    Army Corps of Engineers: Known Performance Issues with New
    Orleans Drainage Canal Pumps Have Been Addressed, but Guidance on
    Future Contracts Is Needed (31-DEC-07, GAO-08-288).

    Hurricane Katrina caused several breaches in the floodwalls along
    three drainage canals in New Orleans, contributing to
    catastrophic flooding. To restore the pre-Katrina level of
    hurricane-related flood protection, the Army Corps of Engineers
    (Corps) decided to acquire several large-capacity pumping
    systems. During the process of acquiring, testing, and installing
    the pumping systems, issues with the pump contract and operation
    of the pumping systems came to light, including several
    identified in a Corps Independent Team Report (ITR). GAO was
    asked to evaluate the Corps' efforts to (1) develop contract
    specifications and award the contract, (2) address pumping system
    performance issues, (3) document contract modifications, and (4)
    reconcile contract payments. GAO reviewed contract and testing
    documents, observed the operation of the pumping system, and
    interviewed officials from the Corps, its consultants and
    contractors, and the ITR team.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-08-288
        ACCNO:   A79249
      TITLE:     Army Corps of Engineers: Known Performance Issues with
    New Orleans Drainage Canal Pumps Have Been Addressed, but
    Guidance on Future Contracts Is Needed
         DATE:   12/31/2007
      SUBJECT:   Army procurement
    	     Contract administration
    	     Defense procurement
    	     Flood control
    	     Flood control management
    	     Floods
    	     Hurricane Katrina
    	     Hurricanes
    	     Performance measures
    	     Pipeline operations
    	     Strategic planning
    	     Water pipelines

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    GAO-08-288

         * [1]Results in Brief
         * [2]Background
         * [3]Commitment to Meet Schedule Drove Specifications but Resulte

              * [4]Space and Schedule Requirements Were Key Considerations in D
              * [5]Specifications Closely Matched Those of One Supplier, but Ke

         * [6]The Corps Used a Streamlined Solicitation Process and Awarde
         * [7]The Corps and the Contractors Have Addressed Pumping System

              * [8]Factory Testing Requirements Were Modified to Focus on Defic
              * [9]Pumping System Performance Issues Have Been Addressed by the

                   * [10]Undersized Motors

                        * [11]Hydraulic Motor Vibrations
                        * [12]Hydraulic Intake Line
                        * [13]Welding
                        * [14]Pumping Capacity

              * [15]Pumping System Acceptance Is Near Completion

         * [16]Contract Files Remained Incomplete for Months, but Currently

              * [17]Significant Documentation Added to the Contract Files Only a
              * [18]Many Specific Documents Cited by the ITR as Missing Were Not
              * [19]File Documentation Establishes Independence of Corps Decisio

         * [20]The Corps Has Not Overpaid the Contract and Has Plans to Rec
         * [21]Conclusion
         * [22]Recommendations for Executive Action
         * [23]Agency Comments and Our Evaluation
         * [24]GAO Contacts
         * [25]Staff Acknowledgments
         * [26]GAO's Mission
         * [27]Obtaining Copies of GAO Reports and Testimony

              * [28]Order by Mail or Phone

         * [29]To Report Fraud, Waste, and Abuse in Federal Programs
         * [30]Congressional Relations
         * [31]Public Affairs

    United States Government Accountability Office

    GAO

    December 2007

    Report to the Chairman, Ad Hoc Subcommittee on Disaster Recovery,
    Committee on Homeland Security and Governmental Affairs, U.S. Senate

    ARMY CORPS OF ENGINEERS

    Known Performance Issues with New Orleans Drainage Canal Pumps Have Been
    Addressed, but Guidance on Future Contracts Is Needed

    GAO-08-288

    Contents

    Letter 1

    Results in Brief 3
    Background 6
    Commitment to Meet Schedule Drove Specifications but Resulted in
    Deficiencies in Some Key Contract Terms 13
    The Corps Used a Streamlined Solicitation Process and Awarded the Pumping
    Systems Contract to the Highest-Rated Competitor 15
    The Corps and the Contractors Have Addressed Pumping System Testing and
    Performance Issues 17
    Contract Files Remained Incomplete for Months, but Currently Contain
    Required Documentation for the Type and Value of Procurement 28
    The Corps Has Not Overpaid the Contract and Has Plans to Reconcile
    Payments Made in Error 32
    Conclusion 33
    Recommendations for Executive Action 34
    Agency Comments and Our Evaluation 34
    Appendix I Scope and Methodology 36
    Appendix II Pumping Capacity for the Three Drainage Canals 37
    Appendix III Comments from the Department of Defense 40
    Appendix IV GAO Contacts and Staff Acknowledgments 42

    Tables

    Table 1: Total Number of Pumps and Pumping Capacity at the 17th Street,
    London Avenue, and Orleans Avenue Outfall Canals, as of November 2007 12
    Table 2: GAO Analysis of the ITR Findings 31

    Figures

    Figure 1: Flood Protection Control Levees in and around New Orleans,
    Louisiana 7
    Figure 2: Orleans East Bank in New Orleans, Louisiana, and Repair Project
    Sites 9
    Figure 3: Graphic of Interim Gates and Temporary Pumps 10
    Figure 4: Hydraulic Pumping System 16
    Figure 5: Original Hydraulic Pump Design with Siphon 21
    Figure 6: Reinstalled Hydraulic Pump without Siphon 22
    Figure 7: Discharge Pipes at the London Avenue Canal 25
    Figure 8: Hydraulic Pumping Systems Performing at the 17th Street Canal,
    September 27, 2007 27
    Figure 9: Pumping Capacity Trend for the 17th Street Canal, June 1, 2006
    through November 30, 2007 37
    Figure 10: Pumping Capacity Trend for the London Avenue Canal, June 1,
    2006 through November 30, 2007 38
    Figure 11: Pumping Capacity Trend for the Orleans Avenue Canal, June 1,
    2006 through November 30, 2007 39

    Abbreviations

    cfs cubic feet per second
    Corps U.S. Army Corps of Engineers
    ERDC Engineering Research and Development Center
    FAR Federal Acquisition Regulation
    HI Hydraulic Institute
    ITR Independent Team Report
    MVD Mississippi Valley Division
    MWI Moving Water Industries
    RFP Request for Proposals

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

    United States Government Accountability Office
    Washington, DC 20548

    December 31, 2007

    The Honorable Mary L. Landrieu
    Chairman
    Ad Hoc Subcommittee on Disaster Recovery
    Committee on Homeland Security and Governmental Affairs
    United States Senate

    Dear Madam Chairman:

    The greater New Orleans metropolitan area sits in the tidal lowlands of
    Lake Pontchartrain and is bordered generally on its southern side by the
    Mississippi River and the Gulf of Mexico. Due to the city's location and
    elevation, which averages six feet below sea level, the area has
    historically experienced many floods. In an effort to reduce such floods,
    a series of levees and other flood control structures have been built over
    the years to reduce that threat. However, hurricane-induced storm surges,
    waves, and rainfall continue to pose a threat to New Orleans. To avoid
    flooding in New Orleans from a rain storm, the city's Sewerage and Water
    Board pumps rainwater from the city into three drainage canals located at
    17th Street, London Avenue, and Orleans Avenue, which then flows
    unrestricted into Lake Pontchartrain. While critical to prevent flooding
    from rainfall, these canals are vulnerable to storm surge from Lake
    Pontchartrain during hurricanes; consequently, floodwalls have been
    erected along both sides of the canals to protect against storm surge
    overtopping the canals and flooding the city. The greater New Orleans
    metropolitan area sits in the tidal lowlands of Lake Pontchartrain and is
    bordered generally on its southern side by the Mississippi River and the
    Gulf of Mexico. Due to the city's location and elevation, which averages
    six feet below sea level, the area has historically experienced many
    floods. In an effort to reduce such floods, a series of levees and other
    flood control structures have been built over the years to reduce that
    threat. However, hurricane-induced storm surges, waves, and rainfall
    continue to pose a threat to New Orleans. To avoid flooding in New Orleans
    from a rain storm, the city's Sewerage and Water Board pumps rainwater
    from the city into three drainage canals located at 17th Street, London
    Avenue, and Orleans Avenue, which then flows unrestricted into Lake
    Pontchartrain. While critical to prevent flooding from rainfall, these
    canals are vulnerable to storm surge from Lake Pontchartrain during
    hurricanes; consequently, floodwalls have been erected along both sides of
    the canals to protect against storm surge overtopping the canals and
    flooding the city.

    On August 29, 2005, storm surge from Hurricane Katrina caused several
    breaches in the floodwalls along the 17th Street and London Avenue canals,
    contributing to catastrophic flooding in New Orleans. In its efforts to
    restore pre-Katrina levels of hurricane protection to New Orleans by the
    June 1 start of the 2006 Atlantic hurricane season (which generally runs
    from June 1 to November 30 each year), the U.S. Army Corps of Engineers
    (Corps), in late 2005, considered strengthening the drainage canal
    floodwalls but decided against this effort due to cost and time
    constraints. Instead, the Corps decided to install three interim closure
    structures or gates near the points where the canals meet the lake. These
    gates would be closed during major hurricane events to prevent storm surge
    from entering the canals and potentially overtopping or breaching the
    canal floodwalls and flooding the city. When the gates are closed,
    however, rainwater cannot drain from the three canals into Lake
    Pontchartrain, and On August 29, 2005, storm surge from Hurricane Katrina
    caused several breaches in the floodwalls along the 17th Street and London
    Avenue canals, contributing to catastrophic flooding in New Orleans. In
    its efforts to restore pre-Katrina levels of hurricane protection to New
    Orleans by the June 1 start of the 2006 Atlantic hurricane season (which
    generally runs from June 1 to November 30 each year), the U.S. Army Corps
    of Engineers (Corps), in late 2005, considered strengthening the drainage
    canal floodwalls but decided against this effort due to cost and time
    constraints. Instead, the Corps decided to install three interim closure
    structures or gates near the points where the canals meet the lake. These
    gates would be closed during major hurricane events to prevent storm surge
    from entering the canals and potentially overtopping or breaching the
    canal floodwalls and flooding the city. When the gates are closed,
    however, rainwater cannot drain from the three canals into Lake
    Pontchartrain, and large-capacity pumping systems are needed to pump water
    out of the canals and into the lake. Due to space constraints along the
    canals and the limited amount of time it had before the start of the 2006
    hurricane season, the Corps decided to procure 34 large-capacity
    hydraulically powered pumping systems^1 to provide the most pumping
    capacity possible by June 1, 2006. In mid-2006, the Corps modified the
    contract to procure six additional hydraulic pumping systems, bringing the
    total number of hydraulic pumping systems to be installed along the three
    drainage canals to 40.^2

    During the process of acquiring, testing, and installing the hydraulic
    pumping systems for the drainage canals, issues with the operation of
    these pumping systems came to light. In response to your request, we
    issued a report on May 23, 2007, on the procurement process and award of
    the pumping system contract and the status of the efforts to address
    issues related to the performance of the pumping systems.^3 In June 2007,
    the Corps' Mississippi Valley Division (MVD) released a technical review
    report, known as the Independent Team Report (ITR). This report identified
    testing and performance-related issues regarding the hydraulic pumping
    systems similar to the issues we had identified in our May report and, in
    addition, raised potential issues related to the administration and
    documentation of contract modifications. The ITR was conducted by a
    three-person technical review team, which consisted of two Corps engineers
    from outside MVD and one engineer from MVD who acted as the team
    coordinator. According to ITR members, the New Orleans District was not
    offered the opportunity to provide official comments on the draft ITR;
    rather, an advisory panel from MVD reviewed the draft before its issuance
    in June 2007.

    In this context, you asked us to update our May 2007 report and consider
    the ITR findings in our analysis. Specifically, you asked us to evaluate
    the Corps' efforts to (1) develop the specifications for the pumping
    systems, (2) award the contract, (3) address pumping system performance
    issues identified during factory and on-site testing, (4) document
    modifications to the contract, and (5) reconcile payments made and amounts
    still owed to the contractor.

    ^1Unlike a more typical direct drive water pumping system where the motor
    or engine is directly coupled by a shaft to the pump it is turning, a
    hydraulic pumping system is one where pressurized hydraulic oil is used to
    transmit power from an engine to a pump impeller. This allows for greater
    flexibility in the placement and possible isolation of the engine from the
    pumping system because they are connected by hydraulic lines.

    ^2During the 2007 hurricane season, the Corps also installed 14 portable
    hydraulic pumps along the 17th Street Canal and 19 additional direct drive
    pumps from another pump manufacturer along the 17th Street and London
    Avenue Canals.

    ^3GAO, U.S. Army Corps of Engineers' Procurement of Pumping Systems for
    the New Orleans Drainage Canals, [32]GAO-07-908R (Washington, D.C.: May
    23, 2007).

    To address these objectives, we reviewed the Corps' plans for the interim
    gates and temporary pumping systems for the three New Orleans drainage
    canals. (Unless otherwise noted, the pumping systems discussed in this
    report are only the 40 60-inch hydraulic pumps installed at the three
    canals.) We reviewed documentation, including e-mails, correspondence, and
    other documents related to the solicitation process, contract
    specifications and other provisions, factory and on-site test results,
    performance requirements, contract modification files, payments to the
    contractor, and the Corps' plans for increasing pumping capacity through
    2007. We visited the 17th Street, London Avenue, and Orleans Avenue Canals
    and observed the operation of the pumping systems. We interviewed
    officials from (1) Corps Headquarters, New Orleans District, other Corps
    districts, and members of the MVD's technical review team related to the
    contract and pump performance; (2) Moving Water Industries (MWI)
    Corporation and two other pump suppliers that bid on the solicitation; and
    (3) the architectural and engineering consulting firms under contract with
    the Corps that researched available pumping system alternatives, qualified
    pump manufacturers, pump delivery timelines, and costs and that helped
    design the canal gates and pumping stations. We conducted our work from
    September through December 2007 in accordance with generally accepted
    government auditing standards.

    Results in Brief

    Schedule concerns drove the Corps' decisions in developing specifications
    for the pumping systems, but the rush to award the contract resulted in
    deficiencies in key contract provisions. The Corps was committed to having
    as much pumping capacity as possible in place at the drainage canals by
    June 1, 2006--the start of the Atlantic hurricane season. Due to the
    compressed schedule and the limited space available for installation, and
    based on the limited market research conducted by the Corps' consultants,
    the Corps decided to use 60-inch hydraulic pumping systems rather than
    alternatives that would have involved longer delivery schedules or
    required more space. The Corps' consultants drafted contract
    specifications that closely matched those of one supplier, which, combined
    with the 60-inch pumping system requirement, resulted in that supplier
    being in the strongest position to compete for the contract. Further, the
    contract itself was not written as precisely as it should have been.
    Specifically, the original factory test requirements were ambiguous, there
    were limited provisions for on-site testing, and there were no criteria
    for acceptance of the pumping systems by the government.

    Given the need to procure and install the temporary pumping systems before
    the start of the hurricane season, the Corps conducted an expedited
    competition to contract for the pumping systems. The Corps issued a
    competitive solicitation and received three proposals. Using established
    evaluation factors, the Corps rated MWI's proposal significantly higher
    than the other two proposals. The Corps selected MWI for contract award,
    in large part, because it determined that MWI was the competitor most
    likely to enable the agency to meet its June 1 deadline.

    The Corps and the contractors have addressed and corrected known
    performance issues with the pumping systems. As identified in our May 2007
    report and in the ITR, both factory and on-site testing revealed several
    concerns with some components of the pumping systems. Specific concerns
    identified during testing included undersized gear oil circulation motors,
    hydraulic motor vibrations, the design of the hydraulic intake line,
    suspect pipe welds, and lower than expected pumping capacity.
    Nevertheless, the pumping systems were installed as planned because the
    Corps believed it was better to have some pumping capacity along the
    drainage canals during the 2006 hurricane season rather than none. The
    Corps also believed that many of the issues identified during factory
    testing could be resolved after installation. Consequently, on June 1,
    2006, the Corps had installed 11 pumping systems, and by July 2006, it had
    installed 34. However, both our May 2007 report and the ITR concluded that
    it was uncertain how much of the pumping systems' theoretical capacity
    would be available, and for how long, if needed during the 2006 hurricane
    season. The Corps and its contractors have since taken several steps to
    correct known performance issues with the pumping systems. These issues
    were addressed by replacing components that were undersized, such as
    motors and springs; redesigning and replacing the hydraulic intake lines;
    rewelding critical structural welds; and conducting additional pumping
    capacity tests. Between November 2006 and September 2007, the Corps and
    its contractors completed all of the repairs that were noted in the ITR
    and reinstalled all 40 pumping systems. As of September 2007, each pumping
    system has been successfully tested on site for at least 2 hours, thus
    providing greater assurance that they will perform as designed. According
    to Corps officials, all of the outstanding repairs have been completed and
    on-site testing indicates that the system is now fully operational.

    Contract files for the pumping systems, although incomplete at the time of
    the ITR review, now contain the required documentation for the type of
    contract and value of the associated modifications. In a number of cases,
    Corps officials inserted required documentation in the contract files
    several months after modifications were issued and only after the ITR
    reported its findings. The ITR correctly noted the absence of some
    required documentation. However, we found much of the documentation that
    the ITR specifically cited as missing--including requests for proposals,
    independent government estimates, certified cost or pricing data,
    technical analyses, and price negotiation memorandums--was not required,
    either because documentation was not relevant to the contract
    modifications in question, or the value of the modifications were below
    specified regulatory thresholds. In addition, while the ITR found that it
    appeared as though the contractor developed the scope of work and pricing
    for some of the modifications without a subsequent analysis by the Corps,
    we found no instance of this occurring. Rather, our review found that, for
    most of the contract modifications, there was evidence of some analysis by
    the Corps and extensive back and forth discussion, usually by e-mail,
    between officials from the Corps and MWI.

    As of October 31, 2007, the Corps had paid the contractor about $30.5
    million of the $33 million contract for the 40 hydraulic pumping systems
    and has since planned to reconcile mistaken payments it made. The Corps
    made payments to the contractor after receiving invoices for items
    delivered, such as drive units, pumps, and services. In most instances,
    the Corps retained about 20 percent of each invoice to ensure that the
    contractor was not overpaid. The ITR identified a few instances where the
    Corps made duplicate payments to the contractor. Our review found that
    these duplicate payments involved mistakes by the Corps, not inappropriate
    billing actions on the part of the contractor. We found no additional
    cases where the Corps made duplicate payments to the contractor. According
    to the Corps contracting officer, the duplicate payments will be corrected
    by deducting the balance from retained funds or by not paying outstanding
    invoices. In addition, the contract also has an incentive clause of up to
    $5 million for early delivery, but the Corps has withheld any payment
    until the final acceptance of the pumping systems occurs. The contract
    also has a penalty for late delivery. The Corps will determine whether or
    not a penalty will be assessed as part of the close-out process. According
    to Corps officials, final payment and reconciliation of the contract,
    including any incentive payments, will be completed after final acceptance
    of the pumping systems.

    While most of the issues identified to date related to testing, pump
    system performance, and payments have been addressed by the parties, there
    may still be issues that arise and need to be resolved during contract
    closeout. The Corps expects contract closeout to take place during the
    early part of calendar year 2008.

    We are recommending that the Corps develop procedures to help ensure that
    all future contracts, including those awarded for expedited procurements,
    contain the terms and conditions needed to ensure that items contracted
    for meet the government's needs, and that key contract actions are
    adequately documented in a timely manner. In commenting on a draft of this
    report, the Department of Defense concurred with our recommendations.

    Background

    Since its founding in 1718, the city of New Orleans and its surrounding
    areas have been subject to numerous floods from the Mississippi River and
    hurricanes. The greater New Orleans metropolitan area, composed of
    Orleans, Jefferson, St. Charles, St. Bernard, and St. Tammany parishes,
    sits in the tidal lowlands of Lake Pontchartrain and is bordered generally
    on its southern side by the Mississippi River and the Gulf of Mexico. Lake
    Pontchartrain is a tidal basin about 640 square miles in area that
    connects with the Gulf of Mexico through Lake Borgne and the Mississippi
    Sound.

    Many hurricanes have struck the area over the years, including Hurricane
    Betsy in 1965, Hurricane Camille in 1969, Hurricane Lili in 2002, and
    Hurricane Katrina in 2005. The hurricane surge that can inundate coastal
    lowlands is the most destructive characteristic of hurricanes and accounts
    for most of the lives lost from hurricanes. Because of such threats, a
    series of flood control structures, including concrete floodwalls and
    levees, have been constructed in and around the New Orleans metropolitan
    area (see fig. 1).

    Figure 1: Flood Protection Control Levees in and around New Orleans,
    Louisiana

    On August 29, 2005, Hurricane Katrina came ashore near Buras, Louisiana,
    about 60 miles southeast of New Orleans, with wind speeds of up to 127
    miles per hour and a storm driven wave surge of up to 30 feet. The size
    and strength of the storm and subsequent flooding resulted in one of the
    largest natural disasters in U.S. history. Storm waters overtopped
    floodwalls and levees in Louisiana's Orleans and neighboring parishes,
    causing widespread flooding, many billions of dollars of property damage,
    and more than 1,300 deaths. The Corps estimates that more than one-half of
    the 269 miles of federally constructed levees and floodwalls in these
    parishes were damaged by the storm's winds and floodwaters.

    Through a combination of permanent and temporary measures, the Corps
    planned to restore the level of hurricane protection to the New Orleans
    area that existed prior to Hurricane Katrina by June 1, 2006. To restore
    the pre-Katrina level of protection in a period of about 9 months, the
    Corps had to work quickly and, in some instances, engineer temporary
    solutions because not all of the repairs could be completed in time. One
    such temporary solution was needed along the Orleans East Bank, located
    south of Lake Pontchartrain, from the 17th Street Canal to the Inner
    Harbor Navigation Canal, and along the western bank of the Inner Harbor
    Navigation Canal to the Mississippi River. About 19 miles of levees and
    floodwalls are located along the Orleans Lakefront, the Inner Harbor
    Navigation Canal, and three drainage canals--17th Street, London Avenue,
    and Orleans Avenue--which drain rainwater from New Orleans into Lake
    Pontchartrain. A total of about 1 mile of levees and floodwalls was
    damaged along the 17th Street Canal and two sides of the London Avenue
    Canal, resulting in flooding of New Orleans (see fig. 2).

    Figure 2: Orleans East Bank in New Orleans, Louisiana, and Repair Project
    Sites

    The city's three drainage canals are critical to avoid flooding in New
    Orleans from a rain storm. During rain events, the city's Sewerage and
    Water Board pumps rainwater from the city into three drainage canals at
    17th Street, London Avenue, and Orleans Avenue, which then flows
    unrestricted into Lake Pontchartrain. According to the Corps, the maximum
    amount of water that the Sewerage and Water Board can pump into these
    drainage canals is 10,500 cubic feet per second (cfs) at the 17th Street
    Canal, 7,980 cfs at the London Avenue Canal, and 2,690 cfs at the Orleans
    Avenue Canal. Because permanent structures and repairs could not be
    completed on the three drainage canals by June 1, 2006, the Corps decided
    to install temporary pumping systems to provide protection to the area for
    3 to 5 years until permanent structures can be constructed (see fig. 3).
    The Corps chose to install three gates and temporary pumping systems near
    the points where the 17th Street, London Avenue, and Orleans Avenue
    drainage canals meet Lake Pontchartrain. These gates are intended to stop
    hurricane-induced storm surge from Lake Pontchartrain from entering the
    canals and possibly overtopping or breaching the canal floodwalls, which
    would flood the city. However, because the gates prevent the drainage
    canals from draining water from the city into the lake when the gates are
    closed during a hurricane event, temporary pumping systems are needed to
    pump water out of the canals and into the lake.

    Figure 3: Graphic of Interim Gates and Temporary Pumps

    Due to the hurricane damage sustained by the floodwalls bordering the
    canals, the Corps established the following safe water levels for each of
    the drainage canals--6 feet for the 17th Street Canal, 5 feet for the
    London Avenue Canal, and 8 feet for the Orleans Avenue Canal. The water
    level in each of these canals must be maintained at or below the safe
    water level in order to ensure that the already weakened canal floodwalls
    are not breached. Further, the total capacity of the temporary pumping
    systems at the interim gated closure structures that is necessary to
    accommodate a 10-year rainfall event^4 without exceeding the safe water
    levels is 7,700 cfs at the 17th Street Canal, 5,000 cfs at the London
    Avenue Canal, and 1,900 cfs at the Orleans Avenue Canal. The hydraulic
    pumping systems installed by the Corps at the Orleans Avenue Canal were
    sufficient to maintain the safe water levels during a 10-year rainfall
    event. However, the hydraulic pumping systems installed at the 17th Street
    and London Avenue drainage canals could provide about 4,000 cfs and 2,700
    cfs, respectively. In order to ensure that each pumping station had the
    needed capacity to pump enough water during a 10-year rainfall event, the
    Corps used a separate contract to acquire and install an additional 11
    direct drive pumps and 14 portable hydraulic pumps at the 17th Street
    Canal, increasing the capacity from about 4,000 cfs to about 9,200 cfs.
    The Corps also installed 8 additional direct drive pumps at the London
    Avenue Canal, increasing the capacity from about 2,700 cfs to about 5,200
    cfs. Table 1 provides the total number of pumps and pumping capacity at
    the 17th Street, London Avenue, and Orleans Avenue Outfall Canals.

    ^4A 10-year rainfall event is a storm that has a probability of occurring
    once in 10 years, also described as having a 10 percent chance of
    happening in any year.

    Table 1: Total Number of Pumps and Pumping Capacity at the 17th Street,
    London Avenue, and Orleans Avenue Outfall Canals, as of November 2007

    DOT action: Finance Guidebook for Freight;
    Description: Summarizes the potential funding available for freight
    projects.

    DOT action: Freight Analysis Framework;
    Description: Quantifies existing freight flows and forecasts future
    freight flows along national corridors and through international
    gateways.

    DOT action: Intermodal Freight Technology Working Group;
    Description: Cooperative effort of public and private stakeholders to
    identify and operationally test technology solutions to freight
    transportation issues.

    DOT action: Transportation Planning Capacity Building Program;
    Description: Provides a source of information to state departments of
    transportation and MPOs. Through this program, information has been
    posted on how to include freight interests in the planning process.

    DOT action: Freight Professional Development Program;
    Description: Offers training, education, technical assistance, and a
    resource library to assist state and local officials, as well as,
    private stakeholders in freight transportation planning and systems.

    DOT action: Guide to Quantifying the Economic Impacts of Federal
    Investments in Large-Scale Freight Transportation Projects;
    Description: Helps to ensure that freight projects are appropriately
    considered in national, regional, and state decisions about the future
    of transportation system investments.

    DOT action: Freight Industry Roundtable and Draft Framework for a
    National Freight Policy;
    Description: The Freight Industry Roundtable outreach effort led to the
    creation of the Draft Framework for a National Freight Policy, which is
    a new policy initiative to address freight transportation concerns.
    Viewed as a living document, the Draft Framework is intended to
    stimulate discussion and local responses.

    DOT action: Corridors of the Future congestion program;
    Description: Encourages states to think beyond their boundaries to
    reduce congestion on some of the nation's most critical trade
    corridors. DOT plans to facilitate the development of these corridors
    by helping project sponsors reduce institutional and regulatory
    obstacles associated with multistate and multimodal corridor
    investments.

    DOT action: Freight performance measures;
    Description: Measures travel speeds and travel time reliability for
    commercial vehicle traffic on 25 freight significant corridors, and
    measures crossing times and crossing time reliability on five
    U.S./Canadian border crossings.

    DOT action: New offices established by the Maritime Administration;
    Description: The Maritime Administration (MARAD) established 10 offices
    in U.S. ports to help promote and coordinate solutions across
    jurisdictional lines and provide local, state, and regional
    stakeholders with a local link to MARAD. Additionally, MARAD
    established the office of Marine Highways and Passenger Vessel Services
    to focus efforts to relieve road and rail congestion by shifting some
    cargoes to coastal and inland waterways.

    Source: GAO analysis of Corps data.

    ^aPump capacity numbers are approximate and are based on rated pump
    values.

    ^bCubic feet per second (cfs) is a unit of measure for flow. One cfs is
    equivalent to about 449 gallons per minute or 646,000 gallons per day.

    ^cThe upper limit on the total pumping capacity at the 17th Street Canal
    has been set at 9,200 cfs because of the number of pumps at the canal.

    Although these additional pumps allow the total pumping capacity at the
    three canals to maintain the capacity needed to pump water out of the
    canals during a 10-year rainfall event, the capacity is still not
    sufficient to match the maximum pumping capacity of the Sewerage and Water
    Board's pumps. As a result, during a hurricane event, some flooding might
    occur in some parts of the city from rainfall, although it is likely that
    this flooding would be significantly less than that which occurred from
    the overtopping and breaches of the canal walls during Hurricane Katrina.
    Appendix II provides the pumping capacity trends for the 17th Street,
    London Avenue, and Orleans Avenue drainage canals from June 1, 2006,
    through November 30, 2007.

    Commitment to Meet Schedule Drove Specifications but Resulted in Deficiencies in
    Some Key Contract Terms

    The Corps' efforts to develop the specifications for the pumping systems
    were driven by its commitment to have as much pumping capacity as possible
    in place at the drainage canals by June 1, 2006--the start of the first
    Atlantic hurricane season after Hurricane Katrina. Due to the compressed
    schedule and the limited space available for installation, and based on
    the limited market research conducted by the Corps' consultants, the Corps
    decided to use 60-inch hydraulic pumping systems rather than alternatives
    that would have involved longer delivery schedules or required more space.
    The Corps' consultants drafted contract specifications that closely
    matched those of one supplier, which, along with the 60-inch pumping
    system requirement, resulted in that supplier being in the strongest
    position to compete for the contract. Further, the contract itself was not
    written as precisely as it should have been. Specifically, the original
    factory test requirements were ambiguous, there were limited provisions
    for on-site testing, and there were no criteria for acceptance of the
    pumping systems by the government.

    Space and Schedule Requirements Were Key Considerations in Developing
    Specifications

    The decisions made by the Corps during the procurement of pumping systems
    at three New Orleans drainage canals were driven largely by space and
    schedule considerations. The Corps began the acquisition process by
    contracting with two architectural and engineering consultant firms
    (consultants) to determine available technical options that could meet the
    Corps' schedule, space, and pumping capacity needs; conduct the associated
    market research; and survey pump equipment suppliers. On the basis of
    their technical analysis, the consultants concluded that the use of
    hydraulic-driven pumps was the best alternative for the Corps because
    electric-driven direct drive pumps would need auxiliary equipment that
    would require more space for installation and would have a longer delivery
    time. They also determined that using hydraulic pumps less than 60 inches
    in diameter would require more pumps to be installed and require added
    space to provide the same amount of pumping capacity.^5

    ^5The 60 inches refers to the diameter of the pumps' impeller, which moves
    the water. Simplistically, pumping capacity is proportional to the square
    of the pump diameter. For example, using 42-inch hydraulic pumps would
    require nearly twice the number of pumping systems to achieve the same
    capacity as 60-inch hydraulic pumps.

    Specifications Closely Matched Those of One Supplier, but Key Contract
    Provisions Were Deficient

    Corps consultants drafted contract specifications that closely matched
    those of one supplier. The consultants conducted limited market research
    and found that at least two suppliers had specifications for a 60-inch
    hydraulic pump. One of those suppliers was MWI, a company that the
    consultants had spoken with as they were developing the design for the
    gates and pump stations along the drainage canals. The consultants met
    with MWI and also contacted at least two other pump manufacturers
    regarding their pumps. Of these suppliers, the consultants identified MWI
    as the only supplier who had actually manufactured a 60-inch hydraulic
    pump with a 60-inch impeller, the mechanism that drives water through the
    system. Another pump manufacturer had a design for a 60-inch pump, but it
    included only a 54-inch impeller. The consultants believed that MWI could
    deliver the 34 60-inch pumping systems that the Corps needed on schedule.

    The Corps did not have an existing technical specification for a 60-inch
    hydraulic pump. The consultants drafted a specification for the Request
    for Proposals (RFP) based on technical specifications and descriptions of
    the pumps contained in catalogs published by MWI and another manufacturer.
    The consultants told us that they had provided the Corps with a generic
    specification because any reference to a specific supplier had been
    removed. However, our analysis of the RFP's equipment specifications
    indicates that they more closely matched MWI's than the other
    manufacturer's catalog descriptions. In fact, the testing specifications
    used for the RFP were nearly identical to those published by MWI, which
    included an open sump test requirement. After the other manufacturer
    complained that the open sump test requirement was restrictive because
    only MWI had an open sump, the Corps amended the RFP to delete this
    requirement. This open sump test requirement was incorporated into the
    contract at the time of award, however, because it was offered by MWI as
    part of its proposal.

    Other contractual testing and acceptance criteria were ambiguous,
    inadequate, or missing altogether. Specifically, the contract did not
    clearly state whether factory flow and head testing was required of each
    pump, the on-site testing requirement merely stated that there should be
    no leaks, and there were no final acceptance criteria in the contract.
    Terms and conditions in contracts should be clear and complete so that the
    parties fully understand their obligations and that potential disputes can
    be avoided. To date, Corps and MWI have been able to address identified
    deficiencies in the contract, which were largely caused by the perceived
    need to move forward expeditiously. However, the extent to which these or
    other contract issues may lead to disputes between the parties will not be
    known until the time of contract closeout, currently scheduled for early
    2008.

    The Corps Used a Streamlined Solicitation Process and Awarded the Pumping
    Systems Contract to the Highest-Rated Competitor

    Given the need to procure and install the temporary pumping systems before
    the June 1 start of the 2006 hurricane season, the Corps decided to use a
    streamlined process to contract for the pumping systems. Like most other
    federal agencies, the Corps has statutory authority to use other than full
    and open competition procedures when the agency's needs are of an unusual
    and compelling urgency. Using this authority, the Corps streamlined parts
    of the acquisition process. The RFP was issued on January 13, 2006, and
    required that the contractors' proposals be submitted by January 18, just
    5 days later. Normally the solicitation would allow for a response period
    of at least 30 days.

    The Corps received three proposals in response to its RFP. Suppliers
    submitted pricing information and technical proposals and made oral
    presentations to the Corps.^6 The Source Selection Evaluation Board, whose
    voting members consisted of three Corps officials, evaluated offers using
    four technical evaluation factors identified in the RFP in descending
    order of importance: (1) technical approach, (2) project management, (3)
    past performance, and (4) small business or small disadvantaged business
    participation. The solicitation also provided that, when combined, these
    technical evaluation factors were weighted approximately equal to price.

    The Source Selection Evaluation Board rated MWI's proposal significantly
    higher than the other two proposals. MWI's proposal included commitments
    from suppliers and subcontractors to deliver the pump components needed by
    MWI to assemble the pumps. The Corps believed MWI represented the best
    chance of meeting the Corps' critical deadline of June 1, 2006. MWI
    offered a price of $26.6 million, which was within 2.8 percent of the
    government estimate of $25.6 million. The contracting officer determined
    that MWI's price was fair and reasonable and awarded a firm, fixed-price
    contract to MWI on January 27, 2006. The contract also contained an
    incentive of up to $5 million that MWI could earn for early delivery. To
    date, the Corps has increased the contract price by about $6 million for
    required pump modifications and for six additional pumping systems,
    bringing the total number of hydraulic pumping systems acquired to 40.
    Figure 4 shows a diagram of the hydraulic pumping system.

    ^6Corps officials informed us that videotapes were made of the oral
    presentations, but due to technical difficulties the sound did not record.

    Figure 4: Hydraulic Pumping System

    The Corps and the Contractors Have Addressed Pumping System Testing and
    Performance Issues

    The Corps and its contractors have addressed and corrected the pumping
    system testing and performance issues identified by both our May 2007
    report and the ITR. Factory testing, which occurred from March 2006
    through May 2006, revealed several issues with some components of the
    pumping systems, and concerns were raised that the pumping systems would
    not perform as intended. On May 2, 2006, the Corps modified the original
    contract, replacing the original testing requirements with new procedures
    because of schedule and performance concerns. Beginning in June 2006,
    however, even though all of the problems identified during factory testing
    had not been resolved, the systems were installed as planned because the
    Corps believed it was better to have some pumping capacity along the
    drainage canals during the 2006 hurricane season rather than none. The
    Corps also thought that most of the issues identified during factory
    testing could be resolved after installation. The Corps and the
    contractors took several steps to correct the known performance issues
    after installation and, as of September 2007, all of the pumping systems
    have been reinstalled and all of the outstanding repairs have been
    completed. According to Corps officials, the results of on-site testing
    now show that the 40 hydraulic pumping systems are fully operational and
    final acceptance of the pumping systems is scheduled for the beginning of
    calendar year 2008.

    Factory Testing Requirements Were Modified to Focus on Deficiencies Identified

    On May 2, 2006, the Corps issued modification No. 4, "revised test
    procedures," to the contract. According to the contracting officer
    responsible for oversight of the pumping system contract, these revised
    testing procedures replaced the original factory testing requirements with
    new testing requirements. The contract initially required each pump and
    hydraulic power transmission system to be factory pressure tested
    statically and dynamically.^7 In addition, full-size flow and head testing
    was to be witnessed by the government prior to shipment of the pumping
    systems.^8 The pump flow and head testing was to be conducted in an open
    sump at the manufacturer's testing facility in accordance with Hydraulic
    Institute (HI) standards^9 and in the presence of a registered
    professional engineer. According to the contracting officer, modification
    No. 4 replaced these testing procedures. The modification required, among
    other things, testing the hydraulic drive units for a minimum of 3 hours
    and utilizing previous model tests of the pump design to predict the pump
    capacity. Further, the modification required all pumps to be pressure
    tested for 90 minutes.

    ^7According to Corps officials, static testing involves checking for
    external leaks around the seals of the pump units. Dynamic testing
    involves setting the pumps in water and spinning the impeller, while using
    a dynamometer to determine the load of the impeller.

    ^8According to Corps officials, flow and head testing are conducted to
    determine the predicted capacity of water a pump can discharge over time.
    Flow measures how much water can be pumped. Head measures how high the
    water can be pumped.

    According to New Orleans District Corps officials responsible for
    oversight of the contract, the original testing requirements were
    interpreted by a Corps inspector and the ITR to include full-size flow and
    head testing of each of the pumps. Furthermore, the ITR concluded that
    modification No. 4 did not specifically delete the original testing
    requirements and, therefore, assumed the testing that had been conducted
    did not meet the contract requirements regarding full-size flow and head
    testing for each pump in accordance with HI standards. Based on this
    assumption, the ITR concluded that the contractor owed the government a
    refund because it had not completed the testing required in the contract.
    The ITR's reading of the modification may have overlooked the
    modification's purpose, however, which was to adjust the required testing
    to focus on those elements of the pumps in need of further refinement,
    given the limited time available. We believe the ITR may have reached this
    conclusion because it did not discuss the intent of the "revised test
    procedures" modification to the original testing requirements with either
    the contracting officer or the Corps' technical officials. Officials from
    the New Orleans District told us that it was never the intention of the
    Corps to interpret the testing requirements as requiring every pump to be
    full-size flow and head tested in accordance with HI standards-only static
    and dynamic tests were originally required of each pump. Corps technical
    and contracting officials said the revised testing procedures contained in
    the modification were developed to focus on the mechanical issues that had
    been identified and, therefore, replaced the original testing
    requirements, which included allowing the use of model test results in
    lieu of HI tests.^10

    ^9HI is the largest association of pump industry manufacturers in North
    America. The institute provides industry standards for the effective
    application, testing, installation, operation, and maintenance of pumps
    and pumping systems.

    Pumping System Performance Issues Have Been Addressed by the Corps and the
    Contractors

    The Corps and the contractors have addressed and corrected the concerns
    raised about some components of the pumping systems during factory and
    on-site testing. As noted in our May 2007 report and in the ITR, the
    primary concerns identified during testing included undersized gear oil
    circulation motors, hydraulic motor vibrations, the design of the
    hydraulic intake line, suspect pipe welds, and lower than expected pumping
    capacity. As a result of the concerns identified during testing, the Corps
    had no assurance that the pumping systems would operate to capacity if
    needed during the 2006 hurricane season. Nevertheless, the pumping systems
    were installed as planned because the Corps believed it was better to have
    some pumping capacity along the drainage canals during the 2006 hurricane
    season rather than none. On June 1, 2006, the Corps had installed 11
    pumping systems, and by July 2006, it had installed 34, although it is
    uncertain how much of the theoretical capacity of these pumping systems
    would have been available, and for how long, if needed during the 2006
    hurricane season. The Corps also believed that many of the issues
    identified during factory testing could be resolved after installation.
    After installation, the Corps and its contractors took several steps to
    correct known performance issues with the pumping systems. The main
    performance issues, and the ways the Corps and the contractors addressed
    each of them, are described in more detail below.

        Undersized Motors

    During factory testing, the Corps observed that the gear oil circulation
    pump motors were overheating, which resulted in the failure of some of the
    motors. MWI determined that the pump motors were too small. All of the
    motors were eventually replaced with larger gear oil circulation motors,
    resolving the problem.

    ^10The Corps later became concerned that it might not be able to determine
    whether the pumping system met specifications because none of the pumping
    systems had been operated at design conditions. The Corps, therefore,
    issued modification No. 17, which required the contractor to revert to
    full performance and mechanical testing as required under the original
    contract for one pumping system. The rest of the pumping systems would be
    tested only for mechanical integrity.

        Hydraulic Motor Vibrations

    During on-site testing in August 2006, the hydraulic motors were
    experiencing greater than normal vibrations. According to the ITR, this
    condition could have led to the failure of the equipment. Initial analysis
    of the problem indicated that there may have been a hydraulic short in the
    Rineer hydraulic motor that drives the main pump impellers. The motor
    manufacturer made modifications to the motor, and preliminary testing of
    the motors in late August 2006 appeared to confirm that these
    modifications eliminated the vibrations. However, upon further testing,
    vibrations were still present to varying degrees. Additional on-site
    testing was performed, and in late November 2006, it was determined that
    the vibrations were due to undersized springs in the Rineer hydraulic
    motors. The motor manufacturer replaced the undersized springs with
    heavier springs. According to Corps officials, on-site tests witnessed by
    the government after the installation of the new springs and measurements
    conducted by a third-party contractor document that the pumping systems
    now operate with no apparent vibration issues.

        Hydraulic Intake Line

    Because of concerns that the hydraulic intake lines could adversely affect
    pumping performance, the Corps requested that MWI redesign and reinstall
    the hydraulic intake lines on all of the pumping systems. During factory
    testing, the Corps observed a high rate of failure of the Denison
    hydraulic pumps on the drive units. The Denison motors pump the hydraulic
    fluid from a reservoir to the Rineer motor which then turns the pump
    impeller. A preliminary assessment revealed that the majority of the
    issues identified in the factory were caused by air entrainment (or dry
    run condition) in the hydraulic pumps. The dry run condition was
    attributed to air getting into the hydraulic system upon initial start-up
    of the drive unit. To eliminate the dry run issue, two interim changes
    were made to the system until a more permanent fix could be implemented:
    (1) a check valve was installed on all of the hydraulic intake lines, and
    (2) the pump start-up procedure was modified so that the system was
    started at a lower speed and gradually increased to the normal operating
    speed.

    The ITR concluded that the pumping systems would probably not have
    performed as designed because the inclusion of a check valve would require
    priming the pump prior to start-up and the original intent of the design
    was to allow for unmanned operation of the equipment. Both Corps and MWI
    officials stated that the ITR was incorrect in assuming that the pumps
    would have to be primed using the check valve at every start-up. Instead,
    these officials stated that the pumping systems would have operated as
    intended because using this valve to prime the Denison pumps is only
    necessary immediately after maintenance is performed on the system.
    Additionally, according to a Lake Borgne Levee District official, this
    pump design has been successfully used for about 20 years without having
    to prime the pumps prior to start-up. Nevertheless, in order to ensure
    that air would not be pulled into the hydraulic pumps, causing failure of
    the system, the Corps requested that MWI redesign the hydraulic intake
    system to provide for a flooded suction without a siphon. Figure 5 shows a
    drawing of the original hydraulic pump design with siphon.

    Figure 5: Original Hydraulic Pump Design with Siphon

    Corps officials from the New Orleans District emphasized to us that the
    redesign was requested to more adequately meet their needs, not because of
    concerns about the pumping systems operating as intended. MWI subsequently
    agreed to modify the design of the hydraulic intake line at the request of
    the Corps. According to Corps officials, by the end of July 2007 and at
    its own expense, MWI had redesigned and reinstalled the new flooded
    suction design on all 40 pumping systems (see fig. 6).

    Figure 6: Reinstalled Hydraulic Pump without Siphon

        Welding

    Because of questionable welds identified on the pump housing,^11 the Corps
    decided to replace certain welds to ensure they would not fail during pump
    operations. Upon inspection of the pump housing, the Corps determined that
    some of the welds on the pump housing may not be sufficient. While MWI
    provided the Corps with a "fit for service letter" for all of the welds on
    the pump housing and an extended warranty, the Corps decided that it was
    prudent to replace the welds on the pump housing below the base plate (the
    segment of the pump that is below the water level) in order to ensure that
    the welds would not fail during pumping operations. All of the necessary
    welds have been corrected, and the Corps plans to negotiate this
    additional cost during contract closeout.

    Additionally, issues were raised about the adequacy of the welds on the
    hydraulic piping, which carries high pressure hydraulic fluid from the
    Denison pump to the Rineer motor. The hydraulic piping was subsequently
    visually inspected and pressure tested to 1.5 times its operating pressure
    as part of the quality control process. The testing results indicated that
    the piping was adequate for transmitting power from the diesel engine to
    the water pump.

        Pumping Capacity

    Initial pumping capacity testing indicated that the pumping systems may
    not have been performing at the design capacity level. In April 2006, MWI
    conducted full-size factory flow and head tests on the hydraulic pumps. A
    representative from the Corps' Engineering Research and Development Center
    (ERDC) reviewed these test results and concluded that the test results
    showed that the pumps would operate at about 96 percent of the specified
    capacity. However, according to the ITR, these tests were not conducted in
    accordance with HI standards and, therefore, were invalid.

    In August 2006, on-site flow and head testing was conducted at the canals.
    In order to test the pumping systems, the interim gates were closed and
    water was pumped into the canal by the city's Sewerage and Water Board to
    raise the water level in the canal to the elevation necessary for the
    pumping systems to be tested. However, because adequate water levels in
    the canal could not be achieved to replicate design conditions, the pumps
    could not reach a fully primed condition. The Corps decided to invert the
    discharge pipes in order to enable the pumps to reach a primed condition
    with less than design water conditions in the lake. This facilitated
    testing of the pumping systems and allowed measurements to be recorded and
    analyzed.

    ^11The pump housing consists of 60-inch piping, which carries the water
    pumped out of the canal and discharges it into Lake Ponchartrain.

    In September 2006, a representative from ERDC was consulted and performed
    on-site flow and head tests of pumping systems at the London Avenue canal.
    A month later the Corps and ERDC performed the same tests at the 17th
    Street canal. Data collected from these on-site tests revealed that the
    pumping systems were working near the appropriate capacity. Based upon the
    on-site testing results and upon suggestion from the ERDC representative,
    all of the discharge pipes at all of the canals were inverted and cut at a
    30 degree angle, which allows the pumps to prime at lower canal water
    elevations and enhances the flow rates (see fig. 7).

    Figure 7: Discharge Pipes at the London Avenue Canal

    In November 2006, another full-size factory flow and head test was
    conducted by MWI and ERDC. However, due to constraints at the testing
    facility, the full-size factory test, which was done in consultation with
    the ERDC representative, was completed with deviations from the HI
    standards. This test revealed that the pumping capacity ranged from 93.6
    to 97.6 percent of the design specification and performed without problems
    during the 2 days of testing. According to Corps officials, MWI further
    agreed to construct a model test to confirm the pumping systems would
    perform within HI standards. In September 2007, a Corps ERDC official
    witnessed a model test conducted by MWI and prepared a report, which
    concluded that the pumping systems would operate at 98.6 percent of the
    design capacity. According to Corps officials, these results are within
    acceptable limits and any issues remaining with the final pumping capacity
    will be negotiated at contract closeout.

    Pumping System Acceptance Is Near Completion

    According to Corps officials, the Corps plans to make final acceptance of
    the pumping systems during the beginning of calendar year 2008. The
    original pumping system contract lacked clearly defined on-site testing
    procedures, requiring only that the pumps and hydraulic equipment be
    tested for leaks. In light of the various issues surrounding the pumping
    systems, the Corps and MWI agreed that it was necessary to show that all
    of the pumping systems could operate at a steady state after installation.
    According to Corps and MWI officials, a major challenge with on-site
    testing of the pumping systems is simulating the amount of water that
    would be present in the canals and the lake during a storm event. Under
    normal conditions, when there are low water levels in the canals, it is
    not possible to test each pump system for an extended period of time, and
    any tests conducted cannot approach the design capacity of the pumping
    systems. Due to this limitation, the Corps subsequently developed specific
    pumping system acceptance testing procedures that, among other things,
    include running each pumping system continuously for 2 hours. Corps
    officials told us that because most of the issues associated with the
    pumping systems occurred within the first 45 minutes of operation, the
    2-hour testing period for each pumping system was sufficient.

    In its June 2007 report, the ITR team concluded that at the time of their
    review in September 2006, the pumping systems would not perform as
    intended because of issues encountered in factory testing in early 2006.
    Since September 2006, there have been a number of analyses, changes, and
    additional testing of the pumping systems to address these earlier
    concerns. For example, between November 2006 and September 2007, the Corps
    had completed all of the repairs that were outstanding at the end of the
    2006 hurricane season and which were noted in the ITR, and reinstalled all
    40 pumping systems. In addition, as of September 2007, each pumping system
    had been successfully tested on site for at least 2 hours, providing
    greater assurance that they will perform as designed during future
    hurricane seasons. On September 27, 2007, GAO officials witnessed the
    pumping systems performing at both the 17th Street and London Avenue
    Canals (see fig. 8). According to Corps officials, because all of the
    outstanding repairs have been completed and on-site testing indicates that
    the system is now fully operational, final acceptance of the pumping
    systems and the contract closeout is expected to be completed early in
    calendar year 2008.

    Figure 8: Hydraulic Pumping Systems Performing at the 17th Street Canal,
    September 27, 2007

    Contract Files Remained Incomplete for Months, but Currently Contain Required
    Documentation for the Type and Value of Procurement

    Contract files for the pumping systems, although incomplete at the time of
    the ITR review, now contain the required documentation for the type of
    contract and the value of the associated modifications. In a number of
    cases, however, Corps officials inserted required documentation in the
    contract files several months after modifications were issued and only
    after the ITR reported its findings. While the ITR correctly noted the
    absence of some forms of required documentation, we found that much of the
    documentation specifically cited--including requests for proposals,
    independent government estimates, certified cost or pricing data,
    technical analyses, and price negotiation memorandums--was not required
    for the modifications in question. In addition, while the ITR found that
    it appeared as though the contractor developed the scope of work and
    pricing for some of the modifications without a subsequent analysis by the
    Corps, we found no instance of this occurring. Rather, our review found
    that, for most of the contract modifications there was extensive back and
    forth discussion, usually by e-mail, between officials from the Corps and
    MWI.

    Significant Documentation Added to the Contract Files Only after the ITR Review

    The ITR team reviewed 18 of the first 30 contract modification files and
    reported that many lacked significant documentation. Specifically, the ITR
    identified 13 modification files with deficiencies--most pertaining to
    documentation of the Corps' determination of fair and reasonable pricing.
    Our review confirmed that significant documentation was added to the files
    only after the ITR team issued its report. We reviewed the files for the
    32 post-award modifications, focusing in depth on the files related to the
    13 modifications found by the ITR team to contain deficiencies, as well as
    2 additional modifications that were issued after our May 2007 report and
    the ITR review. Of the modifications we reviewed in depth, 10 contained
    internal memorandums, prepared by the contracting officer after the fact,
    to document price reasonableness or the events supporting the
    modification. Another 2 modifications contained undated memorandums of
    price reasonableness signed by the contracting officer. Finally, of the
    eight purchase request and commitment forms on file, five were prepared on
    the same date to retroactively document the availability of funds for
    modifications that were issued 9 to 17 months earlier. Documentation in
    some of the files, however, suggests that the availability of funds was
    determined through other means at the time the modifications were signed.

    In response to the ITR, the Corps' contracting officer acknowledged that
    the contract files could have been better managed but stated the Corps
    felt it was more important to get the pumps installed in a timely manner.
    In order to do this, the Corps issued the modifications with the intention
    of settling all outstanding issues with the contractor before closing out
    the contract. The Corps agreed with the ITR, however, that certain
    documentation was missing and took corrective actions to complete the
    files. The contracting officer, whom the ITR team did not meet with for
    their review, noted that because many of the people working on the pumping
    systems procurement were rotating through the District Office, they may
    not have completed or submitted all of the necessary paperwork before
    leaving. Even though it is currently complete, preparing documentation
    months after an event occurs increases the likelihood that the
    documentation may contain inaccuracies or ambiguities, which make it
    difficult to resolve any disputes that may arise.

    Many Specific Documents Cited by the ITR as Missing Were Not Required

    As of October 2007, the contract modification files appeared up to date
    and consistent with Federal Acquisition Regulation (FAR) requirements.
    While the ITR correctly noted the absence of some forms of required
    documentation, much of the documentation specifically cited by the
    ITR--including requests for proposals, independent government estimates,
    certified cost or pricing data, technical analyses, and price negotiation
    memorandums--was not required for the modifications in question.^12 In
    some respects, it appears the ITR treated the pumping systems contract as
    if it were for construction rather than supplies. Different documentation
    requirements apply to these types of contracts.

    Ten of the modifications we reviewed in-depth increased contract costs
    and, therefore, required documentation of fair and reasonable pricing.^13
    While independent government estimates are one technique that can be used
    to analyze price and are required for construction contracts, they are not
    specifically required for supply contracts, such as the contract for the
    pumping systems. Nonetheless, the Corps obtained--and included in the
    files after the ITR review--independent government estimates for six of
    the modifications.

    None of the 10 modifications with additional costs that we reviewed
    in-depth required the contractor to provide certified cost or pricing
    data. Specifically, we found that 7 of the modifications fell under the
    threshold requiring cost or pricing data.^14 The contracting officer
    determined that cost or pricing data was not required for another
    modification because it combined separately priced changes from 2 previous
    modifications that were each below the threshold. Finally, for 2
    modifications related to the purchase of six additional pumps, the
    contracting officer concluded that adequate price competition existed from
    the base contract and, therefore, additional pricing data was not
    required. At least some information on pricing provided by the contractor
    was included in the files for all 10 of the modifications that involved
    additional costs.

    ^12The documentation cited by the ITR would not have impacted the
    weaknesses we identified earlier in this report.

    ^13Fourteen of the 32 modifications resulted in increased contracting
    costs.

    According to the FAR, when contractor certified cost and pricing data are
    not required, price analysis shall be used to determine a fair and
    reasonable price. While the FAR provides numerous analysis techniques,
    including the use of independent government estimates, it does not require
    the use of any one method. For 8 of the modifications we reviewed, the
    Corps' contracting officer documented price analysis and negotiations with
    the contractor through signed internal memorandums for the files, and for
    2 modifications, used price negotiation memorandums.^15 In addition, while
    not required, the Corps obtained internal technical analyses for 3 of the
    modifications we reviewed in depth to determine the reasonableness of
    MWI's proposals. Table 2 summarizes GAO's analysis of the ITR's findings
    regarding missing documentation in the contract files.

    ^14The threshold for certified cost and pricing data was increased from
    $550,000 to $650,000 on September 28, 2006.

    ^15While price negotiation memorandums can be used to document price
    analysis findings, such as fair and reasonable pricing, they are not
    specifically required for documenting the agreement negotiated between the
    contractor and agency.

    Table 2: GAO Analysis of the ITR Findings

    Documentation cited as
    missing by ITR         GAO analysis and applicable FAR references
    Request for proposal   Not always required for contract modifications.
                              Under the FAR, the Standard Form (SF) 30, Amendment
                              of Solicitation/Modification of Contract may be
                              used at the discretion of the contracting officer.
                              FAR section 15.210(b).
    Independent government A comparison of contractor-proposed prices with an
    estimate               independent government estimate is one of many
                              examples of price analysis techniques, but is not
                              specifically required for contract modifications.
                              FAR section 15.404-1(b).
    Contractor certified   Certified cost or pricing data is required for
    cost or pricing data   modifications of any negotiated contract expected
                              to exceed the current threshold of $650,000 except
                              when adequate price competition exists or when
                              commercial items are being acquired. In addition,
                              this requirement does not apply when unrelated and
                              separately priced changes below the threshold are
                              included for administrative convenience in the same
                              modification. FAR sections 15.403-1, 15.403-4.
    Price, cost, or        Price analysis shall be used when contractor cost
    technical analysis     or pricing data are not required. Various price and
                              cost analysis techniques are listed in the FAR,
                              including the use of independent government
                              estimates. However, none of the listed techniques
                              are specifically required. In addition, the
                              contracting officer may, but is not specifically
                              required to, request that personnel with
                              specialized knowledge, skills, experience, or
                              capabilities perform technical analyses of
                              contractor proposals to determine reasonableness.
                              FAR section 15.404-1.
    Price negotiation      While price negotiation memorandums can be used to
    memorandum             document price analysis findings, such as fair and
                              reasonable pricing, they are not specifically
                              required for documenting the agreement negotiated
                              between the contractor and agency. These
                              memorandums document the principal elements of the
                              negotiated agreement. FAR section 15.406-3.

    Source: GAO.

    File Documentation Establishes Independence of Corps Decision Making

    In addition to contract documentation issues, the ITR also reported that
    it appeared, in some circumstances, as though the contractor developed the
    scope of work and pricing for the modifications without a subsequent
    analysis by the Corps. We found no instance of this occurring. Rather, our
    review of the files indicate that, for most of the contract modifications,
    there was extensive back and forth discussion, usually by e-mail, between
    personnel from the Corps and MWI. These discussions focused on the causes
    of and solutions to technical issues, as well as the costs of corrective
    actions.

    While each of the modifications was unique, modification No. 2 is
    illustrative of many of the contract modifications we reviewed.
    Specifically, shortly after award of the contract, the Corps determined
    that it needed the capability to control the pumps from a remote location,
    since in the event of a hurricane the operator would be required to seek
    shelter in a control booth. The Chief of Engineering from the Corps
    prepared a request to modify the contract to require master pump control
    panels. The request contained detailed specifications of what was required
    and estimated that the additional cost would be $150,000. The contracting
    officer sent the request to MWI and asked for a cost proposal. MWI replied
    through an e-mail that repeated the specifications provided to it by the
    Corps and offered a price of $188,699. The Corps requested additional
    support for the price, and MWI responded with a copy of the quote it had
    received from its supplier, pricing for MWI's markup, and the additional
    work MWI would perform. A Corps engineer reviewed this information and
    informed the contracting office that MWI's proposed price was reasonable.
    The Corps issued a contract modification with the specifications it
    developed at the price quoted by MWI. As was the case for a number of
    modifications, there was no contemporaneous price reasonableness document
    signed by the contracting officer; rather, an undated "after the fact"
    memorandum concluding that MWI's price for the modification was reasonable
    was added to the file.

    The Corps Has Not Overpaid the Contract and Has Plans to Reconcile Payments Made
    in Error

    As of October 31, 2007, the Corps had paid the contractor about $30.5
    million of the $33 million contract for the 40 hydraulic pumping systems
    and has plans for reconciling mistaken payments it made. The Corps made
    payments to the contractor only after receiving invoices from the
    contractor for delivered items and services. In most cases, the Corps only
    paid 80 percent of each invoice and held the other 20 percent as retained
    funds in order to ensure the contractor was not overpaid and that any
    performance issues were addressed.

    The ITR identified a few instances where the contractor had received
    payment more than once for the same item. Our review confirmed that this
    did occur. We found, however, that these payments were made in error by
    the Corps and did not indicate any improper behavior on the contractor's
    part. Specifically, on December 6, 2006, the Corps received one invoice
    requesting payment for three drive units and three pumps valued at about
    $2.2 million because they were complete, and MWI believed that they could
    be delivered if the Corps wanted them at that time. On the same day, the
    Corps notified MWI that it could not pay for the pumps and drive units
    until they were actually delivered. MWI then e-mailed the Corps,
    requesting that they ignore the original invoice and stating that they
    would send new invoices for the drive units and pumps upon shipment. The
    Corps subsequently received three separate invoices, each requesting
    payment for one drive unit and one pump. However, the Corps paid all of
    the invoices, including the invoice that the contractor told them to
    ignore. As a result, the Corps paid twice for the same three pumps and
    three drive units. According to the Corps' contracting officer, the
    duplicate payments will be corrected by deducting the balance from
    withheld funds and not paying some outstanding invoices. Our review found
    no other instances where duplicate payments were made to the contractor.
    We also found 14 instances where the contractor sent invoices to the Corps
    for work completed, which have not been paid. The net effect is that the
    contractor has not been overpaid under the contract.

    On June 8, 2007, the Corps sent a letter to MWI providing an explanation
    as to why the Corps had not paid these outstanding invoices, and
    describing how the Corps planned to reconcile the duplicate payments made
    in January and February 2007 by subtracting the amount of the outstanding
    invoices from any additional invoices it received. From July through
    October 2007, the Corps made four additional payments to the contractor
    from the payments it had withheld, totaling about $1.8 million. The Corps
    has still not made final payment for the outstanding amount remaining on
    the contract. In addition, the Corps has withheld payments related to an
    early delivery incentive of approximately $5 million until the final
    acceptance of the pumping systems.^16 According to Corps officials, the
    final payment and reconciliation of the contract, including any incentive
    payments or penalties, will be settled with the contractor after final
    acceptance of the pumping systems. The Corps expects this to take place in
    the early part of calendar year 2008.

    Conclusion

    The Corps' actions in awarding and administering the pumping system
    contract were generally in accordance with federal requirements. However,
    in its haste to award the contract and acquire and install the pumps, the
    Corps did not develop a contract that was clear and precise with respect
    to testing and acceptance criteria and did not always promptly prepare
    required contract related documents. In some cases, this has led to
    uncertainties about exactly what was required of the contractor to comply
    with the contract's terms and conditions. This also creates the potential
    for contract disputes, which can be difficult, expensive, and
    time-consuming to resolve. In addition, in those cases where required
    documents were prepared "after the fact," there is an increased likelihood
    that documents prepared months after events have occurred may contain
    inaccuracies as memories have faded and key personnel may have moved on to
    other positions.

    ^16The incentive clause also has a penalty for late delivery of $1,700 per
    pump, per day. The Corps will determine whether or not a penalty will be
    assessed as part of the close-out process.

    Recommendations for Executive Action

    While we recognize that this procurement was conducted under exigent
    circumstances, we believe that the procedures used by the Corps could be
    improved for future procurements. For this reason we recommend that the
    Secretary of Defense direct the Commanding General and Chief of Engineers
    of the U.S. Army Corps of Engineers to:

               o take steps, through additional guidance or otherwise, to
               reinforce the importance of adherence to sound acquisition
               practices, even during expedited procurements, including ensuring
               that important contract provisions, such as any required testing,
               are clear so that the contractor and the government understand
               what conditions or criteria must be met for successful completion
               of the contract; and
               o develop procedures to ensure that any required contract-related
               documentation, including that related to contract pricing, is
               completed and filed within a reasonable period of time.

    			  Agency Comments and Our Evaluation

               The Department of Defense provided written comments on a draft of
               this report, which are reprinted in appendix III. The Department
               of Defense concurred with our recommendations and provided
               information on what actions it would take to address them.
               Concerning our recommendation to adhere to sound acquisition
               practices, the Department of Defense said the Secretary of Defense
               will direct the Corps to send guidance to all Corps offices
               emphasizing the need for clearer technical specifications so that
               the contractor and government understand what conditions or
               criteria must be met for successful contract completion. To
               address our recommendation to ensure more timely completion of
               required contract file documentation, the Department of Defense
               said the Secretary of Defense will direct the Corps to review and
               revise as necessary current policies and regulations. The
               Department of Defense also provided us with technical comments,
               which we have incorporated throughout the report, as appropriate.

               As agreed with your office, unless you publicly announce the
               contents of this report earlier, we plan no further distribution
               until 30 days from the report date. At that time, we will send
               copies to interested congressional committees; the Secretary of
               Defense; and the Commanding General and Chief of Engineers of the
               U.S. Army Corps of Engineers. We will also make copies available
               to others on request. In addition, the report will be available at
               no charge on the GAO Web site at http://www.gao.gov.

               If you or any of your staff have any questions about this report,
               please contact one of us at (202) 512-3841 or [33]mittala@gao.gov
               , (202) 512-4841 or [34]woodsw@gao.gov , or (202) 512-6923 or
               [35]dornt@gao.gov . Contact points for our Offices of
               Congressional Relations and Public Affairs may be found on the
               last page of this report. Key contributors to this report are
               listed in appendix IV.

               Sincerely yours,

               Anu K. Mittal
    			  Director, Natural Resources and Environment

               William T. Woods
    			  Director, Acquisition and Sourcing Management

               Terrell G. Dorn
    			  Director, Physical Infrastructure

    			  Appendix I: Scope and Methodology

               To evaluate efforts by the U.S. Army Corps of Engineers (Corps) to
               solicit, award, and administer the pumping system contract, we
               reviewed the Corps' plans for the interim gates and temporary
               pumping systems consisting of the 40 hydraulic pumps installed at
               the three New Orleans drainage canals. We also reviewed applicable
               Federal Acquisition Regulation criteria, especially pertaining to
               contract pricing; the contract and specifications; e-mails,
               correspondence, and other supporting documentation related to the
               solicitation and award of the contract; factory and on-site test
               results; performance requirements; the 32 contract modifications
               and supporting documentation; the Mississippi Valley Division
               (MVD) Independent Team Report (ITR); the Corps project delivery
               team's response to the ITR; contractor invoices and payment
               records; and the Corps' plans for increasing pumping capacity
               through 2007.

               We also visited the 17th Street, London Avenue, and Orleans Avenue
               Canals and observed the operation of the pumping systems. We
               interviewed contracting and program officials from (1) Corps
               Headquarters, New Orleans District, other Corps districts, and
               members of the MVD's technical review team related to the contract
               and pump performance; (2) Moving Water Industries Corporation and
               two other pump suppliers that bid on the solicitation; and (3) the
               architectural and engineering consulting firms under contract with
               the Corps that researched available pumping system alternatives,
               including qualified pump manufactures, pump delivery timelines,
               and costs, and that helped design the canal gates and pumping
               stations. We conducted our work from September through December
               2007 in accordance with generally accepted government auditing
               standards.

    			  Appendix II: Pumping Capacity for the Three Drainage Canals

    Figure 9: Pumping Capacity Trend for the 17th Street Canal, June 1,
    2006 through November 30, 2007:

    This figure is a graph showing pumping capacity trend for the 17th
    Street Canal, between June 1, 2006, and November 30, 2007. The X axis
    represents pump capacity timeline, while the Y axis represents cubic
    feet per second.

    [See PDF for image]

    Source: GAO analysis of U.S. Army Corps of Engineers' data.

    [End of figure]

    Figure 10: Pumping Capacity Trend for the London Avenue Canal, June 1,
    2006 through November 30, 2007:

    This figure is a graph showing pumping capacity trend for London Avenue
    Canal, between June 1, 2006, and November 30, 2007. The X axis
    represents pump capacity timeline, while the Y axis represents cubic
    feet per second.

    [See PDF for image]

    Source: GAO analysis of U.S. Army Corps of Engineers' data.

    [End of figure]

    Figure 11: Pumping Capacity Trend for the Orleans Avenue Canal, June 1,
    2006 through November 30, 2007:

    This figure is a graph showing pumping capacity trend for the Orleans
    Avenue Canal, between June 1, 2006, and November 30, 2007. The X axis
    represents pump capacity timeline, while the Y axis represents cubic
    feet per second.

    [See PDF for image]

    Source: GAO analysis of U.S. Army Corps of Engineers' data.

    Appendix III: Comments from the Department of Defense

    Department Of The Army:
    U.S. Army Corps Of Engineers:
    441 G ST. NW:
    Washington, D.C. 20314-1000:

    December 18, 2007:

    Internal Review Office:

    Ms. Anu K. Mittal:
    Director, Natural Resources And Environment:
    Government Accountability Office 441 G Street, N.W.:
    Washington, D.C. 20548:

    Dear Ms. Mittal:

    This is the Department of Defense (DOD) response to the GAO draft
    report 08-288, 'Army Corps Of Engineers: Known Performance Issues with
    New Orleans Drainage Canal Pumps Have Been Addressed, but Guidance on
    Future Contracts Is Needed,' dated December 4, 2007, (GAO Code 360879).

    We appreciate the opportunity for reviewing the draft report. Command
    comments to the report recommendations are contained in the attachment.

    If you have any questions or require additional information, please
    contact Ms. Alicia Matias, 202-761-4573,
    alicia.s.matias@usace.army.mil.

    Signed by:

    Donna F. Johnson:
    Acting Chief Audit Executive:
    HQ Internal Review Office:

    Enclosure:
    As stated:

    GAO Draft Report 08-288, 'Army Corps Of Engineers: Known Performance
    Issues With New Orleans Drainage Canal Pumps Have Been Addressed, But
    Guidance On Future Contracts Is Needed,' Dated December 4, 2007, (Gao
    Code 360879):

    Department Of Defense Response To The Recommendations:

    Recommendation: We recommend that the Secretary of Defense require the
    Chief of Engineers to:

    Take steps, through additional guidance or otherwise, to reinforce the
    importance of adherence to sound acquisition practices even during
    expedited procurements, including ensuring that important contract
    provisions, such as any required testing, are clear and that the
    contractor and the government understand what conditions or criteria
    must be met for successful completion of the contract.

    DOD Response: Concur: The Secretary of Defense will direct the U.S.
    Army Corps of Engineers to send a memo to all Corps offices reinforcing
    the importance of adherence to sound engineering practices even during
    expedited procurements. The memo will relate lessons learned and
    emphasize the need for technical specifications, such as those required
    for equipment testing, to be clear so that the contractor and the
    government understand what conditions or criteria must be met for
    successful completion of the contract. The anticipated date to transmit
    the memo is 11 January. 2008. Develop procedures to ensure that any
    contract related documentation, including that related to contract
    pricing, is completed and filed within a reasonable period of time.

    DOD Response: Concur: The Secretary of Defense will direct the U.S.
    Army Corps of Engineers to review and revise, as necessary, current
    policies and regulations to ensure that a reasonable period of time is
    identified for completing and filing contract documents. Estimated
    completion date is 30 May, 2008.

               Appendix IV: GAO Contacts and Staff Acknowledgments

    			  GAO Contacts

               Anu K. Mittal, (202) 512-3841 or [36]mittala@gao.gov William T.
               Woods, (202) 512-4841 or [37]woodsw@gao.gov Terrell G. Dorn, (202)
               512-6923 or [38]dornt@gao.gov

    			  Staff Acknowledgments

               In addition to the contacts named above, Ed Zadjura, Assistant
               Director; Matthew Reinhart; Katherine Trimble; Christine Frye;
               James Dishmon; Rich Johnson; Marie P. Ahearn; and Kenneth E.
               Patton made significant contributions to this report.

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    (360879)

    To view the full product, including the scope
    and methodology, click on [45]GAO-08-288 .

    For more information, contact Anu Mittal at (202) 512-3841 or
    mittala@gao.gov.

    Highlights of [46]GAO-08-288 , a report to the Chairman, Ad Hoc
    Subcommittee on Disaster Recovery, Committee on Homeland Security and
    Governmental Affairs, U.S. Senate

    December 2007

    ARMY CORPS OF ENGINEERS

    Known Performance Issues with New Orleans Drainage Canal Pumps Have Been
    Addressed, but Guidance on Future Contracts Is Needed

    Hurricane Katrina caused several breaches in the floodwalls along three
    drainage canals in New Orleans, contributing to catastrophic flooding. To
    restore the pre-Katrina level of hurricane-related flood protection, the
    Army Corps of Engineers (Corps) decided to acquire several large-capacity
    pumping systems. During the process of acquiring, testing, and installing
    the pumping systems, issues with the pump contract and operation of the
    pumping systems came to light, including several identified in a Corps
    Independent Team Report (ITR).

    GAO was asked to evaluate the Corps' efforts to (1) develop contract
    specifications and award the contract, (2) address pumping system
    performance issues, (3) document contract modifications, and (4) reconcile
    contract payments. GAO reviewed contract and testing documents, observed
    the operation of the pumping system, and interviewed officials from the
    Corps, its consultants and contractors, and the ITR team.

    [47]What GAO Recommends

    GAO recommends actions to ensure that future contracts adhere to sound
    acquisition practices, even for expedited procurements, and to ensure that
    any required contract documentation is completed and filed in a timely
    manner.

    The Department of Defense agreed with GAO's recommendations.

    Schedule concerns drove the Corps' decisions in developing specifications
    for the pumping systems and awarding the contract, but the rush to award
    the contract resulted in deficiencies in key contract provisions.
    Specifically, the original factory test requirements were ambiguous, there
    were only limited provisions for on-site testing, and there were no
    criteria for acceptance of the pumping systems by the government. The
    Corps conducted an expedited competition to contract for the pumping
    systems and selected a supplier for contract award based largely on its
    ability to deliver the pumping systems by the June 1 start of the 2006
    Atlantic hurricane season.

    The Corps and the contractors have addressed and corrected known
    performance issues with the pumping systems. Concerns included hydraulic
    motor vibrations, the design of the hydraulic intake line, suspect pipe
    welds, and lower than expected pumping capacity. The pumping systems were
    installed prior to correcting these issues because the Corps believed it
    was better to have some pumping capacity along the drainage canals during
    the 2006 hurricane season rather than none, despite uncertainty over how
    much of the pumping system capacity would be available, and for how long,
    if needed. Between November 2006 and September 2007, the Corps and the
    contractors completed all of the repairs and reinstalled the pumping
    systems. Documents that GAO reviewed indicate that, as of September 2007,
    each pumping system had been successfully tested on site for at least 2
    hours, thus providing greater assurance that they will perform as
    designed.

    The contract files for the pumping systems contained the required
    documentation for the type and value of the contract and associated
    modifications, though, in a number of cases, documentation was inserted in
    the contract files several months after modifications were issued and only
    after the ITR reported its findings. While the ITR correctly noted the
    absence of some required documentation, GAO found that much of the
    specific documentation cited as missing was not required for the
    modifications in question because of the nature and value of these
    modifications. In addition, while the ITR found that it appeared as though
    the contractor developed the scope of work and pricing for some of the
    modifications without a subsequent analysis by the Corps, GAO found no
    instance of this occurring.

    As of October 31, 2007, the Corps had paid the contractor about $30.5
    million of the $33 million contract amount. In a few instances, the Corps
    made duplicate payments to the contractor. GAO found that these payments
    were due to Corps mistakes, not inappropriate billing by the contractor.
    GAO found no other cases of duplicate payments. The Corps plans to adjust
    for the duplicate payments by deducting the balance from remaining funds,
    including any incentive payments, owed to the contractor. According to
    Corps officials, final payment and reconciliation of the contract is
    expected by early 2008; however, it is unknown to what extent contract or
    pump performance issues will affect the final amount paid for the contract
    during the close-out process.

    References

    Visible links
      32. http://www.gao.gov/cgi-bin/getrpt?GAO-07-908R
      33. mailto:mittala@gao.gov
      34. mailto:Woodsw@gao.gov
      35. mailto:dornt@gao.gov
      36. mailto:mittala@gao.gov
      37. mailto:woodsw@gao.gov
      38. mailto:dornt@gao.gov
      39. http://www.gao.gov/
      40. http://www.gao.gov/
      41. http://www.gao.gov/fraudnet/fraudnet.htm
      42. mailto:fraudnet@gao.gov
      43. mailto:jarmong@gao.gov
      44. mailto:youngc1@gao.gov
      45. http://www.gao.gov/cgi-bin/getrpt?GAO-08-288
      46. http://www.gao.gov/cgi-bin/getrpt?GAO-08-288
    *** End of document. ***