Contingency Operations: Opportunities to Improve the Logistics Civil
Augmentation Program (Letter Report, 02/11/97, GAO/NSIAD-97-63).

Pursuant to a congressional request, GAO reviewed the Army's Logistics
Civil Augmentation Program (LOGCAP), focusing on: (1) the extent to
which the Army is using the program; (2) reasons for increases in the
program's cost for the Bosnia peacekeeping mission; (3) opportunities to
improve program implementation from a doctrine, cost control, and
contract oversight standpoint; (4) the use of LOGCAP in Somalia, Rwanda,
and Haiti; and (5) the potential for inefficiency by having similar
support contract programs in the Navy and the Air Force.

GAO found that: (1) over the last 4 years, the Army has relied on LOGCAP
to help support various contingency operations and plans to maintain the
capability as an option for providing support in the future; (2) since
1992, the Army has used LOGCAP to provide logistics and engineering
support services to U.S. forces in six operations and, on January 30,
1997, awarded a new contract that will keep the program available until
2002; (3) as of December 7, 1996, estimated program costs were about
$674.2 million, with the vast majority, about $461.5 million, going to
the Bosnian mission; (4) according to the Army, use of the contractor is
the choice of last resort but necessary in these missions because of
troop ceilings, unavailability of host nation support, and the need to
keep military units available to respond to a major regional conflict;
(5) LOGCAP cost estimate for the Bosnian mission have increased
substantially; (6) the Army's latest revised estimate of $461.5 million
exceeds its original estimate of $350.2 million by $111.3 million or 32
percent; (7) GAO's review shows that the difference in the estimates was
largely driven by changes in operational requirements once the forces
arrived in the Balkan peninsula; (8) weaknesses in financial reporting
and contract monitoring systems also contributed to cost increases; (9)
GAO's analysis of LOGCAP implementation during the Bosnian peacekeeping
mission shows that there are opportunities to make the program more
efficient and effective; (10) little doctrine on how to manage
contractor resources and effectively integrate them with force structure
units exists; (11) the financial reporting and contract monitoring
systems during the early phases of the Bosnian mission were not
sufficient to provide U.S. Army, Europe officials with information they
needed to track the cost of the operation, report on how LOGCAP funds
were spent, or monitor contractor performance; (12) Army Materiel
Command officials have worked with U.S. Army, Europe to identify
problems experienced in Bosnia, and they are taking actions intended to
improve program planning and management and reduce costs for future
operations; and (13) the Air Force and the Navy recently initiated
programs similar to LOGCAP, which may result in unnecessary overhead
costs and duplication.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-97-63
     TITLE:  Contingency Operations: Opportunities to Improve the 
             Logistics Civil Augmentation Program
      DATE:  02/11/97
   SUBJECT:  Logistics
             Contractor performance
             Military cost control
             Defense contingency planning
             Contract administration
             Contract costs
             Military housing
             Contract monitoring
             Service contracts
IDENTIFIER:  Bosnia
             Somalia
             Rwanda
             Haiti
             Army Logistics Civil Augmentation Program
             Navy Emergency Construction Capabilities Program
             Air Force Contract Augmentation Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

February 1997

CONTINGENCY OPERATIONS -
OPPORTUNITIES TO IMPROVE THE
LOGISTICS CIVIL AUGMENTATION
PROGRAM

GAO/NSIAD-97-63

Contingency Operations

(709193)


Abbreviations
=============================================================== ABBREV

  AMC - Army Materiel Command
  LOGCAP - Logistics Civil Augmentation Program

Letter
=============================================================== LETTER


B-272659

February 11, 1997

The Honorable Strom Thurmond
Chairman, Committee on Armed Services
United States Senate

The Honorable Ted Stevens
Chairman, Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Floyd Spence
Chairman, Committee on National Security
House of Representatives

The Honorable C.W.  Bill Young
Chairman
The Honorable John Murtha
Ranking Minority Member
Subcommittee on National Security
Committee on Appropriations
House of Representatives

In response to your requests, we reviewed the Army's Logistics Civil
Augmentation Program (LOGCAP).  Under this program, a civilian
contractor provides logistics and engineering services to deployed
forces.  You had expressed concern about the increasing use of this
program and reports of its escalating costs for the peacekeeping
mission in Bosnia.  As agreed with your offices, this report
addresses (1) the extent to which the Army is using the program; (2)
reasons for increases in the program's cost for the Bosnia
peacekeeping mission; and (3) opportunities to improve program
implementation from a doctrine, cost control, and contract oversight
standpoint.  As requested, it also addresses the potential for
inefficiency by having similar support contract programs in the Navy
and the Air Force.  This report focuses on LOGCAP use during the
peacekeeping mission in Bosnia but also includes information on
LOGCAP use in Somalia, Rwanda, and Haiti.  Details on our scope and
methodology are included in
appendix I. 


   BACKGROUND
------------------------------------------------------------ Letter :1

The U.S.  Army has traditionally employed civilian contractors in
noncombat roles to augment military forces.  For example, civilian
contractors were used extensively in the Korean and Vietnam Wars to
augment logistical support provided to U.S.  forces.  LOGCAP was
established by the Army in 1985 as a means to (1) preplan for the use
of contractor support in contingencies or crises and (2) take
advantage of existing civilian resources in the United States and
overseas to augment active and reserve forces.  Initially, the
program concept was that each Army component of a unified command
would individually plan and contract for its own logistics and
engineering services.  In 1992, the concept was changed to provide a
single, centrally managed worldwide planning and services contract. 
Although it originated as an Army program, LOGCAP is available to the
other services. 


      PROGRAM MANAGEMENT AND
      CONTRACT REQUIREMENTS
---------------------------------------------------------- Letter :1.1

Since 1992, the U.S.  Army Corps of Engineers has been responsible
for the program's management and contract administration.  When
LOGCAP is used in support of a mission, the operational commander
becomes responsible for defining services to be provided by the
contractor, integrating contractor personnel into the mission, and
ensuring that funding is provided.  The contractor is paid from the
operational command's operations and maintenance appropriation
account.  On October 1, 1996, LOGCAP management transferred to the
U.S.  Army Materiel Command (AMC).  However, the Corps of Engineers
will remain responsible for LOGCAP management in Bosnia for the
duration of that mission. 

The original LOGCAP contractor, Brown and Root Services Corporation
of Houston, Texas, was competitively awarded a cost-plus-award-fee\1
contract for 1 year with 4 option years on August 3, 1992.  According
to Army documents, a notice regarding the contract in the Commerce
Business Daily elicited 37 requests for copies of the solicitation. 
Four companies competed for the contract. 

The 1992 LOGCAP contract required the contractor to (1) develop a
worldwide management plan and 13 regional plans, (2) participate in
planning and exercises, and (3) be prepared to execute the plans upon
notification.  The worldwide management plan is a general description
of the equipment, personnel, and supporting services required to
support a force of up to 20,000 troops in 5 base camps for up to 180
days and up to 50,000 troops beyond 180 days.  The regional plans use
the worldwide management plan as a baseline to provide detailed
logistics and engineering support plans for a geographic region based
on a specific planning scenario prescribed by the requiring
commander. 


--------------------
\1 A cost-plus-award-fee contract allows the contractor to be
reimbursed for all reasonable, allowable, and allocable costs
incurred.  Under the original contract, the contractor earns a base
fee of 1 percent of the estimated contract cost.  The contractor also
earns an incentive fee of up to 9 percent of the cost estimate based
on the contractor's performance in a number of areas, including cost
control. 


      USE IN BOSNIAN PEACEKEEPING
      MISSION
---------------------------------------------------------- Letter :1.2

The Army decided to use the LOGCAP contract in December 1995 to
augment its forces that are part of the Bosnian peacekeeping mission. 
The United States provides a major portion of the mission's
implementing force as set forth in the Dayton Peace Accords and
occupies key leadership positions responsible for the mission.  The
U.S.  Army, Europe provides most of the U.S.  force and is the major
command responsible for the mission's logistics planning and funding. 
U.S.  forces deployed in support of the implementation force were
located in 4 countries and numbered approximately 22,200:  about
16,200 in Bosnia, about 1,400 in Croatia, and about 4,600 in Hungary
and Italy.\2 Several factors created unique challenges for the Army
as it implemented LOGCAP during the Bosnian mission.  These factors
related to the uncertainty of the U.S.  role, the need for rapid
deployment once the role was defined, and the harsh weather
environment.  (See app.  II for more detail on these matters.)

U.S.  Army, Europe is using LOGCAP to provide a range of logistics
and engineering services, including troop housing and facilities,
food service, and laundry operations, as well as base camp and
equipment maintenance, shuttle bus services within camps, and cargo
handling services throughout the area of operations.  The Army's
December 1995 estimate of the cost to provide these services for 1
year, which was developed by the contractor based on the Army's
tasking, was $350.2 million.\3 However, when the Department of
Defense submitted its estimate of incremental costs for the Bosnia
peacekeeping mission to Congress on February 23, 1996, it reduced the
estimate to $191.6 million.  The estimate was reduced because
officials in the Office of the Secretary of Defense believed there
was duplication between the services the contractor would provide and
the services military personnel would provide.  However, Defense
Department officials had no documentation supporting the $191.6
million estimate.  Thus, we used the Army's estimate of $350.2
million as the basis for analyzing LOGCAP cost increases in Bosnia. 


--------------------
\2 Approximate number of troops deployed as of July 19, 1996. 

\3 According to the contractor, this dollar amount was a rough order
of magnitude made without benefit of detailed scope data.  The Army
used this dollar amount as its initial estimate and we have referred
to it as such throughout this report. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

Over the last 4 years, the Army has relied on LOGCAP to help support
various contingency operations and plans to maintain the capability
as an option for providing support in the future.  Since 1992, the
Army has used LOGCAP to provide logistics and engineering support
services to U.S.  forces in six operations and on January 30, 1997,
awarded a new contract that will keep the program available until
2002.  As of December 7, 1996, estimated program costs were about
$674.2 million, with the vast majority, about $461.5 million, going
to the Bosnian mission.  According to the Army, use of the contractor
is the choice of last resort but necessary in these missions because
of troop ceilings, unavailability of host nation support, and the
need to keep military units available to respond to a major regional
conflict. 

LOGCAP cost estimates for the Bosnian mission have increased
substantially.  The Army's latest revised estimate of $461.5
million\4 exceeds its original estimate of $350.2 million by $111.3
million, or 32 percent.  Our review shows that the difference in the
estimates was largely driven by changes in operational requirements
once the forces arrived in the Balkan peninsula.  Specifically, the
Commander in Chief of U.S.  Army, Europe decided to substantially
increase the number of base camps from 14 large camps to 34 smaller
camps\5 and to accelerate the schedule for upgrading troop housing. 
These changes were required because of a number of factors, including
the U.S.  geographic area of responsibility, limited infrastructure,
and harsh weather conditions.  Associated management and
administrative cost increases and an unanticipated value added tax
imposed on the contractor by the Hungarian government also added to
the difference.  Weaknesses in financial reporting and contract
monitoring systems also contributed to cost increases. 

Our analysis of LOGCAP implementation during the Bosnian peacekeeping
mission shows that there are opportunities to make the program more
efficient and effective.  For example: 

  -- Little doctrine on how to manage contractor resources and
     effectively integrate them with force structure units exists. 
     In the Bosnian mission, U.S.  Army, Europe officials had limited
     or no experience with LOGCAP and lacked guidance on how to
     prepare planning documents and what type of management and
     oversight structure to establish.  As a result, the officials
     had to develop ad hoc procedures and systems to ensure they were
     effectively managing LOGCAP. 

  -- The financial reporting and contract monitoring systems during
     the early phases of the Bosnian mission were not sufficient to
     provide U.S.  Army, Europe officials with information they
     needed to track the cost of the operation, report on how LOGCAP
     funds were spent, or monitor contractor performance.  Without
     these systems, commanders could not determine whether the
     contractor was adequately controlling costs, if alternative
     support approaches were cost-effective, if changes in the level
     of service being provided were warranted, or whether work was
     performed in accordance with contract provisions. 

AMC officials have worked with U.S.  Army, Europe to identify
problems experienced in Bosnia, and they are taking actions intended
to improve program planning and management and reduce costs for
future operations.  These actions include developing doctrine and
guidance, improving financial management and contract monitoring
systems, and providing assistance to commanders when LOGCAP is
implemented. 

The Air Force and the Navy recently initiated programs similar to
LOGCAP, which may result in unnecessary overhead costs and
duplication.  Although both the Air Force and the Navy have used
LOGCAP for support services during previous peacekeeping missions,
officials of these services believe contractor responsiveness and
control can be enhanced by separate programs.  The Navy awarded a
contract for its program in August 1995 and to date has paid the
contractor approximately $32 million, primarily for emergency
assistance to repair hurricane damage at Camp Lejeune, North
Carolina.  The Air Force expects to award its contract in February
1997 and the contractor could earn about $4.4 million for planning
and preparation over the 5-year life of the contract.  Many of the
services provided under all three programs are similar, and it may be
more efficient and effective to have one service act as the single
manager. 


--------------------
\4 This estimate is as of December 7, 1996, and covers the period
from December 14, 1995, to
December 13, 1996.  In December 1996, the President extended the
mission an additional 6 months.  Overall LOGCAP costs will increase
based on the level of service required from the contractor. 

\5 The number of camps and operating sites fluctuated throughout the
mission.  This is the number of camps and operating sites initially
constructed by the contractor and military units. 


   THE ARMY IS MAKING INCREASING
   USE OF LOGCAP TO MEET SUPPORT
   REQUIREMENTS
------------------------------------------------------------ Letter :3

As shown in table 1, since 1992, the Army has used a contractor
instead of force structure to meet some of its combat support and
combat service support\6 needs in six major peacekeeping and
humanitarian assistance missions.  Although using LOGCAP is the
choice of last resort, Army officials stated it is often necessary to
use LOGCAP in these missions because of planning considerations such
as the ability to respond to a major regional conflict, the political
sensitivity of activating guard and reserve forces, the lack of host
nation support agreements in undeveloped countries, and the desire to
maintain a relatively low U.S.  presence.  The use of the contract by
far has been the most extensive for the Bosnian mission and that
mission provides a good illustration of how the factors come into
play in deciding whether to use the contract. 



                                     Table 1
                     
                      Major Operations in Which The Army Has
                             Used Its LOGCAP Contract

                              (Dollars in millions)

            Starting     Estimated
Event       date              cost  Services provided
----------  ----------  ----------  --------------------------------------------
Somalia     Dec. 1992        $62.0  Base camp construction and maintenance; food
"Operation                          service and supply; laundry; field showers;
Restore                             latrines; water production, storage, and
Hope"                               distribution; sewage/solid waste removal;
                                    bulk fuel receipt, storage, and issue;
                                    transportation for passengers and cargo; and
                                    linguist support.

Rwanda      Aug. 1994          6.3  Water production, storage, and distribution.
"Operation
Support
Hope"

Haiti       Sept. 1994       133.0  Base camp construction and maintenance; food
"Operation                          service and supply; laundry; bulk fuel
Uphold                              receipt, storage, and issue; airport and
Democracy"                          seaport operations; and transportation
                                    services.

Saudi       Oct. 1994          5.1  Food service and supply; transportation;
Arabia/                             convoy support; shuttle bus service;
Kuwait                              laundry; and off loading and storing
"Operation                          containers from ships.
Vigilant
Warrior"

Italy       Sept. 1995         6.3  Base camp construction.
"Operation
Deny
Flight"

Bosnia      Dec.1995         461.5  Base camp construction and maintenance;
"Operation                          showers; latrines; food service and supply;
Joint                               sewage/solid waste removal; water
Endeavor"                           production, storage, and distribution;
                                    shuttle bus service; bulk fuel receipt,
                                    storage, and issue; heavy equipment
                                    transportation; mail delivery; construction
                                    material storage and distribution; railhead
                                    operations; and seaport operations.

================================================================================
Total                       $674.2
--------------------------------------------------------------------------------
Note:  Estimated costs as of December 7, 1996. 

Source:  Department of the Army. 


--------------------
\6 The Army divides support units into combat support and combat
service support units.  Combat support units operate directly with
combat maneuver units in wartime, for example, field artillery,
combat engineer, and signal units.  Combat service support units
provide services to combat and other units, for example,
transportation and maintenance services. 


      LOGCAP IS THE CHOICE OF LAST
      RESORT
---------------------------------------------------------- Letter :3.1

The Army has established a decision-making process for determining
when it will use LOGCAP.  The following discussion describes the
decision-making process and illustrates how it worked in the Bosnian
mission. 


         CRITERIA FOR USING LOGCAP
-------------------------------------------------------- Letter :3.1.1

The Army's LOGCAP regulation states that LOGCAP is one of several
options available to commanders for meeting combat support and combat
service support shortfalls in their operational plans.  It is
intended to be the option of last resort, and it was primarily
designed to be used in areas where host nation support agreements do
not exist.  Other options to be considered by commanders before
selecting LOGCAP include the other military services, allied support,
and local contracting.  In addition, commanders must consider other
factors such as risk to personnel, lift availability, quality of
life, and mission duration. 


         FACTORS CONSIDERED IN
         DECIDING TO USE LOGCAP IN
         BOSNIA
-------------------------------------------------------- Letter :3.1.2

The key planning and resource considerations that led to the Army's
decision to use LOGCAP were (1) troop ceilings for active and reserve
forces, (2) engineering resources available in the Army force
structure, (3) host nation support agreements, and (4) quality of
life issues.  According to U.S.  Army, Europe officials responsible
for planning the Bosnian mission, they initially identified a need
for a force of 38,000 troops, including 20,000 combat troops.  This
number of combat troops was considered necessary because U.S.  forces
had to patrol a 1,200-mile zone between the formerly warring
factions.  Also, the Joint Chiefs of Staff told U.S.  Army, Europe
not to expect authorization for more than 25,000 troops:  20,000 in
Bosnia and 5,000 in Croatia. 

U.S.  Army, Europe also had a ceiling on the reserve forces it could
use.  For Bosnia, the President authorized the call-up of 4,300
reservists for all the services,\7

3,888 of which the Defense Department allocated to the Army.  The
Army used its allocation to activate key support capabilities such as
civil affairs and psychological operations units that existed
primarily in the reserve forces and could not be contracted.  Once
these units were activated, most of the 3,888-reserve ceiling had
been used, leaving little opportunity to call up other types of
support units.  Many of the Army's combat support and combat service
support units were in the guard and reserve.  An Army planner told us
they could have asked the national command authority to increase the
force ceiling and reserve call-up authority; however, because they
had LOGCAP as an option, it was not necessary to seek these increases
to meet support needs. 

The Army also used some units from the other services.  According to
U.S.  Army, Europe officials, the Army did not have enough
engineering resources available for deployment to build all the
required base camps in the time allotted and received assistance from
Air Force and Navy engineering units.  By managing the flow of forces
into the theater to remain below the 25,000-force ceiling, they were
able to use these units and Army engineer units to construct 15 of
the base camps.  When the initial construction was completed, these
units left the area of operations and the remainder of the Army's
force deployed. 

U.S.  Army, Europe officials also told us that because the former
Yugoslav Republic was not a part of the North Atlantic Treaty
Organization, U.S.  Army, Europe had no preexisting support
agreements in the region.  Therefore, little consideration was given
to obtaining host nation support to meet the requirements in excess
of force ceilings. 

Army officials further stated that quality of life considerations and
the fact that the Army lacked the capability to provide some services
also favored the use of LOGCAP.  For example, the Army's Deputy
Commander for Support in Bosnia cited food and laundry services as
areas where the contractor is able to provide a higher standard of
service than Army units typically provide during deployments.  LOGCAP
also was able to provide services, such as sewage and solid waste
disposal and janitorial services, that the Army routinely contracts
for because the capability is not in the force structure. 


--------------------
\7 Under 10 U.S.C.  12304, the President is authorized to call up to
200,000 selected reservists for up to 270 days without a national
emergency.  On December 8, 1995, the President signed Executive Order
12982 authorizing activation of reserve forces.  The Secretary of
Defense set the ceiling for the callup at 4,300 reservists. 


   CHANGES IN OPERATIONAL
   REQUIREMENTS LARGELY DROVE
   LOGCAP COST INCREASES IN BOSNIA
------------------------------------------------------------ Letter :4

The estimated costs for LOGCAP implementation in Bosnia have
increased substantially.  The Army's latest revised estimate of
$461.5 million exceeds its initial estimate of $350.2 million by
$111.3 million, or 32 percent.\8 Our review shows that the difference
in the Army's estimates was largely driven by changes in operational
requirements once the forces arrived in Bosnia.  Specifically, the
Commander in Chief of U.S.  Army, Europe decided to increase the
number of base camps from 14 large camps to 34 smaller ones and to
accelerate the schedule for upgrading troop housing.  Associated
management and administrative costs and an unanticipated value added
tax imposed on the contractor by the Hungarian government also
contributed significantly to the difference. 


--------------------
\8 We used the Army's initial estimate as the basis for our analysis
because Office of the Secretary of Defense officials did not have
supporting documentation for the $191.6 million included in their
estimate of incremental costs submitted to Congress. 


      ESTIMATED COSTS HAVE
      INCREASED BY 32 PERCENT
---------------------------------------------------------- Letter :4.1

Table 2 presents a comparison by seven broad functional areas of the
estimated costs for LOGCAP in Bosnia as of December 1995 and December
1996.  A direct comparison of the two estimates was not possible
because of significant differences in (1) the scope of work covered
by the estimates and (2) the way costs are reported.  For example, in
the December 1995 estimate, the contractor estimated the cost to
establish and operate an intermediate staging base.  This estimate
included costs for building the camp; providing laundry, food, and
bus service; and operating a construction supply storage yard, a
retail fuel section, and an aviation fuel section.  The estimate also
included costs for mobilizing and demobilizing personnel, material,
and equipment and recurring maintenance costs.  However, later
estimates use 52 separate work categories that do not directly link
to the requirements in the original estimate.  Consequently, we
reviewed available cost data and discussed the differences with
contractor and Army officials to determine the primary reasons for
the increases in estimated costs.  We did not attempt to determine
whether the estimated costs were reasonable. 



                                Table 2
                
                  Analysis of LOGCAP Cost Increases in
                                 Bosnia

                         (Dollars in millions)

                                          December    December
                                              1995        1996  Differ
Function                                  estimate    estimate    ence
--------------------------------------  ----------  ----------  ------
Troop housing and facilities                 $56.5      $150.4   $93.9
Management and administration                 85.4       154.2    68.8
Transportation                                 9.8        48.4    38.6
Maintenance                                    0.2        11.0    10.8
Laundry                                       10.1         6.6   (3.5)
Food service                                  64.1        22.8  (41.3)
Base camp maintenance                        124.1        65.2  (58.9)
New work since 3/30/96\a                         0         2.9     2.9
======================================================================
Total                                       $350.2      $461.5  $111.3
----------------------------------------------------------------------
\a New work represents estimated costs for services that were outside
the original contract estimate but were required by U.S.  Army,
Europe. 

Source:  GAO analysis of U.S.  Army, Europe data. 


      TROOP HOUSING AND FACILITIES
---------------------------------------------------------- Letter :4.2

This function covers costs for preparing lodging, offices, and dining
facilities for troops.  The work consisted of repairing designated
government acquired facilities, as well as new tent or modular unit
construction.  Basic facilities included billeting, shower/latrine,
dining, office, and recreation areas.  Estimated costs for troop
housing and facilities rose from an original estimate of $56.5
million to $150.4 million.  Our analysis of available data,
discussions with Army and contractor officials, and observations of
facilities indicated that costs increased largely because the scope
of work performed by the contractor increased. 

The number of camps and facilities increased from the 14 large base
camps originally planned to 34 smaller camps.  In the original plan,
the contractor was to build six base camps, one in Hungary and five
in Bosnia, and upgrade the eight remaining camps.  However, given the
change in operational requirements, the contractor built 19 of the 34
camps and upgraded all 34 camps. 

Our discussions with the Commander in Chief of U.S.  Army, Europe and
his staff revealed that the commander decided to increase the number
of camps required because of several factors.  Two factors were the
size of the U.S.  area of responsibility (the United States had to
patrol a 1,200-mile zone of separation between the warring factions),
and the condition of the soil and limited infrastructure (a very wet
and mine-filled terrain and devastated power, water, and
communication systems).  Other factors were the (1) need to balance
force presence in each former warring factor's sector, (2) condition
of the roads leading to potential base camp sites (the construction
of new and long roads to potential sites was considered too expensive
and raw materials were not available in sufficient quantities at the
time), and (3) challenge of relocating former U.N.  forces from fixed
facilities and into their new areas of operation. 

A U.S.  Army, Europe planner told us that conditions on the ground
were not well known prior to deployment because U.S.  personnel were
not allowed into Bosnia until shortly before the operation started. 
The harsh weather conditions under which the construction took place
and the increased requirement for equipment to provide services at
the additional camps also increased cost.  (See fig.  1 for U.S. 
base camps in the Balkan peninsula.)

   Figure 1:  Dispersion of U.S. 
   Base Camps in Bosnia, Hungary,
   and Croatia

   (See figure in printed
   edition.)

   Note:  The number of camps
   fluctuated throughout the
   mission.  This map shows the
   number of camps as of June 9,
   1996.

   (See figure in printed
   edition.)

   Source:  Developed by GAO based
   on U.S.  Army, Europe data.

   (See figure in printed
   edition.)

Estimated troop housing costs also increased because some services
were not considered in the original estimate.  For example, the
contractor's initial cost estimate assumed that some of the camp
sites selected by the Army would need only minimal site preparation. 
At one site alone, however, approximately 200 railcars of crushed
rock were needed to prepare the ground before construction could
begin.  Many other sites also required significant engineering
preparation.  (See fig.  2.) Additionally, the initial estimate did
not include all costs for the contractor to upgrade camps built by
military engineer units.  The contractor upgraded 15 of these camps. 

   Figure 2:  Many Camps Required
   Significant Engineering
   Preparation

   (See figure in printed
   edition.)

The decision to accelerate the schedule for improving the camps also
increased estimated costs.  The Army's December 1995 cost estimate
was based on a plan in which both the contractor and the military
engineer units would initially erect tents and construct rudimentary
support facilities.  The camps would then be upgraded by the
contractor in two follow-on efforts.  (See fig.  3.) In the first
effort, the contractor would add wooden floors to the tents; provide
lighting, heating, latrines, showers, electric power, and water; and
build kitchen and dining facilities.  In the second effort, the
contractor would provide for level tent pads and tent frames with
insulated walls and ceilings.  However, a U.S.  Army, Europe official
told us that because of the harsh weather conditions, which included
flooding and mud, the Commander in Chief decided to have the
contractor go straight to the end-state standard for all camps and to
increase the standard to modular housing units at several camps where
conditions were particularly harsh.  Because the contractor was not
given additional time to meet the higher standards, significantly
more equipment and material had to be commercially air transported
into the area of operations.  The contractor also had to hire
additional workers and purchase and transport modular units. 

   Figure 3:  U.S.  Military Base
   Camp in Bosnia Upgraded to
   Modular Units

   (See figure in printed
   edition.)


      MANAGEMENT AND
      ADMINISTRATION
---------------------------------------------------------- Letter :4.3

The management and administration function provides for centralized
project management, contract administration, project controls and
reporting, procurement and subcontracting, financial management,
personnel and payroll activities, property management, and life
support for contractor personnel engaged in mission support.  It also
includes the contractor's overhead costs, general and administrative
costs, and award fees.  Costs for this function increased from $85.4
million to $154.2 million.  This cost function increases as estimated
contract costs increase.  For example, a $100-million increase in the
estimated cost of services adds about $14.7 million to cover
overhead, general and administration costs, and potential award fees. 
According to a U.S.  Army, Europe official, the increase in the
amount of services required and greater involvement by the
contractor's home office in procuring and shipping material and
equipment, also contributed to the increase. 

This function also covers taxes, duties, and fees paid by the
contractor.  The contractor prepared the original estimate with the
expectation that it would be included in any Status of Forces
Agreements covering the mission.  It was not included in the
agreement with Hungary, however, and the U.S.  government paid
approximately $18 million in value added tax to the Hungarian
government that is included in this function. 


      TRANSPORTATION
---------------------------------------------------------- Letter :4.4

Transportation covers costs for providing (1) transportation services
throughout the area of operations and (2) providing railhead and
container handling services in Hungary, Croatia, and Bosnia.  It also
includes airfreight charges for equipment and material brought in
from Europe and the United States.  Estimated costs for this function
increased from $9.8 million to $48.4 million.  Our analysis and
discussions with Army officials indicated that these estimated costs
increased because the Army expanded the amount of contract service it
wanted and airfreight charges were much higher than anticipated.  In
the original estimate, the contractor's cost to provide container
handling services was included, but the estimate did not include
costs for other transportation services.  From January through March
1996, however, contractor trucks logged over 55,000 miles and moved
over 9,800 tons of material and equipment.  Estimated airfreight
costs increased from $5 million to $25.1 million because winter
conditions made it difficult to transport supplies and equipment by
road, and accelerating the camp construction schedule required the
contractor to fly in more supplies and equipment. 


      MAINTENANCE
---------------------------------------------------------- Letter :4.5

Maintenance covers the cost of providing mechanical service and
maintenance for dedicated government equipment such as generators,
refrigerators, and all contractor procured vehicles in the area of
operation.  According to the Army's schedule, these estimated costs
increased from $200 thousand to $11 million.  Part of the increase is
due to differences in how equipment maintenance costs were reported
in the two estimates.  In the original estimate, maintenance costs
were included as part of the estimate for an associated piece of
equipment or vehicle.  For example, the estimate for a generator
reflected both the acquisition and maintenance costs.  In the later
estimate, the estimated cost for maintenance of equipment and
vehicles was reported separately. 


      LAUNDRY
---------------------------------------------------------- Letter :4.6

Laundry covers the cost associated with providing personal and
medical laundry service and clothing repair to soldiers and Defense
Department civilians on a daily basis.  Estimated costs for this
function decreased from $10.1 million to $6.6 million.  Contractor
officials told us the original estimate was based on a "worst case
scenario" that did not develop. 


      FOOD SERVICE
---------------------------------------------------------- Letter :4.7

Food service covers costs for providing meals to the troops and
Defense Department civilians.  According to the original cost
estimate, the contractor was to supply, prepare, serve, and
distribute food.  Estimated costs for this function decreased from an
estimated $64.1 million to $22.8 million.  U.S.  Army, Europe
officials told us they believed that the contractor's estimate for
food supply and distribution services was too high and they
contracted elsewhere for these services at a lower price. 
Additionally, the contractor operated fewer dining facilities because
more Army cooks were used than originally planned, further reducing
estimated contract costs for this service. 


      BASE CAMP MAINTENANCE
---------------------------------------------------------- Letter :4.8

Base camp maintenance covers costs for maintaining troop housing and
facilities, latrine/shower units, kitchen and dining facilities, and
utility systems at the 34 camps.  It also includes road repair and
maintenance, water production, storage and distribution, fire
protection, and hazardous waste management.  The original estimate
included $30 million for minefield clearing, as well as costs for the
other services.  Estimated costs for this function decreased from
$124.1 million to $65.2 million.  Our analysis and discussions with
Army and contractor officials indicated that costs for this function
decreased largely because the Army did not use the contractor for
minefield clearing, saving $30 million.  Also, part of the decrease
was due to differences in how equipment maintenance costs were
reported in the two estimates.  A U.S.  Army, Europe official
attributes the remaining decrease in estimated costs to their efforts
to reduce contractor services and to a lower requirement for some
services, such as snow removal. 


   OPPORTUNITIES TO IMPROVE THE
   PROGRAM'S EFFECTIVENESS
------------------------------------------------------------ Letter :5

Our review of the Bosnian operation shows that there are
opportunities to improve the program's effectiveness.  Areas that
need improvement include doctrine and guidance, cost reporting, and
contract monitoring. 


      LOGCAP DOCTRINE AND GUIDANCE
---------------------------------------------------------- Letter :5.1

At the start of the Bosnia mission, little written doctrine and
guidance\9 was available for planners on how to effectively use
LOGCAP.  The Army's Office of the Deputy Chief of Staff for Logistics
had prepared a desk guide to provide background and direction in the
use of LOGCAP, but the guide lacked detail, and several key U.S. 
Army, Europe planners were unaware of its existence.  As a result,
U.S.  Army, Europe officials had to develop ad hoc procedures and
systems to ensure they were effectively managing LOGCAP. 

The desk guide discusses the decision-making process for LOGCAP and
states the need to make the contractor part of the logistics support
team and include it in staff meetings and other activities related to
a mission.  However, the guide provides little information on the
type of management structure to establish, financial control and
oversight requirements, and mission planning considerations.  For
example, even though a combat support or combat service support
function may be replaced by LOGCAP, the Army still has a need for
staff supervision of the function. 

According to Army officials, doctrine and guidance on the use of
LOGCAP are critical because using a contractor to support a deploying
force represents a significant change from the experiences of most
Army personnel.  Typically, Army practice has been to make the force
self-sustaining for the first 30 days in a contingency theater.  In
this environment, troops live under field conditions.  Housing might
consist of multiperson tents, toilets are primitive and shared,
shower facilities are often nonexistent, and food is often a
prepackaged ration.  One official likened the employment of LOGCAP
without doctrine and guidance to giving the Army a new weapon system
without instructions on how to use it. 

Directly related to the doctrine and guidance problem was the lack of
LOGCAP training and experience among U.S.  Army, Europe commanders
and staff.  Some of the key logistics planners for the Bosnian
operation had little knowledge or experience with LOGCAP prior to the
operation.  Despite significant efforts to effectively manage LOGCAP,
U.S.  Army, Europe officials' inexperience and lack of understanding
of the contract, the contractor's capabilities, and program
management created problems during the deployment and resulted in
unnecessary costs.  Examples of management problems during the
mission follow: 

  -- The contractor and the contract administrators were sometimes
     not included as part of U.S.  Army, Europe's planning and
     management team, even though they were responsible for critical
     parts of the mission.  In the early days of the mission, U.S. 
     Army, Europe officials believed the contractor was not
     responsive to their needs.  Contractor officials and contract
     administrators said that once the mission began, significant
     operational changes were made and they had little input despite
     being responsible for executing the changes. 

  -- U.S.  Army, Europe did not initially have a LOGCAP focal point
     to review tasks, assess options for performing these tasks,
     establish priorities, and resolve contractor problems.  The lack
     of a focal point sometimes resulted in conflicting directions
     and a feeling on the part of some U.S.  Army, Europe officials
     that the contractor was not being responsive. 

  -- Commanders were sometimes unaware of the cost ramifications of
     their decisions.  For example, the decision to accelerate the
     camp construction schedule required the contractor to fly
     plywood from the United States into the area of operations
     because sufficient stores were not available in Europe, which
     increased costs.  For example, the contractor reported that the
     cost of a 3/4-inch sheet of plywood, 4' x 8', purchased in the
     United States was $14.06.  Flying that sheet of plywood to the
     area of operations from the United States increased the cost to
     $85.98 per sheet, and shipping by boat increases the cost to
     $27.31 per sheet.  According to a U.S.  Army, Europe official,
     his commander "was shocked" to find the contractor was flying
     plywood from the United States. 

  -- The contractor was not included in the Status of Forces
     Agreement with the Hungarian government.  The result was the
     contractor paid about $18 million in value added tax to the
     Hungarian government, which was subsequently billed to the U.S. 
     government as a contract cost.  The Army is working to recoup
     these taxes from the Hungarian government. 

Given the absence of detailed program guidance, U.S.  Army, Europe
worked to resolve these problems and developed many ideas and ad hoc
systems that the Army plans to incorporate into program doctrine and
guidance that AMC is developing.  For example, U.S.  Army, Europe
established Joint Acquisition Boards to prioritize work and determine
the best available resources for accomplishing the work.  It also
developed the concept of appointing base camp "mayors" to serve as
focal points for the contractor and improved the cost data provided
by the contractor.  Our discussions with members of the acquisition
review boards and camp mayors revealed that, once established, these
systems were effective in setting criteria and priorities for using
LOGCAP services.  However, as discussed later in this report, the
boards only reviewed about 5 percent of estimated LOGCAP costs for
Bosnia. 


--------------------
\9 Doctrine is the Army's statement of how it intends to conduct war
and military operations other than war.  It establishes a shared
approach to operations and serves as a vehicle for organizational and
physical change.  It is also the basis for the curriculum in the Army
school system.  Guidance, including tactics, techniques, and
procedures, flows from the doctrine. 


      LOGCAP COST REPORTING
---------------------------------------------------------- Letter :5.2

The LOGCAP financial reporting systems were not sufficient to provide
U.S.  Army, Europe commanders with adequate information on how much
money had been spent for LOGCAP and for what purpose.  They were
generally aware that changing operational requirements had increased
LOGCAP costs beyond the contractor's original estimate, but they were
surprised by the amount of the increase.  As a result of inadequacies
in the government-required and approved LOGCAP financial reporting
systems, U.S.  Army, Europe officials developed ad hoc systems to
provide stewardship over the funds. 

The contractor's estimate for each assigned task is intended to
provide the basis for monitoring and reporting LOGCAP costs.  Weekly
cost reports submitted by the contractor identify what has been spent
against the estimate for each assigned task and provide a means of
tracking costs and assessing variances.  However, given the change in
operational requirements, U.S.  Army, Europe did not receive a cost
estimate for its revised operational requirements until May 1996, and
the Corps of Engineers and the contractor did not agree on estimated
costs until August 1996.  Weekly cost status reports using the
government-required and approved system were submitted by the
contractor from the onset of the operation.  However, a U.S.  Army,
Europe resource manager stated that these reports were not
particularly useful because (1) the data were generally not current,
(2) there was no baseline estimate with which to compare the data,
and (3) the reports did not explain variances from prior reports. 

As a result, through the early days of the mission, when the bulk of
contract support money was spent, U.S.  Army, Europe commanders could
not determine the cost-effectiveness of alternative support
approaches, nor could they determine if changes in the level of
service being provided were warranted.  They also had difficulty
responding to Defense Department and congressional inquires about
cost.  A similar problem was experienced in Somalia, where a senior
official expressed his concern about the command's inability to
verify expenditures and tie those expenditures to specific tasks. 

U.S.  Army, Europe officials were concerned about the rising
estimates for LOGCAP and in late March 1996, they took several steps
to reduce estimated cost and limit future growth.  One action was to
dispatch a team to Hungary, Croatia, and Bosnia to review all LOGCAP
work orders to determine if (1) the requirement was still valid and
(2) contracting was the most economical means of meeting the
requirement or if the work could be done more economically by
alternate means such as military manpower, alternate contractors, or
adjusting the level of service.  To limit growth in the cost
estimate, the U.S.  Army, Europe Chief of Staff restricted approval
authority for new work estimated to cost over $5,000. 

According to a U.S.  Army, Europe resource manager, efforts to
improve financial reporting began in December 1995, and by the end of
March the data were sufficient to meet the command's reporting and
analysis needs.  The improved financial data reporting format
developed by U.S.  Army, Europe, with assistance from the contractor,
has been shared with AMC personnel who indicate they will improve the
financial reporting requirements. 


      CONTRACT MONITORING
---------------------------------------------------------- Letter :5.3

Reviews by several agencies criticized the Army's administration and
monitoring of LOGCAP contract activities in Bosnia, noting, among
other things, that the Army did not negotiate the estimated costs in
a timely manner and implement a systematic method to ensure that
performed work was in accordance with contract provisions.  As a
result, they were unable to ensure that the contractor adequately
controlled costs and furnished the appropriate level of support. 
Similar criticisms were raised regarding LOGCAP implementation in
Somalia and Haiti. 

The Army Corps of Engineers was responsible for LOGCAP contract
administration in Bosnia.  One responsibility was to develop the
policies and procedures to guide the execution of LOGCAP contract
activities, including property administration, contractor compliance
with contractual quality assurance and safety requirements, and
reviews and analyses of contractor cost proposals.  Specifically, the
Corps turned LOGCAP work on and off, performed quality control
studies on the contractor's services, and provided liaison support to
Army field commanders.  During the construction phase in Bosnia,
these tasks were performed by a team from the Corps' Transatlantic
Program Center in Winchester, Virginia.  During the sustainment
phase, which was from about March 1996 to November 1996, the Corps
delegated contract administration to the Defense Contract Management
District, International, who deployed a team of 30 personnel, along
with a 2-person team from the Defense Contract Audit Agency, to
monitor contractor performance. 

According to the Army Audit Agency,\10 timely actions were not
initiated to negotiate the estimated project costs with the
contractor and modify the logistical support contract.  As a result,
contract provisions that give the contractor major incentives to
contain project costs were not effective.  Moreover, delays in
negotiating estimated costs greatly hindered the Army's ability to
evaluate the amount of award fee that the contractor had earned based
on quality of performance.  The Army Audit Agency explained that the
Federal Acquisition Regulation prohibits contract provisions whereby
a contractor's profits are based on the percentage of costs incurred
(or costs plus a percentage of costs).  For this reason, the
regulation requires the contracting officer to negotiate the
estimated costs of services being furnished by the contractor.  The
audit agency also noted that negotiating contract costs in a timely
manner is important because (1) once the estimated costs are
negotiated with the contractor, the award fee pool is limited to
costs that do not exceed those that were negotiated and (2) until the
estimate is formalized, the contractor has no real incentive to
control costs because increased project costs potentially mean a
higher award fee. 

According to the contractor, under the terms of the contract cost
control constitutes 35 percent of the award fee and that factor alone
is a clear incentive.  The contractor also noted that the lack of a
definitized estimate precludes the submission of invoices for base or
award fee to the government.  In the case of Bosnia, Brown and Root
Services Corporation reported that it received no fee during the
first 10 months of operation. 

The revised statement of work for the Bosnian mission was not
approved until March 7, 1996, and the contractor provided a revised
estimate on May 24, 1996.  By that point, the estimated cost to
complete work requested by U.S.  Army, Europe stood at $477.4
million.  Of this amount, about $325.7 million, or 68 percent, had
already been spent.  The Corps of Engineers and the contractor
reached agreement on an estimated cost for Bosnia on August 12, 1996. 

The Army Audit Agency also found that the Corps and the Defense
Contract Management District, International did not implement a
systematic method of inspections to monitor contract performance.  As
a result, they could not ensure that the contractor performed work in
accordance with contract provisions, used the minimum number of
resources to meet the Army's requirements, and furnished the
appropriate level of support.  The Army Contracting Support Agency
similarly concluded that not enough people were deployed in the early
stages of the operation to monitor contractor performance for the
same reasons.  Contract oversight was similarly criticized in Somalia
and Haiti.  For example, a December 1994 Army Audit Agency report on
LOGCAP operations in Haiti criticized quality control. 


--------------------
\10 Logistics Civil Augmentation Program Contract, Operation Joint
Endeavor; Audit Report AA 96-767, Sept.  19, 1996. 


      ARMY ACTIONS TO ADDRESS
      MANAGEMENT PROBLEMS
---------------------------------------------------------- Letter :5.4

On October 1, 1996, the Army transferred LOGCAP management
responsibilities from the Corps to AMC.  AMC officials have worked
with U.S.  Army, Europe to identify problems experienced in Bosnia
and they intend to make several program changes to improve planning
and management and reduce costs.  Specifically, they are taking or
plan actions, including changing the planning scenarios, developing
doctrine and guidance on LOGCAP and senior level training and
education, and providing assistance to operating commands when LOGCAP
is implemented. 

AMC awarded a new LOGCAP contract on January 30, 1997.  The contract
is for 1 year with the option of extending it for 4 more years,
making the program available until 2002.  One major change is that
the contract pricing arrangement for the planning portion of the
contract has been changed from cost-plus-award-fee to a firm-fixed
price.  According to the AMC program officer, this change was made
because planning costs are easier to estimate than execution costs. 

AMC officials also said that, to improve planning, the new contractor
will be required to prepare worldwide and regional plans under two
specific hypothetical scenarios:  (1) an underdeveloped country with
little or no infrastructure and a weak or nonexistent government and
(2) a developed country with infrastructure and a viable and
diplomatically recognized government.  AMC expects that tailoring
these plans will enhance execution and improve cost controls during
an actual event by better defining LOGCAP requirements. 

AMC has also undertaken several initiatives to address other LOGCAP
problems experienced in Bosnia.  To improve LOGCAP doctrine and
training, AMC directed the U.S.  Army Combined Arms Support Command
to review and revise Army regulations and field manuals so they
properly reflect the program's goals.  The command is revising about
20 Army regulations and field manuals, and it expects to complete
this task early in fiscal year 1998.  One revised field manual, which
was released in September 1996, contains an entire appendix that
discusses only LOGCAP.  In addition, AMC has asked the Combined Arms
Support Command, the Army Command and General Staff College, the
Sergeants Major Academy, and the Warrant Officer Career Center to
create LOGCAP training courses.  The Army hopes to begin providing
this training to its senior level staff by the end of fiscal year
1997. 

To address the LOGCAP implementation problems experienced in Bosnia,
AMC established logistics support teams to act as the single focal
point with operational commands for LOGCAP planning and execution. 
The teams are to be located in the United States, Korea, and Germany
and are to provide command staff advice on LOGCAP and its
capabilities and help develop LOGCAP augmentation requirements when
an operation is being planned.  AMC expects that improving the
planning process in this way will enhance cost controls by
establishing more precise needs determinations, which will result in
better planning and cost estimating to support these needs.  In
addition, AMC plans to establish and deploy a fully trained group of
experts during the initial phases of an operation to provide
technical and contractual support to commanders.  The size and makeup
of this team are flexible, however, and can include LOGCAP technical
advisors; personnel, real estate, and communication/automation
specialists; contracting and legal officers; pay agents; and planning
and operations personnel. 


   MULTIPLE SUPPORT PROGRAMS MAY
   BE INEFFICIENT
------------------------------------------------------------ Letter :6

The Navy and the Air Force recently created programs to preplan for
contractor support, similar in many respects to the Army's program. 
According to Navy and Air Force officials, LOGCAP can meet each
service's requirements, but they see contractor responsiveness and
control as benefits of separate programs.  However, the programs may
result in unnecessary duplication and costs. 


      TYPES OF SERVICES ARE
      SIMILAR
---------------------------------------------------------- Letter :6.1

Although the size and primary purpose of the three programs differ
somewhat, the contracts will require similar engineering, logistics,
and planning services.  For example, under all three programs, the
contractors will be required to provide construction services and
supplies and, in the Army and the Air Force programs, contractors are
asked to identify potential civilian resources that can be relied on
in contingencies.  Before creating these programs, the Navy and the
Air Force relied on LOGCAP for support during operations other than
war such as in Somalia and Aviano, Italy. 


      NAVY PROGRAM
---------------------------------------------------------- Letter :6.2

The Navy's program is known as the Navy Emergency Construction
Capabilities Program and is designed to support contingencies such as
regional conflicts, humanitarian aid, and natural disasters.  The
Navy program consists of two geographic contracts--one covering the
Atlantic and one covering the Pacific--that are identical in scope. 
Atlantic and Pacific contracts are managed by the Naval Facilities
Engineering Commands in Norfolk, Virginia, and Pearl Harbor, Hawaii,
respectively.  The contracts were awarded in August 1995, for 1 year
with 4 option years and provides for an annual fee of $100,000.  The
Atlantic contract has been used several times for services such as
providing natural disaster assistance at Camp Lejeune, North
Carolina, following a hurricane and preparing engineering studies to
rebuild Haiti's infrastructure.  We were told that the total cost of
initiatives taken under the Atlantic contract as of November 1996 was
about $32 million.  The Pacific contract has not been used. 


      AIR FORCE PROGRAM
---------------------------------------------------------- Letter :6.3

The Air Force's program is known as the Air Force Contract
Augmentation Program.  The Air Force solicitation process began on
September 13, 1996, and contract award is expected during February
1997.  The contract will also be awarded for 1 year with 4 option
years.  The basic contract calls for a worldwide management plan, a
program management team, and contractor participation in two
validation exercises a year.  According to program officials, their
program differs from LOGCAP because Air Force engineering and support
assets will be used to construct and maintain facilities during the
initial stages of any contingency.  The contractor will then be
deployed to sustain this existing infrastructure.  The contractor is,
however, expected to have the capability to deploy and set up an
infrastructure if requested.  For planning services and exercise
participation, the contractor could earn, under contract provisions,
fees totaling $4,439,168 over the full 5 years of the contract. 


      OTHER PROGRAMS ARE MANAGED
      BY A LEAD SERVICE
---------------------------------------------------------- Letter :6.4

To avoid duplication of effort and improve economy and efficiency of
programs that are used by all three services, the Defense Department
has, on occasion, designated one service as the lead manager.  For
example, the Army manages the wholesale stockpile of conventional
ammunition for all the services.  The Army is also the lead service
for the Defense Department's program to dispose of the chemical
weapon stockpile. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

As mentioned, we discussed many of our observations on the changes
that are needed to improve the efficiency and effectiveness of LOGCAP
with AMC officials, and they have initiated or plan actions critical
to improving the effective delivery of services using LOGCAP.  As
part of this effort to improve LOGCAP, we recommend that the
Secretary of Defense direct the Secretary of the Army to include
specific changes to LOGCAP that incorporate lessons learned from the
Bosnian operation and other missions, including

  -- developing doctrine and guidance for implementing LOGCAP that
     identify the way to use the contractor effectively, the type of
     management structure to establish, financial control and
     oversight requirements, and mission planning considerations;

  -- providing training to commanders on using LOGCAP, including
     information on contractor capabilities and roles and
     responsibilities in planning and execution;

  -- providing assistance to commands when LOGCAP is implemented to
     include deployable management teams; and

  -- developing improved financial reporting and internal controls
     mechanisms that provide commanders with the assurance that
     LOGCAP services are necessary and reasonably priced. 

We also recommend that the Secretary of Defense determine whether the
Department's needs for civilian augmentation support during
operations are met most effectively and efficiently through
individual programs or some other means such as one service acting as
a single manager for the others. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

We received written comments on a draft of this report from the
Defense Department and they appear in their entirety in appendix III. 
The Defense Department concurred with the report and both
recommendations, noting that it will continue initiatives to further
improve the effectiveness and efficiency of LOGCAP.  The Department
also stated that they considered the actions in the recommendation to
include specific changes to LOGCAP that incorporate lessons learned
to be complete.  While we recognize that various actions are planned
or have been taken, all are not complete.  For example, the revision
of Army regulations and field manuals is not planned to be completed
until early in fiscal year 1998.  Consequently, we will continue to
follow up on the Department's actions in each of the areas. 

We also received comments from Brown and Root Services Corporation. 
Brown and Root provided clarifying technical and editorial
suggestions that have been incorporated into this report where
appropriate.  Brown and Root objected to the use of the term estimate
on the basis that the dollar figure it provided to the Army in
December 1995 was a rough order of magnitude.  We revised the report
to reflect Brown and Root's position and clarify why we used the
term. 


---------------------------------------------------------- Letter :8.1

We are providing copies of this report to the Secretaries of Defense,
the Army, the Navy, and the Air Force and the Commandant, U.S. 
Marine Corps.  Copies will be made available to others on request. 
If you or your staff have any questions on this report, please call
me on (202) 512-8412.  The major contributors to this report are
listed in appendix IV. 

David R.  Warren, Director
Defense Management Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

As agreed with your staffs, the scope of our work was limited to
issues related to how well the Logistics Civil Augmentation Program
(LOGCAP) worked once the decision was made to use the contract.  It
was also agreed that other issues such as the program's force
structure implications and the cost-effectiveness of using
contractors versus military personnel may be the subject of future
reviews.  To obtain information on how the Army has used LOGCAP in
recent peacekeeping operations, we reviewed the Army's LOGCAP
regulation and implementing guidance.  We discussed how this
regulation and guidance were applied with officials from the Army's
Office of the Deputy Chief of Staff for Logistics, Office of the
Deputy Chief of Staff for Operations and Plans, Corps of Engineers,
Corps of Engineers' Transatlantic Program Center, and Office of the
Chief of Army Reserves.  Because Bosnia was by far the largest use of
LOGCAP and provided a first-hand opportunity to observe the
contract's implementation, our review focused primarily on that
operation.  However, we did generally review information related to
the other operations where it was used.  We also visited the U.S. 
Army, Europe, the U.S.  European Command, and the U.S.  forces
deployed in Hungary, Croatia, and Bosnia to observe operations, talk
with Army and contractor officials, and review records related to the
implementation of the contract. 

To determine the LOGCAP cost for Bosnia and the primary reasons for
its growth, we obtained the Army's initial cost estimate, prepared by
the contractor, from the LOGCAP program manager at the Corps of
Engineers' Transatlantic Program Center.  We discussed the
assumptions that were used in developing the estimate with officials
from the Corps of Engineers and the Brown and Root Services
Corporation.  We also analyzed the revised cost estimate submitted by
the contractor in May 1996 and attempted to compare that cost
estimate with the original.  A direct comparison of the two estimates
was not possible because of significant differences in (1) the scope
of work covered by the estimates and (2) the way costs were reported. 
We discussed the results of this comparison with military leaders
responsible for the operation in Hungary, Croatia, and Bosnia and
with representatives from the Brown and Root Services Corporation and
obtained their views on the factors that contributed to the cost
increase.  We did not attempt to determine whether the estimated
costs were reasonable.  Our information on the Defense Department's
estimate of $191.6 million was obtained from our prior work on the
cost of the Bosnian peacekeeping mission.\1

To identify opportunities to improve LOGCAP, we interviewed officials
from U.S.  Army, Europe responsible for logistics planning for the
Bosnian peacekeeping mission and visited U.S.  Army, Europe base
camps in Hungary, Croatia, and Bosnia.  We interviewed resource
managers, base camp mayors, members of the Joint Acquisition Boards,
administrative contracting officers, quality assurance
representatives, and contracting officer representatives from the
Defense Contract Management District, International, who oversaw the
contract.  We also reviewed minutes of meetings at which LOGCAP was
discussed and analyzed copies of weekly cost status reports submitted
to U.S.  Army, Europe.  We discussed the adequacy of cost data with
resource managers at U.S.  Army, Europe and the way they used the
contractor's cost reports to monitor costs.  We did not independently
test internal controls but relied on the work of other independent
audit agencies, including the Defense Contract Audit Agency and the
Army Audit Agency.  We interviewed auditors from the Defense Contract
Agency in Hungary and Croatia and at the contractor's home office in
Houston, Texas, and discussed the scope of their work and the tests
they conducted of contract controls.  We interviewed Army Audit
Agency auditors who tested the Army's contract controls at their home
office in Wiesbaden, Germany, and reviewed all of their supporting
documents.  We also spoke with Army Audit Agency managers responsible
for the review at their headquarters in Alexandria, Virginia.  We
also analyzed lessons learned from the use of LOGCAP in prior
missions from the Defense Contract Management District,
International, and the Army's Center for Army Lessons Learned. 

To identify Army plans to award a new LOGCAP contract, we held
discussions with the new LOGCAP office at the Army Materiel Command. 
We obtained information on the time frame for awarding the contract
and discussed changes needed to overcome problems experienced in
Bosnia. 

Our information on the Air Force Contract Augmentation Program was
obtained from Air Force officials in Washington, D.C., and its
program office at Tyndall Air Force Base, Panama City, Florida. 
Information on the Navy Emergency Construction Capabilities Program
was obtained from Navy contracting officials in Alexandria and
Norfolk, Virginia, and Honolulu, Hawaii. 

We conducted our review from April 1996 to December 1996 in
accordance with generally accepted government auditing standards. 


--------------------
\1 Bosnia:  Costs Are Uncertain but Seem Likely to Exceed DOD's
Estimate (GAO/NSIAD-96-120BR, Mar.  14, 1996). 


OPERATIONAL ENVIRONMENT IN BOSNIA
PRESENTED UNIQUE CHALLENGES
========================================================== Appendix II

Several factors created unique challenges for the Army as it
implemented LOGCAP during the Bosnia mission.  These factors related
to the uncertainty of the U.S.  role, the need for rapid deployment
once the role was defined, and the harsh weather environment.  The
role that U.S.  forces would play in Bosnia was uncertain until the
Dayton Accords were signed on December 14, 1995.  The Accords called
for an implementation force to provide a secure environment for
approximately 1 year to allow "breathing space" or a "cooling off
period" after several years of conflict.  The United States is a
major force provider to the implementation force and occupies North
American Treaty Organization military leadership positions that are
responsible for the operation.  The U.S.  Army, Europe provided most
of the force and is the major command responsible for the mission's
logistics planning and funding.  As of July 19, 1996, about 22,200
U.S.  troops were deployed in support of the implementation
force--about 16,200 to Bosnia, 1,400 to Croatia, and about 4,600 to
Hungary and Italy. 

The Accords required that U.S.  forces deploy rapidly, and the
implementation forces had until January 19, 1996, to be in place and
begin enforcement.  U.S.  troops entered Hungary on December 12,
1995, to establish a staging base for the deployment and on December
16, 1995, they entered Croatia and Bosnia.  The key military tasks in
Bosnia have been to (1) mark and monitor a 4-kilometer wide zone of
separation between the three warring factions, (2) patrol the zone of
separation, and (3) oversee the withdrawal of forces and weapons away
from the zone and back to their cantonment areas. 

Deployment of the U.S.  force occurred during one of the harshest
winters on record in the Balkans.  Weather conditions, for example,
affected construction of a bridge over the Sava River to conduct the
deployment operation.  An unexpected winter thaw resulted in major
flooding, and this bridge project became much larger than originally
envisioned.  The Army had to use construction material intended to
build two spans over the Sava River to build the first span.  Also,
because of the holiday time of the year, the European rail system was
heavily involved in holiday passenger and commercial traffic and rail
employees were taking holiday vacations.  European rail did not
respond to the deployment, which it did not view as a wartime
operation, with the sense of urgency it would have for a wartime
operation.  A rail strike in France further complicated ground
transportation because many large railcars needed for the deployment
could not be moved from France to Germany. 

Each of these factors affected the manner and extent to which LOGCAP
was used.  For example, originally the contractor was to build,
operate, and maintain a support base in Hungary, while military
engineer units were to build the necessary base camps in Bosnia. 
Later, the contractor was to upgrade the military-built camps. 
Because of the operational requirements and the harsh winter weather,
however, a decision was made to increase the number of camps and to
immediately upgrade the camps.  Military engineer units could not
meet the full construction requirement, and the contractor was
brought in to assist with camp construction.  The contractor also
provided building materials to the military engineer units because it
was able to procure and deploy supplies faster than the military
could. 




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix II



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Thomas J.  Howard
Glenn D.  Furbish
David F.  Combs
Robert R.  Poetta


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