  
Justifications and Approvals for the Acquisition Policy has indicated that 
contracts and related task orders    this recommendation will be closed in 
used by the Army Corps of Engineers  the near term.                        
to restore Iraq's electricity        
infrastructure.                      
To ensure that task orders issued to DOD has definitized, or reached       
rebuild Iraq comply with applicable  agreement on key terms and conditions 
requirements, and to maximize        for, all of the six contract actions  
incentives for the contractors to    identified in our June 2004 report.   
ensure effective cost control, the   We noted in our March 2005 report     
Secretary of the Army should direct  entitled, High-Level DOD Coordination 
the Commanding General, Army Field   is Needed to Further Improve the      
Support Command, and the Commanding  Management of the Army's LOGCAP       
General and Chief of Engineers, U.S. Contract ( GAO-05-328 ), that the     
Army Corps of Engineers, to          Army had made improvements in         
definitize outstanding contracts and definitizing task orders issued under 
task orders as soon as possible.     the LOGCAP contract.                  
                                                                              
                                        GAO and DOD consider this             
                                        recommendation closed.                
To improve the delivery of           In November 2005, DOD issued          
acquisition support in future        directive 3000.05, Military Support   
operations, the Secretary of         for Stability, Security, Transition,  
Defense, in consultation with the    and Reconstruction Operations, which, 
Administrator, U.S. Agency for       in part, required that DOD ensure     
International Development, should    proper oversight of contracts in      
evaluate the lessons learned in Iraq stability operations and ensure U.S.  
and develop a strategy for ensuring  commanders deployed in foreign        
that adequate acquisition staff and  countries are able to secure contract 
other resources can be made          support rapidly. DOD is also working  
available in a timely manner.        on developing joint contingency       
                                        contracting policy and doctrine and   
                                        assessing DOD's contract              
                                        administration services capability    
                                        for theater support contracts. The    
                                        estimated completion data of the      
                                        ongoing actions is fall 2006.         
                                                                              
                                        GAO considers this recommendation     
                                        open.                                 

Source: GAO.

Appendix IV: Comments from the Department of State

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

Appendix VI: GAO Contacts and Acknowledgments

GAO Contacts

John Hutton, (202) 512-4841

Acknowledgments

Major contributors to this report were John Neumann, Daniel Chen, Kate
France, Julia Kennon, John Krump, Art James, Shannon Simpson, Karen Sloan,
Adam Vodraska, and Aaron Young.

(120547)

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Highlights of GAO-07-40 , a report to Congressional Committees

October 2006

REBUILDING IRAQ

Status of Competition for Iraq Reconstruction Contracts

Since 2003, Congress has appropriated more than $20 billion through the
Iraq Relief and Reconstruction Fund (IRRF) to support Iraq rebuilding
efforts. The majority of these efforts are being carried out through
contracts awarded by the Departments of Defense (DOD) and State and the
U.S. Agency for International Development (USAID). When awarding
IRRF-funded contracts for $5 million or more noncompetitively, agencies
are required by statute to provide notification and justification to
Congress.

In June 2004, GAO found that agencies generally complied with

laws and regulations governing competition to award new contracts, but did
not always comply with competition requirements when issuing task orders
under existing contracts.

As mandated by Congress, this report (1) describes the extent of
competition in Iraq reconstruction contracts awarded by DOD, USAID, and
State since October 1, 2003, based on available data, and (2) assesses
whether these agencies followed applicable documentation and congressional
notification requirements regarding competition for 51 judgmentally
selected Iraq reconstruction contract actions.

In written comments, State and USAID concurred with the report findings.
DOD provided a technical comment.

While no single, comprehensive system currently tracks governmentwide Iraq
reconstruction contract data, available data showed that from October 1,
2003, through March 31, 2006, DOD, USAID, and State collectively awarded
the majority of Iraq reconstruction contracts competitively. Based on
competition information we obtained on $10 billion of the total $11.6
billion in IRRF obligations by these agencies during the period of our
review, we found that about $9.1 billion-or 91 percent-was for
competitively awarded contracts. While our ability to obtain complete
competition data for all DOD Iraq reconstruction contract actions was
limited because not all DOD components consistently tracked or fully
reported this information, we obtained information on approximately $7
billion, or 82 percent, of DOD's total Iraq reconstruction contract
obligations, and of this, we found that competition occurred for nearly
all of the obligations. Additionally, based on complete data for the
period of our review we found that USAID competitively awarded contract
actions for 99 percent of its obligations, while State awarded contract
actions competitively for only 10 percent of its obligations.

GAO reviewed the files for 51 contract actions totaling $1.55 billion-22
of which were awarded noncompetitively and 29 of which were awarded
competitively-almost all of which contained proper documentation. One
contract file-for a noncompetitively awarded task order issued by
State-did not contain justifications or other required documentation. DOD
was also unable to provide documentation for 4 of the competitively
awarded contract actions. Of the 22 noncompeted contract actions in GAO's
review, State should have notified Congress of 2 actions awarded using
other than full and open competition in accordance with notification
requirements but did not. State officials told GAO that they have taken
steps to address the problem. GAO did not identify any DOD or USAID
contract actions within the sample that required notification.
*** End of document. ***