Prison Construction: Clear Communication on the Accuracy of Cost 
Estimates and Project Changes is Needed (29-MAY-08, GAO-08-634). 
                                                                 
The federal Bureau of Prisons (BOP) is responsible for the	 
custody and care of more than 201,000 federal offenders. To	 
provide housing for the federal prison population, BOP manages	 
the construction and maintenance of its prison facilities and	 
oversees contract facilities. GAO was asked to look into recent  
increases in estimated costs for Federal Correctional Institution
(FCI) construction projects located in Mendota, CA; Berlin, NH;  
and McDowell, WV, which have led to almost $278 million or 62	 
percent more being provided in funding than initially estimated. 
This report addresses (1) the reasons for the changes to the	 
estimated costs and (2) the actions BOP has taken--or plans to	 
take--to control future cost increases and delays. GAO reviewed  
and analyzed BOP's fiscal years 2001 to 2009 budget documents,	 
files for these three projects, and project management guidance. 
GAO also reviewed government and industry guidance on project	 
management and met with BOP officials.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-634 					        
    ACCNO:   A82206						        
  TITLE:     Prison Construction: Clear Communication on the Accuracy 
of Cost Estimates and Project Changes is Needed 		 
     DATE:   05/29/2008 
  SUBJECT:   Budget outlays					 
	     Construction contracts				 
	     Construction costs 				 
	     Correctional facilities				 
	     Cost analysis					 
	     Cost control					 
	     Cost effectiveness analysis			 
	     Cost overruns					 
	     Facility construction				 
	     Facility maintenance				 
	     Facility management				 
	     Federal facilities 				 
	     Maintenance (upkeep)				 
	     Policy evaluation					 
	     Prisoners						 
	     Program evaluation 				 
	     Program management 				 
	     Schedule slippages 				 
	     Site selection					 
	     Cost estimates					 
	     Policies and procedures				 
	     Program costs					 

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GAO-08-634

This is the accessible text file for GAO report number GAO-08-634 
entitled 'Prison construction: Clear Communication on the Accuracy of 
Cost Estimates and Project Changes Is Needed' which was released on May 
29, 2008.

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Report to the Subcommittee on Commerce, Justice, Science, and Related 
Agencies, Committee on Appropriations, U.S. Senate: 

United States Government Accountability Office: 
GAO: 

May 2008: 

Prison construction: 

Clear Communication on the Accuracy of Cost Estimates and Project 
Changes Is Needed: 

GAO-08-634: 

GAO Highlights: 

Highlights of GAO-08-634, a report to the Subcommittee on Commerce, 
Justice, Science, and Related Agencies, Committee on Appropriations, 
U.S. Senate. 

Why GAO Did This Study: 

The federal Bureau of Prisons (BOP) is responsible for the custody and 
care of more than 201,000 federal offenders. To provide housing for the 
federal prison population, BOP manages the construction and maintenance 
of its prison facilities and oversees contract facilities. GAO was 
asked to look into recent increases in estimated costs for Federal 
Correctional Institution (FCI) construction projects located in 
Mendota, CA; Berlin, NH; and McDowell, WV, which have led to almost 
$278 million or 62 percent more being provided in funding than 
initially estimated. This report addresses (1) the reasons for the 
changes to the estimated costs and (2) the actions BOP has takenï¿½or 
plans to takeï¿½to control future cost increases and delays. GAO reviewed 
and analyzed BOPï¿½s fiscal years 2001 to 2009 budget documents, files 
for these three projects, and project management guidance. GAO also 
reviewed government and industry guidance on project management and met 
with BOP officials. 

What GAO Found: 

For these three projects, delays in starting construction or 
disruptions in available funding that interrupted construction 
contributed to increases in cost estimates due to inflation and 
unexpected increases in construction material costs. According to BOP 
officials, delays resulted from problems with selecting and approving 
the sites for the prisons and with the availability of funding. BOP 
officials stated that they expected costs to increase by the inflation 
rate during the delay period, but did not anticipate that market forces 
would cause the construction costs to increase above the inflation 
rate, as they did. For example, steel prices rose about 60 percent and 
oil prices rose by almost 170 percent between the time that BOP 
prepared the initial cost estimates for these projects and when 
construction was ready to begin. In addition, because BOP estimates 
initial project costs early in the planning process, generally before 
an actual prison location is selected, variance from the initial 
estimates would be expected to some extent, even if the projects are 
not delayed. BOP, like other agencies, is not required to communicate 
how much it expects costs may vary from its estimates in its budget 
documents. Without such information, Congress and other stakeholders do 
not know the extent to which additional funding may be required to 
complete the project, even absent any project delays. 

BOP eliminated or reduced portions of two projects to remain within the 
amount that was funded and plans to use its construction management 
policies and procedures to control further cost increases and schedule 
delays. When awarding the contract for FCI Mendota in 2007, BOP 
eliminated a UNICOR facility, which would have provided additional 
employment and job skills training opportunities for inmates, and the 
minimum-security prison camp. At FCI Berlin, BOP eliminated the UNICOR 
facility when it awarded the contract in 2007, but subsequently added a 
smaller UNICOR facility to the project, which will be paid for by 
UNICOR. Intended to reduce costs, these changes also reduced the 
functionality of the two prisons, deviating from what BOP planned and 
requested funding for. In the subsequent budget submission to Congress 
and other stakeholders, BOP did not clearly communicate these changes, 
since BOP does not provide such detailed project information. Now that 
BOP has awarded the construction contracts for the three projects, BOP 
officials believe that their construction management policies and 
procedures will allow them to control cost increases and schedule 
delays. These policies and procedures reflect current government and 
industry project management practices to monitor and track projects, 
and to report on their status. Furthermore, BOP officials said that 
they plan to continue to avoid making changes that would increase 
construction costs after construction begins. GAO did not evaluate the 
effectiveness of BOPï¿½s construction policies and procedures in 
controlling cost increases and schedule delays on these projects 
because while construction contracts were awarded, little construction 
had been done. 

What GAO Recommends: 

GAO recommends that the Attorney General of the United States instruct 
the Director of BOP to clearly communicate in DOJï¿½s annual 
congressional budget submission (1) the extent to which project costs 
may vary from initial estimates and (2) changes that may impact the 
functionality of projects. BOP agreed with GAOï¿½s recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-634]. For more 
information, contact Terrell Dorn at (202) 512-6923 or [email protected]. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Project Delays Contributed to Increased Cost Estimates, and the 
Imprecise Nature of Estimates Was Not Communicated to Congress and 
Other Stakeholders: 

BOP Has Eliminated or Reduced Portions of Two Projects, and Plans to 
Use Its Construction Management Policies and Procedures to Control Cost 
and Schedule Changes: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: FCI Mendota, FCI Berlin, and FCI McDowell Project 
Estimates, Budget Requests, and Funding for Fiscal Years 2001-2009: 

Appendix III: Comments from the Department of Justice, Federal Bureau 
of Prisons: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Bureau of Labor Statistics' Indexes: 

Figure: 

Figure 1: FCI Mendota in California and FCI Forest City in Arkansas: 

Abbreviations: 

BOP: Bureau of Prisons: 

CII: Construction Industry Institute: 

CPC: Capacity Planning Committee: 

DOJ: Department of Justice: 

EPA: Environmental Protection Agency: 

FCI: Federal Correctional Institution: 

ICIPPI: Inputs to Construction Industries Producer Price Index: 

LRPC: Long-Range Planning Committee: 

OMB: Office of Management and Budget: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

May 29, 2008: 

The Honorable Barbara A. Mikulski: 
Chairman: 
The Honorable Richard C. Shelby: 
Ranking Member: 
Subcommittee on Commerce, Justice, Science, and Related Agencies: 
Committee on Appropriations: 
United States Senate: 

The federal Bureau of Prisons (BOP), within the Department of Justice 
(DOJ), is responsible for the custody and care of more than 201,000 
federal offenders. To accommodate the current and future confinement 
needs of the U.S. federal prison population, BOP manages the 
construction and maintenance of its prison facilities. BOP also 
contracts with other facilities to house about 17 percent of the 
federal offenders. Cost estimates that BOP provided to Congress for 
BOP's three current prison construction projects that are located in 
Mendota, California; Berlin, New Hampshire; and McDowell, West 
Virginia, have increased significantly beyond the initial estimates. 
For the purposes of this report, we refer to these Federal Correctional 
Institution (FCI) construction projects as FCI Mendota, FCI Berlin, and 
FCI McDowell. To date, additional funding has been provided for these 
projects totaling almost $278 million, or 62 percent more than the 
projects' initial estimates. 

To assist the Subcommittee in its oversight role and in making future 
funding decisions, you requested that we examine the circumstances 
surrounding the increases in the cost estimates for the three current 
construction projects. Accordingly, for the three prisons currently 
under construction, this report addresses (1) the reasons for the 
changes to the estimated costs to date and (2) the actions BOP has 
taken--or plans to take--to control future cost increases and schedule 
delays. 

To assess the reasons for the changes to the estimated costs related to 
the three prisons currently under construction, we analyzed DOJ's 
congressional budget submissions for BOP from the first year that 
project funding was requested in fiscal years 2001 through 2009, and 
relevant appropriation laws. We also reviewed and analyzed BOP's cost 
estimates, project files, and capital planning guidance. We analyzed 
the Office of Management and Budget's (OMB) guidance on capital 
planning and preparing budget submissions. In addition, to identify the 
rate of inflation and other price indicators that could have affected 
the cost estimates for the three project schedules, we analyzed the 
Department of Labor, Bureau of Labor Statistics, pricing indexes for 
2003 through 2007, and interviewed BOP officials in Washington, D.C. 

To assess the actions taken by BOP--or that BOP plans to take--to 
control cost increases and schedule delays on the three current 
construction projects, we analyzed BOP's construction guidance and 
BOP's project files. Furthermore, we reviewed federal government and 
construction industry data concerning project cost management and 
compared them with BOP's guidance. We also interviewed BOP headquarters 
officials in Washington, D.C. We discuss the scope and methodology of 
this report in more detail in appendix I. 

We conducted this performance audit from June 2007 through May 2008, in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Results in Brief: 

Delays in starting project construction or disruptions in available 
funding that interrupted construction contributed to increases in cost 
estimates due to inflation and unexpected increases in construction 
material costs. According to BOP officials, problems with selecting and 
approving the sites for FCI Mendota, FCI Berlin, and FCI McDowell, 
along with receiving funding later than assumed in the initial 
estimates, delayed the three prison projects. BOP officials stated that 
costs increased by the associated inflation that occurs over time, but 
BOP could not anticipate construction industry costs that increased at 
an accelerated rate due to other market factors. For example, steel 
prices rose by about 60 percent and oil prices rose by almost 170 
percent from the time that BOP prepared the initial cost estimates for 
these projects until the projects were ready to proceed with 
construction. In addition, because BOP estimates its initial project 
costs and requests funding early in the planning process--generally, 
before an actual location for a prison has been selected--variance from 
the initial estimates would be expected to some extent, even if the 
projects are not delayed. BOP, like other agencies, is not required to 
communicate how much it expects costs might vary from its estimates in 
the budget documents submitted to Congress and other stakeholders. 
Without such information, however, Congress and other stakeholders do 
not know the extent to which additional funding may be required to 
complete the project, even absent any project delays. 

BOP eliminated or reduced portions of two projects to remain within the 
amount funded, and it plans to use its construction management policies 
and procedures to control further cost increases and schedule delays. 
When awarding the construction contract for FCI Mendota in 2007, BOP 
eliminated a Federal Prison Industries facility (UNICOR), which would 
have provided additional employment and job skills training 
opportunities for inmates, and the minimum-security prison camp. At FCI 
Berlin, BOP eliminated the UNICOR facility when it awarded the contract 
in 2007, but it subsequently added a smaller UNICOR facility to the 
project, which will be paid for by UNICOR. Although intended to reduce 
costs, these changes also reduced the functionality of the two prisons 
and deviated from what BOP planned and requested funding for. In the 
subsequent budget submission to Congress and other stakeholders, BOP 
did not clearly communicate these changes, since it does not provide 
such detailed project information. Now that BOP has awarded contracts 
to construct these three projects, BOP officials believe that their 
construction management policies and procedures will allow them to 
control cost increases and schedule delays. These policies and 
procedures reflect current government and industry project management 
practices to monitor and track projects, and to report on their status. 
In addition, BOP officials told us that their use of the Design-Build 
project delivery system will help to control cost increases during 
construction. Under this system, the contractor designs and builds the 
project and generally has the responsibility for costs associated with 
design errors, should they occur. Furthermore, BOP officials told us 
that they plan to continue to carefully consider and approve changes 
that would increase construction costs after construction begins. We 
did not evaluate the effectiveness of BOP's construction policies and 
procedures in controlling cost increases and schedule delays on these 
three projects because while design and construction contracts were 
awarded, little construction had been done. 

To improve accountability and transparency, we are making two 
recommendations to the Attorney General of the United States to 
instruct the Director of BOP to clearly communicate the following to 
Congress and other stakeholders in DOJ's annual congressional budget 
submission, in which BOP provides its requests for funding and reports 
the status of construction projects: (1) the extent to which project 
costs might vary from initial estimates and (2) the changes that might 
impact the functionality of projects. BOP concurred with our 
recommendations. 

Background: 

BOP's mission is to protect society by confining offenders in the 
controlled environments of prisons and community-based facilities that 
are safe, humane, cost-efficient, and appropriately secure, and that 
provide work and other self-improvement opportunities to assist 
offenders in becoming law-abiding citizens. BOP is organized into six 
regions of the country--Mid-Atlantic, North Central, Northeast, South 
Central, Southeast, and Western. BOP manages the construction of and 
operates institutions at five security levels--minimum, low, medium, 
high, or administrative security--to confine offenders in an 
appropriate manner. Institutions constructed for a given security level 
generally have the same design and features. For example, FCIs, which 
are medium-security institutions, generally have strengthened perimeter 
fencing, cell-type housing, and a wide variety of work and treatment 
programs. As such, FCI construction projects typically include a UNICOR 
facility that employs and provides job skills training to 
inmates.[Footnote 1] UNICOR is a government corporation administered by 
DOJ, with the Director of the Bureau of Prisons as its Chief Executive 
Officer. FCI construction projects also generally include an adjacent 
work-and program-oriented minimum-security Federal Prison Camp, where 
inmates help serve the labor needs of the larger, higher-security FCI. 

We have previously reported that BOP follows a centralized, long-term 
capacity planning process, with the aim of ensuring sufficient 
institutional capacity while maintaining prison populations at safe- 
and-secure targeted levels.[Footnote 2] BOP has two planning committees 
that are involved in the capital decision-making process to identify 
new facility prison construction projects: the Capacity Planning 
Committee (CPC) and the Long-Range Planning Committee (LRPC).[Footnote 
3] According to BOP headquarters officials, CPC proposes new projects 
by BOP region using the Capacity Plan, which provides projections of 
inmate population and rates of prison overcrowding. BOP develops 
initial budget estimates for the projects that CPC proposes, and LRPC 
ranks the proposed new prison facility construction projects and makes 
specific funding recommendations to the Director of BOP. The new 
construction projects are ranked on the basis of agency need, funding, 
and the speed with which the projects can be constructed. 

BOP includes its proposed new construction projects in its annual 
Federal Prison System budget request made to DOJ. As part of the DOJ 
annual congressional budget submission, BOP also provides its Federal 
Prison System Status of Construction report (status report), which 
provides information on the status of construction for major projects 
that have received funding. The specific information provided is as 
follows: each project's descriptive title, with name, type, and 
location; the amounts funded, by fiscal year; the total project cost 
estimates; the funds obligated to date; the estimated year of use; and 
a brief status of the project. However, detailed project information is 
not provided in this status report. Although BOP provides information 
to Congress about the specific projects that it plans to support with 
the funds it requests, funding for BOP construction is provided as a 
lump sum into its "Buildings and Facilities Account," rather than by 
the specific project. As a result, BOP can shift funds within this 
account to fund cost increases on different projects. 

In the last 10 years, BOP has completed 30 prison projects at a cost 
totaling over $3.6 billion. BOP has received about $710 million for the 
3 prison projects currently under construction--FCI Mendota, FCI 
Berlin, and FCI McDowell. BOP has plans for 10 additional prison 
projects that have received about $363 million in funding to date, as 
listed in its fiscal year 2009 congressional budget submission. 
[Footnote 4] 

Developing Initial Project Cost Estimates: 

To request funding for construction projects such as a prison, an 
agency must develop an initial project cost estimate several years 
before it plans to begin construction. Cost estimating requires both 
science and judgment. Since answers are seldom--if ever--precise, the 
goal is to find a reasonable "answer."[Footnote 5] Cost estimates are 
based on many assumptions, including the rate of inflation and when 
construction will begin. Generally, the more information that is known 
about a project and is used in the development of the estimate, the 
more accurate the estimate is expected to be.[Footnote 6] OMB's 
guidance for preparing budget documents identifies many types and 
methods of estimating project costs. The expected accuracy of the 
resulting project cost estimates varies, depending on the estimating 
method used. 

As part of the project planning and budgeting process, BOP officials 
develop an initial cost estimate when the need is identified for a 
prison in a particular region of the country. Given that its prisons 
for a specific security level generally have the same design features, 
BOP uses cost and pricing information from a previous project to create 
a national average cost for construction as the basis for its initial 
estimate of a new project. To develop an initial cost estimate, BOP 
adjusts its national average cost by assumptions for various factors, 
such as the difference in construction costs for different regions of 
the country, the difficulty of construction, and the expected inflation 
until construction is planned to begin. For example, in 1999, BOP 
created a national average construction cost for an FCI on the basis of 
the average of the 1998 bids for FCI Petersburg, Virginia, the most 
recently available FCI construction cost information. BOP adjusted FCI 
Petersburg's pricing information to take into account inflation between 
1998 and 1999 and the relative construction costs in Petersburg. To 
establish the initial estimate for FCI Mid-Atlantic--which became FCI 
McDowell, located in McDowell County, West Virginia--BOP adjusted the 
national average to take into account the relative construction costs 
and difficulty of construction for the Mid-Atlantic region of the 
country and inflation adjustment to 2001, which is when BOP expected to 
begin construction. BOP used this estimate as the basis for requesting 
funding. 

BOP's process of using cost information from an earlier project to 
estimate the cost of a similar proposed project is one of the types of 
estimates discussed in OMB's guidance. Because this type of cost 
estimate is based on a single overall project cost, guidance indicates 
that actual project costs may vary from such an estimate by as much as 
ï¿½ 40 percent.[Footnote 7] Actual costs may vary by this percentage even 
if the project begins as assumed in the estimate because detailed 
project information, such as quantities of particular construction 
components, was not used in developing the estimate. A BOP official 
stated that he believes BOP's estimates are more accurate than ï¿½ 40 
percent because it uses its own historical project information, and the 
similarities shared by BOP projects. 

Project Delays Contributed to Increased Cost Estimates, and the 
Imprecise Nature of Estimates Was Not Communicated to Congress and 
Other Stakeholders: 

Delays in starting project construction or disruptions in available 
funding, which interrupted construction, contributed to increases in 
cost estimates due to inflation and to unexpected increases in 
construction material costs. According to BOP officials, problems 
associated with selecting sites for FCI Mendota, FCI Berlin, and FCI 
McDowell and with receiving the funding later than planned in the 
initial estimates contributed to the increase in the cost estimates. 
During the time that the projects were delayed, construction costs rose 
at a rate higher than inflation. Also, cost estimates are imprecise and 
should be expected to vary from the initial estimates, but Congress and 
other stakeholders were not informed about the extent to which costs 
might vary from the initial estimates. 

Problems with Site Selection and the Availability of Funding 
Contributed to Project Construction Delays: 

According to BOP officials, all three projects experienced delays in 
beginning construction because of problems associated with selecting 
and approving the sites for the prisons as well as with the 
availability of funding. FCI Mendota also experienced disruptions in 
available funding that led to an interruption in construction. See 
appendix II for project estimates, budget requests, and funding for the 
three projects. 

FCI Mendota: 

In fiscal years 2001 and 2002, about $150 million was appropriated for 
a high-security United States Penitentiary in California as requested 
in the President's budget. Funding was reduced in fiscal year 2002 when 
BOP applied a rescission of about $5.7 million to the project. When BOP 
initially estimated the cost for this project, it expected the contract 
to be awarded in fiscal year 2001 and the construction to begin in 
fiscal year 2002. However, BOP did not award the contract to design and 
construct the prison until fiscal year 2004. Mendota was selected as 
the prison site in fiscal year 2002, at which time BOP changed the 
project to a medium-security FCI.[Footnote 8] Subsequent environment 
impact studies and approvals, which included review and approval by the 
Environmental Protection Agency (EPA), were completed in fiscal year 
2004. In addition, the continued availability of funding for this 
project came into question in fiscal year 2004, when Congress rescinded 
almost $52 million of funding.[Footnote 9] Furthermore, in fiscal year 
2005 an amendment to the President's Budget proposed canceling $55 
million from the unobligated balances in the Buildings and Facilities 
Account previously provided for the FCI Mendota project. 

Despite this disruption in the available funding, BOP continued with 
the FCI Mendota project because it expected that the rescinded funds 
would be restored the following year. Partly as a result of the 
rescission, BOP officials separated the work for this project into 
several pieces. This decision enabled BOP to award a single contract 
for the project's design and construction in September 2004. The 
contract was structured for the contractor to begin with design and 
allowed BOP to decide when and what pieces of the construction would be 
done on the basis of the availability of funding. In December 2004, 
with the funding it had, BOP directed the contractor to construct the 
central utility plant, water tower, and general housing units. The 
contract required BOP to award the remaining pieces necessary to 
complete the facility--such as the support structures, UNICOR factory, 
and Federal Prison Camp--no later than 2006 or the option to do this 
work under the contract would expire. BOP did not exercise the contract 
option because it had not received additional funds. As a result, when 
the contractor completed its work, BOP could not house prisoners at FCI 
Mendota. Figure 1 shows a comparison of the uncompleted FCI Mendota in 
California to the completed FCI Forest City in Arkansas. 

Figure 1: FCI Mendota in California and FCI Forest City in Arkansas: 

[See PDF for image] 

This figure contains a photograph of FCI Mendota, CA (incomplete) and 
FCI Forest City, AR (complete). 

Source: BOP and United States Geological Survey. 

[End of figure] 

Before BOP could solicit for construction bidders to complete the 
required work at FCI Mendota, it had to contract for additional 
engineering services to prepare construction documents. This was 
necessary to inform bidders about what work had been done and what work 
remained to be completed. In September 2007 after it received 
additional funding, BOP awarded the contract to complete FCI Mendota. 

We have previously raised concerns about this type of construction 
management. For example, we have reported that nonconcurrent 
construction--that is where different phases of a project are 
constructed at different times--increases the overall cost to the 
government because it requires additional and expensive mobilization of 
contractor staff and equipment, security, work to procure building 
materials, and construction management oversight.[Footnote 10] We also 
have raised concerns in prior work about starting capital projects 
without all of the funding necessary to complete the project or, if the 
project is divisible into stages, to complete a stand-alone stage that 
would result in a useable asset.[Footnote 11] While BOP had funding for 
the pieces for which it awarded a contract, the pieces did not result 
in a usable asset because it did not have enough of the pieces of the 
project completed to house prisoners safely and securely. Although BOP 
shifted some funds to help pay for the Mendota project, according to 
BOP officials, sufficient funds were not available to fully fund the 
Mendota project without delaying or canceling other projects that BOP 
had told Congress it planned to begin. 

To date, the total funding for FCI Mendota has exceeded the initial 
fiscal year 2001 estimate by about $72 million, or almost 45 percent. 
However, the latest project estimate is over $6 million, or 2.8 
percent, more than the current funding. BOP officials have told us that 
they do not plan to request any more funding for this project, and that 
BOP will shift funds within its Buildings and Facilities Account as 
necessary to complete FCI Mendota. 

FCI Berlin and FCI McDowell: 

In fiscal year 2004, about $154 million was appropriated for FCI 
Berlin, and about $40 million was appropriated for an FCI in the Mid- 
Atlantic region.[Footnote 12] When BOP initially estimated the costs 
for these projects, it expected to receive funding for design and 
construction of these facilities in fiscal years 2004 and 2002, 
respectively. BOP did not award contracts for the design and 
construction of these projects until fiscal years 2007 and 2006, 
respectively. According to BOP, both projects experienced delays in 
selecting the locations for the prisons and the environment impact 
studies. For FCI Berlin, the property was acquired and EPA completed 
its approval process in fiscal year 2007. For FCI McDowell, these 
events occurred in fiscal years 2006 and 2005. In addition, BOP 
officials stated that they were reluctant to proceed with construction 
because of OMB's moratorium on new construction for fiscal years 2005 
through 2007. Also, the President's Budget included proposed 
cancellations of unobligated funds from BOP's Buildings and Facilities 
Account for fiscal years 2004, 2006, and 2007.[Footnote 13] 

To date, the total funding for FCI Berlin and FCI McDowell has exceeded 
the initial estimates by about $93.5 million and $112.3 million, or 56 
percent and 89 percent, respectively. However, the latest project 
estimates are more than $11 million and $9 million, or 4.2 percent and 
3.7 percent, more than the current funding for FCI Berlin and FCI 
McDowell, respectively. BOP officials told us that they do not plan to 
request any more funding for these projects, and that BOP will shift 
funds within its Buildings and Facilities Account as necessary to 
complete them. 

Construction Costs Increased at a Rate Higher Than the Rate of 
Inflation: 

BOP factors into its estimates the project's expected start date and 
duration, on the basis of when BOP expects to receive funding. 
Generally, if a project does not start as assumed in the cost estimate, 
the estimated cost of the project should be expected to change at least 
by the rate of inflation that occurs during the time that elapses 
between the expected start date and the actual start date. BOP 
officials stated that during the time that these projects were delayed, 
construction industry costs increased at a rate greater than inflation. 
Costs for materials used in construction, such as concrete, steel, 
copper, and oil, rose substantially. For example, steel prices rose by 
about 60 percent and oil prices rose by almost 150 percent between 2003 
and 2007--a time between when the initial cost estimates were prepared 
and when the projects were ready to proceed with construction.[Footnote 
14] 

We analyzed national data on construction material costs from 2003 
through 2007 to provide some context on increases to construction 
prices. Specifically, to identify nationwide trends in the costs of 
many of the materials used in construction--from concrete to electrical 
equipment--we analyzed the Department of Labor, Bureau of Labor 
Statistics' Inputs to Construction Industries Producer Price Index 
(ICIPPI).[Footnote 15] As shown in table 1, from 2003 through 2007, the 
ICIPPI increased more than the consumer price index, indicating that 
construction costs increased at a higher rate than other costs. 
[Footnote 16] 

Table 1: Bureau of Labor Statistics' Indexes: 

Fiscal year: 2003; 
Consumer Price Index-All Urban Consumers: CPI: 185.0; 
Consumer Price Index-All Urban Consumers: Percentage increase: 2.0%; 
Producer Price Index-Inputs to Construction Industries: ICIPPI: 142.4; 
Producer Price Index-Inputs to Construction Industries: Percentage 
increase: 3.2%. 

Fiscal year: 2004; 
Consumer Price Index-All Urban Consumers: CPI: 190.9; 
Consumer Price Index-All Urban Consumers: Percentage increase: 3.2%; 
Producer Price Index-Inputs to Construction Industries: ICIPPI: 156.6; 
Producer Price Index-Inputs to Construction Industries: Percentage 
increase: 10.0%. 

Fiscal year: 2005; 
Consumer Price Index-All Urban Consumers: CPI: 199.2; 
Consumer Price Index-All Urban Consumers: Percentage increase: 4.3%; 
Producer Price Index-Inputs to Construction Industries: ICIPPI: 170.1; 
Producer Price Index-Inputs to Construction Industries: Percentage 
increase: 8.6%. 

Fiscal year: 2006; 
Consumer Price Index-All Urban Consumers: CPI: 201.8; 
Consumer Price Index-All Urban Consumers: Percentage increase: 1.3%; 
Producer Price Index-Inputs to Construction Industries: ICIPPI: 175.6; 
Producer Price Index-Inputs to Construction Industries: Percentage 
increase: 3.2%. 

Fiscal year: 2007; 
Consumer Price Index-All Urban Consumers: CPI: 208.9; 
Consumer Price Index-All Urban Consumers: Percentage increase: 3.5%; 
Producer Price Index-Inputs to Construction Industries: ICIPPI: 182.4; 
Producer Price Index-Inputs to Construction Industries: Percentage 
increase: 3.9*. 

Fiscal year: Total[A]; 
Consumer Price Index-All Urban Consumers: Percentage increase: 12.9%; 
Producer Price Index-Inputs to Construction Industries: Percentage 
increase: 28.1%. 

Source: GAO analysis of Department of Labor, Bureau of Labor 
Statistics, data. 

[A] To align with the federal government fiscal year, we compared 
October data. 

[End of table] 

Cost Estimates Are Imprecise, and Congress and Other Stakeholders Were 
Not Informed of the Extent to Which They Might Vary: 

Because BOP estimates its initial project costs and requests funding 
early in the planning process, generally before the specific location 
for the prison has been selected, actual project costs can be expected 
to vary from the initial estimates to some extent. This variance would 
be in addition to any cost implications of a change in the project, 
such as a delay in beginning construction. As we have previously noted 
in this report, the extent to which one might expect actual costs to 
vary from estimates typically depends on the type of estimating process 
used. 

In developing its initial estimate prior to the selection of a site for 
the prison, BOP relies on the cost of a previous prison as the 
foundation of its estimate. However, BOP has more detailed information 
available than just the cost of a previous prison, which, if used, 
would likely result in a more accurate estimate. For example, BOP could 
analyze the design documents or itemized costs that contractors on 
previous projects included in their bills. In addition, when the 
project sites have been selected, actual local market pricing for labor 
and material costs could be used.[Footnote 17] More BOP resources would 
be needed to develop such an analysis. 

According to government guidance, BOP's method of using total cost 
information from a prior project as the basis for its estimate may 
result in actual project costs varying from the estimate by as much as 
ï¿½ 40 percent. A BOP official stated that BOP's estimating method 
results in more precise estimates than ï¿½ 40 percent, but an analysis of 
the accuracy of BOP's estimating method has not been done. 

Regardless of the estimating method used, Congress relies on 
information provided by agencies when making funding decisions. 
Although BOP, like other agencies, is not required to communicate the 
extent to which actual costs may be expected to vary from its estimates 
in budget documents or reports on project status, we have recently 
identified providing such information as a best practice.[Footnote 18] 
BOP has not provided this information to Congress and other 
stakeholders. Thus, BOP has not alerted them of the risks that BOP 
might require additional funding to complete the projects as originally 
planned. OMB guidance points out that estimating inaccuracy--both 
overestimating and underestimating--can adversely affect other 
projects. With overestimating, an agency may request and be provided 
with more resources than it will actually need for the project, thereby 
resulting in less resources being available for other projects or 
programs. Underestimating projects can lead an agency to request less 
resources than it will actually need to complete the project, 
potentially leading to a significant reduction in the project scope, 
termination of the project, or the shifting of funds from other 
projects. Inaccurate estimates also reduce confidence in the accuracy 
of future estimates provided by an agency. Consequently, BOP's ability 
to inform Congress and other stakeholders about the extent to which 
costs may vary from its initial project cost is important as it plans 
additional prison projects and submits subsequent funding requests. 

BOP Has Eliminated or Reduced Portions of Two Projects, and Plans to 
Use Its Construction Management Policies and Procedures to Control Cost 
and Schedule Changes: 

BOP eliminated or reduced portions of two projects, but did not clearly 
communicate these changes to Congress and other stakeholders. BOP also 
plans to use its construction management policies and procedures to 
control cost increases and schedule delays during construction. 

BOP Has Eliminated or Reduced Facilities at FCI Berlin and FCI Mendota, 
but Did Not Clearly Communicate These Changes to Congress and Other 
Stakeholders: 

Congress appropriated funds for fiscal year 2007 that BOP indicated in 
its status report were required to complete the three prison projects. 
However, BOP eliminated portions of the FCI Berlin and FCI Mendota 
projects when it awarded contracts in May and September 2007, 
respectively, to keep the projects within the estimated costs provided 
to Congress. According to BOP officials, the contractors' bids for FCI 
Berlin and FCI Mendota were higher than expected. In response, at FCI 
Berlin, BOP chose to eliminate the UNICOR facility where inmates were 
to be employed and provided with job skills training. Subsequently, 
UNICOR has agreed to pay for the cost of constructing a smaller than 
originally planned facility, which has now been added back to the 
project. At FCI Mendota, BOP eliminated both the UNICOR facility and 
the minimum security Federal Prison Camp. Eliminating or reducing the 
UNICOR facilities affects BOP's mission to provide work and other self- 
improvement opportunities for inmates. As a result, these two projects 
are no longer the same as those for which BOP initially sought and 
received appropriated funds. 

While eliminating or reducing portions of two projects enabled BOP to 
award contracts, the resulting facilities will not provide the same 
range of services as originally planned. As part of its annual 
congressional budget submission, BOP reports on the status of projects 
that have received funding in the past. This status report includes the 
following information: each project's descriptive title, with name, 
type, and location; the amounts funded, by fiscal year; the total 
project cost estimates; the funds obligated to date; the estimated year 
of use; and a brief status of the project. However, detailed project 
information is not provided in this status report. In reviewing the BOP 
Status of Construction report in DOJ fiscal year 2009 budget documents, 
we found that the report does not discuss the elimination of the UNICOR 
facility at FCI Mendota.[Footnote 19] Furthermore, BOP did not mention 
that the Federal Prison Camp had been eliminated from FCI Mendota. The 
only indication of this change is that the project title no longer 
includes the words "with camp." While BOP receives a lump-sum 
appropriation for prison construction, Congress makes its appropriation 
on the basis of, among other things, the project information provided 
by BOP in its annual congressional budget submission. For FCI Berlin 
and FCI Mendota, BOP did not clearly communicate to Congress or other 
stakeholders that the facilities being constructed differed from those 
for which funds were requested and appropriated.[Footnote 20] In 
addition, if BOP should decide to construct these omitted facilities in 
the future and fulfill these projects' initial designs, it would likely 
cost more than if the facilities had been constructed as one project. 
We have previously reported that nonconcurrent construction of a 
project increases the overall cost to the government because such 
construction requires additional and expensive (1) mobilization of 
contractor staff and equipment, (2) security, (3) work to procure 
building materials, and (4) construction management oversight. 

BOP Plans to Use Its Policies and Procedures to Control Cost Increases 
and Schedule Delays during Construction: 

BOP officials told us that they will have more ability to control 
project costs because they have awarded design and construction 
contracts for the three projects. These officials believe that using 
their construction management policies and procedures will allow them 
to control cost increases and schedule delays. Controlling schedule 
delays is critical because such delays can lead to cost increases. BOP 
officials said they will use their Design and Construction Procedures 
and Construction Management Guidelines to manage the construction of 
prison projects. Within BOP, the Design and Construction Branch is 
responsible for the oversight and management of prison construction, 
and each project has a BOP project manager. 

BOP's Design and Construction Procedures outlines the specific tasks 
that the Design and Construction Branch must complete to manage the 
coordination, execution, oversight, and monitoring of the activities 
required to construct the projects. For example, this guidance states 
that the project manager must monitor and report on the contractor's 
performance during construction and review changes or a modification to 
the contract to evaluate the extent to which BOP can hold the 
contractor reasonably liable and, therefore, responsible for the 
resulting costs.[Footnote 21] To accomplish these tasks, BOP's 
Construction Management Guidelines provides additional guidance, which 
identifies the processes that BOP staff must follow to monitor the 
requirements and implementation of BOP construction projects. For 
example, this guidance requires BOP officials and the contractor to 
hold numerous design and construction meetings throughout the duration 
of the project's schedule to ensure good communication and effective 
management of the project. 

In addition, the Construction Management Guidelines requires specific 
reports--including weekly status reports, monthly project progress 
reports, performance evaluations of the contractor's team members, and 
other reports--to facilitate oversight and monitoring of the projects 
within BOP. For example, this guidance requires the use of critical 
path method scheduling that breaks a project down into a sequence of 
necessary activities, which are placed into a project schedule that the 
project manager can closely monitor. With this management tool, BOP has 
the ability to monitor and track a project's current progression of 
work in relation to its initial schedule. This tool also gives the 
project manager the ability to evaluate proposed construction changes 
or modifications to the project and to understand their resulting 
impacts on the project's schedule. This evaluation step remains crucial 
because once BOP awards the contract, any construction changes that 
impact the project schedule may also lead to cost changes. 

BOP's guidance establishes clear lines of responsibility and 
documentation requirements. The bureau's Construction Management 
Guidelines also outlines a detailed process that BOP must follow to 
manage and approve any changes or contract modifications to the 
project. For example, this guidance states that BOP's project manager 
should review any proposed changes or modifications to the project and 
determine if the changes or modifications need further review by BOP's 
Design and Construction Branch chief. If further review is warranted, 
sufficient background information supporting the changes or 
modifications should be provided to the branch chief, along with the 
proposal. In addition, this guidance states that all change or 
modification proposals should be discussed at regularly scheduled--or 
specially scheduled--progress meetings with the contractor. If the 
changes or modifications will affect the work, more detailed 
information should be provided to justify them, and the project 
management team must also evaluate them to ensure they are in 
compliance with BOP's contract requirements. Furthermore, to document 
the process, the guidance requires that detailed files be created and 
maintained for all changes or modifications. 

We found that BOP's construction guidance--specifically, its Design and 
Construction Procedures and Construction Management Guidelines-- 
generally conform to government and industry management practices. We 
compared BOP's existing construction management policies and procedures 
with existing guidance from OMB,[Footnote 22] the General Services 
Administration's Construction Excellence Features, the Department of 
Energy's Project Management for the Acquisition of Capital Assets, and 
the Construction Industry Institute's (CII) Guidelines for 
Implementation of CII Concepts: Best Practices for the Construction 
Industry.[Footnote 23] Our review showed that BOP's construction 
management policies and procedures required systems for monitoring, 
tracking, analyzing, forecasting, and reporting the status of a 
project. For example, we found that BOP has procedures for reporting 
important project information--such as cost and schedule, and their 
deviations from trends--to the appropriate personnel, including 
management. Furthermore, BOP has procedures for corrective actions when 
deviations in cost and schedule occur as well as procedures for 
controlling project changes or modifications. 

In addition to the guidance, BOP officials said that the use of the 
Design-Build delivery system for two of these projects will help to 
reduce the risk of additional costs being incurred during construction. 
[Footnote 24] This type of project delivery system places the project 
design and construction under one contract. This can reduce the risk of 
design errors being identified during construction and leading to 
project delays or cost increases. To provide some context to the extent 
that Design-Build contracting is effective in managing construction, we 
reviewed the National Institute of Standards and Technology and the CII 
study of the performance of the Design-Build delivery method versus the 
traditional Design-Bid-Build delivery system.[Footnote 25] The study 
found that for maintaining the project's schedule, as well as for 
managing any changes or rework needed during the project's 
construction, when the project was managed by its owner the Design-
Build system performed better than the Design-Bid-Build system. 

BOP officials stated that they have more ability to control costs while 
the project is under construction, and that for the FCI Mendota, FCI 
Berlin, and FCI McDowell prison projects, they plan to continue to 
carefully consider and approve changes after construction has begun to 
stay within its budget. Since construction of the projects has just 
begun, it is too early to evaluate the effectiveness of BOP's 
construction policies and procedures in controlling cost increases and 
schedule delays. 

Conclusions: 

When BOP asks Congress or other stakeholders to fund or support 
projects, it is important for them to be aware of the extent to which 
actual project costs may vary from the initial estimate. Given the 
continual competition for limited funds, understanding that a proposed 
project may need an additional 30 percent in funding as opposed to an 
additional 10 percent may influence their approval and funding 
decisions. In addition, BOP is developing its estimates and requests 
funding on the basis of the various facilities it intends to include in 
each project. If elements of a proposed and funded project that can 
affect its functionality are eliminated, the project may not fulfill 
decision makers' expectations. In addition, later construction of the 
omitted facilities would likely cost more than if they had been 
constructed as one project. As the need for prison space continues to 
grow, BOP's ability to complete projects within budget and with the 
elements initially anticipated will be important to demonstrating BOP's 
ability to manage its construction program. By providing information on 
the accuracy of its cost estimates and clearly communicating changes 
that could impact the projects functionality, BOP would establish more 
accountability and transparency to its stakeholders. 

Recommendations for Executive Action: 

To improve accountability and transparency, we are making two 
recommendations to the Attorney General of the United States to 
instruct the Director of BOP to clearly communicate to Congress and 
other stakeholders in DOJ's annual congressional budget submission, in 
which BOP provides its requests for funding and reports on the status 
of construction projects: 

* the extent to which project costs may vary from initial estimates; 
and: 

* changes that may impact the functionality of projects. 

Agency Comments: 

We provided a draft of this report to the Department of Justice for its 
review and comment. The Director of the Federal Bureau of Prisons 
provided written comments on this draft. BOP concurred with our 
recommendations and stated it would incorporate information on the 
extent to which project costs may vary from initial estimates and 
changes that may impact the functionality of projects in DOJ's annual 
congressional budget submission. BOP also provided technical 
corrections, which we incorporated in this report where appropriate. 
BOP's comments are reproduced in appendix III. 

We will send copies of this report to the appropriate congressional 
committees and the Attorney General of the United States. Additional 
copies will be sent to interested congressional committees and the 
Director of the Office of Management and Budget. We will also make 
copies available to others upon request. The report will be available 
at no charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you have any questions about this report, please contact me at (202) 
512-6923 or at [email protected]. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. GAO staff who made key contributions to this 
report are listed in appendix IV. 

Signed by: 

Terrell Dorn: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

To assess the extent to which costs changed for the three prisons 
currently under construction and the reasons for those changes, we 
obtained and analyzed the President's budgets, the Department of 
Justice's budget justifications for the federal Bureau of Prisons (BOP) 
for fiscal years 2001 through 2009, and appropriation laws for fiscal 
years 2001 through 2008. We obtained and analyzed BOP's project files 
for three Federal Correctional Institution (FCI) construction projects 
in Mendota, California; Berlin, New Hampshire; and McDowell, West 
Virginia. To determine the rate of inflation and other price indicators 
for the duration of the three projects' schedules, we obtained and 
analyzed the following Department of Labor, Bureau of Labor Statistics' 
data: (1) Producer Price Index-Commodities, Metals and metal products, 
Steel mill products; (2) Producer Price Index-Commodities, Fuels and 
related products and power, Crude petroleum (domestic production); (3) 
Producer Price Index Industry Data, Inputs to construction industries; 
and (4) Consumer Price Index-All Urban Consumers. We obtained and 
analyzed (1) BOP's initial cost estimates for FCI Mendota, FCI Berlin, 
and FCI McDowell and (2) information on prison projects completed from 
1998 to 2007--10 years prior to our review--to learn about BOP 
historical costs. We reviewed BOP's capital planning guidance. We 
obtained and analyzed the Office of Management and Budget's (OMB) 
guidance for Capital Planning and Budget Submission. We interviewed BOP 
construction, budget, and financial officials in Washington, D.C. 

To assess the actions BOP has taken--or plans to take--to control cost 
increases and schedule delays on the three current construction 
projects, we obtained and analyzed BOP's construction guidance and 
BOP's project files for FCI Mendota, FCI Berlin, and FCI McDowell. We 
obtained and analyzed government and construction industry data 
concerning project cost management and guidance from OMB's Circular A- 
11, the General Services Administration's Construction Excellence 
Features, the Department of Energy's Project Management for the 
Acquisition of Capital Assets, and the Construction Industry 
Institute's (CII) Best Practices for the Construction Industry. We 
obtained and analyzed government and construction industry data 
concerning the performance of the Design-Build delivery method versus 
the traditional Design-Bid-Build delivery system from the National 
Institute of Standards and Technology and the CII study. We interviewed 
BOP construction, budget, and financial officials in Washington, D.C. 
We did not evaluate the effectiveness of BOP's construction policies 
and procedures in controlling cost increases and schedule delays on 
these projects because although design and construction contracts were 
awarded, little construction had been done. 

We conducted this performance audit from June 2007 through May 2008, in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Appendix II: FCI Mendota, FCI Berlin, and FCI McDowell: Project 
Estimates, Budget Requests, and Funding for Fiscal Years 2001-2009 
(Dollars in thousands): 

Fiscal year/Project information category: 2001, Estimate; 
Prison construction project: FCI Mendota: $158,930[A]; 
Prison construction project: FCI Berlin: N/A; 
Prison construction project: FCI McDowell: $126,430[A]. 

Fiscal year/Project information category: 2001, Request; 
Prison construction project: FCI Mendota: $11,930; 
Prison construction project: FCI Berlin: N/A; 
Prison construction project: FCI McDowell: $5,430. 

Fiscal year/Project information category: 2001, Funded; 
Prison construction project: FCI Mendota: $8,930; 
Prison construction project: FCI Berlin: N/A; 
Prison construction project: FCI McDowell: $2,430. 

Fiscal year/Project information category: 2002, Estimate; 
Prison construction project: FCI Mendota: $158,930; 
Prison construction project: FCI Berlin: $166,000[A]; 
Prison construction project: FCI McDowell: $126,430. 

Fiscal year/Project information category: 2002, Request; 
Prison construction project: FCI Mendota: $147,000; 
Prison construction project: FCI Berlin: $9,963; 
Prison construction project: FCI McDowell: $91,047. 

Fiscal year/Project information category: 2002, Funded; 
Prison construction project: FCI Mendota: $141,256[B]; 
Prison construction project: FCI Berlin: $5,000; 
Prison construction project: FCI McDowell: $94,047. 

Fiscal year/Project information category: 2003, Estimate; 
Prison construction project: FCI Mendota: $158,930; 
Prison construction project: FCI Berlin: $173,039; 
Prison construction project: FCI McDowell: $131,314. 

Fiscal year/Project information category: 2003, Request; 
Prison construction project: FCI Mendota: 0[C]; 
Prison construction project: FCI Berlin: 0[C]; 
Prison construction project: FCI McDowell: 0[C]. 

Fiscal year/Project information category: 2003, Funded; 
Prison construction project: FCI Mendota: 0[C]; 
Prison construction project: FCI Berlin: 20,000; 
Prison construction project: FCI McDowell: 0[C]. 

Fiscal year/Project information category: 2004, Estimate; 
Prison construction project: FCI Mendota: $150,186; 
Prison construction project: FCI Berlin: $179,500; 
Prison construction project: FCI McDowell: $136,777. 

Fiscal year/Project information category: 2004, Request; 
Prison construction project: FCI Mendota: 0[C]; 
Prison construction project: FCI Berlin: Cancellation[D]; 
Prison construction project: FCI McDowell: Cancellation[D]. 

Fiscal year/Project information category: 2004, Funded; 
Prison construction project: FCI Mendota: ($48,895)[E]; 
Prison construction project: FCI Berlin: $154,500; 
Prison construction project: FCI McDowell: $40,300. 

Fiscal year/Project information category: 2005, Estimate; 
Prison construction project: FCI Mendota: $150,186; 
Prison construction project: FCI Berlin: $179,500; 
Prison construction project: FCI McDowell: $136,777. 

Fiscal year/Project information category: 2005, Request; 
Prison construction project: FCI Mendota: ($55,000); 
Prison construction project: FCI Berlin: 0[C]; 
Prison construction project: FCI McDowell: 0[C]. 

Fiscal year/Project information category: 2005, Funded; 
Prison construction project: FCI Mendota: $1,900; 
Prison construction project: FCI Berlin: 0[C]; 
Prison construction project: FCI McDowell: 0[C]. 

Fiscal year/Project information category: 2006, Estimate; 
Prison construction project: FCI Mendota: $165,291; 
Prison construction project: FCI Berlin: $179,500; 
Prison construction project: FCI McDowell: $136,777. 

Fiscal year/Project information category: 2006, Request; 
Prison construction project: FCI Mendota: 0[C]; 
Prison construction project: FCI Berlin: Cancellation[D]; 
Prison construction project: FCI McDowell: Cancellation[D]. 

Fiscal year/Project information category: 2006, Funded; 
Prison construction project: FCI Mendota: $4,000; 
Prison construction project: FCI Berlin: 0[C]; 
Prison construction project: FCI McDowell: 0[C]. 

Fiscal year/Project information category: 2007, Estimate; 
Prison construction project: FCI Mendota: $196,291; 
Prison construction project: FCI Berlin: $179,500; 
Prison construction project: FCI McDowell: $136,777. 

Fiscal year/Project information category: 2007, Request; 
Prison construction project: FCI Mendota: 0[C]; 
Prison construction project: FCI Berlin: Cancellation[D]; 
Prison construction project: FCI McDowell: Cancellation[D]. 

Fiscal year/Project information category: 2007, Funded; 
Prison construction project: FCI Mendota: $122,050; 
Prison construction project: FCI Berlin: $80,000; 
Prison construction project: FCI McDowell: $102,000. 

Fiscal year/Project information category: 2008, Estimate; 
Prison construction project: FCI Mendota: $225,000 to $235,000; 
Prison construction project: FCI Berlin: $250,000 to $275,000; 
Prison construction project: FCI McDowell: $225,000 to $235,000. 

Fiscal year/Project information category: 2008, Request; 
Prison construction project: FCI Mendota: $115,000; 
Prison construction project: FCI Berlin: 0[C]; 
Prison construction project: FCI McDowell: 0[C]. 

Fiscal year/Project information category: 2008, Funded; 
Prison construction project: FCI Mendota: $2,000; 
Prison construction project: FCI Berlin: 0[C]; 
Prison construction project: FCI McDowell: 0[C]. 

Fiscal year/Project information category: 2009, Estimate; 
Prison construction project: FCI Mendota: $238,000; 
Prison construction project: FCI Berlin: $271,000; 
Prison construction project: FCI McDowell: $248,000. 

Fiscal year/Project information category: 2009, Request; 
Prison construction project: FCI Mendota: 0[C]; 
Prison construction project: FCI Berlin: 0[C]; 
Prison construction project: FCI McDowell: 0[C]. 

Fiscal year/Project information category: 2009, Funded; 
Prison construction project: FCI Mendota: [F]; 
Prison construction project: FCI Berlin: [F]; 
Prison construction project: FCI McDowell: [F]. 

Fiscal year/Project information category: Total funding; 
Prison construction project: FCI Mendota: $231,241; 
Prison construction project: FCI Berlin: $259,500; 
Prison construction project: FCI McDowell: $238,777. 

Fiscal year/Project information category: Minus initial estimate; 
Prison construction project: FCI Mendota: $158,903; 
Prison construction project: FCI Berlin: $166,000; 
Prison construction project: FCI McDowell: $126,430. 

Fiscal year/Project information category: Dollar increase; 
Prison construction project: FCI Mendota: $72,311; 
Prison construction project: FCI Berlin: $93,500; 
Prison construction project: FCI McDowell: $112,347. 

Fiscal year/Project information category: Percentage increase; 
Prison construction project: FCI Mendota: 45%; 
Prison construction project: FCI Berlin: 56%; 
Prison construction project: FCI McDowell: 89%. 

Source: GAO analysis of Department of Justice, Bureau of Prisons, data. 

Note: In the President's fiscal year 2005 budget, a moratorium on new 
prison construction was announced. This moratorium was in place for 
fiscal years 2005, 2006, and 2007. 

[A] Initial estimate of project costs. 

[B] Includes a rescission to the Buildings and Facilities Account of 
$5.744 million, which was applied by BOP. 

[C] The use of "zeros" indicates either no budget requests or no 
project funding. 

[D] The term "cancellation" refers to a proposal by the President to 
reduce budget resources. 

[E] The Appropriation Conference Report named the project, which became 
FCI Mendota, to apply the rescission to the Buildings and Facilities 
Account. In fiscal year 2004, BOP shifted $3 million to this project. 

[F] Fiscal year 2009 funds have not been determined. 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of Justice, Federal Bureau 
of Prisons: 

U.S. Department of Justice: 
Federal Bureau of Prisons: 
Office of the Director: 
Washington, DC 20534: 

May 16, 2008: 

Terrell Dorn, Director: 
Physical Infrastructure Issues: 
Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Dorn: 

The Bureau of Prisons (Bureau) appreciates the opportunity to formally 
respond to the Government Accountability Office's (GAO's) draft report 
entitled Prison Construction: Clear Communication on the Accuracy of 
Cost Estimates and Project Changes Needed. 

The purpose of this report is to explain (1) the reasons for the 
changes to the estimated costs for federal correctional institution 
construction projects located in Mendota, California; Berlin, New 
Hampshire; and McDowell, West Virginia; and (2) the actions the Bureau 
has taken - or plans to take - to control future costs and schedule 
changes. 

The Bureau has the following specific comments: 

* Summary Page - The GAO Report should note the Status of Construction 
Exhibit (in the Bureau's budget) does not normally discuss specific 
details regarding various program areas of each prison project - such 
as UNICOR work areas. 

* Page 3, 2nd paragraph and thereafter - We suggest the following 
wording change be included: "Inmates are employed in many areas of BOP 
institutions (food service, commissary, facility maintenance, 
landscaping/grounds work, barber shop, cleaning, etc.) not just 
UNICOR." The GAO's current statement might lead the reader to believe 
there will be no work opportunities for inmates at these locations 
without a UNICOR operation. In fact, all sentenced general population 
BOP inmates at all locations are required to work and are given a job 
if they are medically able. 

* Page 4, 9m line beginning with, "Furthermore,..." - We suggest the 
sentence should read, "Furthermore, BOP officials told us they will 
continue to carefully consider and analyze before approving changes 
that would increase construction costs after construction begins." 

* Page 5, 6th line from the top beginning with, "UNICOR is a..." - We 
suggest the sentence read, "The Director of the Federal Prison System, 
Chief Executive Officer, and a board of six Directors, appointed by the 
President, reviews and approves the policy of the Corporation." 

* Page 6, footnote #3: Add the underlined words to the footnote "One of 
the ten, a secure female FCI to be built in Aliceville, AL,..." 

* Page 8, Title - Project Delays Contributed to Increased Cost 
Estimates and Imprecise Nature of Estimates Not Communicated to 
Stakeholders, we suggest replacing "Project Delays" with "Delays 
Related to Funding". 

* Middle of Page 8, Title - Problems with site selection and receiving 
funding later then planned contributed to project construction delays 
we suggest replacing then with than. 

* Page 8, 2nd paragraph beginning with, "FCI Mendota also 
experienced..." Change to make more accurate/precise, "FCI Mendota also 
experienced a number of disruptions in available funding including 
proposals for and actual rescissions of funds that led to delays and an 
interruption in construction." 

* Page 8, end of 2nd paragraph, please add, "For example, the 
Administration offered a FY 2005 Budget Amendment to rescind $55 
million from the Mendota project, which was eventually denied in 
Congressional action (Attachment 4). 

* Page 9, top of page where the 2004 rescission is referenced, please 
include the FY 2002 rescission amount of $5.744 million which was 
applied to the Mendota project. 

* Page 11, 1st paragraph, 8th line, containing "...EPA completed its 
approval process ...Instead of EPA, we suggest... "the environmental 
review and approval process was completed..." 

* Page 11 and Appendix II beginning with, "Also, the President's 
Budget..." The OMB did call these rescissions in the budget documents 
and only clarified, after submission of the FY 2007 President's Budget, 
that they were proposed cancellations (Attachment 1). 

* Page 16, Line 8, "For FCIs Berlin and Mendota, BOP did not clearly 
communicate..." Changes are included in the Status of Construction 
Report which shows any planned satellite camp right after the name of 
the project. The Bureau did clearly change this on the Status report 
(Attachment 3) that went to all shareholders after award of the 
construction contract that did not include the camp. 

* Page 23, table should be updated to reflect FY 2002 rescission of 
$5.744 million applied to the Mendota project. Further, budget 
documents (Attachment 2) clearly state "rescinds" not "cancel" for 
projects prior to FY 2007. The table should be updated to reflect this 
issue. In addition, as agreed upon in George Depaoli's May 6, 2008, e-
mail, please correct the FY 2005 Request Line entry and identify the 
$55 million Mendota rescission proposal in the Administration's budget 
amendment (Attachment 4). 

In addition to the above concerns, our response to the Recommendations 
for Executive Action is as follows: 

Recommendations: To improve accountability and transparency, we are 
making two recommendations to the Attorney General to instruct the 
Director of the BOP to clearly communicate to Congress and other 
stakeholders in DOJ's annual congressional budget submission, in which 
BOP provides its requests for funding and reports on the status of 
construction projects: 

* the extent to which project costs may vary from initial estimates; 
and; 

* changes that may impact the functionality of projects. 

Response: The Bureau concurs with these recommendations and will 
incorporate these elements into the next required DOJ annual 
congressional budget submission. 

If you have any questions regarding this response, please contact 
VaNessa P. Adams, Senior Deputy Assistant Director, Program Review 
Division, at (202) 616-2099. 

Sincerely, 

Signed by: 

Thomas R. Kane: 
for Harley G. Lappin: 
Director: 

Attachments: 

cc: Richard Theis, Assistant Director: 
Audit Liaison Group, JMD: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Terrell Dorn, (202) 512-6923 or [email protected]: 

Staff Acknowledgments: 

In addition to the individual listed above, Maria Edelstein, Assistant 
Director; George Depaoli; Anne Dice; Carlos Diz; Colin Fallon; and 
Susan Michal-Smith made significant contributions to this report. 

[End of section] 

Footnotes: 

[1] BOP provides job opportunities for inmates in many areas of the 
institutions, including food service, commissary, facility maintenance, 
landscaping/grounds work, barber shop, and cleaning. The general 
population BOP inmates are required to work and are given a job, if 
they are medically able. 

[2] GAO, Budget Issues: Agency Implementation of Capital Planning 
Principles Is Mixed, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
04-138] (Washington, D.C.: Jan. 16, 2004). 

[3] CPC consists of senior-executive-level staff of several BOP 
divisions and subject matter experts from the Administration Division. 
LRPC consists of members of the Administration Division who are senior- 
executive-level staff, senior managers, and branch chiefs. 

[4] One of these 10 planned prison projects, a secure female FCI to be 
built in Aliceville, Alabama, received funding for construction in 
fiscal year 2008. We did not include this FCI in our review because it 
had not received construction funding at the time that we started our 
work in June 2007. 

[5] GAO, Cost Assessment Guide: Best Practices for Estimating and 
Managing Program Costs, Exposure Draft, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-07-1134SP] (Washington, D.C.: 
July 2007). 

[6] Office of Management and Budget, Planning, Budgeting, Acquisition, 
and Management of Capital Assets, OMB Circular A-11, Part 7, Section 
300, "Planning, Budgeting, Acquisition, and Management of Capital 
Assets," Supplement to Part 7, "Capital Programming Guide" (Washington, 
D.C.: June 2006); and [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
07-1134SP]. 

[7] OMB Circular A-11, Part 7, refers to the Department of Energy's 
"Cost Estimating Guide," DOE G 4301.1-1 (Washington, D.C.: Mar. 28, 
1997). 

[8] BOP identified Mendota, California, as the site for this prison in 
its budget documents in fiscal year 2006. 

[9] In fiscal year 2004, Congress rescinded $51,895,000 of the 
unobligated balances available for Federal Prison System, Buildings and 
Facilities. The conference report indicated that the rescission was to 
apply from prior year unobligated balances originally made available 
for the FCI California prison construction project. H.R. Conf. Rep. No. 
108-401, at 646 (2003) accompanying Pub. L. No. 108-199, 118 STAT. 3, 
106 (2004). 

[10] GAO, Embassy Construction: Achieving Concurrent Construction Would 
Help Reduce Costs and Meet Security Goals, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-04-952] (Washington, D.C.: Sept. 
24, 2004). 

[11] GAO, Budget Issues: Alternative Approaches to Finance Federal 
Capital, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1011] 
(Washington, D.C.: Aug. 21, 2003). 

[12] McDowell, West Virginia, was selected by BOP in fiscal year 2005 
and was identified in BOP's budget documents as FCI McDowell beginning 
in fiscal year 2007. 

[13] GAO, Status of Funds Proposed for Cancellation in the President's 
Fiscal Year 2007 Budget, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-B-308011] (Washington, D.C.: Aug. 4, 2006). 

[14] Department of Labor, Bureau of Labor Statistics, Producer Price 
Index-Commodities, Metals and metal products, Steel mill products, 
Series ID WPU1017 (Washington, D.C.: Nov. 15, 2007); and Producer Price 
Index-Commodities, Fuels and related products and power, Crude 
petroleum (domestic production), Series ID WPU056 (Washington, D.C.: 
Nov. 15, 2007). 

[15] Department of Labor, Bureau of Labor Statistics, Producer Price 
Index Industry Data, Inputs to construction industries, Series ID 
PCUBCON--BCON (Washington, D.C.: Nov. 15, 2007). 

[16] Department of Labor, Bureau of Labor Statistics, Consumer Price 
Index-All Urban Consumers, Series ID CUUR0000SA0 (Washington, D.C.: 
Nov. 15, 2007). 

[17] Office of Management and Budget, Planning, Budgeting, Acquisition, 
and Management of Capital Assets, OMB Circular A-11, Part 7, Section 
300, "Planning, Budgeting, Acquisition, and Management of Capital 
Assets," Supplement to Part 7, "Capital Programming Guide" (Washington, 
D.C.: June 2006); and [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
07-1134SP]. 

[18] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1134SP]. 

[19] This is the first report submitted after the construction 
contracts were awarded in 2007 for FCI Berlin and FCI Mendota, and 
after the decision to eliminate portions of the projects was made. 

[20] According to a BOP official, stakeholders within BOP, DOJ, and OMB 
are advised by BOP staff of significant changes and receive a monthly 
updated copy of the status report. 

[21] For the technical discussion of change orders and modifications, 
see the Federal Acquisition Regulation, Part 43, Contract 
Modifications. 

[22] Office of Management and Budget, Planning, Budgeting, Acquisition, 
and Management of Capital Assets, OMB Circular A-11, Part 7, Section 
300, "Planning, Budgeting, Acquisition, and Management of Capital 
Assets," Supplement to Part 7, "Capital Programming Guide" (Washington, 
D.C.: June 2006). 

[23] Construction Industry Institute, Guidelines for Implementation of 
CII Concepts: Best Practices for the Construction Industry, Special 
Publication 42-2 (Austin, TX: September 1995). 

[24] The Design-Build delivery system was not used for the current FCI 
Mendota construction phase. 

[25] United States Department of Commerce, Technology Administration, 
National Institute of Standards and Technology, Office of Applied 
Economics, Building and Fire Research Laboratory, Measuring the Impacts 
of the Delivery System on Project Performance--Design-Build and Design- 
Bid-Build (Gaithersburg, MD: November 2002). 

[End of section] 

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