Contingency Operations: Opportunities to Improve the Logistics Civil Augmentation Program

Published by the Government Accountability Office on 1997-02-11.

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

                  United States General Accounting Office

GAO               Report to Congressional Requesters

February 1997
                  Opportunities to
                  Improve the Logistics
                  Civil Augmentation

             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division


             February 11, 1997

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

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

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

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

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

             The U.S. Army has traditionally employed civilian contractors in
Background   noncombat roles to augment military forces. For example, civilian

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

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

                         The original LOGCAP contractor, Brown and Root Services Corporation of
                         Houston, Texas, was competitively awarded a cost-plus-award-fee1
                         contract for 1 year with 4 option years on August 3, 1992. According to
                         Army documents, a notice regarding the contract in the Commerce
                         Business Daily elicited 37 requests for copies of the solicitation. Four
                         companies competed for the contract.

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

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

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                       engineering support plans for a geographic region based on a specific
                       planning scenario prescribed by the requiring commander.

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

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

                        Approximate number of troops deployed as of July 19, 1996.
                        According to the contractor, this dollar amount was a rough order of magnitude made without benefit
                       of detailed scope data. The Army used this dollar amount as its initial estimate and we have referred to
                       it as such throughout this report.

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

                       LOGCAP cost estimates for the Bosnian mission have increased
                       substantially. The Army’s latest revised estimate of $461.5 million4 exceeds
                       its original estimate of $350.2 million by $111.3 million, or 32 percent. Our
                       review shows that the difference in the estimates was largely driven by
                       changes in operational requirements once the forces arrived in the Balkan
                       peninsula. Specifically, the Commander in Chief of U.S. Army, Europe
                       decided to substantially increase the number of base camps from 14 large
                       camps to 34 smaller camps5 and to accelerate the schedule for upgrading
                       troop housing. These changes were required because of a number of
                       factors, including the U.S. geographic area of responsibility, limited
                       infrastructure, and harsh weather conditions. Associated management and
                       administrative cost increases and an unanticipated value added tax
                       imposed on the contractor by the Hungarian government also added to the
                       difference. Weaknesses in financial reporting and contract monitoring
                       systems also contributed to cost increases.

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

                   •   Little doctrine on how to manage contractor resources and effectively
                       integrate them with force structure units exists. In the Bosnian mission,
                       U.S. Army, Europe officials had limited or no experience with LOGCAP and
                       lacked guidance on how to prepare planning documents and what type of

                       This estimate is as of December 7, 1996, and covers the period from December 14, 1995, to
                       December 13, 1996. In December 1996, the President extended the mission an additional 6 months.
                       Overall LOGCAP costs will increase based on the level of service required from the contractor.
                        The number of camps and operating sites fluctuated throughout the mission. This is the number of
                       camps and operating sites initially constructed by the contractor and military units.

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

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

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

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                       As shown in table 1, since 1992, the Army has used a contractor instead of
The Army Is Making     force structure to meet some of its combat support and combat service
Increasing Use of      support6 needs in six major peacekeeping and humanitarian assistance
LOGCAP to Meet         missions. Although using LOGCAP is the choice of last resort, Army officials
                       stated it is often necessary to use LOGCAP in these missions because of
Support Requirements   planning considerations such as the ability to respond to a major regional
                       conflict, the political sensitivity of activating guard and reserve forces, the
                       lack of host nation support agreements in undeveloped countries, and the
                       desire to maintain a relatively low U.S. presence. The use of the contract
                       by far has been the most extensive for the Bosnian mission and that
                       mission provides a good illustration of how the factors come into play in
                       deciding whether to use the contract.

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

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Table 1: Major Operations in Which the Army Has Used Its LOGCAP Contract
Dollars in millions
Event               Starting date   Estimated cost    Services provided
Somalia             Dec. 1992                $62.0    Base camp construction and maintenance; food service and supply; laundry;
“Operation                                            field showers; latrines; water production, storage, and distribution;
Restore Hope”                                         sewage/solid waste removal; bulk fuel receipt, storage, and issue;
                                                      transportation for passengers and cargo; and linguist support.
Rwanda              Aug. 1994                  6.3    Water production, storage, and distribution.
Support Hope”
Haiti               Sept. 1994               133.0    Base camp construction and maintenance; food service and supply; laundry;
“Operation                                            bulk fuel receipt, storage, and issue; airport and seaport operations; and
Uphold                                                transportation services.
Saudi Arabia/       Oct. 1994                  5.1    Food service and supply; transportation; convoy support; shuttle bus service;
Kuwait                                                laundry; and off loading and storing containers from ships.
Vigilant Warrior”
Italy               Sept. 1995                 6.3    Base camp construction.
“Operation Deny
Bosnia              Dec.1995                 461.5    Base camp construction and maintenance; showers; latrines; food service and
“Operation Joint                                      supply; sewage/solid waste removal; water production, storage, and
Endeavor”                                             distribution; shuttle bus service; bulk fuel receipt, storage, and issue; heavy
                                                      equipment transportation; mail delivery; construction material storage and
                                                      distribution; railhead operations; and seaport operations.
Total                                      $674.2
                                           Note: Estimated costs as of December 7, 1996.

                                           Source: Department of the Army.

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

Criteria for Using LOGCAP                  The Army’s LOGCAP regulation states that LOGCAP is one of several options
                                           available to commanders for meeting combat support and combat service
                                           support shortfalls in their operational plans. It is intended to be the option
                                           of last resort, and it was primarily designed to be used in areas where host
                                           nation support agreements do not exist. Other options to be considered by
                                           commanders before selecting LOGCAP include the other military services,
                                           allied support, and local contracting. In addition, commanders must

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                                 consider other factors such as risk to personnel, lift availability, quality of
                                 life, and mission duration.

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

                                 U.S. Army, Europe also had a ceiling on the reserve forces it could use.
                                 For Bosnia, the President authorized the call-up of 4,300 reservists for all
                                 the services,7 3,888 of which the Defense Department allocated to the
                                 Army. The Army used its allocation to activate key support capabilities
                                 such as civil affairs and psychological operations units that existed
                                 primarily in the reserve forces and could not be contracted. Once these
                                 units were activated, most of the 3,888-reserve ceiling had been used,
                                 leaving little opportunity to call up other types of support units. Many of
                                 the Army’s combat support and combat service support units were in the
                                 guard and reserve. An Army planner told us they could have asked the
                                 national command authority to increase the force ceiling and reserve
                                 call-up authority; however, because they had LOGCAP as an option, it was
                                 not necessary to seek these increases to meet support needs.

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

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

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

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

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

Estimated Costs Have      Table 2 presents a comparison by seven broad functional areas of the
Increased by 32 Percent   estimated costs for LOGCAP in Bosnia as of December 1995 and
                          December 1996. A direct comparison of the two estimates was not
                          possible because of significant differences in (1) the scope of work
                          covered by the estimates and (2) the way costs are reported. For example,
                          in the December 1995 estimate, the contractor estimated the cost to
                          establish and operate an intermediate staging base. This estimate included
                          costs for building the camp; providing laundry, food, and bus service; and
                          operating a construction supply storage yard, a retail fuel section, and an
                          aviation fuel section. The estimate also included costs for mobilizing and

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

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                                   demobilizing personnel, material, and equipment and recurring
                                   maintenance costs. However, later estimates use 52 separate work
                                   categories that do not directly link to the requirements in the original
                                   estimate. Consequently, we reviewed available cost data and discussed the
                                   differences with contractor and Army officials to determine the primary
                                   reasons for the increases in estimated costs. We did not attempt to
                                   determine whether the estimated costs were reasonable.

Table 2: Analysis of LOGCAP Cost
Increases in Bosnia                Dollars in millions
                                                                                       December            December
                                   Function                                         1995 estimate       1996 estimate       Difference
                                   Troop housing and facilities                               $56.5              $150.4          $93.9
                                   Management and administration                                85.4               154.2          68.8
                                   Transportation                                                9.8                48.4          38.6
                                   Maintenance                                                   0.2                11.0          10.8
                                   Laundry                                                      10.1                  6.6         (3.5)
                                   Food service                                                 64.1                22.8         (41.3)
                                   Base camp maintenance                                      124.1                 65.2         (58.9)
                                   New work since 3/30/96                                          0                  2.9          2.9
                                   Total                                                     $350.2              $461.5         $111.3
                                     New work represents estimated costs for services that were outside the original contract
                                   estimate but were required by U.S. Army, Europe.

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

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

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

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operational requirements, the contractor built 19 of the 34 camps and
upgraded all 34 camps.

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

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

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




                                                                            Slovanski                                               Serbia


                                                                                            14          10
                                                                                                       13    12
                                                                                                         16 Tuzla
                                                            Bosnia-Herzegovina                          5        1   4
                                                                                                            6 7 8

                                                                                                              18     19
                                                                                                             22           21
   Bases                                                                                           Sarajevo
    1 Eagle          13   Burke
    2 Comanche       14   Gentry
    3 Lukavac        15   Tucker
    4 Steel Castle   16   Walker
    5 Guardian       17   Hampton
    6 Molly          18   Demi
    7 Bedrock        19   Pat
    8 Angela         20   Alicia
     9 Rumbaugh      21   Lisa
    10 Kime          22   Linda
    11 Colt          23   McGill
    12 McGovern      24   Slovanski Brod
                     25   Intermediate Support

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

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

                                                 Page 12                                                GAO/NSIAD-97-63 Contingency Operations

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

Figure 2: Many Camps Required
Significant Engineering Preparation

                                      The decision to accelerate the schedule for improving the camps also
                                      increased estimated costs. The Army’s December 1995 cost estimate was
                                      based on a plan in which both the contractor and the military engineer
                                      units would initially erect tents and construct rudimentary support
                                      facilities. The camps would then be upgraded by the contractor in two
                                      follow-on efforts. (See fig. 3.) In the first effort, the contractor would add
                                      wooden floors to the tents; provide lighting, heating, latrines, showers,
                                      electric power, and water; and build kitchen and dining facilities. In the
                                      second effort, the contractor would provide for level tent pads and tent

                                      Page 13                                    GAO/NSIAD-97-63 Contingency Operations

                                       frames with insulated walls and ceilings. However, a U.S. Army, Europe
                                       official told us that because of the harsh weather conditions, which
                                       included flooding and mud, the Commander in Chief decided to have the
                                       contractor go straight to the end-state standard for all camps and to
                                       increase the standard to modular housing units at several camps where
                                       conditions were particularly harsh. Because the contractor was not given
                                       additional time to meet the higher standards, significantly more equipment
                                       and material had to be commercially air transported into the area of
                                       operations. The contractor also had to hire additional workers and
                                       purchase and transport modular units.

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

Management and                         The management and administration function provides for centralized
Administration                         project management, contract administration, project controls and
                                       reporting, procurement and subcontracting, financial management,
                                       personnel and payroll activities, property management, and life support
                                       for contractor personnel engaged in mission support. It also includes the
                                       contractor’s overhead costs, general and administrative costs, and award
                                       fees. Costs for this function increased from $85.4 million to $154.2 million.
                                       This cost function increases as estimated contract costs increase. For
                                       example, a $100-million increase in the estimated cost of services adds
                                       about $14.7 million to cover overhead, general and administration costs,

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                 and potential award fees. According to a U.S. Army, Europe official, the
                 increase in the amount of services required and greater involvement by the
                 contractor’s home office in procuring and shipping material and
                 equipment, also contributed to the increase.

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

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

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

                 Page 15                                  GAO/NSIAD-97-63 Contingency Operations

                        costs. In the later estimate, the estimated cost for maintenance of
                        equipment and vehicles was reported separately.

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

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

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

                        Page 16                                  GAO/NSIAD-97-63 Contingency Operations

                      Our review of the Bosnian operation shows that there are opportunities to
Opportunities to      improve the program’s effectiveness. Areas that need improvement
Improve the           include doctrine and guidance, cost reporting, and contract monitoring.
LOGCAP Doctrine and   At the start of the Bosnia mission, little written doctrine and guidance9
Guidance              was available for planners on how to effectively use LOGCAP. The Army’s
                      Office of the Deputy Chief of Staff for Logistics had prepared a desk guide
                      to provide background and direction in the use of LOGCAP, but the guide
                      lacked detail, and several key U.S. Army, Europe planners were unaware
                      of its existence. As a result, U.S. Army, Europe officials had to develop ad
                      hoc procedures and systems to ensure they were effectively managing

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

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

                      Directly related to the doctrine and guidance problem was the lack of
                      LOGCAP training and experience among U.S. Army, Europe commanders
                      and staff. Some of the key logistics planners for the Bosnian operation had

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

                      Page 17                                                 GAO/NSIAD-97-63 Contingency Operations

    little knowledge or experience with LOGCAP prior to the operation. Despite
    significant efforts to effectively manage LOGCAP, U.S. Army, Europe
    officials’ inexperience and lack of understanding of the contract, the
    contractor’s capabilities, and program management created problems
    during the deployment and resulted in unnecessary costs. Examples of
    management problems during the mission follow:

•   The contractor and the contract administrators were sometimes not
    included as part of U.S. Army, Europe’s planning and management team,
    even though they were responsible for critical parts of the mission. In the
    early days of the mission, U.S. Army, Europe officials believed the
    contractor was not responsive to their needs. Contractor officials and
    contract administrators said that once the mission began, significant
    operational changes were made and they had little input despite being
    responsible for executing the changes.
•   U.S. Army, Europe did not initially have a LOGCAP focal point to review
    tasks, assess options for performing these tasks, establish priorities, and
    resolve contractor problems. The lack of a focal point sometimes resulted
    in conflicting directions and a feeling on the part of some U.S. Army,
    Europe officials that the contractor was not being responsive.
•   Commanders were sometimes unaware of the cost ramifications of their
    decisions. For example, the decision to accelerate the camp construction
    schedule required the contractor to fly plywood from the United States
    into the area of operations because sufficient stores were not available in
    Europe, which increased costs. For example, the contractor reported that
    the cost of a 3/4-inch sheet of plywood, 4’ x 8’, purchased in the United
    States was $14.06. Flying that sheet of plywood to the area of operations
    from the United States increased the cost to $85.98 per sheet, and shipping
    by boat increases the cost to $27.31 per sheet. According to a U.S. Army,
    Europe official, his commander “was shocked” to find the contractor was
    flying plywood from the United States.
•   The contractor was not included in the Status of Forces Agreement with
    the Hungarian government. The result was the contractor paid about
    $18 million in value added tax to the Hungarian government, which was
    subsequently billed to the U.S. government as a contract cost. The Army is
    working to recoup these taxes from the Hungarian government.

    Given the absence of detailed program guidance, U.S. Army, Europe
    worked to resolve these problems and developed many ideas and ad hoc
    systems that the Army plans to incorporate into program doctrine and
    guidance that AMC is developing. For example, U.S. Army, Europe
    established Joint Acquisition Boards to prioritize work and determine the

    Page 18                                 GAO/NSIAD-97-63 Contingency Operations

                        best available resources for accomplishing the work. It also developed the
                        concept of appointing base camp “mayors” to serve as focal points for the
                        contractor and improved the cost data provided by the contractor. Our
                        discussions with members of the acquisition review boards and camp
                        mayors revealed that, once established, these systems were effective in
                        setting criteria and priorities for using LOGCAP services. However, as
                        discussed later in this report, the boards only reviewed about 5 percent of
                        estimated LOGCAP costs for Bosnia.

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

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

                        As a result, through the early days of the mission, when the bulk of
                        contract support money was spent, U.S. Army, Europe commanders could
                        not determine the cost-effectiveness of alternative support approaches,
                        nor could they determine if changes in the level of service being provided
                        were warranted. They also had difficulty responding to Defense
                        Department and congressional inquires about cost. A similar problem was

                        Page 19                                  GAO/NSIAD-97-63 Contingency Operations

                      experienced in Somalia, where a senior official expressed his concern
                      about the command’s inability to verify expenditures and tie those
                      expenditures to specific tasks.

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

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

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

                      The Army Corps of Engineers was responsible for LOGCAP contract
                      administration in Bosnia. One responsibility was to develop the policies
                      and procedures to guide the execution of LOGCAP contract activities,
                      including property administration, contractor compliance with contractual
                      quality assurance and safety requirements, and reviews and analyses of
                      contractor cost proposals. Specifically, the Corps turned LOGCAP work on
                      and off, performed quality control studies on the contractor’s services, and
                      provided liaison support to Army field commanders. During the
                      construction phase in Bosnia, these tasks were performed by a team from

                      Page 20                                  GAO/NSIAD-97-63 Contingency Operations

the Corps’ Transatlantic Program Center in Winchester, Virginia. During
the sustainment phase, which was from about March 1996 to
November 1996, the Corps delegated contract administration to the
Defense Contract Management District, International, who deployed a
team of 30 personnel, along with a 2-person team from the Defense
Contract Audit Agency, to monitor contractor performance.

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

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

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

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

Page 21                                              GAO/NSIAD-97-63 Contingency Operations

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

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

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

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

                          AMC has also undertaken several initiatives to address other LOGCAP
                          problems experienced in Bosnia. To improve LOGCAP doctrine and training,

                          Page 22                                   GAO/NSIAD-97-63 Contingency Operations

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

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

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

Types of Services Are   Although the size and primary purpose of the three programs differ
Similar                 somewhat, the contracts will require similar engineering, logistics, and
                        planning services. For example, under all three programs, the contractors
                        will be required to provide construction services and supplies and, in the
                        Army and the Air Force programs, contractors are asked to identify

                        Page 23                                   GAO/NSIAD-97-63 Contingency Operations

                            potential civilian resources that can be relied on in contingencies. Before
                            creating these programs, the Navy and the Air Force relied on LOGCAP for
                            support during operations other than war such as in Somalia and Aviano,

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

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

Other Programs Are          To avoid duplication of effort and improve economy and efficiency of
Managed by a Lead Service   programs that are used by all three services, the Defense Department has,
                            on occasion, designated one service as the lead manager. For example, the

                            Page 24                                    GAO/NSIAD-97-63 Contingency Operations

                         Army manages the wholesale stockpile of conventional ammunition for all
                         the services. The Army is also the lead service for the Defense
                         Department’s program to dispose of the chemical weapon stockpile.

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

                     •   developing doctrine and guidance for implementing LOGCAP that identify
                         the way to use the contractor effectively, the type of management
                         structure to establish, financial control and oversight requirements, and
                         mission planning considerations;
                     •   providing training to commanders on using LOGCAP, including information
                         on contractor capabilities and roles and responsibilities in planning and
                     •   providing assistance to commands when LOGCAP is implemented to include
                         deployable management teams; and
                     •   developing improved financial reporting and internal controls mechanisms
                         that provide commanders with the assurance that LOGCAP services are
                         necessary and reasonably priced.

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

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

                         Page 25                                   GAO/NSIAD-97-63 Contingency Operations

to be completed until early in fiscal year 1998. Consequently, we will
continue to follow up on the Department’s actions in each of the areas.

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

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

David R. Warren, Director
Defense Management Issues

Page 26                                  GAO/NSIAD-97-63 Contingency Operations
Page 27   GAO/NSIAD-97-63 Contingency Operations

Letter                                                                                            1

Appendix I                                                                                       30

Scope and
Appendix II                                                                                      32

Environment in
Bosnia Presented
Unique Challenges
Appendix III                                                                                     34

Comments From the
Department of
Appendix IV                                                                                      37

Major Contributors to
This Report
Tables                  Table 1: Major Operations in Which The Army Has Used Its                  7
                          LOGCAP Contract
                        Table 2: Analysis of LOGCAP Cost Increases in Bosnia                     10

Figures                 Figure 1: Dispersion of U.S. Base Camps in Bosnia, Hungary, and          12
                        Figure 2: Many Camps Required Significant Engineering                    13
                        Figure 3: U.S. Military Base Camp in Bosnia Upgraded to Modular          14


                        AMC        Army Materiel Command
                        LOGCAP     Logistics Civil Augmentation Program

                        Page 28                               GAO/NSIAD-97-63 Contingency Operations
Page 29   GAO/NSIAD-97-63 Contingency Operations
Appendix I

Scope and Methodology

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

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

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

             Page 30                                           GAO/NSIAD-97-63 Contingency Operations
Appendix I
Scope and Methodology

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

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

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

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

Page 31                                 GAO/NSIAD-97-63 Contingency Operations
Appendix II

Operational Environment in Bosnia
Presented Unique Challenges

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

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

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

              Page 32                                  GAO/NSIAD-97-63 Contingency Operations
Appendix II
Operational Environment in Bosnia
Presented Unique Challenges

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

Page 33                                 GAO/NSIAD-97-63 Contingency Operations
Appendix III

Comments From the Department of Defense

               Page 34      GAO/NSIAD-97-63 Contingency Operations
                Appendix III
                Comments From the Department of Defense

Now on p. 26.

Now on p. 5.

                Page 35                                   GAO/NSIAD-97-63 Contingency Operations
                Appendix III
                Comments From the Department of Defense

Now on p. 26.

                Page 36                                   GAO/NSIAD-97-63 Contingency Operations
Appendix IV

Major Contributors to This Report

                        Thomas J. Howard
National Security and   Glenn D. Furbish
International Affairs   David F. Combs
Division, Washington,   Robert R. Poetta


(709193)                Page 37            GAO/NSIAD-97-63 Contingency Operations
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