oversight

Chemical Weapons: Stockpile Destruction Delayed at the Army's Prototype Disposal Facility

Published by the Government Accountability Office on 1990-07-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

July 1990
                     CHEMICAL
                     WEAPONS
                     Stockpile Destruction
                     Delayed at the Amy’s
                     Prototype Disposal -
                     Facility




                   RE!3TRICIZD--     Not to be released outside the
                   General Accounting Office unless specifically
                   approved by the OfTice of Congressional
                   Relations.


GAO/NSIAD-90-222
National Security and
International Affairs Division

B-239332

July 30, 1990

The Honorable John Glenn
Chairman, Committee on Governmental
  Affairs
United States Senate

The Honorable John Conyers, Jr.
Chairman, Legislation and National
  Security Subcommittee
Committee on Government Operations
House of Representatives

The Honorable Earl Hutto
Chairman, Subcommittee on Readiness
Committee on Armed Services
House of Representatives

This report responds to your requests that we review the Department of Defense’s Chemical
Stockpile Disposal Program. We discussed the Department’s overall efforts to dispose of
chemical weapons in our earlier report entitled Chemical Weapons: Obstacles to the Army’s
Plan to Destroy Obsolete U.S. Stockpile (GAO/NSIm90-155, May 24, 1990). This report
discusses the operational delays at the Johnston Atoll Chemical Agent Disposal System-the
Defense Department’s prototype disposal plant.

Unless you publicly announce its contents earlier, we plan no further distribution of this
report for 30 days. At that time, we will send copies to the Chairmen of the House and Senate
Committees on Armed Services and on Appropriations, the Secretaries of Defense and the
Army, the Director of the Office of Management and Budget, and other interested parties.

This report was prepared under the direction of Richard Davis, Army Issues, who may be
reached on (202) 275-4141 if you or your staff have any questions. Other major contributors
are listed in appendix II.




Frank C. Conahan
Assistant Comptroller General
Executive Summary


             In November 1985, the Congress enacted Public Law 99-145, requiring
Purpose      the Department of Defense to destroy the U.S. stockpile of chemical
             weapons by September 30, 1994. In September 1988, the Congress
             extended the completion date for chemical weapons disposal to April 30,
             1997. The Army has concluded that high-temperature incineration is the
             preferred disposal method. In 1988, the Army completed construction of
             its prototype plant-the Johnston Atoll Chemical Agent Disposal
             System. However, this plant needs additional testing and verification
             before it becomes a fully operational chemical weapons disposal plant.

             The Chairmen of the Subcommittee on Readiness, House Committee on
             Armed Services; the Legislation and National Security Subcommittee,
             House Committee on Government Operations; and the Senate Committee
             on Governmental Affairs asked GAO to determine the status of the
             Johnston Island disposal program. Our objectives were to identify and
             assess (1) the program’s current schedule and cost estimates, (2) the
             causes of schedule slippage, (3) the impact of this slippage on the
             Army’s overall chemical disposal program, and (4) the Army’s con-
             tractor oversight activities.


             In fiscal year 1981, the Army planned to build a disposal facility on
Background   Johnston Island to destroy M55 chemical rockets. The Congress, in 1985,
             directed the Defense Department to destroy the entire U.S. chemical
             weapons stockpile, not just M55s. In that same year, the Army began to
             construct a disposal plant on Johnston Island. In 1986, the Army’s
             Western Command, headquartered in Hawaii, awarded an 8-year opera-
             tions and maintenance contract on a cost-plus-award-fee basis for the
             Johnston disposal plant.




              32 months after the original February 1989 full-scale start-up date. The
              original full-scale start-up date was delayed about 22.5 months by the
              Army’s efforts to comply with the statutory requirements to ( 1) destroy
              all types of munitions, not just the M55 rockets, and (2) conduct opcra-
              tional verification tests. The start-up date slipped another 9.5 months
              because of technical and contractor staffing problems. Further delays
              are likely if problems continue at the facility.

              ‘As of this date, the Army had not begun these tests. The Army estimates that operar IOK>LS/iI tu*ym
              in the summer of 1990.



              Page 2                             GAO/NSLAIMO-222       Army’s Chemical    Weapons I)i.spcwd   Plant
                          Executive   Summary




                          Moreover, as of March 1990, the Army estimated that the total *Johnston
                          disposal program will cost about $561 million to complete operations
                          through 1994-an increase of $190 million over the Army’s 1985 esti-
                          mate. Most of the increased estimated cost can be attributed to the two
                          statutory requirements and the technical and contractor problems. If
                          problems continue and the operations and maintenance contract is
                          extended beyond July 1994, the estimated cost will continue to grow.

                          Because of delays in operational testing at Johnston Island, the Army
                          also delayed the construction of three follow-on facilities--at Anniston,
                          Alabama; Pine Bluff, Arkansas; and Umatilla, Oregon. GAO estimated
                          that the additional time required to store the munitions at Johnston
                          Island and the three follow-on sites will cost the Army more than
                          $33 million.

                          To improve the contractor’s performance on the operations and mainte-
                          nance contract, the Army withheld all or significant portions of the con-
                          tractor’s award fee for several evaluation periods. Further, the Army
                          attempted to strengthen its own oversight of the operations and mainte-
                          nance contract, including controls over contractor overtime costs. How-
                          ever, the Army’s oversight of contractor overtime needs to be further
                          improved.



Principal Findings

Several Problems Caused   The Johnston disposal program has expanded significantly since 1985.
                          Until November 1985, when the Congress required the Defense
Johnston Schedule         Department to destroy the entire chemical stockpile, the Johnston
Slippage and Estimated    facility was intended to destroy only M55 rockets, beginning full-scale
Cost Increases            operations on February 1, 1989. In December 1987, the Congress passed
                          Public Law 100-180, which required the Army to conduct full-scale ver-
                          ification tests with lethal agents to demonstrate that the disposal tcch-
                          nology could safely and efficiently destroy chemical weapons. These
                          two statutory changes caused the Army’s original full-scale operations
                          start date to slip 22.5 months-from     February 1, 1989, to December 1.5,
                          1990. The Army moved the full-scale operational date back another I)..’
                          months-from       December 15, 1990, to September 27, 1991-due to
                          equipment, computer, and plant corrosion problems and the contrac.tor’s
                          inability to fill some technical and management positions. Further



                          Page 3                     GAO/NSLAIMO-222   Army’s Chemical   Weapons Dibpwal   Plant
                            Executive   Summary




                            delays are possible if, as in the past, the Army experiences major slip-
                            page in any of the 279 operational testing start-up activities. For
                            example, as of January 1990,42 of the 279 start-up activities had
                            slipped an average of 22 days; some activities had slipped almost 2
                            months.

                            In October 1985, the Army’s life-cycle cost estimate for the Johnston
                            disposal program was $371 million. As of March 1990, the total esti-
                            mated cost to complete operations through 1994 was about $561 million.
                            The March 1990 estimate includes about $421 million for construction,
                            equipment installation, and the operations and maintenance contract
                            and about $140 million for base and logistical support and other costs.


Schedule Slippage Delayed   The schedule slippage in the Johnston program has resulted in construc-
                            tion delays at three stateside facilities-at  Anniston, Pine Bluff. and
Follow-on Facilities’       Umatilla. Chemical weapons will have to be stored an additional
Construction and            9.5 months on Johnston Island, 19 months at each of the Pine Bluff and
Increased Munition          Umatilla sites, and 10 months at Anniston. GAO estimated that the addi-
Storage Costs               tional time required to store, guard, inspect, and maintain the munitions
                            at Johnston Island and the three follow-on sites will cost more than
                            $33 million.


Army Has Withheld Most      In 1988 and 1989, the Army took action to correct contractor perform-
                            ance on the operations and maintenance contract. In response to staffing
of Contractor’s Award Fee   and other problems, the Army gave the contractor successively lower
Due to Unsatisfactory       performance ratings from May 1988 through April 1989. For all ev.alua-
Performance                 tion periods, beginning in August 1986 and ending in August 1989. the
                            Army awarded 47 percent of the total available award fees. The &-my
                            withheld the contractor’s entire award fee for one period covering
                            January through April 1989.


Improved Controls Needed    According to the contracting officer’s representative, contract
                            employees regularly worked 60 to 80 hours per week. GAO'S anal> SIS
for Overtime Costs          showed that in July 1989, 19 employees worked at least one 9c1-h I!II
                            week. Army officials told GAO that the operations and maintcnan~ t’ (‘on-
                            tract did not include provisions for the Army to ensure that t ht. 4I III
                            tractor’s overtime was necessary or that charges were legitimatcn ‘l’ht
                            Army tried to persuade the contractor to strengthen its review\ ;mct
                            reporting procedures for overtime. In January 1990, according t I ) ! rmy
                            officials, the contractor verbally agreed to have its department t 11’.1( is


                             Page 4                    GAO/NSIADQO-222   Army’s Chemical   Weapon-   lhnprrl   Plant
                      Executive   Summary




                      approve employee overtime in advance and to report to the Army on
                      overtime usage. However, as of March 1990, the contractor had not fully
                      complied with the terms of the verbal agreement.

                  -
                      GAO recommends that the Secretary of the Army direct the Army’s
Recommendations       Western Command to negotiate a formal agreement with the operations
                      and maintenance contractor regarding the approval and the use of over-
                      time and incorporate it into the existing contract. Such an agreement
                      could help the Army in its oversight responsibility of the contractor’s
                      use of overtime.

                      Included in chapter 3 of this report are other recommendations to the
                      Secretary of the Army, which are designed to improve the Army’s over-
                      sight of contractor operations at the Johnston plant and at the follow-on
                      disposal plants.


                      As requested, GAO did not obtain official agency comments on this
Agency Comments       report. However, it discussed the report with agency officials and
                      included their views where appropriate.




                       Page 5                    GAO/NSIAIMO-222   Anny’e   Chemical   Weapons Disposal   Plant
Contents


Executive Summary                                                                                         2

Chapter 1                                                                                                8
Introduction            Background                                                                      10
                        JACADS’ Management Structure                                                    11
                        Objectives, Scope, and Methodology                                              12

Chapter 2
Program Expansion       Mandated Disposal Program Expansion and Testing
                            Delayed Operations
and Technical and       Technical and Contractor Staffing Problems Cause                                15
Contractor Problems         Schedule to Slip
                        Continued Technical Problems Could Cause Further                                19
Caused JACADS’              Slippage
Schedule Slippage and   JL4CADS’ Program Costs Increased                                                19
Cost Increases -        Army Applies Lessons Learned From JACADS to Follow-                             21
                            on Facilities

Chapter 3                                                                                               22
The Army’s Oversight    Army Has Taken Actions to Improve Contractor                                    22
                             Performance
of the Operations and   Inadequate Oversight of Contractor Overtime                                     24
Maintenance             First 32 Invoices Need to Be Audited for Disallowable                           25
                            costs
Contractor Has          Conclusions                                                                     26
Improved but Is Still   Recommendations                                                                 26
Inadequate
Chapter 4                                                                                                28
JACADS’ Schedule        Operational Testing Should Be Completed Before                                   28
                             Construction of Follow-on Plants Begins
Slippage Delays the     JACADS’ Schedule Slippage Causes Delays at Follow-on                             29
Construction of              Plants
                        Increased Storage Costs                                                          29
Follow-on Facilities
and Increases
Munitions Storage
costs


                        Page 6                    GAO/NSIAD-90-222   Army’s Chemical   Weapons Mspod   Plant
-
             Contents




Appendixes   Appendix I: Overview of the JACADS Disposal Process                               32
             Appendix II: Major Contributors to This Report                                    34

Tables       Table 1.1: Munitions and Chemical Agents to Be                                    10
                 Destroyed at JACADS
             Table 2.1: Cost Increases in JACADS’ Contracts                                    20
             Table 3.1: JACADS’ Operations and Maintenance Contract                            24
                 Award Fees

Figures      Figure 1.1: Location of Johnston Island                                            9
             Figure I. 1: JACADS Disposal Process                                              33




             Abbreviations

             DOD        Department of Defense
             GAO        General Accounting Office
             JACADS     Johnston Atoll Chemical Agent Disposal System


             Page 7                    GAO/NSIAtMO-222   Army’s   Chemical   Weapons MmpuJ   Ytant
Introduction


               In November 1985, the Congress enacted Public Law 99-145, requiring
               the Department of Defense (DOD) to destroy the U.S. stockpile of obsolete
               chemical munitions and agents by September 30, 1994. The law also
               required DOD to establish a management organization within the
               Department of the Army to carry out the Chemical Stockpile Disposal
               Program. In September 1988, the Congress extended the completion date
               for chemical weapons disposal to April 30, 1997.’

               The chemical weapons to be destroyed contain three types of agents:
               GB, VX, and HD. The “nonpersistent” nerve agent GB vaporizes and dis-
               sipates readily. The “persistent” nerve agent VX remains in liquid form
               for several days. Both GB and VX disrupt the nervous system. However,
               VX, the more lethal agent, leads to the loss of muscular control and usu-
               ally death. The “persistent” mustard agent HD blisters the skin and can
               be lethal in large amounts.

               Most of the chemical agent and munition stockpile is stored at eight
               Army depots in the continental United States: at Anniston, Alabama;
               Pine Bluff, Arkansas; Pueblo, Colorado; Newport, Indiana; Lexington,
               Kentucky; Aberdeen, Maryland; Umatilla, Oregon; and Tooele, Utah. A
               portion of the stockpile is also stored at two overseas locations: the
               Federal Republic of Germany and at Johnston Island-a U.S. possession
               in the Pacific Ocean.

               The Army selected Johnston Island as the site on which to build and test
               the first U.S. chemical weapons disposal facility because of the deterio-
               rating condition of the munitions stored there (caused by the highly cor-
               rosive climate) and the island’s remote location. By operating the first
               full-scale disposal facility on Johnston Island, the Army will be able to
               gain experience in destroying most of the existing combinations of muni-
               tions and agents in the nation’s chemical stockpile. Occupying
               626 square acres, Johnston Island is the largest of four small islands
               that comprise the Johnston Atoll. Figure 1.1 shows the location of *John-
               ston Island.




               ‘On April 5, 1990, the Assistant Secretary of the Army for Installations, Logistics and En~lrrmmtsnt
               testified before the Senate Committee on Armed Services that the disposal program should tH. ~~)rn-
               pleted at the end of 1998.



               Page 8                              GAO/NSIALHO-222 Army’s Chemical Weapons Dispchal Plant
                                              chapter 1
                                              Introduction




Figure 1.1: Location of Johnston Island



                                                                                                San Francisco




                           French
                           Frigate Shoals




                                                                   Pacific Ocean




                    v-
                                            0 Fanning
           Howland                              a
         8 Baker                            Christmas

                  0 Canton

                                              NM = Nautical Mile



                                              The various chemical munitions to be destroyed at the Johnston Atoll
                                              Chemical Agent Disposal System (JACADS) contain all three types of
                                              lethal agents (see table 1.1).




                                              Page 9                         GAO/NSIAMO-222   Army’s   Chemical   Weapons Dispwal   Plant
                                    Chapter 1
                                    Introduction




Table 1.1: Munitions and Chemical
Agents to Be Destroyed at JACADS    Munitions                                         Agent
                                    M55 rockets                                       GB and VX      _____
                                                                                                     -~___
                                    M23 land mines                                    vx
                                    Bombs                                             GB--
                                    105.mm artillery shells                           GB and HD             ~-___---
                                    155.mm artlllerv shells                           GB. VX. and HD
                                    4.2.tnch artillery shells                         HD                   ~-
                                    8-inch artillery shells                           GB and VX
                                    1-ton containers                                  GB. VX. and HD


                                    None of these agents or munitions have been manufactured since 1968.
                                    All are at least 22 years old, and some are more than 45 years old.


                                    In 1971, the United States moved its chemical weapons from Okinawa
Background                          and stored them on Johnston Island. In this same year, the Congress
                                    enacted Public Law 91-672, which prohibited the transportation of the
                                    chemical weapons that had been stored on Okinawa into the United
                                    States and authorized funding for DOD to destroy these weapons only
                                    outside the United States.

                                    During the 1970s the Army, as DOD’S lead service in chemical matters,
                                    constructed and operated a pilot Chemical Agent Munitions Disposal
                                    System at the Tooele Army Depot in Utah. Using this pilot system, the
                                    Army (1) developed and tested disposal technology, (2) generated main-
                                    tenance data for disposal equipment, (3) generated technical engineering
                                    data for the design of production-scale disposal plants, and (4) disposed
                                    of various quantities of deteriorating chemical stocks. The Army’s dis-
                                    posal technology is known as the “reverse assembly and incineration
                                    process. ” This technology disassembles and drains chemical agents from
                                    the munitions before the component parts are incinerated in a series of
                                    furnaces. A more detailed discussion of this process is included in
                                    appendix I.

                                    In fiscal year 1981, the Army planned to build a disposal facility on
                                    Johnston Island, which would use the reverse assembly and incineration
                                    process to destroy chemical weapons stored on the island. Although the
                                    Army designed the Johnston disposal facility to destroy all types of
                                    munitions, it initially planned to equip the facility to destroy only one
                                    type of chemical munition-the      M55 rocket. Determining that the
                                    M55 rockets were in poor condition and were no longer militarily useful,



                                     Page 10                    GAO/NSIAlHO-222   Army’s Chemical   Weapons Disposal   Plant
                  Chapter 1
                  Introduction




                  the Army established an M55 rocket disposal program to destroy the
                  nerve-agent-filled rockets stored at Johnston Island and five chemical
                  storage sites in the continental United States,

                  In 1985, the Congress approved funds to build the first chemical
                  weapons disposal facility on Johnston Island. On September 27, 1985,
                  the Army awarded a construction contract. However, 2 months later, the
                  Congress enacted Public Law 99-145, which required DOD to destroy the
                  entire existing U.S. chemical weapons stockpile. In response to this law,
                  the Army had to completely revise its M55 destruction program to
                  include all types of chemical weapons.

                  In December 1987, 11 months before the construction of JACALB was
                  completed, the Congress passed Public Law 100-180. This law required
                  the Army to conduct full-scale verification tests to demonstrate that the
                  selected disposal technology could safely destroy the different agents
                  and munitions while meeting all environmental requirements. The Army
                  estimated that this testing, which would be conducted in four phases,
                  should run for 16 months. In effect, the law required the Army to incor-
                  porate lessons learned from this testing into the designs of the future
                  disposal plants planned for the continental United States.

                  In February 1988, the Army formally announced that it would build dis-
                  posal facilities like JACADS at each of the eight stateside chemical
                  weapons storage sites. It also announced that the reverse assembly and
                  incineration process would be the method used to destroy the chemical
                  munitions stockpile at these sites.


                  Three Army organizations manage the JACADS program. The Program
JAWS Management   Manager for Chemical Demilitarization, who is located in the Edgewood
Structure         area of Aberdeen Proving Ground, Maryland, is the head of the manage-
                  ment organization. The Program Manager is responsible for providing
                  technical, engineering, and direct management control over the prepara-
                  tions being made to destroy the Johnston stockpile, as well as the stock-
                  piles at the eight follow-on facilities. Once JACADS begins full-scale
                  operations, the Program Manager also will assume oversight responsi-
                  bility for the day-to-day chemical disposal activities. The Program
                  Manager reports to the Office of the Assistant Secretary of the ,4rmy for
                  Installations, Logistics and the Environment.

                   The U.S. Army Support Command-Hawaii provides the contracting
                   officer for the JACADS operations and maintenance contract. The 1.3.


                   Page 11                  GAO/NSLAD!M-222 by’s   Chemical   Weapons Disposal   Plant
                         Chapter 1
                         Introduction




                         Army Chemical Activity-Western Command maintains and guards the
                         chemical munitions stored on Johnston Island. The Western Command
                         also provides the contracting officer’s representative on Johnston
                         Island, who will oversee the operations and maintenance contractor’s
                         performance until full-scale operations begin.


                         The Chairmen of the Subcommittee on Readiness, House Committee on
Objectives, Scope, and   Armed Services; the Legislation and National Security Subcommittee,
Methodology              House Committee on Government Operations; and the Senate Committee
                         on Governmental Affairs asked us to determine the status of DOD’S pro-
                         gram to destroy the stockpile of obsolete chemical munitions and agents
                         stored within the continental United States and on Johnston Island. We
                         addressed DOD’S overall efforts to dispose of chemical weapons in an ear-
                         lier report.” This report discusses DOD’S efforts to dispose of chemical
                         weapons at the Johnston Island disposal plant.

                         Our objectives were to identify and assess (1) JACADS current program
                         schedule and cost estimates, (2) the causes of any schedule slippage and
                         associated cost increases, (3) the Army’s oversight activities for the
                         operations and maintenance contractor, and (4) the impact of JACADS'
                         schedule slippage on the Army’s overall chemical disposal program. We
                         concentrated our work on the operations and maintenance contract
                         because most of the schedule slippage that was unrelated to the statu-
                         tory requirements occurred on this contract.

                         To accomplish these objectives, we interviewed and obtained and ana-
                         lyzed data from officials of the Department of the Army in Washington,
                         D.C.; the Office of the Program Manager for Chemical Demilitarization in
                         Aberdeen, Maryland; the U.S. Army Chemical Activity-Western
                         Command on Johnston Island; the offices of the operations and mainte-
                         nance contractor on Johnston Island and at Fort Shafter in Honolulu,
                         Hawaii; and the U.S. Army Support Command-Hawaii and the Army
                         Corps of Engineers’ Pacific Ocean Division in Honolulu, Hawaii. We also
                         contacted officials with the Army Corps of Engineers’ Huntsville Divi-
                         sion in Huntsville, Alabama.

                         To identify program schedule and cost estimates, we collected and ana-
                         lyzed schedule and cost documents and discussed the causes of schedule
                         slippages and cost increases with Army and contractor officials. To

                         ‘Chemical Weapons: Obstacles to the Army’s Plan to Destroy Obsolete U.S. Stockpile
                         (GAO/NSIAD-90-155, May 24, 1990).



                         Page 12                            GAO/NSIAMO-222       Army’s Chemical   Weapons Disposal   Plant
Chapter 1
Introduction




assess the extent and causes of schedule slippage, we also reviewed
Army and contractor technical and management reports concerning
JACADS' staff requirements, the extent and nature of contractor staff
shortages, contractor management qualifications and turnover, and
activity scheduling. To assess the extent and nature of JACADS' contract
cost increases, we reviewed contract files for construction, equipment
installation, and operations and maintenance contracts, as well as cost
reports and contract modifications.

We interviewed Army and contractor officials and reviewed Army docu-
ments concerning program management on the operations and mainte-
nance contract to identify current Army oversight activities. We
examined Army correspondence and memoranda, analyses of contractor
cost invoices, and evaluations of the operations and maintenance con-
tractor’s performance.

To determine whether JAGADS' schedule slippage had resulted in state-
side program delays, we interviewed Army officials, reviewed docu-
ments on technology transfer to the stateside program, and analyzed
JACADS' and stateside program schedules. We estimated the impact of
JACADS' schedule slippage on munitions storage costs by multiplying the
Army’s monthly estimates of storage costs at the Johnston Island and
stateside sites by the number of months of delays at these facilities that
were caused by JACXDS' schedule slippage.

We conducted our review from June 1989 to March 1990 in accordance
with generally accepted government auditing standards. As requested,
we did not obtain official agency comments, but we discussed our find-
ings with agency officials and incorporated their views in the report
where appropriate.




Page 13                    GAO/NSUIHO-222   Army’s Chemical   Weapons IX*~ms*al I’lant
Program Ekpansion and Technical and
Contractor Problems CausedJACADS’ Schedule
Slippage and Cost Increases
                      JACADSis scheduled to begin full-scale operations in September 1991-
                      32 months later than the Army originally planned. As of January 1990,
                      several activities were behind schedule. As a result, the start of opera-
                      tional verification testing and full-scale operations could be delayed
                      even further. Also, the estimated total cost for the JACADSprogram has
                      increased with each additional statutory requirement and with the dis-
                      covery of technical and contractor problems. If the technical and con-
                      tractor problems continue, the estimated cost will likely continue to
                      grow.

                      The Army is taking advantage of the delays in the JACADSschedule to
                      use the lessons learned to make design changes to the follow-on facili-
                      ties. The Army believes that these changes should prevent similar
                      problems from occurring at the future stateside sites and avoid the asso-
                      ciated cost growth.



Mandated Disposal     gram to include the destruction of all agent and munition combinations,
Program Expansion     rather than just the M55 rockets. In its January 31, 1984, baseline
and Testing Delayed   master schedule, the Army planned to procure only the equipment
                      needed to destroy M55 rockets and to start operations by February 1I
Operations            1989. The Army’s efforts to expand its destruction plan included pro-
                      curing, installing, and testing the additional munitions processing equip-
                      ment. The Army’s completion of these efforts delayed JACADS' operations
                      about 4 months-from       February 1,1989, to June 1,1989. .J.KADS start-
                      up was delayed another 2.5 months-from         June 1, 1989, to August 1.5,
                      1989-because the Army did not immediately release the funds needed
                      to purchase the additional equipment.

                      Public Law loo-180 requires the Army to conduct full-scale verific&on
                      tests of the disposal technology to be used at JACADS Previously, the
                      Army planned to conduct systemization tests with simulant agents md
                      nontoxic preoperational tests before beginning full-scale operat ion5 The
                      systemization tests would demonstrate the ability of the process and
                      control systems to function properly, while the preoperational t ch5t\
                      would verify that trained personnel, the process system, and t ho Im wess
                      support systems effectively met various standards for operations. moni-
                      toring, quality assurance, maintenance, training, and safety. Thck.\ r-my
                      determined that the additional testing required for full-scale \‘tm fl( ;1r ion
                      would take about 16 months to accomplish. This testing, whit+ N .L.*to




                      Page 14                     GAO/NSIAB90-222   Army’s Chemical   Weapon*   Ih-tnwl   Plant
                      Chapter 2
                      Program Expansion and Technical and
                      Contractor  Problems Caused JAC4DS’
                      Schedule Slippage and Cost Increases




                      have started on August 15,1989 (after the systemization and preopera-
                      tional testing was completed), was expected to end on December 15,
                       1990-22.5 months after the February 1989 start date.

                      The Army will destroy four types of munitions during operational ver-
                      ification testing: M55 rockets with GB, M55 rockets with VX, l-ton con-
                      tainers with mustard agent, and projectiles filled with mustard agent.
                      During each test, the Army will destroy a sufficient number of muni-
                      tions to develop confidence in the technology and to examine the safety
                      and efficiency of personnel, equipment, and operating procedures.


                      Full-scale operations at JACADSslipped another 9.5 months to
Technical and         September 27, 1991, because of technical and contractor staffing
Contractor Staffing   problems during the operations and maintenance phase of the program.
Problems Cause        The operations and maintenance contract, which began in August 1986,
                      is currently scheduled to run through July 1994. This contract covers
Schedule to Slip      disposal equipment testing and integration, plant operation and mainte-
                      nance, and plant closure. The operations and maintenance contractor
                      experienced technical problems during the equipment testing and inte-
                      gration phase of the contract. The contractor also had difficulty filling
                      some staff and management positions with qualified personnel. We
                      could not, nor could the Army, quantify the amount of time or costs that
                      each of these problems individually added to the JACADSschedule
                      overruns.


Technical Problems    During equipment testing and integration, technical problems surfaced
                      with (1) the liquid incinerator and deactivation furnace, (2) the process
                      equipment, (3) the JACADSheating and ventilation and air-conditioning
                      systems, and (4) corrosion caused by the salt-air climate on Johnston
                      Island.

                      The liquid incinerator’s secondary chamber was damaged when a hole
                      burned through its outer plate. The Army’s analysis indicated that the
                      problem was due to a design flaw, requiring the redesign and repair of
                      the secondary chamber. Also, according to Army officials, the deactiva-
                      tion furnace kiln warped and rubbed against the cover, preventing
                      proper rotation. The cover contains heat and prevents the deactivation
                      furnace room from overheating during operation. To remedy the
                      problem, the thickness and diameter of the deactivation furnace cover
                      had to be increased.



                      Page 16                         GAO/NSIAMtO-222   Army’s   Chemical   Weapons Disposal   Plant
                      Chapter 2
                      Program Expansion and Technical and
                      Contractor  Problems Caused JACADS
                      Schedule Slippage and Cost Increases




                      Technical problems also surfaced with the process equipment. For
                      example, the rocket shear machine had to be adjusted to shear rockets
                      into 13-inch lengths to prevent damage to heating coils. During systemi-
                      zation testing, sheared 19-inch rocket parts collected on the conveyor
                      belt from the deactivation furnace, damaging heating coils hanging
                      above the conveyor.

                      Also, air-balancing and duct installation work with the JACADSheating
                      and ventilation and air-conditioning systems was more time-consuming
                      than anticipated. According to an Army official, JACADSuses a complex
                      air-balancing system to ensure that chemical agents are not spread
                      throughout the building during normal operations or as a result of acci-
                      dental spills or explosions. The official also told us that fine-tuning this
                      system to meet rigorous standards for environmental hygiene proved
                      more complicated than anticipated.

                      Finally, the humid, tropical Johnston Island climate corroded parts of
                      the JACADSbuilding and equipment. For example, exterior steel support
                      beams, pipes, and pipe supports rusted and required frequent
                      repainting, and some pipe supports had to be replaced. Also, corrosion
                      caused significant deterioration of exterior valves, instrumentation, and
                      electrical function boxes. Army officials stated that, because they had
                      underestimated how corrosive the environment would be on Johnston
                      Island, they had not initially used appropriate corrosion protection
                      materials. To correct the corrosion problems, the Army now uses
                      corrosion-resistant paints and fiberglass equipment covers. Also, the
                      Army hired additional maintenance personnel to perform preventive
                      maintenance work on the building areas and equipment most susceptible
                      to corrosion.


Contractor Staffing   Staffing problems experienced by the operations and maintenance con-
                      tractor also contributed to the schedule slippage. The contractor has suf-
Problems              fered from a lack of qualified personnel to fill technical and
                      management positions because of rapidly increasing staffing needs. high
                      employee turnover, and inadequate recruitment efforts.

                      The operations and maintenance contractor did not sufficiently staff
                      some technical and management positions at JACADS From May 1988
                      through November 1989, staffing on the operations and maintenance
                      contract increased from 45 to 258 people. During this period, the
                      average staffing level was supposed to be 191 persons, but the actual
                      average staffing level was 158 persons, or 83 percent of the desircti


                      Page 16                         GAO/NSIAD-90-222   Army’s Chemical   Weapons Dikpwal   Plant
-
                           Chapter 2
                           FrogramExpansionandTech.nicaland
                           Contractor  Problems Caused JAfXD6’
                           Schedule Slippage and Cost Increasea




                           level. In 1989, many of the shortages occurred in critical occupations
                           and, therefore, hampered operations. A shortage of control engineers
                           caused the installation of process equipment and the performance of
                           interface tasks to fall behind schedule. A lack of control room operators
                           delayed the debugging of computer software, and personnel training
                           lagged due to an inadequate number of trainers. A shortage of mainte-
                           nance personnel created a l-year backlog of preventive maintenance
                           work on the disposal equipment and building. Further, according to one
                           contractor official, staffing shortfalls in general had adversely affected
                           the contractor’s ability to produce timely and accurate project-related
                           data.

                           In addition to its failure to recruit sufficient numbers of technical per-
                           sonnel for JACAD6, the operations and maintenance contractor filled
                           many management positions with personnel who did not have the
                           appropriate credentials or experience. For example, one of the three per-
                           sons who held the position of project manager, the senior contractor
                           position on Johnston Island, did not have an engineering degree and did
                           not have plant start-up experience. After serving as project manager for
                           about 20 months, this individual was demoted and reassigned to the
                           plant manager position.

Increasing StaffingNeeds   The operations and maintenance contractor had technical and manage-
                           ment staffing problems because staffing needs at JACADS increased as the
                           project progressed. According to Army officials, staffing needs
                           increased because the Army and contractor officials had underestimated
                           the complexity of JAcALI6’ start-up activities and the number of technical
                           and maintenance personnel needed to meet project milestones. For
                           example, they told us that they had underestimated the number of (*on-
                           trol engineers, control room operators, and trainers that would be
                           needed to keep the project on schedule. They told us that they also had
                           underestimated the number of corrective and preventive maintenanc.e
                           personnel that would be required to keep the equipment operational
                           throughout the JACADS start-up phase and to prevent excessive cor-ro~ion
                           of the JACAJX disposal building and equipment.

High Turnover Rates        High turnover rates also contributed to JACADS staffing shortfalls.
                           According to contractor officials, the average turnover rate for the
                           entire year of 1989 was 29 percent. This rate was 45 percent great tar
                           than the 20-percent turnover rate anticipated by the contractor at I htl
                           beginning of the project. In addition, the contractor experienced ul\ (‘I-V
                           turnover in most key management positions. For example, the (*Ibn
                           tractor employed three project managers from August 1986 thrcqtl


                           Page 17                           GAO/NSIAD9@222   Army’s   Chemical   Weapons IIbpwl   llant
                       Chapter 2
                       Program Expansion and Technical and
                       Contractor  Problems Caused JACADS’
                       Schedule Slippage and Cost Increases




                       August 1989. Similarly, the maintenance, operations, surety/safety, and
                       engineering chief positions were each filled by three separate individ-
                       uals, and the quality control chief and training manager positions were
                       each held by two individuals. By May 1989 only 1 of 11 key manage-
                       ment positions was occupied by the person who had originally been
                       hired.

                       In general, turnover occurred because employees were dissatisfied with
                       living conditions on Johnston Island, according to the contractor’s per-
                       sonnel administ,rator. He said that persons leaving the project com-
                       plained about the crowded housing conditions, the poor quality of food,
                       and the lack of recreational activities. He also cited complaints about
                       poor communications (e.g., mail and telephone services) with family
                       members! who are not permitted to live on Johnston Island. The per-
                       sonnel administrator also said that turnover occurred because early in
                       the operations and maintenance contract, employees were dissatisfied
                       with management personnel. He told us that some employees who had
                       left the project complained that the contractor did not show enough con-
                       cern for their welfare.

Recruitment Problems   Staffing shortages also occurred because recruiting problems hampered
                       the contractor’s ability to respond to increases in JACADS' staffing
                       requirements and higher-than-anticipated project turnover. According
                       to the contractor’s personnel administrator, the contractor employed an
                       insufficient number of recruiters until May 1989, when the contractor
                       hired more. Also, he said that many project applicants had refused
                       employment offers at JACADGbecause of the difficult living and working
                       conditions on Johnston Island. The contractor’s personnel administrator
                       also stated that it takes an average of 6 weeks to recruit job applicants.’

                       Some of the contractor’s recruiting problems, however, were unavoid-
                       able. According to the personnel administrator, lengthy annual negotia-
                       tions over staffing levels resulted in long periods during which future
                       staffing requirements were uncertain. On occasion, staffing require-
                       ments increased after negotiations were completed, allowing recruiters
                       as little as 2 weeks to recruit and process prospective JACADSemployees
                       to meet newly negotiated staffing levels.

                        The contractor took several measures to address the staffing problclms.
                        To make employment on Johnston Island more attractive, the cant ractor

                        ‘The contractor performs its own investigation of applicants’ reliability, including a phyh IIII+YI<
                                                                                                                          .4
                        test, a background investigation, and a physical examination.



                        Page 18                             GAO/NSIAD-90-222      Army’s   Chemical   Weapons Dihl)o*lll   Plant
                       Chapter 2
                       Program Expansion and Technical and
                       Contractor  Problems Caused JAC4DS’
                       Schedule Slippage and Cost Increases




                       increased wages and the benefits package. According to the contractor’s
                       personnel administrator, the contractor also hired more recruiters and
                       began processing more applicants.


                       Continuing technical problems could result in further slippage in the
Continued Technical    JACADSschedule. After August 1989-the original operational verifica-
Problems Could Cause   tion testing start date-the Army continued to fall behind schedule in
Further Slippage       preparing for this testing. By November 1989, 7 of the 10 subsystems in
                       the M55 rocket disposal line, the first line to be tested in operational
                       verification testing, were behind schedule. In December 1989, the Army
                       notified the Congress that, due to continuing technical and contractor
                       staffing problems, operational testing would slip to April 16, 1990. By
                       January 1990,42, or 15 percent, of the 279 JACADSstart-up activities
                       had slipped an average of about 22 days, ranging from 5 to 54 days for
                       each activity. Some of the 42 activities had to do with obtaining environ-
                       mental permits, certifying the storage area, and implementing fire pro-
                       tection standard operating procedures. In February 1990, there was a
                       fire in the deactivation furnace room, which helped delay the start of
                       operational verification testing beyond April 16, 1990, according to the
                       contracting officer’s representative. Army officials told us that the oper-
                        ational testing would start by May 31, 1990.’


JAWS’ Program          lion-from    about $371 million in 1985 to about $561 million in 1990-
Costs Increased        and will likely continue to grow. The Army’s October 1985 estimate of
                       $371 million included only the costs of destroying the M55 rockets. By
                       March 1988, after statutory requirements expanded the JACADSmission
                       to include the destruction of all chemical weapons and full-scale verifi-
                       cation testing, the Army estimated total costs at about $500 million.

                       The March, 1990 estimated JACADSprogram cost of $561 million includes
                       about $421 million for the construction, equipment installation, and
                       operations and maintenance contracts and about $140 million for base
                       and logistical support, engineering studies, and other estimated contract
                       costs. The current total J.&CADSprogram cost estimate is an increase of
                       about $61 million, or 12.2 percent, more than the Army’s 1988 cost csti-
                       mate. The increase can be attributed as follows: about $35 million is due
                       to the delay in systemization; about $5.5 million is associated with csosts

                                                                                                                       I Ililt
                        “As of this date, the Army had not begun operational verification testing. The Army e<;l~rn;~t~~\
                        operations will begin in the summer of 1990.



                        Page 19                              GAO/NSIAD-90-222      Army’s Chemical Weapons Di.spnal Plant
                                       Chapter 2
                                       Program Expansion and Techuical and
                                       Contractor  Problems Caused JACADS
                                       Schedule Slippage and Cost Increases




                                       to equip the facility; and about $20.6 million is due to additional staffing
                                       costs and increased base and logistical support costs. Table 2.1 shows
                                       cost increases for JACALX' construction, equipment installation, and oper-
                                       ations and maintenance contracts.

Table 2.1: Cost Increases in JACADS’
Contracts                              Dollars tn millions
                                                                               Award          cost                       Percent
                                       Contract                               amount     increase           Total       increase
                                       Construction                             $38.5        $15.3          $53 a               40
                                       Equipment installation                   76.1         59.4           135.5    -~___-     78
                                       Operations and maintenance               76 4        155.6           232 0    -zii
                                       Total                                  $191.0       $230.3          $421.3             121


                                       Of the $15.3 million cost increases on the construction contract, about
                                       $10.9 million can be attributed to design and structural changes to cor-
                                       rect problems with the building and reinforced concrete foundations.
                                       The remaining $4.4 million increase can be attributed to the Army’s
                                       compensation of contract employees for their loss of income when
                                       Johnston Island lost its federal tax-exempt status in 1986. Army offi-
                                       cials stated that unless contractor employees were compensated for lost
                                       income, many would have left the project.

                                       The Army awarded its equipment installation contract for the purchase
                                       and installation of processing equipment and furnaces for M55 rockets
                                       only. To comply with the 1985 statutory requirement to destroy the
                                       entire chemical stockpile, the Army modified its equipment installation
                                       contract to include additional equipment needed to destroy all types of
                                       chemical munitions. Additional equipment purchases and installation
                                       accounted for about $39.4 million of the cost increases. Other cost
                                       increases on this contract were due to additional project planning and
                                       control costs ($8.5 million); compensation to employees for the loss of
                                       Johnston Island’s tax-exempt status ($3 million); and other administra-
                                       tive, engineering, and miscellaneous costs ($8.5 million). As of March
                                       1990, this contract was about 99 percent complete.

                                       The JAGIDS operations and maintenance contract should experience the
                                       highest cost increases of the three contracts, as costs are estimated to
                                       increase about $155.6 million over the initial award amount of
                                       $76.4 million. In 1986, the Army awarded an 8-year operations and
                                       maintenance contract to run through July 1994. This contract includes
                                       equipment testing and integration, plant operations and maintenance,
                                       and plant closure. Cost increases through 1989, which totaled about


                                       Page 20                         GAO/NSIAIMO-222   Army’s Chemical   Weapons Disposal   Plant
                          Chapter 2
                          Program Expansion and Technical and
                          Contractor  Problem Caused JACkDS
                          Schedule Slippage and Cost Increases




                          $32.6 million, can be attributed to additional staffing and overtime, com-
                          pensation for the loss of Johnston Island’s tax-exempt status, equipment
                          purchasing costs, and other miscellaneous costs. Of the estimated
                          $155.6 million in cost increases, $123 million can be attributed to (1) the
                          statutory requirement to conduct operational verification testing, (2) a
                          9.5-month schedule slippage, and (3) higher-than-anticipated operating
                          costs.


                          The Army has developed a program for implementing design changes to
Army Applies Lessons      the follow-on stateside chemical disposal facilities based on the tech-
Learned From JACADS       nical problems encountered at JACADS.Lessons learned during construc-
to Follow-on Facilities   tion, equipment installation, and equipment testing at JACADSare
                          documented and reviewed by a facility and process design contractor,
                          who has a field office on Johnston Island. Lessons learned are also
                          reviewed by a stateside design team and incorporated into the follow-on
                          designs as appropriate. According to Army officials, some JACADSles-
                          sons, such as the excessive corrosion of the chemical disposal building
                          and equipment, may not apply to the other facilities. The Army has
                          delayed construction of the follow-on facilities, except for Tooele, until
                          the results from operational testing can be integrated.

                          According to Army officials, numerous lessons learned from .JACADS
                          already have been incorporated into the follow-on facilities’ designs. For
                          example, JACADStesting resulted in the redesign of the projectile feed
                          system; the addition of control operator consoles; and an increase in the
                          sizes of the explosive containment, liquid incinerator, and deactivation
                          furnace rooms. By applying lessons learned from JACADS' technical
                          problems, the Army hopes to avoid schedule delays and cost incrtxases at
                          the follow-on sites.




                          Page 21                        GAO/NSLUMO-222   Army’s Chemical   Weapon-   I h-p-I   Plant
Chapter 3

The Army’s Oversight of the Operations and
Maintenance Contractor Has Improved but Is
Still Inadequate
                            The Army has taken actions to improve the contractor’s performance
                            and its own oversight of the operations and maintenance contract. As an
                            initial step, the Army withheld contract award fees to encourage
                            improvements in contractor performance. To improve its oversight of
                            contractor overtime, the Army asked the contractor to require its direc-
                            tors to approve staff overtime in advance and to report to the Program
                            Manager for Chemical Demilitarization on overtime usage. To better con-
                            trol invoice payments, the Army stationed an auditor on Johnston Island
                            to audit invoices for disallowable costs. From January through
                            December 1989, the auditor disallowed $567,000 on invoices totaling
                            $25.3 million.

                            While the Army has taken steps to improve its contractor oversight, fur-
                            ther improvements are needed in overtime control procedures and
                            invoice payments. For instance, according to Army officials, the Army’s
                            requested overtime procedures have not been fully implemented by the
                            contractor. In addition, early invoices, amounting to about $18 million,
                            have not been audited for disallowable costs.


                            The JACADSoperations and maintenance contract is a cost-plus-award-fee
Arrny Has Taken             contract,’ which allows the Army to control the amount of award fee, or
Actions to Improve          profit, the contractor earns. Every 4 months, the Army evaluates con-
Contractor                  tractor performance and, depending on the evaluation, pays the con-
                            tractor a percentage of the available fee. During the three evaluation
Performance                 periods from May 1988 through April 1989, the Army withheld
                            increasing amounts of the contractor award fee as the contractor’s per-
                            formance fell.


Cost-Plus-Award-Fee         Before each evaluation period, the Army contracting officer and his rep-
                            resentative on Johnston Island established the contractor performance
Contracts Link Contractor   categories to be evaluated and the criteria for evaluation. Evaluations
Profit to Performance       contained from 9 to 26 performance categories, such as long-term plan-
                            ning, employee suitability, and laboratory activities. The contracting
                            officer and his representative also assigned a weight to each category.
                            The greater the weight, the more the rating for that category influenced
                            the amount of award fee paid.



                            ‘This cost-reimbursement contract also provides a fee consisting of (1) a base amount fixed AI I tw
                            contract’s inception and (2) an award amount, which may be earned in whole or in part hcLv.li CNII he
                            government’s evaluation of the contractor’s performance.



                            Page 22                             GAO/NSIAIMO-222      Army’s Chemical    Weapons Disptil      Plant
                           Chapter 3
                           The Army’s Oversight of the Operations and
                           Maintenance     Contractor Has Improved but Is
                           Still Inadequate




                           At the end of each 4-month period, the Army evaluated the contractor’s
                           performance in each category by comparing the performance with the
                           evaluation criteria. An award fee board, including representatives from
                           the Army’s Western Command and the Office of the Program Manager
                           for Chemical Demilitarization, assigned a score to each category, multi-
                           plied each score by the category’s weight, and added the weighted
                           scores to get a composite score for the period. The contractor received
                           an award fee based on the composite score.


Army Withheld Fees as      During the first five evaluation periods, from August 1986 through
                           April 1988, the Army’s evaluations indicated that the contractor had
Contractor’s Performance   performed well in quality control and in most management, technical,
Fell                       and safety categories. The contractor received 94 to 100 percent of the
                           available award fee during this time. Small amounts of the award fees
                           were withheld because of poorer performance in subcategories, such as
                           personnel retention and cost control.

                           In the May through August 1988 evaluation period, more serious con-
                           tractor performance problems began to surface. The contractor had
                           staffing shortages and did not promptly inform the Army of personnel
                           hiring difficulties and schedule slippages. Also during this period,
                           strained relations developed between contractor management and the
                           work force. As a result, the Army gave the contractor about 78 percent
                           of the available award fee.

                           In the following two evaluation periods, from September 1988 through
                           April 1989, the contractor’s performance continued to deteriorate. The
                           Army’s evaluations stated that, despite the Army’s repeated requests
                           for improvement, the contractor’s long-term planning and recruitment
                           were inadequate. The contractor’s consistent tardiness in fulfilling
                           staffing requirements caused problems in several technical areas.
                           Finally, in February 1989, the Program Manager for Chemical
                           Demilitarization decided to delay the scheduled operational verification
                           testing start-up from August 15, 1989, to March 30, 1990-7.5 months.
                           This poor performance caused the Army to give the contractor about -15
                           percent of the available award fee for the September through December
                            1988 evaluation period. For the next period, ending in April 1989. thv
                           Army withheld the entire award fee.

                           After this evaluation period, the contractor’s performance began to
                           improve in the areas of recruiting and program management, al t hc)tlg!h
                           the contractor still had problems with training, documentation, and


                           Page 23                            GAO/NSIAD-SO-222   Army’s Chemical   Weapons Disposal   Plant
                                    Chapter 3
                                    The Amy’s Oversight of the Operations      and
                                    Maintenance     Contractor Has Improved   but Is
                                    Still Inadequate




                                    maintenance. As a result, the Army awarded the contractor about
                                    44 percent of the available fee for this period. Table 3.1 summarizes the
                                    Army’s fee awards to the operations and maintenance contractor from
                                    the inception of the contract through August 1989.

Table 3.1: JACADS’ Operations and
Maintenance Contract Award Fees                                                          Percent of
                                                                                       available fee
                                    Period                                                  awarded     Fee awarded           Fee withheld
                                    Aug to Dec. 1986                                            95.7              $20,042             $901
                                    Jan to Apr 1987                                            100.0               29,091                 0
                                    May to Aug. 1987                                            99.0               35,171               355
                                    Sept. to Dec. 1987                                          94.3               52,467             3,171
                                                                                                                                  -~-~__
                                    Jan    to Apr 1988                                          95.3               77,707             3,835
                                    May     to Aug. 1988                                        77.6               70,503      -20,351
                                    Sept     to Dee 1988                                        45.1              143,027     ~-174,107
                                    Jan.   to Apr. 1989                                          00                    ---0    ~~~~255.274
                                                                                                                                    -_
                                    May     to Aug. 1989                                        44.2              191,600           241.885
                                    Total                                                       47.0         $619,606             $699.679


                                    The Army awarded 47 percent of the total available award fees from the
                                    beginning of the contract in August 1986 through August 1989.


                                    Army officials told us that the operations and maintenance contract did
Inadequate Oversight                not include adequate provisions for the Army to ensure that the con-
of Contractor                       tractor’s overtime was necessary and that charges were legitimate.
Overtime                            Although the Army tried to persuade the contractor to strengthen its
                                    review and reporting procedures, as of March 1990, the contractor had
                                    not fully implemented the procedures.

                                    Contractor employees regularly worked overtime hours at JKADS.
                                    According to the contracting officer’s representative, contract
                                    employees regularly worked 60 to 80 hours per week. Further, he said
                                    that some test managers each worked over 100 hours per week in
                                    January and February 1989. Our analysis of contractor time sheets for
                                    July 1989 showed that 19 contractor employees had worked at least one
                                    go-hour week that month, and one employee had twice charged over
                                    100 hours per week.

                                    According to the contracting officer’s representative, the contractor had
                                    its own overtime controls, but Army officials were not confident that



                                    Page 24                            GAO/NSIAD-90-222       Army’s   Chemical     Weapons Disposal   Plant
                         Chapter 3
                         The Army’s Oversight of the Operations     and
                         Maintenance     Contractor Has Improved   but Is
                         Still Inadequate




                         the controls were working. He said that some contractor employees
                         appeared to be working too many hours to be fully productive.

                         According to the contracting officer, the Army, in January 1990, sought
                         to strengthen its oversight of contractor overtime because of the large
                         number of overtime hours worked by contractor employees. He said that
                         the contractor had verbally agreed to require its directors, who are
                         department heads, to approve overtime in advance and to provide
                         monthly reports to the Army on the number of overtime hours worked,
                         reasons for variances from planned staff-hour expenditures, and accom-
                         plishments of overtime. However, the official said that the Army’s
                         requirements had not been communicated to the contractor in writing.
                         He said that, while the contractor had provided the Army with some
                         information on overtime usage, the information did not meet the Army’s
                         needs, As of March 1990, the official said, the Army still did not have
                         adequate oversight of contractor overtime.

                         The contracting officer’s representative said that the Army was taking
                         other steps to control the contractor’s overtime charges. The Army
                         auditor, on Johnston Island since January 1989, has begun to review the
                         operations and maintenance contract payroll summaries and time sheets
                         in greater detail. For each payroll period, he provides the contracting
                         officer’s representative a summary of the number of employees who
                         worked over 72 hours per week. The representative investigates any
                         overtime on these summaries that appears questionable. Also, Army
                         officials are currently reviewing the amount of overtime funding
                         authorized for fiscal year 1990 and are asking the contractor to further
                         delineate overtime costs in its cost proposal. The contracting officer
                         believes that these steps will help the Army maintain better oversight of
                         contractor overtime and provide incentive for the contractor to fully
                         comply with the Army’s requested procedures.


                         The Army auditor told us that, by the time he arrived on Johnston
First 32 Invoices Need   Island, the first 32 invoices, amounting to almost $18 million, had
to Be Audited for        already been paid. The auditor said that he had begun his review with
Disallowable Costs       the 33rd invoice, but he had not audited the previous invoices because
                         of his other responsibilities, which included (1) reviewing contractor
                         payroll summaries and time sheets for excessive overtime charges and
                         supervisory approval, (2) analyzing base support costs, and (3) occa-
                         sionally serving as a liaison for visitors. According to the contracting
                         officer, the first 32 invoices may not be audited for disallowable costs
                         until the Defense Contract Audit Agency’s close-out audit, which may


                         Page 25                            GAO/NSLA.B90-222   Army’s Chemical   Weapons Disposal   Plant
                  Chapter 3
                  The Army’s Oversight of the Operations and
                  Maintenance     Contractor Has Improved but Is
                  Still Inadequate




                  not occur until 1995 or later. Defense Contract Audit Agency officials
                  could not specify when they might audit these invoices.

                  As of March 1990, the auditor had reviewed invoices 33 through 48,
                  which totaled about $25.3 million. Of this total, he disallowed about
                  $567,000, or 2.24 percent. We estimated that if this same percentage
                  were applied to the first 32 invoices, about $401,000 of the almost
                  $18 million could represent disallowable costs. If the invoices are not
                  audited until 1995, as the contracting officer believes, the 6-year delay,
                  assuming an 8.5-percent interest rate,’ would cost the government about
                  $253.000 in lost interest.


                  The Army has taken several actions to improve the contractor’s per-
Conclusions       formance and its own oversight of the operations and maintenance con-
                  tract. The contractor’s performance did not improve, however, until
                  after the Army withheld the entire award fee for one period. To
                  strengthen its oversight of the contractor’s use of overtime, the Army
                  has begun to review the large number of overtime hours charged on the
                  JACADS project by contractor employees. Lastly, the Army also stationed
                  an auditor at Johnston Island to review contractor invoices for disallow-
                  able costs.

                  Despite the Army’s corrective actions, its oversight of contractor over-
                  time charges could be improved. The Army also needs to review the first
                  32 invoices on the operations and maintenance contract to identify disal-
                  lowable costs. The government could lose about $253,000 in excess
                  interest payments if the review of the invoices is deferred until 1995.


                  We recommend that the Secretary of the Army direct the Army’s
Recommendations   Western Command to negotiate a formal agreement with the operations
                  and maintenance contractor regarding the approval and the use of over-
                  time and incorporate it into the existing contract. Such an agreement
                  could help the Army in its oversight responsibility of the contractor’s
                  use of overtime.

                  We also recommend that the Secretary of the Army take steps to ensure
                  that the operations and maintenance contracts for all future chemical


                  ‘We estimated the government’s interest using the average yield of IO-year U.S. Treasury UYIIIIII~S
                  from October 1986 through December 1988.



                  Page 26                            GAO/NSIAL%Ml-222      Army’s   Chemical   Weapons Disposal   Plant
Chapter 3
The Army’s Oversight of the Operations and
Maintenance     Contractor Has Improved but Is
Still Inadequate




weapons disposal facilities in the continental United States include over-
time agreements.

We further recommend that the Secretary of the Army direct the
Army’s Western Command to arrange for a timely audit of the JACADS
invoices on the operations and maintenance contract.




Page 27                           GAO/NSIAD90-222   Army’s Chemical   Weapons Dispmal   Plant
JAWS ScheduleSlippage Delays the
Construction of Follow-on Facilities and
IncreasesMunitions Storage Costs
                         The delays in beginning operational verification testing at .JACADShave
                         caused the Pine Bluff, Umatilla, and Anniston construction programs to
                         be delayed so that lessons learned from JACADScan be integrated into the
                         designs of these facilities. Further, because of these delays, chemical
                         munitions at the Johnston Island, Pine Bluff, Umatilla, and Anniston
                         sites have had to be stored, guarded, and maintained longer than origi-
                         nally anticipated. We estimate that delays will cost the Army more than
                         $33 million in additional munition storage expenses.

                         If JACADScontinues to experience problems, the start of operational ver-
                         ification testing will slip even further. This slippage, which could delay
                         the start of construction at Anniston, would cost about $412,000 for
                         each month of additional munition storage at that site.


                         In accordance with Public Law 100-180, the Army plans to incorporate
Operational Testing      lessons learned from operational verification testing at JACADS into the
Should Be Completed      designs of future disposal plants in the continental United States. This
Before Construction of   testing should identify time and cost savings and safety improvements
                         applicable to the other facilities. For example, the tests should demon-
Follow-on Plants         strate whether the liquid incinerator at JACADS, three times larger than
Begins                   the incinerator tested at the pilot disposal system in Tooele, Utah, oper-
                         ates as efficiently as planned. Also, the tests should demonstrate
                         whether the deactivation furnace can control explosive components and
                         associated surges of agent.

                         According to the Army’s March 1988 Chemical Stockpile Disposal
                         Program Implementation Plan, results from JACADStesting are to be
                         available prior to the construction of the other disposal facilities. tascept
                         for the Tooele Army Depot facility.’ The plan also included a design and
                         equipment verification period at Tooele and a design verification and
                         update of procurement specifications for the other facilities in order to
                         incorporate lessons learned from JACADK Construction contracts f( )r the
                         Pine Bluff, Anniston, and Umatilla facilities were to be awarded 111
                         January 1991, 1 month after the scheduled completion of .J.MN* tcbsting.
                         Construction contracts for the other disposal facilities were scht~(l\il~~dto
                         be awarded in 1992.




                         ’ 1The Army did not delay the design and construction at the Tooele Army Depot by ,*,!v ’ ’ q I.trge
                         size of the chemical stockpile at the site. A delay at Tooele would have pushed back I tu ,I’ 1 ,. 1I(KI of
                         the Chemical Stockpile Disposal Program to 1999 and increased munition storage anal 1I’ r:* L. Gv\ts.



                         Page 28                               GAO/NSL4D90-222       Army’s Chemical     Weapcm*    Ih~pul    Plant
                      Chapter 4
                      JACADS Schedule Slippage Delays the
                      Construction of Follow+m Facilities and
                      Increases Munitions Storage Costa




                      JAGIDS   schedule slippage caused construction start-up delays at three
JACADS’ Schedule      other planned facilities. In the August 1989 schedule, the start of opera-
Slippage Causes       tional verification testing at JACADS was pushed back 7.5 months to
Delays at Follow-on   March 30, 1990, and the construction contracts for the Pine Bluff,
                      Umatilla, and Anniston facilities were pushed back 8 months from Jan-
Plants                uary to September 1991-the same month JACADS is scheduled to begin
                      full-scale operations. Similarly, the Program Manager for Chemical
                      Demilitarization delayed the start of operational verification testing 8
                      months to April 16,1990, and then delayed it again to May 31, 1990-a
                      total of 9.5 months. Consequently, the Army delayed the start of con-
                      struction of the Pine Bluff and Umatilla facilities until June 1992.1

                      Further JACADS’ schedule slippage could affect the construction start
                      date for the Anniston disposal facility as well as the completion date for
                      the overall chemical disposal program. Anniston disposal operations are
                      scheduled to run through April 1997, the program completion date man-
                      dated by the Congress. According to an official from the Office of the
                      Program Manager for Chemical Demilitarization, the Anniston construc-
                      tion date was not delayed in DOD’S fiscal year 1991 budget request
                      because the delay would have affected the 1997 completion date. If
                      JAGIDS operations slip further and the Anniston construction start date
                      remains unchanged, some lessons learned from operational verification
                      testing at JACADS will not be integrated into the Anniston design before
                      construction begins at that site. Some lessons will have to be integrated
                      through design modifications after Anniston construction starts. This
                      less efficient method of incorporating lessons learned could increase
                      program costs.


                      Because of slippage in the JACADS operational verification testing
Increased Storage     schedule, chemical weapons will have to be stored an additional
costs                 9.5 months on Johnston Island, 19 months at each of the Pine Bluff and
                      Umatilla facilities, and 10 months at Anniston. We estimate that it will
                      cost the Army more than $33 million for the additional munition storage




                      ’ According to the Resource Manager for Chemical Demilitarization, the Army originally intended to
                      delay construction of the Pine Bluff and Umatilla facilities 1 month to October 1991. However. he
                      said that delaying construction from foal year 1991 to fLscal year 1992 would delay the construction
                      award 9 months because the Army Corps of Engineers would not be able to advertise the request for
                      proposal for the fiscal year 1992 construction projects until the Corps had “reasonable assuranc~c~”
                      that the construction contracts would be funded.



                      Page 29                            GAO/NSIAIHO-222 Army’s Chemical Weapons Disposal Plant
Chapter 4
JACADS’ Schedule Slippage Delays the
Constmction  of Follow+n   Facilities and
Increases Munitions Storage Costs




time.:’ The additional storage time includes costs for security guards,
facilities maintenance, surveillance, and inspection for leaking agents.
We estimate that it will cost about $412,000 per month at Anniston for
each additional month of storage after May 1990.




“Our estimate does not account for differences in the types of munitions stored at each wt I’
According to the Resource Manager for Chemical Demilitarization, data was not readily ri\ .II!&Iv 11n
munitions storage costs at each stateside site. Further, he said that our estimate was proh,ctd~
conservative.



Page 30                             GAO/NSLAIHO-222       Army’s Chemical     Weapons Dispwal Plant
Page 31   GAO/NSIAD-90-222   by’s   Chemical   Weapons Lhpmd   ?lant
Appendix I

Overview of the JACKDS Disposal Process                                                          -


              The JACADS reverse assembly and incineration disposal process, which is
              fully automated, will be executed in several stages. The Johnston chem-
              ical stockpile is stored in munitions magazines in an area adjacent to the
              JACADSfacility. Before items are removed from storage for disposal, each
              magazine and its contents will be inspected and monitored for leaks.
              Items will be placed on a truck (rockets will be first placed in a special
              container) and transported to the JACADSmunitions disposal building for
              unpacking.

              Munitions will be destroyed in groups by munition type (for instance, all
              rockets filled with one type of nerve agent or all bulk mustard agent
              containers) using a three-stage process involving (1) unpacking, (2) dis-
              assembling and draining, and (3) incinerating.

              In the unpacking area, munitions will be manually removed from their
              transport containers and wooden pallets. Leaking munitions will remain
              in vapor-proof containers, and the containers will be conveyed into an
              agent containment area. The leaking containers will be unpacked by per-
              sonnel in protective clothing and loaded onto conveyors leading to the
              disassembly rooms. Non-leaking munitions will be automatically con-
              veyed from the unpacking area to processing rooms for disassembly and
              drainage.

              In the processing rooms, munitions will be automatically disassembled
              and drained of chemical agents by computer-controlled machines.
              Rockets, projectiles, and land mines will be individually disassembled in
              rooms capable of containing accidental explosions. Rockets will be
              drained of liquid agents and mechanically sheared into seven segments.
              Machines will remove and slice projectile explosive components and
              then convey the nonexplosive projectiles to a bay where they will be
              drained of agents. Land mine disassembly machines will punch out
              booster explosives from land mines and then drain them of agents.
              Bombs and l-ton containers have no explosives; therefore, they will be
              conveyed from the unpacking area directly to a bulk drain station where
              they will be punctured and drained of agents.

               After chemical munitions are disassembled and drained of agents, the
               munition components, metal parts, chemical agents, and packaging will
               be destroyed or decontaminated in four different furnaces. The rocket
               segments, land mines, and explosive components from projectiles will be
               destroyed in a deactivation furnace capable of containing explosions
               and associated surges of agent. The projectiles and bulk items will be
               decontaminated in a metal parts furnace. Liquid agents from all t ht


               Page 32                  GAO/NSlAD-90-222   Army’s Chemical   Weapons Diqmeal   Plant
                                         Appendix      I
                                         Overview      of the JACADS Disposal   Process




                                         munitions and all solutions used to decontaminate equipment will be col-
                                         lected in storage tanks and eventually destroyed in a liquid incinerator.
                                         Pallets and packing materials will be burned in the dunnage furnace.

                                         The disposal process produces by-products, which must be certified
                                         agent-free. Each furnace contains a pollution abatement system, which
                                         cools and neutralizes acidic components and residue from exhaust gases.
                                         Residue from the dunnage and deactivation furnaces is packaged for
                                         disposal. Solid residue from the deactivation furnace will be disposed of
                                         in an approved landfill. An Army official said that the Army would
                                         attempt to sell scrap metal from the metal parts furnace and that scrap
                                         metal dealers have expressed an interest in the metal. Brine solution
                                         from the liquid incinerator will be evaporated through a heating pro-
                                         cess, and the remaining salts will be loaded into containers for disposal
                                         in an approved landfill. Figure I. 1 illustrates the JACADS disposal process.



Figure 1.1:JACADS Disposal Process

                               r ____-----------------


                                                                      P-
                                                                            Dunnage
                                                                          Incineration




                                      Explosive/Agent




I
                               I
                   Transport   1 4   pi-e+


                               I
                                        Containment               ’   -

                                                              \




                                             Page 33                             GAO/NSLUMJ-222   Army’s   Chemical   Weapons Disposal   Plant
Appendix II                                                                                               -
Major Contributors to This Report


c
National Security and   John R. Henderson, Assistant Director
International Affairs   Derek B. Stewart, Assignment Manager
Division, Washington,
DC.

                        Glenn D. Slocum, Evaluator-in-Charge
Far East Office,        Robert C. Howes, Evaluator
Honolulu, Hawaii        Kristi L. Karls, Evaluator




 (393361)                Page 34                  GAO/NSLUMO-222   Army’s Chemical   Weapons Disposal   Plant