HIGH-LEVEL DOD COORDINATION IS NEEDED TO FURTHER IMPROVE THE MANAGEMENT OF THE ARMY'S LOGCAP CONTRACT.

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Original Source: GAO REPORT

032201GA.G26

Defense Logistics: High-Level DOD Coordination Is Needed to Further Improve the Management of the Army`s LOGCAP March 21, 2005

Statement of Brad Berkson, Acting Department of Defense

The Honorable Donald H. Rumsfeld

The Secretary of Defense

Dear Mr. Secretary: As you know, the U.S. military has long relied on contractors to provide supplies and services to deployed U.S. forces, and its reliance on contractors has been growing in recent military operations. Much of this support has come from logistics support contracts, particularly the Army`s Logistics Civil Augmentation Program (LOGCAP) contract. LOGCAP provides a wide array of support for U.S. military personnel throughout southwest and central Asia, including food service and housing. While this contract provides vital services, it is expensive. The estimated value of work under the current LOGCAP contract is more than $15 billion as of early January 2005, including $6.8 billion that the Army budgeted for LOGCAP activities in fiscal year 2005.1 Given the importance of LOGCAP to supporting military operations and the billions of dollars being spent on LOGCAP, effective use of the LOGCAP contract is critical. The Army`s use of its LOGCAP contract has not been without problems. Since 1997 we have issued two reports on the U.S. Army`s use of the LOGCAP contract to provide supplies and services for deployed U.S. forces that highlight both the growing importance of this contract to military operations and the difficulties the Army has experienced in managing and overseeing it and controlling costs. In 1997 we reviewed the Army`s use of its LOGCAP contract to support U.S. forces deployed for the peacekeeping mission in Bosnia;2 and in 2004 we reviewed several logistics support contracts, including the Army`s LOGCAP contract, to support military operations around the world.3

Support Contract is similar to the LOGCAP contract and was established in 1997. Finally, in 2004 we issued a report on contracting procedures in Iraq5 and testified on logistics support contracts and contracting in Iraq before the House Committee on Government Reform.6 Our reports identified difficulties the Army has experienced in planning for the use of the LOGCAP contract, controlling costs, and effectively managing and overseeing contract activities, and each made a number of recommendations intended to improve the Army`s use and management of the contract.

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

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

Results in Brief

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

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

-- First, although DOD continues to agree with our July 2004 recommendation to implement a formal process for regularly reviewing contract activities for economy and efficiency, DOD`s point of contact on our LOGCAP work, who is in the Office of the Deputy Under Secretary of Defense for Logistics and Materiel Readiness, told us that the need to address statutory requirements has taken precedence over implementing our recommendation.7 Our prior reviews have shown that when commanders look for savings in contract activities, they generally find them. For example, in our 2004 report on logistics support contracts, we reported that U.S. Army Europe`s...

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