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Report to Congressional Committees: 

United States Government Accountability Office: 

GAO: 

September 2008: 

Military Operations: 

DOD Needs to Address Contract Oversight and Quality Assurance Issues 
for Contracts Used to Support Contingency Operations: 

Military Operations: 

GAO-08-1087: 

GAO Highlights: 

Highlights of GAO-08-1087, a report to congressional committees 
September. 

Why GAO Did This Study: 

The Department of Defense (DOD) uses contractors to meet many of its 
logistical and operational support needs. With the global war on 
terrorism, there has been a significant increase in deployment of 
contractor personnel to areas such as Iraq and Afghanistan. In its 
fiscal year 2007 report, the House Appropriations Committee directed 
GAO to examine the link between the growth in DOD’s operation and 
maintenance costs and DOD’s increased reliance on service contracts. 
GAO determined (1) the extent to which costs for selected contracts 
increased and the factors causing the increases, (2) the extent to 
which DOD provided oversight for selected contracts, and (3) the 
reasons for DOD’s use of contractors to support contingency operations. 
To address these objectives, GAO reviewed a nonprobability sample of 
seven DOD contracts for services that provide vital support to 
contingency operations in Iraq and Afghanistan. GAO reviewed contract 
requirements, funding documents and DOD guidance for these contracts 
and interviewed DOD and contractor personnel. 

What GAO Found: 

Costs for six of the seven contracts GAO reviewed increased from an 
initial estimate of $783 million to about $3.8 billion, and one 
consistent and primary factor driving the growth was increased 
requirements associated with continued military operations in Iraq and 
Afghanistan. For example, the Army awarded a $218.2 million task order 
for equipment maintenance and supply services in Kuwait in October 
2004. Since then, approximately $154 million of additional work was 
added to this task order for vehicle refurbishment, tire assembly and 
repair, and resetting of prepositioned equipment. Other factors that 
increased individual contract costs include the use of short-term 
contract extensions and the government’s inability to provide 
contractually required equipment and services. For example, in three of 
the contracts GAO reviewed, short-term contract extensions (3 to 6 
months) increased costs because the contractor felt it was too risky to 
obtain long-term leases for vehicles and housing. The actual cost of 
one contract we reviewed did not exceed the estimated cost for reasons 
such as lower than projected labor rates. 

GAO has frequently reported that inadequate staffing contributed to 
contract management challenges. For some contracts GAO reviewed, DOD’s 
oversight was inadequate because it had a shortage of qualified 
personnel and it did not maintain some contract files in accordance 
with applicable guidance. For five contracts, DOD had inadequate 
management and oversight personnel. In one case, the office responsible 
for overseeing two contracts was short 6 of 18 key positions, all of 
which needed specialized training and certifications. In addition, for 
two other contracts, proper accounting of government owned equipment 
was not performed because the property administrator position was 
vacant. Second, DOD did not always follow guidance for maintaining 
contract files or its quality assurance principles. For four contracts, 
complete contract files documenting administration and oversight 
actions taken were not kept and incoming personnel were unable to 
determine how contract management and oversight had been performed and 
if the contractor had performed satisfactorily prior to their arrival. 
In addition, oversight was not always performed by qualified personnel. 
For example, quality assurance officials for the linguist contract were 
unable to speak the language so they could not judge the quality of the 
contractor’s work. Without adequate levels of qualified oversight 
personnel, proper maintenance of contract files, and consistent 
implementation of quality assurance principles, DOD may not be able to 
determine whether contractors are meeting their contract requirements, 
which raises the potential for waste. 

DOD used contractors to support contingency operations for several 
reasons, including the need to compensate for a decrease in force size 
and a lack of capability within the military services. For example, an 
Army contract for linguist services had a requirement for more than 
11,000 linguists because DOD did not have the needed linguists. 
According to Army officials, the Army phased out many interpreter 
positions years ago and did not anticipate a large need for Arabic 
speakers. 

What GAO Recommends: 

To ensure effective oversight, GAO recommends that DOD adequately staff 
oversight positions with qualified personnel, and address 
inconsistencies in maintaining contract files and implementing quality 
assurance principles. DOD concurred with each of GAO’s recommendations 
and stated the Army was aware of and addressing the identified 
problems. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1087]. For more 
information, contact William M. Solis at (202) 512-8365 or 
solisw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Contract Costs Increased, Primarily Due to Added Requirements to 
Support Ongoing Operations in Iraq and Afghanistan: 

DOD's Oversight of Some Contracts Has Been Inadequate: 

DOD Used Contractors Because Military Personnel and DOD Civilians Were 
Not Available: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Defense: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Information Concerning Contracts We Reviewed: 

Table 2: Comparison of Originally Estimated and Total Actual Contract 
Costs: 

Abbreviations: 

APS: Army Prepositioned Stock: 
DFARS: Defense Federal Acquisition Regulation Supplement: 
DOD: Department of Defense: 
FAR: Federal Acquisition Regulation: 
FPRA: Forward Pricing Rate Agreement: 
GAO: Government Accountability Office: 
HMMWV: High Mobility Multi-Wheeled Vehicle: 
LOGCAP: Logistics Civil Augmentation Program: 
O&M: Operations and Maintenance: 

United States Government Accountability Office: 

Washington, DC 20548: 

September 26, 2008: 

Congressional Committees: 

The Department of Defense (DOD) uses contractors to meet many of its 
logistical and operational support needs during combat operations and 
peacekeeping and humanitarian assistance missions. According to DOD, 
the scale and duration of global war on terrorism operations have 
required a significant increase in contractor support and in deployment 
of contractor personnel to areas such as Iraq and Afghanistan. 
Moreover, this reliance on contractors continues to grow, and DOD has 
reported that future deployments of DOD military forces are anticipated 
to require similar levels of support.[Footnote 1] In Iraq, Afghanistan, 
and throughout Southwest Asia, contractors provide deployed U.S. forces 
with communication services, interpreters who accompany military 
patrols, base operations support (e.g., food and housing), weapon 
systems maintenance, intelligence analysis, security services, and a 
variety of other support. As of April 2008, DOD estimated that it had 
more than 164,000 contractors in Iraq, costing billions of dollars each 
year. DOD reported that contingency contract obligations for fiscal 
years 2003 through 2006 totaled nearly $44 billion. In August 2008, the 
Congressional Budget Office reported that DOD's fiscal years 2003 
through 2007 contingency contract obligations for the Iraq theater were 
$76 billion. 

In its fiscal year 2007 report accompanying the DOD Appropriations 
Bill, the House Appropriations Committee directed GAO to examine the 
link between the growth in DOD's operation and maintenance costs and, 
among other things, DOD's increased reliance on service 
contracts.[Footnote 2] This is the third report we have issued in 
response to this direction. In May 2007, we issued a report that 
examined the trends in operation and maintenance costs for fiscal years 
1995 through 2005.[Footnote 3] In January 2008, we issued a report 
addressing oversight weaknesses related to a maintenance and supply 
services contract in Kuwait.[Footnote 4] This report examines issues 
related to cost, oversight, and use of contractors to support 
contingency operations. Our reporting objectives are to determine (1) 
the extent to which costs for selected contracts supporting contingency 
operations increased and the factors causing the increases, (2) the 
extent to which DOD provided oversight for selected contracts that 
support contingency operations, and (3) the reasons for the 
department's use of contractors to support contingency operations for 
the contracts we reviewed, as well as other contracts. 

To accomplish our objectives, we conducted a case study review of a 
nonprobability sample of six DOD contracts and one task order for 
services that support contingency operations.[Footnote 5] To obtain our 
sample, we relied on DOD and our own work. Specifically, due to the 
unavailability of a complete list of contracts supporting contingency 
operations, DOD provided us a list of 34 contracts, based on criteria 
we developed. These criteria included: the contract supported deployed 
forces; Operations and Maintenance (O&M) funds were used to pay for the 
contract services; the principal place of performance was within 
Central Command's Area of Operation; the contract was to maintain a 
weapons system(s) and/or provide support; the contract was still in 
effect; and the contractor was U.S. based. In addition to these 
contracts, based on our own research and experience from past audit 
work, we generated a list of eight contracts that also met the criteria 
to supplement those provided by DOD. From the combined list, we 
selected for case study review our nonprobability sample of seven 
contracts providing various services such as base operations support, 
security, equipment maintenance, and linguist services. Factors that 
influenced the case study selection included previous GAO reviews on 
contracts supporting contingency operations, type of contract service 
provided, location where the contractor's work was performed, and 
contract dollar amount. Our selection of contracts did not allow us to 
project our findings across the universe of DOD contracts for services 
that support contingency operations. For each contract selected, our 
review covered from the beginning of the contract until it ended or 
June 2008, whichever occurred first. 

To determine the extent to which selected contracts supporting 
contingency operations experienced cost increases, we reviewed contract 
requirements and funding documents for our case study contracts and 
interviewed contracting office officials regarding changing 
requirements and cost increases. We also interviewed contractor 
personnel to obtain their views related to changing requirements and 
increasing contract costs. To determine the extent to which DOD 
provided oversight of contracts that support contingency operations, we 
compared authorized oversight positions to actual on-hand oversight 
personnel involved in contract oversight. We also interviewed Army and 
contractor personnel to determine the number of oversight personnel 
involved in providing oversight and the types of oversight provided. To 
determine the reasons the department uses contractors to support 
contingency operations, we interviewed contracting office officials and 
reviewed and compared available guidance and documentation related to 
DOD's decision to use contractors instead of military personnel for the 
contracts. 

We conducted our review from November 2006 through August 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. A more detailed description 
of our scope and methodology is included in appendix I. 

Results in Brief: 

Beginning in September 2000 and covering a period of about eight years, 
the total cost for six of the seven contracts we reviewed increased 
from an initial estimate of $783 million to about $3.8 
billion.[Footnote 6] While other factors contributed to individual 
contract cost growth, one consistent and primary factor driving the 
growth was increased requirements associated with continued military 
operations in Iraq and Afghanistan. For example, in October 2004 the 
Army awarded a $218.2 million task order for equipment maintenance and 
supply services in Kuwait. Since that time, approximately $154 million 
of additional work was added to this task order for High Mobility Multi-
Wheeled Vehicle (HMMWV) refurbishment, tire assembly and repair, and 
resetting of prepositioned equipment ($33 million, $16.6 million, and 
$104.3 million, respectively). Other factors that increased costs for 
the contracts we reviewed included the use of short-term contract 
extensions and the government's inability to provide contractually 
required equipment and services. For example, in three of the contracts 
we reviewed, short-term contract extensions (3 to 6 months) increased 
costs because the contractor felt it was too risky to obtain long-term 
leases for vehicles and housing. We also found that one contract's 
costs increased because the Army was unable to provide the contractor 
with personal protective equipment even though the contract stated the 
government would do so. According to contracting office officials, 
there was a limited supply of authorized equipment which was issued to 
deployed military units. As a result, the contractor purchased the 
equipment at a cost of approximately $600,000 and the government 
reimbursed the contractor, including the cost of overhead expenses 
associated with the purchase. The actual total cost of one contract we 
reviewed did not exceed the estimated cost for reasons such as lower 
than projected labor rates. 

DOD's oversight of some of the contracts we reviewed was inadequate due 
to (1) a shortage of qualified oversight and contract administration 
personnel and (2) because it did not maintain some contract files in 
accordance with applicable policy and guidance. GAO and others have 
frequently reported that inadequate staffing contributed to contract 
management challenges in Iraq and elsewhere. In both 2004 and 2006 we 
reported that oversight personnel told us that DOD does not have 
adequate personnel at deployed locations to effectively oversee and 
manage contractors and we found a similar situation for five of the 
seven contracts we reviewed. For example, in the contracting office 
that managed both the base operations and security services contracts 
we reviewed, 6 of 18 oversight positions were vacant. As of April 2008, 
4 of the 6 positions had been vacant for 7 months or more and the other 
2 had been vacant for 4 and 6 months. The six vacant positions all need 
specialized training and certifications and were judged by the Army to 
be key oversight and management positions. One of these vacant 
positions was the performance evaluation specialist who, according to 
the Army position description, among other tasks, is responsible for 
managing the Army's quality assurance program for two multi-million 
dollar contracts and training other quality assurance personnel. Other 
vacant positions included three contract specialists, who are 
responsible for, among other tasks, reviewing monthly contractor 
invoices. As a result, the contracting officer's representative was 
reviewing contractor invoices, a responsibility for which he said he 
was not trained. According to the contracting officer's representative, 
the invoices required closer scrutiny than he was able to provide and 
he often did not know if the invoices included valid expenses. In 
addition, the contracting officer's representative had oversight 
responsibilities for five additional contracts and his primary 
assignment as the base's Provost Marshal did not always allow him time 
to complete his contract oversight responsibilities. According to the 
contracting officer, it was difficult to find qualified candidates and 
numerous applicants were rejected because they did not have the right 
skills. Second, we found that, for some contracts, DOD did not always 
follow policy and guidance for maintaining contract files and it did 
not follow established quality assurance principles. According to the 
Federal Acquisition Regulation (FAR), the contract administration 
office shall, unless otherwise specified, maintain as part of the 
performance records of the contract, suitable records reflecting the 
nature of quality assurance actions.[Footnote 7] The regulation states 
that contract files must be organized to a level sufficient to ensure 
that they are readily accessible to principal users and, if needed, a 
locator system should be established to ensure the ability to locate 
promptly any contract files.[Footnote 8] However, for three of the 
contracts we reviewed--including two award fee contracts--the 
contracting offices did not maintain complete contract files 
documenting contract administration and oversight actions taken. As a 
result, incoming contract administration personnel were unable to 
determine how contract management and oversight had been performed and 
the extent to which the contractor had performed satisfactorily prior 
to their arrival. Some contracting office personnel whom we spoke with 
stated that previous contracting office personnel had not properly 
documented and maintained all contract actions; however, they could not 
explain why, given that this occurred prior to their assignments. 
Finally, according to an Army regulation, management of a comprehensive 
quality program requires subject matter practitioners with quality 
expertise.[Footnote 9] However, we found that assigned contract 
oversight personnel for the linguist contract were unable to judge the 
contractor's performance because they were generally unable to speak 
the languages of the contractor employees they were responsible for 
overseeing. Without adequate levels of qualified oversight personnel, 
proper maintenance of contract files, and consistent implementation of 
quality assurance principles, DOD's ability to perform the various 
tasks needed to monitor contractor performance may be impaired. In 
addition, until DOD is able to obtain reasonable assurance that 
contractors are meeting their contract requirements efficiently and 
effectively, it may not be able to make fully informed decisions 
related to award fees as well as additional contract awards. Although 
our selection of contracts did not allow us to project our findings 
across all DOD contracts for services that support contingency 
operations, we believe the potential for these weaknesses exists in 
other DOD contracts supporting contingency operations that are managed 
by the same contract oversight and administration offices and 
processes. Unless DOD can determine that inadequate oversight and 
insufficient staff are not problems across the department, the 
potential for waste exists in other DOD contracts supporting 
contingency operations. 

For the contracts we reviewed, DOD used contractors to support 
contingency operations for several reasons, including the need to 
compensate for a decrease in force size and a lack of capability within 
the military services. For example, in fiscal year 2002, Congress 
provided the Air Force with $1.5 billion to acquire 60 additional 
unmanned Predator aircraft; however, according to Air Force documents, 
the Air Force did not have the additional 1,409 personnel needed to 
maintain these new assets. As a result, the Air Force used contractors 
to support the additional aircraft. In another example, in February 
2007 an Army contract that provided linguist services had a requirement 
for more than 11,000 linguists because DOD did not have the number of 
linguists needed. According to Army officials, years ago the Army 
phased out many interpreter military occupational specialties and did 
not anticipate a large requirement for Arabic speakers, thereby 
creating the shortfall. A third contract we reviewed provided, among 
other things, for the repair of severely damaged Army Stryker vehicles. 
According to contracting office officials, the repair and maintenance 
of Army Stryker vehicles was contracted out because DOD did not have 
personnel with the specific skills needed to repair the Stryker. 
Furthermore, according to various GAO, DOD, and RAND reports, other 
reasons the department used contractors included a governmentwide 
policy encouraging contracting for commercial activities, the need to 
obtain contractor support in order to deploy weapon systems before they 
are fully developed, and the increasingly complex nature of DOD weapon 
systems. 

We are making several recommendations to ensure that DOD is able to 
exercise effective oversight over the contracts we reviewed, including 
that DOD develop a plan to adequately staff oversight positions with 
qualified personnel, take steps to determine why guidance for 
maintaining contract files is not consistently being followed and 
implement a corrective action plan, and ensure that quality assurance 
principles are consistently implemented. In addition, we recommend that 
the DOD conduct a review of contract administration functions for 
contingency operations contracts to determine the prevalence of 
inadequate contract oversight and administration staffing levels and 
the extent to which guidance for maintaining contract files and quality 
assurance principles are not being consistently followed, and to take 
corrective actions as necessary. 

In commenting on a draft of this report, DOD concurred with our 
recommendations and discussed actions planned and already taken to 
address the identified weaknesses. While DOD's actions should be viewed 
as positive steps, in the near term they will not address the issues we 
highlighted in this report. DOD provided technical comments which we 
incorporated as appropriate. DOD's comments are reprinted in appendix 
II. 

Background: 

The individual military services and a wide array of DOD and non-DOD 
agencies award contracts to support contingency operations.[Footnote 
10] Within a service or agency, numerous contracting officers, with 
varying degrees of knowledge about how contractors and the military 
operate in deployed locations, can award contracts that support 
contingency operations. According to DOD estimates, in 2005 several 
hundred contractor firms provided U.S. forces with a range of services 
at deployed locations. The customer (e.g., a military unit) for these 
contractor-provided services is responsible for identifying and 
validating requirements to be addressed by the contractor as well as 
evaluating the contractor's performance and ensuring that contractor- 
provided services are used in an economical and efficient manner. In 
addition, DOD has established specific policies on how contracts, 
including those that support contingency operations, should be 
administered and managed. Oversight of contracts--which can refer to 
contract administration functions, quality assurance surveillance, 
corrective action, property administration, and past performance 
evaluation--ultimately rests with the contracting officer, who has the 
responsibility for ensuring that contractors meet the requirements as 
set forth in the contract. However, as some contracting officers are 
not located at the deployed location, the contracting officers appoint 
contract oversight personnel who represent the contracting officer at 
the deployed location and are responsible for monitoring contractor 
performance. The way contracts and contractors are monitored at a 
deployed location is largely a function of the size and scope of the 
contract. Some contracting officers have opted to have personnel from 
the Defense Contract Management Agency monitor 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. Defense Contract Management Agency 
officials delegate daily oversight responsibilities to individuals 
drawn from units receiving support from these contractors to act as 
contracting officer's representatives for specific services being 
provided. For other contracts, contracting officers usually directly 
appoint contracting officer's representatives or contracting officer's 
technical representatives to monitor contractor performance at the 
deployed locations. These individuals are typically drawn from units 
receiving contractor-provided services, are not normally contracting 
specialists, and for whom contract monitoring is an additional duty. 
They cannot direct the contractor by making commitments or changes that 
affect price, quantity, quality, delivery, or other terms and 
conditions of the contract. Instead, they act as the eyes and ears of 
the contracting officer and serve as the liaison between the contractor 
and the contracting officer. 

The FAR requires contract administration offices to perform all actions 
necessary to verify whether contracted services conform to contract 
quality requirements and to maintain records of these actions.[Footnote 
11] The Defense Federal Acquisition Regulation Supplement (DFARS) adds 
an additional requirement for DOD agencies to conduct quality audits to 
ensure the quality of services meets contractual requirements.[Footnote 
12] Oversight begins with trained personnel being nominated for and 
assigned oversight responsibilities, and then conducting oversight 
actions throughout the contract performance period to ensure the 
government receives the services required by the contract. In addition 
to the FAR and DFARS, a DOD best practices guide stresses proper 
documentation. The Guidebook for Performance-Based Services Acquisition 
in the Department of Defense states that an assessment of contractor 
performance should be documented, whether acceptable or unacceptable, 
as it is conducted and this official record may be considered past 
performance information. 

A wide selection of contract types is available to the government and 
contractors to provide needed flexibility in acquiring supplies and 
services. The contract types are grouped into two broad categories: (1) 
fixed price and (2) cost reimbursement. The specific contract types 
range from firm-fixed-priced, in which the contractor has full 
responsibility for the performance cost and any resulting profit or 
loss, to cost-plus-fixed-fee, in which the contractor has minimal 
responsibility for the performance costs and the negotiated fee 
(profit) is fixed. In between are the various incentive contracts, in 
which the contractor's responsibility for the profit or fee incentives 
offered is tailored to the uncertainties involved in contract 
performance. One such contract type that provides incentives on the 
basis of performance is cost-plus-award-fee. A cost-plus-award-fee 
contract is a cost reimbursement contract that provides a fee (base 
amount plus an award amount) sufficient to motivate the contractor to 
excel in areas such as quality and timeliness. The amount of the award 
fee is based on the government's evaluation of the contractor's 
performance in terms of the contract criteria. Another contract type is 
indefinite-delivery/indefinite-quantity which provides for an 
indefinite quantity of supplies or services, within stated limits, 
during the contract period and the government places orders for 
individual requirements. As shown in table 1, most of the contracts we 
reviewed were cost-plus-fixed-fee type contracts. Two of the contracts 
were cost-plus-award-fee contracts. 

Table 1: Information Concerning Contracts We Reviewed: 

Contract information: Linguist Interpretation Services; 
Type of contract: Cost-plus-fixed-fee; 
Contract time period: 1 year--6 months and two 90 day option 
periods[A]; 09/2004-09/2005; 
Unit requiring the contract: Army Intelligence and Security Command. 

Contract information: Maintenance and Supply Services for Army 
Prepositioned Stock--Qatar; 
Type of contract: Hybrid--firm-fixed-price and cost plus incentive fee; 
Contract time period: 10.25 years--3-month transition and 10 option 
years; 09/01/2000-11/30/2010; 
Unit requiring the contract: Army Field Support Battalion - Qatar. 

Contract information: Global Maintenance and Supply Services in Kuwait-
-Task Order 0001; 
Type of contract: Cost-plus-fixed-fee and firm-fixed- price; 
Contract time period: 5 years--1 base year and 4 option years; 
12/01/2004-09/29/2009; 
Unit requiring the contract: Army Field Support Battalion - Kuwait. 

Contract information: Base Operations Support Services--Qatar; 
Type of contract: Cost-plus-award-fee; 
Contract time period: 5 years--1 base year and 4 option years[B]; 
01/01/2003-09/30/2007; 
Unit requiring the contract: Army Support Group - Qatar. 

Contract information: Base Security Support Services--Qatar; 
Type of contract: Cost-plus-award-fee; 
Contract time period: 5 years--1 base year and 4 option years[B]; 
01/01/2003-09/30/2007; 
Unit requiring the contract: Army Support Group - Qatar. 

Contract information: Stryker Battle Damage Repair; 
Type of contract: Cost-plus-fixed-fee; 
Contract time period: 2.33 years--09/22/2005-01/ 31/2008[C]; 
Unit requiring the contract: Army Tank Automotive and Armaments 
Command. 

Contract information: Predator Operations and Maintenance; 
Type of contract: Cost-plus-fixed-fee; 
Contract time period: 3 years--1 base year and 2 option years; 
02/10/2005-03/15/2008; 
Unit requiring the contract: Air Combat Command, Program Management 
Squadron. 

Source: GAO. 

[A] This contract was extended several times through June 2008. 

[B] These contracts were extended through March 2008. 

[C] The Stryker Battle Damage Repair effort was part of the Stryker 
Interim Contractor Logistics Support contract, which was awarded in May 
2002. 

[End of table] 

We looked at specific contracts that provide a variety of services. 
While some of these contracts have ended, DOD continues to acquire 
these services through other contracts. For example, the linguist 
contract ended in June 2008, but another contract valued at $4.6 
billion was awarded to provide linguist services in Iraq for 5 years. 
The base operations support and security services contracts ended in 
March 2008 but two new bridge contracts for these services were 
awarded. The bridge contracts were for 1 year each and provided for 
continued operations and security services while bid protests were 
being decided. 

Contract Costs Increased, Primarily Due to Added Requirements to 
Support Ongoing Operations in Iraq and Afghanistan: 

For six of the seven contracts we reviewed, actual costs exceeded the 
initially estimated contract costs, primarily because of added 
requirements to support ongoing operations in Iraq and Afghanistan. The 
actual costs for the other contract we reviewed did not exceed the 
estimated contract costs. The cost increases occurred primarily because 
as operations in Iraq and Afghanistan expanded, there were increased 
demands for services already established under the contracts and, in 
some cases, new requirements were added to the contracts. Other factors 
that contributed to individual contract cost growth among the contracts 
we reviewed included short-term contract extensions, the government's 
inability to provide promised equipment, changes in host country labor 
laws, and paying for work to be performed multiple times. 

Contract Costs Increased for Six Contracts: 

For six of the contracts we reviewed, the cost of each contract 
exceeded the originally estimated contract cost, primarily because of 
increases in contract requirements from ongoing operations in Iraq and 
Afghanistan. Costs for these six contracts--three of which were 
extended--increased from an initial estimate of $783 million to an 
approximate actual total cost of $3.8 billion.[Footnote 13] In four of 
these cases, the individual contract's actual cost exceeded the 
estimated cost by at least 300 percent. For example, the total cost of 
the base operations support contract exceeded the estimated contract 
cost by $122.4 million, or 481 percent. In another example, the 
estimated cost for the equipment maintenance contract in Qatar was 
$52.7 million for a 3-month base period and 10 option years. However, 
the total cost of the contract as of March 2008--which was during 
option year 8--was $471 million or 794 percent more than originally 
estimated for the entire contract. For the seventh contract, we found 
that the actual contract costs did not exceed the originally estimated 
costs. Table 2 below shows how total actual contract costs, including 
the cost of any extensions, compared to the original cost estimate. 

Table 2: Comparison of Originally Estimated and Total Actual Contract 
Costs: 

Dollars in millions. 

Linguist Interpretation Services; 
Initial estimate for the base and all option years: $400.0; 
Actual cost for the base and exercised option years: $409.6; 
Difference between estimated and actual cost: $9.6; 
Additional costs incurred during contract extensions: $1,784.7; 
Total contract cost including extensions: $2,194.3. 

Maintenance and Supply Services for Army Prepositioned Stock--Qatar; 
Initial estimate for the base and all option years: 52.7; 
Actual cost for the base and exercised option years: 471.0; 
Difference between estimated and actual cost: 418.2; 
Additional costs incurred during contract extensions: N/A; 
Total contract cost including extensions: 471.0. 

Global Maintenance and Supply Services in Kuwait--Task Order 0001; 
Initial estimate for the base and all option years: 218.2; 
Actual cost for the base and exercised option years: 778.6; 
Difference between estimated and actual cost: 560.4; 
Additional costs incurred during contract extensions: N/A; 
Total contract cost including extensions: 778.6. 

Base Operations Support Services--Qatar; 
Initial estimate for the base and all option years: 25.4; 
Actual cost for the base and exercised option years: 131.0; 
Difference between estimated and actual cost: 105.6; 
Additional costs incurred during contract extensions: 16.8; 
Total contract cost including extensions: 147.8. 

Base Security Support Services--Qatar; 
Initial estimate for the base and all option years: 80.3; 
Actual cost for the base and exercised option years: 92.7; 
Difference between estimated and actual cost: 12.0; 
Additional costs incurred during contract extensions: 13.1; 
Total contract cost including extensions: 105.8. 

Stryker Battle Damage Repair; 
Initial estimate for the base and all option years: 6.4; 
Actual cost for the base and exercised option years: 95.1; 
Difference between estimated and actual cost: 88.7; 
Additional costs incurred during contract extensions: N/A; 
Total contract cost including extensions: 95.1. 

Total; 
Initial estimate for the base and all option years: $783.0; 
Actual cost for the base and exercised option years: $1,978.0; 
Difference between estimated and actual cost: $1,194.6; 
Additional costs incurred during contract extensions: 1,814.6; 
Total contract cost including extensions: $3,792.6. 

Predator Operations and Maintenance; 
Initial estimate for the base and all option years: 49.7; 
Actual cost for the base and exercised option years: 45.7; 
Difference between estimated and actual cost: - 4.0; 
Additional costs incurred during contract extensions: 3.6; 
Total contract cost including extensions: 49.3. 

Source: GAO analysis of Army, Air Force, and contractor data. 

[End of table] 

Increased Contract Costs Were Primarily a Result of Added Requirements 
from Ongoing Operations: 

Although several factors increased the contract costs, the primary 
factor was additional requirements associated with ongoing operations 
in Iraq and Afghanistan. Expanding operations in Iraq and Afghanistan 
placed an increased demand for services already established under each 
of the seven contracts we reviewed. In addition, new requirements were 
added to some of the contracts. The following examples illustrate 
additional contract requirements due to ongoing operations in Iraq and 
Afghanistan and their impact on contract costs. 

Linguist Services: 

In April 1999, the Army awarded a contract for linguist translation and 
interpretation services. According to the Army, the initial requirement 
was for about 180 linguists worldwide at an estimated cost of $19 
million for 1 base year and 4 option years. Since the award of this 
contract, the linguist requirement grew and the Army awarded other 
contracts to provide linguist services. For example, we reviewed an 
indefinite-delivery/indefinite-quantity contract awarded in September 
2004--an interim 6-month contract with two 3-month options to continue 
providing linguist services worldwide[Footnote 14]--with an estimated 
maximum cost of $400 million. The total actual cost for the first year 
of services for this contract was about $409.6 million. Linguist 
requirements under the interim contract were increased multiple times, 
which increased contract costs. For example, in February 2007 the 
linguist requirement supporting operations in Iraq and Afghanistan grew 
from 8,899 to 10,714 in response to the surge in the number of military 
forces deployed to these areas of operation. At this same time, the 
worldwide linguist requirement grew from 9,313 to 11,154. To 
accommodate the increasing requirements and the need to continue 
providing the services, the interim contract was modified to increase 
the maximum costs allowable and to extend the performance period. As of 
April 2008, the interim contract had been extended five times and the 
total cost of the contract was $2.2 billion. At that time, the 
requirements to support exercises in the United States and operations 
in Afghanistan and Guantanamo Bay were being provided under new 
contracts while the requirements to support operations in Iraq were 
still being provided under the interim contract. A new indefinite- 
delivery/indefinite-quantity contract for linguist services in Iraq 
took effect in June 2008 with a maximum cost for all orders under the 
contract of $4.6 billion for 5 years. 

Army Prepositioned Stock--5 Maintenance and Supply Services: 

In August 2000, the Army awarded this contract for maintenance and 
supply services of the Army Prepositioned Stocks (APS)--5 in 
Qatar.[Footnote 15] In addition to performing routine maintenance on 
the prepositioned stocks, the contractor was required to support 
contingency operations by receiving, repairing, maintaining, and 
temporarily storing equipment from other sources until it was needed. 
The contract award represented the base year requirements of certain 
contract line items to be performed for 3 months in 2000 at a total 
contract amount of $568,166. The contract had 10 single-year options 
available for full contract performance and the contractor's total 
estimated cost for the base plus 10 option years was $52.7 million. At 
the end of the seventh option year, which was in November 2007, the 
total cost of the contract was $428.9 million, or $376.2 million more 
than originally estimated for the entire contract. According to the 
contracting officer, requirements within the scope of the contract 
increased in support of the global war on terror to include supporting 
operations in Iraq and Afghanistan, performing operations in Kuwait, 
repairing equipment, and supporting additional reimbursable customers, 
such as the 550th Signal Company, Area Support Group-Qatar, and Army 
Tank Automotive and Armaments Command's tire assembly repair program. 
For example, in 2002 contractor resources were deployed to Kuwait to 
meet the requirement for immediate download and urgent maintenance of 
equipment flowing into Southwest Asia in support of operations in 
Iraq.[Footnote 16] Approximately $195.6 million was funded on the APS- 
5 contract for operations in Kuwait between 2002 and 2005. In another 
example, in January 2006 a requirement to produce tire wheel assemblies 
was added to the contract. The scope of this requirement was to provide 
a package of ready-to-use, preconfigured tires to reduce the workload 
at forward maintenance locations. As of March 2008, the total funded 
for the tire operation was $6.4 million. Moreover, at various times 
throughout the life of the contract, requirements were added for the 
resetting of Army Prepositioned Stocks. For example, in the third, 
fifth, sixth, and seventh option years, funding placed on the contract 
for the reset of equipment totaled $35 million, $9 million, $39 
million, and $23 million, respectively. 

Global Maintenance and Supply Services in Kuwait--Task Order 0001: 

In October 2004, the Army issued this task order for equipment 
maintenance and supply services in Kuwait under an umbrella indefinite- 
delivery/indefinite-quantity contract for Global Maintenance and Supply 
Services. The contractor was required to provide maintenance, inspect 
and test equipment, operate a wash rack for agriculture cleaning, and 
perform various other maintenance functions depending on developing 
missions. The contractor estimated a total cost for a 10- month base 
period and four option years of $218.2 million. At the end of the 
second option year in September 2007, the total cost of the task order 
after modifications was about $581.5 million, $363.2 million more than 
the original estimate for the entire task order. According to the 
contracting officer, the magnitude of the requirements under the task 
order increased significantly after the task order was issued. This 
increase included growth in the quantity of equipment repaired and the 
number of customers served, new requirements for resetting and issuing 
Army prepositioned stock and operating tire assembly and repair and 
HMMWV refurbishment programs. For example, in May 2006, a major HMMWV 
refurbishment effort valued at approximately $33 million was added to 
the task order. According to contracting officials, the task order 
could be used to expeditiously provide the required HMMWV refurbishment 
capability. Likewise, in September 2005 a requirement was added to the 
task order for tire assembly and repair. As of March 2008, the total 
funding for the tire assembly and repair operation was approximately 
$16.6 million. In addition, according to the contracting officer, 
requirements for the resetting of Army prepositioned stocks were added 
within the scope of the task order. For example, in option years one 
and two, funding for the reset of equipment totaled approximately $54.2 
million and $50.1 million, respectively. 

Base Operations Support: 

In February 2003 the Army awarded this contract to provide a full range 
of base support activities including public works; logistics; medical; 
food; and morale, welfare, and recreation services in support of an 
installation in Qatar. The contractor estimated a total cost of $25.4 
million for the 9-month base period plus 4 option years. The total cost 
of the contract was approximately $147.8 million, $122.4 million more 
than the original cost estimate. According to contracting officials, 
this growth in requirements was due to changes in the planned use for 
the installation and an increase in major tenants such as the United 
States Central Command Forward Headquarters and Special Operations 
Command Central. For example, the installation increased its logistics 
support of a nearby Air Force base and supported the rest and 
relaxation program for military personnel deployed to Iraq and 
Afghanistan, providing morale, welfare, and recreation services and 
quality-of-life support to more than 300 soldiers per week. To meet the 
increased demands, additional contractor personnel were needed. For 
example, five Medical Supply Clerks were added to the medical services 
requirement and four employees were added to meet the change in 
requirements of the Public Works department. The contractor's estimated 
total costs for these additional personnel were $95,706 and $887,120, 
respectively. In addition, the services provided under the contract 
grew as new requirements were added. For example, in September 2004 a 
new requirement for an installation fire department was added. 
According to the contractor's cost estimate, the total cost for option 
years one through four (the requirement was added during option year 
one) to meet the requirement for fire department services was $10.7 
million. 

Base Security Services: 

In February 2003 the Army awarded this contract for base security 
services at Camp As Sayliyah, Qatar. The contractor was to intercept, 
deter, and prevent unauthorized personnel and instruments of damage and 
destruction from entering the installation. The contractor should also 
conduct surveillance and counter-surveillance of the installation's 
perimeter and vicinity from designated observation towers and posts. 
The contractor estimated a total cost of $80.3 million for the 9-month 
base period plus 4 option years. The total cost of the contract was 
about $105.8 million, or $25.6 million more than originally 
estimated.[Footnote 17] According to the contracting officer, as was 
the case for the base operations support contract, changes in the 
planned use for the installation and an increase in major tenants such 
as the United States Central Command Forward Headquarters and Special 
Operations Command Central resulted in increased contract requirements. 
In some instances, additional personnel were needed to meet the 
requirements of the contract. For example, four guards and four 
screeners were added at a cost of $255,267 for option year one. In 
another example, in option year two, the required coverage at one guard 
tower was increased to 24 hours a day. Funding in the amount of 
$145,327 was provided to meet this requirement for the remainder of the 
option year. The contractor's estimated cost for meeting this 
requirement in the remaining 2 option years was $690,880. In another 
example, in option year one a requirement was added for personnel to 
operate a mobile vehicle and cargo inspection system. This system 
consisted of a truck-mounted, nonintrusive gamma ray imaging system 
that x-rays the contents of trucks, containers, cargo, and passenger 
vehicles entering the base to determine the possible presence of 
various types of contraband. A total of $359,685 was provided to meet 
this requirement for the remainder of the option year. 

Stryker Battle Damage Repair Facility--Qatar: 

In May 2002 the Army awarded a contract that provided total logistics 
support for the Stryker vehicles fielded to two combat brigade 
teams.[Footnote 18] In September 2005 the Army modified the contract to 
add a requirement for the repair of battle-damaged Stryker vehicles in 
Qatar.[Footnote 19] Our review focused on the battle damage repair 
requirements performed in Qatar and the associated modifications. The 
initial requirement was for the repair of 11 battle-damaged vehicles at 
a cost of approximately $6.4 million. As of April 2008, the total cost 
of the battle damage repair facility in Qatar was approximately $95.1 
million. According to officials at the Army Tank Automotive and 
Armaments Command, when the logistics support contract was modified to 
add the Qatar battle damage repair facility requirements, the Army and 
the contractor jointly developed and negotiated the requirements and 
cost estimates. As more Stryker vehicles sustained battle damage, 
additional modifications were added. For example, only a few days after 
this initial requirement was added to the contract, a modification was 
issued that increased the requirement by 15 vehicles, bringing the 
total number of battle-damaged vehicles to be repaired to 26. With this 
increased requirement, approximately $4.6 million in funding was added 
to the contract. According to Army officials, over time the number of 
vehicles that required repair increased as attacks on United States 
forces intensified and more Stryker brigades rotated in and out of Iraq 
and Afghanistan. The battle damage repair requirements are currently 
stated in terms of the number of vehicles that can be repaired per 
month. For example, in February 2006 the repair requirement increased 
from 2 vehicles every 45 days to 4 vehicles per month, and in July 2007 
the requirement increased again to 6 vehicles per month. 

Predator Maintenance: 

In February 2005 the Air Force awarded this contract for maintenance 
support of the Predator unmanned aircraft to support scheduled flying 
hours for a base period of 1 year with 2 option years. According to 
program officials, the contractor was required to provide 
organizational maintenance services such as base support of systems, 
weapons loading, launching, routine day-to-day flight maintenance, 
routine inspections, scheduled and unscheduled maintenance, and 
maintenance of supply and support packages. The estimated base and 
option year one contract cost was $49.7 million. At the end of option 
year one, which included an unanticipated 7-week extension, the total 
cost of the contract was approximately $49.3 million.[Footnote 20] 
While the total cost of the contract, including the cost of the 
extension, did not exceed the total estimated cost for the base and 
option year one, contract requirements changed in support of operations 
in Iraq and Afghanistan and the effect these changes had on the cost of 
the contract varied. For example, according to program officials, the 
contractor established support operations in Afghanistan in March 2005 
and in Iraq three months later. In July 2005, contractor support in 
Iraq was increased to provide additional Predator surveillance at a 
cost of $2.5 million. Also, in June 2006 the contractor support in 
Afghanistan was moved to Iraq, resulting in a $2.3 million decrease in 
contract cost. Other factors also decreased contract costs and as a 
result, the total cost of the contract was less than initially 
estimated. For example, contract labor rates--which were negotiated and 
accepted after the contract was awarded--were lower than the rates used 
to calculate the estimated contract costs, resulting in a lower 
contract cost of approximately $1.8 million.[Footnote 21] Additionally, 
in August 2005 the cost of the contract was decreased by approximately 
$567,000 due to a 6-week delay in the start of the contract. 

Other Factors That Caused Cost Growth: 

Other factors that contributed to individual contract cost growth among 
the contracts we reviewed included (1) short-term contract extensions, 
(2) the government's inability to provide promised equipment, (3) 
changes in host country labor laws, and (4) having to pay for work to 
be performed multiple times because it did not meet required standards. 
First, we found that in three of the contracts, short-term contract 
extensions increased costs because the contractor signed short-term 
leases which were more expensive than longer-term leases. The 
contractors felt it was too risky to obtain long-term leases for such 
things as vehicles and housing because there was no guarantee that the 
contract would be extended again. Each of these three contracts was 
extended for less than 1 year. In each instance, the extensions were to 
allow for the continuation of contractor services during protests of 
newly awarded contracts. For example, in April 2007 the linguist 
contract requirements were being performed under a 3-month extension 
due to protests of newly awarded linguist contracts. According to the 
linguist contractor, the short-term extensions diminished its ability 
to leverage leasing because a short-term lease commitment is more 
expensive than a longer, 1-year lease commitment. For example, the 
monthly cost for one contractor to lease trucks under a 6-month lease 
was $2,437, whereas the monthly cost under a 1-year lease was $1,700-- 
a 30 percent savings. According to the contractor, short-term lease 
commitments also limit the contractor's ability to shop around for 
better prices because most vendors want a longer commitment. 
Additionally, short-term extensions drain contractor resources and 
increase overhead costs because the contractor has to prepare cost 
proposals, review funding, and perform other administrative tasks every 
90 or 120 days. While the contractors could enter into leases for a 
period longer than the specified contract period of performance, they 
would assume the risk for the cost of the excess months. In addition, 
in October 2007 the base operations and security services contract 
requirements were being performed under 6-month contract extensions. 
According to both the base operations contractor and the security 
services contractor, it was difficult to find housing that was 
available for a 6-month lease in Qatar due to the booming economy, and 
any lease term for fewer than 12-months was costly. For example, 
according to the security services contractor, the same 12-month 
housing lease that cost about $1,650 in 2007 cost about $4,100 in 2008. 
The officials added that, when available, a 6-month lease for the same 
housing averaged around $4,700 to $5,000. 

Second, for the linguist contract, additional costs were incurred when 
the government was unable to provide the equipment or services, which 
were to be government-furnished pursuant to the contract. The contract 
stated that contractor personnel providing support to the military in 
contingency operations may be required to wear protective equipment as 
determined by the supported commander. When required by the commander, 
the government will provide to the contractor all military-unique 
individual equipment. According to contracting officials, due to the 
large deployments of soldiers requiring protective equipment, there was 
an insufficient supply of equipment remaining for contractors. 
Contracting officials told us that when the government does not supply 
the equipment as provided for under the contract, the contractor is 
authorized to procure and be reimbursed for the cost of the equipment 
and the associated general and administrative expenses. When the 
contractor is paid for the equipment it becomes government property. 
According to the contracting officer's representative, the contractor 
was able to purchase the equipment at military surplus stores at a cost 
to the government of approximately $600,000. In addition, contracting 
officials for this same contract told us that the government was to 
provide transportation for the contract manager; however, the 
government did not provide this transportation. As a result, the 
contractor leased a vehicle to provide this transportation and the 
government reimbursed the contractor and paid for the associated 
overhead expenses.[Footnote 22] 

Third, changes in the host country labor law resulted in additional 
security services contract costs. According to the contractor, a change 
in Qatar's labor law directed that (1) employees could not work more 
than 10 hours in 1 day, including overtime, and (2) employees be given 
at least a 1-hour break after working for 5 hours. As a result, 
additional employees were required to provide 24-hour security 
coverage. The cost of providing this additional manpower in option year 
two was approximately $752,000. The contractor's estimated cost for 
meeting this requirement in the remaining years (option years three and 
four) was approximately $2.5 million. The contractor also told us that 
a second change in Qatar's labor law required workers to be paid for 1 
day off a week. To comply with this change, employees were 
retroactively paid for the weekly day off from the effective date of 
the law change until their contract ended. The Army added $1.3 million 
in funding to the contract to assist with the retroactive pay for the 
paid day off. 

Fourth, according to contracting officials, under the two cost- 
reimbursable equipment maintenance contracts we reviewed, the 
government must continue to pay for additional work performed on 
equipment rejected for failure to meet the required maintenance 
standard. When equipment was presented to the government and did not 
pass quality assurance inspection, it was returned to the contractor 
for additional maintenance until it met the required standard. 
Contracting officials explained that under the cost-plus-fixed-fee 
maintenance provisions of the contracts, the contractor was reimbursed 
for all maintenance labor hours incurred, including labor hours 
associated with maintenance performed after the equipment was rejected 
because it did not meet specified maintenance standards. This resulted 
in additional costs to the government. As we reported in January 2008, 
our analysis of Army data for a task order under one of these contracts 
in Kuwait found that since May 2005, the contractor worked a total of 
about 188,000 hours to repair equipment after the first failed 
government inspection, at an approximate cost to the government of $4.2 
million.[Footnote 23] We were unable to calculate the total cost of the 
rework performed under the second equipment maintenance contract 
because, according to officials, information entered into the 
maintenance database that tracks equipment status and inspection 
results does not distinguish between the contractor's internal quality 
control inspections and government inspections prior to acceptance. 

DOD's Oversight of Some Contracts Has Been Inadequate: 

DOD's oversight of some of the contracts we reviewed has been 
inadequate because of a shortage of qualified oversight and contract 
administration personnel and because it did not maintain some contract 
files in accordance with applicable policy and guidance. We have 
previously reported that inadequate numbers of trained contract 
management and oversight staff have led to contracting challenges. We 
found that for five of the seven contracts we reviewed, DOD did not 
have adequate numbers of qualified personnel at deployed locations to 
effectively manage and oversee the contracts. Additionally, we found 
that for four of the contracts we reviewed, the contracting offices 
either did not maintain complete contract files documenting contract 
administration and oversight actions taken or did not follow quality 
assurance guidance. For the other two contracts we reviewed, authorized 
oversight positions were filled with personnel to properly oversee the 
contracts. 

Some Contract Management and Oversight Teams Were Inadequately Staffed: 

Having the right people with the right skills to oversee contractor 
performance is critical to ensuring that DOD receives the best value 
for the billions of dollars spent each year on contractor-provided 
services supporting forces deployed in southwest Asia and elsewhere. 
However, inadequate numbers of personnel to oversee and manage 
contracts is a long-standing problem that continues to hinder DOD's 
management and oversight of contractors in deployed locations. In 2004, 
we reported that DOD did not always have sufficient contract oversight 
personnel in place to manage and oversee its logistics support 
contracts such as LOGCAP[Footnote 24] and recommended that DOD develop 
teams of subject matter experts to make periodic visits to deployed 
locations to judge, among other things, if its logistics support 
contracts were being used efficiently.[Footnote 25] DOD concurred with-
-but did not implement--this recommendation. In addition, in 2005 we 
reported in our High-Risk Series that inadequate staffing contributed 
to contract management challenges in Iraq.[Footnote 26] In 2006, we 
reported that oversight personnel told us that DOD does not have 
adequate personnel at deployed locations to effectively oversee and 
manage contractors.[Footnote 27] DOD concurred with our assessment and 
noted that they were congressionally directed to undertake a review of 
the health of the acquisition work forces, including oversight 
personnel, and assess the department's ability to meet the oversight 
mission. Currently, DOD has completed a competency analysis of its work 
force but has not determined what number of oversight personnel will be 
needed to provide adequate oversight for contingency contracting. Our 
review of the staff authorized to provide contract oversight and 
management revealed similar vacancies in some critical oversight and 
administration positions for five of the seven contracts, as 
illustrated by the following examples. 

* The APS-5 contract did not have an administrative contracting officer 
for almost a year. Oversight of contracts ultimately rests with the 
contracting officer, who has the responsibility for ensuring that 
contractors meet the requirements set forth in the contract. However, 
most contracting officers are not located at the deployed location. As 
a result, contracting officers often appoint administrative contracting 
officers to provide day-to-day oversight and management of the 
contractor at the deployed location. The administrative contracting 
officer is a certified contracting officer with specialized training 
and experience. Administrative contracting officers may be responsible 
for many duties including ensuring contractor compliance with contract 
quality assurance requirements, approving the contractor's use of 
subcontractors, reviewing the contractor's management systems, 
reviewing and monitoring the contractor's purchasing system, and 
ensuring that government personnel involved with contract management 
have the proper training and experience. According to the contracting 
officer, while the administrative contracting officer's position was 
vacant, she acted as the administrative contracting officer; however, 
she was located in the United States and the place of performance for 
this contract was in Qatar. 

* The APS-5 contract also lacked a property administrator for more than 
a year. According to a DOD manual, the responsibilities of the property 
administrator include administering the contract clauses related to 
government property in the possession of the contractor, developing and 
applying a property systems analysis program to assess the 
effectiveness of contractor government property management systems, and 
evaluating the contractor's property management system to ensure that 
it does not create an unacceptable risk of loss, damage, or destruction 
of property.[Footnote 28] While some property administrator duties are 
often delegated to the administrative contracting officer, this 
contracting office was also without an administrative contracting 
office for several months. As such, important property administration 
duties were not being performed including the proper accounting for 
government-owned contractor-acquired equipment. 

* As of April 2008, the contract administration office responsible for 
administering the base operations and support and the base security 
contracts in Qatar only had 12 of its 18 authorized positions. The 6 
vacant positions included a performance evaluation specialist, 3 
contracting specialists, 1 cost analyst, and 1 procurement analyst. 
Four of the positions had been vacant for 7 months or more, while 2 had 
been vacant for 4 and 6 months, despite the fact that the Army 
designated both as key positions. According to position descriptions 
provided by the Army, the performance evaluation specialist is a 
technical quality expert who advises the commander on quality issues. 
Moreover, the performance evaluation specialist is responsible for the 
Army's quality assurance program for the two contracts in Qatar. This 
includes developing a quality assurance plan, monitoring contractor 
performance, training junior quality assurance personnel, analyzing 
quality data for trends, and providing input on the contractor's 
performance for the award fee board. This position requires a certified 
quality assurance professional. While some of these duties were 
performed by the administrative contracting officer, other duties need 
specialized skills that administrative contracting officers generally 
do not have. Contract specialists perform a wide variety of pre-and 
post-award tasks encompassing complex acquisition planning, contract 
type selection, contract formation and execution, cost of price 
analysis, contract negotiation, and contract administration including 
reviewing monthly contractor invoices. According to the contracting 
officer's representative, he was responsible for providing the 
technical assessment of the contractor's performance and reviewing 
contractor invoices, a responsibility for which he said that he was not 
trained. He also said that the invoices required closer scrutiny than 
he was able to give them and he often did not know if the invoices 
included valid expenses or not. In addition, the contracting officer's 
representative had oversight responsibilities for five additional 
contracts and his primary assignment as the base's Provost Marshal did 
not always allow him time to complete his contract oversight 
responsibilities. The procurement analyst, among other things, is 
responsible for developing cost/pricing data, proposals, and counter- 
proposals for use in negotiations; analyzing contractor proposals to 
determine reasonableness; determining appropriateness and 
reasonableness of proposed labor and overhead rates; and developing 
data for use in pricing trend analyses. What made these vacancies even 
more critical is that during this time the contracting office awarded 
two, 1-year contracts to continue providing the base security and base 
operations services. According to the contracting officer, it was 
difficult to find qualified candidates to fill some of the vacancies, 
and in the fall of 2007 the Army rejected a number of applicants 
because they did not have the right skills. 

* The contracting officer for the Global Maintenance and Supply 
Services in Kuwait--Task Order and the APS-5 contract said that her 
office was understaffed, which made it difficult to keep up with some 
contract administrative requirements. For example, she said that more 
staff would allow her office to properly handle the deobligation of 
funds against contracts. 

In January 2008, we reported that (1) the contract management oversight 
team was inadequately staffed to effectively oversee the Global 
Maintenance and Supply Services in Kuwait--Task Order 0001, (2) the 
401st Army Field Support battalion was concerned about its ability to 
administer cost-plus-award-fee provisions, and (3) the battalion was 
not meeting Army Quality Program requirements due in part to lack of 
oversight and contract management staff.[Footnote 29] Specifically, we 
reported that there were not enough trained oversight personnel to 
effectively oversee and manage the task order. We also reported that as 
of April 2007 four oversight personnel positions were vacant, including 
two military quality assurance inspectors and two civilian positions-- 
a quality assurance specialist and a property administrator. Due to the 
vacant property administrator position, some proper accounting of 
government-owned equipment was not performed. The Army agreed with our 
recommendation that it take steps to fill the vacant oversight 
positions and Army Sustainment Command officials told us that steps 
were being taken to fill the vacant oversight positions with qualified 
personnel. According to the officials, 16 military personnel were 
assigned to the battalion to help provide contract oversight in 
maintenance, supply, transportation, and operations--8 of which would 
be assigned to maintenance. In addition, the officials stated that the 
quality assurance specialist and property administrator positions had 
both been announced numerous times and several offers had been 
declined. The property administrator position was filled in March 2008; 
however, as of June 2008 the quality assurance specialist position was 
still vacant. 

For the linguist contract, officials responsible for the contract said 
(1) there were not enough contracting officer's technical 
representatives to effectively oversee the contract and (2) the 
representatives spent more time ensuring the contractor met its 
responsibilities concerning employees' pay, uniforms, and other things 
than they did performing the full range of contract oversight actions. 
According to contracting officials, in February 2007 there were 7 
contracting officer's technical representatives providing oversight for 
about 8,300 linguists in 120 locations across Iraq and Afghanistan. In 
one case, a single oversight person was responsible for linguists 
stationed at more than 40 different locations spread throughout the 
theater of operations. The officials also said that one theater 
commander restricted travel within the area of operations during some 
time of the contract. This travel restriction limited the ability of 
oversight personnel to perform adequate contract oversight. In 
addition, oversight officials stated that when they did have the 
opportunity to visit a forward operating location, they often spent 
their time focusing on contractor personnel issues such as ensuring 
that the contractor paid the foreign national linguists on time and as 
agreed to in their contracts. Oversight officials also cited the 
following difficulties in performing contract oversight: (1) 
determining what support the government is supposed to provide to the 
contractor, (2) getting deployed units to provide support such as 
subsistence and transportation to the assigned linguists and (3) 
inexperience of unit commanders in working with contractors. In March 
2008, after awarding four new contracts for linguist services, the Army 
increased the number of alternate contracting officer's representatives 
in Iraq and Afghanistan from 7 to 14 in an effort to improve oversight. 

For the other two contracts we reviewed, authorized oversight positions 
were filled. For the Stryker contract, the Program Manager-Stryker 
Brigade Combat Team provided overall contract management and the 
Defense Contract Management Agency provided contract administration and 
oversight services for the battle damage repair effort in Qatar. The 
Defense Contract Management Agency had a designated administrative 
contracting officer in Kuwait, who also served as the quality assurance 
evaluator. The quality assurance evaluator traveled to Qatar and 
performed final inspection of repaired vehicles prior to accepting them 
for the government. He also performed periodic in-process inspections 
during his visits to Qatar, as his schedule allowed. 

Oversight for the Predator contract was performed by the quality 
assurance group within the Air Combat Command Program Management 
Squadron. According to Air Force officials, the Predator quality 
assurance team consisted of a superintendent quality assurance 
evaluator and 16 additional quality assurance evaluators. One full-time 
evaluator was located in Iraq while the others were located at Creech 
Air Force Base, Nevada. The quality assurance evaluators worked full 
time to ensure that the contractor's maintenance of the Predator met 
contract specifications. According to Air Force officials, based on a 
risk analysis, one evaluator was sufficient to provide oversight in 
Iraq. The quality assurance evaluators planned their oversight 
inspections using a monthly contract surveillance audit plan provided 
by the quality assurance department. At the end of each month, the 
evaluators in Iraq and at Creech prepared a report that described the 
results of site audits, technical inspections, any deficiencies 
identified, the status of corrective action requests, other action 
items, and an overall summary of the business relationship with the 
contractor. 

Guidance for Contract File Maintenance and Quality Assurance Not Always 
Followed: 

We found that contracting offices and oversight activities did not 
always follow policy and guidance for maintaining contract files or 
established quality assurance principles. According to the FAR, unless 
otherwise specified, the contract administration office shall maintain 
suitable records reflecting the nature of quality assurance actions as 
part of the performance records of the contract. The regulation states 
that organization of the contract files must be sufficient to ensure 
the files are readily accessible to principal users and, if needed, a 
locator system should be established to ensure the ability to locate 
promptly any contract files. In addition, a DFARS policy, guidance and 
instruction states that the basis for all award fee determinations 
should be documented in the contract file. However, for three of the 
contracts we reviewed--including two award fee contracts--the 
contracting officers could not provide documents supporting contract 
administration and oversight actions taken. Specifically, for the base 
operations support, security services, and APS-5 contracts, we asked 
the contracting offices to provide documentation from the contract 
files related to past oversight actions, including any records of 
corrective actions. Contracting officials said that they could not 
identify records of oversight actions taken because corrective action 
requests and other such documentation of contractor performance either 
were not maintained in the contract files or were maintained in such a 
manner that the current contracting officer could not locate them and 
was unaware of their existence. As a result, incoming contracting 
officers and contract administration personnel said they were unable to 
identify whether there were recurring contractor performance issues. 
Some of the contracting office personnel with whom we spoke stated that 
previous contracting office personnel had not properly documented and 
maintained all contract actions; however, they could not explain why, 
given that this occurred prior to their assignments. For the base 
operations support and security services contracts, we also asked for 
documents related to the Army's decision concerning award fees to the 
contractors; however, the contracting office personnel were unsure 
whether or how quality assurance evaluations were previously analyzed 
and used to assess the contractor's performance for purposes of 
determining the award fee it received. 

According to DOD's guidebook for performance-based service 
acquisitions, an assessment of contractor performance should be 
documented, whether acceptable or unacceptable, as it is conducted and 
this official record may be considered past performance information. As 
we reported in January 2008, the Army did not always document 
unacceptable performance for the Global Maintenance and Supply Services 
in Kuwait--Task Order 0001. We reported that the Army did not always 
document deficiencies identified during quality assurance inspections 
despite the requirement to do so in the battalion's quality and 
contract management procedures. Instead, quality assurance inspectors 
allowed the contractor to fix some deficiencies without documenting 
them in an attempt to prevent a delay in getting the equipment up to 
standard to pass inspection. We found a similar situation with the APS- 
5 contract for equipment maintenance in Qatar. 

We also found that the regulation governing the Army quality program 
stated that management of a comprehensive quality program requires 
subject matter practitioners with quality expertise. However, according 
to oversight officials, assigned contract oversight personnel for the 
linguist contract were unable to judge the performance of the 
contractor employees because they were generally unable to speak the 
languages of the contractor employees they were responsible for 
overseeing. The officials stated that this prevented the government 
from assessing linguist quality and identifying ways to improve 
contractor performance. We asked how the Army could ensure the 
linguists were properly translating and interpreting information if the 
quality assurance personnel could not speak the language in question. 
Agency officials responded that they thoroughly reviewed and validated 
the contractor's methodology for determining if the linguists spoke the 
language and met the proficiency standards. They further stated that if 
they had people available who could speak the different languages 
needed, they would not need contract linguists. 

Similar to our findings, the Army Inspector General reported in October 
2007 that shortages of contracting officers, quality assurance 
personnel, and technically proficient contracting officer's 
representatives were noticeable at all levels. Without adequate levels 
of qualified oversight personnel, complete and organized contract 
files, and consistent implementation of quality assurance principles, 
DOD's ability to perform the various tasks needed to monitor contractor 
performance may be impaired. Additionally, until DOD is able to obtain 
reasonable assurance that contractors are meeting their contract 
requirements efficiently and effectively, it will be unable to make 
fully informed decisions related to award fees as well as additional 
contract awards. Our selection of contracts did not allow us to project 
our findings across the universe of DOD contracts for services that 
support contingency operations. However, given that we identified 
inadequate oversight and administration staff levels for five of the 
seven contracts, and in four of the contracts we identified a failure 
to follow guidance for contract file maintenance or quality assurance 
principles, we believe the potential for these weaknesses exists in 
other DOD contracts. As we previously stated, some of the contracts we 
reviewed have ended; however, DOD continues to acquire those services 
through new contracts that are managed by the same contract oversight 
and administration offices and processes. As such, it is likely the 
weaknesses we identified continue to exist in the new contracts. While 
we could not determine the cost effect of inadequate oversight, as we 
have previously reported inadequate oversight may have some negative 
cost implications. Unless DOD can determine that inadequate oversight 
and insufficient staff are not a problem on other contracts for 
services to support contingency operations, the potential for waste 
exists DOD-wide. 

DOD Used Contractors Because Military Personnel and DOD Civilians Were 
Not Available: 

DOD uses contractors to support contingency operations for several 
reasons, including the need to compensate for a decrease in the size of 
the force and a lack of expertise within the military services. For the 
seven contracts we reviewed, DOD decided to use a contractor rather 
than DOD personnel because sufficient numbers of military personnel and 
DOD civilians were not available or the available personnel did not 
have the required skills. For five of the seven contracts, DOD lacked 
sufficient personnel to meet increased requirements for services to 
support operations in Iraq and Afghanistan. For example, one contract 
we reviewed was for organizational-level maintenance of the Predator 
unmanned aerial system. In fiscal year 2002, Congress provided the Air 
Force $1.6 billion to acquire 60 additional unmanned Predator aircraft; 
however, according to Air Force documents, it did not have the 
additional 1,409 personnel needed to maintain these new assets. As a 
result, the Air Force decided to use contractors to support the 
additional aircraft. In another example, the contracting officer for a 
contract that provides maintenance of prepositioned Army equipment and 
supply services in Qatar told us that these services are contracted out 
because there were insufficient military personnel to maintain the 
equipment. According to the official, while maintenance personnel 
maintain their unit's equipment, they are not available to maintain all 
prepositioned equipment in a location such as Qatar. We also reviewed a 
similar equipment maintenance and supply services contract in Kuwait. 
According to the contracting officer, who is the same for both the 
Qatar and Kuwait contracts, contractors are used to provide the 
services in Kuwait because no military personnel were available to meet 
the requirements during the required time frame and the maintenance 
effort had previously only been performed by contractors. Additionally, 
contracting office officials for the security services and base 
operations support contracts in Qatar told us that contractors provide 
these services because there are not enough military personnel 
available to perform the work. 

For the two other contracts we reviewed, DOD did not have the personnel 
with specific skill sets to meet the missions. For example, regarding 
the contract that provides linguist interpretation and translation 
services for deployed units, Army officials told us that, the Army does 
not have enough military personnel who can speak the various required 
languages. In February 2007, the contract requirement was for over 
11,000 linguists in over 40 different languages and dialects. According 
to Army officials, years ago the military did not anticipate such a 
large requirement for Arabic speakers. As a result, it phased out many 
interpreter military occupational specialties, thereby creating the 
shortfall. The officials said the requirements for language skills 
change over time and it is very difficult to forecast what language 
skills and what number of personnel with those skills will be needed in 
the future. Similarly, our review of a contract that provided total 
logistics support for the Stryker program found that these services 
were contracted out because DOD did not have people with the specific 
skills to perform this type of repair. According to Army officials, the 
development, production, and fielding of the Stryker vehicles were done 
concurrently and as a result, total logistics support had to be 
contracted out because at that time no organic capability had been 
established within the military to maintain the vehicles. After the 
contract was in place, the Army identified a need for the rapid repair 
of battle-damaged Stryker vehicles in order to restore combat 
capability. This requirement was added to the existing logistics 
support contract. According to Army officials, the decision was made to 
contract for the repair of battle-damaged Army Stryker vehicles because 
DOD did not have people with the specific skills to perform this type 
of repair. Moreover, the officials also stated that the military will 
never have an organic military capability to repair battle-damaged 
vehicles as any extensive structural damage typically requires specific 
welding experience. 

In May 2007 we reported that DOD and service officials attributed the 
increased use of contractors for support services to several factors, 
including (1) increased operations and maintenance requirements from 
the global war on terror and other contingencies, which DOD has met 
without an increase in active duty and civilian personnel; (2) federal 
government policy, which is to rely on the private sector for needed 
commercial services that are not inherently governmental in nature; and 
(3) DOD initiatives, such as its competitive sourcing[Footnote 30] and 
utility privatization programs. We also reported that officials stated 
the increased use of contractor support to help meet expanded mission 
support work has certain benefits.[Footnote 31] For example, they said: 

* the use of contractors allows uniformed personnel to be available for 
combat missions, 

* obtaining contractor support in some instances can be faster than 
hiring government workers, 

* it is generally easier to terminate or not renew a contract than to 
lay off government employees when operations return to normal, and: 

* contractors can provide support capabilities that are in short supply 
in the active and reserve components, thus reducing the frequency and 
duration of deployments for certain uniformed personnel. 

Furthermore, according to other GAO, DOD, and RAND reports, the 
department also uses contractors because of its need to deploy weapon 
systems before they are fully developed, and the increasingly complex 
nature of DOD weapon systems. For example, in a 2005 report that 
examined the Army's use of contractors on the battlefield, RAND 
reported that DOD's decision to field equipment still in development 
delays the date at which maintenance work can be performed in-house and 
extends the time the Army needs contractor personnel because it has not 
had the time to develop any internal capability. Additionally, in 
October 2007 DOD reported that the increasing technical complexity of 
DOD weapons systems and equipment requires a level of specialized 
technical expertise of limited scope, which DOD does not believe can be 
cost-effectively serviced and supported by a military force capability, 
resulting in the use of contractors. 

Conclusions: 

While contractors provide valuable support to contingency operations, 
we have frequently reported that long-standing DOD contract management 
and oversight problems, including DOD's failure to follow contract 
management and oversight policy and guidance, increase the opportunity 
for waste and make it more difficult for DOD to ensure that contractors 
are meeting contract requirements efficiently, effectively, and at a 
reasonable price. Lack of effective oversight over the large number of 
contracts and contractors raises the potential for mismanagement of 
millions of dollars of these obligations. As we previously stated, some 
of the contracts we reviewed have ended, however, DOD continues to 
acquire these services through new contracts that are managed by the 
same contract oversight and administration offices and processes. As 
such, it is likely the weaknesses we identified continue to exist in 
the new contracts. Our selection of contracts did not allow us to 
project our findings across the universe of DOD contracts for services 
that support contingency operations. However, given that we identified 
inadequate oversight and administration staff levels for five of the 
seven contracts, and in four of the contracts we identified a failure 
to follow guidance for contract file maintenance or quality assurance 
principles, we believe the potential for these weaknesses exists in 
other DOD contracts supporting contingency operations. 

Recommendations for Executive Action: 

To ensure that DOD is able to exercise effective oversight over the 
contracts we reviewed, we recommend that the Secretary of Defense 
direct the Secretary of the Army to take the following three actions: 

* develop a plan to adequately staff oversight positions with qualified 
personnel, 

* take steps to determine why guidance for maintaining contract files 
is not consistently being followed and implement a corrective action 
plan, and: 

* ensure that quality assurance principles are consistently 
implemented. 

We also recommend that the Secretary of Defense direct each of the 
service secretaries to conduct a review of the contract administration 
functions that support contingency operations contracts to determine 
the prevalence of inadequate contract oversight and administration 
staffing levels and the extent to which guidance for maintaining 
contract files and quality assurance principles are not being 
consistently followed and take corrective actions as necessary. 

Agency Comments and Our Evaluation: 

In commenting on a draft of this report, DOD concurred with each of our 
recommendations and stated that the Army was well aware of the problems 
we identified. In response to our recommendation that the Army develop 
a plan to adequately staff oversight positions for the contracts we 
reviewed with qualified personnel, DOD stated that the Army established 
the Gansler Commission to review lessons learned in recent operations 
and provide recommendations to improve effectiveness, efficiency, and 
transparency for future military operations. The Gansler Commission 
recommended that the Army contracting workforce be increased by 1,400 
personnel. DOD stated that the Army established three new contracting 
commands that should enhance the focus on contractor oversight and that 
concept plans to support an increase in contract personnel were being 
staffed. While the Army's actions should be viewed as positive steps, 
increasing the workforce and establishing three new contracting 
commands will not address, in the near term, the Army's inadequate 
oversight personnel on the specific contracts we reviewed. We continue 
to believe that the Army should ensure that currently authorized 
oversight positions are filled with qualified personnel. If the concept 
plans include provisions for filling currently vacant authorized 
oversight positions with qualified personnel, then the Army's actions 
should address our recommendation. In response to our recommendation 
that the Army take steps to determine why guidance for maintaining 
contract files is not consistently being followed and implement a 
corrective action plan, DOD stated that contract files are reviewed for 
compliance and completeness during all Army Procurement Management 
Reviews of Army contracting activities and that the Army found that a 
checklist should be developed. We believe that developing a checklist 
may be beneficial for identifying information that should be in 
contract files. However, this may not address the issue of why existing 
guidance for contract file maintenance, which already identifies what 
should be included in the files, is not being followed. In response to 
our recommendation that the Army ensure that quality assurance 
principles are consistently implemented, DOD stated that it has 
stressed the requirement to prepare quality assurance surveillance 
plans for all service contracts greater than $2,500 to ensure 
systematic quality assurance methods are used. While having a quality 
assurance surveillance plan can be beneficial to consistent 
implementation of quality assurance principles, most of the contracts 
we reviewed had a quality assurance surveillance plan, yet quality 
assurance principles were not consistently implemented. For example, 
the Global Maintenance and Supply Services Contract in Kuwait had a 
quality assurance surveillance plan that required documentation of 
contractor performance. However, as we reported, the Army did not 
always document unacceptable contractor performance. Because of our 
concern that the problems we identified may exist in other contingency 
contracts, we recommended that the service secretaries conduct a review 
of contract administration functions that support contingency 
operations contracts to determine the prevalence of inadequate 
oversight and administration staffing levels and the extent to which 
guidance for maintaining contract files and quality assurance 
principles is not being consistently followed and take corrective 
actions as necessary. In response, DOD stated that it has taken several 
initiatives to position itself for future operations, including 
increasing staffing dedicated specifically to contracting in 
expeditionary operations. While these actions may enhance future 
contracting for expeditionary operations, they will not address 
potential problems with active contracts. Additionally, authorized 
oversight positions in deployed locations need to be filled with 
qualified personnel to provide contractor oversight. We believe 
existing active contracts still need to be reviewed to address the 
problems we identified. DOD's comments are reprinted in appendix II. 

We are sending copies of this report to the appropriate congressional 
committees and the Secretary of Defense. We will also 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]. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. 

If you or your staff has any questions regarding this report, please 
contact me at (202) 512-8365 or solisw@gao.gov. Key contributors to the 
report are listed in appendix III. 

Signed by: 

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

List of Committees: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Thad Cochran: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable John P. Murtha: 
Chairman: 
The Honorable C. W. Bill Young: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Ike Skelton: 
Chairman: 
The Honorable Duncan L. Hunter: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

To conduct our work, we selected and conducted a case study review of a 
nonprobability sample of 7 Department of Defense (DOD) contracts for 
services that support deployed forces. Since a complete list of 
contracts was not available, we developed a list from which to select 
our case studies in two steps. First, we developed criteria for such a 
list of contracts (including task orders) awarded by DOD and its 
components that included the following: the contract supports deployed 
forces; Operations and Maintenance (O&M) funds are used to pay for the 
contract services; the principal place of performance is within the 
United States Central Command's Area of Operation (i.e., 50 percent or 
greater); the contract is to maintain a weapons system(s) and/or 
provide support, including base support, but not for reconstruction and 
commodities; the award date of the contract is after October 2002; the 
contract was still in effect as of December 12, 2006; and the 
contractor is U.S. based. We provided this list of criteria to DOD 
which provided us with a list of 34 contracts, some of which did not 
meet the criteria. Second, we generated a short list of 8 contracts to 
supplement those provided by DOD based on our research and experience 
from prior work. We selected our nonprobability sample of 7 contracts 
from these two lists combined. The selected contracts provided various 
services such as base operations support, security, vehicle 
maintenance, and linguist services for case study review. Factors that 
influenced the case study selection included the extent of work we may 
have done on a contract during previous GAO reviews, type of contract 
service provided, location where the contractor's work was performed, 
and contract dollar amount. Our selection of contracts does not allow 
us to project our findings across the universe of DOD contracts for 
services that support deployed forces. 

To determine why selected contracts supporting deployed forces 
experienced cost growth, we reviewed available contract requirements 
and funding documents and interviewed contracting office officials. 
When available, we compared the initially estimated annual contract 
costs with the actual annual contract costs to determine if the annual 
contract costs were different than initially anticipated. If there was 
a difference between annual contract costs and the initially estimated 
contract costs, we reviewed contract modification documents, contractor 
proposals, and other contract documents, and spoke with contracting 
office and contractor representatives to determine what led to the 
change in cost. We also spoke with representatives of the contractor to 
obtain their views related to changing contract requirements and the 
impact the changes had on contract costs. 

To determine the extent to which DOD provided oversight of contracts 
that support contingency operations, we reviewed a variety of quality 
assurance and contract management regulations and guidance, including 
the Federal Acquisition Regulation, the Defense Federal Acquisition 
Regulation Supplement, the Army Quality Program regulation, and DOD's 
Guidebook for Performance-Based Services Acquisition in the Department 
of Defense. We met with contracting and quality assurance officials, 
and reviewed oversight and surveillance plans and inspection records. 
In addition, we spoke with representatives of the contractor and 
reviewed data provided by the contractor. We also observed physical 
inspections of the services provided for two contracts and toured 
operation areas for two other contracts. We spoke with oversight and 
contracting office officials to discuss the extent to which the 
contract management and oversight teams were adequately staffed to 
perform administration and oversight activities. While guidance was not 
available on the appropriate number of personnel needed to monitor 
contractors in a deployed location, we relied on the judgments and 
views of contracting office and contract oversight personnel as to the 
adequacy of staffing. 

To determine why the department uses contractors to support contingency 
operations, we interviewed contracting office officials and reviewed 
available documentation related to the decision to use contractors 
instead of military or DOD civilian personnel for the contracts. We 
also reviewed prior GAO work and DOD studies to determine if the basis 
of the decisions for the seven contracts we reviewed were consistent 
those used to make past decisions to contract for services across DOD. 
We did not, however, compare the cost of contractors versus military 
personnel or make policy judgments as to whether the use of contractors 
is desirable. 

We conducted this performance audit from November 2006 through August 
2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of Defense: 

Deputy Under Secretary Of Defense For Logistics And Materiel Readiness: 
3500 Defense Pentagon: 
Washington, DC 20301-3500: 

September 23, 2008: 

Mr. William M. Solis: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W.: 
Washington, DC 20548: 

Dear Mr. Solis: 

This is the Department of Defense (DoD) technical response to the GAO 
draft report, "Military Operations: DoD Needs to Address Contract 
Oversight and Quality Assurance Issues for Contracts Used to Support 
Contingency Operations," dated August 25, 2008 (GAO Code 350951). 

The Department concurs with these recommendations. Detailed comments on 
the report are enclosed. Technical comments were submitted under 
separate cover. 

Signed by: 

Jack Bell: 

Enclosure: 
As stated: 

GAO Draft Report – Dated August 25, 2008 GAO Code 350951/GAO-08-1087: 

"Military Operations: DoD Needs to Address Contract Oversight and 
Quality Assurance Issues for Contracts Used to Support Contingency 
Operations" 

Department Of Defense Comments To The Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Secretary of the Army to develop a plan to adequately staff 
oversight positions with qualified personnel. 

DOD Response: Concur. 

The Army recognizes the importance of oversight of contractor 
performance and is aggressively moving forward to resolve these issues 
in a timely manner. 

The Secretary of the Army established an independent Commission on Army 
Acquisition and Program Management in Expeditionary Operations (Gansler 
Commission), to review the lessons learned in recent operations and 
provide forward-looking recommendations to ensure that future military 
operations achieve greater effectiveness, efficiency, and transparency. 
The Commission assessed processes (including internal controls), 
personnel, organization, training, policy and regulation, as well as 
explored legislative solutions. In response to the Gansler Commission 
findings and recommendations, dated October 31, 2007, the Army 
established the U.S. Army Contracting Command (ACC), the U.S. Army 
Expeditionary Contracting Command (ECC), and the U.S. Army Installation 
Contracting Command (ICC), under the command and control of the U.S. 
Army Materiel Command (AMC). This is expected to enhance the focus on 
contractor oversight. 

One of the recommendations of the Gansler Commission is to increase the 
number of military (by 400) and civilian (by 1000) in the Army 
contracting workforce, which involves about a 25 percent increase. The 
Commission made this recommendation after considering both the Air 
Force and Marine Corps model for determining the number of military. 
Ultimately, the Commission recommended that a ratio of 70/30 percent 
(civilian to military personnel) is appropriate for the total Army 
Acquisition Force, and a ratio of 80/20 for the Contracting Corps. 
Concept plans to support the increase in additional personnel are being 
staffed. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Secretary of the Army to take steps to determine why 
guidance for maintaining contract files is not consistently being 
followed and implement a corrective action plan. 

DOD Response: Concur. 

The Army is well aware of the problems associated with maintaining 
contract files and Contracting Officer Representative (COR) files in an 
appropriate manner. The Army is aggressively moving ahead to resolve 
these issues in a timely manner. 

Contract files are reviewed for compliance and completeness during all 
Army Procurement Management Reviews (PMRs) of Army contracting 
activities. The Army Associate Deputy Assistant Secretary 
(ADAS)(Procurement) Directorate manages the PMR program and based on 
systemic trend, found that a checklist should be developed. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct the Secretary of the Army to ensure that quality assurance 
principles are consistently implemented. 

DOD Response: Concur. 

The Army is well aware of the problems associated with ensuring that 
quality assurance principles are consistently implemented and 
documented in the contract files. The Army is moving ahead aggressively 
to resolve these issues in a timely manner. 

Deputy Assistant Secretary of the Army (Procurement and Policy) 
memorandum, dated February 9, 2007, "Contract Administration and 
Surveillance for Service Contracts," stressed the requirement to 
prepare Quality Assurance Surveillance Plans (QASPs) for all service 
contract actions greater than $2,500 to ensure systematic quality 
assurance methods are used during contract administration. Further, the 
Army requires that the level of surveillance described in the plan be 
commensurate with the dollar value, risk, complexity and criticality of 
the acquisition. 

Recommendation 4: The GAO recommends that the Secretary of Defense 
direct each of the Service Secretaries to conduct a review of the 
contract administration functions that support contingency operations 
contracts to determine the prevalence of inadequate contract oversight 
and administration staffing levels and the extent to which guidance for 
maintaining contract files and quality assurance principles are not 
being consistently followed and take corrective actions as necessary. 

DOD Response: Concur. 

The DoD is cognizant of the problems associated with expeditionary 
contracting, contract administration and the requirement to adequately 
staff oversight positions with qualified personnel and is aggressively 
moving ahead to resolve these issues in a timely manner. 

To improve contingency contracting, the Department undertook several 
initiatives to position itself for future operations. In May 2007, the 
Department increased the staffing within the Defense Procurement, 
Acquisition Policy and Strategic Sourcing Directorate (DPAP) that is 
dedicated specifically to contracting in expeditionary operations. The 
DoD is developing joint policies for requirements definition, 
contingency program management, and contingency contracting during 
combat operations and post conflict operations in coordination with 
other government agencies in-theater. 

Additionally, the Army established the U.S. Army Contracting Command 
(ACC), the U.S. Army Expeditionary Contracting Command (ECC), and the 
U.S. Army Installation Contracting Command (ICC), under the command and 
control of the U.S. Army Materiel Command (AMC). This is expected to 
enhance the focus on contractor oversight.

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

William M. Solis, (202) 512-8365 or solisw@gao.gov: 

Acknowledgments: 

In addition to the contact named above, Carole Coffey, Assistant 
Director; Sarah Baker, Renee Brown, Larry Junek, Ronald La Due Lake, 
Katherine Lenane, Susan Mason, Connie W. Sawyer, Jr., and Karen 
Thornton made key contributions to this report. 

[End of section] 

Footnotes: 

[1] Department of Defense, Report on DOD Program for Planning, 
Managing, and Accounting for Contractor Services and Contractor 
Personnel during Contingency Operations (October 2007). 

[2] H.R. Rep. No. 109-504, at 46-47 (June 2006). 

[3] GAO, Defense Budget: Trends in Operations and Maintenance Costs and 
Support Services Contracting, GAO-07-631 (Washington, D.C.: May 18, 
2007). 

[4] GAO, Defense Logistics: The Army Needs to Implement an Effective 
Management and Oversight Plan for the Equipment Maintenance Contract in 
Kuwait, GAO-08-316R (Washington, D.C.: January 22, 2008). 

[5] Throughout this report, we refer to the six contracts and the one 
task order as the seven contracts. 

[6] The seven contracts we reviewed were awarded at different times. 
See table 1 for information on when each of the contracts began. 

[7] FAR § 46.104(c). 

[8] FAR § 4.802 (c) & (d). 

[9] Army Regulation 702-11, "Army Quality Program," prescribes the 
policies and responsibilities of an Army quality program applicable to 
all Army activities that acquire services. The March 2007 version of 
the regulation supersedes AR 702-11, dated April 15, 1979, and includes 
a major revision defining the core competencies fundamental to an 
effective quality program. 

[10] For example, in 2003 DOD relied on a Department of the Interior 
contracting office that specializes in awarding and administering 
contracts for other agencies to obtain contractor-provided intelligence-
related services quickly to support U.S. forces in Iraq. See GAO, 
Interagency Contracting: Problems with DOD's and Interior's Orders to 
Support Military Operations, GAO-05-201 (Washington, D.C.: April 29, 
2005). 

[11] FAR §§ 46.104 and 4.802. 

[12] Defense Federal Acquisition Regulation Supplement § 246.102. 

[13] While the initially estimated cost for each of the contracts 
included a base year and all option years, the actual contract costs 
included only those option years that have been exercised. Two of the 
contracts were ongoing and not all of the option years had been 
exercised at the time of this report. 

[14] When the April 1999 contract expired in 2004, the Army sought 
offers for a new contract to provide linguist services worldwide. A bid 
protest was filed alleging that multiple requirements were being 
bundled in a way that made it impossible for small businesses to 
compete. Award of the contract was stayed and the bridge contract we 
reviewed was issued sole source to the existing contractor. According 
to Army officials, when the requirement was solicited in 2005 it was 
broken into four contracts to encourage small business competition. 
Each of the four contracts was awarded; however, performance was stayed 
due to protests, which resulted in the bridge contract being extended 
repeatedly to allow for continued service. 

[15] The Army prepositions stocks at land sites in Europe, Northeast 
Asia, Southwest Asia, and aboard ships afloat near Guam and Diego 
Garcia. APS equipment sets are referred to according to numerical 
designations of 1 through 5, corresponding to their locations. APS-5 is 
the equipment prepositioned in Southwest Asia. 

[16] According to the contracting officer, this modification was issued 
as an undefinitized contract action and supported by an emergency 
justification and approval document citing unusual and compelling 
circumstances. 

[17] The contract was extended by 6 months in light of an ongoing bid 
protest against the follow on contract. 

[18] Support provided includes: maintenance, supply support, technical 
assistance, logistics planning and management, field exercises, 
deployment support preparation, program plans and controls, business 
administration, logistics planning, and technical manual feedback. 

[19] According to Army officials, battle-damaged vehicles are those 
that have sustained structural damage and can not be used in the fight 
due to the vehicles' vulnerability. 

[20] Only 1 option year was exercised because the Air Force sought 
competition and awarded a new contract in an effort to reduce Predator 
maintenance costs. The 7-week extension was to allow for transition to 
the new contract. 

[21] According to program officials, the contract labor rates for the 
Predator maintenance contract were determined by a Forward Pricing Rate 
Agreement (FPRA) that was negotiated between the government and the 
contractor. A FPRA, as defined in the FAR, is a written agreement 
negotiated between a contractor and the government to make certain 
rates available during a specified period for use in pricing contracts 
or contract modifications. Such rates represent reasonable projections 
of specific costs that are not easily estimated for, identified with, 
or generated by a specific contract, contract end item, or task. 

[22] In commenting on a draft of this report, DOD stated that it was 
less costly for the contractor to provide the protective equipment than 
for the government. According to DOD, the actual equipment cost was 
$785,399.91 (excluding shipping), whereas Army-issued equipment would 
have cost $1,296,116.64. Related to the transportation, DOD said that 
actual transportation cost was approximately $1.84 million whereas it 
would have cost between $1.43 million and $1.76 million for HMMWVs to 
provide to the contractor. We believe better communication between the 
contracting officer and the customer using the service would have 
identified the best means to provide the equipment and transportation. 

[23] GAO-08-316R. 

[24] Established in 1985, the Army's LOGCAP program 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 military commander as an option. 

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

[26] GAO, High Risk Series: An Update, GAO-05-207 (Washington, D.C.: 
January 2005). 

[27] GAO, Military Operations: High-Level DOD Action Needed to Address 
Long-standing Problems with Management and Oversight of Contractors 
Supporting Deployed Forces, GAO-07-145 (Washington, D.C.: December 18, 
2006). 

[28] DOD Manual for the Performance of Contract Property 
Administration, DOD 4161.2-M, December 1991. 

[29] GAO-08-316R. 

[30] Competitive sourcing, otherwise known as the A-76 process, is when 
the military services and other defense components conduct public/ 
private competition for a commercial activity currently performed by 
government personnel to determine whether it would be cost effective to 
contract with the private sector to perform that activity. 

[31] GAO-07-631. 

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