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Further Improve the Management of the Army's LOGCAP Contract' which was 
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Report to the Secretary of Defense: 

March 2005: 

Defense Logistics: 

High-Level DOD Coordination Is Needed to Further Improve the Management 
of the Army's LOGCAP Contract: 

GAO-05-328: 

GAO Highlights: 

Highlights of GAO-05-328, a report to the Secretary of Defense: 

Why GAO Did This Study: 

The Logistics Civil Augmentation Program (LOGCAP) is an Army program 
that plans for the use of a private-sector contractor to support 
worldwide contingency operations. Examples of the types of support 
available include laundry and bath, food service, sanitation, 
billeting, maintenance, and power generation. LOGCAP has been used 
extensively to support U.S. forces in recent operations in southwest 
Asia, with more than $15 billion in estimated work as of January 2005. 
While we issued two reports on LOGCAP since 1997 that made 
recommendations to improve the Army's management of the contract, 
broader issues on coordination of LOGCAP's contract functions were 
beyond the scope of our earlier work. This report assesses the extent 
to which the Army is taking action to improve the management and 
oversight of LOGCAP and whether further opportunities for using this 
contract effectively exist.

What GAO Found: 

The Army has taken or is in the process of taking actions to improve 
the management and oversight of LOGCAP on the basis of our earlier 
reporting. The actions that the Army has completed or has underway 
include (1) rewriting its guidance, including its field manual for 
using contractors on the battlefield and its primary regulation for 
obtaining contractor support in wartime operations; (2) implementing 
near-and longer-term training for commanders and logisticians in using 
the contract; (3) developing a deployable unit to assist commands using 
LOGCAP; (4) restructuring the LOGCAP contracting office to provide 
additional personnel resources in key areas; and (5) taking steps to 
eliminate the backlog of contract task orders awaiting definitization-
-that is, coming to agreement on the terms, specifications, and price 
of the task orders--and conducting award fee boards.

While improvements have been made, GAO believes that the Department of 
Defense (DOD) and the Army need to take additional action in two areas. 
First, although DOD continues to agree with our July 2004 
recommendation to create teams of subject matter experts to review 
contract activities for economy and efficiency, it has not done so yet 
because the need to respond to statutory requirements took precedence. 
Prior GAO reviews have shown that when commanders look for savings in 
contract activities, they generally find them, as illustrated in the 
table.

Savings Reported Through DOD's Review of Contract Activities: 

Contract: Balkans Support Contract; Percent savings: 10; 
Comments: Savings of $200 million by reducing services that were no 
longer needed.

Contract: LOGCAP (Djibouti); Percent savings: 18; 
Comments: Savings of $8.6 million by reducing services.

Sources: DOD (data); GAO (analysis).

[End of table]

The second area needing attention is the coordination of contract 
activities between DOD components involved with using LOGCAP. While the 
Army Materiel Command (AMC) is the executive agent for LOGCAP, other 
DOD components also play important LOGCAP roles, including the 
combatant commander, individual deployed units, and the Defense 
Contract Management Agency. The effective and efficient use of the 
contract depends on the coordinated activities of each of these 
agencies. However, at the DOD level, no one is responsible for overall 
leadership in using the contract and, while AMC has sought to influence 
the way in which the other components carry out their roles, it does 
not have command authority over the other components and thus its 
influence is limited. For example, AMC knew that planning for the use 
of LOGCAP for Operation Iraqi Freedom was not comprehensive but lacked 
the command authority to direct better planning. AMC officials believe 
that training will resolve these problems over time. However, given the 
importance of LOGCAP to supporting military operations and the billions 
of dollars being spent on LOGCAP activities, we believe that more 
immediate and direct oversight is needed.

What GAO Recommends: 

GAO is recommending that the Secretary of Defense designate a LOGCAP 
coordinator who would be responsible for ensuring that the contract is 
being used as effectively as possible. This coordinator would advise 
the Secretary of unresolved differences on the use of the contract. DOD 
reviewed a draft of this report and agreed with its recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-05-328.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact William M. Solis at (202) 
512-8365 or solisw@gao.gov.

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

The Army Has Taken Steps to Improve LOGCAP Management and Oversight: 

Enhanced Management and Oversight of LOGCAP Contract Activities Are 
Needed in Two Areas: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Defense: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Key Contract Management Roles and Responsibilities: 

Figure: 

Figure 1: Organizational Structure for Management of the LOGCAP 
Contract in Iraq and Afghanistan: 

Abbreviations: 

AFSC: Army Field Support Command: 

AMC: Army Materiel Command: 

DCAA: Defense Contract Audit Agency: 

DCMA: Defense Contract Management Agency: 

DFARS: Defense Federal Acquisition Regulation Supplement: 

DOD: Department of Defense: 

LOGCAP: Logistics Civil Augmentation Program: 

Letter March 21, 2005: 

The Honorable Donald H. Rumsfeld: 
The Secretary of Defense: 

Dear Mr. Secretary: 

As you know, the U.S. military has long relied on contractors to 
provide supplies and services to deployed U.S. forces, and its reliance 
on contractors has been growing in recent military operations. Much of 
this support has come from logistics support contracts, particularly 
the Army's Logistics Civil Augmentation Program (LOGCAP) contract. 
LOGCAP provides a wide array of support for U.S. military personnel 
throughout southwest and central Asia, including food service and 
housing. While this contract provides vital services, it is expensive. 
The estimated value of work under the current LOGCAP contract is more 
than $15 billion as of early January 2005, including $6.8 billion that 
the Army budgeted for LOGCAP activities in fiscal year 2005.[Footnote 
1] Given the importance of LOGCAP to supporting military operations and 
the billions of dollars being spent on LOGCAP, effective use of the 
LOGCAP contract is critical.

The Army's use of its LOGCAP contract has not been without problems. 
Since 1997 we have issued two reports on the U.S. Army's use of the 
LOGCAP contract to provide supplies and services for deployed U.S. 
forces that highlight both the growing importance of this contract to 
military operations and the difficulties the Army has experienced in 
managing and overseeing it and controlling costs. In 1997 we reviewed 
the Army's use of its LOGCAP contract to support U.S. forces deployed 
for the peacekeeping mission in Bosnia;[Footnote 2] and in 2004 we 
reviewed several logistics support contracts, including the Army's 
LOGCAP contract, to support military operations around the 
world.[Footnote 3]

In 2000 we also reviewed the Army's use of the Balkans Support Contract 
to support the expanded Balkans Peacekeeping Mission.[Footnote 4] The 
Balkans Support Contract is similar to the LOGCAP contract and was 
established in 1997. Finally, in 2004 we issued a report on contracting 
procedures in Iraq[Footnote 5] and testified on logistics support 
contracts and contracting in Iraq before the House Committee on 
Government Reform.[Footnote 6] Our reports identified difficulties the 
Army has experienced in planning for the use of the LOGCAP contract, 
controlling costs, and effectively managing and overseeing contract 
activities, and each made a number of recommendations intended to 
improve the Army's use and management of the contract.

We initiated this report because LOGCAP continues to be an important 
support mechanism for the Army and, as previously noted, the Army plans 
to spend approximately $6.8 billion on LOGCAP contract activities in 
fiscal year 2005 and to address broader issues involving the 
coordination of contract functions that are the responsibility of 
different elements within the Department of Defense (DOD), such as the 
contract administrator and commanders on the ground, that were beyond 
the scope of our prior reports. The objectives of this report are to 
(1) examine the extent to which the Army is taking action to improve 
the management and oversight of LOGCAP and (2) identify further 
opportunities for using the LOGCAP contract effectively.

To examine actions to improve the management and oversight of LOGCAP, 
we examined a wide range of contracting guidance and met with officials 
from the LOGCAP Program Management Office, the LOGCAP Support Unit, and 
the LOGCAP Contracting Office to gain a comprehensive understanding of 
the status of efforts regarding the LOGCAP contract, the contract 
management process, and issues related to using LOGCAP. To identify 
further opportunities for using these contracts effectively, we 
undertook a number of actions. We drew upon our prior work, including 
our visits to U.S. military sites using the LOGCAP contract in Kuwait 
and units that had returned from Iraq, but we did not visit sites in 
Iraq. To obtain more current information about the use of LOGCAP in 
Iraq, we (1) interviewed personnel who were responsible for contract 
management at the Army Materiel Command (AMC); the Army Central Command 
in Ft. McPherson, Georgia; and the former Deputy Commanding General for 
Logistics in Iraq, (2) reviewed Defense Contract Management Agency 
(DCMA) situation reports written by contracting officers in Iraq; (3) 
reviewed Defense Contract Audit Agency (DCAA) reports; and (4) met with 
representatives of the 1st Armored Division shortly after their return 
from Iraq to discuss their experiences with the LOGCAP contract. We 
determined that the information and data discussed in this report were 
reliable for the purposes of the report. We conducted our review from 
October 2004 through January 2005 in accordance with generally accepted 
government auditing standards. We discuss our scope and methodology in 
more detail in appendix I.

Results in Brief: 

The Army has taken or is in the process of taking actions to improve 
the management and oversight of the LOGCAP contract on the basis of our 
earlier reporting, and it continues to proactively look for additional 
areas for improvement. Some of the initiatives that the Army has 
completed or has under way that we believe will contribute to stronger 
management of LOGCAP include (1) rewriting its guidance, including its 
field manual for using contractors on the battlefield and its primary 
regulation for obtaining contractor support in wartime operations; (2) 
implementing near-and longer-term training for commanders and 
logisticians; (3) developing a deployable unit to assist commands using 
LOGCAP; (4) restructuring the LOGCAP contracting office to provide 
additional personnel resources in key areas; and (5) taking steps to 
eliminate the backlog of contract task orders requiring 
"definitization"--that is, coming to agreement on the terms, 
specifications, and price of the task orders--and conducting award fee 
boards in order to improve the financial oversight and control of 
LOGCAP. These steps should help to improve LOGCAP program management.

While improvements have been made in the areas discussed above, we 
believe DOD needs to take additional action in two areas: 

* First, although DOD continues to agree with our July 2004 
recommendation to implement a formal process for regularly reviewing 
contract activities for economy and efficiency, DOD's point of contact 
on our LOGCAP work, who is in the Office of the Deputy Under Secretary 
of Defense for Logistics and Materiel Readiness, told us that the need 
to address statutory requirements has taken precedence over 
implementing our recommendation.[Footnote 7] Our prior reviews have 
shown that when commanders look for savings in contract activities, 
they generally find them. For example, in our 2004 report on logistics 
support contracts, we reported that U.S. Army Europe's reviews of 
contract services provided under the Balkans Support Contract resulted 
in approximately $200 million in savings, or 10 percent of estimated 
project costs, by reducing services that were no longer needed and 
labor costs.

* The second area needing attention is the coordination of contract 
activities. While AMC is the executive agent for LOGCAP, a number of 
other DOD components also have important LOGCAP responsibilities, 
including the combatant commander, individual deployed units, DCMA, and 
DCAA. The effective and efficient use of the LOGCAP contract depends on 
the coordinated activities of each of these entities. However, our 
reports have shown a lack of coordination between the various 
components, including inadequate planning for the use of the contract, 
the last-minute renewal of contract task orders, and the absence of 
customer involvement in monitoring the contractor's performance. This 
lack of coordination stems from the fact that each DOD component is 
independent of the others. While AMC has sought to influence the way in 
which the other components carry out their roles, it does not have 
command authority over the other components and thus its influence is 
limited. For example, decisions on the level and frequency of services 
provided under the contract are the combatant commander's; decisions on 
the level of staffing and resources allocated to contract monitoring 
are DCMA's; and decisions regarding the composition of task orders are 
the ground commander's.

DOD's ability to coordinate the activities of each component involved 
in LOGCAP could facilitate finding economies and efficiencies as 
discussed above, however, no one at DOD has been assigned 
responsibility for overall leadership in using the contract. Given the 
billions of additional dollars the Army plans to spend on LOGCAP 
contract activities, the importance of the contract to the success of 
current military operations, and the existing command authorities, we 
believe that high-level oversight and coordination are needed to 
resolve the coordination issues that we previously cited and to ensure 
that the contract is being used as efficiently and effectively as 
possible.

We are recommending that the Secretary of Defense designate a LOGCAP 
coordinator who would be responsible for ensuring that the contract is 
being used both effectively and efficiently. We are not suggesting a 
change in command and control relationships or contractual authority.

In written comments on a draft of this report, DOD stated that it 
concurred with the report and its recommendations. DOD stated that a 
recently issued instruction creates the position of Defense Logistics 
Executive who will be responsible for DOD logistics and global supply 
chain management, including oversight of logistics support contracts 
such as the Army's LOGCAP contract. DOD also stated that this executive 
would advise the Secretary of unresolved differences among the DOD 
components on how best to use LOGCAP.

Background: 

Established in 1985, LOGCAP is an Army program that preplans for the 
use of global corporate resources to support worldwide contingency 
operations. In the event that U.S. forces deploy, contractor support is 
then available to a commander as an option. Examples of the types of 
support available include supply operations, laundry and bath, food 
service, sanitation, billeting, personnel support, maintenance, 
transportation, engineering and construction, and power generation and 
distribution. LOGCAP has been used to support U.S. forces in operations 
in Somalia, Haiti, and Bosnia and is currently being used to support 
operations in Afghanistan, Iraq, Kuwait, and Uzbekistan, as well as in 
other countries. The use of LOGCAP to support U.S. troops in Iraq is 
the largest effort in the history of LOGCAP.

The LOGCAP contract comprises a series of task orders that commit both 
the contractor to provide services and the government to pay for those 
services. Some of the task orders are considered undefinitized 
contracting actions because the terms, specifications, and price of the 
task orders are not agreed upon before performance begins. 
Undefinitized contract actions are used when (1) government interests 
demand that the contractor be given a binding commitment so that work 
can begin immediately and (2) negotiating a definitive contract is not 
possible in sufficient time to meet the requirement. The Defense 
Federal Acquisition Regulation Supplement (DFARS) requires that 
undefinitized contract actions must include a not-to-exceed cost and a 
definitization schedule. DFARS also requires that the contract be 
definitized within 180 days or before 50 percent of the work to be 
performed is completed, whichever occurs first. The head of an agency 
may waive the requirement.

Both LOGCAP and the Balkans Support Contract are cost-plus-award-fee 
contracts. Cost-plus-award-fee contracts entitle the contractor to be 
reimbursed for reasonable, allowable, and allocable costs incurred to 
the extent prescribed in the contract. The advantage of cost-plus- 
award-fee contracts is that they provide financial incentives based on 
contractor's performance and criteria stated in the contract. These 
contracts enable the government to evaluate a contractor's performance 
according to specified criteria and to grant an award amount within 
designated parameters. Thus, award fees can serve as a valuable tool to 
help control program risk and encourage excellence in contract 
performance. But to reap the advantages that cost-plus-award-fee 
contracts offer, the government must implement an effective award fee 
process.

Responsibility for the LOGCAP contract is divided among multiple DOD 
and service components. AMC is the Army executive agent for LOGCAP, and 
it has organized the program under its Army Field Support Command 
(AFSC). According to Army regulation, as the executive agent, AMC is 
responsible for coordinating LOGCAP requirements (and the requirements 
of any other AMC umbrella support contracts) with the unified commands, 
other services, and Army-supported combatant commanders for AMC 
contractor support. AMC has assigned responsibility for LOGCAP to the 
commander of AFSC, who has task-organized LOGCAP under three separate 
offices, all of which report directly to him. These three offices are 
(1) the LOGCAP Program Manager, (2) the LOGCAP Contracting Office, and 
(3) the LOGCAP Support Unit. The key contract management roles and 
responsibilities for these three offices are detailed in table 1, along 
with the management roles and responsibilities of LOGCAP customers.

Table 1: Key Contract Management Roles and Responsibilities: 

Customers: 
* Develop requirements; 
* Write statements of work; 
* Obtain funding; 
* Monitor contract performance; 
* Evaluate technical performance; 
* Provide the award fee board with input; 

LOGCAP Contracting Officer: 
* Interprets the contract; 
* Obligates the government for work under the contract; 
* Delegates contract administration procedures to administrative 
contracting officers; 
* Provides the award fee board with input; 
* Definitizes the task orders.

Customers: 
* Serves as the Army interface between the customer and the LOGCAP 
contractor; 
* Advises customer of LOGCAP capabilities; 
* Serves as on-site contracting officer representative as needed; 
* Deploys worldwide in support of any contingency using LOGCAP; 

LOGCAP Contracting Officer: 
* Provides LOGCAP central management; 
* Provides education and training; 
* Provides plan and budget for program resources; 
* Prioritizes planning requirements; 
* Partners with contractor to ensure responsive and flexible support; 
* Identifies emerging requirements; 
* Ensures statement of work's execution.

Sources: DOD (data); GAO (analysis).

[End of table]

DCMA also plays a role in overseeing contract activities. When 
requested by the procuring contracting officer, DCMA monitors a 
contractor's performance and management systems to ensure that the 
cost, product performance, and delivery schedules comply with the terms 
and conditions of the contract. As of November 2004, DCMA had 46 
employees in Iraq monitoring multiple DOD contracts, including the 
LOGCAP contract. 

DCAA performs contract audits of the LOGCAP contract and provides 
accounting and financial advisory services regarding contracts and 
subcontracts for AFSC. These services are provided in connection with 
the negotiation, administration, and settlement of contracts and 
subcontracts. 

The Army Has Taken Steps to Improve LOGCAP Management and Oversight: 

Overall, the Army has taken numerous actions, or is in the process of 
taking actions to improve the management and oversight of LOGCAP as 
well as related contracts, based on our earlier reporting. Some of the 
initiatives the Army has completed or has under way that should 
contribute to stronger management of LOGCAP include (1) rewriting its 
guidance, including its field manual for the use of contractors on the 
battlefield, and its primary regulation for obtaining contractor 
support in wartime operations; (2) implementing near-and longer-term 
training for commanders and logisticians; (3) developing a deployable 
unit to provide training and assistance for commands using LOGCAP; (4) 
restructuring the LOGCAP contracting office to provide additional 
personnel resources in key areas; and (5) eliminating the backlog of 
contract task orders requiring definitization and conducting award fee 
boards in order to improve the financial oversight and control of 
LOGCAP. 

Guidance Has Been Rewritten: 

The absence of guidance on how to effectively use LOGCAP was cited in 
our 1997 report as an area that needed improvement, and since that time 
the Army has rewritten two key documents that provide guidance on using 
LOGCAP. In January 2003, the Army reissued Field Manual 3-100.21, 
Contractors on the Battlefield, and it is currently rewriting Army 
Regulation 715-9, Contractors Accompanying the Force. These documents 
should significantly improve the supported forces' understanding of the 
Army policies, responsibilities, and procedures for using contractors 
effectively on the battlefield. The Army's rewritten field manual 
provides guidance for commanders and their staff at all levels in the 
planning, management, and use of contractors in each area of 
operations, as well as guidance describing the relationship between 
contractors and both the combatant commanders and the Army's service 
component commanders. The manual addresses supported forces' roles and 
responsibilities in planning contractor support; deploying and 
redeploying contractor personnel and equipment; and managing, 
supporting, and protecting contractors. It also addresses the planning 
process and relates the planning for contractor support to the military 
decision-making process. 

The Army's regulation for contractors accompanying the force is still 
in draft; however, when completed, we believe it will establish Army 
policy for planning and managing contracted support. According to an 
information paper on the draft regulation, it proposes significant 
changes in three areas. The most significant policy change in terms of 
contract management and oversight is the recommendation that the 
supported unit (that is, the customer) be responsible for providing day-
to-day control of contractors' activities. Contract managers will 
continue to be responsible for the business aspects of managing the 
contractor workforce. The other two changes deal with (1) the 
accountability and support of contractor employees and (2) the medical 
screening, training, and equipping of contractor employees prior to 
deployment. An Army official working on the draft regulation said that 
once the regulation is finalized, the field manual will be revised to 
incorporate the changes. 

Training and Assistance Programs Are Being Developed: 

Training and assistance programs have been or are being developed to 
improve the understanding of the contract and how it is managed and 
controlled. A 1999 initiative was the creation of a deployable unit, 
known as the LOGCAP Support Unit, to assist commanders in planning for 
and using the contract effectively. The unit consists of 66 Army 
Reserve soldiers with specialties in logistics, engineering, 
quartermaster duties, transportation, and ordinance. Because customers 
often have little knowledge of contract processes, the unit has 
developed training materials that address the issues of planning, 
operational impacts, execution responsibilities, and keys to success. 
This training addresses preparing statements of work, independent 
government cost estimates, and the contractor's cost estimates and 
technical plans and has been presented at the Quartermaster School, the 
Battle Command Training Program, and DCMA's predeployment training. The 
LOGCAP Support Unit has also taken steps to increase the size of the 
unit and improve its training. As we reported in July 2004, the unit 
was deployed in the early stages of Operation Iraqi Freedom, and when 
the original members returned home, replacement teams were created and 
staffed with individuals who had no prior LOGCAP or contracting 
experience. Since then, the unit has developed a program of instruction 
to enhance LOGCAP Support Unit members' skills in key areas. As of 
November 2004, two sessions of the training have been conducted for all 
members of the unit who are not deployed. The LOGCAP Support Unit has 
also worked with the LOGCAP Program Manager's office and DCMA to ensure 
the consistency of information being provided in each office's 
training. 

The LOGCAP Program Manager's office, in conjunction with the LOGCAP 
Support Unit, has also made efforts to educate the users of LOGCAP 
services about their responsibilities. When the office has become aware 
of units preparing for deployment, it has dispatched teams tasked with 
briefing commanders on the contract and their responsibilities. LOGCAP 
training has also been presented at senior-level symposiums and made a 
part of several warfighter exercises. 

We did not follow up on DOD's efforts to integrate LOGCAP into 
professional military education because DOD is in the process of 
developing a training module that could be utilized by each of the mid- 
and senior-level service schools. 

AFSC Has Restructured the LOGCAP Contracting Office to Provide 
Additional Personnel Resources in Key Areas: 

Recently, AFSC restructured the LOGCAP Contracting Office to provide 
additional resources in key areas. This includes dividing procuring 
contracting officer functions and contracting branch chief functions as 
well as establishing definitization and award fee board coordinators. 
The command also established a Deputy Division Chief position. To 
assist in the timely resolution of issues in the theater, the command 
deployed contracting officers to Kuwait and Iraq to establish closer 
working relationships with commanders and DCMA personnel located there. 

AFSC is also in the process of reorganizing its contracting office. In 
response to an August 2004 memorandum from the Deputy Assistant 
Secretary of the Army for Policy and Procurement to AMC's Director of 
Contracting stating that it seemed appropriate to have a member of the 
Senior Executive Service manage LOGCAP, given its high dollar value, 
AFSC is in the process of establishing a senior executive position to 
oversee the AFSC Acquisition Center. A key function of this executive 
is to provide the AFSC commander with additional leadership and 
expertise in the LOGCAP arena. The command also established a 
sustainment branch to develop and implement an acquisition strategy for 
the follow-on to the LOGCAP contract. This branch will also lead the 
command's efforts to transition existing LOGCAP work to sustainment 
contracts. 

Improvements Have Been Made in Definitizing Contracts and Conducting 
Award Fee Boards: 

In our February 1997 report and again in our July 2004 report, we noted 
that the Army had not definitized LOGCAP task orders within the time 
frames prescribed in DFARS. Definitization is the process by which the 
government and the customer come to agreement or a determination is 
made on the terms, specifications, and price of the task orders. DFARS 
requires that undefinitized contract actions be definitized within 180 
days or before 50 percent of the work to be performed is completed, 
whichever occurs first. Definitization is important because until the 
estimate is formalized, the contractor has no real incentive to control 
costs, as increased project costs potentially mean a higher project 
estimate, potentially resulting in a higher award fee. Definitization 
is also a necessary first step before the Army can conduct award fee 
boards that evaluate the contractor's performance. In our 2004 report 
on contracting procedures in Iraq, we recommended that the Army 
definitize outstanding contracts and task orders as soon as possible. 

Progress is being made in definitizing task orders. When we issued our 
report in July 2004 on the Army's use of LOGCAP to support ongoing 
military operations, the Army had definitized only 13 of 54 task orders 
that required definitization. As of March 2005, the Army had initiated 
11 additional task orders (bringing the total to 65 task orders that 
require definitization) and has completed the definitization on 31 
additional task orders (bringing the total to 44). The Army also 
reports that it will complete definitization of the remaining 21 by 
March 31, 2005. To help with definitizing the two largest task orders-
-task order 59, which provides base camp services, accommodations, and 
life support services at various locations in Iraq, and task order 43, 
the theater transportation mission--the Army established two special 
cost analysis teams. These teams are led by senior officials with 
extensive contracting and negotiating background, augmented by a 
contractor. In addition, three more teams have been assembled to help 
definitize the remaining backlogged task orders as well as all newly 
issued, undefinitized contract actions. 

Progress has also been made in conducting award fee boards since our 
July 2004 report noted that the Army had not yet conducted an award fee 
board for any of the LOGCAP task orders even though the contract 
requires an award fee board to be held every 6 months. Award fee boards 
are a mechanism for the government to evaluate the contractor's overall 
performance and can serve as a valuable tool to control program risk 
and encourage the contractor's performance. According to AFSC, 41 
undefinitized task orders require award fee boards, and as of mid-March 
2005, the Army had conducted award fee boards for 22 of the 41 task 
orders. It should be noted, however, that the Army converted 12 task 
orders and plans to convert an additional 3 that required 
definitization to fixed fee contracts, thereby negating the need to 
hold award fee boards for these task orders. According to an AFSC 
contracting official, the decision to convert these task orders was 
based on a number of factors, including the small size of the task 
order, the cost to the government to conduct the boards, the Army's 
ability to acquire meaningful customer participation, and whether 
performance is complete on the contract. We stated in our July 2004 
report that the government may find it difficult to conduct a board 
that comprehensively evaluates contractor performance because customers 
have not been documenting their LOGCAP experience. 

Enhanced Management and Oversight of LOGCAP Contract Activities Are 
Needed in Two Areas: 

While improvements have been made in a number of areas, there are two 
areas where management and oversight are lacking. First, there is no 
formal process for seeking economy and efficiency in the use of LOGCAP. 
In our July 2004 report, we recommended that teams of subject matter 
experts be created to travel to locations where contractor services are 
being provided to evaluate the support. DOD concurred with our 
recommendation. However, as of February 2005, teams had not been 
created or deployed to review contract activities. Second, there is a 
lack of coordination of contract activities between all of the LOGCAP 
parties. AMC is the executive agent for LOGCAP, but several other DOD 
components also have important LOGCAP responsibilities, and these 
components must work in coordination with AMC to ensure the contract's 
effective and efficient use. However, AMC does not have command 
authority over the other components and, while it has sought to 
influence how the other components carry out their roles, its influence 
is limited outside the command. We believe that this dispersed 
responsibility has led to numerous instances of inadequate 
coordination, which we have cited in our earlier reports. 

Steps Needed to Ensure That Contractors Provide Services in an 
Economical and Efficient Manner Have Not Been Taken at All Task Order 
Locations: 

Our previous work has shown that when government officials (including 
customers) review a contractor's work for economy and efficiency, 
savings are generated. For example, U.S. Army Europe's reviews of 
contract activities under the Balkans Support Contract resulted in 
approximately $200 million in savings, or 10 percent of estimated 
project costs, by reducing services and labor costs and by closing or 
downsizing camps that were no longer needed. U.S. Army Europe officials 
told us that our 2000 report on the management of the Balkans Support 
Contract was a "wake up call" to them to be more engaged in managing 
the contract. Also, when Marine Corps forces replaced Army forces in 
Djibouti in December 2002, they took over the responsibility for 
funding LOGCAP services there. Marine commanders immediately undertook 
a complete review of the statement of work and were able to reduce the 
$48 million task order by an estimated $8.6 million, or 18 percent. In 
Iraq, the coalition forces military command reviewed task order 59, 
change 7 (the task order for life support services in Iraq) and was 
able to reduce the estimated cost of the task order by over $108 
million by eliminating services and an extra dining and laundry 
facility. Regularly scheduled reviews of all task orders, however, were 
not taking place in Kuwait or Iraq, and we recommended that teams of 
subject matter experts be created to travel to locations where 
contractor services are being provided to evaluate the support and make 
recommendations on (1) the appropriateness of the services being 
provided, (2) the level of services being provided, and (3) the economy 
and efficiency with which the services are being provided. 

In response to our recommendation, DOD stated that it would issue a 
policy memorandum that would identify the need to have teams of subject 
matter experts make periodic visits to evaluate and make 
recommendations on the logistics support contracts. However, as of 
February 2005 no policy memorandum has been issued and no teams of 
subject matter experts have been established or deployed to review 
contract activities. While DOD continues to agree with our 
recommendation, its point of contact on our LOGCAP work, in the Office 
of the Undersecretary of Defense for Logistics and Materiel Readiness, 
told us that the need to address statutory requirements has taken 
precedence.[Footnote 8] However, some individual efforts have been 
undertaken to reduce costs but not as part of a formal review process. 
For example, requests for services costing more than $50,000 now 
require a review by a general officer. Also, in December 2004 the 
commanding general of military forces in Iraq requested that the Army 
Audit Agency evaluate LOGCAP throughout Iraq to identify fiscal and 
managerial efficiencies; the effectiveness of contract administration 
and its impact on cost controls; areas vulnerable to fraud, waste, and 
abuse; systemic processes and procedures that inherently result in 
increased costs; and methods for improving the timeliness and accuracy 
of information presented to assist senior leaders in making timely 
decisions. He also asked that the Army Audit Agency assess the adequacy 
of internal controls. 

The Coordination of Contract Activities Needs Additional Management 
Attention: 

The effective use of the LOGCAP contract largely depends on the 
combined efforts of a number of separate DOD components, including AMC, 
the combatant commander, deployed units, DCMA, and DCAA. For example, 
an AMC pamphlet that provides users with a basic understanding of 
LOGCAP identifies the responsibility to monitor contractor performance 
as one that is shared by AMC, DCMA, and the customer.[Footnote 9] 
Altogether, the pamphlet identifies 22 LOGCAP responsibilities, of 
which 16 are shared by two or more components. Only six 
responsibilities are the sole responsibility of one component. As the 
executive agent for LOGCAP, AMC is responsible for directing the 
worldwide, regional, and country-specific planning, development, and 
execution of a LOGCAP contract. However, while AMC has sought to 
influence the manner in which the other components carry out their 
roles, AMC does not have command authority over the components, and 
thus its influence is limited. We believe that this limitation 
contributes to an overall lack of coordination across the various DOD 
components that are involved with LOGCAP, and consequently less 
effective utilization of the LOGCAP contract. For example, we 
identified the following coordination problems in our previous reports 
and current work: 

* The Army Central Command--the Army command responsible for LOGCAP 
planning in Iraq and Kuwait--did not follow the planning process 
described in Army regulations and guidance as it prepared for 
operations in southwest Asia. While AMC was aware that the Army Central 
Command's plan for the use of the contract was not comprehensive, it 
lacked the authority to direct better planning. 

* An acquisition review board in Kuwait was presented with several 
large preexisting task orders that were to expire within a few weeks, 
giving the board little time to consider alternatives to LOGCAP or 
review the requirements to ensure that they did not provide an 
excessive level of service. Again, AMC was aware that the planning was 
inadequate but lacked the authority to direct better planning. 

* Effective oversight processes were not established by customers at 
several locations. A senior Army division-level logistician who 
returned from Iraq in late 2004 told us that there was nothing in the 
division's operations orders that identified its responsibilities in 
managing or overseeing LOGCAP contract activities. Furthermore, the 
logistician had not seen the contract statement of work that described 
the division's requirements nor had he seen the contractor's technical 
execution plan that described how the contractor planned to meet the 
division's requirements. He also said that the division had not 
prepared any formal assessment of the contractor's performance that 
could be used at award fee boards. AMC has no authority to direct 
contract oversight by LOGCAP customers. 

* In our July 2004 report, we discussed a disagreement between the 
LOGCAP contractor and DCAA involving at least $88 million in food 
service charges to feed soldiers in Iraq. This occurred because the 
Army had defined a population for each base camp in the statement of 
work and had directed the contractor to feed that number. The actual 
number of soldiers served, however, was lower than the number specified 
in the contract for most locations. The contractor requested payment 
based on the base camp numbers in the contract but DCAA believes that 
the contractor should have been paid on the basis of the actual number 
of meals served. These differing views created a billing disagreement. 
According to the 101st Airborne Division official responsible for 
coordinating LOGCAP activities in the division's sector in Iraq, the 
division was not aware of the cost implications of the disparity. He 
also said that the next higher headquarters for the 101st was not 
interested in the number of people who were using the dining facility, 
unless the number exceeded the number contracted for in the statement 
of work. 

* Information for award fee boards was not systematically collected 
from some customers, making it difficult to hold a board that could 
comprehensively evaluate the contractor's performance. Award fee boards 
can serve as a valuable tool to control program risk and encourage 
contractors' performance. AFSC recently told us that it had to convert 
some LOGCAP task orders to cost-plus-fixed-fee task orders partly 
because it lacked the information to hold an award fee board. 

AMC is aware of these problems and has attempted to influence how the 
other DOD components carry out their roles by deploying personnel to 
assist the customer in using the LOGCAP contract effectively. However, 
while AMC can ask the DOD components to carry out their 
responsibilities, it cannot direct their activities. This affects the 
extent to which it can control how effectively the contract is 
utilized. For example, in response to a series of questions we posed to 
AFSC regarding managing LOGCAP, an AFSC official provided the following 
examples where it has no ability, or limited ability, to influence 
contract activities: 

* Decisions on the level and frequency of services provided under the 
contract are the combatant commanders', based on operational 
requirements. 

* Commanders on the ground ultimately make decisions regarding the 
composition of task orders and required services based on their 
operational needs. While AFSC provides input to the planning process, 
once the commander on the ground makes a decision, AFSC's mission is to 
execute that action within established legal, regulatory, and 
contractual parameters. As an example, an AFSC official said that the 
command aggressively pursued the reduction of the major task order for 
services in Iraq (Task Order 59) with the customer. However, the 
customer's decision was to maintain the task order in its current form 
with a planned increase in scope for the follow-on effort. 
Consequently, AFSC will execute the customer's requirement. 

* AFSC's procuring contracting officer has the primary responsibility 
for monitoring the contractor's performance, and DCMA serves as the 
contracting officer's agent in theater to monitor the performance of 
the contractor. However, DCMA makes an independent assessment regarding 
the level of staffing and resources allocated to perform its mission. 

AMC's command relationship to the other DOD components is shown in 
figure 1. As shown, the DOD components with LOGCAP responsibilities 
have separate chains of command leading to the Secretary of Defense and 
only the Office of the Secretary of Defense is in a position to 
exercise overall coordination of the four components. 

Figure 1: Organizational Structure for Management of the LOGCAP 
Contract in Iraq and Afghanistan: 

[See PDF for image]

[End of figure]

To address coordination issues between the components, AFSC has focused 
on training commanders in using the LOGCAP contract effectively and 
deploying personnel to work with commanders to improve their 
understanding of contract oversight practices. However, AFSC officials 
acknowledge that change will be slow because of the turnover of units 
and personnel in southwest Asia. Given the $6.8 billion that the Army 
plans to spend on LOGCAP contract activities in fiscal year 2005, the 
importance of the contract to the success of current military 
operations, and the existing command authorities, we believe that more 
direct oversight and coordination is needed. This oversight would need 
to be at a level sufficiently high enough to ensure participation in 
deliberations and vested in an individual with sufficient stature to 
effectively advocate for the most efficient use of the contract. We are 
not suggesting a change in command and control relationships or 
contractual authority. The view that high level oversight and 
coordination are needed is also shared by the former Deputy Commanding 
General for Logistics in Iraq, who told us that he believes someone was 
needed to provide overall coordination for the program and by a senior 
AFSC official who told us that there was confusion over program 
leadership and that there would be value in having someone of general 
officer stature that could interact with all the DOD components having 
LOGCAP responsibility to advocate for the most effective use of the 
contract. In commenting on a draft of this report, the LOGCAP Support 
Unit commander similarly said that better coordination between the DOD 
components would improve contract oversight. The commander added that 
doctrine development and training are a critical part of the solution 
and that in AMC's current LOGCAP doctrine, there is no "user guide" 
that addresses user responsibilities in using the LOGCAP contract. Our 
February 1997 report identified the need for better guidance, and 
earlier in this report we discussed the Army's ongoing efforts to 
improve its guidance. 

Conclusions: 

In response to our prior reports, the Army has taken or is in the 
process of taking steps designed to improve the management and 
oversight of LOGCAP as well as related contracts and it continues to 
proactively look for additional areas for improvement. This proactive 
work includes the recent establishment of a Senior Executive Service 
position to manage LOGCAP within AFSC. However, many other DOD 
components have responsibilities under LOGCAP. At the DOD level, no one 
is in a position to coordinate these components in using the contract. 
This lack of coordination has resulted in problems in the use of the 
contract. While we are not suggesting a change in command and control 
relationships or contractual authority, we believe that establishing a 
LOGCAP coordinator within DOD with responsibility for coordinating the 
use of LOGCAP and with the authority to participate in deliberations 
and advocate for its most effective use has the potential to improve 
the manner in which LOGCAP is used and managed. 

Our July 2004 report recommended that teams of subject matter experts 
be created to travel to locations where contractor services are being 
provided to evaluate the support of and make recommendations on the 
appropriateness of the services being provided, the level of services 
being provided, and the economy and efficiency with which the services 
are being provided. We continue to believe that this recommendation has 
merit and would generate savings. 

Recommendation for Executive Action: 

To make more effective use of LOGCAP we recommend that the Secretary of 
Defense take the following actions: 

* Designate a LOGCAP coordinator with the authority to participate in 
deliberations and advocate for the most effective and efficient use of 
the LOGCAP contract. Areas where we believe this coordinator should 
provide oversight include (1) reviewing planning for the use of LOGCAP 
to ensure it is in accordance with Army doctrine and guidance; (2) 
evaluating the types and frequency of services to be provided; and (3) 
evaluating the extent to which the contract is being used economically 
and efficiently. 

* Direct the coordinator to advise the Secretary of unresolved 
differences among the DOD components on how best to use LOGCAP, and to 
report to the Secretary periodically regarding how effectively LOGCAP 
is being used. 

As you know, 31 U.S.C. 720 requires the head of a federal agency to 
submit a written statement on the actions taken on our recommendations 
to the Senate Committee on Government Affairs and House Committee on 
Government Reform not later than 60 days after the date of this report. 
A written statement must also be sent to the House and Senate 
Committees on Appropriations with the agency's first request for 
appropriations made more than 60 days after the date of this report. 

Agency Comments and our Evaluation: 

DOD provided written comments on a draft of this report, which were 
signed by the Acting Deputy Under Secretary of Defense for Logistics 
and Materiel Readiness. They are included in appendix II. DOD concurred 
with the report and its recommendations, and described the steps it 
plans to take to implement our recommendations. Regarding our 
recommendation that the Secretary of Defense designate a LOGCAP 
coordinator with the authority to participate in deliberations and 
advocate for the most effective and efficient use of the contract, DOD 
stated that it recently issued a new DOD instruction entitled "The 
Defense Logistics and Global Supply Chain Management System," which 
identifies the Under Secretary of Defense for Acquisition, Technology, 
and Logistics as the Defense Logistics Executive; establishes a Defense 
Logistics Board; and defines the department's logistics and global 
supply chain management system as including all DOD activities that 
provide the combatant commanders with materiel support. According to 
DOD, oversight of logistics support contracts such as the Army's LOGCAP 
contract is within the authority and responsibility of the Defense 
Logistics Executive, and the Defense Logistics Board will include 
logistics support contracts as part of its mandate to "advise the 
Defense Logistics Executive on oversight of the Defense logistics and 
global supply chain management system." Regarding our recommendation 
that the coordinator be directed to advise the Secretary of unresolved 
differences among the DOD components on how best to use LOGCAP, DOD 
stated that the Defense Logistics Executive, with the advice and 
assistance of the Defense Logistics Board, would do so. 

We are sending copies of this report to the Chairman and Ranking 
Minority Members, House and Senate Committees on Armed Services; the 
Chairman and Ranking Minority Members, Subcommittees on Defense, House 
and Senate Committees on Appropriations; Chairman and Ranking Minority 
Member, House Committee on Government Reform; and other interested 
congressional committees. We are also sending a copy to the Director, 
Office of Management and Budget, and we will make copies available to 
others upon request. In addition, the report will be available at no 
charge on the GAO Web site at [Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions, please contact me on (202) 512-
8365 or by e-mail at [Hyperlink, solisw@gao.gov]. Major contributors to 
this report are included in appendix III. 

Sincerely yours,

Signed by: 

William M. Solis: 
Director, Defense Capabilities and Management: 

[End of section]

Appendixes: 

Appendix I: Scope and Methodology: 

To determine the actions the Army has taken for improving the 
management and oversight of the Logistics Civil Augmentation Program 
(LOGCAP), we met with representatives of the Army Field Support 
Command's (AFSC) LOGCAP Program Manager, LOGCAP Contracting Office, and 
LOGCAP Support Unit to gain a comprehensive understanding of the status 
of efforts regarding the LOGCAP contract, the contract management 
process, and issues related to using the contract effectively. We drew 
upon our prior work, including visits to U.S. military sites using the 
LOGCAP contract in Kuwait and units that had returned from Iraq. Among 
the units that had returned from Iraq, we met with representatives of 
the 101st Airborne Division and the 1st Armored Division. We also met 
with customers who used the LOGCAP contract, including logistics 
planners from the Army Central Command, who were responsible for 
planning for the use of LOGCAP in Operations Enduring Freedom and Iraqi 
Freedom, to discuss their experiences, and with contracting officials 
within the same command who played a role in contract management and 
oversight. To identify further opportunities to use the contract 
effectively, we undertook a number of actions. We interviewed the 
former Deputy Commanding General for Logistics in Iraq to discuss his 
experiences in using LOGCAP. We also met with senior logistics 
officials from U.S. Army Europe who were responsible for the Balkans 
Support Contract. As we stated earlier in this report, the Balkans 
Support Contract is similar to the LOGCAP contract and was established 
in 1997 when there was a change in LOGCAP contractors. The purpose of 
our visit was to discuss their lessons learned in controlling the 
Balkans Support Contract and the actions they had taken to improve the 
overall management of that contract. 

We visited or spoke with individuals at the following locations during 
our review: 

Department of the Army: 

* Office of the Deputy Chief of Staff-Logistics, Pentagon: 

* U.S. Army Europe, Heidelberg, Germany: 

* U.S. Army Central Command (Rear), Fort McPherson, Ga. 

* U.S. Army Corps of Engineers--Trans Atlantic Program Center, 
Winchester, Va. 

* 1st Armored Division, Wiesbaden Army Airfield, Wiesbaden, Germany: 

* U.S. Army Materiel Command, Fort Belvoir, Va. 

* U.S. Army Field Support Command, LOGCAP Contracting Office, Rock 
Island, Ill. 

* U.S. Army Field Support Command, LOGCAP Program Office, Fort Belvoir, 
Va. 

* U.S. Army Field Support Command, LOGCAP Support Unit, Fort Belvoir, 
Va. 

We conducted our review from October 2004 through January 2005 in 
accordance with generally accepted government auditing standards. 

[End of section]

Appendix II: Comments from the Department of Defense: 

DEPUTY UNDER SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS: 
3500 DEFENSE PENTAGON: 
WASHINGTON, DC 20301-3500: 

MAR 10 2005: 

Mr. William Solis: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
Washington, D.C. 20548: 

Dear Mr. Solis: 

This is the Department of Defense (DoD) response to the GAO draft 
report GAO-05-328, "DEFENSE LOGISTICS: High Level DoD Coordination is 
Needed to Further Improve Management of the Army's LOGCAP Contract," 
dated February 22, 2005 (GAO Code 350603).

The DoD concurs with the report and the recommendations. Detailed 
comments on the GAO recommendations are provided in the attachment. The 
DoD appreciates the opportunity to comment on the draft report.

Sincerely,

Signed for: 

Brad Berkson: 
Acting: 

Attachment: 

GAO DRAFT REPORT - DATED February 22, 2005 GAO CODE 350603/GAO-05-328: 

"DEFENSE LOGISTICS: High Level DOD Coordination is Needed to Further 
Improve Management of the Army's LOGCAP Contract": 

DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS: 

RECOMMENDATION 1: The GAO recommended that the Secretary of Defense 
designate a LOGCAP coordinator with the authority to participate in 
deliberations and advocate for the most effective and efficient use of 
the LOGCAP contract. Areas where GAO believes this coordinator should 
provide oversight include: (1) reviewing of plans for the use of LOGCAP 
to ensure it is in accordance with Army doctrine and guidance; (2) 
evaluating the types and frequency of services to be provided; and (3) 
evaluating the extent to which the contract is being used economically 
and efficiently. (Page 25/GAO Draft Report): 

DOD RESPONSE: Concur. The Acting Under Secretary of Defense for 
Acquisition, Technology and Logistics (USD(AT&L)) signed a new DoD 
Instruction (DoDI), "The Defense Logistics and Global Supply Chain 
Management System (DLGSCMS)," on January 19, 2005. This DoDI identifies 
the USD(AT&L) as the Defense Logistics Executive, establishes the 
Defense Logistics Board, and defines the DLGSCMS as including all DoD 
activities that provide materiel support to the combatant commanders. 
Oversight of logistics support contracts such as Army's LOGCAP contract 
is therefore within the authority and responsibility of the Defense 
Logistics Executive. The Defense Logistics Board will include logistics 
support contracts as part of its mandate to "advise the DLE on 
oversight of the DLGSCMS and make recommendations for its improvement 
and maintenance."

RECOMMENDATION 2: The GAO recommended that the coordinator, designated 
by the DOD, be directed to advise the Secretary of unresolved 
differences among the DOD components on how best to use LOGCAP, and to 
report to the Secretary periodically regarding how effectively LOGCAP 
is being used. (Page 25/GAO Draft Report): 

DOD RESPONSE: Concur. The Defense Logistics Executive, with the advice 
and assistance of the Defense Logistics Board, will do so. 

[End of section]

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Steve Sternlieb (202) 512-4534: 

Acknowledgments: 

In addition to the person named above, Glenn Furbish, Kenneth Patton, 
Jennifer Thomas, and Earl Williams made key contributions to this 
report. 

(350603): 

FOOTNOTES

[1] The estimated $15 billion value of work under the current LOGCAP 
contract is the contractor's rough order of magnitude estimate. 

[2] GAO, Contingency Operations: Opportunities to Improve the Logistics 
Civil Augmentation Program, GAO/NSIAD-97-63 (Washington, D.C.: Feb. 11, 
1997). 

[3] GAO, Military Operations: DOD's Extensive Use of Logistics Support 
Contracts Requires Strengthened Oversight, GAO-04-854 (Washington, 
D.C.: July 19, 2004). 

[4] GAO, Contingency Operations: Army Should Do More to Control 
Contract Costs in the Balkans, GAO/NSIAD-00-225 (Washington, D.C.: 
Sept. 29, 2000). 

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

[6] GAO, Contract Management: Contracting for Iraq Reconstruction and 
for Global Logistics Support, GAO-04-869T (Washington, D.C.: June 15, 
2004). 

[7] DOD is required to issue defense guidance and make a report to the 
Senate and House Armed Services Committees regarding contractors in 
Iraq no later than 180 days after the enactment of the National Defense 
Authorization Act for Fiscal Year 2005. Pub. L. No. 108-375, §§1205 and 
1206 (2004). 

[8] DOD is required to issue defense guidance and make a report to the 
Senate and House Armed Services Committees regarding contractors in 
Iraq no later than 180 days after the enactment of the National Defense 
Authorization Act for Fiscal Year 2005. Pub. L. No. 108-375, §§1205 and 
1206 (2004). 

[9] U.S. Army Materiel Command, AMC Pamphlet 700-30, Logistics Civil 
Augmentation Program (January 2002). 

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