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Report to the Chairman, Subcommittee on National Security, Emerging 
Threats, and International Relations, Committee on Government Reform, 
House of Representatives: 

September 2004: 

EMBASSY CONSTRUCTION: 

Achieving Concurrent Construction Would Help Reduce Costs and Meet 
Security Goals: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-952]

GAO Highlights: 

Highlights of GAO-04-952, a report to the Chairman, Subcommittee on 
National Security, Emerging Threats, and International Relations, 
Committee on Government Reform, House of Representatives

Why GAO Did This Study: 

After the 1998 bombings of two U.S. embassies in Africa, the State
Department embarked on a multibillion-dollar, multiyear program to 
build new, secure facilities on compounds at posts around the world. 
The Secure Embassy Construction and Counterterrorism Act of 1999 
generally requires that all U.S. agencies, including the U.S. Agency 
for International Development (USAID), colocate offices within the 
newly constructed compounds. This report discusses how State is 
incorporating office space for USAID into the construction of new 
embassy compounds and the cost and security implications of its 
approach.

What GAO Found: 

State has built new embassy compounds in separate stages––scheduling 
construction of the USAID annex after work has begun (or in many cases 
after work has been completed) on the rest of the compound. State and 
USAID attributed this practice to a lack of full simultaneous funding 
for construction at nine locations through fiscal year 2004. 

Concurrent construction of USAID annexes could help decrease overall 
costs to the government and help achieve security goals. Concurrent 
construction would eliminate the second expensive mobilization of 
contractor staff and equipment and added supervision, security, and 
procurement support expenses that result from nonconcurrent 
construction. State has estimated that if nine future USAID annexes 
scheduled for nonconcurrent construction are built concurrently, it 
could save taxpayers $35 million. Extrapolating from data provided by 
State, GAO estimated a total cost savings of around $68 million to $78 
million if all 18 future USAID projects are built concurrently. GAO 
also found that designing additional space for USAID within the main 
office building, or chancery, may cost less than erecting a separate 
annex, depending on a number of factors, including the size and 
configuration of the planned buildings. In addition to cost 
considerations, concurrent construction could help State and USAID 
comply with the colocation requirement and decrease the security risks 
associated with staff remaining outside of the embassy compound. For 
example, USAID staff who remain in a temporary USAID facility after 
other U.S. government personnel move into a new embassy compound may 
be more vulnerable to terrorist attack because the temporary facility 
does not meet security standards for new buildings and may be perceived 
to be a “softer” target relative to the new, more secure embassy 
compound. State’s current plans call for continued nonconcurrent 
construction through fiscal year 2009. 

State acknowledged that there are substantial advantages to concurrent 
construction and has indicated that it may revise its building 
schedule to allow for more concurrent construction if a new cost-
sharing proposal to fund new embassies by allocating construction costs 
among all agencies having an overseas presence is implemented in fiscal 
year 2005. However, even if cost sharing is not implemented, there are 
still opportunities for building some USAID facilities concurrently 
with the overall construction of the embassy compound if State, with 
congressional consent, revised its plan and rescheduled some projects.

What GAO Recommends: 

GAO recommends that State (1) achieve concurrent construction of USAID 
facilities to the maximum extent possible; and (2) consider, in 
coordination with USAID, incorporating USAID space into single office 
buildings in future compounds, where appropriate. GAO also suggests 
that if the new Capital Security Cost-Sharing proposal is not 
implemented in fiscal year 2005, Congress may wish to consider 
alternative funding approaches to support concurrent construction. 
State and USAID agreed with our findings and supported our 
recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-04-952. To view the full product, 
including the scope and methodology, click on the link above. For more 
information, contact Jess T. Ford at (202) 512-4128, or fordj@gao.gov. 

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

State Has Built Compounds in Stages: 

Concurrent Construction Could Decrease Costs, Improve Security: 

Opportunities Exist for More Concurrent Construction: 

Conclusion: 

Matter for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of State: 

GAO Comments: 

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

GAO Comment: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Staff Acknowledgments: 

Tables Tables: 

Table 1: Contract Award Dates for New Embassy Compound Projects That 
Are Completed, Under Way, or Under Contract, and Dates of Award for 
USAID Contract: 

Table 2: New Embassy Compound Construction Projects, Fiscal Years 1999 
through 2009: 

Figures: 

Figure 1: Diagram of U.S. Embassy Adjacent to USAID Construction: 

Figure 2: Estimated Concurrent and Nonconcurrent Construction Costs for 
18 USAID Annexes: 

Figure 3: Hardened Access Facility at New Embassy Compound Compared 
with USAID-Guarded Entrance in Same City: 

Abbreviations: 

OBO: Bureau of Overseas Buildings Operations: 

USAID: U.S. Agency for International Development: 

Letter September 28, 2004: 

The Honorable Christopher Shays: 
Chairman, Subcommittee on National Security, Emerging Threats, and 
International Relations: 
Committee on Government Reform: 
House of Representatives: 

Dear Mr. Chairman: 

After the 1998 bombings of two U.S. embassies in Africa, the State 
Department embarked on a multibillion-dollar, multiyear program to 
build new, secure facilities on compounds at posts around the world. 
The Secure Embassy Construction and Counterterrorism Act of 
1999[Footnote 1] requires that all U.S. agencies, including the U.S. 
Agency for International Development (USAID), colocate offices within 
the newly constructed compounds. USAID had historically provided its 
own office space for larger missions, and according to the State 
Department's Bureau of Overseas Buildings Operations (OBO) and USAID, 
the agencies had unofficially agreed to largely continue this practice. 
Under this agreement, according to State and USAID officials, OBO would 
provide office space within State-funded facilities for USAID missions 
with fewer than 50 staff, but USAID would fund its own annex buildings 
within embassy compounds for larger missions.

At your request, this report examines (1) how State is incorporating 
office space for USAID into the construction of new embassy compounds, 
and (2) the cost and security implications of State's efforts to build 
USAID office space into compounds.

To accomplish these objectives, we reviewed planning and construction 
documents at OBO; interviewed State Department and USAID officials 
regarding construction program plans, implementation, and funding; and 
analyzed OBO estimates of the cost differentials between concurrent and 
nonconcurrent construction of USAID annexes. We also interviewed 
officials from four firms hired to build new embassy projects. Further, 
we visited two field locations--in Nairobi, Kenya, and Kampala, Uganda-
-where we discussed the implications of construction sequencing for the 
embassies and USAID. We conducted our review from December 2003 to July 
2004 in accordance with generally accepted government auditing 
standards. Appendix I provides more information on our scope and 
methodology.

Results in Brief: 

State has built new embassy compound facilities in separate stages--
first constructing the compound and then scheduling construction of a 
USAID annex building at a later date. State and USAID officials said 
that, because they were not able to obtain funding for construction of 
USAID annex buildings at nine locations through fiscal year 2004, OBO 
commenced construction of these compounds without the USAID annex. In 
contrast, USAID did obtain funds to permit concurrent construction of 
one new embassy compound that included the USAID annex. According to 
OBO officials, OBO has always preferred to construct all components of 
a new embassy compound concurrently and noted that its Long-Range 
Overseas Buildings Plan covering fiscal year 2002 through fiscal year 
2007 showed all USAID annexes being constructed at the same time as the 
rest of the compound. OBO's current building plan through fiscal year 
2009 calls for nonconcurrent construction of USAID annexes at an 
additional nine locations. According to OBO, its plan to continue 
nonconcurrent construction is a result of the funding issue.

Concurrent construction of USAID annexes could help reduce overall 
costs to the government and achieve security goals. Concurrent 
construction would eliminate the second expensive mobilization of 
contractor staff and equipment, as well as additional supervision, 
security, and procurement support expenses that result from 
nonconcurrent construction. OBO has estimated that if nine future USAID 
annexes scheduled for nonconcurrent construction are built 
concurrently, it could save taxpayers $35 million.[Footnote 2] OBO's 
cost estimates indicate that annex construction costs increase by an 
average of about 24 percent to 31 percent when USAID facilities are 
built nonconcurrently. Applying these average cost differentials to 
OBO's data, we estimated a total cost savings of around $68 million to 
$78 million if all 18 future USAID projects are built concurrently, 
compared with current plans to build some of the compounds 
nonconcurrently. These amounts, however, do not include other ongoing 
operational, security enhancement, and lease costs that USAID could 
save when staff move to the new compounds. We also found designing 
additional space for USAID within the main office building, or 
chancery, may cost less than erecting a separate annex. For instance, 
OBO has estimated that, in two African locations where new 
nonconcurrent embassy construction is scheduled for 2006, housing USAID 
in the chancery would cost at least $6.5 million per site less than 
building a separate USAID annex. In addition to cost considerations, 
concurrent construction could help State and USAID comply with the 
colocation requirement and decrease the security risks associated with 
remaining outside of the embassy compound. For example, according to 
State and USAID security officials, USAID staff who remain in an 
interim USAID facility after other U.S. government personnel move into 
a new embassy compound may be more vulnerable to terrorist attack 
because the interim facility does not meet security standards for new 
buildings and might be perceived to be a "softer" target relative to 
the new, more secure embassy compound. Under nonconcurrent 
construction, some U.S. personnel remain temporarily at risk, even 
after OBO has completed construction of a new chancery within a secure 
compound.

OBO acknowledged that there are substantial advantages to concurrent 
construction and indicated that it may revise its building schedule to 
allow for more concurrent construction if the new Capital Security 
Cost-Sharing Program to fund new embassy buildings is implemented in 
fiscal year 2005.[Footnote 3] However, even if cost sharing is not 
implemented, there are still opportunities for building more USAID 
facilities concurrently with construction of the overall compound if 
OBO revises, with congressional consent, its construction schedule.

In order to minimize costs and further improve security associated with 
building new embassy compounds, Congress may wish to consider 
alternative funding approaches to support concurrent construction of 
new embassy compounds if the Capital Security Cost-Sharing Program is 
not implemented in fiscal year 2005.

In addition, we recommend that the Director of the Bureau of Overseas 
Buildings Operations (1) update the Long-Range Overseas Buildings Plan 
to achieve the concurrent construction of USAID facilities to the 
maximum extent possible; and (2) in coordination with USAID, consider 
incorporating USAID space into single office buildings in future 
compounds, where appropriate.

In comments on a draft of this report, the State Department 
characterized the report as a fair and accurate representation of the 
issue and said it welcomed our recommendations. In its comments, USAID 
said the report successfully attempts to address the rationale as well 
as many of the difficulties in achieving concurrent construction and 
agreed with the recommendations.

Background: 

In the wake of the 1998 bombings at the U.S. embassies in Nairobi, 
Kenya, and Dar es Salaam, Tanzania, State has received increased 
funding for the construction of new, secure facilities overseas. 
Funding from fiscal year 1999 to 2004 totaled about $3.4 billion. In 
addition, Congress passed the Secure Embassy Construction and 
Counterterrorism Act of 1999. The act established a number of security 
requirements for diplomatic facilities overseas, one of which was that 
all U.S. government personnel (except those under the command of an 
area military commander) at any new U.S. diplomatic facility abroad 
must be located at the same site.[Footnote 4] State identified 
facilities at about 185 posts that would need to be replaced to meet 
the security standards.

To help manage this large-scale construction program, OBO developed the 
Long-Range Overseas Buildings Plan,[Footnote 5] first published in July 
2001 and recently updated in March 2004. The plan is updated annually, 
adding new projects as scheduled projects' construction contracts are 
awarded. The plan prioritizes posts based on security and operational 
considerations, including input from State's regional bureaus and the 
Bureau of Diplomatic Security. The most recent version of the plan 
prioritizes 77 proposed security capital and regular capital 
projects[Footnote 6] from fiscal years 2004 through 2009, including 18 
separate USAID annex buildings.

Until the late 1990s, the majority of USAID missions were not colocated 
with embassies but existed in separate commercial or freestanding 
buildings. Most of these facilities were rented; several were built 
with host country trust funds, and a small number were constructed with 
funds appropriated by the Foreign Operations Appropriations Acts.

Since the 1999 colocation requirement, State and USAID have not been 
fully successful in obtaining funding for construction of separate 
USAID annex buildings at locations where State was building a new 
embassy compound. In its fiscal year 2001 report on Commerce, Justice, 
and State funding, the House Committee on Appropriations wrote that it 
did not approve the use of the funds for the USAID annexes because 
appropriations requirements of USAID fall under the jurisdiction of the 
Foreign Operations, Export Financing, and Related Programs 
Subcommittee.[Footnote 7] In an effort to overcome funding problems, 
USAID requested that the Foreign Operations subcommittee fund a new 
account for fiscal year 2003, the Capital Investment Fund, to fund 
information technology enhancements and construction of colocated USAID 
facilities. Although the fund has been established, USAID has not 
obtained full funding to construct all of its buildings. In its report 
on the fiscal year 2003 Foreign Operations appropriation, the House 
Committee on Appropriations noted that buildings and space for all 
other government agencies overseas were appropriated through State's 
account for overseas construction, and stated that therefore the 
committee had not funded all requests for USAID buildings on new 
embassy compounds.[Footnote 8] State's fiscal year 2005 budget request, 
which has been approved by the House and is pending approval in the 
Senate, includes the construction of four USAID buildings anticipated 
to be funded from contributions through the Capital Security Cost-
Sharing Program.[Footnote 9]

State Has Built Compounds in Stages: 

State has built new embassy compound facilities in separate stages to 
accommodate the lack of USAID funding, according to State and USAID 
officials. Only one of three new embassy compounds completed to date 
includes the planned annex for USAID. In addition, contracts have been 
awarded or construction is under way on several more compounds that do 
not include, but will eventually have, a separate annex for USAID. 
Under OBO's current 6-year building plan, nonconcurrent construction 
will continue through at least fiscal year 2009.

State and USAID Attribute Nonconcurrent Construction to Lack of Funds: 

State initiated the Security Capital Construction Program to replace 
its most vulnerable posts. Under this program, OBO is constructing 
replacement facilities on embassy and consulate compounds that will 
contain the main office building, or chancery, all support buildings, 
and a separate annex building for USAID, where necessary. According to 
OBO, it has always preferred to construct all components of a new 
embassy compound concurrently, and its 2002 long-range plan included 
projects in which the USAID building would be built concurrently with 
rest of the compound. It was only after USAID did not receive funding 
for its annexes in fiscal year 2001 that OBO began to move to a 
nonconcurrent approach to construction, according to OBO officials.

Since 1999, OBO has completed construction of new embassy compounds in 
Dar es Salaam, Nairobi, and Kampala, Uganda, which were planned to 
include a separate facility for USAID. So far, OBO has completed the 
annex for USAID only at the compound in Dar es Salaam. Initially, OBO 
awarded a construction contract that did not include the USAID annex, 
but USAID received $15 million in additional operating expense funds 
through the regular appropriation process to pay for new construction. 
In addition, $2.5 million from program funds were used with $25 million 
obtained from the Security Supplemental Account for security upgrades. 
The funding became available in time for OBO to modify the original 
construction contract and complete the USAID annex at the same time as 
the rest of the compound.

For Nairobi, OBO awarded a construction contract for a new embassy 
compound in September 1999 that did not include the USAID facility 
because there were no funds for this USAID annex. Subsequently, OBO and 
the contractor negotiated to include the USAID annex as a modification 
to the original contract, but sufficient funding did not become 
available in time. Construction of the chancery building was completed 
in 2003. USAID received funding for its annex in fiscal year 2003; 
construction began in June 2004 and is scheduled to end in June 2006, 3 
years after the compound was completed and became operational (see fig. 
1). In the meantime, USAID is leasing space at a cost of about $300,000 
per year on the campus of a nongovernmental research facility.

Figure 1: Diagram of U.S. Embassy Adjacent to USAID Construction: 

[See PDF for image]

[End of figure]

A construction contract for the new embassy compound in Kampala was 
awarded in 1999 and construction was completed in fiscal year 2002, but 
USAID did not receive funding for its annex until fiscal year 2004. OBO 
expects to award a construction contract for the USAID annex sometime 
in 2004, according to an OBO official. USAID plans to remain in its 
interim location outside the new compound--an office converted from a 
residence in Kampala and leased for $144,000 per year--until its new 
facility is built in about 2006.

In addition, contracts have been awarded or construction is under way 
on the following seven compounds that do not include a separate 
building for USAID because the agency lacked funding for the 
construction: Yerevan, Armenia; Phnom Penh, Cambodia; Tbilisi, Georgia; 
Conakry, Guinea; Bamako, Mali; Kingston, Jamaica; and Abuja, Nigeria. 
At most of these posts, construction of the USAID facility will start 
between 2 to 4 years after OBO awarded the contract for the compound. 
For example, OBO awarded construction contracts for the new embassy 
compounds in Phnom Penh and Conakry in fiscal year 2002 and plans to 
solicit bids to construct the USAID annexes on these compounds during 
fiscal year 2004. In Yerevan, the U.S. Ambassador and OBO devised an 
alternative to waiting for funds to build a separate facility for 
USAID: OBO is adding a floor to a warehouse building under construction 
on the compound to house USAID. OBO can add a floor to the building for 
less money than it would cost to build a separate annex, although USAID 
will have less space, according to State and USAID officials. Table 1 
shows the contract award dates for selected new embassy compounds and 
the award dates for the corresponding USAID annex. The Secretary of 
State has had to issue waivers of the colocation requirement for some 
of these locations to permit USAID to remain outside the compound 
pending construction of a facility on the compound.

Table 1: Contract Award Dates for New Embassy Compound Projects That 
Are Completed, Under Way, or Under Contract, and Dates of Award for 
USAID Contract: 

Post: Kampala, Uganda; 
Embassy contract: award date: (fiscal year): 1999; 
USAID contract: award date: (fiscal year): 2004.

Post: Nairobi, Kenya; 
Embassy contract: award date: (fiscal year): 1999; 
USAID contract: award date: (fiscal year): 2003.

Post: Yerevan, Armenia; 
Embassy contract: award date: (fiscal year): 2001; 
USAID contract: award date: (fiscal year): N/A[A].

Post: Abuja, Nigeria; 
Embassy contract: award date: (fiscal year): 2002; 
USAID contract: award date: (fiscal year): 2006.

Post: Conakry, Guinea; 
Embassy contract: award date: (fiscal year): 2002; 
USAID contract: award date: (fiscal year): 2004.

Post: Phnom Penh, Cambodia; 
Embassy contract: award date: (fiscal year): 2002; 
USAID contract: award date: (fiscal year): 2004.

Post: Tbilisi, Georgia; 
Embassy contract: award date: (fiscal year): 2002; 
USAID contract: award date: (fiscal year): 2006.

Post: Bamako, Mali; 
Embassy contract: award date: (fiscal year): 2003; 
USAID contract: award date: (fiscal year): 2005.

Post: Kingston, Jamaica; 
Embassy contract: award date: (fiscal year): 2003; 
USAID contract: award date: (fiscal year): 2006.

Source: GAO analysis of State Department data.

[A] Post is incorporating USAID office space into a warehouse building 
under construction on the compound.

[End of table]

Nonconcurrent Construction Will Continue for Years under Current Plan: 

In addition to the projects previously discussed, OBO's current 6-year 
building plan includes 18 new embassy compounds that will include a 
separate facility for USAID, 9 of which are slated to be built 
nonconcurrently. For the remainder of fiscal year 2004, OBO will award 
construction contracts for 3 new embassy compounds without including 
the USAID annex: in Managua, Nicaragua; Kathmandu, Nepal; and Accra, 
Ghana. The current schedule also calls for awarding embassy 
construction contracts in 5 locations in fiscal year 2006 but not 
awarding the contracts for USAID annexes until fiscal year 2007; and 
awarding 1 embassy project in fiscal year 2008 but not awarding the 
USAID contract until at least fiscal year 2009.[Footnote 10] Table 2 
lists new embassy compound construction projects through fiscal year 
2009.

Table 2: New Embassy Compound Construction Projects, Fiscal Years 1999 
through 2009: 

Locations with USAID staff; 
New compounds: planned or completed: (fiscal years 1999-2009): 54.

Locations without; 
USAID staff; 
New compounds: planned or completed: (fiscal years 1999-2009): 47.

Locations with USAID annexes; 
New compounds: planned or completed: (fiscal years 1999-2009): 28.

Locations without USAID annexes; 
New compounds: planned or completed: (fiscal years 1999-2009): 73.

Annexes built concurrently with chancery; 
New compounds: with USAID annexes: planned or completed: 
(fiscal years 1999-2004): 1.

Chancery completed, nonconcurrent construction of annex under way; 
New compounds: with USAID annexes: planned or completed: 
(fiscal years 1999-2004): 1.

Chanceries under construction, nonconcurrent construction of annexes 
planned; 
New compounds: with USAID annexes: planned or completed: 
(fiscal years 1999-2004): 8[A].

Nonconcurrent construction of annexes planned; 
New compounds: with USAID annexes: planned or completed: 
(fiscal years 1999-2004): 9.

Concurrent construction of annexes planned; 
New compounds: with USAID annexes: planned or completed: 
(fiscal years 1999-2004): 9.

Total; 
New compounds: planned or completed: (fiscal years 1999-2009): 101; 
New compounds: with USAID annexes: planned or completed: 
(fiscal years 1999-2004): 28. 

Source: GAO analysis of State Department data.

[A] This number includes one compound where the chancery has been 
completed, but the annex contract has not yet been awarded.

[End of table]

Concurrent Construction Could Decrease Costs, Improve Security: 

Nonconcurrent construction increases the overall cost to the government 
and raises concerns about security. We also found that, in some cases, 
constructing a separate annex building could cost more than building a 
larger chancery to accommodate USAID. OBO's own analysis of 9 projects 
shows that the current schedule of nonconcurrent construction will add 
more than $35 million in costs.[Footnote 11] In addition, extrapolating 
from OBO's data, we have projected an overall cost increase of as much 
as $78 million if all 18 future USAID annexes follow the historical 
pattern of nonconcurrent construction. This estimate does not include 
security enhancements and other costs that USAID will incur while its 
staff are in interim facilities pending completion of the USAID annex. 
This estimate also does not include potential cost savings from merging 
USAID space into chancery buildings in the future. Finally, 
nonconcurrent construction has security implications for USAID 
employees left behind in interim facilities and for the other U.S. 
government employees moved to more secure compounds.

State and USAID Officials and Contractors Agree That Nonconcurrent 
Construction Is the More Costly Approach: 

All government officials and private construction contractors with whom 
we spoke agreed that the practice of nonconcurrent construction 
significantly adds to the overall expense of building USAID office 
space. Building nonconcurrently can result in a second expensive 
mobilization of contractor staff and equipment, additional work to 
procure building materials, and added construction management 
oversight. According to contractors experienced in building embassy 
compounds overseas, such remobilization and duplication of support 
activities can add 20 percent to 25 percent to what a concurrent 
construction contract would have cost, depending on the location. They 
said that when the U.S. government does not receive funds for the USAID 
annex until after the contractor has finished building the embassy, 
there is no chance of maximizing economies of scale that result from 
contractor staff and equipment already on site. In Nairobi, for 
example, according to one of the contractors we met with, OBO could 
have built the USAID annex for $19 million using the same contractor 
building the embassy chancery, but OBO awarded a contract for almost 
$30 million to a different builder since funding was not available 
until 4 years later. OBO officials have also said that in addition to 
contractor mobilization costs, nonconcurrent expenses must include 
OBO's added supervision and site security costs for a second project. 
For instance, in Nairobi, OBO's project supervision and construction 
security cost estimates for the USAID annex rose from $683,000 for 
concurrent building to $2.9 million for nonconcurrent building.

Nonconcurrent construction also increases security enhancement 
expenses. Until secure office space is built, USAID must either remain 
in or move to interim facilities. The interim site may require 
significant security upgrades to obtain some minimum level of 
protection for staff, including the leasing of surrounding property to 
create setbacks from roads, as well as the addition of perimeter 
fencing and installation of anti-ram barriers. Security, supervision, 
and maintenance personnel costs would continue to accrue until the new 
USAID facility were completed. For instance, in Kampala, Uganda, USAID 
will likely spend $3.2 million for operational and security expenses 
from the time the new chancery opened in 2002 until the annex in the 
new embassy compound is finished in 2006.

Concurrent Construction of Future USAID Annexes Could Save Millions of 
Dollars: 

OBO estimates that future USAID annex projects now scheduled for 
nonconcurrent construction will increase costs to taxpayers by $35 
million. Extrapolating from these data, we project that annex 
construction costs could rise between $68 million to $78 million if all 
18 future annexes were delayed. These expenses do not include the $27 
million to $30 million[Footnote 12] cost increase that, based on OBO's 
data, we inferred was generated by nonconcurrent construction of 
annexes for embassy compounds awarded before 2004. There are no 
opportunities to significantly reduce this expense because these 
compounds are already built or under construction without USAID 
annexes. Estimates from OBO calculate the cost increase for building 
the 9 USAID annexes now scheduled for nonconcurrent construction over 
the next 5 budget years at $43 million (or $35 million at present 
value) above the cost for building at the same time.[Footnote 13] We 
further extrapolated from these and other OBO cost estimates, an 
average cost differential increase for a USAID annex of about 24 
percent to 31 percent for nonconcurrent construction. Using OBO's cost 
data, we calculated the range of the potential cost increase of 
nonconcurrent construction for all future annex projects to be between 
$88 million to $101 million over the next five budget years (or $68 
million to $78 million at present value).[Footnote 14] Figure 2 
compares concurrent and nonconcurrent construction costs for 18 
projects to be built after fiscal year 2004.

Figure 2: Estimated Concurrent and Nonconcurrent Construction Costs for 
18 USAID Annexes: 

[See PDF for image]

[A] This amount reflects the lower end of the estimated range based on 
a 24-percent average cost increase. Total costs could rise to $101 
million in budget dollars and about $78 million at present value for 
fiscal year 2004, if the higher average of 31 percent is used. See 
appendix 1 for a more detailed description of the methodology we used.

[End of figure]

Further, our estimates do not include the costs of additional 
operations and lease expenses or increased security and personnel 
costs, for which we did not have comprehensive data but which could be 
substantial. For example, OBO has estimated that in one European 
location, USAID will have to pay an additional $690,000 for rent 
because of a 1-year delay in awarding the construction contract. In two 
African locations, USAID officials estimate they will have to pay an 
additional $5.5 million for 3 or more years of rent and continuing 
security expenses until their new facilities are built.

Including USAID Space within a Larger Chancery Rather Than Constructing 
a Separate USAID Annex May Decrease Costs: 

Depending on a number of factors, building a separate annex for USAID 
increases costs over designing additional space for USAID within the 
chancery. Two of the contractors we met with stated that constructing 
one building could be more cost effective than constructing two. OBO 
has estimated that in two African locations where new embassy 
construction is scheduled for 2006, building a separate USAID annex 
would cost at least $6.5 million per site more than housing USAID in 
the chancery, assuming nonconcurrent construction. OBO officials have 
said that, except for very large USAID missions, there may be little 
reason to build a separate USAID annex other than the ease of 
allocating construction costs to USAID. Further, OBO has recently re-
evaluated the office space parameters for new overseas missions, 
significantly reducing the sizes of proposed USAID annexes. Assuming 
these revised space allocations are adequate, an additional five to 
eight proposed USAID annexes would be similar in size (2,500 gross 
square meters or less) to those at the two African locations OBO 
analyzed. The cost differentials between a separate annex versus 
locating USAID within the chancery in those locations could be similar 
if other key factors, such as building configuration and site 
conditions, were also comparable.

However, there are factors other than costs that should be considered 
when determining whether to build a separate annex or include space for 
USAID in the chancery, according to USAID. Such factors include 
geographic location, the type of work USAID is engaged in, and the 
security profiles of the country. Moreover, a separate unclassified 
USAID annex may allow greater access for local staff and visitors.

Nonconcurrent Construction Poses Security Risks: 

In addition to cost considerations, nonconcurrent construction of the 
USAID annexes raises a number of security concerns, according to State 
Diplomatic Security and embassy officials as well as USAID security 
officials. For example, some officials expressed concern about the 
safety of USAID employees who remain in interim facilities after other 
U.S. government personnel have moved to the new embassy compounds. 
State is building the compounds to provide safe, secure facilities 
because U.S. facilities and personnel have faced continued threats from 
terrorist and other attacks since the Kenya and Tanzania embassy 
bombings. For example, from 1998 through 2002, there were 30 terrorist 
attacks against overseas posts, personnel, and diplomatic residences. 
During that same period, overseas posts were forced to evacuate 
personnel or suspend operations 83 times in response to direct threats 
or unstable security situations in the host country.

Terrorists continue to look for targets, according to the security 
officials, and an interim USAID facility might be perceived to be a 
"softer" target than a new, more secure embassy, thus making USAID 
employees more vulnerable to attack. For example, figure 3 shows a new 
embassy compound main gate with an anti-vehicle delta barrier, anti-ram 
perimeter wall, and blast-resistant guardhouse containing bomb 
detection equipment, compared with an interim USAID facility entrance 
with temporary barriers that are removed after work hours.

Figure 3: Hardened Access Facility at New Embassy Compound (left) 
Compared with USAID-Guarded Entrance in Same City: 

[See PDF for image]

[End of figure]

State, USAID, and embassy officials described a number of actions taken 
to mitigate the risks for USAID employees who are not colocated in new 
embassy compounds. For example, a post may construct special jersey 
barriers and fences, dig trenches, close streets adjacent to a USAID 
facility to create a setback around the building during the day, and 
lease properties adjacent to its facilities to create a buffer. A post 
may also use contract guard services, deploy surveillance detection 
teams and mobile response teams, and use the services of local police.

Despite actions to mitigate the security risks of nonconcurrent 
construction, State and USAID officials remain concerned because 
interim facilities do not meet the security standards established by 
the Overseas Security Policy Board. In addition to the Secure Embassy 
Construction and Counterrorism Act of 1999, which requires a 100-foot 
setback and colocation of all U.S. government employees at a new site, 
the security standards for new office buildings include anti-ram 
perimeter walls and barriers, construction to meet blast protection, 
forced entry/ballistic resistant protection for doors and windows, and 
controlled access points. A USAID security official stated that, 
despite measures to reduce security risks, facilities are vulnerable 
when they are not controlled by the U.S. government. For example, the 
official said that posts using temporary jersey barriers eliminate the 
setback each evening when the barriers are removed and the streets are 
reopened to normal traffic. Further, a State security official stated 
that the Bureau of Diplomatic Security was an early advocate of 
colocating all U.S. personnel when the new embassy compound is built. 
He said that the bureau is concerned from a threat perspective and that 
the threat to U.S. personnel remains high. He said that when USAID 
cannot be colocated, the bureau tries to find ways to mitigate the risk 
but there is no perfect solution. However, he said the bureau does not 
recommend delaying the construction of a compound until funding for the 
USAID annex is available because that would leave a greater number of 
staff vulnerable.

Nonconcurrent construction also has security implications for the 
employees who move into the newly constructed compound. Subsequent 
construction of the USAID annex on the compound results in more 
workers, vehicles, and equipment on site, which may increase the 
vulnerability of the overall embassy compound and its personnel by 
giving terrorists the opportunity to conduct surveillance or attack the 
embassy, according to State and USAID officials. To address this issue, 
OBO and regional security officers in Nairobi, Kenya, and Kampala, 
Uganda, described a number actions required to control the access of 
construction personnel and equipment to the compound. For example, the 
regional security officers told us that they need to hire additional 
security guards to inspect trucks bringing building materials to the 
compound. The regional security officer in Nairobi said he would need 
about 14 additional guards to perform these inspections. For some 
sites, destruction of part of the perimeter wall to add an entrance for 
the construction vehicles and equipment has been discussed as a way of 
allowing contractor access to the compound. Construction workers need 
to undergo background checks and receive identification cards, 
according to regional security officers; these requirements could place 
a significant burden on their time and workload unless State hires a 
site security manager.

Opportunities Exist for More Concurrent Construction: 

OBO acknowledged that it would be advantageous to the U.S. government 
to build embassy compounds concurrently. OBO said it may revise its 
schedule to allow for more concurrent construction and consider on a 
case-by-case basis whether USAID should have a separate annex if the 
Capital Security Cost-Sharing Program is funded. However, even without 
cost sharing, there are opportunities for more concurrent and efficient 
construction. By delaying one project slated for fiscal year 2006 and 
estimated to cost more than $100 million, State would have sufficient 
funds to eliminate the backlog of USAID projects. Moreover, it is not 
unprecedented for projects in successive annual plans to be moved from 
one year to another. For example, over the last three planning cycles, 
several planned projects have had to be moved from one year to another 
due to factors such as a failure to acquire land in a timely manner or 
a change in executive branch priorities. Therefore, if OBO could 
reschedule planned projects it could make headway in minimizing 
nonconcurrent construction. OBO emphasized that it would need 
congressional support to do this.

Conclusion: 

OBO's multibillion-dollar program to build new, secure embassies and 
consulates around the world was designed to colocate all U.S. employees 
stationed overseas within a secure compound, as required by law. 
However, by building the compounds in stages, some employees must 
temporarily remain in less secure space outside the compound. 
Concurrent construction will help State and USAID comply with the 
colocation requirement. Our analysis also shows that concurrent 
construction likely results in cost savings for the taxpayer and that 
incorporating all office space into the main chancery building rather 
than building a separate annex may be, in some cases, a more efficient 
approach. According to State, lack of funding and restrictions on the 
use of funds has required OBO to phase construction of new embassy 
compounds that have a USAID annex component. However, State said it 
will consider revising its construction schedule to achieve more 
concurrent construction if the Capital Security Cost-Sharing Program is 
implemented in fiscal year 2005. However, even if the plan is not 
implemented, opportunities exist to schedule the construction of more 
projects concurrently.

Matter for Congressional Consideration: 

In order to minimize costs and further improve security associated with 
building new embassy compounds, if the Capital Security Cost-Sharing 
Program is not implemented in fiscal year 2005, Congress may wish to 
consider alternative funding approaches to support concurrent 
construction of new embassy compounds.

Recommendations for Executive Action: 

We recommend that the Director of State's Bureau of Overseas Buildings 
Operations (1) update the Long-Range Overseas Buildings Pan to achieve 
the concurrent construction of USAID facilities to the maximum extent 
possible; and (2) in coordination with USAID, consider incorporating 
USAID space into single office buildings in future compounds, where 
appropriate.

Agency Comments and Our Evaluation: 

The State Department and the U.S. Agency for International Development 
provided written comments on a draft of this report (see app. II and 
app. III). State also provided technical comments, which we have 
incorporated into the report as appropriate.

In its comments, State said that the report is a fair and accurate 
representation of the issue and welcomed our recommendations. State 
said it would update the Long-Range Overseas Buildings Plan to achieve 
concurrent construction to the maximum extent and coordinate with USAID 
to consider incorporating USAID space into single office buildings in 
future compounds where appropriate if the Capital Security Cost-Sharing 
Program is implemented. However, our recommendations and matter for 
consideration are designed to bring about concurrent construction to 
the maximum extent regardless of the implementation of the Capital 
Security Cost-Sharing Program.

In its comments, USAID said the report successfully attempts to address 
the rationale as well as many of the difficulties in achieving the goal 
of concurrent construction of new embassy compounds and facilities to 
be occupied by USAID employees on those compounds. USAID said it agreed 
with both our recommendations and provided information to support the 
recommendations and explain its requirements.

We are sending copies of this report to interested congressional 
committees, the Secretary of State, and the Administrator of USAID. We 
will also make copies available to others upon request. In addition, 
the report will be available at no charge on GAO's Web site at 
[Hyperlink, http://www.gao.gov].

If you or your staff have any questions about this report, please 
contact me at (202) 512-4128. Another GAO contact and staff 
acknowledgments are listed in appendix IV.

Sincerely yours,

Signed by: 

Jess T. Ford: 
Director, International Affairs and Trade: 

[End of section]

Appendixes: 

Appendix I: Scope and Methodology: 

To examine State's efforts to incorporate office space for the U.S. 
Agency for International Development (USAID) into the construction of 
new embassy compounds and to assess the cost and security implications 
of its approach, we: 

* reviewed the State Department's Bureau of Overseas Buildings 
Operations (OBO) construction documents and the Long-Range Overseas 
Buildings Plans for fiscal years 2002 to 2007, years 2003 to 2008, and 
2004 to 2009;

* interviewed State Department and USAID officials regarding completed, 
ongoing, and planned new embassy compound projects that include a 
separate annex for USAID, including operational, cost, and security 
issues arising from nonconcurrent construction and the issues involved 
in housing USAID in separate buildings;

* interviewed officials from several U.S. construction firms 
experienced in building new embassy projects regarding the costs of OBO 
construction scheduling practices; and: 

* analyzed OBO estimates of the cost differentials between concurrent 
and nonconcurrent construction.

Further, we visited two field locations--in Nairobi, Kenya, and 
Kampala, Uganda--where we discussed with State and USAID officers at 
each post the implications of construction sequencing to the embassies 
and USAID.

To analyze the cost impacts of different USAID annex construction 
scheduling, we developed a cost model enabling us to extrapolate from 
State data the aggregate and annual costs for both concurrent or 
nonconcurrent construction projects for USAID annexes. Our model is 
based on cost estimate data provided by OBO for 26 projects. (Estimates 
for Yerevan, Armenia, were not used because OBO no longer plans to 
build a separate annex for USAID.) For some projects, we had estimates 
of fiscal year contract award and midpoint construction costs in 
nominal dollars for concurrent and nonconcurrent construction. Using 
such data from 13 projects, we estimated the average percentage cost 
differential per project[Footnote 15] to build a nonconcurrent annex as 
a range of 30.75 percent and 23.83 percent. The higher end of the range 
results from excluding data for 3 of the 13 locations (Kampala, Uganda; 
Harare, Zimbabwe; and Kingston, Jamaica) where OBO indicated that site-
specific factors accounted for major deviations from the mean. Both 
average percentage differentials are used to project base-year costs 
for concurrent construction for Abuja, Nigeria, and for nonconcurrent 
construction on 11 projects for which we had incomplete data. We also 
had data on an additional project (Tbilisi, Georgia) but used it only 
to represent the costs of that project, not to estimate the average 
cost differential because the data for the project reflected building 
sizes for concurrent and nonconcurrent construction costs that were 
substantially different. Assumptions included: 

* the length of construction period (24 months for concurrent and 15 
months for nonconcurrent),

* the 1-year lag between proposed award year for concurrent 
construction and nonconcurrent construction,

* cost distribution over the construction period, and: 

* average dollar cost escalation of 3 percent per year.

These assumptions for each of the 26 projects enabled us to estimate: 

* annual construction costs,

* total budget dollar costs, and: 

* present value costs in fiscal year 2004 dollars.

We did not verify the accuracy of OBO's cost estimates or its 
methodology for estimating costs. However, we did meet with OBO 
officials responsible for the cost estimates to discuss their 
methodology and underlying assumptions. The cost differentials between 
concurrent and nonconcurrent construction that OBO estimated were 
consistent with those estimated by two of the contractors we met with.

We conducted our work from December 2003 to July 2004 in accordance 
with generally accepted government auditing standards.

[End of section]

Appendix II: Comments from the Department of State: 

United States Department of State: 
Assistant Secretary and Chief Financial Officer: 
Washington, D.C. 20520:

Ms. Jacqueline Williams-Bridgers:
Managing Director: 
International Affairs and Trade:
Government Accountability Office: 
441 G Street, N.W.
Washington, D.C. 20548-0001:

SEP 14 2004

Dear Ms. Williams-Bridgers:

We appreciate the opportunity to review your draft report, "EMBASSY 
CONSTRUCTION: Achieving Concurrent Construction Would Help Reduce Costs 
And Meet Security Goals," GAO Job Code 320237.

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report.

If you have any questions concerning this response, please contact Cy 
Alba, Branch Chief, Bureau of Overseas Building Operations, at (703) 
875-5748.

Sincerely,

Signed by: 

Christopher B. Burnham: 

cc: GAO - John Brummet: 
OBO - Charles Williams: 
State/OIG - Mark Duda:

Department of State Comments on GAO Draft Report EMBASSY CONSTRUCTION: 
Achieving Concurrent Construction Would Help Reduce Costs And Meet 
Security Goals (GAO-04-952):

Introduction:

The Department of State appreciates the opportunity to review and 
comment on the GAO Draft Report, "EMBASSY CONSTRUCTION: Achieving 
Concurrent Construction Would Help Reduce Costs and Meet Security 
Goals." We believe the report is overall a fair and accurate 
representation of the issue. However, the Department offers the 
following observations.

Consistent Support for Concurrent Construction:

As noted in the report, the Department has always preferred and planned 
to construct all components of a new embassy compound (NEC) 
concurrently as evidenced by the first Long-Range Overseas Buildings 
Plan (FY2002 - FY 2007). That Plan showed all USAID annexes being 
constructed at the same time as the rest of the NEC. However, due to 
funding restrictions the Department was required to move to a phased 
approach for construction. We appreciate the GAO's acknowledgement of 
this fact.

Capital Security Cost Sharing is the Solution:

As long as there are restrictions on the use of CJS appropriations for 
USAID facilities, and as long as USAID is unable to secure sufficient 
funding to complete the backlog of annexes, and as long as there is no 
full Capital Security Cost Sharing, we believe the path we are 
following is the most viable and most efficient. Delaying a NEC project 
exposes personnel to the continued risks of security deficiencies. 
OBO's current plan includes 4 USAID annexes in FY 06. After FY06 there 
will only be 4 remaining backlogged USAID annexes. To add those to the 
FY06 list would seem to some of our stakeholders as a misuse of other 
agencies' cost sharing money in that new construction would be biased 
in favor of one agency (USAID). Furthermore, this strategy would still 
require reprogramming notification to the Congress.

The Department welcomes the report's two recommendations. The 
Department has every intention of updating the Long-Range Overseas 
Buildings Plan to achieve the concurrent construction of USAID 
facilities to the maximum extent if Capital Security Cost Sharing goes 
into effect. Furthermore, the Department will also be able to 
coordinate with USAID to consider incorporating USAID space into single 
office buildings in future compounds where this would be more 
appropriate.

Security Standards:

The first portion of paragraph 1 on page 21 of the report should be 
revised as follows to make the statement more accurate and complete:

Despite actions to mitigate the security risks of nonconcurrent 
construction, State and USAID officials remain concerned because 
interim facilities do not meet the security standards established by 
the Overseas Security Board (OSPB). In addition to the Secure Embassy 
Construction and Counterterrorism Act of 1999, which requires a 100-
foot setback and collocation of all USG employees at a new site, the 
OSPB security standards for new office buildings include anti-ram 
perimeter walls and barriers, construction to meet blast protection, 
forced entry/ballistic resistant protection for doors and windows, and 
controlled access points.

A Cooperative Effort:

Throughout the course of the GAO review, the Department's Bureau of 
Overseas Buildings Operations (OBO) has been forthcoming in providing 
information and access to pertinent records, making its staff available 
to answer questions, and providing briefings. GAO staff members were 
also invited to observe monthly internal review meetings. The GAO staff 
has been professional in its endeavors and has been receptive to our 
opinions and explanations. The cooperative effort between the 
legislative and executive branches throughout this review on behalf of 
the American taxpayer continues to serve as a model for future work. 
The openness and cooperative spirit of OBO and GAO staffs has resulted 
in a report that we believe will benefit all parties concerned. 

The following are GAO's comments on the State Department letter dated 
September 14, 2004.

GAO Comments: 

1. Our recommendations and matter for consideration are designed to 
bring about concurrent construction to the maximum extent regardless of 
the implementation of the Capital Security Cost-Sharing Program.

2. We have revised our statement accordingly.

[End of section]

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

Assistant Administrator for Management:

SEP 10 2004:

Mr. Jess T. Ford: 
Director: 
International Affairs and Trade: 
U.S. General Accountability Office: 
441 G Street, N.W.
Washington, D.C. 20548:

Dear Mr. Ford:

I am pleased to provide the U.S. Agency for International Development's 
(USAID) formal response on the draft GAO report entitled Embassy 
Construction: Achieving Concurrent Construction Could Help Reduce Costs 
and Meet Security Goals (GAO-04-952).

The report successfully attempts to address the rationale as well as 
many of the difficulties in achieving the goal of concurrent 
construction of New Embassy Compounds (NEC) and facilities to be 
occupied by USAID employees on those compounds. USAID agrees with both 
recommendations identified in the report and offers the following 
information to support the recommendations as well as explain USAID's 
unique requirements (see enclosure).

Thank you for the opportunity to respond to the GAO draft report and 
for the courtesies extended by your staff in the conduct of this 
review.

Sincerely,

Signed by: 

John Marshall: 
Assistant Administrator: 
Bureau for Management:

Enclosure: a/s: 

USAID Comments on the draft GAO report: EMBASSY CONSTRUCTION: ACHIEVING 
CONCURRENT CONSTRUCTION COULD HELP REDUCE COSTS AND MEET SECURITY GOALS 
(GAO-04-952):

In the aftermath of the 1998 Africa bombings, USAID has been challenged 
to provide its field offices located outside embassy compounds with 
adequate security protection. Given the nature of USAID's work in many 
locations, our historical interests have been to locate outside of the 
embassy compounds in order to work closely with local government 
ministries, private voluntary and non-governmental organizations. With 
the advent of the 1999 collocation law, the manner in which USAID will 
be able to interact in the future with host country counterparts and 
customers has changed. New security standards for NEC restrict what was 
previously for USAID more of an open door to visitors. This is true now 
for locations in which USAID still remains outside of the embassy 
compound. Because of its development mission, USAID continues to 
function and relate to host countries in a manner different from many 
U.S. government organizations overseas, including the Department of 
State.

The first recommendation calls for the Secretary of State to direct the 
Bureau of Overseas Building Operations to achieve concurrent 
construction of facilities for USAID employees to the maximum extent 
possible. From a security perspective alone, USAID facilities face 
unavoidable vulnerabilities when located outside of NECs, primarily as 
softer targets, in relation to the more secure Embassy structures. 
Throughout the process of identifying short-term security remedies to 
long-term needs, USAID has worked closely with the Office of Diplomatic 
Security and OBO to find interim solutions. USAID has temporarily moved 
numerous office locations to enhance security protection or, at 
minimum, provided security upgrades in all locations.

By FY 2002, the only USAID annex project funded for collocation on a 
new embassy compound was Dar es Salaam. OBO had begun embassy 
construction in Nairobi and Kampala but not for the USAID annexes and 
our large staff presence. In FY 2003, funding was made available only 
for Nairobi. In 2004, funding was received for Kampala, Phnom Penh, and 
Conakry where, again, OBO had earlier initiated embassy construction. 
Congressional wrangling over funding responsibility for USAID annexes 
has delayed construction of facilities for USAID employees imposing 
added security risks and costs.

The Capital Security Cost Sharing Program, if approved in FY05, will 
place USAID on a parallel track with OBO NEC construction but not until 
FY 2007. For this reason, a joint review of opportunities that 
currently exist in which the construction of USAID facilities can begin 
in tandem with OBO should be explored immediately. The Department and 
OBO have done an excellent job of informing Congress of the need to 
unify the funding source for overseas construction. This will help 
guarantee concurrent construction in the future. However, in the 
intervening years, and until USAID is viewed as an integral and tandem 
part of current OBO construction planning and prioritization of 
construction activities, USAID offices not collocated with embassies 
will remain as softer targets in multiple overseas locations.

The second recommendation calls for incorporating USAID into single 
office buildings, where appropriate. GAO use of the language "where 
appropriate" is ambiguous and requires clarification to allow for the 
collaborative dialog between State and USAID in identifying potential 
cost saving opportunities. More to the point, the discussion to limit 
the number of separate annexes for USAID employees will need to 
reflect important factors other than simply costs.

USAID is the primary implementer of US foreign policy as it relates to 
development assistance abroad. USAID's mandate, or mission, relies 
heavily on its ability to interact with a wide and varied assortment of 
organizations and individuals. Other critical and equally important 
factors include the physical security considerations necessary to 
protect all employees, and in deference to the taxpayer, additional 
costs required for construction. All three of these factors must be 
considered in the context of geographical locations, security profiles 
of countries, the size of the USAID presence, and the type of work 
USAID is engaged in, in order to appropriately determine if a separate 
annex is more beneficial to US foreign policy.

In certain circumstances a separate annex, although potentially more 
costly, may improve the overall security profile of the embassy 
compound by avoiding a single, large target. This is particularly true 
in larger USAID missions. Another consideration is that USAID utilizes 
a much higher ratio of local foreign national staff than many of our 
embassy counterparts. USAID annex buildings are unclassified allowing 
greater yet appropriate access for local staff and visitors. Unlike the 
Department of State, many of USAID's professional staff include host 
country nationals. A single building constructed primarily for 
classified use limits USAID's ability to interact with clients and 
staff. This is the case for the NEC in Kabul. USAID will not occupy the 
all-classified facility to be completed soon. Instead, in order to meet 
current USAID requirements an interim unclassified:

modular facility was constructed for USAID and other agencies. The life 
span of the interim modular facility (located on a leased property 
adjacent to the Embassy) is five years. However, the long-term 
requirements for USAID in Kabul, as in other locations, will likely 
require an unclassified building solution. For this reason, future 
construction planning for all single buildings that include USAID staff 
requires OBO to introduce design elements that allows both appropriate 
space for USAID to conduct its business, and appropriate access for 
staff and customers in unclassified areas.

USAID remains a staunch supporter of the collocation concept and will 
continue to work with OBO, GAO, and OMB to ensure USAID missions are 
collocated in both secure and functional facilities. 

The following is GAO's comment on the U.S. Agency for International 
Development letter dated September 10, 2004.

GAO Comment: 

We agree with the U.S. Agency for International Development that many 
factors should be considered to determine whether housing USAID in a 
separate building or within the chancery building is beneficial to the 
U.S. government. We have added a brief description of some of these 
factors.

[End of section]

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John Brummet, (202) 512-5260: 

Staff Acknowledgments: 

In addition to the individual named above, Omar Beyah, Janey Cohen, 
David Hudson, Bruce Kutnick, and La Verne Tharpes made key 
contributions to this report.

(320237): 

FOOTNOTES

[1] Pub. L. 106-113, div. B, Sec. 1000(a)(7)(div. A, title VI, sec. 
606).

[2] Estimates calculated in present value (fiscal year 2004) dollars.

[3] The executive branch recently developed the Capital Security Cost-
Sharing Program, under which all agencies having an overseas presence 
will pay a share of the projects undertaken to replace embassies at 
vulnerable posts. Planned to begin in fiscal year 2005, the program 
will be phased in through fiscal year 2009. Legislation to fund this 
program was included in HR 4754, which was passed by the House of 
Representatives on July 8, 2004, and referred to the Senate; and S-
2809, which was approved by the Senate Committee on Appropriations on 
September 15, 2004.

[4] The Secretary of State may waive the colocation requirement if the 
Secretary, together with the head of each agency employing personnel 
who would not be located at site, determines that security 
considerations permit separate sites and it is in the national interest 
of the United States. 22 U.S.C. 4865(a)(2)(B).

[5] See Bureau of Overseas Building Operations, U.S. Department of 
State, Long-Range Overseas Buildings Plan: FY 2004-FY 2009 (Washington, 
D.C., January 2004) for the latest version of the plan.

[6] The plan includes a number of posts where facilities must be 
replaced because of compelling operational or other requirements.

[7] House of Representatives, Departments of Commerce, Justice, and 
State, the Judiciary, and Related Agencies Appropriations Bill, Fiscal 
Year 2001, Report 106-680, p. 106 (Washington, D.C., June 19, 2000). 

[8] House of Representatives, Foreign Operations, Export Financing, and 
Related Programs Appropriations Bill, 2003, Report 107-663 (Washington, 
D.C., Sept. 19, 2002).

[9] See Department of State and U.S. Agency for International 
Development fiscal year 2005 budget justifications.

[10] The next long-range plan will be published in fiscal year 2005. 
According to OBO officials, construction scheduling may be revised in 
this plan to build the last nonconcurrent USAID annex in fiscal year 
2007.

[11] Estimates calculated in present value (fiscal year 2004) dollars.

[12] The $27 million to $30 million cost increase is calculated using 
the present value (fiscal year 2004) of an estimated $40 million to $44 
million (in budget dollars) increase for awarding USAID annex contracts 
during fiscal years 2003 to 2006 for eight compounds already being 
constructed without annexes before fiscal year 2004. See appendix I for 
a more detailed description of the methodology we used.

[13] Although the current building schedule indicates "concurrent 
execution" of the annex at Harare, Zimbabwe, OBO provided estimates for 
the costs of nonconcurrent construction at that location.

[14] The cost increase is calculated for nonconcurrent construction of 
18 planned USAID annexes to be awarded in or after 2004. See appendix I 
for a more detailed description of the methodology we used.

[15] Calculated in fiscal year 2003 dollars.

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